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HomeMy WebLinkAbout08-22-2005PROCEEDINGS OF THE MOUNDS VIEW EDA CITY OF MOUNDS VIEW RAMSEY COUNTY, MINNESOTA Regular Meeting August 22, 2005 Mounds View City Hall 2401 Highway 10, Mounds View, MN 55112 6:02 P.M. 1. CALL MEETING TO ORDER 2. ROLL CALL: President Marty, Vice-President Stigney, Commissioner Gunn, Commissioner Flaherty, and Commissioner Thomas. NOT PRESENT: None. 3. APPROVAL OF AGENDA MOTION/SECOND: Flaherty/Thomas. To Approve the August 22, 2005 Agenda as presented. Ayes –5 Nays – 0 Motion carried. 4. PUBLIC INPUT None. 5. APPROVAL OF MINUTES. The following corrections were requested: • Page 3, line 112, change “EDC” to read “EDA” • Page 4, Line 154, change “RIK, SYSCO” to read “RLK, Kuusisto” • Page 8, Line 310, change “that if they could put together the” to read “that if they could get the” MOTION/SECOND: Marty/Flaherty. To Approve the July 11, 2005 Minutes as amended. Ayes –5 Nays – 0 Motion carried. 6. CONSENT AGENDA None. Mounds View EDA August 22, 2005 Regular Meeting Page 2 7. EDA BUSINESS A. Consideration of EDA Resolution 05-EDA-208A, a Resolution Approving the Elimination of Parcels from TIF District No. 3 and 05-EDA-209B, a Resolution Approving the Establishment of TIF District No. 5, a Special- Legislation Economic Development District. Economic Development Coordinator Bachman referenced the packet provided to the Commission noting that at the June 27, 2005 meeting, the EDA and City Council adopted resolutions approving the sale of land comprising the Bridges of Mounds View Golf Course, approved the Medtronic Development proposal, terms of the purchase agreement. He explained that in order to facilitate this development, the City sought passage of special TIF legislation during the 2005 legislative session. On May 23, 2005, the Minnesota Legislature approved the Public Finance Bill that included the City’s legislation and allows it to create a 25-year Economic Development TIF District, with variations from TIF law authorized in Chapter 152, Article 2, Section 26. The Economic Development TIF District legislation requires that the Boards for Ramsey County and the Mounds View School District need to approve the legislation. Both Boards approved the TIF District legislation for Medtronic on June 28, 2005. Economic Development Coordinator Bachman used a colored map to describe the parcels and adjacent rights-of-way that the proposed District No. 5 encompasses as well as District No. 3. He noted that Parcel Number 05-30-23-22-0004 is 46 acres that will be retained by the City for open space. This parcel is currently in TIF District No. 3 and it would be part of the new district, less the three acres that is being deeded back to SYSCO Minnesota for that company’s expansion project. Economic Development Coordinator Bachman explained that the new District is being created to facilitate development of Phase 1 of a business campus for Medtronic, which includes approximately 820,000 square feet of office space. A development agreement has been authorized, contingent on the approval of the proposed TIF Plan and establishment of TIF District No. 5. If approved, development is likely to begin in the Fall of 2005. Economic Development Coordinator Bachman noted the Mounds View EDA and City Council have determined that it will be necessary to provide assistance to the project for certain TIF- qualified costs. He advised that Staff recommends approval of the two resolutions, as submitted. Commissioner Thomas stated she held a brief discussion with Economic Development Coordinator Bachman regarding this agenda item. She asked Ms. Eldridge to review the issues related to Parcel Number 05-30-23-22-0004 and why Staff recommends it be included in the TIF District. She noted that it would be undeveloped and she is uncomfortable with including this parcel if it doesn’t have to be included in TIF. Mounds View EDA August 22, 2005 Regular Meeting Page 3 Economic Development Coordinator Bachman explained that it is the recommendation of Ehlers & Associates to include it for several reasons. He advised that if there are any TIF expenses within that area such as roads or trails, or something TIF eligible, it could be paid by increment generated from the District. He explained that with a TIF District, the City can subtract parcels but once created the City cannot add parcels to the District. However, Staff is flexible in looking at the wishes of the EDA and in looking at other options relative to this parcel. Commissioner Thomas asked why there would be anything inhibiting the use of TIF dollars since they would be TIF eligible improvements regardless of whether this parcel is or is not within the TIF District. President Marty noted the parcel in question is already within TIF District No. 3. Commissioner Thomas suggested the EDA could remove the parcel from TIF District No. 3 and leave it out completely. Shelly Eldridge, Ehlers & Associates, Inc., advised that one reason Staff recommended to leave the parcel in for now, but maybe not forever, is that the City does not yet know what will be on that parcel. However, once the buildings are located Staff will know if more land is needed. Also, once the City has a better idea of where and how the buildings will be set, actual land and lots splits for both SYSCO and Medtronic, and what is happening with the SYSCO outlot, then the EDA can decide if the parcel should be taken out of the TIF District. Ms. Eldridge explained that putting the parcel in the District now will give the EDA more flexibility and there is nothing to preclude removing the parcel in the future, once the EDA knows what will be happening on the parcel. In addition, the EDA can use some of the increment from older districts. However, Staff has not yet gone through that analysis or determined whether the EDA will change or decertify districts. Ms. Eldridge stated she believes it would be premature to take this parcel out of the TIF District at this point and recommended it be reviewed again in the future. Commissioner Thomas stated she had forgotten about the triangle piece of property and whether the City may need it for an access way. She asked if the City can get a right-of-way easement. Vice-President Stigney questioned the