HRA 05/10/1990 - 29609��
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CITY OF FRIDLEY
HOIISING & REDEVELOPMENT AIITHORITY MEETINC�� MAY 10, 1990
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CALL TO ORDER•
Chairperson Commers called the May 10, 1990, Housing and
Redevelopment Authority meeting to order at 7:10 p.m.
ROLL CALL:
Members Present: Larry Commers, Virginia Schnabel, John Meyer,
Walter Rasmussen
Members Absent: Duane Prairie
Others Present: Jock Robertson, Executive Director of HRA
Rick Pribyl, Finance Director
Dave Newman, HRA Attorney
Paul Hansen, Accountant
Pat Pelstring, BDS/Pappy's Foods, Inc.
Keith Warner, Pappy's Foods, Inc.
APPROVAL OF APRIL 18 1990. HOUSING & REDEVELOPMENT AUTHORITY
MINUTES:
MOTION by Mr. Rasmussen, seconded by Ms. Schnabel, to approve the
April 18, 1990, Housing & Redevelopment Authority minutes as
written.
IIPON A VOICE VOTE� ALL VOTING AYE, CHAIRPERBON COMMERB DECLARED
THE MOTION CARRIED IINANIMOIISLY.
ACTION ITEMS•
1. ACOUISITION OF RICE PLAZA CENTER:
Mr. Commers stated the HRA members had received a copy of the draft
purchase agreement.
Mr. Robertson stated that in the HRA packet, the HRA had received
a letter from Dave Newman dated May 4, 1990, indicating the
purchase price of $1,004,000, and indicating that the MAI appraiser
was comfortable that the price was within the range of fair market
value. Mr. PTewman has subsequently been working with Mr. Levy.
They have gone through two drafts of the purchase agreement, and
Mr. Levy essentially agrees with the draft purchase agreement
handed out at the meeting.
�.., HOIISING AND REDEVELOPMENT AIITHORITY MTa., MAY 10, 1990 - PAGE Z
Mr. Newman stated that at the March meeting, the HRA authorized
staff to obtain an appraisal on the property to determine the
market value of the property. The City hired Dennis Taylor, an MIA
appraiser. Mr. Taylor inspected the site and met with Mr. Levy.
Due to some time constraints and cost considerations, he asked Mr.
Taylor to provide him with a verbal report after Mr. Taylor had
done his analysis to see if they had sufficient information to
proceed without any further delays. About two weeks ago, he met
with Mr. Taylor and went through his report.
Mr. Newman stated Mr. Taylor did a couple of different analyses.
Mr. Taylor looked at the site from the viewpoint of how to maximize
the profit. He broke the property into three parcels: (1) the
shopping center (stand alone); (2) the parcel behind the shopping
center; and (3) the parcel to the west. He then did comparable
values of those properties as raw land. Mr. Taylor's estimate of
the market value was approximately $1 million and he indicated that
would be a plus or minus 10%. With that information, Mr. Newrnan
started discussions with Mr. Levy. Mr. Levy agreed on the
$1,004,000 based on other offers he has received. Based on the
information staff has received from Mr. Taylor, staff feels
comfortable that this is a fair price for the property and what the
property is worth.
� Mr. Newman stated the purchase agreement is fairly straightforward.
It calls for a closing on July 20, 1990. It will be a cash sale.
There are the standard warranties. The HRA will be assuming the
leases and any liabilities in assuming those leases. The only
contingency he put in is that he feels it is incumbent upon the HRA
to obtain a phase I environmental audit. They have until the end
of June to have that audit done and completed. If there are no
problems, they can proceed with the closing on July 20. The two
things they want to look at with the environxnental audit are
asbestos and PCB's. Otherwise, the environmental audit is a fairly
standard transaction.
Mr. Newman staff is recommending that the HRA approve the purchase
agreement and authorize staff to engage in a phase I environmental
audit.
Mr. Meyer asked how the HRA is going to manage the shopping center.
What happens when they become landlords?
Mr. Newman stated staff has not formalized that approach yet. He
planned to bring a formal proposal for managing the center to the
HRA at the June meeting. From staff's point of view, it might make
sense to hire a management company to collect rents and maintain
the center.
