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HRA 07/10/1986 - 29339CITY OF FRIDLEY • HOUSING & REDEVELOPMENT AUTHORITY MEETING, JULY 10, 1986 CALL TO ORDER: Chairperson�Commers called the July 10, 1986, Housing & Redevelopment Authority meeting to order at 7:10 p.m. ROLL CALL: Members Present: Larry Commers, Duane Prairie, John Meyer, and Walter Rasmussen (arrived at 9:10 p.m.) Members Absent: Virginia Schnabel Others Present: Mayor William Nee Councilman Robert Barnette Councilman Dennis Schneider Councilman Brian Goodspeed Nasim Qureshi, HRA Director Dave Newman, HRA Attorney Jock Robertson, Community Development Director John Flora, Public Works Director Rick Pribyl, Finance Director Julie Burt, Asst. Finance Officer Samantha Orduno, Management Asst. Robert Levy, Rice Plaza Gary Van House, Columbia Park Properties Gus Doty, Fridley Plaza Office Building Jim Winkels, Winfield Development Dave Weir, Woodbridge Properties PRESENTATION OF-PLAQUE r ELMARS PRIEDITIS: Mr. Commers presented a plaque to Mr. Prieditis in appreciation for.his. ten years of service as a member of the Housing & Redevelopment Authority. Mr. Commers stated with Mr. Prieditis' architectural background, he made a major contribution to the HRA and community. Mr. Prieditis stated he has learned a lot while serving on the HRA and thanked Chairperson Commers and members of the HRA for his experiences. APPROVAL OF MINUTES OF JUNE 12, 1986: MOTION BY M. MEYER, SECONDED BY MR. PRAIRIE, TO APPROVE THE JUNE 12, 1986, HOUSING AND REDEVELOPMENT AUTHORITY MINUTES AS WRITTEN. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. HOUSING & REDEVELOPMENT AUTHORITY MEETING. JULY _10_,_1986 PAGE 2 • 1. STATUS REPORT ON RIGHT -OF -WAY ACQUISITION AND STREET IMPROVEMENTS TO MISSISSIPPI STREET: Mr. Qureshi stated the County has delayed the plans for the improve- ments to Mississippi Street because of difficulty in acquiring the right -of -way. He stated the plan is to begin construction next year. Mr. Qureshi stated the HRA authorized an agreement with Northern States Power for relocation of the power lines; however,because right -of -way is not fully acquired, it would be necessary to delay this project until next year. He stated he understands NSP still agrees to the original estimated cost of $95,000. Mr. Qureshi stated no action is needed at this time by the HRA, but he wanted to keep them informed regarding this project. 2. UPDATE ON THE LUNDGREN DEVELOPMENT: Mr. Qureshi stated two items that were critical to meet the timetable in the Lundgren project was a new letter of credit and completion of the financing. He stated Mr. Lundgren has submitted the letter of credit and understands he is working diligently to complete the financing for the August deadline. Mr. Meyer asked what this new letter of credit replaces. Mr. Qureshi stated the HRA had an agreement with Mr. Lundgren for his development which became null and void in May and this included a letter of credit. He stated the HRA entered into a new agreement and a new letter of credit, conforming to the new agreement, was requested. Mr. Meyer questioned what this letter of credit means in terms of Mr. Lundgren's project. Mr. Qureshi stated if the HRA performs all their obligations and there is a default on the part of the developer, the HRA has the right to call in this letter of credit for $200,000. Mr. Meyer asked if the HRA would have to show damages for this amount. Mr. Newman stated the letter of credit is active now and if Mr. Lund- gren doesn't have his financing established by August 1, under the terms of the contract and letter of credit, the HRA can call for the full amount of $200,000. Mr. Qureshi stated as part of the agreement with Mr. Lundgren, the HRA would acquire property for the construction of the building. He requested the HRA consider Resolution No. HRA 9 -1986 which auth- orizes the acquisition of Lot 1, Block 1, Sylvan Hills Plat 7, 248 Mississippi Street by eminent domain proceedings, subject to receipt of the financial commitment from Mr. Lundgren. HOUSING & REDEVELOPMENT AUTHORITY MEETING, JULY 10, 1986 PAGE 3 • Mr. Newman stated the reason the resolution is before the HRA at this time is because title to this property must be delivered by December 1 and the soonest the property could be acquired by eminent domain is 90 days. He stated they will continue to negot- iate with the owner to acquire the property without going through the eminent domain proceeding. MOTION BY MR. PRAIRIE, SECONDED BY MR. MEYER, TO APPROVE RESOLUTION NO. HRA 9 -1986 DIRECTING CONDEMNATION AND DETERMINING_THE.NECESSITY FOR AND AUTHORIZING THE ACQUISITION OF CERTAIN PROPERTY BY PROCEEDINGS IN EMINENT DOMAIN ON LOT 1, BLOCK 1, SYLVAN HILLS PLAT 7, 248 MISSISSIPPI STREET N.E., FRIDLEY, MINNESOTA. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. 