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Home My WebLink About04-28-14-- Dave McClung Ed Werner www.cityofardenhills.org Arden Hills is a strong community that values its unique environmental setting, strong residential neighborhoods, vital business community, well- infrastructure, fiscal soundness, and our long-standing tradition as a desirable City in which to live, work, and play. CALL TO ORDER APPROVAL OF AGENDA APPROVAL OF MINUTES 2.A.Approval Of Minutes January 27, 2014 Documents:EDA.PDF CONSENT CALENDAR 3.A.15 EDA Work Plan Patrick Klaers, City Administrator Documents:MEMO.PDF,ATTACHMENT A.PDF NEW BUSINESS 4.A.EDA 2015 General Fund Budget Parameters Sue Iverson, Director of Finance and Administrative Services Documents:MEMO.PDF UNFINISHED BUSINESS 5.A. Matthew Bachler, Associate Planner Documents:MEMO.PDF,ATTACHMENT A.PDF, ATTACHMENT B.PDF, ATTACHMENT C.PDF, ATTACHMENT D.PDF, ATTACHMENT E.PDF EDA MEMBER COMMENTS STAFF COMMENTS Approved: CITY OF ARDEN HILLS, MINNESOTA ECONOMIC DEVELOPMENT AUTHORITY JOINT MEETING WITH ECONOMIC DEVELOPMENT COMMISSION JANUARY 27, 2014 6:00 PM CITY COUNCIL CHAMBERS CALL TO ORDER/ROLL CALL Pursuant to due call and notice thereof, President Grant called to order the Economic Development Authority meeting at 6:00 p.m. Present: EDA President David Grant; EDA Commissioners Brenda Holden, Fran Holmes, Dave McClung, and Ed Werner Absent: None Also present: Secretary Patrick Klaers; Executive Director Jill Hutmacher; Associate Planner Matthew Bachler; and City Clerk Amy Dietl EDC Commissioners Present: Chair Ed von Holtum, Dan Erickson, James Huninghake, Dan Altstatt, Steve Heikkila, and David Radziej OATH OF OFFICE EDC Chair von Holtum administered the Oath of Office to EDC Commissioner David Radziej. 1. APPROVAL OF AGENDA MOTION: EDA Commissioner Holmes moved and EDA President Grant seconded a motion to approve the meeting agenda as presented. The motion carried unanimously (5-0). 2. APPROVAL OF MINUTES A. October 28, 2013 ARDEN HILLS JOINT EDA MEETING JANUARY 27, 20142 MOTION: EDA Commissioner Holmes moved and EDA Commissioner Holden seconded a motion to approve the October 28, 2013, Economic Development Authority minutes as presented. The motion carried unanimously (5-0). 3. NEW BUSINESS A. 2013 EDA Annual Report Executive Director Hutmacher reported that the Economic Development Commission (EDC) approved the 2013 work plan at its December 5, 2012, meeting. The work plan was reviewed and approved by the Economic Development Authority (EDA) at a joint meeting with the EDC on January 28, 2013. She indicated that EDC Chair Ed von Holtum would be addressing the EDA on behalf of the EDC. EDC Chair von Holtum explained that Steve Heikkila was appointed to the EDC by the City Council on May 13, 2013. David Radziej was appointed to the EDC on January 13, 2014. Councilmember Werner has announced vacant EDC positions during televised City Council meetings and information regarding open commission positions, as well as application materials, is available EDC Chair von Holtum stated that research on the history, original funding, and options for The EDA has provided direction regarding changes to the loan program including eligible projects, interest rates, and terms. The EDC has provided feedback on the revolving loan program, and staff is seeking additional feedback from local bankers. All comments will be compiled for presentation to the EDA in early 2014. EDC Chair von Holtum indicated that the EDC and City Council hosted a State of the City event on September 12, 2013. Approximately 75 people attended the event. Presentations included economic development, current transportation and development projects, the Arden Hills Foundation, and TCAAP. EDA President Grant was pleased with the attendance at the State of the City event. He stated that this year a larger venue may have to be selected to accommodate the residents and local business owners in attendance. EDC Chair von Holtum stated that the Commission considered creating an electronic economic development newsletter, but it was decided that business news should be included in the City nd included in district-specific newsletters on an as- needed basis. In 2013, Commissioners and staff posted several business-related articles in the Arden Hills Notes; a business news page was added to the City website; and a Round Lake- specific newsletter was distributed with information on upcoming and proposed transportation improvement projects. ARDEN HILLS JOINT EDA MEETING JANUARY 27, 20143 EDC Chair von Holtum reported that work began on an analysis of vacancy rates for retail, office, and industrial properties in Arden Hills compared to the metropolitan and northeast submarket averages. EDC Chair von Holtum commented that over the past few years, staff has worked to build a business inventory and contact list for all Arden Hills businesses. In 2013, staff visited every business in the Round Lake/Gateway Business District. Information was provided to businesses on the US 10/Highway 96 construction project and the proposed improvement project for Round Lake Road. Information was collected on the type of business, number of employees in Arden Hills, and business representative contact information. EDC Chair von Holtum stated that businesses in the B-2 district were visited in 2012; and business visits are planned for the Red Fox/Grey Fox district in 2014. Commissioners hand- delivered State of the City notices to all City businesses in late August/early September. Staff and Commissioners visited new and relocated Arden Hills businesses including Sweet Chocolat and Now Bikes and Fitness. Also in 2013, staff developed an inventory and contact list for leased commercial property including broker and landlord contact information. EDC Chair von Holtum stated that he was proud of the work accomplished by the EDC in 2013. He discussed the successful business visits conducted by the EDC and thanked each of the EDC members for their contributions to that effort. Discussion ensued regarding how to create a local business mailing/email list. EDA President Grant recommended that the EDC add a local business mailing list to its 2014 work plan. B. 2014 EDC Work Plan Executive Director Hutmacher stated that a t the December 4, 2013, EDC meeting, Commissioners approved the 2014 EDC work plan. The work plan is based on EDC discussions and ss community and establish a reputation as a business and development- Specific objectives within the City Increase contacts with the business community; Support Arden Hills businesses; Research economic development and business outreach efforts in other cities; and Determine whether additional programs are needed to maintain a healthy economic environment. Executive Director Hutmacher reported that t he 2014 EDC work plan includes goals and objectives for marketing and outreach in order to increase contacts with the business community and support Arden Hills