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HRAM 09/01/2016 CITY OF FRIDLEY HOUSING AND REDEVELOPMENT AUTHORITY COMMISSION SEPTEMBER 1, 2016 CHAIRPERSON PRO TEM Gabel called the Housing and Redevelopment Authority Meeting to order at 7:00 p.m. MEMBERS PRESENT: William Holm Pat Gabel Stephen Eggert Gordon Backlund MEMBER ABSENT: Lawrence Commers OTHERS PRESENT: Paul Bolin, HRA Assistant Executive Director Wally Wysopal, City Manager Shelly Peterson, Finance Director/Treasurer Jim Casserly, Development Consultant Greg Johnson, City Accountant Action Items 1. Approval of Expenditures. MOTION by Commissioner Holm to approve the expenditures. Seconded by Commissioner Eggert. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON PRO TEM GABEL DECLARED THE MOTION CARRIED UNANIMOUSLY. 2. Approval of the July 14, 2016, Meeting Minutes. MOTION by Commission Holm to approve the minutes. Seconded by Commissioner Eggert. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON PRO TEM GABEL DECLARED THE MOTION CARRIED UNANIMOUSLY. 3. Resolution Adopting a 2016 Tax Levy Collectible in 2017. Paul Bolin , HRA Assistant Executive Director, stated the Minnesota State Statutes authorize housing authorities to levy properties within their community to support their housing and redevelopment efforts. That levy is equal to .0185 percent of estimated market value. Based on an estimated market value of $2,207,363,400, the 2017 levy will allow the Authority to collect $408,000. The impact this has on Fridley taxpayers is if their home is worth $150,000, it would cost $27.75. If someone owned a $1 million commercial property, it would be $185.00. Housing and Redevelopment Authority Meeting of September 1, 2016 2 Mr. Bolin presented a graph showing historically where the levy amounts have been over the past ten years They are collecting $11,000 more this year than they did last year. The amount is about $92,000 less than they collected in 2009 and 2010. It typically takes about two years for changes in market value to really show up in the levy. The big jump between 2007 and 2009 was when the Legislature changed the amount that authorities could levy. They increased that percentage just slightly. It made quite a bit of difference. That reflected the property values that were increasing in 2005, 2006, and 2007. That is where the big jump came from and then there was the decline from 2010 to 2013 which were affected by the 2008 crash. It is turning around, and looking at some of the numbers for next year, they should see another increase. Mr. Bolin stated staff recommends the approval of the resolution in the HRA's packet. This item does require Council action, and that is set to take place on Monday, September 12. Once Council acts on it, the levy is then certified. It will be forwarded to the County by September 15. Commissioner Backlund asked if they ever split the $408,000 into private property and commercial/industrial, so they know what the split is between the two. Mr. Bolin replied, he does not know what that split is. He thought Ms. Peterson might have that information. Commissioner Backlund stated he is just curious because, does that not have an effect on what they give the central taxing district under fiscal disparities? And, is the common base that is redistributed from an industrial standpoint out to everybody in the seven-county area? Shelly Peterson, Finance Director/Treasurer, stated as to fiscal disparities, she could take the $408,000, look at where their market values are right now, determine how much of that is commercial, and give them an estimate of approximately how much of the levy is paid for by commercial customers vs. residential. Commissioner Backlund replied, and he is just asking approximately. Ms. Peterson replied staff can provide the details for what makes the estimated market values. MOTION by Commission Backlund to adopt HRA Resolution No. 2016-06. Seconded by Commissioner Eggert. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON PRO TEM GABEL DECLARED THE MOTION CARRIED UNANIMOUSLY. 4. Columbia Arena Redevelopment TIF District Creation. Paul Bolin, HRA Assistant Executive Director,stated this item is to create Tax Increment District No. 23. This site includes the former Columbia Arena, the Public Works site, the Fire Training Center, and the eastern two-thirds of a park in that neighborhood. Housing and Redevelopment Authority Meeting of September 1, 2016 3 Mr. Bolin stated as they are aware, there has been discussion of potentially putting a City campus on a portion of this site. If that does happen, that portion would be taken out of the Tax Increment District. Mr. Bolin stated staff is asking for the HRA to adopt a resolution that will modify the City's redevelopment plans, the TIF plans for the existing districts, and the modifications incorporating the project costs that are projected for this project. It also reflects the additional bonding authority the HRA would have as a result of adding this district to its redevelopment program. The District is going to be necessary to assist with what staff estimates to be over $14 million of extraordinary development costs for things such as demolition and environmental remediation. There will also be some geotechnical soil corrections, and utilities and roadways that need to be installed and in some cases, relocated. Mr. Bolin stated staff has based the TIF plans assumptions. In this case, they are assuming the site will be built out over the next five to six years. When it is all completed, there will be 15 patio homes; 30 townhomes; 360 senior housing units; 280 market-rate units; and