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HomeMy WebLinkAbout2013-05-29 13-191 ORDERCOUNCIL ACTION Item No. 13-191_ Date: May 29, 2013 Item/Subject: ORDER, Adopting Revised Guidelines for Leasing and Disposition of City - Owned Land Responsible Department: Community and Economic Development Commentary: This Order, if approved, will adopt the revised "Guidelines for Leasing and Disposition of Land Owned by the City of Bangor." The City of Bangor has a number of parcels of land that are suitable for lease or sale as well as many that are currently leased. At the request of Council, staff has reviewed the policy and prepared revisions for the Council's consideration. There are several proposed changes that guide the sale of leased properties, the sale of vacant land, and the provision for taxes and/or a payment in lieu of taxes. First, the policy creates an opportunity for current lessees of City -owned land to purchase the land by creating development that will replace the lease payments through net new assessed taxable value and job creation. Second, the policy clarifies the methods for determining the land value for sale or lease. Third, the policy includes a provision for a Payment In Lieu of Taxes (PILOT) for nonprofit projects completed on City -owned property. Finally, the policy also includes a provision that any land sold will carry a tax payment deed restriction to ensure the property stays as a tax -producing property in the future. This item was discussed at the May 21, 2013 meeting of the Business & Economic Development Committee and the Committee recommended approval. Department Head Manager's Comments: City Manager Associated Information: Budget Approval: ance Director Legal Approval: 'T - City Solicitor Intr duced for Passage Assigned to Councilor Gallant CITY OF BANGOR 13-191 MAY 29, 2013 (TITLE.) Order, Adopting Revised Guidelines for Leasing and Disposition of City - Owned Land WHEREAS, the City of Bangor owns land that is suitable for development through sale or lease; and WHEREAS, the City of Bangor has a policy providing for Guidelines for Leasing and Disposition of City -Owned Land; and WHEREAS, it is in the best interest of the City of Bangor to revise its Guidelines for Leasing and Disposition of City -Owned Land to clarify methods for determining land value, establishment of a Payment In Lieu of Taxes provision for nonprofit projects, and establishment of methods for current lessees of City -owned land to purchase said land from the City. BE IT ORDERED BY THE CITY COUNCIL OF THE CITY OF BANGOR THAT The Revised Guidelines for Leasing and Disposition of City -Owned Land attached hereto are adopted. IN CITY COUNCIL May 29, 2013 Motion made and seconded for Passage Passed CITY OF BANGOR, MAINE GUIDELINES FOR LEASING AND DISPOSITION OF LAND OWNED BY THE CITY OF BANGOR I. PURPOSE 13-191 The intent of these guidelines is to establish a disposition policy flexible enough to address individual circumstances and to enable Staff to consistently and responsively deal with prospective development. 11. OBJECTIVES OF POLICY A. To generate revenues supporting the City's Economic Development Enterprise Fund and Bangor International Airport's revenue base. B. To expand the economic base of the City of Bangor and create quality job opportunities for its citizens. C. To enhance the tax base of the City of Bangor. D. To provide a full menu of development sites to accommodate a full range of commercial and industrial opportunities. E. To offer competitively priced development sites that generally reflect the local market and do not undercut the private sector real estate market. III. LAND NEGOTIATIONS The City has overall economic development goals which may be different than a private real estate developer and may influence land lease and disposition negotiations. Therefore, the following guidelines shall apply: A. The baseline for land negotiations shall be the fair market value which would be established through an appraisal or another method of determining the value of the property within the context of the local real estate market (i.e. an opinion of value, review of comparable properties — available & sold, assessed value, etc.) and; B. Any lease or purchase cost write-down or incentives should follow the establishment of the fair market value. The decision to offer incentives should be based on factors such as: (1) The number and quality of new jobs to be created, (2) A prospective project's role in implementing the City's Comprehensive Plan, (3) Tax base enhancement, and (4) Project Development Investment Therefore, a lease or purchase write-down or offering other development incentives is likely not appropriate for an existing operation moving to a business or industrial park whereas such incentives may be critical in the job creating expansion of a local industry or the 13-191 attraction of a new business to the Bangor area. IV. LAND LEASE GUIDELINES Two major issues arising in land lease negotiations are lease length and lease rate. The following will describe policy guidelines. The goal of the city is to have flexibility specific to individual projects in conjunction with the criteria outlined above in III. B. A. Lease Length The general guideline for land lease length is to tailor the length of the lease based on the best solution for the client and the City. The City is positioned to enter into long term leases when a substantial investment is being provided. B. Lease Rates (1) Initial Lease Rate: The annual lease rate guideline is 8.5% of the fair market value of the land. Therefore, annual rent for