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HomeMy WebLinkAbout1989-06-05 HRA Regular Meeting MINUTES OF THE JOINT MEETING OF THE EDINA HOUSING AND REDEVELOPMENT AUTHORITY/COUNCIL HELD AT CITY HALL JUNE 5, 1989 A joint meeting of the Edina Housing and Redevelopment Authority and the City Council was convened to consider: 1) Hawthorn Hotel Development, 2) Conveyance of Phase II Condominiums - Centennial Lakes, 3) Award of Bids - Centennial Lakes - Phase I Deck Waterproofing, 4) Tax Increment Financing Assistance - RPI Services - Edina Homestead, and 5) Resolution Adopting Special Law Relating to Edina Transit System & Public Bidding. ROLLCALL Answering rollcall were Commissioners/Members Paulus, Rice and Richards. (Commissioner/Member Kelly arrived at 7:20 p.m. ) MINUTES of the Joint HRA/Council Meeting of April 17, 1989 were approved by motion of Commissioner/Member Paulus, seconded by Commissioner/Member Rice. Ayes: Paulus, Rice, Richards Motion carried. PUBLIC HEARING ON EDINBOROUGH - HAWTHORN HOTEL DEVELOPMENT CONTINUED INDEFINITELY Assistant Manager Gordon Hughes informed the Council that the proponents, Hawthorn Suits Hotel, had asked for an indefinite continuance of their request for Rezoning and Final Development Plan approval. He explained that continuing the hearing indefinitely would mean a new hearing date would be set, with notice mailed and published, when they wished to have the proposed development back on the Agenda. Motion was made by Commissioner/Member Rice to continue indefinitely the public hearing on Edinborough - Hawthorn Hotel Development. Motion was seconded by Commissioner/Member Paulus. Ayes: Paulus, Rice, Richards Motion carried. PHASE II CONDOMINIUMS - CENTENNIAL LAKES CONVEYED HRA Executive Director Hughes advised that the condominiums developer is ready to proceed with construction of the Phase II condominium building - Centennial Lakes. Closing of this conveyance is expected on or about June 9, 1989 with construction to follow immediately. Staff would recommend that the HRA authorize the Chairman and Secretary to execute documents conveying the Phase II condominium lot to the developer. The land will be conveyed on the same terms and conditions as Phase I was conveyed. Commissioner Rice said there has been discussion that some changes may be made, e.g. installation of an elevator. Director Hughes said that if there is a change it would happen with the Phase III building and the developer would come before the HRA at that time to justify any proposed change. Chairman Richards called for public comment on the proposed conveyance of Phase II condominiums. No comment being heard, Commissioner Paulus introduced the following resolution and moved its 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 "HRA"), as follows: 1. Recitals. The HRA 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 BRA and the Foundation (the "Agreement") . By a resolution adopted March 7, 1988, the HRA H.R.A./Council June 5, 1989 Page 2 approved the form of the Agreement and authorized any two officers of the HRA to execute and deliver the Agreement on behalf of the ERA 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 ERA 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 HRA 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 II of the Condominium Development be commenced on the property described on Exhibit A hereto (the "Phase II Condominium Property") and that the Phase II Condominium Property be conveyed pursuant to the Amended Agreement and on the same terms and conditions as the Phase I Condominium Property was conveyed with such changes and modifications as may be approved by the Executive Director and the Attorney to the ERA. 2. Authorization for Execution and Delivery of Documents. Any two officers of the BRA are authorized and directed to execute such instruments and agreements as may be required or be desirable to accomplish the conveyance of the Phase II Condominium Property pursuant to the Amended Agreement with such changes and modifications as may be approved by the Executive Director and Attorney for the ERA. 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. EXHIBIT A THE HOMES AT CENTENNIAL LAKES PHASE II CONDOMINIUM LAND DESCRIPTION All that part of LOT 1, BLOCK 2, SOUTH EDINA DEVELOPMENT ADDITION, according to the recorded plat thereof, Hennepin County, Minnesota, described as follows: Commencing at the southeast corner of said LOT 1; thence on an assumed bearing of North 00 degrees 14 minutes 09 seconds West, along the easterly line of said LOT 1 for 100.00 feet; thence North 18 degrees 11 minutes 57 seconds East, along said easterly line for 47.23 feet to the actual point of beginning; thence South 89 degrees 45 minutes 51 seconds West for 148.64 feet; thence North 45 degrees 14 minutes 09 seconds West for 35.67 feet; thence North 00 degrees 14 minutes 09 seconds West for 187.78 feet; thence North 89 degrees 45 minutes 51 seconds East for 25.93 feet; thence North 00 degrees 14 minutes 09 seconds West for 77.00 feet; thence North 89 degrees 45 minutes 51 seconds East for 153.00 feet to said easterly line of LOT 1; thence South 00 degrees 14 minutes 09 seconds East, along said easterly line for 274.80 feet; thence South 18 degrees 11 minutes 57 seconds West, along said easterly line for 16.02 feet to the point of beginning. Dated as of the 5th day of June, 1989. Attes Chairma 2 L Executiv