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City Council Minutes 04-01-2026 WorkshopMINUTES MONTICELLO CITY COUNCIL WORKSHOP Monday, April 1, 2026 — 5:00 p.m. Monticello Community Center Present: Lloyd Hilgart, Charlotte Gabler, Kip Christianson, Tracy Hinz, Lee Martie Absent: None Staff: Rachel Leonard, Sarah Rathlisberger, Angela Schumann, Matt Leonard, Tom Pawelk, and City Attorney Soren Mattick 1. Call to Order Mayor Lloyd Hilgart called the special meeting to order at 5:00 p.m. 2. Discussion City Administrator Rachel Leonard explained that the workshop was being held for the Council to discuss the proposed Data Center Planned Unit Development (DCPUD) ordinance, review the rationale behind its provisions, and provide an opportunity for discussion of potential revisions before formal consideration. Ms. Leonard noted that no formal decisions would be made, and staff will consider Council discussion for incorporation into a future version of the ordinance. City Attorney Soren Mattick (Campbell Knutson) provided an overview of the City's legal authority for land use regulation, noting that Monticello, as a statutory city under Chapter 462, may establish zoning districts, regulate land uses, and set performance standards. He stated that zoning must be based on objective standards, supported by clear rationale. He added that courts have found in favor of applicants when ordinances are ambiguous. Rachel Leonard encouraged Councilmembers to ask questions regarding potential ordinance provisions, including regulatory scope, staff responses to prior Council direction, and alternative approaches. She explained that staff was directed to draft an ordinance for reviewing data center projects on a case -by -case basis, using rezoning to establish a new zoning district by Planned Unit Development (PUD) and incorporating performance standards. She added that the proposed process includes concept, preliminary, and final review stages, with development agreements outlining development responsibilities. Community Development Director Angela Schumann reviewed statutory timelines for land use applications, noting a 60-day decision period with a single 60-day extension, and explained that as written, the optional concept stage component does not trigger City Council Special Meeting Minutes —April 1, 2026 these timelines. She noted that the development stage initiates the statutory review period, with the final stage generally treated as part of the same application. Soren Mattick confirmed the "60-day rule" and noted that cities should not add extra procedural steps to extend review timelines. He commented on the need for an efficient process that still provides meaningful procedural value. Councilmember Gabler inquired about timelines for incomplete applications. Soren Mattick explained that staff has 15 business days to determine completeness under the 60-day rule; if no notice is sent, the application is presumed complete, and the review period begins. Resubmitted applications reset the 60-day timeline for decision. Angela Schumann clarified that within the DCPUD ordinance as drafted, development must meet the minimum performance standards outlined; the ordinance also details the application submittals required to be considered a complete application. If required, environmental review pauses the 60-day DCPUD application timeline until completed. She explained that the DCPUD ordinance allows that other development components, such as diesel generators, may also require separate environmental review, which would be completed before construction permits for those components. She noted that Section 7 of the DCPUD outlines these submittal requirements for public reference. Councilmember Gabler asked whether data center applications could be submitted prior to adoption of the DCPUD. Both Angela Schumann and Soren Mattick explained that current zoning does not allow data centers, but applicants could pursue a text amendment if the DCPUD ordinance is not finalized. Mr. Mattick also noted that outright bans on certain uses can raise legal issues, and regulating location and placement is a more sustainable approach. Councilmember Gabler asked whether the DCPUD ordinance could limit the size or acreage of a data center project. Mr. Mattick explained that size limits are usually allowed, typically by setting the maximum square footage, floor area, or building mass. He added that the best approach depends on the City's concerns, such as building scale, resource use, or land impact. He noted that limiting acreage alone may be less precise. Councilmember Gabler also asked about referencing "hyperscale" data centers or banning them outright. Mr. Mattick stated that there is no clear, universal definition of "hyperscale." He recommended using specific measurable standards such as limits on building size, height, water use, or electricity consumption —rather than vague terms. This helps ensure the rules are clear, enforceable, and legally defensible. Councilmember Gabler expressed concern about data center water use from the shared community aquifer and suggested adding performance standards, such as daily water limits and building size