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HRA 04/08/1982 - 293880 CITY OF FRIDLEY HOUSING & REDEVELOPMENT AUTHORITY MEETING APRIL 8, 1982 CALL TO ORDER: Chairperson Commers called the April 8, 1982, Housing & Redevelopment Authority meeting to order at 7:44 p.m. ROLL CALL: Members Present: Larry Commers, Russel Houck, Carolyn Svendsen, Duane Prairie Members Absent: Elmars Prieditis Others Present: Jerrold Boardman, City Planner Virgil Herrick, City Attorney Sid Inman, City Finance Director Mark Haggerty, 6441 University Ave. N.E. Cheryl Nybo, 1612 Berne Circle Ted Burandt, 6211 Riverview Terrace A. E. Singer, 378 _ 64th Ave. N.E. • Eric Andersen, 4744 IDS Center Gene Hoff, 100 N.E. Alden Circle Nancy Koepcke, 3013 Crestview Dr. N.E. Kurt Larson, Columbia Heights Len Schollen, 6381 University Ave. N.E. W. G. Doty, 6379 University Ave. N.E. APPROVAL OF MARCH 11, 1982, HOUSING & REDEVELOPMENT AUTHORITY MINUTES: MOTION BY MR. PRAIRIE, SECONDED BY MR. HOUCK, TO APPROVE THE MARCH 11, 1982, HOUSING & REDEVELOPMENT AUTHORITY MINUTES AS WRITTEN. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. APPROVAL OF MARCH 24, 1982, HOUSING & REDEVELOPMENT AUTHORITY MINUTES: MOTION BY MS. SVENDSEN, SECONDED BY MR. HOUCK, TO APPROVE THE MARCH 24, 1982, HOUSING & REDEVELOPMENT AUTHORITY MINUTES AS WRITTEN. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. 40 HOUSING & REDEVELOPMENT AUTHORITY MEETING, APRIL 8, 1982 PAGE 2 I. CENTER CITY PROJECT A. Columbia Park Clinic 1. Review of Contract Documents and Financial Commitment from Juran & Moody (Memo #82 -24 from Executive Director) The HRA reviewed the contract documents and financial commitment with Mr. Herrick, City Attorney, prior to the meeting. Mr. Herrick stated he had discussed with the HRA the same thing he and Mr. Boardman had discussed with Mr. Eric Andersen, attorney for Columbia Park Properties, about the fact that the financial commitment does have certain enumerated items that, if they occurred, would relieve Juran & Moody from the obligation to finance. The concern he had, as he understood the commitment, was it would be necessary to have the HRA and the City in a position where they could deliver a valid title in order to give a first mortgage at the time of closing. This would require the HRA or the City to commence acquisition of the real estate when there still exists the possibility that something could happen that would make the commitment not valid. Mr. Herrick stated he would like Mr. Andersen's comments on his understanding of the commitment, and perhaps Mr. Andersen could relate to the HRA what negotiations he has had with Juran & Moody in terms of tightening up the commitment. Mr. Eric. Andersen stated the commitment is different from a standard commitment in that the interest rate is not specified. He thought that was probably the only difference between this commitment and a regular financing commitment. He stated there are some outs the underwriter has based on the industrial revenue bond market falling apart, but he thought it was treated in the industry as a firm under- writing commitment. He stated Juran & Moody is agreeing to buy the bonds at the rate' set by the market. There are conditions, but there are conditions to any financing commitment they have to meet. The conditions are really very similar to any other financing commitments, except for the conditions of the bond market. That is something that is inherent in revenue bond financing and is something they cannot do anything about. Mr. Andersen stated the idea is that Juran & Moody has agreed to buy the bonds, they have approved the credit of the company,,the terms of the deal, security, guarantees, etc. That is basically the nature of this underwriting commitment as compared to any other commitment they would require in a redevelopment project. Mr. Commers stated the HRA's concern was on page 4, paragraph 1, of the commitment document with the requirement that the title be trans- ferred prior to the closing of the commitment with the bonding company and the requirement that the HRA has to immediately commence HOUSING & REDEVELOPMENT AUTHORITY MEETING, APRIL 8, 1982 PAGE 3 acquisition or commence condemnation in order to acquire title of the property. The HRA is looking at whether the possibility exists that a title insurance company would give a title commitment on the property if the HRA gave them assurance of indemnification if the HRA was unable to get the title commitment. He stated that allows the HRA to make sure the