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HRA 08/05/2004 - 00027891CITY OF FRIDLEY HOUSING AND REDEVELOPMENT AUTHORITY AUGUST 5, 2004 CALL TO ORDER: Chairperson Commers called the August 5, 2004, Housing and Redevelopment Authority meeting to order at 7:30 p.m. ROLL CALL: Members Pesent: Larry Commers John Meyer Pat Gabel William Holm Members Absent: Virginia Schnabel Others Present: Dr. Burns, City Manager Grant Fernelius, Assistant HRA Director Scott Hickok, Community Development Director Richard Pribyl, Finance Director APPROVAL OF MINUTES: JULY 1, 2004 MOTION by Ms. Gabel, seconded by Mr. Holm, to approve the minutes of the July 1 St meeting. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. CONSENT AGENDA: Consider Administrative Contract for North Metro Home and Garden Fair. APPROVED Current Claims and Expenses Chairperson Commers explained that the August 1 St Tax Increment payments reflected on the report have been already been made due to the legal timing requirement. APPROVED HOUSING AND REDEVELOPMENT AUTHORITY MEETING — AUGUST 5, 2004 Page 2 of 11 MOTION by Mr. Holm, seconded by Mr. Meyer to approve the Consent Agenda as presented. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. ACTION: • Consider Purchase Agreement with William and Ora Talley for property at 281 57t" Place NE. Mr. Fernelius stated this action is to consider the purchase of a single family home adjacent to Frank's Used Car Lot in the Gateway West project area. The home was included in the original development plan in the mid 1990's and there was a previous purchase agreement but that fell through due to some problems in negotiating with the adjoining property owner. Up until this past spring the HRA was not looking at acquiring the two homes on 57t" Place, but the staff was contacted by the owner of 271-57tn Place, who was interested in selling. Subsequently, both that property owner and the Talleys were contacted to confirm their interest in selling. Mr. Fernelius explained that the staff has made an offer to both of these property owners and have reached an agreement with the Talley's. The subject property has a 1 '/ story home with 4 bedrooms, 2 bathrooms, and a 2 car attached garage with a total square footage of a little over 1800 square feet and the lot is 80 x 140 feet. The appraiser noted that the property is in decent condition but there is some hail damage to the siding and roofing and some additional issues related to grading around the foundation. The appraised value of the property is $192,000 and after a series of negotiations a purchase price of $204,900 was agreed upon. This amount reflects the price of a comparable replacement dwelling. The seller will receive moving costs as part of the relocation package but they will not be receiving a replacement housing payment. Mr. Fernelius stated the HRA has two options. It can approve the purchase agreement as presented, or it can table action pending resolution of the other negotiations with the adjoining property. From the staff's perspective, they feel this situation is not unusual, as we don't always have all the properties in a redevelopment acquired at the same time. Also, they believe that with additional negotiations the staff believes they will come to an agreement with the adjoining property owner. Staff's recommendation is to approve this purchase agreement. Chairperson Commers commented that even if we're not able to acquire the adjoining property, the HRA should move forward with the purchase of the Talley property. HOUSING AND REDEVELOPMENT AUTHORITY MEETING — AUGUST 5, 2004 Page 3 of 11 MOTION by Mr. Holm, seconded by Ms. Gabel to approve the purchase agreement as presented in the memorandum and according to the terms and conditions provided. Dr. Burns pointed out that if the City is not successful in purchasing the adjoining property, the City would still be able to effectively use the Talley property as a part of the Gateway West project. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. INFORMATION ITEMS: • Evaluate Request of David Henrikson, 6031 3rd St. NE, to Purchase Garage at 5925 3rd St. N E. Mr. Henrikson stated he is interested in purchasing the garage on this site and moving it to his property. Mr. Fernelius explained this was one of the sites the City had acquired as a part of the Gateway West project. This was placed on the agenda to get some direction from the HRA on how they should proceed. The issue is a proposal by Mr. Henrikson to purchase a garage on this property. Ordinarily what they've done in the past is to deed those rights to the demolition contractor. However, in the last couple of years, the City adopted a deconstruction policy to encourage the reuse of building materials. In that spirit, Mr. Henrikson's proposal was intriguing. We do not have a policy in place for this specific type of request. Chairperson Commers asked if the garage can be easily moved. Mr. Henrikson stated he consulted a professional mover who indicated there should be no problems moving the garage. Ms. Gabel asked if the City would incur any liability