EDA 1994 03 31CHANItASSEN HOUSING AND
REDEVELOPMENT AUTHORITY
REGULAR MEETING
MARCH 31, 1994
Chaimmn Bohn called the meeting to order at 7:30 p.t~
MEMBERS PRF_~ENT: Jim Bohn; Don _C~hmiel, Mike Mason, and Gary Boyle
MEMBERS ABSENT: Charlie Robbing
STAFF PRESENT: Todd Gerhardt, Assr Executive Director
APPROVAL OF MINUTES: Bohn moved, Boyle seconded to approve the Minulrs of the
Housing and Redevelopment Authority meeting dated February 24, 1994 as presented. Ail
voted in favor, except Chmiel and Mason who abstained, and the motion carried.
,VISITOR PRESENTATIONS: None.
Gerhardt: Mr. Chairman, ff we could just add that one item that I handed out. The HRA
Presentations portion of the agenda.
Chmiel: As item number 97
Gerhardt: Yeah.
Mason: We can't act on this tonight can we?
Gerhardt: You can. I ~ it should have been on the agenda and he would ~ to know an
answer tonight because he wants to executive the redevelopment agreement.
Mason: Well, I understand that but if somebody were to look at this agenda and then see that
this was approved, they would say but. It wasn't on the agenda and I didn't want it to
happen and I wanted to have my say in it.
Gerhardt: That's your prerogative. If you want to put it until the next month, it's.
Chmiel: Why don't we put that down for HRA Presentation.
Gerhardt: Sure. Mike's point was that it's not on the agenda...
Chmiel: Right. No, and I agree with that.
Housing and Redevelopment Authority - March 31, 1994
Gerhardt: And it was my fault that it didn't get placed on the agenda. When the agenda
went out I forgot all about it. Charlie called me this week and said...and I went oh oh.
That's where I started off saying I forgot.
Boyle: Which is a different word for overlooked.
Gerhardt: Yeah.
Mason: I think he overlooked it. I don't thinir he forgot. I mean I heard you say
overlooked.
Gerhardt: Karen told me I couldn't say forgot. I had to use something else so how about
overlookecL
CONSIDER APPROVAL OF RUSS PAULY'~ LEASE.
Gerhardt: Mr. Chairman, lIRA member. Inckgted in your pack are two kaset. One for a
one year term and a second one for a two year term. Russ and I have been swapping
messages and haven't gotten to each other here in the last two weeks. We met approximately
3 weeks ago and sat down and had a good talk however we never did come to a
determination on the square footage. I told Russ that I had to come somewhere between
$4.75 and $6.00 1 felt, which was the market rate rent based on an opinion from Roman
Roos. And from that I told him that I would ~ him two leases and that he could look at
them and get back to me. So as it stands tonight, stuff is proposing a one year lease at $4.75
a square foot and a two year lease at $6.00.
Bohn: I thought we already voted on 18 months.
~t: We, after one, part of our discussions with Russ was that we run with the length
of the liquor license so he's going to get a liquor license for a full year. How do you rebate
2, 3 months, 4 months worth of liquor license back so we started out with the full second
year.
Chrnicl: Couldn't you just prorate that and put it over a 24 month period, or a 12 month
period when you're paying for it and just deduct whatever's left of the 6 months. That's sort
of simple.
Gerhardt: You probably could do that You could probably prorate it back. We just thought
it would be simpler to go from May 1 to the next May type lease agreement. The additional
4 months isn't going to make or break anything so. We just thought we'd nm with the terms
Housing and Redevelopment Authority - March 31, 1994
of the liquor license and not get inw prorating. But if you wish to §o with the 18 months. I
~ber last time we were just negotiating 2 years down to 18 months.
Bohn: We ended up with 18 months is what we voted on.
Gerhardt: At that time.
Bohn: But the only thing we didn't come to a conclusion on is what the amount of the lease
would be.
Gerhardt: That's correct If you want to see it for 18 months, we can do that.
Boyle: Todd, just for clarification. One year, if the one ye~ lease is signed, then it's $4.75
a square foot. But if it's elected to go, as I understand it, if Russ elects to go 2 years, then
it's $6.00 a square foot. Am I correct?
Gerhardt: That's correct. Russ felt that if it's a shor~ period of time, that he should pay
less and if it's a longer period of time, he would be willing to pay more and we agreed with
him in those statements so that's why you see the two difference in rents.
Boyle: Russ, are you in agreement with these?
Russ Pauly: Not with the dollar amounts, no. For a number of reasons.
Boyle: Maybe we should hear from you.
Russ Pauly: My name is Russ Pauly. I live at 1031 Carver Beach Road in Clmflms~n and I
represent Pauly's Bar and Restaurant. As Todd said, we had discussions that pel~ained to the
amount of the dollar, or the dollar amounts of the lease. That was discussed with Roman
Roos and as he said, it's fair market value. A nnm_her of _things that don't pertain I don't
think to fair market value are you know condition of the existing buildings. The way they are
right now. As far as roof and upkeep and what have you, those are all things that I would do
as the renter. Basically though what Roman had said, some of that makes sense but the City
doesn't want to make any invesunent in the building and I don't think that's really what they
need to do. But on the other hand I don't think I should have to pay fair mazket value if I'm
going to be the one that fixes the roof. If I'm going to be the one that paints the building
and you know. The City doesn't want to pay fire insurance on the bufldin§. They want the
rent but they don't want to take the other responsibilities that go along with renting a
building. And I don't think maybe they should be in that business but the fact is that, if I'm
going to pay fair market rate, then that's what I should get is a fair de~ when it comes to the
Housing and Redevelopment Authority - March 31, 1994
lease you know. And basically when we had our discussions on the rent, my feelings were
that there should be some give and tak~ Basically what Roman Roos came up with is where
the city stands and they haven't budged a nick~ so you know, I told Todd. I said well
there's got to be some area there where we can reach ~ment and they never did, in our
two discussions, they never came back with a counter offer or anything so I don't know,
we're just kind of stuck and I thought at this point, I'm not going to sign a lease agreement
for song I don't feel is fair. Initially when we talked about the possibility of having a 2
year lease as opposed to a one year lease, it would make sense. If I could lock something in
for 2 years, I'd be willing to pay a little extra but on the other hand you know, if it's going to
be a one year deal or an 18 month deal you know now, I don't know where we stand as far
as that situation. The HRA said an 18 month de. al and the city's point of view was that they
would just extend it to a 2 year deal to run concurrently with our liquor license. And given
these changes I don't know really where the HRA slands on that... ~ I said Todd and I
hadn't been able to work anything out. As far as the lease agreement you know it has some
value to the city. They aren't §oing to have to do anything with the property. If they have
no plans to do anything as far as development. You know we're going to take care of the
building. We're in business and it wouldn't be to my advantage to let the e0m~or go down
the drain. To let the roof and the structural part of it go down the drain so I'm going to
maintain it from that perspective...and I don't want to have to pay prime rate if I'm going to
do these things. The conditions of the buildings aren't that bad. A lot of it is physical stuff.
I have plans to paint the exterior of the building again this summer you know but there again
that's at my cost. I'm not asking the city to do it but on the other hand, if they're going to
rent the building to me, you know like I said, I _thinir there should be some consideration you
know if I'm going to do that type of upk~p with the building. That's over and above noimal
lease agreements. We did have a fire there last October and you know I didn't even call the
city to find out if they had building insurance because I'm not in there to harass them or go
after things like that and there again; in the lease agreements that they sent me, you know
they don't plan on carrying fire insurance on the building, which isn't typical of a lease
agreement. You carry your insurance on your business equitnnent and inlm'ior featm~ and
whoever is leasing you the building carries the insurance on the building. Another thing in
consideration, I don't think the city has tak~ fully into consideration the fact that you know I
probably wouldn't be here if I was in the Kenny's building right now. I'd be remocl_elivg that
and be ready to move in probably 2 months. So it's kind of a situation where I'm stuck
because if I want to stay in business at this point, I have to stay in my location where I'm at
fight now. It just isn't physically or financially possible to do anything at this point. Some
of the other businesses that have been given consideration, you know I had a little chat with
Bernie Hanson from Chan Lawn and Sport and they were in there building for I think roughly
a year you know after they were to vaca~ it and he was paying $300.00 a month on a :5,000
square foot building. Well that's only 60 cents a square foot you know. I told Todd, I said
well I'll pay you $3.00 a square foot you know. Somewhere inbetween $3.00 and $4.75 and
Housing and Redevelopment Authority - March 31, 1994
they just, they wouldn't budge so I guess at this point I'm just, I'm here to see what the
HRA's thoughts are on it. I know what the advantages are to keeping me there because you
know we do pay our taxes. We pay a considerable amount in license fees and utilities and
parking lot maintenance and we're never delinquent on any, you know haven't been in the 60
years we've been in business in Chanhassen so I just think there should be a little
consideration given from that point of view. Or from my point of view. I guess that's all
Thank you.
