EDA 2001 11 21CHANHASSEN ECONOMIC
REDEVELOPMENT AUTHORITY
SPECIAL MEETING
NOVEMBER 21, 2001
Chairman Boyle called the meeting to order.
MEMBERS PRESENT: Gary Boyle, Jim Bohn, Steve Labatt, Linda Jansen, and Bob Ayotte
MEMBERS ABSENT: Craig Peterson
STAFF PRESENT: Todd Gerhardt, City Manager
CONSIDER APPROVAL OF PURCHASE AGREEMENT REGARDING THE SALE OF THE
CHANHASSEN BOWL PROPERTY, 581 WEST 78TM STREET.
Gerhardt: Chairman, EDA members. At our last EDA meeting staff was directed to go back and make
modifications to the purchase agreement for the Chanhassen Bowl property. The significant changes in the
purchase agreement, I'd just like to go through my list so everybody understands what the terms are. Right
now the latest closing date, that's if everybody meets all the terms and conditions of the purchase
agreement would be August 1st of 2002. That means that Kraus-Anderson has taking their site plan
through the city approval processes. That means they've met the deadlines for leasing the building out, and
that the building has been demolished and that the asbestos has removed and all environmentals have been
met. The city must complete the survey by December 15th. I have contacted Otto and Associates. I'm still
waiting for an estimate from them. I will call them again on Monday to make sure that I can get that from
them so we can get moving on that so we can meet the 15th deadline. But John and I both believe that's just
an update. They have done an alta survey when it was owned by Copeland. When Copeland brought the
bowling alley through for site plan approval when he was proposing a 16 bay movie theater in that area.
Buyer must have written financial commitment by May 1st of 2002. Buyer must make a site plan
application with the city by February 1st of 2002, and approved by the city on or before May 1st of 2002.
If for some reason he does not meet any of these deadlines, we can terminate the purchase agreement with
Kraus-Anderson. Buyer shall determine by February 1st of 2002 that the demolition can occur after
satisfying all the conditions of the party wall agreement, and that he's done his phase I environmental and
has all the estimates of what the costs are as a part of that demolition. When they did their due diligence in
determining the purchase price they did include demolition costs as a part of that. So they just need to
verify those numbers. And also understand what would be associated in meeting the terms and conditions
of that party wall agreement. And they have seen the party wall agreement. We shared that with them and
have an understanding of some of the costs that would go along with that. Buyer can object to the
restrictive uses against liquor stores, automobile sales, and fast food restaurants. If you remember at our
last meeting those were some of the restrictive uses that you wanted to see. Pardon me?
Bohn: Why?
Gerhardt: Why what?
Bohn: Why those restrictions?
Economic Development Authority - November 21,2001
Gerhardt: Well one of the reasons why we purchased this property was to not to see a large liquor store in
that area. You wanted to see more of a multi-use retail that potentially a liquor store could come in and
take half of the retail space. So we have 2 liquor stores currently in town so they wanted to make sure that
that space was for other retail other than liquor. And as to the fast food, I think we were relating that more
towards a free standing with a drive thru. Not to limit a Subway or Dairy Queen Brazier. Just something
without a drive thru. And that's spelled out as definitions in our zoning ordinance. So how that would
work, if the buyer requests the city to waive any of these, they can always come back and ask you to waive
those uses. And if the city decides not to waive those, then the buyer can elect to terminate the purchase
agreement and walk from the site so I just wanted everybody to understand how that all worked. And the
buyer must have entered into a fully signed and binding non-contingency lease agreement with one or more
tenants by May 2nd of 2002. And the last one, if the buyer elects to terminate the agreement they must
deliver to the City without charge a copy of all environmental and technical reports of the subject property
so that means any Phase I Environmental. Any soil borings. Any asbestos reviews and we paid for the
survey so we could keep that. But that was what we negotiated as a part of them taking their earnest
money back that we would get something for going through this process. Other than that, there were no
other significant changes. I did attach the red line copy to my report. Staff feels that this is a sound
agreement. It allows Kraus-Anderson approximately 6 months to market the property. To find potential
tenants for that 28,000 square feet retail, and recommend approval of the purchase agreement between
Kraus-Anderson and the EDA for a purchase price of $1.1 million.
