HRA 08/01/2002 - 00025085CITY OF FRIDLEY
HOUSING & REDEVELOPMENT AUTHORITY MEETING
AUGUST 1, 2002
CALL TO ORDER:
Chairperson Commers called the August 1, 2002, Housing and Redevelopment Authority
meeting to order at 7:30 p.m.
ROLL CALL:
Members Present: Larry Commers, John Meyer, Virginia Schnabel, Pat Gabel
Members Absent: Jay Bajwa
Others Present: Grant Fernelius, Assistant HRA Director
Scott Hickok, Community Development Director
Rick Pribyl, Finance Director
Paul Eisenmenger, HRA Accountant
APPROVAL OF MINUTES:
MOTION by Ms. Schnabel, seconded by Ms. Gabel, to approve the June 6, 2002, Housing and
Redevelopment Authority meeting minutes.
UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE
MOTION CARRIED UNANIMOUSLY.
CONSENTITEMS:
1. CONSIDER PARTICIPATION IN MN SOLUTIONS FOR 2003 LEGISLATIVE SESSION:
2. CONSIDER FINAL REIMBURSEMENT ON VALVOLINE INSTANT OIL CHANGE SITE:
3. CONSIDER RIGHT-OF-WAY ACQUISITION NEAR INTERSECTION OF 61sT
AVENUE/EAST MOORE LAKE DRIVE AND HIGHWAY 65:
4. CLAIMS AND EXPENSES:
MOTION by Ms. Gabel, seconded by Mr. Meyer, to approve the consent items as presented.
UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE
MOTION CARRIED UNANIMOUSLY.
ACTION ITEMS:
5. REIMBURSEMENT ARRANGEMENT FOR 57T" AVENUE SANITARY SEWER
PROJECT:
Mr. Fernelius stated that due to timing issues and not having the July HRA meeting, this issue
could not wait until the August meeting. The City had reached the 60-day action limit and had
already awarded the bid to the contractor. Additional delay would mean starting over with the
entire bid process. He understood that this project would start later this month. This project
HOUSING & REDEVELOPMENT AUTHORITY MEETING. AUGUST 1. 2002 PAGE 2
involves the construction of a new 8 inch sanitary sewer line located along 57th Avenue. The
line will run from 7th Street west along 57th Avenue to University Avenue to help alleviate what
engineers call a bottleneck, which could be created in the system under peak demands.
Mr. Fernelius stated that right now there is a 10 inch line that runs down to 57th Place, and once
the Medtronic development is fully developed, under peak demand, they could see back-ups in
that part of the system. This issue was identified in the AUAR, the environmental analysis done
in 1999. Funds for this project were included in the 2002 HRA budget at $250,000. This project
is an eligible expense for reimbursement through tax increment. In addition, it was included in
the special legislation that was adopted in 1999 that also extended the tax increment district for
the Medtronic's site. The project was awarded to Park Construction in July at a cost of
$259,000.
Mr. Fernelius stated that this would be funded through an intra-fund loan from the General Fund
to Tax Increment District #6, which is the next item on the agenda. Staff recommends the HRA
agree to reimburse the City up to $285,000 for the project, which includes a 10% contingency.
Ms. Schnabel asked that in addition to the 10-inch pipe that is already in place on 57th Avenue,
this would be additional line.
Mr. Fernelius stated that is correct.
Mr. Meyer asked why an 8-inch line was picked. The 10-inch line would give another 70% or so
capacity. The cheapest part is going from an eight to a ten-inch pipe.
Mr. Fernelius stated that he does not know that answer. He could check with the City Engineer.
That was what was designed and recommended to help alleviate the back up.
Mr. Meyer stated that if there will be a bottleneck, rest assured, it is pretty hard to predict what
will happen 5-10 years down the line and what other demands will be from Medtronic. Is this
supposed to take care of the total Medtronic site development?
Mr. Fernelius stated that Mr. Haukaas, the Public Works Director, stated that the way this new
line is constructed, it will primarily serve the Medtronic project for sure and the residential area
just to the west; basically south of 57th Place, between University Avenue and Highway 65.
