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HRA 09/12/1996 - 29790� CITY OB FRIDLEY HODBINt� i REDB9ELOPMENT AIITHORITY MEBTINa 12, 1996 CALL TO ORDER: Chairperson Commers called the September 12, 1996, Housing and Redevelopment Authority meeting to order at 7:35 p.m. ROLL CALL: Members Present: Members Absent: Larry Commers, Virginia Schnabel, John Meyer, Duane Prairie Jim McFarland Others Present: William Burns, Executive Director Barbara Dacy, Community Development Director Jim Casserly, Financial Consultant Robert Van Nelson, Remodeling Counselor Craig Ellestad, Accountant Frederic Knaak, City Attorney David Wiger, 901 Rice Creek Terrace APPROVAL OF AUGUST 8, 1998. HOUSING AND REDEVELOPMENT AUTHORITY MEETING: Mr. Commers stated page 15, paragraph 2, the last sentence should read, "Staff will be talking to the City Council about this on August 19." MOTION by Mr. Meyer, seconded by Mr. Prairie, to approve the August 8, 1996, Housing and Redevelopment Authority minutes as amended. IIPON A VOICE VOTE, ALL VOTING AYE� CHAIRPER80N COl�II�IERB DECLARED THL MOTION CARRIED DNANIMOIIBLY. CONBENT AQENDA: 1. RDVENQE AND EBPLN8E8: Mr. Ellestad distributed copies of additional expenses for approval. 2. CONSIDER PROPOSALS TO ADMINISTER HOME IMPROVEMENT GRANT PROGRAM• ^ 3. CONSIDER APPLICATION TO MHFA FOR COMMUNITY REHABILITATION FUND• ,,.� HOIIBINGi & REDEVELOPMENT AIITHORITY MTQ., BEPTEMBER 12. 1996 PAGE 2 4. ACQUIRE 5813 - 2 1/2 STREET, 5925 MAIN STREET. AND 5857 MAIN STREETs 5. APPROVE RESOLUTION AUTHORIZING EXECUTION OF LOAN DOCUMENTS WITH THE FAMILY HOUSING FUND: Mr. Meyer stated he had questions regarding item #4 and requested this item be removed from the consent agenda. MOTION by Ms. Schnabel, seconded by Mr. Meyer, to approve Revenue and Expenses including the additional expenses as outlined in Mr. Ellestad's memo of September 12, 1996; Consider Proposals to Administer Home Improvement Grant Program; Consider Application to NIIiFA for Community Rehabilitation Fund; and Approve Resolution authorizing execution of Loan Documents with the Family Housing Fund. IIPON A VOICE VOTE� ALL VOTINa AYE, CHAIAPERBON COMMERB DECLARED T8E MOTION CARRIED IINANIMOIIBLY. ACTION ITEMB: �� 6. CONDUCT PUBLIC HEARING TO AWARD SALE AND APPROVE RESOLUTION AUTHORIZING EXECUTION OF DEVELQPMENT AGREEMENT REGARDING 6431 JACKSON STREET N.E.: MOTION by Mr. Prairie, seconded by Ms. Schnabel, to open the public hearing. IIPON A 00ICE VOTE � ALL VOTIN(3 AYE, CHAIRPER80N CObIIriERB DECLARED T8F MOTION CARRIED AND THE PIIBLIC HEARINt�i OPLN AT 7s38 P.M. Ms. Dacy stated, on July 11, 1996, the HRA authorized staff to solicit proposals for the purchase and rehab of the property at 6431 Jackson Street. At the last meeting, the HRA approved the proposal from Mr. Wiger and authorized preparation of the proposed sale and development agreement. A public hearing is required prior to conveying the property and executing the development agreement. Ms. Dacy stated the proposed development agreement states Mr. Wiger agrees to purchase the property for $40,500 via a purchase money mortgage. Mr. Wiger also agrees to complete the rehab improvements in six months or by the end of March, 1997. The details of the improvements were adopted as part of the development agreement. Staff has received a letter of credit for $48,440 to insure completion of the improvements in their � entirety. A summary of the improvements is as follows: � HOII8IN�3 & REDEVELOPMENT AIITHORITY MTa., BEPTEMBBR 12. 1996 PAGE 3 1. Constructing a 12 foot x 12 foot addition off the rear of the home to create a four season porch. 2. Replacing all of the windows in the home. 3. Replacing the plumbing, electrical and heating systems. 4. Installing new interior trim, millwork, and doors. 5. Installing new flooring and carpeting. 6. Finishing the upper level bathroom (completely gutted at this time). 7. Re-building the front porch. 8. Re-siding and re-roofing the entire home and attached garage. 9. Landscaping the yard. Ms. Dacy stated staff recommends that the HRA conduct the public � hearing, receive comments, close the public hearing, and move to approve the resolution authorizing execution of a sale and development agreement. The contractor is at the meeting if anyone has any questions. Mr. Prairie asked if this covered the items previously discussed. Ms. Dacy stated yes. Mr. Meyer stated he wanted to re-iterate his concerns with the bidding process. Ms. Schnabel stated she understood Mr. Wiger had met with some of the neighbors. She would like to hear the neighbors' reaction to the plan. Mr. Wiger stated most of the neiqhbors are in favor of and enthused about the plan. They want to see action. He knows some of the neighbors, and they were in favor of the work. Ms. Dacy stated Mr. Fernelius had received a phone call also in favor of the proposal. Mr. Commers stated it seemed that the decision to go forward appears to be appropriate. � Mr. Wiger stated he had talked with staff and he has no additional questions. ,!"� � HOIIBINQ i REDEVELOPMENT AIITHORITY MTa.. BEPTEMBER 12. 1996 PAaB 4 MOTION by Ms. Schnabel, seconded by Mr. Prairie, to close the public hearing. IIPON A VOICE VOTE � ALL oOTIN(� AYI� � CSAIRPER80N COI�IIKERB DLCLARED THE MOTION CARRILD AND THE PIIBLIC HEAAINt3 CLOBED AT 7245 P.M. OTION by Ms. Schnabel, seconded by Mr. Prairie, to adopt a resolution awarding the sale of the property, and authorize execution of a development agreement. IIPON A VOICE VOTE, WITH M8. 