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12-05-1988 EDA MIN . . . MEETING OF THE ECONOMIC DEVELOPMENT AUTHORITY HELD AT THE ELK RIVER PUBLIC LIBRARY MONDAY. DECEMBER 5. 1988 Members Present: Commissioners Gunkel. Dobe1. Tra11e. Schuldt. and Holmgren Members Absent: None Staff Present: Pat K1aers. City Administrator; Dick Fursman. Economic Development Coordinator; Peter Beck. City Attorney; Mike Mulrooney. Economic Development Consultant 1. Pursuant to due call and notice thereof. the meeting of the Elk River City Council was called to order at 7:00 p.m. 2. Consider 12/5/88 EDA Agenda COMMISSIONER DOBEL MOVED TO ADOPT THE EDA AGENDA AS PRESENTED. COMMISSIONER TRALLE SECONDED THE MOTION. THE MOTION CARRIED 5-0. 3. Consider 8/22/88 EDA Minutes Commissioner Gunkel noted that there was a change on page one. item #3. the second motion deleting the word president and adding the word "Assistant Treasurer." COMMISSIONER TRALLE MOVED TO APPROVE THE 8/22/88 EDA MINUTES AS AMENDED. COMMISSIONER SCHULDT SECONDED THE MOTION. THE MOTION CARRIED 5-0. Commissioner Tra11e requested that the EDA minutes be distributed to the EDA members shortly after they have been drafted. 4. Consider Boardwalk Proposal Commissioner Gunkel introduced Mr. Jeff Schoenbauer of Brauer and Associates. She indicated that Mr. Schoenbauer had been hired by the City to prepare plans for a boardwalk along the river and that Mr. Schoenbauer was prepared to present the plans to the EDA. Dick Fursman. Economic Development Coordinator. presented a video to the EDA of Northfie1d. He indicated that Northfie1d is a town similar to Elk River in size and its relationship to the metro area and emphasized the fact that they created a riverwa1k in their community. The emphasis of the video was the Northfie1d riverwa1k and the effect it had on the community as a whole and on the businesses in the community. Mr. Schoenbauer presented the plans of the proposed boardwalk for Elk River. He indicated the main purpose was to create an environment utilizing the natural aesthetics of the river to generate more business and interest in the downtown area. Mr. Schoenbauer indicated that the plans had recently been presented to the downtown business people and were given a favorable review by the group. He also indicated that the Page 2 . EDA Minutes December 5, 1988 group had some concerns that would have to be worked out in the final stages of the development. The main concern expressed by the downtown business people was parking availability. Mr. Schoenbauer indicated that the project was proposed to be done in 4 stages with the first stage being in relationship to the proposed hardware building. This first stage would not require extra parking and would be able to stand alone as its own project. Mr. Schoenbauer distributed a cost estimate of the project broken down in four phases. Mr. Fursman stated that the project can be done over a period of time as funds and priorities are established. He also indicated that the costs portrayed in the estimate are not necessarily the actual cost to the City as some of the costs would possibly be taken care of by the business owners. As engineering costs were not included in the figures the fact that this would raise the total cost was discussed. Commissioner Schuldt indicated that the EDA or City Council has never been asked what they would like to see in the proposed area. Mr. Fursman indicated that the Council had directed Staff to obtain a concept plan, and cost estimates for the boardwalk. . Commissioner Holmgren questioned where the financing would come from for the first phase of the project. Mr. Fursman indicated that the tax increment generated from the new construction which will occur on the vacated site will be used as well as grant monies. Commissioner Tra11e questioned where the money will come from for phases 2, 3 & 4. Mr. Fursman stated that he could only speculate as to where the money would come from such as grant funds, money set aside by the City for parks, park dedication fees, and tax increment financing plus possible assessments to benefited property owners. Commissioner Tra11e indicated he is 1eary of initiating phase one of the Boardwalk plan without knowing how the other three stages will be completed. He indicated that he did not want to "saddle" new councils or EDAs with this type of cost. Commissioner Gunkel indicated that this riverwa1k has been a desire of the City for a long