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EDA 09/23/02, , OFFICIAL FILE COPY CITY OF NEW HOPE EDA MEETING City Hall, 4401 Xylon Avenue North September 23, 2002 President W. Peter Enck Commissioner Sharon Cassen Commissioner Don Collier Commissioner Mary Gwin-Lenth Commissioner Pat LaVine Norby 1. Call to Order 2. Roll Call 3. Approval of Regular Meeting Minutes of September 9, 2002 4. Discussion Regarding Request by Armory Development II LLC, to Coordinate with City Staff and Financial Consultant on Potential Redevelopment of Frank's Nursery Site at 5620 Winnetka Avenue North 5. Adjournment CITY OF NEW HOPE 4401 XYLON AVENUE NORTH NEW HOPE, MINNESOTA 55428 Approved EDA Minutes Regular Meeting September 9, 2002 City Hall CALL TO ORDER ROLL CALL APPROVE MINUTES MASTER MODIFICATION Item 4 EDA RESOLUTION 02-05 Item 4 New Hope EDA Page 1 President Pro tem Gwin-Lenth called the meeting of the Economic Development Authority to order at 7:26 p.m. Present: Mary Gwin-Lenth, President Pro rem Sharon Cassen, Commissioner Don Collier, Commissioner Pat LaVine Norby, Commissioner Absent: W. Peter Enck, President Motion was made by Commissioner Collier, seconded by Commissioner Cassen, to approve the Regular Meeting Minutes of August 26, 2002. Voting in favor: Cassen, Collier, Gwin-Lenth; Voting Against: None; Absent: Enck; Abstained: Norby. Motion carried. President Pro tem Gwin-Lenth introduced for discussion Item 4, Resolution Restating the Redevelopment Plans for the Master Modification; Redesignating the Master Modification as Redevelopment Project No. 1; Modifying the Restated Redevelopment Plan and Tax Increment Financing Plans for Redevelopment Project No. 1 and Tax Increment Financing Districts Nos. 80-2, 81-1, 82-1, 85-1, 85-2, and 86-1; Creating Tax Increment Financing District No. 02-1 and Adopting a Tax Increment Financing Plan Relating Thereto. President Pro tem Gwin-Lenth pointed out that the fore-mentioned resolution is similar to the one presented at the council meeting under 7.1, public hearing. Commissioner Norby noted that the city-owned property at 9200 49th Avenue North was difficult to develop. She applauded the businesses and staff for the joint project. Commissioner Cassen also commented on the long time in which the city has marketed the property. She stated the major obstacle was poor soils. Ms. Cassen noted tax increment financing is an excellent financing vehicle for this redevelopment. Commissioner Collier introduced the following resolution and moved its adoption "RESOLUTION RESTATING THE REDEVELOPMENT PLANS FOR THE MASTER MODIFICATION; REDESIGNATING THE MASTER MODIFICATION AS REDEVELOPMENT PROJECT NO. 1; MODIFYING THE RESTATED REDEVELOPMENT PLAN AND TAX INCREMENT FINANCING PLANS FOR REDEVELOPMENT PROJECT NO. 1 AND TAX INCREMENT FINANCING DISTRICTS NOS. 80-2, 81-1, 82-1, 85-1, 85-2, AND 86-1; CREATING TAX INCREMENT FINANCING DISTRICT NO. 02- I AND ADOPTING A TAX INCREMENT FINANCING PLAN RELATING THERETO". The motion for the adoption of the foregoing resolution was seconded by Commissioner Cassen, and upon vote being taken thereon, the following voted in favor thereof: Cassen, Collier, Gwin-Lenth, Norby, and the following voted against the same: None; Abstained: None; Absent: Enck; September 9, 2002 NAVARRE CORPORATION Item 5 EDA RESOLUTION 02-06 Item 5 LAND PURCHASE Item 6 EDA RESOLUTION 02-07 Item 6 LAND SALE Item 7 EDA RESOLUTION 02-08 Item 7 whereupon the resolution was declared duly passed and adopted, signed by the president which was attested to by the executive director. President Pro tern Gwin-Lenth introduced for discussion Item 5, Resolution Authorizing Execution and Delivery of a Contract for Private Redevelopment, by and between the New Hope Economic Development Authority and Navarre Corporation. Mr. Jim Cassefly, Krass Monroe, was recognized. He stated the owners of Navarre Corporation recently created a new entity name to hold this development. He stated the resolutions contained in Items 5, 6, and 7 will be revised to reflect this change using the name of New Hope LLC. He noted some issues are still being clarified for the development, however, the EDA may adopt the items authorizing execution of the docmnents. He