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HomeMy WebLinkAbout2002.01.15 PACKET CITY OF COTTAGE GROVE ECONOMIC Secretary DEVELOPMENT AUTHORITYlimmlimiimmo SPECIAL MEETING AGENDA TUESDAY, JANUARY 15, 2002 7:30 A.M. 1. Call to Order 2. Roll Call 3. Business Items A. 80th Street Gateway Redevelopment Project. B. Strategic Plan. 4. Miscellaneous Business Items 5. Adjourn • J:\Economic Development\EDA Packets\2002\Agendas\January 15 Special.doc • Office of the City • Administrator Memo To: Mayor ayo and Council Economic Development Authority From: Ryan R.Schroeder Date: 01/11/02(updated from 01/04/02 memo) Re: Gateway Redevelopment NOTE: This is a memorandum substantially similar to that which was presented to the EDA at their meeting of January 8, 2000. The background materials have not changed but for a few relatively small changes in some of the numbers not impacting • financial viability of the project. The conclusions within the memorandum have been changed. Background: The Gateway Redevelopment District is divided into the western district (Cottage Square Shopping Center) and the eastern district (Grove Plaza, Walgreen's and Kohl's development areas). While there has been significant bantering about redevelopment of the western district, there is not currently anything planned for that property. Alternatively, there are three projects grouped together for the eastern portion of the district. These projects are as follows: 1) Rose of Sharon/Semper Development/Walgreen's County EMV: $1,934,000 (non-taxable) Estimated Post development EMV: $2,500,000 $11.25/square foot land and building Project Area: 5.1 acres • • Page 1 • 2) Kohl's/80th Street Redevelopment/Hardwood Avenue Project County EMV: $1,096,700 ($387,000 residential, City appraisal at $821,100 and $709,700 commercial, City appraisal at $1,503,170, $135,000 of which is non- taxable) Development Agreement Post development EMV: $4,500,000 $10.48/square foot land and building Project Area: 20.4 acres of which 2.735 acres will be green space, 7.803 acres will be road right of way, and 9.861 acres will be the development parcel. 3) Grove Plaza/Home Depot County EMV: $7,045,800 Development Agreement Post Development EMV: $5,775,000 Home Depot ($13.08/square foot)and $5,045,000 Grove Plaza ($10.80/square foot) in addition to a remnant parcel estimated at$101,700 Project Area: 21.0423 acres of which 10.7204 acres is Grove Plaza, 10.1326 • acres is Home Depot, 0.6486 acres is the remnant parcel By way of comparison values elsewhere within the community are: 1) Target/Target Mall $10.70/square foot 2) Jamaica NE (CUB et al) $10.00/square foot 3) SW Gateway $2.34/square foot 4) NE Gateway(currently) $8.10/square foot 5)Remainder of NE Gateway (currently) $3.26/square foot Recent sales in the community are: Fifth Street Ventures 28.0 acres $0.57/SF Tutor Time 2.3 acres $1.20/SF SD Bus Garage 4.0 acres $2.29/SF • •Page 2 • Country Inn and Suites 3.1 acres $2.98/SF Home Depot 10.1326 acres $4.76/SF Menards Expansion 1.84 acres $5.50/SF EDA Langdon 8.255 acres $0.27/SF EDA Industrial Land various $0.85/SF Semper/Walgreen's 5.1 acres $13.95/SF Almar Village 13.58 $1.70/SF Cedarstrom Project approx. 2 acres $2.00/SF In order to accomplish the Gateway projects we are in the position of upgrading some area infrastructure as well as completing regional infrastructure that traverses the area. We are also proposing to purchase property with resale to an end user in the case of the Kohl's project. Specifically, for Walgreen's Semper we completed utility extensions and constructed the pond on their site with costs assessed back to the property. For Grove/Home Depot we are constructing a storm pond facility • (which also services the Walgreen's parcel and upstream parcels) and proposing to provide up to $500,000 in assistance to the developer upon rehabilitation of the existing shopping center in exchange for transfer of responsibility for the existing CGTAP loan to the developer. For the 80th Street/Kohl's/Gateway project, we are completing utility extensions for the West Draw that traverses the property. We are also completing the Hardwood Avenue project for which land acquisition began in 1998. Hardwood Avenue must be completed concurrent to the development due to elevations of the site and access needs of Burnet Realty, Tutor Time, US Bank, and Kohl's. We are also providing for storm water improvements associated with site development due to undersized existing infrastructure. Finally, we are conducting land packaging for the development with a liability cap of $2.6 million with those funds recovered through resale proceeds, TIF revenues, and MSA contribution for that portion of the property related to the road, and a small contribution from the Economic Development Trust Fund. This last contribution originally was contemplated in a larger amount. However, residual Gateway District TIF proceeds is now proposed to be dedicated toward that project reducing the reliance on the Trust Fund. It should especially be mentioned here that project funded storm sewer improvements are due to pipe restrictions near MGM liquor as well as lack of storage in the Hamlet Park storm system. Redevelopment of the Gateway area with current standards would create the need for these improvements regardless of where those • improvements were located. We are allocating project funding through TIF and Trust • Page 3 . Fund sources to provide for those upgrades at this time providing revenues which subsidize the area fund that would normally be expected to cover this expense. The • other storm sewer improvements were planned for system extensions related to the West Draw that run through the project area and had been programmed prior to initiation of this project. We are providing off site storm holding for the Kohl's project, which normally would incur a charge for a project of this size of $73,015. We are allocating project funds of $419,927, however, as a subsidy to the area fund expense. Likewise, the Hardwood Avenue improvement has been contemplated for a number of years. This project does result in advancing the schedule to 2002 from 2006, moving back another project as a result. Development costs by funding source for the district, therefore, as outlined above are: Project MSA Water Storm TIF EDT Assmt Kohl's Hrdwd C. 2,240,000 Water 300,000 Storm 419,927 256,073 Hidden V.St. 339,500 57,000 E. Pt. Doug. 130,000 • Acquisition 525,000 895,558 31,191 1,153,251` Demo 150,000 Semper utils 409,073 GP Pond 270,400 GP Site Rehab 500,000 District Conting. 368,809 Totals 2,765,000 300,000 609,900 2,152,485 656,073 409,073 1,153,251 *plus acquisition costs exceeding$2.6 million for the 80th Street redevelopment Additionally, the Gateway projects will result in various fees and charges being collected by the City. These include the following: Kohl's Administrative/Finance Fees: $320,150 Gateway Administrative/Finance Fees: $282,224 Kohl's Permit/Connection Fees: $155,176 • • Page 4 • Home Depot Permit/Connection Fees $ 74,537 Grove Plaza Rehab estimated Permits: — $ 9,769 Flemming Permit/Connection fees: $ 4,145 Walgreen's Permit/Connection Fees: $ 75,981 12/03 CGTAP Balance: $154,915 Public Land resale not included above: $219,453 The Gateway District, all told is an approximate 365-acre area of the community. Both the EDA and Council have expressed a desire to realize redevelopment of the area. A corollary to this development and the potential impact is TIF 1-7 and the development opportunity, which resulted in the construction of the Target store and mall at Jamaica and Highway 61. Enclosed are the financing sources and uses for that district. The Cub Store and the various tertiary developments were not part of the development agreement for the Target project but at least a portion of those properties appear to have contributed tax increments to retire TIF 1-7 debt. It would appear from the data that to facilitate that project the City acquired the land and • provided for the entire infrastructure with reimbursements primarily from TIF proceeds with additional revenues from area funds and assessments. It has been asked if the City/EDA is not contributing an excess amount to a project within Gateway due to the construction of Hardwood Avenue. Initially, it should be understood that the new Hardwood Avenue between 70th and 80th Streets is 5818 lineal feet in length (1.1 miles). That portion of the roadway north of the new intersection with the rerouted East Point Douglas is 4418 lineal feet or about 76% of the total project length. Hence with our current project estimates that portion of the project south of the Kohl's project has an expected cost/value of between $195,000 to $240,000 (larger number includes Right of Way cost) with that half of the 900 foot of roadway adjacent to the Kohl's project at a cost/value of perhaps $175,000 to $215,000. That portion of the roadway beyond Gateway, then, would have a project cost/value of between $1.7 and $2.1 million. While Kohl's is not contributing directly to Hardwood construction the project is paying for the entire $130,000 upgrade of East Point Douglas