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HomeMy WebLinkAbout09-03-2019 Council PacketCITY COUNCIL WORK SESSION AGENDA CITY OF LINO LAKES Tuesday, September 3, 2019 Community Room 6:00 P.M. 1. Public Works Facility Financing, Sarah Cotton, Baker Tilly 2. Proposed Jet Ski Flipping Ban, John Swenson 3. MN Technology Corridor (35E) Update, Michael Grochala 4. Tax Exempt Financing Guidelines, Sarah Cotton 5. 2020 Budget, Sarah Cotton 6. Council Updates on Boards/Commissions, City Council 7. Monthly Progress Report, Jeff Karlson 8. Review Regular Agenda 9. Adjourn WS – Item 1 WORK SESSION STAFF REPORT Work Session Item No. 1 Date: September 3, 2019 To: City Council From: Sarah Cotton, Finance Director Re: Public Works Facility Financing Background The City Council and staff have been discussing the need for the eventual replacement of our Public Works Facility (built in 1971) since an updated Public Works Site Analysis and Space Needs Study was completed by CNH Architects in April 2017. The City Council expressed concerns with the scope and costs of a new public works facility outlined in the CNH Study. Oertel Architects was retained to reevaluate our needs and prepare options that were more cost effective. During the May 6, 2019 City Council work session Mr. Jeff Oertel presented some concept plans for Phase I of a public works facility, including cost estimates. At the August 5, 2019 City Council work session, the City Council and staff began preliminary discussions regarding project financing. Municipalities have three basic options for financing these types of improvements, including 1) utilizing current revenues, 2) setting aside funds to build a capital reserve, or 3) borrowing through the issuance of municipal bonds. Local governments often borrow to finance major public facility improvements. Paul Steinman, from Baker Tilly will be present to discuss some of the options that are available and the potential impact on the city’s debt levy. Attachments None Requested Council Direction Staff is requesting City Council direction regarding project scope, timing, and financing. WS – Item 3 WORK SESSION STAFF REPORT Work Session Item No. 3 Date: September 3, 2019 To: City Council From: Michael Grochala, Community Development Director Re: Minnesota Technology Corridor (35E) Update Background City staff has been working with neighboring communities along the I-35E Corridor to develop a strategic marketing campaign to promote the 35E Corridor for business and industrial development. The Minnesota Technology Corridor campaign, sponsored by Connexus Energy, Anoka County, and Washington County, kicked off with a website launch in August. The corridor has been drawing interest over the past year and we expect this to increase as promotional activities continue through both our Tech Corridor partnership and the Anoka County Regional Economic Development (ACRED) partnership. The City’s primary role, from an economic development standpoint, has been to improve our ability to respond to inquiries. Project readiness is one of the driving factors in accommodating new business opportunities. Over the past year staff has worked on multiple projects to obtain information, assess infrastructure capabilities and needs, and streamline entitlement processes for development along the corridor. These activities include: • Comprehensive Plan Amendment to re-guide land use and adjust utility staging to accommodate development opportunities within the corridor. Metropolitan Council approved the amendment on February 14, 2019. • Facilitated an agreement between property owner and energy providers to cost share a site assessment and wetland delineation. • Reviewed Alternative Urban Area-wide Review (AUAR) environmental documents for consistency with corridor objectives and possible development scenarios. Developed an AUAR checklist for to assist prospective users with evaluating mitigation requirements. A required update of the AUAR is due in 2020. • Began infrastructure needs planning for both road, sewer and water extensions to service the area as proposed in the 2040 Comprehensive Plan. Staff is currently proposing to work with WSB and Associates on additional studies to model possible demands on water and sewer infrastructure and verify capital needs. Information gathered will assist with adequately sizing infrastructure and determining system needs for any proposed project. This will also be used for the AUAR update. Additionally, we are proposing to work with property owners to identify a preferred alignment for the extension of Otter Lake Road between its existing location and Elmcrest Avenue. This is an important transportation link for development of the