032293 EDA --' OFFICIAL FILE COPY
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CITY OF NEW HOPE
EDA AGENDA
I
EDA Regular Meeting t4 March 22, 1993
Agenda #4
President Edward J. Erickson
Commissioner W. Peter Enck
Commissioner Gerald Otten
Commissioner Terri Wehling
Commissioner Narky Williamson
1. Call to Order
2. Roll Call
3. Approval of Minutes of February 22, 1993 {Regular and Executive
Session)
4. Presentation of Interim Audit Report Prepared by Springsted Relative
to the Assessment Agreement and Tax Increment Financing on the
Emerald Pointe Apartment Complex {formerly New Hope Terrace)
5. Resolution Appointing Directors to the Board of the New Hope
Community Revitalization Corporation
6. Adjournment
CITY OF NEW HOPE
4401XYLON AVENUE NORTH
HENNEPIN COUNTY, MINNESOTA 55428
Approved EDA Minutes February 22, 1993
Meeting #3
CALL TO ORDER President Erickson called the meeting of the Economic
Development Authority to order at 7:12 p.m.
ROLL CALL Present: Erickson, Enck, Wehling, Otten
Absent: Williamson
APPROVE #INUTES Motion was made by Commissioner Enck, seconded by
Commissioner Otten, to approve the EDA minutes of February
8, 1993. All present voted in favor. Motion carried.
EDA RESOLUTION President Erickson introduced for discussion Item 4,
Item 4 Resolution Finding Need to Acquire Title and Possession of
Property by "Quick-Take" Approving the Appraisal of
Damages Resulting from the Taking, and Ratifying and
Authorizing All Steps Taken by Staff to Acquire the
Property at 5501 Boone Avenue North and 5425 Boone Avenue
North {Improvement Project No. 493}.
Commissioner Enck questioned whether the EDA is pursuing
a friendly condemnation.
Mr. Donahue explained that both property owners have been
approached with that intent; however, they understand that
a project is in place and if an agreement is not reached,
the project will proceed through condemnation. He noted
both property owners are familiar with the condemnation
process.
Commissioner Enck pointed out the significant differences
between the first, second, and third appraisals.
Mr. Donahue stated according to Brad Bjorklund the lower
appraisals are reflective of known poor soil conditions
which increase the cost of developing the property. He
stated the cost of piling for the senior outreach services
building is approximately $550,000.
Commissioner Otten questioned the City's liability
regarding soil contamination if any is discovered in the
future.
Mr. Steve Sondrall, City Attorney, explained that there is
a statutory provision which protects the City for clean-up
costs relating to soil contamination. He commented that
federal law may subject the City to liability; however, he
does not believe there is any concern with this case.
New Hope EDA February 22, 1993
Page 1
Mr. Sondrall continued by stating if an agreement is not
reached with the property owners, the City will proceed
with condemnation and commissioners will be appointed and
after the hearings property values will be determined.
EDA RESOLUTION Commissioner Enck introduced the following resolution and
#93-02 moved its adoption: 'RESOLUTION FINDING NEED TO ACQUIRE
TITLE AND POSSESSION OF PROPERTY BY 'QUICK-TAI~E' APPROVING
THE APPRAISAL OF DAMAGES RESULTING FRON THE TAKING, AND
RATIFYING AND AUTHORIZING ALL STEPS TAI~EN BY STAFF TO
ACQUIRE THE PROPERTY AT 5501 BOONE AVENUE NORTH AND 5425
BOONE AVENUE NORTH (#493)'. The motion for the adoption
of the foregoing resolution was seconded by Commissioner
Wehling, and upon vote being taken thereof; the following
voted in favor thereof: Erickson, Enck, Wehling, Otten;
and the following voted against the same: None;
Abstained: None; Absent: Williamson; whereupon the
resolution was declared duly passed and adooted, signed by
president which was attested to by the city clerk.
NEW HOPE TERRACE President Erickson introduced for discussion Item 5,
APARTNENTS Discussion Regarding Assessment Agreement of New Hope
Item 5 Terrace Apartments (Emerald Pointe Apartments).
Mr. Donahue explained that the owners of Emerald Pointe
Apartments, formerly known as New Hope Terrace Apartments,
are asking the City to change the assessment agreement
which was put into place when the original project was
built. The assessment agreement guarantees that there
will always be sufficient flow of monies to pay off the
tax increment bonds. The assessment agreement stipulates
a minimum 2% increase of market value per year. At the
time the project was developed a base value of 5.5 million
dollars was established. Today that market value is 6.3
million dollars. It will build every year at aminimum of
2%.
He presented illustrations of the projected taxes based on
the market value according to the assessment agreement.
