HomeMy WebLinkAbout22. 15-537DECEMBER 8, 2015 15-537 RESOLUTION
(CARRIED___7-0_____LOST________LAID OVER________WITHDRAWN________)
PURPOSE: APPROVE SETTLEMENT WITH FIRSTMERIT BANK PERTAINING
TO PROPERTY LOCATED AT 1118 SOUTH MAIN STREET
(FORMER BUCKSTAFF PROPERTY)
INITIATED BY: LEGAL DEPARTMENT
WHEREAS, Oshkosh Industries, Inc. and Oshkosh Furniture, LLC, doing business
as the Buckstaff Company, stopped operating the furniture factory located at 1118 South
Main Street in the City of Oshkosh in March 2011; and
WHEREAS, in March 2013, the City of Oshkosh filed a complaint related to
nuisance conditions on the property located at 1118 South Main Street (the former
Buckstaff property); and
WHEREAS, the parties including FirstMerit Bank and Oshkosh Industries, Inc. and
Oshkosh Furniture, LLC (represented by Martin Cowie) have participated in mediation and
continued to work since that time to resolve the outstanding issues pertaining to the former
Buckstaff property; and
WHEREAS, the parties have reached a tentative settlement of this matter
contingent upon the approval of the Common Council.
NOW, THEREFORE, BE IT RESOLVED by the Common Council of the City of
Oshkosh that the proper City officials are hereby authorized to enter into an appropriate
settlement agreement with FirstMerit Bank pertaining to the property located at 1118 South
Main Street in the City of Oshkosh (the former Buckstaff Property) in resolution of the
current litigation between the parties captioned City of Oshkosh v. FirstMerit Bank
according to the following terms and conditions:
DECEMBER 8, 2015 15-537 RESOLUTION
CONT’D
Oshkosh Furniture, LLC / Oshkosh Industries, Inc. will contract with Statewide
Razing and an appropriate asbestos removal contractor for the removal of all
structures from the property. Foundations and slabs will not be removed as part of
the demolition project. Mr. Martin Cowie will oversee and administer the demolition
of the structures for no compensation (other than consideration in the settlement
agreement – principally the release and satisfaction of FirstMerit’s claims against
Mr. Cowie and the businesses that he managed). Neither the City nor the Bank will
acquire any contractual liability to Statewide Razing or to the Asbestos contractor.
Similarly, Oshkosh Furniture, LLC and Mr. Cowie will not be acting as
representatives of either the Bank or the City while performing this work.
Demolition will be completed on or before September 30, 2016.
FirstMerit will pay $532,634 toward removal of the structures upon the property.
The City will pay $307,633 which amount will be paid into an escrow account and
be applied to the costs of the demolition project. To fund its portion of the
agreement, the City and RDA will each apply for a WEDC grant of up to $150,000.
The City will dismiss the lawsuit against FirstMerit and all parties assert that they
will not file any further actions against any of the other parties in relation to the
property. All parties will release any claims against any other party in relation to the
other parties.
FirstMerit, Oshkosh Industries, Inc. and Oshkosh Furniture, LLC will execute and
deliver deeds and all other documents required to convey ownership of the property
to the City. The City shall pay all closing and title insurance costs.
FirstMerit will have no liability for any past, existing or future environmental issues.
The City will indemnify FirstMerit against any environmental liabilities.
The City will assume responsibility for any claims that WDNR/EPA may have
against FirstMerit with respect to the property.
The City will accept responsibility for all unpaid real estate taxes. Neither FirstMerit
nor Mr. Cowie will have any responsibility for current or past taxes.
The Settlement is contingent upon the City receiving a WEDC grant to be applied to
the project.
DECEMBER 8, 2015 15-537 RESOLUTION
CONT’D
BE IT FURTHER RESOLVED that the proper City Officials are hereby authorized
and directed to execute and deliver an agreement substantially in compliance with the
terms listed above, any changes in the execution copy being deemed approved by their
respective signatures, and said City officials are authorized and directed to take those
steps necessary to implement the terms and conditions of the Agreement.
