022717 EDA Meeting Packet
EDA MEETING
City Hall, 4401 Xylon Avenue North
Monday, February 27, 2017
Commences upon adjournment of the City Council Meeting
Agenda
President Kathi Hemken
Commissioner John Elder
Commissioner Andy Hoffe
Commissioner Eric Lammle
Commissioner Jonathan London
1. Call to order – EDA Meeting of February 27, 2017
2. Roll call
3. Approval of Minutes:
February 13, 2017
4. Motion to approve an amendment to the Alatus Development Agreement in
relation to terms concerning the financing of a Variable Refrigerant Flow system
for the building (project no. 964)
5. Adjournment
EDA Meeting
Page 1 February 13, 2017
City of New Hope
4401 Xylon Avenue North
New Hope, Minnesota 55428
EDA Minutes February 13, 2017
Regular Meeting City Hall
CALL TO ORDER President Hemken called the meeting of the Economic Development Authority
to order at 8:36 p.m.
ROLL CALL Present:
Absent:
Kathi Hemken, President
Andy Hoffe, Commissioner
Eric Lammle, Commissioner
Jonathan London, Commissioner
John Elder, Commissioner
Staff Present:
Kirk McDonald, City Manager
Aaron Chirpich, Community Development Specialist
Tim Fournier, Director of Police
Valerie Leone, City Clerk
Chris Long, City Engineer
Jeff Sargent, Director of Community Development
Bernie Weber, Acting Director of Public Works
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 January 23, 2017. All present voted in favor. Motion
carried.
IMP. PROJECT 997
Item 4
President Hemken introduced for discussion EDA Item 4, Resolution approving
Purchase Agreement for the acquisition of 3984 Zealand Avenue North.
Mr. Aaron Chirpich, community development specialist, explained that the
market for distressed properties has become more competitive and the prices for
acquisition of homes has increased. He commented that homes that are “flipped”
by investors may have interior improvements but lack in exterior improvements
that are more costly such as roof, siding and windows.
He requested authority to enter into a purchase agreement for the acquisition of
3984 Zealand Avenue North, for a purchase price of $165,000 plus any associated
fees. He noted the closing would take place within 30 days.
Mr. Chirpich reported the home is a vacant and foreclosed property that was
part of an estate. The home was constructed in 1964 and is in need of general
maintenance. He stated improvements are estimated at $65,000 and would
include a new roof, siding, windows, overhead garage door, new kitchen, re‐
conditioning of existing hardwood floors, remodel the master and main bath,
new interior doors and trim, interior painting and new carpet in the lower level.
Staff recommends purchasing, renovating and reselling the property. He
EDA Meeting
Page 2 February 13, 2017
explained EDA funds will be used for the acquisition and remodeling costs. He
pointed out there will be no income restrictions as CDBG funds are not proposed
for the project.
City Manager McDonald inquired regarding the owner‐occupant requirement.
Assistant City Attorney Stacy Woods indicated the city can require the property
to be owner‐occupied by its first owner.
Commissioner London commented that properties that have been “flipped” and
put on the market for less than $300,000 are in high demand. He noted the vast
majority of rehab work in the private sector is not high quality. He supported
the city’s endeavor for rehabilitation of distressed properties.
Commissioner Lammle inquired of the process undertaken for remodeling
work.
Mr. Chirpich explained the city would solicit bids from multiple contractors for
each rehab project.
RESOLUTION 2017‐02
Item 4
Commissioner Lammle introduced the following resolution and moved its
adoption “RESOLUTION APPROVING PURCHASE AGREEMENT FOR
THE ACQUISITION OF 3984 ZEALAND AVENUE NORTH”. The motion for
the adoption of the foregoing resolution was seconded by Commissioner Hoffe,
and upon vote being taken thereon, the following voted in favor thereof:
Hemken, Hoffe, Lammle; and the following voted against the same: None;
Abstained: London; Absent: Elder; 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 Hoffe,
to adjourn the meeting. All present voted in favor. Motion carried. The New
Hope EDA adjourned at 8:50 p.m.
Respectfully submitted,
Valerie Leone, City Clerk
I:\RFA\COMM DEV\Development\EDA ‐ Amended to Alatus Dev Agr ‐ VRF System 2‐27‐17.docx
Request for Action
February 27, 2017
Approved by: Kirk McDonald, City Manager
Originating Department: Community Development
By: Jeff Sargent, Director
Agenda Title
Motion to approve an amendment to the Alatus Development Agreement in relation to terms concerning the
financing of a Variable Refrigerant Flow system for the building (project no. 964)
Requested Action
Staff and the city’s redevelopment consultant from Ehlers requests that the Economic Development Authority
(EDA) approve a motion to amend the Development Agreement between the EDA and Alatus, LLC in relation
to terms concerning the financing of a Variable Refrigerant Flow (VFR) system for the building.
