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12-11-17 CC WS MinutesCITY OF SHOREWOOD CITY COUNCIL WORK SESSION MONDAY, DECEMBER 11, 2017 MINUTES 1. CONVENE CITY COUNCIL WORK SESSION 5755 COUNTRY CLUB ROAD COUNCIL CHAMBERS 6:00 P.M. Mayor Zerby called the meeting to order at 6:01 P.M. A. Roll Call Present. Mayor Zerby; Councilmembers Johnson, Labadie, Siakel, and Sundberg; City Administrator Lerud; Planning Director Darling; Director of Public Works Brown; and, Engineer Fauske Also present: Planning Commissioners Bean and Davis Absent: None B. Review Agenda Siakel moved, Labadie seconded, approving the agenda as presented. Motion passed 5/0. 2. SMITHTOWN ROAD REDEVELOPMENT PROJECT Director Darling explained in 2012 the City Council adopted the Smithtown Crossing Redevelopment Study (the Study). The Study identified potential redevelopment options for the area near the intersection of Smithtown Road and County Road 19. Todd Frostad, with Frostad Development Company, has expressed interest in redeveloping the area and he had submitted a few drawings for Council's review. His proposal included the following: redeveloping the area on the north side of Smithtown Road from County Road 19 west to nearly Christopher Road for residential uses and a new American Legion Post #259 (Legion) facility; redeveloping the property with a single- family house on it located on the north side of County Road 19 and south of the Public Works property for auto - oriented repair uses; and, redeveloping the properties south of Smithtown Road between Country Club Road and the Southshore Center with a gas station /retail tenant and a drive - through coffee shop. Mr. Frostad explained he first looked at the development area back in 2007. He had come to an agreement with Legion representatives back then about redeveloping the area. After the economy changed so significantly he decided not to move forward with that redevelopment. The City's desire to have that area revitalized continued up until there was third draft of the Study and that was into 2012. When lie was working on The Waters of Excelsior project the former City Planning Director encouraged him to reconsider redeveloping the Smithtown Crossing Redevelopment Study Area. He then restarted discussions with Legion representatives; they started about where they left off back in 2007. His agreement with the Legion was and still is that the Legion would continue to operate a facility for its members, even though its membership continues to dwindle, until it would no longer be possible for the Post to service itself. At that time it would distribute its assets out to charity per its charter. The representatives thought a new Legion facility would help attract new members. The agreement included providing a new Legion facility in exchange for the current Legion property. There had been discussion about several potential different locations for a new facility. After providing a number of drawings and CITY OF SHOREWOOD WORK SESSION MEETING MINUTES December 11, 2017 Page 2 of 8 having a numerous discussions it was decided that the new facility would be located close to but slightly north of where the MGM Liquor Store is located. The representatives want the new facility to be two stories high. The design presented to them would be a little more lodge style and have an open restaurant floor plan with a wood burning fireplace in the corner. It would have more of a family friendly feel than would be found, for example, in a Famous Dave's restaurant. The intent would be to brand the new facility more like a restaurant and bar than just an American Legion. They believe that would allow them to increase revenues for Post #259 and its charities, potentially increase visibility for itself and hopefully increase its membership. As a developer when he looked at the area and based on conversations lie had with City staff, members of the community and Mayor Zerby, Frostad said he made a decision for the area behind the new Legion (to the west) to have a more residential flare. The most recent drawings reflect that. The residential lots that would extend west along Smithtown Road would be on property where the topography somewhat tips back toward the conservation area. That would allow for the entire back section of lots (basically Lots 1 — 23) to be walkout lots. Because of the Minnetonka Country Club (MCC) redevelopment he does not think there is a need for more big homes in the community. The market needs more single - family detached homes for seniors. Most of the senior townhomes or homes designed for seniors in the community sell immediately. But they have to be sold at a price point that is attractive. The product proposed for Lots 1 — 23 is a villa; it would be like a little bungalow. It would be 1300 — 1400 square feet in size. It would have a single level living floor plan with one bedroom on the main level. There would be a two -car garage. The intent is for that product to be attractive to the 55 plus age group but sales would not be restricted to that group. There would be an option to have the lower level finished off. The starting price point for Lots 1 — 23 would be $499,000. The interior lots (Lots 24 — 50) would be developed with a two -story detached townhome villa style product. It would be more of a vertically oriented construction. There would be narrow lot lines. But each unit would have its own four exterior walls and be on its own property. The starting price point for Lots 24 — 50 would be $399,000. The drawing shows an open space along Smithtown Road. The intent was to not have a dense development abut the roadway. He would