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041105 EDAOfficial File Copy CITY OF NEW HOPE EDA MEETING City Hall, 4401 Xylon Avenue North April 11, 2005 EDA Meeting will commence upon adjournment of the City Council Meeting President Martin Opem Sr. Commissioner Mary Gwin-Lenth Commissioner Andy Hoffe Commissioner Karen Nolte Commissioner Steve Sommer 1. Call to order 2. Roll call 3. Approval of regular meeting minutes of March 28, 2005 4. Resolution authorizing approval of a term sheet between the New Hope Economic Development Authority and Frey Development and Manley Land Development Inc. for the redevelopment of 7500-7528 42® Avenue North of the former Electronic Industries site (improvement project no. 740) 5. Adjournment CITY OF NEW HOPE 4401 XYLON AVENUE NORTH NEW HOPE, MINNESOTA 55428 EDA Minutes Regular Meeting March 28, 2005 City Hall CALL TO ORDER ROLL CALL APPROVE MINUTES IMP. PROJECT 740 Item 4 EDA Meeting Page 1 President Opem called the meeting of the Economic Development Authority to order at 10:40 p.m. Present: Martin Opem Sr., President Mary Gwin-Lenth, Commissioner Andy Hoffe, Commissioner Karen Nolte, Commissioner Steve Sommer, Commissioner Motion was made by Commissioner Gwin-Lenth, seconded by Commissioner Sommer, to approve the Regular Meeting Minutes of February 28, 2005. All present voted in favor. Motion carried. President Opem introduced for discussion Item 4, Discussion and update regarding concept plans for the proposed development of city-owned property at 7500-7528 42nd Avenue North, the former Electronic Industries site (improvement project no. 740). Mr. Shawn Siders, community development specialist, stated staff is seeking direction regarding the proposed office/condominium/restaurant and ancillary retail development on the city-owned property at 7500-7828 42-d Avenue North. Over the past ten years, the city has acquired and demolished all three industrial parcels at the intersection of 42nd and Quebec Avenues to promote community development and clean up the contaminated former Electronic Industry site. The properties were acquired and demolished with tax increment finance funds. In order to expedite the contaminated site clean up, the city made a successful application to the State of Minnesota and Hennepin County to fund the clean-up of the ground water. He noted Electronic Industries covered the cost sharing portion of that grant and to date, the environmental remediation efforts are complete and development can commence. In order to receive a "close out" letter from the Minnesota Pollution Control Agency (MPCA), the city must submit the proposed redevelopment site plan to MPCA to ensure it conforms to the Declaration of Environmental Restriction Covenants agreement that was approved by the city and MPCA. Mr. Siders reported that monitoring of the ground water will be permanently required and the costs will always be the responsibility of Electronic Industries. He stated in November of 2003, the city approved a purchase agreement with JCS Development and Frey Development for the redevelopment of the property. The proposal included a Culver's restaurant on the western portion of the property and Frey Development had proposed to develop March 28,2005 EDA Meeting Page 2 eight office condominium units on the eastern half of the property. The total purchase price for the two sites was $510,000 plus brokerage fees. In April of 2004, JCS Development notified the city that it was canceling the approved purchase agreement for the western half of the property. JCS identified the close proximity of this site to other Culver's Restaurants as the principal reason for canceling the purchase agreement. I~e stated when JCS Development withdrew from the approved purchase agreement; the city council approved an exclusive representation agreement with Retail Site Development Services (RSDS) to assist in securing a suitable restaurant for the western half of the site. That agreement expired in November of 2004, and there is a six month provision which lists Frey Development as a "protected developer" by RSDS. Because of that status, the brokerage fees for this developer will apply and Frey Development will pay the brokerage fees. Further, he stated Frey Development will issue the city an indemnification letter against any brokerage fees in the future for this site. In January of 2005, Frey Development and Manly Land Development submitted a redevelopment proposal to construct eight office condominium units on the easterly half of the site and to construct an approximate 9,000 square foot restaurant/retail use on the western half of the site. He stated Viva Italia is the restaurant use that is expected to occupy 5,000 to 6,000 square feet. He stated