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HRA 05/01/2003 - 00027941CITY OF FRIDLEY JOINT CITY COUNCIL/HOUSING & REDEVELOPMENT AUTHORITY MEETING AND REGULAR HOUSING & REDEVELOPMENT AUTHORITY MEETING MAY 1, 2003, 7:00 PM JOINT CITY COUNCIL/HRA MEETING, 7:00-9:15 PM: Council/HRA Members Present: Mayor Lund, Councilmember Billings, Councilmember Bolkcom, Councilmember Wolfe, Councilmember Barnette, Larry Commers, John Meyer, Virginia Schnabel, Jay Bajwa, Pat Gabel Others Present: William Burns, Executive Director of HRA Grant Fernelius, Assistant HRA Director Scott Hickok, Community Development Director Paul Eisenmenger, HRA Accountant James Casserly, Development Consultant Dwight Snow, 290 58th Ave NE Betty Loewen, 278 58th Ave NE Loren Stewart, 276 58th Ave NE Richard Peterson, 247 57th Place NE Toni & Bert Anderson, 241 57th Place NE Paul Beall, 261 57th Place NE Dr. William Burns, City Manager, stated the purpose of the joint City Council/HRA meeting tonight was two-fold: (1) to jointly discuss the proposed redevelopment project on the west side of the 57th Avenue/University Avenue area; and (2) to discuss the results of the Council/Commission survey. He passed out copies of the results of that survey. Gatewav West Discussion Dr. Burns stated the main objective is to talk about the Gateway West Project. Residents from the neighborhood are at the meeting, and this is an opportunity for them to participate as well. Mr. Grant Fernelius, Assistant Executive HRA Director, stated what he thought they would do in terms of the Gateway West portion is just briefly review the previous discussions on January 9, review some of the background research done on the project since then, discuss some of the unresolved issues highlighted in the memo, and then review some of their preliminary conclusions in terms of the project and outline some of the next steps to try to come to some kind of consensus in terms of direction. Mr. Fernelius stated that for a number of months they have been discussing several different scenarios for redeveloping Gateway West, the northwest quadrant of 57th Avenue and University Avenue. Those scenarios have been divided into five different categories: Option No. 1: Included the Frank's site, looking at six new single-family homes Option No. 2: Included Frank's site and the two homes on 57th Place--this would be an attached town home development from 18-28 units JOINT CITY COUNCIL/HRA MEETING, MAY 1, 2003 PAGE 2 Option No. 3: Included the above parcels along with Burger king--this would be an attached town home development of 48 units Option No. 4: Expanded westward to include the apartment and Zantigo buildings--this would be an attached town home development of 64 units Option No. 5: A mixed use development project that would include a combination of both ground floor commercial as well as several floors of residential and, in addition, either some attached town homes or single-family homes Mr. Fernelius stated at that the January 9th meeting, 8 members Council and HRA members were present. At that meeting, an informal survey as taken regarding these five options. Five of the 8 supported the options that were at the smaller end of the spectrum, options 1& 2 and possibly option 3. Three of the 8 supported the larger project, Option 5. So, it appears that more people favored the smaller project. There were a number of concerns about the larger project--the cost, the residents living there, but they did not want to rule out looking at that larger scenario. Mr. Fernelius stated the HRA and Council members wanted to look at additional information. One of the key pieces was a market feasibility study, looking at whether a mixed-use type development would be feasible from a market perspective. They also wanted to refine some of their acquisition and relocation costs. Those costs typically are the largest expenses that you can incur on a redevelopment project, so they wanted to get a better handle on whether their preliminary estimates were even close. Mr. Fernelius stated they also wanted to look at some of the public finance issues--how they would pay for it, cash flow analysis, identify what the net costs would actually be for the Fridley HRA, identify funding sources, and also look at their ability to create a tax increment financing district along with some other non-tax financing as well. Mr. Fernelius reviewed the market study. He provided a condensed analysis of the study done by GVA Marquette Advisors who do a lot of this kind of real estate analysis work. This study looked at the demand for both commercial/retail office as well as housing. The study identified what they call the "market area" — essentially where most of the demand would come from related to the Gateway West project. It is no surprise it includes obviously Fridley, Columbia Heights, Spring Lake Park, Mounds View, New Brighton, St Anthony, and Northeast Minneapolis. On the retail side, they identify just a general 2-mile radius around the project area. They look at things like demographics, incomes, spending patterns in terms of consumer- type expenditures, trends in housing and retail markets, and other factors that typically affect the demand for housing and retail space. He stated it was a very comprehensive study, which produced some very good information. Mr. Fernelius stated that in terms of the trends, one is a net increase in employment and the second is an increase in household growth, actually new households that are forming as opposed to households that are growing in size. Another trend was the turnover among current households and existing residents who were selling their homes and then finding another place to live. Mr. Fernelius stated that in looking at the market areas and thinking beyond Fridley and looking at it from a sort of demographic population perspective over the next five years (2002 to 2007), the authors of this study project the population will increase about 1.8 percent. That is not very significant especially if you look at the large metro population. This slower growth rate is attributed to a lower birth rate and an aging population. In terms of household