4. STATUS REPORT ON COLUMBIA PARK PROPERTIES EXPANSION PROJECT: Mr. Qureshi stated in 1982, the HRA entered into an agreement with Columbia Park Properties for construction of their clinic as the first phase of development. He stated part of the agreement was the option to acquire the property west of the clinic -for an addition. Mr. Qureshi stated there were communications this spring with Columbia Park Properties regarding their plans to proceed with this addition and to make sure the construction would be in conformance with the agreement entered into with the HRA. Mr. Qureshi stated a communication was received from Columbia Park Properties on June 12, 1986 where they indicated they would be unable to proceed with this development and wanted to make arrange- ments to lease the property. Mr. Van House, Columbia Park Properties, stated the development for Columbia Park Properties has been an excellent experience and they continue to plan for expansion and to expand their practice at the Fridley location. He stated a number of factors have happened in the health care community since 1982 characterized by a tremendous amount of competition led by the HMO organizations. He stated their practices have not been growing as fast as anticipated, however, they are expanding at other sites including a $5,000,000 project in Columbia Heights. Mr. Van House stated Columbia Park Properties feel they have to be more conservative in their building plans for the next several years, but if they continue to grow, they should be in a position to expand at Fridley. He stated Columbia Park Properties has three other locations and the Fridley facility is their specialty center and serves as a feeder from the other clinics. HOUSING & REDEVELOPMENT AUTHORITY MEETING. JULY 10, 1986 PAGE 4 • Mr. Van House stated they are asking for continued support from the HRA in resolving a short term problem with their parking. He stated they have a temporary permit for some gravel parking, how- ever, it expired the end of June and they need some remedial action in order to continue the parking. Mr. Qureshi stated because Columbia Park Properties have decided not to expand at this time, they propose to lease the property to serve their parking needs. He stated the HRA would have to decide whether they wish to extend the option for two more ,years by leasing property to them. He stated, hopefully,before the end of the two years, Columbia Park Properties can firm up their plans and proceed with construction. He stated if this cannot be accomplished, they would have no further rights to the property. Mr. Qureshi stated from a planning point of view; it makes more sense for the clinic to expand rather than bringing in-another development to the west of the clinic's property. Mr. Qureshi stated staff would recommend the HRA enter into a lease agreement for two years beginning June 1, 1986 at the rate of $15,000 per year. He stated after this period, the option on the property would expire. He stated the portion of the property used for parking should be blacktopped and the balance restored as it was before the temporary parking permit. . MOTION BY MR. PRAIRIE, SECONDED BY MR. MEYER, TO APPROVE THE PROPOSAL SET FORTH BY THE HRA DIRECTOR FOR THE HRA TO EXTEND THE OPTION ON THIS PROPERTY FOR TWO YEARS ON THE CONDITION COLUMBIA PARK PROPERTIES SATISFACTORILY BLACKTOP A PORTION OF THE PROPERTY TO BE USED FOR PARKING AND RESTORE THE BALANCE TO THE CONDITION IT WAS IN BEFORE, WHICH IS SODDING. IF AT THE END OF THIS TWO YEAR PERIOD, CON- STRUCTION HAS NOT BEGUN, THE OPTION THEY HAVE TO PURCHASE THE PROPERTY WILL ALSO EXPIRE. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. 5. UPDATE ON LAKE POINTE CORPORATE CENTER: This item will be considered later in the meeting. 6. STATUS REPORT ON PARKING FOR FRIDLEY PLAZA OFFICE BUILDING PARTNERSHIP: Mr. Qureshi stated the HRA received a copy of a letter sent to Mr. Doty and the trustee of the Fridley Plaza Office Building Partnership dated June 30, 1986, by Mr. Dave Newman. He stated this letter is in regard to non - payment for use of the parking lot. Mr. Newman stated the HRA received a copy of the lease they entered 40 into with the Fridley Plaza Office Building Partnership for joint use of the parking Lot. HOUSING & REDEVELOPMENT AUTHORITY MEETING, JULY 10, 1986 PAGE 5 Mr. Newman stated the lease provides that beginning on July 1 of last year, the tenant was to pay rental of $800 per month for the non - exclusive use of the parking lot. He stated none of the pay- ments have been made. Mr. Newman stated correspondnece has been sent to Mr. Doty regarding his intentions, but no formal response has been received. Mr. Newman stated a letter was sent on April 30, 1986 to Mr:. Doty and the trustee regarding this default. .He stated he has not re- ceived any written correspondence in reply to his letter. Mr. Newman stated he felt the HRA should be aware of this situation so a determination can be made on how they wish to proceed. Mr. Doty stated the lease also provides for 166 parking spaces and there are only 142 and this number decreases with spaces reserved for City visitors and vehicles and the handicapped parking. He stated there has been a parking problem for the last 18 