Boyle: Thank you Todd. Are there questions of Todd before.
Ayotte: Yeah just point of clarification. I think we addressed it but I'm still a little unclear on it. With the
environmental condition, we have an environmental baseline done, and they go forward and the second
addition change occurs in the demolition, asbestos, what have you, who's responsible for the clean-up of
that condition?
Gerhardt: Once they start a demolition, they would be the owner of the property and so they are the ones
that created the hazard. Now if it's an unknown hazard that they find on site as a part of the demolition,
then they have to go back and find who generated that hazard. And I'm sure we would be named in a suit
as a part of that but I can tell you we haven't done anything over there to generate any hazards. And I
don't believe the bowling alley probably did. What happened when Instant Webb was using that as their
corporate headquarters and printing manufacturing, I don't know. So that's kind of how it works that I'm
aware of. Is that correct John?
John Rice: Well under the acts it's any owner, anyone that had an ownership interest in the property could
be what they call a responsible party. So the EDA, you owned it way back when as a matter of fact before
the bowling alley so if there was an environmental condition at that time when you bought it from the
publisher, you kind of assumed that. I think that it really probably should be a non-issue because Kraus-
Anderson, part of this is they're going to start their environmental work right away and try to determine
whether or not there is a problem before they ever start demolition. You have the potential problem now if
it's, I mean if it's there, it's there and you'd have to clean it up.
Ayotte: I understand that. When we acquired the building, was there any ES done then?
John Rice: There wasn't, let me answer. When you re-acquired it this time there wasn't. When you
acquired it the first time back before it was kind of divided up and went to the bowling alley. Sold off to
the bowling alley, I can't tell you that but we did not do an environmental now and the only thing would be
Economic Development Authority - November 21,2001
the Webb publishing that was in there before. If they were pouring stuff in the parking lot or something,
who knows. If there's asbestos in there now, that is not a major problem. I mean that's dealt with. They'll
go in and do a site assessment and if it's there, you've got to put your white suit on and.
Ayotte: Well I understand the asbestos part. I was more concerned about what the publishing did there
and who would own the liability and whether or not there was an environmental baseline done to capture
what may have occurred back then. But as you say it's already spilt oil. Whatever is there is there but I
was wanting to know what sort of risk was associated with it. No matter what.
Jansen: Am I remembering correctly that with the Phase II of the cinema, wasn't there an environmental
Phase I done?
Gerhardt: Yes. And we had a copy of that in, basically just referenced any surface. They didn't do any
soil borings inside the building. That's where your concern comes from. A lot of it goes to the dry cleaners
and what they pour down the drain or washing their floors or whatever, those kind of solvents usually are
the case laws out there. But if you have some cutting oil or something that you use in machines that would
be into the concrete into the ground, you have a potential there. I'm not going to sit here and say there
isn't, but it's going to be an unforeseen one and we'll have to deal with that when it comes to us. We did a
lot of that with the rest of the redevelopment in downtown. We purchased the Union 76 gas station that sat
in front of, over where the clock tower sits today and we had a petroleum problem there and we accessed
the state petroleum fund and that paid for 90% of it. And then the seller paid for the other 10% so that
worked out. So it's always a potential.
Ayotte: Thank you.
Boyle: Linda, do you have anything more?
Jansen: I guess my only question or comment, I know I didn't receive any public comment after the article
ran in the Villager. I was just curious whether anyone has had anyone mention the redevelopment and the
proposal. Okay. Okay. I know I did not receive anything. And I of course realize this isn't a public
hearing but I'm curious any feedback that we've gotten about the 2 parties having a conversation on the
remnant pieces and.
Gerhardt: We had one today and we've scheduled a meeting for next Tuesday. Scott, Clayton and myself.
I did try to contact the owner of the movie theater today and it was a wrong number. Clayton, you'll have
to get a new number. So it's been disconnected but.
Jansen: Working on it.
Gerhardt: Yeah. We'll try to get the movie theater invited to that meeting on Tuesday also so we can all
work together in redeveloping that area. I think Clayton would like a couple of minutes of the EDA's time
to express some concerns that he has as we go through the redevelopment of this area. I think he just wants
to be on the record.
Boyle: Clayton, if you'd like to take the stand you're welcome.
