EDA Agenda 09-09-2015EDA MEETING
Wednesday, September 9th, 2015
6:00 p.m.
Mississippi Room - 505 Walnut Street, Monticello, MN
Commissioners: President Bill Demeules, Vice President Bill Tapper, Treasurer Tracy
Hinz, James Davidson, Steve Johnson and Council members Tom Perrault and Lloyd Hilgart
Staff: Executive Director Jeff O'Neill, Angela Schumann, Wayne Oberg
Guest: Stephen Sherf — HCG, John Uphoff — WSB & Assoc.
1. Call to Order.
2. Roll Call.
3. Approve Meeting Minutes:
a. Regular Meeting
b. Regular Meeting
c. Special Meeting
d. Regular Meeting
e. Special Meeting
f. Special Meeting
April 8th, 2015
July 8th, 2015
July 22nd, 2015
- August 12th, 2015
August 12th, 2015
August 24th, 2015
4. Consideration of additional agenda items.
5. Consideration of approving payment of bills.
6. Consideration to review the 2015 Hospitality Study Update.
7. Consideration of Market Matching report.
8. Consideration to review current 2015 Fund Balance Report.
9. Consideration to adopt Resolution EDA- 2015 -009 requesting a public hearing on the
modification of Tax Increment Financing District No. 1 -22.
10. Consideration to approve an invoice for Greater MSP SalesForce.
11. Consideration of a request to the City Council regarding redistributed funds from TIF 1-
22 excess increment.
12. Consideration of Director's Report.
13. Adjourn.
EDA Agenda: 9/09/15
5. Consideration of approving payment of bills (WO)
A. REFERENCE AND BACKGROUND:
Accounts Payable summary statements listing bills submitted during the previous
month are included for review.
B. ALTERNATIVE ACTIONS:
1. Motion to approve payment of bills through August 2015.
2. Motion to approve payment of bills through August 2015 with changes as
directed by the EDA.
C. STAFF RECOMMENDATION:
Staff recommends Alternative 91.
D. SUPPORTING DATA:
Accounts Payable Summary Statements
Accounts Payable
C1ii OF
Transactions by Account �
User: Julie.Cheney eRo
Printed: 08/05/2015 - 1:17PM MO Batch: 00202.08.2015
Account Number Vendor Description GL Date Check No Amount PO No
213 - 46301 - 430400 KENNEDY AND GRAVEN CHAR] General EDA Matters through 6/30/15 08/11/2015 114472 647.50
Vendor Subtotal for Dept:46301 647.50
213-46301-431990 HARRY LANTTO EDA Meeting Minutes 7/8/15 08/11/2015 0 60.00
Vendor Subtotal for Dept:46301 60.00
The preceding list of bills payable was reviewed and approved for payment.
Date: 9/9/2015 Approved by:
Tracy Hinz - Treasurer
Subtotal for Fund: 213 707.50
Report Total: 707.50
AP- Transactions by Account (08/05/2015 - 1:17 PM) Page 1
Accounts Payable
C1ii OF
Transactions by Account �
User: Debbie.Davidson eRo
Printed: 08/19/2015 - 2:15PM MO Batch: 00203.08.2015
Account Number Vendor Description GL Date Check No Amount PO No
213-46301-431990 WSB & ASSOCIATES INC Economic Development & Market Ma 08/25/2015 0 4,000.00
213-46301-431990 WSB & ASSOCIATES INC BLK034 - Environmental Doc - June 2 08/25/2015 0 14,200.00
Vendor Subtotal for Dept:46301 18,200.00
213 - 46301 - 435100 ECM PUBLISHERS INC 2014 TIE Disclosure 08/25/2015 0 98.28
Vendor Subtotal for Dept:46301 98.28
213-46519-435100 ECM PUBLISHERS INC 2014 TIE Disclosure 08/25/2015 0 26.00
Vendor Subtotal for Dept:46519 26.00
213 - 46520 - 435100 ECM PUBLISHERS INC 2014 TIE Disclosure 08/25/2015 0 26.00
Vendor Subtotal for Dept:46520 26.00
213 - 46522 - 435100 ECM PUBLISHERS INC 2014 TIE Disclosure 08/25/2015 0 26.00
Vendor Subtotal for Dept:46522 26.00
213 - 46524 - 435100 ECM PUBLISHERS INC 2014 TIE Disclosure 08/25/2015 0 26.00
AP- Transactions by Account (08/19/2015 - 2:15 PM) Page 1
Account Number Vendor Description GL Date Check No Amount PO No
AP- Transactions by Account (08/19/2015 - 2:15 PM) Page 2
Vendor Subtotal for Dept:46524
26.00
213 - 46529 - 435100
ECM PUBLISHERS INC
2014 TIE Disclosure
08/25/2015
0
26.00
Vendor Subtotal for Dept:46529
26.00
213 - 46530 - 435100
ECM PUBLISHERS INC
2014 TIE Disclosure
08/25/2015
0
26.00
Vendor Subtotal for Dept:46530
26.00
213 - 46534 - 435100
ECM PUBLISHERS INC
2014 TIE Disclosure
08/25/2015
0
26.00
Vendor Subtotal for Dept:46534
26.00
213 - 46535 - 435100
ECM PUBLISHERS INC
2014 TIE Disclosure
08/25/2015
0
26.00
Vendor Subtotal for Dept:46535
26.00
213 - 46537 - 435100
ECM PUBLISHERS INC
2014 TIE Disclosure
08/25/2015
0
26.00
Vendor Subtotal for Dept:46537
26.00
Subtotal for Fund: 213
18,532.28
The preceding list of bills payable was
approved for payment.
Report Total:
18,532.28
Date: 9/9/2015 Approved by
Tracy Hinz - Treasurer
AP- Transactions by Account (08/19/2015 - 2:15 PM) Page 2
Accounts Payable
Transactions by Account
User: Julie.Cheney
Printed: 08/14/2015 - 11:02AM
Batch: 00201.08.2015
Account Number
Vendor
Description
GL Date
213 - 46500 - 443990 US BANK CORPORATE PMT SYS Target -dinner for EDA meeting 08/25/2015
Vendor Subtotal for Dept:46500
The preceding list of bills payable was reviewed and approved for payment.
Date: 9/9/2015 Approved by
Tracy Hinz - Treasurer
Subtotal for Fund: 213
Report Total:
Monticello
Check No Amount PO No
0 42.97
42.97
42.97
42.97
AP- Transactions by Account (08/14/2015 - 11:02 AM) Page 1
Accounts Payable
Transactions by Account
User: Debbie.Davidson
Printed: 09/01/2015 - 10:42AM
Batch: 00215.08.2015
Account Number
Vendor Description
Monticello
GL Date Check No Amount PO No
213 - 46522 - 438100 XCEL ENERGY ZCULPS - 51- 0623082 -8 - 349 Broad, 08/31/2015 0 17.05
Vendor Subtotal for Dept:46522 17.05
The preceding list of bills payable was reviewed and approved for payment.
Date: 09/09/2015 Approved by
Tracy Hinz - Treasurer
Subtotal for Fund: 213 17.05
Report Total: 17.05
AP- Transactions by Account (09/01/2015 - 10:42 AM) Page 1
EDA Agenda: 09/09/15
6. Consideration to review the 2015 Hospitality Study Update. (AS)
A. REFERENCE & BACKGROUND
The EDA is asked to review the 2015 hospitality study update completed by Hospitality
Consulting Group.
In June 2015, the EDA approved funding for an update to the 2014 hospitality market study.
The EDA's approval authorized using Hospitality Consulting Group, a well- regarded
hospitality market analysis firm, to complete the analysis.
Hospitality Consulting Group has prepared a report for the EDA's review which provides
updated hotel - related data (such as average daily rate and occupancy information). The report
also provides detailed information on the financial feasibility of a recommended subject hotel
project. This information serves the following purposes: 1) it provides more information on
the level of business subsidy which may be required to make a project work within the
context of a downtown redevelopment site, and 2) it provides a measure by which prospective
hotel developers can evaluate whether anew lodging facility can be market justified at this
time.
HCG representative Stephen Sherf will be present at the meeting to review the report and
answer any questions of the EDA.
Al. Budget Impact: The $4000 study expense was authorized by the EDA from the
"General" sub -fund, "Marketing" line item.
A2. Staff Impact: Staff have worked with HCG to provide requested background data as
needed and have reviewed and provided comment on the initial draft. Staff
comments have not yet been incorporated into the draft included with this report.
B. ALTERNATIVE ACTIONS
No action necessary.
C. STAFF RECOMMWNDATION
Not applicable.
D. SUPPORTING DATA
A. DRAFT — 2015 Hotel Market Study, August 2015
Hospitality
CONSULTING GROUP
HOTEL MARKET STUDY UPDATE
MONTICELLO, MINNESOTA
August 2015
Prepared for:
City of Monticello
5315 Eureka Road • Excelsior, MN 55331
(612) 867 -1649
Hospitality
CONSULTING GROUP
Ms. Angela Schumann, AICP
Community Development Director
City of Monticello
505 Walnut Street
Minneapolis, MN 55362
Dear Ms. Schumann:
The Hospitality Consulting Group is pleased to present the accompanying report
entitled: "Hotel Market Study Update - Monticello, Minnesota" which has been
prepared in accordance with our engagement letter dated June 2, 2015. This report is
an update to our earlier report entitled "Hotel Market Study" - Monticello, Minnesota
that was issued in March 2014.
Incorporated within this report are discussions of the local and area market
conditions, characteristics of competitive hotels, analysis of the potential lodging
demand available to a new hotel, facility recommendations, estimates of utilization for
the recommended facilities, financial projections for the recommended hotel's first
five years of operation, and an analysis of the project's economic feasibility.
Our conclusions are based on information developed from research of the market,
discussions with local government officials, representatives of the business
community, and on our knowledge of the industry. The sources of information and
bases of the estimates and assumptions are stated in the body of the report.
We have no responsibility to update this report for events and circumstances that
occur after the conclusion of our field work, which is concurrent with the report date
shown below. However, we are available to discuss the necessity for revision in view
of changes in the economic and market factors affecting the project.
5315 Eureka Road • Excelsior, MN 55331
(612) 867 -1649
City of Monticello
Page 2
Our report is intended solely for the information of the City of Monticello for use in
attracting a hotel developer or furthering its redevelopment efforts. It may also be
used to obtain funding for the hotel. Otherwise, neither the report nor its contents,
nor any reference to our Firm may be referred to or quoted in any registration
statement, sales brochure, prospectus, loan, appraisal or other financial document
without our prior written consent.
August 3, 2015
HOSPITALITY CONSULTING GROUP, INC.
� y
5315 Eureka Road • Excelsior, MN 55331
(612) 867 -1649
HOTEL MARKET STUDY UPDATE
MONTICELLO, MINNESOTA
Letter of Transmittal
CONTENTS
PAGE
1. INTRODUCTION 1
BACKGROUND................................................................................................................... ............................... 1
PROJECTCONCEPT ........................................................................................................ ............................... 1
SCOPEOF STUDY ............................................................................................................. ............................... 2
2. EXECUTIVE SUMMARY 4
3. REGIONAL CHARACTERISTICS 10
INTRODUCTION............................................................................................................... ...............................
10
LOCATION............................................................................................................................ ...............................
10
DEMOGRAPHICS.............................................................................................................. ...............................
11
BUILDING PERMITS ...................................................................................................... ...............................
13
EMPLOYMENT.................................................................................................................. ...............................
14
SURROUNDING COMMUNITIES ............................................................................. ...............................
17
TRANSPORTATION ........................................................................................................ ...............................
19
RESTAURANTS................................................................................................................. ...............................
21
TOURISM.............................................................................................................................. ...............................
22
4. AREA HOTEL SUPPLY 24
HOTELSUPPLY ................................................................................................................. ............................... 24
ROOM RATE STRUCTURE .......................................................................................... ............................... 32
MEETING FACILITIES ................................................................................................... ............................... 33
5. AREA HOTEL DEMAND 34
HOTEL INDUSTRY TRENDS ...................................................................................... ............................... 34
HOTELDEMAND ............................................................................................................. ............................... 35
HOTEL MARKET PERFORMANCE ......................................................................... ............................... 37
HOTEL DEMAND PROJECTIONS ............................................................................ ............................... 41
HOTEL MARKET STUDY UPDATE
MONTICELLO, MINNESOTA
CONTENTS (Continued)
PAGE
6. RECOMMENDED FACILITIES 44
HOTEL FACILITY RECOMMENDATIONS .......................................................... ............................... 44
7. SITE REVIEW
47
CRITERIA.............................................................................................................................. ............................... 48
SUMMARY EVALUATION ........................................................................................... ............................... 49
8. UTILIZATION PROJECTIONS
51
UTILIZATION ASSUMPTIONS .................................................................................. ............................... 51
PROJECTED OCCUPANCY ........................................................................................... ............................... 52
PROJECTED AVERAGE RATE ................................................................................... ............................... 54
PROJECTED ROOM REVENUE ................................................................................. ............................... 56
9. FINANCIAL PROJECTIONS
NOTES TO FINANCIAL PROJECTIONS ................................................................ ............................... 58
ECONOMIC FEASIBILITY ANALYSIS .................................................................... ............................... 61
ADDENDUM: CONSULTANT'S QUALIFICATIONS
Hotel MarketStudy - Monticello, MN Introduction
SECTION 1: INTRODUCTION
BACKGROUND
Monticello, Minnesota is a prosperous community located along Interstate 94,
midway between Minneapolis and St. Cloud. It functions as a sub - regional
center for shopping, business, and healthcare services between St. Cloud and
Maple Grove. Monticello's downtown was originally developed along Broadway
to parallel the Mississippi River. However, more recent retail developments
along the interstate, combined with changes in traffic patterns and obsolete
store formats, have created a situation where a focused redevelopment effort
will be needed to revitalize downtown.
A retail study performed by the McComb Group' identified a relatively large
retail market area that encompasses an approximate 10 -mile radius and
includes 93,500 people. The population of this area is projected to increase to
over 104,000 by 2015. The study found that Monticello can support an
additional 131,000 square feet of retail and food service space.
To capitalize on this opportunity, the City of Monticello is embarking on a
redevelopment and revitalization plan that will reorient traffic patterns in the
downtown and will encourage commercial development along Pine
Street /Highway 25. This highway is the main corridor between Interstate 94
and the Mississippi River crossing and carries an average of 26,000 to 33,000
vehicles daily.
PROJECT CONCEPT
As an important component to this plan, the City seeks to understand the
opportunity that may exist for a new high quality hotel that will aid in attracting
new employers, and complement the community's four existing hotels. Hotels
1 Embracing Downtown Monticello, McComb Group, Ltd.,2011
1 Hospitality Consulting Group
Hotel MarketStudy - Monticello, MN Introduction
are generally divided into four categories of quality: economy; midscale;
upscale; and luxury. Also, the midscale and upscale categories are further
divided into "upper midscale" and "upper upscale ". The large hotel brands have
separate franchises that meet the criteria for each of these categories.
Hotel types are also differentiated by level of service /amenities they offer. A
"limited" service hotel typically provides a breakfast with hot items to its
guests, has a pool, a fitness room and a small amount of meeting space. A
"focused" service hotel has a small restaurant and lobby bar with a limited
number of entrees and is marketed only to hotel guests, and may have more
meeting space. A "full" service hotel has a restaurant, lounge and much larger
amount of meeting space.
Room rates are charged in relation to a both a hotel's quality and scope of
amenities. While the traveling public is not generally aware of all these
categories, they do have an understanding of the quality level and amenities
that is exhibited by each of the franchises and make their lodging decisions
accordingly.
Three of the Monticello hotels are economy- oriented properties, while the
fourth is a midscale limited service hotel. Visitors and guests to Monticello who
desire more upscale lodging accommodations or more extensive amenities
must travel to one of several surrounding communities to find such hotels.
The purpose of this study is to identify the type and size of hotel that can be
successful at a downtown location in Monticello.
Hospitality Advisors has extensive experience working with hotel
developments throughout the United States. We were retained to research the
market support for a new hotel and to recommend the size and scope of
facilities appropriate for this market. The scope of our work in conjunction with
this engagement is summarized below.
SCOPE OF STUDY
Our original research into the market support for a new hotel included the
following:
2 Hospitality Consulting Group
Hotel MarketStudy - Monticello, MN Introduction
• Determination of the primary market area and evaluation of pertinent
demographic and economic information;
• Identification of sources of lodging demand;
• Identification and evaluation of competitive lodging facilities;
• Recommendation of the type and size of hotel and amenities that will
perform best in the Monticello market;
• Projection of the lodging demand that a hotel could reasonably expect
to capture; and
• Projection of the average daily rate and resulting room revenue that a
hotel could reasonably expect to achieve.
In performing the update of this study, we obtained new performance data
for the competitive hotels, updated the room rates at area hotels, updated
demographic and economic data, recalculated our penetration analysis for
the recommended hotel, and prepared projections of revenue and operating
expenses for the hotel's first five years of operation.
3 Hospitality Consulting Group
Hotel Market Study - Monticello, MN Executive Summary
SECTION 2: EXECUTIVE SUMMARY
This section describes, in brief, the findings and conclusions derived from our
study of the market for a new hotel in Monticello, Minnesota. This overview
includes our review of the market area and the competitive environment our
review of the recommended hotel facilities, and financial projections expected
for the hotel. The estimates and the information presented in this section are
meant as a summary of, not a substitute for, the body of the report which
contains additional information and detail critical to a full understanding of the
basis for the estimates made and the context within which they were formed.
The key findings of our market study are summarized below:
MARKET CHARACTERISTICS
Monticello has a strong economy. It population increased by nearly 50 percent
over the last decade and the median household income of its residents is 6
percent higher than the statewide level. It is a retail center for a large area that
extends out approximately 10 miles. Retail & Utilities makes up the largest
employment category, followed by Manufacturing. Cargill Kitchen Solutions is
the largest generator of lodging demand.
Monticello enjoys a prominent location along Interstate 94 and the
Mississippi River. Two exits on the interstate provide excellent access to the
community's retail and service establishments for the more than 44,000
vehicles that pass by the city each day. Highway 25 provides the only river
crossing within 13 to 15 miles in either direction.
Downtown Monticello is no longer the center or retail activity in the
community. However, it is the location for Cargill, the city government and
the Community Center, all three of which are significant for a new hotel.
