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Request for Committee Action

A briefing memo explaining the purpose, background, and impact of the requested action.
Applications for environmental grant funding in the spring 2019 brownfield grant round (RCA-2019-00353)

ORIGINATING DEPARTMENT
Community Planning & Economic Development
To Committee(s)
# Committee Name Meeting Date
1 Economic Development & Regulatory Services Committee Apr 9, 2019
2 Ways & Means Committee Apr 16, 2019
Lead Staff:
Kevin Carroll
Presented By:
Kevin Carroll
Action Item(s)
# File Type Subcategory Item Description
1 Resolution Grant

Passage of Resolution authorizing application to the Minnesota Department of Employment and Economic Development [DEED] Contamination Cleanup and Investigation Grant Program for environmental investigation and/or remediation funding for the following projects: 901/907 Winter Street Project, 901 Winter St NE; 3120 Excelsior Project, 3120 Excelsior Blvd; Bessemer at Seward Commons, 2200 Snelling Ave, 2206 Snelling Ave, 2210 Snelling Ave, 2214 Snelling Ave, and 2218 Snelling Ave; Capri Theater, 2027 W Broadway, 2029 W Broadway, 2033 W Broadway, and a portion of 2101 W Broadway, 2104 23rd Av N and 2106 23rd Ave N, 2301 Oliver Ave N and 2210 Oliver Ave N; LEEF South Lot fka Currie & Irving, 190 James Ave N, 194 James Ave N, 196 James Ave N, 198 James Ave N, 187 Irving Ave N, 191 Irving Ave N, 195 Irving Ave N, and 199 Irving Ave N; and Malcolm Yards Market, 501 30th Ave SE.

2 Resolution Grant

Passage of Resolution authorizing application to the Metropolitan Council's Tax Base Revitalization Account [TBRA] Grant Program for environmental investigation and/or remediation funding for the following projects: 901/907 Winter Street Project, 901 Winter St NE; 3120 Excelsior Project, 3120 Excelsior Blvd; Calhoun Towers -- Building C, 3404 List Place and 3430 List Place; Checkerboard, 3716 Dight Ave S; LEEF South Lot fka Currie & Irving, 190 James Ave N, 194 James Ave N, 196 James Ave N, 198 James Ave N, 187 Irving Ave N, 191 Irving Ave N, 195 Irving Ave N, and 199 Irving Ave N; Malcolm Yards Market, 501 30th Ave SE; and Sears Warehouse, 2600 Winter St NE.

Ward / Neighborhood / Address
# Ward Neighborhood Address
1. Not Applicable
Background Analysis

The nine projects and the thirteen related grant applications that are being recommended for submission to DEED and the Metropolitan Council in the spring 2019 brownfield grant round are as follows:

Project Name

DEED

Request

Metro.

Council

TBRA Request

Total*

901/907 Winter Street NE

134,821

137,863

272,684

3120 Excelsior

119,146

119,146

238,292

Bessemer at Seward Commons

389,513

389,513

Calhoun Towers – Building C

272,559

272,559

Capri Theater

208,822

208,822

Checkerboard

600,000

600,000

LEEF South Lot (f/k/a Currie & Irving)

173,856

86,800

260,656

Malcolm Yards Market

100,000

100,000

200,000

Sears Warehouse

293,234

293,234

TOTALS*:

$1,126,158

$1,609,602

$2,735,760

*Amounts shown are based on pre-applications submitted to the City on or by March 1, 2019. The final amounts shown on grant applications submitted to the grantors on or by May 1, 2019 may differ, due to project cost updates prepared after March 1, 2019.

The Minnesota Contamination Cleanup and Investigation Grant Program was established in 1993 to clean up contaminated sites and convert contaminated properties into marketable assets. The Department of Employment and Economic Development [DEED] is the administering state agency. Applications for the spring 2019 grant round are due by May 1, 2019. A local match equal to twenty-five percent of the project costs is required, of which twelve percent must come from non-tax increment local funds. For private projects, the developer provides the local funds portion of the required match. The amount that will be available to fund brownfield investigation and cleanup grants in the spring 2019 round is expected to be about $4.25 million, which includes up to $250,000 for investigation grants. The legislature has designated that at least 35% of available funds be spent on remediating sites in Greater Minnesota unless sufficient applications are not received.

