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12-16-02 agendaCITY OF RICHFIELD, MINNESOTA HOUSING AND REDEVELOPMENT AUTHORITY MONDAY, DECEMBER 16, 2002 RICHFIELD CITY HALL 6700 PORTLAND AVENUE COUNCIL CHAMBERS 7 P.M. AGENDA Call to order 1. Adjourn to Special HRA Closed Executive Session in Executive Conference Room to discuss terms of settlement for relocation benefits for three parties formerly located in Interchange West area 2. Reconvene Regular HRA Meeting Approval of minutes of (1) Regular HRA Meeting of November 18, 2002 and (2) Special Concurrent of HRA and City Council Meeting of November 20, 2002 Notes: 3. HRA approval of agenda 4. Consideration of terms of settlement for relocation benefits for three parties formerly located in Interchange West area Staff Report No. 53 Notes: 5. Consideration of cancellation of public hearing and resolution authorizing transfer of property at 1701-77th Street West to City of Richfield for public utility purposes Staff Report No. 54 Notes: 6. Consideration of conceptual funding method for Lyndale Gateway West redevelopment project Staff Report No. 55 Notes: 7. Public hearing and consideration of resolution authorizing eminent domain proceedings to acquire certain real properties for redevelopment pursuant to Richfield Redevelopment Plan -Lyndale Gateway West Project Staff Report No. 56 Notes: 8. Public hearing and consideration of resolution authorizing eminent domain proceedings to acquire certain real properties for redevelopment pursuant to Richfield Redevelopment Plan -City Bella Project Staff Report No 57 Notes: 9. Executive Director report 10. 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 # g REPORT # 5 ~ STAFF REPORT HOUSING AND REDEVELOPMENT AUTHORITY MEETING DECEMBER 16, 2002 REPORT PREPARED BY: REPORT PRESENTER: DEPARTMENT DIRECTOR REVIEW: REVIEWED BY EXECUTIVE DIRECTOR: BRUCE NORDQUIST, HOUSING AND REDEVELOPMENT MANAGER NAME, T/TLL•' BRUCE NORDQUIST, HOUSING AND REDEVELOPMENT MANAGER NAME, TITLE o' SICiNAl'(IItL ITEM FOR HRA CONSIDERATION: Consideration of a resolution authorizing eminent domain proceedings for the City Bella project following a public hearing. RECOMMENDED ACTION: Conduct and Close a Public Hearing and by Motion: Approve the attached resolution which authorizes eminent domain proceedings to acquire certain real properties for redevelopment pursuant to the Richfield Redevelopment Plan -City Bella project. III. BACKGROUND I A public hearing has been scheduled for December 16 to consider the acquisition by eminent domain of properties within the City Bella project area. The developer has reported the following to staff as it relates to property within the project area. (Since negotiations between property owners and the developer are underway, the Housing and Redevelopment Authority (HRA) should anticipate updates to the following on the evening of December 16.): • Lvndale Hardware: purchased by the developer in 2002. Proceedings are not required. 121602CityBella EminentDomain • Winch Residence: multiple contacts between 1997 and 2002 by the developer. -- Purchase agreement and price negotiated and effective to June, 2003. Proceedings are not required. • Trestment Music Center: numerous contacts by the developers between 2000 and 2002. Purchase price agreed upon. Relocation and timing issues remain and are being worked on by respective legal counsels. Proceedings may be required. • Checker Auto/Trifle S Investments: numerous contacts by the developer between 1999 and 2000. Leasehold interest prevents delivery of clear title if purchased by developer. Proceedings are required. • Lake Shore Drive Condominium: numerous contacts by the developer between 1999 and 2002. Interests of so many individual condominium owners prevent delivery of clear title in a timely manner for vacant lot on Lake Shore Drive and for vacated right-of-way which is within the project and along the boundary of the Condominium property. Proceedings are required. • Gramercy Park Cooperative: in recent weeks, the preparation of the preliminary plat and project boundary for City Bella has determined that the alley behind the building would not have one ownership upon vacation. To make necessary improvements, provide for necessary cross easements, and to ensure proper driveway functions for both Gramercy Park and City Bella, proceedings are required. III. BASIS OF RECOMMENDATION A. POLICY • State law requires a public hearing to consider eminent domain proceedings. • The Contract for Private Redevelopment between the HRA and Gramercy Corporation requires HRA consideration of eminent domain proceedings after a period of diligent effort through developer negotiation. B. CRITICAL ISSUES • The developer has reported and demonstrated diligent efforts in negotiating the purchase of property within the project area. • To keep the project moving in a timely manner and on schedule, the eminent domain consideration is required. • Public notice and individual letters to affected owners has been sent. Negotiations are underway where necessary. The developer will report on status on December 16. C. FINANCIAL • The Contract requires the developer to cover the cost of the eminent __ domain proceedings. D. LEGAL The attached resolution was prepared by legal counsel. • Legal counsel would initiate eminent domain proceedings contingent on developer compliance with Section 3 of the Contract; the confirmation of financial commitments and providing financial. deposit necessary for the proceedings. • Under terms of the current contract there are no preconditions. IV. ALTERNATIVE RECOMMENDATION(S~ • The HRA could choose to delay consideration of eminent domain proceedings. However, the project would be delayed and some parcels within the project area with multiple ownership interests could not be acquired. V. ATTACHMENTS • Resolution • Site map VI. PRINCIPAL PARTIES EXPECTED AT MEETING • Affected owners • Mike Conlan, Gramercy Corporation RESOLUTION NO. RESOLUTION OF THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF RICHFIELD, MINNESOTA AUTHORIZING EMINENT DOMAIN PROCEEDINGS TO ACQUIRE CERTAIN REAL PROPERTIES FOR REDEVELOPMENT PURSUANT TO THE RICHFIELD REDEVELOPMENT PLAN (CITY BELLA PROJECT) WHEREAS, the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota (the "HRA") is a housing and redevelopment authority duly constituted and organized under law, with all of the powers enumerated in Minnesota Statutes, Sections 469.001 to 469.047 (the "Act"); and WHEREAS, the HRA is authorized to develop .and carry out redevelopment plans and redevelopment projects, as those terms are respectively defined in Minnesota Statutes, Section 469.002, subdivisions 16 and 14; and WHEREAS, the HRA adopted a redevelopment plan (the "Redevelopment Plan") for the Richfield Redevelopment Project Area (the "Project Area") on May 17, 1993, and said plan was approved by the Richfield City Council on June 14, 1993; and WHEREAS, the HRA adopted a modification to the Redevelopment Plan and established the City Bella Redevelopment Tax Increment District (the "TIF District") within the Project Area which has been found by the City Planning Commission to be consistent with the City's Comprehensive Plan, and was approved by the City Council; and WHEREAS, the Plan, as modified, contemplates the acquisition of certain real properties (the "Properties") which are located in the Project Area and which are more particularly described in Exhibit B attached hereto; and WHEREAS, the HRA has entered into a contract for private redevelopment (the "Contract") of land lying within the TIF District portion of the Project Area (including, but not limited to the Properties); and WHEREAS, the HRA believes that redevelopment of the Properties as contemplated by the Contract will promote and carry out the objectives of the Act and of the HRA as provided in the Redevelopment Plan, will be in the vital best interests of the City, will promote the health, safety, morals, and welfare of its residents and will be in accord with the public purposes and provisions of the applicable state and local laws and requirements under which activities within the Project Area have been undertaken and are being assisted; and RJL-189980v1 1 RC125-212 WHEREAS, the Developer under the Contract is not in default of any of its obligations thereunder, and the HRA is satisfied that the Developer has endeavored reasonably, but without success, to negotiate the acquisition of the Properties; and WHEREAS, the Developer has informed the HRA of the status of such efforts and has established, to the satisfaction of the HRA, that there is no substantial likelihood that further negotiations with the owners of the Properties would be productive; and WHEREAS, the Developer has requested that, in accordance with the terms of the Contract, the HRA commence eminent domain proceedings, and that such proceedings be undertaken as soon as possible so as to assure that the Properties will be available for development when needed is contemplated by the Contract; and WHEREAS, except as qualified below, the HRA is satisfied, based upon the information provided, that the Developer has complied with the requirements of the Contract concerning such request; and WHEREAS, the HRA must receive written confirmation prior to commencing this action that all costs associated with the condemnation will be covered by the developer; and WHEREAS, the HRA approved a Resolution Scheduling a Public Hearing On Use of Eminent Domain Proceedings to Acquire Property for Redevelopment Pursuant to the City Bella Project on November 18, 2002; and WHEREAS, the Minimum Improvements proposed to be constructed on the Properties pursuant to the Contract include 117 cooperative housing units, a 27-unit cooperative building, approximately 18,000 square feet of commercial retail space, 13 single family townhomes, public plaza and parking area related to said uses. NOW, THEREFORE, BE IT RESOLVED by the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota as follows: 1. It is necessary to acquire the Properties described on Exhibit B attached hereto in order for the HRA to carry out the purposes of the Plan, as modified, the Act and the Contract, to deal with properties that are structurally substandard and to eliminate and prevent the development or spread of conditions of blight found to exist by the City and the HRA. 2. Acquisition of the Properties by eminent domain, in the manner provided by Minnesota Statutes, Chapter 117, is deemed to be necessary and for a public purpose and is hereby authorized. 3. The HRA deems it necessary for the reasons set forth in the Plan, as - modified, and in order to meet anticipated construction schedules, to proceed without _ undue delay to commence condemnation of the Properties. Provided, however, that no RJL-189980v1 2 RC125-212 action shall be served or filed until the Executive Director has been notified that the developer has fully complied with the requirements of Sections 3.2(c) and 3.4 of .the Contract. 4. The HRA's attorney and staff are authorized to commence and prosecute to completion eminent domain proceedings to acquire fee simple absolute title to the Properties, pursuant to Minn. Stat. Ch. 117 and §117.042. Adopted by the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota this 16th day of December, 2002. Thomas E. Harms, Chairperson ATTEST: Mike Sandahl, Secretary R.n,-is~ao~i 3 Rci2s-aia EXHIBIT A Legal Description of Property Proposed to be Redeveloped as Part of City Bella Project Lots 1 and 2, Block 1; Lots 11 to 17 inclusive, Block 1, Fairwood Shores, according to the plat thereof on file or of record in the Office of the Registrar of Titles in and for Hennepin County, Minnesota. Lots 3, 4 and 18; Lot 19, except that part of the North 5.0 feet thereof lying East of a line drawn South at right angles to the North line of said Lot from a point thereon distant 32.0 feet West of the Northeast corner of said Lot; and except that part of the Easterly 10.0 feet of said Lot lying Northeasterly of a line drawn Northwesterly at right angles to the Easterly line of said Lot from a point thereon distant 52.0 feet South of the Northeast corner thereof, Block 1, Fairwood Shores, according to the plat thereof on file or of record in the Office of the Registrar of Titles in and for said County. Lots 1, 2 and 3, Block 2, Fairwood Shores. Lots 1 and 2, Block 3, "Fairwood Shores". Lots 3, 4 and 5, Block 3, Fairwood Shores. Lot 16, Block 3, "Fairwood Shores", according to the plat thereof on file and of record in the Office of the Registrar of Titles in and for said County of Hennepin, State of Minnesota. Lot 17, Block 3, Fairwood Shores, according to the plat thereof on file or of record in the Office of the Registrar of Titles in and for said County. Lot 18, Block 3, "Fairwood Shores" Those portions of Auto Lane and Lake View Walk, vacated or to be vacated, accruing to Condominium No. 353, commonly known as Lake Shore Drive Condominium. Those portions of Graham Avenue and Circle Place, vacated or to be vacated, lying Southeasterly of a line commencing on the most Easterly corner of Lot 6, Block 3, Fairwood Shores and ending at the Southwesterly corner of Lot 11, Block 1, Fairwood Shores, accruing to Condominium No. 353, commonly known as Lake Shore Drive Condominium. RJL-189980v 1 A-1 RC125-212 Those portions of Lakeview Walk and Auto Lane, vacated or to be vacated, accruing to Lot 1, Block 1, Gramercy Park Richfield. Those portions of Graham