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HRA 01/07/1999 - 00002655CITY OF FRIDLEY HOUSING & REDEVELOPMENT AUTHORITY MEETING JAN UARY 7, 1999 CALL TO ORDER: Chairperson Commers called the January 7, 1999, Housing and Redevelopment Authority meeting to order at 7:30 p.m. ROLL CALL: Members Present: Larry Commers, Virginia Schnabel, Pat Gabel, John Meyer, Jim McFarland Others Present: Barb Dacy, Community Development Director Grant Fernelius, Housing Coordinator William Burns, City Manager Jim Casserly, Financial Consultant AI Folie, Assistant Finance Director APPROVAL OF DECEMBER 3, 1998, HOUSING AND REDEVELOPMENT AUTHORITY MEETING MINUTES: MOTION by Ms. Gabel, seconded by Ms. Schnabel, to approve the December 3, 1998, Housing and Redevelopment Authority minutes as writen. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. CONSENT AGENDA: 1. CONSIDER CHANGE TO LOAN SUBORDINATION POLICY. 2. AMEND PROFESSIONAL SERAVICE AGREEMENT FOR REGIONAL REMODELING HANDBOOK, GERLOFF RESIDENTIAL ARCHITECTS, INC. 3. CLAIMS AND EXPENSES. Ms. Schnabel noted that a list of additional expenses had been distributed for consideration. MOTION by Ms. Schnabel, seconded by Mr. Mc Farland, to approve the Consent Agenda as presented, including the additional expenses noted. HOUSING & REDEVELOPMENT AUTHORITY MEETING. JAN. 7, 1999 PAGE 2 UPON A VOICE VOTE, ALL MEMBERS VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. ACTION ITEMS: 4. CONSIDER TIF ASSISTANCE FOR MURPHY WAREHOUSE & ONAN. Ms. Barb Dacy, Community Development Director, explained that Murphy Warehouse Company and Cummins Onan are requesting Tax Increment Funding assistance for extraordinary site and public improvements costs in the amount of approximately $1.2 million. In addition, there is another request for $956,000 for pollution-related clean-up costs that the petitioner has requested from the State and Metropolitan Council. Without approval of these funds from the State and Metro Council, the petitioner would be asking for Tax Increment Assistance in the amount of approximately $2.1 million. Ms. Dacy stated that Murphy Warehouse and Cummins Onan are proposing to construct a 400,000 square foot state-of-the-art supplier warehouse and distribution facility on a 26-acre site, south of the existing Onan facility. Onan will lease 2/3 of the building for their part suppliers. The total project cost of building and related site improvements is approximately $13.5 million. Ms. Dacy went through the site issues associated with the proposed project, including clean-up of debris from the previous operation, extension of the water main, installation of a sewer line, creation of a public street, removal of an existing French drain located in the proposed building area, and storm ponding and wetland issues (water table is very high on the site). Ms. Dacy noted that Mr. Casserly and she have been working with the petitioner and have come up with two packages for assistance. The first package would include funding from DTED (State) and Metro Council with assistance from the HRA in the amount of approximately $1.2 million. The petitioner did apply for the State and Metro Council funds in November; however, due to the number of applications submitted, there were not ample funds and they did not receive the funds. However, staff at both the DTED and Metro Council were very encouraging for the City to sponsor this application once again. Ms. Dacy stated that timing issues are very much a concern in order to achieve November 1 occupancy for Onan and Murphy Warehouse. Therefore site improvement costs must be initiated and the steel ordered for the building in March. After State and Metro Funds have been applied for, the HRA would advance $871,000 (spread over several months) in order to start the necessary work. Staff feels that chances are very good of the petitioner receiving the funding in this cycle and, if so, the funds would be received in June 1999 and the HRA would use those funds to reimburse themselves. Under this option, the HRA would provide, in essence, a grant of approximately $435,000 to reduce the Tax Increment note to approximately $764,000, thereby HOUSING & REDEVELOPMENT AUTHORITY MEETING. JAN. 7, 1999 PAGE 3 reducing the term of the note to 9.5 years. The total assistance under this option would be about 10% of the total project costs. Ms. Dacy stated that in the event that the DTED funds and Metro Council funds were not provided, the second package would include Tax Increment Funding assistance in the amount of approximately $2.1 million. The HRA would advance $871,000 for pollution clean-up this spring with Murphy Warehouse providing the local match of $84,000 in addition to its other project costs. The HRA would issue a note of $1.2 million at the certificate of completion. The length of the note would be likely 13 years (four years short of the term initially proposed) at an interest rate of 8%. The tax increment generated from the project would reimburse the HRA. The amount of assistance under this option would be equal to