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032204 EDA CITY OF NEW HOPE 4401 XYLON AVENUE NORTH NEW HOPE, MINNESOTA 55428 EDA Minutes March 22, 2004 Regular Meeting City Hall CALL TO ORDER President Enck called the meeting of the Economic Development Authority to order at 8:11 p.m. ROLL CALL Present: W. Peter Enck, President Sharon Cassen, Commissioner Don Collier, Commissioner Mary Gwin-Lenth, Commissioner Steve Sommer, Commissioner APPROVE MINUTES Motion was made by Commissioner Cassen, seconded by Commissioner Gwin- to approve the Regular Meeting Minutes of March 8, 2004. Lenth, Voting in favor: Enck, Cassen, Collier, Gwin-Lenth; Voting Against: None; Abstained: Sommer; Absent: None. Motion carried. IMP. PROJECT 749 President Enck introduced for discussion Item 4, Update regarding development Item 4 proposal for city owned property at 5501 Boone Avenue North and direction to proceed with preliminary terms of agreement (improvement project no. 749). Mr. Ken Doresky, Community Development Specialist, explained that the development proposal is for two separate residential buildings on the site, one 41- unit condominium building and one 35-unit affordable rental apartment building. He stated in October of 2003, the EDA expressed support for the proposed project and directed staff to coordinate with PPL and Krass Monroe, the city’s financial consultant to complete a tax increment financing analysis for the project. Krass Monroe has prepared a financial analysis and determined that the site will generate approximately $1.6 million of increment. PPL is requesting approximately $1.4 million (dependent on soil correction estimates). The city’s initial investment of $276,764 would be reimbursed with the generated increment. The market value of the property is determined to be $252,100 (market value $760,000 less soil stabilization estimate of $507,900). Mr. Jim Casserly, Krass Monroe, was recognized. Mr. Casserly stated their analysis of the proposed project has determined that the project is feasible. He stated revenues from the increased taxes are sufficient to reimburse the city for its investment in the land and to allow revenues to be invested in the project. He stated the next phase would be preparation of a term sheet for presentation to the EDA. President Enck inquired whether the city would be guaranteed reimbursement of its investment if all or part of the property becomes tax-exempt in the future. Mr. Casserly indicated such a guarantee is a normal provision included in the agreement in order to protect the city. President Enck expressed his appreciation to Mr. Casserly and his staff for their assistance to the city over the years. EDA Meeting March 22, 2004 Page 1 Commissioner Sommer inquired regarding the city’s reimbursement costs. He asked whether the city would retain $200,000 if it provides TIF bonds for $1.6 million and $1.4 million to PPL. Mr. Casserly explained that the financing could occur as Commissioner Sommer outlined; however Krass Monroe is recommending that the city take a note back to subordinate its position to debt that would be issued. The city would be reimbursed with interest. This would build in added protection. He stated calculations would be based on the city’s land costs plus interest to cover carrying costs. Then a note would be created so the city can reimburse itself from increased taxes after the payment of debt service on any bonds that were issued. Commissioner Sommer expressed disappointment that PPL has changed its position from its original proposal of purchasing the property outright from the city. Mr. Casserly indicated the city can sell the land but the project would need that added cost so the issue becomes whether the city wants to sell debt upfront to provide write down at the beginning of the project and reimburse itself upfront or if the city is comfortable with taking a note to itself and repaying it over time. Discussion ensued regarding the price of the condominiums and the impact that sales prices will have on the outstanding debt and recovery of land costs. Mr. Casserly commented that over $4 million of increment will be generated and it is possible that the TIF district could be closed prior to the 25-year projection. Commissioner Gwin-Lenth questioned the changes in the site plan and soil analysis. Mr. Chris Wilson, Project for Pride in Living, responded to design changes. He stated the size and footprint of the project has not changed. Based on marketing advice the larger three or four bedroom units have changed to one or two bedroom units. The buildings were moved closer to Boone Avenue to raise their presence and the rear of the property (with the pond) will be more private. The side will face the public works building to minimize its impact. The playground and bus stop will be located near the rental building and the path and gardens will be near the condominium property. The estimated soil correction costs are based on both buildings. Commissioner Cassen questioned the tax status of the property since PPL is a non- profit organization. Mr. Wilson stated both the rental building and the condominium building will be taxable properties. He clarified that 15 of the 41 for sale units would have income restrictions. President Enck asked Mr. Wilson to elaborate on the tenant screening process. Mr. Wilson stated PPL has a stringent selection criteria in order to ensure the