SPECIAL MEETING OF THE COUNCIL OF THE CITY OF NOVI

MONDAY, JUNE 23, 1997 AT 6:00 P.M.

NOVI CIVIC CENTER - ACTIVITIES ROOM - 45175 W. TEN MILE ROAD

CALL TO ORDER Mayor McLallen called the meeting to order at 6:11 P.M.

ROLL CALL Mayor McLallen, Mayor ProTem Crawford (absent/excused), Council Members Clark, Kramer, Mitzel, Mutch, Schmid

ALSO PRESENT City Manager Ed Kriewall, City Attorney David Fried, Assistant City Attorney Lou Bugbee

Mayor McLallen reported the first agreement is a three part agreement that involves the land developer known as Delta Trucking Company, the City of Novi and the Novi School District. She added that conversation about a prime location for a school and a city park site began approximately three years ago. The Mayor advised they identified a piece of property privately owned by a development company and began to decide how the three entities could form a partnership that would benefit all members. Mayor McLallen reported what is at stake for the city is development. She explained the city would gain a 52 acre park and the school would gain a 52 acre school site. Mayor McLallen stated the advantage of both parties doing this in partnership is improved time and cost. Further, the end result would be to have a recreational school campus facility. However, the Mayor advised what was at stake for the developer was a coordinated school district. She advised the developer petitioned and received the ability to bring their entire project into this school district and by that, begin development of what is probably the largest residential project in Novi’s history. She further advised the project will probably yield millions of dollars in tax revenue to the school and the city over its ten year development process.

AUDIENCE PARTICIPATION

Ray Byers - Novi Board of Education President, 44290 Winthrop Dr., wanted Council to be aware that the Board of Education first considered the agreements in a closed session last Thursday evening. He advised the members spent the weekend resolving some questions with their lawyers and they met again this morning in an open session. Mr. Byers reported that the school board acted favorably and unanimously in support of both agreements. Mr. Byers added they are prepared to handle transfer of the property within 15 days and begin construction. Mr. Byers stated they also want Council to know that Delta Trucking has given the school district a conditional approval to use the land, and the school will mobilize as early as tomorrow morning with trailers and sand for grading purposes. However, they will not take any other action on the advice of their counsel until all parties have signed an agreement.

Councilman Mitzel asked if Council has all of the attachments.

Mayor McLallen advised they do not have Exhibits C, D, and F.

Mr. Bugbee stated he does not have a copy of Exhibit C, but noted Mr. Koster has a copy. He explained Exhibit C is the resolution approving acceptance of the transfer of the portion of the designated parcel into the Novi School District. Mayor McLallen asked if that has been accomplished contingent upon the school district’s action this morning and now it is completely accomplished. Mr. Bugbee agreed.

Mr. Bugbee reported Exhibit E is site plans for the school property as well as some language as far as the development of the site that he believes Delta and the school district have been working on. Mr. Koster interjected, he has Exhibit E which is all of the site plans. Mr. Koster passed his copy of Exhibit E around the council table.

Mr. Byers noted the entire site plan has been reviewed and the DEQ has held it up. Mr. Byers added they cannot move a building because they have agreed to the site plan with the DEQ. Consequently, the site plan before Council is what they must work with from now on.

Mayor McLallen asked if this is the same DEQ plan that they approved approximately one year ago. Mr. Byers agreed and added if they moved anything, the plan would have to go back before the DEQ.

Mayor McLallen asked if Exhibit F is part of the school district’s plan. Mr. Bugbee replied Exhibit F contains a description of the seller’s property across Wixom Road from this project. He added that he believes that description is part of the RUD plan.

Mayor McLallen noted the attorney for the development firm is nodding affirmatively. Mr. Kohls interjected, all of the adjacent land owned currently being reviewed by the city pursuant to the RUD plan that they submitted to the city’s consultants this afternoon is Exhibit F.

