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HRA 10/14/1999 - 00002748CITY OF FRIDLEY HOUSING & REDEVELOPMENT AUTHORITY MEETING OCTOBER 14, 1999 CALL TO ORDER: Vice-Chairperson Schnabel called the October 14, 1999, Housing and Redevelopment Authority meeting to order at 7:32 p.m. ROLL CALL: Members Present: John Meyer, Virginia Schnabel, Jim McFarland, Pat Gabel Members Absent: Larry Commers Others Present: William Burns, Executive Director of HRA Barbara Dacy, Community Development Director Rick Pribyl, Director of Finances APPROVAL OF THE SEPTEMBER 2, 1999, HOUSING AND REDEVELOPMENT AUTHORITY MEETING MINUTES: MOTION by Mr. Meyer, seconded by Mr. McFarland, to approve the September 2, 1999, Housing and Redevelopment Authority meeting minutes as presented. UPON A VOICE VOTE, ALL VOTING AYE, VICE-CHAIRPERSON SCHNABEL DECLARED THE MOTION CARRIED UNANIMOUSLY. CONSENT AGENDA: 1. CLAIMS AND EXPENSES: MOTION by Ms. Gabel, seconded by Mr. McFarland, to approve the Consent Agenda as presented, along with the additional agenda item (check registry) presented at the meeting. UPON A VOICE VOTE, ALL VOTING AYE, VICE-CHAIRPERSON SCHNABEL DECLARED THE MOTION CARRIED UNANIMOUSLY. PUBLIC HEARINGS: 2. PUBLIC HEARING ON SALE OF LOTS 9-10, BLOCK N, RIVERVIEW HEIGHTS: MOTION by Mr. Meyer, seconded by Mr. McFarland, to open the public hearing. HOUSING & REDEVELOPMENT AUTHORITY MEETING. OCTOBER 14. 1999 PAGE 2 UPON A VOICE VOTE, ALL VOTING AYE, VICE-CHAIRPERSON SCHNABEL DECLARED THE MOTION CARRIED AND THE PUBLIC HEARING OPENED AT 7:35 P. M. Ms. Dacy stated that this is a public hearing for the sale of property to Kevin and Paulette Holman. The Holmans reside at 571 79t" Way at the south edge of the Riverview Heights Project in the northwest part of the City. Their lot is now non- conforming, smaller than 9,000 square feet. They are requesting to acquire a 25-foot wide lot to the west of them, owned by the City of Fridley. The City acquired this lot through the tax-forfeit process a few years ago. Ms. Dacy stated that because of the tax-forfeit requirements and restrictions, the City Attorney suggested that the City convey the lot first to the Housing and Redevelopment Authority (HRA), who then in turn can convey it to the Holmans. The HRA will accept the deed from the City for both the adjacent Lot 9 and Lot 10. The HRA will convey Lot 9 to the Holmans, and that lot, combined with their existing lot, will make the property conforming. The other lot will be conveyed back to the City, and the City will combine it with some of its additional property in that particular area. Ms. Schnabel asked if the City has already approved this transfer. Ms. Dacy stated,yes. Ms. Gabel stated that it seems to make good sense to make that lot conforming. Ms. Schnabel agreed. MOTION by Mr. McFarland, seconded by Ms. Gabel, to close the public hearing. UPON A VOICE VOTE, ALL VOTING AYE, VICE-CHAIRPERSON SCHNABEL DECLARED THE MOTION CARRIED AND THE PUBLIC HEARING CLOSED AT 7:39 P. M. MOTION by Mr. McFarland, seconded by Ms. Gabel, to accept the deed for the property from the City, and authorize the Chairperson and Executive Director to execute the deeds to convey Lot 9 to the Holmans and Lot 10 to the City. UPON A VOICE VOTE, ALL VOTING AYE, VICE-CHAIRPERSON SCHNABEL DECLARED THE MOTION CARRIED UNANIMOUSLY. 3. PUBLIC HEARING ON SALE OF 5800 2ND STREET: Ms. Dacy stated this public hearing on the sale of 5800 2nd Street should be postponed indefinitely, due to the fact that the house that C.E.E. was to obtain is no longer available. MOTION by Mr.Meyer, seconded by Mr. McFarland, to table the public hearing on the sale of 5800 2nd Street. HOUSING & REDEVELOPMENT AUTHORITY MEETING. OCTOBER 14. 1999 PAGE 3 UPON A VOICE VOTE, ALL VOTING AYE, VICE-CHAIRPERSON SCHNABEL DECLARED THE MOTION CARRIED AND THE PUBLIC HEARING TABLED. 