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04/09/2012 - 31306CITY OF COUNCIL MEETING CITY OF FRIDLEY APRIL 9, 2012 The City Council meeting for the City of Fridley was called to order by Mayor Lund at 7:00 p.m. ROLL CALL: MEMBERS PRESENT: Mayor Lund Councilmember-at-Large Barnette Councilmember Saefke Councilmember Bolkcom MEMBERS ABSENT: Councilmember Varichak OTHERS PRESENT: William Burns, City Manager Darcy Erickson, City Attorney Mary M Smith, Assessor Patrick Maghrak, Appraiser Michael Sutherland, County Assessor Jim Casserly, Development Consultant Scott Hickok, Community Development Director Paul Bolin, HRA Assistant Executive Director Joe Brothers, Fridley Resident Paul Hyde, Recycling Estate Recycling LOCAL BOARD OFAPPEAL AND EQUALIZATIONMEETING Mary Smith, Assessor, introduced the County Assessor, Mike Sutherland, and the City's new appraiser, Patrick Maghrak She stated this meeting is held in accordance with Minn. Stat. § 274.01. The purpose of the Board is to establish a consistent appeal procedure. Only appeals for the January 2, 2012, valuation or classification may be made. The Board has three possible courses of action. They can choose to affirm, reduce, or increase the current value based on information presented. If, upon reaching a decision, the property owner feels the Board did not resolve their concern, they may bring their case to the County Board of Appeal and Equalization which will be held on June 11 at 6 p.m. Ms. Smith stated the responsibility of the Board is to have the majority of the members in attendance to have a quorum. There must be at least one member who has attended an appeal and equalization course approved by the Commissioner of Revenue within the last four years. If a property is omitted from the tax roles, it may be added by the Board. The Board may only increase or decrease individual properties. If the Board makes reductions to individual FRIDLEY CITY COUNCIL MEETING OF APRIL 9, 2012 PAGE 2 properties, the amount of the reduction cannot exceed 1 percent of the citywide aggregate assessment. If the Board finds a case of undervaluation, it may raise the valuation of the property, but it must first notify the owner. The Board must complete and adjourn within 20 days from the time it convenes. Ms. Smith stated the procedures are as follows: to hear property owners that are present and accept any information provided and direct staff to review property. Written appeals will be read once property owners who are present have completed their appeal. A review of the 2012 assessment showed there were 90 qualified residential sales that occurred in Fridley from October 1, 2010, through September 30, 2011. The sales involved single-family homes, townhomes, double bungalows, and condominiums. These are the sales that are used by the State for the sales ratio study. To bring the City's assessment within the State's recommended range of 90-105 percent, there were decreases in structure and land values for all property types. Ms. Smith stated structure values decreased by 4 to 6 percent depending on the structure type. All single-family land zones required a decrease in land value. The townhome and condo land zones were also subject to decreases. This created an average decrease of 11 to 12 percent of total residential value. Ms. Smith stated on the commercial-industrial side, a study of the sales within the County indicated that values were decreasing. These properties experienced a reduction of 10 to 15 percent in structure value. There was also a decrease in all land values of 10 percent. This created an overall average decrease in value of 8 percent. Ms. Smith stated regarding apartments, as a result of the sales in Anoka County, decreases were made to the 4, 5, and 6-unit apartment rates, resulting in a 6 percent overall decrease in value. Regarding the larger apartment complexes, 7 units or greater, those lost a nominal 1 percent in value. These reductions brought the 2012 assessment within the State and County's recommended ratio. Ms. Smith stated she received an e-mail from a resident regarding his property value, and he had an appraisal done. His e-mail states he wanted this to be presented at tonight's meeting in order to take it to the June 11 meeting at the County. Ms. Smith stated this is the only one they received. They have had a lot of calls and have gone out on a lot of appointments and reviewed values with property owners. However, this year the telephone calls were down. Mayor Lund asked Ms. Smith if she had any comments to make on the one received, considering she only received it a few hours ago. Ms. Smith replied they have not seen this property. She did e-mail the gentleman back and did not receive a response. Rather than continue this to the ne�t Council meeting, not knowing if she would be able look at the property, her recommendation would be to affirm the value at this point, giving the resident the opportunity to go to the meeting at the County level. FRIDLEY CITY COUNCIL MEETING OF APRIL 9, 2012 PAGE 3 Mayor Lund stated it would give him the opportunity to go to the County and also gives him some time to hopefully allow staff to observe the property as it has not been opened for inspection since 2004. Ms. Smith said the last time they were in there was 2004. Councilmember Bolkcom asked if she was recommending they affirm it without even looking at it. Why not wait until the ne�t meeting? Ms. Smith stated in the e-mail the resident indicated he wanted it entered into the minutes tonight in order to give him the chance to take it to the June 11 meeting at the County. Councilmember Bolkcom replied it is kind of going against what they normally do. They get something like this and usually try and make an attempt to take care of it. Why would they vary from that when they are only talking about one property here? Ms. Smith replied, her recommendation was to affirm it. Councilmember Bolkcom replied, she cannot affirm something without even looking at it. It makes sense to her to at least make an attempt to come back with it at the ne�t meeting. That is what they have done in the past. If someone has brought something to them and it has not been looked at, they at least attempt to go and look at it. Mayor Lund confirmed with Ms. Smith she has not had any correspondence with this property owner before today. Ms. Smith replied, no. Mayor Lund asked what price the property owner thought it should be. Ms. Smith replied, she believed it is $164,000. The City has it at $222,000. Mayor Lund stated that is significant. He really does not have a problem with Councilmember Bolkcom's thought process on this, but given the lateness of the notice, it sounds like the property owner did want it to just go to the County. Councilmember Bolkcom stated in the past, people walk up to the podium the night of the meeting, and they attempt to go into their home and do something. Just because the property owner wants to take it to the County, it does not mean they should not still try. MOTION by Councilmember Bolkcom to continue the Local Board of Appeal and Equalization Meeting to the ne�t Council meeting. Seconded by Councilmember Barnette. UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE MOTION CARRIED UNANIMOUSLY ON A 4-0 VOTE. FRIDLEY CITY COUNCIL MEETING OF APRIL 9, 2012 PAGE 4 (15 minute intermission) CITY COUNCIL MEETING APPROVAL OF PROPOSED CONSENT AGENDA: APPROVAL OF MINUTES: City Council Meeting of March 26, 2012 Councilmember Saefke referred to page 4, the word "whished" should be "wished." On page 14, paragraph 6, the word "access" should be "assess." Finally, on page 17, line 1, it should read "SACA," not "SECA." APPROVED AS CORRECTED. NEW BUSINESS: 1. Receive the Minutes from the Planning Commission Meeting of March 21, 2012. RECEIVED. 2. Special Use Permit Request, SP #12-01, by Signcrafters, for St. Phillip's Lutheran Church, to Allow an Electronic Changeable Message Sign as Part of a New Free- Standing Sign, Generally Located at 6180 Highway 65 (Ward 2). and Resolution Approving Special Use Permit, SP #12-01, for Signcrafters, on Behalf of St. Phillip's Lutheran Church, the Property Owner of 6180 Highway 65. William Burns, City Manager, stated Signcrafters is requesting a special use permit for an electronic message sign to be located on a new free-standing sign at St. Phillip's Lutheran Church. The sign meets all City requirements for size and location and was approved by the Planning Commission at their March 21 meeting. Staff recommends Council's approval of the special use permit subject to five stipulations, and approval of the resolution. APPROVED SPECIAL USE PERMIT, SP #12-01, WITH THE FOLLOWING FIVE STIPULATIONS: 1. THE PETITIONER SHALL OBTAIN A SIGN PERMIT AND CURRENT SIGN ERECTOR LICENSE PRIOR TO INSTALLING ANY SIGNAGE ON SITE. FRIDLEY CITY COUNCIL MEETING OF APRIL 9, 2012 PAGE 5 2. MESSAGE ON ELECTRONIC MESSAGE CENTER SIGN SHALL NOT CHANGE MORE OFTEN THAN AUTHORIZED UNDER SECTION 214.07 OF THE FRIDLEY CITY CODE. 3. MESSAGE ON ELECTRONIC MESSAGE CENTER SIGN SHALL NEVER FLASH OR HAVE MOTION THAT MAY DISTRACT VEHICULAR TRAFFIC IN THE AREA. 4. PRIOR TO SIGN INSTALLATION, THE PETITIONER SHALL HAVE THE NORTHEAST PROPERTY STAKE MARKED TO VERIFY SIGN LOCATION MEETS SETBACK REQUIREMENTS. 