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1i. Special Meeting Dates, Fire Station/Equip Bonds of 1988 CITY OF --� N ` CHANHASSENr 690 COULTER DRIVE • P.O. BOX 147 • CHANHASSEN, MINNESOTA 55317 ' (612) 937-1900 ' r MEMORANDUM TO: Mayor and City Council FROM: Don Ashworth, City Manager 1 DATE: September 12, 1988 1 SUBJ: Set Special Meeting Dates: Fire Station/Equipment Bonds of 1988 , September 15 - Budget Worksession, September 19 1 - General Obligation/Tax Increment Bonds of 1988 , Nov. 7 Hopefully, the subject line is self-explanatory. Approval is recommended. 1 1 1 1 1 1 1 I I I I I 1 1 1 1 1 I 1 I 1 1 I 1 1 I I II .. f , II ,^ AN EN 1 , CITY OF 690 COULTER DRIVE • P.O. BOX 147 • CHANHASSEN, MINNESOTA 55317 .v (612) 937-1900 1 MEMORANDUM CONFIDENTIAL TO: Mayor and City Council Housing and Redevelopment Authority I (Note to HRA: This is being sent as an overview of 1988 bonding. You may wish to skip to Rosemount/ ITax Increment sections . ) FROM: Don Ashworth, City Manager 1 DATE: September 12, 1988 SUBJ: Set Special Meeting Dates: 1 - Fire Station/Equipment Bonds of 1988 , September 15 - Budget Worksession, September 19 1 - General Obligation/Tax Increment Bonds of 1988 , Nov. 7 NOTE: This item is being sent under "confidential" status I recognizing that the negotiations/development contracts associated with both the McGlynn as well as Rosemount development proposal have not been finalized. Misrepresentations as to the purpose I and intent of those negotiations could be harmful in finalizing those contracts. IBackground • In February voters approved "voted bonds" totaling $2 million ( Fire Station - $900,000; aerial fire truck - $450 ,000; Lake Ann I Park - $300 ,000; and Parks in southern Chanhassen - $300,000; Bonding costs - $50 ,000) . The sale of those bonds was purposely delayed until fall when it was anticipated that bids would be I received for both the fire station and city hall. Setting simi- lar time lines is desirable to insure that bonds are not sold only to find that the building estimates are 100% low; or, in I contrast, that the contract is awarded for construction and it is impossible to sell bonds. At that time is was known that 1988 would be a large bonding year recognizing projects underway (Kerber Blvd. , West 78th Street Detachment, Church Road, etc. ) as I well as anticipated tax increment bonds for 1988 . The develop- ment of proposals and reaching agreement with both McGlynn and Rosemount simply worsened over bulging workloads . I think we I will make it out of the woods, but not without some scars for trying to do too much too soon. I II Mayor and City Council September 12, 1988 Page 2 Set Special Meeting Date, Fire Station and Equipment Bonds of 1988, September 19: If I were a Council member, I would question this item. The last piece of correspondence received by the Council stated that we were seeking authorization to take bids for our 1988 bonding program and that the details of such would be presented on September 12th - such being well in advance of an anticipated sale in late September/early October. Why then is there nothing included on the September 12th agenda detailing the bond sales and, instead, a recommendation being made to award bids at a special meeting on September 15th? [ Note: If September 15th is unacceptable, we can move a few days on either side of such. ] Most of the time I will take the fall on goof-ups as appear to be portrayed in the above paragraph. This time I won't. I' ll let the State take its own lumps . Specifically, we had moved towards a "voted bonds" sale to approximate the date of the award of bids for the fire station. It was not until approximately two weeks ago that we were notified that the approving attorneys would not approve any bond sale associated with "voted bonds" . The reason I for such is complicated and stems from the legislature' s desire to move from "real property values" to "tax capacities" . In essence, the legislature deleted all sections of state law that