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Home My WebLink About04-13-10 Chair James Ostlund 1245 W. Highway 96 Committee Members Jeff Johnson �REN HILLS Arden Hills, MN 55112 651.792.7800 0 Arlene Mitchell Arden Hills www.ci.arden-hills.mn.us John Braun (Vacant Seat) (Vacant Seat) Financial Planning and Council Liaison Brenda Analysis Committee Holden April 13, 2010 ;�,,,..� City Vision A strong community that values its unique environmental setting, strong residential neighborhoods, vital business community, well-maintained infrastructure, fiscal soundness, and our long-standing tradition as a desirable City in which to live, work, and play. Agenda Regular Committee Meeting Convenes 6:00 PM Call to Order 1. APPROVAL OF THE AGENDA 2. MINUTES A. March 9, 2010 - Regular Meeting 3. UNFINISHED AND NEW BUSINESS A. Communications Tower Sale Proposal —James Lehnhoff 7 B. Next meeting agenda —TIF policy, speakers. 4. REPORTS A. Report from the City Council B. Financial Planning and Analysis Committee Comments and Requests 5. ADJOURNMENT A quorum of the City Council may be present at this meeting. MINUTES EN HILLS • FINANCIAL PLANNING & ANALYSIS COMMITTEE Tuesday, March.9, 2010 6:00 P.M. Second Level Conference Room, Arden Hills City Hall CALL MEETING TO ORDER AND ROLL CALL The meeting was called to order by Jim Ostlund at 5:55 pm. MEMBERS PRESENT: Brenda Holden,Council Liaison; Arlene Mitchell; Jim Ostlund MEMBERS NOT PRESENT: Jeff Johnson OTHERS PRESENT: Sue Iverson;Joe Rueb; John Braun Call to Order 1. APPROVAL OF THE AGENDA Motioned: Arlene Mitchell Seconded: Jim Ostlund 2. APPROVAL OF NOVEMBER 13, 2009 MINUTES Motioned: Arlene Mitchell Seconded:Jim Ostlund . 3. UNFINISHED AND NEW BUSINESS A. Communications Tower Sale Proposal—James Lehnhoff The Committee put together a list of questions and thoughts for Lehnhoff. (Attachment A) B. Work Plan for 2010 Ostlund and Holden reviewed the potential work plan for 2010. The Committee may want to consider a joint meeting with the EDC. Iverson will contact an individual regarding fees and revenues. The group would like to further discuss TIF. Iverson will work on scheduling a speaker on TIF for the April meeting. 4. REPORTS A. Report from the City Council Holden provided an update on previous Council actions and activities_ B. Financial Planning and Analysis Committee Comments and Requests 5. ADJOURNMENT Motioned: Arlene Mitchell Seconded:Jim Ostlund Jim Ostlund, Chair Susan K. Iverson, Finance Director • City of Arden Hills 1245 West Highway 96•Arden Hills Minnesota 55112 Phone 651.792.7800•Fax 651.634.5137 www.ci.arden-hills.mn.us Attachment A • FPAC Discussion on Agenda Item 3A: Communications Tower Sale Proposal g P March 9th, 2010 Meeting Questions: Does the City want to get into this kind of operation? If so, how does a City get into this kind of operation? Would the City hire someone to run this property? Are there any environmental issues or concerns? Has there been an environmental assessment done on the property? What is the height of the tower and land? Would the City want to buy the property then sell it or keep it? Why did Great River Wireless walk away from the property? Need to check with MNDot on road easements. Would the City need an easement for access and maintenance? Would the"gift" fall within IRS guidelines? How long do towers last? Would the transfer of the property require a code change? Requests/Thoughts The City has to consider the operation costs such as maintenance and market. The Committee would like to get information from Roseville on their revenues, expenditures, and thoughts on communication tower properties. The Committee would like to review maintenance reports for this property. The Committee would like to review tax returns for the past three years including income, schedule C if applicable and/or financial statements. The City should have or obtain the original blue prints for the property. The City should review management contracts (termination and extensions). The City should try to figure out the potential for this property. Sand's would be responsible for the land survey. An Analysis of the signal range should be done. • Chair Initial F.Director Initial • - .JEN HILLS MEMORANDUM DATE: April 13,2010 TO: Financial Planning and Analysis Committee Sue Iverson, Acting City Administrator FROM: James Lehnhoff, Community Development Director SUBJECT: Communications Tower Sale