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062518 EDA Meeting Packet EDA MEETING City Hall, 4401 Xylon Avenue North Monday, June 25, 2018 President Kathi Hemken Commissioner John Elder Commissioner Andy Hoffe Commissioner Eric Lammle Commissioner Jonathan London 1. Call to order – EDA Meeting of June 25, 2018 2. Roll call 3. Approval of Minutes:  June 11, 2018 4. Resolution approving the purchase agreement for the acquisition of 7215 62nd Avenue North (improvement project no. 1023) 5. Resolution approving amendment to purchase and redevelopment agreement for construction of new home by Great Buy Homes, Inc. at 6065 Louisiana Avenue North (improvement project no.973) 6. Adjournment EDA Meeting Page 1 June 11, 2018 City of New Hope 4401 Xylon Avenue North New Hope, Minnesota 55428 EDA Minutes June 11, 2018 Regular Meeting City Hall CALL TO ORDER President Hemken called the meeting of the Economic Development Authority to order at 7:31 p.m. ROLL CALL Present: Kathi Hemken, President John Elder, Commissioner Andy Hoffe, Commissioner Eric Lammle, Commissioner Jonathan London, Commissioner Staff Present: Aaron Chirpich, Community Development Specialist Tim Fournier, Police Chief Valerie Leone, City Clerk Jeff Sargent, Director of Community Development Kellie Schlegel, Stantec Stacy Woods, Assistant City Attorney APPROVAL OF MINUTES Item 3 Motion was made by Commissioner Hoffe, seconded by Commissioner London, to approve the minutes of May 14, 2018. All present voted in favor. Motion carried. IMP. PROJECT 997 Item 4 President Hemken introduced for discussion EDA Item 4, Resolution approving the final payment request to Day Construction, LLC for the rehabilitation of the single-family home located at 3984 Zealand Avenue North (Improvement Project No. 997), in the amount of $10,280. Mr. Aaron Chirpich, community development specialist, asked the EDA to approve a final pay request for the contractor who completed the rehabilitation work at 3984 Zealand Avenue North. He explained the EDA purchased the property for $165,000 and approved a contract for $94,650 for rehab work. He stated due to improved market conditions and the absence of realtor commission fees, the scope of the project was broadened to include the addition of central air conditioning, kitchen appliances, relocation of washer/dryer, sidewalk along garage service door new water heater, roof, removal of a pine tree, and minor landscaping for a total of $18,580.76. He stated the additional items increased the value of the property and it was sold for $295,000. President Hemken commended staff on the successful project. RESOLUTION 2018-08 Item 4 Commissioner London introduced the following resolution and moved its adoption “RESOLUTION APPROVING THE FINAL PAYMENT REQUEST TO DAY CONSTRUCTION, LLC FOR THE REHABILITATION OF THE SINGLE- FAMILY HOME LOCATED AT 3984 ZEALAND AVENUE NORTH (IMPROVEMENT PROJECT NO. 997), IN THE AMOUNT OF $10,280)”. The EDA Meeting Page 2 June 11, 2018 motion for the adoption of the foregoing resolution was seconded by Commissioner Elder, and upon vote being taken thereon, the following voted in favor thereof: Hemken, Elder, Hoffe, Lammle, London; and the following voted against the same: None; Abstained: None; Absent: None; whereupon the resolution was declared duly passed and adopted, signed by the president which was attested to by the executive director. ADJOURNMENT Motion was made by Commissioner London, seconded by Commissioner Elder, to adjourn the meeting. All present voted in favor. Motion carried. The New Hope EDA adjourned at 7:38 p.m. Respectfully submitted, Valerie Leone, City Clerk I:\RFA\COMM DEV\Development\Housing\7215 62nd\Q & R - 7215 62nd Ave Acquisition 6-25-18.docx Request for Action June 25, 2018 Approved by: Kirk McDonald, City Manager Originating Department: Community Development By: Aaron Chirpich, CD Specialist Agenda Title Resolution approving purchase agreement for the acquisition of 7215 62nd Avenue North (improvement project no. 1023) Requested Action Staff requests the EDA to authorize entering into a Purchase Agree ment for the acquisition of 7215 62nd Avenue North, for $138,000 (purchase price) plus any associated fees. Policy/Past Practice In the past, the EDA has successfully acquired vacant distressed properties as part of the city’s scattered site housing program. 