refer to real property or the assessed value. State statutes, as the Council is aware, are voluminous . The legislature did a fairly good job in catching 95% to 99% of all sections of state law which refer back to real/assessed values . Unfortunately, Section 619 (voted bonds) was missed in that review process. Section 619 establishes the full faith and credit of the munici- pality as the guarantee for repayment of voted bonds. To make that guarantee, the statute goes on to define how the assessor is to divide the monies necessary by the real/assessed values in determining what percent of the voted bonds is directly attribu- table to each parcel within the community. Therein lies the - problem - there is no real property. There is no assessed value. Accordingly, there is no general obligation and there is no requirement for your property or mine to stand behind those bonds if a default were to occur. This would appear to be a tech- nicality type of issue which could be administratively corrected. Such is not the case. Moody' s would withdraw its designation of legal firms (only a handful exist within the State of Minnesota including the LeFevere Firm used by our City) if it were known that that firm misstated the guarantees backing the sale. To say the least, this office was extremely distressed with the notification from the LeFevere Firm. Only one course of action seemed reasonable - scramble. Section 429 of Minnesota Statutes allows for "negotiated sales" for issues otherwise permitted by law, but being of such minor value as to not warrant the full bidding process . Limitations on negotiated sales are based upon a percent of the total valuation within the community. This r , • ' Mayor and City Council ' September 12, 1988 Page 3 ' section of the statutes had been "fixed" . Accordingly, the City does have the authority to sell negotiated bonds up to $1.2 million. It was my decision to move ahead with the sale of the ' fire station bonds and one-half of the equipment certificate bonds ( recognizes that the City must pay up to one-half of the cost of the aerial truck at time of award and recognizing that the probability of significant expenditures for either Lake Ann or parks in southern Chanhassen would be unlikely in 1988) . I did and do firmly believe that it is imperative that we lock in ' on the good bidding climate for the fire station and have the funds available to make payments to the contractor. However, this new process did alter the direction Mr. Merry was moving and the work tasks needed to be completed. All issues could not be ready for market including the changed direction in how voted bonds would be handled. Faced with what I considered to be little choice, I instructed Andy to move forward with the nego- tiated sale. The movement to September 15th for the negotiated sale simply gives us a better opportunity to start that project earlier than waiting until early October. I am very confident ' that Andy can demonstrate to the City Council that the bids to be received through the negotiated sale process will be as good as any bids received through an advertised bidding process. Council members should feel free to pull this item off of the agenda if September 15th is not acceptable to a majority of the Council (only item to be considered that afternoon - 5 : 00 p.m. ) . ' Special Assessment Bonds, 1988: The agenda shows these as general obligation bonds of 1988 . What they truly are are spe- cial assessment bonds guaranteed by the value of the property ' being assessed. For the most part, very little risk exists with special assessment bonds . This years general obligation bond sale represents an average year. Projects include Kerber Blvd. , West 78th Street Detachment, Church Road, etc. ' Rosemount/McGlynn Tax Increment Bonds of 1988: The City Council is fully aware of the intent and purpose of selling bonds asso- ciated with the McGlynn Industrial Park, i .e. upgrading of ' Audubon Road to industrial standards . Unfortunately, I have not