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HomeMy WebLinkAbout1989-09-05 HRA Regular Meeting MINUTES OF THE JOINT MEETING OF THE EDINA HOUSING AND REDEVELOPMENT AUTHORITY/CITY COUNCIL HELD AT EDINA CITY HALL SEPTEMBER 5, 1989 A joint meeting of the Edina Housing and Redevelopment Authority and the City Council was convened to consider concurrently: 1) Edina Homestead Development/RPI Services, 3) Award of Bids - Centennial Lakes Phase I Residential Amenities, and 4) Centennial Lakes Phase IV. Action was taken by the HRA and Council as recorded. ROLLCALL Answering rollcall were Commissioners/Members Kelly, Paulus, Rice, Smith and Richards. MINUTES of the HRA of July 24, 1989 and the Joint HRA/Council Meeting of August 7, 1989 were approved as submitted by motion of Commissioner/Member Paulus, seconded by Commissioner/Member Smith. Ayes: Kelly, Paulus, Rice, Smith, Richards Motion carried. PUBLIC HEARING ON EDINA HOMESTEAD DEVELOPMENT - RPI SERVICES CONTINUED INDEFINITELY Motion of Commissioner/Member Rice was seconded by Commissioner/Member Smith to continue indefinitely the public hearing on the Edina Homestead Development. Ayes: Kelly, Paulus, Rice, Smith, Richards Motion carried. BID AWARDED FOR CENTENNIAL LAKES - PHASE I RESIDENTIAL AMENITIES Executive Director Gordon Hughes explained that the bids are for the construction of fountains in the common areas of Centennial Lakes Condominiums - Phase I and was bid separately from some of the other amenities. Motion was made by Commissioner Rice for award of bid for construction of fountains in the common areas of Centennial Lakes Condominiums - Phase I to recommended low bidder, Monette Construction, at $15,600.00. Motion was seconded by Commissioner Smith. Ayes: Kelly, Paulus, Rice, Smith, Richards Motion carried. CENTENNIAL LAKES - PHASE IV DISCUSSED Executive Director Hughes said that he had asked Larry Laukka, the Centennial Lakes Condominium developer, to appear and discuss further his plans for the Phase IV Condominiums. He recalled that the HRA gave this concept approval at their July 10, 1989 meeting. This concept would make Phase IV a totally market rate building containing 30 units instead of the 46 units as in Phases I and II. The HRA would make its normal contribution to Phase IV but none of the units would qualify for second mortgage assistance. Instead the unused second mortgage potential would be transferred to other condominium phases that would be eligible for purchase by moderate income individuals. After the meeting, staff was concerned that the HRA had not given approval for that unrecoverable subsidy portion of the HRA assistance. Director Hughes mentioned that in Phases I, II and III, as well as in Edinborough, the HRA provided an unrecoverable subsidy of $650,000 per phase which was used to reduce the selling prices of the units. In Phase IV, Laukka Development is suggesting that the unrecoverable subsidy be reduced from $650,000 to $250,000. This equates approximately to the land cost for the Phase IV site so in essence the HRA would be transferring the land at no cost to construct the project. Director Hughes said that the question for the HRA is: Should Phase IV, which is designed for more affluent purchases, be subsidized by the HRA so as to reduce the selling prices? He referred to his memorandum dated September 1, 1989, addressed to the HRA which listed several pros and cons for the proposed Phase IV. HRA/Council Minutes - 9/5/89 Page 2 Commissioner Paulus asked if this would affect future developments in that other developers would be asking the HRA to underwrite other projects. Director Hughes said possibly there could be others redeveloping in the City but that a more likely event would be if market rate housing was proposed for other phases within Centennial Lakes. The same level of write down could be requested. Commissioner Paulus noted that future requests will have to be considered on their merits by the HRA. Larry Laukka, Centennial Lakes condominium developer, informed the HRA that they have prepared a packet for the proposed Phase IV and have forwarded it to a number of people who have exhibited an interest. They are now in the process of contracting with those people, subject to a pre-sale requirement that, as developer, they have until October 1 to determine if the building is feasible. He reiterated that the building design for the larger units would be within the existing footprint and that the exterior would look the same as those of the earlier phases. He said the intent is to see if they can introduce the larger market rate units at that density (40 units per acre) to that community. Mr. Laukka said that this would also provide an opportunity to construct one of the buildings without any of the second mortgage subsidy which can then be put back into the pool and be spread out over the balance of the development or be saved for subsequent phases of Centennial Lakes. He said he had suggested that the typical unrecoverable write down be reduced from $650,000 to $250,000 because he felt the cost per unit would exceed what most people would be willing to pay at that density and in that environment. He said in projecting cost it is about $113/square foot in the market place. In conclusion, Mr. Laukka said it is not certain that they will go forward with Phase IV as proposed. Nevertheless, the formula has been structured with the $250,000 write-down and that he wanted to be sure that was understood before getting further into the project. Chairman Richards said he was troubled by the $8,000 write-down per unit and the fact that someone may easily be able to afford to pay that. He asked for a feel of ranges of income and/or assets of