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HRA 07/14/1983 - 29371• CITY OF FRIDLEY HOUSING & REDEVELOPMENT AUTHORITY MEETING JULY 14, 1983 CALL TO ORDER: Vice - Chairperson Prieditis called the July 14, 1983, Housing & Redevelopment Authority meeting to order at 7:40 p.m. ROLL CALL: Members Present: Elmars Prieditis, Carolyn Svendsen, Duane Prairie Members Absent: Larry Commers, Walter Rasmussen Others Present: Jerrold Boardman, City Planner Sid Inman, City Finance Director Mark Haggerty, 6441 University Ave. N.E. Arlin Waelti, O'Connor & Hannan Jim Casserly, O'Connor & Hannan Howard Helgen, St. Phillips Human Services, Inc. is APPROVAL OF JUNE 9 1983 HOUSING & REDEVELOPMENT AUTHORITY MINUTES: MOTION BY MR. PRAIRIE, SECONDED BY MS. SVENDSEN, TO APPROVE THE JUNE 9, 1983, HOUSING "& REDEVELOPMENT AUTHORITY MINUTES AS WRITTEN. UPON A VOICE VOTE, ALL VOTING AYE, VICE - CHAIRPERSON PRIEDITIS DECLARED THE MOTION CARRIED UNANIMOUSLY. ADOPTION OF AGENDA: Mr. Boardman stated the following item should be added as Item #2: "Moore Lake District Discussion on Option" Vice - Chairperson Prieditis declared the agenda adopted as amended. 1. CONSIDERATION OF LEASE AGREEMENTS FOR STANDARD STATION: Mr. Boardman stated the "Mutual Agreement" is a standard agreement form. As far as the "Agreement of Lease ", the HRA had approved it at their last meeting; but at that time, the agreement was for zero dollars. After the actual lease documents had been sent to the HRA members and after review of those documents, there was some concern, and the HRA members did want the lease documents back on the agenda for discussion. He stated some modifications have been made to the documents based on the HRA members concerns and comments. After • a discussion with each HRA member, a monthly installment payment of $270 has been put into the lease. That was a change from zero dollars in the original lease agreement. HOUSING & REDEVELOPMENT AUTHORITY MEETING, JULY 14, 1983 PAGE 2 Mr.. Boardman stated that in Memo #83 -53, he was recommending that the HRA approve the execution of the Mutual Agreement and Agreement of Lease as presented with the authorization that Staff work with Mr. RZyan.per Staff's recommendations. Mr. Boardman stated the draft stated that the lesser may, upon request of the lessee, provide some assistance on the modifications. In discussions they said that any HRA expenditures would be strictly for material costs which would go into the building, and the HRA would pay the contractors directly for those material costs. The cost would not exceed $5,900.00. Ms. Svendsen had ha&'a, question about liens on the property. He stated he did discuss this with Mr. Haggerty, And they did put quite an extensive clause in the lease on liens. They are also pretty well protected because they are holding $10,000 in relocation costs, plus there will be an additional dollar amount that will probably come out of the condemnation. Ms. Svendsen stated she felt that any time they are dealing with this type of short term lease where the building most likely will be destroyed at some point in time, she would like to see some routine things that would protect them from any :liens. Mr. Haggerty stated a letter of credit is not a workable solution. He stated that under state law, it takes 90 days to file a lien. He stated he would be willing to add a statement that the City will hold as additional security the relocation money for a period of 120 days after the last item of work has been completed. MOTION BY MS. SVENDSEN, SECONDED BY MR. PRAIRIE, TO APPROVE THE "AGREEMENT OF LEASE" AND "MUTUAL AGREEMENT" CONTINGENT UPON THE CITY HOLDING ALL OF MR. TOM RYAN'S RELOCATION MONIES FOR A PERIOD OF 120 DAYS AFTER THE LAST ITEM OF WORK HAS BEEN COMPLETED. UPON A VOICE VOTE, ALL VOTING AYE, VICE - CHAIRPERSON PRIEDITIS DECLARED THE MOTION CARRIED UNANIMOUSLY. 2. MOORE LAKE DISCUSSION ON OPTION: Mr. Boardman stated that Mr. Howard Helgen had contacted him on this item. Mr. Helgen has been negotiating with Mr. Max Saliterman to get a price on the property. Mr. Helgen and Mr. Saliterman have reached an agreement for pur- chasing the property for $300,000. This comes out to $2.36/sq. ft. Mr. Boardman stated it was his understanding from discussions with Mr. Commers and the other HRA members that they felt-it would be important to have a quick appraisal done on the proeprty. He stated he has contacted Patchin Appraisals • and they can do an appraisal next Wednesday with a report back on Friday. They are just trying to estimate what the actual market value is on that property. Mr. Boardman stated he did feel $2.36/sq. ft. was very realistic. • HOUSING & REDEVELOPMENT AUTHORITY MEETING, JULY 14, 1983 PAGE 3 Mr. Boardman stated that if St. Phillips Human Services, Inc., enters