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HRA 09/14/1995 - 29586%w\ CITY OF FRIDLEY HOIISING & REDEVELOPMENT AIITHORITY MEETING BEPTLMBER 14, 1995 ���..��������..�_��..���....���.,.��..__...�..�..����..���..��..�����������...,..,..,.������ CALL TO ORDER: Chairperson Commers called the September 14, 1995, Housing and Redevelopment Authority meeting to order at 7:33 p.m. ROLL CALL: Members Present: Larry Commers, Virginia Schnabel, Jim McFarland, John Meyer, Duane Prairie (8:30 p.m.) Members Absent: None Others Present: William Burns, Executive Director Barbara Dacy, Community Development Director Jim Casserly, Financial Consultant Grant Fernelius, Housing Coordinator Craig Ellestad, Accountant APPROVAL OF AUGUST 10. 1995, HOUSING AND REDEVELOPMENT AUTHORITY �'lEETING: MOTION by Ms. Schnabel, seconded by Mr. McFarland, to approve the August 10, 1995, Housing and Redevelopment Authority minutes as written. IIPON A VOICE VOTE� ALL DOTING AYE, CHAIRPERSON CONIl�IERB DECLARED THL MOTION CARRIED IINANIMOIISLY. CONSENT AGLNDA• 1. CONSIDER CHANGE ORDER NO. 2 TO SOUTHWEST OUADRANT DEMOLITION PROJECT NO. 281 2. ESTABLI_SH PUBLIC HEARING FOR OCTOBER 12, 1995. TO CONSIDER DISPOSITION OF VARIOUS HRA LOTS AND TO AUTHORIZE RFP FOR SALE OF HRA LOTS 3. CONSIDER ACQUISITION OF 530 HUGO STREET N.E. 4. CONSIDER EXTENSION OF DEVELOPMENT CONTRACT FOR WHITNEY HOMES 5. SOUTHWEST OUADRANT BUDGET UPDATE ,-� 6. MONTHLY HOUSING REPORT � 7. REVENUE AND EXPENSES HOIISINa & REDEVELOPMENT AIITSORITY MTG. BEPTEMBER 14, 1995 PAQE 2 �� MOTION by Mr. Meyer, seconded by Ms. Schnabel, to approve the consent agenda as presented. Mr. Commers stated the check register indicates a payment of over $15,000 for soil testing for 540 Hugo Street. He asked what that expenditure was for. Mr. Ellestad stated check #25674 includes four expenses. This expenditure consists of approximately $5,500 appraisal work for the Suh property, $1,000 appraisal for the 5uh property fixtures, $338 for soil testing, $257 on the process, $3,000 for the demolition of the Suh property, and the remainder for remediation at the fast food and gas station site. The computer system prints only the first line of the description for the summary report due to the limited space. The computer breaks this down into the proper items. Mr. Commers asked why they do not have the balance of the $12,000 additional expenses in the Southwest Quadrant budget for September. Mr. Ellestad stated the budget shows figures through July. This is due to the time that information must be submitted for the �"� agenda packet. Those expenses will be included in the report for next month. IIPON A VOICE VOTE, ALL VOTING AYE, CBAIRPERSON DECLARED THE MOTION CARRIED IINANIMOIISLY. ACTION ITEMB: 8. CONSIDER APPROVAL OF AGREEMENTS FOR SCHOOL DISTRICT REFERENDUM TIF RETURNS Mr. Commers stated this is something the HRA has been doing for several years. He thought everyone was familiar with the background. The amounts were provided in the agenda packet. Mr. Ellestad stated the funds are payable in 1996. The City receives the money the first part of July and makes the first payment to the schools in August. This is for taxes payable in 1996. Ms. Schnabel asked if the HRA would be paying the same amount in 1996 as is 1995. Mr. Ellestad stated yes, there have been no changes. � Mr. Commers stated the issue is that this is voluntary versus the needs of the school districts. The HRA tries to maintain a HOIIBIN(3 & REDEVSLOPMENT AIITHORITY MTG. BEPTEMBER 14, 1995 PAGE 3 ��"\ relationship between the City and the school districts. Mr. Meyer asked if other districts in the state also returned funds to the school. Mr. Casserly stated there are approximately six communities that return funds to the schools. MOTION by Mr. Meyer, seconded by Ms. Schnabel, to approve the School Referendum Levy disbursements as presented. Mr. Commers stated he is beginning to feel uncomfortable from a financial point of view. With all the expenses that the HRA is incurring from all of the projects in which the HRA is involved, he is concerned. Personally, he thinks it is a good thing and they should try to continue, but he cannot support it this year. Mr. Meyer stated, if next year others share the same view, perhaps we should warn the school district that we are seriously contemplating not continuing this. Mr. Commers stated he felt Mr. Burns kept the school district � informed. � Mr. Meyer stated, several years ago, there was discussion where the superintendent made a strong appeal that we continue because of their budget. Mr. Commers stated our approval is very important versus the way they budget. It has a significant effect. What we are voting in the fall of 1995 affects their 1996 school year. Mr. Casserly stated the legislature has been looking at ways of not giving the school districts credit for what it is that you advance to them. If you are going to do this, do it this year. This is something to watch carefully. If the school districts are not getting credit and this is being deducted from their state aid, then nothing is to be gained. This is not in effect at this time. IIPON A VOICE VOTE, WITH M8. BCHNABEL, MR. MLYLR, MR. MCFARLAND, AND MR. PRAIRIE VOTING AYE AND MR. COMMERS VOTIN(3 NAY, CHAIRPER80N COMMERB DECLARED THE MOTION CARRIED BY MAJORITY VOTE. 9. CONSIDER RESOLUTION APPROVING ADOPTION OF HOUSING REPLACEMENT PROGRAM AND HOUSING REPLACEMENT DISTRICT Mr. Fernelius stated staff has been working on this for some � time. During the past legislative session, the legislature passed a special law which authorized the cities of Fridley, -- Crystal, Minneapolis and St. Paul to create housing replacement � ,.---° .�--°'-` 80II8INa & REDEVELOPMENT AIIT$ORITY MTG. BEPTEMBER 1�. 1995 PA(�E 9� �� districts which allows each city to recoup a portion of the costs involved in acquiring and demolishing vacant and substandard housing with the intent of replacing that housing with market rate single family housing. Mr. Fernelius stated some of the provisions are such that the IiRA can designate up to a maximum of 50 parcels or homes over a 10- year period; however, no more than 10 homes can be designated in a year. The new taxes generated by that home can be captured for 15 years. In order to designate the parcel as substandard, there is a test which must be met. There is specific language in the tax increment statutes. Mr. Fernelius stated some of the benefits are that this helps to address the substandard housing problem in the City and allows a means to recapture some of the costs besides land sale income. Another benefit is that it is less cumbersome to administer than the tax increment financing program and the City is not penalized through local government aid. Mr. Fernelius stated staff is