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HomeMy WebLinkAboutOctober 7, 1997 (J .' '\ U ) CITY of ANDOVER ''-../ 1685 CROSSTOWN BOULEVARD NW, . ANDOVER, MINNESOTA 55304. (612) 755-5100 EDA Meeting - Tuesday, October 7, 1997 agenda Call to Order - 7:00 PM Bookmark Name 1. Approve ModificationlDevelopment Program/District No.1 & TIF PlanlDistrict 1-3 tiC 2. Heidelberger Relocation Expenses relocate 3. Commercial Auto Parts Relocation Expenses commercial 4. Discuss Purchase/Mom's Auto purchase 5. Consider Lot Sale/Andover Commercial Park, Lot 3, Block 3 lots ale 6.Adjourn '-.) . , .- '\ ~) 0 Ü /''', CITY of ANDOVER '0 1685 CROSSTOWN BOULEVARD NW. . ANDOVER,MINNESOTA 55304. (612) 755-5100 ANDOVER ECONOMIC DEVELOPMENT AUTHORITY MEETING OCTOBER 7, 1997 - MINUTES A Meeting of the Andover Economic Development Authority was called to order by Mayor Jack McKelvey on October 7, 1997, 7:03 p.m., at the Andover City Hall, 1685 Crosstown Boulevard NW, Andover, Minnesota. Present: Councilmembers Bonnie Dehn, Mike Knight, John Kunza, Ken Orttel Resident members Bill Hupp and Robert Nowak Absent: None Also present: City Attorney, William G. Hawkins City Engineer, Scott Erickson Community Development Director, Dave Carlberg City Administrator, Richard Fursman Others APPROVE MODIFICATION/DEVELOPMENT PROGRAM/DISTRICT NO.1 & TIF PLAN/ 0 DISTRICT 1-3 Mr. Carlberg requested the EDA approve the modification to the development program for Development District NO.1 and approve the establishment of Tax Increment Financing District No. 1-3 and TIF Plan. The request is related to the seniot housing proiect to be known as The Farmstead which is being developed by Presbyterian Homes Housing and Assisted Living, Inc. That project will include 140 independent and assisted living units on the site of the Round Barn on Bunker Lake Boulevard NW. Mr. Fursman explained this is a housing economic development TIF plan in which low-cost units that are qualified under State Statute are developed. It is a pay-as-you go program, and the City does not bond in this instance. The taxes generated from the new value that is created through the construction of the buildings are rebated to the enterprise over the next 15 years. The City receives the taxes each year, then rebates them to Presbyterian Homes, which are then used to lower the cost of the rental to the residents, which in this case is senior housing. John Mehrkins, Presbyterian homes Housing and Assisted Living, Inc., explained they will also have income qualifications to assure that 20 percent of the building is at 50 percent of the medium income level for the metropolitan area. The tax rebate will be used to discount 10 percent of the rental units to below the market rate, which is the minimum requirement to qualifY for the TIF program. They are hoping to begin construction in October and anticipate completion of some units in the spring of í-\ 1998 and others in the fall of 1998. Councilmember Knight was troubled with the low percentage U of affordable housing that will be provided. / \ \) 'I \--- ) \ Andover Economic Development Authority Meeting " ) Minutes - October 7, 1997 Page 2 (Approve Modificaiton/Development Program/District No.1 & TIF Plan/District 1-3, Continued) Mr. Mehrkins explained the 10 percent specifically designates low income units that will benefit the most significantly; however, everybody in the facility will benefit by the tax reduction. They estimate the tax rebate to the project of $229,000 per year will result in the reduction of $125 per unit per month for the rental rate. Depending on the size of the unit, the assisted living will rent for $ L 750 to $2,250, which includes meals and housekeeping services. Other units will start around $810 per month and the affordable units will be in the $625 per month range. The only other financial assistance program that will potentially be available for residents would be the Section 8 voucher program which would be administered by the City. The Authority then discussed the cost for the improvements and the anticipated tax rebate to Presbyterian Homes, established the fact that Presbyterian Homes has requested the rebate for a 15- year period, noted that the City will be receiving an annual administrative fee of between $20,000 to $25,000 to cover expenses associated with the handling of the TIF plan, and recognized that the City does not have to go through the cost of issuing a bond nor have to worry about the business entity defaulting on a bond payment. Mr. Fursman also explained that the property value gets frozen the - first year; and any taxes generated as a result of an inflationary increase in property value will go to ) the county, school and City. Mr. Mehrkins stated this is a fairly common method of financing, and Presbyterian Homes has used in with several different municipalities. It becomes a win-win situation. Reducing the taxes allows their rates to remain competitive in the market, and the individllal renters benefit by reduced rents. Also, the fees that come back to the City are significantly higher than the amount it would receive £Tom its percentage of the taxes paid on the property as it exists today. This plan is no different than what they have entered into with other communities. The 10-percent subsidized rental units would remain over the 15-year period of the plan. MOTION by Dehn, Seconded by Orttel, to approve the Resolution in front of them this evening. (See Resolution EDA 007-97 adopting the modification to the development program for Development District No.1 and adopting the Tax Increment Financing Plan for Tax Increment Financing District No. 1-3). Motion carried unanimously. HEIDELBERGER RELOCATION EXPENSES Mr. Fursman asked the Authority to consider advancing $22,450 to Richard Heidelberger for the purposes of