07-08-03 Worksession
HOUSING AND REDEVELOPMENT
AUTHORITY AND CITY COUNCIL
MEETING MINUTES
Richfield, Minnesota
Special Concurrent Worksession
Of HRA and City Council
July 8, 2003
The meeting was called to order by HRA Chair Harms at 5:52 p.m.
HRA Members
Present:
Thomas Harms; Joan Heimberger; Kristal Stokes; Dan
Linnihan; and Michael Sandahl.
Council Members
Present:
Martin Kirsch, Mayor; Sue Sandahl; and John Enger (arrived at
5:55 p.m.).
Council Members
Not Present:
Susan Rosenberg; and Gertrude Ulrich.
Staff Present:
Samantha Orduno, City ManagerlExecutive Director; Bruce
Palmborg, Community Development Director; John Stark,
Community Development Manager; Cheryl Krumholz,
Recording Secretary; and John Dean, HRA Attorney.
Item #1
City Manager Orduno stated tonight's Worksession discussion is related to a proposed
alternative course of action for the HRA's public financing for the developer, The Cornerstone
Group, of the Lyndale Gateway West area. She said that without this proposed alternative, the
project would fail. She added there is risk for the City/HRA with and without action on the
financing.
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July 8, 2003
Ms. Orduno stated staff is seeking City Council and HRA direction regarding how to
proceed on the public financing of the project.
Community Development Manager Stark reviewed the following:
. Public and private construction financing already approved by the HRA and City
. Status of purchase agreements, which are to be closed on September 1, 2003
. M & I Bank (private financing) loan contingencies regarding retail and housing pre-sales
. Reasons to cause slower than anticipated pre-sales
. Timeline issues related to developer's meeting the pre-sale requirements for financing
. Alternatives for advancing public financing without full construction financing so site
assembly could proceed and the buildings could be demolished
Mr. Stark stated the issue is the availability of the private financing needed for closing on
the properties on September 1, 2003 because the bank's pre-sales requirements for granting the
loan will not be met by that date. He explained that the HRA's contract with the developer states
that the public financing (which is needed to acquire the properties) requires that the private
construction funding be fully available. If the pre-sales requirements are not met by September 1,
then the developer would not have the funds to close on the property purchases and the purchase
agreements will become null and void; which would almost certainly render the project infeasible.
He stated the HRA and City could make the public financing available without the private financing,
so that the developer could go forward with the closings.
Mr. Stark reviewed the goals that must be achieved for the City/HRA to recuperate all of the
public financing. He stated it is essential for the HRA to have security on the property by having a
first security interest on the mortgage or holding title to the property. He explained the
mechanisms for the HRA to take title on the property.
Mr. Stark stated staffs' recommendation was to come before the HRA and City Council at
their next meeting to revise the developer's contract to allow public financing prior to private
financing for the project.
Chair Harms asked if the Cornerstone Group was unable to meet their obligations, could
the City/HRA retain the rights to the development plans and titles and replace Cornerstone as the
developer.
City Manager Orduno stated the City Council and HRA could direct that those rights be
retained.
Commissioner Linnihan asked if the bank would consider releasing just the retail portion of
the financing.
Heidi Kurtz, the Cornerstone Group representative, said the bank could be asked to
consider a split loan since the two loans stand alone.
HRA Attorney Dean expressed caution in splitting the loan because the retail portion is the
easiest financing and may leave the City/HRA with the more difficult housing financing. He stated
it was most prudent to link the loans together and commence the project at the same time.
Commissioner Sandahl asked if staff was asking for a solution to this financing problem.
City Manager Orduno said staff is asking if the proposed alternative of releasing the public
financing prior to the private financing was satisfactory to the City Council and HRA.
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July 8, 2003
Mr. Stark explained the risk an~lysisof the HRA taking ownership of the property.
Chair Harms stated there appeared to be two options: waive the private financing
contingency or stop the project.
Council Member Sandahl stated she believed the HRA owning the land was not a bad
situation and there should be no problem in selling it if this project fails.
Sid Inman, Ehlers and Associates, explained the financing and bond sale process that will
be presented to the City Council and HRA at future meetings.
Commissioner Sandahl expressed support in proceeding since the HRA has owned land
before with a good outcome.
Mayor Kirsch expressed support for proceeding even though there are some risks to the
City and HRA. He added that demolition activity should have a positive impact that the project is
moving forward.
Council Member Enger asked, if Cornerstone fails, what happens if the vacant parcel is not
developed in three years, which is one of the goals needing to be attained to recover the public
financing.
Mr. Stark explained that for every year that the project is undeveloped beyond the three
years would result in the loss of that year's tax increment financing.
Council Member Sandahl stated a preference to own the property and then convey it back
to The Cornerstone Group when the financing is complete.
Ms. Kurtz stated The Cornerstone Group is proceeding with confidence that the pre-sales
requirement will be met by the deadline. She added that moving the sales trailer on site and
beginning demolition will increase pre-sales.
The City Council and HRA consensus, in concept, was to proceed with the public financing
option without the private financing so the Lyndale Gateway West project could move forward.
City Manager Orduno announced that the Special HRA meeting immediately following this
Worksession was no longer necessary because the scheduled agenda item did not require HRA
action.
The Special Concurrent City Council and Housin a
Worksession was adjourned by unanimous consent at
Date Approved: August 18. 2003
~:f/;~
Recording Secretary