0410specialCCHRAPCworksessioncompleteagenda CITY OF RICHFIELD, MINNESOTA
Office of City Manager
April 6, 2012
Council Memorandum No. 41 HRA Memorandum No. 18
Housing & Redevelopment
The Honorable Mayor Authority Commissioners
And City of Richfield
Members of the City Council
Subject: April 10, 2012 Worksession Regarding Pillsbury Commons Proposal
(Worksession Agenda Item No. 1)
Council Members and Commissioners:
At the March 26, 2012 Planning Commission meeting, Ron Clark Construction (Ron Clark)
requested a continuance of the public hearing to the next Planning Commission meeting
due to changes they wished to make to their proposal. The City staff received information
from Ron Clark on April 4, 2012 relating to the revised proposal.
A joint work session of the City Council, Housing and Redevelopment Authority (HRA) and
Planning Commission has been called for Tuesday, April 10, 2012 at 5:45 p.m. The
purpose of the meeting is to enable Ron Clark to present the revised proposal for the
development. After the presentation, members of the Planning Commission, Council and
HRA are asked to identify additional information that they would like to receive regarding
the revised proposal, prior to the meetings that have been scheduled for consideration of
various elements of the development. That schedule of meetings is found at the end of this
memo. Discussion and formal actions on the revised proposal will occur at those meetings.
The key elements of the revised proposal are summarized below:
• Physical expansion of development. The former proposal covered only a portion
of the former city garage site, located on the south half of the block bounded by
West 76th Street, Pillsbury Avenue, West 77th Street, and the CP Rail track. The
revised proposal also includes the mortuary site (owned by the HRA), the remainder
of the former garage site (owned by the City), and the existing single family property
at 7600 Pillsbury Avenue South (owned by a Ron Clark affiliate). The attached
sketch shows the original land area and the land areas that have been added in the
revised proposal.
• Land purchases. Ron Clark is proposing to purchase the mortuary site from the
HRA and the remainder of the garage site from the City. The existing option
agreement between the City and Ron Clark does not include the north part of the
garage site. Ron Clark has provided proposed price information, which is attached.
• Revised plat and land use proposal. The development plan for the original land is
largely unchanged in the revised proposal.
Ron Clark proposes to add the remainder of the garage site and improve it as a
playground.
The mortuary site would be platted into two outlots: Outlot A, which would provide a
drive access to the south half of the lot; and Outlot B, which is proposed to be either
conveyed or dedicated to the City.
Recreation Services Director Jim Topitzhofer has indicated that the City likely does
not have a need for an active park use at that site, but that the City has been looking
for a potential community garden site. The City staff has informed Ron Clark that
the public process needed to study and recommend a suitable public/park use for
Outlot B would take more time than the developer has to bring his proposal forward
for approval. This being the case, the decision for City participation in Outlot B as
public/park space will rest with the City Council.
The revised proposal also states that the three single family lots along Pillsbury
Avenue will remain as such, including the currently vacant lot owned by the HRA.
• Revisions to land use approvals. Staff received the revised plans late in the day
on April 4th. Staff has not had an opportunity to review the plans at the time this
memo was drafted for distribution. The review of the revised plans will determine
what land use approvals may be needed. It is assumed that the proposed plan will
need a zoning district amendment (Industrial to Planned Multi-Family Residential)
and a planned unit development approval. The proposal may no longer need a
comprehensive plan amendment as was required with the original proposal. Staff will
verify whether a comprehensive plan amendment will be needed and will be able to
comment on this at the April 10th joint worksession.
• TIF Financing. The developer's request for TIF and additional information is
attached to this report.
The tentative schedule of upcoming meetings for consideration of the revised Pillsbury
Commons development is listed below. After completing its review of the latest
submissions, staff will have information at the April 10th joint work session if any changes to
the schedule are needed.
