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HRA 08/06/2009 - 29546CITY OF FRIDLEY HOUSING AND REDEVELOPMENT AUTHORITY COMMISSION August 6, 2009 CALL TO ORDER: Chairperson Commers called the Housing and Redevelopment Authority meeting to order at 7:02 p.m. ROLL CALL: Members Present: Larry Commers William Holm John Meyer Member Absent: Pat Gabel Others Present: Paul Bolin, HRA Assistant Executive Director Jim Casserly, Development Consultant ACTION ITEMS 1. Approval of Ezpenditures Commissioner Meyer asked what was the Medtronic $388,000 amount in checking? Chairperson Commers replied, that was the Tax Increment they get back as a result of their development. He inquired whether they have about another two years to go? Paul Bolin, HRA Assistant Executive Director, replied, yes. Chairperson Commers stated that was under the original agreement that we had with them after they pay their taxes, they get a rebate for the parking ramp over there as our contribution. Mr. Bolin stated the tax increment money comes back to the City in July. We get a payment from the County, and the City's finance department then turns around and distributes the tax increment out to those active districts that are still eligible. They will notice on the ledger for tonight there is also the first payment made to Industrial Equities which was a district just approved approximately one and one-half years ago. MOTION by Commissioner Holm, seconded by Commissioner Meyer, to Approve the Expenditures. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. 2. Approval of June 4, 2009, Meeting Minutes MOTION by Commissioner Holm, seconded by Commissioner Meyer, to approve the minutes. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. 3. Approval of June 23, 2009, Meeting Minutes MOTION by Commissioner Meyer, seconded by Commissioner Holm, to approve the minutes. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. 4. Annual Election of Officers MOTION by Commissioner Holm nominating Larry Commers as Chairperson and Pat Gabel as Vice-Chairperson. Seconded by Commissioner Meyer. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. 5. Approval of MN Solutions 2010 Membership Commissioner Meyer commented he thought the write-up describing it is very favorable and reasonable, and Bonnie Balach has done a good job. Chairperson Commers asked attorney Casserly whether Ms. Balach communicates to him also? Jim Casserly, Development Consultant, replied, yes, he actually acts as legal counsel for her organization and helps to draft items. T'hey maintain real good contact. MOTION by Commissioner Holm, seconded by Commissioner Meyer, approving the MN Solutions 2010 Membership at a Cost of $2,000. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. 6. Delay of Gateway West Residential New Construction Program Mr. Bolin stated in April we terminated our exclusive development with Blueprint Homes. Staff explored a number of different options for constructing homes on the remaining nine lots. If they will recall he had given them a draft of the Gateway West Residential New Construction Program which was really modeled on the infill program. It would be one option for us to work 2 with a number of potential builders and buyers and keeps the HRA in control as to what type of development happens on the properties. Mr. Bolin stated one of our concerns before we started to market this program and those lots, was the fact that we were not exactly sure what we should place for a value on the properties. When we had our exclusive agreement with Blueprint Homes, the lots would be purchased for $43,000. After some informal discussions with our in-house appraisers, they felt we could probably get somewhere around $50,000. However, the HRA was strongly encouraged to go out and get some appraisals on our own. The fear Mr. Bolin had was that we may, without some appraisals, end up working with some people who would go apply for a bank loan only to find out they would not qualify because the bank disagreed with the value of the property. Therefore, in June the HRA authorized staff to go out and get an independent appraisal on these parcels. Mr. Bolin stated staff worked with Lake State Realty Services with whom the HRA has a long history with and who knows what properties are worth in Fridley. He thought they would come back with a value somewhere around $40,000. Therefore, Mr. Bolin was very shocked when they came back with values right now of $12,000-$16,000. In talking about this more in-house with our appraisers and with attorney Casserly, Mr. Bolin really could not find any faults with their reasoning and with the appraisals. They did it just as the banks would require it be done on these properties. What has happened is it has finally gotten to the point where all of these foreclosures have had this much of an impact on our market. Unbuilt single lots just are not selling right now. When Mr. Bolin talked to attorney Casserly about this issue as well, this is not unique to Fridley. Attorney Casserly has the same