5.0. HRSR 05-03-2004 Item if 5
-Ii
. City of
Elk
River
MEMORANDUM
TO: Housing & Redevelopment Authority
FROM: Catherine Mehelich, Director of Economic Development
DATE: May 3, 2004
SUBJECT: Downtown Revitalization Project Update
Attachments
• Memorandum dated April 28,2004 regarding Proposed MetroPlains Project.
• Downtown Revitalization Project Description.
• Correspondence dated April 8, 2004 from MN DEED to City of Elk River.
• Article "MetroPlains hits roadblock in rebirth of downtown Elk River",The Business
Journal,April 16, 2004.
410 • Rivers Edge Downtown Business Association DRAFT Meeting Minutes,April 14,2004.
Background
At its April meeting the HRA chose note to extend the Preliminary Redevelopment Agreement
with MetroPlains Development. The HRA directed staff and consultants to work closely with
MetroPlains over the next 30-days to reach agreement on certain key points to be included in the
Development Agreement.
Issue
The attached memorandum dated April 28,2004 describes the agreement reached consistent with
the HRA's direction with MetroPlains. Staff from Ehlers &Associates and Briggs &Morgan will
present the agreement details and discuss next steps at the HRA meeting.
Financing Applications
The attached April 8,2004 letter from the MN Department of Employment and Economic
Development (DEED) indicates that the City's application for a Small Cities Development
Program (SCDP) grant has been approved for funding in the amount of$400,000 toward the
proposed new housing construction. The city's application included the following requests:
• Commercial Rehabilitation (13 buildings) $ 85,000
• Renter Occupied Rehabilitation (5 units) $ 425,100
• New Housing Construction (Jackson Block) $ 618,000
Total Application Request $1,128,100
•
In addition MetroPlains was awarded a portion of their second round tax credit request from
MN Housing Finance Agency for the Jackson Block housing.
APR. 30. 2004 9: 39AM METRO, PLAINS NO. 167 P. 2
MEMORANDUM
TO: MetroPlains
FROM: City Staff
Ehlers&Associates, Inc.
Briggs and Morgan, P.A.
DATE: April 28, 2004
RE: Proposed MetroPlains Project
Two memorandums dated April 7, 2004 and April 22,2004,to MetroPlains were
prepared by the City and it's representatives. These memorandums were based on financial data
provided to Ehlers &Associates by MetroPlains. Two memorandums dated April 16, 2004 and
April 28,2004 were prepared by Larry Olson of MetroPlains.
This updated memorandum incorporates the comments and requests of MetroPlains that
are acceptable to City Staff, Ehlers &Associates and Briggs and Morgan and is based on
financial data submitted by MetroPlains.
• Prior to the preparation of a Development Agreement in connection with the proposed
Bluff Block project and Jackson Block project we thought it would be helpful to set forth in a
memorandum certain key points to be included in the Development Agreements
These points are as follows:
1. Linkage between the Jackson project and the Bluff project.
Concerning the linkage of the Jackson and Bluff projects and all of the provisions relating
to linkage, it is becoming increasingly apparent that the City's requirements will not pernut
construction of the Jackson Block to start before the Bluff Block. Therefore, MetroPlains is
willing to commit that Bluff Block construction will commence prior to or simultaneously with
construction of the Jackson Block.
2. Amount of tax increment financing assistance.
The Development Agreement will identify the amount of tax increment financing
assistance for both the Bluff and Jackson projects. Relative to the discussion about the tax
increment notes and the formation of the tax increment district(s), MetroPlains and the City
agree to consider structuring the districts within the limitations of the tax increment financing
law,to achieve maximum flexibility(i)in the permissible use of the tax increments between the
two projects; and(ii)the pledge of tax increment to the payment of the notes.
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APR. 30. 2004 9:40AM METRO. PLAINS NO. 167 P. 3
The note(s)for the Jackson project will be issued when the construction financing for the
110 Bluff project closes and after the building permit for Bluff project is issued.
The Development Agreement will contain a"look back"method for both the Bluff and
Jackson projects. With regard to the look back provision for the for-sale residential portion of
the Bluff Project, MetroPlains understands that it will be allowed a specific amount of profit tied
to a percentage of the total cost of acquiring and constructing the for-sale portion of the Bluff
Project. If after the sale of all of the units MetroPlains' profit exceeds the allowed profit, the
HRA's assistance for that portion of the project will be reduced. On the rental housing and
commercial portion of the Jackson and Bluff projects MetroPlains will be allowed development
fees and a return on equity based on a preliminary sources and uses statement. To the extent that
final costs are less than those shown in the preliminary sources and uses statement increasing
MetroPlains' return,the assistance for that portion of the project will be reduced.
