HomeMy WebLinkAbout2011/10/24 - ADMIN - Agenda Packets - City Council - Study SessionAGENDA
OCTOBER 24, 2011
(Councilmember Finkelstein Out)
6:30 p.m. CITY COUNCIL STUDY SESSION – Council Chambers
Discussion Items
1. 6:30 p.m. Future Study Session Agenda Planning – November 14, 2011
2. 6:35 p.m. Discuss the City Manager’s 2011 Performance Evaluation
3. 6:50 p.m. Construction Assistance Program (CAP) Application - Stone Mountain Pet
Lodge (former Bennigan’s Building)
4. 7:20 p.m. Preliminary Tax Increment Financing (TIF) Application - Redevelopment of
3340 Republic Avenue (Oak Hill II Office Building)
5. 7:50 p.m. Update on the Aquila Commons Project and Redevelopment Contract with
Aquila Senior LLC
6. 8:20 p.m. Update on Redevelopment Contract with PNMC Holdings (Park Nicollet
Health Services)
7. 8:50 p.m. Communications/Meeting Check-In (Verbal)
8:55 p.m. Adjourn
Written Reports
8. September 2011 Monthly Financial Report
9. Third Quarter Investment Report (July - September, 2011)
10. Prism Dial-A-Ride Program
11. Interested Buyer for 9019 Cedar Lake Road - Vacant City Parcel
12. Update on Request by Greensboro Condominium Association to Establish the Greensboro
Condominium Housing Improvement Area (Greensboro HIA)
13. Vision St. Louis Park Community Check-In Update
Auxiliary aids for individuals with disabilities are available upon request.
To make arrangements, please call the Administration Department at
952/924-2525 (TDD 952/924-2518) at least 96 hours in advance of meeting.
Meeting Date: October 24, 2011
Agenda Item #: 1
Regular Meeting Public Hearing Action Item Consent Item Resolution Ordinance
Presentation Other:
EDA Meeting Action Item Resolution Other:
Study Session Discussion Item Written Report Other:
TITLE:
Future Study Session Agenda Planning – November 14, 2011.
RECOMMENDED ACTION:
The City Council and the City Manager to set the agenda for the regularly scheduled Study
Session on November 14, 2011.
POLICY CONSIDERATION:
Does the Council agree with the agenda as proposed?
BACKGROUND:
At each study session, approximately five minutes are set aside to discuss the next study session
agenda. For this purpose, attached please find the tentative agenda and proposed discussion
items for the regularly scheduled Study Session on November 14, 2011.
FINANCIAL OR BUDGET CONSIDERATION:
None.
VISION CONSIDERATION:
None.
Attachment: Future Study Session Agenda Planning – November 14, 2011
Prepared by: Debbie Fischer, Office Assistant
Approved by: Nancy Deno, Deputy City Manager
Study Session Meeting of October 24, 2011 (Item No. 1) Page 2
Subject: Future Study Session Agenda Planning – November 14, 2011
Study Session, November 14, 2011 – 6:30 p.m.
Tentative Discussion Items
1. Future Study Session Agenda Planning – Administrative Services (5 minutes)
2. Final Budget Discussion Prior to Truth in Taxation Hearing – Administrative Services (60 minutes)
Council discussion regarding overall 2012 budget in preparation for the upcoming Truth in
Taxation Hearing.
3. Hoigaard Village Remaining Project Plans & Construction Schedule – Community Development
(45 minutes)
Developer will discuss plans for constructing the remaining portions of the Hoigaard Village
project and provide a realistic schedule for completion.
4. Communications/Meeting Check-In – Administrative Services (5 minutes)
Time for communications between staff and Council will be set aside on every study session
agenda for the purposes of information sharing.
Reports
5. Fiber Optic and Future of Cable TV Studies Update
6. West End TIF Notes
End of Meeting: 8:25 p.m.
Meeting Date: October 24, 2011
Agenda Item #: 2
Regular Meeting Public Hearing Action Item Consent Item Resolution Ordinance
Presentation Other:
EDA Meeting Action Item Resolution Other:
Study Session Discussion Item Written Report Other:
TITLE:
Discuss the City Manager’s 2011 Performance Evaluation.
RECOMMENDED ACTION:
Staff requests feedback on City Council’s desired approach for an annual performance evaluation
for the City Manager.
POLICY CONSIDERATION:
What is the City Council’s desired approach for the City Manager’s 2011 annual performance
evaluation?
BACKGROUND:
The employment agreement between the City and the City Manager states “that the City may
conduct an annual review of the Manager’s performance.” The purpose of the evaluation
process is to provide feedback to the City Manager on performance so that he can strive for
continuous performance improvement based on City Council expectations.
Over the years, Council has used different methods to provide performance feedback to the City
Manager. These methods range from completing the process “in-house” assisted by staff to
hiring consultants. In 2009 and 2010, we hired consultant J. Forrest to compile and summarize
Council comments on the City Manager’s performance for a total cost of less than $2,000 per
year. Attached is the form that was used to collect data in 2009 and 2010.
FINANCIAL OR BUDGET CONSIDERATION:
Using in-house staff to facilitate the City Manager’s evaluation will not have a budget impact as
costs will be covered by general salary. Consultant costs would be applied to the Human
Resources budget.
VISION CONSIDERATION:
NA
Attachment: Evaluation Form
Prepared by: Ali Fosse, HR Coordinator
Approved by: Nancy Deno, Deputy City Manager/HR Director
Study Session Meeting of October 24, 2011 (Item No. 2) Page 2
Subject: Discuss the City Manager’s 2011 Performance Evaluation
City of St. Louis Park
CITY MANAGER APPRAISAL FORM
CHECK ONE BOX FOR
EACH CATEGORY
PROVIDE COMMENTS FOR EACH
CATEGORY IN THIS COLUMN
Organizational Management & Leadership
Exceeds Expectations
Successful
Meets Expectations
Needs Improvement
Don’t Know
Communication Skills and Public Relations
Exceeds Expectations
Successful
Meets Expectations
Needs Improvement
Don’t Know
Relationship with the City Council
Exceeds Expectations
Successful
Meets Expectations
Needs Improvement
Don’t Know
Interagency Relations
Exceeds Expectations
Successful
Meets Expectations
Needs Improvement
Don’t Know
Long Range Planning
Exceeds Expectations
Successful
Meets Expectations
Needs Improvement
Don’t Know
Study Session Meeting of October 24, 2011 (Item No. 2) Page 3
Subject: Discuss the City Manager’s 2011 Performance Evaluation
CHECK ONE BOX FOR
EACH CATEGORY
PROVIDE COMMENTS FOR EACH
CATEGORY IN THIS COLUMN
Staff Supervision/Overall Performance of City Staff
Exceeds Expectations
Successful
Meets Expectations
Needs Improvement
Don’t Know
Fiscal/Business Management
Exceeds Expectations
Successful
Meets Expectations
Needs Improvement
Don’t Know
OTHER COMMENTS:
___________________________________________________________
Signature Date
Meeting Date: October 24, 2011
Agenda Item #: 3
Regular Meeting Public Hearing Action Item Consent Item Resolution Ordinance
Presentation Other:
EDA Meeting Action Item Resolution Other: Public Hearing
Study Session Discussion Item Written Report Other:
TITLE:
Construction Assistance Program (CAP) Application - Stone Mountain Pet Lodge (former
Bennigan’s Building).
RECOMMENDED ACTION:
Staff wishes to receive feedback from the EDA on the Stone Mountain Pet Lodge application for
CAP funding.
POLICY CONSIDERATION:
Does the EDA wish to provide financial assistance through the Construction Assistance Program
(CAP) for the Stone Mountain Pet Lodge project? Work is still in progress to establish exactly
how much assistance is appropriate. At this point the question for the EDA is whether it
supports some level of assistance for the renovation, expansion and transformation of the former
Bennigan’s building into a pet boarding and retail facility? The CAP program allows up to
$200,000 in assistance.
BACKGROUND:
Stone Mountain Pet Lodge, a full program pet facility based in Blaine, MN, wishes to open a
similar, deluxe pet facility in St. Louis Park. It would feature a doggie day care center, boarding
facilities, a retail store as well as areas dedicated to pet grooming and training. To that end, Stone
Mountain Pet Lodge has entered into a purchase agreement to acquire the former Bennigan’s
restaurant building located at 6475 Wayzata Blvd. The existing 9,691 SF building would be
renovated to house a deluxe dog and cat bathing/grooming facility and shop for high-end pet
foods, toys, and accessories. The building would also be expanded by 8,312 SF which would
bring the total building size to 18,003 SF. The addition would include lodging wings, “Cattery”,
feeding/staging room, garage, caretaker’s apartment, and an open area where training classes,
and special events could be held. The pet lodge would have a boarding capacity of 200 dogs and
30 cats. Stone Mountain’s business plan for its proposed St. Louis Park facility can be viewed at:
http://www.stonemountainpetlodge.com/slp/slp_business_plan.pdf
The Applicant
Stone Mountain Pet Lodge is a premium 23,000 SF boarding kennel for dogs and cats located in
Blaine, MN serving the northern suburbs of the Twin Cities. It was established in 2005 by David
and Maggie Larson and is a family-owned and operated enterprise. A video tour of the facility is
located at: http://www.stonemountainpetlodge.com/video/index.php. Stone Mountain’s pet taxi
ad can be viewed at: http://www.stonemountainpetlodge.com/video/pet_taxi_ad.wmv. The
business was modeled after the Williamsburg Pet Hotel & Suites in a suburb of St. Louis,
Missouri, which is owned and operated by relatives of Dave Larson. Stone Mountain Pet Lodge
quickly became successful and currently has more than 40 employees. It was named the “Best
Pet Lodge 2008” by Mpls/St. Paul Magazine and was featured in Twin Cities Business Magazine
in 2009. As stated in its CAP application: “Recognizing the need for quality pet care in the
central metro area, Stone Mountain Pet Lodge wants to bring its expertise and excellent pet
lodging facilities to St. Louis Park”.
Study Session Meeting of October 24, 2011 (Item No. 3) Page 2
Subject: Construction Assistance Program (CAP) Application - Stone Mountain Pet Lodge
Current/Estimated Market Value
The subject property’s current assessed value is $1.3 million (which is essentially the land
value). Upon renovation and expansion, (depending on the extent of build-out) the building
could be assessed between $2.1 million - $2.5 million by 2013.
Job Creation
The proposed renovation and expansion work would result in several temporary construction
jobs. Stone Mountain Pet Lodge expects to hire approximately 20 full time and 20 part time
employees at this new facility.
Project Schedule
Stone Mountain Pet Lodge hopes to close on the property by mid-November and begin
renovation/expansion work shortly thereafter. The new facility is expected to open in the spring.
Land Use
The subject property is guided and zoned C2 – General Commercial. The renovated building
would be suitable for a variety of retail, service and office uses. It is located in the I-394
commercial area, a “Priority Redevelopment Area” as listed in the Comprehensive Plan.
Renovating a highly visible building along the south side of I-394 also conforms with the long
term goal of enhancing the aesthetic image of that corridor. Based on the recent Commercial
Corridor Study by McComb Group, adding another potential “destination retail” business would
be consistent with the commercial mix in this vicinity. The proposed investment in the
Bennigan’s building could potentially serve as a catalyst for similar renovations in the
neighborhood.
Request for Financial Assistance and Proforma Analysis
As expressed in the Policy, the CAP is based upon demonstrated need. A business or
building owner must provide the EDA with written evidence that the requested assistance is
warranted and necessary and without such assistance the project would be unable to
proceed. The Larson’s are seeking assistance that would specifically help with the down
payment requirement for financing the Stone Mountain Pet Lodge project. Under the CAP
program they would be eligible for reimbursement for one third of construction costs up to
$200,000. The projected cost of construction is in the $3-4 million range. Ehlers & Associates
is working with staff and the applicant to establish exactly how much assistance is justified. The
expectation is that we will provide more details on the appropriate level of assistance Monday
night. Ehlers & Associates preliminary review of the cost assumptions for the proposed Stone
Mountain Pet Lodge finds them to be reasonable and appropriate. Stone Mountain Pet Lodge has
applied for $200,000 in Construction Assistance. This level of assistance is less than 10% of total
estimated project cost and well under the 33% maximum amount for which businesses may
apply under the CAP Policy.
Structure of CAP Funds
Should the EDA wish to financially assist the proposed project, funds would be provided to
Stone Mountain Pet Lodge on a reimbursement basis upon prove-up that qualified construction
costs were incurred. The reimbursement would be structured as a forgivable loan. Provided the
building is held and properly maintained by Stone Mountain Pet Lodge for 5 years after
project completion, the entirety of the loan would be forgiven. If the property is sold within
5 years of project completion, the entirety of the loan must be repaid in full along with 6%
accrued interest from the date funding was provided.
Study Session Meeting of October 24, 2011 (Item No. 3) Page 3
Subject: Construction Assistance Program (CAP) Application - Stone Mountain Pet Lodge
Proposed Funding Source
The source of the CAP funds is tax increment generated by nine of the City’s TIF districts which
would be disbursed from the Development Fund. Currently, there is approximately $1 million
available from these districts to fund Construction Assistance projects.
Compliance with the Construction Assistance Program Policy
The goal of the Construction Assistance Program is to improve the city’s commercial/
industrial building stock by constructing new structures or rehabilitating existing ones so as
to attract and retain jobs as well as stimulate additional private investment in the city. The
resulting new investment should result in a higher market value for the underlying property
consistent with the city’s Comprehensive Plan. The project should also have the potential to
serve as a catalyst for additional neighborhood investment. The renovation and expansion
of the former Bennigan’s building as proposed by Stone Mountain Pet Lodge meets all of
the objectives for funding as expressed in the CAP Policy.
Compliance with Green Building Policy
Since Stone Mountain Pet Lodge’s request for financial assistance is no more than $200,000, it is
exempt from the City’s recently-adopted Green Building Policy. The proposed financial assistance
would however be help with the purchase of energy efficient HVAC equipment for the building.
Summary
Stone Mountain Pet Lodge would provide a full range of high quality services for dogs and cats in a
premium facility. The proposed renovation and expansion of the former Bennigan’s building would
benefit both the surrounding neighborhood and the city. The proposed project would enhance the
neighborhood and City’s appearance along I-394. In addition it would increase the City’s tax base
and create approximately 40 new jobs. The Stone Mountain Pet Lodge would also complement the
hotels in the area as it would provide visitors traveling with pets a place to board their animals in close
proximity. I-394 hotels.
Next Steps
If the EDA is supportive of Stone Mountain Pet Lodge’s application for CAP assistance, staff will
complete the analysis necessary to establish the appropriate level of assistance and begin drafting a
proposed Redevelopment Contract with the applicant. Such a contract would be brought back to the
EDA for its review and subsequent formal consideration in the next month. Larson’s target is to close
on the purchase of the former Bennigan’s property and finalize financing for the Stone Mountain Pet
Lodge project in November. A commitment from the EDA in November for CAP assistance would
make it possible for the project to move forward as scheduled.
