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HRA Minutes 09-06-2006 . . . MINUTES MONTICELLO HOUSING AND REDEVELOPMENT AUTHORITY Wednesday, September 6th, 2006 Commissioners Present: Chair Brad Barger, Bill Fair, Damn Lahr, Dan Frie, Steve Andrews Commissioners Absent: None Council Liaison Present: Wayne Mayer Staff Present: Rick Wolfsteller, Ollie Koropchak, Angela Schumann 1. Call to Order. Chairman Barger called the meeting to order at 6:00 PM. 2. Consideration to approve the August 2. 2006 HRA minutes MOTION BY COMMISSIONER FRIE TO APPROVE THE MINUTES OF AUGUST 2, 2006. MOTION SECONDED BY COMMISSIONER FAIR. MOTION CARRIED, 5-0. 3. Consideration of adding or removing items from the agenda. Koropchak added as item 6: Review of incentive pricing criteria for Otter Creek Business Industrial Park in relationship to parties interested in land. 4. Consent agenda. A. Consideration to approve ratification of the Subordination of Redevelopment Agreement between the HRA, SL Real Estate Holdings, LLC, and First Federal Savings Bank. MOTION BY COMMISSIONER ANDREWS TO APPROVE THE CONSENT AGENDA. MOTION SECONDED BY COMMSSIONER FAIR. MOTION CARRIED, 5-0. I . 5. Consideration of follow-up bv Commissioner Frie as to discussion with business property owners. Frie stated that he had met with or talked to six of the property owners on both Blocks 52 and 53. Frie stated that the Muller building is vacant, there are no rental tenants. They are asking for $850,000, which they stated is negotiable. Barger asked who owned parking lot on 25. W olfsteller replied that the parking lot is Allied's; the previous owners had a joint parking arrangement with the theater. Frie stated that the old Holker building is by Udal Larson. He noted that communication with both the owner and agent from Edina Realty has been difficult. However, they are interested in selling. They would like to talk with the HRA regarding a sale. Koropchak asked about tenants. Frie stated that it would be made clear in proposal. Frie reported that he had spoken with Dennis Anderson, who owns the old senior center building. Anderson had indicated that it is fully leased, but he does want to sell. Allied no longer wants to buy this building. He is asking for $625,000. Frie stated that Anderson is willing to emaillease and value information. Frie stated that relocation is an issue on this property. . Frie stated that on Block 52, many are also interested in selling. Springboard is asking for $299,000. The Springboard building is the warehouse behind Johnson's. There would be no relocation. Frie stated that he had also spoken with Cathy Froslie. She stated that she also wants to sell. Her appraisal put the land and building at $750,000. She has one tenant, plus the antique shop. The idea of possibly closing within a year was appealing to Froslie. Frie noted that there are two types of valuation that are typically used - the income approach or replacement approach. Property owners tend to go with biggest number. Frie reported that he also met with Steve Johnson, who agreed that numbers are inflated. Johnson wants to sell and is willing to sell buildings separately. All tenants in east building are on less than a two year lease. Johnson stated that a 1031 exchange would be preferred, or that he would consider being an investor in the property. Fair asked if the Commissioners agreed on the guidelines set earlier. Frie stated that perhaps the HRA should target a direction, then use the criteria. Barger asked what generates the higher valuation numbers. Frie stated cost per square foot. Frie stated that the Springboard and Froslie buildings would be the more valuable purchase, considering the location. . 2 . Fair asked about cash on hand. Koropchak responded that Ehlers had projected that fund balances for redevelopment districts would be estimated at $900,000 to $1 million for acquisition. Housing dollars could also be used. The pre-1990 districts are probably in the same range. Koropchak reminded the Commissioners that the pre-I 990 district funding is less restrictive. In any case, all of the cash isn't available right now. Lahr stated that his vote would be to acquire the buildings on the west side of Highway 25 rather than the east. He stated that he would recommend buying the Froslie and warehouse buildings, then let Johnson be a partner investor. Mayer noted River Street closing as a factor in redevelopment plans. Barger noted that the Froslie and Springboard building have no relocation encumbrances. Frie noted there is a parking lot owned by the City in that area already. Barger stated that ifFroslie's tenants need to stay, we could agree to that. Koropchak stated that the HRA doesn't have a concrete redevelopment plan for that area at this point, anyway. . Frie indicated that the HRA will need to find someone to act as its agent in the negotiations. Frie recommended that the HRA make each offer contingent on the other, so that one can't hold the HRA up. Andrews suggested perhaps