or would that be the responsibility of the person doing the moving. Mr. Fernelius stated staff would recommend that Mr. Henrikson indemnify the City. Chairperson Commers questioned how far the garage will be moved. Mr. Henrikson stated it is only one block. Mr. Fernelius stated the deconstruction policy applies in this situation and it would allow Mr. Henrikson would have a usable garage. There would be reasons to justify this. Chairperson Commers asked the condition of the garage. HOUSING AND REDEVELOPMENT AUTHORITY MEETING — AUGUST 5, 2004 Page 4 of 11 Mr. Henrikson stated it was constructed in 1988 and is in good shape. Mr. Meyers commented that when the City contracts out for bids on demolition it isn't unusual to exclude some portions of the building. He didn't think the City would be establishing any negative precedent and it doesn't necessarily mean the City is establishing a policy by approving this request. Mr. Holm questioned if a price has been agreed upon. Mr. Fernelius stated there is a written offer of $500 for the garage. That offer has not been accepted at this point. Chairperson Commers stated he believes the HRA members are in agreement that Mr. Fernelius should proceed with negotiations and bring the matter back for the required public hearing. • Evaluate Request by Columbia Park Medical Group to Share Parking Lot Improvement Costs Mr. Hickok explained that in November 2003, a master plan amendment was before the HRA and consideration was given to a redevelopment plan for the parking lot connected with Columbia Park Medical Center. The improvements have been designed and the project has been bid. The project costs, $368,647, exceeded what Columbia Park Medical Group had expected. The request before the HRA is to participate in this project and to pay for a portion of that. The City does own 45% of that parking area and Columbia Park Medical Group is requesting that the City pay for 45% of the project cost, $165,891. This is a parking lot which was a part of the master plan for redevelopment. Mr. Hickok reviewed the reworked plan, which includes a revised access point to the north, a straightened drive aisle from the service drive into the ambulance lane and the front entrance to the facility. Included is a re-striped parking lot on new asphalt, new curb and gutter, new landscaping and irrigation, and a new storm sewer interceptor. There is currently a curb that separates the City's 45% of the parking lot which separates the City's portion and which leads to inefficiencies and design challenges. Mr. Hickok explained this redesign will create 34 new parking spaces which will alleviate some of the parking issues the City has experienced. The City's being asked to contribute 34 parking spaces at the contribution level; which, would be about $4,800 per parking stall being created. If the City were to do an additional parking ramp level, the cost would be approximately $50,000 per parking space. The new lot would meet City requirements for curb, gutter and asphalt and would have a storm sewer interceptor and would include better lighting and landscaping. This new parking area would enhance the overall image along University Avenue. HOUSING AND REDEVELOPMENT AUTHORITY MEETING — AUGUST 5, 2004 Page 5 of 11 Mr. Hickok further explained that the cost is based on credible costs estimates by contractors. The HRA did not anticipate this kind of expenditure and, for that reason, the staff recommends that this be included in the 2005 budget. HRA's alternatives regarding this matter would be to agree to fund in 2004, adjust the budget to make room for this contribution; agree to fund it wholly in 2005; agree to fund a portion of the next three years; or the option of just saying "no." Mr. Hickok stated the staff recommends the HRA approve their portion of the funding for this parking area but that their contribution be done over the budgetary years 2005, 2006 and 2007. Chairperson Commers asked Mr. Hickok why the City originally agreed to let the Columbia Park Medical Group use a parking area owned by the HRA. Mr. Hickok explained the records are not entirely clear, but it appears that the HRA owned a part of the parking area prior to the redevelopment project and rather than just forfeiting that in the redevelopment we retained ownership with the idea we would control the activity on that area. We did think it was an important part of the shared campus effect that we allow that to be parking for one of the buildings along the corridor. At that time, it worked best for the southern most building of the Columbia Park Medical Group. The City retained ownership and control but allowed the parking to be used in the campus setting to alleviate the City's parking and their parking. Chairperson Commers asked what the contract provided as far as maintenance of that parking lot. Mr. Fernelius stated that has not been reviewed but they will follow-up on it. Mr. Meyer asked if they're proposing to narrow the parking stalls. Mr. Hickok stated they will be narrowing some of the parking stalls to 9 feet, but those adjacent to the