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05-08-07 WSMay 8, 2007 Page 1 MINUTES CITY COUNCIL WORK SESSION -May 8, 2007 A work session of the Hopkins City Council was called to order by Mayor Gene Maxwell at 6:35 p.m. on May 8, 2007, at the Hopkins City Hall. Council members Kristi Halverson, Bruce Rowan, Jay Thompson and Cheryl Youakim were present. City personnel present were City Manager Riclc Getschow, Housing Coordinator Kersten Elverum, Public Works Director Steve Stadler, Facilities Director Jay Strachota, and City Attorney Bob Dieke. Also present were Steve Flanagan of GPS; Sid Inman of Ehlers; Rick Brausen; and Don Bates, Marti Justus, Paul Slaton, Susan Hanna-Bibus, and Wayne Olson of HCA, Inc. Block 64 Housing Coordinator Elverum said the Block 64 project has reached a critical point. Both the development agreement and the purchase agreement are near expiration. Mr. Flanagan said that technically the purchase agreement expired on May 5, but he has not received any notice of cancellation, which would actually cancel the agreement. He would have a 30-day window after the notice. He has two banks willing to give GPS the necessary loan, but the process would take 60 days, leaving him with the possibility of cancellation of the purchase agreement before he could get the money. The work on the development started in October 2004; it took 27 months to get a purchase agreement with Mr. Rixmann. He now has all the retail space and 43 units (60%) sold and is ready to start demolition of the gas station. If he is allowed to go ahead, he feels the complex would be ready for occupancy next spring or summer. City Attorney Dieke noted some terms of the development agreement have not been performed. This agreement has been amended twice to allow GPS more time; the second amendment provided HRA would make a loan for $2 million to help GPS buy the Parlc Plaza properties if certain conditions were met. Although the terms had various due dates, all had to be completed by May 6, 2007, or HRA could terminate the agreement. A memo details the status of each of those conditions. He noted that GPS has contracted with an environmental consulting firm and a Phase II assessment and action plan were prepared, but they have not been allowed on the Park Plaza properties to complete the assessment. GPS has acquired some parcels of land and has purchase agreements on others, but proof of all has not been submitted. GPS says it now has firm financing for Phase I, as required, but proof has not been submitted. Final plat approval has been granted but the final plat has not been approved yet. Conditions for the HRA loan that have not been met, besides meeting the development agreement terms, include identifying one or more guarantors for said loan. GPS has provided information on properties to which HRA would be given a mortgage to cover the loan but analysis has not been finished. Also, GPS currently owes HRA $8,498.07 for current costs. He added Phase II requirements have been done on all but Mr. Rixmann's property. Answering Mayor Maxwell, he said the development agreement would stay in force unless the Council gives 30-day notice of termination. However, if Mr. Rixmann terminates the purchase agreement, the development agreement would be no good; and he might choose to start the lawsuit again. Answering Mr. Thompson, he agreed that if May 8, 2007 Page 2 the purchase agreement is completed, Mr. Rixmann had agreed there would be no lawsuit. Mr. Inman said he had looked over Mr. Flanagan's figures and does not think the development is feasible. There is no positive cash flow until Phase III. Mr. Flanagan noted that he has put up $1.7 million so far, and the environmental costs were given as $1.25 million more than are actually expected. He carried the environmental costs and has applied for various grants from MET and the county, which would reduce those costs. Mr. Inman said the payback for the HRA loan would come from Phase II so Phase I has to work. It will take 20 years to get the money back. He estimates $7.5-8 million for the whole project, and $2.4-2.6 million for Phase I. Mr. Flanagan said he had met with Marshall Bank with the revised term sheet, and they were comfortable with the equity values. Mr. Thompson asked what the city could do to get control of the property if a 30- day notice is given. Attorney Dieke said it would need to be taken by the City, and that would probably re-start the lawsuit. Laws pertaining to TIF would also need to be considered. Ms. Youakim asked if there could be a reverse referendum; Mr. Inman said no. A temporary tax increment bond with a 3-year term would take 60 days and the city would be at risk for $4 million. It would also probably cost more down payment money. Mr. Flanagan said Marshall Bank will make the loan without a construction loan if Hopkins will guarantee the loan. Attorney Dieke said he is not sure it would be legally possible for the city to