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HRA 03/09/1995 - 29580G■� � CITY OF FRIDLEY HOIIBIN(� & REDLVELOPMENT AIITHORITY MELTIN(�4� MARCH 9, 1995 CALL TO ORDER: Chairperson Commers called the March 9, 1995, Housing and Redevelopment Authority meeting to order at 7:40 p.m. ROLL CALL• Members Present: Members Absent: Larry Commers, Virginia Schnabel, Duane Prairie Jim McFarland, John Meyer Others Present: William Burns, Executive Director Barbara Dacy, Community Development Director Jim Casserly, Financial Consultant Grant Fernelius, Housing Coordinator Craig Ellestad, Accountant Tom Stanek, 7035 Willow Lane Bert McElrath, Norway Pine Builders APPROVAL OF FEBRUARY 9. 1995, HOUSING AND REDEVELOPMENT AUTHORITY MINUTES• MOTION by Ms. Schnabel, seconded by Mr. Prairie, to approve the February 9, 1995, Housing & Redevelopment Authority minutes as written. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DTCLARED THE MOTION CARRIED IINANIMOUBLY. CONBENT AGENDA• 1. AUTHORIZE 1995 HOME FUND APPLICATION TO ANOKA COUNTY AND AUTHORIZE HRA MATCHING FUNDS 2. CONSIDER ACOUISITION OF THREE SCATTERED-SITE PROPERTIES: 6200 - 2nd Street 540 Hugo Street 533 Janesville Street 3. 4. ^ 5. CONSIDER APPROVAL OF RESOLUTION AND MEMORANDUM OF UNDERSTANDING WITH NORTHEAST STATE BANK TO PARTICIPATE IN MHFAjFRIDLEY HOME IMPROVEMENT PROGRAM CONSIDER AC4UISITION OF ANOKA COUNTY PROPERTY AT 6765 EAST RIVER ROAD MONTHLY HOUSING REPORT ^ HOIISING & REDEVELOPMENT AIITHORITY MEETINa, MARCH 9. 1995 PAaE 2 6. REVENUE AND EXPENSES MOTION by Ms. Schnabel, seconded by Mr. Prairie, to authorize the 1995 Home Fund Application to Anoka County and authorize HRA matching funds; to authorize the Executive Director to proceed with acquisition of three scattered site properties located at 6200 - 2nd 5treet, 540 Hugo Street, and 533 Janesville Street; to approve a Resolution Authorizing the Execution of a Memorandum of Understanding By and Between the Housing and Redevelopment Authority In and For the City of Fridley and the Northeast State Bank of Minneapolis; to authorize acquisition of Anoka County property located at 6765 East River Road; to receive the Monthly Housing Report; and to check register #25434 through #25464 as submitted. IIPON A VOICE VOTE� ALL VOTING AYE, CHAIRPERSON COMMERB DECLARED THE MOTION CARRIED IINANIMOIISLY. ACTION ITEMS• 7. CONSIDER AWARD OF BIDS FOR SCATTERED-SITE PROPERTIES Mr. Fernelius stated staff contacted 15 builders to solicit ^ interest in bidding on the lots. Two parties submitted bids for the properties. A summary of the bids was distributed. The two bidders are Tollefson Homes and Norway Pine Builders. Mr. McElrath, Norway Pine Builders, has submitted some additional materials about the company. Staff's recommendation is for the HRA to authorize the sale of the lots located at 6409 East River Road, 8280 East River Road and 187 Longfellow Street to Tollefson Homes. Staff does not recommend that the bid be awarded for the last two properties. Staff makes this recommendation based upon the fact that Norway Pine Builders does not want to enter into a development contract as required. Norway Pine Builders is essentially offering a cash offer for the lots and would not enter into the development agreement or provide a letter of credit. They would be buying the properties and constructing homes on those lots. The HRA would have essentially no means of insuring that homes are actually constructed. Therefore, staff is recommending awarding the bid to Tollefson Homes who would agree to enter into a development contract. Staff feels the offer made for 677 Hugo Street and 539 and 547 Glencoe Street is not adequate. Mr. Commers asked why there were such low bids for 677 Hugo Street and 539 and 547 Glencoe Street. Mr. Fernelius stated he could not explain the rationale. Ms. Dacy stated Mr. Brad Dunham, on behalf of Tollefson Homes, called and stated the reason for the bids as they are is because ^ HOIISING & REDEVELOPMENT AIITHORITY MEETINa. MARCH 9, 1995 PAGE_3 they work backwards in their calculations to construct homes on those lots. They felt the asking price for homes in these areas would be $69,900 to $70,000 which left the remaining land price. Despite that answer, in talking to Mr. Burns and Mr. Fernelius, staff feels that this is too low. We did not feel good about making a recommendation to award those lots. Mr. Prairie asked if the lots were similar in size. Mr. Fernelius stated 6409 East River Road and 8280 East River Road are approximately 15,000 square feet. 187 Longfellow Street and 677 Iiugo are approximately 8,000 square feet. He believed the rationale for the lower bid for the Glencoe Street property from Norway Pine is that they were going to remove the buildings and bear that cost themselves. Ms. Schnabel asked if staff had any idea of the value of those lots would be when cleared. Mr. Fernelius stated, in his opinion, the value would be somewhere close to the value of the other properties. There is some concern on the part of one of the bidders that the values of the homes in that area may not support as high a home value and, ^ therefore, their bid was lower. The value of the land for tax purposes is included on the summary of bids. Mr. Commers stated there is no relationship between the bids and the assessor's value. Ms. Dacy stated staff could come back next month and