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HRA 12/08/2001 - 00010459CITY OF FRIDLEY HOUSING & REDEVELOPMENT AUTHORITY MEETING DECEMBER 6, 2001 CALL TO ORDER: Chairperson Commers called the December 6, 2001, Housing and Redevelopment Authority meeting to order at 7:30 p.m. ROLL CALL: Members Present: Larry Commers, Virginia Schnabel, Jay Bajwa, Pat Gabel Members Absent: John Meyer Others Present: William Burns, Executive Director of the HRA Grant Fernelius, Assistant Executive Director of HRA Scott Hickok, Community Development Director Rick Pribyl, Finance Director James Casserly, Development Consultant APPROVAL OF THE OCTOBER 4, 2001, HOUSING AND REDEVELOPMENT AUTHORITY MEETING MINUTES: MOTION by Ms. Schnabel, seconded by Mr. Bajwa, to approve the October 4, 2001, Housing and Redevelopment Authority meeting minutes. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. CONSENT AGENDA: 1. ESTABLISH 2O02 MEETING DATES: 2. AUTHORIZE APPLICATION FOR 2002 MINNESOTA CITIES PARTICIPATION PROGRAM: Mr. Commers stated this is consideration to reapply to the program rather than the joint participation the HRA had last year. 3. CLAIMS AND EXPENSES: Mr. Fernelius stated there is an additional handout including cash receipts and checks payable for October and November. The January 3, 2002, meeting will hopefully be moved to Monday, January 14 to meet jointly with the City Council. Mr. Pribyl stated that the check series for approval this evening are #27694-#27711. Mr. Commers asked if there was any back up for the cash receipt update list. HOUSING & REDEVELOPMENT AUTHORITY MEETING. DECEMBER 6. 2001 PAGE 2 Mr. Pribyl stated that shows the receipts for cash brought in for the months of October and November. Mr. Commers asked if there was anything special to talk about in the January 14 meeting. Mr. Burns stated that the Mayor has requested the discussion of the land trust concept. MOTION by Ms. Schnabel, seconded by Ms. Gabel, to approve the Consent Agenda with the additional claims and expenses. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. ACTION ITEMS: 4. CONSIDER FINAL 2002 HRA BUDGET: Mr. Fernelius stated that not included in the budget were the wage and benefit costs for the part-time remodeling position that was tabled in June. They have not had time to revisit that issue, but will in the first quarter. Mr. Commers stated they do not have anything included for Gateway West. Mr. Fernelius stated that is correct. Mr. Commers asked what was in the budget for the Highway 65 Causeway project and the State's plan of not providing aid. Mr. Fernelius stated that they have not factored the State's plan and the Capital Expenditures referred to in the memo regarding right-of-way acquisition for the area around 61St and Highway 65. This is right-of-way within the City's control as opposed to State highway right-of-way. They do not have a specific cost number on that. Evergreen Land Services has identified a number around $87,000 not based on any kind of appraisal, but that figure is arbitrary. That is the extent of the capital expenditures for 2002. Mr. Commers asked when the timeframe for the City's commitment to have that done. Mr. Burns stated that the development agreement does not specify a timeframe. Mr. Burns stated they have done their best to get State money and hired a lobbyist who has been working with the City all year, but it has not become a reality. Mr. Commers stated that on page 18 under the Revenue Source for 2002, the $2,000,006 represents the anticipated revenue for next year, which shows a decline. Mr. Pribyl stated that is correct. Mr. Commers asked if the $2,000,009 under the expenditures represent the total at this point in the budget. Mr. Fernelius stated that is only for the Tax Increment Funds. HOUSING & REDEVELOPMENT AUTHORITY MEETING. DECEMBER 6. 2001 PAGE 3 Mr. Commers stated that those funds will have them spending more than their revenue source. Mr. Fernelius stated that was correct. To get a picture of the overall budget in terms of revenues and expenses, they need to look at page 1. Mr. Commers stated that is the $3,000,005 and the $3,000,003. Based upon that, they will have a net of $150,000-$175,000. Mr. Fernelius stated that is correct. Mr. Commers stated that was including transfer of funds. Mr. Pribyl stated it encompasses all funds. There are transfers within the fund claims. The shortfall of TIF funds is made up by transfers from the General Fund. Mr. Fernelius stated that page 2 it shows the total transfers of revenues. Column 1 at the bottom would have Other Financing