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HRA Minutes 08-16-2005 . MINUTES - SPECIAL MEETING MONTICELLO HOUSING AND REDEVELOPMENT AUTHORITY Tuesday, August 16th, 2005 505 Walnut Street - Boom Room Commissioners Present: Steve Andrews, Brad Barger, Bill Fair, Darrin Lahr Commissioners Absent: Dan Frie Council Liaison Absent: Wayne Mayer Staff Present: Rick Wolfsteller, Ollie Koropchak, and Angela Schumann. 1. Call to Order Chairman Lahr callcd the mecting to order at 6:00 PM and declared a quorum. 2. Consideration to approve the June 18th and 2ih , 2005 BRA minutes. MOTION BY COMMISSIONER BARGER TO APPROVE ITIE MINUTES OF JUNE 27th, 2005. . MOTION SECONDED BY COMMISSIONER ANDREWS. MOTION CARRIED. MOTION BY COMMISSIONER FRIE TO APPROVE THE MINUTES OF JUNE 18th, 2005, NOTING THAT COUNCIL LIAISON MA YER WAS NOT PRESENT. MOTION SECONDED BY COMMISSIONER BARGER. MOTION CARRIED. 3. Consideration of adding or removing items from the agenda. Koropehak added as item 13 entering into a license agreement between the City/HRA with Rocky Mountain, LLC. Koropchak stated that item 5 regarding the public hearing on the business subsidy agreement will be removed. The lIRA will not consider adopting resolution at this meeting, only discuss the item. . liRA Minutes 8/16/2005 . 4. Consideration to approve a resolution adopting a modifIcation to the Redevelopment Plan for Central Minnesota Redevelopmcnt Proiect Plan No. I and cstablishing 'I'll" District No. 1-36 and adopting the 'rlF Plan therefore. Applicant: Rocky Mountain Group, Ll-,C. Koropchak explained that the resolution creates an economic district for the purpose of the creation and retention of jobs. The district also includes requirements for employment number and wage levels. Koropchak noted that the plan prepared by Ehlers illustrates the requirements of the State statute in terms of uses and funds f(Jr the district. The report also discusses the projected impacts of the district on the City tax base. The report discusses the proposed project specifically, including that the City will repay itself for costs incurred flJr completion of public improvement projects. Koropchak stated that the Dahlheimer site is 8.6 acre parcel. Koropchak reviewed the Ehlers cash flows projection, noting that they illustrate a 5% interest rate and $61 per square foot value. Koropchak stated that based on those calculations, $450,000 would be collected in TIF. The resolution reiterates the project's process and public purpose. Barger clarified that the City is repaying itself for the public improvements. Koropchak reiterated that an approval of this resolution only establishes the district. . MOTION BY COMMISSIONER fAIR TO APPROVE A RESOLUTION ADOPTING A MODIfICATION TO 'fHE REDEVELOPMENT PLAN FOR CENTRAL MINNESOTA REDEVELOPMENT PROJECT PLAN NO. I AND ESTAHLlSIIING TIF DISTRICT NO. 1-36 AND ADOPTING THE TIF PLAN THEREFORE. APPLICANT: ROCKY MOUNTAIN GROUP, IJ,C. MOTION SECONDED BY BARGER. MOTION CARRIED. 5. Public Hearing -Business Subsidy Agreement and Public Ilearing -- Sale of Land Consideration to adopt a resolution approving Purchase and Redevelopment Contract between the ERA and Rocky Mountain Group, LLC. Koropchak asked the HRA to open and continue the public hearing on the sale of land to the August 29th meeting. Chairman Lahr opened the public hearing. MOTION BY COMMISISONER ANDREWS TO CONTINUE THE PUBLIC HEARING ON THE SALE OF LAND FROM AUGUST 16th, 2005 TO AUGUST 291\ 2005. . 2 HRA Minutes 8/16/2005 . MOTION SECONDED BY COMMISSIONER BARGER. MOTION CARRIED. Koropchak reported that removal of the public hearing on the business subsidy was because of the notice on August 4th. Koropchak explained that Bubul had indicated that in the special session, the legislature made changes to TIF statutes, particularly related to the business subsidy act. Specifically, Koropchak stated that they needed to add a clause in public hearing notice stating that "Any person with residence or taxable property in Monticello may tile a written complaint if the guarantor" As this clause was not included at the time of the first publication, it needed to be republished. Fair asked if this would change the project timetable. Koropchak indicated that City is working hard to meet the Dahlheimer's schedule, although they do not have their plans in order at this time. Fair asked how far along the City is in infrastructure improvements. Koropchak reported that they are moving on schedule, to be complete in October. Koropchak referred to the stock pile