FINANCIAL OR BUDGET CONSIDERATION:
The specific amount of CAP assistance that would be appropriate for the Stone Mountain Pet
Lodge project is still be determined. The CAP program allows up $200,000. No more than that
amount would be provided. The funds would be provided as a forgivable loan from tax
increment generated by the City’s various TIF districts.
VISION CONSIDERATION:
Renovating existing buildings through the Construction Assistance Program is consistent with
elements of Vision St. Louis Park as it facilitates and promotes environmental stewardship and
green development.
Study Session Meeting of October 24, 2011 (Item No. 3) Page 4
Subject: Construction Assistance Program (CAP) Application - Stone Mountain Pet Lodge
Attachments: Stone Mountain Pet Lodge SLP Site Plan
Prepared by: Greg Hunt, Economic Development Coordinator
Reviewed by: Kevin Locke, Community Development Director
Approved by: Nancy Deno, EDA Executive Deputy Director and Deputy City Manager
Stone Mountain Pet Lodge - St. Louis Park Site Plan
Front Parking
Front Desk
& Retail
Entrance
Restrooms
14 Express
Suites
Lodging Wings
121 Suites
Outside Play
Courtyard
Outside
Exercise
Area
Rear Parking
Security
Wall
Grooming
Salon
36 Lodging
Suites
Inside
DDC Room
Outside
DDC Yards
Loft
(2nd Floor)
Garage
Staging,
Feeding
(1st Floor)
Apartment
(2nd Floor)
Cattery
“Beach End”
DDC Pool
Study Session Meeting of October 24, 2011 (Item No. 3)
Subject: Construction Assistance Program (CAP) Application - Stone Mountain Pet Lodge Page 5
Meeting Date: October 24, 2011
Agenda Item #: 4
Regular Meeting Public Hearing Action Item Consent Item Resolution Ordinance
Presentation Other:
EDA Meeting Action Item Resolution Other:
Study Session Discussion Item Written Report Other:
TITLE:
Preliminary Tax Increment Financing (TIF) Application - Redevelopment of 3340 Republic
Avenue (Oak Hill II Office Building).
RECOMMENDED ACTION:
Staff wishes to review and receive feedback on Anderson-KM Builders’ proposed office building
development at 3340 Republic Avenue and Preliminary TIF Application. Specific issues staff
wishes to discuss include:
Proposed Project and Plans
Project Economics/Amount of TIF Assistance
Compliance with the EDA’s TIF Policy
Next Steps
In summary, Anderson-KM Builders wishes to construct a two-story, 21,432 SF office building
called Oak Hill II at 3340 Republic Avenue. The proposed building would complement the
existing Oak Hill office building next door. After careful analysis by Ehlers & Associates it is
clear the proposed project cannot proceed without financial assistance. It is proposed that
$300,000 in tax increment assistance be provided to make the project financially feasible so as to
move the project forward.
As a reminder, the purpose of a Preliminary TIF Application is to allow a developer to present a
proposal to the EDA in the initial stages of a project to determine if it merits consideration for
TIF financing. Even if the EDA should direct staff to pursue the project further, the EDA is not
obligating itself to providing the requested assistance.
POLICY CONSIDERATION:
Does the EDA preliminarily support Anderson-KM Builders’ proposed Oak Hill II project and is
it willing to consider entering into a Redevelopment Contract to provide financial assistance to
facilitate the project?
BACKGROUND:
Anderson Builders was a real estate development, design management, and construction
company based in St. Louis Park since 1999. In addition to the Oak Hill office building located
at 3501 Louisiana Ave. (near the intersection of Louisiana Ave and Walker St.) the firm built a
variety of office, industrial and retail facilities as well as churches and health care clinics
throughout the Twin Cities area.
In 2007, Anderson Builders planned to acquire and redevelop a small (3/4-acre) property at 3340
Republic Avenue and construct a 2-story, 15,000 SF office building on the site. The subject
property was located in the Lenox Neighborhood at the northwest corner of Walker Street and
Republic Avenue; immediately east of Anderson Builders’ Oak Hill office building. The subject
property posed several development challenges as the site is small (¾-acre), triangular in shape,
Study Session Meeting of October 24, 2011 (Item No. 4) Page 2
Subject: Preliminary TIF Application - Redevelopment of 3340 Republic Ave (Oak Hill II Office Bldg)
required demolition of an old commercial building, and has a 13 foot elevation change across the
site.
To facilitate the proposed project, the EDA agreed to reimburse Anderson Builders $400,000 for
certain site preparation costs. The assistance was structured as a grant that was to be paid from the
Development Fund on a declining scale over a 10-year period so the net present value of the
assistance was actually $300,000. On October 15, 2007, the EDA approved a Contract for
Private Redevelopment with Oak Hill 7100 (Anderson Builders) for the redevelopment of the
subject property. As a result, Anderson Builders purchased the property and removed the former
two-story, 6,400 SF office building that occupied the site.
According to the Redevelopment Contract, Anderson Builders was to have completed
construction on the Oak Hill II office building by December 31, 2008. Due to the recession and
the Redeveloper’s inability to obtain project financing, the Anderson Builders requested that the
project’s completion date be extended. On April 6, 2009, the EDA approved an Amendment to
the Redevelopment Contract which extended the required completion date until December 31,
2009. Anderson Builders subsequently acknowledged that due to the severe downturn in the
office market it was unable to proceed with the project and the situation was not likely to change
in the near future. Thus, on April 5, 2010, the EDA approved a Termination of Contract
Agreement and Release between the EDA and Oak Hill 7100 LLC. This Agreement terminated
the Contract between the EDA and Oak Hill 7100 LLC and released each party from all
obligations which remained unperformed under the Contract as well as waived all rights under
the Contract.
This past July it was announced that Anderson Builders and Minneapolis-based KM Building
Company, led by Greg Anderson and Steven Faber, respectively, had joined with real estate and
construction executives Kent M. Carlson and Arne Cook to form a new firm called: Anderson-
KM Builders. Carlson was formerly a senior executive with Ryan Companies. Cook is a real
estate development consultant who held senior management positions with CSM Corporation,
First Industrial Realty Trust and The Opus Group. Carlson is the new company's chief executive.
The four partners established Anderson-KM Builders to provide comprehensive building and
development services to local and regional clients. The new company employs 30 people.
Anderson-KM Builders is currently operating from Anderson Builder's location on Park Glen Rd
in St. Louis Park as well as KM Building's offices in Minneapolis. The firm plans to build a new
facility and consolidate its operations within a single location. The proposed office site is the
property owned by Anderson Builders at 3340 Republic Avenue. The proposed office building
would be 21,432 SF; approximately 6,430 SF larger than the office building Anderson
previously planned to construct on the site. Like the former building, the new Oak Hill II would
be a 2-story, multi-tenant, professional office building. Because the proposed new building
would be constructed into the side of the hill facing Republic Avenue it will appear as one story
off Republic and two stories off Walker Street. Oak Hill II would be an attractive brick structure
designed to complement the original Oak Hill office building next door.
Under this latest proposal, Anderson-KM Builders would occupy approximately half the new
building (6,001 SF of office and 4,715 SF of storage). The remaining 10,716 SF would be built
out as office space and leased to one or more tenants. Oak Hill II would be marketed to general
office users and specialty medical users given its proximity to Methodist Hospital.
Study Session Meeting of October 24, 2011 (Item No. 4) Page 3
Subject: Preliminary TIF Application - Redevelopment of 3340 Republic Ave (Oak Hill II Office Bldg)
Land Use
The subject property is located in the Walker/Lake commercial area, a “Priority Redevelopment
Area” as listed in the Comprehensive Plan. It is guided and zoned C2 – General Commercial.
The proposed project conforms to this land use and is consistent with the goal of higher
density/intensity near Hwy 7. The proposed project fulfills the following objectives within the
Highway 7 corridor:
Eliminate physical blight in the Highway 7 corridor.
1. Redevelop or substantially rehabilitate deteriorated buildings.
2. Replace non-conforming land uses, obsolescent businesses, and deteriorated
buildings with contemporary developments which are compatible with their
surroundings and consistent with City plans.
Improve the image and appearance of the Highway 7 corridor.
Improve the economic viability of the Highway 7 corridor.
Promote new employment opportunities within the area.
In addition, the proposed office building could stimulate additional redevelopment and/or
reinvestment in the area. Many of the industrial buildings surrounding the subject property are
obsolete, tired, and/or lack adequate parking. Anderson KM Builders has expressed interest in
pursuing other redevelopment projects in the area.
Current/Estimated Market Value
The subject property’s current assessed value is $700,000. Once the new building is complete
and fully occupied, the property could be assessed for $3.2 to $3.8 million by 2013.
Job Creation
As noted earlier, Anderson-KM Builders plans to consolidate its operations within the proposed
Oak Hill II building. Anderson Builders with its 15 employees would relocate from its Park
Glen location and KM Builders with its 15 employees would relocate from Minneapolis. In
addition, 25 jobs are anticipated to result from tenants filling the 2nd floor office space. Thus, a
total of 15 jobs are expected to be retained and 40 jobs are expected to be created in St. Louis
Park if the proposed project proceeds.
Project Schedule
Anderson-KM Builders plans to commence construction on the office building in March 2012
and have it completed in the fall.
Proforma Analysis and Assistance Request
Anderson-KM Builders maintains that it cannot undertake the proposed project without financial
assistance from the EDA. To that end, Staff requested Ehlers to review Anderson-KM Builders’
preliminary sources and uses statements, cash flow projections, and investor cash-on-cash return
(COC) related to Oak Hill II to determine how much assistance, if any, was warranted by the
proposed project. Ehlers analyzed the project in comparison with general industry standards for
land price, construction costs, various fees, lease rates, return on equity/profit, etc.
Study Session Meeting of October 24, 2011 (Item No. 4) Page 4
Subject: Preliminary TIF Application - Redevelopment of 3340 Republic Ave (Oak Hill II Office Bldg)
Land Acquisition Cost
Anderson Builders purchased the subject property in 2007 for $640,000 or approximately $19
per square foot. According to the City Assessor, a reasonable purchase for this property today is
between $15 and $18 sq/ft. At the time of acquisition, what Anderson paid was within market as
it included a 6,400 sq/ft commercial structure.
Construction Costs
Total construction costs of $2.7 million or $127/SF are comprised of $100 sq/ft for the shell and
blended rate of $27 sq/ft for tenant improvements. These costs are consistent with industry
standards for the size of the building, exterior façade materials used and the level of finish
prospective tenants expect in today’s market .
Lease Rates
The projected tenant triple net lease rates of $16/SF and blended rate of $12/SF for the office and
storage space occupied by Anderson-KM Builders are in line with similar types of office
developments within the Southwest submarket.
Rates of Return
The Redeveloper’s expected return on investment of less than ten (10) percent is actually below
industry standards of ten (10) percent to twelve (12) percent (depending on the size and risk
associated with the project).
Without pay-as-you-go TIF assistance, Anderson-KM Builder’s project proforma reflects an
expected cash-on-cash (COC) return in year three (stabilized year) of approximately 6.8%. With
TIF, the return is expected to be approximately 9.6%. They are requesting a profit level at the
lower end of the spectrum (10% COC) based upon their view of the market and demand for the
type of product it is developing. In order for the developer to attain a higher return than shown
above, it will have to rely on cost savings from construction of the project or obtaining higher
lease rates than anticipated.
Based on its review of the above, Ehlers’ concluded that Anderson-KM Builder’s cost and
revenue assumptions were reasonable and appropriate. Furthermore it is clear that Anderson-
KM Builders is unable to undertake the proposed project without the EDA’s financial
assistance.
Level and Type of Financial Assistance
Based upon Ehlers’ review, in order for the Redeveloper to achieve the above return on
investment, the proposed project warrants approximately $300,000 in assistance. This level of
assistance exceeds the $200,000 maximum loan amount under the EDA’s Construction
Assistance Program (CAP). CAP dollars are currently the EDA’s most flexible financing tool for
assisting projects. It is therefore prudent for the EDA to preserve its CAP dollars for projects
which don’t qualify for tax increment financing. In the case of Oak Hill II, it meets the
requirements of an Economic Development TIF District (9 year TIF District) under the 2010
Minnesota Jobs Bill. This law temporarily allows local governments to create an Economic
Development District for any type of new construction provided construction commenced by
July 1, 2012. If this type of TIF district were created, the proposed project would generate a
present value (principle amount) of approximately $300,000 over the life of the district. These
funds would then be used to reimburse Anderson-KM Builders on a "pay-as-you-go" basis,
which is the preferred financing method under the City's TIF Policy.
Study Session Meeting of October 24, 2011 (Item No. 4) Page 5
Subject: Preliminary TIF Application - Redevelopment of 3340 Republic Ave (Oak Hill II Office Bldg)
TIF Note
It will take less than a year to construct Oak Hill II. Assuming construction is completed in 2012,
the first increment would be paid in 2014. Given current estimates of market value, it is
expected that it would take the full 9-year term of the TIF district to pay off the related TIF
Note. As with most of the City’s TIF Development Agreements, the Redeveloper will be
required to execute a Minimum Assessment Agreement for the value utilized for projecting the
amount of TIF assistance available.
Look Back Provision
As with other recent redevelopment projects with which the EDA has been involved, Anderson-
KM Builders would be expected to agree to a "look back" provision in a future redevelopment
contract with the EDA for this project. Per the agreement, the Redeveloper would be required to
submit a final proforma detailing actual construction, soft and financing costs of the development
upon completion and lease up of the building. This will allow the EDA to calculate the
estimated profit return to the Redeveloper. It is proposed that any profits exceeding the projected
ten (10) percent would be split between the Redeveloper and the EDA which would then reduce
the amount of TIF assistance provided. This is an important provision as it ensures that if the
project cash flows at a higher rate than anticipated, the EDA shares economically in the success
of the project.
Preliminary Conformance and Analysis under the City’s TIF Policy
The proposed project meets the following “Minimum Qualifications” as outlined in the city’s
TIF Policy:
Consistent with the City's Comprehensive Plan and Zoning Ordinances.
Removes blight and/or encourages redevelopment in the commercial and industrial areas
of the City in order to encourage high quality development or redevelopment and private
reinvestment in those areas. (The original blighted building on the subject property was
removed in 2008 by the Redeveloper).
Retains local jobs and/or increases the number and diversity of quality jobs (e.g. stable
employment and/or living wages and benefits).
Facilitates the development process and to achieve development on sites which would not
be developed without this assistance.
Encourages additional unsubsidized private development in the area, either directly, or
through secondary "spin-off" development.
The proposed project meets the following “Desired Qualifications” as outlined in the TIF Policy:
Creates a higher ratio of property taxes paid before and after redevelopment and provides
a significant increase in tax base.
