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HRA Agenda 09-05-1985AGENDA MMICEILO HOUSING AND REDEVELOPMENT AUTHORITY Thursday, September 5, 1985 - 7:00 P.M. Members: Chair Gary Wieber, Bud Schrupp, Ken Maus, Roger Hedtke, and Ben Smith. 1. Call to Order. 2. Approval of the Minutes of the Regular Meeting held July 2, 1985. New Business 3. Consideration of Authorizing a Call for Applications for BRA Executive Director. d. Other Business 5. Adjourn. MINUTES MONTICELLO HOUSING AND REDEVELOPMENT AUTHORITY Tuesday, July 2, 1985 - 7:00 P.M. Members Present: Chair Gary Wieber, Bud Schrupp, Ken Maus, Roger Hedtke, and Ben Smith. Chair Gary Wieber made an opening statement welcoming Mr. Ben Smith as an official HRA member and then opened the meeting requesting approval of the 6/6/85 minutes. Bud Schrupp moved to approve the 6/6/85 minutes, was seconded by Ken Maus, and passed 5-0. The first item on the agenda pertained to a proposal from Veit Construction for redeveloping Block 15 and using tax increment financing. Mr. Tom Godlewski (Veits) explained the property, the building, and the possible physical layout. He then explained the reason why they felt the project would not work without various financial incentives such as tax increment financing. Tom explained a cost analysis/spread sheet for both a 29,000 eq. ft. and a 33,000 eq. ft. building. 29,000 sq. ft. was shown because Monticello's zoning ordinance states that this is the largest the building can be and still comply with setback, parking, and other ordinances. 33,000 sq. ft. was listed to show that a larger building could produce more revenue and make the project more feasible. A variance on setbacks and/or parking requirements may be applied for to make 33,000 sq. ft. work. Tom explained the total expenses and revenue, indicating a negative cash flow. He added that there were two ways to obtain a positive cash flow: 1) to raise the rent, or 2) to lower the debt by the use of finance incentives or construction costo. His last comment wan that he felt it difficult to raise the rent subotantially over the going rate. Chair Wieber asked if tax increment financing would help them obtain their goal; and Tom stated that it would help considerably, but Industrial Revenue Bonds would also be needed. At this time, Allan Polvit explained how staff arrived at the amount of tax incromont financing (TIP) benefit they could expect to receive. The City's concern was that the tax increments be applied appropriately for improvamento of the property; and then if any increments remain, they be applied to reduce the cost of the property. He otated that staff estimated the costa of the unimproved property, street, and sower improvements. At that point, the total tax increment was calculated and used to determine how large a bond issue could be obtained with a 20 -year debt retirement. Working backwardo, staff determined a bond issue of $300,000.00 to be the maximum benefit available at today's rates. Allen emphasizcd the importance of the 8300,000.00 amount and stated that what the increment monies were applied to was not important. What was important was the 9300,000.00. Staff felt comfortable with using the funds to offset or pay for street construction, sewor improvements, soil corrections, and than land reduction. Again. Allen stressed the importance of the 8300,000.09 HRA Minutes - 7/2/85 amount being the moot that could be deducted from their expenses. He stressed the fact that the purpose of tonight's meeting was to get the HRA -s approval of the project's concept and not approval of the TIF Plan. The construction of street, sewer, and other improvements would have to be discussed during the coming months with City staff. Allen explained two options that are available. 1) the HRA purchases all unimproved properties; constructs 6th Street, and improves the sewer using the tax increments, and the developer mucks out the property themselves; or 2) the HRA buys the unimproved properties, mucks the property out, builds the street and improves the sewer. Again, the important thing to remember is that no more than $300,000.00 will be available for offsetting these hard costs. An exaVle aalght be total hard costs of $500,000.00 If $300,000.00 is the moat benefit from TIF, then $200,000.00 MUST be paid for by the developer either in the form of increased rents, decreased mortgage monies, or decreased construction costs. Chair Wisher had some questions about the differences in land costs between the City's estimate and the developers. Allen stated that different techniques were used in arriving at land. costa, but total expenses were the same. He stated that $2.85/sq. ft. was used. Because that is what improved property has recently sold for, then we multiplied the square footage of the property by the $2.75 to get the improved properties cost. From that we calculated and deducted the cost/sq. ft. of soil correction to give us an estimate of unimproved property. He stressed that these numbers are ESTIMATES and may increase/decrease as firmer estimates are obtained in the future. Ken Maus asked if sewer improvements were addressed by Vait's analyala. Tom stated that when they prepared their analysis, they were not aware of the aboance of a sower system in the immediate area. The fact that the property is so low and construction of the interceptor sower would be nocosoary, their estimate of $12,000.00 was only for connecting sewer from the building to the existing sower. Again, Chair Wiabor asked why the City's estimate of the land cost was $208,000.00 and Voit'o was $126,000.00. Tom Godlawaki stated that the City'o portion was valued at $2.75 x .9 (acre) - 596,400.00. Eck's property was 32.75 x 1.6 (acres) equaled so much, and then special aaa000ments/taxeo and square footage taken by MN/DOT were deducted leaving a net land coat of $126,500.00. In other words, the coot of the property should be raw costs lase taxes, special aseosctuents, and any neceasary improvements to the soil. Bon Smith asked about what was planned for the water drainage from the largo parking lot. He also ackad if the drainage would be natural or taken away by storm sower. Tom Godlswski stated that the piano call for the project to have its own drainage system inotalled and would then drain into the City's storm sewer. -2- HRA Minutes - 7/2/85 Ken Maus asked Allen if the $60,000.00 for the sanitary sewer was to be assessed or charged to this project. Allen responded by saying that because this improvement would probably not take place in 1986 but for this project and that they would benefit more than anyone also, staff felt that the expense should be charged fully to the redevelopment project. Ken suggested that this should be charged or assessed on an oversizing/prorated