HomeMy WebLinkAboutEDA MIN 09-17-12ECONOMIC DEVELOPMENT AUTHORITY (EDA)
MINUTES OFTHE EXECUTIVE SESSION OF
SEPTEMBER 17, 2012 IN CONFERENCE ROOM 1,
The Executive Session meeting was called to order at 6:04 prn by Chair Peterson.
Members Present: Bruce Nawrocki, Gary Peterson, Donna Schmitt, Gerry HeiTinger, Marlaine
Szurek, and Tarninera Diehm.
Members Absent: Bobby Williams
Staff Present: Wait Felist, Scott Clark, Sheila Cartney, and Shelley Hanson,
Also present-. Bob L,indahl, attorney from Kennedy & Graven
Discussion on Purchase of 3919-3927 Central Avenue Property
Clark reminded inernbers that any discussion or comments must be limited to this issue only.
Clark again reviewed with members that during early 2012 staff negotiated with Doug and Der n Foss
for the purchase of the shopping center at 3919 - 3'92.7 Central Avenue. These negotiations resulted in
an EDA action on May 7, 2.012 approving a purchase agreement (the EDA action letter of May 7,
2012 was provided). After that approval the Sellers walked from the deal and entered into an
agreement in May 2012 with another party for a grocery store, which in turn did not come to fruition.
The Foss' have now asked the EDA if they would enter Into diSCUSsions regarding the original deal.
At the August 27"' meeting, the majority of the members felt that staff should proceed to gather
information for the possible purchase of the property being offered by the Foss'.
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Clark reviewed a revised purchase Agreement Nvith the members noting that the purchase price has
been reduced as directed by members to reflect the increase of property tax liability that will be
ilICUITed by the City if the purchase goes through. Clark told the EDA members that the Foss'
provided him with a copy of the written 'notice to vacate' given to the only tenant left in the building.
This "notice to vacate" was driven by the private purchase agreement that was signed in May
between the Foss' and the So-Low Grocery owner, That notice told the tenant that he had to be out
by September 30, 2012.
Clark stated that a revised Letter of Understanding between the EDA and Gem Properties was also
provided to include a first right of refusal regarding a future sale. Ile then told members that Bob
Lindahl was present at this meeting to answer questions, and address some of the aspects of this
transaction.
Comments from Bob Lindahl:
Lindahl stated there are Federal regulations that relate to relocation of tenants in properties purchased
by government entities and that the State of Minnesota has incorporated these regulations by
reference. He then stated several factors relevant to this particular case and the potential liability the
City nay have if they move ahead with this in regards to relocation fees:
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September 18, 2012
I . The City has not condemned the property.
2, The City has not yet entered into a purchase agreement with the owners, nor do we have
any ownership in the property at the present time.
3. The tenant is not being displaced as a direct effect of the negotiations taking place, but
because of other landlord/tenant lease issues.
4. Even though this was originally discussed in May 2012, the situation has changed since
then and we have a copy of the letter given to the tenant by the current owners.
5. That the owners approached the City both. in May and August to possibly purchase their
property -it was not initiated by the City.
Lindahl told the members that if they choose to proceed with the purchase, he would recommend not
taking any action until the tenant has completely vacated the site. lie said there are not many
appellate court cases to determine what the City's liability may be. If the City would be sued, there is
a defense if no decision is made until after the tenant has vacated the premise, but of course, there is
no guarantee. lie explained that the tenant would have to initiate the lawsuit.
Clark asked if the Board could take any action on this matter if some of the merchandise is still in the
building for a couple weeks till they can get everything moved. I,Andahl advised not to take any
action till everything is gone.
(Questions frqt2i_Men-.[bers:
Schmitt asked if there is only one tenant. Clark replied yes. Herringer asked if there was a lease in
place for the daycare business that was planned. Lindahl stated ifthey never occupied the space, they
would not have any rights to relocation funds.