8Cffi�iA88L, MR. COluII�IERB AND MR. PRAIRIE VOTINt� AYE� AND MR. MEYBR VOTINa NAYi CHAIRPLR80N COMMERB DSCLARED THE MOTION CARRIED BY A MA.70RITY VOTE. 7. CONSIDER RESOLUTION AUTHORIZING THE ISSUANCE AND PROVIDING FOR THE REPAYMENT OF A GENERAL OBLIGATION TAX INCREMENT NOTE: Ms. Dacy stated, on July 11, the HRA authorized a resolution for the levy and initiated the revolving loan program. That request was sent to the City Council to issue the loan. During the August meeting, the City Council agreed to the levy and made the corresponding action to issue the loan. While we did not discuss a note per se, it is the means to implement the revolving loan program and repay the City. Mr. Casserly stated this is the $1.5 million loan that the City Council agreed to that would provide some assistance. That originally started with the discussion on the Southwest Quadrant. In further discussion, it seemed to make more sense to tie it in with the housing plan and with the adoption of a levy which would be available as a source of repayment. Mr. Commers stated his only concern is the extent that this is another o�ligation on all of the tax increment districts. The question is what kind of restriction this puts on the HRA in terms of doing anything within the existing districts. Mr. Casserly stated what we want to do is pledge all available increment for eligible expenses. Repayment of this debt would be an eligible expense. The levy can be used for more activities. Mr. Commers stated, since the HRA now is going to have increment pledged to this, will that interfere with the HRA's ability to use that for other things. Mr. Casserly stated this will not interfere if there are revenues � available. What we are pledging in this resolution is increment, assets or anything the HRA has available for repayment. ,� HOOBIN� & REDEV'ELOPMENT AIITHORITY MTa.. BEPTEMBER 12. 1996 PAaE S � Mr. Commers stated this is then not a priority pledge. This would not come before other activities or uses that the HRA would want to make of the tax increment money. Mr. Casserly state no. All the i�tA is pledging is that there will be enough at the time that you make the payments. This is a general obligation of the HRA. All assets available can be used to repay this obligation. One of the concerns we have is that we have identified adequate eligible expenses. That has not been a problem in recent years. You are goinq to have revenues coming in in the future which will be available to pay this note. Mr. Prairie asked if this uses up any part of the purse that the HRA has. Mr. Casserly stated no. The other side of this is that the HRA has authorized a levy which the City Council has consented to which will brinq in about $168,000 per year. The annual payments on the note are about $142,000. Mr. Commers stated the levy is not dedicated to this. When you call this a general obligation tax increment note, it seems to � mean the HRA has some kind of blanket liability for all of the pool of funds. Section 6 says that, in the event there is not sufficient tax inerement, the finance officer will pay such principal or interest from the general fund. What does that mean? Mr. Casserly stated the HRA has a general fund where all the revenues are and which is invested. The HRA issues two kinds of debt. One is revenue obliqations which is secured by tax increments from projects. When the City Council sells bonds in the HRA's behalf, such as for Lake Pointe, the HRA pledges tax increment. The City Council is the only one that can provide the general obligation levy for the property in the City. Another obligation is a general obligation of the HRA. When the HRA issues their own general obligation, you cannot pledge property taxes, but you can pledge all of the other assets. That is what this is saying. Mr. Commers asked what other notes such as this does the HRA have outstanding. Mr. Casserly stated the HRA has one note outstanding that was issued about 10 years ago. This helped finance the improvements in the City Center. The only revenue obligation or general obligation of the HRA was refinanced in 1984 which was a general �„1 obligation bond which was converted into a revenue bond. That is an obligation of the HRA only. The HRA has done this type of thing before. This is worded very carefully because, if we have ,,,� HOIIBIN(� � REDEVELOPMENT AIITHORITY MTa.. BLPTEMBER 12. 1996 PAGE 6 the ability, we will always use tax increment first because those are the funds that have the most restrictions. Any other assets available will not have the restrictions that tax increment has. Ms. Schnabel asked the status of the other $4 million bond. Mr. Ellestad stated the tax increment refunding bond from 1985 has a balance of approximately $1.2 million. That bond issue was an advance of the refunding of three other issues. It is a tax increment revenue refunding bond. Ms. Schnabel asked if there was another bond from 1990 that was also out. Mr. Casserly stated that was the 1985 bond that was refunded in 1990 which 3s structured to be paid off in the next decade. In addition to the Lake Pointe bond, the HRA has approximately $11 million out. Mr. Commers asked, when the HRA did the refunding, the underlying bond stayed in place and the refunding is just that the bond is pledged against the underling bond. Is that correct? � Mr. Casaerly stated those early general obligation bonds were refunded by the revenue bond in 1984 or 1985. Mr. Commer� stated, technically, this is the only one we have. Mr. Casserly stated it is a little bit of nomenclature. When you say you are issuing a revenue bond of the HRA, the actual pledge agreement is essentially what this is. Ms. Schnabel stated Section 5.2, the dollar amount should read $1,500,000. Mr. Casserly stated this was an error which will be corrected. OM TION by Ms. Schnabel, seconded by Mr. Prairie, to approve a Resolution Authorizing the Issuance and Providing for the Repayment of a General Obligation Tax Increment Note, Series 1997, in the Principal Amount of $1,500,000. IIPON A VOICL VOTE, ALL VOTIN(� AYE, CHAIRPER80N COMMERB DECLARED T8E MOTION CARRIED ONANIMOIIBLY. 