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HRA 05/06/2010 - 29810CITY OF FRIDLEY HOUSING AND REDEVELOPMENT AUTHORITY COMMISSION MAY 6, 2010 CALL TO ORDER: Chairperson Commers called the HRA Meeting to order at 7:40 p.m. ROLL CALL: MEMBERS PRESENT: William Holm Pat Gabel Larry Commers Stephen Eggert John Meyer NONMEMBERS PRESENT: Paul Bolin, HRA Assistant Executive Director Scott Hickok, Community Development Director Jim Casserly, Development Consultant Greg Johnson, Financial Analyst Richard Pribyl, Finance Director ACTION ITEMS: MOTION by Commissioner Holm to add the proposal of the Sikh Society Purchase. Seconded by Commissioner Gabel. UPON VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED 1. Approval of Expenditures MOTION by Commissioner Holm to approve the expenditures as presented. Seconded by Commissioner Meyer. Commissioner Holm said that several items on the report are related to costs associated with 831 Mississippi. He asked if these costs would be categorized under one section to look at upon completion of the project. Paul Bolin, HRA Assistant Executive Director, answered yes. Chairperson Commers asked if those costs have already been approved for that project. Mr. Bolin answered that is correct. UPON VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY 2. Approval of March 23, 2010, Meeting Minutes MOTION by Commissioner Meyer to approve the minutes as presented. Seconded by Commissioner Gabel. Commissioner Gabel asked for corrections on pages 2, 3 and 4 UPON VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MINUTES APPROVED AS AMENDED. 3. Public Hearing to consider the proposed sale of property to Fridley Assisted Living, LLC MOTION by Commissioner Gabel to open the public hearing. Seconded by Commissioner Eggert. UPON VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED AND THE PUBLIC HEARING OPENED AT 7:46 P.M. Paul Bolin, HRA Assistant Executive Director, said HRA has received an offer, from Jim Faulkner / Fridley Assisted Living, LLC, to purchase two vacant properties the HRA has owned since early 2000; 6352 Old Central Avenue and 1271 E. Moore Lake Drive. HRA purchased the two parcels in early 2000 for a total price of $143,000. The parcels are not buildable in their current state due to the depth of organic soils. Currently over $500,000 is needed to correct soils and the properties have been off tax roles for 10 years. Mr. Bolin said that the Faulkner Group is seeking to obtain the parcels for $100,000. Faulkner will correct soils on both sites upon closing of sale. A senior assisted living project will be constructed upon completion of soil corrections, which will generate nearly $15,000 / year to the City in property tax. The second phase of assisted living will be constructed in the near future, generating additional tax revenue. Mr. Bolin said that this project has received approval from the Planning Commissions on the "master plan" for the site as it is located in an S-2 Redevelopment District. This item goes to City Council May lOth. Staff recommends sale of the parcels to Mr. Faulkner's group by resolution. The terms of sale are included in the redevelopment agreement Commissioner Holm asked if Mr. Faulkner was in agreement with the terms of the sale. Jim Faulkner answered yes, and he met with Staff prior to the meeting and is in agreement as amended. Jim Casserly, Development Consultant, said that the changes are very minor, the significant change was the name. A closing date was also added along with payment information. Chairperson Commers asked about financing before the closing date. Mr. Casserly said that the lender wants to make sure this will go through. Staff will submit the changes tomorrow and copies will be distributed to members for ne�t weeks for execution. Chairperson Commers asked what happens on a default if the first phase is done and not the second phase. Mr. Casserly said that if the second phase is not completed HRA has no rights to the property. Because the concept changed the commercial portion of this site would not be developed. Chairperson Commers asked what would be developed on this property if the memory care unit is not built. Scott Hickok, Community Development Director, said that a 19 unit memory care facility will be built but if it is not developed the developer would need approval from the Commission and Council to have the master plan amended. Commissioner Meyer asked what happens if phase one is not completed or abandoned like past experiences. Mr. Casserly said that if they start construction there will be a construction loan and HRA subordinated their rights to the construction loan. Commissioner Meyer asked if anything would happen to HRA. Chairperson Commers said HRA would be out of it as the money would be paid up front. Mr. Faulkner said he did not see this issue being a problem, construction will happen on this site. Commissioner Meyer asked how the soil would be improved. Mr. Faulkner said by removing and replacing, no piling. Commissioner Eggert asked when the financing piece would occur. Mr. Faulkner said the financing will be provided at closing. MOTION by Commissioner Gabel to close the public hearing. Seconded by Commissioner Holm. UPON VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED AND THE PUBLIC HEARING CLOSED AT 8:04 P.M. MOTION by Commissioner Eggert to approve the motion to sell the two vacant properties at 6352 Old Central Avenue and 1271 East Moor Lake Drive Fridley Assisted Living LLC. Seconded by Commissioner Gabel. UPON VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED 4. Sikh Society Purchase Paul Bolin, HRA Executive Assistant Director, said that the Sikh Society delivered a letter asking that the HRA purchase their property located at 5831 University Avenue. HRA originally made an offer to purchase in 2007 as follows: $450,000 for land and building $ 20,000 for relocation $470,000 total Mr. Bolin said that comparable commercial / restaurant properties have decreased in value by 8 - 11% since 2007. This parcel is not vital to redevelopment of University Avenue, therefore staff recommends the HRA only acquire for a reduced price of $414,000 +$20,000 for relocation. Chairperson Commers asked for clarification that the proposal is for $414,000 plus $20,000 for relocation. Mr. Bolin said that is staff s recommendation. Commissioner Meyer asked what would happen if the HRA chose not to purchase the property. Mr. Bolin said that HRA would not have the southern property and it would not be included in future redevelopment. In 2007 the actual value the assessors placed on the property was $270,000 but when the appraisal was done, because it was formerly a McDonalds with