Avenue and Auto Lane, vacated or to be vacated, accruing to Lots 1 and 2, Block 3, Fairwood Shores. Those portions of Graham Avenue and Circle Place vacated or to be vacated, accruing to Lots 1, 2 and 3, Block 2, Fairwood Shores. Those portions of Auto Lane, vacated or to be vacated, accruing to Lot 17, Block 3, Fairwood Shores. RJL-189980v 1 A-2 RC 125-212 EXHIBIT B Legal Description of Portions of Property to be Redeveloped as Part of City Bella Project Which are to be Acquired by the HRA's Use of Condemnation ~"Remaining Properties") Parcel 1: Lots 1, 2 and 3, Block 2, Fairwood Shores, according to the map or plat thereof on file in the Office of the Registrar of Titles in and for Hennepin County, Minnesota Together with adjacent street or alleys vacated or to be vacated, accruing thereto. Being registered property pursuant to Certificate of Title No. 715782. Owner: Sharon Trestman Address of Property: 6630 Lyndale Avenue South Property Tax Identification No.: 27-028-24-32-0005 Parcel 2: Lots 1 and 2, Block 3, Fairwood Shores, according to the map or plat thereof on file in the Office of the Registrar of Titles in and for Hennepin County, Minnesota Together with adjacent street or alleys vacated or to be vacated, accruing thereto. Being registered property pursuant to Certificate of Title No. 770971. Owner: Triple S. Investments, a Minnesota general partnership Address of Property: 6700 Lyndale Avenue South Property Tax Identification No.: 27-028-24-32-0006 Parcel 3: Lot 17, Block 3, Fairwood Shores, according to the map or plat thereof on file in the Office of the Registrar of Titles in and for Hennepin County, Minnesota Together with adjacent street or alleys vacated or to be vacated, accruing thereto. Being registered property pursuant to Certificate of Title No. 684656. Owner: Lake Shore Drive Condominium Association, a Minnesota non- profit corporation RJL-189980v1 B'1 RC125-212 Address of Property: 6633 Lake Shore Drive Property Tax Identification No.: 28-028-24-41-0016 Parcel 4: Those portions of Auto Lane and Lake View Walk, vacated or to be vacated, accruing to Condominium No. 353, commonly known as Lake Shore Drive Condominium. Parcel 5: Those portions of Graham Avenue and Circle Place, vacated or to be vacated, lying Southeasterly of a line commencing on the most Easterly corner of Lot 6, Block 3, Fairwood Shores and ending at the Southwesterly corner of Lot 11, Block 1, Fairwood Shores, accruing to Condominium No. 353, commonly known as Lake Shore Drive Condominium. Parcel 6: Those portions of Lakeview Walk and Auto Lane, vacated or to be vacated, accruing to Lot 1, Block 1, Gramercy Park Richfield. Parcel 7: Those portions of Graham Avenue and Auto Lane, vacated or to be vacated, accruing to Lots 1 and 2, Block 3, Fairwood Shores. Parcel 8: Those portions of Graham Avenue and Circle Place vacated or to be vacated, accruing to Lots 1, 2 and 3, Block 2, Fairwood Shores. Parcel 9: Those portions of Auto Lane, vacated or to be vacated, accruing to Lot 17, Block 3, Fairwood Shores. RJL-189980v1 B-2 RC125-212 EMINENT DOMAIN PROCEEDINGS, AND _ RIGHT-OF-WAY TO BE VACATED CITY BELLA 66TH ST. Areas to be vacated; ownership of joint interests - to be secured by eminent domain proceedings _~- Parcels requested by developer to be secured by eminent domain proceedings (to be updated 12-16-02) N 100 D 100 200 300 400 Feet 12-10-02 Y `` s ~~ ~~ ~~l -~ .~ ~ ~~~ '' AGENDA ITEM # REPORT # STAFF REPORT HOUSING AND REDEVELOPMENT AUTHORITY MEETING DECEMBER 16, 2002 56 REPORT PREPARED BY: JOHN STARK, COMMUNITY DEVELOPMENT MANAGER NAME, TITLE REPORT PRESENTER: JOHN STARK COMMUNITY DEVELOPMENT MANAGER DEPARTMENT DIRECTOR REVIEW: REVIEWED BY EXECUTIVE DIRECTOR: ~',~°~' r 1_I ~s~;.~~. ITEM FOR HRA CONSIDERATION: Consideration of a Resolution authorizing eminent domain proceedings to acquire certain real properties for redevelopment pursuant to the Richfield Redevelopment Plan (Lyndale Gateway West Project). I. RECOMMENDED ACTION: Conduct and Close a Public Hearing and by Motion: Approve the attached resolution which authorizes eminent domain proceedings to acquire certain real properties for redevelopment pursuant to the Richfield Redevelopment Plan (Lyndale Gateway West Project). 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 (the Developer) for the redevelopment of the Lyndale Gateway West area. The selection of this Developer was the result of a Request for Proposals (RFP) - process to try to identify a feasible development concept for the area. Prior to this _ RFP process, there had been several years of redevelopment planning. The Contract with the Developer differentiates the roles and responsibilities of the Developer and the HRA. To date, the Developer is in conformance with the terms 1216LG_condemn of the Contract. Section 3.2 of the Contract has a number of conditions that the Developer is to fulfill by December 15 (effective December 16, as a workday). These conditions, followed by a description of their completion, are described as follows: 1. That it has taken reasonable steps to acquire all the redevelopment property. As stated in the attached letter from the Developer, they have met with, and made a purchase offer to, all property owners in the area. The amount of each purchase offer was based on a real estate analysis performed by the Developer. 2. That any owner of residential property that has requested mediation has been afforded such an opportunity. As stated in the attached letter from the Developer, no residential property owners have requested mediation. 3. That financing necessary for the acquisition of property and the construction of the development is, in the reasonable judgement of the HRA, likely to be available. The HRA is considering (at its December 16 meeting) a conceptual financing method for this project which would provide the necessary funding. The Richfield City Council approved the financing concept on December 10, 2002. 4. The redeveloper is not aware of any conditions, environmental or otherwise, that would prevent them from proceeding. As stated in the attached letter. from the Developer, they are not aware of any site conditions that would prevent them from proceeding. 5. A list of properties for which purchase offers or options have been executed. The attached letter from the Developer lists those properties for which they have executed purchase agreements. This includes five of the seven residential properties as well as three of the eleven commercial properties. 6. A list of properties for which purchase offers or options have not been executed: The attached letter from the Developer lists those properties for which they have not been able to execute purchase agreements. This includes two of the seven residential properties as well as eight of the eleven commercial properties. 