Redevelops an underutilized property.
Redeveloper has demonstrated that the project plan is not financially feasible “but-for”
the use of tax increment financing.
Redeveloper is able to demonstrate past general development capability as well as
specific capability in the type and size of development proposed.
Study Session Meeting of October 24, 2011 (Item No. 4) Page 6
Subject: Preliminary TIF Application - Redevelopment of 3340 Republic Ave (Oak Hill II Office Bldg)
In addition to the above, the proposed project could have the following additional benefits:
Intensifies the subject property’s usage (which is vacant) with a high quality/high
value, office development.
Incorporates design features preferred for future redevelopment in the area.
Complements, supports, and integrates with the Oak Hill office building next door
which has proven to be an attractive development within the Lenox neighborhood.
Incorporates modern interpretations of traditional architectural principles.
Incorporates Livable Communities and Transit Oriented Design principles.
Incorporates Green Building design and features.
High project quality (e.g. sound architectural design, quality construction and
materials)
Projects that provide a significant increase in tax base
Projects that provide significant new, or retained, employment
Grading under City’s TIF Report Card
Anderson-KM Builders’ Preliminary TIF Application was evaluated according to the City’s TIF
Policy. The project was thus graded as follows:
Ratio of private to public (TIF) financing.
$4.3 million in private development costs to $300,000 in TIF which equals a $14.3
private / $1 public ratio which garnered 5 points.
The value of the site before and after redevelopment.
Estimated current market value: $700,000. Projected market value: $3,536,280. This
is a ratio of 1:5 which equaled 5 points.
Job retention in the City
15 jobs are expected to be retained with this project. This garnered 1 point.
Job creation in the City
40 jobs are expected to be created with this project. This garnered 3 points.
Ratio of TIF investment to jobs created & retained
The amount of TIF assistance per job retained/created was $5,454. This garnered 5
points.
Pay level of Jobs
The pay levels of nearly all the jobs were at the upper end of the spectrum. This
garnered 5 points.
The proposed project received bonus points for: site assembly, redeveloping a blighted property,
adding value to the neighborhood, incorporating LEED and livable communities principles,
likelihood of stimulating further investment in the neighborhood, being located in a City-
designated Redevelopment Area and community impact.
Study Session Meeting of October 24, 2011 (Item No. 4) Page 7
Subject: Preliminary TIF Application - Redevelopment of 3340 Republic Ave (Oak Hill II Office Bldg)
Upon calculation of all applicable factors and bonus points, Anderson-KM Builders’ proposed
project received a final grade of “B” according to the scale provided within the Policy.
Compliance with Green Building Policy
Since Anderson-KM Builders’ request for financial assistance is greater than $200,000 it must
comply with the City’s recently adopted Green Building Policy. The Redeveloper is aware of
this requirement and has expressed a ready willingness to comply.
Compliance with the City’s Business Subsidy Policy
Any proposed TIF assistance provided the subject project would be exempt from state business
subsidy requirements as it relates to redevelopment (Section 116J.993, Subdivision 3).
Therefore, no public subsidy hearing would be required; however, the EDA would still be
subject a modified reporting requirements.
Summary
The proposed construction of the Oak Hill II Office Building clearly has numerous benefits for both
the surrounding neighborhood and the city. The proposed project would be constructed on what is
currently vacant property and would visually enhance the esthetic appearance of the Highway 7
corridor. In addition it would lead to an increase in the market value of the property resulting in a
greater property tax yield. Most importantly, the building would be home to the newly consolidated
Anderson KM Builders and attract other tenants who in turn would provide additional employment
opportunities. The project would also have the potential to serve as a catalyst for additional
redevelopment in the neighborhood. Anderson-KM Builders, as a developer, has expressed
interest in pursuing such projects.
Next Steps
If the EDA is supportive of Anderson-KM Builders’ application for TIF assistance, staff would begin
drafting a proposed Redevelopment Contract with the applicant. Such a contract would be brought
back to the EDA for its review and subsequent formal consideration.
FINANCIAL OR BUDGET CONSIDERATION:
To stimulate private construction activity within the city it is proposed that the EDA consider
providing Anderson-KM Builders with $300,000 in tax increment financing assistance so as to
enable the construction of a $4.3 million office building. This is equivalent, on a net present
value basis, to the amount that was approved under the previous agreement with Anderson
Builders for the same property. It is proposed that the assistance be provided through pay-as-
you-go tax increment from a newly-formed Economic Development TIF District.
VISION CONSIDERATION:
The proposed project is consistent with elements of Vision St. Louis Park as it facilitates and
promotes environmental stewardship and green development.
Attachments: Preliminary Site Plan and Building Renderings for Oak Hill II
Prepared by: Greg Hunt, Economic Development Coordinator
Reviewed by: Kevin Locke, Community Development Director
Approved by: Nancy Deno, EDA Executive Deputy Director and Deputy City Manager
Study Session Meeting of October 24, 2011 (Item No. 4)
Subject: Preliminary TIF Application - Redevelopment of 3340 Republic Ave (Oak Hill II Office Bldg)Page 8
Study Session Meeting of October 24, 2011 (Item No. 4)
Subject: Preliminary TIF Application - Redevelopment of 3340 Republic Ave (Oak Hill II Office Bldg)Page 9
Meeting Date: October 24, 2011
Agenda Item #: 5
Regular Meeting Public Hearing Action Item Consent Item Resolution Ordinance
Presentation Other:
EDA Meeting Action Item Resolution Other:
Study Session Discussion Item Written Report Other:
TITLE:
Update on the Aquila Commons Project and Redevelopment Contract with Aquila Senior LLC.
RECOMMENDED ACTION:
No action at this time. Staff would like to discuss modifying the Aquila Commons
Redevelopment Contract to stimulate the sale of the remaining original units as well as the resale
of units.
POLICY CONSIDERATION:
The purpose of this report is to update the EDA on the status of the project and actions needed to
stimulate the sale of units so as to make the building fully occupied and the project successful.
BACKGROUND:
On October 4, 2004, a Redevelopment Contract with Stonebridge Development (Aquila Senior,
LLC) was approved and a Housing TIF District was created to facilitate the redevelopment of the
former Talmud Torah School property located at 8200 West 33rd Street. As required under the
Contract, the Redeveloper was to demolish the existing school building and construct a 106-unit
senior cooperative housing development in its place called Aquila Commons. In return, the EDA
agreed to provide TIF assistance for the project in the maximum principal amount of $1,050,000.
Construction of Aquila Commons was fully completed in December 2007. After nearly four
years, 15 of the original 106 units remain unsold. In addition, some of the previously sold units
are now being resold. Currently there are 5 units up for resale. Thus the total number of units
currently for sale in the building is 20.
Need to Revisit Asset and Income Requirements within the Contract
At the time the Aquila Commons project was under consideration it was the intent of the EDA
that the project be primarily marketed to St. Louis Park senior residents in need of affordable
housing. In compliance with state requirements for Housing TIF Districts, 95% of the housing
units (that being 100 units) within the project were required to be purchased and occupied by
individuals whose family income was at or below certain federal income requirements. The EDA
applied this income restriction to subsequent buyers as well. In addition, the EDA imposed its
own restrictions on the total assets buyers could have. This restriction on total assets also applied
to subsequent purchasers. Thus, the Contract included restrictions on both income and assets of
both original and subsequent unit purchasers within the project. The requirements are as follows:
(i) At least 40 % (or 42) of the unit interests will be sold to persons with a household
income not exceeding 80% of the median income for the Minneapolis-St. Paul metropolitan
area, adjusted for family size.
(ii) At least 55% (or 58) of the unit interests will be sold to persons with (1) in the
case of one and two-person households, household income not exceeding 100% of the
metropolitan area income median income, (2) in the case of three or more person households,
household income not exceeding 115% of the metropolitan area median income.
Study Session Meeting of October 24, 2011 (Item No. 5) Page 2
Subject: Update on Aquila Commons Project and Redevelopment Contract with Aquila Senior LLC
(iii)For all units subject to either clause (i) or clause (ii) above, the buyer’s total assets
(determined in accordance with the Public Housing Leasing and Occupancy Plan adopted by
the St. Louis Park Housing Authority) as of the date of sale may not exceed $500,000 on a
net present value basis (the “Maximum Assets”), determined in accordance with generally
accepted accounting principles. The Maximum Assets will be adjusted on January 1, 2011
and January 1 of every fifth year thereafter through the Termination Date, based on the
cumulative increase in the United States Bureau of Labor Statistics Consumer Price Index—
All Urban Consumers for the preceding five-year period.
This asset limit may be increased by up to an additional $250,000 based upon the most recent
assessed value of a buyer’s principal residence as expressed on the city’s tax rolls or the sale
price of a buyer’s principal residence. The sale price of a principal residence shall be
evidenced by closing statements substantiating the sale of the principal residence and the net
proceeds thereof. The $250,000 limit may be adjusted upwards annually by three percent
(3%) commencing on January 1, 2006.
The above requirements meant that the total asset limit for persons purchasing units within
Aquila Commons was originally set at $750,000 and has been subsequently adjusted annually.
On January 1, 2011, the maximum total asset limit was adjusted to $839,513 or less depending
on the value of the buyer’s home. At first blush this limit would appear to be a considerable sum
under which many seniors would expect to qualify. However, the reality is that many St. Louis
Park seniors have proven careful stewards of their assets and by the time they combine the
entirety of their savings and total pensions along with net proceeds from the sale of their
principal residence in St. Louis Park they exceed the EDA’s asset limits. This prevents them
from purchasing a unit within Aquila Commons. In some cases, potential purchasers did not have
pensions but were provided net payouts at the time of their retirement. Thus their total assets
well exceeded the asset restriction yet the income generated from their assets was very modest.
The asset restrictions are making it difficult for many of our residents to purchase units within
Aquila Commons resulting in a significant number of unsold units.
The sale of units within Aquila Commons has become an issue that is only likely to get worse as
more of the original units start to turnover. While some of the difficulty in selling units is
certainly attributable to the downturn in the real estate market, in many cases the asset
restrictions have become the major stumbling block to closing sales. Staff investigated whether
other coops have a similar provision and, as it turns out, Aquila Commons appears to be the only
senior cooperative housing project in Minnesota to have restrictions on purchaser’s assets.
Under the Contract, the EDA requires that units being resold must also meet asset and income
restrictions. The EDA does not have to have these restrictions. State and federal laws pertaining
to housing programs only stipulate that the initial buyers be income qualified and include no
such restriction on subsequent purchasers. The EDA imposed these restrictions on the resale of
units at Aquila Commons too. The intent was to continue to ensure Aquila Commons was
protected for seniors with modest incomes. The reality is that the restrictions create an obstacle
for unit owners (and their heirs) when it comes time to sell. As noted previously, there are
currently 5 units up for resale in the building – several of which have been on the market for
more than two years. In a number of cases, the re-sales are due to the original buyer passing
away and the unsold units are preventing estates from being settled. Given the difficulty of
reselling units, the number of units up for resale is likely to become an increasing issue.
Study Session Meeting of October 24, 2011 (Item No. 5) Page 3
Subject: Update on Aquila Commons Project and Redevelopment Contract with Aquila Senior LLC
Recommendations
The income restrictions for initial buyers at Aquila Commons need to be retained in order for the
project to remain in compliance with statutory Housing TIF District requirements.
The asset restriction included in the Contract for all purchasers at Aquila Commons, while well
intended, has proven to be an impediment to sales and does not necessarily accomplish the
EDA’s goal of helping house seniors of modest means. This trend is expected to continue and
become an increasing problem. Therefore, Staff recommends that the asset restriction on all
purchasers be lifted. This modification would be consistent with both state and federal housing
project requirements and, in so doing, would streamline the administrative process of qualifying
potential buyers.
Regarding the resale of units, it is recommended that both the income requirements and asset
restrictions be lifted. This too would be consistent with state and federal housing project
requirements. Eliminating restrictions will make it easier for St. Louis Park residents and their
families to sell their units and ensure the continued vitality of the Aquila Commons property.
The buyer interest in Aquila Commons has made it clear that Aquila Commons is meeting a
community need. The income restrictions on the initial buyers will ensure seniors of modest
means will benefit from the EDA’s investment in making Aquila Commons a reality.
The developer will be in attendance to answer any questions.
NEXT STEPS:
Should the EDA be favorably inclined toward modifying the asset and income requirements
contained in the Contract with Aquila Senior, LLC as proposed, the EDA’s attorney would
prepare an amendment to the Contract for consideration by the EDA at an upcoming meeting.
FINANCIAL OR BUDGET CONSIDERATION:
Modifying the asset and income requirements contained in the Redevelopment Contract with
Aquila Senior, LLC will stimulate unit sales within Aquila Commons so as to make it fully
occupied and the project successful.
VISION CONSIDERATION:
Aquila Commons is consistent with the City’s vision to be a community of diverse, high quality
housing.
Attachments: None
Prepared by: Greg Hunt, Economic Development Coordinator
Reviewed by: Kevin Locke, Community Development Director
Approved by: Nancy Deno, EDA Executive Deputy Director and Deputy City Manager
Meeting Date: October 24, 2011
Agenda Item #: 6
Regular Meeting Public Hearing Action Item Consent Item Resolution Ordinance
Presentation Other:
EDA Meeting Action Item Resolution Other:
Study Session Discussion Item Written Report Other:
TITLE:
Update on Redevelopment Contract with PNMC Holdings (Park Nicollet Health Services).
RECOMMENDED ACTION:
No action required at this time.
POLICY CONSIDERATION:
The purpose of this report is to update the EDA on the status of its redevelopment contract with
PNMC Holdings and present the terms of a proposed third amendment for the EDA’s
consideration.
Under the terms of the contract, Park Nicollet was required to construct a certain amount of
office space on the clinic campus by certain dates. Some of the building construction called for
in that agreement has not occurred. As a result Park Nicollet is in default of the agreement. Over
the last several years staff and Park Nicollet representatives have strived to find an equitable,
“win/win” resolution to the default situation. Staff, in consultation with the EDA’s legal counsel,
has reached a proposed settlement with Park Nicollet which addresses the default and terminates
the contract early. Such a settlement would be the basis for a proposed Third Amendment to the
Contract for Private Redevelopment. A summary of the proposed Third Amendment and the
original Contract for Private Redevelopment has been prepared by the EDA’s legal counsel,
Steve Bubul and is attached to this staff report.
BACKGROUND:
The EDA entered into a Contract for Private Redevelopment with PNMC Holdings in 1993 (the
“Contract”. The Contract called for the phased construction of much of what we now know as
the Park Nicollet Clinic Campus at Excelsior Blvd and Hwy 100. Under the terms of the
agreement the “3850 Building”, the “3900 Building” and the parking ramp serving the Park
Nicollet Clinic were constructed. Additional construction was required under the terms of the
Contract.
