The URL can be used to link to this page

030292 EDAOFFICIAL FILE COPY Agenda #7 EDA Work Session #1 CITY OF NEW HOPE 4401XYLON AVENUE NORTH HENNEPIN COUNTY, MINNESOTA 55428 March 2, 1992 City Hall, 6:00 p.m. President: Commissioners: Edward J. Erickson W. Peter Enck Gary L'Herault Gerald Otten Marky Williamson 1. Call to Order 2. Roll Call 3. Approval of February 10, 1992, EDA Minutes 4. Discussion Regarding Acquisition of Foremost, Inc. Property, 7528 42nd Avenue North, Improvement Project No. 474 5. Other Business 6. Adjournment Approved EDA Minutes Meeting #2 CITY OF NEW HOPE 4401Xylon Avenue North Hennepin County, Minnesota 55428 February 10, 1992 CALL TO ORDER ROLL CALL APPROVE NINUTES FOREMOST PROPERTY (PROJECT #474) Item 4 President Erickson called the meeting of the Economic Development Authority to order at 9:25 p.m. Present: Erickson, L'Herault, Otten, Enck, Williamson Motion was made by Commissioner Otten, seconded by Commissioner Enck, to approve the EDA minutes of January 13, 1992. All present voted in favor. Motion carried. President Erickson introduced for discussion Item 4, Discussion Regarding Acquisition of Foremost, Inc. Property, 7528 42nd Avenue North, Improvement Project No. 474. Mr. Donahue stated the EDA asked a number of questions at the December 16, 1991, meeting. He indicated staff has since responded to the questions and has shared the information with Mr. Allan Fredendall. Mr. Donahue added that Mr. Fredendall would like to address the EDA to answer their questions especially relative to the viability and strength of his business as well as his future plans since there seems to be some concern as to whether he would remain in business or whether the EDA is relieving-a failing business. Mr. Donahue stated Mr. Fredendall would like to assure the EDA that he has a strong organization and intends to remain in business. Mayor Erickson noted the substantial amount of information and the number of questions which need to be reviewed. He recommended scheduling a work session to discuss this item only. Councilmembers Enck and Otten conveyed that they agreed with President's Erickson's recommendation for a work session. Mr. Allan Fredendall, owner of Foremost, Inc., was recognized. He provided a brief history of the Foremost Company and stated he has been a self-employed businessman for 25 years and has employed as many as 50 people at the present location. He noted he is actually one of the few businesses actually making items and selling items in the United States. He stated they use raw sheet steel to finished goods for consumer products. Mr. Fredendall explained that he has long-term employees with very New Hope EDA Page 1 February 10, 1992 technical-oriented skilled. Some of the products manufactured include items used in people's every day lives. They are a supplier to IBM, Honeywell, Thermal King and some of the products made include medical products such as baby monitors for sudden infant crib death. They have a complete quality control program which checks outside sourcing for plating and certifications of all materials. Mr. Fredendall pointed out that he wishes to remain in New Hope and to be a very viable business. Due to the economic downturn of the past 19 months they have considered many alternatives to lower overhead and curb costs and there are a certain amount of things that they have done. Nonetheless the economy has hurt them as it has many other companies. He assured the EDA that they will be around when things turn and will be a better company for it. He expressed the desire to work with Kirk McDonald to locate space within New Hope as he finds New Hope to be a wonderful community. President Erickson questioned the number of employees at Foremost. Mr. Fredendall replied that they currently have 24 employees. President Erickson asked whether Mr. Fredendall has contacted Brad Hoyt who could provide information regarding industrial properties within the City. Mr. Fredendall stated he felt it would be premature to speak with developers or realtors until he receives direction from the City. He commented that it is the most unsettling time in his life and expressed concern for his employees. He noted the business deals with precise metal stamping and small quantity production runs; therefore, it is necessary to retain capable and trained employees. President Erickson commented that the EDA has a strong motivation to keep Foremost within the City of New Hope, as it is a good neighbor and well as good employer. He commented that he hopes a mutual arrangement can be found. The EDA will review the information at a work session and will respond to Mr. Fredendall as soon as possible. Commissioner Enck called attention to the original discussions with Mr. Fredendall at which time he indicated his intentions to build or own a building within New Hope. Commissioner Enck commented that now the discussions New Hope EDA Page 2 February 10, 1992 NORK SESSION OTHER BUSINESS include leasing a building.