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Home My WebLink About[00] Jun 15 RCAcri~~ of ST .tc~w ~~x MEETING DATE: AGENDA ITEM: SUBMITTED BY: Council Agenda Item 2 June 15, 2009 Public Hearing -Tax Abatement Coborn's Inc Cynthia Smith Strack, EDA Director Judy Weyrens, Administrator BOARD/COMMISSION/COMMITTEE RECOMMENDATION: On May 27th the EDA discussed the preliminary tax abatement application and signified support for utilizing abatement for this project. To those ends, the EDA approved a motion: (a) recommending the City Council approve the pre-application and authorize submittal of the final application and fee ($ 7,500); and (b) recommending the Council call for a public hearing on the request. PREVIOUS COUNCIL ACTION: Following action by the EDA (May 27) and discussion by the City Council, the Council signified support for utilizing tax abatement for this project by: (a) approving the pre-application and authorizing submittal of the final application and fee; and (b) approving a Resolution calling for a public hearing on the request. BACKGROUND INFORMATION: Coborn's Inc. and Rice Building Systems, Inc have submitted a final application for $300,000 in tax abatement assistance for the construction of $2.7 million, 35,500 square foot grocery superstore at 1500 Elm Street East. A copy of the final application is attached for your review as Exhibit A. When completed the project's estimated market value is anticipated to be $3.4 million (using the League of Mn. Cities Property Tax Estimator). The proposed single story structure will be utilized for a supermarket (Phase I) with full build-out of the facility including ancillary automobile fueling (Phase II) and washing structures (Phase III). The building design is similar to Coborn's Superstore structures existing in Clearwater and New Ulm. The proposed commercial facility will provide food service and produce to a regional market area. The request does not involve a payment up front, but rather refunds taxes paid by the company over the term of the project provided the payment does not exceed the agreed upon total value. The final application and processing fee were submitted after the pre-application was accepted unanimously by the Council. The company has provided sufficient detail to City staff/consultants in the form of financial proformas illustrating the project does not generate a sufficient internal rate of return without the abatement assistance primarily due to cannibalization from other Company stores. The Company has certified the project will not move forward at this time without abatement. The original term of the agreement requested was ten (10) years. However, upon further examination the proceeds of abatement of taxes on the building over 10 years did not reach the requested $300,000 amount. As a result the City's Abatement Specialist, Traci Ryan provided three options to the EDA/City at a joint meeting on May 27th. Following the discussion the Company indicated a higher amount of tax reimbursement over a shorter term would provide a greater impact on the project's bottom line. The City Council has had several discussions on the need to increase the tax base and how to best accomplish that goal. The City has a disproportionate amount of residential property and the City cannot lower the tax base without increasing the commercial/industrial tax base. Back in 2000, the City discussed the tax burden of a community with a large residential tax base. Typically residential property costs more to provide services then received through taxation. St. Joseph has been provided an opportunity to work with a local company that has established roots in the St. Cloud area and can provide evidence of giving back to the community. In a time of economic turn down, where people are losing their jobs, we have the opportunity to add 135 jobs. All of which are new to our community. Coborn's has provided the required data to show that the project will not be built without assistance and it is unknown when or if Coborn's will build. As is stated later in this document, the St. Joseph Coborn's is not an entirely new market; it is a shift of market from the current stores in the St. Cloud area. A map later in this packet shows the potential trade area the store is targeted towards. The City Office has received many comments over the past week, some positive and some negative, as I am sure all you have heard as well. We have heard complaints about the affect of competition. As we have stated at meetings, the