IDC Agenda 06-19-1997• AGENDA
MONTICELLO INDUSTRIAL DEVELOPMENT COMMITTEE
Thursday, June 19,1997 - 7:00 a.m.
City Hall
MEMBERS: Chair Ken Maus, Vice Chair Tom Lmdquist, Secretary Tom Ollig, Shelly Johnson,
Jay Morrell, Don Smith, Kevin Doty, Bill Tapper, Dick Van Allen, and Grace
Pederson.
COUNCIL LIAISON: Mayor Bill Fair.
STAFF: Rick Wolfsteller, Jeff O'Neill, and Ollie Koropchak.
GUESTS: Steve Grittman, Northwest Associated Consultants, Inc.
Dick Frie, Planning Commission
Charlie Pfeffer, Pfeffer Company, Inc.
Bill Fahrney, Shingobee, Inc.
1. CALL TO ORDER.
2. CONSIDERATION TO APPROVE THE MAY 15, 1997 IDC MINUTES.
• 3. CONSIDERATION OF A PRESENTATION BY THE IDC TASK FORCE AND CITY
PLANNER STEVE GRITTMAN:
a) Consideration to rename the Business Campus (BC) Zone and modify the
requirements thereof for recommendation to the Planning Commission.
b) Consideration of an update of potential site options for a future industrial park.
4. CONSIDERATION OF AN UPDATE ON BUSINESS EXPANSION AND PROSPECT
PROJECTS.
5. CONSIDERATION TO CONFIRM THE DATE AND SPEAKER FOR THE IDC
FUNDRAISER BANQUET.
6. OTHER BUSINESS.
7. ADJOURNMENT.
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• AGENDA
MONTICELLO INDUSTRIAL DEVELOPMENT COMMITTEE
Thursday, June 19,1997 - 7:00 a.m. ~,_;~
City Hall ''' S ~ ~- Q
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MEMBERS: Chair Ken~us, Vice Chair T~indquist, Secretary~er~i Ollig, Shelly Johnson,
Jay Mp~rell, Don Smith, Kevin Doty, Biller, Dick~Allen, and C~ae~e
COUNCIL LIAISON: Ma Fair. i, Cam' ~~-~~'°'
STAFF: Rick Wolfsteller, Jeff O'Neill, and Olli~,K'6ropchak. ~'-~
GUESTS: Steve Grit, Northwest Associated Consultants, Inc.
Dick FAe; Planning Commission ~c.~-
Charlie~€effer, Pfeffer Company, Inc. ~'
1. CALL TO ORDER. ~ ~• ° ° A • `~-
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2. CONSIDERATION TO APPROVE THE MAY 15, 1997 IDC MIl~TIJTES. ~ ~~
3. CONSIDERATION OF A PRESENTATION BY THE IDC TASK FORCE AND CITY
PLANNER STEVE GRIT'I'1V1AN:
a) Consideration to rename the Business Campus (BC) Zone and modify the
requirements thereof for recommendation to the Planning Commission.
b) Consideration of an update of potential site options for a future industrial park.
4. CONSIDERATION OF AN UPDATE ON BUSINESS EXPANSION AND PROSPECT
PROJECTS.
5. CONSIDERATION TO CO ii~~,, ~ ~A~T~AND SPEAKER FOR THE IDC
FUNDRAISER BANQUETrd~~~
6. OTHER BUSINESS.
7. ADJOURNMENT.
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Minutes: May 15,1997 IDC Meeting
Members Present: Ken Maus, Shelly Johnson, Tom Ollig, Don Smith, Kevin Doty,
Bitt Tapper, Dick Van Allen, Grace Pederson.
Mayor Bill Fair, City Staff, Ollie Koropchak.
Members Absent: Tom Lindquist, Jay Morrell, Merrtyn Seefeldt.
1. Meeting was called to order by Chairperson, Ken Maus.
2. Mayor Bill Fair volunteered to record minutes of the meeting if Secretary Tom
Ollig is not in attendance.
3. Was reported that IDC member Merrlyn Seefeldt has resigned from the IDC.
4. Mayor Bilt Fair shared with the IDC comments from his meetings with
Fulfillment Systems, Aroplex Corp., Custom Canopy.
Some comments were in regard to the labor shortage in the Monticello area as well
as apartment/housing shortages for entry level laborers. Did say however that the
quality labor shortage was worse the closer you were to the Metro. Area. Overall
these company's seemed pleased to be in Monticello
5. Ollie Koropchak reported on the following.
Lake Tool, building permit is ready tog fora 9,000 square foot addition.
Fay Mar is looking at financing for an ~ ~ square foot addition.
Standard Iron, putting up a 6,000 square foot metal storage building.