8. CONSIDER APPEAL OF COMMISSIONER'S DETERMINATION REGARDING CHERRYWOOD APARTMENTS: � Mr. Rnaak stated he had sent a letter to Mr. Burns summarizing the history of the proceedings and the result of commissioners � HOIIBI�a 6 REDSVELOPMENT AIITHORITY MTa., BEPTEMBBR 12, 1996 PAGE 7 report, a copy of which was provided with the agenda. This has to do with the Southwest Quadrant and a portion of the condemned property, specifically the Cherrywood Apartments. This case was unusual for the length of time it took to complete. The commissioners decision was $1,557,814 which is approximately $374,000 higher than estimates projected. It is also $317,000 less than the value advanced by the owners appraisers at the time of the hearing. It appears that the commissioners took the two positions and went down the middle. The report has now been filed and was filed on September 3, which gives the parties 40 days in which to appeal. Mr. Knaak stated the review with the appraisers for the City as well as his discussions with the commissioners leads him to believe that the City's prospects are reasonably good. There are no assurances. There is a substantial difference between the amount advanced by the City and the value as determined by the commissioners. When appealing, you are getting a trial for the purpose of determining the valuation of what was taken. In this instance, he believes, the analysis done on behalf of the City was thorouqh and would serve as a very good basis to make a case to a jury for a lesser determination than that decided on by the commissioners. Mr. Knaak stated there are drawbacks. It is not just that you will end up with a lower award. The jury can consider testimony but also the testimony of the owners. It is possible that the award that a jury would make could also be higher. As a practical matter, that does not tend to happen. Usually, the greatest concern he has is that it would be more along the line with the commissioners determination. If that adheres, the jury may make an independent determination. There might be some possibility that the commissioners would be effective in their testimony. The commissioners had gone through the trouble of visiting comparable sites and asking the managers on site about rents received at the time. Those commissioners that Mr. Knaak spoke with stated they had done a thorough job in making an analysis and studying the market, and in making their own independent determination. Mr. Knaak stated there are some risks. If you proceed to appeal and if the jury hearing the testimony would be persuaded by the testimony of the three commissioners that the value was $1.5+ million, he would suggest that the other commissioners he spoke with felt the testimony by the owner was not particularly credible. It was their opinion that the owner would take the award that we had offered. Given that fact, he would suspect the owner would be offering additional testimony of the commissioners �� with the objective of sustaining the commissioners determination. It comes down to the testimony of the commissioners, the HOIIBIN(� � RI:DEVELOPMENT AIITSORITY MTG4.. BEPTEMHER 12. 1996 PAGE 8 estimates by the owner as to the original valuation, estimates of condemnation blight and the arguments that the amount should be higher which might have an effect on a jury as opposed to the City's testimony, which he believes is substantial. He thought the appraiser for the City did an exhaustive job. Mr. Rnaak stated, while he did not want to scare the HRA off, he believes the City's case is a strong one. He wants the HRA to be aware of the fact that there is also a chance that the City, if they appeal, will not prevail. He would suspect, however, that after a trial the figure would be less. Mr. Commers stated, based on the 10.5 capitalization rate, are you able to determine from the award what would have been the income they were capitalizing. Mr. Knaak stated he has asked Mr. Bjorklund to make that calculation. He has not yet received that information. Mr. Commers asked how many units were there. Mr. Rnaak stated there were 53 units. r"'�, Mr. Commers asked what that comes out to be per unit. Is there anything else in the $1.5 million award in the value such as fixtures? Mr. Knaak stated he believed nothing else was included in the award. Ms. Dacy stated the value per unit comes out to be $29,392. Mr. Commers asked what the figure is if they take the award times the capitalization rate of 10.5. Mr. Casserly stated the amount if $163,566. Mr. Prairie stated they are talking about $6,000 to $8,000. They could end up with a number that is $1.4 million, $1,3 million, etc. Mr. Knaak stated theoretically that is correct. He did not think �they would see anything higher than their appraisal. The down side could be a loss of up to $323,000. The positive side is that they could also gain $370,000 or more. Mr. Knaak stated, given what Mr. Hennessey indicated as the City's other consultant and what he heard from two of the � commissioners, he would not be surprised to see the cap rate somewhat lower than what the City's position was. He would � �, HOIIBIN(,� i REDEVELOPMENT AIITHORITY MTa.. BEPTEMBER 12. 