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HRA 05/20/1999 - 00002682CITY OF FRIDLEY HOUSING & REDEVELOPMENT AUTHORITY MEETING MAY 20, 1999 CALL TO ORDER: Chairperson Commers called the May 20, 1999, Housing and Redevelopment Authority meeting to order at 7:30 p.m. ROLL CALL: Members Present: Larry Commers, Virginia Schnabel, Pat Gabel, Jim McFarland, John Meyer Members Absent: None Others Present: Barb Dacy, Community Development Director Grant Fernelius, Housing Coordinator Bill Burns, City Manager Jim Casserly, Financial Consultant Julie Vogel, Accountant Cindy Arndt, Medtronic APPROVAL OF THE APRIL 1, 1999, HOUSING AND REDEVELOPMENT AUTHORITY MEETING MINUTES: MOTION by Ms. Schnabel, seconded by Mr. Meyer, to approve the April 1, 1999, Housing and Redevelopment Authority minutes as presented. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLRED THE MOTION CARRIED UNANIMOUSLY. CONSENT AGENDA: CONSIDER EXTENSIONOF PARTICIPATION AGREEMENT FOR AFFORDABLE SUBURBAN HOUSING 2. CLAIMS AND EXPENSES Mr. Commers stated additional claims and expenses as outlined in Ms. Vogel's memo dated May 20, 1999, are also part of the claims and expenses. MOTION by Mr. Meyer, seconded by Ms. Gabel, to approve the Consent Agenda as presented. HOUSING & REDEVELOPMENT AUTHORITY MEETING. MAY 20. 1999 PAGE 2 UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. ACTION ITEMS: 3. CONDUCT PUBLIC HEARING TO SELL PORTION OF LAKE POINTE SITE TO MEDTRONIC. INC. Ms. Dacy stated the public hearing for this item was advertised to be held during the regular meeting on May 6. Because that meeting did not occur and staff was not aware of the date of this meeting, staff was not able to properly advertise the public hearing. Staff is suggesting that the public hearing be held at the June 3, 1999, meeting in order to provide time for staff to properly advertise. The HRA could conduct a public hearing at that time for comments, if any. Assuming the successful conclusion, they would close on the property on June 4. The HRA, however, can act on the development agreement. MOTION by Mr. Meyer, seconded by Mr. McFarland, to table the sale of a portion of the Lake Pointe site to Medtronic, Inc. pending the public hearing on June 3. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. 4. CONSIDER RESOLUTION AUTHORIZING EXECUTION OF REDEVELOPMENT CONTRACT, MEDTRONIC, INC. Mr. Casserly stated the HRA has received packet of materials containing a resolution to execute the redevelopment contract, a black line copy of some changes in the development agreement, and some of the financial analysis that goes into the project. Ms. Dacy distributed copies of a map of the site. She stated the area to the east and an area to the north are what would be conveyed to Medtronic as part of Phase 1. Lot 1 and Lot 1A are where Medtronic is proposing to locate their five buildings, the storm pond, and access drive. Across the north part of the site, Medtronic will construct a new parkway that will be a public street on the plat. The proposed parkway will be located on the strip of land along the north side of the project. The HRA will retain ownership of the west part of the property for Phases 2 and 3, which is described as Outlot A and Outlot B. Carrie Lane will be reconstructed at the north and east area of the site and at the southerly portions of Quincy and Jackson Streets. Medtronic has now executed a purchase agreement with all seven of the property owners. Outlots C and D will be owned by Medtronic. Ms. Dacy stated staff will review the tax increment issues, what Medtronic is going to represent to the HRA in the agreement, what the HRA agrees to do, the concept of the land holding payments, the parking requirements, issues regarding special assessments, and the expansion parcels. HOUSING & REDEVELOPMENT AUTHORITY MEETING. MAY 20. 1999 PAGE 3 Mr. Casserly reviewed the tax increment issues. He stated they made a number of assumptions in developing these figures. This model represents a three-phase build- out, the first phase being 450,000 square feet that would start in 1999 and end in 2000. Phase 1 comes on line for valuation in 2001 for taxes payable in 2002. Phase 2 assumes the construction of 300,000 square feet in the years 2002 and 2003 for valuation in 2004 and for taxes payable in 2005. The third phase follows sequentially. All of the taxes for this model would not be on line until 2008. The company genuinely does not know how soon it will need the additional space. It may, in fact, be in smaller increments than what this is showing. This represents one potential scenario. The master plan is currently for 1,050,000 square feet. Mr. Casserly stated that for the purposes of analysis, they used an average tax rate over a five-year period and added a small inflation factor effective 2003. There are some other things they did on how to recover some of the tax increment. He was not sure what the fair market value of the site will be. The assessor has to make that determination when the property is transferred from the HRA to Medtronic. They have been using $4 million, and the number is probably somewhere between $4 and $5 million for the land value. When the property is fully developed and all three phases are completed, they are assuming the estimated market value will be $118 million for purposes of this analysis. It is clear from the 1,050,000 square feet that the total construction costs are anywhere between $200 