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HomeMy WebLinkAbout1994 02-22 CCM Special Session MINUTES OF THE PROCEEDINGS OF THE CITY COUNCIL WORK SESSION OF THE CITY OF BROOKLYN CENTER IN THE COUNTY OF ]HENNEPIN AND THE STATE OF MINNESOTA SPECIAL SESSION FEBRUARY 22, 1994 CITY HALL CALL TO ORDER The Brooklyn Center City Council met in special work session and was called to order by Mayor Todd Paulson at 7 p.m. ROLL CALL Mayor Todd Paulson, Councilmembers Celia Scott, Dave Rosene, and Barb Kalligher. Also present were City Manager Gerald Splinter, Community Development Director Brad Hoffman, Planning and Zoning Specialist Ron Warren, and Community Development Specialist Tom Bublitz. Councilmember Kristen Mann was absent from the meeting. Also in attendance were Sid Inman and Mark Ruff, representatives of Publicorp, Inc. The City Manager explained Publicorp was present this evening to review the technical aspects of tax increment and essential function bond use in the City of Brooklyn Center. He explained he would like to defer their presentation until later in the meeting and proceed with staff presentations on the Willow Lane area. The Community Development Director explained staff would like to focus on the redevelopment issues around the Willow Lane area and the 69th Avenue and Brooklyn Boulevard area. He stated staff is seeking direction from the City Council on redevelopment issues in both these areas. The Community Development Director stated one of the issues staff would like to discuss with the Council is the possibility of placing the entire city in a redevelopment project area. He proceeded to explain this provides the greatest amount of flexibility in the potential use of tax increment financing and other financing tools. The Community Development Director reviewed a proforma he had prepared from a private sector perspective. He pointed out the Willow Lane redevelopment project cost is approximately $8.845 million. He reviewed an example of a proforma that could be developed by a private sector developer based on the fair market value of the property which is what lending institutions would loan against the project. Private lending institutions 2/22/94 -1- will loan approximately 70% loan to value ratio at approximately 9% interest for 20 to 30 years. Under this scenario, approximately $3.570 million would be loaned against the $8.845 million total project cost with an equity requirement on the part of the developer for $1.905 million. He pointed out even with the loan and the equity participation on the part of the developer, the gap for needed financing is $3.37 million which essentially means this type of redevelopment project would not provide the return on investment that private developers would need, hence the need for public sector participation to make the redevelopment a possibility. PRESENTATION BY PUBLICORP ON TAX INCREMENT LAW AND ESSENTIAL FUNCTION BONDS AND THEIR USE IN BROOKLYN CENTER The Community Development Director introduced Sid Inman with Publicorp, Inc. who explained Publicorp is a company specializing in public housing financing. He explained Publicorp has worked with numerous metropolitan cities including Brooklyn Park and Richfield along with a number of cities in Greater Minnesota. Mr. Inman explained the basic mechanics of tax increment requires that cities establish project areas within which tax increment financing districts are organized. He pointed out cities can create numerous project districts within a city or as a number of cities are doing, include the majority of the municipality within the project area. Tax increment financing districts are created within the designated project areas. Mr. Inman reviewed the history of tax increment financing legislation since 1979, pointing out numerous changes and restrictions in the law since that time and emphasized the fact we are now in the most restrictive period of tax increment financing. One of the major tests a tax increment district is the "but for" test which means the philosophy of tax increment is such that but for the use of tax increment the development would not have occurred. He then pointed out the numerous types of tax increment districts that can be created including redevelopment, renewal and renovation, economic development, housing, and soils condition districts. As an example of how a tax increment project works, he pointed out a housing redevelopment district can be set up for a period of 25 years and at the outset a base value of taxable property is established within the district, and the tax increment is calculated from the base value. He pointed out the tax increment district may not receive income for a period of up to three years, and the 25 -year period is calculated from the date of the receipt of the first increment. Mr. Inman also pointed one of the most restrictive features of tax increment law which is the local government aids penalty which means cities are penalized and lose the amount of local government aid in direct relationship to the amount of tax revenue used in the tax increment district. 