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HomeMy WebLinkAbout1999-11-01 HRA Regular Meeting s • MINUTES OF THE EDINA HOUSING AND REDEVELOPMENT AUTHORITY HELD AT CITY HALL NOVEMBER 1, 1999 - 7:00 P.M. ROLLCALL Answering rollcall were Commissioners Faust, Hovland, Johnson, Kelly, and Chair Maetzold. CONSENT AGENDA ITEMS APPROVED Motion made by Commissioner Faust and seconded by Commissioner Hovland approving the Housing and Redevelopment Authority Agenda as presented. Rollcall: Ayes: Faust, Hovland, Johnson, Kelly, Maetzold Motion carried. *MINUTES OF THE REGULAR MEETING OF THE EDINA HOUSING AND REDEVELOPMENT AUTHORITY FOR OCTOBER 19 1999 APPROVED Commissioner Faust made a motion seconded by Commissioner Hovland, approving the Minutes of the Edina Housing and Redevelopment Authority for October 19, 1999. Motion carried on rollcall vote - five ayes. • DEVELOPER SELECTED FOR KUNZ/LEWIS SITE Chair Maetzold gave background information into the process that has been followed during the developer selection for the Kunz/Lewis site. At the HRA meeting of October 26, 1999, Opus/Clark Construction was selected after deliberation. Commissioners did not take formal action rather intending to do so at the November 1, 1999, regular meeting. On October 29, 1999, the HRA received a revised plan from Laukka/Jarvis/Namron. He discussed the revised plan with three Commissioners to determine their interest in receiving additional information on the proposal. The Commissioners were interested in receiving more information from Lau kka/Jarvis/Namron. Chair Maetzold said that both Opus/Clark and Laukka/Jarvis/Namron would make presentations. HRA comments Commissioner Johnson made a motion to hear final proposals from Opus/Clark and from Laukka/Jarvis/Namron. Commissioner Kelly stated he believed the HRA should listen to the proposals. Commissioner Hovland stated that the proposals deserve to be heard and seconded the motion. Commissioner Faust said she hoped the new proposal would be only new information. Commissioner Hovland noted there are many things to worry about. He believes both proposers should be heard even though there was a 'hand shake' type of situation on 1 October 26, 1999. The proposal that came in on Friday put the HRA in a clumsy spot. • He reminded the Commissioners that It is the job of the HRA to make decisions in the best interest of the City. Ayes: Faust, Hovland, Johnson, Kelly, Maetzold Motion carried. Laukka/Jarvis/Namron/Jerry's presentation Larry Laukka, apologized for any concerns the HRA might have with more information coming forward on the Kunz/Lewis site. After they met with the Edina School Board, it was expressed that they wished the bus garage to stay in the Grandview area and at no cost to themselves. Nothing came of the discussions, therefore the Laukka partnership decided to do something on their own. The memo submitted to the HRA on October 29, 1999, by the Laukka partnership, states the belief that the area as a whole needs to be developed. A new location for the bus garage has been sought within the area to no avail. Mr. Laukka proposed keeping the bus garage in its current location. The new part to this proposal would be to re-build the bus garage on its current site and 'turnkey' it back to the School District. Initially the Laukka partnership chose not to deal with the property to the west where the three small businesses operate. He said the TAGS building is out of context with the site and they have included it into their proposal for the redevelopment. Mr. Laukka continued that the proposal is a modified expansion of the Jerry's enterprises and their operation by incorporating the bus garage on a level that would access onto Brookside and • provide air rights to the commercial development above it. The south side of the proposal would remain as proposed. Mr. Laukka introduced Bob Shadduck of Jerry's Enterprises, Norm Bjornnes of Namron, and Peter Jarvis of Laukka/Jarvis. Mr. Laukka summarized that the Laukka partnership proposal serves the purpose of solving the long-standing issue of the bus garage and leaves intact the three small business properties abutting the proposed development. Their development is good for the whole area and creates a positive image for the Richmond Hills neighborhood. Mr. Laukka said he has been in the building/development business for many years and has built many townhomes and condominiums. He said he knows the market and what can be or cannot be sustained and units between $150,000 - $250,000 will sell. He reported they could enter into an agreement within 30 - 60 days and be ready to begin the Phase 1 modified plan including the bus garage. Chair Maetzold asked clarification if what is being offered would provide