Loading...
HRA 12/16/1993 - 29567!� CITY OF FRIDLEY 80IISING & REDEVELOPMENT AOT80RITY MEETINa� DECEMBER 16� 1993 ���..�..���..�����....���....�����......�»......���....��.._............�............�.._.......... CALL TO ORDER: In the absence of Chairperson Commers, John Meyer was appointed to chair the meeting. Acting Chairperson Meyer called the December 16, 1993, Housing & Redevelopment Authority minutes to order at 7:35 p.m. ROLL CALL• Members Present: John Meyer, Duane Prairie, Jim McFarland Members Absent: Larry Commers, Virginia Schnabel Others Present: William Burns, Executive Director of HRA Barbara Dacy, Community Development Director Craig Ellestad, Accountant Jim Casserly, Consultant Robert Welle, Reliance Real Estate Services, Inc. � APPROVAL OF NOVEMBER 18 1993. HOUSING & REDEVELOPMENT AUTHORITY MINUTES• MOTION by Mr. McFarland, seconded by Mr. Prairie, to approve the November 18, 1993, Housing & Redevelopment Authority minutes as written. UPON A VOICE DOTE, ALL DOTING AYE, ACTING CHAIItPERSON MEYER DECLARED THE MOTION CARRIED IINANIMOIISLY. 1. CONSIDER REQUEST TO AC UIRE SUH PROPERTY, ROBERT C. WELLE: Mr. Burns stated that the property owners, Dr. and Nirs. Suh, feel they have been unnecessarily put upon by the apparent plans by the City to develop the southwest quadrant and the fact that the City has condemned at least one property in this area. They feel the access to their property for their tenants' businesses has been seriously damaged due to the construction of the median on Mississippi Street. Mr. Burns stated staff has considered the request by the Suhs that the HRA acquire their property and has come up with the following three options: 1. Decline Mr. Welle's request to purchase the property, but to continue to work diligently to identify uses for the site and acquire a developer or redeveloper for the southwest quadrant. � 80IISING & REDEVELOPMENT AIITHORITY MTt�, DECEMBER 16. 1993 - PAC�E 2 2. Purchase the site and immediately demolish the buildings to avoid any cost of leasing and maintaining another shopping center. 3. Purchase the property and attempt to lease and operate the property much like the HRA did with Rice Plaza. Mr. Burns stated staff is recommending that the HRA not purchase the property but work diligently to identify an acceptable redevelopment plan and developer for the site. Mr. Meyer stated the HRA members have been contacted by A+ir. Robert Welle, both verbally as well as in writing. He stated the HRA members also received a letter from Councilmember Steve Billings dated December 16, 1993, in which Councilmember Billings states he is against the HRA taking any action to acquire the Suh property at this time. Mr. Robert Welle, Reliance Real Estate Services, Inc., stated he wanted to make some comments for the record. He stated he was in attendance at the September 9, 1993, HRA meeting where he made a similar request to the HRA to purchase the Suh property. At that time, the HRA's answer was "no". The HRA stated that the southwest quadrant is a priority, but that so far no developer has come forth ,--� with a feasible proposal. The HRA also referred to some other priorities, but the members seemed willing to hold this subject open for reconsideration and to look at it again some time in the future. The HRA stated the most logical time to discuss it would be with the discussion of the 1994 budget. He stated he is at the meeting because it is his understanding that the 1994 budget will be discussed at this meeting. Mr. Welle stated he specifically wanted to stress the matter of a "hardship acquisition". The issue of access and rumors of condemnation cloud the future for this retail center. He stated his main concern is from the standpoint of the public sector. He is talking about what is in the best interest of the people of Fridley and Anoka County and what is in the best interest of one property owner. Mr. Welle stated he is not pointing a finger or finding fault with the City regarding the median on Mississippi Street. However, even though it is Anoka County right-of-way and was funded by either the County or federal funds, there was some dialogue or participation or cooperation by the City in the design of the median, and the impact on the Suhs property is the same. Because this is commercial property, the access is critical. Convenient access has a lot to do with whether or not the center is viable as commercial property. '� Mr. Welle stated he is asking the HRA to reconsider the purchase of the Suh property. His understanding of a hardship acquisition or HOIISING & REDEVELOPMENT AIITHORITY MTG, DECEMBER 16, 1993 - PAGE 3 � the spirit behind it is that a public body such as the HRA uses its ability to purchase the property even though it may be in advance of redevelopment; in effect, buying early because