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HomeMy WebLinkAbout1991-08-19 HRA Regular Meeting MINUTES • OF THE EDINA HOUSING AND REDEVELOPMENT AUTHORITY AUGUST 19, 1991 ROLLCALL Answering rollcall were Commissioners Kelly, Paulus, Rice, Smith and Richards. CONSENT AGENDA ITEMS ADOPTED Motion was made by Commissioner Smith and was seconded by Commissioner Rice to adopt the BRA Consent Agenda items as presented. Rollcall: Ayes: Kelly, Paulus, Rice, Smith, Richards Motion carried. *MINUTES OF THE MEETING OF AUGUST 5. 1991, APPROVED Motion was made by Commissioner Smith and was seconded by Commissioner Rice to approve the HRA Minutes of August 5, 1991. Motion carried on rollcall vote, five ayes. RESOLUTION ADOPTED CONVEYING PHASES V AND VI - CENTENNIAL LAKES CONDOMINIUMS Presentation by HRA Director Executive Director Hughes explained that on September 5, 1989, the Centennial Lakes condominium developer, Laukka Development, appeared before the HRA to discuss the conveyance of the Phase IV condominium property. The matter now before the Council is almost exactly the same, only Phase V will introduce more of a market-rate condominium element into the project, rather than a low • or moderately priced unit as with Phases I through IV. Assuming that the HRA is of the same opinion as two years ago, which was that the introduction of a higher priced product made sense from both a market and development standpoint, the issue again is to what extent should the HRA be involved financially in the development. In the first four buildings, the HRA participated by providing $650,000 of direct unrecoverable write-down to the project. The HRA contributed an additional $200,000 per phase to form the second mortgage pool used to assist purchasers who otherwise could not afford the units. For Phase V Laukka Development has requested permission to build a 28 unit market rate development. The average floor area of each unit is proposed to be approximately 1700 square feet, with an average sale price of $177,000. Phases I and II are 46 unit, non-elevator buildings and Phases III and IV are 42 unit buildings with elevators. Laukka Development has requested the HRA provide an unrecoverable subsidy towards Phase V of $450,000, which is $200,000 less than was provided for the first four buildings. However, it is $200,000 more than was approved by the HRA when it considered this in September 1989. In reviewing Laukka Development's request for Phase V, the HRA may wish to consider the following, both pro and con: 1. Phase V would be identical in exterior appearance to previous phases. Therefore, the floor plans for Phase V must be substantially modified to accommodate the redesign. Laukka Development submits that this is expensive and will increase cost which cannot be fully recovered in the unit selling • price. H.R.A. Minutes - 8/19/91 Page 2 2. Phase V would be the first departure from offering housing • opportunities for low and moderate income individuals. However, not all Phase I through IV purchasers are low income. Although they do not qualify for a second mortgage, they may purchase a unit and therefore benefit from the unrecovered subsidy in the earlier phases. 3. Laukka Development's gross margin is capped at 25% of cost. Any benefit realized from the additional unrecoverable subsidy would be in the form of faster sales and resultant reduction in holding cost. 4. Phase V could provide a test market for more affluent housing for future development of other Centennial Lakes housing sites. 5. Although land costs are somewhat higher than similar market rate projects, staff cannot identify other site or design conditions that make the Phase V site more difficult or costly to develop. 6. Due to the progressive nature of the property tax system, a 28 unit building with average sales price of $170,000 would generate more tax increment than either the 42 or 46 unit moderately priced buildings. 7. The market-rate condominiums would be directly competitive with other market-rate condominiums in the City. Therefore, it may be difficult to justify to the owners of such condominiums the reason for the unrecoverable subsidy to this project. 8. The proposed subsidy would help facilitate the completion of the initial condominium phase of Centennial Lakes. The HRA and the City would benefit from this completion through the collection of tax increments, the conveyance of property owned by the HRA and the completion of the edge between the condominium development and the Park. • If the HRA grants approval for Phase V as requested, it then is subject to review and approval of the East Edina Housing Foundation. Director Hughes mentioned that for Phase VI, Laukka Development plans to return to a 46 unit elevator building, again directed at moderate income purchasers. The attempt would be to use up all the second mortgage proceeds that were created for this venture with completion of the Phase VI project. Presentation by Developer Larry Laukka, Laukka Development, stated that the Centennial Lakes market focus has changed from Edinborough. Edinborough has 392 walk-up garden condominium units. Centennial Lakes was designed to follow in that mode and the first two phases were just that. At Edinborough and at the inception of Centennial Lakes older prospective buyers showed interest in elevator service which was provided in Phases III and IV. In each of those