up to about 15,000 square feet of retail. Mr. Bolin stated once that is all constructed, it would have a value of about $75 million and would generate approximately $24 million in increment over the life of the district. The $24 million would have a present value of about $13.5 million. Mr. Bolin stated staff recommends approval of the resolution modifying the existing TIF plans and creating the new TIF District No. 23. The City Council will hold a public hearing on this and be asked to adopt a similar resolution on Monday, September 12. CHAIRPERSON PRO TEM Gabel asked if they put a road in and it will be used by both the neighborhood and City staff, how would they determine if that was eligible. Mr. Bolin replied public roadways are eligible. Those are one of those typical costs that they assist with. A lot of times there are utilities that need to be moved and installed as part of a roadway going in. Those are TIF eligible. What would not be eligible would be, i.e., a driveway in the municipal campus portion of a development. Everything that would be TIF eligible will be really those kinds of costs that the Authority has assisted other projects with. Commissioner Eggert asked Mr. Casserly to talk about the timing of creating this TIF district and the flexibility they have going into the future as they explore development there. Jim Casserly , Development Consultant, replied this is a multi-phased, multi-year development. They anticipate in Phase I which hopefully will commence next year, they are looking at 15 owner-occupied homes, because that area is essentially ready to go with a minimum amount of public improvements that are needed. Phase II requires some additional infrastructure. They need to have a lot more investment in this site to make Phases II, III, IV, and V work. They have really spread out the development and they are conservative with their timing, which is why there are five phases spread over a number of years. Housing and Redevelopment Authority Meeting of September 1, 2016 4 Attorney Casserly stated they are a little bit expansive on what they think will actually go into the development because, when you create a district, you are really limited on the income you can spend based on what goes into your plan. They always like to think, as expansively as they can to shape the plan. They try to be as conservative as they can when they think increment will actually occur. Attorney Casserly stated it is a trade-off. If they move all these numbers up a couple of years, there would definitely be more increment generated; however, you may not have the kind of value that they are hopeful will be there. Attorney Casserly stated they try to build in some flexibility in how they think the development will occur. Also, they have deferred the collection of increment (just like they did on their last two districts), for a year or two; and that gives them an opportunity to have a longer phasing time. What they are doing in this district is really what they did for Gateway Northeast because they anticipated that would take some time to build out. In fact, it is going very well. In their original analysis, they thought it was going to take longer. They do not know when Phase III will occur. However, the first two phases are happening pretty quickly. They really try and build in as much time as they can just because history has taught them that these things do not go so smoothly. Commissioner Holm stated he noticed there are some assumptions built into the TIF District as to what they will have in Phases I and II--townhomes and patio homes. However, they have not received any information from developers yet on how that may occur. He asked if they were committed to proceeding with Phases I and II as outlined, or if they had some flexibility in modifying that in the event they find developers who have some other ideas that might be better for the City and for the HRA. Attorney Casserly replied this document does not govern how the development occurs. This is simply the best guess as to the kind of development that will occur. They are not sure of the timing of the development. They just made what they thought were reasonable assumptions based on some early site plans that have been put together. There is in no way a commitment on what is going to occur. That is all subject to the normal Council overview and permitting process. When any developer comes in to work with the HRA, they exercise their normal oversight and how they want to assist with the development. It may be in a completely different phasing or structure. Attorney Casserly stated what really has happened here is they know they made a very substantial investment in this site already and will be asked to make additional investments. This allows the HRA to recapture the investment they have already made in the site and it gives them the ability to put in some additional infrastructure and improvements to get a higher quality and more dense development than what would normally occur. They have already invested several million dollars into this site. Creating this district allows them to recapture that money and to repay their general fund. However, it does not commit to this type of timing. This is just what they have to do in order to have some understanding of the kind of revenue that would be generated. Housing and Redevelopment Authority Meeting of September 1, 2016 5 Commissioner Eggert asked, by creating the TIF District in advance, what is the impact on the development community. Attorney Casserly replied it shows that they are very serious about trying to develop this site. Also, it allows