HRA 12/13/1990 - 29616CITY OF FRIDLEY
HOIISING & REDEVELOPMENT AIITHORITY MEETING� DECEMBER 13� 1990
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CALL TO ORDER•
Chairperson Commers called the December 13, 1990, Housing &
Redevelopment Authority minutes to order at 7:10 p.m.
ROLL CALL•
Members Present: Larry Commers, Virginia Schnabel, John Meyer,
Duane Prairie
Members Absent: Walter Rasmussen
Others Present: Bill Burns, Executive Director of HRA
Barbara Dacy, Planning Coordinator
Rick Pribyl, Finance Director
Paul Hansen, Accountant
Jim Hoeft, City Attorney
APPROVAL OF NOVEMBER 8 1990. HOUSING & REDEVELOPMENT AUTHORITY
MINUTES•
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MOTION by Mr. Prairie, seconded by Ms. Schnabel, to approve the
November 8, 1990, Housing & Redevelopment Authority minutes as
written.
IIPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON CONIl+�ERS DECLARED
THE MOTION CARRIED UNANIMOIISLY.
1. PROPOSED TAX INCREMENT TURNBACK TO SCHOOL DISTRICTS:
Mr. Burns stated that in addition to the agenda material, the HRA
members were given an updated memo entitled "Update on Information
Regarding Interest and Penalties on Delinquent Taxes from Skywood
Mall".
Mr. Pribyl stated that as the HRA stipulated, he is bringing this
agreement to the HRA earlier than in the past so that the school
districts can incorporate this into their budgeting processes.
Staff has provided the HRA with an estimate of what they feel this
agreement will actually return to the various school districts
within the boundaries of the City of Fridley. This year the
estimated amount is $268,958, the most significant amount returned
to date.
Mr. Pribyl stated one item he wanted to clarify is in regard to the
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penalties and interest on the Skywood Mall. In his memo he made
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HOUSING � REDEVELOPMENT AUTHORITY MTG., DEC. 13, 1990 PAaE 2
a comment regarding the windfall to School District #13 and
possibly holding back $113,500. The Finance Department of the
Department of Education has just clarified what happens with those
penalties and interest. These penalties and interest are actually
part of a formula, just as the City has a formula for the levy
limit and the state aids. These penalties and interest for the
school district are part of their formula in their determination
of their per pupil aid that they received more in penalties and
interest because they are actually coming through with the tax
settlement that actually reduces their aid. So, School District
#13 is not privy to a windfall of $113,500, because their aids are
reduced proportionately by that amount. TnThat really happens is the
State of Minnesota then is the benefactor of that $113,500; it is
not the school district. As it stands, he is asking the HRA's
approval of these agreements without any stipulations.
Mr. Burns stated that if the HRA withholds the $113,500 turnback
to School District #13, the State does not kick in with more aid.
Mr. Pribyl stated that in regard to the referendum return, this
amount of money does not enter into the State's calculations. So,
this amount of money would be a true return to the School District.
If the HRA holds back the $113,500 from School District #13, they
will not get that amount of money back from the State, because it
is not part of the apportionment process that is figured into their
taxes and the School District would be penalized for something they
did not even receive.
Mr. Commers stated there is a bigger policy issue that has been
raised every time they have discussed this subject, and that is
the purpose of the refunding to the school districts and the fact
that they are doing it now in December 1990 for the 1992 fiscal
year without knowing what, in fact, will be the HRA's financial
position. That raises issues in view of the fact that they have
a major project under dispute which may cause a significant
financial commitment from the HRA. He is not so sure the HRA can
just continue to promise the return of these funds to the school
districts two years in advance. The original reason was not that
this was going to be an ongoing process, but he did know there have
been a number of issues raised by the schools and they do have
problems, so it is very difficult to draw the line. But, from a
philosophical and policy point of view, it is something the HRA
will need to address again. He believed the HRA said they would
consider it this time; but it is something they will have to watch,
especially since the dollar amount has increased significantly.
Mr. Prairie stated that it might be prudent for the HRA to set a
maximum dollar limit on the return to the school districts and not
exceed that amount. Setting a limit would provide the HRA some
^ protection from these increases.
