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EDA 1997 02 20CHANHASSEN HOUSING AND REDEVELOPMENT AUTHORITY REGULAR MEETING FEBRUARY 20, 1997 Vice Chairman Bohn called the meeting to order at TOO p.m. MEMBERS PRESENT: Mike Mason, Barbara Murphy, and Jim Bohn MEMBERS ABSENT: Don Chmiel and Gary Boyle STAFF PRESENT: Todd Gerhardt APPROVAL OF MINTES: Mason moved, Murphy seconded to approve the Minutes of the Housing and Redevelopment Authority meeting dated January 9, 1997 as presented. All voted in favor and the motion carried. VISITOR PRESENTATIONS: None. CONSIDER APPROVING THE PURCHASE AGREEMENT ON A 2.2 ACRE PARCEL FROM THE WARDS. Todd Gerhardt presented the staff report on this item. Bohn: You were going to bring a diagram. Gerhardt: Oh that's right. Bohn: I have a real problem with it. I just can't believe we're doing it. Why? Murphy: Will 212 go north or south of that? Bohn: 212 will be south of that. Actually 212 goes south of Marsh Rice Lake. And the...has got his farm and it go south of his farm. Southeast of his farm... Definitely. Definitely, ! want to hear something. ! talked to Gary Boyle about this too. He's got a hard problem with agreeing to buy this property too. He was real, ! walked over and looked at it. He wanted to go with me and sort of to see what property we're talking about. Gerhardt: This is the parcel that... Bohn: You can't really see it. No, it's just that you can't tell the relationship from that piece of property to Marsh Rice Lake. Gerhardt: This is Rice Marsh back in here. This would be the, this is old 101 right here. Housing and Redevelopment Authority - February 20, 1997 Bohn: It's north, or east of old 1017 Gerhardt: Yes. This is 101 here. Here's the old 101 that goes this way. there. Just south of there. So that would be the property. The trail does go through the property? The one side of it. To the north of the property. Murphy: Gerhardt: The trail goes this way Bohn: What's to the east of that property? Gerhardt: The road. Oh to the east? Rosemount. Bohn: How about to the south? Gerhardt: South there's the, it's the old Klein house. We purchased that house for proposed future road right-of-way. On one of those drawings.., existing roadway. Bohn: ! thought you were going to have a colored drawing for us. Color rendering. No? ! want to see the relationship to everything else. Gerhardt: To the retail development? Bohn: No, ! think that retail development is in here. Yeah, it's in here. Gerhardt: This is the existing alignment of TH 101 right here. And then the new alignment is this black line. And then the Klein house is a little yellow house on top of the hill. It sits right about in here. The Klein house sits about here. This is the old TH 101 alignment and this dark line is the future alignment. Murphy: Will the new TH 101...property away? Or will it cut into that grove of trees? Gerhardt: No. ! think the 2.2 is outside of the road right-of-way. Bohn: It's this site right here. It's where the green spot is. Gerhardt: They've dedicated the road right-of-way. Bohn: Does anybody have any questions? Murphy: My question is with your letter from Don. It says that the Park and Recreation Commission but it hopes that the Council and HRA would agree that option for the HRA to buy it would be the best option. What's Council's opinion? Would they support that? 2 Housing and Redevelopment Authority - February 20, 1997 Gerhardt: Just to explain why the Park and Rec Commission would hope that the HRA would purchase it is, as a part of the development. If the City required this area to remain open, the developer would request some type of park and trail credit as a part of that. So that would reduce the future revenues that Todd would get from the development. So that's why the Park and Rec Commission is hoping that the HRA purchases it so they can get both park and trail dedication fees once the development comes through. Bohn: How much is that? Gerhardt: ! don't remember offhand. Bohn: In the vicinity of what? Gerhardt: Of it'd probably be a total off the development itself, it's probably around $90,000.00. No, it's closer to $6,000.00 an acre. Bohn: 2 acres right? For the development. Gerhardt: That's 300. Mark Senn: Total project right now is about 40. Gerhardt: Well that's 360. Mark Senn: The Ward parcel... Gerhardt: That's $180,000.00. That's 30 acres developable. That's $6,000.00 an acre. Murphy: Did the developer say $6,000.00 an acre? Gerhardt: In park and trail dedication fees that the City would collect when developments would come in .... if they build some interior trails and something, they'd get some credit for that. Mark Senn: But there's also, ! mean that's part of doing the project, the overall project... If ! were to answer your question on the City Council, the City Council did talk about it most recently at a work session... Murphy: If! understand it right, either it comes out of Park and Rec or it comes out of liRA or out of the developer's pocket? Gerhardt: Well what Mark's saying is that he thinks that the developer, the City would just say, you just don't get credit. Mark Senn: Well it'd be... Housing and Redevelopment Authority - February 20, 1997 Gerhardt: It's a little different when it comes to residential versus commercial. In residential we can ask for larger green space for a future park and natural area as a part of the development because you're going to have kids there playing in that area. That's a typical process. You know where it comes down to a commercial use, it's real difficult to get a commercial use to give you a large green space dedication. They're always looking for credits when they build storm ponds, you know on their site, they look for a credit. It's fairly expensive land and they want to be compensated somehow. Staff is recommending that you compensate the developer by purchasing that property in lieu that he doesn't ask for park or trail dedication credits is staff's recommendation. Bohn: Steve, do you want to address the HRA? Steve Berquist: I do. I thought I'd wait until I was recognized before I opened my mouth... The last time when you started, I'm Steve Berquist, 7207 Frontier Trail. The last time when you folks authorized the purchase, the preparation of the purchase agreement, I asked specifically whether or not it was going to be executed or simply for consideration. You said it was going to be for consideration. Since that time what I have done is I have gone back and just highlighted some concerns that I have. In Don Ashworth's staff report to you dated 3 January, he talks about it being a highly desirable knoll to be left in it's natural state. I don't dispute that. That's absolutely true. And he goes on to talk about precedent for HRA making the purchase. And the