growth (this is a JOINT CITY COUNCIL/HRA MEETING, MAY 1, 2003 PAGE 3 key component when looking at the demand for housing, and they need housing so when you look at what is happening with the formation of households), that is going to give you an indication and potential demand for new houses. That is projected to increase about 5%2 percent or about 2,800 households. Mr. Fernelius stated that household size is an interesting factor. It is getting smaller. Statistically it doesn't look that significant, but he thinks it suggests that they are seeing smaller households. So, those are the factors that typically influence people's housing choices. There is a higher tendency for those individuals, not all of them, but many of them to choose multi-family type housing. When they use the term, multi-family housing, they are really referring to attached town home condominiums. Mr. Fernelius stated the last factor looks at employment growth. This is also a good predictor of housing demand. Generally, as employment increases, there is a tendency for new households to form. Regional employment, again over that targeted area, they expect to increase by about 2,800 new jobs between 2002 and 2007. So that is an interesting factor. It is not substantial growth compared to the rest of the metro area, but it is adding right around 500-600 new jobs per year in that marketed area. Presumably, they will see some additional households forming as a result of that, better than 10 percent. Mr. Fernelius stated some people are interested in how many people could afford new units in this development. In Option 5, adding 90 new units of housing, the average sales price of units would be around $195,000. When analysts look at household income distribution, they are trying to determine the percentage of the market that could afford those units. Typically they use 30 percent of income. So for a household to be able to purchase a$195,000 home, they would have to have an income around $58,000. Looking at that target market, approximately 45 percent of the households could afford one of those units. Again, the study looked at the demand for retail because that's a mixed-use development. And this looks at a little bit different set of information; it looks at household spending and also the availability of goods and services within a particular area. Mr. Fernelius stated they are able to analyze categories of discretionary-type expenditures. The top five average annual per capita expenditures within that targeted market area are food away from home, apparel, gifts, recreational equipment, as well as video and audio equipment. What is significant is that those numbers are consistent with the same spending patterns in the area that is identified as 2-5 miles or beyond. That means that in some cases people who are trying to find these things can't find them in the immediate 2-mile market area, so they are going outside to find those particular goods and services. So there is the term "leakage" which means those dollars are actually going outside the market area, which indicates there would be some demand for retail-type activity in this particular location. Mr. Fernelius stated the overall study conclusions were fairly positive. There would be a strongly fair demand for new housing as well as retail space. GVA Market Advisors gave staff some suggestions in terms of actual unit prices, and they are suggesting on the condominium side a range of $190,000 to $275,000 with an actual sales price of $205,000-$206,000. On the town home side, they are suggesting an average of $240,000-$250,000 with an average of $245,000. On the retail and office side, the City had originally estimated a projected space of up to 56,000 square feet; and the advisors are recommending something smaller than that with retail tenants that would include things like a full-service restaurant, bookstore, florist, dry cleaner, and even an artwork or frame type shop. On the office side, insurance agents, real estate companies, those kinds of businesses that would attract that type of development. Neighboring communities are working on similar, actually larger, redevelopment projects, and the advisors mention that. They said that would clearly have an impact on a project like JOINT CITY COUNCIL/HRA MEETING, MAY 1, 2003 PAGE 4 Gateway West. They are projecting that over the next four years, in that market area including Fridley, up to 600 new units of housing will be built. That factors in those two developments he just mentioned. So it shows there would still be additional demand for new housing which would include a project like Gateway West. Mr. Fernelius stated GVA Marquette Advisors looked at project costs. They worked with an appraiser and a relocation specialist to give them a range of estimates in terms of cost on the acquisition and relocation side. Quite frankly the initial estimates were low. They weren't surprised to hear that. But on the average, they were about 15 to 20 percent low on their estimate. Mr. Fernelius stated the public finance portion is a critical topic because it is obviously an area where they talk about how they can pay for this in terms of funding the project. Public finance people like to prepare a cash flow analysis that shows the dollars in, dollars out and, at the end of the analysis, you get the net cost/final number. That obviously has significant relevance because the negative numbers mean that this project doesn't pay for itself so they have to find other sources to fund it, either locally through the Fridley HRA or outside funding through the Metropolitan Council or the State Department of Trade and Economic Development (DTED). They looked at three of the scenarios in terms of what the actual net cost would be at the end of the project in today's dollars. As they go from Option 1 to Option 5, the project is underwater financially, and it is very expensive to do. When you convert higher-value commercial to lower- value residential, because it is taxed at different rates, you begin to see what the net impact is. There is actually a net negative cost to the HRA. Option 5 is the scenario they spent the most amount