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HRA 09/09/1993 - 29564n � � CITY OF BRIDLEY 80II8ING & REDEVELOPMENT AIITHORITY MELTINa� BEPTEMBER 9� 1993 ___________________________..____----___..______________________.,__ CALL TO ORDER: Chairperson Commers called the September 9, 1993, Redevelopment Authority minutes to order at 7:38 p.m. ROLL CALL: Members Present: Members Absent: Others Present: Housing & Larry Commers, Virginia Schnabel, John Meyer, Duane Prairie, Jim McFarland None Barbara Dacy, Community Development Director Rick Pribyl, Finance Director Craig Ellestad, Accountant Jim Casserly, Consultant Robert Welle, Reliance Real Estate Services, Inc. Jai and Shin Jae Suh APPROVAL OF JULY 8, 1993. HOUSING & REDEVELOPMENT AUTHORITY MINITTES • MOTION by Ms. Schnabel, seconded by Mr. Meyer, to approve the July 8, 1993, Housing & Redevelopment Authority minutes as written. IIPOAT A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED IINANIMOIISLY. 1. CONSIDER REQUEST TO ACOUIRE SUH PROPERTY: Ms. Dacy stated Mr. Welle from Reliance Real Estate Services, Inc., is at the meeting on behalf of the property owners of 6440 University Avenue N.E. The property owners, Dr. and Mrs. Suh, are alsa at the meeting. Dr. and Mrs. Suh are requesting that the HRA acquire their property at this time. Ms. Dacy stated the Suh's request was presented to the HRA at the May 9, 1991, HRA meeting. A copy of those minutes were included in the agenda packet. Staff continues the same recommendation presented at the May 9, 1991, meeting, and that is that the HRA not begin negotiations with the Suhs at this time. Staff believes any acquisition at this time would be premature. As the HRA is aware, staff will be starting an analysis regarding the development options of the southwest quadrant within the next 6-8 month time- f rame . Mr. Robert Welle stated he is a licensed real estate sales person with Reliance Real Estate Services, Inc. He has been in retail � HOIIBIN� & REDEVELOPMENT AIITHORITY I�EETIN�. BSPT. 9. �993 - PAaB 2 i � management and leasing for about 14 years. In May 1993, Reliance Real Estate Services was appointed as the exclusive leasing agent for the property at 6440 University Avenue N.E. Mr. Welle stated he was aware in the change in access from Mississippi Street to 3rd Street. University Avenue, of course, is where the action is in terms of traffic. Visibility is important, but it is also important for people to be able to see a way to get to the retail center. That is what is lacking now with the new access off 3rd Street from Missisaippi Street, about two blocks off University Avenue. He believed they would be able to work this out with prospective tenants for the building, but that is not the case. In pursuing some past leads and some cold calling to recruit new tenants, he ran into two obstacles: 1. There has been a deterioration in the accessibility to the property. For a tenant operating a business with customers, this poor accessibility could make the difference between a successful businesa or a failed business. 2. The word is out that there is something in motion about redevelopment in the southwest quadrant. Prospective tenants are concerned that they may be forced to move in 1-2 years. � Mr. Welle stated he tried to assure prospective tenants that there is no plan for redevelopment at this time, but that wasn't enough and he could not assure them that nothing would happen in the future. After running into these objections, he realized that the property owned by J& S Investments has diminished in value and use. He believes that J& S Investments is suffering due to the way the HRA has acquired the Rice Plaza property but has not gone all the way to completion as far as acquiring the Suh's property. If the HRA was the owner and was in control of all the properties, they would be much closer in getting development going. He believes it is very logical for the HRA to purchase the property. However, if it is not possible for the HRA to acquire the property, then the property owners are requesting that the City cooperate in any way it can to allow another party to purchase the property and develop it in such a way that makes economical sense. Mr. Welle stated that when he ran into problems when seeking prospective tenants, he called some developers. A developer who specializes in retail thought the area has merit. The reason the developer was not interested in pursuing it wae because it was his understanding that there was supposed to be some type of mixed use with residential. A developer who specializes in residential said the site will never work as retail anymore because of the access. As a representative of the property owners, Reliance Real Estate Services, feels an obligation to pursue whatever remedies are �� required to get out of the current situation. They believe the property owners have suffered economic damages and consequences. HOIISING & REDEVELOPMENT AIITHORITY MEETINa. 