1996 PAaB 9 anticipate that most of the focus of a trial would be what were comparable units. He visited some of the sites and rejected them. He believed the comparables provided by the City were ones for which they had different figures as to the income. The City's analysis was based on independent studies and the market studies in the area at that time. He would suspect, if this is the case and even if the cap rate was adjusted somewhat, the City's case would be very strong. Mr. Commers stated he believed that $29,000 figure is a high number for those units, and he could not believe the income would justify the award. Mr. Prairie asked if the commissioners had those figures. IKr. Commers stated Mr. Rnaak is saying the commissioners did give him an exact idea of what they used for an income figure those units. That is what they capitalized. That is a very crucial number. That might be the place where there would be potential for change. Ms. Schnabel asked if they see or subpoena the books of the owners for the income figures. Mr. Rnaak stated the owners figures were provided. not for the Mr. Commers stated they try to find comparable buildings and use that for a fair market value. Ms. Schnabel asked if the value was based on the income or the fair market value. Mr. Knaak stated the value is based on the income. The City's appraisal used the approach where a different method was weighted and utilized. The commissioners decided to use the income approach exclusively because this kind of property is purchased for a gain. That resulted in this type of property having a somewhat higher figures. When a commissioner was asked about how they arrived at the figure, they ment ioned tha t to arrive a t t his kind of number they would have taken an income analysis per unit which was much higher than the City in their comparable study. Mr. Commers asked if Mr. Rnaak believed the units would average approximately $500 per month. Mr. Knaak stated he believed the units would rent for the mid- $500's. The owners were saying the rents were $585 to $595 which � is what they would have received if they had been able to complete their improvement plan. � � HOIIBING{i REDEVELOPMENT AIITHORITY MTa.. BLPTEMBER 12. 1996 PA(�E 10 Mr. Rnaak stated he would anticipate the commissioners would defend their position by saying they went to comparables of their choosing, talked to the managers at those places, and received figures on rents based on what was posted at the time. For the purposes of this analysis, the numbers are not higher but similar. Mr. Prairie stated, if the commissioners did split the difference, you would then need to have compelling information to get them to move. Mr. Rnaak stated he thought the commissioners had made their decision and were prepared to be asked to testify. The position taken so far was that this was cautious and de€ensible. Ms. Schnabel stated, when talking before about the cost to the HRA to appeal, there would be the legal fees and the witness fees. Are there any other costs? Mr. Prairie thought the associated costs could be $15,000 to $20,000. Mr. Knaak stated he thought that would be realistic. It could be less. Mr. Meyer asked, if we assume the commissioners did split the difference and also assume the same case goes to a jury who knows less about this than the commissioners, what makes us think they will give us any different judgment. Mr. Knaak stated one cannot predict what will happen. If we got that kind of admission from the commissioners, it would be good for us. He thought the City's facts were very strong because of the analysis done by Bjorklund and Associates. If this is presented as apples versus apples, a layperson can understand a like comparison. That is a good argument to be making. The problem he has is that more we peel information from the commissioners, the more they are able to defend an independent analysis and what they concluded. Mr. Commers stated it seems that the risk is that it is going to be harder for them to exceed the commissioners decision than it is for us to try to get it lower. It could end up to be the same. We would spend money to find out it is the same. Mr. Prairie stated, if we could present the best case of ours and they present the best case of theirs, then you are back to the middle. �-.., �OIIBIN� & REDBVSLOPMENT AIITHORiTY MTG. , BLPTEMBER 12 , 1996 PADE_ _11 Mr. Commers stated the problem is what is comparable. There may be some difference but not a great deal. The issue is we do not know what the commissioners used as comparables. We do know what the apartments were. There is also the possibility that in filing a notice of appeals you will be able to negotiate something. There is a risk to them also. That opportunity will certainly arise. Mr. Prairie stated the ownera had requested $1.8 million. Mr. Commers stated the commissioners did not give credence to that. Mr. Rnaak stated he had asked the commissioners if they had split it down the middle. They did calculations and found they were close. If that were true, it would be a relief. It presents something trickier. It raises the possibility that the City was conservative in its appraisal. Based on what we have seen, we are not saying it. We don't know what is wrong with this picture. Until he sees something that indicates the commissioners saw something everyone else has been missing, it strikes him that the City should continue. If in the course of �� the appealing process we realize there is a point we missed or a method