HomeMy WebLinkAbout15.D.1. Shutrop Property Purchase Agreement-Res. No. 6196
IS.6./
CITY OF SHAKOPEE
MEMORANDUM
To: Mayor and City Council
Mark McNeill, City Administrator
From: Mark Themig, Parks, Recreation, and Facilities Director
Meeting Date: March 1, 2005
Subject: Shutrop Property Purchase Agreement - Resolution No. 6196
INTRODUCTION
City Council is asked to adopt Resolution No. 6196, A Resolution Authorizing Purchase
of Real Property from Idella Shutrop Revocable Trust.
BACKGROUND
The attached purchase agreement finalizes a park land acquisition process that has
been underway for several years. According to records, the City Council directed the
Parks and Recreation Advisory Board to begin looking at acquiring land for a future
community park as far back as 1999.
In March 2000, the Advisory Board recommended that land for future acquisition meet
the fol/owing criteria:
1. Land be outside the urban service area.
2. Try to acquire land for two community parks: A) One in the southern portion of the
community and B) one in the eastern area of the City.
3. Both parks be 40 acres in size or more.
4. One of the parks be a future site for a youth sports complex.
5. Encourage partnerships with townships, county or other non-profit entities.
6. Set aside $500,000 per year for the next four years for land acquisition.
In 2001, staff identified a potential site east of CR 17 on the west shore of O'Dowd Lake
to for the Advisory Board's consideration. The Advisory Board found that the site had
significant access and development issues, and they recommended that the city not
proceed with acquisition of this property. In the summer of 2002, the City Council asked
the Parks and Recreation Advisory Board to continue its search for parkland in the rural
areas of Shakopee or in one of the neighboring townships. There were some
discussions with land owners during this time, but no significant progress.
In the spring of 2004, staff presented the Advisory Board with four different parcels of
land for consideration. From those four parcels, the Advisory Board identified the
Shutrop Property north of County Road 16 and east of Dean Lake as the priority site for
park land acquisition. This is a 103-acre parcel that is located north of CR 16 and
bounded generally by Dean Lake and South bridge open space to the north, CR 16 to the
south, and undeveloped private property to the east and west. The parcel contains a mix
of wetlands, wooded bluff line, and upland area. Portions of the parcel are still a working
farm and contain a house and other farm structures.
Although the site is 103 acres, the topography and vegetation on the site appears to
promote more passive than active uses. However, the natural characteristics make it
ideal for passive uses including trails, picnicking, and experiencing nature. A strength of
this site is the possibility of acquiring additional adjacent parkland. Going west from the
Shutrop property, there are two parcels along Dean Lake that extend up the bluff that
could also be acquired some day through park dedication, if these parcels develop.
City Council endorsed the recommendation in the summer of 2004, and appointed
Councilor Lehman, Chair Dorenkamp, and staff to work on several questions about the
property, and to develop funding options. Since that time, we have been working with the
Shutrops, Scott County for future CR 21 alignment and funding, and Tollefson
Development who has a relationship with the Shutrops for developing some of their
other property. In the fall of 2004, the Advisory Board and City Council reviewed a
concept for acquiring the property that would involve selling the county the right-of-way
needed for future CR 21, and selling a portion of the property that would be separated
from the remaining park area due to CR 21 for residential development. Revenue from
these sales would help fund the acquisition costs for the remainder of the site.
The Shutrops disclosed their asking price for the property in December 2004,
$6,375,000. The appraised value of the property from a November 2004 appraisal was
$7,725,000. The Shutrops proposed the lower purchase price as part of their estate
planning, and to help the city acquire a portion of their land to serve as park land that
would protect a natural resource and benefit future generations of Shakopee residents
by providing recreational opportuhities.
There were several months of work on the funding plan, which resulted in several delays
of anticipated closing dates for the sale. The Shutrops set March 11, 2005 as the final
deadline to close the sale under the proposed terms, and any delay past March 11
would have resulted in renegotiating the terms, or potentially selling the property to
another party.
