4.0. HRSR 05-06-1996 ELK RIVER HOUSING AND REDEVELOPMENT AUTHORITY
MEMORANDUM
TO: Housing and Redevelopment Authority
FROM: Pat Klaers, Executiv D re' or
DATE: May 6, 1996
SUBJECT: King and Main Project
At the April 17, 1996, meeting the HRA was in agreement that the city
should pursue the purchasing of lots in the northwest corner of the King and
Main intersection. Also at that meeting the HRA discussed the project
timeframe options and the worst/best case development scenarios.
The site has three structures on it, contains four different parcels of property
and is 180 feet by 180 feet for 32,400 square feet (about 3/4 of an acre). The
purchase price for the properties is a total of$410,000. Mark Kleckner,
W Century 21, is representing the owners of the property. A draft purchase
agreement is either enclosed for your reference or will be handed out and
reviewed at the meeting. The timetable calls for the city to sign off on the
purchase agreement before May 30, 1996, and to have the properties close by
June 26, 1996. For tax and TIF reasons, the city needs to take possession
before the end of June, 1996.
The method to recapture the city's investment in this project is to do a
redevelopment TIF district. In this regard, Building Official Cliff Skogstad
will inspect the properties and videotape the buildings in order to document
that the facilities meet the definition of a TIF redevelopment district.
At the last meeting on April 17, 1996, the HRA discussed two different
options for the TIF project. One option was to do the project as soon as
possible and the second option was to try to bring the original project
valuation down so that a larger increment could be captured. City Attorney
Dave Sellergren has analyzed the TIF law and provided us with a memo that
outlines how the city can get this site value down to a zero original net tax
capacity. If we proceed under this scenario, we would want the county
assessing department to verify that their understanding of our project and
the law is the same as what is outlined by Dave Sellergren.
P.O. Box 490 • 13065 Orono Parkway • Elk River, MN 55330-1743 • (612) 441-7420 • Fax: (612) 441-7425
Equal Opportunity Housing and Equal Opportunity Employment
Whether or not we would want to purchase the property now and do a project
as soon as possible(scenario 1) or we purchase the property now and hold it
for 366 days (scenario 2) depends mainly on the financial ramifications for
holding the land for over one year. Lori Johnson has done the financial
analysis of the two different scenarios and will be in attendance on May 6 to
update the HRA on her findings. In general, the city supports scenario 1
because we want a new facility constructed as soon as possible for the benefit
of the downtown area, there is less risk to the city (compared to holding the
land for over one year), the school and county continue to receive tax
revenues based on the tax capacity currently on the property, the total
project cost that needs to be recaptured is about $58,000 less, and it is
possible that the TIF district would be decertified a year earlier than under
scenario 2. With that being said, it should be noted that scenario 2 also
works financially. The project under scenario 2 would take either 7 or 8
years to recapture our investment, depending upon interest rates and site
preparation costs. The penalty under both scenarios is in the $11,000 range.
However, if we need to go to an extra year for scenario 2, the penalty may be
$16,000. Either way, the penalty is something that appears to be able to be
handled by the HRA through use of its fund balance.
Staff has met with Denny Chuba to discuss this project since the April 17,
1996, meeting. As the HRA knows, Denny was the most interested in the
RFP that was sent out in 1994 and we are working with him based on the
good experience we have had on the east Main Street redevelopment projects.
Nonetheless, before the city proceeds in actually purchasing the property, it
should get some level of commitment from Mr. Chuba that he will complete a
project of$1 million total valuation by January 1, 1998, or as soon as possible
if the project is to proceed in 1996. I think Denny would also like a
commitment from the city so that he can market and invest in the project and
know that the city will be working with him. Likewise, the city needs a
commitment from Denny so that we know we will not have to hold the land
too long and that the debt will be manageable and a facility will be built. A
draft letter regarding Mr. Chuba's commitment to the project will be
distributed on Monday. This letter from Mr. Chuba needs to be reviewed by
the city attorney and signed off on within the next couple of weeks.
Mr. Chuba needs at least one and most likely two commitments from future
owners in order to proceed with the project. One owner that is possible, but
is premature to discuss in any detail, is the municipal utilities operation.
