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HRA 02/09/1995 - 29579/'1 �"� � CITY OF FRIDLEY HOIISING & REDEDELOPMENT AIITHORITY MEETING, FEHRIIARY 9, 1995 CALL TO ORDER• Chairperson Commers called the February 9, 1995, Housing and Redevelopment Authority meeting to order at 7:35 p.m. ROLL CALL• Members Present: Members Absent: Larry Commers, Virginia Schnabel, Jim McFarland John Meyer, Duane Prairie Others Present: William Burns, Executive Director Barbara Dacy, Community Development Director Jim Casserly, Financial Consultant Grant Fernelius, Housing Coordinator Craig Ellestad, Accountant James Hoeft, HRA Attorney Lee Arman, 8125 Riverview Drive Peggy Brown, 170 Liberty Street N.E. APPROVAL OF JANUARY 12. 1995. HOUSING AND REDEVELOPMENT AUTHORITY MINUTES• MOTION by Mr. McFarland, seconded by Ms. Schnabel, to approve the January 12, 1995, Housing & Redevelopment Authority minutes as written. UPON A VOICE VOTE � ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED IINANIMOIISLY. APPROVAL OF AGENDA: Mr. Commers requested that discussion of the 1995 HRA Budget be held at the March meeting. MOTION by Ms. Schnabel, seconded by Mr. McFarland, to approved the agenda as amended. IIPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERB DECLARED THE MOTION CARRIED IINANIMOIISLY. CONSENT AGENDA: 1. RESOLUTION TO APPROVE A LOAN FOR DAVID STEWART. MOORE LAKE APARTMENTS Mr. McFarland asked if Commission members can assume their concerns have been addressed when it comes to final approval. HOIIBING & REDEVELOPMENT AIITHORITY MTG. FEBRIIARY 9, 1995 PAGE 2 �"� Ms. Schnabel also expressed concern. There was lengthy discussion in the August 1994 minutes, and she was not sure those items had been addressed concerning the Moore Lake Apartments. She was not at the August meeting. The concerns were expressed by Mr. McFarland, Mr. Meyer, and Mr. Commers. If they are comfortable, she has no problem with approval. Ms. Dacy stated it was her understanding of the discussion that there will D�e a guarantee provided by the owner. Mr. Casserly has assured her this will be done and the resolution provides for a guarantee and enforces that. Mr. Commers stated the Resolution, Section 3, Paragraph 3.01, states, "Upon execution and delivery by the Redeveloper to the Authority of a note, mortgage, and guarantee in a form satisfactory to the Officers." Who are the officers? Mr. Casserly stated the officers are the Executive Director and the Chairman of the HRA. This is a very simple document and provides a guarantee. 2. RESOLUTION DESIGNATING OFFICIAL DEPOSITORIES ^ 3. REVENUE AND EXPENSES 4. MONTHLY HOUSING REPORT MOTION by Ms. Schnabel, seconded by Mr. McFarland, to approve a Resolution Authorizing a Loan and the Delivery of Funds By and Between the Housing an Redevelopment Authority In and For the City of Fridley and 5701 General Partnership; to approve a Resolution Designating Official Depositories for the Fridley Housing and Redevelopment Authority; to approve check register #25399 through #25433 as submitted; and to approve the Monthly Housing Report as submitted. IIPON A VOICE VOTE, ALL VOTING AYE, CHAIRPER80N COMMERS DECLARED TSE MOTION CARRIED IINANIMOIISLY. Ms. Schnabel stated the question was raised regarding the Moore Lake Apartments that we should look into establishing a set of rules in the event a similar situation should arise in the future. Ms. Dacy stated staff will develop those types of guidelines when discussing programs for the Hyde Park area and will submit them to the HRA for review. �„� HOUSING & REDEVELOPMENT AIITHORITY MT(�. FLBRIIARY 9. 1995 PAGE 3 ACTION ITEMB: 5. PUBLIC HEARING ON SALE OF SCATTERED SITE ACOUISITION LOTS: 187 Longfellow Street 6409 East River Road 8280 East River Road 677 Hugo Street 539 Glencoe Street 547 Glencoe Street MOTION by Ms. Schnabel, seconded by Mr. McFarland, to open the public hearing. IIPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED AND THE PIIBLIC HEARING OPEN AT 7:40 P.M. Mr. Commers stated the above listed properties are to be sold. The two properties located at 539 Glencoe and 547 Glencoe are to be sold as one buildable lot. The sites have been cleared of any structures. The HRA is proposing that only new single family homes be constructed. The lots are to be sold to the highest, most responsible bidder on a sealed bid basis. Bids will be accepted � during mid-February to early-March and will be reviewed by the HRA at the March 9, 1995, meeting. The successful bidder will have 45 - days to enter into a Sale and Development Agreement with the HRA or forfeit their earnest money. A summary of the bid package and the development agreement has been provided previously. After execution of the agreements, the HRA and bidder(s) would close on the property and convey title. At closing, the HRA would provide a quit claim deed to the buyer in exchange for a mortgage on the property. The mortgage would be in the amount of the lot purchase price due within 90 to 120 days. During that time, the buyer would submit plans and drawings to the HRA for review and approval. After approval, the buyer would proceed with construction after obtaining all building permits, etc. Mr. Fernelius stated the lots were acquired through the scattered site program and will now be sold. Before selling those lots, State statutes require there be a public hearing which is being held at this time. He reviewed the format for the public hearing. Mr. Fernelius provided the background for the scattered site program which began last year. The purpose is to acquire and remove substandard and dilapidated housing which is considered a neighborhood blight. By doing this, they provide an opportunity to construct new homes, improve the neighborhood in appearance and property values, and hopefully encourage surrounding homeowners to make improvements to their property. This is a voluntary program �, so the HRA must come to an agreement with the property owner to acquire the property. The plan is to sell those lots which are ^ HOIISING & REDEVELOPMENT AIITHORITY MTG, FEBRIIARY 9, 1995 PAGE 4 considered buildable to potential home builders. Eight parcels were acquired and six parcels are being sold (the two parcels on Glencoe Street are to be combined into one buildable lot). Mr. Fernelius stated design guidelines have been established for the builders to follow. They are recommending that new, single family homes be constructed on the sites with a minimum of two bedrooms with a third bedroom desirable, one bathroom plus a 1/2 bath roughed in or preferably two bathrooms. In addition, the homes must have