kept the City Council as well informed on the negotiations associated with Rosemount. It was my belief that the nego- tiations carried out by the Housing and Redevelopment Authority should be treated similar to other decisions made by the HRA to stimulate development of the grocery complex, hotel, or Retail ' West. [ Note: Rosemount is proposed to be located within the existing HRA Tax Increment District and, accordingly, would appear to come within their jurisdiction of negotiations regarding land acquisitions/public improvements . Although all of w II Mayor and City Council September 12 , 1988 Page 4 that is correct, the attorneys properly note that the final approval of any bond sale must be authorized by the City Council. As the Council had not been involved with each step of the deve- lopment process , I feel like I am now asking the Council to finish the game playing with only a half deck of cards . ] Basically the Rosemount and McGlynn proposals are exactly the , same. HRA policy has been one of offering an incentive to a new business coming into the community equal to 3-4 years of taxes from that facility. Typically, the amount of money generated is ' equivalent to the special assessments that may be placed against the property, i .e. Fluoroware, DayCo, Chanhassen Lakes Business Centres I and II, Roos, etc. In the case of Rosemount, the amount of taxes generated was far in excess of any other type of proposal previously considered. In that instance, the HRA was in a position to offer to purchase the lands necessary for Rosemount' s development as a part of the proposal and still meet existing criteria. What the Council will be looking to approve is a tax increment bond sale equalling approximately $1.8 million. Although this may sound high, it should be noted that the pro- perty taxes guaranteed to be generated off of this facility are approximately $840 ,000 per year. In addition, both McGlynn and Rosemount have agreed to pay taxes in advance of when they might ordinarily be required to pay such, i .e. given the size of both McGlynn and Rosemount construction projects , they would not nor- mally start paying taxes until 1991 . Recognizing that the City would have interest payments that are payable in both 1989 and ' 1990 , both firms have agreed to make tax payments equal to those interest payments in advance of when they would ordinarily start making tax payments . The 3 year period would then start when first full taxes were normally due. It should be noted that the actual repayment schedule has been set for a longer period of time than would actually be needed to repay the debt. This was solely to protect the City. The State Legislature continues to change rules and too often does not con- sider the implications on an individual city. For example, the legislature nearly approved reducing the revenues available to districts, such as ours, by 40% two years ago. That idea is still well and alive in St. Paul. It is imperative that we pro- tect the financial integrity of the City while similarly allowing us to have the option of closing debt if our projections prove correct. The proposed schedule by Mr. Merry accomplishes both goals . Specifically, the repayment is scheduled for 8 years following the date of full payment of taxes , but the City main- tains the right to call those bonds five years prior to maturity. ' Tax Increment Bonds of 1988: Both the HRA and City Council will be asked to approve tax increment bonds for the downtown project equalling approximately $800 ,000 . Before someone says "I am I . ' Mayor and City Council September 12 , 1988 Page 5 surprised" , let me jog memories. Lot 8 ( see attached map - Frontier Development Park, West 79th Street) was shown in the ' initial feasibility study as a partial taking. After approving bonds, prior to commencing construction, staff recognized that the taking as outlined simply did not make sense. Specifically, ' the amount of land being taken for pond and roadway purposes would be so severe