Clayton Johnson: Alright, I'm Clayton Johnson with the Bloomberg Companies. I know you received my
letter and I apologize. I was leaving town that day and didn't have a whole lot of time to devote to writing
Economic Development Authority - November 21,2001
that letter but I think I tried to capture in that letter some of our concerns. Have you all received it and had
a chance to read it? Sometimes a memory's a good thing. Sometimes it's a bad thing and the only guy I
can talk to here is probably Jim. He's the only one that's going to go back this far but actually I have to
give Kraus-Anderson credit for me being in Chanhassen, and Scott doesn't know this either but it is a word
of caution in that you're about to select Kraus-Anderson and I've got to tell you, there is a little history
with Kraus-Anderson in Chanhassen and the HRA. In 1980 they came to town and proposed something
called the ring road and you guys incurred somewhere around a half a million dollars in cost, and the
market went into the tank about that time. Kraus-Anderson left town. So what affect did that have on us?
Well, you guys were stuck with a half million dollars and that was the first financial crisis that the Housing
and Redevelopment Authority faced. And I always accused Don, I said Don solution to that question, or
the problem was he looked out the window and he saw the largest taxpayer in the city, namely the Dinner
Theater and he called up the assessor and says I think the only way we can solve this problem is to double
the taxes on the Dinner Theater, which is what happened. Well that created some financial problems at the
Dinner Theater and that's how I came about coming to Chanhassen to work with Herb in 1986. And
actually as you are aware, we have been responsible for virtually everything, either as directly or as a
partner in every project that's happened downtown. As I stated in my letter we're not here to oppose the
project. We are very interested in seeing something happen on that site. Our concern is that we want to
make sure, since we own the 10 ½ acres directly to the east, that we have some input and I think every time
we've come to a public meeting, whether it be this group or the HRA or City Council or the Planning
Commission, I don't know how many times I've been told, what do the neighbors think. And here we sit
today, I had no notice of the first meeting. I didn't know of the proposal. A 5 second slide across the deck
that Todd made me aware of and we don't have an opinion on this project because of that. We've never
seen it, and until Scott called me today, there's been no contact with Kraus-Anderson. And I think it's very
ironic. It has a lot of the, it's very analogous to a couple of very famous cases that are going on in
Minnesota right now. Walser and Best Buy and the Opus, Target, Ryan controversy downtown. Where
what you're proposing to do, I read the staff report and this concerned me. When I saw the staff report and
there was a parenthesis under Bloomberg. Condemnation. There's a suggestion here that you're going to
condemn our land to accommodate another developer, and I don't know if that's your intention but it did
show up in the staff report and that's very much a concern to me because we own that land for one very
specific reason. We want to influence what happens on the adjacent parcel. The other thing I want to point
out, there's a little bit of history again. If you review your minutes, the project that you turned down for
Mr. Copeland and Mr. Mithun for the 16 screen cinema was turned down for very one specific reason. If
you read your own minutes you're going to see, the lack of access to the east. Okay. And we refused to
grant that access. Copeland came to us and asked for an easement but we said no. We're not going to give
you an easement until we can work together to develop a plan for the whole 10 ½ acres and our position
has not changed on that. We're not here to oppose it. We're here to cooperate with the plan, but I don't
like what I sense is this whole thing is taking place totally outside of any discussion or consideration of our
interest so. We've scheduled a meeting for Tuesday. I have no idea where that's going to go but I've got
to tell you that we are very interested in what happens on this parcel and are very concerned. Okay? Any
other questions?
Jansen: No questions.
Labatt: No questions.
Boyle: Thank you for your comments and we appreciate them. And we understand. And I would, based
on the fact that we have a meeting coming up with staff, I think you will be very much involved and we
would hope that you would be, and contribute to whatever happens on that piece of property.
Economic Development Authority - November 21,2001
Gerhardt: Yeah I'd just add, we did include the condemnation in our pros and cons analysis. How things
would come. It's nothing that we want to try to encourage right now. It's a lot easier. I don't have to pay
John as much money then if we can all come to terms on it. I want to include the movie theater people as a
part of that so we have a development where everybody's successful and that we can have a development
that will utilize the back side of the Dinner Theater and access from east and west for all parties in that
area. That was the driving force. We wanted to make sure Southwest Metro was a player in this now and
into the future so we're going to work hard but we wanted to make the EDA aware of what other potential
tools might be available to you. And so I think it fell under a con if I remember right so.
