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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 12/07/2021 - SECOND READING OF ORDINANCE NO. 157, 2021, APPROPR Agenda Item 7 Item # 7 Page 1 AGENDA ITEM SUMMARY December 7, 2021 City Council STAFF Nina Bodenhamer, City Give Director Ken Mannon, Operations Services Director John Duval, Legal SUBJECT Second Reading of Ordinance No. 157, 2021, Appropriating Prior Year Re serves from the General Government Capital Expansion Fee Account in the Capital Expansion Fee Fund for the Purchase of the Condominiums in the Civic Center Parking Structure. EXECUTIVE SUMMARY This Ordinance, unanimously adopted on First Reading on Novem ber 16, 2021, appropriates $975,000 from the reserves in the City’s General Government Capital Expansion Fee Account in the Capital Expansion Fee Fund to be used for the acquisition of the eight condominium units located at 144 North Mason Street and which are on the ground floor area along the western face of the City’s Civic Center Parking Structure (the “Condominiums). The purchase price for the Condominiums is $975,000, which is substantially below their appraised fair market value of $3,700,000. The difference between the appraised fair market value and the $975,000 purchase price is being made by the current owner of the Condominiums, Civic Center, LLC, as a charitable donation to the City. STAFF RECOMMENDATION Staff recommends adoption of the Ordinance on Second Reading. ATTACHMENTS 1. First Reading Agenda Item Summary, November 16, 2021 (w/o attachments) (PDF) 2. Ordinance No. 157, 2021 (PDF) Agenda Item 14 Item # 14 Page 1 AGENDA ITEM SUMMARY November 16, 2021 City Council STAFF Nina Bodenhamer, City Give Director Ken Mannon, Operations Services Director John Duval, Legal SUBJECT First Reading of Ordinance No. 157, 2021, Appropriating Prior Year Reserves from the General Government Capital Expansion Fee Account in the Capital Expansion Fee Fund for the Purchase of the Condominiums in the Civic Center Parking Structure. EXECUTIVE SUMMARY The purpose of this item is to appropriate $975,000 from the reserves in the City’s General Government Capital Expansion Fee Account in the Capital Expansion Fee Fund to be used for the acquisition of the eight condominium units located at 144 North Mason Street and which are on the ground floor area along the western face of the City’s Civic Center Parking Structure (the “Condominiums). The purchase price for the Condominiums is $975,000, which is substantially below their appraised fair market value of $3,700,000. The difference between the appraised fair market value and the $975,000 purchase price is being made by the current owner of the Condominiums, Civic Center, LLC, as a charitable donation to the City. STAFF RECOMMENDATION Staff recommends adoption of the Ordinance on First Reading. BACKGROUND / DISCUSSION City Give Since its inception in 2018, City Give has facilitated a range of donations of real property from 26 acres of property for the expansion of the Two Trees Natural Areas to water shares; from mineral rights to five acres adjacent to the Southridge Greens golf course. The donation of real property is a tangible investment in the City’s mission, values and services to our residents. Asset-based giving requires strict adherence to IRS guidelines and depends on the staff determination if any potential donation is in the long-term best interests of the City. Per IRS requirements, an appraisal must be performed by the seller within 60 days of closing to substantiate a charitable gift. The Condominiums The Condominiums are in a 15,629-square foot, urban office condominium building located at 144 North Mason, in Fort Collins, Colorado. Constructed in 2001, and renovated in 2014, the Condominiums consist of eight individual commercial condominium units within the City’s Civic Center Parking Structure. Units 1 and 2 are currently combined for occupancy by Fort Collins Police Services. Units 4, 5, and 6 are combined and operate as an executive office suite facility with private offices and shared conference and reception areas. Units 3, 7 and 8 are each separately leased to businesses. COPYATTACHMENT 1 Agenda Item 14 Item # 14 Page 2 The Condominiums are owned by Civic Center, LLC (“Civic Center LLC”). However, the Condominiums are located on real property currently owned by the City, which property is the ground floor area along the western face of the City’s Civic Center Parking Structure (the “Property”). In 1998, the City entered into a ground lease with Phelps Program Management LLC (“PPM”) leasing the Property to PPM for a term ending December 31, 2039, (the “Ground Lease”). The Ground Lease provides that