on the actual Dahlheimer lot. The estimated cost is $27,000 to move the stockpile. Fair asked about the siting of the lot. Koropchak reported that it would be at the corner of School Boulevard and Chelsea Road. . Koropchak reviewed the contract, noting declaration of covenants are included. She also noted that the information related to the acquisition and conveyance of the property allows the City to transfer property to HRA. There will be a quit claim deed completed from City to the HRA. The I--IRA then transfers the deed to the developer. The developer will pay $549,000 for the land. The land purchase is five acres at $.95 cents per square foot with the remaining 3.65 acres at $2.15 per square foot. The internal loan is at 4%. Koropchak stated that approved construction plans have not yet been provided. Koropchak also stated that there will not be a mortgage, the sale will be made in cash and conveyed no later than September 2nd. Koropchak stated that the HRA agreed to pay the state deed tax, estimated to be $1812. I n addition to the land cost, the buyer will pay $37,914 in trunk fees for the extra 3.65 acres. . Koropchak stated that general grading is to be included in the cost. Koropchak indicated that the dilemma was the stock pile, and that the lIRA docs not have a clear estimate for general grading. Koropchak noted that in the last conversation with the buyer, they are not agreeable to moving the stockpile early at their cost. Koropchak stated that a solution offered to the buyer would be that the City wOlLld move the stockpile and the developer would do their own grading. The developer could also use the extra sand from on-site ponding. Koropchak stated that WSB seems to think that is reasonable. Koropchak stated that Bubul will make the adjustments to the contract as noted. Andrews asked if the dirt in the stockpile 3 HRA Minutes 8/16/2005 . has value. Koropchak thought it would be spread back over the site. WSB stated that general grading is estimated at about $20,000, so with the use of the sand, the resolution seems fair. Wolfsteller stated that when the stockpile was put there, it wasn't expected that City would sell that immediately, as a prime lot. The City was also not aware of Dahlheimer's desire for that particular lot in May. Koropchak reported that the stockpile would be gone in November, toward the completion of the improvement projects. Andrews asked what happens if we don't move the stockpile. Wolfsteller commented that the current proposed resolution seems reasonable. Koropchak reported that Simola had asked if it could be spread across the site. It was statcd that the road was not to a point that it could be. Fair agreed with the proposed resolution. Koropchak stated that the fair market value for 8.6 acres is $998,000+- with a valuc of $2.65 per square foot. She noted that this number is relevant in terms of the reimbursement purposes. . Koropchak outlined the need to create jobs and wages within the district and the requirements f()f reporting. Koropchak indicated that Dahlheimers have asked for the written report to commence February 2007. I n discussion of the construction of minimum improvements required by May I, 2007, Koropchak stated that the liRA understood they needed to be done by December 3 pI 01'2005. Koropchak stated that the buyers will see the contract changes tomorrow. Lahr clarified that the HRA will be approving the contract with changes at the August 29tl1 meeting. Koropchak confirmed. fair asked if the contract would be available for signature on the 29th. Koropchak stated that on August 22nd, the Council will hold the public hearing on the TIF plan and approve the plan The City Council will also consider the Business Subsidy Agreement and approve subject to the lIRA approving the contract. Fair asked when the title transfer would take place. Koropchak stated it would depend on when the buyer can meet the terms of the contract. The license agreemcnt would come later. 