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HRA 04/13/1995 - 29581� � CITY OB FRIDLBY HOIIBING & REDI:VELOPMENT AIITSORITY MEETINa� APRII. 13� 1995 CALL TO ORDER: Chairperson Commers called the April 13, 1995, Housing and Redevelopment Authority meeting to order at 7:30 p.m. ROLL CALL: Members Present: Members Absent: Others Present: Larry Commers, Virginia Schnabel, John Meyer, Jim McFarland, Duane Prairie i,[•�T? William Burns, Executive Director Barbara Dacy, Community Development Director Jim Casserly, Financial Consultant Grant Fernelius, Housing Coordinator Jim Hoeft, HRA Attorney Craig Ellestad, Accountant Tom White, 5705 Hawkes Drive, Edina James Wilkinson, Legal Aid Society Glen Oliver, Attorney Gary Wruck, 1628 Highway 10, Spring Lk Park Dave Harris, 470 Rice Creek Boulevard Brad Dunham, Tollefson Homes Jeff Johnson, ACCAP APPROVAL OF MARCH 9, 1995. HOUSING AND REDEVELOPMENT AUTHORITY MINUTES: MOTION by Ms. Schnabel, seconded by Mr. Prairie, to approve the March 9, 1995, Housing and Redevelopment Authority minutes as written. IIPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON CO1�IIrIERB DECLARED THE MOTION CARRIED IINANIMOIISLY. CONSENT AGENDA• 1. SOUTHWEST QUADRANT BUDGET INFORMATION Mr. Prairie stated there are no changes from the previous month. Ms. Dacy stated staff provided the monthly report of expenses as they are incurred. This may have been updated for March but she did not get that to the HRA. There were some expenses completed in March for the relocation consultant and relocation payments, but these items were not significant. The information shows �. p�yments made through February 28. 1 80IIBINa & REDEVELOPMENT AIIT80RITY MEETIN�. APRIL 13. 1995 PAaB 2 �, 2. MONTHLY HOUSYNG REPORT 3. REVENUE AND EXPENSES Mr. Commers stated, because there are questions concerning the Revenue and Expenses portion of the Consent Agenda, he requested a motion to approve agenda items 1 and 2 and to move the discussion regarding the Revenue and Expenses to the end of the Action Items portion of the agenda. MOTION by Mr. Prairie, seconded by Ms. Schnabel, to approved the Southwest Quadrant Budget Information and the Monthly Housing Report as presented. IIPON A VOICE VOTE, ALL VOTING AYE� CBAIRPERSON COMMERS DECLAR�D THE MOTION CARRIED IINANIMOIISLY. ACTION ITEMS• 4. CONSIDER OFFER BY TOLLEFSON HOMES TO BUY VACANT LOTS AT 539 AND 547 GLENCOE STREET AND 67? HUGO STREET Mr. Commers stated the HRA accepted the proposal at the last � meeting with respect to Tollefson Homes and three lots, and staff were requested to go back to Tollefson Homes to negotiate further with respect to the above stated lots. Mr. Fernelius stated staff talked to Mr. Dunham, Tollefson Homes, about the possibility of increasing their offer. As a result of those.discussions, they did increase their offer from $3,000 to $7,000 for those properties. Mr. Dunham is present and will provide some explanation about their offer. Staff has discussed this offer and recommends that the HRA approve the sale of these properties at that price for the reasona cited in their memo. The HRA continues to incur expenses on these properties. The other important issue is that we have emphasized a certain quality in terms of the product we would like to see and, as a result of those standards, we probably are willing to accept that as opposed to a higher lot price. Also, there is legislation making its way through the legislature that would allow us to establish a housing replacement program. If that is adopted, we would have the ability to recoup over time some of the taxes on that property to help offset the costs. Staff feels it is important to start constructing some homes and making an impact in those neighborhoodse Staff's recommendation is to accept the offer from Tollefson Homes. Mr. Dunham, Tollefson Homes, stated their purchase price was based on their ability to pay and still market houses in that ^ area. The houses in that area are valued at $40,000 to $70,000. The costs of building a house in $68,000 to $70,000. The quality HOIIBINa � RED�VELOPMENT AIITHORITY MEETINa. APRIL 13, 1995 PAGE 3 � of the home must be in accordance with the standards as outlined. They cannot market a home that is priced too much higher than what is existing in the neighborhood. Tollefson Homes is looking forward to putting some homes in these areas. MOTION by Mr. Meyer, seconded by Mr. McFarland, to accept the offer by Tollefson Homes to purchase the lots located at 677 Hugo Street and 539 and 547 Glencoe Street for a total of $7,000 subject to Tollefson Homes entering into a development contract with the HRA by the May, 1995, meeting. IIPON A VOICE VOTE, ALL VOTINa AYE, CHAIRPER80N COM1�R8 DECLARED THE MOTION CARRIED IINANIMOIIBLY. 5. RESOLUTION APPROVING DEVELOPMENT CONTRACT WITH TOLLEFSON HOMES ON CONSTRUCTION OF NEW HOMES Mr. Fernelius stated the developer has agreed to comply with the development contract and is willing to construct homes this summer. The developer is also willing to provide a mortgage for security and a letter of credit. Staff is satisfied that Tollefson Homes will perform and is recommending the HI2A approve the sale and development agreement by resolution. � Mr. Hoeft stated the only substantive addition to the development contract is that Tollefson Homes made a request in our negotiations that, as development on the property occurs, they can come back to the City to work together to reduce the letter of credit on that property because of the value of the improvements in order to free up their line of credit for use somewhere else. Language has been added to the development contract to accomznodate this provision. MOTION by Mr. Prairie, seconded by Ms. Schnabel, to approve the Resolution Authorizing Execution of Sale and Development Agreement By and Between the Housing and Redevelopment Authority In and For the City of Fridley and Tollefson Homes, Inc. IIPON A VOICE YOTE, ALL VOTINd AYE, CBAIRPER80N COMMERS DECLARED THE MOTION CARRIED ONANIMOIIBLY. 