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HRA 09/02/1999 - 00002738CITY OF FRIDLEY HOUSING & REDEVELOPMENT AUTHORITY MEETING SEPTEMBER 2, 1999 CALL TO ORDER: Vice-Chairperson Schnabel called the September 2, 1999, Housing and Redevelopment Authority meeting to order at 7:32 p.m. ROLL CALL: Members Present: Virginia Schnabel, John Meyer, Jim McFarland Members Absent: Larry Commers, Pat Gabel Others Present: Barbara Dacy, Community Development Director Grant Fernelius, Housing Coordinator Julie Vogel, Accountant Jim Casserly, Development Consultant APPROVAL OF THE AUGUST 5, 1999, HOUSING AND REDEVELOPMENT AUTHORITY MEETING MINUTES: MOTION by Mr. Meyer, seconded by Mr. McFarland to approve the August 5, 1999, Housing and Redevelopment minutes as written. UPON A VOICE VOTE, ALL VOTING AYE, VICE-CHAIRPERSON SCHNABEL DECLARED THE MOTION CARRIED UNANIMOUSLY. MOTION by Mr. Meyer, seconded by Mr. McFarland, to approve the July 28, 1999, Joint Housing and Redevelopment Authority and City Council minutes as written. UPON A VOICE VOTE, ALL VOTING AYE, VICE-CHAIRPERSON SCHNABEL DECLARED THE MOTION CARRIED UNANIMOUSLY. CONSENT AGENDA: RESOLUTION AUTHORIZING APPLICATION TO THE MINNESOTA DEPARTMENT OF TRADE AND ECONOMIC DEVELOPMENT FOR THE REDEVELOPMENT GRANT PROGRAM: Ms. Schnabel asked if this was a request for redevelopment grant program funding. Mr. Fernelius stated that was correct. MOTION by Mr. Meyer, seconded by Mr. McFarland, to approve the Consent Agenda as presented. HOUSING & REDEVELOPMENT AUTHORITY MEETING, SEPTEMBER 2, 1999 PAGE 2 UPON A VOICE VOTE, ALL VOTING AYE, VICE-CHAIRPERSON SCHNABEL DECLARED THE MOTION CARRIED UNANIMOUSLY. 2. CLAIMS AND EXPENSES: MOTION by Mr. Meyer, seconded by Mr. McFarland, to approve the Consent Agenda as presented along with any additional expenses presented at the meeting. UPON A VOICE VOTE, ALL VOTING AYE, VICE-CHAIRPERSON SCHNABEL DECLARED THE MOTION CARRIED UNANIMOUSLY. ACTION ITEM: 3. CONSIDER RESOLUTION AUTHORIZING SCATTERED SITE ACQUISITIONS: Mr. Fernelius stated that at the July 28, 1999, joint meeting, the HRA and City Council discussed the acquisition of ten to fifteen properties under the Scattered Site Program. The goal is to acquire as many of the properties as possible through the end of the year and replace the houses with new houses. Mr. Fernelius stated that Staff has determined that they would like to look at approximately 21 sites. The number of homes for the Scattered Site Program has been re-evaluated, because Staff wanted to have options in the event that some owners did not want to negotiate. The list of properties was generated by a number of different means including windshield surveys and information provided by City Staff. Mr. Fernelius stated that their goal was to approach the owners and give them an opportunity to sell. City staff has contacted Dan Wilson, Wilson Development Services, who will do a lot of the negotiating on behalf of the HRA and will work closely with City staff. Julie Schwartz, an appraiser the City of Fridley has worked with in the past, will be appraising the properties as necessary. Mr. Fernelius stated that in terms of the City's strategy, once the owners who are interested in selling are identified, negotiations will proceed in a range of ten percent (10%), plus or minus that appraisal amount. A closing will be scheduled hopefully before the end of the year. Owners may possibly be allowed to continue to occupy the properties throughout the spring for their convenience. The City does need to expend the dollars and actually close on the properties by December of this year. Because of the short time window, the City needs to move fairly aggressively. The City is asking for approval this evening to negotiate with the owners on the list, have the properties appraised, and make offers without bringing each acquisition back to the HRA for review and approval. The same procedures used in the past to appraise the properties to pay fair values will be used. All the activities will be done on a voluntary basis. If the owners do not want to sell, the City will move on to the next one on the list. The City will also require the seller to sign a waiver for relocation benefits so there will not be any relocation benefits paid to the seller on top of the funds for the purchase. HOUSING & REDEVELOPMENT AUTHORITY MEETING, SEPTEMBER 2, 1999 PAGE 3 Mr. Fernelius stated that it is Staff's recommendation this evening for the HRA to authorize purchase of up to ten properties on the Scattered Site Program list and authorize the Executive Director to enter into purchase agreements and sign any other documents related to the transactions. Mr. Meyer asked Mr. Fernelius why there seemed to be such a rush for a December closing for the houses chosen for the Scattered Site Program. Mr. Fernelius stated that on the July 28, 1999, joint HRA and City Council meeting, the City has access to the TIF resources which have a deadline in terms of when the City can use those dollars. The deadline is the end of 1999 and if the