HRA Agenda 07-02-1985AGENDA
MONTICELLO HOUSING AND REDEVELOPMENT AUTHORITY
Tuesday, July 2, 1985 - 7:00 P.M.
Members: Chair Gary Mieber, Bud Schrupp, Ken Maus, Roger Hedtke,
and Sen Smith.
I. Call to Order.
2. Approval of the Minutes of the June 6, 1985, Meeting.
3. Consideration of Concept Approval and Use of Tax Increment
Financing (SIP) for Veit -8 Proposal.
6. Consideration of Concept Approval and Use of Tax Increment
Financing (TIF) for Gruye Johnson and Associates- Proposal.
5. Other Business.
6. Adjournment.
NOTE: Keating will be on Tuesday duo to 4th of July on Thursday.
MINUTES
MONTICELLO HOUSING AND REDEVELOPMENT AUTHORITY
Thursday, June 6, 1985 - 7:00 P.M.
Members Present: Chair Gary Wieber, Bud Schrupp, Ken Maus, and
Roger Hedtke.
Chair Wieber opened the meeting asking for approval of the April 4,
1985, minutes and the 5/2/85 minutes. A motion was made by Bud
Schrupp and seconded by Ken Maus. Passed 4-0.
The next item on the agenda pertained to the extension of the
option on Lots 13, 14, and 15. Block 51, to Metcalf 6 Larson.
Wiaber summarized Metcalf 6 Larson's request and turned the floor
over to Brad Larson. Mr. Larson explained that both of their
current applications have been approved at the state level, but
the elderly project vent on to Washington. D.C., for approval because
it is 2% stories and contains an elevator. He also stated that
they expect approval within 30-60 days and to purchase the land
shortly thereaftor and begin fall construction.
The option has already cost Metcalf 6 Larson $5,000.00. However,
that, according to Larson, "is the cost of doing business."
The extension of 90 days is hoped to allow enough time to purchase
the property.
Allen explained why the staff favored a 6 -month option versus
a 90 -day (3 month) option. The original mortgage was for $35,000.00
and the HRA to take control of the property from the Monticello
Development Corporation. Wright County State Bank agreed to
lot tho HRA pay only the interest due ovary 6 months. Those
intaroot dates aro November 9 and May 9 of each year. Allen
further explained that when one of those dates comes duo, the
interest paid is for pact interest and each day in the future
accrues 312.45 interact. In affect, the $2,400.00 option money
Just covers the interest expense that we have already expended.
If a 90 -day option is granted, and at the and of 90 days you
withdraw from this project, the NRA Is out 91,120.50 and has
no one interacted in buying the property. It has boon this Authority'o
history to at least break oven, and staff fools it should be
no in the future. Staff agrees that if the land is purchased,
the remaining option money could be applied toward the calling
price.
Sud moved to extend tho option on Lots 13, 14, and 15. Block 51,
for a 6 -month term to Metcalf 6 Larson. The motion was aacondod
by Ken Maus and pacsod 4-0.
HRA Minutes - 6/6/85
The next agenda item concerned itself with the conditional use
request for the old Ford garage. Chair wieber asked if it was
the Authority's responsibility to control the area. Allen commented
that it was not the Authority's duty to control or mandate provisions,
planning or zoning ordinances such as the Planning Commission,
but rather to recommend to the Planning Commission how to best
utilize a commercial apace adjacent to a residential property.
Mr. Larson stated that by Minnesota Statute, the Authority did
have a responsibility to make their recommendations known to
the Planning Commission.
Allen then explained what had taken place between Mr. Flake and
Mr. Townsend with regard to their plans to purchase/rent and
remodel the old Ford Garage. He explained how Mr. Townsend
decided to build his own building in the industrial park and
that Mr. Flake inquired about tax increment financing, etc.,
for a new building. After finding that this was not financially
feasible to a developer, Mr. Flake stated that he would have
to perhaps continue remodeling the building and rent it out.
Mr. Flake has found a tenant that wants to have a body shop in
the rear section only. He would like to occupy this space for
approximately one year and than build his own building when the
business becomes more established.
