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HomeMy WebLinkAbout08-08-2005PROCEEDINGS OF THE MOUNDS VIEW EDA CITY OF MOUNDS VIEW RAMSEY COUNTY, MINNESOTA Regular Meeting August 8, 2005 Mounds View City Hall 2401 Highway 10, Mounds View, MN 55112 6:30 P.M. 1. CALL MEETING TO ORDER 2. ROLL CALL: President Marty; Vice President Stigney, Commissioners Flaherty, Gunn, and Thomas. NOT PRESENT: 3. APPROVAL OF AGENDA MOTION/SECOND: Thomas/Flaherty. To Approve the August 8, 2005 Agenda as presented. Ayes – 4 Nays – 0 Motion carried. 4. PUBLIC INPUT Bill Werner, 2765 Shorewood Road, stated that he has a philosophical issue that has to do with mitigation. He reviewed the dictionary definition stating that to mitigate is to make pain, grief, punishment, or the like milder, and asked how it relates to the wetlands. Director Ericson stated that in terms of wetland mitigation, the mitigation aspect relates to the fact that you are taking and replacing wetlands that are potentially lost by a development and mitigating it to a different area, the mitigation being the replacement. He further explained that in terms of making a painful situation less, you make the loss of the wetland a less of a problem by creating additional wetland in its’ place so it is termed as a mitigation. Mr. Werner asked where they would replace the wetlands, in the City, the County or the State. He clarified that the location where it would be replaced would matter. Commissioner Flaherty explained that mitigation could be done either on the site or where the development would go noting that it could be anywhere within the City or County. He explained that typically the City tries to mitigate within the site itself. He further explained that if a parcel of land is developed and water needs to be moved they try to mitigate within the development itself. Mounds View EDA August 8, 2005 Regular Meeting Page 2 Mr. Werner asked if this is a law or is this something that the EDA does because they think it is a good thing to do. Director Ericson confirmed that it is a law although the City whole-heartedly supports the replacement of wetlands regardless. He explained that this is from the Wetland Conservation Act Legislation as well as the Rice Creek Watershed District regulations. Duane McCarty, 8060 Long Lake Road, suggested that someone on the EDA or Council explain the local wetland ordinance and the priorities as set forth in the ordinance in terms of the mediations that could take place. Director Ericson stated that the City has a very aggressive position on wetland management and has had for a number of years. He explained that there are two levels of wetland review in the City; there is a wetland buffer that protects all land within 100-feet of a wetland noting that any of activity that occurs within 100-feet of a wetland necessitates a wetland buffer permit and has to come before the Council; any work that occurs within a wetland has to come before Council for a wetland alteration permit and there are various standards that have to be adhered to based on specific criteria. He stated that the City cannot grant a permit in excess of what is necessary and is in a sense, the minimum alteration necessary to accomplish the goals of the project. He stated that the intent is to limit, to whatever extent possible, any alteration or development within a wetland. He stated that the City has taken the position, since the early 1990’s, that the wetlands are very critical to the City’s environmental eco-system and the benefit that they provide the City in terms of stormwater management, they do not want to lose the wetlands that they have adding that the City has been actively protecting them for a number of years. President Marty further clarified that it is not just stormwater management it is also for water quality. Mr. McCarty asked what the requirements are in terms of onsite retention. He asked if this is one of the first requirements for onsite. Director Ericson stated that in terms of mitigating on site or accommodating stormwater management features on site, it is the intent of the City that a project would accommodate stormwater management on site on a property. He stated that it is important that the stormwater runoff generated from one property does not continue to flow downstream and cause further problems. He stated that in terms of mitigation there is a hierarchy of where the City can mitigate noting that the first goal is to always mitigate on site, the second is to mitigate immediately adjacent to the site and third is within the Watershed district. He stated that this is also a recognized goal of the Watershed District and is definitely a requirement that mitigation is accommodated on site. Mounds View EDA August 8, 2005 Regular Meeting Page 3 5. APPROVAL OF MINUTES. A. EDA Minutes for July 11 and July 25, 2005 will be presented at the next EDA Meeting. 