That is the area that will tie into this line also.
Mr. Meyer asked when the 10-inch line was installed.
Mr. Fernelius stated he did not know. Part of the design challenge was that the existing line
runs near the Gateway East project, and it would have been too costly to install a second
companion line. The decision was made to move south one-half block to 57th Avenue.
Mr. Meyer stated that he would like to know the City Engineer's answer. For pennies more, they
could get 70% more capacity.
Mr. Commers stated that he did not remember any discussion of this at the time of the budget
hearings. The law that was passed says that no increments may be spent on activities spent
outside of the area of the district. This is outside the area of the district. The paragraph Mr.
Casserly referred to is as follows: "No increments made and spent on activities located outside
of the area district other than the administrative expenses, sanitary sewer and the cost of
HOUSING & REDEVELOPMENT AUTHORITY MEETING. AUGUST 1. 2002 PAGE 3
Highway #65 and other road improvements that are direct result of development occurring in the
area of the district." It does seem that it should be okay to approve this project and not create
any liabilities there. The sanitary sewer and road improvements must be a direct result of
Medtronic's development. This seems to be a factual thing that someone would have to
determine. Mr. Fernelius and Mr. Hickok both tell him that the sanitary sewer and road
improvements are a direct result of the Medtronic Development.
Mr. Hickok and Mr. Fernelius stated that was correct.
Mr. Hickok stated that the AUAR was the alternative environmental impact statement that was
done on this project. As known from other projects, the purpose is to determine the impacts of a
development on the surrounding area. That would be the environmental impacts, roadway
impacts, coalition impacts, sewer and water impacts. This did identify sewer capacity as one of
the issues that needed to be addressed at the time of the second phase of development. That
links it directly to Medtronic AUAR. The City engineers did not disagree. On an earlier question
about capacity, it is not just an 8-inch pipe to focus on, but is 18 inches of capacity, which is
more important. A 10-inch pipe was evaluated to determine its longevity and its ability to serve
into the future. It is a very good serviceable pipe. Rather than disrupting service, they
calculated the capacity and future capacity based on full development, not only the Medtronic
development, but also other areas south of the new Gateway Development. A determination
was made that 18 inches would be more than adequate. It would serve the present and future
development.
Mr. Meyer asked him if ineant an 8-inch plus a 10-inch.
Mr. Hickok stated that is correct. The two lines are different. The 10-inch that is in there was
meant to serve current and future development of this certain area. That will do that into the
future. There is a new line that is run that is meant to serve Medtronic and other future
development that is a separate line that has more than enough capacity than an eight-inch pipe.
It should be clear that a lot of good engineering concentration was put into this, and they
certainly do not want to over-design the project. An 8-inch is far in excess for what they would
need for this current expansion and other Medtronic or other development expansion that would
occur.
MOTION by Mr. Meyer, seconded by Ms. Schnabel, to approve the reimbursement to the City of
up to $285,000 as part of the 57th Avenue Sanitary Improvement Project No. 346.
UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE
MOTION CARRIED UNANIMOUSLY.
6. CONSIDER RESOLUTION NO. HRA 03-2002, APPROVING INTRA-FUND LOAN TO
TIF DISTRICT #6:
Mr. Commers stated that this is the granting of funds from TIF District #6 to help in the
reimbursement of the sanitary sewer project. This is a permissible transaction at this point.
Mr. Fernelius stated Mr. Commers is correct. The 2001 legislative changes require that intra-
fund loans must be approved by resolution. This is now a requirement to formalize the process.
A correction in the memo is that the term of the loan would run through the end of the district.
Mr. Commers asked when it would get repaid.
HOUSING & REDEVELOPMENT AUTHORITY MEETING. AUGUST 1. 2002 PAGE 4
Mr. Fernelius stated that it would be repaid during the term of the district.
Mr. Commers asked if it is of District #6.
