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03222010CRACM' OF HOME OF PELICAN ISLAND COMMUNITY REDEVELOPMENT AGENCY (CRA) (CITY COUNCIL) MINUTES MONDAY, MARCH 22, 2010 5:00 PM CITY COUNCIL CHAMBERS 1225 MAIN ST, SEBASTIAN, FL Continuation of March 10, 2010 CRA Meeting 1. Mayor Gillmor called the CRA meeting to order at 5:00 p.m. 2. The Pledge of Allegiance was recited. 3. ROLL CALL City Council Present: Mayor Richard H. Gillmor Vice -Mayor Jim Hill Council Member Andrea Coy Council Member Eugene Wolff Council Member Don Wright Staff Present: City Manager, Al Minner City Attorney, Robert Ginsburg Deputy City Clerk, Jeanette Williams Growth Management Director, Rebecca Grohall MIS Systems Analyst, Rob Messersmith 4. UNFINISHED BUSINESS FROM 3/10/10 A. Council Deliberation and Action on Stan Mayfield Working Waterfront Dabrowski Purchase (City Manager Transmittal, 3/10/10 Draft Minutes, Backup from 3/10/10 Meeting, Agreement) MOTION by Mayor Gillmor and SECOND by Mr. Wright to take the motion from the table that Council discussed at the last CRA meeting. Ms. Coy asked for that motion to be repeated. Mayor Gillmor stated the motion was to approve chart number two on circle page 13 and instruct the City Manager to negotiate with the trust at the $571,000 number. Community Redevelopment Agency Meeting March 22, 2010 Page Two Mr. Hill clarified that they are not voting on that motion. The City Attorney confirmed the motion is procedural to remove the motion from the table. Result of the roll call: AYES: Hill, Coy, Wolff, Wright, Gillmor NAYS: None Motion carried to remove the motion from the table. Mr. Wright said there are certain facts they have been made aware of including the appraisals which he studied and made some notes which he distributed. (See Attached) He said if you invest with a bank right now, you are lucky to get 2% and there is a substantial argument for the value of the lease and he felt the price of $750,000 is a reasonable amount to pay. Ms. Coy said she too was willing to pay a higher purchase price because the highest best use is commercial. She noted it took a long time to get the trustee to come to the $750,000 number. Mayor Gillmor said the project will have to net $4,000 a month just to cover the note, he couldn't find it in his background to spend 50% over valuation for the property, he said to let negotiation take its course and asked the City Manager if every dollar over $571,000 will be coming out of the City's coffers. The City Manager confirmed it would be coming out of the CRA monies. Mayor Gillmor said they should at least try to get the property at $571,000. Mr. Hill said he was willing to go above appraised value looking to the intrinsic value noting the City could have had the property where the Hess gas station is located. He said the CRA has the opportunity to acquire $3 M in riverfront property, forever giving taxpayers that property for $750,000 with 85% coming from the state. He said this was a good deal for the citizens that can't be taken away. Mr. Wolff said unless you can substantiate for yourself that the previous appraisal was done as commercial, you cannot take that to be correct as appraisals are always for the highest and best use. He said the proposal in front of legislators to have tax assessors to use the current use is because there is no business for commercial waterfront right now. He said he didn't understand 10% return rate on the investment of $750,000 if you receive a $20,000 return. Mr. Wright said he wasn't addressing the purchase price, but the return valuation of what you have to invest to get a certain rate of return. He said it is based on what $20,000 income is worth to you and what you would be willing to put out to get that. Mr. Wolff said it is difficult to pay more than the appraised value in this current market. 