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HRA 12/04/2003 - 29526� � CITY OF FRIDLEY HOUSING AND REDEVELOPMENT AUTHORITY MEETING '� DECEMBER 4, 2003 CALL TO ORDER: Chairperson Commers called the December 4, 2003, Housing and Redevelopment Authority meeting to order at 7:30 p.m. ROLL CALL: Members Present: Larry Commers, Virginia Schnabei, Pat Gabel, Bill Holm Members Absent: John Meyer Others Present: Grant Femeliius, Assistant HRA Director William Bums, Executive Director of HRA Paul Eisenmenger, HRA Accountant APPROVAL THE NOVEMBER 6 2003 HOUSING AND REDEVELOPMENT AUTHORITY MEETING MINUTES: MOTION by Ms. Gabel, seconded by Ms. Schnabel, to approve the November 6, 2003, HRA minutes. Ms. Schnabel refeITed to page 8, paragraph 3: "Mr. Commers asked about the status of the loan ^, balance to the City." She believed the correct word should be �from the City". It would be the same for paragraph 4. Mr. Meyer stated that in paragraph 5, the word °butt" should be "but iY'. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLQRED THE MOTION CARRIED UNANIMOUSLY AND THE MINUTES APPROVED AS AMENDED. CONSENT ITEMS: 1. CONSIDER RESOLUTION ADOPTING A FINAL HRA TAX LEVY FOR TAXES PAYABLE FOR 2004 (RESOLUTION HRA 6-2003) 2. CONSIDER PROPOSAL BY SEH TO CONDUCT TIF BLIGHT ANALYSIS 3. CLAIMS AND EXPENSES Ms. Gabel requested that item #2 be removed from the Consent Agenda for further discussion. MOTION by Ms. Gabel, seconded by Mr. Holm, to approve Consent Agenda, items #1 and #3. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. ACTION ITEMS: �'�1 4. CONSIDER ADOPTION OF FINAL 2004 HRA BUDGET: HOUSING & REDEVELOPMENT AUTHORITY MEETING, DECEMBER 4, 2003 PAGE 2 ' Mr. Femelius stated he had a couple of items on the 2004 budget that he wanted to bring to the ^ HRA's attention. The first one is the budget document itself. Staff included a new set of budget pages which replaced the previous version received at the November HRA meeting. In teRns of the changes made in the previous budget document and this one, staff updated the estimates of tax increment revenue which went up slightly. On the expense side, they reduced the payment to Medtronic. Other than that, the items within the budget are the same as the previous budget document. Mr. Femelius stated that he had included a letter in the agenda packet from the City Assessor, Mary Smith, on the "Status of the Medtronic's Tax Petition°. M�. Smith presented a nice chronology of what has happened since August 2002. Today, he spoke with her about the current status. Medtronic has received the City's appraisal and reviewed that with the County Attomey's office. Medtronic will soon be discussing what the next steps might be. Medtronic has filed its petition with the tax courts, but he did not know if a trial date has yet been set. Mr. Commers stated that he had read in the agenda that the City has valued the building at $150/square foot, and Medtronic is talking about $100/square foot, so about one-third is at risk. Mr. Femelius stated the second item concemed the HRA's real estate.holdings. He did prepare a list of the 14 real estate holdings. All of these sites were acquired for redevelopment purposes, not for any speculative purposes. In fact, in addition to the five sites listed on the Gateway West project, five additional sites are scattered site properties the HRA has acquired. There are also two vacant sites along old Central acquired back in 1999. Those sites have some soil problems which are not currently developable. No activity is planned on those sites at this time. Of the last two sites, one is a vacant parcel leased to ACCAP that adjoins an apartment property owned by ACCAP in Hyde Park, and the other site is a transitional housing � facility the HRA owns and leases to ACCAP for a transitional housing service. Mr. Fernelius stated that he believed Mr. Commers had asked how those real estate holdings were reflected in the auditor's financial statement. The answer is that they are no# reflected in that statement. They are treated as expenses, because the typical practice is to buy�them, then tum around and reconvey or sell them to a developer. So, they are not held onto for any length of time and are classified as an asset. Ms. Schnabel asked about the sites leased to ACCAP. Does ACCAP pay any type of rental fee? Mr. Femelius stated he would have to check on that, but he did not believe ACCAP pays a fee. The HRA acted as kind of a"pastor" for the transitional project. It was a requirement that a public entity actually own the land. The HRA has no active role in managing the project. He ' wasn't sure if a payment was made up front on the vacant parcel. Mr. Femelius stated the last piece of information for this agenda item is a memo from Krass Monroe P.A., along with some spreadsheets. He summarized some of the issues that Krass Monroe had raised and reviewed the spreadsheets to give the HRA a sense of what some of the cash flow projections are going foruvard. Mr. Femelius stated that in the memo, Krass Monroe stated that beginning in 2004, the HRA should receive approximately $210,000 of additional tax increment. That is a result of the adjustments that will