businesses. EDC goals related to the revolving loan program and a potential business retention and expansion program are consistent with Economic Development Authority ARDEN HILLS JOINT EDA MEETING JANUARY 27, 20144 discussions regarding the loan program and the need to be in closer contact with businesses regarding their real estate needs. EDC Chair von Holtum was pleased with the new members on the EDC. He explained that efforts continue to bring new members to the group. He reported that the Red Fox/Grey Fox area continues to be an area of interest for the EDC, and marketing efforts for this location will also continue. He has been pleased with the articles the EDC members have newsletter. He discussed business retention efforts that would be addressed by the EDC along with new business visits. Executive Director Hutmacher explained that the EDC may look into creating an economic development video for t for local businesses. EDC Commissioner Huninghake was in favor of moving forward with this initiative. EDA President Grant anticipated that the City and the County may be creating some sort of video for the redevelopment of the TCAAP property. He suggested that if the EDC moves EDA Commissioner McClung agreed and recommended the video tour be elevated on the EDA Commissioner Holden did not want to see existing businesses struggle or relocating after the TCAAP development was completed. She hoped the TCAAP businesses would be compleexisting businesses. EDA Commissioner McClung stated that there would be some level of marketing or branding for the TCAAP site that would be different from all other businesses in the City. He did not want the rest of toked. EDA Commissioner Holden indicated that this focus would have to change eventually, because the TCAAP site was part of Arden Hills. EDC Chair von Holtum anticipated that the future residents on the TCAAP property would benefit the existing businesses in Arden Hills. EDA President Grant thought it would be important to find strong, vibrant businesses offering good paying jobs and a solid employment history to locate on the TCAAP site. He stated that the TCAAP property has a prime location and would be able to draw from the surrounding talent pool. He discussed the TCAAP Master Plan along with the open house that was held on January 22, 2014. He asked if the Council had anything they would like to add or remove from the lan. EDA Commissioner Holden discussed traffic concerns near HealthPartners. ARDEN HILLS JOINT EDA MEETING JANUARY 27, 20145 MOTION: EDA President Grant moved and EDA Commissioner Holmes seconded a motion to approve the 2014 EDC Work Plan. The motion carried unanimously (5-0). C. 2014 EDA Work Plan Secretary Klaers stated that at the January 28, 2013, Economic Development Authority (EDA) meeting, the EDA approved their 2013-14 work plan. The EDA held their four quarterly meetings and had two special meetings in 2013 (one on the business subsidy policy and one on the revolving loan program). The only work plan item that did not get much attention last year was a review of TIF #3. Secretary Klaers requested that the EDA consider what they would like to see in the 2014-15 work plan. The work plan will be considered for approval at the April EDA meeting. Possible topics/issues for the EDA to consider for their 2014-15 work plan include the following: Round Lake Road improvement project This is really a City Council project but it is related to economic development as it impacts local businesses. Also, the EDA approved using TIF #2 funds to help finance this project (about $160,000). Revolving Loan program comments from their August 2013 special meeting and will offer the EDA some feedback on the program. The EDA should plan to update the Loan Guidelines in 2014. Any update needs to be reviewed by DEED. The Guidelines have not been updated since they were approved in 1997. The EDA (City) will continue to monitor the redevelopment situation at the site for the benefit of all the businesses in this vicinity. Budget The 2015 EDA budgets will need to be reviewed and approved. Gateways Signs (money is transferred from the PIR fund) are included in the 2014 EDA budget. A sustainable revenue source needs to be identified for the EDA General Fund budget. TIF #3 This district expires in 2019. The EDA needs to develop a plan to use the available funds for the benefit of qualified low to moderate income housing projects. TIF #4 want to be kept advised as to the revenues and expenditures in this district. Business Retention and Expansion (BRE) program The EDC plans to make a in Arden Hills. B2 Improvement project This may be a 2015 construction project. This is a City Council project but is also related to economic development as it will impact most of the businesses along County Road E. Secretary Klaers explained that this list is not meant to be all-inclusive. He requested comments from the Council for projects that could be added to the 2014-15 work plan. ARDEN HILLS JOINT EDA MEETING JANUARY 27, 20146 EDA Commissioner Holden suggested the EDA consider improvements for the B-2 District. EDA Commissioner Holmes agreed and recommended an item be added to the work plan that would focus on TCAAP. She wanted to be certain that the City could cover the expense of the roadways and utilities within the development without having to increase property taxes. EDA President Grant stated that the spine road would be constructed by the County. He explained that the City would be installing the utilities and these expenses would be passed on to future developers. EDA Commissioner Holden did not believe that this was an EDA concern and should be left to the City Council. MOTION: EDA President Grant moved and EDA Commissioner Holmes seconded a motion to approve the 2014-15 EDA Work Plan. The motion carried unanimously (5-0). EDA President Grant requested that staff put together a tasks and timeframe outline for the work plan projects. 4. EDA COMMISSIONER COMMENTS None. 5. ADJOURN MOTION: EDA President Grant moved and EDA Commissioner Holmes seconded a motion to adjourn the Economic Development Authority meeting. The motion carried unanimously (5-0). EDA President Grant adjourned the special Economic Development Authority meeting at 6:58 p.m. __________________________ __________________________ Jill Hutmacher David Grant Executive Director EDA President CONSENT ITEM 3A MEMORANDUM DATE: April 28, 2014 TO:Economic Development Authority (EDA) Board of Commissioners FROM: Patrick Klaers, Secretary SUBJECT: 2014-15 EDA Work Plan Background/Discussion th On January 27, 2014, the EDA meet and accepted the 2014-15 Work Plan. My January 27 work plan memo is attached for your reference. At this April 28, 2014, EDA meeting, a timeline for the work plan is being offered for your consideration. The following statements on the EDA Work Plan should be noted before the timeline is discussed. cross projects and activities especially when no EDA funds are involved and since the EDA and Council have the same membership. The line of responsibilities is sometime Some of the projects in the EDA Work Plan are ongoing; some are activities; and some are more task related as compared to big picture or long term goals. The EDA Work Plan has some common elements with the Economic Development Commission (EDC) Work Plan. There is some carryover with the 2013-14 and the 2014-15 Work Plans. A limited amount of economic development work gets accomplished annually due to financial and staff time constraints (other City priorities). Project/Activity Timeline 1. Round Lake Road improvement project. 