6. Consideration to discuss first draft of the Contract for Private Redevelopment between the HRA and Master's 5th Avenue. . Koropchak reviewed her report, stating that the HRA had until September ill to develop the private development contract. Lahr and Koropchak had discussed that the HRA should provide some direction for Bubul in terms of writing the 4 liRA Minutes 8/16/2005 . contract. Koropchak reported that Fluth had given approval to hire LHB as the inspector and the inspection took place on Monday. Brad Johnson, representative fl)f Master Fifth A venue, reported that the actual inspection took 3 hours for the 3 houses. Koropchak stated that the paperwork for the inspections would be available for review on September ill. Johnson stated that he had checked with other cities, there aren't many inspectors that qualify, and he noted that it is important to complete the right way for future liability. Koropchak stated that the redevelopment district is for 25 years, and at a value of $91 per square foot at a 6.5% interest rate, it is estimated that $172,000 would be generated in 'f'IF at the present net value. Koropchak stated that the previous but- for numbers are different from what was provided with this HRA packet. Koropchak stated that Bubul has some concerns with leaving three parcels in the district, particularly if the developer is planning to move the home. Bubul' s concern is that if the house is declared substandard and using TIF, why would the developer be allowed to move it to another location within the City. Instead, Koropchak reported that 8ubul is suggesting the use of only two parcels. Johnson stated that without the report, it is hard to tell what should be included. Johnson commented that the home doesn't fit the zoning for the CCl). . Johnson explained that the house would be brought up to code when placed on another site. Lahr inquired whether if the home is brought up to code, is it really a problem. Mayer stated that the Council is going to ask the question related to substandard housing being moved to another location. Koropchak indicated that the TIF involvement in terms of the substandard test and coverage testmay make it more simple to eliminate that parcel from the district. Johnson asked why then are they paying for the report. Koropehak stated that the inspection will answer the substandard questions needed to resolve the issue. Koropehak reported that both the inspector and Bubul had stated that it is much more difficult to qualify a residential versus commercial property. Johnson stated that the people living in the subject home plan to purchase it based on the move. Koropchak stated that thcre should be enough eligible costs to take that parcel out. Koropchak also noted that the developer cannot move it until the inspection is done. . I,ahr questioned why the Council would raise the relocation issue. Mayer stated that it will get raised at the Council level due to '1'1 F assistance. Fair noted that it will have to meet building codes and zoning codes in order to get occupancy. Johnson stated that in the next four weeks, they will be negotiating a development agreement with the HRA. Johnson stated that he wanted to make the HRA aware of some of those discussions as the redevelopment agreement is basis for the project. Johnson referred to the new but-for analysis. Johnson indicated that theoretically, it is how the original discussion on funding was based. Using the Ehlers format, a return on equity with a $300,000 current value, would be at 5 BRA Minutes 8/16/2005 . 12.25%. Johnson pointed out that Barry Fluth already has $450,000 into the deal. Johnson explained that as the HRA has not had to acquire any house or property, the developer is taking all the risk. Johnson statcd that one of the biggest problems on the site is the Koppy garage. In order to improve the parking and circulation, they would like to movc it and have indications that Koppy would now like to sell. Lahr asked if the liRA hadn't paid to do that once. Johnson responded that the HRA paid to get parking lot there today. Johnson statcd if Fluth buys it, he has to guarantee Koppy storage somewhere fcn two years. Andrews asked how much for the garagc. Johnson answered that it would be about $15,000, and inquired if the HRA cover the cost of the purchase. Johnson pointcd out that if another person buys the garagc from Koppy, they havc no inccntive to movc it. Koropchak reportcd that when the HRA did the contract for phase onc, the developer was provided $185,000 in pay-as-you go TIF assistance, with an additional up-front amount of $75,000 for ofT-site improvements. This was to include ofT-site parking on the five parcels to the east, including the Koppy parcel. The agreement specifically included $45,000 for sitc improvements on the Koppy, Hammond, and Paulson parcels. Koropchak reported the assumption was that with that contribution, the garage was supposed to be moved at that time. Johnson notcd that $15,000 was to be applied to each of those three parcels, but it did not specifically refer to