months and it has been that long since he brought it to the attention of City officials. He stated to ignore the problem isn't much of a solution. He stated the $800 /month isn't the problem, but he wants someone to talk to them to resolve the parking problem. He stated if there were 166 spaces, there wouldn't be a problem. • Mr. Qureshi stated arrangements have been made with Target to use their lot to park 27 vehicles. He stated if you take that into consideration, there are more than 166 spaces for the City Hall and the office building. He stated there are spaces available to park 166 vehicles, even though all of these aren't striped. Mr. Qureshi stated if it is the desire to show 166 parking spaces, others could be striped to meet this requirement. He stated the argument that they don't have 166 parking spaces so,they are not going to pay the amount provided for in the lease agreement doesn't seem reasonable. Mr. Doty stated all he is asking is for his day in court and for someone to listen. He suggested the parking between the office building and City Hall be designated as visitor parking and limited to one -half hour, with ten minute parking along the curb. He stated if the width of the parking spaces was reduced from 10 feet to 9 feet, you would gain 12 additional spaces. Mr. Doty stated both the clinic and Target have nine foot parking spaces. Mr. Qureshi stated he has discussed with the City Council the possibility of reducing the width of some parking spaces. Mr. Comers asked who was responsible and why someone hadn't talked with Mr. Doty. HOUSING & REDEVELOPMENT AUTHORITY MEETING, JULY 10, 1986 PAGE 6 Mr. Newman stated he felt several efforts were made a letter in which he would received. this was a two -way street. He stated to contact Mr. Doty and he promised outline his position, but it was never Mr. Doty stated he does plead guilty in not writing a letter, but would rather talk to them in person. Mr. Commers felt staff and Mr. Doty should try to solve this problem and if they cannot, the HRA will then address it. Mr. Meyer stated if the HRA is guaranteeing 166 parking spaces, he feels they have an obligation to furnish these and, if this cannot be done, the lease agreement should be revised. Mr. Doty stated it has been suggested the cost be reduced on a pro - rata basis. He stated the issue isn't really the cost, but there isn't sufficient parking. Mr. Newman stated he and staff would try to solve this problem with Mr. Doty. He stated if it can't be resolved by the next meeting, it may be necessary to proceed with some legal action. 7. WINFIELD DEVELOPMENT'S REQUEST FOR ASSISTANCE: Mr. Qureshi stated Mr. Winkels appeared before the HRA at their last meeting and advised them about the soil problems at their proposed construction site. He stated Winfield Development is requesting assistance from the HRA to correct the soil problems. Mr. Qureshi stated the HRA in the past has provided assistance for soil correction to several developments such as Mr. Paschke's, Johnson Printing and Vantage Companies. He stated staff would recommend the HRA provide $30,000 in assistance as the_6stimated Lost for correction is in excess of $116,000. Mr. Winkels stated 15,000 yards of material need to be removed. He stated he understands there is some concern why they didn't take this into consideration when the property was purchased four years ago. He stated they did not anticipate the severity of the problem and it came to light when the U.S. Swim & Fitness Club was under construction. Mr. Winkels stated the material to be removed is where actual construction of the building would take place and a part of the parking area. He stated it doesn't involve the entire site, but goes beyond the building itself. Mr. Qureshi stated the property is not in a Redevelopment District. He stated if this was the desire of the HRA, it would be necessary to go through the formal procedures to include it in the increment district. HOUSING & REDEVELOPMENT AUTHORITY MEETING, JULY 10, 1986 PAGE 7 • Mr. Meyer stated he thought it was unusual that Winfield Develop- ment didn't have knowledge of the poor soil conditions when they purchased the property. Mr. Winkels stated they did have soil tests done and the logical question now is if they are coming back after the fact. He stated the severity of the problem was not known at that time. Mr. Winkels stated they are trying for an upscale project and all indicators are the market is right for such a building. He stated they can't construct something that doesn't make sense economically. He stated they may be asking for a fair amount in terms of percent- ages, but didn't feel it was out of line in terms of the value of the project and amount of taxes generated. Mr. Commers stated the recommendation from staff is for $30,000 in assistance. He asked Mr. Winkels if he was saying if they have the $90,000 requested the project would definitely proceed. Mr. Winkels stated they have to make some decisions in the next several weeks and should know if they