issue on a development in another community he works with where they have 33 lots left to go on their project, and their values have gone down over 60 percent as well. There was no fault in the appraisals that were given to us. Mr. Bolin stated as we talk more about these values, it seems way too low to sell these properties at these prices. More discussion was done by staff, attorney Casserly, Greg Johnson from his office, as well as Dr. Burns and Scott Hickok, and it is best to hold ofF selling any of these properties for these prices and not actively market these properties for at least another 18 months. Not building for two years or so essentially does not have a big impact on the amount of taxes that could be collected ofF these properties. Staff is hopeful that even once Northstar rail is up and running, that will boost these properties values up at least a few thousand dollars. Also, staff is really hopeful that by January 2011, the values are going to be marching on their way back up. Mr. Bolin stated at this time staff would recommend the HRA not take any action on the Gateway West Residential New Construction Program. Staff does have that ready to go at a moment's notice as soon as the economy starts coming back around and then the properties can be actively marketed again. In the interim if someone calls and is interested in one of the lots, staff can certainly bring it to the HRA at that time if it is someone who is willing to pay a reasonable price for the lot. That may be something the HRA would want to consider. However, we certainly would not be actively marketing these properties while they are in that $12,000- $16,000 range. Attorney Casserly is here and if the HRA has any specific questions in regard to the spreadsheet and what he is seeing in some of these other communities, he is prepazed to answer some questions as well. Chairperson Commers stated so at this time we are just going to hold them in inventory and if somebody approaches us, see what we can negotiate on the prices. Otherwise we will not be actively trying to promote the sales of the properties. That is Mr. Bolin's recommendation? Mr. Bolin replied that is his recommendation. Unless somebody haci cash in hand for the lot, even if they agreed to a higher value, the bank would not give them the financing to pay any more than the $12,000-$16,000 right now. � Chairperson Meyer asked what was our original investment for the lot? Mr. Bolin replied a few years ago they were thinking the lots were going to be worth between $50,000-$60,000. When the project was first underway we all believed the lots were worth around $60,000 at that time. Chairperson Commers stated we all recognize what has happened in the market and what we have foreclosed in Fridley. He does not know that the HRA should necessarily agree that these appraised numbers are in any way binding on us. Looking at the appraisals, a11 of the properties are basically owned by government, bank loans, there are probably short sales on those if they were sold. Also, there are a 750-square foot building and a 832-square foot building. He would think almost all the value is in the land, someone would buy that, clear the lot, and put something on there. Just for purposes of the record, he does not think the HRA should necessarily acknowledge that this thing is really that accurate. He would think they are probably worth a little bit more than what the appraisals are seeing. The banks do not want to hold on to them, and he thinks today they will give you a pretty good deal. The record should reflect that, but the overall recommendation should be what Mr. Bolin says as we certainly know they are way down. Attorney Casserly sta.ted the experience they are having is a lot of folks genuinely believe the lots and values are not being reflected as fully as they should be. Clearly properties were valued too highly for a long period of time, and many of us believed they are now being valued at too little. Our hope is that this is going to work its way out preriy quickly. These are buildable, clean, fully-improved lots. All the improvements are in. Generally what folks used to consider as the site costs could be between 20-25 percent of the value of the finished sale price. This is way out of kilter right now. The only question we really had, and that is the reason for the analysis, is how much t� increment are we losing by not proceeding. Forturiately, we are not losing that much and estimate we are losing about $1,500 per lot per year. Clearly we are anticipating our values will increase by more than that by waiting. Normally staff would not recommend waiting when you are in a tax increment district. Commissioner Meyer stated he agreed. There is no sense in rushing into a fire sale. Attorney Casserly stated and you may have the unintended consequence of then potentially reducing value of other properties, too, for no good reason. 