The City of Shannon Hills purchasing land from the Mayor Mike Kemp does not have the greatest optics. There was an obviously conflict of interest and to be open and transparent an extraordinary effort for public disclosure prior to the sale should have been made. To avoid this kind of issue, the City actually has a policy that requires extraordinary public notification if a member of the City Council or Mayor is purchasing property/equipment from the City [Source]. Technically this policy did not apply, since the City was the one making the purchase. Regardless if it is required or not a extraordinary public notification should have been the default.
From the City Council minutes [Source], it appears the purchase of the Kemp property was first presented and approved at the same September meeting. The Mayor presented the City Council with a resolution that waved an assessment to determine the value of the property to “save the cost”. In general with a low sale price like $5,000, waving an assessment to save cost could be a good idea. However, in this case, Mayor Kemp had a conflict of interest and he was the one that set the purchase price.
In addition, Mayor Kemp does not have the cleanest slate with fair sale prices for the City. Back in 2005 when Mayor Kemp was Alderman Kemp the City purchased land from him that had Ross Road. The purchase was pushed by then Mayor Davis as being needed to facilitate future annexation of the area and to allow for a direct connection to Heinke Road and Chico Road. However, neither the annexation nor the connection ever materialized.
Mayor Davis presented the proposed purchase price of $10,000 to be "well below market value". However, this valuation turned out not to be close to right, the City’s own assessor later put the value of the land closer to $5,000 [Source], which was later supported by the Arkansas Legislative Joint Audit Committee’s findings [Source]. The issue was significant enough that the matter was turned over to Saline County Prosecutor Ken Casady [Source]. No charges were filed and the official prosecutor's office response was "The City Council ratified these actions and apparently agrees that the value of the property to the City justified the purchase price" [Source].
I don’t doubt the Prosecutor determination that there was no criminal intent, I don’t agree with the prosecutor's statement that the City Council “apparently agrees that the value of the property”. The City Council minutes [Source] clearly indicate the City Council never approved the purchase price. The City Council voted to allow Mayor Davis to negotiate on behalf of the City. I never met Mayor Davis, but from what I do know of him I don’t have much trust that he always acted with the best interest of the City. Around this time the City had multiple conflict of having interest sales [Source] that were also turned over to the prosecutor’s office for investigation [Source]. In 2009 Mayor Davis stepped down from office as part of his plea deal as a result of an investigation by the FBI into the City finances [Source] and others in his administration were convicted of embezzling from the City [Source].
I asked Mayor Kemp about my concerns and he was gracious enough to meet me at the property and talk about the purchase of the Kemp property. Below is a summary of my questions and his responses.
I asked about the apparent overpriced sale of Ross Road back in 2005: Mayor Kemp explained that was 14 years ago and that the “Ross Road” was really just a pig trail. There had been some heated debating and contention over the road and he was willing to end the issue by letting the City buy it. However, he was not willing to split his property in two pieces for anything less than the price he asked. He said if he did not sell it to the City, he would likely have closed the road.
I asked what the public use there is for the recent purchase of his property: Mayor Kemp explained that in the short term little would need done to make it an overflow parking lot for the Shamrock Park. It would be ideal for event parking, for example during Fall Feast. The Mayor has some great ideas of how the lot could be used in the coming years, but there is no written plan and he stressed all the ideas are years away. The ideas require both federal and state grant applications to be approved.
I asked how he insured that the public got a fair price for his property: Mayor Kemp showed me the properties the City has acquired nearby and explained the situations around each one. He also explained that he did not believe he had profited off the sale. Over the years he had paid property taxes and had spent several hundred dollars to clean up property.
I asked about the trees that recently were cleared at the property and if the City was able to sell them: Mayor Kemp explained that given the very small acreage the City cannot find anyone willing to pay for the timbers. The City ended up giving them away, rather than paying for them to be landfilled or having a fire that burned for days.
With the little bit of history as backdrop, I thought that Mayor Kemp’s explanations warranted extra information. Below are my opinions on the property purchases:
The sale of Ross Road back in 2005. City’s involved in small land sales, often are willing to pay above market value. This is because the City often “needs” the land for a project and will use eminent domain if it must. However, the legal cost of using eminent domain can be significant, so landowners can often get above market prices because they know the City is willing to pay to avoid eminent domain. You can see the current land owners that are holding up the stoplight project at the corner of County Line and Vimy Ridge trying to play this game right now. This is a likely explanation of why Alderman Kemp got a premium for his property. However, an Alderman on the City Council should never have been paid above market value by the City.
Is there an immediate need for the Kemp property near Shamrock Park? In my opinion, there was no current need for the Kemp property. The Dunnahoo property across the street and Larosa property just down the road are both owned by the City and could also be used for event parking.
Is there a long-term public need for the Kemp property? That is debatable. The Kemp property is in a floodplain, which means it cannot have any new structures built on it. That really limits the future utility of to the City. The Mayor does have several good ideas for the Kemp property for the Park District. The Kemp property is well placed to integrate with the existing Parks District. However, the City already owns several acres for future growth of the Park District. It also has a grant application submitted to acquire up to five more lots. The City does not require more land to develop the Park District. If the City never acquired the Kemp property, none of those good ideas would be in any jeopardy. Further, the City has a history of buying land that it never uses. The City has at least 10 parcels and over 50+ acres of unused land that could it might use someday. However, there is no written plan for these parcels and any ideas are years if not decades from fruition. Further these idea’s have a real possibility of never happening.
Did the City get a good price for the Kemp property? In my opinion the answer is no. By my estimation, explained below, the City overpaid around $1,400 - $2,000 market price. The easiest way get a good idea of the market price is to look at the appraised value of the land. However, as explained above no appraisal was conducted. Now I am not an assessor, but we can look at comparable properties the City has bought recently to get a close to true market value of the Kemp property. The City has made five purchases recently that could be considered comparable. I am not going to get into the situation specific details of each sale, but I did want to mention that the City needed the Larosa property for a drainage project and was likely willing to pay a premium for it rather than using eminent domain. If we ignore that property, the highest price per an acre the City has recently paid is $7,792 per an acre. Using this price per and approximately 0.46 acres, the Kemp property was worth about $3,600. Unarguably, the Donnhoo property is the most comparable property to the Kemp Property. It across the street from the Kemp property and very similar characteristics and utility to the City. Using the Donnhoo price per an acre the Kemp property was worth $3,000.
Now, the Kemp property may one day be the crown jewel in the Park District. But given the clear conflict of interest more should have been done to make sure the City paid a fair price, that the public was informed, and that the transaction was transparent. In addition, the City Council should stop using public funds on property that it does not have at least a written plan for the specific future public use and a strategy to acquire funds for that use. The City should not be in the business of land prospecting, it is not in the public’s best interest.