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HomeMy WebLinkAboutEDA MIN 04-04-11 ECONOMIC DEVELOPMENT AUTHORITY (EDA) MINUTES OF THE SPECIAL MEETING APRIL 4, 2011 The meeting was called to order at 7:00 pm by President-Gary Peterson. Members Present: Bruce Nawrocki, Gary Peterson, Bobby Williams, Donna Schmitt, Tammera Diehm, Marlaine Szurek, and Gerry Herringer Staff Present: Walt Fehst, Scott Clark, Sheila Cartney, and Shelley Hanson. 2. PLEDGE OF ALLEGIANCE- RECITED 3.CONSENT AGENDA 1.Approve the Minutes of February 22, 2011. 2.Approve the Financial Report and Payment of Bills for February 2011 per Resolution 2011-03 Questions from members: Nawrocki stated he is still waiting for answers to some of his questions noted in the minutes from the last meeting. Clark reviewed each item in question and gave a detailed response. Nawrocki then asked what the three expenditures were on page 4 of the Financials. Clark told him they were the rebates issued for the Home Improvement Rebate Program. Nawrocki then asked about the County Grant posting of $4,886.66 on page 7 of the report. Clark explained that was actually a 2010 expenditure for the Make Heights Your Home Program, and that the Finance Department will be correcting the financial reports as necessary. Motion by Nawrocki, seconded by Herringer, to waive the Reading of Resolution 2011-03, there being ample copies available to the public. All ayes. MOTION PASSED. Motion by Nawrocki, seconded by Herringer,to approve the minutes and to adopt Resolution 2011-03, approving the Financial Report and payment of bills for February 2011. All ayes. MOTION PASSED. EDA RESOLUTION 2011-03 RESOLUTION OF THE COLUMBIA HEIGHTS ECONOMIC DEVELOPMENT AUTHORITY (EDA) APPROVING THE FINANCIAL STATEMENT FOR FEBRUARY 2011 AND PAYMENT OF BILLS FOR THE MONTH OF FEBRUARY 2011. 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 EDA COMMISSION MINUTES PAGE 2 APRIL 4, 2011 WHEREAS, the financial statement for the month of February 2011 has been reviewed by the EDA Commission; and WHEREAS, the EDA has examined the financial statement and finds them to be acceptable as to both form and accuracy; and WHEREAS, the EDA Commission has other means to verify the intent of Section 469.096, Subd. 9, including but not limited to Comprehensive Annual Financial Reports, Annual City approved Budgets, Audits and similar documentation; and WHEREAS, financials statements are held by the City’s Finance Department in a method outlined by the State of Minnesota’s Records Retention Schedule, NOW, THEREFORE BE IT RESOLVED by the Board of Commissioners of the Columbia Heights Economic Development Authority that it has examined the referenced financial statements including the check history, 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 check history as presented in writing is approved for payment out of proper funds; and BE IT FURTHER RESOLVED this resolution is made a part of the permanent records of the Columbia Heights Economic Development Authority. Passed this 4th day of April, 2011. MOTION BY: Nawrocki SECONDED BY: Herringer AYES: All ayes BUSINESS ITEMS th 4. 37 and CENTRAL PROPOSAL Clark reminded members that at the February 22, 2011 EDA meeting Chris Little, along with a th representative from O’Reilly Auto Parts, presented a plan for the 37 and Central Redevelopment site. It was emphasized that O’Reilly’s will be vacating their current location in the 4200 block of Central Ave. and it is their desire to 1) Relocate within the city and 2) To own a 7,600 sq. ft. facility. The construction of this subject building would need a development agreement amendment due to the size of the building (amended agreement had a minimum of 9,000 sq. ft.) and was specific to a given site plan and architecture. The issue that was discussed by the EDA was the use of the facility and whether or not it meets the spirit and intent of the original agreement. The design of the building was not an issue as it does meet the City’s design guidelines (if approved the building will need to go through the Planning Commission for site plan review.) The major concern was the amount of public subsidy for this type of facility. EDA COMMISSION MINUTES PAGE 3 APRIL 4, 2011 Staff met with Chris Little after the meeting to discuss whether the subsidy level could be modified. Chris presented staff with information, which he shared with the Commission members at this meeting, regarding a purchase agreement from O’Reilly’s. Clark stated that based on the purchase price and some of the known expenses, the developer will lose at least $60,000. The only adjustment in the amount of the stated subsidy will be a reduction of $15,000 in interest write-down since the original $43,600 loan will be repaid after three years instead of ten years (meaning the grant and in- kind assistance will be reduced from $369,998 to approximately $354,000). Clark went on to explain that the purchase price O’Reillys has committed to is approximately $16/sf which is in line with the current market price for a corner piece of property on Central Avenue. Clark stated he had checked with Larry Pietrzak from NE Bank who is familiar with local market values, and that he also thought the price was fair. Clark then reminded members that when the Savers appraisals were done, the Court decided $15/sf was a fair price for that site. Although the aforementioned amount seems high for a redevelopment with the end use being an auto parts store, staff would like to state the following for discussion or thought: 1)Redevelopment costs do not translate the same way that private side transactions occur (meaning that the key measurement for a private side success is the return on investment. Redevelopment carries with it other objectives including creating the ability to build new and create new reinvestment opportunities in the city). A portion of these dollars went to demolishing four buildings (two of them single family homes) that had marginal utility left in the buildings. 