[0:00] e [0:31] 7th 2025 7:30 a.m. and this is the meeting of the ATA Housing and [0:37] Redevelopment Authority uh and um we are doing these meetings as we are with City Council [0:43] meetings in a hybrid fashion folks will be able to uh watch the meeting and participate in the meeting uh at least [0:49] in one instance this morning on community comment uh so those watching on cable TV or via computer uh we'll [0:57] make sure that you have a chance to particip in community comment uh a reminder that um your remarks are [1:03] limited to uh 3 minutes and um it can't be a topic that's on the agenda today or [1:09] scheduled for a future public hearing and having provided that information we will now ask uh that the role be called [1:16] who is our executive director and city manager Scott Neil is going to call the [1:22] role thank you Mr chair uh commissioner Risser here commissioner Jackson here [1:28] commissioner Pierce here Commission agnu here chair huband here uh next is the pledge of [1:37] allegiance to the flag of the United States of America and to the Republic [1:42] for which it stands one nation under God indivisible with liberty and justice for [1:50] all thanks everyone for that and uh we have a form of meeting agenda is there [1:57] any on anyone on the HRA uh or on staff that wishes to modify the agenda any former fashion is there a motion to [2:04] approve the meeting agenda is published so moved I second Mr Jackson moves commissioner U second the adoption of [2:09] the meeting agenda has published uh any further conversation on that all right [2:14] all those in favor of adopting the meeting agenda is published say I I I posed carried the meeting agenda is [2:20] adopted uh and now we are at Community comment um so if there's anyone in the [2:26] audience we've got uh some of our residents in the audience this morning and uh if anyone wants to address the H [2:32] in a matter of concern to them that's not on the agenda today uh uh or scheduled for a future public hearing um [2:39] feel free to come forward and uh we'll hear those concerns or or [2:46] comments and I'll turn Communications nothing anybody [2:53] online no no callers right now but I do recommend that we wait about a minute before proceeding thank you all right [3:00] and then we'll move on to our executive director who may have some remarks regarding people that appeared at the [3:06] last uh HRA meeting I do not this morning okay very good uh then let's [3:11] move on to uh the consent agenda there are three three items on the consent [3:16] agenda does anyone on the H wish to remove an item from the consent agenda all right is there a motion to [3:23] adopt the items on the consent agenda a single motion so moved second Mr Jackson moves commissioner Pierce second the [3:29] adoption of the item on the consent agenda in a single motion any further discussion on that all those in favor of [3:35] adoption of the motion is St say I I I opposed carried the motion the items on [3:40] the consent agenda are adopted um and now we are on to the heart of the meeting which is the reports and [3:46] recommendations portion of the meeting and um the first matter in front of us [3:52] is uh for discussion only uh but I think we reached the point where U staff would [3:58] like a little guidance from the HR uh at least a conversation about an [4:03] issue that we know that's been ongoing in nature and that's uh challenges around [4:08] um I think getting this project that we approved at the 70th in France at the US [4:13] Bank site um keep it moving forward it's been stalled out for primarily reasons [4:21] uh unrelated to the developer um out outside economic conditions and land [4:28] labor Lumber as they say uh interest rates all these things have caused this [4:33] project to not move forward as fast as we thought and uh you've been creative I think from a staff standpoint and from a [4:39] developer standpoint about trying to think of ways that we could keep this project moving forward and we're going to hear a little bit about that this [4:45] morning so our um economic development director bill nondorf has this matter and we've got folks with us this morning [4:51] from Orion Investments uh from Mortenson and uh others as well to talk about this so [4:59] welcome uh Mr nindorf nice to have you here this morning great thank you of course um and as you mentioned this [5:05] conversation is for discussion only at this point uh but we think we have enough information put together for you [5:11] uh to help you understand uh what the proposal could look like and to really [5:16] gauge your level of interest in moving forward um uh at our previous meeting I [5:21] did do a brief overview and introduction uh that would we'd be coming back with with a proposal that that looked like [5:27] this so in your packet there is an outline of more of a structural arrangement of how the modification of [5:34] the financing and the Tiff agreement uh could work um but for the presentation [5:39] this morning I'm not going to get into the nuts and bolts so much as the concepts I think that's more important [5:45] so I put a brief presentation together um uh that I'll walk through uh of [5:51] course this morning we are joined by the developers um from Ayan Investments and Mortenson development company uh and [5:57] also Nick an Hut with 's Associates the City's consultant is here as well uh this team has been chatting about this [6:04] project uh uh on a regular basis for the last several years uh in the last several months we've um we've uh [6:11] accelerated those conversations to try to think of more creative ways to move forward as you had mentioned since a lot [6:17] of the tra traditional ways were just were not working in the in the economy the last couple [6:23] years so as we put the this proposal uh in summary form together for you a [6:28] couple questions to consider consider and then we'll come back to these same questions at the end um uh and these are [6:35] some fundamental questions about whether or not the interest the HRA would be interested in using our various [6:40] financing abilities um to pursue this project uh of course provided that our [6:45] city that the city's credit rating would not be uh impacted uh is the H [6:52] interested in potential debt repayment if there's full coverage full um uh full [6:59] commitment from the developers or the owners of the building without risk to the city uh is the H interested in [7:05] moving forward if we need to rely on our tax levy as a secondary payment Source [7:11] that'd be an alternate to the qu to the second question uh and then the fundamentally um if this interest if [7:18] this proposal is not of interest to the H are we sing are we willing to see this [7:23] uh proposal not advance and not move forward in a timely fashion so something [7:29] to think about as we run through this of course we know the site at 70th in France um as a refresher this is the [7:35] site plan that was approved uh back in 2022 uh we uh the developers had [7:41] acquired uh the the nearly six acre parcel from US Bank uh the bank needed [7:46] to relocate to a to a newer facility um that's in the southwestern corner of the property uh that project Advanced um [7:54] right on schedule one of the challenges of this overall project was before the developers could start doing anything on [8:00] their land they had to move the bank they couldn't tear down the old buildings until that new bank was up and [8:06] operational so from the get-go we knew there'd be about a year to maybe an 18month delay in in the developer [8:12] starting the bigger projects while the bank built theirs and that was part of the of the original assumption U but the [8:19] bank is finished and then site a is the northeast corner of the parcel that would be the residential highrise site B [8:26] was an eight-story professional office and then site C in the Southeast Corner [8:32] uh is the is the parking structure uh renderings of what the [8:38] office and the residential uh look like uh uh then a different view um also [8:45] as a reminder the both the office and the residential do have their own internal parking um and the as well as [8:53] commercial space uh residential or I'm sorry not residential uh retail and restaurant space on the first floor [9:00] but the um but due to the scale of the project and the commercial nature of the [9:06] businesses they they do need the separate parking in site C which is shown here in the in the uh right hand [9:13] of the image these are renderings of the of the approved garage the way it was designed [9:18] a few years ago um couple different angles of that and part of the rationale why we [9:25] even considered uh getting involved in the first place the our greater self uh plan the vision for that District [9:32] recom made a strong recommendation to shift away from Individual private parking lots to more of a district model [9:40] where shared parking can be used this is a model that has worked successfully for the for the city of ad at 50th in France [9:47] uh and also um to a to a lower scale override in Grand View by Jerry's where the where the various properties there [9:54] work together uh on a shared parking garage um rather than each one their own [10:00] individual private Lots we find it to be more land efficient if you can share parking and that was one of the [10:06] recommendations in our greater Southdale plan the challenges um these should not [10:11] be a surprise to anybody but one of the biggest um uh conditions is the rise of [10:17] in of the rise of interest rates the rise of inflation and just hases [10:23] hesitancy in the capital markets to fund large projects like this from a numbers perspective [10:30] we had we had Nick at ERS run some numbers and initially we were anticipating financing this project at [10:35] just over 4% well today in the real world we're hoping to get 6 and a half% [10:41] that makes a dramatic increase to the time value of of the cash flow of that project so initially we are we are [10:49] looking at a funding gap of 22 million that was the The Gap that we were using [10:54] Tiff to to fill uh a few years ago well today with the same project the same [11:00] cash flow the same time frame but only that interest rate adjustment while we used to get 22 [11:07] million in the Tiff increment with the increased inflation rate that's been [11:12] reduced down to 17 so just assuming nothing else changed assuming everything [11:17] else was the same we already are at a $4.7 million [11:22] shortfall um we also know construction costs have increased um uh but also [11:28] there is strong interest in this area by professional office users the developer H is having strong success at the [11:35] Craftsman office that broke ground at at 7250 France just a few weeks ago uh and [11:41] they think that interest is strong enough to move forward with this project but the first thing we have to do is [11:47] figure out how to resolve this new shortfall [11:52] um the the impacts to both projects are real um the site a the Residential [11:58] Building uh does also see a devaluation of the of the $5 million Tiff pledge [12:04] that was proposed for that but at this point the developer of the residential is not ready to proceed um and so we're [12:10] really kind of putting that one on the on the back burner for the time being um but the site B we think is ready to go [12:16] and so we've been trying to find