4 Commissioner Holm asked attorney Casserly, regarding the value for ta.x increment finance, the base, is not that based on the value of the fuushed product on the lot? For example, if someone buys a lot for $12,000 and puts on a$220,000 home, making it $232,000, is that the base? Attorney Casserly replied, that becomes the new market value. From that you subtract the original market value of what was there when we created the district. Commissioner Holm asked, if HRA delays this and ends up with a$230,000 market value home, it essentially loses $3,000 over that two-year period. What attorney Casserly is seeing is the likelihood of that occurring is not very high, that the HRA is not going to get that type of value of constructible property within that time. Attorney Casserly stated what we are seeing in some other instances, where the situation is far more desperate, is that folks have reduced the values by 50-60 percent, and so the authority or the current development/owner is subsidizing in essence the finished sale price. Instead of something selling for $300,000, it is selling for $250,000 because the site is being purchased for $50,000 less. There is no reason to do that with these parcels. There is no reason that they should not sell in the $40,000-$50,000 range. Staff's hope is that by waiting through another construction season and then maybe looking at the construction season in 2011, these values will escalate back up or increased back to a reasonable level. Commissioner Holm stated he still sees that Blueprint has signs over there notifying the public that there are lots available. Are they coming down? Mr. Bolin replied, staff has taken down a11 the smaller ones. However, they are waiting for Public Works to take down the bigger ones. Chairperson Commers asked so staff's plan is not to have any signs up? � Mr. Bolin replied, yes, that is the plan for now. MOTION by Commissianer Holm to Not Actively Pursue Selling of the Lots at This Time Until Further Consideration by the HRA Based on Further Information. Seconded by Commissioner Meyer. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. INFORMATIONAL ITEMS: 1. Northstar Construction & Ground Lease Update. Attorney Casserly provided some handouts and stated there is only one section of this that is creating any problems and that will come as no surprise. It is the environmenta.l exposure. That is Section 17. �� Mr. Bolin gave a brief construction update and stated it is moving forward at a very rapid pace. Just last week the sidewalks were installed, the curbing is in place for the parking lot, and the first layer of asphalt is down. Also, they have started putting in the structural steel for the access building that will take folks out to the platform as well as working on the platform itself. They are on schedule to have our station essentially done in September. Then they will. be doing the final details in October. There is not a firm date yet for the startup of the entire system. They had been shooting for the beginning of November. Now they are talking some time between November and early December. . Part of it is they want to have a kickoff event in each community prior to the opening of the line. 'They want to have it on a Sunday, but they do not want to have it on a Sunday when the Vikings are in town. He was just at the NCDA Board meeting prior to coming here tonight. Things are moving along. They seem to have the rates fairly well set. For people getting on in Fridley it is going to be $3.25 to ride the line during the week and $2.50 to ride on the weekends. Seniors will get he believed a 75 percent discount on the ticket price. They are doing yuite a few things that should generate some ridership. Attorney Casserly stated this copy of the agreement has been floating around, and he thinks even a copy was given to the Authority about eight months ago. T'here have been a number of meetings over the last six months sorting out various issues. Really the only remaining issue is the environmental responsibility and liability. He has received the final comments from Anoka County and Anoka County Regional Rail Authority (ACRR�1). The comments are minor, and he has incorporated them. The two parties are okay with the way this was arranged and are clearly okay with the City's approach to the environmental liability. 'The Met Council's counsel sent the City an approach in which they really wanted to be responsible only for themselves and their contractors. Our problem with that is those are not the folks we are worried about. We are worried about all of the people using the system. For example, people parking their cars with who knows what kinds of contaminants in the trunk that leak and go into our pond. We do not know what is going to happen. This is going to be there for at least 100 years and possibly another 100. This is really a long-term kind of prospective. Attorney Casserly stated in reviewing a11 of this they went back and analyzed what the Met Council had done with the Burlington Northern Santa Fe because they thought that would be a good model for trying to figure out how to be responsible. If we