so as to result in "severance" damages equal to or exceeding the land remaining. The remaining land simply could not be built upon and would be far better coupled with Lot ' 7 (proposed for a total taking) . It was this plan modification which Mr. Burdick challenged in court and attempted to portray and that the City had doctored its records so as to prevent him from seeking higher values . In actuality, there is nothing wrong with a city modifying its initial feasibility study prior to com- mencing land acquisitions and the court found that Mr. Burdick' s ' positions were totally false. However, such did add approxima- tely $50,000 to land acquisition costs . Similarly, Lot 6 was anticipated in the original feasibil-ity study to only be a par- tial taking. In negotiating with the then property owner ' (Chanhassen State Bank as a receivership from a default) , it was learned that the Bank would be required to sell both parcels (proposed total acquisition of Lot 7 as well as partial acquisi- tion of Lot 6 ) as one unit sale. Their estimated land costs were approximately $1. 70 per sq. ft. and were willing to sell at a $1 .75. This position was presented to the Housing and Redevelopment Authority and it was felt that purchasing both lots ' at current market values made far greater sense than having the bank sell said lots to another individual and look to condem- nation of Lot 7 and partial condemnation of Lot 6 . That deci- sion, as wise as it was, did add approximately $200 ,000 to land costs over those anticipated in the feasibility study. Finally, Mr . Renner (owner of Lot 6 ) approached the City stating that the current option agreement he had on his property was nearing expiration. Before he started resale processes, he questioned • whether the City had reasons of its own for acquiring that par- cel. Again, he would be willing to sell for the same amount as ' shown in that option agreement - $1. 75 per sq. ft. Staff pre- sented this proposal to the Housing and Redevelopment Authority concluding that although a specific use had not been identified, ' that the overall intent of the redevelopment plan would be enhanced by such acquisition. The HRA approved that acquisition - such adding approximately $200 ,000 to original feasibility ' study estimates . I can detail a number of other arenas where costs exceeded original estimates . For the most part, we can live with these with the one exception of the NSP undergrounding cost element. BRW correctly assumed that this would be a minor cost factor based upon their previous experience. What was unknown is the change in policies made by NSP and the number of cities that were seeking undergrounding at little or no cost - I such representing a primary factor in NSP holding to its newly adopted policies. In total, $330 ,000 was being sought by NSP Mayor and City Council ' September 12 , 1988 Page 6 for such undergrounding. Mayor Hamilton may wish to remind the Council of the numerous sessions that he participated in and his statements regarding those policies . The bottom line is that the City negotiated that figure down to $110,000 - a cost not antici- pated in the original feasibility study. Except for the last item noted in the above paragraph, all other added costs associated with the proposed tax increment bonds of 1988 represent new assets of the HRA/City. I firmly believe that the HRA has assets ( land values) on West 79th Street well in excess of $1,000 ,000 - such easily covering the $700,000 in addi- tional expenditures. As the HRA is aware, staff has already brought to the commission two bonafided developers who would be willing to pay approximately $2 .50 per sq. ft. for the HRA' s ownership - such not including the specific development proposals which would generate anywhere from $100 ,000 to $200,000 per year in new taxes . Although either of these two proposals may warrant some consideration for land write-downs, it may be advisable for both the HRA and City Council to consider the agony that