06/25/2002 - City Council SpecialAGENDA
SPECIAL CITY COUNCIL MEETING
TUESDAY, JUNE 25, 2002
5:30 P.M.
CITY HALL COMMUNITY ROOM
I. ROLL CALL & AGENDA ADOPTION
II. VISITORS TO BE HEARD
III. DISCUSS PROPOSED ZONING ORDINANCE UPDATE
IV. REVIEW CEDAR GROVE AUAR
V. REVIEW COMMUNITY-WIDE SURVEY
VI. REVIEW PROPOSED POLICIES
RE: COMMUNITY CENTER OPERATIONS
VII. UPDATE & DISCUSSION RE: REVERSE 9-1-1
VIII. STATUS UPDATE ON WESCOTT SQUARE
IX. OTHER BUSINESS
X. ADJOURNMENT
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' _ city of eagan
MEMO
-TO: HONORABLE MAYOR AND CITY COUNCILMEMBERS
FROM: CITY ADMINISTRATOR HEDGES
DATE: JUNE 21, 2002
SUBJECT: SPECIAL CITY COUNCIL MEETING /TUESDAY, JUNE 25
A Special City Council meeting is scheduled for Tuesday, June 25, 2002 in the City Hall
Community Room to discuss various topics that require public policy direction by the
City Council. The agenda includes the following:
DISCUSSION REGARDING CHAPTER 11 (ZONING ORDINANCE) UPDATE
City staff and a subcommittee of the APC and Council have worked with a consultant
over the past two years to reorganize and update Chapter 11. The APC held a Public .'•
Hearing on April 23, 2002 and recommended approval of the Zoning Ordinance
Amendment. At their regular meeting of May 21, 2002, the Council continued this item
and directed it to their June 2002 Special Meeting. Due to the substantial size of this
draft document, a copy will not be included with the June 25 packet. If any member
needs another copy, please contact the City Administrator's office.
DIRECTION TO BE CONSIDERED:
To provide staff with any suggestions or modifications to the proposed zoning ordinance
and direct placement of the ordinance as an action item on a future regulaz City Council
agenda.
REVIEW CEDAR GROVE AUAR
In September 2001, the City Council issued an order to commence an Alternative Urban
Areawide Review (AUAR) for the Cedar Grove Redevelopment Area. SRF Consulting
Group was retained by the City to perform the AUAR analysis. The draft AUAR has
been completed for City Council review and is attached without page number. SRF has
provided- an executive s ary of the report highlights. That summary is attached on
pages ~ through Staff will give a brief presentation and answer questions
that the Council may have.
DIRECTION TO BE CONSIDERED:
To direct staff to place the AUAR on the July 2, 2002 City Council Consent Agenda to
commence the public comment period.
REVIEW COMMUNITY-WIDE SURVEY
As an action item on the June 4 City Council meeting agenda, Decision Resources, Ltd.
(DRL), was approved to conduct acommunity-wide survey including special questions
on open space for the City of Eagan. The City considered interest from anEagan - -
reseazch firm (Power Systems), which did not submit a quote, and proposals from ;
Anderson, Niebuhr and Associates, Inc., and Decision Resources, Ltd. DRL was selected .
due to their considerable experience conducting similar community-wide surveys in other
metropolitan communities, including Apple Valley, Burnsville, Lakeville, Rosemount
and West St. Paul. Eagan can use the database of other cities as a benchmark to compare
results with Eagan's community-wide survey.
After reviewing topical areas with the Council, DRL will draft questions and submit the
questionnaire for the survey to the City staff for approval prior to the commencement of
interviews. DRL asked that the survey as to timing, questionnaire content, and
population sample to be surveyed shall be mutually agreed upon by the parties. The
sample size that has preliminarily been agreed upon between DRL and City of Eagan is
400, which will allow for a projectable accuracy of +/- five percent. The cost of the DRL
survey, with additional questions, is estimated at $12,000-$13,000. Additional questions
are $135 each. The projected cost for the community-wide survey is well within the
$20,000 that was budgeted for 2002 for acommunity-wide survey in the
Communications Department.
The purpose of this item being placed on the workshop agenda is to allow DRL to present
the survey topics, make sure all key topical areas of interest to the Council are covered,
and receive agreement and direction by the City Council. DRL will draft specific
questions for the questionnaire and submit to City staff for final approval. The intent is
to complete the questionnaire and field the telephone survey in July so that results can be
obtained by early August, as requested by members of the Council and interested parties.
A copy of the survey topic azeas is attached without page number for Council review and
Bill Morris, Ph.D., of DRL, will present the suggested topic areas to the City Council for
review and discussion at the meeting on Tuesday.
