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HRA 05/08/1997 - 6276HOUSING & REDEVELOPMENT AUTHORITY MEETING THURSDAY, MAY 811997 7:30 P.M. WILLIAM BURNS EXECUTIVE DIRECTOR OF HRA CITY OF FRIDLEY HOUSING & REDEVELOPMENT AUTHORITY MEETING THURSDAY, MAY 8, 1997 7 :30 P.M. AGENDA LOCATION: Council Chambers (upper level), Fridley Municipal Center CALL TO ORDER ROLL CALL APPROVAL OF MINUTES: April 10, 1997 CONSENT AGENDA: Consider Resolution Authorizing Execution of Development ......... 1 - 1 D Contract, Commercial Rail Properties, Inc. Consider Resolution Approving and Authorizing Execution ....:.... 2-213 of Tax Increment Pledge Agreement Respecting $9,575,000 General Obligation Tax Increment Refunding Bonds, Series 1997A Revenue and Expenses ..... ............................... 3-3C ACTION ITEMS: Consider Resolution Authorizing Execution of Development ........ 4-4 Contract, Linn Properties Consider Acquisition of 5800 - 2"d Street N.E . .................... 5 - 5 �.� INFORMATION ITEMS: Fridley Executive Center Update .............................. 6 Housing Funding Update ..... ............................... 7 - 7A OTHER BUSINESS`�'' ✓� ADJOURNMENT CITY OF FRIDLEY HOUSING 6 REDEVELOPMENT AUTHORITY MEETING APRIL 10, 1997 CALL TO ORDER: Chairperson Commers called the April 10, 1997, Housing and. Redevelopment Authority meeting to order at 7:33 p.m. ROLL CALL: Members Present: Larry Commers, Virginia Schnabel, John Meyer, Duane Prairie Members Absent: Jim McFarland Others Present: William Burns, Executive Director Barbara Dacy, Community Development Director. Jim Casserly, Financial Consultant Rick Pribyl, Finance Director Grant Fernelius, Housing Coordinator Craig Ellestad, Accountant . Niles Schulz, Dolphin Development & Construction, Inc. Stephen Linn, The Linn Companies Joe Harding, Dolphin Development & Construction, Inc APPROVAL OF MARCH 13,-1997, HOUSING AND,REDEVELOPMENT AUTHORITY MEETING: MOTION by Ms. Schnabel, seconded by Mr..Meyer, to approve the March 13, 1997,.Housing and Redevelopment Authority minutes as written. UPON A VOICE VOTE., ALL VOTING AYE, CHAIRPERSON CONNERS DECLARED THE MOTION CARRIED UNANIMOUSLY. CONSENT AGENDA: 1. RESOLUTION AUTHORIZING JOINT ACCOUNT WITH CENTER FOR ENERGY AND THE ENVIRONMENT TO ADMINISTER HOME IMPROVEMENT LOAN PROGRAM 2. ACQUISITION OF 5800 - 2ND STREET N.E. 3. RESOLUTION APPROVING TIF #15, MINNESOTA COMMERCIAL RAILWAY 4. REVENUE AND EXPENSES Mr. Ellestad distributed.copies of additional expenses needing HOUSING & REDEVELOPMENT AUTHORITY MTG. APRIL 10 1997 PAGE 2 approval as outlined in his memo dated April 10, 1997. Mr. Meyer requested that item #2, Acquisition of 5800 - 2nd Street N.E., be placed on the regular agenda for discussion. MOTION by Ms. Schnabel, seconded by Mr. Meyer, to approve Consent Agenda items #1, #3, and #4 and the additional expenses as outlined in the April 10, 1997, memo from Mr. Ellestad. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON CObgjERS DECLARED THE MOTION CARRIED UNANIMOUSLY. ACTION ITEMS• 6. .RESOLUTION APPROVING TIF #16, STEVE LINN Ms'. Dacy stated the subject parcels (5) are located in the northeast corner of Main Street and 57th Avenue. The site is approximately 1.5 acres and is zoned C -2, General Commercial. To the south is the Holiday Plus store, and to the southwest is Home Depot.. To the north of the site is the Hyde Park area. To the east of the site is Burger King, an apartment building, and Hardee's at the northwest corner.of 57th and University. Mr. Meyer asked what the S -1 zoning was. Ms. Dacy stated S -1 is a special zoning district that was created in the latter part of the 1970's. designed for the Hyde Park area. The S -1 indicates that it is the first special district and contains unique requirements that do not exist in other districts in the area. Ms. Dacy stated the request is threefold. The first part is that the developer is asking for tax increment assistance; in.other words, to create a tax increment financing (TIF) district .to provide the increment to finance the.project. Secondly, the redevelopment project area needs to be amended to add the parcels to the redevelopment project area. Third, staff is requesting to include the proposed and existing right -of -way for 57th Avenue in the project area to enable the HRA to make potential TIF expenditures as part of a future reconstruction of 57th Avenue. Ms. Dacy stated the redevelopment project being proposed contains two parts. First, the developer is proposing to acquire and renovate the former Dick's Wheel and Tire building and reuse that as a Goodyear service center. Second, the request is to put together three of the five parcels, take down the single family home, and construct an 8,000 square foot strip mall. The developer is assembling five parcels for the two developments. As HOUSING & REDEVELOPMENT AUTHORITY NTG., APRIL 10, 1997 PAGE 3 part of this assembly, the single - family home would have to be demolished. There was a duplex on the site for which the HRA passed a resolution identifying that as blight, and that is one of the eligible parcels to be included in this development.. Ms. Dacy stated the project costs', according to the developer, is approximately $1.5 million. About $460,000 is to acquire-the three parcels, the land costs for the Dick's Wheel and Tire site and to demolish the single family home. The proposed TIF district is a redevelopment district which has a maximum life of 25 years. However, the increment can be used not only to•provide assistance but also future increments can be used to repay the HRA for any costs incurred for the 57th Avenue reconstruction. Ms. Dacy stated the assistance package being recommended is a pay - as- you -go note of $175,000 to be paid over 12 years. The developer has originally requested $200,000. Staff is recommending $175,000. The assistance staff is proposing is truly not a subsidy as in an economic. development project, but.is a redevelopment cost. As mentioned earlier, there is $460,000 eligible acquisition and demolition costs. Ms. Dacy stated the HRA has evaluated other commercial projects in. the past. Some have been approved and have not been approved. Examples-of-projects evaluated include the northeast quadrant of University and.Mississippi Street; the Cub Foods.and Bob's.Produce projects are part of a redevelopment district; the office project in the southeast corner of University and Mississippi; and the Moore Lake developments on the east side of Highway 65. An example of a commercial development the HRA chose not to pursue was a.strip mall and automotive service center.on the east side of Highway 65 proposed by Mr.'A1 Schrader. However, that was a vacant site to begin with. Ms'. Dacy stated, pertaining to 57th Avenue, there has been a lot of work on traffic analysis for that street.. The developer and Holiday Plus updated a.1996 Home.Depot traffic study:. The City was a client with Holiday Plus.. Out of that study there is a reconstruction plan that is recommended., and City staff and*the City Council are now working on a package to submit to.Anoka County to share the costs of that reconstruction.. A copy of that plan was included in the agenda packet. The impact to the HRA would be 50% of the street lights and 500 of the landscaping and irrigation costs. These costs have yet to be further determined and refined. Ms. Dacy stated staff's recommendation is to evaluate the resolution to add the five parcels and the existing and proposed right -of -way of 57th Avenue into the:redevelopment project area HOUSING 1 REDEVELOPMENT AUTHORITY NTG., -APRIL 10 1997 PAGE 4 and to create a TIF district; and to authorize staff to prepare a development contract with the assistance package outlined. The HRA does not have to take any action regarding the street lights or.the landscaping issues. Staff will come back with more details. However, staff is requesting to include the right -of -way in the project area. The developer received approval from the Appeals Commission on variance requests subject to several stipulations. The next step is City Council evaluation and approval of the TIF district at their April 28 meeting. A public hearing will be held on April 14. Ms. Schnabel stated it sounds as though the upgrading of 57th Avenue is a part of this request for assistance. Technically, that is not true, is it? The 57th Avenue upgrade could go.forward if this went forward or not. Ms. -Dacy stated this.was correct. The HRA could pass a--separate motion to add the right -of -way to the project area and proceed. Ms. Schnabel asked if the financing of doing the project was' tied to this TIF district. Ms. Dacy stated the financing of the reconstruction wi.11 come from Anoka County, the City and some.type of assessment to the.-property owners. The part that includes the HRA is the street lighting element and the landscaping element, and staff i$ proposing the HRA pay 500 of that. If the district is created, the increment could be used in the future to offset the HRA's costs. Mr. Commers stated that would be after the first 12 years. He asked for the total amount that the.HRA would pay on this project. Mr.. Casserly stated the total, principle and interest, was $306,566. Mr. Commers stated, as he told Mr. Burns, he -has great difficulty with this kind of project being a commercial project. It is not a project that we have done similarly in the past. In his opinion, they have never done a project in terms of direct assistance to a developer. The Cub Foods project.and the West Moore Lake project was something quite a bit different. That is where he has the difficulty in that it is a direct payment on a commercial type of a project which has not been the HRA's practice. Mr. Casserly stated, in past actions, the HRA has fronted some money to either acquire parcels and incurred some redevelopment expense and sold the property. So, the HRA has fronted these expenses and incurred them up front. In this type of a hybrid project, what we have.going on here is the developer is fronting HOUSING & REDEVELOPXM AUTHORITY MTG., APRIL 10, 1997 PAGE 5- expenses which the HRA could legitimately front and, in addition, the HRA could borrow from reserves, incur the expense and then sell the property. In this instance, the redevelopev is taking the note that the HRA issues and using a revenue stream of security for borrowing money. They are providing the equity that the HRA could have provided, if you so choose. It is really no different arrangement than what you have done. In some respects, if the HRA can do redevelopment projects like this, you have managed to shift the risk to a third party. Mr. Commers stated there is a direct subsidy in terms of the tax increment. When Mr. Casserly says we shift the risk, we do shift the up front risk but ultimately there is a $300,000 subsidy being made. Mr. Casserly stated it is hard.to figure out in these kinds of projects where the subsidy exists. It i-s hard to know if you are subsidizing the land. If it were clear and could be developed right now and then you write down the land further, generally you would think of that as a subsidy. When there are-other-expenses involved to get the site ready for development, he thinks of those as redevelopment expenses. It is not often that you are able to have someone absorb redevelopment expenses and then reimburse them. Mr. Commers stated the overall project looks good and he would presume it will do some enhancement. Although, it will enhance the traffic issue and we will have to deal with the City as well in their dealing with the street on 57th Avenue. It is true- that the HRA could put the 57th Avenue right -of -way into the project area and still finance some of the costs from that as we would anyway, although we might not get it back from the tax increment. He is hearing that the HRA would get it back. Mr. Casserly stated there is an opportunity to recover the costs. It is.toward the end of the district because the early years goes. to provide early assistance. Those are clearly eligible expenses that are charged to this district. Mr. Linn stated he has been working with staff and Mr. Casserly for several months. He actually got involved in the project last fall. He is affiliated with Holiday Company as a Holiday station franchisee so he has contacts with individuals in the company. They contacted him about a property they had in Fridley, namely the former Dick's Wheel & Tire, and they .asked him to take a look at it. They.knew he was in the automotive service business. Mr. Linn also operates a, number of Amoco and Conoco facilities and has' a number of Goodyear tire dealerships. He came out to look at the property. He is not a developer in.the true sense. They are HOUSING & REDEVELOPMENT AUTHORITY NTG. APRIL 10 1997 PAGE 6 developing and redeveloping, and.hope to redevelop this site. The TIF district -is.to enhance the project: It is not intended as a subsidy to them. When he looked at the project, he was interested in the area due to the traffic counts, the density and what they thought they could do with a Goodyear store there. But the entire area around it was blighted. At that time, there was a boarded up, vacant house and the house that remains is a rental house that he felt did not fit with the area. Mr. Linn stated the automotive service center has obviously been neglected and is in desperate need of renovation. To-do so creates a lot of additional costs that you would not have if building from the ground up. If he had bare land, he would not have the costs that he would.have .into redevelopment of that site. They need to brick up one set of garage doors because of inadequate storage facilities. The.windows are not up to standards. They need to be removed and disposed. The roof on the building needs to be replaced. It is more difficult to remove the ,existing roof and insulation underneath and put another one on than it is just to put in a new building. Unfortunately, there is a building there that does have a sound structure as far as exterior walls but it does create a number of costs. The economics of doing the project do.not work without TIF financing. As Mr. Casserly said,, the intent is that these funds and the commitment on the,TIF would be used for additional financing. It is not funds that they would ever actually see, but the funds would be invested directly into the facility through means of financing. Mr. Commers asked if the cost of the building was $233,000. Mr. Casserly stated Mr. Linn tried to breakdown the costs.- They tried to break out the building costs and separate that from the land costs. $233,000 is the cost of the building and about a third of a million dollars is needed to do all of the <renovations and improvements. Mr. Commers asked how long the Dick's Wheel and Tire building has been vacant. Ms. Dacy stated the building had been vacant since August, 1996. Mr. Commers stated it sounds as if the building was substandard and could be condemned. Ms. Dacy stated she had been inside the store when it was operational and is not surprised.by the amount of work that needs to be done. As part of the site plan, Mr. Linn is also proposing to redo the parking lot, curbing, fencing, etc. HOUSING & REDEVEWPMM AUTHORITY MTG., APRIL 10, 1997 PAGE 7 Mr. Linn stated, for.example, the bathrooms that exist do not meet today's City codes or ADA standards. Their intent is redo the bathrooms. They will need to remove the bathroom walls to make them large enough for wheelchair access. The plumbing is substandard. The.electrical is substandard. The parking lot lighting is.substandard and does not meet expectations in any city today. The parking lot will be changed. It is less expensive to just put down a blacktop parking lot than it is to remove one-that already exists and put in another one. Mr. Linn stated, as far as the building being condemned, the components inside the building do meet justification for condemning (plumbing, electrical, HVC, etc.); however, the structure itself is fine and meets or-even exceeds.today's architectural standards. It does not make sense to demolish the building. Mr. Linn provided drawings of the proposed buildings. To the west would be an 8.,000 square foot..retail.center .or strip mall. They have been working with staff to create a beautiful.design that would have arched roofs to match the pillars on the side, awnings. over the windows, creative lighting, and use colored block.to bring in some color, all of which add expense. The automotive service center currently has six garage doors across the front of the building. Their intent is to replace. all the doors with those* that have some: glass., The last door would become a storage area. There are six doors in the back as well.-' ell. A number have been boarded up and not used for a few.years. Their intent is to brick the last door and use that area for storage with access from one side.. They would add a new trim piece along the top.. The colors in the door, the trim and beneath the glass would all match. 'All of the stuff currently on the building would have to be removed. The brick.and block would have to be acid washed and cleaned as well as a great deal of repair to what is there now. It will really dress up the building. Currently, the landscape has never been taken care of. With the redevelopment of the parking lot and redevelopment of the road,. it would require all that anyway: The fence along the back is not salvageable: They will put in a new fence that is more decorative which was a recommendation of staff and the result of a survey from the neighborhood. Mr. Linn showed drawings of the parking lot layout. Currently, the.parking for the service center.lines up with the proposed retail center. Along the east is brush and landscaping that has been maintained and is between the service center lot and Burger King property. They are shifting the parking to the west which requires new.blacktop and.allows.for a large.enough retail center. Although it is a two -part project, this is really one project. It would be impossible for them to develop a retail center because of HOUSING & REDEVELOPMENT AUTHORITY MTG. APRIL 10 1997 PAGE S the parking and lack of space. He personally would not have been interested in renovating the service center with the condition of the surrounding property. That is how he got involved in both. This is not the first strip center they have done. Mr. Commers asked if, by keeping together, they could use parking interchangeably between the two. Ms. Dacy stated this was correct. Mr. Commers asked if this needed to remain they could be divided into two parcels. Ms. Dacy stated there is enough parking on could be sold as separate. parcels. If the some part of the day, people could park at set up so that they could be -conveyed as ti as single parcels or if the both sites so they strip mall.was busy for the other site. It is ao separate parcels. Mr. Linn stated the property line runs between the two sites. There would cross easements between the parcels. The company would actually be the owner and operator of the automotive service center.site and the landlord of the strip mall. Mr. Commers stated the first action. is to adopt a resolution modifying the project area to include these parcels into the current project area and also to include the, right -of -way on. 57th Avenue. MOTION by Mr. Meyer, seconded by Ms. Schnabel, to approve a resolution to include expansion of the project area and to create tax increment district #15. Mr. Meyer asked if Mr. Commers had any comments for them on this motion. Mr. Commers stated he felt everyone had to deal with the issue however they think about it. He has no objection to this motion He thought the bigger issue is whether or not it is appropriate for the HRA to get into this kind of financing on this kind of a project. He has great difficulty supporting the actual project: As far as creating the TIF district, the HRA obviously will have to do something with the.street and traffic and he thought that was appropriate. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMKKRS DECLARED THE MOTION CARRIED. UNANIMOUSLY. Mr. Commers stated the next motion is to provide for a development contract for $175,000 for tax increment assistance via pay- as -you- HOUSING & REDEVELOPMENT AUTHORITY NTG., APRIL 10, 1997 PAGE 9 go financing. MOTION by Mr. Meyer, seconded by Mr. Prairie, to approve a development contract for $175,000 via the tax increment assistance with a pay -as- you -go note. Mr. Commers stated he thought it was straight forward in that this is an economic development district. We are trying to make into a redevelopment district. The issue is whether or not it is appropriate �o do the pay -as- you -go type of financing on what he would characterize *as a commercial transaction. He did not think they had done those types of things. He did not think the HRA did those kinds of projects and he -does not want to open themselves up to having commercial developers coming in with those types of requests. This is his personal opinion. Ms. Schnabel.stated she did not see this as redevelopment in a sense of an existing property that needs to.be redeveloped to bring it up to a high standard. Mr. Commers stated this is certainly redevelopment under the statutes. Everyone seems to be saying Holiday has a building that is not very good, that something is going to have to be done to it, and it is going to have to be redeveloped in order to be-put into use of some kind. He thought.that is what it is, and that is why they came to Mr. Linn.to see if he was interested in.. redevelopment. In its current state, it must be not economically feasible to use. He presumes Holiday does not want to put any money into it to bring it up to standard. Mr. Linn stated he has been in the automotive service.bus.iness for most of his life. He thought they could get someone in there and operate it much like Dick's Tire did. There are people who are .willing to operate in a very run down type of setting. He did not think that particular type of person would be able to afford to buy, but may be able to lease it as Dick's Tire leased from Holiday Companies. He thought what the HRA needed to-'ask themselves is if.this is what is.best for the City or if that is what you want. There could be a use in there but the use certainly without some sort of TIF financing or some sort of creative financing would not be able to have the type of project that is being proposed. That is his opinion and his belief. Mr. Commers stated he thought Mr. Linn's comments were accurate. He did not think someone would go in and put in money to upgrade it to the same level. Conversely, he did not see how.anyone would be allowed to operate in that building in the condition it is in: If the bathrooms do not meet ADA standards, there is no.way they could get an occupancy certificate. HOUSING & REDEVELOPMENT AUTHORITY MTG., APRIL 10, 1997 PAGE 10 Mr. Prairie stated they could do the minimum that is required. Ms. Dacy stated someone could re- occupy the building as long as they do nothing to the building. Mr. Linn stated that was his experience. A person is required to come up to ADA or OSHA standards or any other standards only if there is a need to pull a building permit. Ms. Dacy stated the building also needs to be brought up to standard if the use is different than for what it is built. Another tire operation could go in there if they made no changes. UPON A.VOICE VOTE, WITH MS. SCHNABEL AND MR. PRAIRIE VOTING AYE, AND MR. MEYER AND MR. COMMERS VOTING NAY, CHAIRPERSON COMMERS DECLARED THE MOTION FAILED FOR LACK OF A MAJORITY. Mr. Commers stated the HRA did have one member missing from -the meeting which may have made a difference in terms of the vote. He knows Mr. Linn has put .a lot into it and looks like a very nice project. Mr. Linn asked-when he might be able to represent the proposal at a time when all members of the HRA are present.. Mr. Commers stated he did not know of anything.that would prevent Mr. Linn from doing so. Ms. Dac.y stated there is no ordinance requirement. The next meeting of the HRA is in May and the HRA could entertain another request in the amount of assistance. Mr. Prairie asked if there.was any area for compromise or for a lesser amount. Mr. Commers stated he did not think.it is an issue of money. It is a good idea and the project is a good project. Perhaps the compromise might come from Holiday to see if they might somehow contribute so the developer might still be able to do it. 7. ACQUISITION OF 5800 2ND STREET N.E. Mr. Fernelius stated this is a rather routine acquisition under the scattered site housing replacement program. The property is located in the Hyde Park neighborhood which is an area we have been focusing on. The property is a two - bedroom house that was constructed in 1948 with approximately 744 square feet. It is sited on a lot which is considered buildable under current code, so that is rather attractive. HOUSING & REDEVELOPMENT AUTHORITY MTG., APRIL 10; 1997 PAGE 11 Mr. Fernelius showed pictures of the property taken last summer when the property was appraised. The pictures of the outside are not indicative of the actual condition of the property. The home does not have a standard basement. The basement has a dirt floor. •A portion of the interior basement wall is actually missing and is shored up with some large wood planking. The property has other numerous code -type violations. - plumbing, electrical, chimney venting, etc. The interior condition is in fair to poor. condition. There is clearly signs of water damage. -The owner has not been able to keep the property up. 'This is a deteriorated property which meets the definition of the program which requires that the cost to improve the property up to today's codes for a new structure at a minimum exceeds 150 of the cost of the.new structure. The property is appraised at $57,200. The owner has been trying to sell it, but due to its condition has had difficulty in doing so. The owner has agreed to sell the property for $54,900. Mr. Meyer stated his point in wanting to discuss this is the fact that this property by its description is about as lousy and poor a property as we perhaps have in Fridley. He cannot believe that people are living in the conditions sited here, and we are talking about.mid- $50.,000's to buy this property, then demolish, get it ready for.resale and .get a few thousand.dollars for.the lot. He thought this property.would be-an-ideal point to try to have it declared as hazardous property.-and condemn it. He thought the time has come, instead.of shelling out unconscionable amounts of money for this property, to see what else.could be done to have it. declared a hazardous dwelling and get rid of.it. He thought they should ask staff and the attorney to explore what steps there might be and what their possibilities might.be to get rid of bli.ght.without paying the kind of money that is-being-asked. He knows the appraiser was there and knows the assessed valuation, and he cannot understand either of those two figures coming anywhere near that considering the description of the property. He did not know how this can continue and people be allowed to live in it. This home has a number.-of major items and we are talking about spending nearly $55,000 for it. He thought something else should be tried or explored before going ahead. Ms.- Dacy stated there area couple of issues.. First, from a legal standpoint, the City does not have a housing maintenance code that would enable staff to go inside homes and make interior. inspections. The program is under the scattered site program which is voluntary. This is not a program to condemn property. If an.owner does not wish to negotiate, then they move on down the list. If they were to go to condemnation, she thought it would have some.policy repercussions that staff would.need to look at. We have discussed this in the past.including Mr. Meyer's concerns HOUSING & REDEVELOP -NT AUTHORITY MTG., APRIL 10, 1997 PAGE 12 about the amount paid for the properties. That is why staff had the appraiser come in and talk with the HRA about market valuations. Home sales in this area for similar types of structures are similar in value. She thought they would have legal and.policy issues if they were to.legally condemn. Mr. Meyer stated he thought these were valid points. However, he thought this was something legal staff explore - the hazardous building ordinances and hazardous buildings in the state building code. There must be some method by which a dangerous house can be abated. This property has exposed electrical, plumbing which could perhaps contaminate a water system, fire hazards, a dirt floor in the basement, joists that are spliced together, etc. He drove by the house and it looks like.it has a sagging roof line also. The pictures are probably too generous. Somewhere along the line, he thought they should make a hard effort to avoid paying this kind of money for a pile of junk. He cannot believe that such a thing exists in the City. Mr. Commers stated he thought it creates a special problem. That is an isolated deal. As a general overall issue, he is surprised that we cannot go into someone's house. Mr. Meyer stated he thought they possibly could, but there must be some way under the public safety that the City can go into a house. He would like to make a motion that the HRA direct staff and their.legal staff to explore the possibility of condemnation proceedings against this house and.others in similar situations and report back to us as to what our courses of action might be. Mr. Commers stated they can request the City. to do something about it. If our.hands are tied legally, there must be some reasonable type of ordinance that would allow the City to do an inspection. If we do not have it in our code, perhaps there is a way to remedy or correct it. Mr. Burns stated staff went into the home of 57th because it was ..a rental unit. The City has an inspection program for rentals. The City does not have a single family maintenance code that allows the City .to inspect the interior. All the inspections done are based on what can be observed from the curb. Mr..Meyer stated the Minnesota State Building Code is the governing item and,. as far as he knows, the building inspector has authority to go inside any structure and make inspections. There are all sorts of nuances to that, but he thought the time has come for all of us to understand the legal ramifications and the possibilities of doing something other than spending this kind of money for this kind of junk. HOUSING & REDEVELOR4=T A7MOR='NTG., APRIL 10, 1997 PAGE 13 Mr. Burns stated staff would investigate the legal aspects but staff were not prepared to respond at this time. Staff has gone through the nuisance abatement process at other locations where they.thought they had the ability. Perhaps we do not know the full limits of their ability, but staff does talk to the attorneys about these issues. Mr. Meyer stated he agreed, but he thought this was a flagrant case. He thought they should truly-wring out their position not only on this property but on others to come so,we know where we can go and where we cannot. Mr. Burns stated, as far as the appraisals, staff has demonstrated in that past that the appraisals.are comparable with the sales in the area. Sometimes it is unbelievable, but it is also.hard .to argue with the numbers. Mr. Meyer stated he did not think there was a comparable house in that condition in this neighborhood that was sold for anything near what is being discussed. Mr. Burns stated the appraiser was at a meeting and showed comparables. He hates to have.it appear that the City is giving away the taxpayers money. He thought they were doing very honest appraisals and basing their decisions on those appraisals. Mr. Meyer stated 'he concurred, but he.thought the time had come-to see if there is another route beyond appraisals or tax assessments to establish the true value of a house that is a pile of junk. How can we say that there is a similar house sold down the block with similar defects that no right - thinking person would put up with. Mr. Burns stated he thought the appraisal process.