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9.3. SR 01-04-2021 Request for Action To Item Number Mayor and City Council 9.3 Agenda Section Meeting Date Prepared by General Business January 4, 2021 Cal Portner, City Administrator Item Description Reviewed by Modern Construction Preliminary Development Colleen Eddy, Economic Development Specialist Agreement Extension Amendment Reviewed by Zack Carlton, Planning Manager Action Requested Direct staff, by motion, to prepare an amendment to extend the current preliminary development agreement with Modern Construction. Background/Discussion On October 7, 2019, the City Council approved the execution of a Preliminary Development Agreement with Jesse Hartung, President of Modern Construction for a high density, market rate, mixed-use development concept in downtown Elk River. An extension was approved on February 3, 2020 to June 1, 2020. Mr. Hartung requested another extension to September 8, 2020, which was acted on May 4, 2020. The Council and HRA received a presentation from Mr. Hartung on September 8 in a joint meeting. At their October 5, 2020, meeting, the Council approved an extension to January 4, 2021, at which time another joint meeting with the HRA was to be scheduled. On December 21, Mr. Hartung provided a letter with updates on his progress and asked for an additional six-month extension Financial Impact N/A Mission/Policy/Goal The Elk River Vision is a welcoming community with revolutionary and spirited resourcefulness, exceptional service, and community engagement that encourages and inspires prosperity. Attachments  Modern Construction Update and Extension Request Letter  October 7, 2019, Staff Report  February 3, 2020, Staff Report  May 4, 2020, Staff Report  September 8, 2020, Staff Report  September 21, 2020, Staff Report  October 5, 2020, Staff Report The Elk River Vision A welcoming community with revolutionary and spirited resourcefulness, exceptional service, and community engagement that encourages and inspires prosperity. Updated: August 2020 Mayor, Council, Staff, I hope everyone is staying healthy and safe. I would like to provide an update on the Downtown development project. Over the last few months, I have completed some test borings (4 total) of the parking lot, I have begun preliminary civil site work, and worked with my commercial contractor partners to firm up schedules, staging plans, and budgets including the construction phase and proposed temporary impacts to parking and traffic. The soil tests went to a depth of 30’ and while we did not find an artisan well or underground river the soils were fine sands at that depth and would not support the project as proposed. Initial indications suggest geo piers/pilings or doing soil corrections work will be required. Additional testing and drilling are required to determine specifically what will be needed and at what cost, but I am working through potential scenarios with my engineering team and I’m looking at the effect this will have on my PROFORMA. I intended to bring all of my latest information (specifically the construction phase information) to all of the downtown stake holders however this has not been possible given the current pandemic situation. I supposed I was overly optimistic that covid was going to be behind us and having further discussions with downtown business owners would be feasible; the reality is covid has never been worse and a project of this scale requires personal face to face meetings to overcome speculation. I am aware of the petition that was turned in to city council and I 100% support and respect everyone’s voices and opinions; no project will ever be unanimously supported by all stake holders and I think that is especially true of a project this bold. I heard from a few people that signed the petition and I believe most people simply do not understand what I am proposing and how it will be done- as an example of a speculative rumor, one of the people that signed the petition said they heard I was shutting down main st and the project would take 3 years so they signed it. I am clearly not shutting down main street. I have not heard from most of the people on the petition even though I have made attempts and I still firmly believe when the opportunity is available for me to pound the pavement and meet with people face to face and explain the project and answer questions most downtown stakeholders will support the project. Most of the signatures on the petition were from the restaurants- I can understand and respect that they don’t want Tipsy chicken down there as competition, but we do live in a free-market society and study after study has shown more restaurants actually attract more customers and our own star news independent survey showed that more than 75% of the people that go downtown go there for the restaurants. I may never be able to overcome their concerns, but I’ll go to my grave trying to explain to them my project should not be perceived as competition. As we all know Elk River is more than just the downtown business group and I am well underway gathering letters, signatures, and endorsements form the city and regional stake holders at large; I will have more to share at our next meeting and during the eventual public forum with regards to overall support for my project and ask that council keeps an open mind and weights all stake holders interest evenly as this process continues. Lastly, the results of the soil tests and status of the pandemic suggest to me that moving forward with a meeting on Jan 4 th will probably provide further confusion and not do justice to the community or the project. I would like to request we extend the agreement again until a time when the covid restrictions have been lifted and are well in the rear-view mirror. 