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HRA 04/04/2002 - 00025065CITY OF FRIDLEY HOUSING & REDEVELOPMENT AUTHORITY MEETING APRIL 4, 2002 CALL TO ORDER: Chairperson Commers called the April 4, 2002, Housing and Redevelopment Authority meeting to order at 7:30 p.m. ROLL CALL: Members Present: Larry Commers, Jay Bajwa, John Meyer Members Absent: Virginia Schnabel, Pat Gabel. Others Present: Grant Fernelius, Assistant HRA Director Scott Hickok, Community Development Director Paul Eisenmenger, HRA Accountant APPROVAL OF THE JANUARY 14, 2002, HOUSING AND REDEVELOPMENT AUTHORITY MEETING MINUTES: MOTION by Mr. Meyer, seconded by Mr. Bajwa, to approve the January 14, 2002, Housing and Redevelopment Authority meeting minutes. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. CONSENT AGENDA: 1. CONSIDER AMENDMENT TO AGREEMENT WITH CEE FOR DISCOUNT LOAN PROGRAM: 2. CONSIDER RESOLUTION NO. HRA 1-2002 RATIFYING SIGNATURE ON GATEWAY TOWNHOME PLAT: 3. CLAIMS AND EXPENSES: MOTION by Mr. Meyer, seconded by Mr. Bajwa, to approve the Consent Agenda as presented. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. INFORMATION ITEMS: 4. UPDATE OF PROPOSAL FOR PENK PETERSON (a.k.a. FRIDLEY MAIN L Mr. Fernelius stated staff inet with representatives from the Rohn Industries out of St. Paul in February. Griffin Companies is their broker. Rohn Industries is interested in buying and developing a new facility on the vacant site located along Main Street. Fridley Main LLC owns this parcel, and Dick Peterson and Bill Penk are the representatives of that company. Rohn Industries is a commercial paper processor/recycler. They collect paper from large commercial printers and take the material back to their facility and sort it. They then transfer it to other companies who process it for a variety of uses. They employ 23-30 people at their existing HOUSING & REDEVELOPMENT AUTHORITY MEETING, APRIL 4, 2002 PAGE 2 facility in the Midway area of St. Paul. They are proposing to build a 36,000 square foot office/warehouse building to be used for the processing operations. They are proposing to construct the building with either concrete tip-up panels or a metal-type structure with an EFIS finish. Mr. Hickok stated that a similar building, Tri-Star Insulation, is located on East River Road. Mr. Fernelius stated that the front end of the building would be at a lower height and constructed of rock-face block. The building plans have not been finalized. They are interested in the site because it is located in the M-3 industrial district allowing outdoor storage. The HRA assistance to help with soil correction was also a bonus. Rohn Industries would purchase the site from Fridley Main LLC, which would assign their interest in the development contract. As an aside, the HRA escrowed $250,000 in 1999, which was the maximum amount of assistance it would provide. Upon completion of the project, one-half of the assistance would be forgiven and the rest would be provided as a loan at 5% and paid back over eight years. Mr. Fernelius stated that that the development agreement stipulates that the building must be a minimum of 51,000 square feet and have a minimum valuation for tax purposes at $1,750,000. The total project cost with land, buildings, and fixtures would have to be a minimum of $2,500,000. One of the issues the Authority needs to address is whether this is the type of use the HRA envisioned for this site? This is probably compatible with the office/warehouse type discussed previously. The larger issue is whether the amount of HRA assistance is appropriate given the quality and size of the proposed building. The developers are still negotiating the sale of the property with the owners. Before a recommendation can be made, staff needs additional information such as building plans and financial information about the new buyer. No action is needed by the HRA. Mr. Commers stated that assistance would have been based on tax generation calculations that Mr. Casserly would have made. It would be helpful if Mr. Casserly brought those calculations to the next meeting so the HRA knows how he arrived at the amount of money. Staff should check the traffic count and look at the facility immediately. How does the company load and unload this paper? Mr. Fernelius stated staff would check into that, but this would have docks on the north and south side of the building. Drive-in doors would be on the west side. City ordinance has provisions about dock doors facing the public right-of-way. Mr. Hickok stated that paper coming in open containers, or unloaded in the parking lot and being a mess, was a concern. They are allowed to do outdoor storage but none of this paper work would be outside at all. Trucks would bring it into the building and they would sort it inside the building. It would be shifted out in bundles as required by their vendors. Mr. Bajwa stated this type of company is friendly to the environment, and he endorses paper recycling heavily. At the May 2 meeting, the HRA could discuss the intention of the company in terms of the future. Is this building going to be adequate for its needs? It seems to be a pollution free type of business, but is there anything else on the horizon that may cause pollution in the future? He would also like to see the financial background of the company and if they are able to see a project of this magnitude through. What is their level of interest and motivation to come to this site? If they are considering other sites, which sites may those be? What are they looking for from the HRA in terms of whether this site is better suited for their needs or not? HOUSING & REDEVELOPMENT AUTHORITY MEETING. APRIL 4. 