Brainerd City Council: Development deals discussed, debated

After extensive discussion Monday night, the Brainerd City Council didn't accept an offer from a developer to purchase three mostly vacant and tax-forfeited housing developments in Brainerd.

Instead, the council approved a motion which dictated the terms it would prefer from any developer who made an offer on the tax-forfeited properties.

Paxmar, a real estate development company located in Anoka specializing in developing single family residential communities, has made an offer on Brainerd Oaks, Serene Pines and Dal-Mar Estates. The offer includes the development, all of which have mostly been idle since the Great Recession.

The offer negotiated by the Crow Wing County Housing and Redevelopment Authority, if accepted by all parties involved, would result in a purchase price of 113 lots at 86 percent of the assessed value totaling $912,300. Paxmar's plan would include the building of 93 homes over six to 10 years, with a minimum of 10 and a maximum of 30 lots under construction each of those years.

The developer is asking the city of Brainerd to forgive the assessments on the properties, reduce the sewer and water hookup fees from $3,300 per lot to $1,500 and to waive the park dedication fee of $500 per lot.

In total, the council would be forgiving $1.77 million in costs associated with the developments. All but $290,000 of the city's cost has already been assessed to city taxpayers and paid in debt service.

After the estimated closing costs and legal fees associated with the sale are paid to the HRA, the city of Brainerd has the potential to recoup just over $835,000 in the deal.

Another offer

Monday night, the council learned an offer to purchase only the Brainerd Oaks development had been made by David Pueringer. City Administrator Jim Thoreen said Pueringer's offer came in late Monday afternoon and the city attorney had not yet been able to review it. The first chance council members had to review the offer was at the meeting Monday night.

Council member Mary Koep suggested waiting on a decision until the city had time to review Pueringer's offer in full. She proposed holding a special meeting in a week on June 13 to discuss the offers after the Pueringer offer had been reviewed. She withdrew her proposal after learning council members Borkenhagen and Dave Pritschet would be absent.

Council member Gabe Johnson said the city council already held a special meeting on May 23 on the Paxmar offer and they can keep having special meetings, "but eventually, we will need to make a decision."

"We're elected to make decisions, not hold special meetings," Johnson said.

Pueringer was present to explain the points of his offer, which would cover the legal fees associated with the transaction, he said, which he estimated would total around $50,000.

Pueringer is offering $239,455 in cash upfront to purchase all the Brainerd Oaks lots. He said the Paxmar offer only offers $125,000 upfront and lots would only be released as they were built. His offer also asks for the forgiveness of the special assessments on each lot but not waiving or reducing the sewer and water hookup fees and park dedication fees. He said the value of homes built in Brainerd Oaks under his proposal would fall in the range of those already there, which he estimated at $130,000-$170,000.

Pueringer emphasized he is a local and knows area builders who would like to build homes in the Brainerd Oaks development. He said he was concerned the project would be "turned over to somebody from out of the city." He pointed out Paxmar would still be able to purchase the Serene Pines and Dal-Mar Estates developments if the city accepted his offer on Brainerd Oaks.

"The Paxmar deal, as a real estate investor, I look at it as a very bad deal for the city," Pueringer said.

At a May 23 work session, Council President Gary Scheeler said a St. Cloud-based developer had contacted him and shown interest in developing the properties. Thoreen said the city was contacted by Torborg Builders after that meeting but had not heard back from them.

Discussing issues

Thoreen reminded council members the county HRA is negotiating the sale of the developments and the city's role in the sale is determining what to do about the special assessments, sewer and water hookup fees and park dedication fees for the lots.

"We don't own the land, we aren't here fielding offers," Johnson said. "We have nothing to sell. What we have is assessments on properties."

City Attorney Eric Quiring also clarified that the city isn't in the position to weigh offers to sell the land, "because the city doesn't own the land." The city wouldn't be a party to a purchase agreement, he said, because the city can't sell the property.

Council member Sue Hilgart pointed out the properties had an assessed value on the properties from the county. But they hadn't been appraised, she said, which might provide more information on the value of the properties.

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Council member Chip Borkenhagen said he was concerned if the city waived sewer and water hookup fees and park dedication fees for the lots, it would be setting a precedent for future developers asking to have those fees waived as well. City Engineer Jeff Hulsether said the city on a few occasions has waived sewer and water hookup fees for homes built through Habitat For Humanity.

Scheeler said he had been advised by Quiring he has a conflict of interest on the topic, as he owns one lot in the Brainerd Oaks development. Scheeler did not participate in the discussion and abstained from voting on the motion. Instead, Pritschet, council vice president, led discussion on the offers.

Motion made

Johnson made a motion to notify the county HRA the city is willing to write down the special assessments but would like an offer to include payment of the full sewer and water hookup and park dedication fees. Borkenhagen seconded the motion.

Hilgart said she was concerned the motion didn't include an amount the city would be writing down in waiving the special assessments and voted against the motion, along with Koep.

"We don't know enough to vote on that motion, in my opinion," Hilgart said.

Council member Kelly Bevans, who voted for the motion, said the city should entrust the county HRA to negotiate to the best of its ability, as well as vet any developer who made an offer. It's important for the city to move forward on the issue, he said.

"The one thing that would be totally tragic in this would be to do nothing," Bevans said. "I can move forward and have some faith that doing something is better than doing nothing."

The motion passed on a 4-2 vote, with Scheeler abstaining.

Park fees

One of the proposals made by Paxmar was to waive the $500 per lot park dedication fee. Depending on how many buildable lots are available, this could amount to a waiver of $46,500. There was no offer to provide land dedicated for park use in the proposal.

At its May 24 meeting, the Park Board discussed the proposal and indicated it would prefer to collect the $500 per lot park dedication fee. But the board indicated it understood the city council may need to be flexible when negotiating the proposal.

The board also indicated it was not interested in receiving land for park development. Additional park land at this time would be difficult to maintain due to staff and equipment limitations, along with the costs of purchasing playground equipment and other amenities.

The Brainerd Oaks development is located at Oak Street and Holton Avenue. The Serene Pines development is located at Wise Road and Sugarberry Creek. The Dal-Mar Estates are located very close to Serene Pines, off of Beaver Dam Road and Dal-Mar Drive.

SPENSER BICKETT may be reached at 218-855-5859 or spenser.bickett@brainerddispatch.com . Follow on Twitter at www.twitter.com/spenserbickett .