HRA Agenda 02-04-1987AGENDA
1 MONTICELLO HOUSING AND REDEVELOPMENT AUTHORITY
Wednesday, February 4, 1987 - 7:00AM
City Hall
1. Call to Order.
2. Approval of the January 7, 1987, HRA Minutes.
3. Consideration for the Monticello HRA to Adopt Construction
Five's Development Agreement.
4. Consideration to Select/Approve an HRA Member for Re-
commendation to the City Council.
5. Other Business.
Reports - NAWCO Minnesota, Inc.
Metcalf/Larson Project.
HRA Financial Tools
Low -Level Radioactive Waste (LLRW) Disposal Facility
b. Adjournment.
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MINUTES
MONTICELLO HOUSING AND REDEVELOPMENT AUTHORITY
Wednesday, January 7, 1987 - 7:OOAM
City Hall
Members Present: Acting Chairperson Bud Schrupp. Ken Maus,
and Ben Smith.
Members Absent: Marlys Erickson.
1. Call To Order.
Acting Chairperson Bud Schrupp called the HRA meeting to
order at 7:05AM.
2. Approval of the October 1, 1986 HRA Minutes.
Ben Smith motioned to approve the October 1, 1986 HRA
minutes, Ken Maus seconded the motion. Minutes stand
approved.
3. Consideration to Recommend Reappointment of HRA member,
Ken Maus.
Ken Maus accepted reappointment to the HRA with non-
committment to serve the full five year term. Ben Smith
motioned to accept and to recommend Ken Maus for HRA
membership to the City Mayor for ratification by the
City Council. Bud Schrupp seconded the motion. Motion
passed unanimously.
4. Consideration to Amend Construction Five's Tax Increment
Finance Plan and to Reauest the City Council to Set a
Public Hearing for the Purpose of Amending the Tax
Increment Finance Plan.
Discussion centered around the continued use of Tax
Increment Finance without the tool of tax-exempt bonds.
Koropchak informed the Authority that according to Jerry
Shannon, Springstad, Inc., that TIF is still usable, as
the increment generated by a project remains the same,
however, the budget cost increases because of the in-
creased interest rate, thereby, reducing the amount
of increment to be applied toward the amount of .
bond issuance. Koropchak, then, reiterated the
projects public improvements, proposed dovoloper's
plan, and how this fits into the city's overall future
plans. Ken Maus motioned to amend and adopt Construction
Five's Tax Increment Finance Plan and to request the
City Council to act a public hearing for the purpose
of amending tho Tax Increment Finance Plan. Seconded
by Ban Smith, the motion passed 3-0.
5. Other Business.
Discussion centered around the Metcalf/Larson proposed
Elderly Project 11 with regards to the comment of FmHA
funding for retail stores on the first floor. THe HRA
suggested o meeting with Metcalf/Larson to obtain their
current interest in the project.
HBA Minutes - 1/7/87
Portions of Block 51, City of Monticello; and Moon Motors
and the Olson property were set as the 1987 BRA goals.
The HBA request the City Council to supply names for the
vacant seat on the BBA. The BBA suggested to call
Dr. McCarty or Al Larson.
6. Adjournment.
Ken Maus motioned to adjourn the HRA meeting, seconded by
Ben Smith. Meeting adjourned.
Olive M. Koropchak
HRA Secretary
3. Consideration for the HRA to Adopt Construction Five's
Development Agreement.
A. REFERENCE AND BACKGROUND.
On January 7, 1987, the HRA amended Construction Five's
Tax Increment Finance Plan and requested the City Council
to set a public hearing for the purpose of amending the
TIF Plan. On Monday, January 12, 1987, the City Council
set Monday, January 26, 1987, as the date for the said
public hearing. The public hearing for the purpose
of amending Construction Five's TIF Plan was held with
no opposition at the Council meeting, however, the public
hearing remains open to allow for the 30 day waiting
period. Notification of amending Construction
Five's TIF Plan was presented to County Auditor O.J.
Arlien and School District 1882 Supt. Shelly Johnson.
Construction Five proposes to build one 24 -unit apart-
ment building and one 30 -unit apartment building on
Lots 1,2,3,4,and 5, Block 1, Construction Five Addition.
The purpose of Tax Increment District 65 is to subsidize
the coat of the proposed public improvements: sanitary
sever will be extended along Lauring Lane from Washington
to Fallon and down Fallon Avenue to serve both Malone's
and the Rand property; water will be extended along
Lauring Lane from Washington to Fallon and will be
looped around Fallon; street construction will include
part urban and part rural design extending Lauring Lane
from Washington to Fallon and the construction of the
o new Fallon Avenue; storm sewer will be installed where
needed along Washington. Fallon, and Lauring. Curb
and gutter will be installed around the City park and
down Fallon Avenue and on the perimeter of Block 2.