Mr. Fernelius stated that is correct.
Mr. Commers stated it is a 25-year term.
Mr. Fernelius stated that is correct, although there is actually less than 25 years remaining in the
district.
Mr. Commers asked if they would be charging interest and then paying back that interest over
time?
Mr. Fernelius stated they would create an amortization schedule and apply the payments as the
increment is received. The HRA will apply the principal from those payments against the
various obligations that are in the development contract, and then the remaining amount would
be applied against this loan.
Mr. Commers asked if the 5% was chargeable against the increment?
Mr. Pribyl stated that it would be similar to a loan that they could consider a bond that they
would be issuing and taking resources from the General Fund and providing it to the tax
increment district.
Mr. Commers stated that the HRA would be responsible.
Mr. Pribyl stated they are taking resources that are part of the General Fund and dedicating
those to a period of time to that tax increment district. In this particular case, they are the bond
holder.
Mr. Commers asked where the HRA stands on paragraph 1.03 that states: "The HRA is
required to limit the principal amount of interfund loan to largest negative cash balance that
existed at any one time in the fund receiving the loans." Do they have a negative cash fund in
TIF District #6?
Mr. Pribyl stated that in the past they have had some negative cash balances that have accrued
now. One of the things the more current legislation has done is that the HRA is required to do
the interfund loans. As far as the magnitude of negative cash balance in District #6, he is not
aware of exactly how large it has been. He does not think District #6 had a large negative cash
balance.
Mr. Commers stated that it seems to him that it has to be at least $300,000 negative cash
balance for the HRA to approve this loan.
Mr. Pribyl stated they are doing the loan in anticipation of the use of the resources for the sewer
lines. They need to reimburse the City for the cost involved in the project.
HOUSING & REDEVELOPMENT AUTHORITY MEETING. AUGUST 1. 2002 PAGE 5
Mr. Commers stated that it seems like there is a restriction here on how much they can do. This
provision does not limit them in making a$300,000 loan. They should approve it subject to that
the loan does not exceed the negative cash balance of District #6 at some given time.
Mr. Meyer stated that it is restricted to the largest negative balance that existed at any one time.
Mr. Commers stated they have had expenditures in District #6.
Mr. Pribyl stated that in the past, as they got into the year-end and financial statements, they
would do the interfund loans to clean those loans up. Now they are doing things in anticipation
of those negative cash balances, and it is a State Statute.
Ms. Schnabel asked if they would ever have a negative cash balance during construction.
Mr. Fernelius stated that the district does have over $1 million negative fund balance right now
as listed on page 29 of the 2001 Financial Statements.
MOTION by Mr. Meyer, seconded by Ms. Schnabel, to approve Resolution No. HRA 3-2002,
Approving Intra-Fund Loan between General Fund and TIF District #6.
UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE
MOTION CARRIED UNANIMOUSLY.
7. CONSIDER TAX LEVY CERTIFICATION FOR TAXES PAYABLE IN 2003:
Mr. Fernelius stated that the HRA has utilized a tax levy, which is allowed by state law to help
support HRA activity. This is primarily for the Housing Rehabilitation loan programs. The levy
itself is equal to .0144% of the market of the City as set by Statute and is fixed rate. It is applied
to all taxable real property in the City. They have utilized this levy since 1997 and every year
the amount of revenue that it generates has gone up. The first year in 1997 they raised
$165,000 in revenue. Last year they raised $225,000. That is a result of market values going
up. The levy rates stay fixed. Based on a typical home at $150,000, this would cost $21.60 per
year. On the commercial property value at $500,000, it would be $72.00 per year. The tax levy
is subject to Council approval and that is on the agenda later this month. Staff is recommending
approval of the resolution authorizing an HRA tax levy for taxes payable in 2003.
Mr. Commers asked if the tax levy is dedicated to reimbursement of the loan from the City that
we use to create several of our housing programs.
Mr. Fernelius stated that it goes into the HRA General Fund.