7. A request that. the HRA undertake condemnation activities for those properties for which purchase offers or options have not been executed along with a deposit of $20, 000 for each of those parcels in order to cover the HRA's costs and expenses. In the attached letter, the Developer specifically requests that the HRA undertake condemnation activities for those properties for which purchase offers have not been executed. This includes ten properties in all. The developer has provided staff with a check in the amount of $200,000 as fulfillmenf of this condition. If costs for such activities. for any of these properties is less than $20,000, then staff will refund the unspent balance for that property. Furthermore, the developer states, in their letter, that they assume financial responsibility for any additional costs incurred in the HRA's undertaking of condemnation on these parcels. In order for the HRA to grant the request by the developer to undertake condemnation activities, it must approve the attached resolution authorizing eminent domain proceedings to acquire certain real properties for redevelopment pursuant to the Richfield Redevelopment Plan (Lyndale Gateway West Project). III. BASIS OF RECOMMENDATION A. POLICY • On August 5, 2002, the HRA entered into a Contract for Private Development (Contract) with Lyndale Gateway, LLC (the Developer). • To date, the Developer is in compliance with the terms of that Contract. • Section 3.2 of that Contract lists several conditions to be met by the Developer by December 15. • Included in the conditions listed in Section 3.2 of the Contract is a requirement that the Developer make a request for condemnation for any redevelopment property for which they have not entered into a purchase agreement or option to purchase. • The Developer has made a request for condemnation for those parcels for which they have not entered into a purchase agreement or option to purchase. B. CRITICAL ISSUES • In order for the Developer to move forward with necessary steps in the development process, according to their development schedule, the timely passage of the attached resolution is required. C. FINANCIAL • The Developer has provided a deposit of $20,000 per property for which condemnation is being requested as well as making a statement that they assume financial responsibility for any additional costs incurred in the HRA's undertaking of condemnation on these parcels. D. LEGAL • HRA legal counsel drafted the Contract as well as the attached resolution and has: been involved in discussions related to the Developer's efforts to acquire the properties.. • At its November 18, 2002 meeting the HRA called for a public hearing on this mattes and the legal notice was published December 5, 2002. IV. ALTERNATIVE RECOMMENDATION S~ • Do not approve the use of condemnation at this -time .and instruct the developer to continue negotiations on the remaining. properties. `• Approve use of condemnation for a limited number of properties and instruct: the developer to continue negotiations on the remaining properties. • Defer a decision until a later date. V. ATTACFIlVIENTS • Resolution • A letter from the developer which includes a request for condemnation VI. PRINCIPAL PARTIES EXPECTED AT MEETING • Coleen Carey, The Cornerstone Group (parent company of Lyndale Gateway LLC) • HRA legal counsel RESOLUTION NO. RESOLUTION OF THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF RICHFIELD, MINNESOTA AUTHORIZING EMINENT. DOMAIN PROCEEDINGS TO ACQUIRE CERTAIN REAL PROPERTIES FOR REDEVELOPMENT PURSUANT TO THE RICHFIELD REDEVELOPMENT PLAN (LYNDALE GATEWAY WEST PROJECT) WHEREAS, the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota (the "HRA") is a housing and redevelopment authority duly constituted and organized under law, with all of the powers enumerated in Minnesota Statutes, Sections 469.001 to 469.047 (the "Act"); and WHEREAS, the HRA is authorized to develop and carry out redevelopment plans and redevelopment projects, as those terms are respectively defined in Minnesota Statutes, Section 469.002, subdivisions 16 and 14; and WHEREAS, redevelopment pursuant to the Act may be undertaken, among other reasons, to remedy the shortage of housing for low and moderate income residents, and to redevelop blighted areas, in situations in which private enterprise would not act without government participation or subsidies; and WHEREAS, the HRA adopted a redevelopment plan (the "Redevelopment Plan") for the Richfield Redevelopment Project Area (the "Project Area") on May 17, 1993, and said plan was approved by the Richfield City Council on June 14, 1993; and WHEREAS, the HRA adopted a modification to the Redevelopment Plan and established the Lyndale Gateway West Tax Increment Financing District (the "TIF District") within the Project.. Area which has been found by the City Planning Commission to be consistent. with the City's Comprehensive Plan,. and which was approved bythe City Council on December 10; 2002; and. WHEREAS, the Redevelopment Plan, as modified, contemplates the acquisition. of certain real properties (the "Properties") which are located in the Project Area and which are more particularly described in Exhibit B attached hereto; and WHEREAS, the HRA believes that redevelopment of the Properties as contemplated by the Contract will promote and carry out the objectives of the Act and of the HRA as provided in the Redevelopment Plan, will be in the vital best interests of the City, will promote the health, safety, morals, and welfare of its residents and will be in accord with the public purposes and provisions of the applicable state and local laws and requirements under which activities within the Project Area have been undertaken and are being assisted; and BDS-224487v1 RC125-245 WHEREAS, the HRA has entered into a contract for private redevelopment (the "Contract") of land lying within the TIF District portion of the Project Area (including, but not limited to the Properties), which land is described on Exhibit A attached hereto ("Lands to be Redeveloped"); and WHEREAS, the Developer under the Contract is not in. default of any of its obligations thereunder, and the HRA is satisfied that the Developer .has endeavored reasonably, but without success, to negotiate the acquisition of the Properties; and WHEREAS, the Developer has informed the HRA of the status of such efforts and has established, to the satisfaction of the HRA, that there is not a substantial likelihood that further negotiations with the owners of the Properties would be productive; and WHEREAS, the Developer has requested that, in accordance with the terms of the Contract, the HRA commence