Enacted by the legislature in 1995, the Metropolitan Livable Communities Act designated the Metropolitan Council as the administrator of the Tax Base Revitalization Account [TBRA] Program. This program makes grants to clean up contaminated land for subsequent redevelopment, job retention, and job growth in areas that have lost some of their commercial/industrial base. Applications for the spring round of this program are due by May 1, 2019. No local match is required. The amount that will be available to fund brownfield cleanup grants in the spring 2019 round is expected to be about $2.9 million, which includes up to $125,000 for investigation grants. The TBRA program reserves at least one-quarter of the funding available in each grant cycle for projects outside of the two core cities of Minneapolis and St. Paul, and restricts any one municipality from receiving more than half of the funding in any given round.

Hennepin County will not be participating in the spring 2019 brownfield grant round.

DEED and the Metropolitan Council are expected to finalize awards for the spring brownfield round sometime between late June and late July. For the spring 2019 brownfield grant round, details regarding the City’s pre-application process and related program requirements were provided to CPED project coordinators and potential applicants in early February. Relevant information was distributed via email to the 1200+ parties on CPED’s Development Notices Distribution List. Staff processing of the submitted pre-applications included consideration of factors such as readiness to proceed with cleanup, removal of blighting influences, commitment of City funds, creation or retention of affordable housing, compliance with zoning requirements and comprehensive plan designations, and job creation.

In this round, staff continued the use of a more rigorous review process that was first implemented during the fall 2012 round. This process required developers to submit a Grant Assessment Worksheet [GAW] that included a project fact sheet with information important to the City such as jobs created or displaced and the number of affordable housing units to be created or retained. The review also included other sections regarding readiness measures, policy alignment and developer experience. City staff will continue to monitor the progress of the projects referred to herein during April. Applications for any given project will not be submitted on May 1 if, in the opinion of City staff, that project will not be able to meet the grantors’ project readiness expectations as of the May 1 application deadline.

Twelve projects submitted a total of eighteen pre-applications for the spring grant round. Two projects subsequently withdrew their three pre-applications when they were advised that City staff would not be recommending in favor of their requested waivers from the City Council’s rule requiring market rate housing projects to comply with the City’s affordable housing policy.

One additional project (which had submitted two pre-applications) is not being recommended by City staff due to “project readiness” considerations.

The nine remaining projects and their thirteen pre-applications are being recommended for submission to the brownfield grantors. The City’s interactions with our local brownfield grantors during past grant rounds have established that their internal processes for reviewing, scoring and ranking brownfield applications give no weight to any city’s prioritization of the applications that it submits to the grantors. The analyses conducted by the grantors, and the decisions that they make in awarding brownfield grants, are based on statutory criteria and adopted guidelines that do not include the (relative) preferences of municipal applicants regarding the applications submitted. Accordingly, and in keeping with the practice that has been followed by the City in recent years, the recommendation of City staff is that the City Council not rank or prioritize the brownfield applications that it authorizes staff to submit to the brownfield grantors on or by their joint May 1, 2019 application deadline.

Analysis of Requested Waiver(s):

In December 2018, the City Council updated its Unified Housing Policy to require affordability for housing projects that receive brownfield grants, unless the City Council approves a waiver of the policy based on the following factors:

  1. To allow new market-rate housing development in areas where none has occurred in the last three years; or
  2. The total combined land value (i.e. the most current assessor's valuations) of all parcels involved in the project is less than the total projected environmental investigation and remediation costs required for the project.

The housing-related projects that have indicated a desire to seek brownfield grant funding in the spring 2019 round fall into the following two categories with regard to affordability issues:

  1. Projects that appear to comply with the City’s affordability requirements:

• 901/907 Winter: 20 apartments in total, 4 of which (20%) will be affordable at or below 60% AMI

• Calhoun Towers – Building C: 125 apartments in total, 25 of which (20%) will be affordable at 31-50% AMI

• Checkerboard: 500 apartments in total, 125 of which (25%) will be affordable at 31-50% AMI

     2.  Project(s) that do(es) not comply with the City’s affordability requirements:

• Bessemer at Seward Commons: 121 market rate units

This project requested and the City Council granted a waiver in the fall 2018 brownfield grant round. No project details have changed since then, so City staff is once again recommending approval of the requested waiver. This project’s waiver request is based on the policy exception for “no new market rate projects in the area for the last three years.” Seward Commons is located about 1.1 miles from the nearest market rate project that was built within the last three years. It should be noted that the 128 apartments in the Bessemer project (Phase IIIA) will be the only market rate units in Seward Commons’ overall multi-phase development; the planned/adjacent Phase IIIB will include 35 apartments, all of which will be affordable at 60% AMI. It should also be noted that 100% of the housing that was included in the first two phases (100 units in total) of the Seward Commons project was affordable.