to $250 million. It is a considerable investment in the site. Mr. Casserly stated the reason that the market valuation for tax purposes will be considerably less is that there is a lot of cost going into the site that does not necessarily represent value. The parking ramps are an example of that. They are extremely expensive to build and have a nominal value. The ramps increase the density on the site. Mr. Casserly stated the cash flow analysis is based on these assumptions and the market valuation is assumed to be $100 per square foot. When the property is built out, it means that they are going to generate an estimated tax increment of almost $112 million from this project. The years from 2012 to 2025 represent $75 million of that tax increment. There are references to the years 2012 to 2025 because that is the period of the special law in which the legislature allowed them to extend this district. The legislation allows extending the district, requires approval of the county and school district, requires that in the year 2012, 200,000 square feet or about 20% of the value comes on the tax rolls. This becomes a significant point because over $1 million of taxes will then be coming available for the other taxing jurisdictions as a result of this project. Mr. Casserly stated the present value analysis gets into how the deal works. Column (b) shows the same $111 million estimated tax increment. The HRA gets 20% of the increment until it achieves a present value of $3.9 million. After it has achieved that HOUSING & REDEVELOPMENT AUTHORITY MEETING. MAY 20. 1999 PAGE 4 number, the HRA then retains 2.5% of the increment. This analysis reflects the terms of the contract as it now exists. Mr. Casserly stated that after 2012, a different ratio starts. The HRA retains 30% and the company gets 70%. In Column (c), 30% is immediately a fairly substantial amount and that continues to rise over the years. The totals indicate that under this scenario, there is almost $29 million of gross tax increment available to the HRA. The company with this extension is able to receive over $82 million under this scenario. The present value of that number is $31,500,000. Mr. Casserly stated the debt coverage for the full development is more for internal use and shows what happens. Column (b) shows over $28 million they have gotten through the operation of the contract. This is one model of how you might treat that revenue. This issue will be revisited. Essentially there is $28+ million. The problem in this district is that they have debt service payments as shown in Column (f). The allocation to tax increment district 6 is $10,889,250. Mr. Commers stated there is a$7 million shortfall that the HRA will have to cover by 2011. Mr. Casserly stated this is correct. It will probably be $5 million at the most, but with interest it could rise to up to $10 million. Mr. Commers asked that in addition to this, is there fiscal disparities that they will have to pay? Mr. Casserly stated they have left the fiscal disparities issue out of this. You cannot use tax increment to fund fiscal disparities. You can use tax increment to fund programs that the City might have levied for the HRA. Mr. Commers stated that, in addition, by the year 2011, what is going to be the additional monies that will be needed to make up the fiscal disparities? Mr. Casserly stated they did not know. The problem with the calculations is that Fridley is a net contributor to fiscal disparities. You contribute to fiscal disparities 40% of the increase of the commercial/industrial tax base after 1972. Medtronic will also be part of that contribution. The distribution has them receiving revenues from the area-wide pool. The amount that they contribute is the area-wide tax rate applied and distributed to all taxing jurisdictions in the metro area using a different formula. Those two formulas change. The amount contributed is a function of how much increased commercial/ industrial growth that you have had since 1972. The amount you receive depends on how much growth everybody else has and how you affect the other parts. Fridley's contribution is now about 30%. The amount received back is less. Everyone pays in in tax capacity and get back out in tax dollars. It is the tax capacity along with everyone else's multiplied by the uniform tax rate that is distributed back to all of the jurisdictions. HOUSING & REDEVELOPMENT AUTHORITY MEETING. MAY 20. 1999 PAGE 5 Mr. Commers asked if Fridley is a net loser now with this project, will Fridley become a worse net loser? Mr. Casserly stated that is a fair assumption. Mr. Commers stated they know there is going to be a significant increase in contribution. Mr. Casserly stated this is correct, because this project will have to contribute to the pool. They can solve that problem by having the entire contribution come from the district itself. When they do that, it reduces the amount available. Fridley has never done that in any of its districts that he is aware of. When it was set up, this district was not done that way either. The fiscal disparities are going to be contributed, even if nothing had happened, until the year 2011. On 2012, approximately 20% of the value is going to come out of the district and that 20% will also be available to contribute to its own fiscal disparities impact. The actual impact in the years 2012, 2013 and 2014, while substantial, will not be as substantial as they were in 