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HRA 10/03/2013 CITY OF FRIDLEY HOUSING AND REDEVELOPMENT AUTHORITY COMMISSION October 3, 2013 CALL TO ORDER: Chairperson Commers called the HRA Meeting to order at 7:00 p.m. ROLL CALL: MEMBERS PRESENT: Larry Commers Pat Gabel Stephen Eggert William Holm Gordon Backlund OTHERS PRESENT: Wally Wysopal, City Manager Paul Bolin, HRA Assistant Executive Director Scott Hickok, Community Development Director Darin Nelson, Finance Director Becky Kiernan, Accountant Jim Casserly, Development Consultant Greg Johnson, Accountant Paul Hyde, Real Estate Recycling (RER) ACTION ITEMS: 1.Approval of Expenditures MOTION by Commissioner Gabel to approve the expenditures. Seconded by Commissioner Backlund. UPON VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY 2.Approval of September 3, 2013 Meeting Minutes MOTION by Commissioner Eggert to approve the minutes as presented. Seconded by Commissioner Holm. Commissioner Gabel noted on page two, number four, first paragraph, third sentence should read the “Revenues from booth rental cover the expenses for show.” And the last sentence should read the “work for 2014 Home & Garden Show.” The last page, item number three, second paragraph, should second sentence should read “He didn’t think the Authority give up on it.” UPON VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MINUTES APPROVED AS AMENDED HRA Meeting of October 3, 2013 2 3.Approval of 2014 Meeting Dates MOTION by Commissioner Holm to approve the 2014 Meeting dates. Seconded by Commissioner Backlund. Commissioner Gabel didn’t think the July 3 meeting should take place, she thought it could stay on the schedule and if a meeting is needed in July the date could be switched. Paul Bolin, HRA Assistant Executive Director, said that in the past if a July meeting was th necessary the Authority would meet the week before or after the 4 of July. UPON VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY 4.Approval of Hyde Development’s Redevelopment Agreement Paul Bolin, HRA Assistant Executive Director, said that over the years this site at 4800 East River Road has gone by many different names but now this site will be promoted as the Northern Stacks Business Park. This will be a big part of the marketing materials and staff wanted to make the Authority aware of the new name. Mr. Bolin said that meetings, regarding redevelopment of the site, started with Mr. Hyde in July of 2011 and by November 2011 an interim agreement was signed. In April of 2012 TIF District #20 was created along with the hazardous substance sub-district (HSS). In June of 2013 the term sheet was agreed upon which turned into the redevelopment contract submitted to the Authority in October of 2013. The redevelopment contract is a large document and lays out the obligations and responsibilities for the HRA and Hyde Development. The HRA will provide TIF assistance and assist in obtaining grants. Hyde Development will develop the site as proposed and clean up the contamination in accordance with Response Action Plans (RAP). Staff recommends approval of the Redevelopment Contract which will allow construction to begin in the spring of 2014. Paul Hyde, Hyde Development, said that they are thrilled to see the logo and a new branding to honor the history this site presents. The leasing interest has been very active over the last six weeks. They are actively showing space and sending out proposals to interested parties. On the environmental side they have completed the phase one site investigation and are starting the phase two site environmental investigation. They found 5-6 different things, some of which they were st expecting and some they weren’t expecting. On November 1 they will apply for Metropolitan Council and DEED cleanup grants to supplement the tax increment to help cleanup and redevelop the site. The development agreement has been approved and signed so they will be able to go in on st November 1 with grant applications. All the tools are in place to get the work done. Commissioner Backlund asked about the wells on the property and if they will be removed as they clean up the site. Mr. Hyde said that there are wells pumping ground water on west side of the property extracting ground water and those wells will not be touched. The other wells are monitoring wells. If they need to be relocated, that will be done; if wells can be removed they will be removed. HRA Meeting of October 3, 2013 3 Chairperson Commers asked for a rundown on the financing of the project. Jim Casserly , Development Consultant, said that a summary of project financing was included in part of the documents that were sent out to the Authority. There are four phases totaling about $20M per phase. Tax increment will start accumulating in 2015. The paperwork shows examples of a slow and fast build out. The reason for this analysis is because the Authority is using money G from their eneral Fund balances. Because the General Fund has other commitments and demands, staff needed to make sure there is enough money in the General Fund to loan to the Hazardous Substance Sub-district (HSS). Mr. Casserly stated that there will be a resolution at the November meeting to authorize a loan from the General Fund to the HSS. That loan then becomes the funds available for grants to the developer and the developer is not repaying those grants. Taxes that currently exist and taxes from the sub-district will repay the loans back to the General Fund. At the end of the day the Authority’s General Fund will be paid back all of the money. Chairperson Commers asked how long it will take