efficient use of the public’s money. It was noted that owners of the condominiums would have private financing and if an owner defaulted, the financial institute would intervene. Commissioner Cassen pointed out that private mortgage insurance is required by the lender to be placed on the property if the value is less than 80% loan to value. Mr. Steve Cramer, PPL, confirmed that Morris Manning, Property Director, has committed to the employment of a full-time property management position for the New Hope properties to office at Boone Avenue Apartments. Ms. Juanita Hoffe, 4632 Flag Avenue North, was recognized. She asked the financial consultant to clarify the funding options. EDA Meeting March 22, 2004 Page 2 Mr. Jim Casserly, Krass Monroe, stated the EDA purchased the property several years ago and borrowed from available funding. So, the EDA has the right to reimburse those funds through two different mechanisms: 1) pledge future taxes and pay increments each year until the amount is fully repaid or 2) the city has the option of selling a bond and including in the bond proceeds enough to reimburse itself for the same investment. Both options will be examined as the project proceeds. MOTION Motion was made by Commissioner Gwin-Lenth, seconded by Commissioner Item 4 to proceed with preparation of preliminary terms of agreement based Collier, on the financial/tax increment financing analysis completed by Krass Monroe. Voting in favor: Enck, Cassen, Collier, Gwin-Lenth; Voting Against: Sommer; Abstained: None; Absent: None. Motion carried. IMP. PROJECT 734 President Enck introduced for discussion Item 5, Discussion and direction to Item 5 proceed with a purchase agreement for the NCRC development proposal, 4301 and 4317 Nevada Avenue North (improvement project no. 734). Mr. Kirk McDonald, Director of Community Development, stated staff is requesting authorization to proceed with a purchase agreement for the sale of 4317 Nevada Avenue North to the Northwest Community Revitalization Corporation (NCRC) Community Housing Development Organization (CHDO). He stated the property would be incorporated into their proposal to replace two blighted single family properties with six owner-occupied twinhomes (one accessible unit). Mr. McDonald illustrated the sites and stated the NCRC owns 4301 Nevada and the city owns 4317 Nevada. He stated the property was designated in the comprehensive plan for redevelopment with medium density residential use. The EDA previously declined a proposal for development of 12 units primarily due to the density and financial assistance being requested. Mr. McDonald explained that CDBG funds of $83,000 were originally used to purchase the property. Staff recommends demolition of the house at 4317 Nevada utilizing CDBG funds (total CDBG contribution estimated at $100,000). The EDA would sell the property to the NCRC for $1 and permit the NCRC to construct six owner occupied twinhome units on the site. In return, the city will realize a significant increase in taxes at the site. He stated a portion of the CDBG funds invested in the project would also be returned to the city as program income upon the sale of the units, and the program income could be utilized for future CDBG eligible projects. He introduced Kristine Madsen, Executive Director, and Julie Dunkle, Associate Director, of NCRC. Ms. Madsen explained that both properties (4301 and 4317 Nevada) are uninhabitable. The concept is for 12 owner-occupied units (six twinhomes) targeted at $180,000 or less. She noted they have applied for several grants and are having conversations with the West Hennepin Affordable Land Trust. Driveways and garages would face the rear rather than the front of the property. Discussion ensued regarding the implications of a land trust. It was noted that there would be no issues relating to city ordinances with a land trust owning the property and an individual owning the structure. Commissioner Cassen expressed support for the project. She pointed out the need for one-level homes in New Hope. Ms. Madsen stated the property has a slope and they will keep the need for one-level homes in mind during the design process. Commissioner Sommer reiterated the need for one-level homes and requested that EDA Meeting March 22, 2004 Page 3 at least two of the six structures be one-level housing. President Enck asked that NCRC document who is responsible for maintenance of the property. Ms. Madsen acknowledged that this issue has been part of their discussions. Mr. McDonald indicated the next step would be preparation of a purchase agreement and development proposal for review by the EDA. He stated the NCRC would be required to participate in the planning application process for rezoning and platting, and NCRC would pay all associated fees (building permit, park dedication fees, etc). MOTION/PROCEED Motion was made by Commissioner Collier, seconded by Commissioner Gwin- Item 5 directing staff to proceed with preparation of a purchase agreement and Lenth, development proposal. All present voted in favor. Motion carried. IMP. PROJECT 723 President Enck introduced for discussion Item 6, Discussion regarding 7615 Bass Item 6 Lake Road (New Hope Alano), gap request and appraisal proposal (improvement project no. 723). Mr. Kirk McDonald, Director of Community Development, stated staff is seeking direction regarding a gap financing request (7615 Bass Lake Road) and