2009, 2010, and 2011. What happens to the Fiscal Disparities Act of the next 10 to 15 years and what kind of development takes place in other jurisdictions will have an effect. Mr. Commers stated the bottom line of the contributions to fiscal disparities and the recovery of distributions back will come out of the basic tax base and will not come out of the tax increment monies. Mr. Casserly stated that is correct. The basic tax rate may have to increase to make up for the lack of tax capacity that would have been available if it came from within the district. Mr. Commers stated they may have an increase in real estate taxes to make up for this disparity, and the City may have to reduce their levy in order to keep taxes more stable. By reducing the levy, they will not have the funds available to do some of their projects. However, the HRA with the tax increment may have some extra money in order to assist the city in projects that they otherwise would not be able to fund. Mr. Casserly stated that is a fair statement. The HRA could assist with projects that they are authorized to do in order to help the city. Mr. Commers stated it is true that the HRA will not have funds available until 2011, and there will not be funds available to pay to the City for their programs. The HRA would not be able to give the City funds if they reduce their levy until after 2011. Mr. Casserly stated this was not necessarily correct. There are some other districts where funds may or may not be locked up. They have two districts, #2 and #3, the North Area and Moore Lake. In those districts, a ton of work has gone on to see if the dollars from those districts can be used to pay the debt service on Lake Pointe. The current tax bill now shuts down those districts on January 1, 2000, except for HOUSING & REDEVELOPMENT AUTHORITY MEETING. MAY 20. 1999 PAGE 6 commitments and obligations that are in existence now. The question is whether or not pledge agreements are going to be valid and enforceable so that the HRA can use up the revenue from districts 2 and 3 to pay this debt. If they cannot, the revenues in districts #2 and #3 will be returned to the County. If they can use the tax increment for the next 7 to 8 years, it will reduce the debt service on District 6 and will free up this revenue quickly. Ms. Gabel asked who makes this determination. Mr. Casserly stated the bond council feels that the funds are available. The state auditor feels the funds are not available. Mr. Commers asked if Mr. Casserly had done any pro formas. Mr. Casserly stated he had. They need to reach a consensus because it shapes how they will have to revise the agreement. No matter what happens, they will be better off than before. Prior to the passage of the special law, the HRA would have $6 or $7 million to pay off $10 million in debt. With the passing of the special law, the HRA will have $20 million to pay off the debt. This can be adjusted slightly. Mr. Commers stated the problem with the $20 million is the year 2025. The HRA will use up $10 million by 2011. Yes, in 25 years they will have it but they won't have it when they need it. The HRA is in a position of negative cash until 2011 unless it comes out of the other districts. Mr. Burns stated districts #2 and #3 are generating about $1 million per year. Mr. Commers stated the HRA might be able to get a little money for their programs. Mr. Casserly stated the legislature has ratified all prior pooling from these districts. Staff has gone back and reassessed. In previous years, the HRA has been using those monies anyway as they have come available. The issue is the future increment from those districts. Mr. Commers asked why they could not expand the district. Mr. Casserly stated it is beyond the five-year limit. The HRA has about $8.5 million in all the accounts. The worst case scenario is that half would have to be reserved. The best case is that nothing would have to be reserved because you can use districts #2 and #3 and could free up revenue in district #6 for other activities. His position is that the HRA can achieve that result, but the HRA needs to understand the risk. Mr. Commers stated the HRA needs to see some pro formas. This interferes with the budgeting, programs, etc. The HRA has to see what these numbers are. It will be hard to approve other projects until they know where they stand. HOUSING & REDEVELOPMENT AUTHORITY MEETING. MAY 20. 1999 PAGE 7 Mr. Casserly agreed. This has been a problem. Mr. Commers stated they did not need to worry about that right now, but they will need to move quickly in order to do planning and budgeting. Whatever is within their control, they should get to the HRA as soon as they can. Has this discussion been held with the City Council? Ms. Dacy stated staff had a conference meeting with the City Council where she reviewed the legislation proposed at the time. Prior to that, they had another discussion in February. Mr. Commers stated he thought they needed to discuss with the City Council the fact that the HRA's resources may be much more limited than what they thought. Mr. Burns stated the one thing the City Council has not heard is the outcome of the Medtronic negotiations. Mr. Commers stated that makes it better but it does not solve the issue. There are other issues. Mr. Casserly stated the annual distribution of taxes shows the amount of taxes Medtronic would be paying over the 25-year period. The other columns list other