HRA 02/08/1990 - 29606CITY OF FRIDLEY
HOII8INC3 & REDEVELOPMENT AIITHORITY MEETING, FEBRIIARY 8, 1990
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CALL TO ORDER:
Vice Chairperson Schnabel called the February 8, 1990, Housing and
Redevelopment Authority meeting to order at 7:15 p.m.
ROLL CALL•
Members Present: Virginia Schnabel, Duane Prairie, John Meyer
Members Absent: Larry Commers, Walter Rasmussen
Others Present: Jock Robertson, Executive Director of HRA
William Burns, City Manager & Director of HRA
Rick Pribyl, Finance Director
Dave Newman, HRA Attorney
Jim Casserly, Casserly Molzahn & Associates
Barbara Dacy, Planning Coordinator
William Nee, Mayor
Nancy Jorgenson, Councilmember-at-Large
Steve Billings, Councilmember
Dennis Schneider, Councilmember
Ed Fitzpatrick, Councilmember
� Pat Woolrich, Miller & Schroeder
APPROVAL OF DECEMBER 14 1989. HOUSING & REDEVELOPMENT AUTHORITY
MINi7TES :
MOTION by Mr. Meyer, seconded by Mr. Prairie, to approve the
December 14, 1989, Housing & Redevelopment Authority minutes as
written.
IIPON A VOICE VOTE, ALL VOTIN(3 AYE, VICE-CHAIRPERSON 8C8NABEL
DECI,ARED THE MOTION CARRIED IINANIMOIIBLY.
ACTION PENDINas
1. OUTLINE OF DEVELOPMENT AGREEMENT FOR PROPOSED PRO ENGINEERING
PLANT•
Mr. Robertson stated that Pro Engineering intended to buy the
western portion of the plant site owned by Serve America
Corporation on the northwest corner of Fireside Drive and Central
Avenue. Between the time Pro Engineering submitted a purchase
agreement to Serve America Corporation and now, in a nation-wide
restructuring of Serve America, Serve America has decided to change
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JOINT HOIIBING & REDEVELOPMENT
AIITIiORITY/CITY COIINCIL MEETINa. FEBRIIARY 8, 1990 PAGE 2
from dispersed, company-owned plant sites to more centralized
leased sites. Serve America made the corporate decision to sell
the site with the additional land attached rather than first
selling the land to Pro Engineering and then selling the rest of
the site. From Serve America�s perspective, it is probably a good
decision.
Mr. Robertson stated Pro Engineering is still very much interested
in locating in Fridley but is without a site. He recommended the
iiRA table this item indefinitely. He will try to work with Pro
Engineering to find another site in Fridley, hopefully within
another existing TIF district.
MOTION by Mr. Prairie, seconded by Mr. Meyer, to table this item
indefinitely and that staff work with Pro Engineering to try to
find a new site in Fridley.
IIPON A VOICE VOTE, ALL VOTING AYE, VICE-CHAIRPERBON BCHNABEL
DECLARED THE MOTION CARRIED IINANIMOIIBLY.
2. RESOLUTION MODIFYING THE REDEVELOPMENT PLAN FOR NORTHCO PHASE
III AND PRO ENGINEERING:
,...� Mr. Robertson stated that in the agenda there is a resolution
�_ modifying the Redevelopment Plan for Northco Phase III and Pro
Engineering. Anticipating a contingency that something might fall
through for one company or the other, Jim Casserly prepared the
resolution to create two separate districts, Tax Increment District
#10 for Northco, and Tax Increment District #11 for Pro
Engineering. Since Pro Engineering is District #11, staff is
recommending the HRA adopt the resolution striking all references
to Pro Engineering and Tax Increment District #11, thereby clearing
the way for the City Council to hold a public hearing on creating
District #10 at their February 26, 1990, meeting.
Mr. Casserly stated that when the HRA makes the motion to approve
the resolution to create District #10 and delete all references to
District #11, he will prepare a new resolution.
Mr. Robertson stated that if the City Council approves the creation
of this new district after the pubic hearing, staff will prepare
a draft development agreement for HRA action at their March
meeting.