DISCUSSION
Funding the Acquistion
Resolving the funding issues, particularly the funding for future CR 21 right-of-way, is
one of the most significant challenges for this acquisition. The county doesn't have
funding in its transportation improvement plan for the acquisition of the right-of-way,
leaving the city in a situation where it would have to cash-flow these costs until the
county had funding. In a development late in the process, the county received notice of
available federal highway funds that could be used to pay for the right-of-way under a
"threat of development" or "hardship" scenario.
Initially, there were questions as to whether or not the city could close by the deadline
the Shutrops had set (March 11) and have the county still qualify for the use of the
federal highway funds. Initially, it appeared that the city could not be under a purchase
agreement nor close on the property before the county received approval to use the
funds. That put the closing sometime in late-April. On February 23, I received notice
from Lezlie Vermillion, Scott County Public Works Director, that the county appears to
have negotiated an agreement with the federal government that would allow the city
proceeding with a March 11 close under a hardship for the current property owner,
provided the city folloW~ the f~der~1 ~overnment's criteria for land acquisition:
1. The city will need to provide the Shutrops a written offer based on the fair market
value (appraised value) for the entire parcel. The Shutrops would counter with the
terms in the proposed purchase agreement.
2. The purchase agreement must be structured as a bargain sale, where it specifically
states the appraised value, sale price, and the portion the city receives as a
donation.
The purchase agreement has been structured as a bargain sale, and the City Attorney is
aware of the need to make a written offer based on the appraised value, and will be
drafting this letter. I am attending a meeting with Ms. Vermillion and the City Attorney on
Thursday, March 3 at the Federal Highway Administration's office in St. Paul to ensure
that the letter meets the federal government's criteria. Provided everything goes as
planned, the county will have the funding to pay the city for the right-of-way this spring.
The exact amount of this funding would be based on an appraisal that the county is
conducting on the property, and negotiated in a separate agreement.
Another funding source involves the simultaneous sale of approximately 37 acres of land
east of future CR 21 for residential development. The Shutrop's residential developer,
Tollefson Development Company, will pay the city $2.5 million for this land, plus pay for
the construction of Pike Lake Trail.
Finally, the city will contribute funds from its Park Reserve Fund for the park and open
space, the Building Fund for a future fire station site, and the Capital Improvement Fund
for the value of Pike Lake Trail that would normally be assessed to the city since it is
adjacent to property that the city would own.
On Februa 22, 2005, Cit Council endorsed the followin
Item
Purchase Price 6,375,000
Fundin Sources
2,354,250
2,500,000
500,000
300,000
720,750
1.
2.
Purchase Agreement Terms
The terms of the purchase agreement were being negotiated through the early evening
of Friday, February 25. At the time of completing this staff report, it appears that we were
able to resolve most of the outstanding issues. However, there may need to be revised
agreements distributed to you prior to Tuesday's meeting.
With that said, the key terms of the purchase agreement are as follows:
. Section 2.: The purchase is a bargain sale, where under threat of condemnation, the
city is purchasing a parcel valued at $7,725,000 for a price of $6,375,00. The
difference is being provided to the city as a donation.
. Section 6.d.: The city is required to enter into a purchase agreement with Tollefson
Development Company for sale of approximately 37 acres for $2,500,000.
,
. Section 15.: A portion of the property that the city will retain is in the Conservation
Reserve Program. This involves approximately 13.2 acres of filter strips along the
outlet channel. The city would be required to assume the existing contract, which
expires September 30,2007, or buyout of the program.
Under the terms of the proposed purchase agreement, the city would assume the
existing contract and the Shutrops would receive pro-rated payment from the CRP
program for the portion of the year they are in ownership. Although the city can sign
up for the remaining payments, the Scott County Farm Service Agency has indicated
that we would need to be put on a wait list for funding, and wouldn't likely qualify
before the existing contract expires.