a 'turnkey' to the school district without any cost to the taxpayers. Mr. Laukka stated yes. Commissioner Kelly inquired if the numbers were the same as previously presented in the Ehler's report. Mr. Laukka responded the numbers would be the same except the school district will get the $1 million dollar bus garage facility. Commissioner Kelly asked whether the car wash and the doctor's building are owned by Jerry's. Mr. Laukka 2 . responded the doctor's building is not owned by Jerry's. The plan does not incorporate use of that site. Commissioner Kelly asked if the plan required the acquisition of the doctor's building. Mr. Laukka answered no. Bob Shadduck, Jerry's Enterprises, responded that the doctor's building rents parking from Jerry's to sustain their day in/day out operation. Commissioner Faust questioned if what appears to be free is really free. She asked if the HRA buys the bus garage for one million dollars then sells it back to Laukka partnership at $717,000, there would be a shortfall of $283,000. Director Hughes explained that the bus garage cannot be built with tax increments. Based upon past appraisals, the most the HRA could pay for the site would be the million dollars. The $717,000 was part of the Jerry's offer on the property. Commissioner Faust asked about the financing which appeared to be the same with the WMEP proposal as well as the project proposed in 1997. Part of the proposal stated the City was responsible for all demolition and clean-up. Mr. Shadduck said he believed there is a $500,000 estimate for demolition. Commissioner Faust said nothing is free. She said TIF money could not pay for building the bus garage. Attorney Gilligan stated that would have to be examined if indirectly TIF monies would be used. Commissioner Faust said we could be in real trouble if we were audited. Attorney Gilligan said that is a risk. Mr. Laukka reiterated that is not really an issue. Commissioner Hovland inquired if the Laukka partnership paid two million dollars for the . bus property and the school district gets it back for a bus garage. The school district is on record as the proposal being acceptable to build on the site and 'turnkey' the garage. Commissioner Hovland asked when the Laukka partnership would pay for the HRA property. Mr. Laukka said it would be paid when construction begins. Commissioner Hovland asked why the Laukka partnership suggested using G.O. Bonds rather than pay-as-you-go financing. Norm Bjornnes commented with the G.O. Bonds, they would be refunding 3.5 million dollars of bonds already in place with a new issue. There would be an additional 3.5 million dollars of bonds required for the site and would result in a lower cost. The Ehler's analysis showed the Laukka partnership as the most efficient of the four proposals and did not have a deficit because of fewer dollar demands on TIF dollars. The goal in using G.O Bonds was to only add 3.5 million of new issue to the existing bonds and would be taking the most conservative approach. Commissioner Hovland inquired whether the Laukka partnership would guarantee repayment of all the G.O. Bonds. Mr. Bjornnes said yes, through the shortfall agreement. Commissioner Hovland asked if the prediction of receiving TIF revenues as soon as 2002 is still valid. Mr. Bjornnes said the schedule is the same. Commissioner Hovland asked if the Laukka partnership was chosen, would their be any contingencies that would predicate performance. Mr. Bjornnes said no. Commissioner Hovland asked if the Laukka partnership would be interested in including the Noonan, pet hospital and hair salon properties. Mr. Bjornnes said it could be feasible but would need the approval of the building owners. Commissioner Hovland asked how the decision was made about how much the market would bear in the pricing of the proposed townhouses/condominiums. Mr. Laukka said he has been in business since 1962 and he has an experienced "sense for the market". 3 r Commissioner Faust asked for more elaboration on the Laukka partnership experience. • Mr. Shadduck said one office building has been built under the Jerry's auspices. They worked with the City on the Jerry's ramp and agreed to as assessment back on the ramp. Mr. Bjornnes said he has been building projects since 1979 in numerous suburbs for a total of 681 units. Mr. Laukka said the partnership has also built a parking ramp in Edinborough. Commissioner Johnson said the purchase price appears to be approximately $2,500,000 plus $717,000 for the bus garage and the Opus/Clark purchase price appears higher. Mr. Laukka commented the bottom line must be the impact on the community and that the partnership has mixed-use development experience. Chair Maetzold asked clarification if the