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HRA Minutes 04-07-2004 . . . MINUTES MONTICELLO HOUSING AND REDEVELOPMENT AUTHORITY Wednesday, April 7th, 2004 - 6:00 p.m. 505 Walnut Street - Bridge Room Commissioners: Chair Steve Andrews, Brad Barger, Dan Frie, Darrin Lahr, and Council Liaison Roger Carlson Vice Chair Bill Fair Rick Wolfsteller, Ollie Koropchak, and Angela Schumann Absent: S ta ff: I. Call to Order. Chair Andrews called the meeting to order at 6:00 p.m. and declared a quorum, noting the absence of Commissioner Fair. 2. Consideration to approve the March 3rd. 2004 HRA minutes. A MOTION WAS MADE BY BARGER TO APPROVE THE MINUTES OF THE MARCH 3RD, 2004 HRA MEETING. ANDREWS SECONDED TI IE MOTION. MOTION CARRIED UNANIMOUSLY. 3. Consideration of adding or removing items trom the agenda. Koropchak requested the removal of item 6 and 6a, regarding Block 52. Representatives from that company had indicated to Koropchak that they had no new report. 4. Consent Agenda. None 5. Continued - Consideration of a request for additional TIF assistance and to authorize the BRA Attorney to amend. accordingly, the Contract for Private Redevelopment between Masters Fifth Avenue and the liRA for Landmark Square Phase II. Koropchak verified that the HRA had moved to amend the contract to alter the approved constmction commencement date. Koropchak stated that she and Wolfsteller had met with the developers to address the gap between cost of development and current funding levels, as previously discussed. Koropchak indicated that Johnson had presented a pro forma at that time. Koropchak reported that litsed on the number of units proposed, the developer could save $35,700 in HRA Minutes 04/07/04 . SAC and WAC charges. In lowering the interest rate on thc bonds from 6.5 to 5.5 pcrcent, the developers could save approximately $16,000. Johnson spoke on behalf of the developers, indicating that the pro forma provided illustrates the current shortage, even with lIRA assistance. Johnson re-stated their goal of achieving a $30,000 lot cost. Johnson stated that the gap currently stands at $125,000. With the eligible costs as listed, Johnson indicated that should the liRA provide more assistance, they would have adequate costs. Johnson reported that Fluth has already personally bought one house. Johnson also stated that they could begin in June as required. Johnson asked the HRA if they still had the desire to make the project work. He indicated that the unspent bond funds would be lost by June 30th without a project. Koropchak clarified that they could retire the bond at that point, or form another district. Johnson commented that thus far, they have been good stewards of development within the community, citing the Locust Street and Cub projects as examples. . Wolfsteller indicated that it is better to use non-general fund dollars toward the project. TIF district collects all taxes. Johnson inquired of Dan Frie what average townhome lot cost is in Monticcllo. Frie estimated $30,000. Johnson reported that they were aiming for that average range. Andrews commented that he had review October's liRA discussion on this matter and noted that a similar conversation had occurred. At that time, the HRA was comfortable with the amount of assistance offered, based on what the project would generate. He suggested that the HRA consider the value of the rcdevelopmcnt in the area and the val uc in terms of the fact that this development would remove 3 homes and create II. Koropchak reported that she had spoken with Ruff again, who rccommended using the simple analysis provided in Koropchak's staff report. If the value of the raw land (no improvements) had a value of $20,000 per lot and the developers are building II units at $220,000, less in terms of their costs for demo, etc., the gap is $259,000. This analysis is variable based on the value of the raw land. Korpchak statcd that she is somewhat concerned about the "but for" test. Koropchak stated that she and Wolfsteller had discussed providing $314,000 in assistance as requcsted and had some issucs with justifying that to the public. Johnson stated that if they don't approach the $100,000 mark, they cannot work the project, because they can't do it at a loss. . - 2 - HRA Minutes 04/07/04 . Frie stated that he believed the developer's numbers are accurate, it's just a matter of whether the HRA wants to spend the money to close the gap. Frie commented that it may be possible to address pay back if the actual amounts are less. In some contracts, the HRA has approved language that at the end of the project, actuals are provided and if there is a difference, the developer can pay HRA back. Johnson stated that he will be putting up a letter of credit for every dollar the I I RA spends. Barger asked Carlson if Council would approve WAC