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City Council Agenda Packet 03-24-1980AGENDA REGULAR MEETING - MONTICELLU CITY COUNCIL March 24, 1980 - 7:30 P.M. Mayor: Arve Grimsmo Council Members: Dan Blonigen, Fran Fair, Ken Maus, Philip White. Meeting to be taped. Citizens Comments - 1. Public Hearing on the Consideration of a Variance Request for a Beauty Shop in an R-1 Zone at 1305 West Broadway - Barb Soucy. 2. Public Hearing on the Consideration of a Variance Request on Rear Yard Setback and Minimum Lot Width and Subdivision of Lots - Lee Hatfield. 3. Public Hearing on the 1980-1 Improvement Project Feasibility Report for Sewer, Water and other Improvements along East County Road 39 and East County Road 75. 4. Consideration of Developing Guidelines for Industrial Revenue Bonds. 5. Consideration of Resolution for Life Insurance Coverage through Payroll Withholding - City Administrator. 6. Approval of Bills - March 1980. 7. Approval of Minutes - March 10, 1980 Regular Meeting. Unfinished Business - New Business - COUNCIL AGENDA - 3/24/80 AGENDA SUPPLEMENT Public Hearing on the Consideration of a Variance Request fora beauty Sr,op in an R-1 Zone at 1305 West Broadway - Barb Soucv. PURPOSE: Consideration of a variance request for Barb Soucy to operate a beauty shop in her home at 1305 West Broadway (Lot 9, Block 1, Doerr Estates). This item was previously scheduled for the City Council's February 25, 1980 meeting but was rescheduled to March 24, 1980. According to Ms. Soucy, she would have no employees and no more than one appointment at any time unless there might be an overlap of one person leaving and a new appointment coming. According to Monticello City Ordinances, a variance is required to operate this business since the request does not fall exactly within the definition of a home occupation. Specifically, the Ordinance indicates that no mecha- nical equipment shall be employed that is not customarily found in the home, and no home occupation shall be permitted which results in or generates more traffic than one car for offstreet parking at any given point in time. You might recall that at the February 25, 1980 meeting at which this particular item was withdrawn, there was another request by Ms. Geraldine Vinar for a beauty shop. This particular beauty shop, that was going to reside in a residential home, was on Sandy Lane, and there was opposition in that area from some of the surrounding property owners. However, the same people who signed the petition in opposition to the request by Ms. Vinar have not submitted a similar request in the case of Barb Soucy, and are in fact about two blocks away since Ms. Soucy is located actually on County Road 75. Ms. Soucy has filed with the City of Monticello a petition, copy of which is enclosed, of support for her beauty shop. Those people that live in the same proximity that Ms. Soucy does have been noted on the petition itself. PLANNING COMMISSION RECOMMENDATION: At their meeting on this item, the Planning Commission voted to deny the request for a variance. The reasons why the Planning Commission voted to recommend denial of the request are as follows: A. There are areas that are properly zoned for such a use. B. Felt this would be an unfair advantage to those beauty shops that were operating out of the home as opposed to those that are in a business location. C. Concern with the number of requests for beauty shops that have been before the Planning Commission lately, and felt that a precedent would be set with these types of uses and other home occupation uses. COUNCIL AGENDA - 3/24/80 It should be pointed out that the Planning Commission, at their March 11, 1980 meeting, felt the whole issue of allowable home occupations in a residential zone should be reviewed. For example, allowable uses include lawyer, real estate agent, accountant, engineer, etc. (complete definition and allowable uses is enclosed). Planning Commission felt that many of these uses were just as intrusive as a beauty shop. After the issue of signs is reviewed, the question of home occupations will be reviewed by the Planning Commission. Hearings for variances are held at the City Council level and a 4/5's vote is required for approval. POSSIBLE ACTION: Consideration of a variance request to allow a beauty shop in an R-1 zone for Lot 9, Block 1, Doerr Estates. REFERENCES: Enclosed map depicting location of property, Planning Commission Minutes of 2/19/80 relative to this matter, petition in support of beauty shop, and copy of definition of home occupation.