-is what the law provides for whether through condemnation. or through a voluntary sale. He did not know.of another route. If there is, staff will investigate it. Mr. Meyer stated his proposed motion speaks to the idea that, despite the appraisal route and despite the tax assessor's route, there may be another way to get rid of this kind of property without paying this kind of money. Mr. Burns stated staff has been evaluating the house. It is a very dramatic change in policy and takes some time. Mr. Meyer stated the time is here now for this house to find out what our options are to.fight this kind of structure in the City. HOUSING & REDEVELOPMENT AUTHORITY NTG., APRIL 10, 1997 PAGE 14 Ms. Dacy stated staff would be happy to investigate that. On those communities that do have a housing maintenance code, the policy is not to include interior standards because the interior is considered a person's "castle" in the eyes of the law. This is a slippery area which will be thoroughly investigated. When you start going inside homes and doing condemnations, it will be put to a higher test. Mr. Meyer..stated that is what he is asking. He thought it worth it to put this to the test. Mr. Commers asked what Mr. Meyer proposed for this specific property. Staff has been negotiating with the owner. He thought that creates a problem. He did not think they.could negotiate with the owner, obtain information and use it in a manner different than what was anticipated. Mr. Meyer stated this.bothers him because in the other world you do hear of gaining evidence in ways considered not proper. That bothers him as well, but he would like to hear it from the legal staff in a formal opinion. There may be ways in which a precedent has been established. They may point out that this issue notwithstanding there is nothing we can do about it. He thought it was worth it for now and for in the future. Mr. Commers stated he thought for the future.it would be good to get that information. He was not sure they would be in a position to do something on this specific property. That is the issue to him tonight. He was inclined to think the HRA should approve -this request but instruct staff before we do any more we want an answer.. We.may create .problems for ourselves otherwise on this specific one. He would be concerned about that. Mr. Meyer stated he did not understand, using this as a point of reference, after they get advise and research the matter and find this is something we should not do then bypass this and apply it to other projects. Mr. Prairie asked what would happen if the HRA tabled this item for one month. That.would allow time to get the options. This question may then be academic. Ms. Schnabel asked if the intent was to clear the property including the garage. Mr. Fernelius stated the entire site would be cleared and redeveloped. HOUSING & REDEVELOPMENT AUTHORITY nPG., APRIL 10, 1997 PAGE 15 Ms. Schnabel stated they face the additional cost of demolition in the future. Mr. Fernelius stated yes. Mr. Commers stated the HRA would get the land sale money back. He asked staff the typical sale price for. lots in this area. Mr. Fernelius stated the other properties they have sold in the Hyde Park neighborhood have averaged between $5,000 and $10,000. Mr. Burns asked, in terms of timing, if tabling this item would have an impact on construction- this year Mr: Fernelius stated tabling should not set us back. The discussion would be very timely because staff is going to start looking at additional properties throughout the City so.staff should have a clear understanding of what the HRA wants staff to do. Mr. Casserly stated he thought this community was in a long line of communities trying to resolve this. very issue. The City of Minneapolis spent years and millions to. achieve alternatives. They are not simple. If you can. voluntarily negotiate acquisitions and can do it within the limitations that we work with and you can do them a few at a time over a long period, you will probably have the most cost effective -program a municipality. can put together. If.you move more. toward enforcement, you will have costs escalate -to achieve the same result. The last thing. you will want to do is be involved in condemnation. particularly if you have residents in these locations. His observations from his past experience is that it is very expensive. This may seem. expensive and unreasonable but, if you start taking a difference course, you will find this is not unreasonable at all. MOTION by Mr. Prairie, seconded by Mr. Meyer,-to table consideration of the acquisition of 5800 --2nd Street N.E. until the May meeting. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON CONaERS DECLARED THE MOTION CARRIED UNANIMOUSLY. INFORMATION ITEMS• 8. PREVAILING WAGE REQUIREMENT Mr. Commers stated there is some question as to whether or not the prevailing wage ordinance adopted by the City is binding or applicable to the HRA. The one thing for discussion is that it HOUSING & REDEVELOPKM A=ORITY MTG., APRIL 10, 1997 PAGE 16 does include the Noah's Ark senior housing building. Is it correct that it does not have a bearing on this project? Mr. Burns stated it apparently does not. When he knew the prevailing wage ordinance was coming up, he asked Ms. Dacy to make some contacts. He asked how many projects would be completed and have a signed development agreement prior to the effective date. Noah's Ark is approved, but not signed. Ms. Dacy subsequently made some contacts with the owners of the various projects knowing the ordinance was coming. That is how the language was placed in the agreement. The owners are willing to accept this. Mr. Commers stated there is some opportunity to discuss the matter with the City Council if it is necessary. We know what happened with Rottlund and that it made a significant difference in whether the project moved forward or not. He did not know if this was an impediment. He wants everyone to be paid a fair wage but we are undertaking to do some housing development that economically does not carry itself. If we are going to be successful in doing housing redevelopment, any extra costs will come from the.HRA.' Mr. Prairie stated he was sure there were some developers who will avoid the cities that have this ordinance and go to those that do not to avoid whatever problems they perceive are there. Mr. Meyer stated it is ironic that the Rottlund development, which is private, is exempt where Noah's Ark for subsidized housing will be wracked with a higher wage. Mr. Commers stated he has not had a chance to review it. He was not sure there.was.any language to.be suggested that might make it a little more flexible. Mr.. Burns stated the prevailing wage ordinance goes to the City Council for the second reading on Monday unless you want to ask for consideration to delay the second reading. He understood from talking with the sponsor that the intent is not to stop typical housing redevelopment projects the HRA has been doing. The language exempts 1 -4 family units including townhouses and a lot of the rehab projects that are under $25,000. Mr. Commers stated he was not sure he understood when you say it would not affect the Rottlund project. Is that because each of the individual buildings is 4 units or less so therefore they are exempt? Mr. Burns stated that was correct. HOUSING & REDEVELOPMENT AUTHORITY MTG., APRIL 10, 1997 PAGE 1-7 Ms..Schnabel stated, from what she can see, this is not an actual .ordinance but rather a City policy. Mr. Burns stated it is in ordinance form. Mr. Meyer asked if staff had talked to Noah's Ark to see what would happen to the project. Ms. Dacy stated Mr. Casserly talked to Noah's Ark and she talked to Minnesota Railway and Mr. Linn. It probably will not be a problem. Mr. Casserly stated most of these are pretty large projects. The Noah's Ark project under construction in Spring Lake.Park.would comply with the requirement. Mr. Meyer asked why. they are not objecting. He would assume they- are paying prevailing wages. Ms. Dacy stated they will conform with the requirement of the' contract. It is not the same kind of construction company we ran into with the Rottlund issue. The larger construction companies that do the larger projects tend to have wages that meet the prevailing wage guidelines. The owners.go through a bid process and evaluate that. Mr. Commers asked if this would have any influence with MEPC. Ms. Dacy stated yes. Again, it is a larger construction firm that will construct that type of project and, typically, their wages are in line with the state guidelines. This was in place for other projects. Mr. Commers stated he thought staff should inquire with MEPC. Mr. Prairie asked if it was conceivable that we could have someone come with their own builder. Mr. Commers stated he thought MEPC would do the construction and maintain control of the buildings. They want to be the owner and the manager. Mr. Prairie stated he did not think MEPC would do the construction but rather would be the construction manager. Mr. Casserly stated there is a distinction between Rottlund and others. In a number these, you are providing a level of assistance. In the Rottlund project, they believed that they were paying fair market value so any additional cost above fair market HOUSING & REDEVELOPMENT AUTHORITY NTG., APRIL 10, 1997 PAGE 18 value they did not perceive as.getting a subsidy. Mr. Commers agreed that Rottlund did take that position. Mr. Meyer asked if the HRA should advise the City Council to hold on this in order to investigate the matter more fully. Mr. Prairie stated it would be nice to know. Mr. Commers stated he did not want to get out of proportion if there is no issue but then again it could be a big thing. He is concerned as to what kind of assistance the HRA would have to give for the-project. It is going to be an expensive proposition given the public improvements and hopefully it will not be more that what we have figured. Mr. Burns stated, in his opinion, the prevailing wage as it relates to MEPC is a non - issue. He understands these large jobs pay the prevailing wage anyway and it will not be a problem for those kinds of projects. Maybe the larger concern-you might.have is a concern of the impact of the prevailing wage on the housing redeveloping programs. If you needed more time, it might be the time you would take to find the wording that might be more satisfactory to you in protecting your housing redevelopment programs. As he mentioned, it is not the sponsor's intent to apply this language to townhomes. However, somewhere down the road, someone else might read this and interpret that this does indeed apply. That may'be the type of issue to address. Mr. Commers stated the more they talk about it the more points are made. His sense is that perhaps we should ask the City Council to wait. Mr. Prairie asked how.this would affect a HUD home. Mr.- Fernelius stated that would be exempt because it is a single family home. Mr. Burns stated he did not think the sponsor had any intent to impede the housing program but, if you have some suggestions for changing the language in a manner that would be more suitable for the housing redevelopment program, he is willing to listen. Mr. Meyer stated what about the scenario where the ordinance passes and a non -union contractor starts construction with lower wages. Then a union comes in and sues all concerned for not following the ordinance. The State of Minnesota establishes that for the various counties and for various trades, and he did not know how they are determined. Is there the possibility of a HOUSING & REDEVELOPMENT AUTHORITY MTG., APRIL 10, 1997 PAGE 19 lawsuit between a union and non -union contractor? Mr. Commers stated he did not see a lawsuit between them. It would be between the HRA and the developer. If a developer breaches a contract, it would be the HRA's obligation to try to enforce the contract. At this point, they were talking about penalties. He did not know what the penalty would be. A civil penalty does not seem to be remedied. It seems that they are talking about a penalty to liquidate damages which would be 5% of the-contract amount. That does not look like that is in the ordinance language itself. Mr. Burns stated there is enforcement language that the City Council has asked him and the City Attorney to prepare for the meeting. The language is similar to the prevailing wage enforcement language that is in the Anoka County highway department contract. Mr. Prairie stated he did not think a company will come in and not pay the prevailing wage. He thought the problem will be those companies who do not come in because they do not want to pay it. Mr. Meyer stated, if he was a union person and wanted to hit at the non -union tradesmen competing with his union job, he would look all over to hit the lower paying people in the nose. This would be a way to do it. We might not care too much, but someone in this circumstance could very well care. This is going on constantly between the two groups. Somewhere along the line, we have had to reverse this - once for Rottlund. It would*be too bad to go back to the City Council to reverse this again because someone has a problem with it. Mr. Commers stated he is inclined to think we should do as Mr. Burns suggested to carry this over to the next meeting to give Ms. Dacy an opportunity to verify it is not a problem with MEPC and discuss it to clarify the language so that the expressed intent is clear. Ms. Schnabel stated her guess is that Mr. of the City Council have thought a lot of already, and her feeling is that this has with many issues discussed. If we have a asked to express our concerns, she though ask to wait and discuss it with MEPC. If there would be any other objections. Billings and the members these things out been developed over time concern and we have been t it was legitimate to not, she did not think Mr. Commers stated the only other one is an indirect one. There are developers that would stay away because.of it. HOUSING & REDEVELOPMENT AUTHORITY NTG., APRIL 10, 1997 PAGE 20 Ms. Schnabel stated she did thought this was a pretty generalized ordinance from what Mr. Casserly has indicated and following HUD guidelines and the Anoka County highway department language. It seems to be fairly common language that others are using. She did not see a problem. Mr. Prairie asked if a lot of suburbs have this. Mr. Casserly stated Minneapolis and St. Paul have a prevailing wage ordinance. He did not come across it in the other communities in which they work. Mr. Commers asked if this was common on highway projects. Mr. Prairie stated yes. As you get further out, then it is different. Mr. Commers asked if without a formal motion that staff could talk to the City Council that it is the HRA's consensus to have more time in order to look into a couple of our projects and make sure to clarify the language. Mr. Burns stated he would talk to the sponsor and see what reaction there is. Ms. Dacy stated she would talk to MEPC. 9. UPDATE ON MEPC Ms. Dacy stated MEPC has been working with two potential users and has submitted proposals this week to one of the users. Staff is hoping to get preliminary feedback next week. There may be a third party interested so they are beginning to investigate that as well. Interest in the site is increasing. 10. ANOKA COUNTY HRA CDBG BLOCK GRANTS Ms. Dacy stated the City of Fridley hired CEE to administer the CDBG program and the City hired them at a lower cost, and that has had some impact on the County's program. Mr. Yantos called Ms. Dacy last week. Staff will be meeting with the County to identify the impact and what the next steps will be. Mr. Commers stated he did not remember this being an issue when discussing switching to CEE. Ms. Dacy stated ACCAP conveyed to Ms. Dacy that they were upset about the process. ACCAP felt we should have combined the grant and the loan program. Staff did not know ACCAP could administrate HOUSING 6 REDEVELOPMENT AUTHORITY MTG., APRIL 10, 1997 PAGE 21 the grant and the loan program. 11. UPDATE ON 1997 HOME REMODELING FAIR Mr. Fernelius stated the second annual Home Remodeling Fair was held April 5. Approximately 1200 to 1500 people attended the event. They had steady traffic throughout the day so the vendors were very busy. The event was co- sponsored with the HRA, Home Depot and the Southern Anoka County Chamber of Commerce. About 60 contractors were in attendance. The contractors provided positive feedback. There seems to be a lot of support for what we are doing, and the residents he talked to also seems to like what they were doing. They will try to plan something for next year as well. Mr. Commers stated he was happy to hear it was successful. One suggestion he would make is that the mailing came out late. It came only one or two days before the fair. A contractor called him and left a message.that he would have liked to participate but he-did not know about it. Mr. Fernelius stated the planning process started in January. Mr. Fernelius stated CEE sent out 60 applications the week following the fair so there was much interest in the programs as well. Mr. Meyer asked if there was a mix of contractors. Mr. Fernelius stated they did have a variety including general remodeling contractors and some specialty trades including plumbing, heating, electrical, etc. as well as garden and outdoor vendors. 12. FRIDLEY LOAN PROGRAM SUMMARY Mr.- Commers stated information was included in the agenda packet. He presumed the information was year -to -date. Considering Hyde Park is one of the focus and target areas, we are still percentage -wise not doing well. Mr. Fernelius stated that report does not show the latest activity. This week there were 5 additional closings and of that number two or three were Hyde Park. We are seeing some of the volume pick up. In the next few weeks, they will try to send out another newsletter into the Hyde Park area to promote the program. HOUSING & REDEVELOPMENT AUTHORITY NTG., APRIL 10, 1997 PAGE 22 13. FIRST TIME HOME BUYERS PROGRAM Mr. Commers stated information was included in the agenda packet regarding MHFA's treatment of us. Staff will work something out through Anoka County. 14. STREET LIGHTS Mr. Commers asked the status of the request by Bob-Schroer for street lights. Ms. Dacy stated the survey went out on Wednesday. Staff is waiting for a response. Staff-may have this item on the May agenda. If not, they will be sure to have something in June. Mr. Prairie asked what spacing between the lights is being proposed. Ms. Dacy stated the spacing is 150 feet because of cost considerations. Staff have also narrowed the project area. 15. CHRISTENSON CROSSING Mr. Commers asked for an update or information on the number of units completed and the number of units sold at Rottlund's project. Ms., Dacy stated 13 gable homes have been sold; however, there are approximately 50 units of the gable homes that are under construction. Ten of the village homes or the one -story homes have been sold. Additional village homes will be constructed. Mr. Commers asked if Rottlund had given them a feeling as to how they think the project is going. Ms. Dacy stated the sale of the gable homes started strong and interest remains strong. Interest in the village homes is not as strong. As a result, they have created one additional floor plan in order to respond to the market information. Since that time, they have closed on more. They hope sales will improve during the spring. One of the floor plans received a Reggie Award. Mr. Prairie asked if it was their target date to have all the units sold by the end of this year. Ms. Dacy stated they wanted to sell 50% in the first year and the remaining.in the second year. They will have a total of 118 units. HOUSING & REDEVELOPMENT AUTHORITY MTG., APRIL 10, 1997 PAGE 23 16. CITIZENS SURVEY Mr. Burns stated he has started working on the 1997 citizens survey this year. One of the things they are planning to do this year is to solicit the HRA's opinion for the relevant sections of the survey. They are making copies of the HRA redevelopment portions of the 1995 survey and asking if the HRA has additions or input on what you want to ask the citizens. 17. MHFA Ms. Dacy stated, as a follow -up on a previous item, staff has contacted the legislators abou4t their request for funding from MHFA for the revolving loan program. Mr. Casserly and his associate have been down at the legislature and have drafted language for a bill. They do not expect-anything to be adopted this year unless they are able to attach it to an existing bill. The intent is to initiate discussion with MHFA to see if they can create or modify some of their programs to model Fridley's approach. ADJOURPiMENT : MOTION by Ms. Schnabel, seconded by Mr. Meyer, to adjourn the meeting. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON CMgWRS DECLARED THE MOTION CARRIED AND THE APRIL 10, 1997, HOUSING AND REDEVELOPMENT AUTHORITY MEETING ADJOURNED AT 9:33 P.M. Respectfully submitted, I K, uou.,% dra"I/Cit(i Lavonn Cooper Recording Secretary S I G N- I N S H E E T HOUSING AND REDEVELOPMENT AUTHORITY MEETING, April 10, 1997 Name Address /Business S 4� T �- MEMORANDUM HOUSING REDEVELOPMENT AUTHORITY DATE: May 7, 1997 TO: William Bums, Executive Director of HRA FROM: Barbara Dacy, Community Development Director SUBJECT: Resolution Implementing the Provisions of Prevailing Wage Ordinance The City Council at its May 5, 1997 meeting adopted the attached resolution providing for the implementation of the prevailing wage ordinance which was also adopted for second and final reading. Councilman Billings requested that the HRA adopt a similar resolution pertaining to the development agreements which the HRA adopts. A copy of the ordinance. with the modification addressing the HRA's concerns is also attached. Because of the other items which needed to be prepared (the Dealer's Manufacturing request and the Highway 65 street light discussion issue), a resolution for HRA adoption could not be prepared in time for the HRA meeting on Thursday night; however, a resolution will be proposed for adoption on the June 12, 1997 agenda. BD /dw M -97 -220 RESOLUTION NO_ __ _ 9997 A RESOLUTION OF THE CITY OF FRIDLEY, MINNESOTA, FOR THE ADOPTION OF A POLICY AND CONTRACT LANGUAGE IMPLEMENTING THE PROVISIONS OF ORDINANCE NO_ -1 PROVIDING PAYMENT OF PREVAILING WAGES ON CERTAIN PROJECTS R AN E CONTRACTS WITHIN THE CITY D WHEREAS, the City of Fridley, Minnesota, has adopted a certain Ordinance, Providing for the payment of the prevailing wage to worke s within the Cier under certain specified conditions and circumstances; and ry WHEREAS, the City ty of Fridley, Minnesota-' , wishes to Provide public and its own employees, as well as contractors and othe spdoing gor wanting to the do business with or in the City, as to how it expects the aforesaid g wanting to be implemented in contracts and work governed b y the Ordinance; Ordinance to be NOW, THEREFORE, BE IT RESOLVED, 'that the C' o concerning all bids and contracts governed b � f Fridley adopts as its policy g Y language, either full the aforesaid Ordinance that the following Y or by express reference to the aforesaid Ordinance and this Resolution, shall be included in all such bids and contracts, and that shall operate as the ongoing poky th is same lan ua e contracts: 9 ' 9 °f�Y w respect to any such bids and PAYMENT OF PREVAILING WAGES The Contractor agrees that the Contractors laborers and mechanics and any subcontractol's, of any tier, laborers and Within any job classification mechanics who wok °n �� Project and who fall Labor & Industry shall be pili estaab iss A d and published by Minnesota Department of prev Department Each Contractor, subconfiacor o a ber he a ng wage rates as certfied by said shall Poston the project the applicable revaiGn Y . P�orming work on this project for the County or area within which the project s beige rates and hourly basic rates of pay date of any changes thereof, in a least one conspicuous place or the information the effective employees working on the project The information so posted shall includea of the of contributions for health and welfare benefits, vacation benefits, breakdown other economic benefit required to be paid Pension benefits and any • Definition The definition of "laborer" and "mechanic' used in connection Prevailing be that definition contained in 29CFR Part 5.2( m) 9 wa ges shall x Page 2 -- Resolution No_ -1997 2• Submission f P roll. a. Upon request of the City, the contractor and subcontractors, if any, shall submit to the City, weekly for each week in which any contract work is Performed, a copy of all payrolls_ The payroll submitted shall set out accurately and Completely all the information under Section 5.5(a)(3)(I) of regulations, required be maintained b. Each payroll submitted shall be accompanied by a "Statement Compliance" signed by the contractor or subcontractor or her agent who supervises the payment of the persons employed under he contract and shall certify the following: - T (�) That the payroll for he payroll period contains information of the type required to be maintained under Section 5-5(a)(3) of regulation 29 CFR Part 5, and that such information is correct and complete_ (2) That each laborer or mechanic (including each helper, apprentice trainee) employed on the contract during the payroll period has been paid the full weekly wages earned, without rebate, either directly or indirectly, and that no deductions have been made either directly or indirectly from the full wages awned_ (3) That each laborer or mechanic has been aid not less than the applicable wage rates and fi e paid classification of work °r cash equivalent for the determination into performed as specified in the applicable wage rporated into the contract! (4) The contractor or subcontractor shall make the records required under this paragraph available for ins by the City and shall won, O(Wng or transcription working hours on the 1�ob If the contractor subcontractor during submit the required records and make them available, he City may, after written notice to the contractor, take such action as may be necessary to cause the suspension of further payments, advance, or guarantee of funds. 3. Violation: Liabifily for Unpaid Wages. In the event of any violation by the contractor or subcontractor relatin to the Prevailing wage provision in this contract, he contractor shall be liable for the unpaid paid Page 3 -- Resolution No_ ____71997 4. Withhold- n of Un The City of Fn►dle from an Y may, upon its own action, withhold or cause to be withheld Y monies payable on account of work subcontractor such sums as the City Performed b liabilities of such contractor or subcontractor y may determine to ben the contractor or any or any unpaid wages s required herein. any 5- Frin a Seneflts. The Contractor and subcontractor shall pay fringe benefits i accordance with the 1964 amendments to the Davis-Bacon and the implementing regulations contained in 2 n the manner and in Act (Public Law 88 -349) . 9 CFR, Subpart g, 5.20, et seq. 6- Liquidated Damages ' If the Contractor or any subcontractor of any tier does no mechanics prevailing wages as provided herein, the Contractor to the City, pay its laborers and tY as liquidated damages, a sum equal shall be liable to and pay amount. The City may deduct an ual to five percent (5 %) of the contract as the City Y Y money due or corning due to the Contractor such sums ty ma determine to be necessary to satisfy any liability of the Contractor to pay construed a g provided herein. Any monies collected or deducted are not to be Penalty but as liquidated damages to Contractor's and/or subcontractor's7ure to cote the remedies provided for in these County for the' any wages. - The rights and ec very or. remedies otherwisss ca be in adder to and not a fimita6on of recovery of liquidated dama available at jaw In any lawsuit iwofvin assessment Presumed, and the amount assessed the reasonableness of the charges therefore hall be hereinafter enforceable at laws � � sal � in �d�on to every eq �Y, by statute or remedy now or 7- T under the contract ermination of Contract, A violation of any'of the above - stated provisions in a co Ordinance shall constitute a substantial breach of that ntract governed by the grounds for termination. contract and shall constitute PASSED AND ADOPTED 8Y THE CITY COUNCIL OF THE CITY OF FRIOLEY THIS DAY OF APRIL, 1997 AYES NAYS ATTEST. Wtt_L1AM /1. CHAMIDA _ C1 TY CLERK NANCY J_ JORGENSON - MAYOR R ORDINANCE NO_ AN ORDINANCE OF THE CITY OF FRIDLEY, MINNESOTA, ADOPTING THE PREVAILING HOURS OF LABOR AND PREVAILING WAGE RATE ON CERTAIN PROJECTS FOR OR WITHIN THE CITY The City Council of the City of Fridley does ordain as follows: Subdivision 1. Legislative Findings. The City of Fridley finds it to be in the best interest of its citizens that buildings and public works projects constructed with City funds be constructed and maintained by the best means and highest quality of labor reasonable available, and that persons working under contract on buildings and public works constructed in whole or in part with City funds should be compensated according to the real value of the services they perform, which, for purposes of this Ordinance, is defined as the prevailing wage and hours of employment as determined for the City by,the Minnesota Department of Labor and Industry, pursuant to Minnesota Statutes, Section 177.42, subd 6. Subdivision 2. Prevailing Wage and Hours on Certain City - related or funded projects. a Wages paid for all work performed by contractors and subcontractors that is financed in whole or in part by funds obtained by bonds issues by the City, including but not limited to Industrial Revenue Bonds, and all projects let after May 1, 1997, financed by General Obligation Tax Increment Bonds shall be pain in accordance with the prevailing wage and hourly rate. ✓� b• Wages paid for all work rform any project let after May 1, 1997, hatbis financed contractors n whole or in part, e subcontractors on funds shall be paid in accordance with the prevailing wage and hourly rate - C. City c• Wages paid for all work performed on any project for a Developer in conjunction with the Developer's development of real ro e purchases said real property from the City, or if e' City grants City if oars moDeveloper ey to the Developer for the development of said real property, shall be paid in accordance with the prevailing wage and hourly rate. d• The term "City" shall refer to the City of Fridley and to all related agencies, including, but not limited to all Housing and Redevelopment Authorities and Economic Development Authorities created by the City of Fridley. Subdivision 3. Exceptions. This ordinance shall not apply to the following circumstances: a. Any project financed by City funds or bonds authorized by the City as provided t in subdivision 2 that has a value of $25,000.00 or less or a value equal to or less that the amount required for sealed bids by Minnesota Statutes, Section 471.345, subd. 3. b. Any housing project or program within the City directed to housing for one, two, three or four families per building_ 9.01 J Council Member moves to amend proposed Fridley City Ordinance published in its First Reading on March 31, 1997, in part, to read as follows: Subdivision 3. Exceptions This ordinance shall not apply to the following circumstances: b. Any housing project or program within the City directed to heusiAg- #erne; lwe; th_, � or marketed for owner occupancy' or C. Any housing pried or program directed at rental units containing eight or fewer units or d. Any residential rehabilitation proiect regardless of size entirely paid for with non -Gtv funds 9.03 t Passed and adopted by the City Council of the City of Fridley this day f 19 . The following Council Members voted Aye: y and the following Nay: Attest: Nancy J. Jorgenson - Mayor William A. Champa - City Clerk First Reading: March 31, 1997 Second Reading: Publication: 9.02 MEMORANDUM HOUSING r REDEVELOPMENT AUTHORITY DATE: May 2, 1997 TO: William Bums, Executive Director of HRA' FROM: Barbara Dacy, Community Development Director SUBJECT: Resolution Authorizing Execution of Development Contract, Commercial Rail Properties, Inc. BACKGROUND The HRA at its April 10, 1997 meeting approved a resolution recommending the addition of a four acre site to the redevelopment project area and creation of TIF District No. 15 to permit Commercial Rail Properties, Inc. to construct a 57,890 square foot industrial building. The City Council at its April 28, 1997 meeting approved its corresponding resolution to modify the redevelopment project area and to create the TIF district. PROPOSED DEVELOPMENT CONTRACT The proposed contract requires completion of the project prior to the delivery of the grant and loan assistance. Also, because the property is to be valued by the State of Minnesota as a railway property, a requirement is proposed for the payment of a minimum amount of taxes ($92,000) as opposed to a minimum assessment agreement. The grant amount is $125,000 and the loan amount is $125,000, to be provided at 5% over ten years. The contract also requires a personal guarantee in the amount of the loan. 1 Commercial Rail Properties, Inc. May 2, 1997 Page 2 RECOMMENDATION Staff recommends that the HRA approve the attached resolution authorizing execution of the development contract with Commercial Rail Properties, Inc. B D /dw M -97 -209 cr 1A 05/01/97 THU 15:33 FAX 612 885 5969 HRUSS MONROE Q002 ■ Jamcs R. cassedy Direct Diat (612) 88S.12Y6 K-RASS MONROE KRASS MONROE. P.A. - ATTORNEYS AT LAW MEMORANDUM TO: City of Fridley Attn: Barbara Dacy, Community Development Director FRONT: James R. Casserly RE: Contract for Private Redevelopment Between the HRA and Commercial Rail Properties, Inc. (MN Commercial Railway Company) Our File No. JRC 9571 -15 DATE: May 1, 1997 Attached you will find the April 30, 1997 draft of the above Contract. In accordance with our agreement with the Redeveloper and as directed by the Authority, we have prepared this Contract, which provides the Redeveloper assistance in the amount of $250,000 upon the issuance of a Certificate of Completion. One- -half of the. assistance, $125,000, will be provided in the form of a grant. The remainder, $125,000, will be provided in the form of a loan which the Redeveloper must repay. The terms of the Note are identical to other notes in which the Authority has provided funds. Interest commences from the dale of the Note at 5 percent per annum and is added to the Note principal. 