building all the way around will remain at a 10 foot width and the handicapped stalls are according to state standards. Ms. Sonja Feinberg, Facilities and Materials Manager for Columbia Park Medical Group, stated the purpose of this project is to increase the amount of parking available for their patients. They've received numerous complaints about the lack of parking and their practice in this area has increased. She added if the HRA's contribution is delayed, the project would probably be delayed as well. She also pointed out that at times some of the vehicles are City Hall visitors. Chairperson Commers asked if elimination of green space or any other type of area available to help make these additional parking spaces. Mark Hansen, Mohagen Hansen Architectural Group, explained they actually added green space. In the new layout, the entrance off the west frontage road has been HOUSING AND REDEVELOPMENT AUTHORITY MEETING — AUGUST 5, 2004 Page 6 of 11 shifted and by shifting it over they put in a planter bed running west to east to align the access and the parking lot is being bumped a little to the north. This proposal is a win- win situation because the parking spaces will be increased, the City will have an improvement to their property, and the costs will be shared by Columbia Park. One of the alternates was not included in the price. This alternate is in the southwest corner there is an entry to Wells Fargo that will have to be modified which Wells Fargo will pay for if they choose to proceed with that modification. Chairperson Commers commented that it appears the greatest expense is the utilities going in. Mr. Hansen explained there is currently no lighting on that site so they will be putting in new electrical service and new lights. Mr. Meyer questioned if the parking area is used enough in the evenings to warrant the installation of lighting. Ms. Feinberg explained that they do have urgent care services until 9:00 p.m. Mr. Meyer asked if the projected costs were obtained from competitive bids. Mr. Hansen stated they did seek competitive bids and what's included in the package is the final bids that were selected. Chairperson Commers stated the HRA will take this matter under consideration and will do the best they can to work with Columbia Park. He also asked staff to come back with contract details. Chairperson Commers commented that if we have a parking problem, the HRA should look at the entire parking issue including the Target lot. Mr. Hickok stated this is an excellent time to try and work with both parties. The staff is currently at the point of negotiating for additional stalls along the southern edge of the Target site. There are 21 stalls that nose into the entrance to the City ramp and so far they seem open to the idea of the City obtaining an easement along that edge. The current agreement with Target does not include the use of their parking lot. Chairperson Commers questioned if the Columbia Park Medical Group patients are actually parking in the City lot. Mr. Hickok stated Columbia Park uses the lower portion of the City lot for parking a van and employees and patients for the Columbia Park building adjacent to City Hall do use the City lot on a regular basis. There are days when City Hall is closed and the clinic is open and there are enough vehicles parked in the City lot that it appears City Hall is open. HOUSING AND REDEVELOPMENT AUTHORITY MEETING — AUGUST 5, 2004 Page 7 of 11 Dr. Burns pointed out that the parking issue will only get worse when the Target building to the north is being utilized again; there's nothing to keep their employees from parking on the City ramp to free up parking for customers. Mr. Hansen questioned the timeline for a response from the HRA. If there is a commitment from the City, Columbia Park will start the project this year and carry the cost. If the City doesn't commit, they won't start this year. The project is expected to take approximately 3 months to complete. Chairperson Commers stated the HRA will take the time constraints into consideration. • Review HRA Cash Flow Information Jim Casserly and Greg Johnson from Krass Monroe reviewed the updated cash flow projections for the HRA. The HRA's financial position is improving, in part due to the method by which Anoka County calculates tax increment for the older TIF districts. In fact, Krass Monroe believes that there will be sufficient TIF revenues in Districts 1, 2 and 3 to meet all of the outstanding debt service obligations. This would free up most or all of the $3.OM in General Fund monies that have been reserved for future bond payments. Mr. Johnson stated there has been a settlement reached with Medtronic and the County Attorney's office. They have settled upon a market value for 2003, 2004 and 2005 taxes. Chairperson Commers stated that it appears the projection through 2007 shows the HRA would still be $1,300,000 in the hole for the fund balances in the TIF district. Mr. Johnson explained we are showing that every penny in the TIF district is being spent either to Medtronic as their share of the tax increment