restrictions. Mr. Mattick noted that other communities often City Council Special Meeting Minutes — April 1, 2026 manage high -use users through agreements that set limits and ensure fair use, which could also be included in the DCPUD. Rachel Leonard explained that state law requires an aquifer analysis, and the DCPUD ordinance requires applicants to provide estimated water use and to complete any required environmental review. She noted that the proposed approval standards require municipal water service and confirmation that a project will not cause shortages. She added that the City can negotiate agreements or impose conditions for projects with high water demand. Soren Mattick added that water limits should not be set directly in the ordinance because allowable amounts depend on aquifer modeling results. City Planner Steve Grittman noted that long-term planning should protect water availability for future development. Public Works Director/City Engineer Matthew Leonard explained that the Minnesota Department of Natural Resources (DNR) regulates water use permits and evaluates the impact of new wells and withdrawals. Mayor Hilgart emphasized that any restrictions should be applied consistently for all users. Mr. Mattick confirmed that major or significant user agreements typically allocate water based on actual usage needs, not the type of business. Councilmember Martie asked how the 0.25 floor area ratio (FAR) would apply to a large parcel, such as 550 acres with 450 buildable acres. Steve Grittman explained that FAR is calculated using net buildable area, excluding setbacks, ponds, wetlands, and other unbuildable land, so the actual result is lower than a simple gross calculation. Industrial analyses indicate that 0.25 is reasonable, though results vary depending on site constraints. Angela Schumann noted that earlier examples provided for industrial sites in Monticello used gross acreage, while the DCPUD ordinance defines exclusions to calculate net area. She added that comparable cities, such as Pine Island, used gross measurements for development areas and building development in some of their materials. Council has discretion to set FAR at a level that balances tax base, land use, and industrial development objectives. Councilmember Hinz asked about the ability to utilize community benefits agreements and if the attorney could provide information on legal issues if a developer does not comply. To the question of compliance and legal ability to enforce, Mr. Mattick explained that Minnesota law allows cities to enforce clear regulations and agreements, giving the City a strong legal position regardless of developer resources. Councilmember Hinz stressed the importance of a transparent framework that clearly defines how projects contribute to the community, along with monitoring and City Council Special Meeting Minutes —April 1, 2026 accountability. Mr. Mattick explained that the City may require certain contributions, such as park dedication or fees through statutory authority related specifically to subdivision, but cannot required other community benefits, like social programs. Ms. Schumann noted that minimum assessment agreements can be used to establish agreed -upon property values that help ensure predictable tax revenue in some cases and requested the attorney clarify those allowances. Mr. Mattick stated that cities are allowed to use these agreements when providing financial assistance, such as through Tax Increment Financing (TIF). In those cases, the city may give funding or incentives, and in return the developer agrees the property will be assessed at or above a certain value. Rachel Leonard noted Council's prior direction that companies pay for their own infrastructure without incentives for this type of development, but the City could allow flexibility to use minimum assessment agreements if Council chooses. Councilmember Christianson emphasized the importance of fully addressing concerns and explained that the DCPUD review process considers both project suitability and applicant contributions. Soren Mattick made note that staff could evaluate applications to determine whether they align with community goals. Rachel Leonard emphasized clearly communicating expectations for community benefits throughout the process and ensuring applicants understand that Council has final decision -making authority. Lloyd Hilgart revisited FAR standards, citing past projects like Ryan Automotive where building sizes were less than the code minimum required variances or PUD approvals. Angela Schumann clarified that the City has a building to lot size standard for auto sales uses but has reserved the use of FAR and impervious surface standards at this time, choosing instead to maintain flexibility, applying text amendments or PUDs when needed. Council discussed balancing development intensity with planning goals, including setbacks and landscaping. Councilmember Martie stated that the 0.25 FAR target is intended to guide realistic development without promoting excessively large projects. Mayor Hilgart and Councilmember Christianson highlighted the importance of efficient land and utility use, tax base generation, and aligning