5. THE SIGNAGE ON THE EXISTING RETAINING WALL SHALL BE REMOVED WITHIN 30 DAYS OF COMPLETION OF THE NEW FREE- STANDING SIGN. ADOPTED RESOLUTION NO. 2012-26. 3. Resolution Approving and Authorizing Signing an Agreement with Police Officers of the City of Fridley Police Department for the Years 2012 and 2013. William Burns, stated he has listed the topics in the agreement. Health insurance remains the same as for non-union employees. Wages will be increased by 1 percent retroactively to January 1. There is another 1 percent increase on July 1, 2012. With the beginning of 2013, there will be a 2 percent increase. Dr. Burns stated the third item is shift differential for time worked between 11 p.m. and 7 a.m. This is a new item. It includes three different categories of shift differential. There would be a $.50 per hour differential for hours worked during that time period normally. There is $.75 per hour for callbacks. Also, there is a$1.00 per hour shift differential for overtime hours worked on a holiday. Dr. Burns stated the police officers agreed to eliminate the annual leave sellback that has been an issue for quite some time. In exchange, the leave cap has been raised from 240 hours or 30 days to 280 hours or 35 days. Dr. Burns stated holiday pay has also been changed slightly. Unused holiday time up to 80 hours for 11 paid holidays will be paid out at the end of the hour. This is consistent with current practice but not officially included in their contract. Dr. Burns stated the tuition reimbursement level remains at $2,925 per employee. However, there is a change in type of payment that will be made. Rather than pay it at the beginning of each course and at the end (half each time), it is a lot simpler financially to make the payment at the completion of the course. That has been included in the contract. FRIDLEY CITY COUNCIL MEETING OF APRIL 9, 2012 PAGE 6 Dr. Burns stated estimated cost for these salary adjustments and the shift differential is $79,006 for 2012 and an additional $64,378 for 2013. Staff recommends Council's approval. Councilmember Barnette asked how the salaries of our police officers compared to those in neighboring communities. Dr. Burns replied they are somewhat below the median for the salary level of police officers in other communities. ADOPTED RESOLUTION NO. 2012-27. 4. Approve 2012-2013 Liquor License Renewals. William Burns, City Manager, stated staff recommends the renewal of the on-sale liquor licenses found in each of the following categories: On-Sale Intoxicating Liquor Licenses, On- Sale 3.2 Percent Malt Liquor and Wine Licenses, and On-Sale Club Intoxicating Liquor Licenses. Each of the establishments has met the City's food-to-liquor sales ratio requirements during the past year. The Police Department reviewed these licenses and found no major issues preventing renewal. Staff recommends Council's approval. APPROVED. 5. Appointment — Police Officer: William Burns, City Manager, stated Public Safety Director, Don Abbott, is recommending the appointment of John Kotchen to fill the police officer vacancy created by the recent retirement of Sergeant Mike Morissey. Kotchen was born and raised in Fridley and currently resides here with his family. He graduated from Fridley High School in 2006 and attended St. Cloud State University where he received a B.A. degree in criminal justice studies. He completed his police skills program at Alexandra Technical College in 2009, and is currently working on a Master's degree in criminal justice studies at St. Cloud State University. John also holds an EMT certificate and has completed numerous law enforcement certification programs on his own. He has been a member of the Fridley Police Reserves since 2008 and has also served as a volunteer at the Central Minnesota Se�ual Assault Center. Staff recommends Council's approval. APPROVED. 6. Claims (154527 — 154680) APPROVED. 7. Licenses APPROVED THE LICENSES AS SUBMITTED AND AS ON FILE. FRIDLEY CITY COUNCIL MEETING OF APRIL 9, 2012 PAGE 7 APPROVAL OF PROPOSED CONSENT AGENDA: MOTION by Councilmember Barnette to approve the consent agenda. Seconded by Councilmember Bolkcom. UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE MOTION CARRIED UNANIMOUSLY ON A 4-0 VOTE. ADOPTION OF THE AGENDA: MOTION by Councilmember Barnette to approve the agenda. Seconded by Councilmember Bolkcom. UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE MOTION CARRIED UNANIMOUSLY ON A 4-0 VOTE. OPEN FORUM: Mayor Lund responded to a visitor's comments at the last Council meeting. The visitor asked if Council would rescind the tax levy for the permanent levy that was voted on by the voters in 2004. Prior to the meeting, he polled the Council, and he did not get a favorable response from Council to even address that issue. They did look into this issue in 2003 and carried it into 2004 and allowed the voters to make that determination. He does not currently see the need to readdress that issue. Mayor Lund said in response to the other question was about the actual name of the Springbrook Nature Center. The records do show that there was a motion to accept North Park as the name which goes back to the 70s as well. With the inclusion or additions of the facilities, and the building, it became known by many as North Park. He supposed the most correct would be Springbrook Nature Center at North Park More people today know it as Springbrook Nature Center than North Park. Mayor Lund stated a couple of questions were asked by e-mail after the fact which related to when Council went to a phased planning. He believed that came back in about 2009. The Foundation approached Council about doing a phased project when the veto first came down from Governor Pawlenty at the time about the bonding for Springbrook's "Spring Project" as it is known. There were many legislators who said they were interested in getting the people back to work and, therefore, is it shovel ready. The legislature did provide the money to make it shovel ready, and they hired a consultant and engineer, and also looked at a phased approach. They brought it to Council, and Council agreed as long as the intent still held that there would be no additional taxes other than what was already proposed or already in the permanent levy created in 2004. No additional taxation would go to the citizens of Fridley. The Foundation must have the monies in hand before the phasing would start. FRIDLEY CITY COUNCIL MEETING OF APRIL 9, 2012 PAGE 8 Mayor Lund stated regarding the fourth question on why Council did not tell Dr. Burns to cut Springbrook from the budget, he thinks it was Dr. Burns who first proposed that in 2003 in light of the City's cuts of local government aid. The City was lobbied by the Foundation and other people who did not want the project to proceed, and the Foundation said they would pay a considerable amount of money to keep the operations going in the interim until it went to the voters. It was kept somewhat in limbo at least for a year. The staff there was in limbo as to whether they would have a job or the facilities would close. It was a very significant issue. Council once again looked at whether it was feasible to have a golf course there and had a consultant back in, and they had quite a lengthy discussion. They did not accept Dr. Burns' initial desire to cut that in the budget, but they also did not continue on and decided to let the voters make that decision. Mayor Lund stated there were some other questions that came up, and he will respond to those also by e-mail since they came by e-mail. There is no real set time cast in stone for addressing issues under the open forum. Council does have a statement in their desks that limits it to three minutes. Open forum is just another avenue for people to approach Council besides e-mailing. PUBLIC HEARING: 8. Consideration of the Creation of TIF District #20 and Hazardous Substance Subdistrict (HSS) #20A. MOTION by Councilmember Bolkcom to waive the reading of the public hearing notice and open the public hearing. Seconded by Councilmember Saefke. UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE MOTION CARRIED UNANIMOUSLY ON A 4-0 VOTE AND THE HEARING WAS OPENED AT 7:46 P.M. Paul Bolin, HRA Assistant Executive Director, stated Real Estate Recycling (RER) is a development group led by Paul Hyde. They are in the act of purchasing 136 acres located at 4800 East River Road. This, like Springbrook Nature Center, is a site known by many different names over the years. Most recently it has been referred by the BAE site, as BAE is the large tenant currently operating the building. The site is also known as the United Defense site, the FMC site, the Navy site, and the Northern Pump site. The building is currently owned by an investment group out of St. Louis, not by BAE. The site is very heavily polluted. It has 2,000,000 million square feet of substandard building, and nearly all of the 2,000,000 square feet is in one large mass basically located in the center of the site. The original construction on this site started in the late 1930s, and there were additions put on a number of times over the years. There are a number