Loading...
The URL can be used to link to this page
Your browser does not support the video tag.
Home
My WebLink
About
EDA AGN 11-16-04
CITY OF COLUMBIA HEIGHTS 590 40th Avenue N.E., Columbia Heights, MN 55421-3878 (763) 706-3600 TDD (763) 706-3692 Visit Our Website at: www. ci. columbia-heights, rnn. us EDA COMMISSIONERS Don Murzyn Jr. Patricia Jindra Bruce Kelzenberg Julienne Wyckoff Bruce Nawrocki Bobby Williams Tammera Ericson ECONOMIC DEVELOPMENT AUTHORITY REGULAR MEETING 7:00 P.M., TUESDAY, NOVEMBER 16, 2004 CITY HALL, CONFERENCE ROOM 1 .4 GEND.4 e CALL TO ORDER/ROLL CALL PLEDGE OF ALLEGIANCE. CONSENT AGENDA. (These items are considered to be routine by the EDA Board of Commissioners and will be enacted as part of the Consent Agenda by one motion.) Ao MOTION: Move to approve the consent agenda items as listed below: 1) Approve EDA Meeting Minutes MOTION: Move to approve the minutes of the July 29th, September 15, September 21, September 27 and October 25, 2004 EDA Meetings as presented. 2) Approve the Financial Report and Payment of Bills MOTION: Move to approve Resolution 2004-14, a Resolution of the Columbia Heights Economic Development Authority (EDA) approving the £znancial statement and payment of bills for the months of September and October 2004. ITEMS FOR CONSIDERATION A. Adopt Resolution 2004-15 and Resolution 2004-16, 2005 Budget and Levy MOTION: Move to Adopt Resolution 2004-15, being a Resolution of the Columbia Heights EDA Adopting the 2005 Budget of $223,790 and a Levy of $62,424 and recommending this Budget and Levy to the City Council for approval. MOTION: Move to Adopt Resolution 2004-16, being a Resolution of the Columbia Heights EDA approving and Levying $161,366, subject to approval by the City Council. aJ Adopt Resolution 2004-17, Approving the Consulting Services Agreement, with the Greater Metropolitan Housing Corporation (GMHC), which includes services from the Housing Resource Center and the Rehab Incentive Program for 2005 MOTION: Move to Adopt Resolution 2004-17, Approving the Consulting Services Agreement with the Greater Metropolitan Housing Corporation (GMHC), which includes funding the Housing Resource Center and the Rehab Incentive Program for 2005; and furthermore, to authorize the President and Executive Director to enter into an agreement for the same. THE CITY OF COLUMBIA HEIGHTS DOES NOT DISCRIMINATE ON THE BASIS OF DISABILITY IN EMPLOYMENT OR THE PROVISION Of SERVICES EQUAL OPPORTUNITY EMPLOYER C. Williams-Peterson Real Estate Agreement for 40th & University Redevelopment MOTION: Move to terminate the Agreement between the Columbia Heights Economic Development Authority and Williams-Peterson Real Estate for redevelopment of 40th & University. Do Approve Change in Funding for the Purchase of 322 40th Avenue MOTION: Move to Approve the Purchase Agreement for the property located at 322 40th Avenue NE in the mount of $225,000, with $159,961.26 in CDBG funds and $65,038.74 from fund 420, to be reimbursed when a future development agreement for the project area is established. 5. ADMINISTRATIVE REPORTS A. Discuss establishing December 14, 2004, 7:00 pm for a Special HRA meeting and moving the Regular EDA meeting to this date. 6. ADJOURNMENT Walter R. Fehst, Executive Director H:\edaAgenda2004XNovember 16, 2004 The EDA does not discriminate on the basis of disability in the admission or access to, or treatment or employment in, its accommodation will be provided to allow individuals with disabilities to participate in all EDA services, programs, and activities. Auxiliary aids for handicapped persons are available upon request when the request is made at least 96 hours in advance. Please call the EDA Secretary at 706-3669 to make arrangements (TDD 706-2806) for deaf or hearing impaired only. ECONOMIC DEVELOPMENT AUTHORITY (EDA) SPECIAL MEETING MINUTES JULY 29, 2004 CALL TO ORDER/ROLL CALL President Murzyn called the meeting to order at 5:34 p.m. Present: Don Murzyn Jr., Patricia Jindra, Bobby Williams, Bruce Nawrocki, Tammera Ericson, and Bruce Kelzenberg Staff.' City Manager Walt Fehst and Assistant to th¢ Community Development Director Randy Schumacher Absent: Julienne Wyckoff ITEMS FOR CONSIDERATION Further Discussion on NEI Site Fehst stated that Commissioners Nawrocki and Williams called this meeting to discuss if the Authority acted prematurely to approve the demolition of the NEI building. The bid was awarded on April 14, 2004 to F. M. Frattolone. The building has been gutted of asbestos, which has resulted in a lot of damage. The contractor is on site and ready to begin demolition. Fehst referred to touring the building yesterday with Mr. Williams and his architect. Fehst stated that the building was for sale, unsuccessfully, for one year for the price of $1,200,000. The City purchased it for $600,000. The only interest in the building was by non-profit groups. Dunbar Development proposed 50 apartment units on top of community space with 22 units of carriage homes in the back of the tot. Staff spoke to a dozen developers to see if they were interested in keeping the building. Six developers looked at the building and indicated that the real value was in the raw land. The EDA requested staff obtain CDBG funds to remove the building. Williams stated that he and Commissioner Nawrocki were against moving so fast on the demolition, and that the commission does not have a consensus for what to do with the site. He stated his wish to have started earlier to save the building. Architect Chuck Fryberg indicated that he probably could have found someone to purchase the building and put in a $20,000,000 project. The building will be difficult to remove, because it is so well built. However, there is now water coming through the roof to the gym floor. Williams referred to the refurbishment of the Grainbelt Brewery, which took 20 years. Murzyn stated this is not an historical building. Williams stated that in the future if there are two descending votes on an issue, it should be discussed further. We need to be more of a team. Ericson stated this discussion began on the timing issue, setting aside the ultimate issue to tear down, which began late last year. The issue was discussed, we applied for a demolition grant, and approved demolition in April. Following this, there were no further issues to discuss, resulting in no EDA meetings during June and July. Now we have a signed contract. Ericson stated it bothers her to hear that we moved to quickly, and sees this as a last minute effort. In getting rid of the building, we can look at something else. She reiterated that we received funds for removal and that any interest shown for the site was for raw land. Ericson stated that Councilmembers toured the building, read the reports, and indicated that her decision was not made quickly. Economic Development Authority Meeting Minutes July 29, 2004 Page 2 of 4 Williams stated that he did not get input from citizens until after the vote was taken. We need to have a plan and better communication. Kelzenberg indicated that residents he spoke to say the building should be tom down. These residents may be young and may have a different vision for the future. They know we need space for our youth, right in Columbia Heights. Kelzenberg referred to an E-mail from Tom Sherohman stating that we need to do this for the kids and offered his help. Kelzenberg stated that we need to think of the future, not just today. The school gyms are not open during the summer. He is also in favor of a pool. Williams indicated this was voted down five years ago and that was before we lost $2 million in State aid. Kelzenberg agreed that the time to do this was 25 years ago. He stated there were only 2,600 votes cast, two to one against their proposal. The kids need something to do and someplace to go. Williams stated that the NEI gyms were in good shape. Kelzenberg indicated they were substandard. Nawrocki stated that three months ago he voted against demolition because we did not have a plan. We should have hung onto the building to see if we could use it. Staff had indicated it was unfeasible to bring the building up to code. The document given in the packet was to justify the area as a TIF district to tear it down and redevelop the area. Nawrocki still feels strongly, but realizes at this point it is probably too late to save the building. The need for gym space is a concern. He referred to a call he received regarding papers, which indicate the old part of the building was built in the 1920's for $70,000. Those gyms could still have been used for recreation programs. The auditorium had 1,000 seats and a newer gym floor. Nawrocki stated that he has been convinced there is a need for gym space. With the loss of NEI we will have no gym space other than the schools for our programs. If something comes of the site at 37th and University, it would be great, but there may be sites of higher priority. Nawrocki stated he has had discussions with our schools regarding a cooperative venture. Unfortunate, they will not be pursued in this fall's election. Sharing the cost with the school district, including Fridley residents that attend our schools, would have been the best solution. Murzyn stated that has not been ruled out. Nawrocki indicated it has been ruled out for the time being and that delays meeting the need. This last ditch effort to try and save the building with two gym spaces is an honest concem to find some temporary space for the programs. He is saddened that we won't be able to keep the property until we are able to do something better. He referred to the cost to bring the building up to code. He indicated he is not hung up on the historical preservation, but on trying to save two gym spaces. Murzyn questioned what Dunwoody Institute paid in taxes. Fehst indicated they paid no taxes. Murzyn indicated that we should have bought it before they did. We have done nothing for years for our kids. Whatever is done will be to late for today. This property should be multi-use and the taxes would help with our loss of aid. We drastically need to change to a bedroom community and then our taxes would go down. The parks we have are minimal, poorly maintained and not being improved. Nawrocki debated these comments and gave the past history of our parks. Murzyn asked when the last park was obtained. Nawrocki stated it was when he got land donated from Burlington Northern. Murzyn stated that we may have more park space than most and suggested a skate park, as that is what kids today do. Ericson agreed with Chairperson Murzyn, that these are two different issues, and that the recreation program does not influence the decision on the NEI building. The money put into the Economic Development Authority Meeting Minutes July 29, 2004 Page 3 of 4 building for renovation, ADA, and maintenance would be a huge expense. Ericson spoke of the selling price of homes in Columbia Heights compared to other communities such as St. Louis Park, where the homes sell for more and residents are willing to pay for the amenities they want. The houses that sell here are sold to become rental property. We need to make our community a competitive place to live. Nawrocki stated that interest rates are going to rise. The boom is over. Kelzenberg stated that is another reason to do something now. Because of the current interest rates, now is the time to build a facility to meet our needs. An audience member questioned the legal ramification to back out of the signed contract and to the demolition grant money. Murzyn stated that we would be sued for the contract amount. Nawrocki stated that we would not back out, but negotiate. The grant money would have to be given back, but could possibly be used for another project. Sue, a member of the recreation facility task force, stated that they have not rejected the NEI site. Our efforts have been diverted to the choice location as next to Murzyn hall. Gary Peterson indicated that at the building open house in June, people expressed concern to possibly save the building. Don't tear it down until you have a plan for the property. Peterson stated he did express concern six weeks ago at the council meeting and everyone was alerted. The necessary time was not taken to cover all the options. It is sad to see the shape the building is in now, as it would be unusable as a city facility. Those gyms could have been used from day one. Ericson stated that we could not just open the doors without bringing the building up to code. Peterson stated there was not a health or safety hazard, just that the plumbing did not work because the outside line was broken. Peterson questioned plans for the site, considering the city is in a money dilemma. Fehst stated that the MN Design Group from the University is looking at site options for private and public development. Joe Sturdevant stated that we had two votes for a recreation center; one was in a presidential year. He did not agree with spending money indicated by a survey that only spoke to 300 of the 18,000 residents. If the building were kept for gym space, we would still need two more gyms and would not have the $900,000 spent on the renovation for a new facility. An audience member asked if this would go to the people for a vote? Murzyn indicated that Council would not need to put it on the ballot. Kelzenberg stated he is adamant that gym space be on the ballot this year. Murzyn stated that this discussion was not about gym space. Jindra stated that permits have been pulled and if we renege, we could be sued. Nawrocki suggested negotiating with them. Jindra stated that then we would be back to where we were before. Jindra stated that she liked the old building, but the reports show it is too costly to redo and it is prime property. She stated she would like to see multi-use on the site. Peterson stated that if the building were demolished, the task force would like to see the sale funds directed toward a community center to take the burden off the taxpayer. There would be user fees. Economic Development Authority Meeting Minutes July 29, 2004 Page 4 of 4 An audience member questioned the student enrollment numbers. Kelzenberg stated there are more programs, and therefore more people to accommodate, i.e. volleyball, wrestling and girls sports. Murzyn referred to the school track being repaired, but the fence is locked on the weekend and residents can't use it. ADJOURNMENT Ericson moved to adjourn the meeting at 6:47 p.m. Second by Kclzenbcrg. Upon vote: All ayes. Motion carried. Patricia Muscovitz, CMC Deputy City Clerk/Council Secretary ECONOMIC DEVELOPMENT AUTHORITY (EDA) SPECIAL MEETING MINUTES SEPTEMBER 15, 2004 CALL TO ORDER/ROLL CALL President, Murzyn called the meeting to order at 7:15 p.m. Present: Don Murzyn Jr., Patricia Jindra, Julienne Wyckoff, Bobby Williams and Bruce Nawrocki, Tammera Ericson, and Bruce Kelzenberg PLEDGE OF ALLEGIANCE ITEMS FOR CONSIDERATION COLUMBIA HEIGHTS INDUSTRIAL PARK REDEVELOPMENT Murzyn asked the board to hold their questions until the entire presentation was complete. Schumacher introduced Sue Mason, Project Manager from S.E.H. that did the Infrastructure study, Mark Ruff, Financial Consultant from Ehlers & Associates, Steve Bubul, the City's consultant from Kennedy and Graven, Brad Schafer, President of Schafer Richardson and Evan Rice, Legal Counsel for Schafer Richardson. Schumacher stated this meeting was called to bring the board up to speed on the Industrial Park Redevelopment project proposed by Schafer Richardson and that there will be no action items. The City received $1.2 million in grants for clean up in Phase I. For Phase II, the DEED grant application is due by November 1st, 2004. Sue Mason stated S.E.H. looked at the infrastructure of the development, which is traffic, parkways, sewer, water, walkway& and lighting issues. Mason stated the Feasibility Report identified 1) would not add any traffic problems; 2) the sanitary sewer is okay; 3) there is a cast iron water main that needs to be replace& 4) recommended adding a new storm sewer; and 5) they recommended added trails and sidewalk~ along the parkway with lighting. The report also shows a round-a-bout in the area of 39th & Jefferson to provide a barrier between the businesses and housing. Nawrocki stated he didn't feel it was necessary to have a round-a-bout as shown in Concept A and the need for curved roads on Concept B. Mason stated anytime you