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HRA Minutes 08-11-1993 . . . MINUTES MONTICELLO HOUSING AND REDEVELOPMENT AUTHORITY Wednesday, August 11. 1993 - 7;00 p.m. City Hall MEMBERS PRESENT; Chairperson Al Larson, Vice Chair Ben Smith, Lowell Schrupp, Everette Ellison, and Tom St. Hilaire. STAFF PRESENT; Ollie Koropchak. STAFF ABSENT; Rick Wolfsteller and Jeff O'Neill. GUEST ABSENT; Lenny Kirscht, BDS, Inc. 1. CALL TO ORDER. Chairperson Larson called the HRA meeting to order at 7;00 p.m. 2. CONSIDERATION TO APPROVE THE JUNE 3, 1993 HRA MINUTES. Ben Smi th made a motion to approve the June 3, 1993 HRA minutes. Seconded by Lowell Schrupp and with no corrections or additions, the minutes were approved as written. 3. CONSIDERATION TO ADOPT A RESOLUTION AUTHORIZING THE PREPARATION OF TAX INCREMENT FINANCE PLAN FOR AND THE CREATION OF TAX INCREMENT FINANCE DISTRICT NO. 1-13 (Standard Iron & Wire Works, Inc.) Koropchak reviewed Standard Ironls proposed construction project of 52,000 sq ft (office/manufacturing) and the projected creation of 50-75 jobs within the first year. In the absence of Lenny Kirscht, Koropchak noted that initial building construction costs of $1,950,000 were over-estimated and included some si te improvement costs; therefore, the building costs were modified to $1,556,000 and the TIF assistance increased from $200,000 to approximately $300,000. The project generates sufficient tax increment to cover the increased TIF pay~as-you-go assistance. Koropchak also indicated that Mr. Kirscht has in-hand the Preliminary Agreement executed by Standard Iron, the $5,000 HRA check, and a copy of the Purchase Agreement between the company and the Oakwood Partnership. If the HRA adopts the enclosed resolution, the TIF Plan will be distributed to the taxing jurisdictions prior to or on August 23. The HRA will adopt the plan on September 1 with the City Council public hearing and plan adoption on September 27. HRA MINUTES ~ AUGUST 11, 1993 Lowell Schrupp made a motion to adopt the resolution authorizing the preparation of TIF Plan for and the creation of TIF District No. 1~13 for Standard Iron and Wire Works, Inc. The motion was seconded by Tom St. Hilaire and with no further discussion, the motion passed unanimously. The HRA found the project to comply with the HRA~TIF policy criteria and the Minnesota Statutory through the retention and creation of jobs and property taxes for both the State of Minnesota and the City of Monticello. 4. CONSIDERATION TO ADOPT A RESOLUTION AUTHORIZING TO SPLIT AND DECERTIFY LOT PARCELS 11 AND 12 OF TIF DISTRICT NO. 1-7 (NAWCO) AND THE PREPARATION OF TIF PLAN FOR AND THE CREATION OF TIF DISTRICT NO. 1-16 (The H-Window Company) . Koropchak reviewed the H-Window's proposed expansion of 25,600 sq ft manufacturing space, 4,000 sq ft office, and the creation of 60 new jobs. ~ In the absence of Lenny Kirscht, Koropchak explained that the financial proposal included an annual TIF pay-as-you-go assistance of $20,000 over the life of the newly created district. This increment generated from the 25,600 sq ft addition would be used to reduce the company's construction debt-service. First and foremost, to utilize the increment from the proposed expansion and newly created district, the HRA must legally be able to de-certify the existing TIF District No. 1-7 boundaries. This has been a question of Koropchak and Administrator Wolfsteller of the initial BDS proposal. Mr. Kirscht is to inform the HRA this evening. Secondly, are building construction costs a legal expenditure of TIF? Lastly, Koropchak indicated that a request for an executed Preliminary Agreement or a $5,000 check had not been made of the H-Window Company todate. Does the HRA want to request this of a BRE project? ~ Lowell Schrupp made a motion authorizing to spli t and de- certify lot parcels 11 and 12 of the TIF District No. 1-7 and to prepare the TIF Plan for and the creation of TIF District No. 1-16. The motion was subject to obtaining a $5,000 check from the H-Window and verification of Statutory compliance regarding de-certification of an existing TIF district and use of TIF for building construction costs. The motion was seconded by Tom St. Hilaire and with no further discussion the motion passed unanimously. Page 2 HRA MINUTES . AUGUST 11, 1993 5. CONSIDERATION TO REVIEW FOR RECOMMENDATION THE PRELIMINARY 1994 HRA BUDGET. In the absence of Rick Wolfsteller, Koropchak reviewed the proposed HRA budget for 1994 with the commission. Revenues are generated from projected TIF District tax increments. Koropchak noted that TIF District Nos. 1-3 and 1-4 end in 1993, the TIF District No. 1-10 revenue does not include Remmele's 10,000 sq ft expansion, and the amount of valorem taxes is determined by the combined total of personal service and service/charge expenditures. The increase in valorem tax revenue is due to a recommendation by the IDC and Mayor Maus to increase the HRA Executive Director's salary portion from 20% to 25%. The recommendation is made to help subsidize the IDC yearly expenditures. TIF District expenditures are HRA loan paybacks to the city. The HRA accepted the proposed HRA budget for 1994 and recommended City Council consider approval. 