6. RESOLUTION AUTHORIZING BIDS FOR DEMOLITION OF THE SOUTHWEST QUADRANT Ms. Dacy provided an outline of the demolition projects and reviewed the information. Staff is asking the HRA to approve a resolution authorizing staff to publish a bid request for the demolition of all buildings in the Southwest Quadrant. The scope of work would include the commercial buildings along University �`� Avenue, the apartment buildings and garages along Satellite Lane, the liquor store site, and the frontage road north of Satellite � � � 80IIBINa & REDEVELOPMENT AIIT80RITY MEBTINa. APAIL 13, 1995 PA�E 4 Lane and south of Mississippi Street. Ms. Dacy stated four different types of contractors would be needed to do the demolition. Abatement contractors are needed because there is asbestos and fluorescent light bulbs. There could be potentially three abatement contractors over the life the project. The first abatement contractor would remove the asbestos material and light bulbs. If there are any environmental issues in the apartment buildings, there will be another contractor. Based on the Phase II audit, there is asbestos present in the liquor store. There will be three abatement contractors to remove the asbestos material, dispose those materials, and then the demolition people will come in. of of Mr. Prairie asked if there would be three different bids because there are three different times. Ms. Dacy stated this was correct. Based on what staff knows now, the abatement bid for the commercial buildings along University Avenue will be fairly modest. The abatement for the liquor store may be close to $25,000. She was not sure of the costs for the apartment buildings because the Phase I audit is still being conducted. Ms. Dacy stated, when the abatement is being done, an abatement inspector must be hired. There must be someone on site qualified in that particular area to monitor the air until the abatement is completed. The consultant they have been working with, Bruce Leisch and Associates, has submitted a cost proposal on the abatement inspection on the commercial buildings and will submit additional cost estimates for the remaining phases. Ms. Dacy stated there is still an oil tank behind the fast food building. When that tank is removed, soil samples will be taken. The consultant is still following through on the underground contamination issue and is still in the process of doing a remediation plan. Ms. Dacy stated the third type of contractor is a salvage contractor. Staff is now in the process of taking quotes as part of the acquisition of the commercial buildings. There are materials in these buildings that can be salvaged as well as in the apartment buildings. Staff would like to hire a salvage contractor to go through the buildings to identify those materials, sell those materials, and return that money to the HRA. Potentially, this could cover the costs. Staff discussed whether or not the demolition contractor should be responsible for salvage of all materials and therefore reduce the cost of the bid. Because of the size of this project, we may not be to the HRA's benefit to have no control over the values assigned to those materials. n � 80II8INa 5 RSDEVELOPMENT AIITHORITY MBETIN�, APRIL 13. 1995 PAaE 5 Mr. Prairie stated the salvage contractor could bid by themselves. Ms. Dacy stated staff would like to have the salvage contractor bid by themselves. They could go through the buildings and give a price. Staff will seek at least three c�uotes. Ms. Dacy stated the demolition contractor is responsible for removing the buildings, the street pavement, filling holes, and doing a light grading on the property. Because of the timing of the project, she did not think the contractor would have to sod or seed. The plan is convey title this fall and avoid this cost. Ms. Dacy stated the timeframe they are looking at is the quick take on the commercial buildings by May 15. At that time, staff would like the salvage contractor begin to look to remove the fixtures by the latter part of May. They would like the abatement work to begin the latter part of May and then the demolition. Ms. Dacy stated that concurrent with this request is a copy of a letter from Mr. Dennis Trisler of the Nath Companies. This is the firm now occupying the Burger King building. They have signed a lease to occupy the former Pizza Hut building on 57th Avenue. They want to seek an extension on the move out date from May 15 to June 25. The reason is that they would have to release the employees that currently work at Burger King and rehire employees at the new location if forced out on May 15. Ms. Dacy is very reluctant to extend the time frame for one tenant when everyone else is being asked to leave. She did not know if the employees were from Fridley; however, if the date is moved for one, the date may have to be changed for others. Unless directed otherwise, staff will hold firm to May 15. Mr. Commers asked if the problem is that the new site will not be availablee Ms. Dacy stated yes. Nath Companies has just signed a lease and are beginning to do the plans to remodel include adding a drive through window. Mr. Prairie asked how many others there are. Ms. Dacy stated there are eight tenants in the strip mall, one in the car wash, the fast food property, and the apartment buildings. Mr. Meyer asked how many weeks difference between May 15 and the date being requested. Ms. Dacy stated this was about five weeks. n �"� 80II8INa & REDEVELOPMENT AIITHORITY MEETINa, APRIL 13, 1995 PAaE 6 Mr. Meyer asked how many employees would be affected. Ms. Dacy stated 35 employees are at this site as stated in the letter from Mr. Trisler, who also stated, "This would allow the restaurant crew to remain gainfully employed by our company. If not, we would be forced to terminate the existing crew, re-hire and train new personnel for the new location." There would be a break in business. Ms. Dacy stated the City of Fridley may experience its own break in business with the liquor store. So, it is not as though �e are not aware of the consequences of these types of projectse Mr. Meyer asked if we would be out any money or would it inconvenience the HRA to wait the five weeks. Ms. Dacy stated it will slow the project. We can start on demolition of other buildings in the meantime. The larger concern is, if one tenant sees another stay when they have leave, we may see additional requests. the to Mr. Prairie stated, when the crews start taking these buildings down, it should go fast. Ms. Dacy stated yes. What she is trying to say is that, if you do approve this request, you need to be prepared to act on others. Mr. Commers asked if there had been an e�rtension for the apartment tenants. Ms. Dacy stated yes. Those who have children may stay until June 15. Mr. Commers stated it looked as though they were not in a position to start at the west end of the site and work toward the easto Mr. Burns stated it would be a problem because this would mean taking the liquor store out at the height of their salea season. Ms. Dacy stated this woul.d be going through the planning process the following Wednesday. According to the specifications, there is a window of opportunity between July 1 and October 1. It is a shifting date depending on how the process goes. Mr. Pieyer stated he is trying to see how they can save people�s welfare. Also, this business of having a separate salvage contractor is foreign to him. In the demolition projects he has ^ worked with, they have said that, as of a certain date, materials left in the buildings belong to the demotion contractor to r"1 � � HOIISINa & REDEVELOPMENT AIITHORITY MEETINQ. APRIL 13. 