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HRA 10/14/1993 - 29565�. � CITY OF FRIDLEY HOIIBING & REDEVELOPMENT AIITHORITY MEETINd� OCTOBER 14i 1993 _________________________________________________________________ CALL TO ORDER: Chairperson Commers called the October 14, 1993, Redevelopment Authority minutes to order at 7:30 p.m. ROLL CALL• Members Present: Members Absent: Housing & Larry Commers, Virginia Schnabel, John Meyer, Duane Prairie Jim McFarland Others Present: Barbara Dacy, Community Development Director Grant Fernelius, Housing Coordinator Craig Ellestad, Accountant � Jim Casserly, Consultant Dr. Spencer Johnson, Columbia Park Properties Matthew Karl, Frauenshuh Management Co. Douglas Mayo, Westminster Corporation Deborah Gustafson, Bridgewater Financial Group APPROVAL OF SEPTEMBER 9 1993, HOUSING & REDEVELOPMENT AUTHORITY MINUTE5• MOTION by Mr. Prairie, seconded by Ms. Schnabel, to approve the September 9, 1993, Housing & Redevelopment Authority minutes with the following correction on page 2, paragraph 5, middle of page: change "Moon Plaza" to "Rice Plaza". IIPON A VOICE VOTB, ALL VOTING AYE, CHAIRPERBON COMMERS DECLARED THE MOTION CARRIED AND THE MINIITEB APPROVED AS AMLNDED. 1. TABLED: CONSIDER RESOLUTION AUTHORIZING A MODIFICATION TO THE REDEVELOPMENT PLAN, ECO FINISHING, INC.: MOTION by Ms. Schnabel, seconded by Mr. Prairie, to remove this item from the table. IIPON A VOICE VOTE� ALL VOTING AYE, CHAIRPTRSON COpII+�ERB DECLARED THE MOTIOAT CARRIED IINANIMOIISLY. Ms. Dacy stated that at the last meeting, the HRA tabled this item until the City Council conducted a public hearing on the amendment to the redevelopment plan and determined whether or not the Council wanted to create a tax increment district for ECO Finishing. The Council ultimately decided they did not want to establish a tax ^ 80II8INa & REDBVELOPMENT AIITHORITY MTG.. OCT. 14, 1993 - PAGE 2 increment district; however, they did add the parcel into the redevelopment project area. Ms. Dacy stated it would be in order for the HRA to pass a similar resolution if the HRA approves of the modification of the redevelopment plan. Secondly, staff is asking the HRA to consider providing ECO Finishing with a$125,000 loan. Ms. Dacy stated that on page 1.6 of the agenda was Mr. Casserly's proposed amortization schedule on the loan that would be spread over six years. At a 5� interest rate, the first two years with principal and interest would be deferred. The HRA would gain approximately $22,354 in interest, and the loan would be repaid at the end of six years. Ms. Dacy stated that regarding the creation of a tax increment district, the Council was very concerned about the new state law which would subtract local government aid and HACA from the community if a tax increment district is created. However, by adding the parcel into the redevelopment project area, assistance is still provided to ECO Finishing, and the HRA does recoup its funds plus interest on the loan. Ms. Dacy stated that Deborah Gustafson of Bridgewater Financial � Group is at the meeting on behalf of ECO Finishing, Inc. Ms. Gustafson put together the SBA financing for the project. Ms. Gustafson stated ECO Finishing is planning to construct a 29,000 sq. ft. building in Fridley. In addition to the building, there will be $1.5 million in new equipment costs. ECO Finishing is making a substantial investment into this project, and this project will create 30 new jobs for Fridley. MOTION by Mr. Meyer, seconded by Ms. Schnabel, to approve Resolution No. HRA 9- 1993, "A Resolution Modifying the Redevelop- ment Plan for Redevelopment Project No. 1 to Reflect Increased Project Costs and Increased Geographic Area within Redevelopment Project No. 1 and Modifying the Tax IMCrement Financing Plans for Tax Increment Financing Districts No. 1 through No. 12 to Reflect Increased Project Costs and Increased Geographic Area within Redevelopment Project No. 1". UPON A VOICE VOTE, ALI, VOTING AYE, CBAIRPER80N CONIIKERB DECLARED T8E MOTION CARRIED IINANIMOIIBLY. Mr. Commers thanked Ms. Gustafson for coming to the meeting. He stated the HRA hopes this is a very successful project for ECO Finishing. Mr. Casserly stated the development contract has been prepared and �"� will be brought back to the HRA for approval at the ATovember meeting. n � �� HOIIBINd � R1�DEVELOPMENT AIITHORITY MTG., OCT. 14, 1993 - PAGE__3 2. CONSIDER AGREEMENT, FRIDLEY PLAZA OFFICE BUILDING PARKING: Mr. Commers stated that at the last meeting, the HRA members had some questions regarding the leasehold agreement. Staff has addressed those questions in a memo from Barbara Dacy dated October 7, 1993. Staff is recommending the HRA pass a motion approving the "Amended and Restated Leasehold Agreement" for the Fridley Plaza Office Building parking lot. 0�+�[ TION by Ms. Schnabel, seconded by Mr. Prairie, to approve the "Amended and Restated Leasehold Agreement" for the Fridley Plaza Office Building parking lot. IIPON A VOICE VOTE � ALL VOTING AYE, CSAIRPSRSON COMMERB DECLARED T8E MOTION CARRIED IINANIMOIISLY. 