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HRA 11/14/1991 - 29626n CITY OF FRIDLEY HODSING � REDEVELOPMFNT AIITHORITY MEETING, NOVEMBER 14, 1991 _��������������������������_�������_������»������_������������___ CALL TO ORDER• Chairperson Commers called the November 14, 1991, Housing & Redevelopment Authority meeting to order at 7:30 p.m. ROLL CALL• Members Present: Larry Commers, Virginia Schnabel, John Meyer, Duane Prairie Members Absent: Jim McFarland Others Present: William Burns, Executive Director of HRA Barbara Dacy, Community Development Director Paul Hansen, Accountant Jim Casserly, Consultant Jim Hoeft, HRA Attorney Mark Rasmusson, McGlynn Bakeries Terrie Mau, Cinnamon Skin Tanning Salon Chris Wallace �, APPROVAL OF OCTOBER 24, 1991, HOUSING & REDEVELOPMENT AUTHORITY MINUTES• MOTION by Ms. Schnabel, seconded by Mr. Meyer, to approve the October 24, 1991, Housing & Redevelopment Authority min�tes as written. IIPON A VOICB VOTE, ALL VOTING AYL, CBAIRPERBON COMMERB DECLARED THE MOTION CARRIED IINANIMOIIBLY. 1. RESOLUTION MODIFYING THE REDEVELOPMENT PLAN FOR REDEVELOPMENT PROJECT NO. 1 AND ESTABLISHING PROPOSED TAX INCREMENT FINANCE DISTRICT #12• Mr. Casserly stated that this is a draft Tax Increment Plan. There are some small changes that need to be incorporated into the.Plan; however, the changes are relatively minor and are underlined. He reviewed the changes with the HRA. Mr. Casserly stated that this plan is very similar to plans adopted by the HRA in previous years. This plan fits into the total development program. A lot of the language in the plan is designed to meet statutory requirements, s.o some of the language is broader than what is being contemplated in this specific project. A tax increment plan outlines the powers the HRA has and will almost � � � � $OIIBING & REDEVELOPMTNT AIIT80RITY MEETINa� NOV. 14, 1991 - PAGE 2 always be broader than the specific project which allows the HRA some leeway in the event there are occurrences the HRA has not anticipated. The development agreement is the contract the HRA has with the developer for the project, and the development agreement lays out the very specific terms for a specific project. Mr. Casserly stated that this note is exactly like the note the HRA has on Lake Pointe. They only pay the note when the revenues are available, but when the revenues are not available in the first several years, that interest is accruing and being added to the principal. Mr. Commers stated his only concern is that the monies that are being contributed through the State Economic Recovery Fund is really a separate transaction, albeit coming to the HRA and the HRA forgiving those funds in terms of repayment. He did not understand why that should be included in the fund when they are talking about the total Bonded Indebtedness of $1,125,000 when it should really be $250,000 less than that. Mr. Casserly stated they did not actually change the total amount of Bonded Indebtedness from the numbers given to the HRA previously in the agenda. The reason for that is that the number they were using before was $800,000. They are not going to create any more bonded indebtedness, nor are they going to pay any more capitalized interest. All they are doing is meeting the statutory requirements of showing how the monies received would be expended. They could break that out better, because the public could perceive that the entire amount is coming from the HRA, and it is not. That is why he does not put specific numbers in some places. He is assuming it will come in at $250,000, but he does not see it being any more than that. The amounts put in the budget are all high. They always make the budgets higher than any number they would use in their development agreement. The reason for that is that if something doesn't take place for 3-4 years and they have the effect of inflation, then they do not have to amend the budget in order to make certain expenditures. Mr. Commers stated there is probably no need to discuss that any further, but it does seem a little misleading to the general public. Mr. Casserly stated the existing building is in two school districts so they have to make assumptions on what the valuations are going to be in each school district when it is improved. This creates some technical problems. One of the parcels (owned by the City) is essentially a ponding area in the northwest corner adjacent to the railroad tracks, and that parcel is not in the tax increment district. The reason it is included in the project area is because they will probably have expenditures in that parcel that the City owns. In order to allow the HRA to make expenditures, it � HOIISING � REDEVELOPMENT AIITHORITY MEETING NOV. 14, 1991 - PAGE 3 has to be included in the project area. That is why the project area is slightly larger than the tax increment district. Ms. Dacy stated this stormwater pond collects a lot of the runoff from the general area. When this pond is at capacity, the water flows back into the Totino lot. Mr. Flora, Public