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08/08/2005 - 00026927CITY COUNCIL MEETING CITY OF FRIDLEY AUGUST 8, 2005 The City Council meeting for the City of Fridley was called to order by Mayor Lund at 7:30 p.m. PLEDGE OF ALLEGIANCE: Mayor Lund led the Council and audience in the Pledge of Allegiance to the flag. ROLL CALL: MEMBERS PRESENT: Mayor Lund Councilmember-at-Large Barnette Councilmember Billings Councilmember Wolfe Councilmember Bolkcom OTHERS PRESENT: William Burns, City Manager Fritz Knaak, City Attorney Scott Hickok, Community Development Director Paul Bolin, Assistant HRA Director APPROVAL OF PROPOSED CONSENT AGENDA: APPROVAL OF MINUTES: • City Council meeting of July 25, 2005 APPROVED NEW BUSINESS: 1. Receive the Minutes from the Planning Commission Meeting of July 6, 2005. RECEIVED. 2. Receive the Minutes from the Planning Commission Meeting of July 20, 2005. RECEIVED. FRIDLEY CITY COUNCIL MEETING OF AUGUST 8, 2005 PAGE 2 3. Variance Extension Request, VAR #03-17, by Jim Kiewel for an Extension of One Year to Increase the Maximum Size of a First Accessory Structure from 1,000 Square Feet to 1,390 Square Feet, and to Allow the Construction of a 22 Foot by 37 Foot Addition to the Existing Garage, Generally Located at 1631 Rice Creek Road NE (Ward 2). Dr. Burns, City Manager, said this is the second one-year extension requested by Mr. Kiewel for a variance that will permit him to increase the size of his first accessory structure from the allowed 1,000 square feet to 1,390 square feet. Staff recommends Council's approval. APPROVED. 4. Claims (122624 — 122807). APPROVED. 5. Licenses. APPROVED AS SUBMITTED AND AS ON FILE. 6. Estimates. APPROVED. Councilmember Bolkcom asked how many extensions can be granted for a variance. Mr. Hickok, Community Development Director, stated he does not believe it can go beyond a second one-year extension without being revisited by the Appeals Commission. MOTION by Councilmember Barnette, seconded by Councilmember Wolfe, to approve the proposed consent agenda. UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE MOTION CARRIED UNANIMOUSLY. ADOPTION OF AGENDA: MOTION by Councilmember Bolkcom, seconded by Councilmember Wolfe, to approve the agenda as presented. UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE MOTION CARRIED UNANIMOUSLY. FRIDLEY CITY COUNCIL MEETING OF AUGUST 8, 2005 PAGE 3 LEGISLATIVE UPDATE: State Representatives Char Samuelson, Barbara Goodwin and Connie Bernardy and Senator pon Betzold reviewed recent legislative activities. OPEN FORUM (VISITORS): Consideration of items not on agenda — 15 minutes. Joan Olson, 6320 Van Buren Street NE, stated staff has claimed in the past that Master Plan changes must come before Council for approval. But that is not true. Only significant Master Plan changes require Council consideration, and staff determines what is significant. She did not understand how staff can make Master Plan changes. Pete Eisenzimmer, 6535 Oakley Drive, asked why the Charter change was not published and both readings done in the same night. Also, this Council approved a grant for $2.5 million for Springbrook Nature Center if Springbrook matches that amount. He asked if the taxpayers will be responsible for paying that grant. Mr. Knaak, City Attorney, said the Charter amendment, under State statutes, can be submitted at either a general or special election. Councilmember Bolkcom stated that the first and second readings of the ordinance for the Charter amendment were not held on the same night. Anoka County Commissioner County Board of Commissioner conservation efforts. PUBLIC HEARINGS: Jim Kordiak presented a plaque from the Anoka s commending the City of Fridley for its resource 7. Consideration of the Proposed Transfer of Control of the City of Fridley's Cable Television Franchise from Time Warner Cable to Comcast Cable Communications, LLC, and to Determine Whether the Proposed Transfer may have an Adverse Effect on Cable Television Subscribers. MOTION by Councilmember Bolkcom, seconded by Mayor Lund, to waive the reading and open the public hearing. UPON A UNANIMOUS VOICE VOTE, MAYOR LUND DECLARED THE MOTION CARRIED. Mr. Knaak, City Attorney, stated this public hearing is necessary because Time Warner, the current cable franchise in Fridley, notified the City that it intended to transfer the City's franchise to Comcast. This is part of a national deal to divide the assets of a bankrupt competitor and reallocate local franchise assets. Federal approval for all of these is pending. Federal law requires local franchise review and approval of any such transfer subject to some limited exceptions. Both the Fridley Cable Community FRIDLEY CITY COUNCIL MEETING OF AUGUST 8, 