PURPOSE OF SPECIAL MEETING

To approve two (2) Property Agreements

1. Approval of a Property Agreement between the City of Novi, the Novi Community School District and the Levy Company (Delta Trucking)

Mayor McLallen reported Delta Trucking has 93.01 acres and the city has 11.2 acres that is the archdiocese property for a total of 104.21 acres. Mayor McLallen advised the city is offering to purchase 93 acres from Delta for $1,670,680. Further, the city will keep approximately 52 acres and will then sell it to the school for the development of a school and park joint site. The Mayor noted Delta is requesting the inclusion of the Novi School District which they have accomplished and that this property transfer excludes any transfer of mineral rights. The Mayor further stated the agreement is subject to all existing easements. Mayor McLallen believes this summarizes the purchase agreement portion of the property, but not the development agreement. The Mayor advised there is a reiteration of the boundary transfer in the development agreement which they have accomplished. Further, a paragraph states that the property that they now know as the city school property may be used for density calculations per the approved RUD Ordinance or any other applicable zoning. It also allows for mutual review of plans for all three parties so that they can develop all three adjacent properties in harmony. Further, it specifically sets out quarterly meetings including the time and place. The Mayor said the other item was that the development agreement establishes that they will maintain a view corridor for the school site on the developer’s property from the school site to the developer’s property. It also states that the closing will take place on this document twenty days (approximately July 13) after they have satisfied all conditions. Further, this offer and all of its parts is valid to the developer for five days from the date of signing. Mayor McLallen noted the date of the seller’s acceptance will begin the clock.

Councilman Mitzel asked if the original purchase agreement in 1995 was for the same amount of money? Mr. Bugbee replied it was.

Councilman Mitzel asked if the title issue from that same period was cleared up. Mr. Bugbee replied the interest that appeared on the title at that time has been deleted but other interests with respect to oil and gas have surfaced.

Councilman Mitzel asked if they are now in the same position in that a clear title is not attainable. Mr. Bugbee replied that is true at this time.

Councilman Mitzel believes the 93 acres owned by Delta is a combination of RA and R-1. He asked if the density calculation includes only the 93 acres or does it include the city’s 11 acres. Mayor McLallen believes it includes only the 93 acres. Mr. Fried advised it does not include archdiocese property.

Councilman Mitzel asked if they know how much of the land is RA and R-1; there was no response.

Councilwoman Mutch asked if it really matters that there is not a clear title when they are not buying the mineral rights. Mr. Fried agreed they are more concerned with surface rights and not the mineral rights. However, he explained they are concerned that some oil leases might contain surface rights.

Mayor McLallen asked if they accommodated for that in the contract because it relinquishes all of their surface rights. Mr. Bugbee replied the agreement further requires that no one other than the city will have any interest in the surface of the property. He explained if there is any exploration of any of those mineral oil rights, it would have to be off site. He added people other than Delta trucking would have surface interests.

Councilman Mitzel understood Mr. Bugbee to state that people other than Delta Trucking may have surface interests. Mr. Bugbee replied that is correct.

Councilman Clark would assume that the whole agreement from everyone’s position will be contingent upon the title company having a title commitment that is satisfactory to everybody. Mr. Fried agreed.

Councilman Schmid asked if relinquishing mineral rights is normal. Mr. Fried replied Delta relinquished those rights before the city became involved.

Councilman Schmid said the agreement infers that they will compute the 93 acres in the density of the development. Mr. Fried replied that the agreement does not say that, but the ordinance adopted with the agreement makes that conclusion. He reiterated that it is not a part of the agreement and that the ordinance provides that if Delta has control over this property that it is a part of the density.

Councilman Schmid asked how that would work under this agreement. Mr. Fried replied the agreement provides that Delta has control over that property regarding control and design in joining the RUD.

Councilman Schmid asked in what fashion would the legal control be. Mr. Fried replied the agreement provides that they will include it in the RUD agreement. Councilman Schmid said they could then include the property for the density or whatever; Mr. Fried agreed. Councilman Schmid said they obviously cannot build on it; Mr. Fried agreed.

Councilman Schmid asked if the agreement addresses water and sewer, and so forth. Mr. Kriewall replied it provides for bringing water and sewer to the school. Mayor McLallen interjected, this purchase agreement does not include this and noted it is the tri-party agreement that is currently before them. She advised the second agreement will include those issues raised by Councilman Schmid.

Councilman Schmid asked if the city attorney is comfortable with this agreement as it relates to the issues that have been at hand in terms of the school and city. Councilman Schmid added although the ordinance is passed, it does not suggest that Council will approve this developer’s request. Mr. Fried stated this agreement does not imply that Council would approve the RUD. He further added there is no implication and there is no requirement included in this agreement that the city must approve the RUD. However, Mr. Fried stated the language does provide control to Delta in that part of the property will be included in density calculations. Based upon earlier conversations, Councilman Schmid believes that is how it should be.

