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02-19-02 agendaCITY OF RICHFIELD, MINNESOTA HOUSING AND REDEVELOPMENT AUTHORITY TUESDAY, FEBRUARY 19, 2002 RICHFIELD CITY HALL 6700 PORTLAND AVENUE COUNCIL CHAMBERS 7 P.M. AGENDA Call to order Approval of minutes of Regular HRA Meeting of January 23, 2002 1. Opportunity for citizens to address the HRA on items not on the agenda 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 amendments to Contract for Private Redevelopment for rehabilitation project at 6444 Clinton Avenue S.R. No. 8 B. Consideration of approval of reallocation of Community Development Block Grant (CDBG) funds for a remediation activity at Lake Shore Drive S.R. No. 9 C. Consideration of a Subordination Agreement that will allow interim acquisition financing for City Bella from non-HRA sources S.R. No. 10 D. Consideration of authorization of application to Hennepin County for Federal Home Investment Partnerships Program (HOME) funds to support affordable housing at City Bella S.R. No. 11 Notes: 4. Consideration of resolution requesting the City Council to undertake a study to determine appropriate land uses near 66th Street and Lyndale Avenue ....StaffReport.No. a2 Notes:. 5. 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 # 4 REPORT # 12 STAFF REPORT r HOUSING AND REDEVELOPMENT AUTHORITY MEETING FEBRUARY 19, 2002 REPORT PREPARED BY: REPORT PRESENTER: DEPARTMENT DIRECTOR REVIEW: BRUCE NORDQUIST, HOUSING & REDEVELOPMENT MANAGER NAME, TITLE BRUCE NORDQUIST, HOUSING & REDEVELOPMENT MANAGER REVIEWED BY EXECUTIVE DIRECTOR: ~ ITEM FOR HRA CONSIDERATION: Consideration of a resolution requesting the City Council to undertake a study to determine appropriate land uses near 66th Street and Lyndale Avenue. I. RECOMMENDED ACTION: By Resolution: Request the City Council to undertake a study to determine appropriate uses and reuses of land in the area of 66th Street and Lyndale Avenue. ~ II. BACKGROUND The Housing and Redevelopment Authority (HRA) and City Council reviewed and approved the "Lakes at Lyndale" Concept Plan in 1999. The Concept Plan is now referenced in the Comprehensive Plan as the guide plan for redevelopment of Richfield's downtown at 66th Street and Lyndale Avenue. Changing business activity by Kmart has drawn attention to the future of the northeast quadrant of 66th Street and Lyndale Avenue. It has expedited a concern that different users and uses would not further the vision for this quadrant as part of a revitalized downtown. The Lakes at Lyndale concept plan included six major projects of which two are completed: Gramercy Park and Woodlake Centre. City Bella plans are being resubmitted in February for consideration by the HRA and City Council during the first half of 2002. Lyndale Garden continues to be monitored as ownership changes 021966th-Lyndale NAME, TITLE have occurred and Lyndale Garden and Lyndale Hardware are now united into one business entity. The Post Office is also being monitored. A moratorium on federal funding of new facilities has limited development options. Redeveloping the Kmart area was also envisioned in the Plan. Cinema, housing and office uses were forecast to offer entertainment and daytime/evening destinations for the downtown. A recent story published in an Atlanta newspaper and distributed by WCCO News suggests the Richfield Kmart will be closed as part of the retailer's strategy to deal with bankruptcy court reorganization. Contacts with Kmart representatives have confirmed they are not yet prepared to confirm or deny the potential closing. However, the Kmart site remains an integral part of Richfield's downtown redevelopment strategy. The closing of Kmart presents a compelling reason for the HRA to request the City Council to evaluate the impact of changing uses and study new uses. The loss of an anchor retailer and the changing competitive marketplace for retailing, office and entertainment could weaken the downtown without a thoughtful response. A study is warranted to manage these changing circumstances as an opportunity to continue the coordinated and harmonious redevelopment that is already completed, underway and planned. III. BASIS OF RECOMMENDATION A. POLICY • The HRA is responsible for guiding downtown redevelopment in a manner consistent with the "Lakes at Lyndale" Plan. • The City is responsible for evaluating and regulating land uses and conducting land use studies. B. CRITICAL ISSUES • A vacant boarded Kmart store or a reuse of the Kmart site in a manner not consistent with the Plan and proposed uses is detrimental to the downtown and impacts the safety and well. being of residents and businesses, particularly downtown residents and businesses. • Changing markets for retailing, housing, office, and entertainment require a study to guide downtown redevelopment directions, C. FINANCIAL • The HRA would incur expenses for a study if the City concurred that a study is needed. • A developer is not yet identified. D. LEGAL • Legal counsel has drafted the resolution. IV. ALTERNATIVE RECOMMENDATION~S~ • Do not support a study or request the City to consider a study of the Kmart quadrant. V. ATTACHMENTS • Resolution • WCCO news release on Kmart: February 1, 2002 • The "Lakes at Lyndale" Plan VI. PRINCIPAL PARTIES EXPECTED.. AT MEETING • N/A HRA RESOLUTION NO. RESOLUTION REQUESTING THE CITY COUNCIL TO UNDERTAKE A STUDY TO DETERMINE APPROPRIATE USES AND REUSES OF LAND IN THE AREA OF 66TH STREET AND LYNDALE AVEUNUE WHEREAS, the Housing and Redevelopment Authority in and for the City of Richfield (the "HRA"), is a public body operating within the geographic boundaries of the City of Richfield; and WHEREAS, the powers and duties of the HRA include those necessary to carry out its objective of establishing redevelopment projects intended to eliminate or prevent the spread of blight and deteriorating areas within the City of Richfield; and WHEREAS, in the fulfillment of that objective, the HRA for many years has carried out redevelopment within the area