appraisal for the property at 7550 Bass Lake Road. He stated it is proposed that the cost of the appraisal (estimated at $3,000) be shared equally among the city, Alano, and AC Carlson. Previously the city directed staff to coordinate with Alano regarding their relocation needs. He explained that one of the buildings that would meet their needs is the AC Carlson site at 7550 Bass Lake Road. AC Carlson is planning to relocate to the corner of Science Center Drive and International Parkway. One of the reasons for the gap request is due to the $695,000 asking price. An appraisal could determine if the asking price is accurate. President Enck thanked Alano for being a good community neighbor. He noted his desire to find a suitable site for Alano’s relocation. MOTION Motion was made by Commissioner Gwin-Lenth, seconded by Commissioner Item 6 authorizing the expenditure of $1,000 towards an appraisal of 7550 Cassen, Bass Lake Road. All present voted in favor. Motion carried. IMP. PROJECTS President Enck introduced for discussion Item 7, Resolution approving purchase 761, 748, 768 agreements and relocation benefits for acquisition of three properties in the Item 7 Winnetka East housing redevelopment area (5446 Winnetka, 5512 Winnetka, and 5519 Sumter (improvement project nos. 761, 748, and 768). Mr. Ken Doresky, Community Development Specialist, stated staff is continuing to coordinate the purchase of the remaining properties in the east Winnetka redevelopment area. The resolution will approve purchase agreements for three additional properties. He stated staff is negotiating the purchase of five remaining properties. EDA RESOLUTION Commissioner Sommer introduced the following resolution and moved its adoption 04-13 “RESOLUTION APPROVING PURCHASE AGREEMENTS AND Item 7 RELOCATION BENEFITS FOR ACQUISITION OF THREE PROPERTIES IN THE WINNETKA EAST HOUSING REDEVELOPMENT AREA (5446 WINNETKA, 5512 WINNETKA, AND 5519 SUMTER (IMPROVEMENT PROJECT NOS. 761, 748, AND 768).” The motion for the adoption of the foregoing resolution was seconded by Commissioner Collier, and upon vote being taken thereon, the following voted in favor thereof: Enck, Cassen, Collier, Gwin- Lenth, Sommer, and the following voted against the same: None; Abstained: None; Absent: None; whereupon the resolution was declared duly passed and adopted, EDA Meeting March 22, 2004 Page 4 signed by the president which was attested to by the executive director. IMP. PROJECT 724 President Enck introduced for discussion Item 8, Resolution finding need to acquire Item 8 title and possession of the Winnetka Avenue East area development properties prior to the commissioner’s award, approving the appraisal of damages for each property resulting from the taking and ratifying and authorizing all steps taken by staff to acquire the properties (improvement project no. 724). Mr. Steve Sondrall, City Attorney, stated the city started the legal time table in December relative to the “quick-take” procedure. He stated there is a hearing scheduled on April 6 for appointment of commissioners. He stated adoption of the resolution does not prevent the city from continuing to negotiate with the owners to acquire their property voluntarily. However, it does start the time period running where both parties either have to agree on a purchase price or submit the issue of valuation and damages to a commission of three persons appointed by the court. The resolution approves the appraisal amounts that the city will pay into court to satisfy the requirements of Minnesota Statutes chapter 117 that allows the city to acquire the properties under eminent domain for the redevelopment project. Ms. Juanita Hoffe, 4632 Flag Avenue North, questioned the number of unsold properties. Mr. Sondrall stated the resolution lists eleven properties for condemnation action; however purchase agreements have been negotiated on six of the properties which reduces the number to five properties. He noted the action does not prevent negotiations on the remaining five properties, and the city hopes it will be successful in acquiring all of the properties voluntarily. EDA RESOLUTION Commissioner Cassen introduced the following resolution and moved its adoption 04-14 “RESOLUTION FINDING NEED TO ACQUIRE TITLE AND POSSESSION Item 8 OF THE WINNETKA AVENUE EAST AREA DEVELOPMENT PROPERTIES PRIOR TO THE COMMISSIONER’S AWARD, APPROVING THE APPRAISAL OF DAMAGES FOR EACH PROPERTY RESULTING FROM THE TAKING AND RATIFYING AND AUTHORIZING ALL STEPS TAKEN BY STAFF TO ACQUIRE THE PROPERTIES (IMPROVEMENT PROJECT NO. 724).” The motion for the adoption of the foregoing resolution was seconded by Commissioner Collier, and upon vote being taken thereon, the following voted in favor thereof: Enck, Cassen, Collier, Gwin-Lenth, Sommer, 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. ENCK FAREWELL Prior to adjournment, the EDA recognized W. Peter Enck and wished him well in his retirement. President Enck expressed his gratitude to colleagues and staff that he has had the opportunity to work with over the past 33 years. He pointed out that the School District honored him at its March 15 meeting. to ADJOURNMENT Motion was made by Commissioner Collier, seconded by Commissioner Cassen, adjourn the meeting . All present voted in favor. Motion carried. The New Hope EDA adjourned at 9:50 p.m. Respectfully submitted, Valerie Leone City Clerk EDA Meeting March 22, 2004 Page 5