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HRA 10/03/2002 - 00025111CITY OF FRIDLEY HOUSING & REDEVELOPMENT AUTHORITY MEETING OCTOBER 3, 2002 CALL TO ORDER: Vice-Chairperson. Schnabel called the October 3, 2002, Housing and Redevelopment Authority meeting to order at 7:48 p.m. ROLL CALL: Members Present: Pat Gabel, Jay Bajwa, Virginia Schnabel, John Meyer Member Absent: Larry Commers Others Present: William Burns, Executive Director of the HRA Grant Fernelius, Assistant HRA Director Paul Eisenmenger, HRA Accountant Jim Casserly, Development Consultant Scott Hickok, Community Development Director Paul Bolin, Planning Coordinator Clarissa Klug, Krass & Monroe PA Richard Harris, 6200 Riverview Terrace APPROVAL OF MINUTES: Ms. Schnabel stated that on page 15 (halfway down the page) of the September 5, 2002, minutes, the word "Onan" should be changed to "Lunds" site. MOTION by Ms. Gabel, seconded by Mr. Bajwa, to approve the September 5, 2002, Housing and Redevelopment Authority meeting minutes as amended. UPON A VOICE VOTE, ALL VOTING AYE, VICE-CHAIRPERSON SCHNABEL DECLARED THE MOTION CARRIED UNANIMOUSLY. CONSENTITEMS: 1. CLAIMS AND EXPENSES MOTION by Mr. Meyer, seconded by Ms. Gabel, to approve the consent items as presented. UPON A VOICE VOTE, ALL VOTING AYE, VICE-CHAIRPERSON SCHNABEL DECLARED THE MOTION CARRIED UNANIMOUSLY. INFORMATION ITEMS: 2. UPDATE ON GATEWAY EAST PROJECT Mr. Fernelius reported all 28 units were sold. In terms of the financial picture, the developer has drawn down $532,000 from the site work budget. The HRA escrowed $665,000 to assist the developer with site development costs ($600,000) and ($65,000) for soil testing and remediation. The developer has drawn down most of the site development escrow and staff HOUSING & REDEVELOPMENT AUTHORITY MEETING, OCTOBER 3, 2002 PAGE 2 anticipates the balance of those funds will be drawn down in the near future. In terms of the environmental escrow, there is goods news — the developer will fully reimburse the HRA for all environmental testing and soil correction costs. Under the development agreement, the developer agreed to reimburse the HRA out of the net proceeds. The developer has gone through a financial analysis and calculated the net revenues. After deducting their initial equity contribution of $421,000, the developer has net profits of $144,000 or about $5,000 to $6,000 a unit. The developer will cut a check to the Authority for $21,000 to reimburse the HRA for the environmental costs. Mr. Fernelius stated that for the most part, the project has been completed. The average sales price for the units is $172,000. When they first started negotiations with the builder, the estimated sales price ranged from $125,000 to $140,000. The actual sales price is a function of several factors, including an increase in the developer's cost and overall inflation in real estate prices. Mr. Fernelius relayed the demographic information provided by the developer which stated about one-quarter of the units were sold to people who already live in Fridley; the other 75 percent came from people living in surrounding suburban areas. About 10 percent of the units were sold to empty nesters, 10 percent to young families, and over half the units were sold to young couples. This is consistent with the developer's initial marketing plan. Mr. Fernelius stated this project would clearly have never happened if it were not for HRA assistance. Mr. Bajwa inquired about the front steps that were not built according to the developer's initial site plan. Mr. Fernelius stated there were several occasions when they talked about this to the developer, and that was frustrating. The comparison of what was on the site plan initially and what was constructed was slightly different, in staff's opinion. The developer explained that certain things had to be considered, i.e., costs, long-term maintenance, etc. More attention should probably have been given to those details. Mr. Burns stated some things were not pushed as much as other things, such as landscaping. Mr. Fernelius stated those were the types of things they had the ability to directly influence. Mr. Bajwa stated it seems that with townhomes you have the price going up, while the quality goes down compared to a house. Mr. Meyer asked about the level of detail in construction drawings. Mr. Fernelius stated the porch was not detailed in the initial plan. After the construction was started, the developer submitted a detailed drawing of the front porch construction. The construction is consistent with the plan; however, the quality of materials was not addressed. Staff encouraged the developer to do some kind of framework for the lattice installed below the front porch and to add a finish detail, as well. The developer was able to accommodate part of this request. Mr. Meyer stated getting back to the townhouse problems on future projects, like Gateway West, he would like to see more detailed drawings for things not shown, such as flashing, roofing. For the $179,000 for the architectural fees, the HRA should have received some very specific drawings showing the very practical items. HOUSING & REDEVELOPMENT AUTHORITY MEETING, OCTOBER 3, 2002 PAGE 3 Mr. Hickok stated when he received the plans from the developer, it included a photographic journal of a project they had been done and they clearly had cedar decks, cedar flashing, and cedar railings. For this project, they also put colored architectural rendering showing the porches in somewhat of an off-white color. So the photos are exactly what the architectural drawing