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EDA 1997 06 23CHANHASSEN ECONOMIC DEVELOPMENT AUTHORITY REGULAR MEETING JUNE 23, 1997 Chairman Mancino called the meeting to order at 5:30 p.m. MEMBERS PRESENT: Jim Bohn, Gary Boyle, Nancy Mancino, Steve Berquist, Mark Engel, Mike Mason, and Mark Senn STAFF PRESENT: Todd Gerhardt, Asst. Executive Director; Kate Aanenson, Planning Director; Charles Folch, City Engineer Mancino: I'd like to add something to the agenda prior to starting tonight and that is item number 3 which we'll have an election of Chair and Vice-Chair after the approval of Minutes. REQUEST OF TAX INCREMENT PAYMENT, DEAN JOHNSON. Todd Gerhardt presented the staff report on this item. Mancino: Thank you very much. Is Mr. Johnson here? And would he like to appear in front of the EDA? Gerhardt: Mr. Johnson isn't here. ! had discussions with him last Friday. He expressed that his letter is, he'd like to receive payment. He still stands behind his letter. He is prepared to make the next step if payment isn't received was his statements to me and he does have representatives here in the audience just to monitor discussions. ! don't know if they're prepared to speak or not on his behalf. Mancino: Okay. Good. Thank you very much. I'd like to open this for a public hearing. May I have a motion and a second please. Berquist moved, Engel seconded to open the public hearing. The public hearing was opened. Mancino: Thank you. This is open for a public hearing. Anyone wishing to address the EDA on this issue, would you please come forward. Come to the podium. State your name and address and please give us your comments. Laurie Carsick: Yes, thank you. Laurie Carsick and I'm on the current Association Board with the Oak Hill Townhome Association. Have been a resident there since 1994 and ! had heard about this hearing and ! understand that some of the issues are the fact that a contract is a contract but one thing that I'd like to say in particular that ! know that Dean Johnson had come before, ! don't know whether it was this committee or the City Council, but he had made many promises knowing that his reputation preceded him. That he had problems with other Economic Development Authority - June 23, 1997 developments around the cities and that he had made many representations and promises that there would be no such difficulties with this development, and yet there certainly are. Big time problems in fact. So I guess mainly I'm here to say that there's also a part of a contract that's called good faith and I don't feel that he's upheld his end of the bargain as far as good faith. You know maybe if he's interested in just the fact that he needs to get paid just because the contract says so, but as I say good faith is good faith and he has not hold up his end of the bargain as far as insuring us there were no such problems and as some of you know, we have some major structural problems where people can't even open their front doors and get in and out and those types of things. So I guess that's kind of the bottom line is that the City took him at his word on his good faith and he did not uphold that end of the bargain. So thanks for doing that. Mancino: Okay, thank you Laurie. Anyone else wishing to address the EDA at this time? Wayne Salisbury: Wayne Salisbury, also a resident of Oak Hill. I'm also on the Board of the Association. We have prepared notes but let me in just a moment or two, in a minute or two, we represent 90 homeowners. If those 90 homeowners were present tonight they would tell you that they are greatly disturbed. Now am ! talking about all 90? With problems, not necessarily. We're talking about a number of residents up there that have serious structural problems with their homes. And I'm representing 90 because it's in the interest of 90 homeowners that we're here tonight and ! would ask that you take these 90 homeowners in your concern for advisement. ! know some of you Council members, if not all, have been out to the subdivision. Up to the community and you've seen for yourself some of the things that we've had to deal with. Some homeowners that had to take their houses off the market because they can't sell them. Had a 32 or 33 year old woman that called me the other night in tears. She's got to leave and she cannot sell her house. Now it's the reputation that Oak Hill is getting, and it's the reputation we've got regrettably today. Stay away from Oak Hill. Stay away from it. People are trying to bail out. So please consider these 90 homeowners. And incidentally ! had another homeowner that was single. She