Memo Minnehaha Oaks Association
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. CITY OF HOPKINS
MEMORANDUM
DATE: September 1, 1993
TO: Honorable Ma~~nd City council
FROM: Tom Harmening~ community Development Director
SUBJECT: MINNEHAHA OAKS ASSOCIATION
I. Purpose of Discussion
During the 8/17/93 city council meeting the Council asked
staff to examine alternatives for providing relief to the
four property owners along Hiawatha Avenue who signed the
loan/special assessment agreement. This agreement is
related to the purchase of the 1.5 acre Mark Z. Jones
property.
. Outlined in this memo are various alternatives which staff
has identified. Staff desires to discuss these alternatives
with the City council, and receive direction on how staff
should proceed in dealing with this issue.
Also included in the report is the following:
0 Funding source alternatives if the Council desires to
provide some type of relief to the Association/
homeowners.
0 Process for undertaking a special assessment to the
homeowners if the Council should decide to continue
with the current loan agreement.
0 Chronological history of this issue.
II. Alternatives
Outlined below are various alternatives available to the
City Council which staff has identified. During our
discussion additional alternatives, or derivatives of those
outlined below, may also be identified.
. 0 continue with current agreements/process. Currently,
the terms for repaying the $175,000 loan made to the
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Honorable Mayor and city council
Page 2
September 1, 1993
. Association is a 15 year amortization period at 8%.
The agreement states that if the Association does not
make all or part of its annual 'September payment
(approximately $20,000) the City has the option to
assess the delinquent amount, plus $500 in
administrative costs, to four property owners at 8%
over a one year period.
0 Attempt to sell the property back to Mark Z. Jones for
development purposes. If there is a shortfa1l from
this sale to repay the $175,000 owed the City, assess
shortfall to four property owners.
0 Forgive all or part of the loan (100%, 25% - 75%). If
a portion of loan is forgiven the remaining amount
would be required to be repaid by the Association/
homeowners.
0 Alter the terms of the loan to eliminate or reduce the
interest rate. Require payment of the principal amount
only. At this point the interest rate is at 8%.
0 Forgive a portion of the loan and reduce the interest
rate.
0 Allow the Association/homeowners additional time to
. make this years payment. Perhaps allow this payment to
be made as a part of the 1994 payment.
III. Funding Source Alternatives
If the Council desires to provide some type of financial relief
to the Association/homeowners, a funding source needs to be
identified. possible sources include:
0 General Fund Reserves. Two options exist:
- Reallocate funds currently directed towards park
improvements, such as Maetzold Field, for the
purchase of the subject property.
- Allocate additional'funds from this source towards
the purchase of the property.
0 Levy necessary amount as part of 1994 General Fund tax
levy.
0 Real Estate Sales Fund. Currently, no funds are
available in this account. However, if the city should
sell the City's well site property, approximately
'. $100,000 would be available and could be used in part
to purchase the subject property.
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Honorable Mayor and City council ' .~
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September 1, 1993
( IV. Special Assessment Process .
If the Association defaults on its obligation under the loan
arrangement, and the City decides to undertake the special
assessment process, certain steps must be taken. These
steps and the related timelines are as follows:
0 October 8 - City notifies four property owners of their
proposed special assessment and the City's plans to
adopt an assessment roll. Although this step is not
technically required, it has been a practice in the
past where other property owners have waived their
notification rights.
0 October 19 - City Council adopts assessment roll.
0 October 20~November 18 - Property owners can pre-pay
their assessment without interest.
0 November 30 - By this day the City must certify the
assessment roll with Hennepin County.
v. Background Information I
0 November 21, 1972 - Council approved a conditional use .
permit for a 24 unit townhouse project on the subject
property.
0 December 10, 1990 - Mark Z. Jones made application for
concept review of a 13 unit townhouse project on the
subject property.
0 January, 1991 - Mark Z. Jones made formal application
for a conditional use permit (C.U.P.), preliminary plat
approval, and Comprehensive Plan amendment for a 13
unit townhouse project on the subject property.
0 March 26, 1991 - Zoning and Planning commission
recommends approval of C.U.P. to construct 12 townhomes
on subject property.
0 March 28, 1991 - city receives petition from concerned
individuals asking that an Environmental Assessment
Worksheet (EAW) be prepared for the project.
