Approve Revised Cost Share Framework for Riverdale Drive Extension Improvement Project Related to Riverstone South; Case of Capstone Homes and Pearson Properties of Ramsey

The purpose of this case is to consider a revised Cost Share Framework for the Riverdale Drive Extension related to the Riverstone South Subdivision. 

The need for this project is being driven by a development proposal known as Riverstone South by Capstone Homes located on property owned by Pearson Properties of Ramsey on the south side of Highway 10. That being said, the project has a broader benefit for Highway 10 Safety/Congestion and the Bowers Drive Neighborhood.

This topic was discussed last discussed in March, 2020. General direction has been to split costs evenly between the City, Property Owner (Pearson) and Developer (Capstone), including any funding gap related to improvements to an adjacent parcel required to make this connection. 

Below is a summary of topics for discussion at the request of the Developer and Property Owner. Additional detail is included in the attached presentation.

• Developer/Owner object to contributing to off-site improvements (County Parcel, Bowers Drive)
• City has found that acquisition/repayment of previous funding for the County Parcel shall likely be required
• Planning Level Layout has been adjusted slightly
• Cost Estimates have been improved
• The City was unsuccessful in the planned MnDOT Grant ($710,000)
• The City is applying for a different MnDOT Grant ($1.25M)

30 minutes. 

Assessment Method

All parties involved have verbally agreed to an even split of the assessment between Capstone's residential development and the Pearson's future commercial/industrial development along Highway 10. The assumption is that all parties will agree to these terms in a future Assessment Agreement that eliminates any risk and/or liability from deviating from the 'net developable acreage' method of assessment used on Puma Street on the north side of Highway 10. 

City Contribution to Collector Road

The original framework is attached along with minutes from Public Works Committee and City Council for additional detail. 

A key component to the success of this project is a potential grant award from MnDOT in the amount of $1.25M. While Staff feels confident that this project will score well in the next application round, there is no guarantee of this award. This project is listed in MnDOT and Anoka County's 2014 Highway 10 Access Planning Study, and the City's 2019 Ramsey Gateway Study. 

A portion of the full Riverdale Drive project is located on real property owned by Anoka County. This corridor was originally planned for a river crossing across the Mississippi River to the City of Dayton. At this time, Anoka County does not have funding available to contribute to this project (Riverdale Drive Extension). As such, Anoka County has offered that the City can purchase this parcel, repaying grant funds for acquisition and receive any future land sales from redevelopment. This would not be a County Road - it would be a local City Street. 

As a sidebar, the City still desires to plan for a river crossing, the alignment simply has changed to coincide with Armstrong Boulevard. MnDOT is currently leading a study on the feasibility of this river crossing. 

Total Assessment Amount and Preliminary Assessment Amount

Attached to this case is a detailed breakdown of the proposed Project Proforma.

Timelines

Capstone Homes has their schedule for subdivision approval for Riverstone South by the end of 2021 with construction to commence in 2022. If the City Council is comfortable with the proposed cost share agreement, this timeframe is feasible. The City Council could consider a higher contribution with traditional funds or introducing an eligible Tax Increment Financing (TIF) economic development project on the commercial/industrial parcels along Highway 10. This could extend the desired timeframe. 

At the end of the day, the City is not obligated to contribute to any portion of this project at any given time, although there would be value in doing so. The question at hand is to better determine what funding sources can be secured and at what timeframes. The City may be able to assemble additional funding sources (both internal and external) to increase our participation, but that will take time.  

Future Discussions

This case is intended to serve as high-level policy direction. Next steps including, but not limited to Feasibility Report, Approving Plans, Awarding Contract and holding Assessment Hearing will provide additional levels of detail. The intent of this step is to limit the number of alternatives Staff should explore, given the request from the Developer to revise previous direction.

The City Council could consider asking the City's Financial Consultant, Ehlers, complete a financial analysis of the private development pro-forma to ensure that their Return on Investment is within industry standards and that the Land Sale Price is within industry standards. The Public Works Committee does not believe this is necessary. Of note, Staff will still be having Ehlers evaluate the Cost Share Framework without evaluating the private development pro-forma to ensure accuracy and compliance with applicable rules and regulations. 

Alternatives

Alternative 1 - Recommend that the City Council proceed the ORIGINAL Cost Share Framework, including their contribution to the County Property, updating planned grant fund revenue and ROW acquisition cost. [Developer/Owner Object]

Alternative 2 - Recommend that the City Council proceed with the REVISED Cost Share Framework. [Current Discussions]

The funding for this project is proposed to be a combination of City Contributions and Developer Assessments as outlined below. As it pertains to the City's Cost Share (Municipal Contribution to Collector Road + Assessment Amount for Ownership of Real Property), several funding sources are available.

1. City's Public Improvement Revolving (PIR) Fund (generated from local property tax revenue)
2. Anoka County Redevelopment Authority (ACHRA)
3. State of Minnesota Municipal State Aid (MSA) Account
4. MnDOT Local Partnership Program (LRIP - competitive grant up to $1.25M)
5. Tax Increment Financing (for qualifying projects in the Commercial/Industrial District)

The Public Works Committee recommends approval of the revised Cost Share Framework without the need for financial underwriting. The Public Works Committee feels that a contribution to a collector road has a broader public benefit and that the revised cost share framework is close to the original framework originally approved (non-binding) by the City Council and that additional underwriting is unnecessary. 

Motion to adopt Resolution approving the revised Cost Share Framework for the Riverdale Drive Extension related to Riverstone South.