DIRECTION TO BE CONSIDERED:
Provide DRL with the proper direction on questionnaire topics for the City of Eagan
community-wide survey.
~.
REVIEW PROPOSED POLICIES RE: COMMUNITY CENTER OPERATIONS
The Community Center Operations Committee consisting of City Councilmembers
Bakken and Carlson met with Parks and Recreation Director Vraa and City Administrator
Hedges to provide a brief update on various public policy issues concerning the
Community Center operations. For a copy of the discussion that transpired at that
committee meeting held on June 3, 2002, refer to pages ~ through ~~.
At the direction of the City Council, the wording for a plaque is under consideration that
would be placed in the entrance of the Community Center Building sometime this fall.
There has been some discussion on the part of the Council that a ceremony could be held '
at that time which would provide the community with an update on the construction -
status of both the Community Center and Central Park. Staff hopes to have a couple of
layouts for the City Council to review at the meeting on Tuesday for wording on the
plaque. A decision will need to be reached soon so the plaque can be ordered and
received in time for its placement in the Community Center during September/October.
DIRECTION TO BE CONSIDERED:
To provide direction regarding public policy issues pertaining to the operations of the
Community Center. Also to provide direction regarding verbiage to appear on the Eagan
Community Center -Central Park plaque.
UPDATE & DISCUSSION RE: REVERSE 9-1-1
As a part of the City Council goals for 2001/2002, a goal was adopted to study a "rapid
outbound telephone notification system". The Police Department has completed their
study of the emergency phone network (Reverse 9-1-1) and for a copy of that report, refer
to pages ,~ through ~~/ .
Chief Therkelsen will be present to review the report and answer any questions at the
City Council work session on Tuesday.
DIRECTION TO BE CONSIDERED:
To provide direction regarding the Reverse 9-1-1 System.
STATUS UPDATE ON WESCOTT SOUARE
In Apri12002, the City Council directed staff to enter into a preliminary redevelopment
agreement with CommonBond Communities for the purpose of redeveloping the Wescott
Squaze neighborhood under single ownership. City staff, with the assistance of fiscal
consultant Springsted, began working with CommonBond to clarify the project financing
structure, timelines, and other issues. CommonBond hosted a meeting of current property
owners in May to outline the vision for the azea and the process schedule.
Shortly after CommonBond provided a preliminary project budget to the City and after
the owners meeting, the City learned that a number of units had sold for more than
$100,000 each and that several purchase agreements for similar amounts were pending.
The sales figure and pending agreements were significantly higher than the acquisition
figure budgeted by CommonBond, which created a larger gap in the financing structure
than originally projected.
At the same time the sales were occurring, staff and CommonBond were reviewing a
request from Jeff Johnson to consider an alternate acquisition structure. Owners were
concerned that the CommonBond schedule, which includes semi-annual or annual
funding cycle opportunities, was too lengthy. The alternate structure would have the City
acquire the properties in a much shorter time•frame and hold the properties for a number
of years. CommonBond would act as the property manager during that time until a point
when the City would be taken out of the project.
CommonBond has indicated an interest at looking at the alternate structure if the City is
interested. A letter from CommonBond in this regard is attached on page ~~
Springsted has done an analysis of the structure. That analysis is attached on pages
through,
Given the changing market conditions and this latest proposal, a redevelopment
agreement should not be drafted until more direction is received.
DIRECTION TO BE CONSIDERED:
To give staff direction regarding the alternate structure and preliminary redevelopment
agreement with CommonBond Communities.
/s/ Thomas L. Hedges
City Administrator
CONSULTING GROUP, INC.
Transportation • Civil • Structural ^ Environmental • Planning ^ Traffic ^ Landscape Architecture • Parking
SRF No. 001420
MEMORANDUM
TO: Jamie Verbrugge, Assistant City Administrator
City of Eagan
FROM: Nancy Frick
Senior Environmental Planner
DATE: June 20, 2002
SUBJECT: CEDAR GROVE REDEVELOPMENT AREA AUAR OVERVIEW
The Draft Alternative Urban Areawide Review (AUAR) for the Cedar Grove Redevelopment Area is
scheduled for approval for distribution by the Eagan City Council July 2, 2002. This memo
summarizes the key points presented in the AUAR.
AUAR Study Area
• 258-acre site along TH 13 between Cedar Avenue (TH 77) and Seneca Road.
• Existing uses: retail, service commercial, office, restaurant, warehouse, and residential. Twenty-
eight acres of vacant land.