� Ms. Schnabel asked about the status of the leases.
,_. HOIIBIN(� AND REDEVELOPMENT AIITHORITY MTG.. MAY 10. 1990 - PAGE 3
Mr. Newman stated that a couple of leases expire this summer, a
couple expire in 1991, one expires in 1992, and one expires in
1993.
Mr. Robertson stated that he and Mr. Newman have discussed the
status of the leases a little bit. They think the objective of a
short range management policy should be to keep the center
operating with as few vacancies as possible. By doing that, they
could be easier on the lease rates rather than the normal
management philosophy. It would be an advantage to keep the
tenants on as many short term renewable leases as possible.
Mr. Commers stated that he thought the HRA could require the
tenants, for the right to remain in the center, to waive any claim
to relocation costs. He asked Mr. Newman to check into the
legality of that.
Mr. Rasmussen stated he is concerned about the price. The real
estate market is down right now, and, in his opinion, he thought
a price around $3/4 million would have been more in line with the
present market. However, he also realized the importance of the
HRA getting control of the land.
Mr. Meyer stated that when the HRA has control of the property, he
r"� can envision leases not being renewed by the present tenants.
Mr. Newman stated he thought most of the tenants know that the HRA
has been considering this site for redevelopment for some time and
yet they have continued to renew their leases. The last time staff
checked the rents, the tenants were rentinq at a low market value
so there was the inducement of lower rents.
MOTION by Ms. Schnabel, seconded by Mr. Meyer, to authorize staff
to proceed with the Purchase Agreement between the Housing and
Redevelopment Authority and Rice Plaza.
Ms. Schnabel stated she agreed with Mr. Rasmussen in that she also
thought the purchase price is a little high. By the same token,
she felt that based on what they have heard and what staff has
recommended, it is probably wise to gain control of the property
as soon as possible. The HRA needs to have control of that
property if they want the type and quality of development they have
discussed. She thought the time has come to proceed with the
purchase.
Mr. Rasmussen asked if there was a prospective developer.
Mr. Robertson stated staff has several prospects, and staff will
have additional information at future meetings.
� IIPON A VOICE VOTE� RASMII88EN VOTING NAY, CHAIRPERSON CONIIKERS
DECLARED THE MOTION CARRIED BY A VOTE OF 3-1.
�, HOIISING AND REDEVELOPMENT AIITHORITY MTG., MAY 10. 1990 - PAGE 4
Mr. Newman stated staff would also recommend the HRA authorize
staff to procure a phase I environmental audit. Normally, the cost
for such an audit is around $2,500. In this case, there might be
some additional work involved, but he did not think the cost would
exceed $5,000.
MOTION by Ms. Schnabel, seconded by Mr. Meyer, to authorize staff
to proceed with procuring a phase I environmental audit for Rice
Plaza.
IIPON A VOICL VOTE, ALL VOTINC, AYE � CBAIRPERSON COI�IlKERB DECLARED
THS MOTION CARRIED IINANIMOIIBLY.
2. PAPPY'S FOODS. INC.:
Mr. Robertson stated Mr. ICeith Warner of Pappy's Foods, Inc., a
Fridley business, and Mr. Pat Pelstring of BDS, Pappy's financial
consultant, were in the audience. Mr. Robertson stated he asked
them to come to the meeting to give some background information on
a project staff has been working on with them for about one month.
Mr. Robertson stated Pappy's Foods, Inc., a Fridley business is
outgrowing their leased space on Beech Street in the North
� Industrial Area. Their sales have grown from approximately
$900, 000 in 1982 to about $3 million this year. Two years ago,
they almost tripled the size of the company with the acquisition
of a bakery chain in Iowa and Illinois. Pappy's is seeking to
expand their facility and, in the course of this, wish to acquire
additional bakery equipment. If they acquire this equipment, they
anticipate that they will also secure additional business of at
least $2,000,000. Mr. Warner approached the City about one month
ago stating that he would appreciate any assistance the City could
give him in finding a larger facility in Fridley.
