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HomeMy WebLinkAbout01-23-2006PROCEEDINGS OF THE MOUNDS VIEW EDA CITY OF MOUNDS VIEW RAMSEY COUNTY, MINNESOTA Regular Meeting January 23, 2006 New Brighton City Hall 803 Old Highway 8, New Brighton, MN 55112 6:37 P.M. 1. CALL MEETING TO ORDER 2. ROLL CALL: President Marty, Vice-President Stigney, Commissioner Gunn, and Commissioner Thomas. NOT PRESENT: Commissioner Flaherty 3. APPROVAL OF AGENDA MOTION/SECOND: Gunn/Stigney. To Approve the January 23, 2006 Agenda as presented. Ayes – 4 Nays – 0 Motion carried. 4. PUBLIC INPUT Ken Glidden, 5240 Edgewood Drive, stated he has three questions to ask regarding what the EDA does and what is its purpose. Community Development Director Ericson explained that the EDA was created by the City of Mounds View to deal with matters relating to economic development and helping to enhance the tax base. In the last 20 years, the EDA has been actively involved in enhancing the tax base through TIF and redevelopment of areas that might not have seen the type or extent of development. The EDA has also been involved with growing the employment base. City Administrator Ulrich stated it is a good point because the EDA is a legal and corporate body that has the authorities of the HRA as well as a number of housing programs that have been undertaken in Mounds View. The EDA has statutory given rights as a separate entity for economic development in terms of contracts and TIF, and activities they can undertake by statute. President Marty stated as to TIF, the EDA is involved in what they spend, what goes where, and arrangements for that. Mr. Glidden stated Director Ericson, in describing its function, described the EDA as partly having to do with enhancing the tax base through TIF. He asked whether the purpose of the Mounds View EDA January 23, 2006 Regular Meeting Page 2 EDA is to finance development using TIF. President Marty stated not necessarily but TIF is controlled by the EDA. Mr. Glidden asked if the EDA is the overseer of TIF utilization. President Marty answered in the affirmative. Mr. Glidden asked whether TIF is a tool for economic development in the City. President Marty explained that as the EDA sees fit, it can be. Mr. Glidden stated he is puzzled a bit at how that benefits the citizens and taxpayers of the City. He stated the EDA is an organization established to carry out economic development in Mounds View but he didn’t hear one word in that description that related to the benefit of the taxpayers of Mounds View. He asked what is the purpose of economic development, and what is the gain for doing it. President Marty explained that by encouraging and assisting business with some TIF districts, the City has encouraged them to move into Mounds View and develop land that was vacant. So, once that property has been decertified it has a much greater tax value than it did previously to the development. Mr. Glidden suggested that the tax value only is of benefit if the taxes are available for general use. If the taxes are tied to the development paying it, then there is no benefit to the taxpayer, only benefit to the corporation or organization being economically developed. President Marty explained that when a district is in effect, there are payments and obligations to developers and businesses. But, in 2004 the City was able to decertify a number of parcels that either did not use TIF but happened to be within the TIF district or their TIF obligation had already been satisfied. By decertifying, those businesses and parcels went back on the tax rolls. Mr. Glidden stated he understands this and that it is the legal requirement and definition, which is why the district is limited to eight years. At that point, the taxes then go into the general fund and are available for general use. President Marty explained that when the districts were first set up the law and the requirements were different. Mr. Glidden suggested that the definitions for the typical term of TIF or economic redevelopment have not been recently changed in the State statute. He stated that the maximum term for TIF is eight years. Commissioner Thomas explained that there are several different types of districts and for redevelopment districts it is eight years. She stated that while there are limited benefits in TIF districts with the tax base, there are other benefits when you encourage development such as the jobs that come into the City. In addition, there are TIF administrative fees that are used for City Mounds View EDA January 23, 2006 Regular Meeting Page 3 operations and of a significant benefit to the residents of Mounds View. She noted the term of the TIF district, no matter how permanent it may feel, is still temporary. President Marty stated there are different uses for TIF and existing TIF districts that the City has. He stated the City found out in the last few months that due to the requirements on the type of TIF districts that Mounds View has, the City would probably be able to use some of the captured money to put into the City’s streets and infrastructure. He noted that will save the assessment cost to the residents. Mr. Glidden asked if the EDA is absolutely sure that can be done to make the funds available for general usage. President Marty