~ ~.He~asked Mr. Fredendall to elaborate on his plans for renting or purchasing a building. Mr. Fredendall responded that he does not have anything concrete from the EDA and therefore is unable to make firm plans yet. He conveyed that he would have to confer with his attorney and tax person to find out what would be best. He indicated that currently he and his wife own the building and they lease it to the corporation and he would favor that situation if it is advantageous but he does not know whether it is economically possible in these times. Commissioner Enck commented that the original request was from Mr. Fredendall rather than something the City took the initiate in; however, he does not believe the City is adverse to it. He noted both parties have to look at the economics of the situation including the sources of funding and the improved properties. He stated it is in the best interest of the City to keep employment and keep technical people here in New Hope. President Erickson advised Mr. Fredendall that every attempt will be made by the City to act on the matter as quickly as possible so as to put Foremost employees' minds at ease. Mr. Fredendall explained that his employees have technical backgrounds but even in this difficult job market they can find jobs, and he has tried to convey this message to them. The EDA scheduled a work session for Monday, March 2nd, at 6 p.m. to discuss this matter. Mr. Donahue informed the EDA that he has recently received a request from Process Displays for the City to consider a refinancing of their original industrial revenue bond from 1980. He informed the Council that he believes the refinancing would be handled in a similar manner to the original issue. Mr. Donahue recommended an increase in the non-refundable handling fee from $500 to $1,000 plus a fee based upon $100 per $100,000 face value of the bond; therefore, a million dollar bond issue would be $1,000 fee. Commissioner Enck commented that the fees should substantially cover all expenses including the City's staff time and legal fees. Mr. Donahue informed him that the proposed fees are to cover staff time only; all legal fees and bond counsel are New Hope EDA Page 3 February 10, 1992 AD~OURNHENT in addition to the established fees. He also stated a certain amount has to be factored in to cover unrecover- able staff time; he noted because the City's name is on the bond, if something goes wrong with the bond issue several years later, extensive staff time could be spent dealing with institutions to resolve the problems. President Erickson informed Mr. Donahue to research the matter, draft a proposal, and make a recommendation to the City Council. Motion was made by Commissioner Enck, seconded by Commissioner L'Herault, to adjourn the EDA meeting as there was no further business to come before the Council. All present voted in favor. The New Hope EDA adjourned at g:42 p.m. Respectful ly submitted, Valerie Leone City Clerk New Hope EDA Page 4 February 10, 1992 ~.u~ REQUEST FOR ACTION Originating Department Approved for Agenda Agenda Section Manager 3-2- 92 EDA Dan Donahue ~ Item No. By: By: DISCUSSION REGARDING ACQUISITION OF FOREMOST, INC. PROPERTY, 7528 42ND AVENUE NORTH, IMPROVEMENT PROJECT NO. 474 This work session was scheduled at the February lOth EDA Meeting to allow adequate time for consideration of the Foremost project. Please bring your February lOth EDA packet. - - 0 - ~ ' ' .... Review: Administration: Finance: RFA-O01 DATE: TO: FROM: SUBJECT: CITY OF NEW HOPE MEMORANDUM February 28, 1992 Daniel J. Donahue, City Manager Kirk McDonald, Management Assistant/ Community Development Coordinator U_~late on Foremost, Electronic Industries and Ardell Properties for March 2nd EDA Meeting Three issues/items which have taken place since the last EDA meeting that you may want to make the City Council aware of include the following: Electronic Industries Appraisal Completed The appraisal of the Electronic Industries property at 7516 42nd Avenue North was completed by BCL Appraisals on January 27th. The summary and conclusion are attached. The bottom line is as follows: Value Without Corrosion/Pollution Stigma Less Corrosion/Pollution Stigma Final Value Estimate of Present Property $238,000 220.000 $18,000 Also attached are excerpts from the site description (topography and soils), which describes the pollution and remedial action. Ardell Engineering & Manufacturing Appraisal Completed The appraisal of the Ardell Engineering & Manufacturing property at 7500 42nd Avenue North was completed by BCL Appraisals on February 17th. The summary and conclusion are attached. The bottom line is as follows: Value Without Pollution Stigma Less Pollution