HRA Minutes 05-01-1991
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MINUTES
MONTICELLO HOUSING AND REDEVELOPMENT AUTHORITY
Wednesday, May 1, 1991 - 7:00 PM
City Hall
MEMBERS PRESENT:
Chairperson Al Larson, Ben
Schrupp, Everette Ellison,
Hilaire.
Smith, Lowell
and Tom St.
STAFF PRESENT:
Rick Wolfsteller, Jeff O'Neill, and Ollie
Koropchak.
GUEST:
Jerry and Steve Schoen, Aroplax Corporation.
Pat Pelstring, BDS
Gae Veit and Tom Golewski, Shingobee, Inc.
1. CALL TO ORDER.
Chairperson Al Larson called the HRA meeting to order at 7:04
PM.
2.
CONSIDERATION TO APPROVE THE APRIL 3, 1991 HRA MINUTES.
Lowell Schrupp made a motion to approve the April 3, 1991 HRA
minutes, seconded by Ben Smith, and without comments or
corrections the minutes were approved as written.
3.
CONSIDERATION TO ADOPT A RESOLUTION TO ESTABLISH THE TAX
INCREMENT FINANCE DISTRICT AND PLAN FOR AROPLAX CORPORATION
AND TO REQUEST CITY COUNCIL TO SET A PUBLIC HEARING DATE.
Mr. Jerry Schoen and his son, Steve, were present at the HRA
meeting and gave the members a brief history of their company.
Mr. Schoen stated that they had looked at other Minnesota
communities and a Wisconsin community for their planned
relocation before making a committment to locate in
Monitcello. The company's present location in Minneapolis is
of 39,000 sq ft which is leased to two other busineses in
addition to space occupied by Aroplax. The company needs to
relocate into a one story facility with a 24 foot ceiling
clearance inorder to maximize the use of their production
equipment and to increase productivity. The company is a
heavy user of electricity with the need for 1,600-2,000 amps
as they use an electric heat process instead of gas. The
company initially expects approximately 20 of their current
employees to transfer with the need for approximately six new
employees. The company employs both high and medium skilled
personnel and provides good benefits. Some employees have
been with the company for 25-30 years. Mr. Schoen stated the
cost to move the equipment will be in excess of $150,000. The
company's financial package will include SBA funding, TIF, and
the GMEF.
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HRA Minutes
5-1-91
Mr. Pat Pelstring of BDS, noted the District proposed budget
included $90,000 for land acquisition and a maximum liberation
of $75,000 for public improvements. Mr. Pelstring informed
the members that by approving the resolution they were
authorizing the establishment of the TIF Plan and District No.
1-12 for Aroplax Corporation and requesting City Council to
set a public hearing date for the adoption of the TIF Plan and
District Establishment. Thereby the taxing jurisdictions of
the county, the school district, and the hospital district
have thirty days to make written or oral comment.
Tom St. Hilaire made a motion to adopt the resolution
authorizing the establisment of the TIF District and Plan for
Aroplax Corporation and requesting City Council to set a
public hearing date of June 10. The motion was seconded by
Lowell Schrupp and without further discussion the motion
passed unanimously. The motion passed as it met the public
purpose of the HRA guidelines and the State Statutory
requirements.
4.
CONSIDERATION TO SET A POLICY TO RECAPTURE THE HACA PENALTY
PAYMENT FOR AROPLAX TIF DISTRICT WITH RECOMMENDATION TO THE
CITY COUNCIL.
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Mr. Pelstring explained to the HRA members the HACA or TIF
Penalty. First, as the City of Monticello was designated to
receive HACA (state aid) in the amount of $246,000; the city
was able to reduce their tax levy but also became subject to
the HAC A Penalty. Secondly, the HACA Penalty is applied to
newly created TIF districts only, therefore, as a City
receives HACA and a new TIF district is created, the school
district does not receive a portion of TIF increment during
the life of the TIF district. Thereby the state requires a
city to replenish the state's budget which was reduced because
the state has supplemented the school's loss. Thirdly, now
the HRA must determine a method to replenish or not to
replenish the city's general fund which replenished the
state's budget. The HAC A or TIF Penalty amount is calculated
by the state through various school district data.
For TIF District No. 1-12 (Aroplax) the annual HAC A Penalty is
approximately $5,000 of the projected $21,000 annual TIF
increment. Mr. Pelstring stated that Monticello's loss is
about 24-26% whereas most other communities' loss is about 30-
35%.
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5-1-91
The HRA may determine that the community will simply bite the
bullet and swallow the HACA Penalty, or the the HRA may
determine to construct the TIF budget to cover the penalty
through the use of a legal TIF expenditures (public
improvements), or the HRA may determine that the developer
absorb the penalty, or the HRA may set the budget based on the
"net" increment. It was the general consensus of the HRA that
they continue to keep their noses clean on TIF projects and
agreed with the maximum liberation of $75,000 for public
improvements within the proposed TIF District No. 1-12 budget.