talk about how to sell these lots. The HRA could hire a realtor to sell the properties to the general public. Tollefson Homes has done business in Fridley as has Norway Pine Builders. For the HRA the key issue is control and the development contract. One bidder is willing to go by the rules, and there is an alternative offer. A representative from Norway Pine Builders is present to answer any questions. Mr. Prairie asked if the first bidder was willing to go with three properties. Ms. Dacy stated yes. Mr. Commers asked the representative from Norway Pine Builders what their objection was to entering into a development contract. Mr. McElrath stated, with interest rates going up, to put up five houses right away is risky. He has been in business since 1988 and plans to continue in the business. He has a concern about �� building five houses. He has never done that. ^ HOUBINa & REDEVELOPMENT AIITHORITY MBETIN�3. MARCH 9, 1995 PAaB 4 Mr. Commers asked if he was concerned that, when building on speculation with rates going up, he may not be able to sell the homes. Mr. McElrath stated yes. When constructing, the interest on the loans starts immediately. Mr. Commers stated it also seems risky to be willing to put up cash. Mr. Stanek stated he was the realtor for Norway Pine Builders. The package they put together would comply with what the HRA is asking for as far as size and the features of the home. He felt the price was fair and allowed them to make a modest profit. Mr. McElrath stated his goal was to make a profit on the home and not on the lot. He has a purchase money mortgage which is included in the package. The HRA would not be cashed out immediately but would be cashed out in one year or as soon as a house is sold. Mr. Stanek stated they can put up one house now. They have a buyer for one home. Their bid was lower for the Glencoe Street � properties because they would be taking down the buildings. The prices as stated are based on a package. Mr. McElrath asked if these properties were on the flood plain. Mr. Fernelius stated he would have to check on this. Mr. McElrath stated he would be willing to make an offer for properties in a flood plain. They can get insurance to cover the house. Buyers stay away from lots requiring flood insurance. He would look at offering buyers two to three years worth of reserves in escrow to help pay for the flood insurance for that period of time to help move the lots. Mr. 5tanek stated the bid is priced to keep the price of the homes where they should be. The Hugo Street lot is tough unless it is part of a package because of the existing homes in that area. The lots on East River Road is across from a new development and is easier to get an appraisal. Mr. McElrath stated in December he closed on a new home in that area. They bought the lot for $17,900. Another lot was $17,900 in that neighborhood. He did not think there is a problem in selling these. The problem is the line of credit. Mr. Prairie asked if the risk on five properties was less than ^ the risk on one or two. ^ �OIISING 8 REDEVELOPMENT AIITHORITY MEETINa, MARCH 9, 1995 PAGE 5 Mr. Stanek stated they could do that on one or two lots, but they could not do that on the Hugo lot because the type of home required and the price of that lot would be overpriced for the area. Mr. McElrath stated he was interested in looking at it. He did not think it fair that the other bidder be given the prime lots and they be given the two more difficult properties. They would prefer to go with the package. They are confident they can sell the homes. Mr. Stanek stated, in the price range that these homes will be in, there is no competition. The price will not exceed $100,000. They would have a nice home valued from upper $80,000's to upper $90,000's for the first three properties and about $10,000 less for the last two properties. He did not understand the appraised values as listed for these properties. Mr. Prairie asked the total square footage for the lots on Glencoe Street. Mr. Fernelius stated the combined total would be approximately 10,000 square feet. � Mr. Commers asked what the requirement was for the letters of credit. Mr. Fernelius stated the bidder is to provide a letter of credit on the value of the improvements to the property. Mr. Commers asked if this is the value of the improvements when they are built. Mr. Fernelius stated this is prior to construction but it would be part of the development contract. Mr. Commers asked if they expected that all would be built right away or over a period of time. Mr. Fernelius stated ideally the construction would be simultaneously. Realistically, these would likely be phased in over time. Ms. Dacy stated the development contract has a timelinee Mr. Stanek stated all five properties are very marketable. He knows the market well. For this package price, they could get affordable homes constructed; although, without a letter of credit, they could have all sold by early summer. There are � first time home buyer programs out there that fall into this category. There is little available. Lots are getting harder � HOIISING & REDEVELOPMENT AIITHORITY MEETINa, MARCB 9. 