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032293 EDA --' OFFICIAL FILE COPY m 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.