2/22/94 -2- Mr. Inman explained further that the use of tax increment funds relies on the present value theory which determines the gap needed to be financed with tax increment financing. Mr. Inman explained there are various ways to use tax increment one of which is a as you xP Y � pay Y go which means the project costs are paid off with the tax increments as they come in and another way is to finance with the use of bonds. He explained Brooklyn Center will be more likely to finance with bonds rather than to pay as you go. Mr. Inman also pointed out the restrictions on the spending of tax increment dollars and explained only 25% of tax increment generated within a district can be used outside that district. He further explained a tax increment financing plan, which is required of all tax increment projects, is prepared to serve as a budget and as a development guide. Mr. Inman emphasized one important fact with regard to tax increment financing which is school districts do not lose funding through the use of tax increment financing. He pointed out the more tax increment financing that is within a specific district, the more the state pays in school aids to make up the difference in the tax increment lost. He emphasized the fact school districts are not financially affected in a negative manner by the use of tax increment. DISCUSSION ITEMS WILLOW LANE REDEVELOPMENT The Community Development Specialist reviewed a memorandum on the potential redevelopment of the south Willow The in 1 e in th n i al Lane area. e c ud d e ote t P P redevelopment area included the Willow River Apartments which is the 18 -unit apartment building now owned by the EDA, the Brookdale Motel, the Premier Mechanical property, and Lyn River Apartments, which is an 84 -unit apartment complex consisting of seven separate apartment buildings. He pointed out the total acreage of the potential redevelopment area is approximately ten acres. The Community Development Specialist also briefly reviewed a description of each of the potential redevelopment parcels including their current assessed value and likely acquisition costs. The total estimated acquisition cost of all the parcels in the redevelopment area is approximately $3.724 million. The Community Development Specialist reviewed several factors affecting potential redevelopment of this area including the following: • The Brooklyn Center EDA already owns the 18 -unit apartment complex at 6525, 27 and 29 Willow Lane North. This building is scheduled for demolition later this spring. 2/22/94 -3- • The issue of the lawsuit in response to the City's denial of the application for the Holiday gas station is also a factor influencing the potential redevelopment of this area. • The emergence of a neighborhood organization formed in response to the proposed development at the Premier Mechanical site also affects the redevelopment scenario for this area. The primary focus of this neighborhood group is to assure that any development of the area adjacent to their neighborhood will be compatible with their existing neighborhood. Presently, the neighborhood group has indicated the only type of development that would seem compatible with their neighborhood with regard to multifamily housing is senior citizen housing. • The Brooklyn Center EDA has been awarded a grant of $275,000 as part of the Minnesota Housing Finance Agency's (MHFA) Community Rehabilitation Fund Grant Program. The rants were funded on a competitive basis �' g P statewide, and the City's award provides funds that can be used for acquisition or demolition of properties in the project area. • The City's Housing Maxfield points out the Willow Lane area is Y P g Stud indicated as a high priority for redevelopment with multifamily housing. The Community Development Specialist pointed out staff has prepared an estimate of the cost for senior citizen housing on the Willow Lane redevelopment area which totals approximately $3.624 million for 100 to 120 units of senior citizen housing. With total acquisition and redevelopment costs approaching $8 million, the Community Development Specialist pointed out the need to undertake financing for the project. He explained the available dollars from existing revenue sources the City can use is $275,000 from the MHFA grant and approximately $750,000 from the EDA Reserve Fund. The remainder of the project, including acquisition and construction, must be financed from other sources. The Community Development Specialist explained in order to proceed with the project, one of the important pieces of information to prepare is a market study for senior housing. He pointed out in addition to defining the senior housing needs of the area, the market study is essential in order for any possible bond financing to be part of the project. Underwriters require market studies before they can consider any financing. The estimated cost of a marketing study of this nature is approximately $6,500. The City Manager introduced Mark Ruff of Publicorp who reviewed the use of essential function bonds for municipal housing projects. Mr. Ruff explained before 1986, tax breaks were given on rental property at a much greater rate than now and developers could get tax exempt bonds to finance their projects. Currently, there are few tax breaks and lenders are reluctant to lend money on multifamily housing projects since rents have not shown growth over the past number of years. 