06/12/2018 - City Council Finance CommitteeFINANCE COMMITTEE MEETING
TUESDAY, JUNE 12, 2018
4:00 P.M.
CITY HALL
FIRST FLOOR CONFERENCE ROOM
AGENDA
I.AGENDA ADOPTION
II.BLUE GENTIAN RIGHT-OF-WAY DISPOSITION
III.HOUSING IMPROVEMENT AREAS
IV.OTHER BUSINESS
V.ADJOURNMENT
Agenda Information Memo
Finance Committee Meeting
June 12, 2018
II.BLUE GENTIAN RIGHT-OF-WAY DISPOSITION
DIRECTION TO BE CONSIDERED:
To make a recommendation to the City Council regarding the disposition process for
surplus right-of-way property near Blue Gentian Road in northeast Eagan.
FACTS:
McGough Development partnered with the Eagan EDA on the acquisition and
assembly of property at the northwest corner of State Highway 55 and Blue
Gentian Road for redevelopment purposes. The property is part of Northeast
Eagan Redevelopment District #2-5.
After marketing the site for office development for several years, McGough
entered into a purchase agreement with Costco Wholesale.
During its due diligence, Costco has identified right-of-way parcels that need to
be assembled to facilitate private development.
o Southwest Parcel. The City owns this parcel. The deed states that it is to
be used for highway purposes, but there is no reversionary clause.
MnDOT has said that it will not oppose a quiet title action by
McGough/Costco to eliminate the cloud on title created by the use
restriction. Based on work by Costco’s surveyor, it appears that the
parcel lines shown on GIS are incorrect, and the legal description in the
deed places the parcel boundaries contiguous to Lot 1, Block 1, Blue
Gentian Corporate Center and includes the “Other ROW” area. A City
surveyor would need to confirm the location of property lines.
o Northeast Parcel. This is a tax-forfeited parcel with a highway purposes
use restriction and reversionary clause. The City Council has authorized it
to be conveyed to the State. Based on conversations with Dakota
County, it may be most efficient for the City to acquire the property from
Dakota County for fair market value, and then for McGough to acquire it
from the City.
o City Right-of-Way (northeast area). Costco’s surveyor is initiating title
research to determine if a portion of this right-of-way should or could be
conveyed to McGough.
POLICY QUESTIONS:
1.Southwest Parcel. Should the City dispose of surplus right-of-way through a
Request for Proposals process or sell directly to McGough to facilitate
development? Should the City obtain an appraisal for the southwest parcel?
2.Northeast Parcel. Should the City acquire the parcel from Dakota County with an
agreement that it will be purchased by McGough?
3.If additional right-of-way needs to be acquired, should the City participate in that
process? Should the City enter into an agreement with McGough to ensure that
the City’s legal, surveyor, and staffs costs for property transactions are
reimbursed?
ATTACHMENTS: (1)
FCII-1 Right-of-Way Map
Southwest Parcel
NortheastParcel City ROW
Other ROWOther ROWLot 1, Block 1 Blue Gentian Corporate Center
HWY 55
HWY 55HWY 55HWY 55
B
lu
e Wate
r
R
o
a
dBlue Gentian RoadB lu e G e n tia n R o a d
B lu e G e n tia n R o a d
200 0100 Feet ´This map is for reference use only. This is not a survey and is not indtended to be used as one.
Aerial photo-Fall-2017
Blue Gentian (Costco) Area
Agenda Information Memo
Finance Committee Meeting
June 12, 2018
III.HOUSING IMPROVEMENT AREAS
DIRECTION TO BE CONSIDERED:
To provide direction on whether the City should provide financing for Housing
Improvement Areas and whether the City’s Housing Improvement Area Policy should be
modified.
FACTS:
Housing Improvement Areas are governed by Minnesota Statutes and are a
funding mechanism for townhome and condominium homeowner associations
to finance common area improvements through the means of an owner-imposed
special taxing district.
Because private banks are often unwilling or unable to finance common area
improvements, HIA’s are used when associations do not have sufficient reserve
balances to address common area needs.
The City of Eagan has approved three HIA’s for Cedar Bluffs (2006), Meadowlark
Ridge (2010), and Coachman Oaks (2012). Repayments for all three are
progressing as originally anticipated.
In the years since the Coachman Oaks HIA, the Dakota County CDA has been
approving and funding HIA’s throughout Dakota County. Recently, however, the
Dakota County CDA has notified the City that the CDA will no longer approve or
fund HIA’s.
Countryside Villas townhome association has approached the City with a request
for HIA financing. The Scope of Work for the proposed Countryside Villas HIA
includes replacement of siding, garage doors, decks, and asphalt.
