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HRA 06/07/2001 - 00009308CITY OF FRIDLEY HOUSING & REDEVELOPMENT AUTHORITY MEETING JUNE 7, 2001 CALL TO ORDER: Chairperson Commers called the June 7, 2001, Housing and Redevelopment Authority meeting to order at 7:30 p.m. ROLL CALL: Members Present: Larry Commers, Virginia Schnabel, Pat Gabel, John Meyer Jay Bajwa Members Absent: None. Others Present: William Burns, Executive Director of the HRA Grant Fernelius, Housing Coordinator Scott Hickok, Community Development Director Rick Pribyl, HRA Director of Finance James Casserly, Development Consultant Paul Eisenmenger, HRA Accountant APPROVAL OF THE MAY 3, 2001, HOUSING AND REDEVELOPMENT AUTHORITY MEETING MINUTES: Ms. Gabel stated that on page 3, second paragraph, the sentence should read that the Appeals Commission, rather than the HRA, granted a variance. MOTION by Ms. Gabel, seconded by Ms. Schnabel, to approve the May 3, 2001, Housing and Redevelopment Authority meeting minutes as amended. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. CONSENT AGENDA: 1. CONSIDER RESOLUTION HRA 5-2001 AUTHORIZING EXECUTION OF A COOPERATIVE CONSTRUCTION AGREEMENT WITH Mn/DOT FOR DECORATIVE TRIM DETAIL ON UNIVERSITY AVENUE SOUND WALL: 2. CONSIDER REVISED PROCEDURE FOR SELLING HRA LOTS: 3. CLAIMS AND EXPENSES: Mr. Commers asked if there were any questions regarding the items for the Consent Agenda. Mr. Commers stated that item #1, "Consider Resolution Authorizing Execution of a Cooperative Construction Agreement with MnDOT for Decorative Trim Detail on University Avenue Sound Wall", would be discussed under the "Action Agenda". Ms. Gabel stated that she had a question on item #2. HOUSING & REDEVELOPMENT AUTHORITY MEETING, JUNE 7, 2001 PAGE 2 MOTION by Mr. Meyer, seconded by Ms. Schnabel, to approve the consent agenda as amended with items 1 and 2 to be placed at the end of the Action Agenda. . UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. ACTION ITEMS: 4. CONSIDER MODIFICATIONS TO JOB DESCRIPTIONS AND RESPONSIBILITIES FOR HOUSING COORDINATOR AND REMODELING ADVISOR: Mr. Commers asked if any changes were made to these job descriptions, as the HRA has reviewed them before. Mr. Hickok stated that no changes have been made. The job description for the Community Development Director was included in the agenda with the understanding that further modification will be necessary, although there is some dovetailing that will happen in terms of job descriptions. The Community Development Director has distinct responsibilities outlined under housing. Staff recommends that the position be modified as recommended for Grant Fernelius and also that the former Remodeling Advisor position be modified to a three-quarter time position with the new description attached for review. Mr. Commers asked if they have done anything about the former Remodeling Advisor position. Mr. Hickok stated they are waiting for the HRA's approval before advertising for the position. Ms. Schnabel stated that she was pleased to have had the opportunity to review these descriptions in order to better understand the roles. Mr. Fernelius is assuming more of the duties that were previously done by Barb Dacy. Mr. Hickok's role is expanded to include more areas than what Ms. Dacy had in the past. She is very satisfied with both descriptions and has no further questions. Ms. Gabel stated that the whole concept is good, but she is still concern about the remodeling information. One of the HRA's goals is to upgrade Fridley's housing stock, and it would be easier for people if there was somebody at the City to talk to rather than dealing with CEE. CEE will not be able to answer many questions and will have to refer people back to the City. Mr. Hickok stated that CEE knows the building officials and Planning Staff very well, and people come to the City with the information they need. He is not seeing the differences in terms of timing with questions of setbacks and things like that. He would be very concerned as Community Development Director about lessening the amount of service or making it cumbersome for the public. The people can call in and get the information they need. Customer satisfaction levels are going to remain the same. If not, that will be an issue for staff to take up with CEE. Mr. Meyer stated he is puzzled as to why they feel they have to expand staff to transfer duties when they have had many jobs accomplished with certain staff. What is in the immediate future that would demand that staff would need more planning for projects? They seem to be now expanding the role when the really time-consuming projects have already been brought to fruition. Is this justified by Fridley's