6 months would be my request at this time with the hope that by spring discussions with the downtown business group can begin in earnest. I have promised to show support for the project and hope to be able to be able to present that support under the right circumstances. Thank you for your consideration, Jesse Hartung, President TO Mayor and City Council Agenda Section Meeting Date General Business October 7, 2019 Item Description Preliminary Development Agreement with Modern Construction of MN Request for Action Item Number 8.3 Prepared by Amanda Othoudt, EDD Reviewed by Cal Portner, Cit v Administrator Reviewed by Action Requested Approve, or deny, by motion, execution of the preliminary development agreement with Modern Construction of MN. Background/Discussion At the September 2, 2019, Work Session, the City Council heard a presentation by Modern Construction on a high density, market rate, mixed -use development concept in downtown Elk River. The property up for discussion is owned by multiple entities, which includes parcel #75-405-0230 and 75-405-0235 owned by the HRA. Modern Construction of Minnesota, Inc. is owned and operated by Jesse Hartung, and is a local developer. The developer requested the council consider an option agreement for the property the city and HRA own within the project area. Council directed city staff to research other agreements that can accomplish the developer's objectives, while limiting the risk of the city. At their September 16, 2019, Work Session, it was the consensus of the council to enter into a preliminary development agreement with the developer. The agreement allows the developer to explore the idea of a multi -family, mixed -use development concept in downtown Elk River. The HRA is listed as a party to the agreement, since the HRA owns some of the property. Important components of the agreement include: Section 3 pertains to the developer's obligations which encompass all aspects of the discussion that the council discussed at their work session on the 16. Section 4 pertains to the city and the HRA's obligations to take appropriate steps to review the proposal as we would in any development scenario. Section 5 refers to contingencies. subject to any request for financial assistance, project feasibility, the project is in the best interest of the city, and the ability of the city and the HRA to agree upon the terms to convey property to the developer, with the sole understanding that this agreement does not obligate the city or the HRA to sell the properties to the developer. The Ells River Vision A welcoming community with revolution y and spirited ��sourcefulness, exceptional P ®r E B E I e r service, and community engagement that encourages and inspires prospeaztyr1gTUR Section 6 pertains to the reimbursement of reasonable and necessary out of pocket costs. It should not be on the burden of the taxpayers to pay for these costs typically covered by the developer. If approved, the developer will be required to deposit $1,100 in escrow to the city. Section 7 designates Modern Construction as the sole developer of property. Section 8 outlines the term of the agreement effective until February 3, 2020. In addition, the agreement may be terminated by the city with a 10 day written notice if certain conditions are not met by the developer, or if the city or the Authority reaches an impasse on the negotiation or implementation of this agreement. The HRA reviewed the preliminary development agreement earlier this evening. Staff will provide an update to the council. Financial Impact None Attachments Preliminary Development Agreement Parcel Map N:\PublicBodies\Agenda Packets\ 10-07-2019\Done\x8.3 sr Preliminary Development Agreement with Modem Construction of IMN.docx PRELE%HNARY DEVELOPMENT AGREEMENT THIS AGREEMENT, made and entered into this _ day of , 2019 by and between the City of Elk River, a Minnesota municipal corporation (the "City"), the Housing and Redevelopment Authority of the City of Elk River, a public body corporate and politic under the laws of the State of Minnesota (the "Authority"), and Modern Construction of Minnesota, Inc., a Minnesota corporation (the "Developer"). RECITALS WHEREAS, the City and the Authority desire to promote redevelopment of certain property within the City of Elk River, which property is described on Exhibit A attached hereto (the "Property"); and WHEREAS, the Developer has requested the City and the Authority explore the use of