Councilman Kramer asked if the five days are five calendar days. Mr. Fried replied it is five calendar days.

Councilman Kramer asked if the approval should be subject to obtaining a clear title. Mr. Fried advised the language of the contract provides for that.

Councilman Mitzel will not support the motion because he believes it is a poor agreement for the city. He explained the city had an agreement a year and a half ago that would have purchased this land for the same amount of money with none of these other conditions attached. He reminded Council that they conditioned the approval on a clear title and they still have not resolved that. He further believes if the city is going to spend tax money to buy park land and school property, then they should buy it out right. He also does not believe that they should include it in density calculations and density credits.

Council Schmid will support the motion only because of the school’s predicament.

Councilman Clark agrees with Councilmen Schmid and Mitzel’s concerns. However, he believes all the parties will be looking for a commitment from the title company and he does not think anybody will be spending more than one million dollars if they are not getting clear title. He is also certain that the title company is not going to put themselves on the line until they satisfy them because ultimately they will pick up the cost if there is a future problem. Consequently, he thinks there is protection.

Mr. Fried added they require that Delta give the city a warranty deed and that warranty deed will survive this agreement if the warranty deed does not live up to the provisions of this agreement.

Councilman Mitzel asked if Council can approve this agreement without having all of the attachments to it. He then asked if they would approve the agreement subject to the attachments being provided.

Mr. Fried would not suggest that Council approve this agreement subject to something being provided later.

Councilman Mitzel asked if counsel is comfortable that they have everything they need for the agreement. Mr. Fried stated he has been advised by Mr. Bugbee that all the exhibits are attached and available except the exhibit regarding the transfer of the school district property and therefore, he is satisfied.

Mayor McLallen stated the motion passes five to one and noted Mayor ProTem Crawford is not present.

Councilwoman Mutch raised a procedural question about Council discussing such agreements before voting. She advised when Council has an agreement of this type before them, they would first have some discussion in an Executive Session about what kind of offer is being made and what kind of conditions they will accept. She said they get some indication at these sessions about whether the other parties to the agreement had input and she cannot remember a time when they had an agreement that was only presented to them in a public meeting.

Mayor McLallen advised Council can request an Executive Session.

Councilwoman Mutch noted she did try to contact the Mayor over the weekend. She further noted the comment made in the last memo they received from Mr. Kriewall and wonders why they did not have some prior discussion. However, she does not see any reason to hold up school agreement at this point.

Mayor McLallen advised she had extensive conversations with the city attorney, representatives of the school board, and the developer and their attorney. She explained because they have dragged this out for so long, she called this meeting to force this issue so they could move forward. The Mayor is fully aware that there are still outstanding development issues and she is not certain whether they have resolved those issues.

Councilwoman Mutch appreciates that effort. Councilwoman Mutch stated Council can agree to this, however how far ahead does this really put them because now they will be in an agreement with the school district on the second part, but they do not know if the first part will be agreeable or not.

Mayor McLallen is fully aware of that. However, this has been going on for quite some time and all parties have been unable to come to agreements and she felt this would force the issue. She reminded Council the school district stepped forward, and Council is raising some of their issues and moving forward.

Mr. Byers stated they discussed this at length at the school board meeting and they also think it is time to move forward. Further, from their perspective the RUD ended any discussion on the matter and the school board has been ready to move forward for the last nine months. Mr. Byers stated they are hoping between the school and city action that the developer will also say it is time to move on. Mr. Byers does not believe everybody can have everything they want in an agreement, but there is a time to move on and he thinks that time is here.

Mayor McLallen stated they concur with Mr. Byers and added a real estate transaction of this size is a compromise. However, her position is that this is a positive transaction for all three parties.

