HRA Minutes 07-11-2001
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MINUTES
MONTICELLO HOUSING AND RI<~DEVELOPMENT AUTHORITY
Wednesday, .July 11,2001 - 7:00 p.m.
505 Walnut Street - Bridge Room
Commissioners Present:
Chair Dan Frie, Vice Chair Brad Barger, Steve Andrews, and Bob
Murray.
Absent:
Commissioner Darrin Lahr and Council Liaison Brian Stumpf.
Staff Present: Rick Wolfsteller and Ollie Koropchak.
Staff Ahsent: Lori Kraemer.
Guests:
Brad Johnson, Lotus Realty Services, Inc.
Barry Fluth, Masters Fifth Avenue, Inc.
Pat O'Donnell, Smith & Associates
Mike Cyr, MLC Building and Remodeling
Mark Rul1 Ehlers & Associates
Sheri Harris, Central Minnesota Housing Partnership, Inc.
John Kopy and Judy Grenier
I.
Call to Order.
Chair hie called the HRA meeting to order at 7: I 0 p.m.
2. Consideration to approve the June 6, 2001 liRA minutes.
Barger inquired to whether Lake Tool was not interested in selling land to EOMA
Company per the June Executive Report. Koropchak noted that was true in June;
however, the July report notes Lake Tool interest to sell. Brad Harger made a motion to
approve the June 6. 2001 lIRA minutes. Hoh Murray seconded the nwtion and lvith no
corrections or additions. rhe minutes were approved as HTi//en.
3. Consideration of adding or removing. items from the agenda.
None.
4. Consent AQenda.
None.
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liRA Minutes - 7/11/01
5.
Consideration of an update on the impact to TIt relative to the Legislative Tax Bill and a
recommendation to the City Council to consider issuinQ a Temporary Bond.
Financial Consultant Mark Ruft~ Ehlers & Associates, summarized the impact to tax
increment as a result of the Omnibus Tax Bill adopted by the 2001 Legislation. The
impact varies among communities depending upon the type ofTIF projects. Monticello's
impact is minimal due to a conservative amount of debt. The classification rate reduction
for commercial/industrial results in a 40% reduction in tax capacity. I Iowever, with the
implementation of the state wide business tax, the reduction result is 10%. For the
purpose of tax increment the state business tax is not collected. The Bill encourages
apartment ownership. It goes to say if one pays less taxes, one collects less tax
increment. The Bill includes a provision to apply for a grant for 'I'lF shortfalls; however,
there is no help for TIF pay-as-you-go finance methods and no protection for inter-fund
loans. Thc good news is thcrc is no more I IACA Penalty and the cducation tax levy such
as bond referumdums is collectable for tax increment. Bubul, Wolfsteller, Koropchak,
and Ruff have had several conference calls to discuss the benefits of selling 'femporary
Bonds which would accelerate funds for the inter-fund loans between the City/HRA and
HRA General Fund/TIF and for future projects within the downtown These bonds need
to be sold by August I, 200 I. From a process standpoint, this is doable. The City
Council would authorize the sale of temporary bonds at the July 23 Council meeting.
The Temporary Bonds at a 1ixed rate of approxirnately 5SY<1 for three years. The bond
amount suggested ranges between $1.5 to $2.5 million based on existing debt and
projects in the pipeline. The bonds arc taxable temporary bonds requiring at least 2(YYo
tax increment. Ruff suggested issuance of the bonds because first, it extends the life of
the 5-year rule for the Downtown TIF District by two years or until August 1,2004 (threc
years from date of bond sale) allowing time to complete projects in the pipeline and
future redevelopment projects. Secondly, it provides protection for the existing internal
loans and lastly, it provides thc option to apply for a grant if a shortfall would occur
although not anticipated. S'teve Andrews made a motion recommending the City C'ouncil
sell Tenlpora/y Bonds in the amount oj'S2. 000. 000 net proceedsfhr the reasons noted
ahove. Hoh Murray seconded the motion. Memhers inquired as to the issuance costs for
the bonds. Ruff'responded. ImderH'rirer 'sfee hy hasis points oj'50-100 perhaps up to
S20.000. no costsfor boml raring as tem!JOrwy honds are not rated. and t"'hlerslBuhul
costs heHveen S 12.000 to S 13. 000 f()!' a rotal hetlvcen S30. 000 ro 533.000. With no
fill.ther discussion. the rnotion passed on a ./-0 vote. The Commissioners then called for a
special HRA meeting of Monday, July 23, 200 I, 6:30 p.m. to adopt a resolution pledging
tax increment for repayment of the 'Temporary Bonds.
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HRA Minutes - 7/t 1/01
6.
