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HomeMy WebLinkAbout02-13-2006 CITY OF MOUNDS VIEW ECONOMIC DEVELOPMENT AUTHORITY MEETING AGENDA NEW BRIGHTON CITY HALL Monday, February 13, 2006 6:30 PM 1. CALL TO ORDER 2. ROLL CALL: President Marty, Vice President Stigney, Commissioner Flaherty, Commissioner Gunn, Commissioner Thomas 3. APPROVAL OF AGENDA 4. PUBLIC INPUT: Citizens may speak to issues not on tonight’s agenda. Before speaking, please give your full name and address for the minutes. Also, please limit your comments to three minutes. 5. APPROVAL OF MINUTES A. January 23, 2006 EDA Meeting Minutes 6. CONSENT AGENDA A. Set a Public Hearing for Monday, February 27, 2006 at 6:00 pm to Consider the Amended and Restated Development Agreement and Modification to the Business Subsidy Agreement for the Medtronic CRM Project. B. Establish an Executive Session of the EDA immediately following conclusion of the City Council meeting, Monday, February 13, 2006, to consider negotiations relating to the possible acquisition of 2390 County Road 10. 7. EDA BUSINESS A. Consideration of a Modification to the Project Plan for the Mounds View Economic Development Project and the Proposed Modification of Tax Increment Financing District No. 5 8. REPORTS 9. NEXT EDA MEETING: Monday, February 27, 2006 @ 6:00pm 10. RECESS (Adjourn at Conclusion of the Executive Session of the EDA) PROCEEDINGS OF THE MOUNDS VIEW EDA 1 CITY OF MOUNDS VIEW 2 RAMSEY COUNTY, MINNESOTA 3 4 Regular Meeting 5 January 23, 2006 6 New Brighton City Hall 7 803 Old Highway 8, New Brighton, MN 55112 8 6:37 P.M. 9 10 11 1. CALL MEETING TO ORDER 12 13 2. ROLL CALL: President Marty, Vice-President Stigney, Commissioner Gunn, and 14 Commissioner Thomas. 15 16 NOT PRESENT: Commissioner Flaherty 17 18 3. APPROVAL OF AGENDA 19 20 MOTION/SECOND: Gunn/Stigney. To Approve the January 23, 2006 Agenda as presented. 21 22 Ayes – 4 Nays – 0 Motion carried. 23 24 4. PUBLIC INPUT 25 26 Ken Glidden, 5240 Edgewood Drive, stated he has three questions to ask regarding what the 27 EDA does and what is its purpose. 28 29 Community Development Director Ericson explained that the EDA was created by the City of 30 Mounds View to deal with matters relating to economic development and helping to enhance the 31 tax base. In last 20 years, the EDA has been actively involved in enhancing the tax base through 32 TIF and redevelopment of areas that might not have seen the type or extent of development. The 33 EDA has also been involved with growing the employment base. 34 35 City Administrator Ulrich stated it is a good point because the EDA is a legal and corporate body 36 that has the authorities of the HRA as well so a number of housing programs have been 37 undertaken in Mounds View. The EDA has statutory given rights as a separate entity for 38 economic development in terms of contracts and TIF, and activities they can undertake by 39 statute. 40 41 President Marty stated as to TIF, the EDA is involved in what they spend, what goes where, and 42 arrangements for that. 43 44 Mr. Glidden stated Director Ericson, in describing its function, described the EDA as partly 45 Mounds View EDA January 23, 2006 Regular Meeting Page 2 having to do with enhancing the tax base through TIF. He asked whether the purpose of the 46 EDA is to finance development using TIF. 47 48 President Marty stated not necessarily but TIF is controlled by the EDA. 49 50 Mr. Glidden asked if the EDA is the overseer of TIF utilization. President Marty answered in the 51 affirmative. 52 53 Mr. Glidden asked whether TIF is a tool for economic development in the City. President Marty 54 explained that as the EDA sees fit, it can be. 55 56 Mr. Glidden stated he is puzzled a bit at how that benefits the citizens and taxpayers of the City. 57 He stated the EDA is an organization established to carry out economic development in Mounds 58 View but he didn’t hear one word in that description that related to the benefit of the taxpayers of 59 Mounds View. He asked what is the purpose of economic development, and what is the gain for 60 doing it. 61 62 President Marty explained that by encouraging and assisting business with some TIF districts, the 63 City has encouraged them to move into Mounds View and develop land that was vacant. So, 64 once that property has been decertified it has a much greater tax value than it did previously to 65 the development. 66 67 Mr. Glidden suggested that the tax value only is of benefit if the taxes are available for general 68 use. If the taxes are tied to the development paying it, then there is no benefit to the taxpayer, 69 only benefit to the corporation or organization being economically developed. 70 71 President Marty explained that when a district is in effect, there are payments and obligations to 72 developers and businesses. But, in 2004 the City was able to decertify a number of parcels that 73 either did not use TIF but happened to be within the TIF district or their TIF obligation had 74 already been satisfied. By decertifying, those businesses and parcels went back on the tax rolls. 