1995 PAGE 6 and harder to find. Not everyone wants to be located in the outer areas in order to build a home. Ms. Dacy stated, while she respects what is being said, she wants to advise the HRA that there are different issues. Mr. Commers stated his concern is that all the lot are sold and that the HRA is not left with the least desirable lots, that the HRA also has a problem with the last two lots and there is a difference in the price for these lots. The HRA has already approved the rules under which we are going to do this. Mr. Prairie stated the HRA has to have a development contract. Mr. Stanek stated the letter of credit to put up all the houses at once is where they have a problem. They have to keep their doors open as well. Mr. Prairie asked if it was a total letter of credit. � Mr. Fernelius stated the letter of credit is for the value of the improvements and this will depend on what they propose. ^ Mr. Stanek estimated the value of the homes to be approximately $90,000 each for the first three lots and $80,000 each for the last two lots. That is over $400,000. Mr. Fernelius stated those estimates would have to include the land price. The letter of credit is not for the cost of the land. The letter of credit is just for the improvements so, with the estimate as provided, the letter of credit would be approximately $360,000. Mr. McElrath stated the other issue is putting up the houses in the time period designated. As the interest rates go up, the market goes down. Mr. Prairie asked if Tollefson Homes would be able to provide a letter of credit. Ms. Dacy stated, from what she understands, Tollefson is affiliated with a builders mortgage company. To provide a comparison between the two bidding firms, Tollefson probably has a larger base to work from so the letter of credit is perhaps not an issue. Mr. McElrath stated he knows Mr. Stanton and talked to them about a letter of credit and he stated he would not provide a letter of � credit. There are other companies out there as well. � HOIIBING & REDEVELOPMENT AIIT80RITY MEETIN(�, MARCH 9, 1995 PAt�E 7 Mr. Dacy stated she spoke with a representative from Tollefson who stated they would sign a development agreement and letter of credit. They had a lower bid. Staff had to evaluate and advise the HRA of our recommendation. Her information is that they will comply. If they do not, staff will certainly bring this back. Ms. Schnabel asked what the expectations are if they do not follow instructions. Mr. Commers stated we have to follow the instructions. That is the problem. Mr. Stanek stated, given the fact that Mr. Fernelius contacted 15 builders and two submitted bids, it is because of the way the offer was presented. Every builder wants to get a good lot and to get a good price on that lot. On these bids, a builder could afford to build and make some money. If the terms were a little different, there would have been more bids. A full line of credit minus the land is why this is down to two bidders. He understands this is written as it is for a reason. Mr. Commers stated it is different dealing with a public entity rather than another type of land owner. � Ms. Dacy stated the reason is that the properties have been blighted. The intent is to sell them, get a new house in the neighborhoods and start to get the tax dollars as soon as possible. It depends on what the HRA wants to do in terms of control and how soon they want to see a house on these properties. Mr. Commers stated the HRA does want control and wants to see something as soon as possible but also wants to make sure they do this wisely. It seems as if you could qo back and put on a reasonable value. � Ms. Dacy asked if they wanted staff to meet with Tollefson and evaluate their offer on the two lots in question. Mr. Commers stated it would be good to get the whole package to go, but we have to have more on those two lots. It is difficult, and he did not know if there was anything they could do to overcome the fact that one bidder cannot comply with the requirements. Mr. McElrath stated it is not that he cannot do this but it is too risky for this business. Mr. Commers stated, even if their price was higher and they � wanted to give Norway Pine the bid, their hands are tied on that. �, �. i"� � HOIIBING & REDEVELOPMENT AIITHORITY MEETINa. MARCB 9, 1995 PAaE 8 Once the HRA requested bids and the development criteria, there is nothing much more they can do. Mr. Casserly stated, for this part, the HRA has laid down the arrangements to be followed. The first round is a learning experience unless you want to open it up again and redo the requirements. Mr. McElrath stated they have a potential buyer who is showing an interest and is leaning toward 8280 East River Road. Mr. Casserly stated, if for some reason, it did not work out with Tollefson Homes, he would hope staff could be authorized to talk again with Norway Pine Builders to see if something could be worked out. His observations of the discussion is on the letter of credit. They are saying it is unusual to require a letter of credit for the value of the structure. Ms. Schnabel stated, if Tollefson Homes has any question or doubt and wants to back out, at that point we would reevaluate the process and start over rather then negating our process. Perhaps we don�t want to put all the lots together at once. At this point, she did not see that the HRA could do anything but accept Tollefson Homes' bid based on their willingness to comply. Mr. Commers suggested staff talk to them to see if they are willing to come up on the last