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HRA Minutes 05-02-2007• MINUTES MONTICELLO HOUSING AND REDEVELOPMENT AUTHORITY Wednesday, May 2, 2007 - 6:00 p.m. Bridge Room -Community Center Commissioners Present: Brad Barger, Dan Frie, and Vice Chair Bill Fair. Commissioners Absent: Chair Steve Andrews, Darrin Lahr Council Liaison Present: Wayne Mayer Staff: Rick Wolfsteller, Ollie Koropchak, and Angela Schumann. Guest: Mike Cyr, MLC Building and Remodeling, Inc. 1. Call to Order. Vice Chairman Fair called the meeting to order and noted a quorum, and the absence of Commissioners Lahr and Andrews. 2. Consideration to approve the April 11, 2007 HRA minutes. Koropchak indicated that the minutes have not been prepared. As such, they will be • considered for approval at the June meeting. 3. Consideration of adding or removing items from the a e Koropchak added as part of item 5 a consideration to discuss information regarding another proposal for downtown development interest. Koropchak stated that she thought the information was relevant to the Cedar Street Garden Center discussion. 4. Consent A enda. NONE. Frie recommended moving item 7 forward as Mike Cyr was present for the discussion. Item 7 was brought forward for discussion prior to item 5. Consideration to discuss the presentation on the Cedar Street Garden Center for possible acquisition and to take action accordingly Fair noted that there had been a presentation, after which staff was to put together more information. Koropchak stated that the asking price is now $459,900, which has dropped significantly. • Koropchak stated that the property is within the downtown redevelopment district. Based on the financial information available, the HRA's cash balance is $299,000. Projections over the life of district are $1.4 million from 25% pooling rule. Koropchak stated that the HRA doesn't have the cash to pay for the land today, but would over the time of the district. • Koropchak explained that if the HRA wanted to demolish the building and create a new TIF district, the City's Building Official would need to perform an inspection, and the property would need to qualify as substandard. Koropchak noted that while an appraisal isn't required to purchase the property, if the HRA would use any Community Development Block Grant, it may be required. Fair asked if there would be a new appraisal needed at that time. Koropchak responded that it would be more important to complete it at the beginning of the project. Koropchak stated that the decision to purchase the property relates to how important the HRA views the property in terms of redevelopment. Koropchak indicated that she had spoken with Greg Hayes of Shingobee Development. He had stopped by and inquired about redevelopment. He explained that they had worked with Ehlers and Mark Ruff on the St. Michael redevelopment project. The project took two years and their EDA had acquired properties over time. Fair stated that as the HRA starts acquiring buildable parcels, it will start to see things happen. He noted the reluctance of some property owners to come together on a proposal. Fair stated that he believes the Cedar Street property has potential. Frie noted that the parcel could be developed on its own. Fair indicated that he thinks numbers are right for • the purchase and would like the HRA to offer a purchase agreement. Frie suggested that the HRA could allow the property owner to not give up possession until after season. Frie noted that 3 years ago the price for the property was slightly higher. Barger stated that there would be no relocation because the property owner had approached the HRA. Mayer stated that purchase of the property would make a statement that the City is serious about redevelopment. Frie stated that real estate market is low and suggested offering perhaps 3% less than the asking price with possession in October. Fair commented that a January 1St, 2008 possession date would gives her time to clear out. Fair inquired where the HRA would obtain funding for the purchase. Koropchak stated that the HRA would have to go City Council to see if they'll lend the funds. Frie noted that the loan would be paid back out of the district. MOTION BY COMMISSIONER BARGER TO OFFER $450,000 FOR THE CEDAR STREET GARDEN CENTER PROPERTY WITH POSSESSION OF THE PROPERTY NO LATER THAN JANUARY 1 2008, SUBJECT TO NO RELOCATION BENEFITS, WITH OFFER CONTINGENT UPON FINANCING. • MOTION SECONDED BY COMMISSIONER FRIE. MOTION CARRIED, 3 YEYS - 0 NEYS. Koropchak asked if Frie would be willing to prepare the purchase agreement. 2 6. Consideration of a request from Lyle Trunnell for HRA purchase of residential property • MOTION BY COMMISSIONER FRIE TO EXPRESS NO INTEREST 1N 33 FOOT LOTS TO THE PROPERTY OWNER. MOTION SECONDED BY COMMISSIONER BARGER. MOTION CARRIED; 3 YEYS - 0 NEYS. 7. Consideration of a request for advancement ofthe pay-as-you-go finance method associated with TIF District No. 1-29 (Front Porch. Koropchak provided background stating that TIF District 1-29 is a housing district. The HRA entered into a contract for private redevelopment, which was then assigned to 1St National Bank. The TIF total was $220,000 at 7.25% interest. The note goes to February 1St, 2020, and the life of the district can go through 2029. Koropchak stated that payments through the end of December, 2005, did not include any principal, only interest payments. At the end of 2006, there was $22,000 fund balance in that district. Mike Cyr stated that the contract indicates that the authority may pre-pay part or all of land acquisition. Koropchak stated that the language is put in all contracts, as it allows HRA the option ofpre-payment. Koropchak stated that the developer was to complete 18 homes by December of 2004, which was accomplished in March of 2005. She noted that there were 8 additional units