4. PUBLIC HEARING ON PROPOSED POLICIES FOR BUSINESS SUBSIDIES: MOTION by Ms. Gabel, seconded by Mr. McFarland, to open the public hearing on Proposed Policies for Business Subsidies. UPON A VOICE VOTE, ALL VOTING AYE, VICE-CHAIRPERSON SCHNABEL DECLARED THE MOTION CARRIED AND THE PUBLIC HEARING OPENED AT 7:40. Ms. Dacy stated that the Legislature passed a new law this past year, which requires an adoption of a policy for business subsidies. This new law states that a subsidy is defined by some type of grant of money or property that is in value of more than $25,000. This particular section of the law has evolved over the last four years from the job creation reporting requirement, which was the first part of the law passed in 1995. The Legislature has amended this part of the law to state that each government agency should adopt some type of policy when providing a subsidy. If a subsidy is provided, a subsidy agreement should also be approved which sets out the actual requirements of the administration of the subsidy. In general, the law states that the subsidy must further a public purpose; and if the subsidy requires in excess of $100,000, another public hearing must be conducted. There are several exemptions listed in the law. Redevelopment projects is identified as an exemption. There is a specific provision which relates to site improvement costs that exceed seventy percent (70%) of the assessors current value of the land. Ms. Dacy stated the bond counsel for the City of Fridley, Jim O'Meara, has suggested a proposed policy for the HRA to adopt in order to be consistent with the state law at this time. The policy suggests a case-by-case approach to evaluate these issues as they come before the HRA. The policy specifically states that there may be other purposes other than job creation that may be pertinent to a project, and the HRA may decide that it may not have to establish job and wage goals. Staff is suggesting tonight that the HRA conduct a public hearing to be consistent with the state laws that stand now. The HRA can easily go back and change this policy if there are modifications in the next legislative session. Staff suggests that the HRA pass a motion which adopts the policy. Ms. Schnabel asked what the exact intent of the legislature is in passing this act. Ms. Dacy stated that it has evolved from a job creation requirement as part of providing tax-increment financing assistance or other types of municipal financial assistance. It is now more involved in terms of the purpose of that subsidy or the agreement. The Legislature wants to hold cities accountable for the types of subsidies they provide to the business community. In Fridley's situation, tax-increment financing is the only tool it uses to assist projects. HOUSING & REDEVELOPMENT AUTHORITY MEETING. OCTOBER 14. 1999 PAGE 4 Mr. Meyer stated that it does not seem to be too restrictive on the HRA. There seems to be enough leeway that individual cases can be judged on their own merits under this policy. Ms. Dacy stated that this is the first year that this law is in place. There is still some debate as to what certain terms actually mean. The proposed policies will give legal protection and at the same time the flexibility to evaluate projects as they come forward. Ms. Gabel stated that it seems a little redundant in terms of existing law. MOTION by Mr. Meyer, seconded by Mr. McFarland, to close the public hearing. UPON A VOICE VOTE, ALL VOTING AYE, VICE-CHAIRPERSON SCHNABEL DECLARED THE PUBLIC HEARING CLOSED AT 7:50 P.M. MOTION by Mr. Meyer, seconded by Mr. McFarland, to adopt the Policies for Business Subsidies as presented. UPON A VOICE VOTE, ALL VOTING AYE, VICE-CHAIRPERSON SCHNABEL DECLARED THE MOTION CARRIED UNANIMOUSLY. ACTION ITEMS: 5. RESOLUTION AUTHORIZING EXECUTION OF A DEVELOPM ENT AGREEMENT WITH WILLIAM PENK AND RICHARD PETERSON, 8632 MAIN STREET: Ms. Dacy stated that the developer, Fridley Main L.L.C., is requesting tax-increment financing assistance for soil correction work at the six-acre site on the west side of Main Street. The developers are proposing to construct a 51,000 square foot office/ warehouse facility; however, there is a significant amount of soil correction that needs to be completed on the property. This soil correction is estimated to be between 30,000 - 40,000 cubic yards of poor material on the site. The contract will require the developer to complete the building before the end of next year, December 31, 2000. The HRA's assistance will be capped at about 2/3 of the soil cost or a maximum of $250,000. As is typically done, the assistance will be provided to the developer at the time of certificate of completion of the building. Assistance will be provided in two ways as follows: 1. A loan and a grant, each with a cap of $120,000 each. 2. The loan terms are at five percent (5%) interest with a ten year term. A personal guarantee is required, as well as the loan being recorded against the property. Ms. Dacy stated staff's estimate of the total project cost between the building and land and soil correction is at about $2,500,000. Staff is interpreting, with the advice of legal counsel, that this project is exempt from a business subsidy loan. By provision of the loan, the loan will help recapture about one-half of the HRA's assistance. The developer will repay the HRA $125,000 plus 5% interest. This also accomplishes HOUSING & REDEVELOPMENT AUTHORITY MEETING. OCTOBER 14. 