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EDA Minutes 05-21-2008MINUTES CITY OF MONTICELLO ECONOMIC DEVELOPMENT AUTHORITY Wednesday, May 21, 2008 1. Call to Order. Chairman Demeules called the meeting to order and declared a quorum of the EDA. 2. Roll Call. On roll call, the following Commissioners were present: President Bill Demueles Vice President Dan Frie Treasurer Bill Tapper Commissioner Wayne Mayer Commissioner Bob Viering Commissioner Bill Fair Commissioner Clint Herbst Also present were Executive Director 011ie Koropchak and Treasurer Tom Kelly. Commissioner Frie asked that staff review a foreclosed property for possible purchase for redevelopment. Frie stated that on that order, he had invited a listing agent to discuss this topic. He stated that he would like to move that item to head of agenda. Commissioner Tapper added under old business a clarification of the role of the EDA versus the IEDC. 3. Reading and approval of the April 9, 2008 City of Monticello EDA Workshop and Annual Meeting Minutes. MOTION BY COMMISSIONER FAIR TO APPROVE THE MINUTES OF APRIL 9, 2008 FOR THE CITY OF MONTICELLO EDA WORKSHOP. MOTION SECONDED BY COMMISSIONER VIERING. MOTION CARRIED, 7 -0. Commissioner Herbst abstained from the vote. Regarding the Annual Meeting Minutes, Commissioner Tapper noted the spelling correction of "Front Porch" and "Motion" on page 11 of the minutes. MOTION BY COMMISSIONER TAPPER TO APPROVE THE MINUTES OF THE ANNUAL EDA MEETING. MOTION SECONDED BY COMMISSIONER VIERING. MOTION CARRIED, 7 -0. EDA Minutes — 05/21/08 4. Approval of the EDA Bills and Communications Commissioner Mayer inquired whether the property tax statement for Cedar Street Garden Center parcel had been reclassified back to vacant. Koropchak stated that it would not be reclassified for this year, but would be noted as vacant for the following year. Koropchak also added an invoice from Veit Companies in the amount of $35.50 for a solid waste fee associated with the demolition of the Cedar street Garden Center. She stated that she is recommending approval of the invoices as shown, but is asking Bret Weiss of WSB to attend to discuss items discussed previously on invoicing and work done and to be completed at Otter Creek. Viering inquired about why Kennedy & Graven got involved in an accounting issue. Koropchak clarified that it had to do with previous and future expenditures as related to TIF legalities. Demeueles inquired about the reason for a separate invoice from Veit, as the demolition was to be all- inclusive. Koropchak stated that she believed it was a permit fee. Koropchak stated that the balance most likely had to do with the tank removal. Koropchak stated that she would provide further clarification. MOTION BY BF TO TABLE UNTIL CLARIFICATION PROVIDED ON THE VEIT INVOICE. VIERING inquired about the project coordination portion of WSB's billings. Herbst noted that he had spoken with the State Auditor about this issue. Herbst stated that he does think it is appropriate that WSB provide further clarification Tapper asked if Kelly had been able to ascertain what the budget for this project was. Frie noted that s a summary of billings to date had been provided at the bottom of WSB's billings. Tapper asked Kelly for his opinion. MOTION BY COMMISSIONER VIERING TO APPROVE KENNEDY ANG GRAVEN AND EHLERS AND PROPERTY TAX INVOICES INVOICES AND TO TABLE ACTION ON VEIT AND WSB INVOICES. MOTION SECONDED BY TAPPER. Tapper stated that he is totally amazed at the amount of time spent by Kennedy & Graven on that topic. Mayer stated that even though WSB has already categorized these as labor expenses, this body wants that body to be further itemized. Viering sought clarification on project management. MOTION CARRIED, 7 -0. 5. Reports of the Executive Director. No questions on the report of the Executive Director EDA Minutes — 05/21/08 8. New Business. E. Added Item: 413 W. 4'h Street Property Wally Coudron, representing Edina Realty, addressed the EDA regarding the matter of the foreclosed property at 413 W. 4a' Street. The property is currently listed at $55,000. It is a bank foreclosure property. Current estimated tax value is approximately $116,000. Coudron reviewed background data on the house, including past sales. Commissioner Frie stated that this information was being presented based on information from City staff, this is due to history of illegal activity and the state of the