REDEVELOPMENT AUTHORITY OF THE CITY OF LANCASTER. Board of Directors Meeting December 18, 2018

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1 REDEVELOPMENT AUTHORITY OF THE CITY OF LANCASTER Board of Directors Meeting December 18, 2018 The members of the Board of the Redevelopment Authority of the City of Lancaster met on December 18, 2018, at 5:15 p.m. in the Commission Room, City Hall Annex Building, 120 North Duke Street, Lancaster, Pennsylvania. PRESENT: STAFF: GUESTS: Randall Horst, Douglas Byler, Jason Wynne, and Carlos Gonzalez. Frank Mincarelli, Marisol Torres and Carolyn Faggart. Dave Garpstas, Larry Cohen, Susan Bleecher, Galen Huyard, Jill Stoltzfoos, Erin & Jim Stewart, Rev. Edward Bailey, and Erin Dixon. Chairperson Horst called the meeting to order and asked if anyone from the public is not on the agenda. Hearing none, he then asked for approval of the minutes of November 20, Mr. Wynne made a motion to approve the minutes of the November 20 meeting. Mr. Gonzalez seconded the motion. Mr. Horst called for the vote, and all were in favor. Mr. Horst noted that the Treasurer s Report was ed to the Board then he asked for questions or corrections. After reviewing the Report, Mr. Wynne made a motion to accept the Treasurer s Report as presented. Mr. Byler seconded the motion. Mr. Horst called for a rollcall vote, and all were in favor. Mr. Horst went on to the Staff Report. Ms. Faggart said we have two extension requests and no proposals to purchase tonight. There was one property for Act 1 tonight. Mr. Byler made a motion to take Act 1 on 606 Stevens Avenue, and Mr. Wynne seconded the motion. Mr. Horst called for the vote, and all were in favor. A gentleman in the audience who said he works for Stevens College was interested in purchasing and rehabbing the Stevens Avenue property. He did a title search and was in contact with the owner s estate. He asked how the process to purchase properties works. Mr. Horst explained how a property goes through the Property Reinvestment Board, the Planning Commission, then on to the Redevelopment Authority where an appraisal is conducted to determine a value for the just compensation for eventual taking. After the legal work is completed the property is put on a list and marketed for sale to be rehabbed and occupied by owner occupants. If he would purchase the property from the former owner before it was taken he would need to enter into an Agreement for Rehabilitation with the Redevelopment Authority and leave a $1,000 deposit until the rehab is completed and the CO acquired. After further discussion on the process, Mr. Mincarelli gave his card to the gentleman if he had any further questions.

2 Mr. Horst moved on to the North Queen Street Garage Update. Ms. Torres said since the Redevelopment Authority owns the Garage, she gave a short history on this project for the new Board members. Prior to 2013 the City created a Tax Increment Financing District to redevelop the North Queen and North Prince Streets area. Redevelopment was occurring in several locations on the 400 blocks of North Prince and North Queen Streets. The redevelopment of the Keppel Building resulted in a loss of public parking. One of the roles of the Authority is to assist the City in implementing the Redevelopment Area Plan. The City then approached the Authority to take on the North Queen Street Parking Garage project. The City had conversations with the Lancaster Parking Authority, but the Authority determined they were not in a position to build a garage. However, they agreed to manage the garage for the Redevelopment Authority after the project was completed and the Authority would provide a management fee. The agreement states that at some point in the future the Parking Authority would like to acquire the garage and part of that acquisition would include reimbursement to the City of $3.0M in Capital Bond Funds the City contributed to build the garage. That s how the Redevelopment Authority came to own the North Queen Street Parking Garage. Ms. Torres then said Mr. Cohen and Ms. Bleecher were here to give an update on this project. Larry Cohen introduced himself as the Executive Director of the Lancaster Parking Authority and with him was Susan Bleecher, Deputy Executive Director who has attended the last several meetings to learn about the Redevelopment Authority and to explain the role and responsibilities of the Parking Authority. Mr. Cohen said the Parking Authority is happy to continue to manage the garage for the Redevelopment Authority for the next ten years which was voted on at a previous meeting. He appreciated the opportunity and the opportunity the Redevelopment Authority brought to the Parking Authority to evaluate the purchase and transfer ownership of the garage to the Parking Authority. Ms. Bleecher distributed a budget they prepared which will give anticipated changes to the garage s financial position for the 2019 year. The budget will reflect the current status of the garage plus where current revenues and cash flows do not provide adequate funds to pay the current debt service on the TIF Note which is currently paid with TIF funds unless the TIF funds would continue to pay off the $3.5M TIF Bond debt. Given that the anticipated cash flow does not cover the debt payment, the additional debt of $3M to repay the City for their Capital Bond fund as part of the project would also not be supported by garage revenue. While the Parking Authority has debt capacity, they anticipate having a significant borrowing need over the next few years with new construction projects, such as the Library and Garage project on the Lancaster Square Annex where the Parking Authority will take the lead in that project. The Authority currently provides quarterly financial packets to the Board and also offers the opportunity to present quarterly financial and operational updates on the garage. Ms. Bleecher distributed financials for background information and Mr. Cohen anticipated having a conversation if the Board is interested in how we can move forward with the Parking Authority taking ownership of the garage. Ms. Bleecher said the first chart is on the budget. We present this every year to Mr. Patterson and Ms. Torres on what they anticipate the garage financials will look like for the coming year. This budget is based on actual expenses plus anticipated changes for the current year. Revenues compared to the 2018 budget are continuing to grow due to increased usage of the garage. The opening of Decades Bowling Alley is anticipated in 2019 as well as other businesses on North Queen Street whose customers will use the garage. Transient parking customers are increasing as well as employees in that area. 2