are a responsible party, we are a responsible party; and we ca.nnot get away from that exposure or liability and we are not trying to. What we want the Met Council to be responsible for is to defend us because we are the property owner, and we need to be defended in the event there is some kind of mishap as that line is used to serve the public. A considerable amount of time was spent with Colleen Hermann from Anoka County. She has worked on a number of agreements and has gotten into the environmental liability issues. Attorney Casserly pulled in Rod Krass in his office because it is really an allocation of liability and responsibiliry. The three of them spent an hour or more yesterday hammering out an approach, talking what Peter Hanf from the Met Council, and trying to just modify it enough so it would give them what they want and what they thought was adequate protection for the City. Attorney Casserly referred to Section 17 which is what he sent Mr. Hanf again this afternoon. It is an approach that will address their concerns and be good for the City, too. G� Chairperson Commers asked attorney Casserly what is Met Council's objection to giving the City the same thing they give Burlington Northern or Anoka County Rail Authority? Why can't we be consistent? What argument do they have? Attorney Casserly replied, they don't. They just do not want to do it. He thinks staff will know better over the next. It may require some political input to get a solution to this. However, if we can manage this and handle it at staff level and reach a consensus then we will. This is the only issue that is left. And it is a significant one. Chairperson Commers asked attorney Casserly what does he intend to do? Make changes in 17.3? Attorney Casserly replied, yes: Chairperson Commers asked, and what is that intended to do? Attorney Casserly replied it is intended to have the tenant being the operating agency the Met Council will indemnify, defend, and hold us (the landlord) harmless, our agents, a11 the people that are named, employees, vendors. Also, in the event we lease the ground to somebody else from any claim, damage, or expense arising out of the Met Council or its contractors and a11 of the peoples who might participate with them, subtenants, assignees, agents, employees, customers, or other invitees. So it holds us harmless from the breach of any obligations, covenants, etc. It is the paragraph right above 17, too, that provides for various kinds of prohibitions. Chairperson Commers stated what is it they told attorney Casserly they wanted? Where is their language? Is that in 17.3 on page 11 ? Attorney Casserly replied, no, that is our original language. We are quite happy with the language that is in the agreement right now. Chairperson Commers asked all of those provisions remain the same except now he is introducing a revised 17.3? Attorney Casserly replied, frankly, we like their definition of environmental laws. They just seem a little more comprehensive. The final section on landlord representation, 17.4, that is identical to ours. So the only issue is that in 17.3, the indemnity provision. Chairperson Commers asked and what are they insisting upon? Attorney Casserly replied, they do not want the underlying (blacklined) language. Chairperson Commers stated they do not want agents, ernployees, lenders, ground lesser and against any claim, damage, expense arising out of tenant, its contractors. 7 Attorney Casserly sta.ted there is another provision they wanted in there which they completely took out. It has to do with them capping their limit under an applicable section of state law. They are trying to create a cap for themselves. What we are genuinely afraid of is that they may create a cap for themselves and open us up under some kind of joint liability problem. So we are concerned with their langua.ge, and we really need to have something. At the end of the day, and that is why he has written several times to all the players involved in this, it should be as though they were the owners of the site for purposes of operating a commuter rail line. Because when you have a lease of 200 years you are essentially the owner of the site. We want to mainta.in our interest in that site because that really is for the best interest of the region, the Met Council, and ourselves, too; and it gives us a little better position in terms of trying to sort out what we want to do with the site. Attorney Casserly stated as the site shrinks because we build structured parking or we get into some other arrangement, then one of the most likely things to happen is to figure out a different way to manage storm water. We have a big chunk of the site that is being used up as a holding pond, and there certainly may be other options for that. So as time goes on here, we really need to be able to try and do some other things with that area. That is the reason that we do not want to be penalized because we want to have options and yet we are not in the commuter rail business, and they clearly are. If