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HRA 10/04/2001 - 00010444CITY OF FRIDLEY HOUSING & REDEVELOPMENT AUTHORITY MEETING OCTOBER 4, 2001 CALL TO ORDER: Chairperson Commers called the October 4, 2001, Housing and Redevelopment Authority meeting to order at 7:30 p.m. ROLL CALL: Members Present: Larry Commers, Virginia Schnabel, Jay Bajwa Members Absent: Pat Gabel, John Meyer. Others_Present: William Burns, Executive Director of the HRA Grant Fernelius, Assistant Executive Director of HRA Scott Hickok, Community Development Director Rick Pribyl, Finance Director Paul Eisenmenger, HRA Accountant James Casserly, Development Consultant Greg Johnson, Development Consultant Assistant APPROVAL OF THE AUGUST 2, 2001, HOUSING AND REDEVELOPMENT AUTHORITY MEETING MINUTES: MOTION by Ms. Schnabel, seconded by Mr. Bajwa, to approve the August 2, 2001, Housing and Redevelopment Authority meeting minutes as written. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. CONSENT AGENDA: CLAIMS AND EXPENSES: Mr. Commers stated that there are check numbers 27687 - 27693 with three additional items presented involving property taxes and the sound wall improvements along University Avenue. Mr. Bajwa asked what check number 27687 was for. Mr. Fernelius stated that it is for the company that processes the loans. Mr. Burns stated it is for the housing rehab program. Mr. Bajwa asked if it was for a six-month period. Mr. Fernelius stated that it is for the single loan. Mr. Commers asked if they entered into a contract this year to have them service the loan. HOUSING & REDEVELOPMENT AUTHORITY MEETING. OCTOBER 4. 2001 PAGE 2 Mr. Fernelius stated that they did last year. MOTION by Mr. Bajwa, seconded by Ms. Schnabel, to approve the Consent Agenda with the additional claims and expenses. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. ACTION ITEMS: None INFORMATION ITEMS: 2. REVIEW TIF CASH FLOW ANALYSIS: Mr. Fernelius stated that Jim Casserly and Greg Johnson will review the cash flow analysis. The past legislative session had significant impacts regarding property tax reform. That has affected our tax increment program. Mr. Casserly stated that trying to get a handle on resources for any HRA is complicated. There are constant changes in the tax laws. TIF had a major reform the last session so City staff has asked them to review various legislative changes and how these changes impact the programs. They have worked extensively with City staff, and this is work in progress with more issues needing to be addresses as they keep going. This is for planning purposes and not a budget or audit. Mr. Commers asked if this gave a clear picture as of January 1, 2002. Mr. Casserly stated that was correct assuming that balances toward the end of the year change. He is not sure of the expenses for 2001, but a number has been identified. Mr. Commers asked what was the best way to do that with assumptions having a bearing on the analysis. Mr. Casserly stated it is a cash flow analysis. They tried to set up the first three pages to give a basic overview. The assumptions are on page 4. Mr. Johnson stated that the assumptions listed are showing fund balances calculating interest components. The next category is tax capacity rates for property taxes for 2002. They have dropped 40% from 2001, and this shows class rates going forward. Mr. Commers asked what the $150,000 means for 2001. Mr. Johnson stated that under the commercial/industrial, the first $150,000 market value is taxed at a 1.5% rate for 2002. For 2001, it was 2.4% and has dropped to 1.5%. The rate over the base $150,000 dropped from 3.4% in 2001 to 2% in 2002. There are drops in each category. Rental dropped from 2.4% to 1.8% in 2002 and drops again in 2003 and 2004. Low income housing has seen an increase in 2002 and will go up to the market rate rental property HOUSING & REDEVELOPMENT AUTHORITY MEETING. OCTOBER 4. 2001 PAGE 3 within 2 years. This shows tax breaks for low income property. The market rate rental will have the same types of tax calculation as low income rental. Mr. Commers stated that the exemptions will go away. Mr. Johnson stated that it will go away by 2004. Residential homestead had the base raised to $500,000 for 2002. This means significantly less property tax will be paid on a house. The rate above $500,000 is taxed at 1.25% for a class rate. There is about a 40% reduction from 2001 to 2002 in taxes. Mr. Commers stated that increasing market values will reduce the difference. Mr. Johnson stated that the cash flow brought some increases for 2002. Most of the assumptions used were really the calculation of tax increment. The actual tax rates included three different school districts, the watershed district, and different tax increment districts. They had to make a guess that the rates will go up in the future, but there are some issues that the new rates cannot go above the frozen tax rate the legislature has in place right now. If it goes above that, they are limited to a tax increment collection at 1.9.