a two-car garage, either attached or detached. It is desirable that the homes have low maintenance siding. Other criteria include that the new homes fit in with the existing neighborhood as much as possible and the front and side yards be landscaped. All construction must comply with current building codes. The HRA would then have the ability to approve the building plans before a permit would be issued. Mr. Fernelius stated the properties would be sold to the highest bidder contingent upon the buyer entering into a development contract with the HRA. If the buyer refuses, the HRA would retain the earnest money and could proceed with another buyer. The buyer would have to build a home according to the design guidelines, provide a letter of credit and a provide mortgage to the HRA for ,--� the land. The HRA would approve the plans in May, and construction _ could hopefully start in June with a completion date in September. Mr. Commers asked if that time frame and design criteria were included in the bid package. Mr. Fernelius stated yes. Also included in the bid package are the bidding procedures, a process that is outlined in terms of what the buyer must comply with, what the buyer must provide, information on the lot size, zoning, utility services, etc. The bid package will also include a copy of the sale and development agreement, a sample letter of credit, a sample mortgage, and a sample note. Mr. Commers asked if the forms were simple to fill out. Mr. Fernelius stated that only one form on one page needs to be submitted. Mr. Commers opened the meeting to public comment. Ms. Brown stated she lived next to the parcel located at 187 Longfellow Street. She asked if there was any control on the buyer not building a rental property? Mr. Fernelius stated this can be controlled to the extend that the buyer is building a single family home. If the home is sold to a � home buyer who later decides to rent the property, we have no control over that just as we have no control over any other single HOIIBING & REDEVELOPMENT AIITHORITY MTC�, FEBRIIARY 9, 1995 PA(3E 5 �"'`� family homes. The HRA's intent is for the buyer to construct a single family home. Mr. Commers asked if the mortgage requires the owner to live in the home. Mr. McFarland stated he did not think so. It is difficult today to make it worthwhile to have a new single family home as a rental unit. Ms. Brown expressed concern about drainage. Due to people redoing things on their property, the land has gotten built up. The backyards were originally a drainage area. The landscaping in the neighboring houses has filled this up. She has a problem in the spring, before the frost-line goes out, with water melting and collecting, and they have a lake in the back yard. Once the frost is out of the ground, the water drains. How can she go about having the City come out and check the drainage? Would this be an opportune time to have the City check this to see if something can be done and make sure the landscaping on the vacant is done appropriately? Ms. Dacy stated the City could have engineering staff evaluate the � site and address the situation. She recommended staff contact her in the spring to qet more information so staff are sure to understand the problem and point this out to the buyer of the property. Ms. Brown asked if there was any way they can be assured that something can be done. Ms. Dacy asked Ms. Brown to call staff at any time after the home goes up. Ms. Brown asked to clarify if she should call before the home goes up or after. Ms. Dacy stated it would be advantageous to have staff go out prior to conveying the lot to make the potential buyer aware of the situation and again review it when then the specific site plan is submitted. Ms. Brown stated, over the years, people have put up garages and/or remodelled, placed the remaining soil in other parts of their yard and landscaped which has changed the drainage. Her property is to the north of the vacant parcel and the problem occurs in the southeast corner of her property. The properties in that area are offset. ^ Mr. Commers asked if there was a drainage ditch in the back. .� � HOIIBING & REDEVELOPMLNT AIITHORITY MTG, FEBRIIARY 9, 1995 PAGE 6 Ms . Brown stated this was originally an alley but this has not been used as an alley since they moved into the property. They put up a fence which is one-foot on their side of the center of the alley. People on both sides use that one foot. Whoever buys the property may question that. There is a drain on Ashton Street. Mr. Commers stated the drainage would have to be looked at when placing a house and before doing any actual site work and site preparation. He recommended Ms. Brown call staff so they are alerted and also to call if she notices anyone moving dirt on the site. Mr. Arman stated his property adjoins the lots on Glencoe Street. He came because he was interested in the plans to build but he understands that this is not a buildable lot. He asked if there were lots that will never be built on. Mr. Fernelius stated the lot in question is 683 Glencoe. This is one of two properties currently considered non-buildable. In a different location, they are considering acquiring adjacent properties in order to combine the parcels into a buildable lot. This lot should remain vacant for the near term. Mr. Arman stated there is an area near this lot which is a park. There is also a neighbor doing a major renovation. Mr. Commers stated that perhaps the landowner might be interested in the lot to add to his property. Mr. Arman asked if there would be minimum bids. Mr. Fernelius stated the bids would be presented at the March meetings. The HRA will decide at that time what is or is not acceptable. Mr. McFarland stated there is no minimum bid, but the iiRA reserves the right to reject a bid. Mr. Arman stated the lot he is concerned about is considered non- buildable at this time. For the other lots that are buildable, would consideration be given to adjacent property owners to purchase and not build. Mr. Fernelius stated the intent of the program is to have a new home constructed. Mr. Arman stated the schedule seemed aggressive. He thought it was a wonderful thing that is being done. As one that has property in the neighborhood, this property was vacant and in disrepair. Many n people think this is a good program. ^ 80IISING & REDEVELOPMENT AIITHORITY MTG. FEBRIIARY 9, 1995 PAGE 7 Mr. McFarland stated lot #6 is non-buildable. Will the HRA consider those neighbors who might have an interest in the property? Mr. Fernelius stated staff had not developed a recommendation. The