EDA Minutes 06-10-2020MINUTES
REGULAR MEETING - ECONOMIC DEVELOPMENT AUTHORITY (EDA)
Wednesday, June 10th, 2020 — 6:00 p.m.
Mississippi Room, Monticello Community Center
Commissioners Present: Bill Tapper, Jon Morphew, Tracy Hinz, 011ie Koropchak-White,
and Lloyd Hilgart
Commissioners Absent: Steve Johnson and Jim Davidson
Staff Present: Jim Thares and Angela Schumann
1. Call to Order
Bill Tapper called the Regular Meeting of the EDA to order at 6:00 p.m.
2. Roll Call
3. Consideration of additional agenda items
None.
4. Consent Agenda
LLOYD HILGART MOVED TO APPROVE THE CONSENT AGENDA. TRACY
HINZ SECONDED THE MOTION. MOTION CARRIED, 5-0.
a. Consideration of approving Regular Meeting Minutes — May 13, 2020
Recommendation: Approve Regular Meeting Minutes — May 13, 2020.
b. Consideration of approving Workshop Meeting Minutes - May 13, 2020
Recommendation: Approve Workshop Meeting Minutes — May 13, 2020.
c. Consideration of approving Regular Meeting Minutes — May 27, 2020
Recommendation: Approve Regular Meeting Minutes — May 27, 2020.
d. Consideration of approving payment of bills
Recommendation: Approve payment of bills through May, 2020.
e. Consideration of approving demolition quotes for 300 - 4th Street East and
authorizing entering into negotiations for a contract for services with the
lowest qualified quote submitter
Recommendation: Select Carlson Construction in the amount of $6,500 for
post fire training demolition work or in the amount of $9,995 for a no burn -
regular demolition.
Economic Development Authority Minutes — June 10th, 2020 Page 1 1 8
Regular Agenda
5. Consideration of TIF Pre -Application and Concept Review of Proposed Affordable
Housing Apartment Development at Riverwood Bank Parcel along 711 Street West
by Duffy Development
Jim Thares introduced the item and explained that Duffy Development is a residential
developer in the metro area and surrounding region specializing in developing projects
using the Federal Government's Low Income Housing Tax Credit (LIHTC) program.
Thares noted that the developer would provide a concept review for the submittal of a
Tax Increment Financing (TIF) District pre -application. The estimated financing gap for
the project is $500,000 and the total costs is projected to be $13.5 million. The
development would be for a 53 -unit apartment style development located on the far west
end of the vacant 20 -acre land tract owned by Riverwood Bank on 7th Street West.
Bill Tapper and Lloyd Hilgart asked for more clarification on where on 7th Street West
the proposed development would be located. Thares indicate that it is proposed as a
newly created 2.66 -acre site that would be located on the west end of the 20 -acre parcel
and border Elm Street.
Jeff Von Feldt, Duffy Development, introduced himself and explained Duffy's focus on
residential development with an emphasis on the affordable nature of housing and
utilizing the Federal Housing Tax Credit Program administered by the State of
Minnesota.
Von Feldt noted that they currently own and manage 18 properties in the Twin Cities and
surrounding areas. They manage all of their development properties, with the closest
developments to Monticello being in Big Lake and Elk River. They emphasize long term
property ownership as a way to support residents that can't afford to live in higher
income housing options. Von Feldt explained that they typically construct one building a
year estimated at around 50 -units. They are proud of their strong relationships in
communities and mentioned the support these communities have for Duffy
Development's completed projects.
Von Feldt noted that they originally preferred locating their development adjacent to
Running's, but City Staff felt that area was better suited for the continuation of
commercial uses. Von Feldt explained that the west portion of the parcel would work
well because of the elevation and the need for underground parking.
Von Feldt presented a concept layout to the EDA. It noted two parcels in the
development area, with the apartment complex being proposed on "Parcel A" with 2.66
acres. "Parcel B" would be 1.5 acres and suitable for a hotel (preferred) or strip center to
continue the commercial zoning along 7th Street West.
Von Feldt provided examples their developments in Maple Grove and Elk River. He
provided a concept elevation of the proposed apartment. The building would be an "L"
Economic Development Authority Minutes — June 10th, 2020 Page 2 18
shape, with the ends being two stories and the center will be three stories with
underground parking.
