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HomeMy WebLinkAboutHousing & Redevelopment Authority Minutes 08-25-2011APPROVED MINUTES PLYMOUTH HOUSING AND REDEVELOPMENT AUTHORITY August 25, 2011 PRESENT: Chairman Jeff Kulaszewicz, Commissioners Paul Caryotakis, David Miller, Bob Stein, and Jim Willis ABSENT: None STAFF PRESENT: Housing Program Manager Jim Barnes and Office Support Representative Janice Bergstrom OTHERS PRESENT: Paul Tucci, Oppidan, Mark Ruff and Clare Naughton representing Ehlers, Luke and Ann Davey 1. CALL TO ORDER Chairman Kulaszewicz called the Plymouth Housing and Redevelopment Authority meeting to order at 7:00 p.m. 2. CONSENT AGENDA A. Approve HRA Meeting Minutes from July 21, 2011. B. Plymouth Towne Square. Accept July housing report. C. Vicksburg Crossing. Accept July housing report. MOTION by Commissioner Willis, seconded by Commissioner Stein, to approve the consent agenda. Vote. 5 Ayes. MOTION approved unanimously. 3. NEW BUSINESS A. First Time Homebuyer Program. Consider forgiveness of First Time Homebuyer loan. Housing Program Manager Barnes gave an overview of the staff report. Housing Manager Barnes introduced Luke and Amy Davey, 13730 54th Avenue N. Mr. Davey said since purchasing their home in 2002, Amy lost her job; they had a third child, and have been actively trying to sell their home since January, 2011. He said there have been few showings and the realtor advised them to lower the price to $155,000 as there are a lot of foreclosures and short sales occurring and they don't want to be another one. Mr. Davey said they refinanced to an interest only" loan in 2005 which helped them to pay their bills and not lose the house. Approved Plymouth Housing and Redevelopment Authority August 25, 2011 Page 2 Ms. Davey said they enjoy living in Plymouth, and are looking for something that will accommodate their growing family and they need help. Commissioner Willis asked what the mortgage balance is. Mr. Davey said the first mortgage balance is $150,000, and said they would have to go to the table with a lot of cash just to sell the house to pay back the city and for the closing costs. Chairman Kulaszewicz said you are asking the public to bail you out. He said if we bail you out the question becomes why we can't bail out other people in the community. Ms. Davey said each situation would have to be looked at case by case, but this is all we can do. Commissioner Caryotakis asked if they are intending to rent to get a bigger place. Mr. Davey said they would move in with Amy's mom in Golden Valley to save money for a down payment for a house. Chairman Kulaszewicz asked if they have any savings now. Mr. Davey said some, but with medical bills from the third child it has been hard. Chairman Kulaszewicz asked the definition of hardship in our guidelines in regard to overcrowding. Housing Program Manager Barnes said the FTHB program does not have provisions regarding overcrowding. He said the Section 8 program allows for two people per bedroom, which includes the living room as a sleeping room. Commissioner Willis asked if there would be three rooms available at Amy's mother's. Ms. Davey answered affirmatively. Chairman Kulaszewicz said even though it is within our guidelines to look at these situations on a case by case basis, he is concerned about setting a precedent for the taxpayers to pick up the deficiency and forgive the loan. He said he is uncomfortable forgiving the loan in its entirety with this situation. Chairman Kulaszewicz said if the owners had a bona fide offer of an amount in between what they owe and an offer that would be a different situation than what they are bringing before us now. Mr. Davey said that would be something they would consider if that is a route we could take. Commissioner Caryotakis said it is a strange situation where you buy a house in 2002 and nine years later you are upside down because of market conditions. He said he hopes with time the Approved Plymouth Housing and Redevelopment Authority August 25, 2011 Page 3 economy will allow the Davey's to recover some of that value. Commissioner Caryotakis said house ownership involves risk, and people who were unfortunate to buy in the last few years are seeing that. He asked if their family situation is such that they would still have an alternative of staying in the house and hope it appreciates. Commissioner Stein asked about a previous situation in which the HRA Board did not forgive a loan. Housing Manager Barnes said it was a similar situation with an expanding family, and they were unable to sell at the