Sources used and shows all the various transfers taking place in 2002. The Transfers to the Cities represents transfers for the bond payments. Mr. Fernelius stated that the Operating Transfer Out represents the loan payment the HRA makes to the City for the $1,500,000 loan made several years ago. Mr. Commers stated that he is looking forward to the transfer of the General Fund to make up for the TIF shortfall. Mr. Fernelius stated that page 3 has a breakdown of the General Fund itself showing revenues and expenditures. The projected transfers for 2002 are $88,000. Ms. Schnabel stated that comparing page 2 and 3 under Revenues Summary, the figures do not match. Page 2 under Total General is different than page 3. That is true of the HRA All Funds budget also. Mr. Pribyl stated that Total Revenues and Other Financing Sources and Uses are different, because other financing Sources and Uses has revenue of $88,000. Mr. Commers asked about the $428,000 increase in the Revenue Summary in the General Budget on page 3. Mr. Pribyl stated that could fund the TIF shortfall. That is a surplus. Mr. Burns asked about the $88,000 transfer from the City to the HRA that shows up on page 3 as a Revenue Source. Mr. Commers stated that is for Special Assessments, and the grants for the City passes through the HRA. It looks like they have $106,000 in Revenues over expenses in this budget, yet they only have two or three items included in the budget. What is the sense of how to handle that? Mr. Pribyl stated they have a surplus, and the revenue source versus the expenditure has about a$100,000 difference. That is going to fund balance if not used. That is how they end up having both revenues and expenses equaled if they do not have revenues in excess. They have a surplus budget and the transfers of a tax increment district are part of it also. They did HOUSING & REDEVELOPMENT AUTHORITY MEETING. DECEMBER 6. 2001 PAGE 4 not have any project for any expenditure in here, and they did not know what they had in TIF funds because of the State legislature. They only have a small amount of surplus coming out in 2002, and they have to use the fund balance or the General Fund balance for a project. It is easy to amend the budget, but this was more of a management tool as far as the core elements of the expenditures. Mr. Commers stated that is different than what they have done in the past. Mr. Pribyl stated that is because of the legislature and the change in taxes. They did not know what they are going to have coming out of this as far as any excess increments for projects. Mr. Commers stated that each individual project would have to be considered. Mr. Pribyl stated that any projects in the future would be difficult to stand on its own with TIF financing. Ms. Schnabel stated they had a discussion along the same lines about projects that could be self-supporting, unless they find that the legislature provides additional funding to cover what has occurred now. Mr. Fernelius stated that the Pro Forma analysis is used to evaluate projects, and they will now have to look at how it will impact the General Fund. Mr. Casserly stated they are now in a position to do this on an on-going basis. Mr. Commers asked if they have to do this only for now or in the coming year also. Mr. Pribyl stated this would be from this point on. Mr. Burns asked if GASB 34 would impact this budget? Mr. Pribyl stated that it would not. The impact would be to the City. Mr. Commers stated that if they hire a Remodeling Advisor, that will be in the budget. Mr. Burns stated they need to discuss that, as staff is not prepared to recommend that. Ms. Schnabel stated that even on a causeway, is there a chance they may get funding from someone? Mr. Burns stated there is a possibility of economic stimulus money coming from somewhere. Another way may be if the State approves a bonding bill including highway projects. That would probably require a gas tax to support repayment of the bond. Mr. Commers asked if they had long term commitments against the General Fund in the next five or ten years? Mr. Casserly stated they would not have had previously, but this had affected revenues in the Legislature, and they will have shortfalls in the Medtronic District General Obligation Funds. They have planned for that and will be recommending an amount to be set-aside in the next budget. HOUSING & REDEVELOPMENT AUTHORITY MEETING. DECEMBER 6. 