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HomeMy WebLinkAbout07-23-24 JDAJoint Development Authority Work Session Tuesday, July 23, 2024 Arden Hills City Council Chambers Minutes 5:30 pm Roll Call Joint Development Authority: Commissioner Nicole Frethem, Commissioner Victoria Reinhardt, Commissioner Tom Fabel, Commissioner Tena Monson Chair Jon Wicklund was absent. Also present: Dave Perrault (Arden Hills); Jessica Jagoe (Arden Hills); Ella Mitchell (Ramsey County), Larina DeWalt (Ramsey County) Roll call taken. Public Input Lyle Salmela, 1480 Arden Vista Court, discussed the cost of energy with the JDA. He understood the JDA wanted future tenants and homeowners on Rice Creek Commons to save energy, greenhouse gases, and costs. He recommended Rice Creek Commons be an all electric community. He noted the cost per kilowatt hour for electricity has not changed over the past 60 years. He commented further on how kilowatt hours could be reduced per year by eliminating the inefficiency of natural gas. He offered to be an energy advisor to the JDA. Mark Kelliher, 3712 Chatham Court, explained he has lived in the area for almost 40 years. He commented on the lack of progress that has occurred on the TCAAP development noting this has been an embarrassment. He discussed community land trusts (CLTs) noting this may be a way to advance affordable housing within TCAAP. He indicated he was a long-time volunteer with Habitat for Humanity. He reported this year he attended a mortgage seminar and discussed how CLTs were beneficial for affordable housing. He encouraged the County and JDA to use CLTs to advance more affordable housing within TCAAP. He then invited the JDA to participate in the Carter Work Project at the end of September. Rice Creek Commons Project Status Update Ms. Mitchell provided the JDA with a memo that outlined the conversations the County and City have had with Alatus over the past several months. She explained the first section talks about the scope of work and noted the focus has been on the horizontal and site infrastructure. She indicated the second section addresses the obligations of the City and the County within the JPA. She explained there was a financial gap of $38.4 million at this time. She reiterated that the State failed to pass a bonding bill, which meant the project did not receive funding from the State. She was hopeful Alatus would be providing the City and County with a new proposal. Acting Chair Frethem requested an update on the design plans for the spine road. Ms. DeWalt explained the County put out an RFP for the final design of the spine road this spring and received two proposals from Kimley Horn and WSB. Upon review of the proposals, Kimley Horn was chosen for the project. She indicated the design plans for the spine road were currently at 60%. She reported construction of the project would hinge greatly on securing adequate funding, but noted the project remains on schedule. She explained construction was slated to begin in the spring of 2026 into 2027. Commissioner Fabel reported the JDA has met with Ehlers and at one point in the past it was noted the County could bond for the $40 million funding gap and repay the bonds through the sale of the property. He questioned if this proposal has been considered by the County Board. Acting Chair Frethem explained this has not been considered by the Board because this was not something the County CFO recommends. She indicated the number of years the County would be paying debt service would be a hit on the County’s levy. Commissioner Monson indicated Commissioner Fabel was talking about temporary bonds and not GO Bonds. Commissioner Fabel stated he was talking about either temporary or GO Bonds that could be paid off by the sale of the land, which would occur pretty quickly. Bruce Kimmel, Ehlers, explained he was representing the County on this matter. He noted the idea of the bond sale was brought about by his colleague Stacie Kvilvang, who represents the City in this discussion. He reported he took an in depth look at doing bond financing for the mass grading/gap, and, as Commissioner Frethem alluded to what makes that difficult to pencil out was the number of years for the buyer to purchase the land. He stated the debt then ballooned over time. He indicated they looked at TIF and other options to offset the carrying costs, but based on the assumed take-down schedule for the land, this was not something the County finance department was interested in pursuing at this time. He indicated temporary bond options were also considered, noting these could only be issued for three years and then be rolled over into another three years. He commented that the overall finances for the options that had been analyzed at this time would not work. Commissioner Monson stated the land sales may not be completed within six years and she understood this was a risk the County was not willing to take, even though this was something traditional landowners and developers would take. Commissioner Fabel said that the value estimates of the land would more than cover the $40,000,000 payments for the bonds. Mr. Kimmel stated this was not the case. He reported when the accumulated interest is added in, the payments would be higher. Another issue is that the land value estimates assumed that the developer would pay for the neighborhood infrastructure. Using city special assessment bonds instead could help increase the land values to help the overall deal economics. It is a multifaceted deal where we are trying to see what combination of things might work. Commissioner Reinhardt explained she did not believe the land would be sold down in six years. She indicated the land would not be ready for sale until 2027 when the grading was complete. She commented this was not an ordinary development. Rather, this was 400+ acres of development so the timing would be different. Mr. Kimmel stated the extended timeframes for this development were making the finances difficult. He indicated Alatus has been working on a front loading take down of the land that could benefit the economics that would reduce the risks for the public parties involved. He stated he was waiting to see the details of this plan. Commissioner Reinhardt asked if there was a risk to the City to do the special assessment bonds. Mr. Kimmel explained there was a bit of a risk to the City to issue 429 special assessment bonds. He