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HomeMy WebLinkAbout2009 [06] Jun 15June 15, 2009 Page 1 of 6 Pursuant to due call and notice thereof, the City Council and the Economic Development Authority met in special session on Monday, June 15, 2009 at 7:00 in the St. Joseph City Hall, opening the meeting with the Pledge of Allegiance. City Council Members Present: Mayor AI Rassier, Councilors Renee Symanietz, Dale Wick, Bob Loso, Steve Frank, City Administrator Judy Weyrens EDA Members Present: Chair Dale Wick. Commissioners AI Rassier, Tom Skahen, Ken Jacobson City Representatives Present: Finance Director Lori Bartlett, EDA Consultant Cynthia Smith-Strack, Tax Abatement Consultant Traci Ryan. Others Present: Brad Dullinger, Nelda Dehn, Thomasette Schuller, Jennifer Steinkamp, Anne & Jesse Johnson, Mike McDonald, Mike Wahlin, Curt Tillotson, Chas Rising, Greg Kacures, Kathy Lyon, Scott & Marlys Thompson, Traci Ryan, Chuck Fredricks, Mike Deutz, Paul Rowe, Bill Arndt Public Hearing -Coborns Tax Abatement: Mayor Rassier called the hearing to order and stated the purpose of the hearing is to consider a request for Tax Abatement to allow for the construction of a 36,000 square foot super store adjacent to CR 75. The request has been submitted by Coborns. Cynthia Smith-Strack, EDA Consultant, approached the Council and EDA to give a brief overview of the proposed project and the request for tax abatement. Strack stated that Coborn's has submitted a request for tax abatement in the amount of $ 300,000 to construct a 35,000 square foot retail superstore. The proposed development will create 22 new full-time jobs meeting or exceeding the wage requirements stated in the St. Joseph Business subsidy policy. Strack clarified that the developer is requesting Tax Abatement as they do not meet the requirements for Tax Increment Financing (TIF). TIF is used for industrial uses or redevelopment. Tax Abatement and TIF both utilize gap financing through apay-as- you-go tax mechanism. TIF requires participation from the County and School District, whereas, Tax Abatement is voluntary. Tax abatement provides a refund of the property taxes for a specified period of time or for a specific periods of time. The amount of abatement is related to the demonstrated need. The City Council and EDA have previously approved the use of Tax Abatement, concurring that the project would not move forward with the public assistance. The City's general tax abatement policy is as follows: "The City of St. Joseph and the EDA shall consider tax abatement for projects that serve to accomplish the City's goals for housing and economic development as they may change over time. " The general tax abatement policy was approved by the City Council and EDA after the EDA was formed in 2001. The policy was then modified in 2002. Strack stated that comments have been received questioning why Coborn's needs tax abatement or public assistance. Strack stated that in reviewing the project financial statement the project does not cash flow. The abatement requested is equal to 10% of the project cost. Strack stated that public financing is typically controversial as the general public has an opinion that business should pay for itself. The City and EDA are committed to increasing the tax base in St. Joseph and if the City does not offer incentives development will not occur. Once the project is completed, there will be an increased tax capacity resulting in a larger pool from which taxes are derived. This will lead to a more diversified tax base. Strack then stated that the proposed development will have a positive impact on retail within the City of St. Joseph based on the following: • Increase retail destination drawing power • Increase in retail traffic in CSAH 75 area June 15, 2009 Page 2 of 6 • Capture workers heading home that reside West, Northwest, and Southwest of St. Joseph • Keep payroll dollars in the community • Shrink retail leakage problem • National shift in economic model, away from production and manufacturing toward services, including retail. Along with the retail benefits, she also stated some of the public benefits that would be achieved if the abatement request were approved. There would be an increase in the number and diversity of quality jobs that are available locally, as Coborn's intends to create approximately 25 full-time positions and 50- 100 part-time positions, adding approximately $982,176 payroll dollars to the community annually. Based on the 2007 McComb Group study, "the retail trade area would increase by 140%", resulting in increased retail activity. The increased tax base would result in an annual increase in City Taxes of approximately $25-$30,000 as well as increased revenues for the County and the School District. Strack stated that, previously, the Council and EDA met to review Coborn's preliminary tax abatement application. The purpose of the preliminary application is to determine whether or not the project would qualify for abatement under the City's policy. By authorizing the final application and accepting the application fee in the amount of $7,500, as well as calling for the public hearing, the EDA recommended and the Council accepted the project as being conceptually eligible for abatement. She re-stated that the application requested tax abatement in the amount of $300,000 for a term of 10 years. After an analysis by an abatement specialist, Traci Ryan, it was determined the 10 year term is not sufficient to assist with the financial gap. Strack provided the Council and EDA members with four optional terms: 11 year, 9 year, 7 year and 6 year terms. Strack added that the shorter term increases the Net Present Value for the