eminent domain proceedings, and that such proceedings be undertaken as soon as possible so as to assure that the Properties will be available for development when needed; and WHEREAS, the HRA must receive written confirmation, prior to the commencement of condemnation, that all costs associated with the condemnation will be borne by the developer; and WHEREAS, the HRA is satisfied, based upon the information provided, that the Developer has complied with the requirements of the Contract concerning such request; and WHEREAS, the HRA approved a Resolution Scheduling a Public Hearing On Use of Eminent Domain Proceedings To Acquire Property For Redevelopment Pursuant To The Lyndale Gateway West Project on November 18, 2002; and WHEREAS, Minimum Improvements to be constructed on the Properties pursuant to the Contract include approximately 92 residential condominium units, 14 townhomes and 28,000 feet of commercial space. NOW, THEREFORE, BE IT RESOLVED by the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota as follows: 1. It is necessary to acquire the Properties described below in Exhibit B attached hereto in order for the HRA to implement the purposes of the Redevelopment Plan, as modified, and the Act, including but not limited to, dealing with properties that are structurally substandard, eliminating and. preventing the development or spread of conditions of blight found to exist by the City and the HRA, and providing housing for persons of low and moderate income. 2. Acquisition of the Properties by eminent domain, in the manner provided by Minnesota Statutes, Chapter 117, is deemed to be necessary and for a public purpose and is hereby authorized. 3. The HRA deems it necessary for the reasons set forth in the Redevelopment Plan, as sDS-22a4s~~i 2 RC125-245 modified, and in order to meet anticipated construction schedules, to proceed without undue delay to commence condemnation of the Properties. 4. The HRA's attorney and staff are authorized to commence and prosecute to completion eminent domain proceedings to acquire fee simple absolute title to the Properties, pursuant to Minn. Stat. Ch. 117 and § 117.042. Adopted by the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota this 16th day of December, 2002. Thomas E. Harms, Chairperson ATTEST: Mike Sandahl, Secretary BDS-224487v1 3 RC125-245 EXHIBIT A Lands to be Redeveloped The property bounded by Lyndale Avenue on the east, Aldrich Avenue on the west, West 77tH Street on the south and West 76tH Street on the north, Richfield, Minnesota. Lot 1, Glenn's Addition, according to the plat thereof on file or of record in the Office of the Registrar of Titles in and for Hennepin County Lot 2, Glenn's Addition, according to the plat thereof on file or of record in the Office of the Registrar of Titles in and for Hennepin County Lot 3, Glenn's Addition, according to the plat thereof on file or of record in the Office of the Registrar of Titles in and for Hennepin County Lot 4, Glenn's Addition, according to the plat thereof on file or of record in the Office of the Registrar of Titles in and for Hennepin County South half of Lot 5, Glenn's Addition, according to the plat thereof on file or of record in the Office of the Registrar of Titles in and for Hennepin County North 20 5/10 feet of Lot 5, Glenn's Addition, according to the plat thereof on file or of record in the Office of the Registrar of Titles in and for Hennepin County South 20 5/10 feet of the North 1/2 of Lot 5, Glenn's Addition, according to the plat thereof on file or of record in the Office of the Registrar of Titles in and for Hennepin County North 35 1/10 feet of Lot 6, Glenn's Addition, according to the plat thereof on file or of record in the Office of the Registrar of Titles in and for Hennepin County South 33 2/10 feet of the North 68 3/10 feet of Lot 6, Glenn's Addition, according to the plat thereof on file or of record in the Office of the Registrar of Titles in and for Hennepin County South 13 7/10 feet of Lot 6 and North 6 3/10 feet of Lot 7, Glenn's Addition, according to the plat thereof on file or of record in the Office of the Registrar of Titles in and for Hennepin County South 22 feet of the North 28 3/10 feet of Lot 7, Glenn's Addition, according to the plat thereof on file or of record in the Office of the Registrar of Titles in and for Hennepin County South 30 9/10 feet of Lot 7, Glenn's Addition, according to the plat thereof on file or of record in the Office of the Registrar of Titles in and for Hennepin County BDS-224487v1 B-1 RC125-245 That part of Lot 7 lying South of North 28 3/10 feet and North of South 30 9/10 feet thereof, Glenn's Addition, according to the plat thereof on file or of record in the Office of the Registrar of Titles in and for Hennepin County Lot 8, Glenn's Addition, according to the plat thereof on file or of record in the Office of the Registrar of Titles in and for Hennepin County Lot 9, Glenn's Addition, according to the plat thereof on file or of record in the Office of the Registrar of Titles in and for Hennepin County Lot 10, Glenn's Addition, according to the plat thereof on file or of record in the Office of the Registrar of Titles in and for Hennepin County Lot 11, Glenn's Addition, according to the plat thereof on file or of record in the Office of the Registrar of Titles in and for Hennepin County Lot 12, Glenn's Addition, according to the plat thereof on file or of record in the Office of the Registrar of Titles in and for Hennepin County Lot 13, Glenn's Addition, according to the plat thereof on file or of record in the Office of the Registrar of Titles in and for Hennepin County Lot 14, Glenn's Addition, according to the plat thereof on file or of record in the Office of the Registrar of Titles in and for Hennepin County RJL-224487v1 B-2 RC 125-212 EXHIBIT B Description of Portions of Property to be Redeveloped as Part of Lyndale Gateway West Project Which are to be Acquired by the HRA's Use of Condemnation ("Properties") Parcel No. Address Parcel Identification No. 1 7600 L ndale Avenue South 33-028-24-44-0036 2 7608 L ndale Avenue South 33-028-24-44-0037 3 7614 Lyndale Avenue South 33-028-24-44-0038 4 7620 L dale Avenue South 33-028-24-44-0039 5 7628 L ndale Avenue South 33-028-24-44-0041 6 7634 L ndale Avenue South 33-028-24-44-0043 7 7638 L ndale Avenue South 33-028-24-44-0044 8 7644 L ndale Avenue South 33-028-24-44-0046 9 7601 Aldrich Avenue South 33-028-24-44-0056 10 7615 Aldrich Avenue South 33-028-24-44-0054 Parcel 1: Lot 1, Glenn's Addition, according to the map or plat thereof on file in the Office of the Registrar of Titles in and for Hennepin County, Minnesota Together with adjacent street or alleys vacated or to be vacated, accruing thereto. Parcel 2: Lot 