time and stated the City would be neglecting a responsibility if it did not adopt a plan while the opportunity was present. Gary Santwire commented that there was no interest debt service included in the figures for the boardwalk. He further stated that the people in the downtown area could petition for the riverwa1k improvement and the assessment would be minimal if divided between the owners and put on a 15 to 20 year assessment roll, therefore eliminating the need for tax increment financing. . Cliff Lundberg stated that in the next five years there will be much more downtown development. He also indicated that the riverwa1k would spur on downtown redevelopment. Page 3 . EDA Minutes December 5, 1988 Commissioner Tra11e questioned Mr. Rob Vanva1kenberg as to his feelings toward the proposed riverwa1k. Mr. Vanva1kenberg stated he was in favor of the plan. Mr. Vanvalkenberg also indicated that he had plans to improve his property and direct attention toward the river. Mr. Larry Toth, Economic Development Authority Committee member, indicated that the City must be able and ready to progress when the opportunity provides itself. Mr. Toth also said that the EDA should not "what if" the project to death. tht sooner or later a certain risk would be acceptable. COMMISSIONER TRALLE MOVED TO ACCEPT THE RIVERWALK PLAN AS PRESENTED BY BRAUER A'ND ASSOCIATES. THE MOTION DIED FOR LACK OF A SECOND. COMMISSIONER DOBEL MOVED TO CONTINUE THE EDA MEETING UNTIL MONDAY. DECEMBER 12, 1988, AT WHICH TIME AMOTION WILL BE MADE REGARDING THE PLAN FOR THE RIVERWALK. COMMISSIONER HOLMGREN. SECONDED THE MOTION. THE MOTION CARRIED 5-0. The EDA recessed at 9:00 p.m. The EDA reconvened at 9:10 p.m. 5. Consideration of Hardware Redevelopment Proposal . Estelle Gunkel indicated that the City would next be looking at the possibility of redeveloping the hardware store with the use of tax increment financing. Dick Fursman stated that the use of TIF funds is being considered because it is the only financing mechanism the City can afford. Mr. Fursman also stated that the TIF funds will be used to financially help reconstruct a hardware store that is much more than a basic building and which would help the City accomplish its goal of emphasizing the river as an economic development tool. Peter Beck. City Attorney, discussed the appropriateness of this redevelopment project and the use of TIF. He indicated that there are two main issues that must be met to establish a legal TIF district; 1) that the proposed development would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future; and 2) that the standards for a redevelopment district must be met. Mr. Beck stated that the proposed redevelopment does meet the criteria for a TIF district. . Gene Schuldt questioned what the City's obligation would be for anyone else requesting assistance for replacement or remodeling. if the City granted the use of TIF funds for the hardware store. Peter Beck stated that the City would have no legal obligation as the law requires that each project be looked at individually and that the findings be made before a TIF district is allowed. Commissioner Schuldt stated that allowing TIF in one situation and not another would ethically create an unfair economic advantage from one commercial area to the other. Dick Fursman introduced Terry Duffy of Winkleman Company. as the Designer and Engineer of the project. Mr. Duffey presented the design of the proposed hardware store to the EDA. Page 4 . EDA Minutes December 5. 1988 Dick Fursman reviewed a financing option for the project which included private financing. TIF and City revolving loans. He indicated that the property as established will not be able to carry itself financially at this time and presented a hypothetical example of using $36.000 in tax increment. It was indicated that $72.000 of increment may be captured and that part of this could be used for the downtown boardwalk as these two projects are related. Mr. Fursman stated that the use of TIF on the hardware property would not be needed for the entire life of the district but would be weened of City help as the property matured. Commissioner Holmgren stated that if the project was less than 1.5 million. the property tax would be cut in half therefore. resulting in less of a debt responsibility to the owners which would make the project more affordable and eliminate the use of tax increment funds. . Commissioner Gunkel indicated that the City has an asset at its back door but has never had the opportunity to use it. Other development plans for focal point in the community have been discussed. She stated that the opportunity is now present to create a focal point and also that the City has already indicated to the victims of the fire that they are willing to lend assistance. She stated that if the City does not create a TIF redevelopment district of the fire site. they are sending mixed signals to the community and also misleading the victims of the fire. Mike Mulrooney. Economic dated December 5. 