each feels with authorizing $700,000 to $800 ,000 in tax increment bonds of 1988 . In addition, hopefully, the above dissertation will re-emphasize the fact that the Bernie Hanson proposal does not make good logical financial sense for our community, i .e. ' his request is that the City allow him to construct one-half of the previously approved building and to have the City give him the land as well as make site improvements (the HRA denied this request) . I am very much in favor of keeping Mr. Hanson within our community; however, we must maintain the financial integrity of our community and must seek means by which we insure that the cross which we are now being asked to finance can be recouped. In conclusion, I believe all costs with the downtown project have stayed within budgets (as modified) . However, I must warn the . Council and HRA that this could change if the settlements being sought by Burdick, Pauly, and Kallestad are given. I believe our appraiser, Swenson-Bjorkiand and Associates, did a professional job. I am hopeful that their work will be sustained. 1°Asr-- 1. 1 Hoisington Group Inc. I Land Use Consultants I MEMO To : Don Ashworth and Todd Gerhardt , Chanhassen I From : Fred Hoisington , Consultant Subject : Rosemount Engineering Approvals Schedule (Particularly EAW , ISP and Variance) IDate: 9-1-88 _ I The purpose of this memo is to explain the process required to get Rosemount approved and under construction by November , 1988. As you know, it is Rosemount ' s intent to construct a 600,000 square ' "° foot building in two phases , the first 330,000 square feet of Iwhich is scheduled for occupancy by the spring of 1990. To build 600, 000 square feet and more than 1 , 000 parking spaces I requires an Indirect Source Permit ( ISP) which will. Lake 4-6 months to process through the MPCA . The requirement is that an ISP must be completed for any project involving over 1 ,000 parking spaces and located within one-quarter mile of a street or highway I carrying an excess of 8 ,337 +/- cars per day . We also understand that the City may not even be able to sell bonds for the project if an ISP is pending . Having to go through the ISP process will Icertainly delay the project ' s construction start . A variance in hard-surface lot coverage will also be required I because the site is within a shoreland area which allows no more than 30% coverage. The proposed hard-surface cover is in the vicinity of 50% for the ultimate 600, 000 square foot project . Tt is the City 's responsibility to hear the variance but it does I require review by the DNR . The DNR has no authority to deny Lite permit but will likely comment very strongly unless the maximum mitigation measures are taken . The problem is with the ISP and the time it takes to process 'through the MCPA given their backlog of applications . The Phase 1 of 330 ,000 square feet requires neither an T P nor a Iproject variance and requires only 950 parking spaces which , inci,dentally , substantially exceeds the City ' s parking requirements . I What we are suggesting is that the project he approved for up to 330 ,000 square feet and that all documentation , including the EAW, be based on that number . If and when the expansion occurs it will. I require an EAW Amendment and an ISP . It. is not: our. intent to avoid the I.SP. We simply do not want it to delay the Rosemount project and thereby jeopardize their ability to build in Chanhassen . I 7300 Metro Blvd. i-i. y:r=3tJ: F� 1 Suite 525 Edina,MN 55435 ��� U e 19BQ Q ' (612)835-9960 -`~ CITY OF CHANHASSEN wd • Avoidance of the variance at this time may be a problem for Rosemount Engineering becatise it may want assurance that it can expand and it will have no assurance without variance approval . Granting the variance now, on the other hand , will mean that it will expire before being used . We will have to talk to Rosemount to establish its level of comfort with the "no variance" scenario . We , of course , will assure them that the City is as much interested in the expansion as is the Company. ' Don , in the interest of time , I really think we should communicate this message to the City Council and Planning Commission immediately to avoid any misunderstandings later during the heat of public hearings. If the Council would have us deal with this matter differently, we would welcome their suggestions immediately . ' • .' .