He noted that amenities would include a fitness center, playground, community room,
and an on-site management office. In addition, Von Feldt explained that the building
would have a prominent entrance sign. There would be 9 one -bedroom units, 24
two-bedroom units, and 20 three-bedroom units. The site would need to also need to
include infiltration basins, ponding, and parking. Underground parking would be
included in the rent. Von Feldt noted that seven (7) units would be designated as lower
income units to residents that are coming from a homeless scenario.
Lloyd Hilgart asked how the rents were determined. Von Feldt responded that the tax
credit program uses incomes at or below 50% of the area median income based on county
and family size. Wright County is considered a metro county and uses the current income
rate of $51,000. A resident cannot pay more than a 1/3 of their income on rent. Von Feldt
noted that the rent is adjusted on an annual basis based on how incomes increase or
decrease in the county. It was noted that the rates typically utilize the area median income
from a few years back. The current rates are based on the 2018 area median income.
Hilgart asked if the renter has to submit financial information to qualify. Von Feldt
confirmed and explained that they need to ensure higher income residents are not allowed
in a project that is to be available for households that qualify to be in an affordable
development. The Tax Credit Program utilizes a 40 year timeframe to monitor and
restrict income levels.
Hilgart also asked if the renter needs to submit yearly documentation of income earned.
Von Feldt explained that typically, an income certification is received from the renters'
employer. He added that the facility is a 100 percent tax credit project and nobody is
forced out once they are approved, even if their incomes rise. Typically, he noted, renters
that experience an increase in income will move out and purchase a home, especially in
the non -metro areas as housing is generally more affordable. A renter is still responsible
for rent if their income declines.
Hilgart asked if the rates are fixed. Von Feldt confirmed that everyone pays the same rate
per unit style. Von Feldt added that rents will typically increase annually due to
additional expenses, but they cannot charge more than the cap.
Von Feldt explained a timeline for the proposed concept apartments. It was noted that
they would submit an application to the Minnesota Housing Finance Agency on July 16,
2020, with selection occurring in December, 2020. If approved, then they could work on
the approval process with the City and holding neighborhood meetings in March/April,
2021. Construction would occur starting in August, 2021, with occupancy in August,
2022.
Hilgart asked if the funding is coming from the State. Von Feldt explained it comes
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through the State and provided an understanding of how the housing tax credits work. He
explained that the Federal Housing Tax Credit program is under the auspices of the
Internal Revenue Service (IRS). It was started in 1987, where the government set aside
tax credits for affordable housing projects. A developer would apply through the State,
with the State administering the Federal tax credits. If the application is successful, the
developer would get a specified dollar amount for credits. The credit is received for ten
years. Somebody has to utilize the tax credits each year for ten years, such as a
corporation, bank, or insurance company. They work through an intermediary to bring an
investor in and a partnership would be created between the investor and the developer.
The investors provide the current value they feel accurately represents the credits. The
developer then can use the money to begin construction. Von Feldt reviewed a proposed
sources and uses table showing $11 million of the total investment of $13.5 million
would be provided through the tax credits partnership/investor.
Hilgart asked if the current interest rates at the banks affect the return. Von Feldt noted
that the rates of return are market driven and can fluctuate. He explained that the
amortizing first mortgage is estimated at $1.8 million, (40 -year term). He said 20 percent
of the total project costs rely on a mortgage. Still a small (3.70 percent) gap exists and
that is why the City is being asked to help. TIF assistance will help fill the gap and
elevate their tax credit application as it demonstrates City support for the proposal.
Von Feldt said the LIHTC program is highly competitive and only 20 percent of
applicants are approved each year. The developer is also including the homeless housing
units in the project as it is considered a high priority for the State agency to reduce
homelessness around the state and helps increase their odds of being selected for the
credits.
Bill Tapper asked if the TIF they were looking at was under the pay-as-you-go system.
Von Feldt responded that they were open to how the City typically does it.
Hilgart requested seeing more information about how much taxes it would pay and how
many years it would take before it would start kicking in. Von Feldt noted that the
$500,000 gap would be needed upfront. He said that they could obtain a second
mortgage or sell a TIF note to get the funding if the EDA chose to use a PAY GO format.