1999 PAGE 5 development on a very hard-to-develop site. Staff recommends that the HRA approve the resolution. The resolution authorizes the Chairperson or the Executive Director to execute the development agreement. These funds will be placed in escrow. Bob Corey, Esq., of Krass and Monroe, handled the preparation of the development agreement and was present to answer any questions. Ms. Schnabel stated that they have reviewed this site about three times in the past already. She hoped they will be able to get the property developed this time. MOTION by Ms. Gabel, seconded by Mr. Meyer, to approve Resolution No. HRA 11 — 1999, 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 of Fridley, Minnesota, and Fridley Main L.L.C. UPON A VOICE VOTE, ALL VOTING AYE, VICE-CHAIRPERSON SCHNABEL DECLARED THE MOTION CARRIED UNANIMOUSLY. 6. 1999 SCHOOL DISTRICT AGREEMENTS: Ms. Schnabel stated that this is the estimate that has been given to the board of the amounts that will be returned to School Districts #13, #14, and #16. Mr. Pribyl stated that this estimate is the increments the HRA has received that were not initially planned on when the districts were originally established. The agreements for 1999 and it appears that the year 2000 is the last time City Staff will be able to bring forward agreements like this because of the change in the way that the referendum levies are being delivered to the school districts. After the year 2000, they are not based on tax capacity, so the HRA does not receive increment associated with the referendum levies anymore. They are based on market value prior to actually rolling into tax capacity. The total estimate for 1999 would be $168,045. Ms. Schnabel asked Mr. Pribyl if these funds have been delivered to the school districts and if the school districts were aware of the amount they would be receiving. Mr. Pribyl stated that the funds have not been delivered and they were aware of the amount they would be receiving. MOTION by Mr. McFarland, seconded by Ms. Gabel, to approve the 1999 School District Agreements for School Districts 13, 14, and 16. UPON A VOICE VOTE, ALL VOTING AYE, VICE-CHAIRPERSON SCHNABEL DECLARED THE MOTION CARRIED UNANIMOUSLY. 7. RESOLUTION AUTHORIZING CONDEMNATION OF PROPERTIES IN THE GATEWAY EAST PROJECT: Ms. Dacy stated that Staff would like to table this item until the November meeting. One of the property owners contacted Staff and they are in the process of negotiating. HOUSING & REDEVELOPMENT AUTHORITY MEETING. OCTOBER 14. 1999 PAGE 6 MOTION by Mr. Meyer, seconded by Mr. McFarland, to table the Resolution Authorizing Condemnation of Properties in the Gateway East Project. UPON A VOICE VOTE, ALL VOTING AYE, VICE-CHAIRPERSON SCHNABEL DECLARED THE MOTION CARRIED UNANIMOUSLY. 8. RESOLUTION ADOPTING MODIFICATION TO REDEVELOPMENT PROJECT AREA AND TAX INCREMENT FINANCING PLANS: Ms. Dacy stated that the purpose of this resolution is to enlarge the redevelopment project area, modify the tax increment financing budgets, and to specifically amend the tax increment financing plan for Lake Pointe District to reflect the extension of the duration of that district. Ms. Dacy stated that they are enlarging the project area to plan for the future. Twenty years ago, the HRA and the City Council undertook a similar exercise and now it is time to do the same thing. The project area enables the HRA to have the flexibility to create additional tax increment districts or implement a variety of rehabilitation/replacement programs, or acquire substandard properties and assemble parcels for future redevelopment projects. Ms. Day stated the second part of the plan updates the budgets of each of the districts to reflect updated estimates of anticipated expenditures. The Medtronic project and the Lake Pointe District