of time on, from roughly $3.5 million to now around $4.2 million. Mr. Fernelius stated in terms of outside funding, there is recent good news from Metropolitan Council about additional funding. There is roughly $8.5 million, almost $10 million in funding through the Metropolitan Council, to do these kinds of development projects. There is some indication that DTED will be funded again as a redevelopment comp. It's a program that is about five years old. It has been fairly successful, but there is a lot of competition for those dollars. Last year that program was not funded. The Minnesota Housing Financing Agency has some funds as well, but all of these programs typically have an affordable housing requirement so that is something that impacts the HRA if they decide to pursue those dollars. Mr. Fernelius stated tax increment financing is really the only tool they have besides the outside funding. The City spent a lot of time looking at creating a tax increment-financing district. Mr. Fernelius stated they did an exterior condition study on some of the properties in the area to find out what the property conditions are like now. The vast majority of the properties are in good condition and that is reflective of a lot of investment by the homeowners. In looking at building permit data within the last five years, a lot of homeowners have fixed up their homes. The bottom line is they really don't have a complete picture in terms of making an assessment as to whether there is blight. It appears they don't have the kind of blight they thought they did in order to create a tax increment district. Mr. Fernelius stated another issue is affordable housing. Whenever you remove an affordable unit, affordable housing advocates scrutinize cities. An attorney has advised them that they will be evaluated in the context of the City's overall commitment to housing. So that is the test they will essentially have to pass. Mr. Fernelius stated Burger King is the highest valued project in the Gateway West project area; however, at this time Burger King does not seem to have much interest in participating in any kind of project. JOINT CITY COUNCIL/HRA MEETING, MAY 1, 2003 PAGE 5 Mr. Fernelius stated it seems apparent at this time that pursuing a larger development is going to be very difficult for the obvious reasons, not the least of which includes the cost. The project that is somewhere around $9 million has to be funded somehow and, as they all know, resources are tight and a project of that size would be very significant for the City. It does appear, however, that the smaller options might be good. He is talking about Options 1 and 2. So, they should discuss whether or not they do the Frank's site only, the single-family scenario, or do they do an expanded scenario and actually include the two homes to the south, on 57tn Place, or do we sit tight. There certainly is a"do nothing" option out there, too. Councilmember Barnette asked why don't they at least tear down Frank's and make that property look good? Mr. Fernelius stated that is a good question. The Frank's property is the blight they need to create a tax increment district. So, until the City makes a decision on the future of the site, once that property is demolished the clock starts clicking and then they are under the gun to do some type of development project. A resident stated he didn't care about the ugliness of the site. It was the gangs writing graffiti on the building that bothered him. Mr. Fernelius stated they have repainted the building several times, but it has been hard to keep up with it. The City would rather tear it down, and it would be less of a maintenance problem. A resident asked if the larger options not recommended at this time could come up again in a few years, and she would have to give up her home? Mr. Fernelius replied he didn't know if he could answer that. This is only the second time that the HRA and City Council have had a chance to really talk about this. He hoped that they would decide at this meeting what direction the City is going to go. Mayor Lund stated they are looking at this as an opportunity to enhance the community, and they hope that the residents can also look at it in a positive way. Councilmember Bolkcom stated that if they decided to go with one of the larger options later, it would be harder to do after they had done options 1 or 2 when they already have the streets and the sewer and all the infrastructure. Mr. Fernelius agreed that it would obviously create more challenges, and they would be establishing a development pattern for a long time into the future. It's not going to get any cheaper to do an option 5. Mr. Meyer stated the only adjacent property in the two smaller options would be no more at risk at being redeveloped than virtually any other parts of the City of Fridley, because by definition they would have taken Frank's down and then lost their reason for blight, so the houses that are remaining would not really be in jeopardy. Mr. Fernelius replied that is true. Councilmember Billings stated that if he understands this correctly and all goes according to plan, in option 1 there is a positive cash flow to the HRA of $125,000. In option 2, there is an out-of-pocket expense of about $115,000 so that the difference between the two is approximately $240,000. JOINT CITY COUNCIL/HRA MEETING, MAY 1, 2003 PAGE 6 Dr. Burns that the State Legislature did weaken TIF for planning and redevelopment back in 2001, and they have not shown a strong sense of urgency to give us something new in the way of a funding source. Until that happens, the City is going to have trouble financing an expensive project. Another consideration is they have to save some of their resources for a Medtronic expansion. A resident stated that based on the projection of need for housing in a year much closer to where they are now, what is Fridley's option in a landlocked community? What are Fridley's options for providing the needed housing additions? Mayor Lund stated that in redevelopment, usually it is land acquisition at remedial costs, and it means more density. A lot of these younger families that grew up in