EDA Agenda 08-28-2019AGENDA
JOINT ECONOMIC DEVELOPMENT AUTHORITY (EDA) AND CITY COUNCIL
MEETING
Wednesday, August 28th, 2019 — 7:00 a.m.
Academy Room, Monticello Community Center
Commissioners: President Steve Johnson, Vice President Bill Tapper, Treasurer Jon
Morphew, Tracy Hinz, 011ie Koropchak-White and Councilmembers
Lloyd Hilgart and Jim Davidson
City CounciL Mayor Brian Stumpf, Charlotte Gabler, Bill Fair, Lloyd Hilgart, Jim
Davidson
Staff: Executive Director Jim Thares, Jeff O'Neill, Angela Schumann, Wayne Oberg and Jacob
Thunander
1. Call to Order
2. Roll Call
3. Consideration of additional agenda items
4. Consent Agenda
None
Regular Agenda
5. Global review of UMC, Inc. expansion, proposed land transaction, assistance package
and timeline
6. Consideration of Memorandum of Agreement (MOA) for Public Works use of 112 West
River Street
7. Director's Report
8. Adj ourn
5.
EDA:8/28/19
Consideration of UMC, Inc. Expansion, Land Transaction, Financial Assistance
Package and Timeline (JT)
A. REFERENCE AND BACKGROUND:
UMC, Inc., is proposing to develop a new 40,000 square foot light industrial facility on land
adj acent to its 72,000 square foot building at 500 Chelsea Road East. They are planning to create
60 new FTE jobs as part of the expansion. Upon completion of the new facility, UMC will have
in effect created a campus setting for its facilities along Chelsea Road East. The campus layout
is expected to enhance LJMC's flexibility, production efficiency and growth.
The development proposal consists of land acquisition, new construction and purchase of
equipment. The entire proj ect is expected to cost approximately $8,600,000 +/-. The 60 new
j obs will be created over the next three years with wage rates ranging from $22 to $25 per hour.
The overall project cost, its prospective financial structure and the land acquisition process
combine to make this a complicated proposal from the standpoint of review steps and
sequencing. A preliminary breakdown of the costs is as follows.
Anticipated Fundin� Uses
Land Acquisition
New Construction
Equipment Purchase and Installation
Soft Costs and Contingency
Total Project Uses
$1,029,000
$4,000,000
$3,500,000
$ 160,011
$8,689,000
Land Transaction: UMC has requested that the EDA or the City acquire a vacant 7.39-acre
parcel adj acent to its current facility located at 500 Chelsea Road East and convey it to them
for $300,000. After the land conveyance to UMC is completed, it would finalize City site
approvals and permitting steps and begin construction of the 40,000 square foot facility in
late November 2019. UMC envisions the new facility eventually being expanded to 85,000
square feet in the future with employment levels at the two sites reaching 500 FTEs which
would be an increase of 300 total jobs over the current 200 employees.
The current owner of the Chelsea Road parcel has agreed in principal to sell the property to
the City for a reduced cash amount and to purchase a vacant City owned parcel located at the
south edge of the City at or slightly below taxable value. This 20 acre-parcel was acquired by
the City in 2007 as a potential public works facility site. It is located outside of the corporate
City limits, within the Monticello Orderly Annexation area, and is contiguous to the City.
The parcel is guided "urban Reserve" and it is the understanding of staff that the intention of
the buyer is to develop the parcel as residential. Development would be required to follow all
City annexation and land use processes.
Per state statutes, the EDA is not allowed to be involved in the purchase, sale or development
of land that is not located in the City limits. Therefore, the City will acquire the 7.39-acre
parcel from the private land owner and also convey the 20-acre parcel to the same property
EDA:8/28/19
owner. The City will convey the 7.39-acre parcel to the EDA. Then contingent on all required
TIF, business subsidy and other critical related decisions, the EDA would then convey the
land to LTMC.
