[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