into an option agreement with Mr. Saliterman, the HRA would require St. Phillips to put up the option money which is $1,000. That essentially takes the HRA out of the acquisition of the property. He stated the HRA needs to rewrite the right of development so it is tied to 202 funding and to the potion. It_ ties the money directly to St. Phillips Human Services, Inc., so that St. Phillips can exercise the option with HRA assistance. Mr. Boardman - stated he has talked to Mr. Qureshi, City Manager, about this. As far as the CDBG funding, Mr. Qureshi seems to feel the City Council would be in favor of working with St. Phillips Human Service, Inc., on an option agree - ment, rather than going into condemnation. Mr. Boardman stated he also checked with HUD on the use of CDBG funds. CDBG monies canibe directed to non - profit or private organizations based on a purchase agreement, rather than on an appraisal. He stated if they can work out an option agreement with St. Phillips Human Services, Inc., and Mr. Saliterman, it saves Staff a lot of paperwork and time. Mr. Helgen stated he thought $2.36/sq. ft. was a fair figure and he felt they should get the option contract in writing and get it to HUD so HUD knows that St. Phillips Human Services, Inc., has some control of the site. One of the problems when putting in an application to HUD is that if,they • don't have control of the site, HUD is more reluctant to give funding because HUD does not know if they are actually going to get the property. There are too many uncertainties with condemnation. Mr. Helgen stated Mr. Boardman feels that St. Phillips Human Services, Inc., should acquire the property. He stated he did not have any strong feelings on that, but he thought that the HRA bbu ht_the'properties in a lot of other projects. If the appraisal comes in at 300,000, he did not know how the HRA would feel about acquiring the property. The concern was that if the appraisal comes in at less, there may be some problems with having the HRA acquire the property. The concern he had was that if St. Phillips Human Services, Inc., does the acquiring, St. Phillips Human Services, Inc., needs to be assured that any expenses they incur,that would otherwise have been incurred by the HRA, will be covered by the HRA. He was a little reluctant to have their committees and non - profit organization acquire the property unless they are pretty sure on the documents ahead of time that all the costs are covered. Mr. Boardman stated the easiest thing to do with CDBG monies is land acqui- sition because there are no contractors with land acquisition.' So they want to take the $80,000 or whatever is put in from CDBG monies for acquisition, take tax increment monies, and turn around and do the soil correction. It is cleaner in terms of the administration of the project. If the HRA acquires the property, then the acquiring agency becomes a public agency, and CDBG monies cannot be used unless there is an appraisal, and if the appraisal is lower than the $300,000, they cannot spend CDBG monies for a project over . that appraised value. That is where they run into problems. How do they put CDBG monies into land acquisition if the appraisal is at $270,000? Once the HRA gets involved, they are required to have an appraisal. He felt it was better for St. Phillips Human Services, Inc., to enter into the option agree- ment, and the HRA would cover St. Phillips with a right of development. • HOUSING & REDEVELOPMENT AUTHORITY MEETING, JULY 14, 1983 PAGE 4 Mr. Prieditis asked Mr. Helgen what action he was looking for from the HRA. Mr. Helgen stated he would like to be in the position to enter into an agree- ment with Mr. Saliterman within the.next couple of weeks. At this point, d though there has been an agreement, that agreement is not binding until it is put into writing. He would like a motion from the HRA that says the HRA, in principle, supports the acquisition based on entering into an option contract. The main thing is to get a guarantee from the HRA before they can apply for the funding. MOTION BY MR. PRAIRIE, SECONDED BY MR. PRIEDITIS, TO AUTHORIZE STAFF TO GO AHEAD WITH THE APPRAISAL ON THE MOORE LAKE PROPERTY. UPON A VOICE VOTE, PRIEDITIS AND PRAIRIE VOTING AYE, SVENDSEN ABSTAINING, VICE - CHAIRPERSON PRIEDITIS DECLARED THE MOTION CARRIED. MOTION BY MR. PRAIRIE, SECONDED BY MR. PRIEDITIS, TO APPROVE THE IDEA OF THE OPTION IN PRINCIPLE AND TO AUTHORIZE STAFF TO WORK WITH ST. PHILLIPS HUMAN SERVICES, INC., ON THE APPROPRIATE RIGHT -OF- DEVELOPMENT DOCUMENTS. UPON A VOICE VOTE, PRIEDITIS AND PRAIRIE VOTING AYE, SVENDSEN ABSTAINING, VICE - CHAIRPERSON PRIEDITIS DECLARED THE MOTION CARRIED. 