•I a_...:.41,,{,T .✓:'.^�':i il:1i':LYt.r'w :. .“44ikli,1NVii,id.:;._1at1atio 444,4i•6.il. s Hoisington Group Inc. I Land Use Consultants ' ROSEMOUNT ENGINEERING APPROVALS/CONSTRUCTION SCHEDULE August 26 , 1988 CITY OF CHANHASSEN I A. AGREEMENTS PHASE ' AUG 17 , 1988 SELECTION OF CHANHASSEN ' AUG 17 INITIATE PLATTING/SURVEY (OPUS) AUG 17 - SEP 26 PREPARE/NEGOTIATE AGREEMENTS - CITY WITH OPUS (LAND PURCHASE) ' - CITY WITH ROSEMOUNT (DEV AGREEMENT) - ROSEMOUNT WITH OPUS (DESIGN AGREEMENT) SEP 14 TEAM MEETING: ROSEMOUNT , OPUS , CHANHASSEN (7 : 00 A .M. ) B. DOCUMENTATION/APPLICATION PHASE AUG 15 - SEP 19 PREPARE ENVIRONMENTAL ASSESSMENT WORKSHEET ' (OPUS) /ROSEMOUNT COMMITS TO BUILDING AND SITE DEVELOPMENT PROGRAM AUG 15 - SEP 15 PREPARE PLANS & SUPPORT DOCUMENTATION (OPUS) - _PRELIMINARY BUILDING & SITE PROGRAM - PRELIMINARY DESIGN/SITE PLAN - WETLAND ALTERATION PERMIT - VARIANCE (SHORELAND ORDINANCE) - WATERSHED DISTRICT ' - PRELIMINARY PLAT VACATION OF LAKE DRIVE EAST - DNR PERMIT TO WORK IN PUBLIC WATERS ItSEP 1 - 10 PREPARE REDEVELOPMENT PLAN MODIFICATION (CITY) PUBLISH HEARING NOTICE ISEP 15 SUBMIT APPLICATIONS TO CITY/SELECT CONTRACTOR SEP 19 NEIGHBORHOOD INFORMATION MEETING (CITY) C. APPROVALS PHASE ' AUG 22 CC CALL FOR BOND SALE SEP 16 APPLICATION DEADLINE FOR PC PUBLIC HEARING ION 7300 Metro Blvd Suite 525 SPR APPLICATION, ETC. Edina,MN 55435 (612)835-9960 - • 1 SEP 16 PUBLIC HEARING ADS PREPARATION (PC) SEP 19 - 23 CITY STAFF REVIEW OF EAW SEP 21 PC REVIEW OF REDEVELOPMENT PLAN MODIFICATION AND LAND SALE RE: COMPREHENSIVE PLAN COMPLIANCE SEP 22 PUBLISH PC PUBLIC HEARINGS NOTICES ' SEP 22 HRA APPROVAL OF REDEVELOPMENT PLAN MOD/TIF AGREEMENT WITH CC/DEVELOPMENT AGREEMENT/ . PURCHASE AGREEMENT/SETS PUBLIC HEARING ON LAND SALE/DIRECTS PUBLICATION NOTICE FOR LAND SALE SEP 26 DISTRIBUTE EAW TO REGULATORY AGENCIES INCLUDING EQB SEP 26 CC APPROVAL OF DEVELOPMENT AGREEMENT/TIF AGREEMENT WITH HRA/INITIATES LAKE DRIVE EAST FEASIBILITY STUDY/SETS 429 HEARING DATE SEP 30 PUBLIC HEARING ADS PREPARATION (STREET VACATION) OCT 3 PUBLICATION OF EAW IN MONITOR ' OCT 3 - NOV 2 EAW COMMENT PERIOD OCT 5 PC PUBLIC HEARING ON ALL APPLICATIONS OCT 6 PUBLICATION OF STREET VACATION NOTICE (LAKE DRIVE EAST) OCT 7 PUBLIC HEARING ADS PREPARATION (CC & HRA ) ' OCT 10 CC PUBLIC HEARING & APPROVAL OF REDEVELOPMENT PLAN MODIFICATION/RECEIVES LAKE DRIVE EAST FEASIBILITY STUDY/AUTHORIZES BOND SALE OCT 13 PUBLISH/MAIL NOTICES FOR VARIANCE AND CC HEARINGS ' OCT 13 PUBLISH NOTICE FOR HRA LAND SALE HEARING OCT 21 APPLY FOR WATERSHED DISTRICT PERMIT , (GRADING & EROSION CONTROL) - • ' OCT 24 BOARD OF ADJUSTMENTS & APPEALS PUBLIC HEARING OCT 24 CLOSING DATE FOR BOND SALE & CC HEARINGS ON: ' - LAKE DRIVE EAST SPECIAL ASSESSMENTS (429) - ALL APPLICATIONS OCT 27 HRA PUBLIC HEARING ON SALE OF PROPERTY ' OCT 31 BOND PROCEEDS AVAILABLE PENDING AGREEMENT NOV 1 - 4 SIMULTANEOUS CLOSINGS ON PROPERTY NOV 2 WATERSHED DISTRICT MEETING ' NOV 14 CC NEGATIVE DECLARATION ON EAW D. DESIGN/APPLICATION/CONSTRUCTION PHASE OCT 6 - NOV 8 CONSTRUCTION DOCUMENTS PREPARATION (DEVELOPER)/ ONGOING REVIEW BY ROSEMOUNT OCT 6 - JAN 15 DESIGN LAKE DRIVE EAST (CITY) NOV 9 GRADING AND FOUNDATION/BUILDING PERMIT APPS NOV 9 - 22 CITY BUILDING DEPARTMENT REVIEW OF CONSTRUCTION DOCUMENTS/PERMIT ISSUANCE NOV 14 CC APPROVAL OF GRADING/FOUNDATION PERMIT NOV 15 GROUND BREAKING/COMMENCE SITE GRADING ' NOV 28 - MAY 1990 ROSEMOUNT CONSTRUCTION - JAN 23 , 1989 CC APPROVAL OF LAKE DRIVE EAST PLANS & SPECS/AUTHORIZES TAKING BIDS MAR 13 CC AWARDS LAKE DRIVE EAST PROJECT ' MAR 27 - SEP 1989 LAKE DRIVE EAST CONSTRUCTION APR 1990 OCCUPANCY-OF ROSEMOUNT BUILDING 1