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HRA 10/11/1990 - 29614�`�, � ,� CITY OF FRIDLEY HOIIBING & REDEVELOPMENT AIITHORITY MEETING, OCTOHER il� 1990 .,��������������������..��������_..��������������»����....����..������� CALL TO ORDER: Vice-Chairperson Schnabel called the October 11, 1990, Housing and Redevelopment Authority meeting to order at 7:10 p.m. ROLL CALL• Members Present: Virginia Schnabel, Duane Prairie, John Meyer Members Absent: Larry Commers, Walter Rasmussen Others Present: Jock Robertson, Executive Director of HRA Virgil Herrick, City and HRA Attorney Paul Hansen, Accountant Jim Casserly, Development Consultant Jerry Brill, representing Ashland oil/Rapid Oil Doug Erickson, Fridley Focus APPROVAL OF SEPTEMBER 13 1990. HOUSING & REDEVELOPMENT AUTHORITY MINUTES• MOTION by Mr. Meyer, seconded by Mr. Prairie, to approve the September 13, 1990, Housing & Redevelopment Authority minutes as written. IIPON A VOICE VOTE, ALL VOTINa AYE, VICL-CHAIRPER80N SCHNABEL DECLAR�D THE MOTION CARRIED IINANIMOIIBLY. ESTIMATES• 1. TALBERG LAWN & LANDSCAPE (LAKE POINTE): MOTION by Mr. Prairie, seconded by Mr. Meyer, to approve the payment to Talberg Lawn & Landscape in the amount of $4,458.22. IIPON A DOICE VOTE� ALL VOTING AYE, VICE-CHAIRPERSON BCHNABEL DECLARTsD T8E MOTION CARRIED UNANIMOIISLY. 2. R NELSON ENGINEERING (SOUTHWEST 4UADRANT 5TORMWATER); Mr. Robertson stated this estimate is in connection with the corporation which is looking seriously at the southwest quadrant. City staff wanted to furnish information to this corporation on how this stormwater should be handled and the approximate costs. This information was completed satisfactorily by R. Nelson Engineering, and staff recommends approval. �. HOIISINd & REDEVELOPMENT AIIT80RITY MTG.. OCT. 11, 1990 PAGE 2 O�I TION by Mr. Meyer, seconded by Mr. Prairie, to approve the payment to R. Nelson Engineering in the amount of $1,800. UPON A VOICE VOTE, ALL VOTING AYE, VICE-CHAIRPERBON BCHNABEL DECLARED T8E MOTION CARRIED IINANIMOIIBLY. 3. CLAIMS (2066-2075): MOTION by Mr. Prairie, seconded by Mr. Meyer, to approve the check register as presented. IIPON A VOICE VOTE, ALL VOTING AYE, VICE-CHAIRPER80N BCHNABEL DECLARED THE MOTION CARRIED IINANIMOIISLY. Mr. Hansen stated that regarding tax increment revenue return to the school districts, the HRA wanted staff to start working on this in the fall. However, they are going to have to wait until after the general election because the four school districts are attempting to pass referendums. He stated staff will try to have something prepared for the November meeting. 4. STATUS OF THE CORRECTIVE ACTION (CLEAN-UP) AT 57TH PLACE: /'� Mr. Robertson stated staff received a copy of the letter the MPCA sent to the previous owner of the Rapid Oil Company. After receiving the letter, he contacted Delta Environmental who referred him to Art Newby, the Consulting Engineer for Ashland Oil Company. Mr. Newby told him they had been working on this for about one month. There is some detailed testing work which will determine th f' 1 number and location of both the withdrawal wells and the e ina monitoring wells. Mr. Newby estimates it will take about one more month for the detailed work to be completed. Mr. Newby also estimates the clean-up program, once commenced, may take from 5-10 years. Mr. Robertson stated he believed it will probably be about another month before anyone will know what the site constraints are while the contaminated water is being pumped from the recovery wells. Mr. Robertson stated there is going to be an aeration operation in addition to the separation tank, and the City might want to know how large the tank is and if it can be removed and put off to the side of the site so that the site can be redeveloped while the withdrawal is going on. He will ask this question of Mr. Newby. Mr. Robertson stated he has also asked Mr. Virgil Herrick to contact the Assistant AG for the Petro Board to give the City an update on what the City's legal liability may be if they were to ^ proceed to acquire the site for redevelopment while the treatment and cleanup is going on. �„ HOIIBINa � REDEVELOPMENT AIITHORITY MTa.. OCT. 11, 199Q PAGE 3 Mr. Herrick stated he was unable to contact the Assistant AG, but he did sufficient research to answer these questions. He stated there is no question that if the HRA becomes owner of the property, under the state and federal law, it would be determined that the HRA is the responsible party. However, in