Director Motion for adopt, of the resolution was seconded by Commissioner Rice. Rollcall: Ayes: Paulus, Rice, Richards Resolution adopted. H.R.A./Council June 5, 1989 Page 3 BID AWARDED FOR CENTENNIAL LAKES - PHASE I DECK WATERPROOFING Executive Director Hughes explained that the proposed project is the deck waterproofing for the Phase I Centennial Lakes building. This work is part of the public improvements undertaken by the HRA that will benefit the condominiums. Motion was made by Commissioner Rice for award of bid for Centennial Lakes - Phase I Deck Waterproofing to recommended low bidder, Nichols & Hines, Inc. , at $5,138.00. Motion was seconded by Commissioner Paulus. Ayes: Paulus, Rice, Richards Motion carried. REQUEST FOR TAX INCREMENT FINANCING ASSISTANCE - RPI SERVICES - EDINA HOMESTEAD CONTINUED TO 6(19/89 Executive Director Hughes recalled that on April 3, 1989, the HRA considered the preliminary request of RPI Services for tax exempt bonds and tax increment financing assistance for a proposed project in the northwest quadrant of Parklawn/York Avenues. The proposed project is an 80 dwelling unit development designed for frail elderly. The project is designed to fill the gap between traditional senior housing and a rest home. Based upon Council direction on April 3, staff had met with the developers of the project to outline the terms of a proposed agreement concerning bond issuance and tax increment financing. The bonds would be similar to the housing revenue bonds which the City issued for the Edina Park Plaza and Vernon Terrace projects. Pending federal legislation would require that 20% of the proposed units be available at rents affordable to low and moderate income individuals. Even though this legislation is pending, if passed it will impose the 20% requirement on the project. This requirement is similar to that imposed at Edina Park Plaza and Vernon Terrace. The tax exempt bond issue is proposed to be an un-rated issue which would be privately placed to institutional investors. Under this arrangement, it is felt that individual local investors would not be affected in the event of a default on such bonds. Director Hughes explained that the proposed tax increment financing assistance for the project would be similar to that extended to Edina Park Plaza. By way of the proposed agreement, the HRA would agree to make an annual loan to the project of $70,000. The annual loans would commence in 1991 and would continue for 20 years thereafter. Each annual loan would be conditioned upon the following: 1. The tax increment generated from the development would have to be at least $70,000 annually. If less than $70,000, the annual loan would be for the actual tax increment generated. 2. The annual loan would be made upon receipt of evidence that the current year's real estate taxes had been paid. 3. Federal law would have to require that 20% of the units would be available to low and moderate income residents. The annual loans would continue for 20 years but not later than 2009. If the annual payments extend for the full term of 20 years, the project then must repay all annual loans to the HRA with interest over the subsequent 20 years. If, however, the project is sold to an unrelated entity, converted to a condominium or other type of housing, or refinanced, the annual loan payments by the HRA would terminate and all prior payments made would have to be repaid immediately, but without interest. The repayment of the annual loans by the HRA would be secured by a second mortgage. In connection with the proposed development, the developers are prepared to make a dedication to the City of $40,000. The developers would also pay all legal fees incurred by the HRA in connection with the project. H.R.A./Council June 5, 1989 Page 4 Director Hughes pointed out that the proposed tax increment financing assistance for this project would result in an essentially risk-free position for the HRA. Under the proposed agreement, the HRA would make annual loan advances only if the taxes are paid by the development and only in an amount which does not exceed the tax increment generated from the payment of such taxes. Increments from other projects in the Southeast Edina Redevelopment Plan Area would not be required to assist the proposed development. Director Hughes concluded the presentation by saying that if the HRA wished to assist this project, staff believes that the terms outlined represent fair and reasonable contribution on the part of the City and the HRA. In light of recent defaults of housing revenue bonds in the City, the HRA may wish to discuss with the developers the credit worthiness of the proposed tax exempt bond issue. There are three approaches that the HRA could take: 1) Insist that this be a rated bond issue, 2) That the bond issue be an un-rated issue, as proposed by the developers, that would be sold only to an institutional investor who would submit to the HRA an investment letter acknowledging that the investor understands the risks of the program, with the bonds being issued in large denominations that would avoid re-sale to small investors, and 3) That the bond issue be rated and guaranteed but also be required to be sold to an institutional investor. Director Hughes advised that Larry Olson, RPI Services, was present to answer questions. Mayor Richards suggested that, because only three Council Members were present, this