not followed, that would be cause to reconsider. Based on the information we do have, the interest would be best promoted by advancinq for the appeal. We can always stop. Ms. Schnabel stated the choice appears to be between paying $317,000 outright or trying to avoid that. Mr. Commers stated he did not think the HRA has exposure for that. If they do not appeal, they pay the $1.5+ million. If they do appeal, the figure could go lower. Mr. Meyer asked what happens if the figure goes higher. Mr. Knaak stated it is also true that some of this discussion may be moot. If the owner sincerely believes this building is a give away, he may also appeal. Mr. Prairie asked how the owners arrived at their figures. Mr. Rnaak stated they had an analysis done. He felt that estimate was optimistic.. We did not have the opportunity to examine the appraisers. Mr. Prairie stated this seems to be a decision that could go ^ either way. i� � � HOIIBINC� i REDEVELOPMENT AIITHORITY MTGi. . BLPTEMHER lx . 1996 PAGiE 12 Mr. Commers stated he would expect the HRA would save more than the cost. A lot depends on what the commissioners used to arrive at income. We do not know, but we will find out. From a legal point of view, he thought the other commissioners should decide what is in the best interest of the City. Mr. Meyer stated, in hearing this testimony, he didn't think he as a layman would change the award too much and he would be inclined to split the difference. Perhaps at the end of the trial, they may have saved $50,000. It would be nice to have a guarantee, but we do not have that. Mr. Prairie asked, for the benefit of history, what happened to Dairy Queen. Ms. Dacy stated the commissioners came down to $167,000. The other side appealed. The City ended up with about $200,000. That was concluded throuqh negotiations. Mr. Casserly asked if Mr. Rnaak recalled the capitalization rate used by the City. Mr. Rnaak stated the rate was 11.5. Mr. Casserly stated he reviews projects such as this periodically. A 10.5 cap rate on the project seems low. The cap rate is a function of what kind of risk people feel is in a project. The higher the cap rate, the greater the risk. The higher the cap rate, the lower the value. As an example, if you divide $100,000 by 10.5 you get a different number than if you divide that amount by 11.5. The a cap rate of 10.5 and given the age, the history, the repairs, etc., these are the kinds of elements that go into determining the cap rate. He does not know how the 10.5 figure was arrived at. If he were reviewing this, he would be looking for 11.5 or 12. Just an adjustment in that number moves the figure by $50,000 for every 1/2 percent. You could have a reasonable argument over the cap rate. That is a judgment call. Rents can be verified but the cap rate represents the risk you want to take. If you can bring a different viewpoint to that issue, it may well be worth the investment to do that. This is a valid issue. Ms. Schnabel stated it seems that the cost to appeal as a percentage of the total is about 1�. It is not all that much invest in taking the chance that we may come out better than where we are now. It can go both ways. From what she is hearing, there is a likelihood it could go in our favor. She feeling at a crossroad. She could go in either direction. to is � 80II8IN6 & REDEVELOPMENT AIIT80RITY MTa.. BLPTEMHBR 12, 1996 PAa� 13 Mr. Meyer stated, let's say the commissioners are knowledgeable, did their job as best they saw it, and came up with what they did. This now comes before a jury where some of this terminology and concepts are foreign territory. Why would a jury come up with a different view than that of the commissioners? Mr. Knaak stated the jury would be the one making the decision. It would be the City's responsibility to persuade the jury that the analysis the City has done is the right way. The Commissioners perhaps did not pay attention to certain factors. It is a tougher argument to make and it depends on your analysis and the strength of the position. If the City's original analysis is correct, is it good enough to be put in such a position so an unbiased fact finder would agree? Mr. Commers stated that is why the worst you will have is the same number. The commissioners are guarded and defensive about what they use for comparables. There is the chance that the commissioners were not thorough in their appraisal. Mr. Meyer asked how the facts as presQnted to the commissioners differ from the facts given to a jury. �-•, Mr. Knaak stateol a jury is presumably operating under the same set of facts. The juries are held to the evidence presented to them. The commissioners qo out and find out on their own. We cannot control that. If they are not accurate, they can skew a decision. A commissioner also has more expertise. We would have to basically lay out all the information point by point and educate the jury. That can make it almast easier. Mr. Burns stated he thought from the discussions the one thing that did not come out in the commissioners report was taking apart the other parties appraisal. We were not given the opportunity to attack their appraisal. Mr. Rnaak stated, on the assumption they would offer us that appraisal, he would say yes. We were able to make this argument in the brief. We were not given an opportunity to cross examine. The benefit of a jury is, if you effectively contradict the key witness during cross examination, that can convince the jurors that the party is not providing reliable information. MOTION by Mr. Meyer, seconded by Ms. Schnabel, to authorize the HRA Attorney to proceed with the appeal of the Commissioners determination. � II�N A VOICL VOTEi ALL VOTINt3 AYE, CHAIRPERBON CO1�ER8 DECLARED THL MOTION CARRIED IINANIMODBLY. � HOIIBINa � REDEVELOPMENT AIITHORITY MTa.. BLPTEMBER 12. 