the Authority to recover the funds. Mr. Casserly replied 18-20 years. Wally Wysopal , City Manager, asked staff to define slow and fast build out. Greg Johnson, Accountant, replied that in the slow build out a new phase would start every three years and in the fast build out a new phase would start every 18 months. Mr. Johnson reviewed the tax increment analysis and revenue notes to the developer. This shows there would be about $16.76M in revenue notes available to the developer and the contract would create a max of $20M. This example is assuming a 6% interest rate on the revenue notes. Mr. Casserly added that the interest rate on the agreement is what has been negotiated with the lenders. These notes will be used for security so Mr. Hyde can maximize the principal on the notes and get the best interest rate he can. The exception is any note that goes to the developer that the developer is keeping and not using as security for another loan. It is that note that is subject to limitations in the agreement. Mr. Hyde said that people think the superfund pays for the cleanup which is doesn’t. It allows the EPA to make grants to DEED or counties and once the EPA money is received they can loan it out and pay a nominal interest rate. This is nice because not a lot of money is spent on interest; that is the goal. TIF funds are paid off faster because more money goes to the principal. The DEED st application that will be submitted November 1 is for grants and there is an appendix that answers supplemental questions that relate to the eligibility of these separate programs. Mr. Casserly noted that if an interest rate of 2-3% can be achieved the district will be able to be closed down earlier because there are fewer obligations. Given the size of this project there will be private sector loans at a higher interest rate plus the EPA loans. The revenue note portion is similar to what has been done in the past; issuing a number of notes at different interest rates and to different payees. HRA Meeting of October 3, 2013 4 Chairperson Commers asked if the purpose to issue bonds was to take the notes out. Mr. Casserly replied that when the notes are paid off, the developer can use the lender again to secure additional funds for phases 2, 3 or 4. Everyone would like to use EPA funds but that may not be enough so some funds will be issued in notes to lenders to raise funds. Chairperson Commers noted that there is a difference in the interest on notes vs. bonds. Mr. Casserly said that it is noted in the agreement to only issue bonds to take out notes. Notes can only be issued when the project is complete and bonds can only be issued to take out notes. Once the project is completed, it can be identified with certainty that this project will be there to pay taxes, which gives more assurance. Commissioner Eggert added that it is a mechanism to reduce risk by issuing bonds on things that may not get built. Chairperson Commers noted that sometimes insurance is issued on bonds but that is an additional cost. Commissioner Holm asked if the revenue bonds were issued tax exempt like municipal general obligation bonds. Mr. Casserly replied that it would all be taxable. Commissioner Backlund said that the risk is that obligations may be committed and there is a potential for a loss of finances by supporting the project as it may or may not succeed. He didn’t think that it is a worthy discussion at this point and time. The Authority will have to take some risk and the risk seems to be minimized. Chairperson Commers asked about the timing of how the project has to progress before the grants or TIF starts. Mr. Casserly replied that this will all happen in multiple phases. Notes will not be issued until the project is completed. Commissioner Backlund noted that it is not all upfront; pay and receive as you go. Mr. Casserly replied that is what allows the Authority to help with a project of this size. Financing is done incrementally; the first grant is being secured and subsequent grants are provided when a phase is completed. The base taxes will pay for the project. Chairperson Commers asked if the first payment is guaranteed. Mr. Casserly replied that it is a traditional kind of loan and will turn into a grant when the first building starts. MOTION by Commissioner Gabel to approve Hyde Development’s Redevelopment Agreement. Seconded by Commissioner Eggert. HRA Meeting of October 3, 2013 5 UPON VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY 5.Approval of Resolution Supporting Grant Application – MN DEED Paul Bolin, HRA Assistant Executive Director, stated that he will present item nos. 5 and 6 and then the Authority will vote separately on the items. The Phase I development site investigation was completed in August and the results and RAP will be sent to the MPCA tomorrow. On August th 15 an application was sent to DEED for the Redevelopment Grant and a decision is expected any day. The Phase I development plan for Hyde Development is completed, the rezoning process is underway and was approved by the Planning Commission on September 18 and will go before City Council on October 14. The marketing strategy is underway and several prospects are interested for spring 2014 construction. The budget project indicates a need for $10.4M in grants from outside sources. The development agreement states that the redeveloper and Authority will cooperate and use their best efforts to seek grants from the State of Minnesota, Metropolitan Council, DEED, Anoka County, Department of Navy, EPA or other available public funds. Mr. Bolin stated that the DEED Contamination Cleanup Grant