Development of this site required addressing significant environmental issues. An MPCA
approved Remedial Action Plan (RAP) was prepared to address the environmental problems and
Park Nicollet incurred substantial remediation expenses ($6.2 million) in the course of building
the campus. Under the terms of the Contract, the City is providing tax increment assistance to
Park Nicollet in the form of a pay-as-you-go tax increment note to help offset the majority of the
remediation expenses. The City is currently obligated to provide $4,975,000 in assistance. The
Contract envisioned that remediation costs could be much higher and that the City could be
obligated to provide up to $9 million in assistance.
Study Session Meeting of October 24, 2010 (Item No. 6) Page 2
Subject: Update on Redevelopment Contract with PNMC Holdings (Park Nicollet Health Services)
The Park Nicollet campus is within the former Excelsior Blvd TIF district (expired in August
2009) and a Hazardous Substance Sub-district was created specifically to address the
contamination remediation expenses. This Sub-district is in effect until December 31, 2021.
The original Contract has been amended twice, most recently in May 2001. The Second
Amendment established new deadlines for construction of phase II of Park Nicollet’s project.
The Second amendment called for PNMC Holdings to construct 50,690 square feet of new
medical office space (Phase IIB) by December 31, 2006 and another 45,000 square feet of new
medical office space (Phase IIC) by December 31, 2010. Neither of these deadlines have been
met. As a result PNMC Holdings is in default under the terms of the Contract.
On October 5, 2007, the EDA sent Park Nicollet Health Services a letter notifying it of PNMC
Holdings’ default under the amended Contract. Since then efforts have been underway to find an
acceptable resolution to the Redeveloper’s default.
The Redeveloper’s failure to build the required additional phases has three primary impacts on
the City:
1. A loss of approximately $300,000 in tax increment for the years 2008 and 2009
(when the underlying Excelsior Boulevard TIF District was still in place). This amount would
have been payable to the EDA (not the Redeveloper) for ongoing redevelopment activities.
2. If both Phase IIB and IIC had been built on schedule, the tax increment revenues
generated would have been sufficient to pay off the obligations to PNMC one year earlier, which
in turn would have allowed the EDA to terminate the Subdistrict one year earlier and make the
tax base available to the City and all other taxing jurisdictions. The net “cost” of the Subdistrict
to all taxing jurisdictions, caused by the lost tax increment revenue, is approximately $900,000.
Study Session Meeting of October 24, 2010 (Item No. 6) Page 3
Subject: Update on Redevelopment Contract with PNMC Holdings (Park Nicollet Health Services)
3. The failure to complete the required improvements means the tax base after
termination of the HSTI Subdistrict will be less than what was expected at the time the Contract
was entered into. In 2008 it was estimated that Phases IIB and IIC would have added
approximately $290,000 to the City’s total Tax Capacity.
City staff and Park Nicollet have been in extended discussions regarding how best to address the
default situation. In 2008 and 2009 Park Nicollet paid (two payments of $156,000 each), the
amount the City would otherwise have collected as tax increment if the Phase II buildings had
been built on schedule. The City has also suspended payment on the pay-as-you-go Note
reimbursing PNMC for remediation expenses as a result of the default condition. The City is
withholding about $1.1 million in Note payments at this time.
While Park Nicollet has not constructed the 95,690 square feet of new medical office buildings
called for in Phase II of the contract, it has made substantial investments in St. Louis Park.
These include the 206,000 square foot Heart and Vascular Center, the Melrose Institute (68,000
square feet) and the Frauenschuh Cancer Center (80,000 square feet). Park Nicollet has
demonstrated its commitment to St. Louis Park with these community investments and proven
itself to be a dependable and strong community partner through numerous joint efforts with the
City. However none of these buildings are within the HSTI Subdistrict and, in some cases, they
do not pay property taxes. Thus they do not satisfy the construction requirements within the
Contract.
In its discussions with Park Nicollet, Staff has been striving to find an equitable, resolution to the
default situation.
NEXT STEPS:
Assuming the proposed amendment terms are acceptable, staff will prepare the necessary
documents and schedule the Third Amendment to the Redevelopment Contract for the EDA’s
formal consideration in the very near future.
FINANCIAL OR BUDGET CONSIDERATION:
Execution of the proposed Third Amendment to the Redevelopment Contract with PNMC
Holdings would essentially cap the qualified costs for which Park Nicollet is eligible for
reimbursement as well as reduce total amount the City is currently obligated to pay PNMC by
$500,000. It would also result in the early termination of the Excelsior Blvd HSTI TIF District,
adding approximately $1 million or about 1.4% in tax capacity to the City total tax base.
Furthermore, early termination of the district would save considerable staff time in the process.
VISION CONSIDERATION:
This proposal is consistent with the Strategic Direction of making a connected and engaged
community.
Attachments: PNMC Holdings Memo from Kennedy & Graven
Prepared by: Greg Hunt, Economic Development Coordinator
Reviewed by: Kevin Locke, Community Development Director
Approved by: Nancy Deno, EDA Executive Deputy Director and Deputy City Manager
Study Session Meeting of October 24, 2010 (Item No. 6) Page 4
Subject: Update on Redevelopment Contract with PNMC Holdings (Park Nicollet Health Services)
Kennedy 470 US Bank Plaza
200 South Sixth Street
Minneapolis MN 55402
&
Graven (612) 337-9300 telephone
(612) 337-9310 fax
http://www.kennedy-graven.com
C H A R T E R E D
M E M O R A N D U M
TO: Kevin Locke
Greg Hunt
FROM: Stephen Bubul
DATE: October 18, 2011
RE: Third Amendment to Contract for Private Redevelopment between EDA and
PNMC Holdings (the “Third Amendment”)
You asked me to explain and summarize the above-referenced Third Amendment, which amends
the original Contract for Private Redevelopment between the EDA and PNMC Holdings
(“Redeveloper”) dated as of March 30, 1993 (the “Original Contract”) as amended by a Second
Amendment thereto dated May 7, 2001 (the “Second Amendment”).
The TIF District and the HSTI District
The Original Contract required Redeveloper to construct a series of medical office buildings on
its property on Excelsior Boulevard in the City. That development required significant
remediation of hazardous substances, identified in a remedial action plan (“RAP”) approved by
the Minnesota Pollution Control Agency. To help finance the RAP costs, in 1993 the EDA and
City established the Park Nicollet Hazardous Substance Tax Increment Financing District (the
“HSTI” District”), which encompassed certain parcels owned by Redeveloper. The HSTI
District was an “overlay” within existing Excelsior Boulevard Tax Increment Financing District
(the “TIF District”), which was created in 1976.
The EDA was authorized to collect tax increment (referred to as “TI”) from the TIF District
through August 1, 2009. The TI from that district was calculated in the conventional way; i.e., it
represented the taxes generated from the incremental increase in value over the “base value” in 1976.
Increment from the HSTI District (referred to as “HSTI”) is a special case:
1. While the underlying TIF District was in place, the HSTI represented the taxes
generated from the “base value” of the TIF District. In other words, the taxes from value above
the TIF District base value are TI going to the TIF District, and the taxes from value below the
base value are HSTI going to the HSTI District (and useable only to finance RAP costs). The
HSTI dollars are a relatively small amount (essentially, taxes on the land before redevelopment),
compared to the TI created by the completed medical office buildings.
Study Session Meeting of October 24, 2010 (Item No. 6) Page 5
Subject: Update on Redevelopment Contract with PNMC Holdings (Park Nicollet Health Services)
2. In addition, the HSTI District allows collection of HSTI for 25 years from the date of
the first HSTI (in this case, the tax-payable years 1997 through 2022). After the underlying TIF
District was decertified in 2009, the HSTI expanded to include taxes from the entire value of the
property. That is, beginning with taxes payable in 2010, the TI and HSTI are combined, and all
are treated as increment from the HSTI District. This expanded HSTI may be collected through
end of 2022, with the caveat that these funds may only be used to finance RAP costs.
Redeveloper’s Performance
Phase I of Redeveloper’s obligation was approximately 105,000 square feet of medical office
space (the Park Nicollet Medical Center, West Lot; and the Mall Medical Office Building).
Phase II called for an approximately 49,000 square foot expansion of the building at 3850
Excelsior Boulevard, plus another approximately 50,000 square feet of expanded or new medical
facilities completed by December 31, 2006, and another approximately 45,000 square feet of
expanded or new medical facilities by December 31, 2010. (These requirements are mostly
found in the Second Amendment, which modified the construction sizing and timing somewhat
from the Original Contract.)
Redeveloper completed Phase I and the first component of Phase II (the 3850 Excelsior
expansion). However, the remainder of Phase II has never been constructed.
In exchange for these construction obligations, the EDA agreed to reimburse Redeveloper for a
portion of the RAP costs. The reimbursement was payable (over time, on a pay-as-you-go basis)
from 95% of the HSTI. As noted above, through 2009 these HSTI payments were the relatively
small “base value” payments; but beginning 2010 the payments increased to the full developed value.
Under the Original Contract, the maximum aggregate payments of HSTI was $9,000,000, but
payment was conditioned upon Redeveloper demonstrating that it had spent qualified
remediation costs under the RAP. Further, the Original Contract included a somewhat complex
formula to determine how much of the RAP costs were eligible for reimbursement from HSTI.
Since the date of the Original Contract, the Redeveloper demonstrated expenditures of
approximately $6,200,000 million in qualified RAP costs, of which it was entitled to be
reimbursed approximately $4,975,000 (under the formula referenced above). The EDA made
semi-annual HSTI payments (based on the small base value) through February 1, 2010. Starting
with taxes payable in 2010, the payments began to be based on the full value, and the EDA made
one such payment in October, 2010 (from the first-half 2010 taxes). No further payments have
been made since then, pending negotiation of the Third Amendment to the Original Contract.
Impact of Failure to Complete Phase II
Redeveloper understands that it has long been in “technical” default under the Second
Amendment, as it failed to complete Phase II. This failure was especially significant while the
underlying TIF District was in place, because (as explained above) the increment generated by
those improvements would have been TI going to the TIF District, where it could have been used
for ongoing EDA redevelopment activities.
The EDA determined that failure to complete Phase II resulted in a loss of TI for the TIF District
in the amount of approximately $312,000. Redeveloper acknowledged this financial impact, and
paid that amount to the EDA (in two installments, paid in December 2008 and January, 2009).
Study Session Meeting of October 24, 2010 (Item No. 6) Page 6
Subject: Update on Redevelopment Contract with PNMC Holdings (Park Nicollet Health Services)
However, the EDA also determined that, had Phase II been completed in accordance with the
square footages and timing specified in the Second Amendment, the EDA could have paid all
remaining RAP costs approximately one year earlier. This would have allowed the EDA to
terminate the HSTI District one year earlier, which would have returned the entire market value
of this site to the general tax rolls. Further, the City itself will not realize the long-term tax base
that would have been created by Phase II, which was part of the original “bargain” in exchange
for the tax increment assistance at the time the Original Contract was approved.
Proposed Third Amendment
EDA staff and Redeveloper have negotiated a resolution to the ongoing default with these goals
in mind: (1) recognize Redeveloper’s significant accomplishments to date, and acknowledge that
market forces have contributed to the Phase II default; and (2) recognize that the need for
financial assistance has been reduced as well, and acknowledge that the EDA should be
compensated in some fashion for the failure to realize the full tax base growth that was part of
the consideration for the Original Contract.
A complicating factor is that Redeveloper has filed petitions to reduce the market value of its
existing buildings within the HSTI District. Such petition was permissible under the Original
Contract, and is therefore not a default. However, the tax petitions complicate the payment of
HSTI, because the correct amount of taxes (and therefore HSTI) is not known at the time of
payment. Petitions for 2008 through 2010 have now been settled, but a petition for taxes payable
in 2011 remains pending.
Another complicating factor is that certain other property owners in the TIF District previously
petitioned to reduce their taxes, which resulted in loss of tax increment from that district. Since
the TIF District has now been decertified, the City will lose tax general tax dollars to account for
the prior “overpayment” of TI. To account for this, the EDA needs to withhold a portion of
HSTI payments to Redeveloper.
In light of these considerations, the proposed Third Amendment contains these key features:
1. The current balance of unpaid RAP costs is approximately $2,315,000. The EDA
will make further HSTI payments in the amount that leaves an unpaid balance of $500,000. In
other words, the EDA will pay approximately $1,815,000 of additional HSTI payments, and the
contract will then terminate.
2. The result is that Redeveloper’s total assistance will be reduced by $800,000,
including the $500,000 left unpaid as described above, and the $300,000 cash payment made to
the EDA in 2008.
3. The remaining payments will be made in three installments:
Ten Days after the Third Amendment: This payment will be in the amount of all the
previously withheld HSTI from the second-half 2010 taxes and the first-half 2011 taxes (i.e., the
payments that would have been made on February 1, 2011 and August 1, 2011). The second-
half 2010 amount is based on the stipulated market values for payable 2010, reduced by a
holdback because of other property tax petitions that were not filed by Redeveloper, as described
above. The first-half 20111 amount is reduced by a holdback because of a pending Redeveloper
tax petition. The net payment will be approximately $1,046,000.
Study Session Meeting of October 24, 2010 (Item No. 6) Page 7
Subject: Update on Redevelopment Contract with PNMC Holdings (Park Nicollet Health Services)
February 1, 2012: This payment will be the HSTI from the second-half 2011 taxes,
again less a hold back to account for the pending 2011 tax petition; provided that if that tax
petition is resolved before February 1, 2012, the holdback will be eliminated and actual payment
will be based on the resolved market value. The payment amount is currently estimated to be
approximately $544,000.
August 1, 2012: This final payment will be the amount left, after the two earlier
payments, that leaves a balance of $500,000 in unpaid RAP costs. The payment amount is
currently estimated to be approximately $226,000.
4. Redeveloper is permitted to seek a reduction market value for taxes payable in 2012
(the source of the last payment on August 1, 2012). However, Redeveloper may not seek a
reduction that would reduce the HSTI to a level below the amount of the August 1, 2012
payment. Such a reduction is almost impossible, because the final payment is approximately
one-half of the full HSTI payments. That is, Redeveloper would have to reduce its property
value in half in order to reduce the HSTI payment below the expected amount.
5. The other changes in the Third Amendment simply remove provisions that are no
longer needed in light of the proposed resolution.
6. After the final payment on August 1, 2012, the Original Contract is effectively
terminated, and the EDA will be required to decertify the HSTI District (even though it could be
in place through 2022, there are no further RAP costs to be paid, and there is no other possible
use of the HSTI under State statutes). Decertification of the HSTI District will bring the current
full market value onto the tax rolls for the City and all other taxing jurisdictions. The HSTI from
the first half of 2012 in excess of the payment on August 1, 2012, and all of the second half
HSTI in 2012, will be redistributed to the City and other taxing jurisdictions. The estimated
amount of HSTI redistributed in 2012 is approximately $938,000. The full value will be restored
for taxes payable in 2013.