2. Approval of a Property Exchange Agreement between the City of Novi and the Novi Community School District

Mayor McLallen reported the school and city are the two parties involved in this agreement. She explained the parcel is 104 acres because of the combination of the Delta property and the archdiocese property. Of this acreage, the city is going to offer to sell 52 acres to the school for $819,414 plus the deed to 6.54 acres known as the Fuerst property. The Mayor noted there is a listing of cross easements on both parcels in the Fuerst agreement allowing both the school and the city to use the property in a joint manner. Further, the purchase agreement relates to fact that the school is responsible for the cost involved in land grading on the entire parcel at the Eleven Mile and Wixom Road property as a benefit to the city. The Mayor again noted that there are no mineral rights transferring from private previous owners. Further, the school will also permit an easement for a detention basin of 1.99 acres to the city at no further cost. In addition, the city will permit the school board to use the barn for storage on the Fuerst property at their risk and hold the city harmless until the city finalizes its development issues. Also included is the unresolved issue of the utilities and the Mayor explained the developer advised that having a sanitary sewer lift station on this property is important to them.

Mr. Fried noted there is a letter on the table that reflects a change to Paragraph 4 on Page 9 of the agreement which requires the school to pay all normal tap charges.

Mr. Kohls, attorney for Delta, advised they did not cover the issue of the sanitary sewer lift station in this agreement and they expressly excluded it. He stated they would ask that the city approve this agreement with the inclusion of construction of the sanitary sewer lift station at a location to be determined within the school property. He noted they have discussed and reviewed this matter with the school officials over time and understand that the city’s engineer will show the location of the lift station. Further, Mr. Kohls understands that the user of the facility would ultimately pay back the cost of construction from tap charges. Mr. Kohls also stated that he understands that the title issue relates from strictly subsurface interest and noted they are waiting for confirmation from the title company to that effect. He further added that his client is not in the position to accept the written offer. He explained they must do some addendum on the title at present because it proposes certain affirmative obligations on them. He said they provided the title and he is of the view that the title is satisfactory as presented because of the exception relating to the interest of oil and gas. Mr. Kohls stated this is a highly technical matter and the title company is spending time so that all concerned can be assured that they have addressed the title issue satisfactorily.

Mayor McLallen noted the section Mr. Kohls is referring to is Item 1 on Page 8.

Mayor McLallen advised she has discussed the issue of the lift station with the developer and added she knows Council’s previous position was no. However as Mr. Byers stated earlier, they all would win some and lose some in this agreement and she believes they all will ultimately win a positive series of projects for the city.

Mayor McLallen asked if the construction of the lift station is different from the proposed construction of the utilities involved with the Taft Road extension. Mr. Kriewall replied no, not in concept. He explained although they do not have a lift station as part of the design for the Taft Road extension, they are in fact building significant elements of a collection system. He added they are prefunding that and collecting taps subsequently to pay for that cost. Mr. Kriewall reported that they initially needed the lift station to service school district property and the proposed schools. As the design developed for the sanitary sewer to go cross country to the school, the final design that JCK has developed shows that the school proper does not require a lift station. Mr. Kriewall stated the developer contends that the city should still build the lift station because everything west of Wixom Road will eventually have to be pumped perhaps two or three times to get back to the system. Mr. Kriewall reported they had an ongoing discussion with the city’s engineers about whether the lift station should be included in this agreement and the last comment received from Dave Bluhm of JCK was that he did not see that it made a difference either way. Mr. Kriewall said Mr. Bluhm advised that the city could build a lift station in an unspecified area as a part of this agreement and they would build it as they do the rest of the system by collecting tap fees.

Councilman Schmid asked what part of the Fuerst property will the city get. Mr. Byers replied the city will get all of the barns and the house. He reported the school will get the soccer field to the west and some property on the east side. He reported the school is getting 2 acres and the city is getting approximately 6.5 acres.

Mr. Kriewall added according to Dan Davis the description in the purchase agreement provided to Mr. Bugbee provides for everything that the school and city finally agreed upon. Mr. Kriewall advised they had to increase the setback and distances along the sides of the barns to provide some access and maintenance space.

Councilman Schmid asked if the entire northeast and some of the southeast portion belongs to the city. Mr. Kriewall replied that was correct and noted the southwest is primarily a vacant field.

Councilman Schmid asked if there is sufficient room around the barn for setbacks. Mr. Kriewall replied there is sufficient room.

Councilman Schmid stated since this agreement suggests that this land will belong to the city, he wonders why does the school have any say about how the city will maintain the barns. Mr. Byers stated they can strike that provision if the city would like to.

Councilman Kramer said they could strike Items B, C, D, E, and F.

