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HomeMy WebLinkAbout2023/07/24 - ADMIN - Minutes - Economic Development Authority - RegularOfficial minutes Special EDA meeting St. Louis Park, Minnesota July 24, 2023 1.Call to order. President Mohamed called the special meeting to order at 6:02 p.m. a.Roll call. Commissioners present: President Nadia Mohamed, Tim Brausen, Sue Budd, Lynette Dumalag, Yolanda Farris, Margaret Rog, and Jake Spano Commissioners absent: none. Staff present: City manager (Ms. Keller), deputy city manager (Ms. Walsh), executive director (Ms. Barton), economic development manager (Mr. Hunt), housing supervisor (Ms. Olson), planning manager (Mr. Walther), redevelopment administrator (Ms. Monson) Guests: Chris Sherman, Will Anderson with Sherman Associates; Stacy Kvilvang with Ehlers 2.Approve agenda. Commissioner Rog asked to move item 4a from consent to item 6a under regular business. It was moved by Commissioner Rog, seconded by Commissioner Brausen, to approve the EDA agenda as amended. The motion passed 7-0. 3.Minutes – none. 4.Consent items. a.Resolution approving contract for private redevelopment and amendments to purchase agreement with Sherman Associates related to the Beltline Station market rate components. This item was removed from consent to item 6a under regular business. 5.Public hearings – none. 6.Regular business. a.Resolution approving contract for private redevelopment and amendments to purchase agreement with Sherman Associates related to the Beltline Station market rate DocuSign Envelope ID: 2F87D0D4-0679-429D-BC73-74A04D0C4B44 - 2 - Special economic development authority components and Resolution amending the interfund loan res olutions to allow pooled tax increment to be used to repay the interfund loans. Ms. Monson presented the report. Commissioner Rog noted the total cost of the affordable component is about $26 million. Ms. Monson stated that was correct. Commissioner Rog asked if $24 million in financing for the affordable component is between federal, state and local resources. Ms. M onson stated that was not correct. Commissioner Rog stated there is $8 million in low -income housing tax credits, $14 million in tax- exempt bonds, and $2 million from the city including affordable housing trust funds and TIF. Mr. Sherman stated of the $26 million referenced, there is $12,150,000 of private debt financing and $2 million of deferred developer fees they are bringing to the project, for a total of $14,000,000 of financing. He noted the tax-exempt bonds are a tool that allows the developer to access lower-cost interest rates, but they are not a direct subsidy to the project. Commissioner Rog stated the EDA sold the affordable housing parcel valued at $2.6 million to the developer a year ago for $1. She added the building permits were approved and cleanup activities have begun. Ms. Monson clarified the property has not yet been sold and the bonds have not yet been fully closed. Commissioner Rog stated the total cost of the market rate and mixed -use project is about $142 million. Ms. Monson noted that cost includes the affordable component. Commissioner Rog stated the developer will contribute $24 million in owner equity to the mixed- use and market rate component, and the city is being asked to contribute $16.41 million. Ms. Monson stated that is correct. Commissioner Rog stated the developer entered into a purchase agreement last year and agreed to pay $6 million for the 3 parcels and $1 for the fourth parcel. Ms. Monson stated that is correct. Commissioner Rog stated that the bank assessed the parcels at $3.4 million. Ms. M onson stated that is correct. Commissioner Rog stated the city is proposing t hat the developer pay $3 million for the parcels, which is $400,000 less than the assessed value and $3 million less than the purchase agreement. Ms. Monson stated that is correct. Commissioner Rog stated the city made a $3.1 million bridge loan to the developer in 2019 to buy the Vision Bank property, and that was provided to the developer because the city had quicker access to capital at the time and the city wanted this to h appen quickly so a surface parking lot would not be built there. Ms. Monson stated yes , and added the land is still being used to construct the required parking, and noted the funds were provided to Sherman to get more than just the surface parking lot. She also noted that Met Council recorded a permanent transit easement on the property which requires permanent transit parking as well as supporting further development. July 24, 2023 DocuSign Envelope ID: 2F87D0D4-0679-429D-BC73-74A04D0C4B44 Commissioner Rog stated those funds came from the city’s development funds and there i s $1 million outstanding on the bridge loan. Ms. Monson stated that is correct. Commissioner Rog stated a temporary COVID-related loophole allows the city to use pooled TIF for private market rate projects and this pooled TIF could be used for other affo rdable housing projects if deposited into the affordable housing trust fund or the general fund. Stacy Kvilvang with Ehlers stated the spending plan depends on the districts where those dollars are coming from, as they have certain restrictions. She added some of those dollars have to stay in those specific districts for affordable housing and would be available for future redevelopment projects. She stated the majority of those dollars were made into spending plan dollars because they had no restrictions. Commissioner Rog stated the total direct financing being requested tonight is $16.41 million which includes the land write-down, loan forgiveness and additional TIF. Ms. Monson stated that is correct. Commissioner Rog stated the