Assuming the current contract doesn't appear to have significant impact to the city,
as the filter strips are in the designated wetland area. There may be a section of filter
strips in the area of the future Pike Lake Trail (we have not reviewed the drawings
yet), but the boundaries can be moved within the site to prevent any penalty for the
city.
There are a few remaining issues that hopefully will be resolved by your meeting:
. Exhibit A: The latest version of the purchase agreement I received qid not have
Attachment A, the property description.
. Section 7.a.: The agreement requires that the Shutrops have entered into an
occupancy agreement with Tollefson development. At the time of writing this staff
report, I was not able to confirm whether or not this agreement is in place.
Section 11.: There was significant discussion about representations and warranties,
specifically relating to existing site conditions. There was a Phase 1 environmental
site assessment completed on the property, and it identified visual concerns on the
portion that Tollefson would be acquiring. Tollefson completed a Phase 2 study for
those concerns, and found no soil contamination issues. The portion that the city
would retain had no issues identified in the Phase 1 environmental site assessment.
Initially, the Shutrops requested an "As Is" clause where the city would assume any
liability for the condition of the property. We incorporated the same "As Is" clause into
our purchase agreement with Tollefson in order to transfer any liability to Tollefson,
but Tollefson objected. The current version of the agreement has no "As Is" clause.
The city will need to ensure that the purchase agreement does not pose any liability
for the city for the portion that we are conveying to Tollefson.
Review of Property Appraisal
The appraised value in the purchase agreement is based on an appraisal that was
performed on behalf of the Shutrops in November 2004. Instead of incurring the costs for
a full appraisal on behalf of the city, the Shutrops appraisal is being reviewed on behalf
of the city by Patchin Messner and Dodd, an appraisal firm that the city has used in the
past. This review is not yet complete, but will be prior to closing. I should note that the
county is also conducting their own full appraisal of the property.
Since the purchase agreement is based on the Shutrop's appraisal, and the appraised
amount needs to be verified by the city in order for the county to qualify for the use of !
I
federal funding, approval of the purchase agreement should be conditioned such that the I
review being done on behalf of the city supports the appraised value.
REQUESTED ACTION
City Council is asked to adopt Resolution No. 6196, A Resolution Authorizing Purchase
of Real Property from Idella Shutrop Revocable Trust, conditioned that the review of the
November 2004 appraisal being done on behalf of the city supports the appraised value.
J would also suggest that City Council consider appointing two members to serve as
representatives of Council as you did with the Quarry project, should any last-minute
issues arise prior to closing. !
Finally, I would like Council to be aware that the City Attorney will be drafting a written
offer based on the appraised value of the property in order to meet the criteria for using
federal funding for the County Road 21 right-of-way.
,
I
Purchase Agreement Shutrop to City
2/24/05 Draft
Revised 2/25/2005
AGREEMENT FOR BARGAIN SALE
THIS AGREEMENT FOR BARGIAN SALE is made and entered into as of February _,
2005, by and between Idella J. Shutrop, Ben Shutrop, and Norman Shutrop, as Trustees of the
Idella Shutrop Revocable Trust ("Seller") and CITY OF SHAKOPEE, MINNESOTA, a
statutory city and political subdivision organized and existing under the Constitution and laws of
the State of Minnesota ("Buyer").
WITNESSETH that:
WHEREAS, Buyer has adopted a resolution initiating condemnation proceedings to acquire
fee title to certain real property located in the City Shakopee, Scott County, Minnesota, consisting of
approximately one hundred and three (103) acres and legally described on Exhibit A hereto,
including all improvements located thereon andall fIxtures located therein (the "Property"), for use
as parkland and future fire station; and,
WHEREAS, Seller and Buyer desire to avoid the expense, time and uncertainty of judicial
proceedings with respect to said condemnation proceeding, and Seller wishes to. voluntarily convey
the Property to Buyer; and,
WHEREAS, Seller and Buyer have reached agreement as to the purchase price for the
Property and other terms pertinent to the conveyance of the Property; and
WHEREAS, Buyer is aware that Seller is selling an additional 130 acres south of Eagle
Creek Blvd. to a Developer for residential purposes.