3. CONSIDERATION OF GENERAL RESERVE SYSTEM DOCUMENTS: Mr. Boardman stated the HRA approved the resolution approving the General Reserve System and had authorized City Staff to prepare the necessary documents to enact this System. The General Reserve System documents were given to the HRA for review, but discussion was not to be held until all the documentation was gotten together. The items mailed to the HRA recently were the actual amendments necessary to the redevelopment districts and tax increment districts to allow tax increment funds to be used in a General Reserve System. He stated there were two separate sets of documents:(1)the documents establishing the General Reserve System; and (2) the documents needed to amend the existing plans to allow the General Reserve System within the.tax increment. Mr. Boardman stated Jim Casserly and Arlin Waelti from O'Connor & Hannan were at the meeting to answer questions. Mr. Casserly handed out a brochure on the "Common Bond Fund System" (shortened to "Bond Fund "), the system that Minneapolis has developed over the last 18 months. He stated this is the brochure the Minneapolis Community Development Agency is using and sending to prospective users of the System. It explains the System in a fairly reasonable way. What it explains to the potential user • is why the Bond Fund in Minneapolis would be an attractive device, it explains what an industrial revenue bond is, why you can get long term fixed rate • HOUSING & REDEVELOPMENT AUTHORITY MEETING, JULY 14, 1983 PAGE 5 financing, explains that a user could get up to 100% financing for rehab for a new facility, for an addition, for equipment and have a fixed rate, it explains that it is a rated bond and also explains how the reserves are pooled and that provides the additional security. Mr. Casserly stated that in the middle of the brochure, there is one distinc- tion between the system they are talking about in Fridley and the one Minneapolis now has in effect. "The Minneapolis Bond Fund was established with a $5 million letter of credit from Northwest Bank of Minneapolis. This letter of credit acts as a secondary reserve for repayment of bonds issued to the Fund and has helped the Fund's initial bond issue receive an invest- ment rate with Standard & Poor Corporation. The Fund is further enhanced by pooling the debt service and reserve accounts of each individual bond issued." Mr. Casserly stated that what Fridley is doing is basically providing initially a cash from their existing bond proceeds to fund the secondary reserve. In Minneapolis, they were able to convince Northwest Bank Systems to come up with a $5 milTion letter of credit. He stated cash is actually superior. Minneapolis is spending a lot of time trying to figure out how to put cash into their system. Once they achieve that and put the cash in and the secondary reserve is finally funded, they will then have an A -rated system. He stated it is going to take longer in Fridley to get a rating for their system, because they do not have as much area to work with. Minneapolis was able to do it immediately. It will probably take a couple of years in Fridley. Once the system is rated, the bonds are even more marketable. Mr. Casserly stated that is essentially what the system is all about - -the System is to provide additional security for those people allowed to use it. Because Fridley has a System, they have a development tool, a way to attract businesses into the community, they have lower.cost financing, financing that is more like the traditional home mortgage, fixed -rate, long -term financing. In order to make the System work, they have to have policy makers who understand what the System is about, they have to have a staff who feels comfortable with the System, they have to have underwriters to manage it -- underwriters willing to meet the potential users, explain the System, and work out small and medium -sized businesspeople's problems. If they have those things, they have a chance to develop a very attractive device. Mr. Boardman stated the HRA has been pretty well briefed on the actual work- ings of the System. The only thing they haven't covered in great length is the actual amendments to the documents. Mr. Casserly stated there are three resolutions that ultimately have to be adopted. He stated the second part of what they are preparing for the HRA is the "Modified Redevelopment Plan" prepared by Arlin Waelti. Mr. Casserly stated this plan has two real functions: (1) Combining all of the City's redevelopment projects into a single project area. This is what • cities are now doing around the state. Since it does not force the City to HOUSING & REDEVELOPMENT AUTHORITY MEETING, JULY 14, 1983 PAGE 6 do anything or not do anything. It simply gives the City greater latitude in dealing with what they do have. It makes good sense to integrate the City's