After much discussion took place regarding the pro's and con's,
the Authority decided to recommend to the Planning Commission
that they control the uses that would be allowed in a B-4 Zone
that is adjacent to an R-3 Zone. Since the future elderly housing
project would be next to the Ford garage, the HRA felt that if
the Planning Commission gave a conditional uoo permit, they should
have good controls over what takes place on the property. The
HRA would also like the right to proceed with redevelopment plans
if the occasion Orions.
It was the consensus of the Authority to have a written recommendation
presented to the Planning Comminsion stating that the Authority
did not fool it appropriate to allow a body shop in a B-4 Zone
and adjacent to a multiple R-3 Zone. If the Planning Commission
allows the conditional use pormit for ono year, the Authority
rocommonds that certain conditions be attached to the permit.
A discussion took place regarding possible redevelopment of the
Ford property. If a developer could be found, the RRA could
condoms the property and then develop it. The Tax Increment
Finance Development Diatrict could be amended and approximately
814,000.00 from the future elderly housing project could be used
to spur the redevelopment of the Ford property.
-2-
HRA Minutes - 6/6/85
Bud Schrupp moved to send a letter to the Planning Commission
recommending that we, as adjacent land owners, hope they would
take careful consideration when allowing a business into a B-4
Zone other than is allowed by the ordinance. It was seconded
by Ken Maus and passed 4-0.
IXI Assemblies has been considering adding more buildings to
their complex, and Allen stated that he has prepared a proposal
for completion of 7 more buildings during the next two years.
IXI is still somewhat secretive about what they do but have indicated
that 2-3 buildings are likely to be constructed in 1985 with
the remainder built in 1986.
My purpose in having this on this agenda was to see if the purchase
price could be worked out prior to IXIOs coming into City Hall
and requesting a building permit. There were also some other
circumstances that made the project somewhat more complicated.
An example was that IXI may become involved with the Norwegian
"Greenhouse" Project. If that happened and tax abatements were
available, then perhaps the land could be sold at a very low
price to IXI. This would allow IXI to in turn give a very favorable
lease rate to (STP) Scandinavian Transport Products.
The remainder of the meeting was used to discuss the possibilities
of STP happening and then agreeing on what the land should be
sold for. Allen recommended that the Authority should concentrate
a on dealing with IXI, assuming the use of tax increment financing,
and completion of the remaining 7 buildings during the next two
years. If STP eventually happens and something develops between
IXI and STP, then we could proceed in that direction.
Chair Miobar asked what agreement was arranged between IXI and
the City of Monticello. Allan stated that it was his understanding
that tax increment financing would be utilized throughout the
entire project but that the cost/acro wan somewhat nogotiablo.
That in what Allen would like to have taken caro of at thio meeting.
Tax Increment District 01 and 44 brought approximately 53,500.00/
acro. When we sold IXI Lot 6 for their parking lot, we did not
uoo tax increment financing and sold tho land to them at $3,500.00/
acro. The proposal submitted indicates that if two buildings
were completed in 1985 and five in 1986, there would be more
than enough tax increment to pay off the Authority -a debt on
the land.
Chair wiabor asked if the property was sold at 93,500.00/acro,
would the Authority otay colvant. Allan stated that even if
we gave IXI the property, we have enough tax increment to pay
off the debt. Allan stated that the RRA has not given land away
(for 91.00) in the past and probably will not in the future.
-3.
HRA Minutes - 6/6/85
He stated that if I%I came in to request a building permit and
knew a cost for the property, he could give them an amount.
Bud Schrupp moved to have $3,500.00/acre eat as the cost subject
to other developmente that may come along. If STP -s proposal
develops, then the numbers can be changed. Ken Maus seconded
the motion and was passed 6-0.
The neat HRA meeting regularly scheduled for July 4, 1985, will
be held on July 2, 1985, due to the 4th of July falling on a
Thursday. There being no further business, the meeting was adjourned.
Allen L. Pelvit
Executive Secretary of HRA
HRA Agenda - 7/2/85
r 3. Consideration of Concept ApRroval and Use of Tax Increment Financinq
(TIF) for Veit's Proposal. (A.P.)
A. REFERENCE AND BACKGROUND:
Veit Construction of Rogers, Minnesota met with the Industrial
Development Committee on 6/20/85 to discuss the redevelopment
proposal intended for Block 15. This property lies directly
south of the railroad tracks and east of Highway 25. The City
of Monticello owns .9 acres with Wilbur Eck owning the remaining
1.6 acres, and offers have been given to each. Assuming that a
purchase price can be agreed upon, the following will be proposed.