a creative way to restructure that Tiff payment so that they can move forward [12:24] and bridge that Gap a couple fundamentals to consider as [12:29] we move forward um and these were in the back of our heads as we sat down and started brainstorming uh with our uh [12:36] with the city's Consultants um we had input from Jay Jay lingren at Doran Whitney uh and Nick Nick an hunt from [12:43] ERS uh as well as the Mortenson team and the Orion team looking back at some of their past projects and other projects [12:49] they do around the country a couple of the fundamentals that was just the fact that the city and the H have some of the [12:56] strongest bwing power in the area uh we strong credit ratings AAA uh ratings [13:01] from both s S&P and Moody uh there's the fact that governments with the strongest [13:07] credit can typically borrow funds at lower interest rates than a private developer could um we considered whether [13:14] or not the city or the H or possibly even creating a special purpose entity [13:19] um like an LLC essentially uh a joint partnership to take the lead on this [13:24] they can borrow at T at tax exempt rates if the project is for a public purpose [13:31] so a public parking garage a public intersection a sewage treatment plant [13:36] like those types of things in our case the as long as the parking garage is considered public parking uh it would be [13:43] uh it would it would qualify for that tax exempt uh type of rate we also realized uh that uh an even [13:53] lower interest rate could be secured if the city was willing to pledge guaranteed repayment of this cash flow [14:00] so just like when we issue a bond to redo a road or build a fire station we [14:05] pledge the full faith and credit of the city to make sure that loan is repaid whether the actal source is tax [14:11] increment or sales tax or whatever the finite source is we get the best borrowing power if we pledge that full [14:18] security of the city or the H and so those are a couple things we we talked about to see if we could actually [14:26] use those and apply that to this to this project we came to the to the conclusion at the [14:31] bottom that we could move this project forward most efficiently if we combine [14:37] the tax exempt financing supported by a repayment pledge from the city that [14:42] would lower the cost of borrowing to a point where we resolve that Gap that we that the interest rate had created for [14:52] us so I walk briefly through through the outline um of how that deal could be [14:58] structured because because there there's impacts to what we just suggested so in in your packet I believe there's a [15:04] five-page bullet point type summary I'm going to keep it to just the highlights here because the real conversation is [15:11] really about is really about the impacts not you know if if this is something we want we want to move forward with we'll [15:17] come back we'll have a full contract for you we'll have all the details worked out but just as an overview of how this [15:22] could work so working with the developers we realized that if only the office [15:29] building is ready to move forward today we could construct that um that separate [15:34] parking garage in two phases taking advantage of the underground parking in [15:40] the office plus using site a as a temporary surface lot for a couple [15:45] hundred stalls that would lower the cost of building the initial parking garage that could save some [15:52] money that also gives us time so that when site a is ready to go um we could [15:58] see what the parking world is like in a few years we know that the parking requirements are changing dramatically [16:04] around the country um as as Wells locally um so perhaps in a few years we [16:10] might not need to build so much parking that this would give us a few a few years of time to see what the real [16:16] parking demand is and then make that decision um whether or not to finish the the the initial garage to go to to its [16:22] full height or maybe we're sufficient where we are so just kind of putting that placeholder in there [16:29] we would consider the creation of a special purpose entity that could be used as a guide to this partnership [16:35] between the developer of the office building and the H in the city uh we could rely on the H H or [16:43] City's credit um to secure to secure debt or we could work through that [16:49] special purpose entity and rely on a lease commitment a long-term lease [16:55] commitment from the city or the HRA um uh to support uh repayment of the debt [17:01] on the garage that would be done in lie of a of the more traditional private [17:06] route of going to the lenders going to the banks getting a mortgage or a construction loan on the project there [17:12] there would actually be more of a debt issue of a bond issued on it one of the big uh big changes were [17:20] that were that this structure would eliminate the Tiff note that that was [17:26] originally anticipated so as you recall theity pledged to provide a 17 $17 million Tiff [17:33] note that we'd use to reimburse the developer for their expense if we go with an alternative structure as we're [17:39] discussing here today that Tiff note goes away but the same Tiff dollars that [17:44] are coming in the door would go out the door to pay for the bond [17:50] um we would also reach uh potentially contractual Arrangements between the [17:55] city and the developer you would you explain that again sure the Tiff is is gone but really it's not because the [18:02] Tiff has gone we're not really using Tiff payments to pay the debt we're [18:09] using our general taxing Authority on the levy to pay the debt is that what you me that that's that's the dist [18:16] that's the distinction so if you if you fast forward in time a little bit the Project's finished and [18:22] it's paying its taxes so the base taxes go to the schools the county like they always do and the city um but that tax [18:28] increment is still being generated MH what we what we typically would do what [18:34] our current Arrangement says is that upon completion we give the developer a $17 million Tiff note and we take that [18:42] tax increment that comes in from the project and we pay down the note to his borrowing [18:48] costs in this Arrangement we're proposing that he doesn't take on the borrowing either the city or a special [18:56] purpose entity takes on the borrowing so the $17 million so the the Tiff payments [19:03] don't go to the developer they go to the debt holder that issued the debt on the [19:09] on the parking garage so it's the same cash flow but in order to get an attractive rate that's where we have to [19:16] think about what if there's not enough Tiff we always think about what what if something goes wrong right because we [19:22] hope it all goes right but what if it goes wrong we don't want to be on the short end of the stick and so one of the [19:29] options if some if there's a shortfall is that we could rely on the city's or the H's taxing authority to make up any [19:36] shortfall that's an option um or we could try to mitigate that risk by [19:43] reaching agreement with the developer where if there's a shortfall somehow they're going to be on the hook for it [19:49] either through a personal commitment special assessment to the property um uh [19:55] charging for parking in the ramp and relying on that Revenue there's a a several different mitigation sources [20:00] there Comm Jackson has a question for you yes um so the not the Tiff note goes [20:07] away but the Tiff District does not is that correct so the the structure for Gathering that increment is still in [20:13] place but instead of paying off a tiff note it's paying off this other debt instrument that's exactly correct okay [20:20] thank you yes thank you for [20:25] that uh commissioner rer procedurally um how would this move [20:32] forward and specifically what would be opportunities for public involvement [20:37] would there need to be public hearings on this [20:44] um from a financing perspective I don't believe there's a public hearing required we've already done that when we [20:50] established the Tiff District so the public input on uh on the financing [20:57] proposal would um just be our normal uh input uh through through the city [21:03] council the the temporary use of the parking lot or the temporary use of site [21:10] a as a parking lot temp instead of a building right away I believe that has to go back to either Planning Commission [21:16] or councel from a zoning perspective and there there might be a public hearing there I'm not certain but that that [21:23] would be from a land use perspective not a financing perspective [21:31] you have you have further slides you wanted to talk about yeah y okay a few more yeah go we've also started thinking [21:37] about day-to-day operations and maintenance um so uh we we would uh come [21:43] to an agreement with the developer that the developer the owner of that office building would be responsible for those [21:49] costs cleaning electricity security um minor repairs things that are associated [21:55] with it and then from a long-term perspective 20 years down the road the city owns the ramp let's say there is a [22:02] $5 million modification needed we could use a special assessment process um to [22:08] assess those costs back to the benefiting properties um and these last two two Arrangements we've um we've [22:15] basically copied from how we do things at 50th in France where the businesses that use the property and benefit from [22:20] it pay those daily costs we've done the same thing at Grand View so a couple risks to consider [22:27] because this is this is different from our traditional pay youo Tiff note um one of the initial risks is the [22:34] marketplace um this is a creative solution we think it could solve the problem um but there's still no [22:40] guarantee that the private Market is going to jump on this right away so um [22:46] things that are easy would have been ha would have been done already um the developer would still has to go and lock [22:52] in the equity lock in the debt on the project bring in the tenants so they still have a big workload ahead of them [22:59] the other uh question is how the investors will will respond and the debt issuers will respond is the bond [23:06] offering that we put out there um uh of enough interest to get good rates uh [23:14] with the full backing of the city I think there'd be strong interest with limited support and no shortfall [23:21] agreement with the developer I'm questioning if we' even get a better rate or not so that that [23:27] those are a couple questions that are still out there and we'll resolve as we keep going here um but what are the [23:34] potential risks to the city and how does this impact our overall finances I think that's the big question here because we [23:41] think we can get all the nuts and bolts to work fine but what's the potential impact to us um will the issuance of this debt [23:49] have a negative impact on the city's credit rating that's something to really take into consideration considering that in the [23:57] next couple years we're going to be building Fred Richards Park Brar Arena [24:02] entering into a long-term lease for the Art Center building a new fire station hopefully a second a third fire station [24:08] in the next few years plus our typical road projects we're doing a lot of big Capital Improvements um