of reasons why this building has become substandard. Mr. Bolin stated RER is proposing to redevelop this site in four different phases. It would start on the southern end of the property which is now mostly grass and parking lot. They would then skip over the existing building and redevelop the northern end of the building. Finally, for FRIDLEY CITY COUNCIL MEETING OF APRIL 9, 2012 PAGE 9 Phases 3 and 4, they would get into tearing down the existing buildings and getting new buildings in that area. Mr. Bolin stated when the redevelopment does happen, they will be left with 1.6 million square feet of new office, showroom, and industrial space. The value on the site will increase from $15 million up to $75 million. They will go from less than 400 jobs down on the site right now to new buildings that could accommodate up to 3,000 jobs. Mr. Bolin stated tonight the Housing and Redevelopment Authority is asking Council to adopt a resolution allowing the HRA to continue moving this project forward. The resolution modifies the City's TIF plan for the existing tax increment districts. This is a requirement of State Statute. The modifications in essence simply add the project costs and the increased bonding authority this project brings to the City's overall redevelopment plan and redevelopment districts. Mr. Bolin stated adoption of the resolution does not create any financial obligations for the HRA or for the City. It simply allows the HRA to continue negotiating the redevelopment agreement and ultimately moving forward with certifying this tax increment district. Mr. Bolin stated although the HRA adopted a similar resolution at last Thursday night's HRA meeting, the proposed TIF districts themselves would not become active until they are certified by Anoka County. The districts they are proposing be created tonight cannot be certified by Anoka County until a development agreement is in place and, more importantly, an approved remediation action plan has been approved by the Minnesota Pollution Control Agency. Mr. Bolin stated the remediation action plan most likely will not be developed and approved until some time this fall or potentially early ne�t year. They will wait to actually certify both the redevelopment district and the subdistrict once the Pollution Control Agency does approve the remediation action plan. Mr. Bolin stated because this project is much more complex than a number of the City's recent redevelopment projects, the HRA has also consented to creating a hazardous substance subdistrict. To illustrate how this subdistrict differs from the City's typical pay-as-you-go TIF districts, he presented an illustration showing what the property value will do over time. The illustration included a 25-year timeline, showing base taxes that are currently being paid by the owner of the property. In this instance, that is about $550,000 that is being collected right now; and that money is split up between the State, County, School District, and City. Mr. Bolin stated as they move forward with the redevelopment on this project, like the City's other tax increment projects, those increased incremental funds will be captured and used to pay for a number of the redevelopment costs of the project. When the district has met all of its obligations or run its 25-year maximum life timeframe, all of the taxes being paid then get shared by all of the districts. Mr. Bolin stated what is a little different about this project is that where they have the current taxes being paid, the Hazardous Substance Subdistrict allows for capturing some of those FRIDLEY CITY COUNCIL MEETING OF APRIL 9, 2012 PAGE 10 existing taxes and using those to actually pay for some of the soil remediation on the site. In the case of this project, of the $550,000 that is currently being paid in taxes, the City gets $76,000 of that. That City's share would go into the Hazardous Substance Subdistrict. The $47,000 the School District No. 13 collects would also go into the Hazardous Substance Subdistrict, the almost $80,000 that Anoka County collects would also o into that district. They have about $120,000 that currently goes out in fiscal disparities that would also be collected by that Hazardous Substance Subdistrict. The State general taxes and market value referendums are two areas where the taxes being currently paid do not stay in that hazardous subdistrict. The State and the market value referendums, a small portion of fiscal disparities, are still paid out to those entities. Mr. Bolin stated staff recommends approval of both Redevelopment District No. 20 as well as the Hazardous Substance Subdistrict No. 20A. The HRA approved a similar resolution last Thursday night. Without assistance, redevelopment of this site is not possible. Councilmember Bolkcom asked staff to go over how this fits in. A big portion of this is related to the City's Comprehensive Plan. Scott Hickok, Community Development Director, stated this fits nicely in the Comprehensive Plan in that in both the Comprehensive Plan and the Zoning, the City defines this as a redevelopment district. The current zoning is heavy industrial but guided by the Comprehensive Plan, the City would find this in a redevelopment district as well. They did anticipate at the time of doing the Comprehensive Plan that something likely would happen on this site, and they set the stage for this type of development in the Comprehensive Plan. Councilmember Bolkcom asked if the Comprehensive Plan have to be modified to be in line with what is being proposed here? Mr. Hickok replied, no, the Comprehensive Plan would not have to be changed nor would the Zoning. There is some prospect that because the buildings may want to sit in a bit different position they may want to put an S-2 zoning to provide flexibility to do the buildings as they are being proposed. That is also in concert with the Comprehensive Plan that talks about this being a redevelopment district, very much like what the City did on the Medtronics site and some of the other redevelopment districts. MOTION by Councilmember Bolkcom to accept into the record the HRA Resolution. Seconded by Councilmember Saefke. UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE MOTION CARRIED UNANIMOUSLY ON A 4-0 VOTE. Councilmember Bolkcom asked on page 66, under No. 6, it says there is obligation by the HRA and none of the options are mandated and are all permissive and require additional approval by the HRA. Would there be additional Council approval or anything related to that question? FRIDLEY CITY COUNCIL MEETING OF APRIL 9, 2012 PAGE 11 Mr. Bolin replied, not to any of the tax increment financing itself. Councilmember Bolkcom asked if the resolution passes, what would Council see in the future. Mr. Bolin stated all they will see after this will be the land use and zoning items that may be coming down the line. It will be the Housing Redevelopment Authority that will negotiate the redevelopment agreement with RER. Councilmember Bolkcom asked, as far as what goes on with this property or anything else, other than a rezoning as a City Council, they would not really see anything else? Is that correct? Mr. Bolin replied, correct. Councilmember Bolkcom asked regarding No. 7, it says, "Speaking of financial matters, I've reviewed a very lengthy "Term Sheet." Where is the Term Sheet and what is it? Mr. Bolin replied, it is a list of questions generated by the City Manager. This is to answer questions he had and to give a better understanding of what the project entailed. There has been an early draft of the Term Sheet. Councilmember Bolkcom asked what is a"Term Sheet"? Mr. Bolin replied, it is simply a rough outline for the different elements that will ultimately end up in the redevelopment agreement. Councilmember Bolkcom asked what is an example of what is in a Term Sheet." Mr. Bolin replied it simply lays out things like the projected phasing plan. It lays out potentially what the monetary value may be on the Authority's assistance. It is the groundwork for the specifics that will go into the redevelopment plan, how much the assistance the Authority can make available and when that assistance will be made available, the form that assistance will take place in, and whether it is notes, bond issuances down the road. There are a number of things that can go into the Term Sheet. They simply do not have one that has been approved yet. They are still negotiating with the developer on this, and the Authority itself has only seen one of the earlier drafts of the Term Sheet. Councilmember Bolkcom stated she is confused as to whether she is to approve a resolution that is many pages long. As a City Councilmember it says, I find this and I declare this, and the Council does this; but they have had one conference meeting with Mr. Bolin and the HRA attorney. She is not sure exactly what the City Council does. This is a huge project. She asked if they had all the information. The Term Sheet is really nothing the City Council would deal with other than they know the HRA is working with someone. FRIDLEY CITY COUNCIL MEETING OF APRIL 9, 2012 PAGE 12 Dr. Burns replied it is the Term Sheet that will define the redevelopment agreement between the HRA and