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05-08-12 Special HRA Workshop Agenda Packet AGENDA Special Workshop Meeting of the Housing and Redevelopment Authority Golden Valley City Hall 7800 Golden Valley Road Council Conference Room May 8, 2012 6 pm Paaes 1. Roll Call 2. Description of Past Projects 2-6 3. Redevelopment Tools 7-8 4. Future Direction af the Housing and Redevelopment Authority 9 5. Adjournment This document is available in alternate formats upan a 72-hour request. Please call 763-593-8006 (TTY: 763-593-3968}to make a request. Examples of alternate formats '. may inelude large print, electranic, Braille, audiocassette, etc. �1�� fl� g,, Hausing and Redevelopment Authority 763-593-8002/763-593-8109(fax) Executive Summary Golden Valley Housing and Redevelopment Authority Special Workshop Meeting May 8, 2012 Agenda Item 1. Description of Past Projects Prepared By Jeanne Andre, Assistant Director, Housing and Redevelopment Authority Summary The Housing and Redevelopment Authority (HRA) and City Council have participated in many redevelopment projects since the HRA was created in 1978, shortly after Tax Increment Financing (TIF) was authorized by the State. Staff has selected a few projects as examples of public participation in development and redevelopment that demonstrate some of the tools and processes available to promote municipal renewal. A more extensive list of projects completed over the years is included at the end of the summary. General Mills—Tax Abatement In 2001, General Mills approached the City for tax abatement support for office expansion on the main campus. After continued discussion,the nature of the support changed from direct subsidy of General Mills environmental and construction costs to support for intersection improvements at TH 55 and General Mills Boulevard/Boone Avenue. The intersection improvements were found to be necessary to support increased traffic caused by the additional employees in the new offices. In additian, significant analysis of storrn water drainage, wetland and flood plain mitigation related to General Mills property and land adjacent to the intersection led to other beneficial outcomes for General Mills and the City, including: 1) identification of a future building pad for General Mills on land that was previously unbuildable due to the fact that it was in the flood plain; 2)the dedication of the General Mills Nature Center to the City with an easement to the Land Trust for public use; and 3) construction of a pond, berm and lift station near the intersectian of TH 55 and Boone Avenue allowed the intersection to be raised and greatly reduces the frequency af flaoding north of the intersection. General Mills added 480,000 sq. ft. to the campus under the tax abatement agreement. The taxable market value of the General Mills main campus is $68 million, of which $36 million is attributed to the portion constructed under the tax abatement agreement. The tax abatement ends in 2019. Other financing tools used for the intersection project included Storm Sewer Revenue Bonds, a surcharge on Xcel accounts to fund the conduit for undergrounding the utilities and a cooperative agreement with the Minnesota Department of Transportation. Golden Hills—Colonnade—Tax Increment �Property at the southeast corner of Xenia&Golden Hills Drive) In 1984,the City established the Golden Hills Redevelopment Area in anticipation of changes that would occur with the construction of a new interchange at Xenia Avenue as Highway 12 turned into I-394. In 1985, the HRA reached an agreement with the Minnesota Department of Transportation that each would take on the acquisition of selected parcels and apportion costs between the two entities as these parcels were divided into roadway and redevelopment sites. The HRA sought proposals for the construction of a high-rise office building and hotel. The proposal initially selected was submitted by Turner Development Corporation. Negatiations on a development agreement broke down and the HRA then proceeded to negotiate with Trammel Crow to construct the office building and with Embassy Suites (Cornell Moore) to construct a suites hotel. The agreements provided that the HRA would secure the land and the developers would purchase the land at a written-down price and would build respectively a 409,000 sq. ft. gross, (360,000 leasable), 15-story office building and a 250-room suite hotel, with a shared parking deck and entry drive. The HRA requested the City to issue General Obligation (GO) tax increment bonds to provide funds to secure the land. The bonds were refinanced and now extend until 2014 because of changes in state statutes regarding commercial valuations. For the office building, the developer provided demolition and environmental remediation in addition to constructing the building, The developer signed an assessment agreement that assured a minimum assessor's value for the life of the bonds. The hotel developer defaulted and lost a $100,000 deposit that secured his performance. The HRA retained ownership of the property, but eventually sold it to Trammel Crow without a specific development proposal, so that it would go back on the tax rolls. The land later went back to the bank that financed the purchase. TIA Cref subsequently purchased the land from the bank and expressed interest in developing a second office building (the PUD still provides for a suite hotel use). This development did not accur and the site remains vacant. The frozen taxable market value of the Golden Hills Tax Increment District is $14,350,000. The current taxable market value is $177,512,000. The current taxable market value of the Colonnade is $41,076,000 and the vacant land adjacent to the parking deck has a taxable market value of $6,150,000. Valley Square Area A—Tax Increment (Property north of Highway 55 between Wisconsin &Bassett Creek) The HRA negotiated two development agreements with Northland (United Properties) for the construction of an office building and market rate apartments. The HRA was to purchase the Reiss Greenhouse for this project. The property was to be subdivided with an extension of Golden Valley Road constructed. The purchase of the greenhouse was negotiated when Northland defaulted on the purchase of land for the office building. The HRA decided to proceed with the acquisition and the sale of land for the apartment building and construct the road. Lawsuits ensued regarding the default, with the end result that Northland paid $1 million to settle the litigation. The greenhouse property cost approximately $5 million. The HRA was able to proceed with the acquisition beeause previous TIF laws allowed the creation of a 97 acre district, which started collections in 1980 and captured increased market values on both new and existing development. The residual parcel remained vacant for many years during an economic downturn. The HRA received a number of proposals for the development of non-office uses, but retained its vision that offices would be the highest and best use. Eventually, in 1997, a new development agreement was negotiated with Valley Creek Development, LLC (Frank Dunbar) for the construction of three, three-story office buildings. The land was sold for $1,514,396 and the HRA also paid for remediation of pollution remaining on the greenhouse land. The current taxable market value of the apartments is $8,66Q,000. The current market value of the office buildings is $12,829,000. Valley Square Area C—Tax Increment (Property north of Highway 55&south of Golden Valley Road between Rhode Island &Winnetka) Over time the HRA had acquired scattered parcels in this area with funds from the existing Valley Square Tax Increment District. Two larger properties, the Valley Plaza Shopping Center and the KFC parcel had not been acquired. In 1990, the HRA signed an agreement with Ron Clark Construction to develop the biock with multifamily housing on the northeast portion, oriented toward Rhode Island and Golden Valley Road, and a retail shopping center on the remainder of the block, oriented ta TH 55 and Winnetka. The HRA started to acquire the remaining parcels on the block, but the Ron Clark project did not go forward due to market conditions. In 1993, new considerations influenced redevelopment options. Jerry's New Market indicated that it would be clasing its store at 8000 Golden Valley Road but would be interested in building a large Cub store on Area C. The HRA previously expressed a goal to retain a grocery store in the downtown area, so staff proposed the designation of lerry's Enterprises for the development of the Cub store in Area C. A neighborhood contingent came out in opposition to this proposal for a "big box" store and the HRA changed course and set up the Area C Task Force to study the area with the goal of seeking a developer for the site through a Request for Proposals. The Task Farce concept was for denser develapment that had a mix of residential, office and retail uses with good pedestrian connections to other parts of Valley Square. Two proposals were received, one of which had denser uses but no schedule for construction and the second which was a lower density retail concept with amenities oriented to the public (outdoor gathering space and fountain). The later was selected for negotiation of a development agreement. It was a high priority of the City to relocate the Golden Valley Post Office from its former site north of City Hall, In the same time frame as the negotiations with Opus, the City was able to convince the Post Office to relocate to the northeast corner of the block. In 1995, separate development agreements were negotiated with Opus, for the construction of Golden Valley Commons, and the Post Office. These agreements provided that the cost of the land would be written down for both entities. The Post Office does not pay property taxes, but is considered an anchor for the downtown area. The current taxable market value for Golden