A summary of the concepted land transaction is shown below:
Step 1. City purchases 7.39-acre parcel (PID# 155143001020) for $1,029,000 from
Monticello Industrial Park, Inc. (Shawn Wienand)
Step 2. City conveys 7.39-acre parcel to EDA
Step 3. EDA sells 7.39-acre site to UMC, Inc. for $300,000
Step 4. City sells 20-acre tract (PID# 213100232400) to LSW Investments, LLC for $300,000
for residential development
Assistance Package: Based on the initial information, it is understood that the proj ect would
not be able to move forward without the use of TIF assistance to help write down the land costs.
The size of the land parcel along with the price means the typical 9-year TIF District will not be
sufficient to recapture the increment needed to make the EDA whole. The shortfall will need to
be made up in the form of a combination MIF Grant and Economic Development Tax
Abatement.
Use of Tax Abatement: EDA Attorney Martha Ingram of Kennedy & Graven and Tammy
Omdal, Northland Securities, will be present to help answer questions and discuss the use of Tax
Abatement under the City's current Business Subsidy policy. In summary, tax abatement will
be used as a tool to help repay the EDA for its expenditure in acquiring the land.
• Staff will outline the following components of Tax Abatement:
• Statutory Authority (Jurisdictions)
• Mechanics of Usage (hearings, agreements, terms, etc.)
• Examples of Usage (projects types and length of agreements)
• Proposed usage in UMC proj ect and why it is needed (TIF-TA financial run)
UMC has also stated interest in other available financial assistance programs for construction
activities and equipment purchases. The proposed financing components are expected to
include the following sources:
Anticipated Fundin� Sources
Bank Loan =
Equity =
TIF Land Write Down =
TA Land Write Down =
MIF Grant Forgiveness =
EDA-SCDP Loan =
Total Project Sources
$6,400,000
$ 850,000
$ 521,884 (See TIF run)
$ 207,116 (City and County?)
$ 300,000
$ 410,000 (equipment)
$8,689,000
EDA:8/28/19
Timeline: The timeline for various approval steps is shown below:
7-31-19 EDA recommends City Council call for a TIF Public Hearing (Resolution #2019-06)
8-12-19 City Council calls for TIF PH (Resolution # 2019-55)
8-14-19 Non-Binding Letter of Intent between EDA and UMC, Inc. approved by EDA
8-14-19 EDA accepts TIF application in concept
8-14-19 EDA recommends City Council approval of MIF application to MN-DEED
8-14-19 EDA recommends City Council approval of JCF application to MN-DEED
8-26-19 City Council authorizing MIF Community Needs Public Hearing by Resolution
8-28-19 Joint EDA and City Council Mtg to discuss global UMC project elements and
Tax Abatement
9-03-19 Planning Commission Considers TIF Plan for conformity to Comp Plan
9-09-19 MIF Community Needs Public Hearing held at City Council Mtg.
9-09-19 City Council considers MIF application submittal by Resolution
9-09-19 City Council considers JCF application submittal by Resolution
9-09-19 TIF PH Notice to Newspaper
9-11-19 EDA considers Economic Development District TIF #1-41 Plan by Resolution
9-12-19 TIF PH Notice Published in Newspaper
9-23-19 City Council holds TIF PH; considers TIF Plan by Resolution
9-30-19 Last Day for Notice to newspaper for Business Subsidy and Tax Abatement PH
10-21-19 MIF and JCF Award Letters received
10-23-19 EDA holds Tax Abatement PH
10-23-19 EDA holds Business Subsidy Hearing on all Assistance components
10-23-19 EDA considers Contract for Private Development; inclusive of both TIF
and TA terms by Resolution
10-28-19 City Council considers Contract for Private Development; inclusive of both
TIF and TA by Resolution
10-28-19 Land Sale PH Notice to newspaper*
10-31-19 Land Sale PH Notice published*
11-12-19 City Council considers Purchase Agreements for Purchase 7.39-acre parcel by
Resolution*
11-12-19 City Council considers Purchase Agreement for Sale of 20-acre farm parcel by
Resolution*
11-13-19 EDA holds PH for land sale*
11-13-19 EDA considers Purchase Agreement with UMC by Resolution*
11-14-19 Estimated MN-DEED Release of Funds for EDA-SCDP $$ for equipment*
11-19-19 Projected closing date for 7.39-acre tract purchase by City*
11-20-19 Projected transfer of 7.39-acre parcel to EDA by deed*
11-21-19 Projected closing-conveyance of EDA's 7.39-acre parcel to UMC*
11-25-19 Projected sale of 20-acre City owned land to LSW Investments, LLC
(residential development land)
Note#1: Wright County Tax Abatement process is separate and not shown. That
process could start in early October (10-01-19 or (10-15-19) and be completed
by early November (est. date of 11-05-19)
Note #2 * means under discussion as to inclusion in the global deal and process;
alternate process may be implemented.