the redeveloper. Councilmember Bolkcom asked whether the development agreement would eventually come to the City Council? Dr. Burns replied, no, other than for information purposes. Councilmember Bolkcom asked regarding No. 8. If BAE came forward and does not come to some agreement with the developer, would this project go away? Mr. Bolin replied, no, the project is not dependent on BAE's involvement. Councilmember Bolkcom asked regarding the MPCA and the responsive action plan, is that all related to the contamination plan? How does it all get divided up? How much of that money comes out of the TIF district and how much from the Navy and others involved in the contamination of that site? How is that negotiated? Mr. Bolin replied, the best person to answer that question is Paul Hyde, the developer. Paul Hyde, RER, stated regarding the clean-up, this is a federal superfund site. It is also a state superfund site meaning it is on the national priority list (NTL) as well as the State's permanent list or priorities, or PLP. This is the fourth federal and state superfund site they have developed in the Twin Cities. One of those was the Boise/Onan/Murphy site in Fridley, and they are pretty good at how to work the bigger companies who are responsible for the existing pollution and have negotiated a cleanup with the state and the federal government which their redevelopment might create and may be new obligations. Mr. Hyde stated one of the things they are working on with the Navy primarily and British Aerospace (BAE) is figuring out what their responsibilities are, how they can help them save money in the future, which has never been an option for them by tearing down the existing building, and being able to address some of the existing hot spots and soil under the building and saving money going forward in the operation of the groundwater system. Mr. Hyde stated one of their tasks, in addition to putting together some of the funding with the City's participation, is figuring out roles and responsibilities with the Navy and BAE. They will be doing that over the ne�t 75 days. So far, he is quite encouraged that the Navy seems open- minded, optimistic, and aware that their redevelop can help them in ways that they have not been able to address the pollution on site for the past 25 years because the building has been there. They are not doing anything to let the Navy off the hook In fact, they are going to help them and hope that some of that help, enables the redevelopment to go forward. Nevertheless, there are things they are going to run into that is not their responsibility; and they will have to manage that under their response action plan--their clean-up plan approved by the state and the federal government. That will involve some City assistance as well as state grants and Metropolitan FRIDLEY CITY COUNCIL MEETING OF APRIL 9, 2012 PAGE 13 Council grants and perhaps USCPA loans to help all of it come together to make the redevelopment happen. Councilmember Bolkcom asked, and how it was divided up Mr. Hyde replied there is a negotiated document between the Navy, British Aerospace, the State and the Federal government that very clearly defines the roles and responsibilities of what is going on at the site. The document contemplates an existing building. What it does not contemplate is the removal of that existing building, finding stuff that is underneath the floor, managing that, and perhaps being able to modify the existing groundwater system so it is more efficient, cleans up the groundwater better, and perhaps for less cost for the Navy. That is what they are trying to negotiate. They are trying to follow the template that was followed on the TCAAP site in Arden Hills. They are using a lot of the same people. They have done it before. They are presenting the federal government, the state, the Navy, and BAE with an opportunity they have not seen in a long time and will not see if they go away. Councilmember Bolkcom asked when he says "stuff' it is not stuff they put there. Mr. Hyde replied, chlorinated solvents. They used solvents to clean grease off guns for Navy battleships in World War II. There were no federal, state, or perhaps even scientific awareness of what these manmade solvents did to both the environment, public health, and to people. It wasn't until the late 60s and early 70s after Rachel Carlson's book, Silent Spring, and not until the passage of the National Environmental Policy Act and later the Comprehensive Environmental Response Compensation and Liability Act Superfund that there became a regulatory age. Disposal practices were not criminal. They were not pouring it into a river, they poured it into a hole. Now that it is there, they have to address the stuff under the building. A great majority of the stuff that is not under the building has already been addressed. That is why the site is in sort of this operation maintenance program that it is under right now. Councilmember Bolkcom asked if the grants are not approved, what happens. Mr. Hyde replied there are two grant programs they are addressing. The first is administered by the State department. Both grants are administered semi-annually. They are about $3.5 million. The HRA has to apply for them. They are matched by grants from the Metropolitan Council, and those grants are scored based on clean-up of the environment, tax base increase, job creation, removal of blight, green building, the use of existing infrastructure, and the use of a bus. All those things they would be applying for every six months or a year for each new building they roll out on the site. They are not trying to do this all at once; they are trying to do it over ten years and take this very large redevelopment and make it into smaller pieces. Councilmember Bolkcom stated the HRA money has to basically match from that grant. That money comes out of that subdistrict? She asked where that money comes from. FRIDLEY CITY COUNCIL MEETING OF APRIL 9, 2012 PAGE 14 Jim Casserly, Attorney for the HRA, said the Hazardous Substance Subdistrict would provide grant funds that would be used to boot strap our way into getting much more substantial funds. What they have been negotiating. Part of the reason the Term Sheet is about 90 percent done, is they are still trying to understand when funds may become available. He understands Mr. Hyde completed some of the engineering on Friday. Just because of the complexity and the difficulty of doing this project, they keep assembling more information. The way they have it designed now is that the subdistrict on Phase I would provide a match of a grant of approximately $750,000. Same thing for Phase II and then for Phase III, when you start tearing down the buildings, it would be $1,250,000. For Phase IV there would be another $1,250,000. The subdistrict total grants would not exceed $4 million, which they have determined is very manageable within the subdistrict. That subdistrict will generate about $340,000 a year in tax increment. When they provide these grants which may be spread over a number of years, they will be recovering from taxes that are being paid on an annual basis. They will be recovering substantial amounts of those grants that they have advanced. Attorney Casserly stated that is how the Authority reimburses itself, through the payment of taxes on the site. The Authority at very defined times will provide grants to the developer to assist with the remediation of the project. Councilmember Bolkcom asked, but if there is not a grant that comes from some place, is there no money going out? Is there still money coming out of this subdistrict? Attorney Casserly asked there are funds that are available from the subdistrict. The first phase is going to require the least amount of outside grants or assistance from the Authority. As the project proceeds, they have evermore assurance the taxes are going to be paid in the subdistrict. They have assurance when they start, and it becomes even stronger as soon as another building appears. Because of the length of time associated with this project, it may be 2 to 6 years before they make the actual final grant from the Hazardous Substance Subdistrict. William Burns, City Manager, stated the prospects for getting those grants are pretty good; the EPA part of it at any rate. Attorney Casserly replied, the prospects in the past have been very good; and this project is going to have a very high priority. Mr. Bolin has been working with the various granting agencies. Mr. Hyde stated they have used those grants for 17 years. They have a great track record including on the Boise/Onan/Murphy site. Because they spend their money and give them jobs, a tax base, they get to run back to the legislature and say this was a success. They have to do that often. Mr. Hyde stated one of the things they are trying to create is a sustainable project that is not completely dependent on a DTED grant on June 1, 2012. That is one of the reasons they are trying to create this grant from the Hazardous Substance Subdistrict as well as the rest of the tax increment package, low interest loans from the EPA, help from the Navy and BAE. FRIDLEY CITY COUNCIL MEETING OF APRIL 9, 2012 PAGE 15 Nevertheless