when it terminates in 2039, the City becomes the owner of the Condominiums without any payment obligation to the Ground Lease tenant. In 2003, PPM sold the Condominiums and assigned its rights and obligations under the Ground Lease to Civic Center LLC. Civic Center LLC has owned the Condominiums since then and leased the units to various entities and businesses. As such, Civic Center LLC is also the current tenant under the Ground Lease. Charitable Donation Civic Center LLC and the City have been in negotiations to enter into a Purchase and Sale Agreement (Agreement) under which Civic Center LLC will convey the Condominiums to the City and Civic Center LLC and the City will agree to the termination of the Ground Lease. Civic Center LLC has agreed to do this for $975,000 even though it has an appraisal (Attachment 1) that its interests in the Condominiums and Ground Lease have a fair market value of $3.7 million. Civic Center LLC wishes to donate the difference between this $3.7 million fair market value and the $975,000 as a charitable donation to the City. However, the City’s obligation under the Agreement to purchase the Condominiums is contingent on the City approving this Ordinance appropriating the $975,000 from the reserves in the City’s General Government Capital Expansion Fee Account in the Capital Expansion Fee Fund (General Government CEF Reserves). Also, Civic Center LLC needs for this transaction be completed by the end of this year for tax reasons. Use of General Government CEF for Acquisition Council will also be considering a Resolution to approve the City’s Civic Center Master Plan (the “Master Plan”) and to adopt the Master Plan as an element of the City’s Comprehensive Plan. The Master Plan identifies the Condominiums as capital improvements within the “Civic Center Area” to be acquired by the City by end of this year to house the offices of the City’s Parking Services Division. Parking Services is currently in the City’s 215 North Mason Street building. Moving Parking Services to the Condominiums will also allow the Municipal Court offices to expand within the Mason Street building. If Council approves Resolution 2021-105, the General Government CEF Reserves may be used to acquire the Condominiums. The City Code authorizes the General Government CEF Reserves to be used to fund the construction or acquisition of capital improvements to be used to provide “general government services,” such as offices for Parking Services, if such improvements are identified in an “applicable capital improvements plan,” such as the Master Plan. Here, the Condominiums have been so identified in the Master Plan. As required by Section 9 in City Charter Article V, the Interim City Manager is recommending this supplemental appropriation and has determined the funds for it are available in and previously unappropriated from General Government CEF Reserves. The management, utilization and operations of the Condominiums will be guided per City strategic priorities and the designation of “public purpose” which defines IRS charitable exemptions and must be used to provide general government services, as opposed to more specific services such as utilities or uses covered by other capital expansion fees. For example, the City collects a capital expansion fee to fund capital improvements to be used for police, fire, community park, neighborhood park and transportation services. CITY FINANCIAL IMPACTS Capital expansion fees are paid by new development to “buy-in” into the estimated value of the capital improvements the City must provide its services related to transportation, fire, police, general government, neighborhood parks, and community parks. The collected fees are then used to fund the acquisition, construction and leasing of future capital improvements to provide such services needed due to new development. The General Government CEF Reserves have a current balance of approximately $12 million. COPY Agenda Item 14 Item # 14 Page 3 This Ordinance, if adopted, will authorize the reduction of the General Government CEF Reserves by $975,000. ATTACHMENTS 1. Appraisal (PDF) 2. Council Finance Committee Minutes (excerpt) (PDF) COPY -1- ORDINANCE NO. 157, 2021 OF THE COUNCIL OF THE CITY OF FORT COLLINS APPROPRIATING PRIOR YEAR RESERVES FROM THE GENERAL GOVERNMENT CAPITAL EXPANSION FEE ACCOUNT IN THE CAPITAL EXPANSION FEE FUND FOR THE PURCHASE OF THE CONDOMINIUMS IN THE CIVIC CENTER PARKING STRUCTURE WHEREAS, located at 144 North Mason in Fort Collins are eight condominium units built within and located on the ground floor of the western face of the City’s Civic Center Parking Structure (“Condominiums”); and WHEREAS, the Condominiums are currently owned