2)The demolishing of these buildings, and subsequent land assemblage with the developer, provided a reasonable sized lot that could be developed on. 3)The development will increase the tax base (new building versus the four old buildings) by approximately $15,000 annually. 4)The risk to the EDA, and an important policy question, is the willingness to do nothing with this property for an extended period of time. The proposal at hand is real with an end user desiring to start the development process immediately. 5)The end user is relocating, within the city, from a leased space user to one that will own property. One of the issues associated with redevelopment agreements is the difficulty associated with moving away from the original plan. Unfortunately, development agreements often times run into the vagaries of the market and in this case, the market changes are long term. The new use fits into what is present in the immediate area, the design will meet all of the City Ordinances, taxes are increased, an existing business will be investing in the city, and a difficult site (square footage and depth) will have an appropriate sized retail establishment. Staff recommends these changes, and if agreed upon, the next step would be a formal development agreement modification at the next meeting. EDA COMMISSION MINUTES PAGE 4 APRIL 4, 2011 Questions from members: Nawrocki wanted to know how much money had been expended thus far on this site that once included the restaurant on the corner, the office building and two houses. Clark responded that the City has a net amount of $205,200 into the property thus far, plus $105,000 CDBG funds that were used for the purchase and demolition of the two homes. Clark reminded members that the City purchased the Beecroft Office Building for $248,800, but is to receive $43,600 back from the developer that was considered a loan. He went on to explain there are other costs involved such as the $30,000 for State Aid road modifications required by MNDOT, $133,000 land value write down, and $21,800 interest write down. Clark stated the figure of $354,000 noted in some of the documents was a calculation arrived at to make a determination on whether the property had to go through the business subsidy process. This was arrived at using a formula of various costs and valuations. Clark also pointed out that Chris Little purchased the Chutney Restaurant for $575,000, plus closing costs for a total of $593,000. The City did not expend funds for that property. Nawrocki asked what benefit this would be to the City. Clark responded that it would provide the City with a 7,600 sf freestanding building that rid the City of some very, blighted properties. It would also generate approximately $15,000 more in tax revenue than what the old buildings would have generated in today’s market. Plus we retain a business that wants to stay in our City. The alternative would be to deny the project and let the site sit as is for an indefinite amount of time, which costs all parties ultimately. There has been little interest in the site, even though Chris Little has worked hard to get some small retail businesses to commit to being part of the development as originally planned. Peterson stated the only thing that has really changed is that it is a smaller building than the one originally planned for the site. Herringer asked if the modification to the turn lane was still going to be a requirement since the scope of the project has changed somewhat. Clark informed him that it would still be required. Diehm stated she had read the minutes and felt the consensus was that “it was better than nothing”. She said they faced a similar decision last year regarding the Grand Central Lofts site when the construction of rental units was considered. At that time, the Council decided to stick with the original agreement, and denied the amended plan. She thinks the Board needs to be consistent in their decision making. Peterson said that is not comparing apples to apples. The size of the sites is different, which limits what can be done on them. He also said the prospect of adding more rental to the City is what ultimately killed that project. Herringer agreed and stated that amending that agreement was difficult especially since there had been promises made to condo owners who currently are part of the project. EDA COMMISSION MINUTES PAGE 5 APRIL 4, 2011 Chris Little said he understands the Board’s disappointment that this development isn’t exactly what they had envisioned. He stated he had worked hard to get a coffee shop to commit to the site, but no one was interested in that location. He told members he didn’t bring a fast food, drive through concept to the Board even though there was some interest by that type of business. Chris said the other thing to consider is that O’Reilly’s is set to move to a location in NE Minneapolis if this doesn’t get approved, as they are definitely leaving their present site. Herringer said he thinks if the developer can soften the financial impact to the City that it might help the