this was something that was only going to lasf for three years or five years, then maybe we would not be negotiating as firmly. They may have to come back to the Commission and say we do not have a consensus, and we will have to see if there is some other relief we can get by working with our elected officials or whoever we need to work with. However, we assume people are rational until they prove otherwise. Chairperson Commers stated they do not seem to have any kind of explanation why they want to treat us differently than other stations along the line or the land right across the street. How do you justify it? Attorney Casserly replied if we conveyed the land to them this issue would not exist. The land across the street is being given to the Met Council, so the Anoka County Regional Rail Authority has no other relationship to that site anymore. Chairperson Commers sta.ted as attorney Casserly pointed out, they virtually have the same deal as us. Attorney Casserly stated this has been going on for a long time. What they would like to do is have a public hearing on the lease. They would like to have a hearing at our next HRA meeting. T'hat is statutory requirement that we do that. 2. Housing Loan Program Update Mr. Bolin stated the HRA has doubled the number of loans done year-to-date just in the past two months. We have done four loans out of the revolving loan fund and two other MHFA loans that went to Fridley residents who did not qualify for our program. This brings the year-to-date total of nine home improvement loans in Fridley, of which seven were out of our program. Remodeling Advisor visits were up: four in June and one in July. Just in the past two weeks staff has had a number of ca11s about our loan programs. We are starting to see some reinvesting again that we were not seeing a year ago or six months ago. That gives us some optimism and hopefully things are going to turn around here in the next year or 18 months. Chairperson Commers sta.ted he sees, for example, in June we sent out 13 applications and we got 1 back. Does staff ever call the other people and ask whether they have any questions or whether they are just not interested or anything like that? Mr. Bolin replied, when our loan officer, Jim Hasnik down at Center Point Energy and Environment, has contact information from these people he does follow up. Mr. Bolin can get some more details from him as to the reasons why. Just from talking with some of the people on the phone right now he thinks a lot of people who have bought or are buying foreclosed homes aze under the impression that every city in the state has money to give out to people buying foreclosed homes. He thinks some of these people just want the loan information. One other thing is Anoka County has bought two homes in Fridley using the stimulus money they had ta.lked about. It sounds like there is another one they are looking at in the next week or so. If the HRA's recalls there was not a lot of that money to go around. Chairperson Commers asked what was their criteria on that? Mr. Bolin replied, the homes had to be foreclosed on, they had to be through the redemption period, and vacant. Depending on the shape of the properties, the County will either fix them up and sell them or they may just demolish the home if it is in poor enough condition. They also have a program as part of this where they would give a forgivable loan or grant for those who were planning to live in them for five years or more. One of the caveats of that program is they had to have their application in before they closed on the home. The few calls he had, people have gone out and had already closed on the home. T'hey wanted this money from the County, but they were not eligible for it anymore. Mr. Bolin stated, also the First Time Home Buyers Program that is funded by the State Housing Finance Agency is administered locally through the Anoka County Community Action Program is actually done for the year. They are out of funds. The MHFA did not get some of the federal money they were hoping to get. Typically they run out of money towards the end of November or end of December. They are not even sure whether they will have funding for 2010. They will keep us updated, and he will keep the HRA updated on that as well. OTHER: Commissioner Holm asked that at the next meeting by removing the transportation TIF District from the ta.ble, he would like to have some further discussion on the pros and cons of moving ahead with that district. The discussion would be as to what the HRA would like to see and have additional information provided for the public hearing if the HRA decides to move ahead with that. ADJOURNMENT: E MOTION by Commissioner Holm to adjourn. Seconded by Commissioner Meyer. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MEETING ADJOURNED AT 7:53 P.M. Respectfully submitted, ��'�e�{� �� Denise M. Johnson Recording Secretary 10 � CITY OF FRIDLEY SIGN-IN SHEET HOUSING & REDEVELOPMENT AUTHORITY MEETING Z�d Name and Address Agenda Item of Interest