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HomeMy WebLinkAbout1989-04-03 HRA Regular Meeting MINUTES EDINA HOUSING AND REDEVELOPMENT AUTHORITY APRIL 3, 1989 Answering rollcall were Commissioners Kelly, Paulus, Rice, Smith and Richards. MINUTES of the Joint HRA/Council Meeting of March 20, 1989 were approved as submitted by motion of Commissioner Smith, seconded by Commissioner Rice. Ayes: Kelly, Paulus, Rice, Smith, Richards Motion carried. HEARING DATE OF 5/15/89 SET FOR PROPOSED 1989 PROJECT - 50TH & FRANCE Executive Director Gordon Hughes recalled that on March 21, 1989 the HRA reviewed a letter from the 50th and France Business and Professional Association concerning a proposed 1989 project. The proposed project would include the following elements: 1. Sidewalk Renovation 2. Signage Upgrade 3. Ramp Renovation - Painting and Interior Lighting 4. Landscaping Upgrade 5. Replacement of Street Furnishings 6. Pedestrian Lighting 7. Carillon Tower and Kiosk Upgrading The Association also asked that the HRA consider the use of tax increment financing for the project. The HRA continued the matter to the April 3 meeting and invited representatives of the Association to appear. Director Hughes presented slides illustrating the existing condition of the items proposed to be renovated or upgraded. He then presented the following information. 50th and France History - The City and the HRA created the 50th & France redevelopment and tax increment financing district in 1974. At that time, the HRA adopted a commercial area redevelopment plan. Prior to 1974 the City was involved in a limited number of projects at 50th and France that were financed through special assessments; including the construction of the 51st street parking ramp in 1969. Following the establishment of the tax increment financing district, the HRA undertook the initial redevelopment project in 1975-76. This project included the construction of the 49 1/2 Street parking ramp, the expansion of the 51st Street parking ramp and numerous sidewalk, roadway, landscaping and lighting improvements. In 1977 and 1978 the HRA undertook additional improvements including the carillon tower and fountain as well as work in the vicinity of Arby's Restaurant. In 1988 the 51st Street parking ramp was expanded by approximately 115 parking spaces. The initial redevelopment project was financed through a combination of special assessments and tax increment financing, with 20% of the project costs assessed against benefitted properties and the remaining 80% financed through tax increment financing, state aid and CDBG funds. The special assessments were levied on a floor area basis and were spread over 15 years. The special assessment for the initial redevelopment project was approximately $2.15/square foot of floor area. The 1988 ramp expansion was likewise financed through a combination of special assessment and tax increment financing, with approximately 30% of the costs to be assessed against the Edina Theatre and the balance financed through tax increments. No businesses other than the theatre will be assessed for the 51st Street ramp expansion. P Status of Tax Increment District - The 50th and France tax increment financing district will exist until 2009 to repay debts incurred prior to April of 1990. Public debt incurred after April 1990 must be repaid prior to 2001. An analysis of the present status of the district illustrates that the final bond principal H.R.A. Minutes April 3, 1989 Page 2 and interest payment for the original 1976-78 redevelopment project will occur in 1993. Likewise, the loan from the City to finance the 51st Street ramp expansion can be repaid by 1991. Assuming a very conservative 2% inflation rate, the amount of tax increments collected substantially exceeds the current obligations of the district. As such, the estimated reserve balance of the district will grow substantially in the next two to three years. Based on estimates, it appears that the reserve balance will be great enough in 1991 to pay all remaining obligations of the district. If no other debt were incurred, the City and HRA could elect to terminate the district at that time. Proposed 1989 Project - Detailed design of the proposed 1989 project has not been undertaken. As a result, the total estimated cost is difficult to determine at this time. The major variable affecting cost will be the treatment selected for the sidewalk paver areas. Total paver area is estimated at between 19,000-20,000+ square feet. Replacement options range from $3.50 to $4 a square foot for concrete, $10 to $11 a square foot for concrete or brick pavers, to $15 to $20 a square foot for more ornate materials. If a product such as concrete pavers were selected the anticipated total project cost would be in the range of $500,000-600,000 at a minimum, exclusive of any additional off-street parking facilities. Finance Alternatives - The following general alternatives could be consider by the HRA for this project: 1. Finance project cost solely through tax increment financing. 2. Assess all costs against commercial area properties. 