2/22/94 -4- Mr. Ruff pointed out an example of a project undertaken by local government in Northwest Minnesota where the Northwestern Minnesota HRA is creating 400 units of multifamily senior housing through the use of essential function bonds. Essential function bonds require a City or other public agency to own the facility which is financed by the bonds. He cited other examples of jurisdictions using essential function bonds including Dakota County ERA, Washington County HRA, and the cities of Faribault, Hibbing, and Virginia. He explained in many cases the excess cash flow from the essential function bond projects can be used to create new projects in other areas of the city. He pointed out the City has control of the project and receives the benefit of the cash flow when the essential function bonds are used to finance a project. He further explained most essential function bond projects have been done with revenue bonds and no G. O. backing is required but without G. O. backing the bonds receive a higher rate, currently seven to eight percent without G. O. backing. With G. O. backing, the interest rates can be driven down to five to five and one -half percent currently. Mr. Ruff explained Publicorp prepared a variety of financial scenarios assuming an essential function tax exempt bond issue and other financing for the redevelopment of the Willow Lane area into 120 units of senior housing apartment units owned by the EDA. He explained under these scenarios, rents for the two- bedroom units are expected to be $640 to $650 per month. He reviewed the four types of financing scenarios for the project which included various combinations of revenue housing bonds, equity, and general obligation tax increment bonds. He pointed out the scenario providing the most cash flow for the project is one where a G. O. housing bond is issued for $5.125 million, a G. O. tax increment bond is issued at $3.3 million and the equity participation is $1.25 million for a total project cost of $9.180 million and an annual cash flow in year five after debt service of $93,000. The City Manager emphasized the fact the project proformas are developed on all projects to present a possible financial scenario but that in reality the actual financing experience is not always what the proforma estimates it to be, and oftentimes reality performs much worse than the proforma. He pointed out these project proformas presented this evening are similar to those prepared for the municipal golf course and the Earle Brown Farm projects. He emphasized the need for thorough financial analysis of any financing scenario proposed for redevelopment of the Willow Lane area. The City Manager pointed out one of the things essential function bonds provides is public ownership which assures the continued occupancy of any building constructed to continue as senior housing. He emphasized public ownership is needed for essential function bond financing and that this public ownership would assure that senior citizen housing remains in the area. The Community Development Director explained to Councilmembers that in order to begin the redevelopment process, the staff needs direction from the City Council to do a market study and to determine if the financing scenarios discussed this evening have a market. 2/22/94 -5- Councilmember Rosene inquired whether handicapped occupants could be put in the housing project along with seniors. The Community Development Director speculated this may be possible but would need to be analyzed carefully. Councilmember Scott pointed out the City of Minneapolis' experience has shown that seniors tend to want to live with other seniors only and the first thing the City would need to do is to conduct a market study to determine just what kind of market there is for this type of senior housing. She pointed out there currently are waiting lists for senior projects in the northwest suburban area. Mr. Ruff encouraged the Council and staff to tour some of the senior citizen buildings built in Dakota County which will help provide the City with an idea of what will and will not work in senior housing. 69TH AND BROOKLYN BOULEVARD REDEVELOPMENT The City Manager explained Hennepin County will be receiving an ISTEA grant to provide funds for among other things, the acquisition of properties along Brooklyn Boulevard from Bob Ryan Olds to 70th Avenue. He explained the City must also participate in the costs of these takings. Next, the Planning and Zoning Specialist reviewed his memorandum regarding the 69th and Brooklyn Boulevard redevelopment area. He proceeded to review his memo relating to the redevelopment potential and redevelopment issues involving the 69th and Brooklyn Boulevard area. Specifically, he pointed out the area in question is the east side of Brooklyn Boulevard from 68th Avenue northerly to just south of the site of the Boulevard Office Condominiums north of 70th Avenue. He explained the Brooklyn Boulevard enhancement study being undertaken by BRW has provided a redevelopment scenario that would include a major redevelopment involving