of 66th Street and Lyndale Avenue (the "Area"); and WHEREAS, the HRA has expended and wilt continue to expend substantial amounts of public funds, including tax increment, in furtherance of such redevelopment activities; and WHEREAS, those activities are currently continuing, and include the recent completion of redevelopment on the southeast quadrant of 66th Street and Lyndale Avenue (Urban Village aka Woodlake Centre), and the redevelopment of the southwest quadrant of the intersection which is currently under development agreement (City Bella); and WHEREAS, it is of critical importance to the continued development of the Area that an overall plan and program for the Area, including the northeast quadrant of 66th Street and Lyndale Avenue, be studied and formulated, and that such plan and program should include consideration of such factors as land use, design, public infrastructure, and the integration and connection of the development in the Area so as to result, to the extent possible, in a coordinated and harmonious whole. NOW THEREFORE, BE IT RESOLVED by the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota as follows: 1. Except as to developments currently under contract, the HRA will not enter into any additional agreements involving land in the Area which call for the expenditure of tax increment, or for the use of the HRA's power of eminent domain, until the HRA is satisfied that a proposal requesting such assistance from the HRA would be consistent with the coordinated and harmonious development of the Area. 2, The HRA asks the City to take the necessary actions to pursue studies and to hold all necessary hearings and meetings on the issue of the coordination and integration of land uses in the Area, and to make all necessary amendments to its Comprehensive Plan or official controls necessary to effectuate the results of such studies. 3. The HRA pledges its support, cooperation and assistance to the City on all actions it undertakes on this matter. Approved by the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota this 19th day of February, 2002. Thomas E. Harms, Chair ATTEST: Michael Sandahl, Secretary Channe14000 -Report: Kmart To Close 7 Stores In State CAREER CENTER ~ AUTOMOTIVE N O Z V1 O TRAVEL ~ LEGAL CENTER ~ SHOPPING HOME NEWS TIPS CONTACT US SEARCH SITE MAP ~- E-MAIL STORY TO A FRIEND: i Report: Kmart To Close 7 Stores In State Taxes SmartMoney List Inc/udes Four In Metro Area BusinessWeek Posted: 5:02 p.m. CST February 1, 2002 WEATHER A published report said Kmart plans to close seven Minnesota stores as SPORTS the retailer struggles through a bankruptcy court reorganization. MONEY TECHNOLOGY The list, reported in the Atlanta Business ENTERTAINMENT HEALTH Chronicle, includes four metro-area stores and three in outstate cities, WCCO 4 News reported. LIVE CAMS Kmart would not confirm whether it plans to "~~-- ~ wcco Tv - close stores in Richfield, Columbia Heights, TOWN TALK Apple Valley, Forest Lake, Hutchinson, Hibbing and Mankato. EDUCATION FooD, ETC A source told the Atlanta business newspaper that more stores could be added as the company works to reorganize and emerge from DATING bankruptcy proceedings with a better chance to be profitable. TRAFFIC Ahigh-profile metro Kmart, on Lake Street in Minneapolis, has been a target for relocation or demolition by city planners hoping to hook up the now separated stretches of Nicollet Avenue. Previous Stories: . January 25, 2002: Kinart Launching.Investi ag tion . January 25, 2002: Kmart Executive To_Get Millions • January 23, 2002: Martha Stewart's Co~an~ Optimistic About Kn~art . January 22, 2002: Kmart Files For Batlkru~tey Page 1 of 2 HOUSE & HOMI Stock 1 provide b~ Upd~ Dow Nasdat NYSE QUID enter n. Quotes c minimur Fi A I :. .-. ~ Inve, Videi sw r Asian N Mixed Captive Fate Un http://www.channe14000.com/money/stories/money-121790020020201-170249.htm1 02/05/2002 J j`~r ~ ' ~ ~ Dear Community Members, .. .. During a 23-month study in 1997 and 1998, hundreds of Richfield residents and business people worked together on a new vision for the Richfield Lake area, now known as "Lakes at Lyndale." This area is located from 62nd Street to 67th Street, and Pleasant Avenue to I-35W. Community members attended workshops, reviewed concepts and talked about the features that were important to them in the Lakes at Lyndale area. The resulting master plan for Lakes at Lyndale is an exciting one not just for the neighborhood, but for the entire community. It creates new housing and greater housing choices; new retail, restaurants, office space and entertainment; and a new postal facility at a better location. It makes Lakes at Lyndale the urban heart of our community where people will come to live, to work, to shop and to enjoy the lakes. We believe this is an exciting plan and think you will too. Share the Lakes at Lyndale vision! ~~ . Mayor Mar ' J. Kirsch The Lakes at Lyndale Mission To make the Lakes at Lyndale area Richfield's thriving urban center, providing more housing oppor- tunities, upgrading business properties and providing fuller enjoyment of both Wood Lake and Richfield Lake. Achieving this mission will help ensure Richfield remains the best place to live, work, learn and do business in the metropolitan area. Lakes at Lyndale Themes ~~ Nature -- The Lakes are a natural centerpiece to an urban downtown. Housing -- More choices and new locations for living. People -- A place for walking with nature pathways and urban skyways. Transit -- Bringing efficient transit service closer to you. Ic~entitg -- Distinctive look, visual appeal and connection ~~ Gateavags -- Attractive front, doors to the community. Business -- Opportunities for investment and creating value. .