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07-19-04 agendaCITY OF RICHFIELD, MINNESOTA MONDAY, JULY 19, 2004 REGULAR HOUSING AND REDEVELOPMENT AUTHORITY MEETING RICHFIELD CITY HALL 6700 PORTLAND AVENUE COUNCIL CHAMBERS 7:00 P.M. AGENDA Call to order 1. Approval of minutes of Regular HRA Meeting of June 21, 2004 Notes: 2. HRA approval of agenda 3. Consent Calendar contains several separate items which are acted upon by the HRA in one motion. Once the Consent Calendar has been approved, the individual items and recommended actions have also been approved. No further HRA action is necessary. However, any HRA Commissioner may request that an item be removed from the Consent Calendar and placed on the regular agenda for HRA discussion and action. All items listed on the Consent Calendar are recommended for approval. A. Consideration of approval of contract with Julianne Schwietz to work with Livable Communities Team beginning July 220, 2004 for 12 months S.R. No. 28 B. Consideration of approval of continuing public hearing to August 16, 2004 authorizing sale of 6805-12th Avenue to Twin Cities Habitat for Humanity for single family home development S.R. No. 29 C. Consideration of approval of resolution accepting service, waiving timeliness of service of land title summons, and consenting to land registration proceedings for the Best Buy Campus S.R. No. 30 D. Consideration of approval of resolution approving the first amendment to the Amended and Restated Contract for Private Redevelopment by and between the Housing and Redevelopment Authority in and for the City of Richfield and Richfield State Agency S.R. No. 31 Notes: 4. Public hearing regarding Richfield HRA revised Administrative Plan for Section 8 Housing Assistance Program Staff Report No. 32 Notes: 5. Consideration of a third amendment to the Purchase and Private Redevelopment Agreement with the Penn Place Townhouse development Staff Report No. 33 Notes: 6. Executive Director report 7. Claims and payroll Adjournment Auxiliary aids for individuals with disabilities are available upon request. Requests must be made at least 96 hours in advance to the Administrative Services Director at 612-861-9702. AGENDA ITEM # 5 REPORT # 33 STAFF REPORT HOUSING AND REDEVELOPMENT AUTHORITY MEETING JULY 19, 2004 REPORT PREPARED BY: PAM BOOKHOUT, REHABILITATION SPECIALIST NAME, TITLE REPORT PRESENTER: BRUCE NORDQUIST, HOUSING AND REDEVELOPMENT MANAGER DEPARTMENT DIRECTOR REVIEW: SlGNAT(IRE REVIEWED BY EXECUTIVE DIRECTOR: ITEM FOR HRA CONSIDERATION: Consideration of a third amendment to the Purchase and. Private Redevelopment Agreement with the Penn Place Townhouse development. I. RECOMMENDED ACTION: By Motion: Amend the contract with Penn Place Townhouses LLC to extend the completion date and share the costs of soil correction. IIL BACKGROUND ~ Construction has begun on the seven-unit townhome development at 6833 and 6855 Penn Avenue. As reported in a June HRA memo, the developer contracted with Braun Intertech to test the soil conditions at the site. Braun's engineers found unbuildable organic soils on much of the site. They are being removed to permit construction to proceed. The developer's builder, Frerichs Construction, estimates that the cost to correcf could be in the range of $41,600 to $60,830. The developer is requesting assistance from the HRA due to the unexpected cost of correction. Staff sought other possible resources, from the Metropolitan Council, Hennepin County and the State Department of Employment and Economic Development, but no funds were available. The site is not contaminated with petroleum or other hazardous waste, but has soils unsuitable to support the footings for residential construction. To correct the conditions, soils are being removed and replaced with compactable layers that support footings beneath the housing units and garages. 071904 Penn Place soils The developer wanted to proceed and purchased the site on June 15. He also asked staff to request the HRA to consider assisting with the soil correction costs. The concept is that the HRA match funds, dollar for dollar spent by the developer, not to exceed $30,410, or half of the estimated cost to correct. In addition to the soil corrections matter, the language of the third amendment also extends the closing date to June 30, 2004; the completion date to June 30, 2005; and includes technical matters related to draws on the Letter of Credit. III. BASIS OF RECOMMENDATION A. POLICY • The HRA approved the sale of the land to the developer in March 2004 after a public hearing. The price was $150,000. The developer will pay $80,000. The balance will be paid by the tax increment generated by the project. • In redevelopment projects the cost of soil correction is typically reflected in the value placed on the site. • The sale price of the site did not reflect the need for soil correction, as it was an unknown condition when the price was set. B. CRITICAL ISSUES • The land has been vacant since August 1999, but did provide a site for a house and garage at the time of purchase. Neither structure evidenced any indication of poor soils. • The developer has put considerable time and expense into the project to get underway. • No funds are available from outside sources. C. FINANCIAL • At closing, the Developer provided a Letter of Credit to pay for the land upon project completion. The $80,000 will be deposited in the Development Account.. It is proposed that the Development Account be the source of the HRA's contribution toward soil correction. Funds are available. D. LEGAL • Legal counsel has prepared the amendment. • With or without soil correction assistance to the developer, a third amendment to the Purchase and Private Redevelopment Agreement is required to acknowledge the extended closing date, completion date, and terms of the Letter of Credit which were finalized just prior to closing. IV. ALTERNATIVE RECOMMENDATION~S~ • Amend the Purchase and Private Redevelopment Agreement to allow revised performance dates but do not approve soil correction assistance. V. ATTACHMENTS • Third Amendment June HRA memo VI. PRINCIPAL PARTIES EXPECTED AT MEETING • David Gepner, developer HOUSING AND REDEVELOPMENT AUTHORITY Office of Executive Director June 17, 2004 HRA Memorandum No. s Housing and Redevelopment Authority Commissioners City of Richfield Subject: Penn Place Townhouses Status Dear Commissioners: At the July HRA meeting, the HRA will be asked to consider two actions related to the Penn Place Townhouse development. The first relates to soil correction. The developer contracted with Braun Intertech to test the soil conditions at the site. Braun's engineers found unbuildable soils on the site that need to be removed for construction to proceed. There have been no prior indications that soil conditions would be a problem. The developer's builder, Frerichs Construction, estimates that the cost to correct could be in the range of $41,600 to $60,830. The developer is seeking assistance from the HRA due to the high costs. Staff sought out other possible resources, including the Metropolitan Council, ,Hennepin County and the State Department of Employment and Economic Development, but no funds were available. The site is not contaminated with petroleum or other hazardous waste, but has organic soils "black dirt" in sufficient depth to not support building foundations. However, the condition is correctable. The developer wants to keep the project moving forward and a closing with the HRA was on June 15. One proposal being discussed would be for the HRA to match dollar for dollar spent by the developer, but not to exceed $30,410, or half of the high range of the estimated cost to correct. The fund source would be Development Account. The second action the HRA will be asked to consider is the approval of a third amendment to the Purchase and Private Redevelopment Agreement. The language of the proposed amendment: • Extends the closing date from March 31, 2004 to July 31, 2004 • Adjusts the completion date from October 31, 2004 to June 30, 2005 • Adds specific requirements related to the developer providing a letter of credit as the form of project security. • Addresses the soil conditions role for the developer and HRA. If commissioners have any questions about pending project action, please contact Bruce Palmborg or Pam Bookhout. Resp ully submitte arrant ~~ O o xecuti Dire for SO:cak THIRD AMENDMENT TO PURCHASE AND PRIVATE REDEVELOPMENT AGREEMENT By and Between THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF RICHFIELD