% Mr. Commers asked if they have always captured that increase in the past. Mr. Pribyl stated that is the basis for what they are doing in the school districts. Mr. Commers stated they are refunding that difference. Mr. Pribyl stated that was correct. They perceive that more or less as a windfall to the HRA, and it is now eliminated by the changes in State Statute. Mr. Commers asked if they ever really did include that. Mr. Pribyl stated they did not. All projections were based on the tax break that was in place at that time with the bonds. Mr. Commers stated that on page 2, the HACA/LGA elimination of the McGlynn property was represented. How is that handled? Mr. Casserly stated that the McGlynn payment has never been recovered by the HRA because it was a resulting payment that went to the City. That was never reflected. Mr. Johnson stated that he thought that was a true statement. Mr. Casserly stated that it went to the City, because they were able to collect from the developer an amount to cover their loss at the time. That penalty has been eliminated, and the reason for the City to receive the payment no longer exists. This is just a policy issue. Mr. Commers stated that the policy has been to make sure that they reimburse the City for any HACA losses. Mr. Casserly stated that when this district was set up, that was the policy. The law changed which prohibited that. They determined what contributions the City has made to the various projects so they could meet the requirement that the City is making a local contribution. This is HOUSING & REDEVELOPMENT AUTHORITY MEETING. OCTOBER 4. 2001 PAGE 4 isolated and only was possible for 18 months to 2 years in the early 1990s. There are a number of projects which they calculated a developer's fee which was payable to the City to compensate for the loss of government aid. They were trying to do it on a level basis for a penalty that was phased in over a number of years. The first five years, there was no penalty and the City was receiving funds. The issue is where this resource should go. Mr. Commers stated that they do not need to spend time on this if it is not significant. They could talk about TIF #1,#2, and #3, and the bonds issue. Mr. Casserly stated it is significant because it is whether or not we can use the resources in the districts #1,#2, and #3. They have limited tax increment use, and they can only use the tax increment being generated for some specific kinds of activities. They have used the increment to pay debt service and continue to use the increment to pay the debt service for two specific bond issues. If you have a debt, you would be mandated to use that increment to pay your debts under the new State law. Mr. Commers stated that he had a question about that on page 4 and 5. Mr. Johnson stated that on page 7, where it shows the debt service coming out of TIF #2 is the repayment of 1998 bonds. Coming out of TIF #3 and #1 is the 1997 A bonds. Mr. Commers stated this does not require any action, it is just continuing. Mr. Casserly stated that is correct. Mr. Johnson stated they are showing that there are no excess funds in the first three TIF districts that can be used. Mr. Casserly stated this is good, because if there were additional revenues in those districts, they would have a difficult time using them. Ms. Schnabel asked what it meant on page 8 to continue on with the TIF district #2 in which the H RA pays. Mr. Johnson stated that TIF #2 is payment debt service on 1998 A bonds. TIF District #2 ends in 2007, but there are payments to be cleared after that point. It will probably have to come from the HRA General Fund. Mr. Commers stated that when they get to 2009, they are going to have make sure they have a reserve or resource for $1,500,000 and then for $600,000. Mr. Pribyl stated they are keeping an eye on that and will make sure they are reserving any funds needed for those future payments with tax increment shortfalls. Ms. Schnabel stated that TIF #3 and TIF #1 in 2010 will start sooner. Mr. Johnson stated that on page 8, in the General Fund, there are about five numbers that show this. Ms. Schnabel asked how they will plan ahead for that. HOUSING & REDEVELOPMENT AUTHORITY MEETING. OCTOBER 4. 2001 PAGE 5 Mr. Pribyl stated they will set aside part of the General Fund under reservation for future debt service. They will then have a presentation for the financial statement and will show what is in the General Fund. That will probably be a future source of payment for future debt service. Mr. Casserly stated this identifies a non-existent problem, and this is a snapshot right now. They have the lowest class rates in possibly 30 years and the lowest tax rates with no inflation in future years for any property or districts. There are very adequate funds as they reserve each year's debt service out of the cash flow. Mr. Commers stated they will have to watch that. Ms. Schnabel stated they want to make sure they can cover these expenses or expenditures. Are they prohibited from doing anything else in the meantime? Mr. Commers