Currently the utilities building is being evaluated from a "building health"
point of view. The results of this environmental evaluation will not be known
for 20 days or so. There are lots of reasons for the utilities to relocate at,this
King/Main site, but if their facility is relatively healthy and the cost of
repairing the building is not significant, then this relocation is unlikely. On
the other hand, if the cost of fixing up the building is substantial and ADA
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19276 Vernon Street NW
+ � . Building 100,Vernon Plaza Phone (612)441-4488
--� k+y.^ Elk River,MN 55330 Fax (612)441-5835
. .
41,
6 May 1996
TO: Elk River HRA & EDA
13065 Orono Road
Elk River , Mn. 55330
SUBJECT: King & Main Redevelopment
We would like to propose the construction of a multi-tennant
zero lot-line building on the corner of King and Main Street in
downtown Elk River . The size of the building would range from at
least 10,000 S.F. up to about 14 ,000 S .F. based on tennants '
space requirements and design constraints . Completed value of
the building would range from $800,000 .00 to over $1 million.
Construction would begin as soon as tennant committments were
firm, design completed and construction lending in place . The
earliest anticipated start is late summer/early fall 1996 with
completion in early spring 1997 . Latest completion date is Jan 1
•1998 .
Lvnd purchase of the 180 ' x 180 ' parcel would be a minimum of
$20 ;1000 after buildings bought and site cleared .
Th nki You
i '.
D-nnis Chuba
e Chu Company
•
UNITED Of
STATES
NEW CONSTRUCTION& REMODELING ECLa[ _MBE.
DOHERTY 3500 Fifth Street foeers 28170 Minnesota Mirld lrikii.ti enter iai yrrs lurk 3verrto yJ1. 2371)One labor Center
150 South Fifth Street 30 East Seventh Street Suite 1100 1200 Seventeenth Street
RL;MBT j Minneapolis,Minnesota 55402-4235 Saint Paul,Minnesota 55101-4999 ltiashington,D.C.20(105 Denver,Colorado 80202-5823
& BUTLER Telephone(612)340-5555 Telephone(612)291-9333 lelephone(202)393-2554 Telephone(303)5'2-6200
R
FAX(612)340-5584 FAX(612)291-9313 FAX(202)393-3131 FAX(303)572-6203
0 PROFESSIONAL ASSOCIATION
Attorneys at Law Writer's direct dial number: Reply to Minneapolis office
MEMORANDUM s;{ 25th
TO: Pat Klaers and Lori Johnson, City of Elk River
FROM: Dave Sellergren
RE: King and Main - Getting to Zero Original Net Tax Capacity
DATE: April 24, 1996
The operative statutes are §469.174, subd. 7 and subd. 10, which define original net tax capacity
and redevelopment district, respectively. The latter subdivision refers to §469.177, subd. 1(h)
in those situations in which the authority acquires a substandard building, demolishes it, and
holds it for a period of time before certifying the district, subject to a maximum of three years.
My analysis assumes that the area qualifies as a redevelopment district.
• After reading these statutes, if the authority wishes to achieve zero original net tax capacity, I
believe it can do so through the following steps:
1. Acquire property early in 1996, so that it can be tax exempt as of January 2, 1997.
2. Demolish buildings in 1997.
3. Hold the property for a minimum of 366 days and at least until July 1, 1997.
4. After the 366 days and July 1, 1997, certify the redevelopment tax increment financing
• district to the county auditor.
5. Having done so, the auditor, pursuant to §469.177, subd. 1(h) must certify the original
net tax capacity using the greater of (1) the current net tax capacity of the parcel - zero
or (2) the estimated market value of the parcel for the year in which the building was
demolished or removed - zero. This occurs because the property was tax exempt as of
January 2, 1997 and that is the same year in which the buildings were demolished. You
are able to achieve zero because you held the property for longer than one year, as
required by §469.174, subd. 7.
Lori and I have discussed this. We think it works. As she has noted, however, you have to
balance achieving zero against the carrying costs. If you have any questions or comments,
t-jfi)_e______.____
• please call.
DCS 117721
COMMERCIAL-INDUSTRIAL
PURCHASE AGREEMENT
• This form approved by the Minnesota Association of
REALTORS.,which disclaims any liability arising
out of use or misuse of this form.