and PENN PLACE TOWNHOUSES, LLC This document drafted by: KENNEDY & GRAVEN, CHARTERED 470 Pillsbury Center Minneapolis, MN 55402 (612) 337-9300 n JBD-248791v1 RC125-244 THIRD AMENDMENT TO PURCHASE AND PRIVATE REDEVELOPMENT AGREEMENT This Third Amendment to Purchase and Private Redevelopment Agreement (the "Third Amendment"), is made as of the 19th day of July, 2004, by and between the Housing and Redevelopment Authority in and for the city of Richfield, a public body corporate and politic under the laws of Minnesota, having its office at 6700 Portland Avenue South, Richfield, Minnesota 55423-2560 (the "Authority") and Penn Place Townhouses, LLC, a Minnesota limited liability company, having its office at 5407 Excelsior Boulevard, Suite B, Minneapolis, Minnesota SS416 (the "Redeveloper"). WITNESSETH: WHEREAS, the Authority and the Redeveloper have entered into that certain Purchase and Private Redevelopment Agreement dated November 18, 2002 (the "Agreement") concerning property generally located at 6833 and 68SS Penn Avenue in Richfield and more specifically described in the Agreement and in the attached Exhibit A (the "Redevelopment Property"); and WHEREAS, the Agreement was thereafter amended by a First Amendment to Purchase and Private Development Agreement dated as of April 21, 2003; and by a Second Amendment to Purchase and Private Development Agreement dated as of September 1 S, 2003 (the Agreement and the two amendments hereinafter referred to as the "Amended Agreement"). WHEREAS, the parties desire to modify the Amended Agreement in certain respects as hereafter provided. NOW,. THEREFORE, in consideration of the covenants and the mutual obligations contained herein, the parties agree as follows: 1. Section 3.4 of the Amended Agreement is amended to read as follows: Section 3.4. Closing. The Authority shall execute and deliver at closing the Redevelopment Property Deed in the form attached hereto as Exhibit B. Closing shall occur on or before June 30, 2004 or upon such other date as the parties may agree. Notwithstanding any other provision in this Agreement to the contrary, if closing has not occurred by July 30, 2004, either party may declare an Event of Default pursuant to Section 6.1 of this Agreement and terminate this Agreement. The balance of the purchase price shall be paid by the Redeveloper in cash. at closing, unless the parties agree to a-letter of credit or property lien. All levied or pending special assessments shall be paid by the Authority prior to closing. The Redeveloper and the Authority agree to pro rate as of the date of closing any real estate property taxes for the Redevelopment Property payable in the year of closing. The Redeveloper agrees to pay all real estate taxes payable with regard to the Redevelopment Property in the years after closing. The Redeveloper's use of the Redevelopment Property shall also be subject to the building and zoning laws and ordinances and all other City, State and federal laws and regulations. The Redeveloper shall have possession of the JBD-248791v1 2 RC 125-244 Redevelopment Property upon closing. Closing shall be at the offices of the Authority or (~ such other location to which the parties may agree. The Redeveloper shall pay for the cost ``--~ of recording the Redevelopment Property Deed and the premium for title insurance. The Authority shall pay the fee associated with obtaining the commitment for title insurance. The Redeveloper and the Authority shall each pay one-half of the closer's fee. 2. Section 4.2 of the Amended Agreement is amended to read as follows: Section 4.2. Commencement and Completion of Construction. Subject to Unavoidable Delays, the Redeveloper shall commence construction of the Improvements within 30 days of the date of closing. Subject to Unavoidable Delays, the Redeveloper shall have substantially completed the construction of the Improvements by no later than June 30, 2005, but at least one of the units shall be completed by September 10, 2004 for entry in the fall 2004 Parade of Homes, unless the parties mutually agree on participation in the spring 2005 Parade of Homes. All work with respect to the Improvements to be constructed or provided by the Redeveloper on the Redevelopment Property shall be in substantial conformity with the Construction Plans. In addition to construction of the Improvements, the Redeveloper shall be responsible for proper platting of the Redevelopment Property, for closing the two curb cuts on Penn Avenue, and for all work associated with site preparation and the installation, moving or removal of all public and private utilities serving the Redevelopment Property. The Redeveloper shall make such reports to the Authority regarding progress on construction of the Improvements as the Authority deems necessary or helpful. 3. The Amended Agreement is amended by adding to Section 6.2 the following new paragraph: (e) Subject to the notice and cure provisions contained in Section 7.7, but without being subject to the notice and cure provisions of this Section 6.2, draw on the Letter of Credit. 4. The Amended Agreement is amended by adding the following new Section: Section 7.7. Letter of Credit. In accordance with the provisions of Section 3.2, the Redeveloper will deliver. to the Authority, at closing, a Letter of Credit ("LC") in a form and from an institution reasonably acceptable to the Authority. The LC will be in the amount of $80,000, which is the Purchase Price of the Redevelopment Property. The Authority may draw on the LC to cover any Event of Default described in Section 6.1, or the failure of the Redeveloper to pay the Authority the $80,000 Purchase Price of the Property by the earlier of (i) ten days following the closing on the sale of the last townhouse unit to be sold, or (ii) December 14, 2005. The Redeveloper shall remain responsible for the payment of the portion of any monetary Events of Default described in Section 6. l; and for the portion of the Purchase Price not covered by the LC. If the payment of the Purchase Price has not been made before 30 days from the expiration date of the LC, the Authority will notify and direct the Redeveloper to provide it with an acceptable ~`'~ substitute or replacement letter of credit. If the substitute or replacement letter of credit is not 7BD-248791v1 3 RC125-244 provided by 10 days before the expiration of the LC, the Authority may draw the entire balance of the LC and apply it to the payment of the Purchase Price and any other monetary Events of Default existing at that time. 5. The Amended Agreement is amended by adding the following new Section: Section 7.8. Soil Correction Costs. It is anticipated that up to $60,830 will be necessary to fund soil correction costs necessary to prepare the Redevelopment Property for construction of the Improvements. These costs were not known at the time the parties calculated the land and construction costs for the development. In order for the development to remain economically feasible, the Authority has agreed to share with the Redeveloper the cost of the soil correction as follows: (a) The Redeveloper will contract for the soil correction work; the Authority will not be a party to the contract, nor have any obligation to the contractor. The Redeveloper shall be responsible for the full and prompt payment of all invoices from its contractor. (b) Upon receiving an invoice from its contractor for soils correction work performed, the Redeveloper will provide a copy to the Authority together with supporting documentation reasonably necessary for the Authority to review the invoice. (c) The Authority will have ten business days to review the invoice, and either reject, or approve and pay within forty-five business days, in accordance with the Authority's action of July 19, 2004. If the invoice is rejected, the Authority will indicate in what respects the invoice is deficient, and what additional information is needed. (d) The Authority, upon approving an invoice (including invoices approved following initial rejection), will pay the Redeveloper an amount equal to 50% of the approved invoice. Such payment will be made within five days of approval. (e) The Authority shall have no further obligation to make payments under this section once the Authority's total payments reaches $30,415. 