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051418 EDA Meeting Packet EDA MEETING City Hall, 4401 Xylon Avenue North Monday, May 14, 2018 President Kathi Hemken Commissioner John Elder Commissioner Andy Hoffe Commissioner Eric Lammle Commissioner Jonathan London 1. Call to order – EDA Meeting of May 14, 2018 2. Roll call 3. Approval of Minutes:  April 9, 2018 4. Resolution approving sale of 3984 Zealand Avenue North (improvement project no. 997) 5. Resolution approving purchase agreement for the acquisition of 7311 62nd Avenue North (improvement project no. 1022) 6. Resolution approving assignment of tax increment note from Industrial Equities, New Hope, LLC to trustees of John N. and Rebecca B. Allen 2012 family trust (improvement project no. 971) 7. Adjournment EDA Meeting Page 1 April 9, 2018 City of New Hope 4401 Xylon Avenue North New Hope, Minnesota 55428 EDA Minutes April 9, 2018 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: 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, Police Chief Valerie Leone, City Clerk Chris Long, City Engineer Jeff Sargent, Director of Community Development Bernie Weber, 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 March 12, 2018. Voted in favor thereof: Hemken, Hoffe, London; and the following voted against the same: None; Abstained: Lammle; Absent: Elder. Motion carried. IMP. PROJECT 1018 Item 4 President Hemken introduced for discussion EDA Item 4, Resolution approving purchase agreement for the acquisition of 5355 Oregon Avenue North (improvement project no. 1018). Mr. Aaron Chirpich, community development specialist, stated the requested action approves a purchase agreement for the acquisition of 5355 Oregon Avenue North for $170,000 for redevelopment as part of the city’s scattered site housing program. He illustrated and described the home as a 900-square-foot, single-story rambler that was built in 1952 and sits over a dirt floor crawlspace. He stated , although the home has had cosmetic updates, it has not been substantially improved since built and does not meet the expectations of many buyers in the market. Mr. Chirpich stated rehabilitation of the home does not make economic sense, and based on the home’s age and functionally obsolete floor plan, staff views the home as a candidate for demolition to facilitate the development of two new single-family homes. EDA Meeting Page 2 April 9, 2018 Mr. Chirpich explained that the lot could be subdivided to accommodate two new homes and they would meet the setback requirements. He stated although the proposed lots are sufficient size to construct two homes, the south lot would require a 464-square-foot variance for lot size. He stated the potential subdivision of the subject property will be fully reviewed by the Planning Commission and their recommendation will be forwarded to the City Council for final action. He emphasized the purchase of 5355 Oregon Avenue North by the EDA is not contingent on a variance being approved. Mr. Chirpich stated the bank accepted the city’s offer of $170,000. He pointed out that because the house is in relatively good condition, it will not qualify as a blighted property. Therefore, CDBG grant funds cannot be used for the project and a value gap of $105,000 will need to be covered by EDA reserve funds. He reviewed the proposed costs and noted despite a projected value gap of $105,000 on this project, the long-term benefits of securing a double-lot opportunity are substantial. He indicated the site could support two new single-family homes valued in the $350,000 range per home, thereby increasing the value of the property by $550,000. He explained this type of increase would achieve the broader goal of growing the city’s overall market value on a lot-by-lot basis and bring new construction to a neighborhood that is located in a distressed census tract. He recommended approval of the resolution authorizing the purchase of the property and noted the closing could occur by the end of April. Mr. Jeff Sargent, community development director, commended Mr. Chirpich for exploring the purchase and devising a lot subdivision proposal for the uniquely shaped parcel. He emphasized the city is not obligated to approve any variances, as the property can be re-sold if needbe. Council Member Lammle stated he would support a variance due to the unique shaped lot of 5355 Oregon Avenue North. Mr. Kirk McDonald, city manager, conveyed his appreci ation to the community development staff for working towards the overall long-term goal to raise the city’s tax valuation. RESOLUTION 2018-04 Item 4 Commissioner Lammle introduced the following resolution and moved its adoption “RESOLUTION APPROVING PURCHASE AGREEMENT FOR THE ACQUISITION OF 5355 OREGON AVENUE NORTH (IMPROVEMENT PROJECT NO. 1018)”. 