Mr. Robertson stated Pappy's present financial structure is
extended to the point where they are not able to build a new
building or purchase one. The HRA's primary means of assistance,
of course, would be through the tax increment financing if they
were able to build a new building. That is not possible in this
case. He stated he then turned to the Anoka County Economic
Development Partnership who is the chief source of financial aid
beyond tax increment financing. After several meetings, they came
up with the proposal that is outlined in Dave Newman's letter to
him dated May 10, 1990.
Mr. Robertson stated Pappy's has a building in mind in Fridley.
There is a third party that would purchase the building and lease
it to Pappy's. They also have the possibility of purchasing about
� $2,000,000 of used bakery equipment for about $600,000. If they
are able to purchase this equipment, they would secure at least
$2,000,000 of additional business. Pappy's only needs about half
,,...� HOIIBINa AND REDEVELOPMENT AIITHORITY MTG.. MAY 10. 1990 - PAGE 5
of that equipment. It appears there might be an arrangement
whereby the equipment would be purchased by a leasing company that
is experienced in handling this equipment and lease back to Pappy's
the portion they need. One way the HRA might assist with this
package would be to place a bond on that leasehold equipment for
the length of the lease, about 5 years. This would be an interest
bearing account of approximately $100,000 placed in escrow.
Mr. Robertson stated that at this time, staff is asking the HRA to
authorize staff to proceed to see how they might structure this
package and to bring back further information to the June HRA
meeting.
Mr. Reith Warner stated the company was founded in 1966 in Brooklyn
Center. He bought the company in 1982. They did acquire a family-
owned business in Illinois and Iowa two years ago. They have out-
grown their space and the time has now come to seek new space.
Their lease is up and the opportunity of obtaining the used bakery
equipment has come up. It will upgrade their existing equipment,
and it will add employees and quarantee another $2,000,000 in
business for their company.
Mr. Commers stated that it was his understanding that Pappy's wants
to acquire this equipment by leasing it; but since they do not need
�'`� all the equipment, are they going to sell a portion of it and use
that to reduce the lease?
Mr. Warner stated, yes, that would be the best approach. They have
a company who will be assisting them. He stated there will be some
additional costs in relocating, refurbishing, and getting the
equipment operating.
Mr. Commers stated this is something the HRA has never done before,
but it seemed appropriate for the HRA to authorize staff to proceed
with discussions with Pappy's to see if some satisfactory arrange-
ments can be made.
Mr. Pelstring stated there is a lot of work to be done, and they
also understand that this is an approach the HRA has not looked at
before. It was a proposal borne out of frustration because tax
increment financing, which is the principal tool the HRA works
with, really does not apply very often in these types of cases .
He has been involved in a couple of similar projects that were
similar with other HRA's which involved assisting secure lease
transactions. Mr. Jim O'Meara, Bond Counsel for the Fridley HRA,
thought this would be feasible as far as the use of HRA funds. He
stated the justification for this assistance is over and above the
equipment involved. The company will be bringing additional jobs
into the City and will be creating other economic benefits within
�, the City.
� HOIIBINa AND REDEVELOPMENT AIITHORITY MTa., MAY 10, 1990 - PAG$ 6
Mr. Robertson stated that if the HRA does approve this proposal,
they will start the process of enlarging the Onan redevelopment
project area to include this property, approximately a 45 day
process, recommended by Jim O'Meara, so there would be no question
of using $100,000 for the expanded business on the new site.
It was the consensus of the HRA members present to authorize staff
to initiate discussion with Pappy's Foods, Inc., in order to see
if a satisfactory arrangements can be made regarding assistance for
Pappy's Foods, Inc., as proposed.
3. CONSIDERATION OF 1990-91 OBJECTIVES AND ACTIVITIES:
Mr. Robertson stated that last year, the City Manager, William
Burns started a more explicit open budget preparation process.
Each City department prepares a statement of objectives and
activities for 1990-91. He stated the City Council has reviewed
these objectives and activities and they feel some of the
objectives and activities are important enough to move to 1990.
After the review of market information, the Council has also
recommended some others originally targeted for 1990 become longer
range projects.