Mr. Burns stated he would like to make two observations:
� HOUSING & REDEVELOPMENT AUTHORITY MTG.. DEC. 13, 1990 PAGE 3
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1. It is important to go back to the rationale that supports
the HRA's option, and the rationale behind the
legislation gives the HRA this discretion that this
referendum money is money that was not anticipated at
the time the tax increment financing district was set
up.
2. They have seen a lot of increase in their return to the
schools, but he believed as Moore Lake Commons and the
Moore Lake Racquet, Swim, & Health Club have been
completed that they are probably getting close to the
point in time when they will not see these large
increases.
Mr. Meyer stated that if they put a cap on the amount of money to
be returned to the school districts, the school districts would be
put on notice that they cannot continue to expect increasing
returns.
Mr. Pribyl stated the way the agreement is now written, it actually
stipulates that the increments will be returned. By approving and
signing the agreement, the HRA is bound to return the amount
collected.
Mr. Burns stated the HRA might want to consider tabling further
discussion and before voting on it, look at their revenue flow and
compare it with the projected projects. The HRA has not done that
for awhile, and it might be timely to do that as they start a new
year.
Mr. Commers stated that he thought the HRA should be honest with
the school districts that the HRA may not be able to continue
returning these kinds of monies in the future. He did think the
HRA should make a commitment to the school districts, but they
should make the commitment less than what it is--possibly $200,000.
Mr. Meyer stated he thought the HRA should send a noticeable signal
to let the school districts know that the HRA is trying to build
a noticeable reserve for any future needs the HRA might have.
MOTION by Mr. Meyer, seconded by Ms. Schnabel, to authorize a
referendum levy return to School Districts #11, #13, #14, and #16
in the amount of $200,000, payable out of the referendum recovery
of 1991, payable to the school districts in 1991-92; the total
amount to be prorated among the four school districts.
IIPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED
THE MOTION CARRIED UNANIMOUSLY.
� Mr. Pribyl stated the agreements will be modified to incorporate
this dollar change.
^ HOIISING & REDEVELOPMENT AUTAORITY MTG., DEC. 13, 1990 PAGE 4
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2. SIGN PERMIT FOR FRIDLEY PLAZA PHARMACY. FRIDLEY PLAZA OFFICE
BUILDING•
Ms. Dacy stated this request is brought to the HRA as a result of
the original development contract for the Fridley Plaza Office
building. The original development contract was quite specific on
the type of exterior signage allowed. There is no wall signage on
this building, except for the signs within the tenants' windows.
Staff wanted to bring this request before the HRA and the City
Council to make sure that this request is consistent with the
original intent of the development contract and the intent of the
redevelopment district.
Ms. Dacy stated the Fridley Plaza Pharmacy is proposing to put a
sign right above their tenant space on the south side of the
building across from the Fridley Plaza Clinic. The owners of the
pharmacy have received a number of complaints from their clients
regarding the clients' ability to see the pharmacy from 5th Street
and from their elderly patients coming from the clinic across the
street. The Fridley Plaza Pharmacy wants to put up a 17 sq. ft.
sign which will say "Pharmacy". The height of the letters is about
18 inches, and the length is 11 feet 4 inches.
�''� Ms. Dacy stated staff is recommending that the HRA approve the sign
permit request for the Fridley Plaza Pharmacy with the following
two stipulations:
1. The letters be a golden color consistent with other
window signage on the building;
2. No additional signage be permitted for the building
unless the HRA and the Council consents to accept
additional exterior signage for the building.
Ms. Dacy stated it was staff's interpretation that the original
intent to control the signage on this particular building was to
minimize the impact of the appearance from along University Avenue.
This particular sign would be on the south side of the building and
would not be very visible from University Avenue. However, if one
tenant has a sign, there is nothing to prevent another tenant from
petitioning for additional signage.
Ms. Dacy stated staff has expressed their recommendation to Tony
Krajeci, the building manager. Mr. Krajeci agreed with staff's
recommendation and stipulations.
