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HomeMy WebLinkAboutEDA MIN 05-05-14 ECONOMIC DEVELOPMENT AUTHORITY (EDA) MINUTES OF THE MEETING OF MAY 5, 2014 IN CONFERENCE ROOM 1 The meeting was called to order at 6:30 pm by Chair Peterson. Members Present: Bruce Nawrocki, Donna Schmitt, Bobby Williams, Marlaine Szurek, Gary Peterson, Gerry Herringer, and Tami Diehm. Staff Present: Walt Fehst, Joseph Hogeboom, and Shelley Hanson. 2. PLEDGE OF ALLEGIANCE- RECITED 3CONSENT ITEMS . 1.Approve the Minutes from April 7, 2014. Motion by Diehm, seconded by Williams, to approve the minutes of April 7, 2014. All ayes. MOTION PASSED. NEW BUSINESS 4. Northeast Business Center-Request for Support of Project Hogeboom told members that during the past year and a half, the City Council has discussed the possibility of acquiring part or all of the Northeast Business Center property. The City ultimately has chosen to focus on relocating the new Library to an alternate site, therefore ceasing discussions concerning a partnership with the Northeast Business Center. The owner of the Northeast Office Center is currently pursuing another option for the property, and is working with Schuett Companies, Inc. to develop affordable senior-targeted housing on the upper floors of the building. As part of its proposal, Schuett Companies is seeking to develop approximately 80 units which would be comprised of one and two bedroom plans. To qualify, perspective residents must earn at or below 30% of average area household income. To finance this proposal, the developer is seeking funding sources that are managed through the Minnesota Housing Finance Agency (MHFA) and the Metropolitan Council. To qualify for financing options, City support of the project is required. Specifically, the developer is seeking authorization to submit funding applications, as well as for the City to create a “Community th Revitalization and Stabilization Plan” which would focus on the 40 Avenue/Central Avenue intersection. A representative for the project will be present at the EDA meeting to discuss the specific details about the proposal and to officially request the City’s support of the project. In addition to fundamental support of this project, the developer is requesting that the EDA consider property tax abatement for economic development purposes. A tax abatement could be either be permanent forgiveness or temporary deferral of property taxes, up to a certain limit. The developer has enclosed additional information about the property tax abatement process. If the EDA selects to consider tax abatement for this project, it should direct staff to work with Ehlers and Associates to create a tax abatement plan. EDA Minutes Page 2 May 5, 2014 Hogeboom said if the EDA chooses to endorse this project, staff recommends to formally enact a motion that provides support of the project and directs staff to work with the developer to seek funding opportunities and to create a Community Revitalization and Stabilization Plan for this area that would include the Northeast Business Center site. Questions/Comments from members: Diehm reminded members that she would be abstaining from any discussion and any voting on this matter since there is a potential conflict of interest as her Law Firm represents Schuett Company. Representatives from Schuett group were present to answer questions. Becky Lander, Alisha Witherspoon and Jim Schloemer from Kaas-Wilson Architects gave an overview of the Company’s other facilities throughout the state and some of the services they provide to seniors. Becky said the plan for this site is to remodel the facility into 80 units, mostly 1 Bedroom which will provide “affordable” housing for those 62 years of age and older. Residents would have to have incomes 50% less than the established median income rate. The building would not be open to anyone under 62, unless it is a spouse of someone over 62 years of age. She said Schuett is building these types of facilities as it is the trend with an aging population to keep people in their homes longer by providing services to them as they need them. They have recently constructed facilities in Thief River Falls, Detroit Lakes, Downtown Minneapolis, and Downtown St. Paul. The units will be geared to accessibility for the elderly. st Szurek asked if the Bank would be staying or leaving as the plans indicate they would be using 1 floor area for another use. The representative from Schuett said the plans under consideration for tonight are for the upper floors only. The first floor is unaffected at this point. The long term arrangement with NE Bank will have to be negotiated. NE Bank wants less space and they need to re-work the lease terms. If they can come to agreeable terms, Schuett would like them to stay. st Herringer asked if 1 floor, street level would have apartments also. He was told if the bank leaves, then the activity/community