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HomeMy WebLinkAboutCC MINUTES 05301989 Meeting Sheet IIIIIIVIIIVIIIVIIIVIIIVIIIIIIIIIII 101535 t Box: 21 Folder: CC MINUTES AND AGENDAS 1989 Document: CC MINUTES 05301989 • CITY OF ST. ANTHONY SPECIAL MEETING OF THE CITY COUNCIL MAY 30 , 1989 The meeting was called to order at 6 : 05 p.m. with the Pledge of Allegiance led by Mayor Sundland . ROLL CALL Present : Enrooth, Marks , Makowske , Ranallo, Sundland Also Present: Susan VandeirHeyden, Acting City Manager William-Soth, -City Attorney EVERGREEN TOWNHOUSES PROPOSAL Mayor Sundland led the discussion by requesting that Vern Hoium and Ursula Sheehy of Evergreen Development Corporation explain their current proposal . Mr . Hoium reviewed the fact that Evergreen has considered several financing options , including pay-as-you-go tax increment financing, which would have a payback of between • $250 , 000 and $270 , 000 to the developer and a reimbursement of $20 , 000 to the City for their out-of-pocket expenses . He stated that in working with the law firm of Dorsey and Whitney in attempting to draft appropriate documents , an impasse was reached when Dorsey and Whitney would not take a position as to whether or not such notes were tax exempt . He stated that counsel for Evergreen, Holmes and Graven, has stated that the notes can be made tax exempt, although some of the language in the documents drawn up by Dorsey and Whitney must be changed. Evergreen ' s impression is that Dorsey and Whitney feels that there is some exposure to the City if the notes are tax exempt, although Evergreen questions that assumption. Mr . Hoium summed up the City ' s alternatives as follows : 1 . pay-as-you-go tax increment financing; 2 . regular G.O. bonds; 3 . abandonment of the project by Evergreen. He speculated that the cost of floating regular G.O. bonds would be in the neighborhood of $450 , 000 , and that the City might save itself $170 , 000 to $180 , 000 with the pay-as-you-go tax increment financing proposal . He asked that the City decide whether or not they want to take any risk . • 2 • Mr . Soth asked to be allowed to clarify Mr . Hoium' s explanation of the proposal . He stated that in the way the developer proposed to structure the transaction Dorsey and Whitney concluded that they could not give an opinion that the notes were tax exempt . They then offered to permit the developer ' s own counsel to give such an opinion to the investors . Developer ' s own counsel apparently concluded that they could not give such an opinion, either. At that point the suggestion had been made that the problem could be overcome by having the City do the soil correction work . Mr . Soth had advised against that because of the liabilities involved. He said he understood 'that since that time a proposal had been made whereby the developer could still do the soil correc-tion--Work , but- that the - notes would not run "to the developer but would run directly to the investors , solving the tax exemption problem. He raised the question of whether there were, however , sufficient investors to purchase the notes . Mr . Hoium responded that they had stopped seeking investors because of those uncertainties , and stated that they had never intended that the notes run to Evergreen but had always intended that they run directly to the investors . • Mr. Soth indicated that, because the City would be doing business directly with Evergreen, the City would prefer that the notes run to Evergreen, but that the City would be agreeable to having the notes run directly to the investors if the City was able to obtain adequate protections . In that case, the investors would sign investor ' s letters acknowledging that the City has no liability and Evergreen would indemnify the City against any liability. Mayor Sundland questioned the saleability of the notes . Mr. Hoium responded that it was his feeling that without the tax exemption the notes were not saleable except perhaps at 16 percent, but that with the tax exemption they were possibly saleable at 12 or 13 percent , depending upon financial markets . Council Member Enrooth asked whether there was actually any action that the Council could take in light of the many unanswered questions . Mr . Hoium responded that at this point Evergreen simply wanted to get the Council ' s reaction to the tax exemption proposal , and, if that was not feasible, to the bond issuance proposal . He then offered some statistics about tax revenues to the City from the units , which he projected would total $84 , 683 , providing sufficient revenue for bonds . • 3 • Mayor Sundland expressed his concerns about the element of risk to the City and its taxpayers involved in issuing bonds . He pointed out that the City was not eager to risk its money in the project if private investors