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HomeMy WebLinkAbout2023 09.11 CCM WORK SESSION9/11/23 -1- MINUTES OF THE PROCEEDINGS OF THE CITY COUNCIL/ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF BROOKLYN CENTER IN THE COUNTY OF HENNEPIN AND THE STATE OF MINNESOTA WORK SESSION SEPTEMBER 11, 2023 CITY HALL – COUNCIL CHAMBERS CALL TO ORDER The Brooklyn Center City Council/Economic Development Authority (EDA) met in a Work Session called to order by Mayor/President April Graves at 9:04 p.m. ROLL CALL Mayor/President April Graves and Councilmembers/Commissioners Marquita Butler, Kris Lawrence-Anderson, Dan Jerzak, and Teneshia Kragness. Also present were City Manager Reggie Edwards, Assistant City Manager/City Clerk Barb Suciu, Community Development Director Jesse Anderson, and Attorney Jason Hill. OPPORTUNITY SITE PHASE 1 UPDATE The discussion for this item began during the Study Session. Community Development Director Jesse Anderson explained that the next step is to continue working with Alatus to proceed with the project as soon as feasible. They will hold discussions with grant agencies regarding the revised timing. Mr. Anderson pointed out his most crucial decision regarding the Ocean Buffet lease. The current extension is set to expire on September 30, 2023. Initially, Alatus agreed to pay the $300,000 lease termination fee, which would be reimbursed through Tax Increment Financing (TIF). There is also a need to pursue special legislation for TIF flexibility in the Opportunity Site because the clock is ticking on the current district, and another year has been lost. Legislation could help Phase 1 of the Opportunity Site along with future phases. Mr. Anderson noted a few options to address the Ocean Buffet lease. First, the City Council/EDA could extend the lease as it has been in the recent past, which would maintain the status quo at the site. The lease has already been extended six times. Another option is to move forward with buying out the lease now. Lastly, the City could allow the extension to expire. Mr. Anderson stated the City may look to extend the lease for the seventh time. It may be the most straightforward action to take. The lease termination fee would be pushed out again to a new Alatus closing date. However, the exact timeline for Alatus is unknown, and the timeline may need to be extended again. There would be continued uncertainty for the existing business. 9/11/23 -2- Mr. Anderson stated the City could opt for a lease buy-out. The City owes a lease termination fee to the tenant that would be paid upon closing with Alatus. Alatus was financing that fee for the City, but the City reimbursed Alatus with TIF. A buy-out of the fee could be negotiated now. The City would need to pay the fee now rather than later. However, the funds could come from existing TIF resources. The lease buy-out eliminates ongoing building management and future lease issues, removing another barrier to the site’s development. It may be preferred by the business to have closure now rather than waiting for an uncertain date in the future. Mr. Anderson added allowing the lease to expire is an option. That would lead to two potential outcomes. First, the tenant could exercise the option to extend the lease for five years and pay fair market rent. Alternatively, the tenant may not exercise its five-year option, in which case the lease would be terminated. If the five-year option is exercised, the site is tied up, hindering future redevelopment for up to five years. If the tenant does not extend the lease, they may close. The City may avoid the lease termination fee in that scenario, but the business has been anticipating this. Councilmember/Commissioner Jerzak stated the lease has been extended several times, and there is no commitment on the site. Terminating the lease would save the City a potential $300,000 while costing closer to $40,000 on the front end. Then, the worst-case scenario is that Alatus drops out, and a minority-owned business would not be forced to relocate. Mr. Anderson explained the lease expiration would likely result in the current tenant doing some deferred maintenance. After that point, there is a potential that the tenant would not be interested in extending the buy-out. Councilmember/Commissioner Jerzak pointed out that the City Council/EDA has been unfairly subsidizing the business. The tenant needs to pay market value or vacate. Also, there is no official commitment from Alatus. Mr. Anderson agreed it is not financially feasible to extend the lease for six months, nor does it support the tenant’s stability. Mayor/President Graves stated she prefers the lease buy-out option. She added she isn’t opposed to seeking out special TIF legislation. Councilmember/Commissioners Butler and Lawrence- Anderson agreed with Mayor/President Graves. Councilmember/Commissioner Jerzak noted he isn’t opposed to the preference of fellow Councilmembers. He suggested offering a fair-market value option for the buy-out as a compromise for all parties. Mr. Anderson agreed the fair-market value suggestion could be discussed with the tenant. Mr. Anderson added the tenant would likely be most interested in a lease buy-out. Councilmember/Commissioner Lawrence-Anderson asked what would happen with the building in the case of a buy-out. Mr. Anderson stated the site would likely be demolished, and the bid could be combined with the demolition of the Target building. 