MOTION by Mr. Prairie, seconded by Mr. Meyer, to approve Resolution
No. HRA 1-1990 as amended, deleting all reference to Tax Increment
Financing District #11.
IIPON A VOICE VOTE, ALL VOTING AYE� VICE-CHAIRPERBON SCffiJABEL
!�'� DECLARED THE MOTION CARRIED IINANIMOIISLY.
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JOINT 80II8IN(� & REDEVELOPMENT
�"'� AIIT80RITY/CITY COIINCIL MEETINa, FEBRIIARY 8, 1990 PAGE 3
3. LONG RANGE TIF OPTIONS FOR THE SOUTHWEST OUADRANT:
Mr. Robertson introduced Mr. Pat Woolrich from Miller Schroeder who
has been working with Mr. Casserly and staff on this issue.
Mr. Robertson stated that staff was alerted in December that the
changes in the state TIF legislation restricted the life of pre-
1979 districts where the debt has expired by the year 2001.
Originally, that pre-1979 district, Center City, envisioned the
life of the district extending out to about the year 2010. It
became increasingly apparent to staff that because of the long lead
time they have experienced in trying to get development completed,
especially in the southwest quadrant, they might want to consider
some mechanism whereby they can re-establish the original life of
the district after it has been truncated by the legislature.
Mr. Burns stated that for the last two weeks, staff has been
grappling with the issue of how to meet the demands imposed by
state law. Staff has done a very thorough review of this and has
had the opportunity to talk to two different financial consultants
and received proposals from the two financial consultants. Staff
is now ready to provide the HRA and City Council with some good
,� information and recommendations on how to handle the challenge the
state has given them. That wouldn't have been possible without
participation from Rick Pribyl, Dave Newman, Jim Casserly, and Jock
Robertson. They have had a number of brainstorming sessions, one
of which involved Mayor Nee and HRA Chairperson Larry Commers.
Mr. Burns stated he would serve as a moderator and would like to
divide the discussion into three major areas: Overview, Refinance,
and G.O. or Revenue Bonds. He would like to first present the
"Basic Issues" and then come back later to try to resolve the basic
issues. He stated Mr. Robertson has outlined the problem, and they
must now decide how they are going to meet the deadline the state
law imposes. They need to have some sort of debt obligation that
exists up to the year 2009; otherwise, they lose their ability to
collect TIF on the southwest quadrant and also on the 10,000 Auto
Parts site between the years 2000 and 2009.
Mr. Burns stated the decisions fall into approximately four
categories:
1. Do we refinance?
2. If we refinance, which refinancing resources do we use?
3. Do we issue a revenue or G.O. Bonds?
� 4. Do we bid the underwriting services?
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JOINT HOII8IN�3 � REDEVELOPMENT
AIIT80RITY/CITY COIINCIL MEETINa. FEBRQARY 8, 1990 PAGE 4
Mr. Burns stated they briefly looked at the possibility of doing
a bond issue. For a variety of reasons, they decided that was not
the route to go and instead decided to consider refinancing the
existing debt they issued in 1985 and restructured again in 1986.
Between what they have done in 1985 and 1986, there is about $11.5
million in bonds that were issued for projects at Lake Pointe, the
southwest quadrant, and a variety of other projects. When they
talk about refinancing, they are talking about refinancing what is
left of the $11.5 million in debt that was issued in the mid-
1980's.
Mr. Burns stated that given their current cash flow situation and
project needs at this time, do they want to refinance? They will
be looking at the cash flow situation and their project needs and
see how they balance out. Staff is recommending the refinancing
and they hope the HRA and City Council will come to some decision
at this meeting.
Mr. Burns stated that if they refinance, which refinancing
resources do they use: Full refinance, full defeasance with level
payments over the period between now and 2000, full refinancing
with deferred principle out beyond the year 2000, or partial
refinancing (advanced refunding)? Staff is recommending full
refinancing - deferred principal.
Mr. Burns stated the third issue is whether to issue a revenue or
G.O. bond. The major difference is that with a revenue bond issue,
only revenue from the TIF districts is pledged to retire the bonds.
