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Work Session 1 ' 1 1 I AGENDA CITY COUNCIL WORK SESSION MONDAY, MAY 3, 1993, 5:00 P.M. 1 CHANHASSEN CITY HALL COUNCIL CHAMBERS 1 I 1. Downtown Redevelopment Plans, Joint Work Session With City Council/HRA/ Planning Commission/Park and Recreation Commission 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 ,, , .1. CITYOF 1 ,t, _,,,, _,,,, , iii" / CHANIIASSEN ._.,.4. .•..,. 1 „.„.,,,, i 4, „ ,:,... 0, ; , 690 COULTER DRIVE • P.O. BOX 147 • CHANHASSEN, MINNESOTA 55317 1 (612) 937 -1900 • FAX (612) 937 -5739 MEMORA i UM 1 TO: Mayor and City Council Housing and Redevelopment Authority I Planning Commission Park and Recreation Commission 1 FROM: Don Ashworth, City Manager DATE: April 29, 1993 1 SUBJ: Downtown Redevelopment Plans, Joint Worksession with City Council/HRA/ Planning Commission/Park and Recreation Commission 1 I The numerous plans that have been developed over the last six months for redeveloping the core area of Chanhassen have been reviewed by the Planning Commission, Park and Recreation Commission, City Council, and HRA at at least two different meetings each. Based on I comments received, new revised plans were created. We believe we are down to three plans which incorporate directions given at previous meetings, i.e: I - Filly's is deleted from all three plans; and - The conference center element, although originally proposed to be financed both publicly I and privately, has lost interest with the private developers, and accordingly, has been deleted from all plans; and I - The restaurant, although desired by the HRA, has not generated any private interest, and accordingly, has been deleted from all plans; and I - Plan sets 10 and 11 do not provide a public access to West 78th Street. Hypothetically, access could be gained through a corridor system along the rear side of the stores on West 78th Street, but that would be up to individual businesses as to whether access could 1 come through their store; and - A bulk of the redevelopment effort is proposed to be private. For example, all 1 construction between the Dinner Theatre and the new hotel on West 78th Street is proposed to be private. [Note: I would hope that we will be able to introduce architectural controls as a part of any redevelopment agreement for that area. 1 1 t isi PRINTED ON RECYCLED PAPER April 29, 1993 Page 2 1 Additionally, a cinema has been incorporated off Pauly Drive in all three of the plans. Alternative 11 envisions a conference center, but such would be anticipated to be a ' private development associated with future hotel expansions. - Alternatives 10 and 11 provide space for future growth, i.e. additional gymnasiums, racquetball courts, meeting rooms, etc. Given the extent of private development currently being shown in all of the optional plans, ' Monday evening's meeting could better have been labeled, the "do" vs. the "don't" meeting. The "do" side would be saying that we "do" want to include a recreational element as a part of the redevelopment plan vs. the "don't" which would not include that element. It should be noted that in both the "do" and "don't" options, the bowling center would be proposed to be acquired with the removal of Filly's. Bloomberg Companies has prepared a plan for how they would redevelop the store fronts along West 78th Street, including the expansion of the hotel. They also believe U that they can develop the rear side, but that the HRA would have to purchase the bowling center and demolish Filly's in a similar fashion to how the HRA assembled lands and demolished buildings for Market Square, first and second phase of Medical Arts, Target, etc. Although Bloomberg Companies have not developed a specific plan for how the entire rear side could be developed if that option were chosen, it should be noted that a Budget Power or Knox could easily consume the entire rear portion of the properties from the back of the Dinner Theatre to 1 Market Boulevard. Bloomberg acknowledges that these are logical. The final decision as to whether we "do" include a recreational element or "don't" rests with the City Council (authorizing a plan amendment/bonding authority) and Housing and Redevelopment Authority (authorizing the project). However, I am confident that both of these groups want ' input from each other, as well as input from the Park and Recreation Commission (responsible for ultimately managing that facility), and the Planning Commission (conformance to Comprehensive Plan). Accordingly, after hearing the presentation by HGA (Curt Green and Gary ' Reitz), I would propose to poll each of the members present in regards to the fundamental question of whether we "do" introduce a recreational element or we "don't." ' If the "do" option is chosen, three sub - decisions would need to be made in choosing Alternative 8, 10 or 11 (see attached booklet). The following is my opinion as to each of the options. It should be noted that my driving force is financial (surprise, surprise): 1 - Alternative 8: HGA prefers this alternative. There is no question but that it provides a major centerpiece to the south side development, and introduces a strong architectural ' element, i.e. a striking entry and large green/landscaped areas My concern with this plan is that it is virtually impossible to phase and requires the immediate acquisition of the bowling center, demolition of Filly's, purchase of Bloomberg's warehouse, Bloomberg's 1 dance studio building, and both of the out - buildings behind the Dinner Theatre, as well as nearly 200,000 sq. ft. of land. We could easily consume one -half of our total budget in land acquisitions. The plan would call for raising the ground elevation behind the 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 April 29, 1993 Page 3 1 bowling center by approximately 4 feet so as to provide handicapped access, a drop -off zone, and reduce the overall height of the