The amount of profit, return and fees that the amount of tax increment financing will be
based on and the "look back"method will be based on is as follows:
Bluff Block
For-sale housing-10% of costs
Commercial-5% development fee, market rate leasing commissions and a 12%cash on
cash rate of return
Jackson Block
Rental Housing-12% developer fee based on costs approved by MHFA
Commercial-5% development fee, market rate leasing commissions and a 12% cash on
cash rate of return
The Development Agreement will provide that any reduction of the assistance for one of
the phases of the project will be offset by verifiable increased costs on other phases,
3. SAC/WAC/Park Dedication/Building Permit Fees.
The City is willing to reduce or waive in their entirety the SAC and WAC fees, if
necessary,to make the projects feasible. MetroPlains acknowledges that the City's utility
commission must approve these reductions or waivers. The City will not reduce park dedication
fees, building permit fees or other applicable City application and development fees that are
payable in connection with the projects. MetroPlains is not in a position to bear the tax
increment inflation risk. MetroPlains agrees that the City can recapture these amounts from tax
increments derived from inflation. The City will recommend to the Park and Recreation Board
that the park dedication fees are used for park, boardwalk, gazebo relocation and other
improvements related to the downtown redevelopment.
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APR. 30. 2004 9 :40AM METRO, PLAINS NO. 167 P. 4
• 4. Cost of the Bluff Block.
The Development Agreement will identify the purchase price that MetroPlains must pay
to acquire the Jackson Block.
In addition to being willing to reduce the SAC and WAC fees, if necessary,to make the
projects feasible the City is willing to reduce the cost of the Jackson Block in its entirety if
necessary. However,the City is willing to reduce the SAC and WAC fees and the cost of the
Jackson Block only if construction of the Bluff Block occurs. MetroPlains agrees that the City
can recapture the value of the Jackson Block from tax increments derived from inflation.
5. Issuance of City Tax Increment Bonds.
The Development Agreement will state that in order to enable MetroPlains to achieve the
profit, fees and rate of return contemplated by this memorandum,the City will consider issuing
revenue or general obligation tax increment bonds to refinance the Bluff Block tax increment
revenue notes.
The City will consider issuing General Obligation Tax Increment Bonds subject to the
following conditions;
• it is determined that the construction of the Bluff project will not occur without
• the issuance of the bonds;
• the principal amount of the bonds will not exceed the amount of tax increment
generated by the Bluff project;
• bonds will not be issued for the Jackson project.
• bonds will not be issued until the construction financing closes on the Bluff
project;
• personal guarantees of shortfall in tax increments will be required from principals
of MetroPlains or MetroPlains' parent company, MetroPlains Properties, Inc. if determined by
Ehlers and Associates to have sufficient net worth and asset liquidity;
• no profit can be taken out of the Bluff project by MetroPlains until the actual
market value of the completed Bluff project is determined and the actual amount tax increments
generated by the Bluff project is established;
• if tax increments are less than expected,developer profit will be used to pay the
debt service on the bonds;
• minimum sale prices established for the Bluff housing units cannot be changed
without HRA consent.
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APR. 30. 2004 9:40AM METRO. PLAINS NO. 167 P. 5
6. Purchase of Bluff Block properties.
The City will not finance the acquisition of the Bluff Block properties. If the actual cost
of acquiring and carrying the Bluff Block properties is greater than the costs contained in the
financial analysis prepared by Ehlers &Associates, it is agreed that the financial analysis will be
recalculated and the City is willing to consider the reduction of SAC and WAC fees and the cost
of the Jackson Block in order to make the Bluff project feasible.
7. Type of Bluff Block Project.
MetroPlains is willing to proceed with the Jackson and Bluff Blocks linked. If efforts to
finance and market the Bluff Block show that financing and marketing thresholds cannot be
achieved and if MetroPlains has by that time expended substantial amounts of money and time
on design,marketing and approvals,the Development Agreement will state that the HRA and
MetroPlains will explore the feasibility of other types of projects on the Bluff Block, including a
combination of commercial and rental (if market rate)and/or for-sale housing.