and whether the [24:16] city issues the debt on our behalf or whether or whether we enter into a long-term [24:22] lease the Credit Agencies will notice that um second question is is there [24:29] enough sufficient is there enough incremental taxes to actually repay the debt if all goes perfectly well there [24:35] will be but what if there isn't that's something to to keep in mind and there's ways to mitigate that but I don't want [24:41] to uh ignore it um potentially will additional Bond payments re be required [24:47] from the city we have our general Levy we could always go to that but I know there's been lots of conversations about [24:52] our Levy so again I don't want to um hide that some of the mitigate mitigation uh [24:59] factors that we've discussed so far um are identifying alternative sources to [25:04] supplement uh tax increment if there's a shortfall I'd mentioned um charging [25:09] revenues for the parking um whether it's to the tenants in the buildings or the [25:14] general public um issue special assessments to the owner of the building [25:20] uh which would then trickle down to the tenants of the building there's also Tiff pooling we have a little bit of money money left in the um Centennial [25:28] Lake fund that we could pull into there if we wished um there's also the ability to establish minimum assessment [25:34] agreements agreements on both sites to have the owners to commit to a certain [25:39] value of their properties and guarantee that they will not protest any to get [25:44] any lower valuation uh we do that quite regularly we could also pursue personal [25:50] guarantees from the developer or letters of credit from the developer so there there are ways to mitigate mitigate that [25:56] risk to the city about repayment so in conclusion I'll wrap this up um [26:03] what is the developer asking for and what aren't they asking for um at the uh [26:09] in this proposal they're not asking for any additional expenditure of Tiff monies than we've already pledged the [26:16] the ass the dollar amount is the same but how those dollars get put into the deal is is shift is as to be changed [26:24] they are asking to modify the method that we use Tiff Monies to finance that garage and they are asking to for the [26:32] city to consider using a full commitment from the city whether it's through direct borrowing or entering into a [26:38] long-term lease to try to get the lowest possible borrowing rate for the [26:43] project um and then the one thing I haven't touched on and this is were all [26:49] closed the fundamental difference um uh in this proposal does create two [26:55] different benefits to the city um at the end of the lease or the repayment of the [27:01] debt the city will own the parking garage forever that can be a blessing and a [27:06] curse we own a piece of real estate we own an asset it's been wellmaintained we've got agreements with the developers [27:12] and owners that keep it in good condition um but they get expensive we've seen that at 50th in France [27:18] there's repairs that need that are needed every year after they get to a certain point and that gets expensive so [27:25] while it's there can be the pros and the cons there but fundamentally um the reason that we're bringing this forward [27:31] is we do think it's a it's a way uh to create a path to get this big ambitious [27:36] project that we approved a few years ago remotivate and get it back in the marketplace with the hopes to really [27:42] reinvigorate that corner so we I'll close where we ended with those four basic questions uh we're [27:49] not looking for any formal lch in today it's strictly for discussion um but [27:55] we're we're at a point in time where general direction is is really helpful to the to the developer so they know how [28:01] to how to proceed right they're they're actively out there in the marketplace they're wondering if they've got a path [28:07] in an alternative method uh or not so with that I'll turn it back to you Mr chair um I'm happy to answer any [28:13] questions I will rely a lot on uh Mr anut for MERS and uh and our folks Orion [28:19] and Morton as well but with that Mr yeah thank you for that I'm wondering if [28:25] before uh the Commissioners has asked questions and um commissioner AGN is ready to go her inquisitive mind has [28:32] some and everybody else up here too I think questions and concerns U I wonder if we should hear from the developer [28:38] about their perspective on this and why why this has evolved [28:45] um might help us background the situation a little bit more thoroughly well good morning Commissioners and [28:51] chair uh Ted Carlson with Orion Investments nice to see you today I think what um our team at Orion and the [28:57] Morton team are looking to accomplish as a mechanism for us to develop the sites independently and ultimately with the [29:04] structure of the Tiff notes and the way it's set up today we're not able to do that um and so with the help of Bill and [29:10] and and Nick and team at looking at different creative ways to finance this project if we're able to work on some [29:18] type of structure that bill outlined today that would give the opportunity for the office site and the multif [29:25] family site or whatever that site may be in the future to develop independently [29:30] similarly to what we're doing right now at 7200 7250 France where we've got [29:36] adjacent sites brings the guidelines to life uh different uses mixed uses but [29:42] they're financed differently with different structure different Equity different debt and so I think for our [29:48] perspective um as the markets have shifted and changed that in order for us to make this project happen we need to [29:55] have need to be able to decouple the financing between the two [30:02] sites okay thanks for that um Stand By You might want to just stay right there [30:07] I'm going to go to commissioner EGU thank you mayor and thank you manager Noor for the the overview this [30:14] morning um so it feels to me based on what you said that we as a city would be [30:20] assuming more risk in this um I want to make sure I'm understanding that [30:25] correctly so can you speak a little bit more in depth about the change in our [30:30] risk profile knowing that typically when we agree to Tiff agreements um pay as [30:35] you go it is a lot less risky for us as a city um so speak more to that if you [30:41] could please sure sure um uh happy to address that so there's [30:48] two types of risk that that get added to the conversation um because you're right [30:53] with a payo note the risk is all with with the developer and the city just you uses Tiff as a reward when they're [30:59] finished um so the two types of risk that we're that we're now getting involved in um is the risk of impact to [31:08] the city's credit rating um because whether we whether we issue the debt or whether we sign a [31:15] long-term lease the Credit Agencies will notice that we have some type of commitment in the17 million range um so [31:24] that is that enough to to damage us or injure our credit rating I'll leave that to to Mr anut he [31:32] might have some comments there but you never really know until it happens but just looking at everything that's on our [31:39] plate there is some risk there um and the second risk is debt [31:44] repayment um uh the Tiff increment from the parking garage I'm sorry the Tiff [31:52] increment from the office should pay about half of the debt guaranteed [31:58] project gets finished gets built gets leased up we've got at least half of it covered that's half so that's why we're [32:05] thinking about building the deck in two phases about 50 or 60% of it now and [32:11] come back and finish it later to try to minimize that Delta but there's always the risk that let's say the office [32:17] finishes and it's assessed at a lower value or maybe they lease 80% of it and [32:23] they just can't get to 95% which is where they all want to be there's some [32:28] risk there and so if there is a shortfall in the tax increment then we have we have a couple choices either [32:35] that can fall back on the city or the HRA and we'd have to figure out where that revenue is coming from the easy [32:42] thing is also the hardest thing our tax levy easiest to do and hardest to do at [32:47] the same time hardest to stomach perhaps at this point um but there's alternatives to that there's shortfall [32:53] agreements with the developers there's revenues that can be generated from the garage uh and then special assessments [33:00] that can be wrapped in into the whole deal so there's ways to mitigate it but that's still a risk so those are the two [33:06] types of risk that are now on our side of The Ledger thank you for going through that um so I want to dig in more [33:15] to the parking itself um so would you be viewing this as District parking or site specific [33:24] parking in order to qualify for tax exempt parking or tax exempt financing it would have to [33:31] be public parking which is defined as 50% of the parking must be [33:37] public so we'll have to really test what's in the marketplace um uh right [33:44] now we the existing garage has I think one level all public parking and then [33:50] the upper levels public parking in the evenings and weekends um that probably [33:55] hits the 50% threshold right there um but as we get into it we'd want to make sure that that's sufficient um [34:03] while the parking is needed for the tenants the tenants aren't there on weekends but all the Shoppers at the [34:09] Galleria are um other businesses in the area are there on the weekends the Pancake House overflows every Saturday [34:16] and Sunday um so the the garage would be available for that and it would have to [34:21] be public if we don't pass that threshold we lose our um Lending [34:27] advantages or borrowing advantages thank you so as we talk about the potential [34:35] phasing um first can you speak to me about when the ramp would be built in [34:41] comparison to site B sure so um we will [34:46] work hard to to minimize any risk to the city so uh the construction of site C would [34:56] be triggered after after the full financing of site B office so once they [35:02] know that they've got their debt in equity and they've got their pre-leasing all ready to go and they're ready to [35:07] close on the deal that will be the trigger to us that that that it's not just a proposal it's really happening [35:15] and then we would start moving on sight c um it would take the city time um you [35:21] know to do full design construction design we'd have to bid it we'd have to hire a construction manager like we just [35:26] did for the Fred for the fire station so that takes time um we'd recommend not [35:32] investing our time and and treasure um until we know site B is ready to go um [35:39] as fortunately um it's it takes less time to build a parking garage than it does a full-blown office building so [35:46] even if the parking garage construction starts a little bit after the office they can still be delivered at about the [35:53] same time that way it reduces risk to the city what we don't want to do is have the city build a parking garage in [35:59] the middle of a vacant lot and have nothing else happen that would be injurious to us right exactly thank you [36:07] so do both sites A and B need additional [36:13] parking or we talking about staggering it because we could use the empty lot of site