Frie could represent the HRA and abstain from the vote. Mayer stated that the perception may be negative if Frie acted on behalf ofthe HRA as he is a sitting Commissioner. Local attorney Steve Conroy was suggested as a possible representative. Lahr suggested keeping Johnson in the loop as a courtesy. Fair asked ifHRA can sell bonds to finance the buy. Koropchak answered that the HRA could, and could also borrow from the City. Frie asked if the HRA had to have an appraisal. Koropchak stated that it is not required. Fair stated that it should be noted to the property owners that the land would be purchased for future redevelopment. Frie stated that he had made that clear. Mayer asked if when the HRA makes an offer based on market value of land only, would they recommend adding a percentage and it so, what percentage. Frie stated that he would make an offer based on the value of land. Even using the most expensive raw land values in Monticello, the offer would still be less than what the property owners are asking for. Mayer asked ifhe would disregard taxable value. Frie stated that he doesn't use that number in determining sale prices. Barger recommended using the 15% premium discussed previosuly. Fair commented that the HRA would also have the costs ofthe relocation of utilities and demolition costs, which should be presented in making the offer. Koropchak clarified that the direction of the HRA would be to ask Steve Conroy to represent the HRA, and to check with Ehlers on other particulars. . 3 . . . MOTION BY COMMISSIONER FAIR TO AUTHORIZE NEGOTIATION OF AN OFFER ON THE FROSLIE AND SPRINGBOARD PROPERTIES USING THE HIGHEST COMMERCIAL SQUARE FOOTAGE LAND VALUE IN THE CITY AND ADDING A 15% PREMIUM, WITH OFFERS CONTINGENT ON EACH OTHER. MOTION SECONDED BY LAHR. MOTION CARRIED, 4-0, WITH FRIE ABSTAINING. Fair stated that perhaps the HRA should send a letter to other property owners regarding the HRA's interest downtown and ask them to contact the HRA if interested. Andrews stated that it might be best to wait until the negotiations have commenced on other properties first. 6. Consideration to review for discussion criteria for extended an offer to interested industrial park businesses. Koropchak reported that she had received inquiries for businesses looking at Otter Creek. With the deal with A VR relatively close to closing and with the closing on additional land with Chadwick, Koropchak stated that she wanted to clarifY the HRA's position on offering market rate versus incentive pricing on land. Lahr questioned whether they needed to meet one or all of the criteria. Koropchak stated that Karlsburger had met all of the criteria for jobs, wages and square footage. Dahlheimer's did not meet the criteria, however, they were given special consideration due to relocation. Barger stated that if potential buyers want the discounted rate, they should meet all of the criteria. Koropchak inquired on whether the HRA wanted to use average hourly wages of all jobs, or pro-rate the number of jobs meeting the hourly rate. Barger stated that you almost need to weight the jobs in determining a rate. Lahr pointed out that many companies have a couple of jobs at higher wages. Andrews stated that we want wages spread out. Commissioner Andrews excused himself from the meeting. Lahr and Fair commented that to get the preferred incentive pricing, they thought buyers should qualifY in each criteria area. They can purchase balance of property at market rate. Frie stated he would be okay with pro-rating. Koropchak confirmed that building size would also still be tied to pricing. Lahr asked if the HRA should give Koropchak direction on land sales in light of the A VR closing. Lahr stated while A VR isn't a preferred user, he would still prefer to stick to criteria. Fair stated that it is too early to tell. Barger stated that if prospective buyers do not meet the criteria, they could still buy at market rate. Lahr stated that we haven't changed the philosophy. 4 . Given the discussion, the Commissioners agreed to offer Arch Aluminum & Glass land at the market rate of$3.00 per square foot plus trunk fees, and Walker In- store 1.55 developable acres at $1.00 per square foot for Lot 2, Block 1, Otter Creek Crossing 3 rd Addition. The entire lot is 5.8 acres consisting of powerline and pond easement. The property is adjacent to A YR. 6. Consideration to authorize pavrnent of HRA bills. MOTION BY COMMISSIONER LAHR TO AUTHORIZE PAYMENT OF BILLS. MOTION SECONDED BY COMMISSIONER FRIE. MOTION CARRIED, 4-0. 7. Consideration of Executive Director's Report Koropchak reported that she had included for the Commissioner's review a labor market profile. 8. Committee Reoorts Marketing . None. Fiber Optics Mayer reported that there would be a task force meeting to present the feasibility study to the City Council on Sept. 25th. 9. ADJOURN 5 MOTION BY COMMISSIONER FAIR TO ADJOURN. MOTION SECONDED BY COMMISSIONER FRIE. MOTION CARRIED, 4-0. /f) Gi-?;/ l~cJ ufl~- Chairman . Recorder