1995 PAaE 7 dispose of as they wish. The smart ones will make best use of whatever is in the building at the time. This saves red tape and saves in not needing a separate contractor. In this case, it could save a number of weeks from the total process if the salvage and demolition were put together. NIs. Dacy stated this would probably save time. Staff's motivation for the program was the cost. The fixture appraisal for the strip mall came to approximately $88,000. Staff had separate appraisals for each building. The HRA will be paying for the real estate, land, and fixtures. There is potential money coming back from these fixtures. Also, the value of the apartment fixtures are included in the appraisal of the apartments. This includes the air conditioners, stoves, refrigerators, cabinets, etc. This could amount to $20,000 to $50,000 that we would not see from a demolition contractor. Mr. Meyer stated, if a demolition contractor wants to be low bidder, they would bid with the value of the fixtures in mind. Is this saying the courts will award the present owners the amount of money based on the fixture appraisal? Mr. Commers stated there will be competing appraisals and someone will have to make a decision as to what the award will be for the fixturese Mr. Meyer stated, if the demolition contractor also had a salvage bid, he felt that bid would be noticeably lower. Would the court use the salvage bid as a basis? Mr. Hoeft stated they would use the appraised value. Ms. Dacy stated, if you clo not want a salvage contractor, we will save timee Mr. Meyer stated, if we save a month and let Burger King stay, would that make senseo Ms. Dacy stated staff was hoping to accomplish the time issue by getting the salvage contractor in their as soon as possible. Staff hopes to time things so as not to delay the project. Mr. Meyer stated he recognize this point but he is also trying to serve the human needs by allowing people to have continuity of employment. The HRA is not out anything. We do have to, in order to gain the time, fold them together. They have their jobs and we have our funding. We would still get the salvage through the saving with the low demolition bide Mr. Prairie did not think the demolition people worry about the salvage. ^ 80II8INa � REDEVELOPMENT AIITHORITY MS�TINa. APRIL 13. 1995 PAG$ 8 Mr. Meyer stated the demolition people have their own salvage for metals. He asked if someone could find out the cost �o carry this firm out for five weeks and negotiate with them. Ms. Schnabel stated the fast food employees are likely part time. Mr. Prairie stated also to be considered is the loss of sales. Mr. Commers stated this is a difficult thing. We have taken care of several people. Everyone on the property has an interest in staying as long as they can. Mr. Meyer stated the people whose jobs are affected have an interest in staying on the payroll. It would seem that there is enough room in the total scheme of things to help them and not hurt ourselves. Mr. Commers stated, if there is a way of working this out without hurting ourselves, there is no reason why we should not t'ry to save those jobs. These are likely minimum wage jobs and the employees need worke Mr. McFarland stated they could get the salvage bidder to bid ^ both ways. They can break it out. Ms. Dacy stated staff could include that in the specifications if the HRA chooses. Mr. Meyer asked, if staff were to do that, would you ask for completion times. Ms. Dacy stated the work �ust needs to be done by a certain date. Staff's motivation was to recoup some money. Mr. Commers asked what the overall time scheme was that is at issue here. Ms. Dacy stated the original plan in the contract for exclusive negotiations was to convey the property to the developer in August. Mr. Prairie asked if this would be done with the exception of the liquor store. Ms. Dacy stated that has its own process to go through. Staff is working with the developer about working around liquor store. That would be the last thing to go. Staff is trying to accomplish everything by the end of September in order to qrade before the weather changes. If Rottlund can get started early enough, they plan to build a model of each of the housing types anci then work on the interior during the winter. � � �"� HOIIBINa & REDEVELOPI�ENT AIITHORITY MSBTING. APRIL 13. 1995 PAaE 9 Mr. Burns stated an issue with leaving the Burger Ring open while the demolition for the other buildings is taking place is creating a liability with the potential conflicts between the demolition crews and traffic coming in. He worried about the impact on the retail tenants and residential tenants. The deadline for the residential tenants is June 15 and Mr. Trisler is asking for June 25. Mr. Prairie stated June 15 would be a compromise. Mr. Burns stated he is somewhat concerned about how savinq the Burger Ring building for that length of time impairs the demolition of the properties a�d creates a liability for those usinq the drives in the face of the demolition. Mr. Meyer stated he agreed; however, any construction work that goes, including road construction, on creates a hazard to people. He is not saying there is not a hazard, but because that building is a stand-alone building it is easier. It would stand a better chance of being protected. He thought that 35 people who have seen fit to work at the Burger King deserve as much consideration as we can have for them. Ms. Schnabel asked how long they have known that May 15th was the date established for them to vacate the property. Ms. Dacy stated they have known since mid-December. Ms. Schnabel stated she had sympathy with the predicament, but they have also been on a month-by-month basis in that location for a long time because of their dealings with the owners of the property. She wished there was some kind of compromise they could come to. They have known for a long time that this was comingo Ms. Dacy stated staff has met with them for the past two years since the northeast corner was under consideration. She would be happy to go back and talk to them. Mr. Meyer stated he is not concerned as much about the owners as he is about the 35 people who work there. Whatever the owners did or did not do is secondary to the fact that we are talking about 35 people who may not have a job. Mr. Burns stated a manager from this business called wondering how this was progressinge He would suspect that the employees are wondering alsoe Mr. Meyer stated the employees do not make the decisions. There is a change for them to relocate. Under these circumstances, we should be able to bend a littleo �,,,, HOIIBINa & REDEVELOPMENT AIITHORITY MEETINa. �PRIL 13. 