Works Director, is evaluating the construction of a storm sewer connection from the rear of the property into an existing storm sewer over to the west and then directed down to the south. Mr. Commers asked why this ponding area is not included in the tax increment district and pay for it off increment, rather than having it separated out. Mr. Casserly stated they can spend money as long as the parcels are included in the project area. Mr. Casserly stated that if the Tax Increment Plan is acceptable to the HRA as amended, by approving the resolution, they are recommending that the Council create the tax increment district, approve the plan, and amend the development program and the existing districts. Mr. Commers asked Mr. Rasmusson to give a general summary of ^ McGlynn's plans. Mr. Mark Rasmusson stated that on behalf of the McGlynn family, he would like to say how excited they are about coming to Fridley. They appreciate the accommodations the HRA, City Council, and Planning Commission are making to help them with their project; and they are proud to become a part of the Fridley community. He also wanted to compliment the professionalism of the City staff, who represent the type of city that McGlynn wants to be a part of. Mr. Rasmusson stated McGlynn Bakeries has been a very fast growing business over the last few years. They have gone from $60 million in sales four years ago to $180 million in sales this December 1991. They are the largest croissant manufacturer in the United States. Because they are growing so fast, plants change rapidly. They currently have two production facilities in Minnesota, one in Eden Prairie (15 years) and one in Chanhassen (2 years). Basically two production facilities share one building in Eden Prairie: the retail division and the frozen products division. The frozen products division is growing more rapidly than the retail division. The Chanhassen facility supports the frozen division. Mr. Rasmusson stated that because they anticipated running into more capacity problems at Eden Prairie last spring, they started looking at expansion possibilities. One was a bandaid, stop-gap, measure in Eden Prairie where they would buy the warehouse they n currently lease and use it for a variety of purposes. Because it is a warehouse and not a food processing plant, it would be cost ,� HOUBING � REDEVELOPMENT AIITHORITY MEETING NOV. 14, 1991 - PAGE 4 prohibitive to turn it into a full fledged bakery. They began exploring going out of state, particularly southeast, perhaps North Carolina. Before they got too far into that, the Totino's plant became the focus of their attention. Mr. Rasmusson stated the great thing about the Totino's plant is that it is a good food plant, and the basic structure is sound. It will cost about $4.8 million to rehab it before they can put their own equipment into it. The plant was also attractive because of the distribution issues and business climate issues. They plan to move into the plant by the fall of 1992. This will be real boon for their retail division, because it has been at capacity for about 5 years. Now with a new refurbished plant, they can start looking at other business opportunities with their retail division. Again, they are really excited about coming to Fridley and the opportunity this plant is going to have for them to invest in new opportunities for the retail division. Mr. Commers asked Mr. Rasmusson to talk about the number of employees that will be coming to Fridley and what they plan to do with the plant in Eden Prairie. Mr. Commers stated that, over time, they will be taking out most of the retail plant production equipment from Eden Prairie and ^ moving it to Fridley. The bulk of it will be moved by the fall of 1992. As far as employees, they have not yet surveyed their employees as to who would like to make the move to Fridley. They are looking at approximately 200 employees moving to Fridley initially. That initial phase would include retail production, retail divisional offices, big stock division (internal supply division) , and a bakery outlet store. Most of tl�ose employees will be current McGlynn employees; however, there will be the opportunity for a lot of new hires, because of future growth plus about a 30% turnover that they have experienced in the last three years. Mr. Prairie asked Mr. Rasmussen about the employee capacity at the Fridley plant. Mr. Rasmusson stated he believed they can be here 25-30 years and not run out of space. They may be at 80� capacity once they get everything moved in. That would be approximately 250-300 employees. The next step after that is to move the big stock or supply division to a nearby warehouse. That would increase their floor space for production by about 40%. They don't anticipate any more parking spaces than are on the site right now, but they are buying an additional acre from Pillsbury and working a lot split so they have an additional acre for future parking and which would also allow an approximately 20,000-25,000 sq. ft. addition