2005 PAGE 4 Franchise Ordinance and Minnesota law require advanced written approval for any sale or transfer of a franchise. This process began with the receipt of a Form 394 which is a federal FCC form from Time Warner which notified the City and provided information regarding Comcast's legal, technical and financial qualifications. The City's franchise ordinance has an additional requirement which states the City must reply within 30 days indicating either its approval of the application or making the determination that a public hearing is necessary. In this case, the City made the decision to conduct a public hearing because the transfer could have an adverse effect on the City's cable subscribers and the City needs to offer its residents an opportunity to provide input regarding the transfer. Once the City closes the public hearing, it will then have 30 days to take action on a resolution to approve or deny the request for the transfer. Mr. Knaak said Fridley has been involved for several years in negotiations regarding the terms of its cable franchise with Time Warner. The City had rejected Time Warner's most recent proposal and the City had permitted Time Warner to continue to operate under the old franchise while renewal procedures continued. The terms of the new franchise have been worked out in negotiations, but Comcast's necessary documents are not completed. Exhibit 2 of the application provided states "Comcast has no plans to change the current terms or conditions of service or operations of the system. The cable system will be operated pursuant to the terms of the current franchise agreement and applicable law after the consummation of the proposed transaction. Comcast reserves the right to make service and operational changes in accordance with the terms of the current franchise agreement and applicable law." His interpretation of this language would be that if Time Warner reaches an approved agreement on the terms of the new franchise by the time the transaction with Comcast is approved, Comcast's franchise terms would be those agreed to with Time Warner. If, however, no final agreement is reached and formal process is continuing, Comcast will own a non- renewed franchise with the right to continue the formal procedure to its conclusion. This is a matter of an approval process in many areas of the country and as a part of the application process, both Time Warner and Comcast were required to provide information. To his knowledge, the financial qualification element has not served as the basis for any decision by a local unit of government not to recommend approval of this transaction. His review of the 10K form indicates that it is a company that has been making a profit. There have been some difficulties with some accounting issues but those have been resolved. As of this year, Time Warner is showing a substantial increase in profits with considerable sales generated by their new digital products. For clarification on the financial concerns, he explained that he is not an accountant or expert in such matters. Mr. Knaak said with respect to legal issues concerning Time Warner, a number of interesting issues have surfaced in other jurisdictions related to consent which is the process Council is going through now. One of those issues is whether or not approval would be given because of disputes related to a franchise fee audit or the agreed upon language in the new franchise. He then reviewed the actions of other municipalities across the country on the Comcast matter. There are a number of issues with respect to EEOC claims. It is his opinion that for a company the size of Time Warner, these FRIDLEY CITY COUNCIL MEETING OF AUGUST 8, 2005 PAGE 5 claims are by their nature occur fairly regularly and are, therefore, unremarkable. With respect to the technical issues, he stated that to his knowledge, there are no technical reasons that Comcast would not be able to take over the current system. Brian Strand has conducted a review of surrounding communities that are serviced by Comcast and his report has been summarized in a succinct analysis. There were no remarkable unfavorable reports from any of the communities being serviced by Comcast. MOTION by Councilmember Barnette, seconded by Councilmember Billings, to accept Brian Strand's report dated August 8, 2005, into the record. UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE MOTION CARRIED UNANIMOUSLY. Councilmember Billings asked if there has been any information submitted regarding the financial strength of Comcast. Mr. Knaak stated the information in the 10K form was Comcast's financial information. Councilmember Barnette asked what would happen to the building near City Hall. Mr. Knaak