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Home My WebLink AboutOrdinance No. 2968-2017Sponsored by: Council Member Boyle n vn �p�v CITY OF KENAI ORDINANCE NO. 2968-2017 AN ORDINANCE OF THE COUNCIL OF THE CITY OF KENAI, ALASKA, AP OPRIATING GENERAL FUND BALANCE FUNDS INTO GENERAL FUND LAND ADMINIS TION -LANDS FUND FOR THE PURCHASE BY THE CITY OF KENAI'S GENERAL F D OF AIRPORT PROPERTY OUTSIDE THE AIRPORT RESERVE CONSTITUTING AP OXIMATELY 16.49 ACRES OF REAL PROPERTY DESCRIBED AS S1/2 S1/2 SW1/4, S TION 33,T6N, R11W, SEWARD MERIDIAN, COMMONLY REFERRED TO AS 'LAWT N ACRES' AND DEED RESTRICTING THE FUTURE USE OF THE PROPERTY TO 'L/ KS AND RECREATIONAL USES TO BE RETAINED BY THE CITY FOR A PUBLIC PURP E. WHEREAS, the City obtained the 16.49 acre parcel (Lawt,qh Acres) from the Federal Aviation Administration (FAA) in 1964, via a Quit Claim Deed gen ally restricting the use of the property to development, improvement, operation or maint enan of the Airport; and, WHEREAS, pursuant to a request by the City o April 20, 1983, the FAA issued a Deed of Release for Lawton Acres containing a Reverter lause similar to the original Quit Claim Deed that provides that if the terms and conditions the conveyance document are not followed, the property will revert to the federal governmen at its option; and, WHEREAS, in accepting the Deed o elease, the City Council passed Resolution 83-48 providing that proceeds from any sale r lease of the property would be devoted to the Airport for development, improvement, operati or maintenance; and, WHEREAS, Lawton Acres is no needed by the Airport for Airport purposes; and, WHEREAS, the funds utili d for the purchase will not leave the City, but transfer from the General Fund to the Airpo for Airport uses; and, WHEREAS, Lawton A es is currently and has historically been zoned as Conservation allowing for Parks and Recre ional uses; and, WHEREAS, the ity's 2016 Comprehensive Plan provides for Lawton Acres to be parks, recreation and pen space; and, WHEREAS istoric and recent efforts by the City to sell Lawton Acres for development purposes has been et with public opposition in favor of maintaining the existing uses; and, 5, the City Council and majority of public comments reflect a desire for a permanent for the property eliminating future uncertainty and conflict; and, WHEREAS, there is significant public support, expressed in writing and orally at public meetings, for the purchase of Lawton Acres by the General Fund to allow for preservation of property; and, New Text Underlined; [DELETED TEXT BRACKETED] Ordinance No. 2968-2017 Page 2of4 WHEREAS, preserving the property in its current state or allowing limited Parks and Recreational development will maintain the sanctity of the surrounding residential neighborhoods and provide separation from industrial and commercial areas; and, WHEREAS, at least parts of the 16.49 acres, which specifically includes the 'Field of Flowers,' is already used as a public park; and, WHEREAS, the City's General Fund has sufficient funds to purchase the property without significant negative implications; and, WHEREAS, KMC 21.15.080 -Appraisal, requires that Airport land be appraised within the last 12 months prior to a sale, and KMC 21.15.180 -Sale, requires the sale to be at fair market value; and, WHEREAS, KMC 22.05.135 -Acquisition of Property, allows the Council to authorize the purchase of property for a public use, after a qualified appraiser has appraised the property; and, WHEREAS, it is in the best interest of the City to purchase the property at its appraised value for the public use of preserving the property in its current state or allowing limited Parks and Recreational development to maintain the sanctity of the surrounding residential neighborhoods and provide separation from industrial and commercial areas and create public parks and recreational opportunities for all residents of the City; and, WHEREAS, placing a deed restriction on the property restricting its use in perpetuity for parks and recreational uses, will accomplish the public purpose in the property acquisition. NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, as follows: Section 1. Form: That this is a non -code ordinance Section 2. Statement of Ownership: That the City of Kenai, on behalf of the Airport is the Owner of the real property described as S 1/2 S 1/2 SW 1/4, Section 33, T6N, R11W, Seward Meridian. Section 3. Public Purpose and Best Interest Findings: That the Kenai City Council further finds the acquisition of the subject parcel to be in the best interests of the citizens of the City of Kenai and that the public interest shall be served by its acquisition for the total purchase price as established by a fair market value appraisal, in accordance with the recitals above which are incorporated herein. That it is further found that the property is not needed for Airport purposes. Section 4. Authorization of Purchase: That the Kenai City Council hereby authorizes the City Manager to purchase the real property described as S 1/2 S 1/2 SW 1/4, Section 33, T6N, R1 1W, Seward Meridian, for the total purchase price as appraised, on a form approved by the City Attorney, to be retained by the City for public use and restricted as provided below. New Text Underlined; [DELETED TEXT BRACKETED] Ordinance No. 2968-2017 Page 3 of 4 Section 5. That estimated revenues and aoorooriations be increased as follows: General Fund Increase Estimated Revenues — Appropriation of Fund Balance: Increase Appropriations: Land Administration — Land: $ Section 6. Title: That Title shall be conveyed by a Quit Claim Deed. Any instrument conveying Title to the property shall include the following restrictions, promises, and/or covenants: (a) that the City of Kenai reserves unto that the Grantee expressly agree for itself and its heirs, executors, administrators, successors, transferees, and assigns, for the use and benefit of the public a right of flight for the passage of aircraft in the airspace above the surface of the property, together with the right to cause in said airspace such noise as may be inherent in the operation of aircraft, now known or hereafter used, for navigation of or flight in the said airspace, and for use of said airspace for landing on or at and for taking off from or operating on Kenai Municipal Airport; and, (b) that the Grantee expressly agree for itself and its heirs, executors, administrators, successors, transferees, and assigns to restrict the height of structures, objects of natural grown, and other obstructions on the property to a height of not more than 242 above mean sea level; and, (c) that the Grantee expressly agree for itself and its heirs, executors, administrators, successors, transferees, and assigns to prevent any use of the property which would interfere with landing or taking off of aircraft at the Kenai Municipal Airport, or otherwise constitute an airport hazard; and, (d) that in perpetuity, the use of the property shall be restricted for public park, recreation; and, (e) that all covenants heretofore stated, shall run with the land and shall inure to the benefit of, and be binding upon the heirs, executors, administrators, successors, transferees, and assigns of the parties to the contract for sale and conveyance. Section 7. Proceeds of Sale: That should a sale of the property be finalized, all revenues from the sale shall be deposited in the Airport Land Sale Permanent Fund for use in the development, improvement, and operation of the Kenai Municipal Airport and as otherwise required in that Deed of Release executed on April 20, 1983 and recorded at Book 209, Pages 30-31, Kenai Recording District. Section 8. Severabilitv: That if any part or provision of this Ordinance or application thereof to any person or circumstances is adjudged invalid by any court of competent jurisdiction, such judgment shall be confined in its operation to the part, provision, or application directly involved in all controversy in which this judgment shall have been rendered, and shall not affect or impair the validity of the remainder of this Title or application thereof to other persons or circumstances. The City Council hereby declares that it would have enacted the remainder of this Ordinance even without such part, provision, or application. New Text Underlined; [DELETED TEXT BRACKETED] Ordinance No. 2968-2017 Page 4 of 4 Section 9. Effective Date: That pursuant to KMC 1.15.070(f), this ordinance shall take effect 30 days after adoption. ENACTED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, this 21st day of June, 2017. ATTEST: City Clerk BRIAN GABRIEL SR., MAYOR New Text Undedined; [DELETED TEXT BRACKETED] Introduced: June 7, 2017 Enacted: June 21, 2017 Effective: July 21, 2017 r ' �eaae with a Past, nwith a gape 210 Fidalgo Ave, Kenai, Alaska 99611-7794 Telephone: (907) 283-75351 Fax: (907) 283-3014 the tidy a f/ www.kenai.city KENAI, ALASKA MEMORANDUM TO: Mayor Brian Gabriel and Kenai City Council FROM: Council Member Boyle DATE: June 1, 2017 SUBJECT: Ordinance No. 2968-2017 regarding Lawton Acres Ordinance 2968-2017 proposes to purchase Lawton Acres utilizing General Fund, Fund Balance and deed restrict the property for Parks and Recreational uses. The funds utilized for the purchase will stay within the City and will be utilized for the benefit of the City's Airport. This direction is consistent with historic and recent public testimony and provides a final solution and direction for Lawton Acres. Kenai Municipal Code requires that the property be appraised and the purchase price reflect fair market value. There is not a recent appraisal on the property. This Agenda includes an Action Approval item authorizing the City Manager or City Attorney to obtain an appraisal. It is my understanding that an appraisal can be accomplished by June 19, 2017. This would allow the Council to know the purchase price of the property prior to voting on enactment of this Ordinance at Council's June 21, 2017 meeting. Your consideration is appreciated. Compromise Between City Residents and The City of Kenai: Lawton Acres. Background: A: The area known as Lawton Acres (see attachment)- a stretch of land in the City of Kenai, Alaska - running along the Kenai Spur Highway from Walker Lane to Rogers Road on the North side and from Walker Lane to Rogers Road along Lawton Drive on the South side — continues to resurrect itself for consideration by the City Council/Planning and Zone Commission for rezoning, conditional use considerations, and potential sale. B. It would seem to make sense to reach a permanent solution versus revisiting the issue over and over. Note: The land is currently drawn up by the City as four tracts (A -D) (see the attached drawing). Starting on at Tract A on the Walker Lane side, the lot maybe 150 feet deep, but there is only 100 feet of tree cover. For Tracts A and B, one can see the Spur Hwy through the trees already. Lack of an adequate buffer is a paramount issue with the area's residents. The Walker lane end of Lawton Acres (Tracts A and B) appears to be too narrow to allow a realistic - commercial to residential -transition. A 30 feet buffer at Tract A and B is just too thin in width! Tract C (Field of Flowers) is a former fire training ground and is plagued with contamination. Option: 1. Deem Tracts A, B, and C as not being commercially viable — using the rational of narrowness (lack of adequate buffer) of Tracts A & B and contamination of Tract C. Petition the FAA to deed over to the City without charge and without land sale requirements due to the costly process to make a viable and acceptable buffer or to remediate contamination. The three tracts would then be added to the City Parks systems and would be under the care of Parks and Recreation. 2. With input from the Lawton Acres affected residents, sell, via an acceptable competitive offer, the property (Tract D) from Rogers Road to the beginning of Tract 3 (Field of Flowers) as LIMITED Light Commercial conditional use property- allowing such development as a Professional Office Building, Med icaI(Doctor's Office) or Dental Office. Require using a Spur Highway entrance, or possibly Rogers Road entrance and with limited reduction in trees toward the Lawton Drive side. Proceeds would go into the Airport Fund to further support the Kenai Airport. NOT ALL COMMERICAL USE ZONE BUSINESSES OR STRUCTURES WOULD BE ALLOWED. Stipulations would be made of the purchaser to provide development that has the esthetics and design to be the least conspicuous. Strict adherence to submitted site and building plans would be required. The Lawton Drive/Rogers Road buffer zone could be 150- 200 feet! Since once trees are cut down it is impossible to replace them, close scrutiny is required by City Inspectors or designated personnel in the property Landscape phase. THOUGH IN A PERFECT WORLD, HAVING EVERYTHING STAY THE SAME MIGHT BE IDEALISTIC, THIS COMPROMISE WOULD ALLOW THE AREA TO GET THIS ISSUE BEHIND US. Attachments— Lawton Acres — Tracts A, B, C, and D. Jamie Heinz From: Peter O. Hansen <pohansen@alaska.net> Sent: Thursday, June 15, 2017 9:58 PM To: Jamie Heinz Subject: Testimony in Support of Ordinance No. 2968-2017 Dear Miss Heinz, My wife and I are aware the Kenai City Council is planning to hold a public hearing Wednesday June 21, 2017 on Ordinance No. 2968-2017 regarding Lawton Acres. We strongly support and favor the passage of this ordinance for the following reasons; since we will be out of state that evening we are asking for this information to be submitted as our testimony during the Public Hearing and read into the minutes of it. • Our home at 418 Rogers Road is one of about 80 residences in the Inlet View Subdivision which are effected by noise from the traffic rolling into and out of Kenai. Even though we live a block south of Lawton Street we often hear the Semi -truck tractors starting up from the Wal-Mart traffic light as well as other heavy traffic as they pick up speed leaving town. Preserving Lawton Acres for recreational purposes as it is with the flora and fauna it has helps keep a sound buffer even though it is not perfect for residences south of the highway. • Lawton Acres in its natural state