finances? HOUSING & REDEVELOPMENT AUTHORITY MEETING, JUNE 7, 2001 PAGE 3 Mr. Hickok stated that now is not the time to sit back. Staff's job is more complex, and these projects are very detail-oriented and time consuming. The customer service delivery concern causes them to ask the question. They are still trying to be true to the lean way of operating. Mr. Commers stated that the point is: Where do they stand today in terms of the changes in the State tax law? He is not sure where this leaves us and how they can tie this all together. They could put a moratorium on everything to see where the numbers will be. Mr. Casserly stated that there will probably be deficits in dealing with more smaller projects and a lot more emphasis on continuing with some housing programs. The HRA has a good General Fund. Mr. Commers stated he is more interested in where they would be standing financially and how much of a reduction in revenues this would be. Mr. Casserly stated that it is a matter of what kind of resources are available for projects. They have the same resources as in 2001 phased in over a couple of years. There is not an issue of not being able to cover any contractual obligations. Mr. Commers asked if it was firmed up that they could cover some of their existing programs. Mr. Casserly stated that was not firm, but the HRA has always been in a position where they have been very secure with the debt. Medtronic is the biggest debt they have based on the revenues generated and taxes. Most other revenues are quite manageable, and Fridley is fortunate to be able to pay the debts off. Ms. Schabel stated that maybe they should hold off on the Remodeling Advisor position. Mr. Commers stated that he had not given that much thought. It is just the whole thing about where they are in debt. Ms. Schnabel stated that with the three-quarters time change, maybe the next person will hold onto the job longer. If they are faced with financial problems, they might be better off waiting until the legislature shows better where the budget figures will end up. Mr. Hickok stated that in spite of all the legislature discussion, the devotion of staff to HRA projects does not change. The big projects may come under a new light now, but the small project detail does demand an incredible amount of time with more time than the existing staff level has. Delaying further on this creates demands on current staff, and there is a void that is creating strain as staff tries to deliver the same amount of service with less people. Mr. Commers stated that maybe they can postpone this until after the budget discussion. Ms. Schnabel stated she has no problem with Mr. Fernelius' salary, but the Remodeling Advisor salary decision could wait until after the budget decision. Mr. Bajwa stated that the bigger issue is whether there is a need and he sees this as a constantly evolving process. The HRA will be busy with more projects in the future. The research that goes into finding what needs to be done requires a person at three-quarters time. An article he read in Wall Street a few days ago states that cities are looking at clustering as an element to attracting new industry to their communities. This spawns new industry and creates new jobs and there is need for housing, and the HRA will be busy trying to find affordable housing. The HRA needs to consider the future and how to fulfill the needs. HOUSING & REDEVELOPMENT AUTHORITY MEETING. JUNE 7. 2001 PAGE 4 Mr. Commers asked him if he was aware that they have the joint Columbia Heights and Fridley Committee to examine the needs as a result of Medtronic's development. Mr. Bajwa stated that he is aware of that and this resource is a way to be thinking about this and it is a great idea. Mr. Commers stated the only significant change is the budget change. They have $3,500,000 of their $4,000,000 from TIF money. If that is reduced, they are going to have to figure out what we are going to do. MOTION by Mr. Meyer, seconded by Mr. Bajwa, to approve Mr. Fernelius' annual salary of $62,472.80. MOTION by Ms. Schnabel, seconded by Mr. Meyer, to remove the item of Modifications to HRA Staff Responsibilities and Salary Restructuring for the Housing Coordinator and Remodeling Advisor from the table. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. MOTION by Mr. Meyer, seconded by Ms. Schnabel, to amend his main motion to approve Mr. Fernelius' salary retroactive to February 1, 2001. Seconded by Ms. Schnabel. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. MOTION by Mr. Meyer, seconded by Mr. Bajwa, to table the Remodeling Advisor job modifications and job descriptions and responsibilities. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. 