Valley Common and its two out lots is $9,140,000. Golden Hills—Xenia Ridge Office Building—Tax Increment and 429 Assessment (Proposed for the northwest quadrant of Xenia Avenue and Golden Hills Drive—not executed) This property, while in the Golden Hills Tax Increment District, had been purchased by private parties for development. The owner had proposed developing the building in two components, office and multifamily housing. This development did not move forward and the owner optioned the property to Opus. Opus applied for tax increment assistance and proposed to develop an office building with a small retail companent and a parking deck. Staff worked for over a year on a development agreement. Opus paid for a detailed analysis of the blight on the site (two vacant buildings). The development agreement was not brought before the HRA because in a down market Opus decided not to proceed. This example is provided as a sample project in a new development environment in which TIF laws have been changed and new strategies were proposed. The proposed development agreement provided public assistance with demolition of the blighted buildings, environmental clean-up, soil corrections and a public parking deck. A major consideration for the HRA was that traffic analysis indicated the need to improve the intersection of Xenia Avenue and Golden Hills Drive to handle new and existing traffic (as provided in the City's traffic management overlay district). The existing Golden Hills TIF District is set to expire in 2014. To use TIF, it was proposed that the property be removed from the existing district with payments made from the new district to the old district to guarantee its solvency. The develaper would pay for all improvements but be reimbursed on a pay-as-you-go basis from TIF proceeds for eligible TIF costs such as demolition, environmental clean-up, soil corrections and the public parking deck. A portion of the TIF would fund 50 percent of the intersection improvements. However there was not enough TIF ta cover the total cost of the intersection improvements from the increment created by the new building, so a portion af the street improvements was ta be financed through a 429 assessment district. The developer would agree up front and waive the right to appeal the assessments for 25 percent of the assessment project costs (1/8 of the project cost). With 5/8 of the street project funded up front (half by TIF and 1/8 by the developer's assessment),the rest of the street project was to be assessed to other benefiting property owners. The development agreement did not come to the HRA and the property went back ta the bank holding the mortgage. The bank sold the property and it is still available for development. TIF laws provide that when a blighted building is removed, the determination of blight on the property is retained for five years. Other Projects by Redevelopment Area North Wirth: North Wirth Offices (Martenson), Dahlberg Electronics, Breck Ice Arena, Grow Biz (Dahlberg), GVEC Business Center Valley Square: Valley Square Corporate Center, Calvary Co-op and senior apartments, Area B (Rottland-Wesley Commons, CommonBond-Valley Square Commons, and KMJ-Town Square), Northup King (United) Golden Hills: Holiday Inn Express (Torgerson), Allianz (Duke), West Area (MECP), Golden Hills Business Center (United) Other: Sheriff's site (Habitat/Bulls Eye), Ewald Dairy (Habitat), Medley Park housing ���� �� ;; Housing and Redevelopment Authority 763-593-8002/763-593-81Q9(fax) Executive Summary Golden Valley Housing and Redevelopment Authority Special Workshop Meeting May 8, 2012 Agenda Item 2. Redeve�opment Tools Prepared By Jeanne Andre, Assistant Director, Housing and Redevelopment Authority Summary This memo will provide a brief overview of redevelopment tools available to the City and Housing and Redevelopment Authority (HRA). Most of these tools have been used by the City and HRA over time, but some of the statutory provisions authorizing these tools have changed over time, so that future use may be more limited in scope. Tax Abatement* This financing tool authorizes the issuance of bonds to be paid back with the funds collected by tax abatements. The term "abatement" is misleading as the tax is not forgiven or abated. The tax is paid normally, but the amount of property tax levied by the City is used to pay for the bonds. For example, a city may "abate" all or a portion of city property tax on one or more parcels of real or personal property, including machinery, for economic development purposes. And cities may issue general obligation or revenue bonds to construct public improvements. As the property owners pay the abated taxes, rather than the local property taxes, the payments go directly to paying off the bonds. Abatement bonds are not subject to referendum approval and are excluded from debt limits. In any year, the total amaunt of property taxes abated by a city may not exceed 10 percent of the net tax capacity of the political subdivision of the taxes payable year to which the abatement applies, or$200,000, whichever is greater. 