##VIDEO ID:zQFgJ5js8Ws## e e e knock it off good morning it is 8:00 a.m. on Tuesday September 10th 2024 I call The Economic Development Authority meeting to order item number one is roll call and we do have six members present and we have a quorum item two point1 is Eda August 13th 2024 minutes I'll offer a motion to approve those second we have a motion in a second any further discussion all in favor say I I I opposed motion carries item 3.1 administrative activities August 2024 good morning president Mark graph and Commissioners you have the report in your packet um I just have um a few items to highlight for you um this month under the public housing program um note that the solar panel installation has been completed now on all of the public housing properties and the state electrical inspections are scheduled for next week um as long as all goes well once they've passed the state inspection then they can actually go live um with the with those systems so we'll see how that goes in the next week or so none of them are live now none of them are live until they pass that state inspection okay thank you um and note under the rental property report um update on the Eda Lot Sale uh the three lots on North Broadway have a sale pending the um we're in the process of moving the house that's located at 320 North Broadway onto a lot on 10th North Minnesota Street the garage has been moved um it hasn't been set on the foundation yet but it's moved to the new location and the house is scheduled to be moved the week of the 23rd and then we will close on the sale once that's happened so late September um should be closing on that sale um those were the only two items I wanted to highlight for you but I'm happy to take any questions if there are any I'm excited to have the solar panels going forward and almost ready to go I know it is exciting I think it might be I I have to ask Derek for sure but it might be the largest solar panel installation in town um there's quite a few up on the roof of Broadway house it's it's just covered and we're going to have Adam um go over with his drone and get some Drone footage of that when it's all done so with regards to the house I'm assuming that it's a night move or don't we know a night move I don't know when they move hours when they moved the garage they um closed Minnesota street they uh so people wouldn't park on the street to allow the room for them to get through with the garage so I would imagine they'll do the same thing with the house and um the garage moved on a Tuesday morning I think during the day I know in the past seems like when they move houses it's at night or something there's less traffic how tall it is um because if it goes under the any Highline wires or um Street uh stop lights or something like that then they might have to it depends I don't think it's much bigger than the garage I mean no it's not a real tall house yeah and they'll take it down Minnesota street so there won't be any won't be any stop lights to worry about so I know they had to trim some trees along the road right yeah probably ash trees if there's no other comments I'll make a motion to approve the uh administrative activities for August 2024 I'll second that we have a motion in a second any further discussion all in favor say I I I opposed motion carries item 4.1 payment standards for sector Section 8 housing Choice Voucher Program all right um this is an item we review on an annual basis the Department of Housing and Urban Development or HUD Issues new fair market rents um for each County every fall um fair market rents are the gross rent estimates um for the area and that includes rent and any tenant paid utilities and then our program for Section 8 uses the fair market rents or the fmrs um for Brown County Minnesota um you can see the new fair market rents that have been set by the federal government are um for an efficiency or studio apartment $640 a one-bedroom $711 a two-bedroom $933 a three-bedroom $1,140 and a 4bedroom $1,567 just a slight increase from last year not as big as we've seen in the um prior year or two where we've seen significant jumps um so this is more I would say a normal increase or typical year um so then for the Section 8 program we use the fair market rents to determine our payment standards for the voucher program um so Hut allows us to set the payment standards anywhere between 90% to 110% of the fair market rents for the area and so every year when the fair market rents come out I do an analysis of our current voucher holders we want them to be paying we want as many voucher holders as possible to be paying 30% of their their income that's the way the programs meant to work however they can pay up to 40% of their income but we have to have certain percentages um so that the payment standards are set that it's affordable for them so anyway I did my analysis and um came up with different rates depending on the bedroom size for the efficiency apartments um we have a few on the program that are in an efficiency unit they're all at Sunset Apartments and their efficiency unit rent is $299 and they don't pay any utilities so just leaving that at 100% of the fmr is just fine more than fine I could have gone to 90% on that but I just left it at 100% um for the one and two bedrooms I do feel we need to go to the maximum 110% of the f Mr RS to keep those units affordable and that's where the majority of our voucher holders are because we issue vouchers one bedroom per two people um that's going to be your one and two person households are going to be in a one-bedroom voucher size and three and four person households are in a two-bedroom we have a few households in the three-bedroom we have no households in the four-bedroom at this time um um so in order to keep those one and two bedroom vouchers and the people on the program close to that 30% I did need to go all the way to 110% um the three-bedroom were okay at at 103% of