the HRA is then able to spread the carrying costs over a wider spread of property. Mr. Welle stated that since September, the Burger Ring lease has expired. Burger King had an option they could have exercised for an additional five years, but they notified the Suhs that due to the deterioration in their sales after the median was put in, their business was no longer viable and they are looking at relocating the business. As long as Burger King stays, they will continue to pay operating expenses, but they will no longer pay any rent. As of December 1, 1993, the Suhs have no rental income from the Burger King property. The Suhs have gone from a very positive cashflow to a negative cashflow so they are paying out-of-pocket to maintain status quo, but they are heading in a downward spiral. Mr. Welle stated that notwithstanding that the HRA has their reasons for not purchasing the property, he is at the meeting to try to persuade the HRA that in light of the Suhs' financial situation that the HRA purchase the property at this time. Mr. welle stated he is not sure what actions the HRA is taking in � terms of finding a developer or redeveloper. The HRA has a considerable interest in the southwest quadrant, and it seems in the best interest of the HRA to get something going there. He is suggesting that completing the package by putting the entire parcel together, even if it means demolition of the building, presents a site ready for redevelopment which sometimes helps attract developers. By carrying through with the HRA's objective in completing development and having the whole site ready might help make that development happen. Mr. Welle stated he is curious about the timing for the development of this site. Is the HRA pursuing an aggressive marketing program? Will this activity take place in 90 days, six months, or six years from now? The timing is critical to the Suhs because every month adds to the Suhs' financial deficit. Mr. Welle stated that when the Suhs listed the property with Reliance Real Estate Services, they made it very clear that they wanted him to take a proactive stand. He stated that besides his efforts with the HRA, he is putting together a marketing package to bring to the development community. He stated his job is to get the Suhs out of the financial burden they are in, whether it is to sell the property to someone who wants it as it is or to someone who will redevelop just this parcel. Mr. Welle stated that in conversations with developers, the comment �"� has been made as whether it is going to be possible or viable to - sell the property separately. He stated he will continue to try to xOII3ING & REDEVELOPMENT AIITHORITY MTa. DECBMBER 16� 1993 - PAGS 4 � find a prospective buyer, but it appears that comment might be valid. In that case, they are really in a bind if it is true what the marketplace is telling them that no one will redevelop this site without control of the whole site. And, the Suhs only have control of a part of that site. Mr. Welle referred to his October 8, 1993, letter in which he asked the HRA to adopt a policy of proactive piecemeal development and allow the Dairy Queen and service station to be sold for development. If the HRA is not willing to sell piecemeal, then he is not going to get very far in trying to sell the Suhs' property separately. If the HRA is not willing to adopt a policy, what are their feelings if someone wanted to purchase just the Dairy Queen and service station? Would the HRA be willing to sell those two properties? Mr . Meyer stated that only three of the f ive HRA members are at the meeting, and he would be very reluctant to say much about this issue until all five members are present. He stated he did not think the HRA members are in a position to express any firm opinions about this issue. Mr. Welle stated he just wanted to get a feel for whether the HRA would allow any kind of piecemeal development to even take place, � or if the Suhs can act independently to sell their property. If the answer is, no, and people cannot access the site without going through HRA land, it does cast some light on the subject of whether it is a moral or legal obligation. It is a public sector issue versus a private sector issue. He would like to believe that it is possible to sell their property. If the Suhs are unable to sell their property, then it is just a matter of including it as part of the redevelopment of the whole southwest quadrant, and it goes back to the hardship issue. Mr. Welle stated he is future to try to get a come into play here. just looking for help in trying to see the feel for the probabilities or issues that Mr. Meyer stated the HRA has been trying to get a development on that corner for many years. They have come close with some developers, but then the projects have fallen through for various reasons. The HRA wants the best development for this site, because it is in the heart of Fridley. Anyone who might want to purchase the Suh property would have to realize that he/she has a large neighbor next door, the HRA, and the developer would have to weigh whether or not he/she wanted to buy the property with the possibility that they could be swallowed up by some future HRA development plan. Beyond that, he could not answer Mr. Welle's question about a policy regarding piecemeal selling. �''1 Mr. Prairie stated it is hard to answer Mr. Welle's question about whether a developer could buy the property piecemeal without � �"'1 � HOIISING & REDEVELOPMENT AIIT80RITY MT�3, DECEMBER 16. 