2001 PAGE 5 Mr. Pribyl stated that as part of the year-end process, they would work with Mr. Casserly and set a reserve fund balance or debt service. Mr. Commers asked if there was a problem with the HRA reserving. Mr. Casserly stated they could get more complex than that, but there is no reason to do that. MOTION by Ms. Schnabel, seconded by Mr. Bajwa, to approve the final 2002 HRA Budget as presented. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. 5. CONSIDER CONTRACT WITH EVERGREEN LAND SERVICES FOR 61ST AVENUE RIGHT-OF-WAY ACQUISITION (HIGHWAY 65 CAUSEWAY EXPANSION): Mr. Commers stated they have used Evergreen several times in the past and they have performed satisfactorily. Mr. Fernelius recommended a cap of $10,000 on the contract. Jon Haukaas, the Public Works Director, is agreeable to that. Mr. Commers stated that the cost of the acquisition might change due to not being based on an appraisal. Have any landowners been talked to about this for the strips of land needed? Mr. Fernelius stated that Mr. Haukaas has talked to a couple of property owners so they are aware of the project. Mr. Commers asked if they would have to do a condemnation. Mr. Fernelius stated that the amount of land is relatively small. Mr. Commers asked if the land is in the drainage ditch area. Mr. Fernelius stated the land is not within the MnDOT right-of-way. The area involved is along the north and south sides of 61St near the Miller Funeral Home and St. Phillips Church and the north side at the shopping center site at East Moore Lake Drive. MOTION by Ms. Gabel, seconded by Mr. Bajwa, to approve the contract with Evergreen Land Services for 61St Avenue right-of-way Acquisition (Highway 65 Causeway Expansion). UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. 6. CONSIDER CONTRACT WITH CENTER FOR ENERGY AND ENVIRONMENT FOR OPERATION INSULATION PROGRAM: Mr. Fernelius stated that CEE administers this program and intends to help people evaluate the energy efficiency of their homes with insulation and weather stripping. The indoor air quality is also tested and this fits in well with the educational component of their programs. This program has been operated by CEE throughout the metro area since 1984, and Fifteen thousand homes HOUSING & REDEVELOPMENT AUTHORITY MEETING. DECEMBER 6. 2001 PAGE 6 have been insulated. They do an analysis, including the blower door test, and come up with a list of recommendations. If the homeowner wants to go forward, CEE has access to contractors who perform this work for the homeowner. The cost is around $150, and CEE has proposed to offer this to Fridley residents for $125. They might want to try this program on a pilot basis and assist in helping people pay for the cost. They can also use this as a marketing tool for the housing rehab program. The HRA would pay for half ($62.50) of the OI cost. If people decide to go ahead with the contractor, then the HRA would pay for the entire cost of the energy inspection. They would set a cap of $25,000 for the program that could assist up to 300 homeowners. Mr. Fernelius stated that with the rising energy costs last year, everyone is aware of the need to conserve energy. There is a real value to this program. Mary Raasch from CEE is at the meeting to answer any questions. Mary Raasch, OI Program Manager, stated that she would oversee the program. They have one technician who will handle the marketing and track the homeowners. Mr. Commers asked if this is the same program that was paid for by the utility company? Ms. Raasch stated CEE's service is more comprehensive than that done by the utility company, because CEE does the home inspection and energy audit and points out the problem areas and where to save energy. The utility company provides a similar energy audit, but the homeowners are on their own as far as getting a good contractor to do the work. Mr. Commers asked if the utility company follows up. Ms. Raasch stated they do not. Ms. Gabel asked if the utility companies still provide this free service. Ms. Raasch stated that the energy companies pay for half. The audit overall is about $120. The CEE program is similar but is one complete package, and they make sure the homeowner is getting a good job done and they know the contractor is required to do a good job. Ms. Schnabel asked if this was open to all residents of Fridley. Ms. Raasch stated it is, and they have already evaluated three homes in Fridley. One homeowner had a combustion spillage problem with the water heater. Ms. Schnabel asked Mr. Fernelius if he received any inquiries of this program in the past. Mr. Fernelius stated that he gets questions about weatherization-related programs, and this ties into that. There definitely is a need out there. Mr. Bajwa asked if there is a condition in here that if you do recommend some changes that the work will get done, whether the homeowner chooses to or not. Ms. Raasch stated they do not require the homeowner to get the work done; that is up to the homeowner. If they sign the work order, that is forwarded to a contractor who follows up. She tracks as well. HOUSING & REDEVELOPMENT AUTHORITY MEETING. DECEMBER 6. 