certain public assistance, financial, and otherwise, to assist with the construction of multi -family housing and commercial buildings on the Property, hereafter referred to as the "Redevelopment"; and WHEREAS, the City and the Authority have determined that it is in their best interest that the Developer be designated sole developer of the Property during the term of this Agreement; and WHEREAS, the City, the Authority, and the Developer are willing and desirous to undertake the Redevelopment if. (i) a satisfactory agreement can be reached regarding the City or the Authority's commitment for public assistance necessary for the Redevelopment; (ii) satisfactory mortgage and equity financing, or adequate cash resources for the Redevelopment can be secured by the Developer; (iii) the economic feasibility and soundness of the Redevelopment can be demonstrated; (iv) satisfactory terms of conveyance of the Property to the Developer can be negotiated; and (v) satisfactory resolution of zoning, land use, site design, and engineering issues, and other necessary preconditions have been determined to the satisfaction of the parties; and WHEREAS, the City and the Authority are willing to evaluate the Redevelopment and work toward all necessary agreements with the Developer if the Developer agrees to reimburse the City for the City and the Authority's costs relating to the Redevelopment even if the Redevelopment is abandoned or necessary agreements are not reached under the terms of this Agreement. NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and obligations set forth herein, the parties agree as follows: Section 1. Intention of Parties. It is the intention of the parties that this Agreement: (a) documents the present understanding and commitments of the parties; and (b) will lead to negotiation and execution of a mutually satisfactory Contract for Private Redevelopment (the "Contract"). The Contract (together with any other agreements entered into between the parties hereto contemporaneously therewith) if executed, will supersede all obligations of the parties hereunder. 614738v3EL185-54 Section 2. Outline of Negotiations. Negotiations between the parties shall proceed in an attempt to formulate a definitive Contract based on the following: (a) the Developer's proposal (when submitted) together with any changes or modifications required by the City or the Authority; (b) such documentation regarding economic feasibility of the Redevelopment as the City or the Authority may wish to undertake during the term of this Agreement; and (c) other terms and conditions of this Agreement. The parties agree and understand that negotiations regarding the Contract will proceed as soon as reasonably practicable after the date of this Agreement, as sufficient details for the Redevelopment become available. Section 3. Developer's Obligations. On February 3, 2020, the Developer must submit a proposal to the City and the Authority, which proposal must provide the following information: (a) Information about the Developer, including information that shows that the Developer is capable of handling a project of the scope and size of the Redevelopment. This information shall include information regarding the Developer's experience with similar types of large projects and references for the Developer who can be contacted. (b) Detailed site plans that show the proposed locations and sizes of all buildings and improvements. (c) Detailed renderings of the buildings that show the sample floor layouts, elevations, and other graphic or written explanations of the Redevelopment. (d) Detailed information about how all existing parking on the Property will be accommodated by the Developer both during and after construction along with information on any additional parking that will be needed by the Developer for the Redevelopment and how this additional parking will be accommodated, including whether or not the proposed additional parking will be private or available to the public. (e) A detailed concept of how traffic will flow within and around the Property that will be improved with the Redevelopment. (f) Detailed information on how adjacent businesses will be able to receive deliveries and shipments during the Developer's construction of the Redevelopment, in particular the businesses located along Jackson Street. 614738v3EL 185-54 _2_ (g) Information about how the construction of the Redevelopment will be staged, including information about measures that will be taken by the Developer in order to ensure that there is safety on the job site and the surrounding areas during construction. (h) A cost estimate for the design and construction of the Redevelopment. (i) Information on the status of the Developer's acquisition of the parcels within the Property that are not owned by the Authority and the City. 0) A time schedule for the starting and completion of all phases of the Redevelopment. (k) A financial pro forma showing income and expense projections, rates of return, and any other information requested by the Authority that is reasonably necessary to demonstrate the need for public financial