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TO: Honorable Mayor and Members of the Common Council
FROM: Lynn A. Lorenson, City Attorney
DATE: December 3, 2015
RE: Resolution to Approve Settlement with FirstMerit Bank pertaining to Property
located at 1118 S. Main Street (Former Buckstaff Property)
BACKGROUND
In February 2011, Citizens Bank (now FirstMerit Bank, hereinafter, "the Bank")
commenced foreclosure on Oshkosh Industries, Inc., and Oshkosh Furniture, LLC,
(known as Buckstaff Furniture) property located at 1118 South Main Street in the City of
Oshkosh. The Buckstaff property was actually comprised of three separate parcels;
however, only the main factory parcel is the subject of the current litigation. In March
2011, Buckstaff Furniture, (hereinafter "Buckstaff') stopped doing business at the site
and vacated the property. In September 2011, the Oshkosh Fire Department conducted
an inspection of the site and issued orders to correct various nuisance conditions on the
property. At the time of these orders, a representative of the Bank was overseeing the
properties. In January of 2012, representatives of the Bank met with city staff regarding
conditions at the site and the Bank undertook some measures to attempt to address
some of the safety concerns raised. In January of 2013 representatives of the Bank
met with city staff and representatives from the Wisconsin Department of Natural
Resources (hereinafter, "WDNR") and the United States Environmental Protection
Agency (hereinafter, "EPA") regarding conditions at the site.
In March 2013 the City filed a Summons and Complaint against the Bank related to the
nuisance conditions on the property. The Bank filed a third party Complaint adding
Oshkosh Industries, Inc. and Oshkosh Furniture, LLC, to the lawsuit. In April 2013, the
City approved an application for a Wisconsin Plant Recovery Initiative Assessment
Monies (WAM) grant for a Phase I environmental assessment of the site. WDNR hired
a contractor and completed the Phase I investigation of the site. WDNR working with
the EPA removed various containerized materials and hazardous waste at Buckstaff.
In May 2014, the City met with representatives of the Bank and Martin Cowie, the
principal for Oshkosh Furniture, LLC and Oshkosh Industries, Inc, for mediation. Since
that time, city staff and outside counsel have been working toward a resolution of this
matter.
ANALYSIS
The parties explored various options for removal of the Buckstaff structures. The Bank
has indicated that it does not wish to be responsible for oversight of the demolition
process and has obtained an agreement from Mr. Cowie to manage the demolition
process. The Bank has obtained final costs for removal of the structures on the
property from Statewide Razing. Based upon the revised bid from Statewide Razing,
the terms and conditions of the proposed settlement include the following:
Buckstaff will contract with Statewide Razing and an appropriate asbestos
removal contractor for the removal of all structures from the property. Mc Cowie
will oversee and administer the demolition of the structures for no monetary
compensation (he will receive consideration in the settlement agreement,
principally the release and satisfaction of the Bank's claims against him and the
businesses that he managed). Neither the City nor the Bank will acquire any
contractual liability to Statewide Razing or to the asbestos
contractor. Additionally, Mr. Cowie will not be acting as a representative of either
the Bank or the City while performing this work.
• Statewide Razing has provided a bid for removal of the structures in the amount
of $671,152. Demolition of the structures will also require the removal of
asbestos materials which is proposed to be done through a separate contract in
the amount of $179,114. The total demolition costs, including the removal of the
asbestos materials, will be $850,266.
. Demolition would be completed on or before September 30, 2016. Although the
contractor has indicated that the buildings may be down earlier, he is seeking
additional time to allow for more building materials to be salvaged from the site.
. Each party will contribute funds to resolve the litigation, which will be placed in an
escrow account and used to fund the demolition of the structures on the property:
� FirstMerit $532,634
o Ciry of Oshkosh $307,633
o Martin Cowie $ 10.000
Total $ 850,267
The City of Oshkosh portion would be funded as follows:
o Anticipated WEDC grant $ 255,OS0
o Cash 52 553
Total $ 307,633
To fund its portion of the agreement, the City and the RDA will apply for WEDC
grants of up to $150,000 each. Because the grant is a matching grant, the City
conservatively anticipates its maximum grant eligibility to be $255,080 based
upon the demolition bid. The remaining $52,553 would have to be fnanced
through other means, most likely blight elimination funds within the City budget.
