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14a. Discussion of Bongard Acquisition I . II CITY t OF _ . 1 \\"1:LS:t CHANHASSEN . .„. 1 z 690 COULTER DRIVE • P.O. BOX 147 • CHANHASSEN, MINNESOTA 55317 _ _ � ' ..r (612) 937-1900 1 MEMORANDUM TO: Mayor and City Council 1 FROM: Don Ashworth, City Manager 1 DATE: February 27 , 1989 SUBJ: Bongard Acquisition, Realigned TH 101 III am attaching a copy of a letter from Mrs . Bongard. As can be seen, she is quite upset and concerned with the actions of the 1 City regarding realigned TH 101. I am also attaching a copy of a memorandum from Fred Hoisington detailing the background on this item. 1 The prospective buyer of the Bongard property , Bill Diem, has inappropriately put the City into the current position. Any pro- perty owner, for the past ten years , lying within any of the ten- I tative routes for realigned TH 101 has been encouraged to proceed with their own development plans and not to rely on alternative routes as being cast in stone. Two examples worth citing are the 1 shopping center proposal lying south of Highway 5 on Lake Drive and the most southerly Meadows Apartment Building. Before going through those examples, I would remind the Council that the problem existing at Dakota/ West 79th Street/TH 101 has existed Ifor many, many years and simply continues to get worse. At least ten alternative plans for that general area have been considered during the past 10 to 15 years. Each of those plans have 1 involved innumerable public hearings to gain input on each of the alternatives. The alternative considered most likely to be approved one year ago was for the realignment of TH 101 to occur Ito the west of existing Dakota Avenue and then to traverse Lake Drive to present TH 101. That proposal took a major portion of the Kerr shopping center site. The developers of the site wanted the City to enter into a firm purchase agreement for approxima- I tely $5 . 00 per square foot. City staff informed Kerr that funding was not assured and that the hearing process was simply starting and no commitments could be made until that process had I been consummated - at least 12 months was considered logical . Kerr was encouraged to present their development plans and to either receive approval or denial from the City (denial repre- 1 senLing action to condemn the site) . Kerr did proceed with their 1 Mayor and City Council , February 27 , 1989 Page 2 development proposal and staff recommended that the Council approve the plans as the alternative of paying for potential footing costs would be far less than having to pay for a parcel which was later found not to be needed . As it turns out, that advice was reasonable. The second example would be the most southerly Meadows Apartment Building (newest building) . At time of their presenting their construction plans, the City Engineer strongly recommended that the city not approve the construction plan, but instead to purchase the property for realigned TH 101. If the realignment considered one year ago would in fact have been the final approved plan , that recommendation would be seen, in hindsight, as a poor one. Today, knowing that the preferred alignment is through the middle of that building, hindsight would show that the Engineer ' s recommendation should have been followed. i Through the hearing process , the Bongards became aware of the City ' s consideration of their parcel for realigned TH 101. Supposedly , the acquisition from Bongard to Bill Diem was well underway at the time they received notice. Although Mr. Diem was informed that he should proceed presenting potential development plans , he was also informed that our best guesstimate was that the parcel would be taken as a part of realigned TH 101 . It was his position that the development prospects of the parcel would not be pursued, but that he would instead pursue selling the par- cel to the City. We did carry out an appraisal of the property to help expedite the process . Two stumbling blocks exist in our further negotiating the purchase: 1) the value being requested by Mr . Diem significantly exceeds our appraised value; and 2 ) the State Legislature has not acted to extend the term on our tax increment district so as to allow the revenues from that district to flow towards the Minnesota Department of Transportation (Highway 101 realignment) . I have had a number of telephone con- versations with Mr. Diem and I am confident that he would not agree with the facts as I have listed them above. I believe that Mr. Diem would tell you that the City ' s appraiser, Harvey Swenson, is rude; that the City coerced them into following the course of action that they are presently following, and that the he is only trying to be a good guy and to sell the property for his costs . Unfortunately, in