stated under the agreement, whatever real estate Time Warner has would become Comcast's property. Mayor Lund asked if the City accepts the transfer, would there be any problems in the continuation of the current franchise agreement if it has not been finalized with Time Warner prior to the transfer to Comcast. Mr. Knaak stated there is no clear answer. Mayor Lund commented that in light of ongoing franchise negotiations he would prefer to deny the transfer to Comcast until such time that the City has an agreement with Time Warner. Mr. Knaak said an agreement has been reached on all key points and all that remains is to iron out language. He has every confidence this can be accomplished. If Council approves the franchise agreement and then the transfer to Comcast, Comcast would get that franchise with those terms. There would not be immediate renegotiation. Time Warner has certain rights to keep doing business, as the City has allowed it to continue operating under the old franchise, so there is the argument that Comcast would be able to "stand in the stead" and do that. If there is a formal determination by the City that the franchise is terminated, under that circumstance, Comcast would have to apply as a new franchisee. Emmet Coleman, Area Director of Government Affairs for Comcast, stated Mr. Knaak did a very effective job conveying to Council this process. There is a right under the Federal Cable Act for Time Warner as they are currently operating and he believed that FRIDLEY CITY COUNCIL MEETING OF AUGUST 8, 2005 PAGE 6 right would convey if the transfer process is approved. If a franchise renewal agreement is on the table and approved by Council, Comcast would assume those obligations as they are. Mayor Lund stated if Council approves the franchise transfer to Comcast within the 30- day timeframe but has not yet signed for the new franchise agreement with Time Warner, he asked if Comcast would object to some of the franchise terms and demand the process start all over. Mr. Coleman stated he is not privy to the discussions that have been going on between Time Warner and the City. By Federal law, they are prohibited from getting involved in operational issues. Each company has a different operating philosophy and those will come into play if there is no negotiated settlement between Time Warner and the City of Fridley in advance of the transfer. His sense is that the operating philosophies are fairly close so he does not foresee Comcast insisting on starting from square one. Another issue is what the City is agreeing to is the transfer process, but that transfer will not actually take place until the deal is closed on a national level, which would probably not occur until the second quarter of next year. That gives the City a fair amount of time to reach an agreement with Time Warner. Federal law is pretty clear that at this point, Comcast cannot engage in the regulatory or operational issues. Mayor Lund asked Mr. Coleman to comment on why the transfer to Comcast was denied in some areas of the country. Mr. Coleman said he is not familiar with the details or whether those issues have been resolved. He said there were only a handful of communities with concerns, but thousands of communities which approved the transfer. In Minnesota, almost half the communities have already approved the transfer to Comcast. He further stated that the prevailing view has been, if there is a right to continue operating under the Cable Act, that right can be legally conveyed in the transfer process. Mr. Knaak agreed, but added that the problem is what Comcast would actually have. He believed there is an obvious understanding that there is an ongoing operation and a value to that operation. He agreed that there is some kind of transferable interest, but the problem would be defining that interest. He added the fine print in the agreement between Comcast and Time Warner has to do with the ongoing and thorough disclosures between the two entities as to who owns what and how much. Mr. Coleman briefly reviewed how this change will impact Time Warner cable subscribers. Councilmember Billings asked if Comcast has branch offices or remote locations for the convenience of subscribers. Mr. Coleman said it varies by community, but they do try to manage this strategically throughout the Metro area. FRIDLEY CITY COUNCIL MEETING OF AUGUST 8, 2005 PAGE 7 Councilmember Bolkcom questioned the cost of Comcast service compared to Time Warner. Mr. Coleman explained that all of the service areas compete against each other and Comcast is held accountable based on overall satisfaction surveys. Service costs are difficult to get into because different franchise areas have different requirements and