Stigma Final Value Estimate as Alleged by Polluted $313,000 29.700 $283,300 -1- With the completion of these two appraisals we can now formulate a ballpark estimate as to what it would cost to acquire all three properties: Electronic Industries Ardell Engineering Foremost (current after being considered) $18,000 283,300 585.000 $886,300 There has also been considerable discussion as to whether there would be any increment created by the acquisition/demolition of these three properties and the combination of all three parcels/construction of a new commercial-retail development Frozen Values Land Building Total Tax Capacity Foremost, Inc. Electronic Ind. Ardell Engineering $51,600 388,400 440,000 20,030 41,500 192,800 234,300 9,848 43,500 216,500 260.000 11,120 934,300 40,998 As stated in the memo prepared for the last EDA meeting, the county has significantly reduced the value of the Electronic Industries building and have indicated that the value of the Foremost property will also be reduced. The question then arises - if the County is lowering the values due to pollution, can't the original frozen values be reduced? If the answer is affirmative, then the City has a much better chance to generate an increment. Staff has contacted Hennepin County in regards to this issue and they referred us to several State Statutes. The County indicated that normally they cannot reduce a frozen value once it has been established, but that the City may be able to create a hazardous waste sub-district within the 42nd Avenue TIF District due to pollution. I referred this information on to Steve and he is obtaining a legal opinion on this issue to see if New Hope can use the statute to its advantage. If the determination is made that the frozen values can be reduced by the creation of a sub-district, the City would have an opportunity to capture a larger increment with redevelopment. Steve should have an answer on this by Monday. -2- Lastly, the market value on the Foremost property currently is $494,000 ($85,800 land/S408,200 building). The City appraisal was $475,000 or $433,000/impaired value and the Foremost appraisal was $660,000 or $405,000/impaired value. We are currently discussing an offer of $585,000. Hennepin County has indicated that, similar to an earlier reduction for Electronic Industries, the value on the Foremost property will be substantially reduced due to the pollution impact (down from $494,000 to $235,000 for payable 1992). The City could possibly use this fact to reduce our offer to Foremost along with Steve's recommendation not to be involved in the lawsuit between Electronic Industries and Foremost. -3- ~K LAW OFIqCE~, PA. WI.I. IAM J. CORRICK 8TEVEN A. 80NDRALL, ~TLeV~N MICHAEL R. L~FLEUR MARTIN P. MALECHA WILt.tAM C, ~rRNT CORRICK & SONDRALL A P~JqTNE~BHIP OF PROFE~MONId. GOI~OflIAT~ON8 Edinburgh Executive Office Plaza 8525 Edinbrook Crossing Suite #203 Brooklyn Pmk. Minnesota 55443 LAVONNE E* KEM(E ~HAJqON O. DERBY February 19, 1992 Mr. Jerry Gilligan Attorney at Law 2200 First Bank Place East Minneapolis, HN 55402 RE: Creation of Hazardous SubStance Subdistrict/M.S.§469.175(7) Dear Jerry: This letter will confirm our recent conversation regarding the creation of a Hazardous Substance Subdistrict for property on 42nd Avenue North. Basically, the City is interested in determining whether the creation of such a district would be beneficial to lower the original net tax capacity for properties between Quebec and Nevada on the north side of 42nd Avenue North. As we discussed, the descri-bed properties have suffered both soil and ground water contamination due to the Electronic Industries site. Also, I believe there is some contamination on the corner lot at Nevada and 42nd due to underground gasoline storage tanks once located on the site. Currently, the City owns the property east of the railroad tracks. It is contemplating acquiring the properties west of the tracks, specifically Foremost, Electronic Industries and Ardel Engineering by eminent domain. ' Obviously, economics is of concern. The City does not have a developer at this time but would be actively seeking one if they assembled the property for development. Given the high frozen tax base, it appears no additional increment could be generated by new development. The City would like your opinion on: Nr. Jerry Gilligan February 19, 1992 Page 2 1. whether the property qualifies for the creation of a hazardous substance Subdistrict; 2. if we can lower the original net tax capacity as a result; 3. and what steps we must take to successfully create such a district; 4. should we tie this in with the amendment to our redevelopment plan you are already working on. Please contact me or Kirk if you have any queetions. Very truly yours, Steven A. Sondrall slw2 CC: Kirk McDonald, Management Asst.