7215 62nd Avenue The EDA has directed community development staff to pursue the acquisition of distressed and functionally obsolete single-family homes as part of the city’s scattered site housing program. 7215 62nd Avenue is located in one of the EDA’s priority redevelopment neighborhoods, just east of the EDA’s recent scattered site demolition project at 7303 62nd Avenue. The homes in this area are some of the smallest and oldest in city, and 7215 62nd Avenue is no exception, as it was built in 1952 with approximately 900 square feet of living space on the main floor. The home has not seen many upgrades since built, and does not meet the expectations of many buyers in the market. Rehabilitation of the home does not make economic sense, as adding on to the home would prove cost prohibitive. Staff feels that the best use of the home and site would be demolition to facilitate the construction of a new single-family home. The lot is 66 feet wide, and therefore narrower than the average 75-foot New Hope lot. However, the lot is still considered buildable, and is big enough to fit a variety of the new home designs that the EDA has seen in recent proposals for the sale of EDA owned lots. Staff became aware of the opportunity to purchase 7215 62nd Avenue when the owner contacted the city after observing the Scattered Site Housing Program yard sign that was placed in the yard of the EDA owned property just down the street at 7303 62nd Avenue. After a conversation with the seller, an appraisal was ordered for the property and the appraised value came in at $143,000. The 2018 tax assessed value has been set at $131,000 by Hennepin County. Staff discussed the project budget with the city manager and decided to offer $138,000 to purchase the home. This offer was accepted by the seller on the following day. The offer was made contingent upon EDA review and approval. Funding Funding for the acquisition and all costs associated with demolition of this home will come from EDA reserves. The house would likely qualify for the use of CDBG grant funds. However, the entire 2018 CDBG allocation of $55,000 has already been dedicated to the Scattered Site Housing Project at 7311 62nd Avenue Agenda Section EDA Item Number 4 Request for Action, Page 2 North. Despite the unavailability of grant funds, staff believes that the project is worth pursuing, as acquiring multiple homes along the same stretch of 62nd Avenue has the potential to create a substantial impact on the character of the neighborhood. The lack of CDBG resources will require that the projected value gap of $102,750 be covered by EDA reserve funds. However, the increased taxable value of a new home on the site would help recover the financial loss over a period of years. A copy of the full project budget is attached for review. Recommendation Staff is seeking approval of the acquisition of 7215 62nd Avenue. Staff recommends the EDA approve the attached resolution prepared by the City Attorney and terms of the attached purchase agreement. Attachments  Resolution  Location Map  Project Budget  County Tax Information  Pictures of Home  Sample Lot Layout  Purchase Agreement CITY OF NEW HOPE ECONOMIC DEVELOPMENT AUTHORITY EDA RESOLUTION NO. 18-___ RESOLUTION APPROVING PURCHASE AGREEMENT FOR THE ACQUISITION OF 7215 62nd AVENUE NORTH (IMPROVEMENT PROJECT NO. 1023) BE IT RESOLVED by the Economic Development Authority in and for the City of New Hope (“EDA”) as follows: WHEREAS, on September 22, 2014, the City Council adopted Resolution No.14-126 at the City Council meeting authorizing City community development staff to actively pursue the acquisition of distressed single family homes for potential purchase by the EDA, as part of the City’s scattered site housing program; WHEREAS, the City Council has directed City staff to negotiate for the terms most favorable to the City and EDA, and the execution of purchase agreements so as to secure purchase rights for these real properties, contingent on the review and approval of the EDA to the terms of the purchase agreements; WHEREAS, City staff have identified the opportunity to purchase certain real property located at 7215 62nd Avenue North, New Hope, MN, P.I.D. 05-118-21-21-0008, and legally described on the attached Exhibit A (the “Property”) from James A. Landini (“Seller”); WHEREAS, the house located on the Property was built in 1952 and has a functionally obsolete floor plan and is in need of substantial rehabilitation and