NOW, THEREFORE, in consideration of the mutual premises and the covenants and
agreements hereinafter contained, the parties agree as follows:
1. Description of Land Sold. Seller hereby sells and agrees to convey the Property
unto the Buyer, its successors and assigns, by trustee's deed, accompanied by an abstract of title or
registered property abstract and Seller's affidavit, upon the prompt and full performance by the
Buyer of its part of this Agreement.
2. Value and Manner of Allocation. Unless this Agreement is terminated as provided
in and permitted by the terms of this Agreement, Seller and Buyer shall consummate a bargain sale
in which the total value of the Property shall be Seven Million Seven Hundred Twenty-Five
Thousand and no/l00 Dollars ($7,725,000.00) (the "Property Value"). The Property Value shall
be allocated and taken into. account as follows:
2.1 Cash Portion of Bargain Sale. Buyer shall pay to Seller on the Closing Date
(as hereinafter defIned) the amount of Six Million Three Hundred Seventy Five Thousand
and no/lOO Dollars ($6,375,000.00) by wire transfer of U.S. Federal Funds or cashier's
check.
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2.2 Donation. Exclusively for public purposes, Seller shall donate to Buyer on
the Closing Date the amount of One Million Three Hundred Fifty Thousand and no/l 00
Dollars ($1,350,000.00).
3. Deed. It is agreed that the trustee's deed executed and delivered by Seller to Buyer
at the Closing Date (accompanied by such documents as may be required to convey the Property
pursuant to trustee's deed, and customary affidavits and certificates) shall be subject only to the
following exceptions:
(a) Building zoning and platting laws, ordinances and state and federal
regulations;
(b) Reservation of any minerals or mineral rights to the State of Minnesota;
(c) Utility and road easements of record that do not interfere materially with the
use or development of the Property by Buyer;
(d) The lien of current taxes not yet due and payable;
(e) Any lien, claim or encumbrance incurred or suffered by Buyer.
Said Deed shall be accompanied by all required well disclosure.
4. Taxes and Special Assessments. Seller shall pay all real estate taxes, interest and
penalties, if any, relating to the Property due and payable in the year prior to the year of Closing and
the years prior thereto. Provided that the transaction contemplated by this Agreement shall close,
Buyer agrees to pay taxes due and payable in the year after the year of Closing and all taxes due and
payable thereafter. Seller and Buyer shall prorate all taxes due in the year of Closing as of the
Closing Date. Buyer shall assume any levied . or pending assessments, except for special
assessments unrelated to Buyer's development. Seller shall be responsible for all Green Acres. deed
taxes, and other taxes due as a result of the sale of the Property.
5. Preliminary Development. Buyer shall have the right, prior to the Closing Date, to
enter upon the Property for the purpose of taking soil tests, borings, making surveys and maps,
inspecting the residence and the barn, and performing other preliminary investigative work;
provided, however, that Buyer shall indemnify and hold harmless Seller from any mechanic's liens
or claims arising out of such preliminary development work by Buyer. Prior to the Closing Date,
Buyer shall not construct or cause the construction of any improvements on the Property.