1996 PAGE__14 Mr. Knaak stated he would keep the HI2A informed. 9. ACOUIRE 5813 - 2 ll2 STREET 5925 MAIN STREET, AND 5857 MAIN STREET: Ms. Dacy stated these three acquisitions are part of the program. All of the letters sent out in the last three to four months have been in the Hyde Park area. There is more older housing in that area. Of the ten letters sent out, staff received interest from five and three of those five have agreed to acquisition. Two of the three properties are buildable lots. Mr. Commers asked what would happen to the lot which is not a buildable lot. Ms. Dacy stated, as you drive down that street, the lots are very small with small homes. The HRA would have to retain ownership of this lot until we can put it together with another lot to make one buildable parcel. Until we can get adjacent lots put together, we will have to continue to own the property. Mr. Commers asked what was built to either side of 5813 - 2 1/2 �� Street. Ms. Dacy stated those lots contain structures that are very similar in size. Ms. Schnabel asked the width of the lot. Ms. Dacy stated the lots are usually 40 feet wide. The City requires 75 feet for a new home. On Hugo Street, two or three lots were put together there to qet a buildable lot. On this particular block, there are a number of small lots in a row. When staff conducted focus groups, the comment was made that the HRA should take a look at this block. Mr. Commers asked if this was the block being considered for the potential multiple family structures. He thought the neighborhood objected to that. Ms. Dacy stated the multiple family proposal taken to the neighborhood was for the Frank's Used Cars site. Staff did not discuss any additional multiple family housing at this time. Mr. Meyer stated his main concern is the price. In looking at the prices and reading the descriptions, he is appalled by the price proposed to purchase property of this size and in this � condition. He did not know from where the figures come. One property is very small and has only one bedroom in the basement � HOIIBINa & REDEVELOPMENT AIITHORITY MTt3.. BEPTEMBER 12, 1996 PAaE 15 which may be illegal, and we are talking about paying $56,500. He thought this was excessive. Mr. Prairie asked if there were examples of what other similar properties have sold for. Ms. Dacy stated all acquisitions for the same area with buildings of similar square footage have been from $40,000 to $55,000, and the procesa has not changed. Mr. Prairie asked how this compared top private purchases. Ms. Dacy stated for every acquisition an appraisal is done. The appraiser does comparables. Staff's direction has historically been to negotiate within 10�s above or below, and staff has not strayed from that. About half of the price is the land itself. Comparable properties are listed on the appraisal. She reviewed the figures for a number of properties. Mr. Prairie asked if the owners were elderly. Ms. Dacy stated it is a mixture, �'1 properties. 5925 Main Street is two are very similar to all our Street is also a buildable site. and all are owners of the the highest price but the other other acquisitions. 5925 Main Mr. Meyer stated the City assessor is to take comparable actual sales and judge on that basis. He has not heard that we are dealing with actual sales. Ms. Dacy stated she would speak with the appraiser if the HRA so wished. Information regarding the assessed value was included in the agenda packet. Mr. Meyer asked why they did not come into a house such as this and condemn the property. Mr. Casserly stated condemnation would result in $10,000 to $15,000 in relocation expenses along with other activities that will enter into it. If you can negotiate a purchase, you are farther ahead than going through any kind of condemnation. Mr. Meyer asked if they could deny the owner access to a bedroom in the basement. Ms. Dacy stated the City does not have a housing maintenance for single family homes. We do have statutes on hazardous � buildings. While this is not appealing, it is not bad enough qualify under the hazardous building statute. code to /'� ,� HOIIBINa i REDERELOPMENT AIITHORITY MT(�., BLPTEMBER 12. 1996 PAaE 16 Mr. Commers stated the worst they could do is tag them and not let the owner use the basement as a bedroom. Ms. Dacy stated the program is voluntary and the owner allowa the appraiser to walk through the home. The City cannot go into a single family home unless we receive a complaint. Mr. Prairie asked if the home owners had seen the numbers. Ms. Dacy stated they have not. We try to make an offer of 10�s below and negotiate from there. Mr. Meyer stated, if we get the house and eventually make it an 80-foot lot but on either side are more similar small houses, what type of house would be built in this kind of area. Ms. Dacy stated the Remodelling Counselor came up with a list of homes that were in the worst condition. The others are better. These lots would be added to the scattered site inventory and do as we have done already. As part of the scattered site program, we now have three newer homes in similar situations. It is a systematic way to try to get rid of a bad house and put in a new house, and a way of getting others to improve their property. Ms. Dacy stated this is an expensive program. These lots would be put in a tax increment financing