HRA 04/04/1991 - 6361HOUSING AND REDEVELOPMENT AUTHORITY
MEETING, THURSDAY, APRIL 4, 1991
7:30 P.M.
WILLIAM BURNS
EXECUTIVE DIRECTOR OF HRA
CITY OF FRIDLEY
A G E N D A
HOUSING & REDEVELOPMENT AUTHORITY MEETING
THURSDAY, APRIL 4, 1991, 7:30 P.M.
Location: City Council Chambers
Fridley Municipal Center
6431 University Avenue N.E.
CALL TO ORDER:
ROLL CALL:
APPROVAL OF MINUTES: March 14, 1991
ACTION ITEMS:
CONSIDERATION OF LEASE AGREEMENT
WITH KEITH DEGROSS . . . . . . . . . . . . . . . . . . 1 - 1L
CONSIDER APPROVAL OF MORTGAGE SATISFACTIONS
FOR PRICE & HENDRICKSON PROPERTIES (LARGE
FAMILY HOME OWNERSHIP PROGRAM) . . . . . . . . . . . . . 2 - 2D
CONSIDER CUB FOODS REDEVELOPMENT PROPOSAL . . . . . . . 3 - 3H
_vv CONSIDER REQUEST BY PLAZA OFFICE BUILDING . . . .. . . .4 - 4A
CLAIMS AND EXPENSES
9-60�B=� UTED AT MEETING) . . . . . . . . . . . . . 5
-4, i�'G°'eI� Gt'
INFORMATION ITEMS:
PLANNING COMMISSION, CITY COUNCIL AND TRAFFIC
INFORMATION PERTAINING TO FRIDLEY TOWN SQUARE . . . . . 6 - 6A
SUMMARY OF HOUSING INTERVIEWS . . . . . . . . . . . . . 7 - 7C
MEMO REGARDING MEETING WITH SIMER PUMP. . . . . . . . . 8
TERRI MAU AGREEMENT . . . . . . . . . . 9 - 9B
MEMO REGARDING ERRORS AND OMISSIONS INSURANCE . . . . .10 - 10 -0
RICEPLAZA UPDATE . . . . . . . . . . . . . . . . . . .11
MEMO REGARDING TIF TURNBACK AMOUNTS . . . . . . . . . .12 - 12A
OTHER BUSINESS
ADJOURNMENT
12
CITY OF FRIDLEY
M E M O R A N D U M
TO: BRA COMMISSION MEMBERS
FROM: RICHARD D. PRIBYL, FINANCE DIRECTOR
PAUL S. HANSEN, ACCOUNTANT
SUBJECT: SCHOOL REFERENDUM LEVY REFUNDS
DATE: Marcb 28, 1991
This memo is in response to the HRA commission's question at the
March 14, 1991 HRA meeting as to whether or not we could calculate
the payable 1992 referendum levy return amounts by July of 1991
instead of December. Assuming we receive the applicable tax
information from the county in April or May we could have actual
payable 1991 amounts by June of 1991. Therefore, at that time, we
could ESTIMATE payable 1992 return amounts based on the payable
1991 amounts plus a possible increase of .20% (see attached
projections as presented in a previous meeting). These amounts are
only ESTIMATES and would be affected by delinquent taxes, State
legislation, or any unforeseeable increases or decreases in overall
property values.
This matter will be brought up for discussion at the June, 1991 HRA
meeting. So, in July a timely decision in regards to the
referendum levy return amounts can be given to the School
Districts.
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COUNTY OF ANOKA
PROPERTY RECORDS AND TAXATION DIVISION
COURTHOUSE • 325 EAST MAIN STREET • ANOKA, MN 55303
(612) 421 -4760
Ewe
t -Ifik 1 9 1991
March 18, 1991
Rick Pribyl
Financial Director
City of Fridley
6431 University Avenue N.E.
Fridley, MN 55432
Dear Mr. Pribyl:
Pursuant to M.S. 469.176. Subd 4h, I am herewith
certifying your city's total expenses incurred by Anoka
County in administering the Tax Increment Financing Laws
of Minnesota. The expenses for Fridley are $7150.32.
Please refer to the attached invoice for the.breakdown of
your charges.
These expenses represent the recordkeeping and
administrative frunctions preformed by county staff as
prescribed by M.S. 469.174 - M.S. 469.179. Please refer
to the attachment for the listing of all these
administrative functions.
If you have any questions please contact me at 421-
4760, ext 1136.
Sincerel
cL�uY�tl
Edward M. Treska
Department of itme;ntal Tax dministration
By: Ric and J� Inner Depa ccountant
Affirmative Action / Equal Opportunity Employer
DECERTIFIED DISTRICTS:
DISTRICT
ID. NO.
NONE
DISTRICT -MAINTENANCE:
ADDITIONAL TOTAL
COSTS COSTS
$120.00 $570.00
$15.81 $515.81
TOTAL $1085.81
MAINTENANCE COSTS ARE $7.11 PER PARCEL AND $270.16 PER DISTRICT
DISTRICT
NO. OF
INVOICE
DISTRICT
TOTAL
ID. NO.
CITY OF FRIDLEY
NEW DISTRICTS:
COSTS
COSTS
A2
DISTRICT
COSTS
ADDITIONAL
RATE
ID. NO.
57
HOURS
$270.16
Kl
$450.00
8
$15.00
K6
$450.00
1
$15.81
DECERTIFIED DISTRICTS:
DISTRICT
ID. NO.
NONE
DISTRICT -MAINTENANCE:
ADDITIONAL TOTAL
COSTS COSTS
$120.00 $570.00
$15.81 $515.81
TOTAL $1085.81
MAINTENANCE COSTS ARE $7.11 PER PARCEL AND $270.16 PER DISTRICT
DISTRICT
NO. OF
PARCEL
DISTRICT
TOTAL
ID. NO.
PARCELS
COSTS
COSTS
COSTS
A2
69
$490.59
$270.16
$760.75
A5
57
$405.27
$270.16
$675.43
A8
8
$56.88
$270.16
$327.04
A9
21
$149.31
$270.16
$419.47
B2
16
$113.76
$270.16
$383.92
B3
7
$49.77
$270.16
$319.93
B9
1
$7.11
$270.16
$277.27
Cl
5
$35.55
$270.16
$305.71
C6
1
$7.11
$270.16
$277.27
D3
15
$106.65
$270.16
$376.81
D5
1
$7.11
$270.16
$277.27
E8
5
$35.55
$270.16
$305.71
G3
1
$7.11
$270.16
$277.27
G4
1
$7.11
$270.16
$277.27
K1
36
$255.96
$270.16
$526.12
K6
1
$7.11
$270.16
$277.27
TOTAL $6064.51
TOTAL AMOUNT DUE $7150.32
PLEASE MAKE CHECK PAYABLE TO ANOKA COUNTY
TIF Administrative Costs
* analyze TIF plans to determine type of district, date establish and
other relevant data;
* verify legal boundaries and parcels included in TIF districts;
* determine original tax capacity, tax capacity rate and
classification of each parcel in the TIF.district;
* prepare certification document for TIF district;
*' monitor change in parcel status from exempt to taxable and vice
versa and adjust base accordingly each year;
* adjust base for enlargement or reduction of district area;
* enforce knock down provision;
* adjust economic development district base each year to remove
inflation growth of base;
* adjust base for court ordered abatements;
* adjust base for changes in property class percentages;
* adjust base for prior planned improvements;
* compute captured value, considering TIF plan concerning "sharing"
and fiscal disparity election.or treatment.
* modify computer programs for collection, distribution and tax
statement printing;
* for districts created after May 1, 1988, monitor each parcel for
changes in property classification, green acres status-or vacant
land use and adjust the base value accordingly.each year;
* monitor assessment agreements;
* prepare annual reports to cities to advise of base and captured tax
capacity;
* prepare annual reports to cities and the state detailing the tax
increment-taxes extended for that year;
* collect and distribute TIF, current and delinquent;
* report to the Commissioner of Revenue after each distribution of
excess tax increment to school district exceeding $25,000;
* maintain bond register;
* key original data and all subsequent changes into computer system.
TIFBILL.LIST
6r [� Community Development Department
PLANNING DIVISION
City of Fridley
DATE: March 14, 1991 nI
TO: William Burns, City Manager
Jim Hill, Acting City Manager
FROM: Barbara Dacy, Community Development Director
SUBJECT: Meeting with the Anoka County Economic
Development Partnership
On Friday, March 8, 1991, I had lunch with Roger Jensen and Kurt
Larsen from the Anoka County Economic Development Partnership. The
purpose of the meeting was to familiarize me with the purpose and
functions of the Partnership. During the course of the meeting,
I also asked them what they expect from the City of Fridley and
what we can do to work with them cooperatively.
As you may be aware, the Partnership is a non - profit corporation
responsible for promoting and stimulating business development and
expansion in Anoka County. The Partnership was initiated by the
Anoka County Board in April of 1985. The Partnership is under the
direction of a board of directors who represent corporations,
educators, banks, service groups, and public officials. Roger
Jensen is the Executive Director, and Kurt Larsen is his assistant.
Jensen stated that he would like to-work with us on three issues:
1. Developing and maintaining an inventory of available existing
building space (either multi- tenant or a single purpose
building). You may recall that Jock and I had talked to you
about this several months ago. It is very difficult for the
City to maintain records regarding the availability of
leasable or saleable space without the benefit of constant
input from realtors or property managers. However, an
opportunity may exist to work with the property managers and
local realtors on a regular basis.
2. Jensen indicated that the Anoka County Business Assistance
Network ( ACBAN) is undergoing restructuring as to how it is
managed and administered. Jensen stated that he believes that
communities should become more involved with ACBAN activities
( ACBAN is a clearing house where a small business can go to
locate resource specialists in a variety of fields pertaining
Anoka County Economic Development
March 14, 1991
Page 2
to businesses; ACBAN also has a joint venture with the Coon
Rapids Development Company for small business administration
504 loans).
3. Jensen requested that we communicate on a regular basis
regarding current events or issues occurring with the
community.
Some of the Partnership's successes to date have been the creation
of the Minnesota Medical Enterprise park in Coon Rapids, the
NCR /Comten Pheasant Ridge Industrial Park in Blaine, participation
in the Minnesota Olympic facility study, participation in the fund
raising effort for the National Sports Center in Blaine, as well
as establishing a County -wide small business investment corporation
called the Anoka County Seed Capital Corporation.
Also of interest was the Partnership's involvement with the City
of Fridley in preparing a hotel study in 1986 for the Lake Pointe
site. Apparently, Woodbridge was working with a number of major
hotel chains at that time. The Partnership conducted a survey of
businesses in the area to determine a demand for conference /hotel
space. The report also provided statistical information about our
area and development information.
I have attached a summary of the Partnership's strategies and
results for your review.
BD /dn
M -91 -180
ANOKA COUNTY
ECONOMIC DEVELOPMENT
PARTNERSHIP
The First Years
The Anoka County Economic Development Partnership is a public/private, non profit
corporation whose objective is to promote and stimulate business development and
expansion in the 21 community Anoka County area. This unique economic
development effort initiated by the Anoka County Board of Commissioners and area
corporations became operational in April, 1985. It is directed by an active board
representing area corporations, educators, banks, service groups and public officials.
The Partnership has concentrated its effort on building a strong diversified business
support and development infrastructure in Anoka County. A strategic action plan for
the Partnership was developed immediately upon organization and has guided the
effort to date. The plan was developed over a six month period with input from area
economic development professionals, public officials, business leaders. educators and
other civic and business organizations. The following are examples of the Anoka
County Economic Development Partnership's activity during its first five years as it
relates to implementation of its strategic plan.
jGW Grow through a focused approach to economic development for Anoka County.
Target growth of the medical industry in Anoka County.
Rc1jw., s .. Minnesota Medical Enterprise Park - MMEP
This project was developed with the objective of making Anoka County a focal point
for the growth of the strong medical industry in the State of Minnesota. The result
was the development of a 110 acre medical park located at University Avenue and
Coon Rapids Boulevard. The MMEP is the only industrial park in the world devoted
exclusively to the success of medical product companies and their suppliers. The
project features the "Environment for Success" concept of surrounding medical
product companies with contract and other support services they need to be
successful. Two buildings, Minnesota Medical Enterprise Centers I and II totalling
113,000 square feet were constructed in 1987.
Today over 20 emerging medical product and service companies are located in the
Minnesota Medical Enterprise Park. Also in the Park are a day care center.and
precision tooling company. MMEP projects in progress include plans for a third
multi - tenant building, a medical incubator, a program to attract foreign medical
companies interested in exploring the U.S. market, a medical industry focused
business innovation center and a supporting seed capital fund.
Stf-&&K Identify and seek to attract those business /industry which match up
with the development assets and opportunities of the county.
Respe,W NCR Comten /Pheasant Ridge Industrial Park
The Partnership worked with the City of Blaine on an effort that resulted in the
construction of NCR Comten's 270,000 square foot computer assembly facility
located at Interstate 35W and Lexington Avenue. NCR Comten serves as the anchor
tenant for the Pheasant Ridge Industrial Park, a 660 acre industrial park designed
exclusively for large corporate users. NCR Comten is now the City of Blaine's largest
employer employing approximately 800 people. The company recently announced
the proposed sale of its present corporate headquarters site and subsequent
150,000 square foot addition /consolidation to the Pheasant Ridge facility.
Slr-iie� . Assess the county's needs and opportunities for cultural and service
development (to attract projects of metropolitan significance to Anoka County).
Res�QSe National Sports Center
The Partnership was an active member of the Minnesota Olympic Facility Study
Team. This organization was part of the overall state effort to become more
involved in the big business of U.S. Amateur Athletics. The Partnership set up and
hosted the initial joint meeting of the county's six chambers of commerce to launch
the necessary fundraising effort. The National Sports Center was constructed in
1989 at Highway 65 and 105th Avenue N.E. in Blaine on a 92 acre site. The project
includes:
• a specialized sports stadium for soccer, track and field
• a six lane, 200 meter indoor track
• a nine lane, 400 meter outdoor track
• international regulation soccer field
• stadium seating for up to 12,000, designed for future permanent seating
expansions
• residence hall with 50 rooms for training Olympic athletes, sleeps up to 200
• administrative office space
• commissary
• only all-wood, all- weather cycling track in the United States, accommodations
for up to 5,000
The facility is owned and operated by the Minnesota Amateur Sports Commission
and has been designated by both the men's and women's track and field and soccer
organizations as an official U.S. Olympic Training Center. Many major sporting
events are proposed for 1990 at the National Sports Center including various events
for the U.S. Olympic Festival which will be held the summer of 1990 in the Twin
Cities. In addition, the Partnership's executive director serves on the World Cup
Minnesota '94 board of directors. This organization is actively seeking to bring
round one World Cup competition to the Twin Cities. If this happens, the games will
be played at the National Sports Center.
�Pesp� Dan Patch Raceway
In 1987 the state legislature passed a bill that cleared the way for the development
of a standardbred (harness) track in Minnesota. The Partnership immediately met
with the Minnesota Harness Racing Association to let them know that should a
developer /owner desire to build a harness track in Minnesota, it should consider
Anoka County. After a year long effort, in collaboration with the City of Blaine, a
group that owns and /or operates several harness tracks in the United States has
purchased a 92 acre site on 105th and Highway 65. This site is directly across from
the National Sports Center. Although Dan Patch Raceway, Inc. has completed a
substantial portion of the comprehensive application necessary for presentation to
the Minnesota Racing Commission, the project is officially on hold until further
notice.
Rest Minnesota Equestrian Center
The Partnership has been working with an organized group of persons representing
various horse associations throughout the State of Minnesota (Centaur Complex,
Inc.). The objective of Centaur is to see a world class equestrian center built in the
Twin Cities. This proposed ten million dollar complex would be the focal point of
the large and growing horse industry in Minnesota. A location in the City of Blaine
near the National Sports Center and proposed Dan Patch Raceway is desired by
Centaur. The effort has obtained the support of the University of Minnesota School
of Architecture (architectural drawings) and the college of St. Thomas' MBA
program (market study) as well as the support of the Minnesota Amateur Sports
Commission and Governor Perpich.
Sto Explore the creation of a county wide small business investment
corporation and or venture capital corporation.
Best The Anoka County Seed Capital Corporation (ACSCC)
An essential component of growth is access to capital. Small business and
entrepreneurs constantly complain that when it comes to funds for start -ups or
small business expansions, most traditional lending institutions are not much help.
Venture capitalists and private investors are a source of funding but far from the
total answer. The establishment of a for - profit seed capital fund or funds was
considered an important component to our overall goal of building, in Anoka County,
an environment conducive to small business growth and development.
In response to this the ACSCC was formed and incorporated in December, 1989. The
ACSCC is a for - profit corporation that is currently raising a five million dollar seed
fund. The purpose of the fund is to provide early stage financing for promising
technology - driven and manufacturing companies.
The need for such a fund surfaced through the Partnership's experience with the
Minnesota Medical Enterprise Park and the Anoka County Business Assistance
Network ( ACBAN). These two programs have and continue to attract many
entrepreneurs, small businesses, investors, etc. to the Partnership / ACBAN offices,
many of which are looking for financing sources especially for working capital.
Some of these inquiries appeared to have promising technology with needs too
small for most traditional venture capital funds yet they do not possess the track
record for traditional lending institutions. This is the perceived niche of the Anoka
County Seed Capital Corporation. The ACSCC has an experienced board of directors
with strong business and finance backgrounds.
�PesQp,Q, Establishment of a county -Aide development corporation
(debt financing).
In 1987 the Partnership entered into a contractual agreement with the Coon Rapids
Development Corporation establishing, in essence, a county -wide development
corporation. The program involved the Coon Rapids Development Corporation
gaining approval from the Small Business Administration to extend its SBA
certification area to include all of Anoka County. All loans outside of the City of
Coon Rapids go through the Anoka County Business Assistance Network ( ACBAN)
loan review committee. ACBAN is a business support program established by the
Partnership in 1987. To date ACBAN has approved loans for a total project
investment of $5.9 million
Suit Actively work with industry and economic development organizations.
Resvo m. This was and remains an important area of concentration for the
Partnership. The emphasis of the Partnership's county -wide economic development
effort was to enhance rather than replace individual community efforts as well as
those initiatives by the county's six chambers of commerce, North Metro Mayors
Association, etc. The Partnership is a member of all Anoka County chambers of
commerce, the North Metro Mayors Association and the Greater Minneapolis
Chamber of Commerce. In 1989 the Partnership organized a monthly meeting of
the Anoka County economic development professionals. Each month the economic
and /or community development directors in the county get together at a host city.
These meetings open dialogue among cities on economic development issues
important to the area, exchange ideas, network, etc. In February, 1990 the
Partnership hosted a meeting with the Anoka County Legislative Delegation and
area economic development professionals to collectively discuss a variety of
legislative matters affecting economic development. In addition, city staff, public
:%
officials, area educators and county personnel are active along with the business
community in virtually all of the Partnership's programs and projects.
S&AW Organize and promote a north metro effort to cause an accelerated
completion of Highway 610, while also addressing the enhancement of other north
metro transportation activities.
Resnuase U.S. 10 Task Force
The Partnership was an active member of the U.S. 10 Task Force. This task force,
chaired by Anoka County Commissioner Paul McCarron, was organized to see, the
completion of the long awaited U.S. 10 connecting I -35W with the new 610 bridge.
The completion of this section of road was considered a top priority to virtually all
area business and public organizations concerned with transportation and /or
economic development matters. The completion of U.S. 10 is now a Minnesota
Department of Transportation priority project with construction to commence in
1992. The estimated cost is $55 million.
Res�oDSe Light Rail Transit
The Partnership is a member of the Anoka/Hennepin Light Rail Advisory
Committee. The charge of this committee is to make recommendations on proposed
routes should an LRT system be built in the Twin Cities.
S&i = Develop a clearinghouse for business development support for new and
existing Anoka County businesses /organizations.
Refer = The Anoka County Business Assistance Network - ACBAN
Beginning in 1988, the Partnership began working with local business leaders,
communities, chambers of commerce, educational institutions, etc. in an effort to
develop a county wide business assistance network.
The basis for this county wide project with the premise that although the large
corporate moves make headlines, most of the job growth in Anoka County will come
from the growth and expansion of its existing businesses.
The Anoka County Business Assistance Network became a reality in July, 1987 and
a 14 member special advisory board was established. The nucleus of ACBAN is the
resource center or clearinghouse. Through this resource center we can direct area
businesses and entrepreneurs to the many public and private assistance resources
that are available in Anoka County, the Twin Cities and nationally.
ACBAN has become the pivotal program in the Partnership's vision of creating a
complete support environment for the attraction and growth of small and emerging
businesses in Anoka County.
grzeam Anoka County Quality Council - ACQC
The ACQC was formed in 1989 and is comprised of representatives from business,
education, retail, religion, manufacturing, medical, service, government and labor
organizations. The ACQC was formed to network area quality efforts and to develop
quality projects and programs that instil quality concepts in all Anoka County
organizations.
The quality concept fits in with the very essence of any business development
program. Ingraining the importance of the principles of quality in product, plant
and management will help our companies remain competitive and vital in an
increasingly competitive world market. We envision the ACQC to become a
clearinghouse for quality improvement resources and information, work with the
Minnesota Council for Quality and Minnesota Project Outreach in developing a
quality information database. sponsoring quality focused seminars stressing the
importance of quality to emerging companies and explore the creation of a
technology assistance program or teams.
The ACQC received a grant from the Minnesota Council for Quality to establish the
metro area's first branch. A permanent 22 member board representing
manufacturing, labor, education, retail, government, religion and agriculture was
formed in February, 1990.
a
Community Development Department 1
HOUSING AND REDEVELOPMENT AUTHORITY
City of Fridley
MM: March 28, 1991 h.
TO: William Burns, Mtecutive Director of HRA
FRONT: Barbara Dacy, Ccammmity Development Director
SUBJECT: Consideration of Iease Agreement with Keith Degross
Keith Degross has signed a purchase agreement with Jack Kiffe of Kiffe Automotive
to purchase his automotive business now located in the building at the southwest
- corner of University Avenue and Mississippi Street. Mr. Degross wishes to
continue an automotive repair operation at the former Kiffe facility. We have,
therefore, redrafted a one year lease for consideration by the-Mh.
We have conducted a credit check on Mr. Degross and have determined that he is
capable of meeting the $650 rental payment per month. Terns of the lease
agreement are essentially the same as was dorms in the Kiffe agreement. After
a one year period, the lease will switch to a month -to -month basis, thus giving
the HRA the flexibility regarding redevelopment options. We will, however,
notify Mr. Degross of any informal plans that we may be aware of.
The BRA should also be aware that at this time the Kiffe parcel is under tax
exempt status; however, because we are collecting income by virtue of rental of
the building, the city Attorney's office has advised that a taxable status should
be applied to the property. In so doing, the taxes would bane due and payable
in 1992 and total about $4,015 (see memo from Paul Hansen).
The lease has been written so that the tenant is not responsible for payment of
taxes. Four months of taxes equate to an additional $335 /month. It is doubtful
whether the BRA could rent this building for $1,000 /month. Therefore, the BRA
will be responsible for the taxes. We will accrue $7,800 in rent payments for
the lease period, which would retire the tax amount.
Mr. Degross has also requested the ability to install a free - standing pylon sign.
Paragraph 18 of the lease permits signs to be placed on the premises which are
about the same size.
Reca mnndation
Continued use of the facility will generate additional income and a continued
service to ccmm mity residents. Approval of the attached lease agreement as
prepared by the Attorney's office is revamwxled. Mr. Degross and Mr. Kiffe will
attend the meeting on Thursday.
BD: Is
M -91 -219
1 -A
CITY OF FRIDLEY
M E M O R A N D U M
TO: BARBARA DACY, COMMUNITY DEVELOPMENT DIRECTOR
FROM: RICHARD D. PRIBYL, FINANCE DIRECTOR
PAUL S. HANSEN, ACCOUNTANT
SUBJECT: KIFFE'S AUTOMOTIVE TAB STATUS.
DATE: March 28, 1991
The purpose of this memo is to respond to your question as to what
the Fridley HRA needs to do in regards to the tax status of KiffeIs
Automotive.
The property is classified as tax exempt. The property should be
taxable according to Virgil Herrick (see attached memo). Property
that is owned by a public body but leased to private individuals
is taxable property.
The process of changing the tax status is a fairly simple process
and would be handled by the assessor department.
However, if the property is not leased then it would continue to
be classified as exempt.
If you have any questions, please feel free to call.
MEMORANDUM
MEMO TO: Richard D. Pribyl
Finance Director
cc: Leon L. Madsen
City Assessor
MEMO FROM: Virgil C. Herrick
City Attorney
SUBJECT: Tax Classification of City Property
DATE: March 20, 1991
Flovj�
RECE89iED
MAR 2 i 1991
1 -B
This Memorandum is in response to your inquiry, dated March 7, 1991,
regarding tax classification of City property. Specifically, you
inquired as to who has the responsibility to request a change in the
tax status of property acquired by the City (and /or the HRA).
The process of requesting a change in tax status from taxable to tax
exempt or vice versa is a fairly simple process. An application
should be obtained from Anoka County. The request is then made to the
County and it determines whether the facts justify a change in status.
Property owned by the City and the HRA may be taxable or may be tax
exempt depending on the purpose and use of the property. Property
such as the Rice Creek Plaza Shopping Center which is owned by a
public body but leased to private individuals is taxable property.
Property that is acquired by the City to be used for park purposes is
tax exempt property. Those types of classifications are fairly clear.
Unfortunately, there are some properties that are in a.gray area. It
probably would be worth while for you, Leon and perhaps Bill Burns and
myself to have a meeting to set a policy and procedure on how to
handle these situations. After that policy is established, I would
suggest that Leon would be the appropriate person to secure the
applications and prepare them for delivery to the County.
1 -C
AGREEMENT OF LEASE
THIS AGREEMENT, made this day of May, 1991, by and between
the Fridley Housing and Redevelopment Authority (hereinafter
designated as "Lessor ") and Keith Degross, 10645 Quincy Boulevard,
Blaine, MN 55434 (hereinafter designated as "Lessee ").
WITNESSETH:
That the Lessor, for and in consideration of the terms, covenants,
rents and conditions herein mentioned, to be paid and performed by
Lessee, does hereby demise and let unto said Lessee, and the said
Lessee does hereby hire and take from the Lessor, the following
described premises situated in the City of Fridley, County of Anoka,
State of Minnesota, to -wit:
Lowell Addition, part Block 12, that part of NW 1/4 of
SW 1/4 of-Section 14, Township 30, Range 24 described
as follows:
Commencing at a point on the North line of said NW 1/4
of SW 1/4 distance 1,043.58 feet East from NW corner
thereof, then Southerly, including N 1/2 of 64 1/2 Avenue
NE line adjacent thereto per Ordinance 299, 1/18/65,
subject to street and utility easements over Northerly
15 feet to the City, 1972.
TO HAVE AND TO HOLD the same just as they are, without liability
on the part of the Lessor to make alterations, improvements or repairs
of any kind in and about the demised premises, except as and if
otherwise set forth herein, for the term of one (1) year from the 1st
day of May, 1991 through and until the 30th day of April, 1992 for the
following purposes, and for no other purposes, to -wit:
Automotive service and repairs. This purpose does not
include the sale of gasoline.
1. Lessee agrees to pay Lessor as and for rent for the
above mentioned premises, in monthly installments of
$650.00 Dollars each, in advance on the first day of each
me
1 -D
and' every month during the full term of this Lease at the
office of the Lessor, or at such other place as Lessor may
in writing designate.
In addition to the rent specified in the preceding Paragraph
(the "base annual rental "), Lessee agrees to provide for and
pay the cost of maintaining the parking areas, grounds and
sidewalks serving the Leased premises. Such costs shall
include lighting, snow removal, line painting and replacement
of paving, curbs and sidewalks, if necessary. The cost of
operation and maintenance shall not include taxes and
assessments. Further, the Lessee shall promptly pay the costs
of all utilities, including, but not limited to, electricity,
telephone, sewer, water, refuse removal and natural gas.
2. Lessee agrees that it will not sublet the demised
premises or any part thereof and will not assign this Lease
or any interest therein.
3. Lessee shall provide or pay for all repairs and
maintenance of the premises including, but not limited to,
glass breakage, furnace, plumbing, electrical systems,
structural repairs, parking and other exterior maintenance.
4. Lessee agrees to indemnify and hold the Lessor harmless
for any liability arising out of the Lessee's use of the
premises. For this purpose the Lessee shall at its sole
expense procure and maintain comprehensive public liability
insurance for the demised premises during the term hereof
in the minimum amount of Three Hundred Thousand - Five
Hundred Thousand Dollars ($300,000.00 - $500,000.00) bodily
injury and One Hundred Thousand Dollars ($100,000.00)
-2-
1 -E
property damage. Lessee shall provide Lessor with evidence
of such insurance prior to occupancy. Lessee shall at its
sole expense procure and maintain insurance for its fixtures
and equipment within the demised premises.
5. Lessee to obtain workers compensation insurance. Lessee
shall maintain and keep in force all employees compensation
insurance required under the laws of the State of Minnesota,
and such other insurance as may be necessary to protect
Lessor against any other liability to person or property
arising hereunder by operations of law, whether such law is
now in force or is adopted subsequent to the execution hereof.
6. Lessee to furnish certificate of insurance. Lessee shall
furnish to Lessor, a certificate of insurance showing that its
liability insurance policies are in full force and effect
and naming Lessor as an insured thereon. The policy shall
further provide that Lessor shall be given a minimum of ten
(10) days notice by the insurance company prior to cancellation,
termination or change of such insurance. Such policies or duly
executed certificates of insurance shall be delivered to Lessor
prior to the commencement of Lessee's occupancy hereunder and
renewals thereof shall be delivered to Lessor at least thirty
(30) days prior to expiration of the respective policy terms.
7. The Lessor consents to allow the Lessee to make the
necessary alterations to the said property in the manner
necessary for the Lessee to operate his business. The Lessee
shall be required to provide all plans necessary for the
remodeling to the Lessor and shall get all necessary permits
as needed from the City.
-3-
1 -F
8. 'Lessee covenants and agrees that it will make no structural
change or major alteration without the Lessor's consent, which
consent shall not be unreasonably withheld, provided that the
proposed improvements are consistent with the use of the
property, do not significantly reduce the value of the property
and do not violate any local, state or federal laws; and
without first furnishing the Lessor five (5) days' advance
written notice outlining the proposed changes or alterations.
Upon the City consenting to the alterations, then the City will
issue all necessary permits without unreasonable delay. The
Lessee further covenants that it will promptly pay for any
alterations, repairs or maintenance made to the demised property
so that no mechanic's liens will be filed against the property.
In the event, a mechanic's lien is filed, the Lessee shall have
twenty (20) days to pay or in the alternative to post 1 -1/2
times the lien amount with the district court in order to
contest it. Failure to do either of the above mentioned lien
corrections shall be deemed as a default under this Lease. In
any event, the Lessee shall indemnify and hold harmless the
Lessor for any and all costs of removing said lien.
9. The Lessee agrees that upon termination of this Lease, all
improvements to the property, together with all fixtures, shall
become the property of the Lessor.
10. Lessor shall at all times have the right to enter upon said
premises to inspect their condition and at his election to make
reasonable and necessary repairs thereon for the protection and
preservation thereof but nothing herein shall be construed to
require the Lessor to make such repairs except as may be herein
-4-
1 -G
provided for and the Lessor shall not be liable to the Lessee
for the failure or delay in making such repairs or for damage
or injury to persons or property caused in or by the making of
such repairs or the doing of such work.
11. Lessee agrees to pay for all special requirements for
utilities such as gas, steam, water and electricity and for all
other alterations, modifications or other services to the demised
premises. Charges for any such utilities or services shall be
paid by Lessee and, in the event such charges are not paid when
due, the same shall constitute a default hereunder on the part
of the Lessee.
12. The premises shall not be used for lodging or sleeping or
for any immoral or illegal purposes.
13. The parties hereto mutually agree that if the demised
premises are partially or totally destroyed by fire or other
hazards, then Lessor may, but is not obligated to, repair and
restore the demised premises as soon as is reasonably
practicable to substantially the same condition in which the
demised premises were before such damage. The Lessee may
repair the damage as allowed under Paragraph 7 at his own
expense. In the event the demised premises are completely
destroyed or so badly damaged as not to be useable by the
Lessee for the purposes herein provided, then this Lease shall
be terminable by either party hereto by serving written notice
upon the other; and provided, further, that in any event if
repairs have not been commenced within thirty (30) days from
the date of said damage and thereafter completed within a
reasonable time, in no case to exceed three (3) months, this
-5-
1 -H
Lease may be immediately terminated by the Lessee by serving
written notice upon the Lessor.
14. The Lessee acknowledges that it is aware that Anoka
County intends to widen Mississippi Street along the north
boundary of the property and that in the course of doing so
the County intends to acquire a portion of the property. The
Lessee acknowledges that it is waiving any and all claims to
any compensation or monies which the Lessor may receive from
the County as a result of this taking. Further the Lessee
agrees to waive any claim that this acquisition by the County
constitutes a breach of this Lease.
15. THIS PARAGRAPH DESCRIBES THE CONDITIONS UNDER WHICH THE
LESSOR MAY TERMINATE THIS LEASE EARLY. YOU SHOULD READ
THIS PARAGRAPH CAREFULLY. In addition to the provisions
contained elsewhere in this Lease, the Lessor may terminate
this Lease prior to expiration date and without cause upon
the Fridley Housing and Redevelopment Authority making the
determination that it needs to terminate this leasehold
interest as a result of development intended for this site
or elsewhere in the southwest quadrant of Mississippi and
University. This termination can only be effective upon
the giving of ninety (90) days written notice by the Lessor
to the Lessee.
16. In the event that the Lessee shall continue to occupy
the demised premises after the expiration of the term of said
Lease, such "holding over" shall be on a month to month basis.
Either party may terminate said "holding over" by giving the
Q�
1 -1
proper notice, as required by Minnesota law, to terminate a
month to month tenancy.
17. The Lessee hereby agrees to waive any right or benefits
he may have pursuant to the Uniform Relocation Assistance
and Real Property Acquisition Policies Act of 1970
(40 U.S.C. 4601) and will provide Lessor with a signed waiver
upon request.
It is understood that the parties have entered into this
Lease as an accomodation to each other. Upon the proper
termination of this Lease, the Lessee will not be entitled
to any compensation or damages for the termination of the
Lessee's leasehold interest.
18. No sign shall be painted or affixed by the Lessee on any
part of the outside of the demised premises without prior
written consent of the Lessor. In the event of a violation
of this clause by the Lessee, Lessor may remove said sign
without any liability and may charge the expense incurred by
such removal to the Lessee. The Lessee is permitted to
substitute a sign on the building which would be affixed in
substantially the same location as any existing sign and
shall be constructed of letters which are substantially
similar to and which letters do not collectively or
significantly exceed the size of any current sign.
19. If the Lessee shall make default in any covenant or
agreement to be performed by it and if after written notice
from Lessor to Lessee such default shall continue for a
period of five (5) days or if the leasehold interest of the
Lessee shall be taken on execution or other process of law
-7-
•1
1 -J
or if the Lessee shall petition to be or be declared
bankrupt or insolvent according to law, then, and in any of
said cases, the Lessor may immediately or at any time
thereafter, without further notice or demand, enter into and
upon said premises or any part thereof and take absolute
possession of the same fully and absolutely without such
re -entry working a forfeiture of the rents to be paid and the
covenants to be performed by the Lessee for the full term of
this Lease; and at Lessor's election, Lessor may either lease
or sublet such premises or any part thereof on such terms and
conditions and for such rents and for such time as the Lessor
may reasonably elect and after crediting the rent actually
collected by the Lessor from such re- letting collect from the
Lessee any balance remaining due on the rent reserved under
this Lease, or Lessor may declare this Lease forfeited and may
take full and absolute possession of said premises free from
any subsequent rights of the Lessee.
That in the event of default by the Lessee, the Lessee shall
compensate the Lessor for all reasonable attorneys fees,
expenses and costs incurred by the Lessor in either re- acquiring
possession of the property or for bringing an action for the
recovery of unpaid rent.
20. Wherever in this Lease it shall be required or permitted
that notice or demand be given or served by either party to
this Lease to or on the other, such notice or demand shall be
given or served and shall not be deemed to have been given or
WE
1 -K
served unless in writing and forwarded by mail addressed as
follows:
To The Lessor: Barbara Dacy
Community Development Director
Fridley Housing & Redevelopment Authority
6431 University Avenue Northeast
Fridley, MN 55432
To The Lessee: Keith Degross
10645 Quincy Boulevard
Blaine, MN 55434
Such addresses may be changed from time to time by either party by
service of notice as above provided.
