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HRA Agenda 03-11-1985"r 14— AGENDA MONTICELLO HOUSING AND REDEVELOPMENT AUTHORITY Monday, March 11, 1985 - 10:00 A.M. Monticello City Hall Members: Vic Vokaty, Hud Schrupp, Gary Wisher, Kan Maus. 1. Call to order. 2. Approval of Minutes of the February 7, 1985, Meeting. 3. Consideration of Tax Increment Finance Plan and Requesting City Council to Sot a Public Hearing. 4. other Business. 5. Adjournment. I MINUTES MONTICELLO HOUSING AND REDEVELOPMENT AUTHORITY Thursday, February 7, 1985 - 7:00 P.M. Monticello City Hall Members Present: Chairman Gary Mieber, Ken Maus, and Bud Schrupp. Chairman Gary Wieber opened the meeting asking for approval of the January 3, 1985, minutes. Bud Schrupp moved to approve said minutes and was seconded by Ken Maus. Passed 3-0. Allen noted that Jack Reeve was out of town and Vic Vokaty was sick. James Metcalf, of Metcalf 6 Larson, presented their proposal for a 33 -unit multiple complex. He described the property as that lying just east of Cy Reinert's housing complex and just west of Construction 5's projects. He then stated that in the initial application to FmHA, they need an endorsement type letter from the Council, the Planning Commiseicn, and the Housing Authority. Ile then showed the Authority tentative piano for the 33 -unit complex. The construction consisted of 19 one -bedroom unite, 12 two-bedroom unite, and two handicapped unite. He stated that because of City code, the building will be 24 stories instead of 3. The property is ouch that ground from the high side (south and of lot) will be moved to the low and (north and of lot). They will be presenting their proposal to the Planning Commission on the 12th of February. He stated that they will be asking the Planning Commission to waive the requirements of the garages and to allow more than 12 unite. If the Planning Commission and/or Council does not grant their request, their FmHA will not cover the garages with the mortgage, in which cess they will consider either donating the garages to the project or abort the project. He also suggested building the garages separately, holding them back for five years hoping that the coat could be recaptured in the increased rant, etc. Metcalf explained that they started this process at about the name time as their proposal for the elderly project but held off for other masons. They have an option on Lauring's property and will pay 2-3 month an it. He indicated that this proposal reaileticaliy stands about a 1Ue chance at getting tunded. He felt that FmHA programs would be drastically cut, if not abolished, during the next four years. This project would be more suspect than the elderly, which is in the process of getting final approval. Jim explained that the project to going to be located in an aroa that is properly coned and to designated for multiple units and will probably be the atte for future multiple unite. ME C� HRA Minutes - 2/7/85 Cary wieber questioned the progress of Mr. Poehler's project. Allen stated that when Poehler's request for a conditional use and a variance was not acted upon by the Planning Commission, it was his understanding that Joe withdrew his proposal. Cary wieber asked if their surveys indicated a need and what percentage of the respondents were from Monticello. Jim Metcalf stated that they knew previously to this proposal that there was a need from other surveys, either their own or Barthel Homes. He further stated that FmHA requires at least a 2 to 7 needs ratio to be eligible, and they have no problem with that. He also stated that these people have to be from the Monticello area, either having a 295 prefix or in the Monticello School District. In fact, he stated he would have no qualms about constructing a 60 -unit complex instead of 30 unite. Chairman Mieber asked for direction on this. Ken Maus moved to have Allen draft the letter on behalf of the Authority endorsing the need and project to be funded through FmHA. It was seconded by Bud Schrupp and passed 3-0. The next item on the agenda concerned the consideration of approving the concept of establishing a tax increment. Chairman Niebar'a first comment was, why the big hurry on this. Allen stated that if it appears to be a rushed proposal, staff apologises. It in not intended to be pushed through fast. Quite the opposite is true. Staff has been actively working with Construction 5, Malone, City engineers, planners, etc., for come time. It was not until this weak that staff has actively pursued the Tax Increment Financing (TIP) concept and prepared the information for this meeting. Also, it may seem like we aro in a hurry with this because of the time frame involved. For example, it could take three months or longer just to certify this