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12-29-1979 CCM14 r --.a MINUTES SPECIAL MEETING - HUTCHINSON CITY COUNCIL SATURDAY, DECEMBER 29, 1979 The special meeting of the City Council was called to order by Mayor Black at 1:30 P.M., with the following members present: Aldermen Westlund, Peterson, Gruenhagen and Hunt - work, in addition to Mayor Black. Also present were: City Engineer/Public Works Direc- tor Priebe and City Attorney Schantzen. Mayor Black read Publication No. 2237, Notice of Public Hearing on A Proposed Project and the Issuance of Industrial Development Revenue Bonds under the Municipal Industrial Development Act, Minnesota Statutes, Chapter 474, As Amended. The public hearing was then opened to the public for comments. Ted Beatty Urged City Council to reject or table the request to 700 Shady Ridge Rd. give the downtown project a chance to proceed. Stated the two projects could not succeed, and the other shop- ping center would kill the downtown. Felt this request must be denied. Don Erickson Felt issuing of bonding in the beginning was an error 731 Shady Ridge Rd. in order to keep a viable downtown. Did not want to see any further issuance of bonds. Milt Brinkman Stated he had same feelings as the others had stated Sioux Hills and felt both projects could not succeed. David McCuskey Commented that back in August the City gave Developers Bond Counsel Diversified a bond for their project. The federal law Dorsey Law Firm imposes a total limit of $10 million that can be spent. The developer found that amount to be spent might cause the project to exceed the $10 million limit. Felt it would need a second developer to take a portion of the project. Therefore, $2,200,000 would be issued to Hecht Associates with a lease to K -Mart and the balance of $6,400,000 would remain in the hands of the original developer. The amendment to the bond will not increase the total amount of bonds issued but rather separate the amount into two projects. Clarence Simonowicz Asked if K -Mart would be developed separately or if both C.R.S. projects would go ahead simultaneously. David McCuskey Responded both projects would go ahead simultaneously. Jim DeMeyer Commented that this is a community serving a community, DeMeyer Realty and should take into account the entire community. There are a lot of personal interests of people who are serving Council Minutes December 29, 1979 the community who are surrounded with avenues of con- cern as to how they will be about the business of the business community if more business is developed. Hutchinson is a city with a population to grow in the next few years and to accommodate in the future. The shopping center south of town is a project that will immediately bring revenue to the city after it is built. It is important that these monies and funds come into the city to make it more viable. Mentioned he had talked to Skip Quade and reviewed the proposal made recently. Felt it had some promise, but to accomplish what the city needs and could be incor- porated into the city at this time is far short of developing this. There already is a developer who has come in good faith and put forth money and effort to create space for anyone who would choose to rent this available space. The previously established businesses should be able to compete. Commented the breaks given to Developers Diversified are only monetary. Other communities are doing the same thing. Cited Litchfield as an example for a fu- ture K -Mart store. The northern traffic will go where they can acquire and fulfill their needs. Need major merchandisers to attract customers. The cost of adver- tising is so high that it becomes costly to attract customers. Would like to see downtown develop. There are needs with the downtown area. Stated he had done computations on footage vs. area placed in. Takes three to four acres to provide store with adequate parking. The previous downtown settings would not allow for downtown growth. Common concern is that it is difficult to do this because of space. Stated major stores will not come in unless they can get visibility. Restricted parking and area limit growth and outreach. Feels that the shopping center is part of the viable plan for the community and will work with the downtown to assist with the downtown. Cited a lesson to be learned. Any subsidized financ- ing is a very dangerous situation. Alluded to the Eisenhower administration and multiple housing units. Expressed concern about the S & L building. Felt it is a very viable part of the downtown. -2- Council Minutes December 29, 1979 DeMeyer (Cont.) Felt the downtown project should be on a larger scale and go with the shopping center on the south of town. Parking is a key to the success of business. Ron McGraw Stated he is interested in the downtown. Had reviewed 325 Washington Ave. W. minutes and saw that the downtown was also a concern of the present Council. Today they have plans for the downtown and feel that would accomplish this. Urge re- jection of the request made today and go ahead with the downtown. Milt Brinkman Felt DeMeyer was contradicting himself in his state - Sioux Hills ments. He is asking the City to finance a project to compete with the present businesses. John Miller Not sure what DeMeyer was saying. DeMeyer had ad - 714 Shady Ridge Rd. mitted he was promoter of the proposed shopping center south of town. Raised question about Ken Gruenhagen being on the Coun- cil and working for DeMeyer. Asked if there wasn't a conflict of interest. Stated other Council members have abstained from voting or resigned from the Council under similar situations. Wanted the City Attorney's opinion on the matter. M. D. Schantzen Stated there was no conflict of interest on the part City Attorney of Ken Gruenhagen serving on the Council. Jim DeMeyer Commented on favorable financing. Tax increment financ- ing is favorable financing but not industrial revenue bond -- it is common place financing. Tax payer sub- sidizes tax increment financing. Stated Ken Gruenhagen is only an employee of DeMeyer Realty and has nothing to do with Developer Diversi- fied project. Bob Carney Where do you draw the line on who gets financing? 