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11-17-03 Worksession HOUSING AND REDEVELOPMENT AUTHORITY AND CITY COUNCIL MEETING MINUTES Richfield, Minnesota Special Concurrent Worksession Of HRA and City Council November 17, 2003 The meeting was called to order by HRA Chair Harms at 6:05 p.m. Council Members Present: Martin Kirsch, Mayor; Gertrude Ulrich; and Sue Sandahl. Council Members Not Present: Susan Rosenberg; and John Enger. HRA Members Present: Thomas Harms; Joan Heimberger; Kristal Stokes; and Dan Linnihan. Staff Present: Samantha Orduno, City Manager/Executive Director; John Stark, Assistant Director of Community Development; Bruce Nordquist, Housing and Redevelopment Manager; Deborah Guiher, Deputy City Clerk; and John Dean, HRA Attorney. Item #1 City Manager/Executive Director Orduno presented background to the redevelopment of the east side of Richfield north of 66th Street. HRA staff has formulated a plan that could help with noise mitigation and provide retail operations that will make this a gateway into the community. Assistant Community Development Director Stark reviewed the following: . The new north-south runway has been constructed approximately 1,200 feet from the single-family neighborhood area north of 66th Street between Cedar Avenue and 17th Avenue. Special Concurrent Minutes -2- November 17, 2003 . This area has been termed "Cedar Point Redevelopment Area". . This area is part of the Low Frequency Noise Impact Area. This was based on the results of a City of Richfield/Metropolitan Airports Commission (MAC) noise study that concluded that existing structures will be unable to endure the negative impacts of the low frequency noise (anticipated to ~xceed 87 decibels once the new runway is oper~tional) . . Noise studies indicate that masonry constructed commercial structures with a continuous building mass and height exceeding adjacent structures is required to help block the low frequency noise penetration into the neighborhood. . There were 63 single-family homes, seven apartment buildings and 30 commercial properties in the proposed development area. The City has acquired 30 of the single- family homes, four of the apartment buildings and 27 of the commercial properties. These properties were acquired in cooperation with the State of Minnesota and the MAC. . It is estimated that the cost to purchase the remainder of the affected properties in the proposed development area will be approximately $10.8 million. . Despite numerous legislative initiatives, the City has been unable to secure additional funding for the remainder of the affected properties in the proposed development area. . The City has been in discussions with developers regarding the redevelopment of the site with a noise compatiple use. . The Ryan Companies has proposed the construction of a 300,000+ sq. ft. retail center, constructed of masonry materials with a continuous building footprint of 1,400 linear feet and a height exceeding all surrounding properties. . The $10.8 million cost of acquiring the remaining developed property plus the $3 million appraised value of the vacant land, is cost prohibitive for the development being proposed. . In order for the proposed development to be financially viable, Ryan Companies has indicated that public financing will be necessary to provide public assistance to reduce the site assembly costs to a financially feasible level. . A TIF District is not a viable source of public financing for this area, because evidence shows this area does not meet the definition of "substandard". . Tax Abatement has been investigated to determine its viability to provide the necessary land assembly cost assistance. . Prior to runway construction, the area's annual property tax contribution was $68,380 to the City and $86,258 to the County. . With the completion of recent property purchases by the City, and the exemption of these properties from property tax payments, the area's annual property tax contribution will be $26,713 to the City and $33,698 to the County. (This represents a decline of $41,670 to the City and $52,560 to the County.) . As money becomes available, it is the City's stated policy to complete property acquisitions in this area. Once completed the annual property tax contribution will be $0. . The development proposed by Ryan Companies, once completed, would result in annual property tax contribution of approximately $176,662 to the City and $222,851 to the County. . Without public assistance of approximately $3 million to assist in reducing the land costs, it would be financially infeasible to construct the proposed development. . The City could authorize an abatement of its portion of the property taxes to a $0 base for the maximum allowable period of 15 years. This would result in a tax abatement valued at $1,246,159. . Upon expiration of such a tax abatement, it would take the City only two and a half years to recuperate the property taxes that could have been realized during the abatement period at the property's present state. Special Concurrent Minutes -3- November 17, 2003 . An abatement by the City ..