plan is to sell the buildable lots first and then consider what to do with the other properties. He would make a recommendation in the future. Ms. Dacy stated this will occur fairly quickly to minimize the on- going costs. A logical option is to approach adjacent property owners. Staff must consider the process that this would entail. Mr. Commers asked if there was some other viable option. Mr. Fernelius stated the down side to keeping the properties is the cost of maintaining. There is the possibility of land banking. The logical option would be to sell to an adjacent property owner. Staff needs to spend more time on this. Ms. Brown asked if it would be advantageous to have landowners on them for the tax revenues. ^ Ms. Dacy stated yes. Mr. Commers stated that makes sense. Staff are looking at it. It sounds as if it may be one of those things the HRA may do. MOTION by Ms. Schnabel, seconded by Mr. McFarland, to close the public hearing. IIPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERB DECLARED THE MOTION CARRIED AND T8E PIIBLIC HEARING CLOSED AT 8:05 P.M. Ms. Schnabel stated there are no minimum bids established. Are there any guidelines in terms of the dollar amount of the bids? Is what was paid for the lots relevant in terms of the bids? Mr. Hoeft stated the process is a sealed bid and the bidder knows the bid will go to the highest bidder. If there is not the desire for the lots and the bids are not what staff and the HRA think the property is worth, the bids can be rejected. Ms. Schnabel stated she is trying to get a handle on just what the property is worth. Mr. Fernelius stated a value has been assigned as part of the appraisal for the land. This could be used as a reference point as far as whether a bid is acceptable. � n n, HOIISING & REDEVELOPMENT AIITHORITY MTG. FEBRIIARY 9. 1995 PAGE 8 Mr. Commers asked what the HRA could use as a basis. How do they know whether to sell a lot for the bid price or not sell? Mr. McFarland asked, if a bid is rejected, do we have to rebid. Mr. Hoeft stated, as far as the value of the land, different people will give different values. Because of the nature of the program, if for example the best bid is $3,000, the land is obviously worth more. The question is do you want to go forward on the value of the best bid that you get in order to get single family homes on the property knowing it is unlikely the HRA would get back out what has been put in. Staff can provide some guidance on that. There is a land value and appraisal report. The HRA can also, from their general real estate knowledge of the area, estimate a buildable lot would generally sell for x dollars. Staff will provide as much guidance as possible. We can look to the County to determine the value for tax purposes, which provides a point of reference. Mr. Commers asked if the County determines a value of the land only for tax purposes? Does the assessor assign a value? Ms. Dacy stated the County determines a value for tax purposes. She did not know if the assessor assigned a value and would check with their office to see. Mr. Casserly stated, in theory, the land value should be the same. Mr. Hoeft stated, if there is an improvement on the property, the County has the land value and the building value. With the buildings gone, the County would take off the building value to see what the land is worth. Mr. Casserly stated the values are divided on the assessor's card but not on the tax statements. In this first round of bids, this is by far the best way to see what the results are going to be. The reason the HRA may want to e�eriment is because they may conclude it is better to take a reduced value for the land and have that put into structure. You may decide to give the lots away to the person who will build the most expensive structure. He is working with the House and Senate staff trying to design a housing replacement program with the state legislature. The goal of the program is to take parcels with substandard homes and replace them with as high value homes as is possible. They are trying to create a mini-tax increment district. In order to capture the value, the HRA may decide in the future that it is worth more to have more value in the homes. Mr. Commers stated the problem he sees is that someone would come in bidding on the land and are not necessarily be committed to ,�"1 doing anything on the building. How do we get a commitment up front? HOIIBING & REDEVELOPMENT AIITHORITY MTG. FEBRIIARY 9, 1995 PAC�E 9 i ',, - Mr. Hoeft stated the present procedure requires that. The bidders are aware this is based on subsequent specifications for the home. Ms. Schnabel asked if the HRA can establish a minimum price home to be built on the properties. Mr. Hoeft stated the HRA could, but the guidelines in place will dictate a certain value of home in and of itself. The HRA has the sole discretion. This is weighted on the HRA's side to approve or not approve the proposed plan. The HRA will see the plans as they come in and will know from looking at the plans the value the homes will have. If the plan does not carry the value or has features that are not in line with the requirements, the HRA can discuss that with the builder to resolve. The guidelines will bring us to a value which will be comparable to existing properties. Ms. Schnabel stated, if someone is bidding a minimal amount for the lot, are you sure the builder will put up a quality home. The residents are relieved to see the substandard buildings removed, but they also do not want the same type of situation on their hands in the future. Mr. Hoeft stated the assurance the HRA has is that they are have � the sole discretion to approve or reject the building plans presented. If someone comes in with a 900 square foot house, you can indicate this is not the type of home you had anticipated and the builder would have to redesign to your satisfaction. That is the control. Mr. Commers stated that perhaps the HRA would be better off getting a builder and giving them the lots for a price if they agreed to build a specific priced house. Mr. Fernelius stated staff had considered this option. Staff thought it would be a better process to see how the market would value those properties. It is a first step in a program that can be changed in the future. Ms. Schnabel asked how the lots are being advertised. Mr. Fernelius stated an ad would be placed in the Focus. Probably an ad would be place in the Builders' Exchancte. Staff will contact directly those people who have contacted the City in the past as well as builders who have constructed homes in Fridley. 