Last month Mark Kuykendall and James Junga proposed a partnership to build a Best Western Plus Hotel and a new Ace Hardware store on land across the street from Rentschler Farm Museum. Those plans hit a snag at City Council Monday night.
The problem is money. City Manager Todd Campbell explained the numbers.
Junga and Kuykendall want to buy lot 18 and a portion of lot 19, a total of about 6.5 acres. The city had hoped to get over $100,000 per acre for the sale of the lots in Sauk Trail Industrial Park, recently rezoned to SPA-1 to allow more development options. Perhaps it was too optimistic.
Junga offered $400,000 for the property and requested that the city bury or relocate the power lines at the front of the property, with all these costs being borne by the city. The cost of burying the lines is prohibitive. Last week the city finally received an estimate from DTE for the relocation, $225,000.
Even without any extra costs, the offer represents significantly less per acre than officials had hoped for, but after subtracting payment to DTE and other fees the realized financial gain becomes far smaller.
“When we had got the cost estimate from DTE, the $225,000, we had asked Mr. Junga to consider splitting that with the city,” Campbell said. “The response was to increase the purchase price from $400,000 to $430,000, but then the city would still be 100 percent responsible for the relocation of the utility lines.”
After subtracting the DTE expense, the realtor’s fees, surveying fees and closing costs, that $430,000 drops to about $130,000 to $140,000 net. This amounts to around $21,000 per acre.
Most of the Council members have had very little time to digest these numbers. Dean Girbach asked for more financial information relating to city debts and the effect of sale of the property on revenue streams. Others wanted information on possible alternative bids on the property.
Council member Jack Ceo was concerned about the city accepting the relocation burden and was not prepared to decide on the issue.
“This trend to throw the costs back on the seller, the city in this case, somewhat disturbs me,” Ceo said.
Realtor Tony Caparese tried to address this practice and the actual worth of land like this. He said that similar situations are occurring elsewhere where utility adjustments are required to close a deal and, regarding proper valuation of land, there is “no clear answer.”
“Ultimately the city has to decide what is it worth to move the property, to get it developed, to get it back on the tax rolls and to start to see some activity on that end of town,” Caparese said. “Will this be the only deal to come around? I’m sure it won’t be, but it certainly is a very attractive proposition right now that I think deserves serious consideration.”
Junga was asked to offer his perspective. He spoke about the urgency of a quick decision.
“With Mark Kuykendall’s participation, he has a family to support,” Junga said. “He can’t go another six, twelve, nine months debating, negotiating, trying to come to terms with putting a business like what was proposed on this lot. I don’t need six acres for an Ace Hardware, so without this hotel, I’m not interested in this plot either.”
He said that the hotel project would not be viable unless it could be started this year and completed by the next.
It’s not accurate, Junga also suggested, to attribute all of the cost of the power line move to his project, since developers of the other lots in the parcel would also benefit from moving the lines to the back of the lots. It will make these lots more saleable.
City Council members have a tough decision to make. To turn down the proposal could kill Saline’s opportunity to have a long-desired hotel. To approve the proposal invites criticism of poor financial stewardship.
Council decided to have a special session just to consider this question. Due to time pressure, a decision was required this week. To accommodate the schedules of council members, the meeting was scheduled for Thursday, August 25 at 7 in the morning.