a to compensate for some of that [36:21] yeah um uh we're proposing to proposing to Stager it just to reduce the financial [36:29] exposure up front if we know that we've got a acre and a half of surface parking [36:35] lot let's rely on that first it saves a whole lot of money um that's why we [36:40] proposing to stagger it so do both A and B require more [36:46] parking than what's provided in the buildings themselves [36:51] uh uh the site B office does for sure the site a residential [36:58] um I think is as I recall is self parked self Park yeah I mean because the site a [37:04] also has a lot of public space on the first level as well the first level and a half I think a little bit lower in the [37:11] main level yeah so part yeah so I'm sorry I'm getting over over cold so [37:16] thoughts are not always directly in order this week um so site a is [37:22] self-parked site B needs the parking garage okay and so [37:28] we could potentially evaluate if we only did half of the parking ramp or some [37:34] portion of it and we were seeing not full utilization between the Surface lot [37:42] and the parking ramp we could potentially decrease the [37:47] overall scale of the parking ramp at that point in time if it's identified [37:52] that there isn't as much of a need for it is that correct that's correct okay thank you [38:01] I think that those are my questions thank you we'll come back to you if you think of more uh Mr Pierce thank you [38:11] thank you Mr chair um I do have a couple of questions [38:16] but I I'm not sure what I think about doing [38:22] this and so I um it is really complicated um but [38:28] it in my mind it reminds me of this story I would use for an Erp team that I [38:36] was trying to rescue a project and we kept pushing the date and [38:43] um and I asked them if they knew what it meant when you were in a boat there's a hole in the boat what do you do and [38:51] everybody said well we start right you have to bail the water out of the boat and I said that that's that's [38:59] true but if you just bail the water and you don't know where the hole is [39:05] then the chances that you're going to save yourself is it's just a guess right [39:12] and I said so you have to have the discipline even though you're behind on a [39:18] project to stop and then reassess where you are [39:24] where you're trying to go to figure out what really is the issue and then focus [39:30] on that issue and so like this kind of [39:35] feels like that to me but um and so are we solving the right [39:43] problem um and so I hear um you know maybe the problem [39:50] really isn't the financing maybe the problem is the kind of development that we approved I I don't know the answer [39:58] that um is this really about a financial [40:04] construct um that won't allow the two sites to be developed separately or [40:10] independently or is it that we can't Finance the development we can't and so I hear where [40:18] we can't get PRI enough private investment um and so is that is it [40:26] really the construct or is it we just we can't get enough [40:32] financing um and so when I you know I think about it in that way um [40:41] I It just strikes me when you look at the [40:46] overall Market um so I heard you say well you know tenants want um office space and I [40:56] know these this example I'm going to give isn't the same but I'm trying to to [41:01] paint the market um so we've said we can't secure our private [41:06] investment um you actually said well you know if we do the parking ramp in a few [41:13] years we just talked about this a few years if because the market is changing [41:19] in traffic Transportation patterns we may not need as much parking as we do [41:25] today and then you said we really don't know right [41:30] so we're going to put that into part of a solution to a problem and we're not [41:36] really even sure if we need all the parking yet um and then the last and so [41:42] I I think that that has to do with what the market is um and then the last this [41:48] is the example of the priz Tower so you go [41:54] downtown um and I granted it's different market right Minneapolis is not [42:00] a um but when you step back and look at the [42:06] trends that leads me to where I started right is this is our [42:12] issue financing maybe financing is a symptom but there's some other issue and [42:19] um I don't want to today dive into asking questions of how [42:27] to enable the solution that you're providing um because I personally think [42:32] that um it could it could be it's not [42:39] constructive in my opinion um it would be more [42:44] constructive to have and we set this path so this is not about this is not about you you came before and told us [42:52] this is the next thing we're going to do um and so I'm not however if there were [42:57] three options and I'm making up the number three you had one in here that [43:03] says we're we're done we're out um maybe a second one is looking at the [43:09] development and looking at our policies like asking the question we asked The [43:14] Enclave developer for the Macy site why is it so expensive are there things that [43:21] we're requiring as a city that make this development more expensive expensive [43:27] debt you can Finance maybe that's the problem we need [43:32] we need to solve we've had that as an issue before with other [43:37] developments um and we've talked about some of those challenges um and so I [43:44] where I am at the moment you're not you're just asking for feedback um it strikes me [43:53] that if we can't fund it through private investment we've already committed 22 [44:00] million and when you went through that analysis you said well that's not enough based on what the market is is dictating [44:08] there's a shortfall it feels like we're bailing [44:14] water and I I don't know that that's a good position for us to be in um as a [44:23] city with the risk profile that you're framing if we do that um and so that's [44:30] kind of that that's where I am today um excuse me today [44:37] um I I don't know that I'm expecting an answer from any of the questions I'm [44:43] just giving you uh where my hit space is uh [44:49] today than thank you thank you and we've had several conversations that followed [44:55] your direct line of thought um I know the developer has looked at a lot of different options um I don't know [45:01] if you have time to take the time to talk about that but they have spent [45:06] months looking at other options I think I think you should opine on that yeah sure um well it's a really [45:14] important question we have the right project in these times yeah it's a great question great dialogue thank you for [45:20] the opportunity um you know we we first of all uh you know what most respect to [45:26] the this group and staff is we wouldn't be here if we didn't think that the programming for the the office building [45:33] was spot on and dialed with the market that's our job and our responsibility we're having success of blocking a [45:38] halfway so to the mer prize question which I've answered probably a thousand times over the past 90 days is you've [45:47] got a unique opportunity a unique set of circumstances and while they're both are called office they're incredibly [45:53] different so I'll just leave it at that and if we want to have a different deep dive on that we can but in our world [45:59] it's a little U you know apples to potatoes it's it's way different as it [46:05] as it relates to this um you know we think this is the patch in the boat not bailing water frankly uh we need the [46:12] ability to build these sites independently and currently we don't have that ability and so for us it's [46:17] again back to a decoupling I think the risk profile can be further adjusted and measured I think that's been crystal [46:23] clear with Bill and and his team is that the city is not willing to take addition risk so um I think this dialogue is [46:30] exactly what we need to figure out how can we bring a great project that brings a lot of jobs and a lot of Investments [46:36] to our community to life that's what our focus is but and so I like that sounds [46:43] great to me but then when I go through the deck we're asking for more money and so [46:50] then I would say if the issue is we need to decouple the sites [46:57] then the problem is how do we do that without putting the city at more risk [47:02] and requiring more uh funding go solve that [47:09] problem if the issue is we just need to decouple right and so that's I I have no [47:16] issue with that trying to figure that out but what you're asking for is for the city to take on more debt more risk [47:24] in order to do that and then on the AER prize I started by saying it's a [47:31] different Market however it's happening everywhere we just we got there's a [47:38] letter in the packet about the public work site right so Jesters cancel that [47:45] contract why did we cancel that we cancel that because the um 55 plus um [47:54] development couldn't get funding right it's not mixed use right it's [48:01] residential but they couldn't get funding and so I there's a laundry list [48:06] and you the last thing I'll say there I'm I'm actually on the board of a of a [48:12] bank we look at the risk profile of all that debt at the executive meeting every [48:18] month and so I give you a list of things that can't get financing and companies [48:25] that are defaulting on loans across residential mixed use and office um and [48:33] so I'm only I use a miror prize because everybody knows that example uh but my [48:38] point is the market is what it is and so if [48:44] the problem that's what I would offer to you if the problem is we need to decouple the sites so that we can [48:50] develop them independently come back with an option to do that that doesn't put the city at [48:56] risk that's not asking for more money because we've already committed 22 [49:04] million thank you for those thoughts commissioner Jackson um so I have a lot to follow on [49:11] on that but I just want to ask help me I guess I read this differently is this [49:18] committing the city to more money and more risk or just more [49:23] risk it's more risk and it might be more money if things go [49:31] poorly okay but we won't know until that's kind of the risk part of it and that's part of the risk okay but today [49:37] you didn't take the initial Tiff dollar amount and increase it no okay I just I [49:44] want to be clear because I think sort of as we've talked behind the scenes about this over time some of the different [49:50] options did involve more money and this one does not cor cor okay thank you um so this is from Mr Carlson [49:58] um we looked at this as a prototype of the Southdale District um and the [50:03] Southdale guidelines um when you're looking at financing are you finding in the market [50:10] that there's a disconnect between what Financial lenders are expecting from a project because we're in a suburb and [50:17] we're having an urban type of development is is this not translating [50:22] into the financial markets is this something that we should be aware of as we think about Southdale guidelines or [50:29] is this a problem that that is just in my imagination that there's a disconnect between you know A lender will say okay [50:36] I'm building an office building in an urban area okay I'm building an office area building in a suburban area the [50:42] cost of parking in particular