property. City Administrator O'Neill had noted it as a possible redevelopment property. It may be combined with other parcels for a project. Herbst inquired about surrounding properties. The property to the west is also in poor condition. Herbst noted that the price was reasonable and suggested that the resale of vacant property would be a good idea. Fair commented that with Habitat for Humanity now in Monticello, this may be a case where the property could be sold to Habitat and they could do a project on the parcel. Fair noted that a legal opinion on whether that could be done would be needed. Erie stated that the EDA would be primarily interested in the land. Koropchak stated that a site visit would be a good idea, and then the EDA would need to consider where funds for purchase and demolition would come from. Fair inquired whether an option on the property could be made to research that information. Coudron stated that banks do not add contingencies on foreclosure properties. Tapper inquired whether there were any known issues with the property. Coudron stated that the bank is selling the property as is and the bank has not noted anything beyond trash removal. Koropchak stated that funds would most likely come from an old redevelopment district and staff would need to confirm that those funds are available. The Commissioners discussed the merits of moving forward or waiting for staff to provide answers on funding sources. Mayer commented that a counter offer should be made. Mayer inquired whether Edina would be listing and selling agent. Coudron confirmed it would be a dual representation. MOTION BY COMMISSIONER FRIE TO DIRECT STAFF WORK WITH KOROPCHAK TO OFFER THE SELLER $46,000, WITH EARNEST MONEY NOT TO EXCEED $2,500, WITH INCREMENTAL OFFERS NOT TO EXCEED A FINAL OFFER OF $52,000, SUBJECT TO UNRESTRICTED FUNDING. EDA Minutes — 05/21/08 MOTION SECONDED BY COMMISSIONER MAYER. MOTION CARRIED, 7 -0. 6. Report of Committees. A. Marketing: Erie reported that the Marketing Committee had renewed a contract for the billboard in order to maintain continuous visibility. A presentation by commercial brokers was also discussed for an upcoming meeting. Herbst inquired whether the City could advertise on the billboards it owns, rather than renting. Koropchak stated that the Marketing Committee did research the EDA -owned billboard. The EDA does own the land and the space is leased for the year. When they come up, the Marketing Committee could look at them at that time. B. Fiber Optics Committee: Mayer reported that bonds are currently being sold. Herbst noted that TDS is putting out information on their own fiber loop. Herbst stated that TDS is now stating that they are going to place their own system. Herbst noted that he and Mayer had met with them some months ago and that was not their plan at that time. C. Housing: Viering stated that he had met with Central MN Housing Partnership and he will be putting together a meeting regarding possible grant opportunities. Greater MN Housing Fund may be another option. Fire noted that options for grant funds are available, it will be a matter of meeting the grant criteria. Educational component will be important to grant funding. 7. Unfinished Business. A. Consideration to review the amendments to the EDA Business Subsidy Criteria (TIF) and to call for a public hearing date to approve amendments. Koropchak reported that a revised version of the subsidy criteria was included in the agenda packet. The recommend revisions are included in this draft. As noted, the GMEF and TIF criteria had been separated. These criteria do not need to be approved by the City Council MOTION BY COMMISSIONER HERBST TO APPROVE THE PROPOSED BUSINESS SUBSIDY CRITERA. MOTION SECONDED BY COMMISSIONER TAPPER. Koropchak clarified that a public hearing would actually be needed prior to approving the criteria. COMMISSIONER HERBST AMENDED HIS MOTION TO CALL FOR A PUBLI HEARING FOR THE REGUALR AUGUST MEETING OF THE EDA. EDA Minutes — 05/21/08 AMENDED MOTION SECONDED BY COMMISSIONER TAPPER. MOTION CARRIED, 7 -0. B. Consideration to review the amendments to the EDA Business Subsidy Criteria (GMEF) requesting City Council approval and to call for a public hearing date to approve amendments. Koropchak explained that the recommended amendments had been made. The criteria would need to go to the Council and then come back to the EDA for a public hearing. MOTION BY COMMISSIONER