6. RESOLUTION AUTHORIZING EXPANSION OF REDEVELOPMENT PROJECT AREA NO. 1, AND CREATION OF TAX INCREMENT DISTRICT NO. 13 Mr. Casserly stated the expansion of the redevelopment area puts ,� the HRA in a position to capture an increased value. HOIISING & REDEVELOPMENT AIITHORITY MTG, FEBRIIARY 9, 1995 PAGE 10 � Mr. Commers asked, by creating this, does that subsequently create a downside for any other tax situation for the City. Mr. Casserly stated it does impact the local government act because this is a redevelopment district. The impact will be about 15 years out before there is a detrimental effect to the City. They are not going any further than that. They can decertify before the net effect of the impact is detrimental to the City. This is something they will have to watch. MOTION by Mr. McFarland, seconded by Ms. Schnabel, to approve the Resolution Modifying the Redevelopment Plan for Redevelopment Project No. 1 to Refleat Increased Project Costs and Increased Geographic Area Within Redevelopment Project No. 1, Modifying the Tax Increment Financing Plans for Tax Increment Financing Districts No. 1 Through No. 12 to Reflect Increased Project Costs and Increased Geographic Area Within Redevelopment Project No. 1, and Creating Tax Increment Financing District No. 13 and Adopting a Tax Increment Financing Plan Relating Thereto. IIPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERB DECLARED THE MOTION CARRIED IINANIMOIISLY. � Mr. Commers stated the last page of this agenda section is a modified schedule of expenses and he asked for additional information on the figures. Ms. Dacy stated this is what she was referring to in her cover memo. Some of these costs have been expended to provide the HRA with maximum flexibility for this project in the event other issues occur with the district. Mr. Casserly stated the HRA does not have before them a very substantial program document. This page is an insert into that document. This is increasing the eligible amount of costs for which you can use funds. Each time the document is amended, it is very expensive. The increases being generated do not come close to covering these costs. These costs are generous but they cannot be exceeded. Mr. Commers stated, when looking at the figures, he thought some items would be more expensive than proposed. Mr. Casserly stated the numbers can be moved around within the contract. Listed are general categories. The HRA must approve all expansion items. There could be additional amounts. There is a contingency of $200,000. Out of that, they could use the entire amount for relocation. ^ Mr. Commers stated he understood it would be fairly simple to set up a budget and track it on a monthly basis. HOIIBING & REDEVELOPMENT AIIT80RITY MTG. FEHRIIARY 9, 1995 PA(3E 11 � Mr. Ellestad stated staff have a fund number designated for the Southwest Quadrant. They can also set up a project code. Ms. Schnabel s�ated she had asked this of Mr. Pribyl previously, and he indicated this would be very easy. Ms. Dacy stated staff had provided copies of the list of expenses which will be a part of the budget. They have taken some of the expenses already paid and some which have not been paid. They will use these costs to keep track of how contracts come in, etc. All of these costs are wrapped into the budget document in the appropriate slots. The one question that staff do not have much information on is the Fast Lube site across the street and the associated expenses. Mr. Burns has been working on this. Mr. Commers stated this is the HRA's first big project. Some money will be coming out of the general fund and will not be reimbursed. It would be nice, as far as the format is concerned, have a budget with columns showing the budgeted amount, monthly expenditures and year-to-date expenditures. It is still okay to make shifts between tYie categories . Mr. Commers asked Mr. Burns for additional information on the Fast � Lube site. Mr. Burns stated this is a best guess on what the remediation plan would cost. If the environmental study goes normally, they could be faced with these costs. Later in the meeting, staff will be requesting $11,500 for a remediation investigation. If the amount of petroleum found in the groundwater is infinitesimal, the MPCA may say we do not need to go any further so there would be no additional expense. However, if the amount found goes beyond acceptable levels, then there will be expenses for drilling monitoring wells and analysis estimated to be about $15,000. He estimated for budget purposes $20,000. It is also likely the City would be asked to excavate contaminated soil from the area where the tanks were located. The soil is incinerated and then disposed. This cost is estimated to be $20,000. The total could be $51,500. These are tentative numbers. There is no guarantee that these are typical. 90 0 of the costs should be reimbursed by the petrol fund. Mr. Commers stated this was not in the budget, but it is not significant. Ms. Dacy stated the remedial plan is accounted for on the list. Not accounted for is the drilling, monitoring, and/or excavation. Ms. Schnabel stated, if 90% is reimbursed, it will probably be a minimal cost to the HRA. �� HOIIBINC� & REDEVELOPMENT AIITHORITY MT(3. FEBRIIARY 9, 1995 PA(3E 12 � Mr. Burns stated, at some point, Ms. Dacy is taking quotes from one other consultant. Staff believe the costs should not exceed $11,500 as proposed. Staff is requesting the authority to spend this amount for a remedial investigation. Mr. Commers asked if the Phase 2 had been completed. Ms. Dacy stated this was held up based on the negotiations with the Suhs. A good portion of the Phase 2 audit was completed because the City owned the fast food property. They have not been able to gain access to the Suh property and able to complete the remainder of the audit. Mr. Burns stated the remainder of the audit is that which must be done inside the building. They could not gain access to the interior of the building for a while, but now can. Mr. Commers asked if there was any testing underground. Mr. Burns stated there was not other than the tanks. There was a fuel oil tank there, and there is some leakage associated with that around the area. It does not look like a serious problem. ^ MOTION by Ms. Schnabel, seconded by Mr. McFarland, to authorize staff to expend $11,500 to start the process of a remedial investigation. Mr. McFarland asked if the Fast Lube site was purchased from a major petroleum company. Ms. Dacy stated the site was purchased in 1981 from Amoco Oil. Mr. McFarland asked if they had signed anything regarding liability on the property. Ms. Dacy stated she was not sure and that she would check. Mr. Commers stated he would doubt it. This was not an issue at that time. Mr. Hoeft stated it appears that we can be reimbursed for 90a of the remediation costs from the petrol fund. If that is the case, it may be money better spent focusing time getting the reimbursement from the fund rather than taking some type of action from Amoco. Mr. McFarland stated they could write a letter to Amoco putting them on notice. The only cost is a stamp. "�, Mr. Commers thought this was something staff should consider. He �. did not see a down side to that. HOIIBIN(3 & REDEVELOPMENT AIITHORITY MTG. FEBRIIARY 9, 1995 PA(�E 13 /'\ There being no further discussion, Mr. Commers called for a vote. IIPON A VOICE VOTE, ALL VOTIN(� AYE � CHAIRPERSON COMMERB DECLARED THE MOTION CARRIED IINANIMOIIBLY. 