noted if the issues are not resolved, the documents will not be delivered. Commissioner Collier disclosed that he belongs to a stock club at his place of employment. The club has purchased Navarre stock; therefore, he will abstain from vote of the remaining related items. He apologized for his delay in this recollection. Commissioner Cassen advised that the abbreviation LLC stands for Limited Liability Company. She requested that documents reflect the full name, New Hope Limited Liability Company. Commissioner Cassen introduced the following resolution and moved its adoption "RESOLUTION AUTHORIZING EXECUTION AND DELIVERY OF A CONTRACT FOR PRIVATE REDEVELOPMENT, BY AND BETWEEN THE NEW HOPE ECONOMIC DEVELOPMENT AUTHORITY AND NAVARRE CORPORATION". The motion for the adoption of the foregoing resolution was seconded by Commissioner Norby, and upon vote being taken thereon, the following voted in favor thereof: Cassen, Gwin-Lenth, Norby, and the following voted against the same: None; Abstained: Collier; Absent: Enck; whereupon the resolution was declared duly passed and adopted, signed by the president which was attested to by the executive director. President Pro tem Gwin-Lenth introduced for discussion Item 6, Resolution Authorizing a Land Purchase from the City of New Hope and the Execution of a Note Establishing Terms for Payment. Commissioner Cassen introduced the following resolution and moved its adoption "RESOLUTION AUTHORIZING A LAND PURCHASE FROM THE CITY OF NEW HOPE AND THE EXECUTION OF A NOTE ESTABLISHING TERMS FOR PAYMENT". The motion for the adoption of the foregoing resolution was seconded by Commissioner Norby, and upon vote being taken thereon, the following voted in favor thereof: Cassen, Gwin-Lenth, Norby, and the following voted against the same: None; Abstained: Collier; Absent: Enck; whereupon the resolution was declared duly passed and adopted, signed by the president which was attested to by the executive director. President Pro tem Gwin-Lenth introduced for discussion Item 7, Resolution Authorizing a Sale and Conveyance of Land to Navarre Corporation, or its Permitted Successors or Assigns, in Accordance with the New Hope Economic Development Authority's Terms and Conditions of Sale. Commissioner Cassen introduced the following resolution and moved its adoption "RESOLUTION AUTHORIZING A SALE AND CONVEYANCE OF LAND TO NAVARRE CORPORATION, OR ITS PERMITTED SUCCESSORS OR ASSIGNS, IN ACCORDANCE WITH THE NEW HOPE ECONOMIC New Hope EDA Page 2 September 9, 2002 REMODELING PLANBOOK Item 8 EDA RESOLUTION 02-09 Item 8 ADJOURNMENT New Hope EDA Page 3 DEVELOPMENT AUTHORITY'S TERMS AND CONDITIONS OF SALE". The motion for the adoption of the foregoing resolution was seconded by Commissioner Norby, and upon vote being taken thereon, the following voted in favor thereof: Cassen, Gwin-Lenth, Norby, and the following voted against the same: None; Abstained: Collier; Absent: Enck; whereupon the resolution was declared duly passed and adopted, signed by the president which was attested to by the executive director. President Pro tern Gwin-Lenth introduced for discussion Item 8, Resolution Approving Letter of Agreement Between the Brooklyn Park Economic Development Authority and the New Hope Economic Development Authority for the Second Suburban Remodeling Planbook Project, Split-Levels and Split-Entrys at a Cost of $5,000 (Improvement Project No. 623). Mr. Ken Doresky, Community Development Specialist, explained that on April 8, 2002, the EDA allocated up to $6,250 for participation in the second suburban remodeling planbook project. He stated there are 13 agencies participating in the project and sharing the cost. He stated the planbook would be published prior the next year's remodeling fair. Participants will also receive materials to display on websites. Mr. Doresky stated the £u~st planbook will also be published on-line. Commissioner Cassen questioned why more cities participated in the last planbook project. She also inquired why Shoreview is only contributing $3,000 rather than $5,000. Mr. Doresky noted that some cities do not have split-level style of housing stock and have declined to participate. He stated he will inquire regarding the Shoreview payment situation. Commissioner Collier asked whether the City still has "Cape Code and Rambler" planbooks available. Mr. Doresky noted copies of the first planbook are available free of charge to New Hope residents. Commissioner Cassen introduced the following resolution and moved its adoption "RESOLUTION APPROVING LETTER OF AGREEMENT BETWEEN THE BROOKLYN PARK ECONOMIC DEVELOPMENT AUTHORITY AND TIlE NEW HOPE ECONOMIC DEVELOPMENT AUTHORITY FOR THE SECOND SURBURBAN REMODELING PLANBOOK PROJECT, SPLIT-LEVELS AND SPLIT-ENTRYS AT A COST OF $5,000 (IMPROVEMENT PROJECT NO. 623)". 