In lgg3 the owners would pay $271,286 in taxes. The total
expenditures in 1993 to pay off the bonds is $221,048.
There is a considerable disparity between revenues and
expenditures. He stated the fund balance on December 31,
1993, would be $600,007. In year 2003 when the bonds are
to be paid off, the fund balance would be $1,936,158. The
current tax rate of the City is 1.27%. He emphasized that
the projected figures are based on the tax capacity rate
remaining constant over time which is an unlikely
scenario.
Hr. Donahue stated the owners would like some relief and
changes to the assessment agreement. They are
experiencing some financial difficulties and in order to
make the project feasible for them they need some changes
New Hope EDA February 22, 1993
Page 2
· to the assessment agreement. He stated prior to the
consideration of changes in the assessment agreement it is
advisable that a third party be hired to conduct an audit
so the EDA is aware of the financial condition.
Mayor Erickson explained that the current market value,
based on the assessment agreement, is 6.3 million.
Without the assessment agreement the County would set the
1993 market value at $ million. He questioned whether a
5 million market value would generate enough property
taxes to pay off the general obligation bonds.
Mr. Donahue explained the consequences and legal
obligations of the City regarding the general obligation
bonds. He stated the City backs the bonds and if the
project were to default and there was no increment to flow
from the tax revenues, the City would be responsible for
payment of the bonds.
He continued by stating the lower market value will
generate a lower tax rate and the EDA must be assured that
the lower value will pay a sufficient amount of revenues
to keep a sufficient fund balance and pay off the bonds.
Next, Mr. Donahue illustrated tax projections based on a
$5,000,000 market value and assuming a constant tax
capacity rate. In 1993 revenue of $216,335 would be
generated and $215,553 in expenditures with a fund balance
of $550,551. The projections between 1993-1998 show
comparatively close revenues and expenditures.
He recommended maintaining a minimum fund balance of
$500,000. The fund balance in 1998 would be $695,207 and
builds to $889,937 by year 2003. He reiterated the fact
that the projections were based on the tax capacity rate
remaining constant.
He stated there is an approximate frozen value of $200,000
which generates $9,000 to all taxing jurisdictions and,
although minimal, has not been factored into the
projections.
His recommendation to the EDA was to consider the long-
term health of this property and whether an adjustment in
the assessment agreement will provide assistance to that
end and whether the financial need can be verified. An
independent audit can reveal the necessary data.
President Erickson inquired whether a clause could be
included in the contract to guarantee the market value
generates sufficient tax to pay the bonds.
Mr. Sondrall indicated he believed it would be possible
but he would discuss it with Jerry Gilligan, who
New Hope EDA February 22, 1993
Page 3
participated in the creation of the assessment agreement.
He noted if the assessment agreement was modified in no
event should the property owner pay taxes less than what
is necessary for the bond issue.
President Erickson stated first the EDA must protect the
City by ensuring adequate taxes to pay off the bond and
second, if the audit shows this is a distressed financial
situation, lowering the valuation will provide enough cash
flow to maintain the complex. He recommended pursuing the
audit.
Mr. Donahue named firms capable of conducting the audit.
Mr. Paul Brewer, Lang-Nelson Associates, addressed the
Council and stated they purchased the property in January
of 1992 for $5,000,000.
Mr. Brewer stated the current situation would allow the
bonds to be paid off by 1998. He pointed out that a
reduction of market value to $5,000,000 would only affect
the pay off by one year, 1999 compared to 1998, which is
still well in advance of the projected 2003 pay off date.
He commented that the economic impact to the City will not
be harmed by reducing the market value.
He noted Lang-Nelson has approximately 3,000 apartment
units within the metro area at 23 different sites with 500
of these units in New Hope: 252 at Broadway Village
Apartments; 73 units at Anthony James; and 152 units at
Emerald Pointe.
Mr. Frank Lang next addressed the Council. He stated
there are two important facts to understand in determining
estimated market value of real estate. Since the 30 years
he has been in real estate there has been no year where
there has not been an increase in estimated market value
and/or mill rate. He stated an increase in value will
greatly increase the projections mentioned by Mr. Donahue.
Mr. Lang stated today 25¢ of every dollar of revenue from
Emerald Point is paid towards real estate taxes. He is
concerned that the property will be dysfunctional if no
changes are made to the assessment agreement. He conveyed
his pride in the properties of which he is involved and
his confidence that Emerald Pointe will be a beautiful
apartment community for the lggO's.
He stated lowering the property taxes will ensure that
adequate funds are available and go towards necessary
repairs.
He stated dollars paid for real estate taxes have grown
New Hope EDA February 22, 1993
Page 4
substantially and not proportionate to the dollar amount
of the estimated market value.