75 76 Mr. Glidden stated he understands this and that it is the legal requirement and definition, which 77 is why the district is limited to eight years. At that point, the taxes then go into the general fund 78 and are available for general use. 79 80 President Marty explained that when the districts were first set up the law and the requirements 81 were different. 82 83 Mr. Glidden suggested that the definitions for the typical term of TIF or economic redevelopment 84 have not been recently changed in the State statute. He stated that the maximum term for TIF is 85 eight years. 86 87 Mounds View EDA January 23, 2006 Regular Meeting Page 3 Commissioner Thomas explained that there are several different types of districts and for 88 redevelopment districts it is eight years. She stated that while there are limited benefits in TIF 89 districts with the tax base, there are other benefits when you encourage development such as the 90 jobs that come into the City. In addition, there are TIF administrative fees that are used for City 91 operations and of a significant benefit to the residents of Mounds View. She noted the term of 92 the TIF district, no matter how permanent it may feel, is still temporary. 93 94 President Marty stated there are different uses for TIF and existing TIF districts that the City has. 95 He stated the City found out in the last few months that due to the requirements on the type of 96 TIF districts that Mounds View has, the City would probably be able to use some of the captured 97 money to put into the City’s streets and infrastructure. He noted that will save the assessment 98 cost to the residents. 99 100 Mr. Glidden asked if the EDA is absolutely sure that can be done to make the funds available for 101 general usage. President Marty clarified that the funds cannot go into the General Fund. 102 103 Mr. Glidden asked if it can go to pay for his street. Commissioner Thomas stated the EDA 104 knows that it can be used for the City’s street projects and infrastructure. 105 106 Vice President Stigney stated it can also be used for trails and street lighting as well and cleaning 107 up contaminated sites. 108 109 Commissioner Gunn noted the City did use some excess TIF to help with the cleanup after the 110 storm and to build the Community Center. 111 112 Mr. Glidden asked about job creation and pointed out that jobs only have a benefit if they are 113 truly new jobs. In terms of revenue or how you define a job, he suggested it has to be a new job 114 and that a transferred job into Mounds View has no financial benefit or tax benefits to Mounds 115 View residents. Mr. Glidden stated his point is that if you are going to undertake economic 116 development on the basis of creating new jobs, then you have to understand the benefit of having 117 new jobs. If you want to undertake economic development to provide new jobs, you have to 118 understand what that means. 119 120 Commissioner Thomas stated that she cannot disagree with Mr. Glidden more. She emphasized 121 that new jobs, even if transferred from somewhere else, are still new jobs. She noted the job pays 122 taxes into the County and that comes into the City. It also provides improvement of the business 123 environment whether transferred jobs or new jobs. Commissioner Thomas explained that when 124 you bring in new development or improve a property tax base, it improves the tax base for all 125 residents and businesses in Mounds View. 126 127 Mr. Glidden asked if anything in his environment changed when the new Cinema was placed in 128 Mounds View. 129 Mounds View EDA January 23, 2006 Regular Meeting Page 4 130 Commissioner Thomas pointed out that several things improved in the environment because the 131 Cinema improved the road infrastructure, sidewalks, lighting, and definitely improved attention 132 to the area for the residents of Mounds View. 133 134 Vice President Stigney stated it also benefits businesses and brings more people in to eat and buy 135 merchandise. In addition, it increases the demand for housing and the value of housing. He 136 noted there are many benefits other than an immediate job creation per se. There are indirect 137 benefits as well as direct benefits. 138 139 President Marty stated he should call time on Mr. Glidden’s Public Input comments. 140 141 Mr. Glidden stated he will then wrap up his questions. He suggested that if the EDA is 142 undertaking economic development there should be clear cut explainable reasons for the 143 economic development the EDA plans to undertake. He stated that relates to some of the items 144 on the agenda tonight. Mr. Glidden again suggested there should be clear cut benefits to the 145 citizens of Mounds View. 146 147 Duane McCarty, 8060 Long Lake Road, stated there are a few things he wants to clarify on the 148 issue of streets and using TIF. He stated he would like to have a statement from the City 149 Attorney whether the City can use TIF funds on streets, whether or not the streets are connected 150 with the TIF district. 