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Home My WebLink About1978-08-24 Council Minutes - Special MeetingAGENDA KENAI CITY COUNCIL. - SPECIAL MEETING AUGUST 24, 1078 - 7: 00 P.M. KENAI PUBLIC SAFETY BUILDING PILEDGE OF AL.LUGIANCE A. ROLL CALL AGENDA APPROVAL 8. NEW BUSINESS 1. M&tWcation of appointoes to the Kenai Recreation Commission jj 2. Specific lessees relative to lease of City lands renegotiation rates .i • MA'YOIi-f�'COUt�1CIL - 3UESTIOri$ O.rSD.COMMENTS D. ADJOUROWNT i E - ' .r •a..'. n. .ar•. •.. •.� r. ..�. ...... ri _ _ r� r• .� _p ��•r-i.M!r.� ar... ..—.�.,, a�e.r ..'._ --- I' 11 KEN I CITY COUNCIL - SPECIAL MEETING T 24, 1978 - 7.00 P.M. KENAI PUBLIC SAFETY BUILDING COUNCILMAN DAN WHELAN PRESIDING PLEDGE OF ALLEGIANCE A . ROLL CALL Present: Ronald Malston, Dan Whelan, Tom Ackerly, Edward Ambarian, Betty Glick Absent: Vincent O'Reilly, Phillip Aber B. AGENDA APPROVAL Approved as distributed. C. NEW BUSINESS C-1: Ratification of appointees to the Kenai Recreation Commission Councilwoman Glick inquired 9 there should be seven names on the list instead of six. City Manager Wise said there should be J seven names and that six people responded so far. Councilman Whelan said that Mayor O'Reilly had appointed Kim Ambarian on the Commission so that youth could be represented and that when she graduated from high school that another high school student would be appointed to serve out the rest of the term. MOTION: Councilman Ackerly moved, seconded by Councilwoman Glick for ratification of appointees to the Kenai Recreation Commission. Councilman Malston asked if there was anything in the Ordinance about the length of the term of the appointees and City Attorney Schlereth said he did not have a copy of the Ordinance with him. Mr. Schlereth is to amend the Ordinance to show the length of office with regards to the youth represented on the Commission. Carmen Gintolli wanted to know if the Council had enough volunteers on the Commission or if they were missing one person. City Manager Wise advised Mr. Gintolli that we did not receive a response from one person yet. Motion passed unanimously by roll call vote with Councilman Ambarian abstaining for Kim Ambarian. 4 i� 41 Minutes, Page 2 C-2: Specific lessees relative to lease of City lands renegotiation rates Councilman Whelan advised that the meeting was to investigate why Attorney Baldwin fools the lease rates are erroneous and need adjust- ment. He advised Mr. Baldwin that the Council could not make a decision that evening. Mr. Baldwin apologized for unintentionally and erroneously channelling his correspondence through the City Council instead of the City Attorney. Mr. Baldwin represents RAY CASON, as owner of a lot in the General Aviation Subdivision; JACK THOMPSON, as owner of a lot in the Alyeska Subdivision (Post Office); and DICK MOROAN and MAX SWEARINGEN as owner of a lot in Cook Inlet Industrial Park (Clarion Building) . Mr. Baldwin stated that he would review the problems of the City's evaluations and then examine each of the leases individually. Mr. Baldwin stated that the leases provided for renegotiation at five- year intervals with provision for either increase or decrease at that time, but without guidelines for this renegotiation. The general principle of contract law is that it must be materially specific. The Thompson and Morgan/Swearingen leases provide for arbitration, but without standards outlined in the leases, the arbitrators do not know whether to negotiate for a fair price or a fair market evaluation without consideration for circumstances. The Cason lease has no provision for arbitration, merely stating that the "lease can be renegotiated every five years." The next step to be taken is a judicial resolution but the City is not faced with attorney's fees as are these lessees. Mr. Baldwin would like to resolve the matter short of court. Mr. Baldwin next discussed the weaknesses of the Frykholm appraisal. The appraisal evaluates property at fair market value, but, as the City is aware, the land is not owned as "fee simple," or unencumbered and without restriction, title to the property. The City cannot sell, but can only lease the property at the going lease rate. Property is worth less if it cannot be sold. The appraisal on page two, under Property Rights, states that the "land is treated as if it were 'fee simple' and without consideration of the effect of a restrictive lease on value." The title is subject to be returned to the FAA if the restrictions of the deed are not followed. There are also reservations over each parcel of subdivided lots on air space easements, the loss