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02-18-03 agendaCITY OF RICHFIELD, MINNESOTA HOUSING AND REDEVELOPMENT AUTHORITY TUESDAY, FEBRUARY 18, 2003 RICHFIELD CITY HALL 6700 PORTLAND AVENUE COUNCIL CHAMBERS 7 P.M. AGENDA Call to order 1. Approval of minutes of Regular HRA Meeting of January 21, 2003 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 resolution authorizing purchase of 6309 Bryant Avenue with Community Development Block Grant funds for rehabilitation through New Home Program S.R. No. 9 B. Consideration of approval of resolution authorizing execution of contract with Project for Pride in Living in amount of $158,950 for rehabilitation of 6945 Clinton Avenue for future sale to first time buyer under New Home Program S.R. No. 10 C. Consideration of approval of resolution amending Tax Increment Financing Plan for City Bella Tax Increment Financing District within Richfield Redevelopment Project Area S.R. No. 11 D. Consideration of approval of modification to Transformation Homes and First Time Advantage Loan program guidelines S.R. No. 12 E. Consideration of approval of supplemental agreement to Contract for Private Redevelopment between Gramercy Corporation and HRA for condemnation and relocation costs and required financial security S.R. No. 13 Notes: 4. Consideration of future status of Lyndale Gateway West redevelopment project as proposed by Lyndale Gateway, LLC Staff Report No. 14 Notes: 5. Executive Director report 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 # REPORT # ., STAFF REPORT r HOUSING AND REDEVELOPMENT AUTHORITY MEETING FEBRUARY 18, 2003 ~ REPORT PREPARED BY: MICHELLE LEWIS, COMMUNITY DEVELOPMENT TECHNICIAN NAME, T/TLE REPORT PRESENTER: BRUCE PALMBORG, COMMUNITY DEVELOPMENT DIRECTOR NAME, TITLE DEPARTMENT DIRECTOR REVIEW: ~ ,. SIGNATURE REVIEWED BY EXECUTIVE DIRECTOR: ITEM FOR HRA CONSIDERATION: Consideration of a resolution authorizing the purchase of real property located at 6309 Bryant Avenue with Communit Development Block Grant funds for the New Home Proaram_ RECOMMENDED ACTION: By Motion: Approve the attached resolution authorizing the purchase of real property located at 6309 Bryant Avenue South for rehabilitation through the New Home Program. ~ II. BACKGROUND The structure at 6309 Bryant Avenue was built in 1935 and is a 522 sq. ft. one-story structure with a detached garage, and is currently vacant. The bedroom and living room are combined. The owner has requested to sell the property to the City. The structure has various code violations and is in need of considerable repairs. The lot is 40 ft. by 128 ft. If approved, the Housing and Redevelopment Authority (HRA) would purchase the property, demolish the existing buildings, and enter into an agreement with Twin Cities Habitat for Humanity (HFH) to construct a new home on this property under the HRA's New Home Program. The agreement would be presented to the HRA at a subsequent meeting. 0218-63096ryantAve The purchase price of the property has been determined to be $120,000 based on an independent appraisal report prepared by an appraiser who is experienced in valuing property in the Richfield market. HFH would contribute $30,000 towards the acquisition from federal grant funds they have received. The remaining $90,000 would come from Community Development Block Grant (CDBG) funds available from the City, which have been identified for this acquisition. To fully utilize federal funding for acquisition, the City must purchase the property and subsequently transfer it to the HRA. No City funds would be used for acquisition. III. BASIS OF RECOMMENDATION A. POLICY • This use of CDBG funds to buy substandard property and construct a home with HFH has been a productive program combination for several years. Habitat has completed seven homes in Richfield. B. CRITICAL ISSUES • A poor quality house will be replaced by a new home. C. FINANCIAL • Federal CDBG funds and proceeds of sale will provide the financial means to implement the project. No City General Fund revenues are utilized. D. LEGAL • The sale from the City to the HRA will require a City Council public hearing and second reading of a transitory ordinance scheduled for March 25, 2003. IV. ALTERNATIVE RECOMMENDATION(S~ • Do not acquire the property. V. ATTACHMENTS • Resolution VI. PRINCIPAL PARTIES EXPECTED AT MEETING • N/A HRA RESOLUTION NO. RESOLUTION AUTHORIZING PURCHASE OF REAL PROPERTY LOCATED AT 6309 BRYANT AVENUE SOUTH UNDER THE NEW HOME PROGRAM WHEREAS, the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota ("the HRA") desires to purchase certain real property pursuant to and in furtherance of the New Home Program, said property being described as: Lot 11, Block 2, Ray's Lynnhurst 2nd Addition; and WHEREAS, the HRA is authorized by Minnesota Statutes Section 469.012 to acquire real property within its area of operation; and WHEREAS, a purchase price of $120,000 has been established based on an independent appraisal; and WHEREAS, $90,000 in Community Development Block Grant funds are available for acquisition, and Habitat for Humanity will contribute $30,000 towards acquisition. NOW, THEREFORE, BE IT RESOLVED by the City of Richfield Housing and Redevelopment Authority: 1. The purchase price for 6309 Bryant Avenue South is approved at $120,000. 2. The Chairperson and Executive Director are authorized to execute a purchase agreement and other documents to allow purchase for the amount set forth in this resolution. Adopted by the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota on this 18th day of February 2003. Thomas E. Harms, Chair ATTEST: Michael Sandahl, Secretary AGENDA SECTION: 3B AGENDA ITEM # I ~ REPORT # STAFF REPORT ~ HOUSING AND REDEVELOPMENT AUTHORITY MEETING FEBRUARY 18, 2003 REPORT PREPARED BY: PAM BOOKHOUT, REHABILITATION SPECIALIST NAME, TITLE REPORT PRESENTER: BRUCE PALMBORG, COMMUNITY DEVELOPMENT DIRECTOR NAME, TITLE DEPARTMENT DIRECTOR REVIEW: SIGNATURE REVIEWED BY EXECUTIVE DIRECTOR: ITEM FOR HRA CONSIDERATION: Authorization to execute a contract with Project for Pride in Living to rehabilitate the property at 6945 Clinton Avenue South, for future sale to a first time buyer under the New Home Program. I. RECOMMENDED ACTION: By Motion: Adopt the attached resolution authorizing the execution of the contract with Project for Pride in Living in the amount of $158,950 for the rehabilitation of the property at 6945 Clinton Avenue South under the New Home Program, for future sale to a first time buyer. ~ II. BACKGROUND The Housing and Redevelopment Authority (HRA) approved the purchase of a single-family property at 6945 Clinton Avenue for remodeling and sale to an income qualified first time buyer at their meeting in January. Code repairs, updates to finishes, and treatment of vvater issues and lead-based paint will also be completed. Project for Pride in Living (PPL) is anon-profit agency whose mission is to assist low and moderate income people to become self-sufficient through housing and neighborhood development, employment and job training, youth education and 0218PPL contract 6945 Clinton support services. PPL has built or remodeled over 1,380 housing units in the metropolitan area since its beginning 30 years ago. PPL would provide architectural design, assembly of subcontractors, site