3. CONSIDER REOUEST FOR TIF ASSISTANCE WESTMINSTER CORPORATIOPT: Ms. Dacy stated that four years ago, a similar, but different, request by Westminster was evaluated by the City. At that time, Westminster was proposing a market rate project. For a variety of reasons, Westminster did not pursue i�hat project. Now, Westminster has submitted an application to the Department of Housing & Urban Development and has received approval for a"capital grant" to construct a 51-unit, low income, elderly apartment project just north of St. William's Church on 5th Street. Ms. Dacy stated that in February and March 1993, Westminster received the required land use approvals from the Planning Commission and City Council for the project. Westminster is now requesting $82,000 in tax increment assistance for the project. The purpose for the assistance is for land writedown and site preparation. Staff has suggested to the HRA and to the petitioner that the assistance be provided through "pay-as-you-go". The parcel is already in Tax Increment District No. 1, so there is no need to create a new district. The $82,000 is well within the recommended guidelines for a"pay-as-you-go" project. It is about 3% of the project cost which is around $2.5 million. The assistance would be paid back in about 3 1/2 years. Ms. Dacy stated staff is recommendirsg that the HRA authorize staff to continue to the development contract stage with Westminster Corporation to prepare a development agreement for HRA approval at a future meeting. Mr. Doug Mayo, Westminster Corporation, stated that since last spring, the project has gone through some minor revisions and design changes. The project is for a three story, 51-unit building designed to house senior citizens. Fifty of the units will be one bedroom units for seniors on rental assistance. One unit without rental assistance will be a two bedroom unit for the caretaker. � HOIISINa � REDEVEIAPMENT AIITHORITY MTa., OCT. 14. 1993 - PAaE 4 Mr. Mayo stated this was a senior citizen project submitted to HUD several years ago. Westminster obtained a reservation of funds, and they have been working through the development process since then. They are now working on submitting an application for HUD's firm commitment. They hope to have some fina numbers in a couple of weeks and submit their application to HUD by mid-November so they will probably get their commitment from HUD in January 1994, with construction starting in mid to early April. Mr. Mayo stated the building will have a community room for use by the tenants. There will be lounges on the second floor and third floor. Westminster runs a strong resident service program for its tenants, and there will be a resident service advisor assigned to the project to assist the tenants in running programs. Mr. Commers asked if there is any loss to the City. Mr. Casserly stated, no, this project will have a substantial contribution to the development program. Mr. Meyer asked if there will be any type of resident prescreening program. He stated the City is embarking on a number of ways to start upgrading their housing stock. Many other communities are finding that a prescreening process for prospective tenants helps '�� prevent huge amounts of damage and deterioration to rental units. Mr. Mayo stated that in his experience with their elderly housing projects, they do not have any problem with seniors. Seniors treat the property very well. Typically, senior citizen projects are very low maintenance because there is literally no damage to the units. Ms. Schnabel asked if tenants will come from the Fridley area, or will they come from all over the metropolitan area? Mr. Mayo stated that there is the potential for tenants to come from all over the metropolitan area: When the elderly leave their homes or environment, they do not like to move very far away, so he would expect that most of the tenants will come from Fridley or communities immediately surrounding Fridley. However, this is a �federally assisted project so it has to be open to anyone who is income eligible in the metropolitan area. Mr. Commers asked the square footage of the units. Mr. Mayo stated each unit is 540 square feet. Mr. Commers asked what the typical market rate rental would be? � Mr. Mayo stated that $265 per unit per month is needed to cover operating expenses for each unit on an annual basis. The market HOIIBING & REDEVELOPMENT AIITHORITY MTG., OCT. 14. 