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1988-02-09 CC Special Notice of Change CITY OF ALBERTVILLE . POBOX 131 ALBERTVILLE, MINNESOTA 55301 PHONE (612) 497-3384 SPECIAL COUNCIL MEETING FEBRUARY 9, 1988 A spec1al meet1ng of the Albertv111e C1ty Counc11 meet1ng was called to order by Mayor Loretta Roden. Members present 1ncluded Gary Schwenzfe1er, Donatus Vetsch and Bob Braun. Counc11 member Don Cornel1us was absent. Others present 1ncluded Maureen Andrews, Brad Farnham and Bob M111er. The Councll was fust 1nformed of Spnngstead.'ls reactlOn to the notlce of change Maureen had rece1ved a call from Jerry Shannon on Fr1day, February 5th and told the Counc11 not to be surpr1sed to have Mr. Shannon at the next Counc11 meet1ng. The Counc11 d1scussed the lssue and agreed that 1f he d1d come to the meet1ng that they would expla1n to h1m the1r reason1ng for change. Gary Schwenzfe1er summed 1t up by saY1ng that 11ke other sltuat10ns, 1t lS somet1mes good to have a change. Brad told the Counc11 that 1t was 1mportant they are comfortable because 1f a representat1ve of Spr1ngstead lS present, 1t could be a 11ttle tense. . There was some dlscussln about the fact that Spr1ngstead lS known to have contracts w1th cltles that go on for an undeflned perlod of tl~e. A member of the Councl1 asked lf the Clty was currently under such a contract and was told by Maureen that she had asked Sprlngstead for a coPy of any executed contract that they had on fl1e and was lnstead sent out a new contract to slgn. The record should note that thlS contract was never slgned Bob M111er asked Brad lf Juran and Moody, Inc. used a contract and was told no. Brad went on to say that under federal regulatlons the Clty slgn documents at a tlme of publlC sale WhlCh lS a blnder for that sale. Brad told the Councl1 that they also have the optlon to appo1nt Juran and Moody, Inc. as thelr flnanclal adv1sor at the organlzatlonal meetlng ln January of each year But 1n elther sltuatlons, the flrm does not attempt to tle up cltles ln a contract agreement. The Councl1 sa1d that they were satlsfled wlth the change and dld not feel that they had to Just1fy thelr declslon wlth a Sprlngstead representatlve, If one showed up. They made the declslon and were wl11lng to stand by It. The next ltem brlefly d1scussed was a meetlng regardlng the 2,000 + acre 1ndustrlal park. Maureen lnformed the Councl1 that she had recelved a call from the developer's representatlve request1ng a meetlng on Fr1day mornlng wlth herself and the Mayor. . Maureen had already checked wlth Loretta Roden and Gary Schwenzfeler to see 1f they could attend the meet1ng. In add1t10n, she suggested that Brad Farnham be lnvolved w1th the meetlng Slnce a Trade and Economlc Development person would also be at the meetlng. Whl1e d1scuss1ng thlS lssue lt was agreed that 1t was lmportant to have the Clty Attorney and Clty Englneer at the meetlng as well. There was also dlScuss10n about 1f thlS proJ~~e9MC~ a re~~t~tthat lt would be 1mportant We mvlte Home Industrv Busmess SPECIAL COUNCIL MEETING PAGE 2 . to develop a strong workIng team to surround the CouncIl. It was also pOInted out that the CIty would need to keep themselves In control of the sItuatIon In order to protect the Interest of the CIty. There was no other dIScussIon reqardInq thIS Issue other than to Inform the members that the meetIng was scheduled for FrIday at 9:00 a.m. The next Item dIscussed was the LegIslatIve Conference In St. Paul on Tuesday, February 16th. Both Maureen and Brad encouraged the CouncIl to attend If possIble because of the Impact of bIlls that would be Introduced durIng the legIslatIve seSSIon. Brad also pOInted out that the League's conferences also help gIve the CouncIl a sense that they are not the only ones dealIng wIth Issues that are related to operatIng a CIty. After some addItIonal dIScussIon, Gary SchwenzfeIer stated that he would attend the conference along wIth Maureen. The CouncIl next moved on to the dIScussIon of Tax Increment FInancIng. When and how to use It and how It applIed to the Pat Meyer proJect. Brad fIrst revIewed wIth the CouncIl the Juran and Moody presentatIon they use for Tax Increment FInancIng Workshop. He brIefly revIewed the dIfferent portIons of the report WhICh Include. . - What IS Tax Increment FInancIng? - AuthorIty for dOIng Tax Increment FInancIng - Plan and ModIfIcatIons - Approval process - FInancIal reportIng - General polIcIes for undertakIng Tax Increment FInancIng projects - Advantages/DIsadvantages of uSIng Tax Increment FInancIng - The use of Taxable Tax Increment FInancIng There was some dIScussIon about the possIble changes to the tax Increment laws In 1988 