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HRA 04/10/1997 - 29797�, � CITY OF FRIDLEY HOUSING & REDEVELOPMENT AUTHORITY MEETING APRIL 10, 1997 CALL TO ORDER: Chairperson Commers called the April 10, 1997, Housing and Redevelopment Authority meeting to order at 7:33 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 Rick Pribyl, Finance Director Grant Fernelius, Housing Coordinator Craig Ellestad, Accountant Niles Schulz, Dolphin Development & Construction, Inc. Stephen Linn, The Linn Companies Joe Harding, Dolphin Development & Construction, Inc. APPROVAL OF MARCH 13, 1997, HOUSING AND REDEVELOPMENT AUTHORITY MEETING: MOTION by Ms. Schnabel, seconded by Mr. Meyer, to approve the March 13, 1997, Housing and Redevelopment Authority minutes as written. UPON A VOICE VOTE, ALL VOTING AYE, CEAIRPERSON CONIl�RS DECLARED THE MOTION CARRIED UNANIMOUSI�Y. CONSENT AGENDA• l. RESOLUTION AUTHORIZING JOINT ACCOUNT WITH CENTER FOR ENERGY AND THE ENVIRONMENT TO ADMINISTER HOME IMPROVEMENT LOAN PROGRAM 2. ACQUISITION OF 5800 - 2ND STREET N.E. 3. RESOLUTION APPROVING TIF #15, MINNESOTA COMMERCIAL RAILWAY � 4. REVENUE AND EXPENSES Mr. Ellestad distributed copies of additional expenses needing �� � /'�� HOUSING & REDEVEI�OPN�IJT AUTHORITY MTG., APRIL 10, 1997 PAGE 2 approval as outlined in his memo dated April 10, 1997. Mr. Meyer requested that item #2, Acquisition of 5800 - 2nd Street N.E., be placed on the regular agenda for discussion. MOTION by Ms. Schnabel, seconded by Mr. Meyer, to approve Consent Agenda items #1, #3, and #4 and the additional expenses as outlined in the April 10, 1997, memo from Mr. Ellestad. UPON A VOICE VOTE, ALL VOTING AYE, CIIAIRPERSON COI�RS DECLARED THE MOTION CARRIED UNANIMOUSLY. ACTION ITEMS: 6. RESOLUTION APPROVING TIF #16, STEVE LINN Ms. Dacy stated the subject parcels (5) are located in the northeast corner of Main Street and 57th Avenue. The site is approximately 1.5 acres and is zoned C-2, General Commercial. To the south is the Holiday Plus store, and to the southwest is Home Depot. To the north of the site is the Hyde Park area. To the east of the site is Burger King, an apartment building, and Hardee's at the northwest corner of 57th and University. Mr. Meyer asked what the S-1 zoning was. Ms. Dacy stated S-1 is a special zoning district that was created in the latter part of the 1970's designed for the Hyde Park area. The S-1 indicates that it is the first special district and contains unique requirements that do not exist in other districts in the area. Ms. Dacy stated the request is threefold. The first part is that the developer is asking for tax increment assistance; in other words, to create a tax increment financing (TIF) district to provide the increment to finance the project. Secondly, the redevelopment project area needs to be amended to add the parcels to the redevelopment project area. Third, staff is requesting to include the proposed and existing right-of-way for 57th Avenue in the project area to enable the HRA to make potential TIF expenditures as part of a future reconstruction of 57th Avenue. Ms. Dacy stated the redevelopment project being proposed contains two parts. First, the developer is proposing to acquire and renovate the former Dick's Wheel and Tire building and reuse that as a Goodyear service center. Second, the request is to put together three of the five parcels, take down the single family home, and construct an 8,000 square foot strip mall. The developer is assembling five parcels for the two developments. As � HOUSING � REDEVELOPN�TT AUTHORITY MTG., APRIL 10, 1997 PAGE 3 part of this assembly, the single family home would have to be demolished. There was a duplex on the site for which the HRA passed a resolution identifying that as blight, and that is one of the eligible parcels to be included in this development. Ms. Dacy stated the project costs, according to the developer, is approximately $1.5 million. About $460,000 is to acquire the three parcels, the land costs for the Dick's Wheel and Tire site and to demolish the single family home. The proposed TIF district is a redevelopment district which has a maximum life of 25 years. However, the increment can be used not only to provide assistance but also future increments can be used to repay the HRA for any costs incurred for the 57th Avenue reconstruction. Ms. Dacy stated the assistance package being recommended is a pay- as-you-go note of $175,000 to be paid over 12 years. The developer has originally requested $200,000. Staff is recommending $175,000. The assistance staff is proposing is truly not a subsidy as in an economic development project, but is a redevelopment cost. As mentioned earlier, there is $460,000 eligible acquisition and demolition costs. '� Ms. Dacy stated the HRA has evaluated other commercial projects in the past. Some have been approved and have not been approved. Examples of projects evaluated include the northeast quadrant of University and Mississippi Street; the Cub Foods and Bob's Produce projects are part of a redevelopment district; the office project in the southeast corner of University and Mississippi; and the Moore Lake developments on the east side of Highway 65. An example of a commercial development the HRA chose not to pursue was a strip mall and automotive service center on the east side of Highway 65 proposed by Mr. Al Schrader. However, that was a vacant site to begin with. Ms. Dacy stated, pertaining to 57th Avenue, there has been a lot of work on traffic analysis for that street. The developer and Holiday Plus updated a 1996 Home Depot traffic study. The City was a client with Holiday Plus. Out of that study there is a reconstruction plan that is recommended, and City staff and the City Council are now working on a package to submit to Anoka County to share the costs of that reconstruction. A copy of that plan was included in the agenda packet. The impact to the HRA would be 500 of the street lights and 50% of the landscaping and irrigation costs. These costs have yet to be further determined and refined. Ms. Dacy stated staff's recommendation is to evaluate the � resolution to add the five parcels and the existing and proposed right-of-way of 57th Avenue into the redevelopment project area n HOUSING & REDEVELOPMENT AUTHORITY MTG., APRIL 10, 1997 PAGE 4 and to create a TIF district; and to authorize staff to prepare a development contract with the assistance package outlined. The HRA does not have to take any action regarding the street lights or the landscaping