was married. She went on her honeymoon. She put the house up for sale. When she came back and she's had to take it off the market. People aren't buying. There's disclosure, the real estate agent is required by law to disclose certain things and this is what's bothering us. This is what's preventing some homeowners from selling their home. So listen please not to two people but listen to 90. There's a big voice. Thank you very much. Mancino: Thank you. Anyone else wishing to address the EDA at this time? Then may ! have a motion and a second to close the public hearing. Berquist moved, Engel seconded to close the public hearing. The public hearing was closed. Mancino: Comments from EDA members. Mr. Senn. Senn: I've got some questions for Charles. For Charles if! could. As far as the roads go, was every phase of construction on the roads monitored? 2 Economic Development Authority - June 23, 1997 Folch: For the private streets, those are outside our realm of jurisdiction. But the public streets that you have all had to be constructed. They had to meet our city standards... Construction of private streets would be just like Byerly' s or Target parking lot. It' s all done privately under whatever specifications... Senn: Okay. But the part we're reimbursing them for is the public streets, correct? And but you say those were monitored, ! mean fairly detailed. Folch: They had to meet, those streets had to meet all the standards that any other public street... Senn: Okay. But given what else we've seen, ! guess my question is are we sure that that happened 100%? Folch: Oh absolutely. We go through and do certain tests on the compaction of different levels of grading to... but also the strength of the concrete curbing that we put in... Senn: So those were all done? Folch: Yes. Senn: Okay. No other questions at this time. Mancino: Mike, any comments or questions? Mason: I have no questions at this time. Is now the time for comments, or do you want to wait on them? Mancino: Yes. Mason: Based on what our attorneys say, my personal view is I don't know that we have much choice but to reimburse or to pay Johnson Construction Inc. ! have been over there. To say I'm appalled would be a bit of an under statement. ! would like to have a discussion with this Council, and ! don't know whether that would be executive session or not, about what actions, (a) we can take to help out the people that are living there, and (b) what actions we can take to make sure that this doesn't happen again in this community and hopefully anywhere else but bottom line for me is the people that live there and to make sure this doesn't happen again in our community. Mancino: That would be a very good discussion. Mr. Senn. Senn: Oh sorry. I didn't understand we were doing comments. I don't know, from my opinion without getting into a lot of detailed discussion. I mean it seems to me that this is a, I mean if we have a lawsuit going over, it seems to me that most of this discussion shouldn't be public but you know based on what I've seen and what I've been happened, I can't really support forwarding Economic Development Authority - June 23, 1997 funds at this point from the City to Johnson. And would not support doing that but I'm not sure at the same time that we know everything we need to know at this point to make that decision. Mancino: So you're asking for further information. Senn: Yeah. I'd really like to see a meeting on this with, (a) our Building officials, (b) our attorneys and ©, us. You know like Mike said, an executive session's probably want makes the most sense, especially given the lawsuit but ! think that's a discussion that needs to occur before we go anywhere on this. Mancino: Okay. I would certainly support that too. I would like to get an update on where we are right now as far as the code violations. Of the 11 that we have the letter from Steve Kirchman from August 19, 1996. The reply in February. ! would like to get an update on exactly what has happened. What has been taken care of and where we are in the lawsuit, etc. Mr. Engel. Engel: If there's any legal means whatsoever available to us to withhold payment, ! would like to do that. Mancino: And would you like to direct staff to do some further investigation of that? Engel: Yes, I'd really like to have an executive session with our attorney... Mancino: Mr. Berquist. Berquist: In reference to legal ability to withhold payment worries me a little bit. I've got a couple of questions regarding the staff' s memo. The cover page on the memo that you sent out in the packet Todd makes reference to 144 townhomes. It's the first time I've seen 144. I've always understood it to be 90 units. Gerhardt: There's 90 on the south side of the road. Berquist: That road. Does that also include the doubles? Gerhardt: Yeah. That's the. Berquist: There's 54 of them? Gerhardt: Well there's more than 54. There's only 54 that are within the tax increment boundaries. Berquist: So there's 54 doubles that are going in across the street? Within the TIF that make up the 144. Really? Gerhardt: There's 54. 