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HRA 11/02/2006 - 29604CITY OF FRIDLEY � HOUSING 8� REDEVELOPMENT AUTHORITY NOVEMBER 2ND, 2006 CALL TO ORDER: Chairperson Commers called the regular meeting of the Housing & Redevelopment Authority to order at 7:30 pm. MEMBERS PRESENT: Larry Commers, Pat Gabel, William Holm, John Meyer OTHERS PRESENT: Paul Bolin, HRA Assistant Executive Director Scott Hickok, Development Director Jim Casserly, Development Consultant Richard Pribyl, Financial Director/Treasurer Mike Jeziroski, City Accountant APPROVE OF MINUTES: 1. Approval of September 7th, 2006 HRA meeting minutes Commissioner Gabel stated that on page two, paragraph two, last sentence should read "Staff recommends this payment so Mr. Miller will no longer have a claim against the City." (not County) ^ Commissioner Gabel stated that the last page under Other Business, first paragraph, last sentence should read "She questioned if there was a potential to get the station (not land) back." MOTION by Commissioner Gabel to approve the minutes as submitted with the above corrections. Seconded by Commissioner Meyer. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. CONSENT AGENDA: 1. Approve expenses 2. Approve 2007 HRA meeting dates Commissioner Gabel questioned if the July 5�' meeting date should be changed. Paul Bolin, HRA Assistant Executive Director, recommended to wait and see if a July meeting is needed. If a meeting is needed in July, we can move it at that time. MOTION by Commissioner Gabel to approve the consent agenda as presented. Seconded by Councilmember Meyer. ^ UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. ACTION: � 1. Approval of Tax Increment Assistance Request for Industrial Equities Redevelopment of Former Guardian Building Products Site. Paul Bolin, HRA Assistant Executive Director, stated that John Allen of Industrial Equities is seeking to redevelop the former Guardian Building Products site at 5110 Main Street. Mr. Allen is planning to construct between 202,000 and 242,000 square feet new office/warehouse space and anticipates high cost for demolition of the existing building and soil corrections. Mr. Allen is seeking $1.5M in pay-as-you-go assistance to help with the demolition costs. This assistance would make this site competitive on a cost basis with outlying suburbs that still have undeveloped land. But for this type of assistance being granted, redevelopment of this site is not feasible and will not happen. Staff is aware from past court cases that after the 1965 tornado, most of the original building was destroyed, a large trench was dug and everything was buried at that time. Over the years excess shingles were torn off and discarded in the parking lot area. With the two options that are being proposed (the 202,000 sq. ft. and the 242,000 sq. ft.) total development costs for this project are befinreen $12.8M and $14.OM. The $1.5M in assistance is equal to about 10.6% of the $12.8M cost or 11.6% of the larger option. HRA TIF guidelines (from 1997) typically only allow up to 5% of total development cost through TIF assistance. Mr. Bolin stated that HRA TIF policies are guidelines only, not law. They are subject to change based on the redevelopment priorities and projects. The guidelines may have to be exceeded based on the projects contributions toward community needs. The City had a long legal battle with Guardian Building Products related to outdoor storage. The site has contamination from ^ improper disposal of building and roofing materials, burial of 1965 tornado debris and shingles discarded in the back parking lot. The existing building is outdated and industry specific. For redevelopment of this site we will not get new users into that existing building that aren't similar in nature to the prior tenants. The site would not generate a large number of jobs based on those types of storage uses. Industrial Equities will construct the new building, own it and manage it for the long term. In the process the city will get a clean site, existing building will be torn down and we will get a new building in its place. Mr. Bolin stated that Staff recommends that the HRA approve the TIF request and authorize staff to move forward with the steps necessary to create the tax increment district and provide the requested assistance. Chairperson Commers asked for a breakdown of the HRA contribution. Does it include removal of contamination and importing of fill? How would the tax increment HRA is contributing be used? Mr. Bolin answered that the items mentioned are items the tax increment would be used for along with soil mediation and demolition of the building. Chairperson Commers asked for a breakdown of the costs. Jim Casserly, Development Consultant, stated that an itemized list was on page five of the packet titled �Sources and Uses" � Chairperson Commers commented that it looked like the demolition and land improvements were considerably less and questioned if part of the TIF would be going to interest expense and acquisition. ,—. Mr. Casserly answered that staff analyzed this as an HRA project. They questioned what an � authority would pay for the site, provide the remediation and put the site in a buildable form. The costs are all estimates. The only costs that are firm are the finro acquisition costs. They tried to determine the value of the site if it was improved, clean and buildable. Part of the problem with this acquisition is that you are paying for a building that you are not going to use. That cost is built into the acquisition cost. To get a handle on the market value of the site is to talk with the assessor about other comparable