relocation. The City of Andover is in the process of purchasing Mr.Heildeberger's house and .6 acres ofland surrounding it. The City hired Conworth, Inc., a relocation expert, who is \, ) making the recommendation. The amount is half of the total relocation cost. Attorney Hawkins \ '_ J ) U Andover Economic Development Authority Meeting , ) Minutes - October 7, 1997 Page 3 (Heidelberger Relocation Expenses, Continued) advised the City is responsible for moving the individual, which includes moving personal property, points on mortgages, etc. Conworth, Inc., was hired to meet with the landowner and find suitable or comparable housing and get an estimate to move all the items on Mr. Heidelberger's property. This is over and above the cost of the land. MOTION by Orttel, Seconded by Kunza, for approval. DISCUSSION: Gregory Collins, attorney for Mr. Heidelberger, explained the City is condemning the house. He also clarified that while the Staff report indicates $22,450 is one-half the cost of the total relocation, that is inaccurate based on the information he has. That is one-half of the moving costs, not half of the total relocation costs. That is for moving Mr. Heidelberger's property to storage until he finds another place to live and then the costs from storage to another location and unpacking. Total relocation costs could be double the $44,900 indicated in the Staff's report, over $85,000. The storage costs alone for a period up to a year could potentially be in excess of $5,000 per month. They are agreeable to cutting the check for $22,450, but he wanted the Authority to understand the other expenses they are obligated to pay for as well. Attorney Hawkins stated the relocation expert - has given this estimate of $44,900. The Heidelbergers will be reimbursed for everything they are , ) entitled to under the relocation law. I Authority members felt some of the relocation costs are extremely high and that the tax dollars are being taken advantage of Frustration was expressed that while they are charged with being good stewards of the tax dollars, they are helpless in controlling these costs. Richard Heidelberger explained it is a big household with many antiques and an antique truck collection. There are no storage fees involved in the $44,900, and the City is liable for storage up to one year. Then the City must pay to move from storage to an area within 50 miles and unpack his items. The City is also obligated to pay any difference in the interest rate from his present mortgage to what he might get for another house. Motion carried on a 6- Yes, I-Abstain (Dehn feeling the Authority should look at the relocation report before making a decision). Councilmember Orttel agreed the cost seems high, but the City is obligated to pay those expenses. COMMERCIAL AUTO PARTS RELOCATION EXPENSES Attorney Hawkins advised the Authority that Charles Mistelski lacks the funds necessary to begin the moving process; however, no decision can be made until Mr. Mistelski submits a plan detailing the \ move. It is estimated those relocation costs will be in excess of one-half million dollars, but no plan , \ ) / ) l) , '-~ \ Andover Economic Development Authority Meeting , ) Minutes - October 7, 1997 / Page 4 (Commercial Auto Parts Relocation Expenses, Continued) has been submitted yet. The amount is substantially larger than the Heidelberger move because of the large number of vehicles, plus the City must help find a place in which to relocate the business. The possibility of purchasing the business has been discussed; but the on-going value of the business makes the cost of relocation much less than the cost of acquiring it. The City must pay for the relocation costs to move the business within a 50-mile area of the site. The difference to any place beyond the 50-mile radius would be Mr. Mistelski's cost. No action is required of the EDA at this time. DISCUSS PURCHASEIMOM'S AUTO PARTS Mr. Fursman reviewed the background of the ownership of Mom's Auto Salvage. As a result of a bankruptcy settlement, Parmack, Inc., owns the property and is two-thirds owner of Mom's Auto Corporation. He, along with the Mayor and City Attorney, met with the principals of Par mack, Inc., to discuss the City's purchase of the property. In April Parmack expressed an acceptable purchase price of$225,000. Since then, Parmack has indicated there are other expenses they were not aware ) of regarding costs associated with the business, and they are now asking for $225,000 for the land J and $157,000 for moving or closing expenses. Mr. Fursman expressed frustration over the increase in the cost, but he is still recommending approval because the purchase of the yard meets the City's goals and the cost still remains well below the purchase of the other salvage yards. There is a significant reduction in the price with the City assuming all of the liability for any below-ground contaminates. The City has purposely done extensive research on the property to determine the extent of the soil and water contamination in an attempt to avoid the surprise of finding extensive contamination after the site is purchased, which is what happened on the Best Auto Parts site. Contaminates were discovered on this property, and Maxim Technologies has provided an estimate of $36,000 to clean them up. There are no hazardous materials on the site. There is a potential of finding a serious problem, and the City would be responsible for the clean up, but it is very unlikely given the redundancy of the tests done on the property. Councilmember Orttel noted this is an isolated piece of property. With the concern over contaminates and the surprised increase in the purchase price from $225,000 to $383,000 now presented by Parmack, Inc., he suggested leaving it to be developed through private means. He was also concerned that the