88PT. 9. 1993 - PA6E 3 � Mr. Welle asked if there is any type of use plan or use guide or any kind of objectives for the southwest quadrant, particularly something that would include his clients' property. Mr. Commers stated the HRA tried to develop the southwest quadrant about ten years ago. Over the past ten years, they have given specific developers exclusive rights of development for different development proposals. For various reasons, each project has fallen through. At this point, the HRA plans to demolish the Rice Creek Plaza Shopping Center and to have the land prepared for a developer, and then to go forward with an analysis over the next 6-8 months to determine what would be the best development for that site in today�s market. The only requirement is that a developer must make economic sense. It must be able to generate certain types of taxes that will enable the HRA to recover the costs put into acquiring the property and any other incentives the HRA is able to give. The HRA is willing to review any development proposal to determine its economic feasibility and whether the HRA can give any type of assistance. Mr. Welle stated it is time for something to happen. The longer this delays, the more it costs the property owners. The existing Burger King franchise has given notice that they will not renew their lease. Burger King's business dropped off when the median was put up on Mississippi Street and access changed. Burger King � will continue to operate on a month-to-month basis while they search for an alternate location. They will pay no rent and will pay operating expenses only. Mr. Commers stated this is the first time the HRA was made aware of the problems with access and how it has affected the Suhs' property. Ms. Schnabel asked how much property is owned by J& S Properties. Mr. Welle stated the boundary survey shows 102,000 sq. ft.--about 2 1/2 acres. The Burger King building is 2,500 sq. ft., the main shopping center is 1,400 sq. ft., and the car wash is about 1,700 sq. ft. Mr. Welle stated something needs to be done with this property. If the HRA does not want to move forward and purchase the property at this time, he believed the Suhs are entitled to sell their property to someone else. Mr. Commers stated there are practical reasons why the HRA cannot purchase the property at this time. One reason is that the HRA does not have an item budgeted for it in the 1993 budget. Mr. Welle asked if it could be included in the 1994 budget. ,� Mr. Commers stated it could be if the HR� decided the purchase is appropriate. The HRA is interested in redeveloping that site and has been for a long time. At their strategy meetings last summer, HOIISIN('� & REDEVSLOPMENT AIITHORITY MEI3TINGr. 88PT. 9, 1993 - PA�iE 4 ^ the HRA decided to move forward to try to find some kind of project - that would make sense on that site. That is one of the things they will be discussing over the next 6-8 months. The fact that they will be demolishing Rice Plaza indicates that the City is getting closer to getting something done there. The other issue is the HRA is not interested in acquiring property and then holding it for a long period of time and managing the property. However, the HRA is willing to cooperate in any way it can with anyone who is interested in a particular project on that site. Mr. Meyer asked what makes this request different from the HRA's actions in acquiring the Rice Plaza property. Ms. Dacy stated the Mississippi Street improvement project was the big factor in acquiring the Dairy Queen and Levy properties as additional right-of-way was needed for the street improvement project. Mr. Meyer stated that in the large picture, the reason the Rice Plaza property was going down hill and losing tenants was because of the street improvements, the lack of desirability, and the fact that the HRA was not going to do anything on the property. So, the HRA listened to the arguments and purchased the property. Now, with this situation, it seems like the same rationale the HRA used to purchase the Rice Plaza property. He believed that the HRA � should examine the Suhs' request