Mayor McLallen stated they would want to keep Item F because of the truck easements for ingress and egress.

Mr. Fried asked what items do they want to strike. Councilman Clark believes it would be B, C, and D.

Councilman Kramer believes all those items simply address renovation, raising, maintaining and so forth.

Mr. Byers stated the reason the school board asked to include that was to protect the integrity of the historical site.

Councilman Schmid understands that, but it seems it may be something that would be arguable down the road if the school felt the city did not maintain the property the way they thought they should maintain it. Mr. Byers does not believe that would be a problem.

Mr. Byers advised the school district asked for a clause earlier that the school would have the first right of refusal to purchase. Councilman Kramer believes they still included that language.

Mayor McLallen believes Councilman Schmid is asking for the removal of Items B through D. Councilman Schmid believes it would include B, C, D, and E.

Mayor McLallen noted that the school would like to retain the right of first refusal should the city choose not to pursue the Fuerst property as an historic site.

Councilman Schmid believes that is a great idea. However, he asked if they could include language that would state the property would be used for school facilities if the school purchased the property. Mr. Byers agreed and added they had discussed clearing the property and turning it into an intergenerational learning center.

Mr. Byers would like Item E to remain because in Item F the city is providing the school space to use if they do not maintain it. Mr. Byers would rather see B and C stricken, and leave D, E, and F intact to cover the appropriateness of the building.

Councilman Schmid repeated if they return the property to the school that they agree to use it for educational purposes. Mr. Byers suggested that the language should state that it will remain with the school district in perpetuity.

Mr. Fried will look for an appropriate spot in the agreement to insert that language.

Councilwoman Mutch suggested if the city changes what they do there from what they outline in the agreement, then the city would have to return the land to the school. She asked what would happen if lightening destroyed the buildings; would the city have to sell the property back. She believes they would have plenty of reason to continue use of the property and asked if they are suggesting the property would have to be returned to the school.

Councilman Schmid would not agree with that statement and he also does not agree that they should even have the right to buy it back. Councilman Schmid asked what would happen if the city decided not to use it as a historical site and planned to use it as a small park.

Mr. Byers said the only thing they are dealing with is that the city should take care of the barns where the school has items stored. He said they have no problem with what the city wants to do with the property. However, if the city decides to put the property on the market, the school would like the first right to be able to buy it back.

Councilman Schmid noted the language states "historical." Councilwoman Mutch added it also includes "and other related purposes."

Mr. Byers believes "public purpose" would satisfy them.

Mr. Koster asked what would happen to the historical status as to the National Registry if they destroyed all of the buildings. Councilwoman Mutch is not certain what the process is when they remove something. Mr. Byers interjected, there is a rock behind a Stop n’ Go gas station in Georgia that says George Washington spent the evening on his tour of the United States on this spot in 1792.

Councilwoman Mutch advised it is not restrictive when someone pursues a National Registry nomination unless federal funds are used. Consequently, no restrictions were placed on the school or city when the pursued that for the Fuerst property. Further, Councilwoman Mutch advised any organization or individual could have pursued the historic site registration, but noted they do not require that they have the property owner’s cooperation because the significance is determined independent of who owns it.

Mayor McLallen advised there seems to be a consensus to retain the ability for the school to have a right of first refusal on the property if the city ceases to use the property for any public purpose.

Councilman Kramer would question inclusion of the amount of the purchase price because he believes it should be negotiable over time.

Mr. Fried believes if they do not arrive at a price now, he does not know how they can arrive at a price for the property. He asked how can they determine what the value of the property is when they say it is limited for public purposes and excluded in the back is an area used for mitigation purposes. He suggested the best way is to arrive at a price is in a transaction in the way they are doing it right now and not relying on someone coming in three years from now through a litigation process.

Councilman Kramer would then believe the agreement would need a cost of living or escalation clause with regards to the evaluation of money.

Mr. Byers stated in opposition to that, the school did not fair market value the price when they put it in the spot it is sitting. He advised they took it back to the price of the property on Eleven Mile and Wixom Roads which is a discounted price. He added if they were to put it at the price that real estate people advised, it would have been very different. He stated they opted not to do that because fair is fair and they agreed to a swap.

In all fairness, Councilwoman Mutch stated the Wixom Road price is a price that they negotiated some time ago and does not consider current market value. Mr. Byers stated it was below market value.