taxing jurisdictions. Beginning 2012, the amounts change dramatically. The figures listed are semi-annual amounts. This is a big deal. Having 200,000 square feet of valuation come on line in 2012 is a major contribution. Mr. Casserly stated columns g and h show the numbers available for the city and for Medtronic. The last column is Medtronic's share of the total taxes. The share of total taxes they will be getting increases until 2011 and then in 2012 decreases. In 2012, 200,000 square feet have come off and are available for taxes and the City rate increases to 20%, the amount of taxes they are getting back is about 55% and stays in the middle 50's throughout the remaining years. They are making a substantial contribution. This schedule is important. People tend to think the company is getting back the taxes they are paying. They are getting back about 55% on the average. For the life of the district, it averages out to about 62%. Ms. Dacy stated the next issue is the use of the increment. In the extension, the legislature gave the HRA the authority to use increment for roadway improvements that are directly related to the site. A question was raised about street improvements on 57tn Avenue. The traffic analysis shows that in the year 2010 there may be a need for a right turn lane from westbound 57t" to go northbound onto University Avenue. That would be a dedicated right turn lane with an island to separate it from the other traffic. Mr. Commers asked how the Highway 65 improvements are being done now. HOUSING & REDEVELOPMENT AUTHORITY MEETING. MAY 20. 1999 PAGE 8 Ms. Dacy stated the AUAR and the mitigation plan were approved based on the fact that it looked like all of the air quality issues could be met without the Highway 65 improvements and that all of the environmental issues were also adequately addressed if the lane expansion were not completed. In the City agreement, the City is stating that it will use its "best efforts" to pursue construction and is now in the process of trying to obtain Federal funding for that project. This is the extra lane from I-694 to just beyond East Moore Lake Drive and potentially another lane on the southbound side. Ms. Schnabel asked if the road construction included Bridgewater Drive. Ms. Dacy stated Medtronic will undertake construction of Bridgewater. The expenses are part of the eligible expenses for reimbursement. Ms. Dacy stated the agreement defines minimum improvements as the initial improvements or Phase 1 and optional improvements that are defined in the agreement as future development. Ms. Dacy stated the Phase 1 plan was approved by the HRA as of April 1, and the City Council approved the master plan on April 26. They are still working on the plat and vacation issues. Medtronic is committing to build a parkway across the project and have agreed to maintain the trees and cut the grass on the medians. However, it will be a public street. The city will do the snow plowing, repair potholes, etc. Ms. Dacy stated the agreement requires the construction of structured parking. In Phase 1, they were required to construct a minimum of 75% of their space as parking. They have exceeded that. They have only 12 spaces on a surface lot. The structured parking has approximately 1,000 spaces with two levels below grade, one at grade, and three above grade. Ms. Dacy stated the Department of Trade and Economic Development requires that they agree to job and wage goals because of the level of assistance. Mr. Commers asked that regarding the parking, what is shared parking? In the future, structured parking cannot be in excess of three parking levels above ground. Ms. Dacy stated the question was whether the schedule of parking requirements was what they typically require. The shared parking means that some of the uses inside the five buildings are going to be used by Medtronic employees. Those uses in and of itself will be used by the employees on the site and will not be attracting additional traffic. What they are agreeing to in the parking is to work with their architect to determine what the net amount of space will drive the parking. In subsequent phases, the definition of structured parking does not state one way or the other about the underground parking. It just states it may be on or above grade. There is a stipulation in the Master Plan that if structured parking exceeds the height of the first phase ramp, they would have to come back. Medtronic has minimized the height impacts as best as possible. Mr. Commers asked if it was correct that the height cannot exceed 10 stories. HOUSING & REDEVELOPMENT AUTHORITY MEETING. MAY 20. 