the fmr and um I did the same for the four bedroom as well so a long explanation but after doing an analysis of our program that's where um they need to be um for us to be in that 30% of the income with a few um in that 40% range and when I went to the 110% on the three and four bedroom it didn't change anything for the ones that are in that higher range so um I didn't want to go all the way to 110% on those are there minimum income requirements I mean I know 30% of the income but well you have to be under a certain income to get on the program no like are they required to have a minimum income like they need to make at least $1,000 a month to qualify or something like that no we have people on the program that are zero income and they pay a $50 minimum rent um that's our policy um so no they don't have a minimum income to be on the program if they are zero income then they need to they need to find a place to rent that's within the payment standard or it won't work um people with income can get in a unit that's and that's where you get where they go up to 40% is if they're renting a unit that is a little bit over their payment standard for their voucher then they have to pay the difference and you have to have income in order to be able to do that um the proposed payment standards would go into effect November 1st of this year okay if no other questions I'll offer a motion to approve the payment standards for Section 8 housing Choice voucher program I'll second that motion we have a motion and a second any further discussion all in favor say I I opposed motion carries item five .1 public housing flat R rents all right this is another item we review every year when the fair market rents come out um we use the fair market rents to set the flat rents for the public housing program um the proposed flat rents um here would be effective October 1st 2024 um so again same fair market rents that we just reviewed for the Section 8 program um in the public housing program um families are given a choice of paying income base rent which is based on 30% of their income or they can choose to pay flat rent and sometimes as a family has been in the public housing program over the years their income goes up ideally you know that's what we hope and then their income base rent might actually be higher than the flat rent so the flat rent kind of caps you know if they choose flat rent it kind of caps their payment at that amount rather than paying the higher rent um based on their income so they're given the choice between those two um every year at their annual recertification um we recommend setting the flat rents at the fair market rent levels because that is the going rate for our area and if they can afford to go out into the private Market um or buy a home because their income's gone up you know we want to encourage them to leave public housing and then open it up for um someone who needs it [Music] so Heather I think I asked this question last year but we're already in the middle of September these rates go up in like two weeks yeah but they wouldn't affect the tenant until their annual recertification right so for Broadway house those all happen March 1st of next year and then for the um rental houses it would be September 1st of next year so they will have ample notice of the new rates now I remember good question though hearing nothing I I'll offer a motion to approve the flat rents for public housing program effect of October 1st 2024 I will second that we have a motion in a second any further discussion all in favor say I I I opposed motion carries item 5.2 Eda September 10th 2024 claims list the only question I had on this list was the the lawn care isn't that large a property for a $500 bill is that one month yeah I think there might have been five weeks on there I think they charge $100 a time but they are mowing uh until the Eda lots are sold they mow that entire front half of the block from third North to Fourth North from the alley to Broadway so that's including the vacant lot next door the rental house and the corner lot that makes sense thank you with no questions I will offer a motion to approve the Eda September 10th 2024 claims list we have a I'll second we have a motion in a second I was too jumpy there I'll in uh any questions all in favor say I I oppose same sign motion carries item 6.1 approve the 2025 Eda budget Commissioners this is the budget for the Eda um as it stands this is what will be presented to council as part of the city's budget next week um you'll see for the taxes we've levied the full amount Allowed by Statute of 117,000 again um there is a new commercial rental income on there that is the rent for the daycare center that we receive um there is a small a transfer from Garden Terrace of 260,000 to help cover some of those program expenses you'll see it's not enough to cover the deficits that that has been created because I have budgeted the full amount for all of the programs um we don't generally use the entire program but Garden terce would be available to cover that deficit if needed so unless there's any other questions I really don't have a lot of other information to present on the budget I had asked beforehand but just for everyone the miscellaneous of 320,000 what does that cover that is the loan programs basically so that that assumes we would fund all of the loan programs in their full amount that year that they would be used completely which they generally aren't and we probably won't need that entire amount cuz we'll carry over from this year but until we get farther into this year it's hard to know what that amount will be for that carryover me and I will note this is the first year that we've started um collecting payments under the home buyer assistance Loan program if you recall that program has a 5-year deferred payment so the first the very first people that took out loans in 2019 are just starting to make their payments um the