May 9, 2017
MEMO TO: Mayor Barber and Board of Commissioners
FROM: Frank A. Rush, Jr., Town Manager
SUBJECT: Islander Drive Land Purchase - (Summary & Suggested Motions)
The Board of Commissioners is scheduled to review the satisfaction of the “due diligence” requirements associated with the Town’s planned purchase of a 1.8-acre tract of land located at 203 Islander Drive, and then consider three items to enable the Town to proceed with closing on the purchase no later than June 1.
If the Town acquires this property, it would be combined with the 4.4-acre Western Ocean Regional Access property (and perhaps other properties in this area), and the Town would solicit proposals from potential private partners for the construction of a new “meeting and events center” on the combined site. After the property is acquired by the Town, I envision that the Board of Commissioners will begin a more detailed process, with significant community input, to determine the desired parameters of any public-private partnership that may be negotiated in the future. I expect this process to take several months, after which the Town would solicit proposals from potential private partners. This process will be focused on achieving a project plan that:
- provides the desired economic benefits for Emerald Isle and western Carteret County,
- is respectful of Town and County taxpayers,
- considers the concerns of nearby property owners,
- maintains and enhances public beach access and parking at this site,
- embodies the core values of Emerald Isle (family beach image, small-town atmosphere),
- adheres to the Town’s building height limits and other development ordinances, and
- that is attractive to a private partner.
As discussed several times in recent weeks, this project is still in the conceptual stage and there is no specific site plan or private partner at this time. The upcoming process will seek to finalize those details. The immediate issue for Board consideration is whether or not the Town should proceed with the purchase of the land on or about June 1, as stipulated in the purchase contract. As noted previously, if the Town is unable to identify a suitable private partner for the development of a new “meeting and events center”, the Board will have three options (and perhaps more) for the property at that time:
- the Town could retain ownership of the property and develop it as expanded beach access parking,
- the Town could retain ownership of the property and reserve it for future development of a small centralized wastewater system to promote redevelopment in the Village West area, or
- the Town could simply market the property for sale to a private entity.
From my perspective, there is very minimal risk to the Town in proceeding with the land purchase, and there are potentially very significant benefits for our community in the future. Every new initiative begins somewhere, and the planned purchase of this 1.8 acre tract represents the very first step of many to develop a “meeting and events center” in Emerald Isle.
Satisfaction of Due Diligence Requirements
As you know, the Board approved the purchase of this 1.8 acre tract at its March 14 regular meeting, and validated the purchase contract (attached). The purchase price was initially estimated at $656,250 pending a detailed boundary survey, and as a result of that survey and stipulations in the contract the purchase price has now been reduced to $629,647. Additionally, the Town expects to incur approximately $70,000 of additional cost to clean up the property, remove all existing concrete, and restore the land to a grassy field. Thus, the total investment in the 1.8-acre tract is approximately $700,000.
The purchase contract includes a “due diligence” period that expires on May 17. At the time of contract execution, the Town provided a $12,500 earnest money deposit that is refundable up until May 17. The purchase contract includes a June 1 closing deadline. As you know, the primary requirement that needed to be satisfied prior to May 17 is the availability of Carteret County economic development funding to assist the Town with the land purchase. The Town requested a total of $450,000 from Carteret County, and the County Commissioners unanimously approved this funding request at its meeting on May 1, subject to certain conditions outlined below:
- as part of the development of a “meeting and events center” on the combined site, the Town shall maintain at least 165 public beach parking spaces available for use by the general public after construction of the “meeting and events center”, and
- title to the 1.8 acre tract shall be jointly held by Carteret County and the Town in proportion to the initial investment (64.3% Carteret County, 35.7% Emerald Isle), until such time that Carteret County determines that it is prudent to release its interest in the property, and
- any lease-hold improvements constructed on the eventual site of a new “meeting and events center” by a private partner and/or any real property that may be transferred to a private partner shall be subject to ad valorem taxation by both Carteret County and the Town, and
- if the Town decides to sell the property and any improvements thereon to a private party in the future, Carteret County shall receive its proportional share of the proceeds of the sale, and
- if the Town is unable to execute a contact with a private partner to construct the new “meeting and events center” before June 30, 2019, the Town shall be required to reimburse Carteret County the full $450,000 contribution.