151 152 The City Attorney stated it depends on the pool of money it comes from and the bottom line is if 153 Mr. McCarty wants an answer, or to “sharp shoot” staff at this point in time. He stated he will 154 provide Mr. McCarty with an answer and the State statues pertaining to this issue. He advised 155 that the City has been given information that they can utilize certain funds for certain roads. He 156 stated he does not have the State statutes in front of him but can provide that answer to Mr. 157 McCarty. 158 159 Mr. McCarty stated he is sorry staff feels they are “sharp shooting.” He stated it is the right of 160 residents to question elected officials and that should not be construed as “sharp shooting.” He 161 suggested that the question Mr. Glidden posed is whether the City can use TIF for streets but now 162 the City Attorney has said not everywhere because you need to show direct relationship with the 163 TIF district. Mr. McCarty stated the City may not be able to use the funds on the worst streets 164 because that connection does not exist. He stated his opinion that the question Mr. Glidden 165 asked was not properly responded to and it is the responsibility of the Council and should be 166 made clear that there are restrictions and you cannot use TIF for any street you want because 167 there are restrictions. 168 169 Mr. McCarty stated with regard to new jobs, the EDA can say that new jobs fulfill the 170 requirements of the economic development laws even though the jobs are coming from Arden 171 Mounds View EDA January 23, 2006 Regular Meeting Page 5 Hills or Shoreview, they are new jobs to Mounds View. But that is not what the economic 172 development statutes, TIF, or other encouragement for business intended. They describe those 173 employments as increase in employment. He suggested that in a common sense application, it is 174 an increase in jobs and it is not increasing jobs in Ramsey County if the job is being transferred 175 from Arden Hills or Shoreview. Mr. McCarty stated the answers should be more clear for those 176 who are not familiar with TIF details. 177 178 Commissioner Thomas stated before things get too heated, she wanted to clarify some things. 179 She stated that the EDA has already been down this road and yes, there will be some transfer jobs 180 from Shoreview and Arden Hills but there will also be some new jobs beyond what they already 181 have employees for. She asked Mr. McCarty what are the worst streets in Mounds View, noting 182 that 75% of the streets in Mounds View are significantly in need of restructuring and every dollar 183 that can be found to put on streets is applicable. Commissioner Thomas noted that for every 184 dollar that can be used from TIF it will keep that dollar off the assessment rolls. She stated the 185 City has been trying to find alternatives for ten years and to now find out there are expanded uses 186 for the old TIF district pools should show residents the creativity of the City’s advisors to find 187 new uses for TIF because the City is getting desperate. Commissioner Thomas stated that 188 residents should find some joy in the City’s ability to find new uses for TIF. 189 190 City Administrator Ulrich commented that traditionally TIF, as we have thought of it before, was 191 not to be used for general fund purposes or street reconstruction in general. However, Mounds 192 View has older districts with less restriction and because of that they can be used within the 193 development district, which is defined as the entire City. Those funds can be used for 194 infrastructure improvements throughout the entire City. He explained that opinion came from 195 Ehlers & Associates when the City looked at the street projects in terms of maintenance and long 196 term reconstruction. 197 198 Stacie Kvilvang, Ehlers & Associates, explained that typically in TIF districts when creating new 199 ones for economic redevelopment, renovation, renewal, housing, or redevelopment, you can use 200 funds for road and utility improvements tied to that development. However, since several 201 Mounds View TIF districts are pre-1990, there are not the restrictions on those districts. There is 202 a different set of statutes governing those pre-1990 districts. Based on that, bond counsel 203 concurred that the City can use pre-1990 TIF district funds for street reconstruction. 204 205 Vice President Stigney asked if those funds can be used throughout the City. Ms. Kvilvang 206 stated yes, that is correct. 207 208 Mr. McCarty stated he understands that as well and was there when some of the districts were 209 formed, but did not vote for them. He asked why, if there is so much money flowing around 210 those districts, the City’s streets are in the condition they are in. He also asked how many TIF 211 dollars are available that can be used City-wide on streets. 