Thares noted that it would be up the EDA to determine how to proceed in future
discussions about providing TIF to Duffy's proposal.
Angela Schumann noted that if the EDA approved the concept, the item would be
brought back on June 24, 2020 for a formal letter of support or resolution pending
financial information from Northland Securities.
Thares added that staff have been communicating with Duffy Development since late
February. Staff directed Northland Securities to complete a preliminary TIF run. It shows
a value less than half of the proposed $13.5 million project and that more than $500,000
was possible in increment. If the EDA is supportive, staff would ask Northland Securities
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to update the proposed TIF calculation. Thares also mentioned there are additional extra
TIF funds from other districts set aside to support affordable housing development
features such as underground parking. There is an estimated $120,000 right now and it
increases by a small amount next year.
Thares reminded the EDA that if they are supportive, the item would return to the EDA
on June 24, 2020 for next steps. Thares explained that the EDA's attorney, Kennedy &
Graven, stated that it was not uncommon for developers to request a resolution of
support, which would be included in the application packet to MHFA. Hilgart noted the
importance of knowing what the TIF District would generate and how soon it would be
paid back.
011ie Koropchak-White asked how the proposal would fit in with the new housing study.
Thares stated that the 2018 Housing Study noted the need for 250 multifamily units, of
which 143 units have been constructed. Schumann added that an additional 165 units
were recently approved in Deephaven proposal. Schumann further explained that until
the new housing study is done, staff would not be have an answer to the Commissioner's
question. She added that four years ago, there was an identified demand for
approximately 250 multi -family units. Schumann said hat anecdotally, the City hears of
the need for affordable housing within Monticello. Von Feldt added that as a part of their
application to MHFA, they are required to complete a market study. He thought that the
study could be completed prior to the next EDA meeting on June 24, 2020.
Tracy Hinz explained that to her recollection, there are no housing units in Monticello
allotted for the long term homeless population. She added that homelessness is often
underserved and under -represented in Wright County.
Schumann explained that the Planning Commission and City Council would also be
reviewing the proposed concept at a special meeting on July 7, 2020 because of land use
and zoning changes.
Tapper asked if there were any members of the EDA opposed to the concept. No
comments were recorded, with all members in favor of the proposal.
6. Consideration of approving Small Business Emergency Grant Funding Agreements
in the amount of $5,000 to the following businesses: Derek Abramowski, DDS, sc,
dba South Side Dental Center; TriCambra Foods, Inc, dba Cornerstone Cafe; and
Daylight Enterprises, Inc. dba Days Inn of Monticello; and Fancy Nails, LLC to
mitigate COVID-19 economic impacts
Jim Thares explained that this was the EDA's first set of applications in response to the
grant program that the EDA created on May 27, 2020. The purpose of the grant was to
help small businesses effected by the COVID-19 crisis and $100,000 was allocated from
the GMEF. The maximum amount per grant is $5,000. Staff received four applications
for the first round.
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A spreadsheet with the scoring criteria was attached to the staff report along with all four
applications, the grant agreement, and grant guidelines.
Bill Tapper asked if there was any reason that the EDA would not want to approve the
grants for the applications received. Thares stated that all applicants meet the eligibility
criteria and their businesses have been impacted by the shutdown financially or had to lay
off employees. The businesses are small with minimal employees, have been in business
for many years, serve the public interest, and some have applied for Federal and/or State
assistance.
Tracy Hinz explained that it sounded like staff already reviewed, vetted the application,
and they meet the criteria. Thares confirmed.
OLLIE KOROPCHAK-WHITE MOVED TO APPROVE SMALL BUSINESS
EMERGENCY GRANT AGREEMENTS BETWEEN THE EDA AND: DEREK
ABRAMOWSKI, DDS DBA SOUTH SIDE DENTAL CENTER; TRICAMBRA
FOODS, INC. DBA CORNERSTONE CAFE; DAYLIGHT ENTERPRISES, INC. DBA
DAYS INN OF MONTICELLO; AND FANCY NAILS, LLC, IN THE AMOUNT OF
$51000 TO MITIGATE COVID-19 ECONOMIC IMPACTS. JON MORPHEW
SECONDED THE MOTION. MOTION CARRIED, 5-0.
