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HRA 02/07/2008 - 30948�_ CITY OF FRIDLEY HOUSING AND REDEVELOPMENT AUTHORITY COMMISSION February 7, 2008 CALL TO ORDER: Chairperson Commers called the Housing and Redevelopment Authority meeting to order at 7:28 p.m. ROLL CALL: Members Present: Larry Commers Pat Gabel William Holm John Meyer Member Absent: Steve Billings Others Present: Mike Jeziorski, City Accountant Paul Bolin, HRA Assistant Executive Director Jim Casserly, Development Consultant William Burns, HRA Director Scott Hickok, Community Development Director ACTION ITEMS 1. Approval of Expenditures MOTION by Commissioner Meyer, seconded by Commissioner Holm, to approve the expenditures. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED TI� MOTION CARRIED UNANIMOUSLY. 2. Approval of January 10, 2008, Meeting Minutes MOTION by Commissioner Holm, seconded by Commissioner Gabel, to approve the minutes. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. 3. Approval of Purchase Offer for Gateway NE Property Paul Bolin, HRA Assistant Executive Director, stated the property is located just south of 61S` Avenue on the east side of University Avenue. There is a frontage road that comes around on the south and east side of the site and has been previously used as a Sinclair gas station. Now he believes it goes by the name, Fridley Gas and Shop, and still has the Sinclair signage. Mr. Bolin stated this past November the HRA did have an appraisal done by Lake States Realty of White Bear Lake. They put a value on the property based on like sales of $305,000. When they brought this item before the HRA in December, there was a discussion regarding the value of the appraisal and whether the HRA should make an offer based on that appraised value. No action was taken that night. 1 f , They have gone back and examined what they are required to do about the State statutes. The HRA is not necessarily bound to use an appraised value and can also use an assessed value if they so choose to. However, the HRA's practice has been to use that appraised value, have an independent third party tell us what the property is worth, and use that as the basis for our purchase offer. On some occasions some properties come in higher than maybe we think they should. Overall he believes it does save them money. They have not negotiated upwards from our appraised values. Commissioner Billings had the strongest feelings about the appraised value on this site. He did send an e-mail stating his belief that this property is overvalued and, if it were up to him, he would actually wait until some future date when they actually need the property to move a project forward. Mr. Bolin stated Dan Wilson from the Wilson Development Group (the relocation consultant) has finally had a chance to get out and actually meet with the tenant that is in the Sinclair station and meet with the owner of the property. They have agreed and identified a payment of $20,000 to pay for relocating the existing tenant. The payment of moving expenses in this instance (and is usually the case) is much cheaper than paying the actual moving expenses, and the payment goes directly to the tenant. With that in mind the purchase agreement would include the relocation package. Also in this case they would reserve the right to investigate the soil conditions; most likely do a Stage II environmental study, drill a couple of holes, and see what is actually down in the soils. The records at City Hall and the Fire Deparhnent indicate in the past there had been some relatively minor concerns with gasoline leakage. There was a spill on this site in 1991, and in 1999 the Pollution Control Agency said it had been cleaned up enough that they were not concerned about it anymore. However, it might be worth spending a couple thousand dollars now to identify anything there that may cause us potential problems down the road or prevent certain types of construction from happening on this site. If the soils are absolutely terrible, then perhaps we do not want to buy this property at this time. Mr. Bolin stated also per the purchase agreement, they would require the removal of all vehicles and personal property from this site. It seems there are a couple of vehicles that have been sitting on the site for most of the winter they just keep plowing around. If we do acquire the property, we do not want to get stuck getting rid of those. Staff does recommend making an offer to purchase in the amount of $325,000, $305,000 would be for the building and $20,000 would be for the tenant relocation. Further they would recommend that both the chair and vice-chair be authorized to execute a purchase agreement if they get one in place prior to the March meeting. Commissioner Gabel is the vice-chair, and he understands Chairperson Commers may be out of town a little bit over the next month so they would like to have somebody else that is authorized to sign these ageements as well. Commissioner Meyer asked, why not get soil borings immediately because that could radically affect the costs from their standpoint or that of the owner. Should that not be known before they sign any final agreement? Mr. Bolin replied, it would be nice to get on this site beforehand; however, not just on this particular properly, until there is some sort of purchase agreement the properly owner does not want them on this site digging holes. Anything they find they have to report, so they want some reasonable assurance the HRA really does have an intention of purchasing this site before they will let us go on and start boring. Commissioner Meyer asked, is that true of this particular owner or just a general statement? Mr. Bolin replied, it is his understa.nding that it is fairly general and common, but it is definitely the case with this particular owner. William Burns, HRA Director, asked could they not make the purchase agreement contingent upon a clean bill of health upon examination. 