The Lessor and Lessee agree that all the provisions hereof are to
be construed as covenants and agreements.
IN WITNESS WHEREOF, the Lessor and Lessee have caused their
respective names to be subscribed to this Lease on the date first
above written.
In the Presence Of: LESSOR:
Dated: 1991.
FRIDLEY HOUSING & REDEVELOPMENT
AUTHORITY
BY:
LESSEE:
BY:
Sole Owner
ME
a° 0
Community Development Department
HOUSING AND REDEVELOPMENT AUTHORITY
City of Fridley
DATE: March 28, 1991
TO: William Burns, Executive Director of HRA 4,A Y
FROM: Barbara Dacy, Community Development Director
SUBJECT: Consideration of Approval of Two Mortgage
Satisfaction Documents for Large Family Home
Ownership Program
I have been contacted by two property owners who participated in
the Fridley HRA's Large Family Home Ownership Program. Del Price
of 5821 - 3rd Street N.E. and David Hendrickson of 6031 - 3rd
Street N. E. are in the process of refinancing their homes. In both
cases, the Fridley HRA issued a second mortgage under the Home
Ownership Program. The ten year requirement to live in the home
has expired in the Hendrickson family's case and will shortly
expire on April 24, 1991, in the Price family's case.
The City Attorney's office has prepared mortgage satisfaction
documents which will be recorded at Anoka County to state that the
Fridley HRA is releasing any claim regarding the second mortgage.
The program was designed to encourage the homeowners to live in the
newly constructed homes for at least ten years. If the owner lived
within the property for ten years, then the second mortgage amount
was forgiven (see attached minutes from 1980).
Recommendation
The attached mortgage satisfaction agreements are recommended for
approval by the HRA. The satisfaction regarding the Price property
will not be recorded until after April 24, 1991.
BD:ls
M -91 -217
2 -A
HOUSING & REDEVELOPMENT AUTHORITY MEETING, JUNE 12, 1980 PAGE 2
2. LARGE FAMILY HOME OWNERSHIP PROGRAM:
A. Approve Demolition Contract for Removing Structure at
5832 University Ave. N.E.
Mr. Boardman stated he would like the approval of the Authority to
enter into a contract for demolition on the Johnson property at
5832 University Ave. N.E. The bids that came in were $2,100 by
Boland Construction and $1,400 by Herbst Construction. He stated
they advertised to try to sell the garage on that property, but did
not receive any response, so the garage will be torn down also.
MOTION by Mr. Prairie, seconded by Ms. Svendsen, to-approve the
Contract for Demolition with Herbst Construction Co. for $1,400
for the structure demolition at 5832 University Ave. N.E., including
both single family house and garage. Upon a voice vote, all voting
aye, Vice - Chairperson Houck declared the motion carried unanimously.
B. Update on Survey on 6025 - 3rd St. N,E. and 5932 University Ave.. N.E.
Mr. Boardman stated they have gotten quotes on prices for surveying.
The quotes were $600 from Suburban Engineering, $690 from Comstock &
Davis, and a third quote for $900. He stated they have authorized
Suburban Engineering to do the survey on the four lots.
MOTION by Mr. Prairie, seconded by Ms. Svendsen, to approve the bid
from Suburban Engineering of $600 to do the surveys on 6025 - 3rd St. N.E.
and 5932 University Ave. N.E. Upon a voice vote, all voting aye,
Vice - Chairperson Houck declared the motion carried unanimously.
C. Approve Ordering of Updated Abstracts for the New Lots as Split by
the Fridley City Council to Prepare for Sale of Lots
Mr. Boardman stated he had written a memo, #80 -45, dated June 6, 1980,
to the Authority asking for the approval of the Authority to order the
updating of the abstracts on the HRA lots being acquired. Updated
abstracts are required to complete the purchase agreements for the
sale of the lots. The cost of the abstracts is $199.
MOTION by Ms. Svendsen, seconded by Mr. Prairie, to approve the
cost of $199 for updating the abstracts of the Large Family Home
Ownership Program Lots. Upon a voice vote, all voting aye, Vice -
Chairperson Houck declared the motion carried unanimously.
D. Approve Wording of the Proposed Purchase Agreement and Second
Mortgage to be Attached at Time of Sale /
Mr. Boardman stated they had Mr. Herrick put together some wording /
similar to the wording discussed at the last HRA meeting. Within
the Purchase Agreement, it states they are going to be placing a
E
r
HOUSING & REDEVELOPMENT AUTHORITY MEETING, JUNE 12, 1980 PAGE 3
second mortgage on the property at 87. interest. That second mortgage
is the difference between what the purchase price is and what the
appraised price of that lot is prior to the time of sale. The wording
also states that if the purchaser of that property moves out of the
house within ten years,'the HRA has first right of refusal on the
property, purchasing the property at the current appraised value
minus the difference between the appraised value and the 87. interest,
or they will foreclose on the second mortgage. The Mortgage Note
is the second mortgage that is attached to the Purchase Agreement.
If the purchaser stays in the house for the ten year period, then
the principal and interest accumulated on the second.mortgage would -%
be classified as satisfied.
Mr. Boardman stated they sent the Purchase Agreement and the Mortgage
Note to Dick Buddig, Legal Counsel for HUD, and he has no problems
with the documents.
MOTION by Mr. Prairie, seconded by Ms. Svendsen, to approve the
wording of the proposed "Purchase Agreement" and "Mortgage Note" to
be attached at time of sale. Upon a voice vote, all voting aye,
Vice - Chairperson Houck declared the motion carried unanimously.
E. Approve Appraisals on the Four New Lots to be Completed
Mr. Boardman stated that, as stated in the Purchase Agreement, prior
to the time they lay out the purchase agreements, they have to get
appraised values done on the vacant piece of properties. He was
asking for approval of these appraisals.from the Authority so that
when they get ready to sell a property and write up a purchase agree-
ment, they can go ahead and get an appraised value so they can put
that appraised value within the purchase agreement. The appraisals
cost approximately $175 each.
MOTION by Ms. Svendsen, seconded by Mr. Prairie, to approve
appraisals on the four new lots to be completed. Upon a voice vote,
all voting aye, Vice - Chairperson Houck declared the motion carried
unanimously.
3. UPDATE ON REHAB PROGRAM:
Mr. Boardman stated that with the rehab program, they have been having
problems getting contractors to do the.work. They have two projects with
two bids, three projects with one bid, and one project with no bid. The
City gives the property owners a list of contractors who are interested in
the rehab program. The property owner is responsible for contacting those
contractors and getting three bids.
Mr. Boardman stated they feel they should move ahead with these projects.
On those projects that have two bids, they will take the low bid. On the
projects with only one bid, they are going to have Darrel Clark, Chief
Building Official, go out, look at the one bid, and give notice of whether
he thinks that bid is within reason. They have talked this over with HUD,
and HUD has no problem with it.
2 -C
Satisfaction of Mortgage
By Corporation
KNOW ALL MEN BY THESE PRESENTS, That a certain Indenture of
Mortgage, now owned by the undersigned, a Public Corporation existing
under the laws of the State of Minnesota, bearing date the 24th day of
April, 1981, made and executed by Del F. Price and Peggy B. Price,
husband and wife, as Mortgagors, to the Fridley Housing and
Redevelopment Authority, a Minnesota Public Corporation, as Mortgagee,
and recorded in the Office of the County Recorder in and for the
County of Anoka and State of Minnesota on the 20th day of May, 1981 as
Document #116328, is, with the indebtedness thereby secured, fully
paid and satisfied upon the record thereof, according to the statute
in such case provided.
IN TESTIMONY WHEREOF, The said
Corporation has caused these
presents to be executed in its
corporate name by its Executive
Director this day of
1991.
FRIDLEY HOUSING AND REDEVELOPMENT
AUTHORITY
BY:
William W. Burns
Its Executive Director
STATE OF MINNESOTA )
)ss.
COUNTY OF ANOKA )
The foregoing was acknowledged before me this day of
1991 by William W. Burns, the Executive Director of the
Fridley Housing and Redevelopment Authority, a Public Corporation
under the laws of Minnesota, on behalf of the Public Corporation.
THIS INSTRUMENT WAS DRAFTED BY:
HERRICK & NEWMAN
Suite 205
6401 University Avenue Northeast
Fridley, MN 55432
(612) 571 -3850
2 -B
HOUSING & REDEVELOPMENT AUTHORITY MEETING, JUNE 12, 1980 PAGE 3
second mortgage on the property at 87. interest. That second mortgage
is the difference between what the purchase price is and what the
appraised price of that lot is prior to the time of sale. The wording
also states that if the purchaser of that property moves out of the
house within ten years,-the HRA has first right of refusal on the
property, purchasing the property at the current appraised value
minus the difference between the appraised value and the 87. interest,
or they will foreclose on the second mortgage. The Mortgage Note
is the second mortgage that is attached to the Purchase Agreement.
If the purchaser stays in the house for the ten year period, then
the principal and interest accumulated on the second.mortgage would
be classified as satisfied.
Mr. Boardman stated they sent the Purchase Agreement and the Mortgage
Note to Dick Buddig, Legal Counsel for HUD, and he has no problems
with the documents.
MOTION by Mr. Prairie, seconded by Ms. Svendsen, to approve the
wording of the proposed "Purchase Agreement" and "Mortgage Note" to
be attached at time of sale. Upon a voice -vote, all voting aye,
Vice - Chairperson Houck declared the motion carried unanimously.
E. Approve Appraisals on the Your New Lots to be Completed
Mr. Boardman stated that, as stated in the Purchase Agreement, prior
to the time they lay out the purchase agreements, they have to get
appraised values done on the vacant piece of properties. He was
asking for approval of these appraisals.from the Authority so that
when they get ready to sell a property and write up a purchase agree-
ment, they can go ahead and get an appraised value so they can put
that appraised value within the purchase agreement. The appraisals
cost approximately $175 each.
MOTION by Ms. Svendseu, seconded by Mr. Prairie, to approve
appraisals on the four new lots to be completed. Upon a voice vote,
all voting aye, Vice- Chairperson Houck declared the motion carried
unanimously.
3. UPDATE ON REHAB PROGRAM:
Mr. Boardman stated that with the rehab program, they have been having
problems getting contractors to do the.work. They have two projects with
two bids, three projects with one bid, and one project with no bid. The
City gives the property owners a list of contractors who are interested in
the rehab program. The property owner is responsible for contacting those
contractors and getting three bids.
Mr. Boardman stated they feel they should move ahead with these projects.
On those projects that have two bids, they will take the low bid. On the
projects with only one bid, they are going to have Darrel Clark, Chief
Building Official, go out, look at the one bid, and give notice of whether
he thinks that bid is within reason. They have talked this over with HUD,
and HUD has no problem with it.
2 -C
Satisfaction of Mortgage
By Corporation
KNOW ALL MEN BY THESE PRESENTS, That a certain Indenture of
Mortgage, now owned by the undersigned, a Public Corporation existing
under the laws of the State of Minnesota, bearing date the 24th day of
April, 1981, made and executed by Del F. Price and Peggy B. Price,
husband and wife, as Mortgagors, to the Fridley Housing and
Redevelopment Authority, a Minnesota Public Corporation, as Mortgagee,
and recorded in the Office of the County Recorder in and for the
County of Anoka and State of Minnesota on the 20th day of May, 1981 as
Document #116328, is, with the indebtedness thereby secured, fully
paid and satisfied upon the record thereof, according to the statute
in such case provided.
IN TESTIMONY WHEREOF, The said
Corporation has caused these
presents to be executed in its
corporate name by its Executive
Director this day of
, 1991.
FRIDLEY HOUSING AND REDEVELOPMENT
AUTHORITY
BY:
William W. Burns
Its Executive Director
STATE OF MINNESOTA )
)ss.
COUNTY OF ANOKA )
The foregoing was acknowledged before me this day of
, 1991 by William W. Burns, the Executive Director of the
Fridley Housing and Redevelopment Authority, a Public Corporation
under the laws of Minnesota, on behalf of the Public Corporation.
THIS INSTRUMENT WAS DRAFTED BY:
HERRICK & NEWMAN
Suite 205
6401 University Avenue Northeast
Fridley, MN 55432
(612) 571 -3850
2 -D
Satisfaction of Mortgage
By Corporation
KNOW ALL MEN BY THESE PRESENTS, That a certain Indenture of
Mortgage, now owned by the undersigned, a Public Corporation existing
under the laws of the State of Minnesota, bearing date the 21st day of
October, 1980, made and executed by David G. Henrikson and Marianne M.
Henrikson, husband and wife, as Mortgagors, to the Fridley Housing and
Redevelopment Authority, a Minnesota Public Corporation, as Mortgagee,
and recorded in the Office of the County Recorder in and for the
County of Anoka and State of Minnesota on the 23rd day of October,
1980 as Document #558849, is, with the indebtedness thereby secured,
fully paid and satisfied upon the record thereof, according to the
statute in such case provided.
IN TESTIMONY WHEREOF, The said
Corporation has caused these
presents to be executed in its
corporate name by its Executive
Director this day of
, 1991.
FRIDLEY HOUSING AND REDEVELOPMENT
AUTHORITY
BY:
William W. Burns
Its Executive Director
STATE OF MINNESOTA )
)ss.
COUNTY OF ANOKA )
The foregoing was acknowledged before me this day of
, 1991 by William W. Burns, the Executive Director of the
Fridley Housing and Redevelopment Authority, a Public Corporation
under the laws of Minnesota, on behalf of the Public Corporation.
THIS INSTRUMENT WAS DRAFTED BY:
HERRICK & NEWMAN
Suite 205
6401 University Avenue Northeast
Fridley, MN 55432
(612) 571 -3850
, - rR
Community Development Department 3
HOUSING AND REDEVELOPMENT AUTHORITY
City of Fridley
DATE: March 29, 1991
TO: William Burns, Executive Director of HRA 40. �
FROM: Barbara Dacy, Community Development Director
SUBJECT: Redevelopment of Cub Foods Site
On Wednesday, March 20, 1991, I met with Bob Grootwasink of Weis
Management, Inc., Richard Walquist, and Mike Hurley of Barna, Guzy,
& Steffen, Ltd., regarding the redevelopment of the Cub Foods site.
Grootwasink and Walquist are the brokers for the site, and Hurley
represents the fee owners of the property, the Charles Smith family
heirs. They are proposing to remodel the existing building to
create three large tenant spaces. As part of the remodeling, about
2,500 square feet will be removed from the front of the building
and the parking lot and lighting standards will be improved and
modernized (total value of improvement is $477,000).
Request
They are requesting $50,000 to assist them in completing the
exterior improvements to the property -- parking, landscaping,
lighting, and exterior modifications (see attached letter). They
will also be requesting a setback variance along Osborne Road
(similar to the one granted by the City to Jerry Farrell) and will
be finalizing the plat process to create a second lot on the
property for an additional free - standing building. They are
requesting a $15,000 grant and $35,000 to be financed through a
loan or mortgage. The HRA would also have to create a district for
the parcel, and include it in the redevelopment project area.
They have one tenant already which will comprise 605.-' of the
building, Pet Food Warehouse; however, their credit rating is not
strong enough to convince the bank to issue a loan. Apparently,
the Pet Food Warehouse company has just opened two brand new
facilities and the operating success from those two facilities is
not documented as of yet.
The current value of the property is about $832,500 which dictates
payment of $40,440 in taxes. The value was reduced from $1,016,500
as a result of a tax appeal. If the redevelopment occurs the value
could rise again to $1,100,000, which would generate $47,500 in
taxes.
.r,
3 -A
Redevelopment; CUB Foods Site
March 29, 1991
Page 2
Recommendation
The amount of the request is about 10% of the reconstruction costs.
The grant amount is 3% of the reconstruction costs, and the
remaining 7% ($35,000) can be financed through a second mortgage.
Although another tax increment district would have to be created,
the HRA would recover its costs through repayment of the loan and
taxes generated from the development.
The petitioner is requesting an indication from the HRA as to
whether a formal application (agreement and escrow deposit) would
be considered. If the HRA does not believe the proposal deserves
further consideration, the petitioner will not submit the
application. Pending the outcome and benefit of an analysis by our
consultants, the proposed request appears to be a viable
redevelopment project, and warrants further review.
BD:ls
M -91 -220
tz
O
Z
(��% � yam: � �•. T•�-
3 -B
3 -C
-ROBERT A. GUZY
BERNARD E. STEFFEN
RICHARD A. MERRILL
ROBERT C. HYNES
STEPHEN H. MUNSTENTEIGER
RICHARD A. BEENS
RONALD B. PETERSON
DARRELL A. JENSEN
JEFFREY S. JOHNSON
RUSSELL H. CROWDER
JON P. ERICKSON
LAWRENCE R. JOHNSON
DAVID A. COSSI
THOMAS P. MALONE
MICHAEL F. HURLEY
Df"'Is
D%J
Barna, Guzy & Steffen, Ltd.
ATTORNEYS AT LAW
400 Northtown Financial Plaza
200 Coon Rapids Boulevard
Coon Rapids, MN 55433
(612) 780 -8500 FAX (612) 780 -1777
March 28, 1991
Ms. Barbara Dacy
Fridley Community Development Director
Fridley City Hall
6431 University Avenue N.E.
Fridley, MN 55432
RE: Proposed Tax Increment Financing
Application /250 Osborne Road
Dear Ms. Dacy:
THOMAS L.DONOVAN
3 -D PAMELA M. HARRIS
SHARON L. HALL
KENNETH A. AMDAHL
CHARLES M. SEYKORA
WILLIAM M. HANSEN
JOAN M. THIEMAN
DANIEL D. CANTER. JR.
BEVERLY K. DODGE
JOAN M. QUADS
SCOTT M. LEPAK
STEVEN L. MACKEY
OF COUNSEL
PETER BARNA
NANCIE R. THEISSEN
LAWRENCE M. NAWROCKI
PATENT, COPYRIGHT
AND TRADEMARK LAW
Thank you for taking time out of your busy schedule to meet with
myself and the brokers of the transaction, Bob Grootwassink and
Richard Walquist. As I indicated to you during our discussion, I
represent the fee owners of the property referred to above. The
purpose of this letter is to ask that you informally approach the
Housing and Redevelopment Authority of Fridley to investigate the
possibility of including the property referred to above within a
tax increment financing district. If your response is positive,
the fee owners of the property will make a formal application for
funds from tax increment financing.
To fully understand the complexities of this project, I feel it
is important for you to understand the historical background
behind this property.
The building on the property was originally constructed to house
• grocery store. Cub Foods fka Fairway Foods, Inc. entered into
• long term (30 year) lease for the property in 1968. After
occupying the property for approximately 12 years, Cub Foods
decided to vacate the premises and move their operation to
another site. After they vacated the property Cub Foods
attempted to relet the property. Various small tenants such as
Stone Fabrics, American Furniture Outlet, etc. occupied the
property from time to time. All of these tenants were on a short
term basis. Cub Foods had a below market lease rental. They
felt originally that they could sublet the property for the
remaining term of the 30 year lease, meet their lease obligations
and still make money. However, they were unable to attract any
significant tenants. Cub Foods then attempted to sell the
property as a way of getting out from under the remainder of
their 30 year lease. Of course, any sale of the property would
have to be by and through a purchase agreement with the fee
Columbia Heights Office
Anoka Office
3989 Central Avenue NE
Anoka Professional Building
Minneapolis, MN 55421
403 Jackson Street
(612) 788 -1644
Anoka, MN 55303
(612) 427 -6300
3 -E
March 28, 1991
Page 2
owners of the property agreeing to the sale. Cub Foods was
unsuccessful in locating a purchaser for the property.
In approximately 1987, the fee owners of the property were
approached by a prospective purchaser, Southam Development. In
order to enter into the Purchase Agreement, it was determined
that the fee owners needed to either terminate or buy out the
remaining lease term of Cub. The lease interest of Cub in the
property was ultimately terminated. The purchase agreement with
the Canadian developers (Southam Development) fell through. They
were unable to secure financing. Subsequent to Southam
Development, the sellers entered into a purchase agreement with
JSW Properties. JSW Properties backed out of the purchase
agreement after they were unable to secure their anchor tenant.
Subsequent to JSW Properties, Linville & Associates, Inc. entered
into a purchase agreement with the seller. Linville & Associates
Inc. were unable to secure their anchor and adequate financing.
They canceled their interest in the purchase agreement. All of
the purchase agreements above dealt with some sort of seller
financing in order to get this transaction accomplished. The
purchase price for this property was reduced dramatically to
accomplish a sale. To date, the sellers have been unsuccessful
in entering into and completing any purchase agreement for this
property. In light of today's market, it is the seller's feeling
that the property in its present condition is not saleable.
In light of my client's past experience in trying to sell the
property, it was determined that some action needed to be taken
in order to stop the cash flow drain from the property until the
real estate market recovers. My clients are paying real estate
taxes of $48,000.00 plus utilities and other maintenance expenses
without any income of the property. Since we have been unable to
sell the property, the sellers have determined that they need to
lease the property to stop the cash drain and recognize some
return. One anchor tenant, Pet Food Warehouse, has expressed an
interest in leasing approximately 60% of the building space.
However, in order to lease out this space substantial exterior,
heating, air conditioning and tenant improvements must be
completed. My clients estimate that the cost to rehab this
particular parcel will exceed $400,000.00. I enclose for your
review a copy of a preliminary statement as to costs which will
be incurred by sellers for exterior and interior improvements.
The purpose of this letter is to request that the City of Fridley
Housing and Redevelopment Authority consider tax increment
financing to offset some of the seller's cost for completing
exterior site improvements to the project. As the property
currently stands, there is no tax revenue other than real estate
taxes being generated by this project. An improvement to the
property by way of site renovation and bringing tenants into the
project will generate increased tax dollars and create new jobs
3 -F
March 28, 1991
Page 3
and other tax revenue for the City. Therefore, the sellers of
this property would request that the City of Fridley, Housing and
Redevelopment Authority consider the prospect of offering
$50,000.00 in tax increment financing for this project.
The City has indicated that one of the conditions for site
approval of this project will be the creating of a green space
area between the parking lot and the roadway and revitalizing the
parking lot. By way of background, the property originally did
have green space between the parking lot and the street.
Approximately six or seven years ago the County condemned part of
the property to increase the right of way for the highway. The
County reimbursed my clients approximately $6,000.00 - $7,000.00
for the taking. The present cost to create the green space will
be approximately $40,000.00. The project will also loose parking
area as a result of the creation of the green space. In
addition, we expect the new exterior lighting system for the
project will cost approximately $8,000.00 and parking lot
improvement project including servicing or striping will cost
approximately $20,000.00. In addition to these improvements we
expect the exterior facelift of the project including removal and
remodeling of some of the facia of the building and replacing
sidewalks to be approximately $24,000.00. Therefore, you can see
that the total project cost for just the exterior improvements of
this project to exceed $92,000.00.
In light of the history of the taking of the green space on this
project, my clients would like to request that the HRA consider a
$15,000.00 grant to go towards the cost of re- establishing the
green area. My clients were paid approximately $7,000 for the
taking of all of this green area. Now at the request of the
City, they will be required to re- establish this green area. My
clients feel strongly that some costs associated with the
establishment of this green area should be shared by Fridley.
My clients are now going through the process of trying to locate
financing to cover the costs for all improvements to this
project. This is an extremely difficult task. The fee owners of
this property are not wealthy individuals. Their only security
for the property is the project itself. Therefore, the ability
of the bank to finance the total amount of the project
improvements will be questionable. Therefore, my clients would
like to request from the City of Fridley Housing and
Redevelopment Authority, $35,000.00 in tax increment financing to
help offset some of the project costs. The structuring of the
repayment of this $35,000.00 should not be an issue as to the
sellers.
This project will enhance both the neighborhood, increase tax
revenues and create jobs for the community. I would therefore
ask that you informally speak to the Housing and Redevelopment
3 -G
March 28, 1991
Page 4
Authority to see if the creation of tax increment financing
district for this particular project would be acceptable. If so,
I will commence the application process. For your information I
have included some information regarding the Pet Food Warehouse
who will be the anchor tenant for this project. If you need any
further information regarding this project, please feel free to
contact me.
Sincerely,
Michael F. Hurley
MFH:lj
Enclosures
Realest \Letters \MDacy
• � \F
f
FRIDLEY CUB SITE
PRELIMINARY PRO FORMA
COST ESTIMATES
Building Cost
Demo and remodel exterior and interior bid
Includes outside concrete walk & new
parking lot lights
Al Carr Construction
Roof bid for balance of the roof
Bid protective maintenance
Tenant allowance Pet Food Warehouse
Tenant allowance balance of building
Estimates
Leasing commission x $2.00 sq. ft.
Outside landscaping estimate
Misc. costs
Total estimate cost for remodeling
not counting loan closing cost
Annual Income
Pet Food Warehouse 19,730 x $5.50
Balance of the space 14,470 x $5.50
Pad site ground lease
Annual Income - 100% of the space
Costs needed just for Pet Food Warehouse
Less $100,000
$202,000
28,000
75,000
S-19,700
68400
20,000
25,000
477,100
108,515
79,580
25,000
$213,095
3 -H
a
Community Development Department4
D HoUSING AND REDEVELOPMENT AUTHORITY
City of Fridley
TO: Housing and Redevelopment Authority Members
FROM: William W. Burns, City Manager�„��
DATE: March 29, 1991
SUBJECT: HRA Parking Lot Lease
We received the attached letter from a representative of the new
owners of the Fridley Office Plaza. In the letter, they point out
that the Fridley Office Plaza is in arrears by $19,200 on the
amount they owe for use of the parking lot and the municipal
parking ramp.
We have verified that the amount due is accurate. We recommend
that the HRA accept their offer of $10,000 as a settlement for the
past due debt.
Thank you for considering this recommendation.
WWB:rsc
Attachment
FRIDLEY
OFFICE PLAZA
March 14, 1991
Herrick & Newman P.A.
6401 University Avenue Northeast
Suite 205
Fridley, Minnesota SS432
Attn: Mr. Virgil Herrick
Re: HRA Parking Lot Lease
Dear Mr. Herrick:
cc: Dr. Michael Park
4 -A
This letter will suffice as a follow up to our initial meeting on Monday April 8th, regarding
the parking lot lease at the Fridley Office Plaza. As I stated in our conversation, the former
owner, Jack Brandt, Performance Investments did not perform in paying debts that
amounted to hundreds of thousands of dollars. Therefore the new owner, Dr. Michael
Park, is being requested to work out agreements to settle with past creditors and establish
a creditable response with the vendors.
We understand that deficit of $19,200.00 is owed to the (HRA) City of Fridley. We would
greatly appreciate your responding to the Council on our behalf and offer ten thousand
dollars to settle this debt immediately.
We would also like to keep the lease in force and start monthly payment as of May 1, 1991,
in relation to the present lease that is in effect. It is our intention to maintain a good
standing with the City of Fridley and upgrade the Fridley Office Plaza from its present
condition. Your fullest attention to this letter would be greatly appreciated.
Sincerely,
Columbia Park P rtners
FRIDLEY OFFICE PLAZA, SUITE 324, 6101 UNIVERSITY AVE. MINNEAPOLIS, MINNESOTA 55432
RESOLUTION OF DIRECTION TO ACQUIRE FEE SIMPLE
NUMBER
Whereas, in the operation of the Housing and Redevelopment Authority
the Board of Commissioners of the Authority has determined that there
is a need for development and redevelopment within the corporate limits
of the City to provide employment opportunities, to provide adequate
housing in the City,,to improve the tax base, and to improve the
general economy of the City and the State of Minnesota; and
Whereas, the Authority believes that the acquisition of the property
described in the attached Exhibit A is reasonably necessary and convenient
to the furtherance of these objectives and will promote the health,
safety and welfare of the City's residents and is in accord with the
public purposes and provisions of the applicable State and local laws; and
Whereas, the County of Anoka has approved improvement plans for
Mississippi street from 5th street east of University Avenue to 2nd
street west of University Avenue, with construction scheduled to begin
in July of this year; and
Whereas, an emergency exists in the usual operation of the Authority in
that it is immediately necessary to acquire title to and possession of
approximately forty (40) feet of the subject property for the improvement
of Mississippi street prior to the filing of any award by the Court -
appointed commissioners;
Be It Resolved by the Housing and Redevelopment: Authority in and for the
City of Fridley:
1. That the Authority attorney be, and hereby is authorized and directed
to take all appropriate steps to acquire the subject property using
the Quick -Take procedure as set forth in Minnesota Statute 9117 et. seq.
2. That the expenditure of $ is hereby authorized and approved
as an appraisal of damages to the subject property and represents the
Authority's approved appraisal of value.
PASSED AND ADOPTED BY THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR
THE CITY OF FRIDLEY THIS DAY OF ,1991.
4*
Larry Commers, Chairman
William Burns, Executive Director
5
C L A I X 8 A N D E% P E N 8 E 8
(AT MEETING)
Community Development Departments
HOUSING AND REDEVELOPMENT AUTHORITY
City of Fridley
DATE: March 28, 1991 1
TO: William Burns, Executive Director of HRA 4'
FROM: Barbara Dacy, Community Development Director
SUBJECT: Planning Commission and City Council
Consideration of Fridley Town Square Project
At the March 14, 1991, meeting, the HRA requested copies of the
minutes from the Planning Commission and City Council meetings
regarding the proposal to locate a Burger King and a drive - through
window as part of the Fridley Town Square redevelopment plan. I
have also enclosed copies of the original and recent traffic report
prepared by Barton - Aschman.
We also understand that the developer is still working with his
financiers regarding the project. Because Burger King has declared
bankruptcy, it has apparently slowed down the financing process.
We will keep the HRA apprised of the developer's financial status
as soon as information is made available.
BD:ls
M -91 -218
6 -A
Casserly Molzahn & Associates, Inc.
215 South 11 th Street, Suite 200 • Minneapolis • Minnesota 55403
Office (612) 342 -2277 • Fax (612) 332 -4765
MEMORANDUM
TO: City of Fridley
_Wiliam Burns, City Manager
arbara Dacy, Planning Coordinator
Virgil Herrick, City Attorney
FROM: James R. Casserly �
DATE: March 26, 1991
RE: Fridley Town Square Development
I spoke with Scott Ericson last week regarding the progress of
the Fridley Town Square project. Scott explained that the
underwriters (Miller & Schroeder Financial) have secured
commitments to fund approximately one -half of the project. The
underwriting is going slower than anticipated because of the
bankruptcy of the franchise holder, the Burger King. The
underwriters believe that it is very important to have Burger
King as part of the project. However, it will take some time to
straighten out the transfer of the franchise because the matter
is now in bankruptcy court and the trustee in bankruptcy is
sorting out the various assets. I had spoken previously with an
investment banker from Miller & Schroeder about the funding
problems, and he indicated that this was going slower than
anticipated.
Scott Ericson has indicated he will keep us fully informed as to
the financial commitments and we should expect to hear from him
in the next three weeks.
JRC /db
r _
Community Development Department$
PLANNING DIVISION
City of Fridley
DATE: March 21, 1991 1
TO: William Burns, City Manager
FROM: Barbara Dacy, Community Development Director
SUBJECT: Meeting with Simer Pump on Wednesday, March 20,
1991
I met with Dennis Nyhus, Materials Manager, and John Johnson, Plant
Manager, of the Simer Pump company at 5960 Main Street N.E. (they
are just south of the vacant piece of property at 61st Avenue and
Main Street) . You may recall that Jock had met with them in
February and October of 1990 to discuss expansion on -site or
construction of a new building in the Northco Business Park. I met
with them Wednesday to follow -up on their plans (Roger Jensen of
the Anoka County Economic Development Partnership had also
inquired).
Nyhus and Johnson informed me that the lease for their existing
space on Main Street will expire in 1992. Simer Pump is a division
of the Marlee Pump company, which is located in Kansas City. They
indicated that they are receiving pressure to locate out of state
for a variety of reasons. They met with Representative Wayne
Simoneau regarding the State of Minnesota's wage compensation rates
and the proposed changes to that law. They are upset with the
costs that the wage compensation law imposes. They are also
unhappy with the property tax rates. Finally, new construction
alternatives appear to be cost prohibitive at this point in time.
I advised them that the City of Fridley is in the process of
establishing a business retention program. I advised them that one
possible means to help them stay in Fridley was evaluating the
creation of an economic development district with the Housing &
Redevelopment Authority assisting them in some fashion that is
acceptable under State law. I also told them that if we hear of
any existing vacant building that becomes available in the Fridley
area that we will try and connect them with that possibility.
They indicated they will contact me regarding their decision - making
process.
BD /dn
cc: Jim Casserly
M -91 -197
11 . . -jk
r �
Community Development Department 9
P
HOUSING AND REDEVELOPMENT AUTHORITY
City of Fridley
TO: Housing and Redevelopment Authority Members
FROM: William W. Burns, City Manager,�•�
DATE: March 29, 1991
SUBJECT: Agreement with Terri Mau
Ms. Terri Mau visited me recently regarding the terms of her lease
at Rice Creek Plaza. Whether it was wise for me to do this, I am
not sure. At any rate, I negotiated the attached agreement with
her. The agreement was subsequently reviewed by Jim Kordiak and
provisions on taxes due were added. Otherwise, Jim felt the terms
I negotiated were good.
We are asking the HRA to consider this agreement informally, and
give it their approval.
Thank you for your consideration.
WWB:rsc
Attachment
-
The
n n n Kordiak 9'A
n n n Company
it Real Estate n Property Management n Appraisals n Income Tax Service
March 28, 1991
Terri Mau
Cinnamon Skin Tan
248 Mississippi St. N.E.
Fridley, Minnesota 55432
Dear Terri,
I am advised that you have made arrangements with Bill Burns to pay the
balance due on Cinnamon Skin Tan and T's Hair Plus. I have been asked to
put this agreement in writing for you and the HRA board. If you have any
questions please call, if there are none please sign the original letter and
return it to me for signature by Mr Burns.
You have agreed to:
(A) pay your monthly base rent including CAM charge plus an additional
$150.00 per month beginning March 1 st, 1991 and continue unti 1 June
1 st) 1992.
(B) On June 1 st, 1992 a balloon payment for the remaining balance would
be due.
(C) At the time of the balloon, interest would be paid at a rate of 9%
amortized over the term of the loan.
(D) To protect the owners interest it was agreed that you would secure a
Letter of Credit from your bank for $7,891.63 plus 1991 taxes due and
provide that Letter of Credit to the Fridley HRA. Please deliver that
Letter of Credit me by April 25th and I will forward it.
3948 Central Ave. N.E. Minneapolis, MN 55421
788 -9651 788 -0911
(E) Your 1991 taxes are due and payable by March 31 st. This agreement
will presume that 1991 taxes will be included with and added to
$7,891.63 balance due. I will notify you shortly regarding what your tax
obligation will be. Your 1992 tax obligation wtll not be considered as part
of this agreement and will be due and payable as described In your lease.
Please call me If you have any questions regarding this information and I
will be happy to work with you to insure that we have a clear
understanding of this agreement. Please sign and send the original.
Terri your March payment was short according to this agreement. Your
March rent and SCAM is $91221 plus $150:00 is $1,062.21. You have paid
$1,000.00. Please forward $62.21 in March to remalb current.
Sincerely,
Jim Kordiak
Bui 1 d I ng Manager
X_
Ms. Terri Mau Cinnamon Skin Tan
X
Mr. Bill Burns -HRA Director
FINANCE DEPARTMENT 10
MEMORANDUM
TO: WILLIAM W. BURNS, CITY MANAGER
FROM: RICHARD D. PRIBYL,. FINANCE DIRECTOR
SUBJECT: LIMITS OF LIABILITY
DATE: March 29, 1991
In the last HRA Meeting, Larry Commers commented on the inadequacy of the
$600,000 limit that we have on our liability insurance. Conway Olson has been
the insurance consultant that we've used since 1985 and his role is to provide
to the City different options that are available for our insurance coverage.
Some time ago, there was a conscience decision made, as the insurance rates went
up, to actually not renew the umbrella policy because of its extreme cost and
its diminished coverage of liability. At that point in time, the City embarked
upon a self insurance plan that was to self insure more and more of the risks
associated with various liabilities. We chose to use a liability plan that had
a $50,000 deductible associated with it; thus saving dollars associated with
smaller claims. Also, Council decided not to utilize an umbrella policy because
of the cost and the diminished coverage that umbrella plans have had. The
decision was based on information provided by Conway on the limits of liability
contained in the Statute of Limitations, as it pertains to units of government.
