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HomeMy WebLinkAbout20180507_EDA_Minutes ECONOMIC DEVELOPMENT AUTHORITY (EDA) MINUTES OF THE MEETING OF MAY 7, 2018 The meeting was called to order at 6:30 pm by Vice President, Donna Schmitt. Members Present: Murzyn, Schmitt, Buesgens, Novitsky, Herringer, and Williams (arrived at 6:33 pm) Members Absent: Szurek Staff Present: Walt Fehst, Keith Dahl, Joseph Hogeboom , and Shelley Hanson PLEDGE OF ALLEGIANCE- RECITED CONSENT AGENDA 1. Approve minutes of April 2, 2018. 2. Approve Financial Report & Payment of Bills for March, 2018–Resolution 2018-07 Questions from Members: There were no questions. Motion by Murzyn, seconded by Buesgens, to approve the Minutes of April 2, 2018, and the Financial Report and Payment of Bills for March, 2018 as presented. All ayes. MOTION PASSED. RESOLUTIONNO.2018-07 AResolution of theEconomic Development Authorityof Columbia Heights, Minnesota, Approving the Financial Statements for the Month of March 2018 and the Payment of the Bills for the Month of March 2018. 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 resolutionand enter the resolution in its records; and WHEREAS,the financial statement for the month of March 2018 has been reviewed by the EDA Commission; and WHEREAS,the EDA has examined the financial statements 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 20180507_EDA_Minutes EDA Minutes Page 2 May 7, 2018 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 RESOLVEDby 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 RESOLVEDthe financial statements are acknowledged and received and the check historyas presented in writing is approved for payment out of proper funds; and BE IT FURTHER RESOLVEDthis resolution is made a part of the permanent records of the Columbia Heights Economic Development Authority. ORDER OFECONOMIC DEVELOPMENT AUTHORITY Passed this __7th____ dayof ___May______, 2018 Offered by: Murzyn Seconded by: Buesgens Roll Call: All ayes BUSINESS ITEMS 1. Relocation of 3841 Central Avenue Dahl stated that on November 6, 2017, the Columbia Height Economic Development Authority (the “EDA”) directed staff to offer the residential structure located at 3841 Central Avenue NE, Columbia Heights, MN (the “Residential Structure”) for one dollar ($1.00) to the Greater Metropolitan Housing Corporation (the “GMHC”); and if accepted, authorized staff to prepare a Bill of Sale, Waiver of Trespass, and Waiver of Liability for the GMHC to relocate the Residential Structure onto 3805 2nd Street NE (the “ Subject Project”). However, before acceptance, two (2) separate situations occurred which prolonged the approval consideration of the Subject Project; (1) a pipe burst occurred on November 21, 2017 and (2) the cost to relocate the Residential Structure onto 3805 2nd Street NE was significantly higher than what was originally anticipated. Therefore, the GMHC required an extended amount of time to reevaluate the feasibility of the Subject Project. Kurt, from GMHC, stated it would have cost $120,000 to nd relocate the house to the 2 St property. Enclosed in the packets for discussion were two documents, the Scope of Work and Pro Forma. Both of these documents have been updated to reflect changes to the Subject Project. The main difference is that instead of relocating the Residential Structure onto 3805 2nd Street NE, the GMHC now proposes to purchase the vacant property located at 666 40th Avenue NE (the “Subject Property”) for one dollar ($1.00) so that they may relocate the Residential Structure to it. Currently, the Subject Property is owned by the City of Columbia Heights (the “City”) and was assessed by Anoka County to have a 2019 estimated market land value of $52,500. Dahl told members that Public works is not in favor of making this property a gateway to Huset Park because of the alley located behind the home. It would not provide a safe entryway into the park. 20180507_EDA_Minutes EDA Minutes Page 3 May 7, 2018 If the EDA were to consider this as an option, the City Council would need to consider the conveyance of the Subject Property for one dollar ($1.00), as well as a rezoning amendment since the Subject Property is currently zoned as LB, Limited Business District. The LB District allows for a single-family dwelling as a Conditional Use; however it requires an accessory structure to contain a commercial use. Dahl told members that since GMHC will not have a commercial use associated with the Residential Structure, a zoning amendment will be required. He went on to say that businesses have not shown an interest in these properties and because they are small lots, several properties would need to be purchased in order to do any kind of a business development. Hogeboom told members that in the new Comprehensive Plan Update this area will be considered as “transitional” th so that properties can be used as residential or business uses. Since 40 Avenue is already a mix of residential and businesses this will allow properties along that street to be conforming uses, rather than having the status of “non- conforming” as is the case now. Based on the Scope of Work and the Pro Forma, the GMHC projects a loss of profit in the amount of $72,153.00. Please note that the Pro Forma was based on a sale price in the amount of $250,000. Due to the location of the Subject Property on Huset Park, staff anticipates this figure to be conservative. Regardless, the GMHC would like to purchase the Subject Property for one dollar ($1.00) and formally requests that the EDA consider providing gap funding in the amount equal to what it would cost for the EDA to demolish the Residential Structure. STAFF RECOMMENDATION: If the EDA desires to preserve the unique architectural characteristics of the Residential Structure, staff recommends a formal motion requesting that the City Council consider selling 666 40th Avenue NE to the Greater Metropolitan Housing Corporation for one dollar ($1.00), as well as