Development Scenario (attached figure)
Sub-Area 2 Sub-Area 3
Sub-Area 1 south of TH 13, south of TH 13,
north of TH 13 west of Rahn Road east of Rahn Road
Site A: 400,000 sq. ft. office Site A*: 2,500 sq. ft. transit Site A*: 25,000 sq. ft. retaiU
station, 120-unit hotel, 100 units servicelcommerciaUrestaurant
senior housin
Site B: 16,000 sq. ft. office Site B: 50,000 sq. ft. Site B*: 25,000 sq. ft. retaiU
retaiUoffice, 625 units high service%ommerciaU restaurant
densit residential
Site C*: 175,000 sq. ft. office Site C*: 269 townhomes Site C: 4,200 sq. ft. service
commercial, 4,800 sq. ft.
restaurant, 20,000 s . ft. retail
Existing uses to remain: 35,800 Existing uses to remain: 34,940 Existing uses to remain: 45,626
sq. ft. school, 100,340 sq. ft. sq. ft. retaiUservice%ommercial sq. ft. retaiUservice/commercial,
office, 235,000 sq. ft. warehouse 7,99 sq. ft. restaurant, public/
ark
*Interim de~~elopmen[, assumed to be developeo by _uu~ ror analysts purposes.
One Carlson Park~ti•a}~ I~TOrth, Suite 150, Minneapolis, 1~1\' 55447-4443
Telephone (763) 475-0010 ^ Fax (763) 475-2429 ^ http://~~~«-ti~•.srfconsulting.com
-cr:t~,2,•.~ ~,,...,
Cedar Grove AUAR Overview - 2 - June 20, 2002
Scenario developed as a result of community planning process initiated in 1999; refined
development concept devised in 2001.
• Market-based "worst-case" scenario for impact assessment.
Environmental Issues
Traffic
• Traffic operations in the assumed interim development year (2005) will be maintained at an
acceptable Level of Service (D or better) with these roadway improvements:
- Blackhawk Road/Silver Bell Road: Installation of a traffic signal.
- Nicols Road/Diffley Road: Construction of an additional eastbound left-turn lane on Diffley
Road. The eastbound approach would then consist of dual left-turn lanes, one through lane and
one shared through/right-turn lane.
- TH 13/Silver Bell Road: Construction of additional left-turn lanes for the north and south
approaches of TH 13 to accommodate future traffic volumes. The north and south approaches
on TH 13 would then consist of dual left-turn lanes, two through lanes and aright-turn lane.
The City is implementing other recommended improvements to Silver Bell Road as part of the
previously programmed realignment of Silver Bell Road, Cedarvale Boulevard and Beau
D'Rue Drive. The west approach of Silver Bell Road will consist of dual left-turn lanes, one
through lane and aright-turn lane. The east approach of Silver Bell Road will consist of dual
left-turn lanes, two through lanes and aright-turn lane.
Traffic operations in the assumed full-build development year (2015) will be maintained at an
acceptable Level of Service (D or better) with these roadway improvements:
- Blackhawk Road/Silver Bell Road: Extension of the northbound left-turn lane on Blackhawk
Road to accommodate future a.m. peak hour traffic volumes; construction of a southbound
right-tum lane on Blackhawk Road.
- TH 13/Silver Bell Road:
Increasing intersection capacity as follows: reconstruction of TH 13 to six lanes;
construction of an additional right-turn lane on the west approach of Silver Bell Road. The
west approach would then consist of dual left-turn lanes, one through lane and dual
right-turn lanes.
- OR -
• Allowing a reduced amount of traffic impact (as compared to that resulting from the AUAR
Development Scenario) by implementing development limits and management
requirements that together result in peak hour trips within a limit (trip budget) assigned to
each development site.
• Actual timing of roadway improvements will depend upon the implementation of the Development
Scenario, which may occur faster or slower than assumed for analysis purposes.
6
Cedar Grove AUAR Overview - 3 - June 20, 2002
Traffic-related Noise
• Project-related increases in traffic noise levels would be, at most, barely perceptible.
• Noise walls are not required and would be impractical and ineffective.
Water Quality; Fish, Wildlife, and Ecolog'cally Sensitive Resources
• Thirty-eight percent of overall drainage area is cutTently impervious; 54 percent of drainage area
will become impervious surface upon full build-out.
• Storm water analysis addresses pretreatment of the additional runoff generated by increase in
impervious surface; mitigation presented for five sub-watersheds.
• Nicols Meadow Fen Complex located immediately north of AUAR study area, involves two sub-
watersheds.
- Rare combination of sedge fen, calcareous seepage fen, spring-fed trout streams.
- Provides habitat for a number of rare and endangered plant species.