Program assists with the contamination investigations and development of Response Action Plans (RAP) or with contamination prescribed in the Minnesota Pollution Control Agency (MPCA). These grants require a 25% local match, participation in the Metropolitan Council’s Local Housing Incentive Programs for Twin cities metro-area applicants, and the serious expectation that the site will be redeveloped. DEED is considering Hyde’s acquisition cost as a local match and Tax Base Revitalization Account (TBRA) funds may be used for 13% of the match. Mr. Bolin said that the TBRA provides $5M annually to investigate and cleanup brownfields, contaminated land, ground water or buildings for redevelopment. Staff recommends that the Authority adopt the resolution, approving application to enter into a funding agreement with DEED, and act as the project sponsor for the Contamination Cleanup Grant funds necessary to redevelop the property located at 4800 East River Road. Staff also recommends that the Authority adopt a Resolution, approving application to Metropolitan Council’s Tax Base Revitalization Account, for grant funds necessary to redevelop the property located at 4800 East River Road. Chairperson Commers asked about the 25% match. Paul Hyde, RER, replied that there is a broad match of 25%, 13% for Met Council or other funds that could be in the tax increment and 12% on funds that are not TIF. There are plenty of match funds available and getting awarded the grant is the main focus. MOTION by Commissioner Gabel to approve the Resolution Supporting Grant Application – MN DEED. Seconded by Commissioner Backlund. UPON VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY 6.Approval of Resolution Supporting Grant Application – Met Council HRA Meeting of October 3, 2013 6 MOTION by Commissioner Holm to approve the Resolution Supporting Grant Application – Met Council. Seconded by Commissioner Backlund. UPON VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY 7.Approval of Award for Demolition Services – GWNE & HRP Paul Bolin, HRA Assistant Executive Director, stated that two building are to be demolished; the Fridley Animal Hospital at 5895 University and a single family home at 561 Lafayette Street. Staff and Public Works ran the formal quote process. The quotes were reviewed on October 3, 2013. Four quotes were received and the bids ranged from $43,880 to $68,280. The lowest bid was Buberl Recycling. Staff recommends awarding work to Buberl Recycling. The quote was within staff estimates and Buberl has performed well on past HRA jobs. MOTION by Commissioner Holm to award contract for demolition services – GWNE & HRP to Buberl Recycling. Seconded by Commissioner Backlund. UPON VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY INFORMATIONAL ITEMS: 1.HRA Fund Balances Greg Johnson, Accountant, reviewed the cash flow report and summarized where the Authority has been and where they are going. At the end of 2012 the fund balance was $10.8M and the cash balance was $10M; the revolving loan fund has about $1M in there and that is the reason for the difference. The biggest difference is $4.5M shortfall in the newer TIF districts. Details are listed on #11. Funds can be advanced to cover shortfalls in newer districts and as districts advance they will repay back the General Fund. Mr. Johnson said that there is a bigger shortfall in Gateway NE and that district can’t recover $4.5M in outstanding obligations. Some funds, maybe $2-3M may be recovered. Other TIF funds may be used to pay Gateway NE and then funds could be paid back to the General Fund. They can work with the finance department and identify transfers that may be necessary. Mr. Johnson said that TIF districts 1 and 3 are not cleaned up yet and those funds will go back to the county and distributed to the city and school districts. Medtronic added tax capacity and value in the last year. The net impact of this change is approximately $12.16M of market value and has become available for all taxing jurisdictions to levy against which will have the effect of reducing tax rates assuming that all other variables are held constant. Commissioner Backlund asked how much of that increase is beyond tax increment and goes to physical disparities. Mr. Johnson was not sure; maybe 1/3. HRA Meeting of October 3, 2013 7 Mr. Johnson said that there is quite a bit of cash in the Onan district and staff should consider transferring to cover the shortfalls in Gateway West and NE. These funds could reduce the negatives in the Gateway districts and the cash would flow back to the HRA General Fund. Chairperson Commers said that looking at the TIF District overview it shows that we started with a value of $30M and through different programs added $302M. Mr. Casserly replied yes, this is a nice summary of what has happened since inception. 2.Housing Loan Program Update Paul Bolin, HRA Assistant Executive Director, reported that in September one RLF loan and one other loan was closed. There was one Remodeling Advisor Visit making a total of 5 year to date. Mr. Bolin thanked Becky Kiernan for her years of employment with the City of Fridley. She has been with the City since July 2009 and has done a great job. She will be missed. Chairperson Commers added that it is Fridley’s loss and Dakota County’s gain. On behalf of the Authority he thanked Becky for her work with the HRA. ADJOURNMENT: MOTION by Commissioner Gabel to Adjourn. Seconded by Commissioner Eggert. UPON VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED AND THE MEETING ADJOURNED AT 8:35 P.M. Respectfully Submitted, Krista Peterson, Recording Secretary