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HomeMy WebLinkAbout10-24-88 Council Special MinutesMINUTES OF THF SPECIAL MEETING CITY COUNCIL LITTI.E CANADA, P9INNESOTA October~ 24, 1988 Pur•suant to due call and notice thereof a special meeting of the Council of the City of Little Canada, Minnesota was held on the 24th day of October, 1988 in the Council Chambers of the City Center located at 515 Little Canada Road in said City. Acting Mayor Beverly Scalze chair•ed the meeting and called it to or•der at 5:00 P.M. and the following member~s of the Council wer•e present at roll call: MEMBERS PRESENT Acting Mayor Councilman Councilman Councilman Mrs. Beverly Scalze Mr. 6i11 Blesener P4r. Rick Collova Mr~. Jim LaValle MEMBERS ABSENT ALSO PRESENT Mayor City Clerk Ci ty P1 anner• City Auditor Recordi ng Secr•etar•y Mr•. Michael Fahey Mr. Joseph Chlebeck Mr•. Dan Wi 1 son Mr•. Rober~t Voto Mrs. Kathy Glanzer~ The City Auditor• pr•esented to the Council a r~epor•t dated October~ 24, 1988 r•egar•ding fiscal dispar•ity and its impact upon the tax incr•ement plan for the Larry Lee development on Centerville P,oad. The City Auditor reviewed this r~eport in detail with the Council. The Auditor• outlined the Tax Incr•ement Financing options the City had to consider~, those beinq Option A- 100% Tax Increment Base, or• Option B- 60% Tax Incr~ement Base. Dan Wilson pointed out that the City's policy is Option B uncler• the Tax Increment Policy Statement the City adopted. The City Auditor also pointed out the City's policy statement of 2/.irds of the increment being pr•ovided to the developer and 1/3 going to the Gity for other purposes. Scalze asked if the City commited to Option A if the City's mill rate would increase. The Auditor replied that this was corr•ect, and went on to explain the effect on the mill r•ate under Option A versus Option B as outlined in the r~epor~t. The Auditor also pointed out that one decision the Council will need to make is whether~ or• not to gener•ate additional monies in the project for• other~ City purposes. Scalze asked if the Council would be asked to make a ciecision on whether Option A or• B would be used. The Audi tor repl i ed that thi s i s cor~r~ect wi th r~egar~d to the Lee pr•oject. Page -1- MINUTES City Council October~ 24, 1988 Scalze pointed out that when the City fir•st considered Tax Increment Financing as a tool to attr•act development, it made the decision that the City would be an Option B community. Scalze asked why the City would be considering Option A at this point. The City Auditor went on to explain the situation with the Lee project and the developer~'s need for• $140,000 in TIF assistance and the effect of the fair market value the pr•oject will be given on this amount of assistance. The Auditor~ r•eviewed these figures as contained in his repor•t. The Auditor• then reviewed his recommendation as contained on page 15 of his r•eport. The Auditor pointed out that in this instance the City will have to decide if it will allow a developer to make an offer to the City with r•egard to the amount of TIF a project will receive, or if the City will give the developer a fairly rigid set of guidelines and tell the developer• that he must abide by these quidelines. Scalze asked who pr~ovided the City with the financing market value for• the pr•oject. The Auditor• believed that that figure was provided by Larry Lee. The Auditor went on to explain that the difference in the two market values referred to in his r•eport is the land costs versus land costs valued as high as possible including soft costs and pr•ofit. Wilson agreed that the difference was pr~ofit. The City Auditor pointed out that the key issue is the effect on City tax rolls. The Auditor• r•eported that the financial information that he reviewed for the TIF pr•oject was sketchy and it was unclear• what the market value for the project would be. The Auditor• stated that in reviewing this information he was unsure of the City's intent and whether~ the City had commited to pr~ovide 10% in TIF assistance based on a$1.4 million pr•oject, or 13% based on a$1 million project. Scalze pointed out that the issue was confusing to the Council who relied on the advice of its consultants. However, Scalze pointed out