City Council Agenda Packet 11-26-2007 SpecialAGENDA
SPECIAL MEETING - MONTICELLO CITY COUNCIL
Monday November 26, 2007 - 5:30 p.m.
Mayor: Clint Herbst
Council Members: Wayne Mayer, Tom Perrault, Brian Stumpf and Susie Wojchouski
1. Call to Order
2. Cedar Street right of way agreement
3. Adjourn
Special Council Agenda: 11/26/07
Consideration of Amending Original Cedar Street Right of Wav agreement by Droviding
Davment to John Lundsten in Lieu of Land.
A. REFERENCE AND BACKGROUND:
City Council is asked to consider whether or not to provide John Lundsten with a cash payment to
supplement the value of land provided in trade via quit claim deed. Consideration of this supplemental
payment is requested because a portion of the land quit claimed to Lundsten must legally go to a
different property owner (Glen Posusta).
By way of history, the original deal with Lundsten stemmed from the City's need to extend Cedar
Street through the Lundsten's property. As part of the arrangement for obtaining the right of way
through the property, the City agreed to quit claim the real property described in Exhibit B to Mr.
Lundsten. Exhibit B of the original agreement contained land that was encumbered by easement for
use by the State of Minnesota for Highway 25 right of way. The turnback process associated with
vacating this right of way ultimately results in a portion of this area to be turned back to others
(Estimate 4,695 square feet)
It should be noted that according to Tom Scott, "the transfer to Mr. Lundsten was by quit claim deed.
The City did not warrant title. Consistent with the settlement document, Rick Wolfsteller recalled
conversations with Mr. Lundsten in which both sides understood that the City was conveying whatever
interest it had as a result of the tumbacks from the state/county. It appears that MnDOT may only have
had an easement interest, as opposed to fee title, which may mean the portion abutting another
property in fact reverts to that property upon vacation.
While the City does not have any legal liability because the land was provided via quite claim deed,
this is a situation which could result in the City being drawn into litigation. To avoid that situation, the
City may want to consider a payment to Lundsten in exchange for a release of any interest he might
have in the approximately 4,695 square feet of vacated right of way that that ultimately would be
assigned to another property.
Budget Imvaet
Up to $51,000 which must be drawn from reserves.
B. ALTERNATIVE ACTIONS:
1. Motion by Council supplementing the original agreement with a payment to Lundsten
in the amount of (see below). This payment to be provided under the condition that
Lundsten releases any interest he might have in the land area involved.
Under this alternative it is believed that the quit claim deed sufficiently portrayed the
amount of land that Lundsten should have expected to receive in the deal. Now that it
has been found that the he will not get all the land that was identified in the quit claim
deed, the City should make it right by providing him a supplemental payment instead.
La. In speaking with John Lundsten, he believes the value of the land today is in the
neighborhood of $11 per square foot. The amount of the payment under this alternative
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Special Council Agenda: 11/26/07
would be $55,000. Lundsten has noted that he will not bring litigation against the City
and will release any interest he has in the area if the City pays this amount. I have
informed him that this amount seems high compared to land values in the area and that I
can not guarantee that the City Council will agree to paying this much when legally,
under the provisions of the agreement and associated quite claim deed, the City is not
bound to supplement the agreement.
Lb City Council set amount based on recent sales or sale prices Attached is a table
outlining recent sales or land for sale prices that the Council may wish to review when
setting a payment amount.
If the City and Lundsten can agree on the value of the subject land area and put the deal
to bed, the ability of the adjoining property owner to establish ownership of the vacated
area and attach it to his parcel improves and thus the cost of the quiet title action is
likely to be reduced.
2. Motion to deny providing payment to supplement original deal based on the finding that
by accepting a quit claim deed, Lundsten was aware that the City was not warranting
title on the property and that he was or should have been aware that he was accepting
the arrangement with some risk that the entire vacated area outlined in exhibit B would
not ultimately come under his control.
