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HRA Minutes 01-07-1998 , . . MINUTES MONTICELLO HOUSING AND REDEVELOPMENT AUTHORITY Wednesday, January 7, 1998 - 7:00 p.m. City Hall Members Present: Chair Brad Barger, Vice Chair Steve Andrews, Darrin Lahr, Bob Murray, and Dan Frie. Council Liaison: Roger Carlson. Staff Present: Rick Wolfsteller, Jeff O'Neill, and Ollie Koropchak. 1. Call to order. Chair Brad Barger called the HRA meeting to order at 7:10 p.m. 2. Consideration to approve the December 3 and December 10. 1997 HRA minutes. Darrin Lahr made a motion to approve the December 3, 1997 HRA minutes. Dan Frie seconded the motion and with no corrections or additions, the minutes were approved as written. Yeas: Lahr, Frie, Andrews, and Murray. Nays: None. Abstention: Barger, not present. Dan Frie made a motion to approve the December 10, 1997 HRA minutes. Steve Andrews seconded the motion and with no corrections or additions, the minutes were approved unanimously as written. 3. Consideration of adding items to the agenda. None. 4. Consideration to accept the Purchase Agreement between the HRA and Irwin Hawkins. 225 West River Street. Kacey Kjellberg, real estate agent for seller Irwin Hawkins, presented a counter-offer of $57,500 "as is" for the property located at 225 West River Street. Kjellberg noted the assessor's value for payable '98 had risen to $55,700. The original HRA purchase offer was $50,000 "as is". With no advanced notice of the counter-offer price, Darrin Lahr made a motion for the HRA to take the counter-offer of $57,500 "as is" under consideration. Steve Andrews seconded the motion and with no further discussion, the motion passed unanimously. Kjellberg understood the need for consideration and noted her phone number where she could be reached the next day. 1 , . . HRA MINUTES JANUARY 7,1998 5. Consideration to approve the Private Redevelopment Contract between the HRA and BBF Properties. Inc. In December, the HRA approved TIF assistance in the amount of $400,000 for demolition and relocation costs associated with redevelopment of the Monticello Mall, thereafter, the first draft ofthe Private Redevelopment Contract was prepared. The annual tax increment to be split equally between the developer and the HRA over 15 years. Brad Johnson, representing developer Barry Fluth, submitted an updated uses and sources statement requesting the approved $400,000 assistance be increased to $600,000. Johnson stated the soft cost estimates of$1.2 million included a reduction of$235,000 from the initial estimates. Construction, relocation, and demolition estimates total $3.6 million for a total project costs of $6.8 million. In order for the developer to receive a rate of return of 11.9%, Johnson requested TIF assistance in the amount of $600,000 at 7.5% interest rate over 20 years or an annual tax increment of $56,907. HRA members were comfortable with the 50/50 split of increment. Brad Johnson felt the assessor's estimated market value of $3 million was low and suggested the developer would take the risk gambling on a higher EMV and classification rate reductions. Financial Consultant Ruff agreed that a higher EMV was not a great risk for the developer. Andrews expressed his concern that the HRA be indemnified by each tenant. Negotiations continue with the tenants for relocation and business acquisition. Questions relating to tenant buyouts and relocations need further clarification. The restaurant owner (tenant) has not decided whether to stay-in-town, he indicated he was not glued to this town. Lahr expressed the need for the HRA to retain the first $45,000 for other downtown improvements and his interest to retire the mall debt as quickly as possible. Frie agreed and added that the HRA liability issue be researched and resolved. Darrin Lahr made a motion to increase the approved $400,000 TIF assistance to an amount not-to-exceed $500,000 for demolition and relocation costs associated with the redevelopment of the mall, the HRA retains the first $45,000 of annual available tax increment, and authorizes legal counsel and consultants to finalize liability, relocation, and buyout issues associated with the redevelopment project. Bob Murray seconded the motion and with no further discussion, the motion passed unanimously. 