There is potential risk that not all of the costs of demolition will be eligible for
grant reimbursement. Staff experience suggests that generelly 80-90% of costs
are eligible for the grant, which could reduce the potential grant reimbursement
amount to be beriveen $204,064 -$229,572 from the $255,080 identified
above. Staff reasonably anticipates that the City's cash contribution, based upon
past experience with grant reimbursement, to belween $52,553 to $100,000.
• The City will dismiss the lawsuit against the Bank, and all parties assert that they
will not file any further actions in relation to the property. Additionally, all parties
will release any claims against one another.
. FirstMerit, Oshkosh Industries, Inc. and Oshkosh Furniture, LLC will execute and
deliver deeds and all other documents required to convey ownership of the
property to the City. The City shall pay all closing and title insurance costs,
which staff estimates to be approximately $1,300.
. The City will pay for the costs for removal of the foundations and slabs. The cost
to remove the foundation and slabs is approximately $100,000, although we may
be able to have some of this done in exchange for renting of the property to a
local contractor.
• Costs for grading and seeding and/or other site preparation will be paid for by the
City. We have also become aware that the site contains a well, which will need
to be evaluated for potential reuse or abandonment. There are also utilities to
the site and the bids indicate that capping for those utilities has not been included
in the quoted price for demolition of the structures. The utility abandonment may
cost as much as $5,000, but some of that may be done in house by utility staff.
. The Bank will have no liability for any past, existing or future environmental
issues. The City will indemnify the Bank against any environmental liabilities.
. The City will assume responsibility for any claims that WDNR/EPA may have
against the Bank with respect to the property. (Staff has recently reconfirmed the
willingness of the WDNR and EPA staff to recommend a waiver of previous costs
for removal of materials from the site if the City is to end up with the property)
• The City will accept responsibility for all unpaid real estate taxes. Neither the
Bank nor Mr. Cowie will have any responsibility for current or past taxes.
The totals for the property taxes, not including the current year, without
interest, are as follows;
State of Wisconsin $ 740.29
Winnebago County $ 23,437.55
City of Oshkosh $ 36,512.99
School District $ 31,136.39
Technical School $ 7,192.17
Special Charges and Assessments $44,348.52
Staff has had preliminary discussions with the other taxing jurisdictions in
Winnebago County and anticipates requesting those jurisdictions to
forgive their portion of these past due amounts. Therefore, the City would
be responsible for the City's portion, State portion, and the Special
Charges and Assessments for a total of $81,601.80.
• The Settlement is contingent upon the City and the RDA receiving WEDC grants
to be applied to the project.
The proposed settlement allows the City to address the immediate health and safety
concerns on the property. The proposed settlement resolves this matter now allowing
the City to move fonvard in regard to the property more expediently and limits the costs
and risk associated with pursuing this matter to court.
In return for the City's specified out-of-pocket contribution which will be placed into an
escrow account and applied toward the demolition of the Buckstaff buildings, the City
would obtain free and clear ownership of the 7.75 acre industrial site.
While there are some variables in the City's actual out-of-pocket contribution, the
minimum cash contribution would be $58,853. This number includes $52,553 toward
removing the buildings to ground level, plus an estimated $5,000 to cap utilities on the
site, and an estimated $1,300.00 in closing costs.
A critical component of this resolution is the receipt and maximization of a WEDC grant
that will contribute to the demolition of the buildings to ground level. The maximum
value of the grant based upon the current bid is $255,080. The grant value is based
upon 30% of the proposed demolition costs totaling $850,266. The grant value can only
be maximized if all demolition costs submitted are eligible costs. City staff's experience
with grant reimbursements cautions us to conservatively estimate a reduction in grant
value of 10%-20%. Such a reduction in grant value could add $25,508 to $51,016
toward the City's out-of-pocket costs.
While the City will make a cash contribution at a minimum of $58,853 to a worst case of
nearly $110,000; the City does become the property owner at the end of the project and
can control future development of this site adjacent to the South Shore Rredevelopment
Area and along a gateway corridor into the City. While this matter was initially begun as
an enforcement action and it has never been the City's goal to obtain ownership of this
property, through the course of discussions belween the parties, this has become a
value added to the removal of the nuisance conditions on the site and to provide some
beneft for the City to spend public money in support of the cleanup of this property.