If you or EDA commissioners have questions about this memo or the Third Amendment,
please contact me.
Meeting Date: October 24, 2011
Agenda Item #: 7
Regular Meeting Public Hearing Action Item Consent Item Resolution Ordinance
Presentation Other:
EDA Meeting Action Item Resolution Other:
Study Session Discussion Item Written Report Other:
TITLE:
Communications/Meeting Check-In (Verbal).
RECOMMENDED ACTION:
Not Applicable.
POLICY CONSIDERATION:
Not Applicable.
BACKGROUND:
At every Study Session, verbal communications will take place between staff and Council for the
purpose of information sharing.
FINANCIAL OR BUDGET CONSIDERATION:
Not Applicable.
VISION CONSIDERATION:
Not Applicable.
Attachments: None
Prepared and Approved by: Tom Harmening, City Manager
Meeting Date: October 24, 2011
Agenda Item #: 8
Regular Meeting Public Hearing Action Item Consent Item Resolution Ordinance
Presentation Other:
EDA Meeting Action Item Resolution Other:
Study Session Discussion Item Written Report Other:
TITLE:
September 2011 Monthly Financial Report.
RECOMMENDED ACTION:
No action required at this time. This report is being provided for information sharing purposes.
POLICY CONSIDERATION:
None at this time.
BACKGROUND:
This report is designed to provide summary information regarding the overall level of revenues
and expenditures in both the General Fund and the Park and Recreation Fund. These funds
should be a primary concern in analyzing the City’s financial health because they represent the
discretionary use of tax levy dollars.
A few changes have been made to the report and the attachments this month to provide a more
concise summary of General Fund and Park & Recreation revenues and expenditures compared
to budget.
It is important to note the following items when reviewing this report:
Due to a change in accounting practice, payroll and accounts payable expenses are no
longer accrued during the year. What this means is that wages or invoices paid in
October will be expensed in October, even though the expenses may have pertained to a
prior month. Because this may at times cause a slight expenditure variance throughout
the year, Accounting has reflected the applicable amount of September payroll expense in
the attached department summary. This practice will continue to provide consistency to
all reports. At year end, all 2011 accruals will be recorded prior to the audit.
Property tax revenues are received three times per year. Settlements in July and
December make up the majority of the revenue, with a small subsequent settlement in
January for the final tax collections which are accrued back to December as they pertain
to the prior fiscal year.
A large portion of the budgeted intergovernmental revenues are received at specific times
during the year. Because these are significant sources of General Fund revenue, it
usually causes a budget to actual revenue variance until received. These include Police &
Fire Aid typically received in September, DOT Aid/Highway User Tax received in
February and July, and PERA Aid received in July and December.
Actual expenditures should generally run at about 75% of the annual budget through September.
Currently, the General Fund has expenditures totaling 67.7% of the adopted budget and the Park
and Recreation Fund expenditures are at 77.4% of budget. As noted later in the report, the Park
& Recreation Fund variance is due mainly to larger seasonal expenditures incurred over the
summer months.
Study Session Meeting of October 24, 2011 (Item No. 8) Page 2
Subject: September 2011 Monthly Financial Report
Significant variances for both revenues and expenditures are highlighted below accompanied
with a general discussion of reasons for the variance.
General Fund
Revenues:
Through September, 99% of the budgeted license and permit revenues have been
received in the General Fund. The liquor and business license revenues have exceeded
budget by 3% or $25,000, and total permit revenues for the year are at 97% of budget
through September. While permit revenues can tend to slow in the last quarter, these
revenues will exceed budget for the year.
Intergovernmental revenue has exceeded budget by 2.8% or $32,000 for the year. The
annual Police & Fire State Aid payment was received in September in the amount of
$526,000. We also received more DOT Municipal State Aid than anticipated this year.
The State typically withholds 10% of the maintenance allotment until the following year,
however, the full 2011 allotment was sent in advance of the anticipated State shutdown in
June. In addition, we also received the 10% hold back of our 2010 allotment.
Expenditures:
The Facilities Maintenance Department is well below budget overall at 57.5%. This is
due to the retirement of the Facilities Superintendent and the subsequent staffing
reorganization. This has been taken into consideration for the 2012 budget.
Parks and Recreation
Expenditures:
Expenditures in the Organized Recreation and Rec Center Divisions are currently
exceeding budget at 81.7% and 78.0% respectively. Many of the expenditures incurred
in these divisions are seasonal, with larger expenses occurring for pool and recreational
activities over the summer months. A budget overage at end of year is not anticipated in
either of these divisions. Program revenues under Charges for Services are also
exceeding budget due to the seasonal nature of the activities
Total expenses in the Vehicle Maintenance Division are at 81.6% through September.
Motor fuel expense is at 90.7% of budget, due mainly to snow removal in the first quarter
of the year. Repair and maintenance services are also higher than budget, as there have
been many unanticipated equipment repairs requiring external service and labor work.
Certain repairs related to accidents will be reimbursed through a transfer from the
Uninsured Loss Fund at the end of the year. Staff will continue to review expenses in
this division closely throughout the remainder of the year.
FINANCIAL OR BUDGET CONSIDERATION:
None at this time.
VISION CONSIDERATION:
Regular and timely reporting of financial information is part of the City’s mission of being
stewards of financial resources.
Attachments: Summary of Revenues – General Fund and Park & Recreation
Summary of Expenditures – General Fund and Park & Recreation
Prepared by: Darla Monson, Senior Accountant
Reviewed by: Brian Swanson, Controller
Approved by: Nancy Deno, Deputy City Manager
2010 2011 2011 Balance Budget
Actual Budget Sept YTD Remaining to Actual %
General Fund Revenues:
General Property Taxes 15,061,268$ 15,426,072$ 7,967,635$ 7,458,437$ 51.65%
Licenses and Permits 2,359,094 2,345,910 2,322,279 23,631 98.99%
Fines & Forfeits 401,554 328,200 172,934 155,266 52.69%
Intergovernmental 1,578,946 1,136,187 1,167,978 (31,791) 102.80%
Charges for Services 1,125,867 1,152,643 489,541 663,102 42.47%
Miscellaneous Revenue 130,265 100,150 99,070 1,080 98.92%
Transfers In 2,588,235 2,589,876 1,913,157 676,719 73.87%
Investment Earnings 105,927 200,000 - 200,000 0.00%
Other Income 28,128 4,750 19,929 (15,179) 419.56%
Total General Fund Revenues 23,379,284$ 23,283,788$ 14,152,523$ 9,131,265$ 60.78%
Park & Recreation Revenues:
General Property Taxes 4,014,872$ 4,000,561$ 2,000,281$ 2,000,281$ 50.00%
Licenses and Permits 622 6,600 110 6,490 1.67%
Intergovernmental 89,631 77,652 123,951 (46,299) 159.62%
Charges for Services 1,022,826 1,095,250 914,413 180,837 83.49%
Miscellaneous Revenue 954,739 937,400 692,911 244,489 73.92%
Other Income 63,126 15,000 6,862 8,138 45.75%
Total Park & Recreation Revenues 6,145,818$ 6,132,463$ 3,738,528$ 2,393,935$ 60.96%
General Fund and Park & Recreation Revenues
As of September 30, 2011
Study Session Meeting of October 24, 2011 (Item No. 8)
Subject: September 2011 Monthly Financial Report Page 3
2010 2011 2011 Balance Budget
Actual Budget Sept YTD Remaining to Actual %
General Government:
Administration 840,147$ 889,798$ 576,523$ 313,275$ 64.79%
Accounting 562,372 612,964 449,393 163,571 73.31%
Assessing 488,548 500,141 359,463 140,678 71.87%
Human Resources 593,329 652,770 449,192 203,578 68.81%
Community Development 1,019,114 1,094,186 754,043 340,143 68.91%
Facilities Maintenance 952,856 1,114,551 640,314 474,237 57.45%
Information Resources 1,384,228 1,394,226 970,980 423,246 69.64%
Communications & Marketing 241,465 294,470 183,431 111,039 62.29%
Community Outreach 81,530 88,515 61,439 27,076 69.41%
Total General Government 6,163,588$ 6,641,621$ 4,444,778$ 2,196,843$ 66.92%
Public Safety:
Police 6,986,658$ 7,148,512$ 4,946,651$ 2,201,861$ 69.20%
Fire Protection 2,989,550 3,164,344 2,129,363 1,034,981 67.29%
Inspectional Services 1,729,156 1,863,296 1,291,649 571,647 69.32%
Total Public Safety 11,705,363$ 12,176,152$ 8,367,663$ 3,808,489$ 68.72%
Public Works:
Public Works Administration 872,845$ 829,698$ 571,826$ 257,872$ 68.92%
Public Works Engineering 798,240 846,032 576,721 269,311 68.17%
Public Works Operations 2,575,138 2,550,285 1,770,338 779,947 69.42%
Total Public Works 4,246,224$ 4,226,015$ 2,918,884$ 1,307,131$ 69.07%
Non-Departmental:
General 278,554$ 60,000$ 19,961$ 40,039$ 33.27%
Transfers Out 1,800,000 - - - 0.00%
Tax Court Petitions - 180,000 - 180,000 0.00%
Total Non-Departmental 2,078,554$ 240,000$ 19,961$ 220,039$ 8.32%
Total General Fund Expenditures 24,193,729$ 23,283,788$ 15,751,286$ 7,532,502$ 67.65%
Park & Recreation:
Organized Recreation 1,171,301$ 1,239,230$ 1,012,758$ 226,472$ 81.72%
Recreation Center 1,364,584 1,442,447 1,125,482 316,965 78.03%
Park Maintenance 1,413,840 1,435,374 1,073,801 361,573 74.81%
Westwood 488,258 502,366 341,339 161,027 67.95%
Environment 366,887 371,324 259,113 112,211 69.78%
Vehicle Maintenance 1,258,156 1,141,722 931,229 210,493 81.56%
Total Park & Recreation Expenditures 6,063,026$ 6,132,463$ 4,743,722$ 1,388,741$ 77.35%
General Fund and Park & Recreation Expenditures
As of September 30, 2011
Study Session Meeting of October 24, 2011 (Item No. 8)
Subject: September 2011 Monthly Financial Report Page 4
Meeting Date: October 24, 2011
Agenda Item #: 9
Regular Meeting Public Hearing Action Item Consent Item Resolution Ordinance
Presentation Other:
EDA Meeting Action Item Resolution Other:
Study Session Discussion Item Written Report Other:
TITLE:
Third Quarter Investment Report (July - September, 2011).
RECOMMENDED ACTION:
No action required at this time. This report is being provided for information sharing purposes.
POLICY CONSIDERATION:
None at this time.
BACKGROUND:
The City’s investment portfolio is focused on shorter term cash flow needs and investment in
longer term securities. This is done in accordance with Minnesota Statute 118A and the City’s
Investment Policy objectives of: 1) Preservation of capital; 2) Liquidity; and 3) Return on
investment.
The total portfolio value decreased by approximately $3.5 million in the third quarter. This was
primarily due to project expenditures from the UBS Fire Station Bond Fund. The Fire Station
Bond proceeds are invested in short-term commercial paper, which was purchased earlier this
year to mature incrementally over a five month period from June through October. As each
piece of commercial paper matures, cash is made available to pay construction expenses. The
rates on the commercial paper have ranged from .30% to .85% compared to just .10% currently
in the UBS Money Market Fund. Since the bond proceeds could not be invested in long term
securities, the higher yields on the commercial paper have helped to keep the portfolio yield
stable.
The overall yield of the portfolio was basically unchanged from the second quarter (1.28%) to
the third quarter (1.29%). Cities generally use a short horizon benchmark such as the two year
Treasury (.25% at 9/30/2011, .42% 9/30/2010, .95% 9/30/2009) or some similar measure for
yield comparison of their overall portfolio.
Over one-third of the portfolio is invested in money markets and short term commercial paper so
that cash is readily available for the fire stations and other large construction project payments as
well as the normal cash flow needs for payroll and general operating expenses. The money
market account that was opened at Citizens Independent Bank in January continues to earn .41%.
This is substantially higher than the yield of either the 4M Fund Money Market (.02%) or the
UBS Money Markets (.10%). A $5 million balance is being maintained in the Citizens Bank
Money Market to help improve interest earnings on available cash. Longer term investments are
purchased with some of the available cash whenever possible to help raise the portfolio yield.
The remainder of the portfolio is invested in longer term securities that will mature within one to
five years, if not called prior to the maturity date. About 60% of our longer term investments are
in municipal debt, which are bonds issued by States, local governments, or school districts to pay
Study Session Meeting of October 24, 2011 (Item No. 9) Page 2
Subject: Third Quarter Investment Report (July - Sept, 2011)
for special projects. The rest of our longer term purchases are in callable agency bonds, which
are issued by government agencies such as the Federal Home Loan Bank or Fannie Mae. They
typically have more reasonable interest rates to the final maturity date, but the issuers have the
right to call the bonds in three months to a year if interest rates decline. This happens quite
frequently in the current market. Seven securities were called prior to maturity in the third
quarter. New securities with comparable rates were able to be purchased, which kept the
portfolio yield stable.
Here is a summary of the City’s portfolio at September 30, 2011:
FINANCIAL OR BUDGET CONSIDERATION:
None at this time.
VISION CONSIDERATION:
The City has a sound investment policy that brokers are required to follow with the goals of
preservation of capital, liquidity and return on investment. The policy is strictly followed in
making investment decisions to protect the City’s resources.