1995 PAaS 10 Mr. Prairie stated they should not go past June 15. Ms. Dacy stated she would contact them as to a date that will work out. Ms. Dacy stated the apartments are to be vacated by June 15 and the buildings and parking lots associated with the apartmenta are to have the work completed by July 30. The same procedure of abatement and salvage would apply. Depending on how the processes go with the liquor store, between August 1 and October 1 staff hopes to convey title to the developer. Ms. Dacy stated the staff team that will be working on the demolition project includes herself, Clyde Moravetz, Grant Fernelius, and Barry Reisch. She had originally thought, because of the size of the project, it would be wise to get an outside firm to manage the demolition. However, the quote was in excess of $60,000 so they are going with the staff approach. Mr. Reshieu will coordinate this process. She thought this would be most cost effective. Mr. Commers asked if they had considered hiring a summer intern. � Ms. Dacy stated she had thought of it but she thought it important to have someone on site that knows what is going on in the buildings and building construction. Staff is not educated in some of the environmental issues which is why Bruce Leisch and Associates has been retained. We need someone who has had experience, who ]cnows how to talk with the contractors to take charge on the site and keep track of things. That is why they did not opt for an intern. Staff is asking the HRA to authorize the resolution as included in the agenda packet. Mr. Commers asked for a motion to approve the resolution with the exception that staff will talk to the Burqer King people and that the terms and condition of the bid will be maintained. MOTION by Ms. Schnabel, seconded by Mr. McFarland, to approve the Resolution Authorizing Preparation of Specifications and Advertisement for Bids for the Demolition of the Commercial and Residential Buildings in the Southwest Quadrant, with the amendment that the Burger King demolition will be renegotiated. Mr. Meyer stated what Ms. Dacy has outlined in how staff will administer the project is solid and he agrees with it. However, alternately, if this becomes unwieldy for staff, you may be able �o get good experience hiring an architect to prepare plans, specifications, and supervise and coordinate the demolition. � IIPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON CONIIKERB DECLAR�D THE MOTION CARRIED IINANIMOIISLY. �"'� HOIIBINd � RED$VELOPMENT AIIT80RITY MEETINa. APRIL 13. 1995 PAaE 11 Ms. Schnabel referred to the request for proposal and asked if this includes three single family homes. Ms. Dacy stated, when staff was putting this together, there were six homes under the scatter site acquisition program that are set for demolition. Staff thought, at one point, that they could include everything in one bid and get a good price. Since preparing, the way they would approach the scattered site demolition is to break this into two sets of quotes for the three homes. These are not a part of the Southwest Quadrant. 7e RESOLUTION APPROVING DEVELOPMENT CONTRACT WITH ACCAP FOR REHABILITATION OF THItEE APARTMEPTT BUILDINGS IN HYDE PARK Ms. Dacy stated the buildings being discussed consist of two seven-unit buildings on 2 1/2 Street and a four plex at 6008 Second Street. The development contract pertains to 18 total units. Last fall, the HRA talked about assisting �iCCAP in rehabilitation of these properties. They applied to the NN�iFA to acquire, rehab and operate as a lease hold cooperative. The HRA agreed in concept to fund up to 50� of the cost up to a maximum of $90,000. Of this amount, $45,000 would be a grant and $45,000 would be a loan to ACCAP for 30 years at 5�. Between last fall �,.� and now, ACCAP has been going to the City Council to gain authorization for homestead tax treatment. The City had a public hearing and invited the neighborhood which generated a numt�er of comments. Staff now have identified the concerns from the neighborhood and incorporated some of the conditions into the development contract. ACCAP is seeking authorization to enter into a development contract and for the HRA to provide rehab assistance. Ms. Dacy reviewed the work that needs to be completed at each of the buildings. On 2 1/2 Street, the buildings require redoing the roof and soffits, replacing windows, redoing the bathrooms, replacing doors with one-hour fire doors, and sprucing up the exterior, kitchens and fixtures. There is a nice space between the buildings for a play area or passage area. Ms. Dacy stated the four plex would require basically the same approach with replacing windows, the roof, and the stucco. This building requires a lot of interior work. One of the acquisitions authorized by the HI2A was the property just to the south of this four plex. Staff is in the process of negotiating with the owner of that property. Staff is proposing to convey that lot to ACCAP and have them reimburse us. ACCAP is proposing to construct a garage on the property for the four plex and also construct a play area. � Ms. Dacy stated Mr. Johnson, the housing specialist for ACCAP, was present to talk about the financing from NgiFA. Staff is HOIIBING � REDEVELOPMENT AIITHORITY ME$TINd. APRIL 13. 1995 PAQE 12 � recommending the HRA approve a resolution to enter into a development contract. This is an improvement for the neighborhood and matches the intent for that neighborhood. Mr. Commers asked if these buildings were Section 8. Ms. Dacy stated she did not think there were Section 8 tenants in this building. Mr. Johnson stated he is responsible for arranging financing. Ms. Dacy did a nice job of summarizing the work required for these properties. Most of the aspects of the requirements as part of the financing are reflected in the development agreement. The NgiFA has a record of operating statements. The State does two inspections. There is an annual audit by a CPA of the operations to verify the cash flow to the HRA for the additional payment. They have plans which include the drawings of the buildings and individual specifications of the bathrooms to be renovated. The renovation costs are higher than estimated. There is not a contingency added for renovation. The costs could approach $250,000 for these 18 units. Mr. Commers stated the previous estimate was $175,000. That has ^ increased significantly. Are these rehab costs going out for bids? Mr. Johnson stated they started bidding last week and they will have a better idea of the figures in another week or so. Ms. Dacy stated she had included in her memo that, when she met with Mr. Johnson and Steve Klein, because of the increased costs, they would like to take $25,000 the HI2A had allocated toward another project and allocate those funds to this project in order to increase the allocation to $115,000. The other application no longer needs HRA assistance because of the funding source. This amount of money is available in the budget. The amount would be split as discussed with 50� as a grant and 50� as a loan. Over time, the HRA will receive 50� back and can use it for other activities. Mr. Meyer asked if anything would be wrong with deferring the $25,000 allocation until the bids come in. Mr. Johnson stated the HRA is agreeing to 50� of the bids up to a specified amounte If the bids are, for example, $170,000, the amount would be less than approved. Ms. Dacy stated staff is saying, if the HRA wants to go up to $115,000, that is consistent with what was said last fall. �, Mr. Meyer stated this is transferring $25,000 from another HOIIBING � REDEVELOPMENT AIITHORITY MEETINa. APRIL 13. 