HomeMy WebLinkAboutOrdinance No. 3027-2018_____________________________________________________________________________________
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Sponsored by: Administration
CITY OF KENAI
ORDINANCE NO. 3027-2018
AN ORDINANCE OF THE COUNCIL OF THE CITY OF KENAI, ALASKA, AUTHORIZING THE
SALE OF REAL PROPERTY DESCRIBED AS LOT FOUR (4)A, BLOCK THREE (3), COOK
INLET INDUSTRIAL AIR PARK SUBDIVISION, 2014 REPLAT, CITY-OWNED AIRPORT LAND
LOCATED OUTSIDE THE AIRPORT RESERVE, TO SCHILLING RENTALS, A PARTNERSHIP
OWNED BY DAVID AND MICHAEL SCHILLING.
WHEREAS, the City of Kenai received a quitclaim deed from the Federal Aviation Administration
(FAA) on December 1, 1963, to nearly 2,000 acres of land subject to certain restrictions, including
that no property shall be used, leased, sold salvaged, or disposed of for reasons other than for
airport purposes; and,
WHEREAS, on August 20, 1970, the FAA executed a Deed of Release, for an area of land subject
to the Quitclaim Deed allowing for the lease, sale, or disposal of Lot 4A, Block 3, Cook Inlet
Industrial Air Park Subdivision, 2014 Replat, for other than airport purposes; and,
WHEREAS, the City has received a request to purchase Lot 4A, Block 3, Cook Inlet Industrial Air
Park Subdivision, 2014 Replat (the Property) from the current Lessee; and,
WHEREAS, KMC 21.15.010 – Airport Land Outside of the Airport Reserve, provides that the City
may sell land outside the Airport Reserve when in the judgement of the City Council, such lands
are not required by the City for a public purpose; and,
WHEREAS, City of Kenai Ordinance No. 2904-2016 determined that Lot 4A, Block 3, Cook Inlet
Industrial Air Park Subdivision, 2014 Replat is not needed for a public purpose and authorized
the sale for not less than 125% of fair market raw land appraisal; and,
WHEREAS, City of Kenai Resolution No. 2018-12 approved an amendment to the City’s Policy
for Sale of Specific Airport Leased Lands that provided alternatives to a sale approved by the City
Council at 125% of fair market raw land appraisal; and,
WHEREAS, the request to purchase Lot 4A, Block 3, Cook Inlet Industrial Air Park Subdivision,
2014 Replat meets the sale conditions of the amended policy; and,
WHEREAS, sale at fair market value complies with the policy based on stipulated development
of improvements on the property.
NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA,
as follows:
Section 1. Statement of Ownership: That the City of Kenai is the owner of Lot 4A, Block 3,
Cook Inlet Industrial Air Park Subdivision, 2014 Replat (the Property).
Ordinance No. 3027-2018
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Section 2. Public Purpose and Best Interest Findings: That the Property is not needed for
future public municipal or airport purposes. Under the Airport Layout Plan, the Property is
designated for non-aviation commercial or light-industrial uses. The sale of the Property is in the
best interests of the City and Airport, as it serves a purpose of continuing commercial growth and
investment in the City.
Section 3. Authorization of Sale: That the Kenai City Council hereby authorizes the City
Manager to sell the City-owned lands described as Lot 4A, Block 3, Cook Inlet Industrial Air Park
Subdivision, 2014 Replat, under the procedures and terms established for the sale of airport lands
outside of the Airport Reserve, as set forth in KMC 21.15.180 et seq. and subject to the following
additional essential terms and conditions of sale under the Policy for Sale of Specific Airport
Leased Lands approved by City of Kenai Resolution No. 2018-12:
(a) The sale will be made through a negotiated sale to Schilling Rentals, LLC for a
sum not less than the fair market value of the land excluding lessee-constructed
improvements as determined by an appraisal due to the value of the improvements
being greater than four times the appraised fair market value of the land.
Section 4. Title: That title shall be conveyed by quitclaim deed. Any instrument conveying
title to the Property shall include the following restrictions, promises, and/or covenants:
(b) 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,
(c) 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 feet above mean sea level; and,
(d) 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,
(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 5. 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 the Deed
of Release dated August 20, 1970.
Ordinance No. 3027-2018
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Section 6. Effective Date : That pursuant to K MC 1.15.0?0(f), this ordinance shall take effect
30 days after adoption .
ENACTED BY THE COUNCIL OF THE CITY OF KENAI , ALASKA , this 20 day of June, 2018.
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Introduced : June 6, 2018
Enacted : June 20 , 2018
Effective: July 20, 2018
MEMORANDUM
TO: Mayor Brian Gabriel and Kenai City Council
THROUGH: Paul Ostrander, City Manager
FROM: Christine Cunningham, Assistant to City Manager/ HR Specialist
DATE: May 29, 2018
SUBJECT: Ordinance No. 3027-2018 – Authorizing the Sale of Lot 4A, Block 3,
Cook Inlet Industrial Air Park Subdivision, 2014 Replat
______________________________________________________________________
The City has received a request to purchase the above City-owned leased land outside the Airport
Reserve with substantial constructed leasehold improvements pursuant to the City’s Policy for
Sale of Specific Airport Leased Lands, approved by Resolution No. 2018-12.
Shilling Rentals is the current lessee of Lot 4A, Block 3, Cook Inlet Industrial Air Park Subdivision,
which was entered into on March 1, 1967 for purposes as provided in the City of Kenai Zoning
Code. The current use of the lot is for a medical office and clinic building and includes substantial
recent improvements to the building made by the Lessee. The 55-year lease term expires on June
30, 2022 and is in good standing.
