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HomeMy WebLinkAbout[04b] Joint Meeting Minutes November 13, 2014 Page 1 of 4 Pursuant to due call and notice thereof, the City Council and EDA met in special session on Thursday, November 13, 2014 at 7:00 PM in the St. Joseph City Hall, opening the meeting with the Pledge of Allegiance. Members Present: Mayor Rick Schultz, Councilors Dale Wick, Steve Frank, Bob Loso, City Administrator Judy Weyrens EDA Members Present: Doug Danielson, Gary Osberg, Larry Hosch City Representatives: City Engineer Randy Sabart, Public Works Director Terry Thene, Finance Director Lori Bartlett Others Present: Jon Petters, Colleen Petters, Tom Klein, Traci Ryan Public Hearing—TIF, Bayou Blues EDA Director, Cynthia Smith-Strack:Strack stated purpose of the hearing is to receive public comment on the use of TIF to support redevelopment, to act on the use of TIF, and whether to establish a pay-as-you- go arrangement with the developer. Mayor Schultz opened up the public hearing. Smith-Strack stated that the project consists of two phases. Phase I would be built initially and Phase II would be built when three of the four units have been sold. Phase I, Bayou Building: • Three story building—storefront commercial with residential one and two bedroom apartments on the second and third floor. • 5,500 square feet. • Apartment rent: $950 1 BR; $1,495 2 BR • Proposed TIF eligible expenses: $503,000 Phase II Alley Flats: • Three story building residential condominium • 4 residential units, approximately 1,000 square feet each • Price per unit: $270,000-$300,000 • Proposed TIF eligible expenses: $124,000 Smith-Strack stated the project meets both general and preferred eligibility requirements. Prior to approving TIF, the EDA and Council must determine whether the project would move forward with or without TIF. The statutory'but/for'test includes the following questions: • Does requested TIF fill a demonstrated gap in funding (presumes there is a lead lender)? • Is the project viable? • Are public benefits evident, achievable? • Are project costs eligible for TIF reimbursement? • What is the appropriate level of TIF? Smith-Strack stated that prior to the meeting staff reached out to Commissioner Bromenschenkel and he waived his review period. Additionally, copies of the TIF plan were to the county and school district were distributed. Publication and posting of the public hearing were completed in line with state guidelines. Feedback was received from one resident who wished to not have Phase II TIF funding included in the TIF plan. Traci Ryan, Ryan Consulting: Ryan approached the EDA and Council to present the TIF Plan.The purpose of the hearing is to consider the modification of TIF District 2-1 and the creation of TIF District 2-3 3 November 13, 2014 Page 2 of 4 The modification of 2-1 includes moving two parcels from within that district to the new district 2-3. The numbering of the districts also has meaning. The 2 stands for the Municipal Development District#2 which is the underlying law that allows you to create TIF districts.The new district will remain within the boundaries of the Municipal Development District#2. Ryan explained there are several types of TIF districts you can create. This one has a maximum duration of 26 years. Ryan noted that the creation of a TIF district does not mean approval of financial assistance. Rather, it is creating a district that allows you to provide assistance if need be. The budget for maximum budget is$2.5 million.The maximum amount of bonds that can be issued is set at$1.48 million. Ryan stated the district is small, concise, and should be an efficient one as it only includes the parcels of the development and one adjacent parcel that the development might spill into. Ryan stated that the Council and EDA will be asked to approve a resolution modifying TIF district 2-1 and creating district 2-3. In that resolution,findings need to be included. The finding consist of the following: • Tax Increment financing District No. 2-3 is a redevelopment district and meets the definition of a redevelopment district as defined by state statutes. • The proposed development as viewed by the City would not occur solely through private investment in the reasonably foreseeable future. • The TIF plan will afford maximum opportunity, consistent with the sounds needs of the City of St. Joseph as a whole. The resolution serves a public purpose, authorizes internal funding, and authorizes staff to file the plan with the County and State of MN. Ryan stated that the projections in the TIF plan are just that, projections. There are many variables that are unknown, such as the market value and tax rates. Hosch asked how long the TIF assistance is for this district. Ryan stated the maximum is 26 years, but rarely do they go that long. Staff recommends a 13 year pay-as-you-go plan which is half of what the maximum allowance is. Frank asked for any history regarding other projects within the City and how far out those TIF plans were allowed. Smith-Strack stated that with Millstream, the 26 year term was used as it was a project that was occurring during the recession. Coborns was given six years of tax abatement. The expansion of the meat market was approved for a six year TIF as well. Smith Strack stated that at the time of the preliminary TIF application, the developer had asked for $225,000 over 10 years. At the time of final TIF application submittal was$627,000 with the term not yet specified. Staff recommendation is for a 13 year term in the amount of$493,000. The current request by the applicant is $647,000 over 19 years which equates to$1,116,000 total. Frank asked if there insurance is required to protect against any damage to the project. Smith-Strack stated that the lead lender would require insurance as there will be a loan taken out for the project. Because the project is pay as you go, the City will not be lending any money that it has not already received. Jon Petters: Petters thanked the City for helping them do the Millstream project. It was a difficult project as they were waiting to get the correct balance with the restaurant and