individuals who had expressed interest. In response, Mr. Laukka said that would be hard to even guess at but that the names would be recognized as pillars of the community. A good number are retirees or people who are about to retire and want to sell or have sold their homes but wish to maintain residence in Edina. They have indicated that this project would provide them that opportunity. Incomes and ages will range widely and the majority of them are from Edina. Mr. Laukka said when they finished up the product that, in trying to squeeze the design into the building, the question was whether or not it could provide a value. The early response in the past two weeks is that it has not. He said their plan is to offer the units for another three weeks and then make a decision. If it does not sell then they would revert back to a normal building for Phase IV wherein they would use the normal full subsidy and normal write-down. Mr. Laukka stated that he had felt that this was an opportunity to bring a new element into the development and preserve something in excess of $600-700,000 worth of write-down that could be put into the other units to deepen the subsidy in the other areas. He said there was no harm done at this point and it is a question of whether the HRA thinks it is a smart idea to try to do it and move some of the write-down money around and broaden the capital pool. Commissioner Rice asked what percentage of the buyers in Edinborough participated in the second mortgage money. Mr. Laukka said that the maximum was 60%. Member Rice then asked, in his experience in building hundreds of units in various communities, if it was a positive or negative to have various income levels and HRA/Council Minutes - 9/5/89 Page 3 neighborhood.sociological levels in a Mr. Laukka replied that he felt it was g g ver y positive. He said that after now managing the Edinborough project since its inception and in dealing with the homeowners' association they have found that the older and more experienced people bring a certain amount of sophistication and sobriety to the development. A lot of those were energetically involved in running that community. The younger people are first time homeowners and are not as experienced and they look and deal with their elder neighbors with a certain amount of satisfaction because of their wisdom. Commissioner Rice asked how the marketing of Phases I, II and III has gone in comparison with Edinborough. Mr. Laukka said it has gone fairly well. At this point with 134 homes there are 88 bonafide contracts that had people who were qualified to purchase which is about as good or better than this stage with Edinborough. He said they do not as yet have the models open but will have in October. The market is almost identical to that of Edinborough - they are seeing the same mix - younger faces, incomes, working women and empty nesters. He noted that there are some higher priced units in Centennial Lakes, up to $110,000, which have not sold as yet. Chairman Richards asked if the $400,000 write-down not used for Phase IV were put in Phase V, in addition to the normal $650,000, would that mean we could try to reach the lower end of the spectrum. Mr. Laukka said they could deepen the second mortgage program which would provide some flexibility. A larger second mortgage would provide an opportunity to sell homes to people who earn less, possibly in the $25-26,000 income range. Chairman Richards asked Mr. Laukka what additional hard costs he would incur in the next three weeks. Mr. Laukka said that they have spent the money, designed the building and that is speculative - there would be no additional costs. He said he did not want to prolong the prospective project if it is not feasible. Rather they would want to get on with the regular market and get building IV started yet this year. Chairman Richards then asked what the reaction would be if the HRA said no to the project three weeks from now. Mr. Laukka replied that he would prefer the HRA to say no now. They do not wish to antagonize anyone and are spending a lot of time and energy on this marketing. Concerning marketing, Commissioner Smith asked if having a second mortgage available would help. Mr. Laukka said he did not think so. The decision people are making when they buy is if there is value - are they getting space for the dollar and can they live in that environment; the real question is the density. Chairman Richards then asked the Commissioners to express their feelings on the Phase IV as proposed. He said he would be inclined to allow the $250,000 write-down and that the other $400,000 be used in the other phases to try to attract the other end of the economic spectrum as a compensating balance. Commissioner Rice said he would concur with Chairman Richards. Commissioner Kelly said that she would like to see this project happen and would like to see what would happen in the next three weeks. She said that one of her concerns would be the resale value for these units. Commissioner Smith said he would go along with the proposal as presented. Commissioner Paulus said that she, too, would concur. Chairman Richards then made a motion to approve conceptually a market rate development for Phase IV Centennial Lakes Condominiums consisting of 30 units for which the HRA would grant an unrecoverable subsidy not to exceed $250,000, with the remaining subsidy to be transferred to other phases. Motion was seconded by Commissioner Smith. Ayes: Kelly, Paulus, Rice, Smith, Richards Motion carried. HRA/Council Minutes - 9/5/89 Page 4 Motion was made by Commissioner Smith and was seconded by Co i, sioner Rice for adjournment of the HRA. Motion carried unanimous Ex utive Dirg r City Clerk