existing wall. Two marques would be built in this area for entry into the building, and major reconstruction will be required to support the east wall of the bowling center which would then be an exterior wall versus its current status as an inside wall. Similar comments would probably be true as it dealt with ' the back sides of Merlin's and the beauty shop. I sincerely question whether any dollars would remain for physical construction of the recreational element; and ' - Alternatives 10: Alternatives 10 and 11 are virtually the same from the standpoint of costs of constructing the recreational element (they are mirror images of each other). Both plans allow for phasing to ensure that future expansion was considered as our ' community grows and those costs are the same. However, Alternative 10, although allowing the future expansion as shown in the dark yellow, has most of the financial drawbacks associated with Alternative 8, i.e. major costs associated with knocking down 1 Filly's; east, west, and south wall reconstruction; buying four buildings from Bloomberg; etc. 1 - Alternative 11: The bold, dark, dashed line running north and south through all of the alternatives is a line which I believe needs to be respected. Everything to the west of that line is the current bowling center. Although the very easterly portion of the building is - - 1 owned by Bloomberg Companies, the major portion of the acquisition would be the bowling center itself. All of the property east of that line is owned by Bloomberg Companies, and includes the metal building behind Merlin's, the two out - buildings behind ' the Dinner Theatre, and most of the 200,000 sq. ft. referred to above. Alternative 11 will demolish the entire bowling center structure and replace it with the recreational element. ' As noted earlier, retaining this structure requires significant expense in removing Filly's and then dealing with an exposed wall; introducing 4 ft. of fill on the back side of the bowling center, including the new entrances, roads, and major changes within the parking ' areas. When you're all done, the appearance would have been enhanced, but you probably still have the unattractive tilt -up concrete southerly wall, and who knows, maybe the existing sign saying "Bowl." By removing the bowling center in its entirety, a ' structure can be developed having significant architectural style and truly complement the hotel. The pool would be built on the westerly portion of the project, and the entire complex would complement the entrance that has now been created on Market Boulevard ' with the pond, bank, and retail center. With the vast amount of redevelopment required by Bloomberg for the buildings on West 78th Street, it's probably not too logical that a whole lot would be done with the remaining portion of the back side of the Bloomberg 1 Companies' properties for several years. To enhance their ability to attract cinema into that area or some other private development, extension of Pauly Drive from Market to Great Plains Boulevard would probably be desirable, including parking lot construction/ 1 berming, reforestation, etc. In my mind, that decision would be up to Bloomberg Companies depending upon how they would proceed with preparing redevelopment plans for that back side. The city would definitely want to stay in the planning loop as a 1 relatively small, but important, part of that property includes our future expansion area. 1 April 29, 1993 Page 4 1 Recommendation ' I firmly believe that Alternative 11 can be accomplished at approximately the $6M total budget currently being considered. Although not providing the total redevelopment for the back portion of the overall area, it would represent a very attractive starting point and would enhance Bloomberg Companies' ability to attract a cinema or other form of development adjacent to it. A separate budget area which is not being tapped at the current time is monies allocated for a senior housing project (approximately $2.5M). If the cinema construction turns out to not be ' feasible, an alternative could very well be senior housing which appears to be an excellent addition to the master plan, and within reasonable proximity of transportation, retail services, and recreational opportunities. Amenities of Alternative 11 include: ' - Main entrance was developed to maximize its visual image to the entrance onto Pauly Drive from Market Boulevard. Glass walls of the pool building will enhance its image. 1 - Child care and indoor playroom face south. The inner lounge, snack and fitness areas are visualized as quite open, with a glazed wall 1 in the fitness area looking to the outdoor court game area (paddle tennis, volleyball, badminton, etc.). ' - Meeting rooms /connection to hotel corridor is included in the top floor of the structure. ' - Gym and racquetball expansion continues the construction Phase I. Depending upon decisions made earlier in our meeting, I would hope that there will also be time remaining to talk about types of pool, gym areas, meeting rooms, etc. Tax Increment Considerations 1 I had a great deal trepidation about re- stirring the 276/112 pot. However, I believe that the concerns raised warrant additional comments. First, let me start by having each of you assume ' that Chanhassen's largest tax increment district never existed. Secondarily, I would ask you to answer the question as to whether or not you believe that Chanhassen will have a recreational facility ($6M), or a library ($900,000), in the next 5 years? 10 years? 