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HRA Minutes 12-04-1991 . . . MINUTES MONTICELLO HOUSING AND REDEVELOPMENT AUTHORITY Wednesday, December 4, 1991 - 7:00PM City Hall MEMBERS PRESENT: Smith, Lowell and Tom st. Chairperson Al Larson, Ben Schrupp, Everette Ell ison, Hilaire. STAFF PRESENT: Rick Wolfsteller and Ollie Koropchak. STAF'F' ABSENT: Jeff O'Neill GUEST PRESENT: Mayor Ken Maus Pat Pelstring and Lenny Kirscht, BDS, INC. 1. CALL TO ORDER. Chairperson Larson called the HRA meeting to order at 7:00PM. 2. CONSIDERATION TO APPROVE THE NOVEMBER 6, 1991 BRA MINUTES. Ben Smith made a motion to approve the November 6, 1991 HRA minutes, seconded by Tom St. Hilaire, and with no corrections or additions the minutes were approved as written. 3. CONSIDERATION TO HEAR OF THE RESEARCHED INFORMATION ON THE GILLE PROPERTY TAX FORFEITURE. The HRA reviewed the information provided with the agenda on property tax status of the Gille property. The Gille property of 1.77 acres (previous gas station site) has been forfeited to the State of Minnesota. Delinquent taxes date back to prior 1982 and total $14,310.83. The Gille property of 1.03 acres reverted back to Alice Carlson and all taxes are current and paid-in full. Koropchak reviewed the tax forfeiture process as described by DarIa Groshens, Wright County Auditor/Treasurer, with HRA members. The HRA questioned if that meant Gille was completely out-of- the picture or if later he would be offered a recourse to the property; if the property is currently owned by the State, is the State liable for the cleanup; and who actually receives the money from the sale of the property. It was Mr. Pelstring's opinion that the land value and assessments are pro--rated by the government bodies and county retains any excess dollars (less expendi tures) as this is deemed as a public purpose or an indirect purpose. Mayor Maus recommended property tax forfe! ture as a good topic for a League of Minnesota seminar. . . . HRA MINUTES 12--4-91 Wi th the given information on the Petrofund and the LUST Trust, it appears that if the peA guidel ines are followed monies are available for clean-up reimbursement. However, tank removal and sampling costs do not qualify as reimburseemnt costs and these costs are estimated to be between $30,000 to $50,000. It was Mayor Maus' opinion that the HRA should earmark this area as a redevelopment project goal and recognize that redevelopment means just that "redevelopment" (clean-up, demolition, and/or acquisition) and sometimes redevelopment costs become a little greater than one would like, as in the example of the downtown redevelopment project. This area of property is currently zoned R-2 (Single and Two Family Residential). All individuals agreed that this area appears to be the most substandard (blighted) property within the city limits. It was agreed upon to keep abreast of the area property's status (Gille, Katzmarek, Carlson) and to contact the State of the need to clean-up the area. The HRA made a recommendation to obtain information on the property tax forfeiture process and process length from the City Attorney, if the State is the current and legal owner of the Gille property, and if Gille is entitled to a recourse of the property and if so, what is the time period on the recourse. In the meantime, the properties lie within the Central Monticello Redevelopment project area where excess increment can be expended. In the future, the HRA may wish to consider a twenty-five year district for the Katzmarek, Gille, Carlson, West Prairie Partnership, and Monticello Kids Are People, Too properties. The district would need to be certified prior to any issuance of a building permit and would allow the HRA to collect the district's tax increment. Communications wi th Carlson and Katzmarek may lead to a willing sale and/or relocation. 