2002 PAGE 3 Mr. Meyer stated they are coming to Fridley because Fridley does not have a requirement for vast outdoor storage. What other storage areas in the City are not screened? Mr. Commers stated that the Determan-Brownie facility is one example. Mr. Hickok stated that the area along Main Street north of 81St Avenue is zoned M-3 and from there to the west to the railroad tracks is zoned M-3. There are two trucking facilities there and they are good examples of M-3 requirements. Outdoor storage is a permitted use in the district, but staff is critical of the landscape plan. In that chapter of the code, it talks specifically about heavy landscaping and minimizing the impact of the view into the site. Berming would create a more dense effect of the landscaping and fencing is required. The sites developed in the M-3 district were developed to screen unsightliness. Another M-3 use is a construction site along Beech Street that predates the M-3 requirements. As it develops, it will also have a new requirement for heavy landscaping. Mr. Meyer stated it is good they have those safeguards in place now. He does not have any negative thoughts about this, but they are talking about a lot of money in terms of soil correction. How is the figure calculated? Mr. Fernelius stated that the amount is $250,000 for the maximum. They need to find out specifically how it was calculated. They look at the amount of tax increment a project generates. They have established that whatever assistance they provide does not exceed 5- 10% of the total project cost. In this case, he is not certain how $250,000 was calculated. He does know that the soil correction cost ranges anywhere from $400,000 to $500,000. There is a lot of peat that needs to be removed. Mr. Meyer stated this is a good chunk of money, and Rohn Industries is asking for a greater contribution than is usually given by the HRA. Mr. Fernelius stated that the HRA would give no more than 2/3 of the soil correction cost, up to $250,000. Mr. Commers stated they will do what they can with the new deal, and they have requested additional information from staff. 5. UPDATE ON SALE OF TARGET NORTHERN OPERATIONS BUILDING AND REQUEST FOR ASSIGNMENT OF DEVELOPMENT AND LEASE-PURCHASE AGREEMENT: Mr. Fernelius stated that staff inet with Regional Development Associates to talk about the purchase of the Target Northern Operations building. It is a$75,000 square foot building located next to the Fridley Municipal Center. Target moved out of the building last year to its new facility in Brooklyn Park. Since August of last year it has been vacant and for sale. The buyer plans to purchase the building to make a number of improvements to the roof and HVAC systems to upgrade the structure. They want to re-tenant the building and have talked about a single user but have not identified the user. They will do that sometime this summer. This would involve another assignment and there is a development agreement in place. Mr. Fernelius stated that in 1984, Target Corporation entered into a development agreement with the HRA. The sale of the parking lot immediately east of the building was part of that agreement. The HRA continues to own that lot and received $15,000 per year from Target in lease payments. In 2014, Target was obligated to purchase that lot for $300,000. Target bought a treasury bond in the name of the HRA and interest is being collected on that. It has an HOUSING & REDEVELOPMENT AUTHORITY MEETING, APRIL 4, 2002 PAGE 4 11.25% interest rate and that interest covers the rent payments. The HRA holds that bond. The developer is still negotiating, and there are title issues to work through. The letter attached to the memo from Mark McCary of Regional Development Associates states that they are interested in buying the parking lot before 2014. Mr. Fernelius stated they would have to look at what would happen to the bond before 2014 and other legal issues. Staff will bring this back at the May 2 meeting. Mr. Commers asked what the status of the bond would be if Target was no longer responsible under the lease. Is the interest satisfactory to give the HRA its lease payments every year? What did they provide in the agreement and what would happen to the principal of the bond? Would it be applied to the purchase of the parking lot? The City may need additional parking, and