overruns in the budget mean that Anoka Auto Wrecking will not be purchased and that project will not be completed. That in turn will affect this commercial/industrial park development because businesses will not want to locate across from a large auto salvage yard. He again stated the unexpected costs are ridiculous in relation to the size of the improvements. Attorney Hawkins also thought there was an agreement at $225,000, and the additional cost is a surprise. However, this is a better negotiated price than going through eminent domain and having to pay \ those costs plus relocation expenses. He felt it is still a reasonable purchase price. He didn't think I , / ; \ " "- ) CJ Andover Economic Development Authority Meeting I Minutes - October 7, 1997 Page 5 (Discuss Purchase/Mom 's Auto, Continued) the parcel will develop any other way because the City is assuming the risk of clean up of the contaminates where no one else will. Compared to what other cities are having to pay to acquire salvage yards, this is very reasonable. Mr. Fursman stated the budget for this project took into account the relocation costs. The estimated cost to purchase Anoka Auto Wrecking could not be included in the original budget, but it is a separate project. With the removal of Commercial Auto and Mom's Auto salvage, and with the value of the improvements that will be made to those properties, revenues to the tax increment financing fund will be realized which will in turn be used to fund the Anoka Auto Wrecking project. He believed if this property is not purchased by the City, the commercial/industrial area will not develope as anticipated, which will in turn realize greatly diminished returns to the TIF fund. It is hoped that the TIF fund of$4 million will grow to $10 million by the year 2012 if the project and development occurs as planned. At that time the City can look at the property north of Bunker Lake Boulevard. Mayor McKelvey stated the City has a list of 20 businesses who have expressed an interest in developing in the commercial area south of Bunker Lake Boulevard. If the project does not proceed soon, those businesses will withdraw. He felt the City must proceed with the purchase and clean up \ of Commercial Auto and Mom's Auto Salvage and consider Anoka Auto Wrecking in a few years I when new TIF funds have been generated. Discussion was then on the contamination found on the site. Mr. Fursman stated it is petroleum based on the surface of the soil. Nothing was found that would constitute a new hazardous site, nor was anything found in the water table that would be a problem. Attorney Hawkins noted this was a Superfund site, and this is also the first attempt by any municipality to redevelop a Superfund site. It has been a difficult and challenging process. This area would never develop but for the fact that the City did this because of the EP A lien on the entire 60 acres out there, so nobody else will touch it. The City has negotiated an agreement that holds the City harmless, plus the lien will be removed off the property. The City will also have Phase 1 and Phase 2 environmentals. MOTION by McKelvey to approve the purchase of Mom's Auto Parts for the price of $225,000 for the land and $158,000 for the relocation or moving expenses. Motion dies for lack of a Second. Gregory Collins, attorney for Mr. Heidelberger, explained the $225,000 for the land would go to Parmack, Inc., and the $158,000 would go to Mom's Auto Corporation. MOTION by McKelvey, Seconded by Knight, to approve the purchase of Mom's Auto Parts for the price of $225,000 for the land and $158,000 for the relocation or moving expenses. DISCUSSION: Attorney Hawkins advised if the City does not purchased the land, it will probably remain an auto salvage yard. Councilmember Orttel again noted the money takes away from what was set aside for \ the Anoka Auto Wrecking site. The City is purchasing the property for considerably less than it is J \ ( \ ! ) '-.J '-- Andover Economic Development Authority Meeting \ J Minutes - October 7, 1997 Page 6 (Discuss PurchaselMom 's Auto, Continued) selling land in the industrial park. Attorney Hawkins advised the price is 70 cents per square foot, which is substantially below the other properties being purchased on Bunker Lake Boulevard. Mr. Fursman detailed the projected revenues of the TIF to the year 2012, reviewed the estimated cost of the commercial/industrial park project, noted the long-term goal to raise the economic benefit of the area, again expressed ITustration over the increased price of this parcel but was confident the deal represents the citizens well because of the costs of the other salvage yards. He recommended approval. Winslow Holasek asked what happens if the economy turns town and the City is unable to sell the lots. Mayor McKelvey noted there is enough income at the present time to meet the bond payments. The taxpayers will not end up paying for the project. Motion carried unanimously. f , ' CONSIDER LOT SALE/ANDOVER COMMERCIAL PARK, LOT 3, BLOCK 3 "' J Mr. Carlberg explained Bob Peterson, owner of Stucco 1, Inc., of Minnesota, has offered to purchase Lot 3, Block 3 in the Andover Commercial Park for $43,835. This is the last vacant parcel in the Park. The building is proposed to look more like the adjoining residential buildings to the south. Councilmember Orttel noted the company has a good reputation. MOTION by Knight, Seconded by Dehn, to approve the purchase. Motion carried unanimously. Mr. Carlberg stated Staff will be checking into the status of the homestead parcel, which was to remain in the owner's possession until her death. Motion by Kunza, Seconded by Dehn, to adjourn. Motion carried. The meeting adjourned at 8:50 p.m. Respectfully subtnltted;__---, { \\~:c~~~l" C:>t::c .-- \ Marce la A. Peach, Recording Secretary , J