4 Hospitality Consulting Group
Hotel Market Study - Monticello, MN Executive Summary
HOTEL SUPPLY
There are three franchised hotels with a total of 155 rooms in Monticello. They
are all located near, and visible from, Interstate 94. The newest hotel, a
midscale property with a Best Western affiliation, is 15 years old. The other two
hotels are economy level properties. While the community lacks an upper
midscale hotel, several upper midscale and upscale hotels are available in the
nearby communities located along the interstate; specifically Albertville
(Country Inn & Suites), Rogers (Hampton Inn & Suites and Holiday Inn &
Suites), and Maple Grove (two upper midscale and four upscale hotels).
ff$]ION all NaV LIIt,
The combined market occupancy for the four competitive hotels over the last
four years (2011 -2014) was 57 %, 52 %, 66 %, and 53% respectively. The
nearby nuclear power plant undergoes maintenance every other year which
attracts a large work crew whose members are housed in area hotels. We
estimate that these crews generally add approximately 6,000 roomnights to the
competitive market or about 7 occupancy points. (The crew business in 2013
was unusually large on account of major updating and refurbishment at the
plant.)
Although the 53 percent occupancy experienced last year is relatively low, we
identified a considerable amount of demand that leaves the market in search of
higher quality accommodations ( nearly one half of the competitive supply are
economy rooms) and due to lack of hotel capacity. Turnaways from the market
occur during athletic tournaments and generally on summer weekends.
The market -wide average daily rate is influenced by the crew business which
is discounted. The average rate for the competitive supply in 2014 was $82.70,
7 percent higher than the average rate achieved in 2013 when the market
accommodated a large amount of crew business. For the first half of 2015,
crew business resulted in an average rate that was 3.6 percent lower than the
same period last year.
Facility Recommendations
Based on the results of our market study, we believe that a 60 -room upper
midscale hotel can be market justified in Monticello. A strong national
franchise will be needed to compete with the hotels that exist in Rogers and
Maple Grove. The hotel's amenities should include an indoor pool, a meeting
5 Hospitality Consulting Group
Hotel Market Study - Monticello, MN Executive Summary
room of approximately 800 square feet, an exercise room, and facilities to
provide a complimentary breakfast.
19110 101.11&100 V
All four of Monticello's hotels are located near the interstate. Their visibility
makes it easy for interstate travelers to find them and also allows them to
capture "impulse" demand from travelers who stop in Monticello without a
hotel reservation.
A hotel located in or near the downtown would be closer to Cargill, which is the
largest generator of hotel demand, city government, and the New River Medical
Center. It would also be close to the meeting rooms and other facilities available
at the Community Center.
Because the recommended hotel will have the best facilities in the market, it
will be sought out by guests. Therefore, its location will have less of an influence
on its success than it would in a more competitive market. While we believe
that a site located near the river would provide for a somewhat unique and
desirable hotel environment, just about any site within the redevelopment
district that has frontage on Pine Street /Highway 25 will suffice for a hotel.
Projected Occupancy
Based on the community's projected population growth and assumed
continued improvement in the area economy, we have assumed an annual 2.0
percent growth in the area's lodging demand and an annual 3.0 percent
increase in the subject hotel's average daily rate. Combined, these growth
factors result in a projected annual increase in revenue per available room of
5.0 percent.
Based on the results of our market study, we estimate that the recommended
hotel would be able to capture a 13 percent premium over its fair share of
the primary market demand. Its occupancy would be made up of guests
upgrading from the current hotels, guests currently leaving the market to
stay in more upscale hotels in surrounding communities, guests that area
attracted to the market by the new hotel franchise, and guests that are
presently turned away from the market on nights when the hotels are at
capacity.
Hospitality Consulting Group
Hotel Market Study - Monticello, MN Executive Summary
The results of our utilization analysis are presented in the following table,
which shows the subject hotel achieving projected occupancies that open at
54% in its first full year of operation and its market share should stabilize in
its third year. Occupancies projected for the first two years are lower than
the stabilized level of operation as the hotel will require time to build public
awareness and to develop its marketing program.
RECOMMENDED MONTICELLO HOTEL
Projected Utilization
60 Rooms
Projected Occupancy 54% 52% 61% 57% 63%
Average Daily Room Rate
The analysis from which we developed our projections of average daily rate for
the recommended hotel included the quality and pricing structure of the other
competitive area hotels. We estimate that the average daily rate at the upper
midscale hotels in 2015 will range between $85 and $130. Based on our
analysis, we have determined that the recommended hotel should be able to
achieve an average rate of $100 expressed in current dollars.
Factored into the room rates projected for the subject hotel is an inflation factor
of 2 percent and a real growth factor of 1 percent, for a total increase of 3
percent annually. The inflated average rate in 2017, its first full year of
operation, is projected to be $106.63.
7 Hospitality Consulting Group
2017
2018
2019
2020
2021
Market Demand:
Base Market
48,600
49,600
50,500
51,500
52,500
Crews
7,000
0
7,000
0
7,000
Total Market
55,600
49,600
57,500
51,500
59,500
Subject Hotel:
Commercial
5,600
6,000
6,500
6,600
6,700
Crew
1,200
0
1,200
0
1,200
Leisure
4,100
4,400
4,500
4,600
4,700
Group
900
1,000
1,100
1,200
1,200
Occupied Rooms
11,800
11,400
13,300
12,400
13,800
Projected Occupancy 54% 52% 61% 57% 63%
Average Daily Room Rate
The analysis from which we developed our projections of average daily rate for
the recommended hotel included the quality and pricing structure of the other
competitive area hotels. We estimate that the average daily rate at the upper
midscale hotels in 2015 will range between $85 and $130. Based on our
analysis, we have determined that the recommended hotel should be able to
achieve an average rate of $100 expressed in current dollars.
Factored into the room rates projected for the subject hotel is an inflation factor
of 2 percent and a real growth factor of 1 percent, for a total increase of 3
percent annually. The inflated average rate in 2017, its first full year of
operation, is projected to be $106.63.
7 Hospitality Consulting Group
Hotel Market Study - Monticello, MN Executive Summary
Recommended Monticello Hotel
Projected Average Daily Rate
60 Rooms
Current Dollars Inflated Dollars
Year Average Daily Rate Average Daily Rate
2015 $100.00 $100.00
2017(1)
$100.51
$106.63
2018
$103.13
$112.69
2019(2)
$100.72
$113.37
2020
$103.04
$119.45
2021(3)
$100.81
$120.37
Note 1: Includes 1,200 crew nights at $82
Note 2: Includes 1,200 crew nights at $87
Note 3: Includes 1,200 crew nights at $92
Financial Projection Summary
Our financial projections prepared for the first five full years of operations
for the recommended hotel facility are summarized in the following table.
FINANCIAL PROJECTION SUMMARY
60 ROOM HOTEL
2017 2018 2019 2020 2021
Occupancy 54% 53% 61% 57% 63%
Average Daily Rate $106.62 $112.69 $113.37 $119.45 $120.23
Total Revenue
$1,267,881
$1,305,637
$1,519,266
$1,492,854
$1,670,276
Departmental Expenses
(325,333)
(324,056)
(378,269)
(361,740)
(407,413)
Undistributed Expenses
(340,928)
(362,753)
(424,022)
(417,610)
(456,163)
Management Fee
(50,715)
(52,225)
(60,771)
(59,714)
(66,811)
Fixed Charges
(68,763)
(118,244)
(139,406)
(155,302)
(164,343)
Cash Flow For Debt Service
$482,142
$448,359
$516,799
$498,488
$575,546
Economic Feasibility Analysis
For purposes of analysis, Hospitality Consulting Group assumed the hotel to
8 Hospitality Consulting Group
Hotel Market Study - Monticello, MN Executive Summary
have a total cost of $6,240,000, or approximately $104,000 per guest room.
The financing terms utilized in the analysis assumed an equity investment of
$1,872,000, leaving a loan of $4,368,000 to provide funds for the $6,240,000
total project cost.
Source of Funds:
Equity
Debt
$1,872,000
25%
4,368,000
75%
$6,240,000
100%
Debt Term Assumptions:
Annual Interest Rate: 4.75%
Amortization: 25 years
Annual Payment: $298,893
The results of the feasibility analysis are presented in the following table.
Recommended Monticello Hotel
Economic Feasibility Analysis
Estimated Project Cost: $6,240,000
This analysis shows that the hotel is projected to generate sufficient cash
flow to meet its debt service requirements and to generate a cash on cash
return on equity above 10 percent once the hotel reaches its stabilized level
of operation.
Therefore, under the project cost and terms of financing assumptions
utilized in this analysis, we conclude that the hotel project is
economically feasible.
9 Hospitality Consulting Group
2017
2018
2019
2020
2021
Cash Flow Available for Debt Service
$482,142
$448,359
$516,799
$498,488
$575,546
Debt Service
$298,833
$298,833
$298,833
$298,833
$298,833
Debt Service Coverage
1.6X
1.5X
1.7X
1.7X
1.9X
Cash Flow to equity
$183,310
$149,526
$217,966
$199,655
$276,713
Equity
$1,872,000
$1,872,000
$1,872,000
$1,872,000
$1,872,000
Return on Equity
9.8%
8.0%
11.6%
10.7%
14.89/o
This analysis shows that the hotel is projected to generate sufficient cash
flow to meet its debt service requirements and to generate a cash on cash
return on equity above 10 percent once the hotel reaches its stabilized level
of operation.
Therefore, under the project cost and terms of financing assumptions
utilized in this analysis, we conclude that the hotel project is
economically feasible.
9 Hospitality Consulting Group
Hotel MarketStudy - Monticello, MN Regional Characteristics
SECTION 3: REGIONAL CHARACTERISTICS
INTRODUCTION
LOCATION
The following section provides an overview of the market environment
within which a new hotel would operate. Included within this section is a
review of selected economic and demographic data, along with a description
of the transportation infrastructure and attractions in the area.
Monticello is located in Wright County, approximately 37 miles northwest of
the Twin Cities of Minneapolis -St. Paul and 27 miles southeast of St. Cloud. It
is located along Interstate 94 at its intersection with State Highway 25. I -94
is a major east -west traffic route that bisects the state. Highway 25 is a north -
south corridor between the interstate and U.S. Highway 10, an important
route to St. Cloud and north central Minnesota. Highway 25 is the only
Mississippi River crossing between Clearwater and Elk River and is on the
National Scenic Byway Route, and the Mississippi River Trail Bikeway.
There are four lodging facilities in Monticello, of which three carry national
franchises. However, these hotels are not able to meet the needs of travelers
who seek higher quality accommodations. We have determined the primary
market for a new Monticello hotel by analyzing drive times to the surrounding
towns that have such accommodations. This market area is defined by the
proximity of Albertville, Rogers and Maple Grove, and the hotels, restaurants
and shopping options available in these communities.
The hotel market area is smaller than the trade area because lodging
accommodations are typically selected in the location that is nearest to a
traveler's destination. While people residing in outlying communities may
come to Monticello for shopping, health care and professional services, visitors
to these communities are more likely to stay in the closest hotel that meets
10 Hospitality Consulting Group
Hotel MarketStudy - Monticello, MN Regional Characteristics
their quality and service requirements. Thus, Monticello's primary hotel market
is restricted by the proximity of communities that have competitive hotels.
The determined market area for a new hotel, shown on the map on the
following page, includes the neighboring towns of Big Lake and Becker. The
irregular red line on the map depicts a 15- minute drive time.
DEMOGRAPHICS
The market area experienced a large increase in population over the last
decade. Population data for Monticello, the identified market area, and Wright
County is presented in the table below. Between 2000 and 2010, the county
population increased by over 38 percent, while Monticello increased by over 49
percent
POPULATION CHANGE
Primary Market Area
Monticello, MN
2000 2010 Change
Monticello 8,544 12,759 49.3%
Big Lake 6,059 10,060 66.0%
Becker 2,673 4,538 69.8%
Silver Creek 2,332 2,335 0.1%
Total 19,608 29,692 51.4%
Wright County 89,986 124,700 38.6%
Source: U.S Census
The 2014 population within Wright County is estimated to be 129,946 and is
projected to increase by another 26 percent to 163,610 by 20252.
This represents a compound annual increase of 2.1 percent.
2 Minnesota Department of Administration -State Demographic Center
11 Hospitality Consulting Group
Hotel Market Area - Monticello, MN Regional Characteristics
Monticello, Minnesota
Primary Hotel Market Area
12 Hospitality Consulting Group
St CIOGtl
o
St Jo
°
23 1 .'T
.................1�. E..N.. T.. O. N.................
�B endora S Minnesota
do inceton est Point' am rid e Bovs Town.......Spring
......:...............MILLE.LAC ... W
_
ark
R ■
°Stanley Lake
o antiago
dgewood
Spring Hill
15
10
C 6le
189 Spencer Bro Bradford
Bodum
North Bra
h
St artin
Pleasant L
Briggs Lake.
East Lake Francis Shore
Blomfo rd
Sauk
Jacobs
Prairie
°
oxli s nti
P .
Branch
Cold °
R ckville Augusta.
I S R N T I Weber
°
f Lake Henry
Richmond
°
Luxemburg
H E
U R N E
C SAGO
E
N S
° Lake
Fremont o ro.n
Roscoe
rrock
85
Clearwater
...........
23
Ma�`o
.... .. .. .. .......... Bathe l................ ..............................:
I N. N E S 0 Y o
Stacy
55
Bec
St Francis °Coupe
°St
Corner Martin Lake
ay sville
Nicholas
15 min
Mort °
°
Enfiel
Linwood
Hawick 4
Salida
min
Eden Valley
Watkins
o airha
imball
.•
g
°N owthen Cedar ast Bethel
°Oak
—
55
......
�....
ilver Creek
25
Ilk River: Grove Coon Lake Beach
1 8�
_
15 24
Montice
S d 'll
O
:......................:
uth Have
La k N tt
Otseg e e a
A N O K A
°Forest
Y Rive
M
nnah
r
Ram y Constance' Ham Lake r{ Lake
Annandale
R I
G H T
be Ile
An do
z
e City
. French
Lake
` 01 Maple 55
`
Mich
er
1 o Johnsville
x
Q
Kingston
r
Bar
.Mill. t4
Dayton Anoka 85 0
Y
M E E E R
W st Albion
Albion Center Bu al
Rogers
° ° Champlin
Z
N "h ow
Thomp n Oak Park rnerville
g p L1
Knapp
Rassat
Fletcher ° Heighk °
..' West Coon Circle Pines
Grove City
t2
Hanover Rapids tter
Atw er
Litchfield
hland
Lrschville°
Lino Lakes
r Blai P
ak
° .g °
right
Maple Grove P 055 10
t O ak
ale Osseo Coon Rap 3° °Sprin RAMSEY s Z
arwin
r
Corcoran �Br q�jok Park Lake Pa
°
>;rV;YOatlIp1198F2(112 M�r�oA rpo2tlna or M s—llers All riM r rue0
Rockford
° ts�l o
Shorevi w 81 .
12 Hospitality Consulting Group
Hotel Market Area - Monticello, MN Regional Characteristics
Household Incomes
The median household incomes for Monticello, the identified market area,
Wright County, and Minnesota are presented in the table below. Between 2000
and 2010, the median household income of Monticello increased by more than
38 percent, while the county increased by 26 percent. The median is the
midpoint at which there are an equal number of household with larger and
smaller incomes. The median household income in Monticello is estimated to
be $62,891 in 2010, which is 6 percent above the state median.
MEDIAN HOUSEHOLD INCOME
Primary Market Area
Source: U.S. Census; City- Data.com
BUILDING PERMITS
New housing construction in Monticello has been continuously increasing since
2009, but it has not returned to the peak activity that occurred in 2006. The
value of new construction in was $11.1 million in 2013 and $ $15.0 million in
2014.
13 Hospitality Consulting Group
2000
2010
% Increase
Monticello
$45,384
$62,891
38.6%
Big Lake
$50,658
$61,941
22.3%
Becker
$50,714
$60,021
18.4%
Silver Creek
$42,500
$52,507
23.5%
Wright County
$53,945
$67,963
26.0%
Minnesota
$56,874
$59,126
4.0%
Source: U.S. Census; City- Data.com
BUILDING PERMITS
New housing construction in Monticello has been continuously increasing since
2009, but it has not returned to the peak activity that occurred in 2006. The
value of new construction in was $11.1 million in 2013 and $ $15.0 million in
2014.
13 Hospitality Consulting Group
Hotel Market Area - Monticello, MN Regional Characteristics
200
180
160
140
120
100
80
60
40
20
0
EMPLOYMENT
Building Permits
2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: City of Monticello
t Permits
—11—Dwelling Units
Employment is a strong indicator of an area's economic health. The graph
below shows that Trade, Transportation and Utilities is the largest employment
category in Monticello, accounting for more than a third of the total
employment. Manufacturing accounts for 14 percent; these businesses are
generally strong generators of lodging demand.
14 Hospitality Consulting Group
Hotel Market Area - Monticello, MN Regional Characteristics
Public Administration
2% Monticello Employment
_ Information Construc
0%
Other Services Leisure & Food Nk
g% Manufacturing
Service 14%
12%
Health & Social Services
20%
Finance, Insurance, Real J
Estate Transportation & Professional &
6% Warehousing Management Services
3% 1%
Major Employers
Monticello has four large companies that provide the largest source of
employment. It also has a number of manufacturers that generate hotel
demand. These companies are profiled below.
MAJOR EMPLOYERS
Company Name
Xcel Energy
Cargill Kitchen Solutions
New River Medical Center
Ultra Machining Company
Bondhus
Washburn Computer Group
WSI, Inc.
Tapper's Inc.
Aroplax Corp.
Standard Iron & Wire Works, Inc.
Hoglund Bus Company
JME Monticello
Production Stamping
Source: City of Monticello
Product / Service
Employees
Energy
411
Food Products
355
Health Care
267
Precision Machining
119
Tool Mfg & Distribution
67
Computer Repair
63
Precision Machining & Mfg.