1993 - PAG$_5 n - rate rent would be around $500-600 per unit per month, but that is not a factor, because the tenants will only pay 30� of their adjusted gross income. Typically, residents pay about $150 per month, some higher, some lower. In some cases, rental assistance is 100�. Mr. Commers stated he is very familiar with this project. In the early 1970's, he chaired a committee at St. William's to try to do this same kind of project, but they were unable to do so. He is very glad to see this project, and he fully supports it. He believed this project is responsive to some of the issues that have been raised as far as housing for the elderly in the City of Fridley. It is very difficult for churches to do these kinds of projects on their own, and they need a corporation like Westminster to construct and manage these projects. Mr. Meyer stated that in looking at the elevation, it looks like an ugly building. Mr. Mayo stated there are several things HUD will not pay for. One of the reasons they are asking for TIF funds is for some design changes that Westminster would like and the City would like that will enhance the appearance of the building and make it more attractive. � Ms. Dacy stated that when Westminster went through the process in -6 February/March 1993, the Planning Commission and City Council studied the elevations of the building at great length. Attached to the approval of the special use permit was a stipulation that the exterior of the building would be constructed of brick. At that time, Westminster indicated that brick was expensive and that HUD may or may not approve a brick exterior. However, the City wanted to send the message. to HUD, via the special use permit, that the City preferred brick as the predominant material in the downtown Fridley area. If HUD did not approve the brick exterior, then the Planning Commission and City Council reviewed another plan for a combination of rock face block along the bottom with aluminum siding and brick accents. The design changes referred to by Mr. Mayo, the roof and chimney accents, will help to improve the design. MOTION by Mr. Prairie, seconded by Ms. Schnabel, to approve in concept the request for tax increment assistance in the amount of $82,000 by Westminster Corporation and to authorize staff to prepare a development contract for final HRA approval. IIPON A VOICE VOTE, CO1rII�iERB AHBTAINING, CHAIRPLR80N COMMERB DECLARED T8E MOTION CARRIED. 4. REVIEW SCATTERED SITE ACQUISITION POLICY AND AUTHORIZE /� AC UISITION NEGOTIATIONS FOR 560 HUGO STREET N.E.: HOIISIN� & REDEVELOPMENT AIITHORITY MTG., OCT. 14, 1993 - PAGE 6 � - Mr. Fernelius stated that at the October HRA meeting, staff proposed a recommendation to divide the pool of funds for the Scattered Site Acquisition Program in half. Fifty percent of those funds would be allocated to the general acquisition of blighted properties, and the other 50�5 would be allocated to properties which staff has identified, through the Housing Rehab Program, as properties that could not be repaired because they are in such a deteriorated condition. Since that time, staff has identified several properties they would recommend to acquire for each pool of funds. /"`� Pool A2 Housinq Rebab Proqram Mr. Fernelius stated there are two properties which were identified, through the prescreening process and inspections, as substandard and in such poor condition that rehab is not feasible, at least finan�ially. Staff prioritized one of those properties over the other. Mr. Fernelius stated of�e of those properties is 100 Charles Street on the corner of East River Road and Charles Street. It is a 105 foot wide by 200 feet deep lot which consists of one single story, single family structure of about 572 square feet and a deteriorated garage. There are a number of apartment buildings located in the general vicinity of this particular site. The house is occupied. The inspector indicated there are a number of deficiencies with this property, including a bad electrical system, plumbing system, deteriorated windows and doors, and deteriorated flooring. Mr. Fernelius stated the other property which staff identified as a higher priority to acquire is 560 Hugo