EDA 1995 10 12CHANHASSEN HOUSING AND
REDEVELOPMENT AUTHORITY
REGU~R M~grlNG
OCI'OBER 12, 1995
Chairman Boyle called the meeting to order at 7:00 p.m.
MEMBERS PRES~: Gary Boyle, Charlie Robbins, Don Chmiel, Mike Mason, and ~im
Bohn
STAFF PRI~ENT; Todd Gerhardt, Asst. Executive Director
APPROVAL OF MINUTES; Mason moved, Bohn seconded to approve the Minutes of tho
Housing and Redevelopment Authority meeting dated October 18, 1995 as presented. All
voted in favor, except Robbins who abstained, and the motion carded.
VISITOR PRES~ATIONS: None.
PRESENT 1996 BUDGET.
Todd Gerhardt presented the staff report on the 1996 Budge~
Boyle: If we identify these, are these all, the bonds we sold for the improvements, are most
of them, did you say street improvements?
Gerhardt: Most of them are the West 78th Stre~ improvements. Parking lots. The West
78th Street storm pond. Traffic signals out onto Highway 5. Lake Drive between CR 17 and
TH 101. The TH 101 project, north and south leg.
Bohn: I have a question about the north TH 101. That run,q through where that apartment
building was, and that apartment building was not in the HRA district.
Bohn: So where is, the money that was spent for, out of that road was not in our district.
Gerhardt: Those were monies that camo out of, if you remember we went back to the
legislation and we got special funding to ex~end that economic development district for a 2
year period, which was The Press, the DataServ.
Bohn: Redmond Products.
Gerhardt: I don't know if Redmond was in there.
Housing and Redevelopment Authority - October 12, 1995
Bohn: And you included, and ABC Building Products.
Gerhardt: Yeah. Those buildings, the increment created from those buildings were solely to
be used for the construction of that north leg project. But if you remember, you still brought
TH 101, the north leg down along Jerry Schlenk's home and connected into Great Plains in
that area. So it's a combination of HRA and economic development.
Bohn: Because that economic development wasn't part of us.
Gerhardt: That was City Council.
Belin: Right.
Boyle: We interrupted you Todd.
Todd Gerhardt continued on wi~h his stuff report.
Bohn: I have a question about those bonds. Are any of those ones that were referred to in
the paper about being sold?
Gerhardt: The bonds, while they're not really bonds.. They're investment certifi~es...~ are
in the city's investment portfolio and the most volatile ones, there's two of them that we went
back to City Council and asked the City Council if we could sell those and gave them
different alternatives and some forecasts on what could happen if interest rates go up and
down. And we felt at this time that it was in the best interest of the city to sell two of those
most volatile that really fluctuated with interest rates. If interest rates go up less than a
quarter of a percent, that affects our revenues on both sides. So with that we asked the City
Council to authorize staff to sell two of those issues because we felt that with the interest
earnings and how they sat today, that we were plus a million dollars on those issues from the
date that they were in the city's portfolio.
Bohn: Is that liRA money?
Gerhardt: It is money that was derived off. of the-sale of lands in the downtown area. That is
money derived from the interest earnings off of tax increment and those .monies that are
earned off of those different areas are the responsibility of the City Council...Your sole
responsibility is to work with tax increment money.. Not the.. interest earnings.off of tax
increment. That's money that goes into the general fund and the general, fund is nm by the
City Council. And that's what created the historical trust district, which is the responsibility
of City Council to distribute.
Housing and Redevelopment Authority - October 12, 1995
Boyle: That's Fund 460 or the master fund?
Gerhardt: 460 is the master fund of tax increment that you're responsible for. What we call
the historical trust district is 800, which is tho responsibility of tho city.
Boyle: I'm a little confused. It says recognizing that Fund 460 is the parent fund, all tax
increments are receipted into this master fund. And what you just said, I didn't understand it
I guess. What comes back into the HRA parent fund or master fund?
Gerhardt: The increment that is derived off of all the businesses that are within the tax
increment district. And what, the lands on the Tires Plus and Applebee's deal, that money
will go into that historical trust and the interest earnings off of' that money will help facilitate
the operation of the historical
Boyle: Can you explain historical
Gerhardt: Historical trust are the monies derived off of the interest earnings on our tax
increment. The interest earnings off of land sales. So when we get our $5,150,000.00 worth
of tax increment, we stick it over into Chan Bank and we earn 5%-6% on that: The interest
earnings on that money is called non-tax increment money and that then turns, that money is
the responsibility of the City Council because it's non-tax increment. So that goes into that
historical trust.
Boyle: Okay.
Bohn: If we buy land with HRA money, and we sell it, we don't get the money back?
Boyle: Yes, go ahead.