1993 - PA(3E 5 knowing what kind of a project it would be. They have not looked at anything on that end of the property, but it might be conceivable. Mr. Welle stated he needs to manage his time and energy in the direction that is most likely to pay off. He is asking for the HRA's opinion rather than policy, or is he wasting his time? It would be a development that would have to fall within the permitted zoning and within the development limitations of the site. Mr. Prairie stated that if it is a development that would work, he believed the HRA would rather see a new development for the whole southwest quadrant than the way the site is split up now. Mr. Welle stated that if the Suhs are able to sell the property to someone else, they ask that the HRA acknowledge their right to do that even if that may hinder the HRA's ability to redevelop its property in the future, or whether it makes it more expensive for the HRA to redevelop. They need to make something happen. The Suhs cannot continue to tread water because they are sinking. The most logical thing seems to be for the HRA to complete its redevelopment package. The point was well taken that this property is in the heart of Fridley, and what happens over there and how it looks is certainly relevant to all the people of Fridley. There are some abstract issues here about what the public domain stands to gain here. Mr. Welle stated that he is looking for some kind of answer. With the two HRA members being absent, he would ask the following question: "What is next from the HRA's point of view as far as responding to the Suh's request that the HRA purchase their property, and what might happen in the future?" Mr. Meyer stated that as far as the status of the request, unless it is put on a future agenda or it is tabled, it would be a dead issue. Mr. Welle asked if it would be fair to say that none of the HRA members present are willing to make a motion in favor of purchasing the Suh's property. Mr. McFarland stated that is a fair statement. Mr. Welle stated that as far as redevelopment or what happens next, does the HRA have a timetable for making something happen in the southwest quadrant as opposed to waiting for something to happen? Mr. Meyer stated the HRA has almost desperately been trying for many years to make something happen in the southwest quadrant, and the HRA has taken many steps to try to make things happen. As Mr. Welle knows, this is not the climate for anything significant HOIISING & REDEVELOPMENT AIIT80RITY MTG, DECEMBER 16. 1993 - PA(3E 6 /"� happening on this corner. They are dead in the water themselves in terms of any progress on that corner. Mr. Welle asked that if the Suhs wanted to do something to enhance the appearance of their property, like remodeling, does the HRA have any kind of program that could provide financial assistance with low interest loans? Ms. Dacy stated the HRA does not have any available programs for that type of assistance. Most of the HRA's efforts have been in the housing area for those types of programs. Mr. 6Jelle stated Dr. and Mrs. Suh were unable to attend the meeting. They are very interested in the proceedings of the meeting, and he wanted to request a copy of the tape of the dialogue so they can listen to the actual discussion. Mr. Welle stated he would like to stay and listen to the budget discussion later in the meeting. Mr. Burns stated City staff is in the process of trying to develop a plan of action for developing and marketing the southwest quadrant. They will be identifying recommendations for the HRA. The southwest quadrant is the highest priority in the first quarter � of 1994. 2. CLAIMS AND EXPENSES: Mr. Ellestad noted that check #2476 is a void check. MOTION by Mr. Prairie, seconded by Mr. McFarland, to approve the check register, checks #2472-2482, as presented. IIPON A VOICE VOTE, ALL VOTING AYE� ACTING CHAIRPER80N I�iEYER DECLARED THE MOTION CARRIED IINANIMOIISLY. 