Bohn: Thank you Russ. Mike.
Mason: Well, not being here last month I know for a fact that Council vomt and felt very
strongly that the lease should only go 12 months. Council, that was a very strong message
from Council and I happen to concur with that. So therein, there's ~y some pmbl_em~
here as far as I'm concerned. The comment that the City isn't budging I have a little trouble
with considering the fact that it's my understanding from Mr. Roos that he says mark~ value
was $4.75 to $6.00. So what I'm hearing is the city is giving low end to what market value
is in the city right now, is that right Todd?
Geflmrdt: Ah yeah.
Mason: I mean give or take.
Gerhardt: Roman went with the special conditions that go along with this rent. He said that
the market for that special condition should come in between $4.75 and $6.00. The true
market for a building like this is between $6.00 and $10.00. If you're out in the true market.
Mason: This is ~in§ to Roman, right So I, you know with those things, I have, I'm
happy with the direction staff is talcing and then I don't know that lIRA should be involved
in negotiating rents anyway. I think if we stick our fingers in this, then what's to prevent
everybody that has any kind of lease with the city to come knocking at our doorstep.
Bohn: They don't all own properly.
Mason: Well I understand that but there are a number of tenants in the city that ~ is
owned by the dry that will certainly have the opportunity, if we start giving figures to staff
and telling them that this is what we want to see, well I think we're opening up a can of
worms that I quite honestly don't want to open. So I certainly don't want to see this go to 2
years. I can tell you that right now. So I guess that's where I'm at right now.
Housing and Redevelopment Authority - March 31, 1994
Boyle: Mike, why does Council and yourseff feel that 2 years is, why do yo not want to see
it go 2 years?
Mason: Well because I think there's, well for one thing, like I said and I know Dick's in the
audience and Don is here too. Council wanted it to go a year because it's time to start
looking at other ~ings.
Boyle: But we have nothing planned and we know it lakes a long time_, to get something
done, is that correct?
Chmiel: No. No. There were some things that were discussed at that time. In fact that
evening meeting I brought that up as well That potentially we need something within the
city for kids. I was looking for something as a youth center and I had been looking at that
building for a long time. And I was the one that brought up the fact that we should have a
year extension to give Russ that additional year because I thought with the fact that he was
really getting shot down over at Kenny's, that that would at least give him an OlYPOrtunity to
move forward within 6 months to a year to find another location and put that business back in
USe.
Boyle: I guess I kind of like the idea that at least it's creating some revenue for a year or
two if we have nothing else going.
Chmiel: Well that's part of it I think that there's going to be, there's sort of a lack of
communication between HRA and back to Council and or vice versa and I don't know, how
did this come up with the additional 18 monlhs? Or to 2 years.
Bohn: Well if he was going to put any money into the building and maintain the building
and operate the building, a year really wasn't sufficient.
Mason: Why not?
Boyle: It's kind of like a compromise between a one year and two year I think is where it
really came out.
Mason: Well Council wanted to go with 6 months to be honest with you and they were
talked into.
Boyle: That was never brought up at our l~t meeting.
Mason: Well yeah.
Homing and Redevelopment Authority - March 31, 1994
Chrrfiel: And that's why I was sort of surprised when I did read these Minutes that nothing
was mentioned of that fact. Discussion at Council
Mason: Well I believe Todd, in the HRA ~mutes Todd did say that Council wanted, and I'll
check it but I believe you made a comment about the Council wanting a year lease.
Gerhardt: They asked me where the one year came from and I said that that was the
direction from City Council.
Boyle: One year though, not 6 months.
Mason: Well right. Right. Oh 6 months was di~ussed and we voted on a year. I mean he
wouldn't have had any reason to say we wanted 6 months.
Boyle: Mike, in regards to your conm~nt about setting a precedent and other people coming
and asking for the same type of breaks or whatever. I would guess that may be the case if
it's ~ owned by HRA but if it's not owned by liRA then I don't think that's going to
happen. So I don't really personally put much weight on that one.
Mason: Well that's fine you know and as I'm re-reading some Minutes here, Roos says rents
are from $6.00 to $10.00. He did go on to make some comments that because of, I don't
remember what it was but 3% should be taken off because of a management fee or some _this,
that and the other thing and he ended up with $4.75. It seems to me if market rates in the
city are $6.00 to $10.00, I don't know why we'd want to go lower than $4.75 to tell you the
Boyle: If liRA voted at our last meeting for 18 months, does that have to come up again for
another vote then? I mean is this not now made policy?
Gerhardt: That's a good legal question on Robert's Rules of Order that I do not.
Mason: What was your question again?
Boyle: liRA vouxl, and the majority was here, and approved an 18 month exumsion on
Russ' lease. Why are we discussing something different at this time?
Gerhardt: I'm trying to think here. Over the last two weeks, when Russ and I met you know
as part of our negotiations, he made a comment that he would be willing to pay more for a
longer lease.
Housing and Redevelopment Authority - March 31, 1994
Boyle: But more than what we haven't determined yet, right?
Gerhardt: Right.
Boyle: Okay.
Gerhardt: And with that he also said you know, I'm not going to pay for a full year's liquor
license you know and I did not ask Karen if you could prora~ it or that. He said it would be
nice if he could run it with the term of the liquor license and that made sense to both Russ
and I when we talked about it. And in.~e, ad of going with the 18 months you know we
suggested the 2 yeara So that's where the 2 year came from. Now if you want us to modify
that back down to the 18 months, I will look at seeing if we can't prorate liquor licenses and
give a rebate back. I still do not know if you can do that. So that's why I went with the 2
years. And as to can you rescind your decision of a month ago. I would think you could if
you've got a majority but you can always change your mina as long as both parties agree to
it.
Mason: Well because this happened at Council and the meeting that I was not at, and I'm
not saying I'm going to do that. Because I wasn't them, well whoever isn't there according
to our City Attorney, does have the fight to make a motion to reconsider the vote. Now ff it
fails for lack of a second, that's fine. But that can be done. But it has to be done tonight. I
wean it's a one shot deal. After this it's a done deal.
Boyle: But that would have to come from the City Attorney, is that
Mason: No. Either Don or myseff, or I could make a motion if I wanted to asking to
reconsider the vote.
Chmiel: It can be done because neither of us were he~.
Boyle: Okay.
Chmiel: That just sort of surprised me that all of a sudden it takes a different complexity
from what it was at one time to moving it ahead. The additional, either 6 months or 12 more
months. When I did have a hard time to get Cotmcfl to really move ahead even with granting
a one year extension. They wanted to go just strictly a 6 month period and I kept saying,
well let's look at this.
Boyle: Well I don't know Don. Who has the final say in it? Does Coundl or does I-IRA?
Housing and Redevelopment Authority - March 31, 1994
ChmieP I think because it's an HRA project, lIRA has flutt ability.
Boyle: So we can take Council's recommendation but because HRA owns it, it's HRA's
final say on it, right?
Mason: That's true.
Boyle: And three people on the HRA vo~ed and agreed to 18 months, is that correct?
Chrniel: Yeah. But there wasn't any of the disoisdon from our side of which has been
brought out now.
Boyle: Tonight, okay.
Chmiel: And that may have changed the complexity of the final vote. Maybe. It could have
been still a 3 and 2 or 4 and 1. 4 or $ is it depending.
Boyle: Well I guess my mind hasn't changed and I think the constipation, I think the fact
that Russ has been very patient and kept the building up. Is willing to put revenue in. Has
been there for quite some time. How long has it been Russ since.
Russ Pauly: Our 60th Anniversary will be Memorial Day of this year.
Boyle: How long has it been since HRA owned the twoperty?
Russ Pauly: Since they've owned the property?
Boyle: Yes.
Russ Pauly: It will be 4 years.
Boyle: 4 years. So he's asked for an extendom He's willing to pay some rent for the
extension. I believe the consideration should be given and the consideration should be fair
and I believe the 18 months that we voted on was a fair consideration and at $4.75 a square
foot at 18 months is reasonable. That's my opinion_ Providing we can prora~ the liquor
license.
Chmiel: Yeah. And if there's any ramifications to that. Todd will find that out.
Bohn: Don?