has, but there is no label showing the exact material. That was probably changed with the rising cost of construction, etc. Mr. Meyer asked what that means in terms of the developer's liability? Mr. Hickok responded they build what the plans show. As Mr. Fernelius mentioned, basically the plans are very detailed, but lacked a label for the cedar porch area. Mr. Meyer expressed concern about how, whether the building meets code, a lot of little things are not included in the code, and that should be the architect detailing and labeling every little nut and bolt. The City's Building Inspector should not be expected to be knowledgeable about every certain detail. He felt the building plans should have been much more detailed for the money paid the architect. Mr. Bajwa suggested for the future that they require some covenant to finish one model 100 percent and not proceed until the staff and the HRA have agreed that the drawings and construction are okay. Mr. Meyer suggested another way to do it is to hire their own architect to critique the drawings and provide services to ensure they are acceptable. He believed there are other cities that do that. Mr. Bajwa addressed the issue of safety and inquired whether the Association fee would cover any future expenses related to any structural problems. Ms. Schnabel suggested putting this on future agendas. Dr. Burns stated that when they get to the point where they are negotiating with the next developer, these are the kinds of things they will want to look at, i.e., concrete driveways perhaps. Ms. Schnabel recalled from several years ago the "but for" clause that has been used relating to why we do the different projects. NOTE: Vice-Chairperson Schnabel asked that Dick Harris, a Fridley resident, be allowed to make a short presentation before proceeding to the next information item. Mr. Richard Harris, 6200 Riverview Terrace, stated he was representing the S-3, Heavy Industrial Onaway Addition District, property owners and people on the north side of Osborne Road. He stated the City is proposing a new ordinance about outside storage and screening and blacktop, etc. He asked that if the City is going to be requiring this work be done, is there any money available to assist especially the smaller industrial-type businesses--perhaps a low interest loan? Ms. Schnabel asked how many businesses are involved. HOUSING & REDEVELOPMENT AUTHORITY MEETING, OCTOBER 3, 2002 PAGE 4 Mr. Hickok stated he is not prepared to say what number there is which would include all the business districts. Dr. Burns stated there are two processes going on. One is the modification to the outdoor storage ordinance that allows outdoor storage under certain considerations, but there is the actual ordinance requiring the screening and asphalt paving, etc. So, the one process is amending the ordinance to create some manner allowing certain circumstances; and the other process doing comprehensive code. This means the code enforcement officer does an exterior inspection of the property to identify things wrong, and then writes a letter to the property owner about any code violations. In general, he has very cooperative relationships with the industrial property owners and is by and large trying to cooperatively work with the people. Ms. Schnabel inquired about a provision to have outdoor storage. Dr. Burns replied right now there is no outdoor storage allowed in the M-1 and M-2 districts, only in the M-3 district. There are issues about having outdoor storage in the M-1 and M-2 districts and having the storage screened and this relates back to previous ordinances. These issues will be addressed further in the upcoming Council meetings. Dr. Burns stated Mr. Harris is asking for something akin to the outdoor paving program. Five or six years ago, the City passed an ordinance requiring paved driveways. The City had available a rehab loan program to help low and moderate income people with paving. He believes Mr. Harris is asking for a similar program for the smaller industries. Mr. Meyer asked how the City has given aid to the "mom and pop" businesses? Dr. Burns asked if that assistance came from the CDBG funds? Mr. Fernelius stated, yes. Dr. Burns stated there is a small amount of money, like $70,000, that is available for a fairly broad list of primarily exterior improvement. Mr. Fernelius stated it was for primarily exterior improvement for smaller apartment buildings of 7 or less units who have applied for a deferred loan up to $20,000; and the owner has to match it. So there is a requirement that they have to do it all out of their own pocket or find some funding to match it. They are doing that as a way to try and help people with things like dumpster enclosures, paving parking areas, etc. The only grant part of it is the funding from the federal government and then the Authority in turn is using the money to provide the deferred loan. It has to be paid when the property is sold. Mr. Meyer asked about the interest. Mr. Fernelius replied it is zero percent interest. Ms. Schabel asked if there is a raise January 1, 2003. Mr. Fernelius stated they are using 2002 dollars right now and are just unveiling the program so they will see what kind of response they get. Mr. Bajwa asked how much this was per owner. HOUSING & REDEVELOPMENT AUTHORITY MEETING, OCTOBER 3, 2002 PAGE 5 Mr. Fernelius replied the maximum loan, until the owner applies and they go through and do an inspection (not knowing the extent the owner is going to get); we provide the maximum loan, $20,000, and provide three loans for