this case, because Ashland Oil is a substantial corporation and because their liability would be primary to the HRA's, the practical effect of that legal liability would not be great. As the HRA is aware, there is a state fund that refunds up to 90� of the costs of treatment, and that would apply to anyone who has to expend money for treatment. In the first instance, the refund would to go Ashland Oil for whatever they e�end. If the HRA acquired the property and expended money in the future, the HRA, too, would be eligible for the 90� reimbursement. There is a total limit on each site of $250,000. Mr. Herrick stated there is another factor that the HRA ought to keep in mind. That is: If the HRA acquired title and did not have a developer in hand, then the HRA might have to give some thought to whether this pollution problem would be an obstacle as far as getting financing for any future development. Usually in these cases, the financial institutions want to check with the PCA to see what the problem is and what is being done about it, but financial institutions also universally require that a developer issue some ,� sort of a hold harmless agreement as far as the financial institution is concerned. If the HRA has a strong developer financially, then they can do this by way of an indemnity agreement or letter of credit or whatever the financial institution requires. If they have a developer that is not financially strong, then the HRA might have a problem, and this could be an additional hurdle for some developer to get financing. The safest approach would be to have a development agreement in hand and to make sure the developer has secured financing before the HRA considers acquiring the property. But, if, for whatever reason, the HRA feels they have to or want to acquire the property without having a developer in hand, they then have this additional consideration. Mr. Jerry Brill stated Ashland Oil has requested a rezoning for the purpose of redoing the Rapid Oil facility. This all depends, however, on the outcome of the concerns about pollution and the City's interest in the property. Rapid Oil is quite anxious to do something with this property to make it a more economically viable business. As far as the clean-up, Ashland Oil has never tried to duck their responsibility and they will do their part. 5. STATUS OF WINFIELD PROPOSAL FOR 57TH PLACE REDEVELOPMENT: Mr. Robertson stated that at the last meeting, HRA was shown an outline of a development agreement prepared by Jim Casserly that � was forwarded to Winfield at the end of August. He spoke to Mr. Bubany, who said he did not wish to proceed until his primary �„ HOIIBING & RED�VELOPMENT AIITHORITY MTG., OCT. 11, 1990 PAGE_4 financing is lined up and until the extent of the pollution is known. Mr. Robertson stated he then met with Bill Fogerty, who informed him that the major anchor tenant, Crosstown Bank, is now uncertain whether they wish to proceed with a branch bank at this location. Mr. Robertson stated Mr. Fogerty stated he wanted to proceed with the project on his own. Mr. Fogerty verbally outlined the following counter-proposal and said he would follow up with a written proposal. 1. HRA would acquire the Rapid Oil site through condemnation. 2. Fogerty, in addition to the duplex which he acquired two years ago, would also acquire the garage and empty land behind it. 3. Fogerty would continue to pay taxes on the land he owns plus pay the taxes and interest on the Rapid Oil site at the same rate that is being paid today. 4. In exchange, the HRA would grant him exclusive right to develop the property for the next five years. The City ,� would not establish the TIF district or rebuild the streets and utilities until such time as the developer is ready to proceed. Mr. Robertson stated he has not yet received a written counter- proposal from Mr. Fogerty. Mr. Robertson stated he and Mr. Casserly conclude that they really do not have an experienced developer at this time for this specific proposal. What they have is a would-be developer with a desire to proceed, but who does not have a tenant who has made a location decision. He stated he believes it is in the HRA's best interest to seek another developer. Mr. Robertson stated that several months ago, staff presented the North Gateway Redevelopment Plan. One possibility would be to consider using the Rapid Oil site as an extension of the housing development which is being considered for the Phase II property directly to the north. So, rather than create a 2 1/2 acre redevelopment site for commercial, they would look at the existing street and utility pattern and see what could be put on this site in terms of residential as part of the whole residential alternative being explored by staff. Residential would start right at 57th Avenue and go north to the Alanon building. That would provide a larger mass of redevelopment land for residential that might make the project more attractive for a residential developer. � With the HRA's permission, staff will analyze this alternative for the Rapid oil site. �"'�� HOIIBING & REDEVELOPMENT AIITHORITY MTG.