HRA 09/03/1998 - 29830�
CITY OF FRIDLEY
HOUSING � REDEVELOPMENT AUTHORITY MEETING
SEPTEMBER 3, 1998
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Vice-Chairperson Schnabel called the September 3, 1998, Housing and
Redevelopment Authority meeting to order at 7:30 p.m.
ROLL CALL:
Members Present: Virginia Schnabel, Pat Gabel, John Meyer, Jim McFarland
Members Absent: Larry Commers
Others Present: Barb Dacy, Community Development Director
William Bums, City Manager
Grant Femelius, Housing Coordinator
Jim Casserly, Financial Consultant
Rick Pribyl, Finance Director
^ Craig Ellestad, Accountant
Dennis Schneider, Councilmember
Nancy Jorgenson, Mayor
Guy & Kathy Jordan, 6540 E. River Road, #224
APPROVAL OF MINUTES:
June 26, 1998:
MOTION: by Ms. Gable, seconded by Mr. Meyer, to approve the June 26, 1998,
Emergency Housing and Redevelopment Authority meeting minutes as written.
UPON A VOICE VOTE, ALL VOTING AYE, VICE-CHAIRPERSON SCHNABEL
DECLARED THE MOTION �ARRIED UNANIMOUSLY.
August 6, 1998:
MOTION by Mr. Meyer, seconded by Mr. McFarland, to approve the August 6,
1998 Housing and Redevelopment Authority minutes as written.
UPON A VOICE VOTE, ALL VOTING AYE, VICE-CHAIRPERSON SCHNABEL
DECLARED THE MOTION CARRIED UNANIMOUSLY.
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CONSENT AGENDA:
Vice-Chairperson Schnabel noted that a list of additional expenses requiring
HRA approval was distributed for review. She asked if the HRA wished to
remove any of the Consent Agenda items for further discussion.
Mr. McFarland asked that Item 1 be removed. Vice-Chairperson Schnabel
asked that Item 5 be removed.
MOTION by Mr. McFarland, seconded by Ms. Gabel, to approve the Consent
Agenda with the exception of Item 1, Clarification Regarding Acquisition of 5859
3"� Street and Item 5, Claims & Expenses.
UPON A VOICE VOTE, ALL VOTING AYE, VICE-CHAIRPERSON SCHNABEL
DECLARED THE MOTION CARRIED UANIMOUSLY.
1. DISCUSSION ON CLARIFICATION REGARDING ACQUISITION OF
5859 3RD STREET
Mr. Femelius explained that this item was before the HRA at its July meeting. At
that time, staff had negotiated a purchase price of $43,000 with Mid America
Bank who had received the property through a foreclosure. Prior to that
� meeting, staff discovered that there was approximately $9,780 in outstanding
water bills and delinquent taxes on the property. It was felt that the HRA should
reduce the purchase price by the amount of the delinquencies, and the HRA
authorized the acquisition in the amount of $34,000.
Mr. Femelius stated that since that time, staff has been working with Norwest
Bank to coordinate the closing. However the loan officer has indicated that the
bank is essentially paying for the delinquencies finrice by reducing the sale price
to $33,220 and then again by bringing a check to closing for the amount of the
delinquencies. Therefore, they are unwilling to sign the purchase agreement as
presented. It has been suggested that the funds be deducted by the title
company at the closing and paid to the City and County directly. Staff is
therefore recommending that the HRA reauthorize the purchase of 5859 3`�
Street N.E. for the $43,000 subject to Norwest Bank paying the delinquent taxes
and water bill in the amount of $9,780.
Mr. McFarland stated he questions the accuracy of the appraisal, which came in
at $46,000, and feels perhaps the HRA is paying too much for the property. He
asked what the HRA could expect the lot to sell for.
Mr. Femelius stated similar lots have been sold for befinreen $20,000 and
� $25,000. This particular lot is a little larger.
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� Mr. McFarland noted that the HRA can expect to spend approximately $5,000 to
have the home removed.