they are talking about an additional ramp on the southeast corner of the lot for the Municipal Center. Mr. Fernelius stated they do hold the bond in electronic form, and it is in the name of the HRA. What happens to it in the event the lot is purchased prematurely and how do they apply unpaid rent towards the purchase if need be? The agreement for additional parking was written such that the southeast corner of that site was where the structured parking could be built. If the City preserved a right to build structured parking on that corner, Target would be entitled to the same number of stalls located there prior to construction. The HRA needs to talk about that issue, because that was a concern he had when the developer raised that issue. Mr. Commers stated they have an AAA rating, and they want these people to produce so it does not become rundown and dilapidated in the middle of the City. Mr. Bajwa stated that the quicker they reassign the better. If the bond was structured so that the party owns the bond, they have collected the purchase price of the property. As a gesture, maybe they can donate the excess that comes from that part of the transaction back to Target and donate it to United Way or something. They may be able to give back to the party that was part of the whole transaction to start with or utilize it for other useful needs in the future. Mr. Commers stated that the amount of money they are getting was somehow amortized with HRA assistance, at least in part. The two entities they are talking about are LLCs. Those companies usually do not have a lot of assets and that is something to keep in mind. 6. MISCELLANEOUS PROJECT UPDATES: Mr. Commers asked if there would be a change of ownership at the Shorewood. Mr. Hickok stated that there is some speculation. Staff has met with the broker representing the site. The Chamber contacted staff and asked about a specific restaurant name they had been hearing that is interested in buying. The restaurant footprint is a bit larger than some of the other chains such as Applebees. It is more of a specialty restaurant looking for this size footprint. The City would be pleased to have some of these that would include restaurant and office space. Mr. Commers stated that when Ms. Dacy was here, there was interest in the United Stores' site. Various developers that would be more attractive than Pawn America have approached staff. Do they have a hotel inquiry? Mr. Hickok stated they did. HOUSING & REDEVELOPMENT AUTHORITY MEETING, APRIL 4, 2002 PAGE 5 Mr. Commers stated they are not in a position to control that parcel. It is conceivable that they would have development when the whole quadrant comes up. Mr. Hickok stated that the comprehensive plan and zoning is C-3, general shopping. It is the right zoning classification for Target type developments and is an appropriate zoning designation for peripheral uses like restaurants. The United Stores' building is not typical for a retail building. They may have had difficulty putting other retail uses in it. It has space more similar to warehouse space and has limited parking and other difficult characteristics about the site. One concern is that the road that goes back there is a parking lot type road and is on an easement. They are interested in having that issue rectified. Those uses can have public right- of-way adjacent other than the service drive, which is clumsy at best along Highway 65. The hotel use had 2.5 acres and a user was interested in that. One difficulty is that this hotel use did not have a lot of history here. They were looking for City participation in the purchase of some properties adjacent to United Stores. Mr. Commers stated a vacant lot has been for sale there for a long time. Is that about an acre? Mr. Hickok stated that it is part of the United Stores' site and is about an acre. It could not be divided off because there is not a lot of land for independent sites there. It needs to stay contiguous and they need to take access on the west side. Mr. Commers stated this is a 2-acre site. Mr. Hickok stated that is correct. Mr. Bajwa asked if the access off the Embers site is the only access. Mr. Hickok stated that is correct. Mr. Meyer asked what staff knows about Medtronic's hotel/restaurant needs. Mr. Hickok stated staff inet with Medtronic when the specific hotel user was interested and wanted to understand how this or other sites could accommodate Medtronic's needs. This proposed hotel would not meet the criteria for one of the best places they would need. They saw this site as their place for staff and did not feel they could commit a certain number rooms/week or any such arrangement. Medtronic seems to be comfortable with the hotel accommodations within close proximity, and there is not a big push for something closer. Mr. Meyer stated that is a little disappointing. Mr. Commers stated that Medtronic wanted a full service hotel for the doctors and people they bring in and were using the downtown hotels. Mr. Hickok stated that