Attachments: Quarterly Investment Report
Prepared by: Darla Monson, Senior Accountant
Reviewed by: Brian A. Swanson, Controller
Approved by: Nancy Deno, Deputy City Manager
6/30/11 9/30/11
<1 Year 56% 49%
1-2 Years 13% 14%
2-3 Years 12% 19%
>3 Years 19% 18%
6/30/11 9/30/11
Money Markets $20,815,023 $20,940,013
Commercial Paper $10,701,514 $7,265,482
Municipal Debt $20,781,393 $24,106,743
Agency Bonds $17,515,619 $14,021,074
City of St. Louis Park
Investment Portfolio
September 30, 2011
Institution Type Maturity Date
Yield to
Maturity Cost Basis
Market Value at
9/30/2011
Estimated Avg
Annual Income
Citizens Indep Bank Money Market 0.41%5,014,223 5,014,223 20,558
4M Fund Money Market 0.02%1,047,747 1,047,747 210
Citigroup/Smith Barney GNMA 7.19% 30,454 30,454 2,190
30,454
Wells Fargo Advisors FNMA 11/05/2015 1.25% 1,000,000 1,000,840 12,500
Wells Fargo Advisors Fed Farm Credit Bank 10/14/2016 2.48% 1,000,000 1,000,520 24,800
Wells Fargo Advisors FHLB 09/07/2016 1.60% 1,000,000 994,460 16,000
2,995,820
UBS Muni Debt-Illinois State 04/01/2013 1.84% 1,031,190 1,011,570 18,922
UBS Muni Debt-NYC 02/01/2016 3.03% 1,022,000 1,062,970 30,916
UBS Muni Debt-NYC 02/01/2016 3.07% 1,020,000 1,062,970 31,314
UBS FNMA 07/19/2016 2.32% 1,000,000 1,005,800 23,200
UBS Muni Debt -Dist of Columbia 06/01/2015 1.33% 1,085,400 1,074,330 14,447
UBS FHLMC 08/23/2016 1.50% 2,024,005 2,005,320 30,360
UBS Muni Debt -Calif State 10/01/2013 0.78% 2,123,620 2,106,340 16,649
UBS FNMA 09/21/2016 1.32% 1,008,505 1,003,240 13,312
UBS Money Market 0.10% 12,378,660 12,378,660 12,379
UBS Money Market (Fire Station Bonds)0.10% 2,499,382 2,499,382 2,499
UBS Comm Paper (Fire Station Bonds)10/03/2011 0.40% 1,262,258 1,265,962 5,049
UBS Comm Paper (Fire Station Bonds)10/07/2011 0.84% 5,962,200 5,999,520 50,082
32,476,064
Sterne, Agee Farmer Mac 10/03/2011 2.10% 1,069,426 1,000,000 22,458
Sterne, Agee FHLB 12/09/2011 2.63% 1,024,946 1,006,210 26,956
Sterne, Agee Muni Debt-Van Buren, MI Sch 05/01/2012 2.80% 101,504 101,263 2,842
Sterne, Agee Muni Debt-Waukegan, IL 12/30/2012 2.45% 1,579,605 1,552,380 38,700
Sterne, Agee Muni Debt-Greenwood Cnty Sch 03/01/2013 2.03% 752,580 755,510 15,277
Sterne, Agee FNMA 03/18/2013 3.96% 1,000,000 1,051,340 39,600
Sterne, Agee Muni Debt-Van Buren, MI Sch 05/01/2013 3.12% 307,584 310,887 9,597
Sterne, Agee Muni Debt-Milan, MI Sch 05/01/2013 3.16% 599,360 594,036 18,940
Sterne, Agee Muni Debt-Illinois State 04/01/2013 1.75% 1,033,320 1,011,570 18,083
Sterne, Agee FFCB 12/27/2013 2.20% 971,162 909,900 21,327
Sterne, Agee Muni Debt-Waukegan, IL 12/30/2013 2.95% 1,574,415 1,580,985 46,445
Sterne, Agee Muni Debt-Outagamie Cnty WI 04/01/2014 2.53% 820,919 841,793 20,769
Sterne, Agee Muni Debt-Van Buren, MI Sch 05/01/2014 3.52% 720,475 744,995 25,361
Sterne, Agee Muni Debt-Union Co NJ 06/01/2014 4.04% 558,740 567,687 22,573
Sterne, Agee Muni Debt-Illinois State 01/01/2014 3.25% 1,258,660 1,261,432 40,906
Sterne, Agee Muni Debt-Illinois State 01/01/2013 2.63% 865,649 865,079 22,723
Sterne, Agee Muni Debt-Illinois State 01/01/2012 1.65% 2,040,400 2,010,240 33,667
Sterne, Agee FNMA 10/27/2015 1.55% 1,000,086 1,000,860 15,501
Sterne, Agee Muni Debt-Milwuakee Co, WI 10/01/2013 1.50% 1,001,340 987,840 15,020
Sterne, Agee Muni Debt-Smithfield, RI 01/15/2012 0.55% 281,924 280,776 1,551
Sterne, Agee Muni Debt-Smithfield, RI 01/15/2013 0.88% 277,072 277,464 2,424
Sterne, Agee Muni Debt-Smithfield, RI 01/15/2014 1.35% 280,290 282,521 3,784
Sterne, Agee Muni Debt-Smithfield, RI 01/15/2015 1.90% 276,127 282,079 5,246
Sterne, Agee Muni Debt-Smithfield, RI 01/15/2016 2.40% 275,092 287,832 6,602
Sterne, Agee Muni Debt-Racine, WI 04/01/2014 0.70% 1,146,836 1,112,555 8,028
20,677,233
Wells Fargo FNMA 01/13/2014 1.40% 1,000,000 1,002,650 14,000
Wells Fargo Muni Debt-New York, NY 03/01/2013 1.00% 1,034,583 1,014,190 10,346
Wells Fargo Muni Debt-State of WA 08/01/2014 1.33% 1,066,000 1,065,450 14,178
Wells Fargo FHLB 03/27/2013 1.02% 999,580 1,009,480 10,196
4,091,770
GRAND TOTAL 66,333,312 858,488
Portfolio Yield 1.29%
Study Session Meeting of October 24, 2011 (Item No. 9)
Subject: Third Quarter Investment Report (July - September, 2011)Page 3
Meeting Date: October 24, 2011
Agenda Item #: 10
Regular Meeting Public Hearing Action Item Consent Item Resolution Ordinance
Presentation Other:
EDA Meeting Action Item Resolution Other:
Study Session Discussion Item Written Report Other:
TITLE:
Prism Dial-A-Ride Program.
RECOMMENDED ACTION:
No action required at this time. The purpose of this report is to update the Council on the status
of the Prism (People Responding in Social Ministry) door-to-door Dial-a-Ride transportation
services provided to all residents of St. Louis Park as of September 1, 2011.
POLICY CONSIDERATION:
None
BACKGROUND:
At the August 15, 2011 City Council Meeting, the Council approved entering into a contract with
PRISM to expand their existing door-to-door Dial-a-Ride program to encompass St. Louis Park.
The initial Contract term is for six months, September 1, 2011 through February 29, 2012.
Rider eligibility for the new program is open to all St. Louis Park residents, is not restricted by
age or income and is accessible for mobility impaired riders. Riders are asked to pay a $3.00 fee
per one-way trip and there is no limit on the number of trips taken per week. This is an on
demand service and riders need to call at least three business days in advance to schedule a ride.
Prism operates on a 1 hour pick-up window although the driver will call the rider when he is 10
minutes away. The hours of operation for this transportation service are Monday through Friday,
8AM to 4PM.
Based on similar size cities served by Prism’s transportation service, Prism is estimating that St.
Louis Park will generate approximately 2000 to 3000 rides annually.
Status Update: PRISM began providing transportation services to St. Louis Park residents on
September 1. Ride volume for the first month of service is as follows:
Total Riders Health Issues
Riders: 94* Walker: 2
Seniors: 65 Cane: 3
None: 89
Ride Destination
Shopping/Personal: 9
Medical: 81
Other: 4
* Includes duplicates
Study Session Meeting of October 24, 2011 (Item No. 10) Page 2
Subject: Prism Dial-A-Ride Program
The ride volume for the first month is similar to what PRISM has experienced in other new
expansion service areas. It is anticipated that the ridership volume will continue to grow as more
residents hear about the service. The visibility of the buses in the community also tends to
generate new riders.
PRISM has indicated that they have not experienced any major issues or problems in rolling out
the new service. PRISM went live this week with their new ride scheduling software which
should improve their ability to coordinate and track ride reservations. Courtney Whited, Director
of PRISM Express, stated that they did have a couple of days during the implementation of the
new software in which it took longer than usual to return calls for reservations but that the
software is now fully operational and calls should be returned promptly. Ms. Whited also
indicated that she rode along this past week on several of the rides provided to St. Louis Park
residents. The feedback she heard from riders was positive. The flexibility to schedule rides
anytime during the day and the door-to-door service were both mentioned as features the riders
particularly liked.
FINANCIAL OR BUDGET CONSIDERATION:
The City’s 2011 budget includes $20,000 in funding for a Dial-a-Ride program. An additional
$20,000 is proposed to be budgeted in 2012. For the initial 6 month contract, the City agrees to
reimburse expenses for the Dial-a-Ride service at the rate of up to $10,000. PRISM Express
estimates that the full cost of a one way ride is $11.50. PRISM will bill the City monthly on a
per ride basis. The City will reimburse PRISM at a rate of $5.50 per one way ride. The
additional ride expense will be supplemented by contributions from a $5000 grant from the Park
Nicollet Foundation and the $3 fare charged to riders. Staff proposes to utilize the Housing
Rehab Fund as the funding resource.
VISION CONSIDERATION:
The need for a variety of transportation modes allowing residents and visitors to easily and
inexpensively travel throughout the City and the entire metro region was identified through the
Visioning process as one of the City’s primary focus areas.
The agreement with Prism includes an option for the City to provide continued funding for the
program for 2012 contingent upon Council approval. Staff will continue to monitor the
program’s ongoing performance. Following the first six months of operation, staff will provide
an update to the Council and a determination regarding whether to continue funding the program
in 2012.
Attachments: September 14, 2011 Patch Article
Prepared by: Michele Schnitker, Housing Supervisor
Approved by: Nancy Deno, Deputy City Manager
Study Session Meeting of October 24, 2011 (Item No. 10)
Subject: Prism Dial-A-Ride Program Page 3
Meeting Date: October 24, 2011
Agenda Item #: 11
Regular Meeting Public Hearing Action Item Consent Item Resolution Ordinance
Presentation Other:
EDA Meeting Action Item Resolution Other:
Study Session Discussion Item Written Report Other:
TITLE:
Interested Buyer for 9019 Cedar Lake Road - Vacant City Parcel.
RECOMMENDED ACTION:
No Council action is required at this time. Unless the Council wishes to discuss this first, staff
will continue to work with the interested developer towards a proposal and purchase of this
parcel for the purpose of constructing two single family homes. Staff will keep Council apprised
of activity related to this parcel.
POLICY CONSIDERATION:
Is selling this parcel for the current appraised value, for the purpose of building single family
homes consistent with Council’s actions in December 2005, related to the determination to sell
designated excess city owned parcels for move up homes?
BACKGROUND:
In December 2005, the Council determined that designated publically owned parcels including
9019 Cedar Lake Road, be sold for the purpose of constructing large single family homes. The
approved Resolution 05-168 states that “City staff is directed to seek development proposals and
take the necessary steps to sell to a developer with demonstrated capability, the property located
at 9019 Cedar Lake Road; and identified as Parcel 10 for the purpose of developing up to four
single family homes on the site. The site plan shall retain lake visibility from Cedar Lake Road.”
At the December 2005 meeting the Council also established a sale process and design guidelines
for the parcels and homes to be constructed. Sale was to occur through a bidding process in
which parcels were bid out for the fair market appraised value; with the actual sale to be
administered by the Housing Authority. The buyers were to comply with design guidelines and
design review.
Status of Sale Process
The 9019 Cedar Lake Road parcel was bid out in 2007 with a fair market appraised value of
$400,000 for four single family lots, each valued at $100,000. There were no bidders for this
parcel. Since late 2007 the housing market has continued to struggle and there has been no
interest in this parcel. Recently, Mr. Robert Eldridge of Ridge Creek Custom homes has
expressed interest in purchasing this parcel for the purpose of building two single family homes.
Mr. Robert Eldridge is currently developing five single family homes on the 8849 Minnetonka
Boulevard site.
Instead of building four homes, Mr. Eldridge would propose to plat the parcel for two homes;
one on the western portion and one on the eastern portion of the lot. The soft housing market
and site complications including steep grade, soil conditions requiring fill and closeness to Cedar
Lake Road are reasons he cites for building two homes on this parcel instead of four. Therefore,
his proposal would reflect a purchase offer that reflects the value of two lots, rather than four.
Study Session Meeting of October 24 (Item No. 11) Page 2
Subject: Interested Buyer for 9019 Cedar Lake Road - Vacant City Parcel
The City Assessor has conducted an updated appraisal of this parcel based on building two
homes on the site. The 2011 appraised value is $152,000 for two lots, each appraised at $76,000.
Staff from Public Works, Park and Recreation and Community Development has reconfirmed
that building two homes on this site is feasible. The parcel would be platted into three lots; a
140’ side lot on the west portion and a 140’ wide lot on the east portion, both of which would be
for sale to the developer; and the mid- portion, approximately 195’, to be retained by the City.
Platting 140’ wide lots would prevent future potential subdivision of the builder’s lots; and City
ownership of the mid-portion of the site will ensure City access to the detention pond for
operation and maintenance purposes.
Design Guideline Requirements
The established design guidelines included a formal design review process that provided design
recommendations to the buyers. The Design Review Committee was composed of an architect,
landscape architect, realtor, Excess Land Task Force member and one neighborhood
representative. Rather than resurrecting the Design Review Committee which has not met in
roughly three years, Mr. Eldridge would still be required to meet the established guidelines, and
would solicit community input on a broader scale. The process would be similar to the
neighborhood process followed for the Eldridge platting process of the 8849 Minnetonka
Boulevard site.
9019 Cedar Lake Road Property Information
City holds title.
Parcel is unplatted.
Located in Cedar Manor Neighborhood.
50,620 sq feet is located above the 100
year flood elevation.
Zoned for single family residential.
Comprehensive Plan designation is RL
– low density residential.
Water and sanitary sewer access from
Cedar Lake Road.
NEXT STEPS:
To move forward the next step would be to bring forward a resolution for consideration by the
Council to sell the vacant city land at 9019 Cedar Lake Road for creation of a 3-lot subdivision
for two single family lots and one city lot. The Housing Authority would be party to the
purchase agreement, consistent with the sale process of the previous vacant city lands. Mr.
Eldridge would work with the Planning Department on the platting and development of the
parcel, including soliciting neighborhood input. A Planning Commission Public Hearing and
City Council approval would be required for the plat. The City Council would also be given a
Planning Commission recommendation on the proposed plat for its consideration.
SubjectFLAG AVE SC E D A R LA K E R D
Hannon Lake
Study Session Meeting of October 24 (Item No. 11) Page 3
Subject: Interested Buyer for 9019 Cedar Lake Road - Vacant City Parcel
FINANCIAL OR BUDGET CONSIDERATION:
Although the estimated revenue from this parcel is less than originally estimated, the sale of this
parcel would provide revenue of $152,000 which has not been included in the City’s budget.
Since the City holds title to this property, reconveyance and purchase from the State is
unnecessary and the revenue realized would be the City’s alone.
VISION CONSIDERATION:
Building two large single family homes is consistent with Vision St. Louis Park’s commitment to
provide a well-maintained and diverse housing stock by increasing the number of large single-
family, owner-occupied homes.
Attachments: None
Prepared by: Kathy Larsen, Housing Programs Coordinator
Approved by: Nancy Deno, Deputy City Manager
Meeting Date: October 24, 2011
Agenda Item #: 12
Regular Meeting Public Hearing Action Item Consent Item Resolution Ordinance
Presentation Other:
EDA Meeting Action Item Resolution Other:
Study Session Discussion Item Written Report Other:
TITLE:
Update on Request by Greensboro Condominium Association to Establish the Greensboro
Condominium Housing Improvement Area (Greensboro HIA).