approximately 20% of the total project cost. Ms. Dacy noted that staff believed this is a very worthwhile proposal for the HRA to consider, with or without the State and Metro Council funding. The benefits of the project are great; $5.6 million in tax increment would be created through the life of the district (year 2015), $4,453,000 of that amount would be available increment for the salvage yard redevelopment or other issues in the area if the State and regional reimbursement were used. She stated $3.4 million would be made available without the funding. This project would return the parcel back onto the tax rolls which is currently not generating any taxes and Murphy Warehouse would start by paying almost $500,000 per year. In addition, tax dollars would also be created for the county, the school district, etc. The project would also create 100 jobs. She stated that this project makes maximum and highest and best use of the property, and staff recommends that the HRA authorize staff to prepare a development contract based on the concepts presented. Ms. Gabel asked if grant funding from the two sources is tied together. Ms. Dacy stated, yes, and that the two agencies work together. Ms. Schnabel noted that staff is recommending that the HRA be authorized to proceed with the preparation of a development contract. She asked if staff is recommending which option to pursue. Ms. Dacy noted that staff intends to pursue Option A first; however, in order to proceed, the actual agreement will need to spell out the "worst case scenario", with the HRA funding the entire clean up process. Mr. Casserly noted that if the grant funds were obtained, the HRA would use half of it to prepay the note, shortening the term. In order to make the project work, the funds must be provided up-front. Ms. Schnabel asked what would happen if the costs exceeded the projected costs. HOUSING & REDEVELOPMENT AUTHORITY MEETING. JAN. 7, 1999 PAGE 4 Ms. Dacy noted that this issue would need to be addressed prior to the execution of the development agreement. Mr. Casserly stated that most of the estimated amounts have contingencies built in of approximately 15%. Generally, if costs are difficult to estimate, a higher contingency is applied. Mr. Richard Murphy, President of Murphy Oil Company, stated that a series of environmental work was done this fall including soil borings, trenching, etc., based on the plan of the proposed building. This gave them somewhat of a history of the site so that they know what they can expect. Mr. Murphy explained the importance of timing of the project, noting that they wish to occupy a portion of the building themselves. Existing lease options will be terminated and they will need to achieve a specific occupancy date. MOTION by Ms. Schnabel, seconded by Mr. Meyer, to instruct staff to prepare a development agreement based on the concepts presented. Ms. Dacy stated that the Planning Commission reviewed the preliminary plat at their last meeting and recommended City Council approval. The City Council will be reviewing this at its January 25, 1999, meeting. UPON A VOICE VOTE, FOUR MEMBERS VOTING AYE (1 ABSENTION — COMMERS), CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED. 5. UPDATE ON HOUSING PROGRAM EVALUATION REPORT: Mr. Grant Fernelius, Housing Coordinator, explained that staff has completed the survey of 255 families who have participated in the HRA's housing programs since 1993. The response was favorable (41 % returned). In addition, staff also surveyed residents of Hyde Park (22% surveys were returned). The survey asked approximately eight housing related questions. Mr. Ben Martig, Housing Intern, is currently in the process of tabulating the results of the surveys and will include the findings in the report to the HRA in February. Mr. Fernelius stated that Mr. Martig has also set up eight or nine personal interviews with homeowners. The interview will be videotaped and will be available for review at the HRA's February or March meeting. Mr. Fernelius noted that his memo included in the Agenda packet included some information also on the "This Old House Program" which was briefly discussed at the December meeting. This is a property tax program available to homeowners who wish to make improvements to their property where a portion of the improvement value can be deferred over time. Approximately 133 residents have taken advantage of that HOUSING & REDEVELOPMENT AUTHORITY MEETING. JAN. 7, 1999 PAGE 5 program since 1995 when it was approved by the legislature. In Fridley, approximately 4,500 homes would qualify for the program in terms of age. A pamphlet of the program was distributed to the HRA members for their review. Ms. Schnabel suggested that highlights of the program be included in the City newsletter, as she believes there are likely many residents who are not even aware of the program. Mr. Meyer asked if there were any income guidelines for the program. Mr. Fernelius stated that the only qualifying guidelines are the age of the property and the type of improvements. 