63
Cabinets & Counter Tops
58
Injection Molding
48
Custom Metal Fabricating
45
Bus Sales & Distribution
44
Concrete Construction Products
41
Metal Stamping & Fabrication
38
15 Hospitality Consulting Group
Hotel Market Area - Monticello, MN Regional Characteristics
Xcel Energy operates an electric generating nuclear power plant in
Monticello. It completed a $665 million upgrade in 2013 that will boost
output and extend the life of the facility. Its operating license has been
extended through 2030. This facility needs to be re- fueled and maintenance
performed every two years for which a large number of workers are brought
in and stay in area hotels for up to several months.
Cargill Kitchen Solutions is a leading marketer of further processed egg
products. It operates a research & development department on site, as well as
the company's sales and marketing activities. It is a subsidiary of Cargill, Inc.,
the largest privately held company in the nation, which is headquartered in
Wayzata, MN.
New River Medical Center is centered on a 25 -bed critical access
community hospital. Services include a physician's clinic, Urgent care,
Birthing Center, Imaging, Medical /Surgical Care, Rehab and Extended Care,
Monticello Cancer Center, Sleep Center and Wound Care. The Center has 150
medical staff members.
Ultra Machining Company is a precision machining company with a specialty
in the medical and aerospace industries. The company also develops prototype
parts and does dome assembly. It has a 72,000- square foot facility in
Monticello.
Unemployment
The unemployment rate in Wright County as of June 2015 was 3.7 percent, a
level that is slightly lower than the statewide Minnesota rate of 3.9 percent and
significantly lower than the national unemployment rate of 5.3 percent. The
unemployment rate in the local economy trends very closely with the state.
16 Hospitality Consulting Group
Hotel Market Area - Monticello, MN Regional Characteristics
10.0%
9.0%
8.090
7.090
6.0%
5.0%
4.0%
3.0%
2.090
1.0%
0.0%
Unemployment Rate (June)
2007 2008 2009 2010 2011 2012 2013 2014 2015
--W—Wright County --*—Minnesota
Source: U.S. Bureau of Labor Statistics
SURROUNDING COMMUNITIES
In order to understand the dynamics of the area lodging market, we have
provided a summary of Monticello's trade area and the surrounding
communities, which are shown on the map on page 12. Monticello hotels
capture demand from Big Lake and Becker, while they lose demand to Rogers
and Maple Grove. They also lose demand to Albertville, but gain demand on
occasions when the hotel there is full.
Trade Area
The market study performed by the McComb Group (see footnote 1) found that
the healthcare facilities, big box retailers and professional services in
Monticello results in a relatively large retail market area that encompasses an
approximate 10 -mile radius with a total of 93,500 people. The population of
this area is projected to increase to over 104,000 by 2015. The secondary trade
area was found to extend west to include Clear Lake, Clearwater and Annandale
and has a population of nearly 33,700 people.
17 Hospitality Consulting Group
Hotel Market Area - Monticello, MN Regional Characteristics
Big Lake
Big Lake is located 3 miles northwest of Monticello on Highway 10. It has a
population of 10,060 and is growing, partly due to the fact that it is on the
North Star commuter train line that operates between Big Lake and downtown
Minneapolis. The median household income in the community is 5 percent
above the state median. Big Lake has one small independent motel and one fine
dining restaurant banquet facility, Russell's on the Lake. The Friendly Buffalo is
a more informal bistro restaurant. Lodging demand from Big Lake comes to
Monticello due to the larger variety of lodging accommodations and
restaurants there.
Becker
Becker has a population of 4,538 and is located seven miles north and west of
Monticello. The median household income in the community is 2 percent
higher than the state median. The Sherburne County Generating Station, the
largest coal -fired power plant in the state, is located in Becker. The
maintenance of this facility periodically brings in crews that require lodging in
area hotels. There are two motels in Becker, a 68 -room midscale Crossings by
GrandStay and a 32 -room economy Super 8. Restaurants are limited to Hunters
Ridge, located at the public golf course which only serves dinner and also can
accommodate banquets of up to 250, and Nix Bar & Grill, a pub that serves a
broad menu for lunch and dinner.
Albertville
Albertville is located seven miles east of Monticello on I -94. It has a population
of 7,044 and a median household income that is 63 percent higher than the
state. Its major attraction is the Albertville Premium Outlets, a popular outlet
mall with 100 stores. The 66 -room, upper midscale Country Inn & Suites is the
only hotel in Albertville, but the hotels in Monticello and the surrounding
communities of Rogers, Becker, Buffalo, and Maple Grove offer "shop and stay"
packages. While the shopping is an attraction, this hotel draws demand from
Monticello primarily because the popular D Michael B's Resort Bar & Grill is
located adjacent to it. The Space Aliens Bar & Grill is an alternative restaurant.
Rogers
Rogers is located 17 miles east of Monticello on I -94. It has a population of
18 Hospitality Consulting Group
Hotel Market Area - Monticello, MN Regional Characteristics
8,597 and a median household income that is 56 percent higher than the state.
This community developed rapidly during the 1990's and is known as a strong
family community with a good school system. It has a concentration of retail
that is anchored by Kohl's and a Super Target. Its largest retail attraction is a
185,000- square foot Cabela's outdoor store. There are four hotels in Rogers: a
Hampton Inn & Suites and a Holiday inn Express & Suites are upper midscale
properties; an AmericInn midscale property; and a Super 8 economy lodging
facility. Food and beverage outlets include the popular Maynard's Restaurant
and Bar and over 25 other food service options.
Maple Grove
Maple Grove is a suburb of Minneapolis located 24 miles east of Monticello on I-
94. It has a population of 61,567 and a median household income estimated to
be $94,450 that is 60 percent higher than the state. The community's largest
employer is Boston Scientific with around 3,000 employees. Maple Grove has
one of the largest retail concentrations in the state, making it a regional
shopping destination. Since the Shoppes at Arbor Lakes, a 370,000- square foot
lifestyle center opened, three additional centers have been added, bringing the
total to nearly 2 million square feet of retail space. Only Bloomington with the
Mall of America has more space. There are six hotels in Maple Grove: two upper
midscale service hotels (one full service and one limited service) and four
upscale hotels (two focused service with limited restaurants and two limited
service). Within the retail concentration is a wide variety of restaurants that
include steakhouses, ethnic restaurants, bistros, a brewpub coffee shops and
fast food.
TRANSPORTATION
Highways
The highway network around Monticello is shown on the map on the following
page. The irregular blue line indicates a 30 minute drive time from Monticello.
Monticello is located at the intersection of Interstates 94 and State Highway 25.
Interstate 94 is a major route across the upper Midwest that connects
Minneapolis -St. Paul with Chicago and Detroit to the east, and St. Cloud, Fargo,
North Dakota and Billings, Montana to the west. At Billings, I -94 connects with
19 Hospitality Consulting Group
Hotel Market Study -Monticello, MN Regional Characteristics
Monticello Area Highways
7Hawcl J. Mar"
St Nicholas
Eden Valle
Y Watkins 55
............ Pannah Annan
Kingston Forest M E E K E R LNorth o rapp
........ Fork Crow J
I Acton
® Casey,
Rosendale Bedcville
°Strout
a or Ms—llers All rkM r rue0.
St Jo St
Spring
HIII,
75
23
° St artin
Pleasant La
Lake Henry S T E A N S
Cold ckv St
� ..
7Hawcl J. Mar"
St Nicholas
Eden Valle
Y Watkins 55
............ Pannah Annan
Kingston Forest M E E K E R LNorth o rapp
........ Fork Crow J
I Acton
® Casey,
Rosendale Bedcville
°Strout
a or Ms—llers All rkM r rue0.
oc or Shore ew Whde Bear Beach
Lake Fridl o 'ST CROI
Dassel ° okato Wa N N ighton ellaire . °Mahtomedi
gto ke Sar a °. °Stillwater
Stockholm °Howard Lak Montrose oretto He C R A Lake
Del Col bie "" Rose Ile ° Ma Ee od Oak Park o
o ennie ° Rice Lake nd ndence Armstrong Plymouth Robb sdal Hel hts _ p Heights Bdyport
20 Hospitality Consulting Group
B loon :
WISCONSIN
N
Wyanett
albo
Harris
LA S 95
Minnesota
°Stark
Wolf
ndor Princeto
in e
c
Town
... St Crwz. creek
park .....
.... um
Santiago
West Po' t
■
dgewood
..... ..
......
° uprise
Bradford
Spring
Lake
POLK
Briggs Lake.
°Spencer
I S N
T I
g5
Cable
S I E
R B U R N E
Brook
Blomford°
Branch
North Branch
° 1D
Is re
meluna
°Weber
g
Orrock
Crown
C H S A G O
° Lake Fremont
earwat. .. M I
E S O T A ... ........................Bethel,
....
..................._..........:
Center City
cker
St Francis
Coopers
Corner
Lin
Ha
Salida
°Mort
Linwood
°
Chisago City
Enfiel
Bi
:
Wyomll
Bonn
n
o
Nouuhen
alley �
\,. River
e °
ast Bethel
:
Osceola.
— Silver ..
Creek Monticel " "" ..
Sodenrill
Lake
Netta
.............. ............... :'
Haven
Otsego
°
East
li i
101
A N O
A
Forest Lake
Farmin on
°
F
25
Ra ey
°
Ham Lake
°
Scandia
W R I G
Ibertville 1D
T
And
ver
81
Copas°
jk4ple Lake
Be ng Mill"
Johnsuille
-
.....
■
nch Albion Center
St Michael
'. °Roger °
Da on' °
yt
a Marine On .
Weston
Buffalo
e °
Rassat
°
h Fletcher°
Hanover
Cha
1''.
We o
Ra ds O
p'
B e
kPark
St Croix
le CE ter ille/
Pines WASHINGTON
carnelian ■
Lino Lak
i hland
55
urschville Maple Grove
Osseo
COO
810 'p
$ ................
...:......
No Oaks:
Junction° A rola
Smith
R kf d
roo
Park
oc or Shore ew Whde Bear Beach
Lake Fridl o 'ST CROI
Dassel ° okato Wa N N ighton ellaire . °Mahtomedi
gto ke Sar a °. °Stillwater
Stockholm °Howard Lak Montrose oretto He C R A Lake
Del Col bie "" Rose Ile ° Ma Ee od Oak Park o
o ennie ° Rice Lake nd ndence Armstrong Plymouth Robb sdal Hel hts _ p Heights Bdyport
20 Hospitality Consulting Group
Hotel Market Study -Monticello, MN Regional Characteristics
Interstate 90 and continues west to Seattle, Washington. Highway 25 is a north -
south route across central Minnesota that connects Monticello with Big Lake to
the northwest and Buffalo to the south.
Traffic counts taken by the Minnesota Department of Transportation in 2012
show that Interstate 94 carries a large volume of traffic: a daily average of
66,000 vehicles to the east of Monticello and 44,500 vehicles to the west.
Average daily travel on State Highway 25 between Monticello and Buffalo to the
south is about 15,600 vehicles and between Monticello and U.S. Highway 10 to
the north is about 10,400 vehicles. Highway 10 carries an average of 12,600
vehicles a day. This river crossing is the only one within 15 miles to the west and
13 miles to the east.
RESTAURANTS
Restaurants can be an important hotel requirement, particularly for
commercial travelers and for local businesses entertaining customers. There
is a shortage of restaurants in Monticello, compared to Maple Grove, of the
type that would appeal to a commercial traveler. At least one quality
restaurant exists in both Albertville and Rogers, and both communities are
close enough to Maple Grove for its restaurants to support their corporate
hotels. Monticello restaurant alternatives include:
• Applebee's Neighborhood Bar & Grill - A national franchised bistro
that serves lunch and dinner. Liquor is available.
• Chatters Restaurant and Bar -A locally owned restaurant that serves
lunch and dinner. Evening entrees include steak, fish and chicken,
along with burgers, sandwiches and salads. The bar hosts live
entertainment three nights a week.
• Bluestone Grill -Casual Mexican restaurant that serves lunch and
dinner. Beer, wine and margaritas are available
• Buffalo Wild Wings -A national franchised family- oriented sport bar
that serves lunch and dinner. Liquor is available.
• Cornerstone Cafe -A locally owned, well regarded restaurant that
serves lunch and dinner. Liquor is available.
• Pancho Villa Restaurant & Bar - A casual Mexican restaurant with a full
bar that serves lunch and dinner.
21 Hospitality Consulting Group
Hotel Market Study -Monticello, MN Regional Characteristics
TOURISM
• Perkins Family Restaurant -A national franchised coffee shop that is
open 24 hours. Liquor is not available.
• Rancho Grande Authentic Mexican Restaurant - A casual restaurant
with a full bar that serves lunch and dinner.
• River City Extreme Restaurant- Located in a bowling alley, this casual
restaurant and sports bar serves lunch and dinner.
It must be recognized that a high quality restaurant will bean important factor
in a new hotel's ability to capture some of the demand that presently leaves the
Monticello market. This requirement was expressed by several of the large
employers and similar concerns have been voiced on other hotel projects
located in smaller cities. Therefore, we suggest that the development of a free-
standing restaurant should be encouraged either adjacent or very close to the
new hotel. In order to meet the needs of hotel guests who are presently leaving
Monticello, the restaurant should have liquor and market itself to the local
population as well as to hotel guests. Its quality should be appropriate for the
successful entertaining of customers; however, it should be affordable to the
locals.
Monticello is located along the banks of the Mississippi River and is part of the
National Scenic Byway Route. At this location, the river is not deep enough to
be navigable by vessels larger than small fishing boats. However, with a mild
current, the river is ideal for canoes, kayaks and even paddleboats. Both banks
are tree -lined and the city has developed walking and biking paths that extend
six miles along the length of the city.
The City's most recent Comprehensive Plan cites the community's system of
parks and open space as a major factor in attracting and retaining new
residents. At the present time, the city has three community parks located
along the Mississippi River that are connected by the aforementioned
pathway. These provide picnic facilities, restrooms, fishing piers and boat
launches. They also provide excellent locations from which to observe the
flock of over 1,500 Trumpeter Swans that winter here. The nearby power
plant warms the river enough to keep it open during the winter. Several city
residents provide 1,200 pounds of corn daily to help feed the once
endangered birds. The feeding spectacle is a popular attraction for birders.
22 Hospitality Consulting Group
Hotel Market Study -Monticello, MN Regional Characteristics
Other existing recreational facilities include the Montissippi County Park, a
170 -acre park located along the Mississippi River northwest of the downtown
area. The park features several hundred feet of river frontage, a boat launch,
fishing pier, camping area, picnic grounds and two miles of trails for hiking,
biking and cross country skiing.
Lake Maria State Park is located six miles west of Monticello. This 1,580 -
acre park of rolling terrain preserves one of the few remaining stands of "Big
Woods" hardwood trees that once covered southern Minnesota. Park
activities include hiking (14 miles of trails), horseback riding, canoeing,
fishing and cross country skiing. Amenities include camper cabins and
backpack camp sites. The park is open year round.
The Bertram Chain of Lakes Regional Park is in the process of being
developed by both Wright County and the City of Monticello about three miles
south of the city. Approximately one -half of the park's nearly 1,300 acres of
woodlands, wetlands and prairie has been acquired; land acquisition is
expected to be completed by 2016. A beach and field house have been
completed. The park will also have hiking /biking trails, picnic facilities, and
campgrounds. A large field - sports complex is also planned for the park.
The City has expanded its pathway to include the entire length of the city up
to the Montissippi County Park and a path along Broadway. It plans to extend
the trails along the west side of the city limits to include the Bertram Lakes
Park complex. This extensive pathway will connect the city's recreational
facilities. This will create a recreational amenity for residents and visitors that
will include and be supported by the Monticello Community Center.
1
!I
23 Hospitality Consulting Group
Hotel Market Study -Monticello, MN Hotel Su.12.121y
SECTION 4: AREA HOTEL SUPPLY
A new hotel would seek to capture lodging demand from business activities in
Monticello, visitors to area residents, and travelers on Interstate 94. It should
be oriented towards demand that currently leaves the market due to the lack
of upscale hotel rooms, rather than competing directly with the existing hotels
in the community.
Our analysis evaluated the facilities, amenities and pricing structure of the
competitive hotels in Monticello and the neighboring communities that are
capturing some of the Monticello lodging demand. Interviews with
Monticello's large employers revealed that the upscale commercial lodging
demand utilizes hotels in Maple Grove, Rogers and Albertville.
In this section of the report we present information regarding the area's
hotels that would be competitive with a new midscale hotel in Monticello.
HOTEL SUPPLY
The Monticello hotel market is framed by St. Cloud to the west and Maple Grove
to the east. There are several economy and midscale hotels located along U.S.
Highway 10 to the north, but we identified little leakage of Monticello demand to
these properties. There are also two hotels (Country Inn & Suites and Super 8)
located along State Highway 55 in Buffalo to the south. These hotels limit the
draw of Monticello hotels to the south. The locations of these cities and their
competitive hotels are shown on the following map. The irregular red line on the
map represents a 15 minute drive time from Monticello.
There are three franchised hotels and one older motel in Monticello, which are
described in the following table. All three franchised hotels were visited during
our fieldwork. The Monte American Motel is 33 years old and is not considered
to be competitive with a new hotel. The three franchised hotels are located near
each other on the south side of the interstate, east of Highway 25. The area is
currently more industrial than retail- oriented. Restaurants on that side of the
24 Hospitality Consulting Group
Hotel Market Study - Monticello, MN Hotel SuUly
Area Hotel Locations
75 4 i . f � 12
10 25 Crossings by GrandStay
44 .. CleStwater d hufe "17 ............... ............... .. ...... .. .'...r... Coop .................
S A N T I
w r Coo
.. _ � • 28 Bet I , Cor 7 78
■■ 70 r ncis 24
. STEARNS ecker ' 71
... r • 28
' t
+ 146 15 min 11 1 v -� , 13 gastlBethel r
sty t i 1 'M ort 74
T Enfield alida !
r r 189 15
k • r Country Inn & Suites 3 . %I
_
� +.- Super 8 T, 77 9 O e
w !
~ Riverwood Conference Ctr C. der
Holiday Inn
ilver Creek k * r 22 R
oe
58 �i
odenrilf
A O K � yy`..'�' `•r
ake Nett
80
20 Constance'
Ham Lake
7ndwer _
i
�IOdk Pa 52 r 'j t
25 Hospitality Consulting Group
Y'
Y
icello
47
-0
Clearwater
Y jy
+
!