1999 PAGE 9 Ms. Dacy stated this is correct. The agreement does permit up to 10 stories for one of the buildings. They would like to have that 10-story flexibility but they are trying to recapture the campus feel and Phase 1 buildings are shorter than that. The tallest building proposed is 85 feet but there are only four office floors in that building. Ms. Dacy stated the HRA's representation stated that the HRA is cooperating with the City stating the site is suitable for 1.6 million square feet of development. Mr. Commers asked what they had to support that representation. Ms. Dacy stated they had the AUAR document analyzed and approved. Ms. Dacy stated the use of the remaining property in the interim states that the HRA will not permit any use that is detrimental to the phase 1 development. Ms. Dacy stated that regarding the land holding payments, when they decide to purchase additional land to construct phases 2 and 3, staff came up with a formula to calculate that amount of payment. There is also a procedure as to when to calculate and the time frame for the date of closing of the additional phase. Ms. Dacy stated that regarding special assessments, the agreement states there will be no special assessments for the public or site improvements contemplated for the project. Mr. Commers asked who is responsible for the special assessments listed on schedule Ms. Dacy stated the water and sanitary sewer is available already. On University and 57t" Avenue, the City will look at that intersection in the year 2009 to determine if a free right turn lane is required. The City and the HRA will cooperate to ensure that the improvements are available. Mr. Commers asked if 57t" Avenue was an obligation of the City under their agreement. Ms. Dacy stated there is a statement in the City's agreement and the HRA's agreement that one will cooperate with the other. There is a statement in the HRA's agreement that the HRA will ensure that public improvements are available and the same language appears in the city agreement. Ms. Dacy stated they had talked about the expansion parcels. Medtronic now has a signed purchase agreement for all seven parcels. Ms. Dacy distributed copies of three pages of the agreement that were amended as well as the resolution for which staff recommends approval. HOUSING & REDEVELOPMENT AUTHORITY MEETING. MAY 20. 1999 PAGE 10 Mr. Casserly stated the amended pages redefine what the available tax increment is, and there is new language underlined that says starting in 2012 the HRA will provide 70% of the increment to the company. Assuming the governor signs the tax bill, the County and school district both approves the special legislation, the HRA approves a revised budget for district 6, the HRA approves the extension of district 6, the City Council approves the extension of district 6, then this would go into effect. Mr. Casserly stated the second page cleans up the various notice of closing requirements. They changed the notice of closing for the first parcel that is to be given when signing this agreement. The closing date is set for June 4. There are problems on the torrens certificate from years ago. Mr. Casserly stated the last page is the schedule F that clarifies the intersection improvements. The same language is in the city's agreement. Mr. Casserly stated the resolution makes it clearer. Section 3 authorized the chairman and executive director to execute and deliver the contract when certain conditions are met. Mr. Commers asked what provisions were included in the City contract. Ms. Dacy stated the definitions are the same. The structured parking is the same. Public improvements are the same. There is a section in the City's representation regarding the valuation of the project. It states that the City acknowledges that the cost to construct the parking ramps and buildings does not equate exactly to the market valuation of the project. There is much cost associated with the ramps in order to achieve the density. Much of the valuation will result from the construction of the buildings. Ms. Dacy stated there is a section on public streets that acknowledges the demolishing of existing streets and creating new streets. The company wanted to be assured that ultimately they are not responsible for maintaining public streets. There is language regarding the parkway and also the company wanted to insure that it is not responsible for maintaining the reconstructed Carrie Lane. Mr. Commers asked if it was correct that Medtronic retains the right to name the streets. Ms. Dacy stated this was correct. Ms. Dacy stated there is a section regarding the procedure and process to amend the master plan. They are insisting that the city take action within 60 days. This may be an issue for the City Council because current state law does allow for an extension based on reasonable facts. If the city does reject a master plan amendment, it must not be arbitrary and capricious. HOUSING & REDEVELOPMENT AUTHORITY MEETING. MAY 20. 1999 PAGE 11 Ms. Dacy stated she referred earlier to Highway 65 improvements. The city agreement talks about a proposed right in, right out access to Highway 65. MnDOT will approve the right-in, right-out but they want the City to agree to close the median on Highway 65 near the Target warehouse. The language in the agreement sates that the City assist the company in securing those approvals. Mr. Commers stated he did not understand the purpose of closing that median. Ms. Dacy stated MnDOT `s goal is to improve the operation and function of Highway 65. Over the years, they have been closing the crossovers in the medians that detract from the traffic flow. Ms. Dacy stated Medtronic would like to have construction vehicles start at 6:30 a.m. rather than 7:00 a.m. Staff has agreed that they could start vehicles about 500 feet south of the north lot line or more toward I-694 so that the noise will mix in more with the highway traffic. Mr. Meyers asked why they would not work the usual construction hours. Ms. Dacy stated they are talking about construction hours of 6:30 a.m. to 9:00 p.m. Monday through Friday and Saturday from 9:00 a.m. to 9:00 p.m. Those are the hours that are permitted under the ordinance, and it was her understanding that they will be