072291 EDAOFFICIAL FILE COPY
Agenda #7
City of New Hope
EDA AGENDA
EDA Regular Meeting
July 22, 1991
President Edward J. Erickson
Commissioner W. Peter Enck
Commissioner Gary L'Herault
Commissioner Gerald Otten
Commissioner Marky Williamson
2.
3.
4.
5.
6.
Call to Order
Roll Call
Approval of Minutes of June 24, 1991
Request Authorization to Obtain Appraisal on Foremost, Inc. Property
Other Business
Adjournment
~} REQUEST FOR ACTION
Originating Department Approved for Agenda Agenda Section
City Manager EDA
7-22-91 Item No.
Kirk McDonald
By: Management Assistant By: 4
REQUEST AUTHORIZATION TO OBTAIN APPRAISAL ON FOREMOST, INC.
PROPERTY . AT 7528 42ND AVENUE NORTH (IMPROVEMENT PROJECT NO. 474)
Subsequent to the June 24th EDA meeting where it was determined that the City should
proceed with the Foremost grant application and the acquisition of the Foremost property, staff
has met with the Planning consultant to outline the sequence of events that we feel need to be
accomplished in order to achieve the goals of both the City and Foremost. A meeting was then
scheduled with Foremost to review the outline and they were agreeable to the format.
Before a grant application can be submitted, specific costs must be identified. The first task
that needs to be accomplished is for the City to have an independent appraisal of the Foremost
property completed so that the City can structure an offer to purchase the property at fair
market value. Foremost would use the proceeds from the sale to pay off the existing mortgage
and as personal equity in an SBA package for a new building. Staff has obtained an estimate
from Brad Bjorldund, BCL Appraisals, Inc. in the amount of $5,000 to appraise the property
of Foremost, Inc. at 7528 42nd Avenue North. Staff is requesting that the EDA authorize
proceeding with the appraisal. The appraisal will be funded out of 42nd Avenue tax increment
monies.
MOTION BY ((~~ SECOND BY ~/~ -~
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Review: Administration: Ftnance:
RVA-O01 ~
CITY OF NEW HOPE
MEMORANDUM
DATE:
TO:
FROM:
SUBJECT:
July 9, 1991
Dan Donahue, City Manager
Kirk McDonald, Management Assistant/Community Development
Coordinator
Outline for Foremost Project
Subsequent to the June 24th EDA meeting where it was determined
that the City should proceed with the Foremost grant application
and the acquisition of the Foremost property, I have met with the
Planning Consultant and we have outlined the sequence of events
that we feel need to be accomplished in order to achieve the goals
of both the City and Foremost. We will be meeting with Mr.
Fredendall on Thursday, July llth at 11:00 a.m. and want to discuss
the outline at that meeting.
TASKS
City have appraisal of Foremost property completed so that an
independent appraisal is available to document price paid for
property. This information is needed both to structure an
offer and to complete the grant application. An appraisal
will answer the questions about the large disparity between
the market value listed and what the owner feels the property
is worth.
Foremost submit appropriate documentation regarding outstand-
ing mortgage and make determination as to whether they would
own new building or lease it from developer. Both of the
items will impact on how grant package is assembled.
City/Consultant complete cost/benefit analysis on acquisi-
tion/redevelopment of Foremost/E.I./Ardel properties and
impact on TIF District.
City structure offer to purchase property based on completion
of Tasks I & 2 and address following issues:
ae
B.
C.
D.
E.
Purchase price
Foremost waiving relocation benefits
City assuming costs for demolition
Foremost's relocation within City
Appropriate adjustments made to purchase price
Foremost lawsuit against Electronic Industries
successful.
if
e
-2-
City offer to purchase property - if Foremost accepts, proceed
w~th following steps. If Foremost rejects, renegotiate.
Foremost seeks 504 loan application with private consultant in
conjunction with the City's submittal oft he preliminary grant
application. Foremost will need to submit profit/loss
statements and other necessary documentation.
city continue work on condemnation of E.I. property.
Final grant application submitted in conjunction with 504 loan
package.
Possible Scenario for
Grant Application/504 Package
for Acquisition of Foremost Property
(Ail figures are estimates for project planning purposes
and are subject to change)
Project Costs - New Buildinq
Moving
Electrical
Overhead Crane
Office Shops
Welding/Dressing Segregation
Miscellaneous Equipment
$ 17,900
146,000
53,000
22,000
14,300
31,800
Total Moving/Equipment
$ 285,000
*Building Cost
Land
$625,000
190,000
Total Land/Building
$ 815,000
Total Equipment/Land/Building $1,100,000
*(assumes Foremost will own new building)
City purchase Foremost property for $500,000 with TIF funds
Foremost utilizes $300,000 to pay off mortgage and
$200,000 for personal equity in new building.
Loan/Grant structured as follows:
Total Project Costs for New Site
Foremost personal equity
SBA loan
Grant/revolving loan from City
$1,100,000
200,000
800,000
$ 100,000
Approved EDA Minutes
Meeting #6
CITY OF NEW HOPE
4401Xylon Avenue North
Hennepin County, Minnesota 55428
June 24, 1991
CALL TO ORDER
ROLL CALL
APPROVE MINUTES
FOREMOST, INC.
Item 4
President Erickson called the meeting of the Economic
Development Authority to order at 9:05 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 May 28,
1991. All present voted in favor. Motion carried.
President Erickson introduced for discussion Item 4,
Discussion of Request by Foremost, Incorporated for
Economic Development Grant Program/Economic Recovery Fund
Application (#474).