is correct. Mr. Commers stated that he recalls that they did not think the full service hotel could be maintained even though Medtronic could provide a significant guarantee of rooms. Mr. Hickok stated they do visit the local restaurants. The market study found that there would be continued potential for restaurant activity, and it is not impossible to think a hotel could be here. Medtronic looks for things like theater and events they can entertain their out of town guests. The concern is that the synergy would not be at the doorstep of this hotel. HOUSING & REDEVELOPMENT AUTHORITY MEETING, APRIL 4, 2002 PAGE 6 Mr. Fernelius stated they found at the recent meeting that Medtronic employees eat at their own cafeteria a lot. Mr. Commers asked about the joint task force. Mr. Hickok stated there was concern on the part of Columbia Heights about the publication of the final report because they felt they had learned enough through the forums. They need to wrap up the report and prepare the final document that includes the market study from the group in Boston. It includes the summary from Hoisington/Koegler Group and gives the demographic information. The demographic analysis is completed but final touches will come later. The census is completed. They could have one last task force meeting and Technical Advisory Committee meeting to pull together the final report. Mr. Commers stated they should get closure on this thing due to the money spent on consultants. Mr. Hickok stated he agreed. Mr. Meyer stated that the article in the paper this morning about Highway 65 and Columbia Heights showed that there are economic problems, utilization problems, and Medtronic is not bringing the kind of stimulus the task force was hoping for. Mr. Commers stated the fact is that they should know about the situation rather than to speculate. 7. LEGISLATIVE UPDATE (JIM CASSERLY): Mr. Fernelius stated that Mr. Casserly had a family emergency tonight. Mr. Casserly did say that nothing is happening in the Legislature related to development. The biggest thing is money and in terms of appropriation, the House has basically set aside about $4,000,000 for the Redevelopment Grant Program. That is less than what was funded last year. The Senate is proposing $21,000,000 for a redevelopment grant program, half going to the metro area, and half going upstate. Mr. Casserly said the session is rumored to end in the next 2 to 4 weeks. Mr. Commers stated they would have to see what happens. 8. COUNCIL/COMMISSION SURVEY DISCUSSIONS: Mr. Fernelius stated there would be a joint meeting with the Council to review the surveys. They get some benefit and direction from the surveys, but it all comes down to the money issue. The hard thing is that there are a lot of issues in the survey that the HRA does not address. It is hard to answer some of those surveys because they are not familiar with some of those issues. Mr. Bajwa stated that it does bring resolution to some issues the City is addressing. He finds it helpful to know what is on the City's agenda. They can somewhat influence the right approach. Mr. Commers stated that it is helpful. Mr. Meyer stated that he gets more of a learning experience. Mr. Burns had stated that Commission members are more knowledgeable and in tune to City problems than the average individual. HOUSING & REDEVELOPMENT AUTHORITY MEETING, APRIL 4, 2002 PAGE 7 Mr. Bajwa stated they should continue doing the surveys. He considers it a privilege to respond to the survey. Mr. Fernelius stated that staff would talk to the City Manager about a joint meeting. They may have to start the meeting a little earlier on May 2 as they have the Target issue, the Penk Peterson issue, among other things, to discuss. 9. HOUSING PROGRAM UPDATE: Mr. Fernelius stated he has added two additional reports. The last two pages look at the number of remodeling advisor visits. That is the free service offered to homeowners through CEE. The Operation Insulation program summary is also included. Mr. Commers asked what the report meant by 27 visits, 3 work. Mr. Fernelius stated that out of the 27 people who had an energy audit done, three people actually had the energy improvements made to their homes. They have received very good feedback on the insulation program. Mr. Meyer asked who the remodeling advisor is now. Mr. Fernelius stated the remodeling advisor is Bob Rosenthal who works for CEE. Mr. Meyer asked if he was on the HRA payroll. Mr. Fernelius stated he is not. Mr. Commers asked Mr. Eisenmenger what the HRA would be doing with the joint report with the City. Mr. Eisenmenger stated that he believes the HRA is filing a joint report with the City, which is different than what has been done in the past. ADJOURNMENT MOTION by Mr. Meyer, seconded by Mr. Bajwa, to adjourn the meeting. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED AND THE APRIL 4, 2002, MEETING OF THE HOUSING AND REDEVELOPMENT AUTHORITY ADJOURNED AT 8:32 P.M. Respectfully submitted, Signe L. Johnson Recording Secretary