Ms. Schnabel asked if the total residential properties have a certain percentage figure of those
who used the loans and who establishes that levy?
Mr. Fernelius stated that we have around 6600 owner-occupied housing units. Since we started
the rehab programs in 1995, we have assisted about 490 units. Less than ten percent (10%).
443 loans were made with a value of $4,700,000. We already have about 25 loans this year.
Mr. Commers stated that the $1,000,000 has been leveraged into at least $4,700,000 of the
loan benefits we have been able to give.
HOUSING & REDEVELOPMENT AUTHORITY MEETING. AUGUST 1. 2002 PAGE 6
Mr. Fernelius stated that was a specific sort of program and for that revolving loan program on
its own, they have provided 275 loans at $3,300,000. In reality, they have put other resources
in there in addition to that loan. They have provided quite a few loans through that program.
Mr. Meyer asked if the levy is being used right now to repay the debt service on the $1,000,000
plus repayment of the loan.
Mr. Fernelius stated that is correct. The tax levy does go into the HRA General Fund.
Mr. Meyer stated that it is correct to say they are leveraging $3,000,000+ to approve this plan.
Mr. Commers asked if when that $3,200,000 in loans comes back and once they have paid off
the City's indebtedness, would they have revolving loan programs theoretically at least with
$3,000,000 - $4,000,000 in it?
Mr. Fernelius stated that is correct. They would have a self sustaining program.
MOTION by Ms. Gabel, seconded by Mr. Meyer, to approve Resolution No. HRA 4-2002,
Adopting a 2002 Tax Levy Collectible in 2003.
UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE
MOTION CARRIED UNANIMOUSLY.
8. LIESCH & ASSOCIATES CONTRACT:
Mr. Hickok stated that the HRA purchased the Fridley Fast Lube property at the corner of
University Avenue and Mississippi Street as part of the southwest quad redevelopment project.
With the purchase, the HRA took on the responsibility of site remediation and monitoring. The
MPRCB has created a process to allow municipalities and their redevelopment authorities to
recover a portion of their costs. The eligible costs for reimbursement are 90% of $21,151,043,
or $19,036,28.
Mr. Commers stated that this is the most efficient way to manage technical expertise and fill the
void in staff time.
MOTION by Ms. Gabel, seconded by Ms. Schnabel, to approve the Liesch & Associates
Contract.
UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE
MOTION CARRIED UNANIMOUSLY.
INFORMATION ITEMS:
9. 2001 FINANCIAL REPORT:
Mr. Pribyl stated that Mr. Eisenmenger should take the credit for the bulk of the work and the
statement itself. He identified key issues the HRA may be interested in. The General Fund
holds funds that are non-tax increment. In this particular fund you take a look and see at what
the HRA holds as far as cash. It is flexible in how it is spent. In this fund they have $6,256,654.
That due from other funds within the general fund is $2,286,104. These are the interfund loans
that have been provided from tax increment districts that actually fund the deficits mentioned
HOUSING & REDEVELOPMENT AUTHORITY MEETING. AUGUST 1. 2002 PAGE 7
earlier. The HRA has a loan to the Lake Pointe District of $1,081,000, a loan to the Shorewood
District of $16,000, a loan to 57th Avenue of $125,000, and a loan to the Gateway East at
$1,064,000. The fund balance area set aside a reservation of $3,000,000 for the future
repayment of the HRA debt. This is more of a contingency to make sure that they have
sufficient resources to extinguish the tax increment debt. Mr. Casserly, Mr. Fernelius, Mr.
Eisenmenger, and he will approve the debt requirements in the future. It is prudent to set aside
$3,000,000 based on what they are looking at right now just to guarantee that they have
sufficient resources to extinguish that debt. As the future plays out, that balance will be
adjusted based on what they have for future tax increment.
