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HRA Minutes 12-10-1997 . . . MINUTES MONTICELLO HOUSING & REDEVELOPMENT AUTHORITY Wednesday, December 10, 1997.7:00 p.m. City Hall MEMBERS PRESENT: Chair Brad Barger, Vice Chair Steve Andrews, Darrin Lahr, Bob Murray, and Dan Frie. COUNCIL LIAISON: Roger Carlson. STAFF PRESENT: Rick W-olf-steller,Jeff -O'NOOl,and Ollie -Kompchak. GUESTS: Attorney Steve Bubul, Kennedy & Graven Mark Ruff, Ehlers & Associates Barry Fluth, MDnticello Mall Brad Johq.son, Lotus Realty Services Joan Ahrens, Real Estate Manager ofSuperValu 1. Call t9 Order. Chair Barger called the HRA meeting to order at 7:05 p.rn. 2. Consideration to awr-ove the December 3, 1997 lIRA miootes. Not submitted for approval. 3. Consideration of adding items to the agenda. Koropchak requested adding an agenda item: Permission to use the HRA Lot on West Broadway, Item No. 7d. 4. Consideration to negotiate level ofT-lF assistance forr-edevelo9mentofthe Monticello Mall for determination of terms and conditions of the Private Redevelopment Contract between the HRA and Barry and Barbara Fluth. Brad Johnson representing owner Barry Fluth introduced Joan Ahrens, Real Estate Manager for SuperValu. Since the HRA had questions relating to "community involvement", Johnson felt Joan was the best person to answer those questions. Secondly, Johnson informed members that Barry continues to work on tenant relocation. Joan Ahrens told members that Cub takes pride in their involvement within the community. She verbally presented a list of Cub's community attributes and submitted the 1 . . . HRA MINUTES DECEMBER 10, 1997 list to the Executive Director. Generally, the store manager, not the foundation, has the discretion to respond to local fundraisers. Cub's decision to locate in Monticello results because no store exists between St. Cloud and Maple Grove, shoppers are going outside the area for groceries, community benefits, and request from individuals within the community. Also, through a market analysis the community appears staple and growing with easy accessibility to 1-94. Cub services will include a deli, pharmacy, and bank; however, the structure will have no video or card areas. She ended stating "Cub works with communities relating to design". Barry reported tenant relocation is in process and some progress is being made. Barry reviewed a tenant list stating most would relocate downtown, perhaps Hallmark and Wright Way will remain at the mall, not sure about the Skillet, and not much information from the dance studio. Barry hopes to have the tenants relocated for project starting in March. Johnson reiterated the request for $600,000 with the major expense being relocation costs. Harder numbers will be forthcoming to the HRA. HRA members received a copy ofthe letter from Ken Maus relating to TIF assistance for the Monticello Mall. This mailed as supporting data to the agenda supplement. Barb Esse, MCP Chairperson, felt the redevelopment of the mall would serve as a southern gateway to pull people into the community. She stated that the MCP did not solicit Cub Foods. However, in asking the question, "Could any other business better fit the plan? She believed "not" and acknowledged the emotional concern for the local grocer and tenants proposed for relocation. She noted the MCP is willing to work with Cub Foods and the developer to assist with relocation ofthe displaced tenants. The biggest impact Elk River has seen since the opening of the Cub store, is that Cub serves as a selling card to other developers. Esse's only question was "how good of a citizen is Cub?" and that question was previously answered. Mark Ruff explained his December 5 letter using three approaches to qualify the "but for" test. The test being the redevelopment of the mall would occur solely on private dollars without public assistance. There is a need for TIF but how much is the question continued Ruff First approach - Lease rates of $7.25 per sq ft for the grocery store and $12 per sq ft for the smaller tenants appear within the market and expected sales. Second approach - Demolition, tenant relocation, and site improvement costs are all eligible TIF expenditures. Although the costs are estimates at this time and are subject to change, Ruff felt the site improvement costs of $200,000 were difficult to justify as the current value of the site includes site improvements. Therefore until such time evidence is provided, Ruff suggested TIF assistance in the amount of $400,000 for demolition and relocation costs. These estimated costs appear reasonable. Third approach - The rate of return to the developer is estimated at 15%, typical for real estate, assuming the value of the parcel 2 . . . HRA MINUTES DECEMBER 10, 1997 prior to demolition is $1,070,000. Currently, the county assessor has the parcel valued at $800,000. Administrator Wolfsteller recalled when the mall was valued at two million. Utilizing a value of$I,070,000 less the outstanding debt of$350,000 leaves $720,000. Assuming an annual TIP assistance of $45,000 at 7.5% over 20 years plus an annual cash flow of $63,000, an equity requirement of $720,000 is needed for a rate of return of 15% continued Ruff. The real question: "Does the HRA believe the value of the mall parcel prior to demolition is $1,070,000?" Based on the County Assessor's value of$42.85 per sq ft or $3,000,000; the estimated annual tax increment would be approximately $90,000. Ruffrecommends the 50/50% split with the HRA receiving the first $45,000 for other district redevelopment costs and the second $45,000 to the redeveloper. Previously, the City Council agreed to make the annual local contribution for the district which is estimated at $4,500 annually for redevelopment of the mall. Steve Andrews made a motion authorizing the consultants to prepare a draft copy ofthe Private Redevelopment Contract between the HRA and BBF, Inc. for approval by the HRA