~., ,= ,, ~ ~~ ~, ' , ° i . ~ , . ., .: :., << ~ ~, :. ~~ r ~ .. y_,. ~~ • ~ g- LYNDALE AVENUE GATEWAY -- .. Skyway New Housing Office ~ Commercial ~ Transit Station/Stop New Parking Areas o w . Pieparrd by Hoiiingtoi~ Koegler Graup [r.c City of Richfield Gak~a pct -the P~a~c a~' Nature -- The Lakes are a natural centerpiece to an urban downtown. Richfield Lake and Wood Lake remain wild and natural. Richfield Lake water quality is improved through stormwater ponding and a water treat- ment system for rainwater run-off from roads. Through landscaping and design, the character of the lakes radiates along the streets, walkways and parks. .:>-~ Housing -- More choices and new locations for living. Approximately 1,400 new housing units are envi- sioned at Lakes at Lyndale including townhomes, condominiums, apartments, and senior cooperative and assisted housing. In addition to expanding the variety of housing in Richfield, Lakes at Lyndale will offer a location that is .near the lakes, shopping and entertainment. People -- A place for walking with nature pathways and urban skyways. Existing nature pathways are enhanced by a park- like connection established between the two lakes. A system of pedestrian ways and public spaces includes skyways and street-level walkways to provide safe crossings at Lyndale Avenue and West 66th Street. Pedestrian ways extend along the major streets and into development sites. Transit -- Bringing efficient transit service closer to you. Transit enhancements include 1) a transit shelter at West 66th Street, ju t east of Lyndale Avenue; 2) Mn/DOT express bus pullouts at the 66th Street and I-35W bridge; and 3) circulator bus service in the 65th and 66th Street corridors in Lakes at Lyndale. New circulator service is integrated with existing express and cross-town services. Identity -- Distinctive look, visual appeal and connection The area has a connected visual identity. The lakes are its theme. Nature is carried from the lakes throughout the urban district through the use of flowers, trees, plants, garden-like paths, benches, cast stone columns, plantings and small gathering spots. Gateways -- Attractive front doors to the community. Upon entering Lakes at Lyndale from Lyndale Avenue or 66th Street, the first impression is that of a thriving community and an attractive and distinctive neighborhood. That impression is created through new investment and reinvestment, and through landscaping, lights, and other amenities. Business -- Opportunities for investment and creating value. New shopping, office space, restaurants and entertainment abound at Lakes ~t L~-ndale, creating new investment for the c~~mmunit~~. R,ichfield's near cinema is featured on the I~-mart site a~t 66th Street and Lyndale ~~-~~ttue. Restaurants, shops and housing are next to the natural charm of Wood Lake and Richfield Lake. s Lakes at Lyndale Objectives Q2 Urban Village -- Urban Village is a commercial- 1) Housing residential "mixed use" development bordered by 2) New retail, restaurants, office and entertainment Lyndale Avenue, 66th Street, Pleasant Avenue and 3) New, better located postal facility 67th Street. Urban Village adds 90,000 square feet of retail and office space and 214 new housing Target Areas units to the community. It relocates McDonalds to The master plan has been divided into target the corner of 67th Street and Lyndale Avenue. areas for phased redevelopment (refer to map on 1999.2001 page 5). Each area is being explored for its poten- ~3 The VFW/C~ramercy Block -- Retail and tial to meet the Lakes at Lyndale objectives and a expanded office space would be located at 66th determination made whether existing land uses Street and Lyndale Avenue adjacent to the new must stay or go. What follows is a brief summary of co-op. 1999-2002 some of those areas where development is. sched- uled to occur through 2005. ®L~ndale Garden Center Area -- Multi-unit housing and retail are in the plan for this portion 1~ Cramercy Park Co-op -- The Gramercy Park of Lakes at Lyndale. 2000-2003 Co-op at 67th Street and Lyndale Avenue is a 160-unit housing development with underground ~ Post Office Area -- Improved access in the area parking on the site of the Richfield VFW. The would be coupled with a post office that better 12-story building cooperative for senior citizens is serves the community. 2000-2005 attached to an 8,000-square-foot VFW facility. ©Kmart Area -- The plan calls for a future 1998-2001 cinema, housing and office space. 2002.2005 THE LAKES AT LYNDALE VISION- creating new entertainment and leisure l opportunities in Richfield. A neu~ cinema, housing and office space in tlae Northwest corner of Lyndale Avenue and 66th. Street is the proposed alternative to tlae K-m.m•t site. ;~;; ~~ ~~ ~ ~'° ~- ,j i ~ ~, ~- .~_ _ ~ ~~ ~ ~ _ ~ . , - ~ t ;~ a s ,~ r' ~ ~~ t~/;~' ~ ~.~~ ~' Y ~ ^ C ~ ' ,! ir1~~st.?.,_ -r-~'<,~ ~~-~`,rr1'c^"J -_-~ - rS .^!c"~, '--x.~< ~.'- 1~ a.~``;~~. "~~ ..;.~. ~s- ~ t'' ~ '->{~.~'~-~. y..u~,y3`~Jr~.-ti-' ,'_:' l l-7~ '~i0/['~ T 4,4.-'-.. 6 ~~a. , _ x:: __ 2005- 2010 After 2010 ~, ,: 9/~ Perimeter Treatment 2000-2003 ~~ System of Runoff Water 7i~ After 2010 1999-2D00 ® "9lF Lake Environmental Quality Maintenance Program Ongoing ,~ 2005- ,~_ . ~; ~. x . , ~9~F, 2002 stio F~~/~F ~~ Highway I-35W and Crosstown 62 Improvements (MNDOT) 1999.2003 ~~ ~,.~., >~. ~,~ Regional - ~_ ~: Recreational -Trail 2001-2005 •. BLOCK DEVELOPMENT REGIONAL RECREATIONAL TRAIL RICHFIELD LAKE TREATMENT SYSTEM Sooner-1999 2001.2005 1999.2000 concurrent with ~~~' _ ~ MNDOT HIGHWAY IMPROVEMENTS MNDOT Highway improvements 1999.2003 Later-after 2010 P~~~~ ~~„-~~~~~s,,,~ ~ ,~~~~,~:,~~~,,~~„~ NOTE: Dates are best estimates only for planning purposes and do not represent actual construction periods. AGENDA ITEM # 3D REPORT # > > STAFF REPORT ~ HOUSING AND REDEVELOPMENT AUTHORITY MEETING FEBRUARY 19, 2002 REPORT PREPARED BY: REPORT PRESENTER: JOHN OLINGER, COMMUNITY DEVELOPMENT SPECIALIST NAME, TITLE BRUCE NORDQUIST, HOUSING & REDEVELOPMENT MANAGER NAME, TITLE DEPARTMENT DIRECTOR REVIEW: REVIEWED BY EXECUTIVE DIRECTOR: ~~ ITEM FOR HRA CONSIDERATION: Submitting an application to Hennepin County for Federal Home Investment Partnerships Program (HOME) funds to support affordable housing at City Belfa I. RECOMMENDED