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HomeMy WebLinkAboutHRA MINUTES 10291985t CITY OF ST. ANTHONY • . MINUTES OF HOUSING AND REDEVELOPMENT AUTHORITY SPECIAL MEETING October 29, 1985 The meeting was convened at 5:40 P.M. with Chairman Sundland, Secretary/Treasurer Marks, and Commissioner Makowske present. Absent: Vice Chair Enrooth (arrived at 5:50 P.M.) and Commissioner Ranallo. Also present: David Childs, Executive Director; William Soth, Attorney; and Jerry Gilligan, Bond Consultant. Mr. Gilligan first addressed the bonding issues he perceived would be involved if rental apartments were constructed instead of condominiums in the_fina.Lphases_of the Kenzie Te_rr_ace Redevelopment project, as proposed by Arkell Development Company,—the developers. He said the fact that the developers would be taking a $400,000 risk on the project, should establish it as a credible tax increment project rather than a -last minute attempt to get bonding which could be stored away for some future use. The bonding consultant agreed the timing was essential since there was a bill pending in Congress which could change the law governing the tax exempt status of tax increment bonds effective January 1st, and could place restrictions on that type of financing even to the point of requiring 50% rather than 20% occupancy by • low or moderate income families after the first of the year. The availability of this type of financing would also be lessened to some degree if the funds were placed in a state pool for allocation along with IDB's. Chairman Sundland said the information both he and Commissioner Makowske have been getting from the Ramsey County League and other sources, certainly supported the developers' contention that rental apartments had replaced condominiums as the most viable housing alternative forepersons 55 end-ov'er. �� In reply to the question of whether the City could still qualify for the funding if the project were transferred to another developer, Mr. Soth said, typically the bond"s would-be assumable by a replacement developer. He also said such a deal would present no financial risk to the City, but might, to some bond holder, if such a deal were struck. The Attorney then told Secretary/Treasurer Marks the biggest political risk might be incurred if the development never went through at all. Mr. Childs said he perceived the City would be in a better position if the bonds for the rental apartments were sold, than it had been when the Kenzington had been started and the developer hadn't had the financing for the project. The Executive Director indicated he believed the greatest risk would be whether the City could acquire the property at a low enough price and whether the cash flows for tax increment financing were there. The Chair commented that he perceived those risks were present without any change in use. Mr. Soth said the developer would be at almost a million dollar risk with the incurrence of about $600,000 in points for issuance of the bonds and the $400,000 Letter of Credit, which would probably lessen the chances he would not do the project. is Vice Chair Enrooth arrived at 5:50 P.M. y -2- Chairman Sundland observed that Arkell had been reluctant to "walk away" from the • Kenzington project with the $400,000 Letter of Credit pending, which was probably better for the City than the deal offered by Knutson who could have dropped the project for only $50,000. • • The Attorney indicated the developers had claimed to have made arrangements whereby the January 1st deadline could be achieved. Mr. Gilligan speculated the developers had made some arrangement with a financial institution to "park" the bonds temporarily with them for six months or a year. However, before Arkell could do that, he said, the City would have to hold a, public hearing.(,with 15 days notice) on their housing program, after which the project would have to be submitted to MHFA, who has 30 days to reject it. The responsibility for putting together a bond program in time rests with Arkell, the Manager added. He also indicated he perceived the Planning Commission would only.be involved in the terms of the P.U.D. and not the bonds, and then, the only,initial change would be needed for the Development Con- cept Plan, which is not a detailed or final plan. Mr. Childs also informed the. . Commissioners that ifithe hearing were delayed until after the bonds were issued, there would have to be a strong H:R.A. commitment to proceed. The perception was that, if the project was constructed to serve only renters over 55, the cash flow figures mightindicate a need for fewer units and possible reduction of the height of the buil—dings, which had been a point of opposition to the project from some Commission members since its inception, however, this would depend on the revised cash flows. Chairman Sundland said he had found in con- versings,with senior residents, .that many of them were looking for greater flexibility in options for where they would reside, perceiving they would be able to live on the interest from the sale of existing residences, anywhere they chose. He said he believed the developers had also recognized those signs of the time and proposed rental rather than additional condominiums. Secretary/Treasurer Marks indicated he would like to see the units built in such a manner that they could easily be converted back to condos if the market changed. Mr. Gilligan said bond restrictions would prevent conversion before tenyears. The Executive Director said he had discussed the changes with Commissioner Ranallo before the meeting and the Commissioner's greatest concern was that, even discussing the issuance of bonds for this phase, might have an adverse impact on Kenzington sales. Commissioner Makowske indicated she perceived the impact might be just the opposite, when prospective Kenzington buyers perceive something is going to be done, at last, to improve the conditions across the street. Secretary/Treasurer Marks indicated he had always figured the development of the last phases of the project would be at least three or four years away and his concern now was how fast the market could absorb this new use, and whether the demographics had changed enough to support moving faster on this phase. Mr. Soth pointed out that the contract with the City by December 31st that the property and he said, Arkell is also required in Janu developers intend to do about the_$400,000 L Attorney indicated further, that the City is what happens relate` o extensions, defaults the developers required them to notify for this project should be acquired, on The -3 - For the benefit of the Vice Chair who had come in late, it was reiterated that the bonding consultant had assured the H.R.A. that the project was "do -able", but might be difficult to accomplish before the end of the year with a hearing in November and MHFA approval required before the end of December. Mr. Soth said that, in his opinion, the Commission's reaction should legally pose no problem. He also advised that