06-19-1995CITY OF RICHFIELD, MINNESOTA
HOUSING AND REDEVELOPMENT AUTHORITY MEETING
June 19, 1995
HRA MEMBERS PRESENT: Thomas Harms; Michael Sandahl; and Russ Susag.
HRA MEMBERS EXCUSED: Joan Helmberger and Vern Luettinger.
STAFF PRESENT: James D. Prosser, Executive Director; Steven Devich,
Administrative Services Director/ Acting City Clerk; and
Byron Wallace, Community Development Director.
Tlie meeting was called to order by Chair Harms at 7:00 p.m.
APPROVAL OF MINUTES
M/Susag, S/Sandahl to aR~ove the minutes of the Saecial HRA meeting of Mav
~~~.
Motion carried 3-0.
ITEM #1 OPPORTUNITY FOR CITIZENS TO ADDRESS THE HRA
No one wished to address the HRA.
ITEM #2 CONSIDERATION OF PROPOSED CONVEYANCE OF THREE
RENTAL APARTMENT COMMUNITIES TO HRA AND PURCHASE OF
REPLACEMENT RESERVE. HRA LETTER NO. 37
Executive Director Prosser reviewed HRA Letter No. 37 regarding the proposal
from the Sage Company to transfer to the HRA ownership of the following three
apartment communities:
Hampton Place 620-735 East 78th Street 221 units 13 buildings
Heritage Square 900-1000 East 78th Street 150 units 4 buildings
901-1001 East 77th Street
HRA Meeting Minutes -2- June 19, 1995
Crestwood 7720-40 Fourth Avenue 51 nits 3 uildings
TOTAL 422 units 20 buildings
Mr. Prosser stated each community has a replacement reserve, which in the aggregate
totals approximately $750,000, that are intended to help cover the cost of significant
capital improvements when needed such as roof or boiler replacement.
F~cecutive Director Prosser stated that to accept the apartment buildings as a gift,
the HRA must purchase the reserve fund from .Sage Company. He described a
tentative proposal for the HRA to pay for the reserve fund from rent revenues at the rate
of $160,000 per year for two years with the balance due in the third year. The interest
rate would be 5.5%.
Mark Ruff, Publicorp, Inc., stated that Publicorp, Inc. had reviewed the historical
income and operating expense history of the apartment units, reviewed the Stuart
Companies projections for the apartment units, and conducted a feasibility analysis of
the acquisition of the units. He stated that based upon this analysis, the financial risk
to the HRA is relatively small. He indicated the outstanding debt on the buildings is
significantly less than the appraised value of the apartment units. Mr. Ruff stated that
the occupancy rate was historically high and the units were in good shape for their
age. He stated the net operating income from the units is expected to be at least
130% of debt service, which is 10% to 20% higher than the industry standard. Mr.
Ruff responded to detailed financial questions related to the mortgage amount,
minimum payment in lieu of taxes, operating costs, debt service, optional payments in
lieu of taxes over the minimum, repayment of the replacement reserves, appraised
value per unit, revenues, and cash flow. Mr. Ruff stated there appears to be no
financial barriers to the proposed transactions. The HRA and Council indicated a
desire that the financial information described by Mr. Ruff be provided to them in
printed form.
Stuart Nolan, Stuart Properties, discussed the possible motivation for Sage
partnerships to transfer ownership of these apartment properties to the Richfield HRA.
He concluded that the tax benefits, coupled with not having to expose the financial
details of the buildings to the marketplace and not having to pay a real estate
commission, are the most likely motivations for the Sage proposal. Mr. Nolan stated
he believed that the income tax benefits to Sage were of no consequence to the HRA
and that the HRA should only consider the benefits of the transaction to the HRA
which appeared to be considerable. Mr. Nolan recommended that the HRA operate
the buildings as a business, pay off the replacement fund as soon as possible, and
pay an amount in excess of the minimum payment in lieu of taxes. He suggested a
business plan whereby the HRA hire a professional management company to operate
the buildings at market rents with appropriate maintenance and operating policies. He
discussed the potential for the use of the excess cash from the operation of the
properties. Mr. Nolan answered questions from the HRA and City Council on issues
related to this proposal regarding occupancy, appraisal value, management
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HRA Meeting Minutes -4- June 19, 1995
informational item at the July 10 City Council meeting would also be beneficial in
informing the public about this issue.