issues. Staff will come back with more details. However, staff is requesting to include the right-of-way in the project area. The developer received approval from the Appeals Commission on variance requests subject to several stipulations. The next step is City Council evaluation and approval of the TIF district at their April 28 meeting. A public hearing will be held on April 14. Ms. Schnabel stated it sounds as though the upgrading of 57th Avenue is a part of this request for assistance. Technically, that is not true, is it? The 57th Avenue upgrade could go forward if this went forward or not. Ms. Dacy stated this was correct. The HRA could pass a separate motion to add the right-of-way to the project area and proceed. Ms. Schnabel asked if the financing of doing the project was tied to this TIF district. ^ Ms. Dacy stated the financing of the reconstruction will come from Anoka County, the City and some type of assessment to the property owners. The part that includes the HRA is the street lighting element and the landscaping element, and staff is proposing the HRA pay 50% of that. If the district is created, the increment could be used in the future to offset the HRA's costs. Mr. Commers stated that would be after the first 12 years. He asked for the total amount that the HRA would pay on this project. Mr. Casserly stated the total, principle and interest, was $306,566. Mr. Commers stated, as he told Mr. Burns, he has great difficulty with this kind of project being a commercial project. It is not a project that we have done similarly in the past. In his opinion, they have never done a project in terms of direct assistance to a developer. The Cub Foods project and the West Moore Lake project was something quite a bit different. That is where he has the difficulty in that it is a direct payment on a commercial type of a project which has not been the HRA's practice. Mr. Casserly stated, in past actions, the HRA has fronted some money to either acquire parcels and incurred some redevelopment expense and sold the property. So, the HRA has fronted these �"'� expenses and incurred them up front. In this type of a hybrid project, what we have going on here is the developer is fronting �� � � HOUSING & REDEVELOPN�NT AUTHORITY MTG., APRIL 10, 1997 PAGE 5 expenses which the HRA could legitimately front and, in addition, the HRA could borrow from reserves, incur the expense and then sell the property. In this instance, the redeveloper is taking the note that the HRA issues and using a revenue stream of security for borrowing money. They are providing the equity that the HRA could have provided, if you so choose. It is really no different arrangement than what you have done. In some respects, if the HRA can do redevelopment projects like this, you have managed to shift the risk to a third party. , Mr. Commers stated there is a direct subsidy in terms of the tax increment. When Mr. Casserly says we shift the risk, we do shift the up front risk but ultimately there is a$300,000 subsidy being made. Mr. Casserly stated it is hard to figure out in these kinds of projects where the subsidy exists. It is hard to know if you are subsidizing the land. If it were clear and could be developed right now and then you write down the land further, generally you would think of that as a subsidy. When there are other expenses involved to get the site ready for development, he thinks of those as redevelopment expenses. It is not often that you are able to have someone absorb redevelopment expenses and then reimburse them. Mr. Commers stated the overall project looks good and he would presume it will do some enhancement. Although, it will enhance the traffic issue and we will have to deal with the City as well in their dealing with the street on 57th Avenue. It is true that the HRA could put the 57th Avenue right-of-way into the project area and still finance some of the costs from that as we would anyway, although we might not get it back from the tax increment. He is hearing that the HRA would get it back. Mr. Casserly stated there is an opportunity to recover the costs. It is toward the end of the district because the early years goes to provide early assistance. Those are clearly eligible expenses that are charged to this district. Mr. Linn stated he has been working with staff and Mr. Casserly for several months. He actually got involved in the project last fall. He is affiliated with Holiday Company as a Holiday station franchisee so he has contacts with individuals in the company. They contacted him about a property they had in Fridley, namely the former Dick's Wheel & Tire, and they asked him to take a look at it. They knew he was in the automotive service business. Mr. Linn also operates a number of Amoco and Conoco facilities and has a number of Goodyear tire dealerships. He came out to look at the property. He is not a developer in the true sense. They are � �"'i HOUSING & REDEVELOPMENT AUTHORITY MTG., APRIL 10, 1997 PAGE 6 developing and redeveloping, and hope to redevelop this site. The TIF district is to enhance the project. It is not intended as a subsidy to them. When he looked at the project, he was interested in the area due to the traffic counts, the density and what they thought they could do with a Goodyear store there. But the entire area around it was blighted. At that time, there was a boarded up, vacant house and the house that remains is a rental house that he felt did not fit with the area. Mr. Linn stated the automotive service center has obviously been neglected and is in desperate need of renovation. To do so creates a lot of additional costs that you would not have if building from the ground up. If he had bare land, he would not have the costs that he would have.into redevelopment of that site. They need to brick up one set of garage doors because of inadequate storage facilities. The windows are not up to standards. They need to be removed and disposed. The roof on the building needs to be replaced. It is more difficult to remove the existing roof and insulation underneath and put another one on than it is just to put in a new building. Unfortunately, there is a building there that does have a sound structure as far as exterior walls but it does create a number of costs. The economics of doing the project do not work without TIF financing. As Mr. Casserly said, the intent is that these funds and the commitment on the TIF would be used for additional financing. It is not funds that they would ever actually see, but