HomeMy WebLinkAbout09-21-2020 EDA Minutes
ECONOMIC DEVELOPMENT AUTHORITY (EDA)
MINUTES OF THE MEETING OF
September 21, 2020
The meeting was called to order at 6:07 pm by Chair Szurek.
Members Present: Novitsky, Buesgens, Schmitt, Herringer, Murzyn, Williams and Szurek.
Staff Present: Aaron Chirpich (Community Development Director), Kelly Bourgeois (City
Manager), and Christy Bennett (Recording Secretary).
Others Present: Martha Ingram (via Zoom), legal counsel from Kennedy & Graven
PLEDGE OF ALLEGIANCE-
RECITED
CONSENT AGENDA
1.Approve the minutes from the meeting of September 14, 2020.
2.Approve Financial Report and Payment of Bills for August 2020, Resolution 2020-14.
Questions from Members:
Herringer asked about the $330k payment for Friends of Prodeo Inc on page 6 of the August financials. Chirpich said that
Friends of Prodeo were the developer of the new charter school. They had put a cash escrow on deposit with the City for
the development contract, so that if any of the improvements in the public domain did not get completed, the City had
funds to complete the work. This payment reflects that escrow being returned to them. There is a retainer of the original
amount that is still held for landscaping over the next 2 years, but the majority of it was returned to Friends of Prodeo.
Buesgens asked about the $91,500 payment for Cap Improvement Development on page 27. Buesgens wondered if this
has to do with 3989 Central Ave and what it includes. Chirpich said this is the deposit that the City took from Fairview
Health for the capital improvements at the Fairview Ramp.
Motion by Novitsky, seconded by Murzyn, to approve the consent agenda as presented.
All ayes. MOTION PASSED.
Business Items:
1. Public Hearing – Approve Land Sale to BPOZ Columbia Heights, LLC for Redevelopment of EDA
Owned Property, Approval of TIF Agreement, and Interfund Loan for Same – Resolutions 2020-15, and
2020-16
BACKGROUND:
Chirpich said that on July 22, 2019, the EDA approved the acquisition of the vacant six-story office building
located at 3989 Central Avenue NE, and the closing for the purchase occurred on July 31, 2019. The EDA
acquired 3989 Central Avenue to facilitate redevelopment of the property along with the adjacent City owned
parking ramp. Simultaneous to the acquisition of the property, the City and EDA were working with Alatus
LLC as the preferred partner for redevelopment of the entire site. The initial Alatus redevelopment concept
included the following base elements:
200-270 market rate apartments with underground parking
20,000 square foot city hall condominium space
3,000+ square feet of retail/commercial space
Chirpich said in August of 2019, the EDA entered into a preliminary development agreement with Alatus LLC,
for the redevelopment of the 3989 Central Avenue site based upon the project elements listed above. The
preliminary development agreement committed the EDA to working with Alatus to assess the viability of the
project, complete the entitlement process, and finalize the terms of an agreement for the sale of the property.
The agreement also committed the EDA to evaluate a request made by Alatus for tax increment financing to
help fund the project. As part of the project assessment process, the City was also required to review the project
proposal and determine if the site was desirable as the location for a new City Hall as proposed by Alatus. In
September of 2019, the City formally designated the site as the preferred location for a new City Hall and
directed staff to work with Alatus to further the plans for redevelopment.
Chirpich said in September of 2019, the EDA also approved the establishment of the NE Business Center Tax
Increment Financing District and adopted the tax increment financing plan for the project. Approval of the TIF
plan did not obligate the EDA to provide TIF assistance to the project. Rather, the plan established limits for
assistance and qualified the site and buildings as eligible for the creation of a redevelopment TIF district per
state law. Following establishment of the TIF district and TIF plan, the land use approvals were completed in
January of 2020 when the City Council reviewed and approved the Planned Unit Development District Plan for
the site.
Chirpich said now that the entitlements are in place and the land sale terms have been negotiated, it is time to
finalize and execute the purchase and redevelopment agreement for the project. This agreement achieves two
primary objectives. First, it sets the terms of payment for the land conveyance. Secondly, it provides the terms
for the final TIF agreement and associated TIF note that will be issued the developer. The primary provisions of
each objective are listed below.
Primary Components of the Land Sale:
Simultaneous to the closing, the City will convey its parcels to the EDA.
The purchase price for all redevelopment parcels, both City and EDA owned is $4,800,000.
The City will receive $2,000,000 from sale proceeds for its land holdings. Roughly $500,000 of this
amount will be held in escrow to pay for City Hall upgrade costs.