212 213 Mounds View EDA January 23, 2006 Regular Meeting Page 6 City Administrator Ulrich stated there is a budget for TIF dollars that includes other needs 214 beyond street reconstruction. He suggested staff bring back that budget, demonstrate the needs 215 for TIF, and how much can be allocated towards street reconstruction. 216 217 President Marty stated the City is also looking at how to improve the safety and redevelop 218 County Highway 10 and the trailway systems along Silver Lake Road from New Brighton to 219 County Highway 10. He advised that the EDA has talked about a percentage or how to allocate 220 those dollars, noting there are more needs than available TIF. 221 222 President Marty stated to Mr. Glidden that the EDA needs to move on instead of having this back 223 and fourth discussion. 224 225 Mr. Glidden asked if that is the definitive answer to the question he asked. He again asked if TIF 226 can legally be used for street repair or trail development and requested a legally definitive 227 answer. 228 229 President Marty answered in the affirmative. 230 231 Mr. Glidden stated that is not the answer that he received before. 232 233 Commissioner Thomas stated it definitely is the answer Mr. Glidden received before. 234 235 5. APPROVAL OF MINUTES 236 237 President Marty asked staff to review the meeting video tape to include his question on Page 5 to 238 Community Development Director Ericson. 239 240 MOTION/SECOND: Gunn/Marty. To Approve the January 9, 2006 Minutes as corrected. 241 242 Ayes – 1 Nays – 0 Abstain – 1 (Thomas) Motion carried. 243 244 6. CONSENT AGENDA 245 246 None. 247 248 7. EDA BUSINESS 249 250 A. Resolution 06-EDA-214 Authorizing Payment of Pay-As-You-Go Developer 251 Payments to Red Cent Management, L.L.C; Heartland-Mounds View 252 Common Bond; and Bridges Leasing Company 253 254 Economic Development Coordinator Backman reviewed a spreadsheet highlighting the second 255 Mounds View EDA January 23, 2006 Regular Meeting Page 7 half of 2005 TIF developer payment. He noted there are three payments due in February: a 256 residual amount for Building N of $3,066.17; Silver Lake Pointe of $34,078.73; and Midwest 257 I.V. of $27,423. He noted it should be final payments for Building N and Midwest IV. 258 259 MOTION/SECOND: Thomas/Stigney. To waive the reading and adopt Resolution 06-EDA-214 260 Authorizing Payment of Pay-As-You-Go Developer Payments to Red Cent Management, L.L.C; 261 Heartland-Mounds View Common Bond; and Bridges Leasing Company. 262 263 Ayes –4 Nays – 0 Motion carried. 264 265 B. Informational Meeting regarding Phase Two Acceleration of the Medtronic 266 Campus; and Presentation and Discussion of the Medtronic Development 267 Proposal and Terms of the Amended Contract for Private Development 268 269 Economic Development Coordinator Backman reviewed that the project costs for Medtronic, as 270 they are currently configured, total over $125 million, including $65.5 million for building 271 construction, $11 million for land acquisition costs in Mounds View, $24 million for other 272 development costs, such as parking, land acquisition in Blaine, etc., and $25 million for 273 computers, lab equipment and furnishings. That is $125 million of investment that Medtronic is 274 making. The total also excludes $21+ million in State appropriations for the reconstruction of 275 County Road J and replacement of the bridge over I-35W necessary to provide adequate access to 276 the campus. 277 278 Economic Development Coordinator Backman advised that the new Medtronic CRM campus is 279 beginning to be recognized as one of Minnesota’s most important economic development 280 projects. Recently, the national site selection magazine, Business Facilities, announced that 281 Medtronic’s project in Mounds View received the top economic development award in its 282 category for expansion projects in the United States. He noted they will be coming to Minnesota 283 to award the City a plaque, recognizing that this is a significant project. 284 285 Economic Development Coordinator Backman reviewed that on November 28, 2005, the 286 Mounds View City Council directed staff to proceed with discussions with Medtronic regarding 287 the potential acceleration of Phase 2 construction of the campus. On December 12, 2005, the 288 City Council approved setting a public hearing for February 13, 2006 to discuss modification of 289 the TIF plan and the business subsidy necessary for acceleration of Phase 2 to be concurrent with 290 Phase 1. On January 9, 2006, the Mounds View EDA ranked replacement of Well #4 as the 291 highest priority for City infrastructure needs, followed by payment from Medtronic to the City’s 292 roadway fund. Also, the EDA adopted a motion last Friday unanimously recommending 293 approval of the terms of the amended agreement. 294 295 Economic Development Coordinator Backman explained that by combining Phase 1 and 2, the 296 initial phase of the project would be significantly increased. The number of employees would be 297 Mounds View EDA January 23, 2006 Regular Meeting Page 8 increased from approximately 3,000 to over 4,300. The building complex would be increased 298 from 820,000 square feet to 1.2 million square feet. He noted that the Minimum Assessment 299 Agreement would increase accordingly to $96 million. 