they have a phenomenal track record at getting these grants because they deliver pollution cleanup jobs, a tax base, the use of existing infrastructure. Dr. Burns asked Mr. Bolin if he had an idea whether the information about these grants will be available before completion of the redevelopment agreement. He assumes they are going to know about these things in the ne�t two or three months, and the redevelopment agreement is coming to the HRA sometime in September. Attorney Casserly stated they are hoping it will be there in August. Dr. Burns asked Mr. Bolin, will they know something definite about the grants by then? Mr. Hyde replied the grants will take place over five to seven years. They are trying not to go ask DEED for $15 million. They are trying to ask them for $750,000 multiple times and tie that to each building. They can certainly get started with the first round soon. That is the goal is getting the redevelopment agreement in place, getting the rezoning in place, getting those early grant applications in. Dr. Burns asked if they will know about the first one before they have the redevelopment agreement in place? Mr. Hyde replied, that depends. The grants are due May 1. It is three weeks from now. They are more likely looking at a November 1 application for those grants. One of the great things that will give them more points is having a city commitment. That helps them not retrade the weeks before they award the grant. The money will be available. They will score well because of the size of the project, the jobs, the tax base. Councilmember Bolkcom stated on Page 67, it says the first grants will be applied for in November 2012. On the ne�t page it says the first grant to the RER will occur later this year and the repayments will not be back until July 2013. She is kind of confused on the whole timeline. The HRA is actually going to give money out to RER before there is actually a grant that has been approved? Mr. Bolin replied, he thinks the confusing part is the use of the word, "grants." There really are two separate pots in mind. This project is going after as much of that money the project can get its hands on. That is the funding that has the two times per year application cycles. So we are not held up by that grant process by the possibility of maybe not being awarded those grants throughout these various application cycles, the HRA itself is going to make $4 million available over the four phases, and that money would be given to the project. Here it is called a grant which in essence that is what it is. It would be a grant to the project, and the Authority would recover the $4 million through the Hazardous Substance Subdistrict. The Authority would give money to the project up front during those four separate phases and use the $340,000 that is coming into that Hazardous Substance Subdistrict to pay the HRA back for that up front money. That gives the developer money to work with up front so that is not dependent on all of these outside agencies. FRIDLEY CITY COUNCIL MEETING OF APRIL 9, 2012 PAGE 16 Councilmember Bolkcom asked what the grant from the HRA is used by the developer for. Mr. Bolin replied it can only be used for soil remediation. Councilmember Bolkcom asked even if RER walked away, the HRA grant is still being used for soil remediation. There is still a TIF district here and soil correction is happening. Mr. Bolin stated every activity that money is used for needs to be addressed in that remediation action plan that needs to be approved by the State Pollution Control Agency. It is only those activities that are part of that plan. None of that money goes out until the work is underway. Attorney Casserly stated the money does not go to the developer. It goes into a disbursing agreement that is placed in escrow. The only way it gets released from escrow is when various kinds of bills are submitted to the escrow agent for payment for work that has been authorized by the Pollution Control Agency. This is very strictly monitored. Councilmember Bolkcom stated also on page 67, it states, "Notes will be issued by Authority for each phase." Is a note also considered a grant? Attorney Casserly replied the references to notes is the instrument that would be issued as a result of creating the redevelopment district. There are two different districts here. The redevelopment district is the kind of district that you are more accustomed to seeing. The notes issued in the redevelopment agreement are the very traditional pay-as-you-go. They are notes that would only be paid from increment that results from new valuation going on this site. This is the kind of notes you have issued 25 times maybe. It is very traditional. Dr. Burns stated one difference here is these notes can be used for something other than remediation. Be it for infrastructure and demolition, etc. Attorney Casserly stated that is correct. They really have conceived of this as the subdistrict portion going for the remediation and, because of the very e�tent of kinds of infrastructure issues with this site, they would be using the notes for the infrastructure side. They have not sorted out with the redeveloper whether he is going to try and pledge some of those notes that go with the buildings. They are still trying to sort out if they are going to issue a note with each building, with each phase. It is part of the complexity of this project; trying to weave in what really makes sense in terms of the financing mechanism, with how the site is actually going to be redeveloped. That gets into the difficulty of trying to make sure this thing works financially. Councilmember Bolkcom stated also on page 67, Section (E). All the questions were answered except this. This one was by RER. It says, "Once we get the TIF deal done, we will hire a brokerage team to market the site." Is that a responsibility of RER? Mr. Hyde replied they cannot go out to the market and start to represent they can deliver new buildings in a modern industrial park until they know they can pay for the cleanup and infrastructure needed to make those buildings possible. You have one shot at doing this right. FRIDLEY CITY COUNCIL MEETING OF APRIL 9, 2012 PAGE 17 Councilmember Bolkcom referred to page 68 and the sale of bonds. They talk about minimal risk but this seems like a huge risk. Attorney Casserly replied, in the purely legal sense, there really is no difference between notes and bonds. It is really the kind of security that backs them. All they are doing here is suggesting that at the HRA's discretion it may assist the developer with taking out some of the notes. Again, because of the size and complexity of the project, they are weaving this concept into it but making sure it is at the HRA's discretion. Councilmember Bolkcom referred to a comment on that same page, No. 11, "preliminary analysis suggests that the HRA has adequate funds." There is no risk here as they have the money? Do they foresee they may have to go out for a bigger levy in the coming years? Attorney Casserly stated working with the HRA funds and balances and giving the timing that is being suggested by the developer, and given the phasing of this project, they do not see any need for the HRA to go outside of its own resources and the resources they have been currently projecting for the ne� half dozen years. Councilmember Bolkcom referred to page 69 it states, "creates minimal risk to the City and the HRA but provides an enormous opportunity" but what are the risks? Attorney Casserly stated it is a very nice way of saying, while they do not perceive any risk at this time, one has to be very careful in saying there could never not be any risk of any kind. Councilmember Bolkcom asked, what is the risk? Attorney Casserly stated a hypothetical is where they go out and with the subdistrict they make the first advance and RER goes out and finds there are 160 barrels of unexpected stuff. Not only would the taxes not be paid on the site but would probably be deemed prudent by the owners to let the whole thing forfeit to the County. Mr. Hyde stated there is an environmental risk, and they will have surprises. They did have surprises on the Boise/Onan/Murphy site. The HRA has heard him describe how thoroughly they investigated that site and, when the scrapers were mass grading it, they found 80 buried barrels of paint waste that shut the project down for only three days. They will have environmental surprises. He is comfortable with that because: (1) They have the United States Navy on the hook as a responsible party; they have British Aerospace, the second largest defense contractor on the hook;and they have a track record of working with the state and the federal government and working on working through that quickly. That will happen, and they will budget conservatively for it. Mr. Hyde stated there is also the real estate market risk That is the more significant risk in their minds. That is a timing risk Their timing on the recovery of the real estate market is terrific. They could have filled several buildings on the south side of the site last year. Once they get their ducks in a row on this, they will be able to get started. FRIDLEY CITY COUNCIL MEETING OF APRIL 9, 