Under a G.O. bond issue, the fiscal resources (property taxes) of
the City become pledge to retire the bonds. Because of the greater
security of the G.O. bond issue, staff is recommending they issue
a G.O. bond.
Mr. Burns stated that assuming they go with a revenue bond, do they
bid the underwriting services? Since staff is recommending a G.O.
bond issue, the answer is "no". But, if the HRA decided to go with
the revenue bond proposal, they would have to look at that in more
detail.
Mr. Burns stated he would now like to conduct an "Overview'�, to
show the cash flow status for the various TIF districts in the City
of Fridley (Jim Casserly), look at the project status (Jock
Robertson), and the cash flow versus project needs (Jim Casserly).
Mr. Burns stated they will get into the issue of whether or not to
refinance. Mr. Casserly has some financing scenarios to present
to the HRA and Council. He, Mr. Burns, will be talking about a
recommendation and justification.
Mr. Burns stated then they have to discuss the major issue of
whether to use G.O. or revenue bonds, advantages and disadvantages.
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JOINT HOIISINt3 & REDEVELOPMENT
AIITHORITY/CITY COIINCIL MEETIN(�, FEBRIIARY 8. 1990 PAGE 5
Mr. Burns stated that following the overview of all these issues
and, hopefully, coming to some decision, assuming the word is "go"
on any one of these scenarios, he would then like to talk about an
implementation schedule. The first step of the implementation
schedule would be to have a resolution before the Council on
Monday, February 12, 1990, to get this whole process started. A
special HRA meeting would tentatively be scheduled for March 1,
1990, and, ultimately, a final approval of the bond sale on March
7, 1990, at a special Council meeting.
Mr. Burns stated he would like Mr. Casserly to talk about the cash
flow picture.
Mr. Casserly stated he would like to thank Mr. Burns, Mr. Pribyl,
Mr. Robertson, and Mr. Leon Madsen, City Assessor, for the hours
of work put into this. He stated they have spent the last 1/2
weeks trying to analyze each one of the existing tax increment
districts and all the HRA's expenses related to those districts to
try to come up with reasonable assumptions. Some time in the
future when there is more time, it might be appropriate to review
each of those districts with the HRA. In order to find out if it
made sense to do any kind of bonding, whether refunding or new
money, they needed to look at what revenues are available to the
HRA's program. There are gross funds available of approximately
$15 1/2 million, given the expenses that currently exist. The
present value in 1990 dollars is approximately $13 million.
Mr. Robertson stated that at the last meeting, the HRA members had
received a preliminary outline of their 1990 budget. In that
budget, they listed all the projects that may come in line in 1990.
He asked the HRA to think about what priority these projects would
be: high, medium, low. Since they are looking at the year 2000,
what projects are they most likely to be looking at in the next 3-
4 years in terms of how they will choose to proceed to use the
accumulated balance. From the discussions they have had so far,
the following projects seem to have the highest priority:
1990
1991
1991
1991
1991
1992
1993
10,000 Auto Parts
Residential rehab
Southwest quadrant
57th Place
$ 500,000
500,000
4,500,000
500,000
Gateway project (Univ. Ave. no. of I-694) 1,000,000
Lake Pointe 5,000,000
Moon Plaza Shopping Center 2,700,000
TOTAL $14,700,000
Mr. Burns stated all of these monies are monies above and beyond
� the tax increment that would be generated by each project.
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JOINT HOIIBINa & REDEVELOPMENT
AIITHORITY/CITY COONCIL MEETIN(3, FEBRIIARY 8. 1990 PAGE 6
Mr. Robertson stated that since one of the issues the HRA is going
to discuss is what would happen between the year 2000 and 2010,
what might be the need? Staff then added other things that have
been discussed from time to time for which the HRA might want to
consider having additional funds available:
Water quality in Moore Lake
Old Central redevelopment
Onan Corporation
Junkyard removal
Old Central street improvement
Vantage II
Osborne Road Center
University Avenue
SBF//Osborne Crossing (Old Cub Foods site)
Dredging of Moore Lake
FMC Corporation
Totino redevelopment
Mr. Robertson stated these are potential uses of their overall tax
increment program if they wish to proceed.
Mr. Burns stated they now have to relate the projects needs back
to the revenue and see what the balance looks like.
