HRA Minutes 02-04-2004MINUTES
MONTICELLO HOUSING AND REDEVELOPMENT AUTHORITY
Wednesday, February 4th, 2004 - 6:00 p.m.
505 Walnut Street - Bridge Room
Commissioners: Chair Steve Andrews, Vice Chair Bill Fair, Brad Barger, Darrin Lahr, and
Council Liaison Roger Carlson
Absent: Dan Frie
Staff: 011ie Koropchak and Angela Schumann
1. Call to Order.
Chair Andrews called the meeting to order at 6:00 p.m. and declared a quorum, noting the
absence of HRA member Dan Frie and City Administrator Rick Wolfsteller.
2. Consideration to approve. the January 7, 2004 HRA minutes.
A MOTION WAS MADE BY FAIR TO APPROVE THE MINUTES OF THE
JANUARY 7TH, 2004 HRA MEETING. BARGER SECONDED THE MOTION.
FAIR AMENDED THE MOTION TO INCLUDE NOTATION OF DATE CHANGE
FROM JANUARY 7t", 2003 TO JANUARY 71h , 2004. ANDREWS SECONDED THE
AMENDED MOTION. MOTION CARRIED UNANIMOUSLY.
• 3. Consideration of adding or removing items from the agenda.
None
4. Consent Agenda.
None
5. Consideration to approve and authorize execution of the Contract for Private
Redevelopment between Masters Fifth Avenue and the HRA for Landmark Square Phase
II.
Item tabled until Brad Johnson arrived.
Upon arriving, Johnson addressed the HRA, indicating that Barry Fluth is still in the
process of getting the development agreement into an acceptable form in terms of land
use and cost. Fluth did send a letter did to the Mayor and others addressing concerns
regarding both the contract and project. Johnson indicated that the language related to the
TIF deficiency clause has been resolved to both parties' satisfaction. The resolution
would allow a four-year period analysis of tax increments, by which any aggregate
deficiencies would be reimbursed to the developer from any overage (if it exists) within
that four-year period. Excess tax increment after reimbursement would apply to pre-
payment of principal amount. .
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Johnson indicated that one property owner within the development area is seeking to re-
negotiate the original purchase agreement terms. Andrews inquired whether Fluth and
Johnson would be seeking to use eminent domain: Johnson said that was not a
considerations. Fluth and Johnson will try to resolve the issue within the next week.
Johnson stated that per lot cost is still an issue for Fluth. He indicated that this may best
be addressed by working with staff to develop a solution. Johnson referred to Fluth's
letter which outlined a variety of options to reduce per lot cost from $36,000 to $30,000.
Fair asked Johnson whether he was on the Council agenda to discuss sewer and water
access charges. Johnson indicated that discussion would happen with staff before
proceeding to Council. Fair inquired whether staff has talked with Mark Ruff about
adjusting the interest rate. Koropochak noted that she had spoken with the Ruff months
ago on this matter and the HRA made the decision to keep the rate as suggested.
A brief discussion regarding the type of bonds used and the corresponding interest rate
commenced, with Johnson noting that GO bonds would be used for this project.
Lahr noted that the project seemed to be at a make or break point. Fair indicated that he
would like to see the project happen as it is consistent with guide plan for the area. He
expressed that obstacles could be overcome in a manner suitable to all parties. Fair
recommended that Fluth and Johnson go to the Council on the sewer and water access
charges. Johnson noted that for the Hans Hagen project, the Sewer and water access
discussion was internal. Koropchak noted the differences in the two projects, stating that
the HRA cash flowed the project through selling of property and tax increment generated
due to the larger assessment value. Barger clarified that the issue of site control and costs
were still present. Because of the change in tax rate, Johnson estimated taxes at $27,000
as compared to $18,000 in tax increment. Barger asked what Council would say.
Carlson thinks that council may say that project is far enough along to consider some
adjustment.
Andrews asked Johnson whether any decision on the part of the HRA was needed that
evening. Johnson replied that they were asking the HRA for patience as they resolved the
remaining issues and to review the Hans Hagen agreement for options in reducing lot
costs. Koropchak stressed that there are major differences in the two projects that make
applying the same conditions difficult.
6. Consideration to hear an update on redevelopment of Block 52.
Steve Johnson introduced Tom Burke of Told Development, who would be addressing
the HRA on the progress of a proposed Walgreen's on Block 52. Bob Cunningham is the
Told Development representative working on the project, Burke is providing the report
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due to Cunningham being on vacation. Burke indicated that Told had signed a purchase
agreement with Steve Johnson to acquire his property. They are in the process of
working with other property owners. Burke presented the HRA with a preliminary offer
of $74,000 to purchase the needed HRA property, pending the finalization of other
project details. He also indicated that Cunningham has been researching TIF financing
options. Andrews asked Burke if the price per square foot on the offer presented to the
HRA is consistent with estimated offers on properties for the rest of the project. Burke
stated that the current offer is based on historical purchase price and is contingent on
acquiring all land needed for the project. He noted that the per square footage rate
provided is not market rate.
