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HRAM 08/07/2014 CITY OF FRIDLEY HOUSING AND REDEVELOPMENT AUTHORITY COMMISSION August 7, 2014 CALL TO ORDER: Chairperson Commers called the HRA Meeting to order at 7:04 p.m. ROLL CALL: MEMBERS PRESENT: Larry Commers Pat Gabel Stephen Eggert Gordon Backlund MEMBERS ABSENT: William Holm OTHERS PRESENT: Paul Bolin, HRA Assistant Executive Director Scott Hickok, Community Development Director ACTION ITEMS: 1.Approval of Expenditures MOTION by Commissioner Gabel to approve the expenditures. Seconded by Commissioner Backlund. Commissioner Gabel asked what the $291,000 transfer to Medtronic was for. Paul Bolin replied it was the TIF Payment. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY 2.Approval of June 5, 2014, Meeting Minutes Commissioner Gabel asked for the following corrections to be made: rd Page 2, item 4, first paragraph, fourth sentence 3 should be spelled out “third”. Page 4, first sentence “Chairperson” is spelled incorrectly. Commissioner Backlund noted on page 3, first paragraph, second sentence insurance rating should be “AVII”. MOTION by Commissioner Eggert to approve the minutes as amended. Seconded by Commissioner Gabel. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MINUTES APPROVED AS AMENDED rd 3.Approval of HRP Sale of 5725 3 Street MOTION by Commissioner Gabel to open the public hearing. Seconded by Commissioner Eggert. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED AND THE PUBLIC HEARING OPENED AT 7:08 P.M. Paul Bolin, HRA Assistant Executive Director, stated that Kaleab Girma, of Real Estate Transformers, submitted a lot reservation agreement to build a new home on the lot located at rd 5725 3 Street. The builder has been designing the home with input from the buyer. Real Estate Transformers plans to build a three-level home with just over 2,200 square feet of finished living area. The home will have 4 bedrooms and 2 ½ bathrooms. The exterior of the home will utilize a blend of maintenance free materials and incorporate shakes and stone on the front of the home. Mr. Bolin said that staff recommends approval of the resolution, authorizing the sale to Real Estate Transformers. This is a new investment in the neighborhood and the proposed home design will be consistent with HRP Guidelines. Chairperson Commers asked if there were still any vacant lots. th Mr. Bolin replied yes; there is a vacant lot at 291 57 Place. Commissioner Gabel asked if the bedrooms in the lower level were finished. Mr. Bolin replied that the plan is to finish the entire home. Commissioner Gabel said that the lot was unique and she wondered if they figured out the setback. Mr. Bolin replied yes they have. th Commissioner Gabel asked if someone moved into the house on the end of 57, the one that was just built. Mr. Bolin replied that they are still working on finishing the home and there is not a buyer yet. Commissioner Gabel asked what the price was on this home. Mr. Bolin replied that it will be over $250,000. MOTION by Commissioner Eggert to close the public hearing. Seconded by Commissioner Backlund. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED AND THE PUBLIC HEARING CLOSED AT 7:10 P.M. rd MOTION by Commissioner Gabel to approve the Sale of 5725 3 Street NE. Seconded by Commissioner Backlund. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY 4.Approval of Resolution Acknowledging Ownership Allocation of Cielo Partners, LLC for GWNE Redevelopment Agreement Paul Bolin , Assistant HRA Executive Director, stated that over the past two years, the Authority worked with trident Development on the redevelopment of the Gateway Northeast properties. Last June, the Authority approved a development agreement and authorized the sale of the property to Cielo Partners. Due to increases in the costs of constructing the project, Cielo has taken on an additional partner in the project. The Authority is being asked to acknowledge the addition of this partner to the development agreement. Mr. Bolin said that staff recommends the Authority to approve the resolution acknowledging ownership allocation of Cielo Partners, LLC for the Gateway Northeast Redevelopment Agreement. Chairperson Commers asked what staff knew about Mr. Bame. Mr. Bolin replied that Mr. Fink’s bank has done a background check on him and are confident in his ability to assist this project. Chairperson Commers asked who will be making the operating management decisions. Roger Fink, Developer, replied that there are legal documents that dictate who will make the decisions. The way the documents read right now there will be three governors of the company for significant decisions about the company and ongoing operations will be shared with those individuals. There will also be officers in the organization as well. Significant decisions will go back to the governors and there is 1/3 vote for each of them. Mr. Bame operates a large petroleum based product called Lube Tech. He runs a successful business. Chairperson Commers asked for confirmation that the original Trident Group will still be active on the day to day management and others will serve as the Board of Directors. Mr. Fink replied yes; this is Mr. Bame’s first real estate project and he will rely heavily on Trident to make appropriate decisions and manage the property correctly. Commissioner Eggert asked about Don Rachel; it sounded like Rachel Properties