082817 EDA Meeting Packet
EDA MEETING
City Hall, 4401 Xylon Avenue North
Monday, August 28, 2017
President Kathi Hemken
Commissioner John Elder
Commissioner Andy Hoffe
Commissioner Eric Lammle
Commissioner Jonathan London
1. Call to order – EDA Meeting of August 28, 2017
2. Roll call
3. Approval of Minutes:
August 14, 2017
4. Resolution approving contract for private redevelopment with The Lodge of New
Hope, LLC and awarding the sale of, and providing the form, terms, covenants and
directions for the issuance of its Tax Increment Revenue Note, Series 20__, and
resolution approving an assignment and subordination of development agreement
between the Authority, The Lodge of New Hope, LLC, and Charter Bank
(improvement project no. 1006)
5. Resolution awarding the contract for rehabilitation work in association with the EDA
owned property located at 3984 Zealand Avenue North (improvement project no.
997)
6. Resolution approving purchase agreement for the acquisition of 7303 62nd Avenue
North (improvement project no. 1007)
7. Adjournment
EDA Meeting
Page 1 August 14, 2017
City of New Hope
4401 Xylon Avenue North
New Hope, Minnesota 55428
EDA Minutes August 14, 2017
Regular Meeting City Hall
CALL TO ORDER President Hemken called the meeting of the Economic Development Authority to
order at 7:56 p.m.
ROLL CALL Present: Kathi Hemken, President
John Elder, Commissioner
Andy Hoffe, Commissioner
Eric Lammle, Commissioner
Jonathan London, Commissioner
Staff Present: Kirk McDonald, City Manager
Jerry Beck, Communications Coordinator
Aaron Chirpich, Community Development Specialist
Tim Fournier, Police Chief
Valerie Leone, City Clerk
Jeff Sargent, Director of Community Development
Steve Sondrall, City Attorney
Bernie Weber, Director of Public Works
Stacy Woods, Assistant City Attorney
Also Present: Stacie Kvilvang, Ehlers
APPROVAL OF
MINUTES
Item 3
Motion was made by Commissioner Hoffe, seconded by Commissioner London,
to approve the minutes of July 24, 2017. Voted in favor thereof: Hemken, Elder,
Hoffe, London; and the following voted against the same: None; Abstained:
Lammle; Absent: None. Motion carried.
GOOD SAMARITAN
TIF DISTRICT
IMP. PROJECT 1006
Item 4
President Hemken introduced for discussion EDA Item 4, Resolution adopting a
modification to the redevelopment plan for Redevelopment Project No. 1,
establishing the Good Samaritan Tax Increment Financing District Therein, and
adopting a tax increment financing plan therefor (project no. 1006).
Mr. Jeff Sargent, community development director, explained that several items
must be approved to enable Good Samaritan Society’s construction of an assisted
living facility as an addition to their campus at 8100 27th Avenue North. Mr.
Sargent stated the EDA is asked to pass a resolution adopting the modification to
the redevelopment plan for Redevelopment Project No. 1, establishing the Good
Samaritan Tax Increment Financing District, and adopting a tax increment
financing plan. He stated the TIF District will facilitate the redevelopment of
properties located at 2765 and 2773 Virginia Avenue that were acquired and
prepared for development by the Good Samaritan Society, and will aid in the
construction of a 3‐story, 31‐unit assisted living facility. The TIF assistance will
specifically be used for the construction of public improvements, utilities,
administrative costs and other qualifying expenses.
EDA Meeting
Page 2 August 14, 2017
Mr. Sargent reported that a TIF agreement (development agreement) is being
prepared, and it will be presented on August 28, 2017, for consideration by the
EDA.
Mr. Sargent stated subsequent to adjournment of the EDA meeting, a public
hearing on the TIF plan will be held by the City Council.
Mr. Sargent explained the planning commission reviewed the proposed
development at its August 2 meeting and determined the proposal is consistent
with the city’s comprehensive plan.