impact to the money that Medtronic is giving the City for trailways. Economic Development Coordinator Bachman explained that the contribution to the park dedication is $865,000 of which up to $150,000 can be allocated for trails. There is no specification whether the parcel is in TIF District No. 3 or TIF District No. 5 or some other configuration. There is no regulation or specificity in that regard. He used a map to note the location of the triangular piece of property that was referred to by Commissioner Thomas. Mounds View EDA August 22, 2005 Regular Meeting Page 4 Economic Development Coordinator Bachman advised that OPUS does not anticipate any buildings would be located on the SYSCO property but there would be a fire road so they will grant easements. Vice-President Stigney pointed out that if an easement is needed, the City owns the property and could grant the easement. Economic Development Coordinator Bachman stated that is correct. Vice-President Stigney noted that if they want to purchase the triangular piece of property, they could negotiate with the City. Economic Development Coordinator Bachman concurred. Vice-President Stigney stated that since this parcel is not part of the 72.2 acres they purchased, he is uncomfortable with putting it in TIF District No. 5. Commissioner Flaherty stated the parcel is “healthy” in TIF District No. 3 and he sees no rationale for putting it in TIF District No. 5. Also, the parcel isn’t part of the development or needed for the development. President Marty stated his agreement with Commissioner Flaherty’s comments. Commissioner Thomas stated this would be a tax-exempt property and it is not doing anything in TIF District No. 3 so it would be fine to take it out. But, she is not sure that it needs to be put into TIF District No. 5. If removed from TIF District No. 3, it would be totally decertified at that point. She stated she has not yet determined why it should be included in TIF District No. 5 unless for access, but it appears the City can get easements anyway. Commissioner Gunn pointed out that if the parcel is put into TIF District No. 5, the EDA would have the TIF pool to use. Commissioner Thomas noted the TIF pool could be used anyway. Commissioner Gunn stated it was discussed in the past about decertifying sooner and, in that case, the TIF pools disappear. Commissioner Thomas stated that with this piece of property, it makes no difference to either TIF District and the pool of funds would be available regardless. She stated she does not see the benefit of transferring this parcel to TIF District No. 5 unless it is needed for access. President Marty agreed and noted it could stay alive for the next 27 years. Mounds View EDA August 22, 2005 Regular Meeting Page 5 Commissioner Thomas pointed out that it is a tax-exempt property anyway so it would not make a difference. She restated her position that she is not comfortable with putting the parcel in a TIF District if there is no reason to do so. Commissioner Flaherty agreed and noted the EDA still has options to use, if needed. He added that if there is an easement issue, it can be easily rectified. Economic Development Coordinator Bachman stated he generally supports recommendations of advisors but for this particular issue, Staff is flexible. He explained that the key issue is the other five parcels comprising the 72.2 acres and the 46 acre triangular area is less critical for this development. He stated that Parcel Number 05-30-23-22-0004 could be included or excluded from the District from Staff’s point of view. President Marty stated his preference to leave the parcel in TIF District No. 3. President Marty read a paragraph from Page 2 of the Staff report indicating: “The Mounds View EDA and City Council have determined that it will be necessary to provide assistance to the project for certain TIF-qualified costs. These include, but are not limited to, land acquisition, site improvements, public utilities, parking facilities, roads, billboard removal and relocation, and demolition. The amount and use of TIF by Medtronic is outlined in the previously approved development agreement. President Marty stated the issue of land acquisition pertaining to Blaine has been mentioned a number of times at past meetings. In his opinion, that would be the last priority. He asked why land acquisition is listed first, ahead of everything else. Economic Development Coordinator Bachman explained that the Staff report includes the listing as shown in the legislation. It is not a listing of priority. He stated he believes there are other items that would entail more TIF expenditures. President Marty referred to the Ehler’s presentation, and drew the EDA’s attention to the list of authorized uses on Page 2, noting the project cost total of $32,700,000 and interest of $16,947,319, but the land acquisition is only $2,100,000. Sid Inman, Ehlers & Associates, explained that this is a TIF Plan and the numbers are estimated costs. He advised that the EDA can make line item changes as needed. With regard to President Marty’s earlier question, he explained that the State Auditor lists acquisition first but that doesn’t mean it would be reimbursed first. President Marty noted that even with the interest removed, it still equals, $15,752,681. He stated his understanding that this project would have a cap of $14.8 million but the numbers show it is Mounds View EDA August 22, 2005 Regular Meeting Page 6 almost $1 million higher than that and does not include almost $17 million in interest being paid to Medtronic. Mr. Inman explained that this is a budget and the amount they get will be limited by the contract. That limit is $14.8 million. He explained that this is an estimate and the EDA can ago lower but cannot go higher so it is generally estimated on the higher side. City Attorney Riggs concurred that there is a cap of $14.8 million. Mr. Inman stated the EDA is legally obligated to $14.8 million and the interest would be on top of that. President Marty noted there will be almost $17 million of interest on top of the $14.8 million amount. Economic Development Coordinator Bachman noted that administrative costs show 10% but the cap is at 5% so that would be a difference of about $1 million less in expenditures. He