2 � � e � Commissioner Gabel stated that was her thought, too. She would like to see that. Chairperson Commers stated keep in mind there is gas station cleanup assistance from the State of Minnesota. Jim Casserly, Development Consultant, stated special petroleum clean up funding is still operating to the best of his knowledge. This is an agreement that would have a contingency in it that you would have to have an acceptable environmentally-clean parcel or they would have to escrow an adequate sum to make it that way. They can draft it a couple of different ways. Clearly they do not want to buy a piece of property and then have to invest $75,000 in it to clean it up. He believed the properly owner could also access the special funding. Commissioner Gabel asked whether there is money available in the petro fund? Attorney Casserly stated in any event they would have as a condition of purchase the environmenta) issues would be determined as cleaned. If they were not, they would have the option to withdraw from the purchase agreement or the seller would have the option of escrowing sufficient funds to clean the property.up. We would assist with trying to get reimbursed from the petro fund. They can certainly check on the fund, but it has been a very good fund over the years to clean up. Mr. Bolin stated the City actually accessed the petro fund with the Texaco site that was on East River Road. When he checked towards the end of last November, early December, when they first talked about this item, there was funding in that fund. He would not be surprised if there were some minor levels of contamination. Chairperson Commers stated there is always a lot of debate about the value. He thinks they have the same thing going with the Nelson property, some of them think they are paying way too much and some way too less. Of course over the last two or three years that property has escalated in value from $2 million something to over $3 million. The big thing is they have been trying to clean up University Avenue for 10 or 15 years. Although they do not have a plan quite in place, they did the corridor study and know one of the issues out of the study was not having enough property to really get a good plan in place. It seems to him that although they could put this off, they have the risk of them coming in, developing it, and making it some sort of useful business which could cost them a lot more down the line. From his perspective if they can acquire the properties along here and the staff can put together a really good plan to utilize that area, and getting something they are going to like here in Fridley compared to what they have had, he is favor of acquiring these properties along the east side of University Avenue at a reasonable price. As far as the value goes, although they each have their own opinion about it, they do have experts who come in and tell them what it is and they have to put a certain amount of trust in them. Commissioner Meyer stated he agrees with Chairperson Commers' point completely except he thinks Commissioner Billings has raised an interesting point. He would like to explore the argument and asked Mr. Bolin what does he suppose their risk is in the condemnation proceedings in terms of dollars. Does he have any idea? Commissioner Commers commented they have an appraisal that they would have to offer in the condemnation proceedings. Commissioner Meyer stated, right, but then he would want more. How much more might he be awarded? Mr. Bolin replied, definitely the value most likely would go upwards in a condemnation proceeding. Once we start that, a whole new set of rules for the relocation benefits kick in as well. You cannot use the payment in lieu of moving expenses. He had asked Dan Wilson the same question, if he could give him a ballpark if they ended up going through condemnation. His advice was simply, do not do it. This is as cheap as you are ever going to get this parcel. At this time it seems they have a fairly willing seller, and he has a tenant right now that is willing to move and able to move. This is probably the best situation they could have. Attorney Casserly stated as a practical matter, unless they are involved in some sort of public purpose for acquisition of this parcel for road, something that is publicly-owned, they really are not going to be using condemnation. This is going to be a voluntary acquisition. Commissioner Holm stated he thinks that Commissioner Billings raised a good point in that there are certainly locations and situations whereby the HRA would want to pay the appraised value and he would cite as an example the Citgo filling station across the street from the Sinclair station which he believed was appraised at substantially greater value than the Sinclair station. Was it not over $400,000? Mr. Hickok, Community Development Director, replied, it was $405,000. C6airperson Commers asked, by our people? Mr. Hickok replied, yes. Commissioner Holm stated he certainly would not be in favor of acquiring the Citgo property at that appraised value. So, while the HRA may have a precedent of paying appraised value for property that the HRA is interested in, that precedent may not apply in all cases, and certainly he would not be in favor of acquiring the Citgo property at its appraised value. While some of us may have considered the appraised value of the Sinclair station to be at premium over what we believe the cunent value to be, he does not think that this difference is substantial, and therefore is in favor of proceeding with an offer to acquire Sinclair property at the appraised value. Commissioner Gabel stated she had some reservations and agreed with Commissioner Billings on this but, after listening to some of Mr. Bolin's comments, she thinks it very clear they are not going to get this for any less. They could wait for a long time and hope that it would drop in value, but a lot of other things could actually happen and increase the value. MOTION by Commissioner Holm to acquire the properiy at 6071 University Avenue for the price of $305,000 to the landowner and $20,000 relocation expense and also with the authority given to the Chairperson and Vice-Chairperson to sign off on any purchase agreement if that occurs before the nerct HRA meeting. Seconded by Commissioner Meyer. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. � 3A. Tae Kwon Do Building Chairperson Commers asked Mr. Bolin to give them a quick update on the Tae Kwon Do property. Mr. Bolin stated Dan Wilson met with the owners of the Tae Kwon Do center on quite a few occasions. A few weeks ago the Kims had gotten a broker involved. The broker and Mr. Wilson had a conversation and now the broker is apparently not working with the Kims anymore. The broker thought the property is 4 worth somewhere in the neighborhood $400,000. As Mr. Wilson talked further with the broker and the Kims, everybody agreed that it is not worth $400,000. If that is the case, the HRA probably is not interested in the property. Even as of yesterday morning, Mr. Wilson and the Kims were still speaking. What seems to be holding them up from making a counteroffer back to us is they are trying to figure out where they can move to. The business has been there quite a long time so they do not want to move too far away and yet there are not a lot of buildings that can suit their needs. They have been looking everywhere from Fridley up to Blaine. Sounds like they are getting fairly close, and they have it narrowed down to a couple different properties. 'fhey should know more within the next month and hopefully staff can come back asking for authorization to go ahead and purchase that at their March meeting. 3B. Alano Building Mr. Bolin stated just yesterday afternoon Mr. Hickok and Mr. Bolin met with a representative from the Alano Society, the property just to the south of the Van-O-Lite building. It is a relatively large parcel. The representative happens to be a realtor as well. Their Board actually changes every two years, so their current Board looks at the site and looks at what is happening around them. They heard rumblings the City is purchasing properties here and there, and also with the impact of the smoking ban on their facility there, they want to explore some options. They came in yesterday, had a board meeting last night, and about 7:10 tonight the representative got back to them and asked if they would go ahead and seek authorization to have an appraisal done on this site and maybe take the next step in some sort of negotiation on the purchase of their property. If they would like to take that next step, he will go ahead and order an appraisal on that property. Commissioner Gabel asked, it is a pretty new building is it not? Mr. Bolin replied he is not certain of the year of construction. He knows they have done some improvements inside to the kitchen and some of those things. He does not have a lot of details on the property right now. Commission Holm stated it is maybe 10-12 years old. Mr. Hickok stated from talking to Barb it had been here for a few years when he came here in 1994. Maybe early 90's but more likely in the 80's. Dr. Burns stated it is his recollection that it was probably early to mid-90's. Chairperson Commers asked whether there is any harm in getting an appraisal or do they talk to them first? Mr. Bolin stated he thought that to get a realistic value of what they would be looking at would be the first step. There may be some interesting ideas as far as working out some sort of arrangement where they would delay the closing for some time and letting them stay in there until maybe the HRA gets a project going, and they could incorporate their use into whatever our project ends up being. C6airperson Commers stated there really would not be any relocation. Mr. Bolin stated they really have no employees. Their kitchen consists of nothing more than coffee pots and a pizza oven, and there are just folding chairs inside. Chairperson Commers asked what they thought? Is there any reason not to go ahead and do it? Commissioner Meyers replied, might as well. He asked, what does the smoking ban have to do with anything? Mr. Bolin replied, somehow they seem to be included with a place of employment. Until the ban they were still smoking in the building, now they cannot. They are apparently working on some special legislation this session that would exempt those types of clubs from that ban. The fact that they cannot smoke in the building has actually dropped their numbers almost in half. MOTION by Commissioner Gabel authorizing staff to obtain an appraisal of the Alano property. Seconded by Commissioner Meyer. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COD�IIVIERS DECLARED THE MOTION CARRIED UNANIMOUSLY. 