According to Tom Scott, the City is not legally bound to provide a payment as proposed
because the land was provided via quit claim deed and there never was a guarantee to
Lundsten that the land area in question would revert to him via the vacation process.
Council could take the view that Lundsten had knowledge of value and risk associated
with accepting a quit claim deed as part of the original transaction and therefore no
supplemental payment is warranted.
If this alternative is selected, it is possible that the City could get pulled into litigation.
The quiet title process required to establish ownership of this parcel for the rightful
owner will be further complicated if Lundsten places a claim on the parcel.
3. Motion to table matter.
I do not believe that John Lundsten will be available to discuss this matter with the City
Council at the meeting. His direct input on what he expected as part of the original deal
might influence your decision so you may wish to table the matter until he is available
to discuss it with you directly. You may also wish to table a decision to provide the
opportunity to negotiate price.
C. STAFF RECOMMENDATION:
No recommendation at this time as all three alternatives have merit.
D. SUPPORTING DATA:
Copy of original agreement
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Special Council Agenda: 11/26/07
Drawing showing original area (Exhibit B to agreement) conveyed via quite claim deed to
Lundsten along with markings showing subject area.
Aerial photo showing Exhibit B area and subject area
Letter from John Lundsten on topic
Meeting minutes from October 28, 2002
Table showing land value comparisons
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AGREEMENT
This AGREEMENT is executed this ( 7 day of , 2003 between The City of
Monticello, Minnesota (hereinafter " City") and John M. Lundsten and Mary Ellen
Lundsten, 1804 Hillside Lane, Buffalo, Minnesota (hereinafter "Lundstens").
WHEREAS, City intends to construct a public improvement consisting of street
(including curb and gutter) sanitary sewer, water main, storm sewer lateral, storm sewer
area, sidewalk and street lights on and across real property owned by Lundstens as more
fully described in Exhibit A), and other real property (hereinafter "Cedar Street
Extension Project"), and
WHEREAS, At Lundstens' request, City has decided not to install the sidewalk portion
of the improvement across Lundstens' property; and
WHEREAS, City wishes to acquire from Lundstens 1) the Exhibit A property and 2) a
20 -foot storm sewer easement as portrayed on sheet 14 of the WSB document dated
3/24/03 and titled "City of Monticello City Project No. 2002 — 06C (Exhibit C), both at
no cost to City, and
WHEREAS, City owns an interest in real property described in Exhibit B, and Lundstens
wish to acquire the Exhibit B property from City at no cost to Lundstens, and
WHEREAS, The Exhibit A property is part of a larger parcel (hereinafter "Lundsten
property") which is subject to an assessment levied by City in 1980, known as the 1979 —
1 Improvement Project, and
WHEREAS, the original total amount of the assessment levied against the Lundsten
property was $85,950.73, and Lundstens paid the first installment of said assessment
thereby lowering the unpaid amount to $77,355.66, and
WHEREAS, on October 1, 1981, Lundstens applied for and City granted a Special
Assessment Deferral under Minnesota Statutes Section 273. 11, Subd; 11 (known as a
"Green Acres" deferral), and
WHEREAS, City and Lundstens have engaged in discussions regarding the manner in
which interest on said deferred assessments should be calculated, and
WHEREAS, City and Lundstens wish to reach an agreement that will allow City to
proceed with its planned Cedar Street Extension Project in a timely manner and to resolve
their discussions of interest on the deferred assessments in an equitable manner, and
WHEREAS, Lundstens have signed a purchase agreement with AMAX Storage, LLC,
which could create for AMAX an interest in the Exhibit A property;
,� r
NOW, THEREFORE, In consideration of mutual reliance and for other good and
valuable consideration, the sufficiency of which is hereby acknowledged, City and
Lundstens agree as follows:
1. Simultaneously with the execution of this Agreement
a) Lundstens shall Quit Claim to City the real property described in Exhibit A.