impact on TIF dollars has changed with the inclusion of the bus garage. Attorney Gilligan said it has a better feel to it with no change to the original numbers. Mr. Laukka said the outcome will be a new facility with no cost to the school district. The objective is to get rid of the garage and allow the rest of the commercial development to take place. The opportunity is good to improve the condition of the area. Opus/Clark presentation Heidi Kurtze, Project Development Manager for Ron Clark Construction introduced Tom Lund, Director of Real Estate Development for Opus Corporation and Ron Clark, CEO • of Ron Clark Construction. Ms. Kurtze indicated while they were disappointed that their proposal is being reconsidered they do understand the City's reasoning. She stated their belief that the reason they were selected last week will be as valid tonight as it was last week. She spoke on seven points, 1) Scope of the project matches HRH's goals and objectives, 2) Risk to the proposal, 3) Highest property valuation, 4) Realistic schedule, 5) Proper balance, 6) Bus garage is flexible and 7) Experienced development team. 1. Scope - The Opus/Clark team does not believe the project should be done piecemeal. There is no bus garage in their proposal. During the RFP process it seemed there was a desire on the part of the City to allow Jerry's the right to develop that site. Out of respect for Jerry's they left the bus garage site out of the proposal. Their numbers work, even with modifications. 2. Risk - Two biggest factors of risk are, 1) developer fails to perform as promised or 2) HRA sells bonds and incurs the cost but falls short on the increment necessary to make the project work. The Opus/Clark team has unparalleled experience with solid financial statements. Their proposal is an 85% pay-as-you-go note while the other partnership proposes a 100% bond sale. The Opus/Clark team is willing to take a $7 million pay-as-you-go note while the other partnership proposes none. After speaking with Rusty Fifield of Ehlers and Associates, it is always less risky for the City to take a pay-as-you-go note to protect the City's bond rating. 4 3. Property Valuation - $1,000,000 of tax capacity will be generated over the life of the project. 4. Realistic Schedule - The Opus/Clark team is experienced in acquiring property. Over 100 properties were acquired in Minnetonka in a timely manner and included seven businesses and without the use of condemnation. Opus is one of the largest developers in the United States which grants them the ability to work with businessowners in their relocation efforts. An appropriate amount of time has been built into the schedule to allow these relocations. The Opus/Clark team will use a conservative approach to begin with and end up performing better than anticipated. 5. Proposal is Balanced and Know It Will Work - After the last public meeting, the Opus/Clark team proposal had a gap and were hurt by the realistic timing schedule. They went back to the drawing board and used the Opus architects and engineers to solve a three million dollar problem. Since it is the desire to incorporate the larger site, the Opus/Clark team proposal shows how much tax increment will be generated, how much property value will be created, know the schedule to follow, know what they plan to build, and how they plan to pay for it. 6. Bus Garage - The development plus the bus garage could be done on a 'turnkey' basis with no cost to the City. Other uses above the bus garage could be considered, i.e., retail, hotel, office or for Jerry's to expand. The site could be utilized for use of the relocated businesses from across the street. There are many solutions for the bus garage and it should be studied. The 50,000 square feet behind the public works building could be a potential development site. Further possibilities • exist to build under the bus garage, build along 701h Street or, build along the railroad tracks. Some of the other sites may be more cost effective than re-building on the current site. Time does not permit a thorough financial analysis of the best location for the bus garage and what should be built in its place. The Grandview proposal can proceed without a final answer on the bus garage. If the City chooses another developer to develop the bus garage site, the Opus/Clark team would concur. The main point of the RFP was to select a developer for the Kunz/Lewis site and the timing is critical to select the best developer for producing a new library and senior center for the community. The bus garage problem needs solving but it requires more study. 