will receive the bond. He stated he is not saying if they don't receive the assistance, the project wouldn't proceed. He stated they want to have all the information available to make the best decision. Mr. Qureshi stated taking into account what has been done in the past, $30,000 seems a reasonable figure, but it is the HRA's prerogative to increase or decrease this amount. Mr. Prairie stated it may be a little higher than the others, but seemed reasonable. Mr. Meyer stated if the facts are that the soil correction is going to be, basically, under the building, it is crucial to the develop- ment and felt the $30,000 figure was reasonable. MOTION BY MR. MEYER, SECONDED BY MR. PRAIRIE, TO APPROVE, IN CONCEPT, $30,000 IN ASSISTANCE TO WINFIELD DEVELOPMENT TAKING INTO CONSIDERATION THE FACTS KNOWN TODAY AND DIRECT STAFF TO DRAW A FORMAL AGREEMENT FOR THE NEXT HRA MEETING TO TAKE THE NECESSARY STEPS TO INCLUDE THIS PROPERTY IN THE INCREMENT DISTRICT. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. 8. CONSIDERATION OF FINAL PAYMENT FOR TARGET PROJECT: Mr. Commers asked about the $60,000 excess proposed to be set aside for future perimeter improvements. Mr. Qureshi stated this excess could be handled in several ways; either to set this amount aside for future improvements in-Phase II or to close Phase I,of the Target project. He stated future improvements could be considered in conjunction with the Mississippi Street improvement. HOUSING & REDEVELOPMENT AUTHORITY MEETING, JULY 10, 1986 PAGE 8 MOTION BY MR. PRAIRIE, SECONDED BY MR. MEYER, TO RECEIVE THIS INFORMATION AND INSTRUCT STAFF TO CLOSE THE TARGET PROJECT WITH THE EXCESS TO BE RETURNED TO THE HRA'S GENERAL FUND, WITH THE UNDERSTANDING ADDITIONAL IMPROVEMENTS WILL HAVE TO BE DONE IN CONJUNCTION WITH THE MISSISSIPPI STREET IMPROVEMENT. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. 9. CLAIMS: MOTION BY MR. MEYER, SECONDED BY MR. PRAIRIE, TO APPROVE THE CHECK REGISTER DATED JULY 10, 1986. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. Mr. Robertson stated a claim has been received from Storer Cable in the amount of $5,000 for the relocation of underground cable. He stated the HRA has previously agreed to pay this cost and the work has been completed and a certificate of completion submitted. MOTION BY MR. PRAIRIE, SECONDED BY MR. MEYER, TO AUTHORIZE PAYMENT OF $5,000 TO STORER CABLE FOR THE RELOCATION OF UNDERGROUND CABLE. . UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. 10. OTHER BUSINESS: A. RICE PLAZA_ - MR. LEVY: Mr. Levy, Rice Plaza, stated he would like to request the HRA to either remove Rice Plaza from their Redevelopment District or proceed with a plan to acquire the entire parcel. Mr. Levy stated he understands the County has engaged appraisers to look at the property on a joint basis relative to the needs of the HRA and County. He stated he understands the appraisers have pro- vided some preliminary information. Mr. Commers stated the HRA has not been presented with any infor- mation from the appraiser. He stated he had no problem with considering this item at the next meeting, if figures are available. Mr. Qureshi felt two elements are involved. He stated one is the general philosophy if the HRA wants to acquire the property at this time when they don't have approved plans for this site. He stated, on the other hand, if the HRA felt it was prudent to acquire it, cost figures would have to be presented at the next meeting. iMr. Commers felt this should be done so some decision could be made whether or not to acquire the property so Mr. Levy and his tenants will know where they stand. HOUSING & REDEVELOPMENT AUTHORITY MEETING, JULY 10, 1986 PAGE 9 Mr. Commers stated the history of the HRA has been, unless there is a specific purpose to acquire property, they are hesitant to do so and hold it for any length of time. He felt the distinction here if property is being taken for right -of -way and the Lundgren project, it would make sense to proceed and perhaps acquire the entire parcel. He stated, however, they may not financially be in a position to do so. Mr. Prairie stated he has not heard of any costs and felt further information was needed before considering this item. Mr. Meyer stated he is not philosophically opposed to taking the entire parcel. He stated it would depend on the cost and these figures should be available by the August HRA meeting. Mr. Levy stated there is a "range" figure, but he hasn't had a chance to evaluate it. He felt if they don't reach a point after the August meeting where the HRA either takes them out of the Redevelopment District or have a negotiation process to acquire the property, the lines would be drawn from which they could work. He stated he would wait until the August meeting so the HRA can review the cost figures. Mr. Levy stated the appraiser is reluctant to share the figures without specific authorization from the County and HRA. He stated he would like the opportunity to review them and respond before the August meeting. Mr. Newman stated