In a Times’ Q&A, Aaron Parrish explains details of $21M proposal
As this edition hits newsstands, the deciding vote on the $21 million municipal campus proposal will stand just five days away. The plan – which encompasses building a facility at the current Northland Mall site to house city hall and the police and fire departments – is complicated in nature and would significantly impact residents and taxpayers.
Forest Lake City Administrator Aaron Parrish took time this week to answer questions from the Forest Lake Times regarding the proposal.
Forest Lake Times: Please speak briefly to the need for new or renovated city facilities.
Aaron Parrish: There is an array of safety concerns and space limitations associated with the City’s existing facilities. Two different architectural firms have outlined serious reservations about the ability to address the deferred maintenance and functional obsolescence in the existing buildings. The best way to get a better understanding about the challenges associated with the existing facilities is to take a virtual tour and watch a video documenting facility conditions. This can be done at www.ci.forest-lake.mn.us.
FLT: Where does the proposal regarding Northland Mall currently stand?
AP: The EDA and City Council began initial negotiations on the Northland Mall property in December of 2011. The appraisal was finalized in February of 2012 with negotiations occurring up until November of 2012. A development agreement has been approved by the EDA to purchase the property with a closing established for the end of the year. On Nov. 29, the EDA and City Council met to review feedback received online and from an open house earlier in the week. At that time, direction was established to proceed with the closing. That same evening, the EDA after discussion with the City Council, revised the bonding proceeds from $23,000,000 to $21,000,000. The EDA and Council will both consider a lease at their Dec. 17, 2012 meetings. The EDA’s lease with the City Council provides security for the bonds that will be issued to finance the site acquisition, redevelopment of the site, and construction of a new City Hall and Public Safety facility.
FLT: If approved, what is the most plausible general timeline for design, construction and occupancy?
AP: The design process is estimated to take 6-8 months. To lock in material and construction costs the goal would be to have construction contracts awarded by August of 2013 with occupancy by the end of 2014.
FLT: How would the city’s relocation to Northland Mall impact the public, specifically from the perspective of police and fire coverage?
AP: The need to revitalize the Highway 61 corridor has been brought forward in numerous ways including the community conversation series, citizen surveys, and many others. Redevelopment of the Northland Mall site would represent a significant step toward revitalizing the corridor. Relocating police and fire to the Northland Mall site would positively impact police and fire response by more centrally locating both facilities in the community.
FLT: What would happen to the current fire station, city hall/police department and the “south” city building?
AP: BKV Group and Finn Daniels Architects outlined long term and near term options for these sites. Until a new facility for Public Works is established, in the near term the garage space at the South Building (former Township Hall) will be maintained for their use. Similarly, the Fire Station will be repurposed for Public Works until a long-term solution is finalized to meet their needs. The City Hall/Police Department is projected to be redeveloped privately in the future. Housing to provide additional pedestrian and customer activity in the downtown area has been discussed. Longer term, the South Building and the Fire Station/Public Works/old water tower site could be redeveloped privately as Public Works could move to a single site adjacent to the new compost site on land currently owned by the City.
FLT: Explain the timeline, up to this point, for the current proposal. When did the city know of the developer’s year-end deadline?
AP: The discussion of City facilities has been taking place for quite some time. The concept of a new Fire Station was explored approximately eight years ago and the first comprehensive space needs study was completed in 2007. A concept on the potential for redeveloping the Northland Mall property came forward in November of 2011. The EDA and City Council began initial negotiations on the Northland Mall property in December of 2011. The appraisal was finalized in February of 2012 with negotiations occurring up until November of 2012. A development agreement has been approved by the EDA to purchase the property with a closing established for the end of the year. Since a part of the proposal involves a donation of the property for any value over our purchase price of $1,950,000 a year end closing is important to the property owner so current year gains can be offset. This concept was discussed with PACE prior to the EDA’s appraisal being ordered and was formally presented to the EDA and City Council at their Aug. 20, 2012 meeting. The EDA’s appraisal of the 13 acres came in at just over $3,000,000.
FLT: Considering the Northland Mall site involves acquisition costs, what has made it the top choice over city-owned sites?
AP: There are variety of factors that have been referenced when expressing support for the Northland Mall option. Both of the other options did not provide the opportunity to have Police, Fire, and the city’s administrative functions located together. This is due to the Fire Department’s location sensitivity and need to proximate to existing paid per call firefighters so they can effectively respond. Some expressed concern that expanding the current City Hall to meet Police’s needs would not be feasible or provide adequate parking.
There are a number of shared spaces that can be obtained by locating on one site. In addition, enhancing the water quality entering Clear Lake, improving the Highway 61 corridor, and redeveloping a property that does not create a positive impression of Forest Lake were also referenced when supporting the Northland Mall option. Additionally, it was noted by some that the alternative sites that are currently owned by the City are more commercially-viable sites for private redevelopment.
FLT: Did any of the other sites ever gain real traction with city staff or boards?