2001 PAGE 7 Mr. Bajwa asked about the average expenditure. Ms. Raasch stated the average cost is around $1,500. Mr. Commers asked if they also check the furnace and the windows. Ms. Rosch stated they do a carbon monoxide test on the furnace and combustion spillage test. They also check the windows. Ms. Gabel asked what the combustion spillage actually is. Ms. Rosch stated that it is gas that goes up the flue of the appliance and, if not vented properly, the gas will come down the wrong way. Sometimes it is a matter of changing the diameter of the vent or reconfiguring the vent system itself. Mr. Burns asked if the water heater work is done, are they required to upgrade the size of the vents to code? Ms. Rosch stated they would recommend the change. Ms. Gabel asked if that vent would be a code violation. Mr. Bajwa stated they would recommend the work get done. Mr. Fernelius stated that he cannot speak for CEE, but they would want to make sure that any work that gets done by a contractor would have a permit and that work gets inspected. That would be covered through the permitting process. Mr. Bajwa stated some might be frightened to call due to possible code violations. Mr. Fernelius stated that he thinks people may be concerned they have a carbon monoxide problem, which is the larger issue. Health related issues might get fixed. Mr. Bajwa stated this is a good program, and he might recommend this program require a certification of some sort to prove the house passes inspection. Mr. Fernelius stated that they could look at that. Ms. Schnabel stated she would prefer some follow-up in case there are problems such as a hole in the furnace. Would the homeowner alone be notified? Ms. Rosch stated that if they had to red tape the furnace, Minnegasco would be called to repair it immediately. Mr. Bajwa stated he questions whether $25,000 is the right amount. That may start a program that requires a lot more funding. Mr. Commers asked approximately how much that would be by paying $62.50 per house. Mr. Pribyl stated it would be $462.50. HOUSING & REDEVELOPMENT AUTHORITY MEETING. DECEMBER 6. 2001 PAGE 8 Mr. Bajwa asked how many homes they have in Fridley. Mr. Burns stated that they have about 7,300 single-family homes. Mr. Bajwa stated that if people come on a first-come, first-serve basis, then there might be many people missing out. Mr. Fernelius stated that if there is additional demand, they could always come back. Mr. Commers asked about other cities that have had this done. Ms. Raasch stated they did a lot of work in the City of Minneapolis. She has done homes in Fridley, St. Louis Park, Robbinsdale, Hopkins. Ms. Gabel stated this appears to be a good project. Mr. Bajwa asked how this would be published. Mr. Fernelius stated that it would be in the City newsletter, on cable access, and a direct marketing piece would be completed. Mr. Pribyl stated this could also be included on a new utility brochure going out to every resident in Fridley. Mr. Commers stated this program could be reviewed from time to time to see if they want to step it up a little. MOTION by Mr. Bajwa, seconded by Ms. Schnabel, to approve the contract with CEE for Operation Insulation Program. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. 7. CONSIDER RESOLUTIONS APPROVING INTERFUND LOANS FROM GENERAL FUND: Mr. Pribyl stated that a new TIF law passed in 2001 required all interfund loans to be approved via formal resolution by the HRA. These loans are new as far as legislating and are a form of interim financing provided by the General Fund until the district produces tax increment so each tax increment fund can be self sufficient. Cities and HRAs are reimbursing themselves for loans made to districts that were never memorialized via resolution. Often the State Auditor's office would bump into these, and this became a significant problem in their eyes. The new law provides that these loans are a type of bond issuance to temporarily fund the tax increment districts. These three resolutions are made from the General Fund to three tax increment districts. There are a number of expenses that are administrative type expenses that draw from the cash balance. Resolution #10 would provide a loan from the General Funds to the Lake Pointe tax increment district in terms of principal of $8,000. That is the shortfall for 2001. This would put this in a positive status as we close out 2001. The rate on that loan would be five percent (5%) and the term would be ten years. This type of transfer or loan would be seen on an annual basis to cover the shortfalls as the districts build up the tax increment revenues. Staff recommends approval of Resolution #10 be approved. HOUSING & REDEVELOPMENT AUTHORITY MEETING. DECEMBER 6. 