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: Cassen, Collier, Gwin-Lenth, Norby, and the following voted against the same: None; Abstained: None; Absent: Enck; whereupon the resolution was declared duly passed and adopterS, signed by the president which was attested to by the executive director. Motion was made by Commissioner Norby, seconded by Commissioner Cassen, to adjourn the meeting. All present voted in favor. Motion carried. The New Hope EDA adjourned at 7:40 p.m. Respectfully submitted, Valerie Leone City Clerk September 9, 2002 EDA 4 R] QUF_,ST FOR ACTION Originating Department Approved for Agenda Agenda Section Community Development .' 9-23-02 EDA  Item No. By: Kirk McDonald By: il,//' 4 DISCUSSION REGARDING REQUEST BY ARMORY DEVELOPMENT II LLC, TO COORDINATE WITH CITY STAFF AND FINANCIAL CONSULTANT ON POTENTIAL REDEVELOPMENT OF FRANK'S NURSERY SITE AT 5620 WINNETKA AVENUE NORTH REQUESTED ACTION Staff requests that the Economic Development Authority discuss the attached proposal by Armory Development II LLC to coordinate with city staff and financial consultant on the potential redevelopment of the Frank's Nursery site at 5620 Winnetka Avenue North. POLICY/PAST PRACTICE When city staff receives requests for financial assistance from developers, they are submitted to the EDA for consideration. In the past, the City has assisted a number of developers with projects using a variety of financing tools. BACKGROUND Staff has been conducting discussions with Armory Development on a periodic basis since the spring of 2002 regarding the potential redevelopment of the Frank's Nursery site. Armory Development would like to move forward and present the proposed project to the Economic Development Authority at this time. In correspondence submitted to the EDA, Armory Development states: · On behalf of Armory Development II LLC, we would like to introduce our team and our proposed project at the site commonly referred to as Frank's Nursery. We have been working with the current ownership as well as the city staff since February of 2001. At this time, we would like to provide the City Council more information on our project during your September proceedings, as well as discuss possible support for the project. · Our team is comprised of Armory Development LLC, GSR Real Estate Services, Tushie Montgomery Architects, and Anderson Builders. Together our principals have over 100 years of development and construction experience. Our goal is to successfully complete the Frank's project and develop additional sites in the City. MOTION BY SECOND BY Request for Action · Page 2 9-23-02 The project that Armory Development has planned is comprised of 56 for-sale townhomes on the site. We have worked closely with the city staff to review the design, access, and green space of the site and believe the plan meets all of their concerns. The units will be two or three stories tall and will range between 1,100 - 1,400 square feet. The sales plan calls for the units to be marketed between $150,000 - $190,000 depending on final development costs. The target demographic will be the young professional and first-time homeowner. At this time, Armory Development has come to an agreement on the land purchase price with the owner, a large insurance company in Iowa. Negotiations are ongoing with Frank's Nursery on the buy-out of their lease.'Based upon successful negotiations, we hope to break ground on the site in the spring. Because this is a redevelopment site, there will be additional costs in the demolition of the site, refitting of the infrastructure to meet the new development, as well as costs