clarified that the funds cannot go into the General Fund. Mr. Glidden asked if it can go to pay for his street. Commissioner Thomas stated the EDA knows that it can be used for the City’s street projects and infrastructure. Vice President Stigney stated it can also be used for trails and street lighting as well and cleaning up contaminated sites. Commissioner Gunn noted the City did use some excess TIF to help with the cleanup after the storm and to build the Community Center. Mr. Glidden asked about job creation and pointed out that jobs only have a benefit if they are truly new jobs. In terms of revenue or how you define a job, he suggested it has to be a new job and that a transferred job into Mounds View has no financial benefit or tax benefits to Mounds View residents. Mr. Glidden stated his point is that if you are going to undertake economic development on the basis of creating new jobs, then you have to understand the benefit of having new jobs. If you want to undertake economic development to provide new jobs, you have to understand what that means. Commissioner Thomas stated that she cannot disagree with Mr. Glidden more. She emphasized that new jobs, even if transferred from somewhere else, are still new jobs. She noted the job pays taxes into the County and that comes into the City. It also provides improvement of the business environment whether transferred jobs or new jobs. Commissioner Thomas explained that when you bring in new development or improve a property tax base, it improves the tax base for all residents and businesses in Mounds View. Mr. Glidden asked if anything in his environment changed when the new Cinema was placed in Mounds View. Commissioner Thomas pointed out that several things improved in the environment because the Cinema improved the road infrastructure, sidewalks, lighting, and definitely improved attention to the area for the residents of Mounds View. Vice President Stigney stated it also benefits businesses and brings more people in to eat and buy merchandise. In addition, it increases the demand for housing and the value of housing. He Mounds View EDA January 23, 2006 Regular Meeting Page 4 noted there are many benefits other than an immediate job creation per se. There are indirect benefits as well as direct benefits. President Marty stated he should call time on Mr. Glidden’s Public Input comments. Mr. Glidden stated he will then wrap up his questions. He suggested that if the EDA is undertaking economic development there should be clear cut explainable reasons for the economic development the EDA plans to undertake. He stated that relates to some of the items on the agenda tonight. Mr. Glidden again suggested there should be clear cut benefits to the citizens of Mounds View. Duane McCarty, 8060 Long Lake Road, stated there are a few things he wants to clarify on the issue of streets and using TIF. He stated he would like to have a statement from the City Attorney whether the City can use TIF funds on streets, whether or not the streets are connected with the TIF district. The City Attorney stated it depends on the pool of money it comes from and the bottom line is if Mr. McCarty wants an answer, or to “sharp shoot” staff at this point in time. He stated he will provide Mr. McCarty with an answer and the State statues pertaining to this issue. He advised that the City has been given information that they can utilize certain funds for certain roads. He stated he does not have the State statutes in front of him but can provide that answer to Mr. McCarty. Mr. McCarty stated he is sorry staff feels they are “sharp shooting.” He stated it is the right of residents to question elected officials and that should not be construed as “sharp shooting.” He suggested that the question Mr. Glidden posed is whether the City can use TIF for streets but now the City Attorney has said not everywhere because you need to show direct relationship with the TIF district. Mr. McCarty stated the City may not be able to use the funds on the worst streets because that connection does not exist. He stated his opinion that the question Mr. Glidden asked was not properly responded to and it is the responsibility of the Council and should be made clear that there are restrictions and you cannot use TIF for any street you want because there are restrictions. Mr. McCarty stated with regard to new jobs, the EDA can say that new jobs fulfill the requirements of the economic development laws even though the jobs are coming from Arden Hills or Shoreview, they are new jobs to Mounds View. But that is not what the economic development statutes, TIF, or other encouragement for business intended. They describe those employments as increase in employment. He suggested that in a common sense application, it is an increase in jobs and it is not increasing jobs in Ramsey County if the job is being transferred from Arden Hills or Shoreview. Mr. McCarty stated the answers should be more clear for those who are not familiar with TIF details. Commissioner Thomas stated before things get too heated, she wanted to clarify some things. She stated that the EDA has already been down this road and yes, there will be some transfer jobs from Shoreview and Arden Hills but there will also be some new jobs beyond what they