9/11/23 -3- Councilmember/Commissioner Lawrence-Anderson asked what the loss in property taxes would be if the business were to be lost. Mr. Anderson noted the property is EDA-owned, so it should be tax-exempt. However, he would have to confirm that it is in place. Councilmember/Commissioner Kragness asked if the buy-out fee goes down over time. Mr. Anderson stated the buy-out fee is $300,000 according to how the lease was written. However, it may be negotiated if the tenant is motivated to leave. ESTABLISHING A NEW FEE FOR COMMERCIAL VACANT BUILDINGS City Manager Reggie Edwards introduced the item and invited Mr. Anderson to continue the presentation. Mr. Anderson stated the City has a vacant building program for residential and commercial properties. Properties that have been identified by city staff as vacant for 30 days or more are required to be registered. Staff will post the property as a vacant building and send a compliance notice to the owner of record to register. The current fee is $400 for the registration and $195 for the inspection. Both fees are paid together at the time of registration. When a property registers as a vacant building, code enforcement inspectors will complete a drive-by of the property periodically to ensure that the property is maintained and secured. Mr. Anderson explained commercial properties are subject to the exact requirements. However, commercial properties often require additional staff time to monitor and coordinate maintenance with property management companies. Further, due to the time and financial commitment required to re-occupy or redevelop commercial properties, they are also vacant for longer periods than residential properties. There are currently five vacant commercial properties in the City. Mr. Anderson stated City Council/EDA asked for an estimation of staff cost for monitoring the buildings. Code enforcement Staff has a pay rate of $35.81 per hour, not including the cost of benefits. Each visit is about 15 minutes daily, done about once per workday. That makes monitoring a vacant commercial building cost $44.76 per week. If staff monitors that property for an entire year, the cost is $2,327.65. This rate does not include any abatement, temporary securing of the building, or the use of police services for clearing the property or fire services. Mr. Anderson added that if an average of one hour is assumed per week for Community Development staff to notify the property’s owner due to the need for an abatement or temporary securing of the property, the cost would be $1,862.12 annually. The minimal total cost in staff time for monitoring and securing a property would be $4,189.77. This does not include the staff time required for the Brooklyn Center Police Department (BCPD) or Brooklyn Center Fire Department (BCFD) when they are needed to ensure the building’s safety. Mr. Anderson stated when a building requires BCPD services to clear a building or remove individuals from a site, the cost increases. BCPD estimates that clearing a building would require two police officers at a rate of $50 per hour, not including the cost of benefits. Depending on the building, it will take about 15-30 minutes, and if the call requires the officers to document and 9/11/23 -4- write a report, the time would be 30 minutes to 1 hour. The average cost for BCPD services is from $50 to $100 per call. Staff estimates approximately two police visits per month. Staff estimates the annual cost for police service is $1,800. BCFD services are often not needed on routine vacant building calls, but when needed, they are usually related to the fire panel or alarm-related calls. They estimate their cost is a minimum of $200 per call. Staff estimates approximately one fire department visit per month. Staff estimates the annual cost for fire service is $2,400. Mr. Anderson explained that the annual estimated staffing cost for commercial vacant properties is $8,389.38. Due to the increased staff time in monitoring commercial vacant properties, staff would like the City Council/EDA to consider adopting a separate commercial vacant building fee. Other cities in the metro area have a vacant building program. However, few cities differentiate between residential and commercial properties. Minneapolis and St. Paul have the most vigorous vacant building programs, and their fees vary depending on the length of vacancy and size of the building. For example, a vacant commercial building that is 100,000 sq. ft. would cost $1,318.00 in the City of St. Paul. Mr. Anderson stated there are a few options. First, they could continue to charge $400 for the initial vacant building registration fee and $1,000 for the renewal. It would then be $3,000 in the third year. The next option would be to create an initial registration fee of $2,000 with a $5,000 renewal fee. Lastly, the City Council/EDA could create the initial registration fee of $1,000 with a $2,000 renewal fee. Mr. Anderson stated a fee increase can be justified based on the cost of the regular visits made by inspection Staff. However, the higher fee may decrease the likelihood of a property owner voluntarily registering a property. Mayor/President Graves stated the time frame matters. Therefore, it could make sense to keep the initial fee but to increase the charge for each vacancy year. The property value and size also make a difference. A bigger property requires more resources to monitor, but they also likely have more resources to pay for the fees. Councilmember/Commissioner Jerzak stated it is important to keep it simple to keep the taxpayers free from additional burdens. He stated he is open to the staff’s recommendation regarding the fee structure. Councilmember/Commissioner Kragness asked if the fees could be charged upfront as a deposit. Then the fee could be reimbursed if there isn’t a long vacancy. Mr. Anderson said something could be written to allow that process, similar to how the City handles mechanical fees. Councilmember/Commissioner Lawrence-Anderson suggested tiering the renewal fee to promote shorter vacancies—also, the square footage matters because a Wal -Mart shouldn’t pay the same as a small business. Councilmember/Commissioner Butler stated she prefers the first option with the lower registration fee, but the tiered increases over time for vacancies. Mayor/President Graves noted her agreement. 9/11/23 -5- UPCOMING ITEMS • Memorial Policy • Special Assessment Policy/Franchise Fees (referred to Financial Commission) • Beautification and Public Art Commission • Liquor Store 2 • Organizational Chart-Budget work sessions • New and Repeat Type IV Rental License Review (referred to Housing Commission) • Food Truck Ordinance/License • Emerald Ash Borer Policy Review (referred to Park & Rec Commission November) • Opioid Settlement • ARPA Funds • Grants: Revenues & Expenses • Purchasing Policy • Commercial Vacant Building Fees • Interveners Impact • Revisit Resolution 2021-73 ADJOURNMENT Councilmember/Commissioner Lawrence-Anderson moved, and Councilmember/ Commissioner Jerzak seconded adjournment of the City Council/Economic Development Authority Work Session at 9:39 p.m. Motion passed unanimously.