4. CONSIDERATION TO REVIEW THE ANNUAL BILLING OF 80S, INC. Pat Pelstring acknowledged the marketing and duplicate fees of $450 charged the HRA and granted a credit-due to the HRA account. Mr. Pelstring further explained that BDS normally bills on a time system but accepted the HRA's desire to be billed monthly. The HRA expressed their want to understand the billing system and wanted it understood they were not questioning the work provided by BDS, Inc. The HRA understood if a project did not go, no payment would be made. Mr. Pelstring explained that Monticello is the only community who is not charged for marketing. The establishemnt of a TIF district is a flat fee of $3,850 and has no hourly . . . HRA MINUTES 12-4-91 fees attached as does packaging and other funding application services. When a HRA resolution is adopted the HRA gives authorization for establishment a TIF Plan and District therebye call ing for the 30 day jur isdict ion not ice, City Council Public Hearing and approval, and certification by the county. The Shingobee District has held it's public hearings but will not be certified by the county until a tenant is found; however, the HRA has a $5,000 commitment check from Shingobee for such expenditures and Mr. Pelstring agreed to a TIF holdback fee of $1,925. Inorder to avoid a future situation as with the Axoplax TIF project, it was for this reason, the HRA last month agreed with the concept of the Letter of Intent as prepared by Holmes & Graven. 5. CONSIDERATION TO DISCUSS FOR POSSIBLE AUTHORIZATION OF POLICY RECOMMENDATIONS MADE BY BDS, INC. BASED ON THE TIF FINANCIAL ANAT...YSIS. Mr. Pelstring informed the HRA of the adjusted TIF Financial Analysis with the accountability of bond debt for TIF District No. 1-2. For the life duration of the first ten HRA TIF Districts, the estimated excess increment is a little over one million dollars. This accounts for a 10% administrative expenditure and a 5% excess bond reserve fund. Mr. Pelstring sees the analysis as a good management tool for the HRA and recommends the analysis to be completed every couple of years. The first policy discussed by the HRA was the authorization of a 10% administrative expenditure policy. Mr. Pelstring explained that the HRA has the legal right to authorize an expenditure policy of 10% over and above TIF project costs. As illustrated on the finanical analysis for year 1991, the administrative expenditure of $26,000-$27,000 has been deducted from the excess increment column. According to Mr. Pelstring, most of the time this operating expense account (administrative expense) is used for legal fees, housing or marketing studies, development costs, or other operating expenses not covered in a TIF budget. HRA approval would still be required prior to actual expenditure. Administrator Wolfsteller informed members that Koropchak HRA salary and operating expenditures is accounted for under the City's HRA general operating expenses. Wolfsteller asked, if the HRA could payoff bond debts prior to the end of a district's life duration and still collect the full increment. Pelstring answered, yes, Monticello has a master district plan known as the Central Monticello Redevelopment Plan which allows for flexibility. Because of the plan, the HRA has one . . . HRA MINUTES 12-4'~91 debt obligation or the HRA has the option to return a district back to the jurisdictions. Any outstanding city loans can be paid off. The HRA still felt that if the 10% administrative expenditure policy was authorized this would allow the City greater opportunity to spend the monies, although, they understood the need for final HRA approval even with policy authorization. Additionally, the HRA recognizes they still have the opportunity to approve any operating expenditures, not covered by the TIF budget, without this policy. Tom St. Hilaire made a motion to deny authorization of a 10% administrative expenditure policy, and to approve the authorization of an additional 5% debt service reserve policy and of a negotiated payback policy for the loans on Lots 5 & 6, Oakwood Industrial Park. Lowell Schrupp seconded the motion. Ben Smith felt further discussion was needed prior to approval of the addi tional 5% debt service reserve policy and negotiated payback policy. Tom St. Hilaire requested amendment of the previous stated motion and restated the motion to deny authorization of a 10% administrative expenditure policy. The amendment and motion was seconded by Ben Smith and without further discussion passed unanimously. The URA proceeded to discuss the second policy of an additional 5% debt service reserve. Mr. Pelstring informed members that the HRA/City is required by law to guarantee bond debt payment. Through the Pledge Agreement between the HRA and the City, the City agrees to sell the bonds and agrees the bond revenues will be available for payment of HRA costs incurred, and the HRA agrees to transfer increment for deposit in an amount equal to 105% of