RECOMMENDED ACTION:
No action is required at this time. This report is intended to update the City Council on this
project. The Greensboro Condominium Association is requesting that the City Council hold a
Public Hearing on November 7, 2011 to consider establishing the Greensboro HIA and imposing
fees.
POLICY CONSIDERATION:
The City is authorized by the state to establish HIAs as a finance tool for private housing
improvements. The City adopted an HIA policy in 2001, and has established five HIA’s to date
(see attachments). In the 2009 session, the state legislature extended the HIA statute for another
three years.
BACKGROUND:
Greensboro Square Condominiums and Townhomes are
located at the Southeast corner of Louisiana Ave South
and West Franklin Ave. It is somewhat unique in that the
Association is composed of both townhomes and
condominiums.
There are 15 buildings with a total of 260 units:
- 58 three BR townhomes;
- 38 two BR townhomes;
- 164 one & two BR condominium apartments.
It was built in 1970 and apartments converted to
condos in 1978.
The 2011 median estimated market value (EMV) for
the condos is $72,000 and the range of EMV is
$66,000-$91,900.
The 2011 median EMV for the townhomes is
$151,500, and units range from $128,000 - 157,000.
A. History
In 2008, the Association first expressed interest in learning about the HIA process to possibly
assist with financing garage repairs and conducted a physical needs assessment and financial
plan review known as a reserve Study to provide a background for making decisions related to
property improvements. In December 2008 the Board decided not to pursue an HIA in part due
to the uncertainty of the 2008 market upheaval.
Study Session Meeting of October 24, 2011 (Item No. 12) Page 2
Subject: Update on Request by Greensboro Condominium Association to Establish the Greensboro HIA
In September 2010, the Board and property management company, Gassen Property
Management discussed possible financial assistance with staff. They believed that ongoing
deferred maintenance needed to be addressed and that membership support for some level of
improvements existed.
The association formed a renovation committee to evaluate the condition of buildings and
grounds, determine a scope of work and to explore options to finance the work.
On August 12, 2011 the Association submitted the preliminary application for the HIA.
B. Analysis of Application
The City’s policy requires that only associations where the median unit value is less than or
equal to MN Housing’s First Time Home Buyers limit of $298,000 (2011) may apply. The
median condo value of $72,000 and median townhome value of $151,500 are within policy
guidelines.
The following analysis describes how the current proposal meets the HIA policy and intentions
of the statute. The Association’s preliminary application has been reviewed by staff and the
City’s financial advisor, Ehlers and Associates.
1. The Association contracted with a third party to conduct a reserve study.
In September of 2008, the Association had a reserve study conducted by Reserve Advisors,
Inc. This study was updated in summer 2011. The study includes a physical needs
assessment, thirty year capital improvement plan and a financial analysis of the existing and
projected financial situation. The updated reserve study takes into account a loan to fund the
proposed HIA project. The funding plan indicates that projected association fee increases
will meet operational needs and the Association will be capable of funding future
improvements with their reserves.
2. Project Costs are reasonable and eligible for use of the HIA.
To ensure the proposed scope and cost was the most responsible possible, the Association’s
renovation committee hired consultants to assist with evaluating the needed repairs. These
consultants include an Owner’s Rep and Construction Manager; structural and civil
engineers, surveyor and architects. The renovation committee has been meeting weekly since
February, 2011, refining the scope of work and budget.
The proposed scope of work is estimated at $3,286,680 and includes the following basic
improvements which are eligible uses for the HIA and are noted in the following table.
a. Site improvements required due to poor soil conditions and age: repair & replace
sanitary sewer, storm water and water mains, grading corrections, complete asphalt, curb
& gutter replacement, sidewalk and stoop repair.
b. Exterior building repair: siding and trim replacement to address failed mansard siding
detail, balcony repair, roof repairs and replacement of condo common area windows and
entry doors.
Study Session Meeting of October 24, 2011 (Item No. 12) Page 3
Subject: Update on Request by Greensboro Condominium Association to Establish the Greensboro HIA
c. Repair of all exterior garages. The engineer designed alternatives and residents with
garages voted on repair rather than replacement as a means to keep costs affordable.
d. Replacement of unit windows will NOT be included in the project. Residents desiring
unit window replacement may pay to have it done in coordination with HIA work, but are
not required to.
Table 1. Greensboro – Exterior Renovation Scope and Budget
Site Work Budget
Complete asphalt replacement, grade repairs, new concrete curb and gutter $692,622
Repair water main based on Bonestroo recommendations $54,307
Repair sanitary sewer based on Bonestroo recommendations $64,600
Repair storm sewer based on Bonestroo recommendations $154,965
Total Site Work $ 966,494
Resident Buildings
Siding - Remove and replace with new flux mansard design $852,832
New fronts (windows/doors) at condos, front, back, and side entries $ 92,000
Repair balconies as needed and repaint all balconies $185,200
Repair voids at slabs and patios, cable rerouting $ 28,000
Total Resident Buildings $ 1,158,032
Garages Repairs
Brick removal and siding install $ 139,597
Wall and roof framing repairs per Erickson Roed recommendations $ 217,965
Perimeter drain tile $11,424
New roof $276,924
New garage doors as required $79,950
Garage lockers $ 8,400
Garage contingency $108,879
Total Garages Repairs $843,139
Permits and Contingency
Permits $ 25,626
Contingency $269,389
Total Permits & Contingency $295,015
Subtotal Construction Costs $ 3,262,680
The next table shows the total project cost, which is estimated to be $3,835,000. The project
costs includes the cost of issuing bonds at almost $100,000, financing costs, the city’s
administrative fee and the city’s cost of legal and financial advisors. The association’s soft costs
include consultants as noted in the following table. The seemingly high cost of consultants
reflects the complexity of repairs related to soil conditions in this area of town and the need to
find solutions that will have lasting impact as cost effectively as possible.
Study Session Meeting of October 24, 2011 (Item No. 12) Page 4
Subject: Update on Request by Greensboro Condominium Association to Establish the Greensboro HIA
Table 2. Greensboro Total Project Costs
Bond Issuance and City Costs Budget
Underwriter's Discount for Bond Issuance $47,938
Cost of Issuance (Bond Counsel, Financial Advisor) $43,000
Rounding for Bond Issuance $688
Capitalized Interest $143,019
City Soft Costs (City Admin Fee, Legal & Financial Advisor) $29,675
Total Bond Issuance and City Fees $264,320
Consultant Soft Costs Budget
Owner's Rep/Construction Manager $155,000
Architect $65,000
Structural and Civil Engineers $ 57,500
Surveying $12,000
Enclosure/Siding/Windows 3rd Party Inspection/Siding $7,500
Environmental Hygienist $5,000
Legal and Accounting $6,000
Total Soft Costs $ 308,000
Subtotal Construction Costs $ 3,262,680
Total Project Costs $ 3,835,000
3. The HIA Meets City Goals
The proposed improvements meet the City goals in that they will upgrade the existing
housing stock in a neighborhood, stabilize the owner-occupancy level within the association,
and preserve existing affordable housing stock. The use of the HIA to assist with property
improvements is consistent with VISION direction to preserve existing housing stock and
affordable ownership opportunities.
4. The Association’s Process, Timeline and Communication Exceed Statutory Requirements.
The Association’s communication regarding the HIA began in 2008, and re-emerged in 2010.
The Association has followed an extensive process in ensuring owners are and have been
aware of the status of the proposed project, and that residents have been afforded
opportunities to provide input.
On October 12, 2011 the City Clerk received signed petitions from 141 Greensboro owners
requesting the Council schedule a public hearing to establish the HIA and impose fee.
Petitions have been signed by 54% of the owners. City policy and State Statute requires that
50% of the owners sign petitions. Prior to submitting the petitions the association completed
the following steps which meet statutory requirements.
a. In November 2010, the Association held a full membership meeting to discuss property
improvements and options to fund the improvements. The meeting was videotaped for
the Association’s use as well as being aired on the City’s cable channel.
b. In Feb 2011, the Association hired an owners’ rep to manage the three phases of the
renovation project; determining the scope, pre-construction phase and construction
phase. The association hired Blumenthal Architect, Bonestroo Surveying/Civil Engineering
Study Session Meeting of October 24, 2011 (Item No. 12) Page 5
Subject: Update on Request by Greensboro Condominium Association to Establish the Greensboro HIA
and Roed Erickson Structural engineering to determine physical conditions and propose
solutions.
c. The Association’s website: www.greensborosquare.com devoted one section to the
renovation project known as the Greensboro Extreme Makeover, providing ongoing
status updates, meeting minutes and solicited input from residents.
d. From February through September 2011, the renovation committee met almost weekly to
review findings, communicate status with residents and take input.
e. On April 28, 2011 the Association conducted a full membership meeting to inform
owners of the progress of the project.
f. The committee conducted two separate surveys of owners to garner input regarding
garage improvements and architectural design for the exterior siding project
g. On September 20, 2011 the Association conducted a full membership meeting to inform
owners of the final proposed project.
5. The HIA Financing is Necessary for This Project.
The Greensboro Association applied for credit from Signature Bank and Klein Bank. Their
requests were denied based on insufficient income for the amount of credit requested, the
type of collateral was insufficient and the exposure amount was considered too large.
The HIA is designed to be a last resort finance tool for associations. It is also designed to
address obstacles some associations confront when applying for financing – generally
associations are limited by their lack of collateral, and fund larger projects through short term
assessments to owners. The HIA provides affordable payment options, averaging
approximately $113 per month per unit. This payment will still allow association fees to
increase gradually to ensure adequate funds for operation and long term maintenance.
6. Fees and Loan Term.
The average fee per unit will be $14,762 with an annual average cost per unit of $1,354
including interest, payable over 20 years. The range of the unit fees is from $6,016 to
$25,294. Ehlers and Associates have suggested estimating a conservative interest rate of
6.03%, which may be decreased when bonds are actually sold and the city’s interest rate is
known. The following table outlines the loan terms.
Table 3. Loan Terms
Total Loan Amount $3,835,000
Term (years) 20
Interest Rate 6.03%
Average Annual Debt Service $335,167
Required Coverage (105%) $351,925
Total Units 260
Cost/Unit – Annual (Average) $1,354
Cost/Unit - Monthly (Average) $113
Average Assessment - Per/Unit if prepaid $14,762
Study Session Meeting of October 24, 2011 (Item No. 12) Page 6
Subject: Update on Request by Greensboro Condominium Association to Establish the Greensboro HIA
If the HIA is approved, owners would begin making payments with the 2013 real estate tax
payments. If only bonds are used to fund this project, owners may only prepay during a
prepayment period which would end in February 2012; with a combination of bonds and
internal loans there would be more flexibility in allowing pay-offs in the future.
The percentage of prepayments for the existing HIAs has been: forty percent for the Cedar
Trails HIA; twenty-five percent for the Sungate One; sixteen percent for the Wolfe Lake; and
seven percent for the Westmoreland Hills HIA and twenty-one percent for the Sunset Ridge
HIA. Preliminary estimates based on completed owner questionnaires indicate that eighteen
percent of the owners are considering pre-paying the fee if the HIA is approved.
7. Association's Desired Method of Fee Imposition
The newly enacted legislation amending the HIA State Statute requires that if the fee be
imposed “on a basis other than the tax capacity or square footage of the housing unit, the
Council must make a finding that the alternative basis for the fee is more fair and
reasonable.” Previous St. Louis Park HIAs used the percentage of ownership which was
based primarily on square footage and costs of limited common area improvements assigned
to specific units.
The Greensboro Association is seeking to base fees on a three-tiered system, which is
consistent with the formula used to calculate association dues, and considered to be a fair
method.
a. All common area costs including site work, financing and soft costs would be assessed to
each unit based on the percentage of common area ownership which is based on square
feet of units.
b. All common building areas improvements would be assessed to each unit based on the
percentage of building common area ownership, which is based on square feet of units.
c. Limited common areas include garages, lockers and balconies. These costs would be
assessed to each unit based on the cost of improvements associated with that unit. If a
unit has no garage, the owner would not pay for other units’ garage improvements, same
with lockers and balconies.
Kennedy & Graven will prepare a memo describing the proposed fee and providing a factual
basis for the Council's use in making its required findings that the proposed three tiered
system is more fair and reasonable and meets statutory requirements.
C. Homeowner risks and issues
Financial burden and debt load of owners. An HIA loan’s relatively low interest rate and
long term provides modest income homeowners an affordable means to pay for the
improvements. The Association has taken measures to assist owners that may be burdened
by the proposed fee.
1. The Board conducted a survey of owners to determine the number of low income seniors
and low income disabled persons that might be eligible for the hardship special
assessment deferral. The hardship deferral allows deferred payment until the sale or title
transfer of their unit for qualifying owner/residents. Twelve owners have indicated they
may be eligible for the deferred assessment.
Study Session Meeting of October 24, 2011 (Item No. 12) Page 7
Subject: Update on Request by Greensboro Condominium Association to Establish the Greensboro HIA
2. Community Action Partnership of Suburban Hennepin (CAPHS) provides financial
counseling at no cost to St. Louis Park residents and owners have received information to
access this service.
3. There are currently nine units in foreclosure – the bank and investor owners of these units
will be obligated to pay the fee, just as they are obligated to pay real estate taxes on their
properties.
4. By funding the HIA with a combination of bonds and internal funding, owners could
have more flexibility in paying off the assessment in the future.
D. City Issues
1. How best to fund HIA loans.
The City has alternative mechanisms to fund the HIA improvements. The HIA law
anticipates City’s using its bonding authority to fund HIA loans to homeowner associations.
On one hand the cost of issuing bonds, approximately $100,000 is expensive for the owners,
yet alleviates the concern that city reserve funds be tied up for a twenty year period. On the
other hand the use of internal funds could allow owners the flexibility to pay off the
assessment before the 20 year loan term, saving them interest and providing flexibility in
selling their unit; the use of internal funds also generates interest income for the city. Staff
with assistance from Ehlers & Associations will be determining the optimal combination of
issuing bonds and using internal funds to fund this project.
2. The firewalls to reduce the City’s financial risk are significant and include:
a. Repayment of the loan is made through owner’s real estate tax payments.
b. In foreclosure events, tax liabilities including special assessments, must be paid by any
party that purchases the unit. In this arena, HIA fees have been treated the same as
special assessments.
c. There is 105% debt coverage.
d. The development agreement allows the City to obtain assignment of association’s assets.
The agreement also can require associations to pay on behalf of delinquent members if
payments are not made.
e. The delinquency rate of existing HIA fees is low and consistent with the citywide
property tax delinquency rate of less than 1%.
f. Finally, the association, as required by statute conducted a reserve study of capital needs
and long term financials. The financial plan has been reviewed by staff and the city’s
financial advisor, Ehlers and Associates to ensure long term feasibility of financing future
improvements.
g. The Development Agreement provides additional contractual conditions to ensure
financial stability of associations. The agreement will require that the association:
Use professional property management.
