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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. . HRA Minutes 02/04/04 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 -2- HRA Minutes 02/04/04 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. -3- HRA Minutes 02/04/04 • 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 so HRA Minutes 02/04/04 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 -5- HRA Minutes 02/04/04 I* 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. 0 n u 0 HRA Minutes 02/04/04 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 -7- Reco