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HRA Minutes 03-19-1984® MINUTES SPECIAL MEETING - HOUSING AND REDEVELOPMENT AUTHORITY Monday, March 19, 1984 - 5:00 P.M. Monticello City Hall Members Present: Chairman Don Cochran, Jack Reeve, Vic Vokaty Bud Schrvpp, and Gary Wieber. Staff Present: Tom Eidem, Allen Pelvit. Chairman Cochran opened the special meeting. Tom Eidem explained that this special meeting was posted and Betty Smedsrud, Monticello Times, was notified of the meeting. 1. Fulfillment Systems, Inc. (FSI) Tax Increment Financinq. Tom Eidem reminded the Authority that they are holding an interest free loan in the amount of $130,000 from FSI. The money was used to purchase Lots 6, 7, and 8, Block 2, Lauring Hillside Terrace. FSI would like to move this process along as fast as possible to get their money back. Eidem went to the law firm of Holmes and Graven and had them prepare a tax increment plan. He further explained the reason for the special meeting was to obtain the 1� Authority's approval of the tax increment plan before sending it to the School District and the County for their release. They can hold this for a period of 30 days. They haven't in the past, but we want to get this finished as soon as possible. Eidem stated that Allen will hand deliver copies of the Tax Increment Plan and other materials to the School District and the County. He went on to explain the resolution to approve the Monticello Housing and Redevelopment Authority's Modification of the Redevelopment Plan and the FSI Tax Increment Plan. He explained the Redevelopment Plan as the empowering district that they worked on previously to the first IXI Tax Increment Financing package. He went on to say that it was almost exclusively statutory language changes. Don asked if there were any boundary changes. Tom said no, and further stated that they had originally not inserted a section on statutory authority, which refers to Minnesota Statutes 462 (Housing, Redevelopment, Planning 6 Zoning). Don asked if these changes reflected the concerns that Holmes and Graven had regarding the initial plan. Tom explained that it was. -1- Special HRA Minutes - 3/19/84 Eidem went through the modified Redevelopment Plan item by item explaining any changes. He stated that an Environmental Control section was added, as well as a Method of Financing section and review by Planning Commission section. Don Cochran asked if these were all the changes that needed to be resolved and was told no by Eidem. Cochran then stated that didn't seem to be much substance to Holmes and Graven's initial concerns regarding our Redevelopment Plan. Eidem then explained that it was Barbara Portwood's concern that the vacant land in our area wasn't blighted and we should be concerned. He further stated that she had not heard of economic obsolesence; and when she discussed it with other attorneys, they recommended the Plan as being sound and not to worry. Our Plan is perfectly legal. Eidem then began to explain PSI's Tax Increment Plan that was referred to in the resolution. Because the Plans had just arrived in the mail, the Authority did not have a chance to review them. He went on to say that the Plan was similar to other tax increment plans we have had. This one had the legal description, names, and figures changed. (Bond amount $155,000 which includes capitalized interest for 18 months estimated at $20,000, Bond issuance and discount fees of $8,375, Bond counsel of $2,500, Planning and Administrative $7,500, and contingency of $11,625.) In addition to the $155,000 we will be receiving $25,000 from PSI for the cost of the land. This was $2,500 less than the U.D.A.G. application of $27,500 for the land. Tom explained that the $11,625 contingency monies is something that we can use for just about anything. It is recommended that the Authority use some of it to pay for City staff expenses of which they will receive an itemized bill. Don asked if we had a contingency amount in other tax increment projects;and Tom explained that we did, but not that much. Wry Wieber asked for an explanation on the land acquisition costs, and Tom stated that $105,000 was the cost of the land (adjusted - we're paying $130,000 for the land; however, we're receiving 25,000 as income from PSI) . Eidem then explained that FSI will add 65 new positions and, in fact, have already added some now positions and the assessed value of the City will increase by approximately $425,756. Tom explained that the tax increment will be between $28,000 and $34,000 beginning in 1985 (assessed in 1985, payable in 1986). In effect, the District is in place during 1985, but we waive our right to collect increment year one. - 2 - Chairman Cochran asked what exactly the contingency fund was for. Eidem explained that this money can be used to pay for City expenses and the use of their employees. Don then asked if this was the $7,500, and Eidem stated that the $7,500 was the HRA amount to cover expenses, etc., and the contingency amount was $11,625. The HRA's expense could include hiring lawyers, drafting developer agreements, bond counsel, modification of the Redevelopment Plan, and preparation of the Tax Increment Finance Plan are not in the $7,500 figure. T•=m then explained haw the $11,625 contingency amount was arrived at. (By