indicated they could be structured in a manner so that there would be some flexibility and the repayment was in sync with the planned development and sale of residential parcels. He commented the developer would be paying the assessments for some amount of time, but it would be better to have the payments to be spread out among multiple property owners. He reported this still has to be worked out and investigated further. He stated the City was already looking to do special assessments for the trunk water and sewer in the amount of approximately $15 million. Commissioner Reinhardt stated she looked forward to learning more about the new plan from Alatus. Director Perrault reported for both parties it comes down to risk tolerance. He explained the County was not willing to bond for $40 million, and neither is the City. He understood Alatus was talking to a private equity partner at this time. Acting Chair Frethem stated the risk reward balance has been a major topic between the three parties, especially given how costs and interest rates have increased. She reported the County’s financial position has changed a great deal. She understood the horizontal infrastructure has to be solved before any other federal and state bonding dollars can be assumed for affordable housing. She discussed how this project would take many years to build out and would come with a price tag of over $100 million. She stated she appreciated all of the work that was being done by the City, County, Alatus and Ehlers. Commissioner Reinhardt appreciated how all three partners were working to spread the risk out for this project in order to move it forward. She believed the City and County could not figure out the options before receiving a proposal from Alatus. Commissioner Monson commented the County has had a verbal delivery from Alatus for a month and the County won’t do anything unless it is in writing. She understood everything so far has been a no from the County. She explained the City’s levy was only $6 million a year so when considering risk and who could take risk, she indicated the City had a different tolerance because they do not own the land. She indicated only the County could cover a $40 million gap. She stated this was the reality. She hoped there would be a quicker turnaround for this project going forward. She was frustrated with the fact this group has not met since April. She feared that things were just spinning and nothing was moving forward. She understood this project would be really hard to complete and that difficult conversations would have to be held. She hoped this group could work through these conversations for the benefit of the development. Commissioner Reinhardt stated the County’s attorneys require things to be in writing and noted the County has not just been saying no. She reported staff has been sitting down with Alatus and maybe that is the message that has been received. She indicated if a verbal agreement has been reached, the County then needs it in writing. She explained the County does not have $40 million for this project. She anticipated all three parties would have to share in the solution to the funding gap. She did not believe it was fair to assume the County could pick up the entire funding gap. She indicated the County has an AAA bond rating and this was achieved because the County was cautious with what it does. She stated the County could not overextend anymore than the City could. Commissioner Monson commented on equity within the project. She reported if the County wanted equitable participation from the City the County had to understand the City’s levy was $6 million while the County’s levy was $800 million. She indicated the City may be able to participate, but the percentage would be a drop in the bucket. While she understood the County did not have $40 million, she believed it was disingenuous for the County to assume the City could solve this problem when the City’s finances were on a completely different scale than the County’s. Mr. Kimmel explained the special assessment idea has been on the table since 2018 for the $15 or $16 million was for the City. He indicated this funding would be used for neighborhood infrastructure and not mass grading. Commissioner Monson stated she didn’t know anything about this. Director Perrault indicated the Council did receive an update on the neighborhood infrastructure, but reported the City was waiting for a written piece on this. He indicated the special assessments were not proposed for the $40 million funding gap. Mr. Kimmel reported this was the case. He explained if the County were to issue $40 million in bonds, this would be unsecured and would be backed by the levy. This funding would be hinged on when the developer would buy the land. If the deal were to go sideways, the County would be stuck with the $40 million in bonds. He discussed how assessment bonds were a first lien that would go above a mortgage if there was a default. He explained there would still be a risk, but there was some security over the GO Bonds. He commented the County needs to understand when the developer would purchase the land and how much up front escrow would be put down as collateral to buy the land. Also, the County needs to understand how cost overruns will be addressed. He stated if a point could be reached where the City is taking part of the load and the County is taking part of the load, hopefully this enables the developer to put more on the table in terms of risk mitigation and a place can be reached to move the project forward. Commissioner Reinhardt stated a verbal agreement or proposal has been offered by the developer. She understood that has to be put in writing. Ms. Mitchell explained what was discussed in June was a conceptual framework. Commissioner Monson asked if Alatus could come forward to speak to the JDA. Bob Lux, Alatus, stated the reason an offer has not been presented is because he was waiting on a contract from Kimley Horn that the County signed a week ago. He reported he needs this because it informs the work that has to be done. He indicated he could not put a number on the table until he has this document. He explained the RFP was written very wisely because it includes the spine road and as well as addressing the geotechnical soil corrections within the development. He commented on how soil would need to be exported and remixed because it was structurally