• April 10 Joint work session of PC, CC and HRA— Clark presentation
• April 16 Joint work session of HRA, CC & PC — presentation of rental housing
study
• April 23 PC meeting --public hearing on rezoning, PUD; consideration of
consistency of plan modification with comprehensive plan;
consideration of land sale consistency under comprehensive plan
• April 24 CC meeting — 1St reading of ordinance on land sale
• May 8 CC meeting — 1st reading on rezoning; 2nd reading of land sale
ordinance
• May 21 HRA meeting — consideration of development agreement and TIF plan
modification; public hearing on approval of sale of HRA property
• May 22 CC meeting — public hearing on TIF plan modification; 2nd reading of
rezoning; consideration of PUD final development plan; consideration
of approval of agreement for sale of land
Respectful submitted
19'1
Ste - . D evic
City Manager
SLD:cak
Attachments
Email: Department Directors
Assistant City Manager
Copy: Planning Commission
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RonClark
Construction&Design
7500 Weht 78'i■Street
Edina,MN
55139
(952)947-3000
lux(952)9.7-3030
Wednesday,April 4,2012
Mr.Steven L. Devich
Executive Director
City of Richfield Housing &Redevelopment Authority
6700 Portland Ave South
Richfield, MN 55423
Re: Pillsbury Commons
Subject: Request for Tax Increment Financing
Dear Mr. Devich:
From our initial financial modeling that was done prior to submitting our application to Minnesota
Housing Finance Agency(MHFA) it was determined that the cost of the project would exceed
available funding,e.g.there would be a financial gap. Because of this gap, prior to making our
application to MHFA we came to the city and requested Tax Increment Financing(TIF)to make
the project feasible.The TIF will be used to pay for the costs involved in the demolition,
environmental clean-up of the site,site improvements,and other TIF eligible costs and will be
needed to make the project financially feasible. To justify the need for TIF we will support this
request in the future with documentation that these are all TIF eligible costs. It is important to
know that we will incur and pay for these costs up front and then request reimbursement from
"pay as you go TIF"over an extended period of time. In this manner the reimbursement will be
paid from the new, higher real estate taxes paid by our project,and not from other city sources.
This letter is intended to define the amount of TIF needed to make the project financially feasible
and to request the city complete the process of approving the TIF district simultaneously with the
Land Use approval of our Project.
Due to the lengthy time frame to get to this point in the development process,we think it would
be helpful to give a brief "bullet point" history of the tax increment financing element involved in
our development to date:
• City Council meeting on 4/12/11:the City Council was made aware of our intent to submit
an application to Minnesota Housing Finance Agency(MHFA)for a 70-unit 100%
affordable housing project on the former City Maintenance Facility property to be called
"Pillsbury Commons".(This was also restated in an HRA memorandum dated 10/27/2011
to the City Council.)
• City Council meeting on 6/14/11:the City Council approved Resolution 10520.The
Resolution states that"the City wishes to support the Project and directs staff to work
with the Developer to take steps necessary to create a tax increment financing district for
the Project".The"Project"is described in the Resolution to be"70 units of multifamily
housing"and"is to be known as Pillsbury Commons and 100%of the units will be
affordable to persons with incomes at 60%of the area median income".We submitted
our application to MHFA immediately after receiving the City Council's Resolution to
support TIF for our project.
e srwa%,
( A
r t w MN Builder i.icen,c# 1220
iP?LOL'A r' www.lionChIrk.com
2008 Recipient 1'' "
RonClark
Construction& Design
7500 Wcst 78th Street
Edina,MN
55439
(952)947 3000
fax(952)947 3030
• In our application to MHFA for financing for this project we used the approved city TIF
Resolution as a key component of our application in order to demonstrate TIF support by
the city which awarded us additional points for a higher score against our competition.
• On 11/17/2011 MHFA allocated federal tax credits to the Pillsbury Commons project
through its competitive process.A requirement of this approval is a pay as you go TIF
note of$530,082.00 from the City.
On February 21,2012 Ron Clark Construction(Connelly Development, LLC)made formal application
to the City of Richfield for our Pillsbury Commons project.Our project has remained unchanged in its
overall concept for 70 units of 100%affordable rental housing since our meeting on this concept back
on 04/12/2011 noted above. Based on the above noted City approved Resolution, our MHFA
application included Tax Increment Financing(TIF)as an integral financial component for project
feasibility.