6. CONSENT AGENDA NONE 7. EDA BUSINESS A. Resolution 05-EDA-207 Approving the Development Agreement to Provide $250,000.00 in Tax Increment Financing (TIF) Assistance to SYSCO Food Services of Minnesota to facilitate the expansion of the Business located at 2400 County Road J in Mounds View. Economic Development Coordinator Backman stated that SYSCO Minnesota has outgrown its available truck and employee parking and desires to add capacity. He stated that the company is seeking to expand the SYSCO PUD site by approximately three acres. He stated that on August 3, 2005 the Mounds View Planning Commission approved SYSCO’s request for a PUD amendment and they approved the Comprehensive Plan amendment to expand the parking lot and driveway. He stated that the outlot that is part of the 48 acres east of SYSCO has been basically kept natural noting that the three acres would be transferred back from the City to SYSCO for this particular expansion. He stated that SYSCO has estimated that the expansion project would cost approximately $1.2 million and the budget has been included for review. Economic Development Coordinator Backman stated that SYSCO has requested $250,000.00 in TIF assistance to pay for extraordinary development costs, specifically stormwater management and wetland mitigation expenses noting that the company has submitted a completed TIF application to the City. He stated that the project includes the construction of parking areas to the east and the south side of the cold storage portion of the complex and reviewed with the Commission. He explained that this would require the relocation of the existing stormwater pond to the south and east of its’ present location. Economic Development Coordinator Backman stated that Briggs and Morgan prepared a draft of the agreement noting that the agreement reflects a pay-as-you -go TIF reimbursement. He explained that the terms if the tax increment revenue would be three years at 5-percent interest adding that in the first two years the company has committed to creating 40 fulltime jobs at an hourly wage of at least $18.00 per hour from the date the project is completed. He stated that initially they talked about 100 jobs over five years and typically for the purposes of DEED and other State agencies they are typically looking at what is created over the first two years. He provided the Commission with a breakdown of the positions noting that out of the 40 jobs the Mounds View EDA August 8, 2005 Regular Meeting Page 4 positions would include 12 drivers, 12 would be sales, 10 in the warehouse and six would be administrative/office functions. He stated that Staff is recommending that the EDA adopt the resolution approving the development agreement to provide $250,000.00 in TIF assistance to SYSCO Food Services of Minnesota. Economic Development Coordinator Backman indicated that Ehlers has recommended revising two elements within the proposed draft agreement and referenced page four, where it discusses tax increment definitions noting that each of the development agreements typically has various definitions that refer to what the district is. He explained that they should specify a percentage in the definitions noting that due to the way it is currently written SYSCO would potentially receive all of the increments and this is a healthy district right now with a balance of over $300,000.00. He further explained that if they don’t change it, it would basically be paid off in a year even though they have a term of three-years and if it is in this language the increment would come in and basically take care of the note. He referenced C-1, Exhibit B, stating that this is the TIF Note itself, and if they look at the third paragraph, which outlines the payment schedule over three- years and should clarify the intent. He stated that the sentence stating ‘on each payment date the authority shall pay by check or draft and mail to the person registered as the owner of the note, at the close of the last business day of the authority preceding such payment date an amount equal to the sum of the tax increments received by the authority during the six-month period preceding such payment date’ adding that rather than an amount equal to the sum of the increments it should be 30-percent of the increments. He stated that there should be a reference to ‘an amount equal to the sum of 30-percent’. He stated that he would review this with Staff to ensure that they have the correct language adding that it should be consistent throughout the document. He explained that if these changes are not incorporated and it is generating a $309,000.00 increment the note would be paid off in less than a year. He stated that these are the two areas of change and assured the Commission that Staff would review the document to make sure that all other areas are accurate. Commissioner Thomas asked why Staff recommended 30-percent and what other scenarios were used to determine the payment structure. Economic Development Coordinator Backman explained that if they are looking at payments over three years and the amount is $250,000.00 they would have the principal of approximately $83,333.00 and then factor in the interest would bring the payment to approximately $90,000.00 for one year, which would represent approximately one-third of the increment that is currently being generated. He stated that this would reflect a three-year scenario. Commissioner Flaherty asked if this is based on 2006 or 2008 dollars and asked for clarification as to why it would be a good thing to extend this out over a three-year period. Economic Development Coordinator Backman explained that it is not so much the time value of money it is more in terms of cash flow and making sure that the City covers