6. Except as specifically noted in this Third Amendment, all terms of the Amended Agreement remain unchanged. IN WITNESS WHEREOF, the Authority and the Redeveloper have caused this Third Amendment to be duly executed in their names and behalves on or as of the date first above written. THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF RICHFIELD, MINNESOTA By: Its Chairperson By: Its Executive Director JBD-248791v1 RC 125-244 STATE OF MINNESOTA ) SS COUNTY OF ) The foregoing instrument as acknowledged. before me this day of , 2004, by Thomas E. Harms, the. chairperson of the Housing and Redevelopment Authority in and for the city of Richfield, Minnesota, a public body corporate and politic under the laws of Minnesota, on behalf of the Housing and Redevelopment Authority. Notary Public The foregoing instrument as acknowledged before me this day of , 2004, by Samantha Orduno, the executive director of the Housing and Redevelopment Authority in and for the city of Richfield, Minnesota, a public body corporate and politic under the laws of Minnesota, on behalf of the Housing and Redevelopment Authority. Notary Public JBD-248791v1 RC125-244 PENN PLACE TOWNHOUSES, LLC By: David Gepner Its Secretary/Vice President By: Harold W. Teasdale Its Chief Manager STATE OF MINNESOTA ) ss COUNTY OF ) The foregoing instrument was executed this day of , 2004, by David Gepner, the Secretary/Vice President of Penn. Place Townhouses, LLC, a Minnesota limited liability company, on behalf of the limited liability company. Notary Public STATE OF MINNESOTA ) ss COUNTY OF ) The foregoing instrument was executed this day of , 2004, by Harold W. Teasdale, Chief Manager of Penn Place Townhouses, LLC, a Minnesota limited liability company, on behalf of the limited liability company. Notary Public JBD-248791v 1 6 RC125-244 EXHIBIT A REDEVELOPMENT PROPERTY LEGAL DESCRIPTION LEGAL DESCRIPTION n The Redevelopment Property is described as follows: Street Addresses The site consists of three platted lots: 6833 Penn Avenue South, Richfield (one lots) 6855 Penn Avenue South, Richfield (two lots) Legal Descriptions Legal 6833 Penn Avenue: Lot 11, Block 9, Tingdale Bros.' Lincoln Hills Addn Descriptions North parcel of 6855 Penn Avenue: Lot 11 Subject to road, Block 9, Wood Lake Highlands Addn South parcel of 6855 Penn Avenue: Lot 10 Subject to road, Block 9, Wood Lake Highlands Addn PIN 6833 Penn Avenue: 28-028-24-33-0045 6855 Penn Avenue: 28-028-24-33-0146 Parcel Size 184' x 133' JBD-248791v1 RC125-244 AGENDA ITEM # 4 REPORT # 32 STAFF REPORT r HOUSING AND REDEVELOPMENT AUTHORITY MEETING JULY 19, 2004 REPORT PREPARED BY: LYNNETTE CHAMBERS, LEASED HOUSING SPECIALIST NAME, TITLE BRUCE NORDQUIST, REPORT PRESENTER: HOUSING AND REDEVELOPMENT MANAGER NAME, T/TLE DEPARTMENT DIRECTOR REVIEW: SIGNATURE REVIEWED BY EXECUTIVE DIRECTOR: ITEM FOR HRA CONSIDERATION: Public hearing regarding the approval of the Richfield Housing and Redevelopment Authority's revised Administrative Plan. I. RECOMMENDED ACTION: Conduct and close the public hearing and by motion: Approve the Housing and Redevelopment Authority's revised Administrative Plan for the Section 8 Housing Assistance Program. II. BACKGROUND The Department of Housing and Urban Development (HUD) notified the Richfield Housing and Redevelopment Authority (HRA) in April that funding for the current fiscal year for the Housing Choice Voucher Program will be based on August 2003 levels with a small adjustment factor increase. There is a negative financial impact to the Richfield's Voucher Program in Richfield because housing assistance costs continue to increase. HUD has recommended ways to reduce this impact. The HRA implemented one way ;in June by modifying "fair market rent" standards. Another way is for housing authorities to set their minimum rent at $50.00, the highest level allowed by HUD. Currently, the HRA has a minimum rent of $0.00. This means that tenants who claim they have little or no income may pay no rent for their unit and the HRA may also provide the tenant some monies to help pay for_their utilities. (Federal funds are used for this.) 071904 Admin Plan Section 8 Increasing the minimum rent to $50.00 will help lessen the financial burden on the HRA. The cost savings for one year would be approximately $7,800.00. To make this change requires a public hearing and an amendment to the HRA's Administrative Plan. III. BASIS OF RECOMMENDATION A. POLICY • The HRA establishes an Administrative Plan and amends the Plan following a public hearing. • HUD has designated Richfield as a high performer. Thus, the requested budget adjustments are not performance based. Rather, they are in response to budget adjustments made by HUD at the direction of Congress. B. CRITICAL ISSUES • Without raising the minimum rent the HRA will have less housing assistance available for some families. C. FINANCIAL • Adopting the minimum rent will retain approximately $7,800.00 a year for rent assistance obligations. • HUD has reduced funding to the HRA and the proposed minimum rent is one way of minimizing the impact of the reduction. D. LEGAL • The Housing Assistance Program (HAP) contracts that the HRA has with HUD have been previously reviewed and approved by legal counsel. • Proper notice was published on July 8, 2004 in the Sun Current of the availability to review the Plan and of the public hearing to be held concerning Plan approval. The publication schedule is in compliance with HUD regulations. IV. ALTERNATIVE RECOMMENDATION~S~ • Do not approve the revised Administrative Plan at this time. V. ATTACHMENTS • Proposed revision to the Administrative Plan (Attachment A). VI. PRINCIPAL PARTIES EXPECTED AT MEETING • N/A Attachment A Revised Portion of Administrative Plan B. MINIMUM RENT [24 CFR 5.616] Minimum Rent "Minimum rent" is $50.00. Minimum rent refers to the Total Tenant Payment and includes the combined amount a family pays towards rent and/or utilities when it is applied. 071904 Admin Plan Section 8 AGENDA ITEM # 3D REPORT # 31 STAFF REPORT r r HOUSING AND REDEVELOPMENT AUTHORITY MEETING JULY 19, 2004 REPORT PREPARED BY: BRUCE NORDQUIST, HOUSING AND REDEVELOPMENT MANAGER NAME, T/TLC REPORT PRESENTER: BRUCE NORDQUIST, HOUSING AND REDEVELOPMENT MANAGER NAner:, TiTi.r DEPARTMENT DIRECTOR REVIEW: SIGNATURE REVIEWED BY EXECUTIVE DIRECTOR: ITEM FOR HRA CONSIDERATION: Consideration of resolution amending the agreement between the Housing and Redevelopment Authority and Richfield Bank and Trust to allow M&I Bank to convey a portion of the bank property to a third party. I. RECOMMENDED ACTION: By Motion: Adopt the attached resolution which approves the First Amendment to the Amended and Restated Contract for Private Redevelopment by and between the Housing and Redevelopment Authority in and for the City of Richfield and Richfield State Agency, Inc. ~ II. BACKGROUND The Woodlake Centre portion of the "Urban Village" development at 66th Street and Lyndale Avenue has a proposed buyer. The buyer is Lend Lease, a national investor and portfolio manager of commercial property, that is based in Chicago. The seller is M&I Bank (M&I), which merged with Richfield Bank and Trust/Richfield State Agency. M&I is required by federal banking rules to sell the property. M&I has requested the Housing and Redevelopment Authority (HRA) to modify portions of the Amended and Restated Contract to meet the needs of the buyer. Legal counsel for M&I and the HRA have prepared the necessary changes. Wells Fargo, 071904 M&I Bank the holder of the tax increment financing note for Urban Village, is also a party to the transaction and must review the Agreement prepared by M&I and the HRA. No substantive changes are expected from that review, so the Agreement is being brought to the HRA at this time. III. BASIS OF RECOMMENDATION A. POLICY • Typically, the HRA's interest in third party transactions such as this ends at time of project completion. The agreements for this project continues the oversight and participation role for the HRA after completion, hence the review at this time. • The proposed Agreement creates no financial obligation for the HRA. • Wells Fargo may propose non-substantive changes, which would be allowed. Changes considered substantive would be returned to the HRA for consideration. B. CRITICAL ISSUES • Time is of the essence to meet the timeline of M&I and the buyer. It is anticipated that Wells Fargo's review and the completion of the sale would occur before the August HRA meeting. C. FINANCIAL • The proposed Agreement creates no financial obligation for the HRA. D. LEGAL • The attached Agreement has been reviewed by and prepared in collaboration with HRA legal counsel. IV. ALTERNATIVE RECOMMENDATION(S~ • The HRA could propose or modify requirements or not act on the Agreement. However, the