PRIOR TO MHFA Application
The original TIF amount used in our MHFA application for sources of funds for proof of development
financial feasibility was$530,082.00,which was based on the original site plan exiting onto Pillsbury
Ave. Attached please find our"Project Sources& Uses"showing the financial gap in our sources of
funds necessary to pay for project costs.This continues to be the amount of our TIF request even
though the costs of the project have increased with the additional Land to be purchased in order to
exit onto 76th street and to provide additional open space area.This additional Land purchase will be
funded with an additional Developer equity contribution.This will increase the Developer Equity
required for the project from the original amount of$437,589.00 to the current Developer Equity
required of$738,008.00. (See attached Sources and Uses schedule)
1.Tax Increment Financing Requested$530,082.00
Tax Benefits to the City
Upon the closing of the land sale this fall,the area included in the TIF District will come back onto the
tax rolls at the fair market value of the land included in the district based on the Appraisal done by the
city in 2011.The current TIF analysis done by Ehlers for the City shows the base taxes on the site will
be about$3,900.00 per year. The estimated total property taxes produced over the 26 years by the
project are expected to be about$2,000,000.00.
We look forward to the upcoming City meetings to to be able to present and discuss the variations in
our project and come up with the best solution for all involved.
Si erely,
� ie .
Ronald E. Clark
CEO
Ron Clark Construction&Design
Connelly Development,LLC
R.E.C.,Inc.
h�
A d° Cr Builder License it 1220
St atn�° I� www.Ron(lafk.crxn
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RESOLUTION NO. 10520
( RESOLUTION CONSENTING TO THE PROCESS FOR THE CREATION OFA HOUSING
TAX INCREMENT FINANCE DISTRICT IN SUPPORT OF THE PROPOSED PILLSBURY
COMMONS MULTIFAMILY HOUSING PROJECT
WHEREAS, the City of Richfield (the"City") is a municipal corporation and political
subdivision duly organized and existing under the Constitution and laws of the State of
Minnesota; and
WHEREAS, pursuant to the Constitution and laws of the State of Minnesota,
particularly Minnesota Statutes, Sections 469.174-469.1799 et. seq., as amended, the
City acting through the Richfield Housing and Redevelopment Authority("HRA") is
authorized to use tax increment financing to carry out the public purposes described
therein and contemplated thereby; and
WHEREAS, a proposal has been made by R.E.C., Inc. d/b/a Ron Clark
Construction and Design (the "Developer")to construct 70 units of multifamily housing at
211 West 76th Street near Pillsbury Avenue in the City of Richfield, which project is to be
known as Pillsbury Commons and 100%of the units will be affordable to persons with
incomes at 60%of the area median income (the"Project"); and
WHEREAS,the Project would be located on land that is currently owned by the City
of Richfield; and
WHEREAS, the City on or about the date of this resolution has approved an Option
Agreement with the Developer for the sale of the land upon which the Project is intended
to be built;
WHEREAS, the Developer has submitted its development proposal to the City and
the City is supportive of continuing further consideration of the Project; and
WHEREAS, the City wishes to support the Project and directs staff to workwith the
Developer to take the steps necessary to create a tax increment financing district for the
Project.
NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City of Richfield
that the City supports the Project and, pending final determination of project eligibility,
required reviews, public input, notices and hearings, and without surrendering its
legislative discretion, hereby authorizes staff to proceed with the steps required to
establish a tax increment financing district for the.Project; and
BE IT FURTHER RESOLVED, that City staff, in connection with the activities
required to be undertaken by the City and the HRA, continue its analysis of the Pillsbury
Commons project, negotiate the terms and conditions of a development contract with the
Developer or an affiliate whose general partner is controlled by the Developer, and prepare
a development plan and tax increment financing plan for the Project, all subject to final
determination of project eligibility, required reviews, public input, notices and hearings; and
BE IT FURTHER RESOLVED, that the City Council supports implementation of the
attached timeline for the Project(Attachment 1):
This resolution shall be in full force and effect from and after its passage.
Passed by the City Council of the City of Richfield, Minnesota this 14th day of June
2011.
0 /j
De 'ie Goettel, ayor
ATTEST: •
■
Nan'y Gibbs, y Clerk