~f~"!' T~IS COPY ~OR t~t-.? Daniel J. Donahue, City Manager ' EXCERPTS ELECTRONIC INDUSTRIES APPRAISAL Tou,3~ra~v & Soils The subject is located within an area of glacial drift which overlies the St. Per~s Sandstxale. The glacial drift oo~s~ of interlayermd and mixed sands, silts, clays, and gravel. The u~:er 30 feet of t_he drift is primarily till u~.icta con.sisr.~ of a tight, grayish clay wi~h t~-aoes of sand, gravel, and silt. Information gathered £~- soil borin~ lo~s indicated that an alluvial channel de4~sit runs ur~-meanh ~ sits f~. ~he wms~/~ to eas~/~~, and ~ bm~s ~o r~e nozXheas~ ~ east of %he sit~. The up, er port. ion of t_he alluvial channel is rat_her ~?.~hle and is %he type which has t/%e capacity to conduct significant volumes of qrour~ wa~-r across the size of t_he ac~_ mi channel ar~ volume of wat~.r it conduc~s is compax~tively ~m~] 1 when viewed with lard. r, deeper an~ more significan~ aquifers in this re~ion. A mmre dense glacial till, below the channel and apprux/mately 10 feet below grad~ defines the k~se of the normal ground water ~hle. Shallow groudwa~-r flow follows the oonTxa/r of the alluvial channel. Upon the disoovery of a ruptured smttlir~ tank on th~ east si~ of ~ ~ ~ui~ ~ =x~U plum~ir~ wiU~n U~ h~l~u~ in U~ fall of 1983, Sub~oils beneath ~ subjec~ 'ar~ kr~w~ ~o be oo~taminated with a m~ It is not known how lor~ t_he ~%nk an~ plum~ir~ had been ruptured or how ~%x~h possible that contamination on t. he site has been present since a ~_sr3ec~_~a] hazard permi= was ~ ~o EI~¢ Industrie~ on J~ly 26, 1975, or even before. R~ess of past historical data, since t. he ~ery of site oontamina=ion, numerous moni~ an~ pum~ ou~ wells have been insU~led on ~he site. Marke~ success has been noted in the rem=wal of contaminants Trichloroethylene (TCE) and frans-l, 2-dic~loroethylene (DCE). 37 three approaches to v-d_lue inclicat~_ the follc~ir~: 1. R~placement Cc~t Approach $232,800 2. Market [~ta Approac~ $240,000 3. Inccm~ Approach Not Applied All three of the stm~ ~dized approaches to value were considared in the market v~lue of the subject properties. ~he ~ approach w~s deemed to be not applicable due to the owner occupied nature of the market for build/~s of the subjec~ %5~0e. %he Cost Approach considered the replacement cost of the buildir~ improvements, deduct_~ depreciation not considering corrosion and pollution, and added lar~ value. It's weakness lies in the large amount of estima~ depreciation. Buyers ar~ sellers rely m~re strongly on the cost approach when b~ildir~s are new and not when they are over 25 years old like the subject. The Market Data Approach best illustr~t~ the actions of typical b~/ers and sellers of prop~ies unco~-~o~ed and unpollu~_~ of the subject type. Several gocd quality, nearby c~les.were found and cc~ to the subject. ~ older sales. Newer sales were also four~ ar~ they supplied additional good c~ ~ ] ity suppor~ for the subject' s market value. For r_his value conclusion estimat~ wit2nxx~ a corrosion or pollution stigma, mc~-t emphasis is placed upon the fJaxiings of the Market Data Approach with good Conclusion Without Corrosion and Pollution Stigma ~ Co~-~usion ard Pollution Stigma Final Value Estimate of the Pro~ As Is $238,000 220,000 $ 18,000 38 Corrosion Stigma I I I I I I I ! I I The condition of the ~uildir~ as _a~ibed earlier in this report indicatas that a cure of the corroded roof ~ould mor~ than likaly require at l~a~ the replacement of r. he roof over the central area of the k~ildir~ 40' X 91' = 3,640 square feet and replacement of beatify, ventilating and electric s~rvice in r_hat same area. T~e Marshal & Swift cost mare, mi is utilized as an es=imator of the co,cs ~o cure the corroeion probl~. In the manual, it is no~_~ that a number of multiplier~ n~st be a~4~4 such as archi~ fees, Section 99-2, current Co~t Multiplier, Section 99-3, and Local Multiplier, Section 99-5. S~ctioa 54, page 2, Steel joists 24" 39' medium weight $2.51 per sq. ft. 2" insulation 4 ply coverir~ $1.40 per sq. ft. $1.25 per sq. ft. $1- O4 per sq. ft. $6.20 per sq. ft. Arc/~itect~ fees 6.7%, Current Cos~__ $1.00, Mpls., Multiplier 1.12, 3,640 sq. ft. $6.20 X 1.067 X 1.00 X 1.12 X 3,640 sq. ft. = $26,970 Heat Section 53, page 1, Space heater suspended Sec~io~ 54, page 5, 24" exhaust ve_~t $1,640 X 1.067 X .98 X 1.12 = $1,000 640 $ 1,921 Electric Sec~ioa 53, pages 10 & 11 Lighting 8' eac~ fluorescent 33 each X $95 = $ 3,135 Bus~ duc~ 1/2 of $27,160 frc~ Cost Approach = $13,580 Mis~llaneam wirin~ @ $ 3,500 To'i'..n I $20,215 $20,215 X 1.067 X .97 X 1.12 = $23,433 39 I I I I I I I I I ! I ! ! ! ! Corrosion Sticlma Cant'd_ Razinq Old Roof. Section 66, page 6, $1.34 per sq. ft. X 1.01 X 3,640 sq. ft. = Developers Ov~ ar~ Profit (20%), 57,250 X .2 = $11,450 $ 4,926 $57,250 $11,450 $68,700 Floor Pollution Stigma The condition of the build/r~ as described earlier in this repor~ indicatas