'There are no payments of principal or interest for the first two years and then the Note principal interest and are amortized over eight years. The Note is secured by a Second Mortgage and is guaranteed by John Gohmann. Instead of an Assessment Agreement which guarantees the Minimum Market Valuation, the Redeveloper has agreed to a minimum property tax payment of $92,000 per year commencing in the year 1999 and continuing through the year 2007. After taxes have been calculated for the affected year, that amount will be deducted from the sum of $92,000 (assuming that it is less than $92,000) and *the difference, which we are referring to as a SUITE 1100 SOUTIIPOINT OrricE CENTER - 1650 WEST 821YD STREET - BLOOMINGTON. M1eI14660TA 55451.1447 TF.f.RVHONPJ G12 /siiri.fiS 1B IMiI.E G12/8R5.59G9 05/01/97 THU 15:33 FAX 612 885 5969 BRASS MONROE la o0., Payment in Lieu of Taxes, will be paid in accordance with Section 10.2 of the Contract. These amounts are also secured by the Authority Mortgage and the Guarantee. If there are any questions or problems, please do not hesitate to give me a call. JRC /kh Encl cc: Minnesota Commercial Railway Co. Attn: John Gohmann F4RMLEYII i1CORW4.JR 1C HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF FRIDLEY COUNTY OF ANOKA STATE OF MINNESOTA RESOLUTION NO. A RESOLUTION AUTHORIZING EXECUTION AND DELIVERY OF A CONTRACT FOR PRIVATE REDEVELOPMENT BY AND BETWEEN THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY FRIDLEY AND COMMERCIAL RAIL PROPERTIES, INC. BE IT RESOLVED by the Board of Commissioners (the "Commissioners ") of the Housing and Redevelopment Authority in and for the City of Fridley, Minnesota (the "Authority ") as follows: Section 1. Recitals. 1.01. It has been proposed that the Authority enter,into a Contract For Private Redevelopment (the "Contract ") with Commercial Rail Properties, Inc. (the "Redeveloper "). Section 2. Findings. 2.01. The Authority hereby finds that it has approved and adopted a development program known as the Modified Redevelopment Plan for its Redevelopment Project No. 1 (the "Redevelopment- Program".) pursuant to Minnesota'Statutes, Section 469.001 et seg. 2.02. The Authority hereby finds that the Contract promotes the objectives as outlined in its Redevelopment Program. Section 3. Authorization for Execution and Delivery. 3.01. The Chairman and the Executive Director of the Authority are hereby authorized to execute and deliver the Contract when the following condition is met: Substantial conformance of a Contract to the Contract presented to the Authority as of this date. Adopted by the Board of Commissioners of the Authority this day of , 199. ATTEST: Executive Director 1D Chairman TO: WILLIAM W. BURNS, CITYMANAGER4 � 1!�' FROM. RICHARD D. PRIBYL, FINANCE DIRECTOR SUBJECT: RESOLUTIONAPPROYINGAND AUTHORIZING EXECUTION - OF TAX INCREMENT PLEDGE AGREEMENT RESPECTING $9,S7S,000 GENERAL OBLIGATION TAX INCREMENT REFUNDING BONDS, -SERIES 1997A DATE: MAY 1, 1997 Attached you will find a resolution provided to us by Jim O'Meara with Briggs and Morgan that would provide the proper pledge of tax increment for the repayment of the bonds identified above. As we discussed with the HRA Commissioners at their budget meeting, the refunding of the G.O. Tax Increment Refunding Bonds of 1990 would provide a substantial interest savings. Last Monday evening the City Council awarded the bid for refunding of these bonds. The bids were very favorable and through this refunding we will be saving Approximately $1,400,000 over the life of the bonds. This resolution will provide the appropriate legislation for the tax increment pledge agreement necessary for the repayment of the bonds. If the Commission Members would like any more information regarding this refunding, I would happy to provide them it. 2 TAR INC1EME NNT PLEDGE This Tax Increment Pledge Agreement (the "Agreement ") is dated as of June 1, 1997; is by and between the City of Fridley, Minnesota (the "City "), and the Housing and Redevelopment Authority in and for the City of Fridley, Minnesota (the "HRA "); and provides as follows: WHEREAS, on December 16, 1985, the City Council adopted a resolution awarding the sale of the City's $11,550,000 Variable Rate Demand General Obligation Tax Increment Bonds, Series 1985, dated December 30, 1985 (the "Series 1985 Bonds "), to provide financing for certain public improvements (the "Improvements ") made or to be made with respect to the HRA's Redevelopment Project No. 1 (the "Project "); and WHEREAS, on August 14, 1986, the City Council adopted a resolution authorizing the issuance of the City's $10.,045,000 General Obligation Tax Increment Refunding Bonds, Series 1986, dated August 1, 1986 (the "Series 1986 Bonds "), for the purpose of crossover refunding the Series 1985 Bonds; and WHEREAS, on March 7, 1990, the City Council adopted a resolution awarding the sale of the City's $9,485,.000 General Obligation Tax Increment Bonds of 1990, dated March 1, 1990 ( 111990 Bonds "), to advance refund the Series 1986 Bonds; -and WHEREAS, at the request of the HRA, the City Council has adopted or is. expected to adopt a certain resolution (the "Bond Resolution ".) awarding the sale of the City's $9,575,000 General Obligation Tax Increment Refunding Bonds, Series 1997A, dated June 1, 1997 .(the "1997 Bonds "), to currently refund the 1990 Bonds; and WHEREAS, it is necessary to enter into this Tax Increment Pledge Agreement to provide for the payment of the debt service on the 1997 Bonds; and WHEREAS, on February 1, 1990, the Series 1985 Bonds were crossover refunded and paid in full, and on February 1, 1994, the Series 1986 Bonds were paid in full; and WHEREAS, to provide funds. sufficient for the timely payment of the debt service on the 1997 Bonds, it is necessary for the HRA and the City to enter into this Agreement; NOW, THEREFORE, in consideration of the covenants and agreements hereof between the City and- the HRA, and pursuant to Minnesota Statutes, Section 469.178, Subdivision 2, the City .and the HRA hereby agree as follows: 3 � 1, 1 1. In order to pay the principal of and interest on the 1997 Bonds, when due, the HRA hereby pledges to the City, for deposit in the Debt Service Account established by the Bond Resolution for the payment of the 1997 Bonds, and the HRA shall pay to the City, Available Tax Increments (hereinafter defined) in amounts sufficient to pay such principal and interest, when due, and, to the extent that the Available Tax Increments are ever insufficient for such purposes, and the City, pursuant to the Bond Resolution, advances City funds to provide prompt and full payment of the 1997 Bonds, the HRA agrees to reimburse the City for'such advances from such tax increments, when collected by the HRA. As used in this Agreement, "Available Tax Increments" means tax increments that are derived by the HRA from the Tax Increment Financing Districts currently existing within the- Project and which are available pursuant to applicable law for such purposes, including particularly but without necessary limitation tax increments derived by the .HRA from Tax Increment Financing District Nos. 1, 2, 3 and 6 (to the extent the same may be applied toward payment of the .1997 Bonds pursuant to applicable law) within the Project provided that the foregoing pledges and descriptions of Available -Tax Increments are further made subject and junior in lien to all unpaid pledges or other outstanding commitments heretofore made for such tax increments. In discharging its obligations under this Agreement, the HRA expressly reserves the rights (1) to pledge or otherwise dedicate the Available Tax Increments to purposes other than the discharge of the obligations described above upon a finding by the HRA that the estimated Available Tax Increments then remaining will be sufficient'f.rom year to year for such purposes, and (2) to satisfy its obligations hereunder from year to year from-such eligible tax increment districts or other revenues, or combinations thereof, as the HRA may deem in its discretion to be appropriate, desirable or necessary, as may be permitted by law. In payment of its obligations under this Agreement, the HRA expressly reserves the right to pledge or otherwise dedicate such tax increments to purposes other than the payment of. the obligations described above upon a finding by the HRA that the estimated Available Tax Increments then remaining will be sufficient from year to year for such purposes. 2. An executed copy of this Agreement shall be filed with the office of Anoka County Property Records & Taxation, as required by Minnesota Statutes, Section 469.178, Subdivision 2.. 3. This Agreement shall become effective upon the actual issuance and delivery of the 1997 Bonds. 2C IN WITNESS WHEREOF, the City and the HRA have caused this Agreement to be duly approved and executed as of the day and year first above written. HOUSING AND REDEVELOPMENT CITY OF FRIDLEY, MINNESOTA AUTHORITY IN AND FOR THE CITY OF FRIDLEY, MINNESOTA By Nancy J. Jorgenson - Mayor By Lawrence R. Commers - Chairman By William W. Burns - City Manager By y William W. Burns - Executive Director ( SEAL) WE 2D TO: FRIDLEY H.R.A FROM: CITY OF FRIDLEY RE: BILLING FOR ADMINISTRATIVE AND OPERATING EXPENSES APRIL 1997 ADMINISTRATIVE BILLING: ADMINISTRATIVE PERSONAL SERVICES ADMINISTRATIVE OVERHEAD COMPUTER OVERHEAD (For Micro 6 Mini computers) TOTAL ADMINISTRATIVE BILLING: OPERATING EXPENSES: US WEST - PHONE SERVICE Account #'s for Account Vs for CR HRH's Use City's Use Code 20,394.75 101- 0000 - 341 -1200 H1 284.13 101- 0000 - 336 -3000 HA 206.26 101 -0000- 336 -3000 HA 460.0000- 430 -4107 20,885.14 460 - 0000 - 430-4332 TOTAL OPERATING EXPENSES: BENEFITS EXPENSES: CITY OF FRIDLEY - HEALTH INS CITY OF FRIDLEY - DENTAL INS CITY OF FRIDLEY - LIFE INS 262 -0090-219 -1001 262 - 0000 - 219 -1100 262 -0000-219 -1200 TOTAL BENEFITS EXPENSES: TOTAL EXPENDITURES - APRIL 1997 File :1EXDATA\HRA\TIF197BILL.)ds Details 3 23.97 236 -0000- 336 -3000 HA HA HA 21M 171.05 236- 0000 - 219 -1001 11 21.56 236 -0000 -219 -1100 12 3.50 236- 0000 - 219 -1200 13 96 ........... 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O�O�O�P W E> I U I-- I — •- <w" I x p 1 N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N W O m I U O O O O O 0 0 0 0 0 0 O O O O O O O O O O O O 0 0 0 0 0 0 0 0 d, 0 OC \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ d d Ii I Ln w% IA IA u% w% IA I!1 IA u% V1 IA M IA IA IA IA u% IA V1 m Ln u% U1 m w% m in I(1 I(1 3C MEMORANDUM HOUSING AND REDEVELOPMENT DATE: May 2, 1997 AUTHORITY TO: William Bumg, Executive Director of HRA 01 FROM: Barbara Dacy, Community Development Director SUBJECT: Resolution Authorizing Execution of the Development Contract, Linn Property Holdings BACKGROUND At the April 10, 1997 meeting, the HRA passed a motion to modify the redevelopment project area and to create Tax Increment Financing .District No. 16; however, the motion to authorize staff to prepare a development contract failed on a tie vote. Commissioner McFarland who was absent from the April meeting was contacted to determine if he would be available for the May meeting so that this item could be discussed again with all HRA members present. CITY COUNCIL ACTION Councilmember Billings requested a memo from the Community Development Department to the HRA regarding the status of the former Dick's Wheel and Tire building. Attached is a copy of a memo from Ron Julkowski, Building Official. The purpose of Councilmember Billings' request was to clarify any confusion regarding how the existing building could be used. As was discussed at the April meeting, the building is not condemnable and could be reoccupied if a similar use were to reoccupy the building. Reoccupancy would not require updating the building to current codes if it is the same type of occupancy and no construction is proposed. If a permit is requested, all new construction must meet the current building code requirements. Linn Property Holdings May 2, 1997 Page 2 The City Council at its April 28, 1997 meeting approved the variance requests for the retail center subject to several stipulations. A major accomplishment of the approval was to locate the proposed driveways in accordance with the recommendations of the recent traffic study. Several stipulations regarding the design of the building were also adopted, including installation of canopies, accent lighting, accent tiles and block grout, and differentiation of block colors on the facade. RECOMMENDATION Staff recommends that the HRA approve the resolution authorizing execution of the development contract based on the pay- as- you-go approach for a present value amount of $175,000 subject to the HRA Chair and Executive Director reviewing and signing the final draft of the development contract when prepared. A copy of the final development contract will then be distributed in the June packet. If postponed until June, the developer will not be able to initiate and ultimately complete construction as originally planned. In addition, the Chair has asked Jim Casserly to investigate "recapture" options for inclusion in the development contract which would enable the HRA to recover some of its assistance at time of sale. Additional information will be presented at the meeting. BD /dw M -97 -214 ;a BUILDING INSPECTION DIVISION MEMO MEMO TO: Barbara Dacy, Community Development Director MEMO FROM: Ron Julkowski, Chief Building Official /4 MEMO DATE: April 30, 1997 REGARDING: Dicks Wheel & Tire, 25157 Avenue NE The existing building. does not have any structural defects and therefore is not a condemnable building. If the same type of use, such as the Goodyear Tire Store would reoccupy the building, no permit would be required unless modifications were proposed which require a permit. All new construction would therefore have to meet the current State Building Code requirements.. If you have any questions, please feel free to contact me. RJ /mh 90� HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF FRIDLEY COUNTY OF ANOKA STATE OF MINNESOTA RESOLUTION NO. A RESOLUTION AUTHORIZING EXECUTION AND DELIVERY OF A CONTRACT FOR PRIVATE REDEVELOPMENT BY AND BETWEEN THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY FRIDLEY AND LINN PROPERTY HOLDINGS, L.L.C. BE IT RESOLVED by the Board of Commissioners (the "Commissioners ") of the Housing and Redevelopment Authority in and for the City of Fridley, Minnesota (the- "Authority ") as follows: Section 1. Recitals. 1.01. It has been proposed that the Authority enter into a Contract For Private Redevelopment (the "Contract ") with Linn Property Holdings, L.L.C. (the "Redeveloper!'). Section 2. Findings. 2.01. The Authority hereby finds that it has approved and adopted a development program known as the Modified Redevelopment Plan for its Redevelopment Project No. 1 (the "Redevelopment Program ") pursuant to Minnesota Statutes, Section 469.001 et sue. 2.02. The Authority hereby finds that the Contract promotes the objectives as outlined-in its Redevelopment Program. Section 3. Authorization for Execution and Delivery. 3.01. The Chairman and the Executive Director of the Authority are hereby authorized to execute and deliver the Contract when the following condition is met: Substantial conformance of a Contract to the Contract presented to the Authority as of this date. Adopted by the Board of Commissioners of the Authority this day of , 199. ATTEST: Executive Director 4C Chairman MEMORANDUM HOUSING AND REDEVELOPMENT AUTHORITY DATE: May 1, 1997 TO: William Bums, Executive Director of HRA # 4,P FROM: Barbara Dacy, Community Development Director Grant Femelius, Housing Coordinator SUBJECT: Consider Acquisition of 5800 2"d Street NE At the HRH's April 10, 1997 meeting this item was tabled and staff was directed to research the City's ability to condemn substandard housing using its code enforcement and condemnation powers. Staff has requested a legal opinion from the City Attorney which is still pending: We have, however, asked Fritz Knaak to attend the HRA's May a meeting to discuss his findings. Staff still believes that this property is a good candidate for the housing replacement Program and recommends that the HRA authorize the acquisition as outlined in the attached. GF/ M -97 -205 5 MEMORANDUM HOUSING REDEVELOPMENT AUTHORITY DATE: April 4, 1997 t TO: William Bumf, Executive Director of HRA 44 FROM: Barbara Dacy, Community Development Director Grant Femelius, Housing Coordinator SUBJECT: Consider Acquisition of 5800 21 St. NE This is a single family home located on the comer of 2"d St. and 580, Avenue in the Hyde Park neighborhood. The property was identified as a potential acquisition site during a windshield survey last Spring. The house was built in 1948 and has 2 bedrooms, a living room, kitchen, bathroom and a detached garage. The house.has 744 total square feet of living area. The lot is 80'x 130' for a total of 10,400 square feet which meets the minimum lot area requirements. During a recent inspection the following conditions were noted: 1. The basement has a dirt floor and a portion of the foundation is caving in due to improper footings. In addition, several beams are sagging due to no footings for the posts., Many of the floor joists have been spliced together without columns to support the loads. 2. The plumbing and electrical systems are severely inadequate. For example, the water supply piping consists of a combination of plastic and copper and leaks. are visible in numerous spots. The waste lines consist of plastic PVC and cast iron and are improperly connected. The electrical system has open wiring in the basement and first floor. 3. The furnace and water heater vent into an asbestos -lined chimney which appears to be cracking. 4. The interior shows signs of water damage from leaks in the roof. The 5A Memo Regarding 5800 - 2' St. NE April 4, 1997 Page 2 homeowner has tried to make several repairs, but the stains are still evident. 5. The kitchen and bathroom are severely deteriorated. Cabinets are falling apart, drawer fronts are missing and the countertop is damaged. The shower stall is disintegrating and does not have a cleanable surface. 6. The exterior soffit and fascia are rotting from deterioration. The roof shows signs of sagging at the mid -span due to a lack of proper footings in the basement. Based on this information it is clear that a substantial amount of rehabilitation would be required. The property qualifies under the Housing Replacement Program because the cost to improve the property exceeds 15% of the value of the structure. The property is appraised for tax purposes at $57,239. A separate appraisal was prepared by Richard Erickson, Appraisal Engineering Bureau in July of 1996. At that time the property was appraised at $57,000. The owner has agreed to sell the property for $54,900 and waive any relocation benefits. Recommendation Staff recommends that the HRA approve the purchase of 5800 2' St. NE from Carol Hooser for $54,900 and authorize the Executive Director to execute the necessary documents to complete the purchase. GF/ M -97 -160 PLAT MAP ADDENDUM File No. - CTK-7388 opens Address —58002nd Street NE city, Fridley cou Anoka State-.-- Le City of Fridley HRA Address 6431 University Avenue NE, Fridley. 32 , MN 55432 w 0 jo ag %v rllYi /I 7 "4 T-op jV-10 ze af Ij 7-7 A— ... ..... Z. w L Av . mfl 9 39TH AVENUE X.E. X T-371— -Ow a Illy cy 'F PIN 'rr. /w o, ".i-. 17. 58TH AVENUE N.E.z., oil ClckMRMS Real Estate AW1 S IV B,,&prd W RoW� (80018?) -A »7 5C e. Te. 21 59 TH EPP,: !w > V 2 V w Z. 2E % > M 24 46 ClckMRMS Real Estate AW1 S IV B,,&prd W RoW� (80018?) -A »7 5C e. Te. 59 TH !w > V 2 V w 2E M 24 46 tn- ClckMRMS Real Estate AW1 S IV B,,&prd W RoW� (80018?) -A »7 5C 59 TH 2 V 24 PLACE Plat Map ClckMRMS Real Estate AW1 S IV B,,&prd W RoW� (80018?) -A »7 5C ME # �+ g: * r SUBJECT PHOTO ADDENDUM F,ie rK -7388 &,trower PropertyAddress 5800 2nd Street NE c,ty Fridley _county- Anoka _ _ - state MN zip Code55,432 -_ i Amer cnent City of Fridley HRA _ Address 6431 University Avenue NE, Fridley, MN 55432 `�.'a`•,�..'`- h zak f ,4 FRONT OF SUBJECT PROPERTY Address 5800 2nd Street NE Fridley REAR OF SUBJECT PROPERTY STREET SCENE A;- Chan RMS Real Estate Appraisal Software br &adford aed R.Ww. 5E 11I MEMORANDUM HOUSING REDEVELOPMENT AUTHORITY DATE: May 2, 1997 TO: William Bums, Executive Director of HRA g n� FROM: Barbara Dacy, Community Development Director SUBJECT: Fridley Executive Center Update MEPC has submitted a proposal to a potential significant office user on April 24, 1997. A decision regarding whether or not the user wants to pursue the site is still pending. A verbal update will be provided at the meeting.. In the meantime, Merrill Busch has finished a draft of the inserts for the promotional brochure. Final copies of the inserts will hopefully be available soon to the HRA for review. BD /dw M -97 -210 A MEMORANDUM HOUSING �1] REDEVELOPMENT AUTHORITY DATE: May 1, 1997 TO: William Burns, Executive Director of HR . � FROM: Barbara Dacy, Community Development Director Grant Femelius, Housing Coordinator SUBJECT: Update on Meeting with MHFA On April 30' we met with representatives from the Minnesota Housing Finance Agency (MHFA) regarding our efforts to find additional funding sources for the revolving loan program. As you are aware; Jim Casserly and Bonnie Balach have been working with members of our legislative delegation to introduce a bill which would require the MHFA to produce a report by the end of this year showing how it would fund up to 2,000 residential rehabilitation loans per year for 10 years in fully developed cities in the metro area. Due to time constraints the bill was not introduced on its own, but rather was attached as an amendment to the regular MHFA funding bill by Senator Novak. Although the amendment was eventually rejected, it did get MHFA's attention. In fact, MHFA Commissioner Kit Hadley agreed to meet with staff on April 30th to discuss the issue. Because of the recent floods in the Red River Valley, Commissioner Hadley was not able to attend. In her absence we met with Michael Haley, Director of the Homes Division and Kathy Aanerud, Home Improvement Loan Coordinator. We explained the need for State involvement in providing the financial resources for housing rehabilitation. During the meeting we described our experience with MHFA's programs and the recent success we had in designing a user - friendly program for Fridley residents. We also described our joint efforts with CEE and CRF to administer the programs cost effectively. The central message was that the HRA has demonstrated a clear commitment to addressing Fridley's housing needs, but cannot continue to spend funds at the current pace. Since Fridley is 7 MHFA Meeting May 1, 1997 Page 2 not alone in the fight against blight and decline it seems appropriate for MHFA to get involved. MHFA staff indicated a willingness to discuss the issue further, but wanted time to work through policy implications and cost projections. Since much of the funding they receive has numerous restrictions it is likely that any new program would need legislative approval. They also said that the timing of our request was good since this summer they will be working on a Housing Action Plan which outlines their programs for the next two years. T We agreed to formalize our proposal and submit a letter to them in the next two weeks. We also agreed to work with our counterparts in other first -ring suburbs to build support for the program. No action is needed by the HRA at this time. GF/ M -97 -204 7A WMORANDUM HOUSING REDEVELOPMENT AUTHORITY DATE: May 1, 1997 TO: William Bums-, Executive Director SUBJECT: Barbara Dacy, Community Development Director SUBJECT: Update on Prevailing Wage Ordinance In response to the HRA's issues expressed at its April meeting regarding the pending prevailing wage ordinance, the City Council is now in the process of revising the ordinance to: 1. Exempt owner - occupied projects; 2. Exempt residential rehabilitation projects up to eight units; and 3. Exempt projects which use non -HRA or non -City funding sources. First reading of the ordinance will be reviewed by the City Council at its May 5, 1997 meeting and then for second and final reading at its May 19, 1997 meeting. BD /dw M -97 -212 MEMORANDUM HOUSING REDEVELOPMENT AUTHORITY DATE: May 2, 1997 TO: William Bums, Executive Director of HRA,44 FROM: Barbara Dacy, Community Development Director SUBJECT: Status Report on the Osborne Road Street Light Request Bob Schroer has received four responses out of 11 surveys regarding installing the decorative lights along Osborne Road. Two of the respondents were positive, and two of the respondents were not in favor of the project: Bob Schroer was to contact the other persons on the survey list to determine if there would be interest in pursuing this project. The total project cost would be approximately $152,000. Depending upon Schroer's success in speaking with other property owners, an item may be on the June agenda requesting cost sharing with the HRA on this project at 50% of the total cost. No action is needed at this time. BD /dw M -97 -211 MEMORANDUM HOUSING REDEVELOPMENT AUTHORITY DATE: May 1, 1997 TO: William Bums, Executive Director of HRA A14 Al FROM: Barbara Dacy, Community Development Director Grant Femelius, Housing Coordinator SUBJECT: Update on Meeting with Anoka County On April 280' we met with Tom Durand and Alyce Osborn from Anoka County and staff from the City of Columbia Heights concerning the home improvement grant program. Anoka County had requested the meeting to discuss the future of the program and in particular how the program might be administered. According to Durand, the County is experiencing increasing administrative costs since Fridley began contracting with CEE last Fall. Apparently, the County pays a flat rate to ACCAP to administer the program and the lower volume of grant applications creates a higher per unit cost. The County is also concerned because the City of Blaine has indicated that it might contract independently with another vendor. The essence of the County's message was that Fridley's decision to break away now places a greater financial burden on the County. As a side note, we should mention that this is consistent with what was explained at the Anoka County Technical Advisory meeting on March 26, 1997. What is particularly troubling about the issue is that we learned for the first time that another factor may have actually contributed to the problem. Beginning this year several communities, including Anoka and Blaine, chose not to contribute any CDBG funds into the fund pool. Historically, the County reserves a specific amount of CDBG funds for County -wide housing rehabilitation and relies on individual communities to make contributions from'their own CDBG allocations. The net result is that the total budget has fallen from approximately $600,000 to Anoka County Meeting May 1, 1997 Page 2 $230,000. ACCAP has indicated that $600,000 is the minimum threshold at which it can operate and recover its administrative costs. During the meeting we emphasized that the decision to break away from ACCAP was twofold: 1) reduce administrative costs (approximately 50% less) and 2) consolidate administration under one roof to better serve Fridley residents. We also explained that our current agreement with CEE runs through 1998. The County would like to see one vendor administer the program County -wide, but is not tied to any particular agency. The meeting concluded without much accomplished although we agreed to evaluate any future proposals after our commitment with .CEE expires. Columbia Heights, which has maintained its own program for several years, agreed to do the same. No action by the HRA is needed at this time. GF/ M -97 -203 MEMORANDUM[ HOUSING ) REDEVELOPMENT AUTHORITY DATE: May 2, 1997 TO: William Bums, Executive Director of HRA FROM: Barbara Dacy, Community Development Director SUBJECT: American Planning Association National Conference; San Diego, CA I very much appreciate the ability to .go to the .American Planning Association National Conference. Last year, I attended the conference in Orlando, Florida and this year the conference was held the first week of April in San Diego, California. Each day of the conference, I attended a "mobile workshop" regarding redevelopment issues, One of the workshops was on scattered -site public housing in San Diego; both rehabilitation and new construction. Another mobile workshop was on a townhome infill project in the Hillcrest neighborhood. The third mobile workshop was San Diego's livable neighborhood program. San Diego's livable neighborhood initiative is an example of the recent trend in major metropolitan areas to reorganize city staff into interdepartmental teams to analyze and to solve neighborhood problems. San Diego initiated this program four years ago and is still experiencing some of the transitional pains; however, they feel that it is making a difference in some of the neighborhoods. One project which reminded me of the northeast quadrant site at University Avenue and Mississippi Street was the Ralph's Supermarket store in downtown San Diego. The store is 42,000 square feet in area and has underground parking with an escalator ramp designed to transport the grocery carts!! All of the parking is provided underground. I have pictures of the site if you or any of the HRA members are interested. It is a site design concept that could be explored in the northeast quadrant. American Planning Association Conference May 2, 1997 Page 2 There were several other sessions which were directly related to the City's goals and objectives. It is also interesting to point out that without any planning ahead, all of the first ring suburban Community Development Directors ended up on the same mobile workshops; there are over 60 of them, and we always bumped into each other at the same sessions. Some of us had lunch together one day and gossiped about having Jim Cassedy as a consultant. Once again, I thank the HRA and the City for enabling me to attend the conference. 4 BD /dw M -97 -213 Fridley Loan Program Summary April 1997 City Wide Loans Hyde Park Loans Date Date Type of Name Address Closed Amount Closed Property 1 Moses 5180 Hughes Ave. $ 12,922 1/7/97 Single - Family 2 King 375 67th Ave. NE $ 11,306 1/28/97 Single - Family 3 Larson 6130 6th St. NE $ 4,670 2/25/97 Single - Family 4 Diedrich 46 66th Way NE $ 8,375 3/11/97 Single - Family 5 Elverud 221 Rice Creek Terr. $ 4,839 3/12/97 Single - Family 6 Zebro 6589 Clover Place $ 11,039 417/97 Single - Family 7 Westinfield 81 Rice Creek Way $ 25,000 4/8/97 Single - Family 8 Setering 71 66th Way NE' $ 7,980 4/8/97 Single- Family 9 Doherty • 7315 East River Rd. $ 3,474 4/8/97 Single- Family 10 Westby 1467 Onondaga St. $ 10,000 4/22/97 Single - Family 11 Maciej 6400 Stariite Blvd. $ 9,500 4/29/97 Single - Family 12 Anderson 6800 Oakley St. $ 7,500 4/29/97 Single- Family 13 Olson 1442 64th Ave. $ 2,700 4/29/97 Single - Family Sub -Total $ 119,305 Hyde Park Loans 16 Loans ' Q \1997 LOAN ACTIVITY REPORT Sub -Total $ 10,694 Value $ 129,999 Date Type of Name Address Amount Closed Property 1 Anderson 6061 -65 3rd St. NE $ 6,621 1/28/97 Duplex 2 Monson 6046 2 -1/2 St. NE $ 2,235 4/1/97 Single- Family 3 Rocek 5791 2 -1/2 St. NE $ 1,838 4/8/97 Single - Family 16 Loans ' Q \1997 LOAN ACTIVITY REPORT Sub -Total $ 10,694 Value $ 129,999 Law Offices 1400 AT &T Tower 901 Marquette Avenue Minneapolis, MN 55402 -2859 Telephone: (612) 305 -1400 Facsimile: (612) 305 -1414 April 21, 1997 Mr. William Burns City Manager, City of Fridley City Hall 6431 University Avenue N.E. Fridley, MN 55432 Barb Dacy Community Development Director City of Fridley, City Hall 6431 University Avenue N.E. Fridley, MN 55432 Dear Barb and Bill: Lawrence R. Commers (612) 305 -1410 Civil Trial Specialist, certified by the Minnesota State Bar Association and the National Board of Trial Advocacy Enclosed is a copy of an article on corporate incentives and accountability. It is a general discussion. Please provide to the Commissioners with next month's packet. LRC /Kbh /4w685 _i Enclosure Very truly yours, By / & MOORE, PLC R. Commers TBE LAW Toothless Laws They're Minnesota's `Appendix' laws: there may once have been a reason for them, but they're useless now Minnesota's Corporate - Welfare Law: M Gums, No Tooth Legislation designed to safeguard the public nickel isn't worth' a dime By Michael LaFave k oximately six years ago, the state of Minnesota bailed oat a ndering Northwest Airlines to the tune of $838 million. Now, re's talk that taxpayer dollars may helgbuild a posh new stadium for Minnesota Twins. One can argue the merits of such investments ad mitum, but such debates frequently miss the real crux of the issue: accountability. When the state invests public money in private businesses, those busi- nesses have a responsibility to deliver meaningful benefits to the public. The state should have mechanisms in place to ensure that such invest- ments actually do benefit the public, rather than merely pad private wallets. The Minnesota corporate - Welfare law that " Passed the Legislature in 1995 is supposed to serve this fine- ., tion, but it doesn't because the law is poorly crafted and lacks clarity. It's strong in symbolism but short on effectiveness: And if Minnesota lawmakers don't amend the law to give it some weight, we'll continue to see our tax dollars flow freely to major corporations, with no assurance of anything in return. The Northwest Airlines Loan The linchpin of the $838 million Northwest deal was a $270 million loan that effectively kept North- west out of bankruptcy. 