- Depends upon the quantity and quality of groundwater; suffered past degradation.
• Mitigation for sub-watersheds affecting fen area and trout creeks focuses on low impact design and
infiltration.
• Mitigation results in overall lower phosphorus loads than existing conditions.
• Erosion and sedimentation will be controlled per new City land disturbance and erosion control
regulations.
• State and Federal regulations will also be applied during construction (NPDES).
Potential Environmental Hazards
• Several sites with potential to encounter contaminated soil and groundwater.
• City will require developers to investigate sites and implement appropriate clean-up plans.
Additional Findings
• Existing sanitary sewer trunk lines and trunk water main lines have capacity for development.
• Air quality analysis shows that state carbon monoxide standards will not be exceeded.
• Cultural resources investigations found no archaeological sites and no buildings on National
Register.
Mitigation Plan
• Required as part of the AUAR Process.
• City commitment to ensure that mitigation actions are properly implemented and monitored.
• Presents financial responsibility for mitigation.
Cedar Grove AUAR Overview - 4 - June 20.2002
Next Steps
• Notice of Draft AUAR Availability published in EQB Monitor.
• 30-day comment period.
• City responds to comments and adopts a Final AUAR and Mitigation Plan.
• City updates AUAR if substantial changes in development plan or other new information; AUAR
must be updated five years following adoption.
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PROPOSED LAND USE FOR REDEVELOPMENT PARCELS
CEDAR GROVE AUAR
Cca~1^~cGac~T.ic Cirj of Eagan
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Meeting of the Operations Committee
June 3, 2002
Present at the meeting were Council Members Peggy Carlson and Paul Bakken., City of
Eagan Administrator Tom Hedges, Director of Administrative Services Gene
VanOverbeke ,Director of Park and Recreation Ken Vraa
Director Vraa distributed a memo dated May 31 which outline a number of issue for
consideration at the meeting and would be the agenda.
Item One. Consideration of the hiring of a community center General Manager was
reviewed. Hedges spoke to the need to begin for the planning of the Centers operation
and this would follow the example for the Civic Arena and Cascade Bay. This item will
appear on the June 4 council agenda for formal approval.
Item Two. It was expected that responses to the RFP would be available to review.
Despite an extension of the deadline to allow for more time to prepare a response, none
other then an internally generated response by the recreation division, was received.
Director Vraa noted that he believed that there was greater opportunity for the city to
jointly market this facility with Cascade Bay. Council Member Bakken stated that in
absence of anything to review, it seemed that the matter is resolved and we need to move
on. It was agreed that the City would now operate the fitness component.
Item Three. Discussion on the financing for the senior programming and teen
programming; should it remain in the Recreation budget or be transferred to the
Community Center as a program expense? Discussion followed. It was noted that special
programs offered to the seniors or the teens may be done on a fee basics and that a
portion of the fee may include a cost for use of the space as a "rental charge" Director
Vraa noted that currently about 25% to 40% of the programmers time goes to seniors, but
that percentage will likely grow given the experience of other community. That staff has
tried to cultivate the culture that volunteers will be needed ant that there will be fees for
many programmed activities, as there is now a fee. The direction was to have the
programming stay within the recreation department budget.
Item Four. Center Programming. Discussion about the generation of programming at the
Center and existing recreation staffutilizing the facility as an extension of programs.
Question as to the responsibility to develop center programs to fill down times. Direction
was that this would be the responsibility of the Center Manager and staff.
Item Five: Room Usage Policy. Director Vraa explained that staff has received numerous
calls from non-profit organizations regarding their desire to use the banquet room(s) and
meeting rooms for their organization and want to book out a year in advance. The issue is
does the new community Center follow current policies covering the community room in
city hall or follow new policy guidelines. Bakken noted that there should be a fee
attached if the facility is to be revenue neutral. Carlson questioned if groups shouldn't get
~o
free use since they are paying for the center when they voted for it. Discussion about the
number of groups who would want to use the facility and that it would take time that
might be desired by paying groups reducing revenue. Carlson suggested that perhaps it
would be boards of organizations and not each group within the organization that would
have free access. After discussion, staffwas asked to do a survey as to how other
communities were handling this issue. Several communities were identified. It was
decided to leave out Rosemount and Inver Grove Heights because they have an Army
National Guard attached and that may change the structure by which they operate.
Item Six. Banquet Manager. Director Vraa related the amount of time required for
servicing individuals interested in the banquet room and the need to have an early hire of
this individual. Carlson questioned how much time was necessary and that all the city
should have to do is book the room as long as we have a cater. Vraa explained some of
the "hand holding that also is required. Business use was also discussed and that some
groups expect and want you to handle all the arrangement and are happy to pay for that
service. Bakken agreed that groups will pay for that and that the time commitment is
likely to a more than one would realize.