area and produce enough income to cover about one-third of the costs. Some costs are also covered through the sale of the lot. Mr. Meyer stated he is concerned that others will wait and end up taking advantage of the I�2A. Ms. Dacy stated this is a valid point, but the law says for every HRA acquisition, staff must prove the homes meet the statutory definition of blight. These properties meet the definition. If some wants to take advantage of the program, they must meet the requirements. We are within the guidelines on these sites and within the budget. Mr. Meyer stated, when he recently added to his home, the inspector required them to add smoke detectors for each of their bedrooms. This has nothing to do with the addition to the home. Those are the powers that the City has to do various things. When an assessor goes into a house, can he/she report conditions such as these? Mr. Commers stated the City is now working on an ordinance that would allow staff to do that. �, �, � HOIIBIN� & REDEVELOPMENT AIITHORITY MTa.. BEPTEMBER 1�. 1996 PAaE 17 Ms. Dacy stated there is the home inapection. When applying for a building permit, the inspector can then go in and enforce the Uniform Building Code. Ar►other issue is havinq the assessor enter a property and see items that may not meet code. Does the assessor have cause to contact the building inspector and state he saw deficiencies at a particular property? We are trying to evaluate that via two ordinances. Mr. Meyer stated he felt these are outrageous prices for property in this condition. He is appalled by what they are paying to get rid of blight. Is there no other way to challenge or renegotiate these prices? Ms. Dacy stated she thought the assessed value was very close. She did not know individual mortgage situations. The owners may not be making money from the acquisition. Staff have negotiated within the HRA guidelines. The only other option is not to pursue the acquisition. Mr. Meyer stated another choice is to try for condemnation. Mr. Burns stated a condemnation must also rely on the appraisal. Ms. Schnabel stated the property at 6431 Jackson was purchased for $40,500 from HUD. These are considerably higher and not on a buildable lot. That house was also larger. While the circumstances are different, it does not seem consistent. Mr. Burns stated homes from HUD are below market value. Mr. Commers stated it is difficult and he was not sure it was worth getting down to value. Perhaps the appraiser could come and explain how he evaluates property to determine the value. We can then ask him specific questions as well. He was not sure they can buy a house for less than $50,000 anywhere. Mr. Meyer stated he would welcome the opportunity to have the appraiser talk with them. He thought they should put a hold on purchasing these three properties until they can talk with the appraiser. We would continue to set a precedent of paying good prices for property that is in poor condition. Ms. Dacy stated the status of these properties are not eligible for the hazardous building statute. There are people who would say this is legitimate affordable housing. These properties do hold some value. If the issue is how we get to that value, it may be time well spent with the appraiser. If condemning, we would use the hazardous building statute. We are doing that for a duplex in the Hyde Park area. �, � �^. HOIIBING & REDEVELOPMENT AIITHORITY MTm.. BLPTEMBLR 12. 1996 PAGiE 18 Mr. Commers stated, since they have done the work, he would iike to go forward on these three properties but talk to the appraiser before they continued. We have not spent a lot. They spent $147,000 on the first three. These will be under budget. They will be getting $20,000 to $25,000 back from the sale of the lot for each property. He thought it was important to know the criteria. It seems that it would be a reasonable approach. They have talked about these things in the past and have authorized acquisitions last year. Mr. Meyer stated he would agree. P�rhaps they could use these properties as an example. He has no objection to going ahead with these properties. He would however like to know more about it. Mr. Commers asked staff if this could be part of the agenda for the next meeting. Ms. Dacy stated she would work to do that. Mr. Meyer asked if there was little difference between the assessed value and the appraised value. Ms. Dacy stated they are very close. The assessed value is within 95� of the market value. OM TION by Ms. Schnabel, seconded by Mr. Prairie, to authorize the Chair and Executive Director to enter into purchase agreements for 5813 - 2 1/2 Street, 5925 Main Street and 5857 Main Street. II�N A VOICL VOTE � ALL VOTINd AYE, CHAIRPER80N CO1rII�iERB DECLARED THE MOTION CARRII:D D�iNIMOIIBLY. INFORMATION ITEMB: 10. MONTHLY HOUSING REPORT: Mr. Commers stated the Monthly Housing Report was provided for their information. Mr. Prairie stated he found the information on the type of repair very interesting. He thought it would be interesting to have the dollar amounts as well. Mr. Commers stated the average cost for the repair may be good information in terms of the appropriateness of the program. HOIIBINa i REDLVELOPMBNT AIITHORITY MTa.. BEPTEMHER 12, iS96 PAGE 19 � 11. CONSIDER RE4UEST FOR STREET LIGHTS ALONG OSBORNE ROAD: Ms. Dacy stated Mr. Schroer and Mr. Fitch are requesting that the HRA install double ball light standards at the Osborne Road and University Avenue intersection. The maintenance on these standards is very low. Other than bulb replacement, the actual electricity for