AP: Constructing a Police Station and City Hall at city owned property in the Headwaters Development and a new Fire Station at its current location received some discussion when the EDA and City Council met in August and as part of the Public Safety and Municipal Facility Planning Study presented to the EDA and Council on Nov. 13, 2012. Both sites could accommodate the current and projected future service needs. Concerns expressed about this concept include not being centrally located to the current population and the Headwater’s site being designated for a future community center.
Some reservations were expressed that expanding the current City Hall to meet Police’s needs would involve investing in a building originally constructed in the 1930s with subsequent additions in the 1970s and 1980s. Accommodating parking and stormwater management on the current location would be a challenge.
FLT: If the current proposal falls through, how much money has the city invested that will not be recovered?
AP: If the EDA does not close on the property a receivable associated with prior redevelopment efforts on the site of approximately $100,000 would be forfeited. This served as the earnest money for the Development Agreement between the EDA and Pace Development. In addition, there is an estimated $30,000 in fees expended for preparing the financing and no more than $10,000 in other fees that have been incurred as the project has been evaluated.
FLT: If the current proposal falls though, would a deal for the Northland Mall site still be feasible?
AP: We could attempt to renegotiate, but it would likely be under different terms and conditions.
FLT: Why would the project be funded by revenue bonds instead of general obligation bonds? Is part of that choice an effort to avoid a referendum forced by petition?
AP: The EDA is taking the lead on the project as part of the overall redevelopment of the site. Beyond the development of a City Hall and Public Safety Facility, the EDA will be involved in the development of the future outlots that remain. This is a fairly typical approach to financing a redevelopment project.
FLT: From a financial perspective, how much would the proposal limit the city’s ability to pursue other projects going forward?
AP: Addressing these longstanding facility deficiencies comes at a significant cost and will place practical, but not legal or financial, limitations on future projects.
FLT: What is the background on the two expiring TIF districts, and how will they impact the taxpayers’ bottom line?
AP: TIF District #15, Everton Park, was established Feb. 12, 1986. The required decertification date is Dec. 31, 2013. The amount of net tax capacity to be returned to the general tax base is $306,319. This district used increment collections to fund development projects within the district and to fund the City’s share of the Broadway improvement project. The tax increment district is currently generating approximately $290,000 in increment on an annual basis.
TIF District #21, Legion and Mall, was established April 1, 1988. The required decertification date is Dec. 31, 2015. The amount of net tax capacity to be returned to the general tax base is $840,430. This district used increment collections to fund development projects within the district and to fund the City’s share of the Lake Street/Broadway Avenue intersection improvement (roundabout) project. The tax increment district is currently generating approximately $770,000 in increment on an annual basis.
The combined net tax capacity of the two districts, $1,146,746, is currently generating approximately $1,060,000 in tax increment for the benefit of the districts. Upon decertification, the net tax capacity will be “returned” to the tax base. The City’s percentage of the total net tax capacity is approximately 40 percent. The County and School district will benefit from the remainder of the tax capacity being returned.
In essence, the City will receive approximately $425,000 more in property tax revenue due to the decertification of these two districts. The County and School will receive the remainder. Many factors can affect these calculations. At this time, they are considered to be preliminary estimates.
FLT: Considering the nation-wide economic struggles, what makes this the right time for such a large expenditure?
AP: Construction costs continue to be favorable and bonding rates are at all time lows. This will not be the case for an indefinite period of time, and both of these factors have a significant impact on overall project costs. Several factors are helping to mitigate the overall tax impact to homeowners compared to the projections provided originally. These factors include lower than anticipated interest rates, structuring the debt so that expiring tax increment financing districts provide additional tax base, and reducing the overall amount of bonding proceeds for the project ($21,000,000 compared to $23,000,000 previously).
FLT: Is it normal for such a project to cost in the neighborhood of $20 million? What would be compromised by a less expensive facility?
AP: The cost per square foot is consistent with average projects in the area. As part of the design process, a space plan will be developed that effectively balances operational needs, potential future growth, and the need to minimize construction cost. Reducing the overall cost of the project would involve delaying certain elements of the building. Based on the current square footages, public safety needs (police and fire) account for more than 75 percent of the total building program contemplated in the Public Safety and Municipal Facility Planning Study.
FLT: Was it considered to build the facility in stages, as the city grows?
AP: It is anticipated that this will be further discussed and evaluated in conjunction with the design process. The other options in the Public Safety and Municipal Facility Planning Study were more conducive to future phasing than the Northland Mall site. The space dedicated to future growth will likely make up a small percentage of the building. Phasing separate building elements would be more expensive in the long run and minimizes the ability to reutilize other properties.
FLT: City board members have expressed a strong desire to cut the total price tag as much as possible. What process would control the final building design? Would anything come to a formal vote by the EDA or City Council?
AP: The EDA would ultimately provide final approval on the award of any bid on the project, so a vote would be taken at that time. In addition, the EDA and Council will provide feedback during the design process. This will be done in the context of evaluating the proposed design and a corresponding project estimate.
FLT: There has also been talk of a new public works facility. What is the city’s vision for that?
AP: All three of the options in the Public Safety and Municipal Facility Planning Study contemplate public works being relocated to the Forest Land Nursery/Compost site in the future. However, no process or timeline has been established for this.