Street N.E. This property has a history of problems which include exterior maintenance of the building, noxious weeds, and outside storage of junk and other debris. An addition which was originally constructed in 1976 is still unfinished. There are other electrical and plumbing violations that exist, as well as an inadequate heating system. Mr. Fernelius stated that in 1992, the owner of 560 Hugo Street applied to Anoka County for housing rehab assistance and was denied. ACCAP was the agency administering the program at that time, and their inspector made a similar assessment of the property. At that time, the City's building inspector inspected the property and said it was in pretty bad shape. Mr. Fernelius stated the property at 560 Hugo Street has an estimated market value of $38,896. The property consists of two 25 ft. by 110 ft. lots for a total of 5,550 square feet. Under the current City code, this is an unbuildable lot without a variance. In light of these facts, staff feels the only option would be to begin negotiations with the owner for voluntary � acquisition. HOIIBINa b REDEVELOPMENT ADTHORITY MTG., OCT. 14. 1993 - PAGE 7 � Mr. Fernelius stated there is a property immediately to the east which appears to be abandoned. There is the possibility of acquiring that property with funds under the same program in the future and combine the properties for a buildable lot. Ms. Schnabel stated acquiring 560 Hugo Street would certainly be a start in improving the neighborhood, with the hope that they can also acquire the adjacent property. Mr. Commers stated maybe they should do the abandoned site acquisition on the property next to 560 Hugo Street instead of acquiring the property at 513 Fairmont Street N.E. which is being recommended for acquisition under the General Acquisition Program. They need to have some strategy with these programs. Mr. Fernelius stated that is a possibility, but 513 Fairmont is a high priority also. Ms. Dacy stated they will find out if the property is abandoned and the selling price. Pool B: General Acquisition Program Mr. Fernelius stated this pool of money will be used to acquire � abandoned, substandard, and/or vacant properties which are considered blighting influences. He stated staff started with a list of all residential properties (131) with an estimated market value of $50,000 or less. Staff then separated out those properties (13) which had previously been classified in a windshield survey in February 1993 as one or two level priorities (13 properties). They focused on level one priorities (5 properties). Two of those properties (l00 Charles Street and 560 Hugo) left three properties to consider. Mr. Fernelius stated staff used a Scattered Site Acquisition worksheet which evaluated properties on a number of criteria which included whether or not the property was located in a target neighborhood (Riverview Heights or Hyde Park), the size of the lot, cost involved, and in an at risk location. After that assessment, staff prioritized the remaining three properties as follows: 513 Fairmont (the highest pri.ority for acquisition), 8280 East River Road, and 1632 Rice Creek Road. Mr. Fernelius stated 513 Fairmont Street is another property that is unbuildable under current code without a variance. The size of the lot is 50 ft. by 110 ft. The house has been vacant since July 1992 and staff has received numerous complaints from surrounding neighbors. The Public Works Department had to secure the building because kids had broken the windows and were getting into the house. � 80II8IN� & RED$VELOPMENT AIITHORITY MTG.. OCT. 14, 1993 - PAG� 8 ,� Mr. Fernelius stated that regarding 8280 East River Road and 1632 Rice Creek Road, staff is recommending that the City initiate negotiations with these property owners to see if they are interested in selling their homes on a voluntary basis in order to avoid relocation costs. If they are interested, then staff would get appraisals on the properties and come back to the HRA at a future meeting for approval to make formal offers. Ms. Schnabel stated that the first thing staff should do before contacting the property owners is to find out if there are any outstanding debts or liens against these properties. Mr. Commers stated that if 513 Fairmont is abandoned and in foreclosure, the City should be careful and should probably get a legal opinion on how to best go about acquiring the property. Ms. Dacy stated there are a couple of neighbors who might be interested in purchasing the property at 513 Fairmont. Ms. Schnabel asked if these