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HomeMy WebLinkAboutEDA MIN 07-10-06 Special ECONOMIC DEVELOPMENT AUTHORITY (EDA) SPECIAL MEETING MINUTES July 10, 2006 CALL TO ORDER/ROLL CALL President, Murzyn, Jr. called the meeting to order at 6:00 p.m. Present: Don Murzyn Jr., Patricia Jindra, Bruce Nawrocki, Tammera Diehm, Gary L. Peterson and Bruce Kelzenberg Williams arrived at 6:23pm PLEDGE OF ALLEGIANCE BUSINESS ITEMS Grand Central Lofts Proposal Streetar passed out three additional pages of drawings to the board. Streetar stated back in 2004, the EDA entered into a development agreement to facilitate the redevelopment of the vacant, 15-acre Kmart property. This is a request by New Heights Development LLC, Bruce Nedegaard for TIF assistance to construct improvements related to the completion of the Grand Central Lofts redevelopment project. The developer is asking for T1F assistance for: 1) Sanitary Sewer Upsizing and Repair. The engineering feasibility study in June of 2003 estimated the cost to be $236,814, which is now estimated at $470,431 due to increased complexity of increasing the size of the gas line, large fiber optic lines, storm sewer that rest within the right-of-way surrounding the sanitary sewer line, increased cost of polyvinylchloride pipe, and increased cost of petroleum that is used to manufacture the pipe. TIF assistance to pay for the increased cost of up to $233,617, with the developer paying the initial $236,814, which brings the requested T1F assistance of up to $22,049. 2) Retaining Wall. The developer is requesting $200,000 T1F to construct a retaining wall in conjunction with the construction of the new commercial space, which would run east along 4ih avenue to grand avenue then north along the rear of the commercial parcel to the northerly end of the commercial property. 3) Structural Public Parking. Nedegaard is proposing to build two new buildings. The first building with 31,858 sq ft in size, Axel's Bonfire Grill Restaurant on the first floor and office and retail tenants on the second floor. The second building would be 15,480 sq ft in size and includes office and retail tenants on both floors. A public parking ramp with 230 stalls, that could be owned by the EDA, such as the agreement with the Columbia Park Medical Clinic where the City owns it, but the developer maintains the ramp. In Summary, the developer is asking for additional T1F funding of $255, 666 for sanitary sewer improvements and repairs, $200,000 for construction of a retaining wall, and $1,460,631 for construction of a 230 stall, EDA owned public parking facility and recommend the City Council apply for the Metropolitan Council Livable Communities grant in the amount of $974,369. Nedegaard stated the biggest cost is the fiber optics in the piping. Economic Development Authority Meeting Minutes July 10,2006 Page 2 of4 Nawrocki stated bob's comment on the agreement with the medical clinic, that ramp was for the clinic and the community. Streetar stated this parking ramp would a public ramp, not private. Nawrocki stated there was the possibility of some additional commercial along Central, but to his knowledge there hasn't been any talk about any parking ramp. Streetar stated in the development agreement, at that time, this commercial piece was considered out plot, as nobody really new market wise it was plotted as a possibility of redeveloping approx. 10,000 square feet of commercial property. Nawrocki asked when you talk about 15 years TlF, are you talking about the whole project going out 15 years. Streetar stated under this arrangement, it would take more along the lines of 11 to 13 years because we aren't using all of the TlF. It would generate $2.58 million over 15 years. This request is for up to $2.58 million. His guess would be that it would come a little lower than this. John Feges, Land Developer for Nedegaard stated: 1) if you look at the site currently, in regards to the grad that is there, they support the bank of the Grand Central Lofts road on top of the surface, that grade is put there to retain the bank and if they put only a 10,000 square foot building along that road front, they would only have enough for surface parking. It wasn't originally anticipated that the retaining wall be there with the initial 10,000 square feet of space, as well as picking up and redeveloping the other building along Central Avenue with the original proposal. Now we are concentrating on going more vertical with more square footage to accommodate the 280 units of parking. We need to retain the bank to have enough surface parking as well as the structured parking; and 2) the question of 15 years of TIF, the market place would determine how many years would be needed. There is a little bit of a turn in the market right now in regards to higher interest rates and lower absorption, which will change. Realistically we are looking at 5 to 6 years to get the second building under construction and the third one ultimately absorbed with the units Nawrocki asked how it was anticipated in the beginning to support the property other than the 10,000 square foot building along 47th. Feges stated they were considering the retaining wall from the Aldi's store and the parking, but that business venture did not follow through. With the new configuration of the schematics that we have for discussion, they are going more vertical and using less retaining wall for the building, on surface parking as well as structure parking to get the units support and an adequate amount of parking for them. Murzyn Jr. stated the value of the property is the difference of TlF in