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HomeMy WebLinkAboutEDA MIN EXEC 02-03-14ECONOMIC DEVELOPMENT AUTHORITY (EDA) MINUTES OF THE EXECUTIVE SESSION OF FEBRUARY 3, 2014 IN CONFERENCE ROOM I. The Executive Session meeting was called to order at 6:34 pm by Vice Chair Williams. Members Present, Bruce Nawrocki, Donna Schmitt, Marlaine Szurek, Tanu-nera Diehm and Bobby Williams. Members Absent: Gary Peterson and Gerry Herringer Staff Present: Scott Clark, Joe Hogeboom, Shelley Hanson, and Elizabeth f-lo1mbeck (Intern). Also present: Gary Gabrielson who is the representative of Stadium Village (owners of the NE Business Center) and Tom Schuett (Developer). Discussion on Purchase of 33989 Central Ave Property Clark reminded members that any discussion or comments must be limited to this issue only. Over the past year the City Council has negotiated in various forms to acquire some or all of the Northeast Business Center property. As part of that discussion, there seems to have been two acceptable paths for acquisition, both obviously centered on an agreeable acquisition price by both parties. These paths are: 1. The City purchase the entire building, which gives the City control for a first floor Library and also control for repurposing floors 2 through 6 (discussions have centered on senior housing). 2. That if the City acquires just the first floor, that an agreement would have to be in place as to who is acquiring the upper floors and a plan that would be agreeable to the City, based on the idea that we would "neighbor' with them as a first floor user. The owner's representative wanted to present a new offer to the City for a first floor acquisition, and Lased on the concept expressed in the aforementioned item #2, they brought the developer to the meeting to discuss plans for floors 2 through 6. Since this is an executive session, staff recommended that the owner's rep present his offer to the EDA and the developer present his concept, (The executive session was predicated on the fact that an offer would be made, and that an offer would be contingent on the proposed use for floors 2 through 6). Diehm excused herself from the Executive session due to a possible conflict of interest as the firm she works for represents the Developer. Clark told members that the previous discussions have been with city staff and various city council members, so the proposals tonight are for informational purposes and to give staff direction on whether the City Council wishes to pursue this any further, EDA Executive Session Minutes Page 2 February 3, 2014 Gabrielson explained their ideas to the Board. They propose to condo out the property, meaning the first floor could be sold to the City for a City Hall and/or Library and the remaining 5 floors Would be sold to Schuett for housing. He discussed 3 different options for the city to consider, 1. Sell the I" floor to the City for $2 million and the City could do its own design and contracting. 2. Stadium Village would develop the I" floor for the city and then sell to them (a turn-key project). They would go out for bids based on the needs and plans submitted by the City. He estimates the cost would be between $448 million for this option. 3. This would be a combination where Stadium Village would build out the I't floor and then the City could purchase over time based on City Finances and reconitnendations from its Financial Advi sors. Gabrielson said they want some type of tax abatement as part of the deal. The City would be expected to pay pro-rated fees for iii.aintenance/utilities/plowiiig and landscaping needs. Ife went onto say that a future proposed plan would be to add an additional 60 units on top of the existing parking ramp by adding two stories to that. Tom Schuett then presented his plan for the top 5 floors. He told members they have already entered into an agreement with Stadium Village, and that his company would be turning this into affordable tax credit housing. They have applied for the tax credits, and depending on what is approved would determine what type of market they would be targeting. Schuett explained the property is already in a Tax Qualified Census District. SchUett said they have scored the project and it scores well to qualify for either tax credit program. He also said they plan to provide Compassion Care to their residents. Under the 4% credit system, they would be targeting low income senior housing units, There Would still be an equity gap so they have also applied for the HOME funds through Anoka County. Under the 9% credit system, which is more desirable because more funding is available for the project, with less debt load, they would not be able to restrict age and it would be open to families. Clark asked what a typical rent would be for a I bedroom unit. Schuett said probably in the $775- $850/month range. Schuett said another option for the first floor, if the city is not interested in purchasing it, is to possibly locate a medical clinic on that floor. He said the Affordable Care Act is pushing medical care back to the home. He said the new trend is to keep people in their homes as they go through the aging/dying process, rather than putting them in Nursing Homes or Assisted Living facilities. ED Executive Session Minutes Page 3 February 3, 2014 Clark asked Schuett when he would consider himself committed to the project. Schuett said that MFIFA awards the tax credits in late October or November. If lie gets the 9% credits he would move forward. If lie gets the 4% credits and can secure some of the gap financing, then he can move forward also. He has applied for both tax credits, and for the HOME funds, Ile will know about the HOME funds sooner than November, lie believes they could enter into a Purchase Agreement within the next couple months. He told the Board that Kraus Anderson also has interest in partnering with him and buying the credits. Clark asked if the City doesn't purchase the I" floor if they would still move ahead with their plan. Schuett said he would if he gets the tax credits. He said the City's purchase of the I't floor is an asset, but not critical to