their obligations. He Mounds View EDA August 8, 2005 Regular Meeting Page 5 noted that typically the City has had terms longer than three years noting that the consensus was to have the assistance within a defined, shorter period of time. He stated that Scott McGuire, CFO, also indicated that this would be a sufficient time period for them. Vice President Stigney stated that it was his understanding that SYSCO indicated that cash flow was not a problem for them and they didn’t care if they got it upfront or stretched out. He stated that if SYSCO received a one-year TIF then the TIF would be ready to close out when the TIF District is ready to close out. He stated that to him this appears as if they are extending the TIF District to accommodate SYSCO and he has a problem with that. Economic Development Coordinator Backman stated that the City is looking at various aspects in terms of cash flow noting that the City would still have the ability to decertify the district five years early noting that it would not preclude a lot of options for the City. Vice President Stigney asked how the City could decertify a district if they are still collecting revenues on it over a three-year period. He asked why the City wouldn’t want them to pay it back within the one-year and close the district. Economic Development Coordinator Backman stated that the City has various projects currently in the works and have ideas on how the City would improve the Highway 10 corridor noting that it would be a bit premature to presume how much the City would spend on these efforts right now. He stated that hopefully in the next year or two Staff would have a better sense of what those improvements would cost. Vice President Stigney stated that when a district has met its purpose it is his personal belief that this is when the district should be closed out because it costs the taxpayers money to keep the districts going. President Marty explained that right now with the TIF Districts the City captures 100-percent of the taxes coming in. He noted that the consultants have pointed out for years that to redesign and redo County Highway 10 would cost far more. He stated that even if the City didn’t spend a dime of the TIF pool up to the time the districts would be de-certified the City would still not have enough money to redo County Highway 10. He stated that they would have to go ahead and tax the citizens to redo Highway 10 and install a couple of trails. He stated that adding trails, landscaping, repairing some of the intersections and making County Highway 10 safer and more pedestrian friendly would take a lot more money than what the City has. He explained that this is one of the main purposes the City has been earmarking TIF dollars for. He stated that they could also use TIF for housing and redevelopment costs too noting that if they de-certify the district early the City would not have the funds available without taxing for them. Vice President Stigney clarified that President Marty’s philosophy is that the City should milk every dollar the City can legally get from the TIF district. He stated that he has a problem with Mounds View EDA August 8, 2005 Regular Meeting Page 6 this noting that this is just one district and the City has three districts. He stated that the City has to consider what they are charging the taxpayers noting that the taxpayers are picking up approximately $61,000.00 a year for SYSCO for fiscal disparities. He agreed that everyone would like to get the maximum dollars noting that there is a time limit for these districts when it has met its’ original purpose. He stated that he believes that when the development is done it should be closed out. Director Ericson pointed out that by adopting this development agreement and authorizing the three-year TIF note for this project it does not preclude the authority for having an opportunity to review the financing of the TIF Districts, City obligations and expenditures to ensure that the City has the necessary funds available. He stated that it is his understanding that there are no pre- payment penalties and the City could pay off the TIF note before a year concludes. President Marty confirmed that it is setup so that it would come back so that the City could review the TIF priorities and Districts. He referenced Page 7, Article 3, Item 3.2, No. 2, noting that it states that an unpaid balance of the note shall bear simple, non-compounded interest from the date of issuance of the note at 5-percent per annum and interest shall be computed on the basis of a 365-day year with 12 30-day months’ and asked for clarification. Vice President Stigney explained that what he is trying to suggest is that they make it a one year district, with one payment and they pay-as-you-go one payment. Economic Development Coordinator Backman explained that with TIF notes there is typically an interest rate that is considered as part of the TIF note. He stated that a 5-percent rate is a good rate and is typically used for companies with strong financials. He stated that they have had rates that have ranged from the lower interest all the way up to 8-percent noting that in terms of the computation, the 365-day/year is the standard calculation method and the interest rate is applied to the principal for the $250,000.00. Economic Development