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HRA Minutes 06-03-1998 . . . . MINUTES MONTICELLO HOUSING AND REDEVELOPMENT AUTHORITY Wednesday, June 3,1998 - 7:00 p.m. City Hall MEMBERS PRESENT: Chair Steve Andrews, Vice Chair Bob Murray, Brad Barger, Darrin Lahr, and Dan Frie. COUNCIL LIAISON PRESENT: Brian Stumpf. STAFF PRESENT: Rick Wolfsteller and Ollie Koropchak. 1. Call to order. Chair Andrews called the HRA meeting to order at 7:00 p.m. 2. Consideration to approve the January 7 and May 6. 1998 HRA minutes. Tabled. 3. Consideration of adding agenda items. Two items were added under other business: Business card for commissioners and potential industrial project. 4. Consideration to approve general guidelines and level of TIF assistance for proiect II within Redevelopment District No. 1-22. Greg Hayes, Shingobee, Inc., reiterated the need for up-front TIF assistance in the amount of $ I 50,000 for the acquisition and demolition of the Amoco station for construction of a 8,000 sq ft 2-story quality office building. Hayes informed HRA members that Shingobee has an annual gap of $21 ,525 for 15 years for a net loss of $322,000 and are requesting TIF assistance in the amount of less than 'li the net loss. The proforma includes a six month lease up with rental at $15 per sq ft TNL. Depreciation on the mortgage does help to reduce the gap. The current owner of the site guarantees a clean site. The site was earmarked initially by staff members as an area for redevelopment. The site is unused, non-conforming, and blighted and would be replaced with a quality bookend project for the West Broadway downtown area. Hayes said no one was pursuing the site and estimated the demand and increase in valuations were perhaps five years after development of the Cub site. Koropchak reported Mark Ruff recommended the pay-as- you-go and more flexibility with the level of assistance. He also suggested a workshop to 1 BRA MINUTES . JUNE 3,1998 discuss other financing options. Cash flow numbers need to be re-ran with the reduced classification rates. Rita Ulrich reported the MCP was supportive of the plan as it fits the downtown revitalization plan and the design standards. Barger felt the lIRA should preserve their dollars for the larger redevelopment project. Murray saw the project as 100% speculative with no tenants. Lahr liked the project but saw the up-front as too great a risk, he preferred the pay-as-you-go. Barger made a motion to provide TIF assistance in the amount of $100,000 NPV, 45%/55%/22 years or first 100% of increment over 9 years. Hayes said it would not work, they need $150,000. Barger withdrew his motion. Hayes felt the BRA should look at this as equity into a project not a debt. Andrews said not up-front monies. Murray made a motion to table any action and requested a meeting be set with the financial consultants. Andrews seconded the motion and with no further discussion, the motion passed unanimously. 5. Consideration to hear preliminary conce.pt for development of a housing district for St. Benedict's Center. . Koropchak introduced the project with an overhead of a map of the proposed site and brief description of the project. Allen Black informed commissioners St. Bens was receptive to pay-as-you-go assistance~ however, they were unclear as to the length of the district. Koropchak said the maximum length of a housing district was 25 years and stated the city and HRA would be interested in a "qualified housing district" wherebye the City is exempt from the HACA Penalty. Black agreed to a "qualified housing district" and said they plan to use the 20/50% approach. He indicated St. Bens was prepared to execute the Pre Agreement and issue the $5,000 check. Black continued stating the housing market study shows the need for senior independent and assisted living, St. Bens will purchase the eight-acre site for $280,000 from St. Henry's. Lahr found the concept a good community project. Koropchak requested submittal of the marketing information for HRA files as documentation for need of additional senior housing to insure the existence of Mississippi Shores which also received public assistance. Steve Andrews made a motion to use 90% of the increment over 25 years to assist with eligible TIF expenditure in an amount not-to-exceed $440,000 NPV subject to submittal of marketing information. Brad Barger seconded the motion and with no further discussion, the motion passed 5-0. Bob Murray made a motion authorizing preparation of the establishment of TIF District No. 1-24, a qualified housing district, for the 60-unit senior independent living facility to be developed, owned and operated by St. Benedicts Center. Motion subject to receiving . 2 lIRA MINUTES . JUNE 3,1998 an executed Pre Agreement and cashier check. Darrin Lahr seconded the motion and with no further discussion, the motion passed unanimously. 6. Consideration of a req.uest for additional TIF assistance for proiect I within TIF District No. 1-22. Brad Johnson, representing developer Barry Fluth, reminded commissioners of the reciprocal of easement agreement wherein K-Mart and the owner of the K-Mart building had the right to approve any changes to the mall. It had been hoped the resolution of condemnation approved by the HRA would have resolved the dilemma~ however, it did not and with no time to litigate, the developer had to buyout the owner of the K-Mart building. Without a clear title, the title did not insure the bank mortgage. Steel is expected to arrive June 26. . Johnson requested the lIRA consider reimbursing developer Fluth for the buyout from the reciprocal agreement from excess tax increment. The buyout at $10,000 per year for 10 years and $150,000 at year-end ten for a total of $250,000. Johnson informed commissioners that legal costs are eligible TIF expenditures. Lahr was not interested to