1. exchange, Northwest agreed to build two new maintenance facilities, which it had been dangling in front of states around the country, in northern Minnesota. Northwest promised the new plants would bring 1,500 much new jobs to northern Minnesota and that the resulting eco- nomic boon would help offset the deal's astronomical price tag. What's happened since those promises were made? The good news is Northwest successfully avoided bank nrptcy and since the deal's inception has experienced a dramatic . economic turnaround. The bad news is that plans for the promised maintenance facilities were scaled back dramatically in 1994. Iustead of two facilities employing 1,500 worker., Northwest modified its commitment to one airbus maintenance facility that will bring 350 jobs to Duluth and one reservation center that will bring 600 jobs to Chisholm by the year 2000. While the deal has scores of proponents and critics purporting to represent the public's interest, the compelling inquiry lies in how the state aided North- west, not this or that specific of the deal itself. By giving away millions of dol- CrprrZ% Wt#ana/Condnued on 17 Why Lawyers Can't Protect M'mnesota's Environment Weak state regulations have activists turning green By Jim Woehrle cross the 50 states; including right here in Minnesota, there is a .per- ception that Minnesota is a progressive state with regard to environ- mental regulations. But are we actually a model for other states? Not really. Listen to attorney Brian O'Neill: "Minnesota," he says, "is, with the exception of Louisiana and Mississippi, and possibly Oregon, one of the worst states structurally with regard to environmental regulation." Using state law to defend Minnesota's environment has been a struggle for attorneys in Min- - nesota because of our state's weak or nonexistent environ- mental laws. O'Neill should know. Though he's probably best known for wmmng a $5 billion judgment against Exxon after the Valdez oil spill in Alaska, he's been battling in the courts for the environment since he won his first fed- eral case in 1979 that stopped the killing of wolves in Minnesota. O'Neill and other attorneys at Faegte & Benson have been involved with most of the environmental legal action in the state - firom the Freide Island nuclear storage casks to fish farming on the Range to Boundary Waters and Voyageurs disputes. These lawyers are fighting for a cause Min- nesotans believe in. Last year the Minnesota Department of Natural Resources surveyed Min- nesotans, asking what contributed most to their quality of life The environment topped the list. 2 When it asked citizens whether regulations pro- . 24 Wcting the envirommtent were adequate, 41 per- cent said environmental regulations should be tougher. m Are Minnesotans getting true environmental protec- F lion firm our state laws? Is our quality of life in Min - nesota at risk? When O'Neill answers these questions and talks about Min- nesota's environmental laws, he starts by mentioning the nonexis- tent ones. His favorite omissions relate to oil Spills and damaging timber man- agement "We have no effective oil spill statute in Minnesota," O'Neill says. "if there was an oil spill on Lake Superior, it would be a disaster, On the Missis- sippi, it would also be a disaster because it has no place to go like" it would in the ocean," he says. A law is needed, says O'Neill, that creates causative LAW & POLITICS I MAY 1997 EmlmnmenWVContinued on 21 C-GnWrate Welfare/from 16 lars without articulating clear objec- tives or defining any accountability mechanisms, the state-established a dangerous precedent. Accountability. in State Investments There are a number of account - ability mechanisms state govern- ments use throughout the country to make sure they get value from their investments, the most common being job quality, claw -back and right -to- know provisions. Job - quality provisions stem from the notion that most communities suffer not from a lack of jobs, but from a lack of good jobs, and that low -wage, low- benefit jobs do -not provide meaningful benefits to the public. Companies receiving public aid with job - quality provisions must offer employment of a specified .quality— usually measured. in terms of pay and benefits. Claw- backs, which function in a variety of ways, legally enable_ gov emments to recapture public subsi- dies from private businesses when those ..businesses fail to deliver promised benefits to the public. T'he intent of such provisions is to make - incentives quid pro: quo arrange- ments. Claw -backs help ensure the public gets what.it pays for, or that at least it. has, some mechanism of redress if it does not. Minnesota's corporate- welfare law uses .a .form of claw-backs., Right -to -know laws typically require recipients of public money to make public projections, at the time they apply for the money, about the benefits they will provide the public. The laws also require recipients to report periodically on their perfor- mance after they begin receiving funds- Their purpose is to shine some light on deals that are notorious for being made in the dark and to keep the distribution of public money in the public's eye. Incentive programs truly con cerned with accountability to the public would ideally use some com- bination of all three provisions.. Although . a number of states have dabbled with one or two of these pro- visions, most states have been reluc- tant to subject their economic devel- opment procedures to rigorously thorough measures of accountability. The Court's Role Some states, when recipients of their incentives have failed to per- form, have brought their grievances to .court. In the absence of explicit expectation terms, however, the courts have repeatedly refused to rec- ognize subsidy agreements as con- tracts. Despite the protestations of vic- timized governments, the courts have made it clear they will not take responsibility for demanding ear post facto accountability from the recigi- ents- of irresponsible public handouts. Quite to the contrary, the cases illus- trate that governments concerned aboutaccountability from businesses receiving public incentive -aid need to make their expectations clear before they give their money away.. The Legislative Aud'itor's Assessment In February -1996 the Legislative Auditor's office released a controver- sial study and evaluation of state - sponsored financial incentives. The report specifically ana47W the Eco- nomic Recovery Grant Program, a program administered through the Department of Trade and Economic Development, which has distributed more than .$68 million in state funds in the form of grants, loans and other financial awards since 1984. The Auditor concluded that between 1991 and 1995 the program helped create more than 8,300 jobs but noted . that sometimes the- jobs created were not. permanent. (The study did'not indicate what - portion of those jobs Would have been: created without the . incentives.) Although the average wage of the jobs created was $8.64, the median was $7.20, and the Auditor found that "[tjhe distribution of the jobs created is skewed towards lower wage levels:' Furthermore, the Auditor commented, "The 'Legisla- . , ture needs to give the 'department . clearer directions about the pro - gram's Pose," and suggested that "Whe Legislature - might consider restricting mcenti.ve ` 0 arcing .'to infrastructure or job training pur- poses." . In short, the Legislative Auditor's report challenged the Legislature to better articulate the purpose of busi- ness incentives and the standards by which the state should. distribute them. The challenge comes on the heels of Minnesota's first corporate- welfare legislation and is particularly compelling in light of our history and future with incentives. Minnesota's Corporate - Welfare Law In April 1995, the state of Min- nesota passed legislation that pushed accountability to the forefront of state - sponsored economic develop- . Sir`•' r The Minnesota Alliance for Progressive Action estimates that in 1994, Minnesota gave more than t 4' $973 million to private- corporations through ` 3 various incentive programs. Pi t • initiatives. Unfortunately, despite a commendable intent, the C> law will not have a meaningful Impact on the procedures through which the state doles out money. The Minnesota Alliance for Pro - gressive Action (MAPA) estimates that in 1994, Minnesota gave more than $973 million to private corpora - tions through corporate tax expendi- mi es, changes in property tax classi- fications rates, tax- increment financing, subsidies and grants. :.Alarmed by the amount of public money lining private pockets and still wary from recent publicly financed fiascoes. MAPA aligned itself with s 'other concerned- citizens groups and began to push for legislation that Would ensure some return on the public's investments. Agroup of legislators, led by Rep. Karen Clark, responded to these con - cems. They introduced a bill in the Minnesota House of Representatives that became known as the corporate - welfare bill. The original bill required business recipients of public money for economic - development projects to create new jobs and pay at least a poverty-level wage: However, critics in the governor's office believed a minimum -wage require- ment made poor economic sense. Then Commissioner of Trade and Economic Development Peter Gillette argued that the bill imposed unnecessarily heavy burdens on recipient businesses and would hereby make Minnesota less attrac- tive to businesses looking to expand. Hence, the bill that emerged was con- siderably staled down. Although the symbolic signi$- cance of Minnesota's taw looms large, the law suffers from technical and substantive deficiencies that render it largely meaningless. The lath+ seeks to address an extremely complex issue in four brief and Imply deficient paragraphs. The law, as enacted, reads' A business that receives state or local government assistance for economic development or job growth purposes must Create a net increase in jobs in Minnesota within two years of receiving the assistance. The government agency -pro- viding the assistance must establish wage level -and job creation goals to be met by the business receiving the assis- tance. A business that rails to meet the goals must repay the assistance to the' government agency. Each government agency mast report the wage and job goals ' and the results for each project in achieving those goals to the Department of Trade and Eco- nomic Development - The department shall compile and publish the results of the reports for the previous cal- endar year by June 1 of each year. The reports of the.pgen- cies to the department and the compilation repo of the department shall be made available to the public. For the purpose of this section, "assistance" means a grant or loan in excess of $25,000 or tax - increment financing. MINN. STAT. ANN.. 1161.991 (West Supp. 1996). Most notably, the law fails to define crucial terms and concepts inch as "business," -economic devel- opment," job," "fails to meet the goals" and "repay." These are the terms that -give tie'caaw -back ptow- sion force, yet the statute does.not explain them. Consequently, the law floats without an anchoring administrative principle or clear logistical guide- lines, and its ambiguity ultimately serves neither the public nor business interests well The law, for example,. does not pro -rate or scale its penalty to reflect partial achievement It does not define when and how it noncom- plying business must repay the state. And it does not exempt or differen- tiate between businesses of different sizes. Furthermore, the statute's ambi- guity may actually subvert job -cre- ation incentives and undermine the goal of creating quality employment opportunities by encouraging busi- nesses in jeopardy of not meeting their job goals to ftandona is intanded to mdirrtaiit a ployment full-time positions into mul iple, in the state: The sarmto does'ribt pre, part-time positions. Unless • the cisely indicate whether or how the granting governmental agency law applies when Minnesota gives specifically has contracted that the financial aid to mega-entities such as jobs must be full time or of a given Northwest Airlines, Dayton Hudson, type or category, part-time jobs will, or even the Minnesota Twins to for the purpose of the legislation, be ensure that they do not relocate all or of equal value. part of their operations out of the The statute also fails to clarify state Such big -name businesses fre- whether it applies to financial aid that quenty seek financial aid from •the LAW & POLI.TICS ./ MAY 1997 leo state, and it is a weakness of the statute that its applicability in such situations is not clear. How Minnesota's Corporate - Welfare Law Can Be improved For the sake of both enforcement and compliance, the law's terns and applicability need to be better defined. The law should require that the state clearly articulate its goals with respect to each project and define mechanisms through which recipient businesses will be held accountable. Additionally, the law should go further to ensure that the public truly benefits from incentives. Incentives should be limited to projects that pro- duce quality jobs, provide training opportunities, improve the state's infr astructure, develop small-busi- ness opportunities. or provide a needed service to the community. And the governmental agencies granting these incentives should be required to demonstrate that the potential public benefits outweigh the costs. A better law would articulate a', purpose, clarify its terms and create guidelines for both granting govern mental agencies and recipient busi- ness that would ensure account- ability- The Lc&bhue needs to establish parameters for the state's incentive programs and take steps to define the types of projects that do and do not constitute a legitimate public pur- pose. Despite what the Department of Trade and Economic Development says, it is not self - evident how subsi- dizing the creation of dead -end, min - imum -wage, low - benefit jobs bene- fits the public. Editor's Note. For a comprehen- sive look at how the author would rewrite the corporate- welfare law, read the story "How the Corporate Welfare law Should Be Written" on our web site at httpJ/www.lawand- politics.com.. M :n I was a boy, I was told any - could become president. I'm inning to believe it - Clarence Darrow Third Avenue 339 -1116 M E M O R A N D U M TO: City of Fridley William Burns, City Manager Barb Dacy, Community Development Director FROM: James R. Casserly Mary E. Molzahn DATE: February 9, 1993 RE: Project -.Recapture Provisions One method of recapturing the HRA's investment in the above project is to have the Authority share in any net - appreciation of the project. The method of the HRA's participation described below parallels the provisions found in Minnesota Statutes, Section 469.012, subds. 7 through 9 which deal with an interest reduction program. The mechanics of the formula are as follows: 1. Determine net appreciation. Net appreciation is the fair market value (assuming an arms length transaction) of the project less: A. Developer's Net Total Investment (which includes all Developer cash contributions and principal payments on the mortgage); and B. The balance of the mortgage; and C. An amount equal to a simple annual cumulative rate of return (at a rate to be agreed upon) of the Developer's Net Total Investment reduced, however, by any cash distributions from the project. 2. To determine the HRA's share, the net appreciation is multiplied by a fraction: A. The numerator of the fraction equals the HRA's investment; and B. The denominator equals the Developer's Net Total Investment. 3. There should be limitations on when the project is sold or assumed sold. An example of:-,the-formula is provided -below using the following assumptions: Project costs 1994 2,800,000 Developer cash contributions 400,000 Authority investment 300,000 Mortgage 2,100,000 Sale in 1997 (net) 3,000,000 Cash on cash return received during 3 years 0% Agreed annual rate for cash on cash return 12% Developer's Net Total Investment 400,000 The net appreciation is the sale price ($3,000,000) less Developer's Net Total Investment ($400,000) and less the mortgage balance at time of sale (assume $2,100,000) and less the agreed cash on cash return (12%) x number of years (assume no cash distribution for 3 years) x Developer's Net Total Investment. The computations are as follows: $3,000,000 - [$400,000 + 2,100,000 + (.12 x 3 x $400,000)] = $356,000 The fraction is simply the Authority investment ($300,000) divided by the Developer's Net Total Investment ($400,000) which calculates as follows: $ 300,000 = 75% $ 400,000 The net appreciation ($356,000) is then multiplied by 75% to determine the Authority repayment. In the above example, the repayment is 75% of $356,000 which equals $267,000. In this hypothetical case the Developer would receive a total of $633,000 on its investment of $400,000 and the Authority would receive $267,000 on its investment of $300,000. It is-.apparent that if the net proceeds of the.property are greater or if the Developer needs to make fewer cash contributions;'then the Authority has a greater opportunity to completely recover its investment. It is equally apparent that if the project is not successful, the Authority could lose its entire investment. There-are numerous variations which can be designed but this gives us a start. JRC, MEM/ ar C: CITY OF FRIDLEY, MINNESOTA SCHEDULE E PROPOSED REVENUE NOTE Beginning Accrued Principal Interest Interest Total Ending Date Balance Interest Payment Rate Payment Payment Balance 08/01/97 175,000 0 0 8.500% 0 0 175,000 02/01/98 175,000 0 0 8.500% 0 0 175,000 08/01/98 175,000 7,437 0 8.500% 0 0 182,437 02/01/99 182,437 7,754 0 8.500% 0 0 190,191 08/01/99 190,191 4,744 8.500% 8,083 12,827 185,447 02/01/2000 185,447 4,946 8.500% 7,881 12,827 180,501 08/01/2000 180,501 5,156 8.500% 7,671 12,827 175,345 02/01/2001 175,345 5,375 8.500% 7,452 12,827 169,970 08/01/2001 169,970 5,604 8.500% 7,224 12,827 164,366 02/01/2002 164,366 5,842 8.500% 6,986 12,827 158,525 08/01/2002 158,525 6,090 8.500% 6,737 12,827 152,435 02/01/2003 152,435 6,349 8.500% 6,478 12,827 146,086 08/01/2003 146,086 6,619 8.500% 6,209 12,827 139,468 02/01/2004 139,468 6,900 8.500% 5,927 12,827 132,568 08/01/2004 132,568 7,193 8.500% 5,634 12,827 125,375 02/01/2005 125,375 7,499 8.500% 5,328 12,827 117,876 08/01/2005 117,876 7,818 8.500% 5,010 12,827 110,058 02/01/2006 110,058 8,150 8.500% 4,677 12,827 101,909 08/01/2006 101,909 8,496 8.500% 4,331 12,827 93,412 02/01/2007 93,412 8,857 8.500% 3,970 12,827 84,555 08/01/2007 84,555 9,234 8.500% 3,594 12,827 75,322 02/01/2008 75,322 9,626 8.500% 3,201 12,827 65,695 08/01/2008 65,695 10,035 8.500% 2,792 12,827 55,660 02/01/2009 55,660 10,462 8.500% 2,366 12,827 45,199 08/01/2009 45,199 10,906 8.500% 1,921 12,827 34,292 02101/2010 34,292 11,370 8.500% 1,457 12,827 22,923 08/01/2010 22,923 11,853 8.500% 974 12,827 11,070 02/01/2011 11,070 11,070 8.500% 470 11,540 (0) 15,191 190,191 116,375 306,566 LINN1 PREPARED BY KRASS & MONROE 04/01/97 MEMORANDUM HOUSING .REDEVELOPMENT DATE: May 7, 1997 AUTHORITY TO: William Bums, Executive Director of HRA FROM: Barbara Dacy, Community Development Director SUBJECT: Consider Three Resolutions for Contamination Clean -Up Program for Dealers Manufacturing, 5130 Main Street N.E. REQUEST Dealers Manufacturing is requesting that the Fridley HRA act as the applicant for two grant applications to reimburse the company for pollution clean -up costs expended to date and for monitoring_ and testing costs for the next five years: The two grant applications are to the Department of Trade and Economic Development Contamination Clean -.Up Fund and the Metropolitan Council Tax Base Revitalization Fund. .A resolution authorizing each application is proposed for HRA approval. A third resolution is also proposed to authorize the Executive Director and the Chair to enter into an agreement with Dealers Manufacturing. The request was made after preparation of the agenda. The application deadline is May 15,' 1997. THE PROJECT A concrete vault located underneath the Dealers Manufacturing building was the receptacle for the spent fluids that the company uses in its engine rebuilding operation. The company discovered that the vault was leaking contaminants into the soil and the groundwater in 1988. It then hired a consultant to conduct the appropriate tests and prepare an "interim response plan" to begin treating the pollution. A vacuum vaporizer well (a brand new technology) was drilled into the ground underneath the building to mix air and water to treat the contaminated groundwater. The appropriate permits were obtained from MPCA and the Metropolitan Waste Control Commission to discharge the treated water. Dealers Manufacturing May 7, 1997 Page 2 PROJECT COST The total project cost for the pollution clean -up is estimated to be $559,675 through 2001 (see attached letter from West Central Environmental Consultants dated May 6, 1997). Of this amount, approximately $273,600.18 has been expended. It is estimated that $208,198 will be spent between 1997 and 2001 for continuing monitoring and testing. If approved, the DTED grant would pay for half of the project cost, or $279,838. The application to the Metropolitan Council would be for $212,677 (38 %), and the remainder would be the required "local match" (12 %) under the DTED grant of $67,161. DTED staff suggested that the company could provide the source of revenue for the local match. The City nor the HRA has ever provided a "grant" without some type of recovery of its funds. Because tax increment is not a legal source of funds for the match, the match has to come from the company. HRA RESPONSIBILITIES The HRA would act as the applicant on both grant applications. The company.'s consultant, West Central Environmental Consultants, would be responsible for preparing the applications. The HRA would also be responsible for reviewing and submitting invoices to the funding agencies, tracking expenses, providing annual reports, and providing a copy of the City audit to DTED. The company has agreed to be responsible for the cost of the HRA hiring its own consultant, Bruce A. Liesch and Associates, to act as the HRA's project manager.. Because City staff does not have the environmental expertise, it would be prudent to have an independent consultant review the work and invoices to date and be responsible for verifying the accuracy of the expenses. Rick Pribyl, Finance Director, indicated that there may be additional expenses to include the documentation. in the City's audit. It is proposed that Dealers Manufacturing would also be responsible for any additional audit fees charged to the City as a result of this project. AGREEMENTS REQUIRED If approved, two funding agreements from the Metropolitan Council and DTED would have to be approved by the HRA. Further, a separate agreement between the Fridley Dealers Manufacturing May 7, 1997 Page 3 HRA and Dealers Manufacturing would also have to be executed which would outline the following: 1. Dealers Manufacturing agrees to provide the funds for the local match. 2. Dealers Manufacturing agrees to pay for additional costs to the City for hiring �a consultant and any additional audit fees. 3. Dealers Manufacturing indemnifies the HRA for Liability associated with the clean -up project. Staff has also requested that DTED supply a written opinion to us verifying that the source of revenue from the company is an acceptable source for the local match.. Typically, in the tax increment financing area, a developer payment is not a legal source of funds. DTED staff has agreed to provide the Fridley HRA with assurance that the source of funds are acceptable and the HRA would not be responsible for paying those costs. They have agreed to provide this opinion prior to a decision on the application, probably sometime in July. The agreements would not be processed if the company's contribution is not permitted. SUMMARY There is no financial cost to the HRA for this project; however, the staff work involved would constitute an in -kind contribution toward the project in assisting this company in its efforts to clean up the site. The company would use the reimbursed funds to invest in capital equipment and create more jobs. Approximately 125 people are currently employed at this site. Staff recommends the HRA approve the attached three resolutions authorizing the application to DTED, the Metropolitan Council, and authorizing the Chair and Executive Director to enter into an agreement with Dealers Manufacturing. BD /dw M -97 -222 West Central Environmental Consultants 8601- 73rd Ave. North • Suite 29 - Brooklyn Park, MN 55428 (612) 5319481 - Fax (612) 5319483 May 6, 1997 Ms. Barbara Dacy Community Development Director City of Fridley 6431 University Avenue Northeast Fridley, Minnesota 55432 Re: Dealers Manufacturing Company WCEC Project No. 94- 765 -30 Dear Ms. Dacy: Thank you for meeting with me last week to discuss the Department. of Trade and Economic Development (DTED) and Metropolitan Council Tax Base Revitalization Account grants which Dealers Manufacturing Company (Dealers) is pursuing. As we discussed yesterday, I have revised the cost estimates which were provided to you in my May 2, 1997 memorandum to include sewer and electrical costs (Table 1). Also, in my conversations with Meredith Udoibok of DTED, costs for 5 years of the treatment system operation and maintenance have been included in Table 1 since these future costs are part of site cleanup and are eligible costs. Table 2 provides a breakdown of the annual operation and maintenance costs which were used in Table 1. As shown in Table 1; the total project cost is- estimated to :be $559,675 through the year 2001. One half of the total -project cost, or_$ 279, 838, is being-requested. from DTED with the balance being requested in matchingg fiinds, from the City.of Fridley; : Based on.OTED's -requirement that 12% of the project cost come from the City. of Fridley's general fund, a property tax levy, or other unrestricted money. (excluding TIF), it is estimated that $67,161 would be required from the City of Fridley and the balance of the.matching fiords or $212,677 would be requested from the Metropolitan Council .grant fiord. As you know, Dealers: is willing to pay the City of Fridley's cost of $67,161.(12% of the total project cost) -to meet the May 15, .1997 application deadline. Please note that payment-by Dealers of Fridley's cost is conditional on a favorable award by DTED and the Metropolitan Council. If you have any questions or would like clarification of any items contained in the attached cost estimates, please feel free to contact me at (612) 531 -9481. Very truly yours, Weft Central Environm9fital Consultants, Inc. Wade A. Carlsbr Project Manager cc: Mr. David Goodwin - Dealers Manufacturing Company 14 Green River Road - l'.O. Box 594 Morris, MN 56267 -0594 (320) 589 -2039 or 1- 800 -422 -8356 Fax (320) 589 -2814 Equal Opportunity Emplover TABLE 1 Total Project Cost Estimate Dealers MWU&Ctl i Company WCEC Project No. 94- 765 -30 L Project Plan 2. Preliminary Site Characterization Study (Phase I) PSCS Work Plan PSCS Field Work PSCS Technical Memorandum (report) Total 1 $ 2,600.00 Phase I Total 3 Detailed Site In vestigation/Focused Feasibility Study (Phase 2) DSI Work Plan DSI Field Work DSI/FFS Report & IRA Work Plan 4. .Implementation of Interim Response Adis IRA Pre -Design Field Work/Pilot Testing IRA Design Report Installation Field Work & Equipmex IRA As -built Report 1 Year IRATerformance Monitorins Phase II Total (IRA) / Cleanup Costs her Cleanup Activities.(2) Estimated 1997 Operation and Maintenance Estimated 1998 Operation and Maintenance - Estimated 1999 Operation and Maintenance Estimated 2000 Operation and Maintenance Estimated 2001 Operation and Maintenance $ 3,820.52 $ 17,443.53 $ 4,534.31 $ 25,79836 $ 3,752.20 $ 27,629.93 $ 18,098.92 $ 49,481.05 $ 73,609.53 $ .32,0003 - 1 19,877:30 $ 4,594.43. $ 41,514.09(1)- 1RA Total .$ •273,600.18 S. Operation & Maintenance To $ 3 37,678.00(3)-*- $ 3 39,562.00 $ 4 41,540.00 $ 4 43,617.00 $ 4 45,798.00 Grand Total 1 .$ 559,674.59 11 (1) - Includes estimated sewer discharge costs of $4,650 and electrical costs of $3,000 (2) - Estimated inflation rate of 5% used for years 1998 through 2001 (2) - See Table 2 for breakdown of operation and maintenance costs TABLE 2 Annual Operation and Maintenance Cost Estimate Dealers Manufacturing Company WCEC Project No. 94- 765-30 Month Description of Tasks Labor Equipment & I Laboratory Total January March Winter Quarter EMS Sampling PW -1 Discharge Sampling P W -1 Discharge Sampling PW -1 Discharge Sampling Winter Quarter EMS report (1) $ 1,176 $ 98 $ 98 $ 98 $ 2,8'0 $ 268 $ 1,710 $ 5 $ 179 $ 5 $ 179 $ 5 e 0 $ 179 0 $ 282 $ 3,154 $ 282 $ 282 $ 2,820 April May June Spring Quarter EMS Sampling PW -1 Discharge Sampling PW -1 Discharge Sampling PW -1 Discharge Sampling Spring Quarter EMS Report (1) $ 1,176 $ 98 $ 98 $ 98 $ 2,820 Winter Quarter Total $ 268 $ $ 1,710 5 $ 179 $ 5 $ 179 $ 5 $ 0 $ 179 $ 6,820 $ 3,154 $ 282 $ 282 $ 282 July august' September Summer Quarter EMS Sampling PW 1 Discharge Sampling PW 1 Discharge Sampling PW -1 Discharge Sampling Summer Quarter EMS Report (1) $ 1,176 $ 98 $ 98 . $ 98 $ 2,820 Spring Quarter To $ 268 $ 1710 $ S $ 179. $ 5. _` $ 1-79'. $ U $ 179 $ $ 0 $ 6,820 $ 3,154 $. -282 $ . 282 . 282 $ 2,820 October November December Fall :Quarter EMS Sampling. PW:1 Dischar pig PW 1'Discharge'Sampling PW 1 Discharge Sampling Annual EMS Report (1) & (2) $ 1,176 $ 98. $ '98 $ 98 $ 4 368 Summer Quarter Total $ 268 $ 1,710 $ 5 $ 179 $ 5 $ 179 $ 5 $ 179 It 0 $ . 6,820 ' $ 3,154.. $. 282 $ 282 ' $ 0 Fall Quarter and Annual Report Total $ 8,368 Estimated EMS Annual Total (Sum of Each Quarter) $ 28,828 Estimated Electrical Usage for UVB and Extraction Well $ 3,000 Estimated MCES Sewer Discharge Fees $ 4,500 Department of Natural Resources Ground Water Appropriation Fees $ 50 Minnesota Department of Health Well Maintenance Fees $ 1,300 Notes: (1) Includes MetropoLtan Council Environmental Services quarterly discharge report. Estimated Total S37,678 (2) Includes Fall Quarter EMS Report Estimates do not include costs for equipment repair parts and labor. HRA RESOLUTION NO. - 1997 A RESOLUTION AUTHORIZING EXECUTION AND DELIVERY OF AN BY AND BETWEEN THE HOUSING & REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF FRIDLEY AND DEALERS MANUFACTURING, CO. FOR A POLLUTION CLEANUP PROGRAM BE IT RESOLVED by the Board of Commissioners (the "Commissioners ") of the Housing and Redevelopment Authority in and for the City of Fridley, Minnesota (the "Authority "), as follows: Section 1. Recitals. 1.01. It has been proposed that the Authority enter into an Agreement (the "Agreement ") with Dealers Manufacturing, Co. (the "Company "). Section 2. Findings. 2.01. The Authority hereby finds that it has been approved and adopted a development program known as the Modified Redevelopment Plan for its Redevelopment Project No. 1 (the "Redevelopment Program" pursuant to Minnesota Statutes, Section 469.001 et seq. 2.02. The Authority hereby finds that acting as the applicant for the Department of Trade and Economic Development's Contamination Cleanup Grant and the Metropolitan Council's Tax Base Revitalization Program on behalf of the Company promotes the objectives as outlined in its Redevelopment Program. 2.03. The Authority hereby finds that it is necessary to enter. into an agreement with.the Company regarding payment of the required local match and other issues. Section 3. Authorization for Execution and Delivery. 