concluding paragraph says, this office would recommend the HRA enter into a purchase agreement with the Ward's for the 2.2 acre parcel with the assumption that this parcel remain in a natural state. I'm assuming by that sentence alone he simply means the Executive Director of the HRA. Speaking from that pulpit. What I did in preparation for this evening is I went back and looked through the Council Minutes of 9 September, which is the date on which we talked at length and at times heatedly, regarding the north or south soccer field alignment. After much discussion, the motion that was made by Councilman Senn, and seconded by Councilwoman Dockendorf, was to approve the site plan for the St. Hubert's Catholic Community subject to the following conditions. And condition number 4 states, if it is feasible to relocate the soccer field north of the trail, the wooded area south of Highway 101 shall be placed under a conservation easement. That's all it says. Well, there's one other sentence but there's nothing within the context of the motion or the conditions that speak to the disposition of the property. There's nothing that speaks to how the property will be acquired. There's nothing that says the City is going to even explore entering into acquiring it. I suspect, I know that's all come since then but I would argue that if in fact the City of Chanhassen and it's residents are interested in pursuing the purchase of that property, that that is direction that should be given by the City Council, and not solely by the Executive Director of the HRA at this point. It may very well come to pass that this Board is selected to make a decision regarding the purchase but I think the execution of a purchase agreement at this time is very premature. Thank you. Bohn: Thank you. Mason: Steve, just out of curiousity. Why, and I incidentally, double negative, don't disagree with you. ! think that's right. Why do you, for argument sake, why do you call this premature? 4 Housing and Redevelopment Authority - February 20, 1997 Steve Berquist: Because we haven't, ! think it's a decision that the City Council should make and there was no discussion the night that we talked about the north/south alignment. None whatsoever as to where that land would be, or what state of limbo it was going to be in. Whether we were going to work towards purchasing it or whether we were going to expect the developer to donate it or something inbetween. There was absolutely no discussion regarding it. And until there is, I'm not saying I'm against it. I'm not saying that at all. I'm saying that the Council hasn't even discussed the option and to have it come before the Board is, in my opinion, premature. That's why ! say, at some point you may be asked to act on it with the blessing, not that ! look at my approval as anything close to a blessing but you may be asked to act on it if that's what we, as a Council decide to do. Mason: How did you feel about HRA buying that land next to Target to save those trees? Do you think Council should have had a say in that? Steve Berquist: That was before my time so I'm not particularly knowledgable of it. Bohn: We didn't buy the property. We bought all the property, including the Target property. We just didn't sell it back to them. Mason: That's true and that's a different situation. You're right. You're right. Okay. Steve Berquist: Another, just a side light if! may. In looking at the legislation and the way the legislation is recapped within the City code book and the Minnesota League of Cities handbook, it would, in my mind there's some, there's a gray area as to whether the purchase of that land is even within the HRA's perview. ! know Don outlines the scenario by which it would be but ! think the argument could be made either way strongly. Bohn: Mark, do you have anything to say? Do you want to go to the podium. Mark Senn: One of the things, ! think premature probably is two ways here. ! mean the other is, is that and Mike ! think, I'm not as tall as Berquist. One of the things that Council had asked for also too is kind of a, I'd say an overall analysis and scorecard of the Village on the Ponds project. So far what's happened is there's been a lot of requests that make independent little actions on different things. Like transferring publicly owned land to them. Like grants and a whole bunch of other things that are going into the project. Grants have been obtained for them and for the project that will impact a lesser need on their part as far as things they need to do. We've done everything from density transfers to you know some special accommodations for affordable housing. It is not predominantly a commercial project. Predominantly, at least ! think in the city's eyes, a residential project. Those are all things ! think that need to kind of be put together and considered before the City would make any decision on effectively supplying another $100,000.00 or so to a project. And ! wouldn't even you know venture that you guys could be comfortable with that kind of a decision in the fact that we're kind of supposedly watching the project and we're not even comfortable with it. Again because of, I'm going to say...the components that we've been dealing with versus an overall picture. The other thing is that ! don't think, you know Steve referenced the second part which is really, ! mean ! think there's some real Housing and Redevelopment Authority - February 20, 1997 interesting arguments as to whether statutorily either the HRA and/or TIF could be even be used for this purpose. If the City even decides that this is something they want to consider, then ! think that's something that's going to have to be really seriously looked at before we do it. ! mean the justification of coming to the HRA and saying let's use TIF money or let's use HRA money to buy a piece of land for open space, the Statutes don't say we effectively can do that simply because the Park and Rec Department wants more money later out of it, right? And effectively the HRA really isn't in the business of accumulating land for open space, retaining land for open space or really any such thing like that. So ! think those are things that are all going to have to you know really be looked at. But ! would say that the worst thing to do at this point is to make another compartmentalized decision not really knowing the whole picture and also not really knowing from a city perspective what the best way for us to proceed is. ! mean it is not uncommon at all for us to require things like this in relationship to a project. ! agree the Minutes were silent on it in relationship to that but you know, ! would guess if you probably polled the people behind the tabled, you'd probably find half of them were thinking one