two lots. Mr. Prairie stated staff could also check on the numbers for the last lot. If you look at the assessed value and the appraised value, this lot is higher than the others. Ms. Dacy stated, in this case, there were two land values because they were two separate nonbuildable lots. The assessor's number is higher because to establish a land value the two assessed values were added together. Mr. Prairie stated, if they would take a square foot average, the value should be less than the first two. Ms. Dacy stated the values are accurate if one aonsiders that the two separate values were added together. However, if the HRA prefers another appraised value for the one combined lot, staff could do so. Mr. Prairie stated he would like staff to come up with another number. Mr. Commers stated at this time there are two lots in question and it looks like, since Tollefson Homes is willing to comply, the HRA will have to go forward with them. He expressed his �„� HOIISING Se REDEVELOPMENT AIITHORITY MEETING, MARCB 9, 1995 PAGE 9 appreciation to Norway Pine Builders for their willingness to submit a bid and come in to talk with the HRA. The decision is not based on any other factors. Mr. Stanek asked if the HRA had a plan for the lots on Hugo Street and Glencoe Street. Mr. Commers stated he would ask staff to talk to Tollefson Homes about those two lots. If they are not qoing to do anything, the HRA would need staff's recommendation at the next meeting on what to do with those two lots. Ms. Dacy asked if the HRA was comfortable in awarding the bid for the first three lots and possibly all five lots to Tollefson Homes if they are willing to raise their bid on the last two properties. Mr. Prairie asked if this was put out as a package. Mr. Fernelius stated no. In the bid package, staff outlined that each lot would be considered individually. We could have had five different bidders on each lot. ^ Ms. Schnabel stated the HRA can in fact reject the bid for the lots on Hugo Street and Glencoe Street. Mr. Prairie stated, if they did that, there would be two lots next time. Mr. McElrath asked what would happen if the other bidder does not comply with the letter. Mr. Fernelius stated staff would have to come back to the HRA for a decision. Ms. Schnabel stated the input from Mr. McElrath and Mr. Stanek has been very helpful. Mr. Casserly stated the letter of credit is to insure performance. The question then becomes whether you are really looking for a performance bond. What level of security do you need to insure performance? You could have a$15,000 letter of credit and could probably have the same result. A more fundamental question is do you want to sell the lots at all. They had a higher bid by about $20,000. This does not need to be bid. This is a redevelopment contract. Mr. Prairie asked if it would be better to get a performance bond. A letter of credit has to come out of the borrowing base. n, HOIIBINa & REDEVELOPMENT AIITHORITY MEETING, MARCH 9. 1995 PAaE 10 Mr. Commers stated this would be built into the cost of the home. Mr. Fernelius stated Mr. Hoeft could not attend the meeting. In discussion with him, he has worked on a similar project in Columbia Heights with a similar requirement. The requirement worked there, and�staff used it as a basis to try in Fridley. As Mr. Casserly mentioned, it is a means of providing some security that the work will be performed. A performance bond was considered. Mr. Hoeft stated that a performance bond is sometimes expensive for the contractor to obtain. A letter of credit might be easier to get. Mr. Casserly stated a letter of credit uses up the credit line and takes away the ability to finance. Mr. Prairie stated this was his biggest objection to the letter of credit. OTION by Ms. Schnabel, seconded by Mr. Prairie, to authorize the sale of the properties located at 6409 East River Road, 8280 East River Road, and 187 Longfellow Street to Tollefson Homes and to reject their bid for 655 Hugo Street and 539 and 547 Glencoe Street. � Mr. Fernelius stated he wanted to make it clear that this is contingent upon Tollefson Homes executing a development contract. Should they refuse, the process would start over. Mr. Prairie asked what would happen to the properties on Hugo and Glencoe. Ms. Dacy asked if the HRA would like staff to talk to Tollefson Homes about these properties. Mr. Casserly stated it is fine for staff to talk to them. Otherwise, the HRA can hold the properties and look at alternatives. IIPON A VOICE VOTE, ALL �OTINQ AYE, CBAIRPERBON COMMERB DECLARED THE MOTION CARRIED IINANIMOIIBLY. 8. CONSIDER RESOLUTION AUTHORIZING HOUSING REPLACEMENT PLAN LEGISLATION Mr. Casserly stated staff recommend the HRA adopt a resolution which supports the legislation to establish a pilot housing replacement program. The memo included in the agenda packet describes the program. A copy of the resolution was distributed. ^ Mr. Casserly stated the legislation is drafted and ready to be introduced. It allows the cities of Fr�c�ley and Crystal to �, xOIISING & REDEVELOPMENT AIITHORITY MEETINa. MARCH 9. 