Viewed in comparison to potential purchase prices for properties in this area, the
potential cost is significantly less than the City has paid proportionately for other
properties in this area.
As to the property itself, the City is also being asked to take all risks associated with
environmental conditions on the property as the future owner of the site. Phase I and II
reports have been completed on the property. Staff has worked closely with its
experienced environmental counsel as well as the WDNR and believes this risk is
minimal. The City is also being asked to assume the responsibility for any claims that
the WDNR and EPA may have in relation to work performed at the property. Staff
believes those claims are approximately $200,000. Staff has had discussions with
representatives of the WDNR and EPA who have indicated they would recommend
waiver of the claims if the property were to become owned by the City.
The City is also being asked to assume all past real estate tax liability associated with
the property. Again, staff has pursued preliminary discussions with other taxing
jurisdictions in relation to this and believes it may be possible to have those jurisdictions
(the county, school district and technical college) will forgive or write off their respective
portions of the tax liability. The City would write off the City's portion of the outstanding
tax liability.
Understanding all of the risks and benefits of the proposed settlement, staff and outside
counsel believe that this settlement is a reasonable settlement and that the benefits of
resolving this matter without continued litigation, and the costs associated, will ultimately
ensure City ownership and control over the property does outweigh the identified risks
with the proposed settlement.
FISCAL IMPACT
Under the proposed settlement the City would pay $307,633 into an escrow account for
the property, these funds would be used for removal of the existing nuisance structures
located at 1118 South Main Street (the Buckstaff property). The Council has previously
authorized application for WEDC grants related to this project, which may provide up to
$255,080 towards the City's contribution. If the City is able to realize the full benefit of
the WEDC grant money, the City would have a minimum cash contribution of $58,853,
including some additional costs for capping of utilities and real estate closing expenses.
Aside from this initial, minimum amount, there are some variables. Because all costs
for grant reimbursement must be eligible costs, it is anticipated that a reduction in grant
monies received could add behveen $25,508, and $51,016 to the City's out-of-pocket
costs; this potential reduction in grant money received means the City could make a
cash contribution of $58,853 to $110,000 (in a worse-case scenario).
The City will become the owner of the site and there will be additional costs associated
with removal of foundations and grading and site preparation. Staff is reviewing options
for removal of the foundations in connection with other contractual work and is also
reviewing additional grant opportunities for removal of the foundations and additional
site work. These site preparation costs for eventual redevelopment will vary depending
upon the anticipated use of the site.
The City is assuming costs pertaining to environmental remediation work performed on
the site by the WDNR and EPA, which are estimated at approximately $200,000. Staff
would request a waiver of these costs and has received a favorable response to such
requests with representatives of these agencies. However, should such a waiver not be
granted, these amounts would become the responsibility of the Ciry.
The City is also assuming the unpaid tax liability, including some special charges,
related to this parcel. The totals for the property taxes not including the current year,
without interest, are as follows;
State of Wisconsin $ 740.29
Winnebago County $ 23,437.55
City of Oshkosh $ 36,512.99
School District $ 31,136.39
Technical School $ 7,192.17
Special Charges and Assessments $44,348.52
As noted above, the City has had preliminary discussions with the other taxing
jurisdictions in Winnebago County and anticipates requesting those jurisdictions to
assume their portion of these past due amounts. The City would be responsible for the
City's portion, State portion and Special Charges and Assessments for a total of
$81,601.80.
Totaling all of these potential costs, and presuming staff is successful in obtaining
waiver of the outstanding environmental costs and taxes from other jurisdictions, staff
estimates that the maximum out of pocket costs for this site are:
City's contribution to settlement $307,633
Potential minimum grant reimbursement ( $204,064)
Foundation Removal $100,000
Closing Costs $ 1,300
UtilityAbandonment $ 5,000
Unpaid Real Estate Taxes $ 37,253
Unpaid Charges/Special Assessments 44 349
$291,471
Resolution of this matter will save the City additional costs associated with trial
preparation and trial of the matter. To date costs for litigation in this matter have
reached nearly $200,000.
RECOMMENDATION
Staff recommends approval of the resolution authorizing settlement of the litigation.
Respectfully Submi ed, Approved
���-� ��
Lorens MarkA. Rohloff
City Attorney City Manager