1. Ongoing. The improvement project This is a Council project. The EDA will will be substantially completed in likely contribute approximately 2014 but not finalized until 2015. $160,000 into the project to fund part of 2.Revolving Loan program. 2.April, July, and October EDA The program guidelines are expected to meetings. be approved in 2014; then the marketing of the program will take place. 3. 3.Waiting for a development proposal This is a City Council activity. to be submitted for Council consideration. 4. EDA 2015 operating budget. 4. July and October EDA meetings. The EDA needs to identify and approve a sustainable revenues source. 5. TIF 3 District (Cottage Villas). 5. October EDA meeting. Discuss use of fund balance. The funds need to be spent by 2019 on low to moderate housing. 6. TIF 4 District (Pres Homes). 6. Ongoing. Monitor annual revenues and expenditures in this newly established district. 7. Business Retention and Expansion 7. October meeting. (BRE) program. During 2014 the EDC will be analyzing and evaluating the pros and cons for developing and implementing a program. 8. B2 improvement project. 8. Ongoing. This is a Council project. The improvement project is being planned for the 2015 construction season. It is recommended that the EDA discuss and consider accepting the timelines for the 2014-15 Work Plan as outlined above. Attachment Attachment A: EDA Memo written by Patrick Klaers dated January 27, 2014 Attachment A NEW BUSINESS 3C MEMORANDUM DATE: January 27, 2013 TO: Honorable Mayor and City Councilmembers FROM: Patrick Klaers, City Administrator SUBJECT: EDA 2014-15 Work Plan Background/Discussion At the January 28, 2013, Economic Development Authority (EDA) meeting, the EDA approved th their 2013-14 work plan. Attached is this work plan it is included as part of my January 28 agenda memo to the EDA. At this January 28, 2013 EDA meeting, review of the building and site was added to the work plan. Overall, the EDA did a good job in making progress on the 2013-14 work plan. The EDA held their four quarterly meetings and had two special meeting in 2013 (one on the Business Subsidy policy and one on the Revolving Loan program). The only work plan item that did not get much attention last year was a review of TIF #3. At this January 27, 2014 in the 2014-15 work plans. I will then present the work plan for consideration and approval at the April EDA meeting. Possible topics/issues for the EDA to consider for their 2014-15 work plan include the following: Round Lake Road improvement project This is really a City Council project but it is related to economic development as it impacts local businesses. Also, the EDA approved using TIF #2 funds to help finance this project (about $160,000). Revolving Loan program the EDC will be reviewing comments from their August 2013 special meeting and will offer the EDA some feedback on the program. The EDA should plan to update the Loan Guidelines in 2014. Any update needs to be reviewed by DEED. The Guidelines have not been updated since they were approved in 1997. 12 Page of The EDA (City) will continue to monitor the redevelopment situation at the site for the benefit of all the businesses in this vicinity. Budget The 2015 EDA budgets will need to be reviewed and approved. Gateways Signs (money is transferred from the PIR fund) are included in the 2014 EDA budget. A sustainable revenue source needs to be identified for the EDA General Fund budget. TIF #3 This district expires in 2019. The EDA needs to develop a plan to use the available funds for the benefit of qualified low to moderate income housing projects. TIF #4 want to be kept advised as to the revenues and expenditures in this district. Business Retention and Expansion (BRE) program The EDC plans to make a presentation to the EDA in 2014 on a program in Arden Hills. B2 Improvement project This may be a 2015 construction project. This is a City Council project but is also related to economic development as it will impact most of the business operation along County Road E. This list is not meant to be all inclusive. As appropriate, please add projects for the 2014-15 work plans. Attachment Attachment A: EDA 2013 Work Plan 22 Page of NEW BUSINESS 4A MEMORANDUM DATE: April 28, 2014 TO: EDA Chair and Commissioners Patrick Klaers, EDA Secretary FROM: Sue Iverson, EDA Treasurer SUBJECT: EDA 2015 General Fund Budget Parameters Background/Discussion The EDA is a blended component unit of the City of Arden Hills which makes EDA Funds Special Revenue Funds of the City. Annually we are required by the State to set budgets for the These EDA Funds are: EDA General Fund EDA Revolving Loan Fund EDA TIF District #2 Round Lake EDA TIF District #3 Cottage Villas EDA TIF District #4 Presbyterian Homes Overall, the EDA General Fund is in good financial condition for 2014 with an estimated reserve balance of $208,166; but the EDA and City Council need to identify dependable, reoccurring revenue for EDA activities in the future as the primary funding source of revenues from the Round Lake Road TIF District will be done in 2014. The main reason the EDA General Fund is in good condition for at least 2014 is because of the transfer of Conduit Fees into this fund for operating expenses. Unless the EDA and City Council decided to change priorities, the expenses for economic development related activities are going to exist regardless if they are in the City General Fund budget or if they are in the EDA General Fund budget. Today these economic development expenses for Personal Services and for Other Services/Charges are estimated to be in the $100,000 per year range. 12 Page of The fund balance being projected at the end of the year includes funds that are intended to be used for the Gateway Signs program. Tax revenues are likely the only reoccurring source of funding for EDA activities. Given this situation, it may be appropriate to start slowly. Maybe $10-15,000 in tax revenues for the EDA should be part on the 2015 budget and then this amount can increase in future years as needed. Staff is looking for Council input on the budget before they start the budgeting process as this preliminary budget at its July meeting and the final budget at its October meeting. 