the funds would be invested directly into the facility through means of financing. Mr. Commers asked if the cost of the building was $233,000. Mr. Casserly stated Mr. Linn tried to breakdown the costs. They tried to break out the building costs and separate that from the land costs. $233,000 is the cost of the building and about a third of a million dollars is needed to do all of the renovations and improvements. Mr. Commers asked how long the Dick's Wheel and Tire building has been vacant. Ms. Dacy stated the building had been vacant since August, 1996. Mr. Commers stated it sounds as if the building was substandard and could be condemned. Ms. Dacy stated she had been inside the store when it was operational and is not surprised by the amount of work that needs /"'� to be done. As part of the site plan, Mr. Linn is also proposing to redo the parking lot, curbing, fencing, etc. � HOUSING & REDEVELOPMENT AUTHORITY MTG., APRIL 10, 1997 PAGE 7 Mr. Linn stated, for example, the bathrooms that exist do not meet today's City codes or ADA standards. Their intent is redo the bathrooms. They will need to remove the bathroom walls to make them large enough for wheelchair access. The plumbing is substandard. The electrical is substandard. The parking lot lighting is substandard and does not meet expectations in any city today. The parking lot will be changed. It is less expensive to just put down a blacktop parking lot than it is to remove one that already exists and put in another one. Mr. Linn stated, as far as the building being condemned, the components inside the building do meet justification for condemning (plumbing, electrical, HVC, etc.); however, the structure itself is fine and meets or even exceeds today's architectural standards. It does not make sense to demolish the building. Mr. Linn provided drawings of the proposed buildings. To the west would be an 8,000 square foot retail center or strip mall. They have been working with staff to create a beautiful design that would have arched roofs to match the pillars on the side, awnings � over the windows, creative lighting, and use colored block to bring in some color, all of which add expense. The automotive service center currently has six garage doors across the front of the building. Their intent is to replace all the doors with those that have some glass. The last door would become a storage area. There are six doors in the back as well. A number have been boarded up and not used for a few years. Their intent is to brick the last door and use that area for storage with access from one side. They would add a new trim piece along the top. The colors in the door, the trim and beneath the glass would all match. All of the stuff currently on the building would have to be removed. The brick and block would have to be acid washed and cleaned as well as a great deal of repair to what is there now. It will really dress up the building. Currently, the landscape has never been taken care of. With the redevelopment of the parking lot and redevelopment of the road, it would require all that anyway. The fence along the back is not salvageable. They will put in a new fence that is more decorative which was a recommendation of staff and the result of a survey from the neighborhood. Mr. Linn showed drawings of the parking lot layout. Currently, the parking for the service center lines up with the proposed retail center. Along the east is brush and landscaping that has been maintained and is between the service center lot and Burger King property. They are shifting the parking to the west which requires new blacktop and allows for a large enough retail center. �"'� Although it is a two-part project, this is really one project. It would be impossible for them to develop a retail center because of � HOUSING � REDEVELOPI�TT AUTHORITY MTG., APRIL 10, 1997 PAGE 8 the parking and lack of space. He personally would not have been interested in renovating the service center with the condition of the surrounding property. That is how he got involved in both. This is not the first strip center they have done. Mr. Commers asked if, by keeping together, they could use parking interchangeably between the two. Ms. Dacy stated this was correct. Mr. Commers asked if this needed to remain as single parcels or if they could be divided into two parcels. Ms. Dacy stated there is enough parking on the both sites so they could be sold as separate parcels. If the strip mall was busy for some part of the day, people could park at the other site. It is set up so that they could be conveyed as two separate parcels. Mr. Linn stated the property line runs between the two sites. There would cross easements between the parcels. The company would actually be the owner and operator of the automotive service �...1 center site and the landlord of the strip mall. Mr. Commers stated the first action is to adopt a resolution modifying the project area to include these parcels into the current project area and also to include the right-of-way on 57th Avenue. MOTION by Mr. Meyer, seconded by Ms. Schnabel, to approve a resolution to include expansion of the project area and to create tax increment district #15. Mr. Meyer asked if Mr. Commers had any comments for them on this motion. Mr. Commers stated he felt everyone had to deal with the issue however they think about it. He has no objection to this motion. He thought the bigger issue is whether or not it is appropriate for the HRA to get into this kind of financing on this kind of a project. He has great difficulty supporting the actual project. As far as creating the TIF district, the HRA obviously will have to do something with the street and traffic and he thought that was appropriate. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON CONIl�RS DECLARED THE MOTION C.,ATtRIED UNANIMOUSLY . �"'\ Mr. Commers stated the next motion is to provide for a development contract for $175,000 for tax increment assistance via pay-as-you- �..1 HOUSING & REDEVELOPMENT AUTHORITY MTG., APRIL 10, 1997 PAGE 9 go financing. MOTION by Mr. Meyer, seconded by Mr. Prairie, to approve a development contract for $175,000 via the tax increment assistance with a pay-as-you-go note. Mr. Commers stated he thought it was straight forward in that this is an economic development district. We are trying to make into a redevelopment district. The issue is whether or not it is appropriate to do the pay-as-you-go type of financing on what he would characterize as a commercial transaction. He did not think they had done those types of things. He did not think the HRA did those kinds of projects and he does not want to open themselves up to having commercial developers coming in with those types of requests. This is his personal opinion. Ms. Schnabel stated she did not see this as redevelopment in a sense of an existing property that needs to be redeveloped to bring it up to a high standard. Mr. Commers stated this is certainly redevelopment under the statutes. Everyone seems to be saying Holiday has a building that �� is not very good, that something is going to have to be done to it, and it is going to have to be redeveloped in order to be put into use of some kind. He thought that is what it is, and that is why they came to Mr. Linn to see if he was interested in redevelopment. In its current state, it must be not economically feasible to use. He presumes Holiday does not want to put any money into it to bring it up to standard. Mr. Linn stated he has been in the automotive service business for most of his life. He thought they could get someone in there and operate it much like Dick's Tire did. There are people who are willing to operate in a very run down type of setting. He did not think that particular type of person would be able to afford to buy, but may be able to lease it as Dick's Tire leased from Holiday Companies. He thought what the HRA needed to ask themselves is if this is what is best for the City or if that is what you want. There could be a use in there but the use certainly without some sort of TIF financing or some sort of creative financing would not be able to have the type of project that is being proposed. That is his opinion and his belief. Mr. Commers stated he thought Mr. Linn's comments were accurate. He did not think someone would go in and put in money to upgrade it to the same level. Conversely, he did not see how anyone would be allowed to operate in that building in the condition it is in. �—� If the bathrooms do not meet ADA standards, there is no way they could get an occupancy certificate. HOUSING & REDEVELOPMENT AUTSORITY MTG., APRIL 10, 1997 PAGE 10 Mr. Prairie stated they could do the minimum that is required. Ms. Dacy stated someone could re-occupy the building as long as they do nothing to the building. Mr. Linn stated that was his experience. A person is required to come up to ADA or OSHA standards or any other standards only if there is a need to pull a building permit. Ms. Dacy stated the building also needs to be brought up to standard if the use is different than for what it is built. Another tire operation could go in there if they made no changes. UPON A VOICE VOTE, WITH MS. SCffi�TABEL AND NIlZ. PRAIRIE VOTING AYE, AND Ngt. MEYER AND NIlZ. CONIl�RS VOTING NAY, CBAIRPERSON CO1�RS DECLARED THE MOTION FAILED FOR LACR OF A NIl�iJORITY. Mr. Commers stated the HRA did have one member missing from the meeting which may have made a difference in terms of the vote. He knows Mr. Linn has put a lot into it and looks like a very nice project. � Mr. Linn asked when he might be able to represent the proposal at a time when all members of the HRA are present. Mr. Commers stated he did not know of anything that would prevent Mr. Linn from doing so. Ms. Dacy stated there is no ordinance requirement. The next meeting of the HRA is in May and the HRA could entertain another request in the amount of assistance. Mr. Prairie asked if there was any area for compromise or for a lesser amount. Mr. Commers stated he did not think it is an issue of money. It is a good idea and the project is a good project. Perhaps the compromise might come from Holiday to see if they might somehow contribute so the developer might still be able to do it. 7. ACQUI5ITION OF 5800 - 2ND STREET N.E. Mr. Fernelius stated this is a rather routine acquisition under the scattered site housing replacement program. The property is located in the Hyde Park neighborhood which is an area we have been focusing on. The property is a two-bedroom house that was constructed in 1948 with approximately 744 square feet. It is ,�"'� sited on a lot which is considered buildable under current code, so that is rather attractive. � HOUSING & REDEVELOPL�TT AUTHORITY MTG., APRIL 10, 1997 PAGE 11 Mr. Fernelius showed pictures of the property taken last summer when the property was appraised. The pictures of the outside are not indicative of the actual condition of the property. The home does not have a standard basement. The basement has a dirt floor. A portion of the interior basement wall is actually missing and is shored up with some large wood planking. The property has other numerous code-type violations - plumbing, electrical, chimney venting, etc. The interior condition is in fair to poor condition. There is clearly signs of water damage. The owner has not been able to keep the property up. This is a deteriorated property which meets the definition of the program which requires that the cost to improve the property up to today's codes for a new structure at a minimum exceeds 15% of the cost of the new structure. The property is appraised at $57,200. The owner has been trying to sell it, but due to its condition has had difficulty in doing so. The owner has agreed to sell the property for $54,900. � Mr. Meyer stated his point in wanting to discuss this is the fact that this property by its description is about as lousy and poor a property as we perhaps have in Fridley. He cannot believe that ^ people are living in the conditions sited here, and we are talking about mid-$50,000's to buy this property, then demolish, get it ready for resale and get a few thousand dollars for the lot. He thought this property would be an ideal point to try to have it declared as hazardous property and condemn it. He thought the time has come, instead of shelling out unconscionable amounts of money for this property, to see what else could be done to have it declared a hazardous dwelling and get rid of it. He thought they should ask staff and the attorney to explore what steps there might be and what their possibilities might be to get rid of blight without paying the kind of money that is being asked. He knows the appraiser was there and knows the assessed valuation, and he cannot understand either of those two figures coming anywhere near that considering the description of the property. He did not know how this can continue and people be allowed to live in it. This home has a number of major items and we are talking about spending nearly $55,000 for