the string along Mississippi Street is less than $1,000 per year for 20 standards. The replacement of the standards, however, is rather expensive. Mr. Commers asked what the costs were on Rice Creek. Ms. Dacy stated she thought the costs were the same. The major cost issue is installation because the standards are $3,000 to $4,000 each. If you have lights on both sides of the street, it will be more expensive. If you were to put lights from the railroad tracks near East River Road and proceed along Osborne to University Avenue or go up the service road to Kennedy Transmission with lights on one side of the road, about 16 standards would be required for a cost of $48,000 to $64,000. Ms. Dacy stated she talked with Mr. Schroer. He wanted the HRA ,� to initiate the cost and the expenses. Ms. Dacy told him there are other items of priority. She asked if the property owners would be willing to be assessed for the project costs. Mr. Schroer stated he would talk to them. He asked if there was a possibility of cost sharing. Mr. Prairie asked what was done along Moore Lake Drive. Ms. Dacy stated the costs there were assessed. Along Mississippi, the HRA helped with the purchase of the standards. Mr. Prairie suggested lighting along Osborne from University to Main Street. That would reduced the cost to about $20,000. Mr. Meyer thought going around Bob's Produce and perhaps around the corner would make more sense than going toward East River Road. What is there that they would want to draw attention to? Ms. Schnabel stated they are getting a bunch of lights here and a bunch of lights there. She did not know the purpose that would serve . Mr. Commers stated they would address it as it comes to the them. Mr. Prairie asked if there was a possibility of cost sharing. '� Ms. Dacy stated she would talk to the owners and see what they can come up with. � $OIIBINd i REDEVELOPMENT AIITHORxTY MTt�.. BEPTEMBER 12, 1996 PA�3E 20 Mr. Burns asked about the other side of the street. He thought they should be prepared to do this on both sides of the street. 12. 1Z�I�7 PROP�SED FAIR HOUSING ORDINANCE: Mr. Commer� asked if most communities have an ordinance like this. Ms. Dacy stated it is typical for central cities such as Minrieapolis and St. Paul to have an ordinance like this. She did not know if suburbs have such ordinance�. The City of Minneapolis has an ordinance such as this and has staff available to enforce the ordinance. Mr. Commers stated it incorporates into the local laws that there can be no discrimination with respect to rental housing practices. Ms. Dacy stated there is a list of real estate including selling and renting. 13. RAO EASEMENT � Mr. Commers stated there are additional expenses to acquire the permanent easement along the RAO property for purposes of installing a sidewalk along Mississippi Street. The County wants the HRA to acquire the easement at a cost of approximately $2,500. Ms. Dacy stated this is for the extension of the sidewalk from University to the River Road. The Mississippi Street pavement was widened and pushed the pavement into the RAO s�.te. The additional easement is needed for the sidewalk to be replaced as a result of the widening. Mr. Commers asked why the County did not acquire the easement. Ms. Dacy stated the County process is longer. They requested the HRA do this so they can continue working on the project and so the work can be completed. If the County paid the costs, it would still be applied to the cost of the project. It is just a timing is�ue. Mr. Commers asked if the County assessed that cost. Ms. Dacy stated it is essentially a municipal project. The County did agree to put in more funds as did the Holly Center. � Mr. Commers asked if the land owner had agreed to $2,500. � HOIIBIN�3 i REDEVELOPMENT AIITSORITY MTG.. BLPTEMHER 12. ].996 PAGB 21 Ms. Dacy stated that is the maximum. We have put forth an offer that is half that. The owner has not agreed to the amount offered, so we are negotiating. O�I TION by Mr. Prairie, seconded by Mr. Meyer, to authorize staff to acquire a permanent easement from RAO Manufacturing and authorize a check to RAO Manufacturing for easement acquisition for not more than $2,500. II�N !l VOICE VOTE� ALL VOTINt� AYE� CSAIRPERBON COMMERB DECLARBD TH$ MOTION CARRIED IINANIMOIIBLY. 14. ACQUISITION REOUEST FOR 19 - 77TH AVENUE N.E.: Mr. Commers stated members received in their agenda packet a letter from Mr. Burns to Mr. Krall regarding acquisition of this property and his statement that we are not interested in the property at this time. 15. OCTOBER MEETING WITH CITY COUNCIL: Mr. Commers stated, while the HI2A is receptive to a meeting with � the City Council, he was not sure that this should be scheduled at this time. Perhaps they should wait until after the election because there may be different people on the Council at that time. He would suggest a joint meeting be scheduled.after the election and to also allow an opportunity for those who are new to get to know what is transpiring. Ms. Dacy stated she would reschedule this meeting at a later date. ADJOD�NT: MOTION by Ms. Schnabel, seconded by Mr. Prairie, to adjourn the meeting. IIPON A VOICE VOTE, ALL VOTIN(� AYE, CBAIRPERBON COMMERB DECLARED THE MOTION CARRILD AND THE BEPTEMHER 12, 1996, HOIIBINd AND REDEVELOPMENT AIITHORITY MEETIN(�i ADJOORNED AT 10:10 P.M. Respectfully submitted, � � �' r� �� t_ � ;� � � � Lavonn Cooper � Recording Secretary �� � � ,--� 8 I G N- I N B H E E T 80IISING AND REDEVEI,OPMENT AIITHORITY MEE'1'ING� September 12, 1996 Name Address/Business ��� ��� C�.��� �.�.�,��-