restated this is a budget estimate and if there are additional increments because of larger valuations, this could get paid off early and back on the tax rolls in 19.5 years. In that case, less interest would be paid. Mr. Inman stated they tend to recommend to give the broadest range of possibilities. That is why Staff recommended the parcel be included and why the budget is somewhat higher. He noted that interest would have to be paid in any case no matter how it is financed, even if bonds are issued. The interest is to finance the cost of the improvements. President Marty noted the administrative costs would be about $1 million less so the full $2,100,000 would go to Blaine for the land acquisition. Mr. Inman stated that would be correct if it got that far down in the “pecking order.” President Marry read the Interfund Loan Requirement indicating: “If the City wants to pay for administrative or other expenditures from a tax increment fund, it is recommended that a resolution authorizing a loan from another fund be passed prior to the issuance of the check.” He asked if there are any plans for interfund loans. Mr. Inman stated it is on the budget page. President Marty asked where those funds would come from. Mr. Inman stated they are defined to give flexibility and if the EDA decided to do that, Staff will bring back recommendations and resolutions for approval that identifies where the funds would Mounds View EDA August 22, 2005 Regular Meeting Page 7 come from. He explained this section merely memorializes the fact that the EDA may do that. However, this is a method of finance and would need to be approved by the EDA by resolution. President Marty noted if the State compresses business taxes, as they have in the past, and the EDA gets into a bind, the EDA could transfer from the TIF pool in order to meet obligations. Mr. Inman stated that would not be the case for this situation because the contract limits the developer to whatever taxes they generate. If there is tax compression, they just get whatever they pay. The EDA would not be required or obligated to find funds to pay them. President Marty stated he understands this being included as a “safe gap” but he does not understand why interfund loans and transfers are included as $5 million. Mr. Inman explained that none can take place unless approved in the future and it is only included as an option. Director Ericson explained that the Highway 10 plan is adopted and if financing comes up short and there are excess dollars in TIF District No. 5, then the City could authorize a loan to borrow from that District. This resolution would allow that ability but it does not mean the City would have to approve an interfund loan. It would have to be approved by a resolution adoption. President Marty stated his understanding this TIF District is a pay-as-you -go so it will not be creating a pool. Mr. Inman stated it does not create a pool but experience is that it will be paid off early so in a certain period of time, the EDA will have to decide whether to shut down the district and put it back on tax rolls. Or, it could be used for a different project such as a highway project mentioned by Director Ericson. Commissioner Thomas stated it is the same as TIF District No. 3; the EDA can determine if it wants to end it early or use the funds for other projects. Economic Development Coordinator Bachman stated another option is that utilities could be paid from administration. President Marty referred to the last paragraph of Page 2-2, Subsection 2-5 indicating: “The EDA or City may acquire any parcel within the District including interior and adjacent street rights-of- way…The EDA or City may acquire property by gift, dedication, condemnation or direct purchase from willing sellers in order to achieve the objectives of this TIF Plan.” He stated he personally does not like condemnation and including it makes him uncomfortable. Mounds View EDA August 22, 2005 Regular Meeting Page 8 Commissioner Thomas stated some of the language is standard “boiler plate” and not specific to just this District. President Marty referenced Page 2-3, Subsection 2-6, Classification of the District, and read the following definition of TIF: “Economic development district’ means a type of tax increment financing district which consists of any project, or portions of a project, which the authority finds to be in the public interest” and then lists three different reasons. He stated all three are to the benefit of the State and does not reference local jurisdiction. He stated that the creation of TIF Districts is of benefit to the State. Commissioner Thomas noted President Marty is reading from the State Statute, which is why it is referencing benefits to the State. President Marty read Subsection 2-7, Duration of the District, indicating “Pursuant to the special legislation, subd. 2(b), the duration of the District will be 25 years after receipt of the first increment by the EDA or City. The date of receipt by the City of the first tax increment is expected to be in 2007. He pointed out that the clock won’t “start ticking” for about two and a half years. Commissioner Flaherty noted that section also indicates: “The EDA or City reserves the right to decertify the District prior to the legally required date.” He explained the EDA can decertify the district prior to the legally required date so it wouldn’t have to go the full 27 years. President Marty referenced Page 2-4, Subsection 2-8, that indicates: “…the Original Net Tax Capacity as certified for the District will be based on the market values placed on the property by the assessor at the time the property is classified as taxable.” He stated it is up to the Ramsey County Assessor but the City’s appraisal came in at $10 million. President Marty stated he does not understand the chart at the bottom on Page 2-4 and questioned the Original Local Tax Rate of 125.768%. Mr. Inman referenced the chart on Page 2-9 and explained the combined tax rates of all taxing jurisdictions. President Marty referenced the first paragraph on Page 2-7, that indicates: “The cost of all activities to be considered for tax increment financing will not exceed, without formal modification, the budget above pursuant to the applicable statutory