r_~a~ a likely buyer would demand the floor be r~z~ved and replaced where r_he heavy met-al ~ ~ pollution originated, toqer.hm~ with potentially contamina~ soils in r_he area of t_ha~ floor and the old drain pipir~ existir~ the buildir~, goir~ to ar~ around the old catch basis taruk that w-us removed in 1983. Tb~= costs are estimatad as folly: Remove concrete floorir~ incl,~n~ 900 sq. ft. raised slab and abou~ 1/3 of floor in c~_n~ area, $2.68/sf cost X .50 X 1,213 sq. f~. X 1.01 = $1,642 Test borings to 9' for heavy mee~]s $10,000 Remove 2' of soil fr~nbelow removed slab 1,213 sf X .67 yd= 813 cu y ds X $4.13 = Section 51, page 2, $2.75/olydhauled l mile $ 3,358 Ramove 5' of soil f~-~ old pipe and tank ar~a~, 5' X 25' X 5' deep = 23 c~ y ds X $4.13 = Ey~=~ cos~ to ~ of 1/2 of 23 ol yds, say 11.5 c~ yds of heavy metals contaminated soils per Nova expar, ience (D~rrel Oman) and per ~r 2. (Mike Johnson) @ say $300/cu yd = Reinstall and compac~ 836 cu yds of soil @ $13.75 = Section 51, page 2 95 $ 3,450 $11,495 4O I I I I I I I I I I I I ! ! ! I Corrosion Stigma Floor Pollution Stiqmg. Reinstall 1,213 sq. ft. of concrete floor @ $1.98 = Section 51, page 3 $ 2,402 Sub Total Floor Pollution Costs $32,442 Developers Overhead and Profit $32,442 X .2 $ 6,488 To~ Floor Pollution Cc~_t to Cure $38,930 The property is strickan with the stigma of pollution. As a re-~n~lt of that sti?a, a future owner will have problems marketing ar~ m~rtqaging. Creating a ,'no action" letter for the subject is the equivalent of the MPCA saying that the subject future owner or buyer is not a contributing polluter and is not responsible for any pollution found on its property. These types of letters are written by the MPCA wb~n contamination is cleaned up or is in r_he process of being cleaned up ar~ is not the problem of the ~t property owner. The M_tnnesota Pollution Contr~l-.A~ency has two principal areas where "no action" letters are produced. The petroleum tank spills area produces many of these letters but they ar~ primarily for service station propertiem where gasoline and d/esal per_roleum pr~ are the pollutants. ~he subject Pr~ is polluted by a type of pollution other than that frc~ qasoline ar~ diesel tank spills. The Ck~xux~,~ and Solid Waste Division handles this ~ of c~nta~tion and they have report~ a listi~ of about 25 sires in the ~t_r~politan ar~a where ,'no action" letters have been writtan in the past 4 years. Five of these sitas are known or controlled by a public en=ity and %ha balance were reportedly sold or about to be sold on the open marke= and the "no action,, lertar w~s requested so that ~ sale could occur. Th~ of thmse files were examined in scm~ detail in the MPCA offices in St. Paul, M_~. A foll~ing listir~ shows the MPCA file number, a pr~ name and m~ress, the generalized nature of the pollution affectin~ or alleqed to affect thase Prq~_rties, the ti~e period that the parties sought a "no action" letter in dealin~ with the MPCA arzl the approximate number of months that were involved in r-hat pr~.~_~s. 5he average amount of time involved with the Ml~% in 41 I I I I I I ! I ! I I AND 00~I(1~ (IINT'D Pollution Stiqma Cont'd c~taining a "no action" letter was 8.85 month or appruximataly 9 ~t_hs. The various parties probably spent another 1 to 2 ~nths prior tn daaling with the MPCA in consulting and developing their strategy for dealing with contamination problem. Sites adjacent to large well kr~wn polluters lik~ the Riley Tar site in St. Lou/s Park had the short_~-t time periods. Tne process for getting a "no action" letter for pro~_rties adjacent to a w~ll known polluter that bas been well i~ntified by the MPCA is a rathar s~ort one. Even ~ily cleaned problems lik~ the excavation ch~.~ contamination frc~ an old septic tank for Pr~uision Electric in Plymouth or the excavation of allegedly less than a gallon of trichloroeylene spilled at Multitech's facility in New Brighton took 16 and 9 month respectively. These minor contamination prublems equate very well to the subjects where four monitoring wells were regH~ed to be installed and the pollution was found to be generally of minimal impac=. File t190 Name&Address Dixie G~_mi~ Co. E, Corner Hwy 55 at Pine Bend Road, Pollution "No Action Letter" Nitrates & sulfite~ 6-88 to 8-88 frum refiner to south Months R~semount 1270 1280 1540 Cabot ~hot & For~es 1151 Verno~ Dr., Gol4en Valley Precision Electric 615 Co. Rd. 18, Plym~Zn 82 2nd Ave. SE., New BrighUm Chloroethelene in old septic tank in old septic tank Trichloroethylene fr~m small spill 8-88 to 6-89 7-88 to 11-89 1-89 to 10-89 10 16 9 ! ! i I d d I ! ! t ! I d d d d d AND OC~C~IO~ Pullution Sti~ma Cont'd File $ Nam~ & A~d~=~ 1450 Terry Brus. Const. 