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New Business 5.
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| Brentwood City Commission Agenda |
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| Information |
| Subject |
| Resolution 2015-40 - Funding Agreement with Charles W. Witherspoon and Brentwood United Methodist Church for Distribution of Proceeds from Sale of Holt Farm Property |
| Background |
The 263.98 acre Holt property on Crockett Road is currently owned by Brentwood United Methodist Church ("the "Church"), which has a 50% interest, and Charles Witherspoon, who has a life estate in the remaining 50%. The Church and Mr. Witherspoon were both beneficiaries under the will of O'Delle K. Holt. Mrs. Holt's will further allows Mr. Witherspoon to sell his interest and use the proceeds at his discretion. Mrs. Holt provided that anything remaining from Mr. Witherspoon's 50% interest in the property would go to the City of Brentwood to be used for building a public library or maintaining an existing library, provided that the library is to be named the “John P. Holt Library.” Should the City choose to forego Mrs. Holt's bequest, the property or sales proceeds remaining from Mr. Witherspoon's life estate would go to the Church.
In 2014, the City signed off on an agreement that would permit the Church and Mr. Witherspoon to sell the Holt property to Pearl Street Partners, LLC. However, Pearl Street Partners chose not to close on the property after its proposal for an OSRD development failed to win approval.
The Church and Mr. Witherspoon have now accepted a new offer and have entered into a contract to sell the property to Mike Ford Custom Builders, LLC. (See separate agenda item for June 8 pertaining to the City's approval of this contract.) The sale price is $10,500,000 (with an additional $35,000 per lot to be paid if a development plan allowing more than 127 lots is approved.) In anticipation of the new agreement, attorneys for the Church and Mr. Witherspoon asked the City to sign a funding agreement that describes how the proceeds of the sale would be distributed. While Mr. Witherspoon could take his 50% of the proceeds in one lump sum, staff has been advised that he wishes to avoid the tax consequences of doing so. Instead, the funding agreement and a separate trust agreement provide that his portion of the proceeds would be put into a trust for Mr. Witherspoon's benefit. (Yet another trust agreement describes how the funds attributable to the Church's 50% of the property will be handled.) Pertinent provisions of the funding agreement include the following:
- The gross sales price from the sale of the property would be reduced by:
- Down payments received prior to closing.
- Closing costs attributable to the sale (title insurance, document preparation, recordation, etc.)
- Attorneys’ fees in the amount of 3% of the sales price.
- A payment of $750,000 to settle a claim asserted against Mr. Witherspoon and the Holt property for work performed on the property over a period of several years.
- Payment of rollback taxes.
- The net proceeds after deducting the above costs would be divided equally between the Brentwood United Methodist Church Foundation and a trust company that would administer a trust on Mr. Witherspoon’s behalf.
- The assets in the Witherspoon trust would be distributed to him at the rate of 6% of their value each year. In addition, the trustee would be authorized to pay out any additional amounts needed for Mr. Witherspoon’s health care and medical needs, up to $100,000 per year. The City would receive an annual accounting of the assets remaining in the trust.
- The City would accept its interest in the Witherspoon trust in full satisfaction of its interest in the Holt Farm under Mrs. Holt's will.
At Mr. Witherspoon’s death, any remaining principal and undistributed income from his interest in the property will be distributed to the City as directed by Mrs. Holt’s will if the City wishes to use the funds for a library to be designated as the “John P. Holt Library.” If the City chooses not to comply with Mrs. Holt’s wishes, these remaining funds would go to the Church.
The proposed funding agreement protects the City’s potential interest in the property by setting limits on the amount of money from the sale of the property that can be used for Mr. Witherspoon’s benefit. Authorization of the agreement will increase the likelihood that the City will have the option to receive a substantial portion of the proceeds from the sale for the benefit of the City's library, as desired by Mrs. Holt.
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| Staff Recommendation |
| Staff recommends passage of the resolution authorizing the Mayor to execute the proposed funding agreement. |
| Previous Commission Action |
In 1994, the Board of Commissioners passed Resolution 94-27, asserting the City's claim to any and all rights, title and interest due to the City under Mrs. Holt's will.
In 2014, the Board of Commissioners passed Resolution 2014-40, approving an agreement to permit the conveyance of the Holt property to Pearl Street Partners, LLC. |
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| Fiscal Impact |
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| Fiscal Impact: |
| One-half of the net proceeds from the sale of the Holt property, along with any earnings, less all amounts provided to Mr. Witherspoon during his life estate under the trust established for his benefit, will be paid to the City of Brentwood for use in building or maintaining a public library, if the City chooses to designate the library as the "John P. Holt Library." A sample calculation included with the funding agreement estimates total net proceeds of $8,700,000, based on a sales price of $10,500,000. The share of the net sale proceeds attributable to Mr. Witherspoon's life estate would be $4,350,000. (See Exhibit C to Funding Agreement.) This does not include down payments (shown on the sample calculation as $400,000), half of which would go to Mr. Witherspoon as part of his life estate proceeds. |
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