develop a parkway design you use curved streets to allow for slower traffic would compliment the four ball fields design in the park study that the City is also working on. Schumacher stated there are approximately 15 businesses in the Industrial Area that have no intention of moving and with the round about it would create a nice barrier for the housing area. Wyckoff agreed with Schumacher. Mason went over the breakdown of project costs, explained the $500,000 deduction for phased roadway in the north/south portion of the park as this area will be developed after the park is finished, and that the roadway costs are divided up on a front split cost or by lateral footage. Economic Development Authority Meeting Minutes September 15, 2004 Special Meeting Page 2 of 3 Schumacher stated of the $1.4 million coming from the City, $1.2 million would be eligible for MSA funding. Kevin Hansen stated we get $1.2 million per year, but can borrow in advance if this years funding has already been allocated, which was done when they did the Central Avenue project. Mark Ruff stated the project is expected to generate 558 units of owner-occupied housing and 11,600 sq.fi, of commercial to be built in three phases over a period of five years, the developer is responsible for purchasing all of the property, the City agrees to use eminent domain, if necessary, to help the developer purchase any of the remaining properties with the developer paying for the relocation costs for all owners and tenants, the developer agrees to pay for all City fees including park dedication, SAC and WAC fees, the City will reconstruct the road adjacent to the project and assess the developer for its portion of the costs and paying for the City's side of the improvements to sewer and water and MSA dollars. Financing proposed for the project is a TIF Pay-As-You-Go program where the developer pays all of the costs upfront, which is $8,450, O00 for parkway, demo of buildings, site prep, environmental issues, etc. The TIF could be for 13 years provided the City receives the state grant for $3 million for clean up, otherwise, it can be moved out farther to 18 or 20years. The difference between the Kmart and Industrial Park project TIF Districts is that when the state evaluates the costs, percentage of blighted or contaminated area to determine the need for the funding which the Industrial Park does qualify much higher for. Steve Bubul went through some of the issue on the redevelopment contract. On page 2, II Timing and Proposed Phases, Phase 1 will be approximately 170 owner occupied townhomes and condominiums or cooperative units and approximately 11,650 square feet of commercial space, with improvements commencing within 1 year and requires 75% of the housing units done within 3 years. In Phase II there will be approximately 120 owner-occupied townhomes, commencing within 3 years, must complete all site improvements and 75% of the housing units within 4.5 years, plus all land for Phase II must be acquired within 2 years. Phase III will have approximately 256 owner-occupied condominium or cooperative units, commencing within 4 years, must be complete all internal Phase III site improvements and 30% of the housing units within 5 years with all land being acquired within 2 years. If the developer fails to meet the requirements, the EDA may suspend payment of TIF from defaulting parcels until the required minimum improvements are made. To meet the DEED pollution grant price requirements, at least 20% of the units in Phase 1 must be sold at a purchase price not to exceed 110% of the maximum affordable price under Metropolitan Council guidelines. All construction plans must be approved by the EDA and meet the redevelopment plan and design standards prior to construction. Fehst stated that Phase III, will generate the most tax base. Schumacher stated, they will be doing construction in Phase I and II at the same time. Nawrocki asked if staff knows what amount of SAC credits are available to the City. Streetar stated there are a lot. Williams stated under V number 5, isn't the property or business owner responsible for the clean up of contamination. Bubul stated they are only if they created it. Economic Development Authority Meeting Minutes September 15, 2004 Special Meeting Page 3 of 3 Nawrocki quoted from an old document submitted by Ehlers stating that the duration of a TIF district will be 26years. Ruff stated what the document is saying is that it could go up to 26 years. Nawrocki stated he felt staff is moving too fast to adopt the development agreement and requested a better spreadsheet showing money flow for the district. Schumacher stated the following: 1) this is one of the more difficult projects being developed in the Twin Cities; 2) he thanked the developers and consultants for all of their time with weekly meeting being held for months on this project; 3) the end project is to get the grants for clean up; and 4) the board should remember the developer is paying for all the property which is a savings to the City. Murzyn asked how soon could the development agreement be ready. Streetar stated it could be ready as soon as Monday, September 27th and suggested the board have a special meeting prior to the City Council that night, so that the item could also go on the City Council agenda that night. Nawrocki recommended Tuesday the 28tn instead. After some discussion by the board, the consensus was to have a special EDA meeting at 7pm on Monday, September 27tn and the City Council meeting to follow immediately afterwards. Schumacher stated staff would make the arrangements. ADJOURNMENT President, Murzyn, Jr., adjourned the meeting at 9:14 p.m. Respectfully submitted, Cheryl Bakken Community Development Secretary HAEDAminutes2004X9-15-2004 Spec. ECONOMIC DEVELOPMENT AUTHORITY (EDA) REGULAR MEETING MINUTES September 21, 2004 CALL TO ORDER/ROLL CALl, President, Murzyn called the meeting to order at 7:09 p.m. Present: Don Murzyn Jr., Patricia Jindra, Julienne Wyckoff, Bobby Williams and Bruce Nawrocki, Tammera Ericson, and Bruce Kelzenberg PLEDGE OF ALLEGIANCE CONSENT AGENDA Anoroval of Minutes Move to adopt the minutes of the August 17, 2004, regular meeting as presented in writing. Financial Report and Payment of Bills Move to approve Resolution 2004-08, Resolution of the Columbia Heights Economic Development Authority (EDA) approving the financial statements for August, 2004 and approving payment of bills for August, 2004. Nawrocki questioned, why does it state under Parkview Villa North cashflow, revenue rental income, the year to date actual is $170,923, when the year to date budget is $223, 713. Streetar stated this is due in part to the fact that Crest View was certifying residents by their net instead of gross incomes and it will take until the end of the year to make all of the adjustments. Motion by Williams, second by Jindra, to adopt the consent agenda items as listed. All ayes. Motion Carried. ITEMS FOR CONSIDERATION Resolution 2004-06, Acquisition of Burger Kine Proper ,ty Streetar stated the board directed staff to go back to Nath Companies to negotiate an agreement for the purchase of the property..4t this time staff is recommending the purchase price of $800,000, which includes land, building, furniture, fixtures and equipment as well as relocation assistance as laid out in the enclosed agreement. The contingencies include: 1) completing phase 1 environmental review; 2) secure demolition and asbestos abatement estimates; 3) perform tax increment inspection and 4) secure financing from City Council. Funds wouM come from a loan from the City using the parking ramp fund 290 and Sheffield fund 410. Once the property is purchased the building will be demolished using approximately $40,000 of CDBG funds left over from the sale of 4607 Tyler Street. In addition, Bauer Construction estimates the salvage value of Burger King is expected to be $1,000 to $5,000, which couM also help payfor demolition and asbestos abatement. Tom Letness, the owner of the Heights Theatre has contacted staff with interest in adding 2 or 3 more screens. If that would work out, then on the White Rental property a nice restaurant would be ideal aspeople come from all over the cities to the Heights Theatre. Dan Wilson, a relocation specialist stated Burger King is legally entitled up to $200, O00 for FF&E, $100, O00 for relocation, and an additional $300,000 in compensation, for a total of $1,100, 000. He recommended $800,000 settlement because the $300, O00 for FF&~, with relocation included results in a $300,000 savings for the EDA. Economic Development Authority Special Meeting Minutes September 21, 2004 Page 2 of 5 Murzyn, Jr. stated he felt that using $800,000 in funding isn't an issue as we can always come back by the development area and say we did that. Wyckoff also felt confident that the offer was agreeable and with buying Burger King and White Rental, then Mady's should want to redevelopment their site. Ericson stated she didn't feel obligated to buy the property, we could walk away, but it sounds like we could sell it to the theatre or someone else quickly for redevelopment. Fehst stated staff has many priorities, a short amount of staffing and therefore felt the EDA should buy the property or totally drop the development ideas for the site. Motion by Wyckoff, seconded by Ericson, to waive the reading of Resolution 2004-06, there being an ample amount of copies available to the public. All ayes. Motion Carried. Motion by Wyckoff, seconded by Ericson to Adopt Resolution 2004-06, a Resolution Approving the purchase of land between the Columbia Heights Economic Development Authority and Nath Property Corporation, L.P., A Minnesota Corporation; and furthermore, to authorize the President and Executive Director to enter into an agreement for the same. Upon Vote: Jindra- Aye, Nawrocki- Nay, Williams- Nay, Ericson- Aye, Kelzenberg- Aye, Wyckoff- Aye, Murzyn- Aye. Motion Carried. Resolution 2004-09~ Approving an Inter-Fund Loan for Burger Kine Streetar stated Resolution 2004-09 is a resolution approving an Inter-Fund Loan to purchase Burger King in the amount of $800, O00 from the City to the EDA with funding coming from Fund 290 and 410, subject to City Council approval to provide the loan. The loan could be repaid from proceeds from land sales, tax increments generated from a future project, or other sources available to the EDA. Motion by Ericson, seconded by Wyckoff, to waive the reading of Resolution 2004-09, there being an ample amount of copies available to the public. All ayes. Motion Carried. Motion by Ericson, seconded by Wyckoff, to Adopt Resolution 2004-09, a Resolution Approving a loan for $800,000 from the City of Columbia Heights to the Columbia Heights Economic Development Authority for the purchase of a property located at 3939 Central Avenue with funding to come from Funds 290 and 410, subject to the City Council's approval to provide the loan in the same amount and under the same terms. Upon Vote: Jindra-Aye, Nawrocki- Nay, Williams- Nay, Ericson- Aye, Kelzenberg- Aye, Wyckoff- Aye, Murzyn- Aye. Motion Carried Asbestos Abatement Change Order for NEI Building Schumacher stated the demo is going well. Originally when the bid came in from Southern Minnesota Environmental for the asbestos removal, staff wasn 't able to access the property, so the bid was submitted by square footage. Once the asbestos removal began the contractors found more hazardous materials that needed to be removed prior to demolition of the building. Staff received three change orders to the original bid: Change Order #1 was for vermiculite removal in the amount of $11,300; #2 was for transite panels in the fan room in the amount of Economic Development Authority Special Meeting Minutes September 21, 2004 Page 3 of 5 $5,071.50; and #3 was for sink fire doors, more transite panels and vermiculite in the amount of $3, 555.00. The state preformed three inspections during the removal period. Stacie Kvilvang from Ehlers & Associates stated Southern Minnesota Environmental has sent another change order for some additional piping, which we are denying, based on our contract as they failed to notify the City prior to removal. Motion by Kelzenberg, seconded by Ericson, to Approve the change orders submitted by Southern Environmental Technologies Inc. for additional vermiculite removal in the amount of $11,300, additional transite panels in the fan room in the amount of $5,071.50 and removal of sink, fire doom, transite panels and vermiculate in the amount of $3,555.00. These change orders shall be funded by surplus, reallocated Community Development Block Grant dollars from project number 327, the sale of 4607 Tyler Street program income. All ayes. Motion Carried. Resolution 2004-10~ Authorizing Condemnation by Quick Take for 322 40th Schumacher stated staff made every attempt possible to purchase the property at 322 40th avenue with no prevail, an appraisal was conducted by the City, staff waited until Anoka County appraised the property per the owners request. Dan Wilson, Wilson Development met with the owner today. The owner agreed to $225,000 purchase price but had to check with his wife, so at this time he still hasn't signed an agreement. With the $150,000 CDBG funding for the purchase, we need to close on this deal soon or loose the funding. Murzyn, Jr. asked what is a quick take. Schumacher stated it guarantees we get the property. Ericson stated they could adopt the resolution for the quick take tonight and abandon it at anytime, if the owner gives us a purchase agreement. Williams excused himself from the decision, as he is one of the Partners involved in redevelopment of the site. Motion by Kelzenberg, seconded by Nawrocki, to waive the reading of Resolution 2004-10, there being an ample amount of copies available to the public. All ayes. Motion Carried. Motion by Kelzenberg, seconded by Nawrocki, to Adopt Resolution 2004-10, a Resolution authorizing Condemnation by Quick Take for the property located at 322 40th Avenue NE (PIN #35-30-24-31-0118) for redevelopment purposes. Upon Vote: Jindra-Aye, Nawrocki- Nay, Ericson- Aye, Kelzenberg- Aye, Wyckoff- Aye, Murzyn- Aye. Motion Carried. Contract with Maxfield Research~ Inc. to perform a Demand Analysis Streetar stated the City Council, EDA and residents have all talked about the need for a Community/Recreation Center. Maxfield Research Inc is proposing to perform a Demand Analysis, which would analyze existing facilities, look at other amenities in the area and specify the number of gymnasiums needed in Columbia Heights. The analysis would take 45 days, at a total amount of $7,000. The Sports Busters have agreed to pay $2,000; the school board is meeting tonight to vote on putting in $1,000, which would make the City's portion $1,000. Local residents, Schumacher and Streetar can work with Maxfield to develop the analysis. Economic Development Authority Special Meeting Minutes September 2 l, 2004 Page 4 of 5 Nawrocki asked who is Maxfield Research and did they have any comments as to the location for the facility. Streetar stated they are the ftrm that did the Mady's study, Columbia Heights Housing Study, Anoka County Housing Study, he has used the ftrm when he was in Minnetonka and Oakdale and that Maxfteld stated they felt the NE! site was a better site and easier to access than Huset Park. Resident, Sue Genosky, stated she is spearheading getting a Recreation Center in Columbia Heights, stressed the need for gyms, whether or not the Crock Recreation Center is built or not, the study will be very important in the determination, and provided the board with a copy of the minutes from the Booster Club minutes stating they will provide $2, O00 for the analysis. Williams stated after going to the School Board meeting he felt they weren't interested in the project. Ericson stated she also attended the meeting and understood the people there night weren't willing to pay for the facility and that she hopes a study like this would help determine who would use the center. Resident, Aurora Johnston, stated the analysis will not be biased and would tell us what we really need to know. Motion by Ericson, seconded by Wyckoff, to Approve the Contract with Maxfield Research, Inc. to perform a Demand Analysis for a Community and Recreational Center in Columbia Heights; and furthermore, to authorize the President and Executive Director