corridor. Finally, staff is proposing to begin discussions, regarding possible joint powers agreements, with neighboring communities. It is likely that any proposed project within the corridor will require cooperation between abutting communities for use of right-of-way and/or other infrastructure facilities. Funding for these studies is included in the Sewer/Water utility engineering budget and the Community Development - Engineering and Economic Development professional services budget. Requested City Council Direction Discussion Only. Staff will continue to work on planning items unless there is a City Council objection. Attachments 1. Corridor Map 35E Technology Corridor Legend February 21, 2019 Map Powered by DataLink from WSB & Associates 1 in = 6,000 ft ± WS – Item 4 WORK SESSION STAFF REPORT Work Session Item No. 4 Date: September 3, 2019 To: City Council From: Sarah Cotton, Finance Director Re: Tax Exempt Financing Guidelines Background In August of 2005, the City Council adopted Private Activity Tax-Exempt Financing Guidelines. The YMCA had approached the City of Lino Lakes with a request to utilize private activity revenue bonds to finance a portion of their Lino Lakes facility. At the time, it came to light that the City did not have any guidelines in place for this type of financing. Staff worked with Springsted, Inc. and Kennedy and Graven, to write a set of guidelines to establish criteria under which the City would allow this type of financing and set forth fees for such activity. In 2018, the City granted host approval on the issuance of a note by the City of Columbia Heights to finance the construction of the Love to Grow on facility in Lino Lakes and the issuance of a note by the City of Falcon Heights to finance, in part, a senior living campus in Lino Lakes. The City of Lino Lakes was not the issuer of these two notes; however, was required to grant host approval to the issuance of the notes as the properties were physically located within the boundaries of Lino Lakes. During the discussion regarding granting host approval on these two projects, the City Council expressed a desire to update the city’s policy, so that the city was a in a position to consider tax exempt financing as a tool to facilitate economic development within the community. Julie Eddington, Kennedy and Graven, has reviewed the city’s policy and has prepared suggested revisions as outlined in the attached document. At this time, staff is not recommending a change to the administrative fee of 1% of the principal amount of the bond issue. This fee is consistent with the administrative fees included in the policies of surrounding communities. In addition, Part II, Item 9 of the guidelines provides the City Council with sole discretion to reduce the administrative fee in cases where “the borrower’s request is related to a partnership with the City and/or provides a public service benefit to the community as a whole.” Attachments Draft Revised Tax-Exempt Financing Guidelines Requested Council Direction Staff is requesting City Council consideration of the proposed changes. 607378v1LN140-121 Exhibit AAugust 18 Draft Revisions LINO LAKES, MINNESOTA PRIVATE ACTIVITY TAX -EXEMPT FINANCING GUIDELINES AUGUSTAdopted August 8, 2005 Revised September __, 2019 607378v1LN140-121 Lino Lakes, Minnesota Private Activity Tax-Exempt Financing Guidelines PART I GENERAL Under the Minnesota Municipal Industrial development Act, Minnesota Statutes, Sections 469.152 to 469.1651 (the “Industrial Development Act”), the City of Lino Lakes, Minnesota has authority to issue revenue bonds or notes to attract or promote economically sound industry and commerce to the City, including the development of facilities by qualified 501(c)(3) organizations. Under Minnesota Statutes, Chapter 462C (the “Housing Act”) the City is authorized to issue housing revenue bonds to finance multi-family residential housing projects for low and moderate income persona and elderly persons. The City Council is aware that such financing for certain private activities may be of benefit to the City and will consider requests for tax exempt financing subject to these Guidelines. The City Council considers tax exempt financing to be a privilege, not a right. It is the judgment of the City Council that tax exempt financing is to be used on a selective basis to encourage certain development that offers a benefit to the City as a whole, including employment and housing opportunities. It is the applicant’s responsibility to demonstrate the benefit to the City. The applicant should understand that although approval may have been granted by the City for the issuance of financing for a similar project or a similar debt structure that is not a basis upon which approval will be granted. Each application will be judged on the merits of the project as it relates to the public purposes of the Housing Act or the Industrial Development Act and the benefit to the City at the time the request for financing is being considered. 