assistance and the amount of assistance the Developer believes is required to make the Redevelopment financially feasible. (1) Satisfactory financial data to the Authority evidencing the Developer's ability to undertake the Redevelopment. (m) A determination by the City and the Developer of what land use and subdivision applications will be needed to be submitted to the City for the Redevelopment. (n) Evidence of support of the Redevelopment from other property owners and businesses located near the Property. Section 4. Cite and the Authority's Ob ' rations. During the term of this Agreement, the City and the Authority agree to: (a) Commence the process necessary to undertake such public assistance as is necessary pursuant to the terms of the proposal. (b) Proceed to seek all necessary information with regard to the anticipated public costs associated with the Redevelopment. (c) Review zoning, planning, and subdivision implications of the Redevelopment, as appropriate. (d) Analyze the Redeveloper's pro forma and estimate the amount of public financial assistance, if any, that is needed to make the Redevelopment feasible. 614738v3EL185-54 -3- Section 5. Contingencies. It is expressly understood that execution and implementation of the Contract shall be subject to: (a) A determination by the Authority that any public financial assistance for the Redevelopment is feasible based on projected tax increment revenues or other public development revenues designated by the Authority, and that financial assistance is warranted based on the Redeveloper's pro forma and any other information provided to the Authority. (b) A determination by the Developer that the Redevelopment is feasible and in the best interests of the Developer. (c) A determination by the City and the Authority that the Redevelopment is in the best interests of the City and the Authority. (d) The ability of the City and the Authority and the Developer to agree upon terms for the conveyance of the parcels owned by the City and the Authority to the Developer. The Developer understands that this Agreement does not obligate the City or the Authority to sell their respective properties to the Developer. Section 6. Reimbursement of Costs. The Developer shall be solely responsible for all costs incurred by the Developer. In addition, the Developer shall reimburse the City for the following costs: (a) Upon execution of this Agreement, the Developer has deposited with the City funds in the amount of $1,100, receipt of which the City hereby acknowledges. The City may apply such deposit to pay any "Administrative Costs," which means: reasonable and necessary out -of pocket -costs incurred by the City or the Authority from and after the date of submittal of the Proposal, in each case based on actual time spent in connection with rendering assistance and advice to the City and the Authority as evidenced by itemized bills and invoices for (i) the City and the Authority's financial advisor in connection with the City or the Authority's financial participation in redevelopment of the Property, (ii) the City's and the Authority's legal counsel in connection with negotiation and drafting of this Agreement and any related agreements or documents, and any legal services related to the Authority's or City's participation in redevelopment of the Property; and (iii) consultants retained by the City or the Authority for planning, environmental review, and traffic engineering for development of the Property. At the Developer's request, but no more often than monthly, the City and Authority will provide the Developer with a written report on current and anticipated expenditures for Administrative Costs, including invoices or other comparable evidence. (b) If at any time during the term of this Agreement, the City determines that the amount deposited by the Developer is insufficient to pay the Administrative Costs and will exceed $1,100, the City will notify the Developer in writing as what 614738v3EL185-54 _4_ additional Administrative Costs are necessary and the estimated amount of the Administrative Costs. If the Developer agrees to the expenditure of the additional Administrative Costs, the Developer must deposit such additional funds with the City in an amount agreed to by the Developer and the City. If the Developer does not agree to the expenditure of the additional Administrative Costs, the City is not obligated to incur these costs and the Developer understands that the City and the Authority may not be able to fulfill their review obligations under this Agreement. (c) Upon termination of this Agreement in accordance with its terms, the City will return to the Developer the balance of any funds deposited under this section that are on hand as of the date of receipt of the notice of termination, and less any Administrative Costs incurred through the date of receipt of the notice of termination. For the purposes of this paragraph, Administrative Costs are considered to be incurred if they have been paid, relate to services performed, or are payable under a contract entered into, on or before the date of receipt of the notice