to enter into an agreement for the same. All ayes. Motion Carried. ADMINISTRATIVE REPORTS Apache Medical Building, Streetar stated the owners of the Apache Medical Building are interested in building a facility in Columbia Heights and has set up a meeting to discuss this with them. 4232 Madison Street Streetar stated this is the Lonsky property, which the Planning and Zoning Commission denied a lot split at their meeting this month. The property is basically not buildable. Staff contacted GMHC, which determined they could tear down the home and sell it for $240,000, but there would be a gap between it of $60, 000. GMHC will contact MHFA for possible assistance. Streetar stated the home just south of it could possibly be purchased and the lots combined for redevelopment. Nawrocki asked what the address of the other home to the south was. Streetar stated he wasn't sure, but Bakken would call him with the correct address tomorrow. Wyckoff Jindra and Williams also ask for the property address. Hilltop Streetar stated Fehst, Wyckoff and himself attended a Hilltop City Council Meeting were they stated they have applied and received a grant for $25,000 to redevelop the 47th to 49th block of Central Avenue. Economic Development Authority Special Meeting Minutes September 21, 2004 Page 5 of 5 City Planner Streetar stated the City has received a number of applications for the position and may upgrade the position to do some of the things with redevelopment that he and Schumacher currently do. He will be coming before City Council to discuss hiring a full time planner that could do this type of work. Next week there will be a planner coming in three days a week to assist the department. Building Official Streetar stated we have only received two applications for the position, which neither one are qualified for our needs. With all of the new developments coming up in Columbia Heights staff has been talking to other cities about the possibility of combining services. MGS Building $chumacher stated there is an illegal use church in the MGS building that has also put up two illegal signs. The City Planner will be sending out a certified letter to the owners of the property in this regard. Walker ElderCare Streetar stated he met with Denny O'Donnell from Walker ElderCare this week, as they are interested in putting a senior wellness center on part of the NEI site. Staff will continue discussions and inform the board as ideas develop. Nawrocki stated the resident at 1141 Cheery Lane contacted him with concerns that his property is falling down into the Kmart property and asked who he should contact. Streetar stated Jim Mollenaro is the City contact, has talked to Kevin Hansen on this matter already and public works will be addressing the issue with our engineers. Nawrocki stated: 1) he received a call from a Parkview Villa resident concerned that the air conditioning was turned off, which effected her asthma; and 2) heard that the phone was taken out of the elevator and residents are getting trapped in there until someone hears them pounding on the doors. Streetar stated Welke was contacted by staff about the air conditioning problem of which she stated it was turned down but as soon as she came it, she turned it up and with the elevator phone issue, staff will contact Welke to have this corrected. The board directed staff to contact Welke to install a phone that residents can call 911 from for medical emergencies and an elevator emergency number to dial for when they are stuck in the elevator. ADJOURNMENT President, Murzyn, Jr., adjourned the meeting at 9:15 p.m. Respectfully submitted, Cheryl Bakken Community Development Secretary H:~EDAminutes2004X9-21-2004 ECONOMIC DEVELOPMENT AUTHORITY (EDA) SPECIAL MEETING MINUTES Monday, September 27, 2004 CALL TO ORDER/ROLL CALL President, Murzyn called the meeting to order at 7:04 p.m. Present: Don Murzyn Jr., Patricia Jindra, Julienne Wyckoff, Bobby Williams and Bruce Nawrocki, Tammera Ericson, and Bruce Kelzenberg PLEDGE OF ALLEGIANCE ITEMS FOR CONSIDERATION $chumacher requested Resolutions 2004-12 and 13 be tabled until next month as some information was left out of the Tax Increment Financing Plan and stated he will be requesting the same at the City Council meeting along with the public hearing. Resolution 2004-13~ Modification to the Downtown Revitalization Plan for the CBD Redevelopment Project and Establishment of the Huset Park Area TIF Plan and Resolution 2004-12~ Eliminating Parcels from K2 TIF Motion by Williams, seconded by Kelzenberg, to table items 3-A and 3-B until October. All ayes. Motion Carried. Resolution 2004-11~ Approving Contract for Private Redevelopment Schumacher stated this resolution is to approve a contract with $chafer Richardson for redevelopment of the Industrial Park. November 1st the Phase II clean up grant application is due to the state, of which they won't approve until a redevelopment contract is in place. Steve Bubul, Kennedy & Graven, Chartered outlined some of the important parts of the Contract. There is approximately 28 acres to be developed, 80% of the project or approximately 450 units would have to be done before the developer would become eligible to receive TIF funds, the EDA will be reviewing the development plans prior to construction, the developer needs to acquire aH of the properties by October 31st or will come to the City for help with condemnation, if the contract is approved 80% of the project costs would come from the developer and 20%from City funding, the EDA would approve every sub-developer when properties are sold off, the City's cost for the parkway is approximately $1.4 million, with $1.2 million funded from state aid and $1.677 million coming from the developer. The Tax Increment Financing is based on a Pay-as- you-go program, which is where the developer buys all the properties, develops the land and in this case will be asking the City to receive approximately $8 million in funding, Nawrocki stated: 0 he does not intend to support the project, as it should be in City Council hands not the EDA as the meetings don't get to residents; 2) he asked to have it stated in the agreement that all housing is to be owner-occupied and was told the developer could not agree to this at that point; 3) with cut backs in City funds, increased utility rates, and staff cuts, we should wait on this project. Murzyn, Jr. asked Nawrocki what he meant by the EDA not getting information out. Nawrocki stated that isn't what he meant. He meant the EDA meetings are not televised so residents don't Economic Development Authority Special Meeting Minutes September 27, 2004 Page 2 of 2 hear about what we are discussing until it goes to City Council. $chumacher stated these items are on both the EDA and City Council agendas and that the City Council is the governing body. Ericson stated if Nawrocki is concerned the EDA meetings aren't televised we could certainly start televising them, however we would have trouble with the four times a year our meetings are held following the HRA meetings at Parkview Villa. Wyckoff stated if we do that we should televise all EDA meetings, not just for this development project. Motion by Wyckoff, seconded by Ericson, to waive the reading of Resolution 2004-11, there being an ample amount of copies available to the public. All ayes. Motion Carried. Motion by Wyckoff, seconded by Ericson, to Adopt Resolution 2004-11, a Resolution Approving a Contract for Private Redevelopment between the Columbia Heights Economic Development Authority, the City of Columbia Heights and Schafer Richardson, Inc. or a related entity; and furthermore, to authorize the President and Executive Director to enter into an agreement for the same. All ayes. Motion Carried. Wyckoff asked for clarification of "or a related entity". Bubul stated this is limited liability and Schafer Richardson will be one of the owners. Brad Schafer stated he is the chief owner of Schafer Richardson Inc, a related entity and will be an actual partner in the entity. Nawrocki stated entities are used to transfer some of the liabilities of the project. Bubul stated this is true and that is why we have control over the TIF financing, were we can withhold TIF funds to the developer if the project does not get built per your specifications. ADJOURNMENT Motion by Nawrocki, seconded by Ericson, to adjourn the meeting at 7:50 p.m. All ayes. Motion Carried. Respectfully submitted, Cheryl Bakken Community Development Secretary H:~EDAminutes2004\September 27, 2004 Spec. ECONOMIC DEVELOPMENT AUTHORITY (EDA) SPECIAL MEETING MINUTES OCTOBER 25, 2004 CALL TO ORDER/ROLL CALL President, Murzyn called the meeting to order at 6:31 p.m. Present: Don Murzyn Jr., Patricia Jindra, Julienne Wyckoff, Bobby Williams and Bruce Nawrocki, Tammera Ericson, and Bruce Kelzenberg PLEDGE OF ALLEGIANCE ITEMS FOR CONSIDERATION Resolution 2004-13~ Modification to the Downtown Revitalization Plan for the CBD Redevelopment Prolect and Establishment of the Huset Park Area TIF Plan Schumacher stated this is the last action to be taken prior to the demolition and removal of contaminated soil in the industrial park. Once the Tax Increment Financing Plan and the elimination of the parcels from the MURP district to the new district is approved, staff will take the item to City Council for approval of the grant application for the removal of the Honeywell and Rayco buildings and clean up of the soil. As you know the rezoning of the property has taken place, the comprehensive plan has been amended, the environmental assessment worksheet has been approved, the moratorium has been removed and the Schafer Richardson Development Agreement has been completed. Mark Ruff, Ehlers & Associates Inc. stated the process they followed for the Tax Increment District included notifying the County and School District to review the plan and giving them 30 days notice of the Public Hearing with just positive comments being received, the public hearing notice was published and documents were available to review for weeks. One of the documents in the TIF plan is the redevelopment eligibility assessment study preformed by S.E.H. State law requires an attempted inspection on the buildings in the tax increment district, which all but two were inspected, with only two meeting substandard qualifications. The TIF plan lays out a maximum in terms of budget and the length of the TIF district. Under state law the district can go up to 26years, but we don't anticipate it going that long and if everything works out with the developers budget and the grant from the state, it is anticipated the district could be as short as 11 to 12years. Keep in mind the EDA approved a development agreement a few weeks ago that states the number of years couM increase if the costs are higher and the developer would have to share the costs. The district sets a maximum budget of $12 million but with current rates we are looking at $8 million in tax increment assistance. The $12 million of tax increment, compared with the project cost of $125 million wouM make the tax increment about 10%, which is very good for a project of this size. Williams asked how much the developer pays of the cost over the 12 years. Ruff stated in the development agreement it states that if there were increased costs, the developer would pay 20% and 80% would be the tax increment share for certain costs, not everything, which kicks in at the time the total budget is established. Wyckoff stated she understood the development agreement covers all three phases, does the TIF plan cover ali three phases. Ruff stated it did. Economic Development Authority Meeting Minutes October 25, 2004 Special Page 2 of 3 Ruff stated in previous days we would set up a plan with the exact amount of TIF we assume to give the developer. Then the state auditor said if you ever exceed that budget you have to go back and modify the TIF plan, which takes time and money. So most public entities find it much easier to pass a tax increment plan that has a budget, which is much higher than what we intend to spend. The City could then use some of this additional income stream for other projects in the City, without modifying the TIF plan. Nawrocki asked under Use of Funds, what is not applicable in this project. Ruff stated each of the categories are applicable to this project, each category has a higher estimate than what is currently proposed in the development agreement, which was listed in an addendum to the agreement the EDA approved last month. Nawrocki stated on page 7, two ways to compute fiscal disparities what is B. Ruff stated the City and EDA have a choice to pick the fiscal disparities from inside the district or outside the district. The plan identifies the use of plan A, which would collect fiscal disparities from commercial property inside the district at a total of $6,500 per year. Ruff stated 1) the developer doesn't have any incentive to spend more money, because they have to finance it and want to get the development finished as quickly as possible, just like the city is; and 2) there are a lot of uncertainties, so we came to the agreement with the developer to estimate low on the costs, but let them know if the costs go over that amount, we would have to come back and modify the district. Fehst stated with this we have no risk up front. Williams stated by giving this much leeway would they have less incentive to produce. Ruff stated TIF does not drive the developer, what drives them is what they can get built and the flexibility in the development agreement to get that. If you truly want to reduce the budget, we would have to go back to the development agreement, as that is what drives the development. Fehst stated the developer can't make more than his 15%profit on the development and does not get paid until the third phase of the project is complete. Nawrocki stated he does not believe this is the greatest project to come to Columbia Heights. If it worked for 12 years, but we have 20years to capture the money, there won't be any increase in funds for extra police, -fire, city staff and school district costs, but all taxpayers will have to pay more taxes to pay for these extra services, is still concerned with the high density of housing and wants to see documentation the development will be all owner occupied housing. Ruff stated the school district would receive revenue of the development from the operating levy. Williams asked with the estimated $8 to $12 million, for the 10 to 12years the City would start to obtain tax increment after 5 years. Ruff stated 1) after 12 years it is the EDA and City's choice on the tax increment, not the developer and 2) in 5 years, if we find the development is not going to be done you have the choice to extend the tax increment beyond the 12 years, but this must be done within 5 years per state statue. Fehst stated there is up to lO%for administrative staff costs in the TIF plan, which with all the future developments, staff can easily utilize. The current taxes received in the development area Economic Development Authority Meeting Minutes October 25, 2004 Special Page 3 of 3 is hardly anything and the question Mr. Nawrocki is addressing on owner-occupied housing will be the ultimate decision of the Planning and Zoning and City Council prior to anything being developed. Motion by Ericson, second by Wyckoff, to Adopt Resolution 2004-13, a Resolution Adopting a Modification to the Downtown Revitalization Plan for the CBD Redevelopment Project and Establishment of the Huset Park Area TIF Plan. Upon Vote: Jindra- Aye, Nawrocki- Nay, Ericson- Aye, Kelzenberg- Aye, Williams- Aye, Wyckoff- Aye, Murzyn, Jr.