CITY OF FORT SCOTT
SPECIAL CITY COMMISSION MEETING
Minutes of December 29, 2020 Special Meeting #19
A special meeting of the Fort Scott City Commission was held December 29th, 2020 at 9:30 a.m. in the City Commission Meeting Room, 123 S. Main Street, Fort Scott, Kansas.
Commissioners Pete Allen, Kevin Allen, Josh Jones, and Lindsey Watts were present with Mayor Randy Nichols presiding.
AUDIENCE IN ATTENDANCE: Travis Shelton, Rachel Pruitt, Lynette Westhoff, Susan Bancroft, Michael Hoyt, and Allyson Turvey.
Consideration of Quit Claim Deeds – Jeff Hancock, Interim City Manager, informed the Commission that he could have accepted these deeds, but Jeff Deane, City Attorney, thought it would be more transparent to have the meeting so there is documentation accepting these deeds. This is a $22 million investment in the downtown area which is just unheard of in small town America.
Rachel Pruitt, Economic Development Director, said that this is fulfilling the commitment made by the previous City Commission. There are two parcels to be deeded. This property does have a 13-year history of blight conditions documented in the Codes files. We were fortunate to get this property demolished by the developer. When the developer purchased this property, it allowed 1st Street traffic to remain open. When the previous Western project was constructed, it closed 1st Street. She heard from some of the businesses in that area on how this affected them with the street closure. RAU Construction has informed the City that they will have the lot cleared by the end of January or the second week of February at the latest. Most of the materials that is still on the lot is for the utility upgrade project that is going on in that block. This includes the LaRoche Development, E-3, and also Union Lofts. She said that it was brought to her attention that there are unpaid taxes on this property. She has asked for receipts for the taxes that have been paid but is waiting on the County since the Treasurer’s office has been closed to the public. The parcel number that begins with the “West 39.8 feet of Lot 11”, is where the actual building was. The other parcel that begins with “The East 80.2 feet of Lot 11”, is the vacant lot where the awning was. It was part of a family trust and the area was split several years ago. Rachel shared a map of the downtown area of the investment that includes the Lowell Milken Center. These investments amount to $27 million. The LaRoche Development, Margo’s, E-3, Hedgehog Book Store, Union Lofts, Modern Woodmen, and Lowell Milken Center amounts to 93% of the investment in the downtown area.
Josh said that based on the resolution he has in front of him and Rachel’s comment that the conclusion of the project will not be done until the end of January, he made a motion to table this until the end of January or first of February depending on when the construction is completed. Kevin Allen seconded.
Rachel said that this needs to happen before the end of the year for a lot of reasons. Some of these reasons are investment related, but it does need happen before the end of the year. That is why the meeting was held today. She said as far as construction, the Union Lofts is complete, and the delay is the utilities being relocated in the alley.
Jeff Deane, City Attorney, said that the main issue is that the agreement with Mr. Krsnich of Flint Hills Holding was not done in writing but was done verbally, and his position remains that the transfer would occur by the end of this year.
(Problems with the audio with Jeff Deane – he called into Commission room)
Lindsey said that it would be breaking the previous Commission’s commitment and breaking part of the verbal agreement on this project if we don’t accept it by the end of the year.
Randy asked why we would want to put this off.
Josh said that he was going off this resolution. He doesn’t want the City to take any liability of anyone getting hurt over the next 30 or 60 days. It’s a mess over there right now.
Lindsey asked about the liability of them using that property.
Jeff Hancock asked the City Attorney to address the liability issue from the City’s standpoint.
Jeff Deane said that the liability issue becomes the same liability basis that we have in relation to the alley and the streets. It’s the same risk that we face with people using our public streets. The primary liability still lies with the contractors and developer of the property. There is a change in our status with becoming the owner of the property, but we still have avenues against the people who are actually using the property just as we would if they were injured a few steps off the property on a City street.
Kevin asked if the items that are on that lot are the utility contractors. Is that true?
Jeff Deane said that his understanding is that the lot was being used for staging of construction materials for the project. The email that he saw from RAU Construction is that they would have it cleared by the second week in February by the latest. There may still be construction materials there from the Union Lofts project.
Kevin said that 75% of the items are his items. The rented boxes are from his company to RAU, a lift, and some items from CDL. It’s actually the construction company’s items that are there.
Rachel said that the City and the State have provided documentation of the completion of the Union Lofts. There is legal documentation from the State and the City that shows it is complete. They have already leased 10 of the 25 units and they have been given a temporary Certificate of Occupancy. The State is doing their final walk through today.
Josh asked Lynette Westhoff about the insurance side of this.
Deb Needleman said that the City does have its normal standard coverage. The City receives their Certificate of Insurance coverage. That Certificate of Insurance coverage would cover anything that would happen on City streets regardless.
Josh asked for the question to be called.
Lindsey asked based on the liability is why you are making the motion?
Josh said based on the resolution that states based on the conclusion of the construction use.
City Clerk re-read the motion to the Commission.
Lindsey said that we are being told that there is completion of the project, and she asked if he would amend his motion. This conflicts with what we are saying and trying to do.
Josh said that the State says the project is complete, but the construction use is not complete.
