The Disposition Policy governs:
All departments
Council approval: December 28, 2001, Council Action 2001A-1719
Last revised: April 16, 2004 Council Action 2004A-0268
This policy is part of the Real Estate Transactions Policies.
The City of Minneapolis (hereafter "City") recognizes the need for a policy guiding real estate disposition transactions of the City. Real estate dispositions typically occur because a property is no longer needed for City operational purposes or to implement a development strategy. Through this policy, the City assigns the responsibilities connected with real estate dispositions and incorporates the development-related business lines of the newly created department of Community Planning & Economic Development (CPED) into City policy.
The City may dispose of real estate no longer needed for City operational purposes (“Excess Property or Properties”). From time to time, the Public Works Department shall recommend specific operational properties for disposition. The City Engineer shall determine whether a property is “Excess Property” because it is no longer needed for municipal operations.
The City Engineer shall also notify the CPED Director of any proposed dispositions and the CPED Director shall have thirty (30) calendar days to request the Excess Property for development purposes. If the CPED Director requests the Excess Property for development purposes, such request shall include a brief description of the proposed use and shall be communicated to the City Council as part of the disposition process described below. If no response is received within that time, it will be assumed that there is no development need for that property.
Proposed sales of Excess Property shall be referred to the City Planning Commission for conformance with the comprehensive plan, unless the City Council states by resolution with two-thirds vote that the proposed disposition has no relationship to the comprehensive municipal plan.
The City Council shall approve the disposition strategy for each Excess Property. Suggested disposition strategies may include, but are not limited to, the following:
If the Council determines that CPED should market a specific Excess Property for development purposes, Section 2.2 of this Disposition Policy would apply and such conveyance would be exempt from Sections 14.120 and 22.140 of the Minneapolis Code of Ordinances. CPED shall assume property management responsibility for an Excess Property to be sold for development purposes. If the specific Excess Property is not marketed for development purposes, the aforementioned code sections and this Section 2.1 of the Disposition Policy would apply. Public Works will retain property management responsibility for Excess Property not sold for development purposes.
Upon selection of a recommended buyer for an Excess Property, Public Works must publish notice of the proposed sale. The Council must hold a public hearing and the estimated market value of the property shall be reported to the Council. Upon approval by the Council and the Mayor in the manner provided by City Charter, Chapter 3, Section 1, the disposition must be documented by a written contract between the City and the approved buyer or an Affiliate, as defined in section 2.2.1 below, of the buyer acceptable to the Director of Public Works. The contract must be signed as follows:
All disposition proceeds must be distributed as per the applicable City ordinance.
CPED is responsible for the disposition of real property acquired, held or sold by the City for development purposes (“Development Property or Properties”). CPED shall dispose of City Development Property in accordance with Minneapolis Code of Ordinances Chapter 415, applicable Federal and State laws, and this Disposition Policy.
“Affiliate” means any entity directly or indirectly controlling or controlled by or under direct or indirect common control with another entity and any purchaser of all or substantially all of the assets of such entity. For this purpose, “control” means the power to direct management and policies, directly or indirectly, whether through ownership of voting securities, by contract or otherwise, and the term “controlling” and “controlled” have correlative meanings.
“Building Code” means the building code for the City as set forth in Minneapolis Code of Ordinances Chapter 85, as amended.
“CPED Appraiser” means the CPED staff person with the title of “Appraiser” or a future equivalent position, whose duties are to provide appraisal services to CPED.
“Development Property or Properties” means all real property acquired, held or sold by the City for development purposes, including fixtures, improvements, appurtenances, air rights and below grade property rights.
“Fair Reuse Value” means an estimated Market Value for the Development Property based on the planned use of the Development Property as determined by the CPED Appraiser and approved by the CPED Director.
“Land Inventory” means the Development Properties owned by the City.
“Market Value” means the actual value in money for which a willing seller not compelled to sell will sell real property to a willing buyer not required to buy.
“Purchaser” means any person, corporation or other legal entity who (i) purchases, leases or acquires an interest in a Development Property; or (ii) has entered into a Redevelopment Contract with the City for the purchase, lease or other acquisition of an interest in a Development Property; or (iii) has actually purchased, leased or otherwise acquired an interest in a Development Property.
“Purchase Price” means the actual purchase price the Purchaser shall pay for the Development Property as required and approved by the Council.