3. Assess 20% or some other percentage of cost and finance balance through tax increment financing. HRA Action - Staff needs direction concerning the use of tax increment financing for this project. The scope and design standards for certain elements of the project will be affected by the availability of tax increment financing. If the decision is made that a portion of the project cost should be financed through special assessments, then a date should be set for a project hearing and notices sent to all properties proposed to be assessed. Also, if tax increments are to be used for any portion of the project cost, a public hearing should be conducted to amend the tax increment financing district's finance plan. Both hearings could be held at the same time, but not sooner than May 1 in order to meet publication requirements. Hosmer Brown, representing the 50th and France merchants, said that the existing pavers have been costly to maintain and the litigation risk is high. He pointed out that retail sales are becoming extremely competitive in the entire metropolitan area. The merchants at 50th and France will have to compete with the megamall in Bloomington, the large expansion at Southdale, the Galleria and the proposed retail area on the Hedberg site. In order to get a fair share of the consumer dollar, the 50th and France area must attract good shops and to do that the area must be attractive. He explained that the City has been asked to participate in the proposed project because of the diversity of people and personalities among the merchants at 50th and France. He urged the Commissioners to approve HRA assistance for the proposed project. Mr. Brown also asked that the City look ahead to 1990 and consider whether additional parking capacity in the 49 1/2 Street ramp area would be justified. In addition, he asked the Commissioners to keep their minds open as to possible covered walkways for 50th and France. He referred to the local transportation that is being considered for the Southdale area and suggested that, in the future, the City think about some sort of public transportation that would tie together all the commercial areas of the City. H.R.A. Minutes April 3, 1989 Page 3 Mayor Richards asked if the merchants have discussed what might be fair and equitable as to special assessment for the proposed project. Mr. Brown said that they probably could live with a special assessment of 20% as before. The Commissioners then discussed various issues of the proposed project including the impact of the existing tax increments districts on the general fund, whether funds could be transferred between districts, importance of keeping the area attractive, savings in maintenance costs for the area if renovation and upgrading is done, need for additional parking on the north side in the future, percentage of project cost that could be specially assessed, and priorities for various elements of the proposed project. Commissioner Smith made a motion directing staff to schedule a public hearing on May 15, 1989 for the proposed 1989 50th and France project, to obtain cost estimates for the project and to present a funding proposal for the project based on 20% of costs being assessed to benefitted property with the remaining 80% financed through tag increments. Motion was seconded by Commissioner Paulus. Rollcall: Ayes: Kelly, Paulus, Rice, Smith, Richards Motion carried. REQUEST OF R.P.I. SERVICES FOR TAX INCREMENT FINANCING ASSISTANCE CONSIDERED: STAFF DIRECTED TO CONTINUE WORKING WITH DEVELOPERS ON CONCEPT. Assistant Director Hughes recalled that the Council granted preliminary rezoning approval to Planned Senior Residence PSR-4 on September 19, 1988 for property located in the northwest quadrant of Parklawn Avenue and York Avenue. The proposed project involved a development for 72 dwelling units designed for fail elderly that would provide a level of service above traditional senior housing, but less than a nursing home would provide. The proposed development would be located on land presently owned by 7500 York. Development of the property would be accomplished by way of a land swap between 7500 York and Hedbergs. The land exchange has been pursued for several years and has been encouraged by staff. The original proponents of the project, R.P.I. Services, Inc. , have entered into an agreement with the Craig C. Avery Company to develop the project. When completed, it is proposed to be conveyed to Ebenezer Society and Lutheran General Health Care Systems who will own and manage the building. Director Hughes advised that the proponents have recently approached staff and requested tax increment financing assistance as well as the potential use of housing revenue bonds. The request was formally made in a letter dated March 30, 1989 from R.P.I. Services, Inc. Regarding the tax increment financing assistance, the proponents have suggested a pay-as-you-go concept. Under this proposal, the HRA would agree to contribute each year an amount comprising all or part of the tax increment generated from the project in that year. This contribution would be conditioned upon payment by the project of its annual real estate taxes. The tax increment contribution presumably would be used to reduce interest costs, thereby making the project feasible. Under this arrangement, the HRA would not have to sell bonds or incur capital expenditures for the acquisition of the land or other improvements. Rather, the HRA would pay tax increment only if real estate taxes are paid. Therefore, the HRA would not be at risk as may be the case if bonds were issued. The HRA could structure the annual contribution as an unrecoverable grant to the project or it could be structured as a loan, which could be repaid following termination of the tax increment district. H.R.A. Minutes April 3, 1989 Page 4 The proposed project is located in the original Southeast Edina Tax Increment Financing District established in 1977. Based upon staff's understanding of the present law, tax increment contributions could be extended to the project until the year 2009. No tax increment payments could be made following that date. He noted also that tax increments from thi s property have not been relied upon for the Centennial Lakes J ro"ect or for Edinborou h. P g As to housing revenue bonds, staff presently is unclear as to the eligibility of this project for tax exempt bonds. Such