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HRA 03/01/2012 - 31317CITY OF FRIDLEY HOUSING AND REDEVELOPMENT AUTHORITY COMMISSION March 1, 2012 CALL TO ORDER: Chairperson Pro Tem Gabel called the HRA Meeting to order at 7:00 p.m. ROLL CALL: MEMBERS PRESENT: MEMBERS ABSENT: NONMEMBERS PRESENT ACTION ITEMS 1. Approval of Expenditures William Holm John Meyer Pat Gabel Stephen Eggert Larry Commers Paul Bolin, HRA Assistant Executive Director Becky Kiernan, Accountant William Burns, City Manager Darin Nelson, Finance Director/Treasurer Jim Casserly, Development Consultant Greg Johnson, Financial Analyst Paul Hyde, Real Estate Recycling MOTION by Commissioner Holm to approve the expenditures as presented. Seconded by Commissioner Eggert. UPON VOICE VOTE, ALL VOTING AYE, CHAIRPERSON PRO TEM GABEL DECLARED THE MOTION CARRIED UNANIMOUSLY 2. Approval of February 2, 2012 Meeting Minutes MOTION by Commissioner Holm to approve the minutes as presented. Seconded by Commissioner Meyer. UPON VOICE VOTE, ALL VOTING AYE, CHAIRPERSON PRO TEM GABEL DECLARED THE MOTION CARRIED UNANIMOUSLY INFORMATIONAL ITEMS 1. 4800 East River Road Real Estate Recycling Update Paul Bolin, HRA Assistant Executive Director, said that the City Council set the Public Hearing date and Real Estate Recycling has met with Planning Staff. Notices have been sent to Anoka City of Fridley Housing and Redevelopment Meeting of February 2, 2012 County as well. The schedule is for the Authority to consider approval on AprilSth and the City Council to hold the Public Hearing on April9tn Jim Casserly, Development Consultant, said that the HRA entered into an interim agreement to set the time tables back in November of 2011. As part of this agreement there were certain things that needed to be accomplished and all of those things have been performed. 2 Mr. Casserly said that the establishment of a Tax Increment District and a Hazardous Substance Sub-District and a term sheet to be incorporated into a development contract would be reviewed in April. After that recommendation is reviewed, staff would present the information to the City Council. We will continue to work to refine development plans because of the phasing that is involved and the continuing issues raised by environmental clean up. We will also be working with the redeveloper and the City to pursue grant opportunities at different levels. Once all of these things occur and we are satisfied, we will enter a contract for redevelopment prior to November 1, 2012. Mr. Casserly said that most of the time we do not have this type of interim agreement for our projects. Because of the complexity of this project, it will evolve and be a project that the Authority and developer will be working on for the ne�t 5-10 years. We have to be organized and the developer has to be clear on how he will proceed. This will involve a lot of ongoing discussion. We have to have an understanding of the costs, type of remediation, what it will take to clean things up and timetables associated with this project. Paul Hyde, Real Estate Recycling, said there are three components associated with this project; environmental, existing tenants and the redevelopment plan. The environmental component involves the MPCA and US-EPA approving a cleanup plan. As discussed previously, the cleanup will not all happen at once, but over the course of the project development. The plan is to start on the south end, then the north and the last area is where the existing building is located. This will break down the environmental cleanup costs and the public infrastructure costs into four segments. It also allows the existing tenants to stay through the rest of their lease. Mr. Hyde said that he met with the City Planning group and they have started looking at the process of rezoning and what it may look like including site plan approvals, public works issues and have also hired the civil engineer to start working on the project. Mr. Hyde has met with representatives from the Navy to discuss how this would affect their cleanup. The Navy site has a ground water e�traction system that keeps ground water on site. This was used to cleanup metals in the manufacturing process. The Navy has been operating this for a number of years and parts of it work well and others do not. Mr. Hyde said that BAE is primarily focused on the area that we are not buying and that is where the most contaminated soil is located. That area also has a ground water system keeping water from going into the river. After meeting with the Navy they were excited to work on this project and that we could bring some efficiency to their cleanup efforts. The Navy is also happy that we would be giving them some sort of resolution to wrapping up this site. We will start working on an agreement to create a cooperative framework to redevelop the property overtime. Mr. Hyde said that BAE has an old paint booth that needs to be addressed. Our redevelopment team will help them address that issue. We will help them with a cleanup plan that will be City of Fridley Housing and Redevelopment Meeting of February 2, 2012 executed in phases. Hopefully phase one will happen this spring/summer to take advantage of a fall grant application with Met Council and DEED and maybe create a TIF district. Mr. Hyde said that the last piece is talking to the tenants. There are five tenants and they all are using the space for cheap cold storage and auxiliary office use. The anchor tenant is BAE and all leases go unti12015. BAE is moving the majority of their site to Kentucky. Mr. Hyde will get some detail on what they need in a new building so a design can be created to possibly keep them on site and then as their lease expires we would put them in one of the new buildings. Commissioner Meyer asked for clarification that BAE would come back to the site in a few years as a new entity in phase one. Mr. Hyde said that is yet to be resolved. BAE has a lease through December 2015 and they do not know what they will do when the lease