Jeff Hancock said that based on his knowledge and understanding of this project, he would recommend that the Commission accept this property before the end of the year. It is his duty to communicate his feelings to the Commission.
Josh asked why a special meeting had to be called for this.
Jeff Hancock said that technically we didn’t need the resolution. He was going to proceed with accepting the property due to the fact of the previous agreement. The City Attorney recommended approving the resolution accepting the two deeds, so we have documented the fulfillment of our contractual duty with this developer. That’s why the meeting was needed.
Kevin also Jeff Deane to explain about the tax credits and the $400,000 grant.
Jeff Deane said that the issue of tax credits was discussed with the previous Commission. It was a condition of the grants for the funds for the project. This was a ten-month discussion between the Commission and the developer. There was never a condition about tax credits in the minutes. It was City economic development funds that were used. This building was going to have to be demolished. There was no agreement drawn up by the prior City Attorney or the previous City Manager. This was addressed and discussed at the September 1st, 2020 meeting. This is a verbal agreement or an informal contract, but is still enforceable. It makes it more expensive to prove what the contract had in it. Mr. Krsnich has said that based on the agreement, the property was to be transferred by the end of the year for tax purposes. This sounds reasonable to him. He would not have suggested that this meeting be held, but with all the difficulty we have had with this project, he wanted it out in the open and transparent for all to see. This fulfills the delivery aspect of the transfer of the property.
Josh asked if there was any liability surrounding the fact that this is a quit claim deed versus a warranty deed. Is the City liable for any back liens, taxes, judgements, or encumbrances on this?
Jeff Deane said that he called Mr. Krsnich yesterday and discussed how he obtained this property. He said it was obtained through a warranty deed. There was a title search done on it when he obtained the property.
Rachel said that they got a warranty deed.
Josh said that since the time that he got a warranty deed, if there are any liens, judgements, or encumbrances since that point, are we liable for that?
Jeff Deane said yes.
Josh asked that we get that in writing that he is responsible for any back liens, taxes, judgements, or encumbrances.
Pete said that he thinks that due to the controversy and mistakes on this project in the past and all these factors, he doesn’t think we should accept this resolution or these parcels. He asked for the vote to be called.
Lindsey asked if he was wanting a contract in writing? We have a verbal contract.
Pete said we don’t have a contract. We don’t deal in verbal contracts.
Jeff Deane said that a verbal contract is as enforceable as a written contract. It is just difficult to prove what is in there. Mr. Krnsich believes this is part of that contract.
Lindsey said we wish we had a written contract. This is the situation we are in. We are looking at millions of dollars in investment that this developer has made to this community. They want us to take part in what the previous Commission agreed to. If there is wording in a resolution that needs changed, then we need to change it. Breaking a contract and taking on the liability that the City takes on every single day would be a very big mistake for this Commission to do in this situation.
Josh asked if there were any restrictions on this property and if we can do with it whatever we wish to.
Jeff Deane said yes.
Josh said that he would amend his original motion to accept these two parcels and that any liability from now (date of signing) until the end of the construction use will be Flint Hills Holding responsibility. Also, in writing that any judgements, liens, encumbrances prior to the date of signing will be liable to Flint Hills Holding.
Pete said that a warranty deed needs to be presented, and not a quit claim deed.
Josh asked if the City Attorney could present that in writing.
Jeff Deane said that he has told him there are no encumbrances to the title since they acquired it. A title search was done at that time.
Rachel agreed that they did have a title search done. The building was a trustee’s deed and the awning was a warranty deed. The building was in Rosalie Stout’s Trustee name.
Jeff Deane said that the quit claim deed is the easiest way to do it.
Josh asked what the City Attorney’s recommendation was.
Jeff Deane said that Mr. Krsnich said that this is part of the agreement. It is a relative risk proposition. His advice is to take the deeds and record them. If we need to do something more extensive later, we can do that.
Lindsey asked if Josh’s amendment to the resolution is enforceable.
Jeff Deane said that you can put it in there but whether it is enforceable against Mr. Krsnich or Flint Hills Holding is debatable. Mr. Krsnich wants this transaction to happen by December 30th, 2020 at 4:00 p.m. We have a short time frame to get this recorded with the County.
Josh said that a big investment has been made here and he wants to make sure that the City is covered.
Pete said that he thinks this resolution is a farce and a resolution of hearsay and that we are trying to clean up a mess that was created. We do not have a written agreement.
Josh amended his motion to accept these two parcels based on the verbiage that Flint Hills Holding is liable for any encumbrances, debts, liens, prior judgements from their time of purchase until the date they grant it to us, and also they take any liability responsibility of the area until the area is cleaned up from construction use. Lindsey Watts seconded. J. Jones, L. Watts, and R. Nichols voted aye. P. Allen and K. Allen abstained. Motion carried 3-2.
approved to accept these two parcels based on the verbiage that Flint Hills Holding is liable for any encumbrances, debts, liens, prior judgements from their time of purchase until the date they grant it to us, and also they take any liability responsibility of the area until the area is cleaned up from construction use.
R. Nichols moved to adjourn the meeting at 10:14 a.m. R. Nichols seconded. All voted aye.
ADJOURNED MEETING AT 10:14 A.M.
Diane K. Clay, M.M.C.