HRA 04/04/1991 - 29620�
CITY OF FRIDLEY
HOIISING & REDEVELOPMENT AIITHORITY MEETING, APRIL 4, 1991
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CALL TO ORDER•
Chairperson Commers called the April 4, 1991, Housing and
Redevelopment Authority meeting to order at 7:30 p.m.
ROLL CALL•
Members Present:
Members Absent:
Others Present:
Larry Commers, Virginia Schnabel,
Duane Prairie, Jim McFarland
John Meyer
William Burns, City Manager
Barbara Dacy, Community Development Director
Rick Pribyl, Finance Director
Paul Hansen, Accountant
Keith DeGross, 10645 Quincy Blvd., Coon Rapids
Jack Kiffe, 318 - 114th Ave. N.W., Coon Rapids
Steve Hardy, 512 North Main, Cambridge
Robert Grootwassinck, Weis Management
Mike Hurley, 200 Northtown Financial Plaza,
Coon Rapids
� Richard Walquist, 534 Continental Drive,
New Brighton
Doug Erickson, Fridley Focus
APPROVAL OF MARCH 14 1991. HOUSING & REDEVELOPMENT AUTHORITY
MINUTES•
MOTION by Ms. Schnabel, seconded by Mr. Prairie, to approve the
March 14, 1991, Housing & Redevelopment Authority minutes as
written.
IIPON A VOICE VOTE, ALL VOTING AYE� CHAIRPER80N COMMER3 DECLARED
THE MOTION CARRIED IINANIMOIISLY.
1. CONSIDERATION OF LEASE AGREEMENT WITH KEITH DEGROSS:
Ms. Dacy stated that Keith DeGross has signed a purchase
agreement with Jack Kiffe of Kiffe Automotive to purchase
his automotive business located at the southwest corner of
University Avenue and Mississippi Street. Mr. DeGross has
indicated that he wants to use this facility for minor auto
repair, oil changes, etc. The proposed lease maintains the
same rental payment as the previous lease with Mr. Kiffe of
$650 per month. The terms of the lease are for one year
from May 1, 1991, to April 30, 1992. The original language
in the previous lease contained a paragraph which stated
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HOIISING & REDEVELOPMENT AIITHORITY MTG., APRIL 4, 1991 PAGE 2
that after the expiration of the one year period, the lease
would revert to a month-to-month arrangement. Staff is
proposing to continue that arrangement.
Ms. Dacy stated the Attorney's office and the Finance office
has alerted staff that because this piece of property is
generating rental income, it should not maintain its tax
exempt status and that a taxable status should be applied to
the property. In so doing, the taxes would become due and
payable in 1992. The City Assessor estimated these taxes at
about $4,015. Typically in a lease arrangement, the tenant
would pay those taxes; however, staff is not proposing that
in this case. It would mean an additional $335 per month,
and staff feels that is prohibitive and that they would be
unable to lease the building. 5taff is recommending the
lease not contain any requirement for the tenant to pay
taxes.
Ms. Dacy stated Mr. DeGross would like permission to install
a pylon sign. Paragraph 18 of the lease refers to wall
signs on the existing building, so the HRA might wish to
discuss whether or not Mr. DeGross should be allowed to put
up a pylon sign. If the HRA gives permission to Mr. DeGross
to install a pylon sign in accordance with the Sign Code,
they might want to include language that it would be Mr.
DeGross' responsibility to install, maintain, and remove the
sign if necessary.
Ms. Dacy stated Mr. DeGross would also like to improve the
exterior of the building and has proposed some minor repair
plans.
Ms. Dacy stated both Mr. Kiffe and Mr. DeGross are in the
audience. She stated staff is recommending approval of the
lease.
Mr. Commers asked what kind of improvements are being
proposed.
Mr. DeGross stated he will be getting a franchise with
Texaco for a Fast Lube station. In order to be able to do
that, Texaco is requiring he strip off the brick facing and
smooth it out, and then Texaco will paint the building.
This will be done at no cost to the HRA.