requirements.” He asked if the costs could be modified upwards. Mr. Inman referred to Page 2-6 and explained that the State Auditor will allow the EDA, by resolution, to move money from one area to another. However, that at the end of the day it Mounds View EDA August 22, 2005 Regular Meeting Page 9 cannot be increased but can be reduced. To increase the amount the City would have to repeat the entire public hearing process. President Marty asked about the costs. Mr. Inman stated they have to be statutory qualified costs. President Marty asked for an explanation of the charts on Page 2-9, Impact on Tax Base and Impact on Tax Rates. Mr. Inman explained it is a statutory requirement to set forward the percent of the tax or tax capacity as a percentage of the whole. Right now the City’s tax capacity is $6.679 million and when adding Medtronic into the tax capacity, it will be approximately 14.28% of the City’s total tax capacity. The other chart is showing it in tax rate. The charts show what taxes each taxing jurisdiction would get based on that tax rate. Also, there is a State education tax that is not required to be included in this chart for that calculation. President Marty referenced Page 2-10, Subsection 2-16, Definition of Tax Increment Revenues, sub. 1, that indicates: “Taxes paid by the captured net tax capacity, but excluding any excess taxes, as computed under M.S. Section 469.177.” He asked what those taxes would be. Mr. Inman reviewed the rate and explained if approved, it will be a frozen tax rate. So, if Mounds View and the County increases the levy rate, that increase does not go back to the District. President Marty referenced Page 2-11, Subsection 2-17, Modifications to the District, and read sub. 5 and 6 that indicates: “5. Increase in the estimate of the cost of the project, including administrative expenses, that will be paid or financed with tax increment from the District; or 6. Designation of additional property to be acquired by the EDA or City, Shall be approved upon the notice and after the discussion, public hearing and findings required for approval of the original TIF Plan.” President Marty noted that prior to this it states “during the first five years” and asked if it could be enlarged. Mr. Inman explained the District could not be enlarged or the budget increased without going through the same notice and public hearing process. City Attorney Riggs stated the same would be true of the special legislation. President Marty read the last paragraph indicating: “…the tax increments may be used to pay for the County’s actual administrative expenses incurred in connection with the District. The county may require payment of those expenses by February 15 of the year following the year the expenses were incurred.” Mounds View EDA August 22, 2005 Regular Meeting Page 10 President Marty asked what the County’s administrative expenses would be and where payment would come from. Mr. Inman stated each County deals with TIF differently and some have a computer program or Staff time. Each year the County will provide the City with a list of expenses and they will deduct that cost from the TIF prior to giving it to the City. He explained that it varies from County to County and some bill for their expenses while others deduct the costs. Ms. Eldridge advised that Ramsey County goes through substantial analysis of the City’s TIF Districts. Mound View is now getting billed for District Nos. 1, 2, and 3 every year. The deduction is made prior to settlement and goes to the State Auditor for their administrative fees. Ramsey County will send a bill that will be split into the amount and divided by all Districts in the County so it is a flat fee. The other side of it is by parcel. The more parcels in the District, the more maintenance at the County level that is involved. She estimated it will be less than District Nos. 1 and 2. President Marty stated those dedications come from the City’s portion. Ms. Eldridge explained they come from the TIF increment as they do with the other Districts. Director Ericson clarified that it comes from the increment but does not reduce the City’s percent. The City still retains 5% of the increment collected. President Marty referenced Page 2-13, second sentence of the third paragraph, that indicates: “The EDA or City will pay to the developer(s) annually an amount not to exceed an amount as specified in a developer’s agreement to reimburse the costs of land acquisition, public improvements, demolition and relocation, site preparation, and administration.” President Marty asked if these are the payments that Medtronic has. Mr. Inman stated that is correct and they are further limited by the agreement. President Marty referenced Page 2-15, Subsection 2-27, Other Limitations on the Use of Tax Increment, that indicates: “…Increment may only be spent on one or more of the following costs, improvements, or activities: …including structured parking; administrative expenses; wetland mitigation; soil correction …” President Marty asked if these are eligible corrections and if the Blaine property needs soil corrections, would it come from here. Mr. Inman stated the agreement does not say that. President Marty referenced Page 2-15, item 3, that indicated: “Five Year Limitation on Commitment of Tax Increments. Pursuant to the Special Legislation, Subd. 2(c), the five year rule under M.S., Section 469.1763. Subd. 3, has been extended to a ten year period. He asked if they will have up to 10 years from 2007 to create Phases 2 and 3. Mounds View EDA August 22, 2005 Regular Meeting Page 11 Mr. Inman stated it is indicating that they have up to ten years to spend the qualified costs that Mounds View will reimburse them for. If they only do Phase 1 and never do Phases 2 and 3 within the ten years, then everything goes away. President Marty referenced Appendix A-2, the project description under transportation indicating: “The Bridges AUAR, authorized by the City, reviewed all transportation issues related to the proposed development of the site. RLK-Kuusisto of Minnetonka prepared the AUAR documents.” President Marty stated he does not feel it is correct because the AUAR considered the freeways and trunk roads but the City street traffic was not taken into