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HomeMy WebLinkAbout05-24-07-WS ~ ~~HILLS Approved: January 14, 2008 CITY OF ARDEN HILLS, MINNESOTA CITY COUNCIL WORKSESSION MAY 24, 2007; 6:30 P.M. ARDEN HILLS CITY COUNCIL CHAMBERS 1. CALL TO ORDER/ROLL CALL Pursuant to due call and notice thereof, Mayor Stan Harpstead called to order the City Council Worksession meeting at 6:36 p.m. Present: Mayor Stan Harpstead, Councilmembers Brenda Holden, David McClung, and Fran Holmes. Absent: Councilmember David Grant (Excused). Also Present: City Administrator Michelle Wolfe; Community Development Director Karen Barton; City Planner James Lehnhoff, Finance Director Sue Iverson, Ms. Kvilvang Kvilvang, Ehlers & Associates; and Sid Imnan, Ehlers & Associates. 2. APPROVAL OF MEETING AGENDA MOTION: Councilmember Holden moved and Councilmember Holmes seconded a motion to approve the meeting agenda as presented. The motion carried (4-0). 3. TCAAP MASTER DEVELOPMENT AGREEMENT Ms. Kvilvang asked Council to review Page 4 or the Brainstorming Sheet to talk about Public Financing. Other handouts were updates from Comments on Development Issues and updates from Acquisition and Developer Issues from May 17. She indicated additional items were added but nothing from the April 30th notes had been changed. For negotiation purposes, she asked Council to prioritize items. Discussion of Public Finance Councilmember McClung indicated he thinks a good answer to "A" is that the City take a look at both sides of the project before they consider public assistance. ARDEN HILLS CITY COUNCIL WORK SESSION- TCAAP MDA- May 24, 2007 2 Councilmember Holden stated they may need the public financing. Council discussed the "but for test". Councilmember McClung felt it would be much easier if in the statute the legislature states this is the "but-for test" and how to do it. He indicated that basically the City can determine how vigorous they want to be with the test. Mr. Sid Inman stated Ehlers had recommended that Council tell the developer what the City's standards are. He indicated this is a real estate transaction and the City is allowed to ask for what they want. The developer may accept it as part of the risk or they may say they are not willing to accept it. Ms. Kvilvang indicated that for the next meeting she will list of things they feel should be in the agreement to protect the City and their assets. She indicated she will also add a secondary category of items that Ehlers thinks there will be a need to. The Mayor indicated he felt the City needed to have a list of priorities and then they could start talking public financing. Mr. Inman suggested they determine items that are absolutes. He wanted to know if Council agrees the "but for test" include the total for the land transaction and the construction. Council was in agreement. Ms. Kvilvang also asked if the City was willing to issue debt that's supported by a special assessment bond in order to help the project. Mayor Harpstead and Councilmember McClung indicated they were willing to look at that as a tool. Attorney Steve Bubul indicated a certain amount of TIF could be spent outside the district. He could see some scenarios that could present themselves where TIF on TCAAP would provide something for the rest of the city. Ms. Kvilvang asked if this is a tool the City would be willing to look at. There was further discussion about TIF. Mr. Inman noted that TIF can be used for public infrastructure. He also indicated that cities can retain 10 percent for administration Councilmember Holden indicated it would make a difference and they should start with that policy. Mayor Harpstead indicated using the 15 percent outside the district could provide some benefits to the people that are going to live next to the redevelopment. Mr. Bubul indicated there are limits because it is going to be a redevelopment district and the monies need to be used for redevelopment projects and not to pay for streets and roads. ARDEN HILLS CITY COUNCIL WORK SESSION-TCAAP MDA- May 24,2007 3 Councilmember Holden stated she does not feel there should be one huge TIF district, but multiple districts. Mr. Bubul indicated there may be some problems if they finance infrastructure because it creates pooling problems and that is one of the reasons why many times it is advantageous to create the larger district. He also stated it might be possible to get special legislation. Ms. Kvilvang indicated once they start to understand a little bit more about the need and timing a decision would be made on how to do the district. Mayor Harpstead indicated he felt as short as possible and as targeted as possible gives you the best outcome from literature he read on TIF. Council had discussion of fiscal disparities. Ms. Kvilvang indicated she is assuming Council wants the shortest term possible. Mr. Inman indicated they always recommend as far as the tax increment goes, that the City not issue tax increment bonds, but do a pay-as-you-go where they promise to pay. Mayor Harpstead wanted to know if there were any cost differences in terms of organizing or managing the two different types of financing. Ms. Kvilvang indicated that on pay-as-you-go, where you have a floating or variable rate, interest rates are as high as 9 \4 and for tax exempt, the interest rate is in the 5 percent range. Ms. K vilvang indicated if Council were willing to pursue Special Legislation if they deem it's warranted for various reasons. Council was in consensus. Ms. K vilvang indicated she thought they discussed bonding for roadway improvements and those types of things, and that this would be paid 100 percent by assessments. Council concurred. Councilmember Holden had questions on the maintenance of the infrastructure and also if they partner with someone and they default. Mayor Harpstead indicated the City would give the title for land but would require the developer to have a bond or some form of performance that allows for a safe position. He indicated that since the City is carrying the development they should be able to set the terms. Council had discussion on options if clean up of the land was completed and then the redevelopment did not occur for several years. Councilmember McClung indicated they should require that certain areas be developed first. ARDEN HILLS CITY COUNCIL WORK SESSION- TCAAP MDA- May 24, 2007 4 TCAAP Financials and MDA: Ms. Kvilvang indicated that the land developer fee is for both profit and for overhead administrative costs for doing the land development, including assembling the parcels, doing all the grading, getting the utilities, etc. Councilmember Holden asked why there is nothing on return on developer equity. Ms. Kvilvang indicated at this time it is a good thing that there is no return on developer equity in