three properties. Mr. Bajwa asked how many are looking at the loans. Mr. Fernelius replied they have a mailing list of about 100 or owners that fall within the category of owning property, but there are substantially more rental units in the City. They are just addressing a small segment of the market to pilot the program. He wanted to emphasize the pilot nature of the program. Ms. Gabel asked if that money could be used for Mr. Harris. Mr. Fernelius replied, no. Dr. Burns stated they would probably want to take a look at where Mr. Fernelius is with the housing rehab program and develop an opinion/evaluation of how much usage this year. Based on that usage, they would determine whether there might be some excess funds available out of housing rehab to assist with these industrial code update projects. Ms. Gabel replied they would have to look at what businesses would qualify. Mr. Harris stated he wanted to come tonight to see if something was even possible and if it is a function of the HRA. Dr. Burns stated they can take a look at it and get back to Mr. Harris with a report. Mr. Casserly stated that, unlike housing, there are a lot of differences for commercially zoned districts. Mr. Meyer stated one of the first steps talked about was doing something with the TIF district. Mr. Casserly pointed out there is a lot of discretion as to what can be done - there is a broader area. Ms. Schnabel asked whether it was realistic to have a report next month. Mr. Fernelius stated he would look into it. Ms. Schnabel asked Mr. Fernelius for an update on the loan program policy. Mr. Fernelius stated he wished he had more to report on this, but the one thing he had to discuss with the HRA was the question at the last meeting about rationale behind MHFA policy - - why is it they prohibit the exterior improvements? He stated he honestly was not able to get a hold of MHFA prior to the meeting, but he will do that and report back to the HRA. Mr. Fernelius stated they were able to close on three loans so far on the Western Ridge Development and another application is in the process. The remaining owners have paid for their portion in cash or found another financing source. He thinks the policy changes implemented at the last meeting were very helpful. HOUSING & REDEVELOPMENT AUTHORITY MEETING, OCTOBER 3, 2002 PAGE 6 3. FOLLOW-UP ON NEW BRIGHTON HOTEL DEVELOPMENT Mr. Hickok stated Kraus-Anderson is the developer for Brighton Village project, which is meant to be a mixed development. It will be a very nice development. It is at I-694 and Silver Lake Road in the northeast quadrant of that area, the location of the former Lunds store. They have worked very hard and long to pull together an amended land use plan to allow this mix of development. Soon they will have a development schedule, and there is still some approval needed by the Planning Commission and City Council. The project will include 78 units of coop senior housing; an 84-room hotel; a 4,500 square foot restaurant, an 11,900 square foot Snyder's store, a 17,090 square foot mixed retail building, a 14,000 square foot medical building (with underground parking), and expansion of the existing Champp's Bar and Restaurant to approximately 3,900 square feet. He stated he would keep the HRA posted on the progress of this project. Ms. Gabel asked what hotel would be built. Mr. Hickock stated he did not know. Mr. Casserly stated there is actually hotel brand shopping that occurs involving many different studies, etc. Whatever hotel is built there will help the City since there are not many hotels in the immediate area for the comparison of hotel rates. 4. IMPACTS OF MEDTRONIC 2003 PROPERTY TAX APPEAL Mr. Fernelius stated this is really an informational item. He did not know exactly where Medtronic was in the process, but they are appealing the 2003 property tax evaluation and the impact for the HRA is on the City's tax increment financing program. At the last meeting, Mr. Commers had asked that staff work with Krass & Monroe on finding out what impact that might have on the City. Staff did an analysis and basically looked at several different scenarios -- where they are currently in terms of valuation and where potentially this could end up along a range or along a spectrum of different valuation of figures, dollars and square foot, and what the impact might be. Mr. Fernelius stated he believed the bottom line is that it would obviously impact the City depending upon where this ends up. The City could see anywhere from $80,000 based on the figures Krass & Monroe had. Right now the City is scheduled to receive about $326,000 next year from the Medtronic project and obviously as seen in the analysis, as the valuation goes down, the amount the HRA receives goes down accordingly. Those are the potential impacts; where it ends up they do not know. Mr. Casserly stated the chart is a good summary showing the impact of the decreased market value and stated most people do not realize that for every dollar spent, they are getting back 45 cents. He stated in the year 2011 that amount would drop substantially. Ms. Schabel inquired if they were not successful, would it be reasonable to think that the market value could go down? Mr. Casserly replied it is hard to show value. This is one of the most difficult things to try and value. 