The EDA will receive $2,800,000 for the sale of its land holdings. Approximately $1,002,000 of this
will be used to pay the City back for a loan that was provided to acquire the building.
The City will be reimbursed for all demolition related expenses. Funds will be placed in escrow by
Alatus at closing to reimburse the City, as demolition work will continue after closing.
The sale is contingent upon City Council approval of the City Hall condo transfer agreement.
The completion deadline for the project is set at December 31, 2022.
Primary Components of the TIF Agreement:
Alatus will be reimbursed for TIF eligible expenses only.
The maximum principle amount of the TIF note has been set at $9,550,000.
The expected duration of the TIF district is 25 years.
The current assessed value of all property in the district is approximately $2,893,500. This value
generates approximately $99,500 in taxes annually across all parcels.
The estimated future value of all taxable property in the district is approximately $48,372,000. This
value will generate approximately $833,700 in taxes annually.
The estimated annual tax increment generated is $734,200.
When the district decertifies and the taxes return to all jurisdictions, the City will receive an estimated
$389,000 in taxes annually.
The EDA will be reimbursed by Alatus for all costs associated with establishing the TIF district.
The EDA will retain 5% of the available tax increment for administrative costs. This amount is
estimated at $34,000 annually.
Any excess increment held by the EDA after paying administrative costs will be used to reimburse the
EDA for eligible redevelopment expenses associated with the relocation of cell antennas from the
rooftop of 3989 Central.
The EDA will authorize an interfund loan to establish the reimbursement of the relocation expenses
mentioned above. The maximum principle amount of the interfund loan will be $1,300,000.
Other Related Agreements:
Chirpich said in conjunction with the land sale and redevelopment contract, there are additional agreements that
relate to the conveyance of the new City Hall condominium. These agreements will be approved by the City
Council separately. These agreements are summarized below.
Transfer Agreement:
The transfer agreement is the mechanism by which the new City Hall condo will be conveyed to the City once
the condo is complete. The land sale approval is contingent upon Council approval of the transfer agreement.
The expected approval date is September 28, 2020.
Condominium Declarations and Bylaws:
The declarations and bylaws dictate the management and cost sharing structure for the condominium
association. These documents are very close to being complete, and staff expects that they will be 98% finished
before final approval of the transfer agreement. These documents will not actually be formally adopted and
recorded until the condo units are built.
Parking License Agreement:
As part of the land use approvals, the City approved a shared parking arrangement between the multifamily
condo unit and the City Hall condo unit. Under this arrangement, City staff will park in the main level
multifamily parking area during normal business hours, and apartment residents will park in the same spots at
all other times. There will be a fee associated with the rental of these spaces. Staff expects that this agreement
will be 98% complete before final approval of the transfer agreement. Parking for the public as part of the City
Hall is planned to be under control of the City.
STAFF RECOMMENDATION:
Staff recommends approval of Resolution 2020-15, and Resolution 2020-16, respectively.
Questions from members:
Herringer commented that he would feel more comfortable if Resolution 2020-15 section 1 paragraph (b) lines
5-6 had “market rate” added to “
the construction by the Owner of a mixed-use rental housing and commercial/office
facility”. Chirpich said that he would have to defer to the City’s re-development counsel, Martha Ingram, on the Zoom
call. Due to the speakers not working, Chirpich had to relay messages from Ingram to the Commissioners.
Chirpich asked Herringer for more detail around the request. Herringer said that his thinking was that this is the first
market rate rental property that we would have in Columbia Heights, and he wants to be very sure that we really are
talking about market rate and that it stays market rate. Chirpich said that the development plans are linked to this approval
for a very specific project, and the EDA is protected through various contracts. Chirpich said if the EDA could allow the
resolution as proposed, he would appreciate it, as there are multiple layers memorializing the exact project that is being
delivered and the minimum improvements are defined per the plans; there can’t be a shift in housing type post-closing.
The TIF would be at risk if the project that is proposed isn’t built.
Chirpich shared that Ingram stated that it is baked into the various project layers: the entitlement, the approvals, the
development contract itself, the product that has to be delivered before any assistance is provided. Beyond that, there is
another layer of protection in that if the developer builds something lesser, it isn’t going to meet the increment generation
capacity that they are proposing. Chirpich said that Ingram feels it is baked into many areas and she is comfortable with it
as drafted with the protections that are provided elsewhere.
Herringer asked what happens if the project and the rentals don’t come up to snuff and the developers start to get a little
panicky about making their expenses and payments and they think about getting rid of market rate and start cutting some
corners to try to get more activity? Can they do that? Chirpich asked if Chris Osmundson (director of development with
Alatus) could provide some insight from the business side.
