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11-10-1997 EDA MIN . MEETING OF THE ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY HELD AT THE ELK RIVER CITY HALL MONDAY, NOVEMBER 10, 1997 Members Present: President Dwyer, Commissioners Farber, Thompson, Duitsman, Bender and Holmgren Members Absent: Commissioner Gongoll staff Present: Paul Steinman. Executive Director; Pat Klaers. City Administrator; Lori Johnson. Assistant City Administrator 1. Call Meetina To Order Pursuant to due call and notice thereof. the meeting of the Elk River Economic Development Authority was called to order at 6:00 p.m. by President Dwyer. 2. Consider Aaenda It was the consensus of the Authority to move agenda item #9 to follow item #5. COMMISSIONER BENDER MOVED TO APPROVE THE NOVEMBER 10. 1997, ECONOMIC DEVELOPMENT AUTHORITY AGENDA AS AMENDED. COMMISSIONER THOMPSON SECONDED THE MOTION. THE MOTION CARRIED 6-0. e 3. Consider Consent Aaenda COMMISSIONER HOLMGREN MOVED TO APPROVE THE CONSENT AGENDA AS FOLLOWS: 3.1. OCTOBER 14.1997. EDAMINUTES - APPROVED 3.2. OCTOBER 20. 1997. SPECIAL EDA MINUTES - APPROVED 3.3. OCTOBER 9 AND OCTOBER 30. 1997. EDA FINANCE COMMITTEE MINUTES - ACCEPTED 3.4. CHECK REGISTER - APPROVED COMMISSIONER FARBER SECONDED THE MOTION. THE MOTION CARRIED 6-0. 4. Consider Resolution Authorizina the Issuance of the EDA's City Hall and Law Enforcement Facility Revenue Refundina Bond. Series 1997 and Execution and Delivery of a Supplement to the Lease/Purchase Aareement and a Supplement to the Trust Indenture in Connection Therewith Assistant City Administrator Lori Johnson provided an overview of the intent to refund the EDA's City Hall and Law Enforcement Facility bonds due to lower interest rates being available. The refunding of this bond will reduce the basic rent payments and result in a savings to the City. It was noted that the City Council will also have to approve this action at the November 17. 1997. City Council meeting. e City Financial Consultant Mr. Paul Donna of Springsted. Inc. distributed the results of the sale of the refunding bonds. Paul stated that the low bidder was Piper Economic Development Authority Meeting November 10. 1997 Page 2 e Jaffrey, Inc. with a true interest rate of 5.0395%. This will result in a savings of $147.480 in the years 2001 - 2011 over the original bonds. COMMISSIONER DUITSMAN MOVED TO ADOPT RESOLUTION 97- 3, A RESOLUTION AUTHORIZING THE ISSUANCE OF THE EDA'S CITY HALL AND LAW ENFORCEMENT FACILITY REVENUE REFUNDING BOND, SERIES 1997 AND EXECUTION AND DELIVERY OF A SUPPLEMENT TO THE LEASE/PURCHASE AGREEMENT AND A SUPPLEMENT TO THE TRUST INDENTURE IN CONNECTION THEREWITH. COMMISSIONER BENDER SECONDED THE MOTION. THE MOTION CARRIED 6-0. 5. Consider the Kamis Micro Loan Application Executive Director Paul Steinman provided an overview of the loan application for the proposed Italian restaurant named Pattiniccio's. Paul noted that a similar request for a $50,000 revolving loan was rejected by the EDA in October and that this current request. after additional bank financing of the project, is now at the $35,000 level. Additionally Paul noted that. as with the first application, the Finance Committee again recommended denial of this request based on the changing priorities of the EDA for which type of businesses should receive city Micro Loans. Mr. and Mrs. Kamis provided comments on their request and goals for their restaurant. The restaurant is to be located at the south end of the Sax grocery store. e Commissioner Bender, who is also a member of the Finance Committee, provided and overview as to why the Finance Committee again recommended denial of the request and stressed that the criteria for issuing loans is being updated. A number of Authority members indicated support of changing the loan priorities, but also indicated that until the changes are formally approved, this application should be considered based on the existing policy. A number of Commissioners indicated their support of the loan request. COMMISSIONER FARBER MOVED TO APPROVE THE $35,000 KARNIS MICRO LOAN APPLICATION WITH AN INTEREST RATE OF 8.5% FOR 10 YEARS WITH A BALLOON IN 4 YEARS. COMMISSIONER THOMPSON SECONDED THE MOTION. THE MOTION CARRIED 3-2-1. Commissioners Bender and Duitsman opposed. Commissioner Dwyer abstained. 9. Tax Increment Financina Concept Discussion for the Earl Hohlen Proiect e Executive Director Paul Steinman introduced this agenda item indicating that nothing is to be committed to or finalized tonight and that the purpose of this agenda item is to have a discussion on whether or not tax increment financing would be considered for the commercial and industrial project that is proposed for the Earl Hohlen property. It is the goal of the developers to have this area declared a redevelopment district to offset some of the extraordinary costs associated with the development of this area. Tony Gleekel, an attomey representing the developer, provided the EDA with some history of the proposed project, including a June discussion with the EDA Economic Development Authority Meeting November 10.1997 Page 3 e wherein the EDA indicated its support for use of TIF if an industrial component is included within the project. Mr. Gleekel indicated that the developers are negotiating to purchase additional property (the Vandenberg property) in order to have some land available for industrial development. The financial feasibility study for the project indicates that city assistance is necessary in order for the project to be accomplished. Mr. Gleekel noted that he was the attorney that has been dealing with the land use and mobile home closing issues on behalf of the developer. Pat Pelstring, Pelstring Capital Corporation, indicated that he has recently been hired by the developers to assist in the TIF application for the project. Mr. Pelstring noted some of the difficult issues associated with this project, including the buy-out cost of the mobile homes, the large amount of soil corrections that are needed on the site, and the utilities that run throughout the site. Mr. Pelstring noted that it is his belief that the project can qualify as a redevelopment district and, when fully developed, the project can generate approximately $4 million of increments. Mr. Pelstring indicated that the developers are not looking for an advantage, but only assistance to bring the site up to a competitive level. It was noted that the developers are not in a great hurry at this time, but are only looking for general support for the concept of using TIF and that details of the proposal will be submitted later. e A number of Authority members indicated their general support for the proposal if it contains industrial property and that it could not support using TIF specifically for the commercial segment of the project. The Authority also indicated its support for TIF if this Economic Development tool could assist the City in covering some of its costs for extending utilities to the site. The Authority was firm in its position that it cannot use TIF to provide the developers with a competitive advantage over other commercial projects. 