The statute caps liability for units of government at $600,000, thus the decision
to drop the umbrella at that time. In 1990, the City transferred $1,000,000
into the self insurance fund; in lieu of the umbrella coverage. This seems to
be the prevailing practice that many municipalities have embarked upon in the
Twin Cities area and greater Minnesota. Conway did say that in regard to this
activity, we are in more of a lead role because of our $1,000,000 self insured
umbrella. Many municipalities do not have umbrella policies nor do they have
any kind of self insurance for umbrellas; such as, the city of Fridley has.
It might be time to revisit this issue with the City Council to insure that this
is the policy they want us to continue to follow. As it stands right now, the
additional umbrella policy would cost us in the area of $60,000. The burden of
this would be borne by the General Fund.
To answer the question that Larry raised regarding the inadequacy of the
insurance coverage, Conway feels this is more of a policy issue. The City of
Fridley has made policy based on information Conway has provided as insurance
consultant.
It would appear that if there is a concern regarding the limits of our liability
it should be a topic that is brought up at one of the future conference sessions
with Council.
I have attached information provided by Conway, some time ago, that relates to
the coverages we have.
RDP /me
Attachment(s)
10 -A
183 University Ave. East
St. Paul, MN 55101 -2526
League of Minnesota Cities (612) 227 -5600 (FAX: 221 -0986)
August 3, 1990
Conway Olson
T.C. FIELD _
P.O. Box 64016
St. Paul, MN 55164��
1 n
AUG U
Re: Liability limits for municipalities'' C, � s �F10 & CO 1990
Dear Mr. Olson: .
Today we discussed the possibility of the City of Fridley
being held liable for activities involving private businesses which
are located in a building that has been purchased by the HRA. You
expressed concern that the statutory limits may not apply because
the activity was not "'governmental" in nature.
The enclosed case Steven L. Imlay v. City of Lake Crystal,
453 N.W. 2d 326 (Minn. 1990) concerns challenges to the statutory
limits on a city's joint and several liability but the court also
mentions the basic liability limits. I have underlined those
portions of the decision.
Thank you for sending me the information on the landfill in
Oak Grove Township. It will be interesting to see what is going on
there. If you have any other questions, please contact me.
Sincerely,
0m,
Ellen A. Longfellow
LMCIT Staff Attorney
enclosure
i
i
326 Minn. 453 NORTH WESTERN REPORTER, 2d SERIES
bility. He has further joined the Director
in recommending his immediate transfer to
disability inactive status pursuant to Rule
28(a), Rules on Lawyers Professional Re-
sponsibility.
The court, having been duly advised of
the relevant facts and circumstances of the
matter, and taking into consideration a stip-
ulation between the parties NOW OR-
DERS:
1. That the Respondent Steve G. Heik-
ens hereby is transferred to disability inac-
tive status pursuant to Rule 28(a), Rules on
Lawyers Professional Responsibility.
2. That while on such disability inactive
status, the Respondent shall not render
legal advise or discuss legal matters urith
his former clients.
S. That the Director shall undertake to
complete a disciplinary investigation relat-
ing to the alleged shortages in Respon-
dent's trust account as well as other mat-
ters and that Respondent shall cooperate
with such investigation to the extent that
he is able.
4. That further formal disciplinary pro-
ceedings shall be held in abeyance until
Respondent is transferred from disability
inactive status or until further order of this
court.
S. That the probable cause hearing pro-
vided for in Rule 9, Rules on Lawyers
Professional Responsibility, relating to any
allegations arising out of the Director's
disciplinary investigation, is hereby deemed
to be waived.
6. That the Respondent shall not be
reinstated to the practice of law until after
this court has conducted a hearing provided
for in Rule 28(d) and Rule 18, Rules on
Lawyers Professional Responsibility.
7. That Respondent shall not be rein-
stated pursuant to Rules 18 and 28, Rules
on Lawyers Professional Responsibility,
until this court has considered any petition
for disciplinary action filed by the Director
as a result of the Director's disciplinary
investigation herein.
w
Q ScnNUMtltSYMM
T
10 -B
Steven L. IMLAY. et al..
Petitioners. Appellants,
V.
CITY OF LAKE CRYSTAL d /b /a Lake
Crystal Municipal Liquor Store, et al..
Defendants and Third -Party Plaintiffs.
Respondents,
V.
Vicki CARVER, Administrator of the
Estate of Virgil H. Miller, Deceased.
Third -Party Defendant,
State of Minnesota, Intervenor.
No. CX-88 -2551.
Supreme Court of Minnesota.
March 30, 1990.
Motorcycle accident victims brought
personal injury action against city, in its
capacity as operator of a liquor store, seek-
ing damages for injuries sustained in a
collision with an uninsured, intoxicated
motorcyclist City filed a third -party action
against motorcyclist's estate. The District
Court, Blue Earth County, Harvey A. Hol-
ton, J., reduced the jury's verdict against
the city, and accident victims appealed.
The Court of Appeals, 444 N. W.2d 594.
affirmed in part and reversed and remand-
ed on the calculation of interest, and appeal
was taken. The Supreme Court, Popovich,
CJ., held that (1) statutory limit on munic_r
ipal joint and several liability was not un'
constitutional as applied to municipal liquor
- vendors; ' (2) collateral source' 'statute diA
not violate equal protection clauses of Unit-
ed States and Minnesota Constitutions; (3)
municipality's purchase of liability insur-
ance did not constitute• a waiver of limita
tion on liability provided by statutory limit
on municipal joint and several liability; 'and
`(4) uninsured motorist benefits, which were
deductible under collateral source statute
from verdict in favor of motorcycle acci-
dent victims, would be applied first to obli-
4
IbiLAY Y. CITY OF LAKE CRYSTAL Minn.
327 1 O -C
Cite w 453 N.W1d -326 Mum 1990)
Ration of uninsured motorist before being payments result from a source plaintiffs
deducted from municipal liquor vendor's did not even sue. M.S.A. § 548.36.
obligation. 7. Damages 6-59
Affirmed in part, and reversed in part,
and remanded.
1. Constitutional Law x213.1(2)
Under two-part inquiry for determin-
ing ,whether a statute meets rational basis
test, court asks whether challenged legisla-
tion has a legitimate purpose and whether
it was reasonable for lawmakers to believe
that use of challenged classification would
promote that purpose. U.S.C-AL Const
Amend. 14.
2 Municipal Corporations Q -7231h
Statutory limit on municipal joint and
several liability was not unconstitutional as
applied to municipal liquor vendors.
- yi.S.A. § 604.02, subd. 1; U.S.CA. Const.
Amend.
3. Constitutional Law x249(1)
Damages c-59
Collateral source statute did not vio-
late equal protection clauses of United
States and Minnesota Constitutions.
X.S.A. § 548.36; U.S.C.A. Const.Amend.
14; M.S.A. Const. Art 1, § 7.
4. Municipal Corporations x723
Municipality's purchase of liability in- j
surance did not constitute a waiver of limi-
tation on liability provided by statutory lim-
it on municipal joint and several liability.
M.S.A. §§ 466.06, 604;02, subd. 1.
S. Damages 0=59
Uninsured motorist benefits were a
collateral source and therefore were de-
ductible from award recovered by motorcy-
cle accident victims from municipal liquor
vendor where no subrogation rights were
asserted against those benefits. M.S.A.
§ 548.36.
C Damages e-59
Taking collateral sources off top of
jury verdict is justified if there are code-
fendants who are Iiquid, but it is not eq-
uitable to give a single defendant benefit of
collateral source payments when there
would be no double recovery and when
Uninsured motorist benefits, which
were deductible under collateral source
statute from verdict in favor of motorcycle
accident victims, would be applied first to
obligation of uninsured motorist before be-
ing deducted from municipal liquor ven-
dor's obligation. M.S.A_ § 548.36.
B. Interest 6=39(1)
Prevailing party can receive preverdict
interest only if amount of its offer is closer
to verdict then amount of opposing party's
offer. M.S.A. § 549.09, subd. 1(b).
9. Interest 6-21
Lienhard, which held that preverdict
interest is subject to limits on compensato-
ry damages against state, is limited to mon-
etary caps and not applied when only cap is
a percentage of fault limit. M.S.A.
§§ 3.736, 604.02, subd. 1.
Syllabus by the Court
1. Rational bases exist for both Minn.
Stat. §§ 604.02, subd. 1, and 548.36 (1986)
sufficient to withstand an equal protection
constitutional challenge.
2. Respondent city did not waive its
statutory joint and several liability limits
by purchasing liability insurance.
3. Collateral source payments should
not be deducted from appellants' judgment
against respondent city when subrogation
rights have been asserted to the payments
and when appellants would have no double
recovery.
4. Pre - verdict interest can be award-
ed when the statutory limit on the judg-
ment is a percentage of fault cap.
Mary C. Cade, David J. Moskal, Schwe-
bel, Goetz & Seiben, Minneapolis, John M.
Riedy, McLean Peterson Law Firm, Manka-
to, for appellants.
Lindsay G. Arthur, Jr., Katherine L.
MacKinnon, Arthur, Chapman & McDon-
ough, Minneapolis, for respondents.
1
Y.
1
i
i
,i
i
328 Minn. 453 NORTH WESTERN REPORTER, 2d SERIES
Hubert H. Humphrey, 1II, P. Kenneth
Kohnstamm, Atty. General's Office, St.
Paul, for intervenor.
Heard, considered, and decided by the
court en banc.
POPOVICH, Chief Justice.
Appellants brought a personal injury ac-
tion against respondent city, in its capacity
as operator of a liquor store, for injuries
sustained in a collision with an uninsured,
intoxicated motorcyclist who was served
alcoholic beverages by respondent while ob-
viously intoxicated. Respondent city filed
a third -party action against the motorcy-
clist's estate. The jury found respondent
city 206 at fault and the motorcyclist 807c,
and returned a verdict for appellants for
over $2.2 nullion. The trial court reduced
this amount by certain collateral source
payments appellants received and pursuant
to a statutory limit on municipal joint and
several liability. A Minnesota Court of Ap-
peals panel affirmed the constitutionality
of both the joint liability cap and the collat-
eral source statute and each of their appli-
cations, but reversed and remanded on the
calculation of interest. Imlay v. City of
Lake Crystal, 444 N.W.2d 594, 598 -602
(Minn.App.1989). We affirm in part, re-
verse in part, and remand.
I.
The undisputed facts are that on June 16,
1984, appellants Steven and Theresa Imlay
sustained serious injuries when their mo-
torcycle was struck by an uninsured, intoxi-
cated motorcyclist, Virgil Miller, who
crossed into their lane on a rural county
road. Miller, who was killed in the colli-
sion, was served alcoholic beverages by the
City of Lake Crystal, doing business as the
Lake Crystal Municipal Liquor Store, short-
ly before the collision.
Steven Imlay's injuries included amputa-
tion of his left leg below the knee, a frac-
tured pelvis, a ruptured spleen, a collapsed
lung, and other internal injuries. In addi-
tion, his left arm, left shoulder, and vocal
cord are paralyzed. Theresa Imlay suf-
fered a fractured pelvis, soft tissue and
10 -D
tendon damage to her left knee and ankle,
and a left wrist injury.
The Imlays brought a personal injury
action against respondent city on January
21, 1985, under the Minnesota Liquor Act.
Minn.Stat. § 340A.801 et seq. (1986). The
city then brought a third -party action
against Miller's estate. Prior to trial, the
Imlays received $703,326.79 in benefits
from Milwaukee Guardian Insurance, Inc.
( "Milwaukee ") to compensate them for the
fault of the uninsured motorist. Appel-
lants also received $192.370.20 for their
medical expenses from their health insurer.
State Farm Insurance Company, and S50.-
000.00 from Tri-State Insurance Company.
The jury found respondent city illegally
sold alcohol to Miller when he was obvious-
ly intoxicated, and this illegal sale and Mil-
ler's negligence combined to cause appel-
lants' injuries, with 20% of the fault appor-
tioned to respondent city and 80% to Miller.
Steven Imlay, who was driving appellants'
motorcycle, was attributed no fault The
jury set damages at $1,601,212.00 for Ste-
ven Imlay and $600,000.00 for Theresa Im-
lay, which included damages for pain, dis-
ability, disfigurement, emotional distress.
medical expenses, property damage, loss of
earnings, and loss of consortium, to the
date of trial and thereafter.
In response to numerous post -trial mo-
tions, the trial court held Minn.Stat.
§ 604.02, subd. 1 (1986), did not violate
equal protection and respondent's purchase
of liability insurance did not waive these
limits on joint and several liability. The
court found all the insurance payments
constituted collateral sources under Minn.
Stat. § 548.36 (1986), but only deducted
from the total verdict the $703,326.79 in
uninsured motorist benefits to which no
subrogation right was asserted. Pursuant
to Minn.Stat. § 604.02, subd. 1, the court
assigned respondent city responsibility for
4076 of the remaining judgment As a re-
sult of the collateral source deduction and
the limit on municipal joint and several
liability, appellants were awarded a judg-
ment of $599,154.08, plus costs, disburse-
ments, and interest, against respondent.
The court also found Miller's blood alcohol
I:IILAY v. CITY OF LAKE CRYSTAL Minn. 329
Cute - 433 XW.2d 326 (tMtm. 1990)
Wt results were properly admitted, and man V. Croup Health Plan, Ina, 396
thus respondent's motion for a new trial N.W.2d 10, 13 (Minn.1986). It is also pre -
was denied. sumed "[t]he legislature does not intend to
After appellants appealed, the attorney
general's motion to intervene to defend the
constitutionality of the challenged statutes
was granted. A court of appeals panel
affirmed the trial court on all grounds,
except it held no pre - verdict interest was
available and thus remanded for calculation
of post - verdict interest; in addition, it up.
held the constitutionality of the collateral
source statute. Imlay, 444 N.W.2d at 598 -
G)2. We granted appellants' petition for
further review.'
II.
I TUes
1) Whether either Minn.Stat. §§ 604.02,
subd. 1, or 548.36 (1986) violates the equal
protection clauses of the United States and
Minnesota Constitutions.
2) Whether a municipality's purchase of
liability insurance constitutes a waiver of
the limitation on liability provided by Minn.
StaL § 604.02, subd. 1 (1986).
3) Whether the lower courts properly de-
ducted collateral source payments from the
verdict pursuant to Minn.Stat. § 548.36
(1986).
4) Whether pre - verdict interest is proper-
ly- due appellants from respondent.
III.
[ 1 I Appellants challenge the constitu-
tionality of Minn.StaL §§ 604.02, subd. 1,
and 548.36 (1986), arguing both statutes
Violate the equal protection clauses of the
L nited States and Minnesota Constitutions.
'This court exercises the power to declare
a statute unconstitutional only when abso-
lutely necessary," Snyder v. City of Min -
neapolis, 441 N.W.2d 781, 788 (1989), be-
cause statutes are presumed constitutional
until the challenging party proves other -
xzse beyond a reasonable doubt Hick-
Respondent city has not asked us to review the
court of appeals' affirmance of the trial court on
the issue of the admission of Miller's blood
alcohol test results.
violate the constitution." Minn.Stat.
§ 645.17(3) (1988). The parties agree the
rational basis test applies to the challenges
under both the federal and state equal pro-
tection clauses. See Bernthal v. City of
St. Paul, 376 N.W.2d 422, 424 (Minn.1985).
We have adopted a two-part inquiry for
determining whether a statute meets the
rational basis test
1. Does the challenged legislation have
a legitimate purpose? and
2. Was it reasonable for the lawmakers
to believe that use of the challenged
classification would promote that pur-
pose?
Lienhard v. State, 431 N.W.2d 861, 866-67
(Minn.1988) (citing Berntha4 376 N.W.2d
at 425).
A. Minn.Stat. 1604-02, sub& 1
[21 Appellants argue Minn.Stat.
§ 604.02, subd. 1 (1986), is unconstitutional
as applied to municipal liquor vendors be-
cause no legitimate purpose exists for dis.
tinguishing between municipal and private
vendors in this context Section 604.02,
subdivision 1 (1986), provides:
- When two or more persons are jointly
liable, contributions to awards shall be in
proportion to the percentage of fault at-
tributable to each, except that each is
jointly and severally liable for the whole
award. ' ' ' If the state or a municipal-
ity as defined in section 466.01 is jointly
liable, and its fault is less than 35 per-
cent, it is jointly and severally liable for
an amount no greater than twice the
amount of faulL2
Of the total $2,201,212.00 verdict awarded
to the Imlays, the jury apportioned 20%
- fault to respondent city. After finding
Minn.Stat. § 604.02, subd. 1, constitutional,
the trial court applied this provision at the
city's request to cap the city's joint and
L As appellants point out, the statutory language
quoted by the court of appeals panel is the 1988
version and is inconcct, although the difference
is inconsequential to its decision. Imlay, 444
N.W.2d at 597.
10 -E
•K
P
L9
r-M
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J
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/ 1_ ft"
tk .
. -sue
L
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j
i
10_F
330 Minn. 453 NORTH WESTERN REPORTER. 2d SERIES
I ; j
several liability at 40M? which the court of
unmanageable "); Indian Towing Co. r.
appeals panel affirmed. Imlay, 444
United States, 350 U.S. 61, 65, 76 S.Ct.
i
N.W.2d at 598. We concur.
122, 124, 100 L Ed. 46 (1950 (rejecting "the
The court of appeals panel held "pro- ''non-
overnmental -' overnmental' qua
g g q �-
i
tect[ing] municipalities from higher insur-
mire"). Because we do not wish to rein• j
t
ance rates and judgment awards," as well
state this troublesome dichotomy, we situ-
as promoting municipal fiscal stability, is
ply agree with the court of appeals panel.
section 604.02's legitimate purpose.: Im-
The trial court determined another legit-
lay, 444 N.W.2d at 598. The legislative
imate reason for limiting liability is --[t]o
history suggests such purposes were envi%
allow municipalities to give the public bet.
(
sinned when the statute was enacted. E.g.,
ter control over the distribution and use of
Hearing on H.F. 1776, HJud.Comm., 74th
potentially dangerous alcoholic beverages.
Minn.Leg., Feb. 25, 1986 (audio tape) (com-
.. • This limitation allows the municipali•.
ments of Rep. Olsen); Sen. debate on S.F.
ty to meet the limits of this restricted liabil-
2078, 74th Minn.Leg., March 18, 1986 (au-
ity and still remain in operation in the
dio tape) (comments of Sen. Knaak). Ap-
public interest and for the public welfare."
pellants concede these reasons exist for the
While appellants maintain a municipality
statute in general, yet maintain such pur-
sells alcohol for the exclusive purpose of
poses are legitimate "only where the activi-
contrarily noted
ty protected is a public service." They
ownership of liqulor establish.
municipal or
a
further assert "[w]hen functioning as a
meets is an outgrowth of the government's
vendor of intoxicating beverages, a munici-
,.police power ' ' ' to protect and to pro-
pality is not providing a public service and
mote the public health, safety, morals, and
is no different than a private liquor ven-
welfare." Stabs v. City of Tower, 2?9
dor," so that no rational basis exists for
Minn. 552, 559, 40 N.W.2d 362, 367 (1949)
such a distinction regarding joint and sev-
(licensing and bond requirements necessar.
eral liability. _ �
for private ownership held inapplicable to
a
Appellants , "public service" rationale, in
_municipal liquor vendors).
effect, would entail a resurrection of the
Although appellants did not address the
g ppe
"governmental- proprietary" distinction
originally created by the judiciary to avoid ;' second prong of the rational basis test,
the harsh results of sovereign immunity,..'
both the trial court and the court of ap
see Spanel v. Mounds View School Dis-
peals panel determined the legislature rea-
trict No. 621, 264 Minn. 279, 292, 118
sonably could have believed limiting the
and several liability of municipal but
i
N.W.2d 795, 803 (1962), but later_ abolished
by the legislature. / Minn.Stat §§ 3.736,
joint
not private liquor vendors would serve the
subd. 1 (state), and 466.02 (municipalities)
purposes of section 604.02, subdivision 1,
(1988). The court of appeals panel con -'
by shielding municipalities from costly
sidered and rejected this argument, holding
awards and unavailable or unaffordable in-
"[s]ection 604.02 was . enacted to protect
surance. Respondent - intervenor state as
"is with na
�i
municipalities from large judgments by
a cap on their. liability. ; . "Making!
serts section 604.02 in accord
tionwide trends" limiting governmental
placing
distinctions between governmental and pro- r
tort liability. Respondent city notes tort
p=ietary functions does not further that j reform legislation has been passed in 41
`see "in to the national
purpose." Jmmlay, 444 N.W.2d at 598;
states direct response
Thus, our legislature
also Garcia v. San Antonio Metro. Tran-
insurance crisis."
sit. Autk., 469 U.S. 528, 545, 105 S.CL
reasonably could have believed enacting
the
`-
1005, 1015, 83 L.Ed.2d 1016 (1985) ( "notion
'uniquely' function is
section 604.02, subd. 1, could alleviate
insurance crisis facing municipalities. The
of a governmental
:-
;. We question the applicability of joint and sev.
eral liability under these pleadings because the
dant Because the patties have proceeded on
the assumption that MinnStat. § 604.02, subd.
imlays did not sue Miller, rather his estate was
1, does apply, however, we treat it as su Ch.
brought in by the city as a third -party defen-
1
D
IMLAY v. CITY OF LAKE CRYSTAL Minn. 331
Cite w 433 N.W.2d 326 (Minn. 1990)
statute also clearly eases the financial bur - this constitutional issue in the interests of
dens municipalities experience, as demon- justice. Imlay, 444 N.W.2d at 600. We
stated by the reduction of respondent also address this issue because we have not
city-s liability from approximately $2.2 mil- previously ruled on the constitutionality of
Iron to less than $900,000. Minn.Stat. § 54 &36. See Minn.R.Civ.
We conclude section 604.02, subdivision
1, does not violate equal protection guaran-
tees under our Bernthal analysis. We also
note that modified governmental joint and
several liability has been found constitu-
tional in other states. E.g., Evangelatos v.
Superior Court, 44 Cal.3d 1188, 1205, 753
p.2d 585, 595, 246 Ca1.Rptr. 629, 639 (1988).
Analogously, - _monetary caps -on govern-
'tarrical tort liability have withstood consti-
'-utional sdrutiny both in this state, Snyder,
j ; ;1 -..W 2d at 789 (municipality); Lien -
Aard, 431 N.W.2d at 866 (state), and in
other jurisdictions, e.g., Sambs v. City of
Brookfield, 97 Wis.2d 356, 378, 293 N.W.2d
504. 515 (1980) (municipality), cent. denied
:;9 U.S. 1035, 101 S.Ct 611, 66 L.Ed.2d 497
t1950), Estate of Cargill r. City of Roch-
ester. 119 N.H. 661, 669, 406 A.2d 704, 709
1 19 7 9) (municipality), appeal dismissed 445
U.S. 921, 100 S.Ct. 1304, 63 L.Ed.2d 754
11990).
B. Ylinn.Stat. § 548.96
131 We next address whether the collat-
eral source statute, Minn.Stat § 548.36
(1956),' violates the equal protection claus-
es of the United States and Minnesota Con-
stitutions. Even though this challenge was
not raised by appellants at the trial court
level, the court of appeals panel ruled on
4. Minn.Stat. § 548.36 (1986) provides, in rele-
vant part:
Subdivision 1. Definition. For purposes
of this section, "collateral sources' means pay-
ments related to the injury or disability in
question made to the plaintiff, or on the plain-
tiff's behalf up to the date of the verdict, by or
pursuant to:
(2) health, accident and sickness, or auto-
mobile accident insurance or liability insur-
ance that provides health benefits or income
disability coverage; except life insurance ben-
efits available to the plaintiff, whether pur-
chased by the plaintiff or provided by others,
payments made pursuant to the United States
Social Security Act, or pension payments;
Subd. 2. Motion. In a civil action, • •
when liability • • • is determined by the trier
App.P. 103.04.
The common law collateral source rule
provided that payment for some of the
plaintiffs personal injury costs by a source
other than the defendant could not be used
to reduce the plaintiffs damage award
against the defendant. Hueper v Good-
rich, 314 N.W.2d 828, 830 (Minn.1982); D.
Dobbs, Handbook on the Lars of Remedies
r§ 8.10, at 581 (1973); Restatement (Sec-
ond) of Torts § 920A (1979). This rule was
criticized as granting plaintiffs a windfall
or double recovery. E.g., D. Dobbs, supra,
at 584; 2 F. Harper & F. James, The Lam
of Torts § 25.22, at 1348 (1956). Collateral
source statutes, such as adopted by Minne-
sota in 1986, abrogate a plaintiffs common
law right to be over - compensated and now
prevent double recoveries in many circum-
stances by requiring the deduction from
the verdict of certain benefits received by a
plaintiff.
With this background, we first examine
whether the challenged statute has a legit-
imate purpose. It is generally agreed, as
appellants concede, the primary goal of sec-
tion 548.36 is to prevent double recoveries
by plaintiffs, which is a legitimate purpose.
Johnson v. Consolidated Freightmays,
Inc., 420 N.W.2d 608, 614 (Minn-1988). By
of fact, and when damages include an award
to compensate the plaintiff for losses avail-
able to the date of the verdict by collateral
sources, a patty may file a motion within ten
days of the date of entry of the verdict re-
questing determination of collateral sources
If the motion is filed, the parties shall submit
written evidence of, and the court shall deter-
mine:
(1) amounts of collateral sources that have
been paid for the benefit of the plaintiff or are
otherwise available to the plaintiff as a result
of losses except those for which a subrogation
right has been asserted;
Subd. 3. Dutim of the court (a) The court
shall reduce the award by the amounts deter-
mined under subdivision 2, clause (1) • • •.
10 -G
l
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+:A
x.L
i=
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332 Minn. 453 NORTH WESTERN REPORTER. 2d SERIES
preventing double recoveries, the collateral
source statute also should reduce tort lia-
bility insurance premiums, D. Dobbs, su-
pra, at 585, 587, which is one of the pn-
mary goals of tort reform and a legitimate
objective. Johnson v. Farmers Union
Central Exchange, Inc, 414 N.W.2d 425,
431 (Minn.App.1987), pet for rev. denied
(Minn., Nov. 24, 1987).
The second prong of the rational basis
test requires us to determine whether it
was reasonable for lawmakers to believe
the challenged classification would promote
the statute's legitimate purpose. Lien -
hard, 431 N.W.2d at 867. Appellants con-
tend Minn.Stat. 1548.36 fads this prong
because its purpose is not furthered when
the deductions represent the fault of an
uninsured co- tortfeasor while the plaintiff
is not fully compensated. Virtually any
plaintiff can contend that he or she would
be better off had a defendant been better
insured, but such distinctions are necessar-
ily made throughout insurance and tort
law. Appellants also argue that as long as
they are not fully compensated it is a wind-
fall for the tortfeasers. The windfall argu-
ment generally is considered baseless, be-
cause diminished liability is not really a
windfall, respondent city already has more
liability than its proportionate fault, and
fault and cost have little relation to each
other. D. Dobbs, supra, at 586 -87.
In examining equal protection challenges
our focus is on the lawmakers' reasonable
belief, which appellants fail to address, not
on whether all the statute's purposes are
fully satisfied in every conceivable scenar-
io. Section 548.36 generally does promote
the statute's stated purposes — preventing
double recoveries and lowering municipali-
ty insurance premiums —thus it was rea-
sonable for the legislature to believe these
purposes would be promoted. We find
Minn.Stat. § 548.36 constitutional under
the rational basis standard, because the
section clearly has legitimate purposes,
which the legislature could reasonably have
believed were being promoted.
IV.
[4) Respondent city purchased liability
insurance with a policy limit of $1,300,-
10 -H
000.00, as authorized by Minn.Stat.
§ 466.06 (1986), which provides:
The governing body of any municipality
may procure insurance against liability
of the municipality and its officers, eR,.
ployees, and agents for damages result•
ing from its torts and those of its offi-
cers, employees, and agents, including
torts specified in section 466.03 for which
the municipality is immune from liability.
The insurance may provide protection in
excess of the limit of liability imposed by
section 466.04. ' ' ' The procurement
of such insurance constitutes a waiver of
the defense of governmental immunity to
the extent of the liability stated in the
policy but has no effect on the liability of
the municipality beyond the coverage so
provided.
Appellants argue the city's purchase of lia-
bility insurance waived its section 604.02
joint and several liability limit up to the
policy amount. The trial court disagreed.
as did the court of appeals panel. Inlay,
444 N.W.2d at 599. We concur.
The court of appeals panel initially held
the section 466.06 waiver provision did not
even apply to the case, Imlay, 444 N.W.2d
at 599, based on Minn.Stat. § 466.15 (1988),
which provides chapter 466 "do[es] not
modify section 340A.801." (Emphasis add-
ed). Section 340A.801 of the Liquor Act,
under which appellants brought suit, estab-
lishes a right of action for damages result-
ing from intoxication of a person who was
illegally sold alcohol. The panel's interpre-
tation is contrary to the plain meaning of
"modify" as "alter," "change," "limit" or
"extend." E.g., Black's Law Dictionary
905 (5th ed. 1979); Webster's New Interna-
tional Dictionary 1577 (2d ed. 1960). Stat-
utory terms generally should be construed
according to their plain and ordinary mean-
ing. Minn.Stat. § 645.16 (1988). Thus, or
its face chapter 466 applies to but does not
alter actions brought under the Liquor Act.
We have interpreted a municipality's pro-
curement of liability insurance tinder the
plain meaning of section 466.06 to result in
a waiver of the defense of governmental
immunity 'to the extent of the policY
1
CITY OF LAKE CRYSTAL Minn. 333
IMLAY v.
cue .s 4s3 K•W.2d
326 (MIUM 1990) under section
- immunities conferred
Chabot v. City of Sauk Rap -
mount See C
N,W.2d 708, 711 (Minn.1988);
466.03. 1987, ch. 260, § 1, 1987
ids. 422
[airl =., State, 323 N•W.2d 20,26-27 (Minn.
claims re-
Act of May 27. fitly, the leg -
Minn.Laws 997, 998. Importantly,
however,
19`'� Neither party, Y
from liability.
19ZU - -city
islature could have but did not include sec -
was immune
urge us to extend the
Lion 604.02 limits in this waiver provision.
p,�ther, appellants
W include a municipality's
Indeed, nowhere in either the 1986 version
is section 604.02
provision
s'si• eT P liability
604.02 joint and several liabili Jun-
or the 1987 amendment
we believe it
section
AX. As support, appellants cite Nelson v.
641-42 (Minn.App.
mentioned. Thus, while
sense that a municipality should not
e 402 N,W.2d 639,
How , denied (Minn., May 18,
makes
be protected from joint and several liability
or rev.
19t'' 1. Pei f appeals panel stat-
of app
when it urchases liability insurance, we
p
19c 1. where a court
-Section 466.06 [1986] g Querns waiver
result because
are
ed. that are still
fits of immunity
clear statutory language.
of those bene constitute total
preser� ed, whether they V.
immunity or a limit on liability" The Nfi-
mrt panel reasoned section 466.06 "spe
3 A. Collateral Sources
cslly mentions both section 466.0 a dcon-
tJes and 466.04 limits of
liability [affected
cluded elach situation is equally
by the statute." Id at s language, The, panel e
mere, however, held "by
Sat § 466.06 applies exclusively o Stat
ers of immunities conferred by
1 466.03 (1986)," citing Nelson. Imlay,
444 !�.W.2d at 594 (emphasis added).
While this interpretation is inconsistent s n
with '� elson, we nevertheless agree respon-
dent city here did not waive its section
60;.02 joint and several liability limits by
procuring insurance.
When the legislature amended section
466.06 in 1987, it specific Ily distine fished
between ,section : 466.04 limits (monetary {
raps) that maybe waived and section 466.
03 immunities that may not..- Although the
198-4 amendment is not directly applicable
to this case, see Minn.Stat. §§ 645.21 (no
retroactive effect unless clearly intended)
and 645.02 (unless specified, effective date
is August 1) (1988), it is illustrative of
legislative intent regarding the waiver pro-
vision. The 1987 amendment changed sec-
tion 466.06 as follows:
The procurement of such insurance con-
stitutes a waiver of the dd"" limits of
governmental � liability under
section 466.04 to the extent of the liabili-
ty stated in the policy but has no effect
on the liability of the municipality beyond
the coverage so provided. Procurement
• • • shall
of commercial insurance
not constitute a waiver of any of the
151 In determining whether the trial
court and the court of appeals panel prop -
rly deducted Collateral source payments
rom the verdict pursuant to Minn.Stat.
§ 548.36, we must fast determine which
P
to appellants were collateral
sources under Minn.Stat. § 548.36, subd. 1.
Prior to trial, the Imlays received $703:
326.79 in uninsured motorist benefits from
Milwaukee, $192,370.20 from State Farm,
and $50,000.00 from Tri - State. The trial
court found all these payments constituted
collateral sources under Mi n. not
§ 548.36. which the N � 2d at 600. Ap-
pellants Imlay,
do not deny their State Farm and
Tri-State payments are collateral source
benefits.
The parties dispute whether uninsured
motorist benefits are a collateral so are
Several types of payments to a plaintiff
specifically listed as "Collateral sources,"
such as:
health, accident and sickness, or automo-
bile accident insurance or liability insur-
ance that provides health benefits or in-
come disability coverage.
Minn.Stat. § 548.36, subd. 1(2). Automo-
bile accident insurance clearly is covered by
the statute and thus uninsured motorist
benefits are a collateral source. Johnson
v Consolidated Freightways, 420 N.W•2d
at 614 k n. 2. It is unclear, however,
whether the rest of subdivision 1(2) limits
10 -1
.,,T
'mss
c�
IA-1. =.
ii
i
„
i�
.j
j
10 -J
334 Minn. 453 NORTH WESTERN REPORTER, 2d SERIES
automobile insurance or simply lists other
types of collateral sources. Appellants
contend the subpart is one type of collat-
eral source and should be read as "automo-
bile accident insurance which 'provides
health benefits or income disability cover-
age.' " Conversely, respondent city asserts
this subpart names four distinct types of
collateral sources, one of which is "automo-
bile accident insurance."
Minn.Stat. § 548.36, subd. 1(2), is poorly
written, ambiguous, and could conceivably
be read as providing for one, two, three or
four different types of collateral source
benefits. Since there are grammatical and
analytical problems with each of the possi-
bilities, the legislature may wish to reexam-
ine this subsection to clarify its intentions.
B. Subrogation Rights
Although collateral source payments are
to be deducted from a plaintiffs award,
Minn.Stat. § 548.36, subd. 2(1), excepts
from deduction those benefits for which a
subrogation right has been asserted. See
Buck v. Schneider, 413 N.W.2d 569, 571 -72
(Minn.App.1987) (assertion of subrogation
right to workers' compensation benefits
prevents collateral source deduction). Be-
cause the primary purpose of this statute is
to prevent double recoveries, no deduction
is allowed where subrogation rights are
asserted "to ensure that the amount of
collateral sources deducted from the award
is the amount to which the plaintiff is actu-
ally entitled, and does not include amounts
plaintiff must ultimately pay over to a sub -
rogee." Id. at 572. Both Tyi -State and
State Farm have asserted their subrogation
rights, thus these payments cannot be de-
ducted from the verdict as collateral
sources.
The parties dispute whether subrogation
rights to the uninsured motorist benefits
were assigned to and asserted by appel-
lants. Before trial, apellants and Milwau-
kee entered in a settlement agreement and
release, which provided in part
11. Subrogation Right of Insurer.
Claimants assign to the Insurer their
right of action against the driver or own-
er of the uninsured motorcycle, and
grant the Insurer the full right of subrc,
gction, including the right at anytime to
bring an action in their name, by an
attorney of its choice, against the driler
or owner of the uninsured motorcycle.
The Insurer shall pay all costs and ex.
penes and retain all sums recovered. 1,
addition, the Insurer will waive any and
all rights of subrogation arising under
the policy or pursuant to law against
the City of Lake Crystal or its munir,
pal liquor store.
(Emphasis added). We feel this language
is unambiguous and therefore must be giv.
en its plain meaning. Carl Bolander d;
Sons Inc. v. United Stockyards Corp.. 2!j;
Minn. 428, 433, 215 N.W.2d 473, 476 (19,;,
Appellants attempted to introduce testimo
nial evidence as to the meaning of the
highlighted sentence and to its and Milwau-
kee's intent, but where contract language
is unambiguous no parol evidence should
be admitted. Klawitter v. Straumann.