33201~1ic Ave. St. ~ Park 1690 2265-85 W. Co. Rd. C, R~seville 1740 R~semount Die Castir~ ( Spect.ro Alloy's) 13220 Doyle Path E. 1810 7301 W. Lake Street St. kx~s Park 1920 2O4O 1820 Allianz Investment 1000 Bi. Valley Pk. Dr. 1060 33rd Ave. SE, Holiday Stat_ion Store SWC Broadway & 12th st. Forem~c Lake, Mn Reilly Tar c~ntamination T~ P~riod Seeki~ '~o Action 3-89 to 3-89 Benzene etc. fL-om adj. Williams & Amaco tank farms 3-89 to 8-89 Momitorir~ well 3-89 to 12-89 1974 fire chemical spill 2-86 to 9-87 Soil piles contaminated 11-89 to 10-90 RR & many polluters 10-89 tx) 6-90 Buried asphalt chemicals 9-89 tO 12-89 42 1 5 19 11 43 ~ ARD C~/~SI~ (I~T'D Pollution Stiqma Cont'd File ~ Nan~ & Azkiress pollution "No Action Letter,' Months 2450 Hiawatha Mee~] Craft Trichlorethylene 7-90 to 6-91 11 2631 31st Ave. So. 1860 Caliber Development Oil spill, land farm 10-89 to 11-90 11 c. 2660 Fernbrook Lane cleanup Plymouth Average Months 8.85 The above described study ir~icatas t_hat the marketin~ period for a property lik~ the subject that is alleged to be (I~ntam~a~ ~ will be cleaned up to MPCA star~ds will be ~ by approximately 10 months. The normal marketir~ period for a property like the subject would be from 12 =o 18 months and that process would to a certain deqree be able to overlap with a certain a~zunt of th~ time requi~ed to obtain a "no action" letter or equivalent. It is therefore concl,~ that the alleged pollution of th~ subject property will cause a six month increase in the normal mark~tin~ period by itself. In ~4~tion to the increased mark~tin~ time period and the loss of value that it crea~es, ~he subject property owner will be responsible for the costs to obtain the "no action" leTtsr or its equivalent. For the subjec~ property, those costs have been roughly estimated as follows: 1) Owners time spent d~lin~ with alleqed pollution problem hirir~ con~, a=~~, aT~ney, and supervisir~ the t~ir~ and the process are included separate overhead and profit estimates in the above coets to o/re. $ 3,000 2) Owner~ consulting a~corney to supervise MPCA process $ 5,500 3) Owner~ financial consultant/aupraisal charges $ 3,000 4) MPCA staff c~es for producing "no action" letter or equivalent $ 3,000 Total An=icipat~ Owners Co~t~ for No Action Latter $14,500 ! ! II II !1 il ! Il Ii 44 Pollution Stigma Cont'd owners chazges are ex~ to to~al a~tely one '~---k of tim~ or 40 hours at, say, $75.00 per h~ur ei:~l~ $3,000.00. The t~m~ will be spread over a series of weeks and months an~ not concentrated. I~ fees are a rough appr~tion of 35 to 40 hours at, say, $150.00 per hour for the supervision of the pr~oess ar~ d~aling with the M~A. Attorr~ys wr~t~ m~t of the letters in the M~ files for property c~a%ers. M~st of the "no action" letter efforts involved .a potential sale whare bankers ar~ appraisals were required. Production of an appraisal dealirg with pollution on the subj~-t property is expected to cost at least another $3,000. Sometimes buyers pay for these types of financial instruments and require t_he seller to share the costs. MPCA charges will be levied for staff time spent producirg the "no action" letter. A review of the files indicates that those charges for a relatively small effort requir~ like th~ subject should be only a few th~ dollars and $3,000 is a best estimate. ~ ~,nicipalities like St. ~ Park or Minneapolis a~l with the M~CA, the process is smoothar and MPCA staff charges are l~er. That is not the case with the subject property at this point. In a~ition to the estimated out,f-pocket costs, the marketing tim~ period is expected to be in~ by 6 ~m~nths. The market v~lu~ conclusion without the pollution stigma is estimated at $238,000 on a previous page. ~ present value of $238,000 not received for 6 manths at a current estimat~ad inter~st rate of 10% is $226,440, ir~iicatirg a loss in market value of $11,560, say $11,600. ~he final v~lue estimate on the subject property as it is allegedly pollu~__~_ is estimated as folly: Conclusion without pollution stigma [~ Corrosion ar~ Pollution Stigma A. Corrosion $68,700 B. Floor ~ollution $38,900 C. No Action Letter $14,500 D. ~ Marketing Tim~ $11.600 Value Estimate as Corr~ and Allegedly Polluted and that the City of New Hope will not proceed with razing the building. $238,000 $133,700 $104,300 45 AND (/~X~IC~ GC~T~D Pollution Stiqma Cont'd Est~ Markat Value of Pr~ Without Corru~ion or Pollution Estimated Market Value of ~a~d Without Corrosion or Pollution (f~ Market D~ta Approach) Contrik~ Value of Buildin~ and Site Improvements R~on in Value Due to Corrosion and Pollution Stigma (fz~ above) $238,000 $ 65,400 $172,600 $133,700 The above estimated reduction in value of t_he corfcr~t~ value of the subject buildir~ at a~out 77% exceeds 50% by a significant margin even in this very preliminary estimate scenario. ~erefore, the City of New Hope shall demand the ~uilding be razed. The owner will bear that r~zing cos~ and is assumed to be c~led to bear the ~itional cost of making