03-15-04 agendaCITY OF RICHFIELD, MINNESOTA
MONDAY, MARCH 15, 2004
SPECIAL CONCURRENT HOUSING AND REDEVELOMENT AUTHORITY
AND
CITY COUNCIL WORKESSION
RICHFIELD WATER PLANT CONFERENCE ROOM
6221 PORTLAND AVENUE
5:30 P.M.
AGENDA
Call to order
Roll call
1. Discussion regarding airport mitigative area redevelopment
Adjournment
REGULAR HOUSING AND REDEVELOPMENT AUTHORITY MEETING
RICHFIELD WATER PLANT CONFERENCE ROOM
6221 PORTLAND AVENUE
7:00 P.M.
n~FNnn
Call to order
1. Approval of minutes of Regular HRA Meeting of February 17, 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 adjustment of payment standard for Section 8 Rent
Assistance Program S.R. No. 13
B. Consideration of approval of resolution ratifying conclusions from HLB Tautges
Redpath, Ltd., HRA Auditor, regarding use of Lyndale-HUB-Nicollet tax increment
district's remaining balance S.R. No. 14
C. Consideration of approval of resolutions regarding elimination of portions of Richfield
Rediscovered Tax Increment Financing Districts' parcels at 6833 and 6855 Avenue;
Penn Place Townhouse Project S.R. No. 15
D. Consideration of approval of consulting services of Community Partners Research,
Inc. to prepare housing inventory in estimated amount of $33,800 S.R. No. 16
Notes:
4. Public hearing regarding resolution authorizing sale of real property at 6833 and 6855
Penn Avenue to Penn Place Townhouses LLC
Staff Report No.17
Notes:
5. Consideration of work program with McComb Group to evaluate and make
recommendations for downtown markets at 66th Street and Lyndale and Nicollet
Avenues
Staff Report No. 18
Notes:
6. 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 # rj
REPORT # 18
STAFF REPORT
HOUSING AND REDEVELOPMENT
AUTHORITY MEETING
MARCH 15, 2004
REPORT PREPARED BY: BRUCE NORDQUIST, HOUSING AND
REDEVELOPMENT MANAGER
' NAML•', T/TLS
REPORT PRESENTER: BRUCE NORDQUIST, HOUSING AND
REDEVELOPMENT MANAGER
NAME, TITLE
DEPARTMENT DIRECTOR REVIEW:
REVIEWED BY EXECUTIVE DIRECTOR: ~, ~,~)
Q
ITEM FOR HRA CONSIDERATION:
Consideration of approval of the attached Work Program by McComb Group to evaluate future
markets in the downtown at 66th Street, Lyndale Avenue and Nicollet Avenue.
I. RECOMMENDED ACTION:
By Motion: Authorize the attached Work Program with McComb
Group that evaluates and makes recommendations concerning
chanaina and aroiected downtown markets.
III. BACKGROUND ~
The "Lakes at Lyndale Master Plan" is proving successful at introducing a new
vitality to Richfield's 66th Street and Lyndale Avenue area, yet challenges remain.
The plan will be at its midpoint of implementation with the completion of City Bella.
Future redevelopment is forecast by the Master Plan at Lyndale Garden, K-Mart
and Bridgemans.
As planning and redevelopment proceeds, the market place of retail, food services,
and office also continues to evolve. Some examples:
Destination theater proposed in the Master Plan at 66th Street and Lyndale
Avenue would be difficult given new theaters in the market place at Southdale
and the Mall of America.
031504-McComb Group
• K-Mart remained open following the nation wide bankruptcy action, but
continues to not be competitive with similar retailers. The Martha Stewart
product line is reportedly failing.
• Sit down full service dining struggles in many suburban locations.
• Changes in ownership for Woodlake Centre have not been completed and are
holding back it's potential.
• Regional retailers such as Paper Warehouse and Simek's are closed. Snyders
is downsizing but remains open as Drug Emporium.
Jim McComb and the McComb Group are experienced at performing the types of analysis
and tasks outlined in the Work Program. To summarize:
• Studying the area of 66th Street and Lyndale Avenue and Nicollet Avenue.
• Identify and evaluate areas in competition with Richfield's downtown.
• Conduct business and owner interviews.
• Identify opportunity areas.
• Preparation of recommendations.
III. BASIS OF RECOMMENDATION
A. POLICY
• The HRA is responsible for the implementation of the Lakes at Lyndale
Master Plan.
• Additional redevelopment should be considered in context with an analysis of
the evolving market place. The analysis will be a helpful guide as the Master
Plan continues to be implemented.
• The City 2020 Vision document encourages including business areas at the
edge of the downtown, like Shoppes on Nicollet in considerations related to
the Lakes at Lyndale Master Plan.
B. CRITICAL ISSUES
• The local market place is changing with increased store vacancies by well
known retailers and decline by weak performers that remain.
• The Master Plan is an effective guideline to introduce new commercial
choices through redevelopment if it remains current with an evolving market
place. The K-Mart site is a unique future opportunity.
• By working with the Chamber and local business owners, the study results
can be used to strengthen business areas at the edge of the downtown, like
Shoppes on Nicollet area where redevelopment is unlikely.
C. FINANCIAL
• The cost of the evaluation and reporting is $30,350.
• The approved HRA 2004 budget includes funding of this work plan in the
Development Opportunities Fund.
• The Chamber of Commerce is being asked to contribute to the cost of the
study, which may reduce the HRA cost.
D. LEGAL
• Upon approval of the recommended action, the Executive Director is
authorized to sign the proposal for services.
IV. ALTERNATIVE RECOMMENDATION(S~
• The HRA can choose not to authorize or to modify the Work Program.
V. ATTACHMENTS
• McComb Work Program
VI. PRINCIPAL PARTIES EXPECTED AT MEETING
• Representative of McComb Group.
o ~ o M~COMB GROUP, Ltd.
^~^ R E T A I L ECSO N S U L T A N T llS
March 1, 2004
Mr. Bruce Nordquist
Housing and Redevelopment Manager
Community Development
CITY OF RICHFIELD
6700 Portland Avenue
Richfield, Minnesota 55423-2599
Dear Bruce:
In response to your request, we have prepared a work program to conduct market analysis to
determine future retail, food service and service office demand at the commercial areas in and
around 66th Street and Lyndale Avenue, and 66th Street and Nicollet Avenue in Richfield.
Research tasks will focus on both commercial areas and adjacent commercial development.
OBJECTIVES
Redevelopment of 66th Street and Lyndale Avenue has resulted in gradual transformation of an
aging commercial corner into a vibrant mixed-use area with increased density. Older
commercial uses stretch north from 65th Street to TH 62. The Hub Shopping Center extends
west from Nicollet Avenue and abuts 66th and L;yndale. The hub has spawned other commercial
development around it. Objectives of this engagement are. to:
• Evaluate 66th Street and Lyndale commercial area including commercial uses extending
east and west along 66th, and north and south along Lyndale Avenue.
• Evaluate the 66th Street and Nicollet commercial area and its interaction with 66th and
Lyndale.
• Delineate a retail trade area for 66th and Lyndale and 66th and Nicollet taking into
consideration the drawing power of its anchor stores.
• Identify retail areas that are competitive with 66th and Lyndale and 66th and Nicollet.
• Estimate the demand for retail, food service, and service office at 66th and Lyndale and
66th and Nicollet.
• Identify unmet needs for retail, food service, services, and office service uses in these two
interrelated commercial areas so that City can bring needed business establishments to
Richfield when the opportunity arises.
222 South Ninth Street Suite 380 Minneapolis, Minnesota 55402 • (612) 339-7000 Fax: (612) 338-5572
Mr. Bruce Nordquist
March 1, 2004
Page 2
The work program described below is designed to evaluate market potential for retail, food
service and service in the 66th and Lyndale and 66th and Nicollet commercial areas.
WORK PROGRAM
The work program outlined below is designed to fulfill the above objectives. Specific work tasks
include:
• Study Area Evaluation
The 66`h and Lyndale and 66th and Nicollet study areas will be evaluated to identify the
current retail and commercial tenant mix. Business establishments in the area will be
categorized by type and anchor stores will be identified. Factors to be considered
include, but are not limited to: ingress and egress, access, visibility, current and future
traffic counts, and relationship to adjacent uses.
