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Minutes/Finance/Development Standby Committee
Tuesday, October 18, 2005 - 5:00 p.m.____________

The Finance/Development Standby Committee met on Tuesday, October 18, 2005 at 5:00 p.m. in Room A101 in City Hall with Committee Chair Christensen presiding. Present at roll call were Christensen, Glassheim, Hamerlik, Gershman.

Others present included: Greg Hoover, Keith Lund, John Schmisek.

1. Update of Downtown Housing Projects.
Keith Lund, Urban Development, reported that the Schoen Associates project of the Elite Brownstones is moving along nicely in terms of the paperwork and legal documents, documents prepared by Kurt Tingum for their office and were reviewed by staff, and have been submitted to Schoen Associates for review, do not anticipate having problem with them; that they haven't closed on the Herald lot yet but expect to do so soon and at the time that they do that will be able to execute the documents for acquisition of that lot. He stated they want to bid the project out in 60 days and intend to start in the spring, March; 26 units - they've redesigned 5 units into 3-story units with balconies and be quite unique and attractive, those units are along the side near the alley and taking the ones that are less desirable and making them the neatest and are being really creative on the project. They are already thinking of Phase II, have high quality people looking at these units and are very interested in having downtown being their backyard, and a lot of energy and excitement surrounding this project.

He stated that they were communicating with Fannie Mae and going to be increasing the line of credit to facilitate this project in the next month or so and that is on track as well. It was noted that as of Friday all units were sold out.

Christensen stated that we can explore the acquisition of additional land north of City Hall, and as we have the ability to exercise eminent domain for economic development purposes, that we might want to think about that, and seems like a nice block to clean up and could recommend that and if did that now, there would be some thought as to value of the property and would most certainly go up if we build a second set of Brownstones before we took grounds along North 3rd Street. Mr. Lund stated in his last meeting with Mr. Kobetsky they agreed to develop a plan for Phase II as soon as they get the legal documents wrapped up for this project; they are very excited about Phase II and combined energy will get us focused on that.

Hamerlik stated that if some of this other building is not going on, they expressed some interest that they maybe would like to RFP and get involved with other lots, across from Augustana Lutheran, and whether doing downtown across from the Ryan or Dacotah, which will come up at next presentation, that fits together with how much money they have and how much time they have, etc.

Mr. Lund stated that the MetroPlains proposal development for the site in which the Elite Brownstones are going now makes a counterproposal to build a similar project on parking lot , that they have been wrestling with the budget on that and their need for tax abatements, CDBG and HOME funds, etc. and working harder on the financing of it, the 2 lots closest to 3rd Street, and the land behind those lots is actually within the Corps of Engineers work limits through 2006 and part of MetroPlains proposal was to build covered parking in that area. Another factor that made it harder to work on was that all the CDBG and HOME funds have been dedicated and the council is going to make final approval of projects on November 7 but those projects are really in place right now so we really didn't have any available funding for 2006. He stated he wrote them a letter in early October that explained these issues and said that we'll have to defer for a while and if move this project forward will be in step with the funding cycles for funds you are looking for; and then forwarded them a map prepared by engineering of the site issues, information he just received today so that they have a meeting with engineering on Thursday morning to talk about the site issues and how the project could be phased around the Corps work limits and they will get back to him sometime next week to give him an update on the meeting with engineering..

Hamerlik asked at what point do they say that time's up, that we have to be fair with them but funding has something to do with this, that it seems as though they could just wait and not get anything done and should put some sunset clauses on it. Gershman asked how they could mitigate the parking issue there and make this project work because that is the downfall of that site, that we don't have enough parking downtown and is going to cost us $2.3 million to replace that parking.

Mr. Lund reported that the site plan that they have submitted, which is being reviewed, contemplates maintaining Riverboat Road or 1st Avenue North between Dacotah and the site and maintains it as a public right of way and their hope would be that diagonal parking could be installed because it is a dead-end (we're losing 52 parking spaces on that parking lot) and if did diagonal 40 would be put back, and a bit of replacement for public parking, however, it is obvious that some of that would be taken up by the development that occurred there and in effect a net loss of parking. It was noted that this is surface parking for the businesses and the bars - that there is going to be a dead-end with floodwall there and cannot go between DeMers and Dacotah Hotel - Mr. Lund stated he thought the alley would be maintained for fire protection and access to the lift station on DeMers Avenue just to the east of Amazing Grains. Christensen stated we need downtown parking, no place for people to park and on Sundays no parking because used by people who live in the apartments downtown; and not going to be building any more parking ramps. Gershman stated that he would think the parking lot is tremendous asset to the city and that was his concern when he saw that proposal, and if they are able to replace 40 of the 52 lots, then they need to come up with a plan to replace all the parking and that should be on the project and not on the City.

Glassheim stated that in addition to the parking, he was concerned re. the financing and the amount they wanted from the City. Mr. Lund stated the latest rendition of the financing they had worked the tax abatement timeframe down to a 5-year 100% and rather than $450,000 CDBG or HOME deferred loan were looking for $650,000 so tax abatement went down and the cash request up a little bit (believes is a 13-year deferral). He stated they had discussions after every meeting of finance/development where discussed the project, and tried to determine what committee's preference was vs. tax abatement vs. longer period of tax abatement or shorter period, and larger or smaller contribution of federal funds, i.e.;, CDBG or HOME and worked in several different ways but complicated project and his personal opinion is that it is still a little overpriced, however, they haven't budged on the number and explanation is that it is downtown construction and keeping with historical character and more costly to put parking in place in a downtown environment and build a higher story building with those types of elements.