2012 PAGE 18 Councilmember Bolkcom asked if there was any area in the whole site that does not have some hazardous substance. Mr. Hyde stated in the federal and state regulatory system, the site is listed by legal description. It is not listed by the presence of groundwater or soil pollution on or off property lines. There are two superfund sites here, No. 1 is the Navy site; Phases II, III, and IV is the Navy site. Phase I is the beginning of the BAE site. Both sites are federal and state superfund sites. Both sites have very significant chlorinated solvents in the groundwater that are being addressed by a groundwater e�traction system. Both sites both have chlorinated solvents in the soiL Most of those solvent product areas are underneath the building. There are three of them that they know of today. One is on the southeast corner, right between Phases III and IV and Phase I(called the former paint booth). There is a solvent area kind of in the middle of Phases III and IV and there are perhaps one or two solvent areas underneath the building between Phases II and III. They are also going to probably find stuff. In addition to that there is perhaps $2 million asbestos abatement to be done in the building and other things they do not know about. Mr. Hyde stated broadly speaking the whole site is impacted. Dr. Burns stated he kind of agrees the greatest risk is the economy. His understanding is Mr. Hyde is putting a lot of his own money up front before the City's money is reimbursing him. They are doing this step by step and are not moving any faster than the economy allows us. If the economy is telling Mr. Hyde not to put any more money up front, what is the risk to the City if that happens? Attorney Casserly replied, the developer has $15 million that is into the site at the time of closing. It is a cash transaction. The developer only sees this working by doing it very incrementally. That is why the first phase is really on the site where it is essentially open land and the goal is to create the first building, and he thinks the preliminary analysis is that they do not have the worst pollution there so they should be able to develop that with some ease. Getting the first building going solves a whole host of problems. The first building is e�tremely important. Dr. Burns stated even with that first building, that first part of the project, the City is reimbursing RER through the HHS money. He is putting that money in up front to remediate the waste hazard, the contamination hazard; and we are at least initially in the first phase putting up $750,000 as he understands it but are reimbursing Mr. Hyde for his investment. Attorney Casserly replied, that is correct, and it is for the environmental remediation portion. It is limited by phase to what they are advancing, but that amount is going to be available for investigation as well as remediation. Part of what they are sorting out in this agreement is that what they are hoping will happen is with various phases, if the money will come in, it will reimburse for expenses that were advanced and they will be able to recycle that money to keep boot strapping their way through the project. FRIDLEY CITY COUNCIL MEETING OF APRIL 9, 2012 PAGE 19 Councilmember Bolkcom referred to the "But for Analysis" on page 89. She asked who paid for the Code/Condition Deficiency Report. Did the HRA or is it something that is reimbursable? That is all related to everything is substandard here and basically things are not up to code. They are not tearing down a good building so the developer can develop this property, and it needs so much work in so many ways. Is that kind of what that "But for" Analysis is? Mr. Bolin replied with the substandard portion of that, the Authority did engage the engineering firm of LHB to do that. An independent third party went through and did that blight analysis; and then the Authority has had an interim agreement with RER. He believed they started talking about it last October; and the Authority started acting on it in November/December. But through that agreement ultimately the cost for that study has been reimbursed by RER. Councilmember Bolkcom stated and part of doing that whole analysis to set up a TIF district is you have to show blighted property and blighted buildings and that type of thing. Because you cannot just do a TIF district because you want to do a TIF district, is that correct? Mr. Bolin replied, correct, that is simply one of the many things on the checklist that are in Minnesota State Statutes to create a TIF district. Councilmember Bolkcom stated and they are following all those guidelines of the State Statutes related to TIF districts and of course, the City has an attorney who works on that type of thing so the City is not doing anything out of the ordinary here. This is a huge project that is going in phases probably more than any other project they have had. Mr. Hickok stated they really do have some experience on the Boise/Onan/Murphy site. It was very interesting to watch because he would say, much like an architect or an engineer finds that inspiration from the challenge and it drives and motivates them to design a solution, finding this row of barrels it was just fascinating to watch the solution come together quickly. And it is not something this group fears, it is really something that is kind of a motivational challenge. They are going to inevitably find something on this site but it moves them to a solution. He thinks it is just a fascinating multi-layered thing they are entering into, but he can tell them with confidence from seeing how it has worked before, it will work very well when those surprises come up on this site as well. Councilmember Bolkcom stated her concern is that it is such a huge contaminated site that has been contaminated for so many years. There has been "some" work there but not a ton of work. She asked if there were a lot of safeguards in place. Mr. Hickok replied, from what he has seen in the developer world, the developer who is probably the most poised to do this kind of work is the developer who is before them on this proj ect. Mayor Lund asked under this plan, if it is successful with the phasing of it and the markets are there for the construction of all four phases, is this telling the average citizen that the contamination that now exists there, it is capped off, it is being monitored. It is probably a FRIDLEY CITY COUNCIL MEETING OF APRIL 9, 2012 PAGE 20 shorter-term solution but not the end-all solution because the hazmat still exists there. If this thing came to fruition, all four phases, is that telling him that all the pollution is then gone? Is it being removed from the site or is it still going to remain and be monitored and be capped off? Mr. Hyde replied the history of the cleanup and redevelopment of polluted sites is as follows, broadly speaking: it was an approved practice to put your hazardous waste in a hole as long as it was not in the river. Science began to develop an understanding that this was a risk It is a risk to the environment and to people only because of exposure. How do we get exposed to these things? We either drink the water or eat the dirt or are exposed to it. When Superfund was passed in 1980, based on a site in New Jersey, the Love Canal site, there was a feeling that we needed to redevelop and clean up everything to that Garden of Eden level as if there was no presence of hazardous substances in the soil and groundwater. The end result for that was, it was cheaper to fight with lawyers than to clean up. Once science and risk analysis caught up, there was an awareness of, what they are really trying to do is eliminate exposure to people and wildlife. That is the goal of cleanups now. They have very sophisticated, statistical models administered by the state and federal government that drive cleanup standards based on their end use. Mr. Hyde stated this end use will be industrial. There are standards for the stuff they are going to find in the soil based on that industrial use. If they find impacted soils with chlorinated solvents that exceed a state or federal cleanup standard, they are going to dig that up and send it to a landfill. If it is beneath that, they are going to make sure it is not in the water and that it is covered so people, wildlife, birds, cannot be exposed to it. That is the nature of cleanup and redevelopments that was originated by the State of Minnesota in 1993 with the Land Recycling Act. Mr. Hyde stated they will be removing stuff from this site when they find it--soils and groundwater that exceed a state cleanup standard. Once they meet that state cleanup standard for their industrial use, they will have an approved plan that puts whatever residually-impacted soils below the standard under a parking lot or building floor with a groundwater e�traction system that will be modified and improved in place. Their redevelopment will end up with a far better cleanup than has been the case today because they are going to assess impacts in the soil underneath the building. They will also be able to modify the groundwater system in a manner that has not been permissible before because there has been an existing building. Mayor