stated this is being paid out of revolving loan funds. Mr. Casserly stated that is to show that several years ago, when there were other legislative changes, it was prudent to utilize available tax increment to pay off an HRA obligation. That was to repay a loan the City made to the HRA several years ago, and payment was made in 1999. Maximizing funds available to operate the program and spread out the debt was done by re-amortizing the principal balance remaining on the loan and spread the payments over the terms. This is just a suggestion. Mr. Commers stated that previously they were using the total tax to reimburse the City on the loan. Mr. Pribyl stated they are using the amount of levy needed to repay the loan. Mr. Commers stated that they would now have additional funds over and above this $87,000. Mr. Casserly stated that is correct. This is an opportunity to figure out how to preempt some funds to create flexibility and generate more money. Mr. Johnson stated that on page 1 the nature of funds in the HRA is identified, and it shows historically where they have been. These projections are a summary, and it shows that there are funds coming into the program every year. The first line is the HRA General Fund. There is about a$10,000,000 fund balance. TIF #1, #2, and #3 will be used to pay the debt service. TIF District #4-10 have a summary in the last column of what funds would be available. The only one that shows significant dollars is the Onan District. These funds of $2,600,008 have no restrictions and are TIF eligible redevelopment expense. TIF #11-17 have about $1,000,000 through the end of the life of the district. There are not a lot of excess funds coming out of those. There is not a lot of excess increment being generated by TIF districts, except for #1 and #2. Mr. Commers stated the General Fund is staying fairly flat. Mr. Johnson stated that is correct. There are some expenses coming out of there right now. You want to have levy to spend and interest earnings to spend. The last line of the page is the revolving loan. Pages #2 and #3 have the basic summary of all the TIF districts and the HRA General Fund. The actual year 2000 column with the remaining fund balance of $9,582,000 has the reserve of next year's bonds. Eight million dollars is available to pay next year's debt HOUSING & REDEVELOPMENT AUTHORITY MEETING. OCTOBER 4. 2001 PAGE 6 service. Each year is shown what the fund balance is and reserving an amount for the debt reserve. Mr. Commers stated the annual increase/decrease reflects the income and expense. Mr. Johnson stated it is a combination of everything including interest earnings, the tax increment, levy, bonds, revenue notes, TIF districts, and the General Fund. Mr. Casserly stated this gives a sense of how dramatic the program is. Total Market Value shows the year 2002 is $197,000,000 and 2003 is $420,000,000. This represents the market value that is in all of the tax increment districts. Mr. Commers stated that the year 2002 market value had a tax capacity of $636,000 of the properties, and now it is almost $200,000. Mr. Casserly stated that the market value is shown to give a reflection of how much value has been in all of the districts. It applies all the different class rates of market value with different kinds of property. This is estimated tax capacity. Mr. Commers asked if annual expenses for 2002 were $2,931,000. In addition, they have debt service of $1,600,000 so they have $4,500,000 to cover. Mr. Johnson stated that the annual expenses already include one year's debt service. Page 3 shows what it looks like through the end of the payment of the debt. The debt is paid off in 2012. Mr. Commers asked if they pick up Medtronic's in 2010? Mr. Johnson stated that Medtronic has changes that happened in 2012, and they have 100% of the money, but the tax capacity goes back to the County. The revenues in the program other than tax increment are on page 5. The revenue notes and the liability with the developers incurred costs are on page 9. They are reimbursing them for those costs up to a percent or dollar amount of the increment. There will always be enough for the revenue notes. TIF #3, Banfill Crossing, is limited to 90% of the tax increment and paid between the year 2000 and 2007. As tax increment pulls up, they will have a higher amount to pay on the revenue notes. If it goes down, they have a lower payment. There are revenue notes in six different TIF districts. They are paying Medtronic 90% of the tax increment. Mr. Commers asked if it was over and above the TIF. Mr. Johnson stated that it is outside the TIF with a payment structure. Mr. Commers asked if it included both Phase 1 and Phase 2? Mr. Casserly stated that it includes all the land. Mr. Casserly stated that as Medtronic builds out more, they would be obligated to reimburse the HRA more. That is one of the reasons why the projections are somewhat conservative. Even in the year 2002, between the amount paying for land sales and the amount you are able to withhold for administrative expenses is starting to make a noticeable contribution to the HRA. You should be receiving about $50,000 in administrative revenues. HOUSING & REDEVELOPMENT AUTHORITY MEETING. OCTOBER 4. 