already Mounds View EDA January 23, 2006 Regular Meeting Page 5 have employees for. She asked Mr. McCarty what are the worst streets in Mounds View, noting that 75% of the streets in Mounds View are significantly in need of restructuring and every dollar that can be found to put on streets is applicable. Commissioner Thomas noted that for every dollar that can be used from TIF it will keep that dollar off the assessment rolls. She stated the City has been trying to find alternatives for ten years and to now find out there are expanded uses for the old TIF district pools should show residents the creativity of the City’s advisors to find new uses for TIF because the City is getting desperate. Commissioner Thomas stated that residents should find some joy in the City’s ability to find new uses for TIF. City Administrator Ulrich commented that traditionally TIF, as we have thought of it before, was not to be used for general fund purposes or street reconstruction in general. However, Mounds View has older districts with less restriction and because of that they can be used within the development district, which is defined as the entire City. Those funds can be used for infrastructure improvements throughout the entire City. He explained that opinion came from Ehlers & Associates when the City looked at the street projects in terms of maintenance and long term reconstruction. Stacie Kvilvang, Ehlers & Associates, explained that typically in TIF districts when creating new ones for economic redevelopment, renovation, renewal, housing, or redevelopment, you can use funds for road and utility improvements tied to that development. However, since several Mounds View TIF districts are pre-1990, there are not the restrictions on those districts. There is a different set of statutes governing those pre-1990 districts. Based on that, bond counsel concurred that the City can use pre-1990 TIF district funds for street reconstruction. Vice President Stigney asked if those funds can be used throughout the City. Ms. Kvilvang stated yes, that is correct. Mr. McCarty stated he understands that as well and was there when some of the districts were formed, but did not vote for them. He asked why, if there is so much money flowing around those districts, the City’s streets are in the condition they are in. He also asked how many TIF dollars are available that can be used City-wide on streets. City Administrator Ulrich stated there is a budget for TIF dollars that includes other needs beyond street reconstruction. He suggested staff bring back that budget, demonstrate the needs for TIF, and how much can be allocated towards street reconstruction. President Marty stated the City is also looking at how to improve the safety and redevelop County Highway 10 and the trailway systems along Silver Lake Road from New Brighton to County Highway 10. He advised that the EDA has talked about a percentage or how to allocate those dollars, noting there are more needs than available TIF. President Marty stated to Mr. Glidden that the EDA needs to move on instead of having this back and fourth discussion. Mr. Glidden asked if that is the definitive answer to the question he asked. He again asked if TIF Mounds View EDA January 23, 2006 Regular Meeting Page 6 can legally be used for street repair or trail development and requested a legally definitive answer. President Marty answered in the affirmative. Mr. Glidden stated that is not the answer that he received before. Commissioner Thomas stated it definitely is the answer Mr. Glidden received before. 5. APPROVAL OF MINUTES President Marty asked staff to review the meeting video tape to include his question on Page 5 to Community Development Director Ericson. MOTION/SECOND: Gunn/Marty. To Approve the January 9, 2006 Minutes as corrected. Ayes – 1 Nays – 0 Abstain – 1 (Thomas) Motion carried. 6. CONSENT AGENDA None. 7. EDA BUSINESS A. Resolution 06-EDA-214 Authorizing Payment of Pay-As-You-Go Developer Payments to Red Cent Management, L.L.C; Heartland-Mounds View Common Bond; and Bridges Leasing Company Economic Development Coordinator Backman reviewed a spreadsheet highlighting the second half of 2005 TIF developer payment. He noted there are three payments due in February: a residual amount for Building N of $3,066.17; Silver Lake Pointe of $34,078.73; and Midwest I.V. of $27,423. He noted it should be final payments for Building N and Midwest IV. MOTION/SECOND: Thomas/Stigney. To waive the reading and adopt Resolution 06-EDA-214 Authorizing Payment of Pay-As-You-Go Developer Payments to Red Cent Management, L.L.C; Heartland-Mounds View Common Bond; and Bridges Leasing Company. Ayes –4 Nays – 0 Motion carried. B. Informational Meeting regarding Phase Two Acceleration of the Medtronic Campus; and Presentation and Discussion of the Medtronic Development Proposal and Terms of the Amended Contract for Private Development Mounds View EDA January 23, 2006 Regular Meeting Page 7 Economic Development Coordinator Backman indicated that the project costs for Medtronic, as they are currently configured, total over $125 million, including $65.5 million for building construction, $11 million for land acquisition costs in Mounds View, $24 million for other development costs, such as parking, land acquisition in