Board approve the amendment needed to change the scope of the project. He didn’t suggest a dollar amount--that would be up to the developer. He didn’t have an issue with the usage and thought it would fit into what’s currently in the area. Chris stated that he has already taken a financial hit on this project and has sat on the property for three years in an attempt to get a development the City would accept. He reviewed some of the costs he has incurred thus far, and noted that he has lost closer to $130,000 than the $60,000 previously stated. Peterson said there are two things that seem to be an issue. The Board must decide if the development for a new O’Reilly’s store is an acceptable one for that site, and if the financial terms are acceptable. He stated that everyone who has invested in Real Estate over the last couple of years has suffered losses. This is true for the developer and for the City itself. Walt said he thinks the neighbors in the area want to see it developed or seeded to improve the overall look of the site. If it is seeded, then it will have to be maintained indefinitely until such time that is developed, which could be years. Diehm asked if the Development Agreement is amended, does Planning and Zoning also have to approve the Plan for the parcel. Clark stated, yes, it would go through a Site Plan approval process. There was a discussion which process would happen first. Nawrocki stated that it is not the most desirable use of the site, but admitted that the building design is fairly decent. However, he is mostly concerned about the public money being used to get the property developed. He thinks the old businesses and houses should have been left in place longer. He expressed his desire to hold out and wait for something more lucrative to come along. Schmitt stated that it is time to cut our losses and move forward. She appreciates that a local, nationally known business wants to relocate within the City. Whatever decisions were made in the past, are in the past, and the market has changed which is something we do not have control over. She pointed out that we need to move forward with what is available now and make decisions that continue development of our city and add to the tax base. EDA COMMISSION MINUTES PAGE 6 APRIL 4, 2011 Szurek said she is not totally happy with the proposed project, but also recognizes that O’Reilly’s is willing to spend money to build within our City and it will add to our tax base, so she can accept an amendment to the Development Agreement that will allow this to move forward. She also stated that this is reflective of our population and income level of our residents. This is a business that will work because the residents nearby are the ones who frequent this type of business and who work on their cars. She would, however, like to see the sides of the building visible to traffic be softened somehow to make sure the design is appealing. Peterson asked Nawrocki what figure he had in mind that would make this a more acceptable alternative plan? Clark stated the money that has been expended to date for both the City and the developer won’t change. We have both lost something in this venture due to the change in market conditions and values, and the ability to get construction loans for re-development. Clark then suggested that the Board decide on a definable amount to put on the table for the developer to consider, such as the turn lane modification expense that is required by MNDOT. This is an expense of approximately $30,000 that could become the developer’s responsibility rather than the City’s. This expense is to move the driveway further north to meet the distance requirement from the corner. The consensus of the Board was this was an acceptable modification in order to amend the Development Agreement so the proposed O’Reilly’s building could move forward. Motion by Diehm, seconded by Herringer to move forward with amending the Development Agreement to allow for the construction of an O’Reilly’s Auto Parts Store, with the understanding that the Developer agrees to be responsible for the cost of doing the turn lane modification as required by MNDOT. Ayes-Williams, Schmitt, Diehm, Szurek, Herringer, and Peterson Abstain-Nawrocki MOTION PASSED. Clark said the amended Development Agreement will be brought back to the EDA for approval at the next meeting. In addition, the Planning and Zoning Commission will consider the Site Plan at its June or July meeting. 5. OTHER BUSINESS Clark told members that it is unlikely the City will be acquiring the Mady’s site. There is a pending sale on the property. Nawrocki asked about the status on the commercial piece at the Grand Central Lofts site. Clark said there is nothing new regarding that site and he believes the property is still owned by E. Khoratty. Clark told members that the Site Plan for Aldi’s is being considered by the Planning and Zoning th Commission at the April 5 meeting and that McDonalds will be doing a half million dollar remodel of its restaurant that will be on the May or June Planning and Zoning agenda. EDA COMMISSION MINUTES PAGE 7 APRIL 4, 2011 Clark reminded Herringer and Szurek they are invited to attend the Special HRA meeting being held th Thursday, April 7 to interview the two companies who are interested in purchasing Parkview Villa. The meeting will be held at the Public Safety Building. The next meeting is scheduled for Monday, May 2, 2011 at City Hall. The meeting was adjourned at 8:00 pm. Respectfully submitted, Shelley Hanson Secretary