39
�
]
84
w
•
Country Inn & Suites
83
A
Days Inn
I Best Western
83
r
24 narldale
IL
r
10
`
'T
r'
37 1
mse
'
JIL
The Holiday Inn Express & Suites
Hampton Inn & Suites•
Map
1
'
Lake
i..
r
• 37
r
8
' •� St Mic el 241
144
Country
Inn & Suites
1
West Albion
/ /
e
-
118 ~
'
'1 Da Ok
121
• A16ion M
Center
•
1
' z
0
� ' assan°
wt n
AmericIn Lodge & SLlites
s
°:e
+
189
i
�
7
iBuffalo
Muni irport �+ Han
*
81 ,
Champlin
.Albright Highland
Rasat
31'
r�a�N
<
20 �.
',
...
117
F
N N P
• ' r
W ,
RvrtllAOapiP1198F2(112 fRtxA Wmoratlen ai6br
5stcY�asN
oe
58 �i
odenrilf
A O K � yy`..'�' `•r
ake Nett
80
20 Constance'
Ham Lake
7ndwer _
i
�IOdk Pa 52 r 'j t
25 Hospitality Consulting Group
Hotel Market Study - Monticello, MN Hotel Su.12.121y
interstate include Applebee's, Chatters, Blue Stone Grill, McDonald's and a small
oriental restaurant.
MONTICELLO HOTELS
Best Western Chelsea Inn & Suites
This 52 -room, 15- year -old midscale
hotel has the highest quality
accommodations available in
Monticello. It has 14 suites and
menities include an indoor pool and
A C hot tub, an exercise room and 1,200
square feet of meeting space. A hot
- - - _ breakfast is provided to guests. Its
room rates are $100 to $110 and the
hotel offers a 15 percent discount for
advance purchase. We estimate the hotel achieves an average rate of around
$83.
Super 8
-�,— r,.p -N,,_
This 70 -room, 37- year -old economy
hotel originally opened as a Best
Western and later converted to a
Super 8. Thus its indoor pool and
1,500 square feet of meeting space
are unusual amenities for this
economy brand. A limited
continental breakfast is provided to
guests. Its room rates are $70 to $90
26 Hospitality Consulting Group
Year
Rack Rates
Hotel
Quality
Opened
Rooms
Regular
Suite Amenities
Best Western Chelsea Inn & Suites
Midscale
2000
52
$110
$120 -$130 Pool, hot tub, fitness room,
Meeting room(1,200 so
Super
Economy
1977
70
$85
$107 Pool, meeting room (1, 500so
Days Inn
Economy
1986
33
$75 -$96
$112 -$118 Jacuzzi suite
Monti American Motel
Economy
1982
28
$74 -$85
na Refrigerators, microwaves
131
Source: Smith Travel Research and
Hospitality Consulting Group
Best Western Chelsea Inn & Suites
This 52 -room, 15- year -old midscale
hotel has the highest quality
accommodations available in
Monticello. It has 14 suites and
menities include an indoor pool and
A C hot tub, an exercise room and 1,200
square feet of meeting space. A hot
- - - _ breakfast is provided to guests. Its
room rates are $100 to $110 and the
hotel offers a 15 percent discount for
advance purchase. We estimate the hotel achieves an average rate of around
$83.
Super 8
-�,— r,.p -N,,_
This 70 -room, 37- year -old economy
hotel originally opened as a Best
Western and later converted to a
Super 8. Thus its indoor pool and
1,500 square feet of meeting space
are unusual amenities for this
economy brand. A limited
continental breakfast is provided to
guests. Its room rates are $70 to $90
26 Hospitality Consulting Group
Hotel Market Study - Monticello, MN Hotel Su.12.121y
and the hotel offers a 15 percent discount for non - refundable advance
reservations. We estimate the hotel achieves an average rate of around $65.
Days Inn
Monti American Motel
Crossings by GrandStay
This 33 -room, 28- year -old economy
hotel offers very limited amenities. A
continental breakfast is provided to
guests. Its regular room rates are $70
to $77 and suites go for $105 to $110.
The hotel offers a 15 percent discount
for non - refundable advance
reservations. We estimate the hotel
achieves an average rate of around
$65.
This 28 -room, 34- year -old economy
motel features flat screen TVs, a
refrigerator and microwave in each
room. It was one of the earliest
AmericInn properties, before
dropping the franchise. Its room rates
are $64 to $74.
The Crossings by GrandStay is a midscale hotel located in Becker, approximately
seven miles from Monticello. This 11 -year old hotel has a number of suites and is
located near the Xcel Energy Sherburne County (Sherco) Power Plant. Its room
rates are $100 for regular rooms and $111 to $138 for suites. This hotel
occasionally accommodates overflow from the Monticello market.
27 Hospitality Consulting Group
Hotel Market Study - Monticello, MN Hotel Su.12.121y
Riverwood Inn and Conference Center
This facility was constructed in 1978 and functions largely as a conference
center and retreat. Located along the Mississippi River between Monticello and
Otsego, it features an indoor pool and a restaurant. Room rates are $99. The Inn
receives little commercial business, but does capture conference and some
group business.
Interviews with the large Monticello employers disclosed that some lodging
demand is displaced to hotels in Albertville, Rogers, and Maple Grove. The desire
to obtain loyalty club points was given as a reason as frequently as quality
issues. Upper level executives usually stay in Maple Grove where higher quality
hotels and a larger variety of restaurants are available. The most competitive
hotels in these markets are described in the following table and described
below.
Country Inn & Suites - Albertville
S
This 66 -room, 11- year -old upper midscale
hotel features an indoor pool and hot tub, an
exercise room and a small 525 - square foot
meeting room. A hot breakfast is provided to
guests. Its room rates are $119 - $124 for
regular rooms and $129 - $154 for suites. The
hotel offers a 15 percent discount for non-
refundable advance reservations. We
estimate the hotel achieves an average rate of around $100. The hotel is located
adjacent to a popular restaurant and across the street from a large outlet mall.
This is a Carlson - Rezinor franchise.
28 Hospitality Consulting Group
W
F
O
W
�i
W
�i
W
F
F
W
a
0
V
h
d
fE
�i
x
fE
�i
N
L
E E E E o a
0 0 o o n E o
O O O O O N
C C pp CN CN
CNC NNC FO CN CN FO CF CF C�
�F+ �F+ N F F F
F F b�A C F O
F
O O O O O O N N N O
O O C O O C C O O
cn cn F cn cn F FN bA
C C C C Ij C
p N '� �- L+ �-
J2 O
O
C4 C4 C4 C4 C4 C4 � G: a a a a a
OM to to Cl CN O O
ctr ctr ctr ctr ctr c0 � � O O �
c-I c-I c-I c-I N c-I N
EH EH EH EH EH EH EH
N NO O
ci ci � c-i N ci ci
ci C) M c-i
O 6s �!-? �!-? 6
d' M to
c-I 6 EH 6
N 'D d' to O "o to O C�
N'o c-I N N M
c-I c-I c-I c-I c-I c-I c-I
L.r, 00 �(.0 00
W W W
9 79 79 79 7
79 s. s. 79 79 79
0
U
o � > > > > > > �
0 0 0 0 0 0
� � C7 C7 C7 C7 C7 C7 •_
42
O � 0 0 N c6 c6 c6 c6 c6 a'
V7 N U
N �
a0
N N
O
ti
U
N
Hotel Market Study -Monticello, MN Hotel Su.12.121y
Hampton Inn & Suites - Rogers
i
This 8- year -old, upper midscale hotel has
114 rooms along with an indoor pool, a
fitness center and a 1,012- square foot
meeting room. A hot breakfast is provided to
guests. Its room rates are $109 - $114 for a
regular room and $119 - $154 for a suite. The
hotel offers a 15 percent discount for non-
.4 refundable advance reservations. We
estimate the hotel achieves an average rate of around $95. This is a Hilton
franchise.
Holiday Inn Express & Suites - Rogers
ir"ww- 4W
This 7- year -old, upper midscale hotel has
75 rooms, an oversized indoor pool area
that features several water park elements,
an arcade, fitness center and an 806 - square
foot meeting room. A hot breakfast is
provided to guests. Its room rates are $93-
$96 for a regular room and $101- $109 for a
suite. It offers a 15 percent discount for non -
cancellable reservations. We estimate the hotel achieves an average rate of
around $85. The hotel only recently converted from a Choice Hotel brand to this
Intercontinental franchise.
Cambria Suites -Maple Grove
This 6- year -old, upscale hotel has 129
rooms along with an indoor pool, a
fitness center and 2,025 square feet of
meeting space. A hot breakfast is
provided to guests. Its room rates are
$129 for a regular room and $289 -
$299 for a suite. We estimate the hotel
achieves an average rate of $120. This
hotel has struggled financially since
opening, but seems to have established
a sustainable market share. This is a Choice Hotel franchise.
30 Hospitality Consulting Group
Hotel Market Study -Monticello, MN Hotel Su.12.121y
Hampton Inn -Maple Grove
franchise.
Holiday Inn Hotel & Suites -Maple Grove
This 18- year -old, upper midscale
hotel has 120 rooms along with an
indoor pool, a fitness center and a
small 625- square foot meeting room.
A hot breakfast is provided to guests.
Its room rates are $139 to $149. We
estimate the hotel achieves an
average rate of $127. This is a Hilton
Hotel Group franchise.
Marriott Courtyard -Maple Grove
This 7- year -old, upscale hotel has 115
rooms along with an indoor pool, a
fitness center and a 720 - square foot
meeting room. The hotel features a
limited restaurant and bar. It has the
highest room rates in the area at $190
- $200 for a regular room and $230 for
a suite. We estimate the hotel achieves
an average rate of around $160.
31 Hospitality Consulting Group
This 8- year -old, upper midscale
hotel is the only full service hotel in
the market area. It has 136 rooms
along with an indoor waterpark that
popular on weekends, a fitness
center, a restaurant and lounge, and
,W ,�
- ___r two meeting rooms with a total of
NLS N '
A 1,635 square feet. Its room rates are
$145 -$150 for a regular room and
_ $190 - $200 for a suite. We estimate
the hotel achieves an average rate of
$130. This is an Intercontinental
Hotel Group franchise.
Marriott Courtyard -Maple Grove
This 7- year -old, upscale hotel has 115
rooms along with an indoor pool, a
fitness center and a 720 - square foot
meeting room. The hotel features a
limited restaurant and bar. It has the
highest room rates in the area at $190
- $200 for a regular room and $230 for
a suite. We estimate the hotel achieves
an average rate of around $160.
31 Hospitality Consulting Group
Hotel Market Study -Monticello, MN Hotel Su.12.121y
Hilton Garden Inn -Maple Grove
Staybridge Suites
Intercontinental Hotel Group franchise.
ROOM RATE STRUCTURE \
This12- year -old, upscale hotel has
120 rooms along with an indoor pool,
a fitness center and 1,400 square feet
of meeting space. The hotel features a
limited restaurant and bar. Its room
rates are $139 - $149 for a regular
room and $209 for a suite. We
estimate the hotel achieves an average
rate of around $125.
This15- year -old, upscale hotel has
119 rooms along with an indoor pool,
a fitness center and a small 176 -
square foot meeting room. The hotel
provides a breakfast buffet for guests
and a cocktail reception three
evenings per week. Its room rates are
$154 -$166 for a regular room and
$226 -$400 for a suite. We estimate
the hotel achieves an average rate of
around $130. This is an
Current room rates in Monticello range from $75 - $96 for economy lodging to
$110 for midscale lodging accommodations, before discounts. Demand
sometimes peaks on weekends on account of tournaments and various social
events. Room rates are sometimes increased by up to $30 on these weekends
and rates generally are increased by $10 during the summer.
There are higher quality hotels available in Rogers and Maple Grove. Room
rates at the upper midscale hotels in these locations range from $109 to $149,
32 Hospitality Consulting Group
Hotel Market Study -Monticello, MN Hotel Su.12.121y
while rates at the upscale properties range from $129 to $200, before
discounts.
The current posted room rates for the competitive area hotels are
summarized in the following table.
COMPETITIVE AREA HOTELS
Rack Rates Estimated
Hotel
Location Quality
Age
Rooms
Regular
Suite
ADR(2015)
Best Western Chelsea Inn
Monticello Midscale
15
52
$110
$120 -$130
$93
Country Inn & Suites
Albertville Upper midscale
11
66
$119 -$124
$129 -$154
$100
Hampton Inn & Suites
Rogers Upper midscale
8
114
$109 -$114
$119 -$154
$95
Holiday Inn Express & Suites
Rogers Upper midscale
6
75
$93 -$96
$101 -$109
$85
Cambria Suites
Maple Grove Upscale
6
129
$129
$289 -$299
$120
Hampton Inn
Maple Grove Upper midscale
18
120
$149
na
$127
Holiday Inn Hotel & Suites
Maple Grove Upper midscale
8
136
$145 -$150
$190 -$200
$130
Marriott Courtyard
Maple Grove Upscale
7
115
$190 -$200
$230
$160
Hilton Garden Inn
Maple Grove Upscale
12
120
$139 -$149
$209
$125
Stayb ridge Suites
Maple Grove Upscale
15
119
$154 -$166
$226 -$400
$130
Source: Smith Travel Research and Hospitality Consulting Group
MEETING FACILITIES
The largest array of meeting facilities in Monticello is located in the Monticello
Community Center. The center has a large room of 4,200 square feet that is used
for business, entertainment and social functions. It is a popular venue for
wedding receptions. In addition, there are three other meeting rooms of 940,
462, and 168 square feet The rooms are available for rent to the public and
liquor is allowed at events.
Two of the local hotels have meeting rooms: the Super 8 has a 1,500- square foot
meeting space and the Best Western has 1,200 square feet.
Based on this research, we feel that a divisible meeting room of approximately
800 square feet would be appropriate for a new hotel in Monticello. Such a space
would help the hotel attract commercial meetings business and also
accommodate smaller social functions. Due to the large ballroom space in the
community center, a similar large ballroom at the hotel would likely be under-
utilized.
33 Hospitality Consulting Group
Hotel Market Study -Monticello, MN Hotel Demand
SECTION 5: AREA HOTEL DEMAND
HOTEL INDUSTRY TRENDS
As the nation began to slide into a recession in the fourth quarter of 2008, so
did the lodging industry. Travel budgets were one of the first expenses cut by
businesses in an attempt to maintain profitability in the face of rapidly
declining sales as the recession deepened in 2009. Loss of net worth, job loss
or fear of job loss, and other economic uncertainties kept many leisure
travelers at home, which further impacted the hotel industry. The industry
began to recover in the second quarter of 2010 and has continued to improve
in every quarter since then. Most markets have returned or are now
exceeding their pre- recession levels of performance achieved in 2007.
Industry forecasts summarized in a report prepared by Robert W. Baird &
Company3 indicates that strong growth is expected to continue over the next
two years. Lodging demand is expected to increase between 2.6% and 3.1% in
2015 and by 2.2% to 2.5% in 2016. Similarly, average daily room rates (ADR)
are expected to increase between 5.5% and 6.2% this year, and between 5.0%
and 6.1% next year. Revenue per available room (average rate times
occupancy) is projected to increase between 6.4% to 7.6% percent this year
and between 5.9% and 7.6% in 2015, declining slightly in 2016 to a range of
5.9% to 6.6 %. This rate of growth is more than double the historic long run
average.
Statewide hotel demand in Minnesota increased by 2.5 percent in 2014,
according to STR Global data obtained from the Minnesota Lodging
Association. Compared to demand growth of 4.4 percent in 2013, this
indicates that the recovery has occurred, so that future growth will be a result
of real growth. For the first half of 2015, statewide demand has increased by
1.6 percent over the first half of 2014.
3 Hospitality Monthly - April 2015, Robert W. Baird & Co., page 4.
34 Hospitality Consulting Group
Hotel Market Study -Monticello, MN Hotel Demand
More specifically, lodging demand in the region that consists of St. Cloud and
the I -94 corridor increased by 3.7 percent last year, a lesser rate of growth
compared to the 5.5 percent experienced in 2013. Large declines in St. Cloud
demand occurred during two winter months of this year resulting in a 2.9
percent decline year -to -date compared to last year.
HOTEL DEMAND
A new hotel in Monticello would seek to capture the upscale lodging demand
that is leaving the community to stay at higher quality hotels in neighboring
cities, upscale demand from the interstate, and a portion of the demand that is
presently accommodated by local hotels. In order to quantify the amount of
local demand that can be expected, we interviewed representatives of area
businesses, local government, and local hotels. In addition, we obtained
historic performance data for the three franchised hotels in Monticello and
the one franchised hotel in Albertville.
The patronage that will be available to a new hotel consists of commercial
visitors conducting business in the area, travelers on the interstate, people
attending social functions and visitors to area residents, and people attending
meetings and other group functions. In conducting our market analysis, we
looked at the characteristics of each demand component. A description of these
characteristics follows.
Commercial Demand
Commercial demand occurs steadily throughout the year with little seasonal
fluctuations other than a decline in business travel during holiday periods. This
segment of demand occurs mostly during the weekdays. It originates from
travelers conducting business in the area and passing through on the interstate.
Commercial travelers generally seek out franchised hotels that are located near
their business destination. Because much of this segment travels frequently,
they are more likely to participate in hotel loyalty clubs.
Interviews with the large employers in the area revealed the usual amount of
visitors from corporate personnel, management, vendors and customers.
35 Hospitality Consulting Group
Hotel Market Study -Monticello, MN Hotel Demand
• Cargill Kitchen Solutions attracts the largest number of visitors
requiring lodging accommodations, estimated to average 30 to 40
visitors per month. The company officer interviewed indicated that some
of the visitors stay in Monticello hotels due to their convenient location,
while most of the upper level visitors stay in Maple Grove, attracted by
the Hilton, Marriott, and Intercontinental hotel products and the variety
of restaurants and shops. The importance of nice restaurants, either for a
good meal or for entertaining clients or employees, was emphasized by
the Cargill executive, and by other employers with whom we spoke.
• WSI, Inc. estimates that it has an average of four visitors a month that
require lodging. They utilize local hotels, but frequently send visitors to
one of the Maple Grove hotels on account of the hotel, restaurant and
entertainment amenities that are concentrated there. The company
official remarked that only a good restaurant in Monticello, suitable for
entertaining customers, would alter this pattern. He also mentioned that
there are few things for a multi -night stay visitor to do in Monticello. The
company has multiple meeting rooms in its plant, so has little need for
outside meeting space.