6. OTHER BUSINESS: a) Senior Housing Market Analysis Follow-up - Koropchak indicated that Mr. Brad Larson was given a copy of the analysis upon his request and Koropchak's return to work. Other potential developers will be notified this week of the completed study and request for a copy of the study. This developers list was submitted by Pat McCullough. b) Other Prospects - The next potential TIF request may be for a 16,800 sq ft manufacturing/office. The company employs approximately 10 and would add another 10 within the next couple of years. The company produces flexible form products for medical and industrial equipment. . No new information from Wilson Tool or Steinwall, Inc. c) The next HRA meeting is scheduled for Wednesday, September 1. 7. ADJOURNMENT. The HRA meeting adjourned at 7:40 p.m. ~~ \~~Ux~ C) --------------------~---~~- Ollie Koropchak, HRA Executive Director . Page 3 . . . 3. Consideration to approve the use of TIF surplus funds for the H-Window expansion. A. Reference and Background. On May 25, 1993 Pat Pelstring, Lenny Kirscht, and Koropchak met with the Norwegian Board members and Steve Lemme. It was upon Mr. Pelstring request that Mr. Kirscht attend the meeting to become familiar with the project. Following this meeting, Mr. Pelstring suggested de-certification of the existing district and establishment a new district to collect the eight years of tax increment generated by the expansion. The city staff questioned the legality of de-certifying an existing TIF District. A financial package proposal for the H-Window was prepared by BDS and reviewed by the EDA on June 7. The proposal included the issuance of $1,175,000 of G.O. TIF Bonds by the EDA; however, the EDA elected not to issue the bonds because in their opinion the projected bond rate of 7.6% was comparative to commercial lending and not a sufficient savings to the H- Window. The proposal also included equity, TIF, and the state program. BDS revised the financial package proposal to include equity, commercial lending, TIF, and the State program. The legality of de-certification was still not resolved. On June 14, Mr. Kirscht and Koropchak met wi th Mr. Lemme to review the proposal prior Mr. Lemme trip to Norway. In conversations with BDS from Koropchak's home, inquiries were made to the legality of de-certification and progress of the H-Window proposal. At the August 11 HRA meeting, the HRA approved splitting and de-certifying the TIF District No. 1-7 boundary for creation of TIF District No. 1-16 subject to compliance wi th the Minnesota Statutory (Can you legally de-certify a TIF District?). The annual pay~as-you-go TIF assistance proposed was $20,000. On August 12, BDS determined that de-certification of the district boundary was not legal. On August 18, Mr. Kirscht and Koropchak met wi th Mr. Lemme regarding the new TIF information, The pre1 iminary application to the State of Minnesota has been submi tted and a letter of State Fund endorsement to Senator Adkins and Representative Olson has been prepared and mailed. The H-Window plans to begin expansion construction September 15 with completion by mid- November. With the completion of the H-Window Business Plan and Financial Statements, bank financing will actively be pursued on Monday. . To meet the H-Window time frame, the State monies will be requested for equipment financing and not construction financing. The HRA is being asked to consider approval of the use of TIF surplus funds in the amount of $20,000 over 8 years or a total of $160,000 of assistance as originally proposed. At the estimated annual tax increment of $35,000, the HRA possibly ~ recapture two years of increment (1995 and 1996) if the expansion is fully assessable on January 2, 1994. No tax increment is collected by the BRA in year 1997 as the district was originally certified in May of 1987. A new TIF District can be created after July 1, 1997 on the undeveloped parcel. Question: In order to collect the 1995 and 1996 increment, does the budget for District No. 1-7 need to be modified and what's the time frame to accomplish? . On August 19, the IDC fully endorsed the H-Window expansion and request the HRA consider the project as number one priority. Based of the new information, the H-Window may be interested in selling their current facility to Standard Iron and purchasing 20 acres within the Monticello area for a total new development project. Other suggestions by the IDC for the BRA to consider was for the BRA to purchase the H-Window faci 1 i ty and lease it back to them or to other interested smaller companies. They also suggested a committee of IDC and HRA members meet to evaluate the performance and billings of BDS. Mr. Wolfsteller has indicated that the TIF surplus fund is sufficient to cover the $160,000; however, he will inform the HRA at the meeting to what portion of the surplus would remain. PROPOSED EXPANSION PROJECT: 25,600 sq ft manufacturing, 4,000 sq ft office, machinery and equipment, and 60 additional jobs. Projected tax increment on the manufacturing space was $35,000 annually. This district is not subject to LGA or RACA penalties. .