Staff recommendation: Approve waiver request.

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Details of Recommended Brownfield Projects:

This section of the report presents projects/programs, in alphabetical order, that City staff recommend for submission to the brownfield grantors. The summary descriptions were based upon information provided by the developers or by others familiar with the details of the projects in question. Planning-related comments, and map of the development projects listed below, appear in the attachments to this report.

901/907 Winter Street NE (901 Winter St NE)

Projected DEED Request:                     $134,821

Projected Met Council TBRA Request: $137,863

Value Homes LLC intends to decontaminate and demolish the dilapidated and blighted Minnesota Metal Finishing Building and construct a new 3-story apartment building. Of its 20 units, 20% will be affordable. The projected total development cost is $5,122,660. Grant funds, if awarded, will be used primarily for soil remediation.

3120 Excelsior (3120 Excelsior Blvd)

Projected DEED Request:                     $119,146

Projected Met Council TBRA Request: $119,146

3120 Excelsior LLC [Nolan Properties] is planning an adaptive rehabilitation of a dilapidated Jiffy Lube building (3235 square feet) into transit-oriented retail space. The building’s façade will be updated to complement the surrounding buildings and landscape. An outdoor patio and bike racks for local commuters will also be added. The projected total development cost is $1,900,000. Grant funds, if awarded, will be used primarily for soil remediation.

Bessemer at Seward Commons (2200 Snelling Ave, 2206 Snelling Ave, 2210 Snelling Ave, 2214 Snelling Ave, and 2218 Snelling Ave)

Projected DEED Request: $389,513

Redesign, Inc. intends to construct the first market-rate apartment building at the multi-phase Seward Commons site. This project, which will be Phase III of the overall redevelopment plan, will include 128 units of housing, along with a large green space that will serve residents and function as a bike connection for the Seward neighborhood. The projected total development cost is $29,300,400. Grant funds, if awarded, will be used primarily for soil remediation and the installation of a vapor barrier.

Calhoun Towers – Building C (3404 and 3430 List Place)

Projected Met Council TBRA Request: $272,559

Calhoun Towers is an existing 22-story residential tower. Bader Development is working on a master development that will ultimately include 744 new multi-family units with multi-modal connections to the planned Southwest LRT. The current grant application is for Building C --- a 125-unit multi-family building with 20% of the units meeting the City’s affordable housing requirements. The projected total development cost is $34,000,000. Grant funds, if awarded, will be used primarily for soil remediation.

Capri Theater (2027, 2029, 2033, and a portion of 2101 W Broadway, 2104 and 2106 23rd Avenue North, 2301 and 2210 Oliver Avenue North)

Projected DEED Request: $208,822

In 1987 the Plymouth Christian Youth Center purchased the adjacent Capri Theater. In 2015 PCYC launched a capital campaign for renovations and expansion, including theater and classroom spaces, a community hall, teen tech center, and a public plaza. The new Capri is envisioned as a hub of art, civic and learning in North Minneapolis. The projected total development cost is $11,951,120. Grant funds, if awarded, will be used primarily for soil remediation.

Checkerboard (3716 Dight Ave S)

Projected Met Council TBRA Request: $600,000

Developer Checkerboard LLC is planning to construct a transit-oriented, mixed-use residential development, featuring studio, one- and two-bedrooms units, underground parking and ground-level commercial space to activate 38th Street. Of the planned 500 apartments, 125 will be affordable. The projected total development cost is $92,291,895. Grant funds, if awarded, will be used primarily for the abatement of asbestos-containing materials.

LEEF South Lot f/k/a Currie & Irving (190 James Ave N, 194 James Ave N, 196 James Ave N, 198 James Ave N, 187 Irving Ave N, 191 Irving Ave N, 195 Irving Ave N, and 199 Irving Ave N)

Projected DEED Request:                   $173,856

Projected Met Council TBRA Request: $86,800

Wellington Management, Inc. intends to remediate a currently undeveloped industrial site and construct a 95,800 square-foot office building. The property will be Phase 4 of the LEEF development, which also includes 14 owner-occupied townhomes, 100 units of artist-focused rental housing, and a 65,000 square-foot office building. The projected total development cost is $16,400,000. Grant funds, if awarded, will be used primarily for soil remediation.