provides a buffer for Inlet View and Central Heights Subdivisions from north winds. • There are an increasing number of children living in Inlet View as well as the many young folks living in Central Heights Subdivision which has probably another 60 homes and there is no City Park ground for these kids and/or their families to play in other than the middle school and high school playground a half mile away, and often these playgrounds have restrictions. • A portion of Lawton Acres has been used for Oil Fire Training which we have observed in the past and this land is contaminated. • Back in the 1970's we and many of our neighbors petitioned the Kenai City Council to have Lawton Acres preserved for, we believe, Conservation, in order for it to remain a natural habitat for plants and animals. If one looks at the area surrounding Lawton Acres, it is the last acreage of forested area on the Southeast side the City Center and shopping areas to serve this purpose. • The portion of Lawton Acres known as Flower Park is utilized by many citizens of the Central Peninsula. We frequently walk thru this park and meet people who are visitors there from surrounding communities. The park serves as an attraction for these individuals with their families to come and shop in Kenai, thus raising sales tax for the City. • Lawton Acres, preserved and dedicated by the City for Parks and Recreation, could further the quality of life for all Kenai s citizens by uniquely developing winding trails throughout parts of it for hiking, biking, skiing, skateboarding, and families pushing strollers ...... trails thru the trees. • We appreciate the time and consideration Kenai Council persons put in on resolving this issue, which keeps returning every few years, and it would be nice to see it resolved which this ordinance would do for the benefit of Kenai's citizens. Peter and Karolee Hansen 418 Rogers Road Kenai, Alaska 99611 Home phone: 907-283-4615 TO: Kenai Mayor Brian Gabriel, City Manager Paul Ostrander, City Attorney Scott Bloom, and Kenai City Council Members FROM: Mary Whiteley, 212 Susieana St., Kenai, AK 99611 DATE: June 30, 2017 RE: Fire Training, Fire Suppression, Contamination and Ecology of Lawton Acres During the Kenai City Council meeting on June 21, 2017, council members expressed a desire to gather as much information as possible to make an informed decision about Lawton Acres. I am providing some information regarding fire suppression agents that may have been used by the City of Kenai Fire Department. Also, I have included a brief overview on possible environmental concerns caused by fires and fire -suppression agents. The city mayor, manager, lawyer, or council members can request from the fire department what types of fire suppression agents were used in the past while providing fire training at Tract C of Lawton Acres, now commonly known as the "Field of Flowers". There are four (4) classes of fire: Class A -Fires involving ordinary solid combustibles. Class B -Fires involving flammable liquids, gases and greases. Class C -Fires involving energized electrical equipment. Class D -Fires involving combustible metals. There are a number of fire suppressants (aqueous and non -aqueous) that may be used. The appropriate method is dependent on the class/type of fire. AQUEOUS FIRE SUPPRESSANTS • Water • Water with Additives (also known as Wetting Agents) -improve water's ability to penetrate porous materials. The addition of chemicals like inorganic salts can lower the freezing point of water, but are corrosive. The addition of chemicals like ethylene glycol or glycerol can lower the freezing point of water without corrosion, but leave a residual liquid that may be flammable. Friction -reducing additives, like sodium carboxymethylcellulose, will adhere to the surface of a combustible material. Aqueous Foams -Class A foams may be used on 3-dimensional solid fuel fires. Class B foams separate fuel from air. They may be used on large flammable liquid fires (oil refineries, aircraft runways, fuel storage areas). There are different categories of aqueous foams of which some have contaminant properties and some do not. NON -AQUEOUS FIRE SUPPRESSANTS Non -Aqueous agents are used in a variety of situations, most especially, with fires that are not compatible with water (metals that react exothermically with water to form hydrogen; inorganic chemicals that react with water to form hazardous by-products; situations where run-off of contaminated ground water would cause groundwater pollution). There are three (3) categories of non - aqueous fire suppressants: Inert Gases, Active Halogenated Agents, Powdered Inorganic Salts (dry chemicals). There are four (4) groups of Inert Gases: • Noble Gases • Nitrogen • Carbon Dioxide • Perfluorocarbons-Some of these fully fluorinated hydrocarbons have limited and restricted use. EPA restricts use to applications where other suppression agents are not technically feasible as the fully fluorinated organic molecules have an extremely long lifetime, or GWP -global warming potential, in the Earth's atmosphere upon discharge). Active Halogenated Agents Use of fully halogenated hydrocarbons, like Halon 1301 and Halon 1211 contribute to the depletion of the Earth's ozone layer. Production of new Halon ceased in 1994. Powdered Inorganic Salts • Dry Chemical Agents These are mainly used for Class B and Class C fires. • Dry Powders These are used for Class D fires. (Dry powders are used for combustible metal fires -not to be confused with Dry Chemical Agents used in Class B and Class C fires). ENVIRONMENTAL CONCERNS CAUSED BY FIRES AND FIRE -SUPPRESSION AGENTS The combustion by-products or remains from a fire after it is extinguished need to be considered for possible toxic compounds. The combustion by-products can be divided into waste, extinguishing water and residue on fire ground soil. Any or all of these may be contaminated depending on the type of fire that was suppressed and what type of suppression agent was used. Extinguishing water run-off can a have a very significant impact on the environment. This can leach into the soil, groundwater and running water. Contamination maybe, but not always, persistent, bio - accumulative and/or toxic (PBT). Environmental management of fires is a fairly recent addition to fire science. The City Council may consider requesting the following information from the Kenai Fire Department: (1) the historic protocol during the fire training at the Lawton Acres site; (2) records of the fires, the class category, the suppression agents used and amount distributed; (3) measures taken for the removal of the fire -site debris, extinguishing water run-off, disposal of residue and site restoration during the time that the land was used for fire training; (4) any site assessment performed at any time during fire training or after it formally ceased. In summary: As a course of due diligence, given the environmental consequences of the fire training at Lawton Acres, it would be prudent for the Kenai City Council to gather as much information as possible from the Kenai Fire Department. References: Principals of Fire Behavior and Combustion, by Richard G. Gann and Raymond Friedman, Fourth Edition, January 2014. Environmental Problems Caused by Fires and Fire -Fighting Agents, by Hans Holemann, University of Wuppertal, Germany. Article for the International Association of Fire Safety Science Symposium 1994 Chemical Name Latent Heat of Liquid Flange: Melting Point, Heat Capacity: Liquid. 4fOfwwfiUOrOmethane Liquid vaporization prg) Boiling Point (°C) Gas (nmol K) Notes water 2260 0. 100 75, 34 - mer(ury 292 -39.357 28.21 HFC-227ea 1,2,4-lnchlaobenzene 263 17, 213 170 leslnnaled), -- t CHCt"ChlWeform 247 -64,61 114,66 F n4logen 200 -210, -196 —,29 A, C bromine 1.94 -7,59 76,36 1 CCI, ((arbon tetrachloride) 19A -23, 71 131,83 1 argon 167 -199,-197 —,76 A, C CF,Br(halon 1301) 119 -169,-58 —.69 P CF, thalon 141 — -183,-128 —.81 P C,F. , (halon 4 10) 102 -128,2 1270,— P (.FSO 88 -108,49 350.280 — n e Yihor-- ( = (rtu9.ne roa`"q re'j.uek P. PlMviilM tine nq.'M.1='tu. Chemical Name Formula Halon Name Common Name 4fOfwwfiUOrOmethane CF 6r ha!an 7301 halon 1301 biomochlorodl8uoromethane CFr810 halon 1211 halon 1211 peniafluaroethane (F,H halon 125 HFC 125 heptafi6VO ropane C,f H halon 37 HFC-227ea dibomotetrarluoruethane C f 8r ha!an 2402 halon 2402 iodotrifluoromethane CF,I halon 13001 FiC-1311 tenabrornobutan(. Cf, hafen4 10 FC 3 1.10 perflrroroethyfisopropyl4etwre C,F,—CP—C F, — FK•5.12mmy2 A — IG 01 awon nitrogen N, — IG 100 52% N. 40%A, 8% CC N :A:CO — 10 541 f( .. &W%&bm: FIC . rLaaodurba+: Fe . $mrdttone. IL . ira 9es. Tables from Principals of Fire Behavior and Combustion, by Richard G. Gann and Raymond Friedman, Fourth Edition, January 2014. Cheutical Name Formula Popular Names) Specific Heat: Heat of baking soca sodium chloride Cup Bunco comma+ salt potassrom bicarbonate Boiling liquid, Vapor Vaporization KCI 'Super K' o-Heptane Ext. Name formulation Point ('C) (Jig K) (Jig) ODP GWP (Volume %) baton 1301 CF Br -S8 —.041 119 12 1030 3.1 Von 13001 CF; -22 0.59, 0.36 111 <0.1 <5 3.1 halon 1211 CF. BrCI -4 1.54, 0,45 134 6 1800 3.1 , HFC-117ea CrftH -16 1.18.0.81 117 0.00 1900 6.1 WC -2361A CFrCH,CF, -1 1.16.0.84 160 0.00 6300 6.5 HFC -125 C,FM -48 1.41,0.80 164 0.00 3450 8.7 HPC -73 CFH -81 4,13.0.73 239 0.00 14800 12 FK-5.1.12mm C,F,COCFr 49 1.10,0.89 88 0.00 V 4.3' HCFC 124 CHCIFCF, -72 1.13,0 14 166 002 014 7.0 IG -541 N,.0. CO -190 —,0.51 110 0.00 0.D0 33 F&3-1.10 C, F,. -2 5.3,— 98 0.00 7000 5.3 BTP CH,CSrCf, - 30 — — 0.003 <0.03 4,6 ' Dale frau r ri.faauw 5 PI&Ju t talle0n Cheutical Name Formula Popular Names) sodium bicarbonate NaHCO, baking soca sodium chloride NaCl comma+ salt potassrom bicarbonate KHCO 'Purple K' potassium chloride KCI 'Super K' polassrum suilase K:SO, 'Ka -ate Masses' monoammonium phosphate (NH)HrpO, 'ABC' or multipurpow urea . potassium b;ca,bonate NH CONN . KHCO 'h!Dnoea Tables from Principals of Fire Behavior and Combustion, by Richard G. Gann and Raymond Friedman, Fourth Edition, January 2014. 2 GENERAL The various aspects of possible environmental pollution caused by fires and by &e -fighting agents are shown in figure 2. The substances released by a working fire have an influence on the atmosphere, the vicinity of the burning object, the soil, the ground water, and the surface waters in very diverse manners. I shall only discuss the chemical aspects of pollution. My report does not include other dangers to the environment, such as the heat of a fire, bursting tanks, vapour cloud explosions, etc. atmosphere —_ carbon dioxide soot distribution wind �\ carbon monoxide water dilution other aces other condensates sedimentation extinguishing intoxication agents -water-powder T�burning object recycling -foam -gases Il. fire residues • fire debris waste extraction by water vicinity soil /waters contamination sewerage system ground /groundwater » surface waters FIGURE 2: Effects of fires and extinguishing agents on the environment Table from Environmental Problems Caused by Fires and Fire -Fighting Agents, by Hans Holemann, University of Wuppertal, Germany. Article for the International Association of Fire Safety Science Symposium 1994. MacSwain Associates LLC 4401 Business Park Boulevard, Suite 22, Anchorage, Alaska 99503 APPRAISAL REPORT Appraisal of Three Properties in Lawton Acres, Kenai, Alaska Property 1: 16.49 -Acre Parcel (Property ID 045-01-003) Property 2: 4.10 -Acre Parcel (Proposed Tract D) Property 3: 5.80 -Acre Parcel (Proposed Tracts A & B) Effective Appraisal Date: June 15, 2017 File No. 17-3078 Submitted To: Scott M. Bloom, City Attorney City of Kenai 210 Fidalgo Avenue Kenai, AK 99611 MacSwain Associates LLC 4401 Business Park Blvd, Suite 22 Anchorage, Alaska 99503 Phone: 907-561-1965 Fax: 907-561-1955 s.maeswain@,macswain.com June 30, 2017 Scott M. Bloom, City Attorney City of Kenai 210 Fidalgo Avenue Kenai, AK 99611 Re: Appraisal of Three Properties in Lawton Acres Kenai, Alaska Dear Mr. Bloom: We have prepared an Appraisal Report that analyzes three properties located in Kenai, Alaska. Property 1 is a 16.49± acre parcel known as Lawton Acres, which fronts the south side of the Kenai Spur Highway and the north side of Lawton Drive, between Walker Lane and Rogers Road. Property 2 is a proposed tract of land (Tract D) situated on the east end of Lawton Acres, containing 4.10± acres. Property 3 is a proposed tract of land (Tracts A & B) on the westerly half of Lawton Acres, containing 5.80± acres. Because Properties 2 and 3 are proposed, it is an extraordinary assumption of these appraisals that they will be subdivided and the plat will be approved by the Kenai Peninsula Borough. We analyzed each property independently, but present our findings bound in one report. Listed below are property identification numbers or legal descriptions, sizes, and market value estimates for each property appraised. The property rights appraised is the fee simple interest. The report is prepared in accordance with the Uniform Standards of Professional Appraisal Practice (USPAP). Based on the data, reasoning, and analysis that follow, we are of the opinion that the market value of each subject property, as of June 15, 2017, is as follows: Legal Description Size Market Value Property I —Property ID 045-01-003 16.49±Acres $600,000 Property 2 — Proposed Tract D 4.10±Acres $275,000 Property 3 — Proposed Tracts A & B 5.80± Acres $250,000 We invoke an extraordinary assumption for the appraisals of Property 2 and Property 3, that they will be subdivided as indicated by the proposed plat, and the plat will be approved by the Kenai Peninsula Borough. Iffound to be false, the market value estimates could be affected. 17-3078: Three Properties in Lawton Acres, Kenai, Alaska MacSwain Associates LLC Your attention is specifically directed to the Assumptions and Limiting Conditions and Extraordinary Assumption of this report. We hope the appraisal report assists your evaluation of the appraised property. If you have any questions regarding this report, please contact our office. Respectfully submitted, 5 0i� Steve MacSwain, MAI State of Alaska Certificate No. 42 17-3078: Three Properties in Lawton Acres, Kenai, Alaska MacSwain Associates LLC Appraiser Certification The undersigned certifies that to the best of their knowledge and belief: 4 The statements of fact contained in this report are true and correct. 