On August 20, 1970, the Federal Aviation Administration (FAA), released the property for sale for
other than airport purposes, allowing the property to be sold at fair market value. All revenues
from the sale would be deposited in the Airport Land Sale Permanent Fund for use in the
development, improvement, and operation of the Kenai Municipal Airport as required by the Deed
of Release.
The City’s Policy does not provide for the sale of any specific property, but only a method for such
sale, subject to the Ordinances of the City of Kenai. The policy is in effect until July 6, 2021. Any
specific sale must be separately approved by the City Council, which may approve or disapprove
any such sale, in its sole discretion. Schilling Rentals requests to purchase the property at its fair
market value excluding lessee-constructed improvements as determined by an appraisal and
provided the Kenai Peninsula Borough Assessment Report showing the value of Lessee-
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Ordinance No. 3027-2018
constructed improvements totaling $1,746,300 were likely to be greater than four times the
appraised Fair Market Value of the land.
The lessee submitted a good-faith deposit and the City ordered an appraisal to be performed on
the property as-if vacant. The fair market value of the property was determined to be $300,000
by an appraisal performed by Reliant, Advisory Services, LLC on April 25, 2018. Based on the
amount of the appraisal, Schilling Rentals meets the requirement that the value of improvements
are greater than four times the appraised Fair Market Value of the land.
If the City Council approves the sale, City Administration may proceed with a sale.
Thank you for your consideration.
Attachment
cc: Schilling Rentals
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MEMORANDUM
TO: Mayor Brian Gabriel and Kenai City Council
FROM: Paul Ostrander, City Manager
DATE: May 31, 2018
SUBJECT: Ordinance 3027-2018 – Sale to Schilling Rentals – Amendment Memo
______________________________________________________________________
In the letter received May 7, 2018 from Schilling Rentals, requesting to purchase Lot 4A Block 3
Cook Inlet Industrial Air Park Subdivision, 2014 Replat, the applicant requests two specific
conditions of the sale. Neither condition was contemplated or supported by the Administration,
therefore, the conditions were not included in Ordinance 3027-2018. However, Administration
did commit to the applicant that an amendment memo would be drafted that would allow a City
Council member to move one or both of the conditions by motion at the June 6, 2018 City
Council meeting.
The first amendment would require that the City pay for the appraisal of the property that was
required to establish the current fair market value of the land rather than the applicant. The
amendment would require an additional Section be added to the Ordinance and the current
Section 6 be renumbered to Section 7 as follows:
Section 6. Appraisal: That any costs associated with the appraisal of this
property will be borne by the City of Kenai.
Section [6]7.
When the procedure for sale of properties was developed for properties included in Resolution
2018-12, amending the City’s Policy for Sale of Specific Airport Lands, appraisal costs were to
be borne by the buyer. The City is not actively soliciting for the sale of these properties. If a
lessee chooses to pursue the purchase of these properties, it is appropriate for them to pay for
the appraisal, not the City.
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Ordinance 3027-2018 Amendment Memo
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The City sent an email to Schilling Rentals in response to its inquiry to purchase the property on
February 24, 2018, which requested a good faith deposit of $2400 “….to cover the cost of a fair
market value appraisal of the land….”. Schilling Rentals subsequently provided a letter to the
City in response, stating: “Thank you for your 3/12/18 email (City of Kenai Resolutions No.
2018-12). Please accept this letter as our interest in purchasing the land at 100 Trading Bay
Road (Lot 4A CIIAP 2014 Replat). Enclosed, please find our good faith deposit of $2,400…”
The City then contracted with Reliant Advisory Services, LLC to perform the appraisal for
$1500. Only after the appraisal was completed did Schilling Rentals request that the appraisal
be paid for by the City.
The second amendment would allow Schilling Rentals to finance the purchase of the property at
a rate below what is commercially available. This amendment would also require an additional
Section be added to the Ordinance and the current Section 6 be renumbered to Section 7 as
follows:
Section 6. Financing: That the City will carry a deed of trust on the property for
an amount not to exceed $177,000 for a term not to exceed 24 months from the
recording date with an interest rate determined by Council to be 0.75% payable in
interest only monthly installments.
Section [6]7.
If both amendments were moved by Council the second amendment would need to be
numbered Section 7 and the current Section 6 would need to be renumbered to Section 8.
The financial and economic analysis that justified the policy approved by Resolution 2018-12,
did not consider financing of this nature. By providing financing at levels below what is
commercially available, there is a significant financial loss to the Airport Permanent Fund
particularly when selling a parcel that is currently under lease and generating monthly revenues
to the Fund. If the sale of the property were financed as proposed by the buyer as opposed to a
cash sale, the net revenue loss to the City over the course of the 24 months would be $18,167.
It is a goal of the Administration that the policies and procedures of the City in regards to land
sales and leasing be consistent, transparent, reasonable, and predictable. Processing all ten
properties included in the policy approved by Resolution 2018-12 the same, without parcel
specific special consideration is good public policy that will help achieve this goal.
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470 '
Date: 5/31/2018
The information depicted hereon is for graphic representationonly of the best available sources. The City of Kenai assumes no responsibility for errors on this map.
1 inch e quals 461 feet
Lot 4A, Block 3Cook InletIndustrial Air Park Subdivision,2014 Replat