going full speed ahead. Ms. Arndt stated that in some cases, some of the work requires they start early in order to get it done before dark. Mr. Burns stated the City did get $500,000 from the state for the preliminary design for the Highway 65 work so that will enable the city to start almost immediately. This is a very complex project with land use issues, development agreement issues and legislative issues. There were many people involved. It has taken a lot of time. Neither side has lost their resolve. Everyone has done a wonderful job. They are all very pleased with the project. MOTION by Ms. Schnabel, seconded by Mr. Meyer, to approve a Resolution No. HRA- 8, Authorizing Execution and Delivery of a Contract for Private Redevelopment By and Between the Housing and Redevelopment Authority In and Ford the City of Fridley, Minnesota, and Medtronic, Inc. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. INFORMATION ITEMS: HOUSING & REDEVELOPMENT AUTHORITY MEETING. MAY 20. 1999 PAGE 12 5. GATEWAY EAST UPDATE Mr. Fernelius stated Holiday has approached staff with a request to extend the closing date in order to give the tenant time to find a new spot. Since the memo was written on May 14, staff found out that Holiday was going to proceed with legal action next week in order to remove the tenant. He anticipates that the closing on that property would take place sometime this summer. Mr. Fernelius stated the other issue is the duplex. The issue of replacing the two units and finding new rental units has been discussed in the past. Staff has had a lot of trouble identifying a site and identifying a funding source, but he thought they had a solution. Staff inet with ACCAP about a tax forfeit parcel on Starlite Circle that is just south of the Rottlund development. Mr. Fernelius stated there are two possibilities to fund a project which would be a rental duplex owned and managed by ACCAP and would provide affordable rental housing presumably for low and moderate income residents. One possible funding source to develop that project would come from Metropolitan Housing Opportunities Program (MHOP). As the result of a lawsuit, approximately $100 million of money was set aside by HUD to help create essentially public housing and disperse it out into suburban communities. It is an excellent funding source because it would provide virtually all the money to construct the units. There are some strings attached. The tenants would be Minneapolis public housing tenants and would have preference on those two units for a period of 10 years after which time local residents would have an opportunity to lease those units. The City or the HRA would have little of a financial role. ACCAP believes the County would likely donate the tax forfeit lot to the project; therefore, there would be very little commitment the HRA would have to make. There are some political issues that need to be discussed with the City Council. Staff thinks that would be a desirable route. Mr. Fernelius stated the other option is to look at a tax credit project which would require that this project would be part of a larger development. The bottom line is that this would take time and possibly push it out a few years down the line. He is uncertain when this could actually place. The goal is to get these units constructed within a reasonable time frame. Mr. Fernelius stated the third option would be to have the City or the HRA fund the entire cost of the development. This may not be an appealing option. Mr. Fernelius stated this is an update on staff's research. Staff will continue to work on it. The goal is get more details on the MHOP program unless the HRA or City Council gives direction otherwise. He will come back in the future with more information. OTHER BUSINESS: HOUSING & REDEVELOPMENT AUTHORITY MEETING. MAY 20. 1999 PAGE 13 Mr. Burns stated they have recently completed the City Council and Commission survey relative to policy making and goal setting for the year 2000. Many of the issues are also of interest to the HRA. A copy of the results will be provided to the HRA. Mr. Burns stated he is working with NSP and Minnegasco, and he has reached an agreement with franchises with those two utilities. The next step being proposed is a franchise fee. This cost will be passed on to property owners who will end up paying approximately $36 per year. The franchise fee will bring in to the city about $716,000 in new revenues. This is important because the city has a long list of things that have been funded without any property tax levy increases or offsetting revenues. Since 1994, the city has added six new police officers, the rental housing program, community center operation costs, Hayes gymnasium operation costs, the commitment to pick up tree limbs which costs over $20,000 per year, a commitment to mowing and trimming the corridors, etc. The 1999 budget, in order to absorb all of these things, has a projected deficit of $1.3 million. He thought they were at a point where they have to do something to generate some new revenue. This is a major step in that direction. A public hearing regarding this subject will be held July 12. ADJOURNMENT: MOTION by Ms. Gabel, seconded by Ms. Schnabel, to adjourn the meeting. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED AND THE MAY 20, 1999, MEETING OF THE HOUSING & REDEVELOPMENT AUTHORITY ADJOURNED AT 9:47 P.M. Respectfully submitted, Lavonn Cooper Recording Secretary