429 Special Assessments Special assessments collect funds from private property owners to pay for local infrastructure improvements that benefit those properties. Benefit is assumed to be the increase in market value to the property brought by the improvement. A public process is conducted to determine the scope of the improvements and cost to benefiting property awners. A four-fifths vote of the Council is required to adopt special assessments because af the levy impact. Bonds are generally sold to cover the cost of the improvements and repaid with payments by the benefiting property owners over time. Revenue eonds Public improvements for utilities, even if related to a redevelopment project, can be financed with bonds sold and repaid with utility payments over time. These projects are generally approved through the City's Capital Improvement Pragram. Tax Increment Financing** Tax Increment Financing (TIF) is a financing tool that funds both public and private improvement� that revitalize the City. Tax Increment is generated by the increased property value created when a property is developed or redeveloped. The property taxes (including city, county and school district tax levies) attributed to the area of increased value, over and above the existing (frozen) value, are used to fund qualified development and infrastructure costs over the life of the 71F District. Qualified costs for various types of TIF projects include: • public impravements; • land acquisition, write-down and relocation of displaced occupants; • soil correction and environmental remediation; • site preparation including demolition and grading; • financing fees and capitalized interest; and • administrative costs. There are several types of TIF Districts, each with different objectives and statutory requirements, as outlined on the chart below: Types of Tax Increment Districts Type of District Criteria Term Redevelopment Heavy blight and concentrated development- 70% 25 years Renewal and Renovation Lighter blight and concentration 15 years Housing low- and moderate-income housing 25 years Soils Condition Contaminated soils 20 years Economic Development Manufacturing 8 years When a TIF District is created, bonds can be sold and repaid with the stream of increment over time. General Obligation (GO) Bonds can be sold if the benefit is primarily for public improvements. Revenue bonds are used if the benefit is primarily to a private property owner. Another approach is Pay-As-You-Go, in which the developer pays the subsidized costs up front and is repaid with the annual increments. In this case the developer is only repaid to the extent that increments are received. If GO bonds are sold the issuing entity must cover any bond payments not covered by increments. *Excerpted from the League of Minnesota Cities Handbook **Based on a Springsted presentation ���� �� ti ��� Housing and Redevelopment Autharity 763-593-8002/763-593-8109(fax) Executive Summary Golden Valley Housing and Redevelopment Authority Special Workshop Meeting May 8, 2012 Agenda Item 3. Future Direction of the Housing and Redevelopment Authority Prepared By Jeanne Andre, Assistant Director, Housing and Redevelopment Authority Summary After reviewing past projects and tools available to local government to assist with redevelopment, the Housing and Redevelopment Authority (HRA) should discuss the degree of interest it has in actively supporting and redirecting redevelopment activities. One approach is to establish a vision for the community and assure that current zoning supports that vision. A more active appraach would involve more detailed visioning and identification of targeted areas that the City and HRA could promote. Such promotion could include establishing redevelopment areas and actively seeking developers who are experienced in the type of development that is sought. Tax Increment and condemnation loans have been changed in ways that make redevelopment more difficult. Staff has brainstormed an possible new approaches including: • working with property owners to exchange land that could be redeveloped for equivalent land in another location, benefiting from tax laws that support such changes • approaching current land owners to be equity partners in proposed redevelopment • encouraging Hennepin County to adopt an early acquisition program to fund acquisitions on county roads scheduled for future upgrades • seeking grants that support redevelopment • collaboration with transportation partners on joint acquisitions for roadway and redevelopment • seeking housing tax credits • supporting conduit bonds Whatever the HRA does is completely separate from the planning approval process which is established by the City Code and State Statutes. For planning consideration the Council serves in a quasi-judicial capacity and previous action taken by the HRA does not bind the Council.