City does not use the dollars by that time, the City will essentially lose access to the TIF Resource. It is an opportunity to utilize the resources that will not be around after the first of the year. Mr. Meyer asked Mr. Fernelius if these houses for the Scattered Site Program were chosen because they were small. Mr. Fernelius stated that Dan Wilson and Julie Schwartz have used a very detailed checklist that identifies the substandard conditions. By law, these properties have to be substandard with problems in structure, deficient mechanical systems, problems in plumbing or electrical. The City is not in a position to acquire these properties if they are not substandard by the City's inspections. These houses were identified based on exterior conditions only. Inspections will be set up and documented for the criteria for substandard conditions. Mr. Meyer stated that he felt some of the houses showed no signs of anything substandard except that they were smaller than other houses around them. He stated that it seems to him that the sole criteria at this stage is size of the houses. Mr. Fernelius stated that is not correct. Properties they have looked at have been involved in code enforcement issues. The size is not the sole criteria and was not the screening tool used to identify them. Mr. Meyer asked how many of them had a code violation. Mr. Fernelius stated that he didn't have that information at that moment. If these properties do not meet the test for substandard conditions, then the City would not be buying the properties. That is the purpose of making the initial contact and then doing the inspections. Mr. Meyer stated that he felt it was a superficial approach to pick these 20 houses and then search for violations that may or may not be there and then ask the HRA to approve purchasing 10 properties without any review by the HRA. He stated he understood the time constraints, but he felt there was a high degree of superficial judgment on these chosen houses. HOUSING & REDEVELOPMENT AUTHORITY MEETING, SEPTEMBER 2, 1999 PAGE 4 Mr. Fernelius stated that they may not buy those properties and they would only purchase the properties that meet the conditions of the program. Mr. Meyer stated that he was against the procedure of by-stepping the HRA's opportunity to review the process for acquisition of these properties. Ms. Schnabel asked Mr. Meyer if he would feel more comfortable if Staff gave the HRA a report before finalization of the purchase of any of these properties. Mr. Meyer stated that would be fine, but the report should be a discussible item, not just a presentation of the accomplished plan. He felt that the HRA should be able to review five to ten houses in two evenings so all of them could have a chance to review them all. Ms. Schnabel stated that they need to keep in mind that maybe none of these people would be interested in selling. Mr. Meyer stated that the HRA has the prerogative to review any houses for the Scattered Site Program. He believed the HRA is being asked to let that prerogative go, and he doesn't believe that is a good procedure. Ms. Schnabel asked where the dollar figures allotted for the asking price for the homes on the report came from. Mr. Fernelius stated that these are taxable market values from the tax assessor, but in reality the actual appraisal price could be higher. Ms. Schnabel stated that it seemed to her that the HRA has a commitment to proceed. If inembers of the HRA feel they should have an opportunity to review what negotiations have been made, the HRA could possibly review these at the November or December meeting. Ms. Dacy, Community Development Director, stated that it was not the City's intent to usurp the HRA; the intent was to carry out the direction that the City understood they had from the joint HRA and City Council meeting. Ms. Dacy stated that from a budget perspective, the amount allocated toward this part of the activity is approximately $400,000. The goal is to acquire 5-10 houses. Ms. Dacy stated that from a timing perspective, this is an idea that will help speed the process. The HRA can review all of the purchase agreements at the October and November meetings if that is what the HRA prefers. There may be a need for a special meeting, depending on how the acquisition goes. If the HRA wishes to maintain the typical procedures, City staff can accommodate that, but the goal of the recommendation is to speed the process along. HOUSING & REDEVELOPMENT AUTHORITY MEETING, SEPTEMBER 2, 1999 PAGE 5 Mr. Casserly stated that he thought the concern is that there has to be criteria as more and more numbers are involved. When there is a consensus on the criteria that they are using, then they find the structures that fit into that criteria or they do not. Mr. Casserly stated that he felt that in all of these instances, they want to determine that all of these properties are blighted. A different kind of tax increment district will hold together a number of these structures and create a scattered site redevelopment district