Whether or not to place curbing down the vest side
of Washington Street so that we have a complete urban
street has not been decided.
As proposed currently the project would allow for full
and complete payment of the debt through, tax increment.
however, staff's opinion is that the water and sanitary
sever should carry soma assessment against the Rand
property and the Malone property. Assessment income
to expected to be minimal. The bond issue, including
capitalized interest, to projected to be $530.000.
The term of the issue is expected to be 20 years, and
the interest rate is expected to be 6.5 percent.
When the proposed now structures are fully complete
and fully assessed, the City anticipates receiving a
a tax increment on all throe structures of $53.700.
Tom Eidem, representatives of Holmes b Craven. Springsted,
and Construction 5 met on January 26, to work out the
final details. At this time, the development agreement
has not arrived, therefore, will be presented to you
L at the HRA meeting. Construction Five would like to
begin construction this spring in order to begin rental
of unite by August. In order to do this, he must be
absolutely assured that he will have sewer and mater and
streets by August. The City Council February 9, 1987
agenda will consist of approval of the amended Tax
Increment Finance Plan, approval of plans and
specification for the public improvements and approval
for advertisement of public improvement bide.
B. ALTERNATIVE ACTIONS.
1. Adopt the Construction Five Development Agreement.
2. Deny the adoption of the Construction Five Development
Agreement.
C. STAFF RECOMMENDATION.
Staff recommends the adoption of the Construction Five
Development Agreement because the project is viable
to the City's Comprehensive Plan, Construction Five's
Plans, and the District will generate sufficient increment
to cover the bond issue and interest. This recommendation is
contingent upon the delivery of the Tax Increment Development
Agreement.
D. SUPPORTING DATA.
Presented at meeting -
Developer's Agreement
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4. Consideration to Select/Approve an HRA Member for Re-
commendation to the City Council.
A. REFERENCE AND BACKGROUND.
At the January 7, 1987, HRA meeting the Authority suggested
I contact Dr. McCarty and Al Larson for consideration to
become a member of the HRA. Linda Smith's name was also
added to that list. The vacated position's term will
expire on December, 1988.
At this time, Al Larson and Dr. McCarty have accepted to
be nominees for the vacated HRA membership. Al Larson,
ower of Coast to Coast and a Monticello resident. Dr.
C. McCarty, General Dentistry and Orthodontics and a
Monticello resident.
B. ALTERNATIVE ACTIONS.
1. Select/Approve Al Larson as a HRA member.
2. Select/Approve Dr. C. McCarty as a HRA member.
3. Select/Approve no HRA member as this time.
C. STAFF RECOMMENDATION.
Staff recommends the HRA to select/approve one nominee
for HRA membership for the Mayor and City Council to
ratify at the February 9, 1987 meeting. Staff has no
problem with either nominee, however, feels the vacated
position should be filled.
D. SUPPORTING DATA.
None.
5. Other Business.
REPORTS: NAWCO Minnesota, Inc.
1 NAWCO Minnesota, Inc. is the incorporated Minnesota company
name with a proposed manufacture facility to be build in
Monticello. In January, Mr. Fjerdingstad and Mr. Starheim
were in Minnesota to seek final financial arrangements for
their proposed Monticello preject. The total estimated
project cost is $3.2 million, one-half ($1.6 million) will
be financed from Norway plus an additional $800,000 as
backup for marketing capital. The total estimated project
coat is based on a five year projection which includes
building, M b E. furniture and fixtures, vehicles, and
working capital. Mayor Grimsmo and myself joined Mr.
Fjerdingstad and Mr. Starheim at a meeting with represent-
atives from the Minnesota Trade Office and the Department
of Energy and Economic Development. The purpose of the
meeting was to establish available state funds for the
project. The Dept. of Economic Development takes the
second mortgage position, therefore will consider part-
icipation after bank financing has been established.
Mr. Dale Lungwltz and myself joined the Norwegian re-
presentatives and their attorney at a meeting with bank
officials from Norwest and First National Minneapolis.
The bank officers obtained the company's financial
statements and projections, the company's business
plane, the marketing research study and the Twin City
testing results. The banks willing participation in the
project willbe made approximately by the end of February.
` Thereafter,will the state acknowledge it's participation.
The project can be financed fully through Norway, however,
they would like state/local participation. The City of
Monticello has indicated willingness to reduce the land
cost through Tax Increment Finance, however, no committ-
ment regarding the amount of write down has been made,
this contingent with the size of the project. Please
have this remain confidential information.
Metcalf/Lareon Project.
Having talked with Jim Metcalf. Jim indicated a continued
Interest in a second elderly project. The comment in
regards to funding meant that Farmora Home Administration
(FmHA) wouldn't loan monies on a combination first floor
retail/upper level elderly housing project. In other
words. FmHA funding Is limited to housing projections
only, not intended for multi-purpose projections. The
City Mayor indicates a go-ahead with procedures if we
have a committed project, he sees no benefit to the
City to purchase and demolish the property. Mr. Metcalf
indicated they couldn't make a committment without the
benefits of TIF or without the approval of FmHA funding.
