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City Council Minutes 05-11-2009 SpecialCouncil Minutes -May 11, 2009 MINUTES SPECIAL MEETING - MONTICELLO CITY COUNCIL Monday May 11, 2009 - 5:30 p.m. Members Present: Clint Herbst, Tom Perrault, Glen Posusta, Brian Stumpf and Susie Wojchouski Members Absent: None 1. Call to Order. The special meeting was called to order at 5:30 p.m. Economic Development Director, Megan Barnett introduced Rusty Fifield from Northland Strategies who completed the TIF Analysis and Management Plan. This report will be presented to the EDA at their June meeting. 2. TIF Analysis and Management Plan. Rusty Fifield presented information on the plan and reviewed the process they followed in looking at the City's active TIF Districts. Rusty Fifield stated most of the City's TIF Districts are doing fine but there are some districts that have issues that will require the Council action. In 2006 a similar study was done and that study was used as the foundation for this study. Their firm verified existing data and updated the data. Rusty Fifield noted there are some additional steps that should be taken to assure the City that the information is the most accurate. There are 18 TIF districts most of which are small districts made up of only a few parcels. Most of the TIF districts are housing or job related districts. The state legislature has made it more difficult to spend money outside the TIF district that generated it. All districts are governed by state statutes and the statutes governing the TID district depends on when the district was created. The district is also governed by the development plan and other agreements made in the creation of the TIF District. Rusty Fifield noted this plan has been reviewed by Steve Bubul of Kennedy and Graven, the legal counsel for the EDA. Many of the TIF statutes were adopted in the 1990's. The 5-year rule affects 15 of the City's 18 districts. District 1-2, 1-5 and 1-6 are not affected by the 5-year rule. Changes in the TIF statutes relating to pooling requirements make it more difficult to spend money outside the TIF district. Redevelopment districts are set at not more than 25% which includes expenses. Districts that are not re-development districts are at 20%. The City has greater flexibility to use excess increment from housing districts to help other housing districts. All districts are subject to the same decertification requirements and annual reporting requirements. Districts are decertified when the district's obligations have been met. Leftover money from a TIF district goes back to the county for distribution based on the tax rate in place at the time. As a TIF district it is overseen by the EDA. When the district is decertified it comes back to the City. The study split the TIF districts into three groups: 1) Pre-1990; 2) Post 1990 with no issues and 3) Post 1990 with management issues. The pre-1990 and post 1990 with no issues could Council Minutes -May 11, 2009 be decertified or the other alternative is to use the full maximum life of the district with the remaining resources being used according to the TIF plan. The post 1990 district with no management issues each generates enough revenue to meet that districts obligation. Excess funds could be pooled for new housing or industrial development. The post 1990 districts with issues include District 1-36, Dahlheimer Distribution. This is an internal loan that is not projected to be repaid. Rusty Fifield felt this district picked up the major cost of the industrial park development. Another post 1990 district with issues is District 1-35, Landmark Square II. The site has been cleared but the project has not been built. Something needs to be done between now and August 1, 2011. The other post 1990 with issues district is District 1-22 which is the downtown district. The five year rules complicates what happens in this district. Other things that need to be done are 1) Verify what parcels are in each district; 2) Analyze pooling capacity, that is, what money can be spent outside the TIF district. If TIF money is available, what is the most important thing to do with the funds? It is also important to look at what parcels need redevelopment. The 2004 TIF bonds cannot be prepaid until August 2010. The City can't decertify District 1-22 because some parcels are pledged to development notes. In looking at all the TIF districts it is estimated that there about $1,130,000 for redistribution and the City should expect to see approximately $500,000 of that. Rusty Fifield indicated there are some changes to the TIF statutes being considered by the legislature. Glen Posusta asked about Landmark Square II and whether they have to build something before 2011. If the developer doesn't want to do something do the funds come back to the City. Staff indicated it was a "pay as you go" district so if nothing is developed no payment is made. The City should see what parcels were originally in the district and determine whether they have changed by being platted or split. Rusty Fifield said that money from other districts, TIF 1-5 or TIF 1-6 to could be utilized help TIF 1-22. Rusty Fifield said the legislature is considering increasing the time to spend tax increments from 5 years to 10 years. 70% of land area in new redevelopment districts should be designated to buildings and 30% of that can be vacant land. Clint Herbst asked why would they go ahead and decertify a district instead of using the maximum life of the district. Clint Herbst asked if staff should send a support letter to the legislature encouraging adoption of the 10 year rule. Rusty Fifield said Steve Bubul is the President of the Minnesota Institute of Financers, a group that is also looking at this issue. Glen Posusta asked about the issue with the Dahlheimer district. Rusty Fifield said the cash flow projections will not compensate the city for money that has been put back into the district. Megan Barnett said staff needs to get a better idea of the actual cost for the industrial park. She added that Barry Fluth has been contacting staff regarding the LandMark Square TIF district will likely be coming back before the EDA and the Council on this. It was noted that there is another parcel owned by Barry Fluth that is in a TIF district which is the Cub parcel of land. Cub and the City entered into an agreement with the developer to help with development cost. There is TIF income coming in but it is not enough to amortize the note. Glen Posusta felt the assessor had the property valued too high. Rusty Fifield felt it was a value issue. Rusty Fifield said it would be interesting to see how assessors respond to the current economy. As far as Barry Fluth Megan Barnett said there are a few options the City 2 Council Minutes -May 1 1, 2009 can look at. Susie Wojchouski asked who does the report to the County. Tom Kelly does the report and sends it to the county. To decertify a district the Council passes resolution which is sent to the County. Jeff O'Neill asked what are the critical parcels. Rusty Fifield noted it has been 12 years since the downtown plan was done. He said there are parcels that could be redeveloped but because the structures are not substandard they would not qualify as a new district. Clint Herbst brought up tax abatement as a possible tool that could be used. Rusty Fifield said TIF is a significant economic asset and the City needs to apply it where the greatest needs are. Megan Barnett mentioned that the City has to keep in mind the decertification dates that City has to work within. Rusty Fifield said if you going to spend money in the downtown the City needs to decide what things to look at. Rusty Fifield said if you decertify District 1-22 you would have approximately $125,000 that could be used for something else. Brian Stumpf used as an example K-Mart which is in District 1-22. If someone wanted to take down the K-Mart building assuming the building was substandard it could then be put in another TIF district. Some questions on what TIF could actually be used for. Redevelopment TIF districts have to comply with the requirement that 50% of the buildings have to be substandard. Vacant land could be combined with land for economic development. Substandard building is the building block for TIF district and therefore substandard buildings should be kept in place until the district is established. There was general discussion on what is substandard. Megan Barnett brought up the Transformation Loan program and stated that the City is no longer doing that program. The funds for that program came out of District 1-22. Tom Perrault asked about interest rates and whether they could be revised. Rusty Fifield said an amendment to the development agreement could be requested. 3. Adiourn. The meeting was adjourned at 6:35 p.m. Q ,~~.~ ' Recording Secretary 3