that hasn't been done in Fridley before. One of the criteria for that is each property must qualify and it must be concluded that each structure is substandard and that is the threshold. No involuntary acquisitions will be included because there simply is not the time to be involved in those. They want to stay within 110 percent (110%) of the appraisal; and because the houses can be occupied until spring, it will be easier to close these transactions. They are really in some time bonds and do not want to be closing in December. Mr. Meyer stated that he rejects the idea that a small house is a major criteria to be put on the list. He does not agree to turning the entire process over to City Staff. He suggested that staff proceed with the appraisals and negotiations and then have a special meeting for the houses that do work out for acquisition for the HRA to discuss. Ms. Schnabel stated that if they reach the point where the staff has an agreement from the homeowner and there is an agreed dollar amount, that clearly indicates to her that the homeowner would like to sell. She is not sure what the purpose of the meeting would be to review that. She stated that this is purely voluntary for the homeowners. Mr. Meyer stated that he sees nothing wrong with a tentative agreement between the owner and the HRA, just in case the HRA rejects the deal for some reason or another Ms. Schnabel asked Mr. Meyer why the HRA would reject the approval of the sale if the homeowner agreed to sell. Mr. Meyer stated that the owner might be completely happy to sell, but it is the HRA's job to review them. In the past, the HRA has bought properties that were unfit for human habitation and they paid a dear price for them. Mr. Casserly stated the issue was not one of legality. They could insert a clause in the agreement that the purchase is contingent upon approval by the HRA. The issue is a practical matter. It will be created by encouraging people to participate and then not consummating the deal. He stated that after acquisition, it may take 6-18 months to redevelop. Ms. Dacy stated that this approach was structured because of the volume and for a practical purpose more than anything else. Mr. Meyer stated that he understood that. HOUSING & REDEVELOPMENT AUTHORITY MEETING, SEPTEMBER 2, 1999 PAGE 6 Ms. Schnabel stated that a motion could include that the HRA would have opportunity to review the status of the negotiations and in the next meeting in which staff is prepared to present a report to the HRA. Mr. Meyer stated he concurred with the motion. Mr. McFarland asked Ms. Dacy if it was possible that in the negotiations that City Staff would know about the deficiencies of the house prior to the appraisal. Mr. Fernelius stated that they would only know about any deficiencies after the appraisal. City Staff would discuss the condition of the property with Mr. Wilson, but they still need to negotiate with the owner. City staff does not know the condition of the interior of these houses, and that is why they need to follow through with the appraisal process. Ms. Schnabel asked if the first step would be to approach the property owners and ask them if they are interested in selling the property; the second step is to have the appraiser go in and check for deficiencies as well as appraise the property; the third step is to have the appraiser give that information to Mr. Wilson who on behalf of the City, would make an offer to the homeowner based on the appraisal; and the fourth step is to have the homeowner accept or make a counteroffer. Mr. Fernelius stated that was correct. MOTION by Mr. Meyer, seconded by Mr. McFarland, to approve Resolution HRA 10- 1999, A Resolution Authorizing Application to the Minnesota Department of Trade and Economic Development for the Redevelopment Grant Program, with the following stipulation: City staff shall proceed with the negotiations and the appraisal processes with the understanding that the transaction must come before the HRA for discussion and approval or disapproval. UPON A VOICE VOTE, ALL VOTING AYE, VICE-CHAIRPERSON SCHNABEL DECLARED THE MOTION CARRIED UNANIMOUSLY. INFORMATION ITEMS: 4. GATEWAY EAST UPDATE: Mr. Fernelius stated that City staff has met with the owner of the duplex at 348-57tn Place. An introduction to the project and an explanation of the process was well received. The next step involves having the property appraised and then negotiation with the owners. The goal is to complete these negotiations by the end of the year. In addition, the relocation consultant, Dan Wilson, will be working with the tenants on relocation assistance. HOUSING & REDEVELOPMENT AUTHORITY MEETING, SEPTEMBER 2, 1999 PAGE 7 Mr. Fernelius stated that north of the Cash-N-Pawn property, the former McDonalds restaurant currently owned by the Sikh Society is a possibility for the Gateway East Project because it appears to be vacant. The owners of the property are not interested in selling, but want to work with the City to improve and possibly expand the site so the appearance of the