4 The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are our personal, impartial, and unbiased professional analyses, opinions, and conclusions. We have no present or prospective interest in the property that is the subject of this report, and no personal interest with respect to the parties involved. 4 We have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment. 4 MacSwain Associates, LLC appraised Property 1 as part of a project appraisal for the City of Kenai in 2015. We have not performed any other services as an appraiser or in any other capacity, regarding the property that is the subject of this report, within the three-year period immediately preceding acceptance of this assignment. Our engagement in this assignment was not contingent upon developing or reporting predetermined results. 4 Our compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal. 4 The reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute. 4 The reported analyses, opinion, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice. 4 The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. 4 Alex Kleinke inspected the appraised properties on June 15, 2017. Steve MacSwain, MAI is familiar with the property from previous assignments in Kenai. 4 Alex Kleinke provided significant real property appraisal assistance including photography, research, data gathering, and analytical support to the person signing this certification. 4 As of the date of this report, Steve MacSwain, MAI, is a certified General Real Estate Appraiser in the State of Alaska and has completed the education requirements through June 2019. 6/30117 Steve MacSwain, MAI Date State of Alaska Certificate No. 42 17-3078: Three Properties in Lawton Acres, Kenai, Alaska MacSwain Associates LLC Table of Contents Title Page Transmittal Letter Appraiser Certification Table of Contents Appraisal Summary 1 Chapter 1: Definition of the Appraisal Problem 3 Chapter 2: Location and Neighborhood Summaries 7 Chapter 3: Property 1— Property ID 045-01-003 10 Property Photographs 13 Highest and Best Use Analysis 16 Property Valuation 18 Chapter 4: Property 2 — Proposed Tract D 23 Property Photographs 26 Highest and Best Use Analysis 28 Property Valuation 30 Chapter 5: Property 3 — Proposed Tracts A & B 35 Property Photographs 38 Highest and Best Use Analysis 40 Property Valuation 42 Assumptions and Limiting Conditions 47 Extraordinary Assumption 48 Addenda Appraiser Qualifications 17-3078: Three Properties in Lawton Acres, Kenai, Alaska MacSwain Associates LLC Property I — Property ID 045-01 Property Type: Property Rights Appraised: Physical Address: Parcel ID Number: Legal Description: Zoning: Site Size: Shape: Vegetation: Wetlands: Highest and Best Use: Extraordinary Assumption: Effective Appraisal Date: Appraisal Summary 003 Vacant land Fee simple interest 10095 Kenai Spur Highway, Kenai, AK 045-010-03 S''/2 S''/3 SW'/4, Section 33, Township 006N, Range 011 W, Seward Meridian, Lying South of Kenai Spur Highway C, Conservation 16.49± acres or 718,304± square feet Long and narrow Majority treed with partial clearing for flower field Riparian wetlands bisect center of property Subdivision with mixed-use development None June 15, 2017 Market Value Opinion $600,000 Property 2 — Proposed Tract D Property Type: Property Rights Appraised: Physical Address: Parcel ID Number: Legal Description: Zoning: Site Size: Shape: Vegetation: Wetlands: Highest and Best Use: Extraordinary Assumption: Effective Appraisal Date: Vacant land Fee simple interest 10095 Kenai Spur Highway, Kenai, AK N/A Proposed Tract D C, Conservation 4.10± acres or 178,596± square feet Trapezoidal Heavily treed with spruce and birch None Commercial development in accordance with allowable conditional uses under current zoning Property will be subdivided as indicated by the proposed plat, and that the plat will be approved by the Kenai Peninsula Borough June 15, 2017 Market Value Opinion $275,000 17-3078: Three Properties in Lawton Acres, Kenai, Alaska Macswain Associates LLC Property 3 — Proposed Tracts A & B Property Type: Vacant land Property Rights Appraised: Fee simple interest Physical Address: 10095 Kenai Spur Highway, Kenai, AK Parcel ID Number: N/A Legal Description: Proposed Tracts A & B Zoning: C, Conservation Site Size: 5.80± acres or 252,648± square feet Shape: Narrow rectangle Vegetation: Heavily treed with spruce and birch Wetlands: None Highest and Best Use: Commercial development in accordance with allowable conditional uses under current zoning Extraordinary Assumption: Property will be subdivided as indicated by the proposed plat, and that the plat will be approved by the Kenai Peninsula Borough Effective Appraisal Date: June 15, 2017 Market Value Opinion $250,000 Proposed Plat Provided By: City of Kenai 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 2 W m t ��- J N 010 Kenai Spur Highway a ... .. _ -- — Lnwrca eRr --T e .. ., _ .. 15: A po . 0 90RAVE �P2P'f 6T� . Z Provided By: City of Kenai 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 2 MacSwain Associates LLC Chapter 1: Definition of the Appraisal Problem Overview We prepare an Appraisal Report that analyzes Lawton Acres in Kenai Alaska. Our assignment values Lawton Acres under two scenarios. Under the first scenario, we appraise the entire 16.49± acre parcel, referred to as Property 1. The second scenario considers the proposed subdivision of Lawton Acres. Under this scenario, we appraise Proposed Tract D (Property 2) and Proposed Tracts A & B (Property 3). We analyze each property independently, but present our findings bound in one report. Listed below are chapter and page numbers, and identification of each parcel appraised. The report is prepared in accordance with the Uniform Standards of Professional Appraisal Practice (USPAP). Chapter Property Page 3 Property I — Property ID 045-01-003 10 4 Property 2 — Proposed Tract D 23 5 Property 3 — Proposed Tracts A&B 35 Property Name Lawton Acres Value Type Market value Client City of Kenai Intended Use of The intended use of this appraisal report is to assist the client with an Appraisal Report investment decision involving the subject properties. Intended User of The intended user of this appraisal report is the City of Kenai. Appraisal Report 17-3078: Three Properties in Lawton Acres, Kenai, Alaska MacSwain Associates LLC Property Inspection June 15, 2017 Date Effective Appraisal June 15, 2017 Date Date of Report June 30, 2017 Location Lawton Acres is situated on the south side of Kenai Spur Highway, 0.8f mile southeast of Kenai's Municipal Airport. Value Type The type of value estimated is market value. Market value is defined as follows. The most probable price, as of a specified date, in cash, or in terms equivalent to cash, or in other precisely revealed terms, for which the specified property rights should sell after a reasonable exposure in a competitive market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently, knowledgeably, and for self-interest, and assuming neither is under undue duress. t Property Rights The property rights appraised is the fee simple interest, which is Appraised defined as follows. Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat.1 Legal Description The appraised properties are legally defined in each of their respective chapters. 1 Appraisal of Real Estate, Fourteenth Edition (2013), by the Appraisal Institute, p. 58. z Appraisal of Real Estate, Fourteenth Edition (2013), by the Appraisal Institute, p. 5. 17-3078: Three Properties in Lawton Acres, Kenai, Alaska MacSwain Associates LLC Property Ownership Public records indicate the owner of the property is the City of Kenai. Real Property The 16.49-+ acre parcel has been assessed for $478,100 for the past ten Assessment years. This equates to $28,993 per acre or $0.67 per square foot. As the parcel is owned by the City of Kenai, it is exempt from paying property taxes. Appraisal Report We employ the sales comparison approach to estimate the market Overview value of the property, because neither the cost nor the income capitalization approaches provide meaningful analysis for vacant land similar to the subject. Additionally, we found sufficient land sale data to develop our opinion of value. Comparable land sale data was obtained from private parties, real estate brokers/agents, market participants, appraisers, and company files. The appraisal report is a summary of the appraiser's data, analyses, and conclusions with supporting documentation retained on file. Scope of Appraisal The scope of the appraisal is summarized as follows. 4 Inspected the appraised properties on June 15, 2017; 4 Discussed the appraised properties with Paul Ostrander, City Manager, and Scott Bloom, City Attorney with City of Kenai; 4 Reviewed Kenai Peninsula Borough (KPB) land use ordinance pertaining to zoning, permitted uses, and conditional uses, and conditional use permits; 4 Collected data from the City of Kenai, KPB Assessor's Office, and State of Alaska Recorder's Office regarding ownership, assessments, and general property information; 4 Reviewed City of Kenai and KPB mapping and aerial imagery pertaining to ownership, land use, and wetlands; 4 Performed a land use analysis; 4 Determined the highest and best use of each property; + Interviewed real estate agents active in the Kenai market district regarding sale activity, current market trends, and anticipated market trends; + Collected and analyzed MLS data and statistics regarding all types of property sales located in Kenai; 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 5 MacSwain Associates LLC 4 Collected data pertaining to the dynamics of the real estate market district; 4 Collected, verified, and analyzed comparable land sales; + Inspected and photographed the primary sales relied upon in the comparative analysis; and + Developed the sales comparison approach to arrive at estimates of market value for each subject property. Statement of MacSwain Associates LLC has completed numerous appraisals of Competency properties in Kenai and surrounding communities in the Kenai Peninsula Borough. A summary of the appraiser's experience and professional qualifications are located in the addenda. Steve MacSwain, MAI has the knowledge and experience required by the competency provision of USPAP to complete this assignment credibly. Exposure Time We have collected and analyzed market and economic data that projects real estate trends and activity for commercial and residential properties. Discussions with Brokers and analysis of similar property sales indicate that a period of approximately one year prior to our effective date of value is a reasonable exposure period. 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 6 MacSwain Associates LLC Chapter 2: Location and Neighborhood Summaries Overview Due to the knowledge of the reader, we do not include a detailed demographic and economic summary of the Kenai Peninsula Borough (KPB) or City of Kenai. The reader is referred to the map below and on following pages that illustrate the location and assist in the description and analysis. City of Kenai Summary Location Map Kenai Cook Inlet l ,1r _• L 4 9 ` �� u , Kenai River C[ Sol On '. , t Kenai is located on the western coast of the Peninsula, and is often associated with Soldotna, which is located l It miles to the southeast. These two cities have become known as the "twin cities," sharing an integrated economy, while maintaining their independence. Kenai is a home rule city with a population of 7,098. In the summer months, the area benefits from tourists fishing the Kenai River. Kenai is also the center for the oil and gas industry on the Peninsula, providing services and supplies for Cook Inlet's oil and natural gas drilling and exploration. Nikiski, which lies north of Kenai, has two refineries that process oil from the Cook Inlet oil platforms and the Swanson River oil fields. There are numerous oil field support businesses located in the area as well as the refineries. Kenai has the largest airport on the peninsula, the Kenai Municipal Airport, which has scheduled flights to/from Anchorage and other communities in the region. 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 7 MacSwain Associates LLC Neighborhood The subject is located within a mixed-use neighborhood, with Description commercial and institutional development to north, east, and west, and residential development to the south. Development in the immediate neighborhood includes Kenai Central High School to the east, Home Depot, Safeway, Three Bears, and Aspen Hotel to the west, Walmart to the north, and a residential subdivision to the south. The prime commercial district in Kenai is just to the west of the appraised parcel. Neighborhood Development Neighborhood Zoning Map - Conservation - Airport Light Industrial _ Rural Residential Rural Residential I _ Suburban Residential - Suburban Residential I Suburban Residential - Urban Residential Central Commercial QGeneral Commercial _ Central li ixed Use - Limited Commercial - Light Industrial - Heavy Industrial - Recreational Townsite Historic Education Subiects 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 8 MacSwain Associates LLC Conclusion Sale activity remains relatively scarce with assemblage, expansion, or special-purpose use representing the principal components of demand. After analysis, we determined commercial property values have been relatively stable over the past decade. 17-3078: Three Properties in Lawton Acres, Kenai, Alaska MacSwain Associates LLC Chapter 3: Property 1— Property ID 045-01-003 Property Overview The appraised property is a vacant parcel, which is partially cleared and planted with a flower field. We summarize the subject property in a summary format. The inserted exhibits and photographs that follow help illustrate our descriptive analysis. KPB Aerial Imagery -;y41- F r� -17 it Property 1 ogers R - Kenai S ur.Ili _ ` CIC Wal` er Lane F • - 1_iL y ia� ui v Ir4k. t_. 