taking the $155,000 and deducting all the knowns, thus giving a contingency). - 3 - Special HRA Minutes - 3/19/84 Gary Wieber questioned the number of new jobs that will be created by this expansion and was informed that 65 new or additional positions would be added during the first 12-18 months. Thereafter as many as 150 might be added. These positions would be in addition to the 135-150 employees they now have. Tom explained that of the tax increment $9,782 from the County, $15,487 from the School District, $7,356 from the City of Monticello, and $1,373 from the Monticello -Big lake Community Hospital District. Chairman Cochran asked how the various taxing entities viewed tax increment financing. Eidem stated that the Superintendent of Schools was very interested in tax increment financing if it was for industrial development. He further stated that they would probably sign off early again. The County, being experienced in tax increment financing with several area cities, shouldn't be affected in any way by the County since it's in the Township now. In fact, the Kjellberg building will still generate tax. Tom further explained other areas of the Tax Increment Finance District such as the limitation on the duration of the District, limitation on use of revenues (used to retire debt, do other things within the District). Excess tax increments, according to 475, you can prepay outstanding bonds, discharge the pledge of tax Cincrement, pay into escrow account to dedicate payment of bonds, repay any other loans including interest, and you could return any excess to the County Auditor for redistribution to the respective jurisdictions. The Authority will require a Development Agreement, an Assessment Agreement, which is new to us. This establishes a minimum market value of the land and the improvements for the duration of the District. This is reviewed with the Assessor who in turn indicates that the amounts are fair and accurate. Bud Schrupp asked if the monies previously discussed included the money FSI owed the Authority. Eidem explained that the HRA received their initial monies. Any other amounts are the Authority's and can be used to pay interest and delinquent taxes. Chairman Cochran asked what exactly the contingency fund was for. Eidem explained that this money can be used to pay for City expenses and the use of their employees. Don then asked if this was the $7,500, and Eidem stated that the $7,500 was the HRA amount to cover expenses, etc., and the contingency amount was $11,625. The HRA's expense could include hiring lawyers, drafting developer agreements, bond counsel, modification of the Redevelopment Plan, and preparation of the Tax Increment Finance Plan are not in the $7,500 figure. T•=m then explained haw the $11,625 contingency amount was arrived at. (By taking the $155,000 and deducting all the knowns, thus giving a contingency). - 3 - Special HM Minutes - 3/19/84 CJack Peeve made a comment on the $2,000 charge for the plans. Tom explained that this was for the Tax Increment Finance Plan and not the Modification of the Monticello Redevelopment Plan. This, Eidem explained, was something Walt Hartman threw in as long as they had it in their hands. Chairman Cochran asked if we were paying for the Modification, and Tom stated that if the bill came in in excess of the quoted price for the Tax Increment Plan, we will not pay. He further stated that there should be no charge for the Modification and he did not authorize it. Chairman Cochran asked if Holmes and Graven worked on an hourly rate, and Tom stated that they work on a fee basis. Cochran asked haw they substantiate their fees. Eidem explained that different projects get different fees and rates. Various individuals (Barb Portwood, Walt Hartman, Jim Holmes, etc.) all get different fees. But $2,000 is their flat fee to prepare a tax increment finance plan. Don asked if this billing was comparable with past plans prepared by Holmes and Graven. Tom explained that we have not had one prepared before. They were done in house. Tom went on to say that part of Barbara Portwood's concern over our Plan was due to a lack of legal knowledge. Tom stated that because the entire $2,000 would be recaptured during the 8 -year period, he decided to have it prepared professionally and stand up to all scrutiny. Jack again commented on the possibility of the Authority being charged for this Modification because of the staff's preparation of the original Plan. Tom stated that he felt they wouldn't bill us. Jack again stated that if they did and in their mind they're justified in billing us and that is the point I want to make. At this point Tom Eidem read the Resolution Approving Modification of the Monticello Redevelopment Plan in its entirety to the Authority. Chairman Cochran asked if there were any further questions regarding either the Modification of the Monticello Redevelopeent Plan or the Tax Increment Finance Plan for Fulfillment Systems, Inc. When there was no response, he asked for a motion to approve both of the aforementioned plans. Bud Schrupp made the motion and was seconded by Jack Reeve. Approved 4-0. Allen will hand deliver the Plans Tuesday morning, March 20, 1984, to the County Auditor and the Superintendent of Schools. On the 26th of March, we will approach the City