2001 PAGE 7 Mr. Commers asked where the administrative income is. Mr. Johnson stated that they have the administrative income coming out of the TIF districts, and they do not show it coming into the General Fund. They do not show the expense coming out either. They are showing the expense in the TIF districts. They are showing that in 2003; $98,000 approximately would be coming out of Medtronic. Mr. Casserly stated there are certain districts they cannot take the administrative expense out of. Mr. Commers stated they should be putting the payment back into the General Fund to make it more flexible. Mr. Pribyl stated that the administrative costs are those salaries not directly chargeable against the tax increment districts. Costs incurred by the City are charged directly to the Tax Increment Districts. Mr. Commers stated that when they get reimbursed, it should not go back into the TIF districts. Mr. Pribyl stated they charge the tax increment directly into those districts and the administrative costs are charged directly to those districts. This does not go into the General Fund. Mr. Commers stated that he is talking about the money coming back. Mr. Johnson asked if he meant land sales. Mr. Commers stated that, for example, when Medtronic reimburses the HRA. Mr. Casserly stated that what can they statutorily take to contribute to the administrative costs, and what are administrative expenses allocated to the specific districts or program? Page 2 tells what they are statutorily allowed to take out of the program. They have shown this is the amount pulled out of districts #3 and #4. Mr. Pribyl stated that it is the maximum amount to be incurred not transferred out. Mr. Casserly stated they want to take every dollar out of tax increment that they can for administrative expense. You can pool the maximum amount possible. Most things are tax increment eligible. Administrative expense is not subject to a pooling limitation and is only 10%. All the rest of administrative expense have to come from General Funds and levies, mortgage repayments, and land sales. Mr. Pribyl stated they are assuming for project purposes you are maxing out the administrative expense Mr. Casserly stated that is correct. Mr. Johnson stated that the HRA General Fund is on page 11. This ties back to what was identified on page 5, and there are interest earnings for 2002 of $380,000. They have shown the levy and the revenues to show what funds are available. They have the ability to spend around $500,000 of the General Fund each year if they want to hold the fund balances steady. HOUSING & REDEVELOPMENT AUTHORITY MEETING. OCTOBER 4. 2001 PAGE 8 Mr. Casserly stated that the Medtronic District is on page 19 and reflects the tax increment district and shows the tax increment being generated on the revenues side and the fees they talked about that they take out of the system. There are really no funds available, because they have taken out the amount allowed for administrative expense and does make a land sale payment to us. That district does really provide resources for the HRA starting in 2003 of about $180,000. Mr. Johnson stated that on page 3 it shows a$51,000,000 value for the length of the district. Mr. Commers asked where the land sale proceeds come in. He does not see where the revenues are coming in. Mr. Johnson stated that would be the HRA General Fund. Mr. Pribyl stated it is not considered tax increment. Mr. Casserly stated that the HRA is very solvent, very healthy, and well maintained program with a substantial amount in the housing replacement funds. It has reached the point where it is now self sufficient. The mortgage repayments and the available funds that are in the revolving loan program will continue to make loans and will stand on its own. The HRA has the ability to repay the debt without any problems. They need to watch how much they reduce your fund balances to maintain good operating reserves and manage the cash flows. There are resources for projects they really want to invest in that will not be covered by grants or other tax increment resulting in creation of districts. They have resources in the program to back any support of activities. There does not appear to be much going forward to increase these resources. Mr. Commers asked if future projects will more than likely reduce the $10,000,000-12,000,000 reserve. Mr. Casserly stated they only have the tough projects left like salvage yards and any kind of difficult urban renewal project. If the projects do not cover enough increment to cover those redevelopment costs, the HRA will have to use its resources. Mr. Commers stated Mr. Casserly and Mr. Johnson did a good job on this. Mr. Casserly stated they placed this in a format to allow some projecting and to project. The class rates and tax rates change every year and market values change. 