Blaine, etc., and $25 million for computers, lab equipment and furnishings. That is $125 million of investment that Medtronic is making. The total also excludes $21+ million in State appropriations for the reconstruction of County Road J and replacement of the bridge over I-35W necessary to provide adequate access to the campus. Economic Development Coordinator Backman advised that the new Medtronic CRM campus is beginning to be recognized as one of Minnesota’s most important economic development projects. Recently, the national site selection magazine, Business Facilities, announced that Medtronic’s project in Mounds View received the top economic development award in its category for expansion projects in the United States. He noted they will be coming to Minnesota to award the City a plaque, recognizing that this is a significant project. Economic Development Coordinator Backman reviewed that on November 28, 2005, the Mounds View City Council directed staff to proceed with discussions with Medtronic regarding the potential acceleration of Phase 2 construction of the campus. On December 12, 2005, the City Council approved setting a public hearing for February 13, 2006 to discuss modification of the TIF plan and the business subsidy necessary for acceleration of Phase 2 to be concurrent with Phase 1. On January 9, 2006, the Mounds View EDA ranked replacement of Well #4 as the highest priority for City infrastructure needs, followed by payment from Medtronic to the City’s roadway fund. Also, the EDC adopted a motion last Friday unanimously recommending approval of the terms of the amended agreement. Economic Development Coordinator Backman explained that by combining Phase 1 and 2, the initial phase of the project would be significantly increased. The number of employees would be increased from approximately 3,000 to over 4,300. The building complex would be increased from 820,000 square feet to 1.2 million square feet. He noted that the Minimum Assessment Agreement would increase accordingly to $96 million. Economic Development Coordinator Backman advised that Medtronic has requested 95% of the available tax increment from the entire development (Phases 1 and 2), the same percentage that was used in the current agreement. The available TIF increment for the revised project would be $22.9 million. Thus, by combining the two phases, the TIF note issued by the Authority would increase by $8.1 million. Economic Development Coordinator Backman stated that Medtronic would continue to finance their development costs up front and would receive tax increment on a pay-as-you-go basis at the same interest rate as discussed in the first agreement. Under the amended contract, fiscal disparities would continue to be paid inside the district, the same as agreed with the original agreement. The length of the TIF district would remain the same at 25 years. Economic Development Coordinator Backman explained that in return for TIF assistance, the Mounds View EDA January 23, 2006 Regular Meeting Page 8 City would receive the following considerations: 1. Medtronic would reimburse the City for administrative costs, estimated at $150,000. 2. Medtronic would be responsible to construct water and sewer utilities to the site that was previously the City’s responsibility. In other words, Medtronic would pay the $400,000 that the City was obligated to pay. 3. Medtronic would pay 100% of the cost to relocate all four billboards, including the previously agreed City portion, estimated at $550,000 4. If the buyout alternative has to be undertaken for the billboards, Medtronic would pay all costs associated with the four signs. 5. Medtronic agrees to provide the City up to $545,000 for the replacement of Well #4 to ensure adequate water supply. 6. Medtronic agrees to contribute $355,000 to the City’s Street Reconstruction Fund to help offset any traffic impacts on local roads due to the Medtronic project. 7. If trail costs on the former Sysco property are deemed excessive by the City, Mounds View would not be required to construct the trail and the designated funds would remain for other park uses. If Medtronic wants the trail constructed, Medtronic would pay for the trail costs in excess of $150,000. Economic Development Coordinator Backman stated staff is looking for re-affirmation regarding the proposed terms of the amended contract for Phase Two acceleration of the Medtronic CRM Campus. If the proposed terms meet the expectations of the EDA, the next step would be to present them as part of an amended Development Agreement that will be discussed by the City Council at the public hearing scheduled for February 13, 2006. Vice President Stigney asked if the $8.1 million additional project would bring in $22.9 million. He noted that the last set of minutes indicated that Medtronic was waiting for a feasibility study to get a better number to work with and asked if that has been accomplished. Economic Development Coordinator Backman stated the City has been undertaking several feasibility studies. One study was for the water and sewer extensions. He stated he has not seen a written report but was told by Bonestroo that their estimate for extension of water and sewer was $390,000. Staff had used an estimate of $400,000 as the City’s cost