7. Experience - The experience of Ron Clark Construction should give the City confidence in their ability to get the job done. The Opus/Clark team has an unparalleled success rate in delivering on-time and with customer satisfaction. Ron Clark has been in the business for 25 years and has an unparalleled reputation for quality and customer satisfaction. Ms. Kurtze said she has worked for the City of Minnetonka, Hennepin County, and City of Chicago in affordable housing development. If the City desires to incorporate affordable housing in the plan, she is well equipped to bring in livable community dollars for the project. Ms. Kurtze concluded with the reason the Opus/Clark team was chosen on October 29, 1999, was because the City was offered the greatest benefit with the least level of risk for the proposed development. HRA comments 5 . • Y clarified that the O us/Clark team is offering a solution with the bus Commissioner Kelly c p 9 garage at no cost to the City as well. Ms. Kurtze answered yes and added there is, at present, 1.2 million dollars in funds which could be reallocated to the bus garage. Commissioner Johnson said during the work session he questioned all the developers whether the smaller development proposed by the Laukka partnership had less risk to the City. He came away feeling that the Opus/Clark team would say there would be less risk to the City in their proposal regardless if they use the higher pay-as-you-go method or if the construction schedule is slower than the other development, and all would be Opus/Clark team's responsibility. Ron Clark responded yes. The most important thing is the Opus/Clark team would be taking over a seven million dollar pay-as-you-go note as well as they have offered that they would be subordinate to the G. O. Bonds. He added this is very important as the City gets paid first. Commissioner Faust asked about the Opus/Clark team's experience. Ron Clark answered he has been building townhomes and condominiums for 25 years for an approximate total of 1,000. Mr. Lund responded that Opus has built over 41 million square feet of office space with adjacent parking ramps. Commissioner Faust inquired if they had any experience building libraries. Mr. Clark said the Opus/Clark team has built a university library. Commissioner Faust asked if building height next to the park could be reduced and increased on the railroad track side because of neighborhood concern. Mr. Clark said the Opus/Clark team is flexible and a balance needs to be sought to • answer neighborhood concerns as well as financial obligations. Commissioner Hovland asked when will the Opus/Clark team pay for the HRA owned land. Mr. Clark said on the date of closing. Commissioner Hovland asked if there are any contingencies the Opus/Clark team would require in order to enter into a development agreement with the HRA. Mr. Clark said no. Commissioner Hovland said certain assumptions were made about closing the gap. If the value of the adjoining properties is significantly higher than anticipated, what is the impact on the project as proposed. Mr. Lund explained in Minnetonka some property owners set values extremely high on their properties. The city did not go through the condemnation process but worked out an equitable solution using appraised values. This should be done as soon as possible. Commissioner Hovland asked if a condemnation agreement should be made a part of a contingency. Mr. Lund said they have not met with the businessowners to find out their attitude towards price. Commissioner Hovland asked if it would be necessary to acquire the surrounding properties before paying for the HRA land. Mr. Lund said they would need the ability to acquire the property because the proposal depicts the office building in that location. Commissioner Johnson stated he understood that the financial risk is borne by the developer in any case if it is a regular or a quick take condemnation. He inquired whether the question was financial or if the City does not want to use condemnation as a matter of public policy. Commissioner Hovland said using condemnation is a matter of public policy. 6 Commissioner Kelly said public policy regarding condemnation has not been discussed yet. Commissioner Hovland asked if the pay-as-you-go note exceeds the seven million dollars, who pays for that. Ms. Kurtze said the Opus/Clark team would do that. If the number gets exceedingly large the value being created would need to be examined further. Mr. Clark said the City's G.O. Bonds would get paid back first. If Opus/Clark does not capture enough dollars to pay back the note, it's their problem. The Opus/Clark team believes their proposal has the lowest risk to the City. Commissioner Kelly asked the Opus/Clark team to elaborate on why they believe their proposal has the least amount of risk. Mr. Clark explained that everything is