Proposal Action Request Provide staff with comments,questions, and direction regarding the proposal from Sand Companies, Inc. (SCI)to sell the communications tower at 1296 County Road F to the City. Background • At the March 9, 2010, FPAC meeting, the committee was presented with a proposal from Sand Companies, LLC (SCI)to sell the 240 foot communications tower at 1296 County Road F to the City (see attached). The City can prepare a counterproposal after FPAC review and direction from the City Council. The Communications Tower The City commissioned an independent structural analysis of the tower by Ulteig Engineering in January 2010. The report indicated that the tower is in good condition and has been properly maintained. According to the engineer, these types of towers do not have defined lifetimes, but this tower can be expected to remain operational for many years with proper maintenance. There are currently three tenants on the tower: • Verizon Wireless operates 15 antennas for cellular services, • American Messaging operates three antennas for paging services; and • Nextera operates eleven antennas for business to business internet services. City of Arden Hills 4111 C:(Users joe.rueblAppDatalLocallMicrosoftlWindowslTemporary Internet Files1ContentOutlookX8RIDU3K0413/0-FPAC;1'le,no-Reding Tower Purchase.doc Page I of 3 • It was initially thought that there were nine unused antennas on the tower; however, those • antennas have since been identified as operational antennas that belong to the existing tenants. There are no remaining unused antennas on the tower. There is currently a proposal from Clearwire Wireless to install six additional antennas on the tower. This proposal has received a recommendation for approval from the Planning Commission, and the City Council will review the proposal at their April 26 meeting. If the Clearwire proposal is approved by the City, the tower will be at 97.4 percent capacity. However, the City's structural engineer noted that the legs of the tower are only at 62.8 percent capacity and the upper sections of the tower could be upgraded to increase the overall capacity of the tower. Proposal Review Sand Companies Proposal Paragraph 6 of the tower sale proposal from SCI is the crux of the proposal. SCI is requesting a total of$575,000 in assistance from the City for the Arden Village workforce housing project. If the property cannot generate $575,000 in TIF, the remaining portion of the request would be paid by the City in the form of cash or waiving development fees(building permits. SAC/WAC, etc). The preliminary TIF analysis conducted by Ehlers and Associates estimated that the development project would generate $252,254 in a 26 year TIF district. Under the SCI proposal, 411 the remaining$322,746 would be paid by the City to reach the total request of$575,000. It has not yet been determined if a 26 year TIF district is needed for this project. If the length of the TIF district is decreased, the amount of TIF generated would be reduced as shown on page three of the Ehler's analysis and the City's remaining portion would increase accordingly. Insurance, Maintenance, and Utility Costs The City's insurance agent provided a quote of$1,400 per year for insurance, which was based on a value of$175,000 for the tower. Since an appraisal has not yet been completed, a value of $175,000 was initially used because that is the difference between the initial $400.000 TIF request from SCI last fall and the $575,000 request in the tower sale proposal. However, as part of the preliminary TIF analysis, Ehlers used a value or$600,000 for the tower and property. This higher value was determined by Ramsey County as the likely value for the property when it is subdivided. Staff has requested an additional quote from the insurance agent based on a value of$600,000, but the additional quote was not available in time for this memorandum. Staff has been in contact with Jeff Peterson at True North Tower, which is a company that provides communication tower maintenance in Minnesota. Mr. Peterson stated that insurance for a tower like this is minimal. He recommended an annual inspection, which was estimated to cost City of Arden Hills • C lUsersyoe.ruebiAppDatalLocallMicrosoftlWindowsiTemporary Internet Files1Content.Outlookl t8RIDL3K 04/310-FPAC Memo-Reding Tower Purchase.doc Page 2 of 3 approximately$1,500 per year. He also stated that the tower