Submit annual audits and update financial plans to demonstrate capability for
ongoing maintenance & operations.
Demonstrate increases in monthly association dues to build reserves to a
sustainable level.
3. On-going maintenance of townhomes and condos a critical community need.
Study Session Meeting of October 24, 2011 (Item No. 12) Page 8
Subject: Update on Request by Greensboro Condominium Association to Establish the Greensboro HIA
There are roughly 2700 townhome and condo units in St. Louis Park. The majority of them
are over 20 years old. For the strength of our neighborhoods and the whole community, it is
important that these homes be well maintained. Deteriorating housing would be a huge risk
for the community if allowed to happen.
In spring of 2009, the Inspection Department conducted a visual review of all condominium
and townhome complexes in St. Louis Park to determine the extent of potential complexes in
need of exterior maintenance. A handful of complexes were identified as needing repair
including Westmoreland Hills and Sunset Ridge which have established HIAs, and the
needed improvements have been completed. The Greensboro Square complex has been on
the City’s radar as an association with building issues related to poor soil conditions and
deferred exterior maintenance. The other association known to be interested in applying for
a loan is Westwood Hill Villas at 2200 Nevada Ave, with 60 units and a very preliminary
estimated construction cost of $1,000,000.
NEXT STEPS:
The Association has petitioned the City Council to hold a public hearing.
Week of October 24, 2011 Mail Public Hearing Notices
November 7, 2011 Public Hearing at Council Meeting
November 21, 2011 2nd Reading of HIA Ordinance
January 5, 2012 Veto Period Ends
Effective Date of Ordinance
February 16, 2012 Prepayment Period Ends
Hardship Deferment Application Deadline
March 2012 Sale of Bonds
2013 Fee will appear on property tax statements beginning 2013.
BUDGET CONSIDERATION:
Staff will be reviewing using a combination of bonds and internal funds to fund this project.
Using bonds will alleviate the concern that city reserve funds be tied up for a twenty year period
and will ensure that city has sufficient dollars available for other more immediate needs. While
using internal funds will allow owners the ability to pay-off the balance of their fee at any time.
Use of internal funds also generate interest revenue on the internal funds used.
The project fund covers costs incurred by the city; the city would receive an administrative fee of
one-half one percent of the project cost, or $19,175. The legal and financial advisor fees
incurred by the city are included in projects budget.
VISION CONSIDERATION:
This project is consistent with the VISION’s commitment to ensure a diversity of well-
maintained housing and affordable single-family home ownership.
Attachments: City HIA Policy
Summary of Established HIAs (2011)
Prepared by: Kathy Larsen, Housing Programs Coordinator
Approved by: Nancy Deno, Deputy City Manager
Study Session Meeting of October 24, 2011 (Item No. 12) Page 9
Subject: Update on Request by Greensboro Condominium Association to Establish the Greensboro HIA
CITY OF ST. LOUIS PARK
HOUSING IMPROVEMENT AREA POLICY
1. PURPOSE
1.01 The purpose of this policy is to establish the City's position relating to the use of Housing
Improvement Area (HIA) financing for private housing improvements. This policy shall
be used as a guide in processing and reviewing applications requesting HIA financing.
1.02 The City shall have the option of amending or waiving sections of this policy when
determined necessary or appropriate.
2. AUTHORITY
2.01 The City of St. Louis Park has the authority to establish HIAs under 1994 Minnesota
Laws, Chapter 587, Article 9, Section 22 through 3 1, and extended in 2000, M.S.
428A.21
2.02 Within a HIA, the City has the authority to:
A. Make housing improvements
B. Levy fees and assessments
C. Issue bonds to pay for improvements
2.03 The City Council has the authority to review each HIA petition, which includes scope of
improvements, association’s finances, long term financial plan, and membership support.
3. ELIGIBLE USES OF HIA FINANCING
3.01 As a matter of adopted policy, the City of St. Louis Park will consider using HIA
financing to assist private property owners only in those circumstances in which the
proposed private projects address one or more of the following goals:
A. To promote neighborhood stabilization and revitalization by the removal of blight
and/or the upgrading of the existing housing stock in a neighborhood.
B. To correct housing or building code violations as identified by the City Building
Official.
C. To maintain or obtain FHA mortgage eligibility for a particular condominium or
townhome association or single family home within the designated HIA.
D. To increase or prevent the loss of the tax base of the City in order to ensure the long-
term ability of the City to provide adequate services for its residents.
E. To stabilize or increase the owner-occupancy level within a neighborhood or
association.
F. To meet other uses of public policy, as adopted by the City of St. Louis Park from time
to time, including promotion of quality urban design, quality architectural design, energy
conservation, decreasing the capital and operating costs of local government, etc.
Study Session Meeting of October 24, 2011 (Item No. 12) Page 10
Subject: Update on Request by Greensboro Condominium Association to Establish the Greensboro HIA
4. HIA APPROVAL CRITERIA
4.01 All HIA financed through the City of St. Louis Park should meet the following minimum
approval criteria. However, it should not be presumed that a project meeting these criteria would
automatically be approved. Meeting these criteria creates no contractual rights on the part of any
association.
A. The project must be in accordance with the Comprehensive Plan and Zoning
Ordinances, or required changes to the Plan and Ordinances must be under active
consideration by the City at the time of approval.
B. The HIA financing shall be provided within applicable state legislative restrictions,
debt limit guidelines, and other appropriate financial requirements and policies.
C. The project should meet one or more of the above adopted HIA Goals of the City of
St. Louis Park.
D. The term of the HIA should be the shortest term possible while still making the annual
fee affordable to the association members. The term of any bonds or other debt incurred
for the area should mature in 20 years or less.
E. The association in a HIA should provide adequate financial guarantees to ensure the
repayment of the HIA financing and the performance of the administrative requirements
of the development agreement. Financial guarantees may include, but are not limited to
the pledge of the association's assets including reserves, operating funds and/or property.
F. The proposed project, including the use of HIA financing, should be supported by a
majority of the owners within the association. The association should include the results
of a membership vote along with the petitions to create the area.
G. The Association must have adopted a financial plan that provides for the Association
to finance maintenance and operation of the common elements within the Association
and a long-range plan to conduct and finance capital improvements therein, which does
not rely upon the subsequent use of the HIA tool.
H. HIA financial assistance is last resort financing and should not be provided to projects
that have the financial feasibility to proceed without the benefit of HIA financing.
Evidence that the association has sought other financing for the project should be
provided and should include an explanation and verification that an assessment by the
association is not feasible along with letters from private lenders or other evidence
indicating a lack of financing options.
I. The homeowner's association must be willing to enter into a development agreement,
which may include, but is not limited to, the following terms:
establishment of a reserve fund
staffing requirements
annual reporting requirements
conditions of disbursement
required dues increases
notification to new owners of levied fees
Study Session Meeting of October 24, 2011 (Item No. 12) Page 11
Subject: Update on Request by Greensboro Condominium Association to Establish the Greensboro HIA
J. The improvements financed through the HIA should primarily be exterior
improvements and other improvements integral to the operation of the project, e.g.
boilers. In the case of a homeowner's association, the improvements should be restricted
to common areas. The improvements must be of a permanent nature.
The association must have a third party conduct a facility needs assessment to determine
and prioritize the scope of improvements.
K. HIA financing should not be provided to those projects that fail to meet good public
policy criteria as determined by the Council, including: poor project quality; projects that
are not in accord with the Comprehensive Plan, zoning, redevelopment plans, and the
City policies; projects that provide no significant improvement to the neighborhood
and/or the City; and projects that do not provide a significant increase in the tax base
and/or prevent the loss of tax base.
L. The financial structure of the project should receive a favorable review by the City's
Financial Advisor and Bond Counsel. The review will include a review of performance
and level of outstanding debt of previous HIAs.
M. The average market value of units in the association should not exceed the maximum
home purchase price for existing homes under the State’s first time homebuyer program.
(In 2001, the metro amount is $175,591)
N. The association is to submit an application along with application fee as set from time
to time by resolution of the City Council.
Adopted by the City of St. Louis Park on the 16th day of July 2001.
Summary of Established Housing Improvement Areas (2011)AssociationNumber of UnitsLoan AmountMedian EMV Year EstablishedAvg Fee/UnitInterest RateTerm YearsExpirationSource of Funds# of Hardship Deferrals # Prepayments Outstanding Balance 12/31/2010Cedar Trails Condominium Association280 $1,366,000 $112.80 2002 $4,878 6.30% 10 2012 HRF 0 50 $128,811Sungate One Association20 $183,884 $131,700 2006 $9,194 5.90% 10 2016 HRF 0 2 $64,394Wolfe Lake Condominiums130 $1,238,000 $127,300 2007 $9,754 5.85% 15 2022 HRF 0 10 $828,561Westmoreland Hills Owners Association72 $1,026,125 $101,400 2008 $14,250 5.85% 15 2023 HRF 7 12 $843,172TOTALS 742 $7,749,204$4,968,344$118,50020 2031 Bonds 6 50 $3,103,406Sunset Ridge Condominium Association240 $3,935,195 2009 $16,625 5.60%Study Session Meeting of October 24, 2011 (Item No. 12) Subject: Update on Request by Greensboro Condominium Assocation to Establish the Greensboro HIAPage 12
Meeting Date: October 24, 2011
Agenda Item #: 13
Regular Meeting Public Hearing Action Item Consent Item Resolution Ordinance
Presentation Other:
EDA Meeting Action Item Resolution Other:
Study Session Discussion Item Written Report Other:
TITLE:
Vision St. Louis Park Community Check-In Update.
RECOMMENDED ACTION:
Staff has provided this report as an update on the Vision Check-In process. Please let staff know
of any questions or comments you might have.
POLICY CONSIDERATION:
Does Council still want to move forward with the Community Vision Check-In?
BACKGROUND:
Last year the City Council indicated they would like some type of one-time public gathering in
order to check-in with residents on the four strategic directions of Vision, which are:
St. Louis Park is committed to being a connected and engaged community.
St. Louis Park is committed to being a leader in environmental stewardship. We will
increase environmental consciousness and responsibility in all areas of city business.
St. Louis Park is committed to providing a well-maintained and diverse housing stock.
St. Louis Park is committed to promoting and integrating arts, culture, and community
aesthetics in all City initiatives, including implementation where appropriate.
It was further noted that the information shared with St. Louis Park residents would be presented
in a way that people understand that the City Council wants to hear ideas. The purpose is to
discuss and listen and check in with community members on Vision related activities. It is not
intended to create a task list or action items from the sessions. Suggestions may be discussed
and it is important for all to understand that there will be no promise that the City is going to do
whatever may be suggested.
Staff met and came up with a proposed plan which was reviewed by City Council. Subsequently,
dates/times and an agenda for the Vision St. Louis Park Community Check-In was set for April
2011. Due to schedules and larger community issues, we agreed to “put the April session on
hold” and undertake the check-in at a later date. Below is our updated proposal.
FINANCIAL OR BUDGET CONSIDERATION:
None.
VISION CONSIDERATION:
This item is linked directly to the Vision Strategic Direction that St. Louis Park is committed to
being a connected and engaged community.
Attachments: Vision St. Louis Park Community Check-In Update Proposed Plan
Vision St. Louis Park Community Check-In Proposed Agenda
Prepared by: Bridget Gothberg, Organizational Development
Reviewed by: Kathy Larsen, Community Development, Marney Olson, Police
Approved by: Tom Harmening, City Manager
Study Session Meeting of October 24, 2011 (Item No.13) Page 2
Subject: Vision St. Louis Park Community Check-In Update
UPDATED PROPOSED PLAN
Vision St. Louis Park Community Check-In
Thursday, January 12, 2012
Evening Group: 6:00 p.m. -- 9:00 p.m.
Outcomes of the Meetings
To inform the community of progress of Vision St. Louis Park.
To connect with and engage the community in dialogue (discussion, not direction) in order to:
o Gain an understanding what our citizens are thinking and feeling.
o Broaden the City of St. Louis Park’s understanding of citizens’ experiences and
perceptions in relation to Vision St. Louis Park.
o Remind and encourage St. Louis Park citizens on how to be a part of and/or get
involved in Vision St. Louis Park.
Report Back to Council.
Set Up
There will be 4 tables representing each Strategic Direction.
o St. Louis Park is committed to being a connected and engaged community.
o St. Louis Park is committed to being a leader in environmental stewardship. We will
increase environmental consciousness and responsibility in all areas of city business.
o St. Louis Park is committed to providing a well-maintained and diverse housing
stock.
o St. Louis Park is committed to promoting and integrating arts, culture, and community
aesthetics in all City initiatives, including implementation where appropriate.
Tables will be staffed. The community can visit these tables prior to the meeting, at break
and after the meeting.
The Council Chambers will be set up with tables and chairs so we can do the Vision
Check-In and educate, answer questions and have a world café dialogue.
We want both the informal (tables) and more formal (agenda) which will give us ample
opportunity to hear from citizens.
Communication/Publicity/Invitations
It will be in the Park Perspective and on our Web-Site.
We will work with our Vision Partners (School District, Park Nicollet, Children First, Twin
West Chamber of Commerce) to help us promote attendance.
We will send out email invites to boards and commissions, neighborhoods, etc. and ask
them to encourage friends/neighbors to attend.
We will use both the Sailor and Patch to invite.
We will use our local cable station to promote the event.
We will put the presentations on our cable station and on our web stream. People who did
not have a chance to attend will have a designated time to comment online.
Other:
We will give free rides to and from city hall for our residents who are not comfortable
driving at night.
Study Session Meeting of October 24, 2011 (Item No.13) Page 3
Subject: Vision St. Louis Park Community Check-In Update
PROPOSED AGENDA
January 12, 2012
Vision St. Louis Park Community Check-In
1. Welcome (5 minutes)
2. Video (10 minutes)
3. What has happened since 2006: We can give updates of each of the four areas—some
will take longer than others. Examples of this might be:
a. Arts and Culture (5 minutes MAXIMUM with pictures of the new public art, a
poetry event, etc.)
b. Housing (10 minute update)
c. Community Connections (20 minute Update on the civic center research, trails,
public processes, and other things we have done differently as a result of vision.
For example, we might even want to add some of our partners’ successes in this
area—example could be the personalized Champion Charges done by Children
First and each partner.)
d. Environment (25 minute Update since this is more complex and it involves so
many departments.)
4. Questions and Answers (15 minutes)
5. BREAK (15 minutes)
6. Come back to a World Café setting and focus on questions like:
a. What had real meaning for you from what you’ve heard? What surprised you?
What do you want to tell us?
b. What is missing in the Four Vision Areas, that if present, it would make St. Louis
Park an even better place to live?
c. If there was one thing that hasn’t yet been said that you think is important for the
City Council and City staff to know what would that be?
(60 minutes total)
7. Recap the World Café. (20 minutes)
8. Thank people for coming.