Public Hearing - Economic Development Authority - Erik Thorvig, Community Development Director
Title
Title
Considering a Purchase Agreement for an EDA Owned Site on Pheasant Ridge Drive (PID 23-31-23-13-0007)
end
Executive Summary
The EDA is considering selling land generally located on Pheasant Ridge Drive to the State of Minnesota for a state emergency operations center.
Background
The State of Minnesota identified the need for a new State Emergency Operation Center (SEOC) as part of a bonding request for the 2020 Legislative Session. The current SEOC facility is located in downtown St. Paul and does not adequately serve the operations. Approximately $30M was approved in the 2020 state bonding bill to construct a new facility. The timeline is to identify and design a site in 2021 and begin construction in 2022.
The State of Minnesota proposes to construct a new, approximately 50,000 square foot, two-level facility in the North Metro. The proposed facility would house two main functions - the main offices for the 60 to 80 employees of the State’s Department of Public Safety, Division of Homeland Security and Emergency Management (HSEM) and the State of Minnesota Emergency Operations Center.
The HSEM offices would serve as a headquarters for staff to plan and prepare for emergencies in the state as well as to respond and recover from those emergencies. HSEM staff have connectivity to Emergency Managers in counties and cities across the state and frequently bring outside agencies to the facility for disaster planning.
The SEOC would be the primary location where statewide responses to disasters are coordinated by up to 150 people representing the State, its agencies, and outside stakeholders. The SEOC is mandated by law to serve as the primary response location in the case of an emergency at either one of the State’s two nuclear power plants. Because of the critical nature of the SEOC’s role in emergency management, robust continuity of operations strategies will be employed to ensure that the facility maintains operations even when it is located amid the disaster to which it is responding.
Staff became aware of the interest in Blaine in late 2019. Discussions between city and state staff to find a site in Blaine reinitiated after the funding was approved in 2020. City staff provided nine different sites that met the site selection criteria. One of the sites that the state is interested in is owned by the Blaine Economic Development Authority (EDA) at 4001 Pheasant Ridge Drive (see attached map). City staff has marketed the site for approximately three years for industrial development. There have been several interested parties, however no developer has proceeded, mainly due to the challenges related to the site.
The EDA purchased a larger property in the mid-1980s for $135,000. Portions of the property were sold for various light industrial developments. The remaining site is approximately 20 acres however has significant wetlands. A wetland delineation was completed in 2017 and identified approximately 7.59 acres of upland scattered throughout the site. In order to develop the site, wetland credits will be needed. Based on due diligence completed, 187,308 sf. of wetlands would be impacted. The State assumes a replacement ratio of 1:1 however, this has not been confirmed by the Rice Creek Watershed District. The purchase agreement states that “On or before August 3, 2021, Buyer shall have determined in its sole judgement that it is satisfied with all matters related to wetlands on the site, including but not limited to the amount and cost of wetland credits required to be purchased by Buyer to develop the Property. Seller shall assist Buyer in determining the wetland impacts and related requirements to develop the Property.” If the purchase agreement is approved, city staff will work with the State to determine the amount and sale price of wetland credits and have an official EDA action on Monday, August 2.
The site has additional development challenges mainly related to the need to import fill to bring the property to an elevation where a building could be constructed and correct poor soils. Estimates were completed by the state requiring $750,000 in soil corrections and $50,000 in dewatering as part of the soil correction work. Due to the high cost of soil corrections to make the site shovel ready, the EDA will need to sell the land at a discount in order for the site to make financial sense for a developer. The overall site is approximately 20 acres; however, the developer is only impacting approximately 4.77 acres of the site. Shovel ready office/industrial land sells for $4/sf. in the general area. Therefore, if the developer were to purchase approximately 6 acres of land for the project at a market rate price of $4/sf. they’d pay approximately $1.04mil. Between soil correction and dewatering costs of approximately $800,000 and a wetland credit purchase, the EDA would have to sell the land at a price of $1 to make the transaction “market rate” to equal purchasing shovel ready, vacant land.
When the EDA sells property there is a condition within the purchase agreement and deed that allows for the property to revert back to the EDA if it is not developed within one year of sale. Minn. Stat. 469.105, Subd. 5 states that “Within one year from the date of purchase, the purchaser shall devote the property to its intended use or begin work on the improvements to the property to devote it to that use. If the purchaser fails to do so, the authority may cancel the sale and title to the property shall return to it. The authority may extend the time to comply with a condition if the purchaser has good cause.” When proposing this option to the state, they stated that there is no statutory authority that allows the property to revert back to the EDA if purchased by the State of Minnesota.
If for some reason the project does not proceed, there is a statutory process for selling surplus state property. It is first offered to state agencies, University of Minnesota and Minnesota State. If there are no interested parties, it is next offered to local units of government. The minimum purchase price is the appraised value, which presumably would be a nominal amount. It is then offered for public sale via sealed bid. Alternatively, legislation could be pursued to authorize a direct sale of the property back to the EDA. State staff has stated “Given prior to closing all due diligence and approval notification of the legislative chairs will be completed and the project is fully funded, the risk the project does not proceed should be very small.” Staff is still attempting to have language inserted into the purchase agreement that allows the property to revert back to the EDA, however are not confident this will be accepted by the state.
Strategic Plan Relationship
Not applicable.
Board/Commission Review
Not applicable.
Financial Impact
The proposed sale price is $1. The EDA purchased the original property which included other land that has since been sold for other industrial projects, for $135.000. It has always been assumed that the EDA would have to sell the land at a discounted price due to the cost to make the site shovel ready.
The property is currently tax exempt, and would remain tax exempt if sold to the State of Minnesota. The State of Minnesota could purchase other land in Blaine that is currently, and projected to be tax generating. By the state purchasing existing tax-exempt land, it is a net zero impact to current tax base. The city would lose potential future tax generation from the site that would otherwise be created by a private party.
Public Outreach/Input
A public hearing is required for the EDA to agree to sell property. Notice was published in the local newspaper.
Staff Recommendation
Hold a public hearing and determine whether to approve the resolution entering into a purchase agreement to sell property.
Attachment List
Location Map
Concept Site Plan
Draft Purchase Agreement
Body
WHEREAS; the City of Blaine Economic Development Authority owns real property on Pheasant Ridge Drive identified as Outlot A, Pheasant Ridge West Second Addition, Anoka County; and
WHEREAS; the State of Minnesota has identified this site for a future emergency operations center; and
WHEREAS; the City of Blaine Economic Development Authority and State of Minnesota have agreed in principal to a sale of the property for an emergency operations center; and
WHEREAS; the City of Blaine Economic Development Authority held a public hearing on July 7, 2021 to consider sale of real property.
NOW THEREFORE, BE IT RESOLVED, that the Blaine Economic Development Authority hereby approves the sale of property identified as Outlot A, Pheasant Ridge West Second Addition, Anoka County and directs the executive director and president to execute necessary documents to facilitate a sale to the State of Minnesota.
PASSED by the Blaine Economic Development Authority this 7th day of July, 2021.