Housing and Redevelopment Authority - March 31, 1994
Chmiel: Well I guess I have inl~jeced ~ome of my ideas and thoughts as to what I basically
have felt. There's a lot of, well there was ~ome con~ns~ on the Council that when the
HRA purchased the building and paid off the total amount of dollars far that facility, plus the
other thitigs that they had taken into consideration by contract with the lease a/~reement. That
was all in due respect to what was being ~ for total payment, if I remember, and I
think even Russ has indicated that and Todd has, both. But there comes a time when there's
a facility there and we're looking at, and there isn't anything right now concrete for that
particular comer. When we brought up the year extension at Council, I thought that year was
something where Russ would probably want W move on with ~inding a site wi_thin the
community and putting something back in. And that's where I saw the oppartunity to move
ahead with that for a youth center for the time being. Not a permanent situation by any
strewh of the imagination. Because we've got so many, I've been losing my voice for the
last week~ We have so many kids within this community that need a place to go. A place to
be and I thought there was a perfect oppartunity for us to move ahead with that kind of a
location. And I've had a lot of parents and even non-parents who indicat~ that they would
be willing to assist with ~ In fact I left some of that stuff at home. I forgot to hrin§ it but
I think some of the things should have been brought out by what Coundl has said and what
was discussed and I really do. Six more months to me is not §oin§ to make any difference.
If Russ finds a place that's §oin§ to be to his liking. But I'm not sure that even after 18
months that he may even proceed with that. But that's going w be his call Not anybody
else's. It's a lot of money to put into a facility and it's a popular spot. I've been there many
times. My sons frequent it every once in a while and it's a good place for people to meet.
But I just think that there's just been some miscomnnmicatious between Council back to
HRA or vice versa. Even to find somethin§ out and how this came about nt~m_her one is what
I really didn't understand. How this came up again for this discussion. And how it got on
the last agenda and of course I wasn't here either so.
Bohn: I wasn't aware of the 6 month thing. I honestly I wasn't. I thought we went to a
year and then 6 months over a year was no big deal Another 6 months, it makes it easy for
him to operate and get things going and buying another place, I thought well But the 6
months thing never came inW. I don't think we even discussed 6 months.
Mason: Well no. The reason I brought that up is to just hy some ground work for liRA to
know where Council is coming front I mean we all agreed to a year. The first thing that
was thrown out as 6 months and for a while it looked like it was §oin§ to go 6 months. But
Don, and I agreed with him that come on. 6 months wasn't a very realhtic amount of time to
get anything moving. So no, I wouldn't necessarily expect you folks would have known that.
You know if I could interject one more thing here which I think is a bigger picture than what
Russ is going through right now. Richsrd asked that we have an t/RA update at City Council
meetings, which would be our last meeting of the month..~nd_ we concluded that we thought
l0
Housing and Redevelopment Authority - March 31, 1994
that was a pretty good idea and I wondered if maybe.
Bohn: It should be vica versa.
Mason: I was just going to say Jim, I think that would be a real good idea for either Don or
myself to give a Council update on, obviously not on everything but on issues that ~ to
HRA. You know an item at the end of the agenda or whatever.
Bohn: Also with the Planning Commission too.
Mason: Well.
Chmiel: No, we're talking just about these two.
Mason: But I think that's a good _thing to go for in the future but I think, I'd like to see that
Cluniel: We do have people at the Council meetings from Planning Commission- There's a
representative there all the time. And the reason we have that is, in the event there's some
discussion that goes b~ck and fo~h, that's when we can bring them into the discussion to
update us and make us really aware as to what's there.
Mason: Getting back to the current issue at hand here. I don't have any intention of
rehashing that issue. I mean at this point I agree. The difference between 12 months and 18
months isn't that big a deal. And I agree with what Gary said about the 18 months at $4.75,
assuming we can work out some sort of prorated schedule with the liquor license. Sure.
Absolutely.
Boyle: Don, do we have any idea what it might cost to revamp the ~ to convert it to a
teen center? What the cost might be? Has anybody looked into the cost that it might involve
to make that?
Chmiel: No. It's too early in the game to even.
Boyle: That was just an idea. So really the only really issue here of shortening the amount
of time that Russ would like to have his lease extended is to convert the property to a teen
centor and that's really the purpose for City Council wanting a shorter lease period, am I
understanding this correct?
Chrniel: No. I don't even think the teen portion was really the consideration behind it at all
11
Housing and Redevelopment Authority - ~h 31, 1994
It was just a thought that I had on it that I threw out and there was probably hardly any
discussion in regard to it. Other than the infommtion I got back from people who were here
that thought that that would be a good idea.
Boyle: Then why would City Council have any objection7 I mean let me rephrase that.
Why would they want to shoran the lease?
Chmiel: Well it was that some members on Council didn't quite see going any more than 6
month and as Mike has said, and I have said, and I'll reiterate it again, we felt that that
wasn't justifiable and I felt that he should have a~ least a full given year.
Boyle: Okay.
Bohn: Another reason why we thought about the 18 months too is it takes, to get something
done, from the time we concept it, to get it done, it take~ 18 months. Not like the Byerly's
but so many projects we've worked on, it seems like to get something done, it takes 1 Or 2
years at least. And the way, from wh~t I understand, did you talk to A1 Klin§elhutz last night
about the library? He is bound and deum~ned to §et the library on Pauly's property as soon
as possible. Of course he doesn't own it and he's not on the lilm~ board anymore.
Boyle: Does he own the building behind there?
Bohn: Yeah, he owns half of it.
Chmiel: I'm not convinced yet that that might be the location for it either.
Boyle: Todd, did anything come out of the meeting last, excuse me Tuesday night on the ad
hoc committee on Vision 2002 that might shed fight on anythin~ here that would affect that
Gerhardt Well, I think they made real good 1~'o~ They we~ ready to lay out I think
two alive sites for the lihrgry. ~ unformna~y it got late into the evening and I told
Fred, let's close up the tents and go home and re. schedule this thing. But they're at that point
right now of trying to either narrow it down to 1 or 2 spots.
Boyle: Is this property one of the spots?
Ger~t: Yes.
Boyle: Okay.
12
Housing and Redevelopment Authority - March 31, 1994
Gerhardt: But they're just a recommending body to the overall group and the overall group is
going to meet on the 19th again. That's our final vision and get input back.
Boyle: The 19th of April?
Gerhardt: Yes.
Boyle: If that property was selected as the site for a library, in your best estimate, how long
do you think it would take before a library could, I mean everything could be done and the
library constructed on that property? And I know that's a tough question.
Gerhardt: Oh, I would say probably they probably wouldn't rec, omme~d construction until
the following spring. By the time you go through the government process of going through
planning and that's a 2 year process in itself. ,~nd then doing land specifications and bidding
is another 3 months. You may be able to do it yet this fall if you get started right now.
Boyle: But the odds of that are pretty slim are they not?
Gerhardt: Yeah. i can demo a bp~ilding...are about 3 weeks.
Bohn: Can we have a motion on.
Boyle: I'll make a motion that we do an 18 month lease at $4.75 a square foot providing the
liquor license can be prorated for the second year to 6 months.
Bohn: Do I have a second7
Mason: Yes you do. Second.
Bohn: No discussion? I have one question. If Russ would find a place to move to before
the lease is up. Like he finds a place in a year and he wants out of his lease.
Gerha~t: He's bound by the terms of that lease. He can always come back and ask you
guys to relinquish that right but he's bound by the terms of the lease.
Mason: Well I don't think we're that hard nosed. At least I hope not. I mean if that were to
happen, I wouldn't have any trouble with that.
Gerhardt: You can put right into the lease saying that Russ can leave at any time he wants.
13
Housing and Redevelopment Authority - Mamh 31, 1994
Chmiel: I think that would probably be a good condition to have contained in there. Unless
you see for some reason~
Gerhardt: Or he can come back and ask you too. We can write it in there. Roman would
say that's worth money.
Bohn: Who paid Roman?
Gerhardt: ...good representation.
Mason: I can't imagine there's anybody on HRA that would have a problem with that. But
I'm only speaking for myself.
Boyle moved, Mason seconded that the Housing and Redevelopment Authority approve
an 18 month lease for Russ Pauly at a rate of $4.75 per square foot provided the flquor
can be prorated the second year. AH voted in favor and the motion carried
unanimously.
CONSIDER LEASE EXTENSION FOR DON KALLESTAD FOR THE PONY
EXPRESS BAR SITE.
a Visitors Presentation to you asking for an extension to his lease at the Pony Express Bar.
As staff reviewed the file on this we also felt that Mr. Kallestad had the same terms that Mr.
Pauly and Mr. Pryzmus had. That was not the case. His tm'm for his lease ended Scpmnber
lSth, 1991. From that he has received an cxamsion for the last 2 years from that agreermmt.
Staff has also had some concerns over the last approxima~ year and a half, two years. Staff
has had to send notice to Mr. Kallesmd several times for payment of rent. Wc went up to the
fifth hour of litisation to try to get rent out of Mr. Kall~ Finally on that 24th hour he
came to terms on a payment schedule that wc meet Mr. Kallcstad's level Mr. Kallestad is
also delinquent on utility bills and it's staff recommendation that you do not exteaxl the lease
or give him 90 day notice to vacate and that hc also pay all delinquent utility chargcs from
thac Mr. Kall~ is here if you want to hear his side.
