EDSR 08-08-1995 ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY
MEMORANDUM
TO: EDA Commissioners
FROM: William Rubin,Executive Directo r
DATE: August 8, 1995
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SUBJECT: Agenda Memo for EDA Workshop
INTRODUCTION
1. Prioritization of TIF Expenditures from District No. 1 and No. 3 and Former
District No. 4
In June, EDA Commissioners began discussing how funds from the above-
referenced districts could be expended in the future so as to meet the test of"bond
obligations or contractual obligations"as debated in St. Paul last spring. i
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My notes from the workshop indicate that at least four proposed expenditures
were discussed:
• East highway 10 utilities buydown;
• Business park initiatives(carrying assessments):
• Downtown redevelopment initiatives/riverfront;
• District No. 728 utilities buydown(new highschool)
Included as an attachment to this memo is an estimated from Lori Johnson regarding
balances in TIF No. 1 and No. 3 account(approaching $500,000 plus$51,000 currently
used as 20 percent debt service coverage on the Library bond) and the former TIF No. 4
account(approaching$445,000).
In addition, City Council minutes from October 11, 1993 and November 14, 1994 which
describe previous City Council action on various TIF funds is included for your review.
Previously,the City Council allocated$400,000 in the TIF funds from Districts.No. 1 and
No. 3 to be used for land acquisition of industrial park sites(in the western area) and land
acquisition for industrial sites(eastern area). In late 1994, approximately$430,000 in TIF
funds from former District No. 4 were pledged for the business park and to buydown
utilities for the new senior highschool: Presumably,the$430,000 would replace funds
fromTlF districts No. 1 and No. 3 that were committed by Council action in 1993.
1111
P.O. Box 490 • 13065 Orono Parkway • Elk River, MN 55330-1743 • (612) 441-7420• Fax: (612) 441-7425
Equal Opportunity Housing and Equal Opportunity Employment
Another item discussed at the workshop was that of replacing the TIF funds committed to
the business park with another source of funds. Attached with this memo is a one-page
• summary of various revenue sources the Business Park Task Force discussed many
months ago. There are nogreat revelations here. Following its review of the sources,the
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Business Park Task Force concluded that funds from various TIF accounts would be the
most appropriate to assist in the development of a Business Park. This recommendation
was presented to the City Council, and,the resulting action is found d in the City Council
minutes of October 11, 1993. The conclusion here is that before any funds are shifted
away from the Business Park, some assurances should be made that a similar pool,say,
$430,000 is readily available to the Business Park from another source.
Summary
Clearly, proposed expenditures of TIF funds are greater than funds that are available.
That is precisely the reason for this exercise of prioritizing the expenditures and gaining a
consensus so that the City Council can contractually obligate itself to these expenditures in
the near future.
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TIF No. 1 and No. 3 Estimated Ending Cash Balance
Cash Balance 5/31/95 $809,459.00
Debt Outstanding - Ref. Bonds -371,020.00
Transfers to Debt Service 2/1/95 -102,897.50
Library Bond Obligation - 51,000.00*
1995 Increment 210,900.02
Balance Available $495,441.52 (excludes interest income)
NOTE: TIF District No. 1 was decertified on 12/31/94; TIF
District No. 3 will be decertified on 12/31/95.
1111 * Represents 20 percent debt service coverage on the $255,000 library bond.
This bond is retired in 2007, at which time the $51,000 may be used for
another purpose.
TIF No. 4 Summary
$445,000 + 5/31/95 Cash Balance
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Elk River City Council Meeting Page 2
October 11, 1993
Cpnmerce to see if they would be interested in having a community
• ,billboard sign at their new location.
3,, Business Park Task Force Presentation
Pat Dwyer, Chair of the EDA Business Park Task Force, updated the
Council on the Task Force composition and reviewed the progress and
current status of the Task Force. Pat Dwyer also reviewed the current
status of the existing industrial lots available in Elk River and noted
that the City is quickly running out of industrial lots. He stated
there is a need to develop industrial property. He further noted that
the concept of the Task Force is to have two : different types of
industrial parks available. The Task Force -i0 recommending that a
light industrial park be located in the eastern area of the City along
Highway 10 and that a business park be created along Highway 10 in the
western area of the City.