1995 PAGE il establish a pilot program where they can select 50 sites over a period of nine years. On those sites, the taxes that the land pays will go to the taxing jurisdiction as is done now. The taxes that the structures pay will go to the HRA housing replacement fund. That will be for a period of 20 years and can only be used for housing replacement activities. This is one of the few programs where the HRA cannot lose. Mr. Casserly stated the program allows the HRA to select sites where the houses have already been taken down. Because the HRA is not trying to sell these homes to low and/or moderate markets but rather in the range of $90,000 to $110,000, it does not fit into a housing program. It does not fit anywhere. This is a program which is why the HRA may want to have a different approach for empty lots. One option is to sell to the people who will commit to the highest value structure on the site. The goal of the program is to work in areas that have stabilized or declined and try to get as high a market rate home as possible in those areas. For example, the HRA may consider giving away the property in order to have a higher value home in an area. If the neighborhood homes are valued at $80,000 and a home is built worth $90,000, the area will be upgraded. The HRA may want to look at whether they want to sell the land at all. If the ^ legislature adopts this program, these places will have higher valuation, and the HRA will capture some of this valuation. Ms. Schnabel asked if anyone had run the figures out on what it costs to acquire these properties. Mr. Casserly stated the costs will not be recaptured. This is only a small way to recover the costs and have a revolving fund. He hopes, as the program develops and by adding three or sites per year, that the HRA will get more interest and higher value homes going into these areas. MOTION by Mr. Prairie, seconded by Ms. Schnabel, to approve a Resolution Requesting the Legislature and Governor of the State of Minnesota to Pass and Sign into Law Special Legislation for the Fridley Housing Replacement Program. IIPON A VOICE VOT$, ALL VOTING AYE, CHAIRPERSON COMMERS DECLAR�D THE MOTION CARRIED. 9. CONSIDER APPROVAL OF 1995 HRA BUDGET Ms. Dacy stated staff maintained the same format in the budget. The budget summary memo provides an overview of the budget. The cash flow and projection of annual cumulative balances is similar to previous years. For 1995, staff has added a column called � "Projects". �, � � HOIIBING & REDEVELOPMENT AIITHORITY MEETING. MARCB 9, 1995 PAaE 12 Ms. Schnabel questioned the expense for banners for Mississippi Street and did not recall that the HRA had authorized that expense. Nis. Dacy stated the HRA had not authorized that expense. This is an item yet to be discussed. Other communities, such as Columbia Heights and Minneapolis, use banners. The type of banners staff is evaluating are cloth banners that hang from the light posts, for example along Mississippi Street, from 5th Street across the intersection. Staff have received costs from some contractors. This is an aesthetic issue to dress up the intersection now that the redevelopment is almost done. For the cost, the City could get three different sets of banners - perhaps one set for the 49- er Day event; one with a holiday design; and perhaps a special design that would feature the dota�ntown area specific to that intersection. This is a way to dress up the street. The cost would be less than $10,000 for the three sets of banners. Mr. Commers stated he was not sure this was a cost that should be the HRA's. Ms. Schnabel agreed. Mr. Prairie referred to the operating budget summary and asked why the 1995 budget for professional services was so much higher than that allocated for the previous year. Ms. Dacy stated the increase was because of the services associated with the Southwest Quadrant including relocation and with Lake Pointe. Mr. Commers asked if there was anything they could do about that. This is a very expensive proposition. Ms. Dacy referred to the detail page of the operating and outlined the expenses included under professional services. All of these costs have been presented to the HRA to this point. Mr. Commers thought these costs seemed high and asked if there was a way to control some of these costs. Ms. Dacy reviewed the professional services by item. Mr. Prairie stated the increase for the services contracted non- professional looks to be mostly demolition. The other is harder to see where the figures are. Everything else must be new. Ms. Dacy stated the costs for the environmental audits are less than projected. There is a remediation problem at the fast lube site which has not yet been budgeted for. The actual expense of doing monitoring or whatever the plan calls for will be HOIISING & REDEVELOPMENT AIITHORITY MEETINa. MARCH 9, 1995 PAaE 13 �.. reimbursed up to 90�. Staff will have to budget up to the $50,000 figure provided by the consultant. Also, there is also the possibility of minor contamination at the Lake Pointe site. Again, that expense should be reimbursed up to 90�. Ms. Schnabel stated the statement in the memo that the level of contamination has been checked in the 8-acre area at Lake Pointe near Highway 65 where the former bus company was located. She asked when that bus company was located there. Ms. Dacy stated there was a bus company in the early 1940's. Ms. Schnabel asked how far back can one go on the contamination. Mr. Commers stated the real issue is liability. The HRA can go back to the sellers on the liability. He thought they should be put on notice. Ms. Dacy stated she had