3 Garage revenues are expected to increase as they have over the past five years and the expenses are fairly stable. Ms. Bleecher added a line for Commercial Insurance to show cash flow coming into the garage after expenses. The Budget YTD total, approximately $127,000 is what you end up with at the end of the year prior to the Parking Authority s $40,000 to manage the garage, so you are left with $87,000. The second chart shows the TIF Note Mr. Cohen talked about, which is the current debt on the garage. At the end of 2019, you are at $3,517,332. The current year principal payment was $204,000, with interest at $122,800. This Note is currently paid for with tax revenues. The payments increase up to 2028 with a balloon payment of $789,000 on the principal. The insurance and debt service are the only things not covered in what the Parking Authority manages for the Redevelopment Authority. After further discussion, Ms. Bleecher said there are two encumbrances on the garage, one is the Lancaster Press Building, which is the lower level. Next year is the first year the Press Building will contribute to parking. While under construction they had free use of the lower level. That was the agreement because it was part of the redevelopment of that building. The second encumbrance is the public area on the second level where 88 spaces are designated for Prince Street Centre South where the Brickyard used to be. There s 110 spaces in the garage to generate revenue. Mr. Cohen said he was asked to purchase the garage several years ago but the Authority was not interested at that time, but he said they would be interested in managing it, which they have been doing. At the same time, they are now willing to have a conversation about getting this off the Authority s books and managing the garage. Mr. Horst thought it has been well managed. Mr. Cohen said the $3.5M covered by Bonds will continue to be covered if they purchase it and then the additional $3M we would work up a level of terms suitable for us to retain with the City financing them, so they are open to that conversation. Mr. Horst said in most cases the Redevelopment Authority is just the conduit for the City; we would not be in a position to say if the garage can be sold. Ms. Bleecher asked for any further questions on the budget. Mr. Horst said it s a nice revenue growth. He spoke of the increase in the management fee but thought that s the first time the fee has been increased in the five years it s been managed by the Parking Authority. He also acknowledged that costs have gone up during that time. Ms. Bleecher thought the increase was low compared to what it covers. Mr. Cohen thought the financial sheets covered the income and expenses well and said we need to decide whether the City is supportive of the Parking Authority acquiring the garage. We can do that and report back on how well they are going, or the Redevelopment Authority can keep the garage and the Parking Authority will continue to manage it. Mr. Horst asked about a contract and Ms. Bleecher said the Authority already approved that for the Parking Authority to manage the garage for the next ten years then each year the management fee is up for discussion. She asked for five percent increases over the next three years and was happy to negotiate it every year. One comment was that the Redevelopment Authority is not actively managing the garage and she offered to come to the meeting once a quarter to present financials and answer questions. She has been working with Marisol Torres the past several months to add the electric charging stations and the AED devices in the garage. Mr. Cohen said the Parking Authority has the purchase rights to the garage for the next thirty years. Mr. Horst agreed but said there are encumbrances to the purchase that have to be taken into consideration. Mr. Cohen mentioned the TIF Bonds and the $3M to the City which would need to be addressed before a change in ownership can occur. Mr. Horst said the Authority is capable of holding the garage until it s time to move it along to the Parking Authority. 3