607378v1LN140-121 PART II GUIDELINES 1. The City Council will consider tax exempt financing for manufacturing and health care facilities, and other facilities operated by qualified 501(c)(3) organizations, under the Industrial Development Act; and housing projects under the Housing Act. An applicant for tax-exempt financing pursuant to the Industrial Development Act must submit to the City the application contained in Part IV of these Guidelines. 2. The project must be a positive benefit to the City. The project must be of a nature that the City wishes to attract, or an existing business which the City wishes to retain or expand within the City, considering employment opportunities, incentive for further development, impact on City services, and support for the industrial, commercial or health care operations currently located in the City. A housing project must provide significant housing opportunities for low and moderate income persons or the elderly. 3. The City Council will, if requested, grant an applicant a pre-application review. The purpose of the pre-application review is to inform applicants of the possibility of rejection or the possible basis for such a rejection. The fact that the project is not rejected at the pre-application stage is not to be construed as approval of the project or as an indication that the project will be approved upon formal request to the Council. Requests for tax-exempt financing may be rejected by the City whether or not the project was submitted to a pre-application review and regardless of the outcome or recommendation of that pre-application review. A request for pre-application review must be in writing, addressed to the City Finance Director, and set forth the name of the project, the type of project intended and the name, address and telephone number of the person who will be representing the applicant at the pre-application review, together with such additional information as the applicant desires to submit. The City will appoint bond counsel for the bond issue, which will normally be the City’s regularly retained bond counsel. 4. Pursuant to the Industrial Development Act and the Housing Act, consideration of an application for tax exempt financing must be done at a public hearing held by the Board, unless federal and state law allow for the issuance of bonds without a public hearing. 5. The City is to be reimbursed and held harmless for and from any out-of-pocket expenses related to the tax-exempt financing including, but not limited to, legal fees, financial advisor fees, bond counsel fees, the City’s expenses in connection with the application, and any deposits or application fees required under state law in order to secure allocation of bonding authority. A non-refundable application fee in the amount of $2,500 must be included with the submission of the application. 607378v1LN140-121 Prior to closing and delivery of the bonds for the project, the applicant must pay to the City, or commit to pay, as the case may be, a one-time administrative fee equal to 1.0% of the principal amount of the bond issue amount. Notwithstanding anything to the contrary herein, the administrative fees required by this paragraph will be reduced to the extent needed to ensure that the fee does not affect the tax-exempt status of the bonds under Internal Revenue Code of 1986, amended and related regulations. 6. Should the tax exempt financing request cause the City’s total bonding for the year to exceed $10,000,000 in a year that the City would otherwise be eligible to issue bank qualified bonds, (bonds with tax incentives to banks), any interest rate differential between bank qualified and non-bank qualified bonds shall be estimated and the difference paid by the borrower. If the City would have exceeded this amount without the tax-exempt issue, no differential would be calculated or paid by the borrower. 7. Applications for financing must be made on the forms attached to these Guidelines. In addition, the applicant must furnish a description of the project, together with a brief description of applicant and the proposed financing in such form as required at the time of application. 8. The City may, in its sole discretion, withdraw its preliminary approval of a project any time if in its judgment the purposes of the Act will not be served by going forward with the project and it’s financing. 