~1?lJe,.would result in a funding gap to provide the necessary land acquisition assistance.' ",.0 , . It has been determined that the funding gap could be eliminated by a tax abatement by Hennepin County. . The remaining funding needed could be provided through the abatement of Hennepin County's abatement of its portion of tax revenues in the area. The duration of such an abatement would either be 15 years with the current tax base of $33,698 or the same results could be achieved with a 12 year abatement at a $0 base. Either case would result in a County tax abatement valued at approximately $1.8 million. . Upon the expiration of such a tax abatement, it would take the County only two and a half years to recuperate the property taxes that could have been realized during the abatement period at the property's present state of improvement. Mr. Stark reviewed the next steps that would be taken if the concept were accepted. Commissioner Linnihan asked if the money from the sale of these properties would go back to MAC and who holds the title tor the land. Mr. Stark stated that the money would be split. The money for the right-ot-way would go to MAC or MnDOT, and the money for development land would go to the City. City Manager/Executive Director Orduno stated that by law MAC can't hold title to any property west of Trunk Highway 77. Commissioner Linnihan asked if this is the best use for this area. The Mall of America (MOA) is less than a mile away for retail and do we need another home improvement store when we have two within a mile of each other. He asked if we should consider getting Class A office space in this area, because it would make for a quieter environment. He questioned whether the City needs to look at retail and home improvement or if there can be other options. Chair Harms asked how far Ryan Companies is with the users. Mr. Stark said they are quite a ways. Mr. Stark stated that Super Target is considerably interested in this site. Target Engineers have already contacted the Richfield Water Department regarding the cost of sewer cuts. Target wants to serve Richfield, South Minneapolis and the Nokomis neighborhoods. Mr. Stark continued that office users are looking at 4 - 6 acre sites. This would mean piecing them into a 29 acre site. This is an opportunity to get one phase in the ground. Commissioner Heimberger asked if the City would consider Target and use the other area for office space instead of retail home improvement. She stated her concern with vacancies in office buildings in the southwest area. In time will the vacancies disappear, or is this risky. Mayor Kirsch asked if more hotels will be coming down in Bloomington. The City needs to attract one or two of these hotels into Richfield. City Manager/Executive Director Orduno said that some of these hotels want to remain on the 1-494 strip. They may be looking at the Richfield side of 1-494. Commissioner Stokes stated that large buildings could cause tunnel affects that funnel the noise back into the neighborhoods. She isn't enthusiastic about what is being proposed, but finds the funding mechanism intriguing. Special Concurrent Minutes -4- November 17, 2003 Council Member Sandahl said that hotels have been built and are being built immediately adjacent to airports without having any noise impact. Chair Harms suggested approving this request to go to the County for tax abatement. The County needs to preview this plan and they need to be aware that the City is keeping options open. This is the most active plan and the City wants to get the County's support for the concept of tax abatement as the City continues to look at other options and to determine if the County has any ideas they would like the City to pursue. Commission Linnihan asked if the City wants to completely abate the taxes or to do a partial abatement over a longer period of time. Mayor Kirsch said if this concept will work, the City needs to pursue it and continue to move forward. City Manager/Executive Director Orduno confirmed the direction of the City Council and HRA to move forward with the concept of tax abatement and to approach the County and get an idea on how the County feels. She asked if action should be taken to determine if there is another development proposal out there in terms of gOing out in a formal search for other developers that would be interested in doing something other than a retail operation or should we wait until we hear from the County. Chair Harms said the City needs to sell this plan to the County. If the County is interested, then we can consider other plans. (jj~ 0,fuh-u Deborah Guiher Deputy City Clerk ~