and how It mIght Impact the future use of tax Increment money. For example, It was pOInted out that In a new bIll beIng proposed, that the Involvement of the County and the school dIstrIct would be Increased and the reportIng would lIkely be shIfted to the County level to reduce the burden on the State level, but that thIS would not gIve the County the authorIty to say yes or no to development. In addItIon, the CouncIl dIscussed the use of taxable tax Increment bonds. The CouncIl was Informed that the taxable bond prOVIded the CIty WIth more fleXIbIlIty and that It also takes the burden of general oblIgatIon away from the CIty and ShIfts It to the developer. A member of the CounCIl asked If a lot of CItIes were USIng the taxable Tax Increment FInanCIng bonds and was Informed that a majOrIty of the Issues are currently beIng done on a taxable Issue. Reasons for thIS trend are that a taxable bond prOVIdes the CIty addItIonal leverage for the CIty as well as addItIonal protectIon. . The CounCIl next went on to reVIew the Tax Increment gUIdelInes for the CIty of Shorevlew. Brad brIefly reVIewed the goals and objectIves of Shorevlew's Tax Increment FInanCIng process In hopes to gIve the CounCIl a sense of where Shorevlew stands on Tax Increment FInanCIng. Some Issues dIscussed Included the use of eqUIty partICIpatIon In WhIch the CIty shares In the profIt In the event that a development was sold. SPECIAL COUNCIL MEETING PAGE 3 . It was noted that hlS process IS not used very often because of ItS complexlty. The use of equlty partlclpatlon means that the Clty would share In the proflt wlthout belng Involved wlth any of the rlsk that can be Involved In Tax Increment Flnanclng. One of the Councll members asked If the Shorevlew gUldellnes would scare some developers and was told that anythlng was posslble; so that It IS Important that the Councll feel comfortable wlth whatever gUldellnes are developed. It was suggested that Maureen and Brad work a couple of drafts for an Albertvllle gUldellne. It was pOlnted out that at thls tlme the Clty needs to: - Develop a set of gUldellnes WhlCh wlll work for the Clty of Albertvllle - Establlsh a process for gettlng through the process - Provlde an optlon to negotlate dlfferent agreements through Developers Agrrement But that no matter what IS done, the Clty IS puttlng people on notlce that the Councll has thought the process through. - That the Councll has put the burden on the developer to prove why a project should recelve tax Increment money The last Items the Councll revlewed was 1987 Tax Increment Flnanclng Informatlon provlded by the sate. It was apparent that the Clty of Albertvllle has not been opposed to tax Increment flnanclng In the past. . It was suggested the Councll take thlS Informatlon home wlth them to reVlew In more detall and If addltlonal questlons or comments were ralsed they could be dlscussed at a later date. There was also some dlScusslon about the up front cost Involved wlth It so that no budgeted money would be expended on tax Increment. Developers should understand that the up front costs are part of dOlng buslness and shold not be a burden to the general populas. The Councll, after havlng been glven an overVlew of tax Increment flnanclng, went on to dlSCUSS the speclflcs of the Pat Meyer request for tax Increment money. The Councll revlewed brlefly why the tradltlonal bondlng process would not work (see mlnutes of 2-1-88) and what other optlons mayor may not be aval1able. The optlons dlscussed Included: 1. The use of $25,000.00, WhlCh appears to be remalnlng In an earller tax Increment bond. Flnanclal Advlsor's Recommendatlon - That untll the Clty knows where these proceeds came from, they are not allocated. Addltlonally, the Councll was Informed that the Bond Councll would llkely deny the use of proceeds from one project for another. If the funds are determlned to have not been allocated, they , mlght be used to cover some of the debt serVlce of the Issue. . 