total additional financial assistance above what was presented in February is then about $5.5 million. Ms. Monson stated the spending plan dollars were a lready included in the February 2023 report and the EDA approved utilizing spending plan dollars for redevelopment at the end of 2022. Commissioner Rog stated the city is being asked to provide an additional $5.5 million in direct financial assistance to Sherman and Assoc, adding this is a $5 billion for profit enterprise. This would bring the total direct financial assistance for this project to $18.47 million, and as noted with the exception of Excelsior and Grand and the West End, this is the highest amount of direct financial assistance the city has ever been asked to provide to a private developer in this city . Commissioner Rog added that this project is not on the scale of either Excelsior and Grand or the West End, in her view. Commissioner Rog stated she has supported every request for financial assistance made by this developer to date, but she would like the EDA to draw the line here. She stated she understands inflationary pressures and labor shortages, increased materials costs and other economic pressures and noted that residents do too. She noted residents are experiencing the same pressures, but not getting the same relief with debt forgiveness, price reductions and public subsidies. She added she objects to all of this additional assistance, noting these are valuable financial resources that belong to the community, but she noted while she objects, she is a realist and believes her colleagues will support a compromise. It was moved by Commissioner Rog, seconded by Commissioner Dumalag, to adopt the resolution with the following changes: delete all references to forgiveness of the EDA loan, modify the purchase price to be paid in cash by the developer in the amount of $3.4 million for the market rate and mixed-use property and direct staff to take all actions necessary to amend the resolutions and documents subject to final review and approval by the EDA attorney. - 3 - Special economic development authority July 24, 2023 DocuSign Envelope ID: 2F87D0D4-0679-429D-BC73-74A04D0C4B44 The motion failed 2-5 (Commissioners Farris, Dumalag, Spano, Brausen and President Mohamed opposed). Commissioner Dumalag asked if staff has run numbers based on the present value of the land and loan forgiveness changes to the proposed resolutions. Ms. Monson sta ted no. Commissioner Spano asked if anything has substantially changed in the financial package since this was viewed by the EDA in May and June of this year. Ms. Monson stated no financial components have changed since May and June. Commissioner Spano added this is a big number and when looking at this comparatively the 8.1% of total project budget coming in support is within range of other projects approved such as Texa- tonka and Bigos, but smaller than Excelsior and Grand. He stated he appreciated th e consistency of Commissioner Rog’s comments and healthy skepticism around the use of TIF. He stated he is struggling with this concern being brought to the table at the last decision point. He stated he is curious as to why this was not brought forth in May or June so staff could have investigated it more and brought it to the EDA earlier. Commissioner Rog stated she was prepared to meet with community development staff earlier, but because there were delays in agreements with the developers and tasks th ey needed to complete, this item was withdrawn from the agenda as an item for approval. She stated she was surprised this was presented last week for approval one week later, and when this happened, she immediately set to work to meet with community develo pment staff. Commissioner Rog summarized that she had been prepared to explore the entire issue in May or June, and at that time it was withdrawn from the approval process. Ms. Monson stated the development contract was not ready to approve in June, but added the EDA did approve an amendment to the purchase agreement to extend the date of closing from June 30 to September 15. Commissioner Spano stated when he looks at this compared to other projects, he was surprised at the costs, but then realized these items are comparable with what other developers would be requesting. He is comfortable with the proposal and will not support Commissioner Rog’s amended motion. Commissioner Budd stated she does agree with Commissioner Rog’s concerns, adding this project is very complex. She shares concerns that the timeframe is short and very tight. She noted also that if the resolution is not approved tonight, it will put the whole project at risk ; she does not like the feel of that and added that calling a special meeting next week to reconsider changes in the amount of $1.4 million would be a reasonable expectation. Reflecting that the time for an additional meeting was not available, Commissioner Budd said she will support the amended motion. Commissioner Brausen stated he appreciates Commissioner Rog’s concerns, and stated this is the highest and best use of the Beltline parcel s, which achieves so many goals that he cannot see not supporting it. He stated it has affordable housing, green building policy, 380 housing units and 21,000 square feet of commercial space, including a 592-stall parking ramp. He added there - 4 - Special economic development authority July 24, 2023 DocuSign Envelope ID: 2F87D0D4-0679-429D-BC73-74A04D0C4B44 is public utility work that has to be done regardless of who purchases the property, adding those costs will not be cheaper. He stated there is environmental remediation that must be done on the property, and that will occur regardless. He noted there is