second half of this year so um that will help that we won't need to fully fund that program going forward it'll start to be a revolving Loan program like the others not hearing any comments I'll go ahead and offer the resolution approving the 2025 Ed budget second we have a motion and a second any further discussion or questions um I guess I just had one more question I guess under the miscellaneous um I know in the past we have been providing some funding for Newber is that accounted for in here I believe I did still budget that just because I didn't know what your intentions were okay with that funding you did or you did not um I'm trying I saw something under contractor yeah yep or no that's the grants yes still there under contractual Services okay just CU on that no other comments we have a motion and a second all in favor say I I it's a resolution resol sorry it's a resolution director breel please call the RO right commissioner commissioner Berg yes commissioner culk yes commissioner bker yes commissioner Schultz yes commissioner hen yes president marra yes that resolution carries item 7.1 Economic Development activity report okay Commissioners and president Mark graph uh you have the report in your packet um last month at the partnership meeting uh we had a presentation from Grow Minnesota I think that is that the Minnesota Chamber yeah yeah um so they gave us a presentation on that program and we had discussion on that um Child Care team we have the trainers and sessions finalized for the upcoming Child Care appreciation and training event that will be held in November um no activity in any of the loan or Grant programs um just wanted to note the mayor had given me a suggestion to um start visiting with some of our local businesses that are doing some major expansion projects and investing in the community um so we have we met with Patterson's Diamond Center we met with wiborg Chevrolet um and our next meeting is with alen um to talk about their Expansion Project so we will be featuring those on the economic development website as well as social media um pages to show them some appreciation for their continued investment in New Alm so thank you mayor for that suggestion thank thank you for following up on and the businesses are very appreciative of you know getting noticed for that so I'll offer a motion to accept the economic development activity report for August of 2024 second we have a motion and a second any further discussion all in favor say I I I opposed that motion carries item8 is other business we are going to switch the two and start with 8.2 and then move to 8.1 8.2 is a closed session for potential sale of real estate I do have a conflict of interest and I will be leaving control of the meeting to my vice president I believe we do have a presentation before we go into close session though all right so Jay if you want to come up to the podium and state your name for the record uh good morning my name is Jay Scott with rebound Partners happy to be uh back before you this morning um obviously we want to talk about Garden Terrace but before we did that I wanted to give you just a real brief update since we were here uh or I was here last month um first of all exciting news we're looking to close on the purchase of The Lamplighter property tomorrow so uh that'll be the first step in a renovation project there to revitalize that property working with a local operator with snow drop Winery to come in and be a tenant there to open up some wine production Wine Cafe where we'll have food and beverage service offered there as well um so a lot of excitement around that working through plans and and all of that and we hope to be under construction for the renovation yet this year so that'll be coming uh down the road here soon um also wanted to let you know since the last meeting we did have an opportunity to meet with Oak Hills um I know there was um some discussion about their interest in the Garden Terrace property and we met with them and and Heather and Chris were part of that meeting as well and we since have followed up with with some additional conversations um and we're looking forward to sort of a strategic Alliance partnership with them in some fashion it probably will not relate to the uh initial two buildings really more So at their discretion or decision I think but really looking more to the Future to the third potential building on that Outlaw that we could partner with them in some capacity to help them to really I guess expand their services uh that they offer and and we'll continue to talk to them to figure out what does that partnership or Alliance look like cuz I think uh the two companies or organizations would work well together and and we could certainly bring some Capital to the table which I think would be important to them to have success to be able to expand their facilities and uh and do that so I just wanted to share that update with you uh as well uh so for garden teris uh really what you know I'm here this morning is to to seek really your authorization to staff to move board uh with the negotiation of a purchase agreement uh for the Eda to sell that property to rebound Partners um did want to talk a little bit about valuation uh I know you had a recent appraisal done there and I just wanted to spend a few minutes to go through that uh really the terms of our our offer if you will would be very consistent with what we presented last month to you in that letter of intent with the exception of the purchase price based on the information from the appraisal we're willing to raise that price to $7.1 million and I wanted to go through sort of the justification a for that because what we're looking for is really a fair market Price or fair market valuation as ouru as well so we're not looking for any type of a discount but we don't want to overpay either we want to just pay what we feel is a really a fair market price for that uh