City Council Meeting - FINAL

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10.B.

Meeting Date:	08/25/2014
From:	Barbara Goodrich, Management Services Director

Information

TITLE:

Consideration and Approval of the Third Amendment and the Fourth Amendment of Purchase and Sale Agreement: Between the City of Flagstaff and Evergreen - TRAX, LLC ("Evergreen"), for the sale of approximately 33.6 acres of property consisting of three parcels located at the southeast and southwest corners of the intersection of Fourth Street and Route 66, and the northwest corner of Fourth Street and Huntington drive adjacent to the Fourth Street Overpass (the "Property"). (Third Amendment to Evergreen Purchase Agreement to extend closing date; Fourth Amendment to Evergreen Purchase Agreement to Adopt Limited Warranty Quit Claim Conditions)

RECOMMENDED ACTION:

Policy Decision or Reason for Action:

The City of Flagstaff Charter requires the City Council to review and approve agreements that "provide for acquisition, sale or exchange of public real property."

The Third Amendment to the Purchase and Sale Agreement amends the closing date from August 18, 2014 to the first business day which is at least 31 days after any Solution Date, or earlier date as the City and Evergreen-Trax select. The amendment to extend the closing date is needed to finalize the land title.

The Fourth Amendment to the Purchase and Sale Agreement further clarifies the Solution Date and provides for the Limited Warranty Quit Claim language and subsequent relief as related to the any future reversionary interest as related to railroad right of way.

Financial Impact:

There is no financial impact. The purchase price remains at $3,041,000.

Connection to Council Goal and/or Regional Plan:

1. Retain, expand, and diversify economic base
2. Effective governance.

Has There Been Previous Council Decision on This:

June 5, 2012, the City Council approved Ordinance No. 2012-10, authorizing the transfer of title to Evergreen Devco, Inc.
June 12, 2013, the City of Flagstaff and Evergreen Devco, Inc. entered into a Real Estate Purchase and Sale Agreement
May 20, 2014, the City of Flagstaff and Evergreen Devco, Inc. entered into the First Amendment of the Purchase and Sale Agreement
July 15, 2014, the City of Flagstaff and Evergreen Devco, Inc. entered into the Second Amendment of the Purchase and Sale Agreement.

Options and Alternatives:

1. Approve the Third and/or Fourth Amendments to the Evergreen Purchase Agreement and ratify the City Manager's signature of the Third Amendment as recommended by City Staff.
2. Modify the conditions and/or include additional conditions.
3. Deny the Third and/or Fourth Amendment and choose not to ratify the City Manager's signature of the Third Amendment to the Agreement.

Background/History:

In approximately 2007, the City awarded the Property for development. However, due to economic conditions the developer was not able to meet its obligations and returned the property to the City. In October 2010, staff solicited Requests for Proposals (RFP) for the purchase and development of the Property. Revenue generated from this sale was to assist with the repayment of debt incurred by the City in the construction of the Fourth Street Overpass. Only one proposal was received for only two of the three parcels. In addition, the proposal was significantly below the minimum price requested and the development plan did not meet the expectations that were set forth in the RFP. The Council rejected this proposal as it was determined to not be in the best interest of the City. Council directed staff to reissue the RFP. A new RFP was issued that no longer had a minimum price requirement and provided for a greater emphasis on the type and timing of development that would occur. The RFP closed on August 3, 2011. One response was received with an initial offer from Evergreen Devco, Inc. for all three parcels.

The current Purchase and Sale agreement provided for a calculated closing date of August 18, 2014 which was thirty one days after the City Council approved the Development Agreement on July 15,2014. As there wasn't a Council meeting prior to the August 18, 2014 close date, the City Manager signed the amendment to provide for both the City and Evergreen-Trax time to resolve subsequent title issues. This action will approve the agreement and ratify the City Manager's signature.

The Fourth Amendment to the purchase and sale agreement is necessary to address a title concern regarding the implied condition of a reverter clause as related to a portion of the right of way originally owned by the railroad. The City is providing a limited warranty against a future reversion and will subsequently pursue the appropriate legislative action to permanently remove the possibility of this type of claim.

Key Considerations:

The City desires to promote economic development in a number of modalities. Approving the Third Amendment to the Purchase and Sale Agreement for the property will encourage retail development along the Fourth Street Corridor in a more structured manner.

Expanded Financial Considerations:

Evergreen has agreed to the amended purchase price of $3,041,000. Previously, Evergreen deposited with the City $212,899.50 as Earnest Money. Of that, $50,000 was transferred to the Seller at the conclusion of the initial Due Diligence Period and a second $50,000 transferred to the City at the conclusion of the Review Period.

Community Benefits and Considerations:

Community benefits include providing greater commercial and retail opportunities, providing for a larger retail tax base, and providing new job opportunities, particularly along the Fourth Street Corridor. Due to the economic downturn, in addition to the delay in the development of the property, City staff projected that the Fourth Street portion of the transportation tax would not adequately meet the need to fund the Fourth Street Overpass debt service by the time this tax expires in 2020. Staff employed a two-prong strategy to mitigate that risk. First, staff reissued the debt realizing an approximate $1.4 million savings in interest expense. Second, the staff continue to work toward the timely sale and development of the property so that the financial obligation will be met. The City will realize a greater and more certain benefit by receiving incremental growth in both sales and property tax revenues.

Community Involvement:

Collaborate - Evergreen held a forum in February 2014 for public participation. In addition, other public hearings and various Council actions have already occurred that allowed for public communication, as noted in the 'Prior Council Decision' section.

Expanded Options and Alternatives:

Attachments
3rd Amendment Signature Pages
4th Amendment and Deed

Form Review

Inbox	Reviewed By	Date
Purchasing Director	rcompau	08/14/2014 06:57 AM
Legal Assistant	Vicki Baker	08/14/2014 09:49 AM
Form Started By: bgoodrich		Started On: 08/13/2014 05:32 PM
Final Approval Date: 08/20/2014