Policy/Past Practice
It is a practice of the EDA to approve amendments to Development Agreements when conditions change that
warrant the amendment.
Background
Bob Lux, Principal of Alatus, LLC, approached the city with an idea to incorporate a state‐of‐the‐art heating
and cooling system for the project in New Hope. Instead of incorporating individual “MagicPak” systems in
each apartment unit, Alatus is looking to utilize a VRF system for the building. VRF systems achieve extremely
high efficiencies by modulating the flow of the refrigerant according to the exact demands of specific areas
throughout the building. By coupling the boiler/chiller VRF system with solar power, the new apartment
building in New Hope would be able to achieve close to zero emissions, meaning that the building would
generate no carbon footprint. This would allow the building to achieve LEED certification, making it a model
project for the future of heating and cooling needs of similar buildings in the metro area. Support of this project
would also align with the city’s goals of striving for a “green” environment, as it does with the GreenStep
Program.
The benefits of the VRF HVAC system include the nearly 100% efficiency rating, the fact that there will be no
carbon footprint for the building, as well as better control of heating and cooling needs throughout the
development. The VRF system uses roughly 50% of the energy that the MagicPak systems use, saving an
equivalent in emissions of 615,000 gallons of gasoline over a 20‐year period. Each apartment unit would have
its own meter to monitor heating and cooling usage, but would no longer need to have individual MagicPak
systems in each unit, adding to the aesthetics of the building as well. Having a LEED certified building within
city limits is also beneficial to the city.
The challenge facing Alatus to incorporate the VRF system is the cost. Alatus received a quote of $688,000 for
the installation of the VRF HVAC system. Mr. Lux is excited to install the VRF system because of the positive
impacts it would have on the building and the city, however he stated that the cost would be too prohibitive
for Alatus to pursue on its own. He has asked if the City Council would be amenable to cover half the cost of
the system (up to $350,000) to help with the project. This proposal was brought to the City Council’s attention
at the February 21, 2017 work session meeting.
Agenda Section
EDA
Item Number
4
Request for Action, Page 2
Funding
Ehlers conducted a TIF analysis of this proposal, and has indicated that if the Council would like to pursue this
project, TIF generated from the project could be used to help pay for the VRF system. The effect on the TIF note
would be an increase to the agreed upon terms from 23 years of assistance to 23.5 years.
Another option would be for Alatus to agree to accept a monetary contribution from the city in the form of a
loan. Terms and conditions of the loan would be worked out and presented to the EDA when a resolution
approving the amendment to the Development Agreement would be considered.
Attachments
VRF System Benefits Memo provided by Alatus, LLC
VRF System Benefits
8400 Bass Lake Road, New Hope MN
- 2 -
Memo
To: Jeff Sargent, Director of Community Development
City of New Hope
From: Robert Lux
Ashley Bisner
Alatus LLC
Date: February 15, 2017
Re: VRF System Benefits
Alatus’ goal for 8400 Bass Lake Road Apartments (“8400 Bass Lake”) is to create an exceptional
experience not only for the building’s residents, but also for the citizens of New Hope and the citizens of
the surrounding area; every aspect of the building has been designed with this goal in mind. Alatus
strives to set the new standard when developing buildings – specifically, to incorporate designs and
features that others are compelled to emulate. One way Alatus seeks to achieve this goal at 8400 Bass
Lake is with the building’s mechanical system.
There are currently three mechanical systems utilized in apartment buildings: (1) MagicPak, (2) Water
sourced heat pumps, and (3) Variable Refrigerant Flow (VRF). A vast majority of apartment buildings use
separate gas-fired MagicPaks in each individual unit for heating and cooling because the system has the
lowest up-front investment cost and the technology is familiar (it has been around for over 40 years).
Fortunately, there is a better option.
A VRF system presents an opportunity to utilize and benefit from the newest and highest efficiency
technology. The VRF system requires a larger up-front investment cost compared to the other options,
but significantly reduces environmental impact and improves the resident experience. The system also
allows the building to achieve LEED certification and positions it to reach close to a net zero emissions,
making it a model project for future developments in the Twin Cities metro area.
Key Benefits:
1) VRF currently leads the industry as the most energy efficient heating and cooling system
available.
2) A VRF system will vastly improve tenant comfort, system controllability, and building aesthetic
compared to traditional MagicPak systems.