matter be continued to June 19, 1989. Director Hughes noted that final rezoning and plat approval for the development are scheduled for that date. Mr. Olson suggested that at this time the Council review the work they have done with the staff to determine if, basically, they are on the track that they were looking at back in April. Craig Avery, representing the developers, confirmed that they were here to open the proposal for discussion, that they would be incurring some costs in negotiating a development agreement with the City and would be reluctant to do that without additional input from the Council. Commissioner Paulus asked: 1) How this money would be used in the project, 2) How this project would avoid the need for refunding of the bonds as was recently done for the Edina Park Plaza project, and 3) Because this project is specialized, would there be less risk of it not reaching full occupancy. Director Hughes explained that the tax increment assistance would be directed at providing the internal subsidy needed to make 20% of the units affordable for low and moderate income individuals. He said that if a bank would guarantee the bond issue at a fee, if this were to default the bank would play the role of the FHA as in the case of Edina Park Plaza, or in essence would provide a safety net for the bondholders. As to full occupancy, Director Hughes said there is less risk that it will not be fully occupied because the operating entity in this project is the same as at 7500 York and there would be somewhat of a captured market. It may be more risky in that it is a specialized project, e.g. smaller rooms, specialized arrangement that may make it less adaptable to a re-use for other than frail elderly. Member Paulus said her concern would be the risk of having to bail out this project as was done with Vernon Terrace and Edina Park Plaza. Mayor Richards said that the City is not at risk on the bonds as it relates to those two projects. Director Hughes confirmed that both those bond issues and this one are revenue issues and are backed only by the revenue of the building and are not backed by the general obligations of the City. A default would not affect the rating of the City for general obligations bonds per se, but could possibly affect the marketability. (Commissioner Kelly entered the meeting at this point. ) Chairman Richards asked if there would be a $40,000 dedication to the City regardless of what is done on issuance or non-issuance of the bonds. Director H.R.A./Council June 5, 1989 Page 6 would mean the project is exempt from income taxes but is not exempt from real estate taxes, so it would continue to generate a tax increment. Commissioner Rice asked for clarification of the repayment of the loan and interest payment. Director Hughes explained that interest starts to accrue at the beginning of the repayment period. If at any point prior to the repayment period the project is sold or converted, the principal amount of the loan is repaid to the City without interest. If it is after the 20-year period and a sale occurred in the 22nd year the repayment would likewise be accelerated but the HRA would also have accrued two year's interest. Commissioner Kelly asked if the agreement, whereby if the project is sold the loan payments would have to be repaid but without interest, is customary and if it is similar to other projects in the City. Director Hughes said that in the case of Edina Park Plaza it bore interest. In that situation the 20% requirement was based on people earning 80% of the median income; the subject project is based on people earning 50% of the median income so there is a greater subsidy that needs to be made for the 20%. He noted that loans by the HRA are uncommon; typically it has been a grant to acquire the land in other projects, e.g. South Haven, Summit Point, Oak Glen. Commissioner Kelly said her concern was that the City is assisting in these types of projects to meet a need in the community and that she did not want to make it so easy that the building could be sold to a private party that would not accommodate those needs. Chairman Richards stated that he did not think the case had been made for public assistance and that perhaps it may be better to issue a check each month to those people who need the subsidy. He alluded to the other two revenue bond issues both of which are in default and said that of the options suggested by staff he would opt that if issued the bonds be required to be rated and guaranteed. Commissioner Kelly said that she would like to see the market study statistics for this type of facility to know where they are capturing this type of occupant in the community. Commissioner Rice made a motion that the request of RPI Services for tax increment financing assistance for Edina Homestead be continued to June 19, 1989. Motion was seconded by Commissioner Kelly. Ayes: Kelly, Paulus, Rice, Smith, Richards Motion carried. RESOLUTION ADOPTED APPROVING SPECIAL LAW RELATING TO EDINA TRANSIT SYSTEM Director Hughes reported that Chapter 241, has been signed into law on May 25, 1989. This law permits the City to operate a public transit system in southeast Edina and to establish a special service district to provide funding for the operation of that system. The law also provides that the City of Edina and the HRA need not require public bidding and performance bonds in connection with public