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07-10-1989 EDA MIN . . . MEETING OF THE ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY HELD AT THE ELK RIVER CITY HALL CONFERENCE ROOM MONDAY, JULY 10, 1989 MEMBERS PRESENT: Commissioners Tra11e, Schuldt, Dobe1, Holmgren, and Kropuenske MEMBERS ABSENT: None STAFF PRESENT: Richard Fursman, Economic Development Coordinator; and Lori Johnson, Finance Director 1. Pursuant to due call and notice thereof the meeting of the Elk River Economic Development Authority to order at 9:10 p.m. 2. Consider 7/10/89 Economic Development Authority Agenda COMMISSIONER DOBEL AUTHORITY AGENDA. MOTION CARRIED 5-0. MOVED TO APPROVE THE 7/10/89 ECONOMIC DEVELOPMENT COMMISSIONER KROPUENSKE SECONDED THE MOTION. THE 3. Consider 5/22/89 Economic Development Authority Minutes COMMISSIONER HOLMGREN MINUTES. COMMISSIONER 5-0. MOVED TO APPROVE THE 5/22/89 ECONOMIC DEVELOPMENT DOBEL SECONDED THE MOTION. THE MOTION CARRIED 4. Old Hardware Site Mr. Fursman presented the Economic Development Authority (EDA) with a recap of the old hardware site. Mr. Fursman stated that much time and money had been spent by the Developers to clean and prepare the site for construction, only to learn that they would be unable to afford such a venture. Mr. Fursman indicated the holders of the property are interested in building at another site downtown. Mr. Fursman also indicated that the financing necessary to build on the other site was contingent upon the sale of the old hardware site. Mr. Fursman stated that he felt the fire site was a critical portion of downtown and its present state is a depressant, as well as a physical hazard. Mr. Fursman also indicated the site presents design and engineering constraints due to the physical layout of the site. Mr. Fursman also indicated new efforts have to be made by the present owners to move the property as soon as possible and that the City may want to consider purchasing the site, develop a plan, and market it themselves while taking into consideration how the entire block should be developed. Commissioner Tra11e stated that he felt it was important that the Council be aware of the fact that Elmer Anderson, whom owns property at the other end of the block, is considering doing something with his property at this time. He felt the two pieces of property could be tied together with one plan. Page 2 Economic Development Minutes July 10, 1989 . Mr. Fursman stated that the condition of the property as it presently sits will continue to be a detriment to the City and asked that the Council provide direction to staff and to discuss possibilities for the property. Mr. Fursman indicated that members of the community have expressed a desire for City Hall to be located in the downtown area and specifically the old hardware site. Commissioner Schuldt questioned why property as it sits presently could not be marketed by the City as an economic development service to the community without the City purchasing the site. Fursman responded by saying that he felt that would an appropriate function of the EDA and there is actually no need to purchase the site in order to market it, but that the City be advised as to not set a precedent for marketing private property throughout the City regardless of circumstance. Mr. Fursman indicated that one of the advantages to purchasing the property would be the ability of the developers to get a loan to continue with their plans to build in downtown providing for immediate development. . Commissioner Schuldt questioned what the big drawback was to the property not being sold up to this time. Mr. Fursman stated that the property has physical constraints which make designing and building very expensive on this site. He also indicated that a marketing program had not begun on the property and that was the main reason why the property had not been sold in his opinion. Commissioner Kropuenske stated that the Engineering firm, Winkleman, had lead the property owners on to believe that they would purchase this site and build on it themselves, thus keeping the property off the market when it could have been sold. Mr. Kropuenske continued by saying that he felt that an appraisal of the property should be worked up in order to determine the value of the site. Mr. Kropuenske also indicated that the bank may be in a position to take another look at their loan if the City becomes involved in the marketing. Commissioner Schuldt indicated that the City already made a commitment to help with the preparation of the site and was wondering if the City, when it incurs cost through its marketing effort for the site, would be able to recapture those costs when the site preparation takes place. Mr. Fursman indicated that it would be possible to capture the money spent on