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CR 91-098 Development Agreement - Ryan Construction . . . .. April 30, 1991 Council Report: 91-98 DEVELOPMENT AGREEMENT - RYAN CONSTRUCTION Proposed Action. Staff recommends adoption of the following motion: Approval of a Develo~ment Agreement with Ryan Construction Company. Inc. for construction of downtown Grocery Store/Retail Project subject to Staff conditions. Approval of this action will allow the agreement to be executed prior to June 1, 1991 and therefore grandfather the tax increment district under the pre-1990 statute requirements. It is understood by this action that Staff will be allowed to make minor changes prior to execution which do not change the overall intent of the agreement. Overview. Ryan Construction is proposing to construct a Grocery store/Retail Project between 6th and 8th Avenue north of Mainstreet. In conjunction with this project, the developer is requesting the City to utilize tax increment financing to assist in the assemblage for this project. In March the HRA and City Council approved a preliminary tax increment application from Ryan Constructiqn for this project and authorized the Executive Director and Chairman to execute a preliminary Redevelopment Agreement. The staff is presently recommending approval and execution of a Development Agreement for the fOllowing reasons: o To identify more specifically the responsibilities of both the developer and the HRA as relates to this project and facilitate its implementation. o If executed by June 1, 1991, the portion of the project located in tax increment district 2-3 will. be grandfathered under the more lenient pre~1990 tax increment requirements. Primary Issues to Consider. o What are the specifics of the project? o Does the proposal follow the current TIF policy? o What would the tax increment be used for? o What are the specifics of the Development Agreement? o How does the Development Agreement differ from the approved preliminary Redevelopment Agreement? o What are the conditions necessary for approval? Supporting Information. o Development Agreement o Petition from affected property o Notice to property owners Kerr' an, Planning & Deve opment Director ::. . 'CR: 91-98 Page 2 Analysis of Issues. Based on the recommended action, the City/HRA has the following issues to.consider: . o What are the specifics of the project? This project as proposed would consist of construction of the following: o 38,460 sq. ft. New Market Grocery store. o 10,800 sq. ft. secondary retail anchor. o 7,200 sq. ft. retail space attached to Grocery store. o Does the proposal follow the current TIF policy? This project addresses the following objectives identified in the tax increment policy. o Redevelopment of underutilized areas of the community. o Remove blight and encourage redevelopment in the commercial/industrial areas of the City .in order to encourage high levels of property maintenance and private reinvestment in those areas. o Increase the local business and industrial market potential of the City. o Encourage additional unsubsidized private development in the area either directly or through secondary spin-off development. o Off-set increased costs of development over and above those costs that a developer would occur in normal urban and suburban development. o What would the tax increment be. used for? staff is estimating total site assemblage cost to be approximately 2.7 million dollars. This would include the following activities: o Acquisition o Relocation o Demolition o Public Improvements Tax increment would be used to undertake a portion of the above activities in order to make the project financially feasible for the developer. The specific amount of the increment will be determined as part of the final TIF application. o What are the specifics of the Development Agreement?, -- The Development Agreement details various requirements and responsibilities of both the developer and City/HRA.If all of these are undertaken, both parties are required to proceed with the project. Under the Agreement, the developer must meet the following conditions prior to any acquisition of the subject property by the HRAi . CR: 91-98 Page 3 o Complete market study o Complete traffic study o Complete engineering study o Secure conditional use permit approval. o Secure approval of the final tax increment application. o supply letter of credit ,in an amount equal to the acquisition costs of the ,subject property. o Secure options on property to be acquired. o complete environmental assessments. o Obtain financing~ In conjunction with this item, the City/HRA also needs to be aware of the following: ' o The agreement will be terminated if by December 31, 1991 the above conditions have not been satisfied or the following has occurred: o That the County has not transferred light rail transit right-of-way property in subject, area to City/HRA. o Market study determines