thing and half were another and everybody was thinking their own separate thing. But that's why, ! mean the issue did come up at a work session since then and ! think there was a pretty general consensus that nobody anticipated that to mean purchasing the property. So ! think that's a fair statement to make as far as the Council goes... So at this point ! would kind of hope that, basically like Steve, that we get it back out of the HRA and let's look to the Council to make some determination tonight. And ! think also I'd like to see the Council get a lot of the information they've asked for in relationship to this project which is still forthcoming before we revisit the issue. Bohn: Thank you Mark. My opinion on this is, this whole development, actually the HRA's sort of been out of the development. We have been informed very little of the development as a whole. Plans we see are what we see here now but, it's an HRA district but we don't know, as far as the HRA goes, we don't know what went on at the Council or at the Planning Commission decision as far as what goes on that development and we're sort of out of the loop. And my feeling is if the City wants to buy the land, the Council can come to us and ask us to purchase the property but the HRA just going ahead and purchasing the property without knowing all the facts about this property and what's going into that development, ! don't see why we're buying it. Barb. Murphy: ! had made the assumption that the City, City Council wanted to have that purchased and that the way to purchase it, well that the money's going to come either from HRA or from Park and Rec and that they'd rather see the money coming out of the HRA budget. Is how ! interpreted the reading. ! guess I'm uncomfortable with it too without having City Council input on that. The question that ! would have is, what's a negative to delaying the process? Gerhardt: No negative, no. Bohn: The land's not going to go anywhere. They may build on it. It's their property but they still have to go through the Council to do it. Murphy: I'd support you in saying that I feel uncomfortable making a move on that until it got support from the City Council. Housing and Redevelopment Authority - February 20, 1997 Bohn: Mike. Mason: Todd, what's the precedent for HRA doing this kind of thing in this city? Gerhardt: Going back to the Council? Mason: No, no, I'm sorry. For buying land for green space. Which is how I'm reading this. Gerhardt: You did the entire park, Lake Susan Park was purchased outright. You purchased the land behind Paisley Park. You purchased that outright. You know, everything downtown basically. You had pretty much purchased, I'd say 75% of downtown. For open space I'd say Lake Susan Park and Paisley Park and the land around, just not giving the land as a part of the sale back to Target and back to Ryan regarding Taco Bell. There's no rush on it. ! mean we can put this on a Council work session. This still would have to go through a plan modification to your TIF plan so there would be a variety of public hearings that go along with that. And that would go to Council, Planning Commission is always a part of it. Mason: Yeah, clearly the precedent is there but ! too share the concerns of everyone here tonight. ! definitely think on something like this, considering the depth and breadths of discussion that has gone on on this at Council level, ! definitely think there is, it would be good to have, you know again whether we agree or disagree is one thing but ! certainly would like to have, ! think Council should have input on this as well. Bohn: ! definitely agree. Mason: So ! guess with that ! would move to table this item with... ! supposed, ! don't know work session or Council? Gerhardt: Yeah, if you could direct us. Mason: I suppose a work session might be the most logical first step. Gerhardt: I think so and also to get an opinion from the HRA attorney to see if we can use TIF funds to buy open space and get an opinion from him so we can answer that question too. Mason: Okay. I would table this item with it put on, with the direction given to staff that they put it on the first available work session. Bohn: Second? Murphy: Second. Mason: And the opinions. I'd like that too please. Housing and Redevelopment Authority - February 20, 1997 Bohn: Steve Berquist: Bohn: Yes. Steve Berquist: going to buy it. Mason: That's a good point. say about it first and. We have a motion and a second. Discussion? Can ! ask something about the motion? ... may come to an opinion.., spending legal fees until we really figure out if we're think that should be out there but let's see what Council has to Gerhardt: Well you know it was a question... (There was a tape change at this point in the discussion.) Mason moved, Murphy seconded to table action on the purchase agreement on a 2.2 acre parcel from the Wards until the City Council discusses the item. All voted in favor and the motion carried. CONSIDER MODIFYING THE TIF REIMBURSEMENT AGREEMENT WITH SCHOOL DISTRICT 112. (Taping of the discussion began again at this point.) Steve Berquist: The only thing ! wanted, a midget was here. The only thing ! wanted to say, the City Council did talk about this and approve it. The question that we had was, in Don's memo, Don Ashworth's memo he referenced that he did not think that the dollar difference that would be paid by the HRA would be substantial, ! think was the word that he used. We did ask for a clarification on how many dollars it was going to be. I'm a little bit surprised to see that it's over $300,000.00. Gerhardt: Well the $300,000.00 is over the 6 year period and it's roughly $50,000.00 to $60,000.00 additional each year. Bohn: Does somebody want to make a motion? Mason: Yeah, I would agree. It is a hunk of money but I think you could argue that it's due them. With that ! will make the motion to modify TIF reimbursement agreement with School District 112. Do you want it any more specific than that? Gerhardt: No. Murphy: Second. Housing and Redevelopment Authority - February 20, 1997 Bohn: Moved and seconded. Discussion? Mason moved, Murphy seconded that the HRA modify the TIF Reimbursement Agreement with School District 112 in accordance with the schedule shown above as long as the amount of increment generated by the school district is greater than the difference between the current levy and the base year levy of 51.6. All voted in favor and the motion carried. MODIFY THE PURCHASE PRICE ON THE LAND ON WEST 79TM STREET. Todd Gerhardt presented the staff report on this item. Bohn: Well we can always quote more and you can always come down but you quote too less. I mean too little. Quote it for $12.00 a square foot and you can always lower but ! can't see asking a lower