Mr. Pribyl stated that the Special Revenue Fund handles the housing loan activity provided by
the H RA and at year-end it has $2,141,276. The Mortgages Receivable at year-end is a total of
$1,970,178 and is the amount of the loans that are yet to be repaid by individuals that currently
have loans out. The Liability fund holds the loan to the City of Fridley. The balance was
$707,407. Capital Project Funds is where all of our tax increment districts have their revenues
and expenses. Total cash of all districts is $3,984,124. The developer-assisted expenditures
have outlined all the different assistance that was provided during 2001.
Mr. Commers asked if out of the funds in which the HRA has invested listed at $13,000,000, is
$8,420,000 in the mutual fund?
Mr. Pribyl stated that it is U.S. Treasuries that are of very short nature so there is no valuation
change. They have drawn the resources into that type of investment currently based on the
economics that are out there right now. As interest rates start to increase and economics
change, they are trying to shorten up maturity zones and start putting the money back out again
when the yields start to increase.
Mr. Commers asked if the mutual fund was made up totally of government securities.
Mr. Pribyl stated that was correct and the average maturity is 60 days.
Mr. Commers asked what the current value of the $8,420,000 is today.
Mr. Pribyl stated that is the current value and is dollar-based mutual fund and there is no
fluctuation with a 60-day maturity.
Mr. Meyer asked if the CPAs the HRA uses are ethical.
Mr. Pribyl stated they are ethical and do a lot of training for a lot of the professional
organizations within the state. The City has been very happy with them.
10. PROMOTIONAL MAILER FOR HOUSING PROGRAMS:
Mr. Fernelius provided a sample of the mailer for the Housing Rehab Programs. Staff believed
this would be a good idea to promote the HRA's programs related to housing and rehabilitation
and improvements.
Ms. Schnabel asked if this was also being sent to landlords.
HOUSING & REDEVELOPMENT AUTHORITY MEETING. AUGUST 1. 2002 PAGE 8
Mr. Fernelius stated that the first batch would be sent to single family owners. There are some
owners who live in duplexes who could also apply for a loan. The second round would be going
to rental properties.
Mr. Meyer stated that income limits are stated as "combined income for the entire household".
Would it be appropriate to insert "maximum combined household limit" for clarification?
Mr. Fernelius stated that it would be.
11. WESTERN RIDGE CONDOMINIUMS UPDATE:
Mr. Fernelius stated that earlier this spring one of the owners of the Western Ridge
Condominium development applied for a building permit to put in a gas fireplace. During the
process of inspecting the work, the building inspector discovered massive deterioration in the
exterior walls and structural framing. The building inspection staff was surprised that the units
were still standing. The owner approached the City as president of the town home association
wondering if there was anything the City could do for them. Through this process, staff
discovered that this type of exterior repair is not covered under any of the housing rehab
programs. It is considered a common area improvement that the association owns rather than
the individual. The president understood the policy explanation. Staff explained that the City
has been consistent in applying this policy. The policy is based on the MHFA guidelines. Staff
did propose to the owner that they could finance improvements related to the structure, but not
to the exterior. Interior improvements can be covered. It is all being bid on one contract and the
contractor will break out the costs.
Mr. Fernelius stated that the owner can take advantage of the HRA's program, and they will see
how many decide to do that.
Ms. Schnabel stated that she has seen more and more townhouse development all over. Could
that be re-addressed at some point? She agrees that the homeowner's association has certain
obligations for certain improvements, but this type of housing is something they could see more
and more of.
Mr. Fernelius stated that it puts them into an awkward position, and they are encouraging that
kind of development. There are some financial reasons why they cannot have a change in
policy. This issue has come up in other communities where a larger development did not have
the resources and could not go to a bank. He believes the City created a special assessment in
that case.
Mr. Meyer stated that he understands that the owners have to pony up for roof and home
repairs. If there is not enough money, they are assessed. This program tries to alleviate
substandard housing and here is a situation where this is substandard. They are being
legalistic to say that you are a member of a condo association, but it means that the individual
who owns the condo is still the owner of a certain sector just the same as if it was a free
standing house. Would it be proper to say that these people should be under the loan program?
What is the difference outside of the legalistic of this being a condo or not?