sales and the $4.00 a square foot was comparable to some of the other sales. The assessor will have a land value and a building value. The other sites comparable were warehouse sites. There were a few land only sales that were used also. The current market value of the land is about $2.37 a square foot. The building is assessed at $1.215M. If you take off the building and remove the demolition debris and clean up the site, this increases the land value to $4.00 a square foot. The problem with this redevelopment project is that you have to pay for a structure that has some value, but has to be removed to maximize the value of the site. The 2007 value of the site was $2.5M and at the end of the project it should be worth $10.OM to $12.5M with improvements. Chairperson Commers stated that we are exceeding our guidelines over and above what normal site improvements costs are. Mr. Casserly answered that the last time we had a similar project was the Industrial Equities project in 1996, the property on 73`d and University behind Holiday. That project may have been interpreted as 5% grant and 5% loan. That was amortized at 10% over 10 years and was in an economical development district. We may need to go back to McGlynns back in 1993 where we did a revenue note fnr 15 years. � Commissioner Gabel questioned if the there was established criteria regarding exceeding guidelines. Mr. Bolin replied that there is no established criteria and in the past this has been handled on a case-by-case basis. Commissioner Meyer questioned if this would attract negative attention from legislature. Chairperson Commers answered no. Commissioner Meyer questioned if the 5% was a historic figure. Chairperson Commers answered that 5% is the HRA policy; they have stayed within the guidelines and give loans based on that figure. Mr. Casserly stated that there is a risk assessment. It is difficult to get redevelopers to advance all of the cash for redevelopment projects. In this instance, that is what the proposal is for. HRA is advancing the money, the project would be in place, but the HRA would be making advances very early on in the project. The HRA can recover both from the repayment of the loan and from the tax increment that is generated on the new development to cover the cash that is advanced at the beginning of the project. One of the things that has happened to all HRA's is the state has changed the tax laws. On a project like this we would have collected 1/3 more taxes so that a tax increment district could have been greatly reduced. When you lose 1/3 � of your increment, it lengthens the term of the district. This is the kind of a project that should have been paid off in 10-15 years rather than 15-20 years. That is just a function of not having all of the new taxes coming back into to repay expenses. ,—� Chairperson Commers questioned the computation calculated and what the difference is in the two buildings. Would the larger building would be paid off in a shorter period of time? Mr. Casserly stated that there are two options. Option one would build 2 structures for a total of 202,880 square feet with a market value of $10.OM. Option finro would build a 242,000 square foot building with a market value of $12.OM. Based on the market value of $50 a square foot would allow us to negotiate with the assessor better if you try not to overstate the market value. Chairperson Commers questioned the value on $10.OM. Mr. Casserly answered that as a practical matter, this is self policing activity. If the value gets reduced, so do the payments. Chairperson Commers stated that if the payments are spread out longer they would like a minimum valuation agreement. That way there wouldn`t be a protest every year. Mr. Casserly answered that they have done that in other projects. They insist on it when we are providing cash and making grants upfront because we have to have that value there to recover our investments. Sometimes it is a little bit different when the developer has to depend on the taxes being paid for the developer to recover the investment. There is nothing wrong with having a minimum market value. Chairperson Commers stated that they would be putting up money upfront. ^ Mr. Casserly stated that that is not what this proposal is for. He stated it is out of the tax increment captured over the 22 years. Pay-as-you-go proposal. Councilmember Meyers stated that the railroad spur acquisition and removal is $400,000. It was his understanding that the spur was the property of the railroad. The railroad puts the spur in, in hopes of getting business from the entity that is along side the property. John Allen, Industrial Equities, stated that he wishes that was the case. The railroad required you to pay for the design for the new spur, pay for installation of the spur plus give them an easement across the property for you to put the railroad spur into the site. Industrial Equities has done a number of spurs and the one on the property will be a fairly expensive one as it currently does not have a switch on it. The railroad does not do much for you other than get the compounds out and ask for you to find tenants to do a lot of rail service. The spur that is in place will need to be removed because it runs down the middle of the site and would be inconsistent with the designs. The spur is also dated and out of condition that it would not be able to be used even if it was in the right spot. Mr. Bolin stated that Mr. Allen recently purchased an additional parcel from the rail. Mr. Allen stated that in his 25 years of redevelopment history he has never seen a building in this bad of shape. This building has