Mr. Commers asked about the discharge of waste since the
business will include oil changes.
Mr. DeGross stated a drain pan is put under the car and then
,.�, that is dumped into a pipe which goes to an underground
storage tank.
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Mr. Kiffe stated there is a 500 gallon underground storage
tank that was installed when Dr. Ryan moved into the
building.
Mr. DeGross stated there are oil service companies that come
and pump out the storage tanks.
Mr. Commers asked what precipitated the tax exempt status
issue.
Ms. Dacy stated that it was her understanding that the tax
exempt issue came about after the HRA acquired the Rice
Plaza Shopping Center. At that time, the City asked the
question of whether it should be taxable or tax exempt; and
the City Attorney's office rendered the opinion that because
it is an income-generating property, it should be taxable.
Mr. Pribyl stated that based on the issue of the Rice Plaza,
staff did a survey of all the City's properties and which
properties were taxable and which ones were not. Basically,
the Kiffe Automotive site is the only one that is not
taxable.
Mr. Commers asked what HRA expenses have been associated
,� with the Kiffe site, and how does it come out with the HRA
paying taxes out of the $650 per month, leaving them with
$350?
Mr. Pribyl stated the only expenses he is aware of are the
taxes on the property. The old tank was dug up and replaced
with a new tank quite some time ago. The HRA is not paying
any operating expenses at this time.
Ms. Schnabel stated that as far as allowing Mr. DeGross to
have a pylon sign, she would not be concerned as long as the
sign meets code.
Mr. DeGross stated Texaco has a free-standing 4' x 6' "Fast
Lube" plastic illuminated sign. The words "Service Center"
would probably be under "Fast Lube".
Ms. Schnabel stated her only concern is the timing on the
repair to the exterior of the building. She would hope that
it would be done in a timely manner.
Mr. DeGross stated it will probably take less than two
weeks.
Mr. Commers asked about the HRA's liability coverage when
� they own property that is leased to the public. Does the
City's general policy cover any liability?
HOIISING & REDEVELOPMENT AIITHORITY MTG., APRIL 4, 1991 PAGE 4
Mr. Pribyl stated the City's general policy would cover
those businesses that do not have a separate policy. He
believed Mr. DeGross' insurance would be the primary
insurance, and then beyond that, the City's insurance would
step in.
Mr. Hoeft stated that on page 2, paragraph 4, the Agreement
of Lease requires the lessee to maintain comprehensive
public liability insurance for the demised premises during
the term in the minimum amount of $300,000-500,000.
Mr. Commers asked about fire insurance on the building.
Mr. Pribyl stated he is not sure, but he thought they might
not have fire coverage for the building itself since it is
in a redevelopment area. If, in fact, the building did
burn, there is a good possibility they wouldn't rebuild that
particular building. He would tend to think it might be
covered under all property the HRA owns, and it could be
added on; but then the question could be raised: Is it
worth the cost to actually insure the building?
Ms. Dacy stated that page 5, paragraph 13, states that the
IiRA would have the right, but not the obligation, to repair
^ or restore the premises if it is partially or totally
destroyed by fire.
It was the consensus of the HRA to allow Mr. DeGross to put
up a pylon sign as long as the sign meets the Sign Code.
MOTION by Mr. Prairie, seconded by Ms. Schnabel, to approve
the Agreement of Lease By and Between the Housing and
Redevelopment Authority and Keith DeGross.
OPON A VOICE VOTE, ALL VOTING AYE, CHAIRPER80N COMMERS
DECLARED THE MOTION CARRIED IINANIMOIISLY.
2. CONSIDER APPROVAL OF MORTGAGE SATISFACTIONS FOR PRICE AND
HENDRICKSON PROPERTIES �LARGE FAMILY HOME OWNERSHIP
PROGRAM):
MOTION by Mr. McFarland, seconded by Ms. Schnabel, to
approve the Mortgage Satisfaction Agreements for Del Price,
5821 - 3rd Street N.E., and David Hendrickson, 6031 - 3rd
Street N.E. (Large Family Home Ownership Program).
IIPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERB
DECLARED THE MOTION CARRIED IINANIMOIIBLY.
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3. CONSIDER CUB FOODS REDEVELOPMENT PROPOSAL:
Ms. Dacy stated the Cub Foods building has been used
temporarily as a warehouse site and other temporary uses.
The owners have been trying to redevelop the property. This
new proposal utilizes the existing building. Their proposal
is to remove a small portion (approximately 2,500 sq. ft.)
from the front of the building and remodel the interior into
three large tenant spaces, one of which would be for the Pet
Foods Warehouse. The Pet Foods Warehouse would occupy about
60� of the building.
Ms. Dacy stated Mr. Hurley's letter dated March 28, 1991,
explains in detail the problems with trying to obtain
financing on this property. It also details the amount of
expenditures the owners need to do to improve the exterior
of the building as well as to bring the parking lot up to
code. They are also proposing to replace the light
standards.
Ms. Dacy stated the owners want to know whether or not they
should proceed through the formal application process. The
HRA created a TIF application process where the proponents
would deposit a certain amount of money that would be used
,� by the attorney and consultant to evaluate the TIF proposal.
If the HRA feels this is not an appropriate redevelopment
project, the owners need to know that.
Ms. Dacy stated the proposed request is for a$15,000 grant
and $35,000 loan. Staff feels this redevelopment
application does deserve a more intensive look through the
formal application process. The amount is consistent with
the informal guidelines the HRA has used in the past for
redevelopment projects. However, they need to study in more
detail exactly the amount of tax increment that would be
generated from this project.
Ms. Dacy stated this property is not in a tax increment
district nor is the property in a redevelopment project
area; however, it would qualify for those two tests. The
HRA may want to consider e�anding the redevelopment
district to properties across the street.
Mr. Mike Hurley, Barna, Guzy, & Steffen, stated he is the
attorney representing the fee owners of the property. one
of the fee owners, Steve Hardy, is in the audience, along
with Bob Grootwassink and Richard Walquist, brokers, who are
trying to help put the project together.
^ Mr. Hurley stated Cub Foods vacated this building about 6-7
years ago. Since that time, there have been a couple of
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attempts to redevelop the property, but these were
unsuccessful.
Mr. Hurley stated there are three individual owners who are
paying a large amount of utilities and $50,000 in property
taxes on a property that has no tenants. They have come to
the conclusion that there is no way they can sell the
property the way the real estate market is right now, and
they have decided they need to get into the landlord/tenant
business themselves to try to get a tenant in the building
to stop the cash flow problem.
Mr. Hurley stated they were approached by Mr. Grootwassink,
who represents a corporation called Pet Food Warehouse,
which would take approximately 60� of the space. Before
renting out the building, they need to make a lot of repairs
and improvements. The cost to bring this project up to code
is approximately $400,000-500,000. The tenant is not real
strong, and they have not yet been able to lease up the rest
of the space. In order to get the financing to get the
project off the ground, they are asking for assistance from
the HRA to help offset the project costs.
Mr. Hurley stated that when this project is completed, they
^ will have an attractive building, it will create jobs for
the community, and it will increase the tax revenues. He
stated they are willing to work with the HRA on any terms of
repayment of the $35,000 loan.
Mr. Commers asked how this fits into the HRA's overall
costs.
Ms. Dacy stated this proposal is slightly different in that
it is not new construction. Staff took the approximate
reconstruction costs of about $500,000, applied the 10%
ratio, and that equals the $50,000. About 2/3 of the amount
requested can be covered if it is done through a loan.
Another comparison is that the HRA was considering assisting
the RMS Company with about the same amount of money through
a reduction in their special assessments. The value of that
construction was also a lot greater.
Ms. Schnabel stated she would like to see this property
improved and put to good use. She would be supportive of
getting more information to see if things can be worked out.
Mr. Commers stated there seems to be no reason not to give
this proposal more consideration. However, they should be
cautious when they start new districts because of the long
�,,,, time they can be in existence.