• Date:
RECEIVED OF City of Elk River
the sum of Three Thousand Dollars ($ 3 , 000 . 00 )DOLLARS
as earnest money and in part payment for the purchase of property
at 3 I 7 King Avenue , Elk River , MN
situated in the
County of Sherburne ,State of Minnesota,and legally described as follows: The North 60 feet
of Lots 3 and 4 , Block 1 , Village of Elk River , together with an easement
for driveway purposes over and across the north 15 feet of Lot 5 , Block 1 , Village of
together with the following personal property:
Elk River
all of which property the undersigned has this day sold to the Buyer for the sum of: One hundred five thousand
dollars ($10 5 , 0 0 0 . 0 0 )DOLLARS,which the Buyer agrees to pay in the following manner:
Earnest money herein paid$3 ,0 0 0 . 0 0 and$ 102 , 000 . 00 ,cash,on June 2 6 , 19 9 6 the date of
closing and the balance of$ -0- by financing as shown on the attached addendum.
1. DEED/MARKETABLE TITLE:Subject to performance by the Buyer,the Seller agrees to execute and deliver a Marketable
Warranty Deed conveying marketable title to said premises subject only to the following exceptions:
(a)Building and zoning laws,ordinances,State and Federal regulations.(b)Restrictions relating to use or improvement of the premises without
effective forfeiture provision.(c)Reservation of any minerals or mineral rights to the State of Minnesota.(d)Utility and drainage easements
• which do not interfere with present improvements. (e)Rights of tenants as follows:
2. REAL ESTATE TAXES.Real estate taxes due and payable in the year of closing shall be prorated between Seller and Buyer on a calendar
year basis to the actual date of closing unless otherwise provided in this Agreement.Real estate taxes payable in the years prior to closing shall
be paid by Seller.Real estate taxes payable in the years subsequent to closing shall be paid by Buyer.
3. SPECIAL ASSESSMENTS.[Strike out one.] - -. _: : , :- :.:.:._.::. SELLER
SHALL PAY on the date of closing all installments of special assessments certified for payment with the real estate taxes due and payable in
the year of closing.
[Strike out onejaffeetteMELMESSELLER SHALL PAY ON DATE OF CLOSING all other special assessments levied as of
the date of this Agreement.
[Strike out one.] ELLER SHALL PROVIDE FOR PAYMENT OF special assessments pending as of the
date of this Agreement for improvements that have been ordered by the City Council or other governmental assessing authorities. (Seller's
provision for payment shall be by payment into escrow of 1 th times the estimated amount of the assessments.)
If a special assessment becomes pending after the date of this Agreement and before the date of closing,Buyer may,at Buyer's option: (a)
Assume payment of the pending special assessment without adjustment to the purchase price;or(b)Require Seller to pay the pending special
assessment(or escrow for payment of same a sum equal to 11h times the projected pending assessment)and Buyer shall pay a commensurate
increase in the purchase price of the property,which increase shall be the same as the estimated amount of the assessment;or(his
Seller shall pay on date of closing any deferred real estate taxes or special assessments payment of which is required as a result of the closing
of this sale.
4. PRORATIONS.All items customarily prorated and adjusted in connection with the closing of the sale of the property herein including but
not limited to rents,operating expenses,interest on any debt assumed by.Iiayel,shall be prorated as of the date of closing.It shall be assumed
othat the Buyer will own the property for the entire date of the closing. - 'fie"--
DAMAGES TO REAL PROPERTY.if there is any loss or damage to the property between the date hereof and the date of closing;for any
reason,the risk of loss shall be on the Seller.If the property is destroyed or substantially damaged before the closing,this Purchase Agreement
shall become null and void,at Buyer's option.Buyer shall have the right to terminate this Purchase Agreement within 30 days after Seller notifies
Buyer of such damage.Upon said termination,the earnest money shall be refunded to Buyer and Buyer and Seller agree to sign a cancellation
of Purchase Agreement.