he didn't have a problem with the appraiser re- leasing these figures, but it is the County who ordered the appraisal and he would have to contact them. Mr. Commers asked Mr. Newman to convey to the County that the HRA has no objections to disclosing these appraisal figures. Mr. Newman stated it would seem prudent to have Mr. Levy's feedback for the next meeting. B. APPOINTMENT OF HRA EXECUTIVE DIRECTOR: Mr. Qureshi stated in accordance with an agreement between the City and the HRA, it is necessary for the HRA to approve the selection of an Executive Director. He stated Mr. Jock Robertson was hired as the City's Community Development Director and has assumed the job res- ponsibilities once held by Jerry Boardman who served as the Executive Director of the HRA. Mr. Qureshi stated an informational packet regarding Mr. Robertson's background has been submitted to the HRA and he would recommend Mr. Robertson be considered for appointment as the Executive Director. HOUSING & REDEVELOPMENT AUTHORITY MEETING, JULY 10, 1986 PAGE 10 • Mr. Commers stated he felt this matter should be carried over to the next meeting and placed on the HRA's agenda as A formal item . so a vote may be taken by the HRA. C. APPOINTMENT OF VICE - CHAIRPERSON OF THE-HRA: Mr. Commers requested that the appointment of a Vice - Chairperson for the HRA be placed on the agenda for the next meeting. RECESS: Chairperson Commers declared a recess at 9:05 p.m. RECONVENED: Chairperson Commers reconvened the meeting at 9:30 p.m. The following members were present: Chairperson Commers, Duane Prairie, John Meyer and Walter Rasmussen. 5. UPDATE ON LAKE POINTE CORPORATE CENTER: Mr. Newman stated the HRA has received correspondence outling the summary of some proposals staff presented in an attempt to resolve the impasse with Woodbridge Properties. • Mr. Newman stated a meeting was held on Tuesday, July 8, 1986 which Chairperson Commers attended and what evolved from that session were suggestions the developer should meet certain benchmarks for con- struction. He stated the developer didn't want to be tied to a certain schedule because of fluctuations in the market and conflicts with permits. He stated, by the same token, the staff wanted certain requirements for performance through the course of this development. Mr. Newman stated the developer was concerned because of the delays with the Indirect Source Permit and contracts being re -bid, he is incurring some damages. He stated when construct ion_ does. commence, landscaping will not be completed as originally visioned. Mr. Newman stated the concept proposed was if the developer could complete the entire project and meet benchmarks of 120,000 square feet completed by next year; 200,000 square feet completed in five years; 400,000 square feet completed in ten years and 749,000 square feet completed in fifteen years, he probably should be entitled to the $5.6 million revenue note plus interest. Mr. Newman stated if the increment isn't sufficient to make the annual payment, it is lost forever. He stated if the developer is able to meet these benchmarks, the payment could be recovered at the end. HOUSING & REDEVELOPMENT AUTHORITY MEETING, JULY 10, 1986 PAGE 11 • Mr. Newman stated it is anticipated the costs of the public im- provements will exceed the amount budgeted. He stated it was agreed the HRA will share those costs with the developer to the extent they exceed the original projections. Mr..Newman.8tated the HRA agrees to make the improvements to Highway 65 which may be required under the Indirect Source Permit. He stated the parties will cooperate to obtain the Indirect Source Permit for the least amount of improvement to Highway 65. Mr. Newman stated the next step would be for the developer to provide the sum of $1,000,000 to the HRA and they, in turn, would provide him with a deed for Phase I parcel and then complete acquisition of the Johnson property. He stated within 15 days after receipt of the $1,000,000, contracts would be awarded for the public improvements, with the exception of the landscaping. Mr. Newman stated within 12 months of awarding the first contract, the HRA agrees to complete the improvements on the site. Mr. Newman stated construction would commence four months after conveyance of this parcel or by November 30 of this year, with construction completed within 30 months. He stated the buildings would be substantially completed, but the interior walls may not be in place until space is leased. Mr. Newman stated those dates of completion may be delayed in the event the permits which need to be issued by the City are not given. He stated the City would not unreasonably withhold the permits if plans are consistent with the agreement. Mr. Newman stated if the City can't have the improvements of Highway 65 finished by July 1, 1989 because of requirements of the Indirect Source Permit, the developers obligation to meet these construction deadlines will be set back for a likely amount of time. Mr. Newman stated if the developer completes the