so the numbers are still holding relative to that. Economic Development Coordinator Backman stated it is likely that the total $355,000 would go into the street improvement fund. Vice President Stigney asked whether $22.9 million is a solid number at this time. Economic Development Coordinator Backman answered in the affirmative. President Marty stated the staff report indicates that Phase 2 is 46% of the size of Phase 1. Economic Development Coordinator Backman explained that the estimate for the building would go from $820,000 to $1.2 million, which would be approximately that percentage. President Marty reviewed that for Phase 1, Medtronic was granted $14.8 million. He noted that one-half of Phase 1 would be $7.4 million, not $8.1 million. He stated he cannot see how construction costs would be that much greater due to the fact they are being constructed at the Mounds View EDA January 23, 2006 Regular Meeting Page 9 same time. President Marty stated during discussion on this last summer and fall, he had asked this question several times as to whether Medtronic will come back for Phase 2 or Phase 3, what are we looking at. President Marty stated he was told by Community Development Director Ericson that all the infrastructure and everything would be in place so there would be minimal charges, probably in the range of $2 million to $3 million. President Marty noted this figure is almost triple or at least double from a few months ago; $8.1 million in his figures is not even close to $2-3 million. President Marty stated on Item 6 it indicates that Medtronic agrees to contribute $355,000 to the City’s Street Reconstruction Fund to help offset traffic impacts on local roads. He pointed out that is a one-time offering so, in other words, it is divided by 26 years. President Marty stated if the City was not using TIF in this project, the City would be getting approximately $400,000 to $500,000 in taxes from this project per year. So, this $355,000 contribution is almost like their donation of $100,000 to the school whereas if they were not using TIF the schools would get in excess of $160,000 a year. Commissioner Thomas stated the EDA needs to clarify its thinking because this is not a discussion of the Phase 1 TIF, which has already been approved and gone through the process. She noted the EDA is now talking about Phase 2. She asked the EDA to keep that in mind when talking about the difference in tax base for development that is already going to be there, and now adding Phase 2. She stated the numbers need to be recalculated but when talking about what they would added for road improvements, it would only be for Phase 2 and the discussion should only relate to that. Economic Development Coordinator Backman stated the question asked is why TIF is going up by 50%. He presented a side-by-side comparison of Phase 1 and Phase 2, noting the qualified costs in Phase 1 were $23,360,000 and Medtronic would get $14.8 million or about two-thirds. He explained that Medtronic had qualified costs in excess of $23 million but will not be reimbursed for all of those qualified costs. Economic Development Coordinator Backman noted the qualified costs for combined Phases 1 and 2 is $46 million, which is double their qualified costs and the number one reason is structured parking. He explained that a five-level structured parking facility has a substantial cost. So, if you compare in terms of the qualified costs of $46 million and what will they get reimbursed, the amount is $22.9 million, or less than one-half. He noted that from a percentage reimbursement basis, they are going down from two-thirds to less than fifty percent. President Marty stated he does not feel sorry for Medtronic because they are “big boys” and can take care of themselves. It is the EDA’s job to look out for its citizens. He stated he talked to Community Development Director Ericson and City Administrator Ulrich about the original agreement, noting that under Section 4.6, b, public improvements, it addresses installing sewer line improvement necessary for the development property and states it is estimated these improvements will cost about $400,000 and the EDA will be reimbursed through available tax increment first from this district. He stated he heard the argument that this will come out of the City’s five percent cap. However it does not say that, it just states the City will be reimbursed Mounds View EDA January 23, 2006 Regular Meeting Page 10 from available TIF first from this district. Economic Development Coordinator Backman explained that the EDA didn’t decide the source of the $400,000. It could come from available TIF, general funds, or capital funds for the water and sewer extensions. Under the proposed agreement, Medtronic will pick up 100% of that cost. President Marty stated the way this agreement is written, in a literal translation, the City would be reimbursed through available tax increment from this district. He stated the City should do that and plug that into the $14.8 million and let Medtronic build Phase 2 but not use TIF, which would help that district pay itself off sooner and get back on the City’s tax rolls. Commissioner Thomas asked President Marty whether he has honestly been under the assumption for the last six months that