(NOTE: also letter from Via La Charm in opposition to request - this letter received after agenda written) 2. Public Hearing on the Consideration of a Variance Request on Rear Yard Set- back and Minimum Lot Width and Subdivision of Lots - Lee Hatfield. PURPOSE: Consideration of a request by Gary DeBoer, on behalf of Mr. Lee Hatfield, for a simple subdivision of lots. This subdivision of lots is for Lots 4 & 5, Block 39, Townsite of Monticello. Currently, there is a home located on the southerly part of Lots 4 & 5, and the proposal would be to divide off the northerly part of Lots 4 & 5 and to create a separate buildable lot. This proposed lot would be 10,032 square feet, and the remaining lot for the existing home would be 11,728 square feet. Both of these would exceed the 10,000 square foot minimum requirement which is necessary in an R-2 zone. Variances are necessary in that a 30' rear-yard setback is necessary and in this case, only 27' is available. Also, the present ordinance requires an.80' frontage, while this lot provides only 76'. PLANNING COMMISSION RECOMMENDATION: At their last meeting, the Planning Commission voted unanimously to approve of this subdivision since both of the lots did, in fact, exceed the 10,000 square foot minimum requirements in an R-2 zone. Additionally, the Planning Commission felt that although the minimum lot width and setback requirements created the necessity of variances, the actual requirements for the newly created lot very closely approximated the ordinance requirements. Hearings for variances are held at the City Council level; however, at this time, there have been no objections filed with the zoning administrator. Again, it should be noted that a variance does require a 4/5's vote of the Council for approval. - 2 - COUNCIL AGENDA - 3/24/80 POSSIBLE ACTION_ Consideration of approval or denial of variance request and subdivision of lots contingent upon providing a certificate of survey and proof of recording. REFERENCES: Enclosed Plat Plan, map depicting location of lots, and Planning Commission Minutes of 3/11/80. 3. Public Hearing on the 1980-1 Improvement Project Feasibility Report for Sewer, Water and other Improvements along East County Road 39 and East ~. County Road 75. ~~- PURPOSE: Consideration of a resolution ordering the preparation of plans and specifications for improvements for sanitary sewer and water along East County Road 75 and East County Road 39, plus proposed installation of storm sewer to serve Macarlund Plaza. At our last meeting, the City Council passed a resolution to call for a hearing on March 24, 1980 to review the feasibility report with the proposed property owners on the above improvement. A copy of the feasibility report that was handed out to the Council pre- viously was also sent to each of the property owners that was proposed to be assessed. A summary of the assessments is as follows: Macarlund Plaza Townhouse Area $ 93,277 Remaining Portion of Curt Hoglund Property 58,690 Maurice Hoglund Property 98,584 Lot 19, Block 3, Hoglund Add'n (Keith Graham) 5,485 TOTAL PROPOSED ASSESSMENT .$256,036 In addition to the assessable portion of $256,036, it is proposed that a 16" watermain be installed along East County Road 39 from the intersection of County Road 75 and East County Road 39 to the intersection of East County Road 39 with Mississippi Drive at a cost of approximately $30,000, which is proposed at this time to be picked up on ad valorem or general property taxes. According to our Ordinance Section 13-1-2-(B)-6, the City Council shall determine whether a trunk water line shall be considered as benefitting a given area, and wholly or partially assessed, or whether a line is of general benefit to the City, and as a result, should be paid for with general city funds. As a result then, the City Council will have to determine whether any portion of this $30,000 should be pro-rated against the benefit- ting property owners, or whether the entire amount should be put on the general property taxes, or paid through revenues of the water department. Since Macarlund Plaza is the first plat served with sewer and water after the adoption of the City of Monticella's policy on front-end money, a determination will also have to be made in accordance with Ordinance Section 11-7-1-(B) which states that prior to the making of required improve- ments, the City Council shall determine the owner or subdivider to pay to the City an amount equal to a minimum of 25% and up to 100q of the total estimated cost of such improvements, including not only construction but all indirect costs. The actual percentage to be determined by the City - 3 - COUNCIL AGENDA - 3/24/80 in each case is