the resultir~ land free of alleged b~vy me~l coDeam(nation. ~ results in a final overall as is market value estimate for the subject property as follows: Market Value of the Land If Uncontaminat~ (laura Market E~ta Approach) $ 65,400 Section 66, page 6 10,960 sf of ~ldir~ @ $2.68 = $29,373 Cost to dispose of heavy metals frc~ above estimate 11.5 cu yds @ $300/cu yd = $ 3,450 Cos~ to reinstall and compact 11.5 cu yds of soil @ $13.75 = $ 158 Cost to obtain NoActionLaTter (fr~abcve) $14,500 Total Estimate~ Cos~toUnco~ta~te~%e Land $47,481 %3%eDifference Market Value of the Property (I~ and Buildir~) As Is (say) $47,500 $17,900 $18,000 46 ~ A~D C~C~I(l~ O~T'D Pollution Stigma Cont'd at about 77% of it's value. New Hope has stat~_ they shall cause the build/r~ to be razed if the loss i~ v-~lue exceeds 50%. Tf~_refore, the value of the real estate lies in the value of the land as if vacant and uncontaminated. To alleged heavy metal soils contamination cleaned up, and a "No Action LatterI, received. Prior contamination emanatin~ f-~um this site, primarily TCE and t_hat related cleanup and co~c are assumed to be born by pas~ subjec~ real estate owners or occupants and are not considered herein. Their burdans do not r~duce the subject' s value estimate. To~oc~.nhv & Soils cont'd Since the s~a~t of ~i~l act. i.o~'~. ~ F~Dm~ 1987, ~ ~~ti~ of ~ ~ ~ si~fi~y f~-~ 290 ~li~ ~ ~ billion ~ ~t 30 ~e ~ ~ ~l~le T.~m~t (~) ~ ~~ ~ of 30 ~ ~ b~li~, ~ ~ahl~ ~ ~ ~t of ~. ~e la~ a~il~le ~o~ti~ (~ f~ ~ 1991 ~ ~ for ~~c ~~ by ~1 V~ ~iet) ~ ~ levis at 33 ~ ~ ~lli~, or 33,000 ~ ~ b~li~ ~ ~r, 1991. ~mhle l~s of ~ ~~tion ~d ~ ~iv~ at ~ ~t ~ ~i~ ~ 20 y~ or ~re, ~ ~ ~y ~f ~t ~ ~ ~ ~ ~~ of "~ ~~" or ~ ~~i~ of ~~t~ ~ ~ ~ ~ ~ of ~~ti~. ~ ~ ~t ~ ~t~ at ~ si~fi~t l~s at ~ ~ ~e of ~ p~~ (~r~ ~1 ~) ~~y~. ~ ~~~ of ~ ~ ~r~ ~1 ~1 ~ ~ w~t ~e of ~ p~, ~ ~~y ~ ~ ~ of 100 ~ ~ billion ~ ~~. ~~ ~ l~s ~ ~ ~ si~ of ~ si~ ~ al~ ~ ~ ~ ~ ~ ~, it ~ ~le ~t ~y ~d r~ ~ t~. ~e 1~ ~ ~ ~ ~i~ ~ ~ ~ils, ~ ~ t~ ~ ~1~ ~i~o~yl~ (~) ~ ~ ~ i~ ~i~ ~, ~o~yl~ (~). ~ ~~ly l~v~ ~ si~ ~ sl~, ~~t ~tion ~o~ ~ ~1~ ~it wi~ ~ ~ ~ fl~. ~, ~ils ~ ~ ~ ~ ~ ~ of ~ ~j~ ~ ~~y ~ ~~t~. ~ a~i~ ~ ~~y ~ ~ ~ ~ ~ ~ ~ cl~ it ~. ~y, ~ ~ ~ ~ ~i~ of ~ ~~~ it is ~le ~t ~ SITE Tol:x:x:~ral:~hY & Soils cont'd Tn~ elevated heavy metal contaminants (chz-c~ium, lead and copper) were det~ct__~ only in the area of the ruptured settling tank wb~_re soil tests were doP~ to detect these metals. It is also ~_~m~4 that these metals are present 7-6-84, ~ a Twi~ City Testir~ report dated 11-23-87, alor~ with the City of N~w Hope build/n~ inspector Doug Sansta~ with confirmation by Wendell Van Vliet, the owners representative. O~,lative amounts of these hazardous wast~ have not been det-~nnined at this t~. At th/s time, the best one can say is that a reasonable potent~ buyer knowin~ the above would be highly likaly to conclude that hazardous amounts of ~ of these heavy metz]s will be found and have to be cleaned up to MPCA sta~ before the last stigma of site pollutio~ will be removed. Based on the earlier Twin City Testing report, the ~nly c~t which could be classified as being in b~ardous concentrations is chromium. However, r_hese r~sults are only preliminary and do not pertain to the whole property. ForTunately, these heavy metals do not ~ to be m~bile and are held in place by the soil fabric. In other woruls, they stay put ar~ should be found only in the areas of direct contamination. The site has average access by a curb cut to 42r~ Avenue. The rear alley ~a~nt area has not been used in many years. The pro~'s identity is cons~ to be average. It is observable traffic i~ both ~{~M~ioP~ o~ 42r~ Ave~e, a~d i~ adjacent to a well identified c~cial ai-~trict in an average to fa~ industrial neighborhood. A copy of ~he Zoni~ Map is EXCERPTS ARDEL ENGINEERING APPRAISAL I I I I I I I I ! I I I I ! I ! $332 ~ 700 $306,300 was ~ to be no~ applicable due to t~e o~er occu~ie~ r~ture of the market for k~[l~ of the subjec~ type. 25 years old like the subject. ~ Mark~ ~mta ~ best illusUatms ~ actions of %%~ical buy~r~ and sellers of ~es of the subject type. Several good quality, nearby om~mazables ~ found and c~ared to the subject. ~ ~mre older sales. for the subjects market ~alue. is placed upon the fir~ of the Market ~ta Apprmch with good but ~ (ka~.l~ of value without pollm m TA~ POi/Ut:iOn S~n~ of $14,5oo ar~ $14,70~ tz~als Fi, al Valu~ ~cima~ as ~¥ PUllut~ $313,000 $ 29.7o0 $283,300 35 ~ollutiom Sticmm ~ ~~, a ~1~ ~ of ~ ~ ~ ~a~ ~ ~i~ ~ of a ~t ~ ~l~le ~ of a ~~ si~. ~ a ~ of ~ ~11~ ~, a ~ ~~1 ~ve ~t~ ~ ~~~ ~ ~. ~t~ a "~ ~" le~ for ~ ~j~ ~ ~ ~~t of ~~~y~~t a ~~ (or~ ~t ~) ~ ~ ~ ~ a ~~~ ~11~ ~ ~ ~ ~~le f~ ~~ ~ti~ ~ ~~ ~ ~ ~ ~ ~ p~ of ~ cl~ ~ ~ ~ ~ ~~l~of ~ ~tp~~. a~" le~ ~ ~. ~ ~1~~ ~ ~ p~ ~ of ~ 1~ ~ ~ ~ ~~y for ~i~ ~~ ~~ ~ p~ ~ ~11~ ~ a ~ of ~11~ ~~ ~t ~~1~ ~ of ~mm~~ ~ ~ ~ve ~~ ~ of ~ ~ of ~ ~~ a 1~ of 25 si~ ~ ~ ~~li~ ~ ~ "~ ~i~" le~ ~ve ~ ~i~ ~ ~ ~ f~ y~. Five of ~ si~ ~ ~ or ~11~ ~ a ~lic ~ ~ ~ ~~ ~ ~y ~ld or ~ ~ ~ ~ld ~ ~ ~ ~t ~ ~ "~ a~" le~er ~ ~ ~ ~t ~ ~e ~d=. ~ of ~ f~~ ~m~ ~ ~ ~ ~ ~ offi~ ~ ~. ~, ~. A foll~ 1~ ~ ~ ~ f~e m,~, a ~ ~ ~ ~~, ~ ~iz~ ~ of ~ ~ll~i~ aff~ or ~1~ ~ ~f~ ~ p~~, ~ t~ ~i~ ~t ~ ~~~ ~of~ ~t~ ~olv~ ~t ~. ~ av~ ~ of ~ ~olv~ wi~ ~ ~ ~ ~ a "~ ~" le~ ~ ~,' IIII IIII I 1~' II I II II Illl II' 1~ ii il iii I I I I I I I I I I 36 Pollution Stigma Cont'd 8.85 months or approximately 9 months. ~he various parties probably spent another i to 2 ~ prior to dealing with the MPCA in cor~ultin~ and adjacent to large well known polluters like the Riley Tar site in St. letter for ~es adjaoen~ to a well known pollutew that has been well identified by t_he MPCA is a rather short one. Even easily cl~ problems lik~ the e~cawation of a old septic tank for Precision Electric in Plymouth or the excavation of allegedly less than a gallon of trichloroethylene spilled at Multitech's facility in New Brighton took 16 and 9 months respectively. These m/nor contamination problems should equate very well to the subjects. File 1190 Dixie Chemical Co. E. Corner Hwy 55 at Pine Bend Road, T~ Period Seekin~ Nitrates & sulfites 6-88 to 8-88 f~" r~finer to south 1270 ~ ~h~t & Forbes 1151 Vernon ~r., Golden Valley in old ~tic ~ 8-88 to 6-89 10 1280 1540 Precision Electric 615 CO. Rd. 18, Plymouth 82 2nd Ave. SE., in old seutic tank Trichloroethylene small spill 7-88 to 11-89 1-89 to 10-89 16 1450 Terry Brus. Corot. 3320RepublicAve. 1690 2265-85 W. Co. Rd. C, Roseville 1740 m~x~-~c Die C~ting (SpecCro A~ioy's) 13220 Doyle Path E. 1810 AndrocProducts 7301 W. Lake SW. reet St. Action T. stte~' 3-89 tO 3-89 Will~"~ & Amaco tank farms 3-89 tO 8-89 C~Z~m~ nat~ 3-89 tO 12-89 1974 fire chemical s~ill 2-86 tO 9-87 37 9 1920 2O4O 1820 Allianz Investment 1000 BI. Valley Pk.~r. 1060 33rd Ave. SE, Minm~polis RR & many polluters Holiday Station Store Buried ~lt cheaicals SWC Broadway & 12th St. Forest Lake, Mn 11-89 tO 10-90 10-89 tO 6-90 9-89 tO 12-89 11 8 38 M~A Pr~erty Time Period Soeki~ File # Name & ~4~ress pollution '~o Action I~t~e_~' Months 2450 Hiawatha Metal Craft Tric/~loroethyl~ 7-90 to 6-91 11 2631 31st Ave. So. 1860 C~liber Develosm~J~ Oil spill, land farm 10-89 to 11-90 11 c.2660 Fernbrook Lane cleanup Ply~u~ Average Months 8.85 ~he above described study indicates that the -~~ period for a property like the subject that is alleged to be contaminat~ will be ~ by approximately 10 months. ~he normal marketin~ period for a pro~ lik~ the subject would be f~-~ 12 to 18 months and that process wuuld to a certain degree be able to ~verlap with a oertain amount of the time r~Ltred to obta/n a "no action" letter or equivalent. It is therefore co~cl,~ that the alleged pollution of the subject property will cause a six month increase in the normal that it creates, the subject pru~_rty owner will be responsible for the costs to obtain the "no action" letter or its equivalent. For the subject property, those costs are part/ally known and can be anticipated as foll~s: 1) Owners t_~m, spent dealir~ with alleged pollution problem th~ ~ ~tr~ a~ th~ ~ $ 3,000 2) Own~s consultir~ attorn.y to su~ise MPCA proofs $ 5,500 3) Own~s fi~~ o=~1~/~ ~ $ 3,000 4) MPCA staff charges for producin~ "no action" letter or equi%~lent S 3.000 Total Anticipated Owners Costs $14,500 39 ~ Owners cbar~ are expected to total ~tely one week of time or 40 hours at, say, $75.00 per hour e~uals $3,000.00. ~he time will be sp ~r~4 over a series of weeks and montkm and not ooncentra~. ~ fees are a rough ~tion of 35 to 40 hours at, say, $150.00 per bout for the supervision of the process and dealing with the MPCA. Attorney~ wrote mo~t of the letters Most of the "r~ action" letter efforts involved a ~cential sale where pollution on the subject pro~ is expected to cost at l~.~t another $3,000. Sc~etimes k~yers pay for ~ types of financial inst~nts ar~ re~,i~e the seller to share the oo~cs. MPCA charges will be levied for staff time spent producing the "no action" letter. A review of the files indicat~ that those charges for a relatively small effort re~,~ed like the subject should be only a few thousand dollars and $3,000 is a best estimate. %~en ~l~nicipalities like MPCA staff d~3~ges are lower. That is not the case with the subject property- at this point. the pollution stigma is estimated at $313,000 on a previous page. The present value of $313,000 not received for 6 months at a current estimated interest rate of 10% is $297,797, ir~icatir~ a lo~s i~ ma~k~t value of $15,203, say $15,200. ~he final ~alue es~mate on the subject pro~ as it is allecjedly pollut~4 is estimated as follows: Es~-{~t~ value without pollution stigma Less pollution stigma- $14,500 and $15,200 totals Final Value Estimate as Alle~y Pollut~ $313,000 $ 29.700 $283,300