• Competitive Shopping Areas
Shopping areas that are competitive with 66th and Lyndale will be identified and
evaluated to determine impacts on the retail area. Principal competitors will be identified
and evaluated for tenant mix, retail GLA, and anchor stores. Future retail developments
that will affect either 66th and Lyndale or its retail trade area will be identified.
• Business Interviews
Business owners and/or managers of businesses at 66th and Lyndale and 66th and Nicollet
will be interviewed to determine strengths and weaknesses of the retail area, suggestions
for improvements, and where their customers live.
• Owner Interviews
Owner of retail properties in the area will be contacted to determine their plans and
objectives for their properties and willingness to accommodate new uses. A second
meeting will be held with each owner to discus study results. The budget includes 16
hours for owner meetings. Additional meeting time, if necessary, will be billed at normal
hourly rates. Additional meetings will not be held without client approval.
• Trade Area Analysis
Based on manager and tenant interviews and McComb Group experience, the trade area
for 66th and Lyndale will be delineated. The economy of the trade area will be analyzed
to identify and quantify those factors that generate support for retail and service
establishments. Factors to be evaluated include, but are not limited to: employment,
population, households, building permits, household and retail sales. Retail and service
purchasing power of trade area households will be estimated. Trade area growth trends
will be evaluated to determine residential growth potential for target years 2005 and
2010.
Mr. Bruce Nordquist
March 1, 2004
Page 3
• Voids Analysis
Business establishments in the study area and nearby commercial areas will be reviewed
to identify retail, food service, and services that are underrepresented or void in the area.
• Commercial Development Potential
Future commercial development potential for 66th and Lyndale and 66th and Nicollet will
be estimated taking into consideration existing business establishments, competitive
impacts, trade area demographics, trade area purchasing power, and estimated market
share. Based on analysis of purchasing power, competitive shopping centers, and current
retail trends, future retail and service sales potential for 66th and Lyndale will be
estimated by business type. Estimates of retail, service and professional office space
supported by sales potential will be prepared of target years 2005 and 2010. Those retail,
service and professional office uses that would be suitable for future mixed-use
developments will be identified.
• Implementation Recommendations
The City of Richfield has identified a redevelopment schedule for 66th and Lyndale. In
consultant with City staff, opportunity areas will be identified in the 66th and Nicollet
area. Businesses that have been identified in previous tasks will be marketed with
appropriate sites in the two study areas. Identifying specific types of new businesses will
enable the City to plan future developments more efficiently.
• Design Consulting
McComb Group personnel will be available to meet with Richfield staff and a planner to
review development potential as it relates to City redevelopment objectives and discuss
how and where to accommodate future commercial, office and residential growth
potential. The budget provides for two design meetings.
The results of our work will be documented in a final report designed to meet client needs. The
report will contain appropriate graphics and explanations of our principal findings, conclusions,
and recommendations.
MEETINGS
Four client meetings, excluding design consulting, are planned during the course of the
engagement to keep the client informed of our progress and findings. These meetings include
the following:
• Start-Up Meeting will be held at the beginning of the engagement to finalize research
objectives and obtain client-provided information.
• Work Session to review preliminary research findings and discuss implications and how
to accommodate potential retailers.
Mr. Bruce Nordquist
March 1, 2004
Page 4
• Work Session with City staff and the City's planner to further refine of all market
analysis tasks and preliminary recommendations.
• Final Report Meeting to discuss results of work tasks and recommendations with the
client. This meeting will cover all aspects of the research program.
The budget provides for four client meetings and two design meetings as described above.
Additional meetings will be billed at normal hourly rates plus expenses.
QUALIFICATIONS AND EXPERIENCE
McComb Group, Ltd. is afull-service retail and real estate consulting firm specializing in market
research and financial feasibility. The firm has extensive experience in the retail industry and
has conducted market research for retail stores and shopping centers of all types including
regional malls, community centers and specialty centers.
McComb Group, Ltd. has a team that is qualified to conduct the research described in this
proposal. McComb Group's professional staff associated with this engagement includes the
following:
• James B. McComb, President, founded the predecessor of McComb Group in 1974
following six years as a member of the corporate staff with Dayton Hudson Corporation.
His experiences at Dayton Hudson and daily association with merchants and shopping
center developers provided the impetus for McComb Group's approach to shopping
center and retail market research and financial feasibility, which includes strong elements
of design and merchandise sensitivities. The firm's approach to shopping center research
and marketing has undergone continuous development and refinement over the past 20
years.
• William A. Gorton, Executive Associate, has over 25 years experience developing
supermarkets and retail shopping centers, representing supermarket chains as well as
prominent independent supermarket owners. Mr. Gorton provides advice and assistance
related to real estate development, leasing and contract negotiations, business
acquisitions, project management, sales forecasting, site evaluation and market analysis,
financing, capital planning, financial forecasting, business planning, strategy
development, business development and the marketing of programs and services.
Mr. Gorton has provided these services while by employed Fairway Foods, Inc.,
subsidiary of Holiday Stationstores, Inc.; Kohl's Food Stores, Inc., subsidiary of the
Great Atlantic & Pacific Tea Company; SuperValu, Inc.; Loblaw's, Inc.; and Stearns
Bank N.A. St. Cloud, MN. He received a JD from William Mitchell College of Law and
is a member of the Minnesota State Bar Association.
• Linda Oie, Associate, conducts market research, demographic and consumer analysis for
client engagements. Ms. Oie manages the firm's geographic information systems (GIS)
Mr: Bruce Nordquist
March 1, 2004
Page 5
and demographic databases using a variety of computer platforms and proprietary
software.
Prior to joining McComb Group, Ltd., Ms. Oie was employed as Marketplace
Information Manager at SuperValu, Inc. Her responsibilities included conducting
strategic consumer-based analysis of existing and prospective supermarkets, profiling
SuperValu customers, and delineating trade areas for existing and proposed stores.
• Susan Nache, Consultant, performs market research, demographic analysis, and
consumer research tasks. Ms. Nache conducts consumer research analysis and cross-
tabulation on McComb Group's survey processing software; and is familiar with software
programs used by McComb Group, Ltd. for financial feasibility and statistical analysis.
Mr. McComb will be responsible for managing and directing the overall research program and
will participate directly in findings and conclusions. Individual work tasks will be assigned to
personnel within the firm based on qualifications and experience.
BUDGET
J
The budget for the work program and work products described in this proposal is shown below.
Professional Services Budget
Study Area Evaluation $ 3,700
Competitive Shopping Areas 3,200
Business Interviews 1,600
Owner Interviews 3,700
Trade Area Analysis 3,200
Voids Analysis 950
Commercial Development Potential 3,500
Implementation Recommendations 1,850
Design Consulting 2,800
Report Preparation 1,400
Meetings 2,300
Total Professional Services $ 28,200
Expenses (Estimated
Demographics $ 400
Computer 250
Report Production 1,250
Reproduction 150
Miscellaneous 100
Total Expenses $ 2,150
TOTAL BUDGET 30 35
Mr. Bruce Nordquist
March 1, 2004
Page 6
The professional fees for the services outlined in this proposal total $28,200 and will be
performed at a price not-to-exceed that amount. Expenses estimated at $2,150 are to be
reimbursed based on actual cost. The budget is based on the amount of time required to perform
the work tasks and our normal hourly billing rates of $225 for principals, $175 to $200 for
executive associates, $110 for senior associates, $90 for associates, and $50-$85 for consultants.
Company policy requires a retainer of approximately one half the estimated budget for the
project or $15,175. The retainer will be applied to the final invoice as a credit for billing of
professional services and expenses. Invoices for professional services and expenses. will be
rendered at mid-month and month-end as our work progresses.
Standard billing terms are net ten days. A finance charge of 1.5 percent will be charged on all
unpaid balances outstanding more than 30 days.
REPORT PURPOSE
This proposal was prepared with the understanding that the results of our work will be used by
the client to evaluate demand for retail, food service, services and professional office
development in the study areas and is to be used for development planning. Our report will be
prepared for that purpose and will be subject to the following qualifications:
• Our analysis will not ascertain the legal and regulatory requirements applicable to this
project, including zoning, other state and local government regulations, permits and
licenses. No effort will be made to determine the possible effect on the proposed project
of present or future federal, state or local legislation, or any environmental or ecological
matters.