construction schedule and the increments are not sufficient, the HRA agrees to pay that sum to him. He stated those arrearages will accrue interest at the rate of 90 day Treasury Bills and if an arrearage occurs, it allows the HRA to go in and fund those arrearages. Mr. Newman stated Woodbridge, to date, has incurred some substantial engineering costs estimated at about $75,000 for preparation of the public improvements on the site. He stated Woodbridge has decided to front those expenses, however, once the $1,000,000 is paid, the HRA would reimburse for these costs providing they are reasonable and in line with customary charges. Mr. Commers stated this was the first time he had heard about these charges and asked if it was written that they reimburse the consultant or the developer. Mr. Newman stated they would reimburse the con- sultant. HOUSING & REDEVELOPMENT AUTHORITY MEETING. JULY 10, 1986 PAGE_ _12 Mr. Qureshi stated there was a similar approach in the other agree- ment that when the $1,000,000 was received, the HRA would take res- ponsibility for the engineering costs. Mr. Rasmussen asked if there was a list on these costs. Mr, Qureshi stated they should be reasonable and comparable to industry standards. Mr. Rasmussen stated that he does not want the developer to keep coming back to IJRA for fkurfW alssistance every t me e h s s�ine problemfs yer as a i. p ans were prep re un er t�e irection o the developer. Mr. Qureshi stated it was a combined effort between the developer and the City staff. Mr. Meyer asked if these plans were designed according to standards and concepts agreed to by the City staff and if the City controlled development plans just as though the developer wasn't in the picture. Mr. Flora answered in the affirmative. Mr. Newman stated what is proposed is a significant departure re- garding the level of assistance provided to the developer. He stated due to the scope and quality of the development, the HRA can justify why they may want to deviate from their customary practices. Mr. Newman stated increment will go to pay the General Obligation Bond and if not enough increment is generated to pay the Limited Revenue Note that-is lost forever. Mr. Newman stated if the developer meets the benchmark standards, then the HRA guarantees he will re- ceive all the payments he is guaranteed under the Limited Revenue Note. Mr. Meyer stated he felt the development schedule was ultra- conservative. He questioned if there was any way the developer could assign all the rights granted to him to some other developer. Mr. Newman stated this could be done, but all the agreements would remain in force. Mr. Rasmussen asked if the HRA would have the right to approve or disapprove such an arrangement. Mr. Newman stated he believed they would not. Mr. Prairie asked if this occurred, if the quality of the development had to be maintained. Mr. Newman stated there is a quality develop- ment plan attached to the agreement and a developer would be required to meet these standards. Mr. Newman stated the agreement was restructured, after consultation with the bond counsel, and if the HRA concurs with this agreement, it could be approved subject to technical changes as he felt some phrasing may have to be reworded. He stated he wanted to further clarify that even though the HRA is guaranteeing this payment, it isn't going to impair the ability of the HRA to proceed with other • developments. • HOUSING & REDEVELOPMENT AUTHORITY MEETING, JULY 10, 1986 PAGE 13 Mr. Newman stated it is possible for the developer to meet his construction schedule and not make enough increment to pay his Limited Revenue Note. He stated the HRA is then obligated to make up that deficiency. Mr. Newman stated it is extremely un- likely this would occur. He stated if the developer is meeting his benchmarks and the increments aren't sufficient, the HRA can buy a Treasury Bill to secure its potential future obligation. Mayor Nee asked if something changed in the agreement`to go beyond an- 18...year payment. Mr. Newman stated because of the initial delay and construction could not begin as intended, the developer believes it is costing him considerably. Mr. Newman stated he will also not be able to proceed with the next phaseof construction until all the re- quirements of the Indirect Source Permit have been met. Mayor Nee stated he did not like the option for the extra seven years. He felt to extend it one year would be acceptable, but to extend it for seven years is another issue. Mr. Newman stated it is extremely remotethis would happen if develop- ment= occurs as under this agreement. He stated if, in fact, the developer performs according to this standard, he believed the benefit will be such that he will receive his payments under the Limited Revenue Note in the stated 18 years. Mayor Nee stated he can accept the extra $1,000,000 for improvement of the intersection, but it bothers him that they can't go forever in tapping the public coffers on increment, sometimes it has to pay back. Mr. Newman stated