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04-10-2006 EDA MINMEETING OF THE ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY HELD AT THE ELK RIVER CITY HALL MONDAY, APRIL 10, 2006 Members Present: President Gongoll, Commissioners, Dwyer, Farber, Gumphrey, Moon and Tveite. Commissioner Klinzing arrived at 5:32 p.m. Members Absent: None Staff Present: Director of Economic Development Catherine Mehelich, Assistant Director of Economic Development Heidi Steinmetz, Community Development Director Scott Clark, and City Clerk Joan Schmidt 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 DWYER AND SECONDED BY COMMISSIONER TVEITE TO APPROVE THE APRIL 10, 2006 EDA AGENDA WITH THE FOLLOWING CHANGES: REMOVED FROM AGENDA -ITEM 5. -CONSIDER NORTHERN NATURAL GAS ENCROACHMENT AGREEMENT FOR LOT 1, BLOCK 1 NORTHSTAR BUSINESS PARK ADDED TO AGENDA - 9.1.OTHER BUSINESS -STATUS REPORT ON DATA CENTER MOTION CARRIED 7-0. 3. Consider Consent Agenda MOVED BY COMMISSIONER MOTIN AND SECONDED BY COMMISSIONER DWYER TO APPROVE THE CONSENT AGENDA AS FOLLOWS: 3.1. MARCH 13, 2006 REGULAR MEETING MINUTES 3.2. CHECK REGISTERS 3.3. BALANCE SHEET 3.4. REVENUE/EXPENDITURE REPORT MOTION CARRIED 7-0. 4. Open Mike No one appeared for open mike. Economic Development Authority Minutes Page 2 April 10, 2006 6. Discuss Draft Amendments to the City's Business Subsidy Policy Director of Economic Development Catherine Mehelich reviewed the history and purpose of the City's Business Subsidies Polity. She stated that the proposed amendments are not significant, and that the revisions are mostly to "cleanup" the language for consistency with State Statue. She asked for the EDA's direction on whether or not the City should establish a specific employment goal or dollar amount of subsidy per job created. Ms. Mehelich reviewed the current employment criteria. She noted that the wage level set by the City will detemune the types of companies the City wants. Also, the EDA is asked how the City should define a "qualifying job" under the employment goals and whether or not existing jobs are to be included in addition to created jobs in dete~**+in+*+g the level of assistance. President Gongoll asked if it was correct tltaz the Business Subsidy Policy was a requirement of the state. Ms. Mehelich stated yes, that the City is required by State law to have a Business Subsidy policy before granting a subsidy over $25,000. Micro Loans over $75,000 qualify as a business subsidy. Commissioner Klinzing noted that the minimum hourly wage requirement was established by the City in accordance with the Statute, and a dollar amount of subsidy per new job is not required by the state. Cortunissioner Dwyer asked how the amendments to Business Center Policy would impact an application such as the data center, since the benefit was more about tax base than job creation. Ms. Mehelich stated that each application is reviewed on a case-by-case basis. Commissioner Dwyer asked if the City would be limiting their options. Ms. Mehelich stated that language could be written into address this issue. Even though this type of business brings in a significant lower job count, the wages for the jobs created are much higher. Community Development Director Scott Clark explained that the Business Subsidy Polity establishes a specific wage floor, but also gives the City an "out" in Section SD. He stated that they would be allowed to deviate from job policies based upon either valuation or job creation through language in the Tax Abatement or Tax Increment Agreement. Commissioner Farber stated he agreed and did not want to exclude potential businesses based on jobs alone. Ms. Mehelich stated that deviations from city policy are allowed as long as it is reported back to the State Department of Employment and Economic Development why the deviation was made and what other goals were established. Ms. Mehelich reviewed language in the State Statute regarding this issue. Commissioner Tveite suggested that a statement could be included stating that if a certain tax base threshold is exceeded, deviation from the wage and job goals could be considered. Commissioner Klinzing agreed that this type language should be included in the Policy to address this. Commissioner Motin stated that the existing Tax Abatement Policy does not have a job requirement in it. Ms. Mehelich stated that the Tax Increment Finance Polity and Micro-Loan Policy does have a requirement for jobs and wages. She stated that this requirement is lefr out of the Business Subsidy Policy to allow flexibility within the different financing tools. Mr. Clark stated that it is very clear the goal of the current policy was employment, and that if the EDA would like to have both options available, two different types of applications could be generated. Ms. Mehelich asked for comments from the Commission regarding "qualifying jobs". She gave an example of a company moving to Elk River from another community and were not Economic Development Authority Minutes Apri110, 2006 Page 3 actually creating arty "new" jobs, but rather would be relocating a significant number of existing jobs. President Gongoll stated that he felt jobs were being created in the City simply by them moving here, since there will always be some turnover. Some discussion of this issue followed. Ms. Mehelich noted that it would make it easier for staff to administer and evaluate the business subsidy reports based on total number of jobs. She noted that it is difficult to interpret where the new jobs need to come from within the Business Subsidy Policy. President Gongoll asked if all jobs aze looked at or just those within the wage level established in the Policy. Ms. Mehelich stated that wages are not averaged; only the jobs that pay $15.00 or more per hour aze counted. Mr. Scott noted that the under the current Tax Increment Financing Policy, $25,000 in financing is available per job, i.e., 10 jobs equals $250,000. President Gongoll