22 Page of UNFINISHED BUSINESS 5A MEMORANDUM DATE: April 28, 2014 TO: EDA President and Commissioners FROM: Matthew Bachler, Associate Planner SUBJECT: EDA Revolving Loan Fund Requested Action Provide feedback and direction on proposed changes to the EDA Revolving Loan Fund. Background The EDA Revolving Loan Fund (RLF) at two previous meetings on April 29, 2013 and August 26, 2013. At these meetings, staff provided general background information on the history of the RLF and the EDA discussed its goals and priorities for the future use of the funds. Since then, staff has discussed this topic with the Economic Development Commission (EDC) and has met individually with several local bankers to discuss the revisions proposed by the EDA in more detail. The section below provides a summary of these discussions and presents general recommendations on how the RLF program could be restructured so that funds will be more actively used by the Arden Hills business community. Based on the feedback provided by the EDA, staff will work with the EDC to draft revised RLF Guidelines that will be reviewed at a later meeting. Prior to final approval by the EDA and City Council, the revised RLF Guidelines are required to be reviewed by the Minnesota Department of Employment and Economic Development. Discussion Goals and Principles The RLF Guidelines should include a list of goals that clearly define the purpose of the program. Businesses applying for loans should be able to easily evaluate whether their projects would be goals might include: ______________________________________________________________________________ City of Arden Hills Economic Development Authority Meeting April 28, 2014 14 Page of Support projects that encourage redevelopment of and investment in commercial and industrial buildings and properties. Support projects that will result in property maintenance and aesthetic improvements, such as landscaping or commercial façade improvements. Focus on projects that will assist in the retention and expansion of established Arden Hills businesses. Provide affordable financing that could not otherwise be secured in the private capital market. Support projects that advance other public policy goals adopted by the City Council, including energy conservation and sustainable building practices. Loan Amount and Terms The City should set a maximum loan amount somewhere between $50,000 and $75,000. This number should be set in part based on the type and number of projects that the City sees itself financing. For example, a lower maximum amount would allow the City to support more projects, but the projects being undertaken would likely be at a smaller scale. If the City were to set the RLF interest rate at two percent, these loans would be very competitive with commercial lending rates. Currently, commercial rates average at least five percent. The EDA could consider setting the interest rate as high as three percent, which would increase the amount being repaid into the RLF while still being competitive with commercial rates. The private lender should set the term length, but the City could still put a limit on the maximum number of years for a loan term. Terms are determined by the amortization period. Projects requiring less capital investment (equipment acquisition) usually have a shorter amortization and term, while projects with a larger investment (real estate acquisition) have a longer amortization and term. If the goal is to see a quicker return of loan repayments, the City should focus on projects with short-term amortization periods of ten years or less. Eligibility The following types of projects should be eligible for loans issued through the RLF: Real property improvements -Internal fixed improvements (walls, ceilings, floors, lighting, windows, doors) -Streetscape and landscaping improvements -Plumbing, electrical, and mechanical systems -Air conditioning -Roofing -Parking lot surfacing and lighting -Accessibility improvements -Energy conservation and energy retrofits ______________________________________________________________________________ City of Arden Hills Economic Development Authority Meeting April 28, 2014 24 Page of Commercial façade improvements -Cleaning and painting of exterior surfaces -Repair or replacement of windows, doors, cornices, masonry, awnings, and decorative details -Sign removal, repair, or replacement Fixed asset equipment -Production equipment Financial Criteria Revolving fund loans should act as gap financing for loans being made by a private lender. For each bank participating in the program, a Lender Agreement would be signed with the City. This agreement would outline the general requirements of the RLF program and what the expectations are of the bank in partnering with the City. A Participation Agreement would also be created for individual loans, providing specific details and responsibilities for each deal. The lender would prepare the note and collateral documents and the City would issue a check from the RLF to purchase a participation in the note. The lender would be responsible for disbursing the loan funds and collecting payments for both the City and private portions of the loan. Monthly payments would then be submitted to the City. The bank would also be responsible for doing the necessary underwriting for the entire loan package. Since banks are risk- the City can be confident about the risk level associated with the loan. The City should primarily rely on the financial criteria used by the participating bank to screen loan applications. Additional recommendations included: Require that a minimum of 50 percent of the project be privately financed. Many projects would likely not receive a high score using the C Card for public financing proposals, as this tool is largely focused on redevelopment projects. Consider exempting projects receiving financing through the RLF from being reviewed using this evaluation tool. The job creation requirements in the existing RLF Guidelines should be revised considering that certain projects such as façade improvements and equipment acquisition may not meet this required criteria. Be willing to take on some risk recognizing that the City will likely see a direct benefit from a completed project regardless of whether the loan is repaid in full (for example, improvements to landscaping or public frontage façades). Guidelines and Approval Process The application process for obtaining revolving loan funds should be streamlined and transparent. The City should set a goal of completing the necessary evaluation and deciding on a loan request within 30 to 45 days of receiving a completed application. A long approval process ______________________________________________________________________________ City of Arden Hills Economic Development Authority Meeting April 28, 2014 34 Page of will make the program less attractive to businesses interested in participating. While the City should request financial records from the applicant, if possible