Committee Minutes

Minutes/Finance/Development Standby Committee
Wednesday, March 16, 2005 - 4:00 p.m.__________

The Finance/Development Standby Committee met on Wednesday, March 16, 2005 at 4:00 p.m. in Room A101 in City Hall with Committee Chair Christensen presiding. Present at roll call were Christensen, Glassheim (teleconference), Hamerlik.

Others present included: Greg Hoover, Keith Lund, Peggy Kurtz, Peg O'Leary, Lonnie Laffen, Jim Galloway and Amanda Silverman from JLG, Rick Duquette, Mayor Brown, Pete Haga, John Schmisek, Marsha Gunderson.

1. Metropolitan Opera House.
Lonnie Laffen, Johnson Laffen Galloway, Ltd. presented power point display; that originally this property was put out by the City as an RFP to develop, there was no response to the RFP and they received a call from Historic Preservation that they would like them to look at this, they had just finished a couple projects that were on the National Register, and with their encouragement looked at redeveloping this and were able to put everything together and ended up with a loan agreement with the City. He stated they worked on the certification for the historic renovation, restoration that included lengthy process of photographs and approvals by the U.S. Dept. of Interior for the exterior only renovation; they bid that out and completed that work and will detail costs. He stated they have been searching for a first floor tenant, it is 12,000 sq.ft. piece and intent was that upper floors would be apartments, some opportunities have come by but lot of difficulty with location, railroad, and lot of people say they would like to be there but Plain Brown Wrapper is an issue and are competing for the same tenants as the City and lot of others downtown as lot of vacant space on first floor. He stated they have come to the conclusion to get this project finished by the deadline without an extension of the deadline and not optimistic that a first floor tenant that can take 12,000 sq.ft. is going to be found, proposed that they finish this project themselves as an apartment project, saving the storefronts, and they would become the tenant putting their own money into this rather than a tenant.

Mr. Laffen reported that the project costs to date - the City put in $600,000 of CDBG money and Oriental Avenue (their partnership) has put in $309,000 on this project, for total of $909,000 and uses for that and between the purchase of the building, design work that has been done, structural engineering, structural costs and little bit of operations spent to date, City's CDBG money spent on construction and purchase price; the JLG for $98,000 is for in-kind time and have not been paid any cash; $22,000 to MCS (Melby Construction Services, construction management company) was cash and paid partly by City and partly by their firm and almost all of that is material.

Mr. Laffen presented their plan for completing this project, they have received authority from U.S Department of Interior to do whatever renovations they need on the interior to make this property work, no limitations in saving any of the interior finishes or character, etc. but they are going to try to retain as much of the brick wall, etc. as they can. He stated they began the work in early January of this year, deadline is year from January, and they would like to request at this time approval to convert 95% of this building to high-end loft apartments, and take entire back piece and makes them two-story loft apartments, and all of the space above the two small storefronts that would be left would also be apartments, and saving just those two storefronts and represents about 5% of the total project. He stated they have a number of people who are interested in those two small spaces and on a smaller scale easier to fill up those storefronts. He stated that Oriental Avenue is willing to provide all the remaining financing to do that rather than a tenant, and have financing approvals for total financing by Alerus Financial.
He reviewed their schedule for completion: demolition done by April 29; exterior by June 1, some site work (trees, sidewalks, dumpster access, etc.) and interior work, intent to be done by the end of the year. It was noted there 19 apartments and could jump to 21 if they opt not to have restaurant in corner piece but that decision made in time to finish this.

He stated their intent was to bring this plan as a tenant option and they asked for an extension in January to consider another option, for the University of North Dakota to move an entire program down here and take over this building, doesn't know how they would structure that with the University, if donate it or if they would pay taxes and their intent in January was to ask for an extension to consider that, they are very interested. He stated he is on the Advisory Board for the NDSU Department of Architecture and they just moved to downtown Fargo in a building that was donated and has been huge success for NDSU and downtown Fargo, the entire area around that is redeveloped and been a windfall for the downtown, and his opinion is that UND would bring a presence like that to our downtown as well, and his request for extension was to consider that. There may be a lot of issues to that that they can't agree to or settle or successfully make that happen and is requesting today to allow them to substitute full apartments in this building as the tenant, they will not change the end date, the demolition will proceed and if he can work something out with UND, he will bring it back for consideration; that today all he is asking is that they allow them the option for apartments as approval to move forward. Hamerlik asked how rigorous is schedule, Mr. Laffen stated it is very achievable and not a problem.