Undahl noted there were two recitals in the purchase agreement that were changed from the one
prepared in May relating to the City purchasing by eminent domain in order to reinediate
environmental contamination. These clauses were included on the last purchase agreement at the
request of the Foss' for tax reasons but were rejected by the EDA,
Nawrocki asked what the estimate was to clean up this site. Clark stated the preliminary estimate
could run more than $500,000, depending on how the property is developed (residential vs.
commercial), and whether soil corrections would be done or if the site would be capped. NaNvrocki
asked ifthe So-Low Grocery owner had done any environmental assessments. Clark told members
that lie only had his own Phase I done as the report we gave him was only good for a certain period.
Schmitt asked whether there would be any restrictions on how the property is re-developed if we
obtain clean up grants through any of the .funding sources that may be available to us. Cartney stated
it is a requirement that we need to know the use of the property prior to making application for any
grant funding.
ED A Executive Session Minutes
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September 17, 2012
Szurek clarified that we most likely wouldn't clean up the site until it is being developed. Clark
stated that is probably the case and ran through the process we would follow of establishing a vision,
marketing this site and the Burger King site to developers, and working in conjunction with them for
clean-Up grants.
Schmitt questioned whether it night be better to leave the tenant in there and proceed with the
purchase. Clark stated it is not in the City", s best interest to be landlords and be responsible for
upkeep, on an old building. lie stated the guarantee we would receive monthly rent is questionable
and that the City would be responsible for relocation expenses would be certain. He believes it
would cost the City much n-Lore in the long run to keep it occupied.
Nawrocki stated he is not in support of the purchase for this price. The EMV is $678,300 and it'we
go through with the purchase it would be taken off the property tax rolls, in 2013. , It will take several
years till a developer comes along to build on it and bring in tax dollars. He feels we already have
enough into the Burger King property and this would only add to that arnount. He also questioned
the fencing provision and the use of the property by Heights Rental until such time the property is
sold. Clark said the language for the fencing is temporary and would be terminated upon sale of the
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Site.
Schmitt questioned page 4 (F) ofthe Purchase Agreement whether this clause constitutes the need for
the sprinkler system. Clark stated that would not have to be done since the use triggering this has
gone away.
Herringer wanted to know if it is public record what the other offer was. Clark stated the offer by the
owner Of So-Low Grocery was around $950,000. Our previous offer was $925,000.
Felist stated the property is an eyesore in the heart of our City. Ile agreed with Na\vrocki that the
amount they are asking for the property is quite a bit higher than the EMV. Clark reminded members,
we had an appraisal done in 2010 :for $ 1.1 million dollars, not taking environmental clean-Lip Costs
into consideration, He thinks we need to look at the potential improvement this would inean to our
city and eventually more tax dollars would. be generated depending on the development of the site.
Herringeralso understands Nawrocki's comments about loss of tax dollars for a period of time. Ile
does, however, think construction and development is starting to improve, and we need to look
forward. He asked if there vv-ere assessments on this property. Clark said there are some, and they
are being paid by the Seller as stated in the Purchase Agreement. The 2012 taxes will be pro-rated to
date of closing,
Peterson said we need to keep moving forward and making improvements throughout our City.
There has been progress made over the last 10 years or so and lie wants to see it continue, Ile also
said it costs money to reinvest in redevelopment, but over time it is a benefit to the City overall,
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September 17, 20�12
Clark reminded members that funds have been established for redevelopment purposes and this is a,
primary target to use the funds where the improvements would be very visible. Schmitt asked if any
the funding sources would expire. Clark told her no.
Clark said we should table the item even though time is of the essence. Staff will convey to the Foss'
that once the building is vacant the Board will meet to decide whether to negotiate with them for the
purchase of the property. He asked them if they would like to meet next at the regularly scheduled
ineeting date of October 1" or if they would like to postpone it until October 8'h. After some
discussion and based on other items already scheduled, it was decided to schedule the next meeting
for Monday, October 8 Ih it 6:30,
The Executive Session Nvas adJourned at 6:52 pin.
Respectfully submitted,
Shelley Hanson
Secretary