Pat Dwyer reviewed possible funding sources for the City or the EDA to
acquire the land for the parks. He stated that the Task Force is
recommending to amend TIF Plans No. 1 and No. 3 to enable funds from
TIF Districts No. 1 and No. 3 to be used in the acquisitionof land for
additional industrial and business parks. He noted that th'e is an
estimated $430,000 to $435,000 in funds available from Districts No. 1
and No. 3.
Pat Dwyer also discussed infrastructure improvements necessary for the
parks. He stated that the options available to pay for the
construction of roads and the installation of utilities include the
sale of bonds via Minnesota Statutes, Chapter 429, or an application to
the U.S. Economic Development Administration (USEDA) .
Pat Dwyer stated that the Business Park Task Force is also requesting
that a recommendation be made to the Planning Commission to study the
creation of a new business park zone in the western area of the City.
Mayor Duitsman stated it is important to get industrial development in
Elk River and the only way to get ahead is to dedicate the TIF funds
from Districts No. 1 and No. 3 for land acquisition. Mayor Duitsman
further stated that if money is needed for Main Street redevelopment,
the HRA could dedicate some of its funds to that purpose.
Councilmember Dietz indicated he agreed with Mayor Duitsman in that it
is important to acquire land for industrial development and that the
funds from Districts No. 1 and No. 3 be used.
Economic Development Coordinator Bill Rubin indicated that the money
from Districts No. 1 and No. 3 would be used as seed money and would be
recaptured from land sales. These funds would be" used in subsequent
phases of the business park.
Councilmember Holmgren questioned whether it was necessary to use all
of the money from Districts No. 1 and No. 3. He indicated he would
• rather not commit all of the funds at one time, but would like to see a
project prior to committing the funds.
Elk River City Council Meeting Page 3
October 11, 1993
Jeff Gongoll, EDA President, noted that it is important to commit the
• entire amount at this time if the City is to move forward. Pat Dwyer
indicated that the EDA would like to tie up as much land as possible at
this time and, therefore, it is necessary that all of the funds be
dedicated.
Councilmember Holmgren stated he was hoping some of the money could be
used to develop some of the City's existing park land.
COUNCILMEMBER DIETZ MOVED TO ALLOCATE $400,000 IN TAX INCREMENT
FINANCING FUNDS FROM DISTRICTS NO. 1 AND NO. 3. :TO BE USED FOR LAND
ACQUISITION FOR A BUSINESS PARK ON THE WEST END:OF THE CITY AND LIGHT
INDUSTRIAL PARK ON THE EAST END OF THE CITY. CQ.UN.CILMEMBER HOLMGREN
SECONDED THE MOTION. THE MOTION CARRIED 4-0.
Councilmember Farber noted that it was important that the City provide
a business park on the west end and an industrial park on the east end
of the City.
COUNCILMEMBER HOLMGREN MOVED TO REFER THE CONCEPT OF A BUSINESS PARK
ZONE TO THE PLANNING COMMISSION FOR FURTHER STUDY. COUNCILMEMBER
FARBER SECONDED THE MOTION. THE MOTION CARRIED 4-0. Vie,
6.1. Consider 221st Avenue Improvements
Pat Klaers, City Administrator, informed the Council at the 221st
• Avenue improvement project has been delayed. He indicated that
inancing and timing of the project will be d4 -cussed by the City
E -ineer, Street Superintendent, and himself. H- further noted that
thi issue will be brought back to the Counci at a Council meeting in
Octobe
6.2. Consider PL ,k and Recreation Terms and V. `ancies
City Administr= ,or Pat Klaers noted at the City Council previously
determined that ' .the best time ; to advertise for Park and Recreation
Commission vacanc `: was som ime after Labor Day and before
Christmas. He not that ' ere will be three vacancies at the end of
1993, and all three Coy oners, Dave Anderson, Clair Olson, and Sue
Daleiden, have reque ",d reappointment. The City Administrator
questioned whether t.= wished to reappoint the three
Commissioners or t.'' advertise for the positions and interview new
applicants and ex ,' ing Commissi'•"\ers.
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Councilmember olmgren noted that int, he past there have been times
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when the ty Council advertised a`,,• interviewed both new applicants
and exi ing applicants who havi\, requested reappointment.