sale of the property might be impacted and changes might cause new obligations for the HRA. V. ATTACHMENTS • Resolution • Agreement VI. PRINCIPAL PARTIES EXPECTED AT MEETING • N/A HRA Resolution No. RESOLUTION APPROVING FIRST AMENDMENT TO AMENDED AND RESTATED CONTRACT FOR PRIVATE REDEVELOPMENT BY AND BETWEEN THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF RICHFIELD AND RICHFIELD STATE AGENCY, INC. WHEREAS, the Housing and Redevelopment Authority in and for the city of Richfield (the "HRA") and Richfield State Agency, Inc ("RSA") did enter into an Amended and Restated Contract for Private Development dated May 21, 2001 (the "Contract"); and WHEREAS, Marshall & Ilsley Bank, a Wisconsin banking corporation ("M&I") is the successor to RSA by merger; and WHEREAS, M&I desires to convey a portion of the Redevelopment Property to a third party, and following conveyance to have the third party assume certain of the obligations imposed on the Redeveloper under the Contract; and WHEREAS, the contemplated .transaction requires that the Contract be amended in certain respects; and WHEREAS, the HRA has been presented with a proposed first amendment ("First Amendment") to the Contract, and has received the recommendation of staff and the HRA's counsel that the proposed First Amendment be approved, has fully reviewed the proposed amendment and is familiar with its contents. NOW THEREFORE, BE IT RESOLVED by the Housing and Redevelopment Authority in and for the City of Richfield that 1. The proposed first amendment to the Contract in the form received by the HRA is hereby approved subject. to such further non- substantive changes approved by the Chair and HRA counsel; provided that execution of the amendment by the Chair will be conclusive evidence of such approval. 2. The Executive Director and Chair are authorized and directed to execute and deliver such First Amendment. Adopted by the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota this 19th day of July, 2004. Thomas E Harms, Chair ATTEST: Kristal Stokes, Secretary Q FIRST AMENDMENT TO AMENDED AND RESTATED CONTRACT FOR PRIVATE REDEVELOPMENT BY AND BETWEEN THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF RICHFIELD AND RICHFIELD STATE AGENCY, INC. THIS FIRST AMENDMENT ("Amendment") is made and entered into as of the _ day of 2004, by and between The Housing and Redevelopment Authority in and for the City of Richfield, Minnesota, a Minnesota public body corporate and politic (the "HRA"), and M&I Marshall & Ilsley Bank, a Wisconsin banking corporation ("M&I") and successor by merger to Richfield State Agency, Inc. ("RSA"). WITNESSETH: WHEREAS, RSA and the HRA entered into that Amended and Restated Contract for Private Development dated May 21, 2001 ("Contract"), which Contract affects certain property referred to in the Contract as the "Redevelopment Property" and legally described in Exhibit A attached hereto. The Contract was recorded on November 30, 2001 in the office of the County Recorder for Hennepin County, Minnesota, as Document No. 7593401. WHEREAS, M&I is the owner of a portion of the Redevelopment Property, such property being legally described on Exhibit B attached hereto (the "M&I Property"); WHEREAS, M&I desires to convey a portion of the M&I Property and certain adjacent property to ("VEF"). The portion of the M&I Property that is to be transferred to VEF is legally described on Exhibit C attached hereto (the "VEF Property"); WHEREAS, after M&I conveys the VEF Property to VEF, M&I will retain that portion of the Redevelopment Property legally described on Exhibit D attached hereto ("McDonald's Property"). WHEREAS, simultaneously with the execution of this Amendment, VEF has assumed those obligations and liabilities of M&I under the Contract which relate to the VEF Property and which arise after the date of this Agreement. WHEREAS, M&I and the HRA desire to enter into this Amendment all in accordance with the terms set forth below. NOW, THEREFORE, in consideration of the premises and mutual obligations of the parties contained herein, the parties hereby represent, covenant and agree as follows: 1. Capitalized Terms. Capitalized terms not defined herein shall have the meaning ascribed to them in the Contract. In addition to the terms defined in the recitals to this Amendment, for purposes of this Amendment the following terms shall have the following meanings: 2479171v2 "Appraiser" means a Member of the Appraisal Institute that is experienced in appraising commercial real property in the Minneapolis/St. Paul, Minnesota metropolitan area. "McDonald's Minimum Improvements" means the Minimum Improvements located on the McDonald's Property. "McDonald's Property Owner" shall mean the person or entity who holds fee simple title to the McDonald's Property, and its successors or assigns. "Permitted Mortgage" means a mortgage, security agreement, assignment of rents and/or fixture financing statement encumbering all or any portion of the VEF Property and the VEF Minimum Improvements or the McDonald's Property and the McDonald's Minimum Improvements, the principal amount of which, when made and when combined with the principal amount of any other Permitted Mortgages, does not exceed eighty percent (80.0%) of the fair market value, as determined by an Appraiser, of the VEF Property and the VEF Minimum Improvements, or the McDonald's Property and the McDonald's Minimum Improvements, as applicable, encumbered by such mortgage. "Permitted Mortgagee" means the holder of a Permitted Mortgage. "VEF Minimum Improvements" means the Minimum Improvements located on the VEF Property. 2. Transfer to VEF. The HRA and the Tax Exempt Note Holder (which is consenting to this Amendment) hereby (a) consent to the transfer of the VEF Property and all improvements located thereon, including the VEF Minimum Improvements from M&I to VEF, and (b) acknowledge that simultaneously with the transfer of the VEF Property and the VEF Minimum Improvements, M&I will also transfer the Taxable Note to VEF and hereby consents to the same. 3. Minimum Improvements. The Minimum Improvements that were required to be constructed on the VEF Property and the McDonald's Property have been completed in accordance with the Contract. Any owner of any portion of the VEF Property or of the McDonald's Property may construct improvements to such property (such as additional restaurants) which are in addition to Minimum Improvements already constructed. 4. Obligation to Maintain and Repair. Under Section 4.1 of the Contract, the obligation of VEF to maintain and keep the Minimum Improvements in first-class condition and good repair, and to operate the same in a first class manner, until the Maturity Date, shall apply only to the VEF Minimum Improvements. VEF shall have no obligation or liability nor shall it be bound by covenants under the Contract with respect to any Minimum Improvements other than the VEF Minimum Improvements. If another owner of any other portion of the Redevelopment Property or the Minimum Improvements defaults in the performance of its obligations under the Contract, (a) neither the HRA nor the Tax Exempt Note Holder shall have any right to exercise remedies available under the Contract against VEF, the VEF Property or the VEF Minimum Improvements, and (b) no offset shall be made against amounts payable on the Taxable Note. 2 ^ The obligation of the McDonald's Property Owner to maintain and keep the Minimum ~) Improvements in first-class condition and good repair, and to operate the same in a first class manner, until the Maturity Date, shall apply only to the McDonald's Minimum Improvements. The McDonald's Property Owner shall have no obligation or liability nor shall it be bound by covenants under the Contract with respect to any Minimum Improvements other than the McDonald's Minimum Improvements. If another owner of any other portion of the Redevelopment Property or the Minimum Improvements defaults in the performance of its obligations under the Contract, neither the HRA nor the Tax Exempt Note Holder shall have any right to exercise remedies available under the Contract against the McDonald's Property Owner, the McDonald's Property or the McDonald's Minimum Improvements. 