Loading...
HRA Minutes 02-18-1984CMINUTES MOMICELLO HOUSING AND REDEVELOPMENT AUTHORITY Wednesday, February 15, 1984 - 7:00 P.M. Members Present: G. Wieber, Vic Vokaty, Jack Reeve, Bud Schrupp, Don Cochran. Staff Present: Tom Eidem, Allen Pelvit. T. Eidem opened the meeting asking for a motion to accept the minutes from the January 23, 1984, special joint Council/HRA meeting. G. Wieber made a motion to approve the minutes and it was seconded by Jack Reeve. 3. Consideration of Internally Appointinq a Chairman. T. Eidem opened nominations for Chairman. J. Reeve nominated Don Cochran. It was seconded by V. Vokaty. J. Reeve made a motion to close the nominations and was seconded by V. Vokaty. Both motions passed unanimously. D. Cochran thanked the Authority for its confidence and again stated his concern of also serving on the Planning Commission. He stated that if nobody on the Authority saw any problems with this arrangement, he would gladly accept the Chair. He stated that he was pleased with the joint Council/HRA meeting. He asked if there was a statutory limit on the number of members the Authority could have. T. Eidem explained that there was. Eidem further explained that the $58,000 possibly raised by levying a 19 mill has increased to $71,000 because of growth and expansion during 1983. This may keep increasing during 1984 as well. Cochran asked Eidem if he thought it was plausible to submit a budget for our day to day expenses for 1985. Eidem thought it not only possible but necessary. 4. Consideration of Participation in the Minnesota Small Cities Development Program. A. Pelvit briefly explained the three major objectives for eligibility in the Housing or Rehab Program. D. Cochran questioned the importance of the Housing or Rehab Program and if the Authority would benefit by utilizing such programs. - 1 - HRA Minutes - 2/15/84 T. Eidem explained some programs such as fuel assistance, weatherization, etc., for low/moderate income or elderly persons. He also stated that this type of program could be used in a project such as the Poehler's. A. Pelvit explained the Economic Development Program in that it nearly parallels the Urban Development Action Grant in its structure. Although both programs are competitive, the MSCD program is only statewide. Eidem stated that the Authority could buy property, raze the buildings, prepare the site, and sell to a developer. D. Cochran asked Pelvit what action he was looking for. Pelvit stated that to enter the Housing or Rehab Program, the City needed survey data on income limits, etc. for residents, etc. Another factor in this type of program limited applications to a single time during the year. In 1983 the rules and applications were available in December and application deadlines were February 1, 1984. This type of project needs to be documented well in advance. Pelvit went on to explain that the Economic Development Program is an ongoing process and only needs an eligible developer for the Authority or the City to apply in behalf of (similar to UDAG). Pelvit stated that he was looking for the Authority's approval of this program and its backing should a project warrant its use. It was the Authority's consensus to utilize this type of funding in the future when developers need an extra incentive. 5. Consideration of Veits Construction Workinq with HRA on Speculative Buildinq and using Tax Increment Financinq for the Land. T. Eidem mentioned that Barb Portwood (an attorney for Holmes and Graven specializing in tax increment financing (T.I.F.)) indirectly uncovered some problems with our Tax Increment Financing District and plans. There are no legal ramifications that she was aware of. The problem arises in language, etc. In the past Gary Winters worked with the City in this area. Now Barb is reviewing all the tax increment financing materials we have initiated with them. T. Eidem asked the Authority to hold a moratorium with T.I.F. until Ms. Portwood completed her review of all our documents. - 2 - HRA Minutes - 2/15/84 CCochran asked if Holmes 6 Graven approved all our correspondence in the past. Eidem stated that this was the case. Cochran stated that since Holmes 6 Graven provided us with the original materials, etc., they should be liable to correct the errors and come to the Authority and re-educate us. He also questioned why the staff was proceeding with the Fulfillment Systems, Inc., T.I.F. if there are problems. Eidem explained that through routine work on the Fulfillment Systems, Inc. T.I.F. Plan, Portwood discovered terminology differences. He also stated that discussions between the City and Holmes 6 Graven were some- times misunderstood because of different terms being used. Cochran suggested that Allen meet with Veits on the spec building. However, when T.I.F. comes up, he should tell them we are working with F.S.I., that T.I.F. is not going to be possible because the NRA can use it to put up their own spec building. If Veits still want to work on a purely spec building with their own financing, all Allen should be responsible for is helping them locate possible tenants. It was further suggested by Cochran to meet with the I.D.C. and discuss a spec building. 