4. Approval of Contract Eztension for CEE to Administer Home Loan Program. Mr. Bolin stated the HRA has had an ongoing relationship with the Center for Energy and Environment administering loan programs going back to 1996. CEE actually used to be a department within the Minneapolis planning and community development division. Some time in the early 1980's, it spun off as its own separate non-profit group to work with not only Fridley but a number of other cities administering loan programs and doing weatherization progams as well. As part of our existing contract they do marketing of our programs, process our loan applications, all of the loan qualifications, determining eligibility for our program, and customize loans to meet the individual resident's needs. Mr. Bolin sta.ted the CEE also provides residents with technical assistance on such topics as remodeling, energy conservation, and indoor air quality. The partnership we have with CEE allows Fridley residents to access a number of other loan dollars through our state housing finance agency programs and counsel programs out there. CEE is able to access those programs and oftentimes they will combine pieces of our loan programs with some of these other dollazs to make a loan for an amount larger than our $35,000 limit, or oftentimes we will have people who may not qualify for our loans because maybe their incomes are too high and they are able to get residents loans through some of these other programs. Another important piece to this contract extension is they are not proposing to change any of our fees which he thinks go back to 2001. Mr. Bolin stated staff continues to be pleased with working with CEE. They have very little staff turnover down there. So they have been working with the same three or four people for the 4 YZ years he has been with the HRA, and the director of the housing loan programs actually has been with CEE since Fridley has started working with them in 1996. Staff does recommend the HRA approve the contract extension through the end of this year. He is sure between now and then, they will probably revisit the entire contract and take a look at some of those other pieces. One thing he would like to point out is the existing main contract has all the provisions for the remodeling advisor services included in this contract and there are no changes there. However, the operation insulation program which has had its own successive contract expired at the end of 2007. That program has actually been discontinued by CEE right now. What has happened is the cost of their energy audits have increased from $125 and are now into the $300-$600 range. Commissioner Gable asked, why? Mr. Bolin replied just with some of the new technology out there. What they are finding is it takes a lot more time to go out and do these than what they originally thought. It used to be kind of just a walk � through the house and pointing at things that could be improved to now doing blower door tests, using infrared cameras, etc. It ends up taking quite a bit of time. They are not offering that program this year. The remodeling advisor is going to be available for people with questions and can come and do a walk- thru and point out the drai�y windows and identify areas where maybe they could do more insulation in the ceiling, etc. They did also state they are trying to find a way where maybe they could work it in the program again next year, but narrowing part of it back so it is somewhat affordable. Chairperson Commers asked, what exactly is the distinction between the remodeling person and the insulation, does the remodeling advisor not look at the insulation? Mr. Bolin replied, they certainly can. He has seen people using the remodeling advisor the last few years as their starting point to think about maybe doing an addition or kitchen remodel. So they will go out and meet with the residents in the home. The remodeling advisor really helps take those residents from where they are thinking of, for example, doing an addition to sketching some things out for you, and take them in and maybe an architect can improve on the plans. They help the homeowner with advice on selecting a contractor, give them ideas on different materials to use, etc. MOTION by Commissioner Holm for Approval of Contract Extension for CEE to Administer Home Loan Program. Seconded by Commissioner Gabel. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. INFORMATIONAL ITEMS: 1. Northstar Rail Project Update Mr. Bolin stated they met on January 10 and authorized the acquisition of the properly necessary for the Northstar Rail site in Fridley. A number of things have been done. First and foremost, the appraisal originally done for MnDOT in 2006 was updated to reflect the current value of the property and some preliminary site planning done by current owner for the breakdown of $3 million for the property and $165,000 for the redevelopment plans that the current owner has put together on a couple of occasions he believed when he was looking at it in the past. After that was done, attorney Casserly and his staff put together the offer to purchase based on that dollar value and that was presented to Main Street Properties. Shortly thereafter, on January 29, a condemnation petition was filed just in case we are not able to negotiate a sale. We do have that timeline put on us by Burlington Northern that we need to be controlling the site by May 1 in order to get the tunnel built on Memorial weekend. Finally, there has been legislation introduced by Carolyn Laine and a number of others that would fund the entire station and made a request for $10.6 million in bonding. At the local level here we have had Representative Laine and Senator Chaudhary have our most recent language for our tax increment district and they are moving that forward as well. Attorney Casserly stated they have been communicating on a regular basis with the property owner. They started corresponding with them January 11, they responded to our letter on January 14 with a series of questions, we answered all their questions in another letter back to them on January 16, on January 24 we sent them a revised appraisal with an offer, they responded on January 30 by raising issues on our correspondence, and we responded back to them on