a parcel with a current value of $100,000 would be $8,500 per year. Fair market value would be established through an appraisal or another method of determining the value of the property within the context of the local real estate market i.e. opinion of value, assessed values, review of comparable properties — available & sold, etc. (2) Lease Rate Increases: For a typical 40 -year lease, the initial lease rate shall be established by the previously described 8.5% of fair market value. The 8.5% formula may be applied in years 10, 20 and 30. Between years 1 and 10, 11 and 20, 21 and 30, and 31 and 40, the lease rate will be adjusted every 5 years in order to reflect changing land values. This economic adjustment could be made by using a variety of methods including: (a) Prenegotiated annual increases, (b) Changes in market value of the leased land, (c) Consumer Price Index. The method selected will be included in the lease documentation. V. LAND DISPOSITION GUIDELINES A. BanAir Industrial Park & Maine Business Enterprise Park The City shall continue its policy of offering development sites for sale or lease in the BanAir Industrial Park and Maine Business Enterprise Park (MBEP). The City shall continue its preference to lease development sites in the BIA Commercial / Industrial Park and the Maine Business Enterprise Park. Development sites in the MBEP located west of Maine Avenue will only be 13-191 available through a lease and not considered for sale. Sale of lots in the BIA Commercial / Industrial Park and on the east side of Maine Avenue in the MBEP will be considered when requested by the developer and the development proposed conforms to the City's objectives listed in II above. In considering a request for sale of a development site, where title restrictions prohibiting the sale of land do not apply, the City Council will consider sale of the development site based on the following factors: (1) The project must create significant new tax value and an expansion of the area's employment base; (2) The creation or retention of long-term, permanent employment opportunities; (3) Number, type and quality of new jobs to be created, (4) It is the City's policy to include a PILOT on all nonprofit projects that are completed on City owned property. VI. SALE OF DEVELOPED SITES CURRENTLY LEASED FROM THE CITY (1) Where sale is not prohibited by title restrictions and on request by the lessee, the City Council shall consider on a case by case basis, sale of developed sites currently leased from the City. The sale price shall be fair market value (FMV) of the land assuming the land is unimproved. Fair Market Value shall be determined by good faith negotiation between the City and the Buyer. If the two parties cannot agree upon FMV then the City shall commission an appraisal. If the Buyer disagrees with the appraisal and/or the parties cannot agree on the sale price, the buyer shall commission a 2nd appraisal. If the city and the Buyer cannot agree on FMV, then the two parties shall select a third appraiser whose valuation shall be binding. Each party shall pay for their own appraisal and the cost of the third appraisal shall be split evenly between the two parties. (2) No Business Expansion Proposed: Since development on the lots leased already exists, and no development incentive is necessary, the City shall use its reasonable discretion when considering the option to sell. The City Council shall consider sale of the developed site currently leased based on the factors outlined in V. A. above, recognizing that the development may have historically addressed these factors, and that these factors are most relevant for new development and have limited relevance to existing development. (3) Business Expansion Proposed: Where expansion of an existing business or creation of a new business is proposed on a development site currently leased from the City, when requested by the developer / lessee, the City Council shall consider sale of the developed site currently leased for a specific development proposal, based on the factors outlined in V.A. above. (4) In addition to meeting the above criteria, a sale of city owned land with an existing privately owned development on it will only be considered after half of 13-191 the lease time has passed, but not less than 10 years. However, this timeframe may be less if the purchase of the property is necessary for an expansion and the expansion meets the factors outlined in V.A. above. The sale of the land will also carry a tax payment deed restriction to ensure the property will stay a tax producing property in the future. (5) It is the intent of the City Council to not pass on a higher tax burden to the citizens by reducing or forgoing annual lease payments. The sale of a developed leased lot will only occur if there is net new taxable development within the City of Bangor that would replace the annual lease revenue with taxes. For example if your lease is $1,000 per month/$12,000 annually then new taxable assessed value to replace that amount would be approximately $611,000. This example is based on the FY13 tax rate. These numbers will change as the tax rate changes. Any development completed within the prior 24 months will be considered when calculating net new taxable development. Additional credits for job creation will be considered which could reduce the needed amount of investment. VII. FINAL AUTHORITY The final authority to approve sale or lease of any City owned development site rests with the City Council. IN CITY COUNCIL , May 29, 2013 Motion made and seconded for Passage Passed 1-2 oe a