FAIR TO REQUEST THE CITY COUNCIL REVIEW THE PROPOSED AMENDMENTS TO THE GMEF GUIDELINES IN JULY AND TO CALL FOR A PUBLIC HEARING AT THE REGULAR AUGUST MEETING OF THE EDA.. MOTION SECONDED BY COMMISSIONER HERBST. MOTION CARRIED, 7 -0. C. Consideration to review Preliminary Development Agreements and Private Contract for understanding of definition of Administrative Costs and review application fees /deposits of other cities. Koropchak stated that Kelly had provided information regarding fees and deposits charged by other communities, as well as information from the financial and legal firms used by the City. Koropchak clarified that administrative costs often refer to inspections for TIF, staff consultation and environmental inspections. Tapper noted that there seem to be many unpredictable items related to the establishment of these projects. Tapper suggested that at the initiation of each project, the client be provided with an estimate of the costs for these projects, with a 25% addition for the "unknowns ". Tapper stated that the Therefore, the EDA would ask for 30% of the estimated total cost. The balance, or actual costs above that amount, would be paid on the last bank draw, so that it becomes part of the financing for the proj ect. The EDA would also provide a monthly statement on administrative costs. Herbst commented that it is nice to have someone who has been involved in these projects provide the recommendation. Mayer inquired about what happens if the consultant costs come in over the additional 25 %. Tapper stated that the client is still responsible for that amount, but the 25% at least provides opportunity for that overage. Mayer stated that the client then still needs to understand that there may be costs over and above these deposits. EDA Minutes — 05/21/08 Fair stated that his concern is that we might be adding additional administrative costs by adding the monthly statements. The current process may need additional clarification. The Commissioners discussed the merits of further enhancements to the agreement and the timing of consultant involvement. Mayer inquired whether it is the consultants who are not timely with their billings. Kelly reviewed the billing cycle. Koropchak noted that 10% of the TIF can be used for administrative according to the State statutes. Demeules noted that many cities do not require a deposit. Fair noted that they are billed for the costs. Frie asked if there could be a $10,000 deposit with a $20,000 ceiling, and any overage would be paid back through the 10 %. Koropchak stated that she has added some of the late items, after the final payment, to the admin costs of the TIF district. Frie clarified that administrative costs include consultant time. To date, the City has not charged for staff time on projects, but those costs could be included. The commissioners recognized that better up -front communication is the goal of this entire process. Fair recommended reviewing two past projects in terms of administrative fees in order to determine how well Tapper's proposal fits. MOTION BY COMMISSIONER VIERING TO INCORPORATE COMMISSIONE TAPPER'S RECOMMENDATIONS INTO THE DEVELOPMENT AGREEMENT PROCESS. Fair noted that he had a number of questions related to the terminology presented in the proposal. Fair and Viering discussed the merits of the proposal in terms of timing related to bank closing. Fair recommended having the City's consultants review the proposal in order to look out for the City's best interests. Viering stated that he had concerns about spending funds to have consultants review the document when the proposal seemed very simple. Koropchak inquired how the statement indicating that final payment would be made at the last bank draw would be different than finagling the payment at the time of Certificate of Completion for these projects, which is required for economic districts. Tapper clarified that the last draw marks the time from temporary financing to permanent financing, and is bundled by a title company. Tapper stated that his goal is to indicate to the EDA Minutes — 05/21/08 developer that this payment should be part of his last draw. Once those funds are gone, it is difficult to find a funding source. Fair noted that currently, the funding is due at the time of the City's Certificate of Occupancy versus a private arrangement between a bank and their client. Frie inquired about how other cities use the 