9. The City may, in its sole discretion, reduce the administrative fee in cases where the borrower’s request is related to a partnership with the City and/or provides a public service benefit to the community as a whole. 607378v1LN140-121 PART III MISCELLANEOUS MATTERS 1. Ratings. The City will give its most favorable consideration to proposed tax-exempt bond issues that have the sameobtained a credit rating as the City’s obligations by Moody’s Investment Service or Standard & Poor’s Corporation. Issues carrying lower ratings or non-rated issues may be sold only to institutional or other investors on a private placement basis andor private placements. Bonds must be sold in denominations of at least $100,000. The City Council may depart from this guideline when, in its judgment, the project is of a level of merit and public purpose to justify the departure; and in case of such a departure, the City Council must state its reasons therefore in the resolution awarding the sale of bonds.5,000. 2. Refundings. The City Council will normally approve the refunding of a tax-exempt issue but only upon a showing by the applicant of (i) substantial debt service savings, (ii) the removal of bond covenants significantly impairing the financial feasibility of the project, or (iii) both (i) and (ii). In the case of refunding of bonds for which the administrative fee listed in paragraph 65 of Part II have been paid in full, no new administrative fees are required; but the non-refundable application fee must be paid together with all City expenses in excess of that fee. If any fees related to the initial bond issue have not been paid, such fees must be paid in full prior to closing the refunding bonds. 3. Subsequent Proceedings. Where changes to the underlying documents or credit facilities of outstanding bond issues are to be made and require Council action (including changes that are a “deemed reissuance” under Internal Revenue Service regulation), no administrative fee is charged but a non-refundable fee of $2,000 must be deposited with the City to cover administrative costs. No formal application form is required. 4. Issue by Another Political Subdivision. The City will consider requests for tax exempt financing of projects in the City by other political subdivisions. In these cases the non- refundable application fee must be paid and all procedures through the approval of the preliminary resolution followed. No administrative fee is charged. At the Council’s discretion, all or part of the application may be waived if there are offsetting benefits resulting from this financing. 5. City Contact. Initial contacts about tax exempt financing are made by contacting: City Finance Director City of Lino Lakes 600 Town Center Parkway Lino Lakes, MN 55014 (651) 982-2410 6. Deadlines. The City Council conducts all tax-exempt financing matters at regularly scheduled City Council meetings held on the second and fourth Mondays of each month. Documents for City Council consideration must be at the City office no later 607378v1LN140-121 than the Friday 10 days prior to next regular Council meeting at which the matter is to be considered. In the case of a publicly offered bond issue, the documents, when submitted, may specify a maximum price and maximum effective interest rate if prices and rates have not yet been established. 607378v1LN140-121 PART IV CITY OF LINO LAKES, MINNESOTA APPLICATION FOR TAX EXEMPT FINANCING (Commercial, Industrial, Educational or Health Care) 1. APPLICANT a. Business Name – b. Business Address – c. Business Form (corporation, partnership, sole proprietorship, etc.) d. Authorized Representative – e. Principal contact person and telephone number – 2. PURPOSE OF REQUESTED FINANCING – a. New Facility (describe) – b. Expansion (describe) – c. Refunding (attach explanatory letter) 3. GIVE BRIEF DESCRIPTION OF NATURE OF BUSINESS, PRINCIPAL PRODUCTS, ETC. 4. ESTIMATED SOURCES AND USESPROJECT COSTS: (Not required for refunding) SOURCES: Bond proceeds $ Cash Other Loans _______________ Total Sources 607378v1LN140-121 USES: Land $ Building Equipment Architectural, Engineering Cost of Issuance Capitalized Interest Other _______________ Total Uses 5. TOTAL FINANCING REQUESTED $_________________ (_______% of project costs) 6. TYPE OF FINANCING PROPOSED: Bonds _____ Tax-Exempt Mortgage _____ Expected Term of Financing _____ Years Security: Mortgage _____ Letter of Credit _____ Guaranty (third party) _____ Guaranty (personal) _____ Unsecured _____ Other (specify) _____ 7. BUSINESS PROFILE: (Not required for refunding) a. Is the business located within City Boundaries? b. Number of employees within the City of Lino Lakes geographic boundaries i. Before this project – ii. After this project – c. Approximate annual sales – d. Length of time in business – e. Length of time in City f. Do you have business operations in other locations? If so, where? 