3. NORWOOD S4UARE UPDATE: Ms. Dacy stated Norwood Square had requested tax increment assistance in the amount of $82,000 for the construction of a 50- unit elderly building. When this was discussed at the 5eptember HRA meeting, the HRA authorized staff to proceed with the development contract on a pay-as-you go approach. Mr. Casserly has done some more analysis and has determined that a grant may be more prudent for the HRA to implement in the development contract. The reasons are both financial and legal. She stated that at the meeting, the HRA members had received a copy of Mr. Casserly's memo dated December 10, 1993, which further explains his recommendation. Mr. Casserly stated that normally a pay-as-you-go program works � very effectively for the HRA. The basis for doing a pay-as-you-go assumes that the developer or builder has access to money. Then, � HOIIBIN(3 & REDEVELOPMENT AIITHORITY MTG. DECEMBER 16. 1993 - PA(�E 7 ' with the pay-as-you-go, the HRA is reimbursing the developer for the costs of the improvements. � Mr. Casserly stated that he started to examine a little more carefully how this non-profit entity (Westminster Corporation) is really going to acquire funds as non-profit entities have a very difficult time acquiring funds. Mr. Casserly stated the problem is that normally when they use a revenue note, they assume the things they are paying for in that revenue note have been completed when the project is completed. In this instance, the HRA would be issuing a revenue note. Because Westminster Corporation has a difficult time getting the funds up frant from another lender, they definitely have to pay whatever the going rate is, if they can even get the funds in the first place. If they cannot get the funds, the HRA can still go ahead and agree to give Westminster a revenue note, but the way it is structured, Westminster would not be able to make the improvements the HRA is paying for until Westminster gets the revenue note money. So, the HRA runs into this peculiar situation where they are agreeing to pay for future improvements, yet they do not have the improvements until they pay for them. Mr. Casserly stated they can overcome this problem and also save ,-� some money if the HRA provides some assistance at the beginning of the project. Then, Westminster can go ahead with the project and the HRA would provide funds when Westminster placed all the monies . in escrow from Title Insurance to disburse. Westminster actually gets the grant monies for this project from HUD, and Title Insurance is responsible for disbursing the money. The HRA would put its monies in at the same time as Title Insurance does. Mr. Casserly stated that if the HRA agrees to a grant approach, rather than a pay-as-you-go approach, there would be some savings. There is one risk, and that is that the Legislature might change the class rate for these kinds of proj ects and reduce the amount of increment that can be generated. Barring that, it is definitely less expensive for the HRA to fund the project up front than to pay over time at an 8 1/2% interest rate. Mr. Casserly stated he is recommending that the HRA go with the grant approach rather than the pay-as-you-go approach and provide the funds while the proj ect is being constructed rather than paying the developer over a period of 3-4 years. Ms. Dacy stated City staff agrees with Mr. Casserly's recommendation. Mr. Meyer stated it seemed to make practical sense to go with the grant approach instead of the pay-as-you-go approach. They will �i have to take their chances that the Legislature will not do - anything too drastic. � HOIISINa & REDEVELOPMENT AIITHORITY MTC�, DECEMBER 16, 1993 - PAGE 8 - It was the consensus of the members present to approve the grant approach as opposed to the pay-as-you-go approach for the Norwood Square project and to ask staff to redraft the development contract for review at another meeting. 3. HEDMAN AC4UISITION UPDATE: Ms. Dacy stated she and Jim Casserly attended the closing on the Hedman property on December 1, 1993. The negotiated purchase price was $68,000 and the closing costs were $469.80. Ms. Dacy stated she has been working with Ernst Movers who will pay the HRA $4,700 for the house, remove the foundation, and backfill the property. Ernst Movers has until March 15, 1994, to move the building off the property. If Ernst Movers cannot find a buyer for the house and remove the house by March 15, 1993, then they will forfeit $2,700. Ms. Dacy stated staff has a copy of Ernst Movers' certificate of insurance which will cover the house. The land is covered under the HRA's insurance policy. Ms. Dacy stated no action is needed by the HRA. Unless the HRA has any objections, staff will proceed accordingly. She stated the � water and sewer have been disconnected, and the remaining utilities will be disconnected before the house is moved. Mr. Meyer stated he would like a requirement added that the excavation hole be backfilled with "clean granular fill" and compacted to 95o standard