Frey Development will work with the city to identify suitable tenants for the remaining 3,000 square feet of retail space. Mr. Siders illustrated the proposed site plan. He noted the mayor, city manager, and director of community development recently visited the Viva Italia restaurant in Eagan. He stated Viva Italia has expressed its desire to apply for an on-sale liquor license. Mr. Siders stated if the council is supportive of the concept, the next steps involve preparation of a term sheet with the developer. He stated the proposed purchase price of $510,000 is the same price previously approved with JCS Development and Frey Development. He stated the property acquisition will be contingent upon the development being able to secure planning approval. He emphasized that the redevelopment must conform to the Declaration of Environmental Restrictive Covenants as approved by MPCA. Once the term sheet is approved, the city attorney will prepare a purchase agreement and a public hearing will be scheduled. He introduced Bernie Frey (Frey Development) and Kurt Manley (owner of Viva Italia). Mr. Frey was recognized and welcomed questions from the city council. Commissioner Sommer acknowledged that the plan hasn't changed from the previous proposal except for the restaurant use. He expressed support for the owner-occupied office condominiums and the full service Viva Italia restaurant. Commissioner Nolte suggested that the developer consider occupying one of the retail spaces with a Panera Bread store. Mr. Manely noted he has March 28, 2005 IMP. PROJECT 775 Item 5 EDA Meeting Page 3 several proposed tenants in mind. Commissioner Gwin-Lenth pointed out that the parking lot's traffic pattern has changed. She questioned whether the driveway locations will remain. Mr. Frey stated there are no other options for the driveway locations. He stated the traffic pattern may slightly change as the site plans are developed. He noted there may be a restaurant with a drive-thru window. Mr. Siders called attention to the site plan with parking in the center. He noted this layout is required so that it will comply with the MPCA requirements. He stated the area delineated as parking lot is the area with the greatest concentration of the contaminated soils. Commissioner Hoffe asked whether Electronic Industry has a permanent responsibility relative to the groundwater contamination and monitoring requirements. Mr. Siders responded affirmatively. He stated the MPCA will ensure that the site continues to be monitored forever. The EDA expressed support of the development and directed staff to prepare a term sheet. President Opem introduced for discussion Item 5, Discussion and direction regarding redevelopment plans for'5207 Pennsylvania Avenue North (improvement project no. 775). Mr. Shawn Siders, community development specialist, stated his intention to discuss redevelopment of the site at 5207 Pennsylvania and to share a scattered site housing program (independent of block grant funding) that was modeled after the city of Crystal. Mr. Siders explained the proposed scattered site redevelopment program by outlining the program objectives, acquisition of property, property selection criteria, property evaluation procedures, establishment of fair market value, and the acquisition procedures. Mr. Siders reviewed specifications for construction of a single-family house at 5207 Pennsylvania Avenue North. He stated staff recommends a minimum target lot price of $75,000, and a minimum target value of the land and building after redevelopment at $300,000. He stated staff will work with the Hennepin County assessor's office to determine the property value. Mr. Siders stated staff recommends that the EDA require the developer to complete the development within five months after property conveyance in order to avoid a land banking scenario. He reviewed the building standards and stated the house will be required to have three bedrooms and two bathrooms. The basement must have a "rough in" for a three-quarter bath, and the basement must have an egress window to allow for the expansion of living space. Mr. Siders also stated the house must include low maintenance exterior materials and fit in with the neighborhood. March 28, 2005 4415 NEVADA Item 6 EDA Meeting Page 4 Mr. Siders emphasized that with procedures in place, the EDA can attain its objectives of providing additional move up housing in the city of New Hope. Commissioner Hoffe inquired of whether the city would lose money on each project. President Opem noted that it will depend on the criteria established by the city. He noted the city of Crystal has been successful with a similar program. Commissioner Gwin-Lenth complimented Mr. Siders on the aspects