3) VRF technology is built to last.
8400 BASS LAKE ROAD APARTMENTS
- 3 -
1) Energy Efficiency and Lifetime Cost of Energy
The most recent energy survey by the U.S. government (conducted in 2012) shows a use of 6,963 trillion
BTUs of energy each year to operate commercial buildings.1 Almost seven quadrillion BTUs is an
enormous amount of energy and clearly indicates that developers and City officials need to work to
ensure future buildings are built to be more efficient. The easiest and most significant way to improve
energy usage is to invest in high efficiency heating and cooling systems because these systems account
for almost 40% of the energy used by commercial buildings. VRF technology is a full building heating
and cooling system solution that currently leads the industry in energy efficiency and would significantly
reduce the lifetime energy use at 8400 Bass Lake.
VRF systems include the most recent advancements in controls, energy recovery, and heating and
cooling technology. Through these advancements, the VRF system proposed for 8400 Bass Lake will use
50% less energy than the baseline MagicPak system. To put this into perspective, the proposed VRF
system will save the equivalent of 615,000 gallons of gasoline over a 20 -year period; that is enough
gasoline for a car to drive around the entire globe 617 times.
MagicPak Units VRF Potential Savings
by Using VRF
Lifetime Equivalent CO2
Emissions (metric tons) 14,054 8,588 5,466 (39%)
Lifetime Equivalent gasoline
consumed (Gallons) 1,581,418 966,356 615,063 (39%)
Based on a full-scale energy model completed by LG Electronics USA to compare a VRF heat recovery
system to a baseline gas fired MagicPak system, the VRF system will cost $66,000 less per year to
operate than a MagicPak system at 8400 Bass Lake (using current rates). This equates to a heating and
cooling savings of roughly $400 per unit per year. Additionally, VRF systems only use electricity for both
heating and cooling, thus completely replacing unsustainable energy sources with renewable energy.
2) Improved Tenant Comfort, System Controllability, and Building Aesthetic
VRF systems utilize variable speed technology, which is a significant reason the system leads the
industry in energy efficiency. While MagicPak units have two speeds, 100% on or 100% off, the VRF
system has the ability to vacillate between 10% and 100% in order to exactly ma tch the heating or
cooling load a space requires at any given moment. The variable speed technology allows the VRF
system to more accurately maintain space temperature compared to a MagicPak unit. With a VRF
system, each resident can maintain the exact temperature setting they desire using the precise amount
of energy necessary to do so. Comparatively, MagicPak systems have to constantly cycle on and off in
attempts to maintain a desired temperature. The VRF system’s variable speed blower fan that circulates
air in each apartment also provides an additional level of comfort for residents and produces
significantly less noise compared to a MagicPak fan.
1 https://www.eia.gov/consumption/commercial/reports/2012/energyusage/
- 4 -
Figure 1 - Flux Apartments in Uptown, Minneapolis. Picture from: http://bkvgroup.com/wp-
content/uploads/2015/01/flux_img3.jpg
VRF systems use a centralized plant of equipment located in a mechanical room that feeds the terminal
units in each apartment. When compared to a decentralized MagicPak system, the three major benefits
include (1) ease of maintenance, (2) system controllability, and (3) building aesthetic. By centralizing all
of the major equipment in a maintenance room, any service or routine maintenance can be completed
without requiring access to tenants’ apartments. A centralized VRF system includes a central controller
that monitors the entire building and allows the building service personnel to proactively maintain the
system. Lastly, the VRF central plant eliminates the need for the wall penetration a MagicPak unit
requires on the exterior wall of each apartment (see example in Figure 1 below). The large opening
required to install a MagicPak unit detracts from the overall aesthetic of a building and has a tendency
to both rust and allow moisture into the building envelope.
3) Cost implications of utilizing VRF Technology
As outlined above, there are many benefits of utilizing a VRF system. As stated, Alatus’ goal for 8400
Bass Lake is to position the development to be the most advanced suburban apartment product in the
marketplace. As is the case with most leading-edge technology, the up-front costs associated with the
system’s implementation is often times a deterrent to making the better long-term choice. The
additional initial cost of the VRF system as programmed in the building compared to a MagicPak system
is $688,000. Alatus would like to join with the City of New Hope in bringing this technology to 8400 Bass
Lake and would like to propose sharing this additional expense 50% / 50% with the City by reducing the
purchase price on the land by $344,000. We view this as a joint partnership between Alatus and the City
of New Hope to achieve a truly best in class product that demonstrates our values and will serve
residents and citizens into the future.