associated with watershed issues. Armory Development expects these additional costs to be approximately $350,000. We are requesting that the City include this site in its planned TIF District in order to offset this cost. The City's financial planner has been provided a preliminary pro-forma to review our budget. Staff started meeting with the developers prior to the time that the Developers' Roundtable was conducted in June for the Livable Communities Task Force, although the developers agreed to participate in that process. Their redevelopment proposal for the Frank's site was reviewed by the Livable Communities Task Force at the August 21 task force meeting and the task force was very supportive of the proposal. Due to the fact that work on this project started prior to the roundtable, staff and the developer are requesting to move this project along to the EDA for consideration. It is anticipated that the proposals for the remainder of the Livable Communities sites will be presented to the City Council by the end of the year. Staff has requested that the financial consultant review this request on a preliminary basis and that analysis, which is attached, shows that the project could generate enough revenue that the City could provide some assistance for site development. Staff is requesting EDA approval to move forward in working with the developer and financial consultant to develop more definitive numbers, discuss the type of assistance and develop potential terms of agreement. Owner-occupied townhomes are a specific type of housing that are needed in the City, according to both the Comprehensive Plan and the Life Cycle Housing Study. Staff supports this proposal and recommends that the EDA authorize staff to move forward with this request. FUNDING Funding for the analysis could be paid for with EDA funds or incorporated into project costs, if the development proceeds. Staff recommends that if the EDA is interested in pursuing this request, the applicant provide a deposit to assist with consultant costs. A'I-I'ACHMENTS · 8/27 GSR Correspondence · Site Maps · Color Elevations · Site Plan · 8/19 Krass Monroe Memo August 27, 2002 -REAL ESTATE SERVICES City of New Hope City Council c/o Kirk McDonald Community Development Director City of New Hope New Hope, MN 55428 To the City Council: On behalf of Armory Development II LLC, I would like to introduce our team and our proposed project at the site commonly referred to as Frank's Nursery. We have been working with the current ownership as well as the city staffsince February of 2001. At this time we would like to provide the City Council more information on our project during your September proceedings, as well as discuss possible support for the project. Our team is comprised of Armory Development LLC, GSR Real Estate Services, Tushie Montgomery Architects, and Anderson Builders. Together our principals have over one hundred years of development and construction experience. Our goal is to successfully complete the Frank's project and develop additional sites in the city. The project that Armory Development has planned is comprised of 56 for-sale town homes on the site (see enclosure). We have worked closely with the city staffto review the design, access, and green space of the site and believe the plan meets all of their concerns. The units will be two or three stories tall and will range between 1,100 - 1,400 square feet. The sales plan calls for the units to be marketed between $150,000.00 - $190,000.00 depending on final development costs. The target demographic will be the young professional and first time homeowner. At this time, Armory Development has come to an agreement on the land purchase price with the owner, a large insurance company in Iowa. Negotiations are ongoing with Frank's Nursery on the buy-out of their lease. Based upon successful negotiations, we hope to break ground on the site in the spring. Because this is a redevelopment site, there will be additional costs in the demolition of the site, refitting of the infrastructure to meet the new development, as well as costs associated with watershed issues. Armory Development expects these additional costs to be approximately $350,000.00. We are requesting that the city include this site in its planned TIF District in order to offset this cost. The city's financial planner has been provided a preliminary pro-forma to review our budget. 