paid for up front through the Opus/Clark teams cash equity and borrowed dollars. It will be the Opus/Clark team's responsibility to pay it back either to themselves or to the lender. The tax increments being generated already are enough to pay the City back. The only risk is if the current owners don't pay their taxes. Ms. Kurtze noted there is money in the budget of $3.5 million to pay off old existing debt in the district. The Opus/Clark team is proposing that new G.O. Bonds be issued for $2.5 million. The Opus/Clark team will be carrying a million dollars of existing debt with the pay-as-you-go note. Commissioner Hovland asked if the Opus/Clark team is prepared to proceed with the a • project without acquisition of the abutting properties. Mr. Lund said the Opus/Clark team has to have the land before they can start building. Commissioner Faust asked for a short course on the timing of condemnation. Commissioner Kelly said in an assemblage there is the understanding that a condemnation will happen if the developer and owner are unable to come to agreement. There are unscrupulous owners who will try to take advantage with unreasonable prices for their property. An agreement with a clause in place stating our efforts would be supported by the condemnation policy. The City would temper the situation but the developer and owner must reach agreement. Attorney Gilligan indicated the development team should negotiate the property purchase. A resolution should stand behind and exercise the condemnation policy. He noted there could be tax advantages to property owners. There are two different types of condemnation, 1) Quick Take Condemnation - which could take 120 days with a hearing to determine compensation by three court-appointed commissioners, or 2) Normal Condemnation - in a hearing there would be an award to determine the rights to appeal and could take from 6 - 10 months. Commissioner Kelly reiterated the condemnation process takes a long time and would have tax implications. Attorneys take condemnation cases on a contingency basis and the legal costs can be exorbitant. It 7 Chair Maetzold said since the developer cannot proceed without the abutting properties . would this indicate the need for a closing date for all three properties or only that condemnation powers must be in place. Mr. Clark answered the availability of the properties is the most important component. Commissioner Hovland asked if the project had to be downsized, what would be the affect on the Opus/Clark team's development. Mr. Clark responded they would have to modify their proposal and develop in the best interest of the City. Commissioner Hovland asked if there would be room in the development for relocation of the three properties. Mr. Clark said yes. Ms. Kurtze added building a gymnasium on the lower part of the property has been considered because of the slope of the site to possibly accommodate a TAGS relocation. Public comment Darlene Roach Bastian, 5257 Richwood Drive, voiced disappointment that things have changed since the meeting on October 26, 1999, and it does not seem right. John Menke, 5301 Pinewood Trail, said that finally a plan has come forward for the bus garage. If the problem of the garage is not solved, he believes rentals of the Class A office space will be difficult. He submitted a letter previously stating that small businesses are important to the quality of life in Edina. Dan Shebuski, D.V.M., 5237 Eden Avenue, owner of the Edina Pet Hospital, • commented he has received no information regarding the possible taking of his land. He said he has been in Edina since 1975 and if the pet hospital needs to relocate more than a few thousand feet from its current location, he will not only lose his property he will lose his practice. Shirley Kiedrowski. Classic Hair Design, 5241 Eden Avenue, said she was not aware, until the meeting of October 26, 1999, that her business may need to be relocated. She had submitted a letter voicing the same concern. HRA comments Commissioner Kelly empathized with the feeling that it seemed the wheel is being reinvented. He does not believe the Laukka partnership has brought any solution to the problem of the bus garage. Mr. Kelly gave five points to help in making a decision; 1) The Opus/Clark proposal affords greater flexibility because we know what we get up front and will work with whoever controls the bus garage property; 2) The taxpayers need to have an answer about why we would be taking less money; 3) Risk - after deliberating with his colleagues he was told the reasonable risk was after the costs are factored in, a) the cost of issuing the instruments, b) what happens in the event of default, and c) the impact to the rating of the City. There is