co-sign. The city would then have $6.5 million at risk. In that case, the city could just as well buy the property and be done. Mr. Inman said he thinks if the city wants to do this, it should buy the property and sell it to Mr. Flanagan when he gets his money. Mr. Dieke said the bonding people might not agree it meets requirements for city bonding. Mr. Inman added he feels Mr. Rixmann has to agree to a 60-day extension for the bonding to work. Mayor Maxwell and Mr. Thompson both felt the issue is if the city approaches Mr. Rixmann, will he agree to an extension if the city agrees he can go to another developer in 90 days, or will he just send the termination notice. Mr. Inman said he thinks Mr. Rixmann's attorney would feel better if the city approached him first, but to do so Mr. Flanagan would have to sign a letter giving permission. Mr. Flanagan said he would sign the letter if needed. He added each week that goes by costs him $6500; and the property cost is $6.35 million until June 5, then it goes up $30,000 per month. Mayor Maxwell said he doesn't want to walk away after working three years with GPS. Mr. Flanagan said he feels he is 20 days away from a conditional commitment letter, and 60-70 days from the loan. General Consensus was that the Council would like to see this redevelopment project go ahead if at all possible. They directed Mr. Inman and Mr. Dieke to talk to the bonding council and report back to the Council. Hopkins/HCA Agreement Facilities Director Strachota said there was a discussion with the Council on February 27, 2007, during which the Council directed staff to do further research on non- profit models for the Arts Center. This has been done. The Center Approach (also called Macro) would promote the Center as regional arts center and work to increase community involvement; in this model the non-profit would act as a "friend" of the Center. The Independent Nonprofit Approach (also called Micro) would build a strong May 8, 2007 Page 3 independent nonprofit organization to create and sustain quality arts programs. At present HCA, Inc. basically falls between these two models, although it is closer to the Micro model. The HCA, Inc. Board has been constantly busy with fund-raising, with the result the public does not differentiate between the Board and the Center. Ms. Youakim aslced who would be the overseer of programming under each model; her concern is that the city might stifle creative programming. Mr. Strachota said the visual arts and performing arts committees would stay in place under both models. Now Susan has to keep two complete sets of books. With the Friends approach, all money would go through the city, except for a small reserve for future fund-raising events. Money would be coded 1 for the building and 2 for the programming, which would include Susan's salary. The cash flow would be much smoother. Mayor Maxwell was concerned later Councils might not be behind the Art Center as much as the present one. Mr. Strachota said the Center is a special revenue fund, not part of general operating. Mr. Getschow noted that under either model, if the Art Center were in trouble, the city would step in. Mr. Olson said the reality is that the present Micro system has not worked. He thinks answers to creativity concerns can be built into the Macro model. At present the Board is simply not big enough to make the present system work. Ms. Hanna-Bibus said for people to stay on the Board, there has to be a feeling of success, and the present model does not provide that. Under the Macro model, anything accomplished makes a difference and gives that feeling. Mr. Getschow noted fund-raising and programming are important in both models. Ms. Youakim asked what the outlay for the city would be under each model, especially as each adds an employee. Mr. Strachota said he does not have hard figures at present. However, the upcoming 2008 10-year contract with the school district will go from $50,000 to $100,000. There was a re-write at the meet-and- confer, but the hours of usage did not change. Answering Mayor Maxwell, he said the charges to Stages go up 4% a year; it does not stay static like those to the district. Answering Mr. Thompson, he said the Macro model would add a 10-hour part-time employee for big events and a 30-hour program director. Mayor Maxwell said he remembers there was discussion a few years ago that apart-time program director would not have the loyalty afull-time one would. Mr. Strachota said he believes that was for a 20-hour director. The added person would need to have an office on the main level. Mr. Bates said that is good as at present a stranger who walks in thinks the building is Stages, not the Art Center. Mr. Strachota said the new system would relieve some of the pressure on the upstairs offices. There is a real need for more storage so music stands and reception supplies, such as tablecloths, could be on-site. Mayor Maxwell aslced if