Jansen: And I guess in reference to the cinema and that project and noting that yes, the lack of access to
the east was one of the points, but it was compounded and there were a list of points that we got caught on
at the council level not being comfortable with. Parking was a huge issue. And I know that that was a key
catching point for myself on the council at the time because what we were talking about was having people
having to cross from Market Square over and taking that into consideration and the busy time for a cinema
being around the holidays. Picturing families and young kids trying to get to and from going across that
busy street was a major issue, and I know green space was another one of the points in the staff report we
were very tight as far as meeting codes. But as far as anything happening outside of your interest, I guess I
would echo what the chair said and Todd. You know definitely we're wanting this to be an open
conversation about how that property develops. We've been very clear from the beginning when we
purchased the cinema what our intent was for that property and what the vision is and it's following the
vision 2002 1 think is the year that's on that. We keep going back and forth as to what that is.
Gerhardt: We have no vision in 2 months.
Jansen: It's all gone. But definitely the uses that we're talking about are the ones that were projected from
the beginning, and I think that is definitely the direction that we're going in and any feedback that we
receive as it comes through the public process, which hasn't even begun yet, we're certainly going to be
taking a lot of input at the Planning Commission level as well as it approaches council as to the uses that
we're putting into the agreement as well as the look and feel of the site so, obviously there's a lot of time
for public input onto the project still.
Boyle: Thank you Linda. Bob, do you have some comments before I ask for a motion.
Ayotte: Absolutely not.
Boyle: Steve.
Labatt: The only change that concerns me is number 6. If they come in and they want to bring in a huge
MGM. They know upfront that they can walk after that. What would the motive behind putting it in, was
that at Kraus-Anderson's request or was that, is it standard for a purchase agreement?
Gerhardt: Do you remember on that one?
John Rice: Well on the restriction, that was what Todd, staff, whatever came up with as far as the liquor
store and the drive through. Is that what you're talking about?
Labatt: Yeah.
Economic Development Authority - November 21,2001
John Rice: That, they wanted those restrictions and Kraus-Anderson wanted, I think wants to look at those.
I don't think they want to put a liquor store in there. I don't know that they want to put a drive through
type restaurant in there but I think it's more from the standpoint of how those restrictions, since they
haven't been drafted at this point in time, and what will actually be in there. And so we need to probably
sit down and draw up what the restrictions are going to be and let them look at them and say alright, those
are acceptable or they aren't. And so I think it was probably their attorney and some of their people that
were saying look, we want to give them a chance to look at those and if we can't live with them, then we
get to walk away from the deal. I don't know that, I have never been told by Scott or by anybody that they
have plans to put a liquor store or drive through or automobile store in there and I can see Scott shaking his
head over there. It doesn't mean they won't think about it 2 months from now, but and you don't have to
wait on this. I mean that's kind of where they're at. They just wanted to, I believe look at those
restrictions and a document that's going to go of record and say alright, we can live with that.
Boyle: Scott, would you like to comment?
Scott Schmitt: Well, my only comment was that from putting the projects together perspective, those
restrictions to me are not an issue. It was the attorney not having seen, like John said, having not seen the
language of those restrictions that he just, you know, I don't mean how attorney's are but they want to see
all the language that's...
Boyle: Yeah we know.
Scott Schmitt: They want to see all the language. It was more that the language had not been seen yet and
that's why the restriction was in there. Putting a liquor store in, we have no intention. We would end up
with a problem with that with the apartments above. Fast food, I'm having a hard time convincing them of
a high end chef driven restaurant that I am negotiating with right now on this site. For them to accept that
because they're concerned with odors and I think we can make them comfortable and it will happen but, so
fast food is completely out of the question. The automotive, doesn't seem to fit with the housing above so
it would inhibit the whole project if we went that direction so it was simply just the language that was
associated with the restrictions that the attorney wanted to see and have a chance to review, is what it was
surrounding. Does that make it clear with you? Not so much on the uses themselves because generically
the uses, you can, such as fast food. We have fast food restrictions in a lot of our shopping centers that we
own. Fast food means different things to different people so you end up defining those uses. What are the
definitions of those uses. Ifa liquor store gets to the point where it's on and off sale, then we might have a
problem because then we have a restrictions on a nice restaurant to put in there that couldn't sell wine or
beer so that's where it was going.