it. He thought something else should be tried or explored before going ahead. Ms. Dacy stated there are a couple of issues. First, from a legal standpoint, the City does not have a housing maintenance code that would enable staff to go inside homes and make interior inspections. The program is under the scattered site program which is voluntary. This is not a program to condemn property. If an owner does not wish to negotiate, then they move on down the list. If they were to go to condemnation, she thought it would ^ have some policy repercussions that staff would need to look at. We have discussed this in the past including Mr. Meyer's concerns �., HOUSING & REDEVELOPMENT AUTSORITY MTG., APRIL 10, 1997 PAGE 12 about the amount paid for the properties. That is why staff had the appraiser come in and talk with the HRA about market valuations. Home sales in this area for similar types of structures are similar in value. She thought they would have legal and policy issues if they were to legally condemn. Mr. Meyer stated he thought these were valid points. However, he thought this was something legal staff explore - the hazardous building ordinances and hazardous buildings in the state building code. There must be some method by which a dangerous house can be abated. This property has exposed electrical, plumbing which could perhaps contaminate a water system, fire hazards, a dirt floor in the basement, joists that are spliced together, etc. He drove by the house and it looks like it has a sagging roof line also. The pictures are probably too generous. Somewhere along the line, he thought they should make a hard effort to avoid paying this kind of money for a pile of junk. He cannot believe that such a thing exists in the City. Mr. Commers stated he thought it creates a special problem. That is an isolated deal. As a general overall issue, he is surprised that we cannot go into someone's house. �, Mr. Meyer stated he thought they possibly could, but there must be some way under the public safety that the City can go into a house. He would like to make a motion that the HRA direct staff and their legal staff to explore the possibility of condemnation proceedings against this house and others in similar situations and report back to us as to what our courses of action might be. Mr. Commers stated they can request the City to do something about it. If our hands are tied legally, there must be some reasonable type of ordinance that would allow the City to do an inspection. If we do not have it in our code, perhaps there is a way to remedy or correct it. Mr. Burns stated staff went into the home of 57th because it was a rental unit. The City has an inspection program for rentals. The City does not have a single family maintenance code that allows the City to inspect the interior. All the inspections done are based on what can be observed from the curb. Mr. Meyer stated the Minnesota State Building Code is the governing item and, as far as he knows, the building inspector has authority to go inside any structure and make inspections. There are all sorts of nuances to that, but he thought the time has come for all of us to understand the legal ramifications and the �--� possibilities of doing something other than spending this kind of money for this kind of junk. ,� HOUSING & REDEVELOPMENT AUTHORITY MTG., APRIL 10, 1997 PAGE 13 Mr. Burns stated staff would investigate the legal aspects but staff were not prepared to respond at this time. Staff has gone through the nuisance abatement process at other locations where they thought they had the ability. Perhaps we do not know the full limits of their ability, but staff does talk to the attorneys about these issues. Mr. Meyer stated he agreed, but he thought this was a flagrant case. He thought they should truly wring out their position not only on this property but on others to come so we know where we can go and where we cannot. Mr. Burns stated, as far as the appraisals, staff has demonstrated in that past that the appraisals are comparable with the sales in the area. Sometimes it is unbelievable, but it is also hard to argue with the numbers. Mr. Meyer stated he did not think there was a comparable house in that condition in this neighborhood that was sold for anything near what is being discussed. � Mr. Burns stated the appraiser was at a meeting and showed ' comparables. He hates to have it appear that the City is giving away the taxpayers money. He thought they were doing very honest appraisals and basing their decisions on those appraisals. Mr. Meyer stated he concurred, but he thought the time had come to see if there is another route beyond appraisals or tax assessments to establish the true value of a house that is a pile of junk. How can we say that there is a similar house sold down the block with similar defects that no right-thinking person would put up with. Mr. Burns stated he thought the appraisal process is what the law provides for whether through condemnation or through a voluntary sale. He did not know of another route. If there is, staff will investigate it. Mr. Meyer stated his proposed motion speaks to the idea that, despite the appraisal route and despite the tax assessor's route, there may be another way to get rid of this kind of property without paying this kind of money. Mr. Burns stated staff has been evaluating the house. It is a very dramatic change in policy and takes some time. Mr. Meyer stated the time is here now for this house to find out � what our options are to fight this kind of structure in the City. i��1 � /� HOUSING & REDEVELOPMENT AUTHORITY MTG., APRIL 10, 1997 PAGE 14 Ms. Dacy stated staff would be happy to investigate that. On those communities that do have a housing maintenance code, the policy is not to include interior standards because the interior is considered a person's "castle" in the eyes of the law. This is a slippery area which will be thoroughly investigated. When you start going inside homes and doing condemnations, it will be put to a higher test. Mr. Meyer stated that is what he is asking. He thought it worth it to put this to the test. Mr. Commers asked what Mr. Meyer proposed for this specific property. Staff has been negotiating with the owner. He thought that creates a problem. He did not think they could negotiate with the owner, obtain information and use it in a manner different than what was anticipated. Mr. Meyer stated this bothers him because in the other world you do hear of gaining evidence in ways considered not