checked on the purchase agreement on the fast lube property. There is a statement in the purchase agreement that the HRA accepts liability for the possible contamination. On the Lake Pointe site, there may be a question of liability. �"� Mr. Commers stated he would like to have someone look at that to see how binding that is. Mr. Prairie stated it would be helpful under professional services to have a Southwest Quadrant group and a Lake Pointe group. Mr. Ellestad stated the Southwest Quadrant part of this budget section is $198,691 and the Lake Pointe portion is $32,000. Ms. Schnabel asked if they had talked about the payments to the school district and possibly having to stop doing this temporarily. Mr. Prairie stated the only conversation he recalled is that this is one year at a time. He had not heard discussions about cutting. Mr. Commers stated the HRA is now talking about being in a position where the HRA may have to levy an assessment or put out another bond. It gets to be a situation where, on one hand, the HRA may have to do more debt financing and, on the other hand, the HRA is giving money back. Mr. Prairie stated the HRA has passed this through since 1988 or �"1 1989. �„\ HOIISINa � REDEOELOPMENT AIIT80RITY MEETING. MARCH 9. 1995 PAGE 14 Ms. Dacy stated staff included those e�cpenses in the cash flow. Again, this is a conservative cash flow. Mr. Commers stated in years 1995, 1996 and 1997 the HRA has a $2.5 million, $1.3 million, and $1 million deal. In those years, they may have to reconsider returning money to the schools. Someone needs to look at the budget and give the HRA advise on what to do. He asked if there was a conflict. Mr. Burns stated there is a strong philosophical issue in turning the funds back to the schools. It is money that was not anticipated at the time of creating the tax increment district. The money was created by referendum. As he understands it, there is an effort to make this mandatory. Mr. Commers stated the HRA is financing the schools. If we had extra, that would be one thing. If we have to start borrowing to complete projects, what the HRA is really doing is financing the school district. Mr. Prairie stated he philosophically agreed. If they have done this six years out of seven, however, does not change the thinking. �, Mr. Commers asked if they should have to put a$150,000 assessment on the people and should they have to put a$1.5 million bond out there with $50,000 a year in expense in order to give the schools $300,000 or whatever back. Somehow, this does not sound right. Mr. Burns stated he understood the point. The school board can make a good case for their right to recover that money, and from a community relationship standpoint it would be disastrous not to pay the money to the schools. Governments have enough trouble keeping good public relations without fighting among themselves. Mr. Prairie stated the HRA has been careful to tell them all along the situation. Otherwise, there would be no need to discuss it. Mr. Burns stated the other issue is that the school districts are much more limited in what they can do financially than are the cities and HRA's. The school can only keep a fund balance not exceeding 100 of the operating budget. That does not apply to cities and HRA's. Anything we take away from them is lost in terms of teachers and school. On the other hand, our cash flow picture does show that the HRA is doing very well. Overall, the fund balance is staying up. � Mr. Commers stated it looks as if the HRA may have to go out to the market to raise additional �onies on a cash flow basis. � �, /'1 SOIISING & REDLVELOPMENT AIITHORITY MEETIN4. MARCH 9, 1995 PAGE 15 Mr. Burns stated this may be correct. He thought they should borrow as long as the financial advisors feel the time is right. Mr. Commers stated he was not sure that they, as a governmental body, should be leveraging as much as possible. This adds additional risk and adds justifiable criticism. Mr. Casserly stated the school district issue may resolve itself. There is proposed legislation stating that any tax increment paid by the Authority to the school district will need to be reported to the Department of Revenue. The theory behind that may be that this amount will be deducted from the aid to the school. It will be interesting to see how this comes out. This topic will be revisited. Mr. Casserly stated the funds are a significant assistance to the school district. This is voluntary on the HRA's part. If the legislation passes, there is very little reason to continue to make this contribution. Mr. Commers asked if approval of the budget meant they had approved the stated amounts for Frank�s Used Cars and for the banners. Ms. Dacy stated yes. Mr. Commers stated he did not like to do this without discussing or having input. Ms. Dacy stated this is authorizing the budget to account for those expenses. Mr. Burns is still negotiating on the Frank's Use Car property and staff will have to come back for approval of the purchase agreement. For the purpose of the budget, staff tried to outline as many expenses as possible for the coming year. Mr. Commers stated the bottom line amount may be fine, but he does not want that to indicate that the HRA has agreed to spend funds for banners without bringing it before the HRA for discussion. Ms. Dacy stated the intent is not to force