• Standard Iron and Wire Works, Inc. attracts several customers a
month and has two sales meetings a year that attract approximately six
non -local participants for 2 to 3 nights. The customers seem to be loyal to
the large hotel brands so stay in Rogers at the Hampton Inn (Hilton) or
the Holiday Inn Express (Intercontinental), or they stay in Maple Grove
where a Marriott hotel exists. The company does utilize outside meeting
space and requires a capacity of less than 50 people.
• Xcel Energy operates a nuclear energy plant on the northwest edge of
Monticello and a coal -fired energy plant in nearby Becker. The nuclear
plant is shut down every two years for re- fueling and maintenance.
Crews that can number up to 2,000 are brought to the area for a period
of 2 to 6 months. Lodging contracts for the crews are negotiated by the
contractor and this demand can fill area hotels that participate. The
nuclear plant just completed a $665 million project that will extend the
life of the generator (licensed through 2030) and increase its output. We
estimated that the Monticello hotels enjoyed about a 30 point increase in
occupancy during the first six months of 2013 due to this project.
36 Hospitality Consulting Group
Hotel Market Study -Monticello, MN Hotel Demand
Several executives mentioned that a lack of restaurants in Monticello that are
suitable for entertaining would be a detriment to a new hotel for some types of
their visitors. In contrast to the limited restaurants in Monticello, there is a wide
variety of restaurants and fine dining options in Maple Grove.
Leisure Demand
The Leisure demand segment consists primarily of visitors to local residents by
friends and relatives, visitors attending weddings, reunions and other social
gatherings, participants in sports tournaments that are hosted in town, and
visitors to Monticello's special events. Leisure travelers passing through the area
on Interstate 94 are estimated to account for approximately one - fourth of the total
leisure demand accommodated by the four competitive hotels. The Leisure market
segment is largest during the summer months, when vacation travel is at its peak,
and reaches its low point in December and January. Leisure demand is typically
the most price sensitive demand segment.
Monticello is exerting efforts to enhance its outdoor recreational amenities in an
attempt to attract tourists seeking more active experiences. These efforts include
expanding the bike paths throughout the city and linking its parks, and improving
access to the Mississippi for fishing, canoeing and kayaking. We believe these
efforts should be viewed as amenities that will enhance Monticello's attractiveness
as a destination, but are not strong enough to generate a significant amount of
additional hotel demand. This is because the proximity to the Twin Cities area
reduces the probability of an overnight stay.
Group Demand
Group business is generated by meetings, seminars and training sessions held
by area employers, government agencies, associations and businesses.
HOTEL MARKET PERFORMANCE
In order to assess the recent trends in the Monticello lodging market, we
obtained detailed performance data for the three franchised hotels (Best
Western Chelsea Inn, Super 8, and Days Inn) from STR Global, a well -known
research firm that collects and provides lodging data to the industry. In order
to complete the inventory, we included the Country Inn & Suites located in
nearby Albertville. This data shows that the competitive set of four hotels
37 Hospitality Consulting Group
Hotel Market Study -Monticello, MN Hotel Demand
achieved an overall annual occupancy of 53.3 percent in 2014 and an average
daily room rate of $82.70. The previous year, the competitive hotels
experienced a higher occupancy (65.6 %) but a lower average rate ($77.13). This
performance level reflects the impact of the large influx of work crews at the
nuclear power plant that occurred in 2013. In 2014, annual occupancy was more
than 12 points lower and the average daily rate was about $10 higher.
Generally, a hotel targets a 65% to 70% occupancy to be successful.
Lodging Demand
The amount of hotel demand accommodated by the competitive hotels has
fluctuated over the last four years. Demand and occupancy peaked in 2013 at
65.6 percent, a year in which an unusually large work crew was employed
refurbishing the nuclear plant. The number of occupied roomnights in 2014
exceeded the 2012 level by 2.1 percent. The recent trend in occupied hotel
rooms is shown in the following graph.
60,000
50,000
40,000
30,000
20,000
10,000
Lodging Demand
(Occupied Rooms)
2011 2012 2013 2014
Source: STR Global
The impact of the work crews on the market occupancy is demonstrated by
comparing monthly occupancies over the last four years, as shown in the
graph below. After the workers left in June 2013, the occupancies in the
remaining months were nearly identical with the previous year. We estimate
that these workers added between 15 and 35 occupancy points during the
first six months of 2013, resulting in an increase of about 10 points in the
annual occupancy.
38 Hospitality Consulting Group
Hotel Market Study -Monticello, MN Hotel Demand
7,000
6,000
5,000
4,000
3,000
2,000
1,000
I
Demand by Month
Occupied Roomnights
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Source: STR Global
Average Daily Rate
2012
2013
2014
2015
The statewide average daily room rate (ADR) in Minnesota increased by 5.1
percent in 2014, according to STR Global data obtained from the Minnesota
Lodging Association. This increase was larger than the 3.3 percent rate
increase experienced in 2013, a sign that the higher occupancies allowed for
stronger rate increases. For the first half of 2015, the statewide ADR has
increased by 3.8 percent over the same period in 2014.
In the St. Cloud /1 -94 corridor the ADR increased by only 0.8 percent last year,
compared to 3.6 percent in 2013. Year -to -date, the sector's ADR has increased
by 4.6 percent over the first six months of last year.
The average daily rate in this market declines in the years in which long term
stay contracts are negotiated for the work crews at the nuclear plant. The
recent trend in average daily rate is shown in the following graph.
39 Hospitality Consulting Group
Hotel Market Study -Monticello, MN Hotel Demand
$84.00
$83.00
$82.00
$81.00
$80.00
$79.00
$78.00
$77.00
$76.00
$75.00
$74.00
Seasonality
Average Daily Rate
79.11
$76.97 $77.15
61� i'
2011 2012 2013
Source: STR Global
$82.70
2014
The seasonality of demand is an important component in determining the
size of a new hotel and in projecting its annual occupancy. Monthly
performance data for the competitive set obtained from STR Global shows
that lodging activity peaks in the summer, but only exceeds 70 percent in the
month of August. The high occupancies experienced in the spring months of
2011, 2013, and 2015 are a result of energy crews. Demand during the
remainder of the months is consistent over all the years.
�1
40 Hospitality Consulting Group
Hotel Market Study -Monticello, MN Hotel Demand
100%
90°/%
SO%
70%
e
60%
m
50%
U gyp/
O 40%
30%
20%
10%
0%
Seasonality of Demand
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Source: STR Global
HOTEL DEMAND PROJECTIONS
-2012
-2013
-2013
2014
2015
Growth rate assumptions were developed from analysis of the area's
population forecasts, historic demand growth trends, and industry forecasts.
Market Mix
It is important to identify the mix of business in a lodging market since the
different segments are likely to be growing at different rates and have different
room rate characteristics. The mix of the lodging demand accommodated by the
competitive set is estimated to consist of the following:
ESTIMATED MARKET MIX (2014)
Market Occupied % of
Segment Roomnights Total
Commercial
14,000
33%
Interstate
13,000
30%
Leisure
13,000
30%
Group
3,000
7%
Totals
43,000
100%
41 Hospitality Consulting Group
Hotel Market Study -Monticello, MN Hotel Demand
We estimate that approximately 33 percent of the lodging demand
accommodated by the competitive hotel set is generated by commercial activity,
30 percent by interstate travelers, 30 percent is generated by local leisure
travelers, and 7 percent comes from meetings and other group functions.
Growth in Lodging Demand
In estimating future levels of lodging demand that would be available to a
new hotel, we considered the following factors:
1. Factor 1: The continued recovery from the recession will result in
more lodging demand. The hotel industry is tied directly to the
regional and national economy. As business activity continues to
pick up, salesmen, executives and other business travelers will
return to the road in increasing numbers. As unemployed people
find jobs, disposable income is increased, and household savings
balances are restored, the amount of vacations and other leisure
travel will increase. Hotel industry analysts expect the hotel
industry to continue to improve through 2016, forecasting an
annual compounded growth in revenue per available room
(RevPAR) of around 6 percent for both years. To achieve this
growth, demand is expected to increase at around 3 percent this
year and 2 percent next year, and ADR is expected to increase
between 5 and 6 percent in each year.
2. Population projections for Wright County show an expected 26
percent increase between 2014 and 2025. This represents a
compound annual rate of 2.1 percent.
3. Lodging demand has increased in the St. Cloud - Monticello corridor
by 5.5 percent in 2013 and 3.7 percent in 2014. Several slow
months in early 2015 have resulted in a 2.9 percent decline so far
in 2015, so the current year's growth trend is uncertain.
4. The addition of more hotel rooms will allow for more guests to be
accommodated on the nights in which the hotels are at capacity.
The owner of the Best Western indicated that the Monticello
hotels sometimes reach capacity during summer weekends when
interstate travel is at its peak. Capacity is also reached several
times a year when sports tournaments draw participants from
42 Hospitality Consulting Group
Hotel Market Study -Monticello, MN Hotel Demand
outside the local area. In our analysis we assumed a total of 12
capacity nights annually in the market.
Based on these factors, we believe that a base annual growth rate of 2.0
percent is a reasonable expectation for continued hotel demand in
Monticello.
The amount of lodging demand projected to be captured by the competitive
set of Monticello hotels is summarized in the following table. This demand
includes demand that is presently leaving the market due to insufficient hotel
quality and capacity, demand that will be attracted to the market by a new
franchised hotel, and energy crew business that will stay in the market every
other year.
MONTICELLO AREA LODGING MARKET
Projected Growth (With 60 -Room Hotel)
Note 1. Estimated based on 2 quarters in 2015
Note 2. Assumes subject hotel opens with 60 rooms
Note 3. Assumes crew business of 7,000 roomnights in 2017. 2019, and 2021
Source: Hospitality Consulting Group
43 Hospitality Consulting Group
Available
Demand
Growth
Market
Year
Rooms
(Roomnights)
Rate(3)
Occupancy
Historic:
2011
221
46,149
57%
2012
221
42,127
-8.7%
52%
2013
221
52,951
25.7%
66%
2014
221
43,027
-18.7%
53%
2015 (1)
221
49,900
16.0%
62%
Projected:
2016
221
44,800
-10.2%
56%
2017(2)
281
55,600
24.1%
54%
2018
281
49,500
-11.0%
48%
2019
281
57,500
16.2%
56%
2020
281
51,500
-10.4%
50%
2021
281
59,500
15.5%
58%
Note 1. Estimated based on 2 quarters in 2015
Note 2. Assumes subject hotel opens with 60 rooms
Note 3. Assumes crew business of 7,000 roomnights in 2017. 2019, and 2021
Source: Hospitality Consulting Group
43 Hospitality Consulting Group
Hotel Market Study -Monticello, MN Recommended Facilities
SECTION 6: RECOMMENDED FACILITIES
This section of the report presents the facilities that are recommended for a
hotel that will be most successful given the area market characteristics.
Estimates of the utilization of the recommended hotel are presented in the next
section of the report.
HOTEL FACILIITY RECOMMENDATIONS
Building both quality and amenities into a hotel adds cost and therefore, higher
quality hotels with a restaurant and meeting space must charge higher room
rates. Thus, the price sensitivity of a market must be assessed in order to
determine the type of a hotel project that can be supported by the subject
market.
The full service hotel has all but disappeared in recent years for locations other
than urban areas, large office parks, and corporate centers. This is due to their
higher cost (and higher room rates) relative to limited service hotels who can
offer the same quality room but at a lower rate. Due to the challenges of
operating a restaurant, full service hotels are also considered to be of greater
risk by lenders and investors.
Based on our evaluation of the local hotel supply and demand conditions
we believe that a limited service hotel of upper midscale quality is the
lodging product that will perform best within the Monticello competitive
market.
Guest Rooms
The guest rooms should include flat screen televisions with at least one
premium movie channel, a coffee maker, and free high speed internet. We
suggest the hotel's room complement should include four suites for traveling
families, relocations, wedding parties and guests celebrating special occasions.
44 Hospitality Consulting Group
Hotel Market Study -Monticello, MN Recommended Facilities
At least one of the suites should offer full kitchen facilities and one should offer a
fireplace.
Meeting Room
The hotel should include a public function room of between 500 and 1,000
square feet. A room of this size could accommodate 50 to 80 for a meeting, 50
for a banquet, and 100 for a reception. This amenity will allow the hotel to
attract an additional demand segment made up of area meetings and social
functions.
Other Amenities
Other amenities that are recommended for the hotel include:
• An indoor pool that will improve the hotel's competitiveness for leisure
travelers and visitors to area residents;
• An exercise room with several high quality exercise machines and a
television;
• A business center with a computer and printer available to guests 24
hours a day;
• Complimentary breakfast for guests; and
• High speed wi ess iNternet access throughout the hotel.
Franchise Discussion
There is an emerging trend within the hotel industry whereby guests select a
hotel based on its company's rewards program, rather than on convenience of
location, room rates or amenities. The large franchise companies award points
for staying in their hotels which can then be redeemed for free or discounted
stays at any hotel within their respective chains. Thus, it is not unusual for
travelers to drive an extra distance to stay at a hotel whose rewards program
they participate in.
45 Hospitality Consulting Group
Hotel Market Study -Monticello, MN Recommended Facilities
Marriott, Hilton, and Intercontinental Hotel Group have the most popular
programs, as they have hotels throughout the world, including a number of
popular resorts, where rewards can be redeemed. Choice Hotels has a liberal
rewards program that provides free hotel rooms, but its inventory of hotels and
resorts is not nearly as extensive as the three aforementioned hotel companies.
Because these hotel brands are represented in nearby Albertville, Rogers and
Maple Grove, we recommend that a hotel carrying a well - recognized national
franchise should be considered for Monticello in order to achieve maximum
market penetration. Examples of possible considerations are:
Hotel Company
Marriott International:
Hilton Hotels & Resorts:
Intercontinental Hotel Group
Choice Hotels International:
Carlson - Rezidor Hotel Group
Hotel Brand
Fairfield Inn & Suites
Hampton Inn & Suites
Holiday Inn Express
Comfort Suites
Country Inn & Suites
This factor can distort the competitive environment within a particular hotel
market. A new hotel in Monticello faces competition from Marriott, Hilton, and
Intercontinental hotel products located in Rogers and Maple Grove, within about
a 20- minute drive from Monticello. Thus, the stronger the subject hotel's
franchise, the less business will be lost to these hotels in the surrounding
markets.
IR
46 Hospitality Consulting Group
Hotel Market Study -Monticello, MN Site Review
SECTION 7: SITE REVIEW
The most suitable location for a downtown hotel is along Pine Street as this is
the major route into town. The actual site location along this corridor will
have little impact on the hotel's performance, although a location closer to the
Broadway intersection is likely to result in the greatest economic impact on
the downtown. Proximity to the parks and pathway along the Mississippi
River would provide a recreational amenity for guests, but is not essential for
the success of a hotel.
Site Area Location
- rr 1 css► h
dd
� of •, r , ';�� •' iF.. ' L
.� .; N
47 Hospitality Consulting Group
Hotel Market Study -Monticello, MN Site Review
CRITERIA
Hotel sites are evaluated on the basis of visibility from major transportation
routes, access, proximity to restaurants, and the suitability of surrounding
land uses.
Visibility and Accessibility
All of Monticello's existing hotels are located near the Pine Street /Highway 25
intersection with the interstate. Their locations provide visibility from the
interstate and easy accessibility for highway travelers. The available sites in
the redevelopment area lie within the city's retail and business core; however,
they are not visible from the interstate. We believe that a location near the
interstate is not necessary for an upper midscale or upscale hotel, as the bulk
of its business will come from local businesses and residents, as opposed to
highway traffic. Also, the technology of smart phones and GPS systems allows
for a guest to easily book a hotel in advance and find its location. Thus, the
need for visibility is diminished as fewer travelers stop at a hotel on impulse.
A downtown location will provide greater accessibility to Cargill Kitchen
Solutions, other downtown businesses, government, and the Community
Center.
Proximity to Restaurants
Most of the community's restaurants are located along Highway 25, with two
of the more popular ones (Applebee's and Chatters) on the south side of the
interstate. Both are located approximately 0.5 miles from the hotels so are
beyond a comfortable walking distance. There remains a variety of fast food
and table service restaurants in and around the downtown on the north side
of the interstate. Given Monticello's relatively small size, a new hotel located
in the downtown would not be at a significant competitive disadvantage with
respect to supporting restaurants. On the other hand, a sit -down restaurant
within easy walking distance would create a competitive advantage for a new
hotel.
Suitability of Surrounding Land Uses
Generally a retail or residential neighbor is preferable to an industrial land
use. Thus, we prefer a location for the hotel that is nearest to Broadway and
48 Hospitality Consulting Group
Hotel Market Study -Monticello, MN Site Review
on the west side of Pine Street because of the concentration of retail that will
be located there upon the redevelopment, and the proximity to downtown
businesses, the government center and the Community Center. This is only a
minor preference and should not preclude hotel development on the east side
of Pine.
A hotel located in the northwest quadrant of Pine Street and Broadway would
have a view of the river and would be in the center of town. This location
would encourage use of the walking paths and even river activities during the
summer. This proximity to the river would create a desirable setting for social
events, meetings, and leisure travelers.
SUMMARY EVALUATION
As with any real estate development, the cost of the site and its necessary
improvements ultimately has the greatest influence on selection. We believe
that just about any location along Pine Street where at least 1.5 acres can be
obtained will be suitable for a hotel.
We have identified three site locations on the map on the following page
indicating our preference.
We like Site 1 because of its proximity to the river and to the city core. While
we do not think that river amenities are great enough to attract destination
demand, they will provide both recreational opportunities and a pleasant
ambiance that will create a competitive advantage for the hotel.
Site 2 is desirable because it is near both the river and the city core.
Site 3 is also near the city core, but across a busy highway so that access to
downtown is less convenient.
49 Hospitality Consulting Group
Hotel Market Study - Monticello, MN Site Review
Preferred Hotel Site Locations
112 S! r Ap
71h Sf W y$� 6
E
N
62 @
5�
�O
Sr ZY
o
Mavlce�o
IS l5
A
kb,—WP
C�
�r
14
c
�?