10% TIF administrative costs. Kelly responded that the use is somewhat restrictive and needs to be documented very well. A lot of communities track staff and consultant time and charge against the 10 %. However, he indicated that it is not 10% of the increment, but 10% of the expenditure each year. Koropchak stated that she tracks very clearly the consultant time for each project. This is also true for infrastructure and land acquisition purchases. Koropchak stated that although he timing may be different between last draw and certificate of closing, she does believe that the estimate would be helpful. Koropchak suggested that last bank draw item should be reviewed by EDA legal counsel. Viering suggested that the agreement is fine as it reads, this information would be placed in a separate letter. Mayer clarified that this would replace the deposit information in the current pre - development agreement. Mayer inquired about the costs of providing monthly statements. Kelly stated it would be more of a workload issue than a financial cost issue to the City. It will be a matter of setting up a procedure. Kelly stated that if there is money due, they should be paying for overages 30 days from date of monthly invoice. Kelly also stated that only requiring 30% of deposits may be a problem. He suggested that requiring a deposit at 100% of the estimated costs might be more practical. Herbst stated that he agrees that the EDA should take a look at this proposal, but believes that staff should have an opportunity to review and provide recommendations on this. He asked Kelly if with technology, they couldn't just access their account at City Hall with a password. VEIRING AMENDED HIS MOTION TO REFER THE PRESENTED PROPOSAL TO CITY STAFF FOR REVIEW AND RECOMMENDATION. AMENDED MOTION SECONDED BY COMMISSIONER FRIE. MOTION CARRIED, 7- 0. 8. New Business. A. Added Item: Role of the EDA versus IEDC. Commissioner Tapper stated that the two groups have been reviewing their purpose for some time, but he suggested that looking at both from a broad perspective in order to determine clear purpose for both so that they can work in concert. 7 EDA Minutes — 05/21/08 He stated that the EDA has been an organization that deals with the here and now. They are the facilitators, banks, etc. They have economic muscle and provide funds for economic development. The IDC has historically been the group that has looked to the future and work with the City to achieve those goals, whether it be acquisition of land or business recruitment. The group has no economic muscle, but rather to act to promote growth. Mayer noted that this information really resulted from discussions originating with the IDC. Tapper confirmed and stated that he is not seeking any action, just to develop a better understanding of the two roles. Fair noted that the EDA has statutory authority. He indicated that he Council should also have some say in the roles and purpose of the two organizations. Koropchak explained that the Council is being asked to approve and amendment that reaffirms the recognition of the IEDC as a commission of the City and includes a new mission and vision statement. It noted the IEDC's roles as a promoter of business as a whole for the community. Koropchak noted that both groups have work plans and separate responsibilities. Fair asked what powers are being granted by the City Council to this group. Then that information can be brought back to the EDA for information. Koropchak noted that the resolution includes information on accountability to the Council. That information will be brought back to the EDA. Tapper commented that the IDC had been an independent organization for quite some time. Fair noted that he remembers that in the past, it had been advisory, but had no powers. If Council is going to officially recognize it, powers will go with the recognition. Tapper stated that Council has done that, but that the IDC is now recommending a revision that is more inclusive of development to include things such as bio- science technologies and businesses which support overall econom c development. This is consistent with the Comprehensive Plan. Fair clarified that in order to know what the FDA's relationship with the group is, the powers of this group need to be clarified. Tapper noted that the information presented just serves to clarify the two separate purposes of the two groups. The Council can determine