redevelopment areas; (2) it allows tax increment funds to be used to set up a reserve fund program. Mr. Boardman stated the City currently has three redevelopment plans. Within each redevelopment district, there are separate tax increment plans. What they are proposing is amending the Center City Redevelopment Plan to include the North Area and Moore Lake as part of the same redevelopment district. State law now allows them to have non - contiguous redevelopment districts. The proposed district would be called Redevelopment Project No. 1. .The reason they are looking at amending it this way is because it is the only way to do a city -wide reserve system. Otherwise, if they wanted to use the reserve system in each redevelopment district, they would have to set up three separate reserves and it is not functional to do it that way. Instead of calling it Moore Lake Tax Increment, Center City Tax Increment,_North Area Tax Increment, they will call it Tax Increment No. 1, Tax Increment No. 2, and Tax Increment No. 3, etc. Ms. Waelti stated that when they are defining the redevelopment project, that is the geographic area in which they can spend public monies. It has nothing to do with taking monies, so they are identifying a very large area that is non - contiguous where the HRA can decide where they wish public improvements . to occur with funds available from any tax increment district within that project area. What this modification has done is it has taken all of the tax increment districts and put them within one project area so there is lots of flexibility. They can take excess tax increments that have not been pledged to the repayment of bonds (first priority) and can designate where they want public improvements to occur, and they can move those tax increments around. From that definition, the HRA can see how important it is that the underlying project area is one area. Ms. Waelti stated that is not true of what tax increments are all about. A tax increment is the increased value accruing to that property because of public improvements the HRA is making. That is money they are taking, and that increased value is tax money they are going to take for a period of time. They may initially spend that money to retire the principle and interest on the bonds they may have issued or it may be a property they are just capturing the tax increment on and they are going to use that toward their reserve. She stated there are a number of options. Ms. Waelti stated the important thing is they have to meet the commitments on the original pledge of .the.tax increment bond. Any excess money is money to use for public purpose expenditures to either put into the reserve or use for a number of purposes listed in the plan. It is important to keep in mind the concept that the project area defines where they can spend public money and tax increment districts identify those areas where they can acquire money. For that reason, it is important to keep tax increment districts very small. 0 • HOUSING & REDEVELOPMENT AUTHORITY MEETING, JULY 14, 1983 PAGE 7 Ms. Waelti stated that from the public's is rake sure the HRA is taking only those an increased tax base. They want to keep because each tax increment district has a Ms. Svendsen asked what other communities General Reserve System. )erspective, what they want to do parcels from which they are acquiring each tax increment district separate, life of its own. are seriously considering the Mr. Casserly stated that Minneapolis and St. Paul have adopted the General Reserve System. Marshall and Blaine have also adopted the System. Apple Valley is adopting the System that same evening. He stated Blaine adopted the System about 16 months ago. He stated the Iron Range Cities have special authorization to combine the whole Iron Range into a single reserve fund program and $5 million has been allocated to start initial funding of the System. Metropolitan Council is looking at it. He was aware of other under- writers who are trying to design systems that would be multi -city, multi - county. He felt this would be very difficult to do. If you have a well - designed, locally controlled, locally funded system, you have flexibility on your own that is extremely competitive. As you start expanding the number of units who participate in that system, you then have to become far more rigid in how you apply the system. • Mr. Prieditis asked what costs were incurred in getting to the point where the System starts working. Ms. Waelti stated the System is built and the law that was passed kept in mind the fact that as development occurs, it almost requires additional staff. In the law there is an allowance for 10% of each tax increment project to be spent on administrative costs. Each city is going to vary on