Accepted by MetroPlains this act Y14day of , 2004.
METROPLAINS DEVELOPMENT, LLC
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City f I PvaR'(7frili-OJa'(/'-fr'/E Cz<-T withErC Rii T I 0 N
k ......,........,
• r.►" JULY 2003
� e '%� Enhancing Dumntcrcm Elkk River's Role
; � As a Vital Retail,Corrrrnercial and Residential Area.
Primary Goal of Downtown
Revitalization Project:
To assure the long-term viability of downtown by mak
ing a connection to the rest of the community and by
utilizing the riverfront location. Redevelopment will
enhance downtown Elk River's role as a residential,
retail and commercial area and also revitalize invest E
ment in the downtown business district. 3
Development Objectives:
• Mixed use(residential/retail/service)
� �
• Consideration of the historic context study results , „ t , g : r
• Strengthen connection to the community " �
• Traditional downtown design elements r `
• Brick, stucco,stone materials with visual breaks in 1`5);;4'��
the building design ��` �� ��� • �• ,� � " � � 1 ��� ` �� -�
Ilo • Increased residential density, ` ` �' `
• Pedestrian orientation `q � '. --,� a'`
• Increase exposure to the riverfront ��
• Recognize those buildings that have potential ;° t
for rehabilitation _
•BLUFF BLOCK DEVELOPMENT
• Replace market/economic obsolete buildings
• Multiple types of housing products
(i.e.townhomes, senior rental coops,
market rate apartments)
♦ BLUFF BLOCK DEVELOPMENT '
— 10,000 s.f. commercial on first floor along ap � ,
Main Street($13/s.f. avg. rent) ,-
— 52 units of for sale housing �� p T , „
— 3 and 4 stories �-�
— 70-80 below grading parking stalls for housing
&commercial residents ` l °
— Connection to City's Riverwalk development : f p kt tt � 1..�� -�
• JACKSON BLOCK DEVELOPMENT q) g i , . ���
— 10,000 s.f. commercial on first floor along
+• ��, �, , ,=�airi.14"I'' 1 f* '
Jackson Street and at the corner of Jackson • " °" �
and Main
— 32 units rental housing (16 1-bedroom units at v�:.
$600 per month &16 2-bedroom units
at$700 per month)
ill — 3 stories "
— Up to 52 below grade parking units for housing
residents and commercial and 18 surface units •JACKSON BLOCK DEVELOPMENT
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I S' •, „ y and Economic Development.
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April 8, 2004
APR 7 2 4
The Honorable Stephanie Klinzing
Mayor, City of Elk River
13065 Orono Parkway
Elk River, MN 55330-5600
RE: The City of Elk River, Elk River Comprehensive Project
Dear Mayor Klinzing:
I am pleased to inform you that your application for a Minnesota Small Cities
Development Program grant has been approved for funding in the amount of$400,000.
As always, funding was very competitive this year. The Minnesota Department of
Employment and Economic Development (DEED) received a total of 85 applications and
yours was one of 31 selected for an award. Everyone involved in the preparation of your
• application can be proud of a job well done.
DEED's Business and Community Development staff will soon provide you with
information on the implementation of your grant award and will assist you in achieving
your community development goals. For additional information, contact Louis Jambois
at 651/297-3172.
Finally, let me extend my congratulations to you and your staff for developing an
approach, which will effectively address your community development needs.
Sincerely,
, do,
Matt Kramer
Commissioner
. ,
Department of Employment and Economic Development
500 Metro Square •121 7th Place East• Saint Paul,MN 55101-2146 • USA
651-297-1291 • 800-657-3858 • Fax 651-296-1290 •TTYITDD:651-282-6142 • 800-366-2906 • www.deed.state.mn.us
An equal opportunity employer and service provider.