based on its review of: A. The financial background of the developer. B. The normalcy of the unit charge for putting in the improvement. C. The evaluation of the cost recovery potential to the sale of land. D. The likelihood of success of the development. E. Has the developer defaulted on any outstanding assessment payments in the last 12 months. It should be pointed out that this payment must be made to the City prior to the City Council adopting the resolution ordering the project. The resolution ordering the project is not made until the City Council actually orders preparation of plans and specifications, the item before the Council tonight, the approval of the plans and specifications, the acceptance of bids and awarding of a contract. It would appear that this percentage would be applied against the proportion to be assessed against Macarlund Plaza, which is $93,277. As the rest of the land is subdivided that is proposed to be assessed, that is the remaining land owned by Curtis Hoglund and that owned by Maurice Hoglund, the City could determine the proportionate share of front end money to be received against those plats. For example, if the City determines that 25% is necessary at this time for Macarlund Plaza, front end money would be received prior to ordering of the improvement of $23,319. As the remaining unplatted land is developed, front end money determination would be made on each parcel. For example, if 25% were to be used in the case of Maurice Hoglund, as Mr. Hoglund develops his property, one of the requirements of platting the property would be the submission of the front end money in the amount determined by the Council for the pro-rata share of the land platted at that time. According to the same provision, the remaining balance of the project could be assessed up to 10 years at a rate of interest at least 1'2% above the rate paid by the City on bonds issued. As you are aware, the City currently cannot issue bonds since the State Statutes allow a maximum bond interest rate of only 7% to be paid by the City, and in light of prevailing market conditions, no bonds have been sold at that rate in Minnesota. There are various pieces of legislation in the State of Minnesota that are being considered which would lift the lid on this municipal bond market limitation. I will be in contact with both our State Senator and State Representative to determine the status at Monday night's meeting. If the lid is lifted, it would appear that the bonds would be sold for approximately 8'Z - 9%, and as a result, the interest rate to be charged on the assessments would be about 10 - 10'2%. -~4 - T' COUNCIL AGENDA - 3/24/80 In light of the prevailing market conditions and the questions relating to the marketability of the bonds, the City may want to consider delaying action on the resolution for the preparation of plans and specifications until such time as a specific piece of legislation is passed. According to Minnesota Statutes, a City can pass a resolution ordering plans and specifications within six months after holding the hearing on the feasibi- lity report itself. One problem arises with delaying the preparation of plans and specifications, and that is a timetable. If the City were to order plans and specifications, it would appear that the project could start about the middle of June of 1980. However, the legislative session should be taking action within the next 30 days, since the session itself terminates approximately at the end of March. It also should be noted that an easement will he necessary for the instal- lation of services of storm sewer, sewer and water to the Macarlund Plaza area, and as a result, our engineer's should also be directed to prepare the necessary easements. POSSIBLE ACTION: Consideration of resolution ordering preparation of plans and specifications on the 1980-1 improvement project. (As indicated above, the City Council may want to consider delaying action at this time until the legislature produces a bill eliminating the lid on the maximum rate of interest a city can pay). REFERENCES: Copy of feasibility report enclosed with last agenda, and copy of resolution ordering plans and specification to be prepared. 