EDA:8/28/19
UMC's development proposal meets several community and economic development
objectives. Two broad goals stated in the Comprehensive Plan include: 1) Attracting and
Retaining Jobs, and 2) Expanding the Tax Base. Further, in early 2019 the EDA adopted its
annual Workplan which states that the EDA will "Market industrial development
opportunities with a focus on firms extending-impacting the local and regional supply chain
factor".
A1. STAFF IMPACT: Numerous staff are involved in reviewing and processing the
components for the global UMC assistance land transaction and assistance package. Staff
include consultant such as the EDA attorney and financial advisor as well as the City Finance
Director, Community Development Director and Economic Development Manager.
A2. BUDGET IMPACT: The Letter of Intent agreed to between the EDA and UMC
requires a deposit of $10,000 for covering consultant fees. Typically, the TIF application fee,
also $10,000, is used to pay for consultant involvements in that process.
B. ALTERNATIVE ACTIONS
No Decisions required; informational only.
C. STAFF RECOMMENDATION:
UMC's project will allow development of a new manufacturing facility with 60 well-paying
jobs. UMC is a growing firm involved in the medical and aviation precision machining
components sector. If past success is an indicator, UMC will continue to grow and expand its
footprint in Monticello and add to the vibrancy of the local economy and the quality of life as
well. This is a complicated proposal and involves numerous finance tools and programs. The
EDA and City Council will be asked to consider each of those assistance components in the
next two months.
D. SUPPORTING DATA:
a. LTNIC Summary of Expansion Proposal
b. Calendar for TIF District #1-41 and Tax Abatement
c. Aerial photo of proposed TIF #1-41 District
d. Aerial photo of land sites involved in transaction
e. TIF and Tax Abatement Financial Run
From a small, traditional machine shop, started in a garage, to their current, 75,000 sq.ft. state of the art
facility, UMC is a leader in precision manufacturing. Located in Monticello, Minnesota, UMC delivers
solutions to top manufacturers in the medical, aerospace, and other key industries. They continuously
enhance their operational systems and take pride in developing their internal leadership. Operating as
a world class manufacturer has resulted in aggressive growth over the years. In fact, UMC's revenue
has quadrupled since planting its flag in Monticello in 2003.
UMC is growing at a rapid rate and has been working to find the perfect solution to address their growth
through a blind RFP process since 2017. With 190 full time employees, they have hit capacity
constraints at their current facility. The addition of a second facility is vital to the continued growth of
their medical device programs, as well as their aviation fuel delivery manufacturing. With their
expansion, UMC projects to double its business the next five years. That 100% increase in business
correlates to the creation of somewhere between 100 and 125 new well-paying manufacturing jobs.
The goal of the company is to find a solution that not only allows for its next five years of growth, but
provides the flexibility to accommodate its 10-year growth plan of becoming a company with $100
million in annual revenue, providing nearly 500 jobs to the local economy.
Through the multi-state blind RFP process, the city of Monticello did not fall within the top 3 for site
finalists. However, due to the company's history and investments in the community, UMC wanted to
ensure that every option for continuing to do business in Monticello was explored.
The UMC team has had numerous meetings with Monticello city staff, as well as select elected officials,
to find a solution that is mutually beneficial for both the company and the city. Through these meetings,
a single solution was identified that met those criteria. That solution is for the lot adjacent to UMC's
current campus to be purchased by the city and provided to UMC at no cost, with the city recouping its
investment using tax incentives and miscellaneous other economic development programs.