marketing once the property is sold. Commissioner Tra11e indicated that he felt the City staff should be directed to solicit an appraisal for the property and that if the property does not sell in a timely manner, the City would consider purchasing the property in an effort to spur other development in the downtown area. . Commissioner Holmgren City could be used sale of the property advantages could be questioned whether the condemnation power of the to the advantage of the property owners before the in the ensuing discussion suggested that such a possibility seeing as how a condemnation Page 3 Economic Dev10pment Authority Minutes July 10, 1989 . declaration by the City or threat of condemnation would eliminate a windfall profits tax on the current holders of the property allowing them to have more money for construction. Mr. Kropuenske stated that he felt the City should weigh all the advantages of using the condemnation procedure on the property. Counci1member Dobe1 asked if there had been any inquiries as to the availability of the property with the economic development office. Mr. Furs man indicated that there have been inquiries as to the availability of rental space in the building that was to be constructed, but no specific inquiries into the entire site as it is. Commissioner Dobe1 stated that from what we remember that corner to be, the City seems incomplete and we need something else there pledging; 110% support behind getting something started. COMMISSIONER KROPUENSKE MOVED TO DIRECT THE ECONOMIC DEVELOPMENT COORDINATOR TO PROCEED TO SECURE A PROFESSIONAL APPRAI SAL ON THE PROPERTY OF 665 AND 661 MAIN STREET TO OBTAIN A DOLLAR VALUE OF THE PROPERTY. COMMISSIONER DOBEL SECONDED THE MOTION. THE MOTION CARRIED 5-0. COMMISSIONER SCHULDT MOVED THAT STAFF BEGIN A MARKETING PROGRAM FOR THE JENNE PROPERTY. COMMISSIONER KROPUENSKE SECONDED THE MOTION. THE MOTION CARRIED 5-0. . COMMISSIONER KROPUENSKE MOVED TO SCHEDULE ANOTHER ECONOMIC DEVELOPMENT AUTHORITY MEETING FOR 6:30 ON MONDAY, JULY 17, 1989. COMMISSIONER HOLMGREN SECONDED THE MOTION. THE MOTION CARRIED 5-0. 5. Mork Clinic Mr. Fursman stated that the Mork Clinic has fallen behind schedule. The City had expected the site to have been cleared at this time, but they have run into administrative snags in the development of their plans. Mr. Fursman suggested that Mork be asked for the $5,000 Tax Increment Financing plan deposit so the City can begin writting the Tax Increment Financing plan for the redevelopment area rather than waiting for Mork to get building plans into the City. There was ensuing discussion on the point of how expansive the Tax Increment Finaning Redevelopment District should be. Commissioner Holmgren indicated that he felt the idea of creating the entire block as a redevelopment district merited some investigation. Mr. Fursman indicated that the TIF law would require that the City begin using money generated from the Redevelopment District within four years. Mr. Fursman indicated that the block could be protected from other development without creating a Redevelopment District over the entire block and that it might be better to hold off and create Redevelopment Districts as the project occur so maximum dollars could be generated. The consensus of the Commissioners was to go ahead and begin the process of creating a Tax Increment Financing District for the clinic site. . Page 4 Economic Development Authority Minutes July 10. 1989 . Groundbreaking: Commissioner Tra11e recapping the memo. stated that the clinic would be interested in having the Council present at a groundbreaking ceremony. He indicated that he felt that was an appropriate action by the Council. The entire Council concurred that participating in the groundbreaking would be something that they would support. Use of G.O. Bonds: Mr. Fursman presented the EDA with his reasonings behind investigating the use of General Obligation bonds for the financing of the Mork Clinic. Mr. Fursman stated that he has been investigating ways in which the Economic Development Authority can capitalize itself through its ventures. He went on to say that in order to generate money. you have have money. and that there will be a certain amount of risk in every money making venture that there is. Mr. Fursman stated that the City EDA has to decide what an acceptable risk is and what is fair to the community when the City gets involved with this type of project. . Mr. Fursman indicated that he and Lori Johnson made a visit with the City Financial Advisors to investigate rates and finance structure which could be presented to the EDA as a comparison. A graphic display was handed out to the EDA for their review and discussion. The graphic which was given to the Council displayed rate differentials between General