2001 PAGE 9 Mr. Commers stated this is formalizing what they have been doing. Mr. Pribyl stated that is correct. This has been done in the past years by staff covering the shortfalls, and now they are memorializing the transfers of these loans. Mr. Commers asked where the 57th Avenue location was? Mr. Pribyl stated that is the area by Holiday and the tire place. Mr. Commers stated that the last one was Gateway East. He thought they had already funded this one. Mr. Pribyl stated that the district has the shortfall in that amount. Mr. Fernelius stated that these relate to cash balances, which are different than fund balances. Ms. Schnabel asked where this money is coming from. Mr. Pribyl stated it comes from the General Fund. Ms. Schnabel asked where this is figured in the budget. Mr. Pribyl stated that the 2002 budget was discussed. This is a 2001 loan. This will be reflected in the financial statements for 2001. Mr. Bajwa asked if the loan had already taken place. Mr. Pribyl stated that this is initiating the loan and this is replacing the money and creating the loan and putting the money back into zero status of the cash balance. Mr. Bajwa asked about the source of repayment of the loans. Mr. Pribyl stated it would be tax increment dollars. Mr. Bajwa stated they are falling short right now. Mr. Pribyl stated that they tried to target the terms to manage what they felt was appropriate to the future tax increment receipts. Mr. Commers stated that they have to consider the set asides now. Mr. Casserly stated they are simply putting this into a different form of what they have been doing for 20 years. Mr. Commers stated they have never charged themselves interest; it used to be that they could not. Mr. Casserly stated that the majority of the HRAs allocated the interest earnings, and the districts that had shortfalls sorted them out. This does not have much logic and any private sector setting would create interfund transfers and charged themselves. This should not get treated differently in the public sector. HOUSING & REDEVELOPMENT AUTHORITY MEETING. DECEMBER 6. 2001 PAGE 10 Mr. Burns stated that it is a cash flow transaction. Mr. Bajwa asked if this was recommended by the State. Mr. Casserly stated that it is laid out in State Statute. MOTION by Ms. Gabel, seconded by Ms. Schnabel, to approve the Resolution No. HRA 10- 2001, A Resolution Approving Interfund Loan Between General Fund and TIF District #6. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. MOTION by Ms. Schnabel, seconded by Mr. Bajwa, to approve Resolution No. HRA 11-2001, A Resolution Approving Interfund Loan Between General Fund and TIF District #16, and Resolution No. HRA 12-2001, A Resolution Approving Interfund Loan Between General Fund and TIF District #17. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. INFORMATION ITEMS: 8. 2001 ACCOMPLISHMENTS: Mr. Fernelius stated that the Community Development staff wanted to present the successes and things that have gone well during the year. Staff put in a lot of hard work and long hours. The Legislature has impacted the tax increment program, but the future looks bright and there are redevelopment needs to evaluate. They witnessed the completion of a significant redevelopment project and started on a housing project. There have been staff changes as well. Mr. Fernelius stated the major accomplishment is the Medtronic project. Phase 1 was completed this year and the last two buildings, the Research and Education buildings were completed. Those had a value of approximately $13,000,000, but the actual value is higher than that. Medtronic also constructed the daycare facility on the western end of the site and completed a new service parking lot. Mr. Fernelius stated Gateway East, a major housing project, was started in 2001 with a 28 unit townhome development on a 2.5 acre site with a total construction value of $4,000,000. Mr. Fernelius stated that the Housing Replacement Program is a small-scale redevelopment taking