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HomeMy WebLinkAboutEDA MIN 05-23-06 ECONOMIC DEVELOPMENT AUTHORITY (EDA) REGULAR MEETING MINUTES May 23, 2006 CALL TO ORDER/ROLL CALL President, Murzyn, Jr. called the meeting to order at 7:07 p.m. Present: Don Murzyn Jr., Patricia Jindra, Bobby Williams and Bruce Nawrocki, Tammera Diehm, Gary L. Peterson and Bruce Kelzenberg PLEDGE OF ALLEGIANCE CONSENT AGENDA Approve Minutes of March 26, 2006 regular meeting and the Financial Report and Payment of Bills for the months of March and April, on Resolution 2006-03. Nawrocki asked if there are two separate checking accounts, as in March staff only spent $1,600 dollars, which is hard to believe. Streetar stated payroll and any other deductions that finance would deduct automatically, without writing a check processed from our department aren't shown on the check history. Nawrocki stated in the April budget there is a check written to TR Computers, what is that for. Streetar stated the City bought a program called Cityview that should have worked for permits also, but later found out it did not. Staff researched other similar products and purchased the Permit Works Program and the amount listed is for the software, installation and training. MOTION by Diehm, second by Peterson, to approve the consent agenda Items #3 and #4 as listed. All ayes. Motion Carried. BUSINESS ITEMS Resolution 2006-04. Sarna Contract for Private Redevelopment Schumacher stated the EDA board authorized staff to work with Sarna Inc. in developing a contract for private development for construction of a restaurant on the corner of 40th and university. Due to some complexities with the property like: MNDOT, frontage road turn back, site easements, title issues, road vacations, access agreements, utility relocations, off site improvements for M.E. Global and associated costs sharing, and soil correction and contamination. This contract was delayed until now. To date the approved actions on this project are: 1) preliminary plat; 2) 1st reading for the vacation of lookout place by City Council; and 3) variance application. The next step would be for the final plat approval by Planning & Zoning and City Council and the 2nd reading of the vacation of lookout place. EDA board established a purchase price of $75,000, the developer requested a credit for environmental and geotechnical soil corrections in the amount of $120,350. The City obtained a CDBG grant for soil correction in the amount of $64,000 to offset a portion of these costs. The $56,000 baiance would be deducted from the $75,000 sale price, leaving a development agreement final price of $18,650. This write down is consistent with the assistance given to the redevelopment of the Industrial Park. Nawrocki stated the price of $18,650 is ludicrous, we paid a consultant to do a financial review, who talked about $7.00/ square foot on the low range and asked who is Sarna Inc. and have we looked at their finances. Schumacher stated Mr. Sarna is one of the officers. Mr. Norton, Kennedy & Graven, stated the company is registered with the State, they are a viable corporation, Kennedy & Graven does not look into their finances and stated he did know the officers are listed with the Secretary of State. Economic Development Authority Meeting Minutes May 23, 2006 Page 2 of8 Nawrocki stated on page 8, (v) the redeveloper paying fee in lieu of providing on-site storm water ponding, how is the storm water ponding, going to be handled on this site and will the $37,400 cover all of the costs. Schumacher stated they will be handled with an 18" storm sewer pipe, and that he got the $37,400 figure from the City Engineers and that Kevin Hansen would deal with it if it wasn't enough. Nawrocki stated page 8, Section 3.4 Title, has all of the title issues been resolved. Norton stated they have been. Nawrocki asked on page 13.9 Administrative Costs, what are they. Schumacher stated they are primarily legal costs for Kennedy & Graven, not staff time. Nawrocki asked if that is the case, why are we charging the residents of Parkview Villa approximately $35,000 per year for staff time. Streetar stated that was a good question. Staff could always charge their time on a project, when in fact what that does is extends the Tax Increment District. To use Parkview Villa as a comparison is okay but there is a few hundred thousand dollars in debt service every year that they don't pay. In the City we charge based on what the project costs, we don't charge for this because it is in a TIF district, the decision is when we would get paid back. Nawrocki asked about the cost of the attorney. Schumacher stated his fees are a part of this agreement. Murzyn Jr. asked if the administrative fees aren't a part of the Parkview Villa budget, so that it is voted on yearly. Streetar stated yes it is. Nawrocki asked where is a picture of the property. Streetar stated there isn't a copy in the packet as that would come later with the final plat before the Planning Commission and City Council. They have already approved the preliminary plat. Nawrocki stated we have already approved the parking, and wondered what the width of the spaces would be. Streetar stated they are 9 feet. Murzyn Jr. asked, if that wasn't already agreed upon by Gondek and Sarna's. Schumacher stated it was. Nawrocki asked what the size of the alley would be. Schumacher stated he did not see it listed in the agreement, but Kevin Hansen put it in the development agreement that it is