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HomeMy WebLinkAbout09-28-1998 EDA PacketAGENDA ECONOMIC DEVELOPMENT AUTHORITY MONDAY SEPTEMBER 28, 1998 6:00 P.M. 1. Call to Order and Roll Call 2. Consideration of Minutes of Thursday, August 27, 1998 3. Resolution No. 98-04 Authorizing the Preparation of a Redevelopment Project Plan 4. Adjourn CITY OF LINO LAKES ECONOMIC DEVELOPMENT AUTHORITY MINUTES DATE: Thursday, August 27, 1998 MEMBERS PRESENT: K. Sullivan, J. Bergeson, C. Dahl MEMBERS ABSENT: C. Lyden, A. Neal OTHERS PRESENT: Brian Wessel, Mary Divine, Ron Batty, Mike Mulrooney CONSIDERATION OF MINUTES EDA President Sullivan moved to approve the minutes from the August 24, 1998 EDA meeting and noted this meeting was a continuation of the August 24 meeting. EDA Member Dahl seconded the motion. Motion passed unanimously. DEVELOPMENT PROPOSAL, JADT DEVELOPMENT GROUP (SHOPPING CENTER) Mr. Wessel explained that Mr. Batty and Mr. Mulrooney had been working with staff on a development proposal for Tim Baylor of JADT Development Group. The intent was to responsibly respond to the developer's request. Mr. Wessel explained that this proposal was for the only shopping center within Lino Lakes, and that the City Council had approved a concept plan. The proposal for the EDA to consider involved a "non-TIF" pay-as-you-go assistance in the range of $696,000. This was based on the estimated net city tax generated from full development of Phase 1 of $69,600 per year. The developer would be assessed for city improvements to the property and the city could reimburse the net city portion of the taxes for 10 years or $696,000, whichever came first, to use as reimbursement of assessment costs. Mr. Wessel noted that while the city would not be generating city taxes for 10 years, there were advantages that should be weighed. Residents would have needed shopping center services sooner than later, the city would have more control over the type and quality of development, and the risk to the city was minimal because only the city taxes generated by the development would be reimbursed. The Forest Lake School District and the county receive their portions of tax base. The process involves authorizing preparation of a Redevelopment Project Plan, much like a TIF Plan. Mr. Wessel informed the Authority that McDonalds has submitted a site plan for a parcel on the site and wants to go to P&Z in September. Mr. Batty noted that TIF is not available for this project, and discussed the merits of this plan. In it, the EDA would enter into an agreement with the city, and is a better approach for this project than a tax abatement, another form of reimbursing city taxes. EDA President Sullivan asked what would happen if the developer defaulted. Mr. Batty said the pay-as-you-go assistance kept the city from risk, because it would be reimbursed only if the project were built. Under 429, if a property defaults, assessments and taxes are paid first. Under this plan the $69,600 is the increase in the amount of taxes this property now generates. Mr. Mulrooney addressed the issue of how soon a shopping center would develop without assistance. He said that underwriting the project reduced the hurdles to development and made it more feasible by allowing greater latitude on the part of the developer to reduce rents, etc. He suggested a shopping center was unlikely to develop at that site without assistance until the market (head count) was higher, probably in the range of five years. Mr. Wessel noted that assistance makes the project less dependent on the current population. Mr. Mulrooney added that because of fiscal disparities, approximately 40% of the gross taxes went into the metro pool and were returned to the city, which is a fiscal disparities winner. Mr. Batty added that the substance of the development agreement would spell out what the city received in exchange for assistance, and a threshold could be set so if the development did not draw major development, the deal would be off. The burden would be on the developer. EDA Member Bergeson noted that if development did not occur for five years if no assistance were provided, the city was really only losing five years worth of taxes, not 10. He added that his reason to support this project was not so much financial as to keep the momentum for development of the Town Center. Mr. Batty informed the Authority of the procedure, which would require everything to come back for approval, plus a public hearing. EDA President Sullivan said a decision should be made before the city proceeded with it, since it wouldn't help the city's credibility to pull out after leading the developer on. Mr. Wessel said members should not initiate the plan until they felt comfortable with it. Ms. Divine noted that an escrow would be required of the developer before formal action that required legal services was initiated. EDA President said the members needed time to think about it, and the absent members needed information. It was agreed it would go to the next Council work session and they