asking the HRA to adopt the Housing Replacement District Plan and to create Housing Replacement District No. 1. Assuming the HRA concurs, the City Council would /"''� hold a public hearing on October 2 and consider final adoption on October 16. The program could then begin in 1996. � Mr. Commers asked what the funding is now of this program. Mr. Fernelius stated a parcel would be designated. The new taxes generated are what would be captured over 15 years. The amount of money is not significant, but it does allow the HRA to recover some of the costs involved and continue to make future acquisitions. In that respect it is similar to tax increment in that we collect taxes over a period of time. Mr. Commers asked if this were included in the current budget. Ms. Dacy stated the budget has scattered site acquisitions. As parcels are identified for the program and new lots are sold, then the increment starts coming back. Mr. Commers asked if this was then formalizing the scattered site program. Mr. Casserly stated this is in effect trying to recover some of the investment in the scattered site housing program. The tax increment act was very cumbersome. A tax increment district needed to be created for each parcel. This program also eliminates the local government aid issue and establishes a way to do rehab and to capture the entire value of the structure. There are some other options tha�'�� tax increment financing. 80II8IN(� & REDEVELOPMENT AIITHORITY MTC3. BSPTEMHER 14, 1995 PAaE 5 MOTION by Mr. McFarland, seconded by Ms. Schnabel, to approve the Resolution Approving Adoption of a Housing Replacement District Plan and Creation of Housing Replacement District No. 1. IIPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON DECLARED THE MOTION CARRIED IINANIMOIISLY. 10. CONSIDER APPROVAL OF PRELIMINARY OUTLINE OF AGREEMENT FOR LAKE POINTE PROPERTY Mr. Casserly distributed copies of a Contract for Exclusive Negotiations with MEPC. Mr. Burns stated the issues as outlined in his memo dated September 8, 1995, have not been resolved. MEPC did provide a mission statement with which they are satisfied. The original proposal did not say what MEPC's objective was in developing the site. We know their primary interest is in being an owner and manager of buildings, but what about the situation where someone wants to a build-to-suit project or wants to purchase land to develop. It occurred to him that MEPC needed to clarify their main objective in a mission statement which they provided. MEPC's main objective is to build and manage/lease buildings, and they indicated they were willing to build-to-suit and to sell parcels to third parties. Mr. Commers asked if they would be in control as to whether or not they would decide whether to sell or build-to-suit. Mr. Burns stated they did not get that far to say how that would be resolved. This is a preliminary development agreement. Another issue was parking. Their language seemed to imply there would be surface parking and perhaps structured parking as necessary. He would like to turn that around and draft language to recognize that we want the primary parking to be tiered or structured parking, but during the early stages of development we would allow surface parking until the density requires structured parking. Mr. Burns stated two major issues were the length of time of the contract and the price of the land. We wanted to shorten the term of the contract so that it would end on July 31, 1997, rather than December 31, 1997, and that there be an interim check point in July, 1996. The checkpoint would not be used to hold them to developing a number of square feet or to start construction, but to examine the things MEPC said they would do in marketing and planning for the site, the functions of development, and determine whether or not they would do that. In � July, 1997, we would evaluate the actual amount of development that has occurred and decide whether or not to give MEPC � additional years for development. � 80Q8ING & REDEVELOPMENT AIITHORITY MTG. BEPTEMBER 14, 1995 PAQE 6 �'`� Mr. Burns stated the last issue is the cost for the property. They came in with some general language which would have us give them the property. There is a 25-acre primary parcel and an 8- acre parcel. MEPC's original proposal would have us give them the 25-acre parcel and provide them with the second parcel at a 50� markdown from market value. Mr. Casserly and he thought we should finesse the market price issue and get a preliminary agreement that allows time to resolve this. We have not had a lot of time to work with MEPC. Mr. Casserly was in contact with Mr. Jellison today. Mr. Casserly stated he had asked MEPC to send what they thought they would like to see in an agreement. In reviewing, we thought we did not know enough to be so definite on such things as the purchase price and other issues. We are suggesting to MEPC what is in the Contract for Exclusive Negotiations. In this contract, we are saying we will not negotiate with anyone else. As long as they perform, we will continue to work with them to put together a development agreement and try to sort out these issues. Mr. Casserly stated there are two fundamental issues. The first is what can go on the site. We know what we want, but they have suggested a process where they will come back with what they �''� think the market will bear. They will develop a master plan around that. This is good and needs to be done, but to do design releases and a purchase price based on a master plan that does not exist is difficult. We have worked on several formulas and concluded that we will put in language that we will negotiate in good faith, include criteria that the purchase price will be a function of the density and use, build-to-suit, and sale of lots. We will make a statement that, as the density increases, we will reduce the purchase price because of the parking needed. Mr. Casserly stated, if you go out and try to market, do the analysis, and it turns out that what you can develop is a 350,000 square foot, single story facility, you will not need parking. You could sell the land for $3 or $4 million for that use and have no costs for parking. If there is 600,000 to 700,000 square feet of office space, we will need millions of dollars for parking, and our underlying assumption has always been that we will adjust the sale price of the land so the developer can afford to build the parking. We need to know if that is possible. In their agreement, they had a purchase price, the term, and a renewal option. This is a contract laying out a number of circumstances, and we have tried to shift the emphasis. He did not know how MEPC will respond. Mr. Casserly stated NIr. Jellison said they would be meeting with ,--� the managers from around the country next week, and he will be highlighting this project in order to develop some national �- interest. A copy has been sent to their attorney and to MEPC, ^ HOIIBING & REDEVELOPMENT AIITHORITY MTG. BLPTEMHER 14. 