Loading...
07/19/2005 - City Council Finance Committee1 CITY COUNCIL FINANCE COMMITTEE MEETING TUESDAY JULY 1% 2005 4:30 A.M. EAGAN CITY HALL CONFERENCE ROOM 2A I. AGENDA ADOPTION II. UPDATE ON NEGOTIATIONS OF CEDAR GROVE REDEVELOPMENT DISTRICT DEVELOPMENT AGREEMENT III. OTHER BUSINESS IV. ADJOURNMENT TO: MAYOR PAT GEAGAN CITY COUNCILME MBE R PEGGY CARLSON FROM: TOM HEDGES, CITY ADMINISTRATOR DATE: JULY 15, 2005 SUMECT: COUNCIL FINANCE COMMITTEE MEETING JULY 19, 2005 A meeting of the City Council Finance Committee will be held at 4:30 p.m. on Tuesday, July 19, 2005 in Conference Rooms 2A and 2B. The following item is in order for consideration at that time. UPDATE ON NEGOTIATIONS OF CEDAR GROVE REDEVELOPMENT DISTRICT DEVELOPMENT AGREEMENT At the direction of the City Council, the Council Finance Committee has met with staff to provide feedback and direction with respect to specifics of the financial aspects of the Cedar Grove Redevelopment District Development Agreement. The City Council has preliminarily designated Schafer Richardson as the master developer and has given preliminary approval to a redevelopment concept plan for the mixed use redevelopment of the Cedar Grove area. The next step in implementing the redevelopment is to formalize a development agreement outlining the responsibilities of the developer and the City, as well as the financing assistance that would be provided to the developer to fill the demonstrated gap and leverage private sector investments to cause the redevelopment to occur. In particular, the Council identified several view points that the staff and the consultants have pursued in its negotiations with the developer. They included: • A financial structure that would insure the completion of the multi -phase project by the developer. • A commitment to the completion of City Council priorities including: A A substantial area of vertical mixed uses in a centralized area like Excelsior Grand. 9 Integration of some amount of horizontal mixed use from east to west through the area. ➢ Implementation of a transit station in one of the first phases of the development. 9 Development of a hotel for both hospitality purposes and to provide a vertical element on the west end of the site to enhance visibility of the area. ➢ Development of a range of housing types at a range of price points including a substantial commitment to mixed value and scattered site affordable housing. > Housing should fit the redevelopment plan rather than driving the redevelopment plan. ➢ Use of building finishes that meet or exceed the CGD architectural and finish material standards. In particular City Council members have identified housing types from Ryland's Maryland and Indiana divisions that would better suit the City's vision for the area than the products that Ryland has proposed that are comparable to the housing developments in Hopkins and Eden Prairie. ➢ A substantial commitment to commercial development early in the project and in every phase of the project, • Having the developer promptly repurchase property that the City acquires and making the City whole for those transactions. • Coverage of all or as many costs as possible within the financing package for the project. • Active cooperation by the developer in implementing a relocation plan and identifying receiver locations for existing businesses. • The items listed were identified from the Finance Commission and City Council minutes. Other issues may have been identified in other discussions as well. As our redevelopment consultant Ehlers has advised that the profit margins in proformas for redevelopment projects often range between 10-15% of the cost of the project. Because of the complexity of the Cedar Grove project, early discussions placed the proforma rate at 15%. Since that time, a number of changes have occurred which reduced the developer's risk. Specifically, when the Council agreed to shift responsibility from the developer for the acquisition of properties to the City being the primary party for acquisitions, the risk to the developer went down substantially. In addition, the developer is carrying the purchase price of the mall in the proforma at $5.75 million, which may or may not be an appropriate valuation in that the master developer is one of the primary partners in the mall ownership. If all aspects of the deal were to work and the upside benefit of the mall value were to accrue to the developer at the end of the project as part of the return for completing the work, that may be justifiable. If not, the value presents a larger question in attempting to finalize negotiations. At Tuesday's meeting, staff and the consultant will be present to provide additional background and respond to committee questions relative to the status of the negotiations and to discuss options for moving forward. DIRECTION REQUEST OF THE COMMITTEE: To provide feedback relative to next steps regarding the Cedar Grove Redevelopment District Development Agreement. City Administrator cc: Gene VanOverbeke, Director of Administrative Services Jon Hohenstein, Director of Community Development Sid Inman, Ehlers & Associates Rebecca Kurtz, Ehlers & Associates Bob Bauer, Severson, Sheldon Law Firm