7. RESOLUTION CONDEMNING APARTMENT PROPERTIES LOCATED AT 155 TO 175__SATELLITE LANE, 195 SATELLITE LANE, 211 SATELLITE LANE, AND 221 SATELLITE LANE Mr. Commers asked if the resolution would authorize a quick take or a general condemnation. Mr. Hoeft stated the fifth paragraph refers to a quick take. Mr. Commers stated the only issue with that is the fact being that we would have the property but with no development contract. Mr. Burns stated this was correct. However, he thought negotiations with the redeveloper had gone smoothly so far. Reports are that they have made great progress with the redeveloper and do not expect serious problems. Mr. Casserly stated there are other problems that could arise that � we have no control over, such as a major change in the density with which the developer may not be comfortable. There are problems that need to be sorted out as we go. Discussed at the last meeting was an agreement for exclusive negotiations. This lays out a format so each party would need to do certain things. Even with an agreement, there was no guarantee that Rottlund would enter into a development agreement. The conversations we have had with them have been nothing but positive. There has been nothing to suggest we will not have an agreement. From that perspective, it seems reasonable. Mr. Commers that the only issue to him is that the HRA is at some risk. What will the ultimate dollar amount be with what has already been spent? This would be $4 million and $2 million has already been invested for a total of $6 million. Does that include the loan from the City? How is the $1.5 million loan being funded? How will they get their money back? Ms. Dacy stated the loan would be paid back through tax increment funds. Mr. Commers asked if this meant the HRA would have a net into the project of $4.5 million which will not be recaptured? Ms. Dacy stated they had talked about a net of $2.4 million exclusive to what was in the project prior to this year. The HRA will receive $1 million from the land sales. HOIIBING & REDEVELOPMENT AIITHORITY MTG. FEHRIIARY 9, 1995 PAGE 14 /"\ - - Mr. Casserly stated the tax increment would be used to repay the City loan. Mr. Commers stated, if the HRA has $6 million in the project, and out of that $1.5 is a City loan for which they are reimbursed. It is a loan and the City gets it back from the tax increment. That reduces the amount down to $4.5 minus $1 million from the land sales which reduces the risk to $3.5 million as a write off. Mr. Burns stated he thought that $4.2 million was estimated for the cost of this project. If $1.6 million is received from TIF and $1 million for the land, there is a net cost of $1.6 million. Add to that to the $2.5 million already in the project. Mr. Casserly stated he would like to describe what is going on in the legislature as it pertains to what the HRA is doing. The house has introduced legislation, HF #147. The impact of this legislation is to allow the use of tax increment to repay debt on third party contracts. If the legislation were to pass, it would have a serious impact on this Authority. He mentions this because there are a number of people around the state wondering if they should proceed with projects. The legislation contains retroactive language to February 1 of this year. It is very unusual to do � this. The immediate effect was to stop bonding. This HRA is not involved in issuing debt. The real impact could put us in a position where, if this were to pass, the HRA would not have the increment to repay the City. Since this legislation has been introduced, people are taking it seriously. He is suggesting that people conduct business as they normally would. Mr. Commers asked in what way would the HRA finance. Mr. Casserly that the HRA would fund out of the fund balances on hand. Mr. Commers asked if the legislation would impact the HRA's ability to do that. They are not going to do any bonding. Everything is internal. It seems the solution is to get the City to put in their role to the HRA that, if it becomes impossible for the HRA to repay the loan, the City will not be repaid. Mr. Casserly stated this would be true anyway because the repayment is from eligible revenues. If you cannot use revenues, you cannot repay. He only raised this because the legislation puts the author and others who are trying to reform the way you use the tax increment in a better bargaining position. His concern is that this could start pitting cities against each other. Mr. Commers stated it sounds like there will be some changes that �"'�, this HRA might view as detrimental to the law. � � �"� 80IISING & REDEVELOPMENT AIITHORITY MTG, FEBRIIARY 9, 1995 PAGE 15 Mr. Casserly stated there are some changes. In August, 1989, they changed the definition of redevelopment. A number of suburbs created large tax increment districts. Most of it was raw land. They have now started to development this land and are generating large amounts of increment. Because of the way the law was written, the increment can only be spent on qualified expenses in the project area. These suburbs are using the increments doing special assessment projects, etc., normally paid for out of the general fund. Those of us working on redevelopment do not see the cash flow. The only source of revenue for doing projects is the reserves established over the last 10 years. Most new projects will have shortfalls. These are issues we are dealing with. They think they can solve the issue by limiting the use of the tax increment funds just for projects indicated. They hope to reach a conclusion so they do not have the same discussion each year. Mr. Commers asked if Mr. Casserly has any sense of what the HRA has put into public improvements that would have otherwise come out of the general fund. Mr. Casserly stated he thought there had been very little. Mr. Commers asked, if they must redo the Lake Pointe intersection, is that something they are objecting to. Mr. Casserly stated that is an acceptable expense and is a part of the plan needed in order to make the plan workable. This is part of a redevelopment project. MOTION by Ms. Schnabel, seconded by Mr. McFarland to approve the Resolution of the Board of the Housing & Redevelopment Authority of Fridley, Minnesota, Authorizing the Acquisition of Certain Property by an Eminent Domain Proceeding, contingent upon City Council approval of e�tpansion of the project area. IIPON A VOICE VOTE, AI,L VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED IINANIMOIISLY. 