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HRA 04/05/2012 - 31318CITY OF FRIDLEY HOUSING AND REDEVELOPMENT AUTHORITY COMMISSION April 5, 2012 CALL TO ORDER: Chairperson Pro Tem Gabel called the HRA Meeting to order at 7:04 p.m. ROLL CALL: MEMBERS PRESENT: MEMBERS ABSENT: NONMEMBERS PRESENT ACTION ITEMS 1. Approval of Expenditures William Holm Pat Gabel Stephen Eggert Larry Commers John Meyer 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 March 1, 2012 Meeting Minutes MOTION by Commissioner Holm to approve the minutes as presented. Seconded by Commissioner Eggert. UPON VOICE VOTE, ALL VOTING AYE, CHAIRPERSON PRO TEM GABEL DECLARED THE MOTION CARRIED UNANIMOUSLY 3. Approval of Resolution Creating TIF District #20 and Hazardous Substance Subdistrict #20A Paul Bolin, HRA Assistant Executive Director, said that Real Estate Recycling (RER) is looking to purchase the BAE Site. Currently this site is heavily contaminated, has 2M sq. ft. of building and employs less than 400 people. RER's plan is to redevelop this area in phases to include City of Fridley Housing and Redevelopment Meeting of April 5, 2012 1.6M sq. ft. of new office/showroom/industrial space, increase from $15M in value up to $75M and increase the jobs to 3,000. Mr. Bolin said that tonight staff is asking the HRA to adopt a Resolution modifying the City's redevelopment plan and the TIF plans for the existing districts; incorporating the project costs and increased bonding authority from the RER project. This will not create any financial obligation for the Authority or the City but permit the Authority to continue working on this Project to create a Redevelopment Agreement and eventually lead to Certification of the District. The District would not be active until it is certified by Anoka County and the County will not certify the district until the Development agreement is in place and the MPCA has approved a Remediation Action Plan (RAP). The RAP may not be fully developed and approved until this fall or early ne�t year. Staff will wait to certify both the Redevelopment District #20 and the HSS Subdistrict #20A until the MPCA approves the RAP. Mr. Bolin said that Staff recommends approval of the resolution modifying the existing TIF Plans and creating TIF District #20 and HSS #20A. The City Council will hold a public hearing and be asked to adopt a similar resolution on Monday, April9tn Chairperson Pro Tem Gabel asked why this needs to be done now versus waiting until more information is known; she asked if RER needed this action approved for the purchase agreement. Paul Hyde, Real Estate Recycling, said that they have managed to e�tend the purchase agreement with the seller through June 20 which allows enough time to put together a tax increment packet to pay for a portion of the redevelopment cleanup of this site. RER has made good progress with the anchor tenant BAE to talk about a new building on the site. RER will be compiling information over the coming weeks regarding the costs affiliated with this $100M redevelopment. The site cannot be purchased in its existing condition and in this condition they do now know if they can redevelop this site. In order to move forward, RER needs to know that a portion of these costs will be funded through the tax increment district. Chairperson Pro Tem Gabel noted that a revised budget was distributed and she asked for an explanation of the changes. Jim Casserly, Redevelopment Consultant, said that the only revision involves the Hazardous Substance Subdistrict (HSS) interest rate assumption. It was being calculated at a higher interest rate which meant that there would be fewer funds available and that was not accurate. A 4% interest rate is now being used in the analysis which is the interest rate currently allowed by statute. This will result in generating additional funds and showing additional funds available for the HSS district. The exact tax rate will not be known until the district is certified. The revised budget reflects an accurate number given the assumptions we are working with today. Mr. Casserly said that the costs that are shown in this budget are aggressive. The reason aggressive costs are used is so the budget doesn't have to be amended again. A 2.5% inflation rate is being used. In the past we have had to amend budgets and we do not want to do that in this project. There is no commitment to spend the entire amount that is in the budget, the number cannot be exceeded. Chairperson Pro Tem Gabel asked for clarification that this is a projection and is not cast in stone until the development agreement is approved. City of Fridley Housing and Redevelopment Meeting of April 5, 2012 Mr. Casserly answered that is correct; this lays out the parameters of what can be done and how these funds are used is for further discussion. Commissioner Eggert understood that today the Authority is creating the vehicle to fold into the development agreement; from that a redevelopment plan will be created. Today there is no financial obligation. Mr. Casserly answered correct; the HSS district cannot be certified until a plan is approved with a mechanism where they can start to clean up a portion of what is in the plan. The County can only reimburse the Authority for amounts that are actually going to be spent for remediation. William Burns, City Manager, said that the MPCA who oversees the Superfund sites was at the City offices today. This site was discussed and he said he had been having discussions with the developer for this site. Chairperson Pro Tem Gabel noted that there is an estimate of $4.OM for remediation; she asked if that figure was based on experience or if it was just a starting figure. Mr. Hyde answered both; this is the fourth federal Superfund site RER has done. The Boise/ Murphy site in Fridley was one of those sites. The unknown is what is underneath each building