making it work. Nawrocki wanted more information about Schuett and his company's location. He also asked about Gabrielson's relationship to the owner of Stadium Village. There was a discussion regarding the Tax Credits and how they assist development of low income affordable housing by allowing equity into the deal rather than forcing a huge debt load which in turn keeps the rent structures lower. The program was initiated by the IRS in 1986 to encourage `.for profit" entities to develop affordable housing prq)ects. Clark told members this is similar to what is happening for the South building at Parkview Villa. Aeon obtained the 4% tax credits and other gap financing to make that project feasible in the same manner. A member asked Schuett and Gabrielson what would happen to NE Bank. Gabrielson said if the City doesn't purchase the I" floor, they will probably stay on site. If the city does purchase the I't floor, then they are looking to relocate to another location. Nawrocki asked how many units would be on floors 2-6. Gabrielson said 60 units, with another 60 possible if an addition is constructed on top of the parking rarrip. Gabrielson assured the members there would be plenty of parking in the current ramp to accommodate residents and employees. Nawrocki asked what the average number of bedrooms would be per unit. Schuett said that would depend on whether it is senior housing or not. If it houses seniors, most units Would be one bedroom units. If they obtain the 9% tax credits, then at least half the units would be 2-bedroom units. EDA Executive Session Minutes Page 3 February 3, 2014 Szurek and Schmitt both expressed concern over having families and children in the building. There is no place for them to play except in the hallways and common areas. This is not a good location for family housing in their opinion, Szurek asked if they would all be Section 8 tenants. Schuett explained that no, they would riot. This would be housing where the rent is based on their income and that most would be working people. This program is different than Section 8 housing, She asked if there would be managers on site, and lie told her, yes. She then wanted clarification since lie said the building was being condo'd out, but then said these would be rental units. He said the units are riot condos- but the building itself it considered condo'd because a variety of uses with different owners establishes that. Schmitt asked if the Clinic would share the I" floor with the City. Schuett said that is more of a competing idea, an either/or scenario, Ile said the Clinic could also be located on another floor if there is a need for one. She asked if Schuett Company is a profit or non-profit organization. lie told her a "for profit", She then asked is it would be mandatory for residents to have compassion care. Schuett said that is against Federal law, It would be provided to those that request such help in order to keep them in their own homes longer. Schmitt said it would be nice for the residents to have the bank, clinic, and a food place on the I" floor of that building. She then stated that there would need to be an access from the parking ramp to the I" floor no matter who's there. Clark said those are details that would be worked out later in the process. Williams asked how big the units would be. Gabrielson said that preliminary discussions estimated them to be about 800 sf. The owner's rep and developer then left and the EDA was able to continue their discussion and to identify an acquisition position. Clark stated that the acquisition price for the first floor is still at $2 million which the City had already rejected. They haven't provided any documentation how that compares to the market rate of the area. He then went on to tell members that their plan Is a permitted use in that Zoning District. Clark said he feels strongly that the Senior Housing project is the better option, If they do get 4% tax credits, they may need assistance. The request for Tax abatement is speculation and premature since we don't even know what the gap is at this point. He said another option the city could consider is to purchase the I" floor and use for the Library and then let NE Bank stay there for the Revenue stream, Clark said he still doesn't understand how this works for them financially based on the fact they still owe 4.5 million to Venture Bank and it is sitting 80% empty, He is afrarid this prqject will be financially stressed fi -om the beginning, EDA Executive Session minutes Page 5 February 3, 2014 Clark told members that we previously offered them 1.75 million I"or the whole building. He said the City either wanted the whole building or if we only purchased the first floor, we would need, to know who would be developing floors 2-6 as part of the deal. Clark said Gary Peterson told him we need to draw a line about a final price so the Library can move forward with looking at other locations. Schmitt and Szurek both stated they did not want to purchase the first floor for $2 million. Nawrocki didn't feel there should be any further discussions about this either. fie also stated lie doesn't think the Library needs to relocate at all. Clark suggested keeping the discussion going and relaying some feedback back to them to see how it plays out. He said based on the discussion, that the City is only interested if senior housing is the use of floors 2-6, and that they need to come back with a "real" price for the first floor-that $2 million has already been r(jected. In the meantime we can work on actual numbers of what it would take for the Library to relocate there and whether to leave the Bank on site. The City needs to decide if it is a good location for the Library. The Library Task Force thinks this is a desirable site. He is not sure Stadium Village will come down far enough in price to make this work., or not. Williarns thought it is important to have further discussion s about this also. Since this is a cornerstone of our Downtown area, we cannot let the building go empty, " rhe Executive Session was adjourned at 7:50 pm. ReSPeCtfUlly Submitted, Shelley Hanson Secretary