the same way they did for Rice Plaza. He viewed the Suhs' request as being completely in line with the conditions at Rice Plaza, and the HRA should consider this request in the same spirit and with the same ultimate action as they did for Rice Plaza. Mr. Prairie stated he believed one of the reasons for acquisition of the Rice Plaza property was because at the time there was an existing redevelopment agreement with a developer to develop the property and the HRA needed to be in control of the property. Mr. Meyer stated that they already have one property that is blighted, and here is another property that will become blighted through no fault of the property owners. Is the HRA going to let the property sit and become a blighted area, or are they going to acquire it as they did Rice Plaza? Mr. Commers stated that consideration of the Suhs' property has to be put in the overall mix of priorities the HRA has and within the amount of funds the HRA has available for projects. At this time, the HRA is not in a position to pay $1 million for that property. The HRA is already carrying quite a bit of property in the City of Fridley rightly or wrongly, and the HRA has to be very careful in acquiring additional property without a development agreement in hand. It is a change in circumstance that has occurred. In 1991, he did not think there was any thought that the Suh property was ,� starting to deteriorate, and there was not any problem in getting tenants. That appears to have changed in the last 60 days. He did HOII8IN�3 & REDEVELOPMENT AIITHORITY MEETIN(3, BEPT. 9, 1993 - PAQE 5 � not see any problem with lookinq at this in terms of the priorities - they discussed at their planning meeting last summer. Mr. Meyer stated there are a number of ways in which the HRA improves the City. One is to encourage new industry and another is to take care of blighted areas and remove them. The HRA does not have to wait for a developer to come in with a proposal, because the HRA has taken action before to stop blight in the City by taking a positive action against offending structures. He believed that despite the HRA's financial situation, the HRA has the responsibility to decide whether or not there is a certain element of fairness that might be violated by ignoring this situation, and it could mean moving this to a higher priority than some other projects that do not have the element of fairness attached to them. Ms. Schnabel stated there are a lot of factors that need to be reviewed, and she is not prepared to make any decision on this request at this time. Mr. Meyer stated he hoped the HRA does not reject this request but will keep it on the table. Mr. Commers stated the best time to consider this request is when they are discussing the budget, and that process will be starting � within the next three months. - Mr. Commers stated the City can work with Mr. Welle to provide him with whatever information he needs to transmit to a developer. Mr. Welle should also keep the City informed about any possible redevelopment in the southwest quadrant. Mr. Welle stated he is certainly willing to keep the communication and spirit of cooperation open with the City, and they will do whatever is in the best interest of both the property owners and City. 2. CONSIDER LEASEHOLD AGREEMENT WITH FRIDLEY PLAZA OFFICE BUILDING: Ms. Dacy stated that on February 13, 1992, the HRA approved a third amendment to the leasehold agreement between the HRA and Columbia Park Properties to correct a legal description error. At that time, the attorney for Columbia Park Properties suggested that a new leasehold agreement be prepared to incorporate all previous agreements. Staff has met with the property manager regarding ongoing maintenance issues. None of the previous leasehold agreements specifically stated maintenance responsibilities. Mr. Commers asked if anyone has looked at the lease for the purpose of determining whether or not there is any provision for rental increase. HOIISINa & REDEVELOPMENT AIITHORITY MEETINa, BEPT. 9. 