Osmundson said that with the distinction between market rate and affordable, there is no way Alatus would get into a
situation where it would be a benefit for them to reduce the amount of rent they are expecting to receive by an amount that
would come into compliance with something like affordable housing. The biggest thing is that Alatus would not be
generating the increments on the TIF that they have committed to, which would have huge repercussions to both Alatus
and their investors. Changing it to those different income thresholds and corresponding rental levels would hurt Alatus
more than help them, regardless of how the market is, because of the capital structure on the back side. Osmundson said
he has no doubt that the apartments will be operated as market rate for the entire 25 year period of the TIF district.
There are other affordable housing combinations in the area, which is why Alatus is moving forward with market rate. He
said that Alatus has designed them to be competitive, not only with those properties, but also other adjacent developments
in every direction of Columbia Heights. He can’t see any situation where that would play out, as there is such a distinction
between market rate rent versus affordable, it would be catastrophic all around.
Herringer said that he was thinking more workforce housing, rather than affordable. Osmundson said again, that would
have such tremendous repercussions, as it would not generate the same amount in returns. This project is not designed to
be workforce housing, due to the amenity spaces, efficiency ratios, and unit types. Workforce housing would be a lot more
studios or micro units in the 400 sq. ft. range. Alatus’ reputation is to typically operate projects at and above a standard of
market rate housing. There is no intention of turning this project into workforce housing. Some of the smaller units can be
considered more workforce, as even though they are market rate, they will be more affordable. However, there will also
be 2 and 3 bedroom units that can accommodate a family or a roommate scenario.
Herringer said he is still a little leery, but this answered his question. Chirpich said he appreciated the fundamental desire.
The project is not designed to function that way and he doesn’t know that changing the wording on the resolution would
provide any further safeguards against catastrophic future changes to the business structure of the project.
Buesgens asked about the parking fees, since we are part owner. Will they be anything significant, with Alatus being the
major owner and the City at only 5%? Chirpich said it is complicated. The area right outside City Hall is the City’s and
there aren’t fees associated with that. It is the shared area where the fee structure is associated with. The City has the
parking lot to serve City Hall customers and then has the shared parking employees will use that Staff is trying to find
creative ways to limit as many stalls as possible, to also help minimize the cost associated with that.
Public Hearing to consider the business subsidy by BPOZ, LLC consisting of TIF Note in the amount of
$9,550,000 opened
There were no questions/comments
The EDA has determined that the business subsidy being requested by BPOZ, LLC is proper and there are not any job
creations goals or requirements mandated as part of the subsidy approval.
Schmitt asked about opportunity zone. Doesn’t that require employment? Chirpich said that is separate from TIF and that
he is not prepared to talk about job requirements for opportunity zone, however it is not integrated into the TIF statutes.
Osmundson said there is no MB or WB requirement; that typically falls to the registered government unit that it is for.
Chirpich said no job creation requirements are being made as part of the approvals. He said this is also outside our
approval purview, as well. The City does not get involved with underwriting the qualifications that relate to the
opportunity zone.
Public Hearing Closed
Public Hearing to consider if the sale of EDA owned land to BPOZ, LLC is advisable opened
There were no questions/comments
The EDA has determined that the sale is advisable.
Public Hearing Closed
Motion by Buesgens, seconded by Novitsky, to waive the reading of Resolution 2020-15, there being ample copies
available to the public.
Motion by Buesgens, seconded by Novitsky, to adopt Resolution 2020-15, a resolution approving purchase and
redevelopment contract and awarding the sale of, and providing the form, terms, covenants and directions for the
issuance of its tax increment revenue note to BPOZ Columbia Heights, LLC.
All Ayes. MOTION PASSED.
Motion by Novitsky, seconded by Murzyn, to waive the reading of Resolution 2020-16, there being ample copies available
to the public.
All Ayes. MOTION PASSED.
Motion by Novitsky, seconded by Murzyn, to adopt Resolution 2020-16, a resolution authorizing an interfund loan for
advance of certain costs in connection with the NE Business Center tax increment financing district.
All Ayes. MOTION PASSED.
Other Updates
th
Chirpich said that the City may need to bring the EDA in next Monday, September 28. If so, the EDA members will be
notified in advance.
Motion by Murzyn, seconded by Novitsky, to adjourn the meeting at 6:47 pm.
All Ayes. MOTION PASSED.
Respectfully submitted,
Christy Bennett
Secretary