Barger inquired whether Told had enough property to move forward with only the
Johnson and City parcels. Burke indicated that it was not. Fair asked Burke if he is
aware of the TIF deadlines. Burke stated that Bob Cunningham had spoken with both
Mark Ruff and Koropchak on this matter. Koropochak inquired whether Burke could
have an estimated timeline for preparing all project costs, including acquisition costs.
Told Development will be meeting with landowners this week. At that point, they will
have an idea of costs. Koropochak questioned whether Burke anticipated presenting a
package to the HRA in March. Burke stated that they would. Andrews inquired when
Told expected a response on the lot offer. Burke indicated that they would like the
• information as soon as possible, as it would affect other land acquisition costs. Andrews
stated that the HRA would be cognizant of price parity in square footage. He noted that
the HRA would need to evaluate the offer and that they expect a return commensurate
with investment. Burke indicated it was just a paper offer.
L-A
Barger asked if the HRA were to assume that the project would move forward, who
would be the developing parties? Burke stated that Told would be the developer. Lahr
asked who would work on layout and access? Burke indicated that the client was in town
to review the site.
Fair inquired whether a public hearing was needed on the sale of the HRA-owned lot?
Koropchak stated that a hearing would be needed and the Wolfsteller could call for a
public hearing date if needed. Koropochak asked the HRA members if they wanted to act
on the purchase of land without project costs and development agreements. Lahr
indicated that the HRA was most comfortable with the schedule provided by Koropchak.
Fair recommended that staff should review the provided land sale offer and provide an
opinion to the HRA. Andrews also noted that the offer would be subject to legal review.
Koropchak stated that it would also be important to evaluate the project as a total
package, with the HRA lot being the final piece of puzzle. Andrews thanked Burke and
Johnson for the update. Fair asked Burke if he had any other questions. Burke did not.
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• Barger inquired when construction was expected to begin. Burke noted that with TIF
deadlines approaching, they hoped to be in the ground in early summer. Andrews
inquired how long the building phase was expected to be. Burke specified approximately
9 months.
A. Consideration of offer to purchase the HRA lot on Block 52.
No motion required at this time.
7. Consideration to discuss need to increase amount of TIF deposit and authorize action,.
Koropchak provided the staff report, indicating that at the January HRA meeting, the
commissioners requested the February agenda include a discussion to increase the amount
of TIF deposit. This resulted from the agenda item to transfer TIF funds from District
No. 1-23 (available tax increment meaning 80% of tax increment collected) to District
No. 1-32 for over -run administrative costs associated with non -certified District No. 1-32.
Currently, at the time of execution of the HRA Preliminary Development Agreement and
per the Agreement, the developer delivers to the Authority cash or a certified check in the
amount of $5,000. A few years ago, Ehlers & Associates went to a flat fee for
preparation to establish a new TIF District, fee $4,500. Koropchak indicated that legal
fees for preparation of the Contract for Private Development are estimated at $2000,
which far exceeds the remaining amount of $500.
Koropchak referred to two letters provided to Steve Budd, IRTI, (District No. 1-28) and
Don Tomann, UMC, (District No. 1-31) associated with over -run administrative costs.
As you can see both companies paid the over -run costs. The HRA waived the
administrative cost for District No. 1-28 (CMHP) and District No. 1-29 (Front Porch) has
not been accounted. The administrative costs are compiled upon issuance of certificate of
completion (coc) and eleven coc out of 18 coc for Front Porch have been issued.
Koropchack noted that in previous discussions, the HRA felt raising the amount of the
deposit might be proceeded as a impediment to development and elected to bill for over-
run costs. In checking with Ehlers, their recommendation is a $2,500 deposit for
preliminary analysis and then an additional $5,000 to $7,500 deposit for TIF preparation.
Kennedy & Graven reported the common deposit for existing districts is $5,000 and more
to establish a new district.
Korpochack stated that in considering this increase, it may be better to get one deposit up
front as it may be more difficult to collect funds twice. Lahr and Andrews agreed.
Koropchak also noted that each project will have a development agreement. Barger
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isindicated that the perception is that cash is tightest for developers at the beginning of a
project as they are still trying to work out tentative numbers. In that case, the $2,500 may
be easier to collect up front rather than going through the project and then collecting. Fair
stated that it may be important for developers to know the total cost up front, but perhaps
not assess it all at the beginning. Barger inquired what costs were considered
preliminary. Koropchak indicated that Ruff suggested that staff time be attributed to each
TIF district. That funding can cover that staff time and other consulting expenses.