- Aye. Motion Carried. Resolution 2004-12~ Eliminating Parcels from K2 TIF District Ruff stated this Resolution is to take the properties out of the K2 district and put them into the new district you have just established for the development. Tax increment was set up in 1989for the industrial park under the MURP district, which no activity occurred in the area, so the area fell out of the district and have been on the tax rolls since approximately 1994per state law. Technically we need to acknowledge the parcels and eliminate them from the MURP district and place them in the new TIF district being established tonight. Motion by Williams, second by Kelzenberg, to Adopt Resolution 2004-12, a Resolution Approving the Elimination of Parcels fi.om the TIF 4 Multi Use Redevelopment Project (MURP) K2 Tax Increment Financing District within the Central Business District Redevelopment Project in the City of Columbia Heights. All ayes. Motion Carried. ADJOURNMENT Motion by Williams, second by Ericson to adjourned the meeting at 7:17 p.m. All ayes. Motion Carried. Respectfully submitted, Cheryl Bakken Community Development Secretary H:XEDAminutes2004\October 25, 2004 Spec. COLUMBIA HEIGHTS ECONOMIC DEVELOPMENT AUTHORITY (EDA) Meeting of: November 16, 2004 AGENDA SECTION: Consent Agenda ORIGINATING EXECUTIVE NO: DEPARTMENT: EDA DIRECTOR APPROVAL ITEM: Financial Report and Payment of Bills BY: Robert Streetar BY: DATE: November 9, 2004 BACKGROUND: The bound Financial Report for the month of September and October 2004 draft Resolution 2004-14 is attached for review. The enclosed Financial Report lists the Summary (white), the Check History (Green), the Expenditure Guideline with Detail (blue) and Revenue Guideline with detail (yellow) for each fund and department and the Parkview Villa North and South financials (white). The reports cover the activity in the calendar (fiscal) year from January 1 through October 31, 2004. RECOMMENDATION: Staff will be available to answer specific questions. If the report is satisfactorily complete, we recommend the Board take affirmative action to receive the Financial Report and approve the payment of bills. RECOMMENDED MOTION: Move to approve Resolution 2004-14, Resolution of the Columbia Heights Economic Development Authority (EDA) approving the Financial Statement and Payment of Bills for the month of September and October 2004. EDA ACTION: H:\EDAConsent2004\Sept.October Fin Rep 2004 EDA RESOLUTION 2004-14 RESOLUTION OF THE COLUMBIA HEIGHTS ECONOMIC DEVELOPMENT AUTHORITY (EDA) APPROVING THE FINANCIAL STATEMENT FOR SEPTEMBER AND OCTOBER 2004 AND PAYMENT OF BILLS FOR THE MONTHS OF SEPTEMBER AND OCTOBER 2004. WHEREAS, the Columbia Heights Economic Development Authority (EDA) is required by Minnesota Statutes Section 469.096, Subd. 9, to prepare a detailed financial statement which shows all receipts and disbursements, their nature, the money on hand, the purposes to which the money on hand is to be applied, the EDA's credits and assets and its outstanding liabilities; and WHEREAS, said Statute also requires the EDA to examine the statement and treasurer's vouchers or bills and if correct, to approve them by resolution and enter the resolution in its records; and WHEREAS, the financial statement for the month of September and October 2004 and the list of bills for the month of September and October 2004 are attached hereto and made a part of this resolution; and WHEREAS, the EDA has examined the financial statement and the list of bills and finds them to be acceptable as to both form and accuracy. NOW, THEREFORE BE IT RESOLVED by the Board of Commissioners of the Columbia Heights Economic Development Authority that it has examined the attached financial statements and list of bills, which are attached hereto and made a part hereof, and they are found to be correct, as to form and content; and BE IT FURTHER RESOLVED the financial statements are acknowledged and received and the list of bills as presented in writing are approved for payment out of proper funds; and BE IT FURTHER RESOLVED this resolution and attachments are to be made a part of the permanent records of the Columbia Heights Economic Development Authority. Passed this day of ,2004. MOTION BY: SECONDED BY: AYE S: NAY S: President- Don Murzyn, Jr. Attest by: Cheryl Bakken, Assistant Secretary H:~Resolufions2004\EDA2004-14 COLUMBIA HEIGHTS ECONOMIC DEVELOPMENT AUTHORITY (EDA) Meeting of November 16, 2004 AGENDA SECTION: Items for Consideration. ORIGINATING EXECUTIVE NO: 4-A DEPARTMENT: EDA DIRECTOR APPROVAL ITEM: Adopt Resolution 2004-15 and BY: Robert Streetar BY': Resolution 2004-16, 2005 Budget DATE: November 9, 2004 BACKGROUND: This memorandum provides an overview of the proposed 2005 Economic Development Authority (EDA) 2005 budget. The focus of the EDA since 2002 has been redevelopment of specific areas and the improvement of the housing stock. Staff will provide a brief presentation at the November 16 meeting. The EDA proposed budget for 2005 is $223,790. The budget allows the continued implementation of the EDA's priorities related to redevelopment, and housing. The EDA raises the $223,790 through two separate levies, which use two different rates, multiplied by the City's taxable value. Rate Levy Amount .01813 $62,424 .0144 $161,366 TotalLevy $223,790 The EDA must: 1. Pass a resolution approving and recommending the EDA Budget of $223,790 and a levy of $62,424, to the City Council for approval. 2. Pass a resolution approving and levying, subject to City Council approval, the special benefit levy of $161,366. RECOMMENDED MOTION: Move to adopt EDA Resolution 2004-15, being a Resolution of the Columbia Heights EDA adopting the 2005 Budget of $223,790 and a levy of $62,424 and recommending this budget and levy to the City Council for approval. RECOMMENDED MOTION: Move to adopt EDA Resolution 2004-16, being a Resolution of the Columbia Heights EDA approving and levying $161,366, subject to approval by the City Council. EDA ACTION: H:\Consent 2004\EDA Budget Resolutions ECONOMIC DEVELOPMENT AUTHORITY IN AND FOR COLUMBIA HEIGHTS EDA RESOLUTION 2004-15 RESOLUTION OF THE ECONOMIC DEVELOPMENT AUTHORITY IN AND FOR COLUMBIA HEIGHTS (EDA) ADOPTING A BUDGET AND SETTING THE EDA LEVY. BE IT RESOLVED By the Columbia Heights Economic Development Authority (EDA) of Columbia Heights, Minnesota as follows: WHEREAS, the Columbia Heights City Council established the Columbia Heights Economic Development Authority January 8, 1996 pursuant to Minnesota Statutes 469.090 to 469.1081; and WHEREAS, the City Council has given to the EDA the responsibility for all development and redevelopment projects and programs; and WHEREAS, the EDA is authorized under State Statutes, Section 469.107 to levy a tax on its area of operation for the purposes authorized under State Statues 469.090 to 469.1081, subject to consent by the City Council. NOW, THEREFORE BE IT RESOLVED BY THE HRA FOR THE CITY OF COLUMBIA HEIGHTS, MINNESOTA THAT: 1. The EDA adopts and recommends to the City Council for approval a budget of $223,790 for year 2005. 2. The EDA adopts and recommends to the City Council for approval a levy of $62,424 for year 2005. The Executive Director is instructed to transmit a copy of this resolution to the City Manager and Finance Director/City Clerk of the City of Columbia Heights, Minnesota. APPROVED THIS MOTION BY: SECONDED BY: ROLL CALL: AYES: NAYS: DAY OF ,2004. Attest by: Walter R. Fehst, Executive Director Don Murzyn, Jr., President COLUMBIA HEIGHTS ECONOMIC DEVELOPMENT AUTHORITY RESOLUTION NO. 2004-16 AUTHORIZING THE LEVY OF A SPECIAL BENEFIT LEVY PURSUANT TO MINNESOTA STATUTES, SECTION 469.033, SUBDIVISION 6 AND APPROVAL OF A BUDGET FOR FISCAL YEAR 2005 WHEREAS, pursuant to Minnesota Statutes, Section 469.090 to 469.1081 ("EDA Act") the City of Columbia Heights ("City") created the Columbia Heights Economic Development Authority (the "EDA"); and WHEREAS, pursuant to City Resolution 2001-62 and Ordinance No. 1442, the City Council granted to the EDA all powers and duties of a housing and redevelopment authority under the provisions of Minnesota Statutes, Sections 469.001 to 469.047 (the "HRA Act"), except certain powers that are allocated to the Housing and Redevelopment Authority in and for the City of Columbia Heights (the "HRA"); and WHEREAS, Section 469.033, Subdivision 6, of the HRA Act permits the EDA and HRA, together, to levy and collect a special benefit levy of up to .0144 percent of taxable market value in the City upon all taxable real property within the City; and WHEREAS, the EDA desires to levy a special benefit levy in the amount of .0144 percent of taxable market value in the City; and WHEREAS, the EDA understands that the HRA does not expect to levy a special benefit tax for fiscal year 2005; and WHEREAS, the EDA has before it for its consideration a copy of a budget for its operations for the fiscal year 2005 and the amount of the levy for collection in 2005 shall be based on this budget. NOW, THEREFORE, Be It Resolved by the Board of Commissioners of the Columbia Heights Economic Development Authority: 1. The budget of $223,790 for the operations of the EDA presented for consideration by the Board of Commissioners of the EDA is hereby in all respects approved. Such budget includes the amount the EDA requests (by separate resolution) to be levied by the City under Minnesota Statutes, Section 460.107, together with the amount to be levied hereunder by the EDA under Minnesota Statutes, Section 469.133, subdivision 6. 2. Staff of the EDA are hereby authorized and directed to file the budget with the City in accordance with Minnesota Statutes, Section 469.033, Subdivision 6. SJB-236025vl CL205-3 3. There is hereby levied, subject to the approval of the City Council of the City, a special benefit levy pursuant to Minnesota Statutes, Section 469.033, Subdivision 6, in the amount equal to the lesser ora levy at a rate of .0144 percent of taxable market value in City, or $161,366 with respect to taxes payable in calendar year 2005. 4. Staff of the EDA are hereby authorized and directed to seek the approval by resolution of the City Council of the City of the levy of special benefit taxes in 2005 and to take such other actions as are necessary to levy and certify such levy. Motion made this Attest by: __dayof ,2004. Walter R. Fehst, Executive Director Don Murzyn, Jr., President SJB-236025vl 2 CL205-3 City of Columbia Heights 2005 Budget work sheet Department Proposed Fund Fund Actual Actual Adopted Department Manager Department Department Expense Expense Budget Proposed Proposed Line Item Line Item 2002 2003 2004 2005 2005 COMMUNITY DEVELOPMENT FUND - - COMMUNITY'DEVELOPMENT ADMIN - - PERSONAL SERVICES - - 201.46310.1000 ACCRUED SALARIES - _ 201.46310.1010 REGULAR EMPLOYEES 130,884 168,650 172,089 185,129 185,129 201.46310.1011 PART-TIME EMPLOYEES 3,641 - 17,160 201.46310.1012 SEASONAL EMPLOYEES 28,307 - - 201.46310.1020 OVERTIME-REGULAR 997 866 2,000 2,000 2,000 201.46310.1021 OVERTIME-PART-TIME .... 201.46310.1030 VACATION & SICK 3,136 6,248 - - 201.46310.1050 SEVERANCE PAY .... 201.46310.1070 INTERDEPARTMENTAL LABOR SERV 1,013 - - 201.46310.1080 INTERDEPARTMENTAL LABOR CR (75,350) (93,066) (62,008) (53,413) (53,413) 201.46310.1210 P.E.R.A. CONTRIBUTION 8,852 9,285 10,577 10,348 10,348 201.46310.1215 DEFERRED COMP CONTRIBUTION - _ 201.46310.1220 F.I.C.A. CONTRIBUTION 12,717 13,227 14,630 14,315 14,315 201.46310.1225 FLEX BENEFIT FICA - _ _ 201.46310.1300 INSURANCE 12,588 13,335 19,260 19,980 19,980 201.46310.1400 UNEMPLOYMENT COMPENSATION - 201.46310.1510 WORKERS COMP INSURANCE PREM 1,150 1,079 2,008 1,944 1,944 201.46310.1700 ALLOCATED FRINGE 506 - 201.46310.1800 INTERDEPARTMENTAL FRINGE CR (37,675) (46,533) (30,958) (26,665) (26,665) TOTALS: PERSONAL SERVICES 90,768 73,091 144,758 153,638 153,638 851 1,283 1,029 158 356 SUPPLIES 201.46310.2000 OFFICE SUPPLIES 201.46310.2010 MINOR EQUIPMENT 201.46310.2011 COMPUTER EQUIPMENT 201.46310.2020 COMPUTER SUPPLIES 201.46310.2030 PRINTING & PRINTED FORMS 201.46310.2160 MAINT. & CONSTRUCT MATERIALS 201.46310.2171 GENERAL SUPPLIES 201.46310.2175 FOOD SUPPLIES 201.4631.0.2280 VEHICLE PARTS 325 317 851 851 84 100 1,283 1,283 566 1,029 1,029 199 158 158 305 356 356 154 30 453 453 453 13 28 201.46310.2282 GAS, OIL, LUBRICANTS 42 59 119 119 119 TOTALS: SUPPLIES 1,489 732 4,249 4,249 4,249 OTHER SERVICES & CHARGES - 201.46310.3041 ATTORNEY FEES-CIVIL PROCESS - 7,918 3,000 3,000 201.46310.3050 EXPERT & PROFESSIONAL SERV. 3,321 2,413 23,549 27,623 27,623 201.46310.3105 TRAINING & EDUC ACTIVITIES 347 1,741 2,846 2,500 2,500 201.46310.3120 EDUCATIONAL REIMBURSEMENT - - 201.46310.3210 TELEPHONE & TELEGRAPH 3,083 2,794 3,424 1,828 1,828 201.46310.3220 POSTAGE 426 426 791 809 809 201.46310.3250 OTHER COMMUNICATIONS - - 201.46310.3310 LOCAL TRAVEL EXPENSE - 99 615 615 201.46310.3320 OUT OF TOWN TRAVEL EXPENSE 390 - 515 201.46310.3410 ADVERTISING EMPLOYMENT - - 201.46310.3430 ADVERTISING OTHER - - - 201.46310.3500 LEGAL NOTICE PUBLISHING - 475 475 475 City of Columbia Heights 2005 Budget work sheet Department Proposed Fund Fund Actual Actual Adopted Department Manager Department Department Expense Expense Budget Proposed Proposed Line Item Line Item 2002 2003 2004 2005 2005 201.46310.3600 201.46310.3810 201.46310.3820 201.46310.3830 201.46310.3840 201.46310.3850 201.46310.4000 201.46310.4050 201.46310.4100 201.46310.4200 201.46310.4300 201.46310.4330 201.46310.4342 201.46310.4374 201.46310.4376 201.46310.4380 201.46310.4390 201.46310.4395 201.46310.4500 201.46310.4600 201.46310.4700 201.46310.4800 201.46310.5110 201.46310.5120 201.46310.5170 201.46310.7100 201.46310.7200 201.46310.7280 INSURANCE & BONDS 1,929 2,507 9,373 ELECTRIC WATER _ GAS _ _ REFUSE . . SEWER - _ REPAIR & MAINT. SERVICES 1,904 1,874 6,334 GARAGE, LABOR BURD .... RENTS & LEASES 37 25 - PROGRAM ACTIVITIES - - - MISC. CHARGES - - _ SUBSCRIPTION, MEMBERSHIP 49 301 269 PROPERTY DAMAGE - - EMPLOYEE RECOGNITION - MISCELLANEOUS CiViC AFFAIRS - COMMISSION & BOARDS - 1,425 TAXES & LICENSES - 1,834 STATE SALES TAX 181 143 603 ADMINISTRATIVE EXPENSES - LOANS & GRANTS CREDIT INVESTIGATION COLLECTION LOSSES TOTALS: OTHER SERVICES & CHARGE 11,667 12,224 59,455 CAPITAL OUTLAY LAND BUILDING & IMPROVEMENT 475 OFFICE EQUIPMENT TOTALS: CAPITAL OUTLAY 475 OTHER FINANCING USES OPER. TRANSFER OUT - LABOR TRANSFER OUT TO CDBG TRANSFER OUT TO CAP PROJ TOTALS: OTHER FINANCING USES TOTALS: COMMUNITY DEVELOPMENT A TOTALS: COMMUNITY DEVELOPMENT FU GRAND TOTALS: 4,287 4,287 3,000 3,000 5OO 1,425 1,835 500 48,397 5OO 1,425 1,835 500 48,397 5,913 8,113 13,712 17,506 17,506 109,837 94,159 222,649 223,790 223,790 109,837 94,159 222,649 223,790 223,790 109,837 94,159 222,649 223,790 223,790 5,913 8,113 13,712 17,506 17,506 COLUMBIA HEIGHTS HOUSING AND REDEVELOPMENT AUTHORITY Meeting of November 16, 2004 AGENDA SECTION: Items for Consideration ORIGINATING DEPAR~-MENT: EXECUTIVE NO: 4-B Community Development DIRECTOR APPROVAL ITEM: Adopt Resolution 2004-17, Approving the BY: Robert Streetar BY: Consulting Services Agreement, with the Greater DATE: November 9, 2004 Metropolitan Housing Corporation (GMHC), which includes services from the Housing Resource Center and the Rehab Incentive Program for 2005 Introduction: Staff proposes the Columbia Heights Economic Development Authority (EDA) approve a Consultant Services Agreement with the Greater Metropolitan Housing Corporation (GMHC) to provide housing services to Columbia Heights residents for the 2005 calendar year. Services include access to the Housing Resource Center, and the Rehabilitation Incentive Account. These services promote goal 3 "Improve the City's Housing Stock" ,one of five goals established in August 2004. Background: In 2002, 2003 and 2004 the EDA and GMHC entered into a partnership to provide the residents of Columbia Heights with a variety of housing services to help maintain and improve their homes. These services are listed in section lA Scope of Services in the attached Consultant Services Agreement. Many residents have taken advantage of these services and found them to be of great value. The results of this very productive partnership include: Rehab Incentive Account Proqram · Assisted 25 households with $395,500 of home improvements. See attached results. Housinq Resource Center MHFA Fix Up Fund (11 Loans) Construction Consultation-Calls · Construction Consultation-I nspections · Construction Consultation-Scopes · · Homebuyer Information · Mortgage Foreclosure Prevention Assistance · Home Improvement Information $188,273 178 75 53 6 1 296 Proposal: Staff recommends the EDA fund the Housing Resource Center and the Rehabilitation Incentive Program. Funding is available from the Fund 235, which are fund remaining from the sale of 4607 Tyler. Service Housing Resource Center Rehabilitation Incentive Program Total Investment $15,000 $35,000 $50,000 Source Fund 235 Fund 235 The Consultant Services Agreement begins 1/1/2005 and ends 12/31/2005, and can be terminated by either party with 30 days notice. See attached agreement for further details. Carolyn Olson, CEO of GMHC, and Jennifer Bergman, Housing Resource Center Coordinator will be present