The city of Vermillion has agreed to transfer approximately 40 acres of property commonly known as the Erickson Addition to the Vermillion Chamber of Commerce and Development Company with the hope that the VCDC will be successful in its efforts to market it for future commercial or industrial use.
The Erickson Addition is located between properties currently occupied on the west and east by Polaris and Wal-Mart, with Highway 50 on its northern edge and the lots occupied by Hy-Vee and the former Pamida store on its southern boundary.
"The vast majority of that property is currently owned by the city with the exception of one lot, which is privately owned," said John Prescott, city manager, at the Oct. 17 Vermillion City Council meeting. "The VCDC, through their executive director, approached the city council's Surplus Property Committee in September about the possibility of an appraisal a couple months ago. The appraisal would be to look back at the prices that were established in the summer of 2008 and to see if indeed those prices had changed."
The VCDC, through Vermillion Now!, funded the reappraisal of the property. The earlier appraised value of the Erickson Addition, set by the city council in 2008, was based upon comparable sales prior to that time and other commercial lots for sale.
Since that time, as noted in the minutes of the Surplus Property Appraisal Committee meeting of Sept. 26, other commercial lots have had their asking prices reduced and the current sales do not support the city's asking price. Prescott noted at that meeting that the city had been assisting the VCDC in marketing the property, but felt the asking prices was too high and that potential buyers may be turned away.
The reappraised value of the property are considerably lower than the values established in 2008, according to Steve Howe, the VCDC's executive director, and discussions between the city and the VCDC soon followed concerning transferring the city-owned land to the development company.
"The appraisal revealed, as anticipated, some prices different than what was presented in 2008, and in the course of discussion between the VCDC and the Surplus Property Committee, a proposal was put forward to transfer the ownership of this property from the city to the VCDC," Prescott said. "In doing so, that would create the ability for the VCDC to more easily market the property."
The city must follow state statutes when selling property that are a bit more rigid, he noted, than the guidelines that an entity like the VCDC must follow.
"By transferring the property to the VCDC, it makes it a little more easier to make those negotiations take place," Prescott said.
The city council approved a memorandum of understanding Oct. 17 that establishes guidelines for both the city and the VCDC to follow in the property transfer. The transfer is contingent on the VCDC agreeing to market the property in accordance with the goals of the strategic plan adopted the VCDC Board of Directors and Vermillion Now!
The city would receive full purchase price minus any sales transaction costs once the land sells. The city also maintains the right to have the land revert back if conditions of the memorandum of understanding are not met.
Since the transfer means the land is no longer publicly held, the VCDC is responsible for paying property taxes. The city has been leasing the land to be farmed, and the memorandum of understanding provides that income currently generated from that lease will now go to the VCDC to help offset property tax costs.
"What do you view the benefit of you owning the property as opposed to the city?" City Alderman Tom Davies asked Howe, "and then how would you market it?
"The benefit of the VCDC owning it is, as John alluded to, the flexibility in the marketing and the selling of the property is much greater with the Chamber and Development Company," Howe replied. "The city, if it sells the property for less than 90 percent of its appraised value, must go to an open bid process. That in and of itself limits some of the negotiation power that the city has over moving that property.
"There also is a desire for some level of anonymity … and bringing these deals in front of a public meeting sometimes tips the hand of a negotiation that is not quite done yet," he said.
Marketing of the property, Howe said, will include basic signage in the vicinity of the land. "We will also look at doing some enhanced activity on our web site, and create some brochures that I can take along to trade shows, along with other basic marketing."
Aldermen Steve Ward and John Grayson both voiced support for the transfer of property following the guidelines set in the memorandum of understanding.
"I think that it is imperative … that we try to attract businesses and give ourselves every opportunity to try to attract a diverse economy to Vermillion," Ward said. "This is one tool that we haven't had in our arsenal – a flexible tool that we need."
"It isn't the feeling that a developer that a developer is going to come in and buy this land, turn around and profit from it – it's going to be that you're going to sell this to a business, or corporation, or for an industry – it's not going to be sold to a developer to develop it at some future date?" Alderman Howard Willson asked Howe.
"That's correct," Howe replied. "We have no intention of having this property out there for speculation purposes. The intent is to deal with individual businesses coming to the community, and part of the agreement, for the benefit of the public, is they would have to file a building permit within one year and complete the project within two years, and they would have to meet the covenants that the city already has in place. We do not intend to sell this as a whole to a developer."