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HRA Minutes 10-02-1996 . . . MINUTES MONTICELLO HOUSING AND REDEVELOPMENT AUTHORITY Wednesday, October 2,1996 - 7:00 p.m. City Hall MEMBERS PRESENT: Chairperson Al Larson, Vice Chairperson Brad Barger, Tom St. Hilaire, Roger Carlson, and Steve Andrews. STAFF PRESENT: Ollie Koropchak. STAFF ABSENT: Rick Wolfsteller and Jeff O'Neill GUESTS: Eric and Carl Bondbus, Lake Tool, Inc. Michael Schroeder, Hoisington Koegler, Inc. Brad Johnson, Lotus Realty Services and Barry Fluth, Mall owner Steve Bubul, HRA Attorney 1. CALL TO ORDER. Chairperson Larson called the HRA meeting to order at 7:00 p.m. 2. CONSIDERATION TO APPROVE THE AUGUST 7 AND AUGUST 21. 1996 HRA MINUTES. Steve Andrews made a motion to approve the August 7 and August 21, 1996 HRA minutes. Brad Barger seconded the motion and with no corrections or additions, the minutes were approved as written. 3. CONSIDERATION TO REVIEW THE LETTER FROM MORRELL'S ATTORNEY GIVING DIRECTION TO HRA ATTORNEY BUBUL. Koropchak updated HRA members on the prol,Tfess to collect the $12,516.93 TI shortfall for TIF District Nos. 1-1 and 1-4, noting the enclosed letter to Mr. Morrell from HRA Attorney Bubul as directed by the commission at the last meeting. Also enclosed was the letter ofresponse received from Morrell's attorney affirming Mr. Morrell's offer of $2,948.79 which now includes Morrell paying the $450.64. Previously, the HRA was to collect the $450.64 from Plaisted. Upon the direction ofthe HRA Chairperson and Executive Director, Bubul addressed a second letter ofthe HRA's intent to review the response letter at the October HRA meeting. Attorney Bubul informed HRA members that he talked to Attorney Mulligan and it 1 . HRA MINUTES OCTOBER 2, 1996 appears there is a lack of understanding as to the difference between taxes and tax increment which is apparent in Mulligan's letter. Bubul offered the following arguments and options: A Ifthe $28,000 TI Guarantee was not considered as a single TIF District (both parcels), the HRA would not have released the original agreement. B. Ifthe $179,400 EMV reduction was not considered as a single TIF District (both parcels), the HRA would not have reduced the $879,400 EMV ($209,400 and $670,000 both parcels) to $700,000 (both parcels). e. Mutual understanding between all parties at the time ofthe agreement. D. HRA has a good argument: With the reduced $700,000 EMV for both parcels, Morrell's total benefit was a savings of$37,000. Include the $12,516.93 TI deficiency, the HRA's total loss is approximately $50,000. A B. e. D. . E. . Accept Morrell's counter-offer of$2,948.79. Attempt one last HRA compromise offer of$6,258.47 (one-half the deficiency) to Morrell. File claim for total deficiency of$12,526.93 (Must be a good business decision, economical). Consider Binding Arbitration: Can request judge, handled by City staff, does not incur legal costs. Consider Conciliation Court: Not cost effective, maximum collection of$7,500. HRA members had various thoughts: Morrell's rationale to include the TI deficiency as part of his triple net lease carried no weight as the majority of the facility has been owner- occupied. Another member thought arbitration was an acceptable option. Another stood- ground reaffrrming the HRA' s previous agreement that the tax deficiency issue was one of business ethics or principles and felt the HRA should proceed to collect the total deficiency to a point not-to-exceed legal costs. Another felt the HRA should accept the counter-offer of$2,948.79 with a note that the HRA has some bridges to burn and has a long memory. Another felt the HRA Chairperson and Executive Director should make one last offer of$6,258.47 to Morrell. All HRA members agreed this was an issue of principle and agreed morally and ethically Morrell owed the taxpayers/HRA Brad Barger made a motion authorizing Chairperson Larson, Koropchak, and Wolfsteller to meet one last time with Morrell to reach an acceptable compromise thereby avoiding additional legal costs. Roger Carlson seconded the motion and with no further discussion, the motion passed 4-1. Steve Andrews opposed because the HRA previously agreed the tax increment deficiency issue was one of business ethics and principles and felt the HRA should proceed to collect the total deficiency to a point not-to-exceed legal costs. Meeting date to be set after October 18 as the HRA Chairperson is out-of-town. Koropchak to notify Morrell of the HRA's motion. 