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HRA Minutes 08-02-1989 . MINUTES MONTICELLO HOUSING AND REDEVELOPMENT AUTHORITY Wednesday, August 2, 1989 - 7:00PM City Hall MEMBERS PRESENT: Chairperson Al Larson, Ben Smith, and Everette Ellison. MEMBERS ABSENT: Lowell Schrupp and Tom St. Hilaire. STAFF PRESENT: Rick Wo1fste11er, Jeff O'Neill, and Ollie Koropchak. GUEST: Pat Pelstring, Business Development Services, Inc. David Ficek, Scottwood Corporations 1. CALL TO ORDER. Chairperson Al Larson called the HRA meeting to order at 7:05 PM. 2. APPROVAL OF THE JULY 5, 1989 HRA MINUTES. Ben Smith made a motion to approve the July 5, 1989 HRA minutes. seconded by Everette Ellison and with no further discussion the minutes stand approved as written. . 3. CONSIDERATION OF AN UPDATE OF THE MANTEQ INTERNATIONAL PROJECT. Pat Pelstring updated the HRA members on the status of the Manteq project indicating their request for an additional $100.000 for working capital which can be accommodated as long as collateral and the guarantees will cover the increased request. The use of TIF for this project will indirectly benefit Manteq through a write-down of lease per square foot. The TIF Contract would be between the developer (Boyle) and the HRA. The project is a 30.000 sq ft office/1ab/manufacturing/warehouse facility with the potential of 50 employees. 4. CONSIDERA.TION TO REVIEW A REVISED LETTER OF INTENT FOR DAVID FICEK AND TO REVIEW A NEW TIF ANALYSIS. . Mr. Pat Pelstring presented the HRA members with a copy of the TIF Analysis based on Mr. Ficek's July 21. 1989 proposal. The proposal included the construction of 14 single floor townhouses ($69.900 base price). 8 two story townhomes ($62,900 base price). and 8 two story townhomes ($52.900 base price) on Lots 4.5,6.7. and 8, Block G and Lots 1,2,3.4, and 5, Block H, A.C. Riggs Addition plus vacated Palm Street. The analysis based on the assumption the developers cost of land per unit is $1,650 would require TIF assistance of $189,079.20. Projections based on market values (listed above) per unit would generate an annual increment of $31,490. Mr. Pe1string indicated the project was still feasible as the increment is sufficient to retire a $285,000 HRA Minutes - 8/2/89 Page 2 . 4. CONTINUED. . bond issuance over 17 years. The feasibility of the project is also based on the assumption the estimated acquisition costs are real numbers. The HRA members asked what was included in the increased developers cost per unit. Mr. Ficek estimated a $15.00 per foot for water/sewer line, the need for a street or driveway for lot accessibility, curb/gutter, etc. as the reasons for increased developers costs. Concerns raised by HRA members and city staff were the designated property zoned R3 (Block G) and R2 (Block H) would not accommodate any structure greater than a four plex with the R2 zoning unless an ordinance amendment was requested and granted. Secondly, the designated 2.9 acres could accommodate only 25 units (ordinance reads minimum of 5,000 sq ft of land per unit) not the proposed 30. Ordinance reads minimum of 960 sq ft per unit, proposal meets this requirement as the smallest unit is 1,200 sq ft. Another question was, does the project fit the City's TIF policy? Bond issues shall amortized over 8-13 years, proposed project in for 17 years. Policy for housing projects read, TIF compensation, to the extent of the project increment available, shall be utilized to compensate the developer to "equalize" the project to accepted market standards. Mr. Pelstring indicated that in Princeton a construction agreement was drafted stating, in affect to, the proposed housing project market value would be equal or competitive to other developers market value. The HRA was still concerned about their original objective: $89,000 - $110.000 market value townhouses. Mr. Wolfsteller asked if the Homestead Credit reimbursed to the cities by the state irr:Tax Increment Districts would remain in coming years? Mr. Pelstring would check on this. Combined with questions relating to ordinance, TIF policies, and the new proposal the HRA recommended a meeting be held between Mr. Ficek, Mr. Pe1string, O'Neill, and Koropchak to revaluate the numbers, proposals and options. Results of the meeting to be presented at the next HRA meeting with preliminary design and housing layouts. Mr. Ficek's thoughts were to reduce the project size to 4 four-plex townhouses and 2 two-plex townhouse. 