of the program and for articulating that this is a program that the city can use to deal with a blighted property in a neighborhood. She emphasized the need to pay less attention to the dollar-for-dollar payback and to consider its use as an investment in neighborhoods and to improve property values. Commissioner Gwin-Lenth asked how the city determines the level of hazardous materials in a property prior to redevelopment. Mr. Siders stated there are non-evasive testing procedures available that are good indicators of hazardous materials such as asbestos. Commissioner Sommer pointed out that page two of the proposed program does make reference to conducting an investigation as to the existence of any hazardous materials. Commissioner Sommer explained that he views this type of program to improve a blighted property on a different level than some prior larger scale acquisitions made by the city that involved substantial money. He supported the scattered site redevelopment program as outlined by Mr. Siders. Mr. Siders stated if the EDA is receptive to the proposal, staff will prepare a formal policy for adoption at a future meeting. The EDA expressed support of the proposed scattered site redevelopment program and the specifications for 5207 Pennsylvania Avenue North. President Opem introduced for discussion Item 6, Discussion and direction regarding proposed purchase of 4415 Nevada Avenue North. President Opem stated the property is an oversized lot located north of the Northwest Community Revitalization Corporation (NCRC) project involving three twin-homes. He stated the appraised value of 4415 Nevada is $109,000 to $124,000. He stated the property owner is asking $160,000 which is high based on its present condition. Commissioner Sommer suggested that the city contact NCRC to inquire of funding options and whether they would like to increase their current project by pursing a joint venture with the city to include this property. He March 28, 2005 pointed out his desire to explore a potential project that would not result in a large expense by the city. Commissioner Nolte asked whether the owner of 4415 Nevada would consider purchasing a PPL condominit~m. Mr. Siders noted NCRC had previously inquired of the individual's interest in one of the accessible twin- homes and was told that the property owner would like to move to the Buffalo area to be closer to family members. President Opem emphasized the need to negotiate the purchase price as it would not be fiscally responsible to the New Hope taxpayers to pay more than an appraised value. Commissioner Hoffe questioned available revenue sources such as grants that may be available to assist with the property acquisition. Mr. Siders noted that NCRC could pay the asking price for the property but would encounter problems based on the funding limitations set by HUD. He stated Commissioner Sommer's suggestion of a joint venture may be an avenue to pursue. Commissioner Sommer concurred with President Opem that the city should not pay more than the appraised value when acquiring property. However, he stated this situation would involve a willing seller so there would be no relocation costs. He pointed out that a settlement and joint venture may be possible that could benefit both the city and another agency. Mr. Kirk McDonald, director of community development, asked the EDA if staff is authorized to negotiate for the purchase of 4415 Nevada Avenue North. The EDA directed staff to contact NCRC to inquire of their interest in the property or a larger project. Commissioner Nolte inquired whether the property owner would be eligible for funding or special programs to assist her with a relocation to Buffalo. She noted that the owner could reduce the asking price if there were other financial resources made available to her. Mr. Siders stated the asking price was based on what the property owner and her family have identified as suitable living arrangements in Buffalo. He stated he would inquire of any available programs or financial assistance. EDA Meeting Page 5 Commissioner Gwin-Lenth expressed support for the creative ideas and the recommendation to approach NCRC. President Opem stated he would not be opposed to purchasing the property if the price was closer ~o the appraised value. He noted the lot could be divided and would support two single-family homes. Commissioner Hoffe acknowledged that the NCRC obtained an appraisal March 28, 2005 IMP. PROJECT 770 Item 7 MOTION/REQUEST ESTIMATE Item 7 ADJOURNMENT EDA Meeting Page 6 for $105,000. Mr. Siders stated NCRC had the property appraised at $105,000 and the property owner received an appraisal for $124,000. He noted both appraisals are subjective and are lower than the asking