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HRA 06/01/2000 - 00008196CITY OF FRIDLEY HOUSING & REDEVELOPMENT AUTHORITY MEETING JUNE 1, 2000 CALL TO ORDER: Chairperson Commers called the June 1, 2000, Housing and Redevelopment Authority meeting to order at 7:30 p.m. ROLL CALL: Members Present: Larry Commers, John Meyer, Pat Gabel, Jim McFarland Members Absent: Virginia Schnabel Others Present: Barbara Dacy, Community Development Director Scott Hickok, Planning Coordinator Grant Fernelius, Housing Coordinator Ryan Jendro, Home Remodeling Advisor Julie Vogel, Accountant Jim Casserly, Consultant INTRODUCTION OF RYAN JENDRO, REMODELING ADVISOR: Mr. Fernelius stated that Mr. Jendro started as Fridley's new Home Remodeling Advisor in April working three days per week Monday through Wednesday. Mr. Jendro works part-time for the Mille Lacs Band as a building official. Mr. Jendro has a degree in construction management from UW-Stout and has several years of experience in the construction field. Mr. Jendro stated that it is a pleasure to work with the Community Development staff. He looks forward to spending many years with the residents of Fridley and helping to make the housing stock of Fridley something to be proud of. Mr. Commers welcomed Mr. Jendro. Ms. Gabel asked Mr. Jendro what his hours were. Mr. Jendro stated that he works 8:00 a.m. to 5:00 p.m. on Mondays, 9:00 a.m. to 7:00 p. m. on Tuesdays, and 9:00 a. m. to 5:00 p. m. on Wednesdays. He can be contacted at 572-3515. APPROVAL OF THE May 4, 2000, HOUSING AND REDEVELOPMENT AUTHORITY MEETING MINUTES: MOTION by Ms. Gabel, seconded by Mr. McFarland, to approve the May 4, 2000, Housing and Redevelopment Authority meeting minutes as written. HOUSING & REDEVELOPMENT AUTHORITY MEETING. JUNE 1. 2000 PAGE 2 UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. CONSENT AGENDA: CONSIDER CONTRACT WITH CEE FOR 1998 HOME REHAB PROGRAM: 2. CONSIDER PARTICIPATION IN MINNESOTA SOLUTIONS FOR 2001 LEGISLATIVE SESSION: 3. APPROVE AMENDED ESCROW AGREEMENT FOR PURCHASE OF OLD CENTRAL AVENUE SITES (Resolutions No. HRA 5-2000 and HRA 6-2000: 4. CLAIMS AND EXPENSES: Mr. Commers asked about the additional expense for Performance Lawn Care. Ms. Vogel stated that it is the expense for maintenance of the lawns of the properties the HRA owns. MOTION by Ms. Gabel, seconded by Mr. McFarland, to approve the consent agenda with the additional expenses presented by Ms. Vogel. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. ACTION ITEMS: 5. CONSIDER CONTRACT WITH COMMUNITY REINVESTMENT FUND (CRF) FOR FRIDLEY LOAN PROGRAMS: Mr. Fernelius stated that this is a contract with Community Reinvestment Fund, the group that administers or services all the loans for the HRA. They are asking for a revised contract to administer the 5% revolving loan program and the deferred loan program. It is an involved task, including collecting all the payments on a monthly basis from the borrowers, maintaining all the loan servicing records, preparing monthly reports to the HRA, as well as providing the payments received. Mr. Fernelius stated that CRF is requesting a couple of provisions to the new contract which primarily increases in the rates. The set-up fee is the fee they charge in order to put the loan into the system. They are proposing a fee of $25.00. The previous fee was $15.00. The original contract with CRF was negotiated in 1996 with no changes since that time period. The monthly servicing fee will be changed from $4.50 per loan per month to $6.00. The payoff fee will be $25.00 per loan. A$1.00 per deferred loan per monthly charge is proposed also. There are several borrowers who have chosen to make payments on the loan despite the fact that they can defer payment until they sell their property. HOUSING & REDEVELOPMENT AUTHORITY MEETING. JUNE 1. 2000 PAGE 3 Mr. Fernelius stated that many of the fees were not anticipated in the original contract and so some things will now be in line with the types of services provided. The contract proposed will run from July 1, 2000, to July 31, 2002. Ms. Gabel asked if any of theses charges for the loans are passed on to the borrower. Mr. Fernelius stated that the HRA absorbs all the fees. Mr. Meyer stated that there is quite a list of job descriptions that CRF do. Do they do them well? Mr. Fernelius stated that they do. For the most part the City has had a good relationship with CRF, and CRF has been very responsive and good at collecting the payments. They have not had problems or any reports from borrowers of anything out of the ordinary as far as collections are concerned. This is a valuable service. Mr. McFarland asked if they had a number of defaults. Mr. Fernelius stated that they have had a number of defaults in terms of people late on the payments. CRF is responsible for working with the borrowers and getting them current on the payments. Those delinquencies are provided in the monthly report to the H RA. Mr. McFarland asked if a fee was charged for delinquencies. Mr. Fernelius stated that it is a flat fee equal to 5% of the monthly payment. Mr. McFarland asked what the percentage was for deferred loans. Mr. Fernelius stated that he believes it is 5% of the payments. Ms. Vogel stated that it is about $900.00 per month that the HRA pays for service fees. Mr. McFarland asked if that would increase. Mr. Fernelius stated that it is approximately a 30% increase in the monthly fee for the amortizing type loans. There will be a slight increase for the deferred loans. Mr. McFarland asked if any loans are six months out in payments. Mr. Fernelius stated that there are a few that are delinquent for that length of time. Mr. McFarland asked if they are still making payments of some sort. Mr. Fernelius stated that they are. MOTION by Mr. McFarland, seconded by Ms. Gabel, to approve the contract with CEE for 1998 Home Rehab Program. HOUSING & REDEVELOPMENT AUTHORITY MEETING. JUNE 1. 