• Our report and analysis will be based on estimates, assumptions and other information
developed from research of the market, knowledge of the industry and discussions with
the client. Some assumptions inevitably will not materialize and unanticipated events
and circumstances may occur; therefore, actual results achieved will vary from .the
analysis.
• Our analysis will not evaluate management's effectiveness or be responsible for future
marketing efforts and other management actions upon which actual results are dependent.
`~ Our report will be intended solely for the purpose described above and should not be used
for any other purpose without our prior written permission. Permission for other use of
the report will be granted only upon meeting company standards for the proposed use.
These qualifications will be included in our final report. If the report is used for purposes other
than specified above, we reserve the right to review the materials for proper use of our work.
Mr. Bruce Nordquist
March 1, 2004
Page 7
ACCEPTANCE PROCEDURES
To indicate acceptance of the proposal, please sign a copy of the proposal and return it to us
together with your check for the retainer as authorization to proceed with this engagement.
We appreciate the opportunity to submit this proposal and look forward to hearing from you
soon. If you have any questions concerning the proposal, please call me at (612) 339-7000.
Accepted By: McComb Group, Ltd.
Company: n n ~ `~/~~_ r ~,
`U~ lJ, ~J ~(~
Title:
James B. McComb
Date: President
AGENDA ITEM #
REPORT #
~- STAFF REPORT
HOUSING AND REDEVELOPMENT
AUTHORITY MEETING
MARCH 15, 2004
4
17
PAM BOOKHOUT, REHABILITATION
REPORT PREPARED BY:
SPECIALIST
BRUCE NORDQUIST, HOUSING AND
REPORT PRESENTER: REDEVELOPMENT MANAGER
NAME, TiTr,E
DEPARTMENT DIRECTOR REVIEW:.
SIGNATURE
REVIEWED BY EXECUTIVE DIRECTOR:
ITEM FOR HRA CONSIDERATION:
Public hearing regarding approval of the attached resolution authorizing the sale of 6833 and
6855 Penn Avenue to Penn Place Townhouses LLC for the construction of seven attached
townhomes.
I. RECOMMENDED ACTION:
Conduct and close a public hearing and by motion: Approve the
attached resolution authorizing the sale of real property located at
6833 and 6855 Penn Avenue to Penn Place Townhouses LLC.
III. BACKGROUND
The Penn Place townhouses are ready to begin! A public hearing has been
scheduled for March 15 to permit the Housing. and Redevelopment Authority (HRA)
to sell the site to the Developer. The uniqueness of the project is demonstrated in
several ways.
• The layout of the homes and the location on Penn Avenue provides the
opportunity for alive/work environment.
• The site plan incorporates concepts of "Traditional Neighborhood
Design", including more compact space, less yard to care for, and walking
proximity to shopping at 66th Street and Penn Avenue.
• The contemporary exterior style offers a new choice in the marketplace.
031504 Penn Place Townhouses
• Richfield Rediscovered has never generated this many higher value units
in one clustered location.
In November 2002, the HRA approved a Purchase and Private Redevelopment
Agreement (Agreement) with the Developer, Penn Place Townhouses LLC, David
Gepner and Harold Teasdale (Developer) for the construction of seven attached
townhomes at the northeast corner of Penn Avenue and 69th Street. Each unit will
have a double car garage with access off of 69th Street, eliminating the need for
curb cuts on Penn Avenue. Garages will be detached, allowing semi-private yard
areas for the townhome residents. Each townhome unit will have three levels of
704 sq. ft. each, for a total floor area of 2,112 sq. ft. The units will be owner
occupied and have a base price of $345,000.
In the last year, the HRA approved two separate amendments to the Agreement to
give the developer time to complete their planning, construction bidding and
financing process. The building elevation and site plan have not changed since the
HRA viewed them in September 2003. They are attached for reference.
The Agreement states that the land price to be paid by the Developer is based on a
"look back" at the time of the public hearing. The sale price of the land to the
Developer will be $80,000 based on the proposed. sale price of the townhomes and
project costs, and a rate of return to the Developer that cannot exceed 15 percent.
The HRA appraised land value of $150,000 will be achieved with $70,000 in pay as
you go tax increment and land proceeds noted above. This is similar to other
Richfield Rediscovered projects. Tax increment proceeds remaining after the
payment for land will be directed to the Housing Fund for HRA housing program
purposes.
III. BASIS OF RECOMMENDATION
A. POLICY
• The HRA purchased the sites as part of the Richfield Rediscovered
program. The developmenfi concept conforms with Comprehensive
Plan goals for higher density housing on arterial streets such as Penn
Avenue.
• The Developer's plan meets height and setback requirements without
a need for variance.
• A Conditional Use Permit (CUP) as a Cluster Home Development has
been approved by the City Council. The approval encompassed all of
the elements of the development such as site plan, basic unit
configuration elevations and landscaping. Requirements imposed by
the CUP are:
o The Developer must submit to the City Attorney for
review and approval of a "Declaration of Covenants,
Conditions, and Restrictions" for the townhouse owners.
o The Developer must secure a subdivision waiver for
seven units.
o The townhouse Owner Association must remove
garbage cans from the curb after pick-up.
The Developer plans to participate in the 2004 fall Parade of Homes.
The HRA and Developer are subject to a Purchase and Private
Redevelopment Agreement as amended.
B. CRITICAL ISSUES
• The land has been vacant since the HRA removed two substandard
homes from the site in August 1999.
• The Developer has identified a lender and a builder to move forward
with the project.
• The Developer has put considerable time and expense into the project
to date and is now ready to buy the land and begin building.
• A Richfield resident called upon seeing the public hearing notice and
expressed concern about the appearance, color, and materials being
used in the project. In November 2002, 20 neighbors within 350 feet
of the project met to discuss concerns. No concerns were raised
about the style or appearance. The proposed use of a stucco like
cement board product ("hardi-plank" and "hardi-board") was preferred
over vinyl siding.
• In November 2002, the Planning Commission approved a "Cluster
Home Development" after determining "the design of the development
must be compatible with the surrounding neighborhood". The building
lines, window style and placement, and exterior finish present a more
contemporary appearance but are considered compatible.
C. FINANCIAL
• The "look back" provision in the Agreement provides a basis for
evaluating the land sale price at the time of public hearing.
• As in other Richfield Rediscovered projects, the HRA will sell the land
with a Letter of Credit, or similar security provided by the Developer to
secure the land proceeds until the project is completed and sold and
land proceeds received.
D. LEGAL
• Notice of public hearing on sale of the property was published on
March 4, 2004 in the Sun Current.
IV. ALTERNATIVE RECOMMENDATION(S~
• Do not proceed with the public hearing. Continue the public hearing if the
HRA believes additional information is needed prior to authorizing the sale of
the land.
V. ATTACHMENTS
• Resolution
• Townhouse building elevations and site plan
VI. PRINCIPAL PARTIES EXPECTED AT MEETING
• Developer representatives
HRA RESOLUTION NO.
RESOLUTION AUTHORIZING THE SALE OF REAL PROPERTY LOCATED AT
6833 AND 6855 PENN AVENUE SOUTH TO PENN PLACE TOWNHOUSES LLC
WHEREAS, the Housing and Redevelopment Authority in and for the City of
Richfield, Minnesota (HRA) desires to develop certain real property pursuant to and in
furtherance of the Richfield Rediscovered Program adopted by the HRA; said real property
being described as 6833 and 6855 Penn Avenue South, and whose legal description is Lot
11, Block 9, Tingdale Bros. Lincoln Hills Second Addition, and Lots 10 and 11, Block 9,
Wood Lake Highlands Addition, respectively, according to the plats thereof on record in the
office of the County Recorder in Hennepin County, Minnesota; and
WHEREAS, the HRA is authorized to sell real property within its area of operation
after a public hearing and provided the sale is in conformance with the Comprehensive
Plan as determined by the Planning Commission; and
WHEREAS, the purchaser of the described property has been identified as Penn
Place Townhouses LLC; and
WHEREAS, in accordance with a Purchase and Private Redevelopment Agreement
the sale price of the land to Penn Place Townhouses LLC for a seven unit townhouse
project is $80,000; and
WHEREAS, given the value of the land as determined by independent appraisal is
$150,000, the additional $70,000 required to reimburse the HRA for the land cost, in
accordance with the Program, will come from tax increment generated by the project; and
WHEREAS, tax increment received by the HRA after payment for land,
approximately $300,000 over a 20 year period, will be directed to the Housing Fund for
HRA housing program purposes; and
WHEREAS, a public hearing has been held. after proper public notice.