price. Gerhardt: Do you want me to start quoting 127 Bohn: I would start at 12. Barb. Murphy: You think you're having quite a bit more activity in the last 6 months? And their reasons for not buying is more location or more, what are their reasons for not pursuing that land? Gerhardt: Developers in pursuing it? We don't have it on a listing or really marketing it. As people come out and look around Chanhassen, they see the site and then they go out and find out who owns it and then ! get calls. Typically how it happens. That way you get serious calls. My time is limited so that way ! get a lot of serious calls that are looking at it. Applebee's has another restaurant chain that they are marketing and are looking at the entire piece of property for another restaurant. And Mr. Burdick who owns the retail center across the way would like to buy it and expand his building over onto the property. He has submitted a site plan. He has verbally said he would offer $8.00 but we'd have to correct the soils, and ! told him that ! wouldn't think that the HRA would accept that because it's below what they got for Tires Plus and Applebee' s. ! am sending him a copy of the purchase agreements with Tires Plus and Applebee's to show him that. He requested that. Mason: What was the square foot for those two? Gerhardt: The total square footage for. Mason: No, I'm sorry. Cost per square foot. Gerhardt: It was $8.50 and there were no soil corrections associated with Tires Plus and we did give a $10,000.00 credit to Applebee's and they did show proof that there was soil problems there. But it was I'd say less than a third of what the true cost of taking out those soils were. Housing and Redevelopment Authority - February 20, 1997 Murphy: And the Villages on the Ponds are varying from $10.00 to $12.00 a square foot. Once again does that just vary depending upon location of the land in that development? Gerhardt: Highway 5 visibility or not. Murphy: And this parcel has Highway 5, would that be classified as Highway 5 visibility? Gerhardt: It's got visibility, the best visibility would be coming from the west going east. It is kind of blocked by the hotel. It has visibility from the intersection. Bohn: ...in front of that property though. Gerhardt: Pardon me? Bohn: The hotel really isn't in front of that property because the chairs. Gerhardt: It just cuts the angles off. Bohn: Yeah, because Cheers Liquors actually is across the street. Gerhardt: But if you look around downtown, you know the other reason why you could get 10 is just not a supply of land downtown. Charlie James isn't selling his property. He retains his property and develops it himself and leases the buildings back. That's how we operates his business. The only other piece on this side of Highway 5 that is available would be the lot south of Richfield Bank and Trust and behind the Dinner Theater could have some development potential and the Pony/Pauly/Pryzmus site. Then on the south side of Highway 5, the Legion property is going through it's development process right now. Bohn: They vote on the 24th of February. Gerhardt: And you know, it may be one where they've got some smaller lots that they're going to be selling also and some speculation that they're getting 10 to 12 for those too. Bohn: Okay, any discussions? Questions? Steve. Steve Berquist: I have a question. I'm just wondering what are you expecting for soil correction. ! mean from what ! remember when ! was a tenant in the Burdick's building, 100 years ago, that that is a serious wetland when it gets, when we have an abundance of moisture. ! would guess that there's probably going to be somewhere in the neighborhood of $40,000.00 to $60,000.00 worth of soil correction without even blinking an eye. Gerhardt: There's 9 feet of organic material that has to be removed from where the building pad sits. That's typical of what Tires Plus and Applebee's saw. You have soil reports that show that. It's not a footing problem. There's good glacial till underneath that 9 feet of organic. We have soil reports that the HRA directed staff to get so we could market the property and it could hold a 10 Housing and Redevelopment Authority - February 20, 1997 3 story hotel on that site. Support a 3 story hotel on those grounds. Because of topography of the site, ! always contest that the soil corrections could be included as a part of the development because of the less grading that you'd have to do on the site. Just the grading costs over at Village on the Ponds. ! mean they've been grading all fall over there and all the dirt that they've moved is substantial and our site down there is fairly flat. You don't have to grade anything level. You know it is already level so you just have to extract the building pad organic out of there. Steve Berquist: Is there adequate wetland between the site and the railroad track to take the runoff that's going to have to go someplace since that land is going to be impermeable? Gerhardt: There is a high water table in the area. It's high water on Applebee's, Americana. It's 6 inches below the surface on all of those. They had to do some dewatering, putting footings in. But nothing that was, ! mean you have to put tile around your building... Nobody's planning on putting a basement. Just to keep the moisture away from your foundation, and your sidewalks so they don't, so you don't have that freeze/thaw problem. But ! don't care how much of that you do, we've got problems here at City Hall. We've got problems at the Rec Center and put sand in and everything and you still get a freeze/thaw. Even tile and do all the other precautions that you're supposed to do. It's Minnesota and tight clay soils. So you know, ! call it an expected development cost. Tires Plus did it without any assistance and Applebee's did get $10,000.00. Steve Berquist: Well, Richfield Bank and Trust, which you cite as your comp, didn't have any soil corrections to the best of my knowledge. And they don't have any water problems. ! don't know whether $10.00 or $12.00 or $8.00 a foot is good or bad but for us to be, you talk about there being interest in the property but we don't have an abundance of purchase orders to choose from. Given the fact that we're not marketing, are we interested in selling the site? Gerhardt: Are we interested in selling the site? The HRA gave staff direction 2 years ago when we started marketing to sell it. They had established some criteria along. Steve Berquist: Was cost per foot a criteria? Gerhardt: At that time, yes. Steve Berquist: Cost per foot staying with whatever the rest of the City seems to be going at or was it a flat dollar number per foot? Gerhardt: At that time it was $8.50. Staff's coming back saying that you should re-look at that. Steve