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HRA 12/07/2000 - 00008436CITY OF FRIDLEY HOUSING & REDEVELOPMENT AUTHORITY MEETING DECEMBER 7, 2000 CALL TO ORDER: Chairperson Commers called the December 7, 2000, Housing and Redevelopment Authority meeting to order at 7:30 p.m. ROLL CALL: Members Present: Larry Commers, Virginia Schnabel, Jim McFarland Members Absent: John Meyer, Pat Gabel Others Present: Barbara Dacy, Community Development Director Grant Fernelius, Housing Coordinator Bill Burns, City Manager Rick Pribyl, Finance Director Paul Eisenmenger, Accountant Jim Casserly, Development Consultant Keith Janz, Gateway East Redevelopment LLC Chris Winter, REE Development Co. APPROVAL OF THE OCTOBER 5, 2000, HOUSING AND REDEVELOPMENT AUTHORITY MEETING MINUTES: MOTION by Ms. Schnabel, seconded by Mr. McFarland, to approve the October 5, 2000, Housing and Redevelopment Authority meeting minutes. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. CONSENT AGENDA: CIAIMS AND EXPENSES: 2. APPROVE 2001 MEETING DATES: 3. RESOLUTION NO. HRA 12-2000 AUTHORIZING PAY INCREASE FOR HRA EMPLOYEES: Mr. Pribyl stated that two pieces of additional expenses were added for approval. MOTION by Mr. McFarland, seconded by Ms. Schnabel, to approve the consent agenda with the additional expenses. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. HOUSING & REDEVELOPMENT AUTHORITY MEETING. DECEMBER 7. 2000 PAGE 2 PUBLIC HEARING: 4. CONSIDER RESOLUTION NO. HRA 13-2000 AUTHORIZING CONTRACT FOR PRIVATE REDEVELOPMENT WITH GATEWAY EAST REDEVELOPMENT LLC (REAL ESTATE EQUITIES) FOR GATEWAY EAST PROJECT: Mr. Fernelius stated that staff has reached an agreement on the redevelopment contract. The Gateway East Project is at the corner of 57th Avenue and University Avenue behind the Rapid Oil Change facility. The site includes five parcels and is approximately 2.5 acres in size. This includes the former Cash-N-Pawn, JR's Automotive, the duplex, and two vacant lots. The goal is to change the image from an aging commercial area to a residential neighborhood. Real Estate Equities (REE) is the developer proposing to build 28 owner-occupied townhomes on the site priced anywhere from $126,000 -$142,000. Prices may increase slightly. It is a 3-story design with two bedroom units. The agreement will be executed with the HRA and Gateway East Redevelopment LLC. The developer will be responsible for all phases of the project including the site work, public improvements, landscaping, and townhomes. The closing will take place on or before April 2, 2001. The site work may begin sooner than that. Some of the dates may have to be adjusted again as a result of some of the negotiations. Mr. Fernelius stated that ideally construction will start on or before May 1, 2001, and will be completed hopefully by December 31, 2002. The HRA has agreed to sell the land for $1.00 and will contribute funds toward the site improvements. The amount of the contribution has increased. Staff is looking at the contribution as a percentage of the overall project cost. As a result, we are recommending we increase the amount of our contribution. The amount would not exceed $600,000. The funds would be deposited in an escrow account. The developer would draw down on those funds as the public improvements are completed. They would keep $50,000 in that account until the project is completed. The HRA funds would also be used for grading, excavation, sewer and water mains, services, storm sewer as well as internal streets and development. In addition, they are looking at paying the landscaping cost, the decorative fence along University Avenue and 57th. The roadway construction and some utility relocation is required. Mr. Fernelius stated they going to contribute up to $15,000 for additional environmental testing that the developer has identified. The City is going to reapply to the MPCA for additional approvals. It can be somewhat streamlines but there are additional cost involved. Staff is recommending up to $50,000 for those costs. Staff believes the HRA should contribute an amount up to $50,000 used to pay for remediation if any is found. The other thing changed in the development contract is the net revenue sharing concept. That has been modified to reflect our discussions about our environmental issues. The developer has agreed that the HRA can recoup all of its money invested if there is any net profit. The developer would retain any net revenue beyond that. Mr. Commers stated that he understood that the escrow draw-downs would be directed to the subcontractors. Mr. Fernelius stated that is correct, and he misspoke. Mr. Janz stated they are going through a redevelopment phase of a tough site. The development team includes the City of Fridley, HKS Architects, REE Development Company, and Bisanz Brothers Development Company. REE has been in business since 1972 and has developed over 6,600 units for family housing. They have been doing a lot of work for the last HOUSING & REDEVELOPMENT AUTHORITY MEETING. DECEMBER 7. 