615 First Avenue NE · Suite 500 · Minneapolis · I*IN 55413 Phone (612)338-2828 · Fax (612)338-5288 www.gsr-re.com City of New Hope City Council August 27, 2002 Page 2 Please review the enclosed information and schematic. I look forward to introducing the project and answering any questions that you might have regarding the team or the project. Thank you. Sincerely, ~ Charlie Nestor Business Development Manager CN/sln Enclosure REAL ESTATESERVICES ST. THERESE NURSING HOME OOB 8O0O 7910 7900 8001 7901 54~6 54~-7 54~0 5431 5426 5427 .542O 5421 54.16 5417 ' 58TH 'AV-~ · 5736 5732 5720 5716 5700 5704 Z 5705 5701 LI I~11 56TH AVE N~I~III r~524 5,518 55Ol 5559 5546 55~7 , 5520 5512 5506 5500 5446 544O 5423 Z 55TH 5444 5437 5438 54~3 5428 5429 5426, 54.27 5422 5420 I 5436 5437 5434 ~ 54~0 5429 7606 5425 ST RAPHAEL DR. I 54~°1 ~"ml 54201 541'1zl5418 I'~1 / AVE N ~ ST. RAPHAE CATHOLIC CHURCH HOSTERMAN JR HIGH SCHOOL WINNETKA; ;~ .... ;"'--~ .... ; i , ~ ELEMENTARYi ........... ~ ....ii"-': ..... r--! .. l 0~/19/02 ~01~ ~.5:29 FAX 952 ~$ 5969 KRASS ~ONROE ~]003 I KRASS MONROE, P.A. ATTORNEYS AT LAW James IL Casserly~ Esq. EmaiI jame.~,c~_JrrtJz'smonroe, cam Voice Mail (952) 885-1296 DRAFT G'~I D. Johnson, CPA Email.'greg/C~Jcra. tsmonroe, eom Voice Mail (952) 885-5994 MEMORANDUM City of New Hope Attn: Kirk McDonald, Comm. Dev. Dir. · From: James R. Casserly, Esq. Greg D. Johnson, CPA Date: August 19, 2002 Re: Frank's Nursery Site Our File No. 10048-13 INTRODUCTION Armory Development !1 (the "Redeveloper") is considering the redevelopment of the Frank's Nursery site (the "Site"). The redevelopment would include the demolition of the existing building, relocation of Frank's Nursery, site preparation and storm water improvements. Upon completion, the Site would include 56 town homes with an average market value of approximately $160,000. THE ISSUES Because of the substantial costs involved in the acquisition of the Site and the relocation of Frank's Nursery, the Redeveloper has asked the EDA to assist it with a portion of these costs. The issues that need resolution include the following: 1. How would the EDA assist the Redeveloper with defraying these costs; and 2. What is the amount of assistance necessary to facilitate the redevelopment. SUITE 1100 SOUTHPOINT OFRCE CENTER · 1650 WEST 82ND STREET · BLOOMINGTON, MINNESOTA 55431.1447 TELEPHONE 952/885-5999 · FACSIMILE 952/8~5-59~ 0b/lg/0~ ~0~ 15:29 FA..,~. 952 885 8969 KRASS ~O~ROE ~004 ANALYSIS The EDA can provide assistance by establishing a tax increment financing district. The Site would appear to quali~ for inclusion in a redevelopment district. At the present time, the EDA is reviewing not only the Frank's site but a number of parcels in the Livable Communities Study area. The EDA has indicated its desire to establish such a district to include those parcels east of Winnetka. The Site would be part of that redevelopment tax increment district and thus the EDA would capture tax increment resulting from the increased market valuation on this Site. The assistance to the Redeveloper could be in the form of a tax increment revenue note (the "Note") in which the tax increment from the Site would be pledged to pay the Note (this process would be almost identical to the process the EDA has employed in assisting the Navarre expansion). Attached is a three-page tax increment analysis along with an amortization schedule for a revenue note. These pages are numbered 1 through 4 in the upper right-hand comer. As with previous analysis, the assumptions are on page 1 which shows the market value per unit as $160,000. Page 2 shows the amount of tax increment that would be generated over the life of a redevelopment tax increment district. This total amounts to $2,861,142 as shown in column (e). Page 3 demonstrates the result of pledging fifty percent (50%) of the available tax increment for approximately ten (10) years to pay the Note. (Please refer to the underlined numbers at 12/01/14). Page 4 which assumes the amount of assistance