300 301 Economic Development Coordinator Backman advised that Medtronic has requested 95% of the 302 available tax increment from the entire development (Phases 1 and 2), the same percentage that 303 was used in the current agreement. The available TIF increment for the revised project would be 304 $22.9 million. Thus, by combining the two phases, the TIF note issued by the Authority would 305 increase by $8.1 million. 306 307 Economic Development Coordinator Backman stated that Medtronic would continue to finance 308 their development costs up front and would receive tax increment on a pay-as-you-go basis at the 309 same interest rate as discussed in the first agreement. Under the amended contract, fiscal 310 disparities would continue to be paid inside the district, the same as agreed with the original 311 agreement. The length of the TIF district would remain the same at 25 years. 312 313 Economic Development Coordinator Backman explained that in return for TIF assistance, the 314 City would receive the following considerations: 315 316 1. Medtronic would reimburse the City for administrative costs, estimated at $150,000. 317 2. Medtronic would be responsible to construct water and sewer utilities to the site that 318 was previously the City’s responsibility. In other words, Medtronic would pay the 319 $400,000 that the City was obligated to pay. 320 3. Medtronic would pay 100% of the cost to relocate all four billboards, including the 321 previously agreed City portion, estimated at $550,000 322 4. If the buyout alternative has to be undertaken for the billboards, Medtronic would pay 323 all costs associated with the four signs. 324 5. Medtronic agrees to provide the City up to $545,000 for the replacement of Well #4 325 to ensure adequate water supply. 326 6. Medtronic agrees to contribute $355,000 to the City’s Street Reconstruction Fund to 327 help offset any traffic impacts on local roads due to the Medtronic project. 328 7. If trail costs on the former Sysco property are deemed excessive by the City, Mounds 329 View would not be required to construct the trail and the designated funds would 330 remain for other park uses. If Medtronic wants the trail constructed, Medtronic would 331 pay for the trail costs in excess of $150,000. 332 333 Economic Development Coordinator Backman stated staff is looking for re-affirmation regarding 334 the proposed terms of the amended contract for Phase Two acceleration of the Medtronic CRM 335 Campus. If the proposed terms meet the expectations of the EDA, the next step would be to 336 present them as part of an amended Development Agreement that will be discussed by the City 337 Council at the public hearing scheduled for February 13, 2006. 338 339 Mounds View EDA January 23, 2006 Regular Meeting Page 9 Vice President Stigney asked if the $8.1 million additional project would bring in $22.9 million. 340 He noted that the last set of minutes indicated that Medtronic was waiting for a feasibility study 341 to get a better number to work with and asked if that has been accomplished. Economic 342 Development Coordinator Backman stated the City has been undertaking several feasibility 343 studies. One study was for the water and sewer extensions. He stated he has not seen a written 344 report but was told by Bonestroo that their estimate for extension of water and sewer was 345 $390,000. Staff had used an estimate of $400,000 as the City’s cost so the numbers are still 346 holding relative to that. Economic Development Coordinator Backman stated it is likely that the 347 total $355,000 would go into the street improvement fund. 348 349 Vice President Stigney asked whether $22.9 million is a solid number at this time. Economic 350 Development Coordinator Backman answered in the affirmative. 351 352 President Marty stated the staff report indicates that Phase 2 is 46% of the size of Phase 1. 353 Economic Development Coordinator Backman explained that the estimate for the building would 354 go from $820,000 to $1.2 million, which would be approximately that percentage. 355 356 President Marty reviewed that for Phase 1, Medtronic was granted $14.8 million. He noted that 357 one-half of Phase 1 would be $7.4 million, not $8.1 million. He stated he cannot see how 358 construction costs would be that much greater due to the fact they are being constructed at the 359 same time. President Marty stated during discussion on this last summer and fall, he had asked 360 this question several times as to whether Medtronic will come back for Phase 2 or Phase 3, what 361 are we looking at. President Marty stated he was told by Community Development Director 362 Ericson that all the infrastructure and everything would be in place so there would be minimal 363 charges, probably in the range of $2 million to $3 million. President Marty noted this figure is 364 almost triple or at least double from a few months ago; $8.1 million in his figures is not even 365 close to $2-3 million. 