proper. That bothers him as well, but he would like to hear it from the legal staff in a formal opinion. There may be ways in which a precedent has been established. They may point out that this issue notwithstanding there is nothing we can do about it. He thought it was worth it for now and for in the future. Mr. Commers stated he thought for the future it would be good to get that information. He was not sure they would be in a position to do something on this specific property. That is the issue to him tonight. He was inclined to think the HRA should approve this request but instruct staff before we do any more we want an answer. We may create problems for ourselves otherwise on this specific one. He would be concerned about that. Mr. Meyer stated he did not understand, using this as a point of reference, after they get advise and research the matter and find this is something we should not do then bypass this and apply it to other projects. Mr. Prairie asked what would happen if the HRA tabled this item for one month. That would allow time to get the options. This question may then be academic. Ms. Schnabel asked if the intent was to clear the property including the garage. Mr. Fernelius stated the entire site would be cleared and redeveloped. � HOUSING & REDEVELOPMENT AUTHORITY MTG., APRIL 10, 1997 PAGE 15 Ms. Schnabel stated they face the additional cost of demolition in the future. Mr. Fernelius stated yes. Mr. Commers stated the HRA would get the land sale money back. He asked staff the typical sale price for lots in this area. Mr. Fernelius stated the other properties they have sold in the Hyde Park neighborhood have averaged between $5,000 and $10,000. Mr. Burns asked, in terms of timing, if tabling this item would have an impact on construction this year Mr. Fernelius stated tabling should not set us back. The discussion would be very timely because staff is going to start looking at additional properties throughout the City so staff should have a clear understanding of what the HRA wants staff to do. Mr. Casserly stated he thought this community was in a long line � of communities trying to resolve this very issue. The City of Minneapolis spent years and millions to achieve alternatives. They are not simple. If you can voluntarily negotiate acquisitions and can do it within the limitations that we work with and you can do them a few at a time over a long period, you will probably have the most cost effective program a municipality can put together. If you move more toward enforcement, you will have costs escalate to achieve the same result. The last thing you will want to do is be involved in condemnation particularly if you have residents in these locations. His observations from his past experience is that it is very expensive. This may seem expensive and unreasonable but, if you start taking a difference course, you will find this is not unreasonable at all. MOTION by Mr. Prairie, seconded by Mr. Meyer, to table consideration of the acquisition of 5800 - 2nd Street N.E. until the May meeting. UPON A VOICE VOTE, ALL VOTING AYE, CIIAIRPERSON CONIl�RS DECI�ARED T� MOTION CARRIED UNANIMOUSLY. INFORI�iTION ITEMS • 8. PREVAILING WAGE REQUIREMENT Mr. Commers stated there is some question as to whether or not the � prevailing wage ordinance adopted by the City is binding or applicable to the HRA. The one thing for discussion is that it � HOUSING & REDEVELOPMENT AUTHORITY MTG., APRIL 10, 1997 PAGE 16 does include the Noah's Ark senior housing building. Is it correct that it does not have a bearing on this project? Mr. Burns stated it apparently does not. When he knew the prevailing wage ordinance was coming up, he asked Ms. Dacy to make some contacts. He asked how many projects would be completed and have a signed development agreement prior to the effective date. Noah's Ark is approved, but not signed. Ms. Dacy subsequently made some contacts with the owners of the various projects knowing the ordinance was coming. That is how the language was placed in the agreement. The owners are willing to accept this. Mr. Commers stated there is some opportunity to discuss the matter with the City Council if it is necessary. We know what happened with Rottlund and that it made a significant difference in whether the project moved forward or not. He did not know if this was an impediment. He wants everyone to be paid a fair wage but we are undertaking to do some housing development that economically does not carry itself. If we are going to be successful in doing housing redevelopment, any extra costs will come from the HRA. � Mr. Prairie stated he was sure there were some developers who will avoid the cities that have this ordinance and go to those that do not to avoid whatever problems they perceive are there. Mr. Meyer stated it is ironic that the Rottlund development, which is private, is exempt where Noah's Ark for subsidized housing will be wracked with a higher wage. Mr. Commers stated he has not had a chance to review it. He was not sure there was any language to be suggested that might make it a little more flexible. Mr. Burns stated the prevailing wage ordinance goes to the City Council for the second reading on Monday unless you want to ask for consideration to delay the second reading. He understood from talking with the sponsor that the intent is not to stop typical housing redevelopment projects the HRA has been doing. The language exempts 1-4 family units including townhouses and a lot of the rehab projects that are under $25,000. Mr. Commers stated he was not sure he would not affect the Rottlund project. the individual buildings is 4 units or exempt? Mr. Burns stated that was correct. /'� understood when you say it Is that because each of less so therefore they are � HOUSING & REDEVELOPMENT AUTHORITY MTG., APRIL 10, 1997 PAGE 17 Ms. Schnabel stated, from what she can see, this is not an actual ordinance but rather a City policy. Mr. Burns stated it is in ordinance form. Mr. Meyer asked if staff had talked to Noah's Ark to see what would happen to the project. Ms. Dacy stated Mr. Casserly talked to Noah's Ark and she talked to Minnesota Railway and Mr. Linn. It probably will not be a problem. Mr. Casserly stated most of these are pretty large projects. The Noah's Ark project under construction in Spring Lake Park would comply with the requirement. Mr. Meyer asked why they are not objecting. He would assume they are paying prevailing wages. Ms. Dacy stated they will conform with the requirement of the contract. It