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HomeMy WebLinkAbout1998 [07] Jul 15Pursuant to due call and notice thereof, the Economic Development Authority for the City of St. Joseph met in regular session on Wednesday, July 15, 1998 at 8:00 a.m. in the St. Joseph City Hall. Members Present: Chair Kenneth J. Hiemenz, Board Members Bruce Gohman, Ross Rieke, Michael Deutz, and Ken Twit. EDA Director Chad A. Carlson. Others Present: Advanced Resources, Ed Tschida EDA Director, Chad Carlson introduced Ed Tschida as the speaker for the morning. Ed Tschida presented cash flow assumptions to the EDA Board Members in relation to the USDA loan debt service and the amount of Tax Increment Financing associated with the development of the St. Joseph Business Park. With the USDA funding and the timing the Business Park development, the City of St. Joseph would have to carry up front costs of $90,000 to 100,000. The estimated figure consisted of the first year debt service payment of the USDA Loan and the City dollar commitment with Stearns Electric Association. If the timing the prospect's new facility and TIF dollar captured did not coincide or the USDA loan application was not approved, Tschida presented another alternative. Tschida spoke on the alternative of issuing a General Obligation Tax Increment Bond to cover the cost of installing municipal utilities. The bonds would be at a higher interest rate then the USDA money of 1%, but the up front cost to the City would be substantially less. In addition, the City would have less money to use for the improvements due to associated costs of issuing the bond, but the project could still be done. Tschida went on to explain that with the GO Bonding scenario, the City may have to defer assessments within the Business Park until other development occurs. Based on the prospects plan for development, the TIF dollar would only cover a portion of the project and assessment would result on the remaining property. But depending on the final dollar valuation on the project, the TIF assumptions could be more or less. Twit questioned if the entire $375,000 available through the GO Bond was available for construction. Tschida answered yes, but additional costs of administration, underwriting, fees, bond council, etc would increase the actual amount paid by the City. The cost to the City for issuance is estimated at $40,000. Twit clarified for the EDA Board that the City's contribution to the project would be recovered over the life of the TIF package via administration expense. Deutz questioned the $33,000 that was represented on the cash flow assumptions associated with the TIF scenario. Carlson stated that the $33,000 is the first year of the debt service of the USDA Loan. The City would have to carry that cost until the TIF caught up to the debt payments. the TIF dollars are related to the property taxes paid which are paid a year behind. The amount actually carried by the City will depend on the timing of the project and taxes paid. Gohman asked if there are costs such as administration, technical assistance, legal fees, etc calculated into the project cost and the TIF cash flow assumptions. Tschida responded by stating that there would be approximately $40,000 in administration dollars captured from the TIF to pay those expenses. Carlson added that the TIF policy established by the City requires the prospect to deposit $15,000 to cover legal and consulting fees. The up front cost of Tschida's firm will be paid by the prospect or the party requesting TIF assistance. Twit also stated that with the GO bond scenario that there will be costs that the City will not recoup due to the lack of TIF to cover those costs. They would have to be assessed at a later date. Rieke commented that the City will need to lay the foundation for future developments so those costs can be recaptured through assessment or other means. Additional prospects and development in Business Park area should eliminate any concern of the City loosing money on the development. July 15, 1998 Page 1 of 2 Tschida went on with a discussion on the high probability of success with this project. With the location of St. Joseph and economic activity taking place in the region, the project will ultimately sell itself. Even if the prospect decides not to go through the project, the City won't carry costs for long period of time because he feels confident that development will occur. I-Iiemenz suggested requesting the prospect or any developer to pay a percentage of the first years taxes before they are due. This will avoid the City carrying more costs than they want to. Tschida concurred with this assessment. EDA Board discussed the construction timeline and timing of the USDA funds. Carlson stated that a decision on the application should be in September. Payments and term of the loan with Stearns Electric will be determined when an amount is officially awarded. The percentage rate will be 1 %. Tschida presented a contract for service on the TIF proposal for the Business Park Project. The contract is for $7,500 and will cover the expenses through the duration of the project. Deutz requested clarification on the term of the contract and if the City is liable for expenses if the project does not go through. Tschida explained that if the project goes into the hearings and plans are established, a bill will be sent out. If the project doesn't get to the hearing process and little work is completed, a bill will not be sent. The EDA will not get a bill if this project is dead tomorrow. Twit made a motion to accept the contract from Advanced Resources for consulting work on Tax Increment Financing; seconded by Rieke and passed unanimously by those present. Tschida concluded his presentation with an explanation of the TIF Resolution the City Council will be addressing on July 16`~ , 1998. The resolution is a standard requirement to start the process of establishing a TIF district, primarily needed to notify the County Board of Commissioners and 742 School District that a TIF District is being planned. EDA Director Carlson requested the EDA make a motion to support the resolution and strongly encourage the passage of the resolution by the City Council. A motion was made by Gohman; seconded by Rieke and passed unanimously by those present. EDA Director Carlson updated the EDA Board on current activity within his office. Hiemenz requested that Carlson visit with Gary's Pizza as soon as possible to discuss issues. Adjourn: Twit made a motion to adjourn at 9:50 a.m.; seconded by Rieke and passed unanimously by those present. Chad A. Carlson EDA Director July 15, 1998 Paget oft