Midwest Graphics, has a presentation before the HRA to use TIF funding for a
40,000 square foot new building. The City is working with them to overcome some
obstacles. Ollie also shared with the IDC possible future manufactures looking at the
Monticello area.
6. Discussion centered around the lack of Industrial Development property currently in
Monticello. We need to develop a new marketing plan however without property it's
a little difficult. Only 2 acres of Heavy Industrial land is now available in the City of
Monticello. After much discussion the following was motioned.
Motioned by Don Smith, Seconded by Grace Pederson -authorize Ken Maus to appoint
a task force from the IDC to review and report at our June meeting issues of Industrial
zoning and short and long term future plans for obtaining industrial property needs in
Monticello. Unanimously approved.
7. Ollie reported that the IDC Banquet will be held on either October 21st or 28th. She is
looking for ideas for a speaker. Possibly a brief presentation by the IDC Task Force
would be in order.
The IDC Breakfast had 37 participants, a good turnout.
8. Chamber has applied fora $10,000.00 grant to support the Youth Apprenticeship
Program. 15 students currently participate in the program while some 100 applied.
Looking at making the program available to Commercial and Retail businesses.
9. Motioned by Dick Van Allen, seconded by Grace Pederson to adjourn. Unanimous.
NORTHWEST ASSOCIATED CONSULTANTS
. INC COMMUNITY PLANNING - DESIGN - MARKET RESEARCH
MEMORANDUM
TO: Industrial Development Committee
FROM: Stephen Grittman /Daniel Licht
DATE: June 18, 1997
RE: Monticello -Industrial Development Research
FILE NO: 191.06 - 97.09
This report has been prepared at the request of the marketing subcommittee of the
• Industrial Development Committee. The members of the subcommittee have indicated that
they would like to approach the City Council with a proposal to encourage the active
participation of the City in the development of additional industrial land. The nature of that
participation is undefined (although an initial, short-term alternative is discussed in this
report).
This report is intended as a factual collection of research which the IDC may use to
develop its proposal. It is structured in two parts: (1) a general presentation of data which
demonstrates the value of industrial development to the community, and (2) an analysis
of Monticello's industrial land demand and supply. The first set of data is designed to
provide a background against which the IDC and the City Council can agree that industrial
development is important to the City's vitality. The second set of data is designed to
demonstrate the importance of proceeding quickly with new industrial development efforts.
Summary of Data
The summary that can be made of the data is as follows:
a. Industrial Development has a positive impact on the City's tax base and tax rate.
b. City service levels, particularly police services, affect the overall tax rate, but the
• presence of industrial tax base mitigates the impact.
5775 WAYZATA BOULEVARD, SUITE 555 ST. LOUIS PARK, MINNESOTA 554 16
PHONE 6 12-595-9636 FAX 6 12-595-9837
• c. Investment in industrial development returns a net surplus of both dollars and other
jobs created in the community.
d. Industrial development creates housing demand, separate from commuter-
generated housing development.
e. At the current rate, Monticello will have consumed its entire industrial land supply
by approximately 2020, including infill expansions and the sale of currently
unmarketable land. This assumes no "artificial" barriers to industrial development.
Such barriers may include market or regulatory barriers. However, the available
supply of developable land may be consumed much more quickly, due to the way
in which land has been put to use. Many users have acquired significantly more
land than necessary to allow for future expansions or sale. In fact, the actual land
area consumed by industrial uses has totaled approximately 6 acres per year since
1990, whereas land sales have been more. than double that total.
f. To assure ashort-term supply of industrial land, changes may be considered to the
B-C, Business Campus District, which currently holds the vast majority of industrial
land. Such changes could include:
• Re-naming the district to a more "industrial sounding" name, such as
-3.
• Altering some of the district development standards, such as the
green area requirements. These requirements may be considered
less important now that the City has adopted its buffering standards
between conflicting land uses.
g. A longer term supply of industrial land must be considered for a location outside of
the Oakwood Industrial Park area. Due to the lead time necessary for industrial
park development (five years or more), this process should begin as soon as
possible. Future industrial lands may be identified, and strategies developed to
assure their preservation for future industrial use, such as options, zoning, and/or
acquisition.
2
• Tax Capacity Impacts
The table below illustrates the payable tax capacity classes for properties. Tax capacity
is the taxable value of a property to which the property tax rate is applied. In essence, tax
capacity is a percentage of a property's market value.
•
As shown in the table, the tax capacity for industrial properties is calculated based on a
higher percentage of market value than other land use types. As such, industrial
properties are taxed on a greater portion of their actual value. According to the Minnesota
Taxpayer's association for payable 1997, industrial properties pay an effective tax rate of
approximately six percent whereas the effective tax rate for a residential homesteaded
property is approximately two percent. Based upon the effective tax rate, industrial and
commercial properties pay approximately $1.90 a square foot in property taxes according
to the Minnesota Tax Payers Association.