“Recapture” means the amount of any Writedown given the Purchaser that the City intends to be repaid at a future date, usually not to exceed 20 years from the date of conveyance of the Development Property. The Recapture may be evidenced by a promissory note and secured by a mortgage or other collateral acceptable to the City.
“Redevelopment Contract” means the contract between the City and the Purchaser for the disposition and redevelopment of the Development Property consistent with Council approval.
“Soil Correction” means the site and engineering work necessary and required to clean, clear, remove, mitigate and/or remediate Unsuitable Soils from the Development Property.
“Soil Correction Allowance” means the amount by which the Purchase Price is reduced to reimburse the Purchaser for certain Soil Correction costs as approved by the CPED Director or Council.
“Unsuitable Soils” means abnormal, geotechnically substandard or contaminated soils, which in CPED staff’s professional opinion, qualify for Soil Correction. Such abnormal, substandard or contaminated soils shall include, but are not limited to, soils that contain substantive amounts of loose and/or organic soils; demolition debris and rubble; abandoned building foundations, pilings, underground utilities and storage tanks; illegally dumped and buried materials; and hazardous wastes, pollutants or contaminants as those terms are defined under any federal, state or local statute, ordinance, code or regulation.
“Writedown” means the amount by which the Purchase Price is reduced below the Fair Reuse Value based on public purpose considerations.
“Writeoff” means the difference between the City’s actual cost to assemble the Development Property for disposition, which costs include land acquisition, demolition and relocation costs, and the Fair Reuse Value.
“Zoning Ordinance” means Title 20 of the Minneapolis Code of Ordinances.
The disposition of Development Properties shall be for development purposes that are consistent with the City’s development goals. The City shall not dispose of its Development Properties for speculation or land banking.
Upon acquisition of Development Properties to be included in the Land Inventory, the CPED Director shall establish for each Development Property (i) the desired reuse for the Development Property to be offered for disposition; and (ii) its Fair Reuse Value. The Fair Reuse Value shall be periodically reviewed and may be increased or decreased based on appropriate valuation methods as approved by the CPED Appraiser.
Development Properties in the Land Inventory shall be offered for development, redevelopment or other public purposes and marketed by any of the following methods: (i) public bid by auction or sealed bid; (ii) request for proposals; (iii) direct negotiation and sale;(iv) through a broker as approved by the CPED Director; (v) pass-thru conduit sale of property owned by another governmental entity to a Purchaser that pays all costs of transfer and conveyance, including an administrative fee of up to 10% of the purchase price to the City; and (vi) public-use donation by dedication, gift or exchange to another governmental entity. Direct negotiation with a single Purchaser is not appropriate where another Purchaser has already submitted an Offer to Purchase the same Development Property or the Development Property is being marketed by public bid or request for proposals or the Development Property has been approved for exclusive development rights or disposition by the Council to another Purchaser or the CPED Director determines that a direct sale is not in the best interest of the City.
Purchasers who want to acquire Development Property must submit an Offer to Purchase in a form prescribed by CPED. The Offer to Purchase shall include a statement that it is not a legally binding agreement or contract and the acceptance of the Purchaser’s offer is subject to CPED staff review and evaluation, neighborhood review, a public hearing, Council approval and the negotiation and full execution of a Redevelopment Contract.
CPED staff may negotiate the proposed Purchase Price or lease rate for each Development Property. CPED shall not negotiate a Purchase Price or lease rate that is less than the current Fair Reuse Value for the Development Property, unless staff determines that a Writedown is justified. CPED staff may recommend a Writedown for the Development Property where there is a valid public purpose and the Writedown is necessary for the financial viability of the Purchaser’s redevelopment proposal. The amount of the Writedown shall not exceed the value of the public benefit to be received as approved by the Council. A Writedown shall not reduce the Purchase Price or lease rate to less than $1.00. The City may sell, transfer or lease any Development Property to another governmental entity for any public use by gift, exchange or Writedown. The Council must approve the Purchase Price, lease rate or Writedown for the disposition of each Development Property.
Where it can be demonstrated that the Development Property contains substantial amounts of Unsuitable Soils, the Purchaser may be given a Soil Correction Allowance. The CPED Director may approve a Soil Correction Allowance of $100,000 or less. The Council must approve any Soil Correction Allowance that exceeds $100,000. The amount of the Soil Correction Allowance, along with any Writedowns and other City deductible costs, shall not reduce the Purchase Price to less than $1.00. If the Purchase Price has already been adjusted for known Unsuitable Soils and the Development Property is being sold on an “as is” basis, the Purchaser shall not receive a Soil Correction Allowance.