or being taken out as administrative fees. That $1,300,000 could actually never go away and the HRA would have to use admin fees to reduce it or pool some tax increment from a different TIF district to take the balance down to zero. Mr. Casserly stated because of the expenses that occurred in that district early on, those expenses are being carried forward. If the HRA wanted to allocate all the land sale payments to the reduction of those expenses that would be an opportunity. There will be enough revenues flowing through that district that the HRA would probably be able to recover that. The question is at what point does it make sense to do that. The way it is structured now is that the HRA is able to use those resources and have them available for other project expenses. Because it was a sale of land and they are making land sale payments, we are able to use those payments for other qualified expenses. HOUSING AND REDEVELOPMENT AUTHORITY MEETING — AUGUST 5, 2004 Page 8 of 11 Mr. Johnson stated there is enough fund balance in the #7 Winfield TIF district, and #9 Onan, where the net result of all of those is down to zero. He stated they could allocate the money from the Onan district to the Medtronic district and not carry the negative forward. Chairperson Commers stated the HRA knows Onan is creating a very good cash flow for the other projects but Mr. Johnson's analysis uses all those funds up just for Medtronic. Mr. Johnson stated on a project basis, if we look at what Medtronic is generating, it's a significant amount of funds that are just not reflected. Dr. Burns asked how much of the deficit may be attributable to the change in market value through the county and how much of it is due to the 2001 legislation where the tax rates were changed for commercial / industrial property and part of it went to the state out of the normal property tax base. Mr. Johnson stated it would have been there regardless. The deal made with Medtronic was structured so the HRA could get every dollar out of there. Mr. Casserly stated because this was a grandfathered district, it was very important that we were able to use the funds generated by the Medtronic development for other projects throughout the City. They wanted to tie the Medtronic development to other improvements that would occur because they had previously invested a fair amount in the Medtronic site. Dr. Burns asked if we ever collected the $150 per foot originally set. Mr. Johnson responded that for all of 2003 and the first half of 2004 Medtronic paid based on the $150 market value. The County is still working on the final draft of the settlement agreement and; therefore, he doesn't know what the remedy will be for the amount paid in 2003 and the first half of 2004. Chairperson Commers questioned why the HRA couldn't do that with TIF district 14 which is being decertified, use those funds somewhere else. Mr. Johnson explained TIF district 14 is very restrictive; it is a post 1990 district that only allows pooling of 15%, but it is also an economic development district, so it's a closed project and funds can't be spent any place else. Mr. Casserly stated we want to make sure we don't have any bond agreements that are pledging that increment, and if there are not, we will recommend at the end of the year to close the process. Mr. Johnson stated in 2012 a big portion of the market value for Medtronic will go back on the tax roll, so we'll have a corresponding drop in tax increment generated by that HOUSING AND REDEVELOPMENT AUTHORITY MEETING — AUGUST 5, 2004 Page 9 of 11 district so there will be a reduction in the admin fees. Land sale proceeds will double at that point in time. This assumes no increase in market value and no additional development on the site. It appears the County used an average of $109 per square foot market value in the negotiations with Medtronic. We estimate the value will be $43M on the site. The $109 per square foot is only on the net rentable square feet. The Medtronic headquarters is a very open building with approximately 77% of the space leased. Mr. Johnson then continued reviewing the Krass Monroe Cash Flow analysis. Chairperson Commers questioned what the freed up cash balance is available to use. Mr. Johnson stated the $9M figure is available. Mr. Fernelius stated we may need to reevaluate the number of what is actually needed for the revolving loan fund as that balance is probably much higher than what is actually needed to operate that program. There are funds that we could transfer back into the general fund for redevelopment. Mr. Casserly commented that issue has been raised and, in the past, the authority has resisted getting into some housing programs because of the high cost involved. So, the HRA may want to think through some of the rental programs. There have been limits placed on what the HRA was willing to do, but if they had more resources they may be able to provide more encouragement for doing some of the rental rehab. Continuing the analysis review, Mr. Johnson pointed out that in prior years the HRA had a higher fund balance than