supervision, and overall construction management. With PPL, improvements to the home will include: • Interior layout changes to expand kitchen. • Kitchen and bath remodels -new fixtures, cabinets and code repairs. • Wall and ceiling repair, painting and new floor coverings. • Construction of a covered front entry. • New roof; and increase roof line to match from main house to south addition (an addition added years ago as a four season porch, with a lower pitch). • Siding, wrap and trim repair. • Insulation and exterior doors. • Two basement egress windows and window wells. • Garage repairs and new driveway installation. • Grading, landscaping and sod. Other work includes a new furnace, electrical and plumbing repairs, new appliances and lead hazard abatement. Although the sale price of the home will be determined upon completion, based on Hennepin County Assessor data, staff estimates its value at $200,000. According to the Metropolitan Council and the Minnesota Housing Finance Agency, a $170,000 home should be affordable to aloes-to-moderate income family (a four member family with income of $54,400/year). Therefore, a $30,000 second mortgage from the HRA and a low interest rate on the mortgage obtained by the first-time buyer will make it affordable. Depending on the mortgage product, a down payment of $5,000 to $8,000 will be required. ~ III. BASIS OF RECOMMENDATION A. POLICY • PPL is a well known nonprofit housing developer and provider in the Twin Cities area. Their architectural and construction staff have a proven track record. • The contract provisions are similar to previous contracts with other non- profit developers, such as Habitat for Humanity and Affordable Suburban Housing Inc. • The HRA seeks to expand its network to other non-profit metropolitan housing providers to develop attractive, affordable housing at a reasonable cost. B. CRITICAL ISSUES • The house is currently vacant. • Continued neglect will make the conditions worse. C. FINANCIAL • PPL provided an estimate that included the repairs and improvements, closing costs, taxes, contingency and marketing. The estimated cost is approximately $158,950. Proceeds of sale will cover those costs. D. LEGAL • According to Minnesota Statutes 469.015 Subd 4, competitive public bidding is not required in the following circumstances: (1) In the case of a contract for the acquisition of a low-rent housing project (does not apply to this project); (2) -With respect to a structured parking facility (does not apply to this project); and (3) In the case of any building in which at least 75 percent of the usable square footage constitutes a housing development project, and a.) the project is financed with proceeds of bonds or nongovernmental sources (project will be financed with proceeds from sale); b.) project is located on land that is owned by the HRA for development purposes (purchase is authorized); and c.) elimination of the public bidding requirements makes the project economical and feasible (pertains to this project). IV. ALTERNATIVE RECOMMENDATION(S) • Do not authorize execution of the contract with PPL. • Direct staff to administer a public bidding process. V. ATTACHMENTS • Resolution Information on Project for Pride in Living (PPL) VI. PRINCIPAL PARTIES EXPECTED AT MEETING • PPL representative HRA RESOLUTION NO. RESOLUTION AUTHORIZING EXECUTION OF A CONTRACT WITH PROJECT FOR PRIDE IN LIVING FOR THE REHABILITATION OF 6945 CLINTON AVENUE WHEREAS, the City of Richfield has authorized the purchase the property at 6945 Clinton Avenue by voluntary acquisition, to convey it to the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota (HRA) for the purpose of rehabilitation and sale, said real property being legally described as Lot 9, -Block 3, D.L. Tate's Addition, and whose street address is 6945 Clinton Avenue South; and WHEREAS, the HRA determines, as allowed in MN Statutes 469.015 Subd 4, that holding a public bidding process is not financially prudent because the cost for advertising, staff time, and developer overhead would make the project more expensive; and WHEREAS, a project has been proposed as a cooperative effort between the HRA and Project for Pride in Living (PPL); and WHEREAS, the property at 6945 Clinton Avenue would be rehabilitated and improved; and WHEREAS, the cost for rehabilitating and improving the property in accordance with the contract is not to exceed $158,950; and _ WHEREAS, following completion of construction, the property will be sold to a low to moderate income, first-time buying family. NOW, THEREFORE, BE IT RESOLVED by the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota that the Chairperson and Executive Director are authorized to enter into a Construction Agreement with PPL for a contract not to exceed $158,950 for the rehabilitation and improvement of the property at 6945 Clinton Avenue. Adopted by the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota this 18th day of February 2003. Thomas E. Harms, Chair ATTEST: Michael Sandahl, Secretary 30 Years of Building Futures PPL was founded in 1972 by a group of volunteers concerned about the growing number of rundown houses in the Minneapolis core urban neighborhoods. The agency has since grown, gaining national recognition for its unique and effective approach to assisting people improve their lives through: • Affordable Housing & Neighborhood Development • Employment ~ Job Training • Youth Development & Education • Support Services "Until I was able to find safe, affordable housing for myself and my kids I was unable to pursue any of my other goals. Once my housing need was met, I was able to enroll in classes that will help me get agood- paying job in the health care field." - Teishica Participant, PPL Connections to Work & Self-sufficiency Program PPL serves thousands of individuals and families every year through vital and interconnected programs that offer housing, employment, education and self-sufficiency services. Affordable Housing & Neighborhood Development • Over 600 units of affordable rental housing owned and/or managed by PPL. On-site human services are available including children's programming. • Serving low and moderate income families and individuals through both new construction and renovation of existing homes and commercial sites. Employment ~ Job Training • Serving a wide range of adults with barriers to successful employment through paid training programs that operate through businesses and classroom instruction: • PPL SHOP •. PPL Industries • Train to Work • Press for Success, punchpress program • Connections to Work, welfare to work program • Minneapolis Hospitality Skills Training Program Adult Support Services • Serving families and individuals who live iri PPL housing by providing a range of support services and links to community resources. Youth Programs • Striving to improve the lives of children who live in PPL buildings and surrounding areas through programs such as: tutor/mentoring with college students, after school programs, and help with homework. Project for Pride in Living 2516 Chicago Avenue • Minneapolis, MN 55404 b 12.874-8511 • FAX: 612,8741444 einailppl@ppNnc.org • www.ppNnc.org THIRTY YEARS Of BUILDING FUTURES: The spirit of Joe Selvaggio, a tg~z founder and its executive director for