Greg Hoover stated from what Mr. Lund has told him, not in a position to do anything in 2006 and suggested that they consider allowing them to put this on hold and ask them to move onto their project at 500 University Avenue and come back in 30 days with full site plan, rearrange financials and put that on hold for awhile as do have parking issues and do have engineering and dike issues. Hamerlik stated he would agree with that except he didn't know if you have to put them on hold and let them proceed in a slow manner. Glassheim stated that he would want to send the message that the price is too high and the parking has to be solved or not interested, and if they want to still work on it, have to work to get the cost to the City down and to bring in more parking spaces. It was noted that a ratio of 1.3 is not enough.

Mr. Hoover stated that they don't have enough parking planned for their tenants, take care of them all, too spendy at this time and must be significant reduction in the amount of City participation and have the issues of replacement parking. Christensen asked how long let them work on this - Mr. Lund stated December 31, 2005. Glassheim asked what difference does it make if there is a time limit or not, that as far as he's concerned it is probably dead because they are not going to solve those two problems - Hamerlik stated some kind of progress needs to be made at that time and then give deadline. Glassheim stated we will want to make a final decision at the end of January and to pass on that information and want to make final decision on our involvement by the end of January.

Mr. Lund stated they have specifically told him that their priority is the larger project and would hold on the University project until this was resolved. Mr. Hoover suggested hold on this one until January 31 also. Mr. Lund stated the amount of $380,000 was City contribution, original application was a grant and after further discussions looking for something deferred; that does not include buying the house.

Gershman stated that we have somebody that sees the downtown housing and work by repaying a loan, we would give the land and that has some value and why not have that as a template on the University, clean the land and buy the house and that is our contribution and the rest will be a low interest loan through Fannie Mae, why change something that has worked with the Schoen project and why change that, and that should be a model for us.

Christensen stated he would ask if they were so inclined to discuss it that we ask them, that we have two priorities now and would like to know what they are thinking about doing on the 500 University project and when they think they would start. Gershman asked if we should let them know what we think the parameters of the structure of the deal would be. Mr. Lund stated the original proposal was a condo and as they considered it further they thought they might change it to apartments, that if using CDBG or HOME funds you are forced into low income arena - 8 units with house purchased. Mr. Lund stated they can use CDBG funds for acquisition, demolition, relocation and if use CDBG funds a minimum of 20% of the units, whether owner occupied or rental, have to be low income and a maximum of 51% depending on the proration of pre-development cost paid for with CDBG in relation to the entire project.

Christensen stated if 12 units at $120,000 per unit, $1.7 million and could do another townhouse project or condos; it is in our renaissance zone and 5-year tax break and other breaks as far as buying the property, and that there are a lot of incentives for people to buy, and would like to see us move forward and acquire the lot with the house and then see if these people can get off the dime and get it done, and if can't, will try again and find someone else; and idea is to make sure that everybody understands. that we will work with you as much as we can but would like to have conversations to know what we're working with. Mr. Lund stated that staff has allowed them to put aside while we've worked on this other project, and if want to accelerate it and say let's do it or not, we should establish a deadline and talk to them about the parameters of the deal we have discussed here and give them an opportunity to come back to us, but thinks deadline is appropriate and if don't reach an agreement by that time, then we can move forward with things we have discussed here. Mr. Lund stated his approach is to send a similar letter and say that you wanted to wait until this was done, but we need to determine whether this project is feasible or give them to the end of January and if don't have a deal, call it a day. Christensen stated to also suggest to them that financing that we have available - Mr. Hoover stated they would have to talk to Fannie Mae. Mr. Lund stated it depends on when the project come in because we have a large repayment from the first bond we floated for infrastructure and affordable housing district and that would be paid in the later part of 2006 and over $2 million coming back for that and when that comes back in we will be flush.

Christensen stated that if the Brownstones people are building in March and they are all sold out, then they will probably have another nice project downtown and have some inventory and maybe opportunity for those people to actually sell something. Glassheim stated there was some thought with the condos going in that we wanted apartments rather than more condos. although condos nicer. Mr. Hoover stated have rooms now and no condos and his opinion is that not over saturate the market with condos and on January 1 intend to have rental rehab program that they introduced last summer which is going to make better rental units downtown, and have two things going on at the same time.

Mr. Hoover stated this is a market driven decision, had an unproven market, now we have market and have shown there is a market there and have demonstrated that you don't need grant money. Glassheim stated we want to do something with them, want a proposal, don't want any grant money.

Christensen stated to ask them to update project they may have - and inform them at this point that no grants, but low interest money available - and our understanding that they shift from condos to apartments and ask them to give us their proposal as to apartments and original proposal as to condos and would appreciate that information by 31st of January, 2006 so they know what we are looking for, that committee wants that information because they have to report it to committee sometime in beginning of February.

Glassheim stated there have been conversations about renovating office space, and is that part of the response of that committee, making some monies available to conversion of office space into apartments. Mr. Lund stated this committee has seen it and will need to run it through council

Mr. Lund stated they have two pots of money, one is terminated rental rehab program, half million dollars, market based, 4% non-deferred loan, have proposed a LMI unit low income program where there would be a 5-year deferral and 5 years to pay, with 0% interest, and will move that to the council before the first of the year and kick that off January 1.

The meeting was adjourned at 5:40 p.m.
Alice Fontaine
City Clerk