HRA 10/08/1992 - 29635�^,
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CITY OF FRIDLEY
HOIIBINa & REDEVELOPMENT AIIT80RITY MEETING, OCTOBER 8, 1992
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CALL TO ORDER:
Chairperson Commers called the October 8, 1992,
Redevelopment Authority minutes to order at 7:35 p.m.
ROLL CALL:
Members Present:
Members Absent:
Housing &
Larry Commers, Virginia Schnabel, John Meyer,
Duane Prair'ie, Jim McFarland �.._�
None
Others Present: William Burns, Executive Director of HRA
Barbara Dacy, Community Development Director
Rick Pribyl, Finance Director
Paul Hansen, Accountant
Jim Casserly, Consultant
Don Fitch, Fridley Dairy Queen
APPROVAL OF SEPTEMBER 10 1992 HOUSING & REDEVELOPMENT AUTHORITY
MINUTES:
MOTION by Ms. Schnabel, seconded by Mr. Prairie, to approve the
September 10, 1992, Housing & Redevelopment Authority minutes as
written.
IIPON A VOICE VOTE, ALI, VOTING AYL, CHAIRPERBON COMMERS DECLARED
THE MOTION CARRIED IINANIMOIISLY.
1. CONSIDER REQUEST BY DON FITCH FOR NOVEMBER, DECEMBER. AND
JANUARY RENT:
Mr. Commers stated Mr. Fitch, owner of the Dairy Queen, is
requesting a rent reduction for the months of Novemlier, December,
and January from $500 per month to $100 per month.
Mr. Don Fitch stated that earlier this year he had hoped that by
fall he would be relocated in the northeast quadrant. With that
anticipation, he hired two full-time employees because he hoped
that in the new location, he would have a year around facility.
He stated that he usually closes the Dairy Queen around the end of
October, and that is why the lease states that he will pay rent
during the eight months he is open and he will not pay rent during
the four months he is closed.
HOIISING & REDEVELOPMENT AIITHORITY MTG., OCT. 8, 1992 PAGE__2
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Mr. Fitch stated he is still optimistic that the Dairy Queen will
still be a part of the redevelopment of the 10,000 Auto Parts site
and that he will not have this problem.a year from now. Because
of that, he is hoping to stay open through the winter and keep the
employees he hired full-time. If he closes the Dairy Queen, he
will be paying no rent. He is proposing that he keep the Dairy
Queen open, minimize his rent, so that he can minimize his losses
and keep his full-time staff as well as his part-time staff on
through the winter.
Mr. Fitch stated that most of his employees are residents of
Fridley, and he is hoping he can get a rent reduction in order to
give them a job through the holiday times which is not a good time
to be laid off.
Mr. Commers stated that the Dairy Queen lease expires on November
30, 1992.
Mr. Fitch stated that he believed that unless formal written notice
is given, the lease will continue on a month-to-month basis after
November 30, 1992.
Mr. Commers stated that if that is the case, the rent Mr. Fitch is
paying now may not remain the same.
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Mr. Fitch stated he realized that the HRA would have every right
to raise his rent after November 30.
Mr. Commers asked the status of the condemnation.
Mr. Fitch stated that at the present time, since he does not yet
know if he will be able to relocate in the 10,000 Auto Parts re-
development, he has made the necessary steps to file a suit to take
the City to court on the condemnation, from the position that if
the 10,000 Auto Part site falls apart, he will have no place to go..
Mr. Commers stated the City's appraisal was around $120,000. What
was the final Commissioner's award?
Mr. Fitch stated the final Commissioner's award was $165,000. His
appraisal was $325,000.
Ms. Schnabel stated that Mr. Fitch's request seems reasonable since
the alternative would be to close down the Dairy Queen, at which
point the HRA would be receiving no income from the property.
Mr. Commers stated the biggest problem he has with this request is
the fact that it is going to cost the HRA a lot of money to handle
the lawsuit against Mr. Fitch. By Mr. Fitch appealing the
Commissioners' Award of $165,000, it is going to cost the City
� several thousands of dollars to defend that case. Of course, Mr.
Fitch has every right to pursue that and should if he doesn't feel
HOIISING � REDEVELOPMENT AIITHORITY MTG., OCT. 8, 1992 PAGE 3
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the award is fair, but it is also hard to justify the reduction in
rent on the part of the HRA.