how responsibilities will be divided. Fair noted that the direction must come from the Council. EDA Minutes — 05/21/08 Koropchak stated that the EDA will have a clearer picture once they have the opportunity to review the IEDC's work plan. She noted that the IEDC does not have any statutory authority. Herbst agreed that Council will review this information. It is helpful to understand both so that the City understands there is not duplication. B. Consideration to approve a Certificate of Completion (Minimum Improvements) for Vine Place (Front Porch). Mayer inquired what repercussions there will be for allowing rental versus owner- occupied. Koropchak responded that only the first 18 townhomes were required to be owner- occupied. The recommendation of the attorney was that all the homes are completed, of the last 8, two are being rented. Given the current housing situation, the attorney recommended that the City allow this to proceed with reporting on status of purchase of the homes. With the City's rental ordinance, these units must be licensed. Herbst stated that this portion of the contract states that all must be owner- occupied. Koropchak noted that there is a discrepancy in the contract. Herbst noted his concern about areas converting to rental units. Herbst stated that he preferred that the EDA be consistent and require that they be owner occupied, especially given the amount of assistance. Mayer echoed that concern. Fair noted that once the City has completed the contract obligations, they will be able to rent in any case. Mayer inquired what the repercussions of action would be. Koropchak reviewed the financing and contracts for TIF reimbursements. Fair stated that he disagreed. If the certificates of completion have been given and was issued the rental licenses, then perhaps the City should consider this request. He has made the minimum improvements under the contract. The final outcome is that he has met his obligations. Mayer commented that renting is a violation of the contract. MOTION BY COMMISSIONER FAIR TO APPROVE THE CERTIFICATION OF COMPLETION (MINIMUM IMPROVMENTS) FOR THE FRONT PORCH PROJECT AND PRESERVING ITS RIGHT BY WAIRING THE CONTRACT REQUESTING DEVELOPER WITHIN THREE YEARS PROVIDE DOCUMETNATION AS TO THTE STATUS OF LEASE/PURCHASE OF THE TWO RETNAL TOWNHOUSES AND SUBJECT TO ANNUAL COMPLAINCE OF THE CITY RETNAL ORDINANCE. EDA Minutes — 05/21/08 MOTION SECONDED BY COMMISSIONER FRIE. Commissioner Frie stated that this was perhaps a cased of missed opportunity, where that condition should have been included with the planning approvals and with the covenants for the project. He indicated that he sees no purpose served by punishing the developer at this point, given the improvements that have been made to the area. Fair noted that project would not have developed without TIF assistance. MOTION CARRIED 4 -3, WITH COMMISSIONERS HERBST, MAYER AND VIERING IN DISSENT. C. Consideration of a motion acknowledging submission of Declaration of Potential Conflict of Interest. MOTION BY COMMISSIONER HERBST ACKNOWLEDGING THE SUBMISSION OF A DECLARATION OF POTENTIAL CONFLICT OF INTEREST FROM EDA COMMISSIONER WILLIAM TAPPER HEREBY ENTERING INTO THE EDA MINUTES OF MAY 21, 2008. MOTION SECONDED BY COMMISSIONER FRIE. MOTION CARRIED, 7 -0. D. Consideration to approve the request for an extension of the balloon payment date for GMEF Loan No. 021 (rapper's Inc.) Commissioner Tapper excused himself from the meeting. Koropchak explained that the developer is asking for an extension of a balloon payment and has provided the terms of guideline for deferment of payment. Developer is asking for deferment from May 1", 2008 to May 1", 2009/. Loan payments are current. MOTION BY COMMISSIONER FRIE TO APPROVE EXTENDING THE BALOON PAYMENT DATE FOR GMEF LOAN No. 021 FOR TAPPER'S INC. FROM MAY 1, 2008 TO MAY 1, 2009. MOTION SECONDED BY COMMISSIONER HERBST. MOTION CARRIED, 7 -0. E. Other. Koropchak thanked the Commission for the opportunity to work with them. Koropchak commented that she would encourage that the EDA research its ability set up special taxing districts. 9. Adjournment. 10 EDA Minutes — 05/21/08 MOTION BY COMMISSIONER FAIR TO SUSPEND THE REGULAR JUNE MEETING UNTIL A NEW ECONOMIC DEVELOPMENT DIRECTOR IS HIRED. MOTION SECONDED BY VEIRING. MOTION CARRIED, 7 -0. MOTION BY COMMISSIONER FRIE TO ADJOURN. MOTION SECONDED BY HERBST. MOTION CARRIED, 7 -0. President 11 Secreta