2, Glenn's Addition, according to the plat thereof on file or of record in the Office of the Registrar of Titles in and for Hennepin County Together with adjacent street or alleys vacated or to be vacated, accruing thereto. Parcel 3: Lot 3, Glenn's Addition, according to the plat thereof on file or of record in the Office of the Registrar of Titles in and for Hennepin County Together with adjacent street or alleys vacated or to be vacated, accruing thereto. Parcel 4: Lot 4, Glenn's Addition, according to the plat thereof on file or of record in the Office of the Registrar of Titles in and for Hennepin County Together with adjacent street or alleys vacated or to be vacated, accruing thereto. Parcel 5: North 20 5/10 feet of Lot 5, Glenn's Addition, according to the plat thereof on file or of record in the Office of the Registrar of Titles in and for Hennepin County Together with adjacent street or alleys vacated or to be vacated, accruing thereto. Parcel 6: North 35 1/10 feet of Lot 6, Glenn's Addition, according to the plat thereof on file or of record in the Office of the Registrar of Titles in and for Hennepin County RJL-22448w1 B-2 RC125-212 Together with adjacent street or alleys vacated or to be vacated, accruing thereto. Parcel 7: South 33 2/10 feet of the North 68 3/10 feet of Lot 6, Glenn's Addition, according to the plat thereof on file or of record in the Office of the Registrar of Titles in and for Hennepin County Together with adjacent street or alleys vacated or to be vacated, accruing thereto. Parcel 8: South 22 feet of the North 28 3/10 feet of Lot 7, Glenn's Addition, according to the plat thereof on file or of record in the Office of the Registrar of Titles in and for Hennepin County Together with adjacent street or alleys vacated or to be vacated, accruing thereto. Parcel 10: Lot 15, Glenn's Addition, according to the plat thereof on file or of record in the Office of the Registrar of Titles in and for Hennepin County Together with adjacent street or alleys vacated or to be vacated, accruing thereto. Parcel 11: Lot 13, Glenn's Addition, according to the plat thereof on file or of record in the Office of the Registrar of Titles in and for Hennepin County Together with adjacent street or alleys vacated or to be vacated, accruing thereto. RJL-224487v1 B-2 RC125-212 s REPORT # ~ 5 J STAFF REPORT HOUSING AND REDEVELOPMENT AUTHORITY MEETING DECEMBER 16, 2002 REPORT PREPARED BY: REPORT PRESENTER: DEPARTMENT DIRECTOR REVIEW: REVIEWED BY EXECUTIVE DIRECTOR: JOHN STARK, COMMUNITY DEVELOPMENT MANAGER NAME, TITLE JOHN STARK, COMMUNITY DEVELOPMENT MANAGER ~/ ~ NAME, T/T LE 1~1 i' /f ITEM FOR HRA CONSIDERATION: Consideration of a conceptual funding method for the Lyndale Gateway West redevelopment project. I. RECOMMENDED ACTION: By Motion: Approve, in concept, the proposed funding method (attached as Exhibit A) for the Lyndale Gateway West redevelopment project and consider such approval as fulfillment of Section 3.2(a)(3) of the Contract for Private Redevelopment with Lyndale Gateway LLC. ~ II. BACKGROUND ~ At the direction of the City Council and Housing and Redevelopment Authority (HRA), staff has been working on a redevelopment strategy for the Lyndale Gateway area. Lyndale Gateway, LLC (and its parent company The Cornerstone Group) has proposed a redevelopment concept that would include 28,000 sq. ft. of commercial space, 92 for-sale, loft-style condominiums and 14 for-sale townhomes. This area was first identified for redevelopment in 1985 when the HRA's consultant, BRW, Inc., released its report entitled "ILN Redevelopment Study". At that time, the area was within the confines of the Interstate-Lyndale-Nicollet (ILN) Redevelopment Project Area. Subsequently in 1996, the Hoisington Koegler Group was retained to 1216LG_financing study the area and presented its report entitled The Lyndale Gateway Redevelopment Plan and Strategy. This report then became the impetus to undertake requests for proposal for redevelopment feasibility for both sides of Lyndale Avenue between 76th and 77th Streets. Ultimately, two phases of the Lyndale Gateway development were completed in 2000. A third phase, which had been proposed by CSM, Inc., was nearly developed -but eventually failed to occur because of financial difficulties in developing the site. An extensive request for proposals (RFP) process began in June 2001 in which twelve select developers were asked to provide development proposals. Ultimately, the HRA chose The Cornerstone Group's proposal as the preferred development in December 2001 and entered into a Contract for Private Development in August 2002. Beginning with the initial presentation of The Cornerstone Group's proposal to the HRA, the biggest uncertainty lay in the difficulty in identifying sufficient sources of funds for the redevelopment. Because The Cornerstone Group's proposal was the most financially feasible of any presented, however, the HRA did approve the redevelopment concept. On August 5, 2002, the HRA approved a Contract for Private Redevelopment (Contract) with Lyndale Gateway LLC. The project financing was not fully identified at that time, therefore the Contract (in section 3.2[a][3]) required the demonstration of a financing method prior to the December 2002 HRA meeting. With that, the HRA asked staff, legal counsel and the HRA's financial advisors to work with The Cornerstone Group to "find a way" to get the project financed. There are three primary difficulties in financing the project: In 2001 the state legislature passed property tax reforms which dramatically decreased the class rates and, thus, the amount of property taxes that certain properties pay; this, in turn, dramatically reduced the amount of tax increment financing (TIF) that could be generated by a redevelopment project. In the case of The Cornerstone Group's proposal, the amount of TIF generated by the development was reduced by an estimated amount of $1.4 million by these class rate changes. 2. The cost of purchasing the existing properties is estimated at over $6 million dollars. This amount (which translates to $42 per square .foot) rg eatlX exceeds the cost that any redevelopment property has ever cost in Richfield. The reason for these high costs is because the site is so intensively utilized (resulting in high acquisition costs) and there are 24 separate tenant spaces (resulting in high relocation costs). 