2000 PAGE 4 Mr. Meyers asked if they give the new rates. Mr. Commers stated that they are contained in the second page of the cover memo. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. 6. CONSIDER AUTHORIZING DESIGN FOR TH 65 PROJECT: Ms. Dacy stated that the City of Fridley received an allocation from the Legislature of $500,000 to be delivered through the auspices of the Department of Trade and Economic Development. The purpose of the funds was to assist the City in developing the designs for the improvement of Trunk Highway 65. The intersection work was completed on the intersection at Lake Pointe Drive and what is now known as Medtronic Parkway. This project would add another north and southbound lane through that intersection across Moore Lake up to the east and West Moore Lake Drive intersection. This is necessary due to the amount of increased traffic predicted in the next ten to fifteen years. Medtronic's campus is approved from an environmental standpoint to reach at least 1,000,000 square feet and they may go up to 1,000,006 square feet depending on their expansion plans. Ms. Dacy stated that the main bottleneck across the causeway is the amount of through traffic. The people going through Fridley to and from downtown Minneapolis to the north clogs up the intersection. Adding the through lanes for the peak hour in the afternoon going northbound and southbound will help relieve the congestion. A soil boring analysis and a sheet pile wall design were looked at to contain the edges of the highway. Right now there is no pavement or curb. A sheet pile wall could be constructed as determined by SCH to contain the additional lane on both sides and the shoulder. The advantage is that they could install a storm sewer system or piping within the wall to direct the runoff to a treatment facility somewhere along the lake and probably in that area south of St. Phillips Lutheran Church. Staff recommends approval for authorization of staff to conduct a bidding process for the final design of the facility. They did attempt to make an application for federal funding and fell ten points short. They have gained the attention of MnDOT in the importance of the project and it is now included in MnDOT's transportation system plan. Ms. Dacy stated that if the design is done, the project will raise the importance of potential fundability from State and Federal sources. If the public hearings and drawings and engineering and details are addressed, they can tell MnDOT and the State and Federal officials that it is all set to go. Staff is asking for a motion to allow them to start the bidding process. The majority of the costs anticipated for the design work would be reimbursed to the HRA through the City via the allocation from the State. If the design cost exceeds the amount of grant funds received from DTED, that would be an expense to the HRA. There is the possibility of obtaining additional DTED funds. The total design fees are anticipated to range between $600,000 -$750,000 depending on bids from consultants. Because of the amount of fees, they should go through a bid process to make sure that they are making a fair choice. Staff recommends approval of the process to find the appropriate engineer. HOUSING & REDEVELOPMENT AUTHORITY MEETING. JUNE 1. 2000 PAGE 5 Mr. Commers stated that he thought this was to enter into the design contract with SCH. Ms. Dacy stated that the Public Works Director suggested going straight to SCH, but the City Attorney recommended going through a bidding process because of the contract amount. Mr. Commers asked if the cost included the bail wall and what is the projected manner of funding. Ms. Dacy stated that MnDOT or possibly federal grant funds would provide the majority of the construction funds. State or federal programs may require a local match for some of those funds, but they have not had the chance to evaluate and see what that amount would be. Mr. Commers asked if they are required to do this project if they do not get funding. Ms. Dacy stated that they are not required to do it. Mr. Meyer stated that the bidding process puzzles him. The process usually is for the City to issue RFPs, and then the RFPs are contained, evaluated, and three are selected for the first, second, and third choices. The City and the HRA would then sit down and talk about fees with the party. If they could not agree, then they would go to the second and then the third choice. Never should the amount of the fee be the primary reason for selecting a professional, because there is no way to evaluate them on the basis of the fees. Ms. Dacy stated that they want to evaluate a number of proposers and if the appropriate procedure is an RFP as opposed to the bidding, that is fine with staff. Mr. McFarland stated that an RFP reaches the same end with more discussion along the way. Mr. Meyer stated that with the RFP system, they are more assured that this process may have to take the low bid with a competent professional. Ms. Gabel stated that she would agree with that method. Mr. Commers stated that if they are going to authorize something they should do it through the RFP process. Ms. Dacy stated staff would do that. Mr. Commers asked for more information about the access closures through Highway 65 near Moore Lake. Ms. Dacy stated that there is a right lane only going northbound to the Shorewood Restaurant. That would have to be closed and the access removed. Southbound there is a driveway going from the St. Phillips Lutheran Church onto Highway 65. HOUSING & REDEVELOPMENT AUTHORITY MEETING. JUNE 1. 