and that won't be uncovered until the buildings are torn down. That won't happen all at once and we can only estimate based on our experience. The goal is to have a cooperative agreement with the Navy and BAE to use grant funds and federal money to make this redevelopment possible. We have a sense of what it will cost to clean up this site. The site is fairly well investigated and with the exception of what is underneath the buildings; we do not know what kind of surprises we will find under there. Chairperson Pro Tem Gabel asked if they found a horrible surprise under there if the cost to clean up would be taken care of by being aggressive in the budget or if that would be taken out of the HSS funds. Mr. Casserly answered that the HSS funds are only a portion of what is needed for this clean up. Our concept is that we would advance a portion of those funds with each phase as we would not have all of the funds available immediately. There is a 99% likelihood the revenues will be there. Phase one is in the parking lot area and as that phase is developed it will add value to what is already there. As the buildings come down it will subtract value to what is there. At the end of the day there is still going to be a value on that site of $14-$15M and that is where we are getting our subdistrict revenues from. The redevelopment captures the new value. The first project is going to support that existing value; but it is unknown if the first project will add value or maintain value. Chairperson Pro Tem Gabel asked what would happen if we ran out of HSS money; if the HSS funding is frozen at the time the district is certified and not available through the entire project. Mr. Casserly said that the subdistrict would be frozen as there is no ability to inflate those funds; that amount would be a set amount. Chairperson Pro Tem Gabel asked if we ran out of HSS funds for remediation if the project funds could be used. City of Fridley Housing and Redevelopment Meeting of April 5, 2012 Mr. Casserly answered yes; we are anticipating using those funds. We are also looking for other sources of revenues to assist with the remediation costs; grants and advances will be necessary from third parties to help with remediation costs. 4 Commissioner Eggert asked how they plan to manage the cleanup costs in this picture knowing that there is a certain amount to start with and how will a million dollar problem that isn't expected, be handled if it should arise. Mr. Hyde explained that they will start in the least polluted end of the site to spend less money and create more increment. The ne�t area is at the other end and also is not as bad as what may be under the existing buildings. The existing buildings are phase three and four; that is where we hope to build up enough increment ahead of time and will share those costs with responsible parties. The current building sites will save money in the long run by having a more efficient groundwater system. All stakeholders are very motivated to share a success story here. The Navy is eager to have a more efficient clean up system and the development on this site is going to make that happen. Commissioner Eggert asked if there was a knowledgeable approach to limit the surprise that may arise. Mr. Hyde said that there is always a problem. The Boise / Murphy site was investigated perfectly but when the scraper was running across the site it hit several barrels and then it hit some more. A trench was found that was six feet wide and hundreds of feet long with many barrels of restricted material. A similar situation will more than likely happen with this site and we will have to be careful. A plan with the agencies is just as important as the money. We need a relationship with the agencies, a plan to look for problems, dig them up and have a plan to remove and take care of it. A total of 80 barrels were found on the Boise / Murphy site and that put us behind four days; the money was important but so were the relationships to be able to manage that process. Dr. Burns said that he had heard that BAE or someone is doing some remediation. He heard today that eight test wells are going to be drilled, separately to what RER is doing. Mr. Hyde said that there are two Superfund sites on this site and both BAE and the Navy are under significant pressure because their systems are not working that well and they are expensive. Water systems are not working well, they are old and not efficient; the current buildings are in the way to fix this problem. The Navy is under pressure to investigate the three areas under the building. The vault for BAE is on the side that we are not developing. Our redevelopment will help them because they won't have to worry about the buildings. That is an opportunity we present to other stakeholders who have deeper pockets than we do. Commissioner Holm understands the TIF District isn't official until the County certifies it and they won't certify that until RER has submitted a project plan for remediation. The County will want some assurance from the MPCA, the Navy and so on. He asked when the cleanup will start and how this is going to be managed. Mr. Hyde said that RER will be committing to this before it will happen. RER wants assurance from the City and HRA that the tools we need will be there. The grants won't be ready, but with a plan in place and the HRA/City we know we have the primary tools to get started. We have until June 20 to figure this out. In that time we need to get the HRA deal done and figure out City of Fridley Housing and Redevelopment Meeting of April 5, 2012 something with the Navy. The goal in that time is to have an agreement with both the HRA and the Navy and to have a response action in place. Commissioner Eggert noted that the purchase agreement was e�tended, he asked how any deviations from the plan will be characterized. Mr. Hyde