Single Purpose SCDP Score/ranking FY04 4/12/2004 16:31 Comprehensive SCDP Score/ranking FY04
Reg Appl Name Type $Requested Recommended Points Rank Reg Appl Name Type $Requested Recommended Points Rank
10 Albert Lea HO 600,000 600,000 134.0 1 8 Marshall CO 1,399,830 1,196,800 139.9 1
Roseau County HO 262,250 262,250 114.7 2 5 Emily CO 1,245,200 1,200,000 138.4 2
ill"Crookston HO 600,000 475,000 114.0 3 8 Worthington CO 1,380,586 1,231,000 132.5 3
1 Red Lake Falls HO 599,000 599,000 111.5 4 10 Faribault CO 870,569 , 806,200 130.6 4
6W Hazel Run HO 264,056 264,000 104.8 5 4 Ogema CO 1,196,000 1,179,000 115.6 5 ,
8 Wabasso HO 598,178 503,000 103.3 6 7W Elk River CO 1,168,1001 400,000 115.5 6 j
6W Clarkfield HO 595,738 561,600 101.1 7 4 Underwood CO 1,162,2001 1,128,600 115.2 7
1 Marshall County HO 597,625 519,500 100.9 8 8 Hendricks CO 907,792 809,100 114.2 8
8 Bingham Lake HO" 394,788 348,600 100.1 9 4 Urbank CO 696,750 670,000 112.7 9
10 Conger • PF 459,116 583,000 99.9 10 3 Cloquet CO 1,048,320 986,900 111.9 10
4 Ulen PF 600,000 600,000 98.7 11 1 Roseau city CO 1,395,462 999,000 106.9 11
11 Chaska HO 546,460 454,400 96.6 12 11 Watertown CO 575,240 553,400 105.9 12 "
7W Sauk Rapids HO 408,897 296,880 96.5 13 9 Welcome CO 873,000 809,200 104.3 13
3 Grand Rapids PF 583,334 583,300 95.2 14 8 Luverne CO 999,191 882,300 103.9 14
10 Kenyon HO 593,080 551,000 95.0 15 4 Hoffman CO 914,250 799,900 103.6 15
7E Rush City HO 600,000 500,000 95.0 16 8 Hatfield CO 418,640 99.5 16
8 Holland HO 451,720 94.5 17 10 Wanamingo CO 958,800 96.7 17
4 Rothsay HO.' 550,000 94.1 18 1 Viking CO 609,036 96.2 18
4 Fergus Falls HO 590,648 92.4 19 9 New Richland CO 780,842 ' 95.5 19
7E Rutledge PF 600,000 92.2 20 4 Elbow Lake CO 533,632 93.6 20
4 Dent PF 290,000 90.0 21 7W Sauk Centre CO 1,390,925 92.9 21
1 Thief River Falls HO 570,883 88.0 22 _ 4 Forada CO 1,025,000 91.2 22
4 Alexandria HO 593,600 87.3 23 8 Jackson CO 1,312,270 83.1 23
5 Staples HO 488,626 86.4 24 6E Atwater CO 1,207,458 75.9 24
Williams HO 436,352 85.3 25 4 Osakis CO 1,355,680 75.5 25
Lowry HO 464,000 84.5 26 1 Oslo CO 599,600 71.0 26
3' Wright PF 600,000 84.0 27 7E Taylor Falls CO 597,000 66.9 27
3 Cohasset HO 599,990 83.8 28 5 Browerville CO " 1,382,500 65.3 28
1 Nielsville PF 329,960 80.0 29 4 Kensington/Farwell CO 890,000 60.1 29
1 Lake Bronson HO 382,170 80.0 30 1 Warroad CO 1,269,164 56.3 30
7E Harris PF 600,000 78.9 31 1 Alvarado CO 982,389 56.2 31
6W Graceville HO 600,000 78.0 32 11 Jordon CO I 1,270,412 54.8 32
1,. ,S,t;andquist HO 404,279 78.0 33 4 Hawley CO 594,768 54.5 33
7W Cokato HO 505,000 76.6, 34 5 Eagle Bend CO 1,332,840 50.8 34
2 Kelliher HO 515,750 73.8 35 4 Henning CO 1,379,002 46.8 35
7W South Haven PF 318,000 73.7 36 5 Cass Lake CO 1,372,885 19.9 36
1 Pennington County HO 530,000 72.8 37 36 37,095,333 13,651,400
8 Tyler HO 459,100 71.9 38
8 Lamberton HO 497,040 71.4 39
7E Kathio Twn'sp PF 459,700 70.1 40
10 Millville HO 338,080 70.0 41
7W Waite Park HO 476,375 65.3 42
7E Sturgeon Lake • PF 600,000 65.1 43
9 Springfield HO 491,880 62.9 44
1 Mentor PF 600,000 60.0 45
2 Bemidji HO 600,000 59.7 46
•BloomingPrairie HO 520,450 51.2 47
Glenville HO 500,000 33.0 48
4 Detroit Lakes HO 561,000 33.0 49
49 24,827,1251 7,701,530.00
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Rivers Edge Downtown Business Association Minutes
• April 14, 2004
The meeting was called to order at 8AM at the Elk River Chamber of Commerce Meeting Room.
