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Hi-tech firm in Community Center?

Ely Council OKs purchase option pact

Keith Vandervort
Posted 10/8/15

ELY – A high-tech data center could soon come to Ely, and it could be housed in the vacant Community Center.

City Council members were presented with an offer to purchase agreement this week and …

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Hi-tech firm in Community Center?

Ely Council OKs purchase option pact

Posted

ELY – A high-tech data center could soon come to Ely, and it could be housed in the vacant Community Center.

City Council members were presented with an offer to purchase agreement this week and most of them were in favor of giving a development group a one-year exclusive window of opportunity to purchase the city landmark.

The proposal caught many people off guard and a shroud of secrecy surrounds the identity of the development group and any details about how the building will be used. The city’s economic developer, John Fedo, asserted the proposal is the culmination of many months of conversation and negotiation.

In making his case before the council, he noted that developing a data collection center was one of the discussion points in determining the city’s priorities for possible reuse of the CC.

“This particular group saw the value of both the project itself and the possibility of locating in this building,” he said. “One of the elements they ask for is a secure site as they move down the line in their business plan.”

Fedo admitted that the city has not pressed for details or asked any hard questions about the proposal. “Once we do, that becomes public information,” he said.

Taxpayers are paying to keep the building heated for another two years as a re-use study is completed. Renovation estimates are as high as $4.5 million.

He said the request from the development group is to give them the opportunity to explore the possibility of locating in Ely and utilizing the CC.

Fedo said the city would reserve all their rights through the offer to purchase document. “Nothing would please us more than having both sides be winners here,” he said.

According to city attorney Kelly Klun, the city will be able to negotiate and accept a sale price at or below the fair market value of the building. However, the city would be forced to accept the sale of the building to the group if they decide to pay the fair market value. In addition, the city would not have a say in how the building would be used.

“If, for example, they came to the table in nine months with a plan that you did not like and they say they want to buy it at fair market value, you would be obligated to sell,” she said. “You can’t get out if they offer fair market value.”

In addition, the offer to purchase agreement allows the potential buyer to transfer the purchase agreement to any party without the consent of the seller.

Peter Schuler, a member of the Ely Community Center Foundation, and local point of contact for the development group, attempted to shed more light on the proposal.

“This group of investors, from various major cities around the United States, have come together to look at a high-technology project. (Details) are necessarily rather vague because that is the nature of this project,” he said.

“What they are doing right now and the nature of this option is to investigate and engage capital,” Schuler said. “This is a multi-million dollar project and they are approaching this very carefully.”

He said their request to have total control of the site for the one-year period of the option to buy agreement is “totally typical of this sort of real estate investment.”

The applicant group represents a number of large high technology firms around the country, and the principal members are based in Chicago. “They are high-technology investors and some of the best equipment suppliers in that sector, and some of the leading property developers in this sector,” he said.

“The project will provide a significant number of jobs in Ely, a significant amount of tax revenue, and in the best case, open up an entirely new economic driver in this city and region,” Schuler said.

Council member Paul Kess, who also sits on the Community Center Foundation, made a motion to accept the option to purchase agreement. The motion was supported by council member Jerome Debeltz.

Council member Kara Polyner said she was cautious about voting on the proposal that night. “We should have some time to think about this. We should debate this at our next business meeting, and do some research,” she said.

Schuler countered. “Time is of the essence,” he said. “The longer we wait, the investment money will go elsewhere.”

Mayor Chuck Novak added, “It’s not like this is a novel approach on the table.”

Council member Heidi Omerza admitted that there is “a perception that we up here know what’s going on. When we got our council packets last Friday, that’s the first time that we as a council heard about this,” she said. “We don’t have any insider information. We got the option to purchase and that’s what we know. Probably people in the community know way more than I do. My kids probably know more about this.”

She said that at least two members of the Community Center Foundation appear to support the proposal and wondered if the entire organization supported the offer.

The Foundation has not met to formally support the proposal. Kess said, “Even though this isn’t the dream (of public use of the CC) it is a pretty good alternative.”

Council member Al Forsman stressed more public disclosure before moving forward. “They need to be more public about it now that their secret is out,” he said. ”There is no other current proposal for the reuse of the CC, and it will still be there (if the deal falls through), so I’m in favor of moving forward.”

Schuler added that the fact that the CC is a historic landmark in Ely is one of the reasons the investor group is seriously looking at acquiring the building. “One of the principals is absolutely passionate about historic preservation and he is personally passionate about preserving and saving the Community Center, and intrinsic to the marketing approach of this group is the uniqueness of this building,” he said.

Polyner stressed that she is not against the proposal, but is wary of the urgency of approving the agreement. “I don’t feel good about this. I want to think about if this is the best use of that building for our community. I don’t want us to just focus on getting this headache off of our hands. Let’s think about it for a little bit.”

Angela Campbell, a member of the Ely Heritage Preservation Commission, said the proposal “is disturbing.” She added, “I have concerns because this option favors the buyers more than it favors the city. She said the value of the building in 2015 is $1.5 million and just $499,000 in 2016.

“My concern is that the property exists as is when it goes to the seller. Is there any concern for what will be done in the building?” she asked. She wondered that if and when the option to purchase agreement is accepted will the group’s plans for the building be made public. “Everything seems to be so secret,” she said. “I’m very thankful that this group is interested in Ely. I know this opportunity is of interest to the city. I don’t see it as a viable interest for the Community Center. I want you to be very aware of what you are signing.”

The council voted 6-1, with Polyner voting against, to accept the Community Center option to purchase agreement pending the fee payment of $100.

Other business

In other business, the council took the following action:

• Approved a Commercial Loan application from John and Mary Mills from Mills Clothing Inc. for $17,500 for renovation to the Sheridan Street business;

• Directed the City Clerk to obtain bids for the demolition of the property at 1041 E. Washington St. and to board up the windows and doors at the property;

• Tabled the acceptance of the agreement for donation of the former Ford Garage property on East Conan Street;

• OK’d the hiring of a surveyor and appraiser in the city’s attempt to acquire road access to the city’s water pump station on Burntside Lake.