Malcolm Yards Market (501 30th Ave SE)

Projected DEED Request:                     $100,000

Projected Met Council TBRA Request: $100,000

Wall Development Company intends to renovate/repurpose the existing Harris Machinery Building by converting it into a 18,500 square-foot urban food hall with multiple, niche small food vendors and a communal dining space. The projected total development cost is $9,500,000. Grant funds, if awarded, will be used primarily for the abatement of asbestos-containing materials.

Sears Warehouse (2600 Winter St NE)

Projected Met Council TBRA Request: $293,234

Onward Investors is planning an extensive interior renovation of an existing 455,216 square foot light-industrial building. After renovation, the building will support 1-3 light-industrial tenants and approximately 250 jobs (a significant increase from approximately 20 existing on-site employees). The projected total development cost is $16,378,690. Grant funds, if awarded, will be used for hazardous materials sampling, followed by the abatement of any identified hazardous materials prior to renovation.

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Details of Other Brownfield Projects (which are not being recommended)

California Street (2310 California St NE and 78 23rd Ave NE)

Projected DEED Request:                     $216,000

Projected Met Council TBRA Request: $216,000

Developer 2301 California Street LLC (Lander Group) is planning a mixed-income housing development, with owner-occupied townhomes organized around a Community Green, which will be open to the neighborhood. Of the 57 housing units, 6 units (10.5%) would be affordable. The projected total development cost is $16,032,000. Grant funds would be sought for soil remediation and the installation of a vapor barrier.

City staff are not recommending this project for grant funding in the spring 2019 grant round. The nature of the project changed significantly after the project’s pre-applications were submitted to the City on March 1, and only a few days before first internal due date for this staff report. The original project concept (24 townhomes, 110 apartments, $29 million total development cost) was scaled back to a project involving 57 townhomes and carriage houses, no apartments, and a $16 million total development cost. The timing of these project changes left little time to fully assess the potential impact(s) of the changes on a wide range of project readiness criteria. However, the available information has raised readiness concerns that include (but are not necessarily limited to) the following:

  1. No land use applications have been submitted yet.

  2. Preliminary Planning staff comments indicate that a townhome project of this kind is not a permitted use in the I1 district. At a minimum, a rezoning and a conditional use permit will be required. Whether either of those will be supported by Planning staff, the Planning Commission or the City Council cannot currently be predicted or guaranteed.

  3. The project seems to be consistent with the current Comprehensive Plan, but it is inconsistent with the 2040 Plan, under which a “Production Mixed Use” site such as this would allow residential housing to occur only in a mixed-use building that also included production space. City staff cannot currently predict how the difference between the two Plans would be reconciled in a case like this.

  4. The project has “discussions in progress” but has not secured a builder for the project.

  5. Although there seemed to be neighborhood support for the original project, no one currently knows whether that support would extend to the revised project.

  6. The developer has not yet decided whether to remediate the entire site in 2019 or to remediate half of it in 2019 and half in 2020. The Purchase Agreement indicates that the “…purchase and sale…shall occur no later than…August 1, 2020 for…approximately one-half of the property.” No explanation has been provided regarding why or how the developer could proceed with remediation on half of the property in 2019 if that half wasn’t owned by the developer at that time. Moreover, the general uncertainty regarding when the remediation would be done would likely render grant applications non-competitive at best.

  7. The fact that the progress and timing of the project would (according to the developer) “depend on sales” renders the entire project schedule highly speculative, and increases the possibility that the project might be unable to comply with whatever project start date is specified in the grant applications, which in turn increases the likelihood of a contractual default and the resulting need for the City to relinquish awarded grants funds (which is always disfavored by the grantors).   

The staff recommendation in this instance is not intended to be a reflection on the overall merits of the project; rather, it simply reflects the strong direction that the City has gotten from the grantors regarding their desire to not receive grant applications from the City for projects that have a large number of unresolved questions regarding land use approvals, neighborhood support, land acquisition schedule, project construction timetables (especially start dates), environmental remediation options, and other project readiness criteria.

FISCAL NOTE
  • No fiscal impact anticipated