bonds were issued for the Edina Park Plaza and the Vernon Terrace projects. If such bonds were issued, they are backed only by revenues of the project itself, not by the general obligations of the City. Use of housing revenue bonds typically requires that a certain percentage of the units are available to low and moderate income residents. Director Hughes concluded his presentation with the comment that if the HRA wishes to consider public assistance for this project, it should direct staff to prepare a draft development agreement for HRA review. Such an agreement could be considered in connection with final development plan review by the City Council at a future meeting. Larry Olson, R.P.I. Services, Inc. , advised that since the Council granted preliminary rezoning and plat approval for Elder Homestead, they have been busy continuing the plans, developing costs, conducting in-depth market analysis and assembling the final development ownership team. He said that Ebenezer brings expertise in management of seniors' project and an excellent reputation in the market place. Craig C. Avery Company has joined R.P.I. Services to provide a wide range of real estate experience and to assure that a timely, cost effective and state of the art facility is built. The Elder Homestead Corporation, represented by Bob Peterson, has been involved with cutting edge research and operating experience in assisted living. Mr. Olson said that the project is geared to the 1990's needs of the frail elderly, a rapidly expanding part of the seniors' market. It has been designed to fit the needs of Edina, it is residential in nature and offers a wide range of affordability through setting aside 20% of the units for the low and moderate income senior. He introduced Bob Peterson, Mark Thomas and Sid Inman saying they would differentiate their project and the market that it meets from the traditional seniors' projects and nursing homes. Bob Peterson said he wanted to focus the Council on who we are really talking about as the frail elderly. Nationally, assisted living is probably one of the fastest breaking kinds of service program. The frail elderly refers to people 85, 90 and 95 years of age. As a culture we have not as yet experienced any large number of these people who are still living in the community and participating. The intent of a program like Elder Homestead is to provide an environment which adapts to those people's needs versus requiring them to change their life style to adapt to an environment such as a nursing home which can be very stressful for them. Elder Homestead is planned to provide a dignified residential setting for fragile old people who do not need nursing homes or hospitals. What they need is someone around 24 hours a day to be sure they are okay, to be sure they get their meds, and to be sure they get three meals. If they need nursing care, that is brought by a qualified home health agency. Mr. Peterson stated that these kinds of programs work beautifully when tied into a continuum of care such as offered by Ebenezer. The proposed facility completes that continuum so that the people at 7500 York or The Durham, etc. where there are large concentrations of elderly, well into their eighties, have a place to get service and to live and contribute without having to leave their community. Mark Thomas, President of Ebenezer Society, said he would briefly go over their history, how they look at this project and their interest in it. The Ebenezer Society is an affiliate of Lutheran General Health Care Systems out of Chicago. Both Ebenezer and Lutheran General are social ministry organizations under the H.R.A. Minutes April 3, 1989 Page 5 Evangelical Lutheran Church of America. The Society was established in 1917 and has been providing services to the older adult population in the metro area since that time. He noted that currently, the Ebenezer Society operates and owns four health care centers providing services to approximately 800 beds; three adult day care centers providing services to 100 residents per day; eight housing projects that they either own or manage, including 7500 York in Edina. Their community services division provides services to over 2,000 clients in the metro area. Their transportation division has a fleet of 25 vehicles and is a Metro Mobility provider to over 3,000 clients. He explained that they are also in joint venture with Group Health and have developed a social HMO which has a membership of over 3,500 people. Mr. Thomas said that their interest in this project looks specifically at the continuum of care concept. Part of their mission is to provide services at all ranges in the health care system, starting with independent housing supported by community services to help frail individuals stay there as long as they desire, going into board/care services up to skilled nursing facilities and including specialized nursing care. He said that the assisted care concept is an alternative that is receiving a lot of interest these days and is an area that needs to be looked at very carefully. Also, the elderly themselves are expressing a great interest in this alternative. Experience in the industry is a major reason for Ebenezer's participation in the project together with its location adjacent to the 7500 York Avenue development that they currently manage. He concluded with the comment that their interest is a strong one and that they feel there definitely is a market for this type of project. Sid Inman, Publicorp, said they were advising the developer regarding financing on the project. R.P.I. Service's letter had addressed some of the problems this project has as a real estate development, e.g. interest rate increase, increased land holding costs which are