He emphasized that the amendment to the assessment
agreement will prove to be a "win/win" situation for both
the City and property owners. The City will get the TIF
paid off ahead of schedule; residents and community will
have a better maintained and attractive complex; and the
property owners will have a viable apartment community.
Mr. Lang made reference to the impact this change would
have to their escrow which is currently set at $400,000.
He stated multi-housing is under a great deal of stress
from social and economic issues. He feels its to the
City's advantage to develop a good relationship with
owners who are dedicated to the maintenance and ownership
of their apartments. He requested consideration of his
proposal. He stated the proposal would not be detrimental
to anyone and he is willing to agree to an escalator to
ensure that taxes cover bond payments.
President Erickson inquired whether Mr. Lang would agree
to an audit.
Mr. Lang consented to the independent audit as well as an
escalator clause in the contract to protect the City in
the event the market value is such that it would not
generate sufficient property taxes to cover bond payments.
President Erickson suggested taking no action at tonight's
meeting other than instructing staff to proceed with the
audit and upon conclusion of the audit the EDA would
discuss the issue again.
Mr. Donahue felt the audit could be complete prior to the
March 22nd meeting.
Mr. Lang expressed his confidence in reaching a mutually
agreeable arrangement.
Commissioner Enck questioned the distribution of excess
funds once the bonds are paid.
Mr. Donahue stated the County will receive 10% and the
remaining portion will be redistributed of which the City
receives 17% as its normal part of the tax pie.
Commissioner Enck noted that he is not as adamant
regarding not changing the structure as he was previously
during 1992. He commented, however, that it is not
necessarily a "win/win" with a no' loss situation. He
stated there will be a difference of an excess of a
million dollars in year 2003 if the structure is not
New Hope EDA February 22, 1993
Page 5
changed; and the City would receive its portion of that
amount. He stated considering what the City is entitled
to and the moral issues are significantly different and he
is looking to the audit results to see if there is an
ability to achieve an equitable resolution to Lang-
Nelson's conflict.
Mr. Lang agreed that there will be a reduction of
approximately $170,000 but the City's goal was not to make
a profit on the development but the assessment agreement
was to guarantee repayment of the bonds. He s60^U(6^I^\
erty taxes have escalated greater than anticipated at the
time the agreement was put into effect.
He thanked the EDA for their open mindedness to the
proposal and stated the audit will prove that 25¢ of every
dollar received from the complex goes towards real estate
taxes.
Mr. Lang noted several improvements already made to the
apartment complex.
Mr. Donahue stated the audit will cost approximately
$2,000 and will be paid by the existing tax increment
surplus fund.
MOTION Motion was made by Commissioner Enck, seconded by
Commissioner Otten, to authorize staff to proceed with the
audit and bring the issue back no later than April 12,
1993. All present voted in favor. Motion carried.
EDA RESOLUTION President Erickson introduced for discussion Item 6,
Item 6 Resolution Calling for a Closed Meeting of the New Hope
Economic Development Authority, Authorized by M.S. 471.705
to Discuss Litigation/Settlement Strategy on Foremost
Property Located at 7528 42nd Avenue North {#474)
EDA RESOLUTION Commissioner Enck introduced the following resolution and
#93-03 moved its adoption: "RESOLUTION CALLING FOR A CLOSED
MEETING OF THE NL:W HOPE ECONOMIC OEVELOPMENT AUTHORITY,
AUTHORIZEO BY M.S. 471.705 TO OISCUSS LITIGATION/
SETTLEMENT STRATEGY ON FOREMOST PROPERTY LOCATED AT 7528
42NOAVENUE NORTH (#474)". The motion for the adoption of
the foregoing resolution was seconded by Commissioner
Wehling, and upon vote being taken thereof; the following
voted in .favor thereof: Erickson, Enck, Wehling, Otten;
and the following voted against the same: None;
Abstained: None; Absent: Williamson; whereupon the
resolution was declared duly passed and adopted, signed by
the president which was attested to by the city clerk.
AOJOURNMENT Motion was made by Commissioner Enck, seconded by
Commissioner Wehling, to adjourn the meeting as there was
no further business to come before the EDA. All voted in
New Hope EDA February 22, 1993
Page 6
favor. The New Hope Economic Development Authority
adjourned at 7:56 p.m.
Respectfully submitted,
Valerie Leone
City Clerk
New Hope EDA February 22, 1993
Page 7
CITY OF NEW HOPE
4401XYLON AVENUE NORTH
HENNEPIN COUNTY, MINNESOTA 55428
Approved EDA Minutes February 22, 1993
Executive Session
CALL TO ORDER The New Hope Economic Development Authority met in
executive session pursuant to due call and notice thereof;
President Erickson called the meeting to order at 8:02
p.m.