Ms. Stacie Kvilvang, Ehlers, explained creation of the Good Samaritan Housing
Tax Increment Financing District will facilitate the construction of 31 assisted
living units, of which seven units will be affordable to households with incomes
at or below 50% of the area median income. She stated the duration of the district
will be 25 years (26 years of increment). She stated it is anticipated that
development will begin in 2017, the facility will be open in late 2018, and the first
tax increment will be generated in 2019. She stated the terms of the development
agreement will be reviewed on August 28. She indicated the TIF plan contains a
maximum budget of $2.9 million, and the project is proposed to be financed by a
pay‐as‐you‐go note.
President Hemken questioned if the assisted living facility would be a tax‐paying
entity. Ms. Kvilvang responded affirmatively.
Commissioner London inquired of the history of the two vacant parcels. Mr.
Sargent indicated Good Samaritan Society purchased the four‐plex properties
located at 2765 and 2773 Virginia Avenue North in 2012 and subsequently
demolished the buildings.
Commissioner London expressed his opposition to tax increment financing as the
housing facility will require city resources (emergency response) greater than the
city’s share of taxes ($2,000) and the taxes will not increase for several years when
the increment is paid. He pointed out the project could not proceed without TIF
assistance. He commented that he would like to review the development
agreement and finances at the initial discussion phase.
Ms. Kvilvang explained the financial analysis process.
RESOLUTION 2017‐11
Item 4
Commissioner Lammle introduced the following resolution and moved its
adoption “RESOLUTION ADOPTING A MODIFICATION TO THE
REDEVELOPMENT PLAN FOR REDEVELOPMENT PROJECT NO. 1,
ESTABLISHING THE GOOD SAMARITAN TAX INCREMENT FINANCING
DISTRICT THEREIN, AND ADOPTING A TAX INCREMENT FINANCING
PLAN THEREFOR (PROJECT NO. 1006)”. The 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; and the following voted against the same: London; 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.
EDA Meeting
Page 3 August 14, 2017
INTERFUND LOAN
IMP. PROJECT 1006
Item 5
President Hemken introduced for discussion EDA Item 5, Resolution authorizing
an interfund loan for advance of certain costs in connection with the Good
Samaritan Tax Increment Financing District (project no. 1006).
Mr. Jeff Sargent, director of community development, stated the EDA is asked to
approve a resolution authorizing an internal (interfund) loan to the Good
Samaritan Tax Increment Financing District (TIF). The resolution would allow the
EDA to reimburse itself up to $20,000 for qualified costs associated with the
establishment of the Good Samaritan Housing TIF District. He noted most
commonly, these costs are administrative fees accrued through the creation of the
district, but could also include costs associated with public utilities, streets and
sidewalks, or other site preparations or improvements.
RESOLUTION 2017‐12
Item 5
Commissioner Elder introduced the following resolution and moved its adoption
“RESOLUTION AUTHORIZING AN INTERFUND LOAN FOR ADVANCE
OF CERTAIN COSTS IN CONNECTION WITH THE GOOD SAMARITAN
TAX INCREMENT FINANCING DISTRICT (PROJECT NO. 1006)”. The motion
for the adoption of the foregoing resolution was seconded by Commissioner
Lammle, and upon vote being taken thereon, the following voted in favor thereof:
Hemken, Elder, Hoffe, Lammle; and the following voted against the same:
London; 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.
IMP. PROJECT 993
Item 6
President Hemken introduced for discussion EDA Item 6, Resolution approving
purchase and redevelopment agreement with Regal Homes, LLC for the Sale of
3751 Louisiana Avenue North (improvement project no. 993).
Mr. Aaron Chirpich, community development specialist, explained that RFPs
were provided to 20 builders, and proposals were submitted by Regal Homes,
LLC, Novak‐Fleck Inc. and Tollberg Homes, LLC. Mr. Chirpich reviewed the
proposals of the three builders and indicated Regal Homes was selected as the
preferred builder. He noted Regal Homes recently constructed homes at 4415 and
4417 Nevada Avenue North, and one has sold for $364,000. Mr. Chirpich stated
the same two‐story home design is proposed for the Louisiana site.
The EDA commended city staff and the city attorney’s office for making strides
with the scattered site housing program.