4. Consideration of Developing Guidelines for Industrial Revenue Bonds. PURPOSE: Consideration of the development of guidelines to be used by the City Council of Monticello in determining whether to issue industrial revenue bonds. As you recall, this item was requested by the City Council at their Feb- ruary 25, 1980 meeting to be put on a future council agenda within 30 days. At that time, it was briefly discussed whether a development of such guide- lines would be beneficial, and also a determination could be made once this item was placed on the agenda, whether to pursue the matter further and even involve our fiscal consultants, Springsted, Inc. Previously, I had gathered criteria from three communities; Plymouth, Eden prairie and St. Cloud. Additionally, I received a copy of guidelines as suggested by the Department of Economic Development. A summary of these guidelines is as follows: - 5 - COUNCIL AGENDA - 3/24/80 PLYMOUTH A. Well established companies with good past and future performance records. B. Certified annual audit - last two years. C. Dunn & Bradstreet rating. D. Forecasts for next three years. EDEN PRAIRIE A. Project must total at least $500,000. B. Audits - last two years. C. Dunn & Bradstreet rating. D. Minimum average of two times principal and interest due on bonds. Determined on basis of previous year's earnings. E. Fair market rental value of building must equal or exceed the total amount of bonds and interest due. ST. CLOUD A. All projects shall exceed $500,000. B. Available to: (1) Well established companies with good past and future earnings. (2) Newer companies whose performance indicated sound future. D. Audit for last three years, or if not feasible, a CPA's opinion on applicant's ability to meet debt service requirements based on last three fiscal years. D. Dunn & Bradstreet rating report. E. Financial projection for next five years. F. When an applicant business is locating, relocating or expanding in the City, the following objectives shall be considered: (1) Major industries should be located in industrial parks. (2) In order to maintain and expand the vitality of the Central Busi- ness District (CBD), appropriate commercial and residential uses shall be encouraged to locate or expand in this area. (3) Increase the job opportunities and income potential for persons within the City. (4) Increase the tax base to facilitate financing of public services. (5) Encourage business to utilize local suppliers to the greatest extent possible. G. All applicants, individual or corporate, shall demonstrate their ability to service the proposed debt. When a lease agreement or any assignment of obligations is contemplated as part of the transaction, both the applicant and the third party cpmbined must demonstrate their abilities to meet the proposed debt. - 6 - COUNCIL AGENDA - 3/24/80 BASIC REQUIREMENTS - SUGGESTED BY DEPARTMENT OF ECONOMIC DEVELOPMENT A. Ratio of long term debt to equity, after issuance of proposed bonds should not exceed 2 to 1, giving due consideration to other factors. B. Net earnings before taxes and before depreciation should cover long- term debt requirements by 2 to 1. C. Adequate working capital should be demonstrated. D. A five year cash-flow projection may be required. E. The City is to be re-imbursed, and held harmless, for an from any direct expenses related to the actual or proposed issuance of bonds. F. Audited financial statements for the previous five fiscal years as available. G. Particular circumstances possibly ma,y allow a variation from these guidelines. As you can see from the guidelines of the three communities indicated, that there is a strong preference for well-established companies that have a Dunn & Bradstreet rating, and also have certified annual audits available. One problem that would exist in structuring guidelines so stringent would be that companies just formed would not have an opportunity to obtain financing through the industrial revenue bond act. As you can see, the cities of Eden Prairie and St. Cloud have a limitation of a minimum of X500,000 for each project. If the City were going to adopt guidelines as this and apply it to the past issues granted for NSP, Silver Fox Motel, and currently under consideration, for Clow Stamping Company and ScotWood Motel, it is quite likely that only NSP and Clow Stamping would meet the guidelines. I think the adoption of guidelines is good, but I would make the following suggestions relative to the guidelines: A. Copy of the last two certified annual audits, if available. If a company has not previously had a certified audit, a copy of the unaudited finan- cial statements should be made available. B. Dunn & Bradstreet rating, if available. C. Realistic forecast for the next three years. D. Ratio of long term debt to equity after issuance of proposed bonds should not exceed 2 to 1. E. Net earnings before taxes and depreciation should cover long term requirements by 2 to 1. F. If a certified audit is not available for the last two years because the company is