Bohn: Mr. Kallcstad?
Mr. Kallestad: Thank you gentlemen for hearing rr~ I jointed the busine,ssm~ in
Chanhassen in 1980 when I purchased the Pony Express Bar. At the time I was working for
Wilson ~g Corporation when I applied for my license and I was welcomed to
14
Housing and Redevelopment Authority - March 31, 1994
Chanhassen by a couple of very interesting circums~ that normally don't happen to other
people I guess but they did happen to me. My first check on my ledger goes out for $500.00
to the City of C~mnhassen for the investigational fee, which they investiga~ my ~und
to insure that I'm ethical and not connec'a~ to the mob and things liim this for getting my
liquor license. But I was told by Mr. Russ Larson at the time that it was $2,000.00, even
though Section 36B, which if you look up in your records from 1980 state, very ~ly
Minnesota resident, $500.00. I can show you these things...if you don't believe me but
they're u'ue. I didn't make any trouble because I want~l to join the city and Russ Larson
said, if you want a liquor license, it's $2,000.00. He looked me in the ~ and I said Russ,
it's $500.00. Look fight here. He wouldn't even look. He said it's $2,000.00 to get a liquor
license, welcome to Chanhassen. Now, when I came up with my application I was en-fployed
at Wilson ~g Corporation as a Manager of OJent Services. I was formerly a Vice-
President of Kallestad Laboratories producing transplants..~I was guarant~xt the Vice
Presidency within 6 months at Wilson Le. aming but I was told by the City of Chaahasse~,
which is not in any other ordinances, that I must vacate my job and work the promises full
time. That they would not give a liquor license to an absenme owner, which is not in the
ordinance but it was one that they felt they had to do because they had trouble with the prior
owner. This is, I thought it over and I thought about fighting it and that my fights we~
being violated but I went along with it because then, and I tried to get along with the ~
I worked it for all the years. I never had a citation at Pony Express Bar. I brought it from
$185,000.00 gross to $750,000.00 gross by 1987, which is when I was notified that they were
taking my ~ my eminent domain but not my b~_~ilding. Take all my property which I
had about 65 parking places of my own, which met all the city ordinances for taking of
pr~. When the negotiations began, the city would not work with me. I could not get
any replies from the attorney. The City Manager would not reply. We could not get any
deals going. We could not get any arbitration going to work out a deal on the emia~t
domain thing. Finally Judge Reilly ordered the City Manager of Ctmnhassen in the court
under contempt of court to negotiate with me or he was going to find him in conmmpt of
court. This is not unusual for how I've been dealt with the City of Chan. I don't know what
it is that I've done to get this kind of uv. atmeat but I was held up. I had to get, pay extra
legal ~penses to date. We had a jury already sitting the~. By the _time he came down to
be~n his negotiations, the jury had bee~ sel~ A lot of wast~l money on the city's pa~
A lot of wasted money on my part, to the tune of about $35,000.00 and I was told at that
time that if I went through with it, that they would appeal any decimo' n made and they would
appeal it all the way to Supreme Court and I could look at another $50,000.00. Another 2
years of lost time. I wouldn't get all my money so I was forced into scaling for that deal
So I think that they begin the construction. They cut me off on all four sides for almost a
year. Some of my employees couldn't even get into work beca~ they were all four sides.
Russ Pauly also went through a lot of problems going through it. They've been there longer
and I was a little younger and I had just invested in some more things and upgrading the
15
Housing and Redevelopngnt Authority - March 31, 1994
kitchen and things like that so that year hurt me a great deal. I came back in 1989 and made
me an offer for the remaining part of the bnilding. I was in no position to say no. Even
though I was not given anything at all for the business itself, which I had raised to a
considerable level I wasn't given much timu to think about it and my pockets are thin fi'om
all the hard times with all the con--on that went on. So aside from that, I went through
that. I had 2 years to put wgether another thing. In 1991 I had 3 heart attacks. Attdbuaxi a
lot of it to the stress and things like that. I'm not laying any blame because my health
problems are my own. I took 2 years to get back on my feec I was a diabetic and I didn't
know it and I got into all these problems which I've since gotten out of. I had to file
bankruptcy in 1993 as a result of all these things. So...when I came into Chanha~en I was a
rich man. I had properties and everything else. I woflaxi here for 10 years and now I'm
broke. I have a wife. A 2 year old child and we live there. My wife has a job. We're
trying to work our way out of it. I've been working with the Department of Rehabilitation
down in Shakopee since August of 1993. I send out 20-25 resumes a week. It's a hard
market but I anticipate I will be able to succeed shortly and we have, we're optimistic on
that. So I'm asking you gentlemen to be a little gracious to us. To allow us to extend our
time in there a little bit. We have a dog and a cat, a 2 year old little girl My wife and
myseff. The dowuslairs does not lend itself to do anything because it's all screwed up. It's
different levels and it's an old bar and it's dark and you can't put office~ in there without
extensive remodeling and you can't do any commewial things because it's limited in the lease
that there can't be anything with high density patting. So the downstairs is just used for
storage. We pay all the taxes on it so the city's not out anything. We take care of all the
repairs. I just put $800.00 inw the fllmace 3 months ago rebuilding the furnace. Every time
I try to find out from the city how long it will be it was a nebulous answer. No one really
knowing for sure how long we'd be able to stay. It's a very short time period for us to get
all our ducks in a row. We have all our...possessious. We have no place to go. We're
trying to get back on our feet and we'd like to stay maybe until fall if we could. Give us
time w find a place and to get our things moved and get back I really, I commend the city
for a lot of things that they're doing but I don't feel that I've really been treated very fairly
down at that end. I never did get a dollar for my business. I didn't get any monies for
moving or anything. For relocating and I just kind of need a fair shalm fxom you gen~
and if you could see it in your wisdom and your hearts to extend this until the end of the
summertime into the fall sometime, it would really be appreciated by myself and my family.
If you have any questions,..can answer them
Boha: No. Thank you~ Todd, I don't reraember that wasn't a bar when we bought that
building was it? They were operating still?
Gerhardt: Yeah. The lower level was operated as a bar and the upper level was owned by...
Just a little hiswry on that. Gary and Mike weren't on the HRA at that point but when we
16
I
Housing and Redevelopment Authority - March 31, 1994
were looking at starting the downtown redevelopment, we met with the Pony and Pryzmus
and Pauly's and the HRA did not want to go in there and buy those bm/nesse~ We tried to
work with them and put in some new facades and assisting them in trying to redevelop it. I
think Fred or BRW worked on at least 3 or 4 allm'nativ~ W try to renovaIe that area and the
feedback that we received from those three owners was, we want to be bought out. We do
not want to put any money inw these buildings. That's why we moved ahead with the
condemnation.
Boyle: Has thc upkeep of the building been good?
Ga/lardt: I.
Boyle: Is it dem'iorating in any way?
Gerhardt: Not that I'm aware of. I mean the building hasn't been pain~i. It's in it's
original condition when we bought it exmior wise. So I would say that Don has met the
obligation of the lease.
Boyle: Todd, if liRA was to direct staff to prepare the necessary papers, etc, to begin a 90
day advance written notice to evacuate the ~, how long would it take to do the papers,
etc? When would the 90 days probably start7 Would it be May 1st or June 1st or effective
immediately or?
Gerhardt: That's whalever you would like to see. I mean we could probably get notice to
them tomorrow. If you want to see it be out 90 days. It's got to be from the first of the
month. If he doesn't get it Wmorrow, it's going to have to be pushed back to next month.
Boyle: Okay.
Chmicl: I would like to see this go through probably in a 6 month period and give him that
opportunity to find something rather than the 90 days written notice. It's just something I
feel to a point where I understand what he's saying. Some of the situations oc. cumxi and are
given problems, I think the city can have a little bit of bend in their aspect and extend that to
180 days.
Boyle: For humanitarian reasons I have no problem at all with 180 days.
Bohn: Mike.
Mason: That's fine.
17
Housing and Redevelopment Authority - Mm~h 31, 1994
Bohn: You need that as a motion, don't you7
Gerhardt~ If you want, that's fine. I hear your direction. I think Don hears what you're
saying and I will continue to work with Don and helping him in his transifiom We have a
list of aparUnents and any other things he may need. .. share that with him:
Bohn: Okay. That would be 6 months. What would be the last day then of the lease?
Mason: October 31st
Ge~t: End of September.
Boyle: That's assuming you could have it effective April 1st, which is Wmorrow. That's
counting April.