the annual bond payment due. Generall y, the Deve lopmen t Agreement covers defaul ts, tax increment guarantees, and minimun estimated market values. This proposed pol icy would authorize the addition of an accumulating 5% debt service reserve for future potential defaults and/or slow payment of taxes. The HRA felt it wise to establish this rainy day account. Everette Ellison made a motion to approve authorization of an addi tional 5% debt service reserve policy. Seconded by Tom St. Hilaire and without further discussion the motion passed unanimously. The third policy discussed by the HRA was the negotiated payback policy for the loans on Lots 5 & 6, Oakwood Industiral Park. It was the members agreement that a negotiated payback for the remaining balance of the HRA loans from the City for Lots 5 & 6 be authorized. Negotiated terms for the remaining $136,000 balance were recommended at an 8% interest rate over ten years for an approximate annual debt service payment of $20,000 commencing in 1992. Lowell Schrupp made a motion to . . . 8. HRA MINUTES 12-4-91 approve authorization of the above recommended loan payback terms and policy. The annual $20,000 payback to the City to be expended from the HRA excess increment fund. The motion was seconded by Everette Ellison and without further discussion the motion passed unanimously. The HRA members recommended the TIF Financial Analysis be completed annually by BDS, Inc., as it serves as a useful tool for the members. 6. CONSIDERATION OF AN AROPLAX UPDATE. Koropchak informed the HRA members that the $100,000 Central Minnesota Initative Fund (CMIF) request for the Aroplax project was reduced to a $30,000 potential and more equity was requested by the CMIF Board. The requested $200,000 state Economic Recovery Grant required a funding application to the CMIF prior to consideration of the state's monies. The total $936,000 package still needs approval of an additional $25,000 from the Greater Monticello Enterprise Fund. A Monticello location commitment from Aroplax is depended on the state's willingness to participate and the financial package offered by Brooklyn Park. Mr. Pelstring felt the City of Monticello has offered a good financial package to Aroplax. 7. CONSIDERATION TO INVITE PRESTIGE BUILDERS TO AN HRA MEETING. At the Expo, Al Larson spoke to the Prestige Builders representative regarding the HRA's concept for elderly housing. This st. Cloud company has a similiar concept in the development stage for another communi ty and is willing to share their information with the Monticello HRA. With the next HRA meeting scheduled for New Year I sEve, the liRA members agreed to meet on the 15th of January at 7:00PM and to invite a representative from Prestige Builders to attend. liRA members requested Prestige Builders' concept information be mailed out prior to their meeting. OTHER BUSINESS. Koropchak briefly informed the HRA of Ultra Pack, Inc. and their expansion plans. This start-up company, a subsidiary of Ultra Pack, Inc., would recycle plastic coca-cola bottles and the by-product (PETE) will be used at the main facility to produce food containers and lids. The company has an equity of four million dollars for this expansion and for expansion of a 60,000 sq ft addition to their main facili ty. The subs idiary company's plans are for a 20,000 sq ft metal building (very basic) wi th a concrete floor and insulated ceiling and walls. Job creation of 15-20 at $6.00 to $6.50 . . . HRA MINUTES 12-4--91 wages. Koropchak marketed the Shingobee/TIF proposals, however, the company does not plan to invest that kind of money in their fac!li ty. Estimated project cost for land, building, and machinery is $1,000,000. The HRA recommended giving Lot 5 to the company wi th the condition to dress up the outside of the building with decorative brick and other so necessary condi tions. Koropchak reminded the HRA that this project's estimated taxes and jobs created are not as great as the Maid of Scandia project. With no go ahead on the Scandia project, the HRA agrees Lot 5 continues to be a liability and encourages development of the property for some immediate benefits. This type of recycling process may lead to other developments. 9. ADJOURNMENT. Everette Ellison made a motion to adjourn the BRA meeting, seconded by Tom St. Hilaire, the meeting adjourned at 9:20 PM. \2)~ \((\ ~ ~~ Ollie Koropchak, HRA Executive Director