HomeMy WebLinkAbout12-13-10-WS �DENHILLS
Approved: January 10, 2011
CITY OF ARDEN HILLS,MINNESOTA
CITY COUNCIL WORK SESSION MEETING
DECEMBER 13,2010
5:30 P.M.-ARDEN HILLS CITY COUNCIL CHAMBERS
CALL TO ORDER/ROLL CALL
Pursuant to due call and notice thereof, Mayor Stan Harpstead called to order the City
Council Work Session meeting at 5:30 p.m. _
Present: Mayor Stan Harpstead; Council Members David Grant, Brenda Holden
(arrived at 6:00 p.m.) Fran Holmes (arrived at 5:45 p.m.), and David
McClung.
Absent: None.
Also present: City Administrator Patrick Klaers; Director of Finance and Administrative
Services Susan Iverson; Community Development Director Jill Hutmacher.
APPROVAL OF AGENDA
MOTION: Councilmember Grant moved and Councitmember_ McClune seconded a
motion to approve the meeting auenda as presented. The motion carried
unanimously (3-0).
1. COUNCIL COMMENTS AND REQUESTS
Mayor Harpstead thanked the Public Works employees for clearing the snow from City streets
after the tremendous storm last weekend.
2. AGENDA ITEMS
A. Presbyterian Homes Tax Increment Financing(TIF) Contract
City Administrator Klaers reviewed the TIF information discussed last week at the Council
Worksession. He indicated there were several issues that need to be worked through prior to the
public hearing scheduled for this evening. The issues at hand were conduit financing and
environmental concerns for the site.
ARDEN HILLS CITY COUNCIL WORK SESSION—DECEMBER 13, 2010 2
2.A Presbyterian Homes Tax Increment Financing Contract(continued)
City Administrator Klaers noted the environmental exposure on the site has yet to be
determined as staff was not aware that a gas station was located on this site years ago.
City Administrator Klaers indicated the Council can proceed with the redevelopment project
with a conduit debt issuance fee to be determined at a future date. Another option would be
increasing the length of the district or simply stay at a 1% lump sum issuance fee. He explained
Presbyterian Homes was present to discuss the issue with the Council. The Council may also
retain the 1% lump sum fee and acknowledge that the developer may decline the TIF package.
Community Development Director Hutmacher explained she spoke with an environmental
consultant and under most scenarios $15,000-25,000 should cover the clean-up and tank removals
on the triangle site. If significant contamination were found, the expense would be greater as a
site examination would be needed. The City could receive 90% of the clean-up costs returned
through the Petrofund program. According to the environmental consultant contacted, the tanks
are not included in the County database.
Councilmember Grant indicated the residents that have been in the area since the 1940's are
aware of the tanks.
Mayor Harpstead questioned what the triangle parcel was zoned.
City Administrator Klaers stated the site was zoned Neighborhood Business.
Mayor Harpstead asked if the City was pursuing grants to cover the clean-up costs for this
parcel.
City Administrator Klaers indicated this has been discussed.
Joe Mehrkens, Presbyterian Homes, explained the environmental remediation expenses are
estimated at$25,000. A large portion of these expenses would be reimbursed.
Mayor Harpstead questioned if the $25,000 was a maximum or an unreimbursed portion. He
indicated if the City were to receive grants, he felt the $25,000 should be an unreimbursed
maximum.
City Administrator Klaers stated the $25,000 was the cap and a portion of this may be
reimbursed.
Councilmember Holmes apologized for arriving late this evening. She then questioned if the
grants available would be approved.
Community Development Director Hutmacher indicated there was a Petrofund grant that could
pay 90% of the clean-up costs and the City could also apply to an Abandoned Tank Program.
This program did have a waiting list, but this would be kept in mind when applying. She
anticipated that the expense would not exceed $50,000, worst case scenario.
ARDEN HILLS CITY COUNCIL WORK SESSION—DECEMBER 13, 2010 3
2.,4 Presbyterian Homes Tax Increment Financing Contract(continued)
Councilmember Holmes asked if the City received reimbursement for the tank removed on the
old City Hall property.
Mayor Harpstead knew that a tank was removed, but did not recall if the City received any
assistance.
Further discussion ensued regarding the funding and expense of the clean-up on the triangle
parcel.