that the Council's intent was to provide 10% to the developer and retain 5% for other City pur~poses. The Auditor• asked if the intent was to pr~ovide 10% of assistance for• a $1.4 million project. Blesener agreed that this was the Council's intent. The City Cler•k pointed out that Larry Lee appr~oached the City and infor~med the City that he needed $140,000 in TIF assistance to make his pr•oject work. Wilson r•epor~ted that the appr•oach taken in this pr~oject was not uncommon. Page -2- MINUTES City Council October 24, 1988 Wi 1 son agr•eed that ther~e was a di ffer•ence i n market val ue fr~om the val ue on the books for• tax purposes, and the cost of a pr~oject for development. Wilson pointed out that developer•s must make a pr•ofit on a development, the question is how much is a fair• pr~ofit. 4lilson reported that in this instance the "but for" question was not answered until after the public hear~ing was held on the project. ldilson also pointed out that the value of a pr~oject for tax pur•poses will be different than the actual cost of development since pr•ofit is included in the actual cost of development. W.ilson pointed out that under TIF the "but for•" r~ule means that without TIF assistance the project would not work. The Auditor r•eported that he did a telephone sur~vey of other cities using TIF assistance, and the neighbor to the north has some fair~ly r•igid. standar•ds and provide 10% of assistance using the value set by the Ramsey County Assessor•'s Office. This city gets the Assessor's Office involved with each TIF Development Agreement and the tax value is determined for~ the project. This city also bonds only once per year for all TIF pr•ojects. Idilson pointed out that the plans and specs for the Lar•ry Lee project have been at the Assessor~'s Office since July. Wilson r~eported that ther•e are other cities' pr•ojects which ar•e hung iap in the Assessor•'s Office waiting for values. Ther•efore, there is the need to wor~k backwar~ds into the pr~ocess with the developer• r•equesting a certain amount of assistance, and the value decicied on the pr~oject in order~ to make the number•s wor•k. Scalze asked how the $1,083,000 value was ar~r~ived at. Wilson reported that Pat Pelstring of Business Development Services developed that number. Wilson repor•ted that most cities handle their TIF pr~ojects in the same manner as the Larr•y Lee project was handled, tdilson pointed out that Pelstr•ing helped develop the City's TIF policy and negotiated the TIF deal with Lar•r•y Lee so that 10% of assistance would be pr~ovided the developer. Collova pointed out the need for the County's assessed market value. Scalze pointed out that the City is ending up with pr•oviding 13% of the market value of the pr•oject to the developer in TIF. Wilson stated that it is 13% of the taxable value, but 10% of the project costs. Scalze pointed out that the goal of the Economic Development Committee is to lower taxes within the City. Wilson pointed out that initially TIF costs money to pr•ovide gr•owth for the City and a larger tax base in the future. Wilson pointed out that in addition to a lar~ger• tax base, TIF will assist in attracting employment to the City. Page -3- MINUTES City Council October• 24, 1988 Wilson pointed out that TIF does more for• the City than just reduce taxes through an increased tax base, pointing out that the fiscal disparities pool also gives the City its shar~e of taxes generated fr•om growth in the Metro area. Blesener~ pointed out that TIF is also a means of attr•acting better development to the City. The City Auditor pointed out the various justifications for the use of TTF, pointing out that outlying cities use it to attr•act development to their area. The Auditor r•eported that some first-ring subur•ban cities do not use TIF since their~ land values are such that they feel it is not necessar~y. Dlesener stated that he was in favor of using TIF as long as it is needed for• a good reason such as land correction, redevelopment, etc. The City Auditor~ pointed out that once a City offer•s TIF assistance there will be no fur~ther projects in the City that do not need this assistance. Developer~s are awar~e of cities offer•ing TIF and they will put together the numbers to prove that the