5. CONSIDERATION TO HEAR A PRELIMINARY CONCEPT FOR USE OF TIF FOR PUBLIC IMPROVEMENTS ASSOCIATED WITH THE EXPANSION OF SEVENTH STREET. . City Staff knowing the K-Mart project is in it's preliminary stage,: yet,' having the insight for possible public improvement costs proceeded to ask the HRA members for their input . HRA Minutes - 8/2/89 Page 3 5. CONTINUED. for the use of TIF for public improvements associated with the seventh street expansion. Staff members indicated the agenda item does not appear because of a request from K-Mart or Lincoln Properties. The HRA mem~ers were unclear of why they should be involved as one member stated the HRA projects are for creation of jobs, blight areas, and low income housing. City staff reminded the HRA, they were only requesting their input and continued to state the proposed attached K-Mart structure would be approximately 86,000 square feet and employ 165 to l80 full and part time positions. City staff is not interested in assisting Lincoln Properties with the write down of land cost nor to assist them with any site improvements or public improvements directly related to their property. Mr. Pat Pelstring indicated a TIF District can be created for a public purpose to maintain the health, safety, and welfare of the community if city public improvement demands go beyond, the proposed project yet directly related. . The long range plan for the City was to extend seventh street west to connect with Elm Street at Country Club Road, in-other- words run parallel to I-94. At this time, the City has right-of-way easements on the Holthaus and Hornig properties. Presently, the City Engineer, OSM and City Planner, Dahlgren, Shardlow, and Uban are preparing a feasibility study at the developer's expense for road alignment, water & sewer, road grades, and drainage. Public improvement costs can be 100% ad valorem, 100% assessed benefited property, TIF or by a combination of the following. Rick Wolfste1ler indicated that history would indicate that street improvement costs of 10-20% on an average are picked up by the city. At this point, the City looks at three options: l) seventh street be extended to only length of project, 2) seventh street be extended to Minnesota Street and complete connection, or 3) seventh street be extended to Elm Street. City staff suggested the HRA consider TIF for public improvement cost only above any normal costs assoicated with installation of public improvements pending the results of the feasibility study. . TIF was used for public improvement costs associated with District 6 (Raindance Properties) Sixth Street plus land acquisition and soil corrections. And on District #5 (Construction 5) for the extension of Lauring Lane because of the excess cost associated with public improvement costs. HRA Minutes - 8/2/89 Page 4 . 5. CONTINUED. One HRA member indicated that 80% of the City's taxes are paid by NSP and the other 20% by remaining business/ residents if a portion of the project cost would be ad valorem. Staff reminded the HRA members that if the project is a go, taxes generated by this project are an increase to the community tax base and an increase of new\.jobs', Staff members do recognize the concern for existing businesses with the potential of a K-Mart. HRA members clearly stated they were not opposed to a K-Mart coming to town, however, did not feel the need to subsidize the project. HRA members suggested that after final commitments of a K-Mart project, after the feasibility study results indicated scope of project and cost, they may consider the use of TIF for only any public improvement costs over 20% normal costs. CONSIDERATION TO HEAR A PRELIMINARY CONCEPT FOR USE OF TIF FOR COSTS ASSOCIATED WITH THE GILLE PROPERTY. 6. . Jeff O'Neill having to leave the HRA meeting early, this agenda item wasn't thoroughly given a clear explanation of its concept. At this point, the City lS applying pressure to the property owners, Mr. and Mrs. Gille, because an existing non-conforming use does not allow a business to expand (illegal). Evidents of the Gille business expanding since 1975 is shown through a comparison of aerial photos. Suggestion by City Attorney Tom Hayee, Jeff O'Neill and Building Official Gary Anderson, was for the HRA to contact Mr. Gille for permission to gain access to property to obtain soil testing around the buried tanks. Soil testing to be paid for by the property owner because the seller would be his responsible to disclose any buried tanks to a potential buyer. Also, it was suggested the HRA mayor could assist in the relocation of Mr. Gilles' business. Presently, the HRA is unaware of a proposed redevelopment for this property, therefore, no increment would be generated and the project-cis unable to stand on its own. . The HRA decision was to table this item because of an unclear reason why the HRA is asked to be involved at this time (timing inappropriate), no increment would be generated from the project, previously the neighborhood objected to property rezoning, single housing development doesn't generate a large increment, and the HRA felt the cart was placed before the horse (suggesting HRA involvement prior to discussion with HRA). The HRA suggested the City continue to apply pressure to the property owners and to place the item of the HRA agenda again as time would determine. Koropchak reminded the HRA that the concept of the project did remain HRA Minutes - 8/2/89 Page 5 . 