like to discuss with Council and staff how to best use that open space both for the residents living in that immediate area and to residents living in the surrounding areas. For the adjacent neighborhood to the west the intent is to preserve a conservation buffer. Today there is currently a lot of woods and open space. He would like to be as respectful of those residents as possible when developing the area. He thought the redevelopment of the southeast quadrant of the study area where the gas station, auto dealership, and auto repair business are was important to the City. He would like to create an aesthetically pleasing environment there. He had asked the owner of the MGM if he would like to relocate to that area. That owner was not sure if he wanted to keep the MGM business because he had moved to California. What can be done with the southeast quadrant is limited because of the cell phone tower there. A retail center could not built all of the way down to create one continuous look to the property. He thought about how to redevelop the area past the tower. That is the "go to work side" of traffic. So lie discussed having a drive - through coffee shop there. He wants there to be a patio seating area on the back side where people could overlook the sports field in Badger Park. The Caribou drive - through to the north does not have the drive aisle stacking that may be desired for high rush periods, Also, it is not a right -in right -out go to work side of traffic for selling product. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES December 11, 2017 Page 3 of 8 The Justinak residential property (24250 Smithtown Road) is located south of Public Works facility and near the police and fire public safety facility. It is surrounded by commercial properties. There has been a demand for many years for auto oriented services in the area. His proposal would revitalize that area for that purpose. The design included in the meeting packet showed two separate auto service buildings. After conversations he had over the last week he decided to keep the auto service building that would face Smithtown Road and replace the second building with what would basically be car condos. They would be 1000 — 2000 square feet in size garages that would be upgraded significantly. The AutoMotorPlex luxury garage condominium facility in Chanhassen has been sold out for quite some time as are others around the Twin Cities area. He proposed having a 16 -unit car condo complex that would be located north of the proposed auto service facility. That would be the final piece of the total project area. His proposed project encompasses 14 different parcels. It would realistically be constructed in four phases. Some of the sites have significant soil contaminates; they will require some remediation and new soils would have to be brought in. In the financial exchange arrangement his company has with the Legion a brand new building with a restaurant would be in exchange for the current Legion property; it would not be a cash equivalent exchange. He would want to work with the City to create a Tax Increment Financing (TIF) District for that area. After doing some analysis of the area, lie thought there was roughly a tax capacity with significant room for additional coverage of roughly $3 million. If the City carried a TIF note or if it was sold outright, the debt service coverage on a 20 -year amortized loan was showing 1.59. That could be easily be sold to the public as an asset at a lower interest rate (lower than 6 percent) and /or for a longer term and the City could benefit even more. There could be a multitude of uses the TIF could be applied to such as municipal improvements, the cost of land acquisition, and the cost of construction associated with the charitable exchange with the Legion. The reason City has not received a packet from him yet was because of the number of moving parts. The concept of the car condos was created within the last two weeks. He had been speaking with potential tenants for the auto service center originally proposed for the area for the last two months. Originally the MGM wanted to be moved to a new location before that facility was torn down to build a new Legion. His company has already sent out the purchase agreements based on the plan lie just presented to Council. People had been assembling all of the final documents from all of the property owners which were needed to submit a full application to the City. The goal to complete that application and submit it to the City is around February 1, 2018. That would take planning and review periods through the June or July or whatever time is needed to review it. If that process gets successfully completed the MGM building would be raised almost immediately and construction of the new Legion facility would be started. A couple of houses on the far west end would also be raised so the grading and planning for that end of the residential development could be started. It would not be possible to complete all the way to the end of the cul -de -sac until construction of the new Legion facility is complete. Simultaneously they would be looking at starting construction on the Justinak property during that early phase process. Mayor Zerby noted Council and staff still have a lot of questions. Mr. Frostad clarified that part of this meeting was about him explaining what he was envisioning. He noted he did not have a hidden agenda. He stated the big question for everyone is when and how. Mayor Zerby stated quite a bit of what Mr. Frostad has proposed would require zoning changes and /or additional approvals for a planned