Boyle: Thank you.
Jansen: I think I'm understanding your concern and what it's raised in my awareness is what we've done in
this verbiage is said, even though we all identify that we're.., so it needs to be worded a little differently
because we're all acknowledging that that restriction's going to be there. We either need to work out the
language and make sure that their attorney's comfortable with it so that we can waive the statement or get
this statement waived.
John Rice: I'm sure if I went back to Kraus-Anderson and said, here is the restrictive covenants that are
going to put of record on here, either accept them now or walk away from the deal today, they would take a
Economic Development Authority - November 21,2001
look at it and sign off and waive at this point in time. It's just they weren't done and so I think like Scott
said, they want to see what it is and they'll make that decision. Now you can put that as a condition of
signing this purchase agreement and I will make certain that it will put a deadline for us to provide them
with the restrictive covenants and the language and then they have 20 days to either accept or reject and
take that out of the purchase agreement.
Jansen: Okay. How would you want that condition worded?
Gerhardt: I don't have a problem with the condition. We own the property. He wants the property and
he's already stood in front of you and said he doesn't have a problem with the 3 uses. The only exception
might be the definition of the fast food that he can include a sub shop or something like that. And I think
where we came in with fast food is anything that isn't a drive thru I think is where we were coming from on
a fast food. So I don't think he's going to be that fast to pull the termination of the purchase agreement
because he's got so many other avenues in here that he can terminate this purchase agreement. I won't get
hung up on those conditions.
Boyle: Well it would lead to further negotiation at that time I think, should that question arise. That's my
interpretation of the thing. I agree with Todd.
Jansen: But if we leave ourselves open to negotiating something that we're saying we're all in agreement in
now, why don't we memorialize it now and have it not become an issue. You never know when the players
are going to mm over or market conditions are going to change. If that variable is just out of here because
we all reach an agreement on the terminology, why not get that done now before any money is spent on
either side, you know moving into the site plan review.
Gerhardt: John, don't I understand that the restrictive covenants would be an attachment to the purchase
agreement?
John Rice: No they aren't.
Gerhardt: They're not?
John Rice: They're not at this time. We're going to have to, we would have to draft those up and get them
in the format that we're all agreeable on what the EDA and the council wants. And then I'm sure I've had
this conversation with their attorney but if they had them in front of them and could review them, they
would sign off on them or whatever. I mean they also have in front of them a party wall agreement and the
others. They still reserve the right to object because, until you get in there and figure out what's really
going on, it takes some time. This is not like a raw piece of land that's quite easy to do. So if that's what
the council wants, the members of the EDA want to do, we can certainly draft that up and have it attached
and put it into that they accept it as it is.
Boyle: How should that be worded then I think is the next question.
Labatt: You mean how do we proceed with this?
Boyle: Yes. And what should the terminology be that we're asking for.
Labatt: I don't think any one of us up here want him to put a time delay in here.
Economic Development Authority - November 21,2001
Jansen: We're wanting to approve the agreement so I think you had mentioned that if we make a condition
saying that they'll review and approve the restrictions within 20 days did you say?
John Rice: Within 20 days of the date that we provide them with them. Then we can just type that on the
agreement or make it a condition when we send it back to them and have them initial off on it and we'll get
them those and if they don't agree with them, then they walk away from the project at that point in time or
they waive this right to object to them.
Boyle: So the covenants then would be an attachment to this and they could review the specifics and within
20 days give us a response.
Jansen: Would you be able to have those restrictions available for the council to review?
Gerhardt: You'd have to approve it. We'd have to bring the EDA back to approve it.
Jansen: The EDA needs to meet and approve.
Gerhardt: Yeah. You don't have that authority unless you, I mean you've got to see the document.
Boyle: What is the next, the council meeting's a week from Monday, right? Or I mean next Monday.
Gerhardt: I'd try to do it before our first meeting in December.
Labatt: I'll be gone.
Gerhardt: Oh you'll be gone?
Labatt: Could we do something on the 26th. I mean I hate to, we're meeting next Monday for a council
meeting. Isn't EDA before then?