Council to set a public hearing for April 9, the Plan will be approved, authorize the sale of bonds, and sell the bond with cash in hand by May 30, 1984. other items of information: IxI came in and said they are ready to go on its next phase. The - 4 - Special HRA Minutes - 3/19/64 remaining one-half of Lot 7 and all of Lot 6 can be incorporated into the next district. This will help us out. Their plans are to construct four new buildings. They had planned to begin construction on April 1 but have accepted a somewhat later date because of the time it takes to develop the tax increment finance plan. Time involved will be shortened because we already own the land and do not have to sell bonds, etc. Chairman Cochran asked if this addition to the IXI project would increase their labor force. Allen stated that when he talked to I%I officials in late January they indicated bringing their labor force up to approximately 200, which would be an increase of 150 new positions. The other informational item was in regard to the elderly housing project. Chairman Cochran reviewed what had taken place at the last regular HRA meeting (March 7, 1984) and then Tom Eidem expressed his feelings about the meeting's results. Tom stated that after discussing this with Allen the next morning, several things came to light. We were going further into debt, both requests for options had similar types of project plans. Tom's main concern was that the Authority didn't address the question of what to do about the option. Rom further stated that he didn't feel it was fair to listen to another project that was so similar to the first one. He then reviewed the events in this project that have led up to this meeting. Rom stated that Mr. Poehler called City Hall saying that he was contacted by FmHA. They told him that if he could provide an updated occupancy survey, an independent marketing survey, and provide a second justification of the site (cost effective), then they would approve the project in spite of the Big Lake problem. However, they will not give out any money until. 90% of the Big Lake units are rented. He further stated that we do not have any correspondence to this effect. Bud Schrupp asked if the Authority could sit on this property until the project was approved, etc. Tom agreed. However, he also stated that if Metcalf, Larson, and Bartel would make an offer to an outright purchase of the property by conventional means, by all means act or. it. Chairman Cochran raised the point he is still uncomfortable with holding the property while accruing interest. He also stated that staff is directed to return with a proposal for the next regular meeting. Special HBA Minutes - 3/19/84 Eidem then commented that he did not fully understand what the Authority wanted in the proposal. Chairman Cochran stated that it was the Authority's intent to have staff develop a proposal with the Authority's position in terms of conditions for release of an option, including length of time and monies involved. Jack Reeve confirmed Cochran's statement and added that the monies are no longer $200 and more likely to be in the $1,000 range. Chairman Cochran stated that it was his impression that staff would return with only one option/proposal for further discussion. Then the Authority could formalize a statement for treating this property. He opened this up for further discussion. Cary Wieber agreed with Jack Reeve in backing Mr. Poehler's project as a first choice. However, he also felt some monies should be paid to cover our interest expense. This should be nonrefundable. Jack Reeve suggested checking the legalities of giving an option to Poehler. He didn't want any problems with Brad Larson. If what Mr. Larson said was true, then we may have a problem. He wants to make sure that whatever we do is legal. Chairman Cochran reviewed what had been discussed and suggested the staff prepare a proposal that sets forth conditions and terms for the Authority to release an option for a predetermined number C of days so that this project can develop. Also included should be a dollar amount sufficient to cover any future interest expense by the Authority. A third area should cover what is to take place if other developers come in to compete. A fourth area is the legalities involved. Tom's response was to not prepare the option agreement at all but to make a list of conditions that would be in the option agreement. He also suggested steering clear of the two option route. At this point Chairman Cochran again suggested taking careful steps to be assured the option is legal. Eidem stated that this may be delayed because he will check into the public notice requirements, making sure the public hearing for disposition of public lands is proper. Tom stated that if an option was given, then the interest expense should be figured an a monthly basis. This will be checked with Pringle. Chairman Cochran suggested that if there is an issue that has been raised concerning the previous option as to if one existed, etc., it would be in both yours and the City's interest to have this read into the minutes of the next regular meeting. There being no further business, a motion to adjourn was made by Bud Schrupp and seconded by Jack Reeve. Passed 4-0. CAllen L. Pelvit Director of Economic Development - 6 -