were not . Council Member Enrooth stated that because this issue had never before been addressed by the Council that the exact risk exposure to the City was unknown. Ms . Sheehy offered that information that 22 of the 37 units had already been reserved, evidencing interest by the public . Mr . Hoium indicated that up until now, Evergreen had been trying to market the notes under the assumption that they would be tax exempt. He indicated that Holmes and Graven would give -the opinion that the notes were "tax exempt providing the documents were drawn up appropriately. Mr. Enrooth responded that "appropriateness" was a matter of one ' s position . Mr . Soth defined the problem as the City being asked to be responsible for the soil correction work, which he advised against , but stated that the City would consider the proposal if a way could be found around that issue . Council Member Ranallo agreed that the developer should be the one to bear the burden of the responsibility for soil corrections . Mayor • Sundland asked for reaction from the rest of the Council to that comment . Council Member Marks agreed that the City should not be liable for the soil correction work, even though they would like to see the project go ahead. He pointed out that, fortunately, the City is in a secure enough financial position that it does not need to undertake great risks in order to generate revenue . Council Member Enrooth indicated that the Council ' s intention has always been to facilitate such matters as much as possible , but that their prime consideration has always been to minimize or eliminate, preferably, risk to the City. Council Member Makowske offered her support of the opinions voiced by her fellow Council Members , and said that the City can be a partner with developers in ways that would not put it at risk. Mr . Hoium asked that the Council whether, assuming that Evergreen could not sell the notes , the City would consider doing a bonding proposal similar to what was done for Brighton Development . Mayor Sundland asked Mr. Hoium what their position would be if the City refused. Mr. Hoium indicated that their alternatives would be to either abandon • a • the project , or , if a favorable tax exempt ruling were forthcoming, to retest the market and again attempt to sell to private investors . Mr . Soth questioned Mr. Hoium' s use of the term "G.O. bonds . " Mr . Hoium responded that he had misspoken and had meant to say revenue bonds . Mayor Sundland suggested that Evergreen should find out whether or not the notes were tax exempt and saleable before asking the City to issue revenue bonds . Council Member Ranallo pointed out that the investment market was different at the time the City issued bonds for Brighton Development and that the City was not at the same level of risk- in doing-'so at that- time . Mr Soth -asked -Mr . Hoium whether , if there were no investors willing to buy the notes which would be payable solely out of the tax increment revenues , how the situation would be improved by having a regular revenue bond issue if the City were not obligated on those bonds except out of the revenues of the increment . Mr . Hoium responded that they would look for a greater number of investors to invest $5 , 000 apiece . Council Member Ranallo pointed out that the longer the project is delayed the less marketable the homes will become, • comparing the Evergreen situation to the situation. Mr . Hoium responded that they anticipated that a third of the reserved sales would have to be resold, but it was his opinion that interest in the project existed. He felt that interest could be further stimulated by beginning to build as soon as possible before the end of this year ' s construction season. He expressed his wish that the meeting could have been more productive . Mayor Sundland asked that Evergreen pay the City the expenses that the City had incurred to date . Mr. Hoium responded that Evergreen would abandon the project if that were required of them. Mayor Sundland asked for reaction from the Council to Mr . Hoium' s statement . Council Member Ranallo agreed with Mayor Sundland and commented that no further expenses should be incurred at this point . Ms . Sheehy pointed out that the financing had been approved and that they were ready to go with the project . Mr. Hoium emphasized that the impasse was reached when Evergreen decided they could not live with the language in the documents as drawn up by Dorsey and Whitney. • 5 • Mr . Soth pointed out that because Evergreen was now proposing a bond issue, legal and feasibility studies would have to be started from scratch. Council Member Ranallo questioned how the City would be paid for those expenses if such new studies were undertaken and the project did not then go forward. Council Member Enrooth voiced some concern