the garage. . Lahr asked about improvements being madc to the site, Johnson replied that they would bc completing the re-paving, electrical, curb, etc. They have also completed cross-casements for parking. Johnson stated that the whole parking area is public. Koropchak indicated that Bubul recommended that the HRA make a finding for public purpose in eliminating the garage. Andrews noted thc garage removal is was an opportunity to rid blight and deal with a problem. Johnson statcd that HRA would only commit to what is actually spent. Fair recommcnded setting a cap, with the developer responsible for the balance. Fair statcd that the HRA paying rent for storage space wouldn't qualify as public purpose. Koropchak reminded the I-JRA that funding would need to be up-front dollars. Koropchak recommended not including the rent. Lahr recommendcd a cap of $20,000. Maycr stated that thc $3,600 in proposed rent shouldn't be part of the price the HRA pays. MOTION BY COMMISSIONER ANDREWS TO AUTHORIZE UP TO $20,000 FOR TIlE REIMBURSEMENT OF COSTS ASSOCIATED WITH "filE PURCHASE, REI.A TED IMPROVEMENTS AND REMOVAL OF THE KOPPY GARAGE. . 6 BRA Minutes 8/16/2005 . MOTION SECONDED BY COMMISSIONER BARGER. MOTION CARRIED UNANIMOUSLY. Koropehak also asked the BRA to provide guidance in the pay-as-you go amount. Johnson stated that the financial advisor will say that the amount requested wil1 reflect a fair return on equity, stating that the risk should be related to the return. Johnson stated that with no TIF assistance, this project would produce a 3.4% return on equity. With $200,000 of assistance, it would be at 9.1 %. Johnson commented on the project's unplanned expenses, made to make the site more efficient. These include moving the trash enclosure, the LHB inspection fee, a large expense for the relocation of the Xcel uti lity pole. Johnson reported the total for those items to be about $100,000 in extra expenditures. . Lahr stated that in comparing the numbers, the one that stands out is the contingency. Johnson stated that number is high due to previous experience of working in this community. Johnson stated that they are trying to get to a number that Ehlers will agree is a reasonable return on equity. Koropchak stated that $91 per square foot is high. Koropchak commented on the pay-as-you-go method of assistance. She noted that on the cash-flow projections, Ehlers uses 6,5110 over 25 years, and a $172,823 in net present value. With that model, Koropchak stated that the TIF assistance shouldn't be greater then $175,000. If the developer is asking for more, it has to come from another district. Wolfsteller stated that what is collected is what the developer actually gets in pay-as-you-go, the amount in the contract is the maximum amount that could be received. . Andrews stated to keep in mind the $170,000, less the garage. Johnson stated that taxes in Monticello are very low because of the assessed valuation of commercial properties. Johnson stated that the contract needs to be done on the ih. THE HRA DIRECTED TI IE ATTORN BY TO PREP ARE THE CONTRACT TO PROVIDE $170,000 AND FUND THE GARAGE SEPARATELY AT $20,000 UP-FRONT. Johnson stated that the note's value wil1 be based upon the assessed valuation and the interest rate. lIe explained that vacancies will also affect their rate of return. Fair reminded the HRA of the goals for redevelopment versus making money. Koropchak noted that the developer also needs to go back to DA T and the Planning Commission. 7. Consideration to discuss a re<..luest for redevelopment assistance for purchase and demolition of a gara~e located within TIF District 1-32. As discussed in item 6 above. . 7 HRA Minutes 8/16/2005 . 8. Consideration to adopt a resolution authorizing execution of a Tax Increment Pledge Agreement with the City of Monticello relating to $25.150.000 G.O. Bonds, Series 2005A. Koropchak stated that the resolution authorizes an execution of an agreement pledging the tax increment to the bond issue. The balance of the bond will be paid by tax levy. MOTION BY COMMISSIONER ANDREWS TO ADOPT A RESOLUTION AUTHORIZING EXECUTION OF A TAX INCREMENT PLEDGE AGREEMENT WITII THE CITY OF MOTNICELLO RELATING TO $25,150,000 G.O. RONDS, SERIES 2005A. MOTION SECONDED BY COMMISSIONER LAHR. MOTTON CARRIED UNANIMOUSLY. 