4 Economic Development Authority - June 23, 1997 Berquist: All right. In the letter you just gave us from Ron Batty, the funding vehicle for the bonding is through property valuation. Now the property's not appreciating in a fashion that is commensurate with the rest of Chanhassen primarily because of the deficiencies that are... construction, right? Gerhardt: That's correct. Berquist: Is there anything within the language of the note that speaks to that? Gerhardt: It's a pay as you go note. So he only captures what increment is generated on the site so based on whatever value that the County Assessor places on it, that's what he receives. We've done a detailed analysis where we've received a parcel by parcel.., of their taxes and the increment generated from each of those parcels and we calculated that out of available increment to Mr. Johnson. Berquist: Was there references, did you have the Carver County Assessor do a unit by unit assessment? Gerhardt: We received it from the Carver County Auditor's office. A breakout of their annual taxes per parcel. Berquist: Were those, were the units, was it a pattern of valuation decreases or increases in the units that was less severely affected by the deficiencies in construction or more holes so to speak. Gerhardt: They haven't given that analysis yet so ! haven't reviewed this year's payment to Mr. Johnson so this would have been a '96 payment that we're having the discussion about right now and that was the value associated with those units in 1995. So at that time it's whatever the individuals probably paid for the property. It's all first time buyers. It's whatever they came in and paid market value for. Berquist: So it's really of no, okay. Gerhardt: This year would probably give us a better indication of what they did with market value. Berquist: It'd be an interesting study to know whether he went through them individually or did them blanket like he did... Gerhardt: But ! think this is the first year where people probably filed appeals on them because think in the last, it was this last year is when a lot of the stuff showed up and is when they filed their appeals. Mancino: We did get 2 or 3 appeals this year. Gerhardt: Right. And ! don't think we received any the year before. Economic Development Authority - June 23, 1997 Berquist: Did we get some from Oak Hill? Mancino: Yes. Excuse me, if! could interrupt discussions. We will be able to go into executive session at 6:00 when Mr. Knutson, our attorney is here so if you have any questions that you want to ask staff at this point, fine. executive session. Berquist: Mancino: Gerhardt: Otherwise at 6:00 when he does come, we will go into ! was hoping... But we can ask a few questions and take it from there. He was here a half hour ago. Boyle: May ! ask a question? Mancino: Excuse me. Let me make sure Mr. Berquist is done. Boyle: Are you done? Mr. Senn made a couple comments about litigation. What litigation is currently going on? Gerhardt: The City, ! don't want to talk too much about litigation but the City has filed a lawsuit against Dean R. Johnson Construction regarding building code violations with this development and that suit has been continued until August. Boyle: Okay, thank you. If staff is not directed to make...tonight, what's your anticipation of Mr. Johnson's reaction or next action? Gerhardt: I'd rather talk about that in executive session. Bohn: Is there a time limit...to Mr. Johnson? Gerhardt: I'd rather talk about that in executive session also. Mancino: Okay. So ! think we'll close all discussion until we go into executive session. Gerhardt: Well anything that deals with the litigation, you know. Their representative is here and ! think we should keep our hands close to us. Mancino: Okay, and those in the audience you understand that when our attorney gets here we will go into executive session as an EDA and that will be a closed session. So we'll go further on the agenda. The second item on the agenda is the approval of Minutes. APPROVAL OF MINUTES: Economic Development Authority - June 23, 1997 Boyle moved, Mason seconded to