3. REVIEW 2000 FINANCIAL STATEMENT: Mr. Pribyl stated that the General Fund has a cash investment of $6,484,318 and interest receivable of $98,871. Mortgages receivable is $71,173,000. Those are the mortgages that are not considered tax increment. The receivable funds are $2,524,464 where they were running some deficits from the tax increment funds. They had to transfer money from the General Fund to fund the negative deficits to bring those whole. That was a requirement by the Office of the State Auditor. Mr. Pribyl stated the next fund type is the Special Revenue Fund. This is where they handle all the housing loans. There are tax investments in this fund that are contributable to the Housing Revolving Loan Program of $1,396,714. That is available for loans to be issued by the HRA. HOUSING & REDEVELOPMENT AUTHORITY MEETING. OCTOBER 4. 2001 PAGE 9 They handle the receivable for those deferred mortgages. The deferred portion is $2,531,826. They carry the payable for the loan provided by the City of $750,700,662. The other type of funds are Capital Project Funds. These are the tax increment funds combined, and it is a summary total. These are based on requirements in those particular years in which they were established. The total amount is $2,676,697. Mr. Pribyl stated Mortgages Receivable are $335,163,000. They also have the payable side of the transaction of the General Fund of $2,524,464. These are the balance sheet items they are carrying in the combined balance sheet. Items in the General Fund are property taxes from the levy of $38,921,000 and the excess of what was needed to pay the City loan. Interest income is $449,679. Mortgage Interest earnings is $19,191,000. Expenditure summarized in the four basic types of Personal Services is $32,777, and supplies are $3,497. Capital Outlay of $15,153 and a transfer out of $2,967,906. Special Housing Revenue Fund and property taxes is $150,424 with interest income of $47,000. Mortgage Interest is $110,000. Mr. Pribyl stated that is basically an overview, and this lifts the combined schedules. Mr. Casserly identified that the Special Revenue Fund has been set up in a situation of cash and investments that can work as a revolving fund for housing loans. Mr. Commers asked if the $2,599,000 was the Capital Outlay transfer outlined in the memorandum. Mr. Pribyl stated that was the transfer that went to the Housing Fund to support the debts of one of the funds. Mr. Commers asked about the expenditure of the General types of fund of $2,502,000 in 1999 under Capital Outlay. Mr. Pribyl stated that he thinks that in 1999 that was coming from the tax increment districts. The bulk is being generated from the tax increment district and not the General Fund. That was related to actual projects. This is the statement of revenues and expenditures. Mr. Commers asked if these numbers are of 12/31/2000. Mr. Pribyl stated that is correct. Mr. Commers stated there is a difference between these numbers and Mr. Johnson's numbers. Mr. Pribyl stated that Mr. Johnson picked up these numbers as a starting point on his projections and worked with fund balances and cash as a starting point. Mr. Burns asked if these project costs were Medtronic-related. Mr. Johnson stated they are TIF #2 and TIF #3 and are about $780,000 in TIF #2 and $1,400,000 in TIF #3. 4. REVIEW DRAFT 2002 BUDGET: Mr. Fernelius stated they would like to come back in November with the final draft to be approved. There are three different fund types with the General Fund, Special Revenue Fund, HOUSING & REDEVELOPMENT AUTHORITY MEETING. OCTOBER 4. 2001 PAGE 10 and that consists of the Housing Operating Fund, the Deferred Loan, and the Housing Programs Fund, and the Revolving Loan Fund. They have 15 Capital Outlay Funds, and those are the tax increment districts. Revenue issues for 2002 were with the legislature changing the property tax calculations. The reduction of class rates and the elimination of the General Education fund from the tax base of commercial/industrial property have changed. Our best estimate of tax increment is around 20-25% reduction between 2001 and 2002. Some of these numbers are different than the packet. The budget was based on tax increment district #1 totaling about $316,000 and was plugged into the tax increment projection. In addition the tax levy has been modified from what they had in the budget document. The year 2002 was based on the tax levy received for this year. That has gone up about $20,000. All the other numbers are consistent with the budget documents. Interest earnings of around $643,000 and the rental income, parking lot, land sales from the Medtronic project, and miscellaneous revenues of $88,000 with the special assessment revenues. Mr. Fernelius stated that expenses in the Personal Services budget are listed by category. The $74,448 is for staff-related expenses, primarily his position. The City-related administrative charge covers pro-rated staff time at $192,500. Supplies are around $1,150. Other services and charges projected are $155,000 