445 s1 E
7�'TeE
50 Hospitality Consulting Group
Hotel MarketStudy - Monticello, MN Utilization Projections
SECTION 8: UTILIZATION PROJECTIONS
Our analysis of the Monticello lodging market concluded that the community is
losing the more upscale demand to higher quality (upper midscale and upscale)
hotels and franchises of the larger hotel companies that are located in
neighboring cities. In order to assess the viability of a higher quality hotel, we
quantified the amount of demand that such a hotel could capture, given the
dynamics of the market, and estimated the average daily rate it could achieve.
UTILIZATION ASSUMPTIONS
As presented in the Hotel Demand chapter, annual lodging demand in
Monticello does not exceed 60 percent, except when energy crews are in the
area for an extended period. A new, higher quality hotel would charge higher
room rates, but would be expected to participate in the worker contract
business at a discounted rate. It would also benefit from local demand that is
turned away from the less expensive hotels when they are full with work crews.
The focus of a new hotel in Monticello should be to capture the demand that is
currently leaving the market. Therefore, the key issue is the amount of lodging
demand that is being lost from the market due to the lack of higher quality
hotel accommodations.
Based upon an assessment of the market demand, we have estimated the
potential utilization for the recommended hotel's first five full years of
operation, assumed to begin in 2017 and stabilize in 2019. In developing the
utilization estimates, several key assumptions were made including the
following:
• The hotel will obtain and be operated under a strong national
franchise;
51 Hospitality Consulting Group
Hotel MarketStudy - Monticello, MN Utilization Projections
• The hotel will be managed by competent personnel;
• Hotel management will implement a comprehensive program of on-
going maintenance covering all facilities, furnishings and equipment;
• Management will conduct an aggressive program of pre- opening
marketing and will continue an effective program of advertising and
group promotions targeted toward area groups and social
gatherings throughout the projection period; and
• No new hotels, other than the subject, will be constructed in
Monticello during the projection period.
In addition, all findings, estimates, assumptions and conclusions discussed in
this report are integral parts of the analyses and estimates that follow.
PROJECTED OCCUPANCY
In order to calculate the occupancy that the subject hotel is likely to achieve,
we looked at the performance of the other competitive hotels in the primary
market and analyzed the lodging demand that is generated by employers and
activities in the Monticello area and by travelers on the interstate.
Based on the forecasted continued economic improvement and growth in local
population, we have assumed that the amount of lodging demand
accommodated by the subject hotel will increase at a base annual rate of 2.0
percent throughout the projection period.
In our analysis, we estimated the amount of demand that is being
accommodated by the Best Western and assumed that a portion of it would
upgrade to a new hotel. To this demand base, we then added additional
roomnights that would be accommodated during periods of full capacity and
the number of roomnights that a new hotel could capture from the demand that
is presently leaving in search of higher quality facilities. Finally, we added a
component of new demand that would be generated by a well - recognized
franchise from people traveling on the interstate and from businesses and
residents in the market area.
52 Hospitality Consulting Group
Hotel MarketStudy - Monticello, MN Utilization Projections
Projected Hotel Utilization
Based on the results of our market study, we estimate that the proposed
hotel would be able to capture a premium above its fair share of the primary
market demand. By calculating the ratio of the rooms available at the
proposed hotel to the total number of rooms available within the market, the
"fair share" percentage of demand for the hotel may be determined. The fair
share calculation reflects the market share that the hotel could expect to
capture if all available rooms in the market were favored equally by potential
guests and choices were made on a purely random basis. The recommended
60 rooms represents 21.4 percent of the competitive supply (80/281=
21.4 %). Our analysis found that the hotel can expect to achieve a market
share that has a 13 percent premium over its fair share
The results of our utilization analysis are presented in the following table,
which shows the subject hotel achieving projected occupancies that range
from 54 percent in its first year to 63 percent in its fifth year.
RECOMMENDED MONTICELLO HOTEL
Projected Utilization
60 Rooms
2017 2018 2019 2020 2021
M arket D emand:
Base Market 48,600 49,600 50,500 51,500 52,500
Crews 7,000 0 7,000 0 7,000
Total Market 55,600 49,600 57,500 51,500 59,500
Subject Hotel:
Commercial
5,600
6,000
6,500
6,600
6,700
Crew
1,200
0
1,200
0
1,200
Leisure
4,100
4,400
4,500
4,600
4,700
Group
900
1,000
1,100
1,200
1,200
Occupied Rooms
11,800
11,400
13,300
12,400
13,800
Projected Occupancy
54%
52%
61%
57%
63%
Market Share
21.2%
23.0%
23.1%
24.1%
23.2%
Fair Share
21.4%
21.4%
21.4%
21.4%
21.4%
Penetration Rate
99.4%
107.6%
108.3%
112.8%
108.6%
53 Hospitality Consulting Group
Hotel MarketStudy - Monticello, MN Utilization Projections
The utilization projections assume that the hotel will accept contract
business from the work crews at the energy plant that come to Monticello
every other year. Given the proximity to the plant, the subject hotel should
not have to discount rates for this business as deeply as the economy hotels
in the market.
Occupancies projected for the first two years are lower than the stabilized
level of operation, as the hotel will require time to develop its marketing
program, particularly for group business, and to maximize public awareness
of the hotel facilities. The hotel is expected to achieve its full market share of
leisure demand in the second year and its full market share of the
commercial and group demand in its third year. Thus, its market penetration
will stabilize in its third year of operation.
It must be recognized that some local demand will still choose lodging in
Maple Grove because of the restaurants, shopping and variety of hotels that
exist there.
Market Mix
The mix of the hotel's lodging demand at its stabilized level of operation is shown
in the table below, with and without maintenance crew business:
ESTIMATED MARKET MIX
New 60 -Room Hotel (Stabilized)
Market Occupied % of Occupied % of
Segment Roomnights Total Roomnights Total
Commercial
Crew
Leisure
6,500 49%
1,200 9%
4,500 34%
Group 1,100 8%
Totals 13,300 100%
PROJECTED AVERAGE RATE
6,500 54%
0 0%
4,500 37%
1,100 9%
12,100 100%
The analysis from which we developed our projections of average daily rate for
the recommended hotel included the quality and pricing structure of the other
54 Hospitality Consulting Group
Hotel MarketStudy - Monticello, MN Utilization Projections
area hotels. As shown in the table below, current rates for regular rooms at the
competitive area hotels range from $93 to $200. Room rates are very flexible
and can change daily depending on bookings. The room rate at the only
competitive hotel in Monticello is $110.
The average daily rate at a hotel falls below the rack rates due to sales tax, the
numerous discounts that are offered to guests and large corporate clients, and
to lower rates charged during slack periods. Performance data obtained from
Smith Travel Research shows that the competitive supply achieved an overall
average rate of $82.70 in 2014, a year in which there was no maintenance crew
business. This rate is 7 percent higher than the average rate achieved in 2013
when the market accommodated a large amount of crew business. The average
rate between the last two years without crew business (2012 and 2014)
increased by 4.5 percent. For the first half of 2015, the average rate was $78.52
which is 3.6 percent lower than the same period last year.
We estimate that the average daily rate for the competitive area hotel supply in
2015 will range between $93 and $160, while the average daily rates for the
four hotels in the primary market are estimated to range between $70 and $93.
COMPETITIVE AREA HOTELS
Rack Rates Estimated
Hotel
Location Quality
Age
Rooms
Regular
Suite
ADR(2015)
Best Western Chelsea Inn
Monticello Midscale
15
52
$110
$120 -$130
$93
Country Inn & Suites
Albertville Upper midscale
11
66
$119 -$124
$129 -$154
$100
Hampton Inn & Suites
Rogers Upper midscale
8
114
$109 -$114
$119 -$154
$95
Holiday Inn Express & Suites
Rogers Upper midscale
6
75
$93 -$96
$101 -$109
$85
Cambria Suites
Maple Grove Upscale
6
129
$129
$289 -$299
$120
Hampton Inn
Maple Grove Upper midscale
18
120
$149
na
$127
Holiday Inn Hotel & Suites
Maple Grove Upper midscale
8
136
$145 -$150
$190 -$200
$130
Marriott Courtyard
Maple Grove Upscale
7
115
$190 -$200
$230
$160
Hilton Garden Inn
Maple Grove Upscale
12
120
$139 -$149
$209
$125
Staybridge Suites
Maple Grove Upscale
15
119
$154 -$166
$226 -$400
$130
Source: Smith Travel Research and Hospitality Consulting Group
Based on our analysis, we have determined that the recommended upper
midscale hotel should be able to achieve an average rate of $100 expressed in
current dollars. The industry -wide ADR is forecasted to increase at around 6
percent annually through 2016; however we feel that rates in the Monticello
55 Hospitality Consulting Group
Hotel MarketStudy - Monticello, MN Utilization Projections
market will increase at a lesser rate. The average rate growth trend for the
Monticello hotels is distorted by the large amount or discounted work crew
business that occurs every other year. Therefore, we looked to the rate growth
that was experienced by the St. Cloud /I -94 Corridor and by the entire state of
Minnesota. Over the last three years, the St. Cloud /I -94 Corridor experienced
rate increases that averaged 3.0 percent and the state averaged a 4.1 percent
rate growth. In consideration of this trend, we believe that a 3.0 percent annual
rate growth is reasonable for projecting future room rates in the Monticello
market. Factored into the average room rate projected for the subject hotel are
an inflation factor of 2 percent and a real growth factor of 1 percent, for a total
increase of 3 percent annually. The inflated average rate in 2017, assumed to be
its first full year of operation, is projected to be $106.63.
Recommended Monticello Hotel
Projected Average Daily Rate
60 Rooms
Current Dollars Inflated Dollars
Year
Average Daily Rate
Average Daily Rate
2015
$100.00
$100.00
2017(1)
$100.51
$106.63
2018
$103.13
$112.69
2019(2)
$100.72
$113.37
2020
$103.04
$119.45
2021(3)
$100.81
$120.37
Note 1: Includes 1,200 crew nights at $82
Note 2: Includes 1,200 crew nights at $87
Note 3: Includes 1,200 crew nights at $92
PROJECTED ROOM REVENUE
Based on the occupancy and average rate projections developed in this
market study, we project that the recommended hotel facilities should be
able to achieve the levels of room sales shown in the table below.
56 Hospitality Consulting Group
Hotel MarketStudy - Monticello, MN Utilization Projections
PROPOSED MONTICELLO HOTEL
Projected Room Revenue
60 Rooms
Average Daily Rate $106.63 $112.69 $113.37 $119.45 $120.37
Room Sales (Rounded) $730,000 $803,000 $879,000 $927,000 $977,000
57 Hospitality Consulting Group
2017
2018
2019
2020
2021
Available Rooms
21,900
21,900
21,900
21,900
21,900
Occupied Rooms (Rounded)
11,800
11,500
13,300
12,400
13,800
Annual Occupancy
54%
53%
61%
57%
63%
Occupied Rooms (Rounded)
11,800
11,500
13,300
12,400
13,800
Average Daily Rate $106.63 $112.69 $113.37 $119.45 $120.37
Room Sales (Rounded) $730,000 $803,000 $879,000 $927,000 $977,000
57 Hospitality Consulting Group
Hotel Market Study -Monticello, MN Financial Projections
SECTION 9: FINANCIAL PROJECTIONS
Estimates of cash flow from operations before debt service have been prepared
for the first five years of operation for the hotel, expected to open in 2017. The
major assumptions as to the hotel occupancy and room rates are noted at the
bottom of the projection columns and have been developed from an analysis
of the local lodging market. The operating expense projections are derived from
industry data for small limited service hotels.
Room revenues reflect an annual increase of 3.0 percent in average daily rate
and expense categories have been inflated at an annual rate of 2.0 percent.
Many of the expenses were projected on an amount per occupied room basis,
while the relatively fixed expenses reflect only inflationary increases. The
projected Utility expense has both a fixed and a variable component.
The financial projections on the following page are presented in the reporting
format suggested by the Uniform System of Accounts for Hotels.
NOTES TO FINANCIAL PROJECTIONS
Revenue
Guest Room Revenue projections are based upon the occupancy and average
rate estimates previously presented.
Miscellaneous Income consists of telephone commissions, meeting room
rentals, movie rentals, guest laundry, interest and other ancillary revenue
sources presented net of associated costs.
Departmental Expenses
Rooms Departmental Expenses include payroll and related benefit expenses
for the front desk and housekeeping. It also includes other miscellaneous
rooms expenses such as breakfast expense, cleaning and guest room supplies,
cable TV fees, linens and cleaning supplies, and other direct operating costs
58 Hospitality Consulting Group
Hotel Market Study -Monticello, MN Financial Projections
for the rooms department. The payroll component of this expense is
relatively fixed, varying only slightly in response to changes in occupancy, as
housekeeping staff and certain other hourly workers have variable schedules.
Undistributed Operating Expenses
Administrative and General Expenses include management and
administrative payroll and the general costs associated with operating the
hotel facility, including credit card commissions, bank charges, professional
fees, travel and entertainment and other miscellaneous costs.
Marketing Expenses include the costs associated with advertising, sales and
promotion, and include travel agent commissions, promotional materials, and
59 Hospitality Consulting Group
RECOMMENDED HOTEL - MONTICELLO,MN
PROJECTED
CASH FLOW FROM OPERATIONS
BEFORE DEBT SERVICE
2017
2018
2019
2020
2021
AMOUNT %
AMOUNT
%
AMOUNT
%
AMOUNT
%
AMOUNT
%
REVENUE:
Rooms
$1,258,121 99.2%
$1,295,935
99.3%
$1,507,821
99.2%
$1,481,180
99.2%
$1,659,174
99.3%
Miscellaneous Income (net)
9,760 0.8%
9,702
0.7%
11,445
0.8%
11,674
0.8%
11,102
0.7%
Total Revenue
1,267,881 100%
1,305,637
100%
1,519,266
100%
1,492,854
100%
1,670,276
100%
DEPARTMENTAL EXPENSES
Rooms Departmental Expenses
325,333 25.9%
324,056
25.0%
378,269
25.1%
361,740
24.4%
407,413
24.6%
Total Departmental Profit
942,548 74.3%
981,581
75.2%
1,140,998
75.1%
1,131,114
75.8%
1,262,863
75.6%
UNDISTRIBUTED OPERATING EXPENSES
Administrative & General Expenses
124,701 9.8%
127,190
9.7%
134,768
8.9%
135,390
9.1%
141,969
8.5%
Marketing Expenses
63,394 5.0%
65,282
5.0%
75,963
5.0%
74,643
5.0%
83,514
5.0%
Franchise Fee (Royalty)
62,906 5.0%
64,797
5.0%
75,391
5.0%
74,059
5.0%
82,959
5.0%
Utility Costs
58,928 4.6%
58,961
4.5%
67,200
4.4%
65,065
4.4%
71,986
4.3%
Property Operations & Maintenance
30,999 2.4%
46,524
3.6%
70,700
4.7%
68,454
4.6%
75,735
4.5%
Total Undistributed Operating Expenses
340,928 26.9%
362,753
27.8%
424,022
27.9%
417,610
28.0%
456,163
27.3%
GROSS OPERATING PROFIT
601,620 47.5%
618,828
47.4%
716,976
47.2%
713,504
47.8%
806,700
48.3%
Management Fee
50,715 4.0%
52,225
4.0%
60,771
4.0%
59,714
4.0%
66,811
4.0%
INCOME BEFORE FIXED CHARGES
550,905 43.5%
566,603
43.4%
656,205
43.2%
653,790
43.8%
739,889
44.3%
FIXED CHARGES:
Property Taxes
34,333 2.7%
70,040
5.4%
71,441
4.7%
72,869
4.9%
74,327
4.4%
Insurance
21,848 1.7%
22,285
1.7%
22,731
1.5%
23,186
1.6%
23,649
1.4%
Replacement Reserve
12,581 1.0%
25,919
2.0%
45,235
3.0%
59,247
4.0%
66,367
4.0%
Total Fixed Charges
68,763 5.4%
118,244
9.1%
139,406
9.2%
155,302
10.4%
164,343
9.8%
CASH FLOW AVAIL. FOR DEBT SERVICE
$482,142 38.0%
$448,359
34.3%
$516,799
34.0%
$498,488
33.4%
$575,546
34.5%
OCCUPANCY
54%
53%
61%
57%
63%
ADR
$106.62
$112.69
$113.37
$119.45
$120.23
OCCUPIED ROOMNIGHTS
11,800
11,500
13,300
12,400
13,800
The comments and assumptions contained in the report are an integral part of these financial projections.
for the rooms department. The payroll component of this expense is
relatively fixed, varying only slightly in response to changes in occupancy, as
housekeeping staff and certain other hourly workers have variable schedules.
Undistributed Operating Expenses
Administrative and General Expenses include management and
administrative payroll and the general costs associated with operating the
hotel facility, including credit card commissions, bank charges, professional
fees, travel and entertainment and other miscellaneous costs.
Marketing Expenses include the costs associated with advertising, sales and
promotion, and include travel agent commissions, promotional materials, and
59 Hospitality Consulting Group
Hotel Market Study -Monticello, MN Financial Projections
other promotional expenditures. This expense is calculated at 5 percent of
total revenue.
Franchise Fees are fees paid to the franchise company as a royalty. The
expense is calculated to be 5.0 percent of total revenues, an amount typical for
most franchises.
Utilities expense includes costs related to heating and cooling, electricity, gas,
water and sewer. Utilities expense is projected from a base of $4.80 per
occupied room and includes both a fixed and a variable portion.
Property Operations & Maintenance expenses includes the costs associated
with repairs, maintenance, grounds keeping, and other related property
operating costs. This expense is reduced over the early years as the facility
will be new and the equipment under warranty.
Management Fee - We have assumed that the hotel will be managed by a
professional management company for a fee equal to 4.0 percent of total
Fixed Charges
Insurance expense is projected to be $350 per room, similar to the premiums
paid by other hotels with pools.
Property tax expense is projected from an estimate of $1,100 per room, an
amount derived from industry data. This expenses amounts to approximately
5.5 percent of total revenue. In the first year, the tax expense assumes the
hotel is only half completed at the time of assessment.
Replacement Reserve represents funds that will be set aside from operating
cash flow to fund the future cost of replacing and upgrading furnishings and
fixtures in the facility that will be required to maintain its competitive
standing in the market on a continuing basis. This reserve is calculated at 1.0
percent of projected total revenue in the first year, increasing by an additional
1.0 percent of revenue in each of the next three years and stabilizing at 4.0
percent.