remodeling the Jaycees Theater was looked into. Mr. Strachota said the only figure he had gotten was $16,000 for curtains. The full costs would have a long pay-back period and would really be just a community service. It might bring in more rentals for private receptions. Mr. Bates said he doesn't feel windows should be put in; the building is an art center. He felt the money would be much better spent on sound shells or redoing stage lighting. Ms. Youakim asked where the increased storage would be. Mr. Strachota said the trash room could be extended; it would require unit heating. He said what the Board needed now was Council approval of a model. Mr. Bates added the Board had met earlier and they support the Macro model. Ms. Hanna-Bibus said 7 years of hard work on programming have been done; using the Micro model would erase that. Mr. Olson and Ms. Justus both May 8, 2007 Page 4 felt it was the right model. Mr. Slaton said he feels the Macro model is vital for both HCA, Inc. and the Art Center. Mayor Maxwell said he feels the Center and HCA have been successful; the changes now are to keep that success going. Mr. Thompson asked if the change were money-driven or to improve community ownership. Mr. Strachota said much more is driving this than money, including efficiency, membership focus, volunteer involvement. Ms. Hanna-Bibus added at present there is no time to start a volunteer program. She added the Macro model would result in fewer private foundation grants, which are very few now, but would actually be an asset for corporate membership. Ms. Youakim suggested that a grand opening to explain the new set-up would be good, no matter which model was chosen. Ms. Hanna-Bibus said this will be the lOtl' anniversary of the Center, and the whole year's events will center on that. Starting a new model now is good timing. Mr. Rowan said he likes the Macro model as fund-raising events will mean more. Mayor Maxwell asked Mr. Brausen to give comments. He said he feels a $1 per ticket tax should be passed to be used for upkeep of the building. Nancy has had a pristine program, and that needs to be continued. The 20+ age bracket is being missed, both for the Board and in programming. He likes the Macro model because it would help expand the Board. He feels the city needs a volunteer coordinator, not for just the Center, but also the Park Board, etc. Amore definitive number for rental capacity needs to be worked on. Usages have been good. He is glad to see the Board enthusiasm. Mr. Getschow said he feels the new financial numbers need to be in the 2008 budget, which will be worked starting by fall. He wants Ms. Harkess to work on the special revenue fund. The school district lease increase will help. Mr. Strachota noted the payments would start in November at the new level. General Consensus was the Board would work on the Macro model concept, and in June the Board and Council will meet again. Ms. Harkess and Attorney Steiner will work on the financial and legal issues. Other Ms. Halverson said Police Chief Reid had a good attendance Sunday. Ms. Youakim said someone asked her about the limit on pets. Mayor Maxwell said it was two dogs or a total of three pets. Another resident had asked her about "green credits" for rain gardens, etc. Mr. Rowan said they could be given a city beautification award. There are no city financial incentives. She noted the Hopkins Police Reserve would be at the state capitol May 15. She asked Mr. Getschow to follow up on a police report about a car going through a school crossing guard flag to see if the violator had been caught. She asked that following up on Mr. Brausen's suggestion for a volunteer coordinator, would a media person be possible. Mr. Rowan said Stages had asked if they could do a benefit preview performance of Madeline's Christmas, and had gotten a cold reception from the programming at the Center. Mayor Maxwell said money such as that should not be refused. Mr. Getschow will follow up on it. Mayor Maxwell noted next Monday would be the open house for the new school superintendent at Lindbergh School. May 8, 2007 Page 5 The graffiti on the Blake water tower raises concerns for him about city liability. Mr. Getschow will look into that. He asked about progress on the landfill with EPA. Mr. Getschow will look into it. He asked what needed to be done about the bill passed allowing the city to redo the bonds for the police station and fire station. Mr. Getschow said it would save the city money. It will be on the next agenda for the next meeting, which would also be a public hearing. The Council will need to pass a resolution. Then we could use that to bond for the streets. Mr. Getschow said he will be at the State City Managers' Conference Wednesday through Friday. On motion by Ms. Halverson and second by Mr. Thompson, the meeting adjourned at 10:05 p.m. on a vote of 5-0. Kasey Kester, Secretary ATTEST: J -~~ ~.~ Eug e J. axwell, Mayor COUNCIL MEMBERS: `-