space would probably be placed on the first floor. They are also contemplating trying to get a small clinic to go into the first floor area or something else that would be compatible to the residential use. Herringer then asked if they would be making changes to the exterior of the building. Becky stated they would be changing out the windows for ones that are operable. Hogeboom asked if Schuett would be increasing the parking ramp as previously discussed and was told that they had changed their minds on this for now. Nawrocki stated he thought that Schuett should be able to find their own financing if they wish to pursue this project. He doesn’t think the City should subsidize anymore rental housing. He also feels that there is enough subsidized housing in the City already and that we don’t need to lose more tax revenue by allowing such a project. Nawrocki went on to say that he doesn’t feel this is the best use of the property, that it should be used as commercial space. EDA Minutes Page 3 May 5, 2014 Williams disagreed. He thought that if the developers have done their research and think they can fill the building, then we should support that. He doesn’t want to see the building sit empty. Schmitt said surveys from Anoka County indicate that more affordable housing for seniors is needed throughout the County. She also questioned what their plans were for the first floor. She suggested a coffee shop be part of their consideration which she thought would be a nice addition for the area. Hogeboom reminded members not to get too wrapped up in the exact plans for now as they will change as the project progresses. He said what Schuett is seeking at this time is the City’s support of the concept which they need in order to apply for some of the funding. The issue of whether to allow tax abatement or other help by the City can be a separate issue. There was a discussion about where Schuett will be obtaining their financing from. The members were told that Anoka County has committed $300,000 in HOME funds and that they are making application for MHFA funds also. They are also hoping to obtain tax credits or a deferred loan to help bridge the gap. The issue of tax abatement was an attempt to gain additional dollars for the project. Alisha stated that they are prepared to move forward regardless of the City agreeing to that part. Williams asked them if they had considered having market rate units. He felt the Board would be more inclined to accept that as a plan. Peterson then asked if they had considered a development geared to young professionals instead. Alisha stated that it is hard to make a market rate project work financially, since it wouldn’t qualify for all the funding subsidies that a low income project would. Nawrocki questioned how the tax credits would be used. It was explained that the federal tax credits can be sold to provide equity for the project. Along with the HOME funds, the MHFA funding, a possible deferred loan, and tax abatement (if approved) would provide most of the funding for the project to be completed. The developer fees would be taken out of these subsidized funds. Nawrocki then asked what the tax base would be if this is approved. Because the project would be subsidized and be considered a low income building, it would drive the value of the building down. Approximately $200,000 a year is now derived from the building as commercial property, and after the project is completed, the estimated tax revenue would drop to between $65,000-$80,000/year. Fehst said the only advantage to supporting this project is to keep the building occupied. He said the disadvantage is that the City will give up tax revenue for this site. Motion by Nawrocki, seconded by Herringer not to support the project as proposed. There was additional discussion following the motion. Schmitt asked what the vision is for that corner for those members that are against this project taking place. Williams agreed that it is better to have the building occupied than to have it sit empty. EDA Minutes Page 4 May 5, 2014 Peterson said he didn’t have a particular vision at this time, but we don’t always have to take the first thing that comes along and continue to provide more low income housing. He feels we have enough senior housing with the Crestview campus, the Assisted Living Building on Central, Heights Manor, Parkview Villa-North and South. Do we need 80 more units, and do we want to be known as the “senior community”. Peterson said he hears complaints all the time about how there is no place to shop locally anymore. Part of the reason for this is because our residents have no discretionary money to spend, therefore, merchants are not willing to locate in our City. The fact we are so “affordable” has hurt our commercial/retail business options, and this project will not help that. Fehst stated that it would be ideal to get a project that had higher