HOOSING & REDEVELOPNlENT AIITHORITY MTG., APRIL 4, 1991 PAGE 7
4. CONSIDER REOUEST BY PLAZA OFFICE BUILDING:
Mr. Commers stated the HRA has received a copy of a letter
to Herrick & Newman dated March 14, 1991, from Anthony
Krejci of the Fridley Office Plaza, regarding the proposal
on the lease arrearages owned for the parking lot. The
Fridley Office Plaza owes the HRA $19,200, and is making an
offer of $10,000 to settle this debt immediately. Staff is
recommending the HRA accept the offer of $10,000 as
settlement for the past due debt.
Mr. Commers stated that they should keep in mind that the
HRA did �ake a concession about a year ago to the former
owners of the Fridley Office Plaza to facilitate the sale of
this property. The concession was giving up certain escrow
monies they had for security.
Mr. Prairie stated that the next time they have any
discussions regarding the Fridley Plaza Office Building, it
would be interesting to have a history of the building.
Mr. Commers asked how the City tracks all the tenants/
businesses that owe the HRA money on a monthly basis.
� Mr. Pribyl stated that very soon they will have an accounts
receivable module in the new accounting system that will
actually bill and age all accounts receivable. It will help
with followup billings, delinquent billings, etc. It has
been very difficult in the past with all the different kinds
of arrangements they had in financing and lease payments,
etc., to try to follow the billings and payments.
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Mr. Prairie asked if it would be possible for the HRA to
have something they can look at as far as what money is owed
to them and payments.
Mr. Pribyl stated that on the information that was provided
to the HRA a couple of ineetings ago on the cash flow and
projections, there was a section that actually itemized all
the different kinds of payments the HRA receives. However,
if the HRA wishes to get information on a monthly basis as
far as billings, staff can do that also.
Ms. Schnabel stated the HRA should develop some method of
protection for the HRA that would guarantee them some type
of performance on leases. If this building changes owners
every two years, there is no way the HRA is protected. She
is also thinking about this in terms of the lease agreement
they just approved with Mr. DeGross on the station across
the street.
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HOIISING & REDEVELOPMLNT AIITHORITY MTG., APRIL 4, 1991 PAGE 8
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Mr. Commers stated he is very concerned about the station
also, because every service station has a pollution problem.
Whatever cleanup that is required later will be the HRA's
responsibility, especially now that Mr. DeGross is going
into the lube business, in addition to the car repair
business.
Mr. Commers asked staff to check back in the minutes and see
what they could find about the escrow and what the HRA gave
up for the Fridley Office Plaza. There may be something
staff can do with that information.
Mr. McFarland suggested the HRA accept the $10,000 with the
stipulation that if the Fridley Office Plaza makes the rent
payments on the parking lot and municipal ramp for the next
three years, the HRA will forgive the balance. If the
Fridley Office Plaza does not make the payments, then the
HRA will still have the lien value.
MOTION by Mr. McFarland, seconded by Mr. Prairie, to
authorize staff to accept the $10,000 payment from the
Fridley Office Plaza for the use of the parking lot and
municipal parking ramp, with the counterproposal that if the
Fridley Office Plaza makes the payments for three years, the
HRA will forgive the balance of the debt owed at the end of
the three year period.
IIPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS
DECLARED THE MOTION CARRIED IINANIMOIISLY.
CONSIDER RESOLUTION AUTHORIZING CONDEMNATION ACTION ON THE
DAIRY QUEEAT PROPERTY:
Ms. Dacy stated that Mr. Fitch, owner of the Dairy Queen and
staff have not been able to negotiate a settlement on the
sale of the Dairy Queen site. Mr. Fitch is requesting
compensation, not only for the real estate value, but an
additional payment to compensate for his relocation
elsewhere.
MOTION by Ms. Schnabel, seconded by Mr. Prairie, to
authorize execution and approval of a resolution to acquire
by eminent domain the title to the Dairy Queen property.
IIPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS
DECLARED THE MOTION CARRIED IINANIMOUSLY.