1995 PAGE 7 and we are now waiting for a response. Mr. Casserly stated we are taking the HRA and City Council's direction to work with MEPC to get what we want, but there must be some master plan in the process in response to market demands. MEPC must start a process to which we interact. Mr. Commers requested staff to continue working with them until they come up with something with which Mr. Casserly and Mr. Burns are comfortable. Then the HRA will look at it. Mr. Burns stated the objective is to bring back an agreement for the October 12 HRA meeting for formal action. HRA members were asked to contact Mr. Burns if there was anything in the proposed contract on which they wished to comment. Ms. Schnabel stated, on page 5 of the proposed contract, the last statement, states, "Recommend changes to City ordinances to facilitate development consistent with the Master Plan." Mr. Casserly stated he tried in the draft to incorporate MEPC's suggestions. If MEPC comes back with a master plan that does not conform, then we could recommend the City change some of those � things to conform with the master plan. They had the City and --- HRA signing off. The City is not a part of this and will not agree by ordinance to changes. � ,� Nlr. Commers asked if the master plan was similar to a planned unit development. Mr. Casserly stated this was his basic understanding. Mr. Commers asked if there was a problem with a planned unit development. Ms. Dacy stated, in terms of the zoning or a master plan, it is the same thing. The property is zoned S-2 which essentially permits a waiver. Mr. Meyer asked how this contract compared to the one established with the previous developer for the property. Mr. Casserly stated there is no relationship. We are in a different position with being the owners of the property. That is what is making this relationship different. They have no holding costs or investment in the site. All of this is really operating in good faith. We want to get interest as soon as possible and want to maintain control. They had said we would be responsible for any environmental costs but we cannot accept that. On the other hand, we have stated we would accommodate any public improvements. These need to be part of the master plan. HOIIBING & REDEVELOPMENT AIIT80RITY MTG. SEPTEMBER 14. 1995 PAGE 8 �� Ms. Dacy distributed copies of a letter dated September 14, 1995, from Linda Fisher, for Larking, Hoffman, Daly & Lindgren, Ltd., regarding Lake Pointe. Mr. Commers stated he thought the MEPC proposal stated they would obtain all the necessary permits and approvals for the project. Mr. Casserly stated this is something that needs to be done jointly. Ms. Dacy stated, regarding the Lake Pointe intersection, she wanted to provide an outline of what it would take to get an Environmental Assessment Worksheet (EAW), obtain an indirect source permit approval, and other issues needed to be done in order to accomplish those permits. In the future, there will be more costs than what Ms. Fisher is proposing. Ms. Dacy stated the first is the environmental requirements. In order to get the development served appropriately, we need an intersection. In order to have an intersection, we need to know what is going on in the development. There are a number of environmental requirements. We must have an EAW, an indirect source permit from the MCPA to look at the air and noise ^ pollution as a result of the development, and miscellaneous - permits. Ms. Dacy met with Ms. Fisher to discuss the best strategy to obtain these approvals. Ms. Fisher is proposing a two-phase process. The first phase would focus on a strategy to get the EAW and the indirect source permit process outlined. Her estimate of costs is $5,000. In order to update those analyses, there will probably have to be a traffic study. A traffic consultant did a study ten years ago. With the changes over time, we will need to get some better estimates. We will have to hire a specialist to do the air and noise analysis. Also, the state has a wetland conservation act so we will need to review the site for any wetland issues. She felt that would cost less than $1,000. Ms. Fisher stated the MPCA has a fast track process. MEPC has a list of contract consultants who will review the application in order to speed up the process. The cost for this is approximately $5,000. Ms. Dacy stated the second phase is to implement what they have come up with. We would review what they want submitted first. Then Ms. Fisher would give us another estimate to act on our behalf. Ms. Dacy stated staff is asking the HRA to authorize Ms. Fisher's �"'� proposal for $5,000. She will come back in October with a better estimate on the traffic analysis and the air/noise analysis, and �% a better estimate on the fast track costs. We need a lot of HOIISING � REDEVELOPMENT AIIT80RITY MTG. BEPTEMBER 14. 1995 PAGE 9 information to see how long this will take. If we start now, we can come back in October with more information. There may be an opportunity to share some of these costs with MEPC. Mr. Casserly asked at what point in the process do we have to conclude that we have to complete the intersection. How does that interact with the indirect source permit? Ms. Dacy stated the original permit stated that, she believed, up to 300,000 square feet could be completed without the permit. Ms. Fisher thought we could propose a similar approach. Mr. Casserly asked when we need the interaction of MEPC in the process. Mr. Commers asked if they should get approvals before going forward with MEPC. Ms. Dacy stated that may be a possibility. The east side of the intersection is very congested at peak hours. The City Council is receiving pressure from the public in that area to evaluate doing something. There is some amount of concern from the neighborhood on that issue. MnDOT is proposing to do !� signalization improvements at the intersection. That raises a cost efficiency issue. Should we tell MnDOT to hold off until we can get the development going, but in the meantime the traffic on the east side gets worse? Mr. Commers asked if the study would include the east side of Central. Ms. Dacy stated the intersection design did include the east and west sides and provided turn lanes on Highway 65. Mr. Burns stated the general thinking has been that we expect there may be a very long review process associated with this project. Regardless of when the development initiates on the site, it would be wise to start the review process so that, when the first deal comes through, that prospective user does not have to wait for another review process. Mr. Commers asked how much do we spend prior to knowing when there will be development. We can put a significant amount of development on the site without altering the intersection. We do have years before we need to actually alter the intersection. Mr. Burns stated that may be true. The City Council seems to be divided as to when the intersection should be done. All agree in i"� suggesting that we move forward to get through the permit process. HOIIBIN(3 � REDEVELOPMENT AIITHORITY MT�3. BEPTEMBER 14. 