and SAC reductions. Carlson stated that both he and the Mayor would approve the reductions. WolfstelIer recommended that HRA provide the assistance versus the Council waiving the fees. In such case, the HRA would pay SAC and WAC, then the TIF would pay the lIRA back. Johnson stated that they are willing to do "look-backs" to reconcile actual costs. Koropchak asked for clarifications on the number of units and duplexes as reflecting on the pro forma. Johnson said that the $160,000 shown is for one unit or $320,000 for entire building. . Koropchak also reported that she did a quick analysis on the project. If this project was in a new TIF district, with current tax rate, it would take 16 years to pay back the requested amount of assistance. The lIRA would actually have $197,000. At the higher amount, it would take 25 years and would be $265,000, which is less than current HRA offer of $282,500. Barger asked about the possibility of the assessor assessing the project at that value. Koropchak noted that concern, especially in terms of changing the construction date. Koropchak had spoken with the assessor, who was okay with the assessment agrcement reflecting the January 1 st, 2005, date based on the $1.8 million GMV with a completion date of April, 2007, subject to review of building plans. A MOTION WAS MADE BY FRIE TO PROVIDE ADDITIONAL TIF ASSITANCE OF $45,000, BASED ON INCREASED SELLING PRICES IN 2 YEARS AND THE DEVELOPER REDUCING THE PER LOT COST V ALLIE BY $5,000. MOTION SECONDED BY LAHR. Johnson sought clarification on whether the HRA had agreed to an interest rate reduction. Koropchak stated that it could be looked at as an option, but had not been decided upon. Barger asked Johnson if the developer would agree to pay back to the HRA any profits on development over 5%. Johnson indicatcd that they could agree to a 50/50 split on any . - 3 - . . . HRA Minutes 04/07/04 amount over 5%. Lahr asked Koropchak to clarify how much nF assistance was previously approved. Koropchak stated that amount was $282,500. Johnson stated that the H RA had just motioned for an additional $45,000, he is asking for $70,000, or $ I 25,000 minus the $5000 per lot that was motioned). Johnson stated that they would be willing to share pro formas. Koropchak stated that in addition to the pro formas, the HRA would also need evidence of all of those costs. Barger requested that any amendment to the motion include the 50/50 profit split. FRIE AMENDED THE FIRST MOTION TO PROVIDE A TOTAL OF $352,500 IN TIF ASSISTANCE AND A "LOOK BACK" CALUSE CONSISTING OF A 50/50 SPLIT BETWEEN TIlE HRA AND DEVELOPER ON ANY PROCEEDS ABOVE THE 5% PROFIT ON THE SALE OF THE HOMES. MOTION SECONDED BY ANDREWS. MOTION CARRIED UNANIMOUSLY. Koropchak asked Frie why he supported the additional assistance. Frie indicated that considerable time and effort had been invested and that any redevelopment in this area would be expensive. Koropchak indicated that the developer would need to provide updated information on cligible costs and reminded Johnson that the contract requires platting by June I st. Johnson indicated that they cannot plat by June 1. Koropchak asked thc HRA if it wanted to give out the money without the protection of approved plans and plat. Frie stated that the developers would havc to seek to amend thc contract in terms of platting dates at the next meeting. 6. Continued - Consideration to hear an update on redevelopment of Block 52. Removed. 7. Consideration to approve the election of HRA of1icers for 2004 and approve thc appointment of Commissioners to committees. MOTION BY ANDREWS TO NOMINATE AND ELECT BILL FAIR AS CHAIR, DARRIN LAIIR AS VICE-CHAIR AND RICK WOLFSTELLER AS TREASURER. - 4 - . . . lIRA Minutes 04/07/04 MOTION SECONDED BY BARGER. MOTION CARRIED UNANIMOUSLY. MOTION BY ANDREWS TO APPOINT DAN FRIE TO THE SMALL INDUSTIRAL COMMITTEE AND BRAD BARGER AND DARREN LAHR TO TI-IE MARKETING COMMITTEE. MOTION SECONDED BY FRIE. M01'ION CARRIED UNANIMOUSLY. 8. Consideration to review the HRA Business Subsidy Criteria and the HRA Bylaws for possible amendments and to caB for a public hearing. Koropchak noted that in order to be consistent with a motion passed at a previous meeting of the HRA, the Business Subsidy non-refundable fee needs to be changed from $5000 to $7500. This action requires a public hearing. MOTION BY FRIE TO CALL FOR A PUBLIC HEARING ON MAYS, 2004 AT 6:00 PM FOR THE PURPOSE OF AMENDING THE BUSINEES SUBSIDY CRITERIA OF THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF MONTICELLO. MOTION SECONDED BY BARGER. MOTION CARRIED UNANIMOUSLY. 