Gerhardt: Well you only need to give him 30 days notice so I counted...It's your call ff you
want it to be October 1, Sepmntx~ 1, you know.
Chmiek I think ff you use that last day of Septet, which I think probably will give you
enough time.
Mason: To October 1.
Bohn: Yeah, and you don't have to move in the snow.
Don Kallestad: Thank you very much genflemem
UPDATE ON VISION 2002.
Gerhardt: As some of you are aware, we met with the ad hoc committee this last Tuesday
evening. It's a good group. It's a committed group of people that's really..~ interested in
how thc downtown is going to lay out. We get a lot of feedback from them. They get into
some real interesting conversations and...enjoy gathe~g some real interesting information...
and talking about the media and the libraries and one of the in~g things that they came
up with is the possibility of maybe running a commuter line on the existing railroad tracks
out here as a pet proje~ To see ff it would work. People would ride the train to downtown
Minneapolis. See if the railroad would allow things like that to ha~ so it's a free thinking
group and at this time I'd kind of like to have Fred give you an upda~ on all the findings of
that committee.
18
Housing and Redevelopment Authority - March 31, 1994
Chrniel: Just a quick question. You're talking the ~ilroad over by TH 1017
Gerhardt: No, the active one.
Chmiel: Oh the active one.
Gerhardt: They've taken out the tracks in southern Chan already.
Chmiel: Oh they have?
Gerhardt: Yeah. Those tracks are gone.
Boyle: Where is this Todd?
Gerhardt: Thc active line I think is the railroad company...the one that goes through
Chenheasen, Eden Prairie and down through St. Louis Park and then to downtown
Minneapolis. Somebody asked a question of could there be a commuter train that would run,
just a normal one. Just to take people from Chanhassen and to pick them up along the way
into downtown Minneapolis. Aild see if people would use it ag 8. project. It tweaked my
interest and I'm going to look inW it more.
Bohn: Somebody even brought up a thing about a dinner ffaJn.
Gerhardt: There is a dinner train that h~ contacted us that's in~ in coming in for one
week a year to nm a line.
Boyle: I like the idea of the commuter train.
Bohn: Well there was one that was going out west of here wasn't there? ~ I said at that
meeting...he takes a cornmut~r train every day into wc~k in downtown Chicago. He says it's
cheaper to take the train than paying the toll to get in and then paying for the parking and he
has a cup of coffee and a roll and reads the paper on the train going to work. His office is 2
blocks from thc railroad depot.
Mason: Once again Chan could be on the cutting edge hcre...You're right. You're right.
Sorry Richard
Fred Hoisington: I just want you to know we did miss Dick and the Mayor and so forth at
our meeting this last week.
19
Housing and Redevelopment Authority - March 31, 1994
Chmiel: I understand that. I'm happy I wasn't there.
Fred Hoisington: It was, that was really rather kind. There was one testy mon~nt or two in
the se..ssion. The meeting went very well throughout the early part of the process. The future
paper was very well received. The only real disagreement was that A1 does know a great
deal about libraries and has been involved with this one for a long time with Carver County
and he did tend to disagree that we would see the substantial change in libraries that will
occur over the next 10 years. But really nobody was willing to say we ought to change. It's
totally wrong. At least it was poinl~xi in that direction that it appeared to be realis~. We
presented also son of a framewoflc land use plan which is pretty consistent with what the
Highway 5 corridor is coming up with and with what's there today as far as the bac~und
of land use. What seems to be reasonabie while agreed to by the committee. I don't think
we have any problem. We really didn't have much difficulty until we got to the very end.
When we began talking about the faciliti~ themse~ The library. The post office.
Seniors housing and those kinds of _things and a community center, which maybe is just a bad
term to be using but every time it's raised, well here's what happens Don. At the second
town meeting the suggestion came from the group. I didn't make it up. You didn't make it
up. It came from the group made out of 12 groups saying that a community center ought to
be...an element in the city center. So I've been strug.~ling with this group and sirra, ly telling
them that I don't have any latitude to change that. The group told me that we should have a
community center and that's the term that was predominalltly used. There was a little bit I
guess of misconsw]ing what I was saying because of the inlpression was that I was
supporting the commnnity center on the frontier site, which I was noL We agreed dm'lng the
course of the evening to quit thinking about that...§et rid of it. You tell me differently. I'll
listen to you but for all intensive purpo~ that one was resolved and probably will not, no
1on§er pursue it. Otherwise direct us on the frontier site. I think here's the bottom line and I
think it's a very legitimate thing on the part of the group. There are lots of strong opinions
there and I think there was a lot of good discussion taking place but to their credit, they were
saying we need a little bit more information and what we need is to have at least some
description of what these facilities would be. What their sizes would_ be and what the
capabilities of the various sites that we talked about would be to accept them. And what
we've done today is to prepare that backgwund information. We'll be marling that out to
them tomorrow and so they should be able, we believe, on the 12th of April, which is another
additional meeting which we want all of you to attend, if you can possibly do that. To reach
agreement on facilities. The next focus group session is April 19th. We had hoped to have a
general public meeting on I think May 4th...I mean the general public meeting after that
Todd. Another week or two after a focus group session. So with that I fully expect that you
will have some decisions in the very near term and something that can be recommen_ tied to
the larger group on the 19th.
Housing and Redevelopment Authority - March 31, 1994
Boyle: You commented Fred about on the 19th wa~ the committee meeting and then after
that was a focus group meeting on what...
(There was a tape change at this point in thc discussion.)
Chmiel: Is there any way that we can move something out from April inw May?
Fred Hoisington: Which one are you having a problem with Don?
Chmiel: Thc 19th. I think we have meetings every night.
Mason: Council has a couple meetings already with 3 nights.
Chmiel: 3, there's 4 right now. There's 5.
C~rhardt: ...but it is a ~y and it's not the Tuesday for the Park and Rec.
Mason: We've got at least 7 meetings that month.
Chmiel: Yeah, and that doesn't count Coundl meetings.
Mason: Or liRA.
Gerhardt I don't see any problem pushing this back inw May. Move the 19th meeting inw
May?
Fred Hoiaington: I wouldn't see any problem with that Todd. If we could puah it like the
3rd or 10th. Would that be a lime more acceptable time?
Gerhardt: Hopefully not the ~y after a Council meeting.
Mason: Well it'd be May 3rd then.
Chmiel: We don't have a meeting on May 2nd. We have it on the 9th so.
Mason: The 3rd would be better for Council
~t: Does that work for Jim and Gary?
Bohn: The 19th meeting would be on the 3rd of May?
21
Housing and Redevelopment Authority - March 31, 1994
~t: We're not going to meet on the 19th. It would be May 3rd.
Bohn: Yeah. The 19th meeting will be moved to the 3rd of May.
Gerhardt: Right.
Chmiel: So that's a 7:30 meeting?
Bohn: 7:00 wam't it?
Mason: You know if I could, I'd make a comment more than a question. I think we need to
understand, and I hope the people on Vis/on 2002, just like I'm not sure the people on the
Highway 5 Task Force did understand. That it's all part of the process and recommendations
come out but nothing's etched in stone. And I know fi'om being on both sides of those kinds
of committees, that you get pretty fired up in a group like that and you think, by God. This
is what's going to happen but ultimately that committee doesn't have that authority. You
know and I'm not directing any of this at you Fred. But I am already feeling some heat from
the Highway 5 Task Force. You know they made one recomrrmadafion and Council
essentially said, at this point we don't like it. And the way things are set up for city
government and this, that and the other thing, I mean we've got to go flzmugh the process.
They don't have to. And I just, I think maybe that's something that should be brought up
from time to time.
Fred Hoisington: Michael, we are brining that up from time to time. It was brought up,
espedally in the ad hoc committee because we want to make sure that first of all the sense of
the large group is what comes through...Don suggesexi there's going to be more to watch
what was happening than provide some additional input. So I don't think they have any
notion of...We'll have to remind, because we don't meet often in the bigger group...we're
processing something through them but really you folks on the City Council have the uitim~_te
responsibility. So we'll continue to _remind them of thaL
Mason: Okay, and that's not to say we don't listen because I quite honestly I think we do
but it's such a different position to be in. Just for what it's
Gerhardt: We're blaming Don for it.
Mason: Thc Mayor? Well as long as you don't blame Council.
Housing and Redevelopment Authority - March 31, 1994
Chmiel: No Ashworth.
Mason: Oh Ashworth. Oh okay.
Richard Wing: Here's the other...for instance the Highway $. The facts are that Highway 5,
the northern route, was voted on by almost every single person on that commit~e, incl~g
myself. I'm not aware of anybody that did not vote on the northern route. It wasn't a partial
vote. It was almost unanimous.
Mason: Oh Richard that's not true.