would need to be painted at some • point in the future, and he will provide a quote for the painting. The electric costs for communication towers are typically the responsibility of the tenants. Staff is verifying the utility cost responsibility. Although the utility building has water and sewer service,the costs are minimal since there is no on-site staff. Property Taxes Ramsey County Assessor lists the following values for the full existing property: o 2010 Total Market Value= $903,000 o 2009 Land Market Value= $715,600 o 2009 Building Market Value=$187,770 o 2009 Total Market Value = $903,300 o 2009 Total Tax Payable = $27,580 If the City purchases the communications tower property, that property will no longer generate property taxes. The Finance Director will provide the estimated loss of property taxes at the meeting. The tenants pay all taxes related to their equipment on the tower. The housing portion of the property would continue to generate property taxes,though the additional taxes generated by the development would be captured in the TIF district. Leases ill Although the tower sale proposal is from SCI, US Bank manages the property on behalf of the George J. Reiling Estate. Staff will have the annual revenue generated by the tower at the meeting. Since the City is in negotiations with SCI to purchase the tower,the details of the negotiation are considered confidential and the revenue cannot be released in this memorandum. Until the City signs a purchase agreement with SCI, US Bank has remained steadfast in their unwillingness to share the details of the lease agreements. The property manager expressed concern about sharing proprietary information since the City also leases space to communication providers on the City water towers. The leases would include such items as the annual payment, annual adjustment rates,term lengths, and termination provisions. While the purchase agreement can have provisions that allow the City to rescind the offer upon review of the leases, it is difficult to formulate an informed counteroffer without the details of the leases. It is also difficult to obtain a complete appraisal without the leases. Attachment • Communications Tower Sale Proposal • Preliminary TIF Run from Ehlers and Associates, Inc City of Arden Hills • C:IUsersyoe_rueblAppDatalLocallMicrosofilWindowskTemporaiy Internet Files1Content.OutlookIX8RIDU3K\041310-FPAC Memo-Rethng Tower Purchase.doc Page 3 of 3 +,. 3 _ ^r `mot F• - A:O.'%_ • February 22, 2010 Sent Via E-Mail Transmission sand companies,Inc. 366 South Tenth Avenue PO Box 727 Mr. Stan Harpstead Waite Park, MN 56387-0727 Honorable Mayor Office: (320)202-3100 City of Arden Hills Fax: (320)202-3139 1245 West Highway 96 E-mail: SCI@SandCompanies.com Website: www.SandCompanies.com Arden Hills, Minnesota 55112 RE: Sale of Tower at 1296 County Road F West. Arden Hills, Minnesota. Dear Honorable Mayor Harpstead: As you are aware,Arden Village, LLC is proposing to develop a housing project located at the above address called Arden Village. With our purchase of the land for our proposed development, the site includes a tower and other improvements that we are proposing to separate from our project. The operation of a tower is not a business we are familiar with or are very interested in pursing. Our goal is to develop and own a quality housing development that will help • meet some of the housing needs and goals for the City of Arden Hills. With the City already in this business with the water tower antennas, we are proposing to offer the tower and related improvements to the City. Some of the more significant terms and conditions of the proposal are as follows for the sale from Arden Village, LLC or assigns ("Seller")to the City of Arden Hills ("Buyer"): 1. Property. The sale will include the tower and corresponding leases agreements, related improvements and the real property encompassing approximately 0.50 acres, herein referred to as the "Property". 