Lund stated to be clear, wherever there is contamination and a building will be put in, that soil will be removed because they do not want to put it underneath the building? Mr. Hyde replied, where there is contamination that exceeds a state or federal standard, it will be removed. Mayor Lund asked and lower levels that are under that standard can still go underneath a building? FRIDLEY CITY COUNCIL MEETING OF APRIL 9, 2012 PAGE 21 Mr. Hyde replied, or a parking lot. The rationale is why should they spend a ton of money to send it to a landfill when they can accomplish the same barrier to exposure on site and end up with a redevelopment. Dr. Burns asked Mr. Hyde whether they expect to deal with radon on the site? Mr. Hyde replied, no. He expects the hot button at the state level these days are vapors. They have chlorinated solvents here. If you go to the gas stations and you pump gas, and you see the vapors and smell it, that is the exposure issue they are concerned about underneath the building. They will have a vapor barrier to prevent those vapors from getting under the building and, if they are concerned about it, they will actually have venting systems that are venting those vapors before they ever get into the workspace. They have done eight of them in buildings both here and Wisconsin that they would be replicating on this site. Mayor Lund stated not only will the City be investing future TIF monies but also the current dollars that are coming to them from property taxation. Also the school and County will be losing their existing tax dollars as well. Do either of them get to weigh in on the loss of this money? Attorney Casserly replied, they have all been notified as required by Statute; and they do not have an approval process for this. This is like all the other tax increment districts. They can send responses. The County has received two separate notices in addition to the County Commissioner being notified. The school district has received notices and of course the public hearing has been noticed, too. Councilmember Barnette stated the money that is currently being paid on that site, will that money be lost by the school district of Columbia Heights, the City, and the County? Will that money still continue on? The increment is not paid unti125 years? Attorney Casserly replied, with the Hazardous Substance Subdistrict, the current taxes are in fact collected by the HRA. Councilmember Barnette stated so the Columbia Heights School District, the County, and the City will lose those dollars? Attorney Casserly replied, they do in fact lose those dollars for the length of the Hazardous Substance Subdistrict. They do not lose the market value referendum amounts. The school district will in fact collect as it does now any market value referendum. The State will also collect of course its portion. That does not change either. Councilmember Saefke stated even though this district is being set up for a 25-year period, is there a possibility the district would not need to be that length? In other words, recapture the taxing ability prior to 25 years? FRIDLEY CITY COUNCIL MEETING OF APRIL 9, 2012 PAGE 22 Attorney Casserly replied, the short answer is, yes, they do not anticipate this district running 25 years. How much shorter it runs will depend on the assumed interest rate they used in the calculation of the funds. Right now they have done projections which show the Hazardous Substance Subdistrict being as short as 16 or 17 years. Councilmember Saefke stated they are looking at a piece of property they know has had a problem with contaminated soils and groundwater. There are existing buildings on there that are substandard. The way they exist today, it is very unlikely for any private developer to buy that piece of property knowing it would cost them tons of money to build something on there because of that contamination. This is the "but fors" part of that whole thing. He knows they are talking about investing some of the tax dollars that are currently present for that remediation of the contamination. It has been made very clear that, without the removal of those buildings, you will have existing soil contaminations and without a private developer coming in there and removing those buildings, that stuff would stay for an indefinite period of time that no one could predict. Councilmember Saefke stated with the current proposal, they do have a developer who is experienced in remediation and selling these types of properties, and they are willing to put up front money to accomplish this. What the City is doing is providing a relatively small portion of the entire redevelopment and remediation funding for that. If they are not willing to do it, he cannot see any other private developer coming in and saying, this looks great and do it because it has been sitting there for many years. He has been around long enough to remember when FMC was going full bore and the parking lots were full. He thinks it is a good thing and, yes, there is a possibility of some risk because of the economy. He only sees the benefit of both future development. Even if the developer does not build another building but the soil is remediated and the other substandard buildings are removed, it is still an increased asset to the City; and the tax value is significantly increased. It is kind of like saving for that rainy day. Over a period of years you can build up enough and retire a little early. He thinks the City will recover tenfold what they are putting in. Dr. Burns asked Mr. Hyde if he has other projects going on right now. Mr. Hyde replied they are 100 percent focused on this. Frankly, he is putting everything they have into this, personally, emotionally, and financially because they believe in it so much. It is a great project because you have existing leases and an existing building that will allow the project to continue to pay taxes. They will have a bank loan on it, and the bank will pay the taxes. To be able to add to it over time and redevelop it, first on the south side, then the north side, and ultimately in the middle, it is just a timing thing. The only question in his mind is whether it is a five, six, eight or nine year project. Joe Brothers, resident of Fridley, stated he likes this redevelopment project and thinks it is necessary. He does not understand if the Navy and BAE are on the hook, why it is the City's money going to redevelop or remediate the hazardous waste subdistrict, if the Navy and BAE are obviously going to pay for the remediation of the soil. FRIDLEY CITY COUNCIL MEETING OF APRIL 9, 2012 PAGE 23 Mr. Brothers stated he has obtained from a commercial real estate person who claims it is going to cost RER $1 million to develop this site. That includes the $1.5 million per foot of business property, office improvement, demolition, and all this process, legal fees and everything. They predicted the land would be $15,246,000. They also claim that RER will see $102,000,000 and $750,000 in annual net rents. That is not gross. To him he understands the "but for" for TIF financing, but if this is going to cost $100,000,000 to do and you are going to get $102,000,000 in annual net rent, he quite frankly does not see how this can be a TIF district. Because quite frankly in one year he is going to make up, or the Council, is going to make up whatever it costs to do the project. He thinks there are a lot of things in this. You have a commuter rail system one-half mile away from the site. You have I-694 less than a half mile maybe from the site. Obviously they are going to see gas prices rise so more infrastructure is going to happen inside the 694/494 loop. He quite frankly believes Mr. Hyde is a great businessperson because obviously he is going to see some enormous gain. To him $10-$16 million. He quite frankly does not see the "but for" of a TIF district, and he does not see the "but for" for the hazardous waste subdistrict. He provided a paper off the internet from a commercial real estate developer. Mr. Hyde replied, in terms of the rent and the total capital cost, they will be spending perhaps $100,000 of their own money in addition to buying the land to build buildings. The funny thing about the bank is they want to get paid back with those mortgages. A far majority of the net rent they are making goes to pay the mortgage. Over 20 years, they are taking risk with tenants paying the rents, economic cycles. That is where the net rent is going is to pay for the buildings. What they are trying to do is handle the environmental costs and the infrastructure costs, associated with redeveloping the site. Mr. Hyde stated in terms of the responsibility of the Navy and British Aerospace, that is an outstanding question. The Navy and BAE have negotiated liability and expenses with the state and federal government for what is out there now. That is how the status quo is operating. If they find more product out there, the Navy and BAE will be responsible for that. They will document that in their agreements. What the Navy and BAE are not responsible for is, for example, a new venting system underneath the building floor. They are not responsible for making sure the soil underneath their storm water