to be $300,000 is an amortization schedule for the Note at a seven percent (7%) interest rate. The second issue that needs resolution is to determine the level of assistance necessary to facilitate the redevelopment of the Site. Acquisition of the Site is complicated by a very favorable lease arrangement that Frank's Nursery, as tenant, has with Farm Bureau Insurance, the landlord and owner of the Site. The Redeveloper has indicated that the acquisition, demolition, relocation, site preparation and utility cost wiJJ be approximately $1.1 to $1.3 million and that the project cannot afford costs of that magnitude. The Redeveloper has asked for assistance of $300,000. Before the EDA agrees to that level of assistance, we should have an opportunity to review the following: 1. The Purchase Agreement between the Redeveloper and Farm Bureau Insurance; A construction pro forma for the redevelopment project (the information contained in the Redeveloper's Presentation of July 8, 2002 is not adequately detailed and the hard cost budgeting provided by Andersen Builder's appears to be very preliminary); and · Page 2 08/19/02 M0N 15:30 FA.~ 952 885 5969 IO:~SS MONI~OE 3. The amount of real estate taxes projected to be paid by the completed project are considerably less than we are projecting based on the values that we were given. These differences need to be reconciled. CONCLUSION If the EDA wishes to assist this project and the amount of assistance can be properly quantified, and assuming that the Site will qualify for inclusion in a tax increment financing redevelopment district, then there is certainly adequate tax increment to prb~ide the assistance and there are more than a'd~quate costs fo-~ which the EDA has the legal authority to provide such assistance. The assistance can be in the form of a tax increment revenue note which should not expose the City to any dsk. Furthermore, the revenue note would only be delivered upon the completion of the agreed upon improvements to the Site. We look forward to further reviewing this project with you. JRC/GDJItrg Attachments G:\WPDATA~NEW HOP~I~I~.ORWICD(3NALD JRC ® Pal;le 3 08/19/02 ~ON 15:30 952 885 5969 ERASS ~r0NROE CITY OF NEW HOPE Franks Nursery Site ASSUMPTIONS [~006 Original Market Values Area of Parcel (Acres) (Sq. Feet) 3.19 138,761 1/2/2001 Market Value (Pay 2002) Land Building Total Franks Nursery & Crafts Totals Original Tax Capacity Commercial / Retail Rental. Moderate Rental Owner Occupied ....... Phase '1 Es[imated Market Value Estimated Tax Capacity Es{imated Taxes Estimated Tax Increment 05-118.-21-32-OO07 3.19 138,761 674,000 674.0OO $ 578,0OO $ 96,000 $ 578,000 $ 96,000 ~ 4.17 per sq. R. for Land Class Rate* 2.00% = 0 1,25% = 0 1.25% = 0 1.00% = 6,740 674,000 674,000 6,740 · Final rates for Pay 2004 28 Townhomes @ 160,000 per unit 28 Townhomes ~ 2,268 per unit 28 Townhomes ~ 1,919 per unit $4,480,000 44,800 63,515 53,730 84,6% of total taxeS YEAR 20O4 2005 Phase 2 (combined) Estimated Market Value Estimated Tax Capacity Estimated Taxes Estimated Tax Increment 56 Townhomes ~t 160,000 per unit = 8,960,000 89,800 56 Townhomes @ 2,268 per unit = 127,030 56 Townhomes {~ 2,089 per unil = 116,975 92,1% of total taxes 20O5 2006 Phase 3 (combined) Estimated Market Value Estimated Tax Capacity Estimated Taxes Estimated Tax Increment 56 Townhomes ~ 160,000 per unit = 8,960,000 89,600 56 Townhomes ~} 2,268 per unit = 127,030 56 Townhomes l~ 2,089 per unit = 116,975 18,3 times MV increase 2006 2OO7 92.1% of total taxes Local Tax Rate - Pay 2002 estimate State Tax Rate - Pay 2002 estimate Combined Tax Rate - C/I Property Only Admin Fees Coverage 17.6 units per acre 1.41775 ~C/I on~)J 0.57933 1.99708 * used for ~x increment calculations 10.000% 1.4%I EffTaxRa~ State Auditor Fee 0.425% Inflation (after 2 yrs of lull value in each tract) 0.000% PV Rate. Rev. Note 12/1/2002 7,00% PV Rate. City 12/112OO2 5.00% NNETK HOPE, MINNESOTA DEVELOPPIENT DATA 51TI A~EA ....... 1~8,018..$F; 317 AC TOTAL UNITS .......... r~ UNIT5 TOTAL PARKING 5PAC~5 ......... 144 ENCLOSED ............. .~ TANDEtl .............. % SURFACE ............... 32 G ~ITE OPTION2-5f000 ININNtETKA AX/, N. A TOWNH 0MES MARCH 19, ~00~ T U S H I [ MONTGOM~{Iy