that area and asked Nedegaard what part of the parking ramp would block the view of the residents in the area. Nedegaard stated the residents would see the top of the ramp and they would be providing some landscaping around it. Nawrocki asked how many floors would be in the ramp. Feges stated it would be two floors. Economic Development Authority Meeting Minutes July 10, 2006 Page 3 of4 Kelzenberg asked Streetar about applying to Met Council to receive funding. Streetar stated met council will not provide funding for public parking, but if we can show that the City is purchasing part of the ramp, he felt very strong that we would receive the funding. Kelzenberg ask Nedegaard what would be the ramifications if they did not approve the funding. Nedegaard stated they really need the parking, they have Axle's Restaurant, Caribou Coffee and other businesses that want to get in there. Murzyn Jr. asked what the pleasure of the board would be. Streetar stated he wanted to make it clear that staff would bring this back for approval. Nawrocki stated he would approve funding from Met Council but wasn't sure he would approve funding for this project. Streetar stated if we don't get the funding, the developer would have to come back with some other ideas for funding. Murzyn Jr. stated by looking at this, what he could see is that his property value that is going down in 2007 would be going up again. We would be authorizing staff to apply for the grant and come back to the board for approval. Motion by Diehm, Second by Kelzenberg, to authorize staff to proceed to apply for grant funding, proceed to negotiate with the developer and amendment to the Development Agreement in accordance with the terms of this memorandum. All ayes. Motion Carried. Subordination and Consent Aareement Approval Murzyn Jr. stated we have another item for the agenda, the subordination and consent agreement regarding Schafer Richardson, Huset Park Development. Nawrocki stated that item was not on the agenda and for a special meeting you can't add anything to it other than what it's called for. Streetar stated under the EDA by-laws, it states you can add an item to the agenda by requesting it, such as Fehst has done and with the board making a motion to approve the added agenda item. Motion by Diehm, second by Peterson, to amend the agenda to add the Subordination and consent Agreement. All ayes. Motion Carried. Bubul stated these agreements are fairly common with this kind of redevelopment transactions particularly with a pay-as-you-go context, where you have agreed in the original contract to give pay-as-you-go payments to Schafer Richardson. Now they are going out to get their own private financing and as part of that the lender is asking you to do two things: 1) to subordinate whatever interest the City and EDA have in the property; and 2) acknowledge that Schafer Richardson is assigning over to the bank the right to get tax increment notes. So the City does not have liability, the developer goes out to get the financing with the expectation the T1F will come in over time to help pay it back. The bank wants to know they would get the rights to the TIF payments in the Economic Development Authority Meeting Minutes July 10,2006 Page 4 of 4 future. As far as the subordination goes, the EDA doesn't really have anything to subordinate. The lender wants to have a first mortgage on the property, but the EDA doesn't have a mortgage, we don't have assessment agreements. Banks like to do that and to say that no matter what if there is any suggestion that they could interfere with the banks first position, we don't want that to happen. Motion by Diehm, Second by Peterson, to approve the Subordination and Consent Agreement between the Columbia Heights Economic Development Authority (EDA) and BNC National Bank; and furthermore, to authorize the President and Executive Director to enter into an agreement for the same. Streetar stated the developer goes to the bank, gets a loan for the development, then comes to the City for T1F funding support, and if the development fails, the City would not be responsible for the costs. Bubul stated if this developer fails, they go out and get a new developer, so essentially the City would still get the TIF funding returned. It always comes back, whether it's this developer or another one, you are always going to get your money back. Williams stated Schafer Richardson went $500,000 over their own property estimate. That doesn't make sense. Streetar explained when those estimates were granted they said here is what we think. After that, we went out and got an appraisal. The new estimate was based upon their appraisal and our appraisal. We didn't know at the time of the agreement what their building was worth. It was after the appraisals were performed. The City told them that under the Development agreement it states you will have an appraisal and the decision will be based upon that appraisal, so the City didn't give anything to Schafer Richardson. Upon Vote: Jindra-aye, Diehm-aye, Williams-aye, Kelzenberg-aye, Nawrocki- nay, Peterson-aye, Murzyn-aye. Motion Carried. Streetar stated the board may, want to think about another date for the regular July EDA meeting, as there is eleven items on the HRA meeting that is to be held the same night at Parkview Villa. The meeting wouldn't start until really late. Murzyn Jr. stated he would talk to Streetar in the next week about this matter. ADJOURNMENT President, Murzyn, Jr., adjourned the meeting at 6:58 p.m. Respectfully submitted, ~/ &/~- Cheryl Bakken Community Development Secretary H :\EDAminutes2006\7 -10-2006 special