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HomeMy WebLinkAbout1998 [07] Jul 15 . CITY OF ST. JOSEPH !I First Avenue NW '.0. Box 668, ~t. Joseph, MN 56374 )20) 363-7201 ~ax: 363-0342 EDA Board Meeting Ilk July 15, 1998 AGENDA MAYOR Kenneth J. Hiemenz Call to Order - 8:00am =:LERKI ADMINISTRATOR Rachel Stapleton Approval of June 5th Minutes COUNCILORS Bob Loso Industrial Park Cory Ehlert - Ed Tschida presentation on TIF proposal and other financing options Ken Twit - Contract for services with Advanced Resources .Niedenfuer - Resolution for proposed TIF District No. 1-2 Project Updates - Sunset Manufacturing - VicWest Steet - Borgert Products Public Comments to the Agenda Other Business and Announcements . . . Pursuant 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 1. Hiemenz, Board Members Bruce Gohman, Ross Rieke, Michael Deutz, and Ken Twit. EDA Director Chad A. Carlson. ------ Others Present: 'AdvanceaResóurces,'Ed TSehiâa-----' - - - ---~~--.~ -~.~---,--~-~-- -~~-~-~ EDA Director, Chad Carlson introduced Ed Tschida as the speaker for the meeting. Ed Tschida presented cash flow assumptions to 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 rront 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 for the prospect's new facility and TIF dollar captured did not coincide or the USDA loan application was not approved, Tschida presented an alternative method which includes issuing General Obligation Tax Increment Bond. This bond would cover the cost of installing mwicipal utilities. The bonds would be at a higher interest rate then the USDA money of 1 %, but the up rront 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 further clarified if a GO Bond is issued, 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 assessments would result on the remaining property. However, depending on the final dollar valuation on the project, the TIF assumptions could be more or less. Twit questioned ifthe 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 amowt 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 administrative expenses. Deutz questioned the $33,000 that was represented on the cash flow assumption 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 TIF caught up to the debt payments. TIF dollars are related to the property taxes paid which are paid a year in the rears. 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 administrative dollars recaptured rrom 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 ftont 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 there will be costs the City will not recoup due to the lack ofTIF 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. . . Tschida went on with a discussion that in his opinion, the proposed project has a high probability of success. With the location of St. Joseph and economic activity taking place in the region, the project will ultimately sell itself. It is Tschida's belief that even if the prospect decides not to go through the project, the City won't carry costs for long period oftime as he is confident that development will occur. ------<- ,_. ___ Hiemenz suggested requesting the prospect or any developer to pay a percentage of the first years taxes -beforethèy aiêdue~-Thís·will avoid the City Car:ryingmore-costs than they wanH-o;"Tsehiàa-œncurred 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 St. Joseph Business Park Project. The contract is in the amount of $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 be billed if this project dies. Twit made a motion to accept the contract ITom Advanced Resources for consulting work establishing a Tax Increment Financing District; seconded by Rieke and passed unanimously by those present. The motion included the following terms: . 1) The contract shall be for the amount of $7,500. 2) The contract amount shall be payable only if the proposed project enters into the hearing stage. If their is no project, the contract shall no be payable. Tschida concluded his presentation with an explanation of the TIF Resolution the City Council will be addressing on July 16th, 1998. The resolution is a standard requirement to start the process of establishing a TIF district. The resolution notifies County Board of Commissioners and 742 School District that a TIF District is being planned. Gohman made a motion requesting the City Council pass a resolution to establish a hearing date for the proposed TIF District including the notification of the County Board of Commissioners and School District 742. The motion was seconded by Rieke and passed unanimously by those present. EDA Director Carlson updated the EDA Board on current activity within his office. HÍemenz 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. carlso(JÝ EDA Director .