and Capital Outlays is at $1,150,000. Transfers to the City are at $1,700,000 for the three things talked about before with the bond payments for 1997 and 1998 and the loan payment back to the City. Mr. Commers asked if there was a surplus of $146,000 rather than a$72,000 deficit. Mr. Fernelius stated that is correct, Some numbers were different based on the updates. They are programming in $300,000 for the Scattered Site Acquisition, and they also have our revenue obligations of around $600,000 with the existing redevelopment projects. They are looking at a $250,000 cost for the 57th Avenue sewer line improvement that is related to the Medtronic project. They are not programming in any other project expenses. They are able to finance all loans through the revolving loan fund, and it is self sufficient. They project ten deferred loans at $100,000 and up to 50 revolving loans at $661,000. These are receivables. No action is needed tonight; it is only informational. Mr. Commers stated that the bottom line is that staff is projecting a$146,000 balance in this budget, over and above expenditures. There are not any capital projects worked into this program. Mr. Fernelius stated there are no new projects in this program at this time. Mr. Commers stated that any new projects will have to come out of the fund balance basically, to the extent that the TIF funds do not cover it. Mr. Fernelius stated that any new projects are going to be funded out of the General Fund. Mr. Burns stated there would be some TIF funds. Mr. Fernelius stated there would be overtime. If they can leverage their resources and get grants from the State, that would be a bonus. Typically in the past, they have funded projects with their own resources up front. In the future, that will come out of the General Fund. Mr. Commers stated that the housing program seems to be very successful. HOUSING & REDEVELOPMENT AUTHORITY MEETING. OCTOBER 4. 2001 PAGE 11 Ms. Schnabel asked if any future project they might do would only be revenue producing? Mr. Casserly stated that if they are not self-supporting, there is only one source to make up the shortfall. Some projects can get help particularly on environmental issues. The State is looking at trying to fund a redevelopment account to assist with the gaps. The tax increment will only cover a certain amount of the total cost that would have to be made up with grants or from the General Fund. The HRA has the ability to do projects, and its goal is to try to have all the projects be as self-sufficient as possible. It is harder to make them self-sufficient. Mr. Burns stated that part of the problem is that most projected projects are housing projects. Mr. Casserly stated they normally do not generate the amount of increment that commercial/ industrial projects would generate and they are harder to do. Ms. Schnabel stated they need to change their focus, but some of this would change in time with the legislature. Mr. Commers stated they need to figure on a reasonable amount that their fund balance could be maintained at. They know that down the line they will need approximately $1,000,000 to make up for the districts that will go out of existence. Is there a way of analyzing a reasonable conservative amount to keeping that fund? Mr. Casserly stated they could identify the amounts needed and create that need to be taken out annually to cover the shortfall. They could reserve the total amount right now and assume interest earnings at that amount, or they could not reduce the fund balance below a certain amount to cover the shortfall. Mr. Pribyl stated they would probably create reserve fund balances so annually they can take a look at that and the resources would be transferred from the General Fund. They have tried to figure out exactly what will be needed in the future, so they can figure out what is available for the HRA to utilize. Mr. Commers stated that it sounds like the ultimate question. Mr. Casserly stated that all the work has been done. They can estimate what is needed and make the interest rate assumption. 5. UPDATE ON GATEWAY EAST PROJECT: Mr. Fernelius stated that a scheduled groundbreaking ceremony was canceled due to the September 11 events. He thought it may be more appropriate to wait until the spring to have a ribbon-tying ceremony once the units are completed. They have started some of the foundations on the buildings and are working on the site improvements. They do have to deal with the relocation of the gas line and need to move two power poles. Hopefully, the project will be completed in the spring. Mr. Commers stated that some citizens called him and told him they had been at a City Council meeting and wanted that project expanded further to the north. Mr. Burns stated he does not recall someone requesting that at a Council meeting. It may have been a comment someone made to a City Council member. HOUSING & REDEVELOPMENT AUTHORITY MEETING. OCTOBER 4. 