Clinic's closing takes place, and it allows Columbia Park Properties to have the security and have the mortgage company secured on the basis of the commitment from the title insurance company. Mr. Andersen stated that was a possibility. He stated they could close their financing if they had a commitment from Title Insurance Company of Minnesota or another reputable title company saying they would insure the fee title in Columbia Park Properties, and they would insure the mortgage. At that point; however, if there was any question about whether or not there is the ability to come up with that title, he believed his client would have some concern in guaranteeing a public offering of bonds and committing, to build a project with the possibility of going into default because it could not perform, because it actually did not get the title. Mr. Commers stated it is not a question of producing title; they can produce title, it is just a question of when they are going to • do it. Mr. Herrick stated he thought that fact, coupled with indemnification on behalf of the City and the HRA, should make Columbia Park Properties relatively secure. However, it did raise a question in his mind as to whether that process would delay a time when construction could start. He thought it probably would and that was another factor to be considered. Maybe they should discuss what has been suggested about getting a title commitment subject to their guarantee of title and indemnification. What amount of time would that set back the construction process and how important would that be? Mr.Andersen stated they feel they can close the revenue bond financing in June. That would delay construction for the time it would take for the City to acquire the land. Columbia Park Properties would like to start construction as quickly as possible. Mr. Commers stated he thought the most feasible and practical way to go was to see if a title insurance company would give a commit- ment based on the HRA's guarantee, because even if they started now, there would be no guarantee they would have title to all those properties by June 1. Mr. Andersen stated he would check with Minnesota Title and Juran & Moody to see if this was acceptable to them. He was not sure what the land acquisition -cost was on this project, but one aspect of the 0 HOUSING & REDEVELOPMENT AUTHORITY MEETING, APRIL 8, 1982 PAGE 4 deal he believed should give the HRA some comfort was that once the redevelopment contract is signed and the commitment is in place, the partnership has the obligation to go forward, too, if the HRA does not, to the extent that if the HRA commits its resources and the partnership defaults, there is a credit worthy buyer that is probably good for its promises. Mr. Andersen referred to Section 9.2, "Remedies on Default ", page 25 of the contract documents. He stated, as he understood that section, the HRA would have the right to sue for damages or for specific performance. Mr. Herrick stated he believed the City could maintain an action against Columbia Park Properties for non - compliance with the contract. Mr. Andersen stated neither he nor his client would be adverse to the arrangement that has been suggested. He did not think his client was interested in any more delays, particularly in light of the delays that have been incurred to date, through no fault of the HRA. Mr. Herrick asked Mr. Andersen which of the following two choices he felt Columbia Park Properties would prefer: 1. getting a title insurance company to agree to issue a • commitment prior to obtaining title on the assurance that the City or the HRA would acquire title and would indemnify in case they did not; 2. getting a letter from Columbia Park Properties to the HRA requesting the HRA to proceed to acquire title pursuant to the terms of this contract and, if for any unforeseen reason, the commitment is not honored, Columbia Park Properties would be responsible for any out -of- pocket costs the HRA had. Mr. Andersen stated he thought they would prefer the letter of indemnification in order to start things moving now. Mr. Herrick stated he felt the HRA should approve the contract, ask Columbia Park Properties for an indemnification letter, and indicate that the HRA will proceed to start acquiring property as soon as the letter is received from Columbia Park Properties. He stated one factor that is positive is the HRA is dealing with a substantial entity that has good assets and is very credit worthy. Mr. Prairie stated he felt it was certainly in