1995 PAaE 10 Ms. Schnabel asked, if we are going to require MEPC to have a building underway by a certain date, are we not obligated to at least get our analysis of the intersection done so that we can proceed. Mr. Burns stated yes. This would be fitting with their eupectations. Ms. Schnabel stated, if MEPC consents to the proposal, we are saying by July, 1997, we want to see something. That is 1.5 years. If it takes one year to get approval, that gives us 6 months to implement it. We would have to stay on a good timetable to move this along and be prepared to provide an intersection in 1997 or 1998 depending on the size building constructed . Mr. Commers stated he is not suggesting that we not go along with the analysis, but he is raising the issue of the next phase. Mr. Burns stated no one knows what MEPC�s plan will look like. Based on what they have said, it appears that they are going to give strong consideration to the existing plan. In going back and asking for the permits, we have some assurances that the plans will look something like the one we had in the past. Ms. Schnabel stated, as she recalled from the intersection plans to the development, there are new lanes that must be constructed. There would be a major construction at that intersection and it would take a number of months to accomplish what must be done. Yet she also is concerned about how current the data will be by the time we get to that point. MOTION by Ms. Schnabel, seconded by Mr. McFarland, to approve the first phase as proposed in the letter of September 14, 1995, from Ms. Linda Fisher. IIPON A VOICE VOTL, ALL VOTINt� AYE, CHAIRPERBODT COMMERS DECLARED THE MOTION CARRIED IINANIMOIIBLY. INFORMATION ITEMB• 11. CONSIDER REOUEST FOR TIF ASSISTANCE FOR ARK DEVELOPMENT Ms. Dacy distributed copies of a letter dated September 14, 1995, from Mr. Gary Bidne, Executive Director, Noah's Ark Affordable Housing Inc. She also received a site plan. Mr. Bidne provided an estimate of costs. In the sources of funds, Mr. Bidne included the equity of the owner but did not include the � requested amount of TIF and tax exempt bonds. HOIIBINa & REDEVELOPMENT AIITHORITY MTG. BEPTEMBER 14. 1995 PAG� 11 � Ma. Dacy stated the project is similar to what they did in Spring Lake Park. This project however is not constructed. Ms. Dacy assumed Mr. Bidne would be requesting a similar amount of money. The total project costs were approximately $8 million. They got $1.1 million in TIF pay-as-you-go assistance or $75,000 to $85,00 per year for 15 years. The bond issue was from $5-$7 million. They combined their own non-profit sources, tax exempt bonds and TIF. Ms. Dacy stated the proposed site is at 83rd Avenue and University to the west of University next to Springbrook Apartments. They are proposing a 4-story rental senior building with 104 units - half one-bedroom units and half two bedroom units. The rents would be $550 to $650 per month. They would hire a management company to manage the buildings that specializes in senior rentals and in health care to provide assistance to residents. This is an independent living facility with assistance available. There will be a common area to provide space for catered functions. Ark has received approval from Spring Lake Park and New Brighton. Ms. Dacy stated, in terms of TIF, she did not have specific numbers. Staff is asking if the HRA is interested in this �` project so that staff can meet with Mr. Bidne to bring back a more detailed proposal. Senior housing is a permitted use in this area. There are no planning issues at this point. Having just received the site plans, she did not know if any variances were needed. There is a wetland in this area. Mr. Commers asked how this ties in with Rottlund. The argument is whether to spend additional money for 30 to 40 units. If we spent the extra money for 30 to 40 units at the Southwest Quadrant and this project is 110 units, it seems that we would get a bigger result for the money. Ms. Dacy stated one issue is that their TIF request in Spring Lake Park was very similar if not the same to what Spring Lake Park provided. In terms of financing, this is a real proposal in the market. $1.1 million out of $8 million is 12.5� of the project. Ms. Dacy stated she did not think there was a market competition. Their age target is much different. Both would be good for the community. However, the Southwest Quadrant has a cost issue. Ms. Dacy stated, in her memo regarding the Southwest Quadrant, she outlined three options which the City Council evaluated. The City Council recommends the HRA proceed with the condominium units. � � � ,Y� HOIIBINa � REDEVELOPMENT AIITHORITY MTG. SEPTLMBER 14. 1995 PA(3E 12 Mr. Casserly stated staff is looking for direction as to whether to continue to explore the concept. It takes between 6 and 24 months to put something like this together. These are touqh projects to do. The proposed project is rental apartments as opposed to condominiums in the Southwest Quadrant. Ms. Schnabel asked if New Brighton was rental units and are these fully rented. Mr. Casserly stated yes, the units are rental and are fully rented. Mr. McFarland stated New Brighton has a waiting list. The price range is relatively the same. Ms. Schnabel stated, if the units are for those aged 70 and above with rental fees of $550 to $650, she thought that was high for those individuals. Ms. Dacy stated a certain number of units must be identified for lower income. The two bedroom will be higher. There will be low to moderate rents. Ms. Schnabel stated the statement was made that this would not complete with Rottlund. What is the basis for that? Ms. Dacy stated the developer said that he felt these were two different types of developments with perhaps a 5� or less market overlap. She has no data to support that, and it was from the developer's information. Mr. Casserly stated these are two different concepts. This is rental with assisted living. We need to know more. There are several projects in the northern suburbs that are campus-type projects. He thought this worth additional discussion. There are issues to resolve. Mr. Bidne is trying to identify their package and then