Mr. Fernelius explained that these costs have not been deducted from the
purchase price in the past.
Ms. Dacy explained that this property has been vacant for approximately two
years. She is concemed that if the property remains as is, the bank may just
choose to walk away from the property at some point.
Mr. Burr�s asked if the property is °nonconforming".
Ms. Dacy responded that she did not believe so.
Mr. McFarland stated this is a case where the bank rriade a loan for
improvements and the improvements were never made. Therefore, the loan
nearly doubled, and the value of the house remained the same. If the bank
maintains ownership, they will likely complete minimal improvements to make it
salable. Nonetheless, he does not feel the HRA should pay more for the
property than it is worth.
Ms. Dacy noted that if the HRA desired, she could request that the City's
appraiser review the appraisal of the property.
Mr. McFarland asked whether the HRA obtains their own appraisal on the
properties.
Mr. Fernelius stated that this is normally the case; however, due to timing issues,
the HRA did not obtain their own appraisal on this property.
Ms. Schnabel stated she would like to have the City obtain an appraisal on the
property and hold off on any decisions until that has been completed.
MOTION by Mr. McFarland, seconded by Ms. Gabel to re-authorize the
purchase of the property at 5859 Third Street N.E. for $43,000 subject to
Norwest Bank paying the delinquent taxes and water bill in the amount of
$9,780.
UPON A VOICE VOTE, TWO VOTING AYE, AND TWO VOTING NAY
(SCHNABEL AND MEYER), VICE-CHAIRPERSON SCHNABEL DECLARED
THE MOTION FAILED.
Staff will obtain an appraisal of the property per request and bring this issue
�"�� before the HRA for reconsideration.
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� 5. DISCUSSION ON CLAIMS & EXPENSES:
Vice-Chairperson Schnabel asked for clarification on the $259,704.71 in
Administrative expenses for the month of August.
Mr. Ellestad stated that this is a reimbursement for general obligation bonds that
were paid by the City.
MOTION by Ms. Gabel, seconded by Mr. McFarland to approve the Claims and
Expenses as presented.
UPON A VOICE VOTE, ALL VOTING AYE, VICE-CHAIRPERSON SCHNABEL
DECLARED THE MOTION CARRIED UNANIMOUSLY.
ACTION ITEMS:
6. RESOLUTION AUTHORIZING EXECUTION OF A CONTRACT FOR
PRIVATE DEVELOPMENT WITH GUY AND CATHERINE JORDAN
FOR VACANT LOT AT 540 HUGO STREET.
Mr. Femelius explained that this item was previously scheduled for the August
HRA meeting. At that time, Mr. And Mrs. Jordan were in the process of obtaining
� bids on their home plans and discovered that it was more costly than they could
afford. Since that time, they have drafted a new plan and are seeking approval.
The new plan is a split-entry design with 1,085 square feet finished and 420
square feet of unfinished space in the lower level. The plan also includes a finro-
car attached garage. '
Mr. Femelius stated that the proposal states that Mr. And Mrs. Jordan will need
to close and take title to the property by October 1, 1998, and start construction
by November 15, 1998. The home must be completed by June 15, 1999.
Mr. and Mrs. Jordan were present to answer questions. Mr. Jordan stated that
the costs once again came in slightly higher than they anticipated, but they feel
that they are manageable. He stated they are appreciative of the HRA's
completion of the soil boring tests, and that they have included in their plans both
an inside and outside drain tile system to address any drainage concems.
MOTION by Mr. Meyer, seconded by Ms. Gabel to approve Resolution No. HRA
15-1998. A Resolution Authorizing the Execution and Delivery of a Contract for
Private Redevelopment by and befinreen the Housing and Redevelopment
Authority in and for the City of Fridley, Minnesota and Guy W. Jordan and
Catherine S. Jordan.
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� UPON A VOICE VOTE, ALL VOTING AYE, VICE-CHAIRPERSON SCHNABEL
DECLARED THE MOTION CARRIED UNANIMOUSLY.