ACTION: By Motion: Authorize application to Hennepin County Federal Home Investment Partnerships Program funds to support affordable housing at City Bella. ~ II. BACKGROUND ~ Staff continues to search for funding sources that could be used to support affordable housing at City Bella. The County has an additional program that is being investigated. The federally funded and County administered Home Investment Partnerships Program (HOME) provides funding that assists the construction of affordable housing. The Hennepin Housing Consortium, the County agency that administers the loan program, anticipates receiving a federal allocation of $1.923 million in 2002. The Hennepin Housing Consortium was created as a means for the 45 suburban communities of Hennepin County to receive and expend funds provided through the HOME Program. The purpose of the HOME Program is to expand the supply of 0219HOME decent, safe and sanitary housing for low and very low income families and individuals. Applications for the Hennepin Housing Consortium HOME funds must be submitted March 8, 2002. An application requesting approximately $500,000 to $600,000 is being prepared. It is proposed that this application would support funding the construction of four one-bedroom and four two-bedroom units of the 40 rental units planned for a building along Lyndale Avenue and adjacent to the proposed co-op building. The eight units represent 20 percent of the total rental units and would be rented to lower income household at 50 percent of the median income (approximately $30,700 to $38,350 annual income depending on household size). III. BASIS OF RECOMMENDATION A. POLICY • Twenty percent of the rental housing would be affordable. • Additional sources of funding are needed to provide affordable units. B. CRITICAL ISSUES • The developer (owner) will be required to monitor affordability of the rental units and report performance to the Housing and _ Redevelopment Authority (HRA). C. FINANCIAL • The developer, Gramercy .Corporation, is paying the cost of the search for affordable housing funds. • HOME funding is announced in May 2002. D. LEGAL • If funding is received, staff would return to the HRA with agreements reviewed by legal counsel. IV. ALTERNATIVE RECOMMENDATION~S~ • Do not authorize the application for funds. V. ATTACHMENTS • N/A VI. PRINCIPAL PARTIES EXPECTED AT MEETING • N/A AGENDA ITEM # 3C REPORT # 10 STAFF REPORT HOUSING AND REDEVELOPMENT AUTHORITY MEETING FEBRUARY 19, 2002 REPORT PREPARED BY: BRUCE NORDQUIST, HOUSING & REDEVELOPMENT MANAGER NAME, TITLE BRUCE NORDQUIST, REPORT PRESENTER: HOUSING & REDEVELOPMENT MANAGER NAME, TITLE DEPARTMENT DIRECTOR REVIEW: REVIEWED BY EXECUTIVE DIRECTOR: ITEM FOR HRA CONSIDERATION: Consideration of a Subordination Agreement that will allow interim acquisition financing for City Bella from non-HRA sources. RECOMMENDED ACTION: By Motion: Authorize the Housing and Redevelopment Authority Chairperson and Executive Director to effectuate a Subordination Agreement allowing Richfield Bank and Trust to finance interim acquisition activity by Gramercy Corporation at City Bella. III. BACKGROUND ~ The Richfield Housing and Redevelopment Authority (HRA) is being requested by Gramercy Corporation and Richfield Bank and Trust and Lyndale Hardware to subordinate its development contract position in favor of needed interim acquisition financing. The HRA and Gramercy Corporation have a Contract for Private Redevelopment for the City Bella Project. It is Gramercy's responsibility to finance the acquisition of property for the project, with the HRA reimbursing costs of acquisition with future tax increment as these costs are determined. 0219bella Up until recently, the lengthy negotiations with Lyndale Hardware have lacked up front financial resources that would allow the acquisition to proceed. In the last 60 days, Lyndale Hardware and Gramercy settled on terms of a purchase agreement, which has been executed. The success was in part due to Richfield Bank and Trust's review of the project and willingness to provide interim acquisition financing to Gramercy to purchase the Lyndale Hardware site. For this to occur, the HRA is being requested by Gramercy to subordinate its development contract position in favor of this needed financing. III. BASIS OF RECOMMENDATION A. POLICY • The HRA's January 16, 2001 Contract for Private Redevelopment with Gramercy Corporation requires HRA consideration of subordination to lender financing. • Subordination for acquisition financing by the HRA will further site assembly and project approvals. • Prior to a lender providing construction or permanent financing and requesting the HRA again to subordinate, the acquisition financing loan with Richfield Bank and Trust would be paid in full. B. CRITICAL ISSUES • Contract revisions and project plans for City Bella are underway by Gramercy and nearing completion. However, the subordination is being requested (and is needed to secure the financing) in advance of the revised contract and plans. This order of events is unusual given what typically prevails; revised Contract, first, financing second. • If there were a default by Gramercy during the land acquisition phase of the project the Subordination Agreement allows Richfield Bank and Trust to not perform according to the Contract. However, without the interim funding, Gramercy would not be able to proceed with the purchase of Lyndale Hardware. This in turn would cause Lyndale Hardware to find another buyer, which could jeopardize the City Bella development. • The Subordination Agreement would not allow Richfield Bank and Trust to receive tax increment as if they were the developer after default. The PUD and CUP from the official land use controls, would regulate action Richfield Bank and Trust may choose to take. • Gramercy has agreed to satisfy the line of credit (and the basis for the Subordination Agreement) with Richfield Bank and Trust prior to proceeding with construction. The revised Contract would