b) City shall Quit Claim to Lundstens the real property described in Exhibit B.
c) Lundstens shall grant City a 20 -foot storm sewer easement over the portion of
their property portrayed in Exhibit C. This grant of easement is not an
acknowledgement or consent by Lundstens for the future placement of a storm -
water detention pond or ponds on the Lundsten property.
d) City shall obtain from AMAX Storage, LLC, a Quit Claim deed to the Exhibit
A property and deliver a copy of same to Lundstens.
e) Lundstens shall execute a Petition for Public Improvements in the form shown
on Exhibit D hereto. Said Petition will provide, among other things, that the
assessment payable by Lundstens for improvements on, under and across the
Exhibit A property shall not exceed the following:
1) Street $68,679.79
2) Sanitary Sewer $16,939.87
3) Water main $27,823.96
4) Storm Sewer Lateral $15,479.20
5) Storm Sewer Area $13,750.00
6) Street Lights $22,597.32
7) Driveway None Provided
Total $165,270.14
2. City shall defer the principal amount of assessments for the street lights as set forth in
item Le) 6) above, totaling $22,597.32, and waive all interest thereon until such time
as the property which they abut is developed. When the property is developed, the
assessments will become active. At that time, interest will begin to accrue on a simple
Merest basis at the rate specified for the other assessments in this project. Lundstens,
or their successors in interest, shal*ay the assessments and interest over the term of
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years provided for the other assessable items, commencing WILD LJJU L11bL 1 --al c04.am,
tax payment date after the property is developed, reserving the right to pay the
assessments in full at any time. The term for repayment of the Cedar Street
assessments shall be 15 years.
3. Lundstens shall pay simple interest on the deferred assessments at the rate of seven
per -cent per annum, calculated on $77,355.66, or total interest of $5,414.90 for each
year from October 1, 1981. At such time as it is paid, the deferred assessment on the
property indicated in paragraph 4 b) below shall be reduced by $1,000.00.
4. City shall spread the deferred assessments equally across each acre of the entire
Lundsten property remaining after conveyance of Cedar Street, consisting of 35.945
acres in total. Each acre shall be assigned $2,152.06 ($77,355.66/35.945) in principal
amount of deferred assessment plus $150.78 ($5,414.90/35.945) for each year of
interest from October 1, 1981. Lundstens may sell portions of the entire parcel and
pay the deferred assessments plus simple interest as stated in this paragraph on only
the parcel sold. Provided, however, that for purposes of determining how much of
the deferred assessments are due upon the sale of a portion of the Lundsten property,
that. property shall be divided into four parcels as follows:
a) the portion north of Dundas road
b) the portion south of Dundas road and east of the east line of the Amax Storage
property extended south.
c) The portion east of Cedar Street Extended and west of the line described in b)
above,
d) The portion west of cedar Street extended.
5. Provided, however, the entire balance of unpaid deferred assessments and simple
interest thereon shall be due and payable in full on September 30, 2011, if not sooner
paid, as provided in Minnesota Statutes.
In witness whereof, City and Lundstens have executed this agreement this i day of
----� 1� , 2003.
City onticello
M. Lundsten
By:
Mary 91len Lundsten
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John M. Lundsten
1804 Hillside Lane
Buffalo, MN 55313
763/682-4595
October 11, 2007
Mr. Jeff O'Neill
City of Monticello
505 Walnut Street, Suite
Monticello, MN 55362
Dear Jeff:
Pursuant to previous conversations, I am writing to again explain my position
regarding a portion (hereinafter "Part I") of the parcel of real estate conveyed to my wife
and me by the City of Monticello (hereinafter "MnDOT parcel"). You and I have
discussed this issue previously, both in a June 11, 2007 meeting (with Glen Posusta,
Mayor Herbst, the lawyer for the City and some council members and staff), and since
then.
