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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 132097 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 132097 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 132097 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 ,K., 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 northeast corner of the South Half of said No, 1 " assumed bearing, along the north line of said / South 00 degrees 00 minutes 30 seconds Eas distance of 924.00 feet; thence South 89 deg/ 567.42 feet to the point of beginning of said 14 seconds West, a distance of 23.91 feet; th the east, having a radius of 700.00 feet and degrees 24 minutes 38 seconds West, tangent \ south line of said Southwest Quarter of the Ni MONTICELLO BUSINESS CENTER, according to sc 2e Al County, as measured along said south line, an 4F IV,width from said line drawn parallel with the no • / 3eZ o/ o bC)�aPy/•P , %P / OF �y / 80 C "J Cb / 6yN& N 89'00.4i', E / - - - k-=--- ---184.49 4�1a i �h �alv 00 \ ! i i N 17•: - ------- PARCE LUNDS JUNE ly h W / o ci cb /Qv�h'�P / W 2 •Z / �/% P �Pp /by i°i'"":: , \ b ria;!' nay) cut 4 'sten ' f tda ` t J u, o / \ I CR 1 ; 01 I z m to m / ZI------ UTILITY AND AINAGE 1� �� EASEMENT CCORDING TO DESC ON PROM '�8Y CLIENT SO '/�/ <' - — - - — - - — - ��- '•'i m �.:,' m N 8993.5 \ 1 ----------t--�- ,i _-_294.85-_- --.Qs%.1e-- Nl .CONC. BLOCK lei - S 89'1400" X r�TRASH ENCLSUREI'^ ---1297.00---r I CONC. BLOCK \ `---. NORTHWES `-TRASH FNCLSURE �` OUTLOT B. / \ I EXISTING BUILDING `I I 80 BUSINESS /y f 9kT NORTHEAST CORNER OF -' � . ' h h OUTLOT A, MONTICELLO i'U . s �N ^r BUSINESS CENTER � A nnr•. 1-rl��r-1 1^ I > r I V I L_L_L�J '.i 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