programming which impacts costs. Overall, Comcast is within pennies of the vast majority of costs to subscribers in the metropolitan area. Councilmember Bolkcom asked if Comcast will be upgrading to fiber. Mr. Coleman responded that a couple of years ago Comcast completed a full upgrade to fiber coaxial hybrid which they believe offers the best product. Councilmember Bolkcom questioned if it would make sense for Time Warner to work diligently with the City to reach an agreement within the next 30 days. Mr. Knaak stated he expects the City will be able to reach an agreement with Time Warner. He is in the process of revising the agreement submitted by Time Warner and anticipates being done within the next two or three days. Dr. Burns, City Manager, added that September 12 is the tentative date set to bring the Time Warner agreement back before Council. Councilmember Bolkcom believed it would be easier to have the agreement in place prior to the transfer to Comcast. Mr. Knaak said there is no reason why Council could not condition the approval of the transfer on the compliance with the final agreement. The timeframe for approval of the transfer is within 30 days of the hearing. Pete Eisenzimmer, 6535 Oakley Drive, asked if Comcast offers service other than television, such as telephone. Councilmember Billings responded that Comcast offers cable television, telephone and internet services just as Time Warner currently offers. Pam Reynolds, 1241 Norton, questioned the status of the Time Warner negotiations. Councilmember Billings responded that as recently as two weeks ago, there was a negotiation session between the City of Fridley's negotiating team and Time Warner's negotiating team and their attorney. An agreement was reached on all the outstanding issues. It is now just a matter of making sure that the language the attorneys come up with matches the intent of the negotiated terms. FRIDLEY CITY COUNCIL MEETING OF AUGUST 8, 2005 PAGE 8 Ms. Reynolds asked if Fridley residents have any input into those negotiations, such as public access service and the internet service. Councilmember Billings responded that the internet and telephone services are not a part of the cable franchise agreement. Ms. Reynolds stated that it is her understanding that current agreements will stay in place with the franchise transfer. Councilmember Billings responded that is correct. What Council is being asked to do is to give their stamp of approval for Comcast and Time Warner to enter into an agreement for Comcast to take over whatever position Time Warner has in relation to the City. If the City is still in negotiations with Time Warner when the transfer to Comcast occurs, what would be transferred to Comcast is the right to negotiate with the City for a cable franchise agreement. Ms. Reynolds asked if the Council will, at any time, consider the re-establishment of the City's cable commission. Mayor Lund responded it is not the function of the cable commission to participate in such negotiations. Councilmember Billings added that there will still be public access in Fridley. Based on the active involvement of Fridley residents in public access television over the past few years, the need for a studio has gone down tremendously; therefore the City is not negotiating to retain a studio for those purposes. However, if Comcast and Time Warner put this deal together, there are a number of cities currently doing business with Comcast that have excellent facilities for public access television productions which would be available, for a fee, to the City of Fridley. Don Anderson, 7304 West Circle Drive, asked what kind of internet service Comcast provides, whether or not they offer Fox Sports Net and if the channels will change. Mr. Coleman responded that there will be some channel realignment, but nothing will take place immediately. They do offer Fox Sports and the internet service they offer is full broadband with ongoing upgrades. MOTION by Councilmember Barnette, seconded by Councilmember Wolfe, to close the public hearing. After some discussion, it was determined it would be best continue this matter rather than close the public hearing. Councilmember Barnet withdrew his motion and Councilmember Wolfe withdrew his second. MOTION by Councilmember Bolkcom, seconded by Councilmember Wolfe, to continue this public hearing to the City Council meeting of August 22. FRIDLEY CITY COUNCIL MEETING OF AUGUST 8, 2005 PAGE 9 UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE MOTION CARRIED UNANIMOUSLY. 