The public improvements must occur within the Redevelopment
Project area and must be spend within three years of the TIF
approval by City Council.
5. CONSIDERATION TO REVIEW AND ACCEPT THE LETTER OF INTENT
BETWEEN THE HRA AND THE DEVELOPER, SHINGOBEE, INC.
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Upon receiving the Letter of Intent from Paul Weingarden this
day, it was the consensus of all parties involved not to act
on the acceptance of the letter of intent. The HRA was
informed of the previous three main concerns with the TIF
project: One, that the TIF assistance includes the leasehold
costs; secondly, that the TIF assistance is for the life of
the district only, and finally, that all returned request for
proposals were completed as requested. With the inclusion of
the leasehold cost the TIF will be used as a lease assistance
of approximately $.75 per square foot which makes this a
competitive project and the entire TIF assistance is passed
through to the leasee. The project must demonstrate the
public purpose: Not to assist the developer but to reduce
the lease rental.
6 .
CONSIDERATION TO ADOPT A RESOLUTION TO ESTABLISH THE TAX
INCREMENT FINANCE DISTRICT AND PLAN FOR SHINGOBEE, INC. AND TO
REQUEST CITY COUNCIL TO SET A PUBLIC HEARING DATE.
Gae Veit and Tom Go1ewski of Shingobee, Inc. presented the HRA
members with building and site plans for the proposed 25,000,
20,000, or 15,000 sq ft manufacturing/office facility on Lot
8, Block 2, Oakwood Industrial Park. They noted the
utilization of the lot due to the swale and expressed their
interest in the Monticello project.
Due to the latest of the Letter of Intent and latest of the
actual leasehold cost numbers for TIF calculation the adoption
of the resolution was tabled until the June meeting.
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The TIF/SPEC project was questioned on its necessity.
Koropchak responded that on the city's industrial leads
approximately 40% require leaseable space of various size.
The project was initiated with the knowledge of no guarantees
but as a creative marketing tool with no or a minimum cost to
the city. The project will not construct the facility but
with reduce the development time by approximately 50% through
having the TIF public hearing and building/site plans
completed. Also, this allows the city to assist in marketing
a new facility at a below market lease rate.
Upon the suggestion of Mr. Pelstring, Everette Ellison made a
motion authorizing the execution of the letter of intent
subject to conditions and terms and the initiation of the TIF
process. The motion was seconded by Ben Smith and without
further discussion passed unanimously.
7. CONSIDERATION TO SET A POLICY TO RECAPTURE THE HAC A PENALTY
PAYMENT FOR SHINGOBEE, INC. DISTRICT WITH RECOMMENDATION TO
THE CITY COUNCIL.
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Tabled til the June meeting.
8.
OTHER BUSINESS.
Koropchak informed the HRA members of a prospect, Maid of
Scandinavia, who are looking for six to seven acres of free
land without the use of TIF. The company's isn't interested
in TIF because they do not want to take the taxes away from
the school, hospital, or county.
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The company plans to construct a 50,000 sqaure foot facility
comprised of a 15,000 sq ft office of brick exterior and
35,000 sq ft warehouse of decorative metal. Currently 90
jobs, unskilled labor at $5.50 and data processing at $7.00-
$10.00 of which they anticipate 15-20% to relocate. This is
a clean mail order catalog business with a current location at
Highway 7 and 100 which is up for sale.
Koropchak noted that the HRA owns a lot in the Industrial Park
along Dundas Road known as Lot 5, Block 3, which is 6.4 acres.
This lot was purchased by the HRA (through a loan from the
City) in 1983 from the Oakwood partnership with the intent to
resale the property for the IXI proposed development. The
original amount of this loan was $77,400 at 8% and as of
December, 1990 the principal has been reduced by $9,400 to
$68,000 and $44,457 of interest has been paid. Currently the
property is tax exempt for an annual loss of $1,217.
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Additionally, Koropchak had projected annual taxes of
$54,907.63 from the proposed Scandinavia development of which
the city would receive $9,559.22. The question to the HRA
was, based on the presented information, is the HRA interested
in marketing the lot and is the HRA interested at looking at
other creative financial incentives to recruit this company.
Mr. Pelstring suggested a performance development agreement
which ties number of jobs created at a designated time to the
cost of the land. The general agreement was to market the
property and Mr. Pelstring will summary alternative financial
incentives. Staff inquired of the amount of truck traffic
created by the project.
9. ADJOURNMENT.
The HRA meeting adjourned at 9:35 PM.
~ \"0\\~1l-~
Ollie Koropchak, HRA Executive Director
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