include this provision. The revised Contract is being prepared for the March HRA meeting, • Gramercy Corporation plans to close with Richfield Bank and Trust and Lyndale Hardware within days of the HRA's action on the Subordination Agreement. C. FINANCIAL • All costs related to the Subordination Agreement are paid by the developer. • In the event of a developer default prior to initiation of construction, Richfield Bank and Trust may come into title but would not be entitled to tax increment and would be subject to official controls on land use already placed on the property. D. LEGAL • The Subordination Agreement was drafted by legal counsel for Gramercy and Richfield Bank and Trust and reviewed by HRA legal counsel. IV. ALTERNATIVE RECOMMENDATION~S~ • Do not authorize the Subordination Agreement. V. ATTACHMENTS • Subordination Agreement VI. PRINCIPAL PARTIES EXPECTED AT MEETING • Gramercy Corporation representatives SUBORDINATION AGREEMEN'T' THIS SUBORDINATION AGREEMENT (the "Agreement") is made as of this day of , 2002 between RICHFIELD BANK & TRUST CO., a Minnesota banking corporation ("Lender"), whose address is at -suite 240lnvestors Btdg , 733 Marquette Avenue South, Minneapolis, Minnesota 55402, and the HOUSING AND REDEVELOPMENT AUTHORITY tN AND FOR 7'HE CITY O>r RICI3FibLD, MINNESOTA, a public body corporate and politic ("HRA"), whose address is 6700 Portland Avenue South, Richfield, Minnesota 55423. RECITALS A. City Bella LLC, a Minnesota limited liability company ("Developer"), is the owner of certain real property situated in Hennepin County, Minnesota and legally described in Exhibit A attached hereto and incorporated herein (the "Property"). B. Lender has made a mortgage loan to Developer in the original principal amount of 51,500,000 00 (the "Loan"). The Loan is evidenced and secured by the following documents' (i) a certain mortgage note (the "Nate")made by Developer dated February _ , 20G2, in the amount of $1,500,000.00; and (ii) a certain mortgage, security agreement and fixture financing statement (the "Mortgage") made by Developer dated February _ , 2002, filed February , 2002, as Hennepin County Registraz of Titles Doc. No. encumbering the Property: and (iii) a certain assignment of leases-and-rents {the "Assignment") made by Developer dated February ^, 2002, filed February ~,, 2002, as Hennepin County Registrar of Titles Doc. No_ encumbering the Properly. The Note, the Mortgage, the Assigtunent, and all other documents and instruments evidencing, securing and executed in connection with the Loan, are hereinafter collectively referred to as the "Evan Documents." C. HRA is the owner and holder of certain rights under a certain unrecorded Contract for private Redevelopment (tbe "Contract") by and between Gtarnercy Corporation and HRA dated Sanuary 16, 2001; NOW, THEREFORE, in wnsideration of the foregoing and as an inducement to Lender to make the Loan, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto represent, warrant and agree as follows: acz~nszr n~1s~ zs~zo6a..2 z<araooz 959-d 90/ZO d ll!-1 OlE81EEt19+ N3AVa0 ~ A03NN3N-WO~d Z9~90 ZO-II-ZO 1. onsent. The HRA acknowledges that the Lender is making the Loan to the Developer and consents to the same. 2. Subo dinatiou. The HR.A hereby agrees that the rights of the HRA with respect tv the Property under the Contract are and snail remain subordinate and subject to liens, rights and security interests created by the Loan Documents and to any and all amendments, modifications, extensions, replacements of renewals of the Loan. Documents 3 Notice to l~tA. Lender agrees tv use commercially reasonable efforts to notify HRA of the occurrence of any 1/vent of Default given to Developer under the Loan Documents. 4. No Assump ~vn. The HRA acknowledges that the Lender is not a party to the Contract and by executing this Agreement does not become a party to the Contract, and specifically does not assume and shall not be bound by any obligations of the 1eveloper to the HRA under the Contract. and that the Lender shall incur no obligations whatsoever to the HRA except as expressly provided herein. The Lender or its successors or assigns shall not be entitled to any tax increment generated by the redevelopment provided for in the Contract, nor will the Lender be entitled to any other bettefit provided for in the Contract (including but not limited to payments pursuant to the tax increment note or notes unless the Lender agrees to assume the Redeveloper's obligations under the Contract) 5. Notice from HRA. So gong as the Contract remains in effect, the HRA agrees to give to the Lender copies of notices of any event of befault given tv Developer under the Contract. 6. Govettti~e Law, This Agreement is trade in and shall be cvnstroed in accordance with the taws of the State of Minnesota. 7. Successors. This P~greement and each and every covenant, agreement and other provision hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, including any person who acquires title to the Property through the Lender of a foreclosure of the Mortgage. 8. Severabilit The unenforceability or invalidity of any provision hereof shall not render aoy other provision or provisions herein contained unenforceable or invalid 9. Notice_ Any notices and-other communications permitted or required by the provisions of this Agreement shall be in writing and shall be deemed to have bean properly given or served by depositing the same-with-the United States Postal Service, or any official successor thereto, designated as registered or certified mail, return receipt requested, bearing adequate postage, or delivery by reputable private carrier and addressed as set forth above HCZbDSY a~15/ 26~1~1~-~2 7/d2~12 Z 999-d 90/EO'd !Z!