bring it to a larger group. There may be others trying to do other projects. The trend is toward senior campuses with different components. He did not think there was competition between this and the Rottlund project. Ms. Dacy stated she had asked Mr. Bidne if he would be competing with his own projects in New Brighton and Spring Lake Park. He felt the demographics show this will work. Ms. Schnabel stated on the other side, if this was a successful project, would it leave Rottlund off the hook in doing a senior component. Would we want to change our thinking regarding a senior section in the Southwest Quadrant? HOIIBING & REDTVELOPMENT AIIT80RITY MTG. SLPTEMBER 14, 1995 PAGL 13 � Mr. Commers stated, even though one project is condominiums and the other is rental units, to bring in 110 senior units at $1 million in tax increment compared to adding 48 condominiums at $800,000 is hard to justify. The bottom line is you have housing for seniors that you are keeping in the City. Mr. Prairie stated the question is what does the HRA feel about having 48 condominiums or none. We could put in no condominiums and have townhouses. He thought the City Council wanted the condominiums. If this project is 20� or 10�, do we let that affect our thinking. Mr. Casserly stated he thought there were several people looking to do projects in the City. There is a need for this type of product. They are hard projects to put together. Putting together a project requires the right land price, the right amount of subsidy, getting tax exempt bonds, etc. That is why it takes a while to make them work. Mr. Casserly stated the HRA could put a similar kind of project in the Southwest Quadrant. You could put in 80 units. Apartments generate more taxes but also need more ongoing subsidy. You could take that proposal and do a rental building � in the Rottlund project. But, people were more inclined to keep the Southwest Quadrant owner-occupied. There is nothing involved with following through and seeing if this project is doable. They are looking for an expression of interest. Mr. Prairie asked if Rottlund had contacted Mr. Brickner. Mr. Burns stated he had received a call from Rottlund stating they would contact Mr. Brickner, but had not yet done so. Mr. Prairie stated Mr. Brickner proposed 40+ apartments on Old Central. Mr. McFarland asked if these units would generate tax credits for the investor. Mr. Casserly stated yes, if they meet the requirements for the tax credits. He thought they were talking about tax exempt bonds rather than tax credits. Mr. Commers stated our studies indicate we have ample room for senior housing. We have 50 units at Westminster. We have some room. There is no reason not to keep looking at the proposal. The HRA members concurred. /"'� HOIISIN(# & REDEDELOPMENT AIIT80RITY MT(3. BEPTEMHER 14. 1995 PAGE 14 � �\ 12. UPDATE ON SOUTHWEST OUADRANT PROJECT Ms. Dacy stated she has several issues to discuss. The first is the City Council recommendation on the options for the senior component. The second is the meeting with Mr. Prairie, Councilmember Billings, Ms. Dacy and Mr. Stutz where they went over the proposal Mr. Stutz outlined in his letter of August 10. Mr. Stutz also submitted detailed information about the 25� gross margin issue. Since that meeting, Mr. Casserly has also done additional analysis. She said Mr. Stutz would not reduce the 25� margin and this was their final offer. The issue comes down to whether the City and the HI2A wants to proceed with the condominium construction. This is the first option and staff would recommend that, with this option, we go for the equity participation agreement for the project. The second option is to eliminate the senior components and extend the 8-unit townhome buildings. The third option is to terminate the contract for exclusive negotiations. Mr. Casserly stated he thought what Rottlund was saying was reasonably accurate. Another project developer gave costs they were using and the construction costs they were using was $76,000. Rottlund was at $80,000 for which they say they must sell for $110,000 to $115,000. Mr. Prairie stated they talked about the 25� gross profit. They had some things included that he thought would be indirect. They had included 6� for marketing and 3.5� for other indirect construction costs. This brought the percentage down to about 15� minus GNA, which gives a percentage that is in the ballpark. They did provide financial statements. Mr. Casserly stated he also thought they were comparable. He thought the problem was that Mr. Stutz had used the wrong terms. There are not gross profits but rather gross margins. In terms of percentages, the gross margin is after the direct costs. From gross margins are subtracted the rest of the.expenses. That figure is then the gross profit. They were not clear in their statements. Mr. Prairie stated, when they did not get a hard number of the condominiums when they first presented their proposal, they thought this was not a"hard number" deal. They were just giving us a concept. Mr. Casserly stated we must assume that generally people act in good faith and make mistakes. They came in and said they would build this many units and pay a certain sum. We were not asking for that. We took them at their word. There is a way to finesse a bid. They suggested that we agree on a gross profit margin, gross profit or net income for the entire project and split 50/50 80II8INa & REDEVELOPMENT AIITHORITY MTG. BEPTEMBER 14, 1995 PAGE 15 �� any amount in excess of that margin. They would pay $200,000, 1/2 of the park dedication fee and 50� of anything in excess of the margin. Mr. Prairie stated he did think the HRA could expect a great deal. Mr. Casserly stated it was hard to expect much. If what Mr. Stutz provided was legitimate, their margins are very consistent. If you pick something that is 6.5� or 7�, that is net income for operations. That is what they have been showing consistently. Mr. Prairie stated this is a$16 million project. 1a is $160,000. He thought they would be more willing to negotiate, but this was not the case. Mr. McFarland stated he thought they were successful and knew what they must have. Mr. Prairie stated, on the other hand, he hated to see a deal like this slip away. There is usually something there. Mr. Prairie asked if Rottlund had come back with anything else. �. Ms. Dacy stated they had not. Mr. Commers stated we could make a counter proposal. Mr. Prairie stated, if we go to a second developer, that is 6 to 12 months off of the schedule. Ms. Dacy stated there is a chance we could find someone during the winter for spring construction. Mr. Commers stated we have talked about a different developer doing the senior condominiums. Ms. Dacy stated Rottlund is fine with the three other housing types. They are happy to go with those. Mr. Prairie stated they were flexible with the changes on those. Mr. Commers stated, if we do not do it, what do we know about the remarks that there are other projects that might come on board that would fill the senior need. Ms. Dacy stated that comes down to the issue of having owner- occupied or rental units. She is hearing that the City Council �, would prefer owner-occupied units on that property. They have made a recommendation for approval on the first option. If the — HRA does not agree, staff will go b�Ck to the Council. HOIIBIN<3 & REDBVELOPMENT AIITHORITY MTG. SEPTEMBER 14. 