Medtronic was somehow supposed to pay the $400,000 which had been listed as the City’s responsibility and that it would come from the $14.8 million that they were paying. She asked President Marty if he has been under that misassumption. President Marty stated he figured that he would try it since it does not say otherwise. Commissioner Thomas stated significant addendums say otherwise, that it is the City’s responsibility to pay approximately $400,000 for infrastructure to the site. President Marty stated he will then forego that and the City will pay the $400,000. He stated if the EDA does not use TIF on Phase 2, the property would decertify on a greater accelerated rate, definitely not the full 26 years, and that would give everyone in Mounds View a tax reduction that much sooner. Commissioner Thomas noted this is assuming the developer chooses to proceed with the development at this level. If they don’t get the TIF assistance or chose not to, then Mounds View has a smaller development. She stated this is the balance and the EDA needs to decide what it wants. President Marty stated if they chose not to, then Mounds View is not “on the hook” for another $8.1 million at five percent interest. He noted the spreadsheet says Phase 1 has $23 million in qualified costs and the City is allowing $14.8 million. But with five percent interest on $14.8 million over 25 years, it comes to about $16,952,000 and that is what he is concerned about, paying interest on their money. President Marty stated the interest is projected to be greater than what the EDA originally capped Medtronic at. Economic Development Coordinator Backman stated there is time value of money and for other projects like Sysco, the EDA has paid interest on the TIF notes. City Administrator Ulrich stated the financial advisors have a financial analysis on this project that may answer some questions, or lead to other questions. Mr. McCarty stated he would like the EDA to hold a work session on these issues. He Mounds View EDA January 23, 2006 Regular Meeting Page 11 referenced the June 17 memorandum from City Administrator Ulrich regarding the development proposal and terms of the purchase agreement and contract for private development proposed by Medtronic. He noted that on the issue of the $400,000 of public improvements, the memorandum states: “The City is required to install all necessary off site water and sewer line improvements necessary for the development. This includes the extension of the water main, sanitary sewer and storm water lines. It is estimated these lines will cost approximately $400,000 and the City EDA will be reimbursed through available TIF first from this district and as needed from other available TIF funds.” Mr. McCarty stated these exact words were included in the July 8, 2005 contract and then transferred into the executed agreement. He asked if Economic Development Coordinator Backman is saying that it was never settled and it could come from general funds. He suggested that the documentation says otherwise. Mr. McCarty stated the Mounds View Citizens Taxpayers Association has been following this very closely and with his records and experience, he is hearing things that do not ring true to him. He stated he thinks these issues should be clarified so there is a better relationship in the future than there has been in the past. He asked the EDA to sit down with them, with those who have served on committees, as Councilmembers and Mayors. He encouraged the EDA to sit down with residents to talk about these issues because Mounds View is still their City and while he does not want to be serving on the Council any more, he still has a distinct and real interest in the City of Mounds View. He stated that should be respected and again encouraged the EDA to sit down together and talk about it, noting he may even be able to educate Vice President Stigney about something as well. Vice President Stigney asked President Marty if he can control the meeting from the table or if the audience will continue to control this meeting as Mr. McCarty always likes to do. He noted the purpose of this agenda item is to receive information from Ehlers & Associates. President Marty asked if this can be discussed at the January 30, 2006 work session. Stacie Kvilvang, Ehlers & Associates, stated that Mr. Backman has covered most of the presentation. She stated one of the questions asked is how do Phases 1 and 2 pan out separately. As alluded to, there is $22.9 million available in TIF and $14.8 million is available and agreed to in Phase 1. Based on the $22.9 million it gives you $8.1 million as available in Phase 2 for qualified costs. She noted with side-by-side comparison that in Phase 2 there are about $24.7 million in qualified costs predominantly for structured parking but also for the relocation of the billboards and administrative fees for the Phase 2 contract. So, the $8.1 million will go to those four areas. With the $22.9 million, they are recommending that as far as qualified costs and documentation, they do it all for structured parking. Ms. Kvilvang stated if you look back at the documentation for the $14.8 million it is going toward land acquisition, utilities, site improvements, environmental, and other things. That is a much more lengthy