Mr. Fitch stated he would be willing to consider dropping all
charges or any continuation of any legal condemnations for the
condemnation if he knows he is going to be relocated to the 10,000
Auto Parts site and potentially what the assistance from the HRA
would be. He does not want to cause any ill will between himself
and the City of Fridley and if he can stay out of court, he will
do so. Financially, he has to do what he has to do.
Mr. Commers asked what has been done on the relocation issue.
Ms. Dacy stated nothing has been done at this point.
Mr. Commers stated he believes the HRA would be willing to consider
some assistance for the redevelopment of the 10,000 Auto Parts
site, but when Mr. Fitch says he will drop the proceedings once he
knows what he would get in the way of assistance, that appears to
put a little bit of leverage on this whole thing.
Mr. Fitch stated it is difficult to try to separate what he sees
as two separate issues, but at this time, he is requesting a rent
reduction for the months of November, December, and January to
� allow him to remain open during the winter months so that �e can
keep his employees year-round.
Mr. Commers asked staf.f's opinion on Mr. Fitah's request for a rent
reduction.
Ms. Dacy stated that because Mr. Fitch has chosen to file the
appeal, staff is also concerned about that appearance. Maybe the
compromise is for the HRA to consider having Mr. Fitch pay the
deferred amount until a later point in time or subtract those costs
from any type of relocation costs, if there are any.
Mr. Commers asked Mr. Fitch what he thought of staff's suggested
compromise.
Mr. Fitch stated he would probably not view that as a compromise.
It is not so much an issue of whether he has the money in the bank
to pay it; it is a matter of whether or not he takes the $400 and
uses it to offset wages and stay open, or take $500 and use it to
offset wages and close.
Mr. Meyer stated he sees Mr. Fitch's request as separate from the
condemnation issue. He sees this request as a straightforward
small time business deal. No matter what happens with the legal
action, $1,200 doesn't represent enough for the City to leverage
anything against Mr. Fitch or for Mr. Fitch to leverage anything
�"� against the HRA. He would be in favor of granting this request.
HOIISING & REDEVELOPMENT AIITHORITY MTG., OCT. 8, 1992 PAGE 4
MOTION by Mr. McFarland, seconded by Mr. Prairie, to approve the
request by Don Fitch of the Dairy Queen for a rent reduction from
$500 per month to $100 per month for the months of November,
December, and January.
IIPON A VOICE VOTE, MCFARLAND� PRAIRIE� BCHNABEL, MEYER VOTINC�i AYE,
COMMERS VOTINa NAY, CHAIRPisRBON COMMERB DPCLARED THE MOTION CARRIED
BY A VOTE OF 4-1.
Mr. Fitch stated he and his employees thank the HRA very much for
approvi�g this request.
2. CONSIDER APPROVAL OF AGREEMENTS TO RETURN TAX INCREMENT TO
SCHOOL DISTRICTS: �
Mr. Hansen stated that what the HRA has before them is the one year
agreement for 1993. That is pay 1993 which is January 1, 1993, to
December 31, 1993. That applies to the school district year of
July 1, 1993, to June 30, 1994.
Mr. Burns stated they are looking at paying out a total of
$338.,913.17 in pay 1993. That is a decrease of 10o from what they
are estimating to pay out in 1992, and it does not include any
consideration of potential delinquencies.. It could actually be
� less if the delinquencies are taken into consideration.
Mr. Burns stated he asked the Finance Department to prepare a cash
flow projection for the HRA's information. One of the assumptions
that is included in the cash flow projection is that they will be
making full payment of these discretionary TIF turn-backs to the
four school districts. Based on estimated guesses, it does look
like they can accommodate the Lake Pointe debt service and the TIF
turnback and also the $500,000 housing program they are projecting.
The housing program is only projected for five years.
Mr. Burns s.tated some conservatism is also built into the cash flow
projection in that they really had not projected any new
development anywhere. They did plug in Wal-Mart and did adjust
downward for the changes in the tax rate for the Spring Brook
Apartment property. Overall, these projections are reasonable and
conservative and fairly accurate.
Mr. Burns stated staff is recommending the HRA once again return
the TIF discretionary money to the school districts.
Mr. Burns stated School District #14 is heading for a referendum
this fall. What the HRA doesn't pay the School District in TIF
returns represents additional cuts for the School District.