1995 PA�3E 16 �� Mr. Burns stated part of the information missing at the time of the Council's discussion was the award of the Suh condemnation which was higher than what we thought. They also settled with the tenants which was also higher than expected. Hopefully there will be a settlement before the end of the year on the Cherrywood Apartments. It is not clear whether we will be on budget for this either. The costs for condemnation must be considered. He did not know if the City Council would make the same recommendation based on the latest figures. Mr. Commers stated he could not support the school referendum issue because of these same issues and these cost overruns. There are also other projects. He is concerned about the HRA's abilities. Mr. Burns stated he also has another project for the Frank's Used Car site to discuss which he felt was worth considering. Mr. Commers stated no matter what happens we can see that Lake Pointe is going to cost more money now. With all of these projects, we may have our hands tied. Mr. Burns stated they had expected to spend money for the �'`, intersection. This has been put into the cash flow analysis, but it may not be enough. Mr. Prairie asked if staff had run numbers of all of these scenarios. Mr. Burns stated they had not done that. He thought it might be premature to do that because there are still so many unknowns. Mr. Prairie asked if there was discussion about the appraiser that handled the Suh property. Mr. Burns stated he did not think it was the appraiser's problem. The condemnation commissioners factored in what we paid for the Levy property. The appraiser was looking at the value of the apartment buildings based on the various methods of appraisal. He was not factoring in damages for condemnation blight. Mr. Commers stated he had never heard of condemnation blight as a legal concept. He asked what Mr. Herrick thought of that term. Mr. Burns stated he had asked Mr. Herrick to go back to the head condemnation commissioner and ask how much of the award was for damages and how much is blight. He did not know if this commissioner would accommodate the request but Mr. Herrick will ; --��� try to do that . -�' Mr. Commers stated it is proper to do that. � � n $OIIBING & REDEVELOPMENT AIIT$ORITY MTG. SEPT�MBER 14. 1995 PAQE 17_ Mr. Burns stated it seems likely that the condemnation commissioners felt that the numbers offered by the opponents were more believable. It seemed the thing for the decision against us was the price paid for the Levy property. They also noted the taxes were higher on the Suh property. Mr. Burns stated we also lost on the fixture appraisal. The commissioners seemed to give more credibility to the opponent's fixture appraisal. Mr. Commers asked staff to get an analysis and figure out what to do. This is more than what we expected. In addition, there is the apartments. Mr. Burns stated the figure for the Cherrywood Apartments is $1.365 million. They have always wanted $1.8 million. We budgeted $2.1 million for all of the apartments so we will be over budget for that. They are asking over $2 million for condemnation. Our appraisal is at $1.224 million. We went up as high as $1.367 million which gave some recognition for lost rents and other concessions. Mr. Commers asked if Mr. Burns thought it would be well taken to run this by the City Council before the HRA considers this item. Mr. Burns stated the problem is, if we wait until all the numbers are in, it will be the end of the year before we decide to do anything with Rottlund. The issue with the Cherrywood apartments will not be decided until mid-December. We could use the worst case numbers. The appraiser was carefully evaluated. He was used in New Brighton, Richfield, and Bloomington. He came with high recommendations. There was no reason to suspect we had a less than highly qualified appraiser. Mr. Prairie asked if this happens a lot. Mr. Commers stated, if the appraisals vary by more than 10�, they are supposed to be turned into their professional organization. Mr. Burns stated staff will go back to the City Council to discuss the HRA's concerns and the concern about the overall budget. When they discussed, he was not sure they were aware the budget was in excess of $3 million. Mr. Burns stated he felt the City Council wants to see a quality development, they are shy about putting more rental on this site, and they feel there is a market for upscale senior owner-occupied condominiums. Mr. Commers stated the need is limited. There is no need unless it is subsidized for $800,4�00. There i,s not such a need that HOIIBINa & REDEVELOPMENT AIIT80RITY MT(3. BEPTEMBLR 14. 1995 PAGE 18 � people will pay $100,000 for those units. Ms. Schnabel questioned whether people would want to be on that intersection. She would not want to be in that high traffic area. Mr. Burns stated they would take this back to the City Council asking the Council to revisit the issue based on the new numbers on the condemnation. Mr. Meyer asked what the purpose was in going to the City Council. They may ask what our recommendation is. Sho�tld not we have some firm view of our own before we go to the Council to change their ideas? It seems that is what we should formulate. Mr. Prairie thought with the numbers going up there was a concern. We are concerned but there are other projects also. Councilmember Billings sees the HRA as the CFO and the Council as the CEO. If we tell them we think it will work, he thought they would go along. Mr. Meyer stated he thought they should recommend staying with Rottlund. If there is room for negotiations, that is fine. We �� should see what their mix does and see if we can live with it. Then go with that to the Council. �"'� Ms. Dacy stated, if the HRA does not want to pay the additional funds, we can extend the townhomes into that corner but there was less density. Mr. Casserly stated there would be 122 units rather than 146. Ms. Schnabel asked what the basis was for including a specific senior housing on that corner. Ms. Dacy stated density was part of it, but the majority of the demand is for seniors and empty nesters. Mr. Meyer stated we wanted a focal point for the development which the senior highrise would provide. It gives a sense of identity to the project. Ms. Dacy stated we did not want just another townhouse development. Ms. Schnabel stated they could still build that type of structure but not necessarily limited to seniors. There could be a building there for rental units. Ms. Dacy stated the Council does not want rental units. 