60 Hospitality Consulting Group
Hotel Market Study -Monticello, MN Financial Projections
ECONOMIC FEASIBILITY ANALYSIS
In order to test the economic feasibility of the project, we prepared an
analysis of the hotel's ability to generate sufficient funds to cover its estimated
debt service.
Project Cost
The following development budget estimate was prepared by Hospitality
Consulting Group for purposes of testing the economic feasibility of the
project. It is based on budgets from other hotel studies on which we have
worked, but the quality and scope of amenities selected for the actual project
could cause the costs to vary significantly.
For analysis purposes, we have assumed the hotel to have a total cost of
$6,240,000, or approximately $104,000 per guest room.
Estimated Hotel Cost
Monticello, Minnesota
60 guest rooms with several extended stay suites, small meeting room,
indoor pool, hot breakfast, and exercise room.
Source: Hospitality Consulting Group
Financing Scenario
For analysis purposes we have assumed an equity investment of $1,872,000
(30 percent of total project cost), leaving a loan of $4,368,000 to provide
61 Hospitality Consulting Group
Cost
Per Room
Land
360,000
$6,000
Utilities, Grading, Paving, Landscaping
240,000
4,000
Building Construction
3,600,000
60,000
Fixtures, Furnishings, and Equipment
840,000
14,000
Indirect Costs
1,200,000
20,000
Total
$6,240,000
$104,000
Source: Hospitality Consulting Group
Financing Scenario
For analysis purposes we have assumed an equity investment of $1,872,000
(30 percent of total project cost), leaving a loan of $4,368,000 to provide
61 Hospitality Consulting Group
Hotel Market Study -Monticello, MN Financial Projections
funds for the $6,240,000 total project cost.
Source of Funds:
Equity $1,872,000 25%
Debt 4,368,000 75%
$6,240,000 100%
Debt Term Assumptions:
Annual Interest Rate: 4.75%
Amortization: 25 years
Annual Payment: $298,893
The results of this analysis are presented in the following table.
Recommended Monticello Hotel
Economic Feasibility Analysis
Estimated Project Cost: $6,240,000
2017 2018 2019 2020 2021
Cash Flow Available for Debt Service $482,142 $448,359 $516,799 $498,488 $575,546
Debt Service $298,833 $298,833 $298,833 $298,833 $298,833
Debt Service Coverage 1.6X 1.5X 1.7X 1.7X 1.9X
Cash Flow to equity $183,310 $149,526 $217,966 $199,655 $276,713
Equity $1,872,000 $1,872,000 $1,872,000 $1,872,000 $1,872,000
Return on Equity 9.8%11 8.0% 11.6% 10.7% 14.8%
A debt coverage ratio (cash flow /annual debt service) of a minimum of 1.2
times is required and 1.4 times is typically preferred by lenders. This analysis
shows that the hotel is projected to generate sufficient cash flow to meet its
debt service requirements. Also, in this simple analysis, the projected cash on
cash return on equity exceeds 10 percent once the hotel reaches its stabilized
level of operation.
Therefore, under the project cost and terms of financing assumptions
used in this analysis, we conclude that the hotel project is economically
feasible.
62 Hospitality Consulting Group
ADDENDUM
y
63 Hospitality Consulting Group
CONSULTANT QUALIFICATIONS
HOSPITALITY CONSULTING GROUP
Stephen Sherf — President, Hospitality Consulting Group
Stephen Sherf has over 30 years of consulting experience in the hospitality industry. He
spent 15 years with a large national public accounting firm, where he was the partner -in-
charge of the hospitality consulting division for the Upper Midwest. He also started a
gaming consulting company where he worked for 15 years, and most recently, founded a
hospitality consulting company. He is presently active as a sales agent with Minneapolis -
based Leines Hotel Advisors.
Mr. Sherf has an extensive background in hospitality consulting that encompasses market
studies, valuations, appraisals, acquisitions and sales. He has performed market studies
and other advisory services for over 200 hotel projects located mainly throughout the
Midwest for clients that include developers, lenders, hotel companies, and municipalities.
He also has particular expertise in development consulting to the gaming industry and has
worked on numerous income producing real estate projects that include nursing homes,
elderly housing, subsidized and market rate housing, office buildings, retail developments,
convention centers, ice arenas, restaurants, convenience stores, bowling alleys and
cinemas.
Operating positions held during Mr. Sherf s career include restaurant manager, auditor,
Vice President of Development for a hotel company with 13 properties, and Treasurer for
a gaming company where he oversaw the operations of three Colorado casinos.
Mr. Sherf is known for his hands -on involvement and realistic conclusions. Where
appropriate, development recommendations are backed by an economic feasibility
analysis and a sensitivity analysis to assess risk.
He has provided expert witness testimony relating to the valuation of hotels and
restaurants and business interruption claims. He has taught continuing education seminars
and spoken at gaming, investment, and state appraisal conferences. He has been a guest
lecturer at the University of Minnesota Graduate School of Business and Stout University.
He is frequently quoted in local newspapers and business magazines.
Mr. Sherf received an undergraduate degree in economics and an MBA in finance from
Cornell University. He holds a real estate license in Minnesota and Wisconsin and has
taken several American Appraisal Institute courses. He is a Certified Public Accountant
(inactive), is active in the Minnesota Lodging Association, has served on the planning
commission for the City of Minnetrista, and has held a Colorado gaming license.
64 Hospitality Consulting Group
EDA Agenda: 09/09/15
7. Consideration of Market Matching report.
A. REFERENCE AND BACKGROUND:
A verbal report will be provided by WSB Market Matching consultant John Uphoff.
EDA Agenda: 09/09/15
8. Consideration to review current 2015 Fund Balance Report.
A. REFERENCE & BACKGROUND:
The Finance Director has prepared an updated EDA fund balance report for review.
B. ALTERNATIVE ACTIONS:
No action required.
C. STAFF RECOMMWNDATION:
Not applicable.
D. SUPPORTING DATA:
A. 2015 Fund Balance Report
2015
R -12
CONST5
5
R -13
DIST #6
DANCE
H -23
DIST #19
Mississippi
Shores
H -24
DIST #20
West
R -22
DIST #22
Dv
Rede.
H -26
DIST #24
Be edicts
H -29
DIST #29
Porch
H -29
DIST #3
CMHP
R R -22
T DIST #34
M
Interchange
R -33
DIST #35
Landmark
Square I
E -15
DIST #36
DALHMR
D STRIB
E -16
DIST #37
Ka ger
Foods
E -17
DIST #38
Walker
DIST #39
E-21
Manufacturing
GMEF
GENERAL
EDA
V V
TOTALS
Fund Balance (deficit) 1/1/15 (per ledger)
$0
684,044
127,612
115,287
107,636
50,077
9Q535
95,784
® ( 234,053)
4,664
19,136
(0)
(0)
55
1,118,729
4,732,169
6,911,674
REVENUE:
Taxes
$0
Property Rental
$1,250
$1,250
Loan Repayments - Principal
$25,108
$143,815
$168,923
Loan Repayments- Interest
$0
Tax increments
$21,222
$17,173
$288,183
$39,494
$21,450
$8,801
$214,373
$58,241
$0
$11,757
$46,786
$727,480
Interest income
$0
Other Misc. Revenue
$104
$104
Transfer in from other funds
$94,900
$94,900
TOTAL Revenues
$0
$0
$21,222
$17,173
$288,183
$39,494
$21,450
$8,801
$214,373
$0
$58,241
$0
$11,757
$46,786
$25,108
$240,069
$992,657
EXPENSES:
Salaries
$4,937
$4,937
Fringe benefits (PERA, FICA, Health)
$1,903
$1,903
Dues, memberships
$2,446
$2,446
Legal publication
$26
$26
$26
$26
$26
$26
$26
$0
$2,125
$2,307
Travel, Conferences, Schools
$0
Property taxes
$0
Prof. services- -legal
$4,963
$4,963
Prof. services - -engr
$0
Prof. services -- mist.,
$62,463
$62,463
Marketing
$650
$650
Interest expense - -debt
$0
Landheld for Resale Adjustment
$0
Misc. other expense (incl. Fiscal Agent Fees)
$20,078
$20,078
TIF loans- PAYG or Intertund
$6,182
$50,684
$35,545
$17,637
$7,921
$214,373
$77,377
$11,731
$46,786
$468,237
Land acquisition
$35,096
$35,096
Transfer to other funds - Debt Service
$0
Excess TIF Returned
$195,267
$0
$195,267
TOTAL Expenses
$0
$0
$26
$6,208
$281,073
1 $35,571
1 $17,663
$7,921
$214,373
$26
$77,377
1 $0
$11,757
$46,786
$0
$99,564
$798,346
Fund Balance (deficit) 12/31/15
$0
$684,044
$148,808
$126,252
$114,746
L__L54,001JJ
$94,321
1 $96,664
($234,053)
$4,638
($0)
($0)
($0)
$55
$1,143,837
$4,872,674
$7,105,985
Cash paid for Land
Land market value adjustment
Prior Year Land Purchases (221,900) (3,206,856) (3,428,756)
Other Assets (1,365) (1,365)
Intertund Loan 408,883 234,053 (642,936) -
Liabilities 45,901 45,901
Prepaid (8,336) (8,336)
Notes Receivable
Cash Fund Balance $0 $684,044 $148,808 $126,252 $301,729 $54,001 $94,321 $96,664 ($0) $4,638 ($0) ($0) ($0) $55 $1,143,837 $1,059,082 $3,713,429
EDA Agenda: 09/09/15
9. Consideration to adopt Resolution EDA- 2015 -009 requesting a public hearing on the
modification of Tax Increment Financing District No. 1 -22. (AS)
A. REFERENCE AND BACKGROUND
The EDA is asked request that the City Council call for a public hearing on the modification
of TIF District 1 -22. The purpose of the modification is related to the available pooled
housing increment in Monticello Tax Increment Financing District 1 -22. The EDA directed
staff to begin working on the modification process in August.
During the EDA's August meeting, staff described the ability for the EDA to pool an
additional 10% of captured tax increment within TIF District 1 -22 for housing. At present,
the EDA is not capturing the 10% allowable housing pooling. Instead, that increment is being
included within the 75% excess increment calculation and is being returned to Wright County
each year. The amount of pooled increment generated over the remaining life of TIF 1 -22 is
estimated to be approximately $345,000 (collected over 10 years, between years 2016 and
2024). It is estimated that the EDA returns approximately $35,000 annually in increment
which could be used to assist affordable housing projects. The EDA would have the authority
to capitalize this annual revenue through an interfund TIF loan.
The EDA is required to complete a modification to the TIF 1 -22 Plan to allow for the 10%
housing pooling. The modification would include a budget modification and would require a
public hearing and full modification of the plan. As City Council must hold the hearing, a
resolution requesting Council call for and hold the hearing has been prepared for EDA action.
Al. Budget Impact: As noted above, the estimated amount of available pooled housing
increment is $345,000 over the balance of the life of the district. Northland estimates
the cost to complete the modification process will not exceed $4,000.
A2. Staff Impact: Staff will work with Northland Securities and Kennedy & Graven to
support the process. Staff time on this process is estimated at approximately 12 hours.
B. ALTERNATIVE ACTIONS
Motion to adopt Resolution EDA- 2015 -009 requesting a public hearing on the
modification of Tax Increment Financing District No. 1 -22.
2. Motion to deny adoption of Resolution EDA- 2015 -009 requesting a public hearing on the
modification of Tax Increment Financing District No. 1 -22
C. STAFF RECONIlVIENDATION
Staff recommends alternative 1 consistent with the EDA's previous discussion and action.
D. SUPPORTING DATA
A. Resolution EDA- 2015 -009
B. TIF 1 -22 Modification Calendar
C. TIF 1 -22 Financial Summary
CITY OF MONTICELLO ECONOMIC DEVELOPMENT AUTHORITY
RESOLUTION NO. EDA- 2015 -009
RESOLUTION REQUESTING A PUBLIC HEARING ON THE
MODIFICATION OF TAX INCREMENT FINANCING DISTRICT NO. 1 -22.
BE IT RESOLVED, by the Board of Commissioners (the `Board ") of the City of Monticello
Economic Development Authority (the "Authority ") as follows:
WHEREAS, the City Council (the "Council ") of the City of Monticello, Minnesota (the
"City ") previously established Tax Increment Financing District No. 1 -22 (the "TIF District ")
within its Central Monticello Redevelopment Project No. 1, pursuant to Minnesota Statutes,
Sections 469.174 to 469.1794, as amended (the "TIF Act "), in an effort to encourage the
redevelopment of certain designated areas within the City; and
WHEREAS, the Authority recognizes an ongoing need to encourage the development of
housing opportunities within the City; and
WHEREAS, the Authority is proposing the modification of the Tax Increment Financing
Plan ( "TIF Plan ") for the TIF District, pursuant to and in accordance with Section 469.1763,
subd. 2(d) of the TIF Act, which allows an authority to increase by up to ten percent the
permitted amount of expenditures for activities located outside the geographic area of the TIF
District, so long as such expenditures are used exclusively for low- to moderate - income housing
and otherwise meet the requirements of Section 469.1763, subd. 2(d) of the TIF Act; and
WHEREAS, a modification of a TIF Plan for this purpose is a budgetary amendment and
requires a public hearing, pursuant to Section 469.175, subd. 4(b) of the TIF Act.
NOW, THEREFORE BE IT RESOLVED by the Board as follows:
1. The Authority hereby requests that the Council call for a public hearing on November 9,
2015 to consider the proposed adoption of the Modification to the TIF Plan for the TIF
District (the "Modification ") and cause notice of said public hearing to be given as required
by law.
2. The Authority directs the Executive Director to transmit copies of the Modification to the
Planning Commission of the City and requests the Planning Commission's written opinion
indicating whether the proposed Modification is in accordance with the Comprehensive Plan
of the City, prior to the date of the public hearing.
The Executive Director of the Authority is hereby directed to submit a copy of the
Modification to the Council for its approval.
4. The Authority directs the Executive Director to transmit the Modification to the county and
the school district in which the TIF District is located not later than October 9, 2015.
5. Staff and consultants are authorized and directed to take all steps necessary to prepare the
Modification and related documents and to undertake other actions necessary to bring the
Modification before the Council.
Adopted by the Board of Commissioners of the City of Monticello Economic
Development Authority this 9t' day of September, 2015.
President
Attest:
Executive Director
City of Moticello
Modification of Central Monticello Redevelopment Project No.1
Modification of Tax Increment Financing District No. 1-22
Redevelopment TIF District
Public Hearing on November 9
September 2015
S M T W T F S
1 2 3 4 5
6 7 8 9 10 11 12 September 9 EDA request City Council to call public hearing
13 14 15 16 17 18 19 September 28 City Council to call for public hearing and notice
20 21 22 23 24 25 26 September 22 Last day for written notice to county commissioner (469.175, Subd. 2a)
27 28 29 30
October 2015
S
M
T
W
T
F
S
October 9
Last day plan and fiscal implications to County and School District (469.175, Subd. 2)
1
2
3
October 10
Earliest day to publish hearing notice
4
5
6
7
8
9
10
October 14
EDA to approve modification
11
12
13
14
15
16
17
October 16
Last day for notice to newspaper
18
19
20
21
22
23
24
October 22
Actual publication date
25
26
27
28
29
30
31
October 30
Last day to publish hearing notice
November 2015
S
M
T
W
T
F
S
1
2
3
4
5
6
7
8
9
10
11
12
13
14
November 9
Hearing Date, City Council approve modification
15
16
17
18
19
20
21
November 23
File modification with the County
22
23
24
25
26
27
28
November 23
Submit modification to the OSA and State
29
30
December 2015
S
M
T
W
T
F
S
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
Note: Kennedy & Graven will prepare resolutions and notice.
NORTHLAND 0SECURITIES 8/17/2015
u, s
C7 •
F �
Q w
cFn s
O o
Q d
a -
F
O w
z°
Ll
Lf1
rl
O
N
c
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
'Al
O
O
O
O
O
O
O
O
O
O
M
O
I"
O
O
O
Ln
Ln
Ln
Ln
O
O
O
O
O
O
V
Ln
N
Ln
Ln
N
O
n
n
N
n
Ln
O
O
O
O
O
W
O
�
n
b4
l0
b4
O
N
N
61
N
M
61
O
O
O
O
Z
^
b4
'Al
�
�
M
.--I
Ol
O
Ol
Ol
M
M
'Al
M
b4
'Al
'Al
'Al
'Al
.--I
b4
N
b4
M
b4
M
b4
CO
C
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
b4
b4
b4
b4
O
O
O
O
O
'Al
'Al
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
Ln
Sri
Sri
Sri
O
O
O
O
O
++
O
O
N
N
N
N
Ol
O
O
O
O
Ol
Ol
'Al
'Al
'Al
'Al
'Al
61
O
Ol
Ol
'i
'a
ri
b4
b4
b4
b4
b4
b4
O
Q
r\n
N
++
O
�
�
Z
d
y
y
E
B
Q
d
R
w
U
OJO
Q
�_
O
LL
+ +
V
>
W
C
{�
O
w
)
Q)
w
X
+�+
Q,
w
O
E
V
O
O
N
N
7
Q)
N
c
O
V
•�
in
W
C
7
C
W
N
d
i
y
pf
+�
V
O.
N
O
O
Q,
M2
—
C
in
V
N
Q
-6
W
.O
O
.N
0
N
H
Oi
w
N
N
i
O.
-O
LL
\
s
6
O
V
C
i
j
2
O
d
V
O
0
.�.
v
d
V
ma
.0
N
'�
C
N
V
C
,>
X
N
m
C
w
X
C
•�
+
l0
Q
E
O
w
.�
c6
>
O
>
Ly
.�
OV
Q
in
Q
i
y
-6
N
W
7
lr0
.�
Q
+�''
R
N
N
*
L
O
O
E
N
++
lr0
N
o
W
`c°
o
1
V)
D
O
v
V
Q
N
N
5
H
8
J
J
c
N
d
W
w
N
0
W
W
W
F-
u, s
C7 •
F �
Q w
cFn s
O o
Q d
a -
F
O w
z°
Ll
Lf1
rl
O
N
10. Consideration to review for approval 2015 -2016 Greater MSP Salesforce
partnership commitment. (AS)
A. REFERENCE AND BACKGROUND
The EDA is asked to consider approval of renewal of a license agreement for 2015 -2016
with GreaterMSP for participation in its Salesforce program. Market Matching will be
present at the September meeting to describe use and benefit of the system.