255 N.W.2d 407, 411 (Minn.1977).
Appellants contend the emphasized sen-
tence assigns them Milwaukee's subroga-
tion rights against respondent city. Gener-
ally, subrogation rights are either "assert-
ed" or "waived." See Buck, 413 N.W.2d at
571. Appellants and their insurer used the
word "waive," which has a clear meaning
in these circumstances. In fact, there
would be no subrogation right against re-
spondent city --only against the third-party
defendant —for the uninsured motorist ben-
efits because the city was not the unin-
sured motorist Not only do the unambig-
uous terms of the settlement agreement
state the subrogation right against respon-
dent to the uninsured motorist benefits was
waived, but there would be no subrogation
right here against respondent city in the
first place.
C. Method of Deduction of Collateral
Sources
Since we determined only the uninsured
motorist benefits are collateral sources to
which no subrogation rights were asserted.
it is then necessary to examine when and if
these collateral sources payments should
be deducted from appellants' recov erY
1
IMLAY v. CITY OF LAKE CRYSTAL Minn. 335
Clue as 453 N.w2d
326 (Minn. 19") a defen-
motorist, th ird-party dedu
it respondent city. The trial court
motorist benefits
the uninsured
from
dant�
Taking collat-
deducted the uninsured
the total jury, verdict before reducing
dent city's obligation.
the top of the jury verdict
from
to 4r,1 the judgment against respondent
appeals panel affirmed,
era ounces off
is justified if there are tx-defendants who
a
cite - The court of
the collateral source should be de-
are liquid, but it is not equitable to give
the benefit
holding
ducted first from the total verdict because
with more than
single payments would be no
source paym
M[a]ll defendants in cases
defendant are entitled to the benefit of
and when the payments
double recovery the p did not
from a source the plaintiffs
one 444
a section 548.36 deduction." Imlay, dent nor
Neither respondent
result
even sue. A plaintiff's award can be re-
NV• 2d at 601.
agree with the method of calcu-
educed as required by the collateral source
this reduction should not
appellants
lation used by the trial court and the court
statute, and yet
be to benefit a single liquid defendant
of appeals panel. There is no caselaw con -
in
used
it is shown the plaintiff would be
n this question, and no language
g ither the collateral 548.36)
eliab
until
double
receiving a
benefits of $703;
either
or the joint t d several 1 tyn (section
to us which de-
the uninsured motorist
326.79 fast should be fedtlte��,
60.x•021 statutes indicates
duction should be applied first and from
uncompensated portion _ which
v� hat amount this deduction should be
pe11ants, recovery every fromm all souurces to over
made.
-.:III less than the $2.2 million
Respondent city asserts the total judg-
ment of over $2.2 million first should be
apportioned pursuant to Minn.Stat.
1 604.02, with 40% to respondent, and then
all the uninsured motorist benefits should
be credited to it. This result would leave
respondent with less than $200,000 of liabil-
ity and is properly rejected. Its analogy to
no-fault insurance cases is not applicable
since there is no comparative fault by the
plaintiffs here. In addition, it is ineq-
uitable for one party to receive the entire
benefit of collateral source deduction. If
(tiller's estate was not insolvent and had it
been sued by appellants, respondent could
not even make the argument that it should
receive the entire collateral source deduc-
tion, since Miller would be proportionately
entitled to the collateral source deductions.
16.71 Appellants argue the uninsured
motorist benefits should not be deducted
from the judgment against respondent city
because they would not be getting a double
recovery. We agree with appellants' ap-
proach to this issue. Since the primary
purpose of section 548.36 is to avoid double
recoveries, we feel its application in favor
of respondent city when appellants are un-
dercompensatd is not justified. We also
believe the uninsured motorist benefits
should be applied fast to the obligation of
$1.8 ton,
jury verdict. We do not believe the legisla-
ture would pass a statute that Primarily is
aimed at eliminating double recoveries, but
then have it applied to reduce awards
where there is no possibility of a double
recovery. See Minn.Stat. § 645.17(1) (1988)
(absurd result).
VI.
18,91 Lastly, we address whether pre -
verdict interest is properly due appellants
from respondent city. A prevailing party
can receive pre - verdict interest only if the
amount of its offer is closer to the verdict
than the amount of the opposing party's
offer. Minn.Stat. § 549.09, subd. 1(b)
(1988). Respondent city does not dispute
that appellants, as prevailing parties at tri-
al, could be entitled to an award under this
section. The trial court awarded appellants
pre - verdict interest against respondent
starting January 21, 1985 (the date the
lawsuit was filed) to June 3, 1988 (the date
of the jury verdict), on the sum of $150,-
018.65. This amount was reached after
deduction of collateral source benefits allo-
cated to past damages from the actual past
damages, and then reduction of that
amount to 4096. Both parties contend the
trial court erred in its interest calculation.
10-K
1
-z:=
771
-.T
___12
c_7.
336 Minn. 453 NORTH WESTERN REPORTER, 2d SERIES
The court of appeals panel adopted re-
spondent's position and, relying on Lien -
hard, 431 N.W.2d at 861, which was issued
after the trial court decision, reversed the
award of pre - verdict interest and remanded
for the award of only post - verdict interest
Imlay, 444 N.W.2d 601. Lienhard held
that because pre - verdict interest is an ele-
ment of damages awarded to compensate a
plaintiff, pre - verdict interest is subject to
the limits on compensatory damages
against the State of Minnesota set by Minn.
Stat. § 3.736, subd. 4 (1978). 431 N.W.2d
at 865. Since the judgment had already
reached the $100,000 statutory cap, pre -ver-
dict interest could not be assessed when it
would be an additional compensatory sum
pushing the state's total liability over the
cap. Id
The question is whether the reasoning of
Lienhard under Minn.Stat. § 3.736 is appli-
cable to the liability limit set by Minn.Stat
§ 604.02, subd. 1. Appellants contend Li-
enhard should not apply because the issue
was only whether pre - verdict interest was
subject to monetary caps, whereas this
case involves a percentage of fault limits
tion. We agree with appellants that Lien -
hard should be limited to monetary caps
and not applied when the only cap is a
percentage of fault limit If Lienhard
were applied to proportionate fault cases
there might never be pre - verdict interest
awarded because it would push a defen-
dant's total liability over its proportion of
the verdict. We do not believe the legisla-
ture intended a result that would virtually
eliminate pre-verdict interest in proportion-
ate fault cases.
The trial court awarded pre - verdict inter-
est, but did so on an amount after applying
the joint and several liability limits and
making the collateral source deductions.
Awarding pre - verdict interest on only re-
spondent city's share of the judgment was
correct Minn.Stat. § 549.09, subd. 1(b).
Since we hold the trial court and the court
of appeals panel were mistaken in making
the collateral source deduction, we there-
fore must remand to the trial court for the
award of pre - verdict interest against re-
spondent city for the above period on 409/6
of the jury's verdict.
10 -L
The trial court awarded post- verdict in-
terest from June 3, 1988, to September 27,
1988 (the date of entry of judgment).
Minn.Stat. § 549.09, subd. 1(a) (1988). Un-
der Lienhard, because post- verdict interest
is not compensation for the injury but
"compensation for the loss of use of mon.
ey," it is not subject to statutory limita-
tions on municipal liability. 431 N.W.2d at
86&-66. Because the trial court's interest
award did not provide separate figures for
pre - and post - verdict interest, the court of
appeals panel remanded for apportionment
of the post - verdict part of the total interest
award. We hold the trial court's award of
both pre - and post - verdict interest was
proper, however, but must remand for pre -
verdict interest on the increased judgment
against respondent city.
Affirmed in part, reversed in part, and
remanded.
CT O
Louis BENOIT. Respondent,
V.
COMMISSIONER OF
REVENUE, Relator.
No. C7- 89-69.
Supreme Court of Minnesota.
March 30, 1990.
Principal of corporate taxpayer appeal -
ed assessment of personal liability against
him for unpaid sales tax and unpaid with-
holding tax. The Tax Court rendered judg-
ment for principal, and Commissioner of
Revenue appealed. The Supreme Court,
Wahl, J., held that (1) principal was an
employer, personally liable for unpaid with-
holding taxes, and (2) principal was a re-
sponsible person liable for unpaid sales tax-
es.
League of Minnesota Cities
December 1, 1989
183 University Ave. East
St. Paul, MN 55101.2526
(612) 227 -5600 (FAX: 2214)986)
10 -M
To: LMCIT member cities
From: Peter Tritz
Re: New excess liability coverage options
The League of Minnesota Cities Insurance Trust now offers cities
two options in purchasing excess liability coverage:
- LMCIT now makes it possible for cities to obtain excess
coverage without waiving the statutory liability limit of
$600,000 per occurrence. Under this option, the higher
excess coverage limits would be available only for those
claims which are not covered by the statutory limits.
- Alternately, cities may choose to waive the statutory
liability limits to the extent of the excess liability
coverage purchased. Under this option, the higher
coverage limits would be available for all claims,
including claims covered by the statutory liability
limits.
Cost
The city's premium for excess coverage will be 15% lower if the
city chooses not to waive the statutory monetary liability
limits. In addition dverall rate levels for excess coverage
will be substantially below last year's levels.
Background
LMCIT's basic liability coverage provides limits of $600,000 per
occurrence. LMCIT also offers cities the option of an
additional $1 million, $3 million, or $5 million of liability
coverage limits. Since the statutes provide that cities and
city officials and employees can't be held liable for amounts
over $600,000 per occurrence, city officials often ask why it
would ever make sense to buy coverage limits higher than
$600,000. There are four basic kinds of reasons why a city
might choose to buy limits of coverage greater than the
statutory liability limits.
10 -N
First, the city is exposed to some kinds of liability to which
the statutory limits either don't or might not apply. Some
possible examples are
- liability under the federal civil rights acts
- certain types of liability that the city has assumed
contractually, in an indemnification agreement for example
- liability for actions in another state; e.g. by a city
official attending a conference, or under a mutual aid
agreement with a political subdivision across the border
- liability for a zoning action under an 'inverse
condemnation" theory of law
Second, the city may buy higher limits because the underlying
coverage might not cover the full extent of the city's exposure
within the statutory liability limits in all cases. LMCIT
applies a $600,000 aggregate limit to the "'products liability",
the "'limited pollution", and the optional 'inverse condemnation"
coverages. This is an additional limit, besides the $600,000
per occurrence limit that applies to all liability coverage.
The annual limit is the maximum amount the policy will pay for
this kind of liability, regardless of the number of occurrences.
Thus, if part of the annual limit is used up in one occurrence,
there may not be adequate coverage limits available if there is
a second loss of that type. Excess coverage can help protect
against this risk.
(Annual aggregate limits are very common in conventional
commercial liability policies. Often the aggregate limit
applies to all liability, rather than being restricted to only
certain coverages as LMCIT's is. A similar problem can occur in
policies where defense costs are subject to the policy limit;
with that type of policy and a $600,000 per occurrence limit, if
you spend $50,000 on defense you wouldn't have enough limits to
cover the city's full exposure under the statute. LMCIT does
not apply a limit to defense costs.)
Third, the city may feel that the statutory limits aren't high
enough to provide adequate compensation for very serious
injuries, or for multiple parties. That is, the city might in
effect say 'We want to have at least a million dollars (or three
million or five million, etc.) of coverage available, so that if
we injure someone he won't go uncompensated if his injuries
really do exceed the statutory limits."'
Finally, the city might be concerned whether the statutory
liability limits will stand up in court. The statutory
liability limits have been upheld in two recent Minnesota
Supreme Court cases, so this is now less of a concern. However,
it is always difficult to predict the future course of court
decisions.
10 -0
Thus, cities faced a dilemma: The city either had to buy
coverage limits equal to the statutory limits and bear the risk
of a larger claim that the statutory limits don't cover; or the
city could buy additional protection against those claims, but
by doing so expose itself to greater liability in the areas
where the statutory limits do apply, thereby losing the benefit
of those limits.
IMCIT's new approach to excess coverage eliminates that dilemma.
It is now possible for the city, if it wishes, to buy higher
limits of coverage where that protection may be needed, without
automatically waiving the statutory liability limits and losing
their protection where those limits apply.
What must the city do?
All LMCIT quotes
both options. Tl
statutory limits
city council. A
with each quote.
LMCIT.
for excess coverage will show the premiums for
le decision to waive or not to waive the
must be made by motion or resolution of the
form to show the council's choice is enclosed
That form must be completed and returned to
If the city indicates that it wishes to waive the liability
limits, LMCIT will issue a special endorsement as part of the
coverage document showing that the statutory liability limits
are waived to the extent of the coverage purchased.
N
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11
CITY OF FRIDLEY
HOUSING & REDEVELOPMENT AUTHORITY MEETING, MARCH 14, 1991
CALL TO ORDER:
Chairperson Commers called the March 14, 1991, Housing &
Redevelopment Authority minutes to order at 7:35 p.m.
ROLL CALL:
Members Present: Larry Commers, Virginia Schnabel, John Meyer,
Duane Prairie, Jim McFarland
Members Absent: None
Others Present: Barbara Dacy, Community Development Director
Jim Hoeft, HRA Attorney
Rick Pribyl, Finance Director
Paul Hansen, Accountant
Jim Casserly, Consultant
Mr. Commers welcomed Mr. McFarland to the Housing and Redevelopment
Authority. He stated the other members are looking forward to
working with him, and they hope he finds the HRA interesting and
challenging.
APPROVAL OF FEBRUARY 14, 1991, HOUSING & REDEVELOPMENT AUTHORITY
MINUTES•
MOTION by Mr. Prairie, seconded by Mr. Meyer, to approve the
February 14, 1991, Housing & Redevelopment Authority minutes with
the following amendment on page 2, paragraph 7: Mr. jehnsen Pribyl
stated it is net—. ---Tthe Johnson Printing parcel is in School
District #14, and the Skywood Mall parcel is in School District
#13.
UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON CONNERS DECLARED
THE MOTION CARRIED AND THE MINUTES APPROVED AS AMENDED.
1. WRITTEN CONTRACT WITH CASSERLY LAW OFFICE P.A.:
MOTION by Mr. Meyer, seconded by Ms. Schnabel, to approve the
Agreement for Legal Services between the HRA and Casserly Law
Office P.A.
Mr. Meyer stated that in both this agreement and the one with
Herrick & Newman, there is no definition of who does the work.
Is there any need to define more fully who does the work at
what rates?
HOUSING & REDEVELOPMENT AUTHORITY MEETING. MAR. 14, 1991 PAGE 2
Mr. Casserly stated that he and his partner both charge the
same rate and just simply allocate the work depending on
whether it is financial or legal. There is really no need to
define it further.
Mr. Hoeft stated it is the same with Herrick & Newman. All
staff time is absorbed into the hourly rate.
UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS
DECLARED THE MOTION CARRIED UNANIMOUSLY.
2. WRITTEN CONTRACT WITH VIRGIL HERRICK:
MOTION by Ms. Schnabel, seconded by Mr. Meyer, to approve the
Agreement for Legal Services between the HRA and Herrick &
Newman Law Firm for City Attorney Services.
Mr. Prairie asked how the increase in hourly rates would
affect the HRA's budget.
Ms. Dacy stated that the amount estimated in the budget and
presented to the HRA at the February meeting is adequate to
cover the increase in rates.
UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON CONNERS
DECLARED THE MOTION CARRIED UNANIMOUSLY.
3. APPROVAL OF CONTRACT FOR APPRAISAL OF LAKE POINTE:
Mr. Commers stated that at the February 14, 1991, meeting,
the HRA approved the retention of an appraiser to appraise
the Lake Pointe property for the HRA's information and for
discussion with the Lake Pointe developer. The contract for
appraisal is with Mr. Peter Patchin.
Ms. Dacy stated she would like Mr. Casserly to review the
process that led up to the selection of Mr. Patchin.
Mr. Casserly stated he talked with about ten different
economic development directors, developers, condemnation
counsel, and developer counsel. He asked them to put together
a list of names of people they actually work with and would
recommend and to prioritize the list. He then put together
a matrix, found out who was recommended most, and came up with
six names. The City staff contacted and interviewed those six
people and selected the one who came in with a reasonable
price within the reasonable time period.
Mr. Commers stated he has worked with Peter Patchin in the
past, and he is a highly thought of appraiser in the City of
Minneapolis.
HOUSING & REDEVELOPMENT AUTHORITY MEETING, MAR. 14, 1991 PAGE 3
OTION by Mr. Prairie, seconded by Ms. Schnabel, to approve
the contract for appraisal of Lake Pointe with Peter J.
Patchin.
Mr. Meyer stated Mr. Patchin's estimated cost is $5,700 for
the report plus $125 /hour. Under what circumstances can the
costs escalate beyond the "estimated" cost of services?
Ms. Dacy stated that as far as the hourly rate, that rate is
within $10 of the other people they interviewed. Appraisers
of that status charge from $125 -135 per hour, so the $125 per
hour is not out of line for an MAI appraiser.
Mr. Casserly stated he believed the $5,700 would include the
report and a presentation to explain the report. If he is
asked to do more than that, then he would charge the
additional hourly rate.
Mr. Commers stated he believed the $5,700 would include the
preparation of the basic report but would not include
testimony or condemnation testimony.
Ms. Dacy stated it is staff's understanding that Mr. Patchin
could do the work for $5,700. If the HRA wanted to make that
stipulation in the motion, that would be fine.
Mr. Commers stated that he expected that when Mr. Patchin gets
the basic preliminary appraisal done, staff or the HRA will
have an opportunity to talk to him before he prepares his
final draft of that appraisal. Staff should make sure that
Mr. Patchin understands that.
UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS
DECLARED THE MOTION CARRIED UNANIMOUSLY.
4. APPROVE CONVEYANCE OF EASEMENT TO CITY OF FRIDLEY FOR
MISSISSIPPI STREET IMPROVEMENTS:
Ms. Dacy stated the Public Works Department notified her just
that afternoon that they want to change the grantee for the
easement from the HRA directly to Anoka County. The original
easement was to be given to the City of Fridley. The HRA had
received an updated memo from John Flora at the meeting.
Staff has submitted a new easement document for the HRA.
Ms. Dacy stated the purpose of the easement is that Anoka
County is proposing to construct a street widening project on
Mississippi Street from 5th Street east of University Avenue
over to 2nd Street west of University. In order to do that,
Anoka County needs approximately 40 feet of additional right -
of -way along the south of Mississippi Street. Anoka County
has already received easements from the HRA on the liquor site
r
HOUSING & REDEVELOPMENT AUTHORITY MEETING, MAR. 14, 1991 PAGE 4
and Kiffe Automotive site. The purpose of the approval is to
convey the easement directly to Anoka County. Last to convey
to Anoka County will be the easement pertinent to the Dairy
Queen property. Staff is still negotiating with the Dairy
Queen owner and that easement will have be conveyed after that
property is acquired.
Ms. Dacy stated staff is recommending the HRA authorize
conveyance of this easement to Anoka County.
Mr. Hoeft stated the legal description as provided by the
County references a 40 foot easement. Technically, it is not
a 40 foot easement. Because of the nature of the roadway, it
runs from 20 feet to 40 feet. He did not want any confusion
with the 40 foot easement request where only 20 feet is
needed.
Ms. Dacy stated she is going to contact the Anoka County
Right -of -Way Specialist and discuss this. Mr. Hoeft has
suggested that 40 feet be erased in that description.
Mr. Commers agreed. There is a running description; and if
the 40 feet is not correct, then it should be changed or taken
out.
Mr. Hoeft stated a concern he had regarding the Dairy Queen
site is that, if for some reason the proposed purchase of the
Dairy Queen site is not accomplished, how accommodating is the
owner going to be for deeding over the 40 foot easement and
will this happen in a timely-,fashion?
Mr. Commers asked about the status of acquiring the Dairy
Queen site.
Ms. Dacy stated that after the February meeting, she made an
offer to Mr. Fitch, owner of the Dairy Queen. Mr. Fitch is
still investigating acquiring the vacant Amoco station at the
corner of Osborne and University Avenues. He will get back
to her with a counter -offer on Tuesday, March 19.
Mr. Commers asked when the County intends to start physically
making the improvements.
Ms. Dacy stated the physical improvements will begin in August
1991.
Mr. Commers stated that if the HRA would have to condemn the
40 foot easement in front of the Dairy Queen property, with
a quick take type of condemnation, they would need 90 -120
days. They need a decision from Mr. Fitch by April 1;
otherwise, they will have to start the wheels in motion for
condemnation.
HOUSING & REDEVELOPMENT AUTHORITY MEETING. MAR. 14, 1991 PAGE 5
Ms. Dacy stated she understands that, and she made that clear
to Mr. Fitch. He plans to make a decision by March 19. She
stated Mr. Fitch has been very cooperative. He wants to get
the deal completed, but also wants to wait for more
information regarding the Amoco station site.
OTION by Mr. Prairie, seconded by Ms. Schnabel, to approve
the conveyance of easement to Anoka County for the road work
and widening of Mississippi Street west of University Avenue.
UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS
DECLARED THE MOTION CARRIED UNANIMOUSLY.
Mr. Commers stated that staff should discuss the 40 foot
statement with Anoka County.
5. APPROVE AND AWARD BIDS FOR LAKE POINTE MAINTENANCE PROJECT:
Mr. Commers stated the HRA had received a copy of the bid from
Greenmasters Industries, Inc., in the amount of $27,680 for
the maintenance service to mow and fertilize the grass at Lake
Pointe and tree /fertilizer maintenance.
Ms. Dacy stated that at the January 10, 1991, HRA meeting,
Mr. Meyer had asked staff to check to see if the maintenance
service contract includes weed control to preserve the
investment put into the lawn. She stated she did check and
weed control is included in the maintenance service contract.
MOTION by Ms. Schnabel, seconded by Mr. Meyer, to approve the
bid and award the contract for Lake Pointe Maintenance Project
#218 to Greenmasters Industries, Inc., in the amount of
$27,680.
UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS
DECLARED THE MOTION CARRIED UNANIMOUSLY.
7. ESTIMATES /CLAIMS:
MOTION by Mr. Prairie, seconded by Mr. Meyer, to approve the
check register, #2106 - 2114, dated March 7, 1991.
UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS
DECLARED THE MOTION CARRIED UNANIMOUSLY.
8. UPDATE ON FRIDLEY TOWN SQUARE DEVELOPMENT AGREEMENT:
Ms. Dacy stated Bill Burns has written a separate memo that
the HRA had received at the meeting. It describes in more
detail the Council's intent for approving the redevelopment
HOUSING & REDEVELOPMENT AUTHORITY MEETING. MAR. 14. 1991 PAGE 6
project at their February 25, 1991, Council meeting. The
redevelopment project was approved on a 3 -2 vote.
Ms. Dacy stated that Mr. Casserly will talk about one of the
components of the redevelopment, the equity participation
component.
Mr. Casserly stated staff again needs some direction from the
HRA of whether staff should keep pursuing this equity
participation concept. The final form will definitely depend
on a number of factors, not the least of which are the various
kinds of security arrangements that have to be acceptable to
the HRA and the underwriters in this project. At this point,
he is not certain if the proposed security arrangement, the
concept of the second mortgage, is going to be acceptable to
the investment bankers financing this project. He suspected
this project still has a 20 -30% chance of not going forward.
Mr. Commers stated he believed the HRA has already approved
the equity participation concept, and it was just a question
of what the numbers were going to be.
Mr. Casserly stated this project has been around for about a
year. The original concept essentially agreed upon by the HRA
was that the HRA was going to participate because it was a
redevelopment project. The reason the project qualified for
HRA assistance was because the site costs were unduly high.
At that time, it was no risk to the HRA. It was going to be
done as a limited revenue note. The developer was going to
finance the project 100 %, and the HRA was going to help assist
the public purpose part by returning to the developer taxes
he paid over a period of years.
Mr. Casserly stated that market conditions then changed,
preleasing requirements increased, and financing became
extremely difficult. The developer worked on the project
through the summer and fall and came back to the HRA
and requested that the pay -as- you -go or revenue note approach
was not going to work, that the under - writers in the project
were requiring that additional cash be put in up front, and
that it was not adequate to be receiving those sums over a
period of years.
Mr. Casserly stated the HRA discussed this at some length,
and the HRA agreed that they would change their financing
approach and that they would assist the developer with up
front cash input. At that meeting, he recommended to the HRA
that there nothing unusual about the HRA operating in that
fashion. But, because of the nature of the project, because
of its location, and because now the HRA was enduring a
greater risk, the HRA thought they should have an extra little
potential of getting something back out of the project. The
HOUSING & REDEVELOPMENT AUTHORITY MEETING, MAR. 14, 1991 PAGE 7
tax increment that the project would generate would repay the
HRA in full its $250,000 investment, and it would take 8 -9
years or 10 -13 years, depending on whether they create a new
district that would be attached to the existing redevelopment
district.
Mr. Casserly stated that the way the project is designed, even
if that second district is not created, there is enough
project in the existing redevelopment district that all the
tax increment from the taxes of some 12 -13 years would
completely reimburse the HRA for its $250,000 investment in
the project. It is important that they keep that concept in
mind, because when they go on to the recapture and the equity
participation, that amount is over and above any tax increment
they are getting out of the project. And, that is the issue
before the HRA.
Mr. Casserly stated that in the proposal he has outlined an
equity participation in which the HRA puts in the $250,000
after the project is completed. The HRA has the option of
getting back either zero, because the project goes into
default and their security is wiped out, or they could get
$100,000 as a minimum.
Mr. Casserly stated he wanted the HRA to review the concept
again, because the project seems to have a fair amount of
controversy. If there are a lot of reservations, either about
the concept or about the project, it would prudent to express
those now. In his judgement, the project is clearly dead
without any HRA investment.
Mr. Casserly stated this is a concept the HRA has not used
before. The whole idea of recapture is a concept used with
other Authorities. It takes many different forms. The
concept he is drawing from is used principally in multi- family
housing projects in which an HRA helps with the mortgage
payments and at the end of the period of time, there is a sale
and the HRA gets back part of its investment through a
participation.
Mr. Commers stated the HRA has discussed this at length in
the past. He believed the HRA minutes reflect that the HRA
was in agreement with the concept. The HRA was concerned that
the HRA was putting in approximately 70-0. of what the developer
was committing to the project; and, in addition, he was going
to get a 15% return each year the project was in existence,
plus his money back before the HRA really shared in the
project. The HRA had talked about getting a little bit more
money up front, understanding that the developer has to make
a reasonable profit and a certain amount of incentive in order
to put in his $350,000. He thought at that time that there
were some suggestions about either increasing the front end
HOUSING & REDEVELOPMENT AUTHORITY MEETING, MAR. 14, 1991 PAGE _8
a little bit or increasing the back end. So, he did not
believe the HRA had any problem with the equity participation
concept, just the level of participation and how they would
arrive at that and what would be fair to the developer.
Mr. Meyer stated his objection to the whole project was based
on three basic concerns:
1. Increased traffic at a very important intersection;
2. Possibility of problems with the neighborhood and
downgrading the neighborhood by the addition of this
development;
3. Jeopardizing the financial wellbeing of other
developments in the immediate area.
Mr. Meyer stated that since that time, Burger King has come
into the picture, and the HRA has never discussed the addition
of Burger King or taken another vote of what the HRA's
participation should be on this project with the addition of
Burger King. It is his contention that the addition of Burger
King is going to exacerbate all three of his concerns very
noticeably. Burger King will create more traffic and is going
to further jeopardize a very fine residential neighborhood.
He believed it also the HRA' s job to be mindful of downgrading
the quality of residential areas in the City. If they do
downgrade the quality of residential areas in the process of
establishing new businesses, then they are not doing their
Job.
Mr. Meyer stated that Burger King will be moving from the
southwest quadrant, and there are already businesses in Rice
Plaza that are not doing well financially and may want to move
into the Fridley Town Square development.
Mr. Meyer stated this might be the appropriate time for the
HRA to discuss whether or not the advent of Burger King
changes their minds in their participation in the project.
He definitely has a very negative attitude toward giving any
financial assistance to this project. It is not necessarily
the economics of the proposal as it is his overall concern
with the project.
Mr. Commers stated it is true that any time they bring a new
project on line, it may drain away from other existing
projects. The other side of it is that the purpose of
bringing on redevelopment projects is to try to upgrade those
areas that are in existence. If the Fridley Town Square
development takes some businesses out of Rice Plaza,
theoretically, that is supposed to be for the better. The
Burger King has presented a real problem. There was a lot of
s Y
HOUSING & REDEVELOPMENT AUTHORITY MEETING, MAR. 14, 1991 PAGE 9
discussion at the Planning Commission about traffic and the
odors emitted from Burger King.
Ms. Dacy stated the Planning Commission and City Council did
look at all the site related issues. The applicant, at the
City's request, again hired Barton - Aschman to take another
look at the traffic study. The original traffic study based
the estimates on the assumption that the center would generate
100% new traffic. They know that is not true, because 40 -50%
of the traffic that will use the new center is already out on
the street. So, the traffic consultant took a worst case look
at the traffic situation, and said that the intersection could
operate at an acceptable level.
Ms. Dacy stated that when Burger King came into the picture,
staff was very concerned about the traffic and the odor
issues. Barton - Aschman did another traffic analysis and
found that moving Burger King across the street does, in fact,
help the function of the intersection because the movements
now are a right east and a right north instead of going across
the intersection. Staff was satisfied that the traffic issues
had been addressed.
Ms. Dacy stated that as far as the odor issue, the developer
hired Intertech, Inc., to look at the odor issue. There is
a double baffle filtration system the Burger Kings are now
using where odors cannot be detected 150 -175 feet from the
restaurant. Staff feels confident that the site will work.
When the HRA looked at this in January, it was the HRA 's
direction that they wanted the City Council and Planning
Commission to deal with the site issues. What the HRA has to
focus in on is: Does the project meet the HRA's redevelopment
goals for the downtown area?
Mr. Meyer stated he did not agree with the traffic study done
by Barton - Aschman. He had a hard time understanding how the
traffic consultant can say that the traffic is at level D now,
will be at level D with the addition of Walgreen, and will
still be at level D with the addition of Walgreen and Burger
King.
Ms. Dacy stated that if the HRA wanted, she could invite Dave
Koski of Barton - Aschman to the HRA to explain the traffic
study, or she could make copies of the report available to the
HRA. The HRA members should also remember that Anoka County
will be widening Mississippi Street this summer which will
also help the function of the roadway.
Mr. Commers stated it is the consensus of the HRA for staff
to continue to work with the developer and to talk in terms
of equity participation. In the meantime, the HRA should be
brought up to date on the Barton - Aschman traffic study after
r .,
HOUSING & REDEVELOPMENT AUTHORITY MEETING, MAR. 14, 1991 PAGE 10
the addition of Burger King. They can look at the traffic
study and updates to that study at the next meeting; and then
if they wish to invite the traffic consultant, they can make
that decision at the meeting.
Ms. Schnabel stated she would like copies of both the Planning
Commission and City Council minutes where these items were
discussed so the HRA has the benefit of those discussions
also.
8. LETTERS TO ALL FOUR SCHOOL DISTRICTS REGARDING TIF TURNBACK:
Mr. Commers stated that at the last meeting, the HRA
reconsidered and refunded to the school districts for this
year approximately $260,000 to assist them with their programs
and budgets.
Mr. Commers stated the HRA received at the meeting a letter
dated February 13, 1991, from Dr. Dennis Rens, Superintendent
of School District 14, in which Dr. Rens is asking that the
HRA notify the School District of any changes in planned
funding amounts one year advance, so it would be July 1, 1991,
for their 1992 -93 budget (7/1/92 - 6/30/93).
Mr. Prairie stated he believed the letters dated March 7,
1991, sent to the four school districts puts them all on
notice that the HRA may put a cap on money to be returned to
the school districts in the future. He stated he has talked
to a number of School District 14 members, and they understand
that this money might not always be available.
Mr. Commers stated he is not sure if the HRA will be in a
position to make a commitment that early for over a year's
lead time in terms of the School District 14 budget.
9. MEMO REGARDING RESPONSE TO SUH'S PROPOSAL:
Mr. Commers stated it is the HRA's legal counsel's
recommendation that there is no need for the HRA to take any
action at this time.
10. MEMO REGARDING HRA PAYMENT TO T. C. FIELDS:
Mr. Pribyl stated this memo answers a lot of issues brought
up at the February 14, 1991, meeting. The HRA really has
three particular areas of insurance: General Liability,
Municipal Errors & Omissions, and Inverse Condemnation. The
coverage for the HRA is covered under Municipal Errors &
Omissions.
Mr. Commers stated that there is coverage but it appears to
be based on two members of the HRA.
L �
HOUSING 6 REDEVELOPMENT AUTHORITY MEETING, MAR. 14, 1991 PAGE 11
Mr. Pribyl stated he is not sure what that means, but he will
check and verify that the HRA has complete coverage.
Mr. Commers stated that the limit of coverage for each
occurrence under Municipal General Liability is $600,000. He
stated that coverage is low. This could double or triple; for
example, if there is an environmental problem.
Mr. Pribyl stated these are recommended limits, and he was
not aware that it could double in that kind of situation.
Again, it is something he will check into.
Mr. Commers asked staff to verify the HRA's coverage and the
limits.
11. MEMO FROM FINANCE DEPARTMENT REGARDING HRA'S USE OF FINANCIAL
CONSULTANTS:
Mr. Commers stated that per the HRA's request at the February
14, 1991, meeting, this memo describes the services provided
by the professional consultants used by the HRA.
12. LETTER ACCEPTING WALTER RASMUSSEN'S RESIGNATION:
The HRA received Mr. Rasmussen's letter of resignation.
Mr. Commers stated that the HRA wishes him well. He hoped
that there would be some type of certificate of appreciation
presented to him for his service.
13. MEMO REGARDING AMOUNTS THAT MAY BE OWED TO WINFIELD:
Mr. Commers stated this is just an information item.
14. REPORT ON CONTACTS WITH ASHLAND OIL:
Ms. Dacy stated that John Flora, Public Works Director, is
investigating the costs of the cleanup with the consultants
and MPCA. They will have more information at the next
meeting.
15. UPDATE REGARDING RICE PLAZA:
Mr. Commers stated this is an update of the Rice Plaza 1991
rents.
16. UPDATE ON VARIOUS MEETINGS IN LAST MONTH:
Ms. Dacy stated this is an information item.
a
HOUSING & REDEVELOPMENT AUTHORITY MEETING, MAR. 14, 1991 PAGE 12_
17.
LRT PRELIMINARY COMMENTS (Memo dated March 7, 1991, from
Barbara Dacy to William Burns):
Ms. Dacy briefly reviewed the preliminary design plan for the
park and ride sites. Originally, Anoka County was looking at
the Rapid Oil site north of 57th Avenue for a park and ride
site, but that is not the case now, so the park and ride sites
do not directly affect any redevelopment areas. The Fridley
Town Square area has also been resolved.
Ms. Dacy stated these comments have been reviewed by the City
Council, the Planning Commission, the Human Resources
Commission, and will be reviewed by the Environmental Quality
and Energy Commission on Tuesday, March 19. They wanted to
make sure that all agencies and commissions affected by the
design plan had the opportunity to make comments.
Ms. Schnabel stated that what concerns her is that there are
some park and ride sites that will affect people who are
either living or currently doing business within the City of
Fridley. Since the whole LRT concept is still so nebulous,
she would not like to see those persons who feel they might
be affected get upset or disturbed by this concept, because
they think their properties are going to be taken. That is
an injustice these types of things does to people. At this
time, the whole LRT issue is really an unknown.
Ms. Dacy stated that is true. However, the City is required
by law to review and approve these design plans. Anoka County
wants to complete the planning process, the EIS, and the
preliminary design plans so that when and if the funding issue
is solved, they have an approved set of plans. These park and
ride sites would directly affect the SuperAmerica station, the
Motor Valet, the structures on the west side of 4th Street,
and the Amoco station and Minnesota Petroleum at 53rd Avenue.
They are showing the people these plans, but those properties
may not be acquired until the end of the decade. So, there
are two different processes: the planning process and the
funding process.
Mr. Commers stated there is no doubt that even though this may
not happen for ten years, it does cause some stress and
consternation on the part of the people whose properties are
affected.
18. STATUS OF KIFFE AUTOMOTIVE:
Mr. Commers stated Mr. Jack Kiffe of Kiffe Automotive is
selling his automotive business and vacating the building on
Mississippi Street. He will provide a 30 day notice to
vacate.
a 1 e
HOUSING & REDEVELOPMENT AUTHORITY MEETING, MAR. 14, 1991 PAGE 13
19. OTHER BUSINESS:
a. Plans for Acquiring Economic Development Finance
Professional Certification
Ms. Dacy stated Mr. Burns would like to attend economic
development finance courses offered by the National
Development Council. The first course will occur during
the week of the next regularly scheduled meeting, April
11. He is asking the HRA to change the meeting date to
April 4.
The HRA members agreed to the change in meeting date from
April 11 to April 4.