projects with the City's comprehensive plan. Steve Grittman noted that developers might use larger sites and build vertically to reach the desired floor area while preserving buffers. Council expressed concerns about calculating FAR relative to setbacks and parcel size to ensure compliance with the intent of the ordinance. They discussed creating a FAR range to allow for flexibility. City Council Special Meeting Minutes —April 1, 2026 Soren Mattick emphasized that any deviations must be applied consistently and with objective justification. Rachel Leonard clarified that FAR guidance is meant to support City priorities, not dictate exact values. Councilmember Martie stated that applicants may request variances to go below the 0.25 FAR, but the PUD process cannot reduce the minimum FAR on its own; such requests must follow the formal variance process. Rachel Leonard stated that minimum performance standards act as regulatory safeguards, offering objective development standards while still allowing Council discretion in land use decisions. She noted that approved DCPUD rezoning would include a companion ordinance to ensure compliance with these standards and the conditions of the approval. Council members were encouraged to make sure these standards align with the types of development they are willing to integrate into the community. Councilmember Gabler asked for clarification on setbacks for principal buildings, mechanical equipment, and other features. She suggested increasing setbacks near residential areas suggesting 1,200 feet for residential and civic/institution zones, and 1,000 feet adjacent to parkland or recreational property. Councilmember Martie asked how these increased setbacks would apply to residential versus parkland contexts. Angela Schumann noted that most industrial parcels in Monticello are approximately 600-800 feet total, so applying a 1,000 foot setback would make that type of lot unbuildable for a single data center. She added that the ordinance is intended for both smaller -scale developments and larger campuses. She noted the possibility of scaling setbacks based on parcel size, as previously suggested by Council. Councilmember Gabler asked if the City could limit the community to a single data center of a given type, which might make setbacks or other restrictions less relevant. Soren Mattick explained that imposing limits on specific uses is generally beyond the City's statutory authority, citing case law where similar restrictions were struck down, unless state law allows it. Angela Schumann noted that, although approval criteria cannot set numeric limits, land use decisions should take the City's overall industrial land inventory into account. She added that broader planning guidance, like the Comprehensive Plan, provide the proper context for assessing the supply and suitability of industrial land. Councilmember Gabler asked whether the City can update land use guidance if a current designation, such as light industrial, no longer aligns with Comprehensive Plan goals. Soren Mattick confirmed that the City has full legislative authority to re -guide or rezone undeveloped property. City Council Special Meeting Minutes — April 1, 2026 Councilmember Hinz stated she is comfortable with the proposed setbacks. Rachel Leonard emphasized the need to provide rational justification for decisions like increasing setbacks, noting that understanding underlying goals such as mitigating noise, light, or other development impacts allows staff to suggest alternative solutions rather than defaulting to a single approach. Councilmember Christianson expressed general comfort with the proposed setbacks but stressed the need to apply FAR calculations correctly, especially for larger or unusual sites. He suggested that staff monitor FAR calculations to ensure consistency with utility connections, light industrial standards, and previously approved AUAR parameters. Councilmember Gabler requested a spreadsheet or scenario analysis showing how different parcel sizes, building footprints, and setbacks affect FAR and overall site use. Angela Schumann said that staff could develop illustrations at various scales to better visualize potential impacts and support informed decision -making. Mayor Hilgart noted that the DCPUD setbacks are reinforced by additional performance standards, including 10-foot berms and extensive landscaping, which help reduce visual and lighting impacts. Angela Schumann clarified that the listed performance standards are minimum requirements, and all other applicable City codes remain in effect. Rachel Leonard emphasized that staff have focused the ordinance on regulating external impacts, including water use, power, landscaping, noise, and light, rather than internal operations, and that any decisions on requirements have been made carefully and deliberately based on statutory authority. Soren Mattick explained that the City's regulatory authority comes from state law and is subject to state preemption. The City can regulate areas where state law has not otherwise established specific standards. For example, while the City cannot exceed state noise standards as noise standards have been defined by