NOW, THEREFORE, BE IT RESOLVED by the Housing and Redevelopment
Authority in and for the City of Richfield, Minnesota:
1. A public hearing has been held and 6833 and 6955 Penn Avenue are authorized
to be sold for $80,000 to Penn Place Townhouses LLC; the sale having been
determined to be in conformance with the Comprehensive Plan; and
2. The Chairperson and Executive Director are authorized to execute other
agreements .and documents as required to effectuate the sale to Penn Place
Townhouses LLC.
3. Tax increment generated by the project is authorized to be distributed as follows:
• $70,000 to the HRA as land. proceeds.
• The balance to the Housing Fund for HRA housing program purposes.
Adopted by the Housing and Redevelopment Authority in and for the City of
Richfield, Minnesota this 15th day of March, 2004.
Thomas E. Harms, Chair
ATTEST:
Kristal Stokes, Secretary
1 '
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A view of the courtyard, or east, facade of the Penn ~ia~o r.,,.,..ti,,...,,,.
A view of the north facade of the Penn Place showing the space between the units and the oaraaec
A view of the 69th or south facade of the Penn Place townhomes, showing the entry to the courtyard and the garages.
~_~~~~ ~ia~c ~s a seven-unit townhouse development along Penn Avenue in Richfield, MN. This view Shows the weer. nr ao.,., e.,e...,,. ~_
---1e.
AGENDA ITEM #
REPORT #
STAFF REPORT
~ HOUSING AND REDEVELOPMENT
AUTHORITY MEETING
MARCH 15, 2004
REPORT PREPARED BY: BRUCE NORDQUIST, HOUSING AND
REDEVELOPMENT MANAGER
BRUCE NORDQUIST, HOUSING AND
REPORT PRESENTER: REDEVELOPMENT MANAGER
NAME, Tire
DEPARTMENT DIRECTOR REVIEW:
SIGNATURE
REVIEWED BY EXECUTIVE DIRECTOR:
ITEM FOR HRA CONSIDERATION:
Preparation of a housing inventory.
I. RECOMMENDED ACTION:
By Motion: Authorize consulting services of Community Partners
Research Inc. to prepare a housing inventory.
III. BACKGROUND
At the City Council goal setting in January 2004, the initiation of a housing inventory
was identified as a priority. It is time to take a look at our housing assets and
assemble the most current information on needs, conditions, and opportunities.
The inventory will be comprehensive, including:
• Resident demographics; the most recent information that builds on the 2000
Census
• Housing stock data, and changes in the market place.
• Trends and new directions.
• Housing policies, goals, strategies, and programs.
• A rental property survey; rents charged and current vacancy rates.
031504 Housing Inventory
Given the enormity of the task, the most successful effort is a collaborative one.
Community Development staff would work with a consulting group to facilitate data
collection, analysis, synthesis, and reporting.
Community Partners Research, Inc. is aten-year-old consulting group located in
Lake Elmo. Principals Scott Knudson and Steve Griesert are known for their
housing studies, grant writing, program development and delivery. They played an
important role in the housing planning and strategies following devastating flooding
in East Grand Forks. In 2003 they prepared several housing studies for Minnesota
cities, including Rochester.
Attached is the outline prepared by staff and the summary of the consultant's tasks
and proposal. The estimated cost of services by Community Partners Research,
Inc. is $33,800. Amid-summer completion date is proposed. The completed
inventory would be shared with the community and used as the basis for a new
understanding of Richfield's housing stock including hopefully being followed by
new initiatives.
III. BASIS OF RECOMMENDATION
A. POLICY
• The Housing and Redevelopment Authority (HRA) is a leader in
evaluating Richfield's housing needs and identifying opportunities.
• The City Council has identified the need for a Housing Inventory as a
priority in 2004.
• The comprehensive nature of an inventory requires assistance from
experienced housing program and data persons.
• Existing staff resources are insufficient and. would significantly delay
the preparation of an inventory.
• A collaborative effort combining staff and. consulting expertise will
provide a timely product.
C. FINANCIAL
• Development Opportunity funds are available from the 2004 budget.
D. LEGAL
• N/A
TERNATIVE RECOMMENDATION(S~
The HRA can choose to modify the work plan or defer to a future time.
I V . ATTACHMENTS I
• Starr ouume
• Consultant proposal
VI. PRINCIPAL PARTIES EXPECTED AT MEETING
Inventory of Richfield Housing Assets and Opportunities
January 2004
Objective: Assembling demographic and housing data and determining needs,
conditions, and opportunities.
Inventory:
Population -Demographics:
=~ Age
~ Households
Income
Costs
Tenure
Housing Stock Dafa: (to extent County, City data available)
Age
Sq. ft.
Number of bedrooms
Number of bathrooms
~ Condition (point of sale, license inspection, assessing)
~ Value (ongoing and historical)
Price (annually)
.~ Rent (annually)
Housing Patterns:
Number of sales
°:~ Move to, move from patterns
"` Vacancy rates
Single family rentals
Ratio of ownership to rental
Affordability: ,
Review of "standards" of affordability
~: Comparison' of existing stock to standards
~" Comparison of existing affordability to community goals and Livable Community
goals
J~ Q&A: Topic of the month
=~ What housing costs today
Housing Work Plan:
• Review shifting and persistent paradigms:
~ Move, don't improve
~ Richfield houses are too small
I can find a larger home elsewhere
=% I'm concerned about safety, schools, decline
• Review 25 years of success:
Adhoc committees (senior, affordable, 2020).
7 Focus groups (redevelopment, rehab, energy conservation)
~ Events (Remodeling Fair, Parade of Homes, Remodel Tour, Richfield Beautiful,
Landscaping Awards, Open Houses, Ice Cream Socials)
~ Marketing and Communication (since 10/93)
D Events
~ Direct mail
~ Newsletters
D Brochures
D Videos
D Marketing plan
~ Display boards and lawn signs (rotating and permanent)
D Themes:
• "Richfield Rediscovered"
• "New and Improved"
• "Build and Remodel -Next to Everything"
• "This Old House"
~ Plan books
D Home visits, advisor services, action plans, workbooks.
Review of Program Responses:
The 80's:
~ Vo-Tech construction -first time buyer
~ Scattered site new home
D Deferred loans (CDBG)
D Energy conservation
~ Super insulation demonstrations
~ First time buyer mortgages
D -Rent assistance -independent program
The 90's:
D Richfield Rediscovered
~ Habitat for Humanity
~ Transformation
~ Apartment Remodeling
~ Parade of Homes
D Events and advisor services focus on remodeling
The 2000's:
D Multi unit new construction: New choices to improve vitality and livability
~ Sustain efforts -search for new resources
~ Further target program efforts
~ Greater Metropolitan Housing Corporation (GMHC)
~ Match to the single family/multi-family marketplace
~ The continuum
• Search/assemble new trends, findings, best practices, programs, innovative housing.
0
• New Directions:
~ New/Refocused Themes/Program responses
~ "Room to Expand": 74 percent of residential lots are 60' ft. wide or wider
~ "No house left behind": every home should have three bedrooms, two baths,
central air
D Reality Fix-ups:
"face-lift"
"curb appeal"
"weekend warrior"
"trading spaces"
"divine design"
"decorating cents"
~ "Remodeled Apartments: Next to Everything"
• Survey all move-ins, move-outs
• Topical policy/technical briefs on housing as needed ("Issues of the moment")
• Annual assessments of local market conditions and changes
H:CdAdmin:BruceN:lnventory Housing Assets
1 /22/04
Community Partners Research, Inc.
4 10865 g2nd Street North # Lake Elmo MN 55042 # Phone (651) 777-1813 # Fax (651)
779-7102
Date: February 27, 2004
To: Bruce Nordquist and Bruce Palmborg
From: Scott Knudson and Steven Griesert
Re: Richfield Housing Inventory
Based on our Thursday, February i9 discussion, we have revised our proposal as follows:
I. Demographic Section
The Demographic Section will include approximately 25-3o demographic and
housing indicators including population, households, income, tenure, housing
costs, etc.