property so with that uh really the can you see that on the screen or Mike can we get the PowerPoint up on the screens start the show it should just go okay all right thank you okay so the appraiser uh again you probably had an opportunity to review the appraisal so I won't go into a lot of detail but I just wanted to walk through a couple of points uh he used two different valuation techniques one would be a sales comparison technique uh approach the second would be uh an income approach uh so to speak to the sales comparison approach first of all they use 10 comparable sales uh within the area um and to do that they typically try to figure out what's the sales price divided by the number of units and they come up with a per unit value uh the average per unit value of those tenant sales was 6,000 per unit uh the highest purchase price uh was 80,000 per unit on a recent sale in Mano that's probably where we should be on this property too so our purchase price at 71 is actually higher than an 880,000 per unit on the Garden Terrace I feel that would be a fair approach he did make some assumptions using a property sale back in 2021 in New Alm that was higher than that to kind of lift that value up a little bit but uh as you all know interest rate environment was completely different in 2021 and values of properties were completely different than what we're facing today with interest rates being significantly higher so I don't know that that's really a a fair assumption to incorporate a sale uh in a prior period when uh value valuations and interest rates were really in a completely different environment um the second component is the income approach and this is really the most common approach used in the industry when we purchase properties when we sell properties when we work with lenders and underwriting or valuing properties and you know they they use they basically come up with an income for the property and divided by what we call the capitalization rate right and the cap rate is really nothing more than if we purchase the property the income generated from that property uh that's the return we would get on our cash investment if we purchase that property for all cash so he the appraiser is using a 7% cap rate I think that's a fair cap rate for the market so I don't have any issues with that that would generate in essence a 7% return on our investment if we purchase the property for 100% cash um so that seems to be a fair rate but I do have a little bit of concern just with the valuation when it comes down to the income component of that and I just wanted to express that to you or share that with you so you could see how we're justifying our valuation as well um first of all the income generation let's take the income and the expenses and and I'm okay generally speaking with what those are he the appraiser did acknowledge that as a third party sale there would be property taxes paid on this property and and wasn't able to reach Brown County Assessor to verify that but we have and it's about $140,000 uh annual tax bill based on the current valuation that really was not reflected in the expense structure so there was not much of a modification made to the expenses uh in that uh so that's one I'll call it somewhat flaw if you will in the evaluation process I think there should have probably been more of a a recognition for the increased expenses associated with the property taxes that we would encounter the second piece is the typically when you value these properties you have a vacancy Factor applied to your in your net operating income very customary in the industry lenders buyer sellers all use this it's typically 5% so what I want to do if you look at the screen here if we make the Assumption we're not going to modify the expenses and we're just going to take it for face value where the appraiser was on the expenses and we utilize the 7% cap rate that uh the appraiser applied but we do do a reduction it's about $55,000 in that second column as you can see at the top off of the net income uh reflecting the 5% vacancy which again is very market Standard um it does obviously reduce the noi a little bit so if we apply that to the 7% cap rate you can see the valuation of the building then would be 7 , 72,000 uh and again that translates actually very similarly to the value of the property at 80,000 per unit uh based on the sales comparable approach so that's how we backed into the $7.1 Million number that I'm here authorizing or or submitting to you today for your consideration so that's a real quick highlight I just thought it was important to share those facts uh because I thought they were relevant as you consider this um I don't know if there's any questions I'd be happy to answer questions or even if after your close session if you'd like I can come back in and uh uh answer questions at that time nothing now I think that's it thank you okay well thank you so much for your consideration we appreciate it we're looking forward to working with you and hopefully partnering with you on this uh transaction but also looking at other opportunities in the market too we're really excited about new Al and uh the potential uh that your community has and and we want to be a partner with you you to uh reinvest Capital uh and resources in this community to help you uh increase some of the or meet some of the needs I should say that you have in the community so thank you for your time thank you thank you all right with that The newm Economic Development Authority will go into Clos session to develop or consider offers or counter offers for the purchase of the sale of real or personal property located at 10:1 and 1021 North Garden Street the vacant lot identified by parcel number 001 570. 17849 this is an exception to the open meeting law pursuant to Minnesota statute 13d .05 subdivision 3 C3 and 13d 01 subdivision 3 to discuss the potential purchase or sale of real estate property