8. APPROVE 1995 HRA BUDGET Tabled until the March meeting. INFORMATION ITEMB: 9. UPDATE ON NEIGHBORHOOD MEETING FOR SOUTHWEST QUADRANT Ms. Dacy stated she, Mr. Fernelius and Mr. Burns attended the meeting. Councilmember Billings facilitated the meeting. About 100 people attended of whom half were home owners and half were tenants in the apartment buildings. Mr. Schnitker talked to the tenants as a separate group about relocation. The article in the � HOIISING & REDEVELOPMENT AIITHORITY MTG. FEBRIIARY 9. 1995 PAGE 16 Focus did a fairly good job of summarizing what happened at that meeting. She and Councilmember Billings made a presentation about the history of the Southwest Quadrant and the efforts being made to redevelopment the area. Overall, there were positive comments from people in the area. Concerns did come up regarding traffic issues. All in all, the meeting went very well and she believed the meeting with the tenants also went well. Some tenants were upset that they would have to move, but the comments were generally positive. The public hearing was held on Monday night. Councilmember Billings made it clear that a maj ority of the City Council supported the creation of a tax increment district and supported the acquisition of the apartments. 10. UPDATE ON LAKE POINTE MEETINGS Ms. Dacy stated staff had been requested to recommend possible sites for a fast food restaurant and a bank. Staff provided information about available sites in the City. If the HRA has no objections, staff will recommend several sites in the City. Ms. Dacy stated there are some options with the Rapid Oil site. Rapid Oil could stay and there may be some opportunity to build around it or the HRA could consider acquisition of the Rapid Oil ^ building. Another site is the former "Gateway" site at the northeast corner of 57th Avenue and University Avenue. Mr. Commers asked if the Frank's Used Car site might be appropriate. Ms. Dacy stated staff are still in the process of negotiating acquisition. The zoning dictates the property be used for a single family detached home. To re-establish that use as a commercial site would cause a zoning concern. Ms. Schnabel asked if both parties are only interested in sites on University Avenue. Ms. Dacy stated Burger King is only interested in University Avenue sites. Northeast State Bank may be more open to other sites. They definitely want to be on the east side of the road. 11. UPDATE ON GRIFFIN REAL ESTATE PROPOSAL Mr. Burns distributed a copy of his memo dated February 9, 1995, regarding a meeting with Griffin Realty. He stated he had met with Mr. Denny from Griffin Realty and Mr. Hoeg representing ULP, Inc. Mr. Denny and Mr. Hoeg have been meeting with a user. This client was privately owned for 22 years and is now publicly owned. They have net sales of $69 million and have experienced a growth rate of 22% in the last year. Their customers include Carrier Air Conditioning, Caterpillar, Frigidaire, Polaris and Whirlpool. They HOIISING & REDEVELOPMENT AIITHORITY MTG, FEBRDARY 9, 1995 PAGE 17 /"� have 341 full-time and part-time employees nationwide, the majority employed in the Twin Cities. They like our location and most of their employees are already in the neighborhood. The company has a very clean balance sheet with no long-term debt. They are one of four major players in their particular market area, which is a$5 billion per year business. Mr. Burns stated Griffin Realty wants to build a 60,000 square foot building with 40,000 square feet for this client and 20,000 square feet for spec space. The client is willing to commit to a 10-year lease. The company has outgrown their lease commitment. They would need 5 acres of land and visualize their development occurring on the west portion of the site. They indicate they are paying $90 to $100 in project costs. Mr. Burns stated they would like to build a 1-story building. There is some willingness to consider a 2-story building but they make the point that this would cost $12 per square foot more to build. This would be a Class A building. Mr. Burns indicated the Council and HRA preferred 100,000 square feet and a 3-story building. They thought the goal of a highrise in this location was not realistic in today's market. ^ Mr. Burns asked them about financing. They indicated they use their own resources. When asked when the client would need the building, Mr. Denny and Mr. Hoeg stated their client has a short term lease for 18 months. They envisioned starting construction in June or July of this year. They have looked at other cities but have a preference for this site. The total project costs would be approximately $5.5 to $6 million. Mr. Burns stated he ended the meeting indicating the differences between what the City and HRA prefers and what they are proposing, and hopes to close the gap. Mr. Burns stated, after the meeting, he spoke with Merrill Busch and William Tobin and provided a summary of their comments. Mr. Busch stated these guys can deliver. What they are proposing reflects the realities of the marketplace. Some of the people he had talked to in depth had come to the same conclusions. They want lower density, and Mr. Busch thinks that is a realistic assessment. There are a number of prospects for headquarter buildings but in most cases these will be 1 or 2-story buildings barring some exceptions. The broad general marketplace does not support the high density that we had envisioned. There is not much support for spec space. The higher they go the lower the quality of the building because they must keep their lease costs within market reach of their clients. He suggested we tour some of the buildings that they are showing as examples. He also pointed out that MAPC, �'"'� another developer, is still strongly interested and are expected