Mayor Harpstead questioned how the Council would like to proceed with this issue. He felt
there was a high probability that the site could be cleaned and grants would assist the City with the
expense. He stated that the City always had the option of not taking the property.
Councilmember Holmes did not feel the probability was high enough to assure that the expenses
were covered. She was in favor of Presbyterian Homes covering the entire expense.
Councilmember McClung was comfortable with the language as is. He felt the City could walk
away from the property if a situation developed and costs increased substantially for the clean-up.
Councilmember Holden questioned if Presbyterian Homes could sell the parcel to a private
party.
Steve Bubul, Arden Hills bond counsel, indicated the Buyer could determine how to proceed and
could renegotiate the purchase price and Presbyterian Homes would have to provide
environmental information.
Councilmember Holden asked if the $25,000 estimate covered the expense of reseeding the
parcel.
Community Development Director Hutmacher indicated this estimate was for the removal of
the tanks and a portion of this expense could be reimbursed.
Mayor Harpstead explained the City always had the option to not take the property if the
environmental risks appeared to be too high.
John Mehrkens indicated he would be willing to increase this amount to $50,000 as long as there
was cooperation from the City and that grants would be sought to assist with the clean-up
expenses.
Councilmember Holmes didn't see the benefit of a cap. She stated the triangle parcel was in
poor condition and did need to be cleaned up.
Councilmember McClung explained he would be willing to accept Mr. Mehrkens' offer.
Councilmember Grant agreed the site needed to be cleaned up, especially with the new
development across the street.
........................ ................... . . .
ARDEN HILLS CITY COUNCIL WORK SESSION—DECEMBER 13, 2010 4
2.A Presbyterian Homes Tax Increment Financing Contract (continued)
Community Development Director Hutmacher felt it was reasonable for the City to apply for
grants to cover the entire expense of the clean-up and not for only a portion.
Mayor Harpstcad questioned if the building should be demolished before the tanks were
removed.
Councilmember Holden indicated this would be in the best interests of the City.
Councilmember Grant explained the tanks had to be done first to further explore the liability to
Presbyterian Homes before the site was demolished.
Community Development Director Hutmacher stated the tanks would need to be removed
before additional testing could occur below the tanks on the site to see if there was further
contamination. It would be difficult to complete the work at this time, as the ground was frozen. _
Councilmember Holden indicated she spoke with several neighbors that recalled there being two
gas pumps at this site.
Community Development Director Hutmacher explained petroleum degrades in the
environment over time. If the tanks were close to empty, there may be little or no contamination.
Councilmember Holden stated the neighbors in this area are concerned about what would be
developed on the triangle site. The site was zoned neighborhood business and the potential height
of new buildings was a concern for the neighbors.
Mayor Harpstead questioned if the Council was in agreement to pursue a non-ownership of the
parcel as an open space.
Councilmember Grant suggested Presbyterian Homes demolish the building and plant grass.
This would allow the site to remain open space.
Councilmember Holden indicated this would be alright, but she would prefer a transfer.
Mayor Harpstead stated a 99 year lease could also be entered into with Presbyterian Homes on
this site, unless the City receives grants to cover the expense of the cleanup. The City would be
buying the deed through TIF.
John Mehrkens indicated this could be done if the $50,000 was exceeded. This would remove
the blight and assure that the site remains open space through the deed.
Councilmember Holmes felt it was a long shot and that the City did not need to assume the
liability.
ARDEN HILLS CITY COUNCIL WORK SESSION—DECEMBER 13, 2010 5
2.A Presbyterian Homes Tax.Increment Financing Contract (continued)
Councilmember Grant suggested the deed restriction be written that open space would be
pursued only if the site cannot be cleaned due to unforeseen circumstances.
Councilmember Holmes questioned if notice would be given to the current tenants.
Community Development Director Hutmacher indicated the current tenants had a month-to-
month lease. Presbyterian Homes will indemnify the City against any liability for relocation costs.
Mayor Harpstead asked how the Council wanted to proceed with Item 2, the conduit debt
discussion.