is very different between and the revenues can you talk to a little bit about what the [50:48] financial markets are telling you about offices and parking and the the financing of that yeah that's a great [50:55] question and I'll do my best to to answer it um you know as we look at the urban situation downtown is that a lot [51:02] of parking is not included it's separate it's pay you know it's it's it's public [51:08] ramps Andor private ramps here the lender looks at is we need to provide a certain level of parking in order to [51:13] secure financing and we need to provide a certain level of parking in order to attract tenants and that's what we need [51:19] to provide on the site and that's what we're programming for so I think it's a combination of what does the income [51:25] stream for velopment which is tency need and what is that income stream that the lender [51:31] underwrites provide to get them comfortable with the project I don't know if that's answering your question [51:38] but that's you know we need to provide a certain level of parking availability to [51:43] secure tency which provides the income that the lenders will underwrite okay so you have to have a there's parking [51:50] minimums that are expected and they're coupled with the with the office building whereas Minneapolis they're [51:56] separate um does that impact does does the requirement that the [52:02] businesses pay for the parking that that is coupled with the development does [52:08] that um affect the lenders um I I would [52:13] answer it this way that it's not standard for Suburban office to charge for [52:18] parking so it's a different metric and it's it's a drag on a project I think [52:23] the district element is really unique here I think the rest of the public Improvement elements are very unique so [52:29] I think if you take the parking along with those other elements as a whole that creates uh financing challenges yes [52:36] okay and then to follow on with that if we go forward with this how are are the [52:42] um other public amenities on the site the interior streets the pocket park will those be built with the office [52:49] building because it seemed to me that those were initially tied to the apartment building not to the commercial [52:55] office building yeah a great question I think one of the things that we've held sacred throughout this process and dialogue is to maintain all the public [53:02] elements that we've talked about for this project to include the public Street rooms the street grid the plaza [53:08] so on and so forth there's also a um what we can't see is there's a ton of storm water under underground which is [53:15] very costly so we've held that sacred and have not touched it nor is the programming of the office changed as far [53:21] as square footages and things like that so um you know [53:27] if the office is built first which is what we anticipate that grid needs to be [53:32] finished and completed yes in which case there would be a pad site ready for the [53:37] at site a for the multif family tower that could be S short-term surface [53:42] parking similar to the arrangement we looked at at 7200 7250 France so this is [53:49] a question actually for Mr Teague then to follow up um and that is does that [53:54] change the land use that we approved or maybe uh with a tiff uh agreement that [54:00] we have does does that trigger a whole new um series of questions about land [54:07] use um and it's it seems to me that's different from what we approved yes thank you for the question [54:14] so it if surface parking would be utilized on the apartment site it would [54:21] have to go back through a site plan review process so it would trigger public hearing both Planning Commission [54:27] and city council okay and similarly if it's a smaller parking garage than initially approved that also would [54:33] trigger the land use questions uh not not if just a portion [54:39] of the parking structure were constructed you know if it was a change got bigger then it would have to go [54:46] through but just a reduced size parking structure with the ability to go up that [54:52] would not trigger a okay site plan riew and so this is a question to both of you [54:57] though I think I mean tell me about the the public realm that we approved know [55:04] we've got the sidewalk along France we've got the interior streets is linking that to the [55:11] commercial building instead of to the apartment building is that a change in [55:17] does that require a whole new level of agreement or is that something that can be you know administratively changed [55:24] help me understand um the linkage between um the interior the public realm [55:30] and the two different buildings you have a sip for this [55:35] yet yeah yes for for each site so the public improvements from what I just [55:41] heard from Mr Carlson there would be no changes there and that would be constructed as part of the office okay [55:48] uh project so no changes there okay so the linkage between the two buildings is not a land use question it's uh just a [55:55] financing question kind of thing correct and and in the Tiff agreement the current agreement um has a $5 million [56:03] pledge to the residential for some of their qualified costs and then a $17 million pledge to the office for some of [56:08] their costs okay I couldn't remember we have to amend both agreements to reflect this change um but if we if we move [56:18] forward with the office separately we would want upon completion um you know this the street [56:25] grid must be going through and the sidewalks have to connect to something and the utilities need to connect to [56:30] some other utility um so we'd figure out how to make that happen and then that [56:35] would put the residential building on its own timeline whether that's two years out or five years out um but we'd [56:43] want a sidewalk that's connected and those kind of things we could make sure we get okay and then since both of you [56:50] are are up here going to take advantage of your expertise and you can help me decide who needs to answer this what are [56:56] we hearing about the ne neighboring sites um is there are there any what is [57:02] the long-term expectation for whether the neighboring sites would be redeveloped because I think the demand [57:08] for district parking would be I mean right now there's probably some demand but um what's the anticipated future of [57:15] of the neighboring sites because that's kind of the Keystone of this site is if this could be the parking then those [57:22] sites could be developed with less parking um so what are you hearing about neighboring sides anything well I'll [57:28] share what I know I I um often times we're the last to know when when projects happen um but the the shopping [57:36] center to the South um rud of France uh was sold recently to a investor Philips [57:43] Edison um they also own Centennial shops and they tend to buy successful retail [57:50] properties and hold them as successful retail properties um uh in my experience [57:56] they don't buy them to tear them down and do something different at least in the short term maybe in the long term we [58:03] know the Guitar Center site is has been the Bowers for a couple years now so that piece is done and the um the [58:10] shopping center uh where The Original Pancake House Warner stallions [58:16] um I I don't know I hear that there's some interest in that site from [58:21] developers but I don't hear interest from the owners and I don't know the status of their [58:28] leases how long those leases run but I think that site on this block I think [58:33] that would be the next site to CH to change but I don't have any indication [58:38] that that is imminent that could be five years out 10 years out 15 years [58:45] out yeah and I have not received any inquiries about development of [58:51] neighboring properties okay thank you um and then my next question question is uh [58:57] for manager nindorf um we've been talking about the timing of this Tiff [59:02] district and when it's times out um are is that part of the consideration [59:09] of what we're doing what's the time frame that we have to make this decision and uh get shovels in the ground sure [59:17] um yeah um when you establish a a tiff District [59:23] this typical Tiff law says you've got five years to finish to finish your qual [59:29] and and lock in your qualified costs [59:34] um the developer did what they said they would do and they kept on that initial [59:39] Pace expecting to get financing so they tore down the buildings as soon as they could started to try to get the site [59:45] prepped and cleared and whatnot um but the the minute we created that Tiff [59:50] District back in 2022 our 5year clock started ticking so right now I think I [59:56] think we're at it's either June or July of 2027 is our 5-year rule um to get [1:00:03] expenses finished and a certificate of occupancy [1:00:08] issued that's pretty unlikely at this point so we are uh at the senate or at the state capital seeking special [1:00:15] legislation there's a a short list of cities up there for the same same thing this happens every year um so we are [1:00:22] asking to change that 5year rule to 10year rule that's usually what the Senate taxes committee likes to see is [1:00:27] going from 5 to 10 so that's what we're asking for that that does give us more time uh doesn't change the price doesn't [1:00:34] change the city's contribution it gives the developer more time um uh that bill [1:00:40] is moving forward whether it makes it into the final legislation we won't know that until May um but that that piece I [1:00:48] think is critical because if the even if the office goes starts taking [1:00:53] tomorrow the residential we know is not going to to start tomorrow so and the residential is also a part of the cost [1:01:00] so having that except that that uh special legislation is important the [1:01:05] main reason is if we would let this Tiff District expire and just close it out and start over from scratch another day [1:01:12] the blight has already been removed so it's nearly impossible to create a tiff [1:01:18] District on just a vacant piece of land so if that were to happen this Not [1:01:23] only would the developer be in a hole the the community would be in a literal hole right now um because there'd be no [1:01:31] ability to help with any kind of financing so we're hoping to avoid that kind of Doomsday scenario okay um so my [1:01:39] recommendation then is to um table this until we know um because I I don't think [1:01:48] we should spend time and money on something that um we just don't know [1:01:53] whether it's feasible or not um based on that time clock um uh you brought up [1:01:59] another question though um well I'll think of it just hold your [1:02:04] thought for a second this should have been the only thing on the agenda this morning we're [1:02:11] going to we're going to roll till nine o'clock just on this topic and so I want to give other people a chance I I think [1:02:18] we should let people leave frankly that are sitting here waiting because we're [1:02:24] I've got all kinds of questions we haven't even gotten the commissioner verser yet member Jackson this there's going to be a whole dialogue here that's [1:02:31] going to easily take us a half an hour so for the affordable housing report for [1:02:37] the chamber update I think we should be letting people go from