unit development (PUD) plan. Nothing is achievable without Council approving the needed accommodations. Mr. Frostad concurred. CITE' OF SHOREWOOD WORK SESSION MEETING MINUTES December 11, 2017 Page 4 of 8 Mr. Frostad stated he understood that no part of his proposed project could happen without the full support of the City of Shorewood. Councilmember Sundberg asked if the car condos would be just for storage; there would not have things like auto shows happening there. Mr. Frostad confirmed that. He stated the homeowners association (HOA) would restrict it so there would be no outside parking. Sundberg then asked if Mr. Frostad has had any discussions with the owners of properties along Christopher Road. Mr. Frostad responded no. Councilmember Siakel asked Mr. Frostad if his proposed project is dependent on TIF. Mr. Frostad said it was. Siakel stated she does not understand why the project would qualify for TIF. TIF is a tool the City has to work with a developer to develop a project that is not available in the community and that would satisfy an unmet need. She does not think the City needs 50 houses there. Nor does it need the car condos. She noted she thought the first thing that needs to be determined is whether or not the proposed project would qualify for TIF. Mr. Frostad stated he understands a need has to exist or TIF cannot be granted. He then stated that with the land acquisition costs, construction costs for a new Legion, remediation costs, and municipal improvement costs he thought there is a demonstrated need. He then stated the Study basically stated the City wanted a developer to come with a comprehensive redevelopment plan for the Study Area. He could probably come up with a way to take a piecemeal approach and be profitable. But, that would not support the grand vision for the redevelopment area. To take a comprehensive redevelopment approach would require TIF. He was not concerned about having to pass that fiscal (i.e.; but -for) test. Mayor Zerby stated that the use of the Study Area is not defined. It does not speak to an AutoMotorPlex use or a drive - through coffee shop use. That was intentionally not defined in order to allow flexibility in finding the best fit for the Area. Also, the Study did not define that the entire Area would have to be redeveloped all at once. Zerby noted that he wanted the discussion to focus on the residential redevelopment proposed for the northwest quadrant of the Study Area. He explained the proposed residential redevelopment would have two different size lots. The smaller lots would be 30 feet wide by 117 feet long with 5 foot setbacks. That density would be six times that of the R -1C District; part of the residential housing would located in an area currently zoned R -1C. The other half of the housing would be in an area currently zoned commercial. The larger lots would be 45 feet wide by 117 feet long which is four times the R -1C density. The smaller lots would have a 20- foot -wide house with the front of the house basically being a two -car garage. There would be very small houses packed together. He does not think that would fit the character of Shorewood. There is already housing for people 55 years of age or older in Shorewood Ponds. The market information Council had been previously provided for senior housing indicated that once the current senior housing development projects are complete the number of total units would satisfy the market need. Mr. Frostad noted that is a completely different product. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES December 11, 2417 Page 5of8 Mayor Zerby stated the spacing between the houses would not be conducive to growing trees because of there would be too much shade. Zerby then stated that the area historically known as Manitou Forest has some very significant size trees in it. They would be lost if the project moves forward as proposed. The City's Tree Preservation and Reforestation Policy requires three 3 -inch caliper replacement trees be planted for every significant tree lost. He questioned if it would be possible to plant three trees on some of the lots. They could not be planted between the houses; they would have to be planted in the front or in the back of the house. Mr. Frostad stated the trees could be planted on the lots that would have the single -story walkout units. Zerby stated that from his vantage point it did not seem that the developer could comply with the Policy's requirements. Zerby went on to state the City's maximum hardcover requirement is 36 percent for the residential small lots and 43 percent for the larger lots. What is proposed would not comply with the hardcover requirements. Mr. Frostad stated he thought the open space needed to be factored into the calculations. He explained of the 9.6 acres (the area for the residential properties, open space and new Legion) the net green space is substantial. Zerby stated there had been mention that a retention pond could be located in the open space. Mr. Frostad stated he was open to that but there are other options that could ultimately preserve that open space. Zerby noted that during throughout discussions about the MCC project traffic concerns were raised repeatedly. He explained that the concept drawing shows that an entrance on to the site would align with an entrance /exit on the MCC development site. What is being proposed would have about one - third the number of houses that would be in the MCC development; the additional traffic would exacerbate the traffic volume issue in that area. Mr. Frostad noted he understood a traffic study would have to be conducted. He stated that