Berquist: We don't have any purchase offers on the table at 107 How many would we have at 8? Or $8.50 rather. Gerhardt: None. Steve Berquist: None? 11 Housing and Redevelopment Authority - February 20, 1997 Gerhardt: Burdick offered $8.00 plus we correct all soils. ! haven't heard back from the Applebee' s folks. Steve Berquist: You countered with 10, with no soil correction? Gerhardt: That's what ! told him. Tonight we're looking for direction from the HRA on how ! should be marketing that. Murphy: ! have one more question. Will that lot then be in direct competition with the Villages on the Pond that's going 10 to 12 or is it going to be even tougher marketing at that point when they are, ! would assume, aggressively marketing their? Gerhardt: ! haven't gotten into trying to steal other people's developments. You know kind of just let the people make up their own mind, as long as we are at the same cost that they are. In conversations with Vernelle and she doesn't have a problem of us marketing it as long as we are at the market rate that they're at. ! think they'd have a real tough problem if we were selling for $8.50 or $9.00 and they can't compete at that level. And then we stay at the same level playing field, they have to just make the decision if they want to be on the north side or south side of Highway 5. Murphy: Is there any signage out there or is that? Bohn: There used to be. Murphy: That indicates that that lot is available for sale. Or you don't want to do that because you're going to get. Gerhardt: Well there was a sign and we stacked snow up there and it got knocked down so, Mike really doesn't want to get rid of the site because he likes to pile his snow there but it's kind of an expensive piece of property to store snow. But we can put signage up if you want. ! did have a conversation, you will get a letter from me to Mr. Burdick. He called me and asked if he could put a sign out on the property and ! said ! didn't think it was appropriate until such time that we could agree to a price and entered into a purchase agreement. This weekend he put a sign out onto the property. Take the sign down and ! am sending him a letter. It said second phase of his development, some information. Kraus Anderson's the builder so, so I'm writing him a letter and asking him to respect each other's word. Murphy: ! would think once the snow has melted you might want to put some signage up. Gerhardt: Yeah, we can put another one. Murphy: Get some traffic coming in. As far as either where it is to lie between the $10.00 or $12.00, the count's at 10. ! would go along with you to go up, ! don't know if to $12.00 but at least. 12 Housing and Redevelopment Authority - February 20, 1997 Bohn: You can always come down. Murphy: There's that negotiating power, like you said that if you can't come down and if you go up to $12.00, and then once you get into negotiation, well then we'll kick in the $40,000.00- $50,000.00 worth of soil corrections to come out with maybe an actual $11.00 a foot would be something workable. Bohn: ! think the sign out there and people looking at the south side and you drive down that highway, they might come to town and they'll see a sign. Oh, there's another piece of property for sale and. Mark. Mark Senn: One follow-up question just to Steve's. When you talked about extraction of soils, you're talking about 9 feet of extraction where the building sits. How much extraction will there need to be through the entire parking area? Gerhardt: They'll probably have to go down a few feet you know, so you can bring in some Class V where you can get it stable so your parking lot doesn't float away on you. Whatever their engineer recommends. Market Square is sitting on all kinds of organic material and they only brought in, ! think 3 or 4 inches of Class V. They call that super duper parking and our road bases are 12 inches of Class V and they have good material underneath. ! would take a lot of it off if ! were them. Mark Senn: As far as comments go, ! got a couple calls from Mr. Burdick on this, who by the way I've never met so ! mean my reference point to him is a couple phone calls and stuff. He just thought he was being unfairly treated or whatever. ! just simply listened to him and then basically started to check into it a little bit. Trying to understand what his issues were. ! don't really care if we sell to Mr. Burdick or to somebody else. ! think the real issue, at least based on the checking I've done is, really when do you want to sell it. If you want to sell the property relatively soon, ! think the premises that you're basing your pricing on are very flawed. One sale in town at $10.00 a square foot is not a comp. ! mean anytime you have a high sale and a low sale, we throw the high one out. We throw the low one out and then you look at all the other ones. And there was no soil correction on it and you're talking about substantial soil correction on this site. You know 9 feet plus 3 to 4 feet for parking lot is not minor soil correction. That's very expensive soil correction. Especially when it's muck. You know Tires Plus sold for $8.50 and Applebee's for $8.50. We gave them, we gave Applebee's you know some, I'm going to say credit towards their soil correction. We didn't Tires Plus but then they didn't have any soil correction. ! think another issue, and this ! haven't even got in to checking in, is what do you want on the site? Automotive uses pay higher you know, prices per square foot. Certain restaurants pay higher prices per square foot but ! mean, you know again, ! haven't been part of that discussion so ! don't know what the HRA's goal is in terms of what they'd like to see on the site. If it's another automotive use, you know ! think you can get up in the range you've been getting. If it's another restaurant, you know ! think potentially you could get up in the area you're getting but ! think you're going to have to give credits back for soil correction. There aren't any comps even in this neighborhood. I'm going to say in the whole southwest suburbs, and ! checked our records today. The Legion property sold for $6.50 a square foot and it's right 13 Housing and Redevelopment Authority - February 20, 1997 on Highway 5. The Village on the Ponds that ! heard referenced as comps are not comps. ! mean it's a discussion of what they're going to ask for. They haven't sold any property. Or I'm sorry, excuse me. They've sold some property but at nowhere towards $10.00 a square foot. They sold their hotel parcel basically and it's substantially under $10.00 a square foot. Bohn: The Legion property has got a problem with access onto the property because they'll have to come in off Lake Drive because ! think the Highway Department wants to put a