and is contributing funding toward the acquisition expense for the Hardwood corridor, East Point Douglas and Harkness. At this point in time, the City/EDA is faced with some time constraints relative to the Kohls/80th Street portion of the Gateway project. Some of those include taking steps necessary to initiate construction of Hardwood in June, reguiding and zoning a • •Page 5 portion of the property to facilitate the development, acquiring the land and removing • the structures. The immediate concern is for acquisition of the property. We began negotiations on various of the parcels in late November. Within the development agreement, the Council and the EDA recognized the potential for exercise of condemnation if we arrived at a point where we expected a negotiated purchase would not be likely. We appear to have arrived at that point in that we seem to be a significant distance from owner expectations on most of the properties required for either the Kohl's project or the Hardwood Avenue project to proceed. At their meeting of January 8, 2002, the EDA directed that staff prepare the appropriate resolutions for an eminent domain action. The intent is that the EDA consider adoption of those resolutions on January 15, 2002 followed by consideration of same by Council on January 16, 2002. The EDA would be expected to acquire these properties with resale of the appropriate rights of ways to the City in order for the City to then provide for the various infrastructure improvements. Council ratification of EDA actions will include that intent. If Council does not proceed with that intended outcome at their meeting of the 16th it would be recommended that the EDA then rescind any contrary approvals. EXISTING SITUATION: Since the most recent EDA meeting we have conducted additional activities in an • effort to complete negotiated purchase agreements and to reduce the level of risk to both the City/EDA and, in this case, Kohl's. One of those actions is to increase our offers on the residential properties. In preparation for Council/EDA eminent domain considerations our objective is to contact the attorney representing the three householders with a final offer. This offer is being made including the statement that we need all three property owners to accept thier individual offers. If any one of the property owners reject the offer I intend to recommend exercizing our right under the development agreement to abort the project. Further, given how we are funding Hardwood Avenue acquisition (primarily through project funds) it would further be my recommendation that we abort that project as well (we would intend to do no further work on the project at this time given that it is a 2006 project in the CIP and given that it had been moved up at this time only because of the Kohl's project). Alternatively, should the householders accept our offer then we would recommend consideration of the enclosed eminent domain resolution ammended to delete the residential portions and proceed with the project at this time. The offers are as follows: Stoltz County Value for Tax purposes: $123,300 • •Page 6 • City Appraisal: $255,000 City Final Offer: $306,000 Snow (all parcels) County Value for Tax purposes $125,300 City Appraisal: $311,100 City Final Offer: $414,000 Hoekstra County Value for Tax purposes: $139,300 City Appraisal: $255,000 City Final Offer: $348,000 Should we receive an acceptance of the staff offers we would ask that the Board/Council also accept those purchase agreements which will cause the Hardwood/Kohl's project to proceed. Should these offers not be accepted we recommend that the EDA/Council direct staff to notify Kohl's that we are terminating the project under the development agreement; further that we terminate all design and acquisition activities related to the project. F:\USERS\RSCHROED\Gateway analysis.doc • • Page7 • RESOLUTION NO. RESOLUTION OF THE COTTAGE GROVE ECONOMIC DEVELOPMENT AUTHORITY AUTHORIZING EMINENT DOMAIN PROCEEDINGS TO ACQUIRE CERTAIN REAL PROPERTIES WHEREAS, the Cottage Grove Economic Development Authority (the "EDA") is an economic development authority duly constituted and organized under law, with all of the powers enumerated in Minnesota Statutes, Sections 469.090 through 469.1081 (the"EDA Act"); and WHEREAS,the EDA is authorized to develop and carry out plans for the development and redevelopment of the community under Minnesota Statutes, sections 49.124 through 469.134 (the "City Development Districts Act");and WHEREAS, on January 7, 1985, the EDA created Development District No. 1 (the "Development District") and adopted a program (the "Program") for it, all in conformance with the City Development Districts Act; and WHEREAS, the Program articulates the EDA's plan to provide employment opportunities and to improve the tax base by providing an impetus for commercial development; and WHEREAS,the EDA has subsequently amended the Program,most recently on August 15, 2001 and has established Tax Increment Financing District No. 1-12 (the "TIF District") to further the objectives of the Program; and WHEREAS, the Program, as modified, contemplates the acquisition of certain real properties (the "Properties") which are located in the TIF District and which are more particularly described below in this resolution; and WHEREAS, section 469.126, subdivision 2(a) of the City Development Districts Act authorizes the EDA to acquire land needed to carry out the objectives of the Program through the exercise of eminent domain; and WHEREAS, the EDA has entered into a contract for private redevelopment (the "Contract") of land lying within the TIF District portion of the Project Area (including, but not limited to the Properties); and WHEREAS, the Developer under the Contract is not in default of any of its obligations thereunder;and WHEREAS, the Contract requires the EDA to acquire the Properties and convey the same • to the Developer no later than June 30, 2002; and CAH-208593v1 CTI60-91 • WHEREAS, the EDA has retained qualified independent appraisers to estimate the market • value of the Properties and immovable fixtures located on the Properties; and WHEREAS, the EDA staff has been unsuccessful in negotiating agreements for the purchase of the Properties. NOW, THEREFORE, BE IT RESOLVED by the Cottage Grove Economic Development Authority as follows: 1. It is necessary to acquire the Properties in order for the EDA to carry out the purposes of the Program, as modified,and the Act, and to comply with its obligations under the Contract. 2. The acquisition of the Properties is in the public interest and serves a public purpose, for the following reasons(which are not intended to be exclusive): • The Properties are located at one of the primary entrance areas of the City, known as the Gateway Area. The Gateway Area was one of the original commercial development areas of the City. Development in the area dates back to the 1960's, with some structures of more recent 1980's vintage. • The Properties are located within a TIF District, and the EDA has previously found that more than 50 percent of the buildings within the TIF District are structurally substandard as defined by state law. • • The Gateway Area has experienced a general decline since the 1990's when a newer commercial area developed at Jamaica and Highway 61. • Redevelopment is necessary to prevent further decline of the Gateway Area. • Redevelopment is expected to revitalize the Gateway Area and promote additional investment in other properties in the area. • Redevelopment is expected to increase and stabilize the tax base in the City of Cottage Grove. Currently commercial/industrial properties comprise only seven percent of the City's tax base, which is significantly below the percentage of commercial/industrial development that other suburban cities experience. • The existing infrastructure in the Gateway Area is inadequate. East Point Douglas Drive does not meet appropriate design and safety standards, and reconstruction and realignment of the road is necessary to correct the inadequacies. Realignment is also necessary to meet the needs of the proposed commercial redevelopment. Storm water improvements are needed and can be accomplished through redevelopment. 3. Acquisition of the Properties by eminent domain, in the manner provided by Minnesota Statutes, Chapter 117, is deemed to be necessary and for a public purpose and is hereby authorized. 4. The EDA deems it necessary for the reasons set forth in the Program, as modified, and in order to meet anticipated construction schedules, to proceed without undue delay to commence condemnation of the Properties. • JBD-177054v5 RC 125-213 2 • 5. The EDA's attorney and staff are authorized to commence and prosecute to completion eminent domain proceedings to acquire fee simple absolute title to the Properties, pursuant to Minnesota Statutes,Section 117.042. 