Mr. Casserly stated that if the projects reviewed by Mr. Robertson
were to take place in the timeframe over the next four years
($14,700,000), and they were to bring them back into the present
value in 1990 dollars, it would be about $13 million.
Mr. Casserly stated the point of his message is that if the HRA
wants to create some flexibility and they want to give themselves
some additional options, one of the things they can do is take some
of the known expense (debt service expense) and spread it out. By
spreading it out, it allows the HRA to work with some additional
revenues in the 1990's. If they don't need the revenues, they have
to go back to the taxing jurisdictions to pay off the bonds. It
is not a bad time to be looking at refunding. Some of the rates
are very advantageous at this time.
Mr. Burns stated what staff is trying to show the HRA and Council
is the magnitude of the projects needs versus the magnitude of the
cash flow. And, the basic question facing the HRA and City Council
is whether they want to refinance or not. He stated Mr. Casserly
will review the refinancing scenarios and costs associated with
those scenarios.
Mr. Casserly stated that beginning with the assumption that the HRA
wanted to have some savings during the 1990's so they could invest
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JOINT HOQBIIJGI & REDEVELOPMENT
AIITHORITYICITY COIINCIL MEETIN(3, FEBRIIARY 8, 1990 PAGE 7
in other opportunities, he looked at six different kinds of
scenarios, Full Defeasance Bonds (A, B, C), and Crossover Bonds (D,
E, F).
Mr. Casserly reviewed the refinancing scenarios.
Mr. Billings stated that if they refinance at a lower interest rate
and if they were to make the same monthly payments they are making
now, how much less will it cost them to the year 2000, and would
that amount be enough to cover the cost of refinancing?
Mr. Casserly stated the question is not easily answered. He would
have to do an analysis to determine that. The only restraints on
that is that they will have a lower interest rate on the new bonds,
just because the rates are less today than when they sold the
original bonds. The problem is that on bond issues, they cannot
make those kind of orderly increased payments.
Mr. Billings stated that on the particular bonds they are talking
about refinancing, would they make a payment monthly, quarterly,
or annually?
Mr. Casserly they would pay interest semi-annually and principal
annually.
Mr. Billings asked how much they were paying every year in
interest.
Mr. Casserly stated that to the year 2000, if they were to pay in
accordance with its present structure, they would pay a gross
amount of $13.5 million on the present funds.
Mr. Burns stated the question now is whether the City Council and
HRA want to refinance the existing debt. Nir. Casserly showed about
$14.9 million in very roughly estimated projects costs and about
$14 million in carefully estimated revenues. Costs approximate the
revenues. Staff is recommending refinancing. The reason for
suggesting refinancing is not because they have a debt service
problem with the existing bond issue. They have plenty of money
to pay it off; however, the problem is that if they do not have any
debt beyond the year 2000, they will not be able to take advantage
of the TIF from the pre-1979 district as they once did. In order
to give them a little more flexibility, the HRA gains the
refinancing and the additional TIF from extending the debt service
during the period 2000-2009. They are looking at $700,000-800,000
per year from the existing districts during that span of time.
Ms. Schnabel asked how Mr. Commers feels about the refinancing.
Mayor Nee stated Mr. Commers is very much in favor of the
refinancing. He stated he is also in favor of the refinancing.
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JOINT HOIIBINa & REDEVELOPMENT
� AIITHORITYICITY COIINCIL MEETING, FEBRIIARY 8, 1990 PAGE 8
Councilmember Schneider stated he had some philosophical concerns
about this. He thought TIF works to build concrete and mortar
buildings, because it changes the balance of the economic courses,
where it is suddenly economically viable to build something on a
piece of property that otherwise would not have been built. But
forcing something to be built doesn't give it the economic vitality
to survive and keep going. It seems like they are helpless to help
some of the really practical kinds of things that really need
helping, i.e., Totino's, FMC. The refinancing pushes it out again,
and it can just go on forever.
Ms. Schnabel stated she agreed with Councilmember Schneider. A lot
of these proj ects that the HRA has helped would never have been
built if the HRA had not subsidized them. And, maybe some of those
projects should not have been done.