8. NAMES OF: a. Underwriter (name and contact person) – 607378v1LN140-121 b. Corporate Counsel – c. Underwriter’s Counsel – 9. WHAT IS YOUR TARGET DATE FOR: a. Construction start – b. Construction completion – 10. ATTACHMENTS: a. Project description materials – b. Draft resolution calling for public hearing – c. Notice of public hearing – d. Draft of preliminary resolution e. Draft application to Department of Trade and Economic Development – __________ necessary attachments b. f. Financial feasibility letter – g. Preliminary bond counsel opinion – c. h. Initial filing fee (to be set by City Council) – d. i. Indemnification Letter of Agreement The applicant further states that it has been furnished a copy of the City of Lino Lakes’s Private Activity Tax Exempt Financing Guidelines and is aware of its content and agrees to be bound by its terms and the terms of the indemnification letter. Applicant BY DATE For further information, contact: City Finance Director City of Lino Lakes 600 Town Center Parkway Lino Lakes, MN 55014 (651) 982-2410 607378v1LN140-121 PART VI INDEMNIFICATION LETTER OF AGREEMENT City of Lino Lakes Mayor And Members of the Council RE: Application of _______________ for Tax Exempt Revenue Bond Financing by the City of Lino Lakes Dear Mayor and City Council Members: This letter of agreement is given by ____________________, a _______________ under the laws of Minnesota (“Applicant”) as required by the City of Lino Lakes in connection with its consideration of an application for tax-exempt revenue bond financing for the project described in the application. Applicant hereby covenants, warrants and agrees as follows: 1. Applicant agrees to pay or reimburse the City for any and all costs and expenses which the City may incur in connection with its consideration of the project and the granting of tax-exempt revenue bond financing therefore, whether or not the project is preliminarily approved by the City, whether or not the project is approved by the State of Minnesota, whether or not revenue bond financing is finally approved by the City, whether or not the bonds are issued and sold, and whether or not the project is carried to completion. 2. Applicant agrees to indemnify and hold the City, its officers, employees and agents harmless against any and all losses, claims, damages, expenses or liabilities, including attorneys fees incurred in their defense, to which the City, its officers, employees and agents may become subject in connection with the City’s consideration, issuance or sale of the bonds for Applicant’s project and the carrying out of the transactions contemplated by this agreement and any resolutions adopted, or agreements executed by the City in connection with the issuance of its bonds for this project. 3. Applicant here by releases the City, its officers, agents and employees from any claims, causes of action, losses, damages, or liabilities which it may have against the City, its officers, agents, and employees or which it may incur in connection with: the City’s consideration of the application for industrial development revenue bond financing for Applicant’s project; the failure of the City, in its discretion, to issue tax exempt revenue bonds for Applicant’s project; the issuance and sale of the bonds; the construction of the project; or any other matter or thing of any type or nature whatsoever which may arise in connection with the foregoing. 4. Applicant is aware of the City’s application and administrative fee structure for tax exempt financing and agrees and covenants that all such fees will be paid in the amount and at the times required. 5. Applicant understands and acknowledges that Minnesota Statutes, Chapter 13 (Minnesota Government Data Practices Act) governs whether the information that you provide to the City is public or private. If financial assistance is provided, the information submitted in connection with your application may become public, except for those items treated as private data under the Minnesota Government Data Practices Act. 607378v1LN140-121 Dated: (Applicant) By Its Document comparison by Workshare Compare on Sunday, August 18, 2019 1:07:05 PM Input: Rendering set Standard Legend: Insertion Deletion Moved from Moved to Style change Format change Moved deletion Inserted cell Deleted cell Moved cell Split/Merged cell Padding cell Statistics: Count Insertions 15 Deletions 19 Moved from 0 Moved to 0 Style change 0 Format changed 0 Total changes 34 WS – Item 5 WORK SESSION STAFF REPORT Work Session Item No. 5 Date: September 3, 2019 To: City Council From: Sarah