on the north side of the building. � HOIISING � REDEVELOPMENT AIITHORITY MEETING NOV. 14, 1991 - PAGE 5 �"'� Mr. Commers stated the HRA is also happy that McGlynn Bakeries is coming to Fridley, and they hope they are here for a long, long time. � MOTION by Ms. Schnabel, seconded by Mr. Prairie, to approve Resolution No. 6- 1991, "A Resolution Modifying the Redevelopment Plan for Redevelopment Project No. 1 to Reflect Increased Geographic Area and Increased Project Costs within Redevelopment Project No. 1 and Modifying the Tax Increment Financing Plans for Tax Increment Financing Districts No. 1 through No. 11 to Reflect Increased Project Costs within Redevelopment Project No. 1 and Establishing Proposed Tax Increment Financing District No. 12 and Approving and Adopting the Proposed Tax Increment Financing Plan Relating Thereto", as amended. IIPON A VOICE VOTE, COMMERB, BCffiJAHEL, PRAIRIE VOTING AYE, MEYER ABSTAINING, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED. 2. CLAIMS AND EXPENSES: a. Check Register (2172-2178) MOTION by Ms. Schnabel, seconded by Mr. Meyer, to approve the check register dated November 7, 1991. IIPON A VOICE VOTE, ALL VOTING AYE, CHAIRPER80N COMMERB DTCLARED THE MOTION CARRIED IINANIMOIIBLY. 3. APPROVAL OF 1992 MEETING DATES: Mr. Commers stated the dates as proposed are the second Thursday of each month at 7:30 p.m. MOTION by Mr. Prairie, seconded by Ms. Schnabel, to approve the 1992 meeting dates as follows: January 9 July 9 February 13 August 13 March 12 September 10 April 9 October 8 May 14 November 12 June 11 December 10 IIPON A VOICE VOTE, ALL VOTING AYE, CHAIRPE1t80N COMMERB DECLARED THE MOTION CARRIED IINANIMOIISLY. 4. UPDATE ON RICE PLAZA: Mr. Commers stated this is an update on the Rice Plaza rents and is for informational purposes only. � �� HOUBING & REDEVELOPMENT AIITHORITY MEETING. NOV. 14, 1991 - PAGE 6 5. LETTER FROM JIM KORDIAK REGARDING EVICTION OF RICE PLAZA TENANT• Mr. Burns stated that Mr. Kordiak is suggesting that the HRA evict Terrie Mau of Cinnamon Skin Tan and seize the equipment and perhaps seek legal action. He stated he negotiated an agreement with Ms. Mau in May 1991, but she has not lived up to the agreement. Now it is up to the HRA to decide what source of enforcement they want to pursue. Mr. Commers asked Ms. Mau to tell the HRA what has been happening. Ms. Mau stated she appreciated the opportunity to speak to the HRA. She stated it is now time to plead her own case so the HRA can understand her situation. She stated her business is not only her livelihood, but is a goal she has had for some time. Ms. Mau stated that when she purchased the business, she purchased it in good faith; but that obviously that was not the intention of the person she purchased the business from. That led to the situation where the former owner opened a business across the street from her and took her employees. The main source of income in her business is the stylists who work for her, and losing that income made it very difficult for her business. In trying to ^ figure out what to do, she consolidated into one location as opposed to two. By that time, a large sum of rent had already gone into arrears. Ms. Mau stated that since that time, she made a good faith agreement with the HRA with the idea that she would be moving into a new location and, therefore, would have increased her income substantially because of a better opportunity at hiring stylists. This hasn't happened, and she will not be relocating to a new development. Ms. Mau stated that the uncertainty of redevelopment of the Rice Plaza makes it difficult for her to hire stylists because of the uncertainty of the building. In her particular business, the only way to survive is to build a clientele. She can't build a clientele and take the chance that she will not be in this location in six months. They have lived with this uncertainty for a year. Ms. Mau stated she has brought in another person who leases part of her space. She has also brought in another person who does body wrapping who also leases part of her space. However, she cannot survive on those small amounts. 5he needs to be able to expand in order to increase that profit margin. Ms. Mau stated she has every intention of not letting this go on forever, but she cannot tell the HRA how to rectify a situation ^ that she does not foresee getting any better given the problems she has at this particular site. She did work out an agreement with ��'1 n � HOIISING � REDEVELOPMI:NT AIITHORITY MSETING NOV. 14, 1991 - PAGL 7 Mr. Burns in May 1991 that she thought she could handle. The reason she had to come to Mr. Burns was because she could not get an agreement with Jim Kordiak. This is a problem, not only for herself, but with other tenants in this building. She realized the HRA hired Jim Kordiak to manage this property with the very best of intentions, but it is very disconcerting for her and other tenants to see tenants leaving the building because they cannot come to agreements or work out problems with