these documents should not be included in the public records for meetings. The City should consider establishing a special committee comprised of members of the EDA, the EDC, and staff that would be responsible for evaluating applications and making recommendations to the City Council. A detailed list of criteria should be created so that businesses have a level of certainty that a project will be approved by the City Council if it successfully makes it through the committee approval process and meets the required criteria. A schedule similar to the one used by the City to process land use applications could be developed so applicants are aware of the loan approval timeline from the beginning. Because the City is unlikely to receive a large number of loan applications, this committee could have a set regular meeting time every month, but only convene on an as needed basis. Requested Action Provide feedback and direction on proposed changes to the EDA Revolving Loan Fund. Attachments A.City of Arden Hills, EDA Revolving Loan Fund Guidelines B.City of Arden Hills Business Subsidy Criteria and City Public Financing Guidelines, April 29, 2013 C.Public Financing Proposal Grading and Report Card D.EDA Staff Report, August 26, 2013 E.EDA Minutes, August 26, 2013 ______________________________________________________________________________ City of Arden Hills Economic Development Authority Meeting April 28, 2014 44 Page of AttachmentA AttachmentB City of Arden Hills Business Subsidy Criteria and City Public Financing Guidelines APRIL 29, 2013 1. PURPOSE AND AUTHORITY A.The purpose of this document is to establish the criteria for the City of Arden Hills for granting of business subsidies and for City public financing for private development within the City. These criteria shall be used as a guide in processing and reviewing applications requesting business subsidiesand/or City public financing. B.The City's ability to grant business subsidies is governed by the limitations established in Minnesota Statutes 116J.993 through 116J.995(Statutes).The City may choose to apply its Business Subsidy Criteria to other development activities not covered under this statute.City public financing may or may not be considered a business subsidy as defined by the Statutes. C.Unless specifically excluded by the Statutes, business subsidies include grants by state or local government agencies, contributions of personal property, real property, infrastructure, the principal amount of a loan at rates below those commercially available to the recipient of the subsidy, any reduction or deferral of any tax or any fee, tax increment financing(TIF), abatement of property taxes, loans from the City’s Revolving Loan Fund,any guarantee of any payment under any loan, lease, or other obligation, or any preferential use of government facilitiesgiven to a business. D.These criteria are to be used in conjunction with other relevant policies of the City.Compliance with the Business Subsidy Criteria and City Public Financing Guidelines shall not automatically mean compliance with such separate policies. E.The City may deviate from these criteria by documenting in writing the reason(s) for the deviation. The documentation shall be submitted to the Department of Employment and Economic Development with the next annual report. F.The Citymay amend this document at any time. Amendments to these criteria are subject to public hearing requirements contained in the Statutes. 2.BUSINESS SUBSIDY PUBLIC PURPOSE REQUIREMENT A.All business subsidies must meet a public purpose with measurable benefit to the City as a whole. Public purpose may include, but not be limited to, creating needed services or facilities not currently available, providinga variety of housing ownership alternatives and housing choices, redevelopingand removingblight City of Arden Hills Public Financing Policy Page 1of 7 April 29, 2013 and encouragingredevelopment in the commercial and industrial areas of the City in order to encourage high levels of property maintenance and private reinvestment in those areas, retaininglocal jobs, increasingthe job base, and providingdiversity in that job base, enhancingexisting jobs through increased wages, encouragingadditional unsubsidized private development in the area, either directly, or through secondary “spinoff” development, offsettingincreased costs of redevelopment over and above those costs that a developer would incur in normal urban and suburban development, and meetingother uses of public policy, as adopted by the Council from time to time including the promotion of quality urban design, quality architectural design, energy conservation, decreasing the capital and operating costs of local government, etc. B.Job retention may only be used as a public purpose in cases where job loss is specific and demonstrable. The City shall document the information used to determine the nature of the job loss. C.The creation of tax base shall not be the sole public purpose of a subsidy. D.Unless the creation of jobs is removed from a particular project pursuant to the requirements of the Statutes, the creation of jobs is a public purpose for granting a subsidy. Creation of at least oneFull Time Equivalent (FTE)job is a minimum requirement for consideration of assistance. E.The wage floor for wages to be paid for the jobs created shall be not less than 150% of the State minimum wage in effect at the time the subsidy is granted. The City will seek to create jobs with higher wages as appropriate for the overall public purpose of the subsidy. Wage goals may also be set to enhance existing jobs through increased wages, which increase must result in wages higher than the minimum under this Section. 3.SUBSIDY AGREEMENT A.In granting a business subsidy, the Cityshall enter into a subsidy agreement with the recipient that provides the following information: wage and job goals (if applicable), commitments to provide necessary reporting data, and recourse for failure to meet goals required by the Statutes. B.The subsidy agreement may be incorporated into a broader development agreement for a project. C.The subsidy agreement will commit the recipient to providing the reporting information required by the Statutes. 4.CITY’SOBJECTIVEFOR THE USE OF PUBLIC FINANCING A.Asa matter of adopted policy, the City mayconsider using public financing which may include tax increment financing(TIF), tax abatement, bonds, waiver of City fees (excluding building permit fees),and other forms of public financing City of Arden Hills Public Financing Policy Page 2of 7 April 29, 2013 as appropriate,to assist private development projectswhen such assistance complies with all applicable statutory requirements to: 1.Remove blight and/or encourage redevelopment in designated redevelopment/development area(s)per the goals and visionsestablished by the City Council 2.To achieve thefollowing housing-related goals: a.To provide a balanced and sustainable housing stock to meet diverse needs both today and in the future b.To ensure all housing is safe and well-maintained c.To promote neighborhood stabilization and revitalization by the removal ofblightand the upgrading of existing housing stock. 