2. Access & Platting. Seller shall provide access to the Property through a perpetual easement and shall construct a driveway to the Property at Seller's cost. Any improvements on the Property will be at the cost of the Buyer. Seller and Buyer shall enter into a maintenance agreement for the improvements within the easement area. Seller shall pay for all costs relating to platting including surveying and engineering and Buyer shall waive the City's platting fees. 3. Sale Price. The sale price will be determined from an appraisal of the Property by an independent, third party appraiser and payable in the following manner: cash at closing from the Buyer in the amount of $1.00 and the balance will be deemed as a charitable donation from Seller to the Buyer. The cost of the • appraisal will be paid by Seller. Construction • Property Management • Development Equal Opporiuu6r Employer 0 4. Closing. Closing shall take place simultaneously with Seller's closing on the financing for Arden Village with Minnesota Housing. Buyer shall pay for the cost of the title policy, the closing fee and pay the recording cost of the deed. Seller shall pay for state deed tax and recording documents clearing title to the Property. 5. Real Estate Taxes. Real estate taxes due and payable in the year of closing shall be prorated on a calendar year basis. 6. Seller Contingencies. Sale shall be contingent on Seller obtaining all necessary local approvals, an award of federal tax credits from Minnesota Housing and the approval of pay-as-you-go tax increment financing for Arden Village. Tax increment financing shall be over a period of time necessary to finance not less than $575,000. In lieu of tax increment financing or a combination thereof, participation could include waived fees or cash. The costs for the tax increment financing shall be paid 50% by each Buyer and Seller. The Arden Village development will need to meet all statutory requirements of tax increment financing including the "but for test". If there are any questions or comments on this proposal, please do not hesitate to • contact me with questions. If the City is interested in pursuing the purchase of the tower, the next step would be to enter into a purchase agreement that we would draft. Thank you for your consideration. Sincerely, Sand Companies, c. Jamie Thelen Chief Executive Officer • ■i 4/ Base Value Assumptioe 1 aEHLERS S ASSOCIA,CS ,NC Arden Village Apartments - No Inflation City of Arden Hills 55-Unit Apartment-4d Tax Classification ASSUMPTIONS AND RATES DlstrlctType: Housing Maximum/Frozen Local Tax Rate: 105.4760% Pay 2011 Est District Name/Number: Current Local Tax Rate:(Use lesser of Current or Max.) 105.4760% Pay 2011 Eat County District#: State-wide Tax Rate(Comm,/Ind.only used for total taxes) 45.8810% Pay 2011 Est First Year Construction or Inflation on Value 2011 Market Value Tax Rate(Used for total taxes) 0.18845% Pay 2011 Est Existing District • Specify No.Years Remaining Inflation Rate-Every Year: 0.00% PROPERTY TAX CLASSES AND CLASS RATES Interest Rate: 5.75% Exempt Class Rate(Exempt) 0.00% Present Value Date: 1-Aug•11 Commercial Industrial Preferred Class Rate(C/I Pref.) First Period Ending 1-Feb-12 First $150,000 1,50% Tax Year District was Certified: Pay 2010 Over $150,000 2.00% Cashflow Assumes First Tax Increment For District: 2013 Commercial Industrial Class Rate(C/I) 2.00% Years of Tax Increment 26 Rental Housing Class Rate(Rental) 1.25% Assumes Last Year of Tax Increment 2038 Affordable Rental Housing Class Rate(Aft Rental) 0.75% Fiscal Disparities Election[Outside(A), Inside(B),or NA[ NA Non-Homestead Residential(Non•H Res.) 1.25% Incremental or Total Fiscal Disparities Incremental Homestead Residental Class Rate(Hmstd.Res.) Fiscal Disparities Contribution Ratio 37.6592% Pay 2011 Est First $500,000 1.00% Fiscal Disparities Metro-Wide Tax Rate 121.7320% Pay 2011 Est Over $500.000 1.25% Agricultural Non-Homestead 1.00% BASE VALUE INFORMATION (Original Tax Capacity) Percentage Tax Year Property Current Class After Land Building Total Of Value Used Original Original Tax Original After Conversion Map# PID Owner Address Market Value Market Value Market Value for District Market Value Market Value Class Tax Capacity Conversion Orig.Tax Cap. Area/Phase Part of 27,30.23,12.0002 Cell Tower 1296 Cty Rd F 100.000 500.000 600.000 100% 600,000 Pay 2010 C/t Pref. 11,250 Exempt Part of 27.30.23,12.0002 Apt 1296 Cty Rd F 825,000 0 825,000 100% 825,000 Pay 2010 C/I Pref. 15 750 6,188 1,426,000 27,000 6,188 Note: 1. blase values are for pay 2011 per discussions with County Assessor on 4.6.10. Base value will tie reassigned when property is replatted. 2. District is located in SD'N621 Prepared by Ehlers 8 Associates,Inc.-Estimates Only N:wlinnsore'Arden HillstHousing-Economic-Redevelopment)TlF\Penarng ProjecteVArdon Village0TIF Run at 4d Rates 4.08.10xls