hRA Motion: M/Susag, S/Sandahl to approve the concept of the ap nt
community gift and ourcha a of the reserve fund: and to:
1. Set the July 17, 1995 HRA meeting to consider the formal approval of the
Agreement;
2. Invite the City Council to schedule a special meeting for that same date and to
hold the public hearing on the housing plan and program;
3. Request the City Council on July 17 to approve the special legislation recently
enacted by the State Legislature;
4. Direct staff to prepare the necessary documents implementing the special
legislation for presentation to the HRA as soon as practicable following City
Council approval of the special legislation should the approval be forthcoming;
and,
5. Direct staff to prepare a recommendation for presentation to the HRA on July 17
for a property management company.
The HRA motion carried 3-0.
ITEM #3 CONSIDERATION OF INTERIM REPORT ON "TOGETHER WE CAN"
PROGRAM FROM JOHN SZARKE AS PART OF COMMUNITY
APARTMENT PROGRAM, HRA LETTER N0.38
John Szarke presented a brief report on the 'Together We Can" program as part
of the Community Apartment program as described in HRA Letter No. 38.
He stated that final recommendations will be presented at the August HRA
meeting.
ITEM #4 CONSIDERATION OF RESOLUTION AUTHORIZING PURCHASE OF
PROPERTIES FOR RICHFIELD REDISCOVERED: 7037 OAKLAND,
7241 SECOND, 6812-13TH, 6432-15TH AND 6933 QUEEN AVENUES,
HRA LETTER N0.39
Executive Director Prosser reviewed HRA Letter No. 39 regarding consideration
of resolution authorizing purchase of properties for Richfield Rediscovered:
['
HRA Meeting Minutes -5- June 19, 1995
• 7037 Oakland Avenue;
• 7241 Second Avenue;
• 6812-13th Avenue;
• 6432-15th Avenue; and
• 6933 Queen Avenue.
M/Sandahl, S/Susag that the following resolution be adopted: that it be spread in
the resolution book and that it be made part of these minutes:
RESOLUTION NO. 551
RESOLUTION AUTHORIZING PURCHASE OF REAL PROPERTY LOCATED AT:
7037 Oakland Avenue
7241 Second Avenue
6812-13th Avenue
6432-15th Avenue
6933 Queen Avenue
Motion carried 3-0. This resolution appears as Resolution No. 551 in Resolution
Book No. 4.
ITEM #5 CONSIDERATION OF STATUS REPORT BY HENNEPIN TECHNICAL
CENTER ON CITY PROJECTS, HRA LETTER N0.40
Executive Director Prosser reviewed HRA Letter No. 40 regarding consideration
of status report by Hennepin Technical Center on City projects.
Dave Smith, Chair of Building Trades Department for the Hennepin Technical
Center addressed the HRA concerning the status of projects undertaken in Richfield
during the past couple of years.
Council Member Sandahl stated that he had received numerous citizen
complaints regarding Vo-Tech projects.
Council Member Susag stated that he was appalled by the appearance and work
standards used on recent Vo-Tech projects, particularly on the project at 70th and
Nicollet.
Chair Harms stated that the relationship between the HRA and Vo-Tech in the
past has been generally a very positive one and that he would like to see it restored to
that level.
HRA Meeting Minutes -6- June 19, 1995
ITEM #6 EXECUTIVE DIRECTOR REPORT
Executive Director Prosser reported on the car wash site on 18th Avenue and
66th Street. He indicated that the potential now exists that the Gold Eagle Cleaners
site may also be included. There was discussion by the HRA concerning any potential
assistance the HRA staff may provide regarding the marketing of the property.
It was the consensus of the HRA that the City may assist in marketing the
property.
ITEM #5 CLAIMS AND PAYROLL
M/Sandahl S/Susag that_the following claims and payroll be ap rp Quad:
FIRSTAR BANK
Checks: HRA: 7990-8109; 13505-13538; 13638-13677 $626,158.39
Section 8: 1091 $ 19,000.00
Motion carried 3-0.
ADJOURNMENT
The meeting was adjourned by unanimous consent at 9:00 p.m.
Date Approved:
7/17/95
i 'rc.(~,
eve L. Devich
Acting City Clerk
Thomas E. Harms
Chair _ ~
~~,
. Prosser
s Director