� OCT. 11, 1990 PAGE 5 6. STATUS OF RIGHT-OF-WAY ACOUISITION FOR MISSISSIPPIf UNIVERSITY AVENUE INTERSECTION IMPROVEMENTS IN 1991: Mr. Robertson stated the City has petitioned Anoka County to contract for intersection improvements on Mississippi Street on both sides of University Avenue for the 1991 construction season. He wanted to emphasize that the Council has not confirmed proceeding with the Mississippi Street project. Mr. Robertson stated that if the Council confirms the improvements and wants to proceed, staff then has to look at acquiring the Dairy Queen in November when the season is over. There is a remote possibility the Dairy Queen will fit into the Fridley Town Square project on the old 10,000 Auto Parts site. Mr. Fitch, owner of the Dairy Queen, has been talking with Mr. Scott Erickson about this possibility. Staff hopes to have some form of commitment for the HRA to consider at the November meeting. In the meantime, Teri Mau, owner and operator of the beauty parlor and tanning salon in the Levy building, which the HRA recently purchased, has expressed interested in moving into the new Fridley Town Square shopping center if the project proceeds. She has asked the HRA to consider a trade-off where, instead of paying rent for a year, she would use that rent money to pay off her business loan and that would be r� deducted from her relocation entitlement. Mr. Robertson stated, again, until they know for sure whether the Fridley Town Square project will proceed, this item is moot. Obviously, the first step is to determine if the Fridley Town Square project will proceed. Ms. Schnabel stated that if nothing is done with the Levy building before the Fridley Town Square project, then none of the tenants in the Levy building will be entitled to any relocation. Mr. Robertson stated that is correct. What they have to consider is that this is a Fridley business and this would be a chance for this business to stay in operation in Fridley. That is a less measurable attribute, but none the less an attribute. Ms. Schnabel stated that is a real precedent setting issue, and she is not sure the HRA should get into this kind of situation. If one tenant is given special consideration, then every tenant could ask for the same thing. Mr. Robertson stated there are a lot of variables here. He stated Ms. Mau approached the staff with this offer, and he wanted to make the HRA aware of it. Ms. Mau is aware that staff cannot even evaluate it until they know more about the schedule for the ^ northeast quadrant. � � SOIISINa & REDEVELOPMENT AIITHORITY MTG.. OCT. il. 1990 PA�E 6 Ms. Schnabel stated this kind of deal would also have an affect on the HRA's relationship with Jim Kordiak as the manager of Rice Plaza, since Mr. Kordiak is entitled to 5� of the rent. Mr. Meyer stated the only way the HRA can give Ms. Mau relocation monies or any implication of it would be if the Levy building is going to be taken for redevelopment. 7. OTHER BUSINESS: a. Springbrook Apartments Mr. Robertson stated City staff has been approached by the owners of Springbrook Apartments, University Avenue Associates. As the HRA remembered, at the August 1990 meeting, the HI2A passed a one year extension of the HRA's subordination agreement of the HRA's second mortgage. They have now approached the City with a proposal for a ten year mortgage through John Hancock Insurance Agency. Mr. Robertson stated he has asked Mr. Casserly to look at this proposal because the financing proposed by the John Hancock Insurance Agency is a bit unusual in that there is an assumed growth in the final value and selling price of the project � from $16 million to $21 million. There is a certain amount of risk associated with this, and he would like Mr. Casserly to explain this a little further. Mr. Casserly stated that, as he understood it, Springbrook Apartments is still