3. Because the majority of the proposed development is "for sale" rather than the developer retaining ownership and renting out space, it is impossible for the developer to borrow against future tax increment dollars (because they cannot directly control the TIF revenues). The typical method for financing a development in Richfield has been through "pay- as-you-go" financing in which the developer pays all of the development costs up- front and is reimbursed, over time, by the TIF revenues generated by the development. In the first two phases of the Lyndale Gateway development (the Mainstreet Village senior apartments and offices and the Casteel Place townhomes) both had to have a supplemental form of financing. This financing took the form of the issuance of $1.6 million in bonds to be repaid by tax increment being generated by the previously constructed Candlewood Hotel, a $600,000 grant from the HRA and a $320,000 loan from the HRA. The reason that this additional funding was needed for these projects was due to the high site-assembly costs and the problems associated with for-sale versus rental components. If the class-rate laws had been changed prior to the completion of these first two phases of Lyndale Gateway, additional public funding would have surely been required to make the projects feasible. In fact, it is primarily due to the class-rate changes that the former retail proposal by CSM became infeasible and was eventually withdrawn. When the traditional "pay-as-you-go" financing methods were applied to The Cornerstone Group's proposal, a financing gap remained that could not be rectified and left the status of the project as financially infeasible. Staff became optimistic, however, when a possible alternative form of funding was identified. This funding was aloes-interest loan from Fannie Mae's American Communities Fund. The concept was that the HRA would receive a $6 million loan from this source, provide the loan proceeds to the developer and would be repaid by: 1) the tax increment financing that would be generated by the development, and; 2) a portion of the sales proceeds of the townhomes and condominiums. During the early stages of the loan funding application, however, Fannie Mae staff made the determination that the HRA does not have sufficient assets to meet the requirements of the funding. Staff, legal counsel and the HRA's financial advisor then began exploring the possibility of the City of Richfield being the recipient of the Fannie Mae loan instead of the HRA. It became apparent, however, that the City would essentially be required to use its "full faith and credit" to back the loan. This being the case, the conclusion was drawn that if the City were to obligate its full faith and credit, a General Obligation (GO) Bond issued by the City and loaned to the developer would have the same financial risks but with the added financial benefits of giving the City greater flexibility over financing options and reducing fees and interest rates. Staff, based on the advice of legal and financial advisors, are proposing the financing methods described as "Proposed Financing Method for the Lyndale Gateway West Redevelopment Project" in Exhibit A (attached) to make this project feasible. If this financing method is approved, then the City Council would be asked to consider issuance of the bonds sometime between January and July 2003. The funding would not be made available to the developer until they have: - Met their construction lender's requirements for obtaining a loan, including the pre-sale of a given percentage of units; - Received unrestricted construction loan funding in an amount sufficient for construction of all the proposed improvements; - Executed all contracts covering the construction of the proposed improvements; - Executed a loan agreement binding them to the repayment terms, and; - Retained ownership of all of the existing properties or are financially committed to paying any necessary condemnation costs. The worst-case scenario for risk to the City is that after the funding was provided to the developer they were unable to sell all of the housing units. If this were to happen, then both tax increment and sales proceeds would be reduced; thereby reducing the sources for paying the debt. In such a case, the HRA would first use the developers up-front deposit of $750,000 and then rely upon the developer's personal guarantee to assign the debt to them. In the event that this personal guarantee were no longer valid (due to bankruptcy or other similar events) then the City would have to identify alternative sources (in addition to the TIF) for the unpaid balance. In this proposed financing method, there has been a concerted effort to ensure that all possible protections available to the City and HRA have been identified. This proposed financing is also based on the most conservative of assumptions, including: - During the entire life of the TIF district, there would be no market value increase in the units. If one were to assume only a minimal market value increase, then the loan could be paid off much sooner. - The "worst-case" risk scenario is based on the assumption that some remaining units could not be sold at all. If one were assume that these could sell for at least 80% of their value then the risk is greatly reduced. - The developer's construction lender will probably have their own protections (most importantly, apre-sales requirement) in place to ensure construction of the units thereby reducing the risk to the City. Staff would not be proposing the City's obligation of a GO Bond if there were another method for financing this project. The financing difficulties inherent in this development are due to the changes in state tax law and the peculiarities of this site. Staff, legal counsel and the HRA's financial advisor all concur that the proposed financing method is necessary for the redevelopment of this block to occur by this, or any other, developer. III. BASIS OF RECOMMENDATION A. POLICY • The Lyndale Gateway Area has been identified for redevelopment since 1985. • Since 1985, several potential redevelopment projects have failed to come to fruition in this area due to, in part, to the difficulty of financing a project in this area. • On August 5, 2002, the HRA approved a Contract for Private Redevelopment with Lyndale Gateway LLC. • Section 3.2(a)(3) of the Contract requires the HRA to make a finding in - their "reasonable judgement" that financing for the project is likely to be available. • Staff believes that the financing method that is now being proposed represents the only funding solution that would allow this, or any other redevelopment project, to occur at this location. • At a November 20 joint HRA/City Council work session, HRA and Council members indicated a willingness to formally consider this item. • On December 10 the City Council approved, in concept, the financing method that the HRA is now considering. B. CRITICAL ISSUES • The developer has already incurred considerable expense as they have advanced this project. Those expenses will