buildings, the majority of the units were sold to people of modest incomes which was the ultimate goal. One of the goals was to maintain a formula that suggested that 80% of the people residing in Edinborough and Centennial Lakes earn less than 110% of the median income for the region. After 176 units have been built at Centennial Lakes, of which 163 are sold, the 80% formula still works. The age mix has changed from that of Edinborough, e.g. , single women 25-35 who use the second mortgage vehicle, single/divorced women 45-55 and the 65 plus group of which many are widowed and yet want to own a home. The latter two groups began to drive the need for the elevator building. The Housing and Urban Development (HUD) has formally advised that the remaining buildings must contain elevators to accommodate the Fair Housing Accessibility Standards established nationally by HUD. • H.R.A. Minutes - 8/19/91 Page 3 Mr. Laukka said the rationale for the market rate building previously proposed • in September 1989, failed for a variety of reasons. In April 1991, he proposed a market rate building of 32 units which also failed in pre-sales. After listening to what prospective buyers wanted, the proposed Phase V building was designed for 28 units which will be taken to the market place. The exterior appearance would be identical to Phases I through IV. The Phase VI building is proposed as an elevator building with 46 units. The plan is to market and construct both Phase V and Phase VI buildings simultaneously. He indicated that construction financing is not readily available for these types of developments and has a commitment to build these two buildings that will expire at the end of 1991. To take advantage of that Laukka Development would have to fulfill pre-sale requirements this fall, begin construction of both buildings and complete the development next year. Commissioner Comment/Action Chairman Richards asked for comment and action by the Commissioners on the request to convey Phase V, Centennial Lakes condominiums. The policy question to be addressed is the extent of the HRA financial participation. Regarding land costs, Commissioner Rice said he knew of no comparatives with this degree of density that would attract this level of buyer and he could understand the need for some help with cost. Although, these market rate units will be competitive with other similar rate condominiums in the City, he felt there is a need for some upscale units in the Edinborough/Centennial Lakes project. Commissioner Rice concluded that the Centennial Lakes housing element is nearly finished, should be totally completed and he would support • the conveyance and the subsidy as requested. Commissioner Smith asked about the homeowner associations in the project. Mr. Laukka explained that each building has its own association; however, the individual associations get co-mingled into one board. Accordingly, there will be one decision made for the maintenance of all the buildings. Chairman Richards commented that, while Laukka Development is a known commodity and he agreed the project should be completed, he could not in good conscience spend public dollars for market rate housing. He stated he could support a subsidy of $250,000 as was done prior but not the requested unrecoverable subsidy of $450,000 based on the financial summary submitted. Commissioner Paulus said she was concerned because the proposed average unit price of $170,000 is far beyond the average home price in Edina now at $145-150,000 and she could not support subsidizing that level of homeowner. Mr. Laukka clarified that the strategy has been to do one building to expand the market that does not compete with what is out there. By marketing and constructing the Phase V and VI buildings simultaneously, the units can be priced at the break point by trading dollars from building V to building VI. Secondly, the second mortgage money will be parlayed into the Phase VI building to provide a deeper subsidy for Phase VI. Also, the tax differential between a 46 unit building and a 28 unit building is approximately $34,000.00. Lastly, he pointed out that the future and last major segment of Centennial Lakes, Outlot A, is also slated for some type of dense housing development. isThere is an opportunity now to determine what it takes to move people into H.R.A. Minutes - 8/19/91 Page 4 that type of density which will be necessary in order to afford the land. • That final phase will not be supported by subsidy because the laws have changed. He concluded by asking that both Phase V and Phase VI, Centennial Lakes condominiums be conveyed simultaneously. Commissioner Smith made a motion to approve conveyance of property for Phase V, Centennial Lakes Condominiums for construction of a 28 unit market rate housing project and to provide an unrecoverable subsidy of $450,000. Motion for approval was seconded by Commissioner Rice. Rollcall: Ayes: Kelly, Rice, Smith Nays: Paulus, Richards Motion carried. Commissioner Paulus made a motion to approve conveyance of property for Phase VI, Centennial Lakes Condominiums for construction of a 46 unit moderate priced housing project and to provide an unrecoverable subsidy of $650,000. Motion for approval was seconded by Commissioner Kelly. Rollcall: Ayes: Kelly, Paulus, Rice, Smith Nays: Richards Motion carried. Commissioner Smith introduced the following resolutions and moved their