CPED staff shall review and evaluate all development proposals and Offers to Purchase and make recommendations to the CPED Director and the Council and Mayor. Neighborhood review shall be done when required by City policy, state or federal laws or grant requirements; provided, however, that the review of “infill housing” shall be as follows. Affected neighborhood groups may review new infill single-family or duplex housing construction projects on Development Properties. The Purchaser and its representatives and CPED staff shall only be required to attend one neighborhood meeting to review the single-family or duplex housing proposal. The Council will only consider neighborhood comments that relate to building height and mass, front elevation, roof configuration, exterior materials, building setback and other similar design items. Neighborhood design guidelines should recommend what is desirable and not create an inflexible set of rules. Neighborhood recommendations that require any exterior or interior changes or upgrades that would have a significant cost impact on the project will only be considered by the Council if the Purchaser consents to such changes or upgrades and the neighborhood firmly commits to fund or finance for immediate payment, the changes or upgrades at no additional cost to the Purchaser. CPED staff will provide technical assistance to neighborhood groups to develop appropriate design guidelines or to review and revise existing design guidelines.
The Council must hold a public hearing regarding the sale, lease or other disposition of Development Property prior to Council approval. Unless otherwise provided in state law, notice of the public hearing must be published in a newspaper of general circulation, at least once, not less than 10 days nor more than 30 days, prior to the date of the public hearing. The following types of Development Property dispositions do not require a public hearing: (i) public bidding; and (ii) public-use donation.
After the public hearing has been held, the Council will consider the Purchaser’s development proposal or Offer to Purchase; CPED staff recommendations; neighborhood review, if any; and the testimony and written comments from the public hearing. The report to the Council must identify the recommended Purchase Price and the Writeoff, Writedown and/or Recapture, if any. The Council, in its discretion, may approve, reject or modify the terms of the proposed disposition of the Development Property to the Purchaser. The City may not dispose of any Development Property without the approval of the Council and the Mayor in the manner provided by City Charter, Chapter 3, Section 1.
Upon Council approval and Mayoral concurrence as provided above, the City and the approved Purchaser (or an Affiliate of the Purchaser acceptable to the CPED Director) must enter into a Redevelopment Contract containing the approved terms and conditions for the disposition of the Development Property. If a Redevelopment Contract is not fully executed within 6 months after the date of Council approval, the CPED Director may cease further negotiations with the Purchaser and declare the Development Property disposition terminated. At the time the Purchaser signs the Redevelopment Contract, the Purchaser must pay to the City a good faith deposit equal to 10% of the Purchase Price to secure construction/rehabilitation performance on the Development Property. The good faith deposit will not be returned to the Purchaser until the City issues a certificate of completion to the Purchaser.
A Purchaser who is undertaking the construction or rehabilitation of a 1-10 unit housing project for sale to owner-occupant buyers may request deferral of the Purchase Price payment for the Development Property until the housing units are sold to owner-occupant buyer(s). This “Deferred Purchase Price Payment Option” must be described in the Offer to Purchase and approved by the CPED Director. If approved for the “Deferred Purchase Price Payment Option,” the Purchaser shall pay $1.00 at closing, sign a promissory note for the balance of the Purchase Price and give the City a mortgage on the Development Property to secure the note. The Purchaser shall repay the deferred Purchase Price prorata upon the sale of each unit to an owner-occupant buyer in an amount equal to the amount of the deferred Purchase Price divided by the number of units comprising the project; provided, however, that the entire amount of the deferred Purchase Price must be repaid in full within 1 year from the date of conveyance of the Development Property.
The Council may grant an option, right of first refusal or exclusive development rights to a Purchaser for a Development Property and may require the Purchase to pay a reasonable fee for such rights. The City and the Purchaser may enter into a written agreement for any option, right of first refusal or exclusive development rights.
Where the City has used federal funds such as CDBG program funds to acquire a Development Property, the City shall follow the applicable federal regulations, if any, governing the disposition of such acquired property.
The Mayor and City Council will establish any new real estate disposition policies for the City and approve dispositions as required by this policy.
The City Engineer will designate staff to:
The CPED Director will designate staff to:
The City Finance Officer will designate staff to:
The City Attorney will designate staff to:
Department heads must determine operating property needs in conjunction with Public Works staff. Department heads are responsible for ensuring that disposition practices are consistent with City policies and procedures.
This policy supercedes any and all previous City disposition policies unless the exception is listed below.
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