Richard Wing: No, if you go back. It was almost a unanimous vote. The only choice was
where the crossovers occurred. That's where the disagreement occurred. There wasn't a
quarter of that group that went with the southern mute. It was almost unanimous Mike, if we
go back. Now that I've had a chance to go look back into it, it was s_lmost a unanimous vote
for the northern mute. But what happened is then all this work is done and all this ir?ut is
done and we have to start to reinvent the wheel. That's why I said let's get this thing
through the Planning Commission because why rcinvent the wheel there because it's got to go
to Council Well all this information on land use and zoning, etc, etc._back to Council so we
can make a reasonable decision...at the Planning Commission one day and said well why
would they do this, this and this. Well you haven't been at 15 meetings? How can you
discuss it? We're kind of at that so anyway, to get away from that because that's irrelevant
I ~ we'll have to discuss that. With your group now, that's done all this work and it's
going to be carrying it back to the Council and HRA. How do we transmit all that work, all
those ideas and not have to start it all over again and reinvent the wheel at the Council and
the HRA level? It's really unfortunate that these decisions are made and they're sound
decisions and then we just throw them, I mean we have 10 minutes to do what they did over
3 or 4 meetings.
Mason: But see therein lies the problem, It's not a decision. It's a recommendation. And I
thirlL
Richard Wing: But why was the recommendation made?
Mason: And I think that's, I think you know we're lalking here about some communication
problems and I think, because those, none of those bodies are decision making bodies.
They're recommendations. And maybe that's where some of that comes in.
Boylc: Mikc, I think that they realize that. I think thc ad hoc committee and the task force
in general, the focus groups excuse me, sumed with the understanding that they were
23
Housing and Redevelopment Authority - March 31, 1994
assembled to try m come up with some good ideas and recommendations to assist the City
Council and HRA in how we develop it and getting more input.
Mason: Gary, I'm not. I think maybe I'm getting taken, I'm not saying that people aren't
thinking that. I just want to rnak~ sure that people rememb~ that. Because you start taking
ownership because I know, like I said from being on the other side of that, you sUcrt taking
ownership in something like that and it's liire, what do you mean you're going to you know.
And I just think we all need to be real up fxont about it I guess is what I'm saying and I
don't, yeah.
Chmiel: The same thing was brought up basi~y to Council too. Is that we're going to
move ahead with everything we're talking about but we don't know how much that damn
thing's going to cost us and that's one of the most ~t factors. That's what I brought
up at Council. We've got to know what it is. I'm not going to move on anything and I'm
going to say this is the way to go. I need some hard figures to come up with a conclusion.
Richard Wing: But see we didn't even have enough figures to come up with a conclusion
even for the south mute...
Chmiel: I know that. That's why I was asking.
Richard Wing: And I'm not being at all critical.
Mason: Right. No, I understand that.
Richard Wing: You guys favored the south mute all along but for other reasons I think_..I
wanted to just comment just as it perlains to what we're doing downtown here on this 18
months. When the Council went for 6 months to a year pan of it is, and camect me if I'm
not wrong here, if I'm right or wrong here. But I think our reasoning on Russ' year was that
we decided that land use was going to come to a halt. That there was a lot of pressure that
night at Council Half the people said we don't want the bar. We don't want it to move.
And so we gave them 6 months to a year to really be fair but the problem was to close it out.
We own it. Let's shut it down. Let's take it over. Let's get going on it. We didn't want to
extend it out for an extended period of time. Based on that's the end of the liquor license for
that location. That's what I rernern~ kind of what happened. So then when it went to 18
months I say whoa. We own it. We want to shut it down. We want to get on. Even if we
close it down and it's empty but we want to get on with it even though there's no decim'on-
I'm app~ed at what happened here and I would disagree with what you decided. But this
library shown at this comer, this really intrigues me because I really strongly support the
Housing and Redev~op~t Authority - March 31, 1994
lIRA getting whoever, Mark Senn and some of the other people. What's his name, it doesn't
matter. The civic center concept where the post office and city hall and library all create a
community here and a central point rather than start spreading them out...it's a great spot for
the lilxary down there in a way with the designs and left Farmakes came in and said_but on
the other hand, I son of like this concept with the civic cenl~r staying kind of close to
downtown. And that means the library isn't across the street on the Maflcet Square ~.
It's got to be a walkable. .. so I'm dying to see what this group comes up with and I don't
know if that has been discussed with this group. That theory or concept of a, what's the
word.
Boyle: A city center.
Richard Wing: A civic center...is there any direction for that?
Boyle: Oh I think it's very strong.
Gerhardt: One stop §ovemmeat shopping.
Fred Hoisington: I don't think so. Vfnat we ~ about the City Hall si~e is, that it
does have limits and that you cannot put all the things on here. And that was one of the
things that ad hoc commi~ needed to know because if everything could go here. Of course
you could let everythiug in here but what we delta'mined was, that you'd have to have a
million 6 worth of underground parking in order to be able to accommodat~ it. You can't do
much with a million 6 worth of under~~ parking except pazk in it. And so I think, and I
don't want to put words in their mouths but I think we will resolve that. The only concern I
had is that the library may end up going down there on the Pony/Pauly/Pryzmus. However,
my feeling at this point is based on future...~ it really needs to go here without question
and we'll try to at least lay that out. Whether they accept it or not is a different
Boyle: Well I feel very positive that the real purpose that the focus group and the ad hoc
committee was formed was to get a group of citizens in the city of Chanhassen together to
give ideas. Reconm~ndations, A lot of minds that show inl~e, st in the community, to help.
Again I repeat, to City Council and liRA, ideas on how to do it. And when it's done, at least
it's not 5 or 6 or 10 people making the decision. You've got the majority out there all upset.
You might. You might come close to getting some agreement within the community as to
what happens.
Bohn: I don't think it's liRA's job to say where the post office or where anything goes.
Boyle: Oh no. I agree.
Housing and Redeveloprre~t Authority - March 31, 1994
Chrnicl: There for a while Gary, I was thc guy who said, let's involve these people and I
made that happen and a couple diffcrcnt times at thc meetings I sat back and I sort of said,
oh Jesus, what did I do this for. I really did. But yet it's still good because you're 8et~g
that input.
Mason: That's what government is all about.
Boyle: It's extremely frustrating but the bottom line, when it's all over, I think we'll be glad
we did it.
Chmieh Well that's the whole thing.
Mason: And what the gentleman, what Councilman W'mg is talking about. About
reinventing the wheel. You know if nothing else, what Highway 5 does, what SWMP does,
what Vision 2002 does, is it gets the ball rolling. You know at least it gets things off of dead
center. Even if it just in'ita~ the hell out of everybody, sorn~g come_s out of it and then
$o.
Gerhardt: When I smrt~ introducing Fred, I mean I came out with some posifive...and
you're going to get some rubbings in those things but the thing on the railroad and there were
some really good ideas. I really ~ it...There were some neat ideas of how to use the back
side of the Dinner Theatre. You know people are sim'ting to really envision that back side of
the Dinner Theatre being an entertainment area. They're talking about movie theaters.
They're talking about indoor playgrounds...
Bohn: That's why I talked about the end of Pauly's lease because Vernelle's been woricing
with Russ, trying to get Russ to move over there.
Richard Wing: Move where?
Bolm: Behind the Dinner Theaffe.
Chmiel: Well thank you.
Mason: Thanks Fred.
Bohn: Thank you.
UPDATE ON, MARKET SQUARE.
Housing and Redevelopment Authority - March 31, 1994
Gerhardt: It got tabkxl.
Mason: It was 12:30 when that one got tabled.
Chmiel'. R was only 1:00 when we finally got done.
Mason: Oh it was 1:00 when we left and how many imm did we still have left to go7
Chmieh 5. It was a heavy agenda.
Mason: Well there was a lot of important stuff and it needed to happen but Wendy's wasn't
getting talked about.
Gerhardt: I do not think Council delayed that whole action...They had some real difficult
situations to talk about. Byerly's sign took a little long.
Mason: Far longer than it should have.
Chmieh Ch~lie talked too long. Oh sony Charlie.
Mason: No, we can't hang this one on Charlie.
~t: But it's going back to City Council in 2 weeks as unfinished business and the
agenda's being established that that item will be disc~.
Mason: And it will be a real small and short agenda.
Gerhardt: No. It's getting bigger. Everybody's saying I've got to be on it. I've got to be
on it. I'm going oh boy. We'll see what gets de]eu~
Chmich Being that I have a big hand, I've got to really look at that thing very closely for
Monday night because I had mme...
Gerhardt: 8o this is only part of the planning report that went out. I took all the hr_mutm
and things like that It's just too thick to provide everything for you. ff you want to come
up to City Hall and I'll give you the whole file on it if you want to review it any more but I
thought it gave you a good feel for how &ings have been going and the option~ that are
available. So if you want...