either a new company of has not had a certified audit, an opinion should be obtained by the CPA stating that the applicant does have the ability to meet the debt service requirements based on past and/ or future earnings. - 7 - COUNCIL AGENDA - 3/?4/80 In this way, new firms would be given a chance to have industrial revenue bonds issued on their behalf. As far as making a minimum amount required, it would seem to me that the market should determine that, rather than the City of Monticello. Additionally, because these are guidelines, there still could be some flexibility, for example, in the case of ScotWood Motel where the loan was guaranteed by Brutger Companies, Inc. As I indicated, the above are just suggested by me, and you might have some revisions thereto. Furthermore, you might want to consider having our fiscal consultant, Springsted, Inc. either reviewing the suggested guidelines or assisting the City with the development of guidelines. On March 18, 1980, I talked to Jeff Waitchow, Deputy Commissioner of Securities for Minnesota, and Mr. Geoffrey Rogers, Vice President of municipal bond firm of Miller & Schroeder, and their comments are as follows: Mr. Waitchow: Office of Commissioner of Securities does not do an analysis of the financial feasibility of a revenue bond issue, but does require a statement from the bond consultant that the project is financially feasible. Mr. Waitchow felt it would be better to get an opinion from a bond consultant on the extent of their analysis. Mr. Geoffrey Rogers: Felt requirements of municipalities were sometimes too stringent and were in conflict of the enabling legislation, Minnesota Statutes, Chapter 474, which indicated one of the purposes of the act was to stimulate industry and employment in rural areas. For the most part, the criteria he has been familiar with set up by cities tends to discriminate against the small investor. Mr. Rogers felt his opinions were personal and do not necessarily reflect his firm's opinions. He did indicate that although there may be no direct financial liability for a city on industrial revenue bonds, there could be an indirect financial liability in that the reputation of a city, to an extent, is on the line in case a firm went bankrupt, since investors might associate the default with the City and not the firm itself. As a result, future straight municipal issues might be harder to sell. Mr. Rogers felt any criteria, if adopted, should be reasonable. POSSIBLE ACTION: Consideration of the development of guidelines for indus- trial revenue bonds. 5. Consideration of Resolution for Life Insurance Coverage through Payroll Withholding - City Administrator. PURPOSE: Consideration of a resolution for life insurance coverage for Gary Wieber, City Administrator, through a payroll withholding. In order to provide some additional life insurance for my family, I have talked to Jim Foster, my insurance agent, and would like to propose to the Council a payroll withholding plan whereby the City of Monticello would pay the premium on the life insurance for $50,000 of coverage of $757.00 annually, and this amount, in turn, would be deducted from my salary. - 8 - COUNCIL AGENDA - 3/24/80 Reason for using this method of payment is to allow this amount of income not to be taxable. Since I consider this a conflict of interest, I have contacted our City Attorney for his opinion on this matter, and he has concurred it is a legal expenditure of the City, with the understanding that this amount would be deducted from my salary, as opposed to the City picking up the cost, since this was not part of the original salary negotiations. In the future, if I would want to incorporate this into my salary negotiations, it would have to be made a part of the record and so noted in the minutes. Therefore, I am not asking that the City pick up this cost, obviously, since the salary negotiations have already taken place, but I am merely asking that the City withhold this amount from my earnings. Enclosed is a copy of a letter I sent to Gary Pringle for your information. I am asking Gary Pringle to give me his opinion in writing, and will attempt to have this to the Council for Monday night's meeting; however, you are most certainly welcome to call Gary Pringle yourselves if there is any question in this regard. It should be noted that this item would have to be decided every year and would have to be made a part of the permanent record. POSSIBLE ACTION: Consideration of approval of agreement for life insurance coverage for Gary Wieber. REFERENCES: Copy of proposed agreement, copy of letter to Gary Pringle. - 9 -