typical real estate financing considerations. He said that they do have a unique feature in the project which is why they are addressing the need for tax increment financing. Due to the type of product they are required to provide 20% of the units for the low and moderate income, hopefully, mostly Edina residents. Mr. Inman said that what this basically means is that, if you compare it to a real estate development where you are leasing space or renting office space, they are required up front to discount 20% of their service so that they automatically have a negative shortfall going into the project. Because the project is unique they have recommended a unique type of tax increment application referred to as pay-as-you-go. Rather than asking the City to take any risk up front, the building will actually be up and possibly occupied before the City will have any financial commitment to make. He said it was an advantage from their perspective because that money can then be used to directly benefit the individual tenants in the building. On a year to year basis the money will be used directly for what it is intended to do and that is attack those 20% of low and moderate income. Mr. Inman added that the City think about the idea of Tax Exempt Housing Bonds. The same technique applies here, with the high interest rates and the already negative economic feature of the 20% low and moderate income units; they have to develop financing that is below market rate so that the project will work. He mentioned that the trend now in Washington is to go back to these types of requirements for housing. He asked that the Council consider directing staff to discuss the application of these two types of financing tools with them. Commissioner Smith commented that typically with tax increment proposals there is some benefit directly to the City and that he had not heard that. Mr. Peterson said that the payoff is really to the seniors in the community who will have this kind of resource available to them, that it is part of the quality of life, just as are streets, shopping malls, theatres, etc. Commissioner Kelly asked about the range of rent costs for residents and if priority could be be given to Edina citizens. As to housing revenue bonds, she said she was concerned that even though the City was not at risk, if they are H.R.A. Minutes April 3, 1989 Page 6 floated under the name of the City of Edina, that people will assume that the City is putting its full faith and credit behind the bonds. She said that the City should be careful in using that tool in a project unless the City is assured that it will be a successful project. Mr. Peterson said that, based on their experience with the Minnetonka project, the market rate rents are estimated to be between $1200 to $1400. This would fall well within the national average for assisted living. Tax increment financing would allow them to reduce the rates for the 20% units designated for low and moderate income. Chairman Richards asked for clarification that the proposal is for a dollar amount for a period of time. He asked what would happen after the negotiated term ends. Mr. Peterson explained that the pay-as-you-go concept as it has been applied in housing is to try to structure the assistance with an end date. The point is to try to get the revenues over that continuum to graduate to the point that the expenses are also under control so that assistance is no longer needed. It can be structured in many different ways, one way is to put a bond up front and reduce the cost. Mr. Peterson said that the pay-as-you-go method really addresses the costs for the 20% of units for low and moderate income. They will be able to measure and demonstrate in subsequent hearings what the money is being used for. Mr. Peterson addressed the question of how this would service Edina residents. He said that the pattern is quite standard nationally that the draw for a project like this will be within a 3-5 mile radius or it will involve elderly persons who are coming into the area because their children live in the neighborhood. The importance of putting facilities in communities is to allow the elderly to be able to stay in their own communities or be near their families. Chairman Richards asked if guidelines could be drafted by the City that would be adopted in exchange for public assistance whereby the issue of preference for Edina residents could be addressed. Mr. Inman said that under the tax increment law you can pretty much structure anything you want under this method. The only restrictions would be those imposed by state law and the federal income tax law. He commented that they are highly aware of the sensitivity of the bonds and that they are also considering some other vehicles for placement, such as a private institution. Commissioner Paulus commented that when this proposal was first introduced there was no request for public assistance from the City. She asked why this was not figured in when the project was first proposed. Mr. Olson responded that the market research done since then has indicated a need to offer the assisted living to a wider range of income and secondly, there has been some federal legislation introduced which is impacting the 20% requirement. Commissioner Paulus asked if they have the 20% requirement units available in their existing facilities. Mr. Olson said that in their Minnetonka project there is not the 20% set aside, but that he believed that going forward that would be a characteristic of all their projects. Commissioner Paulus said she felt that the concept was excellent, but that she was concerned with recent demographics for Edina that most of the elderly that would apply for the assisted living housing would fall into the 20% low