President Hemken opened the public hearing for comments.
Mr. Chuck Schmidt, 3641 Louisiana Avenue North, was recognized. Mr. Schmidt
expressed support for the project. He expressed disappointment that the city is not
more proactive on acquiring houses that need rehab as they detract from the
neighborhood.
Mr. Jeff Sargent, director of community development, explained the legal
limitations. He pointed out that staff is trying to enact a more robust code
enforcement program that may assist with property maintenance.
EDA Meeting
Page 4 August 14, 2017
CLOSE HEARING
Item 6
Motion was made by Commissioner Lammle, seconded by Commissioner Elder,
to close the public hearing. All present voted in favor. Motion carried.
RESOLUTION 2017‐13
Item 6
Commissioner Lammle introduced the following resolution and moved its
adoption “RESOLUTION APPROVING PURCHASE AND
REDEVELOPMENT AGREEMENT WITH REGAL HOMES, LLC FOR THE
SALE OF 3751 LOUISIANA AVENUE NORTH (IMPROVEMENT PROJECT
NO. 993)”. The 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 Hoffe,
to adjourn the meeting. All present voted in favor. Motion carried. The New Hope
EDA adjourned at 8:40 p.m.
Respectfully submitted,
Valerie Leone, City Clerk
I:\RFA\COMM DEV\Development\Q & R ‐ Good Samaritan TIF Agreement 8‐28‐17.docx
Request for Action
August 28, 2017
Approved by: Kirk McDonald, City Manager
Originating Department: Community Development
By: Jeff Sargent, Director
Agenda Title
Resolution approving contract for private redevelopment with The Lodge of New Hope, LLC and awarding
the sale of, and providing the form, terms, covenants and directions for the issuance of its Tax Increment
Revenue Note, Series 20__, and resolution approving an assignment and subordination of development
agreement between the Authority, The Lodge of New Hope, LLC, and Charter Bank (improvement project
no. 1006).
Requested Action
The Economic Development Authority (EDA) is requested to consider action on the attached resolutions,
effectively setting the terms for the Good Samaritan Tax Increment Financing (TIF) district, and approving the
Assignment of the contract to the development’s lender.
Policy/Past Practice
It is a past practice for the EDA to consider/approve TIF agreements in conjunction with the creation of new
TIF districts throughout the city.
Background
At the August 14, 2017, City Council and EDA meeting, the EDA approved the TIF plan and the interfund loan
for the Good Samaritan TIF District. The City Council held a public hearing and approved the TIF plan for the
Good Samaritan shortly thereafter. Customarily, the EDA would have also approved the TIF agreement to set
the terms of the Good Samaritan TIF District at the same meeting, however the developer’s legal counsel
requested additional time to review the terms. Staff agreed to bring the terms back to the EDA at the August
28 meeting.
Ehlers, the city’s redevelopment financial consultants, conducted a thorough review of the developer’s budget
and operating pro forma to ensure that all development costs, anticipated revenues, and expenditures were
represented appropriately. Based upon the review of the developer’s pro forma and the current market
conditions, Ehlers concluded that the proposed 31‐unit, 3‐story assisted living facility would not reasonably be
expected to occur solely through private investment within the near future. Due to costs associated with
developing a small project and providing units at an affordable rent and service fee, the proposed development
is only feasible through financial assistance provided by the city by creating the TIF district. Ehlers recommends
the following terms within the TIF Agreement:
1. Contract is between the EDA and Community Asset Development Group, LLC (“the Redeveloper”).
2. City create a housing district for the project.
3. Provide the redeveloper a PAYGO TIF Note for $534,000 for 15 years at 3.9% and paid with 90% of the
tax increment (EDA retains 10% for administrative costs). Payment dates are expected to be August 1,
2019 through February 1, 2034. Note may be assigned to a third party and EDA consents to the
assignment conditioned upon receipt of an investment letter from the third party.
Agenda Section
EDA
Item Number
4
Request for Action, Page 2
4. Commence construction by December 31, 2017 and be completed by June 30, 2019.
5. Developer has deposited $10,000 with the EDA to pay costs associated with analyzing their TIF request,
creating the TIF district and development of the TIF agreement. The Redeveloper will replenish the
deposit as needed to pay 100% of the EDA’s costs.