a motion providing gap funding in the amount equal to the cost of demolition for the Residential Structure located at 3841 Central Avenue NE, for an amount of $25,000. Questions from members: Kurt from Greater Metropolitan Housing Corp was present to answer questions regarding this project. He told members that GMHC was formed in 1973 and is a local non-profit with 40 years of experience concentrating on providing affordable housing. He said they have done several projects of this nature, but it is not necessarily a cost saving option. He said the costs to move a home, construct a new foundation, build a garage, and bring it up to today’s code can be cost prohibitive in most cases. He said the house on Central Avenue is in good shape and the decision is whether the City wants to keep older homes like this or just build a new one. th Herringer asked the size of the lot on 40 Avenue. Hogeboom stated it is 40 x 125 and that the house is 30 feet wide which would allow for the 5 foot side yard setbacks to be met. This lot is in the middle of the block and would need to be re-zoned to allow it to be used residentially. He said staff would be recommending that a portion of the LB district be zoned back to residential as most of it is currently used that way. Dahl said this is the only lot we have that would work and because it is closer, the cost to relocate there would be less. Schmitt asked if the re-zoning would affect their taxes and insurance at all. Hogeboom said the taxes are based on the use of the property now, so that wouldn’t change. He said it could actually help current owners as the 20180507_EDA_Minutes EDA Minutes Page 4 May 7, 2018 properties would change to a conforming use, which would allow them to expand or add on to their house if they chose. It also would make selling the homes easier, getting financing easier, and getting insurance easier, as the non-conforming status sometimes raises red flags for these things. th Williams thought 40 Avenue should be kept as a business zoned district. He said the high density housing that is being added to the city will result in the need for more businesses to serve the needs of the residents. Hogeboom said we are not doing away with businesses. He said everything that is now being used as a business would stay that way. Hogeboom stated that most of these uses are near the Central Avenue intersection or the University th Avenue intersection. He said that the properties in the middle of 40 Avenue that are currently used as residential would become residential in the re-zoning process. Buesgens thought this made sense since these properties will continue to be used residentially and it is hard to find someone who wants to buy these properties for commercial use. th Novitsky thought we should give commercial a chance and didn’t think the properties along 40 Avenue should be zoned back to residential. Herringer asked what we paid for the property on Central. Dahl said we paid $200,000 for the property and it is estimated that it would cost $25,000 to demo the house to make the lot available for redevelopment (which is the same amount of the gap financing being proposed by staff). Dahl said he has talked to the Realtors we have been working with over the last few years and they feel this house will sell for $275,000-$300,000 once it is moved and brought up to code, as it will have a walkout basement facing the park and a new garage. This will enable GMHC to meet all expenses. Herringer was concerned that GMHC would come back to the EDA for additional funds if they couldn’t get that much for it. Kurt previously told members they still needed to firm up prices from contractors, and that he was working under the assumption where it would sell in the range of $250,000, which wouldn’t cover all the estimated expenses. That is why the gap of $72,000 was used by GMHC. If they get closer to $300,000 as the City estimates, there shouldn’t be a problem. Dahl told members that is why staff recommends setting a firm amount of $25,000 gap financing so that GMHC can make their decision knowing what they have to work with. He said a 3 BR and 3 bath house on the park with a walk out basement should sell for the $300,000 amount. Schmitt asked when it would be done and ready to be occupied. Kurt said he estimated late fall or sometime early 2019. Murzyn thinks a house on that property is a better use of the site. There are homes on either side and it is located in the middle of the block, with homes located across the street as well. Schmitt asked what “transitional zoning” means. Dahl said it allows the city to guide the Comp Plan in a transitional way. In Land Use terms, it means the property could be used either way to create a mixed use area. Since we are operating under the old Comp Plan, we would have to re-zone the properties in this block, which would meet the guidelines established for the new Comp Plan. He said it is better to re-zone a block or two, so we don’t spot zone each individual property, and it will conform with the new Comp Plan once it’s approved. 20180507_EDA_Minutes EDA Minutes Page 5 May 7, 2018 Fehst said the future “Transitional” classification allows for either residential or commercial use so it gives the City more flexibility along this corridor. th Hogeboom said that if GHMC wasn’t involved, the alternative would be to re-zone the property on 40 Avenue to residential, and sell it as part of our Single Family Lot Sales Program for development and then demo the one on Central Avenue. Either way it will cost $25,000 to get rid of the house on Central Avenue. And the fact that 666 th 40 Avenue was donated to us limits the amount of money we have expended on that property. Novitsky said even though the lot was donated, the City still paid money to demolish the building. Hogeboom agreed, and reminded members that it cost $37,000 to tear down that building due to asbestos and other environmental issues. Novitsky said if we are now