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HomeMy WebLinkAbout07-13-2020 EDA Minutes ECONOMIC DEVELOPMENT AUTHORITY (EDA) MINUTES OF THE MEETING OF July 13, 2020 The meeting was called to order at 5:33pm by Chair Szurek. Members Present: Novitsky, Buesgens, Schmitt, Herringer, Williams, Murzyn and Szurek. Staff Present: Aaron Chirpich (Community Development Director), Kelly Bourgeois (City Manager) and Christy Bennett (Recording Secretary). CONSENT AGENDA 1.Approve the minutes from the meeting of June 22, 2020. 2.Approve Financial Report and Payment of Bills for April and May 2020, Resolution 2020-08. Questions from Members: Herringer asked about Anoka County payment of $50k on page 12 of May financials. Chirpich said that this is the first half of taxes for 3989 Central Ave. Herringer asked what the $121k payment for Northeast Bank on page 12 of the April financials was for. Chirpich said it was for the purchase of 4441 Central Ave as part of the commercial revitalization program. It is labeled incorrectly in the financials, but it came from the same fund the 3989 Central Ave redevelopment project. Herringer asked about Pro-Tec Design Inc payment of $12k on page 12 of the April Financials. Chirpich said this payment was for the cameras that are installed as part of the façade improvement grant. Motion by Buesgens, seconded by Murzyn to approve the consent agenda as presented. All ayes. MOTION PASSED. RESOLUTION NO. 2020-08 A RESOLUTION OF THE ECONOMIC DEVELOPMENT AUTHORITY OF COLUMBIA HEIGHTS, MINNESOTA, APPROVING THE FINANCIAL STATEMENTS FOR THE MONTHS OF APRIL AND MAY 2020, AND THE PAYMENT OF THE BILLS FOR THE MONTHS OF APRIL AND MAY 2020. WHEREAS, the Columbia Heights Economic Development Authority (the “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 WHEREAS, the financial statements for the months of April and May, 2020 have 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 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. ORDER OF ECONOMIC DEVELOPMENT AUTHORITY Passed this 13th day of July, 2020 Offered by: Buesgens Seconded by: Murzyn Roll Call: All Ayes BUSINESS ITEMS 6. Designate the City of Columbia Heights to Act as Agent for EDA for Demolition of 3989 Central Avenue NE. Chirpich explained that since the last EDA meeting held on June 22, staff has continued to work toward preparing the 3989 Central Avenue redevelopment project for closing. One of the primary barriers to closing on the land sale to Alatus is clearing title of the rooftop cell antenna lease encumbrances. To clear title to the property, the City has filed a petition with the courts to remove the lease hold interests by eminent domain.Due to delays in the court system primarily related to the COVID-19 pandemic, the initial eminent domain hearing has been pushed to August 18. Subsequently, the delays with the eminent domain process have pushed the anticipated lease removal and land sale closing to mid-October. To keep the project moving forward and create the space necessary for the eminent domain proceedings to conclude, demolition and removal of all site improvements in the project area need to be completed before closing. In the case of this project, the redevelopment site includes six separate parcels with ownership that is shared between the City and the EDA. In order to consolidate the demolition contract into one agreement, staff recommends the EDA designate the City of Columbia Heights as agent on behalf of the EDA for all demolition related work associated with the project. To complete the demolition work, staff is working with Doran Construction on the preparation of a bid package that will be processed through the typical public bidding process. The City will act as owner and Doran will provide construction management services for the work. Under the current timeline, bids for the demolition work will be due and opened on August 4, and the subsequent contract award will take place at the August 10 City Council meeting. Demolition work is expected to start by August 14, and conclude by mid-October. The costs incurred by the City for demolition will be recaptured with the sale of the redevelopment parcels to Alatus. Questions/comments from members: Szurek asked if there would be money involved in getting Crown to vacate. Chirpich said that with eminent domain, we would deposit the fair market appraisal value of $335 k in escrow with the court. Upon completion th of the hearing on August 18 that determines public purpose, where the judge rules that there is a public purpose for the project, we deposit the appraised amount in escrow and then wait for a hearing at a later date to figure out who gets what. Chirpich stated that the important part is to clear the title and to create the space necessary for this to conclude. Schmitt asked why we have to deposit $325k in escrow, questioning why the City isn’t just paying for the tower space, rather than the building. Chirpich explained that the $335k appraisal is for the tower space/lease area. Chirpich further explained that the appraisal is looking at the business interest that Crown Castle has in our property, in other words, the present day value is considered the amount that Crown Castle could sell the lease space to another theoretical company that is interested using that space in a similar way on the open market. It doesn’t account for future revenue, because that would be the benefit of the new owner. Szurek asked if the EDA could lose that $335k and Chirpich replied that the EDA could. This has been the framework of eminent domain from the beginning that this was an expected outcome. Szurek asked where this money is coming from. Chirpich said that staff are planning to have that money come from the Anoka Count HRA Levy fund for special projects. The council will have to pass a resolution to use the funds, but staff has already checked with Anoka County that this would indeed be an eligible use of the funds. We have about $900,000 in the account right now, with a little more going into it with this year’s first half taxes payment still going into it. Buesgens asked if we were basically buying out