4 Mr. Horst went on to the Report from Younger Realty Group. Dave Garpstas came forward and handed out his monthly report. He didn t have much to report since inventory was low at this time. Mr. Horst went on to the Request for Extensions and started with 345 East Ross Street. Galen Huyard came forward and said the property is for sale and he has an inspection scheduled for December 28. The lead paint certification is completed. To answer a question, he said it was part of the rehab and there were a few requirements he had to meet. The roof certification has been done as well. What s left is the final inspection. Mr. Horst asked for a time. Mr. Huyard said all work was completed unless a few items are found on the final. Mr. Mincarelli said the rehab agreement requires a Certificate of Occupancy be issued. Mr. Byler then made a motion to grant an extension for 345 East Ross Street until the February meeting. Mr. Wynne seconded the motion. Mr. Horst called for the vote, and all were in favor. Mr. Horst went on to 423 Lancaster Avenue. Jill Stoltzfoos came forward and said she is representing her brother-in-law Gerald who could not be here tonight. They are well into construction but not completed yet. The biggest holdup has been UGI who is waiting on permits from the City to come out to redo the gas meter in the street. Paperwork was submitted in October but apparently they still need more information. Mr. Horst asked how much time Mr. Stoltzfoos needs. Ms. Stoltzfoos said she is a partner in the property as well and she hopes the UGI matter can be resolved in two months. Since this held up the heat source for the property there are other items that also need to be finished. All the rough-in inspections were done. Mr. Byler asked when the property was acquired. Ms. Stoltzfoos said mid- to late-july. After further discussion, Mr. Wynne suggested six months due to the UGI issues and Ms. Stoltzfoos agreed. Therefore, he made a motion to grant an extension for 423 Lancaster Avenue for six months. Mr. Gonzalez seconded the motion. Mr. Horst called for the vote, and all were in favor. Mr. Horst then moved on to the Update on 445 East Strawberry Street. Ms. Torres said this property was bid out twice with the first time receiving no bids. The Authority then agreed to issue a public notice to advertise a second time which received one bid in November for a little over $214,000 to rehab 445 East Strawberry Street. Mr. Mincarelli send an to the Board members with two options for this property. One was to request additional funds from the State or to continue with the process to acquire the property. She thought there were also people here today to talk about the property as well. There was a question on ownership and Ms. Torres said that Bethel Harambee was the property owner. Rev. Edward Bailey was here to discuss this project. Last year a contractor said he could rehab the building for $30,000. This was money given to Bethel by the County. We found out he was not able to complete the work for that amount and some work was not done correctly and had to be done over. Ms. Torres spoke to Rev. Bailey last summer about the $60,000 they agreed to put into the property. She called him last week to let him know that the bid was over $200,000. Rev. Bailey said he would like time to put together a financial proposal that is less than $200,000. He would like the Board to continue to put the $60,000 up and he would like to try to match the $30,000 that was there. Ms. Torres said the $60,000 is coming from the State which requires payment of prevailing wage. Part of the reason the bids came in so high is the 4