Councilmember Schneider stated that at some time, maybe staff can
put together a list of TIF projects and indicate which ones are
economically related and which ones are not.
Councilmember Jorgenson stated they are looking at a couple of
areas that are expanding into TIF districts, and one is for office
� facilities and possibly a bank. There is already a 30� vacancy
rate in the City of Fridley. It seemed to her that as they build
more new office in the City, they are drawing tenants to the new
facilities and creating vacancies in some of the older areas. She
had real concerns about expanding any further into the tax
increment districts.
Mr. Casserly stated that what some cities are doing is using tax
increment to provide equality of land cost. Most of the time they
are not helping with an office subsidy or land subsidy, all they
are doing is if a developer wants to build, the developer has to
pay the going rate per square foot. The HRA will act as a
redeveloper to help the developer pay the difference for taking
properties, taking old buildings down, and putting up something
more valuable.
Mr. Billings stated that in terms of buildings being empty, there
is no way anyone can know what is in the mind of the tenant.
Mr. Burns stated office space is not one single monolithic element.
There are different kinds of office space; and depending on what
the HRA uses as an incentive to support, they may or may not dilute
the market for someone else. They have to be very careful about
evaluating projects before the HRA gives them any money.
Mayor Nee stated he shared the reservations being expressed;
^ however he felt they should keep their options open for the next
ten years. They should not cripple their ability to deal with some
JOINT HOIISING & REDEVSLOPMENT
�'`, AIITHORITY/CITY COIINCIL MEETING4. FEBRIIARY 8, 1990 PAGE 9
of the problems they have in Fridley. If there is a public
investment in the southwest quadrant, they should make it available
for a tax increment repayment and a 4-5 year timetable is very
realistic.
Councilmember Schneider stated that, financially, it seems to make
sense to refinance. He just had trouble with the philosophical
dilemma of how they make sure:
1. That some of the districts do get retained to the City
and schools;
2. That as they do more and more, they are not just building
brick and mortar; that they some-times have a grasp on
the financial liability of every project.
Ms. Schnabel stated that probably at some point, the HRA is going
to have to make some philosophical decisions. Are they better off
putting money into a project that won�t show very much (FMC, for
example) or are they better off putting money into projects like
the Stinski building that show up in the City? And, how is the
general public going to perceive that?
^ Mr. Prairie stated he would think the HRA would want to help the
older businesses in Fridley before helping the new.
Mr. Robertson stated that as staff went through this exercise, he
was surprised to be reminded that some of the stimulation they did
in the North Area Redevelopment District has borne fruit. They
have the Maerten warehouse and the Northwest Orthopaedic Surgeons
building in the North District. Those projects did not receive
HRA aide.
Mr. Burns asked for a decision on whether they should refinance or
not refinance.
Councilmember Fitzpatrick stated he felt refinancing is the only
game in town right now, and they either play it or not.
Councilmember Billings stated that based on the information he has
available for analyzing at this time, he is in favor of
refinancing. However, he did want to look into a few more things.
Councilmember Schneider asked Mr. Pribyl's feelings on refinancing.
Mr. Pribyl stated that in his opinion, refinancing seems to be the
viable alternative. At what level of development is a question the
HRA and Council will have to decide. Refinancing seems to make
sense as long as there are �'call" provisions in the document.
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JOINT HOIIBING & REDEVELOPMENT
�"1 AIITHORITY/CITY COIINCIL MEETING, FEBRIIARY 8. 1990 PAGE 10
Councilmember Schneider stated he reluctantly agreed, but still had
some doubt as to whether this is the right thing to do. Before the
Council votes on this at their next meeting, he would like to see
a list of successful HRA projects.
Mr. Robertson stated the HRA and Councilmembers had received this
a draft copy of "Projects Receiving HRA Assistance" in their
information packet.
Councilmember Jorgenson stated she can see the reason and logic
behind refinancing and will vote "yes", but she sees it as a catch-
up stick to what the Legislature did last year. They can do this
now, but what is the Legislature going to do in its next session?
Mr. Prairie stated he would go along with staff's recommendation
to refinance; however, they should keep in mind the comments made
at this meeting that they should look at projects more closely and
make an effort to try to end some of the districts.