zg years, transcends PPL through his venerable vision of a hand up for the poor, decent housing, self-sufficient families and stronger neighborhoods in the lowest-income pock- ets of the metro area. Todau, backed by hundreds of fenders, volunteers, staff, local business and government, PPL houses more than 60o families in rental properties it owns or manages; assists dozens of people every week who seek to leave welfare through. education, train- ing and work; manages commercial developments that have helped revitalize inner-city neighborhoods; and provides job training for the hard-to-employ PPL volunteers tutor and men- torhundreds of youth who reside in and nearby PPL properties. Approaching 8tt million in annual revenue, PPL has developed, refurbished or constructed r,38t housing units and nearly z34,ooo sq. ft. of commercial space, significantly raising both the quality of living conditions and economic activity in core city neighborhoods. It generates revenue from sales, fees, rents and corporate and individual grants, and keeps administrative costs down. "PPL's partnership with Beth El Synagogue and Avodah B'Yachad-Service Together in St. Louis Park is heartwarming. This is an ezamp(e of how collaboration has helped generate community revitalization in several inner- city neighborhoods. Together we have held up an ideal of organizations, communities, and neighborhoods coming together for a common purpose - to make the world a better place." Most importantly, the spirit and vision that drives PPL are grasped by hundreds of stakeholders. PPL, a grassroots organ- ization, links people of means -those who invest time or funds -with the poor and those in need of a second chance or better opportunity Selvaggio's vision was embraced by his successors after he retired in c99G to start a second cazeer as a fundraiser and to inspire greater giving by citizens. Steve Cramer, a former i'~4inneapolis City Council member and PpL executive, ran the - PAULA BEUGEN, former Director, Avodah 6'Yachad-Service Together, le~vish Community Relations %auncil organization for three years before leaving to head the Minneapolis Community Development Agency. Cramer is cur- rently adivision director for Hennepin County. In zooo, Jim Scheibel, a former mayor of St. Paul and city council member, returned from a post in Washington, D.C., as director of AmeriCorps VISTA and the National Senior Service Corps, to lead PPL into its 3oth year and beyond. AGENDA ITEM # 3 C REPORT # , , STAFF REPORT ~ HOUSING AND REDEVELOPMENT AUTHORITY MEETING FEBRUARY 18, 2003 REPORT PREPARED BY: BRUCE NORDQUIST, HOUSING & REDEVELOPMENT MANAGER NAME, TITLE REPORT PRESENTER: BRUCE NORDQUIST, HOUSING & REDEVELOPMENT MANAGER NAME, TITLE DEPARTMENT DIRECTOR REVIEW: S/GNA7'URE REVIEWED BY EXECUTIVE DIRECTOR: ITEM FOR HRA CONSIDERATION: Amending the Tax Increment Financing Plan for the City Bella Tax Increment Financing District. I. RECOMMENDED ACTION: By Motion: Authorize the attached resolution amending the Tax Increment Financing Plan for the City Bella Tax Increment Financing District (a Redevelopment District) within the Richfield Redevelopment Project Area. ~ II. BACKGROUND Given revisions to the Contract for Private Development that occurred January 21, 2003, the Tax Increment Financing Plan is being updated in two areas: • Original Net Tax Capacity as certified for the district will be based on assessor 2002 values for taxes payable in 2003. The district was certified after July 2002 so this adjustment is to make the plan match what is occurring. • The "use of funds" has been adjusted so that only costs not yet incurredwould be applied toward the issuance of atax-exempt note from the available tax increment. 0218cityBellaTlF HRA RESOLUTION NO. RESOLUTION AMENDING THE TAX INCREMENT FINANCING PLAN FOR THE CITY BELLA TAX INCREMENT FINANCING DISTRICT (A REDEVELOPMENT DISTRICT) WITHIN THE RICHFIELD REDEVELOPMENT PROJECT AREA WHEREAS, The Tax Increment Financing Plan (the "Plan") for the City Bella Tax Increment Financing District (the "District") was adopted on June 11, 2002, and WHEREAS, it has been recommended by staff of the Richfield Housing and Redevelopment Authority in and for the City of Richfield (the "HRA") that certain amendments to the Plan be made, and WHEREAS, approval of the proposed amendments does not require the formalities required for the adoption of the initial Plan, and WHEREAS, the HRA has received the report and recommendation of staff, and has been fully advised of the nature and effect of the proposed amendments. NOW THEREFORE, BE IT RESOLVED by the HRA as follows: 1. The first paragraph of Subsection 2-8 of the Plan is amended to read as follows: Pursuant to M.S.,Section 469.174 Subd. 7 and M. S., Section 469.177, Subd. 1, the Original Net Tax Capacity (ONTC) as certified for the District will be based on the market values placed on the property by the assessor in 2002 for taxes payable in 2003. 2. Subsection 2-10 of the Plan is amended to read as follows: Subsection 2-10. Uses of Funds Currently under consideration for the District is a proposal to facilitate the integrated development of housing, commercial, parking and green space elements with pedestrian paths to adjacent existing uses. The HRA and City of Richfield have determined that it will be necessary to provide assistance to the project for certain costs. The HRA has studied the feasibility of the development or redevelopment of property in and around the District. To facilitate the establishment and development or redevelopment of the District, this Plan authorizes the use of tax increment financing to pay for the cost of certain .eligible expenses. The estimate of public costs and uses of funds associated with the District is outlined in the following table. III. BASIS OF RECOMMENDATION A. POLICY • Changes are required to keep the Tax Increment Financing- Plan current. Both the HRA's Legal Counsel and financial advisor recommend that the plan be kept as current as possible if a tax- exempt note is being considered. No changes in financial obligation occur. • These types of changes do not require a public hearing prior to consideration. B. CRITICAL ISSUES • The most accurate up-to-date information is being provided. • No changes in financial obligations occur. C. FINANCIAL • Modifications to the Tax Increment Financing Plan for City Bella were prepared by Ehlers and Associates, Inc. D. LEGAL • The resolution was prepared by Legal Counsel. IV. ALTERNATIVE RECOMMENDATION(S~ • Do not update the Tax Increment Financing Plan. V. ATTACHMENTS • Resolution Changes to plan document VI. PRINCIPAL PARTIES EXPECTED AT MEETING • N/A USES OF FUNDS TOTAL AS TOTAL AS ADOPTED MODIFIED Land/Building Acquisition $5,500,000 $4,000,000 Parking Facilities $6,000,000 $6,000,000 Other Public Improvements/Skyway System $2,500,000 $2,500,000 Site Improvements/Plaza $0 $1,500,000 Interest $9,850,000 $9,850,000 Administrative Costs (up to 10%) $2,650,000 $2,650,000 PROJECT COSTS TOTAL $26,500,000 $26,500,000 The above budget is organized according to the Office of State Auditor (OSA) reporting forms. Estimated costs associated with the District are subject to change among categories without a modification to this Plan. The cost of all activities to be considered for tax