renovation due to deferred maintenance and general lack of upgrades; WHEREAS, City staff believes that the best use of the Property is demolition in order to maximize the tax base by making the lot available for the development of a new residential housing unit; WHEREAS, the Property will be acquired with EDA funds; WHEREAS, it is in the best interest of the EDA to purchase the Property from James A. Landini, in order to redevelop the Property in accordance with the City’s scattered site housing program and policy; and WHEREAS, City staff is hereby seeking approval from the EDA of the Purchase Agreement, subject to the review and approval by the City Attorney of proper title evidence and other terms relating to the closing on the sale of the Property. NOW, THEREFORE, BE IT RESOLVED by the Economic Development Authority in and for the City of New Hope as follows: 1. That the above recitals are incorporated herein by reference. 2. It is in the best interest of the EDA to purchase the Property for demolition and redevelopment in accordance with the City’s scattered site housing program and policy. 3. That the purchase of the Property by EDA from Seller, for a sum of $138,000.00, with other terms and conditions as set forth in the Purchase Agreement attached hereto as Exhibit B, is approved subject to the review and approval by the City Attorney of proper title evidence and other terms relating to the closing on the sale of the Property. 4. The City and EDA shall use due diligence for demolishing the structure located on the Property and conducting any necessary cleanup of the Property to pursue redevelopment and return the Property to the tax rolls for the benefit of all taxing jurisdictions. 5. The President and Executive Director and the New Hope City staff are authorized and directed to sign all appropriate documents, and to take whatever additional actions are necessary or desirable, to complete the purchase of the Property in accordance with the Purchase Agreement. Dated the 25th day of June, 2018. ____________________________________ Kathi Hemken, President Attest: _____________________________ Kirk McDonald, Executive Director P:\Attorney\SAS\1 Client Files\2 City of New Hope\99-11425 7215 62nd Ave. N\Resolution approving purchase of 7215 62nd Ave. N..docx Exhibit A Legal Description See attached. Exhibit B Purchase Agreement See attached. City of New Hope Single-Family Acquisition and Demolition-- Scattered Site Housing Program Total Project Cost and Total Funding Sources 7215 62nd Avenue New Hope MN, 55428 USES Amount Acquisition 143,000 Demolition and Site Prep 18,000 Real Estate Taxes (1 year) 1,600 Closing Costs (purchase) 1,500 Legal (purchase) 1,500 Demo Survey 650 Closing Costs for Sale of Lot + Legal 1,500 Total 167,750 SOURCES Amount CDBG (Grant Funds) Lot Sale Proceeds 60,000 EDA Reserves 107,750 Total 167,750 Henn e p in Co unty Prop erty Map 721 5 62nd Da te : 6/1 9/2018 Com ments: 1 inc h = 5 0 feet PAR C EL ID: 05 11821210008 OWN ER N AME : Jame s A Landini PAR C EL AD DR E SS: 7 215 6 2n d Ave N, New Hope MN 55428 PAR C EL AR EA: 0.3 7 ac re s , 16,023 sq ft A-T-B: Torrens SAL E PR ICE: $85,000 SAL E D ATA: 05/2009 SAL E C OD E: Exclu de d From Ratio Studies ASSESS ED 2 017 , PAYABLE 2018 PR OPERT Y TYPE: Res idential H OM ESTEAD : Homes tead M AR KET VA L UE: $125,000 TAX TO TAL: $1,702.72 ASSESS ED 2 018 , PAYABLE 2019 PRO PER TY TYPE : Residential HO MESTEAD: Homestead MARKE T VALU E: $131,000 This dat a (i) is fur nished 'AS IS' wit h no repres ent at ion as to com pletenes s or acc ura cy; (ii) is furnis hed with no war rant y of an y k ind; an d (i ii) is not s uit able for lega l, engi neering or s urv ey ing purposes . Hen nepin C ounty s hall not be liable f or any dam age, in jury o r los s r esu lting f rom t his data. CO PYRIG HT © HENNEPIN CO UN TY 2 0 18 Form PICPIX.SR - "TOTAL" appraisal software by a la mode, inc. - 1-800-ALAMODE Subject Photo Page N/A 7215 62nd Ave N New Hope Hennepin MN 55428 City of New Hope Subject Front Sales Price Gross Living Area Total Rooms Total Bedrooms Total Bathrooms Location View Site Quality Age 7215 62nd Ave N N/A 995 4 2 1.0 A;BsyRd A;Res/Sch/Apt 16,023 sf Q5 66 Subject Rear Subject Street Borrower Lender/Client Property Address City County State Zip Code Form PICSIX2 - "TOTAL" appraisal software by a la mode, inc. - 1-800-ALAMODE Photograph Addendum N/A 7215 62nd Ave N New