80II8IN(� & REDEVELOPMENT AIITHORITY MTG. BEPTEMBSR 14. 1995 PA�3E 19 %��. Mr. Prairie atated, if you look at a senior buying at $90,000, the average townhome is $100,000. Mr. Commers stated perhaps we should look at a subsidy program to help buy the condominium if the person is below a certain income level. Mr. Casserly stated we are getting into a subsidized program for $100,000 units. We talked about this with Rottlund to provide a subsidy to the user and then having some arrangement to share in that subsidy when the unit is sold. Rottlund thought this would make it difficult to market the units. Buyers purchase property in order to get the appreciation in value. Mr. Prairie stated, if townhouses are built and buyers have to pay $10,000 more, maybe that is an option. Ms. Dacy stated Rottlund says seniors will not buy the attached townhomes because they are three-story units. There are too many stairs for seniors. The option is a one-story unit which is $130,000 to $160,000. The other detached townhomes in the project are two-story homes. �'"� Ms. Dacy asked, if the IiRA is uncomfortable with the cost of one and goes with the City Council's desire of no rental, -do you like the all townhome proposal. If we narrow it down, it is either all townhome or start over. Mr. Prairie stated he thought the City Council wants the 48-unit condominiums, except there are new figures. Ms. Dacy stated they can go back to the Council and say that, in light of the additional costs, the HRA would like the Council to re-evaluate their decision on the condominiums but the HRA is reluctantly prefers the all townhome proposal. That would continue the three-story design up to the corner, then two-story, and the one-story. There would still be a change in elevations. Mr. Meyer stated he liked the idea of having a senior presence. With the townhome situation, there is no designated senior area. What is the scenario to stay with the 48-unit condominiums? Mr. Prairie stated this will end up being $1.2 million over the original budget. Mr. Commers stated, at one time, we were trying to negotiate with Rottlund something in the $400,000 to $500,000 range for 48 units. If we could get the price in that area, we could do it. ^ We never reached a conclusion. � HOIIBINa � REDEVELOPi�lENT AIITHORITY MT(�. BEPTEMBER 14, 1995 PAC�E 20 � - Mr. McFarland asked if they would recover the difference between option 1 and 2 because of the increase in density. Ms. Dacy stated there would not be a cost with option 2. Mr. Meyer stated we seem to be getting in deeper and deeper. We acquired the apartments because we wanted a first class development and to insure success. PTow we are here again with another $1+ million with the same objective of a first class development. Do we now change the plans or go along and see if it is possible? Mr. Commers thought this could be a first class development, but should it include seniors. Mr. Prairie thought the second option could be first class. Mr. Schnabel stated the density would not be as great with this option. Therefore, visually, it would be enhanced somewhat. Mr. Meyer stated density would not be as great but it is still land covered by townhomes. Density is greater with the senior buildings but with a more identifying symbol of the area. There /� is a definition between the commercial and residential. The fact that townhomes come up to the edge of the street makes it appear as if houses were put in a commercial setting. Ms. Schnabel thought the landscaping would have a lot to do with that. Mr. Prairie stated the HRA was close to going with $600,000 but now the ante is raised. It makes this a much tougher decision. Mr. Burns asked if the HRA was saying they did not want the 48- unit buildings. Mr. Commers stated, at $1.2 million, he is getting very concerned. At that rate, he is more inclined to do 122 unite. He would like to do senior housing because he thought it would add a lot, but he was not sure they can justify what is happening. Overall, will this be $5 million by the time we get done? It is getting to be unbelievable. If it is a question of another $1 million or $800,000 just to add the elderly, where do you draw the line? It is very difficult. There is no compromise. Mr. Prairie stated he felt the same. He would like to see the 48-units. He wants to see a first class project whether these � units are included or not. If there are more items to come in, the costs are apt to go up and not down. It could end up to be � another $1.2 or $1.3 million. $OIIBIN(� � REDEVELOPMENT AIITHORITY MTa. SEPTEMBER 14, 1995 PAGS 21 /'� ' , Mr. Meyer stated he thought this is a very important piece of the City's real estate and felt they should make every effort to do what he thought would be best for it, and that is the senior housing in the corner and the rest as planned. He would go for it and not put something there that might be second rate. If we do not do it right, it is forever. Mr. McFarland stated this was not economically viable in the beginning. We under estimated the costs of the property and the buildings. We can go with option 2 and have a lesser project and find other ways to fund. This comes from the surplus of other projects. We go back to the first day when we projected out the project, if we knew then what we know now, would we have the same plan on the board. Would we have gone ahead if we knew we could not fund it through tax increment? Mr. Burns stated he could not answer that, but felt they would have had a much more difficult time deciding to do the project. Mr. Prairie asked, if they figured $1.2 million is as a percentage, what is the total number? Ms. Dacy stated $4,285,000 is the original budget amount. This �'` included all the new expenses and acquisitions. This did not include the fast food site, Dairy Queen, or the Levy property. Mr. Prairie stated the total is about $6 million. If we are off by $1.2 million, that is 20�. If we took their figure of $16 million, it is a lower number. What is a reasonable percent to be off? Mr. Commers stated the bottom line is that, when we are talking $5 to $6 million for the kind of development we are putting on that property, it is a heavily expensive deal. Mr. Casserly stated these are redevelopment costs. You are talking about whether to subsidize Rottlund on the condominiums or sell the land. It is hard to go back and try to calculate the costs. Mr. Schnabel asked, if you have $6 million into it and put up 146 units, what is the cost of those units. Mr. Casserly stated they will decide on the housing later. This was planned to be a mixed use, multi-purpose development. Putting up various types of commercial and other kinds of uses is putting up a lot of value on this site. With the way we tax homestead, it is not generating revenues. � Ms. Schn��l stated she felt as if they were on a runaway train. � W'here cTc�r,� �� stop? If we are going to be responsible, at some HOIIBINa & REDEVELOPMENT AIITSORITY MTG. BEPTBMBER 14. 