2000 PAGE 6 Mr. Commers stated that will be available for an exit. Ms. Dacy stated that is correct. Mr. Commers asked who owns those. Ms. Dacy stated that the abutting property owners probably have some access rights. Mr. Commers stated that there might be some damage to them. Ms. Dacy stated that the church does not feel it would be serious damage. The restaurant does have an alternate access to the frontage road on the west and east side. MOTION by Mr. Meyer, seconded by Ms. Gabel, to authorize design for TH 65 project and complete an RFP process. Mr. Meyer asked if the HRA selects the engineer. Ms. Dacy stated that the HRA would ultimately approve the contract. Staff would review the proposals and make a recommendation to the HRA. This would be on the future agenda. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. Mr. Commers asked if they could get a summary document reflecting the amount of money they have in the property that Medtronic is developing for before, after, and since the sale for possible contingent costs that may arise in the future. Ms. Dacy stated that is possible. INFORMATION ITEM: 7. UPDATE ON GATEWAY EAST RFP: Ms. Dacy stated that another developer has contacted them as well, so they are expecting to receive at least two proposals. Two other developers could not respond. Mr. Commers asked if they have a back-up plan if they do not get enough property interest. Ms. Dacy stated they wanted to take stock of the reasons why they may not get enough responses. Based on that information, staff will come back with a recommendation as to how to proceed. If it is the size of the project, they may want to consider going over to the Frank's Used Car site again. That will raise additional process issues. HOUSING & REDEVELOPMENT AUTHORITY MEETING. JUNE 1. 2000 PAGE 7 8. INFORMATION ON HOUSING REHAB PROGRAM ISSUES: Mr. Fernelius stated that at the April meeting, a proposal to participate in the Community Fix-up fund was presented. This is a program through the Minnesota Housing Finance Agency. The HRA's role was to help write down the interest rate. They were going to pay for a portion of the discount or reduction in the interest rate. MHFA and Metropolitan Council were going to pay the other half. The HRA committed a$50,000 pool of funds for the write-down activity. The HRA had concerns about the income limit and value of homes to be improved. CEE administers the program. Staff feels that it is important to continue on with the program as initially presented. Households with incomes up to $73,000 could obtain a loan at 6% interest rate. The HRA would participate in helping to write down a portion of that interest cost. They would not be funding the underlying loan. Their money would be just a fraction of the total loan to be made. This encourages middle-income people to improve their properties. This would complement the existing program and this would allow them to leverage outside dollars. This would also service a segment of the market they are not able to assist because of the income cap they have right now. Mr. Fernelius stated that, currently, they do not have a cap on the home to be improved under any programs. Staff feels that if a cap is put on the program, people who have a higher valued home on a fixed income with a lot of equity would not be included. It is also hard to pick a number for a cap. Values in Fridley have been going up for the past few years and the median home value of Fridley was about $110,000 in 1999 and the average sales price was $130,000. This is an eighteen-month commitment only and is a way of leveraging the dollars with this good opportunity. Ms. Gabel stated that she would like to see this continue and agreed with the cap position in today's market. Mr. Commers asked if the Housing and Rehab report contains any of these loans. Mr. Fernelius stated that the report contains all of the loans. It is for the HRA's 5% loans. It does not include any of the Community Fix-up Fund loans. They have not been making any of those loans and have held off until after these discussions. Mr. Commers stated they do have some community development block grants. Mr. Fernelius stated that is correct. Mr. Meyer stated that he is opposed to raising the income limit to $73,000. They are not supposed to be trying to put another bath in the house or put another bedroom on, they are supposed to be improving the housing stock. For a unit that makes $73,000 to have to come to the public and ask for a handout does not do anything to improve the housing stock of the City. The Hyde Park area needs improvement, but the program is missing improving the lower end of the quality of the housing stock in Fridley. Now they are rewarding the higher income people who have not seen fit to improve their own property unless they are being given public money to drive them to the bank. HOUSING & REDEVELOPMENT AUTHORITY MEETING. JUNE 1. 2000 PAGE 8 Ms. Gabel stated that she does not think that if they set an income limit, it will do anything to encourage or fix the program that is not addressing these other issues that they have the other program designed to meet. There is probably a lot of data reviewed in setting these guidelines. Mr. Fernelius stated that the limits are based on 115% of inetro median income for 1999. MHFA has sinced raised its rate even higher. The HRA established the 5% program in 1996 and the $58,650 income limit was the 115% cap at that time and they did use that as the basis for establishing the guidelines before. They are trying to keep up with the times by raising the income limit. He respectfully disagrees that they are not assisting households. They are assisting many low-income households, perhaps not through the 5% loan program because some of those folks cannot afford a loan. They have block grant funds and other federal dollars that they do use to assist those families. There are parts of the City they have to focus on, and they are trying to encourage people to fix up the properties. Many improvements upgrade the livability and value of the house that benefits of the homeowner and the community. Ms. Gabel stated she agrees that $73,000 is a lot