5 prevailing wage but in addition to that, there s a lot more work to be done than originally thought when she asked the Authority to request $60,000 from the State. If the $60,000 is used, we still have to pay prevailing wage even if Rev. Bailey adds funds to the project. Mr. Horst said if the $60,000 is used, that will drive up all the costs. Rev. Bailey said nobody would be willing to invest $250,000 into that building in that area of the city. Mr. Horst said that s why the Board said no to it. Rev. Bailey knows a local engineer who could evaluate the building and give a report on his findings. Mr. Byler said that the Authority has been dealing with this for over a decade and if we haven t gotten these numbers together with committed capital and labor in ten years, how are we going to do it in two months. Rev. Bailey didn t say he would get it done in two months, he would get the proposal together in two months. He agreed that this should have been done last year. We are out $30,000 and they put up $20,000 earlier. Erin Dixon stood up and said she lives in the neighborhood and is a member of the neighborhood group. She has attended the last few Redevelopment Authority meetings to discuss this property and another one on East Strawberry Street. She has been sympathetic to Rev. Bailey s efforts to rehab this property over the years but at this point she felt that ten years have passed but there isn t a significant influx of funds to complete this project. She asked what requirements were in the RFP that it would cost so much to complete this project. Regardless of the prevailing wage, that is a pretty lofty amount to rehab this small building. Ms. Torres said the property needs a new furnace since the one in there now is not working. The roof also needs to be replaced, and both of these items were not included in the original scope of work. She didn t have the bid documents with her for the other items included in the RFP. The building inspector went through the property and said a structural engineer would need to assess the condition of the building and make a recommendation for repairs. Since this is a commercial building (and it s zoned commercial), this property would have to be treated like other commercial Redevelopment Authority properties, such as the Franklin Street properties where we issue an RFP for someone to purchase and renovate the building. Mr. Horst didn t hear that anyone was interested in this building yet. Mr. Byler asked if Bethel Harambee still wanted it. Rev. Bailey said yes, they want to put a book store in there for their Living the Experience project. He would like the opportunity to complete this project but if he can t, he would walk away from it. Mr. Byler asked if he needs one or two months to return to the board. Rev. Bailey said he would come back next month with something. Mr. Wynne asked if a decision needs to be made on the $60,000 today. Mr. Mincarelli said Rev. Bailey will present his own proposal; the 60-day time period has expired. Mr. Horst didn t think it made sense to move forward with the $214,000 bid proposal amount. Mr. Wynne said if the Board doesn t put in the $60,000 and Bethel isn t beholden to the prevailing wage, the gap between the $214,000 and roughly what it would be without prevailing wage would be $60,000, if we dropped it to $150,000, makes it a negligible gap so our contribution one way or the other wouldn t make a difference. It would be what sort of a proposal you could put together, how much you need to do, and if you still wanted to continue after you got the proposals. Ms. Dixon asked how long this process will take because the property has been vacant and blighted for about eighteen years now. We have been waiting ten years for this project to happen, and there are no businesses in the Churchtown area. We don t have any service providers in that area and we need a business that s sustainable. A discussion then followed on possible interest in the property. Mr. Gonzalez asked Rev. Bailey how much time he needs. Rev. Bailey said he has a vision and he would like to return next 5

6 month with a plan for the building. If the Board doesn t agree with it, he will step back. Mr. Gonzalez said he would like to see some financials to back up the project, something more concrete than just a plan. Mr. Horst said that s what we had before a plan but no funds to make it happen. Ms. Dixon has been to several meetings and had some valid concerns about this property and another one on Strawberry Street. The Board didn t have a problem waiting another month to see what Rev. Bailey can put together for next month s meeting. Ms. Dixon didn t think the status quo was an option. The neighborhood group is working with residents to fix up the homes and bring businesses to the area. She lives on that block and has spoken to Rev. Bailey about maintenance of the building, criminal activity, trash and homeless people hanging around the building. She would like the church to take responsibility for this property. If the Board allows him to keep this property, please take into consideration the people who live on that block who see this every day. Rev. Bailey said the church has been taking care of that property. Most of the trash that is dumped on the property is cleaned up. He moved the drug addicts off that corner so there s no criminal activity going on in that building. He agreed with what Ms. Dixon is trying to do for the neighborhood and wants to work with the neighbors to improve the block. The community needs for something to happen. Mr. Byler asked if a motion was needed to delay action for thirty days and Mr. Mincarelli thought it was appropriate since the deadline expired. After further discussion, Mr. Gonzalez made a motion to extend the rehab of 445 East Strawberry Street until the January meeting. Mr. Byler seconded the motion. Mr. Horst called for the vote, and all were in favor. Mr. Horst moved on to the Update on Residential/Commercial Properties. The only update Ms. Torres had was for 412 Fremont Street. The owner of this property currently has a rehab agreement with the Authority. We are getting complaints from the neighbors for the lack of work being done and the workmanship completed on the exterior. She didn t think the owner has abided by the agreement as to what should be completed each month and she would like to ask him to come to the next meeting. Ms. Torres said there s a language issue and she will try to contact the contractor who could give the Board an update on the work. She said it took a while before the owner came to the meeting and then the contractor spoke on their behalf. Mr. Mincarelli said since they have a July completion date, they may not be working on it that much now. A discussion then took place on the proposal form the Authority uses versus the inspection report used by the building inspectors since that relates to codes. Ms. Torres asked what could be done if the owner isn t making progress. Mr. Mincarelli said if the milestones in the agreement aren t met, we could notify him that he hasn t met a milestone and needs to come to the Board to explain why, and if this continues, then we can declare a default under the agreement and can take the property. You may want to take that as a first step. Ms. Faggart said the owners lived in the property for a while, moved out and converted it to a two-unit property, which is illegal. Part of the agreement was they had to demo the walls that were added for the two unit. Over the summer months, the inspector said they repaired the framing for the second-floor balcony, poured a footer for the corner post, installed the post and started repainting portions of the building. With no one living there, the property was broken into, the police were called and a suspect arrested. Mr. Mincarelli asked if the Board wanted him to send a letter to the owner; they said yes. Ms. Torres said that s the only item she had for today. 6