INFORMATION ITEMS:
7. UPDATE ON SOIL TESTING AT 530 AND 540 HUGO STREET:
Mr. Femelius explained that the City had Braun Intertec drill a test hole on each
of the sites. The findings indicated that because of the way the site is currently
graded, a lot of water tends to collect in one particular area. The borings have
shown that there is a layer of clay approximately 5-11 feet down below the
surface, and surFace water is draining through the top sandy soil and percolating
down to the clay layer. It appears that the soil is suitable to build on but that a
drain tile system will need to be installed along with waterproofing the outside of
the block wall. In addition, with proper grading, it is not believed that there will
be any major problems.
8. MOIVTHLY HOUSING REPORT:
Mr. Femelius distributed a copy of the Monthly Housing Program Summary for
the month ending July 1998 for the Board's review.
�` 9. OTHER BUSINESS:
Ms. Dacy noted that there were finro additional items which she would like to
bring before the HRA.
RESOLUTION APPROVING AND AUTHORIZING EXECUTION OF TAX
INCREMENT PLEDGE AGREEMENT RESPECTING $4.185.000 TAXABL�E
GENERAL OBLIGATION TAX INCREMENT BONDS. SERIES 1998B.
Mr. Pribyl, Finance Director, explained that this bond would actually be the final
permanent issue related to the money which was originally required to purchase
the Lake Pointe property. In 1992, the City issued $4,030,000, which was a two-
year temporary issue. A$4,090,000 issue replaced this one in 1995. Temporary
issues are no longer allowable, and this permanent issue will finance the Lake
Pointe site.
MOTION by Ms. Gabel, seconded by Mr. Meyer to adopt Resolution No. HRA
16-1998, A Resolution Approving and Authorizing Execution of Tax Increment
Pledge Agreement Respecting $4,185,000 Taxable General Obligation Tax
Increment Bonds, Series 1998B.
� UPON A VOICE VOTE, ALL VOTING AYE, VICE-CHAIRPERSON SCHNABEL
DECLARED THE MOTION CARRIED UNANIMOUSLY.
HOUSING & REDEVELOPMENT AUTHORITY MTG. SEPT. 3, 1998 PAGE 6
� DISCUSSION ON TERMS FOR REDEVEL.OPMENT CONTRACT WITH
MEDTRONIC:
Ms. Dacy explained that on August 20, 1998, Mr. Casserly and she met with
Medtronic's negotiating team and arrived at a conceptual agreement on the
terms of the redevelopment agreement. Both sides agreed to go back to their
respective Boards to obtain input. Ms. Dacy presented the terms to the City
Council at the August 24 meeting. Since that time, however, Medtronic has
made some changes, and a new list of terms has been verbally agreed upon by
them which she wished to present to the HRA. She stated she would like to
obtain approval of the concepts, subject to concurrence by the HRA
Chairperson.
Ms. Dacy went through the original goals, which were presented at the end of
June. These included:
i) maximizing the density on the site;
2) wanting to have it supported by structured parking and parking ramps;
3) wanting a significant tax base and revenue for the citizens of Fridley;
4) wanting to recover at least some of the Authority's costs;
5) wanting a well designed campus;
6) wanting it to be compatible with the surrounding area.
Ms. Dacy stated she believes that a new look at the entire site from what was
originally proposed by MEPC will be necessary in order to accomplish the goals
for Medtronic. They originally came in wanting the land for free and 100% of the
tax increment, which was based upon a previous proposal. The first phase of
the development will be given to them for $1.00; however, the future phases will
be paid for based on a schedule of °holding payment costs". Also agreed upon
was a sharing of the tax increment. They will take 80% of the tax increment and
the HRA will take 20% up to a present value of $3.3 million (this assumes that
they build 1,000,000 square feet of office space). Thereafter, they will take
97.5% and the HRA will take 2.5%.