Mr. Robertson reviewed the major objectives for the next 1 1/2
^ years asking for comments and a general approval from the HRA. He
stated these are also outlined in his memo to the HRA dated May 2,
1990, regarding "1990-91 Objectives and Activities".
A. Develop and test a tax increment financing assisted
rehabilitation program for single and multi-family housing as
part of a comprehensive strategy to improve housing condition.
Move from 1991 to 1990.
B. Help developer resolve Lake Pointe development agreement for
a 1991 construction start. This was moved from 1990 to 1991
based on the projected market conditions for 1990.
C. Conclude development agreement for 1991 construction start on
the southwest quadrant of University Avenue and Mississippi
Street. This was moved from early 1991 to mid-1990.
D. Develop and implement a business retention program. Moved
from early 1991 to mid-1990.
E. If Onan Corporation is prepared to proceed, conclude a
development agreement for a 1991 construction start in TIF
District No. 9 starting in February 1991.
Mr. Robertson stated he would welcome any comments from the HRA
� and would like the HRA to approve of the changes from 1990 to 1991
and 1991 to 1990 as a general approval of his work program for 1990
and the budget proposals for 1991. He would add that these are
�.., HOIISING AND REDEVELOPMENT AIITHORITY MTG.� MAY 10. 1990 - PAGE 7
just the core activities of which they can be proactive. Staff is
always reactive when other opportunities present themselves.
Ms . Schnabel stated she had reviewed these and felt each of the
changes were valid.
Mr. Meyer asked why the City feels a rehab program is necessary
for single and multi-family housing.
Mr. Robertson stated the City Council feels (and he agreed also)
that a lot of the older housing stock in the City of Fridley is
nearing the end of its life cycle. The Council is concerned that
the City should become more proactive in looking at what can be
done to rehab some of that older housing stock, rather than letting
it deteriorate to the point where it becomes operated as income
properties with absentee landlords, which is another way the market
responds to that situation.
MOTION by Mr. Meyer, seconded by Ms. Schnabel, to approve these
1990-91 objectives and activities to be incorporated into the 1990-
91 work program and budget.
IIPON A VOICE VOTE, ALL VOTING AYE� CBAIRPERBON COMMERS DECLARED
T8E MOTION CARRIED IINANIMOIIBLY.
'"�
4. ESTIMATE - MTI DISTRIBUTING COMPANY (LAKE POINTE MAINTENANCE):
Mr. Robertson stated this estimate is for sprinkler heads for the
temporary irrigation system at Lake Pointe. Some of the sprinkler
heads have been damaged during regular maintenance and by
vandalism.
MOTION by Ms. Schnabel, seconded by Mr. Meyer, to approve the
payment to MTI Distributing Company for Lake Pointe maintenance in
the amount of $411,56.
UPON A VOICE VOTL � ALL VOTIN(� AYE, CHAIRPERSON CONII�IERB DECLARED
THE MOTION CARRIED QNANIMOIIBLY.
5. ESTIMATE - TALBERG LAWN & LANDSCAPE (LAKE POINTE MAINTENANCE):
Mr. Robertson stated this is for payment on the current maintenance
agreement.
MOTION by Ms. Schnabel, seconded by Mr. Meyer, to approve the
payment to Talberg Lawn and Landscape for Lake Pointe maintenance
in the amount of $4,458.22.
IIPON A 90ICE VOTE, ALL VOTIN�3 AYE� CHAIRPERSON COMMERB DECLARED
^ THE MOTION CARRIED IINANIMOIIBLY.
�
�
�,
HOIISING AND REDEVELOPMENT AIIT80RITY MTG., MAY 10, 1990 PAGE 8
6. CLAIMS (2010-2017):
MOTION by Ms. Schnabel, seconded by Mr. Rasmussen, to approve the
check register dated May 10, 1990.
IIPON A VOICE VOTE, ALL VOTIN�3 AYE�
THE MOTION CARRIED IINANIMOIIBLY.