Fridley 20 years ago are now leaving their single-family homes. They are tired of the upkeep and want to get into a townhouse. It's not for everybody but there is a trend to that. He hears from Metropolitan Council about the influx of a million more people in the next 15-20 years. There is a dire shortage of housing now, and it's going to get worse. Councilmember Wolfe stated he did not think they wanted all apartment complexes. Forty percent of Fridley residents now are renters. Councilmember Bolkcom stated she believed the key question is what does Fridley want it to be? A resident stated he has heard stories where cities have bought people out, and then they have to go and find another home and for a period of time have two mortgages. How would this work in Fridley? Mr. Fernelius replied the law is very specific in terms of what cities are required to provide, and everyone is entitled to the relocation system. That is money not only to help them move; but, in some cases where people who are buying an equivalent property that actually costs more, that differential is also covered, So there are a number of different ways that people are assisted through relocation, but their practice is not to leave people hanging out there. Councilmember Billings stated he thinks the goal tonight is to find out if joint HRA and City Council prefer option 1 which is the six houses, option 2 which is the 18 townhouses, or option 3 to let Frank's sit there and wait. He believed Frank's has sat there long enough. He believed they should go with option No. 1. It is a reasonable option, It provides six additional homes for the City, and it provides the City with immediate positive cash flow as opposed to negative cash flow. Option 2 probably provides the City with a bigger tax base over the long haul. Mr. Casserly replied that was true. In Option 2 of the amount that they are showing as being short, $115,000 or so, $90,000 of that is a contingency. Option 2 adds valuation that is about $4.4 million as opposed to Option 1, which is about $1.5 million. So there is a lot more room for improvement in terms of additional valuation and growth with Option 2, but they have tried to be reasonably conservative with the estimates. When they show a deficit now of $114,000, it may be considered less or more but of that there is quite a bit built in for contingency and they have been fairly conservative on estimating the tax increment. So there is an opportunity for option 2 to be substantially closer. Mayor Lund commented, with the benefit of a higher tax base. JOINT CITY COUNCIL/HRA MEETING, MAY 1, 2003 PAGE 7 Mr. Casserly stated they would clearly have a higher tax base. With Option 2, they would definitely have an increase. They would go from $420,000 to $4.4 million. Mr. Bajwa stated that in the same measure, with option 1 you have to think of paying that. Mr. Casserly replied they have. Option 1 is just not as expensive to start with, so they would see about $30,000. Mr. Bajwa replied still it could be better than what it should be. Mr. Casserly replied it could be $150,000-$160,000, which is really good, or go the other way. Option 2 could conceivably get closer to break even but probably will not. Mr. Meyer stated that with option 2 they acquire two houses. Council member Bolkcom asked if he has talked to the owners of these two houses. Mr. Fernelius stated he has talked to both of them, and, at tone point, they were very close to selling. Ms. Gabel stated she read in a market study that there was a demand for single-level townhouses. Could they consider something like that? Mr. Fernelius replied there is certainly any number of options they could look into. He believed they have always tried to look at this in terms of what is practical and feasible. The issue with single-level town homes is the density and how it fits with rest of the site. He didn't know if option 2 would work with single-level town homes. Councilmember Barnette stated he would lean toward option. 2 for the simple reason that if they put those six single-family homes there, how good of a marketability is it for single-family homes where the back yards face University Avenue? He's asked that question before and people state that people have their back yards there now. However, when those homes were built, University Avenue was a two-lane road. Who would want to buy a single-family home facing a four-lane highway and maybe eventually even a six-lane highway? Town homes seem to sell on those kinds of corners. Councilmember Wolfe stated he had concerns about affordable housing. These projects are not affordable. They are $206,000 plus. Mr. Fernelius stated these town homes are in the range of $175,000. Councilmember Wolfe stated his point is that whenever they do a project, they say they have to have affordable housing, but they don't do it. Metropolitan Council is always telling them they need more affordable housing. Councilmember Bolkcom stated she didn't think it was the City's fault. She thinks they have looked at an area that was blighted for a redevelopment property, not for affordable housing. Dr. Burns stated the Council and HRA have had the discussion of value versus affordability many times, and every time they have agreed on value as a goal. They want the most value they can get on the property for their money and for the circumstances in Fridley. Affordable housing is a very viable goal, but they have not chosen that. JOINT CITY COUNCIL/HRA MEETING, MAY 1, 2003 PAGE 8 A resident stated that if the City goes with option 2, which included the 18-28 town homes, are they going to be on the same scale as they Gateway East on the other side of University? Those are ugly units. Mayor Lund stated there are not a lot of developers who will take on a small size project. That project has been very successful, but he believed it was the consensus of the HRA and Council to something a little better on Gateway West on a little larger scale. A resident stated that when she sits on her deck looking at the development, she wants it to look nice. Mayor Lund stated this is the gateway to the City and into Anoka County, and they want it to look