5. Insurance and Condemnation Proceeds. (a) With respect to the VEF Property, if VEF has the right to use Net Proceeds in order to repair, restore or rebuild the Minimum Improvements or any other improvements upon the VEF Property, the HRA and the Tax Exempt Note Holder agree that the Permitted Mortgagee may either: (i) act as agent to disburse the Net Proceeds in accordance with the terms of Section 6.3 of the Agreement; or (ii) designate a title insurance company to act as-escrow agent to disburse the Net Proceeds in accordance with the terms of Section 6.3 of the Agreement. (b) Tax Exempt Note Holder hereby agrees that Net Proceeds have been assigned to it under Section 6.1(d) of the Contract only to the extent of the amounts owed under the Tax Exempt Note (without account for any prepayment premium or penalty whatsoever) and, in the event the Tax ~!"1 Exempt Note Holder elects to apply Net Proceeds against the outstanding balance of the Tax Exempt ~~~~ Note, then all excess Net Proceeds shall remain the property of the applicable Redeveloper. (c) Subsection (h) of the Required Deliveries described in Section 6.3 is hereby deleted in its entirety. (d) If at anytime after the Tax Exempt Note Holder shall object to the disbursement of Net Proceeds to a Redeveloper for any reason (including without limitation, by virtue of the existence of a Event of Default, the failure of VEF to make a Required Delivery or the refusal of the Tax Exempt Note Holder to approve any plans or specifications relating to the reconstruction proposed by VEF), then the Redeveloper shall have the right (to be exercised within 90 days of the Tax Exempt Note Holder's objection to the proposed disbursement of Net Proceeds) to purchase, redeem or repay the Tax Exempt Note at par without any prepayment premium or penalty whatsoever ("Purchase Option"). Notwithstanding the foregoing, the Purchase Option shall be subject to the provisions of the last paragraph of Section 6.3 of the Contract and no person shall purchase, redeem or repay the Tax Exempt Note without obtaining the opinion, release, indemnity and other obligations required by such paragraph. 6. Section 7.4 (c). Section 7.4(c) shall be amended to provide that the Available Tax Increment has not been and will not be pledged or assigned to any party other than the Tax Exempt Note Holder except for the subordinate pledge to the holder of the Taxable Note as described in Resolution No. 821 of the HRA. 7. Assignments and Transfers. Notwithstanding anything to the contrary in Article IX of the Contract: 3 (a) No consent of the HRA or the Tax Exempt Note Holder shall be required before the McDonald's Property Owner may grant, modify, amend, increase or replace a Permitted Mortgage of the McDonald's Property or the McDonald's Minimum Improvements. No consent of the HRA or the Tax Exempt Note Holder shall be required before VEF may grant, modify, amend, increase or replace a Permitted Mortgage of the VEF Property or the VEF Minimum Improvements. Further, no consent of the HRA or the Tax Exempt Note Holder shall be required for any transfer of the VEF Property or the McDonalds Property which: (i) results from a foreclosure sale pursuant to a judgment of foreclosure (or other order of court) entered in connection with a Permitted Mortgagee's exercise of its rights and remedies under a Permitted Mortgage; or (ii) is to a Permitted Mortgagee (or its designee) by a Redeveloper in lieu of foreclosure of a Permitted Mortgage. (b) The consent of the HRA and the Tax Exempt Note Holder to a proposed sale, assignment or conveyance of the VEF Property, the McDonald's Property, the VEF Minimum Improvements or the McDonald's Minimum Improvements will not be unreasonably withheld, conditioned or delayed= (c) A proposed transferee of the VEF Property or the VEF Minimum Improvements and a proposed transferee of the McDonald's Property or the McDonald's Minimum Improvements shall be deemed to have the qualifications and financial responsibility required under Section 9.2(b)(i) of the Contract if (i) the transferee (or a property manager with which the transferee Q contracts) has within the last five (5) years owned or managed property of similar size to that being transferred in the greater Minneapolis/St. Paul area, or in metropolitan areas similar in size; and (ii) the transferee (or its parent or ownership constituents, in the aggregate) has a tangible net worth of at least $ [to be completed by Tax Exempt Note Holder] computed in accordance with sound business accounting principles (but including the transferee's equity in the property in question and goodwill as assets)(hereinafter referred to as a "Qualified Transferee"). (d) Notwithstanding anything to the contrary contained herein, the consent rights of the HRA and Tax Exempt Note Holder shall not be applicable to transfers of an equity interest in a Redeveloper by an owner of such equity interest (an "Equity Owner") if such transfer or series of transfers: (i) is between and among existing Equity Owners of a Redeveloper; (ii) is made to a legitimate estate planning vehicle for legitimate estate planning purposes; or (iii) does not result in more that 50% of the aggregate of all such equity interests being owned by Equity Owners that were not Equity Owners as of the date the Redeveloper obtained title to its portion of the Redevelopment Property. (e) Notwithstanding the provisions of Section (d) above, the Equity Owners of VEF shall have the right to freely transfer equity interest in VEF provided VEF: (i) has retained the services of a property manager satisfying the requirements of Section 7(c)(1); and (ii) continues to satisfy the net worth requirement of Section 7(c)(2) above. This exemption contained in this subsection (e) shall be personal to VEF and shall not transfer to or inure to 4 the benefit of any successor or assign of VEF without the written consent of the HRA and the Tax Exempt Note Holder. (f) In any event where the consent of the HRA and the Tax Exempt Note Holder is required to be obtained in connection with a transfer of the VEF Property or the McDonald's Property, such consent shall be deemed to have been given if the HRA or Tax Exempt Note Holder shall fail to object in writing to any said transfer within 45 days of receipt of a written request from a Redeveloper for such consent. Further, in connection with any said transfer, the HRA and Tax Exempt Note Holder hereby agree to deliver to the requesting Redeveloper a Notice of Status described in Section 11.4 specifically confirming that the required consent has been given or deemed given by the HRA and Tax Exempt Note Holder. (g) Notwithstanding Section 9.2(d) of the Contract, upon the sale, transfer, conveyance or assignment by any Redeveloper of fee title in such Redeveloper's portion of the Redevelopment Property to a Qualified Transferee, the transferring Redeveloper shall be released of its obligations under the Contract first arising after the effective date of the conveyance to the Qualified Transferee provided that the transfer was made in accordance with the terms of the Contract. 8. Amendments. Without the prior written consent of VEF, the HRA shall not modify or amend the Agreement, the TIF District, the TIF Plan, the Taxable Note, the Taxable Note Resolution, the Tax Exempt Note or the Tax Exempt Note Resolution in any manner that affects the Available Tax Increment pledged to the Taxable Note, the Tax Exempt Note or VEF's rights, obligations or liabilities with respect to the VEF Property or any of the other Redevelopment Property. 9. Redeveloper Deposit. The HRA and Tax Exempt Note Holder hereby confirm that all obligations of the Redeveloper with respect to reimbursing the HRA for costs incurred by it pursuant to Section 11.7 are satisfied, and M&I and VEF shall have no liability for any of such costs. Notwithstanding the foregoing, M&I and VEF shall reimburse to the HRA and the Tax Exempt Note Holder all costs it incurs in connection with the review and preparation of this Amendment within thirty (30) days after demand therefor. 10. Business Subsidv Agreement. The HRA confirms that (i) there are no defaults on the part of the Redeveloper under that Business Subsidy Agreement dated November 15, 1999, entered into by and between the HRA and the Redeveloper, and (ii) the wage and job goals set forth in paragraph (c) of such Agreement have been timely met and satisfied. The Business Subsidy Agreement has not been modified since its execution. VEF & M&I agree that with respect to the Minimum Improvements owned by them, they shall comply with the provisions of clause (b)(3) and (b)(6) of the Business Subsidy Agreement. 11. Affordable Housing_Commitment. HRA acknowledges and agrees that the Agreement Regarding Affordable Units dated October 17, 2001, between the HRA and the Redeveloper does not apply to the VEF Property or the McDonald's Property, and that neither VEF nor the McDonald's Property Owner shall have any obligation or liability under such Agreement. 