basis; and to his recollection, the City has never assessed a project 100%. He stated that legally the courts may rule against the City if they choose to assess a project 100%. He also added that it has been the Council -s feelings that when the interceptor sewer went in, It would be covered by ad valorem taxes. Ken -s last comment on the interceptor sewer was that perhaps $60,000-$70,000 for sewer was unrealistic. Allen stated that his point was well taken and he would pass it on to staff. A discussion on what sewer services ware available took place, and Ken Maus suggested both the City and the developer look further at other alternative sewer hookups. Perhaps the City would grant a temporary on-site sewer system or container. Roger Hadtke asked the developers if a $300,000.00 tax increment financing bond issue would help them not only bring about a positive cash flow, but one sufficient to obtain the necessary financing from a bank. Tom Godlowski indicated that it would not, but it helped. He stated that the IRB issue would also be needed. Chair Wiaber indicated that only the concept approval in needed tonight, and then both the City and the developer can work on the project further. He then asked the Authority if they felt the project is worthy of using TIP for improving the land, and but for the use of TIP the improvements would not be made. Bud Schrupp moved to approve the project's concept and to have City and developer continue their efforts on the proposal. Roger Hodtko stated that from his limited understanding of TIP, it is blighted and unproductive and should be considered a good use for TIP. He then seconded the motion. The vote was d in favor and 1 abstention. Kon Maus indicated hio abatantion was because of personal reasons. The next project concerned tho use of TIP for rodevoloping the Haan property, which is adjacont to Kan Stolp's. Allen stated that he wished to clarify a etatomant made in the supplement. He referred several times to the City agreeing to call the property for $7,500.00. This vas not the City Council, but rather City staff. In fact, the concept has not boon brought to the Council's attention at this point. Staff wanted to get the KRA'6 feelings on the concept prior to going to the Council. Allen updated the Authority on the changes in the developer's plans. Since first discussing the redevelopment plane with Gruys, Johnson i Associates, they have stated that they are looking at -3- BRA Minutes - 7/2/85 other sites an well. They have considered two lots (6 & 5, Block 6) _% for $65,000.00. At this time, they are acting purely as financial analysts and trying not to let personal preferences such as desirable locations enter into the picture. At this time, they are saying for $65,000.00 we can get two full City Iota that are on a main street leading to the mall and that locating at the Stolp/Hasa site would cost them approximately $100,000.00 for loss land. To an accountant, $35,000.00 difference in a major factor. Ren Maus asked if the developers were considering locating out of the Tax Increment Financing District and not using TIF if they chose Block 6. Allen said that was the case. Ken then stated that perhaps the developer was using these tactics as a ploy in order to get a better deal on the property. Allen stated that if that -s what they are doing, it Is working. Allen explained the project as proposed and how staff suggested entering into it with the developers. The Authority felt that the project should not be lost because we do not have to go in debt. He also stated that as with the Ford building, candidates do not come along very often. He felt we should do whatever is necessary to redevelop this property. It was the Authority's consensus to consider purchasing the Stolp property and bond for it. They felt that this would be more appropriate than losing this project, having Mr. Stolp bring in another business, and only having the Have property left. Thin did not seem very attractive. It was the consensus of the Authority to rework the numbers and J attompt to got both percale at comparable prices as the property on Block 6. Allen stated that he would begin Immediately. The next meeting was scheduled for August 2. But because members may be out of town, a July 25 meeting may be considered. There being no further business, Bud Schrupp moved to adjourn. It was seconded by Ben Smith, and passed 5-0. Allen L. P lvit Executive Secretary for HRA BRA Agenda - 9/5/85 3. Consideration of Authorizing Applications for an HRA Executive Director. A. REFERENCE AND BACKGROUND: Allen Pelvit, former Executive Director of the Monticello Housing and Redevelopment Authority vacated his office on Friday, August 30, 1985. Allen was employed in a three fold function serving the HRA, the City Council in its Economic Development Capacity, and the Independent Industrial Development Committee. Part of his time dedicated to the Industrial Development Committee was donated to the Monticello Chamber of Commerce by virtue of their annual contribution to the Committee's work. There has been substantial discussion about replacing Allen and what shape the position should take if it is to be refilled. If it is to take a similar posture, whereby one individual will be shared by three groups, then this will require some joint planning. The HRA is the first body to formally meet to discuss and state their preference with respect to replacing Allen. I am hoping that the HRA will review the type of work that was performed in the past, and decide upon the scope of a staff person you would like. Whether or not the shared approach is workable needs to be determined, and then the HRA's position will be carried to the next body to discuss their position. Presumably, if the position in to remain essentially the name (some minor modifications may be required) then the chairpersons of the varying controlling boards will need to convine in a joint cession to draft a job description and determine the best approach for applicants. If the HRA opts to not support a staff person, then that work load will be turned back over to existing staff. While the duties of any one of the shared positions could possibly be aaoimilated into the duties of existing staff, when combined I still believe the total job justifies a full time person. While I have not boon in direct contact with the HRA for at least the lent year. I will be attending your meeting as your staff porcon. B. ALTERNATIVE ACTIONS: 1. Elect to request of the other bodies that the position be filled under oubstantially the same definition as in the past. 2. Elect to conduct business without the aid of a full time staff person. 3. Elect to pursue your own part -Limo staff person. There is no staff recommendation not supporting data for this item.