of money to her too, but she has faith in that limit based on the data collected and verified. She would like to see them leave this alone and see what happens in eighteen months. Mr. Commers asked how many of these loans they have made. Mr. Fernelius stated that they did not make any loans at all yet. They could leverage up to 400 some loans. Mr. Commers asked what staff ineant regarding the following text: " If the HRA feels that the income limit is still objectionable, perhaps it would be prudent to maintain the existing $58,650 limit in effect using the community fix-up fund program as a substitute for the revolving loan fund until the write-down funds are depleted." Mr. Fernelius stated that staff is suggesting using the community fix-up fund in place of the 5% loan program over the next eighteen months. They just write down the interest rate on the community fix-up fund loans and use that pot until they deplete the breakdown pool and then go back to offering the 5% loans. Mr. McFarland asked what the maximum loan amount is. Mr. Fernelius stated that $35,000 is the maximum range. Mr. Meyer stated that this constantly takes the focus away from the facts that this program has failed from day one and is continuing the drift away from basic purposes and ignoring the fact that it is not improving the housing stock in Fridley. They need to find ways and other devices to get people in Hyde Park or other areas to fix up their housing stock. Ms. Gabel asked if he would rather see them go back to the $58,000 limit? HOUSING & REDEVELOPMENT AUTHORITY MEETING. JUNE 1. 2000 PAGE 9 Mr. Meyer stated he is urging that they keep their perspective on this program and not increase the $58,000 limit. Mr. Commers asked if they could keep it at $58,000 and still participate in the program or set it at any number in between? Mr. Fernelius stated that they have the ability to design the program as they wish. Mr. Commers asked if it is staff's idea to increase the income level in order to utilize all the funds. Mr. Fernelius stated that the idea is to assist a different segment of the market that they have not helped before. Ms. Gabel asked if the MHFA has done research for this income level. Mr. Fernelius stated that they have done research with communities to find out what they are hearing from people. He knows there is a demand in that income range. He does not know how many folks are in that range in Fridley. Mr. Meyer stated that if someone came to him from the HRA and asked him if he would like a larger loan at a lower rate of interest he would say "yes". If someone offers him a free lunch he would take it. Mr. Fernelius stated he thinks that is oversimplifying it. A lot of this is because the cost of rehab goes up constantly. The cost of construction is driving the need to increase the loan limits. A number of $35,000 loans have been utilized in their program. Mr. Casserly asked if this is the program that has variable interest rates at the State level. Mr. Fernelius stated that is correct. Mr. Casserly stated that part of the reason for the variable interest rates is that the State comes out ahead on the higher interest rate loans because of the low cost of borrowing. They ran some analysis of duplicating the program and if they stuck with a constant interest rate, it would be simpler to administer and easier to understand and it averaged out between the loans that would be going at 6-7% and the loans that would be going out between 3-4%. The program works at the State level. Mr. Commers stated they are talking about raising the rate buy-down from 5-6%, but this seems to be more of a qualification issue about the loan rather than the program itself. It comes down to the income level where the feelings differ. What is the average income in Fridley? Ms. Dacy stated that in the 1990 census, the median income was around $39,000 to $40,000 per year. The average on the loan recipients' income is $40,000 -$42,000. Mr. Commers asked what the income level was for the Hyde Park neighborhood. HOUSING & REDEVELOPMENT AUTHORITY MEETING. JUNE 1. 2000 PAGE 10 Mr. Fernelius stated that it is less than the City-wide median. Ms. Dacy stated that it is a loan program with a lower interest rate than the market rate. The City does get the money back as opposed to grants. The HOME funds in the last six years plus the CDBG funds total up to $1,000,000 for lower income households that meet the federal income restrictions. The HRA has removed a lot of eyesores with the scattered site program. There are four in Hyde Park and at least that many in the Riverview Heights area. Mr. Commers stated that they could possibly make a compromise number on the income guidelines and increase the $58,000 by 5-10% in the next year and a half. Ms. Gabel stated that she is more than willing to compromise. Mr. Meyer stated that he is, too, but they are trying to reach a new group of people by increasing these limits. That is a great puzzlement. They have not tried to reach the group that really needs this program. Mr. Commers stated that he does not know where the guidelines would be drawn to say who is in the group. The big problem is that they have not tried this program and they do not know how it is going to work. Mr. Meyer stated that they would just attract people with higher incomes. Mr. Fernelius stated they are trying to offer that opportunity for people in that income range to get a 6% loan. They may make very few loans in that group, and it may be for the same group that they are serving right now. They are trying for flexibility more than anything else. They are not excluding people under $58,000 from participating in this program. Mr. Meyer stated they are trying to capture a higher income group of people. Should that be a great objective? Mr. McFarland stated that salaries have increased over the last few years. Do they really want the elimination of the higher income people to be detrimental to the whole program? Ms. Gabel stated they do attempt to reach people in Hyde Park. She thinks that people with a higher income with a$200,000 house really do have a valid reason economically to want these types of loans. Do they want to see those houses fall into disrepair? Mr. Fernelius stated that the HRA did previously approve participation in the program. The HRA had the concerns about the guidelines. The program would be on hold until July. Staff will come back with a compromise number on the income limit. Staff was recommending the program continue the way it was set up. Ms. Gabel asked if there could be a way to have one income limit with a certain interest rate and then have another income level with a different or higher rate? HOUSING & REDEVELOPMENT AUTHORITY MEETING. JUNE 1. 