nice too. A resident stated that houses are selling fast in Fridley. Six single-family homes would be sold in no time. She has lived in Fridley for 19 years, and it's a nice quiet community. They don't need any more traffic or any more of those apartment-looking places. Put in some single-family homes and let some young families move into the community. Ms. Schnabel asked if they went with the six houses, is the plan to just clear the land and sell off the lots individually, or would lots be sold to a developer who would come in and build all six houses? Mr. Fernelius stated staff would probably recommend selling the lots to a developer. It might be more efficient, and they might also have more control in terms of design, value, etc. Councilmember Wolfe stated that the City pays for the property; and most of the time they sell it for less than we pay for it. He asked what was done for Gateway East? Mr. Fernelius stated that one property was conveyed to the developer at no cost. Councilmember Wolfe stated a question he gets from taxpayers of Fridley: Why not sell the property for half the price where at least the City recoups some of its money? Mr. Fernelius stated they solicited 20 developers on the Gateway East. They received only two responses, and neither one were willing to pay anything for the property. Quite frankly, the cost of doing a redevelopment on that corner is very expensive. That is fundamentally what the HRA does when they do redevelopment. They do things that developers won't do as there is too much risk and cost involved. That is the HRA's goal. He knows when the public sometimes looks at redevelopment, they think developers are raking in all kinds of money; however sometimes they don't recognize that if it weren't for the City's involvement, that development would not take place. He believed that is true on every redevelopment they have done. Mr. Commers stated they must also keep in mind that they shared in the profits and got some of their money back. Councilmember Billings stated the developer also paid for the entire curb and gutter, the streets, the new sewer in the streets, and all the new water mains. So the land costs are one thing but when you factor in all the other costs that go into it, in order to have a lot that is build able, then there are costs the developer incurred that the City otherwise would have incurred. The City could have installed the streets, the curb and gutter, sewer, and water mains and everything like that and then marketed the lots as an improved lot; but the City chose to provide unimproved land. JOINT CITY COUNCIL/HRA MEETING, MAY 1, 2003 PAGE 9 Mr. Commers stated that project was an exception. Most of the City's projects do not go that way. With a lot of the projects, the HRA has recovered its monies. They have had single-home projects where they have gone in and removed some of the lesser homes in Fridley. They cleared the lots off and sold those lots to a developer. They may not get the full market value. The Gateway East project happened to be an unusual thing and didn't turn out the way everybody wanted. Councilmember Bolkcom stated that is why it is so important for the City to get this information out to the public, through the City newsletters and cable TV programming. A resident stated that a little north of here on University, a furniture shop was removed. What was the City's plan for that property? Mr. Fernelius stated the HRA owns that property (Werner's). It was part of the HRA's plan to take out a number of the commercial buildings along University and redevelop it in the future to single family. Werner's was the second of three businesses to be acquired. A resident stated the HRA would be putting in single-family homes whose back yards would back up against University. The HRA also built two new homes close by on University Avenue, and they are nice houses. There doesn't seem to be any problems. Mr. Meyer asked that with either option, would the State put in a sound fence? Dr. Burns stated it was very unlikely. Mr. Hickok stated the State did an analysis and determined this stretch of University was probably between 20th and 30th on the list. With the condition of the State right now, he was not sure how realistic it was that it would ever get done. But if they did, they would come to the City, and the City would hold a hearing, and then the decision would be made at the local level whether they wanted a sound fence. Mr. Fernelius stated another thing the HRA & Council have discussed, regardless of the option, was continuing the decorative fence, at least as far north at the edge of this property which would be roughly where it ends on the other side of the street. Councilmember Barnette stated that since Ms. Gabel has been an advocate for the Hyde Park neighborhood, did she feel the neighbors are opposed to redevelopment or do they feel there is a need to do something? Ms. Gabel replied she believed the people would like to see the Frank's building gone and something done, but not on a big scale. Several residents stated they would like some single-family houses versus town homes. With 18 town homes, for example, there would be 36 more vehicles in the area. This is a small area, and it is just too congested already. A resident stated that right now they cannot get out onto 57th Avenue at a certain time of day. They either go to 61St Avenue and get onto University Avenue, or go to Main Street to get onto 57th Avenue. A resident asked when the City is planning to start this project. JOINT CITY COUNCIL/HRA MEETING, MAY 1, 2003 PAGE 10 Mr. Fernelius stated if they pursue option 1 or 2, they would start this summer and probably do a groundbreaking with spring of 2004 construction. Option 2 obviously would involve acquisition, and there would be some time to accomplish that. Ms. Schnabel stated would be in favor of option 1 with the six houses. Her reasons are basically the financial costs as she doesn't think they are going to get any backing from the State, Metropolitan Council, or the County. She thinks that building six new homes in there will be attractive to the local area and to community. Mr. Bajwa stated