of termination. This Section 6 shall survive termination of this Agreement and shall be binding on the Developer regardless of the enforceability of any other provision of this Agreement. Section 7. Desi2nation as Sole Developer of Property The City and the Authority hereby agree that for the term of this Agreement that they will not: (i) provide or enter into any agreement for the provision of financial assistance to any third party in connection with any proposed development within the Property; and (ii) condemn or agree to proceed with the condemnation of the Property to assist or facilitate development within such area by a third party. During such period the Developer shall have the exclusive right to work with the City and the Authority in negotiating a definitive Contract for the Property. The Developer may not assign its rights or obligations under this Agreement to any person or entity without prior written approval by the City and the Authority. Section 8. Term of Agreement. This Agreement is effective until February 3, 2020. After such date, neither parry shall have any obligation hereunder except as expressly set forth to the contrary herein. This Agreement may also be terminated upon ten (10) days written notice by the City or the Authority to the Developer if: (a) an essential precondition to the execution of a contract cannot be met; or (b) if, in the sole discretion of the City or the Authority; an impasse has been reached in 614738v3EL185-54 -5- the negotiation or implementation of any material term or condition of this Agreement or the Contract; or (c) the City or the Authority determine that Administrative Costs will exceed the amount initially deposited for such purpose under Section 6 and the Developer does not deliver additional security to the City. If the City or the Authority terminates the Agreement under this Section, the Developer shall remain liable to the City under Section 6 of this Agreement for Administrative Costs incurred by the City and the Authority through the effective date of termination. Section 9. Remedies. In the event that the Developer, its successors or assigns, fail to comply with any of the provisions of this Agreement, the City or the Authority may proceed to enforce this Agreement by appropriate legal or equitable proceedings, or other similar proceedings, and the Developer, its successors or assigns, agree to pay all costs of such enforcement, including reasonable attorneys' fees. Section 10. Seyerabilil r . If any portion of this Agreement is held invalid by a court of competent jurisdiction, such decision shall not affect the validity of any remaining portion of the Agreement. Section 11. Amendment and Waiver. In the event any covenant contained in this Agreement should be breached by one party and subsequently waived by another party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other concurrent, previous or subsequent breach. This Agreement may not be amended nor any of its terms modified except by a writing authorized and executed by all parties hereto. Section 12. Notice. Notice or demand or other communication between or among the parties shall be sufficiently given if sent by mail, postage prepaid, return receipt requested or delivered personally: (a) As to the Authority: Housing and Redevelopment Authority of the City of Elk River 13065 Orono Parkway Elk River, MN 55330 Attn: Executive Director (b) City of Elk River 13065 Orono Parkway Elk River, MN 55330 Attn: City Clerk (c) As to the Developer: Modern Construction of Minnesota, Inc. 17981 Concord Street NW Elk River, MN 55330 Attn: Jesse Hartung 614738v3EL185-54 _6_ Section 13. Counterparts. This Agreement may be executed simultaneously in any number of counterparts, all of which shall constitute one and the same instrument. Section 14. Governinu Law. This Agreement shall be governed by and construed in accordance with the laws of the state of Minnesota. Any disputes, controversies, or claims arising out of this Agreement shall be heard in the state or federal courts of Minnesota, and all parties to this Agreement waive any objection to the jurisdiction of these courts, whether based on convenience or otherwise. 614738v3EL185-54 _�_ IN WITNESS WHEREOF, the parties to this Agreement have cause this Agreement to be duly executed as of the day and year first above written. MODERN CONSTRUCTION OF NIINNESOTA, INC. By Its: 614738v3EL185-54 _g_ HOUSING AND REDEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER By: Its: Chair By: Its: Executive Director 614738v3EL185-54 -9- CITY OF ELK RIVER By: Its: Mayor By: Its: City Clerk 614738v3EL185-54 -10- EXHIBIT A Description of the Property Parcels: 75-405-0210 75-405-0272 75-405-0280 75-405-0350 75-405-0360 75-405-0240 75-405-0230 75-405-0235 75-405-0275 75-405-0205 King Ave ROW A-1 614738v3EL185-54 Request Action Requested Approve, by motion, an amendment to the Preliminary Development Agreement with Modern Construction of Minnesota, Inc. Background/Discussion At their October 4, 2019, meeting, the HRA and the Council entered into a preliminary development agreement with Modern Construction. The agreement