7. Consideration of Hospitality and Lodging Study Cancellation or Re -Start
Jim Thares explained that during the February 26, 2020, the EDA approved signing a
contract with Hospitality Consulting Group to complete a Hospitality Study. Work had
commenced on the project in early March. The consultant emailed staff on March 16,
2020 to notify them that it was not a good idea to continue the study due to the current
effects of the pandemic. Thares mentioned that he reported this information back to the
EDA during their April meeting and it was the consensus of the EDA to delay the study
for a better quality study. The consultant contacted staff again in late May to notify staff
that the associations he is a part of, they believe the hotel industry will be in full strength
again by 2022. The consultant suggested continuing the study and using lodging data
from 2019 to provide information for hotel developers looking to develop new facilities
in future years. Staff noted that it may be best to cancel the contract as the lodging
facility development sector is very quiet and likely to remain so for the foreseeable
future. Thares noted that some charges would need to be paid for work already
completed by the consultant. The consultant said he would be able to provide a ab
abbreviated version of the study with the work that he had already completed.
Tracy Hinz asked for clarity if costs were incurred by the EDA for starting the study.
Thares confirmed that charges were incurred for. Thares did not know the cost of the
work already completed.
TRACY HINZ MOVED TO CANCEL THE HOSPITALITY AND LODGING STUDY
CONTRACT WITH HOSPITALITY CONSULTING GROUP. JON MORPHEW
SECONDED THE MOTION. MOTION CARRIED, 5-0.
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8. Director's Report
Jim Thares provided the Director's Report as included in the staff report.
Thares explained the request to enter into financial planning services with Northland
Securities for the potential creation of a new Economic Development TIF district in
support of Project Gia -Saurus. Thares mentioned that this is an agreement that the EDA
has entered into several times before. These agreements are entered into when the EDA is
preparing to consider creating a new TIF district. Thares noted that the agreement would
allow Northland Securities to be involved in early stages of the considering a potential
TIF district to the end steps when a district is certified with the County. The cost of the
financial planning services is $8,820. This was the same cost that was entered into for the
UMC TIF District in the fall of 2019. Northland Securities will only bill for work actually
completed.
TRACY HINZ MOVED TO AUTHORIZE AN EXPENDITURE IN THE AMOUNT OF
$8,820 TO NORTHLAND SECURITIES TO ENTER INTO FINANCIAL PLANNING
SERVICES FOR TIF DISTRICT #1-42 SUPPORT (PROJECT GIA -SAURUS). LLOYD
HILGART SECONDED THE MOTION. MOTION CARRIED, 5-0.
Angela Schumann also provided an update regarding the Central Mississippi River
Regional Partnership (CMRP) and the opportunity to participate in a community
engagement survey for Framework 2030.
She also explained that the first draft of the foundation of the land use and transportation
chapters for the Monti204O Comprehensive Plan. Staff sent a link to the EDA members
to participate in an online community workshop survey regarding their input on the land
use strategies document. There are resources on the City's website including a full
presentation and all of the draft documents. It is expected that the first drafts of the full
proposed land use and transportation chapters will be available in June. The Lakota
Group (consultant) will then begin working on the Economic Development and Parks,
Pathways, and Open Space chapters of the plan. There would be an upcoming joint
workshop meeting with the EDA in July to review the Economic Development chapter of
the plan.
9. Closed Meeting — Consider Offers or Counter -Offers for the purchase or sale of
Real or Personal Property Pursuant to Minnesota Statute 13D.05, Subdivision
3(c)(3)
Property Address:
Address: 101 Broadwav West — PID: #155010052090
Address: 107 Broadway West — PID: #155010052070
Address: 121 Broadway West — PID: #155010052031
10. Adiourn
JON MORPHEW MOVED TO ADJOURN THE MEETING AT 8:03 P.M. OLLIE
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KOROPCHAK-WHITE SECONDED THE MOTION. MOTION CARRIED, 5-0.
Recorder: Jacob Thunander P�
Approved: July 8th, 2020
Attest:
, Economic Development Director
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