developer. Traci Ryan, David Drown Associates, approached Council and EDA to discuss the request. She stated that based on the projected property taxes, the property would not generate enough revenue in 10 years to provide $300,000 of assistance. Rather, eleven (11) years would be needed. If both the value of the improved land and building are combined, the property may generate enough revenue in 9 years. Ryan stated that St. Joseph is unique in that this piece of property is part of a PUD consisting of three businesses. She suggested utilizing the additional building revenue from all three parcels to shorten the term for the tax abatement. The City would still be able to retain all of the taxes for the land. The land values for these three properties would amount to approximately $23,000 in property taxes annually. The estimated amount of property taxes generated by the buildings is approximately $56,000 annually. After the $50,000 abatement payment, there is still $6,000 remaining. Ryan added that if the property taxes received are less than the payment amount, they would not be liable for that payment. The proposed plan would be a 6 year term not to exceed 10 years or $300,000. Ryan advised the Councilors and the EDA members that, by law, a public hearing is required for tax abatement. A resolution must be passed specifying the length of the terms, the amount and the parcels included. The developer will be required to execute a Tax Abatement Agreement which will identify the terms of the assistance. While it is not uncommon for the Abatement Agreements to be transferable, Ryan recommends the City reserve the right to approve the transfer. By approving the transfer, if such occurs, the can assure that assistance is needed by requiring the new owner to provide evidence that assistance is needed. With respect to job creation, Ryan stated that they are planning to add 25 full-time positions, but they are only required to create 22 positions. The Abatement Agreement will require the maintenance of the 22 positions and the developer will be required to submit an annual report verifying compliance with the agreement. In addition to the 22 full time positions, it is anticipated that 50 part time jobs will be added. Frank commented that the new Superstore will also collect the additional'/z percent sales tax on eligible items which will also be a benefit to the City. Based on the 2004 ballot question, those funds will be used for transportation, parks and a community center. Frank questioned that anticipated additional sales tax revenue to which Weyrens stated it is hard to determine that actual increase as it is part of the regional sales tax that is pooled. St. Joseph actually receives more than $ 1.00 for each $ 1.00 collected. June 15, 2009 Page 3 of 6 Mike Wahlin approached the Councilors and Commissioners on behalf of Coborns. He stated that he is the Director of Construction and Maintenance. He was accompanied by Curt Tillotson (CFO), Mark Zellman (accounting staff) as well as the architect/builder, Rice Building Systems. Coborn's is requesting tax abatement in the amount of $300,000. He added that tax abatement is a fairly common tool and it is used by many other cities to help spur growth. The recent study done by the McComb Group stated that a grocery store would help expand the trade area by 140%. Based on that, he added that other businesses will benefit from the construction of a grocery store as well. Wahlin stated that Coborn's is looking at making a $ 6,000,000 investment in the community by constructing a 36,000 square foot superstore. The Coborn's board approved the development provided tax abatement is received over a six (6) year period. If the City decides to change those terms, they would need to review it again. Mike McDonald, 213 13"'Avenue SE, approached the members of the Council and EDA to state his opposition to the abatement as it currently stands. The applicant originally asked fora 10 year period. He questioned why it dropped to 6 years when the abatement specialist suggested 11 years. The cover letter provided stated that the funds would come from taxes paid by the company. In his opinion, the Credit Union, Clinic and Centra Care have nothing to do with each other. The original application asked for 10 years as well as the delay of WAC/SAC Tess until 2 years after completion. McDonald questioned whether the completed superstore will be a grocery store or will it have the car wash, etc. With respect to the WAC/SAC fees, he suggested that they either pay the 2007 rate and pay it with their building permit or wait 2 years and pay it at the new rate. Based on the numbers, he is unsure why the City doesn't approve the 11 years rather than the 6. In his opinion, 1 additional year will not be a big deal to Coborns. He stated that the City should look at what it can save over an 11 year term. He also questioned why we want to give them money any sooner than what they requested. The City is currently worried about how to pay for various street improvement projects and LGA is not going to get better in the next few years. He stated that it would be better for the City to pay off some of its existing debt rather than giving Coborns money sooner as they do not owe interest to Coborns. He concluded by stating that he is against the terms, not the tax abatement itself. Brad Dullinger, 1224 Cary Ct, spoke in opposition to the proposed tax abatement. He stated that to have a superstore 6 blocks away, would be convenient. He grew up in St. Stephen and knows this community very well. He questioned where the additional 125 jobs will come from and then stated that they will come from existing businesses in the area cities. He