Mr. Pribyl stated that the Lake Pointe site lies within School
�, District #13. Depending upon the result of the negotiations on
the Lake Pointe site, there might be a windfall to School District
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HOIISING � REDEVELOPMENT AIITHORITY MTG.. OCT. 8, 1992 PAGE 5
#13 in regard to penalties and interest. With tax increment
properties, the penalties and interest are split 50/50 between
county and school district, so School District #13 might have a
windfall. It might be prudent for the HRA to wait and reduce the
amount of TIF returns to School District #13 by the amount of
enrichment based on the settlement of the penalties and interest.
Mr. Burns stated that the penalties and interest could total
approximately $150,000.
Mr. Commers stated that if the owner of the Lake Pointe property
had paid the taxes in 1990 and 1991 like he was supposed to, School
District #13's return would have been increased.
Mr. Casserly stated that is correct. Had the taxes been paid
timely, School District #13 would have receiyed those funds; and
if School District #13 was counting on that money, they would have.
experienced a shortfall during that period of time. The real cost
to the School District is making up that shortfall from some other
funds or taking it out of reserves. The problems with the
penalties and interest, if it was just the interest portion, would
not be so bad. But the penalties are put in to encourage property
taxpayers to pay taxes on time. That is the part that becomes the
windfall. Those are not allocated among the taxing jurisdictions
proportionately. The law provides that the county and school
district each get half of penalties and interest. What staff is
suggesting is that there is a portion of this which is genuinely
a windfall to the jurisdictions. Staff needs a little more time
to find out what is really going to happen.
Mr. Burns stated that the HRA could approve the TIF returns to
School Districts #11, #14, and #16, but hold up on #13 at this
time.
Mr. Commers stated he was not sure philasophically whether he quite
follows the windfall thing and that they should keep this money
from School District #13. Maybe it should be computed how much
School District #13 would have collected in the three years without
penalties.
Mr. Casserly stated School District #13 will be reimbursed for
everything they should have received in the second half of 1990,
all of 1991 and 1992. Staff is only talking about the excess
amounts, not the original amounts.
Mr. Commers stated he would appreciate staff putting together some
numbers for the HRA for School District #13, and then the HRA can
go ahead and approve the TIF returns to the other school districts
now.
MOTION by Ms. Schnabel, seconded by Mr. Prairie, to approve the
agreements returning tax increment to.School District #11 in the
HOIIBING & REDEVELOPMENT AIITHORITY MTG., OCT. &, 1992 PAQE 6
amount of $17,685.71, School District #14 in tha amount of
$242,046.07, and School District #16 in the amount of $52,616.68.
IIPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED
THE MOTION CARRIED IINANIMOIIBLY.
3. CONSIDER RESOLUTION NO. HRA 6-1992 AUTHORIZING EXECUTION OF
AGREEMENT TO AC4UIRE EXCLUSIVE DEVELOPMENT RIGHTS ON LAKE
POINTE PROPERTY:
M�. Burns stated the City has reached an agreement with Woodbridge
Corporation to purchase the Lake Pointe property, and they are now
in the process of having the agreement approved. Since both the
HRA and� the Council are involved at different points in the
execution of the agreement, staff believed it was important to have
both the HRA and Council approve the agreement. The Council
reviewed and approved the agreement on October 5, 1992.
Mr. Burns described the content of the Resolution. He would also
review the highlights of the Lake Pointe agreement.
Mr. Burns stated the HRA is paying the Redeveloper $4,230,000 to
terminate his interest in the site and to terminate the $5,603,735
revenue note given to him in 1985. In addition, the HRA is
� assuming responsibility for taxes, penalties, and interest due on
unpaid taxes. The.total delinquent taxes as of December 15, 1992,
will amount to $1,036,951.46. The TIF portion of those taxes due
is $464,429.00, so the next cost to the HRA if they wait until
December 15 to pay the back taxes is $572,522.40. If the HRA
decides not to get the property tax exempt until the site develops,
they will owe more taxes in subsequent years. The 1993 tax bill
would be $157,488.00. That is another issue staff will be bringing
to the HRA at anather time.
Mr. Burns stated the City is currently seeking abatement of
penalties and interest with the County.