increment financing will not exceed, without formal modification, the budget above pursuant to the applicable statutory requirements. Pursuant to M.S., Section 469.1763, Subd. 2, no more than 25 percent caf the tax increment paid by property within the District will be spent on activities related to development or redevelopment outside of the District but within the boundaries of the Richfield Redevelopment Project Area, (including administrative costs, which are considered to be spent outside of the District) subject to the limitations as described in this Plan. Approved by the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota this 18th day of February, 2003. Thomas E. Harms, Chair ATTEST: Michael Sandahl, Secretary Subsection 2-8. Original Tax Capacity, Tax Rate and Estimated Captured Net Tax Capacity Value/Increment and Notification of Prior Planned Improvements Pursuant to M.S., Section 469.174, Subd. 7 and M.S., Section 469.177, Subd. 1, the Original Net Tax Capacity (ONTC) as certified for the District will be based on the market values placed on the property by the assessor in 2002 for taxes payable 2003. Pursuant to M.S., Section 469.177, Subds. 1 and 2, the County Auditor shall certify in each year (beginning in the payment year 2004) the amount by which the original value has increased or decreased as a result of 1. Change in tax exempt status of property; 2. Reduction or enlargement of the geographic boundaries of the district; 3. Change due to adjustments, negotiated or court-ordered abatements; 4. Change in the use of the property and classification; 5. Change in state law governing class rates; or 6. Change in previously issued building permits. In any year in which the current Net Tax Capacity (NTC) value of the District declines below the ONTC, no value will be captured and no tax increment will be payable to the HRA or City. The original local tax rate for the District will be the local tax rate for taxes payable 2003, assuming the request for certification is made before June 30, 2003. The Original Tax Capacity and the Original Local Tax Rate for the District appear in the table on the next page. Pursuant to M.S., Section 469.174 Subd. 4 and M.S., Section 469.177, Subd. 1, 2, and 4, the estimated Captured Net Tax Capacity (CTC) of the District, within the Richfield Redevelopment Project Area, upon completion of the project, will annually approximate tax increment revenues as shown in the table on the next page. The HRA and City request 100 percent of the available increase in tax capacity for repayment of its obligations and current expenditures, beginning in the tax year payable 2004. The Project Tax Capacity (PTC) listed is an estimate of values when the project is completed. Project Estimated Tax Capacity upon Completion (PTC) 570,280 Original Estimated Net Tax Capacity(ONTC) 52,030 Estimated Captured Tax Capacity (CTC) 518,250 Original Local Tax Rate 1.33543 Pay 2002 Estimated Annual Tax Increment (CTC x Local Tax Rate) 692,087 Percent Retained by the HRA 100% Pursuant to M.S., Section 469.177, Subd. 4, the HRA shall, after a due and diligent search, accompany its request for certification to the County Auditor or its notice of the District enlargement pursuant to M.S., Section 469.175, Subd. 4, with a listing of all properties within the District or area of enlargement for which building permits have been issued during the eighteen (18) months immediately preceding approval of the Plan by the municipality pursuant to M.S, Section 469.175, Subd. 3. The County Auditor shall increase the original net tax capacity of the District by the net tax capacity of improvements for which a building permit was issued. The City has reviewed the area to be included in the District has found one building permit that was issued in the 18 months preceding July 11, 2002, but it should not increase the original tax capacity. Please see Appendix H for the building permit that was issued. MODIFICATION TO THE REDEVELOPMENT PLAN FOR THE RICHFIELD REDEVELOPMENT PROJECT AREA and the TAX INCREMENT FINANCING PLAN for the establishment of THE CITY BELLA TAX INCREMENT FINANCING DISTRICT (a redevelopment district) within THE RICHFIELD REDEVELOPMENT PROJECT AREA RICHFIELD HOUSING AND REDEVELOPMENT AUTHORITY CITY OF RICHFIELD HENNEPIN COUNTY STATE OF MINNESOTA Public Hearing: June 11, 2002 Adopted: June 11, 2002 Prepared by: FREERS & ASSOCIATES, INC. 3060 Centre Pointe Drive, Roseville, Minnesota 55113-1105 651-697-8500 fax: 651-697-8555 www.ehlers-inc.com Subsection 2-10. Uses of Funds Currently under consideration for the District is a proposal to facilitate the integrated development of housing, commercial, parking and green space elements with pedestrian paths to adjacent existing uses. The HRA and City have determined that it will be necessary to provide assistance to the project for certain costs. The HRA has studied the feasibility of the development or redevelopment of property in and around the District. To facilitate the establishment and development or redevelopment of the District, this Plan authorizes the use of tax increment financing to pay for the cost of certain eligible expenses. The estimate of public costs and uses of funds associated with the District is outlined in the following table. USES OF FUNDS TOTAL AS ADOPTED TOTAL AS MODIFIED LandBuilding Acquisition $5,500,000 $4,000,000 Parking Facilities $6,000,000 $6,000,000 Other Public Improvements/Skyway System $2,500,000 $2,500,000 Site Improvements/Plaza $0 $1,500,000 Interest $9,850,000 $9,850,000 Administrative Costs (up to 10%) $2,650,000 $2,650,000 PROJECT COSTS TOTAL $26,500,000 $26,500,000 The above budget is organized according to the Office of State Auditor (OSA) reporting forms. Estimated costs associated with the District are subject to change among categories without a modification to this Plan. The cost of all activities to be considered for tax increment financing will not exceed, without formal modification, the budget above pursuant to the applicable statutory requirements. Pursuant t¢LI.S., Section 469.1763, Subd. 2, no more than 25 percent of the tax increment paid by property within the District will be spent on activities related to development or redevelopment outside of the District but within the boundaries of the Richfield Redevelopment Project Area, (including administrative costs, which are considered to be spent outside of the District) subject to the limitations as described in this Plan. Richfield Housing and Redevelopment Authority Tax Increment Financing Plan for the City Bella Tax Increment Financing District 2-6 AGENDA ITEM # 3D REPORT # 12 STAFF REPORT ~ HOUSING AND REDEVELOPMENT AUTHORITY MEETING FEBRUARY 18, 2003 REPORT PREPARED BY: PAM BOOKHOUT, REHABILITATION SPECIALIST NAME, TITLE REPORT PRESENTER: BRUCE PALMBORG, COMMUNITY DEVELOPMENT DIRECTOR NAME, TITLE DEPARTMENT DIRECTOR REVIEW: SIGNATURE REVIEWED BY EXECUTIVE DIRECTOR: ITEM FOR HRA CONSIDERATION: Modify the Transformation Homes and First Time Advantage Loan program guidelines. I. RECOMMENDED ACTION: By Motion: Modify the Transformation Homes and First Time Advantage Loan program guidelines. III. BACKGROUND ~ In 1994, the Housing and Redevelopment Authority (HRA) authorized the Transformation Home Loan program. The program provides zero interest incentive loan financing to homeowners making value added improvements. For projects costing in the $30,000-$50,000 range, a ten percent loan has been available ($3,000-$5,000). For projects costing $50,000 or over, a 15 percent loan has been available ($7,500-$15,000). Since the program began in 1994, 95 homeowners have taken advantage of the loan opportunity. $1,028,957 in loan funds helped leverage $6,802,843 in homeowner investment. Funds were not available in 2002 for the program. Many interested homeowners have expressed interest over the months. Currently, approximately 50 homeowners are on a mailing list to be informed if any funding is identified. 