Mr. Kordiak. One thing that has troubled them is the fact that all but one of the businesses are owned by women. They feel they are not being treated fairly by Mr. Kordiak. Ms. Mau stated the tenants are having a difficult time in this building. The rents they were paying when that building was purchased by the City were probably adequate at that time for that particular situation. Now, the rents are far too high for the problems they are being faced with on a day-to-day basis. The general feeling of the public is that this building is coming down and why start doing business there. This presents a problem for the tenants and for herself especially because her business is very service-oriented. With more and more tenants moving out of this building, it makes it even more difficult to bring in new business. Rapid Printing will be leaving the first of the year. Metz Bakery is leaving this month. She cannot survive if the building does not survive. Ms. Mau stated that for these reasons, she decided to come before the HRA to see if some kind of arrangement can be made for that building. She stated she is doing the best she can, but it is up to the HRA to decide how they want to handle the whole situation. Mr. Commers asked if Ms. Mau had any suggestions for the HRA to consider. Ms. Mau stated she would like the opportunity to manage the property, because she believes the building needs an on-site manager. She is there every day and is accessible to the other tenants. She does almost all the snow shoveling now for the building because she is there and because she is the only one who has access to leave her business during the day when it is snowing. Ms. Mau stated she has never managed a building before. She stated she believes she manages her business well. She is a single parent raising a daughter alone. She handles her finances well, but she cannot handle finances that do not exist, and she cannot handle a situation where there appears to be no solution. Her business is not failing. Considering what she has been up against for the last year, her business is doing well. It has been a very difficult year for her. Ms. Schnabel stated she finds it difficult to understand why Ms. Mau has not been making some attempt to make some type of payments. � HOIISING � REDEVELOPMENT AIITHORITY MEETING NOV. 14, 1991 - PAGE 8 Ms. Mau stated her main reason for not paying is that if she cannot pay all of it, it might as well not be any. Ms. Schnabel asked if Ms. Mau has any solution in terms of the debt. Ms. Mau stated that if the HRA would settle the debt 50 cents on the dollar, she would find the means to pay the debt now. Then she would like the HRA to lower her rent, because the high rent is a problem and does not give her the opportunity to grow. She stated she would like to stay in the building so it does not become an empty building. Ms. Schnabel stated it might be difficult for the HRA to negotiate a reduced rent for Ms. Mau, as it would set a precedent for other tenants in the building to have their rent reduced. Ms. Mau stated her rent is among the highest rents. She believed almost all the other tenants who want to stay in this building feel their rents should be reduced. Mr. Meyer asked how Ms. Mau felt her replacing Jim Kordiak �aould improve her situation. r"� Ms. Mau stated she did not know whether or not her business would improve, but she does care more about this particular site. She cares that the building is occupied because she has a vested interest in the building. She believed the other tenants will feel more secure if the property manager is on site. Mr. Commers stated they have heard Ms. Mau's background and infornaation. He stated the HRA should take this information under consideration and staff can let Ms. Mau know of any decisions they make. Ms. Mau thanked the HRA for their time and consideration. Mr. Hoeft stated that with respect to Mr. Kordiak's letter in which he suggests seizing the property, he wanted the HRA to know that they are not first in line on the security interest in the property. Northeast State Bank has an interest; therefore, if the HRA wanted the tanning beds or other equipment, the HRA would have to pay off the value of that equipment to Northeast State Bank. Mr. Commers stated what concerns him the most is what is going on with the building as a whole. They are losing tenants. They recently lost two tenants, and now it sounds like two more tenants are leaving, one of which is a maj or tenant . He wanted to know what is causing the tenants to leave. � Ms. Schnabel asked who is setting the rental guidelines. � 80IISING & REDEVSLOPMENT AIITHORITY MEETING NOV. 14, 1991 - PAGE 9 Mr. Burns stated he believed they have periodically renegotiated the rents, and basically it is what their leasing agent feels the space can be rented for. He believed some of the renegotiations have taken into consideration the situation the building is in, and there have been some substantial reduction of rents for different tenants with his consent. Mr. Commers