3.01. The Chairman and the Executive Director of the Authority are hereby authorized to execute and deliver the Agreement when the following condition is met: The Company agrees to provide the required local match and agrees to reimburse the Authority for additional consulting and financial costs. PASSED AND ADOPTED BY THE HOUSING & REDEVELOPMENT AUTHORITY OF THE CITY OF FRIDLEY THIS DAY OF , 199. LAWRENCE R. COMMERS - CHAIRMAN ATTEST: WILLIAM W. BURNS - EXECUTIVE DIRECTOR BRA RESOLUTION NO. - 1997 RESOLUTION AUTHORIZING APPLICATION FOR THE TAR BASE REVITALIZATION ACCOUNT WHEREAS, the City of Fridley is a participant in the Livable Communities Act's Housing Incentives Program for 1997 as determined by the Metropolitan Council, and is therefore eligible to make application for funds under the Tax Base Revitalization Account; and WHEREAS, the City has established a Housing & Redevelopment Authority in and for the City (the. "Authority" to promote its housing, development, and redevelopment activities; and WHEREAS, the City has identified a clean-up project within the City that meets the Tax Base Revitalization account's purpose(s) and criteria; and WHEREAS, the City has the institutional, managerial, and financial capability to ensure adequate project administration; and WHEREAS, the City certifies that it will comply with all applicable laws and regulations as stated in the contract agreements; and WHEREAS, the City Council of the City of Fridley, Minnesota agrees to act as legal sponsor for the project contained in the Tax Base Revitalization grant application submitted on May 15, 1997. NOW, THEREFORE BE IT RESOLVED that the City of Fridley is hereby authorized to apply to the Metropolitan Council for this funding on behalf of the City of Fridley and to execute such agreements as are necessary to implement the project on behalf of the applicant. PASSED AND ADOPTED BY THE HOUSING & RLDEVELOPMSNT AUTHORITY OF THE CITY OF FRIDLEY THIS DAY OF , 1997. LAWRENCE R. COMMERS - CHAIRMAN ATTEST: WILLIAM A. BURNS - EXECUTIVE DIRECTOR b BRA RESOLUTION NO. - 1997 RESOLUTION AUTHORIZING APPLICATION TO THE DEPARTMENT OF TRADE AND ECONOMIC DEVELOPMENT FOR CONTAMINATION CLEANUP FUNDS FOR DEALERS MANUFACTURING WHEREAS, the Housing & Redevelopment Authority in and for the City of Fridley (the "Authority ") shall act as the legal sponsor for project(s) contained in the Contamination Cleanup Grant Program to be submitted on May 15, 1997, and that William W. Burns, Executive Director, is hereby authorized to apply to the Department of Trade and Economic Development for funding of this project on behalf of the Authority; and WHEREAS, the Authority has the legal authority to apply for financial assistance, and the institutional, managerial, and financial capability to ensure adequate project administration; and WHEREAS, that the sources and amounts of the local match identified in the application are committed to the project identified; and WHEREAS, that the Authority has not violated any Federal, State, or local laws pertaining to fraud, bribery, graft, kickbacks, collusion, conflict of interest, or other unlawful or corrupt practice; and WHEREAS,.that upon approval.of its application by.the state, the Authority of Fridley may enter into an agreement with the State of Minnesota for the above referenced project(s), and that the Authority certifies that it will comply with all applicable laws and relations.as stated in all contract agreements. NOW, THEREFORE BE IT RESOLVED that William W. Burns, Executive Director, is hereby authorized to execute such agreements as are necessary to implement the project(s) on behalf of the applicant. PASSED AND ADOPTED BY THE HOUSING & REDEVELOPMENT AUTHORITY OF THE CITY OF FRIDLEY THIS DAY OF , 1997. ATTEST: WILLIAM W. BURNS - EXECUTIVE DIRECTOR LAWRENCE R. COMMERS - CHAIRMAN /"*N € � r WHEN, 3 Rai X11 swill lit y, ® v g O i 2 LL a. Q a s _ J � � FW- a I�: o � d .z m aeo p 0 �ibd�gp � "Umv � °�+ °a11 X10 4. o- E +a* 2 tin M dI�CC; !. r.Jhw lei lit 8. .j I 52i— aallamI _ 11 U5 /U "1 /`J7 17: U5 a Wayne B. Holstad Russell L.C. Larson John L. Lindell Karen Hill Fjeld t U612 490 1580 11OLSTAD &LARSON t Real Property Law Specialist May 7, 1997 HOLSTAD AND LARSON, P.L.C. Attorneys at Law 3535 Vadnais Center Drive, Suite 130 St. Paul, Minnesota 55110 Telephone: (612) 490 -9078 FacsimBe: (612) 490 -1580 Of Counsel Frederic W. Knaak* • Also L.iecowd in Wisconsin & Colorado Ms. Barbara Dacy Director of Planning and Development City of Fridley BY FACSIMILE 571 -1287 6431 University Avenue N.E. & U.S. MAIL Fridley, Minnesota 55432 RE: Condemnation of Owner- Occupied Housing Dear Ms. Dacy: Over a month ago you asked me to prepare to discuss with the Fridley Housing and Redevelopment Authority various issues related to the condemnation of vacant or hazardous housing. The particular context of your inquiry was. a decision on the part of the HRA to table an acquisition of a home in the City under its scattered site program. -One of the members of the Fridley HRA raised the question as to whether other altematives to.the program, condemnation proceedings in particular, could be' available as a better alternative to the City's program. The stated purpose of the City's program is to acquire property at. 1) a vacant site, or 2) containing a vacant home, or 3) containing a substandard house as defined in Minnesota Statutes Section 469.174, subd. 10. The. goal of -the program is to "revitalize neighborhoods and encourage private sector Investment, not to simply demolish substandard housing and displace people." I will focus on the alternative of condemnation. At my request, you have provided me with some specific questions to address on that topic and I will focus my response principally to those questions. In addition, as you know, the City and its staff have had a recent. experience in using the abatement/condemnation procedure for the property located at 218 57th Place N.E., and 1 will be using that recent example to offer some practical observations on the matter. I am attaching to and including as part of this memorandum some research prepared by the staff of the Minnesota League of Cities on the general subject of the use of hazardous building statutes that, can serve as a very good general background on the procedures followed in these cases and the general- principals involved. While the research was done some years ago, it is still good law and an excellent summary. UO /UI /y/ 1' /:U6 U612 990 1580 HOLSTAD &LARSON [A 003 Barbara Dacy May 7, 1997 Page Two You have, as noted, asked the following: Question No. 1. Can the HRA condemn single family homes for poor housing conditions and then sell the property for new construction? Yes. Under the hazardous housing statutes, the City is authorized to condemn hazardous or nuisance. properties and the acquisition is expressly stated to be a public purpose under the condemnation provisions of Minnesota Statutes Chapter 117. No restriction is placed under the statutes on subsequent uses, which, nevertheless must be consistent with the underlying purpose of the statute, which provides: 463.152. Exercise of eminent domain. Subdivision 1. Purpose, public, interest. In order to maintain a sufficient supply of adequate, safe, and sanitary housing and buildings used for living, commercial, industrial, or other purposes or any combination of purposes, it is found that the public interest requires that that municipalities be authorized to acquire buildings, real estate on which buildings are located, or vacant or undeveloped real estate which are found to be hazardous within the meaning of section 463.1 S. subdivision 3, and the acquisition of such buildings and real estate is hereby declared to be a public purpose. Subdivision 2. Acquisition; procedure, In furtherance of the public policy declared in - subdivision 1, the governing body of any city or town may acquire any hazardous building, real estate on which any such building is located, or vaunt or undeveloped real estate by eminent domain in the manner provided by chapter 117. A key here is the requirement of a finding that the building or site in question be found to be "hazardous" under the statutes. This requires that the City Council, in this instance, fully comply with the various procedural requirements, including a separate factual hearing and any court hearings where the issue of the hazardous condition may be disputed, .prior to commencing a condemnation proceeding under Minnesota Statutes Chapter 117. Even in undisputed cases, it is necessary for a judicial default determination in order to have the City's initial order enforced. Question 2. What are the distinctions rf any) between ordering the demolition of a hazardous building and acquiring and demolishing a property through condemnation? Is there a difference in building condition or degree? In the usual order of hazardous condition abatement, condemnation is.simply a later, additional option under the same procedure. In either case, an earlier council finding of the hazardous condition, and judicial enforcement of that finding is required. The Council,. in its order may require the removal by the owner. If the owner fails to comply, the Council can have the hazardous condition or building removed and, after an Ub /07 /97 17°07 0612 490 1580 HOLSTAD &LARSON Ms. Barbara Dacy May 7, 1 997 Page Three additional period of time to allow the owner to pay the expenses related to the abatement, assess the costs of the removal against the property. . Condemnation is an additional option after the finding by the council, and judicial determination allowing enforcement. It has the option of either abating the nuisance and beginning the condemnation proceedings after assessment of the cost or beginning the proceedings after a finding that a hazardous condition exists. No distinction is made as to the degree of deterioration or hazard that would be be required for one choice to be made instead of the other:' Either requires the Council action ordering the abatement or razing of the hazardous condition or building and judicial enforcement. The choice of the option to be followed by the City would be dictated, in most cases, by the facts surrounding a particular parcel. If it appears, for example, that owners -are present who are willing to have a building razed and are without resources to do so themselves, but nevertheless do not want to sell the property, it is unlikely that a court would accept an argument by a city that condemnation.is an appropriate remedy. As noted In the League of Cities materials, courts are very Leary of undermining property rights in hazardous condition and nuisance. abatement cases. In instances where a property owner could show.that a lesser remedy than the one proposed by the. City could; in fact, address the hazard or nuisance adequately, it Is likely that the Court would modify the order of the City for abatement accordingly. Similarly, in an instance where the City. would seek condemnation and ownership of a parcel as part of a hazardous building proceeding, it is possible a Court would not permit the condemnation action to begin in a case in which an owner could - establish a reasonable, lesser alternative to alleviate the hazardous condition. Question 3, In Question #2, is the owner entitled compensation in either case, and, if so, how is this determined? No. The owner is entitled to compensation only in cases where the City has condemned and taken the property. Where a hazard or nuisance has been abated by the City, or a hazardous building razed, the cost of that effort by the City is ordinarily assessed to. the parcel and paid on subsequent sale, if any occurs. The City also has a separate option of bringing suit against the owner for those costs if it decides not to go through the assessment process. This, of course, would only be likely in cases where the owner was known and solvent at the time of the abatement and the assessment process would not be considered, for some reason, adequate by the City. Q004 05/07/97 17:08 $612 490 1580 HOLSTAULARSON a 605 Ms. Barbara Dacy May 7, 1997 Page Four Since there is, technically, no taking of the parcel, removal of the structure or nuisance is not a °taking" without compensation. If there is value to the property, that would, presumably, offer incentive to the owner to abate the nuisance voluntarily. As noted in the above - quoted statute, when the City determines that to condemn the property, the usual procedures of Chapter 117 apply, including appointment by the Court of Commissioners and their own determination of the value of the property. The only condemnation issue that would distinguish this from many other.takings is the fact that the statute expressly provides a public purpose in these cases, which would result in the only matter to be determined by the Court would be the value of the property to be taken. Question 4. What are the steps involved in condemning a property? Please outline the criteria which must be met and "findings" necessary to take action. How does the Court view this type of municipal activity, especially when condemning single family homes? The basic procedure is well outlined in the League of City materials. A determination by the-City Council that a hazardous condition exists is the first determination required. I have included with this memorandum a copy of the resolution passed by the Fridley Council in the 218 57th Place matter to provide a general framework for the degree of detail that would be required in the findings. Assuming the hazardous condition finding in the Order of the Council is upheld by the Court on enforcement, condemnation proceedings could commence. An alternative might exist in the condemnation proceedings under Chapter 117, reserving to the Court in the initial condemnation proceedings a determination of whether the building was hazardous within the meeting of the statute, but it is unclear whether an owner could, at that point, demand a separate proceeding under the hazardous building statutes prior to such a determination. As noted earlier, while municipal action of this sort would not appear to be viewed with anything like hostility, it is clear from the Court decisions that every effort is made to accommodate the interests of property owners in these cases. If there is any objection on the part of an owner to condemnation as a remedy in a hazardous condition case, I would expect the Court to make every effort to accommodate the owner's property rights, if possible, by modifying the order to provide for the remedy of the condition, including razing a building, short of condemnation. Question 5. Is condemnation a less expensive option when compared to a voluntary purchase? Based on your experience, what are the typical costs involved in a condemnation action? 05/07/97 17:08 V612 490 1580 HOLSTAD&LARSON 11 006 Ms. Barbara Dacy May 7, 1997 Page 5 Generally, speaking, I would say that condemnation is a more expensive option, in some cases considerably more expensive, than a voluntary purchase for a single family home. Very often, in fact, a successful condemnation action by a City has, as an objective and result, a'voluntary' purchase as early as possible in the proceedings. *Unlike a "true" voluntary purchase, however, initiating a condemnation action brings with it immediate additional expenses that accrue over to make it increasingly unattractive except where acquisition for near an appraised value would otherwise not be possible. In making this general statement in favor of voluntary purchases.where possible, I am making the assumption that the City is relying on good, independent assessments of market value, such as competent appraisals, as the basis of its purchases.. As a practical matter, a condemnation award would generally not be for less than the appraised value by the City. Costs in a condemnation action typically include the City's attorney fees, interest on the award, miscellaneous court costs and the costs of the appraisal of the City, as well as the property owners' appraisal costs and reasonable court costs_ Included as well are the stipend paid to the condemnation commissioners and, as a hidden cost, necessary staff time to prepare the City's case in the proceedings. In some instance, where a .condemnation will. result in the relocation of an occupied residence or business, the City could also be required to pay for relocation costs, which can be substantial. Another factor to consider is the length of time involved. The 218 57th Street case is a good one to take as an example. In.that instance, all of the current owners of record were long gone. A subsequent lienholder, however, had foreclosed on the property and was hoping to gain on resale as a speculation. While there was no real dispute as to the hazardous conditions on the site, the lienhold filed an answer to the Order of the City as an interested party in order to buy time until he would be legally be permitted access. It turned out that the lienholder and the City then made arrangements to deal with the conditions on the site, but an effective delay of three months was accomplished prior to the scheduling of a court trial to determine the matter. Assuming the City was successful in its court action on the issue of hazardous conditions, it is not at all clear that a court, if the City had wanted to pursue obtaining the property through condemnation, would have agreed under the circumstances that such an action would be necessary and the court could have modified the City's order accordingly. Even if the Court had upheld the hazard findings and the City had proceeded with the condemnation case, a substantial additional amount of time could have been required in order to complete the acquisition. UO /U1iy1 1 /:U.9 UMIZ 490 1580 HOLSTAD &LARSON Q007 Ms. Barbara Dacy May 7, 1997 Page 6 I hope you find this information and analysis helpful, and you are more than welcome to share it with the member of the HRA Board, if you believe it will assist them as well. I look forward to seeing you at the meeting tomorrow evening. Sincerely, /rede4ric W. Kri k Fridley City Attorney 05/07/97 16:24 V612 490-1580 HOLSTAD&LARSON IA 008 /018 WEVIIHO a research memo for city officials 75b.2 JUIY9 1976 Municipal Control of Hazardous Buildings and Excavations Contents I. General information A. Summary of Law B. Structures to Which Act Applies C Removal or Repair D. Uses of Hazardous Building Law E. Availability Of -Federal Aid F. Outline of Procedure Under the Act 11. Forms for Use Under Hazardous Building U- w Lea gue of Mifln.esota Cities Lexington Avenue North, St. Paul, IVIN 55126 (612) 490-5600 05/07/97 16:26 V612 490 1580 HOLSTAULARSON MUNICIPAL CONTROL OF HAZARDOUS BUILDINGS AND EXCAVATIONS I. General Information A. Summary of Law Q009/018 M.S. 463.15 - 463.261 sets out a procedure for the removal and repair of hazardous and dilapidated buildings and the filling of dangerous excavations. Under this statute, the council of a city or the town board of a town may, upon a proper finding, order the owner of a hazardous building to correct the hazardous condition or remove the structure. An order to that effect is issued to the owner and if it is not complied With, the municipality applies to the district court for enforcement. The owner may contest the order and if he does, a trial is held as soon as possible at Which the court upholds or dismisses the order. If the order is not contested, the court . authorizes the municipality to proceed with the necessary repair or removal. The procedure for filling a dangerous excavation is similar except that the court proceedings are eliminated. Without this formality, the council may, with the written consent of all owners of record, occupying tenants and all lienholders of record, remove or raze any building or repair it to correct a hazard- ous condition. The cost of removal when ordered by. the court may be collected as a special assessment in a single installment. When removal.occurs with written consent, the special assessment may be spread over a five -year period. So too may the cost of correcting a hazardous condition, whether the correction is court - ordered or undertaken with written consent. Use of the special assessment method of financing the cost of removal or rehabilitation is not required. As an alternative to condemnation of a hazardous building under the police power, the hazardous buildings law authorizes the governing body of a city to acquire through the.use of eminent domain proceed- ings any hazardous building and the land on which it is located as well as any vacant or undeveloped land. Such acquisition is declared by the law to be a public purpose. (M.S. 463.52.) Instead of acquiring such property to use for an authorized municipal.purpose, the city may acquire the property, then transfer it to the local housing and redevelopment authority for rehabilitation and disposal under the "urban homesteading act ", Laws 1974, Chapter 228, amending various sections of the municipal housing and redevelopment act. Under the urban homesteading act, the housing and redevelopment authority may itself, with approval of the council, acquire by eminent domain proceedings buildings and improvements which am vacated and substandard, '"Owner's" 'owner of record" and "lienholder.of record" means a person having a right or interest in property to which this act applies and evidence of which is filed and recorded in the office of the register of deeds or registrar of titles in the county in which the property is situated. (M.S. 463.15, Subd. 4.) - 1 - 05/07/97 16:26 0612 490 1580 HOLSTAD &LARSON .@010/018 mean-"Pr that they " ailapidatcd or obsolescent, faultily designed, lack alecrat -e vcnt_latioa, ligit, or sanitary facilities, or a.zy cen;, :nation of these or other factors that are detrimental to the safety or health of the community." "Urban homesteedinc" ln:•olves the transfer or these .d:rellings at a substantially redtzced price (as low as one dollar) to persons or familien of low and moderate income who have either the financial ability or the building skills to bring the home into compliance with the applicable codes within a specified period of time. Since a hazardous building, like any other building may be acquired by eminent domain proceedings for any authorized municipal use, the provisions in the hazardous building law for acquisition of such a building by eminent domain proceed- ings are useful only where the city wishes to clear the land and keep it vacant or re- sell.it or convey to the housing and redevelopment authority when the building is capable of rehabilitation by private persons under the urban homesteading provisions of the housing and =edevelcpment act or other authorization. Farms for acquisition of hazardous buildings under the eminent domain power are not included in this memorandum. But the fors in another League memorandum, "Municipal Acquisition of Property by Right of Eminent Domain -- Notes and Forms ", 190, may be easily adapted for the purpose. This memorandum outlines the condemnation procedure to be followed under the hazardous buildings law. Part II contains suggested forms for use in having a building removed or re- habilitated under that statute. The forms-are largely patterned after those used in Minneapolis, which has. made extensive use of the hazardous building law in its redevelopment and re- habilitation projects. B. Structures to Which the Act Applies The act defines a hazardous building as follows: "Hazardous building means any building which because of inadequate maintenance, dilapidation, physical �damage, unsanitary condition or abandonment, constitutes ra fire hazard or a hazard to public safety or health." It should be borne in mind that this statutory language only states standards which can be applied to specific situations which in fact come within its meaning. In other words, the mere fact that .a council says a building is hazardous doesn't make it so, and the council together with its attorney and its building ins rector must be prepared to substantiate its r finding to the paperty owner and the court. While no precise guideline can be laid down as to what degree of neglect will bring a structure within the statutory defini- tions, the Minnesota Supreme Ccurt`described such a building in a case uphold'M6 an order of the Dist; .ct Court to destroy - 2 - u5 /u7 /y7 1ti:27 Z=612 490 1580 HOLSTAD&LARSON Roll/018 a building. The following quotation from that case2 describes a building within the definition and suggests the type of facts that should be in an order for removal and in the.record of any trial involving a contested order. "... that the building is unoccupied; that sections of the concrete are decayed and rotted; that the exterior siding is broken, deteriorated and fallen from place; that the roof cornice is rotted and collapsing; that there are large holes in the asphalt roof covering and there is evidence that the roof leaks; that there are large holes in the plaster finish of the walls and ceilings; that many of the window lights are broken and the sash damaged or destroyed; that the water traps of the wash basin and water closet are dry, resulting in open sewers; that the interior of this dwelling is littered with paper, lumber, wood lath, plaster and debris; that this building is a greater fire hazard due to the accumulation of flammable materials, due to the exposure df the wooden framing members caused by the missing plaster surfacing, and due to the fact that this building is open, vacant and unattended;..." C. Removal of Repair It should be noted carefully that the act speaks in terns of order- ing the owner "to correct the hazardous condition of such building or to raze or remove the same." Councils should be cautious not to order removal where the hazardous condition can be eliminated by repair. The court. in the Ukkonen opinion noted with approval the lower court's "caution and restraint in the enforcement of the statutb's drastic provisions" where several extensions of time were granted to give they owner adequate opportunity to make repairs. In an earlier cases with a similar order by the State Fire Marshal, the Supreme Court said: "The law in question is drastic. It.authorizes the destruction of property without compensation. The state, in the exercise of its police power, may do this, but the necessity for thus sacrificing private propertymust clearly appear. The law itself holds out an alternative by which the owner may be directed to•alter or repair so as to eliminate danger. When the police power of the state is exerted against property it is ordinarily to regulate its use, not to destroy it. Destroying or depriving the owner - thereof is a last resort, unless the property is of such nature that its use or possession cannot be other than for evil. It was said in York v. liar adine, 142 Minn. 219, 171 N.W. 773, 3 A. 1. R2 1627 1919 that LTkkonen v. City of Minneapolis, 280 Minn. 494, 160 N.W. 2d 249 (1968). 3State Fire Marshal v. Fitzpatrick, 149 Minn. 203, 183 N.W. 141 (1921). The. Hazardous Building law follows the procedure embodied in the state fire marshal's law quite closely. (See M.S. 73,09,) 05/07/97 16:28 V612 490 1580 HOLSTAD &LARSON 0012/018 the fire marshal and the courts should exercise the tiover conferred by the law in question with great caution. I'k'here repairs or alterations can be made lawfully upon a wooden building so as to eliminate the special dangers arising from its location and condition to surrounding property and to persons, such repairs or alterations should be ordered rather than a tearing down of the building.' The police power cannot be extended by the authority which is intrusted with its exercise to an arbitrary misuse of private rights." Northvestern Tel. Exch. Co. v. Cit. of Minneapolis, 81 Minn. 140, 83 N.V. 527, 86 N.W. 69, 53 L. R. A. 175 (1900). A municipal council using this statute may avoid controversy with the owner and possible litigatiod if this principle is observed. D. Uses of the Hazardous Building Law There are two primary uses for the Hazardous Building Law: (1) The removal or rehabilitation of the single isolated - structure whose owners either cannot be found or will not comply with municipal requests for action. This is the typical situation in the smaller municipality. This statute gives municipal councils a direct summary method of proceeding which affords adequate protection• to the-property owner and the council itself. (2) The systematic removal or rehabilitation of unsound structures from neighborhoods in order to prevent urban blight and decay. In larger cities. the law can be used to exrest.neighborhood deterioration by removing, on e. selective basis, those structures which, if allowed to stand, would ultimately*14ad to conditions requiring-- full scale renewal projects. Such a program can be made part of a housing and building code enforcement program. E. Availability of Federal Aid The Federal Housing Act of.1965 contained provisions for federal grants to assist in financing the.cost of demolishing structures which, under state or local law, have been determined to be structurally unsound or unfit for human living. Those provisions were repealed, however, when the block grant approach to community development was adopted in 1974. There is now no program of earmarked federal funds for the demolition or rehabilitation of hazardous buildings by municipalities; however, expenditures for this purpose constitute an appropriate optional use of a city's block grant for community development. F- Outline of Procedure Under Hazardous Bu ilding s Act The following actions are provided for in the statute relating to hazardous buildings: -k - 05/07/97 16:29 V612 490 1580 HOLSTAD &LARSON IM 013 /018 I. Voluntary repair or removal. The .appropriate first'action for a city to take is to seek the "voluntary - repair of the, hazardous condition or removal of the building if repair is not suitable. If this cannot be done, the city may.obtain the consent of all owners of record, occupying tenants, and, lienhol4grs:.of record and then correct the•hazardous condition or remove the building. It may impose'a special assessment payable in one to five years to defray the -cost. (M.S. 463.151, 463.21.) See Form Nos. B1 - B4: 2. Order for Repair or Removal. a. If voluntary repair or removal of a building is impractical, the council may order the owner of record to correct -the hazardous condition or remove the building. (M.S. 463.16.) The order must be specific as to the grounds, repairs to be made, if any, and a reasonable time for compliance in addition to other required information. (M.S. 463.17, Subd. 1.) The order must be served upon.the parties in interest (M.S. 463.17,-Subd. 2) and filed with proof of service with the clerk of district court. Ks. 463.17, Subd. 3.) Bee Form No. Cl. b. If an excavation is hazardous, the council orders the excavation to be filled or protected or in the alternative that erection of a building begin forthwith if the excavation is for building purposes. If the owner fails to comply, with the order within 15 days diter service upon hiin, the council causes the-excavation to be filled to grade or protected and the cost charged against the property as provided in the case of hazardous buildings. (M.S. 463.25.) As the term is used here, a hazardous excavation is one which is left open for more than six months without proceeding with erection of a building, or an excavation or basement which is not filled to grade or otherwise protected 4fter a building is destroyed or removed. District court action is not required in the case of excavations. See Form!-Nos. D1 - D5. 3. District Court Action.. a. The city files a notice of lis pendens. See Form C2. b. If no answer to the order is served, the city may move the district court for enforcement of the order. (M.S. 463.19.) See Form Nos. C2, C3, C4. c. If an answer is served, the action is .:ied in district court. The action has priority over all pending civil actions. Ks. 463.18, 463.20_) d. If the council's order is sustained by the court, in its original or modified form, the court enters judg- ment and fixes a time after which the building is.to be repaired or destroyed by the city. (M.S.*463.20:) See Form Nos, C5, C6, C7. - 5 - e . uui u i v LU.L0 4JUA4 %OU 140Y nul.JlAl/6eLA1(�un 10014/018 e. If the council's order is not sustained, the court annuls it and sets it aside. ' f. The city reports its expenses, with receipts'from salvage, if any, credited against the expenses. The court then allows expenses as it sees fit, certifying any deficiency to the municipal clerk, who certifies the amount for collection with taxes against the property. (M.S. 462.22.) See Form Nos. C8 - C14. UOiuria1 lb:zu pO1L 4`JU 158U HOLSTAD &LARSON ©1993 League of Minnesota Cities Ali rights reserved Printed in the United States ofAmerica R015/018 05/07/97 16:30 V612 490 1580 HOLSTAULARSON 0016/018 RESOLUTION 59 -1996 ORDERING THE REMOVAL OR REPAIR OF A HAZARDOUS BUILDING, PURSUANT TO MINNESOTA STATUTES SEC71ON 463, LOCATED WITHIN THE CITY OF FRIDLEY, MINNESOTA In the matter of the Hazardous* Building Located at 218 57th Place N.E. Legally described as Lots 5 and 6, Block 8, City View, Anoka County, as on file and of record in the County Recorder's office of said County. TO: Gerald L. Gage, Henry F. and Roselyn Berkholz, and any tenants, occupants or any other persons claiming an interest in the above - described premises 1. Pursuant to Minnesota Statutes, Section 463.15 to 463.61 the Council of the City of Fridley, having duly considered the matter, finds the above - described building to be a hazardous building for the following reasons: Having received numerous citizen calls and complaints concerning the apparent disrepair and abandonment of the above - described premises, the City of Fridley dispatched to that location the Chief Building Official of the City, who conducted an inspection of the premises on July 3, 1996, and submitted to the City a report of his observations of the premises, which report is attached hereto, incorporated by reference, and shall be considered among the findings of the City Council in its determination of the matter. In particular, the defects within the premises that were expressly found to violate the provisions of the State Building Code, as adopted by this City, include, but are not limited to the following: (a) Inadequate or no footings and foundation around the perimeter of the structure. (b) Improper posts, beams, and footing pads to support the floor. (c) Stairway to the basement does not meet the minimum building code requirements: 1) Maximum rise of 8 inches. 