Title
AN ORDINANCE AUTHORIZING THE CONVEYANCE OF CERTAIN PROPERTY NEAR THE DULUTH INTERNATIONAL AIRPORT TO THE DULUTH ECONOMIC DEVELOPMENT AUTHORITY FOR NOMINAL CONSIDERATION.
Body
CITY PROPOSAL:
The city of Duluth does ordain:
Section 1.
(a) Pursuant to Section 2-176(a) of the Duluth City Code, 1959, as amended (the “Code”), the city council stated its intention to sell or convey certain property as set forth in Resolution No. 23-0155, which property is legally described as follows:
The building and other improvements located on the real property located in St. Louis County, Minnesota described as follows (the “Building”):
The South 120.00 feet of Lot 17, Block 4, Airport Division and the South 152.13 feet of the West 65.00 feet of said Lot 17, Block 4, EXCEPT the vacated westerly adjacent spur street; Lot 1, Block 5, Airport Division; and the vacated Taylor Circle, as dedicated in said Airport Division, EXCEPT that part of said Taylor Circle lying easterly of the northerly extended centerline of the easterly portion of said Taylor Circle.
(b) Pursuant to Section 2-176(b) of the Code, the city’s planning department reviewed the proposed conveyance of the Building for conformity to the city’s comprehensive plan and reported that the conveyance of the Building conforms with said comprehensive plan and is surplus to the city’s future needs.
(c) Pursuant to Section 2-176(c) of the Code, the St. Louis County Assessor determined that the estimated market value of the Building is $2,912,200.
(d) Pursuant to Section 2-177.3 of the Code, the city council finds that a conveyance of the Building to the Duluth Economic Development Authority, a public body, corporate and politic and political subdivision under Minnesota Statutes Chapter 469 (“DEDA”), is in the best interests of the citizens of the city and exceeds the needs of the city to retain the Building.
Section 2. That the proper city officials are hereby authorized to: (i) convey the Building to DEDA in accordance with the terms of the Purchase Agreement, substantially in the form on file with the City Clerk, for One and No/100 Dollars and (ii) execute a bill of sale and all other documents necessary to effectuate the conveyance of the Building to DEDA. The sale proceeds of the conveyance authorized by this ordinance shall be deposited into Fund 537 (Broadband Enterprise Fund).
Section 3. That this ordinance only authorizes the conveyance of the Building described above. The city’s fee simple or leasehold interest in the real property that the Building sits upon is expressly not authorized by this ordinance.
Section 4. That this ordinance shall take effect 30 days after its passage and publication.
Statement of Purpose
STATEMENT OF PURPOSE: The purpose of this ordinance is to authorize the conveyance of property legally described above (the “Incubator Building”) to the Duluth Economic Development Authority, a public body, corporate and politic and political subdivision under Minnesota Statutes Chapter 469 (“DEDA”). The Incubator Building is located near the Duluth International Airport and is depicted on the attached Exhibit 1. The City only intends to convey the Incubator Building itself, a 69,000 square foot structure located on the real property described above, and not its fee simple or leasehold interest in the real property that the Incubator Building sits upon. The City desires to convey the Incubator Building to DEDA to allow for its continued use for aviation-related manufacturing. The current tenant of the Incubator Building is Cirrus Aircraft, an aircraft manufacturing company headquartered in Duluth (“Cirrus”).
In 2002, the City was awarded a grant from the U.S. Department of Commerce Economic Development Administration (“EDA”) in the amount of $3,450,000 (the “Grant”) to construct a City-owned building and adjacent parking near the Duluth International Airport to lease for business and manufacturing purposes (the “Project”). The Project, which aimed to support advanced aircraft manufacturing, met its goal of creating high-skill, high-wage employment opportunities at an economically challenging point in time for the region. As a result of these activities, the Grant supported the creation of 233 permanent jobs at the Incubator Building through Cirrus, the long-term manufacturing tenant. All required financial and program reporting associated with the Grant have been submitted and accepted by EDA, as evidenced by the Covenant of Use and Release of Agreement and Mortgage attached as Exhibit B to Resolution No. 23-0155.
The future use of the Incubator Building is intended to match its current use for aviation-related manufacturing. The conveyance of the Incubator Building to DEDA allows for DEDA to sell the Incubator Building to Cirrus subject to the terms and conditions of a development agreement that requires further investment and job growth (the “Development Agreement”). The Development Agreement sets forth the sales price of the Incubator Building in the amount of $3,450,000 (the “Purchase Price”).
The city’s planning department reviewed the proposed sale or conveyance for conformity to the city’s comprehensive plan and determined that a sale or conveyance of the Incubator Building conforms with said comprehensive plan and it is surplus to the city’s future needs. The letter of conformity is attached as Exhibit C to Resolution No. 23-0155.
According to the St. Louis County assessor, the Incubator Building intended to be sold or conveyed has a current estimated market value of $2,912,200. The actual market value, as established through an independent appraisal, is $4,800,000.
In light of the substantial public benefit associated with conveying the Incubator Building to DEDA, the city intends to convey it for nominal consideration and in accordance with the terms and conditions of the purchase agreement attached as Exhibit 2. Once owned by DEDA, DEDA will subsequently enter into the Development Agreement with Cirrus to convey the Incubator Building, which agreement will set forth the Purchase Price, terms and conditions governing the conveyance and other initiatives. Once the Incubator Building is conveyed to Cirrus, DEDA will remit the Purchase Price to the City. The City intends to use the proceeds from the sale of the Incubator Building to support Fund 537 (Broadband Enterprise Fund).
The fee simple in the real property that the Incubator Building sits upon will continue to be owned by the City, subject to management by the Duluth Airport Authority under the laws of the State of Minnesota, 1969, Chapter 577, as amended. The City will continue to hold a ground lease for the real property that the Incubator Building sits upon under a lease agreement from 1993 that was assigned to the City in 2002 (the “Ground Lease”). The City will continue to sublease the Ground Lease to Cirrus under a separate lease agreement.