trying to determine whether the City ' s appraiser could consider all salient facts, we have been unable to obtain from Mr. Diem any of the factual documents demonstrating his cost basis . Placing all of the above to the side, this office has seen where last minute desperation sales by a long-term resident have turned into unjustified windfalls for developers. This fact simply recognizes certain weaknesses in the appraisal/court process. I IIMayor and City Council February 27 , 1989 Page 3 If we currently have the opportunity to work directly with Mrs . Bongard and to arrive at a purchase price, I would highly recom- mend such. Recognizing that the eventual purchase would be $300 ,000 , which the City does not have, the purchase agreement would have to be in the form of an option. An option amount of approximately $30 ,000 would provide Mrs . Bongard with some monies and, if the City failed to exercise that option within 90 days , would allow her to remarket the property for whatever value she ' thought could be achieved. I do not know if this solution can in any way be achieved, but I would like to explore options with the City Council Monday evening. Again , please recognize that my preference would have been to solely have the developer move ahead with whatever development plans he had in mind. Whether we coerced him into his current position or not, the loser is Mrs . Bongard - such being the reason for asking for Council consideration. Tfa 4 .., I t 1 I , ' ' II I 7- 7},Q.. -- 7-- -____ III - )• n _ _ , _ __.• 4 _ga,7,4 ,..x. a__ J--4 )\- , = __- _ , i --- i / 0 - ) • - ,p-a7---2-, 4(i /? P7 bo--e 1 __ 7 . - . __e,--;„ , .L-. _ ( z i,-,_ _„7,4- z-ki, _21/4 -11. . a ,0_772, _ ....,. _. if - ,, , ,,g .______A / I i .,),24_, F , "„69 , , , , . ) ---6 , - i Z I .0 1 a, I * . I I , I I /21("P IF . 1- Zi ZfIligi. (4 ' ' k 1 - g , , / a,,,,, ,/ 0 ,/ , li, ; I7 7 .,,,,,_,,f,d' / `,,/ , /6( . F", , / . ,-L I ,,-,- • ,__Jo, 4 P i • ._,,d' -ck),L-7 0-ii2 .2 , 0,, 01 p I I U r 7 el _,,, / 1 1 7 ,/ / __ ,T /,(, , _ e„-,„(_z, ,,z( --f- 4.--( ,0,., 9 n t ., If 4)),g__?1,/ aryl :d- ... rf I 7).%)740 47-7_ 7/---- ., e2 0,—kyz__ •/ , u9 - I , II 1 I I I MIN _ 1 • MEMO To: Donald Ashworth, City Manager From: Fred Hoisington, Planning Consultant Subject: Bongard Property Acquisition Date: 2-22-89 ' Don, as you know from our recent discussions, the Bongard property , located in the middle of the proposed Trunk Highway 101 also has some pressing issues that need to be resolved in the near future. The purpose of this memo is to establish how we should proceed with a prospective 111 acquisition of the property. I will give a little history as to how we have come to this point. 1 Abby Bongard lives in the house located on the north side of West 78th Street just east of Dakota Avenue. She has allegedly had two buyers for the property at $330,000. The first buyer backed out because of the prospective Highway 101 improvements but the second, Bill Diem of Meid Development and Construction, still wishes to acquire the property at that figure. He is fully aware of the Highway 101 relocation proposal but would like to affect an agreement with the City at a considerably higher number to cover some of his already incurred costs and to protect his financing with his lender. g According to Diem, he was in the process of beginning , from the City of Chanhassen at the time Alternative 2A was approved by approvals the City Council. He was proposing to build a retail development which was to include a garden shop and all of that has been put on hold pending his efforts to resolve the difficulty with the City. We requested that Harvey Swenson prepare an appraisal for the property in October, 1988, but it soon became apparent that the difference between the asking price and our appraisal was substantial. At that point we turned the matter over to Roger Knutsen. We have indicated to Bill Diem that everything hinges on the City's success with extending its Economic Development Tax Increment District and that the best case scenario would be that the Legislature would extend that District by up to three years sometime in June of 1989. I have indicated both to Mr. Diem and 1 I , . 