divider all the way to. Mark Senn: Yeah, they want to close off that existing temporary drive they allowed in. Gerhardt: There's also $300,000.00 worth of soil correction. Mark Senn: Yeah. No, ! understand. They do have soil corrections, just like this site has soil corrections but ! mean, ! just think everybody's kidding themselves if you think land values in Chanhassen are up to $10.00 a square foot based on one bank sale of the last remaining piece of land on 78th Street and stuff, so ! think you know, it's up to you guys what you want to do but ! think if you want to sell the property. If you want to wait, ! mean that approach is fine. But you're not going to, you can't support that kind of a land cost. ! mean if the object, ! mean if the preference, how would ! say this. Put it in perspective. If the preference were to have Burdick for example expand his center, he can't afford to do it at that land cost. If the preference were to have a retail development come in say similar to what Roos did out, down on the old site down there, that couldn't afford that kind of land cost. The only, you know McDonald's can afford that kind of land cost. Most fast foods can. Most automotives uses can. ! mean that's what ! deal with every day in my business but, and in locations that are a lot more prime than that. We just did one on a piece of ground sitting right on the intersection of 55 and 494 at $6.00 a square foot. Right in the heart of you know, Plymouth in a much better place. And it was an automotive use. So ! mean, my fear on this becomes one more of the standpoint that, ! want to make sure the City isn't artificially affectively driving up land values because ! think that's going to hurt us. ! mean us being the city. It' s going to hurt everybody in the long run because you know, you just get a couple of those going and the assessor's going to certainly want to pounce as quick as he can but ! still have a hard time seeing how he's going to be real successful at it because there aren't enough comps for him to be successful at it. ! mean he's not allowed to take the high comp either in terms of his valuations but even the $8.50's we got off those two parcels down there, you know really are the highest comps anywhere in the city other than the bank parcel. Or at least from what's in the record. So again, which way you go is up to you. I'm just saying, ! think the real questions are what do you want on this site and when do you sell it. And then gauge it from there as to how you want to approach the marketing of it because that's going to be what determines when you sell it and what you're going to get on it so. Bohn: Mike. Mason: Well it would seem to me the city would want to make as much money as they could on a deal. ! personally, as a member of liRA, am in no particularly big hurry to sell that parcel of land. It soon will be one of the few remaining parcels left and it seems to me that drives the prices 14 Housing and Redevelopment Authority - February 20, 1997 up. ! don't, ! sometimes guess ! get a little confused on the one hand, you know we spend so much time making sure as a city we're not spending more money than we should be and we're taking care of stuff. But now I'm kind of hearing, well now don't sell it for too much money. You don't want to do that. And maybe I'm missing the point. ! guess that's entirely possible but I'm in no particular hurry to sell the land and it seems to me 10 is at the very least what we should be going for. ! like what you, Jim and Barbara, what you two said. You start high and negotiate. Fine. ! mean that's, you tell somebody $8.50 and by god you're going to be lucky to get $8.50 for that. Bohn: It seems like every time we sell a piece of property, whoever buys it wants something else besides. Mason: Well you know whatever we sell it for, they're going to come back and say we need this and they do this and you did that for them so what are you going to do for us so, ! certainly think we could have a discussion as to what we want on there. ! certainly think, I'm getting a sense from you folks that we're in no particular hurry to sell that land. Murphy: Do you think that the price will be driven up once, like in two years, even when the Villages on the Ponds is developed? To me ! would think that the value' s just going to. Mason: Well you know, let's look around the city. Prices seem to keep going up. Murphy: ! would think that they would accelerate more than they have been in the past. Mason: Well ! would certainly think so. Murphy: ... past 3 years more than they have in. Gerhardt: Clayton Johnson's comments are always, that's fine. You don't want to buy it this year. Next year it's going to be worth more so. Property that he's always had a sale on that fell through, he always got more for the next one. That' s just a comment that he' s always. Murphy: And the only thing that we're losing once again is the tax dollars that would be coming back. Is that a similar size parcel as the Tires Plus? Gerhardt: It's almost a mirror image of the two. It's about Tires Plus and Applebee's. It's 75,000 square feet total. Murphy: And so how much a year does Tires Plus bring us in TIF? Gerhardt: Tires Plus is probably going to be around $25,000.00 a year and... (There was a tape change at this point in the discussion. No Action was taken on this item.) 15 Housing and Redevelopment Authority - February 20, 1997 CONSIDER MODIFYING THE GARY KIRT PURCHASE AGREEMENT. Todd Gerhardt presented the staff report on this item. Bohn: Mike. Mason: Well, maybe I'm missing something but isn't this kind of a no brainer? I mean what, this is definitely all to our benefit to do it this way, right? Or am ! just really missing something on this? Gerhardt: Well I say you're getting, you are kind of giving Gary Kirt an option that he doesn't have. ! mean. Mason: Well right, but ! mean in terms of financial responsibility. In terms of responsibility, obligation to HRA or anything like that, ! mean ! guess I'd ask, why wouldn't we want to do this? Gerhardt: I don't have any reason I mean unless that, you know that the third party he does get to come to buy it, it's not, drives the property into the ground or whatever. But that' s, you know Gary Kirt is on the hook for $135,000.00 to that and so, and we kind of got it covered through that part of the mortgage agreement so ! see it as an opportunity for the HRA to get this mortgage reduced from the 15 year when it balloons down to 7 year. Mason: Or down to this 6 years at...right? Gerhardt: Right. Mason: Okay, okay. Okay. Bohn: Barb. Murphy: So if he sold it the buyer then is going to have a balloon in 7 years or 6 years, 5 years. Gerhardt: If he sells it to a third party. If Gary Kirt sells it to a third party. His balloon is in 15 years if he was to keep it. Murphy: 15 years from now? Okay. And the third party buyer would, that would accelerate to 7 years? If he... 1997, 6 years 1998. ! don't see a negative to it either. He'll still have his liability there and you know him more than ! do. ! don't know who he is. Gerhardt: ! don't think ! can get him down more than 7 years. That's the farthest ! can really get him. Murphy: What happens when there's not an HRA in 5 years and the mortgage comes due in 7 years? 