are good examples of that. When that financing plan was created in the mid-1980s, it did not anticipate the size of the parking ramps and the expenses associated with the parking ramps, site improvement, or soil correction costs. Similarly, the expenses in the Onan and Murphy Warehouse have been updated among other budgets as well. Updates of the redevelopment plan in the Medtronic and Lake Pointe district is just one step in the process to officially extend the duration of those districts. The Legislature passed a special law enabling the City to extend the duration of that district from 2011 to 2025. The HRA would act on the redevelopment plan and have a separate resolution at the November agenda which would approve the special law and agree to the extension. The City Council would ultimately create and adopt the extension. Ms. Dacy stated the Planning Commission reviewed the expansion of the project area on October 6. They passed a resolution that states that the expansion is consistent with the comprehensive plan. The City Council conducted a public hearing on this issue on October 11. Their resolution to approve the plan would be on one of their scheduled meetings in November and they would have to take action on this special law as well. Ms. Dacy stated that some language was added about the public purpose served by the housing programs, the rehab, and the replacement programs. A spreadsheet is also provided showing the budget amounts for each of the tax increment financing plans. Staff's recommendation is to pass a motion to approve the resolution as presented. HOUSING & REDEVELOPMENT AUTHORITY MEETING. OCTOBER 14. 1999 PAGE 7 Ms. Dacy stated that she spoke with the Chairperson and walked through the modification and the budget modifications to the tax increment districts. The Chairperson is in agreement with the proposed plan. Ms. Gabel asked if all of the proposed parcel additions go into the same district as Medtronic. Ms. Dacy stated that there was a difference between the tax increment district and the project area. The geographic land area for the Tax Increment Financing District #6 for Medtronic is not expanding. The length of the time the district is active is being extended to 2025. The land area is not enlarging. The project area identifies certain parcels in the City where the HRA can spend tax increments for eligible expenses. The HRA may never expend increments for a particular parcel. It just gives flexibility to do that in the future. Ms. Schnabel asked if they identify the project area first, then find something that will require tax increment financing to support it, then create the TIF district within that project area. Ms. Dacy stated that is correct. For example the Sheet Metal Connector parcel on Main Street and the Eco Finishing parcel was added already to the project area and a loan was provided for certain expenses for those projects, which was repaid with interest. MOTION by Ms. Gabel, seconded by Mr. Meyer, to approve Resolution No. HRA 12- 1999, a Resolution Modifying the Redevelopment Plan for Redevelopment Project No. 1 and the Tax Increment Financing Plans for Tax Increment Financing Districts Nos. 1 through 3, 6, 7, and 9 through 16 to Reflect Enlargement of Redevelopment Project No. 1 and Increased Project Costs to be Undertaken Therein. UPON A VOICE VOTE, ALL VOTING AYE, VICE-CHAIRPERSON SCHNABEL DECLARED THE MOTION CARRIED UNANIMOUSLY. 9. 1999 HRA BUDGET: Ms. Dacy stated that the tax increment law has changed significantly in the last year. Those changes required the Financing Department to change the accounting procedures for the HRA. The 1999 budget creates individual funds to track expenditures of revenues and expenditures for each of the tax increment districts and for the housing programs and activities. There is also a general fund of non-tax increment types of revenues. Ms. Dacy stated that the budget states that about $4,433,000 is anticipated in revenues this year. A majority of that is tax increment. A portion of that is the property tax levy for the HRA. There is about $4,200,000 in expenditures anticipated for this year. This does not include anticipated debt service payments on some of the bonds and the loan from the City. That total is about $1,300,000. There is a projected year-end fund balance for all of the funds of about $9,800,000. The general fund provides a source for housing programs and other expenditures that the HRA may decide to undertake now HOUSING & REDEVELOPMENT AUTHORITY MEETING. OCTOBER 14. 