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05-09-2005 EDA MINMEETING OF THE ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY HELD AT THE ELK RIVER CITY HALL MONDAY, MAY 9, 2005 Members Present: President Gongoll, Commissioners Farber, Gumphrey, Klinzutg, and Motin Members Absent: Commissioners Dwyer and Tveite Staff Present: Director of Economic Development Catherine Mehelich, Assistant Director of Economic Development Heidi Steinmetz, City Administrator Pat Klaers, Director of Finance Lori Johnson, City Engineer Terry Maurer and Recording Secretary Debbie Huebner 1. Call Meeting To Order Pursuant to due call and notice thereof, the meeting of the Economic Development Authority was called to order at 5:30 p.m. by President Gongoll. 2. Consider Agenda MOVED BY COMMISSIONER KLINZING AND SECONDED BY COMMISSIONER MOTIN TO APPROVE THE MAY 9, 2005 EDA AGENDA. MOTION CARRIED 5-0. 3. Consider Consent Agenda MOVED BY COMMISSIONER FARBER AND SECONDED BY COMMISSIONER GUMPHREY TO APPROVE THE CONSENT AGENDA AS FOLLOWS: 3.1. APRIL 11, 2005 MINUTES 3.2. CHECK REGISTER 3.3. BALANCE SHEET 3.4. REVENUE/EXPENDITURE REPORT MOTION CARRIED 5-0. 4. Oven Mike No one appeared for open mike. 5. Consider Developer Proposals and Draft Feasibility for Twin Lakes Business Park Director of Economic Development Catherine Mehelich noted that staff has proposed a name change to "Twin Lakes Business Park° for what is previously know as the "EDA- ownedBrown property", and asked that the Commission provide input. Ms. Mehelich reviewed the progress to date regarding the Request for Proposals. She stated that additional information was received from both Amcon and Duke Realty and provided a Economic Development Authority Minutes May 9, 2005 Page 2 summary of the information. Ms. Mehelich stated that it appears to be neither parry is interested in acquiring the property and undertakutg the improvement costs. Staff recommends that the EDA abandon the master developer concept and consider contracting with a broker for marketing the business park. President Gongoll asked if there was a chance the gas line muting through the property could be relocated. Ms. Mehelich stated that this was mentioned in the Duke Realty proposal and that the City Engineer could address the question. Commissioner Klinzing stated that she agreed with staff's recommendation. She fek that the Amcon proposal would create a similar situation to the one that already exists in Elk River Business Park, and that she is not comfortable with how that is progressing. She felt that a 30,000 square foot user would be a good fit for Amcon's current site, and that the City is looking for larger users to enhance the job market and tax base. She felt that Duke Realty's proposal was more in line with what the EDA envisioned for the properly, but she did not see the need for a partnership with them. Commissioner Fazber conctued with Commissioner Klu~zing's comments. He did not feel either of the development partnerships would be in the best interest of the City at this time. He felt that Amcon should have been able to construct more buildings by now. Commissioner Klinzing stated that Amcon has expressed concern with competition from neighboring properties. She was concerned that they have not met the requirements of their agreement with the City. Commissioner Farber asked what the status of Amcon's obligations was. Ms. Mehelich stated that the developer is behind they are only receiving half of the tax increment until they fulfill their build out obligation. She stated that staff continues to work with the developer and provide them with leads. She stated that there a couple of smaller users (20,000 square feet) who have expressed interest. Director of Finance Lori Johnson stated that the Elk River Business Pazk developers aze behind 100,000 square feet in their obligations. She stated that the most recent deadlines were scheduled for January 1, 2004 and January 1, 2006. The developer will not be paid tax increment financing in full until they meet their requirements. Ms. Johnson noted that they will need to maximize the use of the remaining lots in order to be paid in full because of the amount given up for commercial development. Commissioner I{]inzuig asked Ms. Johnson what the impact will be on the City's bonds. Ms. Johnson stated that there will be no impact, since the trunk assessments were paid for by the trunk bonds, and that all bond commitments are paid fast, and that there are two notes to the developer, one is paid fast, and then the other is paid second. She said that the City does not suffer a loss, other than the fact that there is not as much tax base coming in. Commissioner Klinzing asked what would happen if Amcon's obligations were a complete default. Ms. Johnson explained that the City has the first right to purchase any property lefr undeveloped. Comnssioner Moon stated that Amcon has expressed a number of reasons they have been unable to fulfill their build-out commitment, including the City imposing too high of standazds for the Business Park. Commissioner Moon questioned which would generate more profit -the increase in property value by waiting to develop, or the TIF return. Ms. Johnson stated that it would be to Amcon's benefit to develop the property as soon as Economic Development Authority Minutes May 9, 2005 Page 3 possible Ms. Mehelich stated that the price of the Elk River Business Park property is very competitive at $1.80/square fool, compared io $2-$2.25/square foot in Rogers and Otsego. She noted the City will need to market the EDA property at a higher rate due to increased costs of infrastructure and the property will likely be in the $2-$2.25/square foot range, as well. Ms. Mehelich stated that Amcon was hoping to attract more 30,000 - 50,000 square foot users, but that staff is seeing more users looking in the 25,000 square foot range. She stated that the Master developer concept would be a different situation than Elk River Business Park, since in this situation the EDA would