assistance is needed. The Auditor r~ecommended that the best appr•oach the City can take is to put together a r•igid set of guidelines that must be followed. The Auditor• pointed out that the Larry Lee project will be an exception, however•, since that pr•oject has already been negotiated and the City should stand by its commitment. Wilson pointed out that Option B will wor•k for the Lar~r•y Lee pr•oject if the City is willing to accept the consequences in that a portion of the debt ser~vice is not covered and there will have to be a levy each year~ to cover it. However, Wilson stated that his r~ecommendation is that the City live up to its commitment that was made based on a$1.4 million value. That commitment was made last March. Wilson pointed out that the project was put together the way it would have been in ever•y other community. Blesener pointed out that the 10% guideline does not follow. Wilson pointed out that the difference is the actual cost versus assessed valuation. Blesener~ pointed out that ther•e was supposed to be monies left for public pur~poses. Under• a$1.4 million valuation there were monies for public purposes, but if a$1 million valuation is used, the money for public purposes has been eaten up. The City Auditor~ agreed, but pointed out that the process that was used was no different than what would have been used by any other• City. The Auditor• reported that the impor•tant thing is to get the City's policy related to 10% of the taxable value for a pr~oject. Blesener• felt that the City should adopt Option A with regar~d to the Lar•r~y Lee project, but that in futur•e pr•ojects 10% of assistance should be pr•ovided based on the taxable value of a pr•oject. Page -4- MINUTES City Council October 24, 1988 Scalze pointed out that a pr•ecedent is being set in the Lar•r•y Lee development, however, the City must be prepar•ed to stick with the 10% assistance limitation on futur~e TIF pr•ojects. Mr~. 6lesener intr~oduced the following r•esolution and moved its adoption: RESOLUTION N0. 88-10-450 - ADOPTING OPTION A FOR THE LARRY LEE PROJECT AS OUTLINED BY THE CITY AUDITOR IN HIS REPORT DATED OCTOBER 24, 1988 The foregoing r•esolution was duly seconded by Mr. LaValle. Ayes (4) Blesener, LaValle, Scalze, Collova. Nays (0). Resolution declar•ed adopted. This resolution appears in Resolution Book No. 20, Page 465. The City Auditor• then r~eviewed pages 16 and 17 of his report outlining a comparison of the City's TIF policy with that of a neighboring City, as well as the position that a City should take when presented with a TIF proposal by a developer•. The City Auditor~ also pointed out that if a 10% TIF assistance limitation is set, this 10% can always be financed successfully. A larger percentage leaves little left over~ for public purposes. The Council agreed that in futur~e TIF pr•ojects the 10% figure should be used and that figur•e should be based on taxable value. The Auditor also requested that he become involved earlier in the process in r•eviewing the numbers for• TIF pr•ojects. Scalze pointed out that the Larry Lee pr~oject was the fir~st commer•cial/ industr•ial TIF project the City was involved in and it was a lear~ning exper~ience for the City. Wilson reported that Briggs and Morgan would like the Larry Lee project closed on by the end of the year•. It was suggested that at the r•egular• Council meeting, the Council call for• a bond sale for the Lee project. Voto also pointed out that other cities do not disper•se TIF funds until a project is 30% complete. Wilson r•epor~ted that the Lee pr~oject will be appr~oximately 50% complete befor•e funds wi 11 be di sper•sed. The contr•act pr~ovi des for• a 30% compl eti on. Adjourn Mr. LaValle introduced the following resolution and moved its adoption: RESOLUTION N0. 88-10-451 - ADJOURNING Page -5- MINUTES City Council October 24, 1988 The foregoing r•esolution was duly seconded by Mr•. Blesener. Ayes (4) LaValle, Blesener~, Collova, Scalze. Nays (0). Resolution declared adopted. This r•esolution appear•s in Resolution Book No. 20, Page 466. There being no further business, the meeting was adjourned at 6:30 P.M. Respectfully submitted, ~: ~e~i/_.~. ~~~'~~-~-~1 ,~,~`~~ -~ ,~~;.._ ~, , ~~, Kathy Gl a z r Recor•di ng Secretar•y Page -6-