if this project is completed, it will be the largest total development in the City and have the largest concent- ration of employees. He stated it is the decision of the HRA and City Council to make a determination if it is worth it and to deviate some from their norms. Mayor Nee stated when you talk about a 25 year payoff, something more has to revolve. He stated the revenue bond is changed and made a guarantee by the HRA and it wasn't this way before, and to guarantee the entire bond is an entirely different story. Councilman Barnette stated the concensus of the Council was to go along with the extra year because of delays in construction, but felt limits needto be set. Councilman Schneider stated the risk has shifted to the City and it shouldn't be there. HOUSING & REDEVELOPMENT AUTHORITY MEETING, JULY 10_, 1986 PAGE 14 • Mr. Newman thought it could be looked at in two ways. He stated there is a greater obligation by the HRA, but the developer is taking the risk of meeting these construction phases schedule. Mr. Weir stated when they began plans for this project, no one knew they would be limited to one building. He stated as a result of the requirements imposed by the State through the Indirect Source Permit, they cannot market any space on this property, other than the one building and restaurant, until improvements are made to the intersection. He stated this is a major difference than what was contemplated and what they wished to accomplish on this site. Mr. Weir stated they would prefer not to have a schedule. He stated they are in the business of investment building and may not have tenants when they begin construction, as opposed to having a tenant sign a lease and then begin construction of their building. Mayor Nee felt if they are going to renegotiate the contract, it should go back to the beginning. He stated he assumes an experienced builder would know what is required such as the Indirect Source Permit. He felt when they entered into the agreement, the developer accepted this kind of hazard. He stated he didn't agree it was 100% of the City's responsibility to anticipate the reaction of the Highway Depart- ment and the Pollution Control Agency. He stated staff convinced him to pay the cost of the intersection improvement, but beyond that he has problems. Mr. Meyer stated he is concerned and understands the agreement has been broadened far beyond the original agreement. He stated he had previ- ously expressed his opinion that the HRA had gone about as far as they could on the basis of staff recommendations. He asked if staff felt they could go from 18 to 25 years. Mr. Newman stated they aren't agreeing to it, but it is a possibility. Mr. Commers stated the HRA is saying this is a Redevelopment District set up for 25 years. He stated it is agreed everything would be done in 18 years, but since it is a 25 year district, there is the option to re' -bond to-the extent of the.full district. He stated bonds were issued for a shorter period, even though it was a 25 year district. He stated it seems it would be better to pay it off_as_soon as possible to-free additional funds. Mr. Newman stated under the original agreement, the note itself would have been paid off in 18 years and, if there were any arrearages, they would have been forgiven. He stated because of the survival of arrear- ages, there is a potential to fund that payment for a longer period. Mr. Qureshi stated this development will be quality construction and, when the completed, the value would be about $80,000,000. He stated • the decision to be made by the HRA is if it is worth the risk. HOUSING & REDEVELOPMENT AUTHORITY MEETING, JULY 10, 1986 _ ___ PAGE 15 . Mr. Qureshi stated the help would be about 15% upfront and if the developer performs to the standards set by the HRA, he receives his money or else he loses. He stated the agreement provides if the increment received is not sufficient to make any of the scheduled payments under the Limited Revenue Note, the HRA would pay the loss with interest. Mr. Qureshi stated Mr. Weir is willing to forego the interest, if given more time for construction of the first building. Mr. Qureshi stated the question has been asked if the HRA is giving too much. He stated there is so much uncertainty in the market and tax structure so this would be a difficult question to answer. He felt substantial help is being provided, but if the anticipated quality development occurs it would be worth it. Mayor Nee stated the HRA is guaranteeing the payment of the note and this wasn't in the original agreement. Mr. Qureshi stated it is guaranteed only if the developer performs as outlined in the agreement. Mayor Nee stated the present agreement states if he performs, the HRA will pay off the note. Mr. Qureshi stated what was in the previous agreement was the developer loses the note, if he doesn't perform. Councilman Schneider asked why increment wouldn't be generated if the developer performs to the standards outlined in the agreement. Mr. Commers stated there may not be