Consideration to re-review and re-aftirm the level of 'fIF assistance for the proposed
I lousing District associated with the MHF ^ Monticello application.
Sheri Harris, Central Minnesota Housing Partnership, informed the commissioners that
the application submitted in March received no red marks as far as the application itself.
The grant was not awarded due to a lack of a targeted population and the limited amount
of funding available (more projects than dollars.) As the City remains interested in the
project and has purchased the Kauffinann property, Harris requested the HRA to re-affirm
the level ofTIF assistance prior to re-submitting the MI IFA application on July l3.
Since the March TIF approvaL the class rates were amended via the Omnibus Tax Bill.
Ehlers IT-ran the TIF Cashl10ws based on the reduced housing class ratcs; however, the
net present value of tax increment did not change significantly. Koropchak noted:
Based on the TIF Cashl10w (no inflation factor) the project would generate $89,623 NPY
over 25 years and the level of assistance approved in March was $125J)OO for a gap of
$35,377. The HRA approval was based on a selling price of $131.000 per unit. I lan-is
inlormed the commissioners that the maximunl selling price is $l20,000 including
closing costs. In order to qualify lix other gap financing programs used to make the
project cashl1ow. the mortgage amounts are between $85,000 to $95.000 and inconle
level are betwcen $2X.000 to $30.000. The up-front Tlf assistance of $125.000 is used to
buy down the land acquisition costs estilnatcd at $300,000. The HR^ discussed using
Tlf for both crcation of jobs with livable wages and to encourage low-end housing.
Previously the Council supported housing of higher value: however. they have supported
the scattered housing project for this area as a redevelopment project. Andrews felt the
level ofTIF assistance was too much. The liRA was also concerned about the quality of
housing and suggested an association with protective covenants for outside maintenance
of snow removal. landscaping. etc. Mark Ruff felt the project would cashl10w at the
level of assistance ($125,000) with an inflation factor added over 25 years. Koropchak
asked: Where does the I I RA plan to get the $125,000 up-front dollars? 5,'eeing the
project as a redevelopment IJroject and suggesting the development of protective
covenantsfor exterior l}wintenance, Brad Barger made a ,notion to re-a//irnl the March
7. 2001 ,notion: To approve the preliminary conceptfiJr use ofTIF in the anwunt of
SI25,()()() NPV to assist with a scattered fWllsing project and to waive the 55,OO()
applicationj('e. Seconded h.v Boh Mun'a}' and with nofiirther discussion, the nlOtion
passed on a 3-/ vote. Yeas: Barger, Ahll'ray, and Frie. Nays: Andrews. A hsent: Lahr.
7.
Consideration to approve the preliminary concept for use of TlF relative to the
redevelopment of a Dortion of Lots 4, 5, 6, 7, and 8, Block 36.
Contractor Mike Cyr presented a concept for redevelopment of a portion of Block 36.
The redevelopment to consist o/'the demolition or removal of the two houses along the
200 block of Walnut Street for construction of a two story, 4,500 sq ft per 11001', office
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HRA Minutes - 7/1l/0t
building. The investment group are Smith, Paulson, O'Donnell & Associates, PLC and
Carlson/White Insurance Agency. Cyr divided the projects into Project 1, the office
building and Project 2, parking. l':stimated redevelopment and construction costs for the
onice building was $1,329,000 including $275,000 for acquisition costs. Qualifying 'I'll"
expenditures, according to Cyr, totaled $449,000 and the amount ofTIF requested was
$328,000 for Project 1. With no Preliminary Development Agreement executed nor
collection of the $5,000 fee, no cashflows have been run. Project 2 for parking
development (Smith, City, and Ilamond parcels) was estimated at a costs of $13X,000
which includes the acquisition of the Kopy storage garage for $50,000. Based on
estimated construction costs and qualifying TIF expenditures, Cyr requested up-front TIf
assistance in the amount of $140.000 for parking development. Additionally, Cyr
prescnted a I ,etter of I ntent for shared parking signed by Hamond. Paulson, Fluth, Kopy,
and Smith and an Option to purchase a storage building for $50,000 between Cyr and
Kopy. Amount of parking stall required was not determined by staff. Mark Ruff
informed the HRA this redevelopment project requires answering some policy questions:
Are the houses substandard? Bench market fiJr TIF, 15 years ($110,000, 8%). Is the land
value reasonable? Does the HRA want redevelopment? What about parking deliciency?