Ms. Dacy stated the City and Medtronic have agreed on a performance schedule
of Medtronic accomplishing certain amounts of square footage before they have
the ability to obtain the remaining land. She presented an example of the
construction threshold requirements, the calculations of the land holding
payments, the tax increment, and the commercial restrictions. She stated that
240,000 square feet of office space must be constructed before the commercial
facilities can be built. The amount of land for commercial development cannot
exceed 356,866 square feet.
� Mr. Casserly stated the commercial restrictions were put in place as a
compromise. At this time, Medtronic is exploring their options; however, the City
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� has indicated that the majority of the land was not intended to be used for
commercial purposes.
Ms. Dacy went through the terms for the redevelopment contract, which had
been negotiated between Medtronic and the City/HRA.
Ms. Schnabel asked if there are any minimum requirements for open space.
Ms. Dacy explained that the agreement would address maximum amount of
building coverage. There are many issues which will determine the actual
amount of green space such as storm ponds, ramps, entry features, etc.
Building site coverage cannot exceed 40% of the site.
Mayor Jorgenson stated that Item #8 on page 3 of the terms of the
redevelopment contract refers to Medtronic using tax increment moneys it
receives from the HRA on any statutorily authorized eligible expenditure
including °road and utility realignments". She stated that roads are already put in
previously using tax increment financing, and she was concerr�ed that this may
be a single use item within a tax increment district.
Mr. Casserly explained that in the light of the district, changes could be made in
the infrastructure.
Ms. Dacy explained that in 1987 the City had to make a decision to make this
site marketable and it was done based on a master plan that was approved.
Unfortunately, there was no way of knowing what would be needed for the site in
the future.
Councilmember Schneider noted that the cost for this would be approximately
2% of the overall value of the development.
Mayor Jorgenson stated she is concemed that the legislature will look at this as
a one-time allowable expense within the tax increment district, and she does not
want to see the City become liable for the expense at a later time.
Ms. Dacy noted that #14 basically states that Medtronic cannot leave any
unusable parcels. Item #24 states that the City/HRA will provide Medtronic with
all environmental studies, tests and analyses. This is the Phase I audit which
was completed finro years ago. Medtronic will be responsible for any additional
environmental testing it desires to complete on the site.
Ms. Dacy stated Item #34 does not relate to the redevelopment project; however,
Medtronic views this as very important to their existing campus on Rice Creek.
� They would like a full access on Highway 65 to their Rice Creek campus. The
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� City/HRA has advised them that they will initiate a traffic analysis to see if
MNDOT will permit that.
MOTION by Mr. Meyer, seconded by Mr. McFarland, to approve the terms and
concepts for the Redevelopment Contract with Medtronic as presented dated
September 3, subject to the final confirmation of the Chairperson.
Mayor Jorgenson asked if #35, which states that Medtronic will not be assessed
for any of the improvements necessitated by the Traffic Plan, has ever been
done before, especially in the case where it is necessary due to their
development.
Mr. Casserly stated he did not know if there is an example within the City where
this has occurred; however, it is not unusual when doing office parks and large
scale commercial development that the community will put in public
improvements to address all of the traffic concems. With the economic state
over the past years, the City has lost almost twelve years of its ability to collect
increment on the site. If they had that ability, they would have been able to
address many of the issues. He stated that this is a land use that will affect the
community for the next 50 to 100 years and it will offer an unusual amount of
opportunities for the City of Fridley.
UPON A VOICE VOTE, ALL MEMBERS VOTING AYE, VICE-CHAIRPERSON
SCHNABEL DECLARED THE MOTION CARRIED UNANIMOUSLY.
�,4DJOURNMENT:
MOTION by Ms. Gabel, seconded by Mr. Meyer, to adjoum the HRA meeting.
UPON Q VOICE VOTE, ALL VOTING AYE, VICE-CHAIRPERSON SCHNABEL
DECLARED THE SEPTEMBER 3, 1998, MEETING OF THE HOUSING AND
REDEVELOPMENT AUTHORITY ADJOURNED AT 9:50 P.M.
�espectfully submitted,
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' amara D. Sae�e� lJ
Recording Secretary �'
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