1993 - PAGE 6 � Ms. Dacy stated Jim Hoeft, III�A attorney, revised the proposed lease, but they did not discuss a proposed rental increase. She did not know that was an issue. Mr. Commers stated that if the HI2A is going to be undertaking a certain parking lot maintenance program that is going to involve several thousands of dollars, it is conceivable that before 2081 the expenses could far exceed the rents. Ms. Dacy stated she did a cursory analysis of the HRA's maintenance responsibilities. There is nothing in the leasehold agreement that is different from what the HRA has been doing up until this point in time. She worked with the Public Works Department to estimate the HRA's expenses to date and, outside of repaving and sealcoating the parking lot, the rent payments exceed the HRA's expenses. The HRA collects about $9,600 per year. Ms. Dacy stated all the irrigation lines are all tied into the Municipal Center property, so it makes sense for the HRA to continue the irrigation. The HRA is responsible for mowing the boulevard areas. In terms of the parking lot and the pavement itself, as owner of the property, she believed the HRA is responsible to ensure that the parking lot is properly maintained and paved. Prior to this time, the HRA has not sealcoated or repaved the lot. '� Mr. Commers stated that as the ro ert owner the HRA is p p y , probably required to do those things. The question is whether or not there is some kind of formula for operating expenses, because those types of expenses are usually recovered by the landlord from the tenant. Mr. McFarland stated that as long as the HRA is negotiating a revised lease agreement, this might be a good time to put in some kind of clause that allows the HRA to review the rents at any time. Mr. Commers asked staff or legal counsel to review the lease. The HRA signed a lease ten years ago in which they agreed to receive a certain amount of rent until the year 2081. It does seems strange that they did not put in some kind of cost of living increase or some other factor. Ms. Dacy stated the HRA should continue with the irrigation, lawn maintenance, and snow removal because they have done that for ten years. If the HRA is uncomfortable with sealcoating and paving the parking lot and feels that is the building owner's responsibility, that could be part of the negotiations. Mr. McFarland stated that if the HRA approves the maintenance program as proposed and the cost of that maintenance escalates many times in the future because of inflation, it would be good to put at least some kind of cap on the cost of that maintenance. He did ,-� not think $800 per month for what the HRA is doing in return is a _ good deal. Actual�.y, the HRA should �tet $800 a month. HOIIBING & REDEVELOPMENT AIITHORITY MEETING. SBPT. 9. 1993 - PAaL 7 �'`� Mr. Meyer stated that maybe they could put in a cap that the - maintenance costs will never exceed 25� of the lease payments. If they do, then the extra costs are the building owner's responsibility. Mr. Commers asked staff to research the files to determine if the building owners would be able to share in the costs of the sealcoating and paving and to see if there is anything that can be done about the rent payments versus the maintenance costs. The HRA can then discuss this again at the next meeting. 3. CONSIDER SETTLEMENT AGREEMENT WITH DON FITCH: Ms. Dacy stated that a settlement has been prepared by Mr. Fitch's attorney. The agreement conforms to the direction provided by the HRA and City Council. The Executive Director has suggested that item #7 on page 2 be changed from 60 days to 120 days to allow adequate time for the redevelopment project in the northeast corner to be finalized. Jim Casserly has reviewed the agreement and agrees with the proposed change. Staff recommends the HRA approve the settlement agreement with the proposed change. Mr. Commers stated one thing he did not like about the settlement agreement is that it is contingent upon Mr. Fitch executing a partnership agreement. He stated this is on the first page of the � Settlement Agreement under ��Agreement'�, subparagraph (b): ��Fitch executing a partnership agreement for the development of the � project." Mr. Meyer stated he agreed with Mr. Commers. Mr. Casserly stated he believed this sentence could be deleted from the Settlement Agreement. Mr. Commers stated he would be more comfortable if the sentence is deleted. It is a statement that is to Mr. Fitch's benefit, but is not to the HRA's benefit. MOTION by Ms. Schnabel, seconded by Mr. McFarland, to approve the Settlement Agreement with Don Fitch with the following amendments: a. Subparagraph (b) under "Agreement" shall be deleted. b. Item #7 on page 2 shall be changed from 60 days to 120 days. IIPON A VOICE VOTE, ALL VOTINa AYE, CHAIRPTsRSON CONIl�iERB DECLARED THE MOTION CARRIED IINAIdIMOIIBLY. 4. CONSIDER RESOLUTION MODIFYING REDEVELOPMENT PLAN AND CREATING TIF DISTRICT #13: � . Mr. Commers stated that he was infox'med by the HRA Executive Director, William Burns, that the majority of the City Council HOIISIN(3 & REDEVELOPMENT AIITHORITY MEETIN(�. BEPT. 9. 