6. Buyer's Conditions. The obligation of Buyer to purchase the Property is subject to
and contingent upon the satisfaction on or prior to the Closing Date of the following conditions, any
of which may be waived in whole or in part by Buyer on or prior to the Closing Date:
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Purchase Agreement Shutrop to City
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(a) The representations and warranties of Seller contained in this Agreement
must be true now and on the Closing Date;
(b) Buyer shall have determined, in its sole judgment, on or before the
Closing Date, that it is satisfied with the physical condition of the Property, including,
without limitation, results of and matters disclosed by environmental site assessments, soil
tests, engineering inspections, and environmental reviews of the Property, all such tests,
assessments, inspections and reviews to be obtained at Buyer's sole cost and
expense;
(c) Title to the Property shall have been found acceptable, or been made
acceptable, in accordance with the requirements' and terms of Section 9 below;
(d) Buyer shall have entered into a purchase agreement between Buyer and
Tollefson Development Company ("Tollefson") for the purchase by Tollefson of a portion
of the Property comprising approximately 37 acres as . depicted on Exhibit B hereto
("Tollefson Parcel"), on such terms as have been approved by resolution of the Shakopee
City Council, duly adopted, and closing on said purchase agreement shall occur
contemporaneously with the Closing of this Purchase Agreement.
(e) This Purchase Agreement shall have been approved by resolution of the
Shakopee City Council, duly adopted.
In the event that Buyer is unable to satisfy any of the foregoing conditions by the Closing Date,
Buyer may, by written notice to Seller, terminate this Purchase Agreement, whereupon neither party
shall have any further liability hereunder, provided that Buyer shall deliver an executed quit claim
deed to the Property to Seller. Buyer agrees to diligently proceed to satisfy the conditions of this
paragraph.
7. Seller's Conditions. The obligation of Seller to convey the Property is subject to and
contingent upon the satisfaction on or prior to the Closing Date of the following condition, which
may be waived in whole or in part by Seller on or prior to the Closing Date:
(a) Norman and Jan Shutrop ("Shutrop") shall have entered into an occupancy
agreement with Tollefson.
In the event that Seller is unable to satisfy the foregoing condition by the Closing Date, Seller may,
by written notice to Buyer, terminate this Purchase Agreement, whereupon neither party shall have
any further liability hereunder, provided that Buyer shall deliver an executed quit claim deed to the
Property to Seller. Seller agrees to diligently proceed to satisfy the conditions of this paragraph.
8. Examination of Title. Seller shall, as soon possible, furnish Buyer a commitment for
title insurance from the Title Company in the amount of the purchase price. Buyer shall be allowed
five (5) days after receipt of the latter of the commitment and the Survey (as hereinafter defined) for
examination of said title and the making of any objections thereto, said objections to be made in
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Purchase Agreement Shutrop to City
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Revised 2/25/2005
writing or deemed to be waived. Existing mortgages or other liquidated liens shall not be deemed
title objections, but shall be paid at closing out the purchase price hereunder. The Seller shall use its
best efforts to make such title marketable within two (2) weeks from Seller's receipt of Buyer's
written objection. Pending correction of title, the payments hereunder required shall be postponed,
bu~ upon correction of title and within ten (10) days after written notice, Buyer shall perform as
provided in this Agreement. If said title is not marketable and is not made so within two (2) months
from the date of written objections thereto as above provided, Buyer may either
(i) terminate this Purchase Agreement by giving written notice by registered
mail to Seller, in which event this Purchase Agreement shall become null and void and
neither party shall be liable for damages hereunder to the other party; or
(ii) elect to accept title in its unmarketable condition by giving written notice by
registered mail to Seller, in which event the warranty deed to be delivered at Closing Date
shall except such objections.
Seller shall deliver to Buyer any abstract to the Property, in Seller's possession or control.
9. Survey. Buyer may procure, at its sole expense and as soon as practical after receipt
of the title commitment, an AL T A survey of the Property prepared by a registered land surveyor
(the "Survey").
10. Default. If Seller, through no fault of Buyer, defaults in its. obligations hereunder in
any manner, Buyer may, by notice upon Seller, (i) terminate this Purchase Agreement, and no party
hereto shall have any further claim against the other hereunder, or (ii) avail itself of an action for
specific performance. If Buyer shall default in the performance of any of its obligations hereunder,
then Seller shall be entitled to terminate this Agreement upon 30 days written notice to Buyer,
pursuant to Minn. Stat. ~559.21 and, upon such termination, and no party hereto shall have any
further claim against the other hereunder. In such event, Buyer shall provide Seller with its quit
claim deed. Nothing herein shall relieve Buyer of any obligation to indemnify or hold Seller
harmless as stated herein.