enough taxes generated to obtain the increment. Mr. Qureshi stated the question is if the developer performs, should he get the revenue note paid. He stated there are'certain benchmarks for this development which must be met-and if this is done, only then does he receive the additional HRA help. Mr. Weir stated no one believed the Indirect Source Permit would have restrictions over the rate of their development. He thought they would be able to construct three or four buildings at a time in order to make the increment available. He stated the PCA is now requiring a complete installation of the improvements as opposed to simply an endorsement that improvements will be completed. Mr. Weir stated if construction cannot proceed, it may preclude delivery of the incre- ment. Mr. Commers stated there are a lot of technicalities they could get into, but felt it comes down to the issue if the HRA wants the project and, if the developer performs, should the HRA guarantee he gets his money. He stated if he doesn't perform, he would lose. Mr. Commers • stated there is no question, if the developer performs, the HRA will HOUSING & REDEVELOPMENT AUTHORITY MEETING, JULY 10, 1986 PAGE 16 have substantial tax increment to meet all their obligations. He stated it is the question of how they capture it and how-they use it. Mr. Qureshi suggested two changes be made in the Addendum to-the Contract with Lake Pointe Investment Company dated July 9, 1986. He stated one change would be to extend the date of completion for the first 120,000 square feet from December, 1987 to June, 1988. He stated the other change is to eliminate the interest payments on the Limited Revenue Note which is covered under Item 11 of the agreement. Mr. Commers stated there are some other technical items that need to be reviewed for possible change. Mr. Rasmussen asked if more time was needed to refine the agreement. Mr. Qureshi stated if the HRA felt the general structure of the agree- ment was reasonable, it should be approved because time is of the greatest essence as several months of the construction season have already been lost. Mr. Qureshi stated if the agreement is approved, he would request a special Council meeting on July 14 to consider the bids. Mr. Newman stated he understands Mr. Prairie has indicated he would abstain from any vote on this agreement as his construction company is one of the bidders on this project. MOTION BY MR. RASMUSSEN, SECONDED BY MR. MEYER, TO APPROVE THE ADDENDUM TO CONTRACT FOR PRIVATE REDEVELOPMENT BY AND BETWEEN THE HRA AND LAKE POINTE INVESTMENT COMPANY DATED JULY 9, 1986 WITH THE DATE FOR SUB- STANTIAL COMPLETION OF THE FIRST 120,000 SQUARE FEET TO BE CHANGED FROM DECEMBER 31, 1987 TO JUNE 30, 1988 AND TO ELIMINATE THE INTEREST PAYMENTS ON THE LIMITED REVENUE NOTE AS COVERED UNDER ITEM 11 OF THIS AGREEMENT. UPON A VOICE VOTE, CHAIRPERSON COMMERS, MR. RASMUSSEN, AND MR. MEYER VOTED AYE, MR. PRAIRIE ABSTAINED FROM VOTING. CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. Mr. Weir stated if it wasn't for the commitment they had from day one from the HRA, City Council and staff, they would be looking at a far different concept plan for this site. Councilman Barnette stated to Mr. Commers that at the last meeting, he was very adamant about his feelings the HRA gave all they could for this project. He stated he respected that position, but now has the feeling he is convinced the action taken by the HRA is good. Mr. Commers stated in evaluating the risk the HRA is undertaking, he felt it was very minimal in respect to the benefits they would • receive. HOUSING & REDEVELOPMENT AUTHORITY MEETING, JULY 10, 1986_ PAGE 17 • Mr. Qureshi stated it may be appropriate to ask Mr. Weir if the agreement is acceptable to him. Mr. Weir stated as a matter of procedure, he would recommend it to the pension fund people who are involved with this project. Mr. Commers stated he hopes the developer will be able to perform like everyone wishes. Mr. Weir stated they are looking forward to being here in Fridley a long time. Mr. Qureshi stated he has expressed his feelings before that the only reason staff felt they should proceed is because of the quality of this project and the ultimate benefit to the community. He stated he hoped they have arrived at an agreement and can proceed full force to get this project accomplished. He stated he recognizes no one can predict the future, but if the past is any indication, he felt this develop- ment would be one of the greatest in the State of Minnesota. Mr. Qureshi stated he appreciated the help of Mr. Commers as he felt he had contributed new ideas to move forward with the project. Mr. Commers thanked staff for all their time and determination in negotiating an agreement: • ADJOURNMENT MOTION BY MR. RASMUSSEN, SECONDED BY MR. MEYER TO ADJOURN THE MEETING. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY AND THE JULY 10, 1986, HOUSING & REDEVELOPMENT AUTHORITY MEETING ADJOURNED AT 11:05 p.m. Respectfully submitted, Carole Haddad Recording Secretary