he believed option 1 was the most practical option, especially if they have one developer making six houses look somewhat nice to complement the other side of the street. Mr. Meyer stated he favored option 1. Mr. Commers stated that at the first discussion, he was in favor of option 1 with the six houses. This time due to the atmosphere, funding issues, and the acquiring of the two properties farther north, he has changed his mind and he doesn't think they should do anything. He believed they should do nothing until they see what develops at the Legislature and what happens in the next year or two years. There is bound to be changes, there is bound to be programs that are going to become available; and he did not believe there was any reason to rush into anything. Dr. Burns stated another variable that they haven't talked about and, he doesn't know how realistic a possibility it is, is the prospect of the Northstar Corridor coming through. That is a competing project that could possibly have an impact on this area. Mayor Lund stated he agreed with Mr. Commers. There are two many variables. There is going to be six single-family homes that are going to be against a highway that is going to get even busier. Councilmember Billings stated he supported option 1 with the six single-family homes. He believed the Frank's building has sat empty long enough. When the building was first acquired, land values for resale to single families were such that it probably would not have been a positive cash flow situation. Things have changed and he thinks they can do single-family with positive cash flow and, even if they don't make money, they at least get money back. Option 1 is the best option, and he believed that it maintains the commitment that the City Council made in the late 60s, early 70s, for single-family houses. Option 2 also has single-family housing, but option 1 comes closer to the traditional single-family housing. Councilmember Bolkcom stated she was had been in favor of option 5, but now with the numbers, she has gone the other direction. The Frank's site has been vacant too long, and it is a blighted area. Regarding them selling because they are right along University, they just have to be very careful who develops the property—maybe some homes with porches. Councilmember Barnette stated he probably was the only one in favor of option 2, but would accept option 1. Councilmember Wolfe stated he would go for option 1. He also liked Council member Bolkcom's idea about the porches. Dr. Burns asked where would they like them to go from here? Councilmember Barnette asked if they go out for bids, they are not really committing themselves are they? JOINT CITY COUNCIL/HRA MEETING, MAY 1, 2003 PAGE 11 Mr. Fernelius replied he thought the next step would be for them to provide the design guidelines for those issues that are important to the City and neighborhood and have a general agreement about overlooking that in terms of single-family homes and then go out to builders. Councilmember Wolfe asked if they could approach the developer who built a house with a porch on Liberty Street? Dr. Burns stated it's not irrevocable; but from a practical point of view, it is very difficult to turn it around once you put somebody to that expense. Mr. Commers asked that this be put on an HRA agenda for a formal vote. Dr. Burns stated the discussion at this meeting would be formalized for action by the HRA at a future HRA meeting, probably at the June meeting. In the meantime, Mr. Fernelius will put together some design standards or proposals to bring to the HRA. They can let those residents in the audience know when that meeting is going to be held so they can come in and see the design standards. If there were approval by the HRA, then they would be moving towards an RFP process. Councilmember Billings suggested that they look at the Werner's site and put those two lots with the Frank's property, which might get them a"bigger bang for their buck" because they have the mobilization of coming into the neighborhood anyway. Council/Commission Survev Discussion Mr. Commers asked if the City has any legal obligation to Medtronic in terms of the Medtronic Parkway extension. Councilmember Billings stated actually the Medtronic Parkway Extension comes from his request that the City take a look at that particular area west of 7th Street and that the City should be taking the lead on what is going to happen with the street design from over there instead of waiting for some developer(s) in the future to decide what they are going to do. Before Medtronic Parkway was in there, everybody zigzagged through the neighborhood along 57th Avenue and looped up and around. It just appeared to him that Medtronic Parkway now, if they did design something that got them over to Seventh Street, would provide a viable option from University Avenue to Central Avenue. Mississippi Street and 53�d Avenue are the only other through streets that go straight through from University Avenue to Central Avenue. This was not a request from Medtronic. Mr. Commers stated his question was whether or not, in either the development agreement or something else, the City had given Medtronic any indication or promise that they would extend Medtronic Parkway to University Avenue. Councilmember Billings replied, no. Mr. Casserly replied there are some interesting options if Medtronic expands. At that time, they would want to talk about those options. Councilmember Bolkcom commented that there is never any money amount attached to the questions on the survey, so that makes it difficult to answer some of the questions. JOINT CITY COUNCIL/HRA MEETING, MAY 1, 2003 PAGE 12 Councilmember Billings stated that at this point in time, the only thing staff would be doing would be indicating how the street should be laid out. Then if somebody comes to the City with a proposal, they will already know where the street is going to go. Mr. Commers stated the real question is what comes first? The HRA did a lot of improvements on the Medtronic's site; and then when Medtronic decided to develop it, a lot of their costs and expenses went out the window. Dr. Burns