At a meeting at City Hall between you and me in August, 2007 I gave you a
survey that showed the MnDOT parcel and Part 1 (Exhibit A). Part 1 consists of
approximately 4,695 square feet. We discussed possible resolution of the conflicting
claims to Part 1 and you said then that you would try to get a proposed resolution to the
Council as soon as possible. You advised me recently that you will bring this matter to
the Council on November 12. Since I will be out of town and unable to attend that
meeting, you suggested that I write this letter.
The MnDOT parcel is a remnant from re -construction of State Highway # 25.
MnDOT conveyed the parcel to Wright County, Wright County conveyed to the City of
Monticello, and the City conveyed it to us. This last conveyance was part of the
consideration involved in our conveyance of a strip of our land to the City for Cedar
Street. Negotiations for these conveyances began over five years ago and concluded with
the Agreement between the City and us dated June 17, 2003. Rick Wolfsteller and I
negotiated the Agreement and the Council approved and accepted it
A copy of the Agreement is enclosed (Exhibit B). You will see that it covers
many different issues, only one of which was the conveyance of real estate by the City. I
have also enclosed a copy of Council Minutes from October 28, 2002(Exhibit C). Please
note that our conveyance of the right of way for Cedar Street was conditioned upon the
City's aereement to convey the MnDOT parcel to us. We would not have conveyed the
Cedar Street right of way if the City not agreed to convey the MnDOT parcel. This is a
critical point, one that you and the Council must understand. We negotiated with the City
over a lengthy period and reached a reasonable settlement to a number of issues.
Subsequent to the June, 2003 Agreement, Glen Posusta objected to the City's
conveyance of A PORTION OF PART 1 to us. He claims that the City was not entitled
to convey the east one-half (more or less) of Part 1 and that he is entitled to a conveyance
of that east one-half of Part 1 (approximately 2358 square feet). He has made his claim
to you and other staff members and most recently in the June 11 meeting referred to
above.
We do not have an opinion on the validity of his claim. We only know that we
negotiated in good faith and have met every term and condition of the June 17, 2003
Agreement. We expect the City to honor its part of that Agreement. To enable the City
to resolve this issue with Mr. Posusta, we are willing to Quit Claim to the City ALL OF
PART 1, for a price of $11.00 per square foot. We are not willing to convey only the east
one-half of Part 1. The City can then negotiate with Mr. Posusta over all or a portion of
Part 1. We are also willing to work with the City in reference to the form of payment for
our re -conveyance.
Please advise me of the outcome of the November 12 meeting. I can be reached
at 619/269-7883 from November 1 through November 18 and after December 15.
Sincerely, '1
�, ` John M. Lundsten
X, C.
A.
t✓.ouncil Auenda - I0/28/02
Consideration of aul-ceui:T to future tui-nback of vacated 1-tialiway 2S ri<_Tltt of way..John
Lundsten. (RW)
REFERENCE AND BACKGROUND:
Recently the City Council approved the vacation of that portion of Cedar Street Ivin�L, south of Dundas
Road to where it intersected with Hiuhway 25 and agreed to sell this portion of the right of way along,
with a remnant trian��ular parcel the City obtained from Mel Wolters to the adjacent property owner.
Glen POSLista.
The vacation of Cedar Street covered all of the right o1' way that MnDOT had originally turned back
to the County who then turned it back to the City but there is an additional trian<_*ular parcel that
continues on to the south of old Cedar Street that MnDOT continued to have as part of the Highway
25 right of way. It is unknown as to why MnDOT had kept this particular piece of property within
the right of way. but Mr. Posusta had contacted MnDOT representatives w -ho indicated they would
be agreeable to turnback the unneeded right of way to Wright County. \N -ho will then likely turn it over
to the City of Monticello as it is not needed for Highway 25 purposes. The majority of this property
abuts a parcel of land that is owned by John Lundsten of' Buiialo. with a smaller portion abutting the
property owned by Mr. Posusta. Mr. Lundsten has indicated he feels this property should be turned
over to him when it is given back by MnDOT in exchange for providing a deed to the new Cedar
Street alignment that the City will need in order to extend Cedar Street to School Boulevard. As you
may recall. Mr. Posusta was required to provide this new Cedar Street alignment as part ofthe
transfer from the City of the old right of \\-a)-to hint as ile \, as purchasing property from heir. Lundsten
and replattim, the entire area. Since Mr. Lundsten is still actual]-,: the owner of the property. he ha,
indicated a willingness to deed over to the City the new riullt of way provided we agree to give him
this small triangular parcel when MnDOT actually turns it over to the County and the City in the
future. Since we have no �-,uarantee when this will occur. Mr. Lundsten is acceptable to a Council
action indicating that if and when the City actually rets title to the property we would be agreeable to
tUrIlin" it over to him for the exchange.