Attending were: Tony Mikols, Heidi Steinmetz, Pat Klaers, Cliff Lundberg, Marlys Ellingson,
Roger Hebeisen, Jeff Gongoll and Wendy Simenson
Secretary's Report: The minutes from the last meeting were accepted with the change that the April
5`h, City Council Meeting was held at Lions Park Center.
Treasurer's Report: The Balance is $2153.41.
Old Business
City Update: The Preliminary Development Agreement between MetroPlains and the City of Elk
River expired April 5, 2004. The HRA directed city staff to continue negotiations with MetroPlains
until the May 3, 2004 HRA meeting. The city is now free to talk to other developers during this
time.
Funding for the parking lot expansion project behind the brick block(Kemper Drug et al) is tied
into the downtown revitalization project. No changes in this lot are anticipated until a formal
development agreement has been reached.
The City received a$400,000 grant that is earmarked for a portion of the Jackson Block. The Grant
came from the Minnesota Department of Employment and Economic Development's Small Cities
• Development Program. If the Downtown Revitalization Project does not move forward, the City
would be able to request that the grant money still be available for downtown development,
however the request must be approved by the State.
The City Council has changed how it will address business at its Monday meetings. The first and
third Mondays of the month they will hold regular meetings. The second week they will hold work
sessions.
The next HRA meeting will be held May 3, 2004 in the Elk River City Hall Council Chambers,
13065 Orono Parkway, at 5:00PM.
The City of Elk River is holding its annual Clean Up Day on April 24, 2004 from 8AM-12PM at
the Public Works Garage, 19000 Proctor Avenue. For a fee, you can drop off fluorescent light
bulbs, computers, televisions and other items that you can't normally put in your trash. Contact
Rebecca Haug at (763) 635-1068 for a fee schedule.
Downtown Directory
We now have a comprehensive list of business contact information on the businesses in the
downtown area. We will make that available on request to RiversEdge members. There was a
request to not include email addresses and fax numbers when giving out the list. Thanks to all who
gave us their information.
• Placemat Advertising
Marlys is working on a prototype for placemats that downtown businesses can buy advertising on.
We would then offer the placemats free of charge to non profit groups in the Elk River Area to use
ins L1
at their pancake breakfasts or other fund raising meals. Marlys will be contacting RiversEdge
• businesses to give them the opportunity to participate in this joint advertising opportunity. She
thought the cost would be about$35.00 per business.
Downtown Promotions
Having a RiversEdge garage sale, looks like a good possibility for us this summer. The Utilities
Building is scheduled to be vacated May 1, 2004. This would be a great location for us to have a
garage sale. We could also tie it in to a sidewalk sale and possibly some music in the park. Wendy
will be writing the city a letter requesting that we be able to use the building for a short time for this
purpose. Let's think positive and start saving non-clothing items to donate to the sale. A Garage
Sale would be a great way to help us build up our bank balance!
New Business:
The Who, What and Why of RiversEdge downtown group. It was brought up at our meeting that
many people who are new to Downtown Elk River or who have just started receiving information
about the Downtown Rivers Edge group may think that we are an off shoot of the Downtown
Revitalization Project. Wendy will work on pulling together the history of our group through the
years and its various name changes. She will also highlight some of the events and projects that the
group has helped with downtown.
Lights on Boulevard Trees
Please take a minute to look at the light strings on the small trees on the boulevards. We, the
businesses in downtown, are responsible for maintaining them. If you see any lights dangling or
• sticking out where they might snag little children or other people walking by, please secure them. A
citizen voiced a complaint to the city that they could be dangerous to children. Thanks for your
help.
The Next Meeting will be held Wednesday May 12, 2004, at 8AM at the Elk River Chamber of
Commerce Meeting Room.
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