The solution outlined above is less than equal to the packages offered by the top 3 competing sites,
however, UMC feels that some of that delta can be addressed through operational efficiencies realized
due to the geographic immediacy of the site in relation to its existing campus.
Pending this land is provided to the company by the city at no cost, UMC would plan for a Fall of 2019
groundbreaking and a Spring 2020 completion of its first 40,000 sq. ft. phase of expansion. The
additional undeveloped space on the parcel will accommodate future phases of growth in a scalable
fashion with little disruption of the company's business and production activities.
With the completion of Phase 1 alone, experts project a local economic impact of nearly $10 million
annually, along with additional local consumer expenditures exceeding $3 million annually. These
amounts are only for Phase 1 expansion and do not take into account the loss in economic activity,
should the company relocate along with its 190 current employees.
The team at UMC is excited to have identified a viable solution for staying and growing in the Monticello
community. The company looks forward to the unanimous support of local elected officials for the
proposal and continued diligent work by staff to deliver on an aggressive timeline.
City of Monticello
Central Monticello Redevelopment Project No. 7
Establishment of Tax Increment Financing District No. 7-47
Economic Development TIF District
Project Novus
Public Hearings on September 23 (City), October 9(EDA), and October 74 (City)
5 M T W T F 5
1 2 3 4 5 6
7 8 9 10 11 12 13
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21 22 23 24 25 26 27
28 29 30 31
5 M T W T F 5
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25 26 27 28 29 30 31
5 M T W T F 5
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29 30
July 31
August 12
August 23
August 24
September 3
September 9
September 11
September 12
September 23
September 30
x/x/xxxx
x/x/xxxx
EDA request City Council call for hearing
City Council calls for public hearing
Last day for notice and TIF plan and fiscal implications to County and School District
First day to publish hearing notice
Planning Commission review
Last day for notice to newspaper for TIF hearing City Council
EDA approval of TIF, subject to Council approval
Notice published for TIF hearing City Council
Public hearing and establishment of TIF District
Last day for notice to newspaper for business susbisdy and tax abatement hearing
Last day for notice to newspaper for land sale hearing EDA
Notice published for land sale hearing EDA
5 M T W T F 5 October 3 Noticed published for business sbusidy and tax abatement hearing City Council
1 2 3 4 5 October 9 EDA approval of Contract for Private Development, subject to City Council approval
6 7 8 9 10 11 12 October 9 Public hearing for land sale EDA
13 14 15 16 17 18 19 October 14 Public hearing for business subsidy and tax abatement and approval of Contract for
20 21 22 23 24 25 26 Private Development City Council
27 28 29 30 31
After October 14 Request certification by County and file with the State of MN DOR and Auditor
June 30, 2020 Certification of TIF District by this Date
Wright County Tax Abatement approval process/dates needs to be added.
Notes:
1. Inspection of property and findings of substandard report was completed on December 9, 2015.
2. Denotes city council meeting dates.
3. Denotes EDA meeting dates
4. City publication dates need to be confirmed and added to calendar.
NORTHLAND
I'UBLIC RNANCE
TIF for Economic Development 8/19/2019
Proposed Econ. Dev. TIF District # 1-41
August 8, 2oig
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EDA: 08/28/19
6. Consideration of Authorizing Memorandum of Agreement (MOA) between EDA
and Public Works Department for use of vacant garage facilitv located at 112 West
River Street (JT)
A. REFERENCE AND BACKGROUND:
This item is to ask the EDA and City Council to consider approving a Memorandum of
Agreement (MOA) between the EDA and the City Public Works Department for
temporary use of a vacant garage facility located at 112 West River Street. The Parks
Department has identified the former auto body repair and craft manufacturing shop as a
good location to store lawn and sidewalk/trail maintenance equipment and supplies. The
EDA reviewed the concept at its meeting in July and authorized moving ahead with a
MOA as the form of use agreement for this facility.