2 . . . HRA MINUTES OCTOBER 2, 1996 4. CONSIDERATION TO AUTHORIZE PUBLICORP TO BEGIN PREPARATION FOR THE ESTABLISHMENT OF TIF DISTRICT NO. 1-21 FOR LAKE TOOL. Eric and Carl Bondhus of Lake Tool, Inc. requested up-front TIF assistance for the purchase of Lot 1, Block 1, OIP Second Addition and for site improvements relating to the development. T.J. Martin, Inc. is a newly formed Minnesota Corporation with equal ownership between Dennis, Eric, and Carl Bondhus. T.J. will lease to Lake Tool, Inc., a tool shop which builds plastic injection molds. Currently, the company employs 5 people and within two years the company anticipates employment of 10 (5 new jobs). Wages range between $40,000 to $60,000 per job annually. Eric and Carl Bondhus had preliminary drawings ofthe exterior building and informed HRA members the 9,000 sq ft manufacturing/office facility is planned to be of a metal exterior with wood-substance frame. The three owners reside within the City limits or have a Monticello address. It is their intent to sell the existing building located on East Oakwood Drive. The EMV ofthe new building is $225,000. Commencement of construction is planned for November 1996; however, the first year to collect tax increment is anticipated for 1999. Tax increment collected by the HRA over 8 years is sufficient to payback the HRA at a 8.25% interest rate. District No. 1-21, an Economic District, has a life duration of eleven years. HRA members felt the proposed project met the local TIF policies and the project met the "but for" test as per the letter from Marquette Bank, the proposed lender. AI Larson made a motion authorizing Publicorp, Inc. to begin preparation ofTIF District No. 1-21 for T.J. Martin, Inc., subject to receipt of a $5,000 cashier check and execution of the Preliminary Agreement. Up-front TIF assistance in the amOllllt of$37,900, the up-front assistance from the TIF Surplus Fund, and the HRA to make the 10% local contribution match avoiding the state aid penalty. The 10% contribution from the HRA levy, a non- restricted fund. Steve Andrews seconded the motion and with no further discussion, the motion passed unanimously. 5. CONSIDERATION TO HEAR AN UPDATE ON THE REVITALIZATION PLAN INCLUDING THREE CONCEPTUAL OPTIONS. Michael Schroeder of Hoisington Koegler Group, Inc. informed the HRA members ofthe three concepts presented at Workshop I( Concept A. Known as River Town included both sides of the Mississippi River. This being contiguous lends a sense of control which is critical for quality development on both sides of the river. River and civic qualities. Extraterritorial powers provide cities with an avenue to control areas within one to two miles. Annexation is another potential avenue. 3 . . . HRA MINUTES OCTOBER 2, 1996 Concept B. Known as Intersection included the area of Pine Street and Broadway. Broadway being the downtown gateway with larger area of redevelopment. Civic qualities at the intersection. Concept C. Known as New Bridge included the redevelopment of Walnut Street as pedestrian friendly with the Mall and river as anchors and a civic/institutional quality in the center (fIfe haWlibrary). Schroeder saw the railroad tracks as a local transportation system in the future. Concept C. was viewed as the most favorable response from individuals attending Workshop II. Schroeder felt Concept A. should not be neglected in order to protect the community's investment on the south side ofthe river. St. Hilaire felt the study area was too small and suggested the study be extended another six blocks to the west encompassing a square block including the south side of 1-94 with collector roads over 1-94. Schroeder emphasized the need to first create a feeling of compactness, high-density, and high-level of activity in the downtown area. Create some place people want to come. To focus on redevelopment: a combination of retail, professional, and civic businesses and housing. Schroeder informed HRA members that some downtown redevelopment projects may have died because of the lack of intensity. He continued stating the market research must include what the market demands are now and in the future. He also noted the importance of the role of an HRA or another agency to implement the plans to redevelop a stagnant downtown. Members discussed the potential for development of box users in the downtown area. Schroeder again emphasized the need to create compactness in the downtown area though development of small retail and housing. He gave a comparison of Apple Valley with box users and no identified downtown to the identified downtowns of Excelsior, Wayzata, and Edina. Schroeder reminded members this is a 20-year process: I. Incorporate ideas from Workshop II. 2. Work with fmancial consultants and developer(s) to develop an economical feasible plan. 3. Develop a character for downtown (how it feels). 4. Develop shared parking. In October, the marketing people will establish what city blocks are worth and assess the housing space over downtown stores. 