8. Consideration of the Construction of Certain Improvements: Neighborhood Street Improvement Project No. ST. 2005-3: 73'/2 Avenue Extension. MOTION by Councilmember Wolfe, seconded by Councilmember Barnette, to waive the reading and open the public hearing. Councilmember Billings explained that while there was a publication in the newspaper, there was some delay in sending out the official notice to some of the property owners. Staff has requested this matter be continued to the August 22nd meeting. MOTION by Councilmember Billings, seconded by Councilmember Bolkcom, to continue the public hearing to the August 22nd meeting. UPON A UNANIMOUS VOICE VOTE, MAYOR LUND DECLARED THE MOTION CARRIED. 9. Consideration of Modifications to the Redevelopment Plan for Redevelopment Project No. 1 and the Tax Increment Financing Plans for Tax Increment Financing Districts Nos. 1-3, 6-7, and 9-17, Creation of Tax Increment Financing District No. 18 and Adoption of a Tax Increment Financing Plan Relating Thereto. MOTION by Councilmember Bolkcom, seconded by Councilmember Billings, to waive the reading and open the public hearing. UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE MOTION CARRIED UNANIMOUSLY. Paul Bolin, Assistant Executive HRA Director, stated this public hearing is for the creation of TIF District 18 for the Gateway West project. Following the public hearing, a resolution will be required to create the TIF District. The City has been working to acquire property in the Hyde Park neighborhood since 1997 in order to develop new single family homes. Within the past six months, the final two properties were acquired. In June, Council set tonight's meeting date for the required public hearing to create the TIF District for Gateway West. Over the past few months, staff has worked with legal counsel to meet all the county and school district requirements. Gateway West will allow for somewhere between 14 to 16 new single family homes to be built in the Hyde Park neighborhood. TIF District 18 will be a 25-year redevelopment district and it does meet the statutory requirements for creation. The present value of the increment being generated and the land sale that will occur will help to recover almost $1.5 million. When all is said and done, the project will have an estimated value of just under $4 million. FRIDLEY CITY COUNCIL MEETING OF AUGUST 8, 2005 PAGE 10 Councilmember Bolkcom asked if there are additional requirements after the resolution is passed. Mr. Bolin stated he discussed this with HRA counsel who advised that only one reading is required since it is a resolution. If the resolution passes at this meeting, he planned to begin seeking bids from demolition contractors and to have the buildings down by the end of the month. Each of the homes on this site has been broken into with damage and theft occurring, including a small fire in one of the properties. The sooner the buildings are removed, the less liability the City will face. Requests for proposals were sent out to approximately 38 developers with only one response being received. The site with 16 units is too small for big developers to be interested in and yet 16 lots are too much for smaller builders. The proposal they did receive, from Family Lifestyle Development, was rejected because their housing style did not fit in the Hyde Park neighborhood and they were unwilling to pay the minimum per lot cost of $50,000. Staff is now meeting with a couple of developers who are interested in this project and hope to come to some resolution by the September HRA meeting. There will be 14 to 16 single family homes on this site. Councilmember Barnette asked if this project could happen without tax increment financing, if the City loses all of the tax income when a TIF District is established, and when the structures will be taken down on this site. Mr. Bolin explained that he hopes the demolition will be completed within the next three weeks. This type of project would not be possible without the establishment of a TIF district. Staff determined that only about three single family homes would have been possible without the TIF district. Because the City was able to purchase and demolish the blighted buildings and build new homes, there will be an estimated market value of just under $4 million. Without the TIF district, they would have had a project value of less than $2 million. The TIF district has allowed them to double the market value in that area. Councilmember Barnette commented that some people believe the City is helping to finance private business with taxpayers' dollars and that money is never recouped. Gay Cerney, redevelopment counsel and financial analyst for the City, explained that the $1.8 million increase in market value the TIF district creates is after they have netted out the approximately $800,000 in present value of tax increment that will be repaid to the City. The way