expires. They can leave the site or renew for the exact square footage they have now. BAE will retain an engineering presence here but it is unclear if it will be on the current site or somewhere else. They will tell us what they want and we will try to keep them on site. William Burns, City Manager, asked where the new building would be for BAE on the map. Mr. Hyde answered either on the south or north side. Commissioner Meyer asked what would happen if someone came in and wanted to build something on phase two and three together and how that would affect the plan. Mr. Hyde said that they would not get to the other phases until the lease expires in December of 2015. The first demolition contractor will take nine months to tear down the building plus another six months of construction which gives us some sense as to when phase three would happen. Phase one and two could be five years of construction; but if someone wanted to build on phases two and three that would be great. Commissioner Holm asked for clarification regarding the hazardous substance sub-district and what part of the district is in the phase one area. Mr. Hyde answered that the polluted parts of the land would be considered the hazardous substance sub-district and both sites are on the federal and state super fund list. The area was scored on what pollution is there and how it will affect the environment. Any new things that are discovered as we start to tear things up is on us but we plan to ask them to help with the costs. Commissioner Holm asked if the entire site would be in the hazardous substance sub-district. Mr. Hyde answered yes, the entire site is contaminated. A sub-district cannot be certified until the MPCA has approved a cleanup plan and the costs associated with the first phase are identified. When an agreement is made we can go ahead and send a plan to the County which then the County can collect taxes and send to the Authority. It works differently than the tax district itself where you only get tax increment from increased value. In a sub-district existing taxes and all of the other provisions of the tax increment act apply, that is why they use the same terminology. A base is created artificially and in this instance we take the base down to zero. City of Fridley Housing and Redevelopment Meeting of February 2, 2012 Chairperson Pro Tem Gabel asked if that included everything except for the referendum and money designated to the state. Mr. Hyde answered that is correct Chairperson Pro Tem Gabel asked if the grants would be asked for all upfront or in phases. Mr. Hyde replied that there aren't enough funds available to ask for it all at once. Two grant funds are available through the Met Council and the State. They each have funds available every six months. Those applications are scored and driven by tax base creation; redevelopment potential, job growth and how much you are cleaning up the environment. We will score a lot of points with this site. The only way we can make this successful is to apply for the grants overtime which is why the phases will work well in this case. Chairperson Pro Tem Gabel asked if there was any federal money available. Mr. Hyde replied that there are loans available at the federal level; all you have to do is apply. You get a low interest loan at 1-2% interest so we wouldn't need to burn tax increment funds paying interest. Because of the tax restrictions these funds cannot be used on Superfund sites, however, the site could be cleaned up and taken off the list and then we could apply for these federal funds. The EPA gives money to the State of Minnesota, like $3.OM, on revolving loans for clean up. We can borrow money for phase one to pay contractors and pay back the tax increment over 15 years. Once this is paid back the State doesn't have to give the money back to the Feds, they can reinvest the money to someone else. Chairperson Pro Tem Gabel was concerned about taking potential money from the schools. She asked if those funds could be paid back early. Mr. Casserly replied that these are concerns that everyone raises when we look at sub-districts. Schools are generally minimally impacted by this program and the school districts get 8% which is a small piece of the pie. Medtronic, for example, has a substantial amount of market valuation that will go into the base of the school district and so will other tax jurisdictions. The amount of valuation from the other projects is roughly equivalent to what we are talking about here. There would be minimal, if any, impact on the schools. Dr. Burns asked about the funds BAE and the Navy have set aside for cleanup, like $4.OM, and if those funds would be available for the RER cleanup. Mr. Hyde said that when the Navy and BAE settled, as part of the settlement BAE made payments to the Navy for $4.OM and now BAE has no further liability on the Navy portion of the site. We couldn't go after BAE as they paid the Navy and that isn't enough money to clean up the site. The Navy spent millions more than that and is still looking for more. We will save the Navy future money in terms of operating the groundwater system, investigation that needs to be done, and if there are other hot spots that need to be addressed. Dr. Burns asked if the Navy would help fund this cleanup. Mr. Hyde said they are still working on that agreement. We are just starting the negotiation process. We will know more later and the ne�t step is to meet with the Navy Project Manager, the Attorney and GSA to create a Memorandum of Understanding. City of Fridley Housing and Redevelopment Meeting of February 2, 2012 Dr. Burns asked about the terms that would be included in a development agreement that will come forward on April 9tn Mr. Casserly said that these are terms that would be in the term sheet and we want to capture all the business part of the agreement. These are all terms that will show up in the development contract and we are hoping to have that ready in July. Dr. Burns said that there is a certain amount