11. Representations and Warranties by Seller. Seller represents and warrants to Buyer
that:
(a) To the best of Seller's knowledge, the Property has not been used for the
generation, transportation, storage, treatment, or disposal of any hazardous waste, hazardous
substance, pollutant, or contaminant, including petroleum, as defmed under federal, state or
local law.
(b) There is a well currently in working order on the Property and Seller will
provide at closing a well disclosure. There are no underground storage tanks located on the
Property. There is no septic system located on the Property. Buyer is aware that there is a
pipe that goes from the house to the ravine in the back of the house that carries waste water.
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Purchase Agreement Shutrop to City
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Revised 2/25/2005
(c) To the best of Seller's knowledge, there has been no dumping or deposit of
construction or other debris on the Property, except as noted in the Phase I environmental
report.
Seller hereby agrees that each of the foregoing representations and warranties shall survive
'closing hereunder and that the breach of any thereof shall constitute a default, whether said breach
occurs prior to or after Closing, entitling Buyer to exercise any remedy provided to Buyer in this
Agreement in the event of a default by Seller. In addition, if any of the foregoing warranties or
representations shall be breached or shall be untrue, Seller shall indemnify and hold Buyer from any
damages or liabilities relating thereto notwithstanding the provisions of Paragraph 10 hereof.
12. Closing. The "Closing Date" of this transaction shall be March 11, 2005. At
closing, Seller and Buyer shall deliver to one another the instruments specified herein. Subject to
the provisions of Paragraph 5 hereof, possession of the Property shall be delivered to Buyer on the
Closing Date.
13. Notices. All notices provided herein shall be given in person or be sent by United
States mail, either certified or registered, postage prepaid. If notice is given by registered or
certified mail, deposit in the United States mail of said notice on or before the date such notice isto
be given shall be deemed timely and acceptable. Notices shall be directed as follows:
To Seller: Idella Shutrop Revocable Trust
c/o Norman Shutrop
6865 Eagle Creek Blvd.
Shakopee,MN 55379
To Buyer: City of City of Shakopee
129 South Holmes Street
Shakopee,~ 5537
Attn: Judy Cox
14. Broker. Seller and Buyer represent and warrant to each other that they have
not engaged any real estate broker in connection with Seller's sale of the Property. Each party shall
defend, indemnify and hold harmless the other party from any claims of any broker claiming
through such party.
15. CRP - Farm Service Agency Contract. Seller has made Buyer aware of a
pending contract with the Farm Service Agency and Norman Shutrop. The Buyer agrees to assume
said contract until its termination, which is September 30, 2007. Said contract will be pro-rated to
closing between Buyer and Seller.
16. Miscellaneous. The terms, covenants, indemnities and conditions of this Purchase
Agreement and the Waiver of Relocation shall be binding upon and inure to the benefit of the
successors and assigns of the respective parties hereto, and shall survive the Closing Date. Time is
of the essence of this Agreement.
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17. Waiver of Relocation. To the extent that Seller may be entitled to any relocation
payments or other relocation assistance, Seller voluntarily waives its rights to any and all such
payments or assistance. Seller further acknowledges that this statement and stipulation is made
voluntarily.
[Signatures on Following Page]
.:
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Purchase Agreement Shutrop to City
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IN WITNESS WHEREOF, the parties have hereunto set their hands the day and year first
above written.
SELLER: BUYER:
IDELLA SHUTROP REVOCABLE TRUST CITY OF SHAKOPEE, MINNESOTA
Idella J. Shutrop, as Trustee of the Idella Its: Mayor
Shutrop Revocable Trust
Ben Shutrop, as Trustee of the Idella
Shutrop Revocable Trust Its: City Administrator
Norman Shutrop, as Trustee of the Idella
Shutrop Revocable Trust Its: City Clerk
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