6. Consideration of an update relating to the proposed National Guard/Community Center. Public comments: Doug Franks submitted a petition to the HRA. The petition included 568 signatures of registered voters of the city of Monticello asking for a referendum vote on the proposed new community center and city hall. The signatures were gathered over 2 . . . HRA MINUTES JANUARY 7,1998 the holidays and Pranks felt many more signatures were obtainable if not for vacations. The issue is not opposition to the proposed project but voters/tax payers have no "say" or VOice. Scott Douglas expressed concerns relating to the proposed site of the community center in relationship to the Pire Hall site. The Pire Department concerns are safety issues associated with increased vehicle and pedestrian traffic along Walnut and 5th Street. Jeff Burns, Little Mountain Peeds, was in favor of the site. He saw the community center as an asset for the business community and the youth. The community center at that site encourages a 6,000 sq ft expansion to his existing facility. Pranks noted he had heard the Becker Community Center had reduced hours, staff, and management as it was running in the red. His family has utilized the center; however, didn't buy anything else in Becker. Additionally, he noted the likelihood of the community center to be in competition with some local businesses notably the health club. The proposed facility is intended for banquet space not conference use. HRA Attorney Greensweig informed commissioners that the square footage and financing options of the enclosed Preliminary Development Agreement between the HRA, City, and Armory Commission are no longer consistent with the updated information received this evening which will be adjusted accordingly. With the HRA to construct and operate the armory and city facility, it is important for the parties to begin establishing their rights and responsibility. The agreement is written so it can be terminated any time prior to ground breaking as outlined on page 3 ofthe agreement and the intent is that all parties agree to negotiate in good faith. In the meantime, the agreement allows HRA staff to continue details and talks; yet, is not an all-term binding contract. HRA commissioners asked if they say "no" to the preliminary agreement, what's next: No lease revenue bonds and the city and NG negotiate. If they say "yes", pursue lease revenue bonds and move ahead to City Council and public meeting and explore other funding revenues such as sales tax, etc.. Jeff O'Neill gave a brief history relating to the first development ideas for a community center which began in 1995 and the momentum accelerated in June 1997 with the National Guard's interest in joint shared-space. With the need for additional city hall space, the plan to redevelop the bulk tank sites, and the implementation of the Downtown/Riverfront Revitalization Plan; a task force was formed to research and make recommendations relating to the proposed site thereby meeting the National Guard's time frame of September 1997 and to recommend community center design options: Core facility only, core plus water, core plus water and ice. AKA, Inc. was hired by the City 3 . . . HRA MINUTES JANUARY 7,1998 as the architect for the community center following presentations by several architectural firms to the task force. Michael Schroeder, Hoisington Koegler, the consultant hired for development of the Downtown/Riverfront Revitalization Plan told of the numerous community meetings held in the process for development of the Revitalization Plan. The Plan addresses the history of the downtown and Broadway and the plans to integrate 1-94 to the river via Walnut Street. The Plan identified the civic core along Walnut, 5th Street, and the railroad. This site the largest undeveloped site within the downtown area. Schroeder noted the capabilities ofthe seven plus acre site: The identified civic core in the Plan brings pedestrian traffic to the downtown and redevelops an under-utilized area. Schroeder noted the site did have some limitations. The AKA consultant informed commissioners of working with the task force which is made up of 8 to 10 user-groups which toured various community centers. The consultant described option one: The core facility to include space for the city hall, National Guard, senior center, gym, walking track, youth, and wheel park. Option two: Core and water. Option three: Core, water, and ice. The task force favored option two with the ice to be phased-in later. Preliminary design plans concentrate on the community center as the focus point with an easterly attractive main entrance and approximately 40 parking spaces along Walnut and the southerly point as a drop-off with approximately 35 parking spaces. Additional parking to the west. The Liquor Store and Farrell Gas sites are not part of the community center site. The facility would consist of multi-levels, some areas 25-30 feet to accommodate the aquatic, gym, and walking track. The consultant felt the water was necessary in order to create "mass". Mass generates user/membership fees and revenues, and brings energy to the center. A core facility alone has no members and no revenues. Ice pays for its self, generally break-even on operations. No market study has been conducted of user fees in the metro or Becker as it relates to population, number on annual passes, rates, and family income levels. Community policies vary as some communities see a community center as a service to the community and other communities view it as a for-profit enterprise. Chaska used TIF for construction and have daily and membership fees for single and family members, residents and non-residents. Residential family memberships are between $200 to $250 annually. Mayor Fair said the task force saw the need for space and for multi-purpose use. They initially identified four sites and noted the need to designate access points into the plan much as is done with the Minneapolis Convention Center. Additionally, Mayor Fair indicated the existing city hall and senior center would return to the tax role. 4 . . . HRA MINUTES JANUARY 7,1998 The National Guard spoke of its essential space needs and the willingness to commitment $1.5 million into the shared facility. The NG had three site options: One, an industrial site. Second, shared space with the school district. Thirdly, shared space with the city. The NG viewed the Walnut street site as an urban site with infrastructure in place. They liked the Walnut site but defined the site as tight noting site and construction planning is critical for development. O'Neill defined the community/NG center as the highest and best use for the Walnut site, consistent with the concept ofthe revitalization plan and serves as a catalyst to generate users. Environmental clean-up if any would be city project costs. AKA estimated construction costs of $7.3 million and acquisition, site prep, contingencies, etc. at an additional $3 million for a total project costs of $10.5 million for the core and water facility. Revenues generated by the water were estimated at $625,000 and operation expenses at $665,000 for a deficit of $40,000. HRA commissioners previously toured community centers in three metro locations. One commissioner noted that the proposed Monticello project was larger than Shoreview's center. Shoreview has a population of 26,000 and an average family income of$68,000. Monticello's population is 6,300 and has a median family income of$33,000. Shoreview City Council elected to budget $30,000 annually for marketing and $150,000 annually for operations as no user group fees were charged only membership fees. AKA estimates the draw area for the Monticello Community Center to include the city and school district and 15-20 miles outside. Becker Community Center - 176 family and individual residential memberships, 130 passholders within school district, and 121 non- resident memberships. Sixty percent of their daily revenue is from walk-ins and of that it is estimated 20% are from Monticello. Becker projected a four-year break-even point for their $222,000 deficit. Rusty Fifield, Ehlers & Associates, estimated the total bond issuance at $7,990,000 after contributions from the NG, sale of city hall and senior center, MDOT, and up-front city dollars for the core and water facility. A Lease Revenue Bond requires no vote, has a greater tax impact on commercial/industrial (C/I) property than residential, and has a higher interest rate. A G.O. Bond requires a vote, has a greater tax impact on residential property than C/I, and has a lower interest rate. 5 , . . HRA MINUTES JANUARY 7,1998 Estimates: Using Lease Revenue Bonds with an annual debt service of $675,000 less a Sales Tax of $500,000 would increase residential property valued at $120,000 by about $20 annually and increase CII property valued at $1,000,000 by about $475 annually. Without a sales tax, a residential property would increase to about $75 annually and CII property to about $1,800. Estimates: Using G.O. Bonds with an annual debt service of $650,000 (lower interest rate) less a Sales Tax of $500,000 would increase residential property valued at $120,000 by about $38 annually and CII property valued at $1,000,000 by about $315. Without a sales tax, a residential property would increase to about $175 annually and CII property to about $1,300. Bonds issued at a maximum of20 years. A Sales Tax needs Legislative approval and referendum approval for a 'l1 to 1 % tax on revenues from designated goods and services sold. Goods and services can exclude car sales. HRA commissioners inquired if an HRA could conduct an advisory vote? This was not acceptable practice. Administrator Wolfsteller informed commissioners issuance of the bonds for the waste water treatment plant will impact property tax statement in 1998 and 1999. Estimates are a 26% increase this year and a guess of 10% increase or more in 1999. The community center bond issuance would be for debt service only and not the operations budget. The city's maximum levy amount is $800,000, $600,000 is not subject to levy limits and $200,000 is subject to levy limits. Mayor Fair informed commissioners that some costs like a city hall were projected within the next 3 to 5 years and with occupancy of a new facility in two years fits right into those projected plans. He sees youth programs as an investment into the community and the community center as an incentive for new families. Other funding revenues to explore are funds from the Sales Tax, Liquor Store, Deputy Register, and TIF. Lahr noted with the 45-day requirement for a referendum on G.O. Bonds it appears ample time to meet the primary or general election or a prior deadline. Community Education or