Obligation Bonds. Open Market financing. and financing which could be attained locally within the City of Elk River. The best information available at the time indicated that the General Obligation Bond would indeed provide a more attractive financing alternative than local financing. The General Obligation Bond. however. could not compete with Open Market financing outside of Elk River. Commissioner Kropuenske asked if the General Obligation Bond would be included as part of the City's overall debt limit. Lori Johnson indicated that this type of General Obligation Bond would not be part of the City's debt limit provided a Developer Agreement were entered into with Mork Clinic backing the bond with payments from revenue generated by the Clinic. Ms. Johnson also stated that increasing the City's debt may have an impact on the City's credit rating. but she did not know how likely that would be. . A discussion ensued as to the technical procedures the City would be required in order to establish a General Obligation Bond. There was also discussion on the risk associated with using General Obligation Bonds to finance a private business. It was pointed out that if the business fails the City would indeed inherit the financial responsibility of the bonds as well as the property the bonds are supporting. Mr. Fursman indicated that this is no different than the risk associated with a Tax Increment Financing District. If a company fails and no longer pays taxes. the Tax Increment Financing Districts fall back onto the City as it is the City's responsibility to settle the debt on the TIF bonds. Page 5 Economic Development Authority Minutes July 10. 1989 . Commissioner Tra11e asked that more information on cost comparison and the General Obligation Bond be made available to the EDA at a future date. He requested that Mork provide some information on what they would be looking for as well as opinions as to the affect this loan could possibly have on our bond rating. COMMISSIONER HOLMGREN MOVED THAT THE AGENDA BE CHANGED SO THAT ITEM 19. PAYMENT OF BILLS. WOULD BE CONSIDERED NEXT ~ COMMISSIONER DOBEL SECONDED THE MOTION. THE MOTION CARRIED 5-0. 6. Payment of Bills COMMISSIONER HOLMGREN THI CITY $13.989.25. MOTION PASSED 5-0. MOVED THAT THE ECONOMIC DEVELOPMENT AUTHORITY PAY COMMISSIONER KROPUENSKE SECONDED THE MOTION. THE 7. Motel Redevelopment Update . Mr. Fursman provided the EDA members with an update on the AmericInn proposal. He indicated that the loan for July did not meet the deadline and that the Developers would be looking to put their loan in August. He also indicated that he would be talking to the developers about a $5.000 Tax Increment Financing package fee if they wanted to start developing their plan at this time. Mr. Fursman suggested that when the TIF plan is written that as much of the vacant Crossroads Plat be included in the redevelopment plan as possible. This would be done to capture additional development increment for the extension of utilities and/or site corrections. 8. King and Lowell Block For Sale Mr. Fursman informed the EDA members that the block between King and Lowell on Main Street is available for some sort of development. Mr. Fursman presented the Council with a proposal to bring the various parties together who are currently occupying the block as commercial users and brainstorm with them for a while as to their possible desire to work together to put up a new facility. Mr. Fursman also informed the EDA that two different developers of elderly housing had contacted the Economic Development office and has scheduled appointments to discuss the possibility of senior housing in the downtown area. The EDA indicated that staff should pursue the development proposals and bring back suggestions for the EDA to consider. 9. Dr. Jarmo1uk Project . The Council was updated by Mr. Fursman as to the status of Dr. Jarmo1uk's plans to expand and build a new facility in downtown Elk River. As of this date. there are no specific plans for his building. Dr. Jarmo1uk will be invited to sit in with the proprietors located between Lowell and King to discuss putting up a facility accross the street from where he is today. . . . Page 6 Economic Development Authority Minutes July 10. 1989 COMMISSIONER HOLMGREN MOVED THAT THE EDA CALL A MEETING ON JULY 31. 1989. 'OLLOWING THE CITY COUNCIL MEETING. COMMISSIONER SCHULDT SECONDED THE MOTION. THE MOTION CARRIED 5-0. 11. Adjournment There being no further business. COMMISSIONER KROPUENSKE MOVED TO ADJOURN THE MEETING OF THE ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY . COMMISSIONER HOLMGREN SECONDED THE MOTION. THE MOTION CARRIED 5-0. The meeting of the Elk River Economic Development Authority adjourned at 11:00 p.m. OUll~ SUbmp; <- _ ~ Economic Development Coordinator