12. Bindin Eg ffect. This Amendment shall run with the VEF Property and the McDonald's Property and shall be binding upon and inure to the benefit of the parties hereto and their successors and assigns, including (without limitation) any transferee of the VEF Property, the 5 McDonald's Property or any successor to VEF or M&I (including any Permitted Mortgagee which becomes the owner of the VEF Property or the McDonald's Property (or any portion thereof). This Amendment shall not affect the Redevelopment Property that is not included within the VEF Property or the McDonald's Property. 13. Permitted Mortgagee Protections . If a Permitted Mortgage shall be placed upon the VEF Property or the McDonald's Property (or any portion thereof), the HRA and Tax Exempt Note Holder agree: (a) to provide the Permitted Mortgagee upon written request of a confirmation that on and as of a date certain said entity is a "Permitted Mortgagee" under the terms of this Agreement; (b) to provide to the Permitted Mortgagee copies of any notices served upon VEF or the McDonald's Property Owner as applicable by the HRA or the Tax Exempt Note Holder; provided that the HRA and the Tax Exempt Note Holder are provided written notice of the address of such Permitted Mortgagee; and (c) that a Permitted Mortgagee shall be permitted to effectuate a cure of any default by VEF or the McDonald's Property Owner under the Contract and performance by said Permitted Mortgagee shall be deemed performance by VEF or the McDonald's Property Owner, as applicable, and, if required in order to obtain possession and control over the VEF Property or the McDonald's Property, such Permitted Mortgagee shall have a reasonable period of time in excess of any cure period afforded to VEF or the McDonald's Property Owner, as applicable, under the Contract, in order to effectuate any default by such party under the Contract. 14. Miscellaneous. Except as amended herein, the Contract remains in full force and effect and has not been amended or modified in any manner. [The remainder of this page has been left blank intentionally.] 6 IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first above written. Acknowledged and consented to as of the date first written above. [VEF ENTITY] By: (Printed Name/Title) THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF RICHFIELD By: Its: By: M&I MARSHALL & ILSLEY BANK By: 7 STATE OF MINNESOTA ) ss. COUNTY OF HENNEPIN ) The foregoing instrument was acknowledged before me this day of , 2004, by and the and and ,respectively, of The Housing and Redevelopment Authority in and for the City of Richfield, Minnesota, a Minnesota public body corporate and politic, on behalf of such public body. Notary Public STATE OF MINNESOTA ) ss. COUNTY OF HENNEPIN ) The foregoing instrument was acknowledged before me this day of _ 2004, by the Marshall & Ilsley Bank, a Wisconsin banking corporation, on behalf of the corporation. Notary Public of M&I 8 CONSENT OF TAX EXEMPT NOTE HOLDER The foregoing Amendment is consented and agreed to by the Tax Exempt Note Holder. WELLS FARGO BANK STATE OF MINNESOTA ) ss. COUNTY OF HENNEPIN ) By: Its: The foregoing instrument was acknowledged before me this 2004, by ,the Bank, a , on behalf of the day of of Wells Fargo Notary Public MW808990_6.DOC 9 EXHIBIT A Redevelopment Property 2479171v2 EXHIBIT B M&I Property 2479171v2 EXHIBIT C VEF Property 2479171v2 EXHIBIT D McDonald's Property MW808990_6.DOC AGENDA ITEM # 3C REPORT # 30 STAFF REPORT HOUSING AND REDEVELOPMENT AUTHORITY MEETING JULY 19, 2004 KATIA MEDVETSKI, REPORT PREPARED BY: REDEVELOPMENT SPECIALIST NAME, TI'!'LE REPORT PRESENTER: BRUCE PALMBORG, COMMUNITY DEVELOPMENT DIRECTOR NAME, TITLL• DEPARTMENT DIRECTOR REVIEW: SIGNATURE REVIEWED BY EXECUTIVE DIRECTOR: ITEM FOR HRA CONSIDERATION: Consideration of a resolution authorizing accepting service, waiving timeliness of service of land title summons, and consenting to land registration proceeding for the Best Buy Campus. I. RECOMMENDED ACTION: By Motion: Adopt the attached resolution authorizing accepting service, waiving timeliness of service of land title summons, and consenting to land registration proceeding. III. BACKGROUND ~ In 2003, Best Buy Co. (Petitioner) initiated a land registration proceeding (proceeding) involving Lot 1, Block 1 and 0utlots A, B, and C, Best Buy Campus. The City of Richfield (City) was a co-applicant in the proceeding because of its ownership of Outlots A, B, and C. The Richfield Housing and Redevelopment Authority (HRA) was named in the proceeding for certain street right of ways involved in the condemnation action which was awarded after the final plat was filed. The Petitioner attempted to serve the land title summons upon the HRA by serving one of its employees who was not authorized to accept service on the HRA's behalf, making the service ineffective. To correct this matter, the HRA needs to assist the Petitioner by not objecting to the registration by resolution. The resolution would grant the HRA's attorney the right to enter into a stipulation on behalf of the HRA to accept the service of the land title summons, waive objection 071904BestBuyland to the timeliness of the service, and consent to the entry of judgment and decree in the proceeding consistent with the proposed Final and Partial Order and Decrees of Registration. III. BASIS OF RECOMMENDATION A. POLICY • The Contract for Private Redevelopment between the HRA and Best Buy calls for the necessary land use permits which includes the platting of the land that encompasses the Best Buy Campus. The land registration proceeding consolidates the title to this land. B. CRITICAL ISSUES • Not objecting to the land registration proceeding would avoid additional costs and delays in the overall registration proceeding. C. FINANCIAL • The HRA could incur certain additional legal costs involved with the proceeding if it objects to the proceeding and service as it currently stands. Best Buy previously agreed to pay all costs associated with the .registration proceedings. D. LEGAL • The HRA's attorney has been involved in the land registration proceeding and has recommended this course of action to facilitate the completion of the proceeding. IV. ALTERNATIVE RECOMMENDATION(S~ • Do not accept service; do not waive timeliness of service of land title summons; and do not consent to land registration proceeding. However, this would be to the detriment of registering the Best Buy Campus land and clearing title matters. V. ATTACHMENTS • Resolution VI. PRINCIPAL PARTIES EXPECTED AT MEETING • N/A HRA RESOLUTION NO. RESOLUTION AUTHORIZING ACCEPTING SERVICE, WAIVING TIMELINESS OF SERVICE OF LAND TITLE SUMMONS, AND CONSENTING TO LAND REGISTRATION PROCEEDING WHEREAS, the Housing and Redevelopment Authority in and for the City of Richfield ("HRA") is a party respondent in a land registration proceeding involving Lot 1, Block 1 and Outlots A, B and C, Best Buy Campus; and WHEREAS, the petitioner Best Buy Co. attempted to serve the land title summons upon the HRA by serving one of its employees; and WHEREAS, the service of the petition was ineffective because the employee who was served was not authorized to accept service on the HRA's behalf; and WHEREAS., the HRA has no objection to the registration of the land in question and desires to assist the petitioner in avoiding additional costs and delays in its registration proceeding. NOW, THEREFORE, BE IT RESOLVED, by the Board of Commissioners of the Housing and Redevelopment Authority in and for the City of Richfield as follows: 1. The attorney for the HRA is authorized to execute a stipulation on behalf of the HRA that accepts service of the land title summons, waives objection to the timeliness of the service, and consents to the entry of a judgment and decree in .the land registration proceeding consistent with the attached proposed Final Order and Decree of Registration and Partial Order and Decree of Registration. Adopted by the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota this 19th day of July, 2004. Thomas E. Harms, Chair ATTEST: Kristal Stokes, Secretary cAx-2soso~~1 RC12s-1 0 TM BEST BUYM Date J ~ ~y ~.0, aoo~l Samantha Orduno City Manager and Executive Director City of Richfield and Richfield HRA 6700 Portland Avenue So. Richfield, MN 55423 Re: Best Buy Campus Title Registration Proceeding Hennepin County District Court File No. T-20629 Dear Ms. Orduno: ~~~-~~TE JUG 2 Q 2004 ~~. ,~ ~~.