The terms of a rental agreement between the city of Washington and a local farmer could hinge on a 2004 handshake.
On Monday, Oct. 28, former Washington Mayor Dick Stratman and Kenny Riegel, with Riegel Farms Inc., formerly Riegel Dairy Farms LLC, recollected a verbal agreement between the city and the farm concerning the rental of 240 acres of farmland in Warren County adjacent to the Washington Regional Airport.
The agreement was made following a settlement between the entities to avoid a court battle so the city could purchase acreage for future expansion of the airport.
During Monday’s council meeting, both Riegel and Stratman said they agreed in 2004 to give Riegel Farms right of first refusal, which allows the farm to match any higher bid and then award them the lease.
See a related story in this issue of The Missourian.
The men said the agreement gave them the right for perpetuity — until the city builds on the land or the Riegels choose to not bid on the rental property.
However, that verbal agreement was never included in the written settlement, nor legally recorded.
“At the time (of negotiations) we were at each other’s throats,” Riegel said. “We made a mistake, the city made a mistake and didn’t write it down.”
The city has leased about 240 acres of farmland to Riegel Farms, Washington, since 2004. Before Oct. 28, the most recent five-year lease was from Nov. 1, 2014, through Oct. 31.
The council last week agreed to extend the lease through Oct. 31, 2024. The city received just one bid — from Riegel Farms — for $125 per acre, which was the minimum amount published in the bid packet.
However, city staff had considered rejecting the bids opened in September, and seek new bids after exploring “fair market” values. That led to a discussion on right of first refusal.
At the Oct. 7 city council meeting, Riegel stated that right of first refusal is guaranteed to Riegel Farms under the condemnation settlement contract from 15 years ago.
Under a 2004 settlement agreement, the city paid Riegel Dairy Farms LLC $20,000 in addition to the $1,027,985 previously paid under a condemnation lawsuit filed by the city to acquire approximately 300 acres of land. The initial price was set at $3,500 per acre by three court-appointed commissioners, the same per acre price paid to owners of three other parcels.
The Riegels, in turn, agreed to dismiss their “exceptions” to the amount awarded by commissioners.
After the city paid the $1.2 million into a court fund, the Riegels filed exceptions, setting the stage for a court battle. The city responded with its own exceptions.
Under another provision of the settlement, the council approved an ordinance leasing approximately 260 acres of “surplus” land to Riegel Farms. At the time, the Riegels agreed to pay annual rent on three parcels at the rate of $135 per tillable acre for 19.47 acres; $121.83 for 35.98 acres; and $111 for 205.06 acres.
When the city sought farm leases for the surplus property not immediately needed for the airport project, the previous owners were granted the right of first refusal, with the option to match the high bid. That offer, however, was not extended to the Riegels because of the adversarial situation over the lawsuit, The Missourian reported in 2004.
Stratman said during talks in 2004, he told the farmers they would have no chance to farm the land as renters if the land deal reached the courts.
“If you don’t agree to settle outside condemnation,” Stratman warned, “(the city) will make sure you do not get to farm that ground.
“We’re not going into an adversary relationship after you take us into condemnation,” he explained.
“I think that is what brought the Riegels to the table,” Stratman added.
That also is when a verbal right of first refusal was broached.
“We promised them they could farm that ground as long as they met the best bid,” Stratman told the council. “Basically, we gave them the right of first refusal.”
However, he added that the right of first refusal was not documented, nor recorded, under any agreements.
“It was a handshake agreement,” Stratman said. “But my intention when we made that agreement, is it was going to be there for perpetuity until the Riegels, for whatever reason, didn’t want to farm that ground anymore and then it would go away.”
Stratman reiterated that there was no “cut-off” date for the right of first refusal verbal agreement.
“That’s my interpretation of what we did,” he said. “That may not be the most lucrative way . . . but $125 an acre, with the flood plain issues, is probably not a bad bid.”
Stratman further noted that the city could put a minimum on the land, based on his recollection of the agreement, even with right of first refusal maintained.
“The city’s word, from my standpoint, has to mean something,” he said. “If you give your word and we got them to the table, there was a reason for giving that right of first refusal.”