the kitchen intact and building was in good shape, the higher value remained. It is highly unlikely a restaurant use would go back into the building. Mr. Bolin said that the appraisal of $470,000 is not a real value for HRA but the site could be used as a restaurant because the building is constructed well. The reality is that as a vacant building it is only worth $270,000. If HRA thinks that the price should now reflect the decreased value of what has been happening with commercial restaurant properties, the $414,000 plus the $20,000 would be a more accurate number. Commissioner Eggert asked if this property is adjacent to current holdings which would e�tend the redevelopment area. Mr. Bolin answered yes, that is correct. Commissioner Gabel said that there are still several other sites that don't belong to HRA. It will be a while before HRA will be in a position to acquire the other pieces of property. There is really no urgency in this matter but if something did come up it would be nice to have this property. Eventually the price will go back up. Commissioner Holm said that the recommendation by staff is generous at $414,000 and HRA could live without that piece of property although it would be nice to have it. He is in favor of acquiring the site to fill out the Northeast Corridor but if the Sikh Society doesn't agree to the lower price it wouldn't be a deal. Commissioner Meyer said that the University Corridor is important to HRA now and in the future. The more HRA can control will benefit HRA in the future. Commissioner Eggert added that looking at future development; if this property is not purchased the property will just sit there. MOTION by Commissioner Holm to approve staffs recommendation to purchase the Sikh Society property for the price of $414,000 plus $20,000 relocation expenses. Seconded by Commissioner Eggert. UPON VOICE VOTE, CHAIRPERSON COMMERS, COMMISSIONER HOLM, COMMISSIONER GABEL AND COMMISSIONER EGGERT VOTING AYE, COMMISSIONER MEYER VOTING NAY, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED ON A 4/1 VOTE INFORMATIONAL ITEMS: 1. HRA Fund Balances for Planning Purposes Paul Bolin, HRA Assistant Executive Director, reviewed the HRA Fund Balances for Planning Purposes and noted highlights of activity in various HRA funds, provided a brief introduction to demonstrate the solvency of the HRA funds and ability to move forward with existing and proposed programs. There will be a work session held to answer specific fund questions in June. Greg Johnson, Financial Analyst, presented an overview of the 2010 HRA Cash Flow Proj ection. Commissioner Holm asked if there is no increase in the levy if that would mean no increase in the city's finances. Mr. Johnson said that is correct. Chairperson Commers asked how HRA is setting up loans and if a TIF district would be created for the Northstar Area. Jim Casserly, Development Consultant, said that HRA will try to take as much from Districts 11, 12 and 13 that they can. Districts 11, 12 and 13 can be used to repay the loans. Mr. Johnson said that currently there are ten active TIF districts. Commissioner Eggert said that he understands that no debt cash flow works pretty easy but also knows there are times to incur debt and times not to. Mr. Casserly said that the problem today is that HRA doesn't have a project that demands that type of capital investment. Maybe if something will get going around the Northstar that will allow HRA the opportunity to borrow on the capital markets. Right now the rates are e�tremely low. 2. Housing Replacement Program Paul Bolin, HRA Assistant Executive Director, said the April6th Legislation approved reauthorizing of the Housing Replacement Program (HRP). The program allows HRA to purchase up to 100 properties to demolish/rehab and place into a multi-phased scattered site Tax Increment (TI) District. HRA can construct / improve properties up to 150% of the average home value. The tax increment is determined by value of new improvements and requires a 25% non-TI match. Mr. Bolin said that with the unique housing market the housing replacement program requires a new approach. Current housing values are low and there are many investors in the market. Foreclosed properties have multiple offers pending and Staff are preparing a multi-pronged approach for review at the 7une meeting. Mr. Bolin said that staff has only had one month to digest and interpret the language approved by the legislature. There are many innovative ways to make the program work in the current market conditions. Staff will strive to stretch HRA resources through new partnerships and bring a well developed plan forward for consideration on June 6tn Commissioner Holm asked if the maximum was 100 properties and what would happen if HRA decided to do 50. Jim Casserly, Development Consultant, said that there would be less than that. This allows an addition for another 78 properties. Commissioner Eggert asked if other cities participated in this program. Mr. Bolin said yes, a meeting was recently attended with other communities and that is how he found out about this program. Chairperson Commers asked if HRA would use the revolving loan to fund this project. Mr. Casserly answered yes, and other resources could be used as well. 3. Home Remodeling Demonstration Program Paul Bolin, HRA Assistant Executive Director, announced the upcoming open house for the remodeling demonstration program at 831 Mississippi Street. The mid-point open houses will be held Sunday May 23rdfrom llAM until4PM and Wednesday May 26th from 4:30PM until 6:30PM. 4. Housing Loan Program Update Paul Bolin, HRA Assistant Executive Director, reviewed the Fridley HRA Loan Program Summary. In April two RLF Loans were closed which makes a year to date total of four RLF loans and one other loan closed year to date. There have been no remodeling advisor visits yet this year. There may be more demand for remodel visits with the remodeling project going on. This is a free service. NONAGENDA ITEMS: Chairperson Commers asked if staff had any updated numbers of people riding the Northstar. Mr. Bolin said that no official numbers have been received but they are going to do counts in April of actual ridership. Commissioner Meyer said that he also rode the train for a non Twins event and noticed that very few got on or off in Fridley. Commissioner Meyer noted that this is the 45th Anniversary of the Fridley Tornado which brought together the HRA. ADJOURNMENT: MOTION by Commissioner Gabel to adjourn. Seconded by Commissioner Holm. UPON VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY AND THE MEETING ADJOURNED AT 9:45 P.M. Respectfully Submitted, Krista Monsrud, Recording Secretary