Mr. Commers stated he believed one of the reasons the HRA put a
restriction on exterior signage was not with so much concern about
^ the appearance of the building from the University Avenue frontage,
but more because it was the HRA's desire to maintain control over
the exterior and general appearance of the building.
�„\ HOUSING & REDEVELOPMENT AUTHORITY MTG., DEC. 13, 1990 PAGE 5
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Mr. Commers stated he could certainly understand the desire and
need by the Fridley Plaza Pharmacy for this sign.
Mr. Meyer stated the sign is not going to be illuminated so that
is not an issue.
MOTION by Ms. Schnabel, seconded by Mr. Prairie, to approve the
sign request as proposed by the Fridley Plaza Pharmacy with the
following stipulations:
1. The letters be a golden color consistent with other
window signage on the building;
2. No additional signage be permitted for the building
unless the HRA and the Council consents to accept
additional exterior signage for the building.
UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERBON COMMERB DECLARED
THE MOTION CARRIED UNANIMOUSLY.
Mr. Commers stated he was not sure the City Council had the right
of final approval on the development agreement for the Fridley
Plaza Office building. He believed it was just the HRA.
3. ESTIMATES•
a. The Kordiak Company (Rice Plaza)
Mr. Hansen stated the HRA no longer needs to approve the
management fee for The Kordiak Company. It is part of
the check register and part of the normal operating
billing.
Mr. Commers stated it might be helpful for The Kordiak
Company to submit a written memo to the HRA on the status
of the tenants in terms of the rent payments.
Mr. Pribyl stated staff can contact Mr. Kordiak and find
out what his policies are as far as rent payments. Staff
can then give the HRA a monthly status report based on
the rent checks received.
4. CLAIMS (2082-2089):
MOTION by Ms. Schnabel, seconded by Mr. Prairie, to approve
the check register dated December 13, 1990, as submitted.
IIPON A VOICE VOTE, ALL VOTING AYE� CHAIRPER80N COMMERS
^ DECLARED THE MOTION CARRIED UNANIMOIISLY.
5. CONSIDERATION OF 1991 MEETING DATES:
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HOIISING � REDEVELOPMENT AUTHORITY MTG., DEC. 13, 1990 PADE 6
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The HRA members were in agreement with the following 1991
meeting dates, with the time of the meeting changed from 7:00
p.m. to 7:30 p.m.
January 10
February 14
March 14
April 11
May 9
June 13
July 11
August 8
5eptember 12
October 10
November 14
December 12
PROPOSED AGREEMENT TO ASSIST PROPOSED NEW RMS PLANT WITH ONE-
HALF OUTSTANDING SPECIAL ASSESSMENTS:
Mr. Burns stated it is staff's plan to have either a
resolution or a very small development agreement prepared for
the January 10, 1991, HRA meeting.
Ms. Schnabel stated that the City Council will discuss this
proposed agreement on December 17, 1990. She stated she would
like staff to give the HRA a general report on the
discussions.
STATUS OF THE CORRECTIVE ACTION AT 57TH PLACE:
Ms. Dacy stated she had just spoken that day with the MPCA
staff inember following this project. As far as the MPCA is
concerned, they feel that Delta Engineering is continuing to
do the additional studies they want. She had also received
a telephone call from Jack Lemley of Ashland Oil that day.
Mr. Lemley wanted to know if the HRA would be discussing this
particular redevelopment area. She told Mr. Lemley that the
HRA would not be discussing it. She stated she asked him
where Rapid Oil is with their particular plans, and Mr. Lemley
said he could not discuss that at this time. They have agreed
to contact each other in January.
STATUS OF UNIVERSITY/MISSISSIPPI STREET IMPROVEMENT PLANS:
Ms. Dacy stated that when the HRA discussed this item on
November 8, 1990, the Council was going to consider the
improvement issue at their November 13th special meeting.
The Council did that and agreed in concept with installing
the street lights and all the elements of the University
Avenue Corridor concept the HRA has agreed to pay for.