them to be creative in their dealings with developers because they already created the district and they are in a position to assist. What will probably happen is there are geotechnical issues that are very substantial on this site, and they do not want to spend any more money. They already have several million dollars into it, and they are going to be putting in roads and other kinds of infrastructure. Attorney Casserly stated the development community is going to come in and say they love the site and will pay $8,000 a unit but, unfortunately, it is going to cost them $6,000 to do the geotechnical work. The HRA is in a good position to deal with all of the issues. Attorney Casserly stated they have the flexibility with their sales. They need the increment to reimburse the HRA for the expenditures it already made and will continue to make to get the site prepared. MOTION by Commissioner Holm to adopt HRA Resolution No. 2016-07. Seconded by Commissioner Eggert. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON PRO TEM GABEL DECLARED THE MOTION CARRIED UNANIMOUSLY. 5. Authorize RFP for Private Development – Columbia Arena . Paul Bolin, Executive Assistant HRA Director,stated over the past several months, the City has spent a great deal of time developing different layouts for the potential City campus on the former Columbia Arena site. Plans are now far enough along that they can start to have some real conversations with developers about the types and amount of private development that can happen on the remainder of this site. Mr. Bolin stated they did start having some discussions of the potential use of the private development on this site back in the spring of 2015 when they met with the Corridor Housing Initiative Group at the Community Center. They had a good cross section of residents at those meetings, and what they told them is on the arena site and the property surrounding it, they would like to see a mix of housing and some public uses. By the time they got to the end of the fourth meeting, there was a lot of discussion about potentially putting a city hall and a combination of patio homes and some multi-family on this site. Mr. Bolin stated the City has spent time looking at the City campus portion and how that would fit on the site. However, really all of the potential and proposed private development on this site has really been a combination of what came out of the HCI meetings, staff looking at what could potentially fit on this site, and having a number of informal discussions with different developers about this site. Housing and Redevelopment Authority Meeting of September 1, 2016 6 Mr. Bolin stated while that has been very helpful, if you ask any developer if they would be interested in building on this site, they are going to tell you, yes, without even looking into it because they do not want to be excluded from an opportunity to build on this site. They have had all positive feedback from the development community so far, but they have not actually gone out to formally solicit proposals and to hear from these different developers what they would build, where they would build it on this site, and when they would build. They have not heard what type of assistance they would want or need from the City, and they have not had any discussions about what they may be willing to pay for on different portions of this site. Mr. Bolin stated they are now at a point where the City campus footprint and that pond are fairly well laid out. They have some idea now of exactly what they have available land-area wise for private redevelopment. Now would be a good time to go out. They also need to make some decisions by next spring as to where some of the roadways should go and where utilities should be run. Mr. Bolin stated they could spend a lot of money trying to guess where a lot of these things should go. To avoid that staff is looking for authorization to go out with a formal solicitation to the development community and ask those questions. Staff will be working with Attorney Casserly to put that together. Mr. Bolin stated this site is large enough that he does not know if they will end up with a single developer that can do all of the different types of housing that could go on this site, or if it is going to be a team of developers that would partner together. Mr. Bolin stated there is a Met Council sewer line that runs there. In most of the drawings that have been put together, the parkway is right over the top of the pipe. That is probably the best place to have that roadway so you can always access that pipe if there are issues, but they want to get things out there and get a development partner on board if they can by the end of the year. They would like to work with them to refine the ideas that have been discussed so far. As Commissioner Holm mentioned, a developer may come with something that none of them thought of. Maybe it is possible to get more of a certain type of housing on this site or maybe there is a clever way to squeeze more retail in there. They are to the point now where he does not think they can keep guessing anymore as to what might happen development-wise. It is time to go out and find a partner who will work with them and work with the City to move this forward. Mr. Bolin stated they have put together a suggested timeline. Staff would like to get this document out this month. They already have a good start on the bones of the document and the supplements that will go with it. They would like to give the development community about a month to get back to them. Then ideally, staff would come back to the HRA in November