Mr. Fernelius stated they do not own the exterior, but they are responsible.
HOUSING & REDEVELOPMENT AUTHORITY MEETING. AUGUST 1. 2002 PAGE 9
Mr. Commers stated that it is a legal thing, and with some creativity they probably could find a
way to include them. They cannot file a lien against the association and collateral becomes an
issue. How many condo units are there in the city?
Mr. Hickok stated that it is the difference of 6,600 and 10,200 units in all. That remainder is the
association.
Mr. Fernelius stated that includes apartments.
Mr. Commers asked for this to be put on the agenda in the next month or so.
Mr. Meyer stated that eligible repairs include wall framing, insulation, window and door headers
and mechanical systems that serve the individual units. In order to get the repair, you have to
take the wall apart. What is the common wall area?
Mr. Commers stated that he assumes it is framing within the unit itself.
Mr. Fernelius stated they were prepared to assist them with framing repairs related to the
outside walls.
Mr. Meyer asked if the physical siding alone is defined as common property?
Mr. Fernelius stated that the owner owns from the sheetrock in and are not responsible for the
exterior.
Mr. Pribyl stated that the definition is in State statute.
Mr. Meyer asked if they could make eligible repairs including the wall, framing, insulation,
windows and door headers.
Mr. Fernelius stated they are staying within the guidelines.
Mr. Meyer stated that they cannot do that if they go from sheetrock in. They could expand it to
say they could go into the wall.
Mr. Fernelius stated they are trying to at least keep the units up.
Mr. Meyer asked if the repair would be done from the outside.
Mr. Fernelius stated that they recommend assistance with certain amounts of the repairs.
Mr. Meyer stated they would pay for everything in the wall that is rotted. What percent would be
paid for?
Mr. Fernelius stated that staff has not done that in the analysis. Anything truly on the exterior of
the building would not be covered. This does not give them all the money they need, so he
does not know how many will apply for assistance.
Mr. Meyer stated that it has to be thought through what eligible repairs means.
HOUSING & REDEVELOPMENT AUTHORITY MEETING. AUGUST 1. 2002 PAGE 10
Mr. Fernelius agreed. This is the first time they have dealt with this type of request, and staff
would be happy to look into this.
Mr. Meyer asked how old the townhouses are.
Mr. Fernelius stated they were built in the mid 1980s.
Mr. Hickok stated that the developer was an individual who lived in one of the units. The
developer has not done any more development in Fridley since.
Ms. Schnabel asked if mold was an issue.
Mr. Hickock stated that it is inevitable with the amount of moisture damage.
12. MONTHLY HOUSING REPORT:
Mr. Fernelius stated that 15 loans and grants were made last month with a combined value of
$221,000. Each of the columns indicates various funding and the bulk of the funding for this
year have come through the CDBG in loan programs and also through the MHFA. They are
trying to leverage the dollars and increase the volume. Loan servicing has a pending principal
balance of $1,627,000 and 166 loans in the portfolio. Delinquency reports were not included.
He apologized that it does not accurately reflect whether somebody is late due to payments not
being due until the following month. There are some inaccuracies. They need to work with
CRF for an accurate report.
Mr. Commers stated that maybe Mr. Eisenmenger could talk with them to help them out a little
bit for the delinquency number.
Mr. Fernelius stated that the Remodeling Advisor has two visits for the month of July and 26 for
the year. Operation Insulation had only about half of the 66 site visits to take advantage of this.
This is more seasonable and this fall it may pick up a little more.
Mr. Meyer stated that one more way of getting more business into the rehab program is to cover
condo repairs.
ADJOURNMENT:
MOTION by Ms. Gabel, seconded by Mr. Meyer, to adjourn the meeting.
UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE
MOTION CARRIED AND THE AUGUST 1, 2002, MEETING OF THE HOUSING AND
REDEVELOPMENT AUTHORITY WAS ADJOURNED AT 8:42 P.M.
Respectfully submitted,
Signe L. Johnson
Recording Secretary