1993 - PAGE 8 n, members are not in favor of this project because of the concern of the loss of LGA funds. Mr. Commers stated this is somewhat of a marginal project, and the problem is that over the lifetime of the project, the City is going to lose $9,000 per year under the new state law. He stated since there is the chance that the Council will not approve this proj ect, he suggested the HRA table any action on this resolution until the October meeting. Mr. Casserly stated this project does meet all the criteria established by the HRA and Council. It creates new employment with the ability for further expansion in the future. The issue is that out of the $400,000, the HRA will actually generate tax increment of about $250,000-260,000. Taking out administrative fees of 10% and taking out the adjustments for LGA takes off another $90,000- 100,000, so this means that the HRA has $150,000 that is really available out of the $400,000 if the HRA supplies this assistance. MOTION by Mr. Prairie, seconded by Mr. McFarland, to table any action on the resolution modifying the Redevelopment Plan and creating Tax Increment District No. 13 for ECO Finishing, Inc., until the October 14, 1993, meeting or a special meeting, if needed. IIPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON CONII►SERS DECLARED � THE MOTION CARRIED IINANIMOIIBLY. 5. CONSIDER SCHOOL DISTRICT TURNBACK AGREEMENTS: Mr. Commers stated that at this point he is not opposed to once again approving the school district agreements and returns, but in view of the HRA's financial condition and other priorities the HRA may have, he is concerned that the HRA may not be able to continue to make these kinds of payments. Mr. Prairie stated that this concern should be conveyed to the school districts, particularly Fridley School District #14 which receives a large dollar amount. Mr. Pribyl stated that last year the City did indicate in a letter with the agreements to the school districts that this was not a guaranteed continuing kind of payment and that the school districts should be cautious as to future funding. He stated the City will again convey to the school districts that the HRA has limited resources and has a number of projects that need to be funded in the future and that these funds are not guaranteed for the future. Mr. Commers stated staff should make sure that this concern is communicated to the proper school board personnel. ,,-� MOTION by Mr. Meyer, seconded by Mr. Prairie, to approve the school district agreements and tax increment financing refunds as set forth for the year 1994. � � ,� HOIIBING � REDEVELOPMENT AIITHORITY MEETING. BEPT. 9, 1993 - PAGE 9 IIPON A VOICE VOTL, ALL VOTING AYB� CBAIAPERSON CONII�lERB DECLARED THE MOTION CARRIED IINANIMOIISLYe 6. AUTHORIZE CHANGE ORDER NO. 1 TO LARE POIATTE DEVELOPMENT MAINTENANCE PROJECT: Mr. Commers stated that staff has informed the HRA that the Lake Pointe maintenance contract is now subject to sales tax under a recent state law imposing sales tax on a variety of government unit purchases. He would like the staff to verify if the state law covers the full contract price of $24,173 or if it only applies to the unpaid balance of the contract. MOTION by Ms. Schnabel, seconded by Mr. Meyer, to approve Change Order No. 1 to Lake Pointe Development Maintenance Project No. 244 to permit payment of sales tax as required by state law. IIPON A VOICE VOTB, ALL VOTING AYF, CHAIRPERSON CONIIKER� DECLARED THE MOTION CARRIED IINANIMOIIBLY. 7. CLAIMS AND EXPENSES: Mr. Ellestad added the following checks to the check register: #2419 - Dependable Courier #2420 - Isaacson Lawn Care #2421 - Majer 1 Hour Photo #2422 - Menards - $45.42 - $26.48 - $3,497.36 - $36.99 MOTION by Mr. McFarland, seconded by Mr. Prairie, to approve the check register, checks #2393-2422. IIPON A VOICL VOTE, ALL VOTING AYE, CBAIRPER80N CONIIKERB DECLAR�D THE MOTION CARRIED IINANIMOIISLY. 8. RICE PLAZA UPDATE: Ms. Dacy stated Hong Kong Kitchen is searching for a new site. They may have a more difficult time finding a site because it is more difficult with restaurant equipment. 9. HOUSING PROGRAM STATUS: Ms. Dacy stated she had handed out a resolution that would authorize the Executive Director or the Housing Coordinator to approve the deferred loans for the program. That means either the Executive Director or the Housing Coordinator would be authorized to attend the closing for some of the petitioners, execute the documents on behalf of the HRA, and request a check from the Finance Department. MOTION by Ms. Schnabel, seconded by Mr. McFarland, to approve Resolution No. HRA 9- 1993, "A Resolution Authorizing Certain �"`, HOIIBING & REDEVELOPMENT AIIT80RITY MEETINa, 88PT. 9. 