Vaits propose to construct a concrete type building that would
total 35,000 square feet. 25,000 square feet would be leased
space, with the remaining 10,000 square feet being speculative.
Ken Maus of Maus Foods is the proposed tenant for the 25,000 sq.ft.
apace. Although Ken is an HRA member, it is okay for him to
enter such negotiations with the developer.
This project in going to be somewhat complicated due to the improvements
that will be needed. At first, Veits felt that fall construction
and early winter completion was possible. since the initial
meeting, all parties have agreed that this scenario is not likely
and perhaps 1986 would be more realistic. Time is needed to
work on the typo of improvements needed and time is needed to help
locate a tenant for the Maus building and not allow it to stand
empty over the winter months. Besides these problems that take
time to resolve, staff teals four months to complete the project
for tax increment purposes is unrealistic.
A project of this scope will definitely change the property in
question. The improvements needed include mucking out the swampy
soil and replacing it with good compacted Boil. Sower and water
are not at the present site. Work would need to be completed
and incorporated in with the City's overall plan. The last major
improvement that would be required is the construction of 6th Street
between Cedar Street and Highway 25.
Staff has briefly discussed these improvements but will need
time to plan them and estimate their costo. Volts will have
estimates available at the meeting for soma of the improvements.
Por tax increment financing purposes, the following is proposed:
35,000 sq. ft. building 0 926.00/sq.ft.
$910,000 Cost of Building
9382,300 Assessed Value
x .OS1305 Mill Rate
8 31,083 Taxes
1,083 Lose Original Assessed Value
$ 30,000 Tax Increment
x20 Year
$600,000 Total Tax Increment
NRA Agenda - 7/2/85
i
I have stressed to Veits that this is going to be considered
a Redevelopment District with a 25 -year duration. The main reason
for 25 year eligibility is the fact that the land is unproductive
and unuseful in its present state, and to correct it would be
very costly. Veits will request TIP using the "but for the use
of TIP, the project becomes financially not feasible."
Staff has discussed the use of the tax increments and agrees
that they should primarily be used for street/road improvements,
soil corrections, sewer and water improvements, and then if tax
increments remain, to reduce the land costs.
B. ALTERNATIVE ACTIONS:
1. Approve project concept and request to use TIP and proceed
with improvement estimates, etc.
2. Do not approve project concept and request to use TIP.
C. RECOKKEKDATION:
Two members of this Authority have heard Veite make their initial
presentation to the Industrial Development Committee as well
as some members of the staff. We feel that the project is one
that deserves the use of TIP, but strongly urge you to require
all tax increment be applied to street/road improvements, sewer
and water improvements, soil corrections, and then land write
down. we want to stress the fact that this in going to be a
long process and somewhat complicated.
D. SUPPORTING DATA:
Map indicating area involved; Site plans, etc., if available
by the time of the meeting.
-2-
n pYopp9pl
VeitSXY
�yoa ofn
atrtu unuur�
a►�-
�� nuru
tint u�n� r Kirit t�urtaNa �i►,q,� �t at�� '� -
r
HIGHWAY
�a
-Al
NO. 94
"fib !�-�' .''...+s'"'� ��l D . ¢rQ w~ •�"^�„
Lis
/tel ,\\ \ � ,.•.- //�
HRA Agenda - 7/2/85
v 6. Consideration of Concept "oval and Use of Tax Increment Financing
(TIP) for Gruys Johnson and Associates' Proposal. (A.P.)
A. REFERENCE AND BACKGROUND:
Approximately six months ago, negotiations between the City and
Mr. and Mrs. Hass started and resulted in their moving last month.
When we first looked at the possibility of purchasing the Hass
property, we felt that perhaps Ken Stolp of K B H Auto would
be the best prospective developer. Since then, his plans have
changed, and the Post Office was strongly considered. Besides
being difficult to deal with the U.S. Post Office and a private
developer, the timing was not good.
During the time we were working with the Post Office, a strong
interest from Gruys,Johnson 6 Associates was expressed. Their
proposal requests the use of TIF to help offset the high cast
of the land. The City owns the northerly y of Lots 1, 2, and
3. Block 50, and Ken Stolp (K G H Auto) owns the southerly 4
of Lots 1, 2, and 3. The developers have been negotiating the
purchase price and terms with Mr. Stolp. As we understand it,
an agreement should be reached by this meeting.