16 Housing and Redevelopment Authority - February 20, 1997 Gerhardt: There has to be an HRA for another 25 years. The contract's out for that long. Gary will have to exist. Murphy: Okay. Gerhardt: You know and the HRA's going, will maybe be around. There will be a body of whatever but who knows if they'll be meeting or not meeting. It will come into the City... mortgage. Bohn: Steve do you have a question? Steve Berquist: I have a couple of comments. First of all the staff report and the letter from Jim Walston is fine. For informational purposes, a 15 year balloon is pretty normal in commercial lending. Commercial CI property. An amortization of 30 years is very unusual. They're generally maxed out at about 25 and more usual would be a 20 year amort. 25 is pretty normal. My concern, number one. I mean if the HRA doesn't go along with this, is Mr. Kirt going to, is this deal going to go away? Number one. He'd still exercise his repurchase agreement. I have a concern insofar as that Mr. Kirt can now in essence assign the building. Someone can come in and assume the mortgage and that individual would have no, we would require no qualifications. My son, at 21 years of age with no appreciable assets could walk in and assume the mortgage and the City of Chanhassen would have nothing to say about whether or not he was qualified. It could just be done and I don't think Mr. Kirt would do that with my son. He may do it with somebody else' s, although my son would certainly be a good risk. But it concerns me that the likelihood of the sale of the property that we, the citizens of Chanhassen own, or hold the mortgage on, could be sold to someone with virtually no qualifications to own a property of that nature. It would appear to me that if we were to agree to this carte blanche, that our risk would be multiplied significantly. And by the way, Councilman Senn who has just left asked, he read my notes and said that they were very similar and he asked that I express these as his viewpoints as well. As far as the liability of $135,000.00 that Mr. Kirt has, that's pretty small given the value of the project. And if in fact the property were to go into a default, enforcing a personal guarantee is costly and very difficult. And insofar as he would have no real interest in the building, I think we would play heck trying to recover that $135,000.00. That, and the likelihood of default by any new buyer would be increased due to the probable higher purchase price that someone is going to negotiate with Mr. Kirt. I've maintained all along that the building is not a cash cow, even with the $400,000.00 mortgage that we held on it. The new numbers that Mr. Kirt is going to be paying for it makes it substantially less of a cash flowing entity. And any new numbers that someone else would pay Mr. Kirt, and obviously he's going to try and sell it for a profit, would only make that proforma worst. Which by the way there's nothing in the documation that would provide for the City to receive any kind of a performa on the building. And for us to issue a mortgage without some type of a cash flow analysis is, I don't think that's particular wise. From my position, if Mr. Kirt has a buyer or is able to find a buyer, I would really like to see the City of Chanhassen be completely off the hook and for that buyer to secure conventional financing outside of the City's resources. Thank you again. Bohn: Thank you Steve. Mike. 17 Housing and Redevelopment Authority - February 20, 1997 Mason: Well that makes a certain amount of sense. I think the last part about securing other finances, ! mean it would be nice to be completely off the hook with this one. What's the rest of your feeling on that? Murphy: Where are we in this possible lawsuit? Back in November it seemed like such a hot issue, or October-November, it seemed like such a hot issue. It seems to kind of cooled down for a while. Gerhardt: The lawsuit still exists... We recognize Mr. Brown's option to purchase this portion of the building. However we have a contract with Mr. Kirt and we have to exercise that contract with Mr. Kirt. How that...with Mr. Kirt is his decision if he's going to close with Mr. Brown or not. There aren't any, because we are in line with the Title. Steve Berquist: Is any of this predicated on the lawsuit? Is the reason for this, for Mr. Brown to assume the mortgage? Gerhardt: Somewhat predicated that Mr. Kirt will sit down with Mr. Brown... our terms. He's trying to get us to do 10 years and lower it down to 7% and other stuff. But our... 7 years, Gary Kirt, you go negotiate with Mr. Brown. Steve Berquist: So in other words this is being put together as a method by which the lawsuit can be settled? Gerhardt: Hopefully. But ! can't say for sure. It's really been hard to read Mr. Brown through this whole process. Steve Berquist: Mr. Brown and Mr. Kirt. Gerhardt: They've been negotiating and.., mortgage to lower the interest rate if we were going to take it down to 10 or 7 years. We received a letter that...negotiate. So Gary Kirt says enough of this. Let's you know, give us the assignment rights to assign this at 7 years and ! will, with that assignment... ! agree with Mark and Steve. ! will throw it out as an option .... assign may be personally liable also to $135,000.00. Steve Berquist: We still have no qualifications. Whoever comes in and buys it has to come up with a pittance up front to buy him out. Let's say about $50 grand buys him out. We're still completely responsible. We're still on the hook. Mason: It certainly changes the tenure of this. Gerhardt: Well Gary Kirt can be real concerned because he doesn't want to lose $135,000.00. Steve Berquist: ...it's difficult to collect on a personal guarantee. He knows. I'm not saying that he's thinking bad thoughts but he knows. 