2 Community Redevelopment Agency Meeting March 22, 2010 Page Three 5. PUBLIC INPUT Mayor Gillmor said he didn't think anyone would like to see condominiums and noted .38 of an acre will only fit two units with not enough parking. He said it is still tax money and the Board has a fiduciary responsibility not to pay more than it's worth. Mr. Wolff said if this was his own money, he would want a sounding to understand the level of water. The City Manager said a depth study has not been done on the Dabrowski dock, but there are boats that go in and out of there everyday. He also said Hurricane Harbor parcel is not deep enough and will probably not be permitted as a commercial waterfront. Mr. Wolff asked the City Manager to explain why the Archie Smith parcel cannot function after the hurricanes. The City Manager said he did not have that answer, but to protect the City in the future, the lease will say Fishermen's Landing is responsible for maintaining the channel's depth. Ms. Coy explained that the Archie Smith parcel was tied to Capt. Butcher's, whose owner was holding out for $300,000 more from the County and who is still sitting with unsold property; and over the years the hurricanes filled in the channels. Ms. Coy asked the Growth Management Director if the City received copies of the trust's appraisal. The Growth Management Director said the trust didn't release it. Mr. Wright asked if the Dept. of Community Affairs is holding the trustee's appraisal. The City Manager said he received the state's appraisal late, and clarified for the record that the trust has not shared their appraised number but their counter offer started out at $1.3 M. Result of the roll call: AYES: Wolff, Gillmor NAYS: Coy, Wright, Hill Motion failed to have the City Manager to negotiate with the trustee at $571,000 MOTION by Mr. Hill and SECOND by Mr. Wright to offer $750,000 for the Dabrowski property per the option agreement signed by the Dabrowski trustees. Keith Clark, resident since 1980, said offering $750,000 makes comps in the neighborhood increase and gives economic stimulus. Chuck Mechling, Collier Club, said appraisals are based on current comps and securing waterfront property is always a solid investment. 3 Community Redevelopment Agency Meeting March 22, 2010 Page Four Approved at the ATTEST: Result of the roll call: AYES: Wright, Hill, Coy NAYS: Wolff, Gillmor Motion carried to have the City Manager offer $750,000 to the Dabrowski trustee. 6. Being no further business, Mayor Gillmor adjourned the CRA meeting at 5:45 p.m. Richard H. Gillmor, Mayor 2E 20/C CRA meeting. ezEtt Sally A. Maio, MJNC City Clerk 4 Submitted by Council Member Wright to CRA Board at their March 22, 2010 meeting The working waterfront appraisal does not reflect the following items which deserve consideration: Appraisal is based on highest and best use of property as single family development parcel and the appraiser thus has decided not to take into account the exiting use of the property. Note page 46 of appraisal dated 11/11/09. this has caused a valuation reduction from commercial sq footage rates to residential and eliminates the use of economic analysis as respects the leased docks. It is interesting to note that the state legislature is considering a proposal to require tax assessors to use current use of waterfront property in setting taxable value instead of highest and best use which is speculative by its very nature. While mentioned in the report of Nov 9 on page 38 there is no credit given for the impact of assemblage which is what is being done using the working wateifiont grant money. The assumption is still made that the use would be for a single family residence. Since the City of Sebastian and any tenant would be using the property in substantially the same commercial manner as used now and since the City would be assembling this property in combination with surrounding properties; I believe that the following should be taken into consideration. 1. The commercial sq ft valuation rate not discounted and shown on page 70is a rate of $47.67. This would when multiplied times the land sq footage indicate a value of 16,553 x 47.67 788,128 2. The economic value based on the annual lease payments of approx $20,000 less annual submerged land lease rent indicated to be less than $2,000 This leaves a return of $18,000 which based on a return on investment of 8% would create a value of $225,000. if a 6% rate of return was used, the value would be $300,000 or a 10% rate of return would be $180,000. Using the above numbers and considering the planned use of this property and that it is part of an assemblage, it would be possible to justify a valuation of $788,128 plus $180,000 $968,128 as respects the value to the City. However, the fact that the property on its own has a value of $500,000 would lead me to temper a purchase offer as follows.. As a result of the above analysis, I feel that the option price of $750,000 is a reasonable amount to pay.