-1 OtEBl6Ett9+ N3Atla9 R Aa3NN3N-W~~d H9~80 ZO-II-ZO l o. Trar-s e f T't1e Lender. The HRA agrees that ir>' the Event the Lender, a transferee of Lender, or a purchaser at foreclosure sale, acquires title to the Property pursuant to a foreclosure, or a deed in lieu thereof, theLender, transferee, or purchaser shall not by virtue of such transferor sale be bound by the terms and conditions of the Contract except as expressly herein provided. IN WITNESS WHEREOF, this Agreeme>vt has been executed and delivered as of the day and year first written above. HOUSING ANb ItI~riLVEt,UPMLNT AUTHORITY IN ANb 1~OIt TIDE CITY 4F RICI~RIELD By: Jts Approved as to fiorm• STATE OF 1tinNNESOTA ) SS COUNTY OF HENNEPII~ The foregoing instrument was acknowledged before me this ,! day of 2002, by and ,the Chairperson and Executive birectot, respectively, of the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota, a public body corporate and politic, on behalf of such public body. Notary Public Hc26b3b d711~ Z6~2068-+2 )/d/2~ 559-d 90Ip0 d !Z!-1 OlEBl66Z19+ N3Atla9 7 d03NN3H-mn~j 6980 ZO-II-ZO CONSENT City Sella LLC, a Minnesota limited }iability company, Developer herein, hereby consents to the terms and conditions of this Subordination Agreement. City Bella LLC Dated: , 2002 By Michael W. Conlan President/Manager STAVE Ol~ MINNESOTA ) SS COUNTY OF HENNEPIN ) The foregoing instrument was acknowledged before ate this _ day of,___, 2002 by Michaet W. Conlan, the President/Manager of City Bella t,LC, a Minnesota limited liability company, on behalf of the limited Iiability company. Notary Public CONSENT Crametcy Corporation, a Minnesota corporation, party to the Contract herein identified, hereby consents to the terms and conditions of this Subordination ,agreement. Crramercy Corporation Gated: , 2002 By Michaet W. Conlan ftczavsv a»y z~noaa.rl va2(u12 4 999-d 90/90'd !ll-1 OlE81EEl19+ N3AYa9 ~ Ap3NN3N-mead E9~80 ZO-II-ZO President STATE OF MINNESOTA ) SS COUNTY OF HENNEPIN ) The foregoing instrument was acknowledged before the this ! day of 2002 by Michael W. Conlan, the President of Gramercy Gorporation, a Minnesota corporation, on behalf of the corporation. Notary Public HC26D31/ t~~ y 1~~2nGR vl ve~2UO2 599-d 90/90'd !2l-1 OlEBlE£Z19+ N3AVa9 ~ Aa3NN3N-Wad E5~80 t0-ll-ZO AGENDA ITEM # 3R REPORT # n ~~ STAFF REPORT HOUSING AND REDEVELOPMENT AUTHORITY MEETING FEBRUARY 19, 2002 REPORT PREPARED BY: REPORT PRESENTER: DEPARTMENT DIRECTOR REVIEW: REVIEWED BY EXECUTIVE DIRECTOR: ~~ PAM BOOKIIOUT, REHABILITATION SPECIALIST NAME, TITLE BRUCE NORDQUIST, HOUSING & REDEVELOPMENT MANAGER ITEM FOR HRA CONSIDERATION: Consideration of using Community Development Block Grant funds for remediation activity at Lake Shore Drive Condominium. I. RECOMMENDED ACTION: By Motion: Approve the use of Community Development Block Grant funds for a remediation activity at Lake Shore Drive. II. BACKGROUND The Richfield Housing and Redevelopment Authority (HRA) has used federal Community Development Block Grant (CDBG) funds for single-family rehabilitation grants and loans since 1975. The condition of the dwelling, building systems and the household income are the primary criteria for qualifying housing units for funding. In late 2001, Lake Shore Drive Condominiums requested staff to explore funding possibilities to help individual homeowners in repairing toilets and .showers that had leaking seals that had caused, over almost 20 years, water damage and mold that was not easy to detect. _ Lake Shore Drive is a 179-unit condominium development for seniors built in 1983. It is currently the most affordable senior ownership housing available in Richfield. In 2001, units had assessed values in the $60,000 to $126,000 range, and most owners are on fixed incomes. 0219reallocation-cdbg NAME TITLE The Condominium Association hired an inspector and discovered that 31 of the units were experiencing mold and moisture problems in the bathrooms. The source of the problem appears to be related to the deterioration of the caulk around the toilets and shower stalls. When several units were experiencing the problem, an inspection of all the units was conducted, which concluded that 31 are affected. Of those units, some units were fixed before the scope of the problem had been determined; therefore, 26 remain to be repaired. Estimates are being obtained by the owners' association for the repair work, which would be done by one contractor for all units. The cost of the repairs is estimated to range from $5,000 to $7,000 per unit. Since these are interior repairs, they are the responsibility of each affected owner, and not provided for by association reserves. In addition to repairing floors and walls, the scope of work also includes the proper mitigation of mold. Mold and mildew are issues of indoor air quality, but are not addressed by grants from state or regional sources, unlike other environmental problems such as radon, asbestos or lead. Staff is proposing using $1,000 of Community Development Block Grant (CDBG) funds for each unit as a grant, which would be a total grant for the program of $26,000. The balance of the repairs would be made through loans provided by Richfield Bank and Trust, which has agreed to provide a special loan to owners at one percent below the market rate. The Housing and Redevelopment Authority's (RBA's) administrative work will be covered by a $20 fee per unit, in addition to $2,600 in CDBG funds. Therefore the total CDBG expenditure (grants and administration) would be $28,600. The Lake Shore Drive Association is also assuming administrative work by obtaining the cost estimates, selecting the contractor, and monitoring work completion. To meet CDBG requirements, all of the owners that participate would have incomes less than 80 percent of the median. ($38,100 annually for one person household, $43,500 annually for two person household.) Some owners may not wish to receive the grant, but the grant opportunity will be extended to all 26 affected owners. Because of CDBG rules on prior work, owners that already made repairs would not be able to receive a grant, nor would grant funds be used for the two affected guestrooms that are owned and managed by the association. III. BASIS OF RECOMMENDATION A. POLICY • The HRA develops