neighbors would be interested in purchasing this property on their own without City involvement when they know it is available. Ms. Dacy stated that is possible. � Mr. Commers stated he believed it is the consensus of the HRA members to approve the concept of acquiring these properties, subject to staff obtaining more information on the financial aspects of these properties before making any offers. Ms. Dacy asked if the HRA would like staff to investigate the status of the property next to 560 Hugo Street N.E. Mr. Commers stated, yes, staff should do that. 5. LAKE POINTE MARKETING STATUS: Ms. Dacy stated the proposal submitted by Busch & Partners, Inc., was the lowest cost proposal of the three proposals reviewed by Mayor Nee, Mr. Burns, Mr. Commers, Mr. Casserly, and herself. Staff believes that Busch & Partners is the best qualified advertising firm to assist the City in advertising and marketing of Lake Pointe. Busch & Partners is proposing a combination of a number of advertising and marketing tools. They divided the proposal into phases. In the first phase, they will identify the prospects, work on the Lake Pointe image, and write a series of marketing materials. They are also looking at some on-site signage. In the second phase, they will continue the advertising effort. They are suggesting an editorial in the Minnesota Real Estate Journal and more bi-monthly direct mail campaigns, more � participation in real estate exhibits, and a number of activities � � HOIISINa � REDEVELOPMENT AIITHORITY MTG.. OCT. 14. 1993 - PAGE 9 to present this site and market this site in the development community. Ms. Dacy stated the small subcommittee who reviewed the proposal is recommending that the HRA authorize staff to execute a contract with Busch & Partners, Inc., for $37,500. This is well within the budget guidelines developed by the HRA in the 1993 budget. Thirty thousand dollars were allocated for advertising, and $30,000 were allocated for a marketing consultant. MOTION by Ms. Schnabel, seconded by Mr. Meyer, to authorize staff to execute a contract with Busch & Partners, Inc., for advertising and marketing the Lake Pointe site at a cost not to exceed $37,500. IIPON A VOICE VOTL, ALI� VOTING AYE, CHAIRPER80N COI�Il►SERB DECLARED THE MOTION CARRIED IINANIMOIIBLY. 6. CLAIMS AND EXPENSES: Mr. Ellestad added the following checks to the check register: #2046 #2047 #2048 #2049 #2050 #2051 #2052 #2053 - ICMA (retirement) - David J. Anderson (aerial photo of Lake Pointe) - Barna, Guzy & Steffen (Sept. legal services) - Briggs & Morgan (legal work) - Casserly (Sept. legal expense) - Isaacson Lawn Care (Lake Pointe maintenance) - Minnegasco (Rice Creek Plaza utilities) - Richfield Bank and Trust (Greenmasters) Ms. Dacy stated that staff has been working with Fay Wegner for the last year and a half. She has provided excellent consulting advise on how to establish the housing programs, specifically the Housing Mortgage Assistance Program. Ms. Dacy stated the HRA members have never formally discussed a fee for Ms. Wegner's consulting services. She wanted the HRA members to be aware that Ms. Wegner will be soon be submitting an invoice in the amount of $7,000. She stated the HRA budget does include an allocation of $28,000 for Professional Services, so there are funds available to pay for these services. She stated Mr. Burns has reviewed and approved Ms. Wegner's request. Mr. Commers stated that the HRA should have been made aware of this sooner. They are being asked to approve an expenditure that is after the fact, and that is not right. Ms. Dacy stated she did not disagree with Mr. Commers. However, on several occasions, staff asked Ms. Wegner to provide the HRA with an hourly rate, a contract, or a quote, and she did not do ;�, that. Ms. Dacy stated this is an unusual situation, and it is not �. the way staff usually operates. `�'� HOIIBINa b REDEVELOPMENT AIITHORITY MTa.. OCT. 14. 1993 - PAaE 10 MOTION by Mr. Prairie, seconded by Ms. Schnabel, to approve the check register, checks #2419-2453. IIPON A VOICE VOTL � ALL VOTING AYE, CHAIRPERSON COMMERB DECLARED THE MOTION CARRIED IINANIMOIIBLY. 7. RICE PLAZA UPDATE: Mr. Commers stated this is an information item only. Apparently, the two remaining tenants, STS Temporary and Hong Rong Ritchen, have found new locations. STS Temporary will be out by November 1 and Hong Kong ICitchen will be out by the middle of December. 