is not the same kind of construction company we ran � into with the Rottlund issue. The larger construction companies that do the larger projects tend to have wages that meet the prevailing wage guidelines. The owners go through a bid process and evaluate that. Mr. Commers asked if this would have any influence with MEPC. Ms. Dacy stated yes. Again, it is a larger construction firm that will construct that type of project and, typically, their wages are in line with the state guidelines. This was in place for other projects. Mr. Commers stated he thought staff should inquire with MEPC. Mr. Prairie asked if it was conceivable that we could have someone come with their own builder. Mr. Commers stated he thought MEPC would do the construction and maintain control of the buildings. They want to be the owner and the manager. Mr. Prairie stated he did not think MEPC would do the construction but rather would be the construction manager. Mr. Casserly stated there is a distinction between Rottlund and others. In a number these, you are providing a level of � assistance. In the Rottlund project, they believed that they were paying fair market value so any additional cost above fair market � 80USING & REDEVELOPN�TT AUTSORITY MTG., APRIL 10, 1997 PAGE 18 value they did not perceive as getting a subsidy. Mr. Commers agreed that Rottlund did take that position. Mr. Meyer asked if the HRA should advise the City Council to hold on this in order to investigate the matter more fully. Mr. Prairie stated it would be nice to know. Mr. Commers stated he did not want to get out of proportion if there is no issue but then again it could be a big thing. He is concerned as to what kind of assistance the HRA would have to give for the project. It is going to be an expensive proposition given the public improvements and hopefully it will not be more that what we have figured. Mr. Burns stated, in his opinion, the prevailing wage as it relates to MEPC is a non-issue. He understands these large jobs pay the prevailing wage anyway and it will not be a problem for those kinds of projects. Maybe the larger concern you might have is a concern of the impact of the prevailing wage on the housing redeveloping programs. If you needed more time, it might be the ��� time you would take to find the wording that might be more satisfactory to you in protecting your housing redevelopment programs. As he mentioned, it is not the sponsor's intent to apply this language to townhomes. However, somewhere down the road, someone else might read this and interpret that this does indeed apply. That may be the type of issue to address. Mr. Commers stated the more they talk about it the more points are made. His sense is that perhaps we should ask the City Council to wait. Mr. Prairie asked how this would affect a HUD home. Mr. Fernelius stated that would be exempt because it is a single family home. Mr. Burns stated he did not think the sponsor had any intent to impede the housing program but, if you have some suggestions for changing the language in a manner that would be more suitable for the housing redevelopment program, he is willing to listen. Mr. Meyer stated what about the scenario where the ordinance passes and a non-union contractor starts construction with lower wages. Then a union comes in and sues all concerned for not following the ordinance. The State of Minnesota establishes that � for the various counties and for various trades, and he did not know how they are determined. Is there the possibility of a �...� HOUSING & REDEVELOPMENT AUTHORITY MTG., APRIL 10, 1997 PAGE 19 lawsuit between a union and non-union contractor? Mr. Commers stated he did not see a lawsuit between them. It would be between the HRA and the developer. If a developer breaches a contract, it would be the HRA's obligation to try to enforce the contract. At this point, they were talking about penalties. He did not know what the penalty would be. A civil penalty does not seem to be remedied. It seems that they are talking about a penalty to liquidate damages which would be 50 of the contract amount. That does not look like that is in the ordinance language itself. Mr. Burns stated there is enforcement language that the City Council has asked him and the City Attorney to prepare for the meeting. The language is similar to the prevailing wage enforcement language that is in the Anoka County highway department contract. Mr. Prairie stated he did not think a company will come in and not pay the prevailing wage. He thought the problem will be those companies who do not come in because they do not want to pay it. ^ Mr. Meyer stated, if he was a union person and wanted to hit at the non-union tradesmen competing with his union job, he would look all over to hit the lower paying people in the nose. This would be a way to do it. We might not care too much, but someone in this circumstance could very well care. This is going on constantly between the two groups. Somewhere along the line, we have had to reverse this - once for Rottlund. It would be too bad to go back to the City Council to reverse this again because someone has a problem with it. Mr. Commers stated he is inclined to think we should do as Mr. Burns suggested to carry this over to the next meeting to give Ms. Dacy an opportunity to verify it is not a problem with MEPC and discuss it to clarify the language so that the expressed intent is clear. Ms. Schnabel stated her guess is that Mr. Billings and the members of the City Council have thought a lot of these things out already, and her feeling is that this has been developed over time with many issues discussed. If we have a concern and we have been asked to express our concerns, she thought it was legitimate to ask to wait and discuss it with MEPC. If not, she did not think there would be any other objections. Mr. Commers stated the only other one is an indirect one. There � are developers that would stay away because of it. � 0 HOUSING & REDEVELOPMENT AUTHORITY MTG., APRIL 10, 1997 PAGE 20 Ms. Schnabel stated she did thought this was a pretty generalized ordinance from what Mr. Casserly has indicated and following HUD guidelines and the Anoka County highway department language. It seems to be fairly common language that oth.ers are using. She did not see a problem. Mr. Prairie asked if a lot of suburbs have this. Mr. Casserly stated Minneapolis and St. Paul have a prevailing wage ordinance. He did not come across it in the other communities in which they work. Mr. Commers asked if this was common on highway projects. Mr. Prairie stated yes. As you get further out, then it is different. Mr. Commers asked if without a formal motion that staff could talk to the City Council that it is the HRA's consensus to have more time in order to look into a couple of our projects and make sure to clarify the language. Mr. Burns stated he would talk to the sponsor and see what reaction there is. Ms. Dacy stated she would talk to MEPC. 9. UPDATE ON MEPC Ms. Dacy stated MEPC has been working with two potential users and has submitted proposals this week to one of the users. Staff is hoping to get preliminary feedback next week. There may be a third party interested so they are beginning to investigate that as well. Interest in the site is increasing. 