18 Housing and Redevelopment Authority - February 20, 1997 Gerhardt: Put some language in that, Mike. Mason: Well I think it also depends a little bit if we're now talking Gary Brown as the possible person here, that puts a little different light and some unknown quantity as well, ! would think. Steve Berquist: ... accentuate his negotiating position dramatically. Mason: Right, right. Yeah, and we can't do that. So ! suppose maybe, any idea how long, ! mean just off your hip or off the top of your head, if we approve this tonight. If we modify this tonight, how intense and how long do you think negotiations would be between Kirt and Brown? Gerhardt: ! think Gary Kirt, once he took ownership, would be done within a month you know if he can get some kind of answer.., within a month. He's not going to waste his time.., within a week ! would think. He's not going to sit there and spend his entire summer negotiating with Gary Brown .... find another buyer. ! don't think he's going to find another buyer until this lawsuit' s settled. Mason: So would it be feasible to put some kind of time limit language on this? The reason I say that, if in fact it is Brown that's done in a month or two. Well, fine. But if it doesn't do that, then it does raise some of these other issues about who it would be and how culpable or responsible, this, that and the other thing. And it could revert back to thus and so or you know, ! don't know. Murphy: ...rate for possibly 2 months or 3 months and if you don't assign it within that period of time then you have no. Mason: Or maybe if it's not assigned after 2 months it would come back to HRA for reconsideration or something like that. Because if it's Brown, ! don't have any trouble with it. Quite honestly, but if it's not, then we don't know and Steve is right. Bohn: ! agree with that. Gerhardt: So grant the 7 years time limit for 3 months? Bohn: Do you need a motion? Mason: Do we also, no. No, yeah if that doesn't work out then ! guess ! could see the need to put some other kinds of conditions on this. Gerhardt: Is it going to be 3 months from the date that we close? We're supposed to close on March 15th... Mason: Well what's your opinion? Assuming Brown is the one here, if that falls through is he going to come up with somebody else in 3 months, although like you said with the lawsuit hanging over him, that's probably pretty unlikely isn't it? 19 Housing and Redevelopment Authority - February 20, 1997 Gerhardt: ! don't think, yeah. All the liability's fallen on him on this whole lawsuit. ! don't think he's got anybody else on... They want to buy it. Mason: He might, and then turn around and sell it for 12, the weasle. ! don't know. Murphy: ! think it opens it up so that you get this thing settled. And if the time limit on it gets things rolling. If it doesn't happen, then it puts the pressure on Kirt to, and Brown, to come to an agreement and settle everything and this issue is hopefully over. Mason: And ! guess they would think that if in fact they were working on something, and we knew who the parties were and they needed more time. Gerhardt: And after 3 months you know, Gary Kirt can always come back to us... know whoever his third party is, you want it to be a credit worthy person. Mason: After 3 months ! think yeah. Gerhardt: If it's not Gary Brown. Mason: Yeah, exactly. Well no, exactly and that's why I'm saying well Brown, fine. So the motion would then be to modify the Gary Kirt Purchase Agreement as stated in staff report with the caveat that there's a 3 month option. Bohn: From closing. Mason: On the reassignment? Yes, okay. Murphy: Second. Bohn: Moved and seconded. Discussion. Mason moved, Murphy seconded that the HRA direct staff to modify the purchase agreement with Gary Kirt as stated in the staff report with a 3 month option from the date of closing on the reassignment. All voted in favor and the motion carried. APPROVAL OF BILLS. Bohn: Does anybody have any questions on the bills? Mike? Vote? Or a motion ! mean. Murphy moved, Mason seconded to approve the HRA Accounts Payable as presented. All voted in favor and the motion carried. 20 Housing and Redevelopment Authority - February 20, 1997 HRA PRESENTATIONS: Bohn: HRA presentations. Other than we can say Pauly's is gone. Gerhardt: Pauly's is gone and...we did use City crews. ! asked Mike Wegler... He did use some outside trucking firms to haul.., and the debris out. He did rent a backhoe compactor and it' s tough saving the sidewalks so... Bohn: The third sidewalk that's gone in there. Mason: Well they do say three's the charm. Gerhardt: The front one, they did save the portion that was redone. It's the older part that heaved but Mike's looking into that. So with that it should be full of sand and compacted at 100% by end of the week. Bohn: ! looked at it tonight, it's pretty well sanded in there. Gerhardt: It should be 2 or 3 feet above that we'll put black dirt down and seed it. Bohn: Roman Roos is coming to the Planning Commission with his proposal for that piece of property next Planning Commission ! understand. Gerhardt: For what now... Bohn: Roman's coming back to the HRA. He wants to get an extension on his option for that property. Gerhardt: ! did get a phone call from a lady that watched the building go down and she definitely thinks it should remain as a park so she wants to stay involved. Bohn: Is she going to pay the taxes? Mason: That would be one expensive park. Gerhardt: ! told her that and she just wanted to make sure that she had.., design of whatever might go in there... So ! got her name pinned up on my Board. Now if! remember to call her will be the big thing. Bohn: Is the dry cleaners going to be redeveloped? ! understand Joe Scott. Steve Berquist: That came to the Planning Commission last night. Bohn: Oh Scott was? Yeah he asked me about it. ! said do us a favor and redevelop that. ! have to look at that out of my window. The stuff that he's got behind that building and every 21 Housing and Redevelopment Authority - February 20, 1997 summer it gets worse and then he cleans it up and then it gets worse again and he cleans it up. ! talked to Don and Don just said, he's just got no place to put it. Gerhardt: Don's a different guy. Bohn: He's got, in Prairie...Mall, he's got the dry cleaners there. He's got one in Hopkins. So this is just. Gerhardt: He's buying and selling them so fast, ! don't know what he's doing anymore... Bohn: When ! moved to Chan that was a bakery on one side... And I've also heard rumors being part of the Legion, that they are looking at the Kenny's building. ! said ! don't know if... They're looking at Kenny's building. They're looking at the old ice arena that they had behind Bloomberg's. Where they skated. ! don't know what, the scene shop or what. And they're looking at that building. Steve Berquist: The Riv. Bohn: They're looking at the Riv too but they don't want to buy the business. They just want to buy the building... (Taping of the meeting ended at this point in the discussion.) Murphy moved, Mason seconded to adourn the meeting. All voted in favor and the motion carried. The meeting was adjourned. Submitted by Todd Gerhardt Assistant Executive Director Prepared by Nann Opheim 22