6. MEDTRONIC UPDATE: Ms. Dacy explained that a meeting has been scheduled with Medtronic and their attorneys to discuss the development contract on Thursday, January 14. Staff has been actively reviewing the changes Medtronic has proposed and has come up with a number of ideas they wish to discuss with them. Ms. Dacy noted that the Alternative Urban Area Wide Review (AUAR) was finalized on Thursday, January 7, and will be available for public comment beginning on Monday, January 11 through February 10, at which time staff will have responses from the reviewing agencies. She noted that she also just received a copy of the Indirect Source Permit application, which will also be reviewed by MPCA. Regarding the development applications, Ms. Dacy noted that Medtronic is currently working through a number of issues. They are still trying to determine the size of the first phase of the development (the first building). Originally they indicated an interest in an additional 150,000 square feet. Now they have indicated that they would like to construct a building of potentially up to 400,000 square feet. For purposes of the Environmental Review, the document will assume a"worst case scenario", with a proposed 1.6 million square feet of development within 10 years, ending in 2009 and in 400,000 square foot increments. Ms. Dacy stated that her memo in the agenda packet regarding this item included a list of issues, noting that she feels the major issue will be traffic and the impact it will have on Highway 65. One possible solution would be to construct an additional northbound lane. Mr. Commers asked what projected dates have been set for construction. Ms. Dacy stated that their goal is to break ground in the spring with grading to take place in late May. A building permit could be issued perhaps by July 1. HOUSING & REDEVELOPMENT AUTHORITY MEETING, JAN. 7, 1999 PAGE 6 7. UPDATE ON DESIGN AND DEVELOPMENT ISSUES FOR SCATTERED SITE PROGRAM. Mr. Fernelius explained that staff's primary concern about this program is that the design and style of homes being built continue to be the same, therefore, stereotyping the types of homes constructed on the scattered site lots. There are currently a couple of vacant lots available which staff has been trying to market with limited success. Mr. Fernelius stated staff recently met with Robert Gerloff, an architect who worked on the City's Remodeling Planbook. He has considerable experience working in the inner ring suburbs and understanding some of the issues that staff is experiencing. Mr. Hickok, Mr. Fernelius and Mr. Gerloff took a tour of some of the neighborhoods where homes were built under the program as well as where vacant lots are for sale. It will now be necessary for staff to determine what they would like Mr. Gerloff specifically to do. Staff will be preparing an outline on a scope of service which Mr. Gerloff will then prepare cost estimates for. Staff intends to come back to the HRA at the February or March meeting with a scope of service to seek authorization to move forward with a contract for services. Mr. Commers asked how many homes have been constructed under the Scattered Site Program. Mr. Fernelius stated that 15 homes have been built. Ms. Gabel asked what staff wants Mr. Gerloff to accomplish. Mr. Fernelius stated that this is what he will need to identify. Ideally he would like to have some type of idea book to give to builders/developers with sample plans, perhaps indicating what the HRA would like to see. The HRA has flexibility as to what they can require; however, staff would like to see more focus on the aesthetics of the property. Mr. Meyer stated he thought the core of the program was to remove blighted homes and replace them with new homes. Now it appears that one is beginning to think about artistically raising the standards of the City and disregarding the comments and attitudes of the builders. He wondered if the HRA is going beyond what the original mission is for the Scattered Site Program. Mr. Fernelius stated he does not believe so, but rather that staff is trying to expand the possibilities of what can be done under the program. He would like to also talk with some builders/developers to get their input/feedback. The goals are still the same, but staff also wants to see that the best homes are constructed that can be. He feels that new designs can be identified which do not stereotype the home. Ms. Schnabel stated that if it can serve as an inspiration to the builder or buyer, she is in support of the process. HOUSING & REDEVELOPMENT AUTHORITY MEETING. JAN. 7, 1999 PAGE 7 OTHER BUSINESS: Mr. Burns noted that Commission members will be receiving an invitation to the Commissioner's Banquet. This banquet will be held at the Shorewood on February 7. ADJOURNMENT: MOTION by Mr. Meyer, seconded by Ms. Schnabel, to adjourn the meeting. UPON A VOICE VOTE, ALL MEMBERS VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY AND THE MEETING WAS OFFICIALLY ADJOURNED AT 8:50 P.M. Respectfully submitted, Tamara D. Saefke Recording Secretary