the tax increment works under the statutory scheme is that the current level of taxes being paid on those properties in their current condition before demolition continues to be paid as regular taxes to all of the different taxing jurisdictions. The institution of the TIF district does not result in a net loss for the City or any other taxing jurisdiction of their current taxes. What the "but for" test wants to determine is that the City could get someone to come in and build on the vacant lots, but no developer would come in and replace structures on a one for one basis because it does not work financially. This is why the City makes a decision and does the analysis to take on a project like this. What staff has determined is that based on what they think FRIDLEY CITY COUNCIL MEETING OF AUGUST 8, 2005 PAGE 11 will be constructed and the assessed value after completion is that the project will yield approximately $720,000 in present value of money the City can use to reimburse itself. This makes economic sense for the City as we would not have had this development at all if not for the City's investment. Between the projected land sales of $800,000 plus the $720,000 value of the tax increment, the City will get within $400,000 of its actual investment. The other $400,000 should not be seen as money that will not be recouped. By putting in new value and revitalizing this area, the City is also stabilizing property values in the whole Hyde Park area. This was something staff and Council decided was a worthwhile investment for the City. Pete Eisenzimmer, 6535 Oakley Drive, stated the TIF district for Medtronic cost the taxpayers a lot of money. He did not think taxpayers' money should go into such projects. Ms. Cerney stated this is not a situation where the City is granting tax increment assistance to any private party. The City has already made an investment in the Hyde Park area and is looking to create the TIF district to recoup the largest part of its investment. According to all projections, they believe the City will end up about $400,000 short. This is a situation where the City made the decision to invest knowing that it would probably not get all its money back, but if you consider other factors such as maintaining property values in the area as a whole, it is less clear that the investment is not being recovered. Councilmember Billings asked if there are other TIF districts where the City's HRA is actually recovering more money than they are spending. Ms. Cerney responded yes. If the density had been increased on the lots in the Hyde Park area, this project could have resulted in a positive cash flow. But that would not have been desirable from a City planning standpoint. The HRA and City staff wanted this to be a development that would be compatible with the existing houses and enhance the neighborhood. Dr. Burns commented that every redevelopment project's major goal is to add to the image of the City of Fridley. We need to be concerned about areas that detract from the City's image and invest in redevelopment. Ms. Cerney pointed out that a neighboring community recently had an "up tick" in their general obligation bond rating based, in part, on that community's long history of redevelopment. Councilmember Bolkcom stated that many Fridley residents oppose high density housing and this is an area where the City chose to put in single family homes even though it meant less return to the City than multi-family housing would have generated. MOTION by Councilmember Bolkcom, seconded by Councilmember Wolfe, to close the public hearing. FRIDLEY CITY COUNCIL MEETING OF AUGUST 8, 2005 PAGE 12 UPON A UNANIMOUS VOICE VOTE, MAYOR LUND DECLARED THE PUBLIC HEARING CLOSED. NEW BUSINESS: 10. Resolution Modifying the Redevelopment Plan for Redevelopment Project No. 1 and the Tax Increment Financing Plans for Tax Increment Financing Districts Nos. 1-3, 6-7, and 9-17 to Reflect Increased Project Costs and Increased Bonding Authority Within Redevelopment Project No. 1, Creating Tax Increment Financing District No. 18 and Adopting a Tax Increment Financing Plan Relating Thereto. MOTION by Councilmember Bolkcom, seconded by Councilmember Wolfe, to adopt Resolution No. 2005-36. UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE MOTION CARRIED UNANIMOUSLY. 11. Informal Status Reports. Councilmember Bolkcom commended the personnel of the Police and Fire Departments on a successful National Night Out on August 2. ADJOURN: MOTION by Councilmember Barnette, seconded by Councilmember Wolfe, to adjourn. UPON A UNANIMOUS VOICE VOTE, MAYOR LUND DECLARED THE MEETING ADJOURNED AT 10:11 PM. Respectfully submitted by, Rebecca Brazys Recording Secretary ��� Scott�L .�n�d �" Mayor