Mr. Conners stated these courses involve a cost to the
HRA. It is a complex complicated area and the more
expertise and information Mr. Burns can gain is to the
HRA's benefit also.
b. Top of the Cities Cycling Club
The HRA members were in favor of a bicycle race at the
Lake Pointe site on April 13, 1991.
C. Habitat for Humanity Selection Process
Ms. Dacy stated this memo is in response to Ms.
Schnabel's questions regarding this process.
ADJOURNMENT:
MOTION by Mr. Meyer, seconded by Mr. Prairie, to adjourn the
meeting. Upon a voice vote, Chairperson Conners declared the
motion carried and the March 14, 1991, Housing and Redevelopment
Authority meeting adjourned at 9:40 p.m.
Respectfully submitted,
Lynio Saba
Recording Secretary
J*
RESOLUTION OF DIRECTION TO ACQUIRE FEE SIMPLE
NUMBER
Whereas, in the operation of the Housing and Redevelopment Authority
the Board of Commissioners of the Authority has determined that there
is a need for development and redevelopment within the corporate limits
of the City to provide employment opportunities, to provide adequate
housing in the City, to improve the tax base, and to improve the
general economy of the City and the State of Minnesota; and
Whereas, the Authority believes that the acquisition of the property
cescribed in the attached Exhibit A is reasonably necessary and convenient
to the furtherance of these objectives and will promote the health,
safety and welfare of the City's residents and is in accord with the
public purposes and provisions of the applicable State and local laws; and
Whereas, the County of Anoka has approved improvement plans for
Mississippi street from 5th street east of University Avenue to 2nd
street west of University Avenue, with construction scheduled to begin
in July of this year; and
Whereas, an emergency exists in the usual operation of the Authority in
that it is immediately necessary to acquire title to and possession of
approximately forty (40) feet of the subject property for the improvement
of Mississippi street prior to the filing of any award by the Court -
appointed commissioners;
Be It Resolved by the Housing and Redevelopment': Authority in and for the
City of Fridley:
1. That the Authority attorney be, and hereby is authorized and directed
to take all appropriate steps to acquire the subject property using
the Quick -Take procedure as set forth in Minnesota Statute 9117 et. seq.
2. That the expenditure of $ is hereby authorized and approved
as an appraisal of damages to the subject property and represents the
Authority's approved appraisal of value.
PASSED AND ADOPTED BY THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR
THE CITY OF FRIDLEY THIS DAY OF ,1991.
Larry Commers, Chairman
William Burns, Executive Director
RESOLUTION OF DIRECTION TO ACQUIRE FEE SIMPLE
NUMBER
Whereas, in the operation of the Housing and Redevelopment Authority
the Board of Commissioners of the Authority has determined that there
is a need for development and redevelopment within the corporate limits
of the City to provide employment opportunities, to provide adequate
housing in the City,-to improve the tax base, and to improve the
general economy of the City and the State of Minnesota; and
Whereas, the Authority believes that the acquisition of the property
described in the attached Exhibit A is reasonably necessary and convenient
to the furtherance of these objectives and will promote the health,
safety and welfare of the City's residents and is in accord with the
public purposes and provisions of the applicable State and local laws; and
Whereas, the County of Anoka has approved improvement plans for
Mississippi street from 5th street east of University Avenue to 2nd
street west of University Avenue, with construction scheduled to begin
in July of this year; and
Whereas, an emergency exists in the usual operation of the Authority in
that it is immediately necessary to acquire title to and possession of
approximately forty (40) feet of the subject property for the improvement
of Mississippi street prior to the filing of any award by the Court -
appointed commissioners;
Be It Resolved by the Housing and Redevelopment: Authority in and for the
City of Fridley:
1. That the Authority attorney be, and hereby is authorized and directed
to take all appropriate steps to acquire the subject property using
the Quick -Take procedure as set forth in Minnesota Statute §117 et. seq.
2. That the expenditure of $ is hereby authorized and approved
as an appraisal of damages to the subject property and represents the
Authority's approved appraisal of value.
PASSED AND ADOPTED BY THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR
THE CITY OF FRIDLEY THIS DAY OF ,1991.
Larry Commers, Chairman
William Burns, Executive Director
RESOLUTION OF DIRECTION TO ACQUIRE FEE SIMPLE
NUMBER
Whereas, in the operation of the Housing and Redevelopment Authority
the Board of Commissioners of the Authority has determined that there
is a need for development and redevelopment within the corporate limits
of the City to provide employment opportunities, to provide adequate
housing in the City,,to improve the tax base, and to improve the
general economy of the City and the State of Minnesota; and
Whereas, the Authority believes that the acquisition of the property
described in the attached Exhibit A is reasonably necessary and convenient
to the furtherance of these objectives and will promote the health,
safety and welfare of the City's residents and is in accord with the
public purposes and provisions of the applicable State and local laws; and
Whereas, the County of Anoka has approved improvement plans for
Mississippi street from 5th street east of University Avenue to 2nd
street west of University Avenue, with construction scheduled to begin
in July of this year; and
Whereas, an emergency exists in the usual operation of the Authority in
that it is immediately necessary to acquire title to and possession of
approximately forty (40) feet of the subject property for the improvement
of Mississippi street prior to the filing of any award by the Court -
appointed commissioners;
Be It.Resolved by the Housing and Redevelopment!: Authority in and for the
City of Fridley:
1. That the Authority attorney be, and hereby is authorized and directed
to take all appropriate steps to acquire the subject property using
"the Quick -Take procedure as set forth in Minnesota Statute §117 et. seq.
2. That the expenditure of $ is hereby authorized and approved
as an appraisal of damages to the subject property and represents the
Authority's approved appraisal of value.
PASSED AND ADOPTED BY THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR
THE CITY OF FRIDLEY THIS DAY OF ,1991.
Larry Commers, Chairman
William Burns, Executive Director
RESOLUTION OF DIRECTION TO ACQUIRE FEE SIMPLE
NUMBER
Whereas, in the operation of the Housing and Redevelopment Authority
the Board of Commissioners of the Authority has determined that there
is a need for development and redevelopment within the corporate limits
of the City to provide employment opportunities, to provide adequate
housing in the City, -to improve the tax base, and to improve the
general economy of the City and the State of Minnesota; and
Whereas, the Authority believes that the acquisition of the property
aescribed in the attached Exhibit A is reasonably necessary and convenient
to the furtherance of these objectives and will promote the health,
safety and welfare of the City's residents and is in accord with the
public purposes and provisions of the applicable State and local laws; and
Whereas, the County of Anoka has approved improvement plans for
Mississippi street from 5th street east of University Avenue to 2nd
street west of University Avenue, with construction scheduled to begin
in July of this year; and
Whereas, an emergency exists in the usual operation of the Authority in
that it is immediately necessary to acquire title to and possession of
approximately forty (40) feet of the subject property for the improvement
of Mississippi street prior to the filing of any award by the Court -
appointed commissioners;
Be It Resolved by the Housing and Redevelopment;: Authority in and for the
City of Fridley:
1. That the Authority attorney be, and hereby is authorized and directed
to take all appropriate steps to acquire the subject property using
the Quick -Take procedure as set forth in Minnesota Statute §117 et. seq.
2. That the expenditure of $ is hereby authorized and approved
as an appraisal of damages to the subject property and represents the
Authority's approved appraisal of value.
PASSED AND ADOPTED BY THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR
THE CITY OF FRIDLEY THIS DAY OF ,1991.
Larry Commers, Chairman
William Burns, Executive Director
HOUSING AND REDEVELOPMENT AUTHORITY
MEETING, THURSDAY, APRIL 4, 1991
7:30 P.M.
PUBLIC COPY
CITY OF FRIDLEY
AGENDA
HOUSING & REDEVELOPMENT AUTHORITY MEETING
THURSDAY, APRIL 4, 1991, 7:30 P.M.
Location: City Council Chambers
Fridley Municipal Center
6431 University Avenue N.E.
CALL TO ORDER:
ROLL CALL:
APPROVAL OF MINUTES: March 14, 1991
ACTION ITEMS:
CONSIDERATION OF LEASE AGREEMENT
WITH KEITH DEGROSS 1 - 1L
CONSIDER APPROVAL OF MORTGAGE SATISFACTIONS
FOR PRICE & HENDRICKSON PROPERTIES (LARGE
FAMILY HOME OWNERSHIP PROGRAM) 2 - 2D
CONSIDER CUB FOODS REDEVELOPMENT PROPOSAL 3 - 3H
CONSIDER REQUEST BY PLAZA OFFICE BUILDING . . . . . . . .4 - 4A
CLAIMS AND EXPENSES
(TO BE DISTRIBUTED AT MEETING) 5
INFORMATION ITEMS:
PLANNING COMMISSION, CITY COUNCIL AND TRAFFIC
INFORMATION PERTAINING TO FRIDLEY TOWN SQUARE 6 - 6A
SUMMARY OF HOUSING INTERVIEWS 7 - 7C
MEMO REGARDING MEETING WITH SIMER PUMP 8
TERRI MAU AGREEMENT 9 - 9B
MEMO REGARDING ERRORS AND OMISSIONS INSURANCE 10 - 10-0
RICE PLAZA UPDATE 11
MEMO REGARDING TIF TURNBACK AMOUNTS 12 - 12A
OTHER BUSINESS
ADJOURNMENT
CITY OF FRIDLEY
HOUSING & REDEVELOPMENT AUTHORITY MEETING, MARCH 14, 1991
CALL TO ORDER:
Chairperson Commers called the March 14, 1991, Housing &
Redevelopment Authority minutes to order at 7:35 p.m.
ROLL CALL:
Members Present: Larry Commers, Virginia Schnabel, John Meyer,
Duane Prairie, Jim McFarland
Members Absent: None
Others Present: Barbara Dacy, Community Development Director
Jim Hoeft, HRA Attorney
Rick Pribyl, Finance Director
Paul Hansen, Accountant
Jim Casserly, Consultant
Mr. Commers welcomed Mr. McFarland to the Housing and Redevelopment
Authority. He stated the other members are looking forward to
working with him, and they hope he finds the HRA interesting and
challenging.
APPROVAL OF FEBRUARY 14, 1991, HOUSING & REDEVELOPMENT AUTHORITY
MINUTES:
MOTION by Mr. Prairie, seconded by Mr. Meyer, to approve the
February 14, 1991, Housing & Redevelopment Authority minutes with
the following amendment on page 2, paragraph 7: Mr. risen Pribyl
stated it is not. Tthe Johnson Printing parcel is in School
District #14, and the Skywood Mall parcel is in School District
#13 .
UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMERS DECLARED
THE MOTION CARRIED AND THE MINUTES APPROVED AS AMENDED•
1. WRITTEN CONTRACT WITH CASSERLY LAW OFFICE P.A. :
MOTION by Mr. Meyer, seconded by Ms. Schnabel, to approve the
Agreement for Legal Services between the HRA and Casserly Law
Office P.A.
Mr. Meyer stated that in both this agreement and the one with
Herrick & Newman, there is no definition of who does the work.
Is there any need to define more fully who does the work at
what rates?
HOUSING & REDEVELOPMENT AUTHORITY MEETING, MAR. 14, 1991 PAGE 2
Mr. Casserly stated that he and his partner both charge the
same rate and just simply allocate the work depending on
whether it is financial or legal. There is really no need to
define it further.
Mr. Hoeft stated it is the same with Herrick & Newman. All
staff time is absorbed into the hourly rate.
UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS
DECLARED THE MOTION CARRIED UNANIMOUSLY.
2. WRITTEN CONTRACT WITH VIRGIL HERRICK:
MOTION by Ms. Schnabel, seconded by Mr. Meyer, to approve the
Agreement for Legal Services between the HRA and Herrick &
Newman Law Firm for City Attorney Services.
Mr. Prairie asked how the increase in hourly rates would
affect the HRA's budget.
Ms. Dacy stated that the amount estimated in the budget and
presented to the HRA at the February meeting is adequate to
cover the increase in rates.
UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS
DECLARED THE MOTION CARRIED UNANIMOUSLY.
3 . APPROVAL OF CONTRACT FOR APPRAISAL OF LAKE POINTE:
Mr. Commers stated that at the February 14, 1991, meeting,
the HRA approved the retention of an appraiser to appraise
the Lake Pointe property for the HRA's information and for
discussion with the Lake Pointe developer. The contract for
appraisal is with Mr. Peter Patchin.
Ms. Dacy stated she would like Mr. Casserly to review the
process that led up to the selection of Mr. Patchin.
Mr. Casserly stated he talked with about ten different
economic development directors, developers, condemnation
counsel, and developer counsel. He asked them to put together
a list of names of people they actually work with and would
recommend and to prioritize the list. He then put together
a matrix, found out who was recommended most, and came up with
six names. The City staff contacted and interviewed those six
people and selected the one who came in with a reasonable
price within the reasonable time period.
Mr. Commers stated he has worked with Peter Patchin in the
past, and he is a highly thought of appraiser in the City of
Minneapolis.
HOUSING & REDEVELOPMENT AUTHORITY MEETING, MAR. 14, 1991 PAGE 3
MOTION by Mr. Prairie, seconded by Ms. Schnabel, to approve
the contract for appraisal of Lake Pointe with Peter J.
Patchin.
Mr. Meyer stated Mr. Patchin's estimated cost is $5,700 for
the report plus $125/hour. Under what circumstances can the
costs escalate beyond the "estimated" cost of services?
Ms. Dacy stated that as far as the hourly rate, that rate is
within $10 of the other people they interviewed. Appraisers
of that status charge from $125-135 per hour, so the $125 per
hour is not out of line for an MAI appraiser.
Mr. Casserly stated he believed the $5,700 would include the
report and a presentation to explain the report. If he is
asked to do more than that, then he would charge the
additional hourly rate.
Mr. Commers stated he believed the $5,700 would include the
preparation of the basic report but would not include
testimony or condemnation testimony.
Ms. Dacy stated it is staff's understanding that Mr. Patchin
could do the work for $5,700. If the HRA wanted to make that
stipulation in the motion, that would be fine.
Mr. Commers stated that he expected that when Mr. Patchin gets
the basic preliminary appraisal done, staff or the HRA will
have an opportunity to talk to him before he prepares his
final draft of that appraisal. Staff should make sure that
Mr. Patchin understands that.
UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS
DECLARED THE MOTION CARRIED UNANIMOUSLY.
4 . APPROVE CONVEYANCE OF EASEMENT TO CITY OF FRIDLEY FOR
MISSISSIPPI STREET IMPROVEMENTS:
Ms. Dacy stated the Public Works Department notified her just
that afternoon that they want to change the grantee for the
easement from the HRA directly to Anoka County. The original
easement was to be given to the City of Fridley. The HRA had
received an updated memo from John Flora at the meeting.
Staff has submitted a new easement document for the HRA.
Ms. Dacy stated the purpose of the easement is that Anoka
County is proposing to construct a street widening project on
Mississippi Street from 5th Street east of University Avenue
over to 2nd Street west of University. In order to do that,
Anoka County needs approximately 40 feet of additional right-
of-way along the south of Mississippi Street. Anoka County
has already received easements from the HRA on the liquor site
HOUSING & REDEVELOPMENT AUTHORITY MEETING, MAR. 14, 1991 PAGE 4
and Kiffe Automotive site. The purpose of the approval is to
convey the easement directly to Anoka County. Last to convey
to Anoka County will be the easement pertinent to the Dairy
Queen property. Staff is still negotiating with the Dairy
Queen owner and that easement will have be conveyed after that
property is acquired.
Ms. Dacy stated staff is recommending the HRA authorize
conveyance of this easement to Anoka County.
Mr. Hoeft stated the legal description as provided by the
County references a 40 foot easement. Technically, it is not
a 40 foot easement. Because of the nature of the roadway, it
runs from 20 feet to 40 feet. He did not want any confusion
with the 40 foot easement request where only 20 feet is
needed.
Ms. Dacy stated she is going to contact the Anoka County
Right-of-Way Specialist and discuss this. Mr. Hoeft has
suggested that 40 feet be erased in that description.
Mr. Commers agreed. There is a running description; and if
the 40 feet is not correct, then it should be changed or taken
out.
Mr. Hoeft stated a concern he had regarding the Dairy Queen
site is that, if for some reason the proposed purchase of the
Dairy Queen site is not accomplished, how accommodating is the
owner going to be for deeding over the 40 foot easement and
will this happen in a timely fashion?
Mr. Commers asked about the status of acquiring the Dairy
Queen site.
Ms. Dacy stated that after the February meeting, she made an
offer to Mr. Fitch, owner of the Dairy Queen. Mr. Fitch is
still investigating acquiring the vacant Amoco station at the
corner of Osborne and University Avenues. He will get back
to her with a counter-offer on Tuesday, March 19.
Mr. Commers asked when the County intends to start physically
making the improvements.
Ms. Dacy stated the physical improvements will begin in August
1991.
Mr. Commers stated that if the HRA would have to condemn the
40 foot easement in front of the Dairy Queen property, with
a quick take type of condemnation, they would need 90-120
days. They need a decision from Mr. Fitch by April 1;
otherwise, they will have to start the wheels in motion for
condemnation.
HOUSING & REDEVELOPMENT AUTHORITY MEETING, MAR. 14, 1991 PAGE 5
Ms. Dacy stated she understands that, and she made that clear
to Mr. Fitch. He plans to make a decision by March 19. She
stated Mr. Fitch has been very cooperative. He wants to get
the deal completed, but also wants to wait for more
information regarding the Amoco station site.
MOTION by Mr. Prairie, seconded by Ms. Schnabel, to approve
the conveyance of easement to Anoka County for the road work
and widening of Mississippi Street west of University Avenue.
UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS
DECLARED THE MOTION CARRIED UNANIMOUSLY.
Mr. Commers stated that staff should discuss the 40 foot
statement with Anoka County.
5. APPROVE AND AWARD BIDS FOR LAKE POINTE MAINTENANCE PROJECT:
Mr. Commers stated the HRA had received a copy of the bid from
Greenmasters Industries, Inc. , in the amount of $27, 680 for
the maintenance service to mow and fertilize the grass at Lake
Pointe and tree/fertilizer maintenance.
Ms. Dacy stated that at the January 10, 1991, HRA meeting,
Mr. Meyer had asked staff to check to see if the maintenance
service contract includes weed control to preserve the
investment put into the lawn. She stated she did check and
weed control is included in the maintenance service contract.
MOTION by Ms. Schnabel, seconded by Mr. Meyer, to approve the
bid and award the contract for Lake Pointe Maintenance Project
#218 to Greenmasters Industries, Inc. , in the amount of
$27, 680.
UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS
DECLARED THE MOTION CARRIED UNANIMOUSLY.
7. ESTIMATES/CLAIMS:
MOTION by Mr. Prairie, seconded by Mr. Meyer, to approve the
check register, #2106 - 2114, dated March 7, 1991.
UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS
DECLARED THE MOTION CARRIED UNANIMOUSLY.
8. UPDATE ON FRIDLEY TOWN SOUARE DEVELOPMENT AGREEMENT:
Ms. Dacy stated Bill Burns has written a separate memo that
the HRA had received at the meeting. It describes in more
detail the Council 's intent for approving the redevelopment
HOUSING & REDEVELOPMENT AUTHORITY MEETING, MAR. 14, 1991 PAGE 6
project at their February 25, 1991, Council meeting. The
redevelopment project was approved on a 3-2 vote.
Ms. Dacy stated that Mr. Casserly will talk about one of the
components of the redevelopment, the equity participation
component.
Mr. Casserly stated staff again needs some direction from the
HRA of whether staff should keep pursuing this equity
participation concept. The final form will definitely depend
on a number of factors, not the least of which are the various
kinds of security arrangements that have to be acceptable to
the HRA and the underwriters in this project. At this point,
he is not certain if the proposed security arrangement, the
concept of the second mortgage, is going to be acceptable to
the investment bankers financing this project. He suspected
this project still has a 20-30% chance of not going forward.
Mr. Commers stated he believed the HRA has already approved
the equity participation concept, and it was just a question
of what the numbers were going to be.
Mr. Casserly stated this project has been around for about a
year. The original concept essentially agreed upon by the HRA
was that the HRA was going to participate because it was a
redevelopment project. The reason the project qualified for
HRA assistance was because the site costs were unduly high.
At that time, it was no risk to the HRA. It was going to be
done as a limited revenue note. The developer was going to
finance the project 100%, and the HRA was going to help assist
the public purpose part by returning to the developer taxes
he paid over a period of years.
Mr. Casserly stated that market conditions then changed,
preleasing requirements increased, and financing became
extremely difficult. The developer worked on the project
through the summer and fall and came back to the HRA
and requested that the pay-as-you-go or revenue note approach
was not going to work, that the under-writers in the project
were requiring that additional cash be put in up front, and
that it was not adequate to be receiving those sums over a
period of years.
Mr. Casserly stated the HRA discussed this at some length,
and the HRA agreed that they would change their financing
approach and that they would assist the developer with up
front cash input. At that meeting, he recommended to the HRA
that there nothing unusual about the HRA operating in that
fashion. But, because of the nature of the project, because
of its location, and because now the HRA was enduring a
greater risk, the HRA thought they should have an extra little
potential of getting something back out of the project. The
HOUSING & REDEVELOPMENT AUTHORITY MEETING, MAR. 14, 1991 PAGE 7
tax increment that the project would generate would repay the
HRA in full its $250,000 investment, and it would take 8-9
years or 10-13 years, depending on whether they create a new
district that would be attached to the existing redevelopment
district.
Mr. Casserly stated that the way the project is designed, even
if that second district is not created, there is enough
project in the existing redevelopment district that all the
tax increment from the taxes of some 12-13 years would
completely reimburse the HRA for its $250,000 investment in
the project. It is important that they keep that concept in
mind, because when they go on to the recapture and the equity
participation, that amount is over and above any tax increment
they are getting out of the project. And, that is the issue
before the HRA.
Mr. Casserly stated that in the proposal he has outlined an
equity participation in which the HRA puts in the $250,000
after the project is completed. The HRA has the option of
getting back either zero, because the project goes into
default and their security is wiped out, or they could get
$100,000 as a minimum.
Mr. Casserly stated he wanted the HRA to review the concept
again, because the project seems to have a fair amount of
controversy. If there are a lot of reservations, either about
the concept or about the project, it would prudent to express
those now. In his judgement, the project is clearly dead
without any HRA investment.
Mr. Casserly stated this is a concept the HRA has not used
before. The whole idea of recapture is a concept used with
other Authorities. It takes many different forms. The
concept he is drawing from is used principally in multi-family
housing projects in which an HRA helps with the mortgage
payments and at the end of the period of time, there is a sale
and the HRA gets back part of its investment through a
participation.
Mr. Commers stated the HRA has discussed this at length in
the past. He believed the HRA minutes reflect that the HRA
was in agreement with the concept. The HRA was concerned that
the HRA was putting in approximately 70% of what the developer
was committing to the project; and, in addition, he was going
to get a 15% return each year the project was in existence,
plus his money back before the HRA really shared in the
project. The HRA had talked about getting a little bit more
money up front, understanding that the developer has to make
a reasonable profit and a certain amount of incentive in order
to put in his $350,000. He thought at that time that there
were some suggestions about either increasing the front end
•
HOUSING & REDEVELOPMENT AUTHORITY MEETING, MAR. 14, 1991 PAGE 8
a little bit or increasing the back end. So, he did not
believe the HRA had any problem with the equity participation
concept, just the level of participation and how they would
arrive at that and what would be fair to the developer.
Mr. Meyer stated his objection to the whole project was based
on three basic concerns:
1. Increased traffic at a very important intersection;
2. Possibility of problems with the neighborhood and
downgrading the neighborhood by the addition of this
development;
3. Jeopardizing the financial wellbeing of other
developments in the immediate area.
Mr. Meyer stated that since that time, Burger King has come
into the picture, and the HRA has never discussed the addition
of Burger King or taken another vote of what the HRA's
participation should be on this project with the addition of
Burger King. It is his contention that the addition of Burger
King is going to exacerbate all three of his concerns very
noticeably. Burger King will create more traffic and is going
to further jeopardize a very fine residential neighborhood.
He believed it also the HRA's job to be mindful of downgrading
the quality of residential areas in the City. If they do
downgrade the quality of residential areas in the process of
establishing new businesses, then they are not doing their
job.
Mr. Meyer stated that Burger King will be moving from the
southwest quadrant, and there are already businesses in Rice
Plaza that are not doing well financially and may want to move
into the Fridley Town Square development.
Mr. Meyer stated this might be the appropriate time for the
HRA to discuss whether or not the advent of Burger King
changes their minds in their participation in the project.
He definitely has a very negative attitude toward giving any
financial assistance to this project. It is not necessarily
the economics of the proposal as it is his overall concern
with the project.
Mr. Commers stated it is true that any time they bring a new
project on line, it may drain away from other existing
projects. The other side of it is that the purpose of
bringing on redevelopment projects is to try to upgrade those
areas that are in existence. If the Fridley Town Square
development takes some businesses out of Rice Plaza,
theoretically, that is supposed to be for the better. The
Burger King has presented a real problem. There was a lot of
HOUSING & REDEVELOPMENT AUTHORITY MEETING, MAR. 14, 1991 PAGE 9
discussion at the Planning Commission about traffic and the
odors emitted from Burger King.
Ms. Dacy stated the Planning Commission and City Council did
look at all the site related issues. The applicant, at the
City's request, again hired Barton-Aschman to take another
look at the traffic study. The original traffic study based
the estimates on the assumption that the center would generate
100% new traffic. They know that is not true, because 40-50%
of the traffic that will use the new center is already out on
the street. So, the traffic consultant took a worst case look
at the traffic situation, and said that the intersection could
operate at an acceptable level.
Ms. Dacy stated that when Burger King came into the picture,
staff was very concerned about the traffic and the odor
issues. Barton-Aschman did another traffic analysis and
found that moving Burger King across the street does, in fact,
help the function of the intersection because the movements
now are a right east and a right north instead of going across
the intersection. Staff was satisfied that the traffic issues
had been addressed.
Ms. Dacy stated that as far as the odor issue, the developer
hired Intertech, Inc. , to look at the odor issue. There is
a double baffle filtration system the Burger Kings are now
using where odors cannot be detected 150-175 feet from the
restaurant. Staff feels confident that the site will work.
When the HRA looked at this in January, it was the HRA's
direction that they wanted the City Council and Planning
Commission to deal with the site issues. What the HRA has to
focus in on is: Does the project meet the HRA's redevelopment
goals for the downtown area?
Mr. Meyer stated he did not agree with the traffic study done
by Barton-Aschman. He had a hard time understanding how the
traffic consultant can say that the traffic is at level D now,
will be at level D with the addition of Walgreen, and will
still be at level D with the addition of Walgreen and Burger
King.
Ms. Dacy stated that if the HRA wanted, she could invite Dave
Koski of Barton-Aschman to the HRA to explain the traffic
study, or she could make copies of the report available to the
HRA. The HRA members should also remember that Anoka County
will be widening Mississippi Street this summer which will
also help the function of the roadway.
Mr. Commers stated it is the consensus of the HRA for staff
to continue to work with the developer and to talk in terms
of equity participation. In the meantime, the HRA should be
brought up to date on the Barton-Aschman traffic study after
HOUSING & REDEVELOPMENT AUTHORITY MEETING, MAR. 14, 1991 PAGE 10
the addition of Burger King. They can look at the traffic
study and updates to that study at the next meeting; and then
if they wish to invite the traffic consultant, they can make
that decision at the meeting.
Ms. Schnabel stated she would like copies of both the Planning
Commission and City Council minutes where these items were
discussed so the HRA has the benefit of those discussions
also.
8. LETTERS TO ALL FOUR SCHOOL DISTRICTS REGARDING TIF TURNBACK:
Mr. Commers stated that at the last meeting, the HRA
reconsidered and refunded to the school districts for this
year approximately $260, 000 to assist them with their programs
and budgets.
Mr. Commers stated the HRA received at the meeting a letter
dated February 13, 1991, from Dr. Dennis Rens, Superintendent
of School District 14, in which Dr. Rens is asking that the
HRA notify the School District of any changes in planned
funding amounts one year advance, so it would be July 1, 1991,
for their 1992-93 budget (7/1/92 - 6/30/93) .
Mr. Prairie stated he believed the letters dated March 7,
1991, sent to the four school districts puts them all on
notice that the HRA may put a cap on money to be returned to
the school districts in the future. He stated he has talked
to a number of School District 14 members, and they understand
that this money might not always be available.
Mr. Commers stated he is not sure if the HRA will be in a
position to make a commitment that early for over a year's
lead time in terms of the School District 14 budget.
9. MEMO REGARDING RESPONSE TO SUH'S PROPOSAL:
Mr. Commers stated it is the HRA's legal counsel 's
recommendation that there is no need for the HRA to take any
action at this time.
10. MEMO REGARDING HRA PAYMENT TO T. C. FIELDS:
Mr. Pribyl stated this memo answers a lot of issues brought
up at the February 14, 1991, meeting. The HRA really has
three particular areas of insurance: General Liability,
Municipal Errors & Omissions, and Inverse Condemnation. The
coverage for the HRA is covered under Municipal Errors &
Omissions.
Mr. Commers stated that there is coverage but it appears to
be based on two members of the HRA.
HOUSING & REDEVELOPMENT AUTHORITY MEETING, MAR. 14, 1991 PAGE 11
Mr. Pribyl stated he is not sure what that means, but he will
check and verify that the HRA has complete coverage.
Mr. Commers stated that the limit of coverage for each
occurrence under Municipal General Liability is $600,000. He
stated that coverage is low. This could double or triple; for
example, if there is an environmental problem.
Mr. Pribyl stated these are recommended limits, and he was
not aware that it could double in that kind of situation.
Again, it is something he will check into.
Mr. Commers asked staff to verify the HRA's coverage and the
limits.
11. MEMO FROM FINANCE DEPARTMENT REGARDING HRA'S USE OF FINANCIAL
CONSULTANTS:
Mr. Commers stated that per the HRA's request at the February
14, 1991, meeting, this memo describes the services provided
by the professional consultants used by the HRA.
12. LETTER ACCEPTING WALTER RASMUSSEN'S RESIGNATION:
The HRA received Mr. Rasmussen's letter of resignation.
Mr. Commers stated that the HRA wishes him well. He hoped
that there would be some type of certificate of appreciation
presented to him for his service.
13. MEMO REGARDING AMOUNTS THAT MAY BE OWED TO WINFIELD:
Mr. Commers stated this is just an information item.
14. REPORT ON CONTACTS WITH ASHLAND OIL:
Ms. Dacy stated that John Flora, Public Works Director, is
investigating the costs of the cleanup with the consultants
and MPCA. They will have more information at the next
meeting.
15. UPDATE REGARDING RICE PLAZA:
Mr. Commers stated this is an update of the Rice Plaza 1991
rents.
16. UPDATE ON VARIOUS MEETINGS IN LAST MONTH:
Ms. Dacy stated this is an information item.
HOUSING & REDEVELOPMENT AUTHORITY MEETING, MAR. 14, 1991 PAGE 12
17. LRT PRELIMINARY COMMENTS (Memo dated March 7, 1991, from
Barbara Dacy to William Burns) :
Ms. Dacy briefly reviewed the preliminary design plan for the
park and ride sites. Originally, Anoka County was looking at
the Rapid Oil site north of 57th Avenue for a park and ride
site, but that is not the case now, so the park and ride sites
do not directly affect any redevelopment areas. The Fridley
Town Square area has also been resolved.
Ms. Dacy stated these comments have been reviewed by the City
Council, the Planning Commission, the Human Resources
Commission, and will be reviewed by the Environmental Quality
and Energy Commission on Tuesday, March 19. They wanted to
make sure that all agencies and commissions affected by the
design plan had the opportunity to make comments.
Ms. Schnabel stated that what concerns her is that there are
some park and ride sites that will affect people who are
either living or currently doing business within the City of
Fridley. Since the whole LRT concept is still so nebulous,
she would not like to see those persons who feel they might
be affected get upset or disturbed by this concept, because
they think their properties are going to be taken. That is
an injustice these types of things does to people. At this
time, the whole LRT issue is really an unknown.
Ms. Dacy stated that is true. However, the City is required
by law to review and approve these design plans. Anoka County
wants to complete the planning process, the EIS, and the
preliminary design plans so that when and if the funding issue
is solved, they have an approved set of plans. These park and
ride sites would directly affect the SuperAmerica station, the
Motor Valet, the structures on the west side of 4th Street,
and the Amoco station and Minnesota Petroleum at 53rd Avenue.
They are showing the people these plans, but those properties
may not be acquired until the end of the decade. So, there
are two different processes: the planning process and the
funding process.
Mr. Commers stated there is no doubt that even though this may
not happen for ten years, it does cause some stress and
consternation on the part of the people whose properties are
affected.
18. STATUS OF KIFFE AUTOMOTIVE:
Mr. Commers stated Mr. Jack Kiffe of Kiffe Automotive is
selling his automotive business and vacating the building on
Mississippi Street. He will provide a 30 day notice to
vacate.
.
HOUSING & REDEVELOPMENT AUTHORITY MEETING, MAR. 14, 1991 PAGE 13
19. OTHER BUSINESS:
a. Plans for Acquiring Economic Development Finance
Professional Certification
Ms. Dacy stated Mr. Burns would like to attend economic
development finance courses offered by the National
Development Council. The first course will occur during
the week of the next regularly scheduled meeting, April
11. He is asking the HRA to change the meeting date to
April 4.
The HRA members agreed to the change in meeting date from
April 11 to April 4.
Mr. Commers stated these courses involve a cost to the
HRA. It is a complex complicated area and the more
expertise and information Mr. Burns can gain is to the
HRA's benefit also.
b. Top of the Cities Cycling Club
The HRA members were in favor of a bicycle race at the
Lake Pointe site on April 13, 1991.
c. Habitat for Humanity Selection Process
Ms. Dacy stated this memo is in response to Ms.
Schnabel 's questions regarding this process.
ADJOURNMENT:
MOTION by Mr. Meyer, seconded by Mr. Prairie, to adjourn the
meeting. Upon a voice vote, Chairperson Commers declared the
motion carried and the March 14, 1991, Housing and Redevelopment
Authority meeting adjourned at 9:40 p.m.
Respectfully submitted,
JAiceL,
Lyn Saba
Recording Secretary
Community DevelopDevelopment Department
GE2J1 HOUSING AND REDEVELOPMENT AUTHORITY
City of Fridley
DATE: March 28, 1991
414 .
TO: William Burns, Executive Director of HRA 41.
FROM: Barbara Dacy, (immunity Development Director
SUBJECT: Consideration of r Pace Agreement with Keith Degross
Keith Degross has signed a purchase agreement with Jack Kiffe of Kiffe Automotive
to purchase his automotive business now located in the building at the southwest
corner of University Avenue and Mississippi Street. Mr. Degross wishes to
continue an automotive repair operation at the former Kiffe facility. We have,
therefore, redrafted a one year lease for consideration by the BRA.
We have conducted a credit check on Mr. Degross and have determined that he is
capable of meeting the $650 rental payment per month. Terms of the lease
agreement are essentially the same as was done in the Kiffe agreement. After
a one year period, the lease will switch to a month-to-month basis, thus giving
the HRA the flexibility regarding redevelopment options. We will, however,
notify Mr. Degross of any informal plans that we may be aware of.
The HRA should also be aware that at this time the Kiffe parcel is under tax
exempt status; however, because we are collecting income by virtue of rental of
the building, the City Attorney's office has advised that a taxable status should
be applied to the property. In so doing, the taxes would became due and payable
in 1992 and total about $4,015 (see memo from Paul Hansen) .
The lease has been written so that the tenant is not responsible for payment of
taxes. Four months of taxes equate to an additional $335/month. It is doubtful
whether the HRA could rent this building for $1,000/month. Therefore, the HRA
will be responsible for the taxes. We will accrue $7,800 in rent payments for
the lea e period, which would retire the tax amount.
Mr. Degross has also requested the ability to install a frec-standing pylon sign.
Paragraph 18 of the lease permits signs to be placed on the premises which are
about the same size.
Recommendation
Continued use of the facility will generate additional income and a continued
service to community residents. Approval of the attached lea agreement as
prepared by the Attorney's office is recommended. Mr. Degross and Mr. Kiffe will
attend the meeting on Thursday.
BD:ls
M-91-219
1-A
CITY OF FRIDLEY
MEMORANDUM
TO: BARBARA DACY, COMMUNITY DEVELOPMENT DIRECTOR
FROM: RICHARD D. PRIBYL, FINANCE DIRECTOR
PAUL S. HANSEN, ACCOUNTANT
SUBJECT: KIFFE'S AUTOMOTIVE TAX STATUS.