intended to act on it at the next EDA. ADJOURNMENT EDA Member Bergeson moved to adjourn. EDA Member Dahl seconded the motion. Motion passed unanimously. AGENDA ITEM 3 STAFF ORIGINATOR: Brian Wessel DATE: 9/28/98 TOPIC: Consideration of Resolution No. 98-04 Authorizing the Preparation of a Redevelopment Project Plan BACKGROUND: Redevelopment Authorities, such as the Lino Lakes EDA, are authorized by state law to establish redevelopment projects in areas of the community which have not developed up to their potential solely through private enterprise. A Redevelopment Project Plan is prepared which identifies the geographic boundaries of the project and describes the goals and objectives the Authority seeks to achieve in that area. The most common financing tool, and the one most familiar in Lino Lakes, is tax increment financing. There are other forms of assistance, however, which must be employed when TIF is not available. The method being proposed in this instance functions much like TIF, but involves only the city's portion of taxes generated by new development. Staff recommends that the EDA reframe the original resolution to authorize the establishment of a Redevelopment Program. This will be a city planning tool that will provide an incentive program for commercial development in the Town Center. It will allow the EDA the opportunity to provide assistance where appropriate to control the type and quality of development the city wants in its Town Center. This is not a site or project specific plan, but an overall program that will provide a kick start for quality commercial development on the interchange, as well as leverage for negotiation on issues such as use, design and landscaping. Criteria for incentives within this Redevelopment Project Area could include the following: 1 The project upholds the intent of the city's Comprehensive Plan. 2. The project fits within the long term economic development goals for tax base stabilization. 3. The project serves the city by providing needed services to the community. 4. The project enhances livability as outlined by the Town Center Group. 5. The project meets all criteria outlined in the Town Center Development Guidelines and Standards. 6. The public assistance fits within the city's overall financial plan. 7. No funding from other sources is available. With the authorization to proceed with a Redevelopment Project and adoption of a Redevelopment Plan, the EDA is declaring that it wishes to ensure sustainable development within the Town Center. Preliminary negotiation points that would be addressed on specific projects included: • Control over land uses, such as a non -compete clause • Enhanced architectural and design control • Pay-as-you-go assistance whereby the obligation would be limited to the taxes actually paid • No assistance until a predetermined threshold of development is achieved within a specific time frame The establishment of a Redevelopment Project Area will buy time for the city so that a budget, timetable and criteria can be worked out for the best interests of the city. The city council will hold a public hearing on the Plan in November. As is always the case, the EDA will review and approve the terms of the Redevelopment Project Plan and any incentive proposal brought forward within the project area. OPTIONS: 1. Authorize the preparation of a Redevelopment Project Plan and direct staff to proceed with the development of a timetable, budget and criteria for the project area. 2. Return to staff for further consideration RECOMMENDATION: Option 1. Member introduced the following resolution and moved its adoption: LINO LAKES ECONOMIC DEVELOPMENT AUTHORITY RESOLUTION NO. 98-04 RESOLUTION AUTHORIZING PREPARATION OF A REDEVELOPMENT PROJECT PLAN WHEREAS, The City Council of the City of Lino Lakes (the "City") established the Lino Lakes Economic Development Authority (the "Authority") in 1990 and conferred upon it responsibility for economic development within Lino Lakes; and WHEREAS, the area of the city in the vicinity of I-35 W and Highway 23 known as the Town Center has not developed solely through private efforts in a manner consistent with its prominence within the city and which justifies the public expenditures for infrastructure improvements which have been made; and WHEREAS, it appears that it will be necessary to provide public assistance to assist development in the area to achieve the city's goal for quality commercial development within the Town Center; and WHEREAS, it has been proposed that the area generally known as the Town Center be established as a Redevelopment Project pursuant to Minnesota Statutes, sections 469.001 through 469.047 (the "HRA Act") in order to offer financial assistance to selected projects. NOW, THEREFORE, BE IT RESOLVED by the Lino Lakes Economic Development Authority as follows: 1. Staff and Kennedy & Graven, Chartered are hereby authorized and directed to prepare a Redevelopment Project Plan (the "Plan") concerning the Redevelopment Project. 