2) Minimum run of 9 inches. 3) Minimum headroom of 80 inches. 4) Minimum width of 36 inches. (d) Improper and unsafe handrail for the basement stairway. uai u l i a l 10: JU "b1z 4au tbbu HOLSTAD &LARSON IA 017/019 (e) No guardrail on the open .sides of the basement stairway - minimum height of 36 inches and a maximum opening between rails of not more than 4 inches on center. (f) No certification on the two gas furnaces and flu size. (g) No exterior source of combustion air to both furnace rooms. (h) Unsecured gas piping and improper installed gas shut -offs. (i) No gas provided to the dwelling. 0) No hot water provided. (k) No heating system capable of maintaining a temperature of 70 degrees. (I) Building main sewer system needs repair, and currently results in raw sewage regularly being dumped into the building. (m) Building waste needs to be secured and vented with proper hangers. (n) Damaged plumbing. (o) Broken and damaged windows. (p) Holes in interior walls. (q) Unclosed openings in the foundation rim joists. (r) Uncaulked exterior openings (siding and soffit). (s) No back flow preventers at laundry tub, and at other hose connections. (t) Damaged wiring and light fixtures need repair and wire needs to be secure per code. (u) Exposed electric wires. (v) Smoke detectors not provided in each level of the dwelling and in every sleeping room. (w) Roof rafters at south end of the building need repair. Roof must support a minimum of 50 pounds per square foot. (x) No building address numbers. (y) Building not secure from trespass. (z) Rodents and other vermin are present in the building and need to be exterminated by licensed contractor. (aa) Improper ceiling height in habitable rooms. (bb) Improper storage of and clearance to combustibles from 13-vent through roof, south apartment furnace. (cc) No firestop above light fixture in south apartment. (dd) Improper ceiling insulation in south apartment. 2. The council further orders that unless such corrective action is taken or an answer is served upon the City of Fridley and filed in the office of the Clerk of District Court of Anoka County, Minnesota within 20 days from the date of the service of this order, a motion for summary enforcement of this order will be made to the District Court of Anoka County. Enforcement of this order shall include, in the City's discretion, the option of razing the structure. The Council orders that all personal property or 018 /018 fixtures that may unreasonably interfere with the razing and removal of the building shall be removed within 20 days, and if not so removed by the owner, and the City then determines to raze the structure, the City of Fridley may remove and sell such personal property or fixtures at public auction in accordance with law. 3. The council further orders that if the city is compelled to take any corrective action herein, all necessary costs expended by the city will be assessed against the real estate concerned and collected in accordance with Minnesota Statutes, Section 463.22. 4. The mayor, clerk, city attorney and other officers and employees of the city are authorized and directed to take such action, prepare, sign and serve such papers as are necessary to comply with this order and to assess the costs thereof against the real estate described above for collection along with taxes. Adopted by the City Council this z6THday of AUGUST 1996 Mayor City Clerk MEMORANDUM HOUSING r � REDEVELOPMENT AUTHORITY DATE: May 7, 1997 TO: William Bums, Executive Director of HRA FROM: Barbara Dacy, Community Development Director SUBJECT: Highway 65 Street Light Discussion The City Council discussed the proposal to install street lights along Highway 65 from the Lake Pointe Drive /Highway 65 /Central Avenue intersection north to the East'Moore Lake Drive intersection on May 5, 1997. A copy of the staff presentation outline is attached. The cost of the project, depending on the light standard selected; would range.from $104,000. to $240,000. A majority of the City Council was in favor of the proposal, but the Council directed staff to do the following: 1. Meet with Councilman Schneider, he was unable to attend the meeting on May 5, 1997. 2. The City Council and the HRA should agree on a type of standard prior to conducting a neighborhood meeting. 3. A neighborhood. meeting should be conducted for the people that may be affected. The residents on the west side of the lake would be notified as well on the east side of Central Avenue. 4. A source of revenue should be identified for the expenditures. The proposed cost would be in addition to the $380,000 already committed for the intersection improvements. (the intersection improvements include all four legs of the intersection; Lake Pointe Drive, Highway 65, and Central Avenue). Highway 65 Street Light Discussion May 7, 1997 Page 2 RECOMMENDATION The HRA should discuss whether it would like to pursue installation of street lights on Highway 65 and determine if they are willing to appropriate additional funds for this expenditure. These additional expenditures were discussed briefly during the budget workshop session with the HRA in February. The HRA would have been responsible for the entire cost of the intersection (approximately $1.9 million); however, the ISTEA funds help to eliminate $1.52 million of the cost. SEH,.the consulting engineer, has advised that the City must decide by July if it is to include the street lights as part of the project in order to incorporate it into the plans and specifications. SEH (see attached presentation outline) suggests that the street lights be either included in the project at this time or deleted in its entirety; they do not recommend that just the conduit be installed as part of the project. BD /dw M -97 -221 HIGHWAY 65 STREET LIGHTS 1987 ACTION: 1. HRA approved inclusion of street lights along Highway 65 on February 12, 1987. 2. Original cost was $104,000 and probably at a longer spacing like 1/300 feet. 3. 40 foot tall standards, with "box- type" fixtures. 4. 14 foot frontage road lights were also considered for Old Central and Lake Pointe Drive. CURRENT PROPOSAL: 1. Installation of 40 foot, high pressure sodium lights along Highway 65 from 1 -694 /Central Avenue /Lake Pointe Drive north to West Moore Lake Drive /East Moore Lake Drive. 2. Shorter frontage road standards not included. 3. Five different standards proposed: a. Executive $4,000 /standard b. Fontana $4,100 /standard c. Humboldt $4,300 /standard d. Franklin III $4,000 /standard e. Lumec Domus $4,600 /standard COMPARISON OF COSTS EXECUTIVE $104,000 - $208,000 (26; diagonal) (52, across) FONTANA $106,600 - $213,200 HUMBOLDT $111,800 - $223,600 FRANKLIN 111 $104,000 - $208,000 LUMEC DOMUS $119,600 - $239,200 PROS AND CONS CONS: 1. Cost: installation and additional electric charges. HRA would have to assume installation cost; City has paid electrical charges in the past. 2. Lights were not discussed. with neighbors during Lake Pointe meetings in 1996. While they may not object, it was not specifically identified in the meetings staff conducted. PROS: 1. Installation can be accommodated in highway intersection project now under preparation. SEH does not recommend installing just the conduit for a future installation: a. Pay twice for mobilization costs. b. Future contractor not responsible for original installation on conduit. . c. Permit approvals along highway and lake already being completed. d. Full lighting project should either be deleted or included. 2. If designed according to MnDOT standards, meets all safety criteria. 3: Adds additional amenity to the "finished" intersection project and makes a "connection" between the 1 -694 interchange and the Moore Lake project area. 4. Adds to "identity" of project and the City; makes a statement of quality and improvement in the City. Z, Hi�hway, 65 Li hg is -1 2 4. Colors proposed: a. NSP approved standards are dark bronze, black, and deep forest green. b. ,Other colors can be ordered i.e. City of Fridley royal blue. C. NSP is very pleased with Lumec Company and will accept that standard as well as Sterner Executive. 5. If NSP will ultimately own and maintain the standards, the standards should be located in accordance with MnDOT standards, probably 1/150 to 1/160 feet. 6. NSP /MNDot may insist on versus a longer spacing i n longer spacing is ultimately sign an acknowledgment standards. their design requirements order to save money. If chosen, City may have to that it is not to "design" 7. Annual electric charge depends on the. fixture; approximately $6,000 to $7,000 /year. 8. If the City chooses a standard not stocked by NSP, the City will need to have extra standards and luminaires available. 9. Ed Farr, architect for MEPC, would prefer the following colors: dark bronze, black, and royal blue. HOUSING, & REDEVELOPMENT AUTHORITY MEETING, FEBRUARY 12, 1987 PAGE 16 5. Mr. Rasmussen asked if the HRA should be doing any kind of PR regarding this impending lawsuit to protect their interests. Mr. Newman stated the subject was raised at the last City Council meeting about whether the City and the HRA should go on the offense and issue their own press release. (Mr. Prairie left the meeting at 10:15 p.m.) Ms. Schnabel stated if people are-concerned about what is going on with that property and rumours are flying around, maybe there was a need for some type of press release and maybe Staff should start preparing for an article. Mr. Newman stated he would caution the HRA members that if they do get served with any legal Davers that they note the date and the time and forward the papers to him immediately. If any of the HRA members feel the need for any further discussion, he /she should let Mr. Robertson know and they will schedule a meeting. Ms. Schnabel stated she would like to know whenever any of the HRA memhers was served with pagers, because she felt that was something the other members should be aware of right .away. IDERATION OF A RESOLUTION (1) REOUESTING THAT THE FRIDLEY CITY COUNCIL A Mr: Robertson stated this project was originally started to improve the easterly entrance to the Lake Pointe project. As theARA remembered, it was the project that was required to, not only improve the entrance visually and functionally, but was also required by the Indirect Source Air Quality Permit to expedite the traffic flow to reduce the air pollution. Mr. Robertson stated the basic cost was not to exceed 31,661,784.40; however, there were some additional costs the HRA might wish to consider in the future on decorative lighting. He would also-call the HRA's attention to the memo given to the HRA members regarding an informational meeting that was held the pre- vious evening at City Hall with the people who own homes along Old Central Ave. beyond the intersection. Mr. Robertson stated Mr. Flora was at the meeting to give some technical background. Mr. Flora stated that since the public hearing with the residents along Old Central, there was some question about whether this was actually an acceptable solution to the intersection at this time. So, they are working on some alternative solutions to satisfy some of the concerns of the neighborhood, but they were still looking at somewhere around $1.7 million for this intersection imarovement which was designed to handle the Lake Pointe Development, Highway. 65, and the future traffic upstream and downstream from the intersection. HOUSING & REDEVELOPMENT AUTHORITY I4EETING, FEBRUARY 12. 1987 PAGE 17 Mr. Flora stated that if the project goes. Staff has some suggestions. As the HRA knew, they were doing a University Ave. Corridor study & in that study, they were looking at the "Fridley look ", certain light fixtures, plantings, motif, etc. If this was to be the Fridley look, the question was should the Fridley look be continued to this location also. If they do that, they should look at incorpurating those types of lights, plantings, etc., into the project. So, depending on the options, they were.looking at a•range of $4,000 to $155,000 for the Fridley street lighting look. Mr. Flora stated another item, with the Indirect Source Permit, was the Rice Creek Road diversion. Part of that plan was that too many cars were coning down Old Central to the Highway 65/01d Central intersection, so the plan was to divert the traffic from Old Central to Highway 65 through Rice Creek Road by the Shorewood Shopping Center. That was another project that was authorized by the HRA for preliminary plans to be prepared. At the informational meeting with the neighborhood, the neighbors felt this was probably the first priority because by moving the traffic off Old Central at the Old Central/ Rice Creek Road intersection, some of the concerns could be resolved more satis- factorily. So, Staff might be coming to the HRA to do this. Right now in round numbers, that-improvement would be $400,000. Staff was also looking at whether they should also continue the Fridley look in this location if they do it at the Highway 65/Old Central location. These were things the HRA would have to decide. Mr. Flora stated the item before the HRA at this meeting was the intersection.. Per.the agreement with tor. Weir.-and the HRA and.the City was supposed to work to get this intersection done this construction season. The City was moving forward, but they needed some approval from the HRA. Councilperson Schneider stated he did not know if the City Council would hold a public hearing or not, but he would be more comfortable if .this resolution came to the City Council without the HRA specifically requesting the City Council not to hold a public hearing. Mr. Qureshi stated there was no legal requirement to hold a public hearing, but certainly the HRA or the City Council could hold a public hearing if they wished. The HRA could delete that wording from the resolution. Mr. Flora stated he would also like some kind of concensus from the HRA so they can tell the consultant he can put the lighting into the plan so they can be identified and the costs provided rather than doing it later. This was certainly going to be another one of the focal points of the City. Ms. Schnabel stated her problem was that as far as she knew the HRA had not made any decision yet on the lighting along University Ave. Mr. Robertson stated the HRA did approve the lighting at the intersections, but not along the Corridor. After'Staff received the recommendations from the Barton- Aschmann firm, staff did recommend a style of lighting standards. It was B d HOUSING & REDEVELOPMENT AUTHORITY MEETING, FEBRUARY 12 1987 PAGE 18 his understanding that when the HRA approved the Staff report in December, they approved that style of Iighting :standards for the intersection. The KRA.then hired Mr. Ellers, a former NSP lighting engineer, to specify the lighting details, not only for the intersections, but for the entire corridor to make sure all the lighting fit so they wouldn't have to redo the intersections to match the corridor at some later time. They now have a design and layout for the entire University Ave, corridor for the approved lighting style plus preliminary recommendations for the commercial frontage road lighting. They - have not yet brought this to the HRA. Mr. Robertson stated they were now beginni.nq preliminary engineering desiqns for Old Central'-and Highway 65 /Lake Pointe Drive entrance. Did the HRA wish to make a commitment at this time to adopt those styles of lighting standards for this intersection also? MOTION BY MR. RASMUSSEN, SECONDED BY MR. MEYER, TO ADOPT RESOLUTION NO. HRA 2 -1987, -DELETING THE LANGUAGE, "AND WAIVE THE PUBLIC HEARING RELATING THERETO ". UPON A VOICE VOTE, ALL VOTING AYE, VICE- CHAIRPERSON SCHNABEL DECLARED THE MOTION CARRIED UNANIMOUSLY. The HRA members agreed Staff could proceed to incorporate the lighting design into the plan all the way to Rice Creek Road, but that the HRA would like to see all the plans before it is approved. 6. CLAIMS (1565- 1581): MOTION BY MR. RASMUSSEN, SECONDED BY M. MF.YER, TO APPROVE THE CHECK REGISTER AS PRESENTED. UPON A VOICE VOTE, ALL VOTING AYE, VICE- CHAIRPERSON SCHNABEL DECLARED THE MOTION CARRIED UNANIMOUSLY. 7. OTHEk BUSINESS: a. Update on Mississippi St. Intersection Mr. Qureshi stated the intersection plans have been prepared. The County originally had plans to do the East River Road /Rice Creek Bridge, but they ran into some technical difficulties. Since the Mississippi Street plans are ready, the County wishes to proceed on it this year if possible. This plan was presented to the City Council and the members of the City Council had some concerns. They recognized the improvements would help move the traffic through the intersection, but their concern was to make sure the neighborhood behind Holly Center still had access to this road and be able to use it safely. The City Council requested the County to look at the possibilities of providing some control of the intersection in this location. The City received a letter from the County stating that when this development comes and they can identify a cross intersection either at 2nd Street or.at the westerly entrance to the Holly Shopping Center, they will assist in providing a signal at that 4c+dation." With that commitment, he felt the City Council would be amiable to the County proceeding with the project. 1 KRAss MONROE KRASS MONROE, P.A. ■ James R. CaSSerly ATTORNETS AT LAW Direct Dint• (612) 885 -1296 MEMORANDUM TO: City of Fridley Attn: Barbara Dacy FROM: James R. Casserly RE: Linn Project Subsidy Analysis Our File No. 9571 -7 DATE: April 1, 1997 INTRODUCTION The Linn Companies is proposing the complete renovation of Dick's Tires and a new retail facility of 7,980 square feet immediately west of Dick's Tires on 57th Avenue. To facilitate this redevelopment, two parcels with existing structures must be acquired and the structures demolished. In addition, substantial site work will be required. The Redeveloper has asked the Authority to assist with the site acquisition and preparation costs: We have been asked to review the requested assistance to determine if it is necessary and within the Authority's guidelines. Our conclusion is that the request is essentially a redevelopment cost and not a subsidy to the Redeveloper as provided for in the Authority's TIF policies and that the assistance is needed to facilitate the project. ANALYSIS In our analysis we have either prepared or reviewed the following: 1. Schedule A, a Source and Use of Funds 2. Schedule B, a Cash on Cash Return Analysis without tax increment assistance 3.. Schedule C, a Cash on Cash Return Analysis with tax increment assistance SUITE 1100 SOUTHPOINT OFFICE CENTER • 1650 WEST 82ND STREET • BLOOMINGTON. :MINNESOTA 55431-1447 TELEPHONE 612/885.5999 • FACSIMILE 612/885.5969 4. Schedule D, Assumptions and Cash Flow for the tax increment district 5. Schedule E, Proposed Revenue Note Schedule A is self - explanatory and has attached to it a very detailed analysis of project costs. Schedule B is an analysis showing the average annual cash on cash return to the Redeveloper for its equity invested in the project. There are a number of variables which can substantially change the results shown in the analysis. We have used the Redeveloper's lease rates of $12 per square foot for the new retail center and $9 per square foot for the renovated tire center. These are triple net lease rates. The operating expenses average about $10,000 per year, which includes a replacement reserve. We are showing a principal on the first mortgage of $1,075,000. The Redeveloper would undoubtedly prefer to secure a higher mortgage to reduce the equity contribution to the project. Given these assumptions, the average annual cash on cash return is 7.02 percent. This is not a reasonable rate of. return and, in our estimation, the project would not proceed based on these assumptions. Schedule C is identical to Schedule B in all respects except that there are revenue note payments by the Authority to the Redeveloper. These revenue note payments are a result of tax increment being generated from the increased market value the Redeveloper has generated. In Year 2 the revenue note payment is $12,901 and for the 11 succeeding years it would be $25,802 with a final. payment in the last year (not shown on the schedule) of $12,901. In total, there would be Authority payments on the revenue note of $306,566, which has a present value in 1997 of $175,000. With the addition of the revenue note payments, the average annual cash on cash return is 11.26 percent. This too is a very mediocre, if not a poor rate of return, for a commercial project. The rate of return can be enhanced by securing a mortgage with a longer amortization, assuming no vacancy (not unreasonable if there are only two users on long term leases) and the assumption of lower operating expenses or less project costs. Finally, a different inflation factor could affect rental income.. The project appears more reasonable if we assume that there will be an inflation in market value over the years and that the project debt is being amortized in a reasonably short period of time. Schedule D are the tax increment assumptions and cash flow which shows the potential available tax increment for the project and the potential available tax increment for the Authority given the current statutes and market values. Schedule E is the proposed revenue note, which has a beginning balance of $175,000. The total payment of $306,566 is the same sum as that available for the project shown on Schedule D. CONCLUSION In addition to reviewing a cash on cash return analysis, there is a second way to review the amount of assistance needed for the project. As a practical matter, a commercial center of the type being proposed would not want to, pay more than $17.50 or $18 per square foot of building for site costs. If this were true, then the site cost should be approximately $299,000 ($16,620 x $18). Instead, the actual site cost is in excess of $461,000. The difference of $162,000 represents a redevelopment cost and is not a developer subsidy. A subsidy would occur if there was a write -down below market value. To account for unexpected costs, which always seem to occur, we have suggested the sum of $175,000 as the amount of Authority assistance. This is the amount that is reflected in the revenue note payments shown on Schedule E and in the assistance available for the project shown on Schedule C. As indicated in the Introduction, because of the redevelopment costs and the low rate of return, it is most unlikely that this project would proceed without the Authority's assistance. JRC/kh Encl SCHEDULE A FRIDLEY/LINN PROJECT SOURCE OF FUNDS Debt (9.5 %, 15 year, 1st Mortgage) Equity USE OF FUNDS (see Attachment III for Detailed Analysis) PROJECT FIRST COSTS Land and Land Related Expense Purchase/Renovation - Service Center Building/ Site Hard Costs - Retail Center Project Soft Costs - Service & Retail 1,075,000 491,200 TOTAL: 1,566,200 461,250 560,000 464,000 80,150 TOTAL: 1,566,200 ATTACHMENT III LINK 157 PROJECT COSTS ...,awa rwt. incivain Soft Costs for Le al e Titl osln sce aneous Fees, a c. A. Siwek Land - Lots 5 & 6 at $6.67 per square foot Base Cost $56,000.00 Taxes /Assessments - $10,250.00 Demolishing Home - $ 8,400.00 TOTAL $ 74,650.00 B. LaDuke Land - Lots 3 & 4 at $7.00 per square foot Base Cost - $70,000..00 Demolishing Home - $ 8,400.00 TOTAL -- $ 78,400.00 C• Holiday Land - Lot 2 at $6.50 per square foot Base Cost - $36,400.00 TOTAL $ 36,400.00 (Calculated) D. Holiday Land - Lots 7 -13 at $6.50 per square foot Base Cost - $254,800.00 TOTAL $25.4,800.00 (Calculated) E. Correction (Import of Soil, filling, compaction, grading, etc.) on Lots 2 through 6 Base Cost - $ 17,000.00 TOTAL $ 17,000.00 TOTAL LAND COST AND LAND RELATED EXPENSE - $ 461,250.00 LINN ' 57 PROJECT COSTS Page 2 ATTACHMENT III II. PURCHASE /RENOVATION OF 8,640 SQ.FT SERVICE CENTER A. Purchase of Building (No Land) B. Renovation /Improvement Expense - * Permit /Plan Check Fees - $ 3,400.00 * Site (Asphalt, Curb, Fence, Landscaping, irrigation) $40,950.00 * Structure Improvements $61,640.00 * Imagine (glas/painting) $23,190.00 * Mechanical /Electrical $83,900.00 * Demolition /Disposal $13,000.00 * Interior Finishes (Tile, Walls, FRP, Acoustical) $46,420.00 Equip (Hoists /Compressor) $27,500.00 * Job Superv, OH & Profit $27,000.00 TOTAL PURCHASE /RENOVATION SERVICE CENTER - $ 233,800.00 $ 327,000.00 $ 560,800.00 III. CONSTRUCTION LEASEHOLD COST - 8,090 S .FT. RETAIL CENTER TOTAL RETAIL CENTER HARD COSTS = $464,000.00 INCLUDES THESE HARD COSTS DOES NOT INCLUDE THESE COSTS General Conditions Excavation /Grading /Backfill Fence, Landscaping, Irrigation Storm Water Retention Maso,WConcrete Utilities Connections Steel /Erection (Joist - Deck - Lentils) Lumber and Carpentry SS Metal (Canopy) Roof /Scuppers /Hatch Electric and Fixturing Plumbing and Fixturing HVAC /RTU's /Curbs /Ducts Fes! /SC Doors and Hardware Concrete Curbs /Asphalt StoreFront Windows /Doors Painting /Caulking Gypsum Board /Insulation Ceramic Tile /Acessories (RR) Acoustical Ceiling /Grid Carpet /VCT /Base Other Tenant Improvements Clean -up /Dempster /Disposal Pylon Structure /Wiring Supervision /Overhead /Profit Architect /Engineer Phase I /II Assessment Survey /Staking /As -Built Soil /Compaction Testing Legal Expenses Title Insurance Closing Costs Utility Connection Fees Park Dedication Fees Occupancy Permits SAC /WAC Charees Leasing Commissions Taxes During Construction Builders Risk Insurance Interim Interest - constr. 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Land M.V. Bldg M.V. Total M.V. 23- 30 -24 -23 -0028 5,600 15,400 0 15,400 23 -30 -24-23 -0029 11,200 20,400 26,500 46,900 23- 30- 24- 23-0030 11,200 201400 35,500 55,900 23- 30 -24 -23 -0031 28,000 92,400 201,000 293,400 23-30 -24-23 -0032 5,600 14,700 0 14,700 61,600 163,300 263,000 426,300 Original Tax Capacity 4.600% 1996/1997 Tax Rate Administrative Fees Inflation P.V. Rate Estimated Market Value New Construction 7,980 sq. ft. @ Rehabilitation 8,640 sq. ft. @ Estimated Tax Capacity 4.600% Estimated Taxes 16,620 sq. ft. @ Construction 1997 Valuation 1998 Taxes Payable 1999 65.00 per sq. ft. 50.00 per sq. ft. 3.11 per sq. ft. 12/01/97 426,300 19,610 1.181680 10.000% 0.000% 8.500% 518,700 950,700 432,000 43,732 51,677 LINN1 PREPARED BY KRASS & MONROE 04/01/97 CITY OF FRIDLEY, MINNESOTA SCHEDULE D CASH FLOW 441,827 44.183 306,566 91,078 175.000 0 JNN1 PREPARED BY KRASS & MONROE t 04/01/97 Original Tax Estimated Estimated Less: Available Available 8.500% P. V. Rate Date Capacity .Tax Capacity Tax Increment Admin Expenses For Project For SemiAnnuai Cumulative Authority Balance Balance 06/01 /97 19,610 19,610 0 0 0 0 0 12/01/97 19,610 19,610 0 0 0 0 0 0 06/01/98 19,610 43,732 0 0 0 0 0 0 12/01/98 19,610 43,732 0 0 0 0 0 0 0 06/01/99 12/01/99 19,610 19,610 43,732 43,732 14,252 14,252 1,425 1,425 12,827 0 11,322 11,322 06/01/2000 19,610 43,732 14,252 1,425 12,827 12,827 0 0 10,860 10,417 22,181 32,599 12/01 /2000 06/01/2001 19,610 19,610 43,732 43,732 14,252 14,252 1,425 1,425 12,827 12,827 0 0 9,993 42,591 12/01/2001 19,610 43,732 14,252 1,425 12,827 0 9,585 9,194 52,176 61,371 06/01/2002 19,610 43,732 14,252 1,425 12,827 0 8,820 70,190 12/01/2002 19,610 43,732 14,252 11425 12,827 0 8,460 78,651 06/01/2003 19,610 43,732 14,252 1,425 12,827 0 8,115 86,766 12101/2003 19,610 43,732 14,252 1,425 12,827 0 7,784 94,550 06/01/2004 19,610 43,732 14,252 1,425 12,827 0 7,467 102,017 12/01 /2004 19,610 43,732 14,252 1,425 12,827 0 7,163 109,179 06/01/2005 19,610 43,732 14,252 1,425 12,827 0 6,871 116,050 12/01/2005 19,610 43,732 14,252 1,425 12,827 0 6,590 122,641 06/01/2006 19,610 43,732 14,252 1,425 12,827 0 6,322 128,962 12/0112006 19,610 43,732 14,252 1,425 12,827 0 6,064 135,026 06/01/2007 19,610 43,732 14,252 1,425 12,827 0 5,817 140,843 12/01/2007 19,610 43,732 14,252 1,425 12,827 0 5,580 146,423 06/01/2008 19,610 43,732 14,252 1,425 12,827 0 5,352 151,775 12/01/2008 19,610 43,732 14,252 1,425 12,827 0 5,134 156,909 06/01/2009 19,610 43,732 14,252 1,425 12,827 0 4,925 161,834 12/01/2009 19,610 43,732 14,252 1,425 12,827 0 4,724 166,558 06/01/2010 19,610 43,732 14,252 1,425 12,827 0 4,531 171,089 12/01/2010 19,610 43,732 14,252 1,425 11,540 1,287 3,910 17-5,000 06/01/2011 19,610 43,732 14,252 1,425 0 12,827 0 0 12/01/2011 19,610 43,732 14,252 1,425 0 12,827 0 0 06/01/2012 19,610 43,732 14,252 1,425 0 12,827 0 0 12/01/2012 19,610 43,732 14,252 1,425 0 12,827 0 0 06101/2013 19,610 43,732 14,252 1,425 0 12;827 0 0 12/01/2013 19,610 43,732 14,252 1,425 0 12,827 0 0 06101/2014 19,610 43,732 14,252 1,425 0 12,827 0 0 441,827 44.183 306,566 91,078 175.000 0 JNN1 PREPARED BY KRASS & MONROE t 04/01/97 CITY OF FRIDLEY, MINNESOTA SCHEDULE E PROPOSED REVENUE NOTE 'Beginning Accrued Principal Interest Interest Total Ending Date Balance Interest Payment Rate Payment Payment Balance 08/01/97 175,000 0 0 8.500% 0 0 175,000 02/01/98 175,000 0 0 8.500% 0 0 175,000 08/01 /98 175,000 7,437 0 8.500% 0 0 182,437 02/01/99 182,437 7,754 0 8.500% 0 0 190,191 08/01/99 190,191 4,744 8.500% 8,083 12,827 185,447 02/01/2000 185,447 4,946 8.500% 7,881 12,827 180,501 08/01/2000 180,501 5,156 8.500% 7,671 12,827 175,345 02/01/2001 175,345 5,375 8.500% 7,452 12,827 169,970 08/01/2001 169,970 5,604 8.500% 7,224 12,827- 164,366 02/01/2002 164,366 5,842 8.500% 6,986 12,827 158,525 08/01/2002 158,525 6,090 8.500% 6,737 12,827 152,435 02/01/2003 152,435 6,49 8.500% 6,478 12,827 146,086 08/01/2003 146,086 6,619 8.500% 6,209 12,827 139,468 02/01/2004 139,468 6,900 8.500% 5,927 12,827 132,568 08/01/2004 132,568 7,193 8.500% 5,634 12,827 125,375 02/01/2005 125,375 7,499 8.500% 5,328 12,827 117,876 08/01/2005 117,876 7,818 8.500% 5,010 12,827 110,058 02/01/2006 110,058 8,150 8.500% 4,677 12,827 101,909 08/01/2006 101,909 8,496 8.500% 4,331 12,827 93,412 02/01/2007 93,412 8,857 8.500% 3,970 12,827 84,555 08/01/2007 84,555 9,234 8.500% 3,594 12,827 75,322 02/01/2008 75,322 9,626 8.500% 3,201 12,827 65,695 08/01/2008 65,695 10,035 8.500% 2,792 12,827 55,660 02/01/2009 55,660 10,462 8.500% 2,366 12,827 45,199 08/01/2009 45,199 10,906 8.500% 1,921 12,827 34,292 02/01/2010 34,292 11,370 8.500% 1,457 12,827 22,923 08/01/2010 22,923 11,853 8.500% 974 12,827 11,070 02/01/2011 11,070 11,070 8.500% 470 11,540 (0) 15,191 190,191 116,375 306,566 LINN1 PREPARED BY KRASS & MONROE 04/01/97 f DRAFT: April 30, 1997 COJITRACT FOR PRIVATE REDEVELOPMENT By and Between THE HOUSING AND REDEVELOPMENT AUTHORITY In .and For THE CITY OF FRIDLEY,. MINNESOTA And COMMERCIAL RAIL PROPERTIES, INC. This document was drafted by: KRASS MONROE, P.A. Suite 1100 Southpoint Office Center 1650 West 82nd Street Minneapolis, MN 55431 James R. Casserly, Esq. L 3 CONTRACT FOR PRIVATE REDEVELOPMENT THIS AGREEMENT, made on or as of the day of , 1997 by and between the Housing and Redevelopment Authority in and for the City of Fridley, Minnesota (the "Authority "), a political subdivision of the State of Minnesota organized under the Constitution and laws of the State of Minnesota and Commercial Rail Properties, Inc., an Illinois corporation organized under the laws of the State of Illinois (the "Redeveloper "), WITNESSETH: WHEREAS, the Board of Commissioners (the "Board ") of the Authority has determined that there-is' a need for development and redevelopment within the corporate limits of the City to provide employment opportunities, to provide adequate housing in the City, including low and moderate income housing and housing for the elderly, to improve the tax base and to improve the general - economy of the City and the State of Minnesota; WHEREAS, in furtherance of these objectives, the Authority has adopted, pursuant to Minnesota Statutes, Sections 469.001 et se . (the "Act"), a development program known as the Modified Redevelopment Plan (the "Redevelopment'Plan ") and established Redevelopment Project No. 1 (the "Project Area ") in the City to encourage and provide maximum opportunity for private development and redevelopment of certain property in the City which is not now in its highest and best.use;. WHEREAS, major objectives in establishing the Project Area are to: 1. Promote and secure the prompt redevelopment of certain property in the Project Area, which property is not now in its highest and best use in a manner consistent with -the City's Comprehensive Plan and with a.minimum adverse impact on the environment, and thereby promote and secure the redevelopment of other land in the City. 2. Provide additional employment opportunities within the Project Area and the City for residents of the City and the surrounding area,. thereby improving living standards, reducing unemployment and the loss of skilled and unskilled labor and other human resources in the City. 3. Prevent the deterioration and secure the increase of commercial /industrial property subject to taxation by the City., the Independent School Districts, Anoka County, and the other taxing jurisdictions in order to better enable such entities to pay for governmental services and programs required to be provided by them. 4. Provide for the financing and.construction for public improvements in and adjacent to the Project Area necessary for the orderly and beneficial redevelopment of the Project Area and adjacent areas of the City. 5. Promote the concentration of new desirable industrial, office, and other appropriate redevelopment in the Project Area so as to maintain the area in a manner compatible with its accessibility and prominence in the City. 6. Encourage local business expansion, improvement, and redevelopment, whenever possible. 