2001 PAGE 12 Mr. Commers stated they said it was at a couple of ineetings. Mr. Hickok stated that he remembers one comment that was made in a discussion Grant had with the Sikh Society. However, that was not in a formal setting. The adjoining property owner was not interested in selling, so it would have been impossible to leapfrog that property and continue north. Mr. Commers stated that he thought they were homeowners going up from the duplex along there. Mr. Fernelius stated that he did not know. Mr. Hickok stated that they would have liked to see that happen, but it takes willing property owners. 6. UPDATE ON PENK PETERSON PROJECT: Mr. Fernelius stated that no action is needed on this item. Mr. Commers asked if there is any kind of State funding for soil corrections. Mr. Casserly stated there really is not. They would probably be looking at redevelopment funds; it is not contamination or blighted building problems. It is just poor soil that is hard to develop. Mr. Commers stated that it probably will not be developed without assistance. Mr. Casserly stated that is correct, but three projects have failed because of the complexity of sorting out the soil problem. This fits in with the reserve category because it has to be utilized before a certain deadline. If this project does not proceed, the money being held in reserve needs to go back into that district. The HRA would probably go back and do debt service to cover the shortfall. There is no way to create a new district to do this project. 7. MEDTRONIC REQUEST TO CONSTRUCT SURFACE PARKING: Mr. Hickok stated this request is a bit early, but Medtronic is requesting to add 250 surface parking spaces to its World Headquarters site. The current parking demands are not being met for special events 1-2 times per month. Their Commons area is being widely used. Recently, the Courage Center had an event at Medtronic with Janet Reno as the guest speaker. They had to park cars on Medtronic Parkway. Mr. Hickok stated the parking spaces would be installed on a short term basis. In earlier projection discussions, they talked about Medtronic only being developed as far as it has. Medtronic has no reason to believe that 1,000,000 square feet will not develop there. The parking is designed to be in the Phase 3 area to provide parking for the equipment to be out of the way for Phase 2 development and keep cars off the street for the events. It would be designed and installed to City street and parking lot standards with curb and gutter, asphalt, lighting, landscaping, and like it is meant to be there for the long run. The area they are looking at is at the western edge around the daycare facility. They would like to use the footprint area off from the Parkway as an entrance, but also see the parking lot possibly expanding to the south of the daycare. The area necessary for 250 parking spaces is about 75,000 square feet. HOUSING & REDEVELOPMENT AUTHORITY MEETING. OCTOBER 4. 2001 PAGE 13 It is close to 7th Street so it will not affect the pond. They will enlarge the pond or do whatever is necessary to handle the surface parking. Medtronic would seek our advice about the pond and the circulation at the Planning level and their corporate design people. Mr. Commers asked where the cars would exit. Mr. Hickok stated they would like to have the parkway be an entrance opportunity with a walkway over to the World Headquarters. They may use the existing 7th Street curb cut where Lake Pointe Drive used to come out near I-694 and 7th Street. Mr. Commers asked if this would create a problem with traffic on 7th Street. Mr. Hickok stated that the design will be scrutinized. They will look at this parking from the perspective that it is going to be a long term thing and whether the circulation will work the way it needs to work. The development agreement was analyzed and the language was broad enough to allow it. Surface parking is permitted on the campus. This will not keep them from doing Phase 2. Medtronic would like to install this parking this fall. Mr. Hickok stated that because the development agreement allows surface parking, because the parking is planned as a temporary solution, because the parking is planned for area to be later used for the parking deck, and because Medtronic is committed to not altering the master plan for the next phase development, staff recommends working with Medtronic on the appropriate approvals for this temporary parking solution. Mr. Burns asked what kind of approvals are needed from the City. Mr. Hickok stated that it would require a land alteration permit. The land alteration permit would involve a discussion about the circulation in making sure the parking lot works right for access onto 7th or the Parkway. Ms. Schnabel asked if there is a sidewalk along Medtronic Drive? Mr. Hickok stated there is a walkway from the daycare, and that lot would be designed for people to walk to the Parkway and then up to the building. Ms. Schnabel stated that there were an enormous amount of cars at one of the events and people were parked everywhere along the side roads. They do need something. Someone expressed concerns to her about