A MOTION WAS MADE BY LAHR TO APPROVE INCREASING THE TIF
DEPOSIT FROM $5,000 TO $7,500AND TO MODIFY THE PRELIMINARY
DEVELOPMENT AGREEMENT AND CONTRACT FOR PRIVATE
DEVELOPMENT ACCORDINGLY. MOTION SECONDED BY ANDREWS.
MOTION CARRIED UNANIMOUSLY.
8. Consideration to authorize payment of HRA bills.
Clarified that through with Michael Connor.
A MOTION WAS MADE BY ANDREWS TO AUTHORIZE PAYMENT OF THE
HRA BILLS. BARGER SECONDED THE MOTION.
MOTION CARRIED UNANIMOUSLY.
9. Consideration of Executive Director's Report.
Koropchak provided the Executive Director's report. Koropochak informed the HRA
about DEED's new Jobz Minnesota program, a new tax-free zone program for Greater
Minnesota. Koropchak noted that she had polled Sunny Fresh Foods and Genereaux Fine
Wood Products to determine whether such a program would encourage relocation.
Genereaux indicated that they would not relocate under such a program because of their
involvement in Monticello. However, if the company were to expand, they may inquire
about program. Don Roberts of Sunny Fresh indicated the same, stating Sunny Fresh's
corporate headquarters is in Monticello, but if they were considering an expansion, they
would look into it.
Roberts also felt that the City should look at purchasing an industrial park. Fair inquired
about possible assessment for the I-94/County Road 18 interchange on the Remmele
property. Carlson indicated that determination of an assessment area is still being made.
He noted that the Remmele property may be too far out for assessments. John Chadwick
and Wolfsteller are working on the details of the letter of intent. Koropchak stated that
there are a few items in the non -binding letter of intent that need to be worked out,
including timing. Price and rate of assessment have been agreed upon. Wolfsteller will
be asking Council to review the non -binding letter of intent. The purchase agreement
would go back to Council for final approval. The Council at this point would be agreeing
to general terms, not making a commitment to purchase. Andrews asked Carlson whether
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part of the proposed interchange improvements involved straightening. Carlson indicated
that the project has come under new discussion, as a new engineer has indicated that re-
alignment of I-94 may not be necessary. Koropchak indicated that ramps would still
happen. Fair asked if MnDoT would be involved in an upgrade to County Road 18
instead of the re -alignment in that case. Carlson doesn't know how involved MnDOT
will be. As the update on this project just occurred, Carlson indicated that he was unsure
if WSB had begun lobbying for the proposed re -alignment versus the updgrade.
Regarding the Executive Director's report on Block 54, Fair inquired whether the HRA
would still have to make a decision about paying off bonds with excess funds and asked if
the HRA should be looking at trying to tie those properties up to move forward with more
development. Koropchak noted that she had sent a letter to Paul Wurm with summarized
staff discussions Koropchak will follow up to see if he has contacted recommended
developers. Fair inquired if the HRA could approach the possible redevelopment area
property owners. Lahr indicated that with Walgreen's and Landmark as potential
projects, an additional project may reduce funds significantly. Koropchak indicated that
the Walgreen's would not generate that much TIF funding, approximately $40,000 -
$50,000 per year. Koropchak stated that the HRA could approach property owners if they
so chose. Fair proposed that it may be simpler to redevelop property for property owner.
Koropchak stated of the possible properties, the Warner property may be the better
opportunity as the house is movable. Fair stated that it may be worthwhile to just ask if
there is interest as the HRA owns the parcels around it. Lahr inquired what the HRA
would do with it. Carlson noted that there would be one less property owner to worry
about in any given redevelopment project. HRA directed Koropchak to see if there was
any interest in selling pending an appraisal and fair market offer. Barger asked about
Wurm's interest in selling. Koropchak stated that Wurm himself would rather redevelop
or sell to a developer. Barger stated that if the HRA did have another property, it would
be of benefit for another developer to work with just Wurm and the City. Koropchak will
first call developers on the Warner house.
Koropchack reviewed her decision not to send a letter explaining the HRA covering the
cost over -run in non -certified TIF district 1-32. Koropchak made this decision after
discussing with Wolfsteller. Koropchak indicated that the letter may confuse payment of
over -run with anticipation of payment of future deficiencies. Koropchak asked the HRA
members if they still wanted to letter sent. They indicated not. Koropchak did note that
she expects a deficiency in 1-23 for the life of that district.
10. Committee Reports.
None.
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11. Other Business.
None
12. Adjournment.
A MOTION WAS MADE BY LAHR TO ADJOURN THE MEETING AT
8:30 P.M. BARGER SECONDED THE MOTION. MOTION CARRIED
UNANIMOUSLY.
R
HRA Chair
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