5. MISCELLANEOUS UPDATES a. Follow-up on Highway 65 Entry Monument Sign HOUSING & REDEVELOPMENT AUTHORITY MEETING, OCTOBER 3, 2002 PAGE 7 Mr. Hickok stated the site of the entry monument sign near Menards has now been landscaped, and the tall weeds have been removed. He wanted to thank the staff for a wonderful job, not only for the landscaping but also for installing a small retaining wall. The Fridley Knights of Columbus has volunteered to adopt this sign. The Fridley Rotary has indicated they may be interested in adopting one or more remaining entry monument signs, and Fridley High School's horticultural club is looking at adopting one. Dr. Burns stated there is an article in the October newsletter that may draw more people in to adopt the signs. Ms. Schnabel stated the Kiwanis Club has also been involved in adopting City signs. Ms. Schnabel stated that she observed that the area all along the whole fence along the frontage road gets filled with debris from nearby businesses. Mr. Hickok stated that perhaps they could talk to the business owners and ask if they would volunteer to keep that area clean. Mr. Hickok stated the sign (unlike the other signs) at Menards is also in disrepair--there is paint deterioration. The City has in its budget to repaint signs every six years. It appears the sign has premature aging, which may be an issue with the paint vendor according to the painting contractor. Staff is checking into this. Mr. Hickok stated that two of three service badges were returned. b. Follow-up on University Avenue Sound Wall Mr. Fernelius stated that regarding the unpainted guardrail brought up at the last meeting, which is on the sound wall on University Avenue at the top at 694, it is large untreated timbers that are used as a guardrail to protect vehicles from crashing through the wall. He did ask Jon Haukaas, Public Works Director, to find out why those timbers are not painted. Mr. Haukaas found out from MnDOT that those pre-treated timbers are not painted; because if they are painted and someone does rub against one of them, that creates a maintenance issue. That is the primary reason; also, pre-treated material does not hold paint very well and you would have an ongoing issue of paint bleeding through. 6. MONTHLY HOUSING REPORT Mr. Fernelius stated the loan and grant origination is the first report. The month of September was barely active. Staff did a mailing in August, which has generated quite a bit of interest in that program. Also, he wanted to point out that at the bottom of the report there is the breakdown of funding by agency and he asked the HRA to recall where they have participated in a discount loan program where they essentially helped break down the interest rate. Both MHFA and the Met Council share that write-down cost, and they have been able to leverage a lot of dollars. The HRA members could see that over 50 percent of funding in loans this year has come through MHFA and also the CDBG. The bottom line is they are trying to leverage more HRA dollars and he believed the HRA has been successful in doing that. Ms. Gabel asked about the CDBG funds. HOUSING & REDEVELOPMENT AUTHORITY MEETING, OCTOBER 3, 2002 PAGE 8 Mr. Fernelius stated the second report is the loan servicing report, which comes from the community reinvestment fund showing the loans collected, principal, interest, etc. The bottom part of the report shows the delinquencies. Over the last year and a half, they have seen the delinquency rate go up which he expects is related to a lot of things going on in the overall economy. Staff will continue to monitor that. Mr. Fernelius stated the last two pages cover the Remodeling Advisor service and Operation Insulation. September was a good month for the Remodeling Advisor. They have seen the activity start to increase in that service primarily because of the marketing they have done. Regarding Operation Insulation, there were only three visits in September, for a total of 71 year-to-date. CEE, which administers that program, is going to be doing some marketing and paying for it themselves. Residents should be getting something in the mail. That should cause some more activity. The HRA does share some of the cost of operating that program, helping out with the inspection cost. Mr. Burns stated there are 25 of the loans out of the rehab loan program for a total of $384,166 year-to-date. How does that compare with our budget? Mr. Fernelius stated they are substantially under budget. Ms. Schnabel asked if the HRA funds have restrictions, which do not allow the HRA to give out funds in some residential areas. Mr. Fernelius stated the other funds are other housing rehab dollars designed specifically for that purpose. MHFA, for example, does not do commercial rehab loans. Typically, when you start to use public dollars for commercial rehab, there is some improvement program. The other "hook" is job creation, and it is very often tied to some public purpose. So there usually are requirements. It is probably something that would affect us as well if they decided to use their own funds. This is something we would have to look at. Ms. Gabel asked if any other communities do that. Mr. Fernelius stated Columbia Heights has a small commercial loan program, for example, for storefront improvement. At one time, Coon Rapids had an economic development loan program. So, it has been done and he thought it would be a question of how one would structure it and ultimately what the dollars would be used for. ADJOURNMENT MOTION by Ms. Gabel, seconded by Mr. Meyer, to adjourn the meeting. UPON A VOICE VOTE, ALL VOTING AYE, VICE-CHAIRPERSON SCHNABEL DECLARED THE MOTION CARRIED AND THE OCTOBER 3, 2002, MEETING OF THE HOUSING AND REDEVELOPMENT AUTHORITY WAS ADJOURNED AT 10:08 P.M. Respectfully submitted, Denise M. Letendre Recording Secretary