Bohn: We won't know anything about, until it comes back from City Council anyway.
Housing and Redevelopment Authority - March 31, 1994
UPDATE ON THE HANUS FACH~rFY ROOF.
Gerhardt: Sl~f received a phone call about 2-3 weeks ago from Gary Kirt. Prior to that I
think Gary had talked to Fred and Tim $1x~fan regarding the detailed plans and wondering, can
a roof really cost $$0,000.00 or not. And after reviewing those and talking to a couple
roofers and he ~ that the best time to do that roof is now. He's in agreement with
what the lIRA has planned for this area and is willing to contribute $50,000.00 to the roof.
Staff is recommending that you put the roof on. I think it helps us in the bidding of the
project and they need a new roof. I have received a couple of complaints. We are now
pr~ managers of that facility and every tenant in there has a leak. Some have it really
bad so that needs a new roof.
Mason: Absentee landlords.
~t: Well, I did it. I'm the new slum lord. I pushed them off.
Boyle: Well if he's willing to kick in $50,000.00 and we're estimating 50. Bids have not
been put out I take it. We can put bids out and more than likely it will be in that
neighborhood anyway, right7 Or dose.
Gerhardt: And the architect on this project is th~ guy that's in the newspaper today...the
Army...
Mason: That's a neat dcal. That's a slick deal
Boyle: Do we need a motion on this7
Gerhardt: Ah yes.
Chmicl: It looks like we have a reco~on yes.
Gerhardt: ...we have that already. It's to include in the specifi~ons the rcroofing of the
tmilding.
Chmiel: Yeah, as it reads here. Staff recommend the HRA direct staff to include re-roofing
as part of the overall improvements in the Hanus facility with the condition that Gary Kirt
submit a check to the City of Chanhassen in the amount of $50,000.00 no later than 2 weeks
after the date of the HRA's approval.
Boyle: I'd second that.
28
Housing and Redevelopment Authority - March 31, 1994
Bohn: h's been moved and seconded. Discussion.
Chmiel moved, Boyle seconded that the NRA direct staff to include re*roofln~ as part of
the overall improvements in the Sanus facility with the condition that C~try girt submit
a check to the City of Chanhassen in the amount of ~0~.00 no later than 2 weeks
after the date of the BRA's approval. Ail voted in favor and the motion carried
unanimously.
CQNSmER GIVIN(~ THE TENANTS OF ~ PRYZMUS BUILDING NOTI(~E TO
VACATE THE BUILDIN(3 AND ASSIST IN RELOCATION.
Cmqmrdt: Another building that has a roof problem. Right now you have over there is an
upper floor, a rental space that has four, one bedroom aplmments. And below it you have
one tmumt, Mr. BlacL..well dig~ng consultant company and he had some very i .mlxm~mt files
in there on well specifwafions and he called me probably every other week about leaks in the
building and I've sent our custodian over there to look at it. He's afraid to go on the roof.
He will not go on the roof alone because he's afraid that it would not support him. And there
are also some code violations as you can see from Mark Lilxfin's memo and those are only
fire codes. Kirchman has, our building official has not provided an official letter of building
code violations. The ~ts are aware that the HRA owns this building. They're aware that
the lease runs up thc end of May and they know that the time is short.
Chmiel: There's no relocation costs involved with that is the~7
Gerhardt: Yes. There is.
Clunicl: AIl those in place
~t: They're all in place. And we _nn¢omma~ly did not get out of that and it's not lilm
an individual business like Pauly's and Pony where you can include relocation as part of thc
acq~fion. This was a rental building and you have to deal with each of the rental tenanls
on relocation and assist them in trying to find relocation son.place else with ~ or
great~ rent and pay for their moving expenses.
Mason: We do have to pay for their moving expenses7
Gerhardt: Yes.
29
Housing and Redevelopngnt Authority - March 31, 1994
Boyle: Within a certain radius or something.
Gerhardt: Right.
Bohn: Thc tenant that's on the main floor is, you said is a what? The tenant on the main
floor is who?
Gerhardt Barchoff. I'm trying to think of. Jack. Jack B~rchoff.
Bohn: I thought that was an architectmal firm in there the time we bought that building.
Bohn: Yeah, Schneiderman's out.
Gedmrdt: He's been there a long time.
Richard Vftng: Jirr~.. Todd, just out of curiosity. Everything you've talked about wnight has
been complex. Why hasn't staff recommended or HRA simply said, it's torch time?
Terminate the leases and level it. Clean it up and get out of them. I mean we have fire
hazards and resident hazards and security in buildings and lease problems with trouble
collecting rent...out of it. Why don't yon simply level it and put some pine lxees on the
corner?
Gerhardt: Well from the feedback I got from the HRA tonight is that you know, we prepare
plans and specifications. If it's your wish to see those two buildings down, the Pony and
Pryzmus buildings, you know we can still get good bids for demolition as soon as Mr.
Kallestad moves out October 1. I mean we could be in there October 2nd and get stnrmt
with demolition of that entire area.
Boyle: I think that's an excellent idea. I really do. I think I asked this before Todd but are
they 3 separal~ buildings?
Geflmrdt: Yes.
Boyle: Okay. If the Pryzmus building is vacated in 90 days, I mean could, would it make
sense, I mean that evidentally is unsafe. Could we move with demolitioning it first or would
that leave. I guess that wouldn't make sense. It's got to be done, yeah. Both at the same
time.
Housing and Redevelopment Authority - March 31, 1994
Chmiel: Rather than taking one off.
Mason: It sure would be nice on the 1st of Ocwber to have those bulldozers ready and you'd
have it within a week fight?
Gerhardt: Well...
Mason: You're quoted.
Boyle: I heard a week.
Gerhardt: But we could, October 2nd. If you wanted to do that, I'll start plans and specs and
bidding.
Boyle: Okay, we'll give you 10 days then.
Bohn: If we have the people out of the ~us building, what are we going to do to
prevent somebody torching if? Not on purpose necessarily but it's going to be a vacant
building.
Gerhardt: I'm sure thc Fire DepOt's going to have some training in there so I would
say, between now and the time we torch it. Or we won't torch it. We'll demo it but they're
going to want to practice. They'll fill it up with artificial smoke and the guys will crawl
around in there. I'm sure they'd love to phy around in there. But we'll just secure it. We'll
board up the windows and lock all the doors and waWh it for the next 6 months.
Boyle: I'd like to make a motion that the HRA direct staff to prepare the necessm~ notices
to all the tenants that they have 90 days to vacate the property and to assist with the
relocation processes. And be~n getting bids for demolition of the two buildings.
Mason: Second.
Bohn: It's been moved and seconded. Discussion.
Mason: Well I just ~in~ng real quickly that maybe there should be some kind of something
in there about Mr. Kallestad. If he can get out of there before 6 months.
Chmiel: I think we move that in the event that he does,
Boyle: We could move faster than this.
31
Housing and Redevelopment Authority - March :31, 1994
Boyle moved, Mason seconded that the HRA direct staff to prepare the n~
notices to all the tenants of the Pry-nm~, building that they have 90 days to vacate the
property and to assist with the relocation processes and to begin getting bids for
demolition of the two buildings. Ali voted in favor and the motion carried unanimously.
APPROVAL OF BILLS.
Chmiei moved, Mason seconded to approve the Housing and Redevdopment Authority
account payables as presented, AH voted in favor and the motion carried unanimously,
HRA PRESENTATIONS:
Bohn: Request for park and wail dedication.
Gerhardt: Mr. Chairman, 2 weeks ago I had discussion with Charlie Sames and he asked to
be placed on thc HRA agenda to request liRA assistance in helping offset the increase in
park and trail dedication fees for 1992 to 1994. I have to apologize. I did overlook adding
him to the agenda and I understand your policy in not taking action on items that are not on
the agenda but in this case I really feel strongly that you are not setting a precedence. I mean
I should have had him on there but that's your decisi~ tonight. As to Mr. Sames' request,
over the past year, raw land values in Chanhas~m have gone up dramatically. With the
expansion of the sewer and water, the MUSA area, and incoxpi~ting those lands weXt of
downwwn Chanhassen, we've seen a dramatic increase in developable land and the price of
that. The City Council, recognizing this, took act/on to raise park and trail dedication fees to
give us the capabilities to go in and buy pafldand. The demands for pafldand and trying to
meet those in the community have been a long struggle of the City Council, particuhrly up in
the Minnewashta area and also the installation of trails throughout Chanhassen. The demands
for those dollars and what the city receives is great. So in recognition of those increases, the
Council did substantially increase park and trail dedication fees. However, through our
negotiations we never really took that into account with Mr. James. We gave information to
Mr. James in '93 when he came in the past 8 months we've been working with him. He did
his budget based on '93 park and trail dedication fees in hopes that he would have started
grading in the early part of Decemlx~, November on his site and he would pull a building
permit at that time. However ~-cum~anc~ and how he would construct his bu/iding
wouldn't allow him to do that. And staff feels strongly that in our negotiations we did use
the '93 benchmarl~ I guess at this time I'd like to introduce Charlie James ~ he can give
his insight on how he feels this process may have come about.