3.To retain local jobs and/or increase the number and diversity of quality jobs 4.To encourage additional unsubsidized private development in the area, either directly or through secondary “spin-off” development. 5.To offset increased costs forredevelopment over and above thecosts that a developer would incur in normal urban and suburban development (determined as part ofthe But-For analysis). 6.To facilitate the development process and to achieve development on sites whichcouldnot be developed without this assistance. 7.To meet other uses of public policy, as adopted by the CityCouncil from time to time, includingbut not limited topromotion of quality urban design, quality architectural design,energyconservation, sustainable building practices,and decreasing the capital and operating costs of local government. 5.PUBLIC FINANCING PRINCIPLES A. The guidelines and principles set forth in this document pertain to all applications for City public financing regardless of whether they are considered a business subsidy as defined by the Statutes. The following general assumptions of redevelopment shall serve as a guide for City public financing: 1.All viable requests for City public financingassistance shall be reviewed by a third party financial advisorwho will inform the City of its findings and recommendations. 2.The City shall establish mechanisms within the development agreement to ensure that adequate checks and balances are incorporatedin the distribution of financial assistancewhere feasible and appropriate, including but not limited to: a.Third party review of the “but for” analysis City of Arden Hills Public Financing Policy Page 3of 7 April 29, 2013 b.Establishment of “look back provisions” c.Establishment of minimum assessment agreements 3.TIF and abatement will be provided on a pay-as-you-go-basis. Any request for upfront assistance will be evaluated on its own merits and mayrequire security to cover any risks assumed by the City. 4.The City will elect the fiscal disparities to come from inside applicable TIF district(s)to eliminate any impact to the existing tax payers of the community. 5.The City will target up to the maximum allowed by State Statute of tax increment for administrative purposesonly. 6.The developer shall proactively attempt to minimize the amount of public assistance needed through the pursuit of grants, innovative solutions in structuring the deal, and other funding mechanisms. 7.Proposals should not be used to support speculative industrial, commercial, office or housing projects. In general the developer should be able to provide market data, tenant letters of commitment or financestatements which support the market potential/demand for the proposed project. 8.Public financing will not be used in a project that involves an excessive land and/or property price. This will normally be where the acquisition price is more than 20% in excess of market value as determined by an independent appraisal of the property (exclusiveof relocation benefits). The City shall commission an appraisal and the cost will be paid from Developer’s escrow. 9.Public financing will not be used in projects that would give a significant competitive financial advantage over similar projects in thearea due to the use of public subsidies. Developers should provide information to support that assistance will not create such a competitive advantage. Priority consideration will be given to projects that fill an unmet market need. 10.TIF and Abatement will not be utilized for the construction of new rental housing units. The City will consider waivers of various City fees for new rental housing developments (building permit fees excluded). 11.Public financing will not be used for projects that would generate significant environmental problems in the opinion of the local, state, or federal governments. Priority will be given to projects that aim to clean-up existing contaminated sites and would facilitate the location of an industry or business that has anenvironmentally-sound track record, or that meets a housing need in the City. 12.The City will not approve new TIF districts that would cause the percentage of the City’s total tax capacity captured within TIF districts to rise above six percent. City of Arden Hills Public Financing Policy Page 4of 7 April 29, 2013 6.PROJECTS WHICH MAY QUALIFY FOR PUBLIC FINANCING ASSISTANCE A.All new applicationsfor assistanceconsidered by the City must meet each of the following minimum qualifications and will also be evaluated based on their not ability to meet the desired qualifications for assistance.However, it should be presumed that aproject meeting any of the qualifications will automatically be approvedfor assistance. Meeting the qualifications does not imply or create contractual rights on the part of any potential developer to have its project approvedfor assistance. 6.1Minimum Qualifications: A.In addition to meeting the applicable requirements of State law, the project shall meet one or more of the Publicfinancing objectives outlinedin Section 4;and shalleither: 1.Remove blight and/or encourage redevelopment in the City in order to encourage high quality development or redevelopment and private reinvestment in those areas; OR 2.Facilitate the development process and to achieve development on sites which would not be developed without this assistance. B.The developer must demonstrate to the satisfaction of the Citythat the project is not financially feasible “but for” the use of tax incrementor other public financing. C.Theproject must be consistent with the City’s Comprehensive Plan and Zoning Ordinances, Design Guidelines or any other applicable land use document. D.Prior to approval of a financing plan, the developer shall provide any requested market and financial feasibility studies, appraisals, soil boring, private lender commitment, and/or other information the City or its financial consultants may require in order to proceed with an independent evaluationof the proposal. E.The developermust provide adequate financial guarantees to ensure the repayment of any public financing and completion of the project. These may include, but are not limited to, assessmentagreements, letters of credit, personal deficiency guarantees, guaranteed maximum cost contract, etc. F.Any developer requesting assistance mustbe able to demonstrate past successful general development capability as well as specific capability in the type and size of development proposed. Public financing will not be used when the developer’s credentials, in the sole judgment of the City, are inadequate due to past history relating to completion of projects, general reputation, and/or bankruptcy, or other problems or issues considered relevant to the City. City of Arden Hills Public Financing Policy Page 5of 7 April 29, 2013 G.The developer, or its contractual assigns, shallretain ownership ofany portion of theproject long enough to completeit, to stabilize its occupancy, to establish projectmanagementand/or needed mechanisms to ensure successful operation. 