At a special meeting Tuesday night, the Lenexa City Council approved two ordinances allowing banks to foreclose on their properties at the City Center East development.
The approval allows the banks, Brotherhood Bank & Trust and BB Syndication Services, to foreclose the properties they own and to exchange the titles to the properties with the city for an economic development grant in the amount equal to the delinquent taxes owed on each property.
The city’s plan for City Center began a decade ago, but since the economic downturn began, the development has struggled.
The city gave Johnson County developer Ralph Varnum $5.3 million in tax increment financing to begin construction on City Center East, on the southeast side of Renner Road and 87th Street. In 2008, construction halted in a bankruptcy case. Since then, Lenexa has accrued about $500,000 a year in debt. Added to that is about $3 million in property taxes that has not been paid on the bankrupt lots.
The City Council had limited options to cut losses. It faced the decision to either let the properties go up for sale through the banks or reach an agreement to acquire the titles to the land outright.
“I think this is our only option. I really do,” said council member Lou Serrone.
Brotherhood Bank & Trust holds the titles to Lots 4-8. In the ordinance agreement, the city will pay the county special assessment taxes on the properties, which total $2,128,528. City administrator Eric Wade said the city has already paid the assessment taxes. The bank will pay delinquent property taxes of $115,645.
The city plans to sell the properties to developers. If this happens within two years, the city would pay the bank 25 percent of the sale price, or a maximum of $200,000.
The title to Lot 1, where a half-constructed parking garage is located, is held by BB Syndication Services. In a similar deal, the city will pay the special assessment taxes totaling $947,949. The bank will pay delinquent property taxes of $77,683.
If the city sells Lot 1, the city will pay BB Syndication Services 20 percent of the sale price, or $400,000. The percent of the sale will go down 5 percent for each year the property is not sold.
City staff struck the third motion of the meeting from the agenda early Tuesday. The motion was to grant pharmaceutical company B.E. Smith an economic development grant to relocate into Lots 2 and 3 in City Center East.
Wade said there are still things to be worked out between the city and B.E. Smith.