the responsibility of the developer to meet the City standards for sidewalks, alley construction, curb and gutter, that is why we have a $94,000 escrow to make sure it is done correctly. Fehst stated it is generally 12 feet. Schumacher stated Hansen has to base the figures on the size of snowplows, maintenance trucks, etc. Resident, Joyce Shellito stated she asked to be notified about meetings, this one she wasn't notified, she received a letter a while ago about a Planning & Zoning meeting and found out that day the meeting was cancelled by calling the City, she wanted to know who pays for this. Murzyn Jr. stated the City does, he did not know what this instance was, but things are dropped from meeting agendas periodically. Resident, Michael Gondek stated there are approximately 20 to 25 trees on the site that he would hope would get some of them replaced, not the same ones, but some new ones. Murzyn Jr. asked if this agreement shows trees. Schumacher stated on the final plat that goes to the Planning & Zoning commission it will show the landscaping. Diehm stated that repeatedly they have heard from Nawrocki that our own consultant valued this property at $7.00/square foot. It was her understanding there was one statement in the report we got, which said that restaurant property in the Twin Cities goes for an amount equal to $7.00/square foot, and wanted to be clear that wasn't making any representation about the value Economic Development Authority Meeting Minutes May 23, 2006 Page 3 of8 of this property and that she felt some of that value was impacted by some of the contamination found on the property. It was important to her to make sure that was clear. Nawrocki stated he disagreed because we hired a consultant to give us an estimate of the property, and that is what they said. Nawrocki asked where M.E. Global is on this and what happens to the highway property adjacent to their property. Schumacher stated M.E. Global is just to the south, the highway property will be removed all the way from 40th down to 37'h, in front of the Schafer Richardson project and ME Global would receive a new driveway. Staff has a pretty good relationship with their staff and they are in the process of executing a deed that will come before City Council. Peterson stated most of the questions that have come up tonight, have been addressed with the satisfaction of the Sarna's and Mr. Gondek, we have the alley required, we have the landscape, utilities and other issues resolved, we need to stop wasting everyone's time and make a decision. Motion by Peterson, second by Kelzenberg, to Adopt Resolution 2006-04, a Resolution Approving a Contract for Private Redevelopment, including the sale of land, between the Columbia Heights Economic Development Authority and Sarna's Inc; and furthermore, to authorize the President and Executive Director to enter into an agreement for the same. Nawrocki stated he doesn't have the same relationship that the mayor has with the Sarna's. Shellito stated she doesn't have that relationship with them either, she was told they would be getting the trees and fencing along the property, and it doesn't look like that on here. Peterson stated we require an 80% opaque fence, which Mr. Gondek doesn't want, so that is something that will be addressed at the Planning Commission meeting. His relationship with the Sarna's is that he has met with them many times, and did go to school with the Soltz brothers, who represent the Sarna's. Nawrocki stated he begged to differ, you want to ask a question at a public meeting, Shellito was right, there were discussions in the past regarding fencing, screening and so forth, and now they are trying to change them. Streetar stated that we probably won't be able to solve all of Mrs. Shellito's problems tonight, but the planning commission meeting is a great place to be to solve the issues on trees, fencing, which is a public hearing and then you'll have another opportunity to speak on these issues at the City Council meeting. Nawrocki stated then we would hear the old story, that it was all resolved at a previous meeting held someplace else. Streetar stated our ordinances are very clear as to what landscaping developers can do. Upon Vote: Jindra-aye, Nawrocki-nay, Williams- aye, Diehm-aye, Kelzenberg-aye, Peterson- aye, Murzyn-aye. Motion Carried. Fehst said you can do these deals many ways, like we could have charged you $300,000 and you would not have done the project, this was a result of constant negotiating, the property is very difficult for a one patron piece of land and wanted to thank staff and the Sarna's for all their time spent on this. Nawrocki stated as long as he brought up the subject of values, what did Taco bell pay for the car wash property. Fehst stated $500,000, so what we aren't putting anything into the property, the property were talking about tonight has a lot of problems. Economic Development Authority Meeting Minutes May 23, 2006 Page 4 of8 Preliminary Development Ameement with Sherman and Associates Streetar stated the EDA directed staff to work with have Sherman and Associates Inc. to prepare a Preliminary Development Agreement for the 39th and Central project area. This area was cited for redevelopment in 2002. Since then, we have completed the following: 1) acquired and demolished the Burger King; 2) completed inspections of all three properties, which shows they are blighted, and would qualify for TIF funding; 3) completed a phase I environmental site