1999 PAGE 8 and in the future. This will continue to fuel the housing programs. Project-related expenses located in TIF districts are charged to that particular fund. Ms. Dacy stated there are 17 tax increment financing districts in the redevelopment program; however, four of those are inactive. Four of the remaining 13 districts are very small and range between 2- 4 acres. There is not a lot of large land area in the City within a tax increment area. The budget proposes continuation of the 5% loan program, rehab programs in the Hyde Park area, funding for participation in the remodeling fair, and funds for the Scattered Site Acquisition Program through 1999. Ms. Dacy stated staff is proposing a"Welcome to Fridley" sign at the southwest corner of University and Mississippi Street. The sign would be consistent with the "Welcome to the City" signs that the 50t" Anniversary Committee have put together. They are placing these signs at the entrances to the City at the north and south ends. Staff is suggesting a smaller version of that sign behind the limestone wall at the Christenson Crossing development. In all likelihood, this will end up as a year 2000 expenditure. Ms. Dacy stated that expenditures for Gateway East are also proposed in the budget. There are three parcels now under negotiation. The budget contains the tax increment financing assistance for Onan Murphy warehouse, assistance authorized for the Peterson site at the north end of the City, and a number of other acquisitions that the Council has asked Staff to look at. The maintenance cost, because of the Medtronic transfer, for Lake Pointe has plummeted. The HRA agreed to pay 50% of the landscaping and lighting improvements for public improvements cost for the 57tn Avenue project. The expenses related to finishing the construction work for the T.H. 65 intersection has not come in yet. Staff recommends approval of the 1999 budget. The year 2000 budget will be available for approval in November. Ms. Schnabel asked if these signs are permanent. Ms. Dacy answered, yes. Mr. Meyer stated that it seems that those signs are rather tacky to have a sponsor. Mr. Burns stated that the sponsors contributed the money. Ms. Dacy stated that all of the sponsors are civic non-profit organizations. The signs are not tacky aesthetically. Staff has avoided that with the design. Ms. Schnabel stated that the signs will let people know that those organizations exist in Fridley. MOTION by Mr. McFarland, seconded by Ms. Gabel, to approve the 1999 HRA Budget as presented. UPON A VOICE VOTE, ALL VOTING AYE, VICE-CHAIRPERSON SCHNABEL DECLARED THE MOTION CARRIED UNANIMOUSLY. HOUSING & REDEVELOPMENT AUTHORITY MEETING. OCTOBER 14. 1999 PAGE 9 INFORMATION ITEMS 10. MEDTRONIC UPDATE: Ms. Dacy stated that City staff will be meeting with Medtronic, hopefully, the week of October 25 to wrap up the modifications to the development agreement. They hope to have a proposal at the November agenda. The City and the HRA put together a funding application for federal funds and submitted that in September for the T.H. 65 sheet-pile wall construction. That proposed construction seems possible. The City will probably hear from the Metropolitan Council as to the determination sometime in the early part of the year 2000. The City has received a response from Medtronic as to what their future needs were in terms of support types of uses. Staff is still evaluating the response. Ms. Schnabel asked Mr. Meyer if he evaluated the sheet-pile wall plans. Mr. Meyer stated that he felt everyone has done a thorough job. Everyone seems to feel that it is a very doable project. Ms. Schnabel stated that using this type of construction will allow two additional lanes, one in each direction. Mr. Meyer stated that the cantilevered walkway on the north side will allow an 8'/ foot- wide walkway which will hang out over the lake. Mr. Meyer asked about the Rottlund homes occupancy. Ms. Dacy stated that all of the units are sold and homeowners' associations are in place. Staff is trying to finalize a few issues with Rottlund, but the construction project is completed. Mr. Meyer asked if there was any turnover of the units at all. Mr. Burns stated that there is some, but as far as he knew the average number of units available is three out of 118. 