the contract, since the building is being torn down. Chirpich responded that more or less, that is how the courts would view it. That is the prescriptive route of eminent domain; you have to appraise it and give them fair market value. What Crown Castle is contesting is our fair market value determination, and thus they are reluctant to accept the offer. Herringer commented that you have to keep in mind that you are dealing with a New York Stock Exchange company with assets of $7 billion dollars who is going to hold out for the max that they can get. Herringer asked when we did our due diligence on buying 3989 Central Ave, when did we realize that the previous owner has sold his interest in the cell tower lease. Chirpich responded that Stadium Village sold the lease for a lump sum of $460,000 to Crown Castle in 2011-12. Crown Castle already had the lease interest on the building when we purchased 3989 Central Ave, and he did disclose the lease hold interest in our negotiation process. They overpaid in 2011 and now the asset that their interest sits on has depreciated. The appraisal tries to take that into consideration; they monetize an expected annual rental income from this leasable space, which is where the $335k is derived. Chirpich commented that Crown Castle knew the property was distressed, which is why they approached the City about getting off it. Szurek asked if we offered Crown Castle the $335,000 to vacate the lease, since that is the fair market value. Buesgens confirmed we did. Szurek asked if they could get more than the $335,000. Chirpich explained that the courts are our outlet, because we have the framework of a deal that we have been working together on in good faith and we have eminent domain powers. This is a viable plan, considering that we need the demolition done either way and we have a viable economic development resource to pay for it, we have no reason to believe the project is in jeopardy. We have to try to exercise our authority, as they have not been reasonable. Buesgens commented that she was glad the title company decided not to move forward without the lease being cleared up, so that Crown Castle doesn’t try to sue them. Williams expressed concern that there is not an executed contract in place with Alatus and that they could back out at any time or even collapse as a company, while we, as a small city, have millions of dollars into this project. He stated he was against this from the beginning. Buesgens asked if we had a pre-development agreement in place with them. Chirpich said yes, but it’s a small escrow deposit. Chirpich said when the EDA went into this decision; it was made based on the importance of redeveloping 3989 Central Ave, regardless of the Alatus project. Alatus is a qualified, capable partner that, despite a pandemic, has secured equity and has a bank lined up. The vision from the Council and the EDA was that this was a priority site and if the EDA did not step in to take the lead, the City would continue to have a vacant 6 story office building with no clear future. Buesgens pointed out that if the EDA hadn’t bought the building, the City would have no control over what happened to it. If by chance this deal falls apart, the City still owns the lot(s) and has control over what happens on the site. Chirpich said that the City was also facing the prospect of handing over a $2 million ramp to Ned Abdul at 500 LLC, which was a motivating factor in the urgency to purchase the building. According to Chirpich, Alatus has invested hundreds of thousands of dollars into this project already. They have submitted their building plans to the City and they are ready to go. Chirpich said that in staff’s opinion, it isn’t really an option to back out at this juncture. Schmitt commented that the city has a history of buying distressed properties. The City bought the Burger King and the bowling alley with no developer in sight, as well as purchasing multiple homes in the city. We took the risk, because we knew they needed to be replaced. This is another risk. In most cases, the risks have panned out in good ways. We need this site re-developed, whether by Alatus or someone else. She said Alatus is proving to be patient. She also said that the pandemic isn’t helping the situation. Chirpich said that it set us back at least 2 months, but is grateful that we are able to check off the big boxes still and be in a positive position, despite the pandemic. Schmitt thanked staff for all their hard work on this project. Motion by Buesgens, seconded by Herringer, to designate the City of Columbia Heights as agent on behalf of the Economic Development Authority for demolition of all site improvements located at the 3989 Central Avenue NE redevelopment site. All Ayes. MOTION PASSED. PUBLIC HEARING 7. Approve Land Sale to Alatus LLC for Redevelopment of EDA Owned Property and Approval of TIF Agreement for Same Chirpich shared that the EDA opened a public hearing on June 8, 2020 to consider the sale of EDA owned property and final approval of the tax increment financing agreement for the EDA’s redevelopment site located at 3989 Central Avenue. At the time of the hearing, the final purchase, redevelopment, and TIF agreements were not ready for review and approval. Therefore, the hearing was continued to June 22 at 6:00 p.m. At the time of the June 22 public hearing, the land sale agreements and final TIF agreement remained unfinished. Therefore, the public hearing was continued to July 13, at 5:30 p.m. Since the June 22 public hearing, staff has continued to work toward preparing the project for closing. One of the primary barriers to closing on the land sale to Alatus is clearing title of the rooftop cell antenna lease encumbrances. To clear title to the property, the City has filed a petition with the courts to remove the lease hold interests by eminent domain. Due to delays in the court system primarily related to the COVID-19 pandemic, the initial eminent domain hearing has been pushed to August 18. Subsequently, the delays with the eminent domain process have pushed the anticipated lease removal and land sale closing to