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Home My WebLink About2009 [05] May 27May 27, 2009 Page 1 of 2 Pursuant to due call and notice thereof, the St. Joseph City Council met in Joint session with the St. Joseph Economic Development Authority at 5:00 PM on May 27, 2009 in the St. Joseph City Council Chambers. Members Present: Mayor AI Rassier. Councilors Dale Wick, Renee Symanietz, Steve Frank, Bob Loso. Administrator Judy Weyrens. EDA Members Present: Chair Dale Wick. Members AI Rassier, Tom Skahen, Ken Jacobson, Carolyn Yaggie-Heinen. EDA Director Cynthia Smith-Strack. City Representatives Present: Finance Director Lori Bartlett, Financial Advisor Traci Ryan. Others Present: Mike Wahlin, Curt Tollikson, Chris Rice, Chaz Rising, Dave Demars, Mike McDonald. Mayor Rassier called the meeting to order and stated the purpose of the joint EDA/City Council meeting is to discuss a preliminary tax abatement application which has been submitted Coborn's Inc. At this time Mayor Rassier turned the floor over to EDA Director Cynthia Smith-Strack. Smith-Strack stated informed the City Council that the St. Joseph Economic Development Authority has received apre-application from Coborn's Inc and Rice Building Systems requesting tax abatement assistance in the amount of $ 300,000 construct a grocery superstore at 1500 Elm Street East. The application requests the funding to fill a financial gap in the project cost. When completed, the estimated market value of the project is anticipated to be 3.4 million with 2.7 million attributed to construction costs. The application requests funding over a ten (10} year period. Smith-Strack clarified that the City has adopted a business subsidy policy and public finance policy in which the City identifies the types of financing assistance that is available. The City most familiar with Tax Increment Financing (TIF) where the property taxes are rebated to the property owner for a specified period of time. The City, County and School District are all required to participate and the taxes are only rebated after the City receives the funds from Stearns County. Tax Abatement is also a rebate of property taxes but the County and School District are not required to participate, it is voluntary. Tax Abatement can extend for a longer period of time as well. The project before the Council at this time does not qualify for TIF due to the nature of the project. The public finance policy requires applicants requesting funding assistance to provide pro-forma information to the City illustrating the gap and need for financing. Smith-Strack stated that the applicant has provided staff with information illustrating the gap. At this time Smith-Strack turned the meeting over to the City Tax Abatement Specialist, Traci Ryan of David Drown and Associates. Traci Ryan presented provided the Council and EDA with an overview of the Tax Abatement process and reiterated the comments of Smith-Strack that the financing is similar to that of TIF which the City is familiar with. One of the unique features of Tax Abatement is the ability to capture tax base from surrounding properties. Ryan presented those present with three alternative tax abatement plans. Each plan has a different assistance period ranging from six to eleven years. The application submitted requested annual assistance in the amount of $ 50,000 per year, totaling $ 300,000. However in projecting the taxes after construction, the project will not generate enough revenue to meet the annual gap. Therefore, Ryan stated that the City would have the option of capturing some of the tax from the new buildings (Centra Care and Central MN Federal Credit Union) under construction. The City would still receive the taxes for the land, but a portion of the taxes from these properties would provide the gap financing requested by Coborn's. Mike Wahlin of Coborn's approached the Council to further address the funding request. Wahlin stated that Coborn's has evaluated the financial impact of the constructing the St. Joseph store and the numbers do not calculate. A store in St. Joseph is not adding an entirely new market, rather a potential shift in customers. While the store is anticipated to gain additional customers it is unlikely that the store will see that increase for a number of years. !f the City does not participate in closing the financial gap, the store May 27, 2009 Page 2 of 2 is not viable and will not be built. Wahlin stated that it is not the intent of Coborn's to threaten the City, but it is a reality that the store needs financial assistance. When questioned by the Council and EDA if the staff has reviewed the financial information presented by Coborn's, both Weyrens and Smith-Strack they had and it was evident that a financing gap existed. Whalin stated they are prepared to show the Council the financial information if they would like to see the data as well. The Council and EDA concurred that if staff had reviewed the information additional data would not be required. Smith-Strack stated that the application illustrates the project will bring the following benefits to the community: 1) Addition of 22 full time jobs and approximately 110 part time jobs with wages ranging from $ 50,000 per year to $ 8.95 per hour; 2) An increase in retail traffic of 8,000 to 9,000 cars per week expanding the retail trade area; 3) A $ 2.67 million structure completing the development of a 13 acre professional/retail PUD at the intersection of CSAH 75 and CR 133; 4) An increase in local property taxes of $ 40,000 per year (initial projection) and 5) Spin off opportunities. The Council and EDA spent considerable time discussing the options presented by Ryan which resulted in the Council indicating that the shorter time period seems to be the best alternative. Mike McDonald, 213 - 13'h Ave spoke in disagreement with the Council. He stated that the shorter time period is best for the developer not the City and urged the Council to consider the time value of money. When asked what the next step in the process is, Ryan responded that the City must determine if the request for abatement is in the best interest of the City and whether or not the applicant can submit the final application. Ryan stated that the City Council must conduct a public hearing notifying the public that the City is intending to provide funding assistance in the form of Tax Abatement to assist Coborn's in the construction of a new 35,000 square foot facility. The tax abatement will rebate property taxes to Coborn's in the amount of $ 300,000. If the Council decides to utilize the tax revenue from abutting properties this information must be included in the hearing notice as well. The Council questioned if at this time they have to determine the term of the abatement. Ryan stated that they can advertise the abatement as the longest term presented at this meeting and they can reduce the term at the hearing. They could not lengthen the term at the hearing. The Council and EDA concurred the hearing notice should include capturing the City tax not only from the Coborn's site but a portion from the abutting properties located in the PUD. (EDA Action) Jacobson made a motion to accept the preliminary application of Coborn's Inc requesting tax abatement in the amount of $ 300,000 and authorize submittal of the final application and request that the City Council take the same action and call for a public hearing to provide the assistance. The motion was seconded by Skahen and passed unanimously. (City Council Action) Symanientz made a motion to accept the recommendation of the EDA authorizing the following: 1. Submittal of the final application and fees for tax abatement in the amount of $ 300,000. 2. Approve the Resolution setting the date of June 15, 2009 for the public hearing to consider providing financial assistance to Coborn's Inc via Tax Abatement. Further, the hearing notice will include the utilization of all properties in the Coborn's PUD. The motion was seconded by Frank and passed unanimously. The EDA and City ncil meeting was adjourned by consensus at 4:45 PM ~2'.~G~ J d Weyr s d inistrator