Item Seven. The hiring of a head maintenance individual was also identified as an early
hire. There was little discussion but recognition that this would be necessary and that a
staff person should be hired during the fourth quarter of the year to begin to track on the
operational equipment.
Item Eight. ECVB space and Chamber. Carlson said that the ECVB wants all of the space
and we should meet with them to determine this issue.
Item Nine. Senior/Teen rental. Vraa noted that the Council had determined in January
that this space could be rented but at the senior meeting in May there was a different
direction given to not rent. Carlson and Bakken both endorsed the idea that the space
should be rented when it did not conflict with program use by either the seniors or the
teens.
Item Ten. Pavilion and Bandshell Administration. Vraa noted that his item did not need
to be determined at this meeting but some thought needs to be explore in regards to the
programming and use of the bandshell and other components of the park For servicing of
the public, it would be better to continue to schedule the pavilion through the department
along with other facilities .Carlson suggested that the Bandshell could be administered
through the Banquet manager or other manager at the Center.
//
MEMORANDUM
EAGAN POLICE DEPARTMENT
3830 Pilot Knob Road
Eagan, MN 55122
651-681-4700
651-681-4738 FAX
DATE: June 20, 2002
TO: City Administrator Thomas Hedges
Honorable Mayor and City Council
FROM: Chief of Police Kent Therkelse~
SUBJECT: Emergency Phone Network (Reverse 9-1-1)
Background
In their 2001-2002 strategic planning process, the Eagan City Council established as goa19.1, the
implementation of a "rapid outbound telephone notification system". These systems, aze available from
a variety of providers and aze often referred to as "Reverse 9-1-1", which is a trade name used by
company who provides a system.
The general theory of these systems is to provide a public safety agency with the capability to provide
warning information to citizens on hazards, which may threaten public safety. The warnings aze
provided by automatic calling to a user defined area or list of phone numbers. A recorded message is
provided to the phone subscriber with instructions from the public safety agency. Hazardous material
spills, flooding, escaped or at-large criminals, lost children, or other situation requiring the public to take
protective actions are examples of situations where systems such as this have been used.
Another useful application of this technology is emergency call back of public safety personnel or as a
backup notification system for the fire service.
When this goal was initially adopted it was hoped that a system could be implemented in other Dakota
County cities to make automatic notification more useful and cost effective. Dakota County Emergency
Management and the City of Eagan explored partnerships with other cities, but to date no other cities
have expressed interest in the system. The Community Advisory Council to Flint Hills Resources
(formerly Koch Petroleum Group) offered financial support for amulti-city project but is not willing to
support a single city project.
Available Systems
The three basic systems choices for rapid outbound phone systems aze: Stand-alone, subscription, and
911 provider. The different vendors provide slightly different features, but for the sake of comparison I
will describe the general features of each of the three choices.
/.~
Outbound Notification System
June 20, 2002
Page Two
Stand alone
s mo el, the public safety agency purchases all necessary equipment, hardware and software for
the system. Outbound notification calls are made from the public safety agency at a rate determined by
the number of available phone lines. (Typical call will take about 30 seconds of connection time).
Stand-alone systems normally use a commercially available phone number database, which does not
include unlisted/unpublished numbers and which is updated at the expense of the public safety agency.
As system owner, the public safety agency is responsible for system maintenance, soflwaze updates and
other support costs. Stand-alone systems aze typically useable for a wider array of notification purposes
than subscription of 911 provider systems.
Note: Police staff recommends that the stand-alone systems not be considered for acquisition. This
recommendation is based upon the inherent limitation on the number of calls that can be placed from an
agency based system, as well as concerns over the on-going maintenance and support obligations we
would assume with such a system.
Subscription
u scnption services provide notification services from their facilities at the direction of the public
safety agency. Costs to the agency aze for implementation, annual subscription fees, and chazges for
calls made during a notification process. The services normally use commercial databases, which do not
include unlisted/unpublished numbers and charge the subscriber for data base updates. Subscription
services can normally process many more calls per hour than stand-alone. The "Community Alert
Network" system is capable of approximately 250 calls per minute.
Under federal law, Qwest must furnish their 9-1-1 database to us if we request it for use with a stand-
alone or subscription service. However, they do charge for providing it, which will increase the cost for
the other services if we desire this database.