to be created which were outside of the district, but within • the project area. Koropchak reported that Cyr has Certificates of Occupancy for 4 of the remaining 8 to be completed, and two more will be completed by the end of this year. Cyr corrected that there are 5 Certificates of Occupancy and that they have a purchase agreement on six of the remaining eight units. Cyr stated that he would like to know if there is a possibility for an advance in tax increment. He is requesting this due to the unexpected slow sales. He noted that he had projected to be done in 2005. In the time since then, financing costs have ballooned. And he had an unexpected cost on inspections from the City. Schumann explained the City's preliminary and construction and review process. Cyr stated that he has 23 of 26 units sold, with one purchase pending and construction on- going on the final two units. Cyr stated that he had expected enough cash flow to pay off abridge loan. He indicated that he has achieved that, which leaves a balance of about $65,000. He stated that his final three closings should generate $60,000 in cash flow. As such, in the short term, there are no profits associated with the sale of these townhomes. Right now, Cyr stated that there is approximately $60,000 in expenses for closing out the project, including paving landscaping and additional financing costs. In summary, he stated that the project will be in the hole until the TIF catches up. • Cyr stated that his request is for pre-payment of $35,000 at minimum, perhaps up to $65,000. He stated that he would use that to pay City invoicing and then pay on the bridge loan. He said that the sales of the final homes would finish bridge loan and last punch list items. 3 • Frie asked how much annual payment is. Koropchak stated that it is $22,000 for 2007. Cyr stated that according to his calculations, he would be owed about $32,000 interest at this point, plus principal of $220,000. Koropchak stated that the accrued interest starts from date of closing. Koropchak stated that she had not checked what the 2006 payment was made to the bank. Barger stated that the increment now is being paid directly to the bank. Fair confirmed that that the advance would go to the bank. Koropchak stated that if a portion ofpay-as-you-go is to be paid up front, normally the HRA would have an assessment agreement. Koropchak stated that in this case, the assessment agreements would have to come from the homeowners, which they most likely wouldn't want to do. Cyr stated that he wasn't aware of that, and he agreed that they wouldn't want to do that. Cyr asked what the HRA would need to act as a guarantee. Koropchak stated that each would have to agree that properties would meet a certain value. Barger noted that could become expensive with attorneys. Koropchak commented that the County assessor also has to agree and that the assessment agreement is tied to both the building and land. Cyr asked what the HRA is securing against. Koropchak referred to a situation where perhaps homeowners do not pay their property taxes. Fair stated that he doesn't know what the HRA can do, as the fees would just add to the problem. He noted that because the TIF funds are public dollars, the HRA would have to • show and sign agreements. MOTION BY COMMISSIONER FRIE TO DENY THE REQUEST FOR ADVANCEMENT OF THE PAY-AS-YOU-GO FINANCE METHOD ASSOCIATED WITH TIF DISTRICT NO. 1-29 (FRONT PORCH.). MOTION SECONDED BY COMMISSIONER BARGER. MOTION CARRIED, 3 YEYS -0 NEYS. Cyr inquired whether the City would be interested in purchasing the Stumpf housenear the Ruff Auto site. The HRA discussed alternatives. After discussion, the HRA directed Cyr to act as a facilitator between Stumpf and Rollings and report to Koropchak. 8. Consideration to authorize payment of HRA bills. Koropchak added invoices for Walker In-Store public hearing notice and Steve Conroy's final invoice. MOTION BY COMMISSIONER BARGER TO AUTHORIZE PAYMENT OF HRA BILLS. . MOTION SECONDED BY COMMISSIONER FRIE. MOTION CARRIED, 3 YEYS - 0 NEYS. 9. Consideration of HRA Executive Report. 4 • Koropchak indicated that with market conditions as they are, she has been receiving more requests for transformation home loans. Koropchak outlined the possible merger of the HRA and EDA. She stated that she is recommending a transfer of powers to the EDA, as that body has more statutory authority. A discussion commenced regarding the resignation of Commissioners Andrews and Lahr, and how other EDA openings could influence the future make-up of the new entity. Koropchak stated that an item is likely to go before the Council on May 14th. 10. Committee Reports. Marketing - Frie reported that a group had attended a presentation of the SCSU feasibility study. Frie explained main points of the study, including the need to build partnerships with bioscience industries such as Cargill and educational facilities. He also noted the lease space often set up as "incubators" for these types of industries. Koropchak noted that the IDC had requested a presentation of the study to stakeholders within the community, which she will be arranging. • Fiber Optics - Fair asked for an update on the timing and cost for the proposed project. Mayer stated that it is hoped that the building housing the system electronics would begin this fall. He stated that the Council has agreed to move forward; the last item to approve is the bond sale. The Task Force is evolving into a committee to keep things secure from bidders. It will be a separate enterprise. Fair asked what happens with TDS and Charter. Mayer stated that the City will be a third service choice. 10. Next regular HRA meeting -Wednesday, June 6, 2007. 11. Adjournment. MOTION TO ADJOURN BY COMISSIONER FRIE. MOTION SECONDED BY COMMISSIONER BARGER. MOTION CARRIED, 3 YEYS - 0 NEYS. • Vice Chair ~~` _~-' C ! -- Secret 5