rents or some larger business that would locate at that sight. He went back to the proposal that Frank Dunbar had proposed for that site a few years back, and how appealing that looks now. Herringer questioned the cost of Schuett’s proposal and then asked what the time period would be for the tax abatement they were asking for. Alisha stated it was for 15 years. During that time, the project wouldn’t generate any taxes for the City. Fehst summed it up and said from an Economic Development standpoint, the city shouldn’t do it. It will not benefit the City financially at all. However, if the members think it is important to keep the building occupied, then that is a decision that needs to be made realizing the financial impact on the tax revenue. The city has limited dollars and the board needs to decide what they want to subsidize. Fehst cautioned members about settling for whatever we could get and to look at the bigger picture for the City’s well being. Herringer asked what the vacancy rate is currently for the senior buildings in the City. Hogeboom stated that Crestview’s rate is at 5%, and that this is down from a 30% vacancy rate a year ago. Parkview Villa’s rate has also improved, but is still at about 5% vacancy overall. Hogeboom asked for clarification of the income requirements since he has heard anywhere from 30- 50% of the median income. Alisha said the funding requirements state incomes must be 50% of the median income rate and that rents will be set at 30% of the median income. He then asked how long those restrictions would remain in place. She responded that they would stay in place for the term of 30 years under the tax credit law, as would the age requirement of 62 plus. Peterson said that we could give them a letter of support if they can get the financing to make this work, but also make it clear that the city will not grant a tax abatement for this project. Nawrocki said that according to the last report he read that out of 180 metro cities that only 3 or 4 other cities rank lower than Columbia Heights in household income. He doesn’t feel a project of this type will help the situation. A vote on his previous motion was called. Ayes-Nawrocki and Herringer Nays-Williams, Szurek, Schmitt, and Peterson. Abstain-Diehm MOTION FAILS. EDA Minutes Page 5 May 5, 2014 Szurek asked if a motion could be made that gave support, but no abatement and if we could include keeping NE Bank on site as a condition. Since there is no liability for their financing, we cannot dictate how they fill the building, or their lease terms with their tenants—even though the members do want to see the bank remain on site if at all possible. Motion by Szurek, seconded by Williams, to support Schuett Companies, Inc.’s proposal for affordable senior housing at the Northeast Business Center site and to direct staff to create a Community Revitalization and Stabilization Plan for the property, as well as initiate a meeting with the property owner and Northeast Bank to discuss and encourage the Bank’s long term commitment to the community. Ayes-Williams, Szurek, Schmitt, Peterson Nays-Nawrocki, Herringer Abstain-Diehm MOTION PASSED. Nawrocki asked what this means for the city’s finances. Fehst said there is no immediate impact. We did not agree to any tax abatement for the project. We only gave them preliminary support which was required for them to apply for their financing. Potentially tax revenues in the future could be lower than the present amount as it will be considered a subsidized building. ADMINISTRATIVE REPORT Hogeboom briefly reviewed the written report he had provided to the members regarding the following matters: 1)Communications and Branding Campaign Hogeboom stated he hadn’t received any proposal to date, but that he had several calls today so he’s hopeful to get some proposals by the deadline. He has also talked to Kathy Kelly from the School District on their campaign. Herringer stated that Jamie Verbrugge, City Manager from Brooklyn Park spoke at the Booster’s Banquet and said that Brooklyn Park had spent about $75,000 on their campaign. He wondered if the $30,000 we had approved would be enough. Hogeboom stated they had a much more extensive campaign than we have in mind. 2)Huset Park/Habitat for Humanity Staff told Habitat that we can’t move forward with their plan until an issue with the property owner is resolved. The owner is in default of their Development Agreement. Hogeboom told them to wait until the issue is resolved, but they have drawn up new plans so he is sure they will bring the project back to the board. EDA Minutes Page 6 May 5, 2014 3)Scattered Site Housing Program Update The model unit has sold, a couple are under construction, and two more lots have sold. The next regular EDA meeting will be Monday, June 2, 2014 at City Hall at 6:30 pm. The meeting was adjourned at 8:05 pm. Respectfully submitted, Shelley Hanson Secretary