asked how many apartment buildings would be taken. Councilmember Billings stated no apartment buildings would be taken. The street would go between the two apartment buildings. They would, however, have to take a single-family house along the way in order to create parking for the apartment house. This will create 1%2 parking stall spaces there. They are not talking about the City acquiring anything at this point in time, but wouldn't it be nice that when a developer does come to them, they are able to tell them that this road is going through this quadrant. Mr. Commers asked about United Defense. Dr. Burns replied United Defense is using 60 percent of its building. They have a meeting tomorrow with the President to go over some United Defense sites over there. Dr. Burns stated there are other buildings that have vacancies or are vacant. Some examples are the Safe Tran building, the Target building at the corner of Mississippi Street & University Avenue, the Barry Blower building, the Wick's Furniture building, etc. The only reason the questions are here is because they recognize this as a growing trend. The City doesn't have a lot of staff, but maybe they should be acting proactively regularly meeting with the real estate contacts and the corporate organizations that own these facilities to make them aware that the City is interested in knowing what is happening in the community. Dr. Burns stated one thing he got out of the discussion with the Planning Commission is that the City needs to be a little more proactive in their contacts with property owners and, rather than wait for them to come to us with a real estate deal, the City should be in contact the property owners. And they are doing that with United Defense. Mr. Meyer stated maybe the City should be spending some money to hire a top grade planner to assemble the facts/figures on this property. Mayor Lund suggested possibly talking to the University of Minnesota and maybe they would take something like this on. Is the U of M Design Center open to anyone? Do they ever utilize that and is there a cost associated with that? Mr. Hickok replied, yes, he believed there would be a cost. The City would basically bid for them to come out. If they would propose a project that was enticing, they would come out based on that. Mr. Meyer stated he was talking about an overall professional planner such as the HRA hired in 1965 to develop an overall plan for major portions of the City in rather interesting detail. This takes time, it takes expertise, and it takes money. Councilmember Bolkcom asked what would it cost? Mr. Meyer replied they could easily spend $20,000-$50,000. JOINT CITY COUNCIL/HRA MEETING, MAY 1, 2003 PAGE 13 Mayor Lund replied the reason why he brought up the U of M Design Center is he had recently seen a very grandiose project that is just going to start in Blaine, and it is run by the Design Center. Mr. Bajwa stated the City should definitely have a plan. Ms. Schnabel stated United Defense is one of the prime pieces of land they have left in the City of Fridley for development and they should stay in contact with the Navy. She agreed that they need a conceptual plan of some type in place. Mayor Lund stated they should be cautious about United Defense. They have a viable business there, which provides a lot of jobs. Dr. Burns stated what he is hearing is that the Council is not quite as enthusiastic about planning, especially because it involves a lot of staff time and a lot of City money. The HRA saying that they think planning is important, and one HRA member believes it's an urgent need. He stated it is his conclusion that planning might proceed if the HRA decides they want to fund something like this with outside help, assuming they are doing it in conjunction with United Defense. He asked if that was a fair conclusion? The Council members and HRA members agreed. REGULAR HRA MEETING CALL TO ORDER: Chairperson Commers called the March 1, 2003, Housing and Redevelopment Authority meeting to order at 9:17 p.m. ROLL CALL: Members Present: Larry Commers, Virginia Schnabel, John Meyer, Pat Gabel, Jay Bajwa Members Absent: None Others Present: Grant Fernelius, Assistant HRA Director William Burns, Executive Director of HRA Scott Hickok, Community Development Director Paul Eisenmenger, HRA Accountant APPROVE THE MARCH 6, 2003, HOUSING AND REDEVELOPMENT AUTHORITY MEETING MINUTES: Correction on page 4, paragraph 9, line 3, and the word "either" changed to "even". MOTION BY Ms. Gabel, seconded by Mr. Bajwa, to approve the minutes as corrected, UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. JOINT CITY COUNCIL/HRA MEETING, MAY 1, 2003 CONSENT AGENDA 1. CLAIMS AND EXPENSES PAGE 14 MOTION by Ms. Schnabel, seconded by Mr. Meyer, to approve the Claims and Expenses as submitted. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. INFORMATION ITEMS: MONTHLY HOUSING REPORT Mr. Fernelius replied they had a little activity in the month of April with two loans. The second two reports cover the standard two programs, the Operation Insulation, and the Remodeling Advisor visits. That traffic was fairly consistent compared to last year. OTHER BUSINESS: Mr. Commers asked the status of the Anoka County HRA and the levy. Mr. Fernelius stated Anoka County has authored some legislation, which would allow the HRA to essentially create a community development agency, which would have economic development powers and also expand its existing HRA powers. That legislation, the Mayor and City Manager went to the Capitol to testify in opposition to it. They had suggested that the bill be amended to allow an opt-out provision because cities like Fridley that already have an HRA tax levy are presumably already paying for redevelopment type activity. So, this would be a levy on top of what the HRA is already doing, and there is some concern of taxing Fridley taxpayers twice for redevelopment projects. As he understands it, the bill was amended. Mr. Fernelius stated the last version was amended to allow the City to opt-out of up to 60 percent of the levy. The County would keep 40 percent for economic development promotion throughout the