7 Mr. Horst moved on to the Solicitor s Report and Proposed Actions. Mr. Mincarelli had three items, the first of which was a suggested revision to the cost sharing agreement that we have with Impact Missions. The reason for it was the Board authorized him a month ago to include a provision that would allow our listing agent to receive a commission, even though it would be deferred until after the property is renovated and resold. It would add the provision that the listing agent would be paid a commission since Impact Missions doesn t give the Authority any money up front; they just give us a Note. We would also require them to list the property for sale with the Authority s listing agent and provide for the commission he spoke about earlier. He passed out the page where the changes would be made with Board approval. Mr. Mincarelli said this is a master agreement the Board has with Impact Missions. It was an oversight that it wasn t included in the original agreement. The next item for Mr. Mincarelli was on 827 East Walnut Street, which sold for more than the just comp. The just comp was $70,000 and was sold at $82,000. The bank was owed $110,000 on the property and they are contesting the just comp claiming the property was worth more. They used a Brokers Price Opinion (BPO) which is not the equivalent of an appraisal, which Mr. Byler has pointed out several times, since it s a curbside appraisal and the realtor doesn t get inside the property where most of the damage exists. Their BPO was written for $115,000 which they claim the property is worth. A Board of View wouldn t put much stock in a BPO either; they would look for a full appraisal. After Mr. Mincarelli sent them inside photos of the property, they reconsidered and lowered their demand to $82,000. After further negotiations, they offered to settle this case for an additional $6,929, the amount paid out for municipal liens the City had against the property. In addition to the $63,000 they would have received, the bank was asking for the amount paid for the liens. If the Board could raise the amount to $69,071 they would withdraw their objections and this would not have to go to a Board of View. After further discussion, the Board didn t want to go to a Board of View with this property and agreed to the additional amount requested, so they authorized Mr. Mincarelli to contact the bank with the Board s decision. Ms. Faggart asked what happened with South West End Avenue. Mr. Mincarelli said they haven t come back with a counter to our last offer yet. Mr. Mincarelli then handed out the most recent list of deed restriction violations. We have resolved all but number 16, and he is waiting on documentation from seven property owners who still have not provided him with the agreement. He received three of them today and was hoping to have all of them by today s meeting. He drafted a letter to be sent out tomorrow notifying the owners they have until January 15 to get the information to him or the Board will revoke the temporary waiver and may commence legal action seeking court-ordered compliance with the deed restriction. Mr. Mincarelli then handed out his monthly report and noted that we are down to seven properties. Mr. Horst went on to Other Business. Ms. Torres handed out a quarterly Financial Report for the Redevelopment Authority as of September 30. This includes revenues and expenses for Penn Square Partners, the Queen Street Garage, the properties we are holding and the tax claims. 7

8 Having no further business to be brought before the Board, Mr. Horst adjourned the meeting. Respectfully submitted, Carolyn Faggart RACLMinutes 8

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