proper. That is the proper way to leave a foundation for any future development on the site. 5. STATUS OF SCATTERED SITE ACOUISITIOAT PROJECTS: Ms. Dacy stated that at the last meeting, the HRA had asked staff to follow through on two properties, 513 Fairmont Street and 560 Hugo Street. Mr. Fernelius has written a letter to the property owner at 560 Hugo Street indicating the HRA's interest in acquiring the property. Staff has not heard back from the property owner as of this date. Ms. Dacy stated that regarding 513 Fairmont Street, it is staff's understanding that HUD does not yet have title to the property; however, it seems like they will be taking that property fairly quickly. Staff has been researching some statutes and other HUD policies. Mr. Fernelius has drafted a letter to HUD to let them know that the City believes the house on this property is not conforming and is unsafe and substandard. As such, the City wanted it made clear for the record that the City will not issue any building permits if a private property owner acquired the property �"� from HUD. HUD's policy is that even though the house may be in ^ HOIISING & REDEVELOPMENT AIITHORITY MTG, DECEMBER 16. 1993 - PAGE 9 J livable or habitable condition, HUD will still convey the property but will disclose these facts to the potential buyer. Ms. Dacy stated that instead of using HRA money to acquire the house and property, the City is looking at the possibility of getting the house demolished. City staff is pursuing the following two options: 1. It is possible that the City can convince HUD to demolish the house. If this happens, the City achieves the objective of removing blight from a neighborhood at no cost to the HRA. It is then possible that private property owners around the subject property may want to buy the property. 2. If the City cannot convince HUD to demolish the house, there is statutory authority for the City, as opposed to the HRA, to condemn the building on the basis of substandard quality. Therefore, the City could provide a notice to the current owner telling them to demolish the building and assessing the costs of demolition to the property owner. Ms. Dacy stated a third option is for the HRA to acquire the �--� property, but staff will explore the first two options first. 6. RICE PLAZA UPDATE: Ms. Dacy stated Jim ICordiak has been able to sell some of the existing furnaces and air conditioning equipment in Rice Plaza. The last tenant, Hong Kong Kitchen will be moving to Holly Center at the end of December. Ms. Dacy stated that at the January meeting, she will be presenting the specifications for the demolition bids. 7. FRIDLEY TOWN S4UARE UPDATE: Ms. Dacy stated she met with Lowell Wagner last week. She stated Mr. Wagner still has not gotten a final definitive answer from the Walgreens management. Walgreens management wants to reorient the site plan so that the building is near University Avenue, and they want a second access onto Mississippi Street. Ms. Dacy stated the HRA needs to start thinking about what happens if the Fridley Town Square redevelopment falls through. Mr. Wagner has not decided whether or not he wants to exercise his option with the property owners, Swanson and Marsolek. If he does own the property, he asked if the City would permit him to remodel the inside of the existing building and do some modest modifications to �`�'� the exterior of the building and possibly lease the building to � HOIISING & REDEVELOPMEAiT AIITHORITY MTG. DBCEMBER 16, 1993 - PAQE 10 - temporary tenants until he can put together a redevelopment package. Ms. Dacy stated the property is zoned S-2, Redevelopment District, which is like a PUD district. She stated she has met with Jim Hoeft, HRA Attorney, and Mr. Hoeft stated the City would have the legal authority to deny the building permits. Her initial concern was that if the City allows permits on the property, would that increase any type of assistance in the future? Mr. Hoeft's opinion was that the types of improvements Mr. Wagner is proposing would not significantly add to the value. Ms. Dacy stated that the way the S-2 zoning ordinance is written, the City has the power to evaluate any use that goes on in that building. She will write Mr. Wagner or Ms. Swanson and ask them to keep the City apprised of the types of uses that go on in that building. The City will not deny any permits for any remodeling or improvements; however, if the property owner proposes to expand the building or do any significant work that means the building would stay, then the City would deny those types of permits. Ms. Dacy stated that if this development does not move ahead, the HRA might have to decide whether they want to take a look at another use for this site. r^� 8. 