said that there was a short fuse with the seller that was driven by the lender and they had an unrealistic approach. Now that we are lying out what is involved, they now have an appreciation for the complexity of this project it is being absorbed by all parties, the seller has been terrific and couldn't be more thrilled with how things are going. Things are going e�tremely well but it still is taking longer than we thought. Chairperson Pro Tem Gabel understands how incredibly complicated this project is and this is just the beginning our journey. She said that at this meeting we are just looking at creating the districts. MOTION by Commissioner Holm to approve the Resolution Creating TIF District #20 and Hazardous Substance Subdistrict #20A. Seconded by Commissioner Eggert. UPON VOICE VOTE, ALL VOTING AYE, CHAIRPERSON PRO TEM GABEL DECLARED THE MOTION CARRIED UNANIMOUSLY 4. Approval of Driveway Easement — 561 Hugo Street Paul Bolin, HRA Assistant Executive Director, said a survey revealed an encroachment of 4.8" on the driveway located at 561 Hugo Street. The code requires a 3' setback There are two options to fix this problem; remove encroachment or create an easement for a driveway. Staff recommends granting easement and the neighbor will pay the County filing fees. Commissioner Eggert asked if the city would bear the cost of the easement. Mr. Bolin said that the City has created easements for similar and more complex situations in the past. Staff took a format already in place and Attorney Casserly reviewed the policy to make sure it was okay. There is not a large cost associated with this request. MOTION by Commissioner Holm to approve the driveway easement at 561 Hugo Street. Seconded by Commissioner Eggert. UPON VOICE VOTE, ALL VOTING AYE, CHAIRPERSON PRO TEM GABEL DECLARED THE MOTION CARRIED UNANIMOUSLY 5. Approval to Hire Appraiser — Medtronic WHQ Property Value Darin Nelson, Finance Director, said that Medtronic is protesting the tax valuation's since 2009. The differences are the property was valued at $5.9M in 2009 and $9.9M in 2011. These valuation differences have a big effect on HRA. The difference in 2011 values would reduce HRA TIF collected by $70,000. Staff is proposing an independent appraisal to help settle the difference in values. The cost of an appraisal is $8,000. Staff recommends approval. It is in the Authorities interest to have proper value placed on property. City of Fridley Housing and Redevelopment Meeting of April 5, 2012 Commissioner Holm asked if Medtronic had conducted any impartial assessor studies to support their valuation. Mr. Nelson answered no; not to the best of his knowledge. Medtronic has a team of attorneys looking at other values in the area. Medtronic is the shining star in the area and their value is placed on other properties throughout the County. Commissioner Eggert noted that there are a lot of properties throughout the area and this is not the first tax case. He asked if staff had knowledge of tax settlements in other areas. Mr. Nelson said that he assumed the assessors had knowledge of other cases but he was not privy to that information. MOTION by Commissioner Holm to hire an appraiser for Medtronic WHQ property value. Seconded by Commissioner Eggert. UPON VOICE VOTE, ALL VOTING AYE, CHAIRPERSON PRO TEM GABEL DECLARED THE MOTION CARRIED UNANIMOUSLY INFORMATIONAL ITEMS 1. Potential Sale of Vacant Lot — 6000 2"d Street Paul Bolin, HRA Assistant Executive Director, said a meeting was held with neighbors and some changes were made to the site plan. It was decided to turn the building so the longer face is toward Second Street which will eliminate the drive loop and allow enough room for parking behind the building. This will also create more green space and a play area. They plan to get updated plans in the ne�t two weeks and this will come up on a public hearing at the ne�t meeting. The developer plans to pay $10,000 or the appraised value of the non buildable lot. Chairperson Pro Tem Gabel noted that she did not get an invitation about this meeting. Scott Hickok, Community Development Director, said that they sent invitations out to a large list of addresses and thought she was on the list. Every small parcel the HRA owns was on the list as well. It is unfortunate her invitation didn't come but we know they did go out. William Burns, City Manager, asked if the reconfiguration would change the number of floors. Mr. Bolin answered no; they are still talking about a three story building. The comments from the neighborhood were that it would fit better if it was longer and that could draw down the height. Commissioner Holm asked if this is a taxable property. Mr. Bolin answered yes. 2. Potential Sale of 551 Hugo street NE — Scattered Site Paul Bolin, HRA Assistant Executive Director, said that this builder likes these sites; they are affordable, clean and ready to go. The lots are desirable for someone building a new home. This City of Fridley Housing and Redevelopment Meeting of April 5, 2012 7 builder has had success buying lots in neighboring cities and has been selling the homes. A public hearing will be on the May agenda regarding this item. Both the City of Coon Rapids and Robbinsdale have confirmed that this builder has been selling the homes they built. This developer has been good to work with. 3. Housing Loan Program Update Paul Bolin, HRA Assistant Executive Director, said that there is a short report this month as no loans were issued. He has spoken with CEE and they have had some activity since the Home and Garden Show. There were three remodel visits this past month. 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 8:25 P.M. Respectfully Submitted, f il /6A-4,10C,Krista Monsrud Recording Secretary CITY OF FRIDLEY SIGN-IN SHEET HOUSING & REDEVELOPMENT AUTHORITY MEETING {-� pc-11 Name and Address Agenda Item of Interest