stated that he assumes that the superstore will have a floral, gas and liquor area and there are 9 local businesses that would be affected by that. He questioned whether it is fair for them to eliminate competition as well as get a tax break. He stated that he is looking at this from the perspective of a citizen that purchases items from those local businesses. He added that some of the affected businesses are located in downtown St. Joseph and questioned how the downtown will grow if the businesses are negatively affected. He asked the City to be careful as these local businesses already made the investment in our community. According to Dullinger, if they are unable to build it and make financial sense out of it, then now is not the time. They already have stores 3.5 miles away. If the closest grocery store was 35 miles away, he feels it would be a different circumstance. In conclusion, he asked the City representatives to be considerate of those who have served the community. Chuck Fredricks spoke on behalf of the Central Minnesota Federal Credit Union. He stated that they are putting up a nice, new building because of the new clinic and the future Coborns superstore. They are supportive of the Coborns development. He stated that the Credit Union also owns 4.9 acres of land across the road that they plan to sell. They have a potential developer who may want to purchase that land. In his opinion, the future Coborns store will bring more business to St. Joseph which will help the entire community. Others say that this new store will hurt local businesses and he is not sure that it will. Scott Thompson, 317 12th Avenue SE, spoke in favor of the abatement request and the proposed development. He began by stating that this is a "no brainer" and if Coborns wants $500,000 over 5 years, the City should give it to them. He questioned how many other small cities get this type of opportunity? According to Thompson, why would people drive 6 miles by car when they can go 6 blocks by bike to do their shopping? Currently, residents coming through St. Joseph from Albany, Rockville, Cold Spring and June 15, 2009 Page 4 of 6 other area cities are not going to stop to shop for groceries or have pizza. In his opinion, the City should give them what they want. Mike Deutz spoke in opposition to the proposed abatement request. As a local business owner, he stated that he is disappointed in the lack of common judgment and lack of intelligence. He has been a member of the St. Joseph Community longer than many have been on the City boards. According to Deutz, there is no reason to approve an abatement request for a company that gives away millions of dollars each year. In the past, he has served on the EDA and they fought to grow this town and bring more business to St. Joseph. Their main focus was; however, not on the Hwy 75 business district. He is opposed to the abatement request and stated that in his opinion this company does not need the help. There are other businesses such as floral shops, liquor stores, the Meat Market and the local grocery store that will be affected by the proposed development. He added that when Casey's moved to St. Joseph, they did not request any TIF or Tax Abatement. He concluded by stating that they should pay their way like everyone else and he feels that this is wrong. Paul Rowe, St. Joseph Liquor Shoppe, stated that he agrees with Mr. Deutz and that a company that makes $545 million annually or $1.3 million daily, does not need help. He feels that they should pay taxes like every other business owner in town as this is going to have an effect on the local businesses. Many other business owners are struggling to pay their taxes and mortgages. He stated that he has been a business owner in St. Joseph for 20 months and his taxes have increased 57%. His expenses keep rising. Although a Coborns Superstore will create jobs in the community, it will also create job loss for the local businesses. Bill Arndt spoke on behalf of the Northland Plaza. He stated that this is not all roses. Having a Coborns is a good thing, as it shows that we are making progress; however, he feels that they should pay for it on their own. If the abatement is approved, he stated that, for 11 years, they will use City services such as police, fire, etc. Arndt concluded by stating that they can make it work without Tax Abatement. Greg Kacures, Floral Arts, also addressed the Councilors and Commissioners as a local business owner opposed to the request. He stated that their business was the first business on that side of town and they have been in business for 41 years. He suggested that the City give the smaller businesses a break. Kacures stated that his business will be greatly affected and, at this time, they are not sure what they will do. Loso made a motion to close the Public Hearing at 8:00 PM. The motion was seconded by Symanietz and passed unanimously. Rassier opened the meeting for discussion by the Council and EDA. Loso suggested that they take a 10- minute break to which Rassier said was not needed. Skahen stated that all of the comments made by the public have merit. He added that change is hard, but he believes that the construction of a Coborns in St. Joseph will improve the City. Jacobson added that if a company were to come to the City and state that they were going to create 100 new jobs in a year, "$300,000 wouldn't scratch the surface". Rassier stated the he and Council member Wick will be discussing the request from both a Council level and an EDA level. According to Rassier, Coborns will create jobs within the City. By using Tax Abatement, the City is taking money that is not currently there to pay for it. He supports the six (6) year term for the abatement as the sooner the City receives the full benefit of the property; the better it is for all the tax payers. Loso stated that he is in favor of the development as he would like to see a Coborns here; however, he is not in favor of the 6 year payback. He would rather see the term be over 11 years instead as there are other revenue shortfalls that the City has to deal with. He added that the Council will begin looking at the 2010 budget and there will be less revenues coming in meaning less money for other things. He then stated that the Council is already struggling with financial issues such as fixing the bridge at Millstream June 15, 2009 Page 5 of 6 and taking care of City Streets. In short, he stated that the 11 year term should be used rather than the 6 year term. Frank posed some questions to the EDA members regarding the request. Assume that this is approved; he questioned the impact of the terms and the WAC/SAC. Jacobson stated that he spoke with some of the local business owners and there is some opposition, but not too much. He added that Losos have one full-time employee and 10 part-time employees. If the Coborns is not built in St. Joseph, it will be built in one of the neighboring communities. Dick Loso stated that he will be the last Loso to run the store. Jacobson stated that there is a mixed impact from the local people, but he concluded by stating that some changes will occur no matter what. Wick stated that based on the McComb Study there will be a 140% increase in traffic through St. Joseph. This increased traffic can only help the existing businesses. Stated that will reviewing statistics on the League of Minnesota Cities website, he noted that St. Joseph is ranked 32 out of 49 for utilization of TIF. This statistic takes into account Cities with populations between 5 and 10,000 and their capability to use TIF. He stated that business is drawn in by higher populations and the Coborn's development is an opportunity for St. Joseph with a minimal investment. Frank questioned why TIF is not being used instead. Wick replied that it does not meet the criteria for TIF. Skahen questioned the terms and whether or not Coborns approved the 6 years. He added that there are some drawbacks to having a Coborns in St. Joseph such as keeping the small town atmosphere, but we need to continue to grow. This is a tremendous opportunity for the City and he added that the City will still make money and the bottom line will get better every year. If this is approved, Frank questioned when they will be in to apply for a building permit. He was advised that it is anticipated to be issued in July. Wick questioned the WAC/SAC fees. Weyrens advised the Council that they have already been calculated and the schedule will be attached to the Tax Abatement Agreement before them. The Agreement before them includes the provision that the collection of the fees will be delayed for two years. Skahen made a motion to recommend Council approval of the tax abatement request for $300,000 over a 6 year term. The motion was seconded by Jacobson and passed unanimously by those present. Symanietz spoke regarding the proposed Coborns development and stated that the increased number of jobs will mean more people living in the area, working here and more children attending our schools. In her opinion, people will continue to go to the local businesses. She stated that this is a positive move for St. Joseph to have a business come in and create jobs. Wick made a motion to accept the recommendation of the EDA to approve the tax abatement request for $300,000 over a 6 year term and approve the following: • Approve Resolution 2009-015 Authorizing Tax Abatement on property within the City of St. Joseph for the purpose of reimbursing some costs associated with the property. o Correction 2(b): "commencing in 2011 and continuing through 2016". o Include an exhibit of the parcels Authorize the Mayor and Administrator to execute the Abatement Agreement, as presented, between the City of St. Joseph and Coborns with minor changes as noted. The motion was seconded by Symanietz. Discussion: Frank questioned the following: • City Services: He questioned the cost for services such as sewer, water, police and fire as there will be some increases. Weyrens advised Frank that utilities are already stubbed into the property. They do not anticipate a large amount of water and sewer usage. She added that generally a grocery store does not have a high demand for services. Pharmacy: Frank stated that the local pharmacy is currently located in the Centra Care facility, but will eventually become Coborns Pharmacy. • Monopoly: He stated that they may want to build their store in and identity in St. Joseph prior to the building of the Super Wal-Mart/Sam's Club in Sartell. June 15, 2009 Page 6 of 6 Before joining St. Cloud State as a professor, he was on the Board for St. Cloud. They looked at using TIF for the McDonald's on Division. When looking at the realities of today, it is important to increase the tax base to take the pressure away from property taxes. Weyrens added that the City has used TIF in the past for Borgert, Vic West and the Millstream Shops and Lofts. Frank stated that if anyone else were to come in with a similar request, the City would be willing to work with them. Currently, the City is not sure of the cuts to LGA. With respect to the building, he would like to see them use some LED lighting in the parking lot. Ayes: Rassier, Wick, Symanietz, Frank The motion passed 4:1:0. Nays: Loso Adiourn: Symanietz made a motion to adjourn at 8:25; seconded by Wick and passed unanimously. ,® ~ ~ ~` ivy ~~~!~~ z ~~~ Cynthia Smith-Strack EDA Director