20 years? If you answered any of these questions with a yes, you will have in essence said that the city would be successful in passing a referendum for those purposes, and that the costs of that referendum - -$6M and $900,000, respectfully, will be paid as a tax increase generated by the City of Chanhassen. Our ' current tax structure is such that approximately two - thirds of the tax burden created by the city is paid by residents in School District 112, i.e. two- thirds of Chanhassen's overall values are associated with property owners who live in School District 112. Similarly, one -third of our 1 overall values are paid for by residents living in School District 276. That means that, in the future, residents in School District 112 will be paying approximately $4M and $600,000 more I 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 i• 1 April 29, 1993 Page 5 than they are today, and School District 276 residents will be paying approximately $2M and $300,000 more than they are today (amortized or 10 -15 years plus interest). File those numbers away in the back of your mind. We'll come back to them later. ' Let's now recognize that Chanhassen does in fact have a tax increment district, and that legal uses for those tax increment dollars are a community center, library, and parks. The overall amount of increment is known - -$6M. It is also relatively easy to calculate how many dollars ' would flow to the school district, city, and county when the district ceases to exist. It is also those same yearly dollars that are lost by each of those entities during the time frame that the district does exist. Minnesota has one of the most complicated property tax laws in the United ' States. At the primary foundation of the taxing system is a system to share the wealth from richer communities and to give to poorer communities. Chanhassen is currently a poorer community because the state does not see the dollars generated inside of the tax increment ' district. However, when that district ceases to exist, we will become a major loser. In addition, the state formula as it applies to revenues for school districts is also one of the most complex in the nation. As it deals with tax increment dollars, very few of those return to the school district, but instead flow to the state. The short and the long of this dissertation is that the number of dollars that would be available for tax reductions when the district ceases is relatively minor as it deals with the school district, with the county, and with the city. Those same minor dollars are the dollars that are being lost by each of those three entities while the district exists (today). It is for that reason that the city/HRA have met with the county and school district over the past four years to determine exactly how many dollars they will have lost between now and the year 1 2000, and that we develop a means by which those same number of dollars can be passed back to the school and county today. It is because of the lost tax dollars that the school would have ' received that we have entered into agreements similar to purchasing the school/park sites on Galpin Boulevard. This is the same reason that we are entering into county road construction contracts with the county - -to get to the county the dollars they are currently losing. Knowing ' that the school and county are getting the same number of dollars today that they would have available to them when the district ceases, and the distributions are made directly from the auditor to each of those entities versus the current pass -back through the city, there will not be a large tax increase or decrease at the time the district ceases. In fact, the only thing that the city has done during the time frame that the district continues to exist, is to keep the dollars for local projects that will be flowing to Minneapolis and St. Paul. The other primary winner will be the State of Minnesota. Clayton Johnson will in all likelihood be present on Monday evening. He will agree that the city is better served in using the dollars that would otherwise flow to Minneapolis /St. Paul and the State of Minnesota for local projects. However, he will be giving ' you a dissertation about investing in geese that lay golden eggs. He strongly believes that the city has done an excellent job in buying geese in the past years, and agrees that they have laid golden eggs. However, he would support that you continue to use those golden eggs to purchase 1 geese. Don't build a recreational facility because it doesn't lay golden eggs - -it consumes them. Don't build a library because it doesn't produce golden eggs - -it consumes them. My position is that we have done an excellent job in helping our business community. Now I think it is time that we looked at those projects that are going to benefit the community. Going back to our original hypothesis - -that the tax increment didn't exist and that a recreational facility or library will occur. Why in the world would you put these costs on residents living in School District 1 1 April 29, 1993 Page 6 1 112 and 276 when such could be paid from the monies that will flow (and that's a guarantee) to poorer cities and the State of Minnesota? 1 1 .►� 1 1 1 1 1 1 1 1 1 1 1 1 1 1 I 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 MORTENSON The Construction Organization" MIDWEST REGION Minneapolis Office 700 Meadow Lane North ENTERTAINMENT CENTER P.O. Box 710 (55440 -0710) CHANHASSEN, MINNESOTA Minneapolis, Minnesota 55422 -4899 PRELIMINARY BUDGET Telephone: (612) 522 2100 (1994 CONSTRUCTION) Facsimile: (612) 520 -3430 April 28, 1993 The Following Schemes Footage Do Not Include: e F to mg Schem s Foo age I : n e 1. Bowling Center 4. Scene Shop 2. Cinema 5. Restaurant 3. Meeting Center 6. Retail 7. Connecting Walkway ' HGA Scheme #8 Lower Level 48,523 SF 3/17/93 Upper Level 20,998 SF ' 69,521 SF 69,500 SF @ $90.00 /SF = $6,255,000 -' HGA Scheme #10 4/23/93 Phase 1 Lower Level 40,532 SF Upper Level 18,310 SF 58,842 SF 59,000 SF @ $90.00 /SF = $5,310,000 Phase 2 Lower Level 11,750 SF Upper Level 4,340 SF 16,090 SF 16,100 SF @ $90.00 /SF = $1,449,000 $6,759,000 HGA Scheme #11 Approximately Same Square Footage and Costs as Scheme #10 4/23/93 Offices In. Minneapolis Seattle Denver Colorado Springs Milwaukee Grand Rapids