Submitted By: Aubrey Hale
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Presentation By: Aubrey Hale
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Department: Electric Utility
STAFF RECOMMENDATION (Motion Ready):
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Property exchange agreement between the City and Ocala SE 8th Street, LLC
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OCALA’S RELEVANT STRATEGIC GOALS:
Operational Excellence, Economic Hub
PROOF OF PUBLICATION:
N/A
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BACKGROUND: Staff proposes the exchange of a 2.18-acre parcel owned by Ocala 8th Street, LLC (122 SE 8th Street) for a 2.08-acre portion of a 2.7-acre parcel (PID - 28597-000-00) owned by the City. Both parcels are located west of the intersection of SE Third Avenue and SE 11th Street. The City acquired the 2.7-acre parcel in 1971 from the railroad company formerly known as the Seaboard Coast Line Railroad Company. The City continues to operate the Leo White electric substation at this site, serving large-scale users such as AdventHealth Hospital, HCA Florida Ocala Hospital, and a large portion of Downtown Ocala. The surrounding properties to the west and south are zoned O-1 (Office); to the east, B-2 (Community Business); and to the north and east, form-based code (FBC).
The parcel the City proposes to exchange with Ocala 8th Street, LLC includes two 15-foot easements along the north and south boundaries of parcel 28597-000-00. These easements are needed to provide underground electric service to the surrounding areas. The City of Ocala property is zoned O-1, and the Ocala 8th Street, LLC property is split-zoned; 1.82-acres zoned B-2, and 0.36-acres in the northern portion zoned FBC.
The Leo White Substation is a critical asset that supplies most of the power to the Central Core/Downtown Ocala area. This substation is approaching the end of its life and will need to be upgraded and expanded to continue meeting the power needs of the growing downtown area. The substation decommissioning is an extensive process that can take several years to complete. A new substation must be constructed before the decommissioning to allow power to be transferred without overtaxing the overall power system. Staff estimates the total construction and decommissioning of the existing substation will take three to four years.
This property exchange agreement is accompanied by a lease agreement that memorializes the anticipated decommissioning process. The lease agreement provides the City a four-year term at a rate of $1 per year. After the four-year term, subsequent one-year renewals will be permitted, starting at $50,000 per year, with a 1.05 percent annual increase.
FINDINGS AND CONCLUSIONS: The City needs to expand and upgrade the existing substation to continue to meet the needs of the growing downtown area. An expansion to the eastern frontage would be required under the current site configuration, as the City parcel fronts on SE Third Avenue, a primary southern entrance to Downtown Ocala. The Ocala 8th Street, LLC parcel has limited frontage along SE First Terrace, a road that ultimately terminates halfway through the parcel.
The City parcel offers a significant opportunity for future development, which leads to higher ad valorem returns. In contrast, the exchange parcel is better suited to a utilitarian purpose, as it is bordered by existing industrial property to the west and by a railroad that prohibits access from the west and south, further limiting access to the parcel.
The City parcel and the Ocala 8th Street, LLC parcel were both appraised in late 2023. The per-acre cost for the City parcel is $210,000, while the Ocala 8th Street, LLC parcel is $155,000 per acre. City staff and Ocala 8th Street, LLC have coordinated on the timelines for the exchange agreement and the lease terms and conditions. Staff is committed to a three to four-year construction and decommissioning process for the substation. Lease provisions have been put in place to accommodate any delays.
Staff recommends approval of the proposed property exchange and lease agreement to capitalize on the greater development potential and allow for an expansion and upgrade of the Leo White substation.
FISCAL IMPACT: Minimal funds will be exchanged by the parties, including closing costs, recording fees, and $4 for all four years of the lease. If, after four years, the lease must be renewed due to delays in decommissioning, an annual expenditure of $50,000 will begin in the fifth year of the lease. It will increase by 1.05 percent each year until the decommissioning process is complete. Staff has coordinated with the Marion County Property Appraiser and determined that property taxes will not be exempt due to the change in ownership but will be greatly reduced due to the presence of the existing substation. Upon completion of the decommissioning, the lease term will be terminated.
PROCUREMENT REVIEW: This property swap complies with the City’s procurement policy.
LEGAL REVIEW: This agreement has been reviewed and approved for form and legality by City Attorney, William E. Sexton.
ALTERNATIVE:
• Approve with changes
• Table
• Deny