all life casualties and problems. It has environmental contamination, outdated construction, burial of materials from the tornado etc. In order to generate the type of jobs that their typical buildings generate, the building will need to be ^ demolished. The site is a pick off location and right in the middle of the Metropolitan area. Redevelopment often spurs redevelopment and this may increase the main street area that is currently underutilized. We are not the merchant type of builder. We put extra money into glass, brick, landscaping, parking lots and are a long haul player. ,� Chairperson Commers asked what would drive the difference between the 202,000 and 248,000 sq. ft. buildings. Mr. Allen answered he could not share names, but there is a major Corporate 100 user looking at this site for a distribution center for the Minneapolis/St. Paul market place. This distribution center would be 242,000 square feet of warehouse with 15,000 square feet of office space. It would also bring in excess of 200 jobs to the city. Chairperson Commers asked if they would need a tenant ahead of time before they would start construction. Mr. Allen answered that they would know within the next 30-45 days if this company is interested in the site. Mr. Allen is confident that this site is a good possibility. This should give plenty of time to get the design approved and construction started by March of 2007. This site has redevelopment written all over it. Mr. Casserly stated that this project is fairly straight forward for a redevelopment project. This is a low risk project. Mr. Bolin added that this project would go a long ways towards taking care of property that has been a problem for a number of years for the city. If this site can be tumed around, maybe interest can be generated in surrounding properties that are underutilized. �..� Commissioner Gabel questioned when they will determine the size of the building. Will it depend on the tenant they find? Mr. Allen answered that the decision will be made in the next 60-90 days. All of Industrial Equities properties across the metropolitan area do not attract the low end user. Industrial Equities will own the properties long term and will have quality, high class tenants. MOTION by Commissioner Meyer to approve the Tax Increment Assistance request for Industrial Equities redevelopment of former Guardian Building Products site. Seconded by Commissioner Gabel. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. 2. Approval of Preliminary 2007 Budget Paul Bolin, HRA Assistant Executive Director, stated that the purpose of tonighYs presentation is to review the proposed 2007 budget. An overview of the budget will be provided including projected revenues and expenses. They hope to bring the final budget back for formal action in December. The budget is broken into three categories; general fund - administrative and operating expenses, special revenue funds - housing programs and the capital outlay funds - tax increment funding districts. Staff does not have all the numbers they need from Anoka County to complete the entire budget. Last year we were not able to approve a final budget until February, hopefully the timing will be better this year. '� Mr. Bolin stated that the total revenue is projected is $4.9M for 2007. This is a$418,729 increase over last year or 9.4%. HRA tax levy is projected at an increase of $30,000 or 8 3/4%. The projected total expenses for 2007 are $3.2M which is a decrease of $511,246 over last year ,--. or 14°/a. The expenses are less in various TIF districts. The general fund expenses total $385,691 and Capital Outlay is projected for Medtronic $279,817, Banfill $77,000 and Lino Development $17,040. The debt service for 2007 is projected at $1.89M which is paid from the revolving loan fund and Moore Lake and North Lake TIF districts. In 2007 we hope to continue to monitor HRA resources, carefully evaluate redevelopment opportunities and look at leverage of local resources within outside resources. Chairperson Commers asked Mr. Bolin if there was a balance sheet for the 2007 budget. Mike Jeziorski, City Accountant, stated that the budget sheet was not included with the packet but he could send it out. Chairperson Commers asked if there was anything unusual they should be aware of. Richard Pribyl, Finance Director/Treasurer, stated that there was nothing unusual nor any pending issues. Nothing outside of normal course of activities. Chairperson Commers stated that he liked the dates of the districts listed on the sheet. There are some that will be expiring. Mr. Pribyl stated that some will expire and some other districts we may want to close down. Commissioner Meyer stated that he was intrigued by the other financial uses of $285,000. ,.� Mr. Pribyl answered that other financial issues is accounting lingo. It is normal terminology. Commissioner Meyer questioned what °other financial uses" is. Mr. Jeziorski stated that there was a transfer to the Islands of Peace fund. Mr. Bolin stated that $235,000 was to purchase a home on East River Road. Other expenses may include appraisals, survey costs, legal expenses etc. that are later tracked separately. Commissioner Gabel questioned the other miscellaneous revenue in the budget. Mr. Jeziorski answered that the 2006 activity was because interest is not allocated, it is put in an undesignated fund at this point. This at the end of the year the interest actually gets allocated. This is an audited adjustment. Mr. Pribyl stated that the amount may be greater than the budget amount because the interest listed is just an estimate. Commissioner Gabel questioned the administrative changes