and moderate income category. Another concern was that it seems like all the developments in southeast Edina are being financed through tax increment financing and that the citizens will question the City's heavy involvement. Chairman Richards said the issue is do we want the staff to explore further the request to utilize tax increment financing for the project. Commissioner Smith made a motion that the City not proceed with any discussions on tax increment financing or any other type of public assistance for the proposed Elder Homestead project. Motion was seconded by Commissioner Paulus. H.R.A. Minutes April 3, 1989 Page 7 Commissioner Kelly said she understood the concerns of Members Paulus and Smith. She pointed out that we have made commitments to provide housing for the younger age citizens in the same area of the City and that we should make the same sort of commitment to our older citizens. She agreed that the low income level is with our elderly and that Edina has the highest amount of seniors per capita in Hennepin County. Commissioner Kelly said she was concerned about the rental amount for the project in that it would be too costly for our elderly citizens. She added that she would like to see the staff continue discussing this with the developers and bring back information as to how it would impact our general fund. She noted that the project land trade with the Centennial Lakes project also gave her incentive to support public financing assistance. Chairman Richards then called the motion on the floor. Ayes: Paulus, Smith Nays: Kelly, Rice, Richards Motion failed. Following further discussion, Commissioner Kelly then made a motion to direct staff to work with the development group for Elder Homestead on the concept of public financing and to bring back a recommendation for Council consideration. Motion was seconded by Chairman Richards. Ayes: Kelly, Paulus, Rice, Richards Nays: Smith Motion carried. I RESOLUTION ADOPTED REGARDING EXEMPTION FROM REAL ESTATE TARES FOR BLOOMINGTON PARCEL - CENTENNIAL LAKES Executive Director Hughes advised that a small portion of the Centennial Lakes property is located within the City of Bloomington and that this parcel is proposed to be developed for hotel uses at a future date. As with the Edina property, the Bloomington parcel is owned via contract for deed by the Edina HRA. Therefore, this property may be eligible for real estate tax exemption until it is resold to the developers. The redevelopment contract for Centennial Lakes requires that the HRA cooperate in obtaining this exemption. Director Hughes explained that staff has administratively applied for the exemption with the City of Bloomington. Bloomington has declined to exempt the property because they believe it is not eligible for exemption. The developers of the project have asked that the request for exemption should be re-filed with Bloomington and the County and should be supported by a resolution of the HRA certifying that the subject property is being held by the HRA for later resale for economic development purposes. He added that if the exemption is ultimately denied, the developers are responsible for the payment of the taxes. Commissioner Rice introduced the following resolution and moved adoption: RESOLUTION WHEREAS, by contract for deed dated October 3, 1988 and filed October 14, 1988 with the Hennepin County Recorder as Document No. 5465055 and with the Hennepin County Registrar of Titles as Document No. 1966600, the ERA purchased certain real property in Hennepin County, Minnesota including, among other parcels, the parcel of real property legally described on Exhibit A attached hereto and having a Property Identification No. of 05-027-24-22-0002 (the "Subject Property"); WHEREAS, the Subject Property is being held by the HRA for later resale for economic development purposes; NOW, THEREFORE, BE IT RESOLVED, that the certification to the Hennepin County Assessor and City of Bloomington dated March 13, 1989 executed by Gordon L. Hughes, as Executive Director of the HRA that the Subject Property is being held by the HRA for later resale for economic development purposes be, and it hereby is, ratified in all respects and said certification shall, and hereby does, constitute the certification of the Board of Directors of the HRA. H.R.A. Minutes April 3, 1989 Page 8 RESOLVED FURTHER, that Gordon L. Hughes, as Executive Director of the HRA be, and he hereby is, authorized to execute on behalf of the Board of Directors of the HRA such other certifications as may be required by law in order to certify that the Subject Property is being held by the HRA for later resale for economic development purposes. EXHIBIT "A" That part of the North one-half of the Northwest Quarter of Section 5, Township 27, Range 24, described as beginning at a point on the North line thereof 1304.875 feet West along said North line from the Northeast corner of the Northwest Quarter of said Section 5; thence West along said North line 354.75 feet; thence South, parallel to the East line of said Northwest Quarter, 475.5 feet; thence Northeasterly to a point which is 327.7 feet South along a line drawn parallel to the East line of said Northwest Quarter from the point of beginning; thence North along said last described parallel line to the point of beginning, according to the United States Government Survey thereof and situate in Hennepin County, Minnesota. Motion for adoption of the resolution was seconded by Commissioner Smith. Rollcall: Ayes: Kelly, Paulus, Rice, Smith, Richards Resolution adopted. There being no further business on the HRA Agenda, Motion was made by Commissioner Kelly and was seconded by Commissioner Smith for adjournment. Motion carried. f 57 i Execut&v Director