there and also there are no dollars in there to return anything on. Mr. Inman indicated equity is what the developer is putting into the project. Mr. Inman recapped on the potential that the developer will be selling themselves land and the City wanted to make sure that it's monitored and an arm's length transaction. He indicated that from the discussion last week, Council had agreed. Ms. K vilvang asked if the City wanted the ability to look at each of the individual developments. Mr. Imnan stated it is really important that Council understand that there are two different functions that the developer has. Their role as master developer is to get the land assembled, prepared for development and sold for development, and that role is different than when they come in to build buildings. City Administrator Wolfe stated there is an advantage to be able to do the cleanup and the land preparation simultaneously because it is more efficient and it takes less time. She stated the overall combined cost of cleanup and preparation for development should be lower than it would be if it were two different and separate processes. Ms. Kvilvang indicated they make sure they are not double counting by looking at everything that they do and every invoice that they get. In addition to that Ehlers recommends having a construction manager. Mr. Inman indicated a document with much more detail will be attached to the development agreement, plus if analyzing buildings those will be attached also. He indicated Mr. Bubul will define in words what grading is allowed. He stated the developer then will have to give back a document and an independent auditor will have to certifY that it is a true and accurate representation of what happened. Ms. Kvilvang indicated they will also be working on figuring out the value of the lots and have more detail on that. Mr. Inman indicated the developer would be giving numbers and how they arrived at those. The City will then look at those, and based on experience of other developments that have happened, see if they are realistic or not. Ms. Kvilvang indicated each type of development has different levels of profit required based on risk. ARDEN HILLS CITY COUNCIL WORK SESSION-TCAAP MDA- May 24,2007 5 Mr. Inman indicated when you have a master developer coming in to do the project, they will want to know that they are at least going to walk away with a certain amount of profit just on the land sale. The construction is a separate activity. Ms. Kvilvang indicated it will be a while before they know the real gap and the real numbers. Mayor Harpstead indicated that the City may sign an agreement that says "based on what we know today, it looks like you need, $X million." Then once building ofB, C, D and E starts, the number could go down to O. He stated the City is not giving the developer the money; they are giving them the opportunity to get that money in the future. Councilmember Holmes stated it is possible that with A, they will have to pay them the money up front. Mayor Harpstead indicated Ehlers is showing them Stage I of a two stage process as to how much potential obligation the City has for assistance. Councilmember Holden expressed concern about whether they are expected to pay the gap money and she did not think the developer should be allowed to assume that the City would pay the difference. Mayor Harpstead indicated the developer and Ehlers want to look at the project in certain management chunks and in this case it was decided it would be land development and then it would be building development. It could even be phases of building development. Councilmember McClung indicated he did not want to go forward with this unless he can see Phase II and felt that Ehlers should be skilled at this and be able to do it. Ms. K vilvang stated at this time they would not know since not all partners were present. Councilmember McClung asked if Ehlers could ask the developer what they planned to build. Councilmember Holden asked wanted to know how the City can obtain as many grants as possible. Ms. K vilvang indicated they put it in the master development agreement that they have to exhaust every grant source that is out there and pursue all those. Most of the grants that are available for redevelopment the City needs to apply for. She stated some will go through the Metropolitan Council, but regardless it's in everybody's best interest to get more cash for the project. Councilmember Holmes asked how the City should go about putting pressure on the developer to get the grants? City Administrator Wolfe indicated she informed them that if they want any chance of consideration in the discussion of public financing they are going to need to demonstrate to the City an enormous amount of time, energy and money spent on identifying, applying and cooperating with the City on getting grants. She stated it is also one of the statements within the Public Finance Policy. ARDEN HILLS CITY COUNCIL WORK SESSION- TCAAP MDA- May 24, 2007 6 City Administrator Wolfe indicated that SEH, the developer, and Community Development Director Barton have already started working on identifying potential grants. Councilmember Holden asked again about the grants and what stops the developer from using up the grant money and then they use their money for cleanup. Mayor Harpstead stated the grants all come to the City and the City decides how they're going to be spent, so the City figures out how the money is spent. Mayor Harpstead asked if Ehlers could highlight the two or three items that they feel the most time and effort will be spent on. Ms. Kvilvang indicated land value is the biggest category. Council had further discussion of special assessments and streets, utilities and landscape. They also had discussion of parks and trails. Mayor Harpstead recommended that everyone read the sample agreements that were given to them. Councilmember Holden asked when there would be a decision on whether the City gets H money? City Administrator Wolfe indicated that the request for federal funding originally was to have it in the 2008 but it was put in the 2009 and they do not know why. One of the discussions at the Legislative Strategy Meeting was to see if they could find out why. There was also a discussion about a hesitancy to push to get it back to 2008 until Council was more certain that they could meet the 2008 construction deadline. The Mayor and City Council discussed a number of items relating to land acquisition and the development that would be addressed in the MDA. 4. COUNCIL COMMENTS AND REQUESTS S. ADJOURNMENT Mayor Stan Harpstead adjourned the Worksession meeting at 9:41 p.m. ~~ Noah A. Simon Deputy Clerk I IMetro-inet. us lardenh illslAdmin ICounci/lMinutesl W orksession 1200 7\05-24-07 TCAAP Work Session- Final.doc