021803 Program Guidelines As a result of a recent refunding of the Series 1999 bonds, $200,000 will be available for Transformation Home loans in 2003. Because of the demand and limited funds, staff recommends: • Limit each loan to a maximum of $5,000 instead of $15,000. With the new limit, 40 loans would be available rather than 13 loans. • .Eliminate the Relocation Support Grant, v-thich has been available to loan recipients who needed to be out of their homes during remodeling, due to kitchens or bathrooms being unavailable for use. A maximum of $500 per month, not to exceed $1,500 has been available under the program. • Prioritize applicants that are further along in the process, e.g. they have architectural drawings or have closed on their primary financing. This ensures that projects most likely to happen receive funding, and staff time is used more efficiently • Drop the provision for a loan when remodeling in the $30,000 to $50,000 range. Very few loans occurred under this program option. It would be smoother administratively to have one level of funding for projects with costs at or above $50,000. The First Time Advantage program made loans available to first time owners who had owned their home for a year or less, and who met certain income criteria. This program was available through three separate grants made to the HRA by the Minnesota Housing Finance Agency (MHFA). Grant funds were sought again in 2002, but the State has narrowed the window for the types of projects eligible for funding and First Time Advantage was not funded. However, the HRA has $83,022 in loan repayments from this program, which can. be redirected into new loans. The original program guidelines state that an owner can apply for up to 10 percent of their purchase price. With limited funds available, staff recommends limiting each loan to a maximum of $10,000. For reference, the average amount borrowed in 2001 was $11,$0.0. A $10,000 limit would allow at .least eight loans to be made from repayments, if the maximum were borrowed each time. III. BASIS OF RECOMMENDATION A. POLICY • Both the Transformation and First Time Advantage loans have been useful and well regarded. Limited funds means fewer loans are possible under existing guidelines. Limiting the maximum loan amount in each program will allow more .loans. B. CRITICAL ISSUES The economic climate may limit some remodeling. • The reduced benefit to the borrower may limit some remodeling. • Approximately 50 people have been hoping to be informed of the program's status and future. Those households will be informed directly of fund availability. C. FINANCIAL • Funds from the bond refunding and from loan repayments are currently available and can only be used for limited purposes as described in this report. With modified dollar amounts, program documents already in use can continue to be used. D. LEGAL • The modifications to the guidelines do not modify any of the required loan documents. IV. ALTERNATIVE RECOMMENDATION(S~ • Do not modify program guidelines. V. ATTACHMENTS • Language reflecting the proposed guideline changes. VI. PRINCIPAL PARTIES EXPECTED AT MEETING • N/A MODIFICATIONS TO THE TRANSFORMATION HOMES LOAN PROGRAM Criteria for Program Eligibility 1. On a case by case basis, -the Remodeling Advisor may be required to visit the property and prepare an action plan to ensure viability of the project. 2. Project costs for remodeling improvements must be $50,000 or more. The Transformation Loan will be in the amount of $5,000 regardless of project size. 6. Based on the degree of substandardness revealed by the Pre-Condition Remodeling Report, the HRA may choose to reject an application and not fund a project. Application Procedure The Homeowner must: 1. Meet with the Richfield Remodeling Advisor, as requested by the HRA; 2. Submit a complete application, which includes a completed application form, attached copy of all bids demonstrating project costs, scopes of improvement and plans; and- 3. Allow aPre-Remodeling Condition Report to be conducted by the HRA or agent of the HRA. Applications will be reviewed and awarded on a first-come, first served basis. In addition to the above, the HRA by its sole determination, will prioritize applicants and reserve funding which evidence of progress using the following criteria: • Loan commitment from a lender in written form; • Complete, final and secured bid from contractor; and/or • Architectural drawings prepared demonstrating substantial remodeling is proposed MODIFICATIONS TO THE FIRST TIME ADVANTAGE LOAN PROGRAM Definitions Applicant. Person or persons who purchase and occupy a Richfield home to be remodeled, who apply for an FTA Loan, and who met the definition of "first-time buyer" when purchasing the property to be improved. First Time Advantage Loan: Interest free loan offered by the. HRA for remodeling a home purchased one year or less from date of application by Applicant. Loan is payable upon sale of the property or forgiven after 30 years. Also referred to as FTA Loan, Advantage Loan, or Loan. Criteria for Eligibility In order for a project to be eligible for an FTA Loan, certain conditions must be met. • Applicant's gross annual income-must be less than or equal to 80% of the Twin Cities Area Median Income, as determined annually by HUD, and adjusted for household size. • No home purchase price limits apply. • Loan may be provided post closing, within one year of the settlement date, or at closing as a junior lien to the first mortgage. Conditions of the First Time Advantage Loan. 1. A minimum of $1,000, up to a maximum of $10,000 is available to the Applicant, depending on the improvement identified. AGENDA ITEM # 3 E REPORT # ~~ STAFF REPORT ~ HOUSING AND REDEVELOPMENT AUTHORITY MEETING FEBRUARY 18, 2003 BRUCE NORDQUIST, REPORT PREPARED BY: HOUSING & REDEVELOPMENT MANAGER NAME, TITLE BRUCE NORDQUIST, REPORT PRESENTER: HOUSING & REDEVELOPMENT MANAGER NAME, TITLE DEPARTMENT DIRECTOR REVIEW: SIGNATURE REVIEWED BY EXECUTIVE DIRECTOR: ITEM FOR HRA CONSIDERATION: Consideration of a Supplemental Agreement between Gramercy Corporation and the Housing and Redevelopment Authority for condemnation and relocation costs and required financial security. I. RECOMMENDED ACTION: By Motion: Authorize the attached Supplemental Agreement Contract for Private Redevelopment. III. BACKGROUND ~ Upon initiating the eminent domain proceedings for City Bella property at the end of December 2002, it was required that the redeveloper Gramercy Corporation acknowledge responsibility for condemnation awards, relocation benefits and providing .financial security for those costs. The Supplemental Agreement formalizes the representations made, responsibility taken and financial security provided. 