1 w ' ., �^AAar�l,-`� lit �t•�' ��s i4 1 � rra rol -4rar r. Legal Description Review of public documents indicates the property is legally defined as follows. Sl/ S''/z SW'/<, Section 33, Township 006N, Range 011 W, Seward Meridian, Lying South of Kenai Spur Highway Identification of Real Location: Estate Appraised Physical Address: Current Use: South of Kenai Spur Highway between Walker Lane and Rogers Road, fronting north side of Lawton Drive, Kenai, Alaska 10095 Kenai Spur Highway, Kenai, Alaska Primarily vacant with flower garden on portion of parcel 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 10 MacSwain Associates LLC Property Rights Fee simple interest Appraised Three -Year Sale There are no known sales of the property in the past three years. History Site Description Analysis of land describes the characteristics that enhance or detract from its utility or marketability. We base the site description and analysis our appraisal inspection on June 15, 2017 and review of the KPB assessor map and other available mapping. The following assessor map and aerial imagery on the previous page assist in the description and analysis of the site. KPB Assessor Map Parcel Shape and Land Area: Vehicular Access: Frontage and Exposure: Topography: Long and narrow parcel containing 16.49± acres (718,304± square feet) per City of Kenai Current access via Lawton Drive, paved two-lane road 2,605± feet on Kenai Spur Highway and Lawton Drive, 490± feet on Rogers Road, 170± feet on Walker Lane Mostly level with undulation near riparian wetlands, which bisect property from north to 17-3078: Three Properties in Lawton Acres, Kenai, Alaska ll .E1I, 36 ]62 aC. 929AC - i_-_ p C, Vp , -Oi �O y�♦I BARM PMN XAtl R6.: FI .- '. 3: ACS \ �I -- 9Y -�u�ONPAkRSN=' BK ..l — -' 043-, m - 06 3f,71 AC. 22 <c.s 1f :C 03 ;(tu dG - Subject BK JULY N For 2014 assessment roll 049 E Delete Add Revise 7o BARON PAR S BARON PAR Parcel Shape and Land Area: Vehicular Access: Frontage and Exposure: Topography: Long and narrow parcel containing 16.49± acres (718,304± square feet) per City of Kenai Current access via Lawton Drive, paved two-lane road 2,605± feet on Kenai Spur Highway and Lawton Drive, 490± feet on Rogers Road, 170± feet on Walker Lane Mostly level with undulation near riparian wetlands, which bisect property from north to 17-3078: Three Properties in Lawton Acres, Kenai, Alaska ll MacSwain Associates LLC Vegetation: Public Utilities: Zoning: Easements and Restrictions: Encroachments: Flood Hazard Conditions: Environmental Considerations: Soil and Subsurface Conditions: Site Improvements: Site Utility: south near center of property Primarily treed with partial clearing for flower field All public utilities available to parcel C, Conservation None noted I None Federal Emergency Management Agency (FEMA) Community Panel No. 02122C0140E, dated October 20, 2016, indicates the site is located in Zone D, an area in which flood hazards are undetermined, but possible. The appraisers were not provided an environmental assessment. The existence of any hazardous material or other type of environmental contamination, which may or may not be present on the property, was not observed by the appraisers nor do the appraisers have any knowledge of the existence of such substances. A search of the Department of Environmental Conservation Contaminated Sites Database yielded no results. Our value conclusion assumes that the property is free of environmental and hazardous contaminants. A soil report was not provided to the appraisers. The soils are consistent with undeveloped land in the area and consists of a good gravel base. Partial clearing for flower field The parcel benefits from substantial Kenai Spur Highway frontage, availability of public utilities, and good gravel based soils 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 12 MacSwain Associates LLC Property 1 Photographs Taken By: Alex Kleinke Date: June 15, 2017 F Westerly view of subject along south boundary Westerly view of subject along north boundary 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 13 MacSwain Associates LLC Taken By: Alex Kleinke Date: June 15, 2017 Northerly view taken from Kenai Spur Highway Easterly view of Lawton Drive frontage 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 14 MacSwain Associates LLC Taken By: Alex Kleinke Date: June 15, 2017 Westerly view of Kenai Spur Highway frontage Easterly view of Kenai Spur Highway frontage 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 15 Macswain Associates LLC Highest and Best Use Analysis Overview Highest and best use is a market-driven concept rather than a subjective conclusion based on the experience of the appraiser or property owner's needs. The Dictionary of Real Estate Appraisal (Sixth Edition) defines highest and best use as follows. The reasonably probable use of property that results in the highest value. The four criteria that the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum productivity. Highest and Best Use Physically Possible: The subject parcel contains 16.49± acres or as Vacant 718,304± square feet. A location within Kenai's commercial core, substantial Kenai Spur Highway exposure, and availability of public utilities enhance commercial development potential. The large size limits demand from a single user, and increases the likelihood for subdivision. Thus, physical character enhances the potential for commercial use, with subdivision to accommodate multiple users. Legally Permissible: Zoning is C, Conservation Zone, "intended to apply to areas which should be preserved primarily as open areas and as watersheds and wildlife reserves. Airport and related uses have been included in this zone to allow for the reservation of aircraft approach zones. It is intended that this zone shall apply mainly to publicly owned land." 3 In addition to this zoning district's intended permitted uses, many residential, institutional, and commercial uses are allowed as conditional uses. The Kenai Municipal Code states "the conditional use permit procedure is intended to allow flexibility in the consideration of the impact of the proposed use on surrounding property and the application of controls and safeguards to assure that the proposed use will be compatible with the surroundings."4 Surrounding development includes commercial and institutional to the north, west, and east, on properties with Kenai Spur Highway frontage. Residential development to the south of the subject is evident, as this area lacks highway frontage. Because of the subject's 3 Kenai Municipal Code, Chapter 14.20 Kenai Zoning Code, City of Kenai, Ordinance 2943-2017, effective May 5, 2017 4 Kenai Municipal Code, Chapter 14.20.150 Conditional Use Permits, City of Kenai, Ordinance 2943-2017, effective May 5, 2017 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 16 MacSwain Associates LLC highway frontage, conditionally allowed commercial use appears to be compatible with surrounding development. Financially Feasible and Maximally Productive: As discussed, commercial uses are evident along the Kenai spur Highway. Proximity to Kenai's commercial core further encourages commercial development. The subject's zoning, and the requirement to obtain a conditional use permit increases risk; however, commercial uses as allowed under Kenai's land use table for conditional uses conform with the neighborhood development pattern. Thus, analysis indicates commercial development represents the only permissible financial option that is physically possible. This type of development maximizes the return to the land. Due to the large size of the property, subdividing the parcel will increase demand. Thus, the highest and best of the appraised parcel, as vacant, is commercial development after subdivision. Highest and Best Use As Vacant Subdivision and Commercial Development 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 17 MacSwain Associates LLC Property 1 Valuation Overview The sales comparison approach is a market-based analysis that develops a land value estimate by analyzing and comparing similar land sales to the subject property. Our market research revealed sufficient market activity of land in Kenai and surrounding areas. Due to the imperfect nature of the market, we use a qualitative comparison technique that rate elements of comparison as superior, inferior, or similar. Explanation of the elements of comparison, and analysis of the primary land sales follows. Elements of The first step of the market analysis is to determine what elements of Comparison comparison cause land sale prices to vary. We found that location, frontage, wetland inundation, topography, size, shape, utilities, and use (zoning) influence market behavior and the price paid for vacant land in Kenai. As discussed, the subject is zoned C, Conservation, which limits development potential. While certain commercial and residential uses are allowable with a conditional use permit, the extent of allowable development is less than the comparable properties' zoning districts. Further, the requirement to file a conditional use permit increases property risk. Thus, Conservation zoning puts downward pressure on demand, requiring an adjustment to the comparables for their superior zoning characteristics. Regarding market conditions, Kenai's land values remained relatively stable for the past 10 years, so we do not make an adjustment for time. Quantifying the identified adjustments is difficult due to the limited sale data; therefore, qualitative techniques are used to measure differences between the comparable sales and the subject. Importantly, the transactions offer similar highest and best use potential and are the best market data available. Comparative Market Researching the Kenai market for conservation zoned land sales Analysis revealed no transactions, requiring us to expand our search to include land in other zoning districts with similar utility. Listed on the following page are four transactions we rely upon to facilitate our comparative analysis. Additional details of the comparable land sales are retained on file. 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 18 Macswain Associates LLC Comparable Land Sales No Location Zoning Sale Sale Price Size S/SF Date $/Ac. 1 East side of Kenai Spur Highway near Mile None 1/14 $207,130 902,258 SF $0.23 20 20.71 Ac. $10,000 2 West side of Marathon Road, north of Kenai CG 9/07 $1,650,000 649,991 SF $2.56 Spur Highway 14.78 Ac. $111,607 3 East side of Kenai Spur Highway at corner of LC 7/16 $75,000 326,700 SF $0.23 Ross Street 7.50 Ac. $10,000 4 South side of Lawton Drive, just east of RS 8/14 $225,000 591,980 SF $0.38 Walker Lane 13.59 Ac. $16,556 South side of Kenai Spur Highway C — — — — 718,304 SF — — between Walker Lane and Rogers 16.49 Ac. Road (Subject) Land Sale Map 17-3078. Three Properties in Lawton Acres, Kenai, Alaska 19 MacSwain Associates ULCI Comparath a Land Analysis: Land Sale 1 is the January 2014 sale located on the east side of Kenai Spur Highway, near Mile 20 at Robert Walker Avenue. This 20.713 - acre (902,130 SF) parcel sold for $207,130 or $10,000 per acre. Located outside of Kenai city limits, the trapezoidal -shaped parcel was heavily treed at the time of sale with generally level to gently rolling topography. Access is provided by Robert Walker Avenue, a gravel road. Public natural gas, electricity, and telephone are available to the property. The intention of the sale was for development of a storage yard for an oil -support related business. Subsequently, the property was purchased by Alaska LNG at an undisclosed price. By comparison, this sale is superior due to shape and lack of wetlands, which expand its developable footprint. Further, lack of zoning allows for greater development potential and reduces risk. Overriding these superiorities is inferior location away from Kenai's commercial core, lack of public water and sewer, and access via a gravel road. Overall, Land Sale 1 is rated inferior, indicating a unit value greater than $10,000 per acre for the subject. Land Sale 2 is the September 2007 sale located on the west side of Marathon Road, just north of Kenai Spur Highway. This 14.78 -acre (649,991 SF) parcel sold for $1,650,000 or $111,607 per acre. Zoned General Commercial (CG), the irregular-shaped parcel was heavily treed at the time of sale. Access is provided by Marathon Road, paved, two-lane, and all public utilities are available. The property was purchased by Lowe's Home Improvement Warehouse to construct a retail warehouse. By comparison, this sale is rated superior in terms of use (zoning), lack of wetlands, level topography, and shape. While lacking direct Kenai Spur Highway frontage, it has good exposure and linkage to Kenai's commercial core. After analysis, Land Sale 2 is rated significantly superior, indicating a unit value substantially less than $111,607 per acre for the subject. Land Sale 3 is the July 2016 sale located on the east side of Kenai Spur Highway near Mile 5 at Ross Street. This 7.50 -acre (326,700 SF) parcel sold for $75,000 or $10,000 per acre. Zoned Limited Commercial (LC), the trapezoidal -shaped parcel is heavily treed and approximately 50% inundated with low-lying wetlands per KPB Wetland Mapper. According to the Broker, the property is dry due to the State rerouting drainage two years ago. Dual access is provided by Kenai Spur Highway, a paved, two-lane highway, and Ross Street, a gravel road. Natural gas and electricity are at the parcel. The Broker stated the buyer had no immediate plans to develop the property, and intended to hold for future commercial development. The parcel was listed for sale for most of the last five years, originally at $129,000 before dropping to $79,900. We make downward adjustments for 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 20 MacSwain Associates LLC zoning, superior size differential, and lack of wetland inundation at the time of sale. Conversely, we make upward adjustments for inferior location away from Kenai's commercial core, and lack of public water and sewer, which increases development costs. Overall, Land Sale 3 is rated inferior, indicating a unit value greater than $10,000 per acre for the subject. Land Sale 4 