9. Consideration to discuss a request for renovationlrenewal assistance for improvements to a commercial building located within TIP District No. 1-6 (Raindance Properties). . Koropchak stated that the new owner of Maus Foods is planning to major upgrades to compete with new and developing big box retailers. Koropchak stated that she had checked with Bubul who indicated that non-restricted funds could be used, should the HRA choose to act. In that case, Bubul had suggested only a low-interest loan. As of December 2005, the HRA has $172,000 in district 1-6. The district docs not decertify until 20] 3, although the }-IRA may need to look at the plan to see if needs to be modified. L,ahr agreed that if anything was offered, it should only be the loan. Mayer asked if as of the end of 2006, the district would decertify if nothing else was offered. Koropchak stated that statutes allow the district to run its course if the liRA has a plan to spend the money and to generate TIF. Lahr stated that as the district is non-restrictive, that the HRA can use that money elsewhere. Fair asked if the new owners are talking about renovation and renewal or keeping the business as a grocery. Koropchak confirmed the latter was accurate. Mayer asked if they would be completing an expansion. Koropchak stated it would just be an exterior/interior improvements. Barger stated that providing funding would set a precedent. Other I IRA Commissioners concurred. Koropchak noted that the building, in this case, does generate increment. Lahr noted there may be higher and better llses for the funding within the community. . The HRA di rected Koropchak to indicate to the property owners that there was no interest in assistance at this time. 8 lIRA Minutes 8/16/2005 . 10. Consideration to authorize payment of I IRA bills. Koropehak noted that the County is now charging to certify districts. That cost will be passed along to applicants. MOTION BY COMMISSIONER ANDREWS TO AUTHORIZE PAYMENT OF ERA BILLS. MOTION SECONDED BY COMMISSIONER FAIR. MOTION CARRIED UNANIMOUSL Y. II. Consideration of the Executive Director's Report. Koropchak noted that she responded to a 300,000 square foot manufacturing user interested in the business park. Fair asked if the property owners or developers of the property near the Post Office distribution center have come back to the City with a light manufacturing plan. Koropchak stated that they are probably waiting for ih street extension. . Koropchak reviewed fund balance information fC)f district 1-5 and 1-6, noting that Ehlers has stated that need to get plans in place in order not to lose funding. Lahr recommended putting it on a future agenda. 12. Committee Reports: Marketing Koropchak indicated that the business park's website had received about 400 hits to the site, increasing after billboard went up. CB Richard Ellis called and asked about commission rates for business park land. Koropchak stated that it would be beneficial for the HRA to determine a percentage up front. The lIRA Commissioners discussed a 5-10% commission based on the fair market value. Fiber Optics . Andrews reported that task force will be holding their last official meeting tomorrow, and taking an official report and recommendation back to Council on the August 22"d. The recommendation will be most likely to move ahead with the feasibility study, and to continue the task ll)fee to work in conjunction with the study. 9 HRA Minutes 8/16/2005 . 13. Other Business A. License agreement - Koropchak reported that the Dahlheimers have requested access to the property before establishment of the TIF district and official land sale. They would like a right of entry to do grading on site. The issue ofthc stockpile seems to prohibit this at the current time. Koropchakinformed the Dahlheimer's representatives that the City would not let them proceed without approved grading plans. MOTION BY COMMISSIONER FAIR TO DENY THE REQUEST TO ENTER IN'fO A LICENSE AGREEMENT UNTIL GRADING AND STOCKPILE ISSUES ARE RESOLVED. MOTION SECONDED BY COMMISSIONER ANDREWS. MOTION CARRIED UNANIMOUSLY. The HRA held another brief discussion regarding site grading within the business park and the stockpile on the proposed Dahlheimer site. . Lahr inquired about grading for other lots. Koropchak stated that preliminary estimates were for $2,500 an acre. WolfstelIer commented that the stockpile would be moved on the November 1 st date, this is in contrast to moving it to meet the buyer's timeframe. The HRA recommended waiting until the land purchase is complete and the agreement is signed to move the stockpile. Mayer concurred. 14. Adjournment MOTION BY COMMISSIONER BARGER TO ADJOURN AT 7:45 PM. MOTION SECONDED B COMMISSIONER ANDREWS. MOTION CARRIED. ------ . 10