that Evergreen might be blaming Dorsey and Whitney for the language they found unacceptable in the documents , and pointed out that as long as Dorsey and Whitney was drafting the documents they would naturally attempt to protect the City. He further commented that it -was neither his nor the Council ' s intention to kill the project . He reminded the Evergreen representatives that the Council had found the project acceptable as originally structured, and encouraged the attorneys for all parties to draft language to make the project both saleable and tax exempt . Brief discussion was had about the effects of a delay in the project , after which Mayor Sundland suggested that Evergreen obtain their legal opinion on the matter and submit it to the Council . He reiterated that expenses incurred to date must be paid before further expenses were incurred if a new • approach to the project was to be undertaken. Mr . Hoium indicated that he expected an opinion to be forthcoming within the next few days , at least regarding the tax exempt status of the notes . ACTION ITEMS Resolution 89-015 Motion by Makowske , seconded by Enrooth, to pass Resolution 89-015 in support the candidacy of Clarence Ranallo as League of Minnesota Cities Vice President. Aye : Enrooth, Marks , Makowske, Sundland. Abstention: Ranallo. Motion carried. Resolution 89-016 Acting City Manager VanderHeyden distributed copies of the Apache Lease agreement to Council Members . Mr . Soth commented that requested changes in the lease had been made with the exception of 90 days ' free rent . The final terms are free base rent for 90 days but operating • 6 • costs and taxes payable during those 90 days at approximately $3 a square foot . Motion by Ranallo, seconded by Enrooth, to approve the Apache lease agreement . Motion passed unanimously. EVERGREEN TOWNHOUSES PROPOSAL - Further Discussion Council Member Ranallo suggested that the Council review their position on the Evergreen matter. Mr. Soth reviewed thehistory of the development agreement for the Council . He stated that when the pay-as-you-go plan was initially proposed it was acceptable because there was no risk to the City. He stated that approximately six to eight months ago he had prepared a development agreement that did not provide for investor notes but provided that the City would make payments to reimburse the developer for soil correction work as the tax increment revenues came in. Mr. Soth stated that at that point, due to other difficulties , discussions between Evergreen and the City were • temporarily delayed until recently. The agreement was : _ ' changed to allow notes to be sold to investors provided r Evergreen indemnify the City. At that time , Mr. Soth stated, an opinion was requested of Dorsey and Whitney that the notes were tax exempt . Dorsey and Whitney was not able to offer that opinion, nor was counsel for Evergreen. Mr. Soth indicated that further discussion has taken place between the attorneys regarding running the notes directly to ,the investors versus running them to Evergreen. Mr. Soth reported that counsel for Evergreen agreed to explore that possibility, but that their' position on that matter is at this time unknown. Council Members Marks and Enrooth pointed out that the school would be- the beneficiary of approximately half of the revenue generated by the project as proposed, while the City would be a minor beneficiary some twelve years from now. Council Members Ranallo and Marks expressed the view that taxpayers should not be asked to, in effect, subsudize a developer. Mayor Sundland agreed, stating that the City can aid the development process in many ways other than by assuming risk unnecessarily. ST. ANTHONY HOMEOWNER ' S QUESTIONNAIRE • 7 • Council Member Makowske received an item in the mail called the "St Anthony Homeowner ' s Questionnaire, " and asked whether any of the other Council Members had received it. The questionnaire appeared to have been sent by the City of Minneapolis offering energy audits and radon testing under the "Operating Insulation Program. " TENNIS COURT LIGHTING The City Council addressed the concerns of a St . Anthony resident who wrote a letter to Larry Hamer, Director of Public Works , asking fora limit on the hours that the City ' s tennis courts are lighted. Acting City Manager VanderHeyden informed the Council that a timer would be used to turn the lights off and that the timer would have to be set for the same time each night. After brief discussion, the Council agreed that lights on the City ' s tennis courts would be turned off at midnight each night by timer . ADJOURNMENT Motion by Ranallo, seconded by Marks, to adjourn the Special Meeting of the City Council at 7 : 00 p.m. • Motion carried unanimously. Respectfully submitted, Doris Hoskin, Secretary Mayor ATTEST: City Clerk