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VII.2. Theater Site Redevelopment; Elverum CITY OF HOPKINS Memorandum To: Honorable Mayor and City Council Mike Mornson, City Manager From: Kersten Elverum, Director of Planning & Development Date: June 20, 2022 Subject: Theater Site Redevelopment _____________________________________________________________________ PURPOSE The purpose of the discussion at the June 20, 2022, City Council meeting is to continue the conversation regarding the public assistance needed to advance the redevelopment proposal from Enclave Companies for the former Hopkins Cinema 6 site. Enclave has refined their project proforma and discussions with staff regarding the use of the municipal parking ramp have led to a determination of the assistance needed. No specific action is necessary by the City Council for this item but Enclave is seeking expressed support for financial assistance and dedicated parking spaces in the adjacent public ramp. They have indicated that without this support, the project will not be able to move forward under current condition and terms. INFORMATION Since the Hopkins Cinema 6 closed as a result of the Covid epidemic, there have been discussions about a redevelopment of the site into a mixed-use, retail and apartment development first by The Beard Group, and then by Enclave Companies. Terms of the site purchase and current market conditions pose challenges to making a development feasible. The developer presented the latest concept drawings and site plan, discussed a proposed parking solution that utilizes the City-owned parking ramp and described the financial gap in their project proforma at the April 12, 2022, work session. Since that time they have refined their proforma and have come to a bottom line financial assistance request of $1,250,000 or 2.9% of the project costs. They have also concluded they need 40 additional parking stalls and have proposed to lease them from the City of Hopkins in the municipal parking ramp. The project includes the construction of 150 residential apartments, 150 parking stalls and retail space on the first floor facing Mainstreet. It also includes costs for renovating the existing retail space and outdoor patio area for Thirty Bales. Public Financial Assistance The developer has not completed a formal application for public financial assistance/tax increment financing, but the project proforma has been reviewed by the City’s financial advisor, Stacie Kvilvang from Ehler’s, and based on current terms, project assumptions and construction pricing, she has determined the financial assistance ask is reasonable. Stacie Kvilvang will be at the City Council meeting to answer any questions the City Council may have regarding the need for assistance. Staff and our advisor have attempted to limit possible financial assistance to a one-time forgivable loan utilizing excess TIF from District 2-11, rather than from a new funding source such as tax abatement. It is likely that the assistance will be phased over two years and based on actual costs incurred. The categories of eligible expenses to be reimbursed up to the maximum of $1.25 million include $750,000 for demolition, $350,000 for exterior improvements to the existing retail and $150,000 for outdoor public space improvements. If demolition costs are less than $750,000 the forgivable loan would be reduced dollar for dollar. The developer will be required to complete the formal application for public financial assistance before any additional review or legal work is completed. Parking Commitment in the Municipal Ramp Enclave is asking for 40 overnight parking spaces in the City’s municipal parking ramp for up to 20 years. They propose paying the same rate as Gallery Flats is currently paying, $55.56 per permit per month, for the first year. The rate would increase 3% per year thereafter starting in year two. The agreement would mirror the Gallery Flats agreement with the following terms: • Management company buys the block of permits through the City of Hopkins. Residents purchase individual permits through the management company • Permits give a nonexclusive right to use unassigned parking spaces • Owner also pays a pro rata share of property taxes and special assessments for the spaces • Owner must carry comprehensive general public liability insurance covering their use of the ramp • Owner is responsible for any damage done to the ramp by their tenants • Owner agrees to hold the City harmless from any liabilities arising from the use of the ramp by residents The main difference in these two arrangements would be the long-term commitment that Enclave is requesting to lock-in the private residential use for up to 20 years. They have indicated that a long-term commitment is necessary for project financing. Enclave has acknowledged that all of the 40 spaces may not be needed and has agreed to provide City staff a report of actual use in order to conduct an annual review of need. The agreement would have an initial 5-year term with three 5-year extensions guaranteed to the owner. There are 380 total spaces in the municipal ramp that was built to support commercial uses in the downtown. It is currently underutilized most of the time but does serve as the parking for the Hopkins Center for the Arts, the Wells Fargo building and event/peak hour parking for the downtown. It is unknown what impact the Bear Cave Brewing business, and other new businesses will have on the ramp going forward. FUTURE ACTION If the City Council is supportive of the request for financial assistance and parking commitment the project will move through the land use approval process. Enclave will be asked to complete an application for financial assistance and staff will begin working on the Development Agreement and Parking Agreement, as we work through the land use approvals including site plan, conditional use permit and planned unit development rezoning. It is anticipated that the approvals would come to the City Council at the August 1, 2022, City Council meeting. Indicating support for public assistance for this project is in no way giving support for the land use applications. That is a separate application and approval process.