As Town Manager, I am comfortable with these conditions and appreciate Carteret County’s assistance with this beneficial project for our town and our county.
In addition, as part of the Town’s “due diligence”, a new boundary survey was completed, and a copy of that survey is attached for your review. The total land area to be acquired is 1.846 acres, which is slightly larger than originally believed. The purchase contract specifically states that the Town’s purchase price would be adjusted based on the actual land area, and as a result of this survey (and the companion survey of the batting cage property to the north), the Town’s purchase price decreased from an expected $656,250 to $629,647.
Finally, the Town commissioned a Phase I Environmental Site Assessment of the property to determine if there are any “recognized environmental conditions” on the site. The Town’s consultant, Land Management Group, Inc. (LMG - Wilmington, NC) has indicated that there are no outstanding environmental concerns associated with the property and that no further investigation is warranted. I have attached an excerpt from the Phase I report (the entire report is very lengthy, but is available to you upon request) that includes LMG’s findings.
If the Board is comfortable that the appropriate “due diligence” requirements have been satisfied, the Town Attorney and I will proceed with closing on the purchase of the land on or before June 1. If the Board has other concerns, I will attempt to address them prior to the May 17 deadline.
If the Board is comfortable with the County’s conditions attached to its $450,000 contribution and that all other concerns have been addressed, the Board should direct the Town Attorney and I to proceed with closing on or before June 1.
Resolution Authorizing Memorandum of Understanding with Carteret County
The attached resolution formally authorizes the Town Manager to execute a formal Memorandum of Understanding (MOU) with Carteret County that includes the conditions noted above and outlined in the attached resolution. If the Board approves the attached resolution, I will confer with the Town Attorney before signing the MOU on behalf of the Town.
Budget Amendments – General Fund, Future Beach Nourishment Fund
As noted above, the Town’s contribution toward the land purchase and associated clean-up is $250,000. In order to finance this expenditure, an internal financing arrangement is proposed whereby the Town would simply “borrow” the money from itself by temporarily adjusting the Town’s current year (FY 16-17) contribution from the General Fund to the Future Beach Nourishment Fund, and then “repay” this internal financing arrangement over the next five years.
The attached General Fund budget amendment simply reduces the current year (FY 16-17) transfer to the Future Beach Nourishment Fund by $250,000, and appropriates this $250,000 to be transferred to the capital project ordinance previously established for the Islander Drive land purchase. The net effect on the cash position of the Future Beach Nourishment Fund is very minor, and the Future Beach Nourishment Fund is projected to have a balance of approximately $2.5 million at June 30, 2017. The Future Beach Nourishment Fund is expected to have sufficient fund balance on hand to meet anticipated future beach nourishment project costs in the next five years. The FY 17-18 Recommended Budget includes the first of five annual payments from the General Fund to the Future Beach Nourishment Fund to retire the proposed internal financing arrangement. A total of $60,000 is included in the FY 17-18 Recommended Budget for the first payment.
The Town used a very similar approach to finance a portion of the land purchase cost for the Emerald Isle Public Boating Access Area and to finance the construction of the new Welcome Center in recent years. The Board should also note that both of these prior internal financing arrangements were fully retired much earlier than initially stipulated, and that will be my goal for this new internal financing arrangement also.
Capital Project Ordinance Amendment
The attached capital project ordinance amendment is procedural in nature, and simply formalizes the budget adjustments noted above in the capital project account.
As discussed several times before, the development of a new “meeting and events center” represents a significant challenge for the Town, but I am optimistic that the Town can ultimately achieve this goal in a way that benefits the entire Emerald Isle community and that is consistent with our overall values.
I look forward to discussing these issues with the Board at the May 9 meeting.