6. The Properties to be acquired are described on the attached Exhibit A. 7. The EDA hereby approves the appraised values of the Properties, as set forth on the attached Exhibit B. Adopted by the Cottage Grove Economic Development Authority this day of January, 2002. James Wolcott,President ATTEST: Ryan R. Schroeder,Executive Director • • JBD-177054v5 RC 125-213 3 i EXHIBIT A Legal Description of Properties to be Acquired Parcel 1: Owners: Eugene E. Stoltz and Joan M. Stoltz PID: 08-027-21-33-0041 Legal: All that part of the Southwest '/4 of the Southwest 1/4 of Section 8, in Township 27, Range 21, Cottage Grove Township, described as follows, to-wit: Commencing at the Southeast corner of the Southwest 1/4 of the Southwest 1/4 of Section 8, Township 27, Range 21, Cottage Grove Township; thence North along the East line of said Southwest 1/4 of Southwest 1/4 for 619.5 feet; thence West and parallel with the South line of said Southwest 1/4 of the Southwest 1/4 for 272.0 feet to the point of beginning of this description; thence North and parallel with said East line of the Southwest 1/4 of the Southwest 1/4 for 417.5 feet; thence West and parallel with said South line of the Southwest 1/4 of the Southwest 1/4 for 84.0 feet; thence North and parallel with said East line of the Southwest 1/4 of the Southwest 1/4 for 280.0 feet, more or less, to the North line of said Southwest 1/4 of the Southwest 1/4; thence West along said North line of the Southwest 1/4 of the Southwest 1/4 for 958.0 feet, more or less, to the Northwest corner of said Southwest 1/4 of the Southwest 1/4; thence South along the West line of said Southwest 1/4 of the Southwest 1/4 for 33.0 feet; thence East and parallel with said North line of the Southwest 1/4 of the Southwest 1/4 and 33.0 feet Southerly therefrom for 561.0 feet; thence South 7 degrees 00 minutes East for 686.76 feet, to a point 619.5 feet North of said South line of said Southwest 1/4 of the Southwest 1/4; thence East and parallel with said South line of the Southwest 1/4 of the Southwest 1/4 for 406.59 feet to the point of beginning. TOGETHER with an easement for ingress and egress by vehicles and on foot from the Town Road located on the South line of the Southwest 1/4 of the Southwest 1/4 of Section 8, Township 27, Range 21 to the South line of the above described real estate over what is commonly known as the "Old School House Road", said roadway being 33 feet in width. EXCEPT for the following described parcel, to-wit: all that part of the Southwest 1/4 of the Southwest 1/4 of Section 8, Township 27, Range 21, City of Cottage Grove, Washington County, Minnesota described as follows: Beginning at the Northwest corner of said Southwest 1/4 of the Southwest 1/4; thence South 00 degrees 37 minutes 41 seconds East,bearings based on the Washington County Coordinate System, South Zone, along the West line of said Southwest '/4 of the Southwest '/4, a distance of 33.00 feet (2 rods); to the Northwest corner of that parcel described in Book 192 of Deeds, page 78, on file and of record in the office of the County Recorder, Washington County, Minnesota; thence North 89 degrees 00 minutes 10 seconds East, parallel with the North line of said Southwest `/4 of the Southwest 1/4, a distance of 561.00 feet (8.50 chains) to the Northeast corner of said parcel described in Book 192 of Deeds, Page 78; thence North 07 degrees 59 minutes 50 seconds West, along the Northwesterly projection of the East line of said parcel described in Book 192 of Deeds, Page 78, a distance of 33.25 feet to its intersection with said North line of the Southwest 1/4 of the Southwest 1/4; thence South 89 degrees 00 minutes 10 seconds West, along said North line of the Southwest 1/4 JBD-177054v5 RC 125-213 A-1 JBD-177054v5 RC 125-213 3 r 4 City of Cottage Grove • Memo To: EDA Members From: Michelle A. Wolfe,Assistant City Administrator rk, Date: 01/11/02 Re: Strategic Plan The most current draft of the 2002 Strategic Plan Update was distributed to you in last week's packet and also via e-mail. We have not made any additional changes to the document. Due to a lack of time at the last EDA meeting, it was decided to spend time discussing the proposed document at the January 15 • Special Meeting. As we have mentioned previously, there was hope that the EDA could approve a plan that could be forwarded to the City Council for review. The Council is planning a goal-setting session for February and staff hoped to have the EDA strategic plan on the agenda for that session. At the January 15 meeting, staff is looking for input, guidance, proposed changes, and any other comments regarding the plan. If comfortable, the EDA can approve a draft of the plan and authorize forwarding it to the City Council. • G:\Economic Development\EDA Memos\2002\Jan 02 Strategic Plan 2.doc