1995 PAaE 13 � project and folding it into this one. If we sense there will be an overage, why not wait until the bids are in and see if they need the additional funds. Mr. Johnson stated ACCAP has a limit imposed by limiting participation to 50� of the renovation costs. For instance, if the actual bids are $180,000, the HIZA investment will remain the same. If the bids are $240,000, then additional monies would be necessary. That money will be saved if the bids come in under the estimate. Mr. Meyer asked if ACCAP had a selected list of contractors who bid this type of work. Mr. Johnson stated before hiring a contractor they advertise in several newspapers and in some construction bulletins. The bids are open for whoever wants to bid. The contractor must have a performance bond. Mr. Commers asked what the occupancy restrictions were. Ms. Dacy stated those are restrictions to the number of people who can be in the one and two bedroom units. � Mr. Johnson stated they are on a relatively fast track and he would like to clarify one item on page 8 of the contract having language requiring the purchase of the property next door to the four plex for a garage and playground. They agree to do this but he would like to identify the price terms or leave it open for negotiationse Ms. Dacy stated �he loan repayment schedule is, when there are any savings in the cash flow, we are requiring ACCAP to pay a higher interest rate. They are obligated to do that for the life of the loano As long as we continue to collect that amount of money, the HRA will recoup money not only for the loan but for the sale of the lot. Mr. Casserly stated the first question is the redeveloper wants to know if we are charging them anything for the lot. That is part of the other package. The initial e�ense to ACCAP is $1. Mr. Johnson asked if language could be added stating, ". .. and terms to be agreed up by the HRA, staff, and Developer." Mr. Casserly stated they could do this. An issue arose at the City during the hearings that, with the reduction in the tax classification of this property, there would be a certain amount of loss of taxes to the City. The property is proposed to be .� taxed at a 3.3� rate and is eligible under statute to be taxed at the homestead rate which is essentially 1�. That difference is a HOIIBINa & REDEVELOPMENT AIIT80RITY MEETIN�, APRIL 13. 1995 PAaE 1� �, loss to the City. The issue came up and there was concern by a Councilmember that the City make an effort to try to recover a part of the City's portion of the taxes. The City portion amounts to approximately $1,000. The way the cash flow is represented and because of the rents that need to be charged for this project, the reduction in taxes is going back in to reduce the rents. Yet the project has to show some cash flow. What they have done is worked out an arrangement whereby r�ve are capturing the first $1,000 of the cash flow and using that to have money come to the HRA because they are making the loan. If there is a minimum payment that has to be made annually and if there is adequate cash flow, there will be an additional payment out of that cash flow. That spread that comes back to the HRA, the HRA can in fact consider reimbursement for the property that is being conveyed to ACCAP. Over the period of 30 years, it is potentially possible to recover to $30,000. Ms. Dacy stated the issue of the value of the land is mute. There is a mechanism to recover the costs. The lot is a nonbuildable piece of property. If ACCAP did not exist, the HRA would be talking with an adjacent property owner. She did not think the property was worth much. The HIZA will be dealing with other nonbuildable lots that they have had to acquire. This � achieves connecting two parcels together and ACCAP can build a garage and improve the property. Mr. Commers asked how this would solve the money issue. Mr. Casserly stated that perhaps at the next meeting they could discuss these issues in depth. If people are comfortable with the concept, it may be helpful to add "the amount of assistance is not to exceed the lesser of $115,000 or 50� of the renovation costs." MOTION by Mr. Meyer, seconded by Ms. Schnabel, to approve the Resolution Authorizing Execution of the Contract for Private Redevelopment between the HRA and ACCAP. IIPON A VOICE VOTE, ALL VOTING AYE, CSAIRPERSON COMMERB DECLARED THE MOTION CARRIED IINANIMOIIB?�Y. Ms. Schnabel stated she was happy to see something happening that area to get buildings rehabilitated. 8. CONSIDER REOUEST FOR TIF ASSISTANCE, DAVE HARRIS Ms. Dacy distributed copies of a letter from Councilmember Billings. Mr. Harris is part of Brookview Investment who owns the office building at 6279 University Avenue N.E. also known as ,� the Rice Creek Office Building. There was a fire in the building last year which destroyed the interior of the building. Mr. /'1 � ,� 80II8INa & RED$VELOPI�ENT AIITHORITY MEETINa, APRIL 13. 1995 PAaB 15 Harris has been negotiating with their insurance company. The insurance claim will pay for the refurbishing costs as the building existed prior to the fire. Since the building was constructed, the building code has also changed; therefore, they are now required to install a sprinkler system and heat detectors. This request is for the HRA to provide a grant to for those additional requirements of the code. Staff is recommending a loan rather than a grant be prepared. This is consistent with some of our assistance guidelines from other projects. Use of TIF discretionary funds have been used for different priorities. If the HRA wishes to pursue assistance this request, staff recommends the following criteria: pay for 1. The amount of the loan shall not exceed $27,500. 2. The purpose of the loan is for fire protection and code compliance. 3. The loan is to provide assistance as a result of an emergency situation. Ms. Dacy stated, in the past, the HRA has not had a commercial rehab program because of other priorities. Mr. Harris informed staff today that there has been a change in ownership of the building as of tomorrow. Mr. Harris state the building had been sold to Mr. Wruck. The deeds would be filed the next day for the change in ownership if they received the release from the rents that no longer exist which was part of the original mortgage. If this is not received, the deeds would be filed the following week. Mr. Harris had been trying to put together a plan for renovating the building. After he had put together the application, he sold the building. There were a number of code updates that were mandated by the City in order to put the building back on the market. He made an application for a grant to cover two items that were code mandated. There are about 14 items, most of which were code mandated, that became quite expansive. The application was for a grant for two major items. If we would have asked for a loan, we would probably have asked for all 14 items and would have made a larger request. Mr. Harris stated it is an unfortunate situation to have a building torchecl and to lose the businesses that were in the building. Some have relocated and some have indicated an interest to come back. There is a need for office space area. They have been able to determine, based on today's numbers, that $27,500 does not quite cover the costs but recognizes that this will be a major portion of those two the sprinkler system and fire and heat detection system. want to focus on something to make th�e building a viable in the items - They � n HOIIBINa � REDEVELOPMENT AIITHORITY ME�TINa. APRIL 13. 