Hamerlik asked if staff has looked at the schedule and financing. Mr. Laffen stated that Alerus Financial is agreeable to finance what they need to do; and financing wasn't contingent in his original loan agreement. Christensen stated they granted them a year's extension and they were to have a tenant, that they don't have a tenant and don't want to see you fail, and not speaking for all council persons but would like to see them pursue their option and build out the apartments, but not in favor of seeing this go off the tax rolls and if it goes to the University of North Dakota it goes off the tax rolls. Agreement doesn't allow him to sell it, has to get prior approval if wants to sell. Loan terms were no-interest, no payment for the first five years, and forgiveness of 3.33% of the principal annually for 30 years provided the project was completed and Oriental Avenue was not in default (nonpayment of taxes and special assessments, conveying the property without prior City approval).

Christensen stated he didn't think any of council wanted to take that building back, and if want to build out apartments can do that; not interested in this coming off the tax rolls because they have agenda to get housing downtown, and if they (JLG) would pursue that, the committee would agree to recommend to the council to move forward and release the tenant clause and ask that you get hard number re. financing and wait until they get their commitment and bring it forward. Mr. Duquette stated they could move the approval forward contingent upon showing to staff the financing. Christensen stated that Mr. Duquette and Mr. Hoover could handle that aspect of it. Mr. Laffen stated what they are asking is that they be the tenant and deadline the same.

Hamerlik asked why couldn't they wait until they see the financing part, have until the end of the year and the only option is who is the tenant and moving forward. Mr. Laffen stated they have some planning to do and before securing financing would like to know that this is something they would approve if they get the financing. Christensen stated they would approve pending financing. Mr. Laffen stated they were asking that they be the tenant and UND option. Christensen stated they were not interested in that option, and stated if they get the financing would change it and they could be the tenant and redo because know that they are going to have apartments and will talk about lifting the sale option as they own the building and City shouldn't be hanging onto that. Hamerlik asked what are obligations for the City other than inspections, if Urban Development has any concerns along the way with changes in this. Peg O'Leary, Historic Preservation Commission, stated they went through early part, processing, etc., request for more exterior windows which was approved, and JLG did a good job on the exterior, location is a problem but people living next to a railroad get used to it and doesn't phase them, thinks it's very workable and good for the building

Mr. Hoover stated as he read the documents they allowed or contemplated commercial or residential on the second or third floor and doesn't see this as being much of a change, where allowing residential on the main level but off the storefront which is an issue they are talking about in another arena and that is what the group has agreed to, keeping commercial in the front. Hamerlik asked what Urban Development had to have to make this a go. Mr. Lund stated the financing is the key.

Moved by Glassheim and Hamerlik to approve request to go forward with apartments subject to financing to be reviewed and approved by the administrative coordinator and Mr. Hoover, and report back to council and grant extension and go forward. Motion carried.

2. Other items.
Mr. Hoover stated the deadline for receiving proposals to the RFP/RFQ downtown is April 1, they would like to have a committee established to review those and are suggesting the following committee: 2 members of the city council (Glassheim because in his ward and Gershman, president of the council); staff including himself, city assessor and city auditor; and 3 general members (Marsha Gunderson, representing Historic Preservation Commission and Downtown Design Review Board; Jim Hawley as downtown business interest and served on the Downtown Study Group; and Karl Bollingberg). Christensen stated he would like to be on the committee as he has been spear-heading the downtown housing; that in talking about the project and design, would like to have an architect involved in this, concerned about the capacity to build it, the design and how blend into the community; maybe reconvene committee they had. Mr. Laffen stated he wasn't going to submit proposal but design a project for group that is. It was noted there is a Downtown Review Board and they would get a person from that Board; there are guidelines in place. Mr. Hoover stated they were suggesting Marsha because she is on both Downtown Review Board and Historical Preservation Commission. Christensen asked if they could e-mail suggestions and persons who might fit in those seats. Hamerlik asked if committee would be named by the council or having Mayor announce it and could name the committee after April 1.

The meeting was adjourned at 4:40 p.m.

Alice Fontaine, City Clerk
Dated: 3/17/05