consideration. President Marty referenced the Exhibit B chart and asked for larger-sized print on future reports so it is easier to read. President Marty questioned Appendix F, the but/for for qualifications. Mr. Inman gave an example of someone buying a car that is worth $10,000 but comes to $17,000 when you add principal and interest. You wouldn’t say it’s a $17,000 car, you’d say it is a $10,000 car. He stated the same is done with the stream of TIF payments. The chart shows it is worth $15,700,000 in today’s dollars. This formula is a statutory formula that is required to be performed. The theory is that if the number at the bottom was rather small in comparison with the other two, it would show that you are not getting much market value. The larger number at the bottom the more the statute indicates you will be getting in market value than if you had not done this project. Mr. Inman explained that is the theory. President Marty stated this is close to what he had arrived at from the $32,700,000 figure, which was $15,752,681 so this is only off by about $50,000. President Marty referenced the second paragraph of Appendix F that includes a sentence that indicates: “In addition, site constraints require the developer to acquire adjacent land to preserve existing wetlands and green space which adds additional costs.” He stated the land being acquired is developed and asked about this comment. Economic Development Coordinator Bachman stated it comes into play if they don’t acquire the adjacent properties, the two businesses, and move them in Blaine. They would have to have a greater proportion in parking, wetland #2 may be lost, and it may be more difficult to get wetland mitigation to the east. This also allows for better placement of the park facility. President Marty read a sentence in Appendix F2 that indicated: “Therefore, the City concludes as follows: a. The City’s estimate of the amount by which the market value of the entire district Mounds View EDA August 22, 2005 Regular Meeting Page 12 will increase without the use of tax increment financing is $0.” He pointed out that the City of New Brighton is finding the opposite to be the case. President Marty read another subparagraph as follows: “c. The present value of tax increments from the District for the maximum duration of the district permitted by the TIF Plan is estimated to be $15,708,780.” He stated that it is capped at $14.8 million and not a fluid number, but it will be higher with the interest. Mr. Inman stated this is the present value number and includes $14.8 million plus administrative expenses. That is the cap and the maximum this plan will let you have. Commissioner Thomas commented that the TIF dollars for the City’s property is not the same situation as what New Brighton has because they don’t have a tax exempt city function on the property they are talking about. She noted that Mounds View currently has a functioning business on that property and that will not change in any way except for this project. That is why subparagraph a., in Appendix F2, is shown as $0. President Marty referenced the last paragraph of Appendix F-2 that indicated: “The conclusion and recommendation of City Staff is that the TIF Plan is consistent with the City’s comprehensive plan based upon the following information and City actions. …On February 2, 2005, the Planning Commission for the City approved a recommendation to the City Council as to the approval of a comprehensive plan amendment revising the land use designation for this development site in the District from Outdoor Sport Recreation (SRO) and Passive Open Space (OSP) to Office (OFC).” He stated that facts have changed considerably since February 2, 2005 and there has even been a change of flavor with the Planning Commission. President Marty read a portion of the first paragraph of Appendix F-3 that indicated: “On July 20, 2005, the Planning Commission confirmed that the proposed sale of the development site in the District to Medtronic was consistent with the City’s comprehensive plan. On August 3, 2005, the Planning Commission did not approve a resolution finding that the TIF Plan for the District conformed to the general plan for the development and redevelopment of the City as a whole.” President Marty stated the conclusion is that it is consistent but the City has modified the Comprehensive Plan to make it consistent. He noted that from the beginning to now, there have been a number of modifications and they are still working on that so it seems there are a number of items and statements in this report that appear, as you read through it, somewhat of a mass of inconsistencies. He noted the City is getting them in order but things have changed tremendously since February. Commissioner Flaherty stated the EDA and City reserves the right to decertify the District prior to the date and, by all discussions, that date will be 19.5 years to decertify the District. Mounds View EDA August 22, 2005 Regular Meeting Page 13 Commissioner Flaherty asked for an explanation of the indication on Page 2-13, Subsection 2-21, Excess Increments, that indicates: “The EDA or City must spend or return the excess increments under paragraph ( c) within nine months after the end of the year.” Economic Development Coordinator Bachman explained that the EDA cannot hoard TIF dollars and if increments are being generated by TIF Districts, then projects must utilize those dollars. If there are no obligations, Ramsey County could say they believe it is excessive and needs to be redistributed. Commissioner Flaherty asked if that is based on the desertification of the District. Economic Development Coordinator Bachman explained that TIF Districts are created for the purpose of economic development. If the TIF dollars are not used they cannot be funneled to general fund dollars. The TIF dollars must either be used or the District decertified. Commissioner Flaherty drew the EDA’s attention to Appendix A, Introduction, indicating: “The current site has acreage that is not buildable and wetland relocation will be required.” He asked if that means this current contract is selling about 20 acres of swampland and the actual buildable land of the 72.2 acres is 52.2 acres. Economic Development Coordinator Bachman stated that is