residents. There are about 350- 400 people that go in and out of that building every day. The TIF projections did not cover the costs that were around 4,000/month. Petters stated that a brewery has signed a lease contingent upon approval of the TIF plan to occupy part of the lower level of the Bayou building. Petters added that St. Joseph is becoming an attractive area and that this will be his last project.When he looked at the numbers, he disagrees with staff on the term. He is requesting 19 years in order to make the project successful. November 13, 2014 Page 3 of 4 Matt Lovin, Rinke Noonan: Lovin approached the Council and EDA to provide additional support for the project. Lovin stated that the applicant is not asking for the maximum term and funding. Rather, they are asking for what is needed to finance the project. Loso asked if there is a lease agreement with a restaurant. Lovin stated there is a current agreement with a brewery, but not a restaurant. Osberg stated he was under the impression that there was an agreement with Jason Mueller. Petters stated he received a letter of intent from Mr. Mueller. However, since that time he has been notified that they will not occupy the space as Mr. Mueller is currently operating six other restaurants. Petters added that having the brewery in the building will attract restaurants to that area. Mike Schoenecker, Winkelmann Building Corp.: Schoenecker stated the project is not only unique to St. Joseph, but also to the region. It will be designed to include patios for all residents, an elevator, and up- scale finishes. The second floor will have nine foot ceilings and the third floor will be 11 feet. Schoenecker added that they could build a much cheaper building, but they are after creating a more unique building to attract people to it. Frank stated that when Millstream was built, he thought that was unique. Frank added he has found the loft style apartments with shops underneath becoming more widespread across the country. Approached the Council as the architect of the project. He has had much experience in working in and with St. Joseph. He visits many rural communities and there is a market rate housing need, but the communities are not willing to contribute to that. As no one else wished to speak, Schultz closed the public hearing. Osberg asked if there is a limit to what the City can do with TIF and what happens if the TIF is approved and the project does not go through. Smith-Strack responded that there is not a limit.The risks would be mitigated due to the TIF being pay as you go. Hosch stated there is not a risk to the City. Hosch added that the main concern is if the City does extend the TIF to 19 years, then they will be missing out on six years of market taxes. Is that a reasonable trade- off? Loso asked if the units were for rent or for purchase. Petters stated the four unit condo building must be purchased.The alley flats are to be rented. He added that when a developer typically does something, they will either use the money as it comes in, or they will go out and borrow money. In order to borrow the money, Petters stated they will need to have the interest rate in the TIF plan to be at 4.5%. Petters added it is more of how important does the City feel this project is? Lovin stated that what the developer is getting back is 90%of the increased taxable value. The projections are based on a lot of uncertain numbers. Lovin added there is no harm in extending the term to 19 years. Osberg made a motion recommend the City Council approve the Bayou Blues TIF plan for eligible expenses not to exceed $647,000 for a term of 19 years at 4%. The motion was seconded by Wick. Motion carried. Aye: Wick, Frank, Osberg, Hosch Motion carried: 4:0:1 Abstain: Danielson Osberg stated that it is a matter of trust and whether they believe in the project. Ryan reiterated that the numbers are all based on projections. The way the development agreement will be written is that the City will issue a tax increment revenue note when the project is complete and the developer has provided documentation of the eligible expenses incurred. S November 13, 2014 Page 4 of 4 Frank stated this is not the only project the city is contemplating. Frank asked how it would affect any other projects. Smith-Strack stated that there would be$300,000 less approximately tax dollars to use if the term would be extended from 13 to 19 years. Weyrens stated that the Council is not being asked to consider the resolution of the EDA. Schultz made a motion to modify TIF district 2-1 and to create TIF District 2-3.The motion was seconded by Wick and passed unanimously by those present. Ryan stated the project has been submitted as a two phase project. The projects have been specifically defined within the context of the development agreement. Phase I will commence immediately. Completion of Phase I would be completed by approximately December 2015. Phase II is set to be completed by December 31, 2016. The agreement will be pay-as-you-go. The developer will be responsible for all the costs in creating the development agreement. The TIF note will not be transferrable unless approved by the City Council. Because assistance is in excess of$150,000, the City will need to enter into a subsidy agreement which is included in the development agreement. Wick made a motion to approve the developer's agreement to include the recommendations made by the EDA as follows; expenses not to exceed$647,000 for a term not to exceed 19 years at an interest rate of 4%. The motion was seconded by Schultz and passed unanimously by those present. Discussion: Loso mentioned that the developers requested 4.5% interest rate. Petters stated that right now his interest rate to borrow is at 4.5%. Smith-Strack stated that the interest rate is probably a moot point since the principal amount of$647,000 will not be reached over the 19 year term, therefore, the length of the term, not reaching the principal dollar amount will ultimately end the agreement first regardless of whether the interest rate is 4 or 4.5 percent. Adiourn: Schultz adjourned the combined Council and EDA meeting at 8:17PM. Judy Weyrens Administrator