Tax Increment Finance District with the County. In that case, we could expect certification in May of 1985. May in the beginning of the construction period; and by postponing the Tax Increment Finance District, we may postpone the actual construction process. Another reason for implementing Tax Increment Financing is to help brine down the costs of the improvements prop000d. Allen stated that if the improvemento wore ina Lalled and urlyinally the proportion wore valued at $1,000.00 and $6,000.00 after the improvements, the City could only 00000s for the $5,000.00 difference in improvements. Thie means that the City would have to absorb the remaining cost. The only way the owner of the properties can be seasoned the total costo is if they agree to pay them. In this proposal. Construction 5 probably would not agree to pay the $320,000.00 so that they could develop the properties. Allen stated that the City is not intending to give the developers and/or land owners some free improvamonto, but rather to reduce the City's obligation and asoess each land owner s reasonable amount; thus, the real benefit is to the City. HRA Minutes - 2/7/85 Allen stated that according to Springsted, we would need $42,000.00 a year to retire the debt on the $320,000.00 bond issue. Holmes 6 Graven is researching into whether it can be a Redevelopment District or a Housing District. Their hunch is that it will be a Housing District because the 18 -unit apartment is expected to be constructed first. Chairman Wieber asked if the developers expect to construct projects that will generate enough tax to pay off the bonds. Allen stated that these are all variables at this time. Staff will be meeting with Construction 5 to discuss the values of future development in order to secure tax information. This information will be needed by Holmes G Graven to prepare the Tax Increment Finance Plan, etc. Allen indicated that although no public lands will be bought or sold, the Tax Increment Finance process is the same as in the pact. We will require Construction 5 to enter into a developers agreement which guarantees the performance of certain items; namely, an 18 -unit apartment complex and XXX amount of sq. ft. for office/warehouse apace. Kon Maus had soma concern that the apartment building would be below grade when the improvements wore completed. Allen stated that once the improvements such as curb and gutter, etc., were in place, the Zoning and Building Inspector would make sure that the building was above grade and at the same time Construction 5 is aware of those ordinances. Bud Schrupp stated that this typo of project was something now to the Authority, that it concerned a lot of money, and that because two of the mom re were absent, they should be given a chance to review the information before deciding. Allen stated that the other members should be and would be informed of the project. He also stated that Staff was not asking for approval of the plan, only the project concept and that the Authority give staff authorisation to proceed with the packaging of the project information in order to see if Tax Increment Financing will work. At that point, the Authority may need to call a spacial meeting for the purpose of approving the plan and requesting the Council to not their public hearing and establish the Tax Increment Finance District. Allen indicated that the mambero will be kept apprised of new progress. Ken Maus asked what typo of commorciol buildings Construction 5 would construct on the commorcial properties. Allen stated that the offico/warchouoo concept to very pocciblo, although it may be somewhat different from their pact proposals. Thor* may be more than 1-2 buildings, but each building may be smaller in size. MRA Minutes - 2/7/85 Ken Maus likes the concept but is a little skeptical about Construction 5's plana to build the office/warehouse type operation. They have had this on the drawing board for so long and for so many years that nobody knows if they can believe in their plans. His concern was that the City/HRA enter into this Tax Increment Finance District and they (Construction 5) back out. Allen stated that the developers agreement will prevent that from happening. Perhaps a clause such as a Performance Bond, etc., will be included. These are the things that still need to be worked out before the Tax Increment Finance District can take place. Ken Moue had a suggestion to possibly use the park property for commercial use and generate additional tax base. Allen stated that it was a very small parcel. Ken suggested that Construction 5 build a 12 -unit building, etc. Allen restated the project and stressed the benefits to the City by lowering its costs associated with the improvements and that the intent was to