CLAIMS AND EXPENSES:
a. Check Register (2115-2121)
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HOIISING & REDLVELOPMENT AIITHORITY MTG., APRIL 4, 1991 PAGE 9
MOTION by Mr. Prairie, seconded by Ms. Schnabel, to approve
the check register dated April 4, 1991, as presented.
IIPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS
DECLARED THE MOTION CARRIED IINANIMOIISLY.
7. PLANNING COMMISSION CITY COUNCIL. AND TRAFFIC INFORMATION
PERTAINING TO FRIDLEY TOWN SOUARE:
Mr. Commers thanked staff for providing this information.
8. SUNIl�IARY OF HOUSIATG INTERVIEWS:
Ms. Dacy stated as explained in her memo to Mr. Burns dated
March 28, 1991, staff interviewed first ring suburbs in a
similar situation to the City of Fridley: Columbia Heights,
Edina, South St. Paul, and Brooklyn Center. They also
interviewed people from the Minneapolis Community
Development Agency (MCDA). All these communities are
carrying out a varying degree of housing programs, all of
them representing a different point on the scale of
involvement.
Ms. Dacy stated staff asked each community and the MCDA to
� outline all their housing program activities and how those
activities are funded. Included with the memo was a matrix
of the types of programs and funding these agencies have.
Ms. Dacy stated staff asked each community if they had an
example of where they had a commercial area that has been
redeveloped into a housing project (in trying to find a
comparison to Fridley's University Avenue Gateway area).
Unfortunately, none of those communities had any comparables
to the size Fridley is looking at along University Avenue;
however, some of them had unique approaches to housing
issues. Some have taken as much of a risk in housing as
Fridley is looking at in this project area. For example,
Columbia Heights recently participated in the construction
and ownership of a senior housing project, as well as South
St. Paul. Dakota and Washington Counties are looking at the
essential function bond, which means their HRA's will be
part of the ownership of the housing project.
Ms. Dacy stated that all of the communities are utilizing to
a great extent CDBG monies and MFHA. MFHA is used primarily
for first time home buyer programs, where the CDBG monies
are used for rehab programs. To a smaller extent, the City
of Fridley has Anoka County do a single family rehab
program, but it is not as widely used as in other
communities.
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HOIISING & REDEVELOPMENT AIITHORITY MTG., APRIL 4, 1991 PAGE 10
Ms. Dacy stated TIF appeared to be used only for new
construction in a variety of ways: to construct public
improvements or to create second mortgages.
Ms. Dacy stated staff was impressed with Brooklyn Center's
housing study, and included in the HRA packet was the
Executive Summary of Maxfield & Associates' findings for
Brooklyn Center. In essence, the City of Fridley is going
to be competing for the same types of markets Brooklyn
Center's report addresses.
Mr. Dacy stated that as a result of these interviews and
analysis, staff has the following recommendations for the
HRA to consider:
1. Staff would like the HRA to consider allowing staff to
conduct such a study for Fridley, to look at the demand
and supply for housing, the markets available, apply
that to specific areas in the City of Fridley, and have
a consultant make some recommendations as to what would
be appropriate strategy in each part of the community,
and use that as a basis to tie the needs into specific
programs and to gauge how much money they want to put
in a rehab program, new construction, and the basis for
decisions.
2. 5taff believes the City of Fridley should pursue the
use of MFHA and CDBG monies as much as possible.
3. Staff would like to 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 program in the Mississippi River flood
plain, the HRA should recommend to the City Council the
use of CDBG monies for a more extensive housing
rehabilitation program, including the institution of a
revolving loan program.
Ms. Dacy stated staff is asking for discussion and approval
of an RFP to have a consultant do a housing study for the
City of Fridley.
Mr. Commers asked what the City Council's attitude is toward
CDBG funds. At one time, those funds were available to the
HRA, but several years ago, the City Council decided they
wanted to control those funds for the Riverview Heights
project. When is the Riverview Heights project going to be
over, and what does it mean that those funds would be
available to the HRA?