7. Create a desirable an unique character within the Project Area through quality land use alternatives and design quality in new or remodeled buildings. 8. Encourage and provide maximum opportunity for private redevelopment of existing areas and structures which are compatible with the Project Area; and WHEREAS, in order to achieve the objectives of the Authority and City in creating the Project Area the Authority is prepared to assist the Redeveloper with the costs of the Site Improvements in accordance with this Agreement; and WHEREAS,. the Authority believes that the development and redevelopment of the Redevelopment Property pursuant to this" Agreement', and fulfillment generally. "of the terms "of this Agreement, are in the vital and best* *ante* of "the Authority and the health, safety, morals and welfare of its'resicTents, and in accord with the public purposes and .provisions of applicable. federal, state and local laws under which the development and redevelopment are being undertaken and assisted; NOW, THEREFORE, in consideration of the premises and the mutual obligations of the parties hereto, each of them does hereby covenant and agree with the other as follows: 2 ARTICLE I Definitions Section 1.1 Definitions. In this Agreement, unless a different meaning clearly appears from the context: "Act" means Minnesota Statutes, Section 469.001 et sue. "Agreement" means this Agreement, as the same may be from time to time modified, amended, or supplemented. "Authority" means the Housing and Redevelopment Authority in and for the City of Fridley, Minnesota. "Authority Mortgage" means a mortgage which is secured by the Redevelopment Property, the form of which is attached hereto as Schedule E and may be subordinate to the Mortgage. In.lieu of the Authority Mortgage, the Redeveloper may provide.a letter of credit or securities acceptable to the Authority in its sole discretion. "Certificate of Completion" means the certification, in the form of the certificate contained in Schedule C attached to and made a part of this Agreement, provided to the Redeveloper., pursuant to Section 4.3 of this Agreement. "City" means the City of Fridley, Minnesota. "Construction Plans" means the plans, specifications, drawings.and related documents on the construction work to be performed-by the Redeveloper on the Redevelopment Property 4hich (a) shall.be as detailed as the plans, specifications, drawings and related documents which are submitted to the building - inspector or the City, and (b) shall include at least the following for each building: .(1) site plan;. (2) foundation. plan; (3) basement plans; (4) floor plan for each floor; (5) cross sections of each (length and width); (6) elevations (all sides, except as to a side of existing structure where no construction is to. take place); (7) facade and landscape plan; and (8) such other plans of supplements to the foregoing plans as the City may reasonably request. "Council" means the Council of the City. "County" means the County of Anoka, Minnesota. "Grant" means the sum of $125,000 to be provided by the Authority to the Redeveloper in accordance with Article III. "Guarantee" means the guarantee of payment of the Note and performance of this Agreement, which is attached hereto as Schedule F. 3 "Holder" means the owner of a Mortgage. "Minimum Improvements" means the construction of a warehouse distribution facility of approximately 58,000 square feet on the Redevelopment Property with a total project cost of approximately $2,500,000. "Minnesota Environmental Policy Act" means the statutes located at Minnesota Statutes, Sections 116D.01 et ses., as amended. "Minnesota Environmental Rights Act" means the statutes located at Minnesota Statutes, Sections 116B.01 et sea., as amended. "Mortgage" means any mortgage or security agreement in which the Redeveloper has granted a. security interest in the Redevelopment Property, or any portion thereof, or any. improvements constructed thereon, and which is a permitted encumbrance pursuant to the provisions of Article VIII. "National Environmental Policy Act "..means the federal law located at 42 U.S.C. Sub. Sect. 4331 et sea., as amended. "Permitted Encumbrances" mean the encumbrances described on Schedule D to this Agreement. "Note" means the note in the principal amount of One Hundred Twenty Five Thousand and no /hundredths Dollars ($125,000.00); substantially in the form of Schedule D attached to this Agreement, and to be made by the Redeveloper payable to the order of the Authority in accordance with the terms of this Agreement. "Project Area" means Redevelopment Project No. 1, as amended, established in accordance with the Act. "Redeveloper" means Commercial Rail Properties, Inc., a corporation organized under the laws of the State of Illinois and authorized to business in the State of Minnesota and in good standing in the State of Minnesota. "Redevelopment Plan" means the modified redevelopment plan adopted by the Authority for its Redevelopment Project No. 1, as amended. "Redevelopment Project" means the Redevelopment Property and the Minimum Improvements. "Redevelopment Property" means the real property described in Schedule A of this Agreement. "Site Improvements" means those costs described on Schedule 4 t I B as qualified improvements of the Redevelopment Property. "State" means the State of Minnesota. "Termination Date" means the later of (1) the date on which the Note is paid in full or (2) December 31, 2007 unless this Agreement is terminated in accordance with the.provisions of Article V. "Unavoidable Delays" means delays which are the result of strikes, unforeseeable and unavoidable casualties to the Minimum Improvements, the Redevelopment Property or the equipment used to construct the Minimum Improvements, delays which are the result of governmental actions, delays which are the result of judicial action commenced by third parties, citizen opposition or action affecting this Agreement or adverse weather conditions or acts of God. 5 ARTICLE II Representations and Warranties Section 2.1 Representations by the Authority. The Authority makes the following representations as the basis for the undertaking on its part herein contained: (a) The Authority is a public body duly organized and existing under the laws of the State. Under the provisions of the Act, the Authority has the power to enter into this Agreement and carry out its obligations hereunder. (b) The Authority has approved the Redevelopment Plan in accordance with the terms of the Act. (c) To finance the costs of the activities to be undertaken by the Redeveloper, the Authority proposes, in accordance with" the provisions of this Agreement, to loan to the Redeveloper the Note principal for Site Improvements. (d) The Authority will cooperate with the Redeveloper with respect to any litigation commenced by third parties in connection with this Agreement. Section 2.2 Representations and Warranties by the Redeveloper. The Redeveloper represents and warrants that: (a) The Redeveloper will construct, operate and maintain the Minimum Improvements in accordance with the*terins of this Agreement, the Redevelopment Plan and all local, state and federal laws and regulations (including, but not limited to, environmental, zoning, building code and public health laws and regulations). (b) The Minimum Improvement's will be an allowed use under the zoning ordinance of the City. (c) As of the date of execution of this Agreement, the Redeveloper has received no notice or communication from any local, state or federal official that the activities of the Redeveloper or the Authority in the Project Area may-be or will be in violation of any environmental law or regulation. As of the date of execution of this Agreement, the Redeveloper is aware of no facts; the existence of which would cause it to be in violation of any local, state or federal environmental law, regulation or review procedure or which would give any person a valid claim under the Minnesota Environmental Rights Act. 6 (d) The Redeveloper will use its best efforts to obtain, in a timely manner, all required permits., licenses and approvals, and will meet, in a timely manner, all requirements of all applicable local, state and federal laws and regulations which must be obtained or met before the Minimum Improvements may be lawfully constructed. (e) The Redeveloper is a corporation organized under the laws of the State of Illinois and is authorized to do business in the State of Minnesota and is in good standing in the State of Minnesota. (f) The Redeveloper agrees that it will cooperate with the Authority and shall indemnify the Authority against all costs, including the costs of defense.incurred by the Authority through an attorney reasonably acceptable to the Authority and Redeveloper, with respect to any litigation commenced by third parties. in connection with Redeveloper's failure to perform according to the terms and conditions of this Agreement. (g) The financing arrangements which the Redeveloper has obtained or will obtain, to finance acquisition or construction of the Minimum Improvements, together with financing provided by the Authority pursuant to this Agreement, will be sufficient to enable the' Redeveloper to successfully complete the Minimum Improvements as contemplated in this Agreement. (h) The construction of the Minimum Improvements, in the opinion of the Redeveloper, would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future without the use of tax increment financing provided by the City pursuant to this Agreement. (i) The Authority has provided to the Redeveloper, and the Redeveloper acknowledges receipt of, a copy of Laws of Minnesota. for 1995, Chapter 22.41*1 Section 58, to be codified in Minnesota Statutes,.Section 116J.991, and entitled "Public Assistance to Business; Wage and Job Requirements," requiring that within 2 years of receiving the assistance provided pursuant to this Agreement, which for this purpose shall be deemed to be the 2 year period beginning on the date the Certificate of Completion is issued in accordance with Section 4.3, the Redeveloper shall comply with certain jobs and other obligations stated in the above- mentioned statute. The Redeveloper hereby covenants to comply with said obligations, and the Parties agree that said goal level shall be the creation of 6 jobs within the applicable 2 year period. The Redeveloper acknowledges and agrees that, as required by this statutory provision, failure.to meet said goals will result in an Event of Default hereunder and in an obligation of the Redeveloper to repay all of the assistance provided pursuant to this Agreement. The Redeveloper further agrees that said jobs shall have an hourly wage of at least $12.00 per hour. This subparagraph shall not be construed as imposing on the Redeveloper.any obligation beyond the scope and purpose. of the above- mentioned statute to maintain or provide minimum employment . and'wage levels. - The Redeveloper further agrees to provide to the Authority in .a timely manner, or to the State of Minnesota, as may be applicable, any information that is.necessary to comply with the above- mentioned statute. (j) For the construction of the Minimum Improvements the Redeveloper will pay wages in accordance with the prevailing wage rate as that term is defined in Minnesota Statutes, Section 177.42, Subdivision 6. The City's Public Works Department shall be responsible for monitoring Redeveloper's compliance of this requirement. (k) The Redeveloper shall not allow any use or occupancy of the Redevelopment Property or Minimum Improvements by a "Sexually Orientated Business" as defined.in Ordinance No. 965 of the City's Code. ARTICLE III Undertakings of Authority and Redeveloper Section 3.1 Loan and Grant to Redeveloper for.Site Improvements. As consideration for the execution of this Agreement, the construction of the Minimum Improvements by the Redeveloper and subject to the further provisions of this Agreement, the Authority agrees to provide the Grant and loan to the Redeveloper for Site Improvements the Note principal as provided in Section 3.3 and Article VIII. Section 3.2 Limitations on Undertaking of the City. (a) The Authority shall have no obligation to the Redeveloper under this Agreement to provide the Grant and loan the Note principal to the Redeveloper for the Site Improvements if the Authority, at the.time the loan and the Grant are to be made is entitled under Section 5.2 to exercise any of the remedies set forth therein as a result of an Event of Default which has not been- cured. If the Authority has not exercised its remedies under Section 5.2(b) and if the loan and the Grant are withheld due to an Event of Default which is later cured, such loan and Grant shall be made after such Event of Default has been cured. (b) The Authority shall have no obligation to provide the. Grant and to loan the Note principal to the Redeveloper for the Site Improvements unless the Redeveloper has submitted to the Authority the original purchase agreement whereby it acquired the Redevelopment Property from Northco Corporation and invoices for the Site Improvements along with a certification signed by the Redeveloper's project architect to the effect that the costs for which payment was made have been incurred in connection with construction documents previously reviewed by the Authority. The Redeveloper shall also provide lien waivers from.the contractors, subcontractors and /or construction managers for the Site Improvements. The Authority shall indicate its acceptance of the amounts for the Grant and loan, assuming the conditions of this section have been complied with and there is no Event of Default, when it issues a Certificate of Completion in accordance with Section 4.3. Section 3.3 Conditions Precedent to Authority Loan. The Authority's obligation to provide the Grant and loan the Note principal in accordance with Section 3.1 shall be contingent upon the satisfaction by the Redeveloper of the following conditions precedent: (a) The Redeveloper shall be in material compliance with all of the terms and provisions of this Agreement. (b) The Redeveloper shall have received a Certificate of Completion from the Authority, pursuant to Section.4.3 of this Agreement. (c) The Redeveloper shall have delivered to the Authority the documents required by Section 3.2 (b) above. (d) There shall have been obtained from the City all special -use permits and zoning approvals necessary for the construction of the Minimum Improvements. (e) That the Redeveloper shall be in compliance with all ordinances of the City. (f) The execution by the Redeveloper of the Note attached as Schedule D. (g) The execution by the Redeveloper of the Authority Mortgage attached as Schedule E. (h) The execution of the Guarantee attached as.Schedule F. OV] ARTICLE IV Construction of Minimum Improvements Section 4.1 Construction of Minimum Improvements. The Redeveloper agrees that it will construct the Minimum Improvements on the Redevelopment Property in accordance with the Construction Plans approved by the City. Section 4.2 Completion of Construction. Subject to Unavoidable Delays, the Redeveloper shall achieve substantial completion of the construction of the Minimum Improvements by December 31, 1997. All work with respect to the Minimum Improvements to be constructed or provided by the Redeveloper on the Redevelopment Property shall be in conformity with the Construction Plans. The Redeveloper agrees for itself, its successors and assigns, and every successor in interest to the Redevelopment Property, or any part thereof, that the Redeveloper, and such successors and assigns, shall.diligently prosecute to completion the development of the Redevelopment Property through the construction of the Minimum Improvements thereon, and that such construction shall in any event be completed within the period specified in this Section 4.2 of this Agreement. Section 4.3 Certificate of Completion. (a) Promptly after substantial completion of the Minimum Improvements in accordance -with those provisions of the Agreement relating to the obligations of the Redeveloper to construct the Minimum - Improvements (including the date for completion thereof), the Authority will furnish the Redeveloper with an appropriate instrument so certifying. Such certification by.the Authority shall be (and it shall be so provided in the certification itself) a conclusive determination of satisfaction and termination of the agreements and covenants in the Agreement with respect to the obligations of the Redeveloper, and its successors and assigns, to construct the Minimum Improvements and the date for the completion thereof. (b) If the Authority shall refuse or fail to provide any certification in accordance with the provisions of this Section 4.3 of this Agreement, the Authority shall, within ten (10) days after written request by the Redeveloper, provide the Redeveloper with a written statement, indicating in adequate detail in what respects the Redeveloper has failed to complete the Minimum Improvements in accordance with the provisions of the.Agreement, or is otherwise in default, and what measures or acts it will be necessary, in the opinion of the Authority, for the Redeveloper to take or perform in order to obtain such certification. 11 (c) The construction of the Minimum Improvements shall be deemed to be substantially completed when the Redeveloper has received an occupancy permit from the City's building inspector, which permit shall not be unreasonably withheld. 12 ARTICLE V Events of Default Section 5.1 Events of Default Defined. The following shall be "Events of Default" under this Agreement and the term "Event of Default" shall mean whenever it is used in this Agreement any one or more of the following events: (a) Failure by the Redeveloper to timely pay all ad valorem real property taxes assessed with respect to the Redevelopment Property. (b) Failure by the Redeveloper to complete the Minimum Improvements pursuant to the terms, conditions and limitations of this Agreement. (c) The holder of any Mortgage on the Redevelopment Property or any improvements thereon, or any portion thereof, commences foreclosure proceedings as a result of any default under the applicable Mortgage documents. (d) Failure by the Redeveloper to substantially observe or perform any-other covenant, condition,.obligation or agreement on its part to be observed or performed under this Agreement. (e) If the Redeveloper shall (A) file any petition in bankruptcy or for any reorganization, arrangement, composition,. readjustment,. liquidation, dissolution,.or similar relief under the United States Bankruptcy Act of 1978, as amended or under any similar federal or state law; or (B) make an assignment for the benefit of its creditors; or (C) admit in writing its inability to pay its debts generally as they become due; or (D) be adjudicated as bankrupt or insolvent; or if a petition or answer proposing the.adjudication of the Redeveloper, as bankrupt or its reorganization under any present or future federal bankruptcy act or any similar federal or state law shall be filed in any court and such petition or answer shall not be discharged or denied within ninety (90) days after the filing thereof;-or a receiver, trustee or liquidator of the Redeveloper, or of the Minimum Improvements, or part thereof, shall be appointed in any proceeding brought against the Redeveloper, and shall not be discharged within ninety (90) days after such appointment, 13 or if the Redeveloper shall consent to or acquiesce in such appointment. Section 5.2 Remedies on Default. Whenever any Event of Default referred to in Section 5.1 occurs and is continuing, the Authority, as specified below, may take any one or more of the following actions after providing thirty (30) days, written notice to the Redeveloper, but only if the Event of Default has not been cured within said thirty (30) days. (a) The Authority may suspend its performance under this Agreement until it receives assurances from the Redeveloper, deemed adequate by the Authority, that the Redeveloper will cure its default and continue its performance under this Agreement. (b) The Authority may cancel and rescind the Agreement. (c) Withhold the Certificate of Completion. Section 5.3 No Remedy Exclusive. No remedy herein conferred upon or reserved to the Authority is intended to be exclusive of any other available remedy or, remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement or now or hereafter existing at law or in equity or by statute. No delay.or.omissi.on to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed.expedient. Section 5.4 No Implied Waiver: In the event contained in this Agreement should be breached by thereafter waived by any other party, such waiver limited to the particular breach so waived and sh; deemed to waive any other concurrent, previous or breach hereunder. any agreement any party and shall be ill not be subsequent Section 5.5 Agreement -to Pay Attorney's Fees and Exnenses'. Whenever any Event of Default occurs.and the Authority shall employ attorneys or incur other expenses for the collection of payments due or to become due or for the enforcement or performance or observance of-any obligation or agreement on the part of the Redeveloper herein contained, the Redeveloper agrees that it shall, on demand therefor, pay to the Authority the reasonable fees of such attorneys and such other expenses so incurred by the Authority. 14 ARTICLE VI Prohibitions Against Assignment and Transfer Section 6.1'Representation as to.Redevelopment. The Redeveloper represents and agrees that its purchase of the Redevelopment Property, and its other undertakings pursuant to this Agreement, are, and will be used, for the purpose of redevelopment of the Redevelopment Property and not for. speculation in land holding. The Redeveloper further recognizes that, in view of (a) the importance of the redevelopment of the Redevelopment Property to the general welfare of the Authority, and (b) the substantial financing that has been made available by the Authority for the purpose of making such redevelopment possible, the qualifications and identity of the Redeveloper are of particular concern to the Authority. The Redeveloper further recognizes that it is because of such qualifications and identity that the Authority is entering into this Agreement with the Redeveloper, and, in so doing, is further willing to accept and rely on the obligations of the Redeveloper for the faithful performance of all undertakings and covenants hereby by it to be performed. Section 6.2 Prohibition Against Transfer of Property and Assignment of-Acrreement. Also, for the foregoing reasons the Redeveloper represents and agrees that prior to the date of expiration as provided in Section 1.8, except .for the purpose of obtaining.financing necessary to enable the Redeveloper or any successor in interest to the Redevelopment Property, or any part thereof, to perform its obligations with respect to making the Minimum Improvements under this Agreement, and any.other purpose. authorized by this Agreement, the Redeveloper has not made or.. created and will not make or create or suffer to be made or created any total or partial sale, assignment, conveyance, or lease, or any trust or power, or transfer in any other. mode or form of or with respect to this Agreement or the Redevelopment Property or any part thereof or any interest therein, or any .. contract or agreement to do any of.the same, without the prior written approval of the Authority which shall not be unreasonably withheld, unless the Redeveloper remains liable and bound by this Redevelopment Agreement in which event the Authority's approval is not.required. Any such transfer shall be subject to the provisions of this Agreement. Notwithstanding the foregoing, the Redeveloper may transfer the Redevelopment Property to any' corporation, partnership or entity controlling, controlled by, or under common control with the Redeveloper. 15 ARTICLE VII Additional Provisions Section 7.1 Conflict of Interests. No member, official, or employee of the Authority shall have any personal interest, direct or indirect, in the Agreement, nor shall any such member, official or employee participate in any decision relating to the Agreement which affects his personal interests or the interests of any corporation, partnership, or association in which he is, directly or indirectly, interested. Section 7.2 Restrictions•on Use. The Redeveloper shall not discriminate upon the basis of race, color, creed, sex or national origin in the sale, lease, or rental.or in the use or occupancy of the Redevelopment Property or any improvements erected or to be erected thereon, or any part thereof. Section 7.3 Titles of Articles and Sections. Any titles of the several parts, Articles and Sections of the Agreement are inserted for convenience of reference only and shall be disregarded in construing or interpreting any of its provisions. Section 7.4 Notices.and Demands. Except as otherwise expressly provided in this Agreement, a notice, demand, or other communication under this Agreement by either party to the other shall be sufficiently given or delivered if it is dispatched by registered or certified mail, postage prepaid, return receipt requested, transmitted by facsimile, delivered by a recognized overnight courier or delivered personally; and (a) in the case of the Redeveloper, is addressed to or 'delivered personally to the mailing or delivery address the. Redeveloper will, from time to time, furnish to the Authority. The Redeveloper's current address is as follows: Commercial Rail Properties, Inc.. Suite 201 14047 Petronella Drive Libertyville, IL 60048 Attn: John W. Gohmann, President (b) in the case of the Authority, is addressed to or delivered personally to: Housing and Redevelopment Authority in and for the City of Fridley 6431 University Avenue N.E. Fridley, Minnesota 55432 Attention:. Executive Director Fax Number: 571 -1287 16 Section 7.5 Indemnification of Authority. (1) The Redeveloper releases from and covenants and agrees that the Authority, the City and its governing body members, officers, agents, including the independent contractors, consultants and legal counsel, servants and employees thereof (hereinafter, for purposes of this Section, collectively the "Indemnified Parties ") shall not be liable for and agrees to indemnify and hold harmless the Indemnified Parties against any loss or damage to property or any injury to or death of any person occurring at or about or resulting from any defect in the Minimum Improvements or the Redevelopment Property. (2) Except for any willful misrepresentation or any willful or wanton misconduct of the Indemnified Parties, the Redeveloper agrees to protect and defend the Indemnified Parties, now and forever, and further agrees to hold the aforesaid harmless from any claim, demand; suit, action {or other proceeding whatsoever by any person or entity whatsoever arising or purportedly arising from the actions or inactions of the Redeveloper (or.of other persons acting on its behalf or under its direction or control) under this Agreement, or the acquisition, construction, installation, ownership, and operation of the Minimum Improvements or the Redevelopment Property; provided, that this indemnification shall not apply to the warranties.made or obligations undertaken. by the Authority in this Agreement. (3) All covenants, stipulations, promises, agreements and obligations of the Authority contained herein shall be deemed to be the covenants, stipulations., promises, agreements and obligations of the Authority and not of any governing body member, officer; agent, servant or employee of the Authority. Section 7.6 Counterparts. This Agreement is executed in any number of counterparts, each of which shall constitute one and the same instrument. Section 7.7 Law Governing. This Agreement will be governed and construed in accordance with the laws of the State. Section 7.8 Expiration. This Agreement shall expire when the Note is paid in full. Section 7.9 Provisions Surviving Rescission or Expiration. Sections 5.5 and 7.5 shall survive any rescission, termination or expiration of this Agreement with respect to or arising out of any event, occurrence or circumstance existing prior to the date thereof. 17 ARTICLE VIII Mortgage Financing Section. 8.1 Limitation Upon Encumbrance of Property. Prior to the substantial completion of the Minimum, Improvements, as certified by the Authority, neither the Redeveloper nor any successor in interest to the Redevelopment Property or any part. thereof shall engage in any financing or any other transaction creating any mortgage or other encumbrance or lien upon the Redevelopment Property, other than Permitted Encumbrances, whether by express agreement or operation of law, or suffer any encumbrance or lien to be made on or attach to the Redevelopment Property, other than Permitted Encumbrances, except: (a) For the purposes of obtaining funds only to the extent necessary for financing of the Minimum Improvements including; but not limited to, labor and materials, equipment, professional fees, real estate taxes, construction interest, organizational and other indirect costs of development, costs of constructing the Minimum Improvements, an allowance for contingencies, acquisition cost of the Redevelopment Property, costs of originating the Mortgage and customary financing costs. (b) only upon the prior written approval of the Authority in accordance with Sections 8.1 and 8.2. The Authority shall not approve any Mortgage which does not contain terms that conform to the terms of Section 8.5, except as provided in Section 8.6 of this Agreement. Section 8.2 Approval —of Mortgage. The Authority shall approve a Mortgage if: (a) The Authority first receives--a copy'of all Mortgage documents. (b) The Mortgage loan, together with other funds available to the Redeveloper, will, in the reasonable judgment of the Authority, be sufficient to acquire the Redevelopment Property, to pay for the Site Improvements and construct the Minimum Improvements. (c) The Authority is not entitled under Section 5.2 to exercise any of the remedies set forth therein as a result of an Event of Default. (d) The Authority determines that the terms of the Mortgage conform to the terms of Section 8.5. 