0218 G ra m e rcyAg re e m e n t III. BASIS OF RECOMMENDATION A. POLICY • The City Bella project is based on a Contract for Private Redevelopment between the Housing and Redevelopment Authority (HRA) and Gramercy Corporation. • A Supplemental Agreement to the Contract formalizes Gramercy Corporation's responsibilities for condemnation awards, relocation benefits and financial security. B. CRITICAL ISSUES • Eminent domain proceedings have begun, costs are being incurred, and the developer is responsible for the costs. This agreement formalizes those requirements. C. FINANCIAL • Gramercy Corporation has provided the financial security as requested and acknowledged other responsibilities related to the eminent domain proceedings. D. LEGAL • Legal Counsel prepared the Supplemental Agreement. IV. ALTERNATIVE RECOMMENDATION~S~ • Modify the conditions in the agreement. V. ATTACHMENTS • Supplemental Agreement VI. PRINCIPAL PARTIES EXPECTED AT MEETING • NA Chervl Krumholz From: Jackie Scott ~~~ ~ ~~~G~ sent: Tuesday, February 18, 2003 1:40 PM <~~ To: Cheryl Krumholz ~~ Subject: Letter to Joan from Bruce Nordquist ~~~ MEMORANDUM DATE: February 17, 2003 TO: Joan Helmberger, Acting Chair FROM: Bruce Nordquist, Housing and Redevelopment Manager SUBJECT: Modified Agreement for February 17 HRA Board Meeting The agreement has changed slightly for the Consent Agenda item 3E "Supplemental Agreement to Contract for Private Redevelopment between Gramercy Corporation and HRA for Condemnation and Relocation Costs and Required Security". The revised agreement is attached. Paragraph 5.01 was added by the HRA's legal counsel to satisfy Gramercy Corporation's request that they receive a report on payment of relocation as it occurs. Legal Counsel indicates the addition is not a substantive change. BN:js Copy: Samantha Orduno, Executive Director 021803Resolution.D0 C 1 SUPPLEMENTAL AGREEMENT TO CONTRACT FOR PRIVATE REDEVELOPMENT THIS AGREEMENT, made and entered into this _ day of , 2003 is 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 GRAMERCY CORPORATION, a Minnesota corporation (the "Redeveloper"). WITNESSETH: WHEREAS, the HRA and Redeveloper entered into an Amended and Restated Contract for Private Redevelopment (the "Contract") as of , 200_ relating to the City Bella TIF District; and WHEREAS, on or about December 16, 2002, the HRA, following a public hearing did adopt a resolution authorizing condemnation of certain parcels within the .Redevelopment Property; and WHEREAS, the resolution was conditioned upon Redeveloper satisfying the conditions contained in Section 3.4 of the Contract including entering into a written agreement and providing security therefore covering all awards that may be payable in the condemnation actions, and all relocation benefits payable as a result of displacements caused by such actions; and any amounts that may become payable. as a result of the .discontinuance of any such action; and WHEREAS, in its letter to the Executive Director of the HRA dated December, 2002, the Redeveloper acknowledged such obligation. NOW, THEREFORE, in consideration of the mutual agreements and undertakings of the parties, the parties do hereby stipulate and agree as follows: Section 1.01. Redeveloper's Undertaking. Redeveloper confirms to the HRA as follows: 1. Redeveloper shall be responsible for the making of any deposit or payment made pursuant to Minnesota Statutes, Section 117.042. 2. Redeveloper shall be responsible for any and all condemnation awards, including, without limitation, awards of commissioners and awards from any appeal of the commissioner award. 3. Redeveloper shall be responsible for payments made as and for relocation benefits to any individual determined to be entitled to such benefits. Section 2.01. Security. Redeveloper will provide security for the undertakings described in Section 1.01 above as follows: JBD-225415v2 RC125-209 1. Prior to the sending of any 90-day relocation notice, the Redeveloper will furnish the HRA with security in the form of an Assignment of Deposit Account and UCC Financing Statement. The amount of such deposit will be determined by the Executive Director after consultation with the HRA's relocation consultant. In the event that the HRA subsequently determines that relocation benefits may exceed the amount of the deposited funds, the Redeveloper shall, upon five business day written notice provide the HRA with such increased amount. 2. Prior to the date on which title and possession is to transfer to the HRA pursuant to any action to acquire title and possession under Minnesota Statutes, Section 117.042, the Redeveloper shall provide security to the HRA in the form of an Assignment of Deposit Account and UCC Financing Statement equal to the amount of any appraisal made by the respondent in the action, or, if none, 150% of the HRA's approved appraisal of value. 3. Prior to the date on which the HRA obtains title to any parcel acquired through condemnation, whether by payment of the "quick-take" deposit, or by the partial payment of any commissioner award pending appeal, the Redeveloper shall, if requested provide additional security to the HRA, equal to the amount of any appraisal made by the respondent in the action, or if none, up to 150% of the HRA's approved appraisal of value, or the commissioners' award if one has been made. Section 3.01 Redeveloper's Obligation Remains. Redeveloper acknowledges and agrees that the making of any of the deposits required of it under this Agreement does not. relieve it of its obligation to pay the actual amounts due pursuant to its obligations under Section 1.01. Section 4.01. Release of Security. Once the HRA has determined that any security provided under this Agreement is no longer needed, or that the amount of any security can be reduced, it will notify the Redeveloper of that determination, and will execute any instruments reasonably necessary to effect such release of reduction of security. Section 5.01. Consultation with Redeveloper. Prior to making any payment of relocation benefits, the HRA will discuss the proposed payment with the Redeveloper, and will, subject to limitations on disclosure contained in applicable law, provide the Redeveloper with information supporting such proposed payment. Section 6.01. Notices and Demands. .Except as otherwise expressly provided in this Agreement, a notice, demand, or other communication under the Agreement by either party to the other shall be sufficiently given or delivered it if is dispatched by registered or certified mail, postage prepaid, return receipt requested, or delivered personally: As to the HRA: Housing and Redevelopment Authority 6700 Portland Avenue South Richfield, Minnesota 55423 Attention: Executive Director JBD-225415v2 RC125-209 With Copy to: John Dean Kennedy & Graven 470 Pillsbury Center Minneapolis, MN 554302 As to the Redeveloper: Gramercy Corporation 6601 Lyndale Avenue South Suite 110 Richfield, MN 55423 Attention: Michael W. Conlan, President With Copy to: Rolfe A. Worden Hinshaw &Culbertson Suite 3100 222 So. 9~' Street Minneapolis, MN 55402 or at such other address with respect to either such