Bohn: Mr. Jsmes.
Charlic James: I guess I'm somewhat embarrassed to be here with my tin cup. I guess
32
Housing and Redevelopment Authority - March 31, 1994
basically we were a victim of a co-uansifion period in preparing our budget and negotiating
our lease with Bycrly's and putting our num~ Wgether for the bank and so forth and so on.
We called the city last year and wc got all the info on what thc petunits were going to cost.
What the sac charges were going to be. What the wac charges were going to be and what all
the development fees were going to be and we had all that out on a spread sheet And we
subsequently awarded the contract to Kraus Anderson and that's being, the contract is being
broken up between Kraus Anderson St. Paul Division and their West Division. And when
they came in with the contract for me to sign they had all new nu~mhers on that part of the
contract and I said there had to be some mistake. I said that wasn't what had been
represented to me. So I called the city and found out that within a week or two of us getting
approval that they had raised all these fees and we weren't told that they were eminent. And
as I said, we had negotiated our leatse and economic terms based on these old figures and so,
I guess we're trying to seek a little more rebate of the taxes we're going to be paying on this
project for this situation.
C. mflmrdt: In negotiations with everybody in this conmnmity, we've always said that, you
know they always say well, is that tax increme~. Are you going to pay for park and trail
dedication fees and we've always said no. And I continue to believe that you would not be
setting a precedence if you should happen to grant Chaflie his credit tonight. This is his one
that, and we feel that thc park and trail dedication fees as they're outlined, o1' the credit would
be, but we feel that through our negotiations with Charlie, that he should receive some type
of credit for this. It's just a matter of circumstances that he was 2 weeks lale in pulling up a
building permit. Do not give him full crediL He's still going to pay $52,~?.0.00 in park snd
trail dedication fees and all we're saying is that if he did take advantage of the increment
coming off of his site to assist that overage~
Charlie James: I guess just one other point that I forgot to mention. We're only talking hem
about Lot 4 and we don't have an issue with paying the new parlr and trail fees on whatever
we bring in on Lots 1, 2 and 3, which constitute a little over ~ acres. So when that happens,
we'll work those n~ into ~er our budget is at that time for whatever project we'll
do.
Gerhardt: Well that's good because then...
Boyle: I guess that leads to the question, is that the only alive then7 I mean is there
another option of absorbing the $26~220.00 difference7
C~rhardt: Charlie could pay it is the other option.
Boyle: No, that wasn't what I was getting to. Rather than TIF...we go that direction. I mean
33
Housing and Redevelopment Authority - March 31, 1994
that's the most logical way.
Chmiel: You can't feel son? for most of them but in this pm'ticuiar case, you know and I
can understand some of these things that happem The timeframe of it change and you put all
your facts and figures down and it's going as a go project.
Gerhardtz What Gary's talking about, is there any other dollars out in the community or in
other programs. The metro area just doesn't receive any of those. Chaska's filing for some...
and it's unbelievable how much hoop jumping and politicking that you have to do for
$100,000.00. I mean you're going to spend more than the benefit.
Charlie James: I guess the other thing is that I will be writing the check for $78,600.00 this
year but we won't be getting, we'll be getting that money paid back in three installments
starting in 1996 so I guess we're going to wait a while to get.
Boyle: Oh I didn't understand that but, well this is kind of...
Bohn: Mike.
Mason: Well, I mean if. Well I don't know. I don't have any quibble at all with what
Charlie is saying here. I mean I wonder what happens to somebody that, I mean if this were
to happen to somebody building a ~ what would happen? Well on something that would
be related to park dedication fees.
Ger~l: They would have to pay it, you know. And ff all the increases on all thc new lots
as they come in...just like everybody else is going to increase the price of their lots to make
up that overage you know. And if we don't grant Charlie the $26,000.00, Charlie will have
to look at trying to make it up through rents against the little ~emmts. He's already negotiated
the lease with Byerly's so the smaller tenants in the building will have to pick up those
additional costs and put it back against the projea.
Boyle: You said the time frame, I mean a 2-3 weeks, whaiever. I ~ this is kind of, I have
no problem at all with it. The $26220.00 ~iff~mce. I have no problem. With Charlie's
request. As Mr. lames' requesuxL
Bohn: Don.
Chmiel: Well I think I mentioned before. This is, he was working with us in good faith to
move along. I'm not one to readily give up anything as far as thc respective developers and
builders within thc community because that's part of the game. But unfommately in this one,
34
Housing and Redevelopment Authority - March 31, 1994
where you are just a short time over a 2 week period, it makes me sit back and think about
why should this really take place, even though that permit was not issued. I don't have any
real problem. I really don't.
Charlie James: Another thing Mr. Mayor, excuse me but I just want to say that the
conditions of the permit were that we cap the well That we pump, the septic system and that
I post a letter of credit I think it was for around $40,000.00 and I did all those things in
November. We just. I did everything that was necessary.
Chrniel: Except thc issuance of the building permit which is, moving the pen~t is thc thing
that...gets it going and yeah, I had understood that you had done those things as well
Gerhardt: In most cases I mean, you know throughout the downtown, I meau Charlie you
know, we typically go in and demo the buildings and cap the wells and we did it over on
Town Square and throughout the. The Hanus hfildin§. I mean there's several wells back
there. Thc old Hanus building.
Mason: Charlie, can I ask you a question? How important is this for you to have this
wnight as opposed to next month? Well
Charlie James: Oh okay. Well the reason we're here tonight is because the TIF agreement is
an agreement to our lease with Byerly's and that's hanging out there. And we need that so
we can deliver the whole thing to the bank. That's a requisite before they'll fund that 80 I'm
already personally guaranteeing payment for spancrete, consUuctional seal and things that
have had to be pre-ordered but I haven't, but the bank isn't going to fund or reimburse me
for those things until they've got this lease in their hands and I can't give them the lease
because Exhibit F to the lease is the.
Mason: Sure. Sure. Okay.
Charlie lames: So that's kind of why this all came about and what we need to do, I believe
the mechanhm is simply to increase the amount of. We're not creating an obligation. Is that
right Todd? I mean how does that work? It's, they increase the amount on one thing but not
the other and it doesn't create a binding obligation on the part of the city. It's just that it's
there and the money will be paid, right?
Mason: Well then okay. I guess I want to ask the Chairman or Todd or whoever how we
can work around the fact that this isn't on the agenda tonight.
Oerhardt: The only thing that I can lend to it is that I forgot to put it on. He had made the
35
Housing and Redevelopment Authority - March 31, 1994
request to be on and he had talked to Don about it. That'~ the only thing I can come up
with.
Boyle: I think with that statement in the Minutr, s, it would probably preclude any future
retribution to that. Don't you Don?
Charlie Janms: I guess I did have, as soon as this issue came up in January, I did have
immediate meetings with the staff and there were aim'natives discussed and so forth and so
on and it was decided that probably the HRA was the appropriate venue fur this.
Gerhardt: If I could add one more thing. Our April meeting is not one that you're going to
be taking action on. It's the goals session with Council So I'm not scheduling any items for
that so we're going to meet in April, you'll have to establish a special meeting time. If you
would like to do that, you know if you want to meet again to do this one item. Otherwise he
would have to wait until May.
Bohn: Let's get it over with.
Mason: Well that's fine. I guess I'm a little worried about some fallout.
Gerhardt: Well I apprecia~ that. Sometimes when you put these under Visitor Presentations
you get...feedback where you gentlemen are sitting on and it gives us some more time to
think about these issues. So I can appreci~ it.
Boyle: I don't think we should hold Mx. James up because of an honest oversight.
Bohn: Do I have a motion?
Mason: I will move that the prior redevelopm~t agreement between HRA and Mx. James
should be modified to reflect a $26,220.00 credit for park and ~ dedication fees.
Bolm: Second?
Boyle: Second.
Bohn: Discussion.
Mason moved, Boyle seconded that the prior redevelopment agreement between lIRA
and Mr. James should be modified to reflect a $26,220.00 credit for park and trail
dedication fees. All voted in favor and the motion carried unanimously.
36
Housing and Redevelopment Authority - March 31, 1994
Mason moved, Boyle seconded to adjourn the meeting~ AH voted in favor and the
motion carried, The meeting w~ ~ed.
Submitted by Don Ashwonh
Executive Director
Pl~ared by Nann Opheim
37