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AI- 3773   11.    
City Council Agenda
Meeting Date: 06/18/2013  
Subject:    Approval of an option agreement with Central Pierce Fire & Rescue for purchase of City-owned property
Presenter: Kevin Yamamoto
Department: City Attorney's Office  

Recommended Action
Authorize the City Manager to enter into an option agreement with Central Pierce Fire & Rescue for the possible purchase of what is commonly known as the AOB (Administrative Office Building) lot.

Note:  If the Council authorizes the City Manager to enter into an option agreement with Central Pierce, the Council should set the amount of consideration for the option, or authorize the City Manager to set the amount of consideration.
After Central Pierce annexed the City of Puyallup in 2008, the City of Puyallup and Central Pierce entered into a Real Property Lease Agreement.  Pursuant to the Lease Agreement, the District leases from the City a number of real properties.  One of the real properties is commonly known as Station Three.  Station Three is located within the building that also houses the City of Puyallup Police Department.  The building that houses Station Three and the Police Department is located at 311 West Pioneer, Puyallup, Washington.

In order to better fulfill its mission in the future, Central Pierce is planning to build Station Three as a new facility that is separate and distinct from the Puyallup Police Department building (hereinafter referred to as the “New Station Three”).  Central Pierce proposes to acquire a nearby City site for the New Station Three.  The site is the former location of the City of Puyallup Administrative Office Building (AOB), and is located at 330 3rd Street SW, Puyallup, Washington.  Please see the attached image.

Central Pierce will seek voter approval of a bond measure in November of 2013.  If approved, Central Pierce will use bond proceeds to, among other things, purchase the AOB lot from the City, and build the New Station Three.

The proposed option agreement will allow Central Pierce to exercise an option to purchase the AOB lot if voters approve the bond measure in November of 2013.
Previous Actions (Discussions/Presentations)
The proposed option with Central Pierce has not previously been presented to the Council in open session for consideration.
Summary of Proposal
The proposed option agreement, which is attached to this agend bill, is structured as a preemptive option (right of first refusal).  Under the agreement, Central Pierce will be given an option to purchase the AOB lot on the same terms as a bona fide offer from a third party—if the City is willing to sell the property on those terms.  In other words, Central Pierce will have the right to purchase the AOB lot by matching any third party offer—if the City is willing to sell the property on those terms.  A preemptive option benefits both Central Pierce and the City:  Central Pierce can rest assured that the AOB lot won't be sold unless Central Pierce has an opportunity to buy the AOB lot on matching terms.  And, the City will be able to receive and consider other purchase offers during the option period.

In order for the option to be binding, Washington law requires consideration.  The amount of consideration should be a reasonable amount as determined by the Council in its business judgment.  A reasonable amount could be a nominal amount because a preemptive option allows flexibility.  If Central Pierce exercises the option and purchases the AOB lot, the consideration can be applied to the purchase price.
The City could grant a straight option to Central Pierce.  Under a straight option, the optionee (or beneficiary) is granted a time period during which the optionee may exercise the option on the terms that are stated in the option.  Typically, the terms of purchase are described with particularity, and the price is stated as a sum certain or as a formula that allows calculation of a definitive amount.  Or, the option dictates the process by which the price will be established, e.g., “The price shall be the fair market value of the property on the date that the option is exercised, as established by an MAI appraisal obtained by the City.”

Given the uncertainties associated with voter approval of a bond measure, and possible changing market conditions over the course of the summer and autumn, a straight option likely will not serve the interests of Central Pierce and the City as effectively as a preemptive option.

Fiscal Impact
Image, AOB Lot
Option Agreement

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