is the August 2014 sale located on the south side of Lawton Drive, just east of Walker Lane. This 13.59 -acre (591,980 SF) parcel sold for $225,000 or $16,556 per acre. Located immediately south of the subject in a Suburban Residential (RS) zone, the irregular- shaped parcel is heavily treed. Riverine wetlands encroach onto the east boundary of the parcel. Access is provided by Lawton Drive, a paved, two-lane road. The Broker indicated public water, sewer, electricity, and telephone are available to the property. The parcel was exposed to the market for 291 days, originally listed at $295,000. We make a downward adjustment for superior RS zoning, which allows a wider array of permitted and conditional uses than the subject's zoning. Conversely, an upward adjustment is required to account for a lack of highway frontage / exposure, significantly reducing demand from commercial users. Overall, Land Sale 4 is rated inferior, indicating a unit value greater than $16,556 per acre. Reconciliation of Comparative Market Analysis: Presented below is a rating grid and analysis of the land sales used in comparative analysis. Land Sale $/Acre Rank Net Adjustment 2 $111,607 Significantly y Superior Subject ---- ---- ---- $16,556 Inferior T $10,000 Inferior T $10,000 Inferior T Before adjustments, the comparable land sales indicate a wide unit value range from $10,000 to $111,607 per acre. Land Sale 2 is rated superior indicating a unit value significantly less than $111,607 per acre. Conversely, Land Sales 1, 3, and 4 are rated inferior indicating a unit value greater than $16,556 per acre. After comparative analysis and making the necessary adjustments, a unit value of $30,000 to $40,000 per acre is market -supported and developed on the following page - 17 -3078: Three Properties in Lawton Acres, Kenai, Alaska 21 Macswain Associates LLC 16.49 acres x $30,000/acre = $494,700 16.49 acres x $40,000/acre = $659,600 Reconciliation and Conclusion of Land Value: Based on the foregoing, the market value via the sales comparison approach ranges from $495,000 to $660,000 after rounding. In conclusion, we correlate with an estimate of land value at $600,000, which approximates $36,000 per acre. Market Value Estimate — Property ID 045-01-003 $600,000 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 22 MacSwain Associates LLC Chapter 4: Property 2 — Proposed Tract D Property Overview The appraised property is a vacant parcel on the southwest corner of Kenai Spur Highway and Rogers Road. We summarize the subject property in a summary format. The inserted exhibits and photographs that follow help illustrate our descriptive analysis. KPB Aerial Imagery Legal Description Identification of Real Estate Appraised As this is a proposed tract, we refer to the subject's legal description as "Proposed Tract D". Location: Physical Address: Current Use: Southwest corner of Kenai Spur Highway and Rogers Road, fronting north side of Lawton Drive, Kenai, Alaska 10095 Kenai Spur Highway, Kenai, Alaska Vacant land 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 23 Macswain Associates LLC Property Rights Fee simple interest Appraised Three -Year Sale There are no known sales of the property in the past three years. History Site Description Analysis of land describes the characteristics that enhance or detract from its utility or marketability. We base the site description and analysis our appraisal inspection on June 15, 2017 and review of the proposed subdivision plat provided by the client, the KPB assessor map, and other available mapping. The following proposed plat and aerial imagery on the previous page assist in the description and analysis of the site. Proposed Subdivision Plat Kenai Spur Highway J�rac 4- s: s• Subject �,� 7e 0. C G- � 14. B Ac. N Parcel Shape and Land Area: Vehicular Access: Frontage and Exposure: Topography: Trapezoidal -shaped parcel containing 4.10± acres (178,5961 square feet) per proposed plat Information provided by the client indicates access via Rogers Road, paved, two-lane road 470± feet on Kenai Spur Highway and Rogers Road, 450± feet on Lawton Drive Generally level, near access grade 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 24 MacSwain Associates LLC Vegetation: Public Utilities: Zoning: Easements and Restrictions: Encroachments: Flood Hazard Conditions: Environmental Considerations: Soil and Subsurface Conditions: Site Improvements: Site Utility: Heavily treed with spruce and birch All public utilities available to parcel C, Conservation None noted None Federal Emergency Management Agency (FEMA) Community Panel No. 02122C0140E, dated October 20, 2016, indicates the site is located in Zone D, an area in which flood hazards are undetermined, but possible. The appraisers were not provided an environmental assessment. The existence of any hazardous material or other type of environmental contamination, which may or may not be present on the property, was not observed by the appraisers nor do the appraisers have any knowledge of the existence of such substances. A search of the Department of Environmental Conservation Contaminated Sites Database yielded no results. Our value conclusion assumes that the property is free of environmental and hazardous contaminants. A soil report was not provided to the appraisers. The soils are consistent with undeveloped land in the area and consists of a good gravel base. None The parcel benefits from a corner location, Kenai Spur Highway frontage, availability of public utilities, and good gravel based soils 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 25 MacSwain Associates LLC Property 2 Photographs Taken By: Alex Kleinke Date: June 15, 2017 Northwesterly view towards Kenai Spur Highway of northeast corner Southerly view of Rogers Road frontage 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 26 MacSwain Associates LLC Taken By: Alex Kleinke Date: June 15, 2017 Southwesterly view of Kenai Spur Highwaaj frontage Westerly view of subject from Rogers Road 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 27 MacSwain Associates LLC Highest and Best Use Analysis Overview Highest and best use is a market-driven concept rather than a subjective conclusion based on the experience of the appraiser or property owner's needs. The Dictionary of Real Estate Appraisal (Sixth Edition) defines highest and best use as follows. The reasonably probable use of property that results in the highest value. The four criteria that the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum productivity. Highest and Best Use Physically Possible: The subject parcel contains 4.10± acres or as Vacant 178,596 square feet. A corner location within Kenai's commercial core, Kenai Spur Highway exposure, and availability of public utilities enhance commercial development potential. Thus, physical character enhances the potential for commercial use. Legally Permissible: Zoning is C, Conservation Zone, "intended to apply to areas which should be preserved primarily as open areas and as watersheds and wildlife reserves. Airport and related uses have been included in this zone to allow for the reservation of aircraft approach zones. It is intended that this zone shall apply mainly to publicly owned land.115 In addition to this zoning district's intended permitted uses, many residential, institutional, and commercial uses are allowed as conditional uses. The Kenai Municipal Code states "the conditional use permit procedure is intended to allow flexibility in the consideration of the impact of the proposed use on surrounding property and the application of controls and safeguards to assure that the proposed use will be compatible with the surroundings.116 Surrounding development includes commercial and institutional to the north, west, and east, on properties with Kenai Spur Highway frontage. Residential development to the south of the subject is evident, as this area lacks highway frontage. Because of the subject's highway frontage, conditionally allowed commercial use appears to be compatible with surrounding development. 5 Kenai Municipal Code, Chapter 14.20 Kenai Zoning Code, City of Kenai, Ordinance 2943-2017, effective May 5, 2017 6 Kenai Municipal Code, Chapter 14.20.150 Conditional Use Permits, City of Kenai, Ordinance 2943-2017, effective May 5, 2017 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 28 MacSwain Associates LLC Financially Feasible and Maximally Productive: As discussed, commercial uses are evident along the Kenai spur Highway. Proximity to Kenai's commercial core further encourages commercial development. The subject's zoning, and the requirement to obtain a conditional use permit increases risk; however, commercial uses as allowed under Kenai's land use table for conditional uses conform with the neighborhood development pattern. Thus, analysis indicates commercial development represents the only permissible financial option that is physically possible. This type of development maximizes the return to the land. Thus, the highest and best of the appraised parcel, as vacant, is commercial. Highest and Best Use As Vacant Commercial Development 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 29 MacSwain Associates ULCI Property 2 Valuation Overview The sales comparison approach is a market-based analysis that develops a land value estimate by analyzing and comparing similar land sales to the subject property. Our market research revealed sufficient market activity of land in Kenai and surrounding areas. Due to the imperfect nature of the market, we use a qualitative comparison technique that rate elements of comparison as superior, inferior, or similar. Explanation of the elements of comparison, and analysis of the primary land sales follows. Elements of The first step of the market analysis is to determine what elements of Comparison comparison cause land sale prices to vary. We found that location, frontage, clearing/grading, topography, size, utilities, and use (zoning) influence market behavior and the price paid for vacant land in Kenai. As discussed, the subject is zoned C, Conservation, which limits development potential. While certain commercial and residential uses are allowable with a conditional use permit, the extent of allowable development is less than the comparable properties' zoning districts. Further, the requirement to file a conditional use permit increases property risk. Thus, Conservation zoning puts downward pressure on demand, requiring an adjustment to the comparables for their superior zoning characteristics. Regarding market conditions, Kenai's land values remained relatively stable for the past 10 years, so we do not make an adjustment for time. Quantifying the identified adjustments is difficult due to the limited sale data; therefore, qualitative techniques are used to measure differences between the comparable sales and the subject. Importantly, the transactions offer similar highest and best use potential and are the best market data available. Comparative Market Researching the Kenai market for conservation zoned land sales Analvsis revealed no transactions, requiring us to expand our search to include land in other zoning districts with similar utility. Listed on the following page are four transactions we rely upon to facilitate our comparative analysis. Additional details of the comparable land sales are retained on file. 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 30 Macswain Associates LLC Comparable Land Sales No Location Zoning Sale Sale Price Size $/SF Date $/Ac. 5 West side of K Beach Road near Mile 19.5 None 9/16 $120,000 80,150 SF $1.50 1.84 Ac. $65,217 6 Southwest corner of N. Forest Drive and CG 4/15 $83,000 52,272 SF $1.59 Second Avenue 1.20 Ac. $69,167 7 South side of K Beach Road near Mile 17.2 None 10/15 $404,500 223,114 SF $1.81 5.12 Ac. $79,004 8 Northwest corner of Kleeb Loop and CI 9/16 $160,000 97,139 SF $1.65 Turnbuckle Terrace Road 2.23 Ac. $71,749 Southwest corner of Kenai Spur C — — — — 178,596 SF — — Highway and Rogers Road (Subject) 4.10 Ac. 1. Commercial (C) zoning by City of Soldotna Land Sale Map 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 31 Macswain Associates LLC Comparative Land Analysis: Land Sale 5 is the September 2016 sale located on the west side of Kalifornsky Beach Road near Mile 19.5. This 1.84 -acre (80,150 SF) lot sold for $120,000 or $65,217 per acre. Located outside of Kenai city limits, the rectangular -shaped lot was heavily treed at the time of sale with generally level topography. There is access from Kalifornsky Beach Road. Natural gas and electricity are available, however the site is not served by public water and sewer. The lot was purchased by the owner of the adjacent property to the north, which is developed with a veterinary clinic. By comparison, this sale is superior due to size differential. Further, lack of zoning allows for greater development potential and reduces risk. Overriding these superiorities is inferior location away from Kenai's commercial core and lack of public water and sewer. Overall, Land Sale 5 is rated marginally inferior, indicating a unit value slightly greater than $65,217 per acre for the subject. Land Sale 6 is the April 2015 sale located on the southwest corner of N. Forest Drive and Second Avenue, just north of Kenai Spur Highway. This 1.20 -acre (52,272 SF) site sold for $83,000 or $69,167 per acre. Zoned General Commercial (CG), the L-shaped site contained three lots, but was replatted into a single lot subsequent to the sale, gaining additional square footage due to vacated Coolidge Lane. The property was exposed to the market for approximately a year and a half, listed at $90,000. By comparison, this sale is rated superior in terms of use (zoning), size differential, and clearing/grading. Conversely, the site lacks direct Kenai Spur Highway frontage and is located slightly west of Kenai's commercial core. After analysis, Land Sale 6 is rated marginally superior, indicating a unit value slightly less than $69,167 per acre for the subject. Land Sale 7 is the October 2015 sale located on the west side of Kalifornsky Beach Road near Mile 19.5. This 5.12 -acre (223,114 SF) site sold for $404,500 or $79,004 per acre. Located