No appraisals of the existing structures had becn completed. Koropchak noted that the
HRA is requested to consider approving the preliminary concept for use of TI F
assistance. If approved. the concept will be forwarded to the City Council. The
commissioners agreed, they liked the general concept for redevelopment of the northerly
halfofBlock 36 and there is a willingness of the property owners. The HRA suggested
the developers refine the numbers and for staff to work on the parking stall requirements.
Hrad Harger made a rnotion to approve Ihe preliminary concept/hI' use of IfF relative 10
the redevelopment of'a portion of Lots -+. 5. 6, 7 & 8, Block 36 andfhr parking
development. The motion }l'as seconded by Hoh Murray and }l'ilh nofi./rther discussion.
the mol ion passed unanimous(v.
8.
Consideration to adopt a resolution entering into the Contract for Private Development by
and between the lIRA and Masters Fifth Avenue, Inc.
The lIRA commissioners received excerpts of the Contract for Private Development as
drafted by Kennedy & Graven per the HRA motion of June 6, 2001. Koropchak
suggested the up to $45,000 fix parking development ofT-site be tied to the I lamond,
Paulson, and Kopy parcels. Brad Johnson presented a list of comments relative to the
Contract. Hosed on the proposed () Donnell and parking projects and the June ffRA
motion which included extending the efFective date of'lhe Preliminwy A;:;reement with
Master's Fifih A venue to A u;:;usl 1. 2001: 5,'teve Andrnvs mode a motion to table any
action. Seconded hy Brad Harger ond with nofiJrther discussion. the motion passed
unanirnous(y.
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HRA Minutes - 7/11/01
9.
Consideration to accept a counter-oller for the property located at 218 Front Street.
Since the agenda preparation, the HRA received a written counter-oiler of $163,000 from
O'Connor via Attorney Peterson. The counter-offer based on an appraisal obtained by
O'Connor. The otler based on the appraised value of $148,000 plus $15,000 lost income.
The HRA offer of May 15 was $145,383 was based on an I IRA appraisal of $92,200
(October 10, 2(00) plus lost income and relocation benefits. The I I RA compared the two
appraisals. It was the opinion of the HRA Attorney and Relocation Consultant that the
verbal counter-offer from O'Connor of June 22 ($155,000) may be reasonable
considering the additional costs to proceed with eminent domain. Afier revinving the
injhrnwtion, the lIRA con1fnissioners, infidl agreenwnt, rejected the counter-ofler 0/
S I 63,000.
10.
Consideration to authorize soliciting bids for demolition/cleanup of the properties located
at J Walnut Street, 220 Front Street. and 8 Locust Street.
Koropchak informed the commissioners that the judge signed the Quiet 'l'itle Action
order for the Bostic property on July 10, 2001, allowing the Fire Departtl1ent to proceed
with the scheduled "test burn" on Sunday, July 15,200 I. All utilities were scheduled for
removal by July 6. In lieu of the time lapse between the scheduled test burn and the
COll1pletion of the eminent domain for the 218 Front Street property, the lIRA is
requested to authorize soliciting of bids fi)r demol ition/cleanup including compaction
testing. A meeting with Hans Ilagen, Mark Ruft~ and city stai'fis scheduled fe)!' July 23.
Roh Murray made a motion to authorize solicitation oj'hidsfhr demolition/cleanup olthe
properties loutted at 3 rValnut Street, 220 J<i.ont 5;treet, and 8 1-ocust ""'treet. Rrad Barger
seconded the motion and with nofill,ther discussion, the motion passed lllwnirnous(v.
11.
Consideration to discuss al11endinQ the wage level criteria within the Business Subsidy
Criteria of the lIRA and calling for a public hearing.
Brad Rarger made a motion to tah/e any action and requested stqtf'research level H'(I,t:-es
oj'surrounding cornrnunities Steve Andrews seconded the motion and with nofill,ther
discussion, the motion passed unanimously.
12. Consideration of authorizing payment of monthly HRi\ bills.
Boh !vfurray Illade a Inotion authorizing payment qj'the monthly !IRA hills. 5,'teve
Andrews seconded the motion and with nofilrther discussion, the motion passed
unanimously.
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HRA Minutes - 7/1l/01
13.
Consideration of Executive Director's Report.
'lhe commissioners accepted the written rerort of the Executive Director with the
following additions: Marketing Committee seheduled to meet Thursday, July 26,7:30
a.m. and FDA scheduled to meet Thursday, July 19,4:00 p.m.
14. Committee Reports: None,
15. Other Business. None.
16. Adjournmcnt.
Boh Murray Inade a motion to adjourn the HRA meeting olJuly 11. 2001, Brad Barger
seconded the motion and vvith nofitrther husiness, the meeting adjourned at 10: lOp. m,
lIRA Chair
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Ollie Kororchak, Recorder
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