party as that party may, from time to time, designate in writing and forward to the other. Section 7.01. Counterparts. This Agreement may be simultaneously executed in any number of counterparts, all of which shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have set their hands and. seals as of the day - and year first above written. THE HOUSING AND REDEVELOPMENT AUTHORITY OF THE CITY OF RICHFIELD, MINNESOTA Dated: 2003 Bv: Dated: Its: Chairperson 2003 By: Its: Executive Director Dated: , 2003 GRAMERCY CORPORATION By: Its: JBD-225415v2 RC125-209 STATE OF MINNESOTA COUNTY OF HENNEPIN ss.. The foregoing instrument was acknowledged before me this 2003, by and ,the Chairperson ana rxecutlve >Jlrector or The Housing and Redevelopment Authority in and for the City of Richfield, Minnesota. Notary Public STATE OF MINNESOTA COUNTY OF HENNEPIN ss.. The foregoing instrument was acknowledged before me this day of 2003, by the of Gramercy Corporation, a corporation under the laws of Minnesota, by and on behalf of said corporation. day of Notary Public JBD-225415v2 RC125-209 SUPPLEMENTAL AGREEMENT TO CONTRACT FOR PRIVATE REDEVELOPMENT THIS AGREEMENT, made and entered into this _ day of , 2003 is 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 GRAMERCY CORPORATION, a Minnesota corporation (the "Redeveloper"). WITNESSETH: WHEREAS, the HRA and Redeveloper entered into an Amended and Restated Contract for Private Redevelopment (the "Contract") as of January 21, 2003 relating to the City Bella TIF District; and WHEREAS, on or about December 16, 2002, the HRA, following a public hearing did adopt a resolution authorizing condemnation of certain parcels within the Redevelopment Property; and WHEREAS, the resolution was conditioned upon Redeveloper satisfying the conditions contained in Section 3.4 of the Contract including entering into a written agreement and providing security therefore covering all awards that may be payable in the condemnation actions, and all relocation benefits payable as a result of displacements caused by such actions; and any amounts that may become payable as a result of the discontinuance of any such action; and WHEREAS, in its letter to the Executive Director of the HRA dated December 16, 2002, the Redeveloper acknowledged such obligation. NOW, THEREFORE, in consideration of the mutual agreements and undertakings of the parties, the parties do hereby stipulate and agree as follows: Section 1.01. Redeveloper's Undertaking. Redeveloper confirms to the HRA as follows: 1. Redeveloper shall be responsible for the making of any deposit or payment made pursuant to Minnesota Statutes, Section 117.042. 2. Redeveloper shall be responsible for any and all condemnation awards, including, without limitation, awards of commissioners and awards from any appeal of the commissioner award. 3. Redeveloper shall be responsible for payments made as and for relocation benefits to any individual determined to be entitled to such benefits. Section 2.01. Security. Redeveloper will provide security for the undertakings described in Section 1.01 above as follows: JBD-225415v2 RC125-209 1. Prior to the sending of any 90-day relocation notice, the Redeveloper will furnish the HRA with security in the form of an Assignment of Deposit Account and UCC Financing Statement. The amount of such deposit will be determined by the Executive Director after consultation with the HRA's relocation consultant. In the event that the HRA subsequently determines that relocation benefits may exceed the amount of the deposited funds, the Redeveloper shall, upon five business day written notice provide the HRA with such increased amount. 2. Prior to the date on which title and possession is to transfer to the HRA pursuant to any action to acquire title and possession under Minnesota Statutes, Section 117.042, the Redeveloper shall provide security to the HRA in the form of an Assignment of Deposit Account and UCC Financing Statement equal to the amount of any appraisal made by the respondent in the action, or, if none, 150% of the HRA's approved appraisal of value. 3. Prior to the date on which the HRA obtains title to any parcel acquired through condemnation, whether by payment of the "quick-take" deposit, or by the partial payment of any commissioner award pending appeal, the Redeveloper shall, if requested provide additional security to the HRA, equal to the amount of any appraisal made by the respondent in the action, or if none, up to 150% of the HRA's approved appraisal of value, or the commissioners' award if one has been made. Section 3.01 Redeveloper's Obligation Remains. Redeveloper acknowledges and agrees that the making of any of the deposits required of it under this Agreement does not relieve it of its obligation to pay the actual amounts due pursuant to its obligations under Section 1.01. Section 4.01. Release of Security. Once the HRA has determined that any security provided under this Agreement is no longer needed, or that the amount of any security can be reduced, it will notify the Redeveloper of that determination, and will execute any instruments reasonably necessary to effect such release of reduction of security. Section 5.01. Notices and Demands. Except as otherwise expressly provided in this Agreement, a notice, demand, or other communication under the Agreement by either party to the other shall be sufficiently given or delivered it if is dispatched by registered or certified mail, postage prepaid, return receipt requested, or delivered personally: As to the HRA: Housing and Redevelopment Authority 6700 Portland Avenue South Richfield, Minnesota 55423 Attention: Executive Director With Copy to: John Dean Kennedy & Graven 470 Pillsbury Center Minneapolis, MN 554302 JBD-225415v2 RC125-209 As to the Redeveloper: Gramercy Corporation 6601 Lyndale Avenue South Suite 110 Richfield, MN 55423 Attention: Michael W. Conlan, President With Copy to: Rolfe A. Worden Hinshaw &Culbertson Suite 3100 222 So. 9t" Street Minneapolis, MN 55402 or at such other address with respect to either such party as that party may, from time to time, designate in writing and forward to the other. Section 6.01. Counterparts. This Agreement may be simultaneously executed in any number of counterparts, all of which shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have set their hands and seals as of the day and year first above written. Dated: 2003 THE HOUSING AND REDEVELOPMENT AUTHORITY OF THE CITY OF RICHFIELD, MINNESOTA Bv: Dated: Its: Chairperson 2003 By: Its: Executive Director Dated: , 2003 GRAMERCY CORPORATION By: Its: JBD-225415v2 RC125-209 STATE OF MINNESOTA COUNTY OF HENNEPIN ss.. The foregoing instrument was acknowledged before me this 2003, by and ,the C;halrperson ana ~xecunve Lirector of The Housing and Redevelopment Authority in and for the City of Richfield, Minnesota. STATE OF MINNESOTA COUNTY OF HENNEPIN ss.. day of Notary Public The foregoing instrument was acknowledged before me this day of 2003, by the of Gramercy Corporation, a corporation under the laws of Minnesota, by and on behalf of said corporation. Notary Public JBD-225415v2 RC125-209 AGENDA ITEM # 4 REPORT # STAFF REPORT ~ HOUSING AND REDEVELOPMENT AUTHORITY MEETING FEBRUARY 18, 2003 JOLT STARK, REPORT PREPARED BY: COMMUNITY DEVELOPMENT