approve the Minutes of the Economic Development Authority meeting dated May 27, 1997 as presented. All voted in favor and the motion carried. ELECTION OF CHAIR AND VICE-CHAIR. Mancino: Is there anyone who would, this is for a year position as Chair of the EDA. And a Vice-Chair or an alternate if that person is not able to attend. May ! have nominations for Chair of the EDA or anyone who would like to volunteer. Mason: ! would nominate Gary Bohn as Chair. Mancino: Okay, do you accept the nomination Gary? Boyle: Sure. Senn: Who is Gary Bohn? Mason: Did ! make a mistake? I'm sorry. I'm sorry. Well ! looked down there, sorry Jim... I'm sorry. Mancino: Any other nominations? Mason moved to nominate Gary Boyle for Chairman of the EDA. All voted in favor and the motion carried. Mancino: Nominations for Vice-Chair. May ! please have nominations for Vice-Chair. Boyle: I'd like to nominate Nancy for Vice-Chair, if you would accept. Mancino: Yes, ! would accept. Any other nominations for Vice-Chair? Mason: Well ! was thinking of nominating Gary Bohn. ! would nominate Jim Bohn... Mancino: Okay. Two nominations. One for Nancy Mancino and one for Jim. Okay, show of hands. All those in favor for Jim please raise your hand. All those in favor for Nancy please raise their hand. And Jim has it and is Vice-Chair. Wonderful. Congratulations to both of you. We'll just wait for Mr. Knutson. Berquist: Can we talk about something else briefly? Mancino: Sure. Berquist: When we last, the last EDA when we talked about the land between Tires Plus and Cheers, there was a time frame from which a purchase option had to be exercised and a $5,000.00 earnest money check received. What was the time frame that we put on that? Economic Development Authority - June 23, 1997 Gerhardt: If! remember right it was June 1st. Mancino: Or July 1st. Gerhardt: Well our meeting was in May and it was June 1st and then there was another 6 months for another extension which took it to the end of December. Berquist: To date have we received anything? Gerhardt: No. Staff sent out a purchase agreement several weeks ago based on direction from the EDA on the terms of your motion and staff had a conversation with Mr. Burdick the early part of last week and he said he's still reviewing the purchase agreement. ! asked him for any changes, comments or anything and the only comment that he made at that time was the private utilities that were extended to his site as a part of construction of Applebee's and Tires Plus and said he was unaware of those costs. And in my detailed memo of the terms and conditions that were sent out last January references that a buyer would be responsible for those private utilities. However it did not list the cost of those and ! was unaware of the costs of those at the time. And ! will be sharing with him a detailed cost of all of those improvements done by Tires Plus so he took pro- rated sharing of those. That was his only comment. He said he'd be very interested in seeing that and end of discussion. Berquist: Was there a closure date on the window? ! don't remember there being. Gerhardt: No, there was not. If you'd like tonight, ! could send him a letter saying that the offer is good until whenever you want since we never heard back from him. Basically it's kind of off the market. Mancino: It would be wise to have a closure date to this. Senn: ! thought when we met or he appeared before us and we discussed, it thought we moved everything off a month. Gerhardt: Pardon? Senn: ! thought we moved everything off a month because ! mean we took so long to meet and talked with him and all that. ! thought ! remembered the comment at the meeting that we were adjusting you know the time frame because... ! thought that's what it was but ! may be wrong. I'm just going by a terribly old memory at this point. Gerhardt: ! mean that makes sense and ! haven't pushed him or anything. I'm giving him his time to review it and you know that's not a problem you know. If you stay in the 6 month cycle, is what ! think... (Taping of the meeting ended at this point in the discussion.) Economic Development Authority - June 23, 1997 Senn moved, Bohn seconded to direct staff to prepare a letter to Mr. Burdick within 10 days regarding the purchase of property next to Applebee's and Tires Plus. All voted in favor and the motion carried. The EDA then went into an executive session regarding litigation with Dean R. Johnson Construction concerning building code violations. The meeting was adjourned at 6:00 p.m. Submitted by Todd Gerhardt Assistant Executive Director Prepared by Nann Opheim