Gerhardt: You derive your money that paid off buying that land is through the new taxes
generated on that. A perfect example is Target. :You went in and bought the land-from
Target for, I think it was $2 million. And then you turn around and you.collect $300,000,00
a year in increment to pay off the bonds of buying that land. . :
:
Boyle: Once that's paid off, where does the revenue from that go then? To the city? Once
the bond is paid off.
Gerhardt: Once the bonds are paid off, then wdve been monitoring that over the years.
Where bonds go out to the life of the district so we take those monies and start, paying off
Housing and Redevelopment Authority - October 12, 1995
other bonds. All this debt you're taking on. Building demolition. Acquiring land. Like the
Taco Bell. The Red-E-Mix site. You sold bonds to buy those things.
Boyle: So once one bond is taken care of, the revenue then that comes in from Target can
help pay off other bonds that the H, I got you. Charlie, you wanted to say something.
Robbins: Well just about 3 more general questions in terms of more of the accountant in me
that asks this. Terms of the general property tax revenue. In other words, where tho money's
going to come in. Whether it bo a '95 budget or '96 is irrelevant. It's more, obviously we
must have something of where the $5.7 million came from as far as the projects that we have
in line that ultimately culminate what that number is. Now if a project changes or it does not
get completed, how drastic would that impact these numbers? For example, I assume that
that part of tho $5.7 million comes from, for an example Target or Taco Bell or some project
that's been done in town here. So there must be a make-up of what made that val. That's
one question. And then if you could I~ind of walk it through in terms of, we take in the
revenue, which obviously is the tax. You've got transfer to debt service of $3.7 million. I'm
just trying to tie out the expenses to a bottom line, in more of an accounting fashion saying
you've got money coming in. You've got cost of goods. You%e got all your expenses.
Bottom line. Retained earnings. And I'm trying to fie out the total debt service of these
numbers over here to page 1, and I don~t see where they do anything.
Gerhardt: Well it's kind of difficult to fill you in...debt study. We usually have Don come in
in November-December and he presents the debt analysis. It gets into more of the detail-of
your bonds versus your revenues and I'mean this is a simplistic way of showing how your
debt service is working but Don has tied in where .he's forecasting your figures out to the. end
of the district and we're updating that fight now.. To answer that question, it'd be better to do
it at your next meeting when we present the debt analysis 'and show you. what, you always
want to know what your bottom line is. How much money you have in reserve. And to
answer your first question, that's the thing that you. read in the paper and we mind over to,
you read a couple weeks ago. We were concerned that the HRA couldn't come in'and fund a
library and the senior center and buy' the land out in. front because' the commercial devaluation
of property. This $600,000.00 should be much more than that. Increase from last year.
You've got Instant Webb, United Mailings, Victory Envelope file tax abatements and have
reduced their taxes to the tune of $150,000.00. When you take that $150,000.00 off of those
three buildings, you don't think it sounds like a lot. When you take it times 8 years, you're
talking a lot of money.' I mean you're up over a million dollars. And Paisley Park is .another
example. They filed a tax abatement and got their valuation lowered by about a million
dollars. And that impacts you about to the tune of-about $80,000.00 a'year. You take .that
times the rest of our district, it makes an impact of what we were. doing in our forecasting
and you don't have minimum market values in these buildings so they .can go in .and file
Housing and Redevelopment Authority - October 12, 1995
those. We met with the County Assessor and saying you know, if you're going to bring
somebody down, you've got to bring somebody else up to stay on an even playing field on
this. But there's been so many comps and there's been so many attorneys out here pushing
for their tax services to go in and fight these th;ngs, it's just been real dit~icult. And all they
need is one sale to go into this tax court and fight this.
Boyle: So in essence Todd, that $5.8 million is, it's a projection that assumes that we're not
going to get all of the money. That they're going to be devaluated and we're going to receive
less taxes. I mean is that correct in summary?
Gerhardt: Well it should be higher.
Boyle: Okay.
Gerhardt: I mean it should be up in the 6 something if we had everything fight. When one
person gets a tax abatement of say $100,000.00, you know and over 8 years that's
$800,000.00 out of your pocket. That took away $800,000.00 to build a library. 'To build
the, to buy the land out front. And you know all this speculative commercial and office
industrial space that was built in the early, middle part of the 80's that when Savings and
Loans and businesses like that lost a lot of money on commercial investments, people sold
these things off right and left at probably 25 cents on the dollar so you saw a dramatic
decrease in valuation in commercial and office industrial space. And then everybody filed a
tax abatement...and it put a dramatic impact on everything along 494, Plymouth, and
Minnetonka and Maple Grove and us took quite a hit. And with that, you know we
forecasted out our numbers in hopes that we can do other Rings based on revenue over that
long period of time. Well now we're at the point where that million dollars that you had to
build the library and senior center, it no longer is there because of the devaluation in those
commercial properties. So bringing more development helps but you know you've got to start
seeing that surge, and we're starting to see some properties turn. I know of a couple of
industrial properties that are probably going to sell from anywhere between $40.00 and
$45.00, and they're got us on the books on most of the surrounding 30 to 28. So you will see
a bump in the next couple of years, is what our hopes are.