0 April 2, 1991 - City council ordered preparation and
submission of a discretionary EAW for the project.
0 May 17 - June 26, 1991 - EAW is processed through the
required public agencies for their r.eview and comment, .
and review and comment by the public.
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Honorable Mayor and city Council
Page 4
September 1, 1993
:. 0 August 6. 1991 - City Council adopted resolution which
determines there are no significant environmental
impacts associated with the proposed project and that
the completion of an Environmental Impact Statement is
not necessary.
A petition was submitted to the City which requested
the city acquire the subject property. The petition
indicated, among other things, that the property owners
living along Hiawatha Avenue were willing to help pay
the cost of acquiring the property.
0 August 19. 1991 - Purchase of property was reviewed by
the Park Board. The Park Board recommended that the
property be preserved in its present state but that no
Park Board funds be used for the purchase.
0 August 20. 1991 - city Council discussed possible use
of eminent domain proceedings to acquire the subject
property. The City Council decided to not pursue the
purchase of the property and approved the CUP,
preliminary plat and Comprehensive Plan amendment for
the twelve unit townhouse project.
0 September 4. 1991 - The City and Mark Z. Jones are
served with a complaint from the Minnehaha Oaks
'. Association regarding the proposed townhouse project.
I'.
In this complaint the Minnehaha Oaks Association was
asking that the Courts make a declaratory judgment in
favor of the Association which in effect would either
stop or make it very difficult for the developer to
proceed with the project.
0 November 26, 1991 .... Planning commission reviewed and
recommended approval of the final plat for the proposed
project.
A petition or resolution type document, signed by
Hiawatha Avenue property owners, was submitted to the
City. This document requested that the City acquire
the property. The document also expressed the property
owners willingness to be assessed their proportionate
share of the cost of the acquisition.
0 December 3. 1991 - City Council reviewed final plat and
landscaping plan. Council again requested that staff
investigate the City's use of eminent domain to acquire
the subject property, and sources of funds to finance
the acquisition.
0 December 17. 1991 - The City Council reviewed the final
'. plat and landscaping plan for the project and took the
following action:
Honorable Mayor and City Council ....---..:;".._..~_...."--.........,.
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September 1, 1993
- Authorized staff to obtain an appraisal of the .
! subject property
- Directed staff to undertake negotiations with Mark
z. Jones regarding the purchase of the property
- Directed staff to prepare, for possible future
use, a resolution authorizing the commencement of
an eminent domain procedure to acquire the
property.
,- Continued action on the final plat and landscaping
-
plan
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0 Januarv 21, 1992 - The City Council established an
overall budget of $200,000 for the purchase of the
subject property and expenses relating to eminent
domain proceedings if they should become necessary.
The Council included in its motion that the source of
funds to pay for the purchase be from private donations
and that these private donations were to be provided by
February 18, 1992 unless an extension was agreed to by
the developer and city.
A petition was submitted by concerned citizens which
expressed opposition to the purchase of the subject
- ~%n'~~3t~ property. .
A representative from Hiawatha Avenue submitted
additional signatures which supported the purchase.
0 February 17, 1992 - City received.letter from Minnehaha
Oaks indicating they had raised $29,020 in last ten
days and were willing to contribute'this towards
purchase.
- 0 Februarv 18, 1992 - The City Council approved the
general terms for the purchase of the subject property.
In addition, the city Council approved the final
plat/landscaping plan for thetownhome project with the
- understanding that Mark Z. Jones would not take any
action on the project until after 3/24/92 in order to
allow various activities to be undertaken to allow for
the completion of the sale.
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The general terms of the sale which were approved were
as follows:
$285,000 Purchase Price
Less 100,000 Donation by Mark Z. Jones to city or
,. Neighborhood as deemed appropriate
$185,000 Contribution to be provided by .
Donations/Assessments from Neighborhood
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Honorable Mayor and City Council
Page 6
September 1, 1993
a, Mark Z. Jones is allowed to retain strip of land on
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western portion of site for parking.
City approves final plat/landscaping plan subject to
understanding that Jones does not file the plat with
the County, 'does notre:move trees from the property or
otherwise disturb the site, or apply for building
permits for a period of at least 30 days (March 24), or
otherwise experience any other undue expense relating
to the development of the property.