programs to meet Richfield's housing needs. • If the HRA supports this proposed program initiative, the City Council would be requested to support the program by reallocating the rehabilitation monies to a special rehabilitation program following a public hearing. • The Department of Housing and Urban Development (HUD) and Hennepin County, Richfield's CDBG providers, support individual communities to solve problems as they deem appropriate. The use of CDBG funds in this instance assists lower income homeowners with a rehabilitation problem in collaboration with the Lake Shore Drive Association and Richfield Bank and Trust. Both HUD and Hennepin County have approved this proposal. Owners need to meet CDBG income eligibility guidelines as outlined by HUD and Hennepin County. B. CRITICAL ISSUES • The HRA's grant program would primarily fund the mold mitigation with the individual homeowners using assets or loans for funding a majority of the repairs. C. FINANCIAL • The CDBG funds provided would be in the form of a $1,000 grant to each eligible homeowner. • The maximum amount of CDBG funds used would be $28,600 (grants and grant administration). • The $26,000 proposed for 26 homeowners compares to the $25,000 maximum amount available for one single-family home through the HRA's Rehabilitation Deferred Loan program. Thus, impact to the regular program would be minimal. D. LEGAL • CDBG funds, procedures and requirements are established and prescribed by HUD and Hennepin County. IV. ALTERNATIVE RECOMMENDATION~S~ • Do not support a rehabilitation program using CDBG funds for the described purpose. V. ATTACHMENTS • N/A VI. PRINCIPAL PARTIES EXPECTED AT MEETING • NA AGENDA ITEM # 3A REPORT # Q STAFF REPORT HOUSING AND REDEVELOPMENT AUTHORITY MEETING FEBRUARY 19, 2002 PAM BOOKHOUT, REPORT PREPARED BY: REHABILITATION SPECIALIST NAME, TITLE BRUCE NORDQUIST, REPORT PRESENTER: HOUSING & REDEVELOPMENT MANAGER NAME, TITLE DEPARTMENT DIRECTOR REVIEW: ~i~ REVIEWED BY EXECUTIVE DIRECTOR: ITEM FOR HRA CONSIDERATION: Consideration of amendments to the contract for rehabilitation project at 6444 Clinton Avenue South. RECOMMENDED ACTION: By Motion: Approve attached amendments to Contract for Private Redevelopment for rehabilitation project at 6444 Clinton Avenue South. III. BACKGROUND The Housing and Redevelopment Authority (HRA) approved the sale of the property at 6444 Clinton Avenue to Affordable Suburban Housing, Inc. (ASH) in August 2001 for construction/rehabilitation and sale to a lower income, first-time buyer. Improvements to the home will include general updates to siding and building systems and a 10-foot addition. The addition will allow for a larger kitchen and bath, making them accessible for the needs of the qualified homebuyer. The value of the home upon completion is estimated to be higher than expected, due to virtually new kitchen and bath space, extra square footage and general increases in Richfield market values. In order to keep the home affordable to the buyer, it is proposed that the HRA convey the property to ASH for the purposes of 021902-6444clinton development, who would then convey to West Hennepin Affordable Housing Land Trust (WHAHLT). WHAHLT would convey the improvements to the homebuyer and would maintain a lease on the land. An attachment explains the purpose of WHAHLT in greater detail. (This lease concept was presented to the HRA in January in relationship to a Minnesota Housing Finance Agency application.) The following conditions describe the land trust model: • The buyer purchases the home but not the land. This creates an affordable opportunity because down payment, closing costs and the first mortgage are all less than in a traditional transaction. • The land is leased from WHAHLT. WHAHLT, and other land trusts like it, are non-profits in the business of managing housing/land assets in a way that makes housing more affordable. The lease is a 99 year renewable lease. The long term benefit is that if the owner/occupant sells, the next buyer will also be able to participate in the land trust model at a lessor cost. • Buyers need to have income at or below 80 percent of the median income ($54,400 for a family of four). This is the same income limit used for homes developed in Richfield with Hennepin Technical College. • The buyer builds equity in the home, pays property taxes, and is able to deduct mortgage interest from federal income taxes. • Part of the property's appreciation upon sale goes to the land trust, and part goes to the seller. • Prospective buyers must attend a training workshop to understand the land trust concept before entering into agreements. The buyer of 6444 Clinton. Avenue attended a workshop earlier this month. III. BASIS OF RECOMMENDATION A. POLICY • Selling the property under the land trust model would still allow the property to be affordable to the buyer, provide affordability to future buyers, and will take the HRA in a new direction in long-term affordability programs. • In January, the HRA approved an application of funds to the Minnesota Housing Finance Agency for land trust projects in cooperation with WHAHLT. Although MHFA funds are not yet available, this is the same concept. B. CRITICAL ISSUES • The rehabilitation/construction and sale of the property to a qualified buyer can proceed. The first amendment to the contract extends the closing and completion dates and the second amendment provides for the transfer to the trust and then the end-buyer. C. FINANCIAL • CDBG funds and HOME funds, both federal funds obtained through Hennepin County, are part of the development. The county has approved the use of those respective funds for this project. • WHAHLT's board met in January and also approved the property as one that would work well as a land trust. The buyer's lender has approved the use of land trusts. D. LEGAL • An amendment to the Contract for Private Redevelopment is attached to allow the transaction. This amendment was drafted by HRA legal counsel. IV. ALTERNATIVE