provide these improvements to the individuals involved at a reasonable assessment. He also stressed the fact that the developers could develop this property themselves at a cost of $320,000.00 but would probably abandon it because of the prohibitive Coate. This, in the City's estimation, meets the "but for" clause. Ken Maus asked if the extremely high cost of constructing the road, etc., could be oversized or spread the assessments to future assessments on the otreet improvements from thin project to County Road 118 and Lauring Lana. Chairman Niabor felt it was possible but had not aeon it approached that way before. This would spread the coat out to more individuals and lower the cost. Allen stated that this could possibly irritate some property owners to have to pay for building up a portion of road bad. They may say that they are willing to pay for the street, never and water improvements, but not the coot of filling In someone's sandpit. This is what the Tax Increment Finance plan will eliminate. Ken Maus suggested that the ovoraizing or spreading of asesasmenta to future assesamenta could be used as an alternative and/or an addition to Tax Increment Financing. The Authority was concerned about Doran and Malone, etc., not sharing in the coats. Allen indicated that was not the cane. The opposite is true. They will be aaaacood for their share of the increased value that Tax Increment Financing does not pick up. Allen again stressed that otaff is not trying to puch thio pact the HRA without careful consideration. If it scow an though It in fast, it is because the time olomonto involved. He atroacad the Authority's willingn000 to hold a apocial mooting, if needed, for the purp000 of approving the plan and coquooting the Council to hold a public hearing to ontablioh a Tax Increment Finance Dictrict. Allan suggostod keeping in touch Individually and Inform them of any progress. HRA Minutes - 2/7/85 Sud Schrupp moved to grant project concept approval to the proposal by the City of Monticello to construct street, never/rater, curb/gutter improvements to the property known as the Construction 5 Improvement. The Authority authorizes staff to investigate the feasibility of using Tax Increment Financing, and upon the property arrangements order the Tax Increment Finance Plan. It was seconded by Ken Maus and passed 3-0. Bud Schrupp stated that he will be out of town from February 28, 1985, to March 18, 1985. Allen will keep this in mind for purposes of holding a special meeting. In other business, Ken Maus mentioned that the Hass's feel that the City, in trying to purchase their property, will resell it and make a lot of money. Their resarks have been that they're not dumb. Perhaps in negotiating with the Hasn'e some sort of guarantee could be given that we will not sell the property for XXX amount o1 dollars above what the City paid for it, or a right of first refusal, etc. There being no further business. Bud Schrupp moved to adjourn and was seconded by Ken Maus. Passed 3-0. &A Allen L. elvit f'secutive Secretary of HRA .5— r HRA Agenda - 3/11/85 1 3. Consideration of Tax Increment Finance Plan and Requesting City Council to Set a Public Hearing. (A.P.) A. REFERENCE AND BACKGROUND: This agenda item concerns the improvements of city streets, curb, water and sewer, etc., to the area known as the Construction 5 Project. The area lies at the corner of Lauring Lane and Washington Street. You may recall that at our last meeting I stressed the fact that we were not trying to help or give these improvements to the individuals involved. Quite the opposite is true. Total improvement coat is estimated to be approximately $390,000.00, of which approximately $150,000.00 will be assessed. Given that Construction 5 will enter into a developers agreement and construct the 18 -unit apartment building and the 25,000 sq. ft. office/warehouse complex, we anticipate $25,000.00 in increment each year. This project is a little different than the previous tax increment finance projects we have done in the past. There is no property to be bought and sold in this case. In its simplest form, we bond for the improvements and then use the tax increments generated from the improvements to retire the debt. Holmes and Graven has sent a plan for your review. However, we have not received it at this time. We anticipate having it in hand by Monday morning and will review it with you than. B. ALTERNATIVE ACTIONS: 1. Approve the TIF Plan and requoot City Council to oat a public hearing. 