price. Commissioner Nolte requested that NCRC reconsider its twin-home design to include two bathrooms rather than one bathroom in the accessible units. Mr. Siders stated he has asked them to review the design. He reported that it is possible to include two bathrooms, but the disadvantage of adding a second bathroom is that the main bath and the entryway to the house are reduced in size. He also pointed out that smaller areas make it more difficult to navigate within the space. The EDA agreed with two options relating to the 44~5 Nevada Avenue property: 1) consult NCRC regarding possible joint venture; or 2) undertake it as an EDA project if the asking price can be negotiated closer to its appraised value. President Opem introduced for discussion Item 7, Motion authorizing staff to request engineering estimate from Xcel Energy for burial of overhead utilities from north side of Bass Lake Road to 58~h Avenue North in conjunction with Winnetka Townhomes redevelopment project (improvement project no. 770). President Opem stated the two options relating to the burial of overhead utilities along the east side of Winnetka Avenue, north of Bass Lake Road include: 1) to 5620 Winnetka Avenue North; or 2) 58th Avenue North. Mr. Kirk McDonald, director of community development, stated the city needs to select one option so that a more detailed engineering estimate can be completed. Motion was made by Commissioner Sommer, seconded by Commissioner Gwin-Lenth, authorizing staff to request engineering estimate on option 2 from Xcel Energy for burial of overhead utilities from north side of Bass Lake Road to 58~h Avenue North in conjunction with Winnetka Townhomes redevelopment project (improvement project no. 770). Ali present voted in favor. Motion carried. Motion was made by Commissioner Sommer seconded by Commissioner Nolte to adjourn the meeting. All present voted in favor. Motion carried. The New Hope EDA adjourned at 11:25 p.m. ectfully submitted, Valerie Leone City Clerk March28, 2005 EDA . REi UEST FOR ACTION Originating Department Approved for Agenda Agenda Section Community Development f~ 4-11-05 EDA Item No. By: Kirk McDonald, Director of CD B Shawn Siders, CD Specialist 4 RESOLUTION AUTHORIZING APPROVAL OF A TERM SHEET BETWEEN THE NEW HOPE ECONOMIC DEVELOPMENT AUTHORITY AND FREY DEVELOPMENT AND MANLEY LAND DEVELOPMENT, INC. FOR THE REDEVELOPMENT OF 7500-7528 42ND AVENUE NORTH THE FORMER ELECTRONIC INDUSTRIES SITE (IMPROVEMENT PROJECT NO. 740). REOUESTED ACTION Staff is requesting EDA consideration of the enclosed resolution prepared by the City Attorney approving a term sheet between the EDA and Frey Development and Manley Land Development, Inc. The proposed development would construct eight owner occupied office condomfrdums on the eastern half of the property and 8,500-9,000 square feet of retail space on the western half of the property. Approximately 5,500-6,000 square feet of the retail space will be occupied by Viva Italia, a full service Italian restaurant. POLICY/PAST PRACTICE City goal #2 is to emphasize the maintenance and redevelopment of commercial and residential properties within the city. The EDA has been addressing the commercial portion of this goal through the city's many development activities, including coordinating with potential developers for the 'sale and development of city owned property. BACKGROUND On January 3, 2005, Frey Development and Manley Land Development submitted a redevelopment proposal for the entire site in conformance with previous discussions. The concept plan outlines the proposed development of this site. Frey Development has agreed to purchase the site from the city for $510,000. The developer will have to pay all customary fees for the development of this parcel which include but not limited to stormwater fees, building permit fees and SAC charges as they may apply. Frey Development has also agreed to provide the city with an indemnification agreement regarding brokerage fees. On March 28, 2005, city staff presented the proposed redevelopment plans to the EDA for its discussion and direction. At that meeting, the EDA indicated their support of the proposed project and directed staff to work with the developer to finalize the terms of the sale and proceed with the potential redevelopment. MOTION BY ~)~'}~ SECOND BY ~ To: £Ok) s'- O I ! I: \ RFA \ PLANNING \ Electronic Industries \ R-Term Sheet Fre~ & Manle~.doc Request for Action Page 2 April 11, 2005 City staff and the City Attorney have developed the enclosed term sheet which outlines the terms of the sale and redevelopment of the city owned property at 7500-7528 42nd Avenue North. Staff is recommending that the terms of the sale be the same as what was originally negotiated with