Community Library Committee Report

D. Acquisition

Members: Susan Kinsella (Coordinator), Priscilla Ciccariello, Gail Slevin, Gloria Primm Brown and Greg Ferraris (JJML Board President)

Introduction

At the CLC’s meeting of Saturday, January 21, 2006, a decision was made to form an Acquisition Working Group. Noting that a conference on the Morpurgo property (6 Union Street) was scheduled for Wednesday, January 25, 2006, there was concern about whether the JJML would be in a position to bid for the property if and when it came up for auction.

Our Working Group’s purpose was to determine the feasibility of acquiring the Morpurgo Property, and if determined to be feasible, present the plan of action that would need to be followed to execute the purchase (bid at auction). Information was gathered and a meeting of the Working Group was held at Greg Ferraris’ office on Friday, January 27, 2006 at 4:00p.m. Present at meeting: Susan Kinsella, Priscilla Ciccariello, Greg Ferraris, Gloria Primm Brown, Fred Stelle, and Laurence Rossbach of the John Jermain Future Fund (JJFF) (sitting in for Gail Slevin). We were joined at 5:00p.m. by Seamus Doyle of the Bridgehampton National Bank.

Funds Needed to Purchase Morpurgo at Auction

On Wednesday, January 25, 2006, Judge Whelan required a new order to be written for a “forced sale” on the Morpurgo property. The order will ask for a new auction date and set a new minimum price for the property. According to Helga Morpurgo and Andrew Towner, Helga’s attorney, the minimum bid will be set at $1.6M. (At the May 2004 auction, 10% cash in hand was due at auction and the balance due in 30 days.) To finance the purchase, Bridgehampton National Bank (BNB) would require $400,000 from private funds with the balance of $ 1.2M being financed, assuming an appraised value of $1.6M. Many people maintain that the Morpurgo property is being auctioned at an above market price, based on the existing condition of the property and the lack of an offer at the last auction. If this is the case, BNB would require additional collateral, i.e. the existing JJML building. If a minimum bid is not offered at this upcoming auction, this court action would be concluded. However, future actions by the court are a possibility.

Timing of Auction

Andrew Towner had initially indicated that the auction would occur no sooner than May 2006. Ted Seiter, the real estate agent representing the Morpurgos in the sale of the property, had indicated that the judge would not look at the case again until May, and it is questionable whether he will issue a new auction date at the May court hearing. The judge has set a Compliance Conference for May 31, 2006. This is a status conference to monitor the various lawsuits between the Morpurgo sisters. The auction date is still undetermined. It took 9 months for the property to go to auction after the judge’s initial ruling.

Status of the JJML Board on the Purchase of the Morpurgo Property

Currently, the JJML Board lacks the net assets (unrestricted fund balance) to purchase the Morpurgo property. The JJML Board has a fiduciary responsibility to not incur debt or liabilities which it may not be able to fund. A bid on the Morpurgo property without collateral guarantees would defy that responsibility. There are numerous risks including personal liability for the JJML Board Trustees. It is the consensus of the JJML Board to not make a bid on the Morpurgo property, or entertain any financing arrangements, until the CLC completes its purpose, renders its recommendation, and the public passes the desired referendum.

Acquiring Morpurgo

If the JJML Board makes its decision prior to the Morpurgo auction, and that decision includes pursuing the purchase of the Morpurgo property, the JJML Board would have to contract with the Morpurgo sisters for the sale of the property. The contract would have to be contingent upon the passing of a referendum. The JJML Board would then go to the voters with a referendum to purchase the Morpurgo property based on the minimum bid of $1.6M, or some agreed upon price less funds provided by the JJFF. After purchasing the property, the JJML Board would have to go back to the public with an additional referendum to complete the project.

Morpurgo Goes to Auction Prior to Referendum

If the Morpurgo property goes to auction prior to the passing of a referendum supporting the necessary funds, the minimum purchase price of $1.6M would have to be funded by charitable donations.

Mission and Status of John Jermain Future Fund (JJFF)

Currently the mission of the JJFF, a 501(c)(3) not-for-profit organization, is to assist the JJML Board to expand its physical quarters in order to serve the growing community. The organization was formed for the sole purpose of raising the necessary funds for the acquisition of real property contiguous to the current location of the existing JJML building. The JJFF has both cash in-hand and pledges. Two potential donors did come to the JJFF offering up to $1M in the form of a loan to be repaid through the referendum process if the JJML Board agrees to pursue the purchase. The JJFF will not entertain a bid on the property without a recommendation of the CLC to purchase the property and the adoption of that recommendation by the JJML Board. If possible, the JJFF would purchase the property on behalf of the JJML Board, but not in the name of the JJFF. The JJFF currently does not have the funds to purchase the property.

Procedure for Referendum

After the CLC makes its recommendation to the JJML Board (and the JJML Board hopefully adopts that recommendation), the JJML Board would then approach the School District (Kathryn Holden, Superintendent or Walter Tice, President, Sag Harbor Board of Education) with the agreed upon referendum. The Board of Education would review the referendum to ensure that its purpose is within the power of the voters. With that determination, the BOE would call, give notice and conduct a special meeting (referendum) of the qualified voters of the school district. Notice of the referendum must be published 4 (four) times within the seven weeks preceding the vote, the first publication to be at least 45 (forty-five) days before the vote. The notice is required to be published in two publications (since two are available) having general circulation within the school district. Thus, this process will take a minimum of 7 weeks. Within this time, voting machines would need to be ordered and the District would have to file an application with the Board of Elections. The cost of the referendum, $5,000 – $7,000, would be borne by the JJML.

Feasibility of Purchase

If a referendum appropriating the funds to purchase the Morpurgo property is passed, there is no question as to the feasibility of purchasing the property. With the guarantee of taxpayer dollars, several financing options are available to the JJML.

Additional Information

Morpurgo purchase vs. 425 Main Street purchase
The purchase of Morpurgo differs from the purchase of 425 Main Street (adjacent to Mashashimuet Park) for three reasons:

  1. The cost of 425 Main Street was significantly lower at $440,000, with closing costs of $4,500.
  2. The Library was able to finance 100% of the purchase price of the property because the appraised value exceeded the purchase price. (Closing costs were paid out of the JJML capital fund.)
  3. 425 Main Street could produce rental income to offset the financing costs until the public passed a referendum.
  4. Value of Morpurgo

    No parties have recently appraised the Morpurgo property, and our Working Group sees no reason to have one performed at this time. The JJML Board had Morpurgo appraised in 2002. The appraised value came in at $750,000. The JJFF had an appraisal done in 2003, which came in at $550,000. The JJFF made an offer of $895,000 on the property, which was rejected.

    No purchase of Morpurgo

    Questions were raised about the JJFF monies if the purchase of Morpurgo was deemed unnecessary. Could the funds possibly be used for the changes to the existing building or even expansion off-site? The donors would have to agree to any change in the use of the funds raised for the purchase of property. The JJFF would have to adopt a by-law change and obtain NYS Attorney General’s Office approval for the change.

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