approximately 110,000 to 120,000 square feet of retail in the 69th and Brooklyn Boulevard area. He also pointed out the ISTEA grant funds would provide for a widening and upgrading of Brooklyn Boulevard. The Planning and Zoning Specialist pointed out for discussion purposes the area has been divided into three general subareas including the area south of 69th, the area north of 69th to 70th and east to June, and the area north and easterly of 70th Avenue. He proceeded to review the potential parcels to be acquired for redevelopment of various areas on 69th and reviewed discussions with St. Al's church and their projected needs in terms of property currently owned by the church. He explained staff has had discussions with a developer representing the owner of a number of parcels in the northeast quadrant of 69th and Brooklyn Boulevard, who has an interest in doing a redevelopment project involving a retail development on their land. He 2/22/94 -6- explained these owners are willing to pursue land acquisition for an expanded site but are seeking City involvement and assistance in the redevelopment. They are seeking creation of a redevelopment district and tax increment financing district among other things. The projected timeframe for their project is to pursue the land acquisition through this year, have plan approvals in early 1995, and development in the spring and summer of 1995 if possible. He explained representatives of the owners of this area have reviewed the BRW concept and may have some interest in pursuing it or at least stage or phase their development so as to be compatible with the larger redevelopment concept. The Planning and Zoning Specialist explained before pursuing or committing to any redevelopment project in this area, staff believes it is necessary to obtain a professional market analysis of whether or not the market can absorb the additional commercial uses and a potential senior citizen housing proposal from St. Alphonsus Church. He explained it is projected the land acquisition and relocation costs for acquiring all of the property in the BRW concept along with the property in the area south of 69th and east of Brooklyn Boulevard, would be approximately $5.19 million. He explained staff has had discussions with a developer interested in the northeast quadrant of Brooklyn Boulevard which is outlined in a letter from Mr. Peter C. Carlson, President of Chesapeake Partners of Minneapolis, Inc. and which is included in the Council's packets. He explained if the city participates in any facet of redevelopment of this area, the City must assure its involvement is coordinated with the provisions of the ISTEA grant. The Planning and Zoning Specialist reviewed sic items which he believed would be necessary direction from the City Council regarding redevelopment in the 69th and Brooklyn Boulevard area as follows: 1. Contract with Maxfield Research Group to conduct an economic analysis involving the ability to absorb approximately 110,000 to 120, 000 square feet of additional commercial retail space in the city. 2. Determine if the City Council is willing to condemn property, if necessary, to assemble together the properties necessary for redevelopment. This may include condemning single family homes and possibly some church property as well as commercial property. 3. Determination in whether or not the BRW concept for redevelopment of an expanded area is an acceptable concept that should be pursued. 4. Determine the willingness on the part of the City Council to consider expanding the general commerce area east to include homes along the east side of June Avenue. 2/22/94 -7- 5. Determine the willingness of the City Council to pursue the amendment of the City's Comprehensive Plan to accommodate expanded commercial or mixed use development in these areas. 6. Determine the willingness of the City Council to consider the establishment of a tax increment financing district as a tool to assist in this redevelopment. In response to the presentation given by the Planning and Zoning Specialist, Councilmember Scott expressed a concern about traffic going west on I -694 to go north on Brooklyn Boulevard. Former Director of Public Works Sy Knapp pointed out the ISTEA project will address the area south of 65th to north of 70th and that Councilmember Scott's concern is a major issue in the ISTEA project. The Community Development Director stressed the need to assess the market demand for the uses contemplated in the Brooklyn Boulevard redevelopment area. Mayor Paulson stated he would like to see what uses would be contained in this proposal, and he would like to look at other concepts to assure we are following the concepts and recommendations contained in the Brooklyn Boulevard Study. The Community Development Director commented the Chesapeake Group is not in complete agreement with the BRW recommendations and pointed out the Chesapeake Group represents the Lane's who own a large portion of the potential redevelopment area. He explained their involvement is important since they already control a large percentage of the property. He emphasized the need to prove a market for the retail use and then shop the development of it. He also