ROLL CALL Present: Erickson, Enck, Otten, Wehling
Absent: Wil 1 iamson
Also Present: Steve Sondrall, Mark Hanson, Dan Donahue,
Kirk McDonald, Valerie Leone
FORENOST PROPERTY The EDA discussed acquisition of the Foremost property in
7528 42nd Ave. N. connection with a possible settlement to a threatened
//474 1 awsui t.
NOTION Motion was made by Commissioner Enck, seconded by
Commissioner Otten, authorizing staff to negotiate an
acceptable purchase contract wi th Foremost for acquisition
of the property. All present voted in favor. Motion
carried.
AD~IOURNNENT Motion was made by Commissioner Enck, seconded by
Commissioner Otten, to adjourn the meeting. All present
voted in favor. The New Hope EDA adjourned its Executive
Session at 8:19 p.m.
Respectful ly submitted,
Valerie Leone
City Clerk
t REQUEST FOR ACTION
Originating Department Approved for Agenda Agenda Section
City Manager 3-22-93 FDA
/f/~ Item No.
By: Dan Oonahue By: 4
/
PRESENTATION OF INTERIM AUDIT R/REPORT PREPARED 'BY SPRINGSTED RELATIVE TO THE
ASSESSMENT AGREEMENT AND TAX INCREMENT FINANCING ON THE EMERALD POINTE APARTMENT
COMPLEX (FORMERLY NEW HOPE TERRACE)
On February 22nd the EDA authorized proceeding with an audit and report back no
later than April 12th.
Staff would like to present a preliminary report and update for the EDA at
tonight's meeting.
MOTIO~ SECOND BY
Review: Administration: Finance:
RFA-O01 ~
EDA
REQUF.~T FOR ACTION
Originating Department Approved for Agenda Agenda Section
City Manager EDA
3-22-93 Item No.
Kirk McDonald ¥ } 5
By: Management Assistant By:
RF_.~OL~ON APPOINTING DIRECTORS TO THE BOARD OF THE NEW HOPE
COMMUNITY REVITALIZATION CORPORATION
The New Hope Community Revitalization Corporation met on March 15, 1993, and
elected directors and officers. The enclosed resolution officially appoints the directors
and officers to serve until the next meeting.
Staff recommends approval of a resolution appointing directors to the Board of New
Hope Community Revitalization Corporation.
BY
Review: Administration: Finance:
RFA-O01 ~
MAR-- 1 7--9~ WED 9 : 4 i CORR I CK ~ SONDRALL
RESOLUTION NO. 93-
RESOLUTION APPOINTING DIRECTORS
TO THE BOARD OF THE
NEW HOPE COMMUNITY REVITALIZATION CORPORATION
BE IT RESOLVED by the Economic Development Authority in and
for the Ctty of New Hope as follows:
~NER.EAS, the Economic Development Authority in and for the
City of New Hope (here&fret EOA) has the authority under the Bylaws
of the New Hope Community Revitalization Corporation to appoint
Directors of the corporation.
bOW, ?HERE~ORE. BE IT RESQLYED:
1. That the following are appointed to the Bo&rd of
Directors of the New Hope Community Revitalization Corporation, who
shall hold office until the next regular EDA &ppotntment meeting or
until their successors are duly elected and qualified=
Qlenn Farmer
Roger Landy
Roger Rubin
Steven Hickel
Elaine Markey
Dated the 2End day of March, 1993.
~dwj J:'" E~'i'¢l<s'~)n, President
Attest:
~anie~ ',1. Donahue~ Executive Director
MAR-- 1 ?--9~ WED 9 : 4 I CORR I CK ~ $ONDRALL P . 02
March 16, 1993
Daniel J. Oonahue
Executive Director
Economic Development Authority
4401Xy]on Avenue North
New Hope, MN 55428
RE: New Hope Community Revitalization Corporation
Our File No. 99.10026
Dear Dan:'
The EDA is the group authorized to appoint the Board of Directors
of the New Hope Community Revitalization Corporation. That
appointment has been done on an annual basis in March. The
enclosed Resolution takes care of that for 1993.
If possible, please pass this Resolution at an EDA meeting on March
22nd. By copy of this letter ! have mailed the original to
Valerie, as well as a copy to Kirk by faX.
Please contact me if you have any questions.
Sincerely,
Mar~in P. Ma]echa
s3t
Enclosure
cc; Va]erie Leone (w/eric)
Kirk McDonald (By Fax)
Steven A, Sondra]], Esq.