1988. Increment Financing. Development Consultant. discussed his memo which reviewed precedents for using Tax Ellen Medenwaldt of 12104 Highland Road questioned why Commissioner Schuldt was opposed to the use of tax increment financing for the project. Commissioner Schuldt responded by stating that using tax increment financing money for a boardwalk is not a commercial use; the boardwalk is not a commercial business nor does it generate jobs or money. Gary Santwire stated that tax increment financing is not the only means of financing development property; private enterprise is an alternative. . Cliff Lundberg representing the downtown corporation. discussed the fact that several studies have been done to beautify the downtown area. When the hardware and boardwalk plans were presented to the downtown people they were very pleased with the project as it enhances the downtown and the entire community. There has been talk about using the riverfront for years and this is the time to make it happen. This will be an impetus for everyone else in the downtown area to tie into the boardwalk which will in turn bring more business to Elk River. He indicated that Elk River will gain more tax dollars than they will lose from this TIF TIF redevelopment district. Dave Decker - property owner on Dodge Avenue - Stated he is opposed to the use of TIF when it is used to give competitors an advantage. Page 5 . EDA Minutes December 5, 1988 Linda Norah questioned why TIF is used for an elaborate building in the downtown area, but not in thecommerical area on Highway 169. COMMISSIONER TRALLE MOVED TO DIRECT CITY STAFF TO PREPARE A TIF REDEVELOPMENT PLAN FOR THE EDA TO CONSIDER REGARDING THE PROPOSED HARDWARE STORE PROJECT. COMMISSIONER SCHULDT SECONDED THE MOTION. Commissioner Schuldt questioned where the additional funds were coming from for the boardwalk. He indicated that by granting the TIF the City would be creating an unfair competitive edge. He further indicated that the issue is proper or improper use of TIF and stated that using TIF for this project would be improper. Mr. Fursman indicated that the City has an open door policy regarding TIF and any other Economic Development tools. He stated that the key to using such funds is to stick to the "but for" test which allows for the use of TIF if the project would otherwise not happen. Commissioner the help of whether the downtown area Holmgren stated many other people develop projects without TIF. He questioned the need of such a large building and City needs 30,000 square feet of commercial area in the when the mall has trouble keeping tenants. . Commissioner Dobel stated that if phase one is developed on the boardwalk, there are still phases 2,3, and 4 that must be funded through unknown means. Commissioner Tralle indicated that an opportunity to make something better of the community, and an opportunity which we get once in a lifetime, has presented itself to Elk River. He stated that if this is denied it will send a negative image to industry and will affect the City's growth for years to come. THE MOTION FAILED 2-3. COMMISSIONERS DOBEL,HOLMGREN, AND SCHULDT VOTED AGAINST THE MOTION. 6.1. Expense Reimbursement to the City The City Administrator indicated that the EDA has incurred expenses through November 7, 1988, in the amount of $13,028.05. He indicated that the EDA had previously approved the expenses of $11,148.68 and that an additional $1,879.37 was incurred for the use of professional services to BDS. Larkin Hoffman and advertising costs in the Minnesota Real Estate Jorna1. JIM TRALLE MOVED TO APPROVE A CHECK IN THE AMOUNT OF $13,028.05. HAROLD DOBEL SECONDED THE MOTION. THE MOTION CARRIED 5-0. . At 11:20 p.m. Commissioner Gunkel indicated that the meeting of the Economic Development Authority was continued to Monday, December 12, ;!6~ River City Hall, 7.00 p.m. Sandy Thackeray Deputy City Clerk