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03-27-1995CITY OF RICHFIELD, MINNESOTA CONCURRENT SPECIAL HOUSING & REDEVELOPMENT AUTHORITY/CITY COUNCIL MEETING March 27,1995 HRA MEMBERS PRESENT: Tom Harms, Chair; Joan Helmberger; Vem Luettinger; Michael Sandahl; and Russ Susag. COUNCIL MEMBERS PRESENT: Martin Kirsch, Mayor; Michael Sandahl; Susan Rosenberg; Russ Susag; and Don Priebe. STAFF PRESENT: James Prosser, City Manager; Steven Devich, Administrative Services Director; Thomas Ferber, City Clerk; Byron Wallace, Community Development Director; Donald Fondrick, Community Services Director; Jack Erskine, Public Safety Director; ~Iliam Fillmore, Liquor Operations Director; and John Dean, City Attorney. Mayor Kirsch and Chair Harms called the Concurrent Special Housing and Redevelopment Authority/City Council Meeting to order at 7:00 p.m. PRESENTATION OF COLORS AND PLEDGE OF ALLEGIANCE Mayor Kirsch led the audience in the Pledge of Allegiance. APPROVAL OF HRA MINUTES M/Luettinger S/Helmberger to a.~prove the minutes of the regular HRA Meeting of Februar..y 28 1995 the minutes of the Concurrent HRA/City Council Meeting of March 13 1995. Motion carried 5-0. Item #1 CONSIDERATION OF RESOLUTION AUTHORIZING PURCHASE OF 7429 DUPONT AVENUE FOR RICHFIELD REDISCOVERED PROGRAM. HRA LETTER NO. 19 Executive Director Prosser reviewed HRA Letter No. 19 recommending that the HRA authorize the purchase of 7429 Dupont Avenue for $45,000 for the Richfield Rediscovered Program. . Special HRA Meeting Minutes -2- ~ March 27,1995 M/Helmberger, S/Luettinger, that the following HRA resolution be adopt~cl, that it be spread in the HRA resolution book and that it be made part o these minutes• HRA RESOLUTION NO. 544 - RESOLUTION AUTHORIZING PURCHASE OF REAL PROPERTY LOCATED AT 7429 DUPONT AVENUE SOUTH Motion carried 5-0: This resolution appears as HRA Resolution No. 544 in HRA Resolution Book No. 4. ~ - Item #2 CONSIDERATION OF MODIFIED SUBORDINATION AGREEMENT; PHASE I CSM. HRA LETTER N0.20 Executive Director Prosser reviewed HRA Letter No. 20 regarding the proposed modifications of the Subordination Agreement with CSM for Phase I of the Shops at Lyndsile. Chair Harms reviewed the proposed modifications and recommended their approval. M/Susag, S/Luettinger to approve the modified Subordination Agreement with CSM for Phase I of the Shops at Lyndale as proposed and to authorize execution of the document_b~th~ HRA Chair and Executive Director. Motion carried 5-0. Item #3' HRA CLAIMS AND PAYROLLS HRA Commissioner Sandahl asked questions about the payment of $19,900 to BCL for an appraisal. Executive Director Prosser indicated the payment was for more than one appraisal and that he would provide further information in the Status and Information report. M/Sandahl, S/Susag, that the following HRA claims and payrolls be approved: FIRSTAR BANK Section 8: 1088 $ 98,800.00 HRA: 7650-7766; 13059-13074; 13399-13438 $ 1,086,019.81 Motion carried 5-0. Special HRA Meeting Minutes -3- March 27, 1995 ITEMS CONSIDERED CONCURRENTLY BY HRA AND C/TY COUNCIL: Item #1 CONCURRENT MEETING WITH CITY COUNCIL TO CONSIDER A RESOLUTION APPROVING HOUSING PLAN AND ISSUANCE OF TAX EXEMPT REVENUE BONDS TO PURCHASE AND RENOVATE CENTURY COURT APARTMENTS. HRA LETTER N0.21 City Manager/Executive Director Prosser reviewed HRA Letter No. 21 regarding the request of Dominium Management Services, Inc. for approval of a housing plan and the issuance of tax exempt revenue bonds to purchase and renovate the Century Court Apartments. Jack Safar, Dominium Management Services, Inc., outlined the proposal for Dominium to purchase and renovate the Century Court Apartments utilizing tax exempt bonds as the finance mechanism. He stated it was the intention of Dominium to position Century Court to maintain the qual~r of housing, maintain its value, and continue to be the largest tax paying property in the City. Terry McNellis, Piper Jaffray, reviewed and answered questions regarding the proposed issuance of tax exempt bonds. He stated the bonds would not have an impact on the City's credit rating or ability to issue other bonds. He stated that credit enhancement would also be required as insurance against default. Mr.~McNellis explained the state bond allocation criteria and potential impact on tax exempt bonds of legislation recently proposed by State Representative Ann Rest. HRA Chair Harms outlined the process used to evaluate this proposal and to address concerns expressed by the public. Mr. Harms discussed his evaluation of the proposal in relationship to the following issues: • The bonds would not be an obligation of the City. • Thy primary benefit to Dominium is the reduced interest rate providing a savings of $3.73 million. • The primary benefit to the City is the negotiated agreement that Dominium will use this savings for the renovation and rehabilitation of the apartment properties. • The purchase and some level of renovation could occur without tax exempt bonds - it is a question of policy for the Council as to whether this is good public policy for the long term maintenance of the property. • Timing of rehabilitation. • Tax credits. • Cash payment replacement for any lost tax revenue to City and School District if tax credits are used. • Credit enhancement. Mr. Harms stated that after evaluating the advantages and disadvantages of this proposal it was his opinion that on balance approval of the tax exempt bonds was a good idea. Special HRA