2. Pass thru the Increment generated by the project. FInancIal Advlsor's RecommendatIons - If the Councll would declde to pass thru the Increment the followlng events would need to occur. a. The developer pay all the up front costs (estlmated at $10,000.00) b. The CIty enter Into a Developer's Agreement to protect the Interest of the Clty c. The Clty would need to determlne whether or not they would llke to share In the Increment generated by the project SPECIAL COUNCIL MEETING PAGE 4 3. Provlde no asslstance In the form of tax lncrement flnanclng . The Councll dlscussed these optlons In detall In an effort to resolve the lssue. A member of the Councll sald lt was hlS oplnlon that by looklng at the flgures generated by the County Assessor, that Mr. Meyer would be better not to use tax lncrement. ThlS lS based on the assumptlon that the County would agree to assess at the hlgh end of thelr estlmate. There was also dlScusslon on the fact that for the elght years, the project would only generate approxlmately $24,000.00 (once up front costs are pald for) translatlng to about $2,000.00 a year. It was pOlnted out that the developer would more then llkely argue that the Clty should allow the up front cost be pald over the years of lncrement because lt lS typlcal that developers don't llke to come up wlth any more money then lS absolutely needed. Donatus Vetsch asked what happens when the assessor and developer agree to assess property at a hlgher than normal value, does that lmpact other projects of slmlllar scale, type or property In and around the project area. He was assured when property lS artlflcally assessed at a hlgher valuatlon that It lS done on a one tlme basls and through a prlvate agreement between the assessor and developer. . At thls tlme Brad asked why the Clty was wllllng to commlt tax lncrement to thlS project. It was pOlnted out that at the beglnnlng the cost flgures were vague and not commltted to. Dlfferent sets of dollar flgures on project cost and how lt was needed In lncrement were glven early In the dlScusslon. Brad was also lnformed that there was some concern about whether or not the project was too small to support lncrement of any Slze. But that the Clty was wllllng to get an oplnlon of Bond Counsel on the lsssue. Flnally the Councll agreed to reVlew the ussue as a courtesy to Pat Meyer and hlS attorney, Slnce the Clty has used tax lncrement In the past. The Councll dlscussed what lmpact the lncrment asslstance for the Meyer project may have on the other two buslnesses. Would lt glve thlS owner an unfalr advantage over the other operators? The Councll was asked to thlnk about what was In lt for the Clty lf the project was approved, dld the project meet any or all of the followlng tests: * What contrlbutlon does the project make to the Clty 1. New serVlce not currently provlded 2. Generatlon of a large number of jobs 3. That wlthout tax lncrement the project would not occur . At thlS pOlnt, the Councll was asked to lndlcate thelr concerns and wlshes on the project. Some lssues ralsed lncluded the concern that lf lncrement was approved on thls project that the Clty would be developlng a precedence for other projects In slmlllar sltuatlons. Would the approval of lncrement reduce the posslblllty of other Tax Increment Flnanclng projects? A member of the Councll pOlnted out that wlth the cost of lncrement belng so low whlle constructlon costs are so hlgh, that he wondered lf lt was worth gOlng through all the work and cost lnvolved. . . . SPECIAL COUNCIL MEETING PAGE 5 . The Coucl1 then talked about the pass thru optlons, provlded that all of the up front costs were covered. It was pOlnted out that the followlng could result: 1. The Clty would have an exposure to cltlzen crltlclsm on why the pass thru was done 2. Do the number of Jobs generated by the project Justlfy the use of Tax Increment Flnanclng money? 3. Wl11 the Clty be precelved as SUbsldlzlng one buslness, whl1e two slml1lar buslnesses are operatlng wlthout any help? If the Councl1 feels comfortable wlth these thlngs happenlng, then they could defend the declslon that the lncrement pass thru should be approved, but lf the Councl1 dld not belleve thls then the project should be turned down. Staff would develop the flndlngs ln what ever manner the Councl1 chose to go on the lssue. At thls tlme the entlre Councl1 lndlcated that they belleved that lt was In the Clty'S best lnterest to deny the lncrement. Bob Ml11er pOlnted out that lt lS lmportant that the Councl1 encourages the project even though the request was denled. It was also agreed that the Clty lS In need of developlng a gUldellne be used when conslderlng these proJects. And that tax lncrement lS used as an lncentlve but not automatlcally assured to every project that asks for It. It was agreed that Maureen and Brad would develop a posltlon paper on the Councl1's declslon for thelr reVlew at the February 16, 1988 meetlng. In addltlon, Maureen was asked to forward a copy to John Grles prlor to the meetlng. It was also suggested that a posltlve Tax Increment Flnanclng statement be ready for the newspaper, to settle any talk about the Councl1's declslon. In addltlon, lt was agreed that Maureen and Brad meet wlth Ken Barthel to settle any of hlS concerns on the lssue of development flnanclng. There was no other buslness so the meetlng was adjourned. "-t'Yl~~~~