mid-October. Therefore, staff recommends that the Council close the public hearing to consider the purchase, redevelopment, and TIF agreements without taking action. Staff will re-publish for a new hearing date once a final closing date has been established. Questions/comments from members: Williams expressed his concern again that there is not a formal/legal agreement to guarantee that Alatus will buy 3989 Central Ave, as agreed upon. Novitsky said we haven’t overpaid for the property, purchased at the market value of $2.8 million, so worst case scenario, if this deal falls through, we aren’t losing money selling it to another development company at market value. On top of that, it is worth more to a developer once the demolition has happened. Novitsky and Buesgens shared that they are still in favor of this project. Williams stated he is still concerned about spending more money on the project. Herringer said that Alatus does have money involved in the project that they will not want to lose, too. Chirpich agreed, sharing that Alatus has spent hundreds of thousands of dollars on this project in architectural and design work, soil borings and environmental testing. If this project doesn’t happen, Alatus is out all that money, while the City still has a property to sell. Chirpich said he would argue that it is a bigger risk for Alatus at this point, than for the City. Chirpich said we have a preliminary development agreement in place, which is on par for how these projects work in many cities. We have a history of doing preliminary development agreements in this city. Public Hearing Opened There were no comments Public Hearing Closed Motion by Schmitt, seconded by Novitsky, to close the public hearing without taking action. Ayes- Schmitt, Notivsky, Buesgens, Murzyn. Abstained- Williams. MOTION PASSED. Other Updates th Chirpich brought up the property 960 40 Ave, located to the east of the ramp, which has been a priority acquisition throughout the planning for this project. Staff had always thought the EDA would entertain the acquisition at a later date, after closing on the Alatus deal. Alatus has approached the owners and has the framework of a deal to acquire the property. They have a purchase agreement in place with some contingencies. Alatus has asked the City if they have interest in the property in a similar fashion as the scattered site redevelopment program. Staff is open to this, but needs to understand what the use would be first. Chirpich stated that the “EDA would need to be able to use it in a way that is consistent with the EDA’s expectations and to not just give it to the project. Staff thinks that it would be a priority acquisition under any measure, given the house’s condition. Houses that have access to their garages along that alley have been placed in a category for future re-development when the owners are ready to sell, so that the City can close the alley and not have to maintain it. It is problematic from a maintenance perspective for the City, as for snow removal; there is nowhere to push it. Chirpich told members that Staff would get more information, understand the nature of the deal, and see if it would be a good project for the City at a later date. This could be used to develop a new home or it could be acquired and held until contiguous sites are acquired to do a bigger project. Kevin Hansen, the City Engineer, has also drawn up storm water improvements for the site he would like to see through that would provide treatment for the lake to the north. Chirpich said he was just putting this on the radar and that Staff may potentially bring this back to the EDA for consideration after further review. Buesgens asked to confirm that Alatus has currently made an offer and has a purchase agreement for the house and that at some future date, Alatus and the City may talk about the City taking over the lot. Chirpich this is the idea, though he needs to review the agreements a little more thoroughly, as it would need to make sense for the City to acquire the property. Herringer asked what the asked what the offer on the house was. Chirpich said he didn’t recall the exact amount, but that the offer was over $200,000 and that the property is tax assessed for just under that. Novitsky commented once the new development goes up, it would be worth over $200,000. Murzyn said there have been cars junked in the backyard for years and that the soil is probably bad, along with the water table being high in that area. This makes him a bit leery of purchasing the property, as there may be cleanup to deal with and/or limitations on what can be built there. Buesgens said that there is the previously mentioned option of using it for the storm water improvements. Chirpich agreed that it could be used similarly to the storm water retention basin on Gould. Szurek said that it would be a lot of money to build something like that. Chirpich said the City could likely secure grant funding, as it would be an improvement that would help the impaired waterway. Looking at it from a global perspective, it’s not a need, but there would be support for that type of improvement. Szurek said this has been the EDA’s plan, to remove questionable housing and replace it with things to improve the city. With the new development at 3989 Central Ave, keeping the deteriorating housing right next to it will bode poorly for the image of the project. Szurek said she thinks this should be taken into consideration and agrees that something needs to be done with those properties. Buesgens said that it could be a good deal for Alatus, creating green space near the development, if we don’t purchase the property from them because of the condition and price. Chirpich said that option is probably not palatable to Alatus. Szurek said the EDA should let Staff look into this more and come back to this discussion at a future meeting, when Staff has a better understanding of whether or not it makes sense for the City to look at purchasing the property. Motion by Herringer, seconded by Buesgens, to adjourn the meeting at 6:26pm. All Ayes. MOTION PASSED. Respectfully submitted, Christy Bennett Secretary