~~~ ~~~~' ~~ x~~ As you are aware, Best Buy Co. has initiated proceedings to register title to Lot 1, Block 1 and Outlots A, B and C of BEST BUY CAMPUS. The hearing on the land registration is scheduled for Tuesday, July 20,.2004, and this letter is provided to the City and to the Richfield HRA as an inducement for the City and Richfield HRA to waive any appearance at the hearing. Throughout the planning and construction phases of the Best Buy Campus, both Best Buy Co. and the City have been aware that certain public improvements were to be constructed, and have been constructed, on portions of Lot 1, Block 1, BEST BUY CAMPUS. Those improvements include the public sidewalk along 76~' Street West and Knox Avenue South, the cul-de-sac at the south end of Knox Avenue .South, and the sanitary sewer lift station located adjacent to Knox Avenue. The planned locations of those improvements are all shown on Sheet 1.01 of the Architectural Site plans for Project Number 200.14, General Revision #1, dated 01/11/02 and prepared by Opus Architects & Engineers, Inc. Best Buy has always intended to grant easements to the City for the ongoing use, maintenance and reconstruction of those facilities, but the easements cannot be prepared and finalized prior to the hearing on Tuesday. As an inducement to proceed with the registration hearing on July 20, 2004, Best Buy commits to undertake the following: 1. Best Buy promptly will retain a registered land surveyor to determine the field locations as constructed of: (a) the public sidewalk along 76~' Street West and Knox Avenue; (b) the cul- de-sac at the south end of Knox Avenue; and (c) the City sanitary sewer lift station and wetwell, and to prepare legal descriptions of the easements referenced below. Best Buy will submit the legal descriptions to the City for its review and approval. e~ Best Buy Corporate Campus 7601 Penn Avenue South, Richfield, MN, USA 55423-3645 (612) 291-1000 NYSE symbol: BBY 2. Promptly after the legal descriptions have been approved by the City, Best Buy will grant to the City, for $1.00 and other valuable consideration, easements that meet the following minimum dimensional requirements: a. A permanent easement for public sidewalk purposes over, under and across those portions of Lot 1, Block 1 that are occupied by public sidewalk adjacent to 76u' Street and Knox Avenue South and also providing for an easement for snow storage and construction purposes within the three-foot area adjacent to the public sidewalk. b. A permanent easement for public street, utility and drainage purposes over, under, and across that part of Lot 1, Block 1 that lies southerly, easterly and northeasterly of aline that is distant 10 feet northerly, westerly, and southwesterly from and parallel to the curb line of the Knox Avenue South cul-de-sac. A permanent easement for public utility purposes over, under and across a portion of Lot 1, Block 1 as occupied by the lift station. The easement to be granted must be at least 30 feet in width and 60.5 feet in depth, must be located so that the lift station building is located at least 10 feet away from any easement boundary, and the easterly line of the easement area must be adjacent to Knox Avenue South. 3. Best Buy will grant the easements by instruments to be prepared by the City's attorney. The terms and conditions of the easements will be no more onerous upon the City than if the easements granted had been dedicated in the plat of BEST BUY CAMPUS. 4. In addition to granting the easements, Best Buy will obtain necessary consents to the easements from any entities that hold prior liens or mortgages over the portions of Lot 1, Block 1 that are to be encumbered by the easements. Yours truly, c~ e- a~ A s s o c~d-~e Gen-e ~x.l Go ~ ns~. AGENDA ITEM # 3g REPORT # 79 STAFF REPORT HOUSING AND REDEVELOPMENT AUTHORITY MEETING JULY 19, 2004 REPORT PREPARED BY: REPORT PRESENTER: PAM BOOKHOUT, REHABILITATION SPECIALIST NAME, TITLE BRUCE PALMBORG, COMMUNITY DEVELOPMENT DIRECTOR DEPARTMENT DIRECTOR REVIEW: NAME, TITLE SIGNATURE REVIEWED BY EXECUTIVE DIRECTOR: ITEM FOR HRA CONSIDERATION: Continue the public hearing regarding the sale of 6805 12th Avenue to Twin Cities Habitat for Humanit for sin le famil home develo ment. I. RECOMMENDED ACTION: Continue the public hearing authorizing the sale of 680512th Avenue to Twin Cities Habitat for Humanity for single family home development to August 16, 2004. II. BACKGROUND The Housing and Redevelopment Authority (HRA) has purchased a very small property at 6805 12th Avenue for single family development and sale to a first time buyer. It is proposed that the HRA sell the property to Twin Cities Habitat for Humanity (Habitat) to build an addition to the home. The existing home has approximately 670 s.f. on the first floor, and 280 on the second floor. The addition will allow 3 to 4 standard sized bedrooms, and two baths to accommodate a family. The development agreement and house plans are still being finalized. A continuance to the August HRA meeting will allow this work to be completed. 071904 6805 12`h Ave III. BASIS OF RECOMMENDATION Q A. POLICY • A public hearing has been scheduled for July 19 and house plans and agreements are still being finalized. • The next scheduled HRA meeting to consider this items is August 16, 2004. B. CRITICAL ISSUES • Proceeding with the public hearing and authorization to sell to Habitat is not advised with plan and agreement preparation still underway. C. FINANCIAL • All of the remodeling will be done with Habitat's funding. D. LEGAL • Notice., of public hearing on sale of the property was published July 8 in the Sun-Current. IV. ALTERNATIVE RECOMMENDATION~S~ • Proceed with the sale and development agreement with Habitat although only presently in an outline form. V. ATTACHMENTS • N/A VI. PRINCIPAL PARTIES EXPECTED AT MEETING Nq : . AGENDA ITEM # 3A REPORT # 28 ~- STAFF REPORT HOUSING AND REDEVELOPMENT AUTHORITY MEETING JULY 19, 2004 REPORT PREPARED BY: BRUCE PALMBORG, COMMUNITY DEVELOPMENT DIRECTOR NAME, TITLE REPORT PRESENTER: BRUCE PALMBORG, COMMUNITY DEVELOPMENT DIRECTOR NAME, TITLL'' DEPARTMENT DIRECTOR REVIEW: S/GNATU2T REVIEWED BY EXECUTIVE DIRECTOR: ITEM FOR HRA CONSIDERATION: Consideration of a Livable Communities Team contract for 2004-2005. I. RECOMMENDED ACTION: By Motion: Approve the execution of a contract with Julianne Schwietz to work with the Livable Communities Team beginning July 22, 2004 for 12 months. III. BACKGROUND Julianne Schwietz has successfully worked with apartment owners, apartment managers, and staff for several years. Because of the need to again reduce operating expenses, the proposed contract is narrowly focused on the Livable Communities Team (staff from several departments and divisions who focus on apartment related issues). The attached report outlines the status of program activity and the proposed focus for the new contract year. III. BASIS OF RECOMMENDATION A. POLICY 071904 Livable Communities • The services of Julianne Schwietz continue to be needed to accomplish the aforementioned objectives. O One third of Richfield's housing units are in apartments and the physical condition of the structures and management practices are of concern to the Housing and Redevelopment Authority (HRA) and City Council. B. CRITICAL IssvEs • A significant portion of Richfield's population is housed in apartments. C. FINANCIAL • The HRA contract will be for 12 months with a cost not to exceed $15,000. The Section 8 program provides this revenue. This is a reduction in the cost of the contract from the current amount of $27,000. D. LEGAL • The contract is the HRA standard form as used previously. IV. ALTERNATIVE RECOMNIENDATION(S~ • Direct staff to find another consultant. Refuse approval Delay approval. V. ATTACHMENTS • Progress Report and Intention Statement. VI. PRINCIPAL PARTIES EXPECTED AT MEETING • Julianne Schwietz I. Richfield Livable Community Team (LCT) Progress Report August, 2003 -July, 2004 Intention Statement for August, 2004 -July, 2005 Introduction: The Livable Community Team was originally created within the Community Apartment Program (CAP), which Julianne Schwietz directed as a contract consultant from 1998-2001. CAP was funded by the HRA and was reviewed annually. The overall goal of CAP has been "To encourage strong, stable, and vital apartment communities in collaboration with other City and community services." Strategies toward this goal have included working with owners and managers of rental