Staff would be supportive of this request contingent upon Mr. Lundsten also agreeing to petition for
public improvements along= the new Cedar Street right of way and agreeing to waive any objection to
future assessments for the improvements. This would be in addition to providing the appropriate right
of way exchange. If Mr. Lundsten is agreeable to this provision. it is recommended that the excess
right of way that is turned back by MnDOT to the City be transferred over to the adjacent property
owner. Mr. Lundsten.
ALTERNATIVE ACTIONS:
Assuming the Citv obtains ownership of the excess right of xyay south of Cedai- Street.
Council would agree to turn over the property to adjacent property- owner. John Lundsten.
a
t.
4
ounc►I ALenda - 1012-18/02
t
contingent upon obtaining, a petition for Cedar Street extension and agreeing to naive the
public hearing requirements for the 1111proverrient and assessments.
�. Do not approve transfer.
C. STAFF RECONINIENDATION:
It is the recommendation of the Citv Administrator that to expedite the City receiving the ne\v Cedar
Street right of wav alignment that any additional excess right of \vav turned back by MnDOT to the
Cite be transferred to the adjacent property owner. John Lundsten. with the provisions noted.
D. SUPPORTING DATA:
Copy of MnDOT letter approving turnback request.
Map outlining property in question.
Council Minutes - 10/28/02
5. Consent A eg nda.
A. Consideration of approving Change Order No. 1 to Front Street Improvement Project
No. 2001-06C. Recommendation: Approve Change Order No. 1 to the Front Street
Improvement Project No. 2001-06C increasing the contract amount with Schluender
Construction by $12,948.50.
B. Consideration to approve authorization to enter into a Grant Agreement between the
State of Minnesota and the City of Monticello for the UMC Project. Recommendation:
Move to approve authorization to enter into Grant Agreement #CDAP-02-0135-AH-
FY03 between the State of Minnesota and the City of Monticello and to approve an
interest rate of 2.75% for the loan to UMC (the Borrower).
C. Consideration of agreeing to a future turnback of vacated Highway 25 right of way -
John Lundsten. Recommendation: In order to expedite the City receiving the new
Cedar Street right of way alignment, any additional excess right of way turned back by
MnDOT to the City will be transferred to the adjacent property owner, John Lundsten
contingent upon the City receiving a petition for Cedar Street extension and agreeing to
waive the public hearing requirements for the improvement and assessments.
D. Consideration of Personnel Committee Recommendations:
1. Consideration of participation in Minnesota State Retirement System Health
Care Savings Plan. Recommendation: Move to approve City participation in
the State Retirement Health Care System Plan with a provision that the City
allows employees who have accumulated in excess of the 100 day maximum to
be allowed to contribute up to 100 hours each year to the plan until they reach the
maximum allowed under the present personnel policy.
2. Consideration of adopting formal policies regarding employee and council
reimbursement for meal expenditures, funding for employee social events and
city membership in the Chamber of Commerce. Recommendation: Adopt
formal policies regarding employee and council reimbursement for meal
expenditures, funding for employee social events and city membership in the
Chamber of Commerce.