to �"� n 80QSING & REDEVELOPMENT AIITHORITY MT(3, FEBRDARY 9, 1995 PAC3E 18 set up a meeting in the near future. In closing, Mr. Busch stated that Mr. Denny is real and the project is sound. Mr. Burns stated Mr. Tobin was not at the meeting. Mr. Burns forwarded to him a write up of the meeting with some other information. Mr. Tobin stated this is clearly something he would pursue. He would push for a 3-story building. He would insist they stop playing games with the name of the client. That is something the City should know soon. Once there is some initial office development, it will be easier to get other offers. We may expect to get higher density office space once an initial project is underway. He disagrees with Mr. Bush and Mr. Denny in that additional height does not necessarily add to the cost. There are cost trade offs. There are less exterior walls, less roof, and less land. We may want to take the additional cost.of a 3-story building into consideration in incentives. Mr. Tobin is a well respected real estate consultant. Mr. Burns spoke with Mr. Casserly who said we ought to, if we are going to make progress, depict something on the site. He had staff come up with a reasonable design for a 60,000 square foot building on this site. The developer stated they wanted a 60,000 square foot building and would be willing to put in the first floor of a two-level parking ramp. Assuming a second 60,000 square foot building, Mr. Hickok came up with a proposed design to provide an idea how such a project could be situated on a site using 5.25 acres. The total acres in this portion of the Lake Pointe site is approximately 24 or 566,000 square feet. This proposal does diminish the goal somewhat. This would assume all 2-story buildings throughout the site as well as a two-level parking ramp. There is another 8 acres to the east that could be preserved for hotel/conference, bank, and restaurant. Mr. Burns recommends they continue to work with Griffin to close the gap and strive for a 3-story building. He is asking the HRA to concur. Ms. Schnabel stated this is a distribution company. Headquarters would be primarily office. What is the secondary use? Mr. Burns stated they needed to identify that use. Mr. Commers stated this sounds very much like operation. Mr. Casserly stated they need to know more about are many combinations which would be acceptable. through this preliminary scenario to find out scenario. If the entire area were designed with n story buildings with bilevel ramps, what would density? It may make sense to do just the first a warehouse the use. There They are going the worst case good quality 2- be the maximum part to get ^ HOIISIN(3 & REDEVELOPMENT AIITHORITY MT(3. FEBRIIARY 9. 1995 PAt�E 19 something going. There may be a 3-story building constructed in the future. The problem may have been that options were eliminated by not considering proposals. If this project can be kept to the west and we can figure out how to handle the parking, it may be an enhancing opportunity. Ms. Schnabel stated she thought the proposal was worth pursuing. She is concerned that there is a 1-story building and a bilevel ramp. The visual effect would be all ramp. Mr. Burns stated he would continue to push for a 2-story building. If the HRA is interested, he can arrange some tours. Mr. Commers stated there is no harm is talking with them further. 60,000 square feet on 5 acres is too much to give up. Mr. Casserly stated this is still very preliminary. Mr. Commers stated the proposal does not meet any of the criteria established. We need to get together to make sure we want to do this. If we cannot get the criteria discussed in planning, then this needs to be changed. This is a major change. � Mr. Burns stated he felt the people consulted were good people and they have a good feel for the real estate market. What we were saying is does not ring true for today. Mr. Casserly stated that is the issue. 'I°wo to three years ago we were told we needed to think in terms of multi-purpose, high tech, single story buildings because that is what the market would bear at that time. The market is now starting to improve. People are talking about building some offices. The only major deviation this represents from what we discussed is, if you start with a two-story building rather than 5-story corporate headquarter in the center, it is not that we cannot achieve the same goals. We are just doing it the hard way because there is no easy way to do so. There are issues to work out with parking. This may fit within the general overall goals that we have, at least for starters. The general consensus was to start at the west end. As you get closer to the center, the visibility is greater and it may be that this is reserved for the highest quality building. There is a host of issues to sort out before being considered. Ms. Schnabel asked what staff was asking of the HRA. Mr. Burns stated he was asked for some sort of reading regarding the proposal as it exists. Is there enough interest to continue to pursue and refine? The suggestion for refinement is to push for a 3-story building and, at a minimum, 2-story building. If they �"� insist on 1-story, perhaps we should not continue. ^ HOIISING & REDEVELOPMENT AIITHORITY MTG, FEBROARY 9, 1995 PAGE 20 Ms. Schnabel stated she did not want to see warehousing. Mr. Commers asked how much they were willing to pay for the land. Mr. Casserly stated that is the crux of the problem. We are trying to sort out, depending on the type of commitment, what we can get. Mr. Commers stated, if they build a 3-story building of good quality, we may c,iant to give the land. Mr. Casserly stated the HRA could sell the land and provide the parking or give the land and have them provide the parking. We do not know until we have an interested party. Mr. Commers stated it would be interesting to know what they could do with the rest of the land. Mr. Burns stated, if you use the site as suggested, you can use the land as proposed and still have 440,000 square feet. Mr. Commers asked how much would be left considering the parking. Mr. Burns stated there would be approximately 19 acres remaining. � The total square feet is 566,000. This project would use approximately 120,000 square feet leaving approximately 440,000. Mr. Commers asked if there was a way to projecting the tax increment. Mr. Casserly stated they can figure a tax increment by square foot. A market value for tax purposes of $80 per square foot and a tax rate of 5a equals $4 per square foot in taxes. This is close to what we would expect for a good quality