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HRA 05/05/1994 - 29572CITY OF FRIDLEY /� HOIISING & REDEVELOPMENT AIITHORITY MEETING� MAY 5� 1994 .,_______________..____________________.,.,..__,.___,.__________________ CALL TO ORDER• Chairperson Commers called the May 5, 1994, Housing & Redevelop- ment Authority meeting to order at 7:30 p.m. ROLL CALL: Members Present: Larry Commers, Virginia Schnabel, Duane Prairie, John Meyer, Jim McFarland Members Absent: None Others Present: William Burns, Executive Director of HRA Barbara Dacy, Community Development Director Grant Fernelius, Housing Coordinator Craig Ellestad, Accountant Jim Casserly, Consultant Scott Lund, Rite-Way Mobile Home Repair, Inc. APPROVAL OF APRIL 7, 1994, HOUSING & REDEVELOPMENT AUTHORITY MINUTES• � � MOTION by Mr. Meyer, seconded by Mr. McFarland, to approve the April 7, 1994, Housing & Redevelopment Authority minutes as written. IIPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERB DECLARED THE MOTYON CARRIED IINANIMOIISLY. 1. CONSIDER PROCEDURES FOR INSPECTIONS FOR REHAB PROGRAMS: Mr. Fernelius stated City staff inet with John Meyer to discuss the concerns Mr. Meyer expressed at the April HRA meeting regarding the inspection process, particularly concerning the loan program. After that meeting, staff developed a number of recommendations to address these concerns and is requesting approval of the following changes to the Housing Rehabilitation Program: 1. Pre-inspections will only be required for applicants to the Home Improvement Loan Program who require HRA gap financing. The inspections will be used to verify the improvements as opposed to a complete inspection of the property. 2. Pre-inspections will not be required for applicants to the Home Mortgage Assistance Program. United Mortgage will be conducting its own inspection as part of the � mortgage application process. n HOIIBING & REDEVELOPMENT AIITHORITY MEETING. MAY 5, 1994 - PAGE 2 3. No changes will be made to the Home Improvement Grant Program with regard to inspections. ACCAP will continue to do inspections and �ork write-ups for that program. Mr. Meyer stated this is a good summary of his meeting with staff, and he is comfortable with these changes. MOTION by Mr. Meyer, seconded by Mr. Prairie, to authorize staff to make the changes to the Housing Rehabilitation Program as outlined by staff. IIPON A VOICE VOTE � ALL VOTIATG AYE, CHAIRPERBON CONII+�ERB DECLARED THE MOTION CARRIED IINANIMOIIBLY. 2. CONSIDER AMENDED TIF REOUEST BY SCOTT LUND: Ms. Dacy stated Scott Lund is proposing to build a new 13,000 square foot office/warehouse building on the north side of 73 1/2 Avenue just east of Highway 65. Before the last HRA meeting, the estimated construction cost was $230,000, so the 5� assistance amount equated to approximately $17,000. Since that time, Mr. Lund has received actual bid estimates, and the project cost totals $494,800. As Mr. Lund is going for SBA 504 financing, he wants to increase his request from 5o to 10%. ^ Ms. Dacy stated Jim Casserly has done his usual analysis in terms of the tax increment district. At this time, this is part of the Onan district. Staff is requesting that the HRA decide whether or not the 10% amount is appropriate. Staff and the petitioner need to work on the mechanics of the assistance, pay-as-you-go versus another method. At this time, staff is not prepared with a recommendation as to how the assistance should be given, but staff would like some direction from the HRA about the 10�. Mr. Casserly stated he has looked at the three years' earnings forecast put together for the project, the executive summary of the SBA 504 loan application, the financial statements for the last two years, and the current revenue and expense analysis for the first two months of the current year. Rite-Way Mobile Home Repair, Inc., is a company that is growing at a steady pace. What appears to have limited its growth is the size of its current facility and the way that the company has had to subcontract out a lot of its work. By constructing this new facility, the company will be able to do a number of their own activities in the new facility and will have the opportunity to generate additional business and have a better profit picture. Mr. Casserly stated staff is still looking at what amount of assistance, if any, should be provided up front or what amount should be provided over time. It is Mr. Lund's feeling that ,�'1 without HRA assistance, the project could not proceed, certainly _ not to the size of the project that is being contemplated, and the �. n ,�1 HOIISING & REDEVELOPMENT AIITHORITY MEETINa, MAY 5, 1994 - PAGB 3 amount requested certainly seems justified. In staff's estimation, it is just a question of how that amount should be provided. Mr. Commers asked if staff is asking the HRA to exceed the guide- lines the HRA has consistently used which is 5�, and what is the basis for doing that? Ms. Dacy stated the recommendation has been 5� on the pay-as-you- go approach. On a loan, the HRA has done a loan amount from 5�S to as high as 150. Mr. Commers asked if staff is looking at a mixed type of assistance; that is, a pay-as-you-go together with a loane Ms. Dacy stated the.requested amount is 10%, but the HRA can mix and match any type of tool. In the past, with pay-as-you-go, 50 has been the guideline. Mr. Prairie asked the number of employees. Mr. Lund stated he currently has nine full-time employees. During the summer months which is their peak season, he hires four to six part-time employees. With this new facility, he anticipates hiring four additional people, two would be full time mechanics just for their equipment. As they expand, there will be additional employees as needed. Within four years, he anticipates hiring an additional four employees. Mr. Commers stated that if the HRA contributes 10�5, how much does the SBA 504 program contribute and what is the equity of the developer? Mr. Casserly stated the developer's equity is about l00 of the total project cost, the SBA provides 500, and the bank financing is 400. Mr. Commers stated that with the 90% financing and the HRA's 10�, the developer is not really putting anything into the project. Mr. Lund stated he has already put $8,000 into the project to date. They are doing a first rate development. His partner and he personally will be putting a lot of money into the interior of the building as they are not financing all the interior improvements, nor did they include any equipment in their proposal for assistance from any of the entities other than SBA, solely for the purpose of trying to keep the monthly costs down. Mr. Meyer asked Mr. Lund to comment on the proposed mix of funds for the 10% HRA assistance, other than an outright pay-as-you-go loan. Mr. Lund stated he had asked Mr. Casserly if there might be an option for the HRA to contribute a 5% loan now and 5o pay-as-you- go, so that he is not strapped for cash flow. He and his partner � HOIIBINa & REDEVELOPMENT AIITHORITY MELTING. MAY 5, 1994 - PAQE 4 have set up a partnership as required by SBA, and each of them has set aside $20, 000 to make sure they have sufficient funds to do the project correctly. Mr. Casserly stated they have probably not included all the project costs, including tenant improvements, machinery, moving expenses, etc., as they normally do in determining percentages. He believed the total cost of this project might be in excess of $550,000. Mr. Commers stated there seems to be a lot of information missing regarding this project. He stated he has never heard of including moving costs as part of the overall project cost. If so, that has never been discussed. Mr. Casserly stated they are talking about the HRA providing assistance that is greater than what the guidelines suggest. What is being suggested is not a loan, but that part of the assistance be provided up front and part be provided over time. The assistance over time is the traditional pay-as-you-go approach and the assistance up front is the traditional grant approach. Those two options can be mixed any way the HRA wants. THe other option is to provide a grant up front with a loan for part, a pay-as-you- go for part, and a loan for part; or they can mix any combination to get the project done. � Mr. Meyer stated that it seems like Mr. Lund has done a very good job at trimming down a building to keep the costs down. It is � somewhat ironic that he is potentially being penalized for staying within what he considers to be his means. Mr. Meyer stated he is in favor of 10a assistance in one form or another for Mr. Lund's project. He is not hung up on exceeding the HRA�s previous guidelines. This sounds like a good project for a person who has been a member of the community for many years and a successful business owner. Mr. Burns stated that more time is needed to work out the exact ° form of assistance. If the HRA can give its consent to the 10% concept without knowing the exact form of assistance, that would be appreciated. Mr. Commers stated what should be explored is what exactly the developers are going to put into the project; and, to the extent they are contributing some equity, what that equity would do to the 5% up front payment and whether or not they can afford to carry a 5� loan to some extended terms. He did not necessarily see anything wrong with the 10%, with 5% up front and 5% over some other terms; but right now the HRA does not have enough information to make that decision. Mr. Burns stated that the HRA was close to 7� on the McGlynn � Bakeries proj ect and was far in excess of 5� for Onan, so there already is a precedent for exceeding the 5� guideline for projects the HRA feels have a substantial benefit to the community. � n HOIISINa & REDEVELOPMENT AIITHOItITY MEETING. MAY 5. 