DATE: March 28, 1991
The purpose of this memo is to respond to your question as to what
the Fridley HRA needs to do in regards to the tax status of Kiffe's
Automotive.
The property is classified as tax exempt. The property should be
taxable according to Virgil Herrick (see attached memo) . Property
that is owned by a public body but leased to private individuals
is taxable property.
The process of changing the tax status is a fairly simple process
and would be handled by the assessor department.
However, if the property is not leased then it would continue to
be classified as exempt.
If you have any questions, please feel free to call.
j-,ECEIi ED
MEMORANDUM MAR 2 1 1991
1-B
MEMO TO: Richard D. Pribyl
Finance Director
cc : Leon L. Madsen
City Assessor
I ' .
MEMO FROM: Virgil C. Herrick i/
City Attorney
SUBJECT: Tax Classification of City Property
DATE: March 20, 1991
This Memorandum is in response to your inquiry, dated March 7, 1991,
regarding tax classification of City property. Specifically, you
inquired as to who has the responsibility to request a change in the
tax status of property acquired by the City (and/or the HRA) .
The process of requesting a change in tax status from taxable to tax
exempt or vice versa is a fairly simple process . An application
should be obtained from Anoka County. The request is then made to the
County and it determines whether the facts justify a change in status.
Property owned by the City and the HRA may be taxable or may be tax
exempt depending on the purpose and use of the property. Property
such as the Rice Creek Plaza Shopping Center which is owned by a
public body but leased to private individuals is taxable property.
Property that is acquired by the City to be used for park purposes is
tax exempt property. Those types of classifications are fairly clear.
Unfortunately, there are some properties that are in a gray area. It
probably would be worth while for you, Leon and perhaps Bill Burns and
myself to have a meeting to set a policy and procedure on how to
handle these situations . After that policy is established, I would
suggest that Leon would be the appropriate person to secure the
applications and prepare them for delivery to the County.
1-C
AGREEMENT OF LEASE
THIS AGREEMENT, made this day of May, 1991, by and between
the Fridley Housing and Redevelopment Authority (hereinafter
designated as "Lessor" ) and Keith Degross, 10645 Quincy Boulevard,
Blaine, MN 55434 (hereinafter designated as "Lessee" ) .
WITNESSETH:
That the Lessor, for and in consideration of the terms, covenants,
rents and conditions herein mentioned, to be paid and performed by
Lessee, does hereby demise and let unto said Lessee, and the said
Lessee does hereby hire and take from the Lessor, the following
described premises situated in the City of Fridley, County of Anoka,
State of Minnesota, to-wit :
Lowell Addition, part Block 12, that part of NW 1/4 of
SW 1/4 of Section 14, Township 30, Range 24 described
as follows:
Commencing at a point on the North line of said NW 1/4
of SW 1/4 distance 1,043.58 feet East from NW corner
thereof, then Southerly, including N 1/2 of 64 1/2 Avenue
NE line adjacent thereto per Ordinance 299, 1/18/65,
subject to street and utility easements over Northerly
15 feet to the City, 1972.
TO HAVE AND TO HOLD the same just as they are, without liability
on the part of the Lessor to make alterations, improvements or repairs
of any kind in and about the demised premises, except as and if
otherwise set forth herein, for the term of one (1 ) year from the 1st
day of May, 1991 through and until the 30th day of April , 1992 for the
following purposes, and for no other purposes, to-wit :
Automotive service and repairs . This purpose does not
include the sale of gasoline.
1 . Lessee agrees to pay Lessor as and for rent for the
above mentioned premises, in monthly installments of
$650.00 Dollars each, in advance on the first day of each
-1-
1-D
and' every month during the full term of this Lease at the
office of the Lessor, or at such other place as Lessor may
in writing designate .
In addition to the rent specified in the preceding Paragraph
( the "base annual rental" ) , Lessee agrees to provide for and
pay the cost of maintaining the parking areas, grounds and
sidewalks serving the Leased premises. Such costs shall
include lighting, snow removal , line painting and replacement
of paving, curbs and sidewalks, if necessary. The cost of
operation and maintenance shall not include taxes and
assessments . Further, the Lessee shall promptly pay the costs
of all utilities, including, but not limited to, electricity,
telephone, sewer, water, refuse removal and natural gas .
2 . Lessee agrees that it will not sublet the demised
premises or any part thereof and will not assign this Lease
or any interest therein.
3 . Lessee shall provide or pay for all repairs and
maintenance of the premises including, but not limited to,
glass breakage, furnace, plumbing, electrical systems,
structural repairs, parking and other exterior maintenance.
4. Lessee agrees to indemnify and hold the Lessor harmless
for any liability arising out of the Lessee' s use of the
premises . For this purpose the Lessee shall at its sole
expense procure and maintain comprehensive public liability
insurance for the demised premises during the term hereof
in the minimum amount of Three Hundred Thousand - Five
Hundred Thousand Dollars ($300,000.00 - $500, 000.00) bodily
injury and One Hundred Thousand Dollars ($100, 000.00)
-2-
1-E
property damage. Lessee shall provide Lessor with evidence
of such insurance prior to occupancy. Lessee shall at its
sole expense procure and maintain insurance for its fixtures
and equipment within the demised premises.
5 . Lessee to obtain workers compensation insurance. Lessee
shall maintain and keep in force all employees compensation
insurance required under the laws of the State of Minnesota,
and such other insurance as may be necessary to protect
Lessor against any other liability to person or property
arising hereunder by operations of law, whether such law is
now in force or is adopted subsequent to the execution hereof.
6 . Lessee to furnish certificate of insurance. Lessee shall
furnish to Lessor, a certificate of insurance showing that its
liability insurance policies are in full force and effect
and naming Lessor as an insured thereon. The policy shall
further provide that Lessor shall be given a minimum of ten
(10) days notice by the insurance company prior to cancellation,
termination or change of such insurance. Such policies or duly
executed certificates of insurance shall be delivered to Lessor
prior to the commencement of Lessee' s occupancy hereunder and
renewals thereof shall be delivered to Lessor at least thirty
(30) days prior to expiration of the respective policy terms.
7 . The Lessor consents to allow the Lessee to make the
necessary alterations to the said property in the manner
necessary for the Lessee to operate his business . The Lessee
shall be required to provide all plans necessary for the
remodeling to the Lessor and shall get all necessary permits
as needed from the City.
-3-
1-F
8. 'Lessee covenants and agrees that it will make no structural
change or major alteration without the Lessor ' s consent, which
consent shall not be unreasonably withheld, provided that the
proposed improvements are consistent with the use of the
property, do not significantly reduce the value of the property
and do not violate any local, state or federal laws; and
without first furnishing the Lessor five (5) days' advance
written notice outlining the proposed changes or alterations.
Upon the City consenting to the alterations, then the City will
issue all necessary permits without unreasonable delay. The
Lessee further covenants that it will promptly pay for any
alterations, repairs or maintenance made to the demised property
so that no mechanic ' s liens will be filed against the property.
In the event, a mechanic ' s lien is filed, the Lessee shall have
twenty (20) days to pay or in the alternative to post 1-1/2
times the lien amount with the district court in order to
contest it . Failure to do either of the above mentioned lien
corrections shall be deemed as a default under this Lease. In
any event, the Lessee shall indemnify and hold harmless the
Lessor for any and all costs of removing said lien.
9. The Lessee agrees that upon termination of this Lease, all
improvements to the property, together with all fixtures, shall
become the property of the Lessor .
10. Lessor shall at all times have the right to enter upon said
premises to inspect their condition and at his election to make
reasonable and necessary repairs thereon for the protection and
preservation thereof but nothing herein shall be construed to
require the Lessor to make such repairs except as may be herein
-4-
1-G
provided for and the Lessor shall not be liable to the Lessee
for the failure or delay in making such repairs or for damage
or injury to persons or property caused in or by the making of
such repairs or the doing of such work.
11 . Lessee agrees to pay for all special requirements for
utilities such as gas, steam, water and electricity and for all
other alterations, modifications or other services to the demised
premises. Charges for any such utilities or services shall be
paid by Lessee and, in the event such charges are not paid when
due, the same shall constitute a default hereunder on the part
of the Lessee .
12 . The premises shall not be used for lodging or sleeping or
for any immoral or illegal purposes .
13. The parties hereto mutually agree that if the demised
premises are partiallyor totallydestroyed byfire or other
Y
hazards, then Lessor may, but is not obligated to, repair and
restore the demised premises as soon as is reasonably
practicable to substantially the same condition in which the
demised premises were before such damage. The Lessee may
repair the damage as allowed under Paragraph 7 at his own
expense. In the event the demised premises are completely
destroyed or so badly damaged as not to be useable by the
Lessee for the purposes herein provided, then this Lease shall
be terminable by either party hereto by serving written notice
upon the other; and provided, further, that in any event if
repairs have not been commenced within thirty ( 30) days from
the date of said damage and thereafter completed within a
reasonable time, in no case to exceed three (3) months, this
-5-
1-H
Lease may be immediately terminated by the Lessee by serving
written notice upon the Lessor .
14. The Lessee acknowledges that it is aware that Anoka
County intends to widen Mississippi Street along the north
boundary of the property and that in the course of doing so
the County intends to acquire a portion of the property. The
Lessee acknowledges that it is waiving any and all claims to
any compensation or monies which the Lessor may receive from
the County as a result of this taking. Further the Lessee
agrees to waive any claim that this acquisition by the County
constitutes a breach of this Lease .
15 . THIS PARAGRAPH DESCRIBES THE CONDITIONS UNDER WHICH THE
LESSOR MAY TERMINATE THIS LEASE EARLY. YOU SHOULD READ
• THIS PARAGRAPH CAREFULLY. In addition to the provisions
contained elsewhere in this Lease, the Lessor may terminate
this Lease prior to expiration date and without cause upon
the Fridley Housing and Redevelopment Authority making the
determination that it needs to terminate this leasehold
interest as a result of development intended for this site
or elsewhere in the southwest quadrant of Mississippi and
University. This termination can only be effective upon
the giving of ninety (90) days written notice by the Lessor
to the Lessee .
16. In the event that the Lessee shall continue to occupy
the demised premises after the expiration of the term of said
Lease, such "holding over" shall be on a month to month basis.
Either party may terminate said "holding over" by giving the
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1-I
proper notice, as required by Minnesota law, to terminate a
month to month tenancy.
17. The Lessee hereby agrees to waive any right or benefits
he may have pursuant to the Uniform Relocation Assistance
and Real Property Acquisition Policies Act of 1970
(40 U.S.C. 4601 ) and will provide Lessor with a signed waiver
upon request .
It is understood that the parties have entered into this
Lease as an accomodation to each other . Upon the proper
termination of this Lease, the Lessee will not be entitled
to any compensation or damages for the termination of the
Lessee' s leasehold interest .
18. No sign shall be painted or affixed by the Lessee on any
part of the outside of the demised premises without prior
written consent of the Lessor . In the event of a violation
of this clause by the Lessee, Lessor may remove said sign
without any liability and may charge the expense incurred by
such removal to the Lessee. The Lessee is permitted to
substitute a sign on the building which would be affixed in
substantially the same location as any existing sign and
shall be constructed of letters which are substantially
similar to and which letters do not collectively or
significantly exceed the size of any current sign.
19. If the Lessee shall make default in any covenant or
agreement to be performed by it and if after written notice
from Lessor to Lessee such default shall continue for a
period of five (5) days or if the leasehold interest of the
Lessee shall be taken on execution or other process of law
-7-
1-J
or if the Lessee shall petition to be or be declared
bankrupt or insolvent according to law, then, and in any of
said cases, the Lessor may immediately or at any time
thereafter, without further notice or demand, enter into and
upon said premises or any part thereof and take absolute
possession of the same fully and absolutely without such
re-entry working a forfeiture of the rents to be paid and the
covenants to be performed by the Lessee for the full term of
this Lease; and at Lessor ' s election, Lessor may either lease
or sublet such premises or any part thereof on such terms and
conditions and for such rents and for such time as the Lessor
may reasonably elect and after crediting the rent actually
collected by the Lessor from such re-letting collect from the
Lessee any balance remaining due on the rent reserved under
this Lease, or Lessor may declare this Lease forfeited and may
take full and absolute possession of said premises free from
any subsequent rights of the Lessee.
That in the event of default by the Lessee, the Lessee shall
compensate the Lessor for all reasonable attorneys fees,
expenses and costs incurred by the Lessor in either re-acquiring
possession of the property or for bringing an action for the
recovery of unpaid rent .
20. Wherever in this Lease it shall be required or permitted
that notice or demand be given or served by either party to
this Lease to or on the other, such notice or demand shall be
given or served and shall not be deemed to have been given or
-8-
1-K
served unless in writing and forwarded by mail addressed as
follows :
To The Lessor : Barbara Dacy
Community Development Director
Fridley Housing & Redevelopment Authority
6431 University Avenue Northeast
Fridley, MN 55432
To The Lessee : Keith Degross
10645 Quincy Boulevard
Blaine, MN 55434
Such addresses may be changed from time to time by either party by
service of notice as above provided.
The Lessor and Lessee agree that all the provisions hereof are to
be construed as covenants and agreements .
IN WITNESS WHEREOF, the Lessor and Lessee have caused their
respective names to be subscribed to this Lease on the date first
above written.
In the Presence Of: LESSOR:
FRIDLEY HOUSING & REDEVELOPMENT
AUTHORITY
BY:
LESSEE:
BY:
Sole Owner
Dated: 1991 .
-9-
1-L
•
STATE OF MINNESOTA )
)ss .
COUNTY OF ANOKA )
The foregoing instrument was acknowledged before me this day
of May, 1991 .
THIS INSTRUMENT WAS DRAFTED BY:
HERRICK & NEWMAN
Suite 205
6401 University Avenue Northeast
Fridley, MN 55432
(612 ) 571-3850
-10-
1.
fl / Community Development Department2
HOUSING AND REDEVELOPMENT AUTHORITY
City of Fridley
DATE: March 28, 1991 I (�
TO: William Burns, Executive Director of HRAd+QI
FROM: Barbara Dacy, Community Development Director
SUBJECT: Consideration of Approval of Two Mortgage
Satisfaction Documents for Large Family Home
Ownership Program
I have been contacted by two property owners who participated in
the Fridley HRA's Large Family Home Ownership Program. Del Price
of 5821 - 3rd Street N.E. and David Hendrickson of 6031 - 3rd
Street N.E. are in the process of refinancing their homes. In both
cases, the Fridley HRA issued a second mortgage under the Home
Ownership Program. The ten year requirement to live in the home
has expired in the Hendrickson family's case and will shortly
expire on April 24, 1991, in the Price family's case.
The City Attorney's office has prepared mortgage satisfaction
documents which will be recorded at Anoka County to state that the
Fridley HRA is releasing any claim regarding the second mortgage.
The program was designed to encourage the homeowners to live in the
newly constructed homes for at least ten years. If the owner lived
within the property for ten years, then the second mortgage amount
was forgiven (see attached minutes from 1980) .
Recommendation
The attached mortgage satisfaction agreements are recommended for
approval by the HRA. The satisfaction regarding the Price property
will not be recorded until after April 24, 1991.
BD: ls
M-91-217
2-A
HOUSING & REDEVELOPMENT AUTHORITY MEETING, JUNE 12, 1980 PAGE 2
2. LARGE FAMILY HOME OWNERSHIP PROGRAM:
A. Approve Demolition Contract for Removing Structure at
5832 University Ave. N.E.
Mr. Boardman stated he would like the approval of the Authority to
enter into a contract for demolition on the Johnson property at
5832 University Ave. N.E. The bids that came in were $2,100 by
Boland Construction and $1,400 by Herbst Construction. He stated
they advertised to try to sell the garage on that property, but did
not receive any response, so the garage will be torn down also.
MOTION by Mr. Prairie, seconded by Ms. Svendsen, to approve the
Contract for Demolition with Herbst Construction Co. for $1,400
for the structure demolition at 5832 University Ave. N.E., including
both single family house and garage. Upon a voice vote, all voting
aye, Vice-Chairperson Houck declared the motion carried unanimously.
B. Update on Survey on 6025 - 3rd St. N.E. and 5932 University Ave. N.E.
Mr. Boardman stated they have gotten quotes on prices for surveying.
The quotes were $600 from Suburban Engineering, $690 from Comstock &
Davis, and a third quote for $900. He stated they have authorized
Suburban Engineering to do the survey on the four lots.
MOTION by Mr. Prairie, seconded by Ms. Svendsen, to approve the bid
from Suburban Engineering of $600 to do the surveys on 6025 - 3rd St. N.E.
and 5932 University Ave. N.E. Upon a voice vote, all voting aye,
Vice-Chairperson Houck declared the motion carried unanimously.
C. Approve Ordering of Updated Abstracts for the New Lots as Split by
the Fridley City Council to Prepare for Sale of Lots
Mr. Boardman stated he had written a memo, #80-45, dated June 6, 1980,
to the Authority asking for the approval of the Authority to order the
updating of the abstracts on the HRA lots being acquired. Updated
abstracts are required to complete the purchase agreements for the
sale of the lots. The cost of the abstracts is $199.
MOTION by Ms. Svendsen, seconded by Mr. Prairie, to approve the
cost of $199 for updating the abstracts of the Large Family Home
Ownership Program Lots. Upon a voice vote, all voting aye, Vice-
Chairperson Houck declared the motion carried unanimously.
D. Approve Wording of the Proposed Purchase Agreement and Second
Mortgage to be Attached at Time of Sale
Mr. Boardman stated they had Mr. Herrick put together some wording
similar to the wording discussed at the last HRA meeting. Within
the Purchase Agreement, it states they are going to be placing a
2-B
HOUSING & REDEVELOPMENT AUTHORITY MEETING, JUNE 12, 1980 PAGE 3
second mortgage on the property at 87. interest. That second mortgage
is the difference between what the purchase price is and what the
appraised price of that lot is prior to the time of sale. The wording
also states that if the purchaser of that property moves out of the
house within ten years, 'the BRA has first right of refusal on the
property, purchasing the property at the current appraised value
minus the difference between the appraised value and the 87. interest,
or they will foreclose on the second mortgage. The Mortgage Note
is the second mortgage that is attached to the Purchase Agreement.
If the purchaser stays in the house for the ten year period, then
the principal and interest accumulated on the second mortgage would oNg
be classified as satisfied.
Mr. Boardman stated they sent the Purchase Agreement and the Mortgage
Note to Dick Buddig, Legal Counsel for HUD, and he has no problems
with the documents.
MOTION by Mr. Prairie, seconded by Ms. Svendsen, to approve the
wording of the proposed "Purchase Agreement" and "Mortgage Note" to
• be attached at time of sale. Upon a voice vote, all voting aye,
Vice-Chairperson Houck declared the motion carried unanimously.
E. Approve Appraisals on the Four New Lots to be Completed
Mr. Boardman stated that, as stated in the Purchase Agreement, prior
to the time they lay out the purchase agreements, they have to get
appraised values done on the vacant piece of properties. Be was
asking for approval of these appraisals from the Authority so that
when they get ready to sell a property and write up a purchase agree-
ment, they can go ahead and get an appraised value so they can put
that appraised value within the purchase agreement. The appraisals
cost approximately $175 each.
MOTION by Ms . Svendsen, seconded by Mr. Prairie, to approve
appraisals on the four new lots to be completed. Upon a voice vote,
all voting aye, Vice- Chairperson Houck declared the motion carried
unanimously.
3. UPDATE ON REHAB PROGRAM:
Mr. Boardman stated that with the rehab program, they have been having
problems getting contractors to do the. work. They have two projects with
two bids, three projects with one bid, and one project with no bid. The
City gives the property owners a list of contractors who are interested in
the rehab program. The property owner is responsible for contacting those
contractors and getting three bids.
Mr. Boardman stated they feel they should move ahead with these projects.
On those projects that have two bids, they will take the low bid. On the
projects with only one bid, they are going to have Darrel Clark, Chief
Building Official, go out, look at the one bid, and give notice of whether
he thinks that bid is within reason. They have talked this over with HUD,
and HUD has no problem with it.
2-C
Satisfaction of Mortgage
By Corporation
KNOW ALL MEN BY THESE PRESENTS, That a certain Indenture of
Mortgage, now owned by the undersigned, a Public Corporation existing
under the laws of the State of Minnesota, bearing date the 24th day of
April, 1981, made and executed by Del F. Price and Peggy B. Price,
husband and wife, as Mortgagors, to the Fridley Housing and
Redevelopment Authority, a Minnesota Public Corporation, as Mortgagee,
and recorded in the Office of the County Recorder in and for the
County of Anoka and State of Minnesota on the 20th day of May, 1981 as
Document #116328, is, with the indebtedness thereby secured, fully
paid and satisfied upon the record thereof, according to the statute
in such case provided.
IN TESTIMONY WHEREOF, The said
Corporation has caused these
presents to be executed in its
corporate name by its Executive
Director this day of
, 1991 .
FRIDLEY HOUSING AND REDEVELOPMENT
AUTHORITY
BY:
William W. Burns
Its Executive Director
STATE OF MINNESOTA )
)ss .
COUNTY OF ANOKA )
The foregoing was acknowledged before me this day of
, 1991 by William W. Burns, the Executive Director of the
Fridley Housing and Redevelopment Authority, a Public Corporation
under the laws of Minnesota, on behalf of the Public Corporation.
THIS INSTRUMENT WAS DRAFTED BY:
HERRICK & NEWMAN
Suite 205
6401 University Avenue Northeast
Fridley, MN 55432
(612 ) 571-3850
2-B
HOUSING & REDEVELOPMENT AUTHORITY MEETING, JUNE 12, 1980 PAGE 3
second mortgage on the property at 87. interest. That second mortgage
is the difference between what the purchase price is and what the
appraised price of that lot is prior to the time of sale. The wording
also states that if the purchaser of that property moves out of the
house within ten years, The HRA has first right of refusal on the
property, purchasing the property at the current appraised value
minus the difference between the appraised value and the 87. interest,
or they will foreclose on the second mortgage. The Mortgage Note
is the second mortgage that is attached to the Purchase Agreement.
If the purchaser stays in the house for the ten year period, then
the principal and interest accumulated on the second mortgage would
...%g
be classified as satisfied.
Mr. Boardman stated they sent the Purchase Agreement and the Mortgage
Note to Dick Buddig, Legal Counsel for HUD, and he has no problems
with the documents.
MOTION by Mr. Prairie, seconded by Ms. Svendsen, to approve the
wording of the proposed "Purchase Agreement" and "Mortgage Note" to
• be attached at time of sale. Upon a voice vote, all voting aye,
Vice-Chairperson Houck declared the motion carried unanimously.
E. Approve Appraisals on the Four New Lots to be Completed
Mr. Boardman stated that, as stated in the Purchase Agreement, prior
to the time they lay out the purchase agreements, they have to get
appraised values done on the vacant piece of properties. He was
asking for approval of these appraisals from the Authority so that
when they get ready to sell a property and write up a purchase agree-
ment, they can go ahead and get an appraised value so they can put
that appraised value within the purchase agreement. The appraisals
cost approximately $175 each.
MOTION by Ms . Svendsen, seconded by Mr. Prairie, to approve
appraisals on the four new lots to be completed. Upon a voice vote,
all voting aye, Vice- Chairperson Houck declared the motion carried
unanimously.
3. UPDATE ON REHAB PROGRAM:
Mr. Boardman stated that with the rehab program, they have been having
problems getting contractors to do the.work. They have two projects with
two bids, three projects with one bid, and one project with no bid. The
City gives the property owners a list of contractors who are interested in
the rehab program. The property owner is responsible for contacting those
contractors and getting three bids .
Mr. Boardman stated they feel they should move ahead with these projects .
On those projects that have two bids, they will take the low bid. On the
projects with only one bid, they are going to have Darrel Clark, Chief
Building Official, go out, look at the one bid, and give notice of whether
he thinks that bid is within reason. They have talked this over with HUD,
and HUD has no problem with it.
p .
2-C
Satisfaction of Mortgage
By Corporation
KNOW ALL MEN BY THESE PRESENTS, That a certain Indenture of
Mortgage, now owned by the undersigned, a Public Corporation existing
under the laws of the State of Minnesota, bearing date the 24th day of
April, 1981, made and executed by Del F. Price and Peggy B. Price,
husband and wife, as Mortgagors, to the Fridley Housing and
Redevelopment Authority, a Minnesota Public Corporation, as Mortgagee,
and recorded in the Office of the County Recorder in and for the
County of Anoka and State of Minnesota on the 20th day of May, 1981 as
Document #116328, is, with the indebtedness thereby secured, fully
paid and satisfied upon the record thereof, according to the statute
in such case provided.
IN TESTIMONY WHEREOF, The said
Corporation has caused these
presents to be executed in its
corporate name by its Executive
Director this day of
, 1991 .
FRIDLEY HOUSING AND REDEVELOPMENT
AUTHORITY
BY:
William W. Burns
Its Executive Director
STATE OF MINNESOTA )
)ss .
COUNTY OF ANOKA )
The foregoing was acknowledged before me this day of
, 1991 by William W. Burns, the Executive Director of the
Fridley Housing and Redevelopment Authority, a Public Corporation
under the laws of Minnesota, on behalf of the Public Corporation.
THIS INSTRUMENT WAS DRAFTED BY:
HERRICK & NEWMAN
Suite 205
6401 University Avenue Northeast
Fridley, MN 55432
(612 ) 571-3850
.
2-D
Satisfaction of Mortgage
By Corporation
KNOW ALL MEN BY THESE PRESENTS, That a certain Indenture of
Mortgage, now owned by the undersigned, a Public Corporation existing
under the laws of the State of Minnesota, bearing date the 21st day of
October , 1980, made and executed by David G. Henrikson and Marianne M.
Henrikson, husband and wife, as Mortgagors, to the Fridley Housing and
Redevelopment Authority, a Minnesota Public Corporation, as Mortgagee,
and recorded in the Office of the County Recorder in and for the
County of Anoka and State of Minnesota on the 23rd day of October,
1980 as Document #558849, is, with the indebtedness thereby secured,
fully paid and satisfied upon the record thereof, according to the
statute in such case provided.
IN TESTIMONY WHEREOF, The said
Corporation has caused these
presents to be executed in its
corporate name by its Executive
Director this day of
, 1991 .
FRIDLEY HOUSING AND REDEVELOPMENT
AUTHORITY
BY:
William W. Burns
Its Executive Director
STATE OF MINNESOTA )
)ss .
COUNTY OF ANOKA )
The foregoing was acknowledged before me this day of
, 1991 by William W. Burns , the Executive Director of the
Fridley Housing and Redevelopment Authority, a Public Corporation
under the laws of Minnesota, on behalf of the Public Corporation.
THIS INSTRUMENT WAS DRAFTED BY:
HERRICK & NEWMAN
Suite 205
6401 University Avenue Northeast
Fridley, MN 55432
(612 ) 571-3850
f / Comm y unit Development Department3
HOUSING AND REDEVELOPMENT AUTHORITY
City of Fridley
DATE: March 29, 1991 r^
TO: William Burns, Executive Director of HRA W
FROM: Barbara Dacy, Community Development Director
SUBJECT: Redevelopment of Cub Foods Site
On Wednesday, March 20, 1991, I met with Bob Grootwasink of Weis
Management, Inc. , Richard Walquist, and Mike Hurley of Barna, Guzy,
& Steffen, Ltd. , regarding the redevelopment of the Cub Foods site.
Grootwasink and Walquist are the brokers for the site, and Hurley
represents the fee owners of the property, the Charles Smith family
heirs. They are proposing to remodel the existing building to
create three large tenant spaces. As part of the remodeling, about
2,500 square feet will be removed from the front of the building
and the parking lot and lighting standards will be improved and
modernized (total value of improvement is $477,000) .
Request
They are requesting $50,000 to assist them in completing the
exterior improvements to the property--parking, landscaping,
lighting, and exterior modifications (see attached letter) . They
will also be requesting a setback variance along Osborne Road
(similar to the one granted by the City to Jerry Farrell) and will
be finalizing the plat process to create a second lot on the
property for an additional free-standing building. They are
requesting a $15, 000 grant and $35, 000 to be financed through a
loan or mortgage. The HRA would also have to create a district for
the parcel, and include it in the redevelopment project area.
They have one tenant already which will comprise 60% of the
building, Pet Food Warehouse; however, their credit rating is not
strong enough to convince the bank to issue a loan. Apparently,
the Pet Food Warehouse company has just opened two brand new
facilities and the operating success from those two facilities is
not documented as of yet.
The current value of the property is about $832,500 which dictates
payment of $40,440 in taxes. The value was reduced from $1, 016, 500
as a result of a tax appeal. If the redevelopment occurs the value
could rise again to $1, 100,000, which would generate $47, 500 in
taxes.
3-A
Redevelopment; CUB Foods Site
March 29, 1991
Page 2
Recommendation
The amount of the request is about 10% of the reconstruction costs.
The grant amount is 3% of the reconstruction costs, and the
remaining 7% ($35, 000) can be financed through a second mortgage.
Although another tax increment district would have to be created,
the HRA would recover its costs through repayment of the loan and
taxes generated from the development.
The petitioner is requesting an indication from the HRA as to
whether a formal application (agreement and escrow deposit) would
be considered. If the HRA does not believe the proposal deserves
further consideration, the petitioner will not submit the
application. Pending the outcome and benefit of an analysis by, our
consultants, the proposed request appears to be a viable
redevelopment project, and warrants further review.
BD:ls
M-91-220
3—B
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•
ROBERT A.GUZY THOMAS L.DONOVAN
3�D PAMELA M.HARRIS
BERNARD E.STEFFENBGS SHARON L.HALL
RICHARD A.MERRILL KENNETH A.AMDAHL
CHARLES M.SEYKORA
ROBERT C.HYNES BEENS NTEIGER T �y1 WILLIAM M.HANSEN
STEPHEN H. Barna Guzy & Steffen, Ltd. JOAN M.THIEMAN
RICHARD A. ) DANIEL D.GANTER,JR.
RONALD B.PETERSON ATTORNEYS AT LAW BEVERLY K.DODGE
JOAN M.QUADE
DARRELL A.JENSEN 400 Northtown Financial Plaza SCOTT M.LEPAK
JEFFREY S.JOHNSON STEVEN L.MACKEY
RUSSELL H.CROWDER 200 Coon Rapids Boulevard OF COUNSEL
JON P.ERICKSON Coon Rapids, MN 55433 PETER BARNA
LAWRENCE R.JOHNSON NANCIE R.THEISSEN
DAVID A.COSSI (612) 780-8500 FAX (612) 780-1777 LAWRENCE M.NAWROCKI
THOMAS P.MALONE PATENT,COPYRIGHT
March 28, 1991 AND TRADEMARK LAW
MICHAEL F.HURLEY
Ms. Barbara Dacy
Fridley Community Development Director
Fridley City Hall
6431 University Avenue N.E.
Fridley, MN 55432
RE: Proposed Tax Increment Financing
Application/250 Osborne Road
Dear Ms. Dacy:
Thank you for taking time out of your busy schedule to meet with
myself and the brokers of the transaction, Bob Grootwassink and
Richard Walquist. As I indicated to you during our discussion, I
represent the fee owners of the property referred to above. The
purpose of this letter is to ask that you informally approach the
Housing and Redevelopment Authority of Fridley to investigate the
possibility of including the property referred to above within a
tax increment financing district. If your response is positive,
the fee owners of the property will make a formal application for
funds from tax increment financing.
To fully understand the complexities of this project, I feel it
is important for you to understand the historical background
behind this property.
The building on the property was originally constructed to house
a grocery store. Cub Foods fka Fairway Foods, Inc. entered into
a long term (30 year) lease for the property in 1968. After
occupying the property for approximately 12 years, Cub Foods
decided to vacate the premises and move their operation to
another site. After they vacated the property Cub Foods
attempted to relet the property. Various small tenants such as
Stone Fabrics, American Furniture Outlet, etc. occupied the
property from time to time. All of these tenants were on a short
term basis. Cub Foods had a below market lease rental. They
felt originally that they could sublet the property for the
remaining term of the 30 year lease, meet their lease obligations
and still make money. However, they were unable to attract any
significant tenants. Cub Foods then attempted to sell the
property as a way of getting out from under the remainder of
their 30 year lease. Of course, any sale of the property would
have to be by and through a purchase agreement with the fee
Columbia Heights Office Anoka Office
3989 Central Avenue NE Anoka Professional Budding
Minneapolis,MN 55421 403 Jackson Street
(612)788-1644 Anoka,MN 55303
(612)427.6300
3-E
March 28, 1991
Page 2
owners of the property agreeing to the sale. Cub Foods was
unsuccessful in locating a purchaser for the property.
In approximately 1987, the fee owners of the property were
approached by a prospective purchaser, Southam Development. In
order to enter into the Purchase Agreement, it was determined
that the fee owners needed to either terminate or buy out the
remaining lease term of Cub. The lease interest of Cub in the
property was ultimately terminated. The purchase agreement with
the Canadian developers (Southam Development) fell through. They
were unable to secure financing. Subsequent to Southam
Development, the sellers entered into a purchase agreement with
JSW Properties. JSW Properties backed out of the purchase
agreement after they were unable to secure their anchor tenant.
Subsequent to JSW Properties, Linville & Associates, Inc. entered
into a purchase agreement with the seller. Linville & Associates
Inc. were unable to secure their anchor and adequate financing.
They canceled their interest in the purchase agreement. All of
the purchase agreements above dealt with some sort of seller
financing in order to get this transaction accomplished. The
purchase price for this property was reduced dramatically to
accomplish a sale. To date, the sellers have been unsuccessful
in entering into and completing any purchase agreement for this
property. In light of today's market, it is the seller's feeling
that the property in its present condition is not saleable.
In light of my client's past experience in trying to sell the
property, it was determined that some action needed to be taken
in order to stop the cash flow drain from the property until the
real estate market recovers. My clients are paying real estate
taxes of $48, 000. 00 plus utilities and other maintenance expenses
without any income of the property. Since we have been unable to
sell the property, the sellers have determined that they need to
lease the property to stop the cash drain and recognize some
return. One anchor tenant, Pet Food Warehouse, has expressed an
interest in leasing approximately 600 of the building space.
However, in order to lease out this space substantial exterior,
heating, air conditioning and tenant improvements must be
completed. My clients estimate that the cost to rehab this
particular parcel will exceed $400, 000.00. I enclose for your
review a copy of a preliminary statement as to costs which will
be incurred by sellers for exterior and interior improvements.
The purpose of this letter is to request that the City of Fridley
Housing and Redevelopment Authority consider tax increment
financing to offset some of the seller's cost for completing
exterior site improvements to the project. As the property
currently stands, there is no tax revenue other than real estate
taxes being generated by this project. An improvement to the
property by way of site renovation and bringing tenants into the
project will generate increased tax dollars and create new jobs
3-F
March 28, 1991
Page 3
and other tax revenue for the City. Therefore, the sellers of
this property would request that the City of Fridley, Housing and
Redevelopment Authority consider the prospect of offering
$50, 000.00 in tax increment financing for this project.
The City has indicated that one of the conditions for site
approval of this project will be the creating of a green space
area between the parking lot and the roadway and revitalizing the
parking lot. By way of background, the property originally did
have green space between the parking lot and the street.
Approximately six or seven years ago the County condemned part of
the property to increase the right of way for the highway. The
County reimbursed my clients approximately $6, 000. 00 - $7,000.00
for the taking. The present cost to create the green space will
be approximately $40, 000.00. The project will also loose parking
area as a result of the creation of the green space. In
addition, we expect the new exterior lighting system for the
project will cost approximately $8, 000.00 and parking lot
improvement project including servicing or striping will cost
approximately $20,000. 00. In addition to these improvements we
expect the exterior facelift of the project including removal and
remodeling of some of the facia of the building and replacing
sidewalks to be approximately $24, 000.00. Therefore, you can see
that the total project cost for just the exterior improvements of
this project to exceed $92, 000.00.
In light of the history of the taking of the green space on this
project, my clients would like to request that the HRA consider a
$15,000.00 grant to go towards the cost of re-establishing the
green area. My clients were paid approximately $7, 000 for the
taking of all of this green area. Now at the request of the
City, they will be required to re-establish this green area. My
clients feel strongly that some costs associated with the
establishment of this green area should be shared by Fridley.
My clients are now going through the process of trying to locate
financing to cover the costs for all improvements to this
project. This is an extremely difficult task. The fee owners of
this property are not wealthy individuals. Their only security
for the property is the project itself. Therefore, the ability
of the bank to finance the total amount of the project
improvements will be questionable. Therefore, my clients would
like to request from the City of Fridley Housing and
Redevelopment Authority, $35, 000. 00 in tax increment financing to
help offset some of the project costs. The structuring of the
repayment of this $35,000.00 should not be an issue as to the
sellers.