3. Consideration of establishing a pre-tax flexible spending account.
Recommendation: Authorize the establishment of a pre-tax flexible spending
account for city employees that sets a limit of $2,500 per year for employees who
are permanent full-time or permanent part-time with a least six months of
employment.
4. Consideration of expanding City Hall operating hours and developing a flexible
work schedule for employees. Recommendation: Authorize staff to establish a
2
Highway 25 Comparables
� arcetfBu�ridi�g�,� _ .� Type 1l��
Arby's
Lease
Unavailable
Premier Bank
Sale
2004
$12.00
Taco John's
Sale
2005
$13.25
Dairy Queen
Ground Lease
Approx. $14.00
Krutzig/Jefferson Commons
Sale
2006
$9.00
Culver's
Sale
2004
$7.25
Applebee's
Sale
2005
$9.00
Thomas J. Campbell
Roger N. Knutson
Thomas M. Scott
Elliott B. Knetsch
Joel J. Jarnnik
Andrea McDowell Poehler
Soren M. Mattick
John F. Kelly
Henry.A. Schaeffer, III
Alina Schwartz
Samuel J. Edmunds
Marguerite M. McCarron
1380 Corporate Center Curve
Surto 317 e Eagan, MN 55121
651-452-5000
Fax 651-452-5550
www.ck-law.eom
CAMPBELL KNUTSON
Professional Association
November 8, 2007
Mr. Jeff O'Neill
City of Monticello
505 Walnut Street, Suite 1
Monticello, MN 55362
Re: Lundsten/Posusta Matter (Vacated Old Highway 25)
Dear Jeff-
As
eff
As you requested, I reviewed the 2003 John Lundsten settlement agreement
and spoke with Rick Wolfsteller about the matter. I also reviewed the 10/28/02
council staff report and minutes of the 10/28/02 council meeting at which the
council approved the agreement.
Based on the staff report and my conversations with Rick, the City's
interest, if any, in the northerly portion of the vacated Highway 25 in front of Mr.
Posusta's property was not transferred inadvertently to Mr. Lundsten. The entire
vacated parcel was described in the staff report and depicted on the attached map.
The City conveyed whatever interest the City had in the vacated right of way,
including this remnant piece abutting Mr. Posusta's property, in exchange for Mr.
Lundsten transferring the easement for the new Cedar Street alignment and
agreeing to certain assessments.
The remnant right of way in front of the Posusta property is approximately
5,000 +/— feet, with one-half or 2,500 feet +/— abutting Posusta's property to the
centerline.
The transfer to Mr. Lundsten was by quit claim deed. The City did not
warrant title. Consistent with the settlement document, Rick recalls conversations
with Mr. Lundsten in which both sides understood that the City was conveying
whatever interest it had as a result of the turnbacks from the state/county. It
appears that MnDOT may only have had an easement interest, as opposed to fee
title, which may mean the portion abutting Mr. Posusta's property has in fact
reverted to his ownership upon vacation. In order to establish marketable title to
the piece Mr. Posusta probably will need to go through a quiet title action.
The bottom line is that the City conveyed to Mr. Lundsten by quit claim
deed whatever interest it had in the vacated right of way, including the portion
abutting Mr. Posusta's property. If the City had no interest because MnDOT only
had an easement, then all or a portion of the vacated right of way in front of Mr.
Posusta's property may be owned by him if he is the underlying fee owner. The
quit claim deed to Mr. Lundsten doesn't change anything.
132097
Mr. Jeff O'Neill
November 8, 2007
Page Two
While the City does not have any legal liability, this is a situation which could result in
the City being drawn into litigation. To avoid that situation, the City may want to consider a
payment to Lundsten in exchange for a release of any interest he might have in the vacated right
of way abutting Posusta's property.
Please contact me if you have any questions or would like to discuss this further.
Best regards,
Car+bell Knutson
Pro ss. nal Association
By: ,
Thomas M. Scott
TMS:cjh
132097