improvements benefitting housing projects within the Southeast Edina Redevelopment Plan area. In order to become effective, the HRA and the City must adopt a resolution which authorizes acceptance of Chapter 241. Staff would recommend adoption. Commissioner Rice introduced the following resolution and moved its adoption: RESOLUTION APPROVING CHAPTER 241, MINNESOTA LAWS, 1989 The Housing and Redevelopment Authority of Edina, Minnesota hereby approves Chapter 241, Minnesota Laws, 1989, as required by such law and pursuant to Minnesota Statutes, Section 645.021, Subd. 2, and the Executive Director is directed to file with the Secretary of State a certificate of approval as required by Minnesota Statutes, Section 645.021, Subd. 3. H.R.A./Council June 5, 1989 Page 5 Hughes explained that it is a larger dedication than would be expected under a traditional park dedication scenario. Chairman Richards asked what the public benefit would be if the City were to issue the bonds. Mr. Olson explained that the facility is designed to serve residents in the local area. Market studies show that approximately 80% of the tenants will come from within a five mile radius so that there is a direct benefit to the frail elderly of Edina. Chairman Richards observed that would occur with a market rate facility also. Mr. Olson said that the structure of the tax increment financing would be a loan which would be repaid to the City, with repayment secured by a second mortgage. The non-profit part of the development group is the Ebenezer Society who will own the property. Commissioner Kelly said that she looked on this as a unique facility that would provide a different type of senior housing. Mr. Olson confirmed that it would be designed to care for the frail elderly in a manner that would provide them the ability to live with dignity in a more residential type of facility, rather than an institutional type such as a nursing home. Assisted living has been designed to meet the unique needs of this segment of the population and is a new and hybrid type of living arrangement. He said that there is no other facility of this type other than the one at Minnetonka. Commissioner Rice commented that he had looked at the Minnetonka facility and thought it was fabulous. It is fully occupied, is non-subsidized and is doing well. He asked why there was a need to subsidize the one proposed for Edina. Mr. Olson explained that the Minnetonka facility was developed in 1983 through Altcare - a joint venture between General Mills and the Wilder Foundation who contributed in excess of $1.5 Million to the research and development of the project. The tax increment assistance on the Edina facility would allow them to serve the 20% low and moderate income as would be required by pending federal legislation. Commissioner Rice asked if that is required as of today. Mr. Olson said that it was not. Mr. Avery elaborated that, if they would go to the market with these bonds today, bond counsel would not give them an opinion because of the pending legislation; they would not be marketable without meeting that requirement. The subsidy would go to the 20% tenants who meet the test for low and moderate income and who would be subsidized $300-400 per month. He added that, on the Homestead project in Minnetonka, General Mills guaranteed the note with the bank. As to how this would benefit Edina, Mr. Avery said that they have an opinion letter from their counsel that says they can focus their marketing and set up a list of only Edina residents who would have first right of refusal if there were a vacancy in the building. Chairman Richards asked if their market research indicated that they could not fill the facility with market rate rents of $1400-1600 per month. Mr. Avery said he did not know the answer, but that they do not feel they can build the project without the tax exempt financing and without the low and moderate income requirement they have to meet as a part of that. Chairman Richards asked if any profit making organization would be involved. Mr. Avery said that by law in order to qualify for these housing revenue bonds it is absolutely necessary, from the time this facility is in use and during the time those bonds are outstanding, that it be totally owned by a tax exempt organization. He said Ebenezer will be 100% owners. Commissioner Rice said he still was confused concerning the effect pending legislation has on this project and asked when this would be resolved. Mr. Avery it is his understanding that the pending legislation is a technical correction to a law that has already been passed and that everyone feels it will be passed this session with an effective date as of introduction which goes back to January. He said if for some reason this legislation does not pass they would not use the tax increment financing at all but would use tax exempt housing bonds and all units would be market rate. Director Hughes elaborated that tax exempt H.R.A./Council June 5, 1989 Page 6 Dated this 5th day of June, 1989. ATTEST: Chairman 4Execu Director Motion for adoptio of the resolution was seconded by Commissioner Kelly. Rollcall: Ayes: Kelly, Paulus, Rice, Smith, Richards Resolution adopted. There being no further business on the joint HRA/Council agenda, motion of Commissioner Kelly was seconded by Commissioner Paulus for adjo ent of the HRA. Motion carried unanimously. Exe t ve Director City Clerk