of the right to complain of low -flying aircraft, and there are restrictions such as the height of the buildings due to the airport. Mr. Baldwin feels that the City will not be able to develop this area in the future because people will be afraid of another runway going in. I =, [I J Minutes, Page 3 Mr. Frykholm's final figure for property evaluation is based upon comparable sales, but there are few comparable to this property since little land has been sold in Kenai since the oil boom of the sixties. The land ownership south of the highway has remained stable largely because of the limited amount of land available duo to the river bluff, owner disinterest in sales, and the hodge-podge of lot shapes, small sizes, mixed uses and several ownerships. Frykholm lists a lot in the East Addition of the Old Townsite offered at $5.07 per square foot and the highest per square foot actually sold of any lot in the area is $1.13. Councilman Malston disagreed with the figure. Frykholm does cite an exception to the price in a corner lot in Etolin Subdivision that has water and sewer and sold to the First National Bank in 1976 for $4.03,. Frykholm's square foot valuation for the lease lots are placed at $2.50 for Thompson's, $1.00 for tie downs for Cason, and $1.30 for the Clarion since it has its disadvantageous location in the pipe yards area. Mr. Baldwin feels his analysis should be examined in detail, He also feels the Angelo J . Hillas appraisal for the City of Kenai made on January 17, 1975 should be updated. From the 1075 Hillas appraisal until last year no land sold due to the high value placed on it or the economic climate not supporting it. Mr. Baldwin passed around a map (attached) he had made that was marked up as follows. The three subject lots have the new price the City to asking in red, the lots sold since last year have their cost in black, and the prices of the lots still on the market are marked in yellow. The lots were then analyzed by Attorney Baldwin in detail with the Cason lease at Lot 1, Block 4, General Aviation Apron and a new appraisal of $39,000.00 and new annual rental rate of $2,327.07 being first. The GAA is the most restrictive of the subdivisions since only aviation related businesses can occupy the leases. The City evaluates the lot as unimproved, not considering the grading, eight tie -downs, and trailer with septic system for the convenience of those utilizing the tie downs that Mr. Cason has provided. For the use of the tie downs and trailer, Mr. Cason charges $35.00 a month. If this lessee did not have the trailer, he could only charge $25.00 a month for his tie -downs. Considering his occupancy factor of 75 percent, the lot itself only provides an income of $1,000 per year, After paying $800 a year maintenance bills. the net income of this lease is $1, 000 a year. In essence, the City is asking$2,327.07 per year when the net income is only $1,000.00 a year for this lease. Minutes, Page 4 Another point concerning the Cason lease is the reevaluation last year of Arctic Aviation with a renegotiated figure of 2.75 cents per square foot rather than the 8.3 cents per square foot figure the City is asking from Mr. Cason. At Councilman Malston's question-relativo to the current lease rate, it was revealed that Mr. Cason was paying two cents per square foot for this land for the previous ten years. This lease should have been re- negotiated every five years. It seems the City is trying to recoup the revenue it feels it missed in renegotiation five years ago. However, the Kenai economy was somewhat depressed at that time and the rates might have been decreased. Mr. Morgan and Mr. Swearingen lease Lot 8, Block 3 of the Cook Inlet Industrial Airport which was appraised by Frykholm on June 18, 1078 at $09,000. The City wants the lease rate to be changed to $4,002.00 per annum, or 7,7 cents a square foot. Contrary to what this indicates, the property remained reladvoly stable because it is in the industrial locale of Kenai. This is supported by the Frykholm earlier appraisal on May 6, 1977 which attributed the "fee simple" interest of it at$20,500, or one third the value he placed on the lot only a year later. Furthermore, only 15 days ago, the Council leased the two lots adjacent to the Clarion that were on the market since the subdivision began, at 3.6 cents per square foot. Jack Thompson leases Lot 10, Alyeska Subdivision, the post office lot. The lease rate for this lot the City is requesting is 14.0 cents per square toot. In 1973 this lot was appraised at five cents per square foot. At Councilman Whelan's question of who did the 1973 appraisal, Attorney