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HomeMy WebLinkAbout1990-02-05 HRA Regular Meeting MINUTES EDINA HOUSING AND REDEVELOPMENT AUTHORITY FEBRUARY 5, 1990 Answering rollcall were Commissioners Kelly, Paulus, Rice, Smith and Chairman Richards. MINUTES of the HRA Meeting of January 22, 1990, were approved as submitted by motion of Commissioner Smith seconded by Commissioner Rice. Ayes: Kelly, Paulus, Rice, Smith, Richards Motion carried. ESTABLISHMENT OF T.I.F. DISTRICTS FOR RETAIL AREAS PROCEEDING. Executive Director Gordon Hughes reported that work is progressing on establishment of Tax Increment Financing Districts. A preliminary review of the plans by Council will be held on March 19, 1990, then will proceed to the Planning Commission on March 28, 1990, and to Council on April 2, 1990, for a public hearing. Chairman Richards opened up the meeting for discussion to the audience. The Council has felt that exploration should be done regarding establishing the tax increment financing districts in the City where there are none now. Three areas were focused on: 1. Valley View and Wooddale 2. 70th and Cahill 3. 44th and France . The City has hired a consultant for the purpose of laying out a schedule/framework to consider the issue of whether or not to establish tax increment financing districts in these areas. Chairman Richards stated that on March 19, 1990, the HRA will look at the proposed plan, 1) to see if there is any reason to establish these districts, 2) to solicit input from residents, property owners, or business people in these areas. One hearing is before the Planning Commission on March 28, 1990, held at City Hall in the Manager's Conference Room. The second public hearing will be April 2, 1990, in the Council Chambers to hear discussion on these proposals. After these meetings the Council will make a decision. Input will be welcomed from the public. Chairman Richards encouraged the audience to mark their calendars with these dates. A brief discussion followed. Executive Director Hughes commented that property owners in the three districts will be getting a notice of a February 27, 1990, informal review. Tenants are welcome but will not receive individual notices. The owner/manager of the Edina Baskin & Robbins questioned whether businesses would have to move, would businesses have to improve the area or what the Commissioners have in mind. Also, if this is for only the property owners or tenants also. He questioned the time frame - would it be 5 - 10 years? Chairman Richards answered that nothing has been decided. Whether the districts will even be established is up for conjecture. We have been able to see how these tax increments have allowed the City and HRA to do projects such as at 50th & France, at Vernon and at Southdale/Edinborough/Centennial Lakes. This tool allows the public sector to get involved and work with the private property owners to see • what options may exist. Chairman Richards commented that the time could be 5 - 15 H.R.A. Minutes - 2/5/90 Page 2 years depending on the laws, which are always subject to change by the legislature. If nothing is done, the City may be missing an opportunity. Executive Director Hughes stated that experience has shown that these commercial redevelopment projects go in stages; for instance 50th & France where the initial project was done in 1974, followed-up in 1979, and another project in 1990 is being considered. Chairman Richards again mentioned the dates when establishment of the tax increment districts would be considered as February 20, 1990, March 28, 1990, April 2, 1990. Questions are to be directed to Director Hughes at City Hall. BID AWARDED FOR GRADING - CENTENNIAL LAKES CONDOMINIUMS Motion was made by Commissioner Smith for award of bid for Centennial Lakes Residential Amenities to recommended low bidder, Steinninger Construction, at $9,600.00. Motion was seconded by Commissioner Rice. Ayes: Kelly, Paulus, Rice, Smith, Richards. Motion carried. BOND ISSUES FOR TAX INCRENENT DISTRICTS - EDINBOROUGH AND 50TH & FRANCE DISCUSSED Jerry Gilligan, City Bond Counsel, referred to his memorandum of February 2, 1990, in which he stated that the Edina HRA has two tax increment financing districts created prior to August 1, 1979, 50th & France and Edinborough. The Edinborough district includes a portion of the Centennial Lakes project. Under the Tax Increment Financing Act, increment from pre-August 1, 1979 districts have an outside termination date of August 1, 2009. After April 1, 2001, increment from pre-August 1, 1979, districts may only be used to pay bonds which were outstanding on April 1, 1990. Although the 50th & France district is technically affected by this restriction, the Edinborough district is more greatly affected in that significant future phases of the Centennial Lakes development may occur. Centennial Lakes is composed of two tax increment financing districts, Edinborough and Centennial Lakes. Bonds issued since the establishment of the Centennial Lakes district (Bonds issued in 1988 and 1989) are payable from tax increment from both districts. If additional tax increment bonds are issued for Centennial Lakes after April 1, 1990, tax increment from the Edinborough district may only be used to pay such bonds until April 1, 2001. The loss of the ability to use increment from the Edinborough district after April 1, 2001, to pay debt service on bonds issued after April 1, 1990, could limit the ability of the HRA to finance additional public costs for the Centennial Lakes development. The HRA may consider two options in an attempt to more fully utilize tax increment from the Edinborough district after April 1, 2001. Both involve issuance and closing of bonds by the City prior to April 1, 1990. 1. Issue refunding bonds to refund the bonds issued in 1981 and 1986, payable from tax increment from the Edinborough district, and push out the final maturity of these bonds until after April 1, 2001. The result is more debt service payable from the district, but frees up increment prior to April 1, 2001, that would otherwise have been used to pay the principal of the refunded bonds. This freed up increment is then available to pay for Centennial Lakes project costs. This is a technique recently used by • Minneapolis. This may be an option to consider independent of financing H.R.A. Minutes - 2/5/90 Page 3 additional public costs for Centennial Lakes, because it may serve to alleviate tight cash flow resulting from the loss of homestead tax credit. 