pond is clean soil and not impacted soil. They are not responsible for making sure the soil in a utility corridor where the water and sanitary sewer is, is clean soil. But if the water line breaks, they are responsible for clean soil to fix it. They are not responsible for making sure there is clean soil where there is green space. Those are the things where the redevelopment adds incremental costs to the remediation they are trying to get funded through grants in this tax increment program. Councilmember Saefke stated Mr. Brothers claimed Mr. Hyde would have net rental fees per year of $102,000,000. Mr. Hyde replied, they have to understand that is probably approximately correct. They are also going to be spending another $75,000,000 or more like $90,000,000 to build new buildings. That capital investment has to have a return as well. That is where the rent is going. You cannot get that money to build new buildings. You cannot get tenants to show up to rent space there unless you are investing in an environmental problem. That is what they are trying to do. FRIDLEY CITY COUNCIL MEETING OF APRIL 9, 2012 PAGE 24 MOTION by Councilmember Barnette to close the public hearing. Seconded by Councilmember Bolkcom. UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE MOTION CARRIED UNANIMOUSLY ON A 4-0 VOTE AND THE HEARING WAS CLOSED AT 9:06 P.M. Mayor Lund stated his sense is the "but for" really applies in this case. This is a really big deal, and it is going to be a big benefit for the City as well. He cannot envision there is anyone beating the door down with another plan like this. In any case, he cannot envision if there were other players who wanted to invest in this property, they would all be seeking HRA or some other public investment. Without public investment, nothing would ever occur on that site. Councilmember Bolkcom asked if the City had seen a lot of interest in this site before Mr. Hyde came forward. Mr. Hickok replied, no. They have not had a lot of interest developmentwise in taking on that project. One developer astutely said one time as he looked at the site, if he got it for free it would be way too expensive. NEW BUSINESS: 9. Resolution Modifying the Redevelopment Plan for Redevelopment Project No. 1 and the Tax Increment Financing Plans for Tax Increment Financing District Nos. 6-7, 9, 11-13 and 16-19, to Reflect Increased Project Costs and Increased Bonding Authority Within Redevelopment Project No. 1, Creating Tax Increment Financing District No. 20 and Adopting a Tax Increment Financing Plan Relating Thereto and Creating Hazardous Substance Subdistrict No. 20A and the Adoption of a Tax Increment Financing Plan Thereto. MOTION by Councilmember Bolkcom to adopt Resolution No. 2012-28. Seconded by Councilmember Saefke. UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE MOTION CARRIED UNANIMOUSLY ON A 4-0 VOTE. 10. Resolution Approving and Authorizing Execution of the Amended and Restated Liquor Store Lease Between the City of Fridley and ZCOF TL, Fridley, LLC. Darin Nelson, Finance Director, stated on February 13, Council approved a new liquor store lease with ZCOF TL, Fridley , LLC, also known as Tri-Land Development. Tri-Land's financial company is currently reviewing both Super Valu's and Fridley Liquor Store leases before approving the final plans before the redevelopment and allowing both leases to be fully executed. FRIDLEY CITY COUNCIL MEETING OF APRIL 9, 2012 PAGE 25 Mr. Nelson stated the financing company has requested two changes on the City's lease that will help expedite the construction timeline. The first change is in Section 2.3 which defines the commencement date. The commencement date is the date the liquor store first opens for business to the public, fully fi�tured, stocked, and staffed. Currently the City has up to 60 days between the delivery date (when keys are handed over to the City) and the commencement date. The concern of the financing company is during the 60-day window, the demolition of the existing premises cannot occur, causing a potential delay in construction. This delay could result in outside work potentially not being completed before the onset of winter. Obviously the City prefers completion to be done before winter so liquor store operations can return to normalcy. The City has since negotiated with Tri-Land to allow it to set up the beer cooler 21 days prior to the delivery date. In return, the City has agreed to reduce the number of days between the delivery date and the commencement date from 60 days to 21 days. The City will have 21 days after the delivery date and before the commencement date occurs. Mr. Nelson stated staff is confident with the beer cooler set up and running prior to the delivery date, they will be able to finish detail work and move into the new space within this time frame. The second change which the finance company requested is in Section 2.4 defining the timeline for surrendering the existing leased space. Under the current lease, the City has up to 14 days to surrender the existing space after the commencement date. In essence, this allows the City to utilize the existing space where the liquor store is at now for 14 days even though it is up and running and fully operational in the new space. This two weeks is potential idle time that puts pressure on the construction schedule, bumping up against the following winter. Staff does not anticipate any need for that existing space after operations are up and running. However, it has concerns there may be some miscellaneous items left in the existing premises right after the commencement date which could even include inventory. In order not to slow down the demolition of the existing space, staff has negotiated with Tri-Land to allow it some temporary storage in another location throughout the building that will not be under construction at that time. They will also have to vacate the existing premises and move whatever is left over to a different location within the current facility so it can get that front wall knocked down and begin construction. Mr. Nelson stated the only other noted change is to Section 1.1 of Exhibit D. This change is directly related to the changes in Section 2.3. This change allows the City to relocate and install the beer cooler prior to the delivery date as previously mentioned with the stipulation the City would have necessary insurance, building permits, etc. in place. He has worked with the City Attorney and believes she is comfortable with the language amendments. Similar to the original lease, staff will not deliver the signed lease to Tri-Land until evidence of a fully-executed Super Valu lease is received. Staff recommends Council pass the attached resolution approving the amended and restated liquor lease between the City of Fridley and ZCOF TL, Fridley, LLC, with the stipulation that the signed lease not be delivered to the landlord until evidence of a fully- executed SuperValu lease is received. Darcy Erickson, City Attorney, stated Section 2.9 was inserted at the City's request and with discussion with Tri-Land's attorney simply to recite why the City has an amended lease. It just recites there was prior approval and then subsequent to approval, these changes have been made. FRIDLEY CITY COUNCIL MEETING OF APRIL 9, 2012 PAGE 26 Mr. Nelson stated he does have a revised copy of the lease if the Council wanted to move that into the record. Councilmember Bolkcom asked are they approving the whole contract or now just the amended part? Attorney Erickson replied they will enact the whole contract. Councilmember Bolkcom asked how many days does the City get to stay in that store after the delivery date? Mr. Nelson replied for 21 days. Councilmember Bolkcom asked Mr. Nelson how close is SuperValu to having their portion signed. Mr. Nelson stated SuperValu has signed their side of the lease. The financial company is now going through both leases. They are hoping construction is done this summer, and the City is into its space in November. William Burns, City Manager, stated the City is going from 13,000 square feet to 10,000 square feet. He asked whether Kyle Birkholz anticipates any inventory problem and having to store inventory somewhere. Mr. Nelson replied, between the two stores, they will be able to accommodate that and probably pair down a little on the inventory and be a little more efficient on that end of it. MOTION by Councilmember Bolkcom receive into the record the new amended and restated liquor store lease. Seconded by Councilmember Barnette. UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE MOTION CARRIED UNANIMOUSLY ON A 4-0 VOTE. MOTION by Councilmember Bolkcom to adopt Resolution No. 2012-29. Seconded by Councilmember Saefke. UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE MOTION CARRIED UNANIMOUSLY ON A 4-0 VOTE. 11. Informal Status Reports There were no informal status reports. FRIDLEY CITY COUNCIL MEETING OF APRIL 9, 2012 PAGE 27 ADJOURN. MOTION by Councilmember Barnette, seconded by Councilmember Saefke, to adjourn. UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE MEETING ADJOURNED AT 9:25 P.M. Respectfully submitted by, Denise M. Johnson Scott J. Lund Recording Secretary Mayor