Bidding for Farmland
Here’s a look at how a bid to purchase the Farmland Industries site would work:
-- The city is not proposing to actually pay any money for the site. Instead, the property could come with as much as a $10.5 million trust fund to clean up the property. The city’s bid is based on how much of that trust fund it would take, and how much it would leave for the bankruptcy trust.
-- The bankruptcy trust will review the city’s bid in the next several weeks. It will make a decision on whether to recommend that the bid become the opening bid in a public auction conducted by the bankruptcy court.
-- If the court agrees to conduct the auction, other interested parties will be allowed to submit bids. The party that agrees to leave the most money in the trust fund is declared the winner.
City commissioners are making another push to buy the environmentally contaminated Farmland Industries property to convert into a new business park.
At their meeting tonight, Lawrence city commissioners will consider authorizing staff members to submit a new sealed bid for the 467-acre piece of property that currently is tied up in bankruptcy court.
“I’m convinced that Farmland needs to be the focus for our future job creation efforts,” said City Commissioner Boog Highberger.
But the site — just east of the city limits on Kansas Highway 10 — comes with the risk of the city being stuck with a sizable bill to clean up decades worth of environmental contamination at the former fertilizer plant.
When Farmland Industries filed bankruptcy in 2002, the company was required to set aside money for environmental cleanup of the property. Currently that trust fund contains $10.5 million, but the Kansas Department of Health and Environment is now estimating it will cost $12 million over 30 years to clean the property of soil and groundwater contamination.
And thus far, the state has rejected a request by the city that a cap be placed on the total amount of money the city would be required to spend on cleaning the property.
City Manager David Corliss said the city’s new bid would make it clear that the city would assume the liability for cleaning up the property, something the previous bid by the city did not do.
Corliss said that makes it possible city taxpayers may have to contribute to cleanup costs in the future, if the trust fund money isn’t adequate to complete the project. But several commissioners have expressed optimism that the cleanup could be done in phases and with city crews so any shortfall in funding would be minimal.
City leaders also have said some of the property could be sold to potential business users relatively quickly, which would give the city a source of revenue to fund any shortfall. The state estimates that about 300 acres of the site already is environmentally clean.
A larger question, though, may be whether the city can afford to extend infrastructure — roads, sewer and water service — to the site. Cost estimates for the infrastructure improvements have been sketchy, but Corliss said it is possible that they could run $10 million to $15 million over 30 years.
But Corliss said some of the infrastructure could be done in phases, and some parts of the property could be developed with relatively minor infrastructure improvements. The southern part of the property, for example, already is served by Kansas Highway 10 and has access to some water and sewer service.
City Commissioner Mike Amyx said he wants more discussion about how the city would pay for future infrastructure costs. The city’s finance department has estimated the city can issue about $5 million in debt annually without requiring an increase in the city’s property tax rate. Whether that would be enough to fund the Farmland project and other capital improvement projects in the city is an open question.
“Let’s face it, we’re not going through the best of times right now,” Amyx said. “We do need to understand what the impacts will be in future budget years.”
Commissioners meet at 6:35 p.m. today at City Hall, Sixth and Massachusetts streets.