this agenda I [1:02:43] don't know Mr executive director you may have some thoughts we can we've got hard stops at 9: we do so if we need to [1:02:50] recalendar those items we those those issues we can because we already had one [1:02:55] person from the chamber has to leave take more of their time because [1:03:02] we're what's going to happen they they'll sit here on 9:00 and then we'll adjourn and they would they would have [1:03:08] lost a half hour of time [1:03:14] so that require amending the agenda it it doesn't but I think we yeah so we can [1:03:20] reschedule the chamber we'll come back next we'll yeah thank you Mr J thank you [1:03:27] all right and um you've got somebody here as well yes I just yeah thanks for thanks for being [1:03:37] here okay I'm going to go back to commissioner Jackson now who remember what you I remembered my final question [1:03:42] and that is um if and when that apartment building gets built would the [1:03:48] revenues from that also be pledged to pay off the Tiff notes yes they would a [1:03:54] portion of them okay great thank you that's that's the $5 million [1:03:59] part um the department building the site a or the that that's part of the [1:04:06] conundrum the amount of tax incremental taxes generated from the office is Big [1:04:14] the amount of incremental taxes from the residential building is enormous and so um like if if the world [1:04:22] were reversed if the residential were ready to go first first in the office light a couple years we won't be having [1:04:28] this conversation um but yeah when the off when the residential is finished a [1:04:34] portion of those incremental dollars would support the payment on the on the perking that's how it was originally [1:04:40] structured can oh you have a segue outside same issue yes can you there was [1:04:46] a slide so I appreciate um commissioner Jackson's correction but I want to make [1:04:53] sure then that I may have misinterpreted one of your slides I thought you said [1:04:58] that we were already at a deficit and the slide had interest rates on it and [1:05:03] you had a $4 million deficit and so I was [1:05:09] interpreting that to mean we had a [Music] shortfall and I was assuming that we [1:05:17] were going to cover that shortfall you'd be coming back at some point wanting to cover that with Tiff or [1:05:24] some other loan and so that's where I was getting that you're asking for more money from and so [1:05:30] I may have been misinterpreting that but if you could clarify that that'd be [1:05:36] great sure um I I think you did misinterpret that uh so initially the [1:05:43] the Tiff pledge uh we were aiming to fill a $22 million gap and the Tiff [1:05:49] Revenue stream would have filled that but today with a with the change in the interest rates um the Tiff Revenue [1:05:56] doesn't come to 22 million it only comes to 17 because of that higher interest rate so by restructuring the deal and [1:06:06] using the city's ability to get tax exempt borrowing as a AAA rated City we can [1:06:12] bring that interest rate back down so we're still at the same $22 million it [1:06:18] just how we get there is different thank you Comm rer [1:06:25] well I have actually been in the middle of a lake bailing water in a small boat [1:06:31] so I'm going to continue commissioner Pierce's analogy and in that situation I [1:06:37] was the Bor but um I was with people who knew what they were doing and one of them reached down and grabbed a raggedy [1:06:45] t-shirt and used it to plug the hole and we hung out on the lake um which was a [1:06:51] very cheap solution and it strikes me that the patch being proposed today is a very expensive one um for several [1:06:59] reasons uh and I do appreciate going last because this is a project that I [1:07:04] was not um I was not on city council or the H when this came forward and um so [1:07:12] just kind of feeling like I'm playing catchup but I went back and I reviewed so much of the information um and one of [1:07:20] the consistent messages for this project um in front of the planning department and or Comm mission in front of council [1:07:27] and also to the city even in an agenda Idina um message was that we do pay as you go [1:07:36] and there's no risk to the city there's no risk we do pay as you go and I also [1:07:43] went back and realized this was one of the most contentious Tiff districts that was created and there wasn't a lot of [1:07:50] public support for it so to hear this potential and I also I wrote down what a [1:07:57] loophole you don't have to have a public hearing um but you can take an [1:08:03] established Tiff district and rejigger the financing so that it is no longer [1:08:10] pay as you go it becomes very different from that and [1:08:16] move away from the commitment and so that made me really think about our tax [1:08:21] increment financing policy so I went back and I looked at that and the fourth [1:08:26] bullet is ensure that Tiff is used in a transparent consistent and Equitable manner to provide value to the community [1:08:34] and I feel this change is going to be going in the opposite direction it also [1:08:40] opens the door can any other entity that has received Tiff financing come before [1:08:46] us and say we would like to have the same kind of deal going on we'd like to [1:08:52] have the city assume um part of the risk and uh we need that to happen our [1:08:59] project's not moving forward the whole um impetus for this is to uh jump start [1:09:06] a project there still isn't financing that has been pinned down it appears so [1:09:13] that raises concerns in my head is it really the role of the HRA to function [1:09:20] in that kind of manner to to be reviewing potential Investments and to be saying okay this is one where we [1:09:26] should Place City resources on the line and back and I feel like that's kind of [1:09:32] going beyond our purview um admittedly I haven't been this concerned about a project [1:09:40] since um the summer of 23 uh when we had two special HRA meetings that were [1:09:47] specifically held uh in order to [1:09:53] award 2.5 million to the Solem [1:09:59] development and um I ended up abstaining from that vote because I felt I didn't [1:10:05] have enough information and I remember thinking the whole purpose of this is to [1:10:10] um Provide support so that a grant um to the state housing agency will be [1:10:16] stronger and then it turned out um and during both of those meetings there was [1:10:23] no mention of the sewer capacity and how and that was a huge huge thing and that was not even part of the discussion and [1:10:29] I really think it should have been and then that things ended up happening and we you know are where we are right there [1:10:35] and that got delayed but I'm I'm also wondering what don't I know about this project because we can say oh it's all [1:10:42] about the parking ramp and it's all about financing that but um the other [1:10:48] thing that struck me as I reviewed was the consistent messaging that this would be the first class A office building [1:10:54] buil for 20 in 20 years it's likely not going to be the first because we've already got another one across the way [1:11:02] that is actually being built um and then we have one scheduled for the Macy's [1:11:08] furniture site we have another one here on Eden Avenue um and so there there [1:11:13] will be you know if all of those go forward this this could be the second or the third or maybe the fourth and um [1:11:22] one thing that is stuck in my head is by [1:11:27] removing the parking from the office building and putting it in a separate [1:11:34] space a you know off-site parking that's something that I believe the other three [1:11:42] Class A office buildings are not doing and so they will be able to have 100% parking needs in a contained heated [1:11:50] secured parking facility and I I just wonder you know if if that's going to be [1:11:55] something that investors are going to say I'm not so sure I want to invest in that I mean there's so many things that I feel like I don't know um if we could [1:12:04] go back to that slide that talks about discussion and [1:12:10] um with the the questions on it yeah [1:12:18] um I don't think we can do this without possibly risking our [1:12:25] credit rating and you know you as you stated you never really know until it [1:12:30] happens um your rating falling and and so that's a concern I do see risk I [1:12:36] don't see um much benefit in taking on this risk I think it provides precedent [1:12:42] that is very concerning um I also saw the the slide that showed [1:12:50] what if we gave Tiff financing to this project by [1:12:56] 2026 um it would have the property value the estimated market value would have [1:13:02] risen from 14.9 million to 184. million and annual property taxes [1:13:08] paid would have skyrocketed from 48457 to [1:13:15] 2,467 494 and I feel like I keep getting [1:13:20] figures that come before me and then they don't necessarily pan out and so when I look at the projections of what [1:13:28] could be generated to pay back a loan I really question that [1:13:36] um the other thing is that question to consider number four is the HRA willing [1:13:41] to see the anticipated 250 um million investment vision for the [1:13:48] site not realized I think that's really not a fair question I think it's it implies that it's all on us and I think [1:13:55] there's so much that is beyond our control and I agree with commissioner Pierce that it could be the project um [1:14:02] that needs to be reconsidered finally I don't remember seeing this in the packet [1:14:08] the presentation that we just received um if that could be added so that the public can see that and I I'm [1:14:16] somebody who is a process thinker and I I really need to see things in advance of meetings otherwise all I can do is [1:14:23] react to them and it it just feels hard um because I feel like I'm [1:14:28] not uh serving the people as well as I could be so it would be great if we could get presentations ahead of time [1:14:36] thank you oh wait I do have a specific question um what grants have been pursued to [1:14:44] support this project uh for this one we have one Grant from deed um about 625,000 [1:14:55] to reim to partially reimburse them for some of the site work are there any other Grant [1:15:02] applications in the hopper uh not for the site when it's [1:15:07] when it's in this in between phase we don't pursue grants it's two it's not worth the time because it is a one of [1:15:15] the recommended terms that the developer must pursue grants from other agencies to reduce Reliance on Tiff so I just [1:15:22] wanted to ask thank you yeah and they did that initially we we did obtain that that deed Grant through their [1:15:28] application and my my apologies for not having the report in I've been out sick the last two days and just did it last [1:15:35] night it's it's the same content I copied it from the staff report I just put it on the PowerPoint and added some [1:15:43] pictures you thank you commissioner um Mr anhut could you come [1:15:50] up please got a [1:15:55] Pi a uniform concern not only amongst staff but amongst uh Commissioners [1:16:04] um about mitigation of risk you know so this risk mitigation issue is critically [1:16:10] important that um on the payo note we had the burden was on the [1:16:16] developer and the question now becomes do we want to try to make something work I don't think it's