Bohn: That building that's proposed for the business park that was in the paper today, was
that in our business park?
-.
Gerhardt: McGlynn? :
Bohn: No.
Housing and Redevelopment Authority - October 12, 1995
Gerhardt: The McGlyrm expansion?
Bohn: No, not the McGlynn expansion. I'm trying to think what it was called.
Gerhardt: Control Products?
Bohn: Yeah, Control Products. Now is that reflected in here?
Gerhardt: Control Products is in an economic development
Bohn: Oh, it's not in here. That's the one over west of McGlynns.
Gerhardt: The only industrial land that we have loft in the redevelopment district is the
Redmond piece. The 51 acres on the south side of the public works buildings, and the Ward
property and Brad Johnson is in now trying to do a mixed use on the Ward property of
commercial and housing and a little bit of office and apartments.
Boyle: Where is the Ward property?
Gerhardt: The Ward property is east of the Rosemount West of tho Legion. It's that wooded
property between old TH 101 and new TH 101. The heavily wooded area. It's a very
environmentally sensitive site, as it's a fairly hilly site. Thoro is a Class I wetland on there.
And it will be, needs to be looked at very carefully when it comes in for development
Brad's proposal is very diverse and I think it's a good one. I think...thirlgs there that aren't
contrary to what we've done in tho downtown. I think they put something like...or a user of
more than 22,000 square feet. So you're not going to draw the energies away from
downtown. They're trying to come in with more little shops type thing. They want it kind of
a little ski resort, if you went to Estes Park, little retail shop type concept in there. But of
course you'd still need a couple of anchors to 'make it successfi~ but he's saying he can buy
anchors at 22,000 square feet, that will be successfig. I know we had trouble with that one.
That conference center was going to build over there. Because of the wetlands and whore the
roads were going to go and that was.
Gerhardt: I thought that was on the Rosemount site. Was that on the Ward site?
Robbins: Well there was like 2 or 3 sites they were looking at.
Bohn: Well one of them was directly-across where TH 101 went.
Mason: This has nothing to do with the budget but what kind of anchors is he talking about?
Housing and Redevelopment Authority - October 12, 1995
Gerhardt: I don't know. That's what we've asked him is to give us a list of potential
tenants...like an outlet center maybe, you know. But a different type of concept where it's not
just strictly retail type. It's kind of buildings are separated throughout it so you have some
out buildings. Kind of like Market Square but with more out buildings of Wendy's and Edina
Realty and that type of retail. You've got 22,000 square fe.~t user and then some little shops
outside of that. To give it a village type feel. So he'll be making a presentation I think in the
next couple of weeks to the Planning Commission .... couple times to clarify because we're
real concerned that he doesn't draw the energies of what wo%e done in the downtown and put
them over there on the south side.
Bohn: Where's that new building that is being built? That was in the paper today. You just
mentioned it wasn't in the HRA district though.
Gerhardt: Control Products. That's next to the National Weather Service. And the
Pillsbury's expansion. There's another one that filed a tax abatement and saw a big reduction
in their value.
Bohn: Well was McGlynn in the HRA district?
Gerhardt: No. It's in economic development district.
Boyle: But wasn't that once an lIRA district?
Gerhardt: No.
Boyle: It never was?
Bohn: Audubon Road was the dividing line.
Gerhardt: It goes down around what was the McMahon's farm down there. He had horses
and stuff. It went around that piece. I don't know why but it didn't include that because I
think at the time the district was started, everybody probably thought that he was going to
continue to farm. that or live there or whatever.
Boyle: Todd, I have one more question. When we're talking abOut some of the payments.
The outlays. We have total personal services which is a percentage of the wages. A
contribution. It's retirement insurance, etc. Then on 4420 is administrative fees for overhead.
Can you give some examples of what that is?
Housing and Redevelopment Authority - October 12, 1995
Gerhardt: That, the administrative fees is the fee that you pay to the City of Chanhassen for
utilizing City Hall. The building. Utilizing this Council Chambers. Any administrative type
of activity that you may see in providing this...list of employees here and using city facilities.
So basically that's our rent payment to the city. Using City Hall. That's our, I don~t want to
computer and the copier. There could be some copier in there.
Bohn: We already bought a copier.