City Administrator Klaers felt this issue came down to cost. He stated there was a gap between
expectations at this time, and a policy change may be needed to find an amount that works for all
parties involved. _
Community Development Director Hutmacher explained the City could reduce the conduit
debt lump sum issuance fee. The budgeted amount by the developer was .25% of the total amount
of bonds. TIF assistance would need to increase to allow the fee to be 1%. Staff feels the TIF
package has a lot of benefits to the City and the developer. The pooling funds would assist with
redevelopment in the B2 district. She understands the triangle parcel is important to the City and
this would be the most cost effective method.
Further discussion ensued regarding the benefits of TIF and the repayment of TIF to the City.
Councilmember Holden indicated there was more of an expense than $500,000 because the
development would not be paying county or school district taxes either. This discrepancy would
have to be absorbed by the residents in the end.
Finance Director Iverson stated if the City were to take the 20% administrative expense these
funds would assist with absorbing the lack of taxes paid to the County and school district.
City Administrator Klaers indicated if the Council cannot reach an agreement, the public
hearing could be held and approval could be delayed until a future time. He suggested it be
determined at the December 20th Worksession. Staff did not want the item to be delayed into the
New Year. He stated he didn't think the Council would want to negotiate this issue at a public
meeting from the dais.
The Council was in agreement with this suggestion.
Mayor Harpstead reviewed the summary of conduit fee rates used in other municipalities. He
indicated Arden Hills has not used TIF a great deal and was unfamiliar with the mechanics. He
felt a staged fee made sense as has been done in Bloomington and Blaine.
ARDEN HILLS CITY COUNCIL WORK SESSION—DECEMBER 13, 2010 6
2.A Presbyterian Homes Tax.Increment Financing Contract (continued)
City Administrator Klaers indicated the Council can open and close the public hearing. The TIF
plan could be approved or postponed along with the contract until a future date.
Community Development Director Hutmacher indicated the contract should be approved on
the December 20th when approval of the development district would be further discussed.
Mayor Harpstead was in agreement to move these items to the December 20th Worksession. He
did not understand if Staff had enough information to complete the negotiations.
City Administrator Klaers agreed this would be difficult as the numbers were not in alignment
at this time. He would like to see the issue resolved by December 20 '. This would allow the
current Council to finalize the contract.
Councilmember McClung questioned how the Council could provide further input between now _
and the 20`h to assure that the issue is resolved.
City Administrator Klaers encouraged the Council to communicate their preferences to Staff in
the coming days.
Councilmember Holmes and Councilmember Holden were in agreement with this suggestion.
Mayor Harpstead stated comments could not be conveyed back to Council but preferences could
be submitted to Staff prior to the December 20th meeting.
MOTION: Mayor Har stead moved and Councilmember McClung seconded a motion to
continue the Work Session meeting after the Regular Council meeting. The
motion carried unanimously(5-0).
Mayor Harpstead resumed the Worksession at 9:52 p.m., stating Councilmember Holden was
out of the room at this time and should return shortly. He encouraged the Council to provide Staff
with comments on how to proceed with the conduit debt fee associated with the TIF district with
Presbyterian Homes. The initial I%was not agreeable by all parties at this time.
Councilmember Holden questioned if Presbyterian Homes had used conduit financing in the
past.
Finance Director Iverson stated it was used in 2008, after which the current policy was drafted.
Mayor Harpstead asked if staff had any further financial information available on TIF policies
from neighboring communities.
ARDEN HILLS CITY COUNCIL WORK SESSION—DECEMBER 13, 2010 7
2.A Presbyterian Homes Tax Increment Financing Contract(continued)
Ms. Kvilvang, Ehlers and Associates, reviewed the financial TIF information with the Council in
detail. She noted the fees charged by other cities were all over the board. There was no clear
answer on how to charge issuance fees.
Mayor Harpstead questioned what the present value of the financing would be if the time length
would change from 14 years to 16 years.
Ms. Kvilvang stated she would have to review this further before providing an answer. After
calculating this amount, the total would be approximately$500,000.
Councilmember Holmes reviewed a section. in Packet 2A, Attachment E and asked for
clarification from Staff.
Steve Bubul stated the only part that was unclear was the future value of the 118 of 1% being paid _
all up front at closing. The lump sum was intentionally ambiguous. There were various ways to
calculate the amount and no developer would choose this option. He noted he has seen other
City's with similar policies for small bond issues. However, this was unusually large and may
need to be readjusted.