building complements the development of Gateway East. In terms of the other sites in the project area, there are two vacant lots for which the City has not been successful in contacting the owners. One is owned by Valvoline Rapid Oil and one was tax forfeit which has been since reversed. The owner is out of state. Mr. Fernelius stated that if City staff cannot reach an agreement with these parties, staff will probably come back to the October HRA meeting with a resolution authorizing condemnation. That would at least allow City staff to start the process and get closure to that part of it. Staff is continuing to work as quickly as possible with those owners under the same time constraints in using the TIF Resources. The goal is acquisition for this year. 5. TIF ASSISTANCE FOR OFFICE WAREHOUSE PROJECT, MAIN STREET: Ms. Dacy stated that the property is located at the west side of Main Street and just north of the former A& R Trucking facility. One year ago, the HRA approved a development agreement for Cintas Uniform Company, but the company did not pursue development because of the amount of soil correction work. Since that time the owners continue to try to market the property and they are proposing to act as developers of the site and build an office/warehouse site of about 50,000 square feet. They have been getting some interest from a trucking company and also a developer of an office/warehouse building similar to the one on 73rd Avenue. Ms. Dacy stated that in order to provide assistance for the soil correction, staff is suggesting that a development agreement be prepared so the company would be required to produce a building of 50,000 square feet in size having an exterior of brick and block construction. In return the HRA would provide up to two-thirds of the cost or a maximum of $250,000 which is the amount of assistance that the authority authorized for the Cintas company. Chairperson Larry Commers recommended providing some type of recovery to the HRA for this assistance. The legislature has changed the rules for this particular area of the tax-increment program, and the HRA would not be able to use the increment created from the project to reimburse the HRA's expenses. Ms. Dacy stated staff is evaluating some type of loan for the project. The developer has agreed to those concepts in a letter. Staff is recommending that staff negotiate a development contract to be brought back for the October agenda for approval. Ms. Schnabel asked Ms. Dacy if staff was aware of the costs of the soil correction previously so they are prepared for this type of expense. Ms. Dacy stated, yes, and that has been a factor in some of their negotiations. Ms. Schnabel asked if the developer was approached with the deferred loan concept. HOUSING & REDEVELOPMENT AUTHORITY MEETING, SEPTEMBER 2, 1999 PAGE 8 Ms. Dacy stated, yes, and the developer is amiable to exploring that but have not had the opportunity to discuss details. Mr. Casserly stated that they do need some latitude on the ability to recover. Over the last 3'/ years, there has been soil costs that have ranged from $210,000 -$600,000. Staff is suggesting that they would get reimbursed for two-thirds of the cost but the City's share would not exceed $250,000 and they would try to work out some kind of recovery with a combination of a grant and a loan. 6. MEDTRONIC DEVELOPMENT UPDATE: Ms. Dacy stated she wanted to bring three issues to the HRA's attention. The first issue was that the meeting scheduled that day with Medtronic was postponed to the following week. Ms. Dacy stated that the second issue involved the TH 65 additional lane project. The deadline is September 20 for the federal funding application. Metropolitan Council has approved the Comprehensive Plan Amendment regarding the issues along that highway. A final report about that project will be presented to the HRA in October. Ms. Dacy stated the third issue is that the Wingate Hotel chain has an interest in building on the United Stores' site south of I-694. The Hotel would have six stories and about 100 rooms. A Damon's Restaurant would also be on site with the hotel. Staff has a concern with the site issues with this particular location. The other issue for the HRA is the architectural exterior. The Hotel does not want to change the plan at all. It is essentially a drivet-type of exterior construction, and a flat roof. She is concerned that they are so early in the comprehensive planning process about the City's goals and the impact from the Medtronic project that this is exemplifying the case where the proposal is inconsistent with the Medtronic image. With Wingate's refusal to amend the exterior, Staff recommends that this design and appearance is not consistent with what the City wants to see. Donn Hagmann of Medtronic had stated that it is a nice hotel with a reputable chain, and the clients could stay there, but Medtronic is also hopeful of a four or five star hotel and a restaurant facility different than the Damon's food chain. Mr. Meyer stated that he felt the exterior