full reimbursement on the land cost and a small profit as well and this is the type of development the city wants. He noted given the size, it is slightly smaller than Excelsior and Grand and West End, and in those instances, there was no affordable housing or environmental measures included. He added it also complies with the city’s TIF policy as adopted by the EDA and staff was given direction to implement it. Commissioner Brausen understands that Commissioner Rog may not agree with it, these are the rules that have been adopted. He added changing the rules at the last-minute feels unfair to him. Commissioner Brausen stated the public grant the city is getting for the park and ride is a major issue, adding that failure to begin the project by September would result in either building a parking lot or the city absorbing the costs to put in a parking ramp. He noted the developer is not making an excessive profit on this project, the rate of return on their equity investment is reasonable, given other developers’ projects, and added he really trusts staff to get the best deal possible when negotiating. He stated these are incredibly complex deals to put together, and for the landscape to evolve as the project progresses is not unusual. Commissioner Brausen stated that he will not support Commissioner Rog’s motion as proposed. Commissioner Rog clarified that she is supportive of the TIF requests but has issues with the investments that could be recouped by the city. Commissioner Dumalag stated she is supportive of staff’s recommendation and while $18 million is a lot of money, it is within the threshold of other assistance the city has given to developers. She added for 380 families that will live here, park here, do commerce here, and take transit, along with the 82 units of deeply affordable housing, she is supportive. She added she is uncomfortable moving forward with Commissioner Rog’s chan ges when the numbers have not been vetted by consultants nor agreed to by the developer, adding she will support the project as presented. Commissioner Rog noted for clarification she is supportive of the development and believes it would move forward if some of the investments could be recouped by the city. Commissioner Farris stated she will support the staff’s recommendations. Commissioner Budd stated we are being asked to change the goal post at this stage, and that she is having an issue with the loan forgiveness and the appraisal price, not the TIF portion. Commissioner Brausen added that he had sent staff a question about what the legal landscape is in the event that the project is not approved, and there are risks associated with that choice. President Mohamed asked if the all-affordable building would have the same amenities as the other two buildings. Mr. Anderson stated Sherman prides itself on developing homes that all will be proud of. He noted it will have similar amenities as the other units and other buildings and will be 2 and 3-bedroom units for families, meeting a significant need for the community. -5 -Special economic development authority July 24, 2023 DocuSign Envelope ID: 2F87D0D4-0679-429D-BC73-74A04D0C4B44 President Mohamed stated she has been concerned about the dollar amounts and the affordable unit details, noting she was hoping for more affordable units, especially since it is right next to a transit station. She stated she is happy to hear there are 82 units, and 77 are at 60% AMI and the units feature more bedrooms. She asked if, considering the dollar amount, there is any tax burden or tax impact. Ms. Monson stated all the financial assistance being provided to the development is paid through pay-as-you-go TIF notes, pooled TIF, and loan forgiveness through the development fund. She noted they are the most flexible and noted no priv ate citizens’ taxes will be used to pay for this development. President Mohamed stated if the project does not go through, the affordable housing units will be lost, and this will just become a parking lot which does not generate any taxes. Ms. Monson stated that is correct. President Mohamed stated she will also support staff’s recommendations and will not support Commissioner Rog’s proposed amendment. Commissioner Rog stated she is disappointed, and it is unfortunate the council is not willing to stand up for taxpayers on this issue. She stated there is no way this development would be scrapped over $1.4 million, and they have the opportunity to recoup that money back for the city’s development fund and not have to tax our residents for this through th e EDA levy. She cautioned residents that higher taxes will be coming because the EDA was unable to recoup funds for other developments in the city and stated she will not support staff’s motion. It was moved by Commissioner Spano, seconded by Commissione r Brausen to adopt Resolution No. 23-17 approving contract for private redevelopment and amendments to purchase agreement with Sherman Associations related to the Beltline Station market rate components. The motion passed 5-2 (Commissioner Rog and Budd opposed). It was moved by Commissioner Spano, seconded by Commissioner Brausen to adopt Resolution No. 23-18 amending the interfund loan resolutions to allow pooled tax increment to be used to repay the interfund loans. The motion passed 5-2 (Commissioners Rog and Budd opposed). 7.Communications and announcements – none. 8.Adjournment. The special meeting adjourned at 6:55 p.m. ______________________________________ ______________________________________ Melissa Kennedy, EDA secretary Nadia Mohamed, EDA president - 6 - Special economic development authority July 24, 2023 DocuSign Envelope ID: 2F87D0D4-0679-429D-BC73-74A04D0C4B44