Coordinator Backman further explained that in terms of the calculations the City is estimating that over the three-year period of time, as payments are coming in, the City would be making payments back to the developer, i.e. SYSCO. He stated that under usual circumstances the City is paying principal and interest noting that the way it was structured the City was only able to pay on the interest and it was not being paid off. He explained that ultimately the risk is on the developer because if the increment were not sufficient to pay off the note, at the end of the note time period they would be out. President Marty clarified that the City would be paying SYSCO 5-percent interest on the $250,000 over the three-year time period. Economic Development Coordinator Backman confirmed that there would be interest on the $250,000. Mounds View EDA August 8, 2005 Regular Meeting Page 7 President Marty referenced Page 8, Section 3.3, Business Subsidies Act, Item 2, states that ‘if the goals are met in part the developer would pay a portion of the business subsidy, plus interest, determined by multiplying the business subsidy by a fraction, the numerator, of which is the number of jobs of the goals which are not created at the wage level set forth above and the denominator, which is 40’ and clarified that if they do not create the jobs they state then they would pay the City interest back. Economic Development Coordinator Backman stated that they would have to re-pay a portion of the business subsidy plus interest. He explained that it holds their feet to the fire in the sense that the City wants to have job creation and that the City has expectations about the wage levels. Commissioner Flaherty stated that when this first came up at the EDA Commission hearing he was not very happy because it came on the heels of everything else when the EDA was talking TIF D istrict as far as Medtronic was concerned. He explained that they had decided as a Commission that they wanted to review the TIF Districts and determine what exactly the TIF Districts are earning and exactly how much the City has in districts. He stated that this is a bit quick for him noting this came back up again before they have had an opportunity to review where the districts are, where they are going, where they want to decertify and what funds the City has with the increment monies. He stated that he is still of this mindset noting that it is quick for him coming on the heels of the Medtronic deal. Commissioner Thomas stated that she is still going back and forth on this noting that she has expressed concerns in the past with regards to spreading the payments out, when knowing what they want to do and understanding still the cash flow issues, what they want to do with the funds. She stated that she tends to agree with Vice President Stigney. She noted that this is a difficult situation and suggested, as a compromise, a 50-percent split taking it down to a two-year spread She stated that it is her understanding that they have the cash flow, at that point, in that district, without taking it too far out. She stated that this would cut it down to a reasonable planning level for the City without dragging it out and allows the City to cash flow some items to get the project going. She noted that they couldn’t wait until next year adding that this is where she believes the City is in trying to manage a compromise. President Marty stated that he spoke with Phil Seipp, President/CEO of SYSCO, earlier this afternoon noting that Mr. Seipp explained that this is time sensitive and if this doesn’t go through, their cap is approximately $1 million and in reviewing the spreadsheets the amounts were over $300,000 and the criteria that SYSCO uses is that if they can keep it under $1 million they would get the funds from their corporate headquarters, if not SYSCO might be looking to invest in their money in other areas, possibly outside of the State of Minnesota. He stated that he sees SYSCO as being a very good neighbor and strong business here in Mounds View and it is not like they are asking for millions of dollars. He stated that they pay their taxes and they have been a growing business and sees this as a positive way that the EDA Authority and City could Mounds View EDA August 8, 2005 Regular Meeting Page 8 use as a tool to help complement SYSCO noting that this would be paid back to the City. He stated that he is going ask Economic Development Coordinator Backman and Director Ericson to clarify how the 50-percent versus the 30-percent would impact the City. Economic Development Coordinator Backman confirmed stating that in terms of the $1 million relative to SYSCO that is their threshold from Corporate noting that if it exceeds this amount it is probable that SYSCO would look at locations in the Wisconsin or Iowa areas. He stated that he is concerned about the possibilities of Rice Creek Watershed coming back with additional changes. He stated that they have had some discussions with the State about finding an additional $50,000 to $100,000 so that they do not end up with a gap. He stated that they met last week in an effort to have this covered in the event that the Watershed does come back with additional changes. He stated that in regards to the two-years versus three-years, a document Ehlers just completed