8. UPDATE ON SALES TAX IMPACT: Mr. Commers stated that at the last meeting, he had questioned whether or not the City had to pay sales tax for the full contract amount for Isaacson Lawn Care (Lake Pointe maintenance) or only for the unpaid balance of the contract. In a memo dated October 5, 1993, Mr. Ellestad states that the sales tax is due on the entire amount of the contract. 9. DISCUSS OPTION PROPERTIES AT LAKE POINTE: � Mr. Commers stated that regarding Lake Pointe, the HRA members had received a copy of a memo dated October 4, 1993, from Jim Casserly stating that he has been informed by Tom Threlkeld of Bayport Properties, who is representing BBMI in its search for a location for a new medical facility, that even though the Fridley Lake Pointe site was attractive, BBMI has decided to select the City of Plymouth where BBMI is currently located. Mr. Casserly stated that as a result of these discussions, he is putting together an analysis which shows what kind of density is needed at Lake Pointe to recover the HRA's investment in the project. Mr. Commers stated that regarding the option properties at Lake Pointe, at the last meeting, the HRA had asked staff to contact Ms. Sadie Gunderson and Mr. David Hedman to see if they were willing to extend the options on their properties for one more year. Any development of the Lake Pointe property will require the HRA to acquire the Hedman property. Mr. Commers stated that according to Ms. Dacy's memo dated October 7, 1993, Mr. Hedman is very anxious to sell his property and move. He is not interested in extending the option for one more year. Ms. Gunderson is willing to extend the option for one more year. �"� Mr. Commers stated that if the HRA is going to spend a lot of money marketing the Lake Pointe site to attract a development within the ^ HOIIBING & RTDLVELOPMENT AIITHORITY MTG., OCT. 14. 1993 - PAGT 11 next two years, it might make sense to acquire the Hedman now in a voluntary type of setting. On the other hand, he did not like to see them take that property and hold it when they do not have a development proposal. But, it is also not a very good situation if Mr. Hedman sells the property and then the HRA has to take the property from the new owners in two years. MOTION by Mr. Prairie, seconded by Ms. Schnabel, to authorize staff to begin negotiations for the purchase of the Hedman property and to authorize staff to obtain a one year option on the Gunderson property at a cost of $500. IIPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COl�lERB DECLARED THE MOTION CARRIED IINANIMOIISLY. Ms. Dacy stated that if the HRA acquires the Hedman property, staff could approach ACCAP to see if they are interested in purchasing the house and moving it off the property. 10. OTHER BUSINESS: a. Letter from Bob Welle, Reliance Real Estate Services, Inc. � Ms. Dacy stated she has received a letter dated October 8, 1993, from Bob Welle of Reliance Real Estate Services. Mr. Welle would like the HRA to receive this letter into the record. No action is needed at this time. Mr. Welle would like the HRA to discuss the following issues at future HRA meetings: 1. The HRA discuss acquisition of the Suh property when the HRA discusses its 1994 budget. 2. The HRA make a motion to establish a policy of a willingness to sell the Dairy Queen and service station properties separately from the Rice Plaza property. 3. The HRA grade with aggregate or paving materials over the Rice Plaza property after demolition to allow a more convenient access to the Suh property. Mr. Commers asked staff to get more specific information from Mr. Wel1e regarding a possible development on the corner which includes the Dairy Queen and service station properties. MOTION by Ms. Schnabel, seconded by Mr. Prairie, to ^ receive the letter dated October 8, 1993, from Bob Welle, Reliance Real Estate Services, Inc. �^, HOIISINa & REDEVELOPMENT AIITHORITY MTG.. OCT. 14, 1993 - PAGE 12 IIPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED T8E MOTION CARRIED IINANIMOIISLY. b. HRA Meeting Dates Ms. Dacy stated that Mr. Burns has a conflict with the HRA meetings on the second Thursday of each month. He would like the I3RA to consider moving the meeting dates to the first Thursday of each month for calendar year 1994. The HRA can think about this and make a decision at their November meeting. Ms. Dacy reminded the HRA members that is on November 18, rather than Novembe 11 is Veterans' Day and the Municipal closed. ADJOURNMENT• the next meeting r il, as November Center will be Chairperson Commers declared the October 14, 1993, Housing & Redevelopment Authority meeting adjourned at 9:50 p.m. r,.� Respectfully sub itted, _ � Lyn' Saba Rec ding Secretary �