of good faith happening right now. Mr. Casserly answered yes there is. Mr. Hyde has a large financial commitment invested before he even has a redevelopment contract. He won't proceed with the closing unless they know we can create the TIF Districts. There is a certain amount of trust and we will all continue to operate in really good faith. Mr. Hyde said that they are driven by the purchase agreement and the amount of time the seller is giving them to figure this out. We don't want to own this in the current state; we want to redevelop the property but there are a lot of steps involved. We are trying to see if this is a viable redevelopment project and if it isn't, we won't buy it. Dr. Burns asked what percent of completion would be known on April9tn Mr. Casserly said that his level of comfort of phase one is very high and that they need to keep thinking in phases and not entire project. Dr. Burns asked if the terms would be known in phase one before the TIF districts were approved. Mr. Casserly answered that is the plan. That doesn't mean the project can't be revised but the goal is to have as much in place as possible. When we come back in July or August they will have a better handle on the grants and development contract. We will get smarter as we proceed. Chairperson Pro Tem Gabel asked if any kind of financial numbers would be available for ne�t month's meeting regarding phase one. Mr. Casserly answered yes. Some of this will be exciting because as they tear out concrete there will be some amazing surprises. We will try to see if we can lay the groundwork for anticipating the numbers. Commissioner Eggert said that we all want to have a certain guarantee about this development and that is not likely to happen for this project. We have to think of this project as a journey and in a journey we need to have a good partnership. Right now we are creating the best map that can be given with what we know and we have land that needs to be redeveloped. Opportunities are coming together now with grants, leases etc. The timing is good and we have to remember that this is a journey and we have to work together. Mr. Hyde added that ultimately someone will have to deal with this property and the time is right to do it now. Dr. Burns asked what the prospects were as to HRA coming up with cash for this project. City of Fridley Housing and Redevelopment Meeting of February 2, 2012 Mr. Casserly answered that they do think that the HRA would be looking at advancing some money, probably on a match basis, with the developer to match the remediation expenses. We are trying to sort out portions, how secure it etc. Some amount will be necessary upfront and timing depends on when the remediation work would actually start. Mr. Hyde added that the grants are a great leverage, are very competitive and available only every six months. What we are trying to avoid is a way not to be held up in the beginning by grant fund timing. It would be great if money were available to match funds, that way we would have a safety net rolling forward and wouldn't get held up with the grant cycle. The timing is to get the clean up started this summer and go into grant funding in November 2012 and start building ne�t spring. Chairperson Pro Tem Gabel asked how the HRA would fund this request. Mr. Casserly answered that the Authority has many viable options; it could be an internal request or go to outside funding sources. Dr. Burns asked about the fiscal disparities in the pie chart with the loss to the HSS District. The City is required to pay to fiscal disparities. Mr. Casserly said that there will be additional amounts coming from other properties so there will only be a small impact. Dr. Burns thought that any lost property tax revenue would go into fiscal disparities; $120,000 is a lot of money for us to lose. Mr. Casserly said he is measuring the impact of the fiscal disparities configuration that is being made, but the commercial property in the tax jurisdiction is being allocated over the entire city so you're not losing that amount. Greg Johnson added that the city would lose the base for the properties in the hazardous substance sub-district. Dr. Burns said that in the revenue sharing program the City would be forced to replace the revenue that would go to other tax jurisdictions. Mr. Johnson said that the taxes are spread on a smaller base so the tax rate goes up for commercial properties. Mr. Casserly said that the City would not lose that amount of revenue; it's the size of the pool you can levy that will be diminished by taking that out. Dr. Burns said that frequently you hear about the federal budget deficit and grants being cut back; this doesn't feel real positive that we would be able to count on grants and loans. Mr. Hyde said typically that would be an accurate analysis but what we see so far this year is more than what we have seen in the past. The Governor's budget has new grant money put into DEED for redevelopment for projects that clean up the environment, create jobs etc. City of Fridley Housing and Redevelopment Meeting of February 2,2012 7 2. Housing Loan Program Update Paul Bolin, HRA Assistant Executive Director, said that from January 15 through February 15 one RLF loan was closed making a total of one year to date. There were no remodeling advisor visits. Mr. Bolin said that over 1,000 people came to the Home Show at the Schwan's Center in Blaine. About 200 Fridley residents attended. There was a lot of interest in the new recycling bins, the vacant land on University and the lots HRA has for sale. We received very good feedback from all the vendors this year. ADJOURNMENT MOTION by Commissioner Eggert to adjourn. Seconded by Commissioner Holm. UPON VOICE VOTE,ALL VOTING AYE, CHAIRPERSON PRO TEM GABEL DECLARED THE MOTION CARRIED AND THE MEETING ADJOURNED AT 8:40 P.M. Respectfully Submitted, Krista Monsrud Recording Secretary CITY OF FRIDLEY SIGN-IN SHEET HOUSING & REDEVELOPMENT AUTHORITY MEETING Name and Address Agenda Item of Interest