selling the lot for $1we are losing potential revenue than if we were to sell the lot for more under the Single Family Lot Sales Program where we could recoup most of the expense to tear down the old commercial building. Herringer said we have lost money on all of the properties we purchased, tore down, and sold for new single family homes. He is not in favor of gap financing in excess of the $25,000 under any circumstances. th Dahl told members that if the EDA wishes to sell 666 40 Avenue to GMHC and relocate the house onto that property then further action may be required by the Planning Commission at a future meeting and staff will update the EDA accordingly. Motion by Buesgens, seconded by Schmitt, to request that the City Council call for a public hearing on May 29, 2018 at approximately 7:00 PM for the proposed conveyance of 666 40th Avenue NE to the Greater Metropolitan Housing Corporation. All ayes - MOTION PASSED. Motion by Buesgens, seconded by Schmitt, to provide gap funding in the amount of $25,000 for relocation of the residential structure located at 3841 Central Avenue NE to 666 40th Avenue NE. Roll Call: ayes- Buesgens, Murzyn, Herringer, and Schmitt (as long as the amount is capped at $25,000). Nays- Williams and Novitsky MOTION PASSED. OTHER BUSINESS 1. Subsidized Interest Loan Program Discussion Dahl explained that after the Annual State of the Cities Address on April 20, 2018, Jeffrey Neisen, Vice President of Commercial Lending at Lake Community Bank contacted the Community Development Department to inquire about more information with respect to the Façade Improvement Grant Program. Jeff was interested in identifying a public-private partnership that would increase the amount of funds reinvested into commercial properties throughout the City of Columbia Heights (the “City”), specifically for businesses or commercial property owners to renovate, retrofit, modernize, or remodel their current space. One concept discussed was in regards to a subsidized interest loan program where the Columbia Heights Economic Development Authority (the “EDA”) would agree to pay a portion of a borrower’s accrued interest over a specified period of time. 20180507_EDA_Minutes EDA Minutes Page 6 May 7, 2018 For instance, the following examples were prepared to depict a subsidized interest loan program, and to determine what the true cost of the program would be to the EDA if a program such as this was offered. Furthermore, the examples were calculated based on an amortization schedule for a loan amount of $5,000, $15,000, and $30,000 over a three-year repayment period at a traditional interest rate of 5.50%, and the EDA would subsidize 2.75% over the specified repayment period. Commercial Loan of $5,000.00: The total three-year cost to the EDA would be a subsidy in the amount of $217.50 with a monthly payment of $6.04. Monthly Payment Total Interest Paid Total Repayment Borrower$ 144.96 $ 217.50 $ 5,217.50 Columbia Heights EDA$ 6.04 $ 217.50 $ 217.50 TOTAL$ 151.00 $ 435.00 $ 5,435.00 Commercial Loan of $15,000.00: The total three-year cost to the EDA would be a subsidy in the amount of $653.00 with a monthly payment of $18.14. Monthly Payment Total Interest Paid Total Repayment Borrower$ 434.86 $ 653.00 $ 15,653.00 Columbia Heights EDA$ 18.14 $ 653.00 $ 653.00 TOTAL$ 453.00 $ 1,306.00 $ 16,306.00 Commercial Loan of $30,000.00: The total three-year cost to the EDA would be a subsidy in the amount of $1,306.00 with a monthly payment of $36.28. Monthly Payment Total Interest Paid Total Repayment Borrower$ 869.72 $ 1,306.00 $ 31,306.00 Columbia Heights EDA$ 36.28 $ 1,306.00 $ 1,306.00 TOTAL$ 906.00 $ 2,612.00 $ 32,612.00 Ultimately, a subsidized interest loan program would be a relatively inexpensive way for the EDA to encourage reinvestment of commercial properties throughout the City, and may have a combined use with the Façade Improvement Grant Program to encourage more substantial improvement, renovation, and remodel projects. Dahl told members this would be two separate programs that businesses would have the opportunity to take advantage of. 20180507_EDA_Minutes EDA Minutes Page 7 May 7, 2018 Staff was seeking a discussion with the EDA Commission Members to determine if further pursuit should be given to develop a subsidized interest loan program or a comparable program with the concept. Dahl told members that staff has been working on a survey that will be given to businesses later this year in order to get feedback from the business community. He said these surveys will be handed out by the Fire Department when they do their annual inspection of businesses throughout the city. He told members it might be a good idea to hold off implementing such a program until we get the survey results. If the EDA decides to endorse further development of this program, staff recommends enacting a formal motion. Questions from members: Herringer asked how lengthy the survey was. Dahl said there are about 20 questions which he gave several examples of. He told members that a long survey and a short survey have been prepared. Staff recommends using the long form this year and then every three years. The short form would be used in between. Schmitt said there are other entities that provide loan and grant money to businesses also. She suggested gathering a list of those possibilities so that they can be given to business owners. Staff said they would reach out to other banks in the area to see if they would be interested in doing a similar program. Dahl said it is a good idea to prepare a list of options and financing help that are available to help businesses grow, expand, or remodel. Motion by Buesgens, seconded by Murzyn, to authorize staff to continue the development of a subsidized interest loan program, and engage local stakeholders to evaluate their level of interest. All ayes. MOTION PASSSED. The meeting was adjourned at 7:38 pm. Respectfully submitted, Shelley Hanson Secretary 20180507_EDA_Minutes