correct. Commissioner Flaherty reviewed the “but/for” qualifications detailed in Appendix F indicating: “While property could be sold to another developer for some other use, these scenarios are not feasible in the market due to various constraints mentioned above along with others. First industrial uses could not meet the market valuation due to the fact that they are single story in nature (can’t get to the same density as office), lack the amenities in design and construction and are traditionally valued at ½ the market value of commercial and office uses. Second, commercial retail uses have the same restraint in that the market does not allow for vertical commercial/retail development.” He asked if the Medtronic development is going up (vertical) so it creates higher density and higher value on the land. Economic Development Coordinator Bachman answered in the affirmative. Commissioner Flaherty noted that by those two statements, the City is getting better value than someone else coming in. Economic Development Coordinator Bachman stated that is correct. President Marty noted there are two resolutions for the EDA’s consideration. Mounds View EDA August 22, 2005 Regular Meeting Page 14 MOTION/SECOND: Thomas/Stigney. To waive the reading and adopt EDA Resolution 05- EDA-208A, Approving the Elimination of Parcels from Tax Increment Financing District No. 3 located within the Mounds View Economic Development Project in the City of Mounds View, removing parcel 05-30-23-22-0004, the triangular property, from TIF District No. 3. President Marty asked that the signature line of the resolution be changed from “Chair” to “President”. Ayes –4 Nay – 1 (Marty) Motion carried. President Marty indicated he would like to amend the resolution in reference to the Planning Commission’s lack of recommendation. Commissioner Thomas stated the motion must first be moved prior to an amendment being made. MOTION/SECOND: Gunn/Stigney. To waive the reading and adopt EDA Resolution 05-EDA- 208B, Adopting a Modification to the Project Plan for the Mounds View Economic Development Project, Establishing Tax Increment Financing District No. 5 Therein and Adopting a Tax Increment Financing Plan Therefor. Mr. Inman stated it indicates the EDA does not want parcel 05-30-23-22-0004 in this District either. President Marty stated that is correct. Mr. Inman stated the record should show the EDA is modifying the Plan without that parcel and Staff will amend plans accordingly. Brian Amundson, 3048 Wooddale Drive, asked for clarification on the EDA action. He explained that on the City’s web site he found Exhibit A, City of Mounds View TIF Policy, and applications. Mr. Amundson asked what step the EDA is taking tonight in relation to this exhibit that says how the EDA will deal with TIF. He also asked if Medtronic has asked for a TIF District, which is the first step of the policy. City Administrator Ulrich stated there is an application for TIF from Medtronic and that application is part of the first step of the process. This is the creation of the public hearing for the TIF District and approval of the Plan. Mr. Amundson asked when that application was submitted to the City. Economic Development Coordinator Bachman stated it was submitted in June of 2005. Mr. Amundson stated that he was told by Staff at the end of June that there was no application. Mounds View EDA August 22, 2005 Regular Meeting Page 15 Commissioner Thomas explained the application came in just after that question was raised. She further explained that no agreement was necessary up to that point but after the meetings were held and the TIF district approved, the application was necessary. Mr. Amundson asked if the EDA is currently reviewing the application for TIF, its public purpose, job creation numbers, and sources and uses. Commissioner Thomas stated the action is the creation of the TIF District by the EDA. The EDA talked about job creation numbers at the last meeting. Mr. Amundson asked if there is a deposit agreement submitted. City Administrator Ulrich answered in the affirmative Mr. Amundson asked if the application is available to the public for review. City Administrator Ulrich answered in the affirmative. Mr. Amundson asked if the application has it been available prior to this meeting. City Administrator Ulrich answered in the affirmative. Mr. Amundson asked if the public was advised it was available for review. Commission Thomas stated it was part of the report. Director Ericson explained that the City does not announce every time a document is available for public viewing because all documents are available for public viewing. Mr. Amundson asked if the application proposal worksheet is also available that provides the evaluation points in determining whether a District is appropriate. City Administrator Ulrich answered in the affirmative. Mr. Amundson asked if EDA members have all received that document. Commissioner Thomas stated all members have the information in the report. City Administrator Ulrich explained the information was passed out the end of June and it went through the worksheet in terms of job creation as required. Mr. Amundson stated since there is a pending request for such development to go to the public on a ballot, he is surprised the EDA is taking any action prior to the public saying whether there will be a sale. He stated to him it seems premature to issue authorization for the creation of a TIF District that may never see an owner. Also, he thought the TIF application had to be after the applicant acquired the property. He pointed out that these questions relate to procedural issues related to the EDA’s own policies. Mounds View EDA August 22, 2005 Regular Meeting Page 16 President Marty asked if the application is to be after the owner acquires property. City Administrator Ulrich stated it could be either ownership or control of the property, but he would have to look at the policy. Economic Development Coordinator Bachman stated the problem is that it would compromise the but/for test. Basically if the EDA is justifying the TIF expenditure, it needs to say that but/for this particular assistance, this project would not happen. Mr. Amundson explained he is asking the Authority why it is moving ahead at this point