it would be possible, with some limitations, for the City to introduce someone else to do`theproject, just as had been done with the Kenzington project. The Attorney indicated he perceived if the City had any interest at all in the new concept the developers would have to be warned that it would be up to them to get a presentation put together immediately for presentation to the Planning Commission regarding a change from condo to rental. Mr. Childs said the City already had a Housing Plan in place which probably addressed rentals. Mr. Gilligan estimated the developer's initial bonding costs would be about $5,000 for attorneys fees and bonding expenses. Secretary/Treasurer Marks commented that the financial risk might be greater for the City not to do the project at all. The bonding consultant agreed, reiterating the anticipated changes in the bonds after the first of the year. Mr. Soth told the Secretary/Treasurer the City is not legally required to_permit the change to rentals_but, as a practical matter; it might 5e difficult, if not impossi6l_e, for the developers to sell the additional condominiums, because he also perceived "condos just aren't viable in today's market". And, he added, there was some truth in the developers' claim that this would be a "one time opportunity" because of the changes anticipated for tax increment financing. • There was also general agreement that commercial development in that particular area remained an unattractive alternative to housing. Secretary/Treasurer Marks said the impending action by Congress might have actually given the City an opportunity to move the project along faster. He indicated he perceived the area test _risk would be_for the Ci.ty._not to,do anything at all. The Executive Director told Commissioner Makowske after the buildings are con- structed, the tax increment payments would have to be made whether the development is occupied or not and Chairman Sundland commented that once the H.R.A. acquires the land and sells it to the developers, their investment in the project would be increased. Vice Chair Enrooth indicated he perceived the developers' credibility was critical at this stage. He was told Arkell had a history of successful projects like the one in Richfield wheret:the'developers'had been ahead in -every. phase. The con- jecture was that the developers might have opted to place all their financing in that project and then had become overextended when the condo market softened. Chairman Sundland said he personally believed the City had no other way to go. Secretary/Treasurer Marks agreed, saying he believed the City "should go for it". However, he said he would like to hear firsthand from the developers how the demographics supported the change to rental and be able to substantiate those figures with an independent study by the City. Commissioner Makowske said she could approve the change to rental as long as a first • class project is developed because she also perceived -there would bd-a more viable market for renters over 55. The Commissioner also indicated she would appreciate a listing of deadlines which must be met to allow the project to be developed. -4 - The Executive Director then summed up what he perceived had been the general sense • of the H.R.A. that evening, which he would be conveying to the developers. He said he would tell Arkell the H.R.A. would be willing to entertain a proposal for Housing Reven_ue_Bo.nds for rental rather than condominiums for Phase II and III of the Kenzie Terrace Redevelopment project, on the condition they are prov5d0' A financial statement from Arkell which would assure that when the attempt is made to place the bonds after "parking" them for some months, they could be placed. 2. A market analysis which indicates this project could be absorbed by the market in a feasible time frame. 3. The preliminary resolution and housing bond program be submitted in time for a public hearing on the bond plan. 4. A joint meeting of the Council and H.R.A. would be held to discuss a new P.U.D. Concept Development Plan, with drawings and sketches to be provided by the developers to demonstrate the proposed construction as it would relate to height of buildings and number of units and conversion of the project from condominiums to rental. Mr. Childs said he would be requesting the Springsted Company to run revised cash flow figures for the final phases of the Kenzie Terrace project to ascertain before the meeting with the developers, just how many units would be needed to make the project economically feasible. • Commissioner.;Enrooth asked..counse•l whether;there was anything further the City could do to find out just how solvent and financially stable the developer was. Mr. Soth said that, in addition to a financial statement, the H.R.A. could require verification that the developers are financially capable of developing this project. He also gave his perceptions regarding what the roler•bfi;META might be in relation to the completion of the project. Mr. Childs indicated he would be conveying the requirement for expanding the financial analysis to Mr. Arkell. In regard to other City developments, the Executive Director reported that a fire had completely destroyed the old gas station across from the new townhome project on Old Highway 8. He said that entire corner had been cleared and he was hoping the property would be developed for something else besides another gas station. ThFe Executive Director then informed the H.R.A. members that the groundbreaking ceremonies for the Chandler Place project were scheduled for Wednesday, November 6th, at whatever time was best for them. It was agreed that 2:00 P.M. after the Kiwanis meeting that noon would be preferable. FAnother groundbreaking, for the Walker on Kenzie project, was acheduled for 3:00 P.M., November 15th, Mr. Childs said (since the meeting this date was changed to November 18th). The Executive Director continued his report by saying the staff was satisfied with the Redevelopment Agreement they had negotiated with the Chandler Place developers but had not gotten the Health Center reaction yet. He said the agreement included is almost everything the H.R.A. had indicated they wanted at the last meeting, including the fact that the $700,000 for the bond reserve would be funded from tax increment revenues, requiring no bonds and the City would still hold a second mortgage for $700,000 at 3% on the property, which the Attorney said, would be payable at the sale of the property or 20 years. -5 - Mr. Childs said the agreement should be returned before the Council meeting • scheduled for 8:30 P.M., November 5th to canvass the election, ,and it would be possible that action on that document could be taken at the same time. The Secretary/Treasurer reiterated that he might be unable to attend the meeting. At.the conclusion of the meeting, Mr. Childs reported the hospitalizations of Dick Engstrom and Harry Lekson. The meeting was adjourned at 6:45 P.M. is is Respectfully submitted, Helen Crowe, Secretary