2. Do not approve the TIF Plan, thus eliminating a chance to improve an otherwise usal000 cand/gravol pit. C. STAFF RECOMMENDATION: Staff has worked hard to got to the point whore you can decide whether to approve or disapprove this project. wo foal vary pgpltivw „hint tho ♦rgviltg. ThP 116e of tax increment financing will bring the coat of the improvements to a level affordable by all parties. we recommend approving the plan and having the Council eat a public hearing. D. SUPPORTING DATA: Refer to the 2/7/85 supplement maps, TIF Plan to be delivered under separate cover. City ./ Montice11 � MONTICELLO. MN 55382 Plane (612) 2952111 Metro J61 2) 3335739 Dear HRA Member: As discussed at the February 7, 1985, meeting, I am updating you on the proposed Tax Increment Financing District. Mayor nyArveOrbnarrw O p BbNpai C%8=0 City staff, as well as representatives from Construction 5, OSM, and Holmes & Graven, met on February 13, 1985. The Fran Fehr Kenneth purpose van to establish construction costa for the proposed Jack Max.01 improvements, assessment values of all types of properties for Tax Increment Financing (TIF), and obtain development plane from Construction 5. Tom Etlem The replat has been altered slightly and may be altered FYmnca DVecla: again to facilitate better placement of the developers Rick WoltetaM buildings. The enclosed map indicates those changes. John 6e Only the physical property lines of the commercial properties Pww*v A Zo*Q: have shifted. Gary Arldemm First of all, Holmes G Graven has confirmed our request to have the TIP District certified as a Redevelopment District. This allows us to establish a 25 -year district. Normally \ this would have been considered an 8 -year Economic Development District; however, because the property is blighted, under developed, and requires substantial filling, grading, or other physical preparations prior to its development, a 25 -year district can be utilized. OSM estimated the total construction cost of the improvements to be approximately $302,000.00. Based on this amount, Springsted. Inc., estimates that $44,000.00/year (18 payments) will be needed to retire the bond indebtedness. They are confident they can obtain a 20 -year bond. The following is a breakdown of the issuance costs and projected total cost: $ 200.00 Miscellaneous 400.00 Bond Printing 500.00 Registering 700.00 Statement Printing 1,500.00 Rating 8,250.00 Finance Charge 2,500.00 TIP Plan 3,500.00 Counsel 2,800.00 Developers Agreement $ 20,050.00 Total Issuance Coats 81,425.00 21 Months Capitalized Interest 7,805.00 Discount $391,080.00 Total Coats 250 East Broo&"V Route •. Bm 83A MonacNo. MN 05352 IL To: RRA Members Re: TIF District Page: Two Minnesota Statutes 429 states that 201 of the project must be assessed. In this example, 20% of $391,000.00 (rounded off to nearest $1,000.00) is $78,000.00. Staff is now working on what percentage will be picked up by the developers and what percentage by the City. This entire project is hinged on the performance of Construction 5 developing the properties to generate tax increment. As of the February 13. 1985, meeting, Construction 5 plane to construct an 18 -unit apartment building. The apartment building will be approximately 19,000 sq. ft. with approximately 3,600 sq. ft. of garage area. The second part of the project consists of a 25,000 sq. ft. office/warehouse complex similar to FSI'a. There is a third office building with approximately 6,500 sq. ft. proposed, but we only used the first two for TIF purposes. If Construction 5 builds more, we stand to benefit. However, if they do not complete the third building, we do not fall short. There is also the possibility of amending the Downtown Redevelopment Project to include the proposed elderly housing project. This would provide excess incroment and could be used to help retire the debt in this Redevelopment District. At this point, Holmes a Graven is refining their estimate for the Tax Increment Plan. When their recommendation arrives, I will lot you know. Indications now look good utilizing Tax Increment Financing. At the last meeting I informed you that not much progress had been made with rho Hasse. On Fabruery 13, 1985, Mrs. Hass and her eon met with staff regarding the purchase of their property and relocation to another site. Mrs. Hass expressed her feelings that the City will resell the property for much more than they paid for it, etc. Staff triad to assure her that this was not the case and, in fact, stood to lose a considerable amount of money in redeveloping the property. The cost of the discussion cantered on what building sites would be acceptable to them and to got oomo estimates from contractors. When they obtain those, they should return to the City for further negotiations. To: HRA Members Re: TIP District Page: Three As a whole, staff felt some substance to the outcome of the meeting. But the Progress is slow. When more is learned, I will pees it on. Respectfully, 1 Allen L. elv t BIIeCUtive Secretary of HRA ALP/kd cc: ALP