Q For each indicator, data will be displayed in table form and in a spatial format
such as a pie chart or bar graph. There will also be several bullets of text that
interprets the major points of each demographic indicator. For most
demographic topics, the goal will be to provide concise information in one or two
pages. The presentation method should allow for easy conversion into
PowerPoint.
The demographic information will be obtained from a variety of sources,
although much of the data will be obtained from base data in the 200o Census.
Other sources that will be reviewed including estimates from the U.S. Census
Bureau, the Metropolitan Council and private data services, such as Claritas, Inc.
Scott and Steve will be responsible for this Section. Estimated Cost: $6,400 -
$~,200.
II. Housing Stock Database Section
This Section will assemble an analyze data from Hennepin County's property tax
system, and/or other property-specific databases that may exist. Ideally, this will
allow for information to be available on each single family home in Richfield
including age, square feet, number of bedrooms and bathrooms, conditions,
value, etc. It is our understanding that this information can be identified by
neighborhood.
City staff, primarily Dave Olund, will be responsible for obtaining this
information, ideally in a personal computer database format. Once the database
is assembled, it should then be possible to assemble reports and analyze this data
in ways that allow for a detailed understanding of the City's existing housing
stock.
Scott and Steve's role will be to provide some advice on what data to collect and
to organize the data into presentation/study format. The City will have primary
responsibility for collecting and maintaining data, and extracting the reports that
we request for inclusion in the Study.
Estimated cost for Scott and Steve - $1,500 - $2,00o for basic services. If our role
in this section expands, and we are primarily responsible for database creation
and usage, then we would need to request additional compensation.
III. Multifamily Rental Inventory Section
The Rental Inventory will include a survey of the multifamily rental properties in
Richfield. Information on each rental project will include number of units, size of
units, age, vacancy rates, rent structure, tenant mix, etc. The initial data
collection will be done by the Section 8 Program staff through their annual rent
survey.
We will attempt to contact rental projects with eight or more units that do not
Q respond to the survey to collect information. We will also attempt to collect
additional information from properties that responded to the Section 8 survey,
but where we believe that addition information would be valuable. We will also
attempt to collect information from a good sampling of projects with less than
eight units including single family homes, duplexes, etc.
Scott and Steve will be responsible for this Section in the final Study. However,
we will work with Lynette to obtain information from her survey and to eliminate
duplication. We will also seek assistance from the City to obtain contact people
and phone numbers.
Estimated cost for Scott and Steve - $5,600 - $6,400.
N. Richfield Housing Patterns and Trends Section
This Section will include information on recent home sales, household moving
patterns, vacancy rates, ownership ratios, etc. The Section will also interpret this
information and its impact on Richfield housing.
It is our understanding that Richfield staff will be primarily responsible for much
of the data collection and/or assembly for this Section. Scott and Steve will assist
in interpreting the information and putting the information in a
presentation/study format.
Estimated cost for Scott and Steve: $i,2oo - $i,8oo.
V. Affordability Section
This Section will compare Richfield's housing costs with the incomes of
Richfield's households and determine Richfield's households and determine
Richfield's housing affordability. This Section will include adefinition/standard
of affordability.
Although we will look for reliable, current-year income estimates, this
information may need to be based on income and housing cost data reported in
the 200o Census.
This Section will be a joint effort between Richfield staff and Scott/Steve.
Estimated cost for Scott and Steve - $2,000 - $2,400.
VI. Richfield in Comparison Section
This Section will compare Richfield with 8 to io other south metro and inter-ring
suburbs. The comparison will include approximately 1o indicators including
population and household growth, home values, incomes, etc. It is assumed that
the indicators will be based on data that is available and consistent between
communities, and will not need significant research time.
Estimated cost for Scott and Steve - $2,400 - $2,800.
VII. Past Accomplishments Section
This Section will review Richfield's housing programs, project and activities over
the past 25 years. This information will be presented in a concise, organized
manner that will inform the residents of the City's past involvement in housing.
City staff will be responsible for this Section. Scott and Steve's involvement will
be to put the information in a presentation format.
Estimate cost for Scott and Steve - $800 - $i,2oo.
VIII. Housing Trends Section
This Section will discuss national housing trends for various age groups including
innovative housing options that have been developed. The Section will also
discuss the housing attitudes and trends of Richfield's residents and how
resident's attitude and trends and national trends will impact the City's housing
strategies and work plan for the future.
This Section will be a joint effort between Richfield staff and Scott/Steve.
Estimated cost for Scott and Steve - $2,400 - $3,200.
IX. Richfield's Housing Strategies and Work Plan Section
Based on all the data and information gathered, this Section will provide the City
of Richfield's Housing strategies and work plan for the future.
This Section is the responsibility of City staff. Scott and Steve's role will be to
provide ideas and advice and to assist in putting this Section into a
presentation/study format.
Estimated cost for Scott and Steve - $2,000 - $2,800.
1~me Frame
This Housing Inventory can be accomplished in i2o days. The time frame will be as
follows:
Days i - 6o Sections I, II and III drafts completed
Days 6i - 9o Sections IV through IX drafts completed
Days 91- iio Review the Sections, make changes as needed
Days iii - i2o Prepare and print final document
After Day i2o Presentations
To accomplish these time lines, we recommend that we meet weekly to establish weekly
tasks and deadlines.
Fees
The total estimated Community Partners Research, Inc. fee to complete this project is
$24,300-$29,800. Additional direct. expenses are estimated to range from $3,00o to
$4,00o for a total fee of $28.,, o~ o to $33.800.
Please note that this fee does not include printing of the final document or presentation
materials as we have not concluded discussions on the type of final product.
Also, any significant deviations from this Rental Inventory Outline will be discussed to
determine if less or additional hours are warranted.
We request that 50% of the fees are paid when 50% of the Inventory is completed and
the remaining 50% is paid upon completion of the Inventory.
~?
® AGENDA ITEM #
REPORT #
STAFF REPORT
HOUSING AND REDEVELOPMENT
AUTHORITY MEETING
MARCH 15, 2004
3C
KATIA MEDVETSKI,
REPORT PREPARED BY: REDEVELOPMENT SPECIALIST
NAME, TITLE
BRUCE PALMBORG,
REPORT PRESENTER: COMMUNITY DEVELOPMENT DIRECTOR
NAMG, T/TEE
DEPARTMENT DIRECTOR REVIEW:
SIGNATURE
REVIEWED BY EXECUTIVE DIRECTOR:
ITEM FOR HRA CONSIDERATION:
Consideration of attached resolution regarding elimination of portions of Richfield
Rediscovered Tax Increment Financing Districts' parcels at 6833 and 6855 Penn Avenue;
Penn Place Townhouse Project.
RECOMMENDED ACTION:
By Motion: (1.) Adopt attached resolution modifying tax increment
district by the elimination of a portion of a parcel therefrom (6855
Penn Avenue); and (2.) Adopt attached resolution modifying tax
increment district by the elimination of a portion of a parcel therefrom
(6833 Penn Avenue); all located within the Richfield Redevelopment
Project Area; all related to the Penn Place Townhouse redevelopment
protect.
® II. BACKGROUND
General
On November 18, 2002, the Richfield Housing and Redevelopment Authority
(HRA) approved a Purchase and Private Redevelopment Agreement
031504Penn Place
4 (Agreement) with Penn Place Townhouses LLC (Developer Harold Teasdale and
David Gepner) for aseven-unit townhouse redevelopment project at 6833 and
6855 Penn Avenue. Subsequently the HRA approved amendments to the
Agreement that allowed extensions to the closing date and construction
completion date.
Crossing Tax Increment District Lines
The current site area at 6833 Penn Avenue and 6855 Penn Avenue is part of two
different tax increment financing districts (Richfield Rediscovered B-5 and
Richfield Rediscovered 1999. The district boundaries were based on the location
of the two former residences on the site.) Under the new Penn Place plat
configuration, the proposed townhouses are situated such that the tax increment
district boundary lines cross through one of the townhouses.
