Sale of municipal land postponed due to buyer concerns

There was a proposed resolution on the February 24 Grand Marais City Council agenda regarding the sale of city-owned property at 1800 West Highway 61, adjacent to the public works facility of the town. However, the resolution did not pass and the sale did not proceed, not because the city chose not to act, but because the buyer was concerned about the wording of the purchase agreement.

Tim Kennedy, representing Gunflint Investments, LLC, had tentatively agreed to purchase the property for $95,000 and hoped to close on ownership by March 18. However, Kennedy was concerned about recent changes to three elements of the purchase agreement. He expressed concern that the city grants a “waiver deed” versus a “warranty deed.” He questioned the fact that the city was asking him as the buyer to cover closing costs, instead of splitting them as is more common.

The main issue, Kennedy told the council, involves the language developed by City Attorney Hood and City Administrator Mike Roth regarding the use of the roadway. Kennedy requested a permanent easement on the driveway leading to the property, as well as the city’s public works facilities.

Hood proposed a licensing agreement, which instead gives the city the ability to terminate use of the causeway with 180 days notice. The license agreement also states that if the agreement is terminated, the city must provide alternate access to the property.

If the property at 1800 West Highway 61 is sold, the new owner will likely share this road with the Grand Marais Public Utilities Commission.

Kennedy said his biggest concern is securing access to the property from the road that runs past the property in question and back to the city’s public works facility.

Kennedy said: “Without access, I don’t have a property that I can reliably rely on for bank financing or to be able to use the property in the way that I would like to use it. Or is it worth what I am willing to pay for this property if access is not via this existing road? “

The city attorney explained the reason the language was included. “So we basically said if we ended it, we had to give 180 days notice,” Hood said. “And we need to provide an alternate location for a holder to access the holder’s property.

“Now the only reason I can think of that we would really want to end this license is that we’re going to make it a public street at some point and therefore won’t need the license agreement. That was so our way of trying to address Tim’s concern.

“But bondage doesn’t work for us. And that doesn’t work for us because we can’t have a perpetual easement on city-owned land, which otherwise might be a public street at some point. So that’s the view of the city. This is how Mike and I tried to address Tim’s concern.

Kennedy didn’t seem to be reassured and said, “I hope you understand that I am taking the risk of buying this property and paying what I think is a very fair price for this property. And I need to be assured that I’m going to have access to it and if it’s possible to remove that access, all of a sudden that property loses all value to me. And with that, I need to understand you before I can sign this agreement, whether or not I have the ability to do what I think needs to be done on this property. And it’s development with the goal of creating a new bike shop in town.

There have been many discussions about access and Hood said government entities generally do not grant easements on public property. He said the license agreement was designed to accommodate Kennedy’s use of the property.

Again, Kennedy expressed a desire for a permanent solution. “But…it’s the ‘but’ that bothers me because I don’t understand why there has to be a ‘but’.”

Hood responded and a bit of debate ensued, with Hood replying, “This is property that is held for the public interest. We have to maintain the public interest in this property, whatever it is, at some point in the future. This is the “but”.

Kennedy replied, “What I claim to be in the public interest is the value of selling this to a person who is going to develop this parcel of vacant city-owned land into a productive, paying parcel.”

To which Hood asserted: “…This mechanism, which was provided to you, clearly allows you to do that.”

The board and Kennedy discussed the purchase agreement for over an hour, with the conversation becoming contentious at times.

Kennedy asked the board, “Why is there a provision that says you can terminate this license?

When Grand Marais Mayor Jay DeCoux responded that it’s because that’s how licensing deals work and that’s the only way to work with a buyer, Kennedy expressed frustration.

He said, “I don’t buy that shit from, you know, that’s how licensing works. It’s a negotiation, it’s reasonable people talking about reasonable solutions to a problem.

“And if you want to sell the property, whoever wants to buy that property will want to be guaranteed that there’s access to it, not that there’s going to be a potential that you can take it out and try to re-route it to access through a drain hole. 30 feet or by a state right of way that the state is not going to grant or that encumbers your already limited space that is available for development on this site.

“It seems to me that you are putting more obstacles in the way of seeing this property developed than you are trying to find a way to put this property back on the tax rolls and put a business there that employs people in this community and providing essential services. I just don’t understand why it has to be so complicated.

Finally, it was agreed that Kennedy should speak with his attorney about his language concerns and return to City Council to discuss further.

Council appeared to have a consensus when councilor Tracy Benson summarized council’s thoughts. Benson said: “I would have felt totally uncomfortable with how this was originally written as it relates to home ownership, but I feel much better hearing all of this. Maybe it sounds more complicated than necessary, but I feel like it’s kind of a balancing act both ways. So the work that Chris and Mike have done to change that, I think that’s good, but I’m definitely getting to where you need more time, just like we did to absorb all of that and talk to whoever you need.