expenditures through. This is a means to try to anticipate expenses. Mr. Commers stated the HRA has agreed on the Gunderson property and the Dairy Queen taxes, but he did not know abaut other items. He did not recall discussion about the plaza area tree replacement. Mr. Burns stated a Phase I audit has been done for Frank's and staff has a report. The report looks better than that for Gary's � �. �, 80II8INa & REDEVELOPMENT AIITHORITY MEETINa, MARCB 9, 1995 PAGE 16 Automotive. There is a well that needs to be capped and there are some underground tanks that need to be pulled. Petrol funds would apply. In the negotiations with the heirs of the estate, staff has stated the heirs are expected to cover the environmental costs for Phase II. Staff shared the report with the heirs and have allowed them to discuss with the consultant how to go about getting petrol fund monies. At this time, there is not a written purchase agreement. Mr. Burns has terms drafted in letter form. Ms. Dacy referred to the budget pages for Housing Programs 1995. The expenditures are separated between Hyde Park and citywide. This represents a departure from what was done before. In the redevelopment plan distributed in December, the recommendation was to try to focus on neighborhoods at risk, preferably one or two per year. The first is Hyde Park. Next week, the focus groups will start. As a result of these focus groups, staff will be coming back with suggestions to meet the needs. One new program is the Last Resort Housing Rehab Fund. This program is for homeowners who are unable to qualify for an existing home rehabilitation program. The effort and the direction of the Council is to make a significant impact in one area. The HRA will be seeing more about Hyde Park in the future. Ms. Schnabel asked where the relocation costs for the apartment tenants was included in the budget. Mr. Ellestad stated these costs were included in the section titled Land. Mr. Commers referred to attachment 9B, Southwest Quadrant Expenses, and asked what the $2.1 million as budgeted for the apartments was for. Mr. Burns stated this was the acquisition costs for the four apartments that was budgeted. Mr. Commers asked what the HRA's status was in the arrangement with the City. Ms. Dacy stated, as she recalled, they would wait until they got some better numbers on the acquisition and relocation and, at a later time, process the loan agreement with the HRA and the City. Mr. Burns stated previously discussed was a$3.2 million net cost after revenues were received from the land sale. The HRA would provide $1.6 million and the City would lend $1.6 million at 5�S interest for the life of the district. � 80II8ING & REDEVELOPMENT AIITHORITY MEETING. MARCH 9. 1995 PAaE 17 MOTION by Ms. Schnabel, seconded by Mr. Prairie, to adopt the 1995 budget with the additions, changes, and/or corrections as outlined. IIPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON CONIIMERB DECLARED THE MOTION CARRIED IINANIMOIIBLY. 10. SATELLITE LANE APARTMENTS Ms. Dacy stated a meeting had been held with the tenants from the Satellite Lane apartments. An article with comments from that meeting will likely appear in next issue of the Focus. Ms. Dacy stated she had received a call from a woman from the Cherrywood Apartments who stated a number of tenants were confused and upset with some of the information received from the relocation consultant. She stated the tenants had contacted a tenants union to represent them. They were going to try to have a weekly meeting and she listed concerns about the information given them on the process and how much tenants would be given for relocation. Ms. Dacy stated she went to a meeting with the tenants. ,..� Approximately 30 tenants were at the meeting. She listened to and listed approximately 28 concerns. In summary, the tenants are upset about the time frame that they have to move out because of their income status. They wanted to receive some of their relocation monies up front in order to enable them to pay the security deposit. Tenants are confused about what they are eligible for and how much they can receive. Mr. Commers asked if those tenants would get back their security deposit. Ms. Dacy stated yes, but there may be reason to believe that some of the owners may not be cooperative on that issue. This is a concern of the tenants. Staff has reason to believe that one of the owners is still having apartments rented and that tenants are still moving in. There is a whole mix of issues occurring at this time. Ms. Dacy stated there are two issues they wanted to discuss. Staff would like to executive checks on a weekly basis in order to meet the demands of the relocation claims. To adhere to the typical monthly cycle creates an imposition for the tenants. The HRA must abide by the Uniform Relocation Act (URA) which requires documentation of how much the tenants receive. Another issue was whether the tenants could get a portion of the relocation costs up front. Mr. Schnitker has assured Ms. Dacy this is possible � and has been done in other relocation projects. � HOIISING & REDEVELOPMENT AIITHORITY MEETING. MARCH 9. 