Ms. Dacy stated that in Mr. Flora's memo dated November 29,
1990, he stated that the City can expect an agreement from
� Anoka County requesting approval and identifying the
appropriate fund participation, and this will come to the HRA
� 80II8ING � REDEVELOPMENT AUTHORITY MTG., DEC. 13, 1990 PAdE 7
for approval. The County is in the process of amending their
plans.
Ms. Dacy stated that Councilmember Steve Billings is quite
concerned that when the new median is constructed down the
middle of Mississippi Street, it will block the full traffic
movement area where the frontage road now intersects with
Mississippi. Councilmember Billings has received a lot of
comments from the neighborhood expressing a need to get out
of the neighborhood and be able to go both directions on
Mississippi. The Council has instructed Mr. Flora to come up
with a method to maintain some type of temporary access during
construction and until the southwest quadrant can be
developed.
Ms. Dacy stated that also in process, staff is still working
with Don Fitch, owner of the Dairy Queen, regarding the impact
this has on his drive-through. A meeting was scheduled with
Mr. Fitch last week, but he had to cancel that meeting.
Another meeting has not yet been rescheduled. Staff will be
working with Mr. Fitch on some type of temporary arrangement
to maintain his drive-through ability.
Ms. Dacy stated staff is proceeding with the appraisal on the
n Dairy Queen to acquire that piece of property so that they can
convey the necessary road easements back to the Anoka County
for the improvements. After the property is acquired, they
would then execute a lease agreement with Mr. Fitch to allow
him to continue to operate his business. Al1 of these issues
duould have to be approved by the HRA.
Mr. Commers asked what is the HRA's responsibility in terms
of the temporary road.
Ms. Dacy stated the road costs will not be part of the HRA's
costs. The HRA costs will be the landscaping and all the
improvements that were part of the University Avenue Corridor
proj ect.
Mr. Burns stated the road costs are $20,000, and it is the
City's responsibility.
9. STATUS OF PROPOSED FRIDLEY T06dN SOUARE DEVELOPMENT AGREEMENT•
Mr. Burns stated there are two parts to this discussion. The
first part is to include a Burger King drive-through as part
of this development. The second part has to do with Jim
Casserly's Equity Participation Agreement.
^ Ms. Dacy stated staff has scheduled a meeting with Scott
Erickson for Tuesday, December 18, 1990, to look at all the
potential impacts of this proposal. Mr. Erickson wants to
,.� HOOSING & REDEVELOPMENT AIITHORITY MTG., DEC. 13, 1990 PAGE 8
locate a Burger King at the west end of the building toward
University Avenue. This particular Burger King tenant is the
same owner that operates across University Avenue in the
southwest quadrant now. They want to have a drive-through
window at the rear of the building, and the traffic, as it
enters the site, would have to go to the rear-end of the site,
go around the rear of the building, customers would place
their orders at the west end of the building, pick up their
food, and then go all the way down to the Mississippi side and
exit that entrance.
Ms. Dacy stated staff has a number of concerns about the
Burger King drive-through. Staff has advised Mr. Erickson
that if he intends to pursue the drive-through, because it is
a substantial change to the originally approved development
plan by the Planning Commission, HRA, and Council, he will
have to back through the process. The surrounding property
owners would have to be renotified, a public hearing would be
conducted by the Planning Commission, the HRA would review the
new plan to see if it is consistent with its redevelopment
objectives, and the Council would review it in terms of their
rezoning decision.
Ms. Dacy stated that the HRA might have to consider this as
^ early as the January meeting. Staff is very concerned about
the traffic pattern because of the drive-through activity,
the noise from the speaker box to take customers' orders, and
the odors generated by the Burger King facility. The
neighbors were also very concerned about these things.
Mr. Commers stated he believed this proposed change would have
a significant impact on Mr. Casserly's Equity Participation
Agreement.
Mr. Prairie asked if the HRA has ever seen a financial
statement for the developer. He would be interested in
knowinq the strength of the developer.
Mr. Burns stated staff can have a financial statement
available for the HRA at the January meeting.