of Wingate is bottom of the line. He believed, too, that the interior quality could be cheated on by any builder. He feels it would be a low-quality place to be near Medtronic. Ms. Schnabel stated that she concurs with Mr. Meyer and supports Staff's position. She stated it is her hope that whatever additional development occurs in the surrounding area of Medtronic will keep some type of theme or cohesiveness in exterior finishes, and she would like to see a nicer class of restaurant. Mr. Meyer asked Ms. Dacy if Medtronic has given the City any idea of how many rooms they would probably need per night. HOUSING & REDEVELOPMENT AUTHORITY MEETING, SEPTEMBER 2, 1999 PAGE 9 Ms. Dacy stated that Medtronic has a wealth of information of which the City needs to take advantage. Having a meeting with Mr. Hagmann would answer a lot of questions, but the meeting date has not yet been arranged. 7. MISCELLANEOUS LAND ACQUISITION UPDATE: Ms. Dacy stated that there are two other sites under negotiation. The Maynard Nielsen property on 61 St Avenue is the potential Northstar Corridor Development Authority site. The appraisal is being finished, and staff hopes to negotiate a purchase agreement for the HRA's review by the October meeting. The Werner's Furniture site is being discussed also. No action is required tonight. 8. 1999 - 2000 BUDGET: Ms. Dacy stated that they are very close in completing the budgets for later years. 9. RAMBLER REHAB UPDATE: Mr. Fernelius stated that Center for Energy and Environment (CEE) has been working on a rambler rehab project. Last spring the HRA and CEE applied jointly to the Minnesota Housing Finance Agency to acquire and rehab an existing Fridley home. The Rambler Remodeling Guidebook was used for direction. One of the problems that CEE has run into is finding a house due to the demanding market. The properties they have been looking at fall into the $115,00 -$130,000 price range which is above the budget identified for the project. They have also found properties below $75,000 that do not fit the style and characteristics that they are trying to achieve in the book. Mr. Fernelius stated that last week, staff looked at some of the homes Medtronic is acquiring as part of it's campus along Quincy and Jackson Street. The property being shown is located at 5675 Quincy Street. Medtronic has apparently sold these properties to a moving company responsible for selling them and also moving the property. Staff has discussed with CEE the possibility of CEE purchasing this property and moving it on to a vacant lot and upgrading it and doing a rehab that would simulate one of the plans in the plan book. Part of the project would involve providing the land on a deferred sale basis similar to what they have done on a new construction project. The City would get its money when that property sells to a homebuyer. It would help make the project affordable so CEE could put more money into the actual rehab. Staff would like to continue to work with CEE and possibly come back with a more detailed project at the October meeting. Mr. Meyer asked Mr. Fernelius what needs rehabbing on this particular house. Mr. Fernelius stated that he suspects the house is a typical Fridley rambler with a detached garage that would be included in the project. Some things that would include reworking the interior space to include a kitchen and office/living room area. The goal is to try and show people how they can update and modernize their rambler. HOUSING & REDEVELOPMENT AUTHORITY MEETING, SEPTEMBER 2, 1999 PAGE 10 Ms. Dacy stated that there are code issues that need to be worked on in this part of the preliminary stage of the rehab. Mr. Meyer asked if the walls were going to be redone and insulated. Mr. Fernelius stated that would be done if necessary, but he is assuming it would be a gut rehab going down to the studs and electrical and plumbing to really modernize it. The budget CEE received for upgrading is $90,000 for acquisition and rehab. The purchase price of the house and moving costs are around $26,000 and the balance would be used for rehab. OTHER BUSINESS: 10. PREVAILING WAGE COMPLAINT: Ms. Dacy stated that City Council did approve a resolution authorizing tax exempt bonds for the Banfill Crossing construction site which is the Senior Housing construction site under way south of Wal-Mart. The City received allegations that the prevailing wage rates were not being paid for the contractor. Since that time, three sworn statements have been submitted by three subcontractors verifying that they are and will pay the prevailing wage rates as required by the development contract by the HRA. There have been no other complaints about the project, but staff will continue to monitor the situation. MOTION by Mr. McFarland, seconded by Mr. Meyer, to adjourn the meeting. UPON A VOICE VOTE, ALL VOTING AYE, VICE-CHAIRPERSON SCHNABEL DECLARED THE MOTION CARRIED AND THE MEETING OF THE HOUSING AND REDEVELOPMENT AUTHORITY ADJOURNED AT 8:54 P.M. Respectfully submitted, Signe L. Johnson Recording Secretary