how much it feels is appropriate, but she thought it was advisable for cities to look at using a portion or all of it because this is a financial tool and it doesn't operate by itself. They need good competent staff to work with the System to make it do what the HRA wants it to do. Administrative staff would be like a city's economic development director. As cities are finding that the state is cutting off funding and federal funding is disappearing, the cities are looking to their own resources, and one of the best uses of city resources is to have economic development people or consultants so the city can attract the type of projects into the city that will use the Reserve System so it expands the city's local tax base. Mr. Casserly stated it is important to know that there is nothing in the resolutions that requires more staff time. There is a trustee the HRA will appoint who actually handles the funds after the bonds are sold and the underwriter is handling the sale of the bonds and the original negotiations. That is not what is causing additional staff; but if a city is successful and has people using the System, it is going to need some help with it. Ms. Svendsen asked if the City would be using existing staff or would they be hiring additional staff? HOUSING & REDEVELOPMENT AUTHORITY MEETING, JULY 14, 1983 PAGE 8 Mr. Inman stated the City will soon be hiring officer to replace Kent Hill. It is a city p that person starts to work with Mr. Haggerty, reserve financing starts, and money begins to person's salary will be picked up by the HRA. need someone to work with the System. an economicidevelopment Dsition. At the point where development comes on line, flow, obviously some of that But, he was convinced they Mr. Boardman stated that with the grand opening of the plaza and the new Community Park on Oct. 7 -8, they will be putting together a brochure to be mailed out to developers in the area, they will be contacting all the real estate agencies in the area that deal with commercial /industrial real estate, and they will be putting an article in the National Association of Office Park Developers' newsletter. He stated they are going to get the word out in a promotional -type effort and they are looking at October as the big push effort. Mr. Boardman stated another thing they have to consider is that this is not necessarily a tool for someone coming into the tax increment district, but a tool to be used by anyone who wants to use industrial development bonds in the City of Fridley. Mr. Boardman stated this was being discussed at this meeting so the HRA would become more comfortable with the System. He would like to have a special meeting in a week or two for approval of the resolutions. He stated the City Council has been receiving the same documents as the HRA. The process is set up for a public hearing before the City Council for approval on Aug. 22. The HRA set a special meeting for Thursday, July 21, at 5!W p.m. 4. FINANCIAL REPORT: Mr. Inman stated the HRA members had received a copy of the annual financial report as audited. The HRA had also received the "HRA Rent Schedule" as of May 31, 1983, and a "Fridley HRA Combined Statements of Revenues, Expenses, and Changes in Fund Balance" as of July 13, 1983. Chairperson Prieditis declared the HRA's annual financial report, the Rent Schedule, and the HRA Combined Statements received into the record. 5. CHECK REGISTER: MOTION BY MS. SVENDSEN, SECONDED BY MR. PRAIRIE, TO APPROVE THE CHECK REGISTER DATED JULY 13, 1983, IN THE AMOUNT OF $364,665,53. UPON A VOICE VOTE, ALL VOTING AYE, VICE - CHAIRPERSON PRIEDITIS DECLARED THE MOTION CARRIED UNANIMOUSLY. • 0 HOUSING & REDEVELOPMENT AUTHORITY MEETING, JULY 14, 1983 PAGE 9 Mr. Boardman stated he:also needed approval on the progress payment for the demolition at 6379 University Ave. N.E. MOTION BY MR. PRAIRIE, SECONDED BY MS. SVENDSEN, TO APPROVE THE PROGRESS PAYMENT FOR THE DEMOLITION AT 6379 UNIVERSITY AVE. N.E. IN THE AMOUNT OF $8,611.75. UPON A VOICE VOTE, ALL VOTING AYE, VICE - CHAIRPERSON PRIEDITIS DECLARED THE MOTION CARRIED UNANIMOUSLY. 6. OTHER BUSINESS: Mr. Boardman stated he wanted to stress to the HRA that there needs to be some discussion on what direction they should go with the hardware building. The Lions Club is still waiting to hear from the HRA, and staff needs some direction from the HRA. Mr. Prieditis stated that this discussion should take place when there are at least four commissioners present at a meeting. ADJOURNMENT: MOTION BY MS. SVENDSEN, SECONDED BY MR. PRAIRIE, TO ADJOURN THE MEETING. UPON A VOICE VOTE, ALL VOTING AYE, VICE - CHAIRPERSON PRIEDITIS DECLARED THE JULY 14, 1983, HOUSING & REDEVELOPMENT AUTHORITY MEETING ADJOURNED AT 9:45 P.M. Respectfully tted, Lyhrfb Saba Recording Secretary