07/14/2005 EDAC Minutes - Laserfiche WebLink

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1 APPROVED CITY OF LINO LAKES ECONOMIC DEVELOPMENT ADVISORY COMMITTEE MINUTES DATE: Thursday, July 14, 2005 MEMBERS PRESENT: J. Schwartz, S. Rymer, B. Combs, K. Corson, J. Kuschke, J. Milbauer, K. Hansmann MEMBERS ABSENT: T. Vacha, J. Helgemoe OTHERS PRESENT: Ms. Divine (part) Al Rolek, Michaela Huot (Springsted) Mike Grochala (part) GENERAL/MINUTES Minutes of June 2, 2005 were approved. TAX ABATEMENT FOR YMCA Ms. Divine introduced Michaela Huot from Springsted, the city’s financial consultant, and Al Rolek, city finance director. The City Council will consider the use of tax abatement for its commitment to the YMCA at the July 25 public hearing. Ms. Huot explained the history of the city’s $1.5 million commitment to the YMCA. Current project costs are $7.5 million. The YMCA has $3 million in donations, they will finance $2.5 million and the city is financing $1.5 million, and contributes $500,000 in land. Separate from the abatement discussion, Mr. Rolek explained that the YMCA is also looking at financing their $2.5 million debt with conduit revenue bonds. They will use the city’s name on the bonds, so the Y can finance at a lower tax exempt interest rate. The city has no liability for repayment. Mr. Milbauer stated Lino Lakes State Bank has agreed to provide the financing for the conduit bonds. In the event of default, the city will be asking for “right of first refusal” on the property, which means the right to assume any debt that would be remaining. Ms. Huot reviewed tax abatement, which is not an actual abatement of taxes, but permits a levy of taxes for development purposes. The amount captured is determined by the local city’s tax rate and can be up to 100% of the land and buildings. To utilize it, you must find that the benefits received are equal the costs to the city and are in the public interest and meet development objectives. Based on the annual levy, the city has a limit of approximately $650,000/year that can be used through tax abatement. The city has one abatement already in place for the Target/Kohls project and that abatement is about $118,000/year through 2009, so even with the new abatement, the city is at only about 50% of its abatement limit. Ms. Huot reviewed the options and the process for financing and why Springsted is recommending a 15-year tax abatement. The G.O. backed abatement bonds are structured to be phased in with the Legacy project to cover principle and interest, so that the levy is offset by the