cash balance, but this year the cash is approximately equal to the fund balance. He also pointed out that for 2004, over and above expenditures, the HRA has $625,000 available to spend without dipping into the fund balances. In 2005, there will be $853,000 available. Mr. Fernelius stated this analysis is something that should continue to be done going forward and will be beneficial as the 2005 budget is prepared as well as the redevelopment planning. Mr. Casserly commented that the HRA is in a position that many communities would envy; if a project is not hugely expensive, they're able to advance the funds from their resources and then reimburse themselves from future tax increment. The hardcore redevelopment projects are so hard to do that the likelihood of them cash-flowing gets pretty remote and, in fact, the HRA may have to use some of their resources simply to cover the deficit to make such projects workable. Dr. Burns asked if it would make sense with the cash that's being forecasted to put our money in land. HOUSING AND REDEVELOPMENT AUTHORITY MEETING — AUGUST 5, 2004 Page 10 of 11 Mr. Casserly responded if there is a well designed goal to achieve, such as buying lots along Central to create an urban expansion, then it can make sense to invest in property. • Update on 2003 HRA Financial Statements Mr. Eisenmenger stated the $135,000 into the general fund last year represents Medtronic land sale payments. Also, a refund was received on the escrow monies originally set up for the Penk Peterson project in 2003, about $281,000. What they did was set those monies up in reserve for future bond payments. Chairperson Commers asked if any of our notes are in default. Mr. Eisenmenger stated all our notes are current and the Onan/Murphy revenue note should be paid off next year. Ms. Gabel asked if the HRA has to give up the money left in that expiring district and the money goes back to the county, how it is redistributed. Mr. Eisenmenger explained that some of it goes to the school district, some of it goes back to the county, and some will come back to the City. • Update on Target Northern Operations Center Mr. Fernelius stated the negotiations for the sale of the Target building and Teachers Federal Credit Union is still ongoing. We had anticipated there would be a formal request for the HRA this evening, but they did not receive one from the Credit Union. They have been working with both parties to clarify various issues related to the parking lot lease and those issues have been addressed including the treasury bond Target had purchased in 1986 to prepay all future rent obligations to the HRA. He explained the legal advice the staff has received indicates that the HRA has the right to retain the bond and the principal of that bond at the end of the lease in 2014. Right now, Mr. Fernelius stated, they're basically in a holding pattern waiting to hear from Teachers Federal Credit Union. • Update on Fridley Housing Forum Mr. Hickok stated the Community Housing Forums are coming up. The first event will be at 7:00 p.m., on August 19, 2004, at the Community Center, and they will be discussing the Comprehensive Plan. Each date will have a separate agenda which different items on each agenda. He explained the staff hopes to get feedback on the housing chapter of the Comprehensive Plan and the summation of all of the forums will be put into a summary document that the Council will review in January. The facilitator HOUSING AND REDEVELOPMENT AUTHORITY MEETING — AUGUST 5, 2004 Page 11 of 11 for the meetings will be Mark Koegler, of Hoisington Koegler Group, Inc. The contract costs would be shared between the Section 8 Housing Fund and the other half would be paid by the HRA. The cost of this contract; including, the forums and the formal report, is $25,590. Staff recommends the HRA confirm Hoisington Koegler Group as the facilitator of these meetings and authorize a payment of $12,795. Mr. Holm commented that this is an important issue that needs to be discussed by the citizens and he supports the HRA contributing to the contract. MOTION by Mr. Holm, seconded by Mr. Meyer, to approve the expenditure of $12,795 for the Hoisington Koegler Group contract. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. • Monthly Housing Report Mr. Fernelius stated the staff will be sending out another flyer in the next couple of weeks promoting the City's housing rehab program. They are expecting the activity to pick up as we get closer to the fall. • Background Information on Housing Costs and Wages Mr. Fernelius stated this was included to provide some background information to the HRA members. • Resignation of Assistant HRA Director Chairperson Commers accepted the resignation of Grant Fernelius, Assistant HRA Director effective August 5, 2004, and presented Mr. Fernelius a plaque recognizing Mr. Fernelius service to the City of Fridley. ADJOURNMENT MOTION by Mr. Holm, seconded by Ms. Gabel, to adjourn. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MEETING ADJOURNED AT 9:30 PM. Respectfully submitted by, Rebecca Brazys Recording Secretary