allows the developer to explore the idea of a multi- family, mixed -use development concept in downtown Elk River. Attached is a letter from Jesse Hartung requesting an extension of his agreement with the city to allow him time to further develop his plans for downtown redevelopment. A joint meeting with the HRA and the Council will be scheduled for June 1, 2020. Financial Impact N/A Attachments ■ Letter of Request from Modern Construction of Minnesota, Inc. (January 16, 2020) ■ Executed Preliminary Development Agreement ■ Amendment to Preliminary Development Agreement The Ells River Vision A xelcoming community imth nevolutiona y and sphzted nesouivefulness, exceptional a W E B E l I r service, and community engagement that encourages and inspires pivspeiztyATURE M v 0 1AODERN CONSTRUCTION OF M I N N e 5 0 Mayor, Council, Staff, I hope everyone had a good holiday season and I wish everyone the best for 2020. I'd like to provide an update on the Downtown development project. Over the last few months I have engaged with the majority of the primary stakeholders in the project, including but not limited to the Downtown Rivers Edge Business Association, The Elk River Chamber, The Bank of Elk River, First National Bank of Elk River, Elk River Lutheran Church, many of the downtown business owners and tenants. Work is well underway on -site designs that incorporate all of the feedback I received, which I am very please to share has been overwhelmingly positive. There is a strong community of business owners downtown working hard to beautify downtown for the city and its residents and I'm excited and honored to be a part of that. The primary concern of everyone I've spoken with both downtown and in the larger community is parking; not just availability of parking but the quality of parking, access to parking, and the proximity of the parking in relation to the front doors of the business's people are trying to visit. This has been the primary focus of site design at this time and I am happy to report with confidence after completing multiple iterations of the site design there will be a significant increase in parking stalls- and they will be closer to the business doors, safer, and more accessible. I'm very excited to be able to share designs with all of you once they are fully vetted. Movement on the project has been steady but slower than anticipated. With the large number of stakeholders involved coordinating meetings, gathering information, and then updating designs has not moved as quickly as hoped. Some of the building owners were unavailable to talk with until early this year and I believe it's important that everyone is involved in the process. I'd like to request from the mayor and council a 4-month extension to the development agreement we have in place so I can spend the next 30-60 days completing all of my community engagement and then have a couple of months to drill into the designs and preliminary engineering to insure my proposal is well vetted and sufficiently detailed. Thank you for your consideration, Jesse Hartung, President RiVe'r To and Cite Council Request for Action Item Number 4.4 IAgenda Section I Meeting Date I Prepared by Consent Mav 4.2020 Amanda Othoudt. ED Director Item Description Amendment to the Preliminary Development Agreement with Modern Construction of Minnesota, Inc. Reviewed by Cal Portner. Citv Administrator Reviewed by Action Requested Approve, by motion, a second amendment to the Preliminary Development Agreement with Modern Construction of Minnesota, Inc. Background/Discussion At their October 4, 2019, meeting, the HRA and the Council entered into a preliminary development agreement with Modern Construction. The agreement allows the developer to explore the idea of a multi- family, mixed -use development concept in downtown Elk River. Jesse Hartung is requesting an extension of his agreement with the city to allow him time to further develop his plans for downtown redevelopment. A joint meeting with the HRA and the Council will be scheduled for September 8, 2020. Financial Impact N/A Attachments Executed Preliminary Development Agreement Second Amendment to Preliminary Development Agreement The Elk River Vision A welcoming community nab nevolutiona y and spifrted i-esoui cefulness, exceptional [INATUREE] 0 x E 0 E I e service, and community engagement that encourages and inspires pivspeizty To and Cit%- Council and the HRA Request for Action Item Number 2 Agenda Section I Meeting Date Prepared by Work Session September 8, 2020 Amanda Othoudt, EDD Item Description Reviewed by Modem Construction — Downtown Cal Portner, City Administrator Development Concept Discussion Reviewed by Action Requested Receive information and discuss. Background/Discussion At their September 3, 2019, Work Session, the City Council heard a presentation by Modem Construction on a high density, market rate, mixed -use development concept in downtown Elk River. On October 7, 2019, the Council entered into a preliminary development agreement with the developer allowing the developer to explore the idea of a multi -family, mixed -use development concept