Mr. Donahue stated City staff recently met with
representatives of the Minnesota Department of Trade and
Economic Development to discuss an Economic Recovery Fund
Application to assist Foremost in the relocation/expansion
of its business. Estimated costs for land, building and
equipment at the new site total $815,800. These costs do
not include the acquisition of the present Foremost site,
which Mr. Fredendall feels has a value of $720,000. While
the grant application could be structured to assist with
the acquisition and development of the new site, the grant
funds cannot be utilized by the City for the purchase of
the existing site. While the acquisition price of the
Foremost property might be reduced significantly if
Foremost is successful in their suit against Electronic
Industries and awarded damages, some source of revenue for
the acquisition of the property (whether it be $400,000 or
$720,000) must be found if the grant application is to
proceed.
A cash flow projection for Tax Increment District #8,
which includes the loan to Autohaus, shows that the
district is projected to have a cash balance of $3,500,000
at the end of the district's life in 2004. The cash
balance at the end of 1990 was $454,000. While there is
presently not enough cash in the district to purchase the
property, the excess cost could be financed internally and
paid back to the district. What has to be decided is
whether the EDA desires to purchase the Foremost property
and draw down the balance of the cash flow so that the
New Hope EDA
Page i
June 24, 1991
grant can proceed.
A second alternative that staff has discussed with
Foremost, in the event that the City does not purchase the
Foremost property, is that perhaps the City should shift
its focus towards the acquisition of the Electronic
Industries site. This would be less costly and the
purpose here would be to rid 42nd Avenue and Foremost of
the building/property from where the contamination was
generated. The building would be demolished and the land
possibly added to the present Foremost site to provide
room for expansion and/or to make the Foremost site more
marketable.
In either case, a preliminary decision needs to be made
regarding the acquisition of the Foremost site because
this will determine if the grant application proceeds or
not. Without the acquisition of the property, Foremost
does not have the equity that is needed to invest in the
grant for the relocation.
Mr. Donahue stated the preliminary testings of the soils
under and around the Foremost building show that there is
no soil contamination but there is ground water
contamination.
He noted that Mr. Fredendall is asking $720,000 for the
property, although it may have a market value closer to
$420,000. The EDA could assist him by purchasing the
Foremost property, however, by doing so, it would deplete
the tax increment funds.
Mr. Donahue recommended pursuing the Electronic Industries
site. He stated the City is currently trying to get the
building up to code and as a last resort may have it
removed. He stated an option would be for the EDA to
acquire Electronic Industries property, clear the
building, clean up the soil problems then divide the
properties between the two neighboring properties,
Foremost Inc. and Ardel Industries. He stated the
remaining properties would be brought into code
conformance and the City would need to structure some type
of agreement that if and when they ever sell the building,
the City may recoup its investment. He commented that
this would be less costly and would make both neighboring
properties more attractive for sale.
The EDA questioned the results of the wells. Mr. Donahue
stated the wells are having a positive impact as the
ground water contamination levels have significantly
decreased.
New Hope EDA
Page 2
June 24, 1991
Commissioner Enck expressed concern that the extent of
contamination is unknown as well as the cost for remedial
action. He commented the EDA must address these issues.
Also, the source of funding must be explained--appears to
be Petro dollars. The cost/benefit ratio for the whole
district must be determined.
Nr. Enck spoke against the option of purchasing the
Electronic Industries site since the City would then
become the generator of the soil contamination problem.
He also stated he did not believe that splitting the
property between the neighboring property owners would
accomplish anything since the buildings do not meet
standards.
He stated the EDA must find the real value of the Foremost
property. He stated if the EDA assisted in any way, he
would recommend demolishing the whole area to carry on
with the intent of the redevelopment to dress up the 42nd
Avenue and put some viable properties there. He stated
the EDA could take over the properties, clean them up, and
do remedial excavations. This would end up costing the
EDA 10% of the total costs. He stated that cost could be
carried over against Electronic Industries. He stated if
Foremost can proceed on their own with some assistance
from the EDA {purchasing property at market value), then
the EDA would be complying with the intent of the 42nd
Avenue Redevelopment Project which is to improve the
neighborhood.
President Erickson agreed with Commissioner Enck's
recommendations.
Mr. Donahue informed the EDA that most of the tax
increment monies would be depleted.
President Erickson noted that Foremost is anxious to reach
an agreement since they are really cramped at their
present building. He stated they are in a bind since they
cannot get a loan from the bank to expand the building due
to the soil contamination. However, the EDA should not
pay an additional $300,000 than what the property is
worth.
President Erickson felt an appraisal is necessary and
Foremost should share the cost. Mr. Donahue stated
Foremost is currently having an appraisal conducted and is
paying the entire cost.
The EDA discussed the necessity of retaining an appraiser
to determine the property's market value.
New Hope EDA
Page 3
June 24, 1991
ADgOURNMENT
Mr. Donahue stated staff will communicate with Foremost
and update Mr. Fredendall of the EDA's intentions. He
stated Foremost is still pursuing its suit against
Electronic Industries.
Mr. Donahue summarized the EDA's direction to proceed to
acquire all three properties, clear them, and work towards
redevelopment.
He reiterated that the EDA cannot use grant funds to
purchase Foremost's existing building, but noted that the
funds may be used for a new site which would offset the
costs.
Commissioner Enck stated if a grant is utilized for part
of Foremost's new building, less money may be needed for
its former building.
The EDA directed staff to pursue the grant application
process.
Motion made by Commissioner L'Herault, seconded by
Commissioner Enck 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
9:25 p.m.
Respectful ly SUbmitted,
Valerie Leone
City Clerk
New Hope EDA
Page 4
June 24, 1991