by Civic Center, LLC (“Civic Center LLC”), but the City owns the real property on which the Condominiums sit (the “Property”); and WHEREAS, the City is the lessor and Civic Center LLC is the lessee under a 1998 ground lease that authorizes the Condominiums to be located on the Property for a term ending December 31, 2039 (the “Ground Lease”); and WHEREAS, the Ground Lease provides that when the Ground Lease terminates at the end of 2039, the City becomes the owner of the Condominiums without any payment obligation to Post Modern; and WHEREAS, Civic Center LLC wishes to convey the Condominiums to the City now and agree with the City to the termination of the Ground Lease; and WHEREAS, Civic Center LLC has obtained a formal appraisal of its ownership interests in the Condominiums and the Ground Lease that appraises them as having a total fair market value of $3.7 million; and WHEREAS, Civic Center LLC has, however, agreed to convey the Condominiums to the City and to the termination of the Ground Lease in return for the City paying Civic Center LLC only $975, 000, and thereby making a charitable donation to the City for the difference between the $3.7 million appraised value and the $975,000 payment; and WHEREAS, Civic Center LLC and the City intend to enter into a Purchase and Sale Agreement memorializing their agreement for this purchase, the termination of the Ground Lease and the charitable donation (the “Purchase Agreement”), which transaction Civic Center LLC needs to be completed by the end of this year for tax reasons; and WHEREAS, the City’s obligations under the Purchase Agreement to purchase the Condominiums for $975,000 and agree to the termination of the Ground Lease, will be subject to and contingent upon the City Council adopting this Ordinance on second reading and it becoming law 10 days after such adoption, as provided in the City Charter; and -2- WHEREAS, the purchase is proposed to be funded with this appropriation from the prior year reserves in the City’s general government capital expansion fee account in the capital expansion fee fund (“General Government CEF Reserves”); and WHEREAS, City Code Section 7.5-22(a) provides that General Government CEF Reserves may be used for the acquisition of capital improvements to be used to provide general government services if such improvements are identified in an applicable capital improvements plan that is part of the City’s Comprehensive Plan; and WHEREAS, on November 16, 2021, the City Council adopted Resolution 2021-105 which adopted the 2021 Civic Center Master Plan as an amendment to the City’s Downtown Plan, which Downtown Plan is an element of the City’s Comprehensive Plan (the “Civic Center Master Plan”); WHEREAS, the Civic Center Master Plan identifies the Condominiums as buildings to be acquired by the City for use by it in the near future as offices to provide general government services, thereby making the General Government CEF Reserves available for use to acquire the Condominiums; and WHEREAS, this appropriation benefits the public health, safety and welfare of the residents of Fort Collins and serves the public purpose of facilitating the acquisition of City offices to provide general government services; and WHEREAS, Article V, Section 9 of the City Charter permits the City Council, upon the recommendation of the City Manager, to appropriate by ordinance at any time during the fiscal year such funds for expenditure as may be available from reserves accumulated in prior years, notwithstanding that such reserves were not previously appropriated; and WHEREAS, the Interim City Manager has recommended the appropriation described herein and determined this appropriation is available and previously unappropriated from the General Government CEF Reserves. NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF FORT COLLINS as follows: Section 1. That the City Council hereby makes and adopts the determinations and findings contained in the recitals set forth above. Section 2. That there is hereby appropriated from the General Government CEF Reserves the sum of NINE HUNDRED SEVENTY-FIVE THOUSAND DOLLARS ($975,000) to be expended for the acquisition of the Condominiums as provided under the Purchase Agreement. -3- Introduced, considered favorably on first reading, and ordered published this 16th day of November, A.D. 2021, and to be presented for final passage on the 7th day of December, A.D. 2021. __________________________________ Mayor ATTEST: _______________________________ Interim City Clerk Passed and adopted on final reading on the 7th day of December, A.D. 2021. __________________________________ Mayor ATTEST: _______________________________ Interim City Clerk