the best interests of the HRA to move ahead. Mr. Commers stated it was his understanding that the approval of this contract did not obligate the HRA in relation to the assessments or . making any decision on the assessments at this time. Mr. Herrick stated that was correct. • HOUSING & REDEVELOPMENT AUTHORITY MEETING, APRIL 8, 1982 PAGE 5 MOTION BY 142. HOUCK, SECONDED BY MR. PRAIRIE, TO APPROVE THE CONTRACT FOR PRIVATE REDEVELOPMENT BY AND BETWEEN THE HRA AND COLUMBIA PARK PROPERTIES AND THE FINANCING COMMITMENT LETTER FROM JURAN & MOODY, SUBJECT TO THE NEGOTIATION OF A SATISFACTORY LETTER OF INDEMNIFICATION BY THE CITY ATTORNEY AND THE ATTORNEY FOR COLUMBIA PARK PROPERTIES. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. B. 73rd Ave. Partnership 1. Review of Contract Documents and Financial Commitment (Memo #82 -25 from Executive Director) Mr. Haggerty stated the contract documents had been discussed that afternoon, but there were a couple of areas in the document that have to be explored further. (1) who is responsible for any potential drainage problems; (2) they have decided on a new layout for the office building and there were some concerns regarding that. Mr. Herrick stated the area that seemed to cause Mr. Haggerty the most concern was the timing in the development of the plaza area. • Mr. Haggerty stated they are concerned in putting the office building together about the fact that the clinic, the office building, the parking lot, and the plaza are to be completed at approximately the same time. He stated Mr. Boardman has said he cannot make any commit- ment as to when the plaza is going to be completed. It may not be started until next spring. He stated he told Mr. Boardman that they still want to sell bonds about the same time as the Clinic and place those funds into a high interest - bearing account and then start groundbreaking at a point where they feel the completion of their project would coincide with the Clinic and the plaza. He stated he has asked Mr. Boardman to do more investigation as to a reasonable time frame on the plaza, as it will make a difference in their costs. Mr. Haggerty stated right now he has to make a decision on whether it would be better to delay commencement of construction and only pay 21/100 of 1% of that delay on an annual basis or to just commence construction and leave the building at only 20 -50% occupied until the rest of it is completed. Before,he can make that decision, he needs a better idea about when the plaza will be completed. Mr. Boardman stated that right now the City is in the process of interviewing about twelve design architects. They are trying to set up a design contest between three design firms so they can get the best design project for Fridley. They are looking at a 30 -day 0 0 HOUSING & REDEVELOPMENT AUTHORITY MEETING, APRIL 8, 1982 PAGE 6 design competition with a selection after that period of time to go to working drawings. They could possibly go out for bids in September and start the plaza, but he doubted if they would get everything done, as far as landscaping in the plaza, until next spring. Mr. Boardman stated they are looking at parking as part of the public improvement so when the road goes in, the parking will go in. They are looking at the possibility of doing the road at the end of August to September. Mr. Haggerty stated they have worked out a site design profile of the building they think will work out better from the perspective of rental and the design factor. He stated it was his suggestion that they check into these problems, firm up these problems, and make the appropriate changes in the contract. Since the construction of the office building is three months shorter than construction of the Clinic and since they missed the April market date, it might be best to defer the actual approval of the contract documents until more information is received regarding the potential drainage problems and the development of the plaza. He stated he was sure he could have the contract documents and financial commitment ready for the HRA's May 13th meeting. MOTION BY MR. HOUCK, SECONDED BY MS. SVENDSEN, TO CONTINUE THE REVIEW AND APPROVAL OF THE 73RD AVE. PARTNERSHIP DOCUMENTATION UNTIL THE NEXT MEETING. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. 