that project' is not feasible and appropriate~ . has additional Under such termination, neither party responsibilities as relates to this project. any The following' are otherlmajor points as part of the Development Agreement. o If the agreement is terminated the HRA agrees to pay one half of the cost of the following: o Environmental studies o option agreements o Appraisals . Staff is estimating the cost of the above at $40,000 - $60,000. o The developer is required to meet some preliminary requirements within a designated time period following execution of the Development Agreement. However the developer is not obligated to proceed wi th most of the requirements detailed in the agreement until a specific time period following the date that the HRA obtains County approval of the purchase of the Hennepin County Light Rail Transit right-of-way property. o The amount of tax .increment that will be provided for this project has not yet been determined. This/will need to be negotiated with the developer in conjunction with the preparation and submission of a final tax increment application. As was stated previously, total site assemblage costs are estimated at approximately 2.7 million dollars. Based on preliminary discussions with the developer, they have requested assistance to write the land .. . CR: 91-98 Page 4 cost down to market value. This would be approximately $5.00 to $6.00 a square foot. This would require a total public expenditure of approximately 1.6 million. o How does the Development Agreement differ from the approved preliminary Redevelopment Agreement? The preliminary Redevelopment Agreement identified certain tasks that needed to be completed prior to execution of a Development Agreement. The Development Agreement identifies the same tasks as well as additional responsibilities that need to be completed. Under the Development Agreement, if all of these conditions are met, then both parties are obligated to proceed with the project. ' . o What are the conditions necessary for approval? Approval 'of the Development Agreement should be condi tioned upon approval of the Agreement by the HRA. Alternatives. 4It The HRA has the following alternatives regarding this issue: 1. Approve the actions recommended by Staff.. This will allow the agreement to be executed by the Chairman and Executive Director. 2. Deny the request. Under this scenario it will be assumed that HRA does not wish to provide any public assistance for this project. The project would therefore be financially unfeasible and it would be assumed that the developer would terminate any further action. 3. continue for further information. The City/HRA needs to be aware that there is a. June 1 deadline date to approve a redevelopment agreement in order to grandfather the tax increment district under the more favorable pre-1990 regulations. If such an agreement is not executed by this date, it will be very difficult to make the project financially feasible for the developer. .. I' \ ~-, -~ . NOTICE OF UPCOMING MEETINGS As relates to the Grocery store/Retail Development Project proposed by Ryan Construction for the.. area between 6th & 8th Ave. North of Mainstreet, the following meeting dates have been set: April 30, 1991, 7:30 p.m. zoning & Planriing commission "' May 7, 1991, 7:30 p.m. city Council The purpose of these meetings is to discuss the concept plan which has been prepared by Ryan Construction. You are invited to attend and provide your comments and suggestions. Both of these above meetings will beheld at Hopkins City Hall, 1010 1st st. S. . Just for your information, the City Council acting as the HRA will also be considering an amendment to the development agreement on May 7, 1991 at 7:00 p.m. The emphasis of this meeting is to consider these changes to this proposed agreement and is not to be oriented towards securing public comment on the specifics of the project. Finally a petition has been received by the City signed by residents located in the grocery retail development area apposing the project. This petition has been forwarded to the Mayor and city council for their review. . ..' ';'. '" .. ~~- 1..41' . . . I . ,,,, . PETITION .. .~ , TO: Hopkins Ci ty C 'I ' ; ounC1 Members Zon1ng and PIa . "C ' , nn1ng omm1SS1on W~ the undersigned, united as residents . , E1ghth Avenues North _ City Blocks 1 . of Hopk1ns, (S1~th, Seventh, and oppo~ed to the purchase of residenti~i'~' and.4 r~spect1vely) are adamantly ment10ned streets by the C't f . omes 1n C1ty Block 1 of the af 1 yo Hopk1ns. ore- " Name Address ~;~ ?1/I'JIlC;lv t(IUk J ()-T7t.t Ph:ne \ Signatur~ IJ ~ If /1'7 t' tqv[ vt 9 J J -;; 7 <II{ ;;t;!~ -f/~ /" (/I';;'~ 3tJ-7">+ve.4. '13:1- ;?lyy va.. Jfi~ ~ \)~~,r Q,t). ~lr1~A.ocIto. q'$'iA't1'4~': , . c/;~-~-- /y~?tf!,~Vh. ,!3f!-'1;;z7~ if~ ' S6WUl.,/'v6t1V or ~0} &5 - 7 i!w /hJL- rt D q35 - CB:U \J!LtLunl 4f~ ~& ~ ')'(;- 71R-.. 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