at the November 16th meeting to answer questions. Recommendation: Staff recommends the Adoption of Resolution 2004-17, Approving the Consultant Services Agreement with the Greater Metropolitan Housing Corporation (GMHC), which includes funding the Housing Resource Center and the Rehab Incentive Program for 2005. Recommended Motion: Move to Adopt Resolution 2004-17, Approving the Consulting Services Agreement with the Greater Metropolitan Housing Corporation (GMHC), which includes funding the Housing Resource Center and the Rehab Incentive Program for 2005; and furthermore, to authorize the President and Executive Director to enter into an agreement for the same. EDA ACTION: h:\consent Form2004\EDA Res.2004-17 GMHC 2005 EDARESOLUTION NO. 2004-17 A RESOLUTION APPROVING THE CONSULTING SERVICES AGREEMENT AND ALLOCATING $50,000 FROM FUND 235; FUNDING THE HOUSING RESOURCE CENTER ($15,000) AND THE REHAB INCENTIVE PROGRAM ($35,000) TO THE GREATER METROPOLITAN HOUSING CORPORATION (GMltC) FOR 2005 WHEREAS, the Greater Metropolitan Housing Corporation has agreed to provide Consulting Services. WHEREAS, the Columbia Heights Economic Development Authority through its Comprehensive Plan has established as a goal the preservation of the single-family housing stock. WHEREAS, the Greater Metropolitan Housing Corporation has provided housing preservation services since 2002. WHEREAS, the residents have found these services to be a significant assistance to help preserve and maintain their homes. THEREFORE, BE IT RESOLVED, that the EDA allocates $50,000 from fund 235 for the Housing Resource Center ($15,000) and Rehab Incentive Account ($35,000) to Greater Metropolitan Housing Corporation. Passed this Offered by: Seconded by: Roll Call: __ day of ., 2004. Walter R. Fehst, Executive Director Don Murzyn, Jr. -President COLUMBIA HEIGHTS ECONOMIC DEVELOPMENT AUTHORITY COMMUNITY DEVELOPMENT DEPARTMENT CONSULTANT SERVICES AGREEMENT THIS IS AN AGREEMENT entered into the 16th day of November 2004 by and between the Columbia Heights Economic Development Authority hereinafter referred to as the EDA, and the Greater Metropolitan Housing Corporation of the Twin Cities (GMHC), a non-profit corporation organized and existing under the laws of the State of Minnesota, hereinafter referred to as the Consultant. WITNESSETH: WHEREAS, the EDA desires to hire the Consultant to render certain technical, professional, and marketing assistance in connection with such undertakings of the EDA. NOW THEREFORE, the parties hereto do mutually agree as follows: Scope of Services. The Consultant shall provide all the necessary technical rehabilitation advisory services, loan administration and fundraising for the Programs as follows: Ao Provide all Housing, Resource Center services to residents of the city of Columbia Heights out of its Northeast Minneapolis office with scheduled visits to Columbia Heights properties. These services include the following: 1) Provide building evaluations to residents; 2) Provide information on city building code, permit requirements and process; 3) Assist residents in preparing written scopes of work for renovation projects; 4) Provide construction cost information to residents; 5) Educate homeowners on the construction bid process; 6) Evaluate bids and work completed to ensure quality and cost effective renovations; 7) Monitor the construction process; and, 8) Assist residents with financing of projects. 9) Assisting First Time Home Buyers with training 10)GMHC through its Housing Resource Center will makes its new construction/housing rehabilitation program available to the city of Columbia Heights. 11) Administer city funded Rehab Incentive Program. Bo Assist the EDA staffin developing financing programs as requested by the EDA, as well as securing additional funding from the Minnesota Housing Finance Agency and the Metropolitan Council needed to implement all program elements. Term. This agreement shall be effective from January 1, 2005 and shall continue through December 31, 2005 and reviewed by August 1 of each successive year by the Consultant and the EDA for services for the following year. Compensation. The fees for service by the Consultant will be $15,000 for the Housing Resource Center, to be paid by February 15, and $35,000 for the Rehabilitation Incentive Program, to be paid when each rehabilitation applicant completes the rehabilitation project according to program requirements. The total to paid to GMHC will be $50,000. If the agreement is terminated by either party prior to December 31,2005, the EDA will be reimbursed a prorated amount of the $50,000 fee. This Agreement can be terminated by either party with a 30-day notice. IV. Insurance. During the term of this agreement, the Consultant shall obtain and maintain workers compensation, comprehensive general liability, and automobile liability insurance. Comprehensive general liability insurance shall have an aggregate limit of $2,000,000. Upon request by the EDA, the Consultant shall provide a certificate or certificates of insurance relating to the insurance required. go Indemnification. The parties shall indemnify and hold harmless each other and their officials, agents, and employees from any loss, claim, liability, and expense (including reasonable attorney's fees and expenses of litigation) arising out of any action of the respective parties in the performance of the service of this contract. VI. Assignment. This agreement shall not be assigned, sublet, or transferred without the written consent of the EDA. VII. Conflict of Interest. The Consultant agrees to immediately alert the Executive Director of possible contractual conflicts of interest in representing the EDA, as well as property owners or developers on the same project. Conflicts of interest may be grounds for termination of this Agreement. THIS AGREEMENT was adopted by the EDA on the 16 day of November 2004. COLUMBIAHEIGHTS ECONOMIC DEVELOPMENT AUTHORITY Its President- Don Murzyn, Jr. Its Executive Director- Walter R. Fehst WITNESSES: GREATER METROPOLITAN HOUSING CORPORATION of the Twin Cities, a non-profit Minnesota corporation Its President ra:. ,..ous nr tesource Center Fax 61.2-:378-7986 612-378-7985 909 Main Street NE, Minneapolis, MN 55412 Columbia Heights Rehab Incentive Program PROGRAM OVERVIEW AND GUIDE~NES :. ~ 'l-he Columbia Heights Rehab Incentive Program is designed to assist, homeowners [nthe city of Columbia Heights maintain and improve their current housing in order to foster stabilization and' revitalization by providing a rebate to homeowners afl:er an improvement has, been completed. Income Limits: gross annual income, from all sources jncol Up to $38,350 = 15% rebate $38,351 - $54,400 = 12% rebate payment $54,401 - $88,205 = 10% rebate payment within the,.~ollowing categories! i/'' Rebate Payment: The rebate payment wi be ~0%, 12%, or 15% of ~'ect cost de endin u on .... -.~ P ~ P g P household income (see above income limits) with a, maximum payment of $3,000~per househo d Home improvements done under a deferred loan or grant' ram will not.be ehg~ble for inclusion in the rebate program. ::~ ~ "' Ehg~ble Properties: Any si~l~mily dwelling (detached), or multi' y dwe lng which upon completion · . , :,~;-~ ~ .~,~,~,' ,% . . . ',f . ,<~ will be converted to a smgl~ifamfly fioBs~ng umt wEh~n th~ Qty of Columbia Heights Single family inc udes owner occupied duplexe~.~!?,~hab Ince~0.tlve Funds can~be used for townhouses and condomlmums or ~nd~v~dual ,ntenor repairs ONLY;,i!~ ~.~, ,, Ineliqible Improvements: Thi~ inclUdes recreational or'luxury improvements, projects not permanent in nature, working capital;payment for 'Owner's labor, debt service or refinancing existing debts, and other expenses determined by the HousingRe$ource Center (HRC). ContractOrs and Permits: Contractors must be currently licensed with the state of Minnesota and the City of ColUmbia Heights. To verify their State license call (651) 296-2488, to verify their City license call 763-706- 3678. Permits must be obtained Wh'en required by city ordinance. Failure to comply with this regulation will disqualify the applicant from receiving program funds. Work By Owner, Work can be performed on a "sweat equity" basis by the homeowner or immediate family. Program funds are to be'Qsed for materials only, not for labor or tools. The HousingResource Center will determine ff the owner has:the ability to properly complete the work within the program time requirement. Material must be purchase~;~nd installed prior to the disbursement of program funds. When applicable, a City Inspection must be obtair{ed by the owner. To obtain a City inspection call 763-706-3672. Important Note: Do not purchase any project' materials or let your contractor(s) begin any work until you have signed a Participation Agreement in our office. We must review all of your documents, including contractor bids and/or Sweat Equity Application before we can schedule your Participation Agreement appointment. GENERAL COND:[TTONS AND PROCEDURES l) 2) Rehabilitation Counselinq: A HousingResource Center's Construction Manager is available, at no cost, to homeowners for advise about their proposed projects prior to obtaining bids and review bids for reasonableness. Work Completion: Weather permitting, all work must be completed within!i'~O~days of signing the Participation Agreement. ~' 3) Rebate Payment Disbursement Proce_~$: A. 2) 3) 4) s) 6) Payment to the homeowner / contractor will be made, on!Yi.affei:'fina inspe~n and approval of the work by the HousingResourfe Center's Construction Manager. When the work is COmpleted submit items 1 - 5, listed below. Upon receipt and approval ~f these items an inspection Wili be schedu ed and preformed by the HRC Construction Hanager:~ ~i~i~i~ ~:~ The following items must be received in the HRC office funds can be released: 1) Final Znvoice from each contractor showing all amoun~:~i~. Lien Waiver. Original from each ~ontractor. Sworn Construction Statement, C°~ signed and ~°~dzed. Material Receipts for sweat equity p" 7) Completion Certificate signed by Permits Closed. Confirmation must l'nspections Departm, Final :]:n: by the Payment is only made ~and the homeowner. struction ger. Center from the City COLUMBIA HEIGHTS ECONOMIC DEVELOPMENT AUTHORITY (EDA) Meeting of: November 16, 2004 AGENDA SECTION: Items for Consideration ORIGINATING EXECUTIVE NO: 4-C DEPARTMENT: EDA DIRECTOR APPROVAL ITEM: Williams-Peterson Real Estate Agreement BY: Randy Schumacher BY: for 40th & University Redevelopment DATE: November 9, 2004 BACKGROUND: After completing a detailed review of State Statutes relating to conflict of interest, the EDA attorney, Steve Bubul, has recommended that the board avoid entering into a contract with the developer in which an EDA commissioner holds a significant interest. Presently, a Preliminary Development Agreement exists with Williams-Peterson Real Estate for the redevelopment of 40th & University. Staff has been working with the developer to complete a final agreement for EDA consideration. Based on the October 12, 2004 conflict of interest letter submitted by the attorney, the present Preliminary Developers Agreement should be terminated. The EDA board may wish to discuss alternatives and future direction of this redevelopment site at the board meeting on November 16, 2004. RECOMMENDATION: Staff recommends termination of the agreement with Williams-Peterson Real Estate per the City Attorney's letter dated October 12, 2004. RECOMMENDED MOTION: Move to terminate the Agreement between the Columbia Heights Economic Development Authority and Williams-Peterson Real Estate for redevelopment of 40th & University. Attachments EDA ACTION: h:\consent Form2004\EDA Williams-Peterson Agreement 11-16-04 -470 U.S. Bank Plaza 200 South Sixth Street MinneapoLis. biN 55,402 (612) 337-9300 telephone (612) 337-9310 fax http://www, kennedy-graven.co m October 12, 2004 STEPHEN J'. Bt~UL Attorney at rnw Direct Dial (612) 357-9223 Email: sbubul(~kennedy-graven.com Robert Streetar City of Columbia Heights 590 40th Avenue NE Columbia Hei*~hts, MN 554214835 RE: EDA Conflict of Interest Dear Bob: · Question Presented: You asked me to review the following question: May a commissioner of the Columbia HeiSts Economic Development Authority ("EDA") be an owner of a development enti .ty ("Developer~) that enters into a contract with the EDA, under which the Developer will acquire certain property, owned by the EDA and be obligated to redevelop that property for specified uses? Brief Ans~ver: h~ my view, such a contract likely violates Minnesota Statutes, Section 469.098, the conflict of interest provision that applies to economic development author/ties created under Minnesota Statutes, Sections 469.090 to 469.108 (the "EDA Act"). For the reasons explained below, a possible argument remains that such a contract is permissible as an exception under other conflict statutes. However, I recommend that the EDA provision be followed unless the EDA obtains an opinion from the Minnesota Attorney General that an exception applies. Analysis: Conflict of interest for local officials is addressed in several statutes. Minnesota Statutes, Section 471.87 to 471.89 (the "General Statute ") provides general rules that apply to all "puNic officers." However, the EDA Act contains a conflict provision that applies specifically to EDA officers and employees. Minnesota Statutes, Section 469.098 provides: JB-254321 v l 1.2o5-26 Robert Streetar October 12, 2004 Page 2 of 6 Except as authorized in section 471.88 a commissioner, officer, or employee of an authority must not acquire any financial interest, direct or indirect, in any project or in any property included or planned to be included in any project, nor shall the person have any financial interest, direct or indirect, in any contract or proposed contract for materials or service to be furnished or used in connection with any project. This language unambiguously prohibits a commissioner from acquiring any financial interest in property to be included in any EDA project, which would seem to include the redevelopment contract at issue here. Significantly, this statute does not allow the conflict to be resolved by permitting the commissioner to abstain from participation in the matter. Absent some exception~ the proposed contract is clearly prohibited. However, this conclusion is clouded by ~vo factors: the inconsistency between the EDA Act and Minnesota Statutes, Section 469.001 to 469.047 (the "HRA Act"); and the meaning of the exception referred to in the General Statute. These two issues will be discussed in mm. The HRA Act The HRA Act contains its own conflict provision in Section 469.009, which provides in relevant part: Subdivision 1. Disclosure. Before taking an action or making a decision which could substantially affect the commissioner's or an employee's financial interests or those of an organization with which the commissioner or an employee is associated, a commissioner or employee of an authority shall (a) prepare a written statement describing the matter requiring action or decision and the nature of the potential conflict of interest and (b)' submit the statement to the commissioners of the authority. The disclosure shall be entered upon the minutes of the authority at its next meeting. The disclosure statement must be submitted no later than one week after the employee or commissioner becomes axvare of the potential conflict of interest. Ho~vever, no disclosure statement is required if the effect on the commissioner or employee of the decision or act will be no ~eater than on other members of the business, profession or occupation or if the effect on the organization with which the commissioner or employee is affiliated is indirect, remote, and insubstantial. A potential conflict of interest is present if the commissioner or employee knows or has reason to know that the organization with which the commissioner or employee is affiliated is or is reasonably likely to become a participant in a project or development which will be affected by the action or decision. Any individual who knowingly fails to submit a statement required by this subdivision or submits a statement Which the individual knows SJB-254321 vi CL205-26 Robert Streetar October 12, 2004 page 3 of 6 contains false information or omits required information is guilty of a gross misdemeanor. Subd. 2. Effect of disclosure. If an employee has a potential conflict of interest, the employee's superior shall immediately assign the matter to another employee who does not have a potential conflict of interest. A commissioner who has a potential conflict of interest shall not attempt to influence an employee in any matter related to the action or decision in question, shall not take part in the action or decision, and shall not be counted toward a quorum during the portion of any meeting of the authority in which the action or decision is to be considered. Any individual who knowingly violates this subdivision is guilty of a gross misdemeanor. Subd. 3. Conflicts forbidden. A commissioner or employee of an authority who knowingly takes part in any manner in making any sale, lease, or contract in ~ the commissioner's or employee's official capacity in which the commissioner or employee has a personal financial interest is guilty ora gross misdemeanor. Unlike the EDA Act provision, this language permits a commissioner to disclose a potential conflict and then take no part in the decision-making. If those rules are followed, the commissioner may enter into the relevant transaction without resigning fi:om his or her position on the board. The confusion arises fi:om the fact that the EDA has all the powers ora housing and redevelopment authority under the I-IRA Act when it carries out redevelopment projects such as that proposed here. See Minnesota Statutes, Section 469.091, subd. I. Further, the EDA Act expressly authorizes cities by ordinance to divide economic development, housing and redevelopment powers between the EDA and other author/ties established by statute or charter. See Minnesota Statues, Section 469.09.4, subd. 1. By Ordinance No. 1442, the City has expressly assigned to the EDA all powers related to redevelopment under the HIL4. Act. One might argue that if the EDA is exercising its redevelopment po~vers under the I-IRA Act} those powers include the more lenient "disclosure" rule. under Section 469.009. However, there is little guidance 'fi:om case law or attorney general opinions to resolve the question in favor of the HRA Act provision. The attorney general has addressed the inconsistency between the HRA Act and the General Statute referenced above. See Op. Atty. Gen., June 9, 1994 (the "1994 Opinion"). 