6. Tax Increment District No.5 Plan Modification Executive Director Paul Steinman provided an overview of the proposed modification to TIF District No.5. Paul recommended that the EDA approve the plan modification in order to allow the expenditure up to $225,000 for the purchase of property and/or to complete public improvements within Development District No.1. COMMISSIONER DUITSMAN MOVED TO APPROVE THE TAX INCREMENT DISTRICT NO.5 PLAN MODIFICATION TO ALLOW THE EXPENDITURE OF UP TO $225,000 FOR THE PURCHASE OF PROPERTY AND/OR TO COMPLETE PUBLIC IMPROVEMENTS WITHIN DEVELOPMENT DISTRICT NO.1. COMMISSIONER BENDER SECONDED THE MOTION. THE MOTION CARRIED 6-0. 7. Tax Increment District No. 17 Concept Approval for the David Decker Proiect . Executive Director Paul Steinman provided an overview of the TIF request. The applicant is requesting $160,000 to assist in the development of a 25,000 square foot multi-tenant industrial facility. The project is proposed to be outside of the city sewer and water district in the southeast part of the community near Highway 10. A second phase of the project could bring the total building size up to 70,000 square feet. Total cost of Phase I of the project is estimated to be Economic Development Authority Meeting November 10. 1997 Page 4 e $1.2 million and there will be a creation of 20 to 25 jobs through businesses moving into this facility. Gary Santwire. representing the developer, indicated that the biggest extraordinary cost associated with this project related to private storm water control. septic system. and street expenses. Paul Steinman indicated that the penalty to the city for creating this T1F district is estimated to be $20.000 and that this penalty can be funded by the EDA through use of the city's development fund. This $20.000 would be a contribution to the project. COMMISSIONER FARBER MOVED TO APPROVE THE CONCEPT FOR TAX INCREMENT DISTRICT NO. 17 FOR THE DECKER INDUSTRIAL FACILITY AS DISCUSSED. COMMISSIONER BENDER SECONDED THE MOTION. THE MOTION CARRIED 6-0. 8. Tax Increment Concept Discussion - Morrell Proiect Executive Director Paul Steinman provided an overview of the T1F request. Paul noted that the Morrell Companies are proposing to construct a 45,000 square foot trucking/distribution/office facility and that they are requesting up to $300,000 in tax increment assistance. Paul noted that the proposed project was approved in June 1997. However, in October 1997, at the request of the Morrell Companies. a number of the development requirements were reduced by the City Council in order to make the project less expensive. e Terry Morrell indicated that the project will cost the Morrell Companies approximately $2.1 million in construction cost excluding land, and that the $300.000 in assistance is necessary for unusual development costs including soil corrections and mitigation of the wetlands. The company does not want to reduce the quality of the project so. in order to save money. the project was downsized. Even with the downsizing of the project, assistance is still needed. Commissioner Holmgren indicated his support for T1F assistance provided that Morrell Companies completely vacate its existing site at the comer of School and Jackson. and that the project is developed so that a Phase II can be constructed to add in the project reductions that were necessary due to financial constraints. In response to a question regarding the financial penalty for this T1F proposal, Paul Steinman indicated that the city's contribution would be its financial participation in the signal at Highway 10 and 171 sf Avenue. Commissioners Dwyer and Bender agreed with the concept of assistance provided that the business is relocated off of the corner of School Street and Jackson. e Terry Morrell indicated that the company's plans for the corner of School and Jackson is to clean up the site. demolish the building, and sell the approximately 3.2 acres. No city financial assistance is planned to be requested for this effort. However, the company hopes to add one additional mini storage building to the area before the site is subdivided and sold. e e e Economic Development Authority Meeting November 10. 1997 Page 5 Discussion took place regarding the development standards for the proposed project. It was noted that when the city provides financial assistance. typically higher development standards for a project are required. Terry Morrell indicated that cost is the number one issue and that if the standards go up. they will most likely have higher costs and no project can then take place. A number of Commissioners agreed that the standards approved by the City Council in October are acceptable even with TIF assistance. It was the general consensus of the EDA to support tax increment financing for the project. 10. Prospect Report/Activity Update No information on this item was provided. Paul stated that information on prospects and activities from September/October/November would be available at the next EDA meeting. 11.1. Marketina Video The EDA decided to review the video at the next meeting. 11.2. MAS Technoloav Update Paul Steinman indicated that MAS Technology has decided against an Elk River incubator location. 12. Adjournment There being no further business. COMMISSIONER HOLMGREN MOVED TO ADJOURN THE ECONOMIC DEVELOPMENT MEETING. COMMISSIONER FARBER SECONDED THE MOTION. THE MOTION CARRIED 6-0. The meeting of the Elk Riv~r Economic Development was adjourned at 7:58 p.m. Respectfully submitted. ~~4!::S~ City Administrator