when other actions may result in never requiring the creation of this District. He stated it seems appropriate to do things in order and to also avoid legal contentions by assuring actions follow the City’s policy. Mr. Amundson explained that he was previously told that the application had not been submitted and believes it is not appropriate to entertain one before moving forward with the sale. He stated he appreciates that the application now exists and he would like the opportunity to review it. He was surprised the notice was not made available. Commissioner Flaherty stated it behooves the City to move forward on a project of this magnitude and he cannot in good conscience stop the project where it is now without moving forward. He stated that he understands the petition is being submitted and that Mr. Amundson is asking the City to stop any negotiation until the petition is ratified. Mr. Amundson asserted the EDA is taking an action it is not authorized to take since the ordinance is not in effect that allows the EDA to sell the property to the requested future property owner. Commissioner Thomas advised that the Ordinance had a 30 day effective period and went into effect on August 20, 2005. Mr. Amundson asserted the action does not take effect until the petition is ratified. President Marty stated the petition issue will be addressed at the Council meeting. Mr. Amundson stated he wanted to address whether policy and procedure is being followed. AMENDMENT MOTION: Stigney/. To waive the reading and adopt EDA Resolution 05-EDA- 208B, Adopting a Modification to the Project Plan for the Mounds View Economic Development Project, Establishing Tax Increment Financing District No. 5 Therein and Adopting a Tax Increment Financing Plan Therefor, as amended to add Section 7. Exempting parcel 05-30-23- 22-0004, the triangular property, as approved in EDA Resolution 05-EDA-208A. Commissioner Thomas questioned how the exemption would be reflected since the PIN is no longer listed in the previous resolution. For documentation sake, when the resolution is filed, she noted it will not have that parcel reflected so referring to it in this document will not make sense. Mounds View EDA August 22, 2005 Regular Meeting Page 17 Mr. Inman noted the parcel does not appear in the second resolution but does appear in the Plan and all documents the EDA has received. He stated he would like the action to include the parcel number to avoid confusion. City Attorney Rigg agreed that is the most correct route since it is referenced in the Plan. He stated what is before the EDA does not have that parcel pulled out at this time and the EDA should have a record. Economic Development Coordinator Bachman suggested Section 1 of the resolution be revised to state: “…Minnesota which is underutilized and that the adoption of the proposed Plans, as amended, will help provide employment opportunities…” Commissioner Thomas stated there are only the five parcels and suggested including those PIN numbers rather than excluding the one that is being omitted. Vice-President Stigney stated Staff can determine how to best reflect that amendment. SECOND: /Thomas. Vote on amendment motion: Ayes – 5 Nays – 0 Motion carried. Duane McCarty, 8060 Long Lake Road, stated he has reviewed the draft contract and believes this proposal is being piecemealed, not by design, but in actual fact. He stated there are several other issues in the overall contract that the EDA will need to deal with. He stated the original contract had an exclusion for existing jobs that has been stricken from the current contract. He assumed that it is intended that Medtronic will move positions from other facilities to the Mounds View location and wondered if that qualifies as the jobs goal as required under the Economic Development Act. Other issues of concern relate to indemnification for liability; however, studies have found a certain amount of hazardous conditions, and that the contract requires the City to indemnify all comers in the first phase. Mr. McCarty stated he has many other issues and is in fear that the EDA is “digging a hole” and when the end comes the City will not like the results but be hard pressed to retract actions. He stated in his mind, the City should understand every contingency from beginning to end before getting this far. That is what the previous speaker was alluding to and is his concern as well. Commissioner Flaherty read the Purchase Agreement, Section 5.2, Jobs and Wages, which indicates that within two years after the date of issuance of the certificate of completion, the compliance date, that developer shall cause to be created at least 1,500 new full-time equivalent jobs on the development property. Mounds View EDA August 22, 2005 Regular Meeting Page 18 Mr. McCarty stated that language does not exclude existing positions and does not prevent them from bringing existing positions in from other facilities. He stated those are the concerns the residents have been talking about and should be addressed. City Administrator Ulrich asked Mr. Inman to respond to the concern that this project does not meet the job creation goals of the State. Mr. Inman explained there are no job creation goals of the State but the State requires that you have job creation goals and they were adopted by the public hearing. He further explained that the City can determine if that involves new jobs or existing jobs. City Administrator Ulrich stated the indemnification on environmental issue is meant to protect the City during the construction phase. There would be limited liability with the City picking up to $200,000 of environmental clean up costs, if any. Mr. McCarty referenced Section 116, j., 943, and noted that some criteria expected on the business subsidy that there would be economic gain to the State and job creation. He explained that he is saying the City can, if they wish, require those new jobs promised to the citizens of Mounds View and anyone else attending the public hearing on June 20, 2005. The City can hold them to that promise and if they don’t fulfill then the City can “pull the pin” on this thing. Mr. McCarty stated the deeper you go the more difficult it will be to “turn the train around” should new evidence make it less desirable for