06-13-11 Common Council Meeting Minutes

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REGULAR MEETING JUNE 13, 2011 community. The investment that they are making here is similar to the investment that they made at the Kroc Center on the west-side of South Bend, where they invested 1 million dollars to bring a 40 million dollar investment to the community. Mayor Luecke stated again, in exchange for services that are provided to members of our community through the Kroc Center. He stated that he believes that is a positive precedent and one that allows them to continue to make the investment in St. Joseph High School. The question is why the Family Dollar Store, how did we end up with this particular parcel and the investment that they are making and what is the valuation that brought us to price that they are suggesting for this store. He reiterated what was said in the Committee Meeting that St. Joseph High School has not asked us for any other participation in this project. There are many things that they could have asked for, additional dollars that they could have put in from the city, but they have not asked that of us. He stated that as they were talking with them about the development of the site, early on they had looked at a corridor for a new sewer line that would run through the Family Dollar facility. So it made sense to them at that point to say that they would take on acquisition of that site because they were going to need it for the sewer line. St. Joe would have provided a utility easement along the rest of their property to the city to allow that sewer line to go into place. Since that time they have decided to put that sewer in the street because of construction timing issues both for the sewer as well as for construction of the new St. Joseph High School as well as for additional cost. Had they followed that original corridor they would not only have had to buy Family Dollar but additional properties down the road. So it would have been even more expensive than the 1.2 million dollars that they are talking about today. He reiterated that he believes this is an important investment for the City of South Bend, in terms of the price; the valuation of the building is really based on income stream. He stated that a presentation was given by Don Inks concerning that income stream and what that value leads to, somewhere between 650,000 to 750,000 as a formula that would recognize the income stream that is there. But in addition to buying the building based on that income stream there is also a tenant in that building and so there is a cost to buy out that tenant and the lease that the tenant has in the building. Furthermore, this is not a seller who had the property on the market. He stated that sometime the City of South Bend and other buyers who are buying at not the opportune time pay a premium over and above the appraised value of the property. It is those three factors really that have led us to the 1.2 million dollar figure that they believe is appropriate and believe is great leverage for us as we look at a 35 million dollar investment in our community that they thinks is good for development in the surrounding neighborhood, development in the East Bank and Downtown as they move forward. Councilmember Oliver Davis asked the Mayor to explain why they are using an appraisal that is out of date and what is the City’s plan to replace the Family Dollar so that the residents of the neighborhood will have some place to shop. Mayor Luecke advised that the information provided to Council earlier referenced appraisals that had been done not saying that was what they were using as the basis for their price but to show a comparison to the price that they generated. He stated that the staff actually used a formula based on the income stream of the property to generate what they believe is the appropriate value. That the assumptions that they have used have been validated by an MIA Appraiser in saying that they have made the right assumptions to come to value that they came to, so they weren’t using the 2002 appraisal or the 2007 appraisals, they showed them as comparison that the value that they came to was a comparable value. In terms of if this store closes which it would obviously if they acquire the property and then transfer it. They certainly will look to attract services for the neighborhood and for the downtown area that will be appropriate for the residents in the area. He stated that he has no guarantees that will happen, but is certainly is on their list of important things to do as they move forward. Councilmember White stated that she is going to wait with her comments until she hears from the public. Her concerns are after hearing the public’s concerns what direction the Council is going to take on how there are going to receive information and the nature of that information and where do they go from here. 11