during conversations with staff it was suggested that the entrance on to the site should be located as far away from the Smithtown Road /County Road 19 intersection as possible. It was decided it would be best to align it across the roadway from the MCC entrance. Zerby stated the proposed project would eliminate a considerable amount of affordable housing in Shorewood. He explained that there are several homes located in the proposed project area that have been in the family for a long time. Those properties were affordable at the time they were purchased and now the property owners are simply paying their taxes. The motel property which is rental property is probably the most affordable housing there is in Shorewood. He doubted that that the owners of those residential properties would be able to afford the new proposed housing. He questioned why the City would want to approve what is being proposed. He did not think there is a need for it. He stated the Legion has wanted a new building for a long time. He did not think that should be the cornerstone of the project. He noted that at this time he was not ready to advance this project in part because it would require TIF. Councilmember Labadie noted there is no guarantee there would be TIF. Mr. Frostad clarified he had not come before Council to ask for anything because he did not have a comprehensive plan for the redevelopment. He stated lie has had conversations over the years with property owners trying to demonstrate what could be achievable. He then stated it would be difficult to redevelop area. There is a reason the collective properties have not been redeveloped for more than one decade even those there has been a desire by the City and others to put some effort into that. He noted that change is always difficult. Mayor Zerby commented it is difficult to change the City's ordinances. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES December 11, 2017 Page 6 of 8 Mr. Frostad stated the Smithtown Crossing Redevelopment Study did open up the opportunity to look at the properties in the area. He had worked with staff to develop a plan he thought would be marketable and successful. The project he proposed and any TIF pay -as- you -go note would become his risk as the developer. Councilmember Siakel expressed concern about the proposed 50 residential properties. She noted she could not support that. Mr. Frostad stated his big challenge is the economic costs for the project. In order redevelop that area there is a cost for acquiring the properties, for remediating the land and for construction all of which are expensive. He had to size the lots and products and structure the price points such that lie offset those costs. He could not build a product that would be similar to those in the MCC development; the risk would be too high for him and for the City. Mr. Frostad noted lie understood that the proposed density is a big number. He stated he was trying to do what he could through conservation buffers, setbacks from the road, and green space to help balance the proposed density. He could reduce the number of lots by a few and increase the space between the buildings a little but that would ultimately have an impact on the demands of TIF. He believed that what he has proposed would have the best chance of success in achieving a comprehensive redevelopment of the Study Area. Councilmember Siakel stated she did not think the proposed 50 residential units fit with the integrity of the area. She noted that she would not support TIF for a project like the one being proposed. Councilmember Labadie thanked Mr. Frostad for all of the work he had put in to his proposal. She stated due to time constraints she was going to focus her comments on a few things. She thought the conservation buffer that would be put in in part to compensate for the large number of mature trees that would be removed was unacceptable. She thought the additional traffic generated by those living in the new housing would make an already bad traffic situation worse even though some of the housing would be occupied by seniors. A traffic study would likely confirm the traffic issues would be exacerbated and if it did not she would question why it did not. She questioned the claim that the housing for those 55 plus years of age would affordable. She considered them to be glorified row houses with a high price tag. It may be cheaper than housing in the MCC development. But teachers, public employees and police, for example, may not consider it to be affordable. Those are the types of individuals Shorewood needs to keep in the City and have housing for. Labadie noted that at this time she would have a difficult time supporting what is being proposed. She clarified that she was not closed to the concept of redeveloping the area but just not as proposed. Councilmember Sundberg stated the critical issue for her was the density noting she understood it was needed for financial reasons. She did not think what was proposed for that area fits. The traffic issues in that area would only be made worse. Councilmember Johnson stated his issue was not necessarily the density of people; it is the way in which it would be accomplished. He then stated he thought there was an opportunity to do something unique on the corner of the northwest quadrant. It could be a mixed use with ground floor retail and residential above. There could be lower density single- family houses to the west of that. He noted that he had no idea if the pro forma for that would work. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES December 11, 2017 Page 7 of 8 Mr. Frostad noted he is one of the few developers in the west metropolitan area that has built mixed use. Economically mixed use would not work for that area. He stated condominium developments are the most volatile real estate parcel for a developer or investor. They have the greatest fluctuation in value because a condo owner does not own their exterior four walls or the dirt the condo is on. Councilmember Siakel stated she would like to see less density and more affordability. Mr. Frostad stated affordable is a balance between land acquisition costs and costs of construction. He clarified that he considers affordable to be a product price point that is not immediately seen based on the average home sale in the area. He asked what the acceptable density would be for Council. Mayor Zerby commented that he and Mr. Frostad had spoken about other types of housing. He noted lie did not want to start negotiating density at this time. Councilmember Sundberg suggested Mr. Frostad tell Council what lower level of density could still be financially viable. Councilmember Siakel stated she thought the density proposed is too much for the area. And, it would create a lot more problems for the County Road 19 /Smithtown Road intersection. She then stated she appreciated the fact that Mr. Frostad took a comprehensive look at the entire Smithtown Crossing Redevelopment Study Area, Mr. Frostad stated he has not heard any comments about what he had proposed for the other areas. He would like feedback on the total proposed project. Councilmember Siakel stated she was open to what has been proposed for the southeast corner of the Study Area and for the area near the Public Works facility. It was the proposed residential area she had concerns about. Councilmember Johnson stated he did not think finding areas where density could be increased was a bad thing. He then stated he thought there was an opportunity to do two different cul -de -sacs in the residential development; one with higher density and the other with lower density. He thought that would alleviate some of the traffic concerns. Mr. Frostad stated that originally he had proposed that a roadway come in near the area where the MGM is now. But staff recommended that buffer area be purely commercial. That is where that commercial front was anchored with the new Legion which then required a back end cul -de -sac. Councilmember Labadie again thanked Mr. Frostad for his efforts. Mr. Frostad encouraged those residents in attendance for this item to provide him with their feedback. 3. LAND USE APPLICATION NOTIFICATION REQUIREMENTS Director Darling stated the meeting packet contains information about the land use application notification requirements for the State, Shorewood and some other cities in the area. Based on that information she concluded that Shorewood's written notification distance of 500 feet is reasonable. Councilmember Johnson stated because Director Darling has experience with the City of Plymouth he asked her why Plymouth elected to go with a distance of 750 feet. Darling explained that when Plymouth CITY OF SHOREWOOD WORK SESSION MEETING MINUTES December 11, 2017 Page 8 of 8 originally put that requirement into its ordinances it was having larger tracks of land being rezoned at one time. The areas where it was doing the most rezoning were more rural and the parcels were 5 to 15 acres in size. If the notification was only sent to owners of properties within 500 feet of the parcel that was to be rezoned it would only be sent to a couple of property owners. The notices that Plymouth sends the farthest out are for the most controversial applications (e.g.; rezoning, comprehensive plan amendments and plats). Mayor Zerby stated he thought there could be value in considering increasing the City's notification distance for rezoning applications. Councilmember Siakel asked Zerby why he thought it should be increased because it has not been a problem in the past. Zerby recalled that there had been an application where the number of notifications sent out to property owners was quite small. Siakel asked if the distance could be increased on a case by case basis noting that for the most part the 500 foot distance meets the City's needs. Councilmember Sundberg noted that she was in favor of more transparency not less. So if increasing the notification distance helps increase transparency she would support that. Councilmember Siakel questioned how that would make the City more transparent. Councilmember Siakel stated she recently received a notice about an application for a property on Birch Bluff Road which is four down from where she lives. She was not sure she needed to receive a notification because she was not going to be directly impacted. She reiterated she thought the 500 foot distance was adequate. Mayor Zerby stated if the marina was going to potentially be rezoned he asked Councilmember Siakel if she would like to receive a notification on that. Siakel stated that would be commercial and questioned if the notification distance should be greater for applications for commercial properties. Zerby then stated he could support increasing the notification distance on a case by case basis and noted lie thought this was a good conversation to have had. Councilmember Labadie stated it was her recollection that there had been times when the City notified more property owners than required by the City Code, Councilmember Johnson noted he would support increasing the notification distance on a case by case basis. Cell 0111 t1ol Labadie moved, Sundberg seconded, Adjourning the City Council Work Session of December 11, 2017, at 6:58 P.M. Motion passed 510.