2. The executive director of the Authority is authorized and directed to schedule a meeting on Monday, November 23, 1998 at 6:00 p.m. in the council chambers at city hall, at which time the Authority will consider adoption of the Plan and the establishment of a Redevelopment Project Area. 3. The staff and consultants are authorized and directed to take all steps necessary to bring the Plan before the Authority at the November 23, 1998 meeting. 4. The city council of Lino Lakes (the "City") is urged to schedule a public hearing on the proposed Plan to be held as soon after consideration of these matters by the Authority as reasonably possible. Dated: September 28, 1998 Kimberly A. Sullivan, President ATTEST: Executive Director The motion for the adoption of the foregoing resolution was duly seconded by member and upon vote being taken thereon, the following voted in favor thereof: and the following voted against same: Whereupon said resolution was declared duly passed and adopted. T 1 CINNAMON TEAL I COURT ZL 20 13 STATE -TRUNK-HIGHWA`:h0.49 r— APOLLO BUS/NESS PAR NO 2 // Ou//o/ B TRACT A R.L.S. 1 2 3 4 5 6 V 8 9 4111UiliVi: GERM TRACT 182 8 SUB. 15 / 134 OU TLOT LRSHAN LAKE N 17 16 • 21 MEMORANDUM TO: Lino Lakes Economic Development Authority FROM: Ron Batty, EDA Attorney DATE: September 18, 1998 RE: JADT Shopping Center Development At several recent meetings the EDA has discussed a proposed shopping center development in the northeast quadrant of the intersection of I-35W and Highway 49. The developer's request for financial assistance from the EDA presents issues that are novel and somewhat complex. The purpose of this memorandum is to summarize these matters for the benefit of all members. The proposal is to create a redevelopment project area centered on the intersection of I- 35W and Highway 49. The project area would include land in addition to the parcel under consideration for the shopping center. Establishing a redevelopment project area is essentially a planning decision. The project should include areas of the city viewed as needing additional development attention but it does not necessarily involve any fiscal or financial implications. There is no commitment to assist a project merely because of its location within a redevelopment project area. Within a redevelopment project, however, the EDA may choose to assist selected developments. In the past, the EDA's most frequently used tool for assistance has been tax increment financing. TIF is not available in this instance because it would be necessary to establish an economic development TIF district and such districts cannot be used to assist retail projects. The suggestion in this instance is to use a different method to assist the developer. The alternate has some characteristics of tax increment, although it is significantly less powerful because it involves only the city's portion of taxes generated by the new development. This method of financing, sometimes called "phantom" tax increment, involves the EDA entering into a contract with a developer. The developer would agree to construct specified improvements and the EDA would agree to provide a level of financial assistance. Rather than utilizing tax increment generated by the project to meet its obligations, the EDA would look to the city. State law allows the city to assist the EDA in promoting specific development goals. The city may use any funds available to it for this purpose. The city would limit its commitment to the EDA to the amount of new taxes generated by development on the subject property. Rather than controlling the entire stream of new taxes, however, the city would be limited to its minority percentage of the taxes generated by the project. Upon receipt of these taxes, the city would pay the EDA, which in turn would reimburse the developer for specified expenses. RHB-150056 LN140-64 A second option is for the city to grant a tax abatement to the project equal to its portion of real estate taxes. This would generate the same number of dollars as the phantom tax increment approach, but there are drawbacks. Tax abatement is a less flexible tool and the city would have a more difficult time exercising the control over the project which it desires. If this option is pursued it is strictly a city -developer arrangement and does not involve the EDA. The key consideration whenever public assistance is offered is whether the public benefit outweighs the cost. There are at least three benefits to be gained by EDA assistance to the shopping center project. The first involves timing of the development. No one knows for certain when, or even if, a particular development will occur. However, the consensus seems to be that some retail development will occur on the subject property within five to ten years. A benefit of assistance would be to advance the initiation of the project. The goal would be to have a retail development under construction soon and substantially in place within 18 months to 2 years. This would mean services available to members of the community earlier than might otherwise be anticipated