Tax Capacity Calculation Rates
Class Land Use Rate
1 a Non-Agricultural Homestead
1st $7-2;660 of market value ~ S• a o 0
Value over $72,000 I , g S
1.00%
--2-96°/a
3a Commercial /Industrial Properties
~S° ~oo° 1st $~96;60T1-limited to one parcel/entity/county
Value over $100,000
3.00%
~~:69%
4b(1) Residential Non-Homestead Properties 2.30%
4b(2) Unclassified Manufactured Homes 2.30%
4c Manufactured Home Parks 2.00%
Source: Wright County Assessors Office
y„~Ol-0
The Minnesota Taxpayers Association further illustrates the effect of the tax capacity rate
differences for industrial properties versus other land use types with the following statistic
in the table below. Industrial and commercial properties represent a significantly small
portion of the total market values for all properties within the state. However, the
proportion of the State's total tax capacity values upon which actual property tax
calculations are based is accounted for by industrial and commercial properties is
approximately one-third. Conversely, while all residential homesteaded properties account
for over one-half of the total market value of property within the state, the tax capacity of
these properties only equal to about 40 percent.
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Comparison of Market Value vs. Tax Capacity
(State of Minnesota)
Pro a Class Share of Market Value Share of Tax Ca aci
Residential Homestead
< $72,000+ 37.5% 19.2%
All Residential Homestead' 57.4% 39.6%
Non-Homestead Residential 5.9% 8.6%
Commercial and Industrial
< $100,000 2.0% 3.2%
All Commercial and Industrial 14.5% 32.3%
Source: Minnesota Taxpayers Association
' Does not include educational homestead credits
The table below illustrates the effect of the difference in tax capacity rates for residential
and industrial properties based specifically on Monticello's payable 1997 local tax rate.
An industrial property with a value of $100,000 would pay approximately $318 more in
local property taxes than a homesteaded residential property of the same value.
Effect of Tax Capacity Rates
(Assume property value of $100,000)
Residential Homestead Property Industrial/Commercial
Class 1 a Property
Class 3a
Tax Capacity 1st $7,000 @ 1 % 720 1st $180,000 @ 3% 3,000
over $72,000 ~ 2% 560 over $100.000 (~ 4.6% 0
Total 1,280 3,000
Tax Capacity x
Local Tax Rate 1,280 x 18.51 % $236.93 3,000 x 18.51 % $555.30
(18.51 %)_
Taxes Payable
(1996)
Source: League of Minnesota Cities
Northwest Associated Consultants, Inc.
The information provided above demonstrates how industrial, as well as commercial
properties absorb for a greater portion of the tax burden than other land use types,
including residential development, base upon the current tax system. The overall impact
• 4
. of the system places a greater portion of the property tax burden on industrial and
commercial properties. What this means for Cities is that greater amounts of revenue can
be generated by industrial land uses on a per property basis.
It should be noted that the State Legislature passed a property tax omnibus bill this past
session that included some measures of property tax reform to reduce the tax load to
industrial and commercial properties. The new tax capacity rates would seek to reduce
the portion of total tax capacity value of commercial and industrial properties to
approximately 30 percent.
Other Benefits of Industrial Development
According the NAIOP (the National Association of Industrial and Office Parks), industrial
development adds to the community's overall economic health by increasing all sectors
of the economy. NAIOP estimates that for each job created through industrial
development efforts, as many as four new jobs may be created in other economic sectors,
including construction, retail, and services. Moreover, the Association estimates that for
every dollar invested in local economic development efforts for new industry, a return of
up to seven dollars is received by the community, including taxes, retail sales, and other
economic activity.
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Relationship of Industrial Development to Local Tax Rate
The table below illustrates the local tax rate, industrial development as a percentage of
total city area, the percentage of market value of industrial and commercial properties and
community population for several communities in Wright County.
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Community Rank By
Local Tax Rate
(Highest to Lowest) Rank by
Percentage of
Industrial
Develo ment Rank by
Percentage of
Market Value of
C/I Rank By
Population
(Highest to Lowest)
Albertville 40.11 2 2.2 6 10.89 8 2,114 7
Annandale 29.95 4 little - - 19.97 2 2,352 6
Buffalo 18.95 7 2.4 5 17.33 4 7,994 2
Delano 8.93 9 8.4` 1 18.61 3 2,989 5
Elk River 24.03 5 7.0* 2 17.15 5 13,286 1
Maple Lake 40.40 1 little - - 15.60 6 1,432 8
Monticello 18.51 8 5.5 4 11.01 7 5,885 4
Otsego 34.64 3 0.1 7 10.77 9 6,114 3
Rogers 23.09 6 7.0' 2 44.90 1 1,204 9
Source: League of Minnesota Cities
Northwest Associated Consultants, Inc.