Due to this situation, the plat cannot be filed at the County and tax increment
cannot be calculated. A remedy is needed. The County has agreed to retain the
site within the respective tax increment districts and have increment calculated
on the new value of six of the seven townhouses, if a portion of each property is
eliminated from its respective tax increment district. The townhouse bisected by
the boundary would be dropped from the TIF and the revenues made available to
the various tax jurisdictions. The site plan at Exhibit A provides a visual
presentation of the two tax increment parcels in relation to the layout of the seven
townhomes.
Due Process and Procedure
Minnesota Statutes Section 469.175, Subd. 4 states that if the geographic area
of a tax increment financing district is reduced in size, the tax increment plan
must be modified, proper notices must be made and a public hearing must be
held. However, a public hearing is not required if the sole purpose of the plan
modification is the elimination of a parcel from a district and (a.) the current net
tax capacity (Current NTC) of the parcel to be eliminated from the district equals
or exceeds the parcel's original, certified base net tax capacity (Base NTC) or
(b.) the authority chooses to reduce the Base NTC of the parcel to be eliminated
from the district to no less than its Current NTC if the Current NTC is less than
the Base NTC.
6855 Penn Avenue -The Current NTC for this parcel is less than its Base NTC.
In order to effectively eliminate a portion of this parcel, the HRA has two options
with regard to process. Option A entails an election by resolution to request the.
County auditor to eliminate a portion of the parcel and have the Base NTC
reduced to no more than the Current NTC._ By undertaking this election, the HRA
would not be required to undertake a formal tax increment plan modification and
public hearing. Option B entails undertaking a formal tax increment plan
modification with public hearing. Staff recommends Option A.
6833 Penn Avenue -The Current NTC for this parcel equals its original, certified
Base NTC. Therefore, there is no issue regarding the NTC. The elimination of a
portion of this parcel would be the only action necessary. If, however, the HRA
031504Penn Place
chooses Option B above, the 6833 Penn Avenue parcel would be included in any
plan modification and public hearing. This would be done to maintain process
consistency rather than legal necessity.
Review and Analysis
Legal counsel, the HRA's financial consultant, and staff have undertaken a
comprehensive review of the situation in order to determine the best outcome for
the townhouse redevelopment project and the Richfield Rediscovered Program
as a whole. Part of the consideration weighing heavily is the cost involved.
Since only a portion of each original, certified base parcel will be eliminated, the
overall increase in market value resulting from the new townhouse development
will more than compensate for any lost base value resulting from changes to the
NTC or elimination of portions of the parcels. Also, the cost for modifying the tax
increment plans, could be two to three times more than any loss in base value.
III. BASIS OF RECOMMENDATION
A. POLICY
• Minnesota Statutes, Section 469.175, Subd. 4 provides the necessary
procedure for eliminating parcels, or portions thereof, from tax
increment financing districts.
• The Penn Avenue site consists of two tax increment district parcels in
two separate districts. One of the townhomes in the proposed
development crosses the tax increment districts' line. This prohibits
the County from filing the new plat and calculating future increment.
B. CRITICAL ISSUES
• Electing Option A will allow the current, revised construction /
processing schedule, for Penn Place to be left intact.
• Undertaking Option B would most likely delay construction start of the
project and increase costs.
C. FINANCIAL
• Ehlers & Associates, Inc. has undertaken the financial reviews
necessary for the proposed options for remedying tax increment
boundary line issues for this project.
D. LEGAL
• Legal counsel has reviewed all options and analyses and prepared all
necessary resolutions and concur with staff to not undertake formal
tax increment plan modifications.
® IV. ALTERNATIVE RECOMMENDATION(S~
• Choose Option B (formal plan modifications).
031504Penn Place
0
V. ATTACHMENTS
• Resolution modifying tax increment district by the elimination of a portion of a
parcel therefrom (6855 Penn Avenue South).
• Resolution modifying tax increment district by the elimination of a portion of a
parcel therefrom (6833 Penn Avenue South)
• Exhibit A -Site Plan
VI. PRINCIPAL PARTIES EXPECTED AT
MEETING
• N/A
031504Penn Place
0
HRA RESOLUTION NO.
RESOLUTION MODIFYING TAX INCREMENT DISTRICT
BY THE ELIMINATION OF A PORTION OF A PARCEL THEREFROM
(6855 Penn Avenue)
BE IT RESOLVED, by the Housing and Redevelopment Authority in and for the
City of Richfield, Minnesota (the "Authority") as follows:
1. Redevelopment Tax Increment Financing District Richfield Rediscovered
No. B-5, County Project Number 1258, (the "District") is hereby modified by eliminating
therefrom the following portion of a parcel of land, to wit:
The north 3..03 feet of Lot 11, Block 9, Wood Lake Highlands, subject to road,
Hennepin County, Minnesota
2. The current net tax capacity of the parcel is less than the original net tax
capacity of the area of land comprising the parcel.
3. Pursuant to Minnesota Statutes Section 469.175, Subdivision 4, the
Authority stipulates and agrees that, notwithstanding Minnesota Statutes Section
469.177, subdivision 1, the original net tax capacity of the District will be reduced by no
more than the current net tax capacity of the parcel of land described in paragraph 1
above.
4. The Executive Director is hereby authorized and directed to provide the
County Auditor with all information and documents necessary to carry out the objectives
of this resolution.
Adopted by the Housing and Redevelopment Authority in and for the City of
Richfield, Minnesota this 15th day of March, 2004.
Thomas E. Harms, Chair
ATTEST:
Kristal Stokes, Secretary
031504Penn Place
HRA RESOLUTION NO.
RESOLUTION MODIFYING TAX INCREMENT DISTRICT
BY THE ELIMINATION OF A PORTION OF A PARCEL THEREFROM
(6833 Penn Avenue)
BE IT RESOLVED, by the Housing and Redevelopment Authority in and for the
City of Richfield, Minnesota (the "Authority") as follows:
1. Redevelopment Tax Increment Financing District Richfield Rediscovered
1999, County Project Number 1283, (the "District") is hereby modified by eliminating
therefrom the following portion of a parcel of land, to wit:
The south 20.63 feet of Lot 11, Block 9, Tingdale Brothers Lincoln Hill 2nd Addition,
Hennepin County, Minnesota
2. The current net tax capacity of the parcel. equals or exceeds the original
net tax capacity of the area of land comprising the parcel.
3. The Executive Director is hereby authorized and directed to provide the
County Auditor with all information and documents necessary to carry out the objectives
of this resolution.
Adopted by the Housing and Redevelopment Authority in and for the City of
Richfield, Minnesota this 15th day of March, 2004.
Thomas E. Harms, Chair
ATTEST:
Kristal Stokes, Secretary
031504Penn Place
EXHIBIT A -SITE PLAN
6833 Penn Avenue South -- County Project #1283
Richfield Rediscovered 1999 Tax Increment District
6855 Penn Avenue South -- County Project #1278
Richfield Rediscovered B-5 Tax Increment District
Cross-hatched Area: Area to be dropped from each District, per County requirements
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AGENDA ITEM # 3B
REPORT # 14
STAFF REPORT
HOUSING AND REDEVELOPMENT
AUTHORITY MEETING
MARCH 15, 2004
REPORT PREPARED BY: BRUCE PALMBORG, COMMUNITY
DEVELOPMENT DIRECTOR
NAME, TITLE
REPORT PRESENTER: BRUCE PALMBORG, COMMUNITY
DEVELOPMENT DIRECTOR
NAME, TITLE
DEPARTMENT DIRECTOR REVIEW:
SIGNATURE
REVIEWED BY EXECUTIVE DIRECTOR:
ITEM FOR HRA CONSIDERATION:
Consideration of the conclusions of the Housing and Redevelopment Authority auditor's letter
regarding the use of the LHN tax increment district's remaining balance and related resolution.
I. RECOMMENDED ACTION:
By Motion: Consider the attached letter from HLB Tautges Redpath,
Ltd. dated December 23, 2003 regarding the LHN tax increment
district's remaining balance and adoption of the attached resolution
which ratifies the conclusions therein.