Baldwin replied that it was Bilks and corrected the year to 1075. One block away from Thompson's lot a corner lot was available for many months at six cents per square foot until it was finally leased on July 1, 1978 at that figure. Three lots away the land was leased for 41/2 cents per square foot on February 1, 1078. The highest leased land indicated on Attorney Baldwin's map is currently leased for site cents per square foot. This is way off balance with the new a �-1 i-- - ! i r f Minutes, Page S asking price for this lot of 14.9 cents per square foot. Presumably the Council's objective is to lease the land, not hold it, In conclusion, Mr. Baldwin asked that the Council consider all this information before determining a fair lease rate. Councilman Whelan asked for Council questions, or comments from the City Attorney, Mr, Schlereth, the City Attorney, said he would also like to apologize for putting his comments in a letter rather than phoning and talking over the matter about the leases with Mr, Baldwin, The City Attorney sought some clarification from Mr. Baldwin. Mr. Baldwin had commented that the Prykholm appraisal was based incorrectly since the property, according to him, had no fair market value due to its leasehold interest and the restrictions, According to Mr. Baldwin, due to these factors, the property could not be valued by comparing it to other property in the area, Mr. Schlereth asked if Mr. Baldwin felt another appraisal should be made by way of comparison. Mr. Baldwin replied that he did not know how he would feel about another appraiser without first seeing his work since the recent appraisal is worthless in his opinion. The only method by which the City cmad reach a fair lease rate would be to compile an index. Mr, Schlereth replied that lease property, despite Mr. Baldwin's comments, does have value in his opinion. Mr. Baldwin said that implication was not his intention. He did not know how to reach the fair market value, what formula could be used to determine value since the City does not own the property "fee simple" and the appraisers cannot, as a consequence, look at comparable property as is normal, The attorney questioned this. Councilman Whelan next asked for comments or questions from Council. Councilman Msiston commented thbt Lso hsd hoped Attorney Baldwin would have a counterproposal of what his clients felt was a reasonable figure. Attorney Baldwin then compared Thompson's lot with one leased on July 1, 1978 for six cents per square foot, He revealed, under Councilman Whelan's question, that this was Lot 9 of Edelin Subdivision leased to Walter Church. Minutes, Page 6 Some 18 days after the Peninsula Clarion's lease rate was raised, four lots wore leased at 3.6 cents per square foot. The City Manager said the lease figure was 3.9, not 3.6. Mr. Baldwin replied that within this same area, the City has leased six lots, the highest one at 3.9 cents. The most recent lot to be leased was to Browning and Henry and this lease will devalue the Clarion lease even more since their lot will be used for truck storage. The land around the Clarion now seems to becoming light industrial instead of commercial. Concerning the evaluation of the Cason lot, Attorney Baldwin cited a lot leased one year ago near Cason for 2.78 cents per square foot and asked that this figure be used for Cason's lot. Councilman Whelan wanted to know if this other lot was Arctic's and Baldwin acknowledged that it was. Using an income analysis approach to the lots, the figure for lease should be closer to 3.6 cents than 3.0 cents a square foot. In conclusion Attorney Baldwin said that he hoped this problem could be worked out fairly for the clients and the City. Councilwoman thick wanted to know if the Council would wait to make a determination until the City Attorney provided a memo to the Council . Mr . Schlereth said that was correct and the memo would be ready prior to the next packet. Councilman Whelan made a motion for adjournment, seconded by Councilman Aekerly. Meeting was adjourned at 8: 20 P.M. Respectfully submitted, Mhry17Anri Dore Actift City Clerk i f ■ w ■406 10 t ' r,-.4(4 i .Yl, ...9rr'. 4, ' / I h.�w �� •it I! d^y�'. �.•� /Qn/ ..i �.� 1. °''�OLYI?r M.� `t '�',` •� L�.Iry � - ��trl+l �� r� � \�\,�•�/ � . -pro ip, /,nliA!! r�r J / V {r4 • !y�►� i ` M `� • .� � ( 11 , � !,� L, t .� ..�, ��. `� 6 ., � !..� . � / � 4#�! Vlflt htSERYl. {e. o • V / d i. 4� �� / rtl ✓••`'� •' !} ./ i. 's� �,. � R•Q j Q' •�,( r '•, f tE ii �It d GP 'J rf• 1 e �* / . e y; :! ! ` Gf /i ` vt. �r V ICl/ I• u ( ..,� �• ! •!, . 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