Frey Development and ]CS Development. Those terms are as follows: Land Acquisition Price - $510,000; Brokerage Fees - To be paid by Frey Development and Manley Land Development, Inc. Developers to provide city with indemnification agreement against brokerage fees; Property is being transferred in an "as is" condition; Buyer must receive all planning approvals prior to closing; Buyer will obtain necessary approvals from the Minnesota Pollution Control Agency (MPCA) prior to closing; Buyer will provide cross easements for shared access and parking for all tenants on the entire site; Buyer agrees to pay all fees associated with the redevelopment of this site; RECOMMENDATION Staff supports the terms and conditions as outlined above. The proposed terms of sale are the same as what was previously approved with JCS Development, Inc. and Frey Development. ATTACHMENTS o Resolution o Term Sheet EDA RESOLUTION NO. 05- RESOLUTION APPROVING TERM SHEET ON PROPOSED SALE OF PROPERTY TO FREY DEVELOPMENT, INC. AND MANLEY DEVELOPMENT (7500-7528 42na AVENUE NORTH - Project No. 740) BE IT RESOLVED by the Economic Development Authority in and for the City of New Hope, Minnesota as follows: WHEREAS, the Economic Development Authority of the City of New Hope (hereafter "EDA") is the fee owner of three (3) parcels of real property more commonly known as 7500, 7516 and 7528 42nd Avenue North, City of New Hope, which real property is legally described on Exhibit A attached hereto and made a part hereof (collectively, the "Property"). WHEREAS, it has been proposed that the EDA enter into a purchase agreement whereby it would sell the Property to FREY DEVELOPMENT, INC. and MANLEY LAND DEVELOPMENT (collectively, the "Redeveloper") for redevelopment; and WHEREAS, the EDA has determined that such transfer, if made pursuant to terms substantially similar to those outlined in Exhibit B attached hereto and made a part hereof, would serve the goals and mission of the EDA and would be beneficial to the citizens of the City of New Hope. NOW, THEREFORE, BE IT RESOLVED by the EDA as follows: 1. That the above recitals are incorporated herein by reference. 2. That the Term Sheet attached hereto as Exhibit B is hereby approved. 3. That the Executive Director and EDA staff are authorized and directed to enter into negotiations for a purchase agreement to govern sale of the Propertyto the Redeveloper, with the terms of such agreement to be substantially similar to those enumerated in the attached Exhibit B. 4. That, in the event mutually-agreeable sale terms can be negotiated, the Executive Director and EDA staff are directed to present a final draft purchase agreement to the EDA Commissioners for review and approval. -1- This resolution is hereby adopted by the EDA this 11th day of April, 2005. Martin E. Opem Sr., President Attest: Daniel J. Donahue, Executive Director P :kAttomey\Cmk\Clients\CNH\99-11293\99-11293-002-res approving term sheet, doc -2- EXHIBIT A LEGAL DESCRIPTIONS Real property situated in the County Hennepin, State of Minnesota, described as follows: That part of Lot 5, "Auditor's Subdivision Number 324, Hennepin County, Minnesota" described as follows: Commencing at the point of intersection of the North hne of Rockford Road and the East line of said Lot 5; thence North along said East line a distance of 350 feet; thence West parallel with the North line of Rockford Road a distance of 100 feet; thence South a distance of 350 feet to a point on the North line of Rockford Road which is distant 100 feet West of the point of beginning; thence East along said North line a distance of 100 feet to the point of beginning. Address. 7500 42nd Avenue North, New Hope, MN. Proper .ty Identification Number. 17-118-21-22-006. Together with The West 95 feet of the East 195 feet of the South 350 feet of Lot 5, Auditor's Subdivision No. 324, Hennepin County, Minnesota. Address. 7516 42~d Avenue North, New Hope, MN. Proper .ty Identification Numb er. 17-118-21-22-0007. And further together with That part of Lot 5, "Auditor's Subdivision Number 324, Hermepin County, Minnesota" described as follows: Commencing at a point on the North line of Rockford Road distant 195.0 feet Westerly of the East hne of said Lot 5; thence North parallel with the East line of said Lot 5 a distance of 350.0 feet; thence West parallel with the North line of Rockford Road a distance of 125.4 feet, more or less, to a point 48.95 feet East of the West line of said Lot 5, as measured at right angles thereto; thence South parallel with the West line of said Lot 5 a distance of 350.0 feet to the North line of Rockford Road; thence Easterly along the North line of Rockford Road a distance of 125.4 feet, more or less to the point of beginning. Address. 