Hope Hennepin MN 55428 City of New Hope Living Room Kitchen Foyer Bathroom Bedroom Bedroom Borrower Lender/Client Property Address City County State Zip Code Form PICSIX2 - "TOTAL" appraisal software by a la mode, inc. - 1-800-ALAMODE Photograph Addendum N/A 7215 62nd Ave N New Hope Hennepin MN 55428 City of New Hope Laundry Mud Bathroom Ceiling/Walls Dining Basement Laundry Main Floor Hallway - Missing Trim/Unfinished Sheetrock Borrower Lender/Client Property Address City County State Zip Code Form PICSIX2 - "TOTAL" appraisal software by a la mode, inc. - 1-800-ALAMODE Photograph Addendum N/A 7215 62nd Ave N New Hope Hennepin MN 55428 City of New Hope Basement Utility Basement HVAC Backyard Driveway View of Apartment Building Far Rear Garage Borrower Lender/Client Property Address City County State Zip Code I:\RFA\COMM DEV\2018\Council Meetings\6-25-18 6065 Louisiana\Q & R - Approve house plan change for 6065 Louisiana 6-25-18.docx Request for Action June 25, 2018 Approved by: Kirk McDonald, City Manager Originating Department: Community Development By: Aaron Chirpich, CD Specialist Agenda Title Resolution approving amendment to purchase and redevelopment agreement for construction of new home by Great Buy Homes, Inc. at 6065 Louisiana Avenue North (improvement project no.973). Requested Action Staff requests the EDA approve a resolution amending the development agreement with Great Buy Homes, Inc. to allow for changes to the proposed building plans for the scattered site lot located at 6065 Louisiana Avenue North. Policy/Past Practice In the past, the city has renegotiated the terms of development contracts related to scattered site properties. Background The EDA sold two side-by-side lots on Louisiana Avenue to Great Buy Homes, Inc. in October of 2016. Great Buy Homes has completed construction of the first home on the north lot, and this home was sold on February 1, 2018 for $324,000. Despite the completion of this sale, the builder reported unexpected difficulties in securing a buyer for the property, as the home sat on the market for several months before the sales contract was secured. The builder indicated that the home received several showings, but many buyers expressed concerns with the location. Under the terms of the original redevelopment contract, Great Buy Homes had until October 27, 2017 to complete the construction of both new homes. Due to the extended marketing period for the first home, the builder was financially unable to start construction of the second home and the deadline for completion of the second home elapsed. As a result, the builder requested a contract extension to allow for more time to complete the project. On February 12 2018, the EDA granted a one year extension to the builder and set a new completion deadline of February 12, 2019. The original proposal from Great Buy Homes contemplated building the same two-story home on both lots, and Great Buy Homes agreed to build the second home as originally proposed as part of the contract extension. However, due to the struggles experienced with the sale of the first home, the builder has concerns with starting construction of the second home, and would now like to change the building plans. The home that the builder would like to construct is a split-entry style design that would be less costly to build and sell at a lower price point. For these reasons, the builder considers the split-entry style a more marketable building type for the location. The original two-story home proposed for the site had an anticipated sales price of $360,000 compared to the split-entry home that is expected to sell for $320,000. The City Council discussed the contract amendment request at the June 18 work session, and the owner of Great Buy Homes was in attendance. The council members present at the meeting were supportive of the builders request to change the building plans for the site and directed staff to seek formal approval of the changes at the next regularly scheduled EDA meeting. Agenda Section EDA Item Number 5 Request for Action, Page 2 Recommendation Staff recommends the EDA approve the attached resolution prepared by the City Attorney, thereby authorizing the development contract amendment to allow Great Buy Homes Inc. the ability to change building plans for the scattered site lot located at 6065 Louisiana Avenue North. Attachments  Resolution  Amendment to Purchase and