MNCI:PA-1(I1/93)
COMMERCIAL-INDUSTRIAL
PURCHASE AGREEMENT
Address 3 1 7 King Avenue
Page 2
•6. EXAMINATION OF TITLE.Within a reasonable time after acceptance of this Agreement,Seller shall furnish Buyer with an Abstract
of Title or a Registered Property Abstract certified to date including proper searches covering bankruptcies and State and Federal judgments,
liens,and levied and pending special assessments.Buyer shall have 10 business days after receipt of the Abstract of Title or Registered Property
Abstract either to have Buyer's attorney examine the title and provide Seller with written objections or,at Buyer's own expense,to make
an application fora title insurance policy and notify Seller of the application.Buyer shall have 10 business days after receipt of the commitment
for title insurance to provide Seller with a copy of the commitment and written objections.Buyer shall be deemed to have waived any title
objections not made within the applicable 10 day period set forth above,except that this shall not operate as a waiver of Seller's covenant
to deliver a Warranty Deed,unless a Warranty Deed is not specified above. I f any objection is so made,Seller shall have 10 business days
from receipt of Buyer's written title objections to notify Buyer of Seller's intention to make title marketable within 120 days from Seller's
receipt of such written objection.If notice is given,payments hereunder required shall be postponed pending correction of title,but upon
correction of title and within 10 days after written notice to Buyer the parties shall perlorm this Purchase Agreement according to its terms.
If no such notice is given or if notice is given but title is not corrected within the time provided for,this Purchase Agreement shall be null
and void,at option of Buyer;neither party shall be liable for damages hereunder to the other and earnest money shall be refunded to Buyer;
Buyer and Seller agree to sign cancellation of Purchase Agreement.If title to the property be found marketable or be so made within said
time,and Buyer shall default in any of the agreements and continue in default for a period of 10 days,then and in that case the Seller may
terminate this contract and on such termination all the payments made upon this contract shall be retained by Seller as liquidated damages,
time being of the essence.This provision shall not deprive either party of the right to enforce the specifice performance of this contract
provided this contract has not been terminated and provided action to enforce such specific performance shall be commenced within six
months after such right of action shall arise.
7. POSSESSION.Seller shall deliver possession of the property on the date of closing.
8. REPRESENTATIONS AND WARRANTIES. See attached addendum.
9. TIME IS OF THE ESSENCE FOR ALL PROVISIONS OF THIS CONTRACT.
10. WELL DISCLOSURE STATEMENT.Buyer has received the well disclosure statement required by Minnesota Statutes Sec. 103I.235.
BUYER AND SELLER INITIAL:Buyer(s) Seller(s)
�
1. ADDENDA.Attached are(number) 1 addenda which are made a part of this Agreement.
. MISCELLANEOUS PROVISIONS.
(a) Survival.All of the warranties,representations,and covenants of this Agreement shall survive and be enforceable after the closing.
(b) Entire Agreement;Modification.This Agreement constitutes the complete agreement between the parties and supercedes any prior
oral or written agreements between the parties regarding the property.There are no verbal agreements that change this Agreement and
no waiver of any of its terms will be effective unless in a writing executed by the parties.
(c) Successors and Assigns.If this Agreement is assigned,all provisions of this Agreement shall be binding on successors and assigns.
13. ACCEPTANCE DEADLINE.This offer to purchase,unless accepted sooner,shall be null and void at 11:59 P.M.
to be determined ,and in such event all earnest money shall be refunded to Buyer.
NOTICE
Mark M. Kleckner Century 21 White Dove Realty Represents Seller
litmus 1(•.n.ywny Nmn:)
,,R„, Represents
Il'u.yrny Name, —
THIS IS A LEGALLY BINDING CONTRACT.IF NOT UNDERSTOOD,SEEK COMPETENT ADVICE.
Dated: Dated:
SELLER . BUYER
SELLER BUYER
IIII SELLING AGENT
MNCI:PA•2(11/93)
Addendum to Purchase Agreement
111 317 King Avenue
1. This purchase agreement shall be contingent upon the City of Elk River
entering into a purchase agreement for the adjacent properties located at 307 King
Avenue and 812 Main Street and performance by the Sellers of the adjacent
properties to provide clear and marketable title as specified in section number six
(6) of this agreement.
Failure of any Seller to provide clear and marketable title to any of the
aforementioned properties, as specified in section number six (6) of this
agreement, shall be deemed, at the Buyer's option, cause for cancellation of this
purchase agreement and earnest money shall be refunded to Buyer.
2. Sellers shall remove all personal property from premises prior to Buyer's
possession.
3. All earnest money specified herein shall be held in the trust account of
Century 21 White Dove Realty, Inc. until the time of closing.
4. Seller accepts all properties in an "as is" condition. Buyer assumes no
warranty whatsoever for condition of property.
•