place on an in-fill basis. Four parcels were sold this year, and construction is underway at 5297 Lincoln Street, 1015 Mississippi Street, 571 Lafayette Street, and 5800 2nd Street. The modular home on Mississippi Street was brought in two pieces and they used a crane to lower it on the foundation. It looks very nice. The design of the one on Lafayette Street is on a 50-foot lot, and it looks nice. Mr. Fernelius stated the Salvage Yard project was evaluated and put on the back burner at this point. Mr. Casserly and finance staff did a wonderful analysis of the tax increment financing program. Based on improving the budget this evening, they want to mirror when City Council goes through theirs. This makes it easier if projects have to be coordinated. They have HOUSING & REDEVELOPMENT AUTHORITY MEETING. DECEMBER 6. 2001 PAGE 11 continued work on the Fridley/Columbia Heights Joint Task Force. The report has been completed, and they are waiting for a final meeting and will release the outcome of that study the first part of next year. They continue to work with CEE on the Housing Rehab Program. They provided 27 Home Improvement Loans and grants but the numbers are down from last year based on the overall economy. There is a need for those programs in the community. Mr. Fernelius stated staff thanks the HRA for all their help during this past year. Mr. Commers stated the HRA also thanks staff. Staff did very well on the budget. 9. GATEWAY EAST UPDATE: Mr. Fernelius stated construction is moving along well. The plat has not been recorded, and the status of the tax forfeit parcel is that they are entitled to it, but the former owner of the property has to be determined if he had any rights to it and if he should be compensated for it. Mr. Knaak is working on this and does not believe the former owner has any legal right to the property. It has been forfeited to the County. Mr. Miller had a bankruptcy going at the same time. Mr. Commers asked why the proceeds would not be with the County. Mr. Fernelius stated the City initiated the condemnation of the parcel. Mr. Commers asked if the HRA had title insurance. Mr. Fernelius stated the HRA does, and the title insurance company has not been involved yet but will be. Mr. Casserly stated that he would be surprised if title insurance would cover this. Mr. Commers asked if they condemned it. Mr. Casserly stated he was not sure. Mr. Fernelius stated they did follow through with the condemnation. 10. MONTHLY HOUSING REPORT: Mr. Fernelius stated that an additional memo talks about the number of loans originated. He understands that Commissioner Gabel would like to change the format and that will be considered in the future. Mr. Burns stated that the number of Housing Rehab Loans including the CDBG funded loans is included. Mr. Fernelius stated that was included in the 27 loans accomplished. Ms. Schnabel stated one time the HRA talked getting the number of loans that have been enacted for only a 30-day period. These reports are for an entire year. Mr. Fernelius stated that is correct. HOUSING & REDEVELOPMENT AUTHORITY MEETING. DECEMBER 6. 2001 PAGE 12 Ms. Gabel stated there might be a value in having the number of applications and loans granted for CEE. Mr. Fernelius stated that he is assuming she means the activity for the previous month. Ms. Gabel stated she prefers the old format. Mr. Fernelius stated they could go back to the old format. Ms. Schnabel stated it is easier to track using that format. Ms. Schnabel asked if the barriers for University Avenue are finished. Mr. Fernelius stated the sound wall is done, and it looks very well. Mr. Commers stated that next spring they should discuss making sure the grass gets cut around the new signs for Fridley. Other cities have flowerbeds and sod around theirs and make it look really nice. The sign by Menards look terrible, and this may be something the HRA could consider. Mr. Burns stated that they hoped to have clubs and organizations volunteer to take responsibility for the maintenance and landscaping around the signs. That did not work out very well. Ms. Schnabel stated that maybe a new appeal could be made in the City Newsletter. Mr. Burns stated he believed they did have it in the summer or fall newsletter. They could do it again. ADJOURNMENT MOTION by Ms. Schnabel, seconded by Mr. Bajwa, to adjourn the meeting. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED AND THE DECEMBER 6, 2001, MEETING OF THE HOUSING AND REDEVELOPMENT AUTHORITY WAS ADJOURNED AT 9:30 P.M. Respectfully submitted, Signe L. Johnson Recording Secretary