operating with its construction financing. University Avenue Aasociates have concerns with the problems of S& L's and take-out financing, so they have been doing a lot of work to find a permanent lender for their project. John Hancock Insurance Agency has made them a very interesting proposal. As he understood the proposal, what often happens with an insurance company or a lender is they want to have some equity participation. This financing is not that kind of an arrangement. What is happening is that the project has a$14 million construction loan against it. The project is worth around $16-18 million. Apparently, John Hancock Insurance Agency would allow University Avenue Associates to reimburse themselves, the developer, for all of the costs they had during lease-up. He is assuming there is a lot of other fees in the project (almost $2 million) they have never been able to take out. So, the mortgage company would actually allow them to take $16 million of financing against the project. If they take out the construction loan of $14 million, they would have $2 million left over for the other expenses. �� Mr. Casserly stated if it was just that arrangement, it probably would not be too much of a problem. The problem is ,� HOIISINa & RBDEVELOPMENT AIITSORITY MTa., OCT. 11, 1990 PAaE 7 � that the HRA has a second mortgage for $850,000, and they cannot place permanent financing on the project without dealing with the HRA's second mortgage. As soon as they pay off the construction mortgage, the HRA's mortgage moves up to # 1. And, anyone who f inances the proj ect wants to be in f irst position. So, no matter who they finance with, University Avenue Associates is going to have to have to ask for subordination again from the HRA. This would not be unusual, and this was originally what the HRA had bargained for. Mr. Casserly stated this is really interesting, because instead of putting a$16 million mortgage on the property, the day they close the financing, it is a$22 million mortgage. At the end of ten years, the developer has to sell the project or refinance it to pay off the $22 million mortgage. During the ten years, no principal is being paid at all--only interest. It is what is called a"reverse amortization", where the interest is not decreased; it is increased. Essentially, they would have a$22 million debt, and the HRA would stand behind the $22 million. In theory, they are really only paying on $16 million, because the balance they owe is increasing each year. At the end of ten years, they would pay off the HRA and do something with the project to pay off John Hancock Insurance Agency. Mr. Robertson stated the original payment schedule for the HRA's mortgage payment will stay the same. Mr. Casserly stated the developer is looking favorably at this kind of financing, and will be back with a proposal to the HRA. b. Fridley Auto Mall Project Mr. Robertson stated the HRA considered a request for tax increment assistance to the Fridley Auto Mall on 73 1/2 Avenue/University. At that time, the HIZA was quite skeptical about the project, as was the Council. The Council is now considering an alternative way to assist the project and get some surplus City land back on the tax rolls. Mr. Robertson stated the City Council will be holding a public hearing on Monday, October 15, 1990, to consider declaring that land surplus. There is a provision in the State Statute that as an alternative to turning the land back to the State Commissioner of Revenue which the City would normally do, the City can also give the land to the HRA for redevelopment purposes. This is what the Council will be considering at this public hearing. Essentially, they will be asking the HRA ^ to be a conduit so the land can be sold directly to the � developer at a negotiable price, rather than having the land ' turned over to the Commissioner of Revenue and purchased back � HOIIBIN�3 & REDSVELOPMENT AIIT80RITY MTa.. OCT. 11, 1990 PAGE 8 at market price. If the Council approves this option, then he will be working with Virgil Herrick on the necessary administrative procedures for using the HRA as a conduit for this surplus land. ADJOURNMENT: Vice-Chairperson Schnabel declared the October 11, 1990, Housing and Redevelopment Authority meeting adjourned at 8:10 p.m. Respectfully s mitted, L Saba Recording Secretary � ,� 8 I a N- IN 8 H E E T ^ HOIISING AND REDEVELOPMENT AIIT80RITY MEETING, (��, //� /C%D Name Address/Business F� y P,l' ` i v� ;�"5 �f'� e e� �Q' �1 .,l' _ � � �� ���