'In the 1994 Opinion, the question posed was whether an HRA commissioner, as owner of a cabinet manufacturing company, could bid on developments that were the subject of contracts with the HRA. The attorney general first observed that the "disclosure and abstention" rule under Section 469.009 differs fi:om the General Statute. The General Statute prat/bits a public officer who is "authorized to take part" in making a contract in his or her official capacity, fi:om voluntarily having a personal financial interest SJB-254321vl CL205-26 Robert Streetar October 12, 2004 Page 4 of 6 in such contract. The conflict cannot be avoided by the officer abstaining from participation; the officer must either resign or not enter into the contract. As such, the General Statute directly contradicts the HRA rule. The attorney general concluded that the }iRA Act prevailed over the General Statute in this context, because the HRA rule was a special exception enacted al~er the General Statute, and there was no evidence of legislative intent that the General Statute should prevail. The I994 Opinion did not address the EDA Act. Howevei-, the EDA Act conflict provision is more like the General Statute: it follows the "blanket prohibition" approach to conflict rather than the "notice and non-participation" approach. As such, the opinion does not help resolve the conflict between the two spec/al provisions for I-IRAs and EDAs. The 1994 Opin/on relied on legislative history and the rules of statutory construction regarding conflicting statutory provisions. Applying that analysis here, there is little support for the conclusion that the HRA provision should apply to EDAs in some circumstances. The HRA Act itself odginally contained a conflict provision almost identical to that now provided in Section 469.098 for EDAs. Until 1981, the HRA Act conflict rule was set forth in Mirmesota Statutes, Section 462.431, which provided in part: "No commissioner or employee of an authority shall acquire any interest, direct or indirect, in any project or in any property included or planned to be included in any' project, nor shall he have any interest, direct or indirect, in any contract or proposed contract for materials or services to be fiauished or used in connection ~vith any project [subject to exceptions not relevant hereJ." ,,ks in the current EDA Act and the General Statute, abstention was not an option to avoid the conflict. See Op. Atty. Gen. Au=m. kst 25, 1950. In 1981, the legislature replaced the absolute prohibition with the disclosure and non-participation language that is now codified at Section 469.009. See 1.981 Laws, Chapter 79, Sections 1 and 2. As the attorney general observed in the 1994 Opin/on, the legislature apparently contemplated that after 1981, I-IRA commissioners could lawfully have a personal financial interest in contracts as long as they follow the procedures laid out in the statute. However,' w. hen the legislature enacted the EDA Act in 1986, it included a specific con.fl/ct of interest rule very similar to the pre-1981 rule from the HRA Act. ,,Cee 1986 Laws, Chapter 400, Section 22, creating Section 458C. I 1, now codified without change at Section 469.098. That is, while the legislature expressly loosened the conflict rule for HRAs in 1981, it returned to the "absolute prohibition" approach for EDAs. Arguably, this history signals a specific le~slative intent to impose a stricter conflict of interest standard for EDAS. Further, nothing in the langnage of Section 469.098 itself suggests that th/s conflict rule should be overridden by the HRA rule in cases where the EDA is exercising the powers of an I-IRA. Rather, the legislative history suggests that the EDA rule, being specifically applied to EDAs, enacted after SJI~-254321 vi CL205-26 Robert Streetar October 12, 2004 Page 5 of 6 the loosening of the HRA rule, and returning to the stricter original version of that rule, was intended to govern EDAs in all circumstances. A contrary argument could be made that in I981, the legislature recognized the special circumstances of HRAs, and the ]iDA is essentially acting as an I=IRA. When the legislature authorized the creation of EDAs in 1986, it gave them all the powers of an HRA under the HRA Act, wkich literally includes the conflict provisions of Section 469.009. Perhaps, the separate conflict provision in Section 469.098 applies to an EDA only in situations where the EDA is not using HRA Act powers. While this arooument has some force, it remains speculative absent clarification fi.om either the attorney general or the courts.' General Statute Exception The second possible exception to the absolute prohibition of conflict under Section 469.098 is the cross reference to the exceptions under the General Statute. Section 471.88 lists several exceptions to the general conflict rules, of which only one is relevant to this fact situation. Sect/on 471.88, subdivision 5 permits a governing body to contract for goods or services w/th an interested officer of the of the governmental trait in the case of any "contract for which competitive bids are not required by law." If that exception is used, the vote of the governing body must be unanimous, and the body must approve a resolution in advance "setting out the essential facts and determining that the contract price is as low or lower that the price at which the commodity or services could be obtained elsewhere." Minnesota Statutes, Section 471.89. The interested officer must also file an affidavit stating, among other things, an "item/zation of the commodity or services furnished," the "contract price" and the "reasonable value." Id. One might argue that a contract to acquire or sell land is not subject to competitive bidding, and therefore should fall within the subdivision 5 exception. However, this exception seems clearly intended to address contracts where the government unit is' acquiring goods and services at contract prices below the threshold for competitive bidd/ng, and is for the benefit of the government trait rather than the contractor. Further, the contract at issue here is not just a purchase agreement. It is a redevelopment contract that includes both sale of the land and activities to redevelop that property for purposes specified by the EDA. In that context, it would be difficult'for the EDA to conclude that the price is "lower than the price at which the commodity or services could be obtained elsewhere." Aside from the fact that the goal is a higher price (for land sale), this type of contract is not amenable to quantification based on price. Many factors go into the decision regarding a redevelopment contract and the specific developer who is selected as party to the contract. The contract may provide for financial assistance in the form of write-down of the land cost, which might mean that the contract does not provide the best price, but rather provides the best project that meets the EDA's redevelopment objectives. CL205-20 Robert Streetar October 12, 2004 Page 6 0£6 Moreover, using the subdivision 5 exception (relating to governmental procurement o£ goods and services) for a land sale and redevelbpment contract seems to undermine the purpose of Section 469.098. The rule prohibits two types of conflicts by a commissioner or other EDA officer: (1) acquiring a financial interest in any property included in a project, and (2) having a financial interest in a contract for materials or service to be fiu'nished or used in connection with a project. The Section 471.88, subd. 5 exception clearly applies to the contracts in clause (2). But if the exception also applies to a contract for acquisition of the proPerty itself, the exception swallows the clause (1) rule, leaving the statute with little meamg as a practical matter. For all these reasons, ! believe that reliance on the Section 471.88, subdivision $ exception is questionable, at least/n the context of a redevelopment contract like the one in the facts presented here. Conclusion As is evident fi.om the discussion above, it is difficult to reach an unqualified conclusion regarding the applicability of the three relevant conflict statues. However, ha my view the most prudent course is to assume that Section 469.098 governs the contract at issue, and that the exception under 471.85, subd. 5 is inapplicable. If a conflict of interest is asserted and proven, the contract may be voided by a court. Therefore, I would recommend that the EDA avoid entering into a contract with a Developer in which an EDA commissioner holds a significant interest. Further, while this opinion is for the benefit of the EDA, a commissioner who enters a contract in violation of Section 469.098 should be aware that criminal sanctions might be imposed. The commissioner may wish to seek his or her own legal advice on that matter. As an alternative, the EDA could request an opinion fi.om the attorney general regarding the applicability of the HRA conflict rule in this context, the al~Plicability of the Section 471.88, suM. 5 exception, or both. If the EDA wishes to pursue that option, I could assist in framing and drafdng the question. If you have further questions on this matter, please contact me. Walt Fehst Randy Schumacher SJB-254321 vi CL205-26 PRELIMINARY DEVELOPMENT AGREEMENT THIS AGREEMENT, dated this b20 day of.. ~ , 2004 by and between the Columbia Heights Economic Development Authority, a bod~ politic and corporate under the laws of Minnesota, ("Authority") and Williams-Peterson Real Estate, A Partnership ("Developer"): WITNESSETH: WHEREAS, the Authority has determined that it is in Authorities .best interest that Developer be designated sole developer of the Property during the term of this Agreement; and WHEREAS, the Authority and Developer are willing and desirous to undertake the Development if (i) a satisfactory agreement can be reached for the purchase price of the Property and the Authorities commitment for public costs, if any, necessary for the Development; (ii) satisfactory mortgage and equity financing, or adequate cash resources, for the Development can be secured by Developer; (iii) satisfactory resolution of zoning, land use and site design issues and (iv). the economic feasibility and soundness of the Development and other necessary preconditions have been determined to the satisfaction of the parties. NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and obligations set forth herein, the parties agree as follows: 1. Negotiations between the parties shall proceed in an attempt to formulate a definitive development contract ("Contract") based on the following: a) Developer's current proposal which shows the scope of the proposed Development in its latest form as of the date of this Agreement, together with any changes or modifications required by the Authority; b) A mutually satisfactory Contract to be negotiated and agreed upon in accordance with negotiations contemplated by this Agreement; ¢) Such documentation regarding economic feasibility of the Project as the · Authority may wish to undertake during the term of this Agreement; and d) Other terms and conditions of this Agreement. It is the intention of the parties that this Agreement (a) documents the present understanding and commitments of the parties and (b) will lead to negotiation and execution ora mutually satisfactory Contract for the Development prior to the termination date of this Agreement. The Contract (together with any other agreements entered into between the parties hereto contemporaneously therewith) when executed, will supersede all obligations of the parties hereunder. Notwithstanding anything to the contrary herein, the Authority shall have no obligation to provide any financial assistance to the Developer or approve any action in connection with the Development unless and until final approval by the Authority ora definitive Contract. -1- o 3. During the term of this Agreement, the Developer shall: Submit to the Authority a design proposal to be approved by the Authority showing the location, size, and nature of the proposed Development, including floor layouts, renderings, elevations, and other graphic or written explanations of the Development. The design proposal shall be accompanied by a proposed schedule for the starting and completion of all phases of Development. b) Submit an over-all cost estimate for the design and construction of the Development. c) d) Submit a time schedule for all phases of the Development. Undertake and obtain such other preliminary economic feasibility studies, income and expense projections, and such other economic information as the Authority may desire to further confirm the economic feasibility and soundness of the Development. Submit to the Authority the Developer's financing plan showing that the proposed Development is financially feasible. Furnish satisfactory, financial data to the Authority evidencing the Developer's ability to undertake the Development. *Relating to issues a) through 19, reasonable progress must be.made to the satisfaction of the Authority during the first 30-60 days. This Agreement is effective for a term ending 120 days from its date, unless extended by mutual written agreement of the parties. The Executive Director is authorized to execute any such extension on behalf of the Authority. Upon execution of this Agreement, the Authority acknowledges receipt from the Developer of a deposit in the amount of $3,000,,from which funds the Authority may pay any' third party out-of-pocket costs incurred by the Authority or Authority in connection with the Authorities activities furthering the Development from and after the date of this Agreement (hereafter, the "Authority Costs"). If at any time the date of this Agreement the Authority determines that its expenses will exceed $3,000, the Authority may notify the Developer of the amount of such additional costs. Within ten calendar days of receipt of said notice, the Developer shall deliver to the Authority the required additional funds: If a Contract is successfully negotiated, any unused balance in the funds deposited under this Section 5 (except the nonrefundable portion thereof) shall be returned to the Developer upon execution of the Contract (unless the parties specify otherwise in the Contract). Il'this Agreement is terminated in accordance with its terms, the Authority will return to the'Developer the balance of any funds deposited under this section (less any amounts that are nonrefundable under the terms of this section) as of the date of receipt of the notice of termination, and less any Authority Costs incurred through the date of receipt of the notice of termination. For the purposes of this paragraph, Authority Costs are considered to be incurred if theY have been paid, relate to services performed, or are -2- payable under a contract entered into, on or before the date of receipt of the notice of termination. 