6.2Desired Qualifications: A.Projects providing higher than a3 to 1 ratio of privateinvestment to City public investmentwill receive priority consideration.Private investment includes developer cash, government and bank loans, conduit bonds, tax credit equity, and land if already owned by the developer. B.Projects meeting the following minimum building valuationwill receive priority consideration: Minimum Value Use Per Sq/Ft or Unit Industrial$60 Commercial/Retail$125 Office$100 Rental Housing$100,000 C.Proposals that significantly increase the amount of property taxes paid after redevelopment will receive priority consideration. D.Proposals that encourage the following will receive priority consideration: 1.Provides significant improvement to surrounding land uses, the neighborhood, and/or the City 2.Provides opportunities for development of restaurants 3.Attracts or retains a significant employer within the City 4.Provides opportunity for hi-tech, med-tech and R & D facilities/office 5.Provides significant rehabilitation of an existing apartment complex or significant rehabilitation and/or expansion of existing office, commercial or industrial facility 6.Provides opportunities for high end and/or specialty retail that is not currently available to City residents 7.Redevelopsa blighted and/or challenged site City of Arden Hills Public Financing Policy Page 6of 7 April 29, 2013 8.Provides opportunities for small businesses E.Preference will be given to projects that meet good public policy criteria as determined by the City Council, including: 1.High project quality (e.g. sound architectural design, quality construction and materials, sustainable building practices) 2.Projects that meet financial feasibility criteria established by the City 3.Projects that provide the highest and best desired use for the property 7.PUBLIC FINANCING PROJECT EVALUATION PROCESS A.The following fivemethods of analysis for all public financingproposals will be used: 1.Consideration of project meeting minimum qualifications 2.Consideration of project meeting desired qualifications 3.Project meets “but-for” analysis and/orstatutory qualifications 4.Project is deemed consistent with City’s Goals and Objectives 5.Score of a “B” or higher on the TIF report card Please note that the evaluation methodology is intended to provide a balanced review. Each area will be evaluated individually and collectively and in no case shouldone area outweigh another in terms of importance to determining the level of assistance. Adopted by Arden Hills City CouncilApril 29, 2013 City of Arden Hills Public Financing Policy Page 7of 7 April 29, 2013 AttachmentC Public Financing Proposal Grading and Report Card Business and Commercial Redevelopment FINAL GRADE:F 1Ratio of private investment to public investment in project: Points: 0 Note: Private investment includes developer cash, loans from banks, conduit bonds, tax credit equity and land if already owned by developer Private Funds/Public FundsPoints $-3to11 Private Investment $-4to12 Public Investment #DIV/0!5to13 Ratio of Private/Public Financing 6to14 7 & Upto15 2Minimum Valuation threshold Points: 0 Industrial ValuationPoints $-$601 Building Valuation 0$61to$702 Building Square Footage $0.00$71to$803 Value Per Sq/Ft $81&Up4 Points: 0 Retail ValuationPoints $-$1251 Building Valuation 0$126to$1502 Building Square Footage $151to$1753 Value Per Sq/Ft $176&Up4 Points: 0 Office ValuationPoints $-$1001 Building Valuation 0$101to$1102 Building Square Footage $111to$1203 Value Per Sq/Ft $121&Up4 Points: 0 3Increase in real estate value: Points: 0 Before/After Points $-1to1.90 Value of site before redevelopment $-1to21 Value of site after redevelopment #DIV/0!1to32 Ratio of value before/after redevelopment 1to43 1to54 1&Up5 4Bonus Points (18 points total) Points:0 Points AvailAwarded A. Project will add value to and likely stimulate further investment in surrounding neighborhood30 B. Provides opportunities for restaurant30 C. Project attracts or retains significant employer within the City30 D. Provides opportunity for hi-tech, med-tech and R & D facilities/office30 E. Provides significant rehabilitation or expansion of existing facility20 F. Provides opportunities for high end and/or specialty retail20 G. Project will redevelop a blighted and/or challenged site10 H. Provides opportunities for small business10 180 TOTAL 32 Total Points Available 5 TOTAL POINTS0Total PointsGrade:F 0to5F 6to10D 11to15C 16to21B 22to32A 1 AttachmentD MEMORANDUM DATE: August 26, 2013 TO: EDA President and Commissioners FROM: Matthew Bachler, Community Development Intern SUBJECT: EDA Revolving Loan Fund Requested Action Provide direction on the future goals of the EDA Revolving Loan Fund. Background The EDA Revolving Loan Fund (RLF) was discussed at two previous EDA meetings on April 29 and July 29, 2013. At these meetings, general background information on the RLF was provided. Topics covered included the establishment of the RLF, the use of funds for business expansion projects, the current financial status of the RLF, and how the Minnesota Business Subsidy Law will impact the use of the RLF going forward. The guidelines for the use of the RLF were first adopted in 1997 and since then have not been updated. At the end of the July 29, 2013 meeting, the EDA began to discuss how the funds in the guidelines should be updated to reflect changes in priorities. Revolving Loan Fund Guidelines Loans issued through the RLF will be regulated by the Minnesota Business Subsidy Law. However, loans of less than $75,000 are not considered business subsidies and are exempt from the provisions of this law. Any revised guidelines will need to be reviewed by the State Department of Employment and Economic Development prior to EDA and City Council approval. At a minimum, the updated guidelines will need to state that the Business Subsidy Law applies to RLF loans. (Financing Policy) and the Grading and Report Card apply to revolving fund loans. (See Section 5.A. of the attached Financing Policy.) ______________________________________________________________________________ City of Arden Hills Economic Development Authority Meeting August 26, 2013 12 Page of Staff is requesting guidance on the following questions: 1.Do the minimum and desired qualifications for City financing established in the 2.What types of projects would the City like to support with revolving fund loans? a.Business expansions b.Equipment purchases c.Commercial façade improvements d.Large vs. small businesses e.Established Arden Hills businesses vs. businesses that are new to the City 3. Grading and Report Card? 4.The current Revolving Loan Fund Guidelines assume that loans would be issued in collaboration with banks which would evaluate projects, determine credit-worthiness, and administer the loans. Should the City continue to partner with private financial institutions? 