II. BACKGROUND
On November 20, 2000 the Housing and Redevelopment Authority (HRA) approved
and ratified a record of financial transactions contained in a report dated November
10, 2000. The report entitled Financial Reporting Analysis Tax Increment Districts
Lyndale Hub Nicollet (LHN) Interstate Lyndale Nicollet (ILN) Cedar Avenue
Business Area (CABA) analyzed all financial transactions. It was prepared by HLB
Tautges Redpath, Ltd. (Tautges), Ehlers and Associates and staff. On December
31, 2002 the LHN district was decertified. The district balance with no outstanding
debt on December 31, 2002 was $963,763.
031504LHN TIF
Based on the work reported in the November 2000 document, Tautges was
O requested to determine the status of the aforementioned district balance. In a letter
dated December 23, 2003 Tautges concludes the balance in the account is non-tax
increment.
III. BASIS OF RECOMMENDATION
A. POLICY
• Tautges is the auditor for the HRA. As stated in their letter the
conclusion is based on TIF accounting practices in Minnesota.
B. CRITICAL ISSUES
• The action steps in the Tautges letter recommend the HRA and City
Council ratify by resolution the conclusion and recommendations of
the letter.
C. FINANCIAL
• Once the ratification process has been completed the balance will
become available to the HRA. HRA authorization to expend these
funds will be required. The upcoming budget process for 2004-2005
will provide an orderly process for managing the funds.
D. LEGAL
• Mr. Steve Bubul Attorney at Kennedy & Graven specializes in tax
increment financing law. His letter dated December 31, 2003 is
attached. Mr. Bubul agrees with the conclusions and
recommendations of the Tautges letter.
IV. ALTERNATIVE RECOMMENDATION(S~
• N/A
V. ATTACHMENTS
• Resolution
• HLB Tautges Redpath, Ltd. Letter of December 23, 2003
• Stephen Bubual letter of December 31, 2003
VI. PRINCIPAL PARTIES EXPECTED AT MEETING
• N/A
RICHFIELD HOUSING AND REDEVELOPMENT AUTHORITY
HRA RESOLUTION NO.
RESOLUTION ADOPTING AND RATIFYING
THE CONCLUSIONS CONTAINED IN AUDITOR'S
LETTER DATED DECEMBER 23, 2003
WI~REAS, the Lyndale Hub and Nicollet ("LHN") tax increment district was decertified
on December 31, 2002; and
WHEREAS, at decertification the reported district balance was $963,763; and
WHEREAS, the Authority sought comments from its auditor, NT .R Tautges Redpath, Ltd,
("Tautges") regarding the use of the remaining reported district balance; and
WHEREAS, by letter dated December 23, 2003, Tautges rendered its conclusion
concerning the uses for which the district balance was available; and
WHEREAS, the Authority has fully reviewed the Tautges letter and is familiar with the
conclusions contained therein.
NOW THEREFORE, BE IT RESOLVED, by the Board of Commissioners of the
Housing and Redevelopment Authority in and for the City of Richfield that the conclusions
contained in the Tautges letter dated December 23, 2003 are hereby adopted and ratified.
Adopted by the Housing and Redevelopment Authority in and for the City of Richfield,
Minnesota this day of March, 2004.
Thomas E. Harms, Chair
ATTEST:
Kristal Stokes, Secretary
~?
.rsn-2aaiaa~i
RC125-1
~ Tautges Redpath, Ltd.
Q
Certified Public Accountants and Consultants
December 23, 2003
Mr. Bruce Palmborg
Community Development Director
Richfield HRA
6700 Portland Avenue South
Richfield, MN 55423
Dear Bruce:
The LHN Tax Increment District was decertified on December 31, 2002. We have been
asked to provide comments on the use of the remaining district balance.
The reported district balance at December 31, 2002 was $963,763, which represents the fund
balances of the following City and HR.A Funds:
Entity Fund
Type Fund Name
Refunding Improvement Bonds of 1994B
O
G $304
2
City
EIRp Debt service
Capital project .
.
LHN Construction ~ 112
2
(248,878)
I~ Capital project LHN Management Properties 987,833
Hgp Capital project LHN Tax Increment
$963,763
Previously, there was a joint effort analysis of certain TIF Districts, including LHN. A report
to the HRA dated November 10, 2000 was issued in conjunction with that analysis.
Wt-ite Bear Lake Office: 4810 White Bear Parkway, White Bear Lake, Minnes SA STele hone: 6511480 49905Fax? 6510 426F500451 426 5004
Hastings Office: 1303 South Frontage Road, Suite 13, Hastings, MN 55/33, U ~
HLB Tautges Redpath. Ltd. is a member of ®Intemational. A world-wide organizadon of accounting firms and business advisers.
Mr. Bruce Palmborg
Community Development Director
O December 23, 2003
Page 2
In the November 10, 2000 report, the December 31, 1999 LHN District balance of
$5,143,997 was determined to be entirely non-TIF except for $2,967,896, which was related
to unspent 1996 TIF bond proceeds in the IiRA Capital Projects Funding fund. That fund's
proceeds were subsequently transferred to the ILN Tax Increment District and therefore are
not part of the LHN District balance at December 31, 2002.
A description of the joint-effort process and cautions contained in the November 10, 2000
report is as follows:
The process included the following:
• Preparation by HRA staff of detail account expenditure and revenue transactions from the
inception of each district.
• Preparation by City and HRA staff of a number of schedules, such as combining fund worksheets
that supported the amounts contained in the audited Comprehensive Annual Financial Statements
of the City and HRA.
• Research by all participants of budgets, transfers, specific transactions, and other areas.
• Consultation with Steve Bubul of Kennedy and Graven regarding interpretation of statutes.
• A series of meetings to review the progress of the project.
The work generally did not include testing of expenditures to invoices or other supporting documents.
The work also did not resolve areas of potential challenge by the OSA review process. The OSA has
taken certain positions regarding interpretation of tax increment statutes. Several of these positions, if
deemed appropriate by the court system or the state legislature, would have broad sweeping effects on
many, if not all, tax increment authorities in Minnesota. Areas often interpreted differently by tax
increment authorities and the OSA include:
• Adequate documentation of expenditures:
1. Administrative
2. Other
• Commingling of TlF revenue with non-T]F revenue.
• Transfers including authorization and reporting issues.
• Potential overpayment of increment.
• Budget and line item reporting specificity.
• Various other compliance areas related to District formation and subsequent administration.
357995.1
Mr. Bruce Palmborg
Community Development Director
December 23, 2003
Page 3
A summary of LHN activity since the issuance of the report dated November 10, 2000 is as
follows:
District balance (deficit) -December 31, 1999
2000-2002 activity:
Sources:
Tax increments (TIF)
Market value homestead credit
Interest on investments -pre-1979 district
Special assessments
Transfers in
Total sources
Uses:
Expenditures
Transfers out
Total uses
District balance (deficit) -December 31, 2002
TIF Non-TIF Total
($11,097,870) $16,241,867 $5,143,997
5,591,143 - 5,591,143
95,070
95,070
_ -
342,927 342,927
_ 177,087 177,087
10,280 10,280
5,686,213 530,294 6,216,507
7,698,138 126,732 7,824,870
871
2
571
1,767,630 804,241
973
930 ,
,
_
41
9,465,768 , ~-
($14,877,425) $15,841,188
$963,763
ex enditurese ember Il, 2002 of $963,763 isy
As shown above, cumulative TIF-qualifying balance at D
$14,877,425. This means that the remaining
entirely from non-TIF sources.
In conclusion, we believe the December 31, 2002 bal lions on these funds. tT'h.eefore, these
TIF purposes and we are not aware of any other re ~ s sub'ect to cautions outlined earlier in
funds should be available to be used for other pure J
this letter regarding OSA interpretation of TIF Statutes.
reconciliation and common reporting and evolving
This conclusion is based on accounting
management practices of tax increment authorities in Minnesota. This is not a legal opinion.
357995.1
Mr. Bruce Palmborg
O Community Development Director
December 23, 2003
Page 4
We recommend the City and HRA governing bodies take the following actions:
• Obtain legal input to verify that the conclusion above is legally acceptable.
• Close the LHN Construction and Management Properties Funds into the LHN Tax
Increment Fund during 2003.
• Close the LHN Tax Increment Fund to the fund or funds as determined by the City
and HRA, during 2003.
• Ratify by resolution the conclusions and recommendations contained in this letter.
Respectfully submitted,
HLB TAUTGES REDPATH, LTD.