Mr. Burns stated that because of the HRA's high level of
participation, which is around 10%, Mr. Casserly is
recommending the HRA should expect to benefit in any windfall
profit which the developer might make as a result of selling
this project in the future. In order to do that, Mr. Casserly
has developed an equity participation formula that is very
similar to formulas used for multi-family housing projects
that have been built in places like White Bear Lake, Shakopee,
� Inver Grove Heights, North St. Paul, St. Paul, and
Minneapolis.
HOUSING & REDEVELOPMENT AUTHORITY MTG., DEC. 13, 1990 PAdE 9
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Mr. Burns stated that in order to arrive at the end result,
which is the City's share in windfall profits, you first
multiply the net appreciation of the project by the ratio of
HRA equity participation to the developer's equity
participation. In this case, the HRA's equity participation
is $250,000. The developer's equity participation is
$350,000. That ratio is 71% based on $250,000 to $350,000.
As a result of negotiations between Mr. Casserly and Mr.
Erickson, there is a minimum return to the HRA that is
specified as $100,000 and a maximum return is specified as
$250,000. There is also an agreement that there will be no
sale of the proj ect by the developer until two years after
the issuances of the certificate of occupancy. It is also
agreed that the project will be sold by the end of the seventh
year. If it is not sold by the end of the seventh year, then
the HRA will retrieve its money based on an appraisal of the
project at the end of the seventh year. So, again, the HRA's
return is based on the current appraisal.
Mr. Burns stated net appreciation is determined by looking at
the sale price and then subtracting from the sale price the
developer's investment, which is $350,000, and the developer's
return on investment, which is anticipated at 15� per year.
� Mr. Burns stated the idea is not necessarily that the HRA is
an equity partner that shares equally in the profit. Staff
realizes that the developer has taken much of the risk himself
and is in the business of developing and deserves a reasonable
cash on cash return. What the HRA is trying to ensure that
if there is a windfall profit above and beyond the reasonable
rate of return that the HRA participate in it, since the
original participation was higher than normal. There is no
sharing of any losses by the City. There is no participation
in any negative situations.
Mr. Commers stated that it seemed to him that at a minimum
any excess payments that the HRA is making over their normal
increment should come off first. The HRA has established a
guideline in terms of what they will contribute to a project,
and they have tried to enforce that guideline uniformly. If,
in this proj ect, they are giving more than what they uniformly
give, then he thought at least that portion should come back
off before the developer gets all his profit and his return
on investment.
Mr. Commers stated that he wondered if the developer would be
willing to give the HRA's investment back without any return
on it; then take his return on investment and give the HRA
some lesser amount in the appreciation. That then puts the
^ HRA more in the position of a mortgage, because it gives the
HRA priority in the project before the devel�oper.
� HOIISING & REDEVELOPMENT AUTHORITY MTG. DEC. 13, 1990 PAGE 10
Mr. Burns stated he will relay these comments and questions
to Mr. Casserly so they can be addressed at the next meeting.
This is strictly an informational item at this time.
Mr. Commers stated the HRA should see the proformas put
together for the shopping center. It would be interesting to
see what the developer expects the projected income for the
project to be 2-5 years from now.
Mr. Burns stated Mr. Casserly has that information, and they
will bring that to the January meeting.
10. OTHER BUSINESS:
Mr. Burns stated that Ms. Dacy and he have been trying to
assess all the HRA's projects; and as they do that, to develop
their thoughts about the work program for the next few months.
At the meeting, the HRA members had received a copy of the
1991 HRA workplan listing all the projects and some of the
steps they are anticipating taking at the staff level in the
near term future. This is for the HRA's review.
Ms. Dacy stated the workplan is divided into three parts:
Economic Development Activities the HRA has underway; Housing
^ issues, and Administration issues. She stated this workplan
helps staff to organize their work tasks and, therefore, to
organize the HRA's agendas and to make sure that things are
done on time.
ADJOURNMENT•
MOTION by Ms. Schnabel, seconded by Mr. Prairie, to adjourn the
meeting. Upon a voice vote, all voting aye, Chairperson Commers
declared the motion carried and the December 13, 1990, HRA meeting
adjourned at 9:25 p.m.
Res ctfully subm tted,
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yn Saba
Recording Secretary
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