1995 PAaE_16 building. They have been there since 1968. He wants the building to look attractive and get back on the tax rolls. Mr. Commers stated he assumed that the sale was not contingent upon approval of this process. Mr. Harris stated no. They had decided to move forward. Each day they wait was costing additional monies. They do have a building permit. A new roof is going on and the air conditioner is ready to be put in place. Mr. Commers stated he understood staff was recommending a loan. Mr. Harris stated, if they would have known that was going to be a concern, he would have focused on all of the items that are code mandated. He did not include 12 of the 14 items. Unfortunately, the insurance company will not cover these costs. Mr. Meyer asked what the total cost would be for all 14 items. Mr. Harris stated he the cost to be in excess of $50,000. It will cost approximately $4,000 for each of the four bathrooms alone and over $27,000 for the sprinkler and detectors. Ms. Dacy stated she would like to speak to the grant versus the loan issuee When she spoke with Mr. Harris, she asked about the possibility of a loan. When she received the memo from Mr. Casserly which stated, if the grant or loan is made, the HRA will not realize any increase for this TIF district since these improvements to not add any considerable amount of additional market value. She recommended a loan because the interest payments would give back some of the costs. The loan vehicle has been done by the HRA in the past and she thought it was a good proposal given what the HRA is doing with the housing program. The HRA has the purview to grant a loan or a grante Mr. Commers stated they had never had a recluest such as this. Mr. Harris stated he understood. They have had an abatement in taxes because the building is not occupied and no income is being generated. There will be taxes generated as a result of the renovation. He stated the last two paragraphs are mute because he no longer owns the building. Mr. Commers asked what the funding issue was. Mr. Casserly stated the kinds of purposes for which this loan would be used are not eligible under the TIF act so the HRA would have to use funds not related to tax increment. The HRA has used � a pool of those funds and have allocated it to the housing - program. Most of the loans that the HRA has done in the past few � 80II8ING & REDEVELOPI�ENT AIITHORITY MEETINa, APRIL 13. 1995 PAQE 17 years have been for tax increment eligible expenses. For this particular kind of a loan, you do have to be careful to be sure there are funds available that are not of a tax increment origin. If approved, it is with the understanding that there are funds available. He did not ]cnow at the time if there are funds available. The HRA has the authority to spend money but many of the resources are from tax increments and those contain prohibitions on how the money is spent. Mr. Commers asked about the criteria for putting together a program for commercial use. Mr. Burns stated these had not yet been established. Staff will do that if that is the wish of the HRA. Ms. Schnabel asked, if the HRA were to work out a loan instead of a grant, then the additional monies would be requested. Mr. Harris stated he thought that would be the most prudent way to do that at this point. He thought a grant was a less expensive way to help with a building that had been here for some time. � Ms. Schnabel stated she assumed that the buyer would be responsible for the loan, if approvede Mr. Harris stated the buyer would have to address that. It is his position to put anything over and above the building as it originally was into a loan package. Mr. Commers stated the first step is to find out if the HRA has the money. Mr. Meyer asked the percent of interest on such a loan. Ms. Schnabel stated there seems to be many things that are not clear and felt the HRA could not make a decision. Mr. Burns stated staff is recommending that the matter be tabled. Staff has just learned there is a new owner and have not had a opportunity to evaluate the new owner. Discussion is about a loan. The Councilmember for this area suggested the HRA consider this type of loan as part of a commercial loan program and the HRA may want to consider that as well before rendering a decision on this particular issue. Mr. Meyer asked if there would be a timing problem. Mr. Harris stated yes. The money must be expended. He felt he ^ should speak at the meeting because he made the application. If it is necessary to reformulate the plan, he would certainly come � HOIISINa & REDEVELOPMENT AIIT80RITY ME$TINa. APRIL 13. 1995 PAaE 18 back. If the HRA is going to make a decision for a loan, he would make a different request. If it is a grant, then the application is as presented and he would ask the i�2A to look favorably upon it. Mr. Commers stated, in looking at where we are in our ability to fund, we should do somethinq in terms of setting up criteria for a program and whether to provide a grant or a loan along with terms. The suggestion to table until the May meeting is appropriate. He asked what the terms were for a similar commercial loan would be. Mr. McFarland stated the length of the loan would likely be five to seven years and the rate would depend on the borrower, probably l� to 40 over the prime rate with equity to the second mortgage of record. Mr. Wrucic stated the renovation has started on the building. The renovation is in excess of $300,000 for the entire project. As days go on, they are finding other problems with the building. Their intent is to try to get the building back up and rented within the next four months. The grant was requested to try to speed this up and to fund part of it. They have been complying ^ with the requirements and have approximately $63,000 in upgrades _ to this building which includes the water main. There are more things that are unknown that the City is requesting such as having enough water pressure. Their urgency is to try to get the building back up and into rental property as soon as possible. Mr. Commers asked when they expected to have this done. Mr. Wruck stated they hoped to have this done by August 1. Until that time, they will be filing for abatement for taxes for this part of the year and they �aill go from there. Mr. Commers stated there will be a low value on the property for taxes property in 1996. The taxes assessed in 1996 will be based on the January 1, 1995, value. The actual fair market taxes will not be payable until 1997 based on the value reassessed January 1, 1996. Mr. Wruck stated another consideration they were looking at during the negotiations with the building is that, when the building is upgraded, the value will increase also as will the tax. Mr. Commers asked if there was an estimated fair market value when the renovation is completed. ^ Mr. Casserly stated, if the market value is greater when completed than before the fire took p��E that would be tax n HOIISYNG & REDEVELOPMENT AIITHORITY MSBTINa. APRIL 13, 1995 PA6E 19 increment which would be eligible for some use by the HRA. Mr. Harris stated the renovations being done to put the building back together does not include tenant improvements. Until the building is fully occupied, it is difficult to determine the value. Mr. Commers stated the HRA would consider this further. He asked Mr. Wruck and Mr. Harris to be in contact with staff to see where they are and to see if they may need any additional informatione OM TION by Mr. Meyer, seconded by Mr. Prairie, to table the request for TIF assistance from Mr. Dave Harris. IIPON A VOICE VOTE, ALL VOTINa AYE, CHAIRPERBON CONIIKERS DECLARED T8E MOTION CARRIED ONANIMOIISLY. 