1995 PAdE 22 point we have to say that perhaps we need to stop. Mr. Casserly stated redevelopment never breaks even. Ms. Schnabel stated, while the intent to do the senior housing is important, that is not the only piece of property in the City where one can build senior housing. While we want to provide senior housing, we have other responsibilities. We must be fiscally responsible as well. If this was the last piece of land left, that would be one thing. But there is more land left. Perhaps this is something we have to give up. Mr. Commers asked the number of acres at the Frank's Used Car site. Mr. Burns stated, assuming the acquisition of two properties next to that property, there would be approximately 2 acres in that area. Ms. Dacy stated they should perhaps then pursue the Ark development. Mr. Meyer stated, of the places in the City, this is where the ^ amenities are within walking distance for the seniors. That is important. If we put this somewhere else, we can still have overruns in costs. This way, it serves the purpose of giving seniors a facility and is an identifying landmark which he thought would benefit the development. � 13. UPDATE ON HYDE PARK PROGRAMS Mr. Fernelius stated the information meetings will be held next Tuesday and Thursday. CEE will put on a presentation about the programs, have staff available to answer questions and have loan applications available. We has not heard what the turnout will be. He is optimistic that a significant number of property owners will be there. He will have more information at the October meeting. CEE put together the materials at their own cost and mailed it out to the home owners. OTRER BII8INE88: 14. APPROVAL OF ADDITIONAL EXPENSES MOTION by Ms. Schnabel, seconded by Mr. Prairie, to approve the additional e�enses totalling $26,159.16 as submitted. IIPON A VOICE VOTE� ALL VOTIN(� AYE, CHAIRPERSON COMMERB DECLARED THE MOTION CARRIED IINANIMOOSLY. HOII8ING & REDEVELOPMENT AIITHORITY MTG. BEPTEMBER 14. 1995 PAQE 23 ,� /'`, 15. CONSIDER OFFER TO PURCHASE A PORTION OF 533 JANESVILLE STREET Mr. Fernelius stated staff is proposing a lot split. The parcel at 533 Janesville actually includes a portion of the lots behind it. Some of that is due to the age of the property which predated the plat. The house has been demolished. The neighbors at 538 and 528 Rimball have approached the City about purchasing that portion of land which, so to speak, encroaches on their lots. The area consisted of a 20 foot x 50 foot area, or approximately 1,000 square feet, on Lots 52 and 53, and a 15 foot x 25 foot area on Lot 54. This would create a non-conforming lot under the City code at 533 Janesville. The reason for the request is that the other owners wish to square off their lots. Right now, the backyard fence is about 10 to 12 feet from the house. It does make sense to sell that part of the property; but it does present a problem for us with a resulting non-conforming lot at 533 Janesville. The two owners have proposed to pay 60 cents per square foot which is consistent for what we have been paid on average through the scattered site program. The owners have also agreed to cover all other costs involved in the lot split. Staff recommends the HRA approve the sale of the land, subject to the following: 1. The buyers agree to cover all costs incurred by the HRA involved in the transaction. 2. A public hearing concerning the sale to be held by the HRA on October 12, 1995. 3. Approval by the City Council of a lot split and a lot area variance. Mr. Commers asked if reducing the size of the lot at 633 Janesville would be a problem. Mr. Fernelius stated the lot is now considered non-buildable. This would create a larger parcel for the adjacent owners. The property could be sold for construction of a new home with a variance. This could solve some issues dealing with the backyard lot lines. MOTION by Mr. Meyer, seconded by Ms. Schnabel, to move forward with the proposal as outlined. IIPON A VOICE VOTE, ALL VOTINa AYE� CHAIRPER80N COMMERB DECLARED THE MOTION CARRIED IINANIMOIISLY. � 16. NORTHCO Mr. Casserly is talking about a 100,000 square foot building off 80U8INa & REDEVELOPMENT AIITHORITY MTQ. BEPTTsMBLR 14. 1995 PA(�E 24 �� University and Osborne. The problem is dealing with site correction. They have had estimates for $1.5 million in site correction and to relocate a storm sewer. He would like to know if the HRA is interested in assisting with the site corrections. He has talked to them about the approach we had taken with Agro-R in which we provided a grant of 5�S of the project cost and a loan of 5� of the project costs. If the concept is worth discussing further, we would be talking about $350,000 in assistance - one- half a grant and one-half a loan. This would assume the HRA would establish a tax increment district that would be appropriate. This will generate some revenues for the City and for the program. All the expenses are eligible expenses. Tax increment generated in a districts with a 100,000 square foot building would be almost $700,000. The HRA could pull out the costs for administration. The HRA would have ample funds in the district to make the loan and grant and would also get back approximately one-half of the assistance package and the loan. This is the kind of project, if it makes sense, where there is no net loss but rather a net gain. He asked if the I�2A wanted to provide this kind of assistance. Mr. Commers asked what kind of building was proposed. /� Mr. Casserly stated the building would have to be a manufacturing, warehouse, or distribution type of building. The HRA can only create a economic development district for that type of a pro j ect . The consensus of the HRA was to continue to discuss the project. ADJOIIRNMENT: MOTION by Mr. Meyer, seconded by Mr. Prairie, to adjourn the meeting. IIPON A VOICE VOTE� ALL VOTING AYE, CHAIRPERSON CONII�lERB DECLARED THE MOTION CARRIED AND THE BEPTEMBER 14, 1995� HOIIBING AND REDEVELOPMFNT AIITHORITY MEETING ADJOIIRNED AT 1Ot25 P.M. Respectfully submitted, ,•: r --�%�J � ! � � ' w Lavonn Cooper Recording Secretary .�-.