INFORNlATION ITEMS :
COMMERB DECLARED
7. 1990 OUARTERLY WORK PROGRAM:
Mr. Robertson stated this is an outline of the HRA/Economic
Development work tasks through June and a 1990 summary chart based
on the City Council priorities discussed earlier.
8. UPDATED 1990 PROJECT BUDGET:
Mr. Robertson stated that because the Legislature was acting on
it, up to now he has deferred preparing drafts objectives and
policies for use of tax increment financing. His work plan now,
based on the new legislation, is to prepare these drafts and bring
them to the HRA for review in May and June 1990, get the HRA's
input and City Council's input, and bring the drafts back to the
HRA in July and August for adoption. He stated he could include
some alternatives in that draft also.
Mr. Commers stated the
projects, assistance
appear to him to be a
"outline of 1990 HRA Budget" sheets listing
type, expense, and revenue source did not
"budget".
Mr. Pribyl stated he thought of this 1990 HRA budget as an outline
for staff direction and information to the HRA as far as some of
the fixed costs associated with the administration and possibly
some guidance as to some potential projects that are coming up in
the future.
Mr. Robertson stated it is really a list of potential projects for
the next several years, and they can take the TIF policies and
drafts and use them to evaluate these projects. He agreed with Mr.
Commers that it probably should not be called a 1990 HRA budget.
Maybe it should be called a project budget.
9. ELECTRICITY BILLINGS TO HRA:
Mr. Pribyl stated that at the last meeting, the HRA had inquired
about the electricity bills to the HRA for the street lighting at
Lake Pointe. Included in the agenda was a definition of that
electric bill.
Mr. Commers stated he questioned whether the HRA should be paying
for this electricity. The HRA paid for the actual installation,
,_,, 80IIBINGi AND REDEVELOPMENT AIITHORITY MT(�., MAY 10. 1990 - PAGE 9
but he did not think they were supposed to pay for the ongoing
electricity bills.
Mr. Pribyl stated that he would check into this and provide some
more information regarding the electrical billings at the next
meeting.
10. COMPREHENSIVE PLAN UPDATE: OUTLINE AND SCHEDULE
Mr. Robertson stated this was in response to several inquiries by
HRA members about where the City is in the overall comprehensive
plan. Included in the agenda packet was an outline of what will
be in the Comprehensive Plan, the approximate schedule for its
preparation, and when the HRA will receive drafts of these policies
for review and comment before going on to City Council.
Mr. Robertson stated that up until now, the City Council has said
that they want to review the outline and schedule even before it
goes to the advisory commissions for drafting and before coming
back the HRA for comments, and then to the Council for action.
11. 57TH PLACE STATUS:
Mr. Robertson stated that Jim Casserly, William Burns, and he met
^ with representatives of Winfield Development. At this meeting,
Winfield indicated that their anchor tenant is indeed interested
in proceeding with the proposed project. Winfield is waiting for
the details of the clean-up agreement between the Pollution Control
Agency (PCA) and Rapid Oil. Rob Goltz, the Project Manager for
contaminated sites, has left the PCA, and the staff hydrologist in
charge had indicated a need for additional information from Delta
Environmental, Rapid Oil's consultant. He was able to confirm on
Wednesday, May 9, that Delta Environmental has furnished the
information that the PCA requested, so the ball is back in the
PCA's court once again. He is hoping to have information on that
agreement by the end of May.
Mr. Robertson stated the City Manager, William Burns, asked
Winfield if they would be interested in furnishing a municipal
liquor store as part of that overall redevelopment project. They
gave at least a preliminary agreement that they would like to look
at that. Details of how this might work have not even been
approached. A telephone survey will be conducted later in May that
will mention potential sites for a municipal liquor store, and the
57th Place location will be included in that telephone survey.
ADJOURNMENT:
MOTION by Mr. Rasmussen, seconded by Mr. Meyer, to adjourn the
^ meeting. IIpon a voice vote, all votinq aye, Chairperson Commers
dealare8 tbe May 10, 1990, Housinq an8 Redevelopment Authority
meetinq adjouraed at 9:00 p.m.
Res ectfully s mitted
Lyn Saba, Recording Secretary