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2025-031 Burch Property February 14, 2025 Report No. 2025-031 INFORMAL STAFF REPORT TO MAYOR AND CITY COUNCIL SUBJECT: Denial of a request to enter into a lease agreement on property located at 4420 Country Club Rd, currently under contract for the City to purchase for a future wastewater treatment facility. EXECUTIVE SUMMARY: City staff met with representatives from ResponsiveEd Texas, operator of"Denton Classical Academy" (Elementary School), on Wednesday February 12, 2025 to discuss permitting for their new school. ResponsiveEd Texas again asked the City to consider entering into a new lease for the operation of a school ("School Lease") on 3.896 acres out of 6.125 acres of land for which the City of Denton is currently under contract to purchase for$1,900,000.00 from Richard Lee Burch (Ordinance No. 24-1090) ("Contract"). ResponsiveEd Texas' current lease is with the owners of the property (Richard Lee Burch) and is set to expire in June of 2025. The representatives from ResponsiveEd Texas stated that their new school at a different location will be constructed within 12 months and City staff do not feel that is a realistic timeline due to observed durations on other commercial developments of similar scope and size. During the meeting on February 12, 2025 Development Services again committed to helping ResponsiveEd Texas find available space to occupy while their new school is constructed. The request to provide a School Lease was previously unapproved based on the City obtaining the property free and clear as required in the Contract and the City's need to timely possess the property to both design and construct the Hickory Creek Wastewater Treatment Facility,utilize the property for temporary office space during the renovation of the Denton Service Center, and liability concerns associated with a School Lease on City property. BACKGROUND: This site is being evaluated as a temporary office location to house Water Department staff during the remodel of the Service Center and is essential for the construction of the Hickory Creek Water Reclamation plant as detailed in the Wastewater Master Plan adopted last year. During negotiations to purchase the subject property and adjacent property, the property owner notified the City that their tenant, ResponsiveEd Texas (operating as Denton Classical Academy), was in the process of constructing a new building and would be relocating their operations to its new facility prior to the end of their existing lease in June 2025. However, ResponsiveEd recently submitted a site plan that differs from a plan originally approved in 2020. The new plan triggers a new round of reviews for compliance with the Denton Development Code. It is the staff s opinion that if the lease were to be extended, there would be no guarantee that ResponsiveEd could complete construction of their new school and vacate the current site that is needed for occupancy by the City's Water Utilities Department staff while the Service Center is being remodeled in 2026. February 14, 2025 Report No. 2025-031 The City and property owner were intentional in their efforts to include contract terms that would allow the property owner to honor its existing lease to ResponsiveEd Texas. The negotiations included re-surveying and subdividing the 6.125-acre lot into two separate tracts: one being 2.233 acres and the other being 3.896 acres. This allowed the City to take title to all remaining property exclusive of the tract under the lease where the school is located. The Contract stipulates that the City will not close on the purchase or take possession of the remaining 3.896 acres of land until after the lease expires in June 2025 and the tenant vacates the property. Taking ownership and possession of the property as planned supports the adopted wastewater masterplan and supports continued growth in this basin along with providing a temporary office location during the upcoming Service Center remodel. DISCUSSION: Water Utilities plans to start developing the project post-closing in 2025. The initial use will include expanded office space for administrative and operational uses. Several entities have expressed interest in participating in a regional biosolids handling program that will directly tie into the expansion of the DynoDirt program with the Burch Property being the primary, centralized, location for this expansion. Development of the Hickory Creek Water Reclamation Plant will begin in the 2028-2030 timeframe, and any impacts to the scheduled development and construction of the Hickory Creek Water Reclamation Plant will have cascading effects on the development of the entire Hickory Creek Basin (which includes both the Hunter and Cole developments) due to treatment capacity constraints. Failure to purchase this property will result in a redesign of the plant footprint which will negatively impact operations and cause delays. The treatment facilities will be placed North of the school site and the Biosolids handling will be placed South of the school site, essentially surrounding the property with wastewater treatment facilities. Failure to purchase the property will result in a redesign of the layout of the water reclamation facilities placing them closer to Hickory Creek. This will result in at least a two-fold increase in the cost to construct the plant. Alternative administrative office space will be necessary starting in 2025/26 due to the renovation of the City's Service Center at 901 Texas Street. If this property is not able to be utilized for administrative offices the Utility may be forced to look elsewhere for temporary office space which will have an unknown financial impact. CONCLUSION: The decision to deny the request for a School Lease is based on the City's need 1) to timely possess and occupy the property as a result of Water Utilities staff being displaced during renovation of the Service Center, 2)to commence with development of the property according to the Wastewater Master Plan developed and adopted by Water Utilities, and 3) the risks and liabilities associated with a school lease on City property. STAFF CONTACT: February 14, 2025 Report No. 2025-031 Stephen Gay General Manager of Water Utilities & Street Operations Stephen.Gay@cityofdenton.com (940) 349-8086 REOUESTOR: STAFF TIME TO COMPLETE REPORT: 2 HRS PARTICIPATING DEPARTMENTS: Water Utilities, City Attorney's Office, Real Estate