Cotton, Finance Director Re: 2020 Budget Background At the August 26, 2019 Budget Work Session, staff proposed the following budget cuts for 2020: 2020 Budget Cuts Government Bldgs – Insurance (4361) $4,000 Fleet – Auto Insurance (4363) $4,500 Engineering – Professional Services (4300) $5,000 Forestry – Contracted Services (4410) $5,000 Police – Personal Services (4100) $90,717 Fire – Capital Outlay (5000) $18,200 Parks – Professional Services (4300) $18,000 Parks – Park Board Stipend (4331) $1,650 Parks – Contracted Services (4410) $12,000 Other - Operating Transfers Pavement Management (4910) $72,000 Total Budget Cuts $231,067 In addition, staff proposed a transfer from the Closed Bond Fund in the amount of $100,000 to soften the impact of the additional debt service requirements in 2020 associated with the 2018 Street Reconstruction project. Council expressed concern with reducing the transfer of funds for street maintenance per the city’s Pavement Management Plan. It was the desire of the council to continue funding the plan at an increase of 5% per year. Staff has prepared an updated Gap Analysis, including the addition of $31,500 to pavement management funding in 2020, an increase of 5% over the 2019 level of $630,000. Budget work sessions may be scheduled at the discretion of the Council to achieve the desired budget level for 2020. Council action is requested by the September 23rd meeting in order to set the preliminary tax levy and to schedule a public hearing date in December on the budget and tax levy. The preliminary levy set at the September meeting may not be increased thereafter, but may be lowered before approving the final budget and levy in December. Attachments 2020 General Fund Gap Analysis 7/29/2019 8/12/2019 8/26/2019 9/3/2019 Adopted Proposed Proposed Proposed Proposed % 2019 2020 2020 2020 2020 Change Change Tax Levies Operating Levy 8,193,124 9,248,018 9,247,299 8,736,256 8,767,756 574,632 7.01% Debt Levy 1,862,292 2,122,762 2,122,762 2,122,762 2,122,762 260,470 13.99% Total Tax Levy 10,055,416 11,370,780 11,370,061 10,859,018 10,890,518 835,102 8.30% Year-over-Year Change Levy $1,315,364 1,314,645 803,602 835,102 8.30% Drill-Down on Year-Over-Year Levy Changes 7/29/2019 8/12/2019 8/26/2019 9/3/2019 Adopted Proposed Proposed Proposed Proposed % 2019 2020 2020 2020 2020 Change Change Revenues Property Taxes (Delinquent, Penalties/Interest)39,000 39,000 39,000 39,000 39,000 - 0.00% Intergovt Revenue 577,105 616,722 616,722 616,722 616,722 39,617 6.86% Business Licenses/Permits 137,600 144,233 144,233 144,233 144,233 6,633 4.82% Non-Business Licenses/Permits 764,860 788,113 788,113 788,113 788,113 23,253 3.04% Charges for Services 25,477 27,538 27,538 27,538 27,538 2,061 8.09% Public Safety Service Charges 200,800 190,800 190,800 190,800 190,800 (10,000) -4.98% Municipal Fines 119,132 116,100 116,100 116,100 116,100 (3,032) -2.55% Miscellaneous 322,445 324,171 324,171 324,171 324,171 1,726 0.54% Trf from Closed Bond Fund - - - 100,000 100,000 100,000 *** Use of Reserves 594,773 - - 180,000 180,000 (414,773) -69.74% Total Revenues/Funding Sources 2,781,192 2,246,677 2,246,677 2,526,677 2,526,677 (254,515) -9.15% Expenditures Personal Services 7,398,006 7,783,412 7,782,693 7,692,000 7,692,000 293,994 3.97% Supplies 472,775 477,825 477,825 477,825 477,825 5,050 1.07% Other Services and Charnges 1,295,289 1,377,557 1,377,557 1,344,407 1,344,407 49,118 3.79% Contracted Services 743,794 742,084 742,084 725,084 725,084 (18,710) -2.52% Capital Outlay 94,452 60,317 60,317 42,117 42,117 (52,335) -55.41% Others 970,000 1,053,500 1,053,500 981,500 1,013,000 43,000 4.43% Total Expenditures 10,974,316 11,494,695 11,493,976 11,262,933 11,294,433 320,117 2.92% Debt Service Bonds 1,255,008 1,549,975 1,549,975 1,549,975 1,549,975 294,967 23.50% Certificates of Indebtedness 607,284 572,788 572,788 572,788 572,788 (34,497) -5.68% Total Debt Service 1,862,292 2,122,762 2,122,762 2,122,762 2,122,762 260,470 13.99% 0 Year-over-Year Change Levy $1,315,364 1,314,645 803,602 835,102 Total Levy Supported by Valuation Increase ($10,978,734)738,640 923,318 923,318 923,318 Gap to Maintain Flat Tax Capacity Rate 576,724 391,327 (119,716) (88,216) Tax Capacity Rate 41.817%44.389%43.535%41.293%41.431% GENERAL FUND FORECAST GAP ANALYSIS 2019-2020 Item #7 Monthly Progress Report September 3, 2019 Item Last Action Taken Staff Status White Bear Lake Restoration Assn. v. Dept. of Natural Resources (DNR) 4/22/19 – The Minnesota Court of Appeals released its ruling in favor of the DNR Jeff The WBL Restoration Assn. said they will appeal the decision Employment Update Two police officer positions need to be filled Jeff First round interviews will be conducted this coming week