February 5 responding to their issues. So right now he thinks they are still waiting for another response to our February 5 letter. At this point they have made the offer pretty simple. Really we are saying that we will pay the appraised price, assuming there are no environmental issues, we expect them to pay the taaces in 2008, and to pay any costs they would have for � . Y a e any additional appraisal work they want done. That is really about it. It is really pretty straightforward. It is one properly owner. They have been told the properly is clean. Folks are not aware of any remediation issues. We should probably pursue that a little bit more. The condemnation petition was filed, a quick take was included in that petition, and we do have a hearing set for March 10. So that would be an initial hearing. Chairperson Commers stated, contrary to the discussion they had earlier, once the condemnation has started, they do have authority to go on the property and drill? Attorney Casserly replied, yes they do, and he believed they do have to petition the court for that approval. Chairperson Commers commented there is nothing located around that would migrate down if there was an issue is there? Commissioner Meyer replied, not really, but even so we are putting in a sizable item. He is surprised the engineers have not asked for that. Commissioner Holm asked, what kind of potential roadblocks there might be for the quick take path they are on? Attorney Casserly replied nothing is certain. He supposed if you were trying to paint a worst-case scenario there would be an opportunity to dispute the public purpose of the taking, that could be appealed. You could probably conjure a scenario that could create an endless amount of mischief. As a practical matter he thinks the court is going to be very hard pressed to find that we are not really well covered for a public purpose. That is why they went to such pains to get the letters from the Department of Transportation and the Anoka County Regional Rail Authority. So it is not just our ability to acquire this properiy, they really have been reyuested to do it, and they have a contractual obligation with our pariners. We have done everything we can to try and make it smooth to the point of offering what they really feel is a very legitimate price. He thinks this is a very, very fair appraisal. We asked them to do the fairest possible appraisal because we do not want to get caught with some other penalties that are potentially built into the new eminent domain law now. Z. Monthly Housing Report Mr. Bolin stated there is not much to report. There were no remodeling visits in January. There is a direct mailing they should start seeing in their mailboxes early next week, hopefuUy generating some excitement over our loan program and our remodeling advisor services. He did do a check on our interest rates on our loan program as of today and was at 5.625. We are still lower than what a lot of people can get a home equity loan for from a traditional bank. If they will recall we try and keep our rate 1.25 percent below the Sta.te Housing Finance Agency's rate. In recent discussion with CEE and the State Housing Finance Agency, they plan on keeping our rate where it is for a while. The indication he got is maybe in June the Sta.te Housing Finance Agency might take a look at adjusting their interest a little bit. Chairperson Commers stated everyone has been provided in their packet a brief report on the Home and Garden Show. The City Comprehensive Plan set to be approved by the City Council. There is some interest by Greco Development for Columbia Arena although that is very preliminary. He asked if anything has been filed with the City yet? Mr. Hickok replied, nothing is officially filed at this time. Lots of good discussions and they are enthusiastic about a developer that has expressed a very strong interest. They have looked at a couple of 8 � � � 6 • different concepts, one that would involve our Public Works facility behind the Columbia Arena. Regarding the site plan in their packet, in the most recent discussion they have talked about maybe scaling that back and maybe just doing the Columbia Arena site without the Public Works facility. It is a very nice site, and they see it as a real prime opportunity in this metro area. Chairperson Commers asked if Greco Development is a fairly significant player in the redevelopment or development market in the Twin Cities? Mr. Hickok replied, yes, as a matter of fact one of the most recent highly sought after sites was the redevelopment of the Bloomington city hall site, and Greco became the development group that is developing that site. You do not see their name up here as much, but they have some very significant projects and do a very nice job on all the work they do. Chairperson Commers asked if we get any taxes off that property? Mr. Hickok stated it is now in the hands of private operators and the zoning as a result has also gone back to its 1968 zoning which is heavy industrial and is one of the reasons the current owner is interested. There is a lot of overhead costs just owning the site, so he is very interested and working very aggessively to get a developer out to develop the site. ADJOURNMENT: MOTION by Commissioner Gabel to adjourn. Seconded by Commissioner Meyer. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MEETING ADJOURNED AT 8:33 P.M. Respectfully submitted, �� M . ���� Denise M. Johnson Recording Secretary 0 � CITY OF FRIDLEY SIGN-IN SHEET HOUSING & REDEVELOPMENT AUTHORITY MEETING �e.�'U� rl. U� --------------------------------------------------------------------------- --------------------------------------------------------------------------- Name and Address Agenda Item of Interest