documentation process to go through. She explained that to simplify things in Phase 2 and since the structure parking cost about $24 million, it seems right to document that for the qualified cost of $22.9 million for the tax increment. Ms. Kvilvang referenced the third page of the report that contains the Phase 1 and 2 analysis Mounds View EDA January 23, 2006 Regular Meeting Page 12 done when the project was first looked at. The question is what you would net to the EDA once you pay off all the obligations (golf course bond, interfund loan, services, and improvements). At that time, it was about $5.6 million. As you add Phase 2, because of the increase cost they will be paying and contributing to this project, the EDA will net about $6.7 million or a difference of $1.1 million. She explained that difference, as noted in the report, is that Medtronic is paying the $550,000 obligation to relocate one billboard, $400,000 for utility extension, and the available TIF is the City administrative fee of 5%. Since Medtronic is picking up these costs, it means the City has the 5% available to use for other projects and developments within the City. Ms. Kvilvang stated another question was the cost to pay off the bonds and interfund loan. Because it was paid off sooner than anticipated, there was an interest savings of about $70,000 and there were increased permit fees of about $168,000 for that development. So, that is the $1.1 million increased balance. An analysis was completed out to the year 2033. At that time with Phase 1, anticipating a growth of 3% inflation over time, the $5.6 million will grow to $19.5 million. Based on the new calculations, updates, and tax generation numbers, that $6.7 million will grow to about $30.4 million. President Marty referenced Page 3, Phases 1 and 2, financial analysis. He noted that for Phase 1 it indicates with a 3% revenue growth it would net $5,588,000, and for Phase 1 and 2 together it is $6,724,000. So, by adding Phase 2 the difference is $1,136,000. President Marty noted, as he has stated before, Phase 1 was $14.8 million as a cap and for Phase 2, which is more than one- half of Phase 1, it is another $8.1 million so it would only change the difference by $1.136 million. He stated that it does not seem to be as large of a jump as it should be for $8.1 million. Economic Development Coordinator Backman stated that is an “apples versus oranges” comparison. He pointed out that the EDA is not selling the land twice and that proceeds generated the bulk of the $5.5 million. The $1.1 million reflects savings on relocation costs and utility savings as well. President Marty questioned Page 3, item 14, of the Medtronic term sheet that states: “New language will be added to the agreement regarding any tax court petitions. To adjust value Medtronic is required to notify the City of tax court petitions filed with the tax court on the development property. Language will be added that the City will continue to make TIF payments to Medtronic based upon the minimum assessed agreement value in place at the time and any TIF available for payment will be withheld until the petition is resolved by the court.” He stated in the Medtronic term sheet, it sounds like Medtronic is already planning to petition the courts on the assessments just as they did in Fridley. Shelly Eldridge, Ehlers & Associates, stated this new language was her idea because it will protect the EDA from having to deal with the situation that occurred in Fridley. She explained the language is saying that Medtronic cannot petition underneath the minimum assessment agreement, which is State law. At this point, the County’s process is to withhold the amount of the petition from the minimum assessment agreement. But if the County were to change that practice and if Medtronic were to pay the full amount when the petition comes due later on and the County settles the whole amount, this language says the City would only have to pay the Mounds View EDA January 23, 2006 Regular Meeting Page 13 minimum assessment agreement. If there is a petition from the County and they get more money from the County assessment agreement, then the City is not required to pay that extra amount. She explained this language is directly coming from the situation in the City of Fridley. President Marty stated that makes him feel more comfortable. Commissioner Gunn stated she remembers that conversation from a past meeting. This is the very thing that was discussed and explained why this language was being included. Ms. Eldridge explained that this language will protect the City from getting into any negative financing or paying out what they don’t have. She also noted the minimum assessment agreement goes up at 3% every year as added protection. President Marty stated this will be discussed again at the January 30, 2006 work session. 8. REPORTS Economic Development Coordinator Backman showed the EDA a copy of the new Twin City North Chamber of Commerce map and recognized the attendance of Bruce Nustad, the new Chamber President. 9. NEXT EDA MEETING: Monday, February 13, 2006 at 6:30 p.m. 10. ADJOURNMENT President Marty adjourned the meeting at 7:38 p.m. Respectfully submitted, Recorded and transcribed by: Carla Wirth TimeSaver Off Site Secretarial, Inc.