911 Provider
i ce t e su scription services, the 911 provider (Qwest) provide notification services from the facilities
at the direction of the public safety agency. The most significant feature differences between Qwest and
the other subscription services are the database and the calling capacity. Qwest uses the 9-1-1 database,
which is updated daily and contains unlisted/unpublished numbers. The Qwest system is capable of
1,152 simultaneous calls or over 2,000 calls per minute.
Qwest charges an initial set-up fee, an annual subscription cost, and aper/call charge for system usage.
Pricing Information
e o owmg costs are estimates presented for comparison purposes. Qwest, as our loca1911 provider
is the only possible provider of a 911-provider solution. Community Alert Network is presented as one
of several vendors that offer subscription based services.
f3
Outbound Notification System
June 20, 2002 .
Page Three
Qwest (Emergency Preparedness Network):
1 yr agreement 3 Yr agreement 5 yr agreement
Installation $24,000 $22,800 $22,320
Monthly 2,273 2,146 2,083
Total for agreement 51,276 100,056 147,300
Avg. Cost/year $~ 1,276 $33,352 $29,460
Cost per call 23¢ 23¢ 23¢
Community Alert Network:
Installation (one time) $9,600
Monthly 12 @ 533
Qwest 911 quarterly updates 4 @ 1,700
Qwest service establish. (One time) ~ 600
Qwest initial database extract (one time) 631
Total for 1St year agreement $24,027
Subsequent years $13,196
Cost per call 25¢
Funding Issues
e u get does not include funds for this project. Possible funding sources include emergency
preparedness/homeland security grants, public/private partnerships, or 911 surcharge funds. This
system would be an eligible expense for our 911 surcharge funds, however, with the additiona1911 lines
being installed as part of the communications center upgrade, this fund may not be adequate to cover on-
going expenses.
I will be present at the June 25th Council meeting for further discussion of this matter and to answer any
questions that the Council may have.
C/ Captain Rick Swanson
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June 18, 2002 ~~~~~~.mm~-~~,nhond.org
Jamie Verbrugge
City of Eagan
3830 Pilot Knob Road _
Eagan, MN 55122
RE: Wescott Squaze
Dear Jamie,
Your recent message that three of the Wescott properties have been sold, and four more are to close this
month, for over $100,000 per unit, is of great concern to CommonBond. Ow original pro-forma
development budget, using what we believed to be a fair mazket value of $55,000 per unit, already had a
funding gap of over $3Million. Given this new development, the funding gap increases to approximately
$S.SMillion. It is hazd to see how this gap could be made up given potential funding sources. It is also
more difficult to maintain the units as affordable given the initial projected cost just to acquire the property.
At the same time, the proposal from Jeff Johnson for the city to consider issuing tax exempt general
obligation housing bonds, with CommonBond stepping in for a ten yeaz period with complete management
control and the guaranteed option to buy, would seem to have some merit. Assuming that our management
control would be similaz to that as if we were also the owners, that an Advantage Service Center would be
built, and that our ability to ultimately purchase the property would be `iron-clad', we would be willing to
explore this option with the city, even in light of the issues of cost to acquire the project noted above.
The sale price of $100,000+ per unit suggests that there aze those who believe that this project has the
potential to be viable as a 100% mazket rate project. Since developing exclusively mazket rate housing is
not compatible with CommonBond's mission, should the city decide to go in this direction, CommonBond
would not be interested in continuing as the redeveloper of the project.
We have put on hold plans to engage a real estate agent to assemble the properties (we were ready to make
a selection) or to inspect the units with ow architect to determine the needs for rehabilitation of the
premises. However, we aze still prepared to continue discussions with the city and would be willing to look
at terms of a prospective redevelopment agreement that would maintain the property as affordable housing.
cercly,
(;
t '
. - ~~ ~~
J Weiss
ousing Development Manager
.c. Doug Mayo, Joseph Holmberg
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EXTERNAL MEMORANDUM
TO: Jamie Verbrugge, City of Eagan
FROM: David MacGillivray and Bruce Kimmel
DATE: June 18, 2002
SUBJECT: Wescott Square Redevelopment Financing
SPRINGSTED
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The City of Eagan has asked Springsted to review the general obligation housing bond proposal
submitted by Jeff Johnson of J.A. Management on May 23. Under this scenario, the City would
issue G.O.-backed "essential function bonds" to purchase Wescott Square, thereby preventing
acquisition price escalation beyond the $100,000 per unit (approximate) mark reached in a sale
last month. CommonBond would lease Wescott from the City, manage the properties for aten-
year period, then purchase and refinance it.
