Despite budget woes and council questions, Payson last week took the first step toward buying 13 acres of prime industrial land next door to the airport — in hopes of becoming a landlord.
The town council, on a 6-1 vote, approved spending $520,000 to buy about 3.25 acres — plus a $113,000 annual option payment so it can eventually buy another 10.5 acres with federal grant money.
Councilor Richard Croy sharply questioned the deal, saying the town should wait until it actually has the hoped-for grant from the Federal Aviation Administration. Even if the FAA does eventually pay the town back the $520,000, Payson might not ever recover the annual option payments.
Instead, Croy said, the town should wait for the grant and use its power to then condemn and acquire the land at fair market value.
“I don’t see any great advantage to the town” in making the first payment now — and then paying for an option in a contract that doesn’t require the seller to count the option payments toward the eventual purchase price.
In fact, the whole arrangement basically obligates the town to buy the land even though the value of the land hasn’t yet been established through an independent appraisal approved by the FAA, he noted
The complicated transaction is part of a 220-acre land exchange around the airport, which will include industrial, apartment and residential developments. The owners of the land exchanged recently with the Forest Service are currently seeking a General Plan Amendment for the parcel, which is now the largest, privately-owned chunk of undeveloped land in Payson.
The action at last Thursday’s council meeting involved a 13.5-acre chunk of the exchanged land wedged between the airport runway and Airport Road.
The town has already gotten approval from the FAA for an airport master plan that would build “airport related” businesses in that area. The general plan amendment would shift and straighten Airport Road, to create a strip of light industrial zoning. This prime 13-acre parcel would provide space for businesses that wanted to take advantage of the industrial zoning and perhaps the ability to move products and materials by air.
Council members said the town has no specific use for the 13 acres, but two businesses have already expressed interest in leasing land at the site. Presumably, the land would eventually be owned by the Airport Authority, providing income from rents to support the airport operations.
But in the meantime, a slowdown in FAA grants and a town budget crisis have created a dilemma for the council.
Ordinarily, the town would wait until it had a grant from the FAA in hand before buying land. The FAA grant would cover almost the entire cost of such a purchase — with the town paying about 2.5 percent. However, the landowners asked the town to act as soon as the land swap went through, rather than wait for the FAA money.
That created certain risks for the town. For instance, the town can’t determine the price of the land until the FAA contracts for an independent appraisal. Moreover, the FAA might not be willing to pay for the option payments that prevent the current owners from selling to anyone else, said assistant town attorney Tim Wright.
Moreover, the land purchase came at a bad moment from a budget point of view. The stagnation of sales taxes and the near disappearance of impact fees from new growth spurred a budget crisis this year. Payson canceled virtually all capital improvements, including several street rebuilds in the pipeline for years. One of the few major capital projects that survived the budget shakedown was the $520,000 upfront payment for a chunk of the airport land.
Croy doggedly challenged the need for the deal right now.
When other council members expressed concern the owner might sell the land to someone else, Croy noted that the town could always condemn the land and acquire it at a price set by an independent appraiser.
“If this economy doesn’t turn around,” Croy noted that the town could find itself without the money to pay for the property and the FAA might never fund the promised grants. In that case, the town could waste hundreds of thousands of dollars and still not end up with land it could lease effectively.
“If we don’t spend the $520,000 on this — it’s available for other purposes,” said Croy.
Just about two months ago, the town adopted a budget for the current fiscal year with an almost non-existent reserve fund, despite warnings from the chief financial officer that the lack of any reserves could create problems later in the year.
However, none of the other council members shared Croy’s concerns.
“Do we have a real risk of losing this property if we don’t act now?” Councilor John Wilson asked Wright.
However, Wright said the town could always condemn and acquire the property later — even if it had been sold to another owner.
Councilor Mike Vogel said he disliked using the town’s power to condemn and force the sale of private property.
Besides, he said, “if we sit on this for two years — the value of that property could go up. It could be $600,000,” for the 3.25 acres the town would be buying.
“But we would only pay 2.5 percent of that increase,” persisted Croy.
He noted that the town would essentially be fronting about one-fifth of the total purchase, without any assurance the FAA will eventually reimburse it.
But Councilor Michael Hughes said “if we go ahead with this now, it will put us in a higher priority to get an FAA grant.”