with a recommendation of developers the HRA would interview. Typically for an RFP of this scope, it might not be a bad idea to have them interview the top two or three developers. Housing and Redevelopment Authority Meeting of September 1, 2016 7 Mr. Bolin stated staff thinks they could have somebody on board, and they know the patio homes in particularly could go up next week if they were in a position to tell somebody to go ahead and start. There is demand for those and there is not a lot of infrastructure that really needs to go in. Also, the soils on that end will be fine for those slab, on-grade patio homes. Mr. Bolin stated staff recommends the HRA authorize staff to move forward and work with Attorney Casserly in getting the right document, whether it is an RFP, an RFQ, or a hybrid out to the development community later this month. They started out back in May of 2015 with some ideas that came out of the Corridor Housing Initiative meetings and kind of continued to use these as they continue to talk about the potential for redevelopment on this site. This is kind of the latest reiterations that show the City campus on the north/northwest side of the property. However, they do not know as far as private development goes if this is the best layout. Chairperson Pro Tem Gabel asked how he saw this tying together with the City’s development. It seems like the two cannot be isolated from each other. While they are separate, they still need to work together. Mr. Bolin replied they are to that point right now. The City is getting fairly far along in developing their site. However, there are things like the pond. Anything the HRA builds on, the private side of things, they are going to need to tie into that pond. There are utilities that are going to serve both sites. There is a roadway that really needs to go through and is going to be a benefit to both sides, but it is definitely needed by the private development to have access to this site. They have reached the point that the sooner they can get somebody on board that can start working with the City's developer (McGough Construction) and start coordinating some of these things, it is going to save all of them money and time in the long run. Commissioner Backlund asked Will there be an opportunity in supplying the RFP, if it is the right proposal process, to look at different ways to develop patio homes? Commissioner Backlund said third, there is a tremendous amount of hard surface parking. That is probably not the most desirable use of surface as opposed to at least having a parking garage concept. Commissioner Backlund stated, finally, he looks at the schedule and today is the 1st and the bid is the 15th. If they have not already had a significant start, can staff look at issuing an RFP that would be significant enough so that somebody could do a good job at responding because it is a difficult job to incorporate all of these things and make them readable and understandable. He thought this was a fairly tight schedule staff has given them. Mr. Bolin replied, in regards to the pond, there has been a great deal of time spent by Wenck engineers working with the City engineers trying to design the pond so it has the capacity that would be needed for this development. He does not see a lot of changes to the pond from the present design. Commissioner Backlund stated staff changed the orientation from the last one he looked at. Housing and Redevelopment Authority Meeting of September 1, 2016 8 Mr. Bolin replied they have changed the tail end of the pond that will run on the east side. This is what they are moving forward with at this point. This design has the capacity to handle the runoff. It will actually treat and recirculate water. They spent a lot of time designing this. The pond gets more natural as it moves to the east. Mr. Bolin stated in regards to the patio homes, that is something they have heard about for the last two in the comprehensive plans they have done. There is a real demand in the community for patio homes. If Commissioner Backlund looks at some of the different commissions in the City, they have lost a number of commissioners to Blaine because Fridley does not have patio homes for people to move into. That is a need. That is something they have heard in the comprehensive plans, at the HCI meetings, that is something that the neighborhood just to the south of this area really supported as a good transition or buffer to higher density further north on this site. They may not be cookie cutter. That is part of this whole process. They want developers to tell them what they are thinking. If they do not like something as a group, they will have a lot of input on this because they are the ones holding the land and any assistance. There will be an opportunity to really help shape that. Mr. Bolin stated as far as the schedule, staff does have a fairly well roughed out draft of the document. They do have all of the environmental studies that the City has done. There has been a lot of work that has gone into this already; therefore, he is not concerned about the timeframe. They will be able to get that done. Where they may run into things that may take a little more time are if in November they have four or five really good developers, it may take some time and/or a special meeting or two, to give them an opportunity to sit down and meet with those developers. However, as far as getting this out to the development community, staff is ready to do that. The development community is just waiting for them to do that. Mr. Bolin stated as to the surface parking that is shown on this plan, again, this is really