This 30 day period will allow the following to occur:
- Allow neighborhood additional time to raise
remaining funds
- Allow for details to be worked out on the sanitary
sewer easement needed from Ramsgate Apartments/
Mark Z. Jones.
- Allow for details to be resolved on donation from
Mark Z. Jones, I.e., should donation be made to
neighborhood or City?
- Allow for details to be resolved on the overall
..... structure of the sale
.........
- Allow for details to be resolved on property owner
assessment
If $185,000 is not raised or committed within the 30
day period, Mr. Jones has the option of proceeding with
his development.
In addition, it was agreed the City would not certify
the assessment roll to the County until November 1992
in order to allow the property owners additional time
to raise funds in order to reduce the assessment to the
affected property owners.
0 February 19 - March 17, 1992 - City staff/legal counsel
prepared a special assessment agreement to be entered
into between the City and property owners along
Hiawatha Avenue, or other parties who may have wished
to sign the agreement. Staff and legal Counsel
discussed and negotiated various aspects of the
agreement with the Association/homeowners.
During this same period staff and legal counsel also
prepared a purchase agreement for the acquisition of
~, the property as well as an easement from Ramsgate
-' Apartments for sanitary sewer purposes.
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Honorable Mayor and city council
Page 7
September 1, 1993
0 March 17. 1992 - City council approved the following ~'-;"""'~'
( items. '....
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- Special assessment agreement between the City and
property owners
- Purchase agreement between city.and Mark Z. Jones
- Acquisition of easement from Ramsgate Apartments
for sanitary sewer purposes at a cost not to
exceed $25,000.
The terms of the special assessment agreement were as
follows:
- Amount to be assessed or provided through
donations - $185,000
- 15 year assessment
- 8% interest
0 April 15. 1992 - Special Assessment Agreement is signed
by both parties. Four property owners along Hiawatha
Avenue signed the agreement. Minnehaha Oaks
Association also provided $10,000 to be applied towards -~.
f"I"'" acquisition. $175,000 remained to be assessed against --
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\ the property owners or raised through donations. .....
0 June 29, 1992 - City closes on purchase of Mark Z.
---- Jones property.
- 0 september - October, 1992 - Minnehaha Oaks Association
approaches City staff to discuss possibility of a loan
arrangement with the Minnehaha Oaks Association in lieu
of a special assessment agreement with the four
homeowners. Staff worked with the Association on this
concept.
0 October 20, 1992 - City Council approved the assessment
roll involving the four property owners along Hiawatha
Avenue and directed staff to continue to work with the
Minnehaha Oaks Association on details pertaining to a
loan arrangement with the Association. This action was
taken based on the understanding that if the city was
able to enter into a loan arrangement it could cancel
the assessment roll in November.
0 November 10, 1992 - staff discussed with the City
Council the loan arrangement concept. The Council
continued to express an interest in this approach.
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Page 8
September 1, 1993
.....~ 0 November '17, 1992 - City Council canceled the special
.- assessment roll which it had adopted on October 20 and
authorized the Mayor and City Manager to execute a loan
agreement with the Minnehaha Oaks Association and
applicable property owners. It was also required that
as a part of this arrangement the property owners
signing this agreement were also to sign a promissory
note and personal guarantee to insure payment of the
loan if necessary.
The terms of the loan arrangement were as follows:
- $175,000 loan from the City of Hopkins to the
Minnehaha Oaks Association.
- Terms - 8% per annum for 15 years (declining
interest - similar to a home mortgage).
- 15 equal payments of approximately $20,500 per
year to the City, although the first year payment
may be adjusted (assumes no prepayments) .
- Total principal and interest paid after the entire
term - approximately $306,000.
- Prepayments would be allowed.
r. - Security provisions - in the event of non-payment
by the Association, the City would assess the four
home owners for a pro rata share of the yearly
payment which was not paid. Each property owner
would be also liable for a pro rata share of the
entire principal and interest amount on the loan,
whiCh equals approximately $76,000 to $77,000 per
property owner (assuming four property owners are
involved). This liability would decline yearly as
payments were made by the Association or through
the assessments to the home owners.
0 November 24,1992 - Minnehaha Oaks Association and four
property owners executed the applicable loan documents.
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