6. CONSIDERATION TO HEAR A PROGRESS REPORT FOR THE POTENTIAL TO EST ABLISH A REDEVELOPMENT DISTRICT. Brad Johnson, Lotus Realty Services, representing Barry Fluth, Monticello Mall owner, told HRA members he had worked with Hoisington Koegler on the 25-mi11ion redevelopment project in Chaska. He is also doing redevelopment in Chanhassen. He reported the Monticello Mall as it exists today is not servicing Monticello nor is it economically viable. He continues to seek a lease arrangement with a potential anchor for 4 . . . HRA MINUTES OCTOBER 2, 1996 the mall which would keep a grocer within the redevelopment study area. The grocer is the hub of this community. TIF assistance would be necessary to assist with demolition of the existing mall and relocation of two/three tenants. Additional tax increment could be used for qualifying TIF expenditures within the designated boundary of the Redevelopment District. Part of the tax increment must be used for other uses than the redevelopment ofthe mall, the other tax increment must be used "for the community". Johnson agreed the downtown needed some help; however, noted Monticello's downtown is not as far gone as that of many other communities. He.also agreed "density" is key and you must create a "place to go". Density increases value over time. Johnson mentioned that some HRAs purchase land outside a desibTfiated redevelopment area to encourage or force certain development to occur within the designated area. Members noted that previously the City was unwilling to vacate Cedar Street to allow expansion of the grocery store at its present location and they agreed with the general concept to keep the grocer to the north side ofI-94. Brad Johnson suggested the next step was to create the geographic boundaries for a Redevelopment District which supports what the community wants. Chairperson Larson felt the lIRA should endorse the local grocer to expand into an area which supports a total package for the community. He felt the time is right for redevelopment of the downtown/riverfront and noted the HRA's accomplished goals: Job creation (economic districts), senior housing (housing district), and blighted area/above market value housing (redevelopment district). St. Hilaire left the meeting for another engagement. 7. CONSIDERATION OF SITE IMPROVEMENT OPTIONS FOR THE lIRA LOT ON WEST BROADWAY. Michael Schroeder reported he suggested the Design Committee of the Monticello Community Partners perhaps in partnership with the HRA create an attractive pedestrian area on the West Broadway parcel owned by the HRA. Utilizing the first 30-40 ft for green space, trees, and bench at a cost of$l ,000. This a temporary use and a good utilization ofMCP labor. HRA members viewed a more extensive design drafted by a Design Committee member. Brad Barger made a motion granting the Design Committee ofthe MCP the use of the HRA lot for green space development on a temporary basis at no cost to the HRA and subject to the verification ofHRA liability insurance coverage. Roger Carlson seconded the motion and with no further discussion, the motion passed 3- 1. Yeas: Barger, Carlson, and Andrews. Abstention: Larson. Absent: St. Hilaire. 5 . . . HRA MINUTES OCTOBER 2, 1996 8. OTHER BUSINESS: a) Hoisington bill: Schroeder reported he addressed the market opportunities in a memo to Bowen with a release to Lahr. The housing market became an optional item in the second draft of the contract. With the community direction supporting Concept C, the market study will now expand with a concentration of retail demands based on old downtown. Roger Carlson made a motion authorizing payment of$10,702.15 to Hoisington Koegler for completion of Task I of the Downtown/Riverfront Revitalization Plan. Steve Andrews seconded the motion and with no further discussion, the motion passed 3-1. Yeas: Carlson, Andrews, and Barger. Abstention: Larson. Absent: St. Hilaire. Kennedy & Graven and Ehlers bills: Members requested Koropchak check the contract to see if Bubul's billable time includes mileage and hours to and from the office or mileage to and from plus hours at meeting only. Bills were OK'd for payment. b) Other: Bill Tapper requested his TI payment of$25,000. The contract states upon certification that the 18,000 sq ft expansion is 90% complete and upon evidence of payment for excavation, curbing, and landscaping, the HRA will reimburse the redeveloper up to $25,000. Tapper's contractor has submitted a letter of evidence certifying 90% completion of the 18,000 sq ft addition. Tapper has indicated the site improvements are completed and will submit evidence of payment within the next few days. Rather than wait another month, HRA members were asked to consider authorization to reimburse Mr. Tapper. Brad Barger made a motion authorizing payment in an amount up to $25,000 for TIF reimbursement of completed site improvements, subject to receipt of evidence of payment. AI Larson seconded the motion and with no further discussion, the motion passed 4-0. HRA members were informed of an interested private party to purchase the Olson house at 525 East Broadway. The party is interested in restoring the home as its residency. The party's real estate agent is contacting Mr. Olson in hopes of fmding a willing seller. 9. ADJOURNMENT. The HRA meeting adjourned at 9:30 p.m. G~ \~6\~~ Ollie Koropchak, Executive Director 6