The purchase of this parcel is separate from the north 5 of Lots
1, 2, and 3, Block 50. They will not be involved with TIP, except
for lying in the Redevelopment District and possibly having a
new building partially on it. The northerly y of Lots 1, 2,
and 3. Block 50, owned by the City, to the parcel that the developers
wish to purchase using TIP.
The scenario begins with the developers purchasing Mr. Stolp's
property direct. Then they request the use of TIP to purchase
the north y of Lots 1, 2, and 3, Block 50. Because the City
already owns the property, the HRA does not have to sell bonds
or borrow money to buy the property. The City has agreed to
cell the parcel to the developers for $7,500.00. The City will
then ask the HRA if they would prefer to 1) pay the City approximataly
$50,000.00 they have invested in the land; or 2) agree to anter
into a pledge agracment betwean the HRA and the City. This agreement
would provide for the HRA to receive the tax increments each
year and than transfer them to the City to retire the $50,000.00
debt.
As in past TIP projects, the City will anter into a Dovelopor'e
Agreement with the developer. The agreement will specify the
building site and assessed values, otc. This will be between
the City and the developer and not the HRA because the City owns
the property. An assessment agreement to also prepared. This
states that the County Assessor's office has certified the minimum
assossod value for tax purposes. We need this to calculate
the tax increment.
-]-
HRA Agenda - 7/2/85
V When staff was discussing how to establish a selling price for
the property, we estimated the beet building sire for the project.
This needs to fit the needs of the developer,as well as providing
enough tax to make TIF feasible. As of 6/28/85, a 4,000 sq.ft.
concrete building similar to Metcalf & Larson's office building
will be constructed. It will be a split entry building and thus
will total 8,000 sq.ft. We have conservatively estimated the
cost of the building (including some parking lot and landscaping)
at $215,000.00. The estimated assessed value would be $83,433.00,
and the tax increment would be $5,850.00 each year. Assuming
that we can collect 20 years of the remaining Tax Increment Financing
Redevelopment District 02, a total of $117,000.00 would be received.
The excess amounts could be considered interest for the money
the City used to purchase the property, or it could be applied
towards other TIF projects.
The City has agreed to sell the property for $7,500.00 to the
developer. They have also agreed to not charge the HRA interest
during the time the debt is being reduced. In effect, $62,000.00
($117,000 - $55,000 - $62,000) will be available over the next
20 years for other TIF projects within the District.
B. ALTERNATIVE ACTIONS:
1. Approve the project concept and request for use of TIP as
presented above.
2. Do not approve project concept and request for use of TIP.
C. RECOMMENDATION:
It is staff's recommendation that this is a good proposal for
redeveloping a property that otherwise would remain blighted,
unproductive, and in non-conformance with the City Ordinance.
Mother important factor is that the City in willing to nail
the property and lot the HRA pledge the Tax Increments to them.
The City receives $7,500.00 payment for the property, and the
HRA does not have to go any further in debt. In fact, over the
next 20 years, the HRA will receive in excess of $60,000.00 to
apply to other projects in the District. we recommend Alternative 11.
D. SUPPORTING DATA:
Exhibit I (tax data): Nap indicating property.
EXHIBIT I
Leo• T.t.t
B.Ildtq Blr. etorle6 Total Og.rt. 3/ .rt. (GN) ►v 10w CAVI nlu Rate Tax Ine. Yra. Increment
50 a 60 - 3000 .q.1t. 1 3 - 6000 q.9t. 1 676.87 - 6161,730 560,335 - 611,477 - 660,066 . .001705 - 33,977 1 70 - 679.440
60 1100 - 6000 .q.1t. 1 S - 8000 q.tt. a 626.87 - $716,960 $03,433 - 511,677 - 671,956 a .081005 - $5,850 . 20 - 6117,000
60 a100 - 6000 q.tt. ■ 3 -13000 q.tt. 1 626.67 - 6337-440 6139,669 - 611,677 -6110,177 . .001305 - $9,600 1 30 - 6192,160
0
0
Gruys Johnson & Associates
Proposal
Lots 1, 2, 3, Block 50
City of Monticello
IVE
111 I ( C► 1 ,\ �,•
I �\