2000 PAGE 3 five years in local communities and non-profits, expanding to redevelopment projects throughout the twin cities. Mr. Janz stated they are looking at eight buildings, six would be three-unit buildings and two would be five-unit buildings. Base pricing is around mid $130,000 -$140,000 based on some changes. The target market is probably single professionals and couples, young families, younger widowers, and recent divorcees. There will be sidewalks along the front of the buildings along the street and garages in the back of the buildings. They have tried to mitigate the impact of University Avenue by providing a courtyard. Decks are on the rear and there are double wide garages with a door entrance through the garage. Mr. Janz stated they are still in the process of finding the layout. The lower level is on the left with a two-stall garage a little wider because there is a walkway in there. The bottom level has a 10 foot by 10 foot room as an extra space. There is a stairway with storage underneath. The main level has a closet with a split entry right off the porch. There is a half bath on the main level and will probably be putting in a loft concept and move the kitchen back a little. The walkout door leads to the deck, and the kitchen living area can be for dining or the living room. The upstairs has two layouts with two bedrooms and a laundry area or a work area. Mr. Janz stated there is lattice work under the deck, landscaping, and brick banding. It will be a lighter siding with a slightly darker roof. The doors will be matched to the brick probably. The rear has the door, deck, and walkout windows. The doors are typically white. There are windows on the ends and have some cantilevering. Mr. McFarland asked about square footage. Mr. Janz stated that the townhomes would be approximately 1,300 square feet finished with 100 square feet for the expansion room on the lower level. Ms. Schnabel asked Mr. Fernelius if the additional $15,000 needed for additional testing and the $50,000 for remediation is included in the $600,000. Mr. Fernelius stated that would be in addition to it. There is potential for $65,000 of additional expense above and beyond $600,000. Ms. Schnabel asked if there is the potential opportunity to recoup some of that. Mr. Fernelius stated there is potential through the net revenue sharing idea. Mr. Commers asked why they had to go through this process again. Mr. Fernelius stated that the plan submitted to the MPCA was not specific enough. It did not include soil testing on the former JR's Automotive site. There are three other sites besides the Cash-N-Pawn and the JR's Automotive site. Mr. Commers asked if contamination was so low that it was not a problem. Mr. Fernelius stated that is correct. They just hope that the soil will not be impacted during the development process. Mr. Commers asked if there is any other known contamination. HOUSING & REDEVELOPMENT AUTHORITY MEETING. DECEMBER 7. 2000 PAGE 4 Mr. Fernelius stated that there is not. Mr. Commers stated this might mean that there may not be remediation expense. Mr. Fernelius stated that is possible. Ms. Schnabel asked when the testing would be completed. Mr. Fernelius stated that it will probably be done in the next month or so. Mr. Janz stated there are three basic parts as to what is going to have to be done. They have to go through the MPCA process and file a work plan and do soil borings in specific spots. They then have to send the tests to the lab and come up with a remediation plan to be approved by the MPCA. That will probably be a three month process. They are hoping to get the results in 30-45 days. Mr. Casserly stated they did not have the benefit of the environmental consultant reviewing a number of the issues and they clearly have to look at that. That is one adjustment that could possibly move back the closing date and construction. They have to build in a contingency that if they need to do a remediation, they have to design that with the time tables accordingly. Mr. McFarland asked what the testing costs will be. Mr. Fernelius stated that the maximum is $15,000. Mr. Commers stated they would not have to pay remediation costs if there is no remediation. What happens in terms of the net revenue? Mr. Fernelius stated that the developer retains the net revenues. Ms. Schnabel stated that the HRA never recoups the $15,000 then. Mr. Fernelius stated that if there are net revenues, the HRA will recoup the $15,000. If there is any remediation activity, they will recoup up to their $15,000 contribution. If there is any remediation, they will not recoup anything beyond the testing. Mr. Burns asked if it is worthwhile to point out how the increment will offset some costs. Mr. Fernelius stated that he was going to touch on that in the next phase. MOTION by Ms. Schnabel, seconded by Mr. McFarland, to adopt Resolution No. HRA 13-2000, 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, Minneesota, and Gateway East Redevelopment LLC. Mr. Commers stated that it seems to him that this is a very good project. They are learning a very expensive proposition to develop residential properties. Mr. Burns stated that it may be worthwhile to ask Mr. Casserly how the cost compares with similar projects in other cities. HOUSING & REDEVELOPMENT AUTHORITY MEETING. DECEMBER 7. 