no question the greater risk is with G.O. Bonds rather than pay-as-you-go; d) Construction Timing/Scheduling - a realistic construction schedule is necessary; and e) Comprehensive vs. less comprehensive Development - Look forward to an attractive frontage on Vernon with 8 the Opus/Clark team. Commissioner Kelly said he is not prepared to revisit the unanimous approval of the Opus/Clark decision of October 26, 1999. Commissioner Faust explained the proposal is no different than what had previously been presented for the bus garage site. She voiced concern that financial gyrations might be necessary to make the plan palatable to the State of Minnesota. After attending a seminar and much deliberation, she prefers the mix of townhomes/condominiums in the Opus/Clark team proposal as well as their extensive experience. She said her choice would remain the same as her original decision with the Opus/Clark team. Commissioner Hovland after taking the time to think about the scope of the project since October 26, 1999, he believes the least financial risk is with the Opus/Clark team. There is slightly more risk due to the size of the project and the acquisitions of additional properties. With the Laukka/Jarvis proposal, there is slightly more financial risk and slightly less developmental risk due to the use of property already owned with the exception of the TAGS property. The issue seems to be whether to take the risk with Opus/Clark to do the bigger project and meet the contingencies in the hope of getting a fully-developed piece of property or chose a more conservative route that would work but could be a timing issue. The bus garage is less important than the project itself. Following a thoughtful process, he proposes approval of the Opus/Clark proposal with the European Village feel. He voiced admiration for the Laukka/Jarvis • partnership both personally and professionally. Commissioner Johnson said he felt fortunate to have been a part of tonight's presentation and concurred with what Commissioner Hovland said. When he became involved with the HRA it was apparent this was an opportunity for a great development and either of the proposers would do a tremendous job. He did a little background checking and found that the Minnetonka Opus/Clark development was done as previously mentioned. The comprehensive nature of the Opus/Clark presentation plus the assurances that they will do everything that is commercially reasonable and that the City is at a minimal risk, is reassuring, and he would support their approval. Chair Maetzold said he previously supported both Opus/Clark and Laukka/Jarvis. They are two excellent teams and at the close of the last meeting he supported the Laukka/Jarvis team. He has worked since 1988 while on the School Board to find a solution for the bus garage and we have one in hand with the Laukka/Jarvis proposal. He further likes the Laukka/Jarvis proposal because of the medium priced, residential use of the site. Chair Maetzold said he is troubled with the taking of the three properties because of, 1) the transition between the neighborhood and the commercial development, 2) the timing of the taking of the properties and 3) concern for the small businesses. He likes the experience of the Laukka/Jarvis team as well. He would vote for the Laukka/Jarvis proposal but wants the vote to be unanimous so if a motion is made for Opus/Clark he will support their proposal. It 9 Correspondence was received from Robin Davidson, 3900 Northwoods Drive, Arden Hills, MN, thanking the City for the thoughtful consideration of their proposal. Bob and Rita Thomale, 5400 Edenmoor Street, stating their selection of developer. Arthur L. Heiam, 5205 Richwood Drive, asked that respectful concern be given to the Richmond Hills Neighborhood regarding building height, costly condemnations, rights of the small businesses, traffic, and financing. A facsimile was received directly prior to the HRA/Council meeting from Opus/Northwest LLC and Ron Clark Construction with six key points. Commissioner Kelly made a motion to select Opus/Clark Construction as the developer of the Kunz/Lewis site and authorize the City to proceed with negotiations for a letter of intent and all appropriate documents. Commissioner Faust seconded the motion. Rollcall: Ayes: Faust, Hovland, Johnson, Kelly, Maetzold Motion carried. CLAIMS PAID Motion made by Commissioner Johnson approving the Check Register dated October 29, 1999, and consisting of one page totaling $66,467.53. Commissioner Hovland seconded the motion. Rollcall: Ayes: Faust, Hovland, Johnson, Kelly, Maetzold Motion carried. There being no further business on the HRA Agenda, Chair Maet old declared the meeting adjourned at 9:08 P.M. Executive Director 10