has participated with them in other developments. Mr. Fink replied yes; they have worked with them in the past. Mr. Rachel likes to be informed but isn’t involved a lot in day to day operations. Commissioner Eggert asked if Mr. Rachel's construction company would participate in this project. Mr. Fink said they are considering his bid now, but he has to be competitive to get there, the decision has not been made yet. MOTION by Commissioner Backlund to approve the amendment to the ownership structure for the Cielo partners. Seconded by Commissioner Eggert. Commissioner Eggert asked if Jim Casserly had a comment on this new partnership. Jim Casserly , Development Consultant, said that this isn’t a real issue if they do another phase and have a different ownership group. They will need to come back and talk to the Authority again if anything is different than what is in the agreement. This has to deal with the first phase. The passage of time, and requirement of additional investment, is what has created this other arrangement in front of the Authority. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY Scott Hickok, Development Director, noted that there will be a material change on the exterior of the building. The stucco like material that was going to be used requires heating the area for winter construction and for the building to be tented. Trident would like to go to another product that doesn’t require tenting. There is a mix of material and colors and the building won’t change in appearance. There may be some more stone closer to the ground at the base. The look of this new material will be the same as the illustration. This new product is a cement board prodcut and is a weather resilient, long lasting product for this scale of project. Mr. Fink said this product was introduced to him nine years ago. The company's production and warehouse is in the United States. The product is poured into a mold and pressed under high pressure to be sure air is out before it is dried/packaged and shipped. It is a superior product. Several apartment buildings use this product. Commissioner Eggert said it would help maintain the property. Mr. Fink added that there is a 25 year warranty on the product and paint. Commissioner Backlund asked how long the product has been on the market. Mr. Fink replied that he became aware of it nine years ago. Commissioner Backlund asked if Mr. Fink knew the history on how it stands up to Minnesota’s extreme weather conditions. Mr. Fink said this is the first time he has used it, but believes it will stand up very well. It is a flat stone product. 5.Approval of Resolution Determining that Parcel is Occupied by Structurally Substandard Buildings and is to be Included in a TIF District Paul Bolin , Assistant HRA Executive Director, stated that the Columbia Arena is a substandard building. A TIF district is likely needed for recovering redevelopment costs. To be considered substandard the cost to meet code standard must exceed 15% which the LHB Report from 2009 showed 24.3%. The lot coverage must exceed 15% of land area and this site has over 60% lot coverage. Mr. Bolin said that the buildings and parcel far exceed the minimum requirements for inclusion in a potential TIF District. Staff recommends the Authority approve the resolution, determining that the parcel is occupied by structurally substandard buildings and is to be included in a tax increment district. This adoption allows an opportunity to recover costs and also allows for the demolition to move forward. Chairperson Commers asked for explanation of the future TIF district. Mr. Bolin replied that this will give the Authority the ability to recover some of its costs for redeveloping this site. By adopting this resolution, it allows the ability to create a TIF District at a later dated and then have this property included in that district. Also the property could be demolished now rather than waiting until the district is created. Chairperson Commers asked what the timeframe was once this is acquired and demolished before the TIF District needed to be created. Mr. Bolin replied seven years; four years to create the district and another three years to get a plan in place. Jim Casserly added that it is three years from the time the building is demolished to create a district. MOTION by Commissioner Gabel to Approve the Resolution Determining that Parcel is Occupied by Structurally Substandard Buildings and is to be Included in a TIF District. Seconded by Commissioner Eggert. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY 6.Approval of Resolution Authorizing Interfund Loans for Columbia Arena Redevelopment Paul Bolin , Assistant HRA Executive Director, said that staff recommends creating a “Columbia Arena” TIF District Fund. There would be an Interfund loan from the HRA and a loan from the City. The City share is from a closed bond fund ($1.5 M) and the HRA share would come from the general fund. The loans will be repaid through future land sales and TIF. Staff recommends approval of the resolution approving interfund loans associated with the proposed Columbia Arena redevelopment project and the repayment of a City loan Chairperson Commers asked what the Authority’s obligation would be if there aren’t enough funds from the TIF for the repayment of the loans. Jim Casserly , Development Consultant, replied that the Authority has control of the TIF