1994 HRA BUDGET: Ms. Dacy stated this is a draft budget, and no action is needed by the HRA at this meeting. After the HRA's comments, staff will finalize and prepare it in booklet format with colored pages for the HRA's use throughout the year. Ms. Dacy stated they are still finishing up some of the key 1993 projects. The City has not yet received the actual bills from Anoka County for the Mississ'ippi Street or University Avenue improvements. The budgeted area for that amount has been carried over into the 1994 budget. Ms. Dacy stated the Lake Pointe marketing effort is underway. The HRA authorized the City to hire a consultant, Busch & Partners. Mr. Burns and Mayor Nee have been working very closely with the consultant. The consultant will be appearing at an upcoming HRA meeting to discuss his ideas and to get the HRA's concurrence. So, those amounts are included in the 1994 budget. Ms. Dacy stated another issue pending is the Fridley Town Square and the Dairy Queen. If the Fridley Town Square project does not proceed, staff believes Don Fitch will appeal the Commissioner's Award. � Ms. Dacy stated staff will be pursuing planning for the southwest quadrant in the first quarter. ^ HOIISIN(3 & REDEVELOPMENT AIIT$ORITY MTG, DECTsMBER 16, 1993 — PAGE 11 - Ms. Dacy stated the HRA's priority is its housing programs. The HRA hasn't actually spent any dollars this year for any of the deferred loans in conjunction with the fix-up funds or the Fannie Mae program. Staff has rolled over those amounts into the 1994 budget. Ms. Dacy stated they are over the initial administrative hurdles. They did not anticipate some of the negotiations with United Mortgage, for example, and the amount of time it would take to execute those agreements. They have now completed all the paperwork they need with Fridley State Bank and United Mortgage. Ms. Dacy stated the rehab and all the housing program activity will significantly increase in 1994. Ms. Dacy stated that in looking at the revenues versus the expenditures, they tried to do an analysis of the tax increment projections versus anticipated expenditures. Staff is trying to take as realistic look as they can at the redevelopment program to the year 2000. Their tax increment projections are based on the 1992 tax payables, and they are assuming a no growth scenario. They do need to update those projections to the 1993 taxes, and it takes about 2 1/2 weeks to do that. n Ms. Dacy stated the HRA has a negative annual balance in 1995 because of temporary Lake Pointe bond payment. However, Mr. Pribyl has advised her that they will probably evaluate looking at a bond roll-over, but they will be coming back to the HRA for another bond issue to postpone that payment. Ms. Dacy stated the HRA has two separate budgets for its expenditures, HRA Reimbursement Fund and the Housing Coordinator Fund. The Reimbursement Fund is essentially all their operating expenses. They are trying to separate some of those expenses, the housing related expenses versus the operating expenses. There is a 5o decrease in the amount of expenditures in their operating funds. That even includes the demolition cost of Rice Plaza. The Housing Coordinator budget will increase significantly, because they are simply rolling over their allocation amounts from 1993. Mr. Dacy stated that Grant Fernelius is the Housing Coordinator and an HRA employee. At its last meeting, the City Council approved a 3% cost of living increase for the 1994 budget. Staff is proposing a similar increase for Mr. Fernelius. The HRA has to pass a motion approving the resolution for HRA employees to receive that cost of living adjustment. Ms. Dacy stated that last year Chairperson Commers asked the question last year about keeping track of legal services. She stated that Casserly is $20, 000 under budget in the Operating Fund, and $5,000 over in the Housing Fund, for a net savings of $15,000. n. 80IISINa & REDEVELOPMENT AIITHORITY MTG, DECEMBER 16. 1993 - PAG� 12 ` The Barna Guzy contract is $2,000 over budget. That is primarily because of the Dairy Queen appeal. The HRA members reviewed the budget with staff. Mr. Burns suggested they go over the "94 Budget Review" chart which provides a good overview of expenditures by category. MOTION by Mr. McFarTand, seconded by Mr. Prairie, to approve Resolution No. HRA il - 1993, "A Resolution Authorizing an Increase in Compensation for Fridley Housing and Redev�lopment Employees for the 1994 Calendar Year". IIPON A VOICE VOTE� ALL VOTIN(� AYE, ACTINt3 CHAIRPERBON MEYBR DECLARED THE MOTION CARRIED ONANIMOIIBLY. ADJOURNMENT• MOTION by Mr. Prairie, seconded by Mr. McFarland to adjourn the meeting. Upon a voice vote, all voting aye, Acting Chairperson Meyer declared the motion carried and the December 16, 1993, Housing and Redevelopment Authority meeting adjourned at 9:15 p.m. Re ectfully submitted, � Lyn Saba Recording Secretary i'°