YMCA were mentioned as possibilities for managing the programs. Stepping up to the plate, Commissioner Andrews summarized in order to keep the project options open for proceeding with assessment of space needs and other funding revenues, he endorsed approval the Preliminary Development Agreement. Lahr felt it takes guts to ask the voters and felt a $10,000,000 blank check was being issued. Lahr saw economic spin-off from the $500,000 invested into redevelopment of the mall for the Cub Store. The community has a voice through the Monticello Community Partners and its 250 members which endorse the Revitalization Plan said Andrews. Commissioner Frie felt a general referendum would not pass as the issue is complex and people have a tendency to vote against issues which increase taxes. Commissioner Barger questioned chasing $9 million 6 . . . HRA MINUTES JANUARY 7,1998 of city money for $1 million ofNG money. Mayor Fair saw this as an opportunity to build a space-needed $10 million facility. Will NSP always be there as it's in transformation? The question becomes: Can we afford to or can we afford not to? Mayor Fair felt if the community center is done right, it's an asset. lfit's done incorrectly, it's a lemon. The community center is one of those intangible things people come into a community for. Barb Esse, MCP Chairperson, gave the example of Dr. Wethington's experience in recruitment of professional help. 7. Consideration to approve the Preliminary Development Agreement between the HRA. the City. and Minnesota State Armory Building Commission. Steve Andrews made a motion to approve the first draft of the Preliminary Development Agreement between the HRA, the City, and the Minnesota State Armory Building Commission allowing the project to move ahead. Dan Prie seconded the motion and with no further discussion, the motion passed 3-2. Yeas: Andrews, Frie, and Murray. Nays: Barger and Lahr. Barger indicated he was not against the community center project but felt there were other ways to finance a $10,000,000 project which includes voter's input. Lahr also indicated his non-support to the motion stating a $10,000,000 project requires a referendum of the public. 8. Consideration to hear a second proposal for development of affordable housing utilizing tax credits. Chuck Malkerson, Community Capital, withdrew his presentation from the agenda as site information has not come together. 9. Consideration to review the returned request for proposals and appraisal for Outlot A. Country Club Manor for recommendation. HRA commissioners reviewed the RFP from Hornig which is for development of 109 market rate rental units and an offer of$300,000 with 20% down at closing. No TIF. Freedom Development's proposal consisted of market rate and afford housing rental and owner occupied town home units and an offer of$151,675 for Outlot A and the request for the city to waive the per acre trunk storm sewer charges. nF was suggested to repay the city for the per acre storm sewer charge, the installation of the sidewalks on 7 Street, and for per acre land price for the 1.73 acre city park. Darrin Lahr made a motion stating the HRA's willingness to support affordable housing projects and to assist with project costs associated with tax credit applications after the city finalizes land sale negotiations. They encouraged owner-occupied housing developments and placing Outlot A on the tax 7 . . . HRA MINUTES JANUARY 7,1998 role. Steve Andrews seconded the motion and with no further discussion, the motion passed unanimously. 10. Consideration to authorize payment of the HRA monthly bills. Steve Andrews made a motion to authorize payment of the monthly HRA bills with the exception of Ehler's bill for the Armory which is under the city/community center project. Dan Prie seconded the motion and with no further discussion, the motion passed unanimously. 11. Consideration of Executive Director's report. HRA commissioners accepted the report and the preliminary concept for redevelopment of a substandard site for construction of a 6,000 print two-story professional building. Commissioner Andrews expressed interest to attend the 1998 TIP Seminar sponsored by Ehlers on Pebruary 5 and 6. 12. Other Business. Brad Barger made a motion endorsing and recommending to the City Council, Commissioner Steve Andrews for a five-year HRA term, expiration date of December, 2002. Darrin Lahr seconded the motion and with no further discussion, the motion passed unanimously. HRA members returned to agenda item no. 4 for consideration of the submitted counter- offer of $57,500 "as is" for the Hawkins property. Steve Andrews made a motion to counter-offer $55,700 "as is", the 1998 market value, for the property located at 225 West River Street. Other terms and conditions remain the same as in the initial purchase offer. Seconded by Dan Prie and with no further discussion, the motion passed unanimously. 13. Adjournment. The HRA meeting adjourned at 11 :00 p.m. C<j ~ ~(\~~~~ Ollie Koropchak, Executive Director 8