County, and that bill is now an article on the tax bill, which they are debating. Their sense is that it is probably going to pass. Dr Burns has talked with Fritz Knaak, the City Attorney, who is trying to see if they can't either get it eliminated from the bill completely or amended to their original plan, which was to have an opt-out provision so they wouldn't have to join in. Fridley is not the only city that is opposed to it. However, they are the only city that showed up on the two occasions where there was a hearing to testify against it. Both the cities of Anoka and Andover passed a resolution in opposition. Earlier this month the Fridley Council met with County officials to talk about Fridley's position on it and, at that point in time, it was made clear that Fridley wanted opt-out language. The County came back was this 60/40 split. Mr. Hickok stated that if they opted out on the 60 percent, they would utilize the 40 percent for promotion throughout the County but wouldn't do a project in this city. They wouldn't bring any of the money back. Mr. Commers stated that is what he suspected, too. So, Fridley loses that 40 percent no matter what? Mr. Hickok replied, yes. JOINT CITY COUNCIL/HRA MEETING, MAY 1, 2003 PAGE 15 Mr. Commers asked if they opt-out for 60 percent, that just means that they don't have to pay 40 percent of the levy and they would just be on their own? Could they still have their own levy? So it adds to our taxpayers another 40 percent of whatever. What is the levy amount? Mr. Fernelius replied about $100,000. It equates to about $4 or $5 a household. The County would be authorized to levy up to the same rate that they are but they wouldn't necessarily do that. They would still establish a portion. There is a real subtle nuance in the legislation, which he has been talking to Jim Casserly about. The way that the opt-out works is that the County first has to declare its intentions to create an EDA. So, if they don't do that, it is not clear that the opt-out language still applies and they would have the authority to use their levy anyway. So, it's kind of confusing but the City's concern is if they decide not to create the EDA but all the other things in the bill pass, they would have the power in theory to levy under their existing HRA up to a maximum and they couldn't opt-out of anything. It was carefully worded obviously to the County's advantage. They are still analyzing it. Ms. Schnabel asked if it was only Anoka County that is doing this. Mr. Fernelius replied the Bill has two pieces. The first piece deals with granting all counties in the metro area with EDA powers, they can grant them some of the EDA powers. The second piece is correcting the original legislation that established the HRA back in 1978. The bill includes two components, and they need both things to pass in order for them to accomplish what they want to do. Both pieces are in the final omnibus bill. Mr. Commers asked so then how would that work? Cities would apply to them for funds to do a project, or they would negotiate and do the project on their own without city involvement and where would it go? They're going to have a big political battle over who gets what. Mr. Hickok stated those are good questions. There is an air of distrust right now frankly and a sense that a lot of things need to be ironed out. They'll figure that out later, but in some ways the damage is done. Mr. Fernelius stated this all started with a letter that Mayor Lund brought in on a Friday afternoon asking what the letter meant. It was the first time staff had heard about it. So the best they can tell there really has been no effort at the staff level to communicate any intent to create the EDA with the levy powers. Mr. Commers asked what the County Commissioners are saying. Mr. Fernelius stated Commissioner Kordiak doesn't know why Fridley is not supportive, why Fridley can't see the benefit, which is County revenue. Mr. Fernelius stated they talk in big terms about promoting the County and that whatever development happens in the County benefits the County as a whole. That is debatable, but the reality is most of the development now is taking place in the farther part of the County and any benefit is probably going to happen there and they are essentially going to see the effects of it, particularly if it's a stadium which they think is a big part of why they want this legislation. Mr. Hickok handed out the topic of the Fridley/Columbia Heights Task Force. He has given them a three-part summary document that includes the framework of the study, which includes the market analysis that was done and the demographic profile. This is in essence the entirety of that joint effort in a document. If HRA the maps are not in color and they read much nicer in color but if they would like to take a look at this certainly they can bring it back on future agenda and talk about the implications of this. For now he really just wanted to put it in their hands so JOINT CITY COUNCIL/HRA MEETING, MAY 1, 2003 PAGE 16 they understand what was the document result of that study. Marquette Advisors used it in the early round as to what is being said about the marketplace in Fridley. Mr. Meyer asked, that committee is defunct now, right? Mr. Hickok replied, yes. Columbia Heights really stopped it where they were. He thinks they were concerned we were going to spend more money and they saw enough in the documents that they had to realize that there wasn't much to that. He thinks there is some good value in all of this thought, and he doesn't think they should be ashamed of or discouraged by the investment they made or the facts they got back. This is all very good stuff that helps them be smarter about planning for the future. Mr. Fernelius replied it was also about good will with another community. Mr. Meyer replied, right, it established that. ADJOURNMENT MOTION by Mr. Meyer, seconded by Ms. Schnabel, to adjourn the meeting. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED AND THE MAY 1, 2003, MEETING OF THE HOUSING AND REDEVELOPMENT AUTHORITY ADJOURNED AT 9:45 P.M. Respectfully submitted, Denise M. Letendre, Recording Secretary