the state, it generally retains the ability to regulate areas not specifically limited by state law, such as water use. Councilmember Hinz asked whether any key elements were missing from the ordinance and if the City has sufficient authority to address relevant issues. Soren Mattick responded that the ordinance is comprehensive, covering major factors such as water, electricity, and noise. Staff believe the ordinance addresses the main operational and development concerns and will continue refining criteria to ensure adequate coverage. Rachel Leonard explained that, because the state limits noise regulation, staff consulted sound engineers to identify practical noise mitigation measures, focusing on site -specific City Council Special Meeting Minutes —April 1, 2026 design such as natural barriers and enclosing mechanical equipment. Councilmember Christianson asked for clarification on the term "principal building structure with mechanical equipment oriented to any exterior portion" in the setbacks table. Angela Schumann agreed to review and clarify the definition, noting that distance alone may not fully mitigate noise, and more effective measures address the source, including berms, walls, and landscaping. Councilmembers generally agreed that noise -generating equipment should be placed inside buildings or properly screened, with setbacks designed to encourage this. Rachel Leonard emphasized allowing flexibility for applicants to use current and sustainable technologies without mandating specific systems. Soren Mattick confirmed that the City must comply with state building and mechanical codes. Rachel Leonard noted that utilities like Xcel Energy have long lead times for power infrastructure, so staff have learned that strict development timelines aren't practical. Councilmember Christianson suggested using "commercially reasonable efforts" to balance timelines for different site sizes. Soren Mattick and City staff are considering milestone -based approaches, focusing on building permits and certificates of occupancy instead of strict completion dates. For utilities, Soren Mattick explained the City can require developers to pay for installation and oversizing for their needed additional capacity, with costs included in utility charges. Large projects might use negotiated cost -sharing. Mayor Hilgart and Matt Leonard spoke on keeping long-term costs low through careful management. Councilmembers Hinz and Christianson added that water usage studies are needed with initial applications to guide planning. Councilmember Hinz expressed concern that City plans for large developments could be delayed if they rely on external electric grid studies beyond the City's control. Angela Schumann stated that recent legislation requires Xcel Energy to provide power consumption and rate plans for large users, which could drive development independently of City ordinances. Mayor Hilgart noted that once developers sign major agreements with Xcel Energy and invest funds, they usually move efficiently to align construction with available power. Rachel Leonard explained that Xcel Energy's process is a multi -step process. While adding grid capacity can take years, developers fund necessary infrastructure once agreements are signed. City planning may also involve multiple agreements to protect the City while coordinating phased development. Angela Schumann commented that smaller developers typically move quickly, as they cannot afford to hold land that is undeveloped. Rachel Leonard added that traditional City Council Special Meeting Minutes —April 1, 2026 City development contracts may not suit large-scale projects, requiring alternative agreement structures. Soren Mattick explained that, unlike traditional subdivisions that need development contracts authorized through statute, these projects combine or consolidate lots. To protect the City, alternative agreements such as a Site Improvement Plan Agreement (SEPA) will be used. He added that SIPAs are common in commercial and industrial projects, familiar to developers, legally reliable, and formalize existing rules without adding obligations. Rachel Leonard reiterated that the purpose of the meeting's discussion was to review the ordinance framework. She added that a summary of possible changes will be shared at the next Council meeting for feedback, and a draft ordinance may be considered at the second April meeting. Councilmember Christianson raised a public concern about a potential conflict of interest for the City Attorney. He asked for clarification on whether they represented Xcel Energy. City Attorney Soren Mattick confirmed that Campbell Knutson does not and has never represented Xcel Energy. He added that the firm represents only municipal entities and emphasized that all work is conducted for the City with strict conflict -of - interest safeguards in place. Mayor Hilgart thanked staff and noted that, in his opinion, using the DCPUD approach for data centers sets this ordinance apart from other cities. 3. Adjournment By consensus, the meeting was adjourned at 7:32 p.m. Recorder: Jennifer Schreibe� J! i Attest: City Administrator City Council Special Meeting Minutes —April 1, 2026