property, rental residents, City staff, and the community at large. Due to budget cuts in 2002, the CAP program was discontinued. However, two of the most critical pieces of this program, RAMA, and the Livable Community Team, were brought back in mid-year, 2002. Today RAMA (Richfield Apartment Managers/owners Association) remains a vital connection between the City and rental property staff, and is facilitated by Lynnette Chambers, in Community Development/HRA. RAMA remains a professional organization in which owners and managers exchange information and ideas with City staff. By working together, ordinance changes, best practices, Crime Free Multi- housing training, and more, are available to Richfield's rental property owners/managers. The work of the Livable Community Team (LCT), was continued with facilitation by Julianne Schwietz, and retained funding by the HRA. The LCT consists of full-time employees within the enforcement departments of Police, Crime Prevention, Housing, Health, and Fire, under the facilitation leadership of Julianne Schwietz. This team has participated in LCT meetings from one to four times per month. The overall goal of the LCT has been to resolve ongoing problems in multi-housing by coordinating efforts of the enforcement departments in the City. Objectives brought before the City Council on August 14, 2000, passed as ongoing efforts toward common goals of the LCT. These objectives included the following strategies, which will be carried forth in the 2004-2005 contract with Julianne Schwietz. • Abatement Plan with Dominium. Identifying properties with recurring high calls for police service led the LCT to recognize Dominium as having perpetual code violations on their properties. In order to encourage compliance, the LCT requested Dominium to enter into an Abatement Plan with the City. This plan was entitled "Concerns, Goals and Actions" and was drawn up as a cooperative agreement toward reducing problems. This agreement was updated with Dominium in March 2004. At that time both City staff and Dominium staff reviewed the document for any necessary adjustments to the plan. This was a successful meeting that ended with full agreement by Dominium to fulfill their obligations in the plan. In April 2004, the Dominium entered into a contingent purchase agreement to sell the property to T.E. Miller. Mike Garvin is the VP at Miller in charge of operations. He has been very receptive to Dan Scott and the idea of continuing a cooperative working relationship with the LCT. 071904 Livable Communities Intention for 2004-2005: Meet with staff from T.E. Miller. The intention is to obtain from Miller a commitment to support the agreement made with Dominium to maintain accountability. • Rewrite Housing Code. In order to assure compliance with Richfield's rental property housing code, changes were made by the following additions. The first is called "Three Strikes." Under this action, property owners are given notice (three times) of disorderly conduct (as defined by Minnesota Statute) by any one tenant within athree-month time frame. The second addition to the housing code is referred to as "Provisional Licenses." This requirement states that multiple dwellings that have generated an average of over .5 police or fire calls per dwelling unit in a preceding six-month period (as specified in the code) are eligible for provisional licenses. These changes to the Housing Code were passed in January 2002. Dan Scott suggested the team shall work together to make this ordinance viable and without flaws. To this point our efforts have been in developing enforcement applications in how data will be entered and retrieved from the computer system. This has required training of officers and dispatch personnel. To date, the team is ready to send out letters of notification to the offenders of the new policy. Immeasurable computer difficulties have plagued the forward movement of this ordinance. In May 2004, the computer server was changed-resulting in a loss of data that was not O (quickly) retrievable. This set back has caused many extra hours of manual data processing and the inability to confidently use the current data. This problem is in the process of being resolved. The effects of working with property owners and managers with the new ordinance have been extremely positive. Ironically, enforcement of this code has not been necessary because of the responsibility taken by the property owners/managers. The working relationship between the Crime Prevention Unit and owners/managers has been remarkably good. Meanwhile, litigation against the City of Brooklyn Park by Mid-Continent Management has resulted in that City losing its legal battle. The issues were around Brooklyn Park's enforcement of an ordinance similar to Richfield's in regard to how police calls for service were counted. The LCT has studied the differences between our code and the findings of the court. While we are confident that we are not acting in the same manner as Brooklyn Park with enforcement issues of this ordinance, we are not proceeding with formal enforcement at this time. Intention: In this next year it will be necessary to ensure that the ordinance is viable and that the positive relationships through RAMA and Crime Prevention will continue to build. • Create a restructuring of internal process for handling ongoing problems in Q enforcement of multi-housing issues. Team members and their responsibilities have changed or rotated, causing the need for restructuring of internal process to occur. Team members have diligently worked to develop internal processes for handling the issues around enforcing this complex ordinance. Intention: Changes in staffing in the Crime Prevention Unit will take place after July. Ongoing learning of individual roles will be necessary. • Compile an overview of the changes in Richfield policies for Judges and Housing Court Referees. The purpose in this is to bring understanding to those working in the justice system of Hennepin County, of our efforts to maintain the quality of life in our multi-housing communities. The team will use the feedback from the Judges/Referees toward collaboration and open communication. Intention: Moving forward on this project will require completion of Richfield's plan for enforcement of the current ordinance. If this is complete in the 2004 - 2005 contract year, the Team will then begin to strategize the tactics to use in this endeavor. II. .5 and 3 Strikes Multi-Housing Ordinance In October of 2003, the Richfield Police began sending letters out to renters, managers, and owners ofmulti-housing units in response to violations of the ordinance. When violations are observed, officers fill out administrative citations and issue them to violators. The citations are then brought back to the police department and entered into a database by our Crime Prevention unit. These violations are then tracked through the database and letters are sent out at the end of each month to violators of the ordinance. Copies of the violations and letters are sent to apartment managers and owners so that they may take appropriate action. Over the past several months, we have had excellent cooperation from renters, managers, and owners of the multi-housing units. Several of the apartment owners have actually written the ordinance into the lease agreement for new tenants. We have publicized the ordinance through various forms of media and community meetings. We have fielded hundreds of questions from renters and managers along with owners concerning the ordinance. We have stressed to the multi-housing community in Richfield that our goal is to work "with you" not "against you." This philosophy has built trust between the City of Richfield and its multi-housing community. We have had owners and managers take action on violations immediately, and they have asked for assistance from the Public Safety Department, if needed. Below is a chart showing the number of .5 and 3 Strike violations over the past several months. The numbers fluctuate. This is probably due in part to the influx of new renters who are unfamiliar with the ordinance. MONTH YEAR 3 STRIKE VIOLATIONS .5 VIOLATIONS TOTAL VIOLATIONS PERCENTAGE INCREASE OR DECREASE October 2003 18 25 43 0 November 2003 25 39 64 49% + December 2003 23 30 53 17% - Janua 2004 47 55 102 92% + Februa 2004 17 25 42 59% - March 2004 25 38 63 50% + A ril 2004 29 37 66 5% + Ma 2004 17 24 41 38% - June 2004 16 16 32 22% - The total number of apartment units in Richfield is approximately 5308.