in the allocation. Mr. Jeziorski stated that the administrative charges will have a lot to do with timing. The administrative charges are being done on a quarterly basis. The actual costs will not get picked up on the financial statement until October. ^ Commissioner Gabel questioned the large professional services amount and if a big accounts payable coming. Mr. Pribyl stated that is an unknown category. The amount of $14,409 is what was actually ,,� spent through 9/30/06 and it is possible we will not reach the entire budgeted amount of $75,000. Chairperson Commers questioned why the cost wouldn't be charged to a specific TIF district. Mr. Pribyl answered that if they haven't created the district yet there may be some upfront costs in anticipation of getting the district. This is similar to what we did with the Islands of Peace district. If the costs relate specifically to that district, we would charge those expenses back to the district once the district is created. Chairperson Commers stated that an example would be expenses that occur with Industrial Equities up until now. Mr. Bolin stated that is correct and it would come out of there. In that particular instance we did get a$7,500 deposit from Mr. Allen to reimburse Mr. Casserly for his time. HRA helped out a few years ago when the city held its housing forms. HRA was asked to participate in contracting some services for the upcoming comprehensive plan. It includes a lot of those type of expenses that don't necessarily fit into any of our districts. Mr. Pribyl stated that this category, before charging any expenses, they would first make sure the expenses wouldn't fit into a particular TIF district. Professional services that are not specifically related to a TIF district would be charged to this fund. Commissioner Gabel questioned what insurance non personal was. ^ Mr. Pribyl answered that this would be insurance that relates to liability insurance, professional errors and omissions for the board. This category would include all insurance expenses that don't relate directly to the personnel. Mr. Bolin stated that insurance is already in place for the 2007 Home & Garden Show. Commissioner Holm stated that in looking at revenue and expenses for the coming year, HRA looks in pretty good shape. He questioned if there were any debt services coming up in the future years that would put pressure on the balances. Mr. Pribyl stated that looking forward at the debt services, the HRA is in good financial condition to take care of any expenditures coming up. They would present a balance sheet at the next meeting to show the cash flow. Chairperson Commers asked for staff to put a report together so HRA has an idea of what is left for excess funds. MOTION by Commissioner Gabel to approve the Preliminary 2007 Budget. Seconded by Commissioner Holm. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. ,� 3. Authorization to negotiate purchase of properties in Gateway Northeast area. Paul Bolin, HRA Assistant Executive Director, presented a request from staff to authorize them to go forward with negotiations on the purchase of two properties along University Avenue. The �-., former Carquest building at 6005 University Avenue and the original Van-o-Lite building at 6041 University Avenue. In December 2005, staff received a call from Harvey Goldstein, the owner of the Carquest Building. At that point in time, Mr. Goldstein did not have an asking price. In March of 2006, HRA and Council met and at that time staff was authorized to work with development services and Mr. Casserly to develop some acquisition costs for the Carquest Property and some properties to the north. The property at that time would have been very expensive to acquire, somewhere between $2.0 - 2.5M. It was determined that there would not be enough usable land area in that area alone to recover the costs for tax increment financing. It was discussed that property could be included in larger project, potentially once things were started on the rail station site. At that point no further action was taken. Mr. Bolin stated that in the past two weeks a realtor representing both Carquest and the Van-o- Lite building contacted the city with the latest asking prices. These numbers were quite a bit less than staff had expected in viewing. The Carquest building they are asking $399,000 and in June they were asking $553,000. The Van-o-Lite building they are asking $460,000 and in June they were asking $522,800. The Carquest building is completely vacant so at this point there would be no relocation expenses. The Van-o-Lite building has one attendant in there but relocation costs would be fairly minimal. Purchase of these properties would allow for future enhancements in this portion of University Avenue. A joint meeting with the council would need to be held to determine the scope of the project area and final use of the property. Staff is asking authorization to negotiate purchase of these two properties subject to final approval before we move forward with an actual purchase. Chairperson Commers questioned the other properties in the area. � Mr. Bolin answered that there is a T'ai Kwan Do building, two gas stations and a newer Van-o- Lite building that is also for sale. Chairperson Commers asked what they were asking for the new Van-o-Lite building. Mr. Bolin answered he thought it was around $585,000 and it is about 5 years old. Chairperson Commers asked how long that building has been sitting on the market and if the price would come down. Mr. Bolin replied that it has been on the market a year or more. The old Van-o-Lite is currently owned by three investors. They