2000 PAGE 11 Mr. Fernelius stated they could do that, but they like to keep things simple with their programs and offer one rate. It is also easier to administer and market. MHFA does that with different rates for different categories. They would need to sit down and look at that. Mr. Meyer stated that is probably the only way to get money into these areas. Mr. Commers stated that a lower interest rate might attract lower income people. He assumes that there may be some logical reason for that if MHFA is doing that. It does make the program harder to administer and harder to market. Ms. Dacy stated that in Hyde Park there is a last resort program set up. It is an annual allocation for emergency or people who fall through the program cracks. This requires code improvements. There is the matching deferred program with the loan deferred at 0% and they provide up to $4,000 per unit. There are these specialized attempts and they did see a lot of activity. They could devise a grant program solely for low-income people. The question of the annual budget issue is if you want to use the money for that particular purpose or for other redevelopment issues. The beauty of the loan program is that in fifteen years they would try to get that self-sufficient so there would not be any responsibility for the HRA. Mr. Meyer stated that hardly anything has been done in the Hyde Park area. They should start with these programs where the housing stock is the worst. Mr. Commers stated that he is not sure if they could solve this problem. It is a very complex issue and in order to get the people to update the housing stock will be almost a complete write-off. This is a$50,000 commitment by the HRA, and it seems that there is no reason to attempt this. They could possibly set the income cap at $63,000. Ms. Gabel stated that she would agree to that. Mr. Meyer stated that the compromise proposal is fine. What are staff's plans to do something more for the Hyde Park area to encourage more participation? Ms. Dacy stated that they have surveyed the area twice, had focus groups in 1995, have four different sets of programs in that area, a scattered site program, and CEE publishes a newsletter on a regular basis. The rental inspection program is about to start the second time through every apartment unit. Ms. Gabel stated that the area is better than what it used to be. Ms. Dacy stated that the City has spent $1,000,000 on the 57t" Avenue improvements, and the HRA has some money into that as well. The Werner's Furniture site has been acquired and the Frank's Used Cars is still pending. The Good Year development and the strip mall are controversial, but the properties look nice. They used funds from Home Depot to get the traffic study done and assess the property owners. HOUSING & REDEVELOPMENT AUTHORITY MEETING. JUNE 1. 2000 PAGE 12 Mr. Meyer stated that the best efforts just are not going over with the residents to date. Do they write off the Hyde Park area housing stock-wise? Ms. Dacy stated that the HRA has made an impact and there are issues about the cost of the housing. She agrees with the concept of assisting low-income people and the housing stock. They have made progress and can look at the HRA creating a grant program. Mr. Commers stated staff should continue to look at some programs, but the next alternative is grants. That seems to be like they are getting down to the bottom line alternative. Can they authorize this program with the commitment of $50,000 allowing Mr. Fernelius and Ms. Dacy to see how it works with an income cap level of $63,000? Mr. Fernelius stated they can do that. Mr. Commers stated they have the housing report. He thought they used to also receive the delinquencies. Mr. Fernelius stated that he does give the delinquencies. Last month there was a glitch with CRF's system so they were not able to provide a report. 9. UPDATE ON SALVAGE YARD REDEVELOPMENT: Mr. Commers stated that everybody should have received the proposed contract with Real Estate Recycling, Inc. Ms. Dacy stated that the contract was prepared and they are suggesting that the HRA look at two things. One is to approve the resolution to authorize the contract and to authorize Staff to start work with an appraiser. They can certainly wait until July if the HRA thinks that is too much. Ms. Dacy stated it is necessary to redevelop certain properties on the north and south sides of 73rd Avenue in the general area between Highway 65 and Central Avenue. The goal is to create 245,000 square feet of new industrial building space. Paul Hyde is the interested redeveloper from Real Estate Recycling, Inc. He was the developer on the Onan-Murphy Warehouse project and specializes in contaminated properties. He had done some preliminary site plans and 245,000 square feet was a conservative estimate. There could be more in the development. The project area on the north side of 73rd Avenue includes three salvage yards and two more to the north at 73'/ Avenue. The 9'/ acres include the salvage yard area and immediately to the north on 73rd a little business called Limpro. On the south side of 73rd Avenue, Determan Companies has approached the City because they are expanding and evaluating other sites in the metro area. They want to investigate potential new construction opportunities here. They have also purchased the building on the north side of 72nd Avenue. Also affected would be a multi-tenant building in the southwest corner of the intersection. The south half is about 11 acres and the north is about 9'/ acres. Ms. Dacy stated that they have not finalized all of the properties. This is the general project area. Paul Hyde has a track record in Fridley with the Onan-Murphy Warehouse HOUSING & REDEVELOPMENT AUTHORITY MEETING. JUNE 1. 