6. This A~eement may be terminated upon 10 days' written notice by either party to the other if: (i) (ii) A party fails to perform any of its obligations hereunder, and fails to cure the default within 30 days after receipt of written notice thereof; or An impasse has been reached in the negotiation of any material term of the Contract. Upon termination under this Section, neither party thereafter shall have any liability or obligations to the other except as otherwise provided in Section 5 hereof. o Developer is designated as sole developer of the Property during the term of this Agreement. During the term of this Agreement, the Authority agrees that it will not negotiate or contract with any other party concerning the development or sale of the Property. The Developer shall not assign or transfer its rights under this Agreement in full or in part without the prior written consent of the Authority. In the event that either party, its heirs, successors or assigns, fail to comply with any of the provisions of this Agreement, the non-defaulting party may proceed to enforce this Agreement by appropriate legal or equitable proceedings, or other similar proceedings. If any portion of this Agreement is held invalid by a court of competent jurisdiction, such decision shall not affect the validity of any remaining portion of the Agreement. 10. In the event any covenant contained in this Agreement should be breached by one party and subsequently waived by another party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other concurrent, previous or subsequent breach. 11. Notice or demand or other communication between or among the parties shall be sufficiently given if sent by mail, postage prepaid, return receipt requested or delivered personally: a) As to the Authority: 590 40th Avenue NE Columbia Heights, MN 55421 b) As to the Developer: 3712 Lincoln Street NE Columbia Heights, MN 12. This Agreement may be executed simultaneously in any number of counterparts, all of which shall constitute one and the same instrument. -3- IN WITNESS WHEREOF, the Authority has caused this Agreement to be duly executed in its name and behalf and its seal to be duly affixed hereto and the Developer has caused this Agreement to be duly executed as of the day and year first above written. COLUMBI~ HEIGHTS ECONOMIC DEVELOPMENT AUTHORITY (EDA) Don ~);n fr. / ~" )Y ITS: BY: President ITS: Executive Director WIL..~~ETERS ~)N~ ESTATE, A P~TNERSHIP ITS: -4- EYd-IIBIT A LEGAL DESCRIPTION OF PROPERTIES 322 40TM AVENUE Lot 15, Blk 68, Columbia Heights Annex to Minneapolis, Anoka County, Minnesota 3944 Lookout Place Rear. Block E, Th. Pt. Of N 1/2, front and rear of Lot 2 thence Lines East of East line' of University Avenue as the same is now laid out & constructed 3950 Lookout Place Rear. Of Blk East of Columbia Heights Annex, City of Columbia Heights that part of Lot 1 Bik E. Rearrangement of Block E, Columbia Heights Annex to Minneapolis Desc as follows-com at the SE corner of said Lot 1-TH nearly along the west line of Lookout Place at Dist. of 90 Ft-th west to a point on the west line of said lot dist. 128 ft south from the north line of said lot-th south 'along the west line of said lot to the south line thereof-th east to the pt of beg-ex th pt thereof lying west of University Avenue N.E. Tract "B" Lot 16 & that part of Lot 17, Block 68, Columbia Heights Annex to Minneapolis, Anoka County, Minnesota lying southwesterly of the following described "line 1" and northwesterly of the following described "Line 2". "Line 1" Beginning at a point on the south line of said Lot 17, distant 21.00 feet westerly of the southeast corner; thence northwesterly to a point on the west line, said point being 100.00 feet southerly of the northwest corner and there terminate. "Line 2" Beginning at a point on the north line of said Lot 17, distant 10:00 feet easterly of. the northwest corner; thence southwesterly to a point on the west line, said point being 10.00 feet southerly of the northwest corner and. there terminate. 3955 University Avenue Rear. Block E, N. 128feet of Lot 1 and also th. Pt. Of Lot 1 lying West of University Avenue as extended. Ex North 30ft for hwy H:\40~ & University~Preliminary Development Agreement-Williarns-Peterson COLUMBIA HEIGHTS ECONOMIC DEVELOPMENT AUTHORITY (EDA) Meeting of: November 16, 2004 AGENDA SECTION: Items for Consideration ORIGINATING EXECUTIVE NO: 4-D DEPARTMENT: EDA DIRECTOR APPROVAL ITEM: Approve Change in Funding for the BY: Randy Schumacher BY: Purchase of 322 40th Avenue DATE: November 9, 2004 BACKGROUND: The last action taken by the EDA board related to the redevelopment of 40th & University, was to authorize staff to negotiate a development agreement with Williams-Peterson requiring a $65,038.74 payment for the 1 acre development site. In addition, after the EDA approved the condemnation by quick take for 322 40th Avenue (Mike Sweat property), a purchase agreement was signed in the amount of $225,000. The funding to pay the balance would come from a $159,961.26 Community Development Block Grant received from Anoka County. Cost of 322 40th Avenue $225,000: · Community Development Block Grant · Developer Payment Total $159,961.26 $ 65,038.74 $225,000.00 This financing issue was generated by a letter from the EDA's attorney, Steve Bubul (see attached letter). Based on his October 12, 2004 letter, Commissioner Williams would be prohibited from participating in any EDA project. Therefore, at this point in time, the City does not have a developer in hand and will be required to pay the full $225,000, which includes relocation costs as required in the purchase agreement. Funding will be allocated from fund 420, the Capital Improvement Development fund. When the EDA approves a future development agreement for the project area, fund 420 can be reimbursed. RECOMMENDATION: Staff recommends approval of the Purchase Agreement with MGS Professional Services located at 322 40th Avenue NE in the total amount of $225,000. RECOMMENDED MOTION: Move to Approve the Purchase Agreement for the property located at 322 40th Avenue NE in the amount of $225,000, with $159,961.26 in CDBG funds, $65,038.74from fund 420, to be reimbursed when a future development agreement for the project area is established. Attachments EDA ACTION: h:\consent Form2004\EDA Approve Funding for MGS RESOLUTION 2004-10 BEING A RESOLUTION AUTHORIZING CONDEMNATION BY QUICK TAKE FOR THE PROPERTY LOCATED AT 322 40TM AVENUE N.E. (PIN # 35-30-24-31-0118) FOR REDEVELOPMENT PURPOSES. WHEREAS, in 2001 the City of COlumbia Heights City Council designated the property at 322 40th Avenue (the Property) as part of a redevelopment area in the City's Comprehensive Plan; and WHEREAS, the Property is zoned General Business and the owner operates a business known as MGS Professional Maintenance Service Inc.; and WHEREAS, the Property is located in a redevelopment project area which contains properties which are blighted; and WHEREAS, the City has successfully negotiated and acquired four oUt of the five blighted properties adjacent to the Property necessary to complete the redevelopment project scheduled in this area; and WHEREAS, City staff has been negotiating in good faith with the owner of the Property since March of 2002; and WHEREAS, the City has completed an appraisal of the Property and provided this information to the property owner; and WItEREAS, at the request of the property owner, the City requested the Anoka County Assessors Office re-evaluate the Property in order to obtain the most current market value, thus reflecting an additional 14% increase in value; and WHEREAS, the City and its consultant have met with the property owner and advised him of his non-residential relocation benefits and rights under the Federal Relocation Law; and WHEREAS, the City applied for and received funding from the Anoka County Community Development Block Grant Program to remove slum and blight relative to the Property for the purpose of Economic Development oppommities; and WHEREAS, the owner of the Property vacated the building during the month of February, 2004 and relocated his business in Minneapolis; and WHEREAS, the City of Columbia Heights has an executed Preliminary Development Agreement for the development of this property and wishes to move forward to redevelop the area; and WHEREAS, to date, the City of Columbia Heights has not received a written offer from the owner of the Property for the purchase of his property in spite of its ongoing efforts to reach a negotiated sale; and MTN-253248vl C L205-21 WHEREAS, the Economic Development Authority and City Council have adopted goals and priorities for year 2004, of which this acquisition/redevelopment project has been given a high priority; and WHEREAS, the City under City Charter (Chapter 9), and Minnesota State Statutes is empowered to acquire by purchase, gift, devise or condemnation, any property, which may be needed by said City for public use or purpose. NOW THEREFORE BE IT RESOLVED BY THE CITY COUNCIL OF COLUMBIA HEIGHTS, MINNESOTA THAT: The stated acquisition of the Property is in the Public interest and for a public purpose. The time requirement for funding this acquisition with Community Development Block Grant dollars makes it necessary to obtain this property in a timely manner so as not to jeopardize the funding source. ge The acquisition is consistent with the City's redevelopment plan and the Property qualifies under the definition of a blighted property. That the City Attorney is directed to proceed with Condemnation, and where legally appropriate, to acquire the Property by direct purchase, if feasible and practical. The City may at any stage of the Condemnation proceedings, abandon such proceedings of the property sought to be acquired. Dated this o~--/ day of September, 2004. Offered by: Seconded by: Roll Call: Attest: CheryI B,~:',~~'~ Acting Secretary MTN-253248vl CL205-21 Economic Development Authority Special Meeting Minutes September 21, 2004 Page 3 of 5 $5,071.50; and #3 was for sink, fire doors, more transite panels and vermiculite in the amount of $3,555.00. The state preformed three inspections during the removal period. Stacie Kvilvang from Ehlers & Associates stated Southern Minnesota Environmental has sent another change order for some additional piping, which we are denying, based on our contract as they failed to notify the CiO/prior to removal. Motion by Kelzenberg, seconded by Ericson, to Approve the change orders submitted by Southern Environmental Technologies Inc. for additional vermiculite removal in the amount of $11,300, additional transite panels in the fan room in the amount of $5,071.50 and removal of sink, fire doors, transite panels and vermiculate in the amount of $3,555.00. These change orders shall be funded by surplus, reallocated Community Development Block Grant dollars from project number 327, the sale of 4607 Tyler Street program income. All ayes. Motion Carried. ~Resolution 2004-10~ Authorizing Condemnation by Quick Take for 322 40th ~ Schumacher stated staff made every attempt possible to purchase the property at 322 40th ave with no prevail, an appraisal was conducted by the City, staff waited until Anoka County appraised the propero/ per the owners request. Dan Wilson, Wilson Development met with the owner today. The owner agreed to $225,000 purchase price but had to check with his wife, so at this time he still hasn't signed an agreement. With the $150,000 CDBG fundingfor the purchase, we need to close on this deal soon or loose the funding. Murzyn, Jr. asked what is a quick take. Schumacher stated it guarantees we get the property. Ericson stated they could adopt the resolution for the quick take tonight and abandon it at anytime, if the owner gives us a purchase agreement. Williams excused himself from the decision, as he is one of the Partners involved in redevelopment of the site. Motion by Kelzenberg, seconded by Nawrocki, to wai~)e the reading of Resolution 2004-10, there being an ample amount of copies available to the public. All ayes. Motion Carried. Motion by Kelzenberg, seconded by Nawrocki, to Adopt Resolution 2004-10, a Resolution authorizing Condemnation by Quick Take for the property located at 322 40th Avenue NE (PIN #35-30-24-31-0118) for redevelopment purposes. Upon Vote: Jindra-Aye, Nawrocki- Nay, Ericson- Aye, Kelzenberg- Aye, Wyckoff- Aye, Murzyn- Aye. Motion Carried. Contract with Maxfield Research, Inc. to perform a Demand Anaiysir. ~ Streetar stated the Cio/Council, EDA and residents have all talked about the need for a Community/Recreation Center. Maxfield ResearCh Inc is proposing to perform a Demand Analysis, which would analyze existing facilities, look at other amenities in the area and specify the number of gymnasiums needed in Columbia Heights. The analysis would take 45 days, at a total amount of $7, 000. The Sports Busters have agreed to pay $2,000; the school board is meeting tonight to vote on putting in $1,000, which would make the City's portion $1,000. Local residents, Schumacher and Streetar can work with Maxfield to develop the analysis. A I~ 'r E R ; 0 470 U.S. Sank Plaza 200 South Sixth Street MinneapoLis. MN 55402 (612) 337-9300 telephone (612) 337-9310 fax h rfp:l/wv, nv. kennedy-graven, co m October 12, 2004 STEPHEN dr. RI.'BUL Attorney ar Law Direct Dial (612) 357-9~g Email: sb ubu l~kenn edy-graven.com Robert Streetar City of Columbia Heights 590 40th Avenue NE Columbia Heights, MN 55421-38.35 RE: EDA Conflict of Interest Dear Bob: Question Presented: You asked me to review the following question: May a commissioner of the Columbia Heights Economic Development Authori .ty ("EDA") be an owner of a development enti .ty ("Developer") that enters int© a contract with the EDA, under which the Developer will acquire certain property, owned bv the EDA and be obligated to redevelop that property for specified uses? Brief Answer: In my view, such a contract likely violates Minnesota Statutes, Section 469.098, the conflict of interest provision that applies to economic development authorities created under Minnesota Statutes, Sections 469.090 to 469.108 (the "EDA Act"). For the reasons explained below, a possible argument remains that such a contract is permissible as an exception under other conflict statutes. However, I recommend that the EDA provision be followed unless the EDA obtains an opinion from the Minnesota Attorney General that an exception applies. Analysis: Conflict of interest for local officials is addressed in several statutes. Mirmesota Statutes, Section 471.87 to 471.89 (the "General Statute ") provides general rules that apply to all "public officers." However, the EDA Act contains a conflict provision that applies specifically to EDA officers and employees. Minnesota Statutes, Section 469.098 provides: SJL1-254321vl CL205-20 Robert Streetar October 12, 2004 Page 2 of 6 Except as authorized in section 471.88 a commissioner, officer, or employee of an authority must not acquire any financial interest, direct or indirect, in any project or in any property included or plarmed to be included in any project, nor shall the person have any financial interest, direct or indirect, in any contract or proposed contract for materials or service to be furnished or used in connection with any project. This language unambiguously prohibits a commissioner from acquiring any financial interest in property to be included in any EDA project, which would seem to include the redevelopment contract at issue here. Sign/ficantly, this statute does not allow the conflict to be resolved by permitting the commissioner to abstain