18 However, the approval of a Mortgage by the.Authority shall not be unreasonably withheld. Any Mortgage which is subordinated to the rights of the Authority under this Agreement may be granted in all or any part of the Redevelopment Property without the approval of the Authority. Section 8.3 Notice of Default; Copy to Mortgagee. Whenever the Authority shall deliver any notice or demand to the Redeveloper with respect to any breach or default by the Redeveloper in its obligations or covenants under this Agreement, the Authority shall at the same time forward a copy of such notice or demand to each Holder of any Mortgage authorized by this Agreement at the last address of such Holder shown in the. records of the Authority. Section 8.4 Mortgagee's Option to Cure Defaults. After any breach or default referred to in Section 8.3, each such Holder shall (insofar as the rights of the Authority are concerned) have the right, at its option, to cure or remedy such breach or default (or such breach or default to the extent that it relates to the part of the Redevelopment Property covered by its Mortgage) and to add the cost thereof to the Mortgage debt and the lien of its Mortgage;.provided, however, that if the breach or default is with respect to construction of the Minimum. Improvements, nothing contained in this Section or any other Section of this Agreement shall be deemed to require such Holder, either before or after foreclosure or action in.lieu thereof, to undertake or continue the construction or completion of the Minimum Improvements, provided that any. such Holder shall.not devote the Redevelopment Property to.a use inconsistent with the Redevelopment Plan or this Agreement without the agreement of the Authority. Section 8.5 Authority's Option to Cure Default on Mortgage. Any Mortgage, unless such requirement is waived by the Authority, executed by the Redeveloper with.respect to the Redevelopment Property or any improvements thereon shall provide that, in the event that the Redeveloper is in default under any Mortgage authorized pursuant to this Article VIII, the Holder shall notify the Authority in writing of: (a) The fact of the default. (b) The elements of the default. (c) The actions required to cure the default. If the default is an "Event of Default" under such Mortgage, which shall entitle such Holder to foreclose upon the Redevelopment Property, the Minimum Improvements or any portion thereof, and any applicable grace periods have expired, the Authority shall have, and each Mortgage executed by the 19 Redeveloper with respect to the Redevelopment property or any improvements thereon shall provide that the Authority shall have such an opportunity to cure the "Event of Default" within such reasonable time period as the Holder shall deem appropriate. Section 8.6 Subordination and Modification for the Benefit of Mortgagees. (a) In addition to the subordination of the Authority Mortgage, in order to facilitate the obtaining of financing for the construction of the Minimum Improvements by the Redeveloper, the Authority agrees to subordinate its rights under this Agreement to the Holder of a Mortgage for the purposes described in Section 8.1(a) of this Agreement. (b) In order to facilitate the obtaining.of financing for the construction of the Minimum Improvements, the Authority agrees that it shall agree to any reasonable modification of this Article VIII or waiver of its rights hereunder to accommodate the interests of the Holder of a Mortgage, provided, however, that the Authority determines, in its reasonable judgment, that any such modification(s) will adequately protect the legitimate interest and security of the Authority with respect to the Redevelopment Property. O ARTICLE IX Insurance and Condemnation Section 9.1 Insurance. (a) The Redeveloper will provide and maintain at all times during the process of constructing the Minimum Improvements and, from time to time at the request of the Authority, furnish the Authority with proof of payment of premiums on: (i) builder's risk insurance, written on the so- called "Builder's Risk -- Completed Value Basis, in an amount equal to one hundred percent (100 %) of the insurable value of •the Minimum Improvements at the date of completion, and with coverage available in nonreporting form on the so- called "all risk" form of policy. The interest of the Authority shall be protectl6d in accordance with a clause in form and content reasonably satisfactory to the Authority; (ii). comprehensive general liability insurance together with an Owner's Contractor's Policy.with limits against bodily injury and property damage of not less than $2,000,000 for each occurrence (to accomplish the above - required limits, an umbrella excess liability policy may be used); and (iii) workers' compensation insurance, with statutory coverage. . (b) Upon completion of construction of the Minimum Improvements and prior to the Termination Date, the Redeveloper shall maintain, or cause to be maintained, at its cost and expense, and from time to time at the request of the Authority shall furnish proof of the payment of premiums on, insurance as follows: (i) Insurance against loss and /or damage to the Minimum Improvements under a policy or policies covering such risks as are ordinarily insured against by similar businesses, including (without limiting the generality of the foregoing) fire, extended coverage, vandalism and malicious mischief, boiler explosion, water damage, demolition cost, debris• removal, and collapse in an amount not less than the full insurable replacement value of such improvements, but any such policy may have a deductible amount of not more than $25,000.00. No policy of insurance shall be so written that the proceeds thereof will produce less than the minimum coverage required by the preceding sentence, by reason of co- insurance provisions or otherwise, without the prior consent thereto in writing by the Authority. The term "full insurable replacement value" shall mean the - actual replacement 21 cost of the Minimum Improvements (excluding foundation and .excavation costs and costs of underground flues, pipes, drains and other uninsurable items) and equipment, and may be determined from time to time at the request of.the Authority, but not more. frequently than once every five years, by. an insurance consultant or insurer, selected and paid for and approved by the Authority. All policies evidencing insurance required by this subparagraph W with respect to the Minimum Improvements shall be carried in the names of the Redeveloper, the Redeveloper's Mortgagee and the Authority as their respective interests may appear and shall contain standard clauses which provide for net proceeds (the amount remaining after the deduction of expenses incurred in the collection of such proceeds, the "Net Proceeds ") of insurance resulting from claims per casualty thereunder to the Minimum Improvements which are equal to or less than $750.,000.00 for loss or damage covered thereby to be made payable directly to the Redeveloper and /or its Mortgagee, and Net Proceeds from such claims in excess of $750,000.0o.to be made payable jointly to.the Redeveloper, its Mortgagee and the Authority. The Authority, the Redeveloper and its mortgagee shall jointly agree on the amount of settlement. (ii) Comprehensive general pubic liability insurance, including personal injury liability, against liability for injuries to persons and /or property, in the minimum amount for each occurrence and for each year of $2,000,000.00, and shall be endorsed to show the Authority as additional insured. (c) All insurance required in Article IX of this Agreement shall be taken out and maintained in responsible. insurance companies selected by the Redeveloper which are authorized under the laws of the State to assume the risks. covered thereby.. The Redeveloper will deposit annually with the Authority policies evidencing all such insurance, or a certificate or certificates or binders of the respective insurers stating that such insurance is in force and effect. Unless otherwise provided in this Article IX of this Agreement each policy shall. contain a provision that the insurer shall not cancel nor modify it without giving written notice -to the Redeveloper and the Authority at least thirty (30) days before the cancellation or modification becomes effective. Not less than fifteen (15) days prior to the. expiration of any policy, the Redeveloper shall furnish the Authority evidence satisfactory to the Authority that the policy has been renewed or replaced by another policy conforming to the provisions of this Article IX of this Agreement, or that there is no necessity therefor under the terms hereof. In lieu of separate policies, the Redeveloper may maintain a single policy, blanket or umbrella policies, or a combination thereof, having the coverage required herein, in which event the Redeveloper shall deposit with the Authority a certificate or certificates of the respective insurers as to the. amount of coverage in force 22 upon the Minimum Improvements. (d) The Redeveloper.agrees to notify the Authority immediately in the case of damage exceeding'$100,000:00 in amount to, or destruction of, the Minimum Improvements or any portion thereof resulting from fire or other casualty. In the event that any such damage does not exceed $750,000.0.0, the Redeveloper will forthwith repair, reconstruct and restore the Minimum Improvements to substantially the same or an improved condition or value as it existed prior to the event causing such damage and, to the extent necessary to accomplish such repair, insurance relating to such damage received by the Redeveloper shall be applied to the payment or reimbursement of the costs thereof. Net Proceeds of any insurance relating to such damage up to $750,000.00 shall be paid directly to the Redeveloper. In the event the Minimum Improvements or any portion thereof are destroyed by fire or other casualty and the damage or destruction is estimated to equal or exceed $750,000.00, then the Redeveloper within one hundred and twenty (120)-days after such damage or destruction, shall proceed forthwith to repair, reconstruct and restore the damaged Minimum Improvements to substantially_ the same condition or utility value as existed prior to the event causing such damage or destruction.and, to the extent necessary to accomplish such.repair, reconstruction and restoration, the Redeveloper, its Mortgagee and the Authority will apply the Net Proceeds of any insurance relating to.such damage or destruction received by its Mortgagee and.the Authority to the payment or reimbursement of the costs thereof. Any Net Proceeds-remaining after completion of construction shall be disbursed to the Redeveloper. (e) If.the Redeveloper is in compliance with the terms and conditions of this Agreement, then any Net Proceeds of insurance relating to such damage or destruction received by the Authority shall be released from time to time by the Authority to the Redeveloper upon the receipt of: (i) A certificate of an authorized representative of the Redeveloper specifying the expenditures made or to be made or the indebtedness incurred in connection with such repair, reconstruction and restoration and stating that such Net Proceeds, together.with any other moneys legally available for such purposes, will be sufficient to complete such repair, construction and restoration; and (ii) If Net Proceeds equal or exceed $750,000.00 in amount, the written approval-of such certificate by an independent engineer. The Redeveloper shall complete the repair, reconstruction and restoration of the Minimum Improvements, whether or not the Net 23 Proceeds of insurance received by the Redeveloper for such, purposes are sufficient to pay for the same. Any Net Proceeds remaining after completion of such repairs, construction and restoration shall be remitted to.the.Redeveloper: Section 9.2 Condemnation. In the event that title to and possession of the Minimum Improvements or any material part thereof shall be taken in condemnation or by the exercise of the power of eminent domain by any governmental body or other person (except the City) prior to the Termination Date, the Redeveloper shall, with reasonable promptness after such taking, notify the Authority as to the nature and extent of such taking. Upon receipt of any condemnation award the Redeveloper shall elect to either: (a) use such portion of the condemnation award as is necessary to reconstruct the Minimum Improvements (or, in the event only a part of the Minimum Improvements has been taken, then to reconstruct such part) within the District; or (b) prepay the remaining balance on the Nole plus accrued interest and repay any grant by the Authority which reduced the Note balance. If the Redeveloper elects option (b) above, this Agreement shall terminate and the Redeveloper shall be entitled to keep all of any condemnation award. Section 9.3 Subordination. Notwithstanding anything to the contrary contained herein, the rights of the Authority with respect to the receipt and application of the proceeds of insurance shall be subject to and subordinate to the rights of any holder of any Mortgage with respect to the. Redevelopment Property as of the date hereof or any Mortgage which is permitted by this Agreement. 24 ARTICLE X Real Property Taxes. Section 10.1 Real Property Taxes. Prior to the Termination Date, the Redeveloper shall pay when due, prior to the attachment of penalty, all real property taxes payable with respect to the Redevelopment Project. Section 10.2 Payment In Lieu Of Taxes. Commencing in the year starting January 1, 1999 and continuing until the Termination Date, the Redeveloper shall be liable for and shall pay to the Authority a payment in lieu of taxes (the "PILOT ") resulting from the real property taxes payable in any affected year (years 1999 -2007) being less than the amount of $92,000. The Authority shall provide the Redeveloper with a notice of the PILOT 30 days prior to the time`�that real estate taxes are payable. The Authority need only provide a single notice, but the Redeveloper may pay the PILOT in equal installments at the times provided by law for the payment of real estate taxes. Failure of the Authority to provide notice shall not relieve the Redeveloper of the obligation imposed by this section. The PILOT shall be secured by the Authority Mortgage and Guarantee. IN WITNESS WHEREOF, the Authority has caused this Agreement to be duly executed in its name and behalf and the Redeveloper has caused this Agreement to be duly executed as of the date first above written. 25 Dated: HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF FRIDLEY, MINNESOTA By Its Chairman And by STATE OF MINNESOTA ) ss COUNTY OF ANOKA ) Its Executive Director On this day of , 199_ before me, a notary public within and for Anoka County, personally appeared and to me personally known who by me duly sworn, did say that they are the Chairman and Executive Director of the Housing and Redevelopment Authority in and for the City of Fridley, Minnesota, a political subdivision of the State of Minnesota, and acknowledged the foregoing instrument on behalf of said Authority. Notary Public Authority Signature Page — Redevelopment Contract 26 Dated: COMMERCIAL RAIL PROPERTIES, INC. By John W. Gohmann Its President STATE OF MINNESOTA ) )ss COUNTY OF ) On this day of , 199_ before me, a notary public within and for County, personally appeared John W. Gohmann, the President of Commercial Rail Properties, Inc., an Illinois corporation, and acknowledged the foregoing instrument on behalf of said corporation. Notary Public Redeveloper Signature Page-- Redevelopment Contract 27 SCHEDULE A DESCRIPTION OF REDEVELOPMENT PROPERTY 28 SCHEDULE B SITE IMPROVEMENTS Grading and soil correction, including removal of poor soil and import of corrected soils Tree removal Additional footing expense resulting from poor soils Acquisition of Site Construction of ponding 29 SCHEDULE C CERTIFICATE OF COMPLETION WHEREAS, the Housing and Redevelopment Authority in and for the City of Fridley, Minnesota, a Minnesota municipal corporation (the "Authority ") and Commercial Rail Properties, Inc., an Illinois corporation (the "Redeveloper ") have entered into a Contract for Private Redevelopment (the "Agreement ") dated as of January 11, 1996, regarding certain real property referred to in the Agreement as the "Redevelopment Property" located in Redevelopment Project No. 1 in the City; and WHEREAS, the Agreement contains certain conditions and provisions requiring the Redeveloper to construct improvements upon the Redevelopment Property (hereinafter referred to and referred to in the.Agreement as the "Minimum Improvements "); and WHEREAS, Section 4.3 of the Agreement requires the Authority to provide an appropriate instrument promptly after the substantial completion A as defined in the Agreement) of the Minimum Improvements so certifying said substantial completion; NOW,'THEREFORE, in compliance with said Section 4.3 of the Agreement, this is to certify that the Redeveloper has substantially completed the Minimum Improvements in accordance with the conditions and provisions of the Agreement relating solely to the obligations of the Redeveloper to construct the Minimum Improvements (including the dates for beginning and . completion thereof), and this certification shall be a conclusive determination of satisfaction and termination of the agreements and covenants in the Agreement with respect to the obligations of the Redeveloper, and its successors and assigns, to construct the Minimum Improvements and the dates for the beginning and completion thereof. Dated: , 19 30 Dated: HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF FRIDLEY, MINNESOTA By Its Chairman And by Its Executive Director STATE OF MINNESOTA ) ss COUNTY OF ANOKA ) On this day of , 199_ before me, a notary public within and for Anoka County, personally appeared and to me personally known who by me duly sworn, did say that they are the Chairman and Executive Director of the Housing and Redevelopment Authority in and for the City of Fridley, Minnesota, a political subdivision of the State of Minnesota, and acknowledged the foregoing instrument on behalf of said.Authority. Notary Public Authority Signature Page — Certificate of Completion 31 SCHEDULE D NOTE US $125,000.00 Fridley, Minnesota 199 FOR VALUE RECEIVED, the undersigned (the "Borrower ") promises to pay to the Housing and Redevelopment Authority in and for the City of Fridley, Minnesota (the "Note Holder "), or order the principal sum of One Hundred Twenty Five Thousand Dollars ($125,000.00) with interest from , 199 on the unpaid principal balance until paid,,kat the rate of 5% percent per annum, and with payments due on the 1st day of each February and August in installments set forth on the Payment Schedule attached as.Exhibit A. The entire unpaid principal balance together with accrued interest shall be due in full on , 200. Payments shall first be applied.to interest with any excess applied to principal. A late payment penalty of five percent (5 %) shall be charged on any payments not received at the mailing address designated by the Note Holder by 5:00 P.M. on the 15th day following the date on which the payment is due; interest will be calculated based on a 360 day year and charged on a per diem basis in each month. Principal and interest shall be payable at the Fridley Housing and Redevelopment Authority, 6431 University Avenue N.E., Fridley, Minnesota, 55432 or such other place as the Note Holder may designate. If said installment under this Note is not paid when due and remains unpaid after a date specified by a notice to Borrower, which date shall not be less than thirty (30) days after the date such notice is mailed, the Note Holder may exercise this option to accelerate during default by Borrower regardless of any prior forbearance. If suit is brought to collect this Note, the Note Holder shall be entitled to collect all reasonable costs and expenses of suit, including, but not limited to, reasonable attorney's fees. Borrower may prepay the principal amount outstanding in whole or in part. Any partial prepayment shall be applied against the principal amount outstanding. 32 Presentment, notice of dishonor, and protest are hereby waived by all makers, sureties, guarantors and endorsers hereof. This Note shall be the joint and several obligation of all makers, sureties, guarantors and endorsers, and shall be binding upon them and their successors and assigns. Any notice to Borrower provided for in this Note shall be given by mailing such notice by certified mail addressed to Borrower at: Commercial Rail Properties, Inc. Suite 201 14047 Petronella Drive Libertyville, IL 60048 Attn: John W. Gohmann, President or to such other address as Borrower may designate by notice-to the Note Holder. Any notice to the Note Holder shall be given by mailing such notice by certified mail, return receipt requested, to the Note Holder at the address stated in the first paragraph of this Note, or at such other address as may have been designated by notice to Borrower. The indebtedness evidenced by this Note is secured by a Mortgage, dated the day of ' 199 , and reference is made to the Mortgage for rights as to acceleration of the indebtedness evidenced by this Note. COMMERCIAL RAIL PROPERTIES, INC. By Its 33 August 1, 1998 February 1, 1999 August 1, 1999 February 1, 2000 August 1, 2000 February 1, 2001 August 1, 2001 February 1, 2002 August 1, 2002 February 1, 2003 August 1, 2003 February 1, 2004 August 1, 2004 February 1, 2005 August 1, 2005 February 1, 2006 August 1, 2006 EXHIBIT A PAYMENT SCHEDULE 34 $ $ SCHEDULE E AUTHORITY MORTGAGE This Indenture, made this day of , 199_, between Commercial Rail Properties, Inc., a corporation organized under the laws of the State of Minnesota (the "Mortgagor "), and the Housing and Redevelopment Authority in and for the City of Fridley, Minnesota (the "Mortgagee "): WITNESSETH: That Mortgagor, in consideration of the Mortgagee's covenants and agreements made under that certain Contract for Private Redevelopment by and between the Mortgagee and Commercial Rail Properties, Inc., an Illinois corporation, dated as of 199 (the "Agreement "), and in order to secure the payment by the Mortgagor of all amounts required to be paid under the Agreement and the Note as provided in the Agreement, and further in consideration of the sum of One Dollar ($1.00), to Mortgagor in hand paid by Mortgagee, the receipt whereof is hereby acknowledged, does hereby convey unto Mortgagee, forever, real property in Anoka County Minnesota, described as follows: together with all hereditaments and appurtenances belonging thereto (the "Property "). TO HAVE AND TO HOLD THE SAME, to Mortgagee forever. Mortgagor covenants with Mortgagee as follows: That Mortgagor is lawfully seized of the Property and has good right to convey the, same; that the Property is free from all encumbrances, except as follows: that Mortgagee shall quietly enjoy and possess the same; and that Mortgagor will warrant and defend the title to the same against all lawful claims not hereinbefore specifically excepted. PROVIDED, NEVERTHELESS, that if Mortgagor shall pay Mortgagee all amounts payable by the Mortgagor under the Agreement and the Note in an amount not exceeding One Hundred Twenty Five Thousand Dollars ($125,000.00) and any amounts required as payment in lieu of taxes as specified in Article X of 35 the Agreement, and shall repay to Mortgagee, at the times and with interest as specified, all sums advanced in protecting the lien of this Mortgage, in payment of taxes on the Property and assessments payable therewith, insurance premiums covering buildings thereon, principal or interest on any prior liens, expenses and attorney's fees herein provided for and sum advanced for any other purpose authorized herein, and shall keep and perform all the covenants and agreements herein contained, then this Mortgage shall be null and void, and shall be released at Mortgagor's expense. AND MORTGAGOR covenants with Mortgagee as follows: 1. To pay the amounts as specified in the Agreement and the Note. 2. To pay all taxes and assessments now due or that may hereafter become liens against the Property before penalty attaches thereto; 3. To keep all buildings, improvements and fixtures now or later located on or a part of the Property insured against loss by fire, extended coverage perils, vandalism, malicious mischief and, if applicable, steam boiler explosion, for at least the amount of the Mortgage at all times while any amount remains unpaid under this Mortgage. If any of the buildings, improvements or fixtures are located in a federally designated flood prone area, and if flood insurance is available for that area, Mortgagor shall procure and maintain flood insurance in amounts reasonably satisfactory to Mortgagee. Each insurance policy shall contain a loss payable clause in favor of Mortgagee affording all rights and privileges customarily provided under the so- called standard mortgage clause. The insurance shall be issued by an insurance company or companies licensed to do business in the State of Minnesota and acceptable to the Mortgagee. the insurance policies shall provide for not less than ten (10) days written notice to Mortgagee before cancellation, non - renewal, termination, or change in coverage, and Mortgagor shall deliver to Mortgagee a duplicate original or certificate of such insurance policies. 4. To pay, when due, both principal and interest of all prior liens or encumbrances, if any, and keep the Property free and clear of all prior liens or encumbrances. 5. To commit or permit no waste on the Property and to keep it in good repair. 6. To complete forthwith any improvements which may hereafter be under course of construction on the Property; and 7. To pay any other expenses and reasonable 36 attorney's fees incurred by Mortgagee by reason of litigation with any third party for the protection of the lien of this Mortgage. 8. To immediately pay the Note balance if the Property is sold or transferred except that the Property may be transferred to any corporation or partnership or entity controlling, controlled by or under common control of the Mortgagor; or the Property may be transferred to John M. Gohmann, the Guarantor under the Guarantee Agreement as provided for in the Agreement; or the property may be transferred to the heirs of John M. Gohmann or his trustees in the event of his death. In case of failure to pay said taxes and assessments, prior liens or encumbrances, expenses and reasonable attorney's fees as above specified, or to insure said buildings, improvements, and fixtures and Deliver the policies as aforesaid, Mortgagee may pay such taxes, assessments, prior liens, expenses and attorney's fees and interest thereon, or obtain such insurance, and the sums so paid shall bear interest from the date of such payment at the same rate of 511 per annum, and shall be impressed as an additional lien upon the Property and be immediately due and payable from Mortgagor to Mortgagee and this Mortgage shall from date thereof secure the repayment of such advances with interest. In case of default in any of the foregoing covenants, and the passage of any applicable periods of cure or notice set forth in the Agreement, Mortgagor confers upon the Mortgagee the option of declaring the unpaid balance of the Note and the interest accrued thereon, together will all sums advanced hereunder, immediately due and payable without notice, and hereby authorizes and empowers Mortgagee to foreclose this Mortgage by judicial proceedings or to sell the Property at public auction and convey the same to the purchaser in fee simple in accordance with the statute, and out of the moneys arising from such sale to retain all sums secured hereby, with interest and all legal costs and charges of such foreclosure and the maximum attorney's fees permitted by law, which costs, charges and fees Mortgagor agrees to pay. The terms of this Mortgage shall run with the Property and bind the parties hereto and their successors in interest. 37 IN TESTIMONY WHEREOF, Mortgagor has hereunto set its hand the day and year first above written. { STATE OF MINNESOTA ) )ss COUNTY OF ) COMMERCIAL RAIL PROPERTIES, INC. By Its John W. Gohmann President On this day of , 199_ before me, a notary public within and for County, personally appeared John W. Gohmann, the President of Commercial Rail Properties, Inc., an Illinois corporation, and acknowledged the foregoing instrument on behalf of said corporation. This document was drafted by: Notary Public KRASS MONROE, P.A. Suite 1100 Southpoint Office Center 1650 West 82nd Street Minneapolis, MN 55431 James R. Casserly, Esq. 38 SCHEDULE F GUARANTEE This Guarantee is being made as of this day of 199_ by John M. Gohmann (the "Guarantor ") for the benefit of the Housing and Redevelopment Authority in and for the City of Fridley, Minnesota (the "Authority "). RECITALS: The Authority as of the date hereof has entered in a Contract for Private Redevelopment (the "Agreement "), Commercial Rail Properties, Inc. (the "Re(kveloper "), a corporation organized under the laws of the State of Minnesota. The Authority and the Guarantor intend that the Guarantor shall fully guarantee the performance by the Redeveloper of all obligations of the Redeveloper under the Agreement. NOW, THEREFORE, the Guarantor, in consideration for the Authority entering into the Agreement with the Redeveloper, covenants and agrees with the Authority as follows: 1. Payment Guarantee. The Guarantor unconditionally guarantees to the Authority, its successors and assigns, the prompt and full payment when due of all present and future payments due from the Redeveloper to the Authority under the Agreement and the Note. 2. Performance Guarantee. The Guarantor agrees that in the event the Redeveloper fails to perform any of its obligations under the Agreement, the Guarantor shall perform such obligations on behalf of or in lieu of the Redeveloper. 3. Consents, Waivers. The Guarantor_agrees that the Authority at any time and from time to time, without notice to or further consent of the Guarantor, may extend the time for making any payment due from the Redeveloper to the Authority or the time for performance by the Redeveloper of any other obligation under the Agreement, and may also make any agreement with the Redeveloper for the extension, payment, compromise or discharge of any payment or other obligation of the Redeveloper under the Agreement without in any way impairing or affecting this Guarantee. 4. Expenses. The Guarantor agrees to pay on demand all out -of- pocket expenses (including reasonable fees and expenses of 39 the Authority's counsel) of the Authority in any way relating to enforcement or protection of the rights of the Authority hereunder. S. Continuing Guarantee. This Guarantee is absolute and unconditional and shall remain in full force and effect and be binding on the Guarantor, their successors and assigns until all obligations of the Redeveloper under the Agreement have been satisfied in full. 6. No Waiver. No failure on the part of the Authority to exercise, and no delay in exercising, any right, remedy or power hereunder shall operate as a waiver thereof; nor shall any single or partial waiver of any obligation of Guarantor hereunder operate as a waiver of any other obligation or preclude any other or future exercise of any right, remedy and power. 7. Representations and Warranties. (a) John M. Gohmann owns more than 500 of the Redeveloper. (b) This Guarantee constitutes the legal, valid and binding obligation of the Guarantor enforceable against the Guarantor in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors' right and to general equity principles. 8. Assignment. The Guarantor may not assign its rights, interests or obligations hereunder to any other persons without the prior written consent of the Authority. 9. Notices. Except as otherwise expressly provided in the Agreement,. a notice, demand, or other communication under the Agreement by either party to the other shall be sufficiently given or delivered if it is dispatched by registered or certified mail, postage prepaid, return receipt requested, transmitted by facsimile, delivered by a recognized overnight courier or delivered personally; and (a) in the case of the Guarantor, is addressed to or delivered personally to the mailing or delivery address the Guarantor will, from time to time, furnish to the Authority. The Guarantor's current address is as follows: John W. Gohmann Commercial Rail Suite 201 14047 Petronella Libertyville, IL 40 Properties, Inc. Drive 60048 (b) in the case of the Authority, is addressed to or delivered personally to: The Housing and Redevelopment Authority in and for the City of Fridley 6431 University Avenue N.E. Fridley, Minnesota 55432 Attention: Executive Director 10. Governing Law. This Guarantee shall be governed by, and construed in accordance with the laws of the State of Minnesota applicable to contracts made and to be performed within the State of Minnesota. IN WITNESS WHEREOF, this Guarantee has been duly. executed and delivered by the Guarantor to the Authority as of the date first written above. JOHN N. GOHMANN Guarantor Signature Page — Guarantee 41 ACCEPTANCE OF GUARANTEE This Guarantee is accepted as of this day of 199_ by the Housing and Redevelopment Authority in and for the City of Fridley, Minnesota. HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF FRIDLEY, MINNESOTA By Its Chairman And by Its Director Authority Signature Page — Guarantee 42 SCHEDULE G PERMITTED ENCUMBRANCES The following shall be permitted encumbrances on the title to the Redevelopment Property: (a) Such encumbrances as are mutually agreed to in writing by the Authority and the Redeveloper. (b) Governmental regulations, if any affecting the use and occupance of the Redevelopment Property and Minimum Improvements. (c) Zoning laws of the City, County and State. (d) All rights in public highways upon the land. (e) Reservations to the State, in trust for the tax districts concerned, of minerals and mineral rights in those portions of the Redevelopment Property the title to which may have at any time heretofore been forfeited to the State for nonpayment of real estate taxes. (f) The lien of unpaid special assessments, if any, not presently payable but to be paid as a part of the annual taxes to become due. (g) The lien of unpaid real estate taxes, if any, not presently payable but to be paid as a part of the annual taxes to become due. (h) A Mortgage as permitted under Section 8.2. (i) Any Mortgage subordinate to the Authority Mortgage as permitted under Section 8.2. 43