turn to the taxpayers. Frie felt the HRA should take a look at it, as the church had been bailed out. Murray would consider an allocation, not the full amount. Barger questioned if payment had been made in order to insure the bank mortgage, how does is fit the "but for" test? Because of a timing issue, condemnation would not work. Council member Stumpf mentioned upon seeing the proposal perhaps a middle of the road approach was possible. Dan Frie made a motion to have the proposal reviewed by the HRA attorney prior to an HRA decision. Bob Murray seconded the motion and with no further discussion, the motion failed. Yeas: Frie and Murray. Nays: Andrews, Lahr, and Barger. Steve Andrews made a motion to dismiss the request and not to waste time. Noting the situation was unfortunate. Darrin Lahr seconded the motion and with no further discussion, the motion passed. Yeas: Andrews, Lahr, and Barger. Nays: Frie and Murray. 7. Consideration to authorize execution of the Contract for Private Redevelopment between the HRA and Allied Companies. Darrin Lahr made a motion authorizing execution of the Contract for Private Redevelopment between the HRA and Allied Companies. The level of pay-as-you-go TIF assistance not-to-exceed $181,000 for site improvement and land write-down. The lIRA retains the first 20% of the annual tax increment. The cityIHRA local contribution will apply to the sanitary, water, and storm sewer trunk fees. Dan Frie seconded the motion and with no further discussion, the motion passed unanimously. . 3 HRA MINUTES . JUNE 3, 1998 8. Consideration of interest to acquire the property located at 613 Sixth Street West. HRA commissioners were requested to consider acquisition of the property located at 613 Sixth Street West. The property is listed at $39,900 and is an ideal start for the scattered housing program which is a top priority of the City Council. Andrews felt the program guidelines must be developed first and funding resources explored such as in Big Lake. Dan Frie made a motion requesting the City Council consider authorizing and exploring the development of a scattered housing program utilizing grant money from the Minnesota Housing Finance Agency, McKnight Foundation, or other sources for the purpose to eliminate blight and provide affordable housing. Steve Andrews second the motion and with no further discussion, the motion passed unanimously. Brad Barger made a motion to table any action to purchase the property because no scattered housing program exists and commissioners were unclear as to the seriousness of the Council for development of such a program without an identified source of funding. Bob Murray seconded the motion and with no further discussion, the motion passed unanimously. 9. Consideration to review the first draft of the proposed TIF Guidelines. . Lahr reported Andrew and he met once to discuss the importance of jobs, wages, and return on investment. They reviewed the Savage guidelines finding no rational or thought process to those guidelines. The item was tabled. 10. Consideration to allprove monthly HRA bills. With the exception of the Hoisington invoice, Bob Murray made a motion to approve the monthly lIRA bills. Brad Barger seconded the motion and with no further discussion, the motion passed unanimously. 11. Consideration of committee reports: a) Community Center - Murray reported the small group was faced with the decision to decease the size and quality ofthe community center or request the $500,000 initially reduced from the project back into the package. Andrews informed commissioners with the acquisition of additional land and increase in size of 10,000 sq ft, the cost would increase about $30,000 annually. Representatives were unable to recall what accounted for the increase in size. Murray said the small group will consider three alternatives to accommodate new input: Design, funding, and adjustment in quality and size. Lahr reminded HRA representatives that the HRA approved a $9.4 million project cost after considerable negotiations to . 4 . ' HRA MINUTES . JUNE 3,1998 reduce the project cost by $500,000 and stressed the importance of quality materials to insure low maintenance and longevity. Council member Stumpf asked why a Chamber office and not the deputy register office? Chamber had requested space within the community center; however, without knowing fee for rent of office and conference space, the Chamber has not made a final decision. Murray said he would take the question of the deputy register space back to the small group for discussion. b) Marketing - Lahr reported on the draft copy of the marketing principals stating the plans to receive lIRA and IDC blessing before submitting to Council. Commissioners agreed to the draft in principal and agreed to hiring an outside firm for development of a concept for the brochure. c) Koropchak reported about 27 individuals have signed up for the bus tour and golf outing. Bus tour begins at 10:00 a.m. on June 10. 12. Executive Director's rellort. Accepted. 13. Other Business. . a) b) Commissioners requested Koropchak order business cards for each commissioner. Barger informed members that he and Harwood are looking into construction of a 12,000 sq ft building to lease 7,000 sq ft to B&B Metal Stamping and the remaining 5,000 sq ft for speculation. He inquired to the use ofTIF for site improvements in order to reduce the lease to under $4.90 plus taxes. As the HRA previously wrote down the land cost, Koropchak suggested perhaps this was a situation where the city tax abatement program would work best to eliminate the need for the local contribution or the HACA Penalty. 14. A<ljoumment. Darrin Lahr made a motion to adjourn. Dan Frie seconded the motion and with no other if:: ili~OO at 1020 p.m. Chatrperson 0\\(\ . \-//'. .0 (1,_ ~ ~\;'" ~\~~' Executive Director'-':' . 5