2000 PAGE 13 site as the developer. He has put together State grant applications for the pollution clean-up funding. They specialize in brownfield sites. They have handled two superfund sites and handled two areas in Wisconsin. They have managed all aspects of the project. The economy and industrial markets are very good, and they do need bigger move-up space for some of the smaller industry in Fridley. There is a great diverse industrial base with existing businesses in spaces that are 10,000 to 20,000 square feet. They agree with the developer that there is a demand for move-up space of 30,000-50,000 square feet. Ms. Dacy stated that grant money is available like never before from Metropolitan Council and DTED. Minnesota is a good state to do these types of projects because of what the State offers for protection via the MPCA in terms of liability. The project would improve the area's image, remove some outdoor storage areas, as well as create new jobs and tax base. This project is financially feasible, and staff is suggesting that if this is done, they establish a new tax increment financing district. Ms. Dacy stated the Murphy-Onan Warehouse project enables them to use some funds from the existing tax increment district to help offset some costs. They are assuming a budget of up to $3,000,000 of state and regional funds. They will negotiate with the redeveloper to negotiate land sale receipts or revenues after the site is cleaned. The cost would approximate about $9,600,000 including a lot of assumptions. There is a 10% contingency and that is almost $900,000. For revenues, they used the present value of tax increment from the new TIF District equaling about $4,300,000, land sale revenues, and about $3,000,000 of grant funds. That came up with $8,300,000 leaving a deficit of $1,200,000 approximately. That is where the TIF #9 comes in, and they are anticipating that they would have $2,000,000 in present value in increment from TIF #9 to offset that deficit. Ms. Dacy stated they do not know the extent of contamination, relocation costs, clean- up costs, exact appraisal, and acquisition costs until they get out there and start talking to owners. In general, the contract states that the redeveloper would be responsible for negotiating with the owners of the properties. The HRA will work exclusively with Real Estate Recycling for approximately one year to provide time to work with the owners. The next step is grant applications in November of this year. Ms. Dacy stated that the contract states that they would attempt to negotiate a redevelopment contract by next year. After they find out more information about the environmental state of the acquisition, they may have to go back to the HRA and revisit the feasibility of the contract. The contract merely states that they will cooperate in further investigation and negotiate in good faith. Mr. Commers asked if the HRA could get a copy of the budget to see how the numbers are derived. His initial impression is that the HRA needs additional information to determine the feasibility. Should they determine what is on that property and get phase II started right away? Is it the intention of Real Estate Recycling to purchase those properties? Mr. Casserly stated that is correct. There would be contingencies on the appropriate environmental aspects; and, as part of the purchase agreement, they would have the HOUSING & REDEVELOPMENT AUTHORITY MEETING. JUNE 1. 2000 PAGE 14 right to test. If there were problems, the cost would be assessed and then negotiation with the sellers would take place. In this case, with a half a dozen different orders, opportunities and options can be explored. Real Estate Recycling seems to be very knowledgeable with environmental issues. They do not proceed unless they get a no- association letter from the MPCA. The letter says that people involved in the clean-up shall not be responsible before the contamination is cleaned up. Any sampling plan would also be approved by the MPCA. A response/action plan would then be prepared. At the end, they would want to have a letter from the MPCA indicating that they had applied and followed procedures. They really do not know all the costs involved. In the event they cannot proceed, they need to know what their exposure could be. It is very important to start an appraisal process. The contract also states that Real Estate Recycling is spending its funds to develop this. When they go ahead and purchase properties, the HRA would reimburse them for costs over and above an appraised market value site. Mr. Commers asked what input they have regarding the cost for the land. They have the biggest exposure so they should have some input. Mr. Casserly stated that is why they need to start an appraisal process. Mr. Commers stated that they need an environmental assessment process. Mr. Casserly stated they will always have the right to say "no". Inherent to these agreements is that they will have a contingent process upon approval of HRA funding. Mr. Commers stated that once the appraisal is determined, the negotiation can start. Hopefully, they will then have a better grasp on the unknowns. Mr. Casserly