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80IISING & REDEVELOPMENT AIITHORITY MTG.. APRIL 4, 1991 PAGE 11
Ms. Dacy stated that in the last 4-5 years, CDBG funds have
been used to acquire homes in the Riverview Heights area;
and, hopefully, the acquisition of those home will be
completed in 1992. The City receives about $115,000 a year.
It is staff's understanding that the Mayor has e�cpressed an
interest in pursuing additional programming in the housing
area, but the full Council needs to debate the future use of
CDBG funds.
Mr. Commers asked if the City Council would be willing to
participate on a 50/50 basis in a research project of
housing needs.
Mr. Burns stated he believed that with the projected revenue
shortfalls the City is expecting as a result of the current
legislative sessions, the City would be hard pressed to make
an additional expenditure for a housing study at this time.
Mr. McFarland stated the HRA might be better off negotiating
with one consultant, rather than going out for bid and have
to settle for the lowest bid.
Ms. Schnabel stated Brooklyn Center's study was very
interesting, but it seemed to concentrate on rental units as
opposed to single family in terms of rehab situations.
It was the consensus of the HRA that it makes no difference
whether staff negotiates with Maxfield & Associates or goes
out for bid for a consultant to do a housing study; however,
the HRA would like to see the dollar figures before
authorizing the study.
9. MEMO REGARDING MEETING WITH SIMER PUMP:
This was an information item only.
10. TERRI NIAU AGREEMENT:
This was an information item only.
11. MEMO REGARDING ERRORS AND OMISSIONS INSURANCE:
Mr. Pribyl stated with regard to Errors and Omissions, the
coverage is for all five HRA members. The billing is
actually based on two members, the reason being that the
exposure is much less with HRA members.
Mr. Commers stated staff should keep in mind that the HRA is
different from any other city body. They are separately
incorporated as a non-profit as compared to the other City
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HOIISING & REDEVELOPMENT AIITHORITY MTG.. APRIL 4, 1991 PAGE 12
12.
13.
commissions. So, they should make sure the HRA is
specifically spelled out in the insurance coverage.
Mr. Pribyl stated the HRA is addressed specifically in the
$600,000 insurance coverage. The $1,000,000 is a City self-
insured umbrella.
Mr. Commers asked Mr. Pribyl to find out if the HRA is
covered under the $1,000,000 umbrella.
Mr. Pribyl stated that is something that is going to have to
be discussed within the City as to how this would be
extended to the HRA, because that would be a direct
obligation of the City.
Mr. Commers stated that maybe the HRA should set up a
reserve insurance policy. He stated he is concerned about
the HRA's insurance coverage because the HRA deals with
significant properties and significant dollar amounts.
Mr. McFarland stated that at Northeast State Bank, they
passed a resolution that the bank would protect the
directors from any suit. So, the bank bought an insurance
policy to protect the directors. He stated the City should
also protect the HRA as the HRA acts as an agent for the
City and is acting on behalf of the City.
Mr. Commers suggested that staff check to see if there is a
statute for non-profit, public corporations. It might be
something the HRA should consider to help fill the void.
RICE PLAZA UPDATE:
The HRA received the Rice Plaza 1991 Rent update.
MEMO REGARDING TIF TURNBACK AMOUNTS:
Mr. Commers stated that Supt. Dennis Rens had stated in a
previous memo that if the HRA is going to cut or change any
of the turnback amounts for 1993, they should do it by July
1991. The HRA should have this on their agenda for
discussion prior to this July 1991.
Mr. Burns stated staff intends to put this on the agenda for
discussion at the June 1991 HRA meeting.
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HOIIBING & REDEVELOPMENT AIITHORITY MTG., APRIL 4, 1991 PAGE 13
ADJOURNMENT•
MOTION by Ms. Schnabel, seconded by Mr. Prairie,
meeting. Upon a voice vote, Chairperson Commers
motion carried and the April 4, 1991, Housing and
Authority meeting adjourned at 9:35 p.m.
Res ectfully sub itted,
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Ly Saba
Rec rding Secretary
to adjourn the
declared the
Redevelopment
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