The EDA acquired this property in Apri12018 as part of its effort to assemble land in
Block 52 for a potential future mixed-use redevelopment proj ect. While the EDA has
entered into a Preliminary Development Agreement with Beard Group, Inc., Hopkins,
MN, it is expected that the process of due diligence and additional site assembly may last
well into 2020. In the interim period, the building is in reasonably decent shape and is
available for use as a storage facility for the Public Work's equipment and supplies.
Under the proposed MOA, the Public Works Department is responsible for operating and
maintaining the property as well as minor repairs and on-going utility bills along with
other required operating expenses such as building and system maintenance and repair
costs, all utility expenses (i.e. water, sewer, garbage, heat, electrical and internet). The
MOA also requires that the EDA be notified by the Public Works Department if it desires
to or feels the need to make any maj or repairs to the building.
The MOA is set to sunset or terminate on June 30, 2020 although it could be extended
upon mutual agreement of both parties. Storage is allowed for public purposes in the
CCD zone at this time.
A1. STAFF IMPACT: There was minimal staff impact in preparing the MOA. The MOA
is not a fully legally binding agreement but rather an understanding or agreement as to
intent and generally understood obligations and responsibilities by both parties entering
into the MOA. The MOA was drafted by in-house staff using existing Lease and MOA
templates.
A2. BUDGET IMPACT: There are no budget impacts for consideration of the MOA.
The Public Works Department is responsible for paying the operating costs to use the
property and has budgeted dollars for such expenses. They are saving on fuel expenses in
the current agreement timeframe by having the ability to store equipment in close
proximity to the parks and public property that is being maintained.
EDA: 08/28/19
B. ALTERNATIVE ACTIONS:
Motion to authorize entering into the MOA between the EDA and the City Public
Works Department for the temporary use of a vacant garage facility located at 112
West River Street.
2. Motion to deny authorizing entering into the MOA.
Motion to table consideration of authorizing entering into the MOA for further
research, discussion and/or document changes as directed.
C. STAFF RECOMMENDATION:
Staff recommends Alternative 1. Entering into a MOA will provide a written
understanding regarding the Public Works Department's use of and responsible
occupancy of 112 West River Street.
D. SUPPORTING DATA:
a. Memorandum of Agreement — 112 West River Street
2
MEMORANDUM OF AGREEMENT
The MEMORANDUM OF AGREEMENT (MOA) is entered into by the City of Monticello
Economic Development Authority, a Minnesota public body corporate and politic and the City of
Monticello Parks Department to govern the usage of the property and facilities located at 112 West
River Street, Monticello, MN. The parties have voluntarily entered into the MOA ("Agreement")
under the following terms and conditions.
TERM: The term of this Agreement shall be for the Period August 28, 2019 through June 30,
2020 or until such earlier notice to end the Agreement is provided by either party. The Agreement
may be terminated by either party with 30 days' written notice. The parties agree that the
Agreement may be extended upon mutual agreement of the parties.
GOALS AND OBJECTIVES: The aforementioned parties desire to enter into to the herein
described Agreement in which they shall work together to accomplish the following goals and
objectives. The EDA currently owns the property and vacant garage facility located at 112 West
River Street with the intention of it being part of a future redevelopment proj ect. The City Public
Works Department is seeking to use the vacant facility for temporary storage of lawn and trail-
sidewalk maintenance equipment and supplies. The parties desire to enter into the Agreement to
allow the proposed temporary use of the building facility as heated storage facility for a variety of
needs and purposes. No hazardous chemicals and/or materials will be stored at the facility. The
parties shall abide by the terms and conditions of the Agreement to achieve the following specific
goals and objectives.
GENERAL PROVISIONS: The parties acknowledge and understand that they must be able to
fulfill their responsibilities under the MOA in accordance with the provisions of the law and
regulations that govern their activities. The parties accept full responsibility for their performance
under the terms of the MOA.
GOVERNING LAW: The MOA shall be governed by and construed in accordance with the laws
of the State of Minnesota.