Mr. Meyer agreed.
Mr. Burns stated staff is also recommending they issue G.O. bonds.
^ MOTION by Mr. Meyer, seconded by Mr. Prairie, to approve the
refinancing procedure with the General Obligation Refunding Bonding
scenario (C), full refinancing/deferred principal beyond the year
2000, and to authorize the issuance of a general obligation bond.
Ms. Schnabel stated she concurred with all that has been said. She
liked the built-in escape clause to have the options of repayment,
and she would vote in favor of the motion.
UPON A VOICE VOTE, ALL VOTING AYE, VICE-CHAIRPERSON 8CffiJABEL
DECLARED THE MOTION CARRIED IINANIMOIIBLY.
Mr. Burns stated the HRA has voted in favor of staff's
recommendation to refinance and go with full refinancing with
deferred principal and G.O. bonds. Did the Council also concur?
All the Councilmembers stated they were supportive of staff's
recommendation.
Mr. Casserly reviewed the Implementation Schedule. He stated it
is important for the HRA to have a special meeting to pledge tax
increment for bond issue around March 1.
The HRA tentatively set a special meeting on Monday, March 5, 1990,
at 6:00 p.m.
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JOINT 80II8INa & REDEVELOPMLNT
AUTHORITYICITY COIINCIL MEETING. FEHRIIARY 8. 1990 PAGE 11
Ms. Schnabel stated that on behalf of the HRA, she wanted to
express the HRA's appreciation for all the time and effort staff
and Councilmembers have put into all of this.
4. RESOLUTION DESIGNATING OFFICIAL DEPOSITORIES:
MOTION by Mr. Prairie, seconded by Mr. Meyer, to approve Resolution
No. HRA 2-1990, "Resolution Designating Official Depositories for
the Fridley Housing and Redevelopment Authority".
IIPON A VOICE VOTE� ALL VOTIN(3 AYE, VICE-CHAIRPERSON BCHNABEL
DECLARED THE MOTION CARRIED IINANIMOIISLY.
5. CLAIMS:
MOTION by Mr. Meyer, seconded by Mr. Prairie, to approve the Check
Registers dated January 10, 1990, and February 8, 1990, as
presented.
IIPON A VOICE VOTL, ALL VOTING AYE, VICE-CHAIRPERSON 8CffiJABEL
DECLARED THE MOTION CARRIED IINANIMOIIBLY.
INFORMATIONAL:
6. 57TH PLACE/RAPID OIL STATUS:
MOTION by Mr. Prairie, seconded by Mr. Meyer, to receive the
informational items on 57th Place/Rapid Oil.
IIPON A VOICE VOTE, ALL VOTIN(� AYE, VICE-CHAIRPER80N BCHNABEL
DECLARED THE MOTION CARRIED IINANIMOIIBLY.
7. REDEVELOPMENT PROPOSAL FOR 10.000 AUTO PARTS SITE•
Mr. Robertson stated an informal neighborhood meeting will be held
on Thursday, February 15. This is preparatory to the public
hearing for a rezoning of the property before the Planning
Commission. It is at that point that the City Council will make
a determination on whether to proceed with the rezoning.
MOTION by Mr. Meyer, seconded by Mr. Prairie, to receive the
information on the redevelopment proposal for the 10,000 Auto Parts
site.
IIPON A VOICE VOTE� ALL VOTING AYE� VICE-CHAIRPERSON BCHNABEL
DECLARED THE MOTION CARRIED IINANIMOIISLY.
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JOINT HOIIBINa i 1tEDEVBLOPMENT
AIITHORITY/CITY CODNCIL MEETINQ. FBBRIIARY 8, 1990 PAGE 12
ADJOURNMENT:
MOTION by Mr. Prairie, seconded by Mr. Meyer
meeting. IIpoa a voice vote, all voting ape,
Bahnabei declared the Februarp 8, 1990, Housinq
Authoritp meetinq adjourned at 11:0o p.m.
Respectfully sub 'tted,
Lynn � aba
Recording Secretary
, to adjourn the
viae-Chairperson
and Redevelopment