5. CONSIDER RESOLUTION NO. 5-2001, "RESOLUTION AUTHORIZING EXECUTION OF A COOPERATIVE CONSTRUCTION AGREEMENT (NO. 81795) BY AND BETWEEN THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF FRIDLEY, MINNESOTA, AND THE MINNESOTA DEPARTMENT OF TRANSPORTATION" FOR DECORATIVE TRIM DETAIL ON UNIVERSITY AVENUE SOUND WALL: Mr. Commers asked if the change is merely that the City will pay the funds and the HRA will reimburse the City. Mr. Burns stated, yes, and there are no other changes. Mr. Fernelius stated that the area of decoration was from 44th Avenue to 53�d Avenue. Mr. Burns stated that a notice would be going out to property owners of the start date. MOTION by Ms. Schnabel, seconded by Ms. Gabel, to approve Resolution No. 5-2001, "Resolution Authorizing Execution of a Cooperative Construction Agreement (No. 81795) By and Between the Housing and Redevelopment Authority in and for the City of Fridley, Minnesota, and the Minnesota Department of Transportation". HOUSING & REDEVELOPMENT AUTHORITY MEETING. JUNE 7. 2001 PAGE 5 UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. 5. CONSIDER REVISED PROCEDURE FOR SELLING HRA LOTS: Mr. Commers stated that it looks like they are going back to the procedure they used in the past. Mr. Fernelius stated that is correct. Ms. Gabel asked if this process became too cumbersome for individuals. Mr. Fernelius stated he did not think so. They are only opening this up for bids and not adding substantial hoops for people to jump through. They would establish a bid deadline and open it up to the highest bidder. Mr. Commers stated they did not start on the modular home on Mississippi the HRA approved. Mr. Fernelius stated they have not closed on that lot yet. The closing date would possibly be within the next couple of weeks. It is an issue of finalizing the plans with the company that would actually build it. The preliminary plans have been submitted but not the final construction plans for a building permit. MOTION by Ms. Gabel, seconded by Mr. Meyer, to approve the revised procedure for selling HRA lots. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. 6. CONSIDER HRA BUDGET FOR 2001: Mr. Commers stated that, typically, they have the working budget meeting first. Ms. Gabel asked if this was the working budget. Mr. Fernelius stated that it is the final budget, but they could postpone the HRA's action. Mr. Burns suggested they do this in the formal setting, and they could table it. In the future, they could return to the informal setting first; but they are very late this year in presenting this. Mr. Fernelius stated that their goal is to get on a schedule that is synchronized with the City's budget. Mr. Pribyl stated that the new software system used is an account software for the actual accounting portion of the HRA accounting system. Mr. Fernelius stated that the revenues are at $4,422,360. A substantial part is tax increment at over $3,000,000. There is an additional $558,000 in interest from loans for the redevelopment and economic side. They are looking at $233,000 in the sale of new property, most through the Scattered Site Program and the HRA tax levy. The expenses are $2,065,000 as listed in the HRA totals spreadsheet with the three columns. The public improvement cost is the Gateway East project. The $664,000 in land payments is an expense including the economic development deals. There is $500,000 of additional capital for the loan program for home HOUSING & REDEVELOPMENT AUTHORITY MEETING, JUNE 7, 2001 PAGE 6 improvements. A Personal Services budget is at $246,000 including salaries and benefits of HRA employees and staff working on behalf of the HRA. Professional Services budget is $356,000 including costs related to tax increment financing projects and demolition projects. Mr. Fernelius stated this is the cap on the amount that they could charge in the tax increment district. This is the maximum they would charge. They have identified in the budget real expenditures of $132,000 out of the General Fund. Under the tax increment category, they are looking at a maximum of $224,000. Mr. Commers asked where they would look to see what that is made up of. Mr. Fernelius stated that there is not any additional back-up detail on that. Mr. Pribyl stated this is the amount in administration that can be legally charged against the tax increment district and is the maximum that can be charged against those tax increment districts. They are only putting the cap in there to show what the maximum exposure would be on administration expenses. Mr. Commers stated that all staff and personnel are paid for under the General Budget. Mr. Pribyl stated that when staff and consultants are working under administration, that charge would