and would set the tone for development within the redevelopment project area. A second benefit would be to have greater discretion over the land uses which are included within the development. Typical zoning controls are not designed to allow fine distinctions among uses. For example, in a commercial district it would be expected that retail uses would be allowed, perhaps to the exclusion of all others. This would exclude residential or industrial uses but not make a distinction among the wide variety of potential retail uses. If the city is interested in including or excluding particular retail uses, zoning is simply not an adequate tool. Offering assistance to a developer would give the EDA the ability to prohibit or require the inclusion of specific uses. For example, if construction of a YMCA in The Village is deemed critical, it would be possible to exclude a competing facility from locating in the shopping center (at least for the length of the development agreement). A third justification might be the enhanced architectural and design control which would be possible under a development agreement. Building codes, zoning ordinances and subdivision regulations do not allow the attention to detail which might be desired by a city seeking to promote a "quality" development. By offering financial assistance, a city earns its place at the table with regard to these matters. Skillful use of this leverage would allow the city to achieve enhanced site plan and design quality over that which could be extracted through typical land use regulations. There is, of course, a cost to all of this. The proposal (subject to further discussion) is for the EDA to offer assistance in the amount of approximately $69,000 per year over ten years. The true cost of such an assistance package is somewhat less than the face amount of $690,000. Although it is beyond the scope of this memo to quantify that cost, the assistance outlined above represents a stream of payments. The present value of those payments is less than $690,000. In addition, if it is true that development of the property has been advanced by a number of years, taxes generated in those years are dollars which would otherwise not have been paid. Nevertheless, there is a true cost to the city for RHB-150056 LN 140-64 2 offering assistance. It is up to the EDA to evaluate whether that cost is worth the additional benefits which have been outlined above. If the EDA decides to pursue this option, there are two agreements which will be necessary. One will be between the city and the EDA and will outline the terms and conditions of the city's assistance to the EDA. Generally, this will be a commitment by the city to pay a specified portion of the taxes it receives from the development to the EDA for its use within the redevelopment project area. The more critical document will be the agreement between the EDA and the developer. The EDA's commitment to the developer absolutely should be on a pay as you go basis whereby its obligation would be limited to the taxes actually paid to the city from the project. If statutory tax rates go down, as they did in 1998 and will again in 1999, or if there are tax delays or delinquencies, there will be less or no money available to assist the developer. This significantly reduces the risk to the city and EDA. Staff recommends that any EDA/developer contract contain several key provisions. The first would be a requirement that no assistance be paid until a predetermined threshold of development is achieved within a specified period of time. This might take the form of requiring that a certain number of square feet of space or building dollar value be constructed within a specified period of time or no assistance would be offered. This would be designed to assure an early and substantial investment in the project. Similarly, it would be possible to exclude the taxes paid by an undesirable use or to negate the EDA's obligations entirely if such a use were included. For example, if the EDA did not want to see a specified use, taxes generated by that project could be excluded in calculating the amount of available assistance or that could even represent a "poison pill" which would cancel the agreement. The EDA could also specify architectural and design controls. This type of control is more or less permanent because once the buildings are constructed, they are likely to remain largely unchanged for a considerable period of time. Good design can be a lasting characteristic of such projects. The converse can also be true. These are only a few suggestions as to the type of conditions the staff envisions in the development agreement. Such provisions would, of course, have to be approved by both the EDA and the developer. I will attend the city council work session on September 23, 1998, and will be prepared to answer any questions you may have with regard to the project. If there is anything you would like to discuss prior to the meeting, please feel free to give me a call at my office at 337-9262. RHB-150056 LN I40-64 3