continue to increase. The developer needs assurance that the HRA and City is committed to providing the necessary public financing. C. FINANCIAL • The proposed financing method was drafted with the assistance of Mr. Sid Inman of Ehlers, Inc., a public financing consultant, who believes that this financing method represents the least amount of financial risk that still provides the funding necessary for redevelopment to occur at this location. D. LEGAL • The proposed financing method was drafted with the assistance of legal counsel at Kennedy and Graven; they also believe that this financing method represents the least amount of financial risk that still provides the funding necessary for redevelopment to occur at this location. IV. ALTERNATIVE RECOMMENDATION~S~ • Reject the proposed funding method for the Lyndale Gateway West area with the understanding that such a decision may render it financially infeasible to redevelop this area. • Defer a decision, which would cause the developer to cease certain development activities until such time that a conceptual funding commitment can be made. V. ATTACHMENTS • Exhibit A: Proposed Financing Method for the Lyndale Gateway West Redevelopment Project ~-- VI. PRINCIPAL PARTIES EXPECTED AT MEETING • Sid Inman, Ehlers Associates, Inc. • John Dean, Kennedy & Graven • Colleen Carey, The Cornerstone Group EXHIBIT A PROPOSED FINANCING METHOD FOR THE LYNDALE GATEWAY WEST REDEVELOPMENT PROJECT The HRA would ask the City to issue General Obligation (GO) Bonds in the amount of $6 million and the Housing and Redevelopment Authority would then provide the proceeds to the developer as a loan on a short-term basis. 2. The need for the $6 million is short term (2 to 3 years) and is needed to finance acquisition of property until sales are completed. 3. The borrowing would have very low short term interest only payments and the payments would come from the developer. 4. The HRA would pledge all of the future tax increments (including the Casteel Place Tax Increment) to the city to pay off the bonds. This amount is estimated to be around $2.7 to $3 million. 5. The developer would deposit 12.5% of the loan (estimated to be $750,000), for use in covering any potential shortfall. 6. The developer agrees to guarantee the amount of the $6 million loan not paid from tax increment or home sales. 7. The developer agrees to commit to sales prices of the units prior to receiving any public financing. 8. The developer would agree that after their construction loan is paid, they will pay to the HRA a percent of all home sales. 9. Once all of the homes have been sold (concluding in 2 to 3 years), the money from home sales will have paid off approximately $3 to $3.3 million of the original $6 million loan. 10. The remaining debt of $2.7 to $3 million would be paid through the tax increment generated by the development; even under conservative assumptions this payoff should be possible in 15 years (rather than 25 years as is common in many TIF districts). 11. The City and HRA would then have a number of options for using the tax increment proceeds to pay this balance. Among these options would be the HRA's issuance of a Tax Increment Revenue Note to pay off the GO Bond, thereby absolving the City of its debt for the project. The HRA would be able to issue this type of bond at that time because the debt service coverage would be ensured because the project will have been completed and homes will be sold. AGENDA ITEM # 5 REPORT # 5 4 STAFF REPORT HOUSING AND REDEVELOPMENT AUTHORITY MEETING DECEMBER 16, 2002 REPORT PREPARED BY: JULIE URBAN, COMMUNITY DEVELOPMENT SPECIALIST NAM[l, Ti7i.i: BRUCE PALMBORG, REPORT PRESENTER: COMMUNITY DEVELOPMENT DIRECTOR DEPARTMENT DIRECTOR REVIEW: REVIEWED BY EXECUTIVE DIRECTOR: ~~ ~r~-~ ITEM FOR HRA CONSIDERATION: Cancellation of public hearing and consideration of a resolution authorizing the transfer of property located at 1701 77th Street West to the City of Richfield for public utility purposes. I. RECOMMENDED ACTION: By motion: Cancel the public hearing. III. BACKGROUND In order to clear title to property located within the Best Buy Campus project area, several remnant parcels were condemned. One of these parcels was the property located at 77th Street and Knox Avenue, where a City sanitary sewer lift station is located. Title to the lift station property had been held by a deceased person, subject to an easement in favor of the City. As a result of the condemnation, the HRA now holds title to the property and may want to transfer title to the City. It has recently come to the attention of the Housing and Redevelopment Authority (HRA) staff that there are some unresolved site issues which require additional research before any action is taken by the HRA. 12161iftstation III. BASIS OF RECOMMENDATION A. POLICY • N/A B. CRITICAL ISSUES • It is appropriate to transfer title to the City which uses the property for the sanitary sewer lift station; however, additional research is necessary before any action is taken. • The property is subject to an easement for the lift station so property transfer is not required to operate the lift station; however, the HRA has no need to retain title to the property. C. FINANCIAL • N/A D. LEGAL • Notice of the public hearing was published in the Sun Current on December 5, 2002. IV. ALTERNATIVE RECOMMENDATION(S~ • N/A V. ATTACHMENTS • N/A VI. PRINCIPAL PARTIES EXPECTED AT MEETING • N/A AGENDA ITEM # REPORT # STAFF REPORT HOUSING AND REDEVELOPMENT AUTHORITY MEETING DECEMBER 16, 2002 4 53 JOHN STARK, REPORT PREPARED BY: COMMUNITY DEVELOPMENT MANAGER NAME, TITLE JOHN STARK, REPORT PRESENTER: COMMUNITY DEVELOPMENT MANAGER NAMB, TirLE DEPARTMENT DIRECTOR REVIEW: SIGNATURE REVIEWED BY EXECUTIVE DIRECTOR: ~ ~•~''~~ ~~ ~%~... .n ~.~'-~ /1 ITEM FOR HRA CONSIDERATION: Consideration of an offer of settlement for relocation benefits for three parties formerly located in the Interchange West area. I. RECOMMENDED ACTION: By Motion: Hold a closed session to discuss the offer of settlement for relocation benefits for three parties formerly located in the Interchange West area and take formal action to approve or deny that offer. II. BACKGROUND To be discussed in closed session. III. BASIS OF RECOMMENDATION A. POLICY • To be discussed in closed session. B. CRITICAL ISSUES 1216settlement • To be discussed in closed session. C. FINANCIAL • To be discussed in closed session. D. LEGAL • Legal counsel has been involved in the related negotiations and has advised staff that a closed session is the lawful and proper place for discussions of the settlement of legal actions. IV. ALTERNATIVE RECOMMENDATION(S~ • N/A V. ATTACHMENTS • N/A VI. PRINCIPAL PARTIES EXPECTED AT MEETING • Bob Vose, Kennedy & Graven