Because federal regulations require aten-year ownership period before a unit can be sold and
be eligible for low-income housing tax credits (LIHTC), this City-CommonBond arrangement
would allow all 120 units to become eligible for tax credits at refinancing in 2012 or 2013. Debt
service on the G.O. bonds would be expected to be paid from the net revenues generated by
Wescott, but if revenues are insufficient and other security provisions fail, the City would be
obligated to cover any debt service shortfalls with other resources.
It is important to note that Mr. Johnson made his proposal in an effort to facilitate and expedite
the coordinated acquisition and redevelopment of the Wescott properties; he has stated that he
is no longer interested in redeveloping Wescott himself. Mr. Johnson was concerned that the
timeline proposed by CommonBond at its May 14 meeting with the Wescott property owners did
not move quickly enough to prevent further sales price inflation that would make redevelopment
that much harder to achieve.
CommonBond Development Budget
On May 17, before Mr. Johnson sent his proposal, Jon Weiss of CommonBond sent you a
preliminary development budget for the Wescott project totaling $13.2 million, including a
developer fee of $628,000. CommonBond estimated that $4 million could be generated from
tax credit equity and that the project could support $6 million of private or public debt, leaving a
gap of $3.2 million. (Actual available tax credit equity is likely to be significantly lower than $4
million, due to lower-than-expected unit eligibility. Most units have not been held ten years.)
Recent Wescott property sales at or around $100,000 per unit ($400,000 per building) have
rendered CommonBond's acquisition estimate of $55,000 per unit obsolete. Assuming the
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Wescott Square Redevelopment Financing
City of Eagan, Minnesota
Page 2
development's projected revenue and debt capacity remain the same, the gap increases by
$5.4 million to $8.6 million.
In calculating the debt capacity of the project, CommonBond assumed average contract rents
(net of utility allowance) of $813 per month. Doug Mayo indicated that CB received this
information from Dakota County CDA. However, Deborah Haugh the CDA Section 8 Manager,
informed me that the average contract rent at Wescott is currently $1,042 (see attached CDA
fax for details).
The discrepancy may be due to the range of contract rents at Wescott. The maximum rent
allowance for Section 8 certificate holders is currently $1,218 per month fora 3-bedroom unit in
Eagan. None of the Wescott units receiving Section 8 assistance are at this level: the highest
appears to be at $1,145 per month while the lowest appears to be at $835 per month.
Although estimated operating expenses and debt service terms are important, estimated unit
rents are the deciding factor in determining the debt supported by project revenues. Raising the
average rent from $813 to $1,042 and keeping the other CB underwriting assumptions the
same, we calculated a maximum loan of approximately $9.4 million. (This assumes that all
Wescott units receive Section 8 assistance HAP, which would be feasible.)
Johnson General Obligation Bond Proposal
On May 23, Mr. Johnson sent you a proposal for the City to issue approximately $12 million in
G.O. housing bonds to finance City acquisition of the entire Wescott property. The main
reasons for Mr. Johnson's larger debt estimate are a higher contract rent and a lower interest
rate, the effect of the proposed G.O. pledge. Mr. Johnson assumed an average contract rent of
$1,200 beginning in 2003, which is possible given current CDA standards but is probably
aggressive for Year 1 of City ownership since 34 units do not currently receive HAP and the
CDA has indicated a need to monitor future rent allowances carefully.
Nevertheless, as a ballpark estimate of the City's financing ability, Mr. Johnson's proposal holds
water. Although his proforma does not include the payment-in-lieu-of-taxes (PILOT) that the
City would be required to make, his other numbers (operating expenses and interest rates)
appear to be conservative enough to cover this oversight.
On the development budget, it is worth noting that Mr. Johnson assumed a deferred, low-
interest City loan of $600,000. Based on our preliminary calculations, it appears that the City
could recoup this loan as part of the project refinancing in 10 years, but such an investment
would present an opportunity cost to the City.
In addition, Mr. Johnson's budget includes a property rehab estimate of $15,000 per unit but
does not include the Advantage Center, which CommonBond estimated at $400,000 in its May
17 budget. Mr. Johnson indicated that this component could be funded through other
CommonBond resources, but that is a question that would have to be resolved.
Finally, it is not clear what kind of security guarantee CommonBond would be willing to give the
City for its G.O. bonds. Mr. Johnson wrote in his May 23 proposal that CommonBond should be
willing to guarantee the debt service is paid. However, given the generally low risk tolerance
CommonBond demonstrated with its May 14 timeline, such a pledge appears unlikely.
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Wescott Square Redevelopment Financing
City of Eagan, Minnesota
Page 3
Policy Discussion Points for Use of General Obligation Pledge
The City has both policy and related financial points to consider with this proposal. Among
these points would be the following:
1. Does the City want to become the owner and financier of this project?
2. The precedent potential of general property tax exposure for housing projects.
3. The risk of project revenues being insufficient to cover annual debt service and the City at
large being responsible for the shortfall.