ASSIGNMENT: Neither party to this MOA may assign or transfer the responsibilities or
agreement made herein without the prior written consent of the non-assigning party, which
approval shall not be unreasonably withheld.
ENTIRE UNDERSTANDING: The herein MOA constitutes the entire understanding of the
Parties pertaining to all matter contemplated hereunder at this time. The parties signing this MOA
desire or intend that any implementing contract, license, or other agreement entered into between
the parties subsequent hereto shall supersede and preempt any conflicting provisions of this MOA
whether written or oral.
S-1
532501v1 MNI MN325-31
MOA SUMMARIZATION:
City of Monticello Economic Development Authority (EDA) shall perform the following
obligations and/or responsibilities.
1. Purchase, in advance, and carry in full force and effect commercial property insurance for
the full insurable value of the Premises.
2. Inspect the property if requested by the Public Works Department.
3. Inform the Public Works Department if the EDA property is sold.
4. Inform the Public Works Department if and when inspections required for redevelopment
purposes are scheduled for the facility.
5. Provide a 30-day vacate notice to the Public Works Department at the appropriate time
City Public Works Department shall perform the following obligations and/or responsibilities.
L Maintain the building in good repair and useable condition in compliance with applicable
health and safety laws.
2. Pay the natural gas heat utility bill.
3. Pay the electric utility bill.
4. Pay the municipal water-sewer bill.
5. Pay the waste refuse bill.
6. Maintain the grounds in good, clean and neat condition.
7. Purchase, in advance, and carry in full force and affect the following insurance:
(1) "All risk" property insurance covering the full replacement value of all of
Tenant's leasehold improvements, trade fixtures, inventory and personal property
within or about the Premises, covering damage from any cause whatsoever; and
$1,000,000, and written on an "occurrence" basis.
(2) Comprehensive general public liability insurance naming both Landlord and
Tenant as insureds, covering all acts of Tenant, its employees, agents,
representatives and guests on or about the Premises, containing a contractual
liability endorsement, in a combined single limit amount of not less than
$1,000,000.
8. Comply with all laws, governmental standards and regulations applicable to Public Works
S-1
532501v1 MNI MN325-31
Department and/or the Premises in respect to occupational health and safety, hazardous
waste and substances and environmental matters.
9. Inform the EDA if any major repairs or building alterations are needed to safely occupy
and efficiently use the building and obtain prior written consent of the EDA before
beginning any major repairs or alterations.
10. Upon expiration of the Agreement, the Public Works Department shall remove all stored
equipment and supplies from the facility.
11. Public Works shall vacate the premises at expiration or termination of the MOA and turn
over all keys to the EDA.
AUTHORIZATION AND EXECUTION:
MOA Entered into this of , 2019.
CITY OF MONTICELLO ECONOMIC DEVELOPMENT AUTHORITY
By:
Its: President
By:
Its: Executive Director
CITY OF MONTICELLO PUBLIC WORKS DEPARTMENT
By:
Its:
ATTEST:
S-1
532501v1 MNI MN325-31
EXHIBIT A
PREMISES
The South'/z of Lots 1, 2, and 3, in Block 50, Townsite of Monticello, according to the plat on
file and of record in the office of the Register of Deeds in and for Wright County, Minnesota;
Said South'/z of Lots 1, 2, and 3, Block 50, can also be described as follows: Beginning at the
mid-point on the common line between Lots 3 and 4, in said Block; thence Southerly along
said common line 82.5 feet to the Southerly line of said Block (being the Southeast corner of
said Lot 3); thence Westerly along the Southerly line of Lots 3, 2 and 1 for a distance of 99
feet to the Southwest corner of Lot 1; thence Northerly along the Westerly line of Lot 1 for a
distance of 82.5 feet; thence straight Easterly 99 feet to the point of beginning and there
terminating.
Subj ect to existing easements, restrictions and reservations of record, if any.
A-1
532501v1 MNI MN325-31
EDA Agenda: 08/28/19
7. Economic Development Report (JT)
A. Ausco Design Loan Request update: Information will be provided at the meeting.