Mr. Burns stated the Agreement provides for a settlement escrow
agreement. Under this settlement escrow agreement, a number of
documents are going to be deposited with an escrow agent. The
Redeveloper is going to assign a quick claim deed assigning the
property to the City. The Redeveloper is also going to assign his
interest in the two purchase agreements for the two adjoining
parcels which will be used �or rebuilding the roadway system in
and out of the site to the HRA. The Redeveloper is going to put
the original revenue note into that escrow account. The only thing
the HRA is required to put in the escrow account is a signed copy
of the Termination Agreement. On or before approximately, December
15, 1992, the HRA is to deliver the money and deliver a directive
in writing to the escrow agent to release the $1 million escrow
�"1 amount, plus accumulated interest, that the redeveloper provided
at the onset of the agreement.
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HOIIBING & REDEVELOPMENT AIITHORITY MTG.. OCT. 8, 1992 PAC�B_7_
Mr. Burns stated the Redeveloper and the HRA will split the cost
of the escrow agent. The HRA is responsible for the title
insurance e�ense, and the Redeveloper will sign all these
agreements and put them into the escrow before the HRA pays any
taxes at all.
Mr. Burns stated Jim Casserly and Barbara Dacy have put a lot of
hard work into these negotiations. He stated staff is recommend-
ing the HRA approve Resolution No. HRA 6-1992.
Mr. Commers stated he has followed these negotiations, and Mr.
Casserly has d.one a very good job. The important factor here is
that the HRA is back in control of the Lake Pointe property. Also,
because of the favorable interest rates, purchasing the property
is not going to hurt any of the HRA's other projects as much as
might have been anticipated.
MOTION by Ms. Schnabel, seconded by Mr. McFarland, to approve
Resolutian No. HRA 6-1992, "A Resolution Authorizing Execution and
Delivery of an Agreement By and Between the Housing and
Redevelopment Authority in and for the City of Fridley, Minnesota;
the City of Fridley, Minnesota, and Lake Pointe Investment Company,
a Limited Partnership".
IIPON A VOICE VOTE� ALL VOTING AYE, CHAIRPERSON COrII�iERB DECLARED
THE MOTION CARRIED IINANIMOIISLY.
Mr. Burns stated another big advantage in approving the resolution
tonight is they are helping to preserve some of the tax incremerit
pot that is quickly running out.
4. CLAIMS AND EXPENSES:
a. Check Register (2248-2255)
MOTION by Mr. Prairie, seconded by Mr. Meyer, to approve the
check register dated October 1, 1992.
UPON A VOICE VOTE� ALL VOTING AYE� CHAIRPERBON CONIIKERS
DECLARED THE MOTION CARRIED IINANIMOUSLY.
5. STATUS REPORT ON MISSISSIPPI STREET IMPROVEMENT PROJECT:
Ms. Dacy stated this is a status report regarding the road
improvement costs, underground and utility�lines, sewer and water
utility costs, and the corridor improvements. Total improvement
costs are well within the budget originally anticipated by the HRA.
6. RICE PLAZA UPDATE:
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80IISING & REDEVELOPMLNT AIITHORITY MTG., OCT. 8, 1992 PAGE 8
Mr. Commers stated that as the end of the year approaches, he would
like staff to�put together a pro forma showing what the HRA's
projected expenses would be for next year.
7. OTHER BUSINESS:
a. Housing Programs
Mr. Burns stated staff is making progress on the housing
programs. Staff has been putting in quite a bit of time in
defining four different housing rehab programs. They have
not yet defined a way to do rental rehab, .but they will
continue to work on that.
Mr. Burns stated that it was his initial hope that perhaps
they could cor�tract out the whole housing program; however,
it is looking more and more like they will need to hire a
housing coordinator and probably one clerical person to assist
the housing coordinator. He anticipates a request in the near
future from staff asking the HRA to hire one or two employees.
These salaries would be part of the $500,000 set aside for
housing programs.
b. Annual Financial Report, December 31, 1991
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Mr. Hansen handed out copies of the HRA's Annual Financial
Report.
Mr. Commers stated he would like to add discussion of the
Annual Financial Report to the November HRA agenda.
ADJOURNMENT•
MOTION by Ms. Schnabel, seconded by Mr. Prairie, to adjourn the
meeting. Upon a voice vote, all voting aye, Chairperson Commers
declared the motion carried and the October 8, 1992, Housing and
Redevelopment Authority meeting adjourned at 9:10 p.m.
Respectfully s itted,
Ly e Saba
Recording Secretary
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