06-07-2010 Council Minutes (2) - Laserfiche WebLink

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CITY COUNCIL WORK SESSION June 7,2010 APPROVED CITY OF LINO LAKES 2 MINUTES 3 4 DATE : June 7,2010 5 TIME STARTED : 5:40 p.m. 6 TIME ENDED : 11:15 p.m. 7 MEMBERS PRESENT : Councilmember Gallup, O'Donnell, 8 Rafferty, Roeser and Mayor Reinert 9 MEMBERS ABSENT : None 10 lI 12 Staff members present Acting City Administrator Dan Tesch; City Attorney Joseph 13 Langel (part); Community Development Director Michael Grochala; City Engineer Jim 14 Studenski; Public Safety Director Dave Pecchia; Economic Development Coordinator 15 Mary Alice Divine; City Planner Paul Bengtson; City Clerk Julie Bartell (part) 16 17 1. Cottages of Willow Ponds, request from buyer to subordinate city's contract 18 and covenants to HUD (purchaser Chuck Reisenberg,Lino Lakes Housing Limited 19 Partnership)—Economic Development Coordinator Divine explained that the council is 20 being asked to reconsider agreements in place regarding the Cottages of Willow Ponds 21 senior housing project. There is a proposal to purchase the property with the U.S. 22 Department of Housing and Urban Development(HUD) as underwriter and there is an 23 agreement in place that HUD will not accept. The agreement relates to a requirement that 24 the project remain senior housing. She introduced Attorney Steve Bubul of Kennedy and 25 Graven (representing the city) and Mr. Chuck Reisenberg, proposed purchaser of the 26 property. 27 28 Mr. Bubul explained that the agreement in question dates back to 1995 and is tied to the 29 city's dedication of tax increment funds to the project. The tax increment element has a 30 final payment in 2012 but an attached agreement includes a requirement for senior 31 housing at the facility through 2026. It is a situation that HUD will not accept as they 32 always require first position. 33 34 Mr. Reisenberg reported that basically this is a situation where the current property owner 35 wants to move the property due to its tax credit status. The best way to finance a 36 purchase of the property is through HUD. He was ready to close on the deal when the 37 aforementioned agreement with the city to maintain senior housing was found. He 38 wishes to buy this property to keep and enhance it as senior housing. It is common to 39 have income requirements and this housing also has a disabled element. He reminded the 40 council that the situation includes the end of the tax increment on the project as well as 41 the first mortgage coming due, and adding to that the future capital needs that go with any 42 housing project, it could be a challenging situation. Those are all big deals. His group is 43 looking ahead and believes their proposal to purchase the project betters its future 44 financial health. There is a market rate conversion option here and although he doesn't