Mr. Koster added at the point they owned all the land and sold land for the city hall and the library, the school sold for the price at which they acquired it.

Councilman Kramer can accept this if this is the way the bodies have done business over time.

Councilwoman Mutch understands that if the city were to dispose of the property that they are acquiring, then the school would have the right of first refusal. However at the same time, they should offer the city the first right of refusal if the southeast two acre section they are not acquiring should become available for sale.

Mr. Byers asked if they have kept D, E, and F on Page 6.

Mr. Fried believes the city would maintain fire insurance and maintain the building despite any clause.

Mayor McLallen noted the language states that the city will maintain the buildings and it does not say to the standards of the school board.

Mayor McLallen noted they will strike B, C, D and E, and A, F, G, and H will remain intact.

Mr. Byers is concerned about the school materials stored in the barn. Mayor McLallen noted G addresses how they will store those materials.

Councilman Kramer referred to the lift station on Page 8 and understands that they will pay for the cost of the lift station back in tap fees. He asked if they pro rate the tap fees to the cost of the project or is there a standard. Mr. Kriewall replied they are based on housing units.

Councilman Kramer asked if the only difference in whether the city or whether the developer builds the lift station is that if the city builds it, it is paid for by the city’s bond money and industry. Mr. Kriewall agreed and noted they pay it back over approximately 15 years.

Councilman Kramer does not know whether that has to be included in the agreement. However, if the city were to foot the bill up front he believes it is reasonable as long as they pay back the city within the time frame of the bonds or the money that they borrowed to build it. Mr. Kriewall advised the city has the funds for the lift station and it will not be necessary to borrow any money.

Councilman Mitzel would rather see the lift station funded by a contract SAD because he does not want to have it built at the city’s expense and rely on tap fees to pay it back. He believes the same thing could happen to this project as what happened at the Vistas of Novi.

CM-97-06-213: Moved by Mitzel, Seconded by Clark, CARRIED: To approve Property Exchange Agreement between the City of Novi and the Novi Community School District with the elimination of Paragraphs B, C, D and E on Page 6, with the text change on Page 4, Paragraph 9 as outlined in Fried & Watson’s June 23 letter, with the change of historical references to public uses, with the change that repurchase by the school district would be limited for educational uses, and if the school district sells the southern two acres adjacent to the Fuerst property that the city would have right of first refusal

COUNCIL DISCUSSION

Councilman Mitzel appreciates the school district’s willingness to work with the city; he believes it will be a good site for a joint use. He also believes this same concept has worked well at the city hall and high school site. Councilman Mitzel supports this agreement and wants everyone to understand that his opposition for the other agreement was not the mutual cooperation between the city and the school district, it was a separate issue.

Mr. Fried does not understand what Councilman Mitzel meant by the two acres outlined in the motion. Councilman Mitzel replied there are two acres that are immediately adjacent to the south of the Fuerst property. He explained if the school district were to decide to sell that, they would give the city first refusal.

Mayor McLallen will not support motion because she has concerns about the lift station. Mayor McLallen agreed that the community will need a lift station to its west and it will ultimately be paid for by future citizen’s of this community. She believes they would just be making it happen sooner by including it in this agreement. Further, she does not believe the city has any open liability about being paid back and she believes it becomes a part of the city’s infrastructure that is necessary for the orderly development of the city in a timely fashion. She added that she appreciates everything that the school board has done to get to this point.

Nay: McLallen

Mayor McLallen reported the motion passes five to one.

Mr. Fried believes they have a basic motion to allow the Mayor and City Clerk to sign both agreements.

Nay: None

Councilman Mitzel is disappointed about how the agreement material came before them and he hopes they can improve on that process so they can address these matters more efficiently. Councilman Mitzel explained they did not have the complete document, they did not have back up for it and they did not have the figures to show which buildings would actually be on the property. He hopes they will improve the process for something this major. He also shares Councilwoman Mutch’s concern in that before they bring it to a public vote, they should have a final Executive Session to make sure all of the issues that they have negotiated are intact. Councilman Mitzel believes he was at fault in that he did not contact the mayor.

ADJOURNMENT

There being no further business before City Council, the meeting was adjourned at 7:22 P.M.

Transcribed by Barbara Holmes