assessment, indicating a high probability of contaminated soils; 4) completed phase II environmental site assessment, which the report is expected to be complete in August; 5) completed real estate and fixture appraisals; 6) toured six other infill redevelopment sites in other metro area cities; and 7) prepared four redevelopment concepts with assistance of DSU. Sherman must conform to the goals of the Design Guidelines, the Comprehensive Plan, and the feedback from community meetings, as weli as the planning concepts and EDA feedback. Streetar stated he also talked to Becky Loader at the library, who said they would like you to consider putting the City Library on the main level, which he felt would add to the amenities of the City and of Central Avenue. If this is something the board is interested in, please let staff know tonight. Loren Bruggemann, Vice President of Sherman and Associates, stated they have been around since 1991, do about 1,000 units of housing per year, half for rent and half for sale, currently working in Des Moines, Duluth, St. Paul, Milwaukee, this project was exposed through DSU and the EDA. His feedback is that site has potential for senior housing, with some commercial, some retail that might be separate, some value in having a City entity in the building, and that they are willing to look into any ideas the board may have. Fehst said Bruggemann mentioned the retail part might be separate, and in talking to the City Manager of Little Canada they had built a unit with retail below, that does not work, what makes it work. Bruggemann stated it depends on your site, in Robbinsdale, that wasn't a good site, in Falcon Heights it is an excellent site, you have to think of the retail as an amenity to the residents. In both cases you are talking about the rental fees, it is an underwriting qualification. Nawrocki stated they did the Bottineau Project on University and 18th, which he didn't feel would be very desirable in our community, as they are mostly rental. They also did a project in Falcon Heights, which was very nice. He strongly felt we should go out for bids and had talked to Streetar about it, who told him to call Murzyn Jr. and didn't hear anything more. He called Streetar a week or so ago and asked if we were going out for bids and he said no. Murzyn Jr. stated the board said we are going to do this and just because you called me, does mean he can just go ahead and change the board's decision to entertain a proposal about doing the development. Nawrocki stated he didn't realize the board had made a decision to go ahead with this outfit and that means we can't talk to anyone else. Murzyn Jr. stated, no, it does not. Nawrocki stated he did some checking on the company and Sherman doesn't put very much of their money into a project, but uses others. Bruggemann stated that was a very unfair statement. Fehst stated there are two things he agreed with: 1) Sherman isn't going to be involved unless they are going to make a profit; and 2) we aren't going to get into an agreement that we aren't interested in. Streetar stated if you look in the agreement, the council isn't tied to this concept, the comprehensive plan goals and the feedback we had from the residents meetings, it provides a broad goal. Mr. Nawrocki as your always saying, the market will decide, there may be more than a few opportunities. What Sherman is saying is this is the broad picture. You have a choice of what goes there. Economic Development Authority Meeting Minutes May 23, 2006 Page 5 of8 Diehm asked if we are spending any money to get into this agreement? Streetar said no. Diehm asked are they covering our costs incurred from the investigation of the property? Streetar said yes. Diehm asked are we obligated to agree to anything that they bring back to us? Streetar said No. Bruggemann stated they use a lot of market tax credit, their most significant project where they used this is the Sears project, one that if you talked to the mayor and City Council of Minneapolis they would say in the beginning the project was a no go. Streetar stated a broker from United Properties contacted him about three weeks ago about an Old Chicago Restaurant possibly locating on Central Avenue, which he directed him to Sherman and Associates. Bruggemann stated he did talk to them, and that certainly is a possibility for the site. Streetar stated we are talking about three parcels, Burger King, Mady's and White Rental, if you want to include more of the housing area, let us know tonight. Murzyn Jr. stated personally, he would like to see housing off of Central Avenue. Kelzenberg agreed. Motion by Diehm, second by Peterson, to execute the Preliminary Development Agreement between the EDA and Sherman and Associates, Inc.; and furthermore, to authorize the President and Executive Director to enter into an agreement for the same. Kelzenberg told the board he is on the library board and at their recent meeting, they decided they would like to be somewhere else, they would prefer to be somewhere else in the City. Peterson stated when we first saw the development concepts we thought they were very interesting, residents have called him saying you brag about Columbia Heights, where is the shopping, he felt this was a good mix. Sitting in this meeting we look very anti-business, but we really aren't, we want to go into an agreement with a good relationship, we want increased tax dollars in the City, and we want to work together as partners to accomplish both of