Meeting Minutes -4- March 27, 1995 Ernie Lindstrom, 7406 Fremont Avenue, stated that he had yet to talk to anyone in the community who supported this proposal. He stated there were no obvious signs of need or deterioration to address at Century Court. He stated that other apartments in the City would seem more in need. He questioned the public purpose and benefit to the community. Mr. Lindstrom suggested that the City Council delay or deny the request. He stated that if there is a proven need and an opportunity for input from the public, then the community would support the proposal. He stated if the Council could get even 1/3 of the community to support the proposal, he would support it. He questiolned the State Statute authority and purpose being used to issue the bonds.. Stephanie Galey, Holmes & Graven bond counsel, reviewed the statutory citations and application of the criteria. Prudence Meyer, property owner of 7521 Penn Avenue and 7536 Oliver Avenue, stated these buildings would also benefit from improvements. She stated all apartments in Richfield would need assistance in order to compete with Century Court. She questioned the fairness of providing assistance to only one large property owner, the public purpose of the bonds, and asked that the Oity support a lower tax rate for apartment properties. Arlene Dixson, Highland Management Group, Inc., discussed issues related to whether any value added would be included in the market value, the unfair competition for other Richfield apartments impacting rent levels and tenancy, the public purpose of the bonds, the differentiation between normal maintenance and rehabilitation, equity to other apartment owners, and the mix of tenants. Tim Erlander, 7500 Thomas Avenue, spoke in opposition to approval of issuing the tax exempt bonds. . Steve Lindgren, 7141 Oak Grove Boulevard, asked questions and stated concerns.about the proposal.. ~ . Dave Brierton, Dominium Management Services, Inc. reviewed the State Statute .authority and State allocation program under which Dominium is proposing to use to finance this proposal. He indicated there were M.H.F.A. programs available to assist small apartment owners. Audrey Hansen, 7320 Lyndale Avenue, stated questions and concerns about why Century Court needs so much money for renovation. HRA Chair Harms stated that there is a risk if Century Court is not maintained that it will deteriorate, lose value, and become a problem to the community. Andrew Akins, Premier Properties, questioned whether there were outstanding problems identified from inspections of the Century Court buildings. HRA Commissioner Luettinger questioned the difference between the . rehabilitation estimate of Stuart Shelard~ of $6.8 million and Dominium's estimate of $4.7 million. Special. HRA Meeting Minutes -5- March 27, 1995 Armand Bachman, Dominium Management Services, Inc., stated that Dominium had received firm bids from contractors instead of estimates. HRA Commissioner Luettinger stated that he opposed-the proposed issuance of tax exempt bonds for this project. HRA Commissioner Helmberger asked questions about the tax credit issue and the types of improvements that Dominium intended to make to the properties. She indicated that her feelings slightly lean toward those of Chair Harms. Item #2 CONSIDERATION OF RESOLUTION APPROVING HOUSING PLAN AND ISSUANCE OF TAX EXEMPT REVENUE BONDS TO PURCHASE AND RENOVATE CENTURY COURT APARTMENTS. C.L. N0.81 City Manager Prosser stated that the staff had reviewed the proposal from a technical aspect, whether it meets Rhe statutorial requirements, and that the proposal addresses interests of the community. He stated the City Council must make the broader policy decision of whether there is a public purpose in authorizing the tax exempt bonds for this proposal. Council Member Susag stated that the proposal has some positive aspects but that there did not seem to be enough of a public purpose in light of the fact that most of the improvements are maintenance replacement rather than rehabilitation. He stated that it left the question of what to do for small apartment owners. Therefore, he opposed the proposed approval of the issuance of the tax exempt bonds. Mayor Kirsch stated that it appeared that the residents of the community did not support this proposal at this time, that there was an issue of equity for the smaller apartment owners,.and therefore he would.support denial of the request. . Council Member Priebe stated that the proposal would benefit the 1100 apartment households and the City as a whole as a result but that other benefits are lacking in relation to the risk. He stated he had hoped that the proposal would generate additional tax capacity and revenue, however it appears this would not be the case. He stated that on balance there was not enough benefit demonstrated to support the issuance of the tax exempt bonds. Council Members Sandahl and Rosenberg concurred that there was not sufficient public purpose to support the proposal. M/Susag, S/Rosenberg to denv the reauest of Dominium Management Services Inc for adoption of a resolution adopting a housing program and authorization for the issuance of tax exempt revenue bonds t2,purchase and renovate the Century Court apartments. Motion carried 5-0. Special HRA Meeting Minutes ADJOURNMENT -6- The HRA meeting was adjourned by unan Date Approved: 4./17/95. ~~ Thomas P. Ferber City Clerk March 27, 1995 1 Thomas E. Harms Chairperson