If the City proceeds with HIA financing, it may want to consider amendments to
the City’s Housing Improvement Area Policy to implement current best practices
for HIA administration.
ATTACHMENTS: (2)
FCIII-1 City of Eagan Housing Improvement Area Policy
FCIII-2 Staff Memo
CITY OF EAGAN
HOUSING IMPROVEMENT AREA POLICY
Approved September 20, 2005
I.PURPOSE
Revised October 3, 2006
Revised August 17, 2010
The purpose of this policy is to establish the City's position relating to the use of
Housing Improvement Area (HIA) financing for private housing improvements.
This policy shall be used as a guide in processing and reviewing applications
requesting HIA financing. The City shall have the option of amending or waiving
sections of this policy when detennined necessary or appropriate.
II.POLICY
It is the policy of the City of Eagan to use HIA financing to assist private property
owners only in those circumstances in which the proposed private projects
address one or more of the following goals:
A.To promote neighborhood stabilization and revitalization by the removal of
blight and/or the upgrading of the existing housing stock in the neighborhood.
B.To correct housing or building code violations as identified by the City Code
Enforcement Staff.
C.To maintain or obtain FHA mortgage eligibility for a particular condominium
or townhome association or single family home within the designated HIA.
D.To increase or prevent the loss of the tax base of the City in order to ensure
the long-tenn ability of the City to provide adequate services for its residents.
E.To stabilize or increase the owner-occupancy level within a neighborhood or
association.
F.To meet other uses of public policy, as adopted by the City of Eagan from
time to time, including promotion of quality urban design, quality
architectural design, energy conservation, decreasing the capital and operating
costs of local government, etc.
III.PROCEDURE
In order to be eligible for HIA financing through the City of Eagan the association
is to submit a preliminary application and follow the established HIA Approval
Process as attached, along with an application fee as set from time to time by
resolution of the City Council. All RIA financed through the City of Eagan
should meet the following minimum approved criteria. However, it should not be
presumed that a project meeting these criteria would automatically be approved.
Meeting these criteria creates 110 contractual rights 011 the part of any association.
Memo
To: Finance Committee
From: Jill Hutmacher, Director of Community Development
Date: June 12, 2018
Subject: Housing Improvement Areas
Introduction
Countryside Villas is working with a consultant, Doug Strandness, who has worked with several
homeowners’ associations to plan and administer Housing Improvement Areas. After receiving
notification that the Dakota County CDA would no longer be processing HIA’s, Mr. Strandness
contacted City staff to inquire about City financing. City and CDA staff met with Mr. Strandness
who offered several ideas for streamlining the HIA process. City and CDA staff agreed that
some of his suggestions may be useful additions to the City’s HIA policies and processes.
Statement of Support
State Statutes require that 50% of property owners petition for an HIA. Following the public
hearing, if 45% or more of property owners or property owners representing 45% or more of
tax capacity object to the HIA, it is not established. To avoid controversy stemming from a thin
majority, some cities have created policies that require a higher percentage for the petition.
Minneapolis, for example, requires a petition from 75% of property owners. Mr. Strandness
recommends that statements of support from property owners be required with application
submission so that resident support is gauged at the outset of the project.
Construction Loans
Mr. Strandness encourages his clients to obtain a construction loan or bridge loan from a
commercial lender. Although commercial banks are unwilling to provide permanent financing
for common area improvements, they are often willing to provide construction financing with a
provision that the City intends to provide permanent financing. Construction financing allows
the bonding to be postponed until final costs and the size of bond are known. Involving a
commercial lender and title company during the construction process eases some
administrative burdens for cities.
Page 2
Property Tax Statements
Several counties list HIA payments on property tax statements as fees to Special Service
Districts not as special assessments. Cities in these counties have noticed that they receive far
fewer resident calls or complaints about HIA fees when they are not listed as a special
assessment. The City may want to work with Dakota County on similar language for property
tax statements.
Communications
The City of Minneapolis requires that an informational statement be provided to prospective
purchasers of properties within an HIA. The statement explains the HIA fees and the
improvements that were financed.
Dakota County CDA
The Dakota County CDA has indicated that they would be willing to assist the City with HIA
administration. CDA fees could be charged to the project and included in financing.
Policy Questions:
•Should the City proceed with HIA financing for Countryside Villas?
•The City’s current HIA policy requires a petition from 51% of homeowners. Should this
percentage be increased?
•Should the City require or encourage the use of construction financing?
•Should the City work with Dakota County on language for property tax statements?
•Should the City work with the Dakota County CDA on HIA administration?