6. 20% of the units (7) must be affordable to persons at or below 50% of the AMI. Redeveloper is required
to submit required documentation to the EDA by February 2nd an annual basis, in order to receive TIF
payments.
It should also be noted that the developer is requesting that the EDA issue the TIF Note directly to the lender.
This is a bit different than what customarily happens when the Note is paid to the developer with the
understanding that the payments under the Note could transfer to the lender if the developer defaults under
its loan agreement. There are provisions in the Assignment document that would give rights to the EDA to
terminate the agreement and the Note if there is any kind of default by the developer under the agreement.
Stacie Kvilvang from Ehlers, and Martha Ingram, the city’s redevelopment attorney, will be in attendance to
help answer any questions that the EDA may have.
Recommendation
The EDA will need to take two separate actions to approve the TIF agreement. First, it is recommended that
the EDA approve the resolution establishing the terms for the Good Samaritan TIF District. Second, in a
separate motion, it is recommended that the EDA approve the resolution approving an assignment and
subordination of development agreement between the Authority, The Lodge of New Hope, LLC, and Charter
Bank
Attachments
TIF Agreement Resolution
Assignment and Subordination Resolution
TIF agreement
Assignment and Subordination Agreement
Ehlers Memo
I:\RFA\COMM DEV\Development\Q & R ‐ Award Rehabilitation Contract for 3984 Zealand Avenue Project 997.docx
Request for Action
August 28, 2017
Approved by: Kirk McDonald, City Manager
Originating Department: Community Development
By: Aaron Chirpich, CD Specialist
Agenda Title
Resolution awarding the contract for rehabilitation work in association with the EDA owned property located
at 3984 Zealand Avenue North (improvement project 997).
Requested Action
Staff requests that the EDA award Day Construction with the rehabilitation contract for the remodel and
rehabilitation of 3984 Zealand Avenue North as part of the scattered site housing program.
Policy/Past Practice
It is the practice of the EDA to award contracts to the lowest responsible bidder for the completion of
rehabilitation work.
Background
On April 27, 2017, the EDA purchased the vacant and foreclosed single‐family home located at 3984 Zealand
Avenue North for $165,000. The intent of the purchase was to rehabilitate the home for resale and maximize
the value of the finished product. There is substantial work needed for the exterior and interior of the home.
Staff completed multiple inspections of the property and compiled a list of project specifications. The
proposed scope of work includes a “base” level of work to be completed that staff considers the minimum
level of improvements necessary. Staff worked with a relator to estimate the value of the completed home
based upon the desired scope of work. The estimated value of the home following completion of the base
improvements is $265,000. Based upon this assumption, the EDA would have a budget of approximately
$75,000 to complete the base improvements and break even. Staff also developed a list of “alternates” to
consider as part of the project that may have the ability to increase the end value of the home and subsequent
sales price.
Following review of the base specifications and alternates with the Council, staff requested quotes from six
contractors. The contractors were asked to provide a cost for the base improvements and individual costs for
each alternate. Staff received quotes from three contractors. The bid results are listed in the tables below. Due
to the large spread in bids, alternate amounts are only provided for Day Construction, as they have provided
the only viable bid for the project.