10. ANOKA COUNTY HRA CDBG BLOCK GRANTS Ms. Dacy stated the City of Fridley hired CEE to administer the CDBG program and the City hired them at a lower cost, and that has had some impact on the County's program. Mr. Yantos called Ms. Dacy last week. Staff will be meeting with the County to identify the impact and what the next steps will be. Mr. Commers stated he did not remember this being an issue when discussing switching to CEE. Ms. Dacy stated ACCAP conveyed to Ms. Dacy that they were upset � about the process. ACCAP felt we should have combined the grant and the loan program. Staff did not know ACCAP could administrate � n � HOUSING & REDEVELOPMENT AUT80RITY MTG., APRIL 10, 1997 PAGE 21 the grant and the loan program. 11. UPDATE ON 1997 HOME REMODELING FAIR Mr. Fernelius stated the second annual Home Remodeling Fair was held April 5. Approximately 1200 to 1500 people attended the event. They had steady traffic throughout the day so the vendors were very busy. The event was co-sponsored with the HRA, Home Depot and the Southern Anoka County Chamber of Commerce. About 60 contractors were in attendance. The contractors provided positive feedback. There seems to be a lot of support for what we are doing, and the residents he talked to also seems to like what they were doing. They will try to plan something for next year as well. Mr. Commers stated he was happy to hear it was successful. One suggestion he would make is that the mailing came out late. It came only one or two days before the fair. A contractor called him and left a message that he would have liked to participate but he did not know about it. Mr. Fernelius stated the planning process started in January. Mr. Fernelius stated CEE sent out 60 applications the week following the fair so there was much interest in the programs as well. Mr. Meyer asked if there was a mix of contractors. Mr. Fernelius stated they did have a variety including general remodeling contractors and some specialty trades including plumbing, heating, electrical, etc. as well as garden and outdoor vendors. 12. FRIDLEY LOAN PROGRAM SUMMARY Mr. Commers stated information was included in the agenda packet. He presumed the information was year-to-date. Considering Hyde Park is one of the focus and target areas, we are still percentage-wise not doing well. Mr. Fernelius stated that report does not show the latest activity. This week there were 5 additional closings and of that number two or three were Hyde Park. We are seeing some of the volume pick up. In the next few weeks, they will try to send out another newsletter into the Hyde Park area to promote the program. � HOUSING & REDEVELOPMENT AUTHORITY MTG., APRIL 10, 1997 PAGE 22 13. FIRST TIME HOME BUYERS PROGRAM Mr. Commers stated information was included in the agenda packet regarding MHFA's treatment of us. Staff will work something out through Anoka County. 14. STREET LIGHTS Mr. Commers asked the status of the request by Bob Schroer for street lights. Ms. Dacy stated the survey went out on Wednesday. Staff is waiting for a response. Staff may have this item on the May agenda. If not, they will be sure to have something in June. Mr. Prairie asked what spacing between the lights is being proposed. Ms. Dacy stated the spacing is 150 feet because of cost considerations. Staff have also narrowed the project area. ^ 15. CHRISTENSON CROSSING Mr. Commers asked for an update or information on the number of units completed and the number of units sold at Rottlund's project. Ms. Dacy stated 13 gable homes have been sold; however, there are approximately 50 units of the gable homes that are under construction. Ten of the village homes or the one-story homes have been sold. Additional village homes will be constructed. Mr. Commers asked if Rottlund had given them a feeling as to how they think the project is going. Ms. Dacy stated the sale of the gable homes started strong and interest remains strong. Interest in the village homes is not as strong. As a result, they have created one additional floor plan in order to respond to the market information. Since that time, they have closed on more. They hope sales will improve during the spring. One of the floor plans received a Reggie Award. Mr. Prairie asked if it was their target date to have all the units sold by the end of this year. Ms. Dacy stated they wanted to sell 50o in the first year and the remaining in the second year. They will have a total of 118 ^ units. � HOUSING & REDEVELOPMENT AUTHORITY MTG., APRIL 10, 1997 PAGE 23 16. CITIZENS SURVEY Mr. Burns stated he has started working on the 1997 citizens survey this year. One of the things they are planning to do this year is to solicit the HRA's opinion for the relevant sections of the survey. They are making copies of the HRA redevelopment portions of the 1995 survey and asking if the HRA has additions or input on what you want to ask the citizens. 17. MHFA Ms. Dacy stated, as a follow-up on a previous item, staff has contacted the legislators about their request for funding from MHFA for the revolving loan proqram. Mr. Casserly and his associate have been down at the legislature and have drafted language for a bill. They do not expect anything to be adopted this year unless they are able to attach it to an existing bill. The intent is to initiate discussion with MHFA to see if they can create or modify some of their programs to model Fridley's approach. ^ ADJOURI�NT : MOTION by Ms. S�hnabel, seconded by Mr. Meyer, to adjourn the meeting. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON CONIl�RS DECLARED THE MOTION CARRIED AND T8E APRIL 10, 1997, HOUSING AND REDEVELOPMENT AUTHORITY MEETING ADJOURNED AT 9:33 P.M. Respectfully submitted, �a.�}�� � � l �v Lavonn Cooper Recording Secretary ��