4. If the City lowers its risk with contractual guarantees from CommonBond, the bonds could
lose their federal and state tax exemption, thereby becoming "taxable" bonds requiring
significantly higher interest rates (to be determined).
5. A portion of the risk profile is the potential that the City will not be taken out of the bond
issue in ten years due to a number of factors, including developer/project performance to
legislative change.
6. The City's credit rating is a factor. We believe this type of debt would become part of the
City's debt burden for credit rating analysis. While such a burden increase would not be
viewed as positive, on a preliminary basis, depending on the transaction's final structure, we
see low probability of a credit rating downgrade occurring from this single transaction.
A number of these points cannot be directly addressed until more information is known.
However, certain points are fundamental to continuing this process and the City Council may
wish to give direction to its staff on several of the above policy questions.
Conclusion
In theory, Mr. Johnson's proposal is credible. Based on its taxable market value, the City has
roughly $23.6 million of available G.O. housing bond capacity, more than enough to issue $12
million for property acquisition. (The housing bond capacity is calculated at 0.5% of taxable
market value or $3 million, whichever is greater.) Meeting the July 2002 MHFA RFP deadline
may be difficult and it is questionable whether the City could corral 100% of the properties
before further inflation occurs, but as a general plan for getting Wescott consolidated and
renovated, this idea works.
The question that arises is one of policy and priorities. As stated above, does the City want to
become the owner and financier of this project? The other choices are (1) for CommonBond to
proceed with its plan and attempt to overcome a higher acquisition cost and gap (amount to be
determined), or (2) for the current speculation to yield either healthy, market~lriven rehab or
further stagnation until the next round of subsidized redevelopment proposals.
If the City wishes to explore the G.O. bond proposal further, we can help establish parameters
that would limit the City's debt service risk. However, no security provisions can eliminate the
possibility that the City might need to levy taxes to cover a revenue shortfall.
Please feel free to contact either of us with any questions. Thank you for the opportunity to be
of assistance.
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Eagan Survey
General Perceptions
Longevity in the City of Eagan
Quality of Life questions
Like, Most about living in Eagan
Most Serious Issue facing Eagan
Sense of Connection to the City of Eagan
Things headed in the Right Direction
Community Characteristics
Does Eagan have the right amount of:
Parks and open spaces
Trails and bikeways
Service establishments
Retail shopping opportunities
Entertainment establishments
Dining establishments
Day care opportunities
Housing options
Perceived need for redevelopment
Seriousness of airport noise problems
City Services
Police protection
Fire protection
Recycling
Storm drainage and flood control
Park maintenance
City-sponsored recreation programs
Animal control
Communications with residents
City street repair and maintenance
Snow plowing
Street lighting
Rate services in comparison to previous residence
Value of services received in comparison to property taxes paid
Favor or oppose property tax increase to maintain city services
If opposed, which services would you be willing to see cut
Perceptions of public safety in city and neighborhood
Parks and Recreation
Use and evaluation of City park facilities including trails, ballfields, Civic Arena
and Cascade Bay waterpark
Existing recreational facilities meet needs of household
If no, what additional recreational facilities are needed in Eagan
Parks and Recreation (continued)
Participation in City-sponsored park and recreation programs
If yes, which programs and satisfaction with experience
Existing recreational programs meet needs of household
If no, what programs are lacking
Open Space
How important to purchase undeveloped open space areas for preservation
Level of concern about the amount of open space in Eagan
Support for public purchase of Caponi Art Park, land north of Patrick Egan Park or other
undeveloped areas in the City
If support, still support if a property tax increase were necessary
Support for Dakota County Park Bond referendum
If support, still support if the referendum. does not include acquiring land
in Eagan
Transportation
Leave Eagan on a regular basis to go to work
If yes, what city is job located in
Minutes it takes to get to work
Rate ease of getting to and from work
Rate ease of getting from place to place in Eagan
If unfavorable, which street, road or intersection is most congested
Use of public transportation
Likelihood of use of another form of public transportation
City Government
Could you have a say if you wanted to
Knowledge about the work of City Council
Approval rating of City Council
First hand contact with City staff
Rating of City staff
Communication
Principal source of information about City Government
Preferred method of receiving information about City Government
Questions about City Newsletter,
Cable Television and local access programming
Access to the Internet and awareness of City's website
Desired information from City on website
Demographics
Age range of those in household
Occupation
Ownership and value of present residence
Gender