11-20-02 Worksession
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HOUSING AND REDEVELOPMENT
AUTHORITY AND CITY COUNCIL
MEETING MINUTES
Richfield, Minnesota
Special Concurrent Worksession
Of HRA and City Council
November 20, 2002
HRA Members
Present:
Thomas Harms; Joan Heimberger; Kristal Stokes; Dan
Linnihan; and Michael Sandahl.
Council Members
Present:
Martin Kirsch, Mayor; Sue Sandahl; Susan Rosenberg; and
John Enger.
Council Members
Not Present:
Gertrude Ulrich.
Staff Present:
Samantha Orduno, City Manager/Executive Director; John
Stark, Community Development Manager; Bruce Nordquist,
Housing and Redevelopment Manager; and Cheryl Krumholz,
Recording Secretary.
Item #1
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NDALE~GA TEWA Y WEST*FINANCINGW,
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City Manager Orduno stated tonight's concurrent City Council/HRA Worksession is an
informal discussion of the Lyndale Gateway West financing for The Cornerstone Group's
redevelopment proposal. She said the traditional pay-as-you-go financing for a project has been
affected by tax rate reductions resulting in less increment.
City Manager Orduno explained that when the pay-as-you-go financing methods were
applied to The Cornerstone Group's proposal, a financing gap remained that left the project
financially infeasible. She explained the concept of alternative funding of a $6 million low-interest
loan from Fannie Mae's American Communities Fund. She also explained the possibility of the
City being the recipient of the Fannie Mae loan instead of the HRA.
HRA Commissioner Sandahl stated proposed redevelopment projects in this area have
never been flush because of the difficulty in financing. He said this is a blighted area in need of
redevelopment.
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Special Concurrent Minutes
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November 20, 2002
City Manager Orduno stated the financing package discussed tonight is the only one
available and if it doesn't work, the project is over.
Community Development Manager Stark stated the financing difficulties in this development
are due to changes in State tax law and the peculiarities of the site. He reviewed the three primary
difficulties in financing the project. Mr. Stark reviewed the financing methods to make this project
feasible. He said the goal is to provide as little risk as possible to the HRA and City.
HRA Chair Harms asked if funding is provided at site acquisition or construction.
Mr. Stark said funding is provided at the time construction obligations are in place and for
site assembly.
Mr. Stark reviewed the developer's obligations to be met before funding is available.
HRA Commissioner Linnihan asked about the two to three year timeframe for loan payoff
related to home sales.
Mr. Stark said the two to three year timeframe is from the funding date, not the date the
homes are sold.
HRA Commissioner Linnihan asked if the City was listed first under the developer's
personal guarantee if the $6 million loan is not paid from tax increment or home sales.
Mr. Stark said there was no way to make that determination.
HRA Chair Harms asked that the developer provide a financial statement.
Sid Inman, Ehlers & Associates, stated the developer's personal guarantee is an extra level
of financial protection for the City and HRA. He added that the proposed financing is not unique to
Richfield; more of this type of financing will be seen on other projects because of tax increment
changes. He stated he was optimistic, but reserved, about the financing being approved by a
lender.
HRA Commissioner Sandahl stated the HRA and City need to review this project and its
financing many more times. He said the financing may not be ideal, but supported having staff
proceed with the project.
HRA Chair Harms said the proposed financing was quite imaginative and believed pre-sale
requirements of the project will be met because of high demand. He said a lender may be hesitant
due to the lag time between acquisition and actual construction. He added that once buildings
start to come down, the project will keep moving ahead and it will be more difficult for the lender to
withdraw. Mr. Harms stated support for the financing if a lender was secured.
HRA Commissioner Heimberger asked if the proposed financing affected other City
projects.
Mr. Inman answered that it will not detract from other projects.
Mayor Kirsch expressed support for the proposed financing and that staff should proceed.
He said the area was a gateway to the City and needed to look like it.
City Manager Orduno said the conceptual approval will formally be presented in the future
and periodic updates will be provided to the City Council and HRA.
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Special Concurrent Minutes
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November 20, 2002
Mr. Stark stated many things could yet happen to halt the project.
Council Member Sandahl expressed optimism for selling the property because it is a very
marketable area.
City Manager Orduno said it is staffs' responsibility to present potential risks to the City
Council and HRA.
Council Member Enger asked about the sale price of the townhomes and lofts.
Ms. Colleen Carey, The Cornerstone Groups representative, stated the price range was
$150,000 to $300,000. She added a market study supports those prices.
Ms. Carey reviewed the proposed redevelopment concept plan.
Council Member Enger asked about the square footage cost to lease retail space.
Ms. Carey said the cost will vary, but will average about $20 per square foot.
There was City Council and HRA consensus supporting staff to proceed with the proposed
financing of the Lyndale Gateway West project.
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Recording Secretary
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