price to pay off the first mortgage and mortgage to the city. He said the Board discussed allowing them to rent the home out and would also consider forgiving a portion of the loan if the purchase price dictated that. Housing Manager Barnes said we have not heard back from them. Commissioner Miller asked if anyone has gone through the townhome for a showing. Ms. Davey said there was one showing this week, which was the first one in three months. She said the price is at $179,000 which is their break-even point. Commissioner Stein asked if they put any money down when purchasing the townhome. Mr. Davey said they covered some closing costs. Commissioner Caryotakis said he normally wouldn't counsel people to rent a place, but the Davey's have an ideal situation where they can live with family and could end up money ahead. Ms. Davey said they are willing to work something out, such as renting the property. She agreed it would be an ideal rental property. Housing Program Manager Barnes said we could restructure the loan with an amortized loan and monthly payments. Commissioner Willis said he would find that acceptable and said everyone around this table knows people who are upside down. He said it is not their fault the economy has impacted so many people and this is not an uncommon occurrence so their situation is not unique. Housing Manager Barnes asked when the mortgage would balloon in their current interest only loan. Mr. Davey said he would have to check on that as they are on a yearly basis for the interest rate, which is 3% right now. The HRA Board concurred that was a good rate. Commissioner Stein said he has a son who is probably upside down, and concurred the Davy's situation is not unique. Commissioner Stein asked if the townhome were rented or sold and they Approved Plymouth Housing and Redevelopment Authority August 25, 2011 Page 4 lived with parents, would it be possible to structure payback of the loan over a period of time even if they don't occupy the house. Housing Program Manager Barnes said once they stop owning the property it is difficult to securitize the loan which results in greater risk on our part as it would be a personal loan. Commissioner Stein stated we are second in line and if the property is foreclosed there is nothing to go after. He said he agrees the owner should try to sell and come back with a request for partial forgiveness, or rent it out and set up some mechanism to repay part of it. Commissioner Stein said he can't see forgiving the whole amount as we have a responsibility to the taxpayers. Chairman Kulaszewicz said he would reconsider if there was an offer to forgive a part of it, but he is not open to setting a precedent of forgiving the whole mortgage. Commissioner Stein stated the HRA Board has not yet forgiven a loan. Ms. Davey asked if there is a way to transfer this loan to another property in Plymouth. Housing Program Manager Barnes clarified this is a non-transferrable loan document; however, the Board has the right to waive that policy and structure the mechanism to allow it to happen. He said this was common years ago, but lenders saw that they lose money on transferable loans. Commissioner Willis said he would be willing to look at this if total indebtedness is not more than 85% of the value of the property. Commissioner Stein concurred and said they are willing to work with the Davey's. Commissioner Willis reiterated it is a matter of many people caught up in the unforeseen and this has torn our economy apart, but the taxpayers of Plymouth can't resolve it. Chairman Kulaszewicz said he is open to some possibilities, but not this one. B. Vicksburg Crossing. Market Report Housing Program Manager Barnes gave an overview of the staff report. He reported one unit became vacant, as someone moved to another care facility. Housing Program Manager Barnes said two people have put down deposits. 4. OLD BUSINESS A. Oppidan Development. Consider Request to revise Tax Increment Financing District 1- 3 budget to facilitate a new development project. (Tabled from the July 21, 2011 meeting) Housing Manager Barnes gave an overview of the staff report. Approved Plymouth Housing and Redevelopment Authority August 25, 2011 Page 5 Mr. Tucci discussed the increased amount of $350,000 and said $150,000 would be for a high pressure gas line at the east end of the new road. He said Xcel Energy is concerned about the potential of the design cover putting too much pressure on the gas line. Mr. Tucci said re- grading the road would be approximately $60,000 but if they have to move that gas line, the