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Barryton land sale to marijuana company moves forward - The Pioneer

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BARRYTON – The Barryton Village Council agreed to allow negotiations to move forward with a proposed sale of village-owned land to a marijuana business for a cultivation facility. 

During its recent meeting, the board voted 4-0, with one abstention, in favor. Board president James Soriano abstained, after council members expressed concerns over a perceived conflict of interest, which stems from Soriano’s association with the business — M66 Group, LLC.

Some village residents said Soriano not only rents his home from M66 Group, but also does mowing for them for a reduced rental rate.

“If someone on the council works for one of the businesses or has a contractual relationship, they are supposed to disclose that to the rest of the council,” Big Rapids-based attorney Eric Williams told council. “The council gets to decide if it is or isn’t a disqualifying conflict.”

Williams said if they think they have a situation that is a conflict, they can decide whether they want to go forward. Or, they could, by motion, determine that Soriano should abstain.

Soriano has previously said he does not work for M66 Group and has no contractual agreement with them.

“I lease from M66 Group, which I have been very open about even prior to running in the election,” Soriano said. “I rent a house from them, not on the property in question. I just want it very clear that I do not work for them.”

Regarding the mowing, he stated that he, and sometimes trustee Evelyn Jones, do mow for them, but there is no financial agreement involved.

“There is a lot of the public that feels there is a conflict of interest between you (Soriano) and M66,” trustee Michelle Kundrat said. “I think, to reassure them that there is not, you shouldn’t vote on anything having to do with M66.”

Soriano said if the council felt he should abstain, he would do that.

Kundrat made a motion that Soriano should “abstain from any legal matters regarding M66 Group, LLC.”  The motion passed by a vote of 3-1, with Pro Tem Kathryn Kerr voting "no," and Soriano abstaining.

LEGAL ISSUES DISCUSSED

Council voted to approve the sale of the property to M66 Group for $8,194 per acre, for a total of $119,000 during a meeting in July. However, because the terms of the contract were deemed to be not legal, the vote was made null and void.

“There were some terms that the village council looked at for the sale of the property, a land contract or some type of financing by the village,” Williams said. “That type of term is not legally authorized for Michigan municipalities. There is a constitutional provision that essentially says cities and villages can not loan money or advance credit for any public or private service except where authorized by law.”

The sale of village-owned land to M66 Group has been a point of contention for Barryton residents, with some saying the sales price was too low and others suggesting the village would be better off holding on to the land and continuing to lease it.

Williams said the other underlying issue is whether or not the publicly-owned land has any remaining current or future public use for which the village needs to hold on to it as opposed to selling it.

“Usually, when a municipality get ready to sell land, there is a preliminary finding made that the land no longer has a public purpose,” he said. “That determination is supposed to be made with public notice and a hearing. In this instance, the land is already subject to lease, which suggests that you (council) had already decided that the land didn’t need to be held for a public purpose.”

The property in question, a total of 21 acres, was purchased from the USDA for the purpose of installing a sewer system for the village.

Soriano explained there was a lot more acreage acquired than necessary based on the sewer ponds that have been built.

“Over the last couple of decades, this same property was leased out as farmland,” Soriano said. “It has been leased out by prior councils for some time.”

Williams said the most common way for a municipality to sell what it has determined to be surplus property is through a public bid, which does not typically “net top dollar.”

“To avoid controversy and questions about what kind of deal is being made, the easiest way to conduct the transaction is to offer the land for public bid,” he said. “If you get caught between different parties about whether the sale is right or wrong, one of the ways you can address that is by public bid. It has a sanitizing affect where it gives everybody an equal chance to buy it.”

He said if the land is currently leased, then the bid for sale would need to be subject to the terms of the lease.

“With the two entities already in a lease situation, if you put it out to public bid, the only entities that will have any particular reason to bid is going to be those existing tenants,” he said. 

TWO LEASEES SPEAK OUT

Currently, M66 Group leases 14.5 acres for $8,000 per year, two acres is under lease to Vivid Farms Cannabis Company for $2000 per year, and six acres are part of the sewer system.

M66 Group made an offer to purchase the 14.5 acres currently under lease for the purpose of expanding their cultivation operation and establishing a processing center, but residents balked at what they perceived as a “low-ball offer.”

Joanna Stevens, a lawyer for M66 Group, addressed residents’ concerns in a letter to the council, stating there are several factors to consider when determining land value – location, nearby features, size and condition, and purpose and timeline.