the holding pond near the daycare, because the pond filled quite full after heavy rainstorms, and that the fencing around the pond was not a permanent type of fencing. They were concerned for the children in the area. Mr. Hickok stated that the fence that was up there was the chain link fence that goes around the campus to keep people out of the construction area. As a policy, the City has not fenced in its pond areas. They require the pond edge to be sloped in the event children may wander into it. Holding ponds generally do not have fences around them. Much of the water goes out to the water feature in the front, but some water from the western edge goes to that area. It was designed to have a capacity and would continue to function without additional hard surface. It would fill up for short periods, and the water will plane off and go into another storm system. There is not a plan for a permanent fence. Ms. Schnabel asked who would handle the liability in the unfortunate incident of drowning. HOUSING & REDEVELOPMENT AUTHORITY MEETING. OCTOBER 4. 2001 PAGE 14 Mr. Hickok stated that it has been a State mandate that development be done in such a way that the runoff in a post development state not be greater than a predevelopment runoff. He would refrain from answering the liability question. The ponds are meant to be an open feature like lakes and from an aesthetic standpoint, the fence has an aesthetic downside. The pond is designed to have shallow approaches. Mr. Commers stated that he presumes that at this time they need to do whatever needs to be done. 8. SALVAGE YARD UPDATE: Mr. Hickok stated they discussed this project on May 3rd. They were looking for a better outcome with the legislative session and a 3 phase project starting with the redevelopment of the Determan piece, 2nd parcel south of 73�d, and salvage yards north of 73�d. They met with the first of the three property owners after the meeting and learned that new things happened in the corporate office, field prices started getting erratic, and now they are concerned about the future. They said that even if the land and building were being given for free, they would not be able to say "yes" because the decision would have been in such an erratic business time. Their business is good but not a time to make a decision about redevelopment or a move. Mr. Hickok stated staff paused as they watched the legislature; and, as a result, they saw an impact to the tax increment to be generated from the Onan Murphy project. They took a conservative approach before that happened and estimated how much money was needed to fill the void. With the new facts about the decrease in taxes generated, it causes them to step back and put the project off a bit. Staff's recommendation is to look at the 2002 legislative session and bring the spotlight back on the project. 9. UPDATE ON 571 LAFAYETTE ST. Mr. Fernelius stated there was some concern by the HRA about the design of this house. Staff has worked with the buyer, Mr. Moran, to modify the plan to incorporate the changes the HRA requested. Construction is underway and it looks good. Ms. Schnabel agreed that it does look good. 10. HOUSING ACTIVITY REPORT: Mr. Fernelius stated they are down from where they were last year. There seems to be fewer people wanting to take out loans. Business has slowed down here in Fridley and elsewhere, but they are optimistic that things will turn around. They do plan to continue this program. The Loan Servicing Report is included and there is nothing to add to that. The loan delinquency number has come up in the last few months from 5%-10%. The good thing is that these are payments that are 30 days late that are eventually paid. Mr. Commers asked if the HRA has adopted a policy about how long they will leave the delinquencies go. Mr. Fernelius stated it was adopted several years ago and all are secured loans, so when the property does sell, they have the ability to recoup the money. The HRA could revisit the policy in the future. HOUSING & REDEVELOPMENT AUTHORITY MEETING. OCTOBER 4. 2001 PAGE 15 Mr. Commers stated that it does not show the default balance on the loan. Mr. Fernelius stated this summary does not show it, but they get information from the actual loan service that shows the actual balance. Ms. Schnabel asked if the first page shows the number of loans from a certain date to a certain date or what does the report represent? Mr. Fernelius stated that it is only since January. Ms. Schnabel asked if the HRA could get that type of information so they know the number of loans as of a certain date and the number of new loans for that month or quarter. Could they get similar information on the delinquencies? Mr. Fernelius stated he could do that. ADJOURNMENT MOTION by Ms. Schnabel, seconded by Mr. Bajwa, to adjourn the meeting. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED AND THE OCTOBER 4, 2001, MEETING OF THE HOUSING AND REDEVELOPMENT AUTHORITY WAS ADJOURNED AT 9:45 P.M. Respectfully submitted, Signe L. Johnson Recording Secretary