that would come from other districts. The TIF from this district would go for repayment of the notes we are talking about. The TIF from other districts is available to make those payments. The Authority has control as to how TIF from other districts will be used. The provision in this resolution is clear on the bottom of page two. The Authority has no obligation to pay TIF loans and the city loan which may remain unpaid after the final payment date. That provision is pretty clear. Also the Authority can forgive amounts of principal or interest. The resolution allows the Authority to use TIF from other districts. Chairperson Commers was concerned in 2.03 if the Authority is required to make annual payments out of TIF from other districts. It seemed to him that the Authority was required to make that payment. Mr. Casserly said that they have tried to use flexible language for that purpose; to pay the note from a different tax district. Mr. Bolin added that 2.03 is a permissive statement and it doesn’t obligate the Authority to use those other TIF funds. Mr. Casserly said that the Authority may not make any payments from any funds, if funds are needed for other activities than the Columbia arena. If the Authority needs to advance funds for another project they have that option. Commissioner Backlund asked what would happen if the money generated was greater than what was needed to pay the loan back; could that extra money be used for other things. Mr. Casserly replied that there would be a legitimate reason to use the tax increment and if it falls within the tax increment act the Authority could use it. Those extra funds would not go back to the county. The Authority wouldn’t know if there would be excess until many years into the district. Commissioner Eggert asked if there should be an amortization schedule on the two loans. Mr. Casserly replied that there never is an amortization schedules because the Authority doesn’t know what kind of increment will have revenues. There is no way to figure out an amortization schedule; they set a limit at 3.5% interest, but it could be less than that. This is the interest the Authority is paying themselves. The Authority is self-financing which allows maximum flexibility in the process. Chairperson Commers said that there is no payment on the notes until tax increment is collected. Mr. Casserly replied that is correct Chairperson Commers asked if interest would accrue during that seven year period. Mr. Casserly replied yes and the Authority has the ability to forgive interest. Commissioner Gabel said that it can get complicated if the Authority, for example, decided to build an infrastructure with TIF funds and not pay back the city that would be ok? Mr. Casserly replied that the risk is apparent to the city and the Authority’s general fund. If the Authority doesn’t have the resources to repay they don’t have to repay. Commissioner Gabel asked if the City Council will read this resolution. Mr. Casserly replied yes, their resolution is to authorize a loan. They will not make an advance until the Authority approves this resolution. MOTION by Commissioner Backlund to approve the Resolution Determining that Parcel is Occupied by Structurally Substandard Buildings and is to be Included in a TIF District. Seconded by Commissioner Eggert. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY Commissioner Gabel asked why some TIF districts were pool-able and some were not. Mr. Casserly replied that it is a function from when they were created. Commissioner Backlund asked if the Freon was Freon 22. Mr. Bolin replied that until the borings are done, we won't know for certain, it could have been Freon 12 based on the age of the first rink. Wally Wysopal, City Manager, asked for clarification if staff had actual facts that Freon was disposed of on the site. Mr. Bolin replied that there is no evidence of what happened to the Freon. Mr. Wysopal said that the findings would be investigated and reported publicly. Mr. Bolin said that an air vapor study was done and nothing showed up in that. Informational Items 1.2014 HRA Review of Fund Balances for Planning Purposes JimCasserly, Development Consultant,stated that this report is based on cash flows that allows the Authority to make investments in a number of programs and activities. He has some suggestions in a memo that accompanies this to be reviewed over the next several months. Greg Johnson , Development Consultant, reviewed the fund balances with the Authority. 2.CEE Programs Update Paul Bolin, HRA Assistant Executive Director, stated that there was one loan last month making a total of six year to date. There were no remodel advisor visits, for a year to date total of two. However, there were 22 Home Energy Squad Visits with 16 more scheduled so far for August. Mr. Bolin added that this summer, staff is meeting with businesses to learn if there is anything the City can do to help their businesses grow in Fridley. The last two weeks staff met with 8-10 businesses. Staff will present a recap of these visits at the October meeting. Staff is trying to meet with up to 40 businesses to identify trends and figure out what the city and/or HRA can do to help our businesses do well. Adjournment MOTION by Commissioner Gabel to adjourn. Seconded by Commissioner Eggert. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY AND DECLARED THE MEETING ADJOURNED AT 9:35 P.M.