9. Consideration to review and accept the year-end financial reports fix the HRA General Fund and TIt' Fund as prepared by Treasurer Wolfsteller. Korpochak reviewed the financial report as supplied to the H RA. Koropchak recommended that TIF District 2 necds to he adjusted as it continues to run at a deficit because of changcs in classification. Koropchak state that the liRA's bottom line in the General Fund is $633,000. Koropchak reminded the HRA that if Council approves buying industrial land, the HRA has committed $300,000. That contract rcquires closing by June 1 st. Thc HRA will need to make motion to approve expenditure. Koropchak has spoken with the attorncy and Mark Ruff about keeping some of County fund pay-back to put into industrial park. Koropchak notcd that whcn the County gets paid back, thc City also gets a check back for thcir portion. WoIfsteller has agrced to put that funding toward the industrial park. - 5 - . . . HRA Minutes 04/07/04 MOTION BY LAHR TO ACKNOWLEDGE ACCEPTANCE OF 2003 FINANCIAL REPORT. MOTION SECONDED BY FRIE. MOTION CARRIED UNANIMOUSLY. 10. Consideration of a concept for recommendation to acquire a parcel for potential redevelopment. Koropchack provided the staff report, indicating that the idea for the parcel purchase had originated with the Community Development department. The area around East 4th Street had becn discussed as an area for potential redevelopment. As such, when 224 E. 4th St. came on the market, a purchase agreement in the amount of $135,000 was drafted. It will be presented to the Council as a City purchase, not HRA. Koropchak is looking for recommendation from HRA to support or reject support of that agenda itcm. An easement for vacation of Palm Street adjaccnt to the property may make it a reasonable purchase for redevelopment. The City planner, Stevc Grittman, has indicated the possibility oflocating up to 8 townhomes per acre. However, if the City is looking to do a broader redevelopment project in that area, thc costs hecome more prohihitive. Barger asked if this is on the blightcd list. Frie and Koropchak stated that they believed it is on the list. Koropchak stated that it would not qualify as a redevelopment project, but could have to be a housing district. This property would not meet the 15% improvement requirement due to the unimproved lot behind the lot the house sits on (one parcel). Koropchak is looking for direction from the liRA on whether they would like to buy the parcel, or leave the parcel for the Council to purchase. She also wanted the HRA to address what thcy think about potential purchase agrecment came f()[ lots 3 and 4. Shc indicated that every house purchase will increase the development cost/assistance gap. Koropchak stated that the price for the property is reasonable, howcver, it would be worthwhile to find a developer to do the projcct. Generally, the I-IRA's position has been to let developer do negotiation on other lots. MOTION BY FRIE TO RECOMMEND THAI' COUNCIL ONLY PROCEED WITH AUTHORIZATION OF THE PURCHASE AGREEMENT IF THE FOLLOWING CONDITIONS ARE MET: - 6 - . . . HRA Minutes 04/07/04 I. TilE PURCIIASE IS A REASONABLE ACQUISITION 2. THE COUNCIL UNDERSTANDS THAT A SUBSTANTIAL AMOUNT OF TIF ASSISTANCE WILL BE NEEDED TO DEVELOP THE PROPERTY 3. DEMOLITION OF ONE BLIGHTED PROPERTY WILL BE COMPLETED IT IS THE HRA'S PREFERENCE THAT IN THE FUTURE, SUCH PROPOSALS ARE PRESENTED TO TI IE HRA BY DEVELOPERS SEEKING -1'0 REDEVELOP. MOTION SECONDED BY LAHR. MOTION CARRIED UNANIMOUSLY. 11. Consideration to review final draft of the Purchase Agreement for acquisition of land for industrial development (Chadwick parcel). Koropchak indicated that the purchase agreement contained blanks, which should have been filled in by the City rather than by Chadwick. Thy City Attorney will be completing the contract after getting the numbers from the City Engineer. Koropchak stated that she is still hoping that the Small Group can look at the contract before Council on the I ih. If Council agrees with terms as filled in, it is up to Chadwick to approve. Chadwick would like to be ablc to sell Moon Motors as a priority. No action required. 12. Consideration to authorize payment of HRA bills. A MOTION WAS MADE BY LAI-IR TO AUTHORIZE PAYMENT OF THE HRA BILLS. 1 MOTION SECONDED BY FRIE. MOTION CARRIED UNANIMOUSLY. 13. Consideration of Executive Director's Report. Koropchak reported that the Remmele building had been sold, although the buyer's name is still confidential infexmation as the shareholders of the company must be notified.. Thc new company will add 46 jobs in manufacturing sector. Koropchak indicated that she is supportive of the use. The EDA will consider a loan at a special meeting. - 7 - . . . HRA Minutes 04/07/04 14. Committee Reports None. 15. Other Business A. May 5, 2004 next II RA meeting (proposed date to adopt resolution for refinancing TIF district No. 1-22 bonds). 16. Adjournment. A MOTION WAS MADE BY BARGER TO ADJOURN THE MEETING AT 8:15 P.M. MOTION SECONDED BY LAHR. MUrlON CARRIED UNANIMOUSLY. ~~l~~ lIRA Chair ~~ - 8 -