outside of zoning districts, the rectangular -shaped site consisted of five lots, but was replatted into a four -lot site subsequent to the sale. The site was primarily cleared, level, and graded at the time of sale with sparse vegetation. There is access from Kalifornsky Beach Road at the northwest corner. Natural gas and electricity are available, however the site is not served by public water and sewer. The parcel was listed for over a year, originally at $439,000. We make a downward adjustment for clearing / grading. Further, lack of zoning allows for greater development potential and reduces risk. Partially offsetting these superiorities are lack of public water and sewer and a location away from Kenai's commercial core. Overall, Land Sale 7 is rated 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 32 MacSwain Associates LLC superior, indicating a unit value less than $79,004 per acre for the subject. Land Sale 8 is the September 2016 sale located on the northwest corner of Kleeb Loop and Turnbuckle Terrace Road, situated just north of Sterling Highway, 0.7f northeast of the "Y". This 2.23 -acre (97,139 SF) parcel sold for $160,000 or $71,749 per acre. Access is provided by Kleeb Loop, a paved frontage road of the Sterling Highway. Public electricity, natural gas, and telephone are available to the property, however public water and sewer are not connected. Reportedly, there is a 120 -foot well on the property, but it is not sufficient to support a commercial operation. The property contained an older home site with several ancillary improvements, however the Broker indicated the seller would remove the structures. The property was exposed to the market for over 2.5 years, originally listed at $349,400 and reduced to $224,000. We make downward adjustments for superior site clearing, size differential and commercial zoning, which allows a wider array of permitted and conditional uses than the subject's zoning. Conversely, an upward adjustment is required to account for a lack of public water and sewer. Overall, Land Sale 8 is rated superior, indicating a unit value less than $71,749 per acre. Additional Data We analyzed the sale of the 1.87 -acre (81,636 SF) AlaskaLanes Considered property located just west of the subject fronting Kenai Spur Highway. The property was purchased from the City of Kenai for $450,000, with the land contributing to the entirety of the property value. The buyers intend to rehabilitate the improvements, which are in disrepair. Comparatively, this sale is superior in all respects, including size differential, use (zoning), clearing/grading, and direct access from Kenai Spur Highway. We analyze this sale due to locational similarities, but relegate it to secondary consideration due to the number of irregular factors involved in the transaction. 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 33 MacSwain Associates LLC Reconciliation of Comparative Market Analysis: Presented below is a rating grid and analysis of the land sales used in comparative analysis. Land Sale $/Acre Rank Net Adjustment 7 $79,004 Superior �L 8 $71,749 Superior J� 6 $69,167 Marginally y Superior Subject - -- -- -- -- 5 $65,217 Marginally T Inferior Before adjustments, the comparable land sales indicate a unit value range from $65,217 to $79,004 per acre. Land Sale 5 is rated marginally inferior indicating a unit value slightly greater than $65,217 per acre. Conversely, Land Sales 6 through 8 are rated superior indicating a unit value slightly less than $69,167 per acre. After comparative analysis and making the necessary adjustments, a unit value of $66,000 to $69,000 per acre is market -supported and develops the following. 4.10 acres x $66,000/acre = $270,600 4.10 acres x $69,000/acre = $282,900 Reconciliation and Conclusion of Land Value: Based on the foregoing, the market value via the sales comparison approach ranges from $271,000 to $283,000 after rounding. In conclusion, we correlate with an estimate of land value at $275,000, which approximates $67,000 per acre. Market Value Estimate — Proposed Tract D $275,000 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 34 MacSwain Associates LLC1 Chapter 5: Property 3 — Proposed Tracts A & B Property Overview The appraised property is a vacant parcel on the southeast corner of Kenai Spur Highway and Walker Lane. We summarize the subject property in a summary format. The inserted exhibits and photographs that follow help illustrate our descriptive analysis. N KPB Aerial Imagery Property'3 Legal Description Identification of Real Estate Appraised r "M Kenai Spur Highway K "V oge RJq As this is a proposed tract, we refer to the subject's legal description as "Proposed Tracts A & B". Location: Physical Address: Current Use: Southeast corner of Kenai Spur Highway and Walker Lane, fronting north side of Lawton Drive, Kenai, Alaska 10095 Kenai Spur Highway, Kenai, Alaska Vacant land 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 35 Falker Lane r 7 �1 Legal Description Identification of Real Estate Appraised r "M Kenai Spur Highway K "V oge RJq As this is a proposed tract, we refer to the subject's legal description as "Proposed Tracts A & B". Location: Physical Address: Current Use: Southeast corner of Kenai Spur Highway and Walker Lane, fronting north side of Lawton Drive, Kenai, Alaska 10095 Kenai Spur Highway, Kenai, Alaska Vacant land 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 35 Macswain Associates LLC Property Rights Fee simple interest Appraised Three -Year Sale There are no sales of the property in the past three years. History Site Description Analysis of land describes the characteristics that enhance or detract from its utility or marketability. We base the site description and analysis our appraisal inspection on June 15, 2017 and review of the proposed subdivision plat provided by the client, the KPB assessor map, and other available mapping. The following proposed plat and aerial imagery on the previous page assist in the description and analysis of the site. Proposed Subdivision Plat a N � a Kenai Spur Highway i Subject L 6. el 4. tt Q,c+ '• Alt o Ls Parcel Shape and Land Area: Vehicular Access: Frontage and Exposure: Topography: Vegetation Narrow parcel containing 5.80± acres (252,648± square feet) per proposed plat Information provided by the client indicates access via Walker Lane, paved, two-lane road 1,290± feet on Kenai Spur Highway and Lawton Drive, 150± feet on Walker Lane Generally level, near access grade Heavily treed with spruce and birch 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 36 MacSwain Associates LLC Public Utilities: Zoning: Easements and Restrictions: Encroachments: Flood Hazard Conditions: Environmental Considerations: Soil and Subsurface Conditions: Site Improvements: Site Utility: All public utilities available to parcel C, Conservation None noted None Federal Emergency Management Agency (FEMA) Community Panel No. 02122C0140E, dated October 20, 2016, indicates the site is located in Zone D, an area in which flood hazards are undetermined, but possible. The appraisers were not provided an environmental assessment. The existence of any hazardous material or other type of environmental contamination, which may or may not be present on the property, was not observed by the appraisers nor do the appraisers have any knowledge of the existence of such substances. A search of the Department of Environmental Conservation Contaminated Sites Database yielded no results. Our value conclusion assumes that the property is free of environmental and hazardous contaminants. A soil report was not provided to the appraisers. The soils are consistent with undeveloped land in the area and consists of a good gravel base. Wrom The parcel benefits from a corner location, Kenai Spur Highway frontage, availability of public utilities, and good gravel based soils 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 37 MacSwain Associates LLC Property 3 Photographs Taken By: Alex Kleinke Date: June 15, 2017 Westerly view of Lawton Drive frontage Northerly view of path through center of parcel 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 38 MacSwain Associates LLC Taken By: Alex Kleinke Date: June 15, 2017 Westerly view of north boundary of property Northerly view of Walker Lane frontage near southwest corner 17-3078 Three Properties in Lawton Acres, Kenai, Alaska 39 MacSwain Associates LLC Highest and Best Use Analysis Overview Highest and best use is a market-driven concept rather than a subjective conclusion based on the experience of the appraiser or property owner's needs. The Dictionary of Real Estate Appraisal (Sixth Edition) defines hijzhest and best use as follows. The reasonably probable use of property that results in the highest value. The four criteria that the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum productivity. Highest and Best Use Physically Possible: The subject parcel contains 5.80± acres or as Vacant 252,648± square feet. A comer location within Kenai's commercial core, Kenai Spur Highway exposure, and availability of public utilities enhance commercial development potential. Thus, physical character enhances the potential for commercial use. Legally Permissible: Zoning is C, Conservation Zone, "intended to apply to areas which should be preserved primarily as open areas and as watersheds and wildlife reserves. Airport and related uses have been included in this zone to allow for the reservation of aircraft approach zones. It is intended that this zone shall apply mainly to publicly owned land." 7 In addition to this zoning district's intended permitted uses, many residential, institutional, and commercial uses are allowed as conditional uses. The Kenai Municipal Code states "the conditional use permit procedure is intended to allow flexibility in the consideration of the impact of the proposed use on surrounding property and the application of controls and safeguards to assure that the proposed use will be compatible with the surroundings."s Surrounding development includes commercial and institutional to the north, west, and east, on properties with Kenai Spur Highway frontage. Residential development to the south of the subject is evident, as this area lacks highway frontage. Because of the subject's highway frontage, conditionally allowed commercial use appears to be compatible with surrounding development. 7 Kenai Municipal Code, Chapter 14.20 Kenai Zoning Code, City of Kenai, Ordinance 2943-2017, effective May 5, 2017 8 Kenai Municipal Code, Chapter 14.20.150 Conditional Use Permits, City of Kenai, Ordinance 2943-2017, effective May 5, 2017 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 40 MacSwain Associates LLC Financially Feasible and Maximally Productive: As discussed, commercial uses are evident along the Kenai spur Highway. Proximity to Kenai's commercial core further encourages commercial development. The subject's zoning, and the requirement to obtain a conditional use permit increases risk; however, commercial uses as allowed under Kenai's land use table for conditional uses conform with the neighborhood development pattern. Thus, analysis indicates commercial development represents the only permissible financial option that is physically possible. This type of development maximizes the return to the land. Thus, the highest and best of the appraised parcel, as vacant, is commercial. Highest and Best Use As Vacant Commercial Development 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 41 MacSwain Associates LLC Property 3 Valuation Overview The sales comparison approach is a market-based analysis that develops a land value estimate by analyzing and comparing similar land sales to the subject property. Our market research revealed sufficient market activity of land in Kenai and surrounding areas. Due to the imperfect nature of the market, we use a qualitative comparison technique that rate elements of comparison as superior, inferior, or similar. Explanation of the elements of comparison, and analysis of the primary land sales follows. Elements of The first step of the market analysis is to determine what elements of Comparison comparison cause land sale prices to vary. We found that location, frontage, clearing/grading, topography, size, utilities, and use (zoning) influence market behavior and the price paid for vacant land in Kenai. As discussed, the subject is zoned C, Conservation, which limits development potential. While certain commercial and residential uses are allowable with a conditional use permit, the extent of allowable development is less than the comparable properties' zoning districts. Further, the requirement to file a conditional use permit increases property risk. Thus, Conservation zoning puts downward pressure on demand, requiring an adjustment to the comparables for their superior zoning characteristics. Regarding market conditions, Kenai's land values remained relatively stable for the past 10 years, so we do not make an adjustment for time. Quantifying the identified adjustments is difficult due to the limited sale data; therefore, qualitative techniques are used to measure differences between the comparable sales and the subject. Importantly, the transactions offer similar highest and best use potential and are the best market data available. Comparative Market Researching the Kenai market for conservation zoned land sales Analvsis revealed no transactions, requiring us to expand our search to include land in other zoning districts with similar utility. Listed on the following page are four transactions we rely upon to facilitate our comparative analysis. Additional details of the comparable land sales are retained on file. 