stated that oftentimes property owners feel they have little, if any, contamination problems. That becomes a condition of the purchase agreement to have the right to go in and do all this testing. This will give them the opportunity to do that. Many property owners are not particularly interested in having tests run. Ms. Dacy stated that the owners may not be motivated to talk to us without some type of discussion on acquisition rights. They do not have the legal right to go in there and ask for a Phase II assessment. Mr. Commers stated they do on the salvage yards. Mr. Casserly stated that they can go in with a modified procedure, but the goal is to try to do as much on a cooperative basis as possible. They were trying to address the real issue. In one instance, there is an opportunity for relocation issues. In another instance, there is an opportunity for someone to relocate within the site to have better exposure. It just seemed like there was opportunity to do those kinds of things. Mr. Commers stated that he would expect the problems would come in acquiring the properties south of 73rd Avenue, because those are active businesses. Mr. Casserly stated they are within the project area. HOUSING & REDEVELOPMENT AUTHORITY MEETING. JUNE 1. 2000 PAGE 15 Mr. Commers stated that may not be a good reason to take their property. Mr. Casserly stated that in terms of a redevelopment program, he thinks they would not have the difficulty including them. They are part of the overall project and probably would qualify for a redevelopment tax district. Ms. Dacy stated that the environmental goal of clean-up should not be overlooked. She believes that it is public record that there is testing going on a property right now. They do not know about the salvage yard properties. Another goal of the project is to make use of these funds to analyze the issues and address them. Is this under the redevelopment statutes? Mr. Casserly stated that was correct. This is inherently a complicated project; and just because of the size and condition of the parcels involved, it will take time to piece this together. He is not sure that the finances are going to work for it. Clearly they have the resources, but it does not appear that the HRA would want to utilize all those available resources to make this project. Additional funds may become available in that tax increment district. Mr. Commers stated that he would like to see the preliminary analysis so he could look at it in budget form and then he could bring any questions he may have. Mr. Casserly stated that he could look at page 3. Mr. Commers asked about the rehab appraisal on the Onan-Murphy property. Mr. Casserly stated that between the land and the building together, the estimated market value would be $14,200,000. They took the tax increment and future value and brought it back to the year 2000 dollars. They are assuming they will have DTED grants and Metropolitan Council grants. The sources are at about $8,300,000. They had to pick some numbers for land acquisition numbers. Building values were doubled. This project is large enough that the HRA would probably have to sell some to finance it. The total uses come up at about $9,600,000. A deficit is being shown right now at about $1,300,000. They suggest making up the shortfall by using part of the revenues to support a bond issue. This is not anything to start moving on without knowing a lot about it. Mr. Commers stated they have to be careful. Mr. Casserly stated that the concern is not the environmental cost. This is industrial land to be reused as industrial businesses. There is more funding becoming available. The real concern is the acquisition costs. Mr. Commers stated that when they start adding south of 73rd is when they put themselves at risk. That is where operating businesses are. Ms. Dacy stated that the majority of the ownership of that land has expressed an interest to the City of potential relocation within the project area or elsewhere. They are HOUSING & REDEVELOPMENT AUTHORITY MEETING. JUNE 1. 2000 PAGE 16 still evaluating options and will come back for an update. They need to start somewhere to determine if the project will work. They feel from a success standpoint of creating a business park, it is better to do both sides of the street and will make an impact on that particular area. They may not need to acquire property on the south side if they decide to stay, and would agree to enclosing all the outdoor activities inside a building. They could potentially see that it can work. It is to their advantage to do that. Mr. Commers asked if she meant putting the tanks inside some kind of structure. Ms. Dacy answered in the affirmative. Mr. Commers asked what has to be appraised. Mr. Casserly stated that is an issue they need to sort out with staff and Real Estate Recycling. A proposal was given to us for most of the properties north of 73rd except two parcels. Some of those properties have different uses that require different analysis. Mr. Commers asked if they are all being used in accordance with the property zoning. Ms. Dacy stated they are as far as she knows. Ms. Dacy stated that staff should maybe come back in July with a more specific proposal. Mr. Casserly stated that at this point it would be more prudent to be more specific. Ms. Dacy stated that the clock is ticking in terms of the appraisers billing us. She wanted to get the HRA to agree to it being acceptable to them billing us. Mr. Casserly stated that they want more clarification on Phase I analysis and also on the series of parcels. They also want to look at parcels that were not included in the original listing. Mr. Commers asked if it was possible that Mr. Hyde could talk to the parcel owners identified in the appraisal and see if they can do Phase II from an environmental standpoint. Mr. Casserly stated there should be some contractual agreement with Real Estate Recycling group. He expects all of these to be well negotiated, and Ms. Dacy and Mr. Fernelius will need a lot of time. Ms. Dacy stated Mr. Hyde has approached these cases with the attitude that it is a clean site contingent upon more analysis of study. The City Manager and City Council are very concerned about any redevelopment project and the impact on existing businesses and how that is approached. They would prefer the approach Mr. Hyde is suggesting with the parameters as identified by the HRA. It will work better in the long run. HOUSING & REDEVELOPMENT AUTHORITY MEETING. JUNE 1. 