be made to the original tax capacities in their pre-1988 districts. That legislation was passed last spring. That is good news. � HOUSING & REDEVELOPMENT AUTHORITY MEETING, DECEMBER 4, 2003 PAGE 3 Mr. Femelius stated that regarding Medtronic, Krass Monroe has projected the worst case � scenario and a lower valuation throughout this cash flow analysis. So, the 30% that Mr. Commers mentioned eariier is already factored into these numbers. Mr. Femelius stated that staff is recommending the HRA approve the 2004 budget. Ms. Schnabel stated that taking the worst case scenario that Krass Monroe determines the HRA cannot use this money in any other TIF district, what happens to that money? Mr. Femelius stated it would go back to the taxing jurisdictions—the County, scliool district, and the City. The City would get approximately one-third of that amount. The first preference, obviously, would be to try to use those resources towards the HRA's debt service obligations. Mr. Commers stated that at the last meeting because of a large amount of money in their revolving loan fund, they had discussed the possibility of paying off the City loan in full. Mr. Femelius stated that it is true that the HRA has a fai�ly substantial cash balance in the revolving loan fund, and the question is whether it is appropriate to pay off the loan? Staff needs to evaluate this and make a recommendation to the HRA. Mr. Commers stated he thought it was important enough for the staff to look into that and give the HRA a recommendation. It would save the HRA a considerable amount of interest. There was some discussion about the possibility of adding the CDBG monies to the budget. Staff indicated they would report back to the HRA when they know more. ^ MOTION by Ms. Schnabel, seconded by Mr. Holm, to approve the final 2004 HRA budget. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. Mr. Commers stated he wanted to again thank staff for all its hard work and time in preparing this budget. 5. CONSIDER RESOLUTION MODIFYING REDEVELOPMENT PROJECT NO. 1 AND Ti4X INCREMENT FINANCING PLANS (RESOLUTION HRA 7-2003) Mr. Femelius stated staff is modifying the redevelopment plan and the underlying tax increment financing plans for each of the HRA's TIF districts. They are doing this in response to new mandates from the Office of the State Auditor (OSA) which has oversight for tax increment financing in the state. These amendments are in response to those new mandates and new requirements from the OSA. Mr. Femelius stated the agenda packet included a lot of spreadsheet information. With this information, he hoped to give the HRA a sense of what is going on in each district. He also had prepared a separate spreadsheet he had handed out at the meeting which provides a kind of summary of the entire budget and how they look at these budgets. As opposed to a revenue and an expense, they look at them from a source and a use. And, they have to balance out. That is what this document does if this is approved by the HRA and City Council. The total sources will reconcile or balance the total uses. � Mr. Femelius stated he believed that has been a sticking point in the past. When these tax increment financing budgets are prepared, when they start a project, they are really trying to anticipate what projected expenses and revenues will be. As often is the case, they found out HOUSING & REDEVELOPMENT AUTHORITY MEETING, DECEMBER 4, 2003 PAGE 4 over time that these projects generate more revenue, there are more expenses, and yet that is not reflected in the budget. The individual tax increment financing �budgets don't have to be � updated every year. So, when they send reports to the OSA office, they have to explain all these issues of why things don't match up. They are doing all the things they are supposed to do, but the action being proposed to the HRA will make it much clearer in terms of what their total projected resources will be and what they are anticipating to be their total expenses at the end of the tax increment financing program. He believed they are using the date of 2025. These are very large numbers, which are kind of surprising, but staff is trying to anticipate what the totals will be over the life of their redevelopment programs looking back from 1979 through the year 2025. Mr. Fernelius stated staff is recommending the HRA approve the amendments to these individual budgets. A resolution that has been prepared is the legislative action the HRA wi(I approve. The next step is for the Council to conduct a public hearing on December 8, and they will also have to approve these modifications as well. As part of this process, they did notify all the affected taxing jurisdictions, school districts, and the County, but they have not re�eived any comments back from those groups. Dr. Bums stated he had received a call from a person who read the legal notice on this and thought the City was setting up a new tax increment district. He wanted to make it real clear that they are not setting up a new district; this is simply an adjustment of finances on existing districts. Mr. Commers asked if there are any districts where they have exeeeded the maximum amount