Boyle: You tried to avoid that, didn't you.
Gerhardt: Yeah. You bought color on the copier. You didn't get the big price. The Council
got that one.
Boyle: Todd I think what I'd like, if you would please, break some of that out for us for the
next one. It's $75,000.00 is quite a bit. The other one that I'm having a little bit of a
problem with is the promotional expenses for 4th of July and the Septemberfest. Whether
this really should be part of HRA expenditures. $12,000.00 is not a huge amount but it's still
$12,000.00. In light of our current situation with less monies coming in than we expected,
we should probably take a hard look at that one I think.
Robbins: And also, this ties back to my questions. The original question, and getting the
flow from top to bottom here, I finally started to see how the numbers do kind of fit in a
way. Maybe. But it would be nice to, where you've got the budget, the re-estimate and the
'96 budget, if for example on the expenses someplace, if you could show... You just might,
maybe not monthly but maybe just quarterly, to show were we are in relation to the budget.
Gerhardt: The last Council packet I included that. I brought one here if you want to see it
but this is where we're at to date. Now in there a lot of things get allocated in the end of
December. You know Karen Engelhardt is checking off paper products and everything that
she doesn't hit me up until December. Takes it out of her account. She's familiar in working
with Account 101 or 112, you know and she kind of waits to the end of the year to make
sure everybody's balanced so if she's over budget in 11 l, she can go back and say well you
haven't taken any money out of mine, so she'll take it out of mine and it will usually balance
out to what we estimated at year end.
Robbins: So then the end of year for us then is actually calendar year, not fiscal?
Gerhardt: Yes.
Housing and Redevelopment Authority - October 12, 1995
Robbins: So in theory then, at the end of the year, December then we'll see a number of
where you've shown the '95 budget and then along side of that, it would be actual numbers.
I'm just looking at for example salaries and legal fees and a few things where there are larger
dollars.
Gerhardt: January and February is usually by the time we close out all the accounts. We get
services in December and they don't bill you until January but our year end is December.
We'll be taking expenditures and.
Robbins: Well when you're paying, thafs more of a cash program. But in terms of through
date we've actually billed out x dollars of legal and we~ve actually, and our budget was y and
the difference is the difference. So that Idnd of approach. Is that possible to get that?
Gerhardt: Sure.
Robbins: Okay.
Boyle: Because you brought up the budget of last week Charlie, Todd that $100,487.00 for
land improvement, etc. You had commented that that should not have been part of the HRA
budget, is that correct?
Gerhardt: Correct.
Boyle: Or being coded out of the budget.
Gerhardt: It should have been coded to a capital project or whatever. I think it was an
easement acquisition for some utilities and it got coded in 460. Other land acquisitions I
think was the category and it should have gotten charged against the capital project... If we
were budgeting for say the land out in front of City Hall, I mean that would be a capital
project. You recall that city commons fund, that would be a capital project so you'd have
land acquisition and then down tho line you're going to include some landscaping in there.
Some grading and things like that and you're going to want to bond for that money and then
pay it off over time in the increments that you receive through that scenario of a million
dollars is gone. The million dollars is gone but we still have $200,000.00 worth of increment
gone for the next 5 years. So that million dollars is gone and the only way we can get it
back is to see valuations go up and get that increment back to about $300,000.00 over 4 years
now.
Bohn: It's too bad we didn't own that property out in front now because of the fill we could
have gotten from the apartment building. Senior housing to fill that property in.
Housing and Redevelopment Authority - October 12, 1995
Gerhardt: Yeah, I mean we will have ownership I would hope before the end of the year and
Charlie James has plenty of fill to use on that site and he's not going anywhere quick with his
because there's just no place to go. We~ve used his fill on the pedestrian bridge and a lot of
people have been taking little bits and pieces out of his but he does have quite a surplus. Not
a matter of not being able to find fill. Some other things included in tho budget for this year
is we're putting in a half time intern, which is the only change in personal services...and tho
reason you've seen a decrease in your re-estimate, your salaries is due to tho vacancies that
we had in finance fight now. I would think that we're planning on filling one of those
positions this coming year. And put in a half time intern of about $8,000.00...9 to 8 month
internship with...and the City Council would be picking up a portion of that too.
Boyle: And that is included in the total personal services budget, 19967
Gerhardt: Correct. Other than that, I think I did up promotional services to take into account
some increases in there for 1996. It is one where...
Craping of the meeting ended at this point in the discussion.)
APPROVAL OF BII~K~.
Mason moved, Bohn seconded to approve the HRA bills as presented. All voted in favor and
the motion carried.
The meeting was adjourned.
Submitted by Todd Gerhardt
Asst. Executive Director
Prepared by Nann Opheim
10