Redevelopment Agreement  Location map  Excerpt from Work Session minutes – 6/18/18  Plans for the newly proposed split-entry style home CITY OF NEW HOPE ECONOMIC DEVELOPMENT AUTHORITY EDA RESOLUTION NO. 18-___ RESOLUTION APPROVING AMENDMENT TO PURCHASE AND REDEVELOPMENT AGREEMENT FOR CONSTRUCTION OF NEW HOME BY GREAT BUY HOMES, INC. AT 6065 LOUISIANA AVENUE NORTH IMPROVEMENT PROJECT 973 BE IT RESOLVED by the Economic Development Authority in and for the City of New Hope (“EDA”) as follows: WHEREAS, the EDA sold that certain real property located at 6065 Louisiana Avenue North, New Hope, MN which was replatted as the following legal description: “Lot 2, Block 1, McDonalds Addition to City of New Hope, Hennepin County, Minnesota” (“Property”), to Great Buy Homes, Inc. (“Great Buy Homes”) on October 27, 2016; and WHEREAS, as required by the Purchase and Redevelopment Agreement, Great Buy Homes executed Restrictive Covenants and Assessment Agreement which required that a new residential home be constructed on the Property no later than one year from the date of closing, or by October 27, 2017; and WHEREAS, Great Buy Homes previously requested and received an extension until February 12, 2019 to complete the construction of the residential home on the Property; and WHEREAS, Great Buy Homes has now requested that the style of the house required by the Purchase and Redevelopment Agreement be modified from a two-story home to a split-entry style home to better enable its marketability and ultimate sale; WHEREAS, the “Minimum Improvements” defined in the Purchase and Redevelopment Agreement as well as Exhibit F – Buyer’s Proposed Plans of the Purchase and Redevelopment Agreement would require amendment to enable Great Buy Homes to build this altered house design that it now desires to build; and WHEREAS, it is in the best interest of the EDA to amend the Purchase and Redevelopment Agreement to permit this modified house design in order for Great Buy Homes to successfully complete the construction of a new single family home on the Property in accordance with the City’s scattered site housing program and policy; and WHEREAS, the City staff is hereby seeking approval from the EDA of the amendment to the Purchase and Redevelopment Agreement. NOW, THEREFORE, BE IT RESOLVED by the Economic Development Authority in and for the City of New Hope as follows: 1. That the above recitals are incorporated herein by reference. 2. That the amendment of the Purchase and Redevelopment Agreement between the EDA and Great Buy Homes, in the form attached hereto as Exhibit A, is approved, it being in the best interest of the EDA to assist Great Buy Homes in the successful redevelopment and construction of a single-family home on the Property in accordance with the City’s scattered site housing program and policy. 3. That all the other terms of the Purchase and Redevelopment Agreement including Exhibit E – Request for Proposal Guidelines which outline certain required specifications for the quality of construction of the single-family home, remain in full force and effect. 4. The President, Executive Director and New Hope City staff are authorized and directed to sign all appropriate documents, and to take whatever additional actions are necessary or desirable, to amend the Restrictive Covenants and Assessment Agreement. Dated the 25th day of June, 2018. ____________________________________ Kathi Hemken, President Attest: __________________________ Kirk McDonald, Executive Director P:\Attorney\SAS\1 Client Files\2 City of New Hope\99-21605 - 6065 Louisana Ave. N. Rezone and Plat\Resolution Approving Amendment to Purchase and Redevelopment Agreement.docx AMENDMENT TO PURCHASE AND REDEVELOPMENT AGREEMENT 6065 Louisiana Ave. N. THIS AMENDMENT TO PURCHASE AND REDEVELOPMENTAGREEMENT (“Amendment”) is effective the ____ day of June, 2018, by and between the Economic Development Authority in and for the City of New Hope, a public body corporate and politic created pursuant to the laws of the State of Minnesota (“EDA”) and Great Buy Homes, Inc., a Minnesota corporation (“Great Buy Homes”) (EDA and Great Buy Homes sometimes jointly referred to as the “Parties”). RECITALS: A. The Parties (through documentation hereinafter recited) are parties to that certain Purchase and Redevelopment Agreement dated September 26, 2016 (“Purchase Agreement”) imposing certain requirements relating to