1994 - PAGT 5 Mr. Burns stated staff will work with Mr. Lund and try to move this along as quickly as possible. 3. CLAIMS AND EXPENSES: a. Check Reqister MOTION by Mr. Prairie, seconded by Ms. Schnabel, to approve the check register, checks 25095-25104 (checks 25105 and 25106 were voided) and checks 25117-25122 (checks 25107-25112 were voided) . IIPON A VOICE VOTE, ALL VOTING AYE, CBAIRPER80N CONII+3ER8 DECLARED THE MOTION CARRIBD IINANIMOIIBLY. 4. SOUTHWEST OUADRANT UPDATE: Ms. Dacy stated that since the last HRA meeting, staff has met with Frank Dunbar of Dunbar Development Corporation, Frederick Furland of Ted Glasrud Associates, Inc., and Harry Yaffee and Ken Belgarde of Belgarde Enterprises, Inc., to explore development opportunities on the southwest quadrant. Since these meetings, Glasrud Associates and Belgarde Enterprises have written letters stating that they are not interested in pursuing this type of site for development. Ms. Dacy stated that when staff reviewed this information with the City Council one week ago, the Council asked staff to go back to Winkels and LaNel Financial and explore the mixed use, multi-story structure and development, which was proposed by Winkels and Lanel Financial. Mr. Burns stated staff has relayed to Winkels and LaNel Financial some of the things the Council would like to see; namely, the project ought to have a little more value than what was originally projected. The Council is also attracted by the approach that would have some "under and over" type retail development where the retail is on the bottom floor and the residential is on the upper floors. Mr. Burns stated staff has asked the developer to address some of these concepts and come back with a conceptual plan to be presented to the Council on May 16, 1994. He has also asked Mr. Winkels and Mr. Casserly to get together to change. the assumptions and then have Mr. Casserly work on the financial projections. At the request of the Council, he has asked Mr. Winkels not to phase the project. In the past, Mr. Winkels wanted to build in two phases. Mr. Burns stated this is a major project. There seems to be a greater community interest in this redevelopinent project now than � there has been in the past. 5. LAI�E POINTE MARKETING UPDATEt �. HOIISING & RBDEVELOPMENT AIITHORITY MEETING. MAY 5, 1994 - PAGE 6 Ms. Dacy stated the Lake Pointe brochures were printed in April, and the kick-off of the marketing effort was to attend a booth at the Commercial Real Estate Exhibition in downtown Minneapolis. Twenty to thirty brochures were distributed. Information inserts will be printed on nice colored card stock to be inserted into the brochures. They have had a lot of good response to the appearance of the brochure and the photos. Ms. Dacy stated she just received the prototype for a sign from Merrill Busch. The sign will read: "Lake Pointe Outstanding Corporate Site Available" and will list the City Manager's telephone number. According to the City's Sign Ordinance, they are allowed a 50 square foot sign per street frontage so they potentially could have four signs. Mr. Busch has prepared a list of specifications. Ms. Dacy stated that Mr. Busch has recommended that Mr. Commers and Mayor Nee co-author a letter that will accompany the brochure to be mailed to brokers and developers to introduce the site to the real estate community. That should be done within 30-45 days. They will start doing news releases and advertising in the Real Estate Journal and other business publications. The final step is to work on a list of Minnesota and metro area corporations and businesses for a direct mail. � ADJOURNMENT• MOTION by Mr. Prairie, seconded by Ms. Schnabel, to adjourn the meeting. Upon a voice vote, all voting aye, Chairperson Commers declared the motion carried and the May 5, 1994, Housing and Redevelopment Authority meeting adjourned at 8:40 p.m. Res ectfully s itted, �� �-l� Lyn Saba Recording Secretary