cost would be $150,000. Mr. Tucci said they are working with the Minnesota Pollution Control Agency and if the contaminated soil is taken to an offsite facility the cost would be $200,000, but they are hopeful all material can be handled onsite. Mr. Tucci stated the $150,000 and $200,000 represented worst case scenarios. Mr. Ruff questioned if the $200,000 is an increase over what was listed as MPCA review and cleanup costs. Mr. Tucci answered affirmatively and reiterated they are hopeful to dispose of it on site. Commissioner Stein asked where the contaminated soil is located. Mr. Tucci said the contamination has leeched primarily from both of the previous gas stations. He said the scope is now bigger than what was in the previous application. Commissioner Stein said he thought the TIF money is primarily for relocating the road. Housing Manager Barnes clarified that the request was for costs associated with the roadway, demo of the building, and some land acquisition. Mr. Ruff said the road costs are $1.35 million which would not include the demo nor land acquisition. He said the $150,000 gas line is related to the road. Commissioner Stein asked Mr. Ruff about their analysis for what is justifiable for TIF money. Mr. Ruff said some cities pay only demo costs or pay only for road costs, and both are legitimate policy decisions. He said they work with staff and the assessor to determine current land value and what is a reasonable assumption it could be sold for. Mr. Ruff said they look at all redevelopment costs that are necessary to make it work. Commissioner Willis asked what does that yield based on valuation in terms of potential revenue for tax increment. Mr. Ruff said the developer assumed a value of $1.85 million and the assessor had a more conservative value of $1.6 million. Mr. Ruff said there is now a proposal for Oppidan to build a 48,000 square foot building, rather than the 35,000 square foot building on Outlot C. Mr. Ruff said they have not looked at a value for the larger building. Commissioner Willis asked if there is a purchase agreement. Approved Plymouth Housing and Redevelopment Authority August 25, 2011 Page 6 Mr. Tucci said no. He addressed the conservative versus high value and said both the Waters and McDonald's groups will sign a minimum assessment agreement. Mr. Tucci said they generated realistic numbers for land pricing and brick and mortar, etc. to use as a basis of what they deliver. Mr. Tucci said a rough valuation of $200 per square foot for the 35,000 square foot building was applied, which results in a value of $7 million. Housing Manager Barnes stated the city will be doing a minimum assessment agreement as part of the development agreement. Housing Manager Barnes said we need to be further along in refining the TIF runs based on the true values. He said this will occur once construction documents are received and the assessor can review the numbers and evaluate the market to come up with an agreed upon value. Housing Program Manager Barnes said if the assessor can't agree with the values Oppidan provided, the increment will be lower and the developer will get less money. Housing Program Manager Barnes said if the third site is a high valued piece of land, it might generate more. Housing Manager Barnes discussed what is included in the TIF and said we are on middle ground for what the TIF statute allows. He said it comes down to what the HRA Board feels would level the playing field for this site to make it on an equal basis with other sites in the city. Chairman Kulaszewicz referenced the TIF amount allocated toward the land purchase price and asked if the 7.5 % has anything to do with the amount of square footage that ends up in the road or right-of-way. Mr. Tucci explained the usable land price per square foot and a reasonable number for the roadway resulted in 7.5% of the total cost they are paying. He said this did not include Outlot C which is being held for future development of Co. Rd. 73. Commissioner Willis asked about the driveway access at 11708 Highway 55. Mr. Tucci said they will provide an easement for Toni Muckala and it will be 100% better than what she has today. Commissioner Stein asked Mr. Ruff if he is recommending $1.899 million. Mr. Ruff clarified that is the TIF amount and is the maximum potential assuming the higher values the developer put forth. He said the assessor's value is $1.6 million using the 35,000 square foot building. Commissioner Willis said a conservative approach would be to approve $1.6 million, and that is what he proposes. Commissioner Miller asked