MANAGER NAME, TITLE REPORT PRESENTER: JOHN STARK, COMMUNITY DEVELOPMENT MANAGER NAME, TITLE DEPARTMENT DIRECTOR REVIEW: ~ ~ REVIEWED BY EXECUTIVE DIRECTOR: ITEM FOR HRA CONSIDERATION: Consideration of the future status of the Lyndale Gateway West redevelopment project as proposed by Lyndale Gateway, LLC. I. RECOMMENDED ACTION: By Motion: No recommended action. Housing and Redevelopment Authority to determine the policy direction for proceeding with the proposed development. III. BACKGROUND I On August 5, 2002, the Richfield Housing and Redevelopment Authority (HRA) entered into a Contract for Private Redevelopment (Contract) with Lyndale Gateway LLC for the redevelopment of the Lyndale Gateway West area. That Contract did not, however, establish the financing plan for the redevelopment project. This was because many costs (primarily site assembly costs) were not known at that time. The Contract required the developer to identify their sources of financing at, or before, the December HRA meeting. On December 16, staff and the developer provided the HRA with a conceptual framework for financing. The HRA approved the conceptual financing method at that meeting, as did the Richfield City Council at their December 10, 2002 meeting. 0218Lynd The Developer has now informed staff that, even with the public assistance that had been conceptually approved, there remained a large funding "gap" in the project. The developer told staff that, in addition to the $610,000 in Candlewood bond proceeds that the HRA had intended to grant to the project, they would require up to $1,150,000 more in public assistance. While the $610,000 Candlewood bond proceeds had been a component of the financing ever since CSM's development proposal in 2000, this additional need for funding would be a new financing component. A potential source of funds would be the bonds of 1996, which have a year end cash balance of $1,850,000. They are taxable bonds, which can be utilized to finance land acquisitions and related activities. However, this is the only HRA fund that has a significant cash balance. Once the cash is expended there is unlikely to be any further opportunity to create such a fund. For the 2003 approved budget no expenditures were charged against this fund. Staff has attempted to maintain the balance until the full impacts of decreasing revenues have been identified. This will become more apparent with the completion of the current legislative session. If the HRA were to provide the required $1,150,000 of additional assistance, the potential sources of recuperating that money would be from: 1. Construction contingencies identified by the developer ($300,000) that may not ultimately be needed. 2. The sales proceeds from any home sales that would result in the developer achieving profit margin greater than 15%. 3. Any tax increment that is not needed to pay off the long-term bond (achieved through inflation). Based on the historic attempts to redevelop this site, staff is concluding that it may be impossible to redevelop this block; primarily because the estimated cost of site assembly currently exceeds $6 million (over $41/sq.ft. -which is far more than any past redevelopment project in Richfield). Among the past attempts to redevelop this area are: • Laurent Park Development, a mixed use concept which was proposed in 1997, but failed to proceed due to lack of financial feasibility. • An attempt by the existing property owners to renovate/redevelop the area in 1996/97 that failed to proceed due to poor physical condition of the structures and excessive overall costs to develop. • A development proposal by CSM in 1998/1999 that included a hotel and retail shops that failed to progress because the hotel concept became infeasible from a market perspective. • A development proposal by CSM in 1999/2000 that included a Walgreens drug store and amulti-tenant retail building that failed because of legislative changes to the property tax class rates which resulted in a financially infeasible project. • In the RFP process that staff undertook to identify a new developer in 2001/2002, many developers indicated to staff that it appeared financially infeasible to develop the block (due to the high site assembly costs) which resulted in their unwillingness to provide a development proposal. If the HRA were to begin action to terminate the agreement with Lyndale Gateway LLC, it would do so under the provision in the Contract (in Section 3.0) that the developer furnish evidence of sufficient funding for the project and that a failure to do so would leave the developer in default of the Contract. In such a case, the HRA would issue a 60 day notice to cure the default (ie identify sufficient funding) before taking final action to terminate the Contract. III. BASIS OF RECOMMENDATION A. POLICY • On August 5, 2002, the HRA entered into a Contract for Private Development with Lyndale Gateway, LLC for the Lyndale Gateway West Area. • The Contract, when approved, anticipated that the financing plan would be approved in a later action by the HRA. • On December 16, 2002, the HRA approved a conceptual financing plan for the Lyndale Gateway West project. • The developer has indicated a need for $1.15 million in additional public assistance (above and beyond that included in the conceptual financing plan) in order to progress with the project. • Staff has anticipated that the HRA would characterize an additional $1.15 million in public assistance as excessive. • The financing plan (which the Contract requires from the developer) would, therefore, be deemed infeasible. • Absent a feasible financing plan from the developer, the HRA has the right to begin the Contract termination process. B. CRITICAL ISSUES • An inability to redevelop this block would result in an inability to reconstruct the adjoining portion of Lyndale Avenue; this might ultimately affect the ability to reconstruct the Lyndale Avenue/I-494 bridge as contemplated. • Staff has anticipated that the HRA would characterize an additional $1.15 million in public assistance as excessive public assistance. This level of public assistance is highly unusual in a market-rate redevelopment project. • There are sufficient HRA funds to fulfill the developer's request, if the HRA deems such an expenditure to be consistent with sound financial public policy. However, this level of public assistance utilizing the remaining monies from the two bonds could have adverse impacts on the ability of the HRA to operate future redevelopment projects of any kind. C. LEGAL • Legal counsel concurs that the lack of a feasible financing plan is sufficient cause to begin the process of terminating the Contract. IV. ALTERNATIVE RECOMMENDATION(S~ • Give Lyndale Gateway LLC a notice of intent to terminate their Contract for Private Redevelopment. • Defer consideration of any action to terminate the Contract to allow the developer and staff to further evaluate the funding needs of the project. • Direct staff to work out the details of the provision of an additional $1.15 million in public assistance in order to allow the proposed project to proceed. V. ATTACHMENTS • NA VI. PRINCIPAL PARTIES EXPECTED AT MEETING • Colleen Carey, The Cornerstone Group • John Dean, Kennedy & Graven • Sid Inman, Ehlers & Associates, Inc.