Table 1. Base Bids
Contractor Base Bid Amount
Day Construction, LLC $84,129
B.E. Homes $151,898
Higgins Construction, LLC $172,000
Agenda Section
EDA
Item Number
5
Request for Action, Page 2
Table 2. Alternate Bids
Contractor Alternate Type Bid Amount
Day Construction
Install granite countertops
in kitchen in place of
laminate
Install ceramic tile
backsplash in kitchen
Install ceramic tile in place
of vinyl flooring (multiple
locations)
Re‐roof house
Install shower in master
bath
Replace driveway with
new asphalt in place of
repairing existing concrete
Move washer and dryer to
new location
$2,223*
$1,552*
$1,640*
$5,735
$5,706*
(‐ $600*)
$1,058
*indicates an alternate that is recommend for approval
Recommendation
In review of the quotes received, staff recommends awarding the contract to Day Construction, as they are
the only contractor to produce a viable bid. The base bid submitted by Day Construction is $9,129 over the
budgeted amount of $75,000 for base improvements. Despite the projected deficit, staff believes the project
should move forward. Staff also recommends including the following alternates as part of the project:
Install granite countertops in kitchen
Install tile backslash in kitchen
Install ceramic tile in place of vinyl (multiple locations)
Install shower in master bath
Replace concrete driveway with asphalt
Total Cost of Recommended Alternates = $10,521
Request for Action, Page 3
After discussing alternate options with Day Construction and the EDA’s realtor, staff is comfortable
expecting that the EDA can recapture the majority of the additional costs by increasing the sale price to
$275,000. Under this assumption, the EDA still stands to lose an estimated $8,765 on the project. In summary,
staff recommends awarding the rehabilitation contract to Day Construction for a total of $94,650. The tables
below provide a basic breakdown of the project budget options.
Table 3. Base Budget Summary
EDA Base Rehab
Budget (based on a sale
price of $265,000)
Day Construction Base
Bid Amount
Difference (loss)
$75,000
$84,129
($9,129)
Table 4. Budget Summary with Alternates (recommended option)
EDA Rehab Budget with
Alternates (based on a sale price
of $275,000)
Day Construction Combined
Bid Amount (base + selected
alternates)
Difference (loss)
$85,000
$94,650
($8,765)
Experience with Recommended Contractor
The EDA has not worked with Day Construction in the past. Staff initially became aware of their work while
searching for builders as part of the scattered site housing program. Day Construction is based out of New
Hope, and the owner Matthew Day is a New Hope resident. The company is active in the construction of new
homes, and completes several rehabilitation projects each year. Staff requested, and received client references
from Day Construction. At the time of this report, staff had not connected with any of the references. Client
Feedback will be available at the EDA meeting.
Funding
Funding for this project will come from EDA resources. Grant funds will not be used. Any loss incurred on
this project will diminish the EDA fund balance.
Attachments
Resolution
Project budget
Bids received
Scope of work
I:\RFA\COMM DEV\Development\Q & R ‐ 7303 62nd Ave Acquisition 8‐28‐17.docx
Request for Action
August 28, 2017
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 7303 62nd Avenue North (improvement
project no. 1007)
Requested Action
Staff requests the EDA to authorize entering into a Purchase Agreement for the acquisition of 7303 62nd
Avenue North, for $132,900 (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.
7303 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. 7303 62nd Avenue is located
in one of the EDA’s priority redevelopment neighborhoods, just east of the recently completed Compass
Pointe apartment project. The homes in this area are some of the smallest and oldest in city, and 7303 62nd
Avenue is no exception, as it was built in 1952 with just over 700 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 65 feet wide, and therefore narrower than the average 75‐
foot New Hope lot. However, it is big enough to accommodate 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 when a point of sale inspection was ordered on the home. Following
the inspection, staff reached out to the owner to discuss pricing. At the time, the home was not yet listed for
sale on the MLS. The seller indicated that they were willing to hold off from listing the home and work
directly with the EDA if the EDA was willing to pay the expected list price of $132,900 for the home. Staff
feels strongly that the anticipated listing price would attract investors looking to convert the home into a
rental property. Rather than risk competition on the open market, staff agreed to submit a full price offer of
$132,900. The offer was made contingent upon EDA approval and environmental clearance by Hennepin
County.
Funding
Funding for the acquisition and all costs associated with demolition of this home will come from EDA
reserves. The EDA will be reimbursed with CDBG grant funds for eligible expenses at a later date.
Agenda Section
EDA
Item Number
6
Request for Action, Page 2
Recommendation
Staff is seeking approval of the acquisition of 7303 62ndAvenue. Staff recommends the EDA approve the
attached resolution prepared by the City Attorney and terms of the attached purchase agreement.
Attachments
Resolution
Project Budget
County Tax Information
Location Map
Pictures of Home
Sample Lot Layout
Purchase Agreement