this project to go forward as proposed. Commissioner Thomas stated the responsibility of the State and City is new jobs in Mounds View. Medtronic currently has 90 employees at the shipping facility in Mounds View. She stated anything above that is new jobs to her and that is where she draws the line. Mr. McCarty asked Commissioner Thomas if she feels that that imported jobs are new jobs. Commissioner Thomas answered in the affirmative. Mr. McCarty stated the employee may be living in New Brighton and he thinks that is a limited view. Mr. McCarty asked who guarantees anything above the $200,000 liability limit should a law suit be brought, since the City is the indemnifier. He also asked under what law the City can claim a liability limit of $200,000. He noted the tort liability for governments under statute is $600,000. City Attorney Riggs explained that this is EDA property that would be transferred and just like any landowner if in the chain of title, they are jointly and severally liable for any type of environmental obligation. He stated this is the case whether by contract or insurance. He advised that the City has taken steps to shift liability and there is also insurance to cover certain percentages. He offered to review the contract terms with Mr. McCarty and the EDA, if desired. Mounds View EDA August 22, 2005 Regular Meeting Page 19 Mr. McCarty stated the proposed draft contract does not go into those details, which is part of the dissatisfaction of many residents in Mounds View. He suggested the contract lays the entire indemnification requirements entirely on the City. Mr. McCarty read a portion of the indemnification language and stated to him, that is a very strong commitment. He stated that it is fine to say “only to the extent of $200,000,” but he would like to see evidence where this body can predispose a court order of over $200,000. He stated that it is a commonsense point of view that until the project is finished for the two years or whatever it is, he doubts that a strong case on behalf of an injured party would allow a limit of $200,000 unless Medtronic will pick up the amount over $200,000. SECOND AMENDMENT MOTION: President Marty/. To amend the third WHEREAS to indicate: “…The EDA has also requested the City Planning Commission to review the plans and did not approve a resolution accordingly, and that the Council schedule a public hearing on the plans upon published notice as required by law. Amendment motion died due to lack of a second. Vote on motion as amended: Ayes –4 Nay – 1 (Marty) Motion carried. B. Consideration of EDA Resolution 05-EDA-209, a Resolution Authorizing Payment of Pay-As-You-Go Developer Payment to Red Cent Management, LLC for the Building N Project in Mounds View. Economic Development Coordinator Bachman referenced the packet provided to the Commission and stated he does this report every six months for the Finance Director. He noted two payments were approved for the first part of August to the Silver Lake Point and Midwest Ivy projects. He stated that basically there were additional property taxes paid by Bethlehem Baptist Church. He stated there was acquisition of Building N by the EDC at the end of June 2004. They made a payment at the end of the year and applied for property tax exemption that would be effective for 2005. Ramsey County looked at the transactions and determined there was additional lease revenue paid to the new property owner, Bethlehem Baptist Church, by Medtronic Systems and that went on for a number of months. As a result, Ramsey County determined a portion of the building was taxable so payment of $26,667 was made to Ramsey County in May of 2005. Economic Development Coordinator Bachman advised that there was a larger payment last time but that was for the full building. The way the TIF agreement is structured, there is an excluded base so they get $3,066.16. He explained that there will be a follow up payment in the fall of this year for a similar amount. Mounds View EDA August 22, 2005 Regular Meeting Page 20 President Marty asked if that will pay it off at that point. Economic Development Coordinator Bachman stated he hopes so. MOTION/SECOND: Thomas/Stigney. To Adopt EDA Resolution 05-EDA-209, a Resolution Authorizing Payment of Pay-As-You-Go Developer Payment to Red Cent Management, LLC for the Building N Project in Mounds View. Carol Mueller, 8343 Groveland Road, stated she raised several questions at the last meeting and asked Staff to respond at the meeting tonight so all the residents of Mounds View can hear the answers. Commissioner Thomas suggested it be discussed during the Council meeting so all can hear the answers who are watching the Council meeting. Ayes –5 Nays – 0 Motion carried. 8. REPORTS Ms. Mueller asked Staff to explain what the existing TIF Districts are, what property the Districts entail, and what percentage of the City’s property is in TIF Districts. In addition, she asked how the new action and establishment of a new TIF District will increase the percentage of the City that is TIF. Director Ericson stated there were three TIF Districts prior to the action taken tonight. Currently there are 225 acres in TIF Districts and Mounds View is about 2,600 acres. Of the total City of Mounds View, 8.55% is captured in TIF District Nos. 1, 2, and 3. The creation of TIF District No. 5 adds 2% that is captured within TIF Districts. However, Outlot A is no longer part of TIF District No. 5. It remained within TIF District No. 3 so that will change, but 10.56% remains the same. Ms. Mueller thanked Mr. Ericson for the response. Vice-President Stigney reported that he attended the YMCA community meeting last week dealing with relocation of employees during reconstruction of City Hall. Vice-President Stigney stated the fireworks last night were fantastic. Economic Development Coordinator Bachman announced a Caribou sighting at Mounds View Square, and that the grand opening will be held this Saturday, August 27 at 5:00 a.m. 9. NEXT EDA MEETING: Monday, September 12, 2005 at 6:30 p.m. Mounds View EDA August 22, 2005 Regular Meeting Page 21 10. ADJOURNMENT President Marty adjourned the meeting at 7:37 p.m. Respectfully submitted, Recorded and transcribed by: Carla Wirth TimeSaver Off Site Secretarial, Inc.