2. Issue bonds prior to April 1, to finance additional Centennial Lakes public improvements or land costs, such as acquisition of South Park and/or Parcel A. By issuing the bonds prior to April 1, increment from the Edinborough district may be used after April 1, 2001, to pay these bonds. If interest on the bonds is to be tax exempt, the City and HRA would have to be able to represent that they reasonably expect to spend the proceeds of the bonds within 3 years from the date of issuance of the bonds. Without some commitment from United Properties that the office portion of the Centennial Lakes development is to proceed in the near future, this may be a difficult representation for the City and HRA to make. i Issuance of bonds under the second option presents certain risks. If proceeds of the bond issue are expended and little or no additional development occurs in the districts for some period of time, the increment will likely not be sufficient to pay the additional debt service. Second, if the bond proceeds are not expended, additional costs will have been incurred by the HRA for bond issuance costs and negative arbitrage on the bonds which will need to be paid from the tax increment from the districts and further exacerbate cash flow problems caused by the loss of the homestead credit. If additional bonds are not issued prior to April 1, it may be possible because of the dual pledge of both the Edinborough and Centennial Lakes tax increment for the bonds to still maximize all or substantially all of the increment from the Edinborough district until the ultimate August 1, 2009, termination date. One possible scenario would be that the City issues bonds after April 1, 1990, for Centennial Lakes public costs payable from tax increment from both the Edinborough and Centennial Lakes districts. After April 1, 2001, debt service on the post April 1, 1990, bonds tax increment form the Edinborough district could not be used to pay these bonds. Tax increment from the Centennial Lakes district, used to pay debt service on the pre-April 1, 1990, bonds, could be used to pay the post-April 1, 1990 bonds, resulting in a greater amount of pre-April 1, 1990 bonds being paid from tax increment from the Edinborough district. The risk with this allocation approach is that the tax increment statute does not envision a situation where bonds are payable form both a pre and post April 1, 1979, district and someone (Hennepin County, Richfield School District or the State) could challenge this allocation of tax increment, or additional legislation could be enacted which deals with this situation which has a negative impact. A third alternative could be for the HRA to do nothing. For the meeting of February 20, 1990, a pre-sale report will include a resolution calling for the sale of the bonds on March 19, 1990, with the closing scheduled on or before April 1, 1990. Mr. Gilligan concluded his presentation by noting that the Council would not be committed to issue bonds until the actual bond sale (March 19, 1990) and closing (April 1, 1990) . Chairman Richards inquired whether, if staff is authorized to proceed, we incur no obligation until March 19, 1990, and we have the option of looking at all the variables. Mr. Gilligan explained that the important thing is that if the process is not begun now, it will be extremely difficult to do anything at a later date. H.R.A. Minutes - 2/5/90 Page 4 Commissioner Smith asked if this is a unique situation to the Edinborough/Centennial Lakes Area. Mr. Gilligan stated that this also applies to the 50th & France area but there are no future projects there. Commissioner Smith also asked if the three proposed tax increment areas mentioned earlier can stand on their own merits? Mr. Gilligan stated that the April 1, 1990, provision only applies to the pre-1979 districts and would not apply to the new tax increment districts. Chairman Richards asked what would happen if between now and April 1, 1990, the HRA would decide to undertake major projects that are not now authorized at 50th & France; would a refunding issue be needed to deal with these options? Mr. Gilligan stated it would depend on how large those major projects would be. Mr. Gilligan said that if no bonds were issued by April 1, bonds could still be issued after April 1, 1990, but the bonds would have to mature before April 1, 2001. This would limit the period in which tax increments could be collected and we would lose 8 years. If bonds were issued to finance the projects, they would Have to be paid back in that period of time. He noted that currently there are not many outstanding bonds for the 50th and France District. Chairman Richards asked Executive Director Hughes whether the scope of this is what has been envisioned and would include the broader perspective so that we have the option to chose? Director Hughes responded that the 50th & France district is generating substantially more increments than it takes to service the debt. About $800,000/year are being generated now and even if we were cut off at year 2001 there would be sufficient increments left to do the projects that are envisioned for the summers of 1990 and 1991. Selling additional bonds at 50th & France would build in a protective measure that would gain another 8 years but would not be necessary for the projects we have in mind today. Chairman Richards asked the Council if they had further questions or concerns about the proposed bond issue. Hearing none, Chairman Richards said staff and legal counsel should proceed. Director Hughes asked for clarification as to procedure. He said he understood the directive was to: 1) Bring back on February 20 the pre-sale report and resolution calling for sale of the bonds, and 2) Include documents for both Edinborough and 50th and France T.I.F. Districts. Chairman Richards said that was the consensus of the Council. There being no further business on the HRA Agenda, the meeting was adjourned by motion of Commissioner Paulus, seconded by Commissioner Rice. Motion rr' d. Exe�cut�iv6 birf tor