9. REVENUE AND EXPENSES Mr. Ellestad distributed copies of additional expenses for approval. Mr. Commers asked who was STS Temporary Services. ^ Ms. Dacy stated STS Temporary Services is one of the tenants in the strip mall owned by the Suhs. The amount is their relocation payment. They are in their new location already. Mr. Commers asked what the payment was for made to Bob's Produce. Mr. Ellestad stated a portion of the amount is for a block grant reimbursement�and the remainder is the normal building statement amount. Mr. Commers asked why a check was written to the City of Fridley. Mr. Fernelius stated this is for the home program. We are required to match at 20�-25o the home funds that the City gets from the County and this represents part of that payment. The City issued the check and the HRA is reimbursing the City. Ms. Schnabel asked if this was the HRA's obligation originally. Ms. Dacy stated this is the HRA's commitment as far as the home program. This amount is included in the budget. MOTION by Mr. McFarland, seconded by Mr. Prairie, to approve check register #25465 through #25494 with the additions contained in the memo of April 13, 1995, from Mr. Ellestad for a total of ^ $168,861.19. HOIISING & REDEVELOPMENT AIITHORITY MEETINa. APRIL 13. 1995 PAaB 20 �� IIPON A VOICE VOTE, ALL VOTIN� AYE, CHAIRPER80N COMMERB DBCLARED THE MOTION CARRIED IINANIMOIIBLY. INFORMATION ITEMS: 10. UPDATE ON LAKE POINTE MARKETING Mr. Burns stated he had communicated at the last meeting that they did have a corporate user prospect. That particular company has since decided they want to combine their corporate offices with their manufacturing facility and, therefore, the Lake Pointe site is no longer something they want to consider. They are potentially considering another Fridley site. That would have been about 70,000 square feet on Lake Pointe which is no longer a viable option. Mr. Burns stated he has had contact from a two developers regarding a U.S. West proposal. U.S. West is looking to build a 80,000 square foot facility in this area. The developers wanted a price for the Lake Pointe land. He indicated to them that they should use any price they want to help establish a viable deal and, at that point, if they are successful he would consider it. There were several caveats to indicate that we had a strong ,.� preference for a three-story buildinq, stacked parking and that we were looking for Class A office space. This is still in the offing. He understands that the decision for this project may be made soon. Mr. Burns stated, probably more practical in terms of future expectations, is the contacts he has been having from MEPC Properties. They are a major office developer, owner and manager in the Twin Cities area. He, Ms. Dacy and Mr. Commers visited with them on March 17. They are very strongly interested in pursuing an exclusive development contract with us. We don't have a particular building plan in mind. They would like to plan a total site development as well as a marketing approach and come back with their proposal for terms for a development agreemente We have been working on that idea. There is a meeting scheduled to look at the redeveloper's concept. He thought this may be a strong redeveloper that the HRA may want to consider, as well as another redeveloper. They have been looking at that concept and looking at potential terms for a redevelopment agreement. Mr. Casserly asked to define the categories that we might consider in a redevelopment agreement. We have been doing some brainstorming about the language or terms to be put within those categories. Mr. Commers stated this firm has many projects around the Twin Cities, but they are one of the largest developers on the national scene. It is worthy that we are getting some interest. � HOIIBIN� & REDEVELOPMENT AIITHORITY M�STINa. APAIL 13. 1995 PAaE 21 �"� 11. UPDATE Old SOUTHWEST QUADRANT DEVELOPMENT PLAN Mr. Wilkinson, Legal Aid Society, stated they represented 30-40 of the tenants from the Satellite Lane Apartments. With him tonight is Mr. Tom White and Mr. Glen Oliver. A letter is in the mail to the chair and mayor. He is being retained by these clients to investigate their feeling that they have been unfairly targeted for relocation on account of their race, public assistance status and familial status. He spoke with Mr. Herrick today. Mr. Wilkinson was under the impression that he represented the HRA as well. They do see that this is a situation they hope to work through with the City and the HRA. He has heard nothing from their clients that they want to stop the project or they would have done something before this. He has just met with the clients in the last few weeks for the first time. They do see a need that these people do need considerable assistance to find housing for themselves and their families here in Fridley where their homes, families, churches, schools, jobs, and connections are. They feel this is not necessarily or not entirely a relocation issue but certainly that does have an effect here. He wanted to let the HRA know why he was thereo A letter was mailed today and should be received shortly. ^ Mr. White stated he was representing tenants with respect to relocation benefits and will be dealing with Mr. Schnitker. He read the minutes from the last meeting stating Mr. Schnitker was authorized to make payment of up to $50 for application fees. When he talked to Mr. Schnitker, he said he was not willing at this time to make advance payments. These are some of the issues that will be raised. Mr. Commers stated the $50 is over and above the requirements that the HRA thought would be of some assistance to the tenants to make application. Ms. Dacy stated she thought there had been some miscommunication. After the meeting with the HRA, the HItA expected her to communicate the payment for application fee and to make advance payments but to hold anywhere between $200-$300 until the move is completed. That policy was communicated to Ms. Patricia Mims by letter. Ms. Dacy has heard that she did not receive the letter. She had a copy of the letter delivered directly to Ms. Olivia Ritchison on Friday. That was their attempt to communicate back to the tenantse Mr. Commers asked who was the identified spokesperson. Ms. Dacy stated she was under the impression that Ms. Ritchison and Ms. Mims were the leaders of the group. At the time the � letter was mailed, she was not aware of who their attorneys were. 80II8INa � REDEVLLOPMENT AIIT80RITY 1�ETING. APRIL 13. 