stated that he would like to have more flexibility. Commissioner It~in?ing asked how the policies affect existing companies in the City that want to move or expand, since it is the City's goal to retain local jobs. Mr. Clark explained that some cities address the potential of job loss if a business was considering relocation to another community. Ms. Mehelich stated that State Statute allows cities to count retained jobs, if in fact a business can demonstrate that they tmly have an offer to go somewhere else. She stated that this language will be worked into the Cit}~s policy. Also, the City is allowed to set the job and wage goals at zero for any and as marry projects as they want. The only case where the City has done this is with the Orluck Industries project. She noted that the only requirement for deviation from the City's policy regarding jobs and wages is to hold a public hearing. Ms. Mehelich stated that the revised Policy will be brought back to the EDA next month. Discuss Draft Amendments to the City's Tax Increment Financing Policy Ms. Mehelich reviewed the history of the City's Tax Increment Financing Policy and Application. She noted that the policy was amended in 2000 to include the provisions of the MN Business Subsidy Law and the City's Business Subsidy Policy. Ms. Mehelich reviewed the proposed amendments as listed in the staff report to the EDA. Comaussioner Moon asked if the number of points was increased for the ranking. Ms. Mehelich stated that one other section was deleted with the same point number. Commissioner Moon noted that there are two Item #8's. President Gongoll stated he was uneasy about allowing a weighted score for either commercial or industrial because of a large dollar amount being spent on a building. He didn't want the perception that a client would need to spend a lot to get into Elk River. Ms. Mehelich cited examples of building cost for industrial at $50 - $60 a square foot in 2005 and $100/square foot for commercial projects ($ank of Elk River and MetroPlains projects). She noted that the data center was an industrial project and had a higher value of $60 - $90/square foot. Commissioner Tveite noted that there is a 7 point range to qualify for the high eligibility. Ms. Mehelich noted that most of the projects approved by the EDA have fallen into the moderate eligibility range. President Gongoll stated he had concerns about fees of $10,000. Ms. Mehelich stated that those fees are for Tax Increment Financing, not Tax Abatement. She explained that there are many more rules, regulations and processes involved in Tax Increment Financing, including public hearings. Ms. Mehelich stated that the fees are established to cover the Economic Development Authority Minutes Apri110, 2006 Page 4 actual costs to establish a TIF district, prepare a TIF plan and negotiate a developer agreement. She cited an example of significant attorney fees that were incurred by the City due to negotiating numerous requests of the client's attorney. Ms. Mehelich also explained that applicants aze made awaze that they can be reimbursed for the fees as part of the negotiations. Commissioner Dwyer stated that he supported a minimum fee, with the client's understanding that anything over and above that fee will be their responsibility. Ms. Mehelich stated that a final document will be presented to the EDA for their approval next month. 8. Report on Outcome of Development Fonun Assistant Director of Economic Development Heidi Steinmetz provided an update on the Development Forum held March 29, 2006 at the City Hall. She noted that 35 contractors/developers attended the event. Both positive feedback and constructive criticism was received. Limited comments were received regarding the Gateway Business Center due to the unknown nature of the developable property rema;n;ng around the many wetlands on the site. Mr. Clark noted that comments received related to two items which the department is currently addressing, those being duplication of services and uncleaz expectations. He noted that the applications have been revised and tailored to specific requests so that an applicant has a clear understanding of the process, what is expected, and financial impacts. Also, a time wt71 be set up, perhaps once a month, to review a concept with the staff (Building, Planning, Engineer, etc.). Also, a meeting has been scheduled for everyone involved in the inspection process including Wastewater, Utilities, Fire, Engineering, etc. in an attempt to resolve issues regarding duplication and undeaz expectations. President Gongoll asked if future development forums were planned. Mr. Clark stated that he plans to work on the issues as a result of this first forum and see how it goes from there. President Gongoll stated that he felt the Wetland Buffer Ordinance will be a negative restriction for development. He stated that he realizes wetland protection is an issue, but he did not support such a restrictive ordinance. Mr. Clark stated that the proposed ordinance is only adding an additiona120 feet around a delineated wetland. He stated that other cities have a much more restrictive ordinance. President Gongoll stated that his knowledge is from what he has heazd and what the County has put out. 9.1. Status Report on Data Center Ms. Mehelich stated that staff is in touch with the site selection consultant once a week She stated that what we know so faz is that the project schedule is being adjusted. They have indicated that Elk River is in a very favorable position in terms of being considered and they are very appreciative of the City's offer of financial assistance toward the project. 10. Adjournment There being no other business, PRESIDENT GONGOLL ADJOURNED THE MEETING. Economic Development Authority Minutes April 10, 2006 The meeting of the Elk River Economic Development Authority adjourned at 6:26 p.m. Submitted by: ~~B/ t ~e~..~- Recording Secretary gym" Page 5 Joan Schmidt City Clerk