in downtown Elk River. The HRA is listed as a party to the agreement, since the HRA owns some of the property. The agreement outlines the developer's obligations to the city and the HRA in Section 3 of the agreement. Jesse Hartung of Modern Construction will present his plan for the project. In addition, he will discuss parking improvements, review proposed traffic study parameters, provide a general outline for financing and construction timelines as well as proposals to support local business during construction. Staff is seeking feedback from the Council and the HRA on next steps. Financial Impact N/A Mission/Policy/Goal Mississippi Connections Plan — Mid-term goals: City partnering with property owners and the development community to implement redevelopment projects that meet the community vision. Continue to assist in the recruitment of highly desirable businesses to the core downtown (e.g. hotel, fine dining, banquet facility). Mississippi Connections Plan — On -going goals: Based on demand, work with property owners and development community on redevelopment proposals. Attachments Preliminary Development Agreement * Mississippi Connections Plan The Elk River Vision r o 1 E B E o a YJ A 9velcoming community wXb revolutionay and spirited msouir� fulness, exceptional FNATURE service, and community engagement that encourages and inspires pmspeyrty. Updated, August 2020 To Mavor and Citv Council Request for Action Item Number 9.4 Agenda Section Meeting Date Prepared by Work Session September 21, 2020 Amanda Othoudt, EDD Item Description Reviewed by Modern Construction Downtown Development Cal Portner, City Administrator Concept Action Requested Receive information and discuss. Reviewed by Background/Discussion At their September$ 2019, Work Session, the City Council heard a presentation by Modern Construction on a high density, market rate, mixed -use development concept in downtown Elk River. On October 7, 2019, the Council entered into a preliminary development agreement with the developer allowing him to explore a multi -family, mixed -use development concept in downtown Elk River. The HRA is listed as a party to the agreement, since the HRA owns some of the property. The agreement outlines the developer's obligations to the city and the HRA in Section 3. At their September 8, 2020, Special Joint Meeting with the HRA and the Council, Jesse Hartung of Modern Construction presented his project. He requested feedback on four items: Incentives: Agree in principle to the incentives with final decision and dollar amounts based on 3`a party ROI determination. Parking: Accept parking quantities proposed as a worst -case minimum, with an understanding that additional improvements may be possible. Traffic and Streets: Willingness to consider alternate street and traffic flows downtown if studies indicate improvements are possible. Timeline: Commitment that the city will work as fast as I [He] can get final docs back to council for review and approval. Time did not allow for further discussion and direction from the Council was to bring it back for fin-ther discussion. Mr. Hartung is requesting direction from the council on the preliminary development concept. The Elk River Vision F O W E R E R R T A rvelcoming community avith irvolutiona y and spbited nrsow-refulness, exceptional [NATURE] service, and community engagement that encourages and inspires pmsperrty. Updated- August 2020 Financial Impact N/A Mission/Policy/Goal Mississippi Connections Plan — Mid-term goals: City partnering with property owners and the development community to implement redevelopment projects that meet the community vision. Continue to assist in the recruitment of highly desirable businesses to the core downtown (e.g. hotel, fine dining, banquet facility). Mississippi Connections Plan — On -going goals: Based on demand, work with property owners and development community on redevelopment proposals. Attachments • Preliminary Development Agreement • City Council Presentation (September 8, 2020) N:\Public Bodies\Agenda Packets\09-21-2020\FinaINDA sr Modem Construction Downtown Development Discrosion.dom Request for Action To Item Number Mayor and Cite Council 4.6 Agenda Section Meeting Date Prepared by Consent October 5, 2020 Amanda Othoudt, EDD Item Description Reviewed by Amendment to the Preliminary Development Cal Portner, City Administrator Agreement with Modern Construction of Reviewed by Minnesota, Inc. Action Requested Approve, by motion, an amendment to the Preliminary Development Agreement with Modern Construction of Minnesota, Inc. Background/Discussion On October 7, 2019, the HRA and the Council entered into a preliminary development agreement with Modern Construction. The agreement allows the developer to explore the idea of a multi -family, mixed -use development concept in downtown Elk River. At their September 21, 2020, meeting, the City Council approved Jesse Hartung's request for an extension of his agreement with the city to allow him time to further develop his plans for downtown redevelopment. A joint meeting with the HRA and the Council will be scheduled on January 4, 