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, London; and the following voted against the same: None; Abstained: None; 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 8:20 p.m. EDA Meeting Page 3 April 9, 2018 Respectfully submitted, Valerie Leone, City Clerk I:\RFA\COMM DEV\Development\Housing\3984 Zealand\Q&R Sale of 3984 Zealand Avenue 5-14-18.docx Request for Action May 14, 2018 Approved by: Kirk McDonald, City Manager Originating Department: Community Development By: Aaron Chirpich, CD Specialist Agenda Title Resolution approving sale of 3984 Zealand Avenue North (improvement project no. 997). Requested Action Staff requests that the EDA approve a resolution approving the sale of the EDA-owned property located at 3984 Zealand Avenue North. Policy/Past Practice The sale of EDA-owned property must be reviewed and approved by the EDA through the public hearing process. Background The EDA purchased the foreclosed single-family home located at 3984 Zealand Avenue North on April 26, 2017 as part of the Scattered Site Housing Program. The purchase price was $165,000, and the intent of the purchase was to rehabilitate the house and create the highest value end product possible. The EDA hired Day Construction and initially approved a contract for $94,650, which covered a broad scope of work for the entire property and assumed a post-rehab sales price of $265,000. Under the original budget assumptions, staff expected that the EDA would incur a loss of $10,000 upon project completion. However, as the project progressed, staff observed an increase in sales prices for single-family homes across the city and comparable sales indicating that the EDA could sell 3984 Zealand Avenue for more than originally expected. Under the improved market conditions, staff was comfortable adjusting the anticipated sales price to $295,000. As a result of the improved market and more budget flexibility, staff felt that it was appropriate to complete additional projects on the property and expand the scope of work to further increase the value of the home, while keeping a budget that would allow the EDA to break even. As the project was nearing completion, staff was approached by an interested buyer that had observed the city’s Scattered Site Housing Program sign in the front yard of the home. Staff agreed to show the home to the prospective buyers without representation from a relator in an effort to save both parties from paying a brokerage fee or listing commission. After showing the home and conveying an asking price of $295,000, the interested buyers expressed their desire to purchase 3984 Zealand Avenue for the full asking price. Therefore, the city attorney prepared a purchase agreement, and staff arranged a meeting with the family to execute the agreement. Due to an absence of a real-estate sales commission as part of the transaction, staff agreed to include a full replacement of the roof as part of the contract terms. In the end, staff expect that the proceeds from the sale will cover all costs associated with the project and generate a small profit. For more details, a copy of the revised project budget is attached for review. Recommendation Staff recommends the EDA approve the attached resolution prepared by the City Attorney and the terms of the attached purchase agreement, thereby authorizing the sale of 3984 Zealand Avenue North. Agenda Section EDA Item Number 4 Request for Action, Page 2 Attachments  Resolution  Project Budget  Public Hearing Notice  Purchase Agreement I:\RFA\COMM DEV\Development\Housing\7311 62nd Avenue\Q & R - 7311 62nd Ave Acquisition 5-14-18.docx Request for Action May 14, 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 7311 62nd Avenue North (improvement project no. 1022) Requested Action Staff requests the EDA to authorize entering into a Purchase Agree ment for the acquisition of 7311 62nd Avenue North, for $130,000 (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. 7311 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. 7311 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 7311 62nd Avenue is no exception, as it was built in 1952 with just over 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 60 feet wide, and therefore narrower than the average 75- foot New Hope lot. The lot 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. However, it is likely that the lot will only accommodate a two-car garage. Staff became aware of the opportunity to purchase 7311 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 $137,000. The 2018 tax assessed value has been set at $124,000 by Hennepin County. Staff discussed the project budget with the city manager and decided to offer $130,000 to purchase the home. This offer was accepted by the seller on the following day. 