City cannot make a decision on competition. When Casey's was proposed, the Council and Planning Commission heard concerns that we did not need another gas station we had enough and the local stations may not survive. Recently North County Trailer Sales appeared before the Planning Commission for a special use permit for trailer sales. At the public hearing, a resident stated that we do not need another trailer sales lot as we already have two. The Planning Commission responded that we cannot make a decision based on competition. We have also heard concerns why should the City provide any assistance, the project will go anyways. As is stated throughout this document, the project will not be built without assistance. The assistance requested is 1% of the project cost, which is 3 Million. People have said that Coborn's can afford to pay the costs, but this is not about the name of the developer, rather is there a financipg gap in the project and will the building be built without assistance. While we have heard negative comments we have also received positive comments and residents excited that we will have a large grocery store in St. Joseph. MEETING PROCEDURE: Since the City has not used the Tax Abatement Procedure before, we thought it would be helpful to outline the procedure. STEP ONE: After the meeting is convened, the Mayor will: 1. Open the public hearing to consider the Approval/Denial of Tax Abatement 2. Invite staff to present information regarding the request (Traci and Cynthia) 3. Invite applicant to present information regarding the request (Coborn's) 4. Accept testimony from the public -The purpose is to accept testimony, not engage in a debate. The following is an extract from the League of MN Cities Handbook- Par~icipatiorxn cou~icl etinQ c~~ Ue inti~idatir~~ fc~~~ tltie a~erag+ ciizen~ Ca~auils ~_h~ul, ~xs~le s~aie citi~er~r ire ir~~•xt~cl tcs par-Crct.+~Pe 1~lte~a appr~.pr~:~e sd.li~te~Qd to .~-€tiz ccurte~}~. Indiz-ideal coua~clriizu~ex-s ~11~~iid ~i~t argue ~~.itla:ita2ea=,. C'itizea~_ attead,~tun~il~teetfrigs tea gAr+e ufc~srmat~n fps tine c.~GU~cil to ct~r~aidex_ L? :~rasio~F, ~rdaite~ betta~ ud~;•i~:iu~l c~~.uclr~~ut~et ~ ara~.l eitizeu~ dt~siug c~-~~~racil xut~ng~ i~apprc~prate a~cl ~~ reflect t~,~cll:- ~r~ tl~e .iecisioi~-~a1;i;lQ process "IJ3e c-~~xncil s~~uld ncr#: r~ple pudic cpir~~ ~,y ~~Iri~ f~~• ~ ~hv ~~ d~_ T~~ rua~orit~. ~pitiicra c+f tl~c e atte~dita~ ~,e +c+~atucil ~zeetlgttg dc+es ~ae~t ~ece=y~asily re~faresesrt gs•~tera[ pixLilic cpinior~. 5. Accept any written testimony received (Administrator) 6. Close the Public Hearing (by motion of the Council) 2 STEP TWO: The City Council and EDA discuss the abatement request, taking into consideration the testimony received during the public hearing. STEP THREE: The EDA motions to either: a. Approve the tax abatement request, identifying the total dollar value of the abatement ($ 300,000) and the term of the agreement. b. Deny the abatement request, citing findings for the denial. STEP FOUR: The Council motions to either: a. Accept the recommendation of the EDA: i. Approving Resolution 2009-015 Authorizing Tax Abatement on property within the City of St. Joseph for the purpose of reimbursing some costs associated with property acquisition and site development. ii. Authorizing the Mayor and Administrator to execute the Abatement Agreement between the City of St. Joseph and Coborn's. b. Deny the abatement request citing findings for the denial. (Note: The vote required for approval is a simple majority) The following pages and exhibits will further identify the details, need and impact of the proposed project. SECTION ONE Public Benefits of Business Incentives Table of Full Time Employment Positions/Wages Page 5 Increases in Retail Trade Area Page 6 Increase to Retail Traffic Page 7 Increase in Tax Base Page 7 Spin Off Opportunities Page 7 Build out of Prominent Intersection Page 7 Consistent with Long Range Plans/Zoning (Comprehensive Plan) Page 7 Not Speculative Development Page 7 SECTION TWO Exhibits Exhibit A Final Application Page A-1 to A- 8 Exhibit B Excerpts from the 2007 McComb Group Market Study Page B-1 to B-11 Exhibit C Abatement Plan (Traci Ryan) Page C-1 to C-13 Exhibit D Abatement Terms Letter (Traci Ryan) .Page D-1 to D- 4 Exhibit E Resolution 2009-015 Approving Abatement (Traci Ryan) Page E-1 to E- 2 Exhibit F Abatement Schedule Options (Lori Bartlett) Page F-1 Exhibit G Abatement Agreement (Sue [Dege] Kadlec) Page G-1 to G-11 Exhibit H Preliminary Site Plan Page H-1 to H-4 3