366 367 President Marty stated on Item 6 it indicates that Medtronic agrees to contribute $355,000 to the 368 City’s Street Reconstruction Fund to help offset traffic impacts on local roads. He pointed out 369 that is a one-time offering so, in other words, it is divided by 26 years. President Marty stated if 370 the City was not using TIF in this project, the City would be getting approximately $400,000 to 371 $500,000 in taxes from this project per year. So, this $355,000 contribution is almost like their 372 donation of $100,000 to the school whereas if they were not using TIF the schools would get in 373 excess of $160,000 a year. 374 375 Commissioner Thomas stated the EDA needs to clarify its thinking because this is not a 376 discussion of the Phase 1 TIF, which has already been approved and gone through the process. 377 She noted the EDA is now talking about Phase 2. She asked the EDA to keep that in mind when 378 talking about the difference in tax base for development that is already going to be there, and 379 now adding Phase 2. She stated the numbers need to be recalculated but when talking about 380 what they would added for road improvements, it would only be for Phase 2 and the discussion 381 Mounds View EDA January 23, 2006 Regular Meeting Page 10 should only relate to that. 382 383 Economic Development Coordinator Backman stated the question asked is why TIF is going up 384 by 50%. He presented a side-by-side comparison of Phase 1 and Phase 2, noting the qualified 385 costs in Phase 1 were $23,360,000 and Medtronic would get $14.8 million or about two-thirds. 386 He explained that Medtronic had qualified costs in excess of $23 million but will not be 387 reimbursed for all of those qualified costs. 388 389 Economic Development Coordinator Backman noted the qualified costs for combined Phases 1 390 and 2 is $46 million, which is double their qualified costs and the number one reason is 391 structured parking. He explained that a five-level structured parking facility has a substantial 392 cost. So, if you compare in terms of the qualified costs of $46 million and what will they get 393 reimbursed, the amount is $22.9 million, or less than one-half. He noted that from a percentage 394 reimbursement basis, they are going down from two-thirds to less than fifty percent. 395 396 President Marty stated he does not feel sorry for Medtronic and believes it is the EDA’s job to 397 look out for its citizens. He stated he talked to Community Development Director Ericson and 398 City Administrator Ulrich about the original agreement, noting that under Section 4.6, b, public 399 improvements, it addresses installing sewer line improvement necessary for the development 400 property and states it is estimated these improvements will cost about $400,000 and the EDA will 401 be reimbursed through available tax increment first from this district. He stated he heard the 402 argument that this will come out of the City’s five percent cap. However it does not say that, it 403 just states the City will be reimbursed from available TIF first from this district. 404 405 Economic Development Coordinator Backman explained that the EDA didn’t decide the source 406 of the $400,000. It could come from available TIF, general funds, or capital funds for the water 407 and sewer extensions. Under the proposed agreement, Medtronic will pick up 100% of that cost. 408 409 President Marty stated the way this agreement is written, in a literal translation, the City would 410 be reimbursed through available tax increment from this district. He stated the City should do 411 that and plug that into the $14.8 million and let Medtronic build Phase 2 but not use TIF, which 412 would help that district pay itself off sooner and get back on the City’s tax rolls. 413 414 Commissioner Thomas asked President Marty whether he has honestly been under the 415 assumption for the last six months that Medtronic was somehow supposed to pay the $400,000 to 416 the City and that it would come from the $4.8 million that they were paying. She asked President 417 Marty if he has been under that misassumption. 418 419 President Marty stated he figured that he would try it since it does not say otherwise. 420 421 Commissioner Thomas stated significant addendums say otherwise, that it is the City’s 422 responsibility to pay approximately $400,000 for infrastructure to the site. 423 Mounds View EDA January 23, 2006 Regular Meeting Page 11 424 President Marty stated he will then forego that and the City will pay the $400,000. He stated if 425 the EDA does not use TIF on Phase 2, the property would decertify on a greater accelerated rate, 426 definitely not the full 26 years, and that would give everyone in Mounds View a tax reduction 427 that much sooner. 428 429 Commissioner Thomas noted this is assuming the developer chooses to proceed with the 430 development at this level. If they don’t get the TIF assistance or chose not to, then Mounds View 431 has a smaller development. She stated this is the balance and the EDA needs to decide what it 432 wants. 