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 a portion of eligible expenses at a later Agenda Section EDA Item Number 5 Request for Action, Page 2 date. The EDA currently has $55,000 available of CDBG grant funds for 2018. This amount will not be sufficient to cover the entire value gap on the project. Therefore, the remaining value gap of $42,750 will have to be covered by EDA reserve funds. A copy of the full project budget is attached for review. Recommendation Staff is seeking approval of the acquisition of 7311 62nd Avenue. Staff recommends the EDA approve the attached resolution prepared by the City Attorney and terms of the attached purchase agree ment. Attachments  Resolution  Location Map  Project Budget  County Tax Information  Pictures of Home  Sample Lot Layout  Purchase Agreement Form PICPIX.SR - "TOTAL" appraisal software by a la mode, inc. - 1-800-ALAMODE Subject Photo Page N/A 7311 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 7311 62nd Ave N N/A 919 5 2 1.0 A;BsRd A;Res/Sch/Apt 14,406 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 7311 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 7311 62nd Ave N New Hope Hennepin MN 55428 City of New Hope Dining Basement Family Basement Work Room HVAC Oil Tank Basement Bath 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 7311 62nd Ave N New Hope Hennepin MN 55428 City of New Hope Basement Den Basement Laundry Subject Side Subject Side Deck Shed Borrower Lender/Client Property Address City County State Zip Code I:\RFA\COMM DEV\Development\Q & R Industrial Equities TIF Note Assignment 5-14-18 Project 971.docx Request for Action May 14, 2018 Approved by: Kirk McDonald, City Manager Originating Department: Community Development By: Aaron Chirpich, CD Specialist Agenda Title Resolution approving assignment of tax increment note from Industrial Equities, New Hope, LLC to trustees of John N. and Rebecca B. Allen 2012 family trust (improvement project no. 971). Requested Action The developer of the Industrial Equities New Hope project has requested an assignment of the tax increment note that was issued by the city as part of the agreement for the redevelopment of 9449 Science Center Drive. The requested assignment will transfer future TIF payments to a trust fund established by the developer rather than the corporation that was originally designated in the redevelopment agreement. Staff requests the EDA approve a resolution approving an assignment of the tax increment note. Policy/Past Practice The terms of the tax increment note establish the right of Industrial Equities, New Hope, LLC to assign the tax increment note. The request for assignment has been reviewed by Martha Ingram, the city’s public finance attorney, and found appropriate. Background In early 2015, Industrial Equities purchased the vacant and distressed industrial building located at 9449 Science Center Drive with the intent of redeveloping the site. Shortly after acquisition, the owner approached the EDA with a request for TIF assistance to pay for demolition, abatement, and soil corrections on the site. In November of 2015, the EDA agreed to support the project by providing $370,000 of TIF assistance. Subsequently, the Industrial Equities TIF district was established and the project was completed. Since completion of the project in January of 2017, the building has sat vacant. However, the developer/owner has recently reached an agreement with Twin Cities Acoustics to lease 2/3 of the 48,000 s.f. building. As part of the agreement, Twin Cities Acoustics will actually acquire a partial ownership stake in the building. This ownership stake has prompted the request for assignment of the tax increment note, as the current owner would like to separate the note under the new ownership arrangement. Twin Cities Acoustics is a family-owned and operated business that was established in 1972. The company is currently located in Plymouth, and plans to locate their headquarters to New Hope while retaining their location in Plymouth. The company is a provider and installer of acoustical materials for the construction industry. The company has worked on many notable projects including:  Excel Energy Center  Minneapolis Convention Center  U.S. Bank Tower  University of Minnesota Molecular and Cellular Biology Building  MSP International Airport Concourse expansion Agenda Section EDA Item Number 6 Request for Action, Page 2 Recommendation Staff recommend that the EDA approve the attached resolution authorizing the assignment of the tax increment note. Attachments  Resolution  Assignment