“The location and nearby features are essential factors, including proximity to large populations, infrastructure and the state border,” she said in the letter. “Size and condition have an impact as well. Large grow operations require larger areas than retail operations.
Other important factors to consider are if the land is already commercially zoned, cleared and has municipal permits attached to them.

“Buyers who must change the zoning, acquire the permits and clear the land will not pay the same amount per acre as purchasing property already zoned and cleared and permitted,” she said. “M66 Group is the buyer in this situation that is putting in the time, sweat and money to facilitate the value increase.”

Stevens suggested a lease with a purchase option would be the best way to move forward with the sale.

“We believe a lease to buy will address the concerns raised by citizens and council members regarding the need for immediate and long term funding and settling the USDA loan,” Stevens said. “Continuing to lease, rather than sell, gives a false sense of increased profit for the village. The rent payment on the lease does not reflect changes in the property value. The rate of taxes reflects the change in property value and is adjusted yearly. The village limits its income stream if they do not sell the land and continues to lease it.”

The proposed lease would include a $10,000 deposit, monthly lease payments and a final balloon payment minimum of $25,000, the letter stated.

“The $25,000 balloon payment will be in addition to the agreed upon price of $119,000, making the total purchase price $144,000, Stevens said. “In addition, upon closing, the village will start to collect property tax revenue on the 14.5 acres, which, once no longer zoned agricultural, will increase with valuation and inflation.”

Tyler Dutcher, co-owner of Vivid Farms Cannabis Company, expressed concern that the sale of the 14.5 acres to M66 Group would interfere with his lease.

“I was under the impression that you were going to split the property and their part of the land would be sold to them and our part to us,” Dutcher said. “We don’t want our land to be sold to them. The fear is that they are going to take over our lease.”

Soriano assured Dutcher that was not the case, saying, “That is not even an entertained thought here. The thought is that we would give you the option to buy your property, just as the M66 Group is for theirs.”

Soriano said if council voted to move forward with the sale of the property to M66 Group, a professional survey would be done to determine accurate property lines.

Stevens said she felt there was a lot of confusion regarding the sale of the property for a lot of people, emphasizing that the two parcels are unrelated.

“The two sales are unlinked and unrelated," she said. "There is nothing about the sale of the 14 acres to M66 Group that would in any way affect the two acres that you (Vivid Farms) lease and could potentially buy on your own.”

Another issue of concern expressed by Dutcher was if the issue of conflict of interest created some legal problems down the road.

“My concern is that later on, I don’t want this to come down on us if we make a deal at the same time as the M66 if, legally, they get in trouble or this council gets in trouble over a conflict of interest,” he said. “Our lawyer said it is a liability to get involved with the conflict of interest and take a low deal.

 “We would do everything we could to get the property, but we don’t want anything to do with their land, or anything to do with them whatsoever,” he said. “We want to negotiate outside of what M66 is doing.”

MOTION TO CONTINUE NEGOTIATIONS

Following public discussion, Soriano asked the board how they would like to move forward on the proposal from M66 Group to enter into a lease with the option to purchase.

“I can’t tell if the collective council wants to go forward or just stop the deal,” Williams said. “I can’t tell if you want to see this go forward and have me work on it so you can vote it up or down, or if you are really just postponing it to tell these people that you are not really interested in selling.

“If you do not have enough people on the council to go forward with either a sale or a lease with an option to buy, you might as well tell these people that and not have them keep coming back with proposals,” he added.

Kerr made the motion to continue negotiations for the lease purchase proposal, with the added condition that it include a timeline for development of the property.

Kundrat added that she would like to start the per acre price negotiations at $20,000, rather than the proposed $10,000, and start with the purchase of a smaller portion of the land.

“That is what I was thinking,” Jones said. “Lowering the amount of property to start, and see where they go with it, with the option to continuing buying the rest. It would show good faith to the people in the village that you mean what you say.”

Williams said all of the items brought forward – a graduated process by which the option to purchase would have to come over time corresponding to development and a higher per acre price – seemed like important issues that could be discussed in the negotiations.

“That is all helpful, and I will have to talk with them about how we would structure that and how that works for their business and still meets your concerns,” he said. “That will give us something to work on.

“There is nothing that you have said that seems outrageous,” Stevens added. “Of course, we would have to work out the details, but nothing seems out of reason.”

A final proposal will be presented to the council once the negotiations have completed, at which time they will vote on whether to proceed with the sale of the property.

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