` Estimated
The table indicates an apparent inverse relationship between industrial development and
local tax rate of communities of similar population and service levels:
-Delano has the highest amount of industrial development as a percentage of total land
area as well as one of the highest percentages of market value accounted for by
commercial or industrial property. Delano's local tax rate is by far the lowest of the
communities surveyed.
-Buffalo has a moderate amount of industrial development as a percentage of total land
area and a moderate percentage of market value accounted for by commercial or industrial
properties compared with surveyed communities. Buffalo's local tax rate is moderate to
low among the communities surveyed.
-Albertville has relatively low amounts of industrial development in terms of percentage
of total land area and percentage of market value comprised of commercial and industrial
properties. Albertville's local tax rate is the second highest surveyed.
6
. Industrial Land Absorption in Monticello .
The table below illustrates the development of industrial property in Monticello over the
last six years.
•
Industrial Development 1990 -1996
Year # of
permits Square Footage
Developed Acres of Land
Absorbed
Est.: s ft x 4
1990 4 97,705 8.97
1991 2 13,730 1.26
1992 3 42,008 3.86
1993 6 109,918 10.09
1994 4 44,086 4.05
1995 2 39,960 3.67
1996 2 49,068 4.51
TOTALS 23 396,475 36.41
Source: City of Monticello Building Permit Data 1990-1996
Northwest Associated Consultants, Inc.
Between 1990 and 1996, an estimated 36.41 acres of vacant land have been absorbed
by 23 new industrial developments. The average annual absorption for the seven year
period is equal to just under six acres a year with an average of 3.3 new developments per
year. This is the actual amount of land necessary to accommodate the industrial
development generated since 1990. This data includes both new developments and
additions to existing buildings. However, many businesses have purchased more land
than necessary to accommodate their current building needs in an effort to allow for future
expansion or resale. This has reduced the available land supply for new development
more quickly than the building permit data would indicate.
The table below attempts to project the future land demand for industrial development
based upon the absorption experienced in Monticello over the last seven years. Projecting
land demand for industrial development is difficult do to the numerous outside factors that
may impact industrial growth in Monticello. Outside factors beyond the control of local
stakeholders that may influence industrial growth in Monticello include national and
regional factors such as interest rates, gasoline prices for transportation, competitive
locations, tax rates etc. Factors under the influence of local stakeholders that may
influence future growth and development include City Policy regarding development,
~.~to -
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• infrastructure capacity, vacant land supply and property values.
WSB and Associates, Inc. has prepared an inventory of undeveloped industrially zoned
property within the City of Monticello. According to the WSB inventory there is
approximately 150 acres of undeveloped industrially zoned land within the City.
With the above factors in mind, land demand calculations have been prepared based upon
the absorption trends over the last seven years, including the peak and low years of 1993
and 1991 respectively. The actual land absorption, accounting for expansions on
currently-developed land, would indicate a sufficient land supply for industrial use for
approximately 25 years. However, numerous factors affect the adequacy of the available
land. As has noted above, many industrial users prefer to purchase more property to
accommodate future expansion, often more than double the immediately required area.
As a result, the real supply may be sufficient for as few as ten to fifteen years.
Other factors which will af#ect the sufficiency include disinterested sellers and barriers to
development. One such barrier, according to some landowners, may be the fact that much
of the available land is zoned for industrial use under the B-C, Business Campus
designation. This concern centers around the belief that some developers may perceive
the B-C District to be unfriendly to industrial use, even though its allowed uses differ little
from the I-1 District. In order to assure that the developable land is truly available for the
industrial marketing efforts of the City, a short term recommendation has been made to
• rename the B-C District to more strongly tie it to industrial use, such as "I-3".
A substantive change to the B-C District has also been discussed. This change would
modify, or eliminate, the green space requirements of the district. It has been suggested
that since the City has recently adopted buffering requirements between conflicting land
uses, the green space requirements are less important. To the extent that these
requirements discourage interest in industrial development, this step could help ensure
greater access to the "B-C" lands for new business.
Over the long term, however, the City's industrial land supply will need to be expanded.
Discussion has centered around the development of a new industrial park in several
possible locations. Due to the lead time necessary to identify sites, develop infrastructure,
and secure land, the City would need to proceed quickly to avoid disruption in the
industrial development efforts as the current land supply dwindles. Typical lead time for
such development can be expected to be five years, however, intervening incompatible
development could cause problems for the project. The City could seek options on the
land, as well as work to properly zone the selected sites to avoid these problems.
8