adoption: RESOLUTION RATIFYING AND AUTHORIZING THE • EXECUTION AND DELIVERY OF VARIOUS DOCUMENTS BE IT RESOLVED by the Board of Commissioners of the Housing and Redevelopment Authority of Edina, Minnesota, (the "BRA"), as follows: 1. Recitals. The BRA and the Edina City Council have previously approved a redevelopment plan, as defined in Minnesota Statutes, Section 462.421, subdivision 15, designated as the Southeast Edina Redevelopment Plan, and have approved various amendments thereto (as so amended, the "Redevelopment Plan"). Acting pursuant to the Redevelopment Plan, the HRA has acquired certain land in the area included in the Redevelopment Plan and it has been proposed that the HRA sell and transfer a portion of such land to the East Edina Housing Foundation (the "Foundation"), pursuant to a Land Sale Agreement by and between the HRA and the Foundation (the "Agreement"). By a resolution adopted March 7, 1988, the BRA approved the form of the Agreement and authorized any two officers of the BRA to execute and deliver the Agreement on behalf of the HRA with such modifications as were deemed appropriate and approved by the Chairman and the Executive Director of the BRA. Pursuant to such authorization, the Chairman and Vice Chairman of the HRA executed and delivered the Agreement dated on or as of March 14, 1988. Subsequently, by resolution dated September 12, 1988, the BRA approved execution and delivery by any two officers of the HRA, on behalf of the HRA, of an Amended and Restated Land Sale Agreement and Contract for Private Redevelopment between the BRA and Foundation with such modifications as the attorney for the HRA and Executive Director of the HRA should approve (the "Amended Agreement"). Pursuant to such authorization the Chairman and Secretary of the HRA executed and delivered the Amended Agreement dated on or as of September 30, 1988. In connection with the transactions contemplated by the Amended Agreement, it is . now proposed that Phase V and Phase VI of the Condominium Development be H.R.A. MINUTES - 8/19/91 Page 5 commenced on the property described as Lots 5 and 6, Block 1, The Homes of • Centennial Lakes, according to the recorded plat thereof, Hennepin County, Minnesota (the "Phase V and Phase VI Condominium Property"), and that the Phase V and Phase VI Condominium Property be conveyed pursuant to the Amended Agreement and on the same terms and conditions as the Phase IV property was conveyed with such changes and modifications as may be approved by the Executive Director and the attorney for the HRA, including those resulting from the grant of an unrecoverable subsidy of $450,000.00 for Phase V and the proposed sale of Phase V units as market rate units without the use of second mortgages, and resulting from the development of Phase VI as a 46-unit building with elevator service to all units. 2. Authorization for Execution and Delivery of Documents. Any two officers of the BRA are authorized and directed to execute said instruments and agreements as may be required or be desirable to accomplish the conveyance of the Phase V and Phase VI Condominium Property pursuant to the Amended Agreement with such changes and modifications as may be approved by the Executive Director and attorney for the HRA as above provided. The execution of such instruments and agreements by any two officers of the HRA shall be conclusive evidence of the approval of such documents by the HRA in accordance with this Resolution. Dated as of the 19th day of August, 1991. RESOLUTION RATIFYING AND AUTHORIZING THE EXECUTION AND DELIVERY OF VARIOUS DOCUMENTS Authorization for Execution and Delivery of Documents. Any two officers of • the Foundation are authorized and directed to execute such instruments and agreements as may be required or be desirable to accomplish the conveyance of the Phase V and Phase VI condominium property described as Lots 5 and 6, Block 1, the Homes of Centennial Lakes, according to the recorded lot thereof, Hennepin County, Minnesota. Such conveyance shall be made pursuant to the Land Sale Agreement and Contract for Private Redevelopment, as amended, by and between the Foundation and South Edina Development Corporation; with any such changes and modifications as may be approved by the signing officers of the Foundation and the attorney for the Foundation, including those resulting from the grant of an unrecoverable subsidy of $450,000.00 for Phase V and the sales of Phase V units as market rate units without the use of second mortgages, and resulting from the development of Phase VI as a 46-unit building with elevator service to all units. The execution of such instruments and agreements by any two officers of the Foundation shall be conclusive evidence of the approval of such documents by the Foundation in accordance with this resolution. Motion for adoption of the resolutions was seconded by Commissioner Rice. Rollcall: Ayes: Kelly, Rice, Smith Nays: Richards Resolutions adopted. *CLAIMS PAID Motion was made by Commissioner Smith and was seconded by Commissioner Rice to approve payment of the following BRA claims as shown in detail on the Check Register dated 8/19/91, and consisting of 2 pages totalling, $98,381.58. • Motion carried on rollcall vote, five ayes. H.R.A. Minutes - 8/19/91 Page 6 There being no further business on the HRA Agenda, Chair n "chards declared the meeting adjourned. Ex'ellkq Director