2021. Financial Impact N/A Mission/Policy/Goal Mississippi Connections Plan — Mid-term goals: City partnering with property owners and the development community to implement redevelopment projects that meet the community vision. Continue to assist in the recruitment of highly desirable businesses to the core downtown (e.g. hotel, fine dining, banquet facility). Mississippi Connections Plan — On -going goals: Based on demand, work with property owners and development community on redevelopment proposals. Attachments ■ Executed Preliminary Development Agreement • First and Second Amendment to Preliminary Development Agreement ■ Third Amendment to the Preliminary Development Agreement The Elk River Vision A welcoming community with rrvolutiona y and spirited msourcefulness, exceptional service, and community engagement that encoutuges and ins�iires pivspeiily. ► 8 W E R E 0 1 Y ATLOE Updated. August 2020 Modern Construction Agreement A petition from downtown businesses shows strong feelings against any project in the city parking lot. The people I have talked to are not going to change their mind relative to this project. It was stated in the extension request that one person that signed the petition said he heard the project would take three years to complete and that Main Street would be closed. The developer did say at an earlier meeting that he wanted Main Street to be a one way street which in effect closes half the street. While the project may not take three years to construct my guess it will be well more than one year. Also I was told about the developer's negative conversation with one business owner that signed the petition against the project. That word has gotten around and it did not help the project's cause. Existing downtown businesses are my main concern here. Several of them are struggling right now because of the virus. The uncertainty of this project and the potential loss of parking spaces for several months may put many of them over the edge. What downtown business is going to remodel or expand their business if they don't know they will be able to survive loss of parking for several months? You say most of the signatures on the petition are from downtown restaurants. I count four restaurants (Sunshine Depot, Olde Main Eatery and DaddyO's, Pompeii Pizza) among the 30 businesses that signed. Maybe we should let them respond to the accusation that they don't want this project because they will have to compete against Tipsy Chicken. Downtown businesses and individual citizens that I have talked to are anxiously waiting the public hearing where they get to weigh in on this issue. I don't plan on waiting 3-6 months to hold that hearing. Your exclusive agreement has now been in effect for 16 months. What has really happened in that 16 months other then a slide show presentation as to what the project could look like and some soil testing? With all the approvals and public hearings needed to get this project off the ground (and based on what has been done to date) you at looking at another year to get through the paperwork. Jennifer's point at an earlier council meeting about whether this exclusive agreement should continue is something the council should talk about now. Also, another point that Jennifer made, do we really want a project in our parking lot? We haven't weighed in on that. That discussion should held before we go any further on this project. Just a couple years back there was a project proposed at the old school district site with retail and apartments. It was similar to the current project we are discussing but with a much smaller footprint than this one. The HRA and the council, at the urging of downtown businesses, did not proceed with that project. How is this one different than that one? Debbi Ryberg from the Chamber sent me a letter a few months back in reference to the current project. She said approve it or deny it but don't let it drag on. By taking a long time to decide the council will cast a cloud of uncertainty over all downtown businesses. To me this project is Wrong Place, Wrong time. If I had another site near downtown that was more appropriate to consider for that project, would it be given consideration or is it downtown or nothing? I am not at liberty to disclose the alternate site publicly but would be glad to speak to Modern Construction about it. The council should start making some preliminary calls on this project. To spend developer and city money on this only to result in denial down the road doesn't seem practical to me. Of course it is the developer's right to make formal application for this project and let it be fully vetted by city staff and the public before a final decision is made by the council. I am hearing the downtown business people, loud and clear. They do not want any project that will take away their parking lot and permanently alter the character of downtown Elk River. New economic development downtown is important but it should not come at the expense of the current businesses who have poured sweat and savings into making a living. I will vote no any any extension of the development agreement.