on January 7, 1998. TIP assistance in an amount not-to-exceed $400,000 pay-as- you-go for demolition and tenant relocation costs associated with the redevelopment of the Monticello Mall. Details of the document to be negotiated by the consultants and the Executive Director. Other conditions of the documents but not-limited-to for consideration: Final site improvement costs in 30-days; lease signed between BBF, Inc. and SuperValu (Cub Foods, Inc.); line-item relocation costs; indemnify agreement from redeveloper and a relocation waiver from each tenant. Bob Murray seconded the motion. The motion was subject to execution of the TIP Preliminary Agreement and receipt of $5,000 cashier check. With no further discussion, the motion passed unanimously. Fluth informed HRA members he may approach the HRA as a separate issue to request additional assistance to purchase property for relocation of tenants. 5. Consideration to review the appraisal for Outlot A. County Club Manor for recommendation to the City Council. HRA members reviewed the corrected appraisal for Outlot A, the corrected appraised value was $171,000 for 16.7 acres. The December 3 appraisal was $204,000 for 20 acres. HRA members questioned as to the number of returned RFPs for the development of Outlot A. The RFP was mailed in search of the highest and best use of the property as moderate-high density residential. Koropchak responded the RFPs are due December 12, 4:30 p.rn. Members noted affordable housing using tax credits require a noise test and the need for a berm. For conventional financing, a noise test is not required. 3 . . . lIRA MINUTES DECEMBER 10, 1997 HRA members mentioned the inconsistency ofthe $8-$12 average wage-level and the desired $150,000 home values. Frie reminded members that Mayor Fair approached him with the need for affordable housing as a means of available housing for the employees of industries and to place Outlot A back on the tax roll. Frie believes the City should develop the parcel and not be land speculators. Wolfsteller informed members that the City Council turned down an offer of approximately $225,000 three years ago. Plus the City receives annual billboard lease revenues of $10,000. Brad Barger made a motion to table any action until the January 7, 1998 meeting for review of the returned RFPs. Darrin Lahr seconded the motion and with no further discussion, the motion passed unanimously. 6. Consideration of a request fr-om the !DC for a joint meeting between the HRAlIDC. Chair Barger informed member IDC Chair Maus contacted him regarding the potential of a joint meeting as the HRA and IDC appear to have similar goals: Purchase of land for future industrial use and development of a marketing program. Darrin Lahr made a motion accepting the invitation and directing staff along with the IDC to determine a date for an evening meeting with the agenda mailed one-week in advance of the meeting date. Steve Andrews seconded the motion and with no further discussion, the motion passed unanimously. Murray will be out-of-town December 19 to the 30. 7. Other Business. a. and b.) Accepted. c.) NG/CommunityCenter Update - HRACommunity-C-enter Representative Steve Andrews reported on the December 5 tour to Maplewood, Shoreview, North St. Paul, Rosemount, and Chaska. Andrews sees the Lease Revenue Bonds which has a higher impact on businesses as a stop-gap: A means to finance the core facility utilizing the 1.5 million NG dollars and perhaps the addition ofa sales tax. It is proposed the core facility will not include ice but perhaps an aquatic center as a family attraction. Barger questioned the duplication of uses and membership provided by the school and the health club. Koropchak noted the aquatic center may not include a lap pool but consist of a leisure pool only for use by all ages. Additionally, the multi-use of the core facility could be used for walk-in basketball and volleyball rather than scheduled games. The MCP represents community involvement but has not voted on the community center reported Lahr. If the proposed cost including an aquatic center is seven to ten million without operations: How far -is one willing to drive? Becker is ten miles. Could the lIRA ask for an advisory vote? Two questions asked the most of some lIRA members: The city purchased land adjoining the city hall some years ago for future expansion of the city hall at the current site. Why not expand as planned? Or what happened to that plan? Secondly, if the city hall was not included, what would be in the community center? Or if the project is estimated at $6 million and the NG contributes $1.5 million and the city hall 4 . . . HRA MINUTES DECEMBER 10, 1997 $800,000 (not land), what is the $4 million for? Wolfsteller estimated to expand the city hall on the current site would costs about $400,000. Andrews said the proposed NG/city hallIcommunity center is consistent with the Revitalization Plan and the City Council's direction to the HRA was to issue Lease Revenue Bonds for the core facility. The bonds are a City levy and only the HRA name is used. Some members questioned the HRA's responsibility to citizens. Estimated costs of 6 million for NG/city hallIcommunity center and 7 to 10 million with aquatic center. Barger would prefer seeing the greater impact on his home than his business. BRA members agreed and recommended that Andrews advise the Community Center Task Force of the concerns ofthe HRA at the upcoming task force meeting prior to the next HRA meeting. The community presentation is scheduled for January 20. d) HRA West Broadway Lot - Dan Frie made a motion allowing the MCP to utilize the HRA lot described as Lots 7 and 8 except for ..., Block 52, at no liability to the BRA. Brad Barger seconded the motion and with no further discussion, the motion passed lman1mously. 8. Adiournment. The HRA special meeting adjourned at 9:10 p.m. a~ KO\.~~ Ollie Koropchak, Executive Director 5