11. NIELSEN ACQUISITION UPDATE: Ms. Dacy stated that the parcel owned by Mr. Nielsen east of East River Road and north of 61 St Avenue had some tests to determine if there was any contamination in the soil. There has been no contamination found, but there has been a significant amount of construction debris. Staff has authorized to conduct additional tests with deeper test pits to determine if there is any hazardous contamination. Staff is suspecting this is not the case but needs to make sure. Staff is not sure of the cost of cleaning out the debris and have advised the property owner that those costs would affect the negotiation process. The property owner has been very cooperative. Mr. Meyer asked why test pits are being dug rather than soil borings. HOUSING & REDEVELOPMENT AUTHORITY MEETING. OCTOBER 14. 1999 PAGE 10 Ms. Dacy stated that the consultant recommended this method as opposed to using the augers. 12. 2000 HRA BUDGET: Ms. Dacy handed out the 2000 HRA budget for the HRA's review. The budget will be discussed at the November meeting. OTHER BUSINESS: Ms. Schnabel stated that the Housing Program Summary was available for their review along with the Loan Origination Report and the Loan Servicing Report for August. Mr. Meyer stated that a$35,000 loan has been granted which reflects the increased loan ceiling at a 5% loan with the address of the area being in probably one of the finest residential districts in the City. Ms. Dacy stated that she would have to research that issue for more information. Mr. Meyer asked how the HRA goes about selecting the loans. Ms. Dacy stated that the loan program has limits in terms of income and uses of the funds consistent with the Minnesota Housing Financing Agency programs. Mr. Meyer asked if they have precluded the other loans of lesser amounts than the $35,000 loan given in other areas of the City like the Hyde Park area. Ms. Dacy stated that they have not. The budget allocates a separate amount of funds for the Hyde Park district and the loan repayments help fuel the revolving loan program. That slowly becomes a self-sustaining program that does not require infusion of cash eventually. Mr. Meyer asked for further clarification of the loan distribution process. Ms. Dacy stated that the demand has been declining, and there has been remodeling activity without the HRA's assistance. Presently, they are not in the situation where they have to tell the citizens that they will put a cap on the loan amount. Mr. Burns stated that they are projecting 51 loans for this year. Ms. Dacy stated that if the demand exceeds the supply, they will have to come back to the HRA first to see if they should continue. Ms. Schnabel asked if they would do that in consideration of a certain dollar amount. Ms. Dacy stated that the cash flow would have capital expenditures of about $600,000 per year for infusion of the revolving loan based on past history and projections for the HOUSING & REDEVELOPMENT AUTHORITY MEETING. OCTOBER 14. 1999 PAGE 11 future. Six hundred thousand dollars will fund between 40 - 60 loans per year depending on the amounts taken out. Mr. Meyer asked for further clarification of income restrictions for loans. Ms. Dacy stated that the income restriction of $55,000 per year is a household amount, which she believes is investigated. Ms. Schnabel stated that the New Brighton project will take place on I-694 and 35W northwest quadrant and will be interesting to see what they do. The information on the Super Lawyers was also interesting. Mr. Burns stated that the Citizen Survey is completed and the results have been coded but now need to be tallied. There are questions regarding redevelopment priorities, the University Avenue fence, and Public Access television. Mr. Meyer stated that the cable company has changed its name. Mr. Burns stated that it has been bought by Time Warner and is called Time Warner in another jurisdiction, but Fridley is still Paragon. ADJOURNMENT: MOTION by Mr. McFarland, seconded by Mr. Meyer, to adjourn the meeting. UPON A VOICE VOTE, ALL VOTING AYE, VICE-CHAIRPERSON SCHNABEL DECLARED MOTION CARRIED AND MEETING OF THE HOUSING AND REDEVELOPMENT AUTHORITY ADJOURNED AT 8:45 P.M. Respectfully submitted, Signe L. Johnson Recording Secretary