433 434 President Marty stated if they chose not to, then Mounds View is not “on the hook” for another 435 $1.8 million at five percent interest. He noted the spreadsheet says Phase 1 has $23 million in 436 qualified costs and the City is allowing $14.8 million. But with five percent interest on $14.8 437 million over 25 years, it comes to about $16,952,000 and that is what he is concerned about, 438 paying interest on their money. President Marty stated the interest is projected to be greater than 439 what the EDA originally capped Medtronic at. 440 441 Economic Development Coordinator Backman stated there is time value of money and for other 442 projects like Sysco, the EDA has paid interest on the TIF notes. 443 444 City Administrator Ulrich stated the financial advisors have a financial analysis on this project 445 that may answer some questions, or lead to other questions. 446 447 Mr. McCarty stated he would like the EDA to hold a work session on these issues. He 448 referenced the June 17 memorandum from City Administrator Ulrich regarding the development 449 proposal and terms of the purchase agreement and contract for private development proposed by 450 Medtronic. He noted that on the issue of the $400,000 of public improvements, the 451 memorandum states: “The City is required to install all necessary off site water and sewer line 452 improvements necessary for the development. This includes the extension of the water main, 453 sanitary sewer and storm water lines. It is estimated these lines will cost approximately $400,000 454 and the City EDA will be reimbursed through available TIF first from this district and as needed 455 from other available TIF funds.” Mr. McCarty stated these exact words were included in the July 456 8, 2005 contract and then transferred into the executed agreement. He asked if Economic 457 Development Coordinator Backman is saying that it was never settled and it could come from 458 general funds. He suggested that the documentation says otherwise. 459 460 Mr. McCarty stated the Mounds View Citizens Taxpayers Association has been following this 461 very closely and with his records and experience, he is hearing things that do not ring true to him. 462 He stated he thinks these issues should be clarified so there is a better relationship in the future 463 than there has been in the past. He asked the EDA to sit down with them, with those who have 464 served on committees, as Councilmembers and Mayors. He encouraged the EDA to sit down 465 Mounds View EDA January 23, 2006 Regular Meeting Page 12 with residents to talk about these issues because Mounds View is still their City and while he 466 does not want to be serving on the Council any more, he still has a distinct and real interest in the 467 City of Mounds View. He stated that should be respected and again encouraged the EDA to sit 468 down together and talk about it, noting he may even be able to educate Vice President Stigney 469 about something as well. 470 471 Vice President Stigney asked President Marty if he can control the meeting from the table or if 472 the audience will continue to control this meeting as Mr. McCarty always likes to do. He noted 473 the purpose of this agenda item is to receive information from Ehlers & Associates. 474 475 President Marty asked if this can be discussed at the January 30, 2006 work session. 476 477 Stacie Kvilvang, Ehlers & Associates, stated that Mr. Backman has covered most of the 478 presentation. She stated one of the questions asked is how do Phases 1 and 2 pan out separately. 479 As alluded to, there is $22.9 million available in TIF and $14.8 million is available and agreed to 480 in Phase 1. Based on the $22.9 million it gives you $8.1 million as available in Phase 2 for 481 qualified costs. She noted with side-by-side comparison that in Phase 2 there are about $24.7 482 million in qualified costs predominantly for structured parking but also for the relocation of the 483 billboards and administrative fees for the Phase 2 contract. So, the $8.1 million will go to those 484 four areas. With the $22.9 million, they are recommending that as far as qualified costs and 485 documentation, they do it all for structured parking. Ms. Kvilvang stated if you look back at the 486 documentation for the $14.8 million it is going toward land acquisition, utilities, site 487 improvements, environmental, and other things. That is a much more lengthy documentation 488 process to go through. She explained that to simplify things in Phase 2 and since the structure 489 parking cost about $24 million, it seems right to document that for the qualified cost of $22.9 490 million for the tax increment. 491 492 Ms. Kvilvang referenced the third page of the report that contains the Phase 1 and 2 analysis 493 done when the project was first look at. The question is what you would net to the EDA once 494 you pay off all the obligations (golf course bond, interfund loan, services, and improvements). 