6. CONTINUED. unclear because of Mr. O'Neill's absence. City staff has for more time send public nuisance violation notices to the property owner. 7. CONSIDERATION TO ADOPT A RESOLUTION AUTHORIZING EXECUTION OF A TAX INCREMENT PLEDGE AGREEEMNT BETWEEN THE HRA AND THE CITY. Ben Smith made a motion to adopt the resolution authorizing execution of the tax increemnt pledge agreement between the HRA and the City for the $260,000 G.O. Taxable TI Bond Sales. The motion was seconded by Everette Ellison, and without further discussion passed 3-0. The HRA adopted the resolution because the bond sales was for the Broadway Square project which was a HRA initated project to eliminate blight and provided needed low income housing for the elderly. The bonds were awarded to Miller Securities, Inc. at 8.8708% interest over 12-13 years at the July 10th City Council meeting. . 8. CONSIDERATION TO ADOPT A RESOLUTION AUTHORIZING EXECUTION OF THREE SEPARATE AMENDED AND RESTATED TAX INCREMENT PLEDGE AGREEMENTS BETWEEN THE HRA AND THE CITY. Ben Smith made a motion to adopt the resolution authorizing execution of three separate amended and restated tax increment pledge agreements between the HRA and the City. The amendment will reduce the HRA pledge of 150% of the annual principal and interest due on the bonds to the city to an amount equal to 105% as required by Minnesota Statutory. This for the Raindance Properties District, the Construction Five District, and the NAWCO District. The motion was seconded by Everette Ellison and without further disscussion passed 3-0. The HRA adopted the resolution as this was part of their 1989 goal to research and endorse the possibility of excess funds for future small projects or projects of good value without planned redevelopments, with the intent that all newly created district project costs should equal the availability of the project increment. 9. CONSIDERATION OF AN UPDATE ON THE NSP, BRIDGEWATER AND RUSS MARTIE PROJECTS. Koropchak reported that the NSP project is still expected to be completed by December, 1989. At present, NSP has received favorable bids for the construction of their planned 5,400 sq ft maintenance facility in the industrial . park. However, the corporate office is preparing a . HRA Minutes - 8/2/89 Page 6 9. CONTINUED. comparative cost analysis for lease/ownership. The bids have been awarded to a contractor and Mr. Zimmer will contact my office after a decision by NSP whether to they will lease or own. Thereafter will the Development Agreement need to be reviewed by the developer. Mr. Russ Martie has decided to hold off with construction of his facility until Spring of 1990. . BRIDEWATER TELEPHONE COMPANY - based on a discussion with Mr. Rierson for Bridgewaters plan to alter or expand the structure located on West County Road 39 and based on the fact that the projected increemtn on a new facility on one of the city owned lots would be substantially small, the suggestion was made to swap lands. Koropchak wrote a letter to Mr. Rierson of his options, informing him that in accordance to the city ordinance, the present use of the property as a site for cold storage is a legal but non-conforming use. If plans are to expand or enlarge a structure for use in conjuction with current operations this is not allowed under current law. In order for an expansion to occur at this site an amendment to the ordinance would be required. Bridgewater has an option to amendment the ordinance or relocate to the industrial park. City staff will continue working with Mr. Rierson. 10. CONSIDERATION TO REVIEW AND DISCUSS THE BILLING STATEMENT FROM BUSINESS DEVELOPMENT SERVICES, INC. Mr. Pat Pelstring apologized to the HRA members for the billing statement error. After notation by Jeff O'Neill of the contact between the HRA and BDS, which doesn't include prospecting/marketing for the City of Monticello (example Genereux and Manteq projects), Mr. Pelstring suggested the reduction of billing statement to $2,626.75 (elimination of Ind. marketing/proposals hours) and the potential to amend the existing contract to include hours attributed to the potential loan writing and future meetings with Manteq or Genereux. The HRA was in acceptance of Mr. Pelstrings suggestion. * CorrectioQ (over) 11. OTHER BUSINESS. Chairperson Al Larson suggested Koropchak contact Barb Schwientek for input on the need for intermediate housing for the elderly. Housing needed between the stage of capability of living alone and the need for full nursing home care. . 12. ADJOURNMENT. The HRA meeting adjourned at 10:00 PM. ~ \(cf\O~ ~ Ollie Koropchak, HRA Executive Secretary Correction made by Chairperson Al Larson: (September 6, 1989) The HRA would like to be advised up front as to when BDS. Inc. billing clock begins to run on individual projects other than TIF projects. . . .