our goals. Mr. Lentness, owner of the Heights Theater stated any kind of restaurant that isn't fast food would be great for his clients. It is a strong incentive with the new housing and shopping to draw people into the City, there is something exciting and inviting in the City. Upon Vote: Nawrocki-nay, Jindra-aye, Williams-aye, Kelzenberg-aye, Peterson-aye, Diehm-aye, Murzyn-aye. Motion Carried. Industrial Park Redevelopment Update Schumacher stated Stacie Kvilvang and Mark Ruff from Ehlers, Jim Crowl, from ProSource are here to answer questions. Phase is doing quite well, six models are available, 50% of the lighting is up along the parkway, focusing on finishing the round about by June 5, in time for the jamboree, landscape architect has a couple of ideas for the city council to look at, all curbing is in from Jefferson to 5th, all storm sewers are in, grading has been done, planting will be done around the base of the holding pond, packing trails. Phase II, where the foundry was, the City has completed with the contamination, some storm sewer replacement is done, Schafer Richardson and Ryland are removing the Linseed Oil on the southeast corner, which isn't considered a contaminant by the MPCA, but they are going to remove it by there own choice. Economic Development Authority Meeting Minutes May 23,2006 Page 6 of8 Phase III is coming along and you should see some construction in the next week or so. They will be starting the bidding process to clean up the Grief Site contamination. Williams asked if Ryland has said where the people are coming from that are buying the units. Schumacher stated about a third are from the community, with the average sale price of $247,000, which is a little higher than the $230,000 we had anticipated. Stacie Kvilvang, Ehlers & Associates stated since the EDA and City signed the Development Agreement with Schafer Richardson back in 2004, they wanted to give the board an update on the TIF status. The budgets are based on estimates and tell you how the project will perform, we don't know what the actual costs will be until you get into the project. So far, the project has over projected. There are three costs: 1) property acquisition increased by $852,000. Grief property came in below estimate and Schafer Richardson property came in at $510,000; 2) Remediation not funded by grants which is currently at $1.4 million. She commended staff in getting so much funding from other sources, as usually cities don't work this hard; and 3) relocation not funded by grants- this is over budget by $1,065,000. There are several factors that go into that: a) until you actually get into the property to see what they have; b) understand what is considered fixtures; and c) look at the relocation areas that would work for them. Keep in mind these businesses are not getting rich from this, if they don't use the money, they don't get it. Nawrocki asked why Schafer Richardson's property remediation was higher when they are the developer and who makes up the difference. Ruff stated that in the beginning we set up a process where we would undertake an appraisal and if they didn't like that number they would get one themselves, we would discuss the appraisals, come up with a more reasonable price and the difference would come out of TIF. Their relocation process was lower as they kept their property rented until they actually needed to relocate. Kvilvang stated there are several factors which will determine the need for additional TIF and/or a longer term of TIF: 1) final costs are higher/lower than current projected estimates; 2) the reduction in overall tax rate will generate less TIF over time; 3) unsuccessful procurement of grants by the City to offset the increased costs associated with remediation; 4) unit sale prices that are higher than anticipated can potentially reduce the term of existing or additional TIF required; and 5) interest rates on final debt may be higher or lower than estimates. Nawrocki asked if Schafer Richardson is getting tax funds now. Ruff stated no. Nawrocki asked why are we looking at it now if they aren't getting any money. Ruff stated there are a couple of reasons: 1) It is much easier to remember if the numbers are fresh in your mind and 2) there was another TIF project that we didn't do this on and the numbers came up as a surprise, so we want to avoid that happening again. Stacie has four books full of invoices on her desk of expenses that she reviews and determines which are eligible. Nawrocki stated there should be a running total on what the costs are. Ruff stated we have been verifying costs, environmental costs have not been made, so he cannot tell you about that yet, but if you wanted to know what the City has been billed by Ehlers or anyone else, he has a spreadsheet that he could show him, and that all out of pocket expenses have been billed to the developer. . Nawrocki said Streetar has showed him some costs on paper, maybe dumby me, but I still don't know what the running total is for the tax increment cost. He would think everybody would be interested in how we are doing on this project. It blows his mind that nobody seems worried about it. Ruff stated he would be more than willing to come in and explain it to the board. Economic Development Authority Meeting Minutes May 23,2006 Page 7 of8 Stacie stated she only brought the larger costs. Streetar stated in the development agreement there is a schedule H, what they are saying today is this is the difference between that $7.9 million and what we know today. Nawrocki stated he still isn't satisfied that we've got a handle on where we are running on this project, it blows his mind, and would bet in a private enterprise people would be watching the books a hell of a lot closer. Streetar stated he had to disagree and doesn't think there is evidence to support that, you've got City staff, the developer, Ehlers staff, Met Council and the auditor checking these numbers, and they don't have a problem, they understand them. Nawrocki said, okay so I'm a dumby, if you are so God Damn smart, you ought to be able to show me. Murzyn Jr. stated we understand that you may need some kind of explanation to help you understand it, that is wonderful, but lets not do it on the board's time. Nawrocki stated he is saying this is a public meeting and that kind of information should be public, that's part of it. Murzyn Jr. stated maybe we should bring in those damn books and go over the expenses page by page so we can see what they are, because you don't think the people that are required to do that are doing a good job. Nawrocki stated well your entitled to your thoughts, I'm entitled to mine, and I need to feel comfortable when I talk to the good citizens of the community that I am giving them good information. Ruff stated what Stacie is trying to say is this is what we estimated before and this is where we are today. Nawrocki stated this is not the information he has been asking for at Council meetings. He has talked to Streetar, maybe he is so damn smart and I'm so damn dumb, he isn't understanding, but he needs someone to make it clear, whether if it's you or someone else, his looking for a better financial report on where we are. Ruff stated Stacie said the information you would like to know is: 1) the tax increment district will run three years long because of all these costs, and what Stacie went over was that we can't make that factual statement, because we don't know what interest rates are, we don't know tax rates are, we don't know what property values are, and we don't know who the tax rate will be built out, so make a public statement like that we would have to come back and retract it in a year or two is probably more harmful for the Cities reputation than updating you as we are tonight. Schumacher stated he asked Jim Crowl from ProSource to be here to answer any questions on clean up issues. So if you have anything, please ask him at this time. He had to say that ProSource has been the best company to work with on this project; they check figures, they do a very good job and should be commended for it. ADMINISTRATIVE REPORTS Activitv Center Streetar stated on June 5 at the City Council work session, the Community Center Committee is going to present the communications plan to City Council for comment and review. The Communications Plan is the need statement and key messages to key stakeholder groups in the City. There are two members of the committee; Barbara Miller and Kathryn Vesley that advocated strongly for a Community Center to include a Library. He suggested they come to the June 5 work session to see what direction the City Council would like to go in considering a Library. The group has met twice. The first meeting was at Murzyn Hall. The second meeting was a bus tour to two other cities (Andover and New Brighton) to see what their Community Centers are like. Mr. Nawrocki attended and the third meeting to be held tomorrow night at 7 pm at Grand Central lofts to prepare for the work session. Economic Development Authority Meeting Minutes May 23, 2006 Page 80f8 Heritaqe Heights On June 51h, this group will be at the work session to update the city on what they have been working on. They have met and prepared five concepts for the area. The first four are a combination of commercial and residential and the fifth one incorporates a Community Center for the simple reason that under the new eminent domain law there will be no redevelopment in that area, unless you could acquire the buildings voluntarily. Nawrocki stated he heard the legislature passed the eminent domain bill. During its travel through the legislature, Barb Goodwin tried hard to get the Columbia Heights projects exempt from the legislation bill and was not successful. The final legislation that was passed, as he understands it, exempts all projects that are underway. He had two questions: 1) is that true and 2) what is the standard for projects to be considered exempt. Streetar stated if you certified a TIF district on or before February 1s1 of 2006 it would be exempt. If this were a year ago, our Industrial Park would not be considered blighted, the project would not have happened. In order to be considered blighted a parcel has to exceed 100% of the estimated market value, which we don't really have out here. Nawrocki asked if the Mady's site would be eligible. Streetar said no, but that property is so contaminated it might qualify, we just don't know at this time. Jim Crowl stated there was a dump on the site years ago, ProSource took a backhoe and found extensive contamination, which starts at the Burger King site and extends to both of the other properties, we would look at the cost of the clean up, and then you would get the answer that Bob was talking about. ADJOURNMENT Motion by Peterson, second by Diehm, to adjourn the meeting at 9:28pm. All ayes. Motion Carried. Respectfully submitted, ~,~d'~- Cheryl Bakken Community Development Secretary H:\EDAminutes2006\5-23-2006