just staff's best guess as to one potential layout for this site that avoids deck parking. The design shows about 450 rental units, and you would be able to park all of those without building a parking deck. That is all they are trying to show on this. Staff is not taking this out to the development community and saying, build this. This was just really more to show what could go around the proposed municipal center. Commissioner Backlund stated with regard to the patio homes, at least when he was part of Met Council a long time ago, it did a study and Fridley was one of the highest cities that had no high-end housing. This is one opportunity when the City could influence that. He does not see an effort to do something like that so they have more mixed housing, some affordable housing, some moderate housing, some middle structures, and some high-end housing. He encourages staff to consider that as part of at least the evaluation process in determining what would be the final look. Commissioner Backlund stated with regard to the parking lot, Cielo, for example, did a nice job having structured the first floor as parking to minimize the amount of surface parking lot in a small footprint. This looks like it has something similar to that available to it. He encourages staff to consider a look at that. Housing and Redevelopment Authority Meeting of September 1, 2016 9 Commissioner Eggert stated to him it appears this is possibly a backup plan. Obviously there are some soil conditions here which impact structure and parking underneath buildings, and that could play a role in the cost of pulling this all together. Commissioner Backlund stated but they should provide the latitude for creative processes and thoughts and then be able to develop a ranking process to give some consideration and some clever ideas or answers some creative thought, so they can possibly get the best alternative for a great opportunity for someone or some group of people to provide this development. Commissioner Eggert stated given there may be some uncertain soil conditions that will play a role in how this residential parking will be played out economically to both the developer and the HRA and the TIF District. Chairperson Pro Tem Gabel stated she thinks that is true because one of the concerns at those meetings was that parking garages would be very difficult to put in there. She actually likes that suggestion too. It is something they could certainly ask about. Mr. Bolin stated through this process, they are not asking developers, how would you build these for us? They are asking them what would they build, where would they build it, because they know this may not be the best site plan. That is really what they are trying to get out of this. Chairperson Pro Tem Gabel stated so this just an idea, a concept, so they have something saying here is some potential, give us some more potential. Mr. Bolin replied correct. One of the patio home builder’s homes start at about $310,000. There is an opportunity, if the market will support these things, to get some higher-end patio homes. He does not think anybody is seeing these as starter homes. They are talking something that will compete with Blaine and keep people in town. Commissioner Backlund stated words are important. When you are talking patio homes to common people such as himself, when he hears the words “patio homes," that thought process is different when he hears $310,000. That is more than just a little patio home sitting on a garage slab. It is important to have the description as to what the word means somewhere along when they are sending these things out so there is an understanding. MOTION by Commissioner Eggert to authorize an RFP for Private Development – Columbia Arena. Seconded by Commissioner Backlund. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON PRO TEM GABEL DECLARED THE MOTION CARRIED UNANIMOUSLY. Housing and Redevelopment Authority Meeting of September 1, 2016 10 Informational items 1. Housing Loan Program Update Mr. Bolin stated this past month the City issued two loans out of the Revolving Loan Program. One was deferred and was a Minnesota Finance Agency loan that they used some of the HRA dollars as leverage to obtain. For year to date, there are now 14 loans which is twice as many as they did all of last year. Mr. Bolin stated the Remodeling Advisor did 3 visits in August for a total of 9 visits year-to- date. Just as a comparison, they did 3 all of last year. As to the Home Energy Squad, in August they did 16 visits, which is 34 for the year to date. That program continues to be strong and receives positive feedback. If it the weather cools down, they will see interest in that go up again this fall. CHAIRPERSON PRO TEM Gabel asked if they have had any interest in the business loans. Mr. Bolin replied they have. There have been a few projects in Fridley the last few months, but none of them needed HRA funding or qualified for its funding. However, there has been activity, and today they met with another business owner who may be a potential borrower. Commissioner Holm asked about mobile homes? Mr. Bolin replied they have not had any takers there either. Staff is going to try and get out and meet with them and push the program a little bit more. ADJOURN : MOTION by Commissioner Backlund to adjourn. Seconded by Commissioner Eggert. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON PRO TEM GABEL DECLARED THE MOTION CARRIED UNANIMOUSLY AND THE MEETING ADJOURNED AT 7:51 P.M. Respectfully submitted, Denise M. Johnson Recording Secretary Housing and Redevelopment Authority Meeting of September 1, 2016 11