This project will enhance both the neighborhood, increase tax
revenues and create jobs for the community. I would therefore
ask that you informally speak to the Housing and Redevelopment
•
3-G -
March 28, 1991
Page 4
Authority to see if the creation of tax increment financing
district for this particular project would be acceptable. If so,
I will commence the application process. For your information I
have included some information regarding the Pet Food Warehouse
who will be the anchor tenant for this project. If you need any
further information regarding this project, please feel free to
contact me.
Sincerely,
Michael F. Hurley
MFH: lj
Enclosures
Realest\Letters\MDacy
3-H
FRIDLEY CUB SITE
PRELIMINARY PRO FORMA
COST ESTIMATES
Building Cost
Demo and remodel exterior and interior bid
Includes outside concrete walk & new
parking lot lights
Al Carr Construction $202, 000
Roof bid for balance of the roof
Bid protective maintenance 28,000
Tenant allowance Pet Food Warehouse 75,000
Tenant allowance balance of building
Estimates 58, 700
Leasing commission x $2 . 00 sq. ft. 68,400
Outside landscaping estimate 20,000
Misc. costs 25,000
Total estimate cost for remodeling
not counting loan closing cost 477 , 100
Annual Income
Pet Food Warehouse 19 ,730 x $5 .50 108,515
Balance of the space 14 ,470 x $5 .50 79,580
Pad site ground lease 25,000
Annual Income - 100% of the space $213,095
Costs needed just for Pet Food Warehouse
Less $100, 000
fl J Community Development Department4
P
HOUSING AND REDEVELOPMENT AUTHORITY
City of Fridley
TO: Housing and Redevelopment Authority Members
FROM: William W. Burns, City Manager4 0.
DATE: March 29, 1991
SUBJECT: HRA Parking Lot Lease
We received the attached letter from a representative of the new
owners of the Fridley Office Plaza. In the letter, they point out
that the Fridley Office Plaza is in arrears by $19,200 on the
amount they owe for use of the parking lot and the municipal
parking ramp.
We have verified that the amount due is accurate. We recommend
that the HRA accept their offer of $10,000 as a settlement for the
past due debt.
Thank you for considering this recommendation.
WWB:rsc
Attachment
4-A
FRIDLEY 4.
OFFICE PLAZA
March 14, 1991
Herrick & Newman P.A.
6401 University Avenue Northeast
Suite 205
Fridley, Minnesota 55432
Attn: Mr. Virgil Herrick
Re: HRA Parking Lot Lease cc: Dr. Michael Park
Dear Mr. Herrick:
This letter will suffice as a follow up to our initial meeting on Monday April 8th, regarding
the parking lot lease at the Fridley Office Plaza. As I stated in our conversation, the former
owner, Jack Brandt, Performance Investments did not perform in paying debts that
amounted to hundreds of thousands of dollars. Therefore the new owner, Dr. Michael
Park, is being requested to work out agreements to settle with past creditors and establish
a creditable response with the vendors.
We understand that deficit of$19,200.00 is owed to the (HRA) City of Fridley. We would
greatly appreciate your responding to the Council on our behalf and offer ten thousand
dollars to settle this debt immediately.
We would also like to keep the lease in force and start monthly payment as of May 1, 1991,
in relation to the present lease that is in effect. It is our intention to maintain a good
standing with the City of Fridley and upgrade the Fridley Office Plaza from its present
condition. Your fullest attention to this letter would be greatly appreciated.
Sincerely,
Columbia Park P4 rtners
j
Z;7‘'/;//-77
Anthon
FRIDLEY OFFICE PLAZA, SUITE 324, 6401 UNIVERSITY AVE. MINNEAPOLIS, MINNESOTA 55432
5
CLAIMS AND EXPENSES
(AT MEETING)
fl / Community Development Department6
HOUSING AND REDEVELOPMENT AUTHORITY
City of Fridley
DATE: March 28, 1991
TO: William Burns, Executive Director of HRA*.
FROM: Barbara Dacy, Community Development Director
SUBJECT: Planning Commission and City Council
Consideration of Fridley Town Square Project
At the March 14, 1991, meeting, the HRA requested copies of the
minutes from the Planning Commission and City Council meetings
regarding the proposal to locate a Burger King and a drive-through
window as part of the Fridley Town Square redevelopment plan. I
have also enclosed copies of the original and recent traffic report
prepared by Barton-Aschman.
We also understand that the developer is still working with his
financiers regarding the project. Because Burger King has declared
bankruptcy, it has apparently slowed down the financing process.
We will keep the HRA apprised of the developer's financial status
as soon as information is made available.
BD: ls
M-91-218
6-A
Casserly Molzahn & Associates, Inc.
215 South 11th Street, Suite 200 • Minneapolis • Minnesota 55403
Office(612)342-2277 • Fax(612)332-4765
MEMORANDUM
TO: City of Fridley
eliam Burns, City Manager
bara Dacy, Planning Coordinator
Virgil Herrick, City Attorney
FROM: James R. Casserly
DATE: March 26, 1991
RE: Fridley Town Square Development
I spoke with Scott Ericson last week regarding the progress of
the Fridley Town Square project. Scott explained that the
underwriters (Miller & Schroeder Financial) have secured
commitments to fund approximately one-half of the project. The
underwriting is going slower than anticipated because of the
bankruptcy of the franchise holder, the Burger King. The
underwriters believe that it is very important to have Burger
King as part of the project. However, it will take some time to
straighten out the transfer of the franchise because the matter
is now in bankruptcy court and the trustee in bankruptcy is
sorting out the various assets. I had spoken previously with an
investment banker from Miller & Schroeder about the funding
problems, and he indicated that this was going slower than
anticipated.
Scott Ericson has indicated he will keep us fully informed as to
the financial commitments and we should expect to hear from him
in the next three weeks.
JRC/db
_f
[ Community Development Department 7
HOUSING AND REDEVELOPMENT AUTHORITY
City of Fridley
DATE: March 28, 1991
TO: William Burns, Executive Director of HRA 1,
FROM: Barbara Dacy, Community Development Director
SUBJECT: Summary of Housing Program Interviews
We interviewed the Cities of Columbia Heights, Edina, South St.
Paul, Brooklyn Center, and the Minneapolis Community Development
Agency regarding their housing programs. Specifically, we wanted
to learn about their housing rehabilitation programs, both single
family and multiple family, their programs for housing
redevelopment, and their programs to maintain and improve housing
quality. Finally, we also inquired as to what level of planning
or what type of planning reports did these communities complete
prior to the implementation of these programs.
Summary of Significant Findings
Attached to this memo is a matrix showing what types of programs
these agencies have and how each of these programs are funded.
Note that we interviewed first ring suburbs, with the exception of
the Minneapolis Community Development Agency, so that a good
comparison could be made with Fridley.
We found that a majority of the cities use community development
block grant funds for single family rehabilitation programs.
(Fridley does participate with Anoka County to a minor extent with
this program now. ) Further, all of these communities use the
Minnesota Housing & Finance Agency funds for the rental
rehabilitation program and, in the case of South St. Paul and the
MCDA, for a first time homebuyer program. Some of these
communities have assisted new construction, either multiple family
or single family and in specific cases own and operate housing
projects. In Columbia Heights and South St. Paul, senior projects
were constructed and are now owned by the HRA. Most of these
communities have also conducted scattered site programs similar to
the City of Fridley's Large Family Home Ownership Program where
vacant lots are purchased and resold to new homebuyers.
Another interesting observation from our interviews is that Dakota
County and Washington County have very active Housing and
Redevelopment Authorities. They also impose a tax levy to sustain
some of their services. These counties are also investigating the
use of essential function bonds where the HRA becomes the owner of
the project.
7-A
Summary of Housing Program Interviews
March 28, 1991
Page 2
These agencies appear to use tax increment financing only to assist
new construction. We found the City of Edina used a unique form
of a second mortgage to finance the housing portion of the
Edinborough project. The intent was to encourage occupancy of the
townhomes by low and moderate income families. The second mortgage
was used to write down the original sale price of those units. The
mortgage was payable to a nonprofit housing agency which ensured
that the units would go to eligible occupants.
Planning Efforts
Unique to our interviews was the City of Brooklyn Center's planning
approach. Maxfield & Associates was hired to analyze the housing
market impact on the community's ability to attract and retain
households. Maxfield also recommended strategies to maintain and
improve the marketability of neighborhoods. The demographic trends
cited by Maxfield are also well documented by the Metropolitan
Council.
The Metropolitan Council has published two reports which all
communities cited as important: "Housing Markets in the Year
2000", and "Looking Ahead at Housing, the Effect of Changing
Demographics on the Twin Cities Area's Housing Market". These
reports indicate that one-third of the housing in a first ring
suburb such as Fridley will be 41-60 years old in the 1990 's.
Since housing units typically begin to show repair when they are
30 years old, maintenance will pose a larger threat to neighborhood
quality. Further, because of the aging of the population, there
are less of the first time renters and first time buyers. Demand
for these types of units will be slower than in previous years.
Lower demand may depress sale prices for some of these homes
causing an increase in the number of lower income residents, young
or single parent families, to purchase these homes. This would
occur as a result of the "filtering" of the housing stock to lower
income households as the housing becomes older and less desirable.
Further, more of the housing stock may shift from an owner
occupancy status to a rental status in order for homeowners to make
house payments.
The Maxfield study for Brooklyn Center addressed these issues as
they relate to that community. The study discussed strategies to
keep the housing competitive in a weakened market for the single
family homes. The study also addressed the rental market and
identified priority areas in the community to focus housing
strategies.
7-B
Summary of Housing Program Interviews
March 28, 1991
Page 3
The Executive Summary of the report has been included in the
packet. We were impressed with the study and recommend the HRA
strongly consider completing such a study before embarking on
housing assistance programs.
Recommendations
As a result of our interviews and our analysis, we have the
following recommendations for the HRA to consider:
1. Conduct a housing study by Maxfield or another reputable
consultant to identify housing markets to maximize or
prioritize and to identify strategies to attack housing
market problems. Further, use the outcome of the study
to match available funding sources to specific areas or
programs.
2. The City of Fridley should make better use of state
(MHFA) , federal (CDBG) , and nonprofit funding sources for
housing programs.
3. Coordinate any HRA housing assistance with city programs
for inspections and any programs for rehabilitation and
housing maintenance inspection programs.
4. After completion of the City's Riverview Heights
acquisition project in the Mississippi River flood plain,
the HRA should recommend to the City Council use of CDBG
monies for a more extensive housing rehabilitation
program, including the institution of a revolving loan
program.
BD:ls
M-91-221
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I Community Development Department8
PLANNING DIVISION
City of Fridley
DATE: March 21, 1991
TO: William Burns, City Manager ( (
FROM: Barbara Dacy, Community Development Director
SUBJECT: Meeting with Simer Pump on Wednesday, March 20,
1991
I met with Dennis Nyhus, Materials Manager, and John Johnson, Plant
Manager, of the Simer Pump company at 5960 Main Street N.E. (they
are just south of the vacant piece of property at 61st Avenue and
Main Street) . You may recall that Jock had met with them in
February and October of 1990 to discuss expansion on-site or
construction of a new building in the Northco Business Park. I met
with them Wednesday to follow-up on their plans (Roger Jensen of
the Anoka County Economic Development Partnership had also
inquired) .
Nyhus and Johnson informed me that the lease for their existing
space on Main Street will expire in 1992. Simer Pump is a division
of the Marlee Pump company, which is located in Kansas City. They
indicated that they are receiving pressure to locate out of state
for a variety of reasons. They met with Representative Wayne
Simoneau regarding the State of Minnesota's wage compensation rates
and the proposed changes to that law. They are upset with the
costs that the wage compensation law imposes. They are also
unhappy with the property tax rates. Finally, new construction
alternatives appear to be cost prohibitive at this point in time.
I advised them that the City of Fridley is in the process of
establishing a business retention program. I advised them that one
possible means to help them stay in Fridley was evaluating the
creation of an economic development district with the Housing &
Redevelopment Authority assisting them in some fashion that is
acceptable under State law. I also told them that if we hear of
any existing vacant building that becomes available in the Fridley
area that we will try and connect them with that possibility.
They indicated they will contact me regarding their decision-making
process.
BD/dn
cc: Jim Casserly
M-91-197
. . _frr
. fl___/ Community Development Department9
HOUSING AND REDEVELOPMENT AUTHORITY
City of Fridley
TO: Housing and Redevelopment Authority Members
FROM: William W. Burns, City Manager 4.4r
DATE: March 29, 1991
SUBJECT: Agreement with Terri Mau
Ms. Terri Mau visited me recently regarding the terms of her lease
at Rice Creek Plaza. Whether it was wise for me to do this, I am
not sure. At any rate, I negotiated the attached agreement with
her. The agreement was subsequently reviewed by Jim Kordiak and
provisions on taxes due were added. Otherwise, Jim felt the terms
I negotiated were good.
We are asking the HRA to consider this agreement informally, and
give it their approval.
Thank you for your consideration.
WWB:rsc
Attachment
The
n n n Kordiak 9-A
n n n ,, Company
rl Real Estate n Property Management n Appraisals n Income Tax Service
March 28, 1991
Terri Mau
Cinnamon Skin Tan
248 Mississippi St. N.E.
Fridley, Minnesota 55432
Dear Terri,
I am advised that you have made arrangements with Bill Burns to pay the
balance due on Cinnamon Skin Tan and T's Hair Plus. I have been asked to
put this agreement in writing for you and the HRA board. If you have any
questions please call, if there are none please sign the original letter and
return it to me for signature by Mr Burns.
You have agreed to:
(A) pay your monthly base rent including CAM charge plus an additional
$ 150.00 per month beginning March 1st, 1991 and continue until June
1 st, 1992.
(B) On June 1st, 1992 a balloon payment for the remaining balance would
be due.
(C) At the time of the balloon, interest would be paid at a rate of 9%
amortized over the term of the loan:
(D) To protect the owners interest it was agreed that you would secure a
Letter of Credit from your bank for $7,891 .63 plus 1991 taxes due and
provide that Letter of Credit to the Fridley HRA. Please deliver that
Letter of Credit me by April 25th and I will forward it.
3948 Central Ave. N.E. Minneapolis, MN 55421
788-9651 788-0911
. i
9-B
r
(E) Your 1991 taxes are due and payable by March 31 st. This agreement
will presume that 1991 taxes will be included with and added to
$7,891.63 balance due. I will notify you shortly regarding what your tax
obligation will be. Your 1992 tax obligation will not be considered as part
of this agreement and will be due and payable as described in your lease.
Please call me if you have any questions regarding this information and I
will be happy to work with you to insure that we have a clear
understanding of this agreement. Please sign and send the original.
Terri your March payment was short according to this agreement. Your
March rent and CAM is $912.21 plus $ 150.00 is $ 1 ,062.21. You have paid
$ 1,000.00. Please forward $62.21 in March to remain current.
Sincerely,
Jim Kordiak
Building Manager
X X
Ms. Terri Mau -Cinnamon Skin Tan Mr. Bill Burns -HRA Director
FINANCE DEPARTMENT 10
Sa
MEMORANDUM
TO: WILLIAM W. BURNS, CITY MANAGER ;h;'`
FROM: RICHARD D. PRIBYL,. FINANCE DIRECTOR
SUBJECT: LIMITS OF LIABILITY
DATE: March 29, 1991
In the last HRA Meeting, Larry Commers commented on the inadequacy of the
$600,000 limit that we have on our liability insurance. Conway Olson has been
the insurance consultant that we've used since 1985 and his role is to provide
to the City different options that are available for our insurance coverage.
Some time ago, there was a conscience decision made, as the insurance rates went
up, to actually not renew the umbrella policy because of its extreme cost and
its diminished coverage of liability. At that point in time, the City embarked
upon a self insurance plan that was to self insure more and more of the risks
associated with various liabilities. We chose to use a liability plan that had
a $50,000 deductible associated with it; thus saving dollars associated with
smaller claims. Also, Council decided not to Utilize an umbrella policy because
of the cost and the diminished coverage that umbrella plans have had. The
decision was based on information provided by Conway on the limits of liability
contained in the Statute of Limitations, as it pertains to units of government.
The statute caps liability for units of government at $600,000, thus the decision
to drop the umbrella at that time. In 1990, the City transferred $1,000,000
into the self insurance fund; in lieu of the umbrella coverage. This seems to
be the prevailing practice that many municipalities have embarked upon in the
Twin Cities area and greater Minnesota. Conway did say that in regard to this
activity, we are in more of a lead role because of our $1,000,000 self insured
umbrella. Many municipalities do not have umbrella policies nor do they have
any kind of self insurance for umbrellas; such as, the city of Fridley has .
It might be time to revisit this issue with the City Council to insure that this
is the policy they want us to continue to follow. As it stands right now, the
additional umbrella policy would cost us in the area of $60,000. The burden of
this would be borne by the General Fund.
To answer the question that Larry raised regarding the inadequacy of the
insurance coverage, Conway feels this is more of a policy issue. The City of
Fridley has made policy based on information Conway has provided as insurance
consultant.
It would appear that if there is a concern regarding the limits of our liability
it should be a topic that is brought up at one of the future conference sessions
with Council.
I have attached information provided by Conway, some time ago, that relates to
the coverages we have.
RDP/me
Attachment(s)
10-A
MEM LI
1 1 183 University Ave.East
St.Paul,MN 55101-2526
League of Minnesota Cities (612)227-5600(FAX:221-0986)
August 3, 1990
Conway Olson
T.C. FIELD
P.O. Box 64016 �• t��
St. Paul, MN 55164 r}"/�
f (IV�
AUGD
Re: Liability limits for municipalities'' C. p
6 1990
•
Dear Mr. Olson: •
° & CO
Today we discussed the possibility of the City of Fridley
being held liable for activities involving private businesses which
are located in a building that has been purchased by the HRA. You
expressed concern that the statutory limits may not apply because
the activity was not "governmental" in nature.
The enclosed case Steven L. Imlay v. City of Lake Crystal,
453 N.W. 2d 326 (Minn. 1990) concerns challenges to the statutory
limits on a city's joint and several liability but the court also
mentions the basic liability limits. I have underlined those
portions of the decision.
Thank you for sending me the information on the landfill in
Oak Grove Township. It will be interesting to see what is going on
there. If you have any other questions, please contact me.
Sincerely,
(AAA
Ellen A. Longfellow
LMCIT Staff Attorney
enclosure
9
II
Tel i 10'B
326 Minn. 453 NORTH WESTERN REPORTER. 2d SERIES
' bility,: He has further joined the Director
•
/ , in recommending his immediate transfer to Steven L. IMLAY, et al.,
disability inactive status pursuant to Rule Petitioners. Appellants.
28(a), Rules on Lawyers Professional Re-
_ •
sponsbility. v•
The court, having been duly advised of CITY OF LAKE CRYSTAL d/b/a Lake
. the relevant facts and circumstances of the Crystal Municipal Liquor Store. et al.•
matter,and taking into consideration a stip• Defendants and Third-Party Plaintiff.,
ulation between the parties NOW OR Respondents,
DERS:
•
1. That the Respondent Steve G. Heik-
ens hereby is transferred to disability inac- Vicki CARVER, Administrator of the
. tive status pursuant to Rule 28(a), Rules on Estate of Virgil H. Miller, Deceased.
Lawyers Professional Responsibility. Third-Party Defendant.
_,. __' 2. That while on such disability inactive
status, the Respondent shall not render State of Minnesota, Intervenor.
_ legal advise or discuss legal matters with No. CX-88-2551.
=" i his former clients.
3. That the Director shall undertake to Supreme Court of Minnesota.
complete a disciplinary investigation relat-
ing to the alleged shortages in Respon- March 30, 1990.
- �- dent's trust account as well as other mat-
_ ;.--
- a . : : ters and that Respondent shall cooperate
= with such investigation to the extent that
Motorcycle accident victims brought
'; he is able. personal injury action against city, in its
• -- '-r;, - 4. That further formal disciplinary pro-
capacity as operator of a liquor store, seek-
-
' �,_ ceedings shall be held in abeyance until ing damages for injuries sustained in a
�-=
• • '= . Respondent is transferred from disability collision with an uninsured, intoxicated
`••,,� , inactive status or until further order of this motorcyclist City filed a third party action
z.r
'-- •-t• '' - - court.
r• ---.4-- • against motorcyclist's estate. The District
; - � 5. That the probable cause hearing pro-
• Court, Blue Earth County, Harvey A. Hol-
t- •• - •. vided for in Rule 9, Rules on Lawyers tan, J., reduced the jury's verdict against
A _ = - Professional Responsibility, relating to any the city, and accident victims appealed.
"0..=' allegations arising out of the
: _ Director's
'` disciplinary investigation, is hereby deemed The Court of Appeals, 444 N.W.2d 594,
= =-`his`
s to be waived. affirmed in part and reversed and remand-
' $ ed on the calculation of interest,and appeal
Q,;�;��,y�' i 6. That the Respondent shall not be was taken. The Supreme Court, Popovich,
'� ` reinstated to the practice of law until after
"i7��- ` -' this court has conducted a hearing provided C•J•, held that: (1)statutory limit on munirr
;.= ter -_
• =�u' � ' for in Rule 28(d) and Rule 18, Rules on ipal joint and several liability was not un�
= '� ' --- constitutional as applied to municipal liquor
�.:-,�,.:: Lawyers Professional Responsibility.
•_- vendors; ;(2) collateral source statute dia
7. That Respondent shall not be rein-' '*- -not violate equal protection clauses of Unit-
��,- � y, - stated pursuant to Rules 18 and 28, Rules ed States and Minnesota Constitutions; (3)
r= on Lawyers Professional Responsibility,
"� ;�
yunti#. ,,
l this court has considered any petition municipality's purchase of liability insurf`
--r-. for disciplinary action filed by the Director ance did not constitute a waiver of limita-
yco as a result of the Director's disciplinary tion on liability provided by statutory limit !
investigation herein. •on municipal joint and several liability;'and
r` ` �-';-''• "(4) uninsured motorist benefits, which were
x�. w
14ti. •_: 0 5«.�o.a�sw,� deductible under collateral source statute
"'='`= T from verdict in favor of motorcycle acci-
dent applied first to obli•
� dent victims, would be
-•
:� 's•-� - t :• wrs,rcyrl, �-,-...�..i.-r V. .-.- .-ya- . _._: .t.- _..._
•
1s�.�i+� twr ..� itr= - 'F •
�..• ••i' .i•• '+1.s: 1 ' -•4L 4 _. Ji r _ .f . . .n .y
... ..
10-C
IMLAY v. CITY OF LAKE CRYSTAL Minn. 327
Cite as 453 N.W2d aii(Mlnn. WM)
ii
_.;
r Ration of uninsured motorist before being payments result from a source plaintiffs .,
deducted from municipal liquor vendor's did not even sue. M.S.A. § 548.36. :�
obligation. 7. Damages �-59 rc i
affirmed in part, and reversed in part, Uninsured motorist benefits, which =_
and remanded. were deductible under collateral source ='y
statute from verdict in favor of motorcycle
accident victims, would be applied first to - -:
1. Constitutional Law <�213.1(2) ;
Under two-part inquiry for determin- obligation of uninsured motorist before be- .-i
deducted from municipal liquor yen- -a =r
u,g whether a statute meets rational basis ing _ - : ,
test,court asks whether challenged legisla- dor's obligation. M.S.A. § 548.36. - 1=
lion has a legitimate purpose and whether S. Interest 4�39(1)
it was reasonable for lawmakers to believe Prevailing party can receive preverdict ;_ —_.
that use of challenged classification would interest only if amount of its offer is closer R
promote that purpose. U.S.C.A. Const to verdict then amount of opposing party's - _ M
Amend. 14. offer. M.S.A. ._§ 549.09, subd. 1(b). -_ _ _
2. Municipal Corporations �723'A 9, Interest �21 --
Statutory on municipal joint and - ',"
S�rutOry Lienhard, which held that preverdict
several several liability was not unconstitutional as interest is subject to limits on compensato- = -
applied to municipal liquor vendors. st state,is limited to mon-
604.02, subd. 1; U.S.CA Const. ry damages again
M.S.A. § etary caps and not applied when only cap is `3=
Amend. 14._ - —~7 ` 1
____ a percentage of fault limit. M.S.A. .-1
c 249(1) §§ 3.736, 604.02, subd. 1. =
3. Constitutional Law "� •• `'Y?
Damages a59 "---. = s
-.:-:ems-
Collateral source statute did not vio- Syllabus by the Court =1�_
late equal protection clauses of United 1 Rational bases exist for both Minn.
States and Minnesota Constitutions. Stat §§ 604.02, subd. 1, and 548.36 (1986) _
14S.M § 548.36; U.S.C.A. Coast Amend. sufficient to withstand an equal protection ;_,-,
ld; M.S.A. Coast Art 1, § 7.
constitutional challenge.
4. Municipal Corporations a723 2. Respondent city did not waive its "'
oint •
and several liability limits _ -% _ .=-`'I
Municipality's purchase of liabilityIn ; statutory j —_ _ �-
surance did not constitute a waiver of limi- by purchasing liability insurance. - -
tation on liability provided by statutory lim 3 Collateral source payments should =N y' t '
•
ycr
it on municipal joint and several liability. not be deducted from appellants'judgment =.;;:?, _f `•
M.S.A. §§ 466.06, 604.02, subd. - against respondent city when subrogation ;icy ', .
5. Damages a59 rights have been asserted to the payments .W, 4e r.„
Uninsured motorist benefits were a and when appellants would have no double -
=s=
collateral source and therefore were de- recovery. ----
ductible from award recovered by motorcy- 4. Pre-verdict interest can be award- '_:o`er=.
ele accident victims from municipal liquor ed when the statutory limit on the judg- . '�::::
vendor where no subrogation rights were ment is a percentage of fault cap. . - --
,ate
asserted against those benefits. M.S.A. �'''' ` '•, ••sat
§ 548.36. .� ter:-_
Mary C. Cade, David J. Moskal, Schwe- __— y.-s
•
6. Damages �59 ff
3; `
Taking collateral sources off top of bel, Goetz & Seiben, Minneapolis, John M.
Ried ,McLean Peterson Law Firm,Manka- - .
jury verdict is justified if there are code- toi.
� for appellants. � •� =-''•
fendants who are liquid, but it is not eq- ----
collateral source payments when there MacKinnon, Arthur, Chapman & McDon- _'r • -.:
would be no double recovery and when ough, Minneapolis, for respondents. = rt
1
w-
1 0-D
328
Minn. 453 NORTH WESTERN REPORTER. 2d SERIES
i
Hubert H. Humphrey, III, P. Kenneth tendon damage to her left knee and ankle,
_ t 1 Kohnstamrii, Atty. General's Office, St. and a left wrist injury.
- iPaul, for intervenor. The Imlays brought a personal injury
4 action against respondent city on January
b
Heard, considered, and decidedy the 21, 1985, under the Minnesota Liquor act.
•
! court en bans. Minn.Stat § 340A.801 et seq. (1986). The
. • I city then brought a third-party action
POPOVICH, Chief Justice.ellants brought a personal injury ac- against Miller's estate. Prior to trial, the
. 1 App Imlays received $703,326.79 in benefits
Appellants
against respondent city, in its capacity from Milwaukee Guardian Insurance, Inc.
J• • as operator of a liquor store, for injuries ("Milwaukee") to compensate them for the
sustained in a collision with an uninsured, fault of the uninsured motorist. Appel-
intoxicated motorcyclist who was served lants also received $192.370.20 for their
. alcoholic beverages by respondent while ob- medical expenses from their health insurer,
viously intoxicated. Respondent city filed State Farm Insurance Company, and S50.-
.-. a third-party action against the motorcy- 000.00 from Tri-State Insurance Company.
clist's estate. The jury found respondent The jury found respondent city illegally
• city 20% at fault and the motorcyclist 80%, sold alcohol to Miller when he was obvious-
_ and returned a verdict for appellants for ly intoxicated, and this illegal sale and Mil-
over $2.2 million. The trial court reduced ler's negligence combined to cause appel
> a -• -: this amount by certain collateral source lants' injuries, with 20% of the fault appor-
__ ' payments appellants received and pursuant tinned to respondent city and 80%to Miller.
-= to a statutory limit on municipal joint and Steven Imlay, who was driving appellants'
_- several liability. A Minnesota Court of Ap- motorcycle, was attributed no fault. The
;=_ peals panel affirmed the constitutionality jury set damages at $1,601,212.00 for Ste
of both the joint liability cap and the collat-
eral source statute and each of their appli- lay, which included damages for pain, dis-
cations, but reversed and remanded on the ability, disfigurement, emotional distress,
calculation of interest. Imlay v. City of medical expenses, property damage, loss of
t"" Lake Crystal, 444 N.W.2d 594, 598-602 earnings, and loss of consortium, to the
(Minn.App.1989). We affirm in part, re- date of trial and thereafter.
;. _• .
verse in part, and remand. In response to numerous post-trial mo-
:.,‘-'-..-,--
` :. lions, the trial court held Minn.Stat.
-- I• § 604.02, subd. 1 (1986), did not violate
.:-
The undisputed facts are that on June 16, equal protection and respondent's purchase
;� 1984, appellants Steven and Theresa Imlay of liability insurance did not waive these
--.z_ sustained serious injuries when their mo- limits on joint and several liability. The
torcycle was struck by an uninsured,intoxi court found all the insurance payments
- ..-•z cated motorcyclist, Virgtl Miller, who constituted collateral sources under Minn.
• ,..; ! crossed into their lane on a rural county Stat. § 548.36 (1986), but only deducted
-----;•-. from the total verdict the $703,326.79 in
�- - � road. Miller, who was killed in the colli-
beveragesby uninsured motorist benefits to which no
-,... . sion, was served alcoholic the
'�=' - City of Lake Crystal, doing business as the subrogation right was asserted. Pursuant
•
+1..�
:', Lake Crystal Municipal Liquor Store, short- to Minn.Stat. § 604.02, subd. 1, the court 7e-
' _ � ly before the collision. assigned respondent city responsibility for
�-: judgment As a re-
Steven Imlay's injuries included amputa- 40% of the remaining
:_• �_• lion of his left leg below the knee, a frac- suit of the collateral source deduction and
-s ' . - tured pelvis, a ruptured spleen, a collapsed the limit on municipal joint and several
,�' lung, and other internal injuries. In addi- liability, appellants were awarded a judg-
Cie' 1.
: - lion, his left arm, left shoulder, and vocal ment of $599,154.08, plus costs, disburse-
cord are paralyzed. Theresa Imlay suf- ments, and interest, against respondent.
= ' • fered a fractured pelvis, soft tissue and The court also found Miller's blood alcohol
=a:_
--- .i-, L ,i r) r t w. J .. • .. Y , .�;1"r.ir.- r ,.v t -h .;-ft
1- .., .,,.. .:_c.t Sr s-.ei .••- .w ,r+•- --, rr 1 t y 1• •t • ,- t
•
•
1 -' e..
INLAY v. CITY OF LAKE CRYSTAL Minn. 329
Cite s453 N.W2d 326(Mtn- 1990)
test results were properly admitted, and man v. Group Health Plan, Inc., 396 .-it
thus respondents motion for a new trial N.W.2d 10, 13 (Minn.1986). It is also pre- -
was denied. sumed "[t]he legislature does not intend to -= >4
After appellants appealed, the attorney violate the constitution." Minn.Stat. -
general's motion to intervene to defend the § 645.17(3) (1988). The parties agree the -._
constitutionality of the challenged statutes rational basis test applies to the challenges __
was
granted. A court of appeals panel under both the federal and state equal pro- w
affirmed the trial court on all grounds, tection clauses. See Bernthal v. City of -J
except it held no pre-verdict interest was
t.iiSt. Paul, 376 N.W.2d 422, 424 (Minn.1985). � '=E
available and thus remanded for calculation We have adopted a two-part inquiry for y
of post-verdict interest; in addition, it up- determining whether a statute meets the == '
held the constitutionality of the collateral rational basis test �`� .d
.c-
source statute. Imlay, 444 N.W.2d at 598- 1. Does the challenged legislation have __ 4
fl?. We granted appellants' petition for a legitimate purpose? and
further review.' 2. Was it reasonable for the lawmakers
to believe that use of the challenged •
II. classification would promote that pun =
Issues Pose? •
I) Whether either Minn.Stat §§ 604.02, Lienhard v. State, 431 N.W.2d 861, 866-67 - ,�_,4 ="-•
subd. 1, or 548.36 (1986) violates the equal (M1nn.1988) (citing Bernthal, 376 N.W.2d
=a=
protection clauses of the United States and at 425).
ti.
Minnesota Constitutions. A. Minn Stat 4 604.02, subd 1 - _
21 Whether a municipality's purchase of =`= -
[2] Appellants argue Minn.Stat •
--. 1 _-
liability insurance constitutes a waiver of § 604.02, subd. 1 (1986), is unconstitutional _;=-a :'3. :
the limitation on liability provided by Minn. as applied to municipal liquor vendors be- = ' -
Sat. § 604.02, subd. 1 (1986). cause no legitimate purpose exists for dis
T=
3) Whether the lower courts properly de- tinguishing between municipal and private -.-
ducted collateral source payments from the vendors in this context. Section 604.02, ~z • -
verdict pursuant to MinnStat § 548.36 subdivision 1 (1986), provides: -F4-i a
(1966). , l•
When two or more persons are jointly ,
4) Whether pre-verdict interest is proper- liable, contributions to awards shall be in _-_ =;,_=> '
ly due appellants from respondent proportion to the percentage of fault at r`
tributable to each, except that each is �-- .'
III. _- ._
jointly and severally liable for the whole =� .;, •`
Ill Appellants challenge the constitu- award. • • • If the state or a municipal- - R �Z
tionalit• of Minn.Stat �'"
y §§ 604.02, subd 1, ity as defined in section 466.01 is jointly �-`: 4 '. �;
and 548.36 1986 arguing A `( ), guing both statutes liable, and its fault is less than 35 per -_ .;s:.„-t- ;
violate the equalprotection clauses of the jointlyand severallyliable for :~ :'�}`� `�S
q cent, it is
United States and Minnesota Constitutions. an amount no greater than twice the mayvegmar-iff.-z
'This court exercises the power to declare amount of fault2 - . '
a statute unconstitutional only when abso- Of the total $2,201,212.00 verdict awarded :_:� •� - T
"llutely necessary," Snyder v. City of Min- to the Imla s, thejury apportioned 20% "'
f -c
'+rapolis, 441 N.W.2d 781, 788 (1989), be- fault to respondent city. After finding _ +,'..
cause statutes are presumed constitutional Minn.Stat § 604.02, subd. 1, constitutional, _--.c-•"' .« '-
until the challenging partyappliedprovision - — -, �g g proves other- the trial court this at the ...,.:.qt ^ *
wise beyond a reasonable doubt. Hick- city's request to cap the city's joint and . '' rttiliNfakz
1• Respondent city has not asked us to review the 2. As appellants point out,the statutory language - ,.*:ice -
court of appeals affirmance of the trial court onquoted b the court of appeals
y panel is the 1988 _._...
the issue of the admission of Miller's blood version and is incorrect,although the difference -` ;�;; ��
alcohol test results. is inconsequential to its decision. Imlay, 444 t-_y-;g-•-
N.W.2d at 597. -= .
v. 1 1; • Ma"•.
10-F
r - 330 Minn• 453 NORTH WESTERN REPORTER. 2d SERIES
- I , j several liability at 40i�= which the court of unmanageable"); Indian Towing Co. t•,
- • ` '• appeals N.W.2d at 598. We concur.'•-panel affirmed. Imlay, 444 United States, 350 U.S. 61, 65, 76 S.Ct.
? 122, 124, 100 L.Ed. 48(1955)(rejecting"the
'
The court of appeals panel held "pro- "non-governmental'-'governmental' qua.
. . ' I tect(ing] municipalities from higher insur- mire"). Because we do not wish to rein- j
' I • ance rates and judgment awards," as well state this troublesome dichotomy, we sim-
as promoting municipal fiscal stability, is ply agree with the court of appeals panel.
section 604.02's legitimate purpose Im The trial court determined another legit-
lay, 444 N.W.2d at 598. The legislative imate •reason for limiting liability is "[go
history suggests such purposes were envi-, allow •municipalities to give the public bet-
.
i sioned when the statute was enacted. E.g•, ter control over the distribution and use of
- Hearing on H.F. 1776, HJud.Comm., 74th potentially dangerous alcoholic beverages.