go to administration under the tax increment districts. Those things that are non-tax increment related would go under the General Fund. They never know what that relationship would be until they get into that year when they are actually dealing with negotiations on development projects and agreements. Mr. Commers asked what it actually was last year. Mr. Burns stated it was around $189,000. Mr. Pribyl stated that would be in the ball park. Mr. Burns stated that the charge in General Fund Services on the spreadsheet was $155,000. Mr. Commers stated that indicates it is coming out twice. Mr. Pribyl stated that the HRA would not be hit twice. If staff is working administration, it will be charged under administration, not general. Mr. Burns stated that in the first group of line items under personal services, are they talking about the interfund charge from the General Fund to the HRA. Mr. Commers stated that was in Form 107. Mr. Burns stated that was correct but in the category "Other Services and Charges", they are talking about contractual people like Mr. Casserly. They are estimating the outside services will cost about $132,500. They are allowed to claim a certain cap, and they have added money for potential expenses they have not yet identified for a total of $358,000. Personnel talks about internal salaries and interfund charges. Mr. Commers asked why the $356,000 has gone up so much from last year. Mr. Pribyl stated they do not know where that is actually going to wind up being. HOUSING & REDEVELOPMENT AUTHORITY MEETING. JUNE 7. 2001 PAGE 7 Mr. Commers stated they should know a little bit about where the expense occurred. Mr. Pribyl stated that is something to be brought before the Commission with each one of the projects. They can only spend the administration dollars based on actual involvement. They have to document each hour spent in those areas. Mr. Commers stated that is a subject for the State Auditors. Mr. Pribyl stated that the administration has to be documented. Mr. Commers stated that explains it and it makes sense to him. Ms. Schnabel asked for an example of non-tax increment finance district related cost. Mr. Pribyl stated that is for outside consultants. Mr. Commers stated that the $224,000 represents the potential cap for outside expense. Ms. Schnabel asked where Mr. Casserly's expense was listed. Mr. Pribyl stated that is a qualified administrative cost under TIF. Mr. Fernelius stated that the home improvement program funding is continued under this budget. They can complete the Gateway East project and still have a healthy General Fund balance. They have not factored in anything about the Salvage Yard project. They do not know what is going to happen with property tax reform and how that will impact in future years. Mr. Commers asked what the tax bill does for our current year. Does it only reduce the revenues for half a year? Mr. Casserly stated that it does not affect it at all this year. Right now everyone is uncertain what the tax rates are going to be. The Legislature and the Governor are considering taking over the General Education budget. The legislation states they are going to levy for a statewide basis at around $450,000,000. Any amounts that come from the tax increment district will be part of the State's fund now and not returned to the tax increment district. They are considering reducing the class rates of commercial and industrial property from 3.4%-2.1 %. They are going to have a reduced tax capacity upon which they could levy. The State is going to take that spread and put a levy against part of that for General Education uses. From a commercial/industrial taxpayer perspective, their taxes are only going to go down maybe 10% because the State is going to be levying back a portion of what they took. They do not have that amount to levy and will have reduced funds. The impression of the class rates for rental and higher valued housing and market rate rental will be reduced. Those two factors will reduce the fund to 30-40%. Mr. Casserly stated there will be some increases in market values and the State is considering eliminating the tax rate cap on all the existing tax increment districts. A smaller tax capacity and the same size budget makes for a higher tax rate to generate the same amount of money. They do not know how high the tax rates are going to be. Their projections show that the rates may increase 15-25%. The projects requiring a long term commitment are going to have to be analyzed very carefully to determine if they have the resources to do the project. Mr. Commers asked what that does to the projects like Medtronic where you pay as you go. HOUSING & REDEVELOPMENT AUTHORITY MEETING. JUNE 7. 