2. City Council Discussion on City Property Purchase (Memo #82 -26 from Executive Director) Mr. Boardman stated that at the City Council's March 29th meeting, they discussed the Phase II office project and the options they have in regard to the use of City property for this development. The City Council gave their preference on the way they would like the HRA to handle the purchase of City property.. Their preference is a direct purchase of the property at $2 /sq. ft. The portion of the building that is on City property is 9,310 sq. ft., and the portion that is on the parking lot is 30,100 sq. ft. The City Council is requesting that, when the district no longer exists, the HRA sell the parking lot property back to the City for $1 to continue the lease arrangements on parking. Mr. Commers asked if this was the most advantageous thing for the HRA. As he understood it, the City Council wants the HRA to spend a sub - stantial amount of money on the plaza, and maybe they should negotiate with the City for some medium ground. He was not sure the HRA should be responsible for everything. M HOUSING & REDEVELOPMENT AUTHORITY MEETING, APRIL 8, 1982 PAGE 7 Mr. Boardman stated he thought it would be advantageous for the City Council and HRA to have a joint meeting so this issue can be discussed. Mr. Commers stated he thought Staff should put together some projec- tions about the kind of proposal numbers they are talking about in terms of assessments, acquisition costs, and plaza costs. He asked Staff to communicate the HRA's concerns to the City Council and that the HRA would like to meet jointly with the City Council within the next 60 days to discuss these issues. C. Center City Financial Analysis 1. Report from Ehlers & Associates and Report on Cash Flow Analysis (Memo #82 -27 from Executive Director) Mr. Sid Inman and Mr. Boardman reviewed the computer runs from Ehlers & Associates and the cash flow analysis. 2. Assessment Analysis (Memo #82 -28 from Executive Director) Mr. Boardman stated that regarding the road, the parking lot, and sewer and water, they are looking at trying to at least combine the . project, if possible, with the other street and sewer projects in the City. At this point in time, they do have preliminary engineering estimates on water, sanitary improvement, and street improvements. They have gone to the City Council for ordering the plans and specs on the project. What they need now is some commitment from the HRA in order to petition for street improvements so they can get it put into a bid proposal in order to get the best price. That is the reason for Resolution No. HRA - 1 - 1982. Mr. Commers asked if the HRA could approve Resolution No. HRA -1 -1982 omitting paragraph 3, "that the Authority agrees to enter into necessary contracts with the City of Fridley to incur 100% of the cost for said improvements ", and have it subject to what the HRA negotiates with the City Council on assessments and the plaza? Mr. Commers stated he thought the HRA should have a meeting with the City Council before the HRA commits to pay everything on the assess- ments and on the plaza and see if there isn't some type of contribution or responsibility the City would like to assume on this project. Mr. Herrick amended paragraph #3 to read: "That the Authority agrees to furnish funds for the initial payment of she costs of those items enumerated in #1 above; but reserves the right to negotiate with the City over the final distribution of costs." 0 The HRA agreed with this amendment to Resolution No. HRA -1 -1982. 0 HOUSING & REDEVELOPMENT AUTHORITY MEETING, APRIL 8, 1982 PAGE 8 MOTION BY MR. PRAIRIE, SECONDED BY MR. HOUCK, TO APPROVE RESOLUTION NO. HRA -1 -1982, "A RESOLUTION PETITIONING THE CITY OF FRIDLEY FOR STREET IMPROVEMENTS, SANITARY SEWER LATERAL AND SERVICES, WATER LATERAL AND SERVICES, AND STORM SEWER FACILITIES ", WITH THE STIPULATION THAT ITEM #3 BE AMENDED AS FOLLOWS: "THAT THE AUTHORITY AGREES TO FURNISH FUNDS FOR THE INITIAL PAYMENT OF THE COSTS OF THOSE.)ITEMS ENUMERATED IN #1 ABOVE; BUT RESERVES THE RIGHT TO NEGOTIATE WITH THE CITY OVER THE'FINAL DISTRIBUTION OF COSTS." UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. D. Discussion on Project Design Consultant (Memo #82 -29 from Executive Director) Mr. Boardman stated he would like to have some concurrence from the HRA that the direction they are going in hiring a project design consultant is the right direction. One direction they have looked at and feel may get them a better project is some remuneration to the three firms they select for competition. Mr. Commers asked Mr. Boardman to put together a proposal on this that the HRA can review and approve at their next meeting. is Mr. Prairie asked about the time span. Mr. Boardman