Minn.Leg., Feb. 25, 1986 (audio tape) (corn- • This limitation allows the municipals=
- • ments of Rep. Olsen); Sen. debate on S.F. �,to meet the limits of this restricted(labs(
2078, 74th Minn.Leg•, March 18, 1986 (au-
-,, ity and still remain in operation in the
dio tape) (comments of Sen. Knack). AP public interest and for the public welfare."
iLf
- _ pellants concede these reasons exist for the While appellants maintain a municipality
r-.__ _
i ___: statute in general, yet maintain such pure sells alcohol for the exclusive purpose of
r ,�_,
poses are legitimate"only where the activi raping a profit, we contrarily notedthat
�~ ty protected is a public service." They
::•- municipal ownership of liquor establish
functioning as a
f}" further assert "[w]henmenu is an outgrowth of the government's
` vendor of intoxicating beverages, a munici• "police power • • • to protect and to pro-
pality is not providing a public service and
�_;,..•,_ mote the public health, safety, morals, and
y�'F �• •' - is no different than a private liquor ven- welfare." Stabs v. City of Tower, 225
. - - dor," soi that not rational basis exists for Minn. 552, 559, 40 N.W.2d 362, 367 (1949)
= ; :' such a distinction regarding joint and sev-
(licensing and bond requirements necessan
eral liability. __ _ • for private ownership held inapplicable to
j Appellants' public service rationale, in
.municipal liquor vendors).
':- _
.�-:�:F-:;• effect, would entail a resurrection of the •
Although appellants did not address the
-'?:- "governmental-proprietary" distinction
�'=-`',= originally created by the judiciary to avoid ; second prong of the rational basis test,
-^�== �=' � the harsh results of sovereign immunity,
both the trial court and the court of ap
• -„ •�+ •_. see Spanel v. Mounds View School Dis- peals panel determined the legislature rea-
trict No. 621, 264 Minn. 279, 292, 118 sonably could have believed limiting the
-, - joint and several liability of municipal but
-' i�'}"- : ' N.W.2d 795, 803 (1962), but later abolished not rivate liquor vendors would serve the
'<- legislature. Minn.Stat. §§ 3.736, P
j subd.the (etas of section 604.02, subdivision 1,
`�; *: ' - 1 (state), and 466.02 (municipalities) purposes
'"`''- appealspanel con-' by shielding municipalities from costly
`, #_ • (1988). The court of awards and unavailable or unaffordable in
`II' ` sidered and rejected this argument,holding
,; �• - "[seection 604.02 was enacted to protect surance. Respondent-intervenor state as-
' n t+'- municipalities from large judgments by serts section 604.02 "is in accord with na-
T placing a cap on their liability.; Making tionwide trends" limiting governmental
$: P g vernmental and pro- tort liability. Respondent city notes tort
-s;'-.•.• distinctions be_ tween go
+t ' reform
•:-- = • 'prietary functions does not further that j states "m duectn has responbeen toptheed in 41
nation l
-_:- purpose." ,Imlay, 444 N.W.2d at 598; see
also Garcia v. San Antonio Metro.
crisis." Thus, our could have believed enacting
islature ,
't.c. sit. Autk, 469 U.S. 528, 545,
105 S.Ct. reasonably
e*:+zir. -iv - 1005, 1015, 83 L.Ed.2d 1016 (1985) ("notion section 604.02, subd. 1, could alleviate the
:*,:f.;: of a 'uniquely' governmental function is insurance crisis facing municipalities. The
.1. -
:'!rj,'•,it, '•r• 3. We question the applicability of joint and sev- dant. Because the parties have proceed su ed on
era( liability under these pleadings because the the assumption tthoat Minn Stat.wever. we § 604 0as2. subd
•
..! imlays did not sue Miller. rather his estate was 1, does apply,
'' •� brought in by the city as a third-party defen-
1
y- .-fine* ^VL'►77r: fr.i. r f ; 1, +-- tom, t
.►a-:44- ;'a-i,fi•••r ♦ ��.=rVY1..'.' .r-✓.A'Lv'. ...r - • _y ,. _•,�:- Yr+".. ,F r:�,
• _ ::Tar-�.�.�'-�R.,'f4p'str�'.r-�': r<s _.. . ...
v
r
•
- _
- IMLAY v. CITY OF LAKE CRYSTAL Minn. S31
Cite se 453 IN.W2d 326(Minn 1990) --'e
•
statute also clearly eases the financial bur- -this constitutional issue in the interests of ,T
dens municipalities experience, as demon- justice. Imlay, 444 N.W.2d at 600. We
stated by the reduction of respondent also address this issue because we have not --.,
from approximately $2.2 mil previouslyruled on the constitutionality of :':' t
city's liability PP Y
(ton to less than $900,000. Minn.Stat. § 548.36. See Minn.R.Civ. - • :-,
W e conclude section 604.02, subdivision App.P. 103.04. • z• ;
1.does not violate equal protection guaran- The common law collateral source rule _ - • ;}
tees under our Bernthal analysis. We also provided that payment for some of the ___� • • 1,
note that modified governmental joint and plaintiffs personal injury costs by a source __,,.t 4'
several liability has been found constitu- other than the defendant could not be used _` _
tional in other states. E.g., Evangelatos V. to reduce the plaintiffs damage award -;: .
Superior Court, 44 Ca1.3d 1188, 1205, 753 against the defendant. Hueper v. Good- •._.{
p 2d J85, 595,246 Cal.Rptr. 629, 639 (1988)• rich, 314 N.W2d 828, 830 (Minn.1982); D. -_-r • _
,analogously, monetary caps-on govern- :Dobbs,Handbook on the Law of Remedies ..F
'rnrntai tort liability have withstood eonsti i§ 8.10, at 581 (1973); Restatement (Sec- • - .. e
";,;tional scrutiny both in this state,Snyder, ond)of Torts§ 920A(1979). This rule was
341 •'�.K"2d at 789 (municipality); Lien- criticized as granting plaintiffs a windfall :4'F - - •-"-... _ _
•
/tcrd 431 N.W.2d at 866 (state), and in or double recovery. E.g., D. Dobbs,supra, �- `
other jurisdictions, e.g., Sambs v. City of at 584; 2 F. Harper dt F. James, The Law -= -
Brookfield, 97 Wis.2d 356, 378, 293 N.W.2d `' ' `�'
of Torts § 25.22, at 1348(1956). Collateral .14
-
5f13, 515 (1980) (municipality), cerL denied, source statutes, such as adopted by Minne- _ •• •-
„n L.S. 1035, 101 S.Ct. 611,66 L.Ed•2d 497 _41
sota in 1986, abrogate a plaintiffs common(1380); Estate of Cargill r. City of Roch law right to be over-compensated and now - -
ester, 119 N.H. 661, 669, 406 A.2d 704, 709
(1979)(municipality),appeal dismissed, 445 prevent double recoveries in many circum
U.S. 921, 100 S.Ct. 1304, 63 L.Ed.2d 754 stances by requiring the deduction from
the verdict of certain benefits received by a
f 19e0). plaintiff. -:
:syeT>>. L :.
B. Minn.Stat § 548.86 With this background, we first examine -•-▪- _-ir=,
whether the challenged statute has a legit - -r `''
13) We next address whether the collat g _ .=�
eral source statute, Minn.Stat. § 548.36 imate purpose. It is generally agreed, as :__z 5. • `-y7,4. _i
(1986),1 violates the equal protection claus- appellants concede,the primary goal of sec- __ ,• .....-•-,"_
es of the United States and Minnesota Con lion 548.36 is to prevent double recoveries _ __
stitutions. Even though this challenge was by plaintiffs,which is a legitimate purpose. ;;
not raised by appellants at the trial court Johnson v. Consolidated Freightways, . _ 7.._" -tz'.:.
level, the court of appeals panel ruled on Inc., 420 N.W.2d 608, 614 (Minn.1988). By :::..•�-,-t,jz
&. MinnStat. § 548.36 (1986) provides, in rele- of fact,and when damages include an award ;- �� -
to compensate theplaintiff for losses avail- - ''t ..
want part: Pe •:tom ,K
Subdivision 1. Definition. For purposes able to the date of the verdict by collateral .•_R- • _ r"
of this section,`collateral sources"means pay- sources,a party may file a motion within tenw ^T_':
menu related to the injury or disability in days of the date of entry of the verdict re- __=— - -
question made to the plaintiff,or on the plain- questing determination of collateral sources _ '.• s_
L' •-�-
tiffs behalf up to the date of the verdict,by or If the motion is filed,the parties shall submit _. . x= z;___
pursuant to: written evidence of,and the court shall deter-
• • • • • • mine: _ .� ,�. .. .
(2) health, accident and sickness, or auto- • ., L
(1) amounts of collateral sources that have
mobile accident insurance or liability insur- been •
paid for the benefit of the plaintiff or are = .. rr+-
ance that provides health benefits or income otherwise available to the plaintiff as a result " •"itr'
disabilitycoverage; except life insurance ben- z~M-
ag P of losses except those for which a subrogation t�
efits available to the plaintiff, whether pur- right has been asserted: - �
chased by the plaintiff or provided by others. • • • • _ ,
payments made pursuant to the United States Subd. 3. Duties of the court. (a)The court --.
Social Security Act. or pension payments; "'
• • • • shall reduce the award by the amounts deter-
Subd. 2. Motion. In a civil action, • • • mined under subdivision 2. clause (1) • • •. -r
when liability' • •is determined by the trier -
=Tti•.
10-H
c 1 i 332 Minn. 453 NORTH WESTERN REPORTER, 2d SERIES
•i ; preventing double recoveries, the collateral 000.00, as authorized by Minn.Stat
r source statute also should reduce tort lia- § 466.06 (1986), which provides:
bility insurance premiums, D. Dobbs, su The governing body of any municipality
_- j pra, at 585, 587, which is one of the pri- may procure insurance against liability
i mary goals of tort reform and a legitimate of the municipality and its officers, em-
objective.=. Johnson v. Farmers Union ployees, and agents for damages result-
Central Exchange, Inc., 414 N.W.2d 425, ing from its torts and those of its off'.
• 431 (Minn.App.1987), pet. for rev. denied cers, employees, and agents, including
• (Minn., Nov. 24, 1987). torts specified in section 466.03 for which
The second prong of the rational basis the municipality is immune from liability-.
- _ test requires us to determine whether it The insurance may provide protection in
was reasonable for lawmakers to believe excess of the limit of liability imposed by
_ _•_ the challenged classification would promote section 466.04. ' ' • The procurement
the statute's legitimate purpose. Lien- of such insurance constitutes a waiver o'
= hard, 431 N.W.2d at 867. Appellants con- the defense of governmental immunity to
== - tend Minn.Stat- § 548.36 fails this prong the extent of the liability stated in the
because its purpose is not furthered when policy but has no effect on the liability of
''- the deductions represent the fault of an
=4� . ..,. the municipality- beyond the coverage so
Cam..._`;_. - uninsured co-tortfeasor while the plaintiff provided.
is not fully compensated. Virtually any
~_ "_"":': Appellants argue the ci 's purchase of ha-
t— _ - plaintiff can contend that he or she would l �'
' % - be better off had a defendant been better bility insurance waived its section 604.02
insured, but such distinctions are necessar joint and several liability limit up to the
�� -ti• _ ily made throughout insurance and tort policy amount The trial court disagreed.
< - : '
law. Appellants also argue that as long as as did the court of appeals panel. Imlay,
�., . .
�':.Y•- :t_ they are not fully compensated it is a wind- 444 N.W.2d at 599. We concur.
L; fall for the tortfeasers. The windfall argu- The court of appeals panel initially held
ment generally is considered baseless, be the section 466.06 waiver provision did not
Wit• : cause diminished liability is not really a
x. even apply to the case, Imlay, 444 N.W.2d
3 '�
windfall, respondent city already has more at 599, based on Minn.Stat § 466.15(1988),
"' - " liability than its proportionate fault, and
._�;:-�s-��° - which provides chapter 466 "do[es] not
fault and cost have little relation to each
�'�' sst ;i�`.•: modify section 340A.801." (Emphasis add-
. other. D. Dobbs, supra, at 586-87.
:„�.;y ed). Section 340A.801 of the Liquor Act,
"' - - In examiningequalprotection challenges
� {w_ under which appellants brought suit,estab-
,.,,�, t _ our focus is on the lawmakers' reasonable lishes a right of action for damages result-
^k ,r belief, which appellants fail to address, not ing from intoxication of a person who was
purposes .1,legdal,flyr,s,old alcohol. The panel's interpre
',•;�.;��;::�.,t - � on whether all the statute's are
full satisfied in everyconceivable scenar
. :�' Y is contrary to the plain meaning of
`' '°' io. Section 548.36 generally does promote " " „ ""•�';;-�7+ mo as "alter, change, limit" or
' the statute's stated purposes—preventing "extend." E.g., Black's Law Dictionary
7" e;r' • double recoveries and lowering municipali 905(5th ed. 1979); Tfebster's New Interns
. .. ty insurance premiums—thus it was rea
tional Dictionary 1577 (2d ed. 1960). Stat-
5: _' sonable for the legislature to believe these
�. utory terms generally should be construed
_ purposes would be promoted. We find according to their plain and ordinary mean
_t = Minn.Stat- § 548.36 constitutional under ing. Minn.Stat. § 645.16 (1988). Thus, or.
-�'_•.• :• the rational basis standard, because the
,fe.-r:i,f,•., its face chapter 466 applies to but does not
a_ :' ,1,: section clearly has legitimate purposes, alter actions brought under the Liquor Act
•+•-••.---• - which the legislature could reasonably have
-"` '- :-r •• believed were being promoted. We have interpreted a municipality's pro-
curement<_- of liability insurance under the
IV. plain meaning of section 466.06 to result in
(4] Respondent city purchased liability a waiver of the defense of governmental
i insurance with a policy limit of $1,300,- immunity to the extent of the policy
.
•
. i• ' +4 t-may ♦r 7 -`,- t '_!". '^-+ rYam
. +-.: ,^X 1- t_-- -• :...- -s;r •
.� n-_ ..7 .4:�stay J.�-�-S. CF•;,---A- - - .i =.'sfJ,; i t,J .�- ,. t;{V - _.�.Y. •Cyz..- : y
t_ <'?:•rr ar• �•' j r.•. - .a ,r Y"i .r a.af- d..
ei;•y . •�t•�.ai: •ors - _ -
10-'
Minn. 333
• Iti1LAY v. CITY OF LAKE CRYSTAL __ ;
Cite as 453 N.W.2d 326(Minn. 1990) --- ykw
See Chabot V. City of Sauk Rap- -ivnmunities conferred under section ..V�
amount 708, 711 (Minn.1988); 466.03.
429_ N.W.2d 1, 1987
[a State, 323 N.W.2d 20,26-27 (Minn. Act of May 27, 1987, ch. 260, § the leg- 'Y
[aid S art however, claims re Minn.Laws 997,998. Importan y,
19`'--) Neither party, Y islature could have but did not include sec- . •
4.
spondent city was immune from liabilit
gather, appellants urge us to extend the tion 604.02 limits in this waiver provision. --j—� i
provision to include a municipality's Indeed, nowhere in either the 1986 version
--
waiver pliability or the 1987 amendment is section 604.02
action 604.02 joint and several lim- while we believe it
support, appellants cite Nelson v. mentioned. Thus, . `
As suppo makes sense that a municipality should not r }�.
e 402 N.W.2d 639, 641-42 (Minn.App. P Y -;~-•--
Xo May 18, be protected from joint and several liability -
ly?71. pet.for rev. denied (Minn., _
where a court of appeals panel stat- when it purchases liability insurance, we =
19b�1, governs waiver T='
"Section 466.06 [1986] g are constrained to reach this result because ?�
that are still of clear statutory language.
of those benefits of immunity
•
whether they constitute total _:_z.
immunity or a limit on liability." The Nel- �
s
son panel reasoned section 466.06 "specifi , _.�'
esllc mentions both section 466.03 immuni A. Collateral Sources _ ; _
[5] In determining whether the trial
tics and 466.04 limits of liability [and con- als anel prop _ - _
chided eeach situation is equally affected court and the court of appe p :a cots
b5 the statute." Id at 642. The panel erly deducted collateral source p Ym
Acre,however,held"by its language,Minn. from the verdict pursuant to Minn.Stat s i. ;�
S:at § 466.06 applies exclusively to waiv § 548.36, we must first determine which {
payments to appellants were collateral
ers of immunities conferred by hiinn.Stat ,. -
i 466.03 (1986)," citing Nelson- Imlay, sources under Minn.Stat § 548.36, subd. 1. _z
the Inlays received $703,- ,_ �=
4;3 N.W.2d at 594 (emphasis added). Prior to trial. .:.••_ ,,;:._
While this interpretation is inconsistent 326.79 in uninsured motorist benefits from .' _
with Nelson, we nevertheless agree respon Milwaukee, $192,370.20 from State Farm, _Y z 's
and $50,000.00 from Tri-State. The trial ;,-�
dent city here did not waive its section ents constituted
604.02 joint and several liability limits by court found all these paym
collateral sources under Minn.Stat _, - -_
procuring insurance. appeals did not �yti� f' \-
nhen the legislature amended section § 548.36,which the court of „__
466.06 in 1987, it specifically distirguished disturb. Imlay, 444 N.W•2d at 600. Ap _-
between section 466.04 limits (monetary pellants do not deny their State Farm and - _rt� i
Tri-State payments are collateral source
caps) that may be waived and section 466: __ _
03 immunities that may not Although the benefits.
198 7 amendment is not directly applicable The parties dispute whether uninsured _�'`
to this case, see Minn.Stat §§ 645.21 (no motorist benefits are a collateral source. ; _
retroactive effect unless clearly intended) Several types of payments to a plaintiff are _
and 645.0t (unless specified, effective date specifically listed as "collateral sources," __ ;;!_
is August 1) (1988), it is illustrative of such as:
legislative intent regarding the waiver pro- _�___ :-`
health, accident and sickness, or automo- _.�r_
vision. The 1987 amendment changed sec .-•:*0 4.�.t
bile accident insurance or liability insur- y
lion 466.06 as follows: ance that provides health benefits or in t=-
The procurement of such insurance con- come disability coverage. _•`-^'•r`
stitutes a waiver of the defease limits of y1g.36, subd. 1(2). Automo- - - ;s
governmental i� liability under Minn.Stat § ;;;_
section 466.04 to the extent of the liabili- bile accident insand uninsured motorearly is covered ist
ty stated in the policy but has no effect the statute Johnson --
on the liability of the municipality beyond benefits are a collateral sour 420 N.W.2d :_
the coverage so provided. Procurement v. Consolidated Freig y
of commercial insurance ' ' ' shall at 614 & n. 2. It is unclear, however,
not constitute a waiver of any of the whether the rest of subdivision 1(2) limits
\ --
i
` 334 Minn. 453 NORTH WESTERN REPORTER, 2d SERIES
_ I ' I
• ' grant the Insurer the full right of subro
automobile insurance or simply lists other
types of collateral sources. Appellants gation, including the right at anytime to
1i
contend the subpart is one type of collat- bring an action in their name, by an
i , eral source and should be read as "automo- attorney of its choice, against the driver
i
bile accident insurance which 'provides or owner of the uninsured motorcycle.
_ health benefits or income disability cover- The Insurer shall pay all costs and ex.
age.'" Conversely,respondent city asserts penses and retain all sums recovered. In
• this subpart names four distinct types of addition, the Insurer will waive any and
• I collateral sources,one of which is "automo- all rights of subrogation arising under
thepolicypursuant to law against
•
__. bile accident insurance." or
Minn.Stat. § 548.36, subd. 1(2), is poorly the City of Lake Crystal or its munin•
i 1 liquor store.
written, ambiguous, and could conceivablyPa
=' be read as providing for one, two, three or (Emphasis added). We feel this language
four different types of collateral source is unambiguous and therefore must be gic-
``-:., t. benefits. Since there are grammatical and en its plain meaning. Carl Bolandrr &
;-•, • analytical problems with each of the possi- Sons Inc. v. United Stockyards Corp.. 09,:.
;;y: bilities,the legislature may wish to reexam- Minn. 428, 433, 215 N.W.2d 473, 476(1974,
r' '= ine this subsection to clarify its intentions. Appellants attempted to introduce testimo-
vial evidence as to the meaning of the
_:-? highlighted sentence and to its and MilK•au-
= _ B. Subrogation Rights hig g
�^; _ ipayments are kee s intent, but where contract language
Y ..' - Although collateral source is unambiguous no parol evidence should
:, to be deducted from a plaintiff's award, be admitted. Klauritter v. Straumann.
== Minn.Stat § 548.36, subd. 2(1), excepts 411 (Minn.1977).
•::-� 255 N.W.2d 407,
`�,� "'Y"''• _ from deduction those benefits for which a
i �` subrogation right has been asserted. See Appellants contend the emphasized sen-
t.- ,:•_ _ . g g
E_ `_,-- Buck v. Schneider, 413 N.W.2d 569,571-72 tence assigns them Milwaukee's subroga-
,•:;' -
`` v (Minn.App.1987) (assertion of subrogation Lion rights against respondent city. Gener
�+4
�Y?',,�;,'�- , right to workers' compensation benefits ally, subrogation rights are either assert-
..
:-,.= -��.,. `� prevents collateral source deduction). Be- ed" or "waived." See Buck, 413 N.W.2d at
' t cause the primary purpose of this statute is 571. Appellants and their insurer used the
tom,,:-;4
�" to prevent double recoveries, no deduction word "waive," which has a clear meaning
4;:.;::tip:
Pik_ _ is allowed where subrogation rights are in these circumstances. In fact, there
"''f " asserted "to ensure that the amount of would be no subrogation right against re-
Li.-T y
::;.., ,FJ collateral sources deducted from the award spondent city—only against the third-party
_. 4 ' ; is the amount to which the plaintiff is actu- defendant—for the uninsured motorist ben-
t ally entitled, and does not include amounts efits because the city was not the unin-
`� plaintiff must ultimately pay over to a sub- sured motorist. Not only do the unambig-
,,
i rogee." Id. at 572. Both Tri-State and uous terms of the settlement agreement
T '
'`. ' State Farm have asserted their subrogation state the subrogation right against respon-
9 )c = rights, thus these payments cannot be de- dent to the uninsured motorist benefits was
' MI5. -._ _ ducted from the verdict as collateral waived, but there would be no subrogation
:
..••Yr right here against respondent city in the
-Y . sources.
•
+ `yw-., first place.
The parties dispute whether subrogation
�yym _
{�.�_._ rights to the uninsured motorist benefits C Method of Deduction of Collateral
- ;.rT;
_�;�;���,�..- were assigned to and asserted by appe- Sources
�4.-I-e lants. Before trial, apellants and Milwau-:mot__.
�-___ z •. kee entered in a settlement agreement and Since we determined only the uninsured
':-=_ -:,- . . release, which provided in part motorist benefits are collateral sources to
`• - - 11. Subrogation Right of Insurer. which no subrogation rights were asserted.
Claimants assign to the Insurer their it is then necessary uo sourcesexaminepayments
when
and if
right of action against the driver or own- these collateralshoul
d
er of the uninsured motorcycle, and be deducted from appellants' re
covery
1
s _ ��:� y
,, t u.�...=-� cY R+.."t3�--tea r -- r• ze7 ''~ ^ z.,Ti
-
'*1. w1fM..,r Rs 1�..-.i�.ca} --Y-N-. .. 1r.a ma�cP+? -•y.;,. •4.s-:n• f. 7u•J�t.`- c••Y•w ti 7-1c xM-, /",,.• • _;r`
rt-, t
4
335 Minn. 10-K -=i
IAfLAY v. CITY OF LAKE CRYSTAL :�
• Clte as4s3 N.W2d 326 (Minn 1990) -s-
.against respondent city. The trial court the uninsured motorist, third-party defen- -= ,
efore being
educted
deducted the uninsuredt' e motorist ore reducing respondent city's obligation.dTak�g collat. _ __
from the total jury verdict bof the jury verdict _ . ,-
40 the judgment against respondent real sources off the top C
to The court of appeals panel affirmed, is justified if there are co-defendants who _
�t�, liquid, butequitable to give a __�
the collateral source should because single defendant theobenefit of collateral _
holding __-
ducted first from the total verdictpayments when there would be no
la)ll defendants in cases with more than source and when the payments
one defendant are entitled to the benefit of double recovery plaintiffs did not _-:.;p
a section 548.36 deductio Imlay, nor even result from
a source A plaintiffs award can be re-
��'?d at 601. Neitherrespondent '`
appellants agree with the method of calcu- duced as required by the collateral source ..s
the trial court and the court statute, and yet this reduction should not _ . .;"
•
lation used by � -
of appeals panel. There is no caselaw con be used to benefit a single liquid defendant -r,. ,
this question, and no language in until it is shown the plaintiff would be
g g In this case, -=Y
either thej collateralseveraleliability n(eetion theuninsured motorist benefits of $703,- _,-
or the joint ands
604.02) statutes indicates to us which de- 326.79 first should be deducted from the - _s. •'�• �`
lied first and from uncompensated portion of the award,which r
eduction should be applin.ed _--� - :-_ r.
what amount this deduction should be pellants' recove over $1.2 ry from all sourcesu to over �=
made. $1.8 million, still less than the E2 2 million k`
Respondent city asserts the total judg- jury verdict We do not believe the legisia =-s�� :
ment of over S2.? million first should be tore would pass a statute that primarily is g '
apportioned pursuant to Minn.Stat. double recoveries, but �Y�
60aimed at eliminating ;.
60 3.02, with 40% to respondent and then applied to reduce awards —then have it =�T
all the uninsured motorist benefits should where there is no possibility of a double �. ;.jam. .
be credited to it This result would leave recovery. See Minn.Stat § 645.17(1)(1988) ___� -
respondent with less than$200,000 of liabil (absurd result). =T� -
rl rejected. Its analogy to _--v
it}' and is properly I applicable '�"�'�- 1-:
no-fault insurance cases is not
since there is no comparative fault by the _- _ _`.
plaintiffs here. In addition, it is ineq- [8,9] Lastly, we address whether pre- _c:•- • :�• s
uitable for one party to receive the entire verdict interest is properly due appellants y•4
benefit of collateral source deduction. If from respondent city. A prevailing party r.� -
Sfiller s estate was not insolvent and had it can receive pre-verdict interest only if the ___;_T 5..-=t,
been sued by appellants, respondent could amount of its offer is closer to the verdict -
not even make the argument that it should than the amount of the opposing party s + _ E,--
receive the entire collateral source deduc- offer. Minn.Stat § y19.09, subd. 1(b) - . .:: ..-
entitled lion, since Miller would be proportionately (1988). •
Respondent city
does not dispute �..
entitled to the collateral source deductions. that appellants, as prevailing parties at to i — __
16.7] Appellants argue the uninsured al, could be entitled to an award under this
''-
motorist benefits should not be deducted section. The trial court awarded appellants
= -
from the judgment against respondent city pre-verdict interest against _
because they would not be getting a double starting January 21, 1985 (the date the _->� t
recovery. We agree with appellants' ap- lawsuit was filed) to June 3, 1988(the date
proach to this issue. Since the primary of the jury verdict), on the sum of $130,- : :.. ',pm-.purpose of section 548.36 is to avoid double 018.65. This amount was reached after -__
recoveries, we feel its application in favor deduction of collateral source benefits all ..• r'�
of respondent city when appellants are un- cated to past damages from the actual past _
dercompensated is not justified. We also damages, and then reduction of that
believe the uninsured motorist benefits amount to 40%. Both partyes contend the _
should be applied first to the obligation of trial court erred in its interest calculation. •_- _
—�� � I , 10 L
' 336 Minn. 453 NORTH WESTERN REPORTER, 2d SERIES 1
The court of appeals panel adopted re- The trial court awarded post-verdict in-
,-, ! spondent's position and, relying on Lien- terest from June 3, 1988, to September 27,
- hard, 431 N.W.2d at 861, which was issued 1988 (the date of entry of judgment).
i after the trial court decision, reversed the Minn.Stat. § 549.09, subd. 1(a) (1988). Lin. i
i award of pre-verdict interest and remanded der Lienhard, because post-verdict interest
for the award of only post-verdict interest is not compensation for the injury but
. ; Imlay, 444 N.W.2d 601. Lienhard held "compensation for the loss of use of mon-
that because pre verdict interest is an ele- ey," it is not subject to statutory limits-
" 1 1 ' : ment of damages awarded to compensate a tions on municipal liability. 431 N.W.2d at
plaintiff, pre-verdict interest is subject to 865-66. Because the trial court's interest
the limits on compensatory damages award did not provide separate figures for
against the State of Minnesota set by Minn. pro and post-verdict interest, the court of
• Stat § 3.736, subd. 4 (1978). 431 N.W.2d appeals panel remanded for apportionment I
s._ = at 865. Since the judgment had already of the post-verdict part of the total interest !
reached the$100,000 statutory cap,pre-ver- award. We hold the trial court's award of f
dict interest could not be assessed when it both pre- and post-verdict interest was
would be an additional compensatory sum proper, however, but must remand for pre-
pushing the state's total liability over the verdict interest on the increased judgment ,
cap. U. against respondent city.
- The question is whether the reasoning of Affirmed in part, reversed in part, and
Lienhard under Minn.Stat § 3.736 is appli- remanded.
i cable to the liability limit set by Minn.Stat
§ 604.02, subd. 1. Appellants contend Li-
`. enhard should not apply because the issue G S UT NUM I[R SYSTEM
was only whether pre-verdict interest was T 44
subject to monetary caps, whereas this
s _ _ i
case involves a percentage of fault limita-
tion.tion. We agree with appellants that Lien-
hard should be limited to monetary caps
and not applied when the only cap is a
,.•_- - percentage of fault limit. If Lienhard Louis BENOIT, Respondent,
were applied to proportionate fault cases v
there might never be pre-verdict interest
awarded because it would push a defen- COMMISSIONER OF
dant's total liability over its proportion of REVENUE, Relator.
- : the verdict. We do not believe the legisla- No. C7-89-69.
ture intended a result that would virtually
eliminate pre-verdict interest in proportion- Supreme Court of Minnesota.
ate fault cases.
' - } The trial court awarded pre-verdict inter March 30, 1990.
r
est, but did so on an amount after applying
the joint and several liability limits and
_ making the collateral source deductions. Principal of corporate taxpayer appeal-
Awarding pre-verdict interest on only re- ed assessment of personal liability against
• spondent city's share of the judgment was him for unpaid sales tax and unpaid with-
correct Minn.Stat § 549.09, subd. 1(b). holding tax. The Tax Court rendered judg-
_ Since we hold the trial court and the court ment for principal, and Commissioner of
of appeals panel were mistaken in making Revenue appealed. The Supreme Court,
the collateral source deduction, we there- Wahl, J., held that (1) principal was an
-c fore must remand to the trial court for the employer, personally liable for unpaid with-
, award of pre-verdict interest against re- holding taxes, and (2) principal was a re-
spondent city for the above period on 40% sponsible person liable for unpaid sales tax-
of the jury's verdict. es.
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o J�1 r - w-i.: , •,..." IR 1 eK ,�'1t;-kich .-r.ct,-�4.4. � wT�'.yy:�SGi-41. .�I e .f_ -,...- j .7,..,•—
10-M
'3 -
163 University Ave.East
St.Paul,MN 55101-2526
League of Minnesota Cities (612)227-5600(FAX:221-0986)
December 1, 1989
To: LICIT member cities.
From: Peter Tritz
Re: New excess liability coverage options
The League of Minnesota Cities Insurance Trust now offers cities
two options in purchasing excess liability coverage:
- LMCIT now makes it possible for cities to obtain excess
coverage without waiving the statutory liability limit of
$600,000 per occurrence. Under this option, the higher
excess coverage limits would be available only for those
claims which are not covered by the statutory limits.
- Alternately, cities may choose to waive the statutory
liability limits to the extent of the excess liability
coverage purchased. Under this option, the higher
coverage limits would be available for all claims,
including claims covered by the statutory liability
limits.
Cost
The city's premium !Or excess coverage will be 15% lower if the
city chooses not to waive the statutory monetary liability
limits. In addition overall rate levels for excess coverage
will be substantially below last year's levels.
Background
LMCIT's basic liability coverage provides limits of $600,000 per
occurrence. LICIT also offers cities the option of an
additional $1 million, $3 million, or $5 million of liability
coverage limits. Since the statutes provide that cities and
city officials and employees can't be held liable for amounts
over $600,000 per occurrence, city officials often ask why it
would ever make sense to buy coverage limits higher than
$600,000. There are four basic kinds of reasons why a city
might choose to buy limits of coverage greater than the
statutory liability limits.
10-N
a
First, the city is exposed to some kinds of liability to which
the statutory limits either don't or might not apply. Some
possible examples are
- liability under the federal civil rights acts
- certain types of liability that the city has assumed
contractually, in an indemnification agreement for example
- liability for actions in another state; e.g. by a city
official attending a conference, or under a mutual aid
agreement with a political subdivision across the border
- liability for a zoning action under an "inverse
condemnation" theory of law
Second, the city may buy higher limits because the underlying
coverage might not cover the full extent of the city's exposure
within the statutory liability limits in all cases. LMCIT
applies a $600,000 aggregate limit to the 'products liability",
the "limited pollution", and the optional "inverse condemnation"
coverages. This is an additional limit, besides the $600,000
per occurrence limit that applies to all liability coverage.
The annual limit is the maximum amount the policy will pay for
this kind of liability, regardless of the number of occurrences.
Thus, if part of the annual limit is used up in one occurrence,
there may not be adequate coverage limits available if there is
a second loss of that type. Excess coverage can help protect
against this risk.
(Annual aggregate limits are very common in conventional
commercial liability policies. Often the aggregate limit
applies to all liability, rather than being restricted to only
certain coverages as LMCIT's is. A similar problem can occur in
policies where defense costs are subject to the policy limit;
with that type of policy and a $600,000 per occurrence limit, if
you spend $50,000 on defense you wouldn't have enough limits to
cover the city's full exposure under the statute. LMCIT does
not apply a limit to defense costs. )
Third, the city may feel that the statutory limits aren't high
enough to provide adequate compensation for very serious
injuries, or for multiple parties. That is, the city might in
effect say "We want to have at least a million dollars (or three
million or five million, etc. ) of coverage available, so that if
we injure someone he won't go uncompensated if his injuries
really do exceed the statutory limits."
Finally, the city might be concerned whether the statutory
liability limits will stand up in court. The statutory
liability limits have been upheld in two recent Minnesota
Supreme Court cases, so this is now less of a concern. However,
it is always difficult to predict the future course of court
decisions.
I
10-0
•
Thus, cities faced a dilemma: The city either had to buy
coverage limits equal to the statutory limits and bear the risk
of a larger claim that the statutory limits don't cover; or the
city could buy additional protection against those claims, but
by doing so expose itself to greater liability in the areas
where the statutory limits do apply, thereby losing the benefit
of those limits.
L1CIT's new approach to excess coverage eliminates that dilemma.
It is now possible for the city, if it wishes, to buy higher
limits of coverage where that protection may be needed, without
automatically waiving the statutory liability limits and losing
their protection where those limits apply.
What must the city do?
All LMCIT quotes for excess coverage will show the premiums for
both options. The decision to waive or not to waive the
statutory limits must be made by motion or resolution of the
city council. A form to show the council's choice is enclosed
with each quote. That form must be completed and returned to
LMCIT.
If the city indicates that it wishes to waive the liability
limits, LMCIT will issue a special endorsement as part of the
coverage document showing that the statutory liability limits
are waived to the extent of the coverage purchased.
• r 11
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• CITY OF FRIDLEY
MEMORANDUM
TO: HRA COMMISSION MEMBERS
FROM: RICHARD D. PRIBYL, FINANCE DIRECTOR
PAUL S. HANSEN, ACCOUNTANT
SUBJECT: SCHOOL REFERENDUM LEVY REFUNDS
DATE: March 28, 1991
This memo is in response to the HRA commission's question at the
March 14, 1991 HRA meeting as to whether or not we could calculate
the payable 1992 referendum levy return amounts by July of 1991
instead of December. Assuming we receive the applicable tax
information from the county in April or May we could have actual
payable 1991 amounts by June of 1991. Therefore, at that time, we
could ESTIMATE payable 1992 return amounts based on the payable
1991 amounts plus a possible increase of 20% (see attached
projections as presented in a previous meeting) . These amounts are
only ESTIMATES and would be affected by delinquent taxes, State
legislation, or any unforeseeable increases or decreases in overall
property values.
This matter will be brought up for discussion at the June, 1991 HRA
meeting. So, in July a timely decision in regards to the
referendum levy return amounts can be given to the School
Districts.
4 i
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