the sale from EDA to Great Buy Homes of certain real property located at 6065 Louisiana Avenue North, New Hope and legally described as: “Lot 2, Block 1, McDonalds Addition to City of New Hope, Hennepin County, Minnesota” (“Property”) and required construction design and guidelines for the single-family home to be constructed by Great Buy Homes. The Purchase Agreement was filed in the office of the County Recorder, Hennepin County, Minnesota on November 2, 2016 as Document No. A10375931. B. The Purchase Agreement is currently in full force and effect according to its terms and conditions and the Parties have agreed to amend the style of the new residential home Great Buy Homes is required to build (“Minimum Improvements”) as set forth in the revised “Exhibit F – Buyer’s Proposed Plans”, attached hereto as “Revised Exhibit F – Buyer’s Revised Plans”. C. The EDA and Great Buy Homes are mutually desirous of amending the Purchase Agreement as more fully set forth herein. NOW, THEREFORE, for $1.00, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by the Parties, the EDA and Great Buy Homes agree as follows: 1. Adoption by Reference of Recitals. The Recitals above, are incorporated herein by reference, and constitute a material part of this Amendment between the Parties. 2. Amendment of “Minimum Improvements: and “Exhibit F – Buyer’s Proposed Plans” of the Purchase Agreement. Paragraph 10. a. and b. and Exhibit F – Buyer’s Proposed Plan” of the Purchase Agreement shall be amended to reflect the revised plans attached hereto as “Revised Exhibit F – Buyer’s Revised Plans”. 3. Representations, Warranties and Covenants. The EDA and Great Buy Homes represent, warrant and covenant as follows: a. With the exception of the modifications recited above and as specified herein, the Purchase Agreement has not been changed, altered, modified or amended in any way prior to the date hereof. b. As modified by this Amendment, the Purchase Agreement constitutes a legal, valid and binding obligation of Great Buy Homes enforceable by the EDA in accordance with its terms. 4. EDA Costs. Great Buy Homes shall pay contemporaneous with the execution of this Amendment the EDA’s costs incurred in connection with this Amendment including without limitation attorney’s fees. 5. Release of EDA. Great Buy Homes releases and forever discharges the EDA, and the EDA’s past and present, representatives, successors and assigns of and from any and all claims, demands, obligations, actions or causes of action, at law or in equity whether arising by contract, statute, common law or otherwise both direct and indirect, known or unknown of whatsoever kind or nature arising out of or by reason of or in connection with the Purchase Agreement, this Amendment or any acts omissions or conduct occurring on or before the effective date of this Amendment. IN WITNESS WHEREOF, the Parties have executed this Amendment effective the date first above written. ECONOMIC DEVELOPMENT AUTHORITY IN AND FOR THE CITY OF NEW HOPE By: _______________________________ _ Kathi Hemken Its: President Dated: June ____, 2018 By: _______________________________ _ Kirk McDonald Its: Executive Director Dated: June ____, 2018 GREAT BUY HOMES, INC. By: ________________________________ Glenn Hammer Its: President Dated: June ____, 2018 STATE OF MINNESOTA COUNTY OF HENNEPIN }ss. The foregoing instrument was acknowledged before me this ___ day of June, 2018, by Kathi Hemken and Kirk McDonald, the President and Executive Director of the Economic Development Authority in and for the City of New Hope, a public body corporate and politic created pursuant to the laws of the State of Minnesota. (Notary Public Seal) _______________________________________ Notary Public STATE OF MINNESOTA } ss. COUNTY OF HENNEPIN____________ The foregoing instrument was acknowledged before me this ____ day of June, 2018, by Glenn Hammer, the President of GREAT BUY HOMES, INC., a Minnesota corporation, on behalf of said corporation. (Notary Public Seal) ____________________________________ Notary Public Drafted By: JENSEN SONDRALL PERSELLIN & WOODS, P.A. 8525 Edinbrook Crossing, Suite 201 Brooklyn Park, MN 55443 (763) 424-8811 Revised Exhibit F Buyer’s Revised Plans See attached. P:\Attorney\SAS\1 Client Files\2 City of New Hope\99-21605 - 6065 Louisana Ave. N. Rezone and Plat\Amendment to Purchase and Redevelopment Agreement - 6065 Louisiana Ave N.docx