stated they are looking at a 30 -day competition. They will be narrowing the selection down to 3 -4 firms; and, hopefully, by the end of April they will be ready to put together a scope and direction, and bring the three firms back to the HRA. Once the HRA selects the three firms and goes with the scope Staff has set up, they are looking at another 30 days. Hopefully, that will be between the May HRA meeting and the June HRA meeting, and by June they will have three concept proposal that will be submitted to the HRA to select an architect. Then it is feasible they will have working drawings within 30 -40 days and will be able to accept, make modifications, and go out for the plaza. Mr. Commers stated it was the concensus of the HRA for Staff to move forward in that direction with the selection of an architect. E. Approval of Final Estimate and Authorization of Pa ment'of Contract on Demolition'of Christensen Buildin,. Letter from John Flora, Publi s Works Director Mr. Commers stated that what is needed is approval and authorization to pay the contractor the balance of the contract price. Ms. Svendsen stated that in the "Report on Final Inspection for Demolition of Building at 6471 University Ave. N.E." dated April 8, 1982, the second paragraph stated: "All deficiencies have been corrected by the contractor. W HOUSING & REDEVELOPMENT AUTHORITY MEETING, APRIL 8, 1982 PAGE 9 Also, the work for which the City feels the contractor should receive a reduced price has been agreed upon by the contractor." She wondered what that meant. Mr. Commers stated maybe they could approve the payment, conditioned upon Mr. Boardman's checking into this and reporting back to the HRA as to whether or not there was any change in the contract price. MOTION BY MR. HOUCK, SECONDED BY MR. PRAIRIE, TO APPROVE THE FINAL ESTIMATE OF $10,840 AND TO AUTHORIZE THE PAYMENT OF THE CONTRACT, CON- DITIONED UPON THE EXECUTIVE DIRECTOR FINDING OUT WHETHER OR NOT THERE WAS ANY CHANGE TN THE CONTRACT PRICE. Mr. Commers asked Mr. Boardman to report back at the next meeting. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. F. Letter to Earl Wyatt on Purchase of Telephone Building Mr. Boardman declared the letter dated April 2, 1982, from Mr. Boardman to Mr. Wyatt received into the record. At the last meeting, the HRA authorized Mr. Boardman to proceed with the acquisition of the North- Ow western Bell Telephone building property. II. MOORE LAKE PROJECT: A. Cheryl Nybo Proposal (Memo #82 -30 from Executive Director) Mr. Boardman stated as he noted in his memo, Mr. Burandt is asking $60,000 for his property if he can retain the existing structure to be moved off the site. The appraised value as documented by Curtis Larson is $46,300. Mr. Boardman stated he has tried to compromise on a value of $55,000 which is midway between Mr. Burandt's asking price and the appraised value. Mr. Leon Madsen of the City Assessor's Dept., felt that was a good compromise as far as the differences in values. Mr. Boardman stated that without an agreed -upon purchase price, they cannot make the necessary agreement for options on the property. He stated he has talked to Ms. Nybo and she has indicated she is in the position at this point in time to sign financing commitments. Now they need to work out contract documents, and they hope to have the contract documents worked out within a week or two. Mr. Burandt stated he has negotiated from $65,000 down to $60,000. In lieu of the fact that he has carried the property for this long, he doesn't want to go down any lower in price. He stated another thing he wanted to point out is that the building Ms. Nybo is in now was purchased 2, -3 years ago for $150,000. The lot she is on now is smaller than his �y lot. He stated his attorney feels if they have to go to court, they will not have a problem, and his attorney feels $60,000 is too low. M HOUSING & REDEVELOPMENT AUTHORITY MEETING, APRIL 8, 1982 PAGE 10 Mr. Boardman stated it is up to the HRA whether they feel they should go with a $60,000 value and Mr. Burandt would retain the existing structure and move it off the site, or whether the HRA wanted to make a purchase _offer and, if necessary, go to condemnation. Mr. Commers stated the HRA was not in the position to go to another number because of their position as a public corporation. They have some obliga- tion with regard to the appraisal. Mr. Burandt stated he has an appraisal for the property Ms. Nybo is on now, and it shows a higher land cost for that property than the