really parking is the [1:16:22] mechanism we're using to make the whole Project work so so it's not really about parking in in a sense we want to see [1:16:28] this $250 million project come to fruition and um can we do that without [1:16:34] changing the creating any risk to our bond rating uh or adding additional risk to [1:16:42] the taxpayer I think that's kind of at the core of it and you've been probably critical in helping on this [1:16:48] analysis and we're getting a sense from director NE andorf that there probably is a little bit more risk than what we [1:16:55] would have had just using Tiff P Pago note so I wonder if you could talk about [1:17:01] that a little bit that could help us understand the the incremental [1:17:07] increase in Risk if we choose to go uh choose to pursue this further in [1:17:13] some way I guess is one way to put it certainly Mr chair members of the board [1:17:19] um so the the discussion that's been been had is how do we utilize the the [1:17:25] tax increment that has already been pledged to this project in perhaps a different way than was originally [1:17:30] envisioned to try to again offset some of those changes in interest rates and other factors that are making the [1:17:36] project INF feasible at this point in time and I think the the analogy I'll give is essentially they're asking for [1:17:43] you know the payo note is basically putting everything [1:17:48] onto the developers back they're they're obtaining the funds the loans the equity [1:17:54] investment everything thing to build the entirety of the project you're promising them that you'll reimburse some of those [1:18:00] expenses through the tax increment allowing them to access that Revenue [1:18:05] stream to help supplement that private financing in this case they're telling [1:18:11] you the private financing is not coming through right the original terms of that it's just it's just not enough uh you [1:18:18] know that uncertainty is is not enough to get us to that full capacity we need [1:18:23] to actually build this project and so now they're basically asking for you to co-sign their loan right that's [1:18:32] essentially what is being asked is that now the the city the HRA whatever that [1:18:37] entity is whether it's through a lease whether it's through maybe the HRA [1:18:42] issuing its own debt to fund the project but now we're we're co-signing that lease so the the increment is exactly [1:18:50] the same the amount of Revenue that that's coming the projections are are not changing at this point we haven't [1:18:55] changed the scope of what's being built um but now instead of all of that risk [1:19:02] falling to the developer if the Tiff doesn't come in that's something they need to make up for to pay off those [1:19:10] loans now if we're the co-signer the HRA if there's that same shortfall now [1:19:17] we need some mechanism to be able to fill it because you know our name is on the line right so it is a increase in [1:19:24] the risk profile we're not putting any more public resources necessarily into it if the Tiff all plays out the way we [1:19:31] want it to Great everything's good but we all know that that's uncertain and so [1:19:37] are we willing to to put the name of the H behind it and try to work out [1:19:42] mechanisms whether it's through the agreement you know maybe we require that they put a [1:19:47] guarantee on top of that cosign so that there is something to backfill the revenue we use assessments like Mr new [1:19:55] andorf mentioned parking revenues on top of the equation things like that we can we can definitely work towards to try to [1:20:02] mitigate that risk but ultimately now we're co-signing this and so that's the fundamental question that is being posed [1:20:09] to you this morning is whether or not that change is warranted for this particular [1:20:16] project um so I hope that helps yeah to put it in your yeah it does help I think a great deal and put it in your vacular [1:20:23] does does the potential co-signing on the loan create risk for our overall [1:20:30] double triaa bond rating it adds to the equation is what [1:20:36] I'll say and so the does it add risk to that evaluation absolutely they're going to treat it you're co-signing alone now [1:20:42] now that's part of your portfolio sure right that you would evaluate at the bank or or wherever um is that enough to [1:20:51] change that credit rating on its own I would say I don't I don't expect that um [1:20:57] you know it's a it's a $17 million commitment you know roughly that we're talking about for this project um in the [1:21:05] grand scheme of things of the city I don't think that by itself moves the needle but we know that there are other [1:21:11] things that you want to finance in the future we know that there are projects right now that are coming forward using [1:21:17] the sales tax new facility needs there's always Street and infrastructure needs [1:21:22] that you're going to be relied upon so it's part of that mix and if the sum of [1:21:28] all of those things gets too large so that the Ci's finances your financial [1:21:33] statements are not able to demonstrate that it it carries that same uh profile [1:21:39] going forward then then it will move the needle just for context you know roughly [1:21:44] right now the HRA the city of Vina you know you you've carried over the past couple of years kind of in a in a you [1:21:52] know a stable sense roughly 160 to $180 Million worth of long-term liabilities [1:21:59] in your debt portfolio so if you add 17 to that that's you know roughly a 9 10% [1:22:06] increase on top of what you already have I don't think that's enough on its own to move the needle but when you add [1:22:12] other things over time you know it's certainly something that we want to manage together with your Capital Improvement [1:22:20] plan um okay that's uh yeah very helpful [1:22:26] um I thought remember Jack commissioner Jackson asked that question in a real Artful way of and you answered it you [1:22:33] know we talked about it's really substituting Tiff funds I mean you're [1:22:38] we're going to capture that increment in a different way just not through a formal Tiff mechanism so then the other part of the [1:22:46] equation that was important that I had also thought about exploring a little bit is because uh it seems to me that [1:22:53] the uh the ability or the inability to secure the Tiff District [1:22:59] extension is kind of critical to those overall analysis and I think you know her suggestion about tabling we can talk [1:23:06] about that but uh it'll come up in the context of what we decided to do here this morning I think it'll probably [1:23:12] answer itself but um I was on a call on a virtual call [1:23:18] with our city manager with the chair of the tax committee from the house [1:23:25] I didn't leave that virtual meeting feeling [1:23:30] confident that we would get that extension because we asked for two things we asked for a waiver on sales [1:23:39] tax for construction materials for all the work we're doing under the Lost under the sales [1:23:45] tax that we got totally projected on I thought she just dismissed that on of [1:23:51] hand the theory being that why should one level of government government paid sales tax to another level of government [1:23:56] well her answer was because we need it we need it for our we need it for our [1:24:02] state we need it for towns that don't have the prosperity that 9 has we need it for Education systems in Greater [1:24:09] Minnesota so I got that I understood that and and we've been takes us down a little bit [1:24:15] different path but we're we're we're a city that helps other [1:24:21] places in the state always we don't get local government Aid we we are a [1:24:27] contributor to fiscal disparities to help other towns and this is another way [1:24:32] that I perceived that the tax chair is telling us you're going to help we're just not going to give you a tax relief [1:24:39] but I also didn't leave there with I I felt like it was like 5050 chance we'd [1:24:44] get this extension on the Tiff I don't I don't know that was just my personal feeling I don't know how manager Neil [1:24:50] felt but I I think we've had a subsequent discussion uh with our lobbyist and and uh some of the other [1:24:57] communities that have similar asks it's a it's a little more positive than 50/50 [1:25:03] but not much more given that this is it is moving forward and there's a dozen or [1:25:09] more other communities that have similar asks but [1:25:14] it's not guaranteed for sure no [1:25:20] okay so we approved this project in a whole different kind of economic environment and then a lot of things [1:25:29] happened um that affected the whole world and [1:25:35] um still it's still the site it always was it's just a great site right in the [1:25:40] middle of right in the heart of our commercial District but you can't help also uh [1:25:46] musing over the question that commissioner Pierce rais and that is we have the right project or how does [1:25:53] it feel like for jamming a scor peg in trying to jam a scor peg in a around hole and that's not only for us but it's [1:25:59] for the developer too but they've been diligent about going forward and I and [1:26:05] we've always had good cander from the developer and I'm just wanting him to [1:26:11] come back up now Mr Carlson and youve got a TR I know you've got a tremendous investment here you and [1:26:19] Morton Ryan and mortson and do you feel like we're trying to jam [1:26:25] squore peg in a round hole now because of conditions that none of us could control and we don't have the right [1:26:30] project anymore for the for a great site I appreciate the direct question [1:26:36] thank you chair huband I do not um you know one of our primary roles as the as [1:26:42] a development partner with mortson on this is to understand the market and [1:26:47] I've got 25 plus years of experience in negotiating commercial leases not only in the Twin Cities but across the [1:26:53] country on behalf of many small medium large corporations and I can tell you without [1:26:59] a doubt that what we have programmed for that office site is desirable and is wanted by occupiers [1:27:07] despite of headlines to the contrary and so um from that perspective [1:27:14] I believe that the demand for office is growing for sites like this in excellent [1:27:21] communities and I believe that if we are able to have some success at the state [1:27:27] legislature to extend This Ti Tiff District that we can build the office [1:27:32] project I also think that you know we still hold sacred to a lot of the site [1:27:38] use requirements with grid and rooms and public amenities that I think above and [1:27:45] beyond including some Design Elements so I think as we think about [1:27:50] what is the project today and what was it 5 years ago or three years years ago when it was approved the programming [1:27:56] piece for the office component remains unchanged that it's desirable and well-liked and the reason it didn't [1:28:02] happen three years ago is collapse of financial markets as it relates to real estate and interest rate risk has gotten [1:28:10] out of control and it's starting to level off so to wrap up my comments um [1:28:16] if we're successful in getting a uh additional time from the state I think [1:28:21] this discussion is really helpful for us and then we can determine later if [1:28:26] there's an opportunity