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 42 MacSwain Associates LLC Comparable Land Sales No Location Zoning Sale Sale Price Size S/SF Date $/Ac. 3 East side of Kenai Spur Highway at corner of LC 7/16 $75,000 326,700 SF $0.23 Ross Street 7.50 Ac. $10,000 4 South side of Lawton Drive, just east of RS 8/14 $225,000 591,980 SF $0.38 Walker Lane 13.59 Ac. $16,556 6 Southwest corner of N. Forest Drive and CG 4/15 $83,000 52,272 SF $1.59 Second Avenue 1.20 Ac. $69,167 7 South side of K Beach Road near Mile 17.2 None 10/15 $404,500 223,114 SF $1.81 5.12 Ac. $79,004 Southeast corner of Kenai Spur C — — — — 252,648 SF — — Highway and Walker Lane (Subject) 5.80 Ac. Land Sale Map 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 43 MacSwain Associates LLC Comparative Land Analysis: Land Sale 3 is the July 2016 sale located on the east side of Kenai Spur Highway near Mile 5 at Ross Street. This 7.50 -acre (326,700 SF) parcel sold for $75,000 or $10,000 per acre. Zoned Limited Commercial (LC), the trapezoidal -shaped parcel is heavily treed and approximately 50% inundated with low-lying wetlands per KPB Wetland Mapper. According to the Broker, the property is dry due to the State rerouting drainage two years ago. Dual access is provided by Kenai Spur Highway, a paved, two-lane highway, and Ross Street, a gravel road. Natural gas and electricity are at the parcel. The Broker stated the buyer had no immediate plans to develop the property, and intended to hold for future commercial development. The parcel was listed for sale for most of the last five years, originally at $129,000 before dropping to $79,900. We make a downward adjustment for zoning. Conversely, we make upward adjustments for inferior location away from Kenai's commercial core, and lack of public water and sewer, which increases development costs. Overall, Land Sale 3 is rated inferior, indicating a unit value greater than $10,000 per acre for the subject. Land Sale 4 is the August 2014 sale located on the south side of Lawton Drive, just east of Walker Lane. This 13.59 -acre (591,980 SF) parcel sold for $225,000 or $16,556 per acre. Located immediately south of the subject in a Suburban Residential (RS) zone, the irregular- shaped parcel is heavily treed. Riverine wetlands encroach onto the east boundary of the parcel. Access is provided by Lawton Drive, a paved, two-lane road. The Broker indicated public water, sewer, electricity, and telephone are available to the property. The parcel was exposed to the market for 291 days, originally listed at $295,000. We make a downward adjustment for superior RS zoning, which allows a wider array of permitted and conditional uses than the subject's zoning. Conversely, upward adjustments are required for size differential and to account for a lack of highway frontage / exposure, which reduces demand from commercial users. Overall, Land Sale 4 is rated inferior, indicating a unit value greater than $16,556 per acre. Land Sale 6 is the April 2015 sale located on the southwest corner of N. Forest Drive and Second Avenue, just north of Kenai Spur Highway. This 1.20 -acre (52,272 SF) site sold for $83,000 or $69,167 per acre. Zoned General Commercial (CG), the L-shaped site contained three lots, but was replatted into a single lot subsequent to the sale, gaining additional square footage due to vacated Coolidge Lane. The property was exposed to the market for approximately a year and a half, listed at $90,000. By comparison, this sale is rated superior in terms of use (zoning), size differential, and clearing/grading. Conversely, the site lacks direct Kenai Spur 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 44 MacSwain Associates LLC Highway frontage and is located slightly west of Kenai's commercial core. After analysis, Land Sale 6 is rated superior, indicating a unit value slightly less than $69,167 per acre for the subject. Land Sale 7 is the October 2015 sale located on the west side of Kalifornsky Beach Road near Mile 19.5. This 5.12 -acre (223,114 SF) site sold for $404,500 or $79,004 per acre. Located outside of zoning districts, the rectangular -shaped site consisted of five lots, but was replatted into a four -lot site subsequent to the sale. The site was primarily cleared, level, and graded at the time of sale with sparse vegetation. There is access from Kalifomsky Beach Road at the northwest corner. Natural gas and electricity are available, however the site is not served by public water and sewer. The parcel was listed for over a year, originally at $439,000. We make a downward adjustment for clearing / grading. Further, lack of zoning allows for greater development potential and reduces risk. Partially offsetting these superiorities are lack of public water and sewer and a location away from Kenai's commercial core. Overall, Land Sale 7 is rated superior, indicating a unit value less than $79,004 per acre for the subject. Reconciliation of Comparative Market Analysis: Presented below is a rating grid and analysis of the land sales used in comparative analysis. Land Sale $/Acre Rank Net Adjustment 7 $79,004 Superior y 6 $69,167 Superior y Subject - - 4 $16,556 Inferior T 3 $10,000 Inferior T Before adjustments, the comparable land sales indicate a unit value range from $10,000 to $79,004 per acre. Land Sales 3 and 4 are rated inferior indicating a unit value greater than $16,556 per acre. Conversely, Land Sales 6 and 7 are rated superior indicating a unit value less than $69,167 per acre. After comparative analysis and making the necessary adjustments, a unit value of $40,000 to $45,000 per acre is market -supported and develops the following. 5.80 acres X $40,000/acre = $232,000 5.80 acres x $45,000/acre = $261,000 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 45 MacSwain Associates LLC Reconciliation and Conclusion foregoing, the market value via the from $232,000 to $261,000. In estimate of land value at $250,000 acre. of Land Value: Based on the sales comparison approach ranges conclusion, we correlate with an , which approximates $43,000 per Market Value Estimate — Proposed Tracts A & B $250,000 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 46 MacSwain Associates LLC Assumptions and Limiting Conditions This appraisal is subject to the following assumptions and limiting conditions. + No responsibility is assumed for the legal description provided or for matters pertaining to legal or title considerations. Titles to the properties are assumed to be marketable unless otherwise stated. 4 The properties are appraised free and clear of all liens or encumbrances unless otherwise stated. + The information furnished by others is believed to be reliable, but no warranty is given for its accuracy. + All maps, plot plans, and other illustrative material are believed to be accurate, but are included only to help the reader visualize the properties. 4 It is assumed that there are no hidden or unapparent conditions of the property, subsoil, or structures that render it more or less valuable. No responsibility is assumed for such conditions or for obtaining the engineering studies that may be required to discover them. 4 It is assumed the properties are in full compliance with all applicable federal, state, and local environmental regulations and laws unless the lack of compliance is stated, described, and considered in the appraisal report. 4 Possession of this report, or a copy thereof, does not carry with it the right of publication. 4 The appraisers, by reason of this appraisal, are not required to give consultation or testimony or to be in attendance in court with reference to the properties in question unless arrangements have been previously made. 4 Neither all nor any part of the contents of this report shall be disseminated to the public through advertising, public relations, news, sales, or other media without the prior written consent and approval of the appraisers. 4 The existence of any hazardous material or other type of environmental contamination, which may or may not be present on the properties, was not observed by the appraiser nor does the appraiser have any knowledge of the existence of such substances. However, the presence of these substances may affect the value of the properties. Therefore, the client is urged to retain an environmental assessment for discovery and evaluation. 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 47 MacSwain Associates LLC Extraordinary Assumption This appraisal is subject to the following extraordinary assumption. 4 It is an extraordinary assumption of the appraisal of Properties 2 and 3 that they will be subdivided and the plat will be approved by the Kenai Peninsula Borough. 17-3078: Three Properties in Lawton Acres, Kenai, Alaska 48 MacSwain Associates LLC 4401 Business Park Boulevard, Suite 22, Anchorage, Alaska 99503 Appraiser: Steve MacSwain, MAI Member of Appraisal Institute - No. 5700 State of Alaska, Certified General Real Estate Appraiser - No. 42 Professional Experience: 1986 to Present - MacSwain Associates LLC 1976 to 1986 - Appraisal Company of Alaska - President 1970 to 1975 - Real Estate Services Corporation — Appraiser 1969 to 1970 - State of Alaska Department of Highways - Right of Way Agent Real estate appraiser and consultant of all property types throughout Alaska including commercial, industrial, subdivisions and special-purpose properties. Appraisals have been performed for financing, leasing, insurance, condemnation, taxation, property damages, investment analysis, and buy -sell decisions. Appraisals include valuation of both real property and business enterprises. Professional experience totals 45 years. Education: Bachelor of Business Administration, Finance (1969), University of Alaska Fairbanks Appraisal Education: The following is a list of completed appraisal courses and seminars. 2017 — Residential & Commercial Valuation of Solar by the Appraisal Institute 2017 — Right of Way Acquisition for Pipeline Projects by the International Right of Way Association 2016 — Uniform Standards of Professional Appraisal Practice — Update by the Appraisal Institute 2015 —Litigation Appraising: Specialized Topics and Applications by the Appraisal Institute 2015 — Business Practices and Ethics by the Appraisal Institute 2013 — Complex Litigation Appraisal Case Studies by the Appraisal Institute 2013 — Uniform Appraisal Standards for Federal Land Acquisitions (Yellow Book) by the Appraisal Institute 2012 — Appraisal Curriculum Overview by the Appraisal Institute 2010 — Reviewing Appraisals in Eminent Domain by the Intemational Right of Way Association 2010 — Commercial Appraisal Engagement and Review Seminar for Bankers and Appraisers by the Appraisal Institute 2009 — The Appraiser as an Expert Witness: Preparation and Testimony by the Appraisal Institute 2009 —Attacking and Defending an Appraisal in Litigation by Whitmer Education 2008 — Uniform Standards of Professional Appraisal Practice by the Appraisal Institute 2007 — Business Practices and Ethics by the Appraisal Institute 2007 — Eminent Domain Law for Right of Way Professionals by the Intemational Right of Way Association 2007 —Appraisal Review for Federal Aid Programs by the International Right of Way Association 2007—Analyzing Operating Expenses by the Appraisal Institute 2007 — Forecasting Revenue by the Appraisal Institute 2007 — Case Studies in Highest and Best Use by the Appraisal Institute 2002 — Uniform Standards for Federal Land Acquisitions: Practical Applications for Fee Appraisers by the Appraisal Institute 2002 — Legal Aspects of Easements by the Intemational Right of Way Association 1969-2001: Numerous appraisal classes pertaining to principles, income capitalization, cost analysis, sale comparison approach, and highest and best use analysis by the Appraisal Institute, Society of Real Estate Appraisers, International Right -of -Way Association, International Association of Assessing Officers, and Marshall Valuation Service Membership and Organizations: Member of Appraisal Institute — No. 5700 Member of International Right of Way Association Member of Building Owners and Managers Association (SOMA), Anchorage Public Service: Past Chairman of the State Board of Certified Appraisers Past member of Board of Equalization, Municipality of Anchorage Past member of National Experience Review Committee of the Appraisal Institute Past member of Regional Ethics and Counseling Panel of the Appraisal Institute Past president of Alaska Chapter 57 of the Appraisal Institute Significant Assignments: + Appraised the Trans -Alaska Pipeline System, an 800 -mile common carrier crude oil pipeline from Prudhoe Bay to Valdez, operated by Alyeska Pipeline Service Company. + Appraised Calais Company, Inc., a real estate holding company consisting of 39 commercial parcels in Anchorage. 4 Principal real estate consultant and expert witness for all lands affected by the Exxon Valdez oil spill. Project involved over 2,000,000 acres of remote land and nearly 2,000 private property owners. 4 Appointed as a representative of a three-member panel that analyzed and valued over 1,000,000 acres and 8,000 parcels for the Mental Health Lands Settlement. Contract assessor for the North Slope Borough, Kodiak Island Borough, City of Nome, and the City of Valdez. 4 Represented Seibu Alaska, Inc. (Alyeska Resort and Alyeska Prince Hotel) in preparing of their property tax appeal with the Municipality of Anchorage that resulted in a $65 million reduction in assessed value. + Appraised submerged tideland parcels and wetlands parcels located in Womens Bay on Kodiak Island for the purpose of an exchange between Koniag, Inc. and U.S. Fish and Wildlife Service 4 Appraised Common Carver Pipeline right-of-ways leased and operated by BP Transportation Alaska and ConocoPhillips Alaska. + Appraised 3,600 acres consisting of the former Adak Naval Air Station and Submarine Base conveyed to the City of Adak and the State of Alaska. 