from participation in the matter. Absent some exception,' the proposed contract is clearly prohibited. However, this conclusion is clouded by ~vo factors: the inconsistency between the EDA Act and M/nnesota Statutes, Section 469.001 to 469.047 (the "HRA Act"); and the meaning of the exception referred to in the General Statute. These two issues will be discussed in mm~ The HRA Act The HRA Act contains its own conflict provision in Section 469.009, which provides in relevant part: Subdivision 1. Disclosure. Before taking an action or making a decision which could substantially affect the commissioner's or an employee's financial interests or those of an organization with which the commissioner or an employee is associated, a commissioner or employee of an authority shall (a) prepare a written statement describing the matter requiring action or d~cision and the nature of the potential conflict of interest and (b)": submit the statement to the commissioners of the authority. The disclosure shall be entered upon the minutes of the authority at its next meeting. The disclosure statement must be submitted no later than one week after the employee or commissioner becomes axvare of the potential conflict of interest. However, no disclosure statement is required if the effect on the commissioner or employee of the decision or act will be no greater than on other members of the business, profession or occupation or if the effect on the organization with which the commissioner or employee is affiliated is indirect, remote, and insubstantial. A potential conflict of interest is present if the commissioner or employee knows or has reason to know that the organization with which the commissioner or employee is affiliated is or is reasonably likely to become a participant in a project or development which will be affected by the action or decision. Any individual who knowingly fails to submit a statement required by this subdivision or submits a statement Which the individual knows SJB-25J,321 vi CL205-26 Robert Streetar October 12, 2004 page 3 of 6 contains false information or omits required information is guilty of a gross misdemeanor. Subd. 2. Effect of disclosure. If an employee has a potential conflict of interest, the employee's superior shall immediately assign the matter to another employee who does not have a potential conflict of interest. A commissioner who has a potential conflict of interest shall not attempt to influence an employee in any matter related to the action or decision in question, shall not take part in the action or decision, and shall not be counted toward a quorum during the portion of any meeting of the authority in which the action or decision is to be considered. Any individual who knowingly violates this subdivision is guilty of a gross misdemeanor. Subd. 3. Conflicts forbidden. A commissioner or employee of an authority who knowingly takes part in any manner in making any sale, lease, or contract i~ -the commissioner's or employee's official capacity in which the commissioner or employee has a personal financial interest is guilty ora goss misdemeanor. Unlike the EDA Act provision, this lan~age pen'nits a commissioner to disclose a potential conflict and then take no part in the decision-making. If those rules are followed, the commissioner may enter into the relevant transaction without resigning from his or her position on the board. The confusion arises from the fact that the EDA has all the powers of a housing and redevelopment authority under the HRA Act when it carries out redevelopment Projects such as that proposed here. See Minnesota Statutes, Section 469.091, subd. 1. Further, the EDA Act expressly authorizes cities by ordinance to divide economic development, housing and redevelopment powers betxveen the EDA and other authorities established by statute or charter. See Minnesota Statues, Section 469.094, subd. 1. By Ordinance No. I442, the City has expressly assigned to the EDA all powers related to redevelopment under the I-IRA Act. One might ar=mae that if the EDA is exercising its redevelopment powers under the HRA Act~ those powers include the more lenient "disclosure" rule. under Section 469.009. However, there is little guidance 'from case law or attorney general opinions to resolve the question in favor of the HRA Act provision. The attorney general has addressed the inconsistency between the HRA Act and the General Statute referenced above. See Op. Atty. Gen., ~'une 9, 1994 (the "1994 Opinion"). 'In the 1994 Opinion, the question posed was whether an I-IRA commissioner, as owner of a cabinet manufacturing company, could bid on developments that were the subject of contracts with the HRA. The attorney general first observed that the "disclosure and abstention" rule under Section 469.009 differs from the General Statute. The General Statute prohibits a public officer who is "authorized to take part" in making a contract in his or her official capacity, fi'om voluntarily having a personal financial interest SJB-254321 vi C[.2.05-26 Robert Streetar October 12, 2004 Page 4 of 6 in such contract. The conflict cannot be avoided by the officer abstaining fi.om participation; the officer must either resign or not enter into the contract. As such, the General Statute directly contradicts the H/P,.A rule. The attomey general concluded that the HR~ Act prevailed over the General Statute in this context, because the HRA rule was a special exception enacted after the General Statute, and there was no evidence of legislative intent that the General Statute should prevail. The 1994 Opinion did not address the EDA Act. Howevei-, the EDA Act conflict provision is more like the General Statute: it follows the "blanket prohibition" approach to conflict rather than the "notice and non-participation" approach. As such, the opinion does not help resolve the confl/ct be~veen the two special provisions for HRAs and EDAs. The 1994 Opinion relied on legislative history and the rules of statutory construction regarding conflicting statutory provisions. Applying that analysis here, there is little support for the conclusion that the I-IRA provision should apply to EDAS in some c/rcumstances. The HRA Act itself originally contained a conflict provision almost identical to that now provided in Section 469.098 for EDAS. Until 1981, the HRA Act conflict rule was set forth in Minnesota Statutes, Section 462.431, which provided in part: "No commissioner or employee of an authority shall acquire any interest, direct or indirect, in any project or in any property included or planned to be included in any' project, nor shall he have any interest, direct or indirect, in any contract or proposed contract for materials or serv/ces to be fum/shed or used in connection with any project [subject to exceptions not relevant here]." As in the current EDA Act and the General Statute, abstention was not an option to avoid the conflict. See Op. Atty. Gen. Au~m. tst 25, 1950. In 1981, the legislature replaced the absolute protfibition with the disclosure and non-participation language that is now codified at Section 469.009. See 1,981 Laws, Chapter 79, Sections 1 and 2. AS the attorney general observed in the 1994 Opinion, the le~slature apparently contemplated that after 1981, HRA commissioners could lawfully have a personal financial interest in contracts as long as they follow the procedures laid out in the statute. However,' w. hen the legislature enacted the EDA Act in 1986, it included a specific cortfl/ct of interest rule very similar to thepre-1981 role fi-om the HRA Act. ,gee 1986 Laws, Chapter 400, Section 22, creating Section 458C.11, now codified without change at Section 469.098. That is, while the legislature expressly loosened the conflict rule for HRAs in I981, it returned to the "absolute prohibition" approach for EDAS. Arguably, this history signals a specific le~slative intent to impose a stricter conflict of interest standard for EDAs. Further, nothing in the lan~age of Section 469.098 itself suggests that this conflict rule should be overridden by the HRA role in cases where the EDA is exercising the powers of an HRA. Rather, the le~slative history suggests that the EDA rule, being specifically applied to EDAs, enacted after SJB-254321vl CL20. -~6 Robert Streetar October 12, 2004 Page 5 of 6 the loosening of the HRA rule, and returning to the stricter original version of that rule, was intended to govern EDAs in ail circumstances. A contrary ar~mmaent could be made that in I981, the legislature recognized the special circumstances of HRAs, and the EDA is essentially acting as an I=I~A. When the legislature authorized the creation of EDAs in 1986, it gave them all the powers of an HRA under the HRA Act, which literally includes the conflict provisions of Section 469.009. Perhaps, the separate conflict provision in Section 469.098 applies to an EDA only in situations where the EDA is not using HRA Act powers. While this arum,anent has some fome, it remains speculative absent clarification from either the attorney general or the courts.. General Statute Exception The second possible exception to the absolute prohibition of conflict under Section 469.098 is the cross reference to the exceptions under the General Statute. Section 471.88 lists several exceptions to the general conflict rules, of which only one is relevant to this fact situation. Section 471.88, subdivision 5 permits a governing body to contract for goods or services with an interested officer of the of the governmental unit in the case of any "contract for wkich competitive bids are not required by law." If that exception is used, the vote of the governing body must be unanimous, and the body must approve a resolution in advance "setting out the essential facts and determining that the contract price is as Iow or lower that the price at which the commodity or services could be obtained elsewhere." Minnesota Statutes, Section 471.89. The interested officer must also file an affidavit stating, among other things, an "itemization of the commodity or services furnished," the "contract price" and the "reasOnable. value." Id. One might arg'ue that a contract to acquire or sell land is not subject to competitive bidding, and therefore should fall within the subdivision 5 exception. HOwever, this exception seems clearly intended to address contracts where the government unit i!~:' acquiring goods and services at contract prices below the threshold for competitive bidding, and is for the benefit of the government unit rather than the contractor. Further, the contract at issue here is not just a purchase agreement. It is a redevelopment contract that includes both sale of the land and activities to redevelop that property for purposes'specified by the EDA. In that context, it would be difficult for the EDA to conclude that the price is "lower than the price at which the commodity or services could be obtained elsewhere." Aside from-the fact that the goal is a higher price (for land sale), this type of contract is not amenable to quantification based on price. Many factors go into the decision regarding a redevelopment contract and the specific developer who is selected as party to the contract. The contract may provide for financial assistance in the fOrm of write-down of the land cost, which might mean that the contract does not provide the best price, but rather provides the best project that meets the EDA's redevelopment objectives. SJB-25,132 t v l C Robert Streetar October 12, 2004 Page 6 of 6 Moreover, using the subdivision 5 exception (relating to governmental procurement of' goods and services) for a land sale and redevelbpment contract seems to undermine the purpose of Section 469.098. The role prohibits two types of conflicts by a commissioner or other EDA officer: (I) acquiring a financial interest in any property included in a project, and (2) having a financial interest in a contract for materials or service to be fi.trnished or used in connection with a project. The Section 471.88, subd. 5 exception clearly applies to the contracts in clause (2). But if the exception also applies to a contract for acquisition of the property itself', the exception s~vallows the clause (1) role, leaving the statute svith little meaning as a practical matter. For all these reasons, I believe that reliance on the Section 471.88, subdivision 5 exception is questionable, at least in the context of a redevelopment contract like the one in the facts presented here. Conclusion As is evident from the discussion above, it is difficult to reach an unqualified conclusion regarding the applicability of the three relevant conflict statues. However, in my view the most prudent course is to assume that Section 469.098 governs the contract at issue, and that the exception under 471.88, subd. 5 is inapplicable. /.f a conflict of interest is asserted and proven, the contract may be voided by a court. Therefore, I would recommend that the EDA avoid entering into a contract with a Developer in wkich an EDA commissioner holds a significant interest. Further, while this opinion is for the benefit of the EDA, a comm/ssioner who enters a contract in violation of Section 469.098 should be aware &at criminal sanctions might be imposed. The comrrfissioner may wish to seek his or her own legal advice on that matter. As an alternative, the EDA could request an opinion from the attorney general regarding the applicability of the [iRA. conflict role in this context, the alSplicability of the Section 471.88, subd. 5 exception, or both. If the EDA wishes to pursue that option, I could ass/st in framing and drafting the question. If you hav. e further questions on t/tis matter, please contact me. CC.' Walt Fehst Randy Schumacher SJB-254321 vi CL205-26 o ~ ~ uJ Sta~ Tribune · NI3 f ave ad ~hole Lori ~'e. the ~resi- CITY from N1 Medtronic may build New Brighton office Randn Rnhlmi~n/Slar Tribune ~ke Mk~v~t A~pha~ Corpora~o. ~ ~. ~om r~mg Lake Park In New ~ghton. ~t~ comply r~nd ~ o~ a lot that the city of New Bdghton wants to redevelop. "We're going to eliminate blight, create housing opportuni- ties, enhance the number of jobs in the city and terrifically enhance · our tax base,~ Black said. The tax base is now $14 million and is ex- pected to jump to $250 million to $300 million with the redevelop- ment, he said. Blacksaidthatcalculationwould increase by several hundred mil- lion more dollars if Fridley-based M~ltronic Inc., a worldwide medi- cal technology company, builds a 1.5 million-square-foot corporate office on the east side of the de- velopment. To pay for the project the city plans to use money from tax in- crement financing (taxes gener- ated by the project would pay off the bonds), $17 million from hous- ing developers and an expected $5 million from environmental cleanup grants. CurrenLly, the Northwest Quadrant is underused and par- dally contaminated, Mayor Steve Larson said. "The image that will be por- trayed :.'. will present a different picture of New Brighton," he said. ' It's a scene the mayor wants to be right in the middle of. He's ready to move out of his five-bedroom home and into one of the condos planned to overlook Long Lake Re- gional Park. Manyresidents are happy about the renewal and are interested in new housing and the prospect of Medtronic moving in, city man- ager Matt Fulton said. "We're getting a lot of positive feedback," he said. "People un- derstand the benefit this can have long tenn." Just a bit more patience is need- ed before production time. "We are taking it one step at a time and trying to work throUgh the issues, methodically planning to get underway full speed next .year so next summer [2005] build- mg can begin," Fulton said. That means acquiring a couple more properties and waiting to hear -- sometime in November -- from Medtronic on whether the company will build on the 45-acre section on the east side of Hwy 8. If Medtronic decides to build elsewhere, the city is ready to move forward and substitute with Source~ ESRI, GDT ' other office and commerciai uses on sal¢l. Taking. Medtronic out of the question, because it would pos- sibly build in two phases, the area should be entirely developed by 2010 at the latest, Black said. - . "We are in some way~ the devel- opers on this ourselves because we own the land and will be control- ling it, so we're definitely anxious to get goings" Black said. smzr~mnC~starfribune, com.