1993 - PA�E 10 Payments under the Fridley Home Improvement Loan, Home Mortgage Assistance and Rental Rehabilitation Loan Programs". IIPON A VOICE VOTE, ALL VOTINa AYE, CHAIRPERBON CO1�tERB DECLARED THE MOTION CARRIED IINANIMOIISLY. 10. DISCUSS SCATTERED SITE ACOUISITIOPT PROCESS: Ms. Dacy stated that as a result o staff discovered that two detached extensive rehabilitation to meet rehab costs would far exceed Authorizing the rehab is not fin� nothing would be equally distur] structures to continue. Because c modification to the scattered site developed a strategy where the sc would be split in half for two puY use about one-hal.f the budget rehabilitation program to remov rehabilitated. The second nurnc ` the rehab application process, single family homes may require minimum code requirements, and the value of the structure. ncially appropriate, yet doing �ing by permitting substandard f this, staff is recommending a acquisition program. Staff has ittered site acquisition budget poses: One purpose would be to to use in tandem with the : properties which cannot be se wau7d Yx� tn imnlAmAnt tho program as previously discussed. A list of properties, ranked in order of importance/priority, will be developed and submitted to the HRA for review. Ms. Dacy stated that in October, staff will probably be coming to �� the HRA with the inspection reports on the two properties. There are public policy questions as to whether or not the HRA should give these homeowners the rehab fund's, or if the HRA should provide another solution to take care of the problem. Mr. Meyer agreed with the strateqy proposed by staff. Mr. Commers authorized the staff to move forward and bring this information to the October meeting for the HRA's review and consideration. 11. LAKE POINTE MARKETIAIG STATUS: Ms. Dacy stated that in May 1993, the HRA directed staff to put together a brochure to be sent to real estate brokers. She stated staff has prepared an RFP for advertising agencies to solicit their costs for marketing the property. She stated staff would like the HRA to make a motion authorizing the Mayor, HRA Chairperson, Executive Director, and herself to review the RFPs and execute a contract with one of these agencies by the end of September. The operating budget provides $30,000 for advertising and $30,000 for a Lake Pointe consultant. MOTION by Mr. Prairie, seconded by Ms. Schnabel, to authorize the execution of a contract with an advertising agency based on the ,-1 RFPs by the Mayor, HRA Chairperson, HRA Executive Director, and Community Development Director. HOIISINm & REDEVELOPMENT AIITHORITY ME�TING, S�PT. 9, 1993 - P�GE 11 �'�, IIPON A VOICL VOTTs, ALL VOTING AYE, CBAIRPERSON CONII�lERB DECLAR�D __ THE MOTION CARRIED IINANIMOIISLY. Ms. Dacy stated that owners of the two option properties had agreed to extend the option agreements to October 31, 1993. At this time, the HRA has three alternatives: (1) Let the options expire at the end of October ($500 each); (2) Extend the options for another year; or (3) Exercise the rights under the purchase agreements and acquire both properties ($165,000). Both property owners are willing sellers at this time and have expressed an eagerness to move. Ms. Dacy stated the Executive Director is recommending that the HRA let the options expire and to acquire the properties when a solid development proposal is submitted. They could then pursue negotiations with the property owners or go through a condemnation process. Mr. Commers stated he believed they should try to keep the options open for one more year. Mr. Prairie agreed. Ms. Dacy stated she can go back to the owners and see if they are willing to extend the options. �� Mr. McFarland asked if there is any chance the values on these properties have depreciated. Ms. Dacy stated she would have to get this information from the City Assessor. Mr. Commers stated it would be good to have that information. He requested that staff obtain the current values on the property and bring that information to the October meeting. 13. FRIDLEY TOWN SOUARE UPDATE• This was an information item only. ADJOURNMEATT• 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 September 9, 1993, Housing & Redevelopment Authority meeting adjourned at 10:40 p.m. Respectfully submitted, � r-.1 Ly Saba _ Recording Secretary