has been included in their packet noting that it addresses the state of the health of the districts. He reviewed the district fund balances with the EDA noting that the healthiest district at the end of 2004 was District 3. He noted the revenues coming in stating that the revenues from District 1 outshined everything else. He stated that the district had over $600,000 in revenues coming in noting that all together revenues coming in for the first half of 2005 was $861,000, which was offset by expenses of $143,000 with a current balance of $1,060,000. He stated that the second-half payments coming in with another $861,000.00 noting that there would be developer payments and administrative costs. He stated that bottom line the City could have a balance at the end of December of $1,600,000. He stated that in looking at the individual districts the largest district would be District 1 with approximately $900,000; District 2, the smallest district, would have approximately $133,000; He noted that District 2 was the district where they decertified 87 parcels this past summer; and District 3 would have $633,000. He stated that on that basis he would agree that a two-year payout would work. Vice President Stigney stated that it is interesting to note that this passive open space land that was given to the City for the purpose of keeping it as open space land and now SYSCO wants to develop on it and change it to heavy industrial. He stated that he does not have a big problem with this if they can mitigate this in some way and the City does not lose the wetland area or the purpose of the wetland. He stated that he does have problems with SYSCO asking for TIF assistance. He noted that they also have two billboards in the area adding that he questions whether SYSCO really needs TIF assistance. He stated that if SYSCO wants to build a new wetland they should do it on their own dime. Commissioner Flaherty acknowledged that SYSCO has been a good neighbor in Mounds View adding that the City appreciates their efforts. He stated that he understands the $1 million benchmark from Corporate noting that he has had experience with this and this is a big concern. He stated that he understands that this is why they are asking for the TIF assistance. He stated that he is in between on this issue adding that he would be inclined to go with the 50/50 option versus a three-year payout. Mounds View EDA August 8, 2005 Regular Meeting Page 9 Vice President Stigney stated that he would like further clarification on the 50/50 split. He suggested that the 50/50 split should be 50-percent of what they are asking for, which would be a two-year payout at $125,000. MOTION Stigney/ To adopt Resolution 05-EDA-207 Approving the Development Agreement to Provide a 50/50 split with a Two-Year Payout at $125,000.00 in Tax Increment Financing (TIF) Assistance to SYSCO Food Services of Minnesota to facilitate the expansion of the Business Located at 2400 County Road J in the City of Mounds View, Minnesota. Motion dies due to lack of a second. MOTION/SECOND: Thomas/Marty. To adopt Resolution 05-EDA-207 Approving the Development Agreement to Provide a 50/50 split with a Two-Year Payout at $250,000.00 in Tax Increment Financing (TIF) Assistance to SYSCO Food Services of Minnesota to facilitate the expansion of the Business located at 2400 County Road J in Mounds View. Ayes –4 Nay – 1 (Stigney) Motion carried. 8. REPORTS A. Update regarding the Medtronic Redevelopment Project Economic Development Coordinator Backman provided the Commission with a brief update on where the City is at on the County Road J Reconstruction project. He referenced the meeting held on July 18th noting that several things have been accomplished relative to the road project including: • A meeting was held with MnDOT to discuss geometric needs for the future of the 35W/County Road J interchange. • Wetland and threatened/endangered species fieldwork has been completed; • An initial meeting has been held with the Rice Creek Watershed District to discuss the Judicial Creek impacts. • There has been work on the overall hydrology, watershed boundaries and preliminary stormwater pond sizing and location. • Development of a bridge plan and elevation concept drawing is under way. • Soil borings have commenced in this area. • Meetings have been held with the Medtronic Staff and Engineers to coordinate the tie-ins to the Coral Sea improvements. Economic Development Coordinator Backman stated that the current actions include: • Shoreview City Council is holding a workshop to discuss the County Road J Reconstruction project. • A utility meeting is scheduled for Tuesday, August 9, 2005, that would include all utilities Mounds View EDA August 8, 2005 Regular Meeting Page 10 along County Road J. • An Open House for the County Road J Reconstruction Project is scheduled for Tuesday, August 9, 2005, at the Blaine City Hall, 4:30 p.m. to 7:00 p.m. to allow the public an opportunity to ask questions about the project. • The goal of Ramsey County and S.E.H. to have design work 30-percent done by the end of August 2005. 9. NEXT EDA MEETING: Monday, August 22, 2005 at 6:00 p.m. 10. ADJOURNMENT President Marty adjourned the meeting at 7:20 p.m. Respectfully submitted, Recorded and transcribed by: Bonnie Sullivan TimeSaver Off Site Secretarial, Inc.