1995 PAaE 22 /'1 Mr. White stated he saw the letter only recently and got a different impression from Mr. Schnitker. One of the problems for many tenants on Section 8 is that it is almost impossible to come up with additional dollarse Ms. Dacy stated she would talk to Mr. Schnitker. Mr. Ellestad stated they did 3ssue some checks for reimbursement of application fees so some tenants did receive the fee. Mr. Commers stated there must be some way to identify who we should be working with. Mr. White stated he would be the spokesperson for the tenants. He represents 31 of the tenants. He thought there were 41 tenants left at the Cherrywood Apartments. Ms. Dacy stated provided an update on the Southwest Quadrant. The Planning Commission held a meeting at the end of March where they reviewed site plans and will meet again at the end of April. From there, this will go to the City Council. Ms. Dacy reviewed the plans from that meeting. Plan A shows 3rd �..� Street moved to the west just beyond the median on Mississippi. The condominium buildings were realigned to create a more central access. The problem with the traffic pattern is that the County is not satisfied with the alignment. Staff had a problem because of the left turn into the property. The developer has been asked to look at this. The Planning Commission was concerned about the size and impact of the 16-unit buildings. Mr. Newman was concerned about the long term salability of the interior units. The developer was asked to minimize the mass and size of the building and not substantially affect density. Ms. Dacy stated Plan B shows the condominiums and three 16-unit buildings. In the northwest part of the site, they are proposing a detached townhome. What is lost in density is made up in value. The flexibility of the footprint is also attractive because they can offer a master bedroom on the first floor. The density for this plan is 152. Mr. Casserly was asked to review the cash flow and he found this would maintain the same amount of TIF. The total market value changes from $16.1 million to $15.1 million but the taxes generated are the �ame. The Planning Commission preferred Plan B because of the mix of housing. Ms. Dacy stated the developer changed the location of the condominiums to create more space from the road. They are now proposing more of a focal point by creating a public plaza area in the northeast corner. � � �"� n HOIISINa & REDEPELOPMENT AIITHORITY MEETINa. APRIL 13. 1995 PAQE 23 Ms. Dacy stated the Planning Commission liked Plan B. They had concerns about the 16-unit buildings. She has since spoken with the developer who is willing to evaluate splitting this up into six to eight unit buildings. She has not seen the plans yet but she will in the next ten days. There is not a lot of room to work with. Staff's opinion was that they liked the appearance of the 16-unit buildings because the size and mass was a match with buildings along University Avenue. The Commission was concerned about the interior space. The developer would like to have one model of each type of housing up and going this year. Ms. Dacy stated she would be meeting with the County. The City is proposing to move the access further to the west to line up with the Holly Shopping Center access. The Holly access may have to shift to the east in order to line up. They are trying to get a full movement intersection across from the shopping center. She thought the County would not support anything closer to University. If there is an opportunity for signalization, it may be here. Ms. Dacy stated Councilmember Billings is concerned about the reaction from the public from the north of 2nd Street and their ability to turn left. Rottlund has not reacted favorably to that alignment. Staff is waiting to get the County's reaction to the compromised approach and waiting to hear the reaction from the neighborhood to the north of Mississippi Street. The two major issues at this time are the location of 3rd Street and evaluating the eight-unit buildings and how this would impact the redevelopment costs. Mr. Meyer stated the Mississippi Street access is a problem no matter what. He asked if there was more they could do coming from the south. People could at least get into the development more directly and perhaps make the a southern approach more attractive. With the shopping center where it is, crossing Mississippi is going to be difficult. Mr. Prairie asked if there would be a traffic signal there and if that would take care of the problem. Ms. Dacy felt this would take care of the problem but that is another issue. They know that the volume of traffic at the shopping center will be greater coming out of that driveway than at 2nd Street. The chance for a controlled intersection would more likely be at the shopping center. 12. UPDATE ON GUNDERSON AC4UISITION Ms. Dacy stated Ms. Gunderson has found a house in Forest Lake. Staff intends to close on this property on May 1. Staff continues to have questions and concerns raised by a neighbor. � �, � HOIISING & REDEVELOPMENT AIITHORITY MEETINa, APRIL 13. 1995 PAaE 24 Staff did go ahead and hire levels and to advise on the needed. The City will need they redo the intersection. OTHER BUSINESS: a consultant to look at the sound type of sound barrier that will be to do some type of noise barrier if Mr. Meyer stated he had seen in the paper the City's ranking in crime statistics. He was shocked and asked if the City has done anything. Mr. Burns stated the statistics are probably accurate. The City has 22,000 to 23,000 who come into the City to work. The measure used for the statistics is the number of crimes per 100,000 people. The City is given credit for the nighttime population. During a significant portion of the day, the City has more people than what the residential population is stated to be. Also, areas with more industrial property tend to have higher crime rates. The City has added three additional police officers and have been awarded funds for another officer. The City has also added a youth worker. Mr. Meyer thought the City would be well advised to put these statistics into perspective. This is bad press for the City. MOTION by Ms. Schnabel, seconded by Mr. Prairie, to adjourn the meeting. IIPON A VOICE VOTE, ALL VOTIN(� AYE� CBAIRPER80N COMMERB DECLARED THE MOTION CARRIED AND THE APRIL 13, 1995� HOIIBINa AND REDEVELOPMENT AIITHORITY MEETIN(3 ADJOIIRNED AT 1Ot15 P.M. Respectfully submitted, � � � Lavonn Cooper Recording Secretary 8 I G N- I N B 8 E E T � HOIISING AND REDEVELOPMENT AIITHORITY MEETING� April 13 ^ 1995 Name Address/Business � L, - S�� %-1 �� �"� � ,-� � �� � . � . /� ' .�P � �� � � � ,, �,