Council ,-mber Holmgren suggested that thea ity have a consistent policy
for a boards and commissions. He further " ted that it would be best
to =dvertise for all boards and commissions` o that the door would be
k= t open for new applicants to apply.
• COUNCILMEMBER HOLMGREN MOVED TO ADOPT A POLICY RE ,. -'ING BOARD AND
COMMISSION APPOINTMENTS. THE POLICY WOULD REQUIRE T ALL COMMISSION
Elk River City Council Special Meeting Page 3
November 14, 1994
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4.2 /City Contribution to the Western Area Water Tower
• 4.3/ Utility Commission Participation in the Business Park
City Administrator Pat Klaers stated that in 1987 the City captured TIF funds from
the RDF project with the goal in mind to use these funds for infrastructure
improvements. He indicated that in 1992 the Council informally decided to use
these funds for the Western Area water tower. The City Administrator indicated
that since 1992, the goal of developing a business park has become closer to
reality and this project is in competition for any funds that are available for public
improvements. The City Administrator stated that the City Council and Utilities
must decide at what level of funding the City should participate for the Western
Area water tower project.
The Council and Commission discussed the financial needs of the water utility in
financing the western area water tower. If growth continues at its current high
rate, it is estimated that sufficient water connections will take place to finance
this water tower. However, if the rate of growth decreases, then a shortfall in
meeting its bond obligations may take place.
Mayor Duitsman indicated that he is in support of building a new high school in
the community and feels that some of the TIF funds could be used for this
purpose.
COUNCILMEMBER DIETZ MOVED TO ISSUE BONDS FOR $1,010,000 AND TO USE THE
APPROXIMATELY $429,000 IN TIF FUNDS FOR THE BUSINESS PARK AND TO POSSIBLY
• WRITE DOWN THE UTILITIES FOR THE NEW SENIOR HIGH SCHOOL. COUNCILMEMBER
HOLMGREN SECONDED THE MOTION. THE MOTION CARRIED 5-0.
4.4. Street Lighting Standards
Discussion was held regarding the possibility of offering higher quality street
lighting for both residential and commercial developments. Bill Birrenkott stated
that he will be working on offering other options to residential developers,
however, the developers will have to pay for the upgrade. He further indicated
that he has been working with commercial developers regarding this issue.
4.5. 1995 New Street Lights
Glenn Sundeen indicated that the fifteen new street lights that were approved in
December, 1993 for installation in the City of Elk River will be installed within a
month.
Councilmember Farber requested that the Utilities consider more street lighting
along Jackson Avenue for safety purposes.
4.6. Water Ordinance
The City Attorney handed out a draft water ordinance which would require water
connections similar to the required sewer connections in the sewer ordinance. It
was the consensus that the Utilities would review the ordinance and make their
• recommendations to the City Council. Bill Birrenkott suggested that the City
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CITY SOURCES/CITY PARTICIPATION
RE: ELK RIVER BUSINESS PARK FINANCING CONCEPTS
*Tax Increment Financing (TIF)
- Access funds from existing TIF Districts to purchase land
and/or improve property
- Recapture funds through:
a) cash sales; or b) creating new TIF Districts
- Reuse TIF funds for other phases
*EDA Levy
- Use a portion of the EDA's annual levy to acquire land
and/or make improvements
- Excess levy (reverse referendum)
*HRA
- Historically, the HRA is an urban renewal agency
- Possible partner (i.e. co-developer with EDA)
*Minnesota Statutes, Chapter 429
- Enables cities to bond for infrastructure improvements,
subject to the 20% threshold. That is, 20% of the bond
issue must be used for street, water, sewer, etc. , costs .
Staff is exploring the merits of utilizing the balance of
• a bond issue for, say, land purchases .
*Grants
- U.S. Economic Development Administration
* Funds available for infrastructure costs
* Does not fund 100% of costs
* Finite grant pool
- Utility Companies
* Possible co-developer, or;
* Cash grant to underwrite a portion of the costs
*Internal Financing
- Access funds from various City accounts
- Funds are finite
- Funds need to be repaid
*Borrowed Funds
- Via Contract for Deed
- Via 5 year mortgage against the land
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