pointed out the need to determine what can or cannot be absorbed in retail and senior housing and then start designing a project around the market potential. He also pointed out the development of this area could be staged in phases. Councilmember Scott stated she believes the Council cannot do anything until some type of market analysis is done in order to put a project together. She emphasized the need for a market study on the Willow Lane and the Brooklyn Boulevard area. In addition to the market study, the Community Development Director explained staff would like to bring back a resolution for the Council to consider which would put the entire city or a major portion of the city in a redevelopment project area. There was a motion by Councilmember Scott and seconded by Councilmember Kalligher to direct staff to prepare a resolution which would place the entire city in a redevelopment project and housing project area. The motion passed unanimously. There was a motion by Councilmember Kalligher and seconded by Councilmember Scott to direct staff to obtain proposals from Maxfield Research Group for the Council's 2/22/94 -8- consideration for market studies of the Willow Lane and 69th Avenue and Brooklyn Boulevard areas. The motion passed unanimously. The Community Development Director inquired of the Council whether the Council would consider or support condemnations of properties on the east side of June Avenue. Councilmember Scott replied she would want to see some development proposal for the area before she agreed to this and would like to see the market studies first. She explained she is not yet ready to commit the Council to condemnation but would not rule it out at the present time. HUMBOLDT STOP SIGN LAYOUT The City Manager reviewed a memorandum from City Engineer Mark Maloney regarding the stop sign layout and pointed out the City Engineer indicates stop signs cannot be placed on Humboldt without impeding ingress or egress from driveways. He pointed out specific areas of concern include: • Humboldt at 69th Avenues • 70th Avenue North, 7001 and 7007 • Humboldt and 72nd Avenues drives directly across from 72nd • 73rd and Dupont Avenues, problem driveway here needs to work with Brooklyn Park to get Brooklyn Park's cooperation in locating this stop sign There was a motion by Councilmember Kalligher and seconded by Councilmember Rosene to approve the layout of the stop signs on Humboldt Avenue as provided by the City's engineering staff. The motion passed unanimously. TOMBSTONE TOBACCO ADVERTISING FOR CENTERBROOK GOLF COURSE AND LIQUOR STORES In discussion of this item, Councilmember Rosene stated he believes the City should set the pace with regard to signs at the City -owned liquor stores. The City Manager replied he would like to talk to Liquor Stores Manager Jerry Olson regarding this item before making a recommendation. There was a motion by Councilmember Rosene and seconded by Councilmember Scott to direct staff to bring the proposal regarding tobacco advertising back to the City Council for consideration after the City Manager consults with the Liquor Stores Manager. The motion passed unanimously. Mayor Paulson expressed a concern that a resident had informed him that he was able to buy a gun at a City auction. The City Manager replied handguns can only be purchased by sworn police officers, and he was not aware of any other types of weapons sold at City auctions. He pointed out there may have been rifles sold at City auctions in the past. Councilmember Rosene requested staff to review their policy of selling firearms at City auctions. 2/22/94 -9- The City Manager reviewed the Council's action on Humboldt Avenue from the last special Council meeting and asked the Council to clarify some of their decisions. He inquired whether the Council wants to have this item back on as an agenda item at the next Council meeting. A Humboldt Square business owner discussed the issue of State Aid on Humboldt Avenue. He explained the City needs as much outside financing as possible and needs to look at the entire length of Humboldt Avenue as opposed to just a small portion. He explained as a businessman in Humboldt Square, he thinks the Council should look at a compromise between the needs of a through road and the needs of homeowners. He explained the businesses in Humboldt Square provide a needed space for many services that are needed and that could not be provided economically elsewhere. He explained Humboldt Square is an asset to the City and not a liability if it is operated properly. In continued discussion of the Humboldt Avenue project, an additional issue brought up by the City Council was to have the City Manager check whether curvilinear streets would mean a loss of trees. In conclusion of the discussion on Humboldt Avenue, the City Manager stated he would take the motions and recommendations off the tape of the special meeting for Monday night to review Council directions on this issue. ADJOURNMENT There was a motion by Councilmember Kalligher and seconded by Councilmember Rosene to adjourn the meeting. The motion passed. The Brooklyn Center City Council adjourned at 10 p.m. /VI Deputy City Clerk Todd Pa son, Mayor 2/22/94 -10-