2000 PAGE 5 Mr. Casserly stated this is the difficulty of doing redevelopment. There are all the normal costs of acquisitions and removing buildings. Fridley is no different than anyplace else. If you replace commercial or residential with office or high-tech or industrial, you often have enough tax increment to cover most of those costs. When you try to put in residential, you rarely have enough money from the taxes on the residential to recover all the costs. In this instance they are going from commercial uses to a use with a lower class rate. This is not unusual. They probably have $25,000 per unit vested in all of the acquisition and just getting the site where it is today. They have to relocate streets, utilities, and demolish buildings. Going forward requires almost another $25,000 to get the site properly designed for residential use and deal with all the infrastructure problems. If they were not doing residential, they would have a very minimal amount of additional expense and may well have more tax increment generated from commercial industrial use. Ms. Schnabel asked if Christianson Crossing was similar on a much grander scale. Mr. Casserly stated, yes, and the per unit cost is probably approximately the same. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. 5. CONSIDER RESOLUTION NO. HRA 14-2000 APPROVING ESTABLISHMENT OF TIF DISTRICT NO. 17 AND CONSIDER ADOPTION OF TIF PLAN MODIFICATIONS TO REDEVELOPMENT PLAN: Mr. Fernelius stated that the HRA has incurred a substantial amount of cost in this project. The cost is roughly $700,000 in acquisition, demolition, and relocation. They will incur additional expenses, over $600,000 potentially. The tax increment is going to be the mechanism they will use to try and recover some of those costs. The TIF plan spells out the details of the district. Basic information about the project is included and the development would generate approximately $70,820 per year in new taxes. They would receive approximately $65,000 tax increment per year. This has a total value of $1,900,000 over the life of the district. In terms of the present value factor of 7.5%, it is worth about $646,000. This assumes that the sales price is about $160,000 and a 2% inflation rate. It contemplates that construction will begin next year with a valuation for tax purposes in 2002, and they would start receiving increment in 2003. The TIF plan has been submitted to Anoka County along with the school districts. The City Council held a public hearing on October 23. The City Council will take action on December 11 to approve the district. Mr. Fernelius stated staff recommends approval of the resolution to establish TIF District #17 for the Gateway East project and adopts the TIF plan and modifications to our overall redevelopment program that covers the other TIF districts created. Mr. Commers asked what the boundaries are. Mr. Fernelius stated that it would include the five parcels mentioned--the former Cash-N-Pawn property, JR's Automotive, the vacant lot to the east of JR's, the former duplex lot east of that, and a piece at the south end owned by Valvoline. Mr. Commers asked if the actual Valvoline site would be used. HOUSING & REDEVELOPMENT AUTHORITY MEETING. DECEMBER 7. 2000 PAGE 6 Mr. Fernelius stated that it is not included. Mr. Commers asked if any issues were raised by Valvoline because of their loss of access. Mr. Fernelius stated that they have not responded to our request to meet with them. The cost of closing off the access needs to be addressed with them. MOTION by Ms. Schnabel, seconded by Mr. McFarland, to adopt the Resolution No. HRA 14- 2000, A Resolution Modifying the Redevelopment Plan for Redevelopment Project No. 1 and the Tax Increment Financing Plans for Tax Increment Financing Districts Nos. 1, 2, 3, 6, 7, 9, 10, 11, 12, 13, 14, 15, and 16 to Reflect Increased Project Costs within Redevelopment Project No. 1, and Creating Tax Increment Financing District No. 17 and Adopting a Tax Increment Financing Plan Relating Thereto. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. OTHER BUSINESS: Mr. Commers stated that Ms. Dacy, Community Development Director, is resigning to be Exeuctive Director of the HRA for Washington County. This is a terrific opportunity for her. The HRA will miss her, but wish her well. They have appreciated what she has accomplished in Fridley, and she should be proud of the work she has done. The Fridley HRA is looked on as a model HRA for communities similar in size. They have done a lot of good projects and good work. They have not had any failures under Ms. Dacy's direction. Ms. Dacy stated she certainly appreciated the Fridley HRA. They are an outstanding group of people. She has been very lucky. Ms. Schnabel stated they will miss her. ADJOURNMENT MOTION by Ms. Schnabel, seconded by Mr. McFarland, to adjourn the meeting UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED AND THE DECEMBER 7, 2000, MEETING OF THE HOUSING AND REDEVELOPMENT AUTHORITY WAS ADJOURNED AT 8:24 P.M. Respectfully submitted, Signe L. Johnson Recording Secretary