City Staff recommends Motcalf/Lareon to secure purchase
prices and agreements from property owners with the
acknowledgement from the NRA to use the tool of Tax In-
crement Finance providing TIF would remain a usable
tool by Lay.
Low -Level Radioactive Waste (LLRW) Disposal Facility.
i With recommendations from the Industrial Development
Committee, Mayor Grimsmo, Administrator Eidem, and myself;
I wrote a "letter of inquiry" to the Minnesota Commissioner
of the Midwest Compact Commission. This letter simply
signals a coamunity's potential interest in hosting a
regional low-level radioactive waste disposal facility
and request additional information aimed at assisting a
city in deciding whether to pursue development of such
a facility in their area. The Midwest Commission benefits
package is expected to include:
• An estimated $2 million each year in direct and indirect
revenue. New Jobe: Employment of about 20 people
with an annual payroll of approximately
$400,000. During construction. add-
itional jobs will also be created.
Volume Tax: The Commission is
supporting a special tax on the
volume of waste accepted at the
facility. this tax would raise about
$800,000 per year for the local
community.
Other Income Source: The facility
will probably be operated by a
private company which will pay
sales and business taxes. Payroll
and tax revenue will spread through
the area and, as a secondary impact,
will add another estimated $800,000
to the local economy.
• An opportunity to have some local control over the facility,
* the potential to attract a national technical center on low-
level waste to a host state.
Approximately 200 acres of land will be needed for the
Midwest Commission's facility. which will be owned by the
host state, most of it will be used for a buffer zone.
An acceptable site must meet all of the NRC performance
standards which are designed to protect both public health
and the environment. Scientists will study the geology of
the site and zany other factors. Toots wells will be drilled
and installed, weather conditions studied and a detailed
onvlronoment assessment prepared. It will be a long and
thorough process. Rather than immediately picking a site,
the Commission has decided first to try to find a volunteer
community with land that macts the stringent environmental
siting requirements. At this time. I'm asking for input
from the city government bodies?
HRA Financial 'fools
The Monticello HRA has basically used the financial tool
of Tax Increment Finance for the write down of land
costs, for public improvements, and for the removal of
blighted areas. Today, TIF is still being used, on our
Construction Five project the bond term is 20 years at
6}x. The interest rate being low because bonds for public
improvements, under law, are still tax-exempt. However,
on Industrial development, as in the industrial park, the
bonds issued for this purpose are no longer tax-exempt.
The tax increment generated by a project remains the same
as in the past, however, to make the bond sale more
attractive, and estimated 2% in added to the interest
rate. The result of this is the principal amount of
the bond issue is reduced and the amount of interest
paid is increased. In other words, you are getting
less for your money. Also, not helpful is the maximun
10 year life of an economic district.
I'm not suggesting we disband TIF, but to inform the HRA
of other financial tools being used by other communities.
A number of small manufacturing businesses have contacted
me with an interest to locate in Monticello. Because
of the large lots in the industrial park and a company's
need for a small facility (7,000 sq. ft.), the use of
TIP is not an incentive because the project doesn't
generate sufficient tax increment to make the package
attractive. A start-up company's greatest need for
working capital is normally within the first five years
of business. First, 1 look at the possibility for
smaller lots in the industrial park, the City recently
acquired 3 lots, however is the cost to subdivide the
lots plus provide streets and additonal stubs for water
and sewer, a viable option.
I'm aware of a neighboring community who's HRA will
grant a warranty dead (contract for decd or mortgage
deed) to a business. Example: ! acres at $10,000,
the land payment is deferred for five years. Also,
the HRA issues construction loans with a forgiveness of
the principal for a limited number of years for each year
the company remains in business. Example: $18,000
construction loan - principal amount of year 1 and 2 or
$12,000 is forgiven. Paid balance on the loan to
$6,000 plus total years interest. Some communities
defer payment of the city taxes, others set up
revolving loans, and other have non-profit development
corporations started by community individuals interested
in community economic development. Through these typos
of incentives. I know I lost 2 businesses to another
community, and soon maybe a third. The HRA in some
communities also own the industrial land. Our HRA
i
presently has a balance of ;20,000-$30,000 and is
scheduled to receive the UDAG repayment from FSI
beginning in 1988. The HRA may begin thinking of
ways to use these monies as incentives, if that's
your choice. In April, I'll be attending a one day
seminar on revolving loans. Whatever, if anything, the
HRA may choose to do, guide lines and limits must be
established and written before any incentive is initiated.
State financial consultants are available to help with
guidelines along with the use of one's city attorney.
This report to for information purposes and discussion.
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