7528 42nd Avenue North, New Hope, MN. Proper .ty Identification Number. 17-118-21-22-0008. -3- TERM SHEET New Hope EDA/Frey Development, Inc. & Manley Land Development Sale of Land at 7500, 7516 and 7528 42nd Avenue North (Former Electronic Industries Site) Seller: Redeveloper: Redevelopment Property: Purchase Price: Earnest Money: Title Review: Due Diligence Period: Closing: "As Is" Condition: Survey: Redeveloper Contingencies: The Economic Development Authority in and for the City of New Hope, Minnesota Frey Development, Inc. & Manley Land Development, collectively the "Redeveloper". The Redeveloper's rights and obligations under the purchase agreement cannot be assigned without prior consent of the EDA. 3 parcels of land at the intersection of 42nd and Quebec Avenues, City of New Hope, currently identified in the County tax records as: 17-118-21-22-0006 17-118-21-22-0007 17-118-21-22-0008 Collectively, the "Redevelopment Property" $510,000 $2,000 EDA to pay for and provide a title insurance commitment within ten (10) days of final execution of the purchase agreement. Redeveloper will examine commitment and either make or waive any title objections within ten (10) days of receipt. 120 days from final execution of Purchase Agreement Within 15 calendar days after Redeveloper Contingencies have been satisfied, but in no event later that 150 days from final execution of the Purchase Agreement Title to be conveyed by quitclaim deed in "as is" condition. EDA to provide to Redeveloper, to be prepared in accordance with minimum standard detail requirements for ALTA/ASCM and to include information items as reasonably requested by Redeveloper Redeveloper's obligation to purchase the Redevelopment Property to be contingent upon: a. Marketable title (subject to the attached list of Permitted Encumbrances) b. Approval for ingress and egress & direct access to a public street c. Approval of any zoning, variance, special use permit, subdivision or other governmental approvals reasonably required for the above-referenced structures d. Corporate approval from Viva Italia, if not akeady obtained e. Financing pursuant to terms reasonably acceptable to Redeveloper Construction: Redeveloper to begin construction of an 8-unit office-condo building on the eastern portion of the site no later than October 1, 2005 and to begin construction of a multi-tenant retail building (approximately 8,500 to 9,000 square feet in size), on the westem portion of the site by this same date. Both structures to be completed no later than January 31, 2006. Occupancy: Approximately 5,000 to 6,000 square feet of the multi-tenant retail building to be occupied by a Viva Italia restaurant. Redeveloper to allow EDA input as to remainder of tenant mix. Access & Parking: Prior to closing the Redeveloper will provide cross easements in a form reasonably acceptable to the EDA in order to facilitate user/tenant access and parking throughout the Redevelopment Property Development Costs: Redeveloper to pay all redevelopment costs associated with the Redevelopment Property and to cooperate with EDA as to any necessary State or federal approvals. All redevelopment costs imposed by EDA and/or City of New Hope to be at customary rates. Broker Fees: Redeveloper to warrant that it will pay all brokerage fees due to Retail Site Development Services (RSDS) with respect to the Redevelopment Property and further that Redeveloper will indemnify the EDA from claims by any other broker for activities relating to the Redevelopment Property. Effect of Term Sheet: This Term Sheet outlines the terms under which the parties are willing to enter into a purchase agreement and does not constitute an offer or acceptance on the part of either party. All rights and obligations with respect to the Redevelopment Property shall be only as provided for in a signed purchase agreement with terms approved by the EDA's Board of Commissioners and by appropriate representatives of the entities that comprise the Redeveloper. P:~AT'fORNEY\CMK\CLIENTS\CNFI~99-11293X99-11293-001-TERM SH~ET3.DOC PERMITTED ENCUMBRANCES 1. Any real estate taxes not yet due and payable Rights-of-way (if any) reasonably necessary for drainage ditches, drain tiles, feeders, laterals and underground pipes 3. All dedicated rights-of way All easements, restrictions, covenants and agreements which are currently included in the public records, so long as the Buyer's intended use of the Property is not materially impaired by such matters of record, provided that the Declaration of Covenants dated November 23, 2003 and entered into by the EDA and the Minnesota Pollution Control Agency shall not be considered to "materially impair" the Redeveloper's intended use of the Property.