to further explore a different mechanism that um [1:28:32] provides us a path in the private markets to finance this project without putting you in the city at any greater [1:28:39] risk all right well let's let's assume that we get that extension on the Tiff request uh Tiff District [1:28:46] request um and let's turn into the question or the way that uh Mr anut [1:28:51] framed it was that we're really being asked to co-sign a loan with you [1:28:59] um and so what what have you been thinking about I think manager nondorf [1:29:05] mentioned a few of these options to mitigate our risk what have you been thinking about that you're willing to do as a developer [1:29:12] to uh create no more risk for the city than it has under the presently approved [1:29:19] model if we went ahead and co-signed that loan with you to to back us up [1:29:24] that's a great question when I find that I'm negotiating and I want performance security I find the best option to get [1:29:31] that is a letter of credit [1:29:38] okay and I would defer to Nick and others to the value or power of a letter [1:29:43] credit but in the world I operate that's a very strong mechanism to mitigate Financial Risk y so you you answered [1:29:49] that a little bit in the abstract so what what I hear you saying and knowing you is that you're willing to extend a letter of credit quite possibly yes [1:29:58] okay well as long as this is just a discussion about possibil yes we're in [1:30:03] the world of possibilities but but all joking [1:30:10] aside if for the followup like that's what I would want to know so I [1:30:16] appreciate you framing it the way you did uh Mr an Hut um and then so my [1:30:22] followup would be if that's the ask I'd want to see all of [1:30:28] the various ways of mitigating or eliminating as much of the risk as [1:30:36] possible um and just from the material I don't it like we haven't gone [1:30:44] through maybe we have it just doesn't feel like we've gone through like every we haven't done an exhaustive view of [1:30:51] how to reduce the risk maybe we have I'm hoping you're going to stand up and say you're right we haven't there's [1:30:58] other things we can look at but maybe not you're right um we have not taken a [1:31:04] full Deep dive you've noticed there's no specific costs there's no specific [1:31:09] schedules before we spend all the time and effort to try to figure out every detail we wanted to see what your [1:31:16] general concept what your general feelings were about the concept we could spend three months working eight hours a [1:31:23] day to to get this figured out but if we do that and bring it back to you and you say no we're not we're not comfortable [1:31:29] with this we've just wasted a whole lot of time and money and so we want to gauge your comfort level before we take [1:31:34] that deep dive so yeah I mean under ging this is the question I think you [1:31:41] impliedly asked or asked us I think about was why would the city do what the [1:31:46] private markets won't do and um you know when you think about if we if we tried [1:31:52] to reload a we don't have to use a tiff because it's no longer meets the BL test [1:31:57] B uh it might mean that we don't get the things that we thought were important to get that we want to cut up to six acres [1:32:06] create all these public elements that you walk through uh so well this [1:32:11] morning um those are important considerations for us as well uh as uh you know to get [1:32:19] what we want in terms of the future development of our community out of that that we were able to accomplish with a [1:32:26] with a public investment to the to the Tiff [1:32:33] so um back to commissioner rers you know she said I'm not even sure this is our [1:32:39] role well the the role this is the very role of the HRA frankly the purpose of [1:32:44] the HRA and Thea and you you can pull it up quickly online is to undertake Urban [1:32:50] Redevelopment projects and that that has a broad sort of definition and I think [1:32:56] this fits right in that that definition is that this isn't this is a urban [1:33:01] Redevelopment or a Suburban Redevelopment project uh that we approved that we're trying to figure out [1:33:07] how to how to get what we want out of it and and uh and preserve a $250 [1:33:14] million uh opportunity for our community uh and the other part of the [1:33:20] responsibility of the HRA is to assist in the development of affordable housing projects well that's not applicable here [1:33:26] it is somewhat because with the with the apartment portion of it 10% but so [1:33:36] um really an interesting discussion this morning so when I look at these questions oh here they are up on the [1:33:41] screen I was trying to look at my computer um to the other question that member [1:33:48] Rissa raised that she thought was unfair number four I I think something will happen there [1:33:54] uh that will be good if we didn't do this but there are there reasons to try to explore this further to make it work [1:34:01] this it just me thinking out loud now so [1:34:09] um if we could for me if we could if we could explore these ideas further [1:34:16] without enhancing the risk profile for the city I'd be willing to take a look at [1:34:23] that because I think we've had a good project approved um and um if that means that we use our [1:34:31] financing abilities potentially without increasing [1:34:37] the risk to the city I don't know why you know I'd be [1:34:43] Comfort I'd be comfortable uh exploring this further to see how it could potentially work to preserve what we [1:34:49] thought we wanted to do in this part of town that was not only good for the private sector but good for the public [1:34:55] sector too so commissioner thank you mayor [1:35:01] um I am I kind of echo some of the sentiments of I am nervous about this um [1:35:07] I don't love investing into parking ramp as a city uh I especially don't know [1:35:12] that we need District parking on this site um so that adds to my hesitation um and I'm also nervous about [1:35:19] doing it when there's still the open question mark about housing and the timing of that and and how that will pay [1:35:27] play into the repayment of this um so if we do explore it [1:35:32] further I'm not a hard no right because we don't have all of the information so I am okay with continuing to explore [1:35:39] this but I would for sure want to um understand or explore charging both [1:35:45] tenants of the commercial building as well as tenants of the residential building for parking in this site um [1:35:52] just so that we're getting a benefit as a city for investing into this um so [1:35:59] that would kind of be my like summary thoughts I know we're short on time but it it's at least worth a lot more [1:36:04] conversation as the city council and H so you feel like going forward and [1:36:10] exploring further to answer all these questions that create some anxiousness for all of us is okay commissioner [1:36:18] Pierce um I just wanted to be really specific on that point I I think you should come back with forecast the [1:36:25] revenues um and so again you haven't done the Deep dive yet but you've talked [1:36:30] about a few constructs um if you take the pause um [1:36:36] and stop bailing and and really think about what you can come back with um I [1:36:44] would come back with a revenue stream um so that we can see um how that risk [1:36:51] profile is shaping up Comm so I'll repeat I'm not going to bet [1:36:59] on the legislature I I really I'm very nervous about whether number of years we've not had a tax bill very high so [1:37:07] minimal work I I like the idea of what my fellow Commissioners have said but I [1:37:13] really want to see that tax bill first thanks yeah I think we'll know in [1:37:19] May you we would expect you to use your time time is you know you you determine [1:37:26] how the best to spend your time and I know this has some some importance to all of us but [1:37:34] that tax bill is really critical uh commissioner um thank you and I I want [1:37:41] to clarify I I do get that the role of the HRA is to help Foster development [1:37:47] andina where I feel we may be going beyond our purview is um moving away [1:37:54] from the original Tiff agreement taking on risk and doing it specifically to [1:37:59] spark um developer or financial interest in a project and I think there's a logic [1:38:06] to saying uh you know you should have the financing in place before starting [1:38:13] the construction and you know removing buildings and all of that so I just wanted to emphasize that but I also [1:38:19] wanted to say I am in complete agreement with commissioner Jackson I think that's a very pragmatic thing to say let's [1:38:26] table this until we know what the legislature is going to do and I do think that that is being very Mindful [1:38:32] and responsible of the time and the energy and I do know um I I do have [1:38:38] another question though um in terms of all of the work that has gone in so far [1:38:44] and representation from ERS and everything what is the revenue stream for covering those costs is because I [1:38:51] know a tiff isn't it the developer pays for that is the developer paying for all [1:38:56] of this that's correct yes when we um do TI agreements with developers they [1:39:03] deposit a sum of money with the city that we hold in escrow to pay for our thirdparty costs so the cost of dorsy [1:39:09] and Whitney the cost of ERS and uh so we pull down from those funds that's being used for pursuing this change that's [1:39:16] being used for this yes thank you it's at their expense [1:39:24] want to explain what you're thinking about yeah so the uh chair just asked me what I meant by things you can continue [1:39:31] to move forward on this but I would not do a large investment of time between [1:39:38] now and and that tax bill getting signed by the governor um with our provision in it um because I'm [1:39:44] just 50/50 is not a particularly good I would put it at just any one any year [1:39:50] regardless of getting a tax bill is pretty uh risky so and so don't come [1:39:56] back to us until after yeah don't come back to us until after we get that for sure well we'll certainly we'll [1:40:02] certainly be mindful of that but also be aware our fiveyear rule is 2027 so it's [1:40:07] still two years out we're not to the deadline yet but we need to start preparing as if that deadline is [1:40:14] approaching because it's approaching quickly okay thank you yeah we'll be backing after that happens [1:40:21] okay okay from from our perspective thank you this has been very helpful dialogue uh so really appreciate your [1:40:28] time and engagement this morning thank you yeah thanks that was really quite a great conversation really I appreciate [1:40:34] everybody's inut uh really thoughtful all the way around uh and thanks to uh Ellers sanut [1:40:43] for being here this morning and uh helping guide us and understand what uh we're looking at [1:40:49] here uh all right um we're a little bit over time uh is anything else for the [1:40:55] good of the order here otherwi as well take entertain a motion to adjourn so moved second got a motion by [1:41:01] commissioner Pierce and the second by commissioner Jackson to adjourn the meeting of the HRA uh any further [1:41:07] discussion all right all in favor of adjournment say I I I oppos carried uh [1:41:13] the h meeting on this Thursday March 27 2025 is a [1:41:22] jour for