of expense prior to this change in the law? Mr. Eisenmenger stated he could not answer that question at this time. He would have to go � back to the prior years' TIF reports and look that up. Mr. Femelius stated an issue they have had with the OSA is when they show districts that have deficits. So, part of what they want to do with this action is to account for some transfers that would be made to clear up those deficit issues. Mr. Commers asked how they would make up for any defi�its? Mr. Femelius stated that they would first need to figure out wh�ch districts have deficits right now. Part of what is going on is trying to anticipate what is going to happen in the future. So, they definitely need to be concemed about any existing deficits they may have in districts and have a strategy for addressing those. Going forward, they will have to address the deficits as they come along. MOTION by Mr. Holm, seconded by Ms. Gabel, to approve Resolution HRA 7-2003, A Resolution Modifying the Redevelopment Plan for Redevelopment Project No. 1 and the Tax Increment Financing Plans for Tax Increment for.Tax Increment Financing Districts Nos. 1, 2, 3, 6, 7, 9, 11, 12, 13, 14, 16, and 17 to Reflect Increased Project Costs and Increased Bonding Authority with Redevelopment Project No. 1, due to new rnandates from the OSA. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. 5. MONTHLY HOUSING REPORT Mr. Fernelius stated these reports include the Loan Servicing report, Loan Originations, and Remodeling Advisor & Operation Insulation programs. _ �''1 � HOUSING & REDEVELOPMENT AUTHORITY MEETING. DECEMBER 4, 2003 PAGE 5 6. CONSIDER PROPOSAL BY SEH TO CONDUCT TIF BLIGHT ANALYSIS (continued from the Consent Items) Mr. Femelius stated this is a contract with SEH, an independent architectural, engineering, and land use planning consultant that has experience in the area of doing blight assessments which are both a legal requirement and a good idea when they create tax increment financing districts. SEH would go out and do a physical inspection of the property, take photographs, make an assessment of the condition, and prepare a report to the HRA documenting the conditions and verify that there is blight. The report would not become pa�t of the findings, but would be part of the background information the HRA would have when they create the district. The cost of the estimate is estimated at $5,000. Ms. Gabel stated she believed this has to be done, but she thought the cost was high. Could staff give her a little information to make her more comfortable? Mr. Femelius stated it involves a number of professional staff members (architectural engineering backgrounds) with credentials that qualify them to make these kinds of assessments. It is expensive to hire experts with these kinds of credentials. They will go out, do an assessment, and then prepare the report for the HRA. The letter agreement was not worded as he had instructed SEH. He wanted a"cost not to exceed $5,000" so that needs to be clarified. It could be less than that depending on the time that has to taken. The conversation he had with SEH was that it would be billed on a time and materials basis. Typically, these agreements are written this way so they don't have to come back for small amendments. Ms. Gabel stated she believed Mr. Fernelius had clarified it well for he� by explaining that these ^ are professional staff people with high qualifying credentials. Mr. Holm stated he believed the letter agreement follows staff s instructions for a"cost not to exceed $5,000". He referred to paragraph 2 of the letter which stated: "The cost for conducting the assessments is estimated to be $5,000. Compensation shall be on an hourly basis to the established maximum fee...." Mr. Commers agreed. Dr. Bums stated maybe the minutes could reflect that it.is the HRA's understanding that it is ",u� to the established maximum fee..." It is really a matter of interpretation. MOTION by Ms. Schnabel, seconded by Ms. Gabel, to approve the contract with SEH to conduct a TIF blight analysis at a cost of up to $5,000 and to authorize the Chairperson and Executive Director to execute the appropriate agreements. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. 7. OTHER BUSINESS Mr. Commers stated the HRA had received a breakdown from Mr. Eisenmenger of the various cash balances and operating expenses from 1999-2003. That was in response to the HRA's question about its cash balances over the last five years, its operating expenses, etc. It is for the �� HRA's information only. HOUSING & REDEVELOPMENT AUTHORITY MEETING, DECEMBER 4, 2003 PAGE 6 Mr. Eisenmenger stated that what he was attempting to show was that the general fund is holding its own when it comes to operating expenses. Between interest revenue and the tax � levy, the general fund is paying for its own operating expenses. ADJOURNMENT: MOTION made by Ms. Gabel, seconded by Ms. Schnabel, to adjourn the meeting. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED AND THE DECEMBER 4, 2003, HOUSING & REDEVELOPMENT AUTHORITY MEETING ADJOURNED AT 8:40 P.M. Respectfully s bmitted, �°,'' �/�.. ' � Lynne Saba Recording Secretary i"� �