continue to maintain control of the property. She stated there would be a 12-18 month time frame for a developer to identify users, and the City would not lose as much time. President Gongoll stated that he felt it was important that they are able to work with a prospect, negotiating through the process, and giving some concessions, if necessary. He stated that he has been through the process with Amcon, Brookstone, and Fischer Investments and that they had to meet some tough market conditions. He felt that the EDA needs to have a good plan that is marketable and competitive. City Engineer Terry Maurer presented the feasibility report for the 80-acre business park site at this time. He stated that although the gas line could be relocated, it maybe very expensive to do so, and the problem would be where to relocate it to. He stated that this issue could be explored further. Mr. Maurer reviewed the conceptual layout of the streets/access points, sanitary sewer and water, storm sewer, ponds and wetlands, and a possible phasing plan. President Gongoll asked if a 10-ton road was sufficient to handle large truck traffic. Mr. Maurer stated yes. Mr. Maurer reviewed five options for the EDA to consider as follows: 1. Platting, staking, constructing all improvements $1.3 million 2. Platting, staking, constructing 1~ phase of business park $720,000 3. Platting, staking, constructing ~k of In phase $250,000 4. Prelutinary platting of property $100,000 5. Doing nothing, continue to wait for developer -0- Mr. Maurer noted that in his discussions with Lori Johnson and Cathy Mehelich, they were leaning more toward Opuon 4 or 5. President Gongoll asked for clarification on Opuon N3. Mr. Maurer explained, noting that Options 1, 2 and 3 commit the City to the layout, and that Option 4 (preliminary platting of the property), only commits them to a concept. He stated that if the property were platted and later the lots were reconfigured, some of the infrastructure could possibly be saved. Ms. Mehelich stated that the logical source for payment of the improvement bond/special assessments would be through tax increment finance (TIF) revenues derived from new developments within the park. Initiating the improvement project prior to pending developments puts the city at risk for not having a source to make bond payments, except through properly tax levy, until TIF revenues are generated. Economic Development Authority Minutes May 9, 2005 Page 4 President Gongoll stated that he supported Option # 1 or 2, but that he understands the financial issues that would need to be addressed. He stated chat he would like comment from the EDA Commissioners on the options. Commissioner Motin stated he did not feel Option # 1 was realistic; he questioned the viability of Option #3, and felt that Options 4 and 5 did not get anything done. Commissioner Farber stated that Option #3 would at least get the improvements in the ground for a few lots to be available, since the major complaint is that there is nothing immediately ready for development. Ms. Mehelich stated that timing of lot availability makes a difference depending on what type of user the city wishes to attract, since smaller users need to build in a shorter time frame and larger users typically have more time before they need to build. Mr. Maurer explained that Option 3 would work for a larger user. Discussion followed regarding Options 2 and 3. MOTION BY COMMISSIONER GUMPHREY AND SECONDED BY COMMISSIONER FARBER TO RECOMMEND THE FEASIBILITY STUDY ADDRESS OPTION N0.3 FOR PRESENTATON AND CONSIDERATION BY THE CITY COUNCIL. MOTION CARRIED 5-0. Ms. Mehelich asked if staff should continue discussions with Duke Realty. It was the consensus of the Commission to advise Amcon and Duke Realty of the status of the EDA's discussions. Ms. Mehelich asked for feedback from the Commission regarding the name of the business park property. It was the consensus of the Commission to tentatively name the property "Norrhstar Business Park", with the understanding that staff would check with the Northstar Comdor Committee for any issues, and providing that the name has not akeady been taken. 6. Sherburne County Economic Development Workplan Assistant Director of Economic Developmem Heidi Steinmetz stated that staff attended the Sherburne County Economic Development Alliance's (SCEDA) Strategic Planning Sessions to assist in developing a workplan. She reviewed the six main goals of the workplan. She noted that preserving land for future development is their number one goal. Commissioner Itlin2ing asked if the County has acquired any additional land or if they have come up with any additional financial incentives, other than what the City has. Ms. Steinmetz stated that she is unaware of any additional land acquired by the County, and ,and she is unaware on any additional financial incentives. She noted that SCEDA has been very supportive of the use of tax abatement in the past. Ms. Steinmetz stated that a consultant is doing research for SCEDA regarding how other communities are dealing with commercial /retail development. Other Business President Gongoll noted that the Chamber of Commerce will be conducting their annual business awards event on Tuesday, May 17, 2005. He noted that M&M Precision Machining Economic Development Authority Minutes Page 5 May 9, 2005 ------------------------------------------ will be receiving the Industrial Business of the Year Award, and John Oliver & Associates will be receiving the Retail Business of the Year Award. Ms. Steinmetz noted that she will be attending the National Business Incubation Association Conference in Baltimore, Maryland, along with Incubator Consultant Harlan Jacobs May 16 through May 18, 2005, and will be speaking on a panel about the Elk River Incubator Program. 8. Adjournment There being no other business, President Gongoll adjourned the meeting. The meeting of the Elk River Economic Development Authority adjourned at 6:22 p.m. Submitted by: ,~~~( 54/x._ cam/ ~iT..~.~..r!r. Joan Schmidt City Clerk