1 Abby Bongard that if the Tax Increment District is not extended I Legislature, the City will have no source of funding for the north by the Highway 101 or for the acquisition of the Bongard ortlt Ieg near of future, g' property in the near IAs we understand it, Bill Diem has hired an attorney to see what recourse he might have with the City given the affect proposed TIC 101 I his project. I have told Abby Bongard and Stev has had on that we will probably not be able to negotiate a settlement Plowman Bill Diem m realtor, Ibut may be able to work out an agreement with her. Abby Bongard's problem is that as part of the deal to sell her I house to Bill Diem, Steve Plowman has commenced construction of a new home for her in anticipation that the Diem transaction would be completed new I and that she would be able to pay for her new house with cash orealized from that transaction. The house is within 30 days of realized has no way to finance a mortgage so that she can take posess onncy and she Iproperty. She is presently faced either with giving up of house new selling the old house in the very near future to either the City or Bill use . As you can see, no matter whom she sells the property to, everything Dr em. I ultimately depends on the City's ability to still the near term. What Abby would like from the City, assuming in arrive at an agreement with Diem, is enough cash down, , cannot I off her new home and an agreement with the City at a ' t purchase to price interest over the term of the agreement. When I met t withclAbb ,price I Steve Plowman on February 16, 1989, that was where they said they would like to be with the City in the near term. Y t17e} IWhat I indicated to them on the 16th was that I would contact you and Roger Knutsen regarding the status of the acquisition from Diem asked if we could set another date for a meeting at which I could give I them a status report and perhaps come back with a ro give that I would be willing to do that but again reiterated al that virtually Ieverything would depend on how the Legislature deals with the City's request to extend the Tax Increment District in the light of the rather large up front payment that Abby Bongard wishes to have for her property. I This is a very difficult ficult problem in that Abby cannot get a mortgage on the new home because she has insufficient income to qualify. If this whole I 2 • deal is interminably dragged out, she will most certainly have to give up the new house and remain in her present residence until such time as the City can find funding for the proposed north leg of Highway 101 . At this point in the process, I frankly do not know what to do to resolve this difficult problem. It would seem to me that we might best ask the City Council how to proceed with Abby Bongard. If we could make an inquiry of the Council at its next meeting, I would be able to report to Abby and Steve Plowman on March 1, 1989 accordingly. I If you have questions about any of the above, do not hesitate to give me a I call. I I 1 1 r 3 ' • . CITY O F • 140 CHANHASSEN • 1 690 COULTER DRIVE • P.O. BOX 147 • CHANHASSEN, MINNESOTA 55317 (612) 937-1900 1 1 February 23, 1989 Representative Becky Kelso 329 State Office Building 1 St. Paul, MN 55155 Dear Becky: 1 Attached please find a copy of a letter I am sending to Commissioner Derus requesting a meeting between the City of Chanhassen and his office. I have noted in the letter your 1 desire to attend that meeting. Any help you could Provide in establishing a meeting date would be sincerely appreciated. 1 I am also attaching copies of correspondence regarding timing for the TH 101 Realignment Project as well as a letter from one of our residents who is highly affected by that project. 1 Thank you again for your help. Sincerely, 1 Don Ashworth City Manager 1 DA:k Enclosures 1 1 i 1 1 CITYOF CHANHASSEN 690 COULTER DRIVE • P.O. BOX 147 • CHANHASSEN, MINNESOTA 55317 (612) 937-1900 1 February 23, 1989 1 Commissioner John Derus 1 Hennepin County Board A-2400 Government Center Minneapolis, MN 55487 - Dear Commissioner Derus : As can be seen from the attached correspondence, the realignment of TH 101 through the City of Chanhassen is progressing rapidly. I would sincerely appreciate meeting with you on this issue. Senator Schmitz and Representative Becky Kelso have asked if they could attend such a meeting. Please notify me as to a time that may be convenient for you. Additionally, if you would like any additional information in advance of meeting, please let me know. Sincerely, 1 c__Cr21L'.: 1 Don Ashworth City Manager DA:k Enclosure i 1 1 1 1 f CITY O F • CHANHASSEN1 ' \ -, , 690 COULTER DRIVE • P.O. BOX 147 • CHANHASSEN, MINNESOTA 55317 (612) 937-1900 1 1 February 23, 1989 • Senator Robert Schmitz 235 State Capitol 1 St. Paul , MN 55155 Dear Bob: 1 Attached please find a copy of a letter I am sending to Commissioner Derus requesting a meeting between the City of Chanhassen and his office. I have noted in the letter your 1 desire to attend that meeting. Any help you could provide in establishing a meeting date would be sincerely appreciated. 1 I am also attaching copies of correspondence regarding timing for the TH 101 Realignment Project as well as a letter from one of our residents who is highly affected by that project. 1 Thank you again for your help. Sincerely, aC71--'71 1 1 Don Ashworth City Manager 1 DA:k Enclosures I i 1 1