purchased the building for about $365,000 and they have been trying to get up to $525,000 for the building. The current asking price is $460,000. Chairperson Commers stated that the newer Van-o-Lite building would be nice to have as well. This is all a nice area to redevelop. Mr. Bolin stated that currently HRA has the financial resources to pursue these properties. Commissioner Meyers questioned what the property was south of the area. Mr. Bolin replied that is the Alanon building. ^ Chairperson Commers stated that he did not think we would need City Council approval to pursue the Carquest and Van-o-Lite properties. Mr. Bolin stated that at some point City Council would be involved to help determine what the �,--� end usage of the property would be. MOTION by Commissioner Meyer to authorize staff to negotiate purchase of properties in Gateway Northeast area. (Former Carquest Building at 6005 University Avenue and the original Van-o-Lite Building at 6041 University Avenue) Seconded by Commissioner Holm. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. Chairperson Commers stated that if staff wanted to gather other information regarding surrounding properties that may be available for purchase, they could do that as well. 4. Approval of Contract for Administrative Service for 2007 Home 8� Garden Show MOTION by Commissioner Meyer to approve the contract for administrative service for the 2007 Home & Garden Show. Seconded by Commissioner Gabel. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. INFORMATIONAL ITEMS: 1. Gateway West Update ;,..� Paul Bolin, HRA Assistant Executive Director, stated that a week ago Blue Print Homes followed through with their agreement with HRA and purchased 2 lots per quarter. They have submitted home plans and it was passed around for HRA to view. Blue Print has completed one of the homes and has already sold the home. Anoka County surveyors are currently reviewing the final plat for the Gateway West Second Addition. There were some title problems in that area and that is set to go before the City Council at the November 13�' meeting. The fence project is nearly complete; they are just waiting for the correct product to come in. The mill and overlay project on 3`d street will be complete next spring. Photo's were shared from the beginning of the project to now. 2. Monthly Housing Report Paul Bolin, HRA Assistant Executive Director, reviewed the monthly housing report. For the month of October, the revolving loan fund issued one loan and one deferred loan. Year to date we have issued eight 6% interest loans and a total of six deferred loan. This is up from last year where we had only one deferred loan. Looking at the available balances in the loan fund, we did budget $625,000 in the regular revolving loan fund and so far we have loaned out just under $139,000 for the year. In the deferred loans we budgeted for $200,000 and have loaned out just under $57,000 for the year. We need to focus on that area and the city news letter has an advertisement for the loan program and hopefully that will help generate some loans. Mr. Bolin stated that the remodeling advisor visits had one visit in October which is 33 year to date. We are on scheduled to meet the plan of 50 visits for the year. Operation insulation has been a big disappointment for HRA this year. October has not generated any interest in the ,.,1 program. Year to date they have only made 3 visits. We had planned to make about 25 visits ' this year. We may need to think of other ways to promote these programs and create interest in the home owners. �,—.\ Scott Hickok, Community Development Director, stated that the City Council has someone from a staff area talk about programs available in their area and the HRA is scheduled to talk about their programs at the December meeting and this could generate some interest in the programs. Northstar Rail Station Site Update Jim Casserly, Development Consultant, stated that there are really not many changes. They are trying to figure out if the property was owned by HRA or the City would be usable for a transfer station. Paul Bolin, HRA Assistant Executive Director, stated that the plans call for that part to have parking on it for the station. (just a portion) Chairperson Commers stated that the other part could be residential or commercial and that could present an issue. He asked Paul to talk to staff to find out what the overall impression of the area would be. Mr. Casserly stated that they are drafting some legislation currently that would allow them to create a tax increment district that is associated with the transfer station. Part of the problem they have in Fridley is it is not uncommon in which they have transfer stations where some of the land is clear and vacant but they don't' have any resources to construct permanent structures. The goal would be to have fairly intense commercial or residential development that would generate some additional revenues to allow us to integrate parking into the entire transfer �, station. This way we would have a more integrated development. Chairperson Commers stated that is the only way HRA could afford to pay for it. Mr. Casserly stated that they are optimistic that if they can design this correctly it may work. ADJOURNMENT: MOTION by Commissioner Meyer to adjourn. Seconded by Commissioner Gabel. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MEETIND ADJOURNED AT 9:10 P.M. RespectFully Submitted, �``� �/, � -���„��� �� � ��.� , Krista Monsrud Recording Secretary � � � � � CITY OF FRIDLEY SIGN-IN SHEET HOUSING 8� REDEVELOPMENT AUTHORITY MEETING Name and Address ����� ��� �, �(� Agenda item of Interest