465 Shady Ridge Rd. Who bears the cost? Skip Quade Referred to DeMeyer's comments regarding rents on new Sioux Hills space and subsidizing. Stated they are trying to build a strong downtown base and strengthen the existing base. Downtown merchants have accepted the plan. Couldn't agree with DeMeyer's comments. There is no way that both projects could succeed. If the downtown project goes, it is a private project and the rates are set. It will not affect the other businesses, and some will split off and set up additional offices in the new space. -3- Council Minutes December 29, 1979 Bob Stearns Stated one concern is the tax base. As you look over 375 First Ave. N.W. the country, you find many cities that have large shop- ping centers built on the outskirts. They have suffered and the downtown has deteriorated. Wondered if loca- tion of a shopping center should not be considered. Didn't think many merchants would put money into re- modeling their buildings. Didn't think the tax in- come would go down as the new project goes in downtown. Merchants would be willing to upgrade their building and value of them. Develop the downtown area rather than south of town. Duane Dickey Stated he liked to see things happen in the building 105 Second Ave. S.W. business, whether downtown or south of town. Felt it was necessary to get act together and make presenta- tion or request. Developers Diversified is ready to do business. Is this open to anybody? Can I make the same request if I have the same situation? Didn't see how one can be turned down and complement the other. How can you take the position and hold one off until the other is ready to go? Posed the thought of how can one hold off until something else gets going? Dick McClure Stated he had no preference on projects but had a ques- 522 Shady Ridge Rd. tion. Made reference to Plaza 15 project and asked what happened to the downtown after the shopping cen- ter was built. Did it hurt their business. Mayor Black Commented he had conducted the public hearing differ- ently this time without making any comments from the Chair prior to the hearing. He felt the things said needed to be said as they were a subject of substan- tial interest to many people. However, there had been very little comment made germain to the subject on in- dustrial revenue bonds. This question was resolved by the Council when they issued a bond to Developers Di- versified for their project. The subject this after- noon had to do with the issue of two parts of the bond so that the developer can develop the project. The question was not whether or if, but rather whether it will be split into two parts. Ralph Westlund Stated the need to go back two and one-half years to Alderman time Council appointed the Downtown Advisory Board. It was appointed by the Mayor and approved by the Coun- cil. A developer was engaged but did not get anything off the ground. In the last three months there has been activity by another developer. The downtown peo- ple are starting to get excited about the project. -4- Council Minutes December 29, 1979 Ralph Westlund (Cont.) The guidelines for industrial revenue bonds state that all information must be submitted to City Hall and the Council. At time approval was given to $8.6 million bond they were shown drawings. Now they are talking about a divided or scaled down project. There would be two developers and different figures. This becomes a new issue. Need to look at the downtown and also that the shopping center will increase the tax base. Not only looking at the tax base because of new de- velopment but present value. Feels there is a com- pletely new issue to be considered. Norm Tulman There will be a great visual with the new concept down - 710 Lakewood Dr. town. A new Council was elected so they have to listen to what the people are saying. Businessmen have been here for many years and want to stay here with their business. Cited other towns where shopping centers have been built and the downtown was destroyed. Don't the peo- ple have anything to say about what is going to happen to their community? The motion was made by Alderman Westlund to close the public hearing at 2:23 P.M. The motion was seconded by Alderman Peterson and carried unanimously. Alderman Westlund moved to table the matter. There was no second, and the motion died. It was moved by Alderman Gruenhagen to split the industrial revenue bond between two de- velopers, Developers Diversified and Hecht Associates, and that the figures be $6,400,000 and $2,200,000 respectively. Seconded by Alderman Peterson. During discussion, Alderman Westlund posed a question about the plans for the proposed shopping center. Mr. McCuskey presented a blueprint of the proposal showing where Hecht Associates would develop the K -Mart area. Alderman Gruenhagen amended his previous motion to include that the entire project be built simultaneously. Seconded by Alderman Peterson, the motion unanimously carried. It was moved by Alderman Gruenhagen, seconded by Alderman Peterson, to waive reading and adopt Resolution No. 6454 entitled Resolution Giving Preliminary Approval to A Project under the Municipal Industrial Development Act; Amending the Resolution Adopted August 14, 1979 Giving Preliminary Approval to A Project In Behalf of Developers Diver- sified Ltd.; Referring the Proposal to the Commissioner of Securities for Approval; and Authorizing Preparation of Necessary Documents. Motion carried unanimously. The public hearing was adjourned at 2:35 P.M. -5-