6. Progress on Fulfillment Systems U.D.A.G. T. Eidem recapped the amounts needed by FSI to bring about this project. The total project cost is $880,000 consisting of $245,500 U.D.A.G., $135,000 private equity, and $505,000 construction on IF3 Funds. He further explained that the HRA would buy lots 6, 7, and B of Block 2, Lauring Hillside Terrace and resell to FSI for approximately $27,500. Springstead is completing the Tax Increment Finance Plan and Holmes a Graven the Tax Increment District Plan. The problem arises from a lack of action in Congress. The Rosten- koowski Bill the way it stands now would put a ceiling on IRB's by State ($150 per capita). In Minnesota this would amount to approximately $600,000,000. The Minnesota Finance Agency gets their share from this total. The remaining amounts ($400,000,000) would be available for Minnesota Industrial Development projects. Because this is at a standstill in Congress, the bond attorneys will not render opinions. With no opinion, banks will not buy bonds. No bonds --no deal. Another problem that emerged was that the original purchase agreement has expired. The owners of the property have agreed to extend their purchase agreement to March 1, 1984. This was extended because of the U.D.A.G. postponement. - 3 - HRA Minutes - 2/15/84 To make the land transaction legal for tax increment financing (T.I.F.) purposes, the HRA will have to purchase the land before March 1, 1984. As in the past, the Authority needed to borrow money to close a sale. In the past it was borrowed from the City and then repaid when the bonds were sold. This time the money will come from the developer. Eidem further explained that FSI will provide the Authority with an interest free loan in the amount of $130,000 to purchase the land. If the project proceeds, we sell the bonds and pay FSI back. If the IRB Bill remains (without a sunrise or retroactive clause) in Congress and the project falls apart, we give FSI the deed and they own the land. They take 1009 of the risk. The Authority takes no risk at all. In order to assure the project's future, FSI was advised to find alternative financing for construction should the bond market stay in limbo. FSI is so convinced and committed to this project that they are willing to assume 1009 of the risks. If saving the project means 14% interest rates, then they will obtain alternative conventional loans. Cochran understood the process but questioned it because he wanted to second guess some City Council members thoughts on this type of transaction. S B. Schrupp made a motion to apply for an interest free loan in the amount of $130,000 from FSI, the purpose of which is to buy or purchase land described as Lots 6, 7, and 8, Block 2, Lauring Hillside Terrace. B. Schrupp also motioned to negotiate a purchase agreement, contingent upon getting the interest free loan of $130,000 from FSI, and bring it back to the Authority with City Attorney's approval. Both motions were seconded by G. wieber. When the first agreement is completed, the second takes place and the Authority purchases the land. Jack motioned to have Tom and Allen prepare these agreements, with the City Attorney's approval, and return to the Authority. The special meeting would be February 28, 1984 in the morning. The agreements will be mailed out previous to the special meeting for members review. Tom Eidem asked for and received the floor. He explained the areas of hard work that both he and Allen have performed only to have developers come in and try to change the game plan once the freebies have been received. Developers have asked for variances knowing that they fully agreed to comply with all City Ordinances. C -4 HRA Minutes - 2/15/84 Eidem further stated that once the incentives are received, the developers become vicious. He said that in economic development the intent is to aid the developers but not give the ship away. As an example, Tom explained the Odes Henrickson case. He told of how almost everyone on the Industrial Development Committee had tried to work with Henricksen. Allen even went with what the City called its last offer (an 18-24 month variance for bituminous and curb) to attract him. He told us he was considering two other cities who didn't have such strigent ordinances. As a result, one of these city's building inspector called our building inspector and asked who this guy was because they didn't want anything to do with his project. 7. Update on Poehler Project. FHA defeated his application again, mainly because of the Big Lake blunder. FHA explained to Poehler that the old survey was no longer adequate to show a need. Poehler is now proceeding with a new survey. FHA has recently taken off the elderly requirements and opened it up to any low/moderate income people, just to fill the apartments. Tom explained that Poehler would have to have two "yes I will move if available today" surveys for every unit available. If he is building 23 units, he needs 46 yes surveys. He also needs to have Can extra 20 to cover the remaining 10 units in Big Lake. Don reported that Brad Larson has a client who is interested in the land. He asked if the Authority should hold it or move it. Bud suggested holding it and trying to develop the Poehler project. It was the Authority's consensus to use this property for a senior housing project. Tom stated that Poehler has always been upfront and honest. He always met or exceeded all requirements. Jack suggested Tom asking Joe if he would take an option to pay the interest payments for six months or one year. If interest in another project arises, the Authority should pursue it if Joe doesn't take the option. Tom agreed to ask Poehler about the option and also stated that if Joe didn't proceed with the project, the Authority could use his project as a standard of excellence to measure other developers. It was the consensus of the Authority to tell potential developers that there is an option on this property. If the project falls through then their project may be considered. HRA Minutes - 2/15/84 FHA told Poehler that if a project happened it would be his because he was first and he had a good project. Tom explained that at present $54,000 is needed for the three lots to recoup our losses. Action is needed soon. Don suggested the staff feeling out the public's interest in the property and return to the Authority for action. Jack asked if the K 6 H project can be worked into the Haas property using T.I.F. Tom explained that the staff is aware of K S H plans to expand and renovate and will try to work with them. The problem is that the amount has to be very substantial (enough to retire the debt). Tom explained that Haas can be very difficult to work with, but the staff will keep trying. Jack Reeve motioned to adjourn the meeting, seconded by Gary Wieber. Meeting adjourned. �J AIlen L. Pelvit Director of Economic Development - 6 -