5.For certain, small-scale projects such as façade improvements, should loans be structured to be forgivable? What private match should be required? Should other goals be included? Requested Action Discuss City goals for the RLF and direct staff to draft policy revisions, if necessary, for further EDA consideration. Attachments EDA Staff Report, April 29, 2013 City of Arden Hills, EDA Revolving Loan Fund Guidelines City of Arden Hills Business Subsidy Criteria and City Public Financing Guidelines, April 29, 2013 Public Financing Proposal Grading and Report Card ______________________________________________________________________________ City of Arden Hills Economic Development Authority Meeting August 26, 2013 22 Page of AttachmentE Approved: October 28, 2013 CITY OF ARDEN HILLS, MINNESOTA SPECIAL ECONOMIC DEVELOPMENT AUTHORITY MEETING AUGUST 26, 2013 CITY COUNCIL CHAMBERS CALL TO ORDER/ROLL CALL Pursuant to due call and notice thereof, President Grant called to order the special Economic Development Authority (EDA) meeting at 7:38 p.m. Present: EDA President David Grant; EDA Commissioners Brenda Holden, Fran Holmes, Dave McClung, and Ed Werner Absent: None Also present : Secretary Patrick Klaers; Executive Director Jill Hutmacher; Community Development Intern Matthew Bachler; and Deputy Clerk Amy Dietl 1. APPROVAL OF AGENDA MOTION: President Grant moved and EDA Commissioner Holmes seconded a motion to approve the meeting agenda as presented. The motion carried unanimously (5-0). 2. UNFINISHED BUSINESS A. EDA Revolving Loan Program Community Development Intern Bachler stated that the EDA Revolving Loan Fund (RLF) was discussed at two previous EDA meetings. At these meetings, general background information on the RLF was provided. Topics covered included the establishment of the RLF, the use of funds for business expansion projects, the current financial status of the RLF, and how the Minnesota Business Subsidy Law will impact the use of the RLF going forward. The RLF currently has a cash balance of approximately $155,000. ARDEN HILLS SPECIAL EDA MEETING AUGUST 26, 20132 Community Development Intern Bachler indicated that the guidelines for the use of the RLF were first adopted in 1997, and since then, have not been updated. At the end of July 29, 2013, meeting, economic development goals and whether the RLF guidelines should be updated to reflect changes in priorities. Community Development Intern Bachler noted that loans issued through the RLF will be regulated by the Minnesota Business Subsidy Law. Loans less than $75,000 are not considered business subsidies and are exempt from the provisions of this law. Any revised guidelines will need to be reviewed by the State Department of Employment and Economic Development prior to EDA and City Council approval. Staff reviewed several questions and requested guidance from the EDA and policies for the RLF. Executive Director Hutmacher commented s current RLF policy is stricter than that the two key components within the policy at this time are for the City to avoid loans over $75,000 and grants over $25,000. With these parameters in mind, she questioned how the Commission wanted to proceed with the program. Discussion ensued regarding the State Business Subsidy Law, the City Business Subsidy Policy, and the size and scale of potential loans within the RLF program. President Grant was in favor of proceeding with smaller loans as this would allow the program to reach more businesses within the community. EDA Commissioner McClung was not sure where he stood on this issue because the City had little experience with the RLF program. EDA Commissioner Holden In response to the questions in the staff memo, stated that she supports loans for commercial façade improvements, that projects should have a grade of B or better, and that she was open to discussing forgiving a percentage of some loans. EDA Commissioner Holden stated that one goal of the program may be to encourage home occupations to expand into commercial areas within the City. She questioned if the EDC had discussed this issue. Executive Director Hutmacher explained that the EDC was waiting for EDA policy direction. Shequestioned if the EDA wanted to consider partial forgiveness on the loans or the parameters that should be set on the loans. EDA Commissioner McClung envisioned that this program would assist small businesses with expansion or to bring new businesses into the City. He noted that section 6.2.D of the City Business Subsidy Policy identifies priorities for giving subsidies. President Grant saw greater benefit in moving businesses to the community. ARDEN HILLS SPECIAL EDA MEETING AUGUST 26, 20133 Discussion ensued regarding the PACEbuilding and business. EDA Commissioner Holmes program. President Grant was in favor of giving the program a try and making the loans attractive enough to small business owners to be pursued. EDA Commissioner McClung recommended that the Authority allocate the funds available with half set aside for façade improvements and the other half for business retention or expansion. President Grant asked if the Authority supported this recommendation. EDA Commissioner Holmes recommended that the funds not be split in half because the City cannot anticipate who will make requests for the funds. President GrantEDA Commissioner Werner and agreed. President Grant inquired if the Authority wanted to push the program to the community or wait for requests to come to the EDA. EDA Commissioner Holmes wanted the loans to be selective with no high risk candidates. She was not supportive of loans for equipment acquisition, working capital, or professional fees. President Grant agreed with these suggestions, but recommended that the loans be low interest and that they be repaid in five years. He was not supportive of grants or equipment loans. EDA Commissioner Holden suggested that the loans have few restrictions so as to remain attractive to business owners. EDA Commissioner McClung wanted to see 1%-2% interest rates to assure the City is keeping a balance in the revolving loan fund. Executive Director Hutmacher thanked the EDA for their input this evening. 3. EDA COMMISSIONER COMMENTS None. 4. STAFF COMMENTS None. 5. ADJOURN ARDEN HILLS SPECIAL EDA MEETING AUGUST 26, 20134 MOTION: President Grant moved and EDA Commissioner McClung seconded a motion to adjourn the special Economic Development Authority meeting. The motion carried unanimously (5-0). EDA President Grant adjourned the special Economic Development Authority meeting at 8:38 p.m. __________________________ __________________________ Patrick Klaers David Grant Secretary EDA President