2001 PAGE 8 Mr. Casserly stated they are trying to recover some of the money they spent. Mr. Fernelius stated that the last page of handouts listed the projects of all the pay-as- you-go payments. Mr. Commers asked which ones are not pay-as-you-go. Mr. Fernelius stated they are all pay-as-you-go. Mr. Commers stated that Gateway East is not pay-as-you-go. Mr. Fernelius stated that is correct, but a revenue note was not issued for that. Mr. Commers asked which ones were pay-as-you-go that would be covered by the revenue generated. Mr. Fernelius asked if he was referring to the districts. Mr. Commers stated that he was. Mr. Fernelius stated that he believed the funds were set up as actual tax increment district funds. Some do not even have projects. Mr. Casserly stated that the debt service allocation on their general obligation debt includes many properties. Mr. Fernelius stated that their bond payments will be $1,572,000. That is what they are obligated in terms of debt payments. That represents other obligations outside the pay- as-you- go notes. The debt service is all paid for by tax increment. Ms. Gabel asked what the "ad valorum" was. Mr. Fernelius stated that is the tax increment. Mr. Commers asked what income they have on housing projects. Mr. Fernelius stated that is a net loser. On the supplemental report under the column "Total Housing", revenues are $470,000 and expenses are $152,000. They make additional contributions to fund the loan program, and they show up outside expenses. That additional capital outlay of cash is at an additional $400,000. Mr. Fernelius stated that on the budget worksheet, they are projecting transfers from the General Fund to the Housing Fund of almost $400,000 which would bring the housing fund to a zero balance at the end of 2001. Mr. Commers asked if the budget is really $550,000 versus the $470,000 that they are bringing in. Mr. Fernelius stated that is correct. Mr. Commers asked how some of these earlier projects are existing? They are all paid back? HOUSING & REDEVELOPMENT AUTHORITY MEETING, JUNE 7, 2001 PAGE 9 Mr. Fernelius stated that is correct. Mr. Pribyl stated they are reaching the end of some projects. MOTION by Ms. Schnabel, seconded by Ms. Gabel, to approve the HRA Budget for 2001 including the Revised Budget figures. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. Ms. Gabel asked where CEE would be included in the budget. Mr. Fernelius stated that it is listed in the non-professional service category. They have identified approximately $15,500 as an expense for that under the Housing Operating Fund #265 with the expense category. Ms. Schnabel asked if that was Form 4340. Mr. Burns stated that is correct for services contracted. Ms. Schnabel stated this comes out of Housing. Mr. Fernelius stated that will come out of the $53,200 in the Housing column. Mr. Commers stated that it would be terrific if they had the same kind of things included in the budget for next year. That is a concern, but it sounds like everything is done and some places may get hit even worse with financing of their districts, especially in small towns. Mr. Casserly stated there are some unintended consequences. It was so complicated that people did not realize how the State was funding local development which was through the Education Fund. Now the State is going to not provide that and that is what is creating consternation among all the various units of government. Some in the banking community are starting to reflect a little bit with what is happening with this change. Because of the latest revenue reports, the Governor has now asked the House and Senate to take another $3,500,000 out of the programs. Mr. Commers asked what happens when the redevelopment funds are zeroed out. Mr. Casserly stated there is going to be some sorting out in the next year with DTED funds and clean-up funds. INFORMATION ITEMS: 7. UPDATE ON GATEWAY EAST PROJECT: Mr. Fernelius stated that they had to delay the closing groundbreaking due to some title issues that relate to the vacation of the University Avenue Service Drive. They need to go to court to establish the City's right to vacate it to convey it to the developer. The County will allow the plat to be recorded while the title action is going on. Staff's goal is to try and close the week of June 18 and then establish groundbreaking shortly after. ADJOURNMENT HOUSING & REDEVELOPMENT AUTHORITY MEETING. JUNE 7. 2001 PAGE 10 MOTION by Ms. Gabel, seconded by Ms. Schnabel, to adjourn the meeting. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED AND THE JUNE 7, 2001, MEETING OF THE HOUSING AND REDEVELOPMENT AUTHORITY ADJOURNED AT 9:00 P.M. Respectfully submitted, Signe L. Johnson Recording Secretary