the difference in value between the 35,000 and 48,000 square foot building. Approved Plymouth Housing and Redevelopment Authority August 25, 2011 Page 7 Mr. Tucci said the two-story medical office would generate a higher value and displayed a site plan showing the first floor with a 24,000 square foot footprint. He speculated this building should reach the $200 per foot evaluation easily. Housing Program Manager Barnes said $1.9 million falls within this TIF budget, explained how variables in the costs for the developer would affect the TIF. He said $1.687 million was approved for the Dove project and was based on the maximum amount their projected development could generate. Commissioner Stein said this TIF request is for $2,035,000, and the assessor stated we are limited to $1.6 million, which is on the conservative side. Mr. Ruff said with the additional costs, $1.8 million would be the maximum amount. Chairman Kulaszewicz said being in the construction business a long time his inclination is if you short someone's capital on development they are going to have to cut that cost some way. He said he does not know that it's in the best public interest to take someone down to the minimum of what we might think without having all the numbers in front of us. Commissioner Stein said the opposite could be true. They may have to put some of their capital in it. Commissioner Willis said for people who believe in a free market there has to be good risk, and said Oppidan does not have a lot of capital coming into this project. Commissioner Willis said he is comfortable with approving the $1.6 million. Commissioner Miller said he would support $1.8 million. Mr. Tucci said in order to close and move forward they need to know what their number is going to be. He said the value from what is built compared to today's expectations could drive that extra $200,000. He said if they can get the assessor comfortable with the minimum assessment agreement they could get credit for that difference. Mr. Tucci said Ehlers has generated $1.899 million based on McDonald's $2 million, retail at $7 million, and $12.6 million for Shelter Corporation. Mr. Tucci asked if the TIF is set at $1.8 million, the assessor would have to be comfortable the values equal $1.8 million or they would not get that amount. Commissioner Willis said it does not mean the assessor is right, over time. Housing Program Manager Barnes said if the value goes up we would close the district early. Housing Program Manager Barnes recommended finding the number as a maximum which is not to be exceeded. He said the amount could be for less and that is what would be in the note and development agreement. Approved Plymouth Housing and Redevelopment Authority August 25, 2011 Page 8 Commissioner Willis said he supports the $1.6 million. Commissioner Stein asked who determines the final building valuation. Housing Program Manager Barnes said the City Assessor does. Mr. Ruff added that the assessor needs to make the statement that this is a fair market value and could defend it in court. He said there was a case in Dakota County where a business challenged their minimum assessment and the assessor signed the paper even though he did not believe it was the value. The business was successful in their challenge and the judge threw out the minimum fair market value. Mr. Tucci concurred with Mr. Ruff that they will have to justify the values and negotiate with the assessor. MOTION by Commissioner Stein, seconded by Commissioner Miller, to approve the request for tax increment financing for HRA District 1-3 in the amount of $1,899,645. Commissioner Stein said this would be the maximum amount and the assessor will assess the property value. Housing Program Manager Barnes added setting the maximum does not mean you are obligated to pay it; we will pay what the assessor says. Chairman Kulaszewicz said he would support the motion. Vote. 4 Ayes. Commissioner Willis voting nay on a 4-1 vote. Motion approved. MOTION by Commissioner Miller, seconded by Chairman Kulaszewicz, to approve Resolution 2011-05 adopting an administrative modification to the tax increment financing plan for tax increment district 1-3. Commissioner Willis asked what this resolution means. Mr. Ruff said this takes the TIF plan from a previous development and re -crafting it for this development to fit with current state auditor rules. Vote. 5 Ayes. MOTION approved unanimously. 4. ADJOURNMENT MOTION by Commissioner Chairman Miller, seconded by Commissioner Caryotakis to adjourn the meeting at 8:17 p.m. MOTION approved unanimously.