John Rice: Yeah I'm leaving tomorrow for Texas and I think tomorrow being the holiday, I think the office
is closed unless you get a hold of Roger or somebody in the office.
Gerhardt: Are you open on Friday?
John Rice: No. No.
Jansen: So it's whether they could do it on Monday.
Gerhardt: The next business day would be the 26th so, work fast. I mean we could try to get something
drafted and handed out to you on Monday night. We'd have to convene as an EDA.
Boyle: And we could do that or if somebody's going to be in that week, if we could get a quorum sometime
during the week of the 26th just for a quick. It wouldn't take long to do that.
Jansen: It just seems like if it just needs a quick review. Are you in town on Monday? So you'd be
available Jim?
Economic Development Authority - November 21,2001
Bohn: Yeah.
Jansen: So I mean we must have a quorum for Monday's meeting.
Boyle: We only need 3. Okay.
Gerhardt: But we're running out of public, we have to do the 3 day notice.
Ayotte: So it'd have to be something after Monday.
Jansen: Yeah, good point.
Labatt: Friday would count, right?
Gerhardt: Yeah, we could, you could do that probably.
Jansen: Do what?
John Rice: I thought you could maybe adjourn the meeting to another set date rather than close the meeting
and have to schedule another one. But I'm not, I don't know what your.
Labatt: You mean just adjourn and continue til Monday night?
John Rice: Adjourn it to Monday night at.
Labatt: 5:15 before work session.
Gerhardt: Do you think you can have legal counsel review it that quickly? Your staff. During the
business day on Monday and then I would take it to the council that night.
John Rice: Somebody's got to get it drafted for you too.
Boyle: I think Monday is not realistic. That's my personal feeling.
Jansen: But if you're having the EDA.
John Rice: ... I just wanted to let you know that the Rice Law Firm is open on Friday but you probably
don't want to hire me to do this.
Boyle: Thank you very much. We appreciate the comment however.
Labatt: Why don't we try to schedule something for next week then. Can't we just post the meeting for
Thursday or something.
Gerhardt: Yeah, that would give me the 3 days for Thursday which would be.
Labatt: I'm in town until December 2nd.
Economic Development Authority - November 21,2001
Boyle:
Labatt:
Jansen:
Let's try to do that okay Todd. Try to schedule something for next week and do the 3 day notice.
Rather than try to rush here. I mean we're all on the same page here.
But it's almost sounding cart before the horse. Do you really want their legal opinion on
something before the EDA's looked at it and said, and blessed it?
Gerhardt: Yeah. Yeah, I mean that saves us from where he says he can't accept it and then I've got to get
you back for another meeting.
Jansen: And then if we say we can't accept it and then it's got to go back again.
Gerhardt: Right, but hopefully if John and I accept it, you'll accept it.
Jansen: Not trying to make it too complicated.
Boyle: Any more comments before I call for a motion then? Well wait a minute. Or I can do a motion.
Gerhardt: You can approve the purchase agreement contingent upon the execution of a, approving their...
Covenants signed by both parties. That's agreeable to both parties.
Jansen: So moved.
Bohn: Second.
Boyle: I didn't call for it yet.
Labatt: Yeah you did.
Bohn: It's been done.
Jansen: We knew where you were going.
Boyle: Did you? Okay. Discussion? Comment?
Jansen moved, Bohn seconded that the Economic Development Authority approve the purchase
agreement with Kraus Anderson for the Chanhassen Bowl property in the amount of $1.1 million
contingent upon execution of covenants agreeable to both parties. All voted in favor and the motion
carried unanimously.
Boyle: I did have one thing Clayton I wanted to say is I hope there can be collaboration between the 3
parties and we do agree and we like the stage efforts of the plan that was talked to at the last meeting but
time is very important and I think on behalf of the taxpayers of Chanhassen we have to try to move as
quick as we can on the property.
Clayton Johnson: Yeah, I mean I think I made it clear in my letter, we're not...
Economic Development Authority - November 21,2001
Boyle: Understand. Thank you. Okay, may I have a motion to adjourn.
Jansen moved, Bohn seconded to adjourn the Economic Development Authority meeting.
Submitted by Todd Gerhardt
City Manager
Prepared by Nann Opheim