~~~
Thomas W. Hodnefield, CPA
TWH/bmj
Enclosures:
c: Steve Bubul, Kennedy and Graven
Sid Inman, Ehlers and Associates
Chris Regis, City of Richfield
357995.1
Kennedy
Graven
470 Pillsbury Center
200 South Sixth Street
Minneapolis MN 55402
(612) 337-9300 telephone
(612) 337-9310 fax
http: //~wwv.kennedy-graven.com
STEPHEN J. BUBUL
Attorney at Law
Direct Dial (612) 337-9228
Email: sbubul@kennedy-graven.com
December 31, 2003
y`T3 K`iV Pa1111VV1~
Community Development Director
City of Richfield
Housing and Redevelopment Authority
6700 Portland Avenue So.
Richfield, MN 55423
Dear Bruce:
You asked me to comment on the conclusions reached by HLB T sut°ge~R ~ pan e of (funds in the
in its letter to you dated December 23, 2003, regardmg .the statu
City's account for the LHN :Tax Increment District. Tautges concluded that the balance in the
account for that district as of December 31, 2002 was not tax increment but rather is attributable
entirely to non-tax increment revenues.
The basis for Tautges conclusion is the analysis of the history of the LHN district transactions
described in its November 10, 2000 report, as supplemented by the December 23, 2003 letter.
Tautges traced revenues and expenditures for each year of the district, and concluded that the "TIF-
qualifying" expenditures exceeded TIF revenues by $963,763. As a result, that revenue balance is
attributable entirely to non-tax increment funds.
In my view, this is a reasonable conclusion, assuming the acc oauntlnf th a~ eslduring the time
information. The analysis is based on generally accepted ac g p
period of the LHN district.
As Tautges notes in its letter, this conclusion must be read in light of the possible views of the
Office of State Auditor ("OSA") regarding the effect of co-mingling of tax increment and non-tax
increment funds. The OSA has, in the past, requested detailed evidence to prove that .expenditures
were in fact made with tax increment when costs are paid from accounts that include both tax
increment and non-tax increment revenues. ~ It is unclear whether the aOScAo ~n 1 ed°funds must be
more of the LHN accounts as a "co-mingled account, and assert that g
treated as tax increment unless each expenditure can be precisely traced to a separate revenue
source.
SJB-242222v1
RC125-1
/ ~ Bruce Palmborg
~! December 31, 2003
Page 2 of 2
In response to that potential risk, I have these observations. First, this issue was litigated in the case
of Nielsen v City of Roseville, 2001 WL 1640040 (D. Minn.), in which plaintiffs argued that the
City spent tax increment for an improper use. The City responded that the expenditures in question
were actually made with non-tax increment revenues paid out of an economic development fund
that included both tax increment and non-tax increment funds. The Court rejected plaintiff s claim
that the co-mingled funds must be treated as tax increment. It observed that the City adhered to
common accounting practices at the time, and held that despite the co-mingling of economic
development funds, the City did not violate the statutory requirement that tax increment "be
segregated by the authority in a special account or accounts on its official books." Minnesota
Statutes, Section 469.177, subd. 5.
While this federal case may only be persuasive authority, it supports the conclusion here that the
balance in the LHN fund may be treated asnon-tax increment revenues based on the common
accounting practices during the long history of this pre-1979 district.
Second, the issue of co-mingling is likely to be addressed in the upcoming legislative session. The
differing views of the OSA and local authorities has led to a need for clarification regarding proper
accounting practices for TIF districts. I expect that legislation will be introduced that, in some form,
will specify the accounting requirements in the future and provide some relief for past districts.
While it's impossible to predict the results of such proposals, I believe that legislation recognizing
widespread past accounting practices is likely to be adopted.
In conclusion, while there is some risk that the OSA would disagree with the determination that the
LHN balance is non-tax increment, I believe the Tautges analysis is supported by existing case law.
Further, the risk of an unfavorable OSA audit on this point is similar to the risks that most local
authorities bear regarding detailed audits of their older tax increment districts. Because of this
widespread problem, I believe the matter is likely to be resolved by legislation.
If you have further questions, please let me know
Ve y yours,
Stephen J. Bubul
cc: John Dean
Tom Hodnefield
Sid Inman
SJB-242222v1
RC125-1
n
AGENDA ITEM # 3A
REPORT # 13
~~ STAFF REPORT
HOUSING AND REDEVELOPMENT
AUTHORITY MEETING
MARCH 15, 2004
n
REPORT PREPARED BY:
REPORT PRESENTER:
DEPARTMENT DIRECTOR REVIEW:
REVIEWED BY EXECUTIVE DIRECTOR:
LYNNETTE CHAMBERS, LEASED HOUSING
SPECIALIAST
NAML, T/TLE
BRUCE PALMBORG, COMMUNITY
DEVELOPMENT DIRECTOR
TITLL
SIGNATURE
ITEM FOR HRA CONSIDERATION:
Consideration regarding a proposed adjustment of payment standard for the Section 8 Rent
Assistance program.
I. RECOMMENDED ACTION:
By Motion: Approve the attached adjustment of payment standard for
the Section 8 Rent Assistance program.
III. BACKGROUND ~
The Section 8 program is administered in accordance with the Housing and
Redevelopment Authority's (HRA) Administrative Plan. According to the plan and
the Department of Housing and Urban Redevelopment (HUD) regulation, the
voucher program provides financial assistance based on unit bedroom size. Clients
pay a minimum of 30 percent of their income towards rent. On an annual basis
HUD establishes a Fair Market Rent (FMR). The allowable FMR is expressed as a
specific percentile point within the rent distribution of standard-quality rental housing
units.
Individual HRA's are allowed to select a payment standard within 90% to 110% of
HUD's FMR. The selection of the payment standard should assure that a sufficient
supply of rental housing is available to program participants. The Richfield HRA
conducts a rental survey on an annual basis to help in determining an appropriate
031504 Section 8
payment standard. Currently, the survey results indicate that the Richfield HRA
should adopt a payment standard that is 100% of the FMR established by HUD. In
order to increase housing selections for families with a disabled person, the
Richfield HRA has requested and received permission from HUD to increase the
payment standard for those families to 120% of the area FMR.
The new payment standards are reflected in the revised budget proposed by the
Richfield HRA to HUD effective June 1, 2004. The attached table (Attachment A)
clarifies the changes being proposed. The last adjustment made by the HRA was
January 2003.
III. BASIS OF RECOMMENDATION
A. POLICY
• The HRA must approve increases in the payment standard for the
Section 8 program.
• Section 8 participants will be able to choose from a larger selection of
affordable housing units and may receive some immediate rent relief
on a case by case basis.
• HUD provides sufficient federal assistance to cover these adjustments
in the payment standards and has approved the increase.
B. CRITICAL ISSUES
• Without an increase in the payment standard many Section 8
participants will be unable to find housing and keep up with changing
rents.
• Potential changes in Federal law impact the financial resources
available to the program if the HRA does not remain current with the
FMR.
• Vacancy rates are lower in Richfield than the metro average because
the housing remains affordable. Thus, a downward of rents due to
high vacancies are not being seen.
C. FINANCIAL
• An increase in the payment standard will decrease the rent burden for
Section 8 participants.
• HUD provides sufficient funding to cover the increase.
D. LEGAL
• The contract between the HRA and HUD provides for FMR
adjustments in accordance with federaP regulations.
IV. ALTERNATIVE RECOMMENDATION(S~'
• Do not change the payment standard at this time. However, HUD guidelines
suggest an adjustment is needed.
V. ATTACHMENTS
• Attachment A, proposed modifications to voucher program..
I V 1. PRINCIPAL PARTIES EXPECTED AT MEETING
Attachment A
PROPOSED MODIFICATIONS TO SECTION 8 VOUCHER PAYMENT STANDARDS
PROPOSED INCREASE FOR JUNE 1, 2004
Payment standard
for Families with a
CURRENT HRA PROPOSED HRA Disabled Family
UNIT SIZE PAYMENT STANDARD PAYMENT STANDARD Member
0 Bedroom $ 554 $ 578 $ 693
1 Bedroom $ 713 $ 743 $ 891
2 Bedroom $ 912 $ 951 $1,141
3 Bedroom $1,233 $1,286 $1,543
4 Bedroom $1,397 $1,457 $1,748
0
031504 Section 8