4 Appraised and/or provided consulting services on properties throughout Alaska including numerous financial institutions, Native corporation lands, and real estate holding companies both public and private. Expert Witness Experience: Steve MacSwain is qualified as an expert witness in both the United States Federal Court and the State of Alaska Superior Court. Steve has testified as an expert witness in State and Federal courts. In addition, Steve has testified as expert witness in numerous Alaskan municipal tax courts, public hearings, and depositions on matters related to real property. Arbitrator Experience: Appointed a Master by the Superior Court of Alaska and Municipality of Anchorage to serve as an arbitrator in determining just compensation. STATE OF ALASKA Ene.Vw'OvtYroD Erp�m:0800.ROta Deperlmcnt orcomm . Cammwity. and Em ndcD wicpmom Division afCoryomiom, B.m., end Pmfe,eionel Licenrind Real Estate Appraisers Licensee: STEVEN JAMES MACSWAIN License Type: Certified General Real Estate Appraiser Status: Active Commmkwr: Chis Nledick the a�la/ V MEMORANDUM 71111a w;d a Past �it� w�t� a Ftp 210 Fidalgo Ave, Kenai, Alaska 99611-7794 Telephone: (907) 283-7535 1 Fax: (907) 283-3014 www.kenai.city TO: Mayor Brian Gabriel and Kenai City Counl 1 THROUGH: Paul Ostrander, City ManagerQ FROM: Mary L. Bondurant— Airport Manag DATE: July 17, 2017 SUBJECT: Ordinance 2968-2017— Lawton Acres The above ordinance was placed on the Airport Commission agenda for discussion and recommendation at the regularly scheduled July 13, 2017 meeting. At the direction of Chair Feeken, Councilman Knackstedt gave Commission background information on the Lawton Acres property. After review of the ordinance and general discussion, Airport Commission made and passed the two recommendations below: 1. Move to recommend that Lawton Acres not be sold to the City. 2. Move to recommend that Council recommend Planning and Zoning look at rezoning property for commercial use. Both recommendations were passed unanimously. Please contact me if you have any questions. ��ear�e wit�i a fast, 6 p with a f tine AV 210 Fidalgo Ave, Kenai, Alaska 99611-7794 Telephone: (907) 283-7535 1 Fax: (907) 283-3014 the city o f www. kenai.city KENAI, ALASKA Nva MEMORANDUM TO: Mayor Brian Gabriel and Kenai City Council THROUGH: Paul Ostrander, City Manager IFS- FROM: Terry Eubank, Finance Director /Z DATE: July 26, 2017 SUBJECT: Fund Balance Policy impact of proposed Lawton Acres purchase, Ordinance 2968-2017. The purpose of this memo is to respond to Councilman Molloy's inquiry regarding the proposed transaction to remove the Federal Aviation Administration's (FAA's) deed restriction from Lawton Acres by the City's General Fund and its compliance with the General Fund's Fund Balance Policy. Facts 1. The adopted FY2018 Budget projects an ending General Fund, fund balance of $10,093,449. $624,937 is restricted for athletics, $6,868,847 is committed, including a $1,000,000 commitment for capital improvements, $2,382,699 is assigned and $216,966 is unassigned and more than the policy's maximum limit. 2. FY2018 ending General Fund, fund balance is $1,869,487 above the policy minimum of $8,223,962. This amount is available for short-term operational needs and non-recurring expenditures. 3. The policy minimum includes a commitment of $1,000,000 for future capital improvements. 4. In total, projected ending fund balance includes $2,869,487 which is available for short- term operational needs and non-recurring expenditures. This is a combination of the amount in excess of the policy's minimum, $1,869,487 and the $1,000,000 committed by Council for future capital improvements 5. The purchase of Lawton Acres would be a non-recurring expenditure of the General Fund. 6. The appraised amount to remove the FAA deed restriction from the 16.49 acres known as Lawton Acres is $600,000. Analysis 1. The use of $600,000 for the non-recurring purpose of removing the FAA deed restriction on Lawton Acres would not violate the City's General Fund, Fund Balance Policy. 2. The use of $600,000 for the non-recurring purpose of removing the FAA deed restriction on Lawton Acres would reduce fund balance available for future non-recurring and operational needs by $600,000 to $2,269,487. Im 'V1aye with a Past, Citi wit% a Ftp -__ 210 Fidalgo Ave, Kenai, Alaska 99611-7794 Telephone: (907) 283-7535 1 Fax: (907) 283-3014 the city o f www.kenai.city KENAI, ALASKA NV/ MEMORANDUM TO: Mayor Brian Gabriel and Kenai City Council FROM: Paul Ostrander, City Manager O . DATE: July 26, 2017 SUBJECT: Lawton Acres General Fund Purchase — Financial analysis and potential impacts on future expenditures of the City Pursuant to the City Council request at its meeting of July 5, 2017, this memo will provide a financial analysis and discuss potential impacts on future City expenditures based on the proposed transaction as outlined in Ordinance 2968-2017 in which the General Fund would pay the Airport Fund $600,000 to remove the FAA deed restriction from the 16.49 acres know as Lawton Acres. Financial Analysis The financial analysis will examine the impact on the City's General Fund and on the City's Airport Fund. Background Information 1. Pursuant to KMC 7.30.010(c), the proceeds from the sale must be deposited in the Airport Land Sale Permanent Fund (ALSPF). Once a component of the ALSPF, the use of the funds will be subject to restrictions. 2. Pursuant to KMC 7.30.010(b), the ALSPF is a restricted fund, created by the City Council, subject to "Deed restrictions, Federal regulations and grant assurances [that] require that airport funds be used for the use and benefit of the Kenai Municipal Airport." 3. Pursuant to KMC 7.30.010(d), "Money placed in the Airport Land Sale Permanent Fund shall not be available for use by the City for any purpose other than for investments in accordance with City ordinances". Page 2 of 4 Lawton Acres General Fund Purchase — Financial Analysis and Impacts 4. Future amendment of KMC 7.30.010 would be limited by the federal regulations and FAA grant assurances noted in KMC 7.30.010(b). 5. As written, Ordinance 2968-2017 would require placement of a deed restriction on the property known as Lawton Acres, permanently limiting future development and/ or sale of the property. 6. The current appraisal of the property included an assumption the property would remain zoned conservation and would be sold as a single 16.49 acre parcel. The appraiser determined that the highest and best use of the property as vacant is commercial development after subdivision. 8. The City's General Fund has sufficient reserves to complete the transaction and maintain compliance with its Fund Balance Policy. General Fund Financial Impact The City's General Fund has the financial capacity to complete the transaction as described in Ordinance 2968-2017. If adopted, the $600,000 that will be transferred to the ALSPF will no longer be available to the General Fund for any purpose. To put it in terms of the mill rate, $600,000 is equivalent to a one-year mill rate increase of 0.6845 mills. The impact of an increased mill rate of 0.6845 would be $68.45 on $100,000 of taxable property. The General Fund, FY2018 ending fund balance is projected to be $10,093,449. The amount restricted for athletics is $624,937; $6,868,847 is committed, including a $1,000,000 commitment for capital improvements; $2,382,699 is assigned; $216,966 is unassigned and more than the policy's maximum limit. The minimum level of fund balance per the policy is $8,223,962 and includes $1,000,000 committed for future capital improvements. The policy's maximum limit is $9,876,483. The difference between the policy minimum and maximum, $1,869,487, is the amount available for future short-term operational needs and non-recurring expenditures. Combine this amount with the committed $1,000,000 for future capital projects and there is $2,869,487 available for future short-term operational needs, non-recurring expenditures and future capital projects. Reducing available funds by $600,000 will impact the amount or timing of other City capital projects and the City's ability to meet short-term operational shortfalls. Placement of a deed restriction that will permanently restrict the use and development of the property will limit its utility and negatively impact the financial value of the property once placed. The loss of future property and sales tax revenues will negatively impact the finances of the General Fund. Airport Fund Financial Impact The Airport Fund will be the recipient of $600,000, however only the earnings on these funds, once invested, will be available for the capital or operational needs of the airport. The percent of market value methodology utilized by the ALSPF makes 5% of invested funds available annually for operations and capital needs. Once deposited in the ALSPF, the $600,000 will return $30,000 annually for use by the Airport. Page 3 of 4 Lawton Acres General Fund Purchase — Financial Analysis and Impacts As noted by the appraisal, the sale of the parcel as it is currently zoned and as a single 16.49 acre track does not represent the highest and best use of the property. Subdivision prior to selling the property for commercial development would generate the highest financial return to the Airport. Additionally, sale of the property will eliminate the future opportunity of the Airport to lease the property. Leasing under current City code provisions which set lease rates at 8% of the property value, would generate more revenue for Airport operations and projects than the one-time receipt of $600,000. Lease revenue can be used for airport operations or capital projects and is not limited to the restrictions of the ALSPF. In summary, despite receiving $600,000 in proceeds, only $30,000 annually will be available to the Airport for operations and capital projects, and the Airport will lose the ability to lease the property in the future. Additionally, the Airport will not benefit from the future appreciation of value, and the sales price of $600,000 does not represent the highest economic value the Airport could receive based on the parcel size and current zoning. Potential Impacts to Future City Expenditures During the preparation of the FY2018 budget, administration committed to the creation of a five year capital plan. This plan will identify and prioritize capital projects throughout the City. The General Fund will be responsible for the rehabilitation of streets, deferred maintenance on City buildings, and the construction of new or expansion to existing City facilities. For FY2018 budget, $631,500 of General Fund money was appropriated for capital projects. To date, administration has identified a number of significant needs of the City but until the capital plan is completed, the extent of those needs and an estimate of total expenditures required is unknown. What we do know is that the $2,869,487 currently available above the General Fund minimum level of fund balance is not sufficient for the foreseeable needs of the City. The Bluff Erosion project is a well-known need of the City and will require additional funding from the City. The total City match amount required for the project is variable, dependent on the total cost of the project, the amount of in-kind contribution the City provides, and if there are State or Federal resources or funds that can be used in lieu of City dollars. However, the City could be responsible for as much as $6,000,000 in additional funds to meet grant obligations. This would almost certainly require that the City bond for the project. However, money that can be appropriated towards the project from the City's fund balance reduces the amount of debt the City would incur. Beyond the Bluff Erosion project, some projects and/or expenditures that have been identified and will need to be addressed in the near future include: 1) Wildwood Drive rehabilitation — Wildwood Drive is badly in need of a complete rehabilitation. The Current road surface is significantly worn and has been patched annually for many years. The cost of this project is unknown, however, in 2008, engineer's estimates for the project, depending on the approach, were between $790,000 and $1,400,000. 2) Aliak Drive — Aliak Drive is being impacted by a recurring sinkhole in one area. This is almost certainly a result of a failure of the storm water system underlying the road. Page 4 of 4 Lawton Acres General Fund Purchase — Financial Analysis and Impacts Investigation and repair of this road and the associated infrastructure is needed. High water tables, significant traffic, and the unknown status of the storm water system makes estimating the cost of this project without significant additional information difficult. 3) General road repair and maintenance — A cost estimate for needed repair and maintenance of City streets over the next five years is a component of the administration's efforts to create a five year capital plan. While not yet quantified, these needs are significant. In the past, State grant funding would have provided for much of this work, however, grant funding from the State in the near future seems unlikely. 4) Cemetery expansion - $250,000 was appropriated for Phase I of the cemetery expansion in FY2018. Additional work will be needed to complete this project in the coming years. Preliminary engineer's estimates for completion of this project exceeded $600,000. 5) Kenai City Dock — The concrete superstructure and the steel pile caps at the dock have either failed or are failing. Additionally, cracks are present in the concrete deck at many locations and guardrail connections need repair. The engineer's estimate to complete this work is $162,000. 6) Police and Fire Department — For FY2018, the identified needs of the Police and Fire Department totals $397,000. This includes new patrol cars, self-contained breathing apparatus, and renovations and upgrades to the public safety building. In these uncertain economic times, the reality is that some of our fund balance may also be needed for short term operational needs, leaving less fund balance available for identified non- recurring (capital) needs. Our fund balance policy requires a budget with financial projections showing recurring expenditures, for which fund balance is the revenue source, will be supported by revenues, other than the use of fund balance, within three fiscal years, inclusive of the budget year being adopted, and at no time shall fund balance drop below the policy's minimum amount. With less support from the State, the City will need to rely more heavily on its fund balance and possibly additional tax revenues, and / or the issuance of debt to meet capital needs. The use of $600,000 to remove the FAA deed restriction from the 16.49 acres know as Lawton Acres will potentially limit the City's ability to meet future capital needs with existing fund balance, requiring greater reliance on bond sales or additional tax revenues to bridge the gap.