RECOMMENDATION(S~ • Do not authorize the amendments. The HRA could choose to hold a large second mortgage for the value in excess of initial sale price. However, large second mortgages are a burden to lower income buyers. V. ATTACHMENTS • First and Second Amendments to Contract for Development • WHAHLT brochure VI. PRINCIPAL PARTIES EXPECTED AT MEETING • NA _ FIRST AMENDMENT TO CONTRACT FOR PRIVATE REDEVELOPMENT As per the Contract for Private Redevelopment, dated August 20, 2001, the closing date for the sale of land located at 6444 Clinton Avenue South, referenced in Section 3.1, is hereby extended to occur on or before March 31, 2002. Completion of the Improvements, referenced in Section 4.3, is to occur on or before June 30, 2002. Dated: THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF RICHFIELD, MINNESOTA 13v Its Chairperson By STATE OF MINNESOTA COUNTY OF HENNPIN Its Executive Director S.S. The foregoing instrument was acknowledged before me this day of , 2002, by ,the Chairperson of the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota (HRA), a public body corporate. and politic under the laws of Minnesota, on behalf of the HRA. Notary Public STATE OF MINNESOTA COUNTY OF HENNEPIN S.S. The foregoing instrument was acknowledged before me this day of , 2002, by ,the Executive Director of the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota (HRA), a public body corporate and politic under the laws of Minnesota, on behalf of the HRA. Notary Public AFFORDABLE SUBURBAN HOUSING INC. Its STATE OF MINNESOTA COUNTY OF HENNEPIN By: S.S. The foregoing instrument was acknowledged before me this 200 , by of Affordable Suburban Housing Inc., its day of Notary Public SECOND AMENDMENT TO CONTRACT FOR PRIVATE REDEVELOPMENT _ THIS AMENDMENT, made and entered into as of the 19th day of February 2002 by and between Affordable Suburban Housing Inc., a Minnesota corporation ("Developer") and the Housing and Redevelopment Authority in and for the City Of Richfield, a Minnesota public body corporate and politic ("HRA"). WITNESSETH: WHEREAS, the HRA and Developer did on the 20th day of August 2001 execute that certain document entitled Contract for Private Redevelopment ("Contract") for a construction/rehabilitation project at 6444 Clinton Avenue; and WHEREAS, the closing date referenced in Section 3.1 and the completion date referenced in Section 4.3 have been modified as per the First Amendment to Contract for Private Redevelopment; and WHEREAS, the Developer has agreed to sell the development to the Homeowner, as defined; and WHEREAS, the Homeowner has been approved by a mortgage lender for a specified mortgage amount; and WHEREAS, the development has been appraised at an amount higher than expected; and WHEREAS, the HRA has determined that the value in excess of initial purchase price would be too large for a first time lower income homeowner to assume without an alternative form of security; and WHEREAS, to keep the project affordable, and to make the size of the second mortgage amount reasonable, the HRA will convey to Developer for the purposes of construction and remodeling, and Developer will convey the Property to West Hennepin Affordable Housing Land Trust, a private, non-profit Minnesota 501(c)(3), who will convey the Improvements to the Homeowner. NOW THEREFORE, based upon the mutual covenants and undertakings of the parties, the Contract is hereby amended as follows: 1. Section 3.1 is amended to read as follows: Sale of Property to Developer. The HRA is the fee owner of the Property. The HRA agrees to sell the Property to the Developer, and the Developer agrees to purchase the Property from the HRA in "as-is" condition. The Developer agrees to convey the Property to West Hennepin Affordable Housing Land Trust (WHAHLT) upon completion of the Improvements, and WHAHLT will subsequently convey the Improvements to the Homeowner according to the terms of a Ground Lease from WHAHLT to Homebuyer ("Ground Lease"). The sale of the Property to the Developer is conditioned upon the Developer providing evidence satisfactory to the HRA prior to closing that the Developer has entered into an agreement to quit claim Developer's interest in the Property to WHAHLT, and has provided an executed Ground Lease. The Ground Lease describes the provisions whereby WHAHLT will sell the Improvements to the Homebuyer and will lease the land to the Homebuyer. The HRA agrees to convey the Property to the Developer by Quit Claim Deed in the general form of Exhibit B. The HRA's deed to the Developer will be subject to the Right of Reverter required in Section 8.3 of this Agreement. The purchase price for the Property will be $16,750.00. 2. Section 9.4 is amended to include the following additional language: (c) As to West Hennepin Affordable Housing Land Trust: West Hennepin Affordable Housing Land Trust Attn: Ms. Jan Callison 5101 Thimsen Avenue, Suite 200 Minnetonka, MN 55345 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 IN AND FOR THE CITY OF RICHFIELD, MINNESOTA By Its Chairperson By Its Executive Director STATE OF MINNESOTA COUNTY OF SS The foregoing instrument was acknowledged before me this day of 200 by the Chairperson of the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota (HRA), a public body corporate and politic under the laws of Minnesota, on behalf of the HRA. Notary Public STATE OF MINNESOTA ) SS COUNTY OF ) The foregoing instrument was acknowledged before me this day of 200 , by ,the Executive Director of the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota (HRA), a public body corporate and politic under the laws of Minnesota, on behalf of the HRA. Notary Public AFFORDABLE SUBURBAN HOUSING, INC. By: Affordable Suburban Housing, Inc. STATE OF MINNESOTA ) SS COUNTY OF The foregoing instrument was acknowledged before me this day of 200 by ,the of Affordable Suburban Housing, Inc., a corporation under the laws of Minnesota, on behalf of the corporation. 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