495 At that time, it was about $5.6 million. As you add Phase 2, because of the increase cost they 496 will be paying and contributing to this project, the EDA will net about $6.7 million or a 497 difference of $1.1 million. She explained that difference, as noted in the report, is that Medtronic 498 is paying the $550,000 obligation to relocate one billboard, $400,000 for utility extension, and 499 the available TIF is the City administrative fee of 5%. Since Medtronic is picking up these costs, 500 it means the City has the 5% available to use for other projects and developments within the City. 501 502 Ms. Kvilvang stated another question was the cost to pay off the bonds and interfund loan. 503 Because it was paid off sooner than anticipated, there was an interest savings of about $70,000 504 and there were increased permit fees of about $168,000 for that development. So, that is the $1.1 505 million increased balance. An analysis was completed out to the year 2033. At that time with 506 Phase 1, anticipating a growth of 3% inflation over time, the $5.6 million will grow to $19.5 507 Mounds View EDA January 23, 2006 Regular Meeting Page 13 million. Based on the new calculations, updates, and tax generation numbers, that $6.7 million 508 will grow to about $30.4 million. 509 510 President Marty referenced Page 3, Phases 1 and 2, financial analysis. He noted that for Phase 1 511 it indicates with a 3% revenue growth it would net $5,588,000, and for Phase 1 and 2 together it 512 is $6,724,000. So, by adding Phase 2 the difference is $1,136,000. President Marty noted, as he 513 has stated before, Phase 1 was $14.8 million as a cap and for Phase 2, which is more than one-514 half of Phase 1, it is another $8.1 million so it would only change the difference by $1.136 515 million. He stated that it does not seem to be as large of a jump as it should be for $8.1 million. 516 517 Economic Development Coordinator Backman stated that is an “apples versus oranges” 518 comparison. He pointed out that the EDA is not selling the land twice and that proceeds 519 generated the bulk of the $5.5 million. The $1.1 million reflects savings on relocation costs and 520 utility savings as well. 521 522 President Marty questioned Page 3, item 14, of the Medtronic term sheet that states: “New 523 language will be added to the agreement regarding any tax court petitions. To adjust value 524 Medtronic is required to notify the City of tax court petitions filed with the tax court on the 525 development property. Language will be added that the City will continue to make TIF payments 526 to Medtronic based upon the minimum assessed agreement value in place at the time and any TIF 527 available for payment will be withheld until the petition is resolved by the court.” He stated in 528 the Medtronic term sheet, it sounds like Medtronic is already planning to petition the courts on 529 the assessments just as they did in Fridley. 530 531 Shelly Aldrich, Ehlers & Associates, stated this new language was her idea because it will protect 532 the EDA from having to deal with the situation that occurred in Fridley. She explained the 533 language is saying that Medtronic cannot petition underneath the minimum assessment 534 agreement, which is State law. At this point, the County’s process is to withhold the amount of 535 the petition from the minimum assessment agreement. But if the County were to change that 536 practice and if Medtronic were to pay the full amount when the petition comes due later on and 537 the County settles the whole amount, this language says the City would only have to pay the 538 minimum assessment agreement. If there is a petition from the County and they get more money 539 from the County assessment agreement, then the City is not required to pay that extra amount. 540 She explained this language is directly coming from the situation in the City of Fridley. 541 542 President Marty stated that makes him feel more comfortable. 543 544 Commissioner Gunn stated she remembers that conversation from a past meeting. This is the 545 very thing that was discussed and explained why this language was being included. 546 547 Ms. Aldrich explained that this language will protect the City from getting into any negative 548 financing or paying out what they don’t have. She also noted the minimum assessment 549 Mounds View EDA January 23, 2006 Regular Meeting Page 14 agreement goes up at 3% every year as added protection. 550 551 President Marty stated this will be discussed again at the January 30, 2006 work session. 552 553 8. REPORTS 554 555 Economic Development Coordinator Backman showed the EDA a copy of the new Twin City 556 North Chamber of Commerce map and recognized the attendance of Bruce Nustad, the new 557 Chamber President. 558 559 9. NEXT EDA MEETING: Monday, February 13, 2006 at 6:30 p.m. 560 561 10. ADJOURNMENT 562 563 President Marty adjourned the meeting at 7:38 p.m. 564 565 Respectfully submitted, 566 567 Recorded and transcribed by: 568 569 Carla Wirth 570 TimeSaver Off Site Secretarial, Inc. 571