2000 PAGE 17 Ms. Gabel stated she is very concerned about the clean-up costs and money available. Ms. Dacy stated they will have a better idea of the clean-up costs after they find out from the owners and conduct the Phase II testing. Mr. Hyde conducts those tests and hires the consultants to analyze them and prepare the action plan. It may depend on the types of contamination and telling the owner they have a problem to take care of. The funding is allocated by the legislature to DTED and the Metropolitan Council. It is the same funding sources used for the Onan-Murphy Warehouse. They are available twice per year with application deadlines on May 1 and November 1. All the testing and analysis should be done prior to November 1. If they do not get it, then the HRA gets to come back and revisit the project. There is nothing in the contract for exclusion of negotiations that commits the HRA to doing the redevelopment project. Mr. Casserly stated that is correct. Ms. Dacy stated that all they are doing is working with the developer, assigning types of responsibilities, and establishing a time frame. Mr. Commers asked what would happen financially if they do not decide to do the project. Mr. Casserly stated they would be responsible for the appraisal. The company would be responsible for environmental testing, negotiations, grant preparation, and other issues. Mr. Commers stated that in July they could come back with more information. As far as the appraisal, there is no reason to forgo that, and it is a critical piece of information. In addition to the appraisal, they would need a relocation number. Mr. Casserly stated they need to identify relocation costs. Mr. Commers asked what the responsibility of the owners is in regards to approval. Ms. Dacy stated that until they have more information, staff does not have a position right now. In Andover, Mr. Hickok interviewed the City Administrator, and learned that the ability to take on the clean-up of the salvage yards there was a leveraging piece in the negotiations saying that the City would take care of that. Mr. Hickok stated that the City of Andover took over that responsibility. He stated that Mr. Hyde goes in with a good understanding of what he would find in a salvage yard. This is his forte, and he can make a far more accurate assessment than staff. Mr. Commers asked if they would have to pay more for remedial than the reduction in purchase price. Mr. Hickok stated that it is all in negotiation, and he would hate to speculate. It really is complicated depending on the owners knowing the extent of contamination and the buyer knowing what it is going to take to clean that up. HOUSING & REDEVELOPMENT AUTHORITY MEETING. JUNE 1. 2000 PAGE 18 Mr. Commers stated that he thought they could use some of the City of Andover's experience, but they are still trying to figure out that they have to pay more than what they got at a reduction. Mr. Casserly stated that is correct. They did the analysis several years ago on what revenues they had available. They do not have anything approaching the kind of problems they hit. They were piling a lot of stuff. This is far more traditional. Mr. Commers stated that for the July meeting, the HRA should look at the budget and get more information and get something going to try to make a decision. Mr. Casserly stated they need more discussion on which parcels they want. This is an agreement to go ahead and do more analysis. If the HRA members are comfortable on approving the agreement and approving the maximum amount of the appraisal, they could do that tonight. If the HRA wants Staff to find out more, they can do that too. Mr. Commers stated that there needs to be changes to the exclusive contract they talked about. They need the appraisal, and he does not see any harm in doing that. Mr. Meyer asked if they need to do more work on the relocation costs. Ms. Dacy stated they would have to investigate a relocation consultant and come back in July with some estimates on that work as well. Mr. Hyde can attend the meeting once the issues are ironed out in the contract. Ms. Dacy asked if they could start with the appraiser. Mr. Commers stated, yes. Mr. Casserly stated that they need to go back and see specifically what those sites are also. Mr. Commers asked if they were on both sides of 73rd Avenue. Mr. Casserly stated that was correct. MOTION by Mr. Meyer, seconded by Ms. Gabel, to authorize an appraisal up to $23,500 for parcels to be identified by staff. UPON A VOICE VOTE, ALLVOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. 10. UPDATE ON JOINT COMMUNITY TASK FORCE: Ms. Dacy stated that the June 8 meeting will not work out so staff will be sending out another letter. At the last meeting, Ms. Schnabel raised the issue of a Medtronic's representative attending the meeting. They are evaluating the appointment of a staff person to attend the Technical Advisory Committee. HOUSING & REDEVELOPMENT AUTHORITY MEETING. JUNE 1. 2000 PAGE 19 ADJOURNMENT MOTION by Mr. Meyer, seconded by Ms. Gabel, to adjourn the meeting. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED AND THE JUNE 1, 2000, MEETING OF THE HOUSING AND REDEVELOPMENT AUTHORITY WAS ADJOURNED AT 10:25 P.M. Respectfully submitted, Signe L. Johnson Recording Secretary