unsuitable. He stated the proposal was in the form of a letter of intent to purchase the property. He explained he was enthused about where this project was at and the equal amount of risk that was being placed on each party. He indicated Alatus would be putting up a significant amount of money, the County would be putting up funding for a three year period and he would have to work out with the City the 429 bonds that would be needed for infrastructure. He discussed how Carla Dunham and Tony Kuechle had been brought in to the project. He indicated he had reshaped his firm in order to be prepared for this development. He described how the TGRS water treatment system has to be moved from the property. He explained the next JDA meeting was scheduled for Monday, August 5 and he should be able to review the contract at that time. Acting Chair Frethem stated she had good discussions with federal representations about moving the TGRS water system and explained there was good support. Mr. Lux commented further on what would have to be done in order to begin the mass grading. He stated the large excavation companies were looking for work. He estimated it would take 12 to 15 months to complete the mass grading work. He was of the opinion this project was further along than all of the parties may realize. Commissioner Reinhardt thanked Mr. Lux for his update. She stated some of her anxiety about the project has been addressed. She indicated it appears the project has pieces in place. She requested further information regarding the contract with Kimley Horn. Ms. DeWalt reported the contract with Kimley Horn was fully executed. She indicated public works was confirming with procurement that everything was good. Commissioner Reinhardt said the County and City should have a better picture of the plans for this development in a short while. She appreciated the proposed timing for the contract. Mr. Lux indicated he was trying to abbreviate the take down period as he understood the City’s and County’s risk tolerance, while balancing that with the cost for private capital. Commissioner Fabel reported the City brought to the table an additional 500 housing units, which was what the County wanted. He commented this came with risk and increased costs down the road for streets, infrastructure, police and fire. He indicated the City was not the property owner and the City should not be assuming the risk of the development, but rather the City should be assuming the risk of operating down the road. Commissioner Reinhardt said more affordable housing was a shared goal between the City and the County. She said she was very grateful for the City’s efforts to provide more affordable housing units within the development. She stated in the long run the development was not just about the number of housing units, but rather about a greater vision for the community with housing, open space and commercial developments. She reiterated that this project would take joint risk on both the City and County’s behalf, noting the County has already taken a great deal of risk. She understood this project has taken longer than expected. She indicated the developer, City and County had to remain partners or this project would not work. Mr. Kimmel commented on the discussions that have been had regarding the water tower funding noting he was cautiously optimistic. Acting Chair Frethem stated this was a hard conversation to have given the fact this was an active negotiation. She understood Alatus was a business and they had bills to pay. She thanked Alatus for working with the City and County through this process. She stated she was looking forward to the August 5 JDA meeting. Mr. Lux commented further on the proposed timeline for the contract and purchase of land. Commissioner Monson recommended the August 5 JDA meeting remain as is and noted a special JDA meeting could be called if necessary. Administrative Director’s Report Director Mitchell stated the Energy Advisory Committee would be meeting on Wednesday, July 24 to discuss a potential recommendation on a sustainability pathway. Ms. DeWalt explained she already provided an update on the Kimley Horn contract. She indicated a feasibility study to move the TGRS was included in the contract. She explained Ryan Companies was continuing to move forward with the development of Outlot A. She noted Ryan Companies was in discussions with a number of tenants and conceptual site design has begun for one of the tenants. She anticipated the closing for Outlot A would be held in early 2025. Commissioner Monson asked if the County would be seeking funding from the State in 2025. Ms. DeWalt reported all of the work that has been done on the project to date would be brought back to the State for another funding request. Commissioner Monson suggested there be a more coordinated effort between the City and the County in 2025 the ensure the City was offering support for the funding request. Ms. Mitchell stated $11 million was penciled in for the Rice Creek Commons project which was a good endorsement for this project. She hoped that great consideration would be given in 2025. Development Director’s Report Director Perrault explained he did not have a report for the JDA. Commissioner Monson noted Director Perrault’s last day with the City would be August 9. Commissioner Updates Commissioner Fabel wished Director Perrault all the best in his new venture and stated he has been an integral part of the City for the past nine years. He explained Community Development Director Jessica Jagoe would be acting as the Interim City Administrator after August 9. Commissioner Reinhardt explained Chair Martinson was stepping down on August 1 and she was elected Chair beginning August 2 and Rafael Ortega would be serving as Vice Chair. She stated even with her additional duties she would remain a constant presence with the JDA through the end of the year. She noted she would not be running for reelection. Acting Chair Frethem indicated she would not be running for reelection either. She stated with the changes on the board, Commissioner Mary Jo McGuire was appointed as the alternate to the JDA. She explained Commissioner McGuire would begin attending JDA meetings in order to assist in getting up to speed on this project. Adjournment Meeting adjourned at 6:52 pm. Approved _____________________________________ Nicole Frethem, Acting Chair ____10/4/24__________ Date