Councilmember Holden questioned why the policy was developed in 2008.
Steve Bubul indicated no policies were perfect, but the new project proposed by Presbyterian
Homes was larger than the one completed in 2008.
Councilmember Holden stated neighboring cities use a differing policy. She questioned how the
Council should proceed.
Ms. Kvilvang explained the bond rates provided by the City would greatly benefit Presbyterian
Homes as the conduit financing was tax exempt.
Councilmember Holmes questioned what amount Presbyterian Homes would be financing for
this project.
Ms. Kvilvang indicated $38.6 million would be financed for this project. The total project cost
was approximately$50 million.
Councilmember Holmes stated she was disappointed that the current policy wasn't working for
the City. She indicated there were no guidelines on how to negotiate lump sum policies.
Councilmember McClung explained that no one policy would be able to address all unforeseen
issues.
Councilmember Holmes questioned if staff was aware that Presbyterian Homes was expecting a
$100,000 lump sum.
ARDEN HILLS CITY COUNCIL WORK SESSION—DECEMBER 13, 2010 8
2.A Presbyterian Homes Tax Increment Financing Contract(continued)
Ms. Kvilvang indicated she was not aware of this presumption but stated this was the amount
paid back in 2008.
Mayor Harpstead suggested one-half of 1% be paid for the first $10 million, which would be
$50,000. Then .2% could be paid on the amount over the first $10 million, which would be
$56,000. This would be a total of$106,000 and a close compromise to the $100,000.
Councilmember Holmes felt this was not a proper solution. She did not understand why the City
had a policy on conduit debt, when it could not be followed.
Councilmember Holden stated this would allow the City to take some money up front while
paying for it in the long term.
Councilmember McClung stated that he is struggling with the .2%.
City Administrator Klaers did not know the right amount, but from a Staff point of view, he was
comfortable with a lower number as the project would greatly benefit the City in the long run. A
reasonable number would be close to the requested amount from Presbyterian Homes.
Councilmember Holden questioned what the numbers would be if the project were run through
the City of Blaine's formula.
Ms. Hutmacher indicated the lump sum would be $170,000.
Councilmember Grant asked if Presbyterian Homes had other establishments in the metro area.
John Mehrkens reviewed the location of other buildings stating projects had recently been
completed in Northland Park, Roseville and Burnsville.
Mayor Harpstead questioned how the Council would like to proceed or if there was other
guidance for staff at this time.
Councilmember Holden felt an extension was unacceptable.
City Administrator Klaers clarified that what made this project unusual was the large amount of
financing requested.
Mayor Harpstead felt the City of Blaine's formula was quite reasonable.
Councilmember Holden was comfortable with a$200,000 fee.
Councilmember Holmes indicated she would not go below $250,000 on the conduit financing
administrative fee. She felt that Presbyterian Homes was asking too much from the City.
ARDEN HILLS CITY COUNCIL WORK SESSION—DECEMBER 13, 2010 9
2.A Presbyterian Homes Tax Increment Financing Contract(continued)
City Administrator Klaers explained the benefits of completing this project as proposed by
Presbyterian Homes and how the City would be affected financially. He stated it would be
beneficial for the City to compromise on this issue.
Councilmember Holmes indicated the triangle parcel's value was uncertain and Presbyterian
Homes was pushing this parcel as being such a bargaining chip. She did not want to go below
$250,000 for the administrative fee.
Mayor Harpstcad questioned if the Council was willing to have Staff negotiate this issue further
with Presbyterian Homes. Perhaps a range near$200,000 could be agreed upon.
Councilmember Holmes was unwilling to waiver.
Councilmember McClung was willing to accept the City of Blaine's formula. _
Councilmember Grant stated he did not feel this one issue would stop the project. He was in
favor of the Blaine formula, but did not want to see the City accept less than$170,000.
Councilmember Holden was in favor of the Blaine formula as well.
Mayor Harpstead indicated he was looking forward to this project beginning and would be
comfortable with Staff negotiating on the Blaine formula.
ADJOURN
Mayor Harpstead adjourned the City Council Worksession at 10:36 p.m.
Patrick Klaers David Grant
City Administrator Mayor