HRA is offering him. That was appraised for Central Northwestern Bank. Mr. Commers asked Mr. Boardman to meet with Mr. Burandt and get those appraisal numbers for the HRA, if Mr. Burandt was willing to release those figures. Mr. Burandt stated he had no problem with that. The problem he had was the fact that he still did not have a commitment. This is all secondary, because Ms. Nybo doesn't have the commitment in yet. He stated they have been going through this for a year now. He stated he has empathy with Ms. Nybo's position in wanting to wait for the bond market to go down, but if Ms. Nybo wants to buy more time, she should pay for it. He stated that at the March 11th HRA meeting, Ms. Nybo was granted an extension of 30 days until this meeting, so this was all supposed to have been worked out by now. He stated he is at the point right now where he would just as soon see Ms. Nybo's developmental rights terminated so he can move on with that property and do something different. Ms. Nybo stated she was going to buy the property from Mr. Burandt a year ago for $49,000. Then the HRA got involved and the price escalated. She felt this project is something that takes time; it is a step -by -step process. If Mr. Burandt was to try to pursue something and go out to get financing, he would see the road blocks that are out there. She stated that in talking to First Corporate Services, they feel this project has moved along and to have this continual pressure is not a normal thing. She stated she is very close at this time. Ms. Nybo stated that Mr. Burandt made the statement at the last HRA meeting that he hasrhad financial losses and she has not. She stated she also has invested thousands of dollars in the project to get to this point. Mr. Boardman stated he felt it would take until the next HRA meeting to get the contract documents ready so the HRA can make some decisions at that meeting. He stated it is his understanding that Ms. Nybo is in the position to sign financial documents and, therefore, they should move ahead with the project. In the meantime, he will attempt to resolve some price o HOUSING & REDEVELOPMENT AUTHORITY MEETING, APRIL 8, 1982 PAGE 11 issues with Mr. Burandt, because the HRA will get involved in acquisition of the property if the project goes through. He stated he would like to be in the position to say this is an agreed -to price with Mr. Burandt so that as soon as the HRA approves the contract documents and the financial commitment, he can go to Mr. Burandt with the agreed -to dollar amount and there will not be any condemnation. He stated he needed some direction from the HRA on how far they feel they should extend this project. Mr. Prairie suggested they grant one more extension of 30 days, and then make it clear that is the final extension. Mr. Burandt stated it was his understanding that the previous 30 -day extension was the last one. He stated he did not want this dragged out any more. He would agree to 30 days, but then that is the end. MOTION BY MR. HOUCK, SECONDED BY MS. SVENDSEN, TO EXTEND A FINAL 30 -DAY RIGHT OF DEVELOPMENT TO CHERYL NYBO WITH THE CONDITION THAT, IF AT THE END OF 30 DAYS, THE EXECUTED FINANCING COMMITMENT IS NOT PRESENTED TO THE HRA, THE DEVELOPMENT RIGHTS WILL TERMINATE AT THAT POINT. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. ow I III. NORTH PARK PROJECT A. Letter from G. W. Paschke (Memo #82 -31 from Executive Director) Mr. Commers stated that in Mr. Paschke's letter to Mr. Boardman, he is requesting information on assistance from the City with respect to bad soil. Mr. Boardman stated they are going to have a lot of projects in this area, and because of the bad soil conditions and the limitation on the tax increment district through loss of fiscal disparities funds, they should start analyzing some of the things they need like drainage so they do not give everything up into ground costs. They need to set some standards by which they can analyze each and every project. He stated he hoped to have some guidelines drawn up by the May 13th meeting. IV. FINANCIAL A. Check Register MOTION BY MR. PRAIRIE, SECONDED BY MS. SVENDSEN, TO APPROVE THE CHECK REGISTER DATED APRIL 7, 1982, IN THE AMOUNT OF $11,616.15. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. CJ� Ow - HOUSING & REDEVELOPMENT AUTHORITY MEETING, APRIL 8, 1982 PAGE 12 ADJOURNMENT: Chairperson Commers declared the April 8, 1982, Housing & Redevelopment Authority meeting adjourned at 10:30 p.m. Respectfully submitted, LYrAe Recording Secretary C