1995 PAGE 18 Ms. Dacy stated staff is requesting authorization to execute the relocation payments on a weekly basis and to provide the monies in advance but withhold between $200-$300 until the tenant is relocated. Mr. Commers stated he thought this was fine, but he requested a letter from Mr. Schnitker stating this is an acceptable thing to do. Ms. Schnabel asked what their guarantee would be, if someone takes relocation money and moves out, that the owner will not rent that same apartment and that tenant would also receive relocation money. Ms. Dacy stated, according to the URA, tenants must be in the unit 90 days before the date that negotiations were initiated for acquisition on the property. This process started in December. If someone moved into an apartment in December, they would not be eligible for the relocation payment but they are eligible for moving expenses. Ms. Schnabel stated they used to post a billboard on property when it was to be rezoned. Is there anything that can be posted ,...� on the apartments knowing we are in the process of acquiring them? This may resolve some of the problems with new tenants moving in. n Ms. Dacy stated she thought this had been discussed with the attorney's office. She will get clarification on that. As she recalled, the direction was it would not be legally possible. Mr. Prairie asked what the total number of tenants were in the apartment buildings. Ms. Dacy stated there is a total of 76 units. She did not know the actual number of tenants per unit. The relocation consultant has met with 40 of the 76 households and will continue to work on that list. Ms. Dacy stated another issue was the matter of the application fees. Some people are having to apply to two or three apartment buildings. In order to get a credit check as part of the application can cost from $20-$35. If they apply to two, that is an expenditure out of their pocket and, because of their incomes, they just do not have the money. She talked to Mr. Schnitker and Mr. Herrick who stated it is not required by the URA but, if the HRA wanted to provide the additional service, they could reimburse up to a maximum of $50 per household strictly for the application fee. She did not think all households would take advantage of this. On the other hand, the Cherrywood Apartments is where more of the lower income families are located. :=� �� 80IISING & REDEVELOPMENT AIITHORITY MEETIN�, MARCB 9, 1995 PA�$ 19 Mr. Commers stated, over and above moving expenses, what do tenants get for relocation. Ms. Dacy stated, depending on income, relocation can range from just moving expenses plus a housing replacement payment based on income and the difference between the rent currently paid and the rent in the new location multiplied by a factor of 42. If a tenant has a higher income, they may get $0 plus moving expenses. If a family is very low income, they could receive anywhere from $2,000 to $10,000. Ms. Schnabel stated one question asked was why face-to-face meetings were required and if the tenants were being judged. Is this a concern with the relocation person? Ms. Dacy stated she thought tenants do not trust the process and they do not understand it. She tried to explain that this is the only way for staff to get the information. She also felt the tenants did not understand that the URA is based on income requirements. She got the sense that some tenants feel income should not be an issue but rather all tenants should receive a flat reimbursement. Ms. Schnabel asked if it would be helpful to call someone at the tenants union and tell them that we are concerned and want to reassure these tenants. Ms. Dacy stated she would be doing that. The city attorney recommended she contact them and that we are trying to respond to the concerns addressed at the meeting. Mr. Burns stated a part of the problem that he saw with the relocation process is that it is not black and white in all cases. He advised staff to send letters out advising tenants of the impending acquisition and condemnation process. This was before talks began with the owners. Owners resent contacting tenants before they are contacted. The law does not require a letter, but practice seems to dictate this be done. Ms. Schnabel stated she thought the tenants are feeling dispossessed and scared. We have an obligation to try to work with them as much as we can within the framework of the law. Mr. Burns agreed. He thought the proposal for application fee reimbursement was worth the few additional dollars to treat these people as well as possible and to recognize that they do have cash flow problems. MOTION by Ms. Schnabel, seconded by Mr. Prairie, to authorize �''� staff to issue partial payments on a weekly basis and that the HRA agrees, over and above the required relocation expenses, to ^ $OIISING & REDEVELOPMENT AIITHORITY MEETINa. MARCH 9. 1995 PAGE 20 reimburse up to $50 per household for confirmed application expenses. IIPON A VOICL VOTE, ALL VOTIN�3 AYE� CHAIRPER80N CO1rIIKERB DECLARED THE MOTION CARRIED IINANIMOIIBLY. Mr. Commers stated he was concerned about the relocation consultant and the publicity. Mr. Prairie stated, when something like this happens, they could expect some adverse publicity as normal. Ms. Dacy stated she thought the tenants union is knowledgeable about the URA, that they could work out the issues and then report back to the tenants. The HRA must also be careful not to advise tenants. ADJOURNMENT MOTION by Ms. Schnabel, seconded by Mr. Prairie, to adjourn the meeting. 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