office building. Multiply that by the number of square feet to be developed on the site to get the approximate total. This does not consider commercial development. Mr. Commers asked if the City Council has looked at the proposal. Mr. Burns stated he planned to show the City Council at their meeting the following Monday. Mr. Burns stated he had another Lake Pointe issue. An issue coming up is the intersection. He was advised at a staff ineeting that the state is planning to do improvements along Highway 65. This provides us an opportunity to do some safety and traffic related signalization improvements at Highway 65 and Lake Pointe. They are not consistent with the overall plan for the intersection. When doing the main intersection project, we took those out so we lose the $28,000 investment. The issue is, do we want to spend $28,000 �'"'� now. The Public Works Department is saying it would be a good idea if you are not going to improve the intersection in the next year ^ HOUSINC3 � REDLVELOPMENT AIIT80RITY MT(3. FEBRIIARY 9, 1995 PA(3E 21 or two. A Councilmember suggested another alternative which is to initiate the intersection improvement project this year. Mr. Burns asked Mr. Pribyl to check on this and look at what would happen to the investment program if the HRA tried to fund both the Southwest Quadrant and the intersection project at the same time. He felt we would have to take a loss on some investments. Mr. Casserly stated the debt for this would be tax exempt. Mr. Burns stated he would like to raise the issue at the City Council meeting. This is an opportunity to correct some problems in that area and the HRA must decide if they want to take advantage of the opportunity. The City has had an increasing number of complaints from citizens living on the east side of Highway 65, especially from the Harstad development. People are complaining about difficulty at the intersection of Hackman and Old Central and Highway 65. He thought there was more support on the City Council for doing something at that intersection. Mr. Commers asked what the total costs would be for those improvements. � Ms. Dacy stated they had budgeted $1.9 million in the year 2,000. Mr. Commers stated this was a big number with no tax increment generated. Mr. Casserly stated they were hopeful that they would not have to do that improvement until there was development to offset the expense. Mr. Commers stated he did not like to sell the investments at a loss. Mr. McFarland stated that is talk but, if that is the value of the bonds today, then that is the value. You are taking a loss because you are not getting the rate. The value is not there. Mr. Casserly stated that is a particular area that you may wish to do some tax exempt financing. The cost of financing may be less than the investment return. Mr. Commers asked if, theoretically, they would be better off doing the project with the bonds. It may be better to get out and buy different bondse Mr. McFarland thought this was worth consideration. You can see what your loss is and see how much you can yield on a replacement �"1 at today's rate. You may get a higher yield. � HOUSING & REDEVELOPMENT AIIT80RITY MTG. FEHRIIARY 9, 1995 PAGE 22 Mr. Ellestad stated the investments are very liquid. It does not meet the objectives of the HRA itself. Mr. Burns stated staff used 5� in the budget for interest rates. Mr. Ellestad stated the interest is currently 5.70. Short term interest rates are high. Mr. Commers stated, if the cost if $1.9 million, he is inclined to think it will hurt the HRA in terms of what we have to give up. He requested staff do a financial analysis in terms of what restrictions this will put on other programs. Mr. Burns stated staff would prepare an analysis including the current value of the intersection project and do some cash flow analysis to help understand the impact the two projects will have on future flexibility. We have shown the project out to the year 2,000. The big question is what happens to the cash flow if this is moved up to 1995. Mr. Commers stated it seems as if it will cost half again as much. Mr. Casserly asked if the HRA would like to do the improvements � before necessary and how do you gauge when they are necessary. Mr. Burns stated the definition of necessary becomes more clouded by the demands from those on the other side of Highway 65. Ms. Schnabel asked if the entire intersection was to be redesigned. Ms. Dacy stated each leg of the intersection on the west side needs to be realigned. The next leg is the additional left turn lanes to go into the site. On the east leg, that is realigned as well. They have to move the access to the frontage road to the east to get traffic into the intersection in a better manner. This is quite an extensive project. Mr. Commers stated he did not think the east side was necessary for the Lake Pointe project itself. Ms. Dacy stated that was probably true for the Lake Pointe project itself. It is the left turn lane into the project on the west side that is directly related to the site. The east leg is a very poor alignment. During the townhome proposal, residents said they could not get through there. Mr. McFarland stated that was not an HRA problem. Mr. Burns stated it could be interpreted as an HRA problem. The ��"'� Harstad proj ect on the other side of the road is generating tax - increment financing and is also generating some of the problem for �"� ^ � HOIISING & REDEVELOPMENT AIITHORITY MTG� FEBRIIARY 9, 1995 PAGE 23 that intersection. Some of that TIF money could be used for that project. Mr. Commers asked how much tax increment is being generated. Mr. Casserly estimated with 46 townhomes valued at $85,000 the tax increment would be approximately $40,000 per year. Mr. Commers requested more information in order to look at alternatives for that project. Mr. Commers stated, as far as Griffin is concerned, there is no down side to talking with them. He asked Mr. Burns to see what he could do. It may be that the HRA will not want to continue when they know what the client does. ADJOURNMENT MOTION by Ms. Schnabel, seconded by Mr. McFarland, to adjourn the meeting. IIPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERBON COMMERS DECLARED THE MOTION CARRIED AND T8E FEBRIIARY 9, 1995, HOIISING AND REDEVELOPMENT AIITHORITY MEETING ADJOIIRNED AT 9:50 P.M. Respectfully submitted, , �W Lavonn Cooper Recording Secretary 8 I G N— I N 8 8 E S T � '�� HOIISING AND REDEVELOPMENT AIITHORITY MEETING, . Thursdav. Februarv 9, 1995 Name �ddress/Business �. ��A� r��,� �S l�. 5 R� �� v; -e� i e,�,� . � i �� �i � J�� � � — � �,