stated that if they are losing tenants, then they have to get the rents to the point where they can attract new tenants. Mr. Burns stated there are also some substantial repair costs to a number of tenant spaces. It wi�l cost about $10,000 to renovate the tenant space that Norge Village recently vacated. Mr. Commers suggested authorizing staff to look at the leases and the rents, and then check around to see what rents are being charged in other shopping centers in the area, such as Moon Plaza. They also need to know what condition the tenant spaces are in. They need a comprehensive, total analysis of the total situation so they can put together some plan to rescue or rehabilitate this building. The HRA members agreed. ^ Mr. Burns stated they should also have Mr. Kordiak respond to the issues raised by Ms. Mau. Ms. Schnabel suggested they talk to the rental manager for Moon Plaza about the possibility of being a rental manager for both shopping centers. 6. OTHER BUSINESS: a. Fridley Dairy Queen Mr. Hoeft stated he received some paperwork from Mr. Fitch's attorney, and Mr. Fitch's attorney has made a motion to the court which is scheduled for the following Wednesday, November 21. They are asking for two things in the motion. One is that the time period for which to have the Commissioners report back to the court be extended. That has been done informally, and he indicated to Mr. Fitch's attorney that the Hearing was rescheduled for the latter half of January. So, that issue has been resolved. The other thing is they are requesting that the court release the $125, 000 that was placed on deposit in District Court based upon the approved valuation at the start of the quick-take proceedings. Mr. Hoeft stated he indicated to Mr. Fitch's attorney that he ^ would have to discuss this with the HRA; but in his consideration of the situation, they had two options when they ,� HOIIBING � REDEVELOPMENT AIITHORITY MEETING NOV. 14, 1991 - PAGE 10 began the process: (1) to pay the $125,000 directly to Mr. Fitch, or (2) to deposit it with the court which places it in an interest bearing account and the petitioner can petition to have it removed. Mr. Hoeft stated the HRA chose to deposit it with the court. It was his recommendation that the HRA not oppose the motion for Mr. Fitch to withdraw the money from the District Court, the situation being that if the settlement figure or the Commissioners' award gets determined is in excess of the $125,000, then obviously the City pays the difference. If it is less than the $125,000, then that would have to be refunded to the City. The area of concern comes if it is less than $125,000. From the numbers that have been talked about with the HRA's appraiser regarding property value and relocation assistance, he did not believe the award will be less than the $125,000; and, therefore, he did not believe the HRA runs the risk of trying to recover funds back from Mr. Fitch after it has been released back from the District Court. What argument do they have to ask the District Court to hold on to the $125,000? Ms. Dacy stated Mr. Fitch still has not signed the lease. She suggested that they ask the Court °to hold on to the $125,000 until the lease is signed and the rent paid to the HRA. ^ Mr. Commers stated another argument to use is that they do not know what Mr. Fitch's appraisal is going to be. It could be lower than the City's. It was the consensus of the HRA that the $125,000 not be released until Mr. Fitch signs a lease with the HRA, pays the rent due since July 1991, and submits a copy of his appraisal. b. Target Parking Ms. Dacy stated that at the last meeting, the HRA asked the question of what was the mechanism that the Target Northern Operations Center used to pay rental payments on parking. Ms. Dacy stated Rick Pribyl researched this and said that Target purchased a U. S. Treasury Bond in the name of the City of Fridley, and the interest payments on that on an annual basis represent the payments in lieu of rental payments on the parking lot. c. Second Mortgage on Shorewood Ms . Dacy stated that in answer to a question raised by the HRA, payments on that began as of October 30, 1990, and Shorewood did make the first payment. The second payment for the second year was due October 30, 1991, and Shorewood have � not make that payment. Mr. Pribyl has been in contact with � HOIIBING � REDEVELOPMENT AIITHORITY MEETING NOV. 14, 1991 - PAGE 11 the owners of Shorewood. There is also a 5� penalty charge for late payment. d. Municipal Liquor Store Mr. Commers asked what the rental situation is with the liquor store. Mr. Burns stated the City pays the HRA approximately $22,000 per year to rent the liquor store. Mr. Commers asked staff to look at the lease the HRA has with the City for the liquor store to find out what the terms are and the amount of the lease. ADJOURNMENT: Chairperson Commers declared the November 14, 1991, Housing and Redevelopment Authority adjourned at 10:05 p.m. Respectfully sub 'tted, ,,.� Ly Saba Recording Secretary r"