Greater MSP is using the Salesforce CRM as its primary data storage system for the entry
and management of information on metro area land and lease opportunities.
Communities which hold licenses with GreaterMSP can access the system and input their
own real -time information. When a lead comes into GreaterMSP, the new Salesforce
CRM is used by GreaterMSP staff to pair the lead with sites which match the lead's basic
search criteria. In short, communities with licensures are part of GreaterMSP's lead
response. Those communities without licenses will be relying on traditional marketing
and sales networking methods with the GreaterMSP team.
The 2015 -2016 licensure continues at a $400 annual fee. Staff questioned GreaterMSP
on the timing of the renewal relative to the service dates listed in the license agreement.
GreaterMSP staff indicated that the first round of licenses were scattered throughout the
calendar year for 2014 -2015. They are attempting to place everyone on the same billing
cycle. However, licenses are effective for one calendar year based on the service dates.
The EDA approved the 2014 -2015 license agreement in February, 2014.
Al. Budget Impact: The EDA's Dues and Memberships line item will fund this
expense.
A2. Staff Impact: John Uphoff has managed the data entry for the system and use for
lead purposes.
B. ALTERNATIVE ACTIONS
Motion to approve a $400 annual license for 2014 for the GreaterMSP Salesforce
CRM license.
2. Motion to deny a $400 annual license for 2014 for the GreaterMSP Salesforce CRM
license.
EDA Agenda. — 09/09/15
C. STAFF RECOMMWNDATION
Staff recommends alternative 91 above. The Salesforce CRM tool is being used not only
by GreaterMSP, but is also used currently by DEED and the MN Chamber as a data
management platform. Continued collaboration with GreaterMSP on this licensure will
ensure that Monticello's data can eventually be integrated into a centralized distribution
point utilized by all three entities for market and lead response.
GreaterMSP has indicated that they can assist with password access and training should
an economic development staff person be hired.
D. SUPPORTING DATA
A. License Renewal
B. Diagram - information and lead development with GreaterMSP Salesforce
2
- . 1
Minneapolis Saint Paid Regional Economic Development Partnership
Contact Information: INVOICE NUMBER
John Uphoff INVOICE DATE
City of Monticello DUE DATE
Monticello, MN
Portal-2015-008
August 11, 2015
Upon receipt
bESeRIFi ....
AMOUNT.
GREATER MSP Salesforce.com Communities Portal 2015 -2016 License
Service Dates: 4123115 to 4/22116
Thank you!
MAKE ALL CHECKS PAYABLE TO:
GREATER MSP
ATTN. Micki Mathiesen, Controller
400 Robert Street North, Suite 1600
Saint Paul, MN 55101
Total Due:
$400.00
$400.
GREATER >MSP®
Minneapolis Saint Paul Regional Economic Development Partnership
AUGUST 13, 2015
Angela Schumann
City of Monticello
505 Walnut Street
Monticello, MN 55362
Dear Angela,
I would like to thank you for being part of the GREATER MSP Salesforce Community Portal. I hope that
you have found value in the economic development tool. Please find enclosed a renewal invoice for the
service year of 2015 -2016. Payment should be submitted to GREATER MSP, Attention Micki (per
instructions on the invoice).
Please let me know if there is any additional training I can provide to you and your team in order to
ensure your organization maximizes the capabilities within Salesforce.
Thank you for being a part of the Salesforce Community.
Sincerely,
Mega Ba ett Livgard
Busin Retention & Expansion Manager
Minneapolis Saint Paul Regional Economic Development Partnership
400 Robert Street North I Suite 16001 Saint Paul, Minnesota 55101 1 651.287.1300
WSB Market Matching
InfoTracker
City staff and All /Anyone to input leads into
City Media 4 1 system
Outlets Market Matching Team manages
information and responds.
Greater
nnrr%
1
WSB Market Matching
Enters relevant land/
building data information
into CRM
DEED
Al u e
SALE F RCE
as the data
platfo
ON Chamber
EDA Agenda: 09/09/15
11. Consideration of a request to the City Council retarding redistributed funds from TIF
1 -22 excess increment. (AS)
A. REFERENCE AND BACKGROUND
During the April EDA meeting, Commissioner Johnson requested that a discussion occur with
the City Council regarding the excess increment generated in TIF 1 -22 and returned to Wright
County for redistribution to the taxing jurisdictions. The EDA is requested to act as a body if
a further formal request is desired by the full EDA regarding the redistributed funds.
The EDA will recall that in July of 2014, the EDA adopted a resolution returning the excess
increment from TIF 1 -22, which had accumulated in the district in the three years prior to
2013 (after the TIF Bonds were called and paid off in full in 2010), as required by statute for
compliance under the "6 -Year Rule ".
The amount of excess increment in TIF 1 -22 through 2013 was calculated at $595,959. This
amount was sent to Wright County, which then redistributes the funds to the taxing
jurisdictions based on percentage. These redistributed funds are no longer considered tax
increment. The amount received by the City after the 2013 redistribution was $228,854. The
funds were allocated to the Capital Projects Fund, which funds a number of City projects.
To maintain compliance with the 6 -year rule, each year, a new calculation is completed for
excess increment in TIF 1 -22. The excess increment amount is then returned to the County
and redistributed based on taxing percentages. Moving forward, the amount of funds sent to
Wright County will be approximately $195,000 annually, with approximately $73,225
redistributed to the City annually. This amount has not been specifically discussed in levy or
budget discussions with the City Council.
Commissioner Johnson also requested an update on this item at the July EDA meeting. Staff
noted that the item would be discussed with the City Council as part of the budgeting process.
Although the issue was briefly discussed during a July budget workshop with the Council (as
a response to a question raised by the Council), no formal action was taken at that time.
Staff would therefore request that the EDA act as a body if a further formal request is desired
by the full EDA regarding the redistributed funds.
B. ALTERNATIVE ACTIONS
1. Motion to request that the City Council consider allocation of funds resulting from the
redistribution of TIF district 1 -22 excess increment to the EDA, with the portion of funds
allocated to be clarified by the EDA.
2. Motion of other.
3. Motion of no action.
EDA Agenda: 09/09/15
C. STAFF RECOMMENDATION
As this is a policy question, staff defers to the EDA on their desired action. However, City
staff would note that redistributed funds for years prior to 2015 have already been allocated to
other funds and would be difficult to re- allocate, as they may be assigned to other projects.
Further, the Finance Director does not support the re- allocation of funds to the EDA.
D. SUPPORTING DATA
A. July 9th, 2015 Staff Report
2
EDA Agenda - 07/09/14
5. Consideration to adopt resolution 2014 -067, Approving the Return of Tax Increments
from Tax Increment Financing District No. 1 -22 to Wright County.
(AS/WO /Northland)
A. REFERENCE AND BACKGROUND:
The EDA is asked to review for adoption a resolution approving the return of excess
increment from TIF District 1 -22.
The EDA previously received a report and summary related to this item in March of 2014.
As the 2013 financial statements are now complete, the EDA is asked to take official
action to return the excess tax increment in the district to Wright County in accordance
with statutes governing pooling limitations for tax increment financing districts.
The EDA may recall that the statute requires that the EDA return excess increment to
Wright County for redistribution. In relationship to TIF District 1 -22, excess increment is
the increment that has not been obligated within the first five years of the district and is not
available for pooling. The amount of excess increment to be returned has been calculated
at $595,959, including 2013 increment.
Once the increment is returned to Wright County, the county will then distribute the funds
back to the district's taxing jurisdictions based on a proportional rate. These funds are
directed to the City and their use is determined by the City Council, as the funds are no
longer considered tax increment.
From this point forward, the EDA will return excess increment on an annual basis to
Wright County.
A background memo related to this item was prepared for the March item and is again
included for reference, with relevant information highlighted. Also included is a table
illustrating the calculations for the return of increment over the life of the district.
As a final note, the EDA has acted previously to keep TIF District 1 -22 intact, allowing it
to continue to generate increment until its required decertification date. This approach
provides the EDA with the maximum amount of financial resources through pooling of the
increment. A maximum of 25% of increment is available through pooling for supporting
the EDA's redevelopment goals in the district.
B. ALTERNATIVE ACTIONS:
1. Motion to adopt Resolution 2014 -067, approving the Return of Tax Increments
from Tax Increment Financing District No. 1 -22 to Wright County.
2. Motion of other.
C. STAFF RECOMMENDATION:
Staff recommends alternative 1 above. This action is required to comply with statutes
which govern the use of tax increment.
D. SUPPORTING DATA:
A. Resolution 2014 -067
B. Northland Securities Memo, RE: TIF 1 -22, dated March 3rd, 2014
C. Table A, Source and Use of Funds and Excess Tax Increment
D. Information Reference on Excess Increment, Office of State Auditor
2
CITY OF MONTICELLO
ECONOMIC DEVELOPMENT AUTHORITY
RESOLUTION NO. 2014-067
RESOLUTION APPROVING RETURN OF TAX INCREMENTS FROM TAX
INCREMENT FINANCING DISTRICT NO. 1-22 TO WRIGHT COUNTY
WHEREAS, on March 10, 1997, the City and the HRA approved a Tax Increment
Financing Plan (the "TIF Plan ") for Tax Increment Financing District No. 1 -22 (the "TIF District ")
located within the Redevelopment Project, pursuant to the HRA Act and Minnesota Statutes,
Sections 469.174 to 469.1794, as amended (collectively, the "TIF Act "); and
WHEREAS, administration of the TIF District was subsequently transferred to the City of
Monticello Economic Development Authority (the "Authority "); and
WHEREA, on June 30, 1997 the County of Wright (the "County ") certified the District; and
WHEREAS, the Authority has completed an analysis of financial activity for the TIF
District to confirm compliance with the TIF Act; and
WHEREAS, Authority has determined there to be excess tax increments in the account for
the TIF District, pursuant to Minnesota Statutes Section 469.1763, Subdivision 4.
NOW, THEREFORE, BE IT RESOLVED, by the City of Monticello Economic
Development Authority as follows:
The Community Development Director is authorized and directed to return $595,959 of
excess tax increments in the account for Tax Increment Financing District No. 1 -22 to
Wright County for redistribution to the City of Monticello, Wright County, and Independent
School District No. 882, pursuant to Minnesota Statutes 469.176, Subdivision 2.
Approved by the City of Monticello Economic Development Authority this 91h day of July,
2014.
ATTEST:
Secretary
President
NORTHLAND
STRATEGIES
Special Projects Group
►I ►I NTIMI UTIff] ►I
To: Angela Schumann, Community Development Director
Wayne Oberg, Finance Director
From: Tammy Omdal
Date: March 3, 2014
Re: Tax Increment Financing (TIF) District No. 1 -22
The purpose of this memorandum is to provide information concerning the on -going management
of TIF District No. 1 -22 (the "District "). Northland has completed a review of preliminary
(unaudited) 2013 expenditures and revenues for the District and a review of the 2012 TIF Report for
the District prepared and submitted by the City to the State Auditor's Office. The purpose of the
analysis was to address the following three items and offer conclusions:
1. Determine the estimated amount of funds that will be available from the District to be spent
on project costs within the boundaries of the Central Monticello Redevelopment Project.
- Based on current estimates for revenue and expenditures, including administrative
costs, the District is estimated to generate an additional $797,755 in tax increment
revenue that will be available to be spent on eligible (new) project costs within the
boundaries of the Redevelopment Project. The source of funds will come from tax
increment available under pooling authority (limited to 25% of tax increment) and
from tax increment not derived from property (i.e., lease revenue, land sale proceeds,
interest income, etc.).
2. Identify actions required by the EDA to provide the authority for the expenditure of funds on
project costs.
- In order to capitalize the estimated cash flow of future tax increment funds (available
under pooling authority and tax increment not derived from property), the EDA will
need to authorize an interfund loan to the District. The par amount of the interfund
loan will equal the estimated amount of future tax increment available for project
costs, which is estimated at $797,755. Repayment of the interfund loan will be made
semi - annually from available tax increment.
Northland Securities, Inc. 45 South 7th Street, Suite 2000, Minneapolis, MN 55402 Toll Free 1- 200 - 851 -2920 Main 612 -851 -5900
www.northlandsecurities.com
Member FINRA and SIPC
Tax Increment Financing
March 3, 2014
Page 2
3. Identify amount and timing of return of excess tax increment to the County for redistribution
to the local taxing jurisdictions (city, county, school district).
- As previously estimated, the District will generate excess tax increment that will need
to be returned to the County for redistribution. Over the life of the district the
estimated amount of excess tax increment to be returned is approximately $2,364,000.
This amount assumes the EDA acts to pool an estimated approximate $340,000 of
future tax increment to pay for qualified housing project costs versus returning the
funds as excess increment. If the EDA does not take future actions to authorize
pooling for qualified housing project costs, then the annual increment that otherwise
could be pooled for housing purposes will need to be returned to the County as
excess tax increment.
In compliance with the statute that governs the use of tax increment, each year the
EDA must calculate the amount of excess tax increment and return the balance to the
County. The balance of excess increment is not available to be spent or to provide a
source of temporary cash flow for project costs. The EDA must return excess
increment within nine months after the end of the year.
Explanation of TI F Fund Balance
As shown in Table A on the next page, based on preliminary 2013 (unaudited) revenues and
expenditures reported for the District, the City reports an estimated fund balance for the District as of
December 31, 2013 of $624,252. The majority of the year end 2013 fund balance, or $595,959, is not
available for expenditure and will need to be returned to the County in 2014 as excess tax increment
for redistribution to the local taxing jurisdictions. There is an estimated $28,294 of increment
available to the EDA within the District for future (new) project spending at the end of 2013.
The total amount of estimated tax increment to be generated and available for project costs,
generated between years 2014 and 2024, is the $797,755. The source of funds comes from estimated
future pooled tax increment and tax increment not derived from property. The EDA may act to
capitalize the future flow of these funds through the authorization of an interfund loan to the District.
Interfund TIF Loan
An interfund loan resolution has been prepared for consideration by the EDA. The resolution will
allow for the payment of project costs, up to a maximum principal amount of $800,000 (or, if less, the
amount actually paid for project costs) to be financed on a temporary basis from the EDA's General
Fund, EDA operating budget or any other fund from which such advances may be legally made.
The EDA will reimburse itself for the payment of project costs, plus interest thereon, from available
tax increment from the District. The repayment of the loan is limited to the actual amount of tax
increment that is generated and available for repayment of the loan plus interest. Restrictions on
pooling and the five -year and sixth -year rules in the statutes governing the use of tax increments
limit the amount of tax increment available for repayment of the proposed interfund loan to 25
percent (or less, if other in- district expenditures are greater) of the total semi - annual revenue derived
from tax increments paid by properties in the district.
Tax Increment Financing
March 3, 2014
Page 3
TABLE A
Tax Increment Financing District No. 1 -22
Source and Use of Funds and Ending TIF Fund Balance
Estimated
Restated Prior Estimated Total Life of
Years (As of Year 2013 Years 2014 District, as of
End 201 1) 2012 (Unaudited) through 2024 Year End 2024
TIF revenue
$5,155,479
$458,232
$357,790
$3,894,264
$9,865,765
Less use of funds (including administration costs)
$3,283,708
$1,583,103
$437,875
$850,318
$6,155,004
Less return of excess increment to County
$42,563
$0
$2,322,194
$2,364,757
Net source of funds
$1,871,771
($1,167,434)
($80,085)
$721,752
$1,346,004
Beginning Fund Balance
$0
$1,871,771
$704,337
$624,252
$0
Increase (decrease) in fund balance
$1,871,771
($1,167,434)
($80,085)
$721,752
$1,346,004
Ending TIF Fund Balance
$1,871,771
$704,337
$624,252
$1,346,004
$1,346,004
Explanation of Ending TIF Fund Balance:
Excess to be returned to County for redistribution
$182,548
$401,416
$595,959
$207,598
$207,598
Available for housing, if so approved by EDA
$0
$0
$0
$340,652
$340,652
Subtotal of Excess Increment
$182,548
$401,416
$595,959
$548,250
$548,250
Available under 25% pooling limitation
$371,007
$293,384
$1,618
$623,987
$623,987
Available TIF not derived from property
$1,318,216
$9,538
$26,676
$173,768
$173,768
Subtotal of Increment Available for Project Spending
$1,689,223
$302,922
$28,294
$797,755
$797,755
Total Ending TIF Fund Balance
$1,871,771
$704,337
$624,252
$1,346,004
$1,346,004
Notes:
The City made adjustments to prior year reported revenue and expenses to remove non -tax increment revenues and expenditures that were
previously accounted for in TIF District No. 1-22. The revenue and expenses were reclassified to the EDA General Fund. The net adjustment to
year end 2011 fund balance for TIF District No. 1 -22 is as follows:
Year End 2011 TIF Fund Balance for TIF District No. 1 -22, as originally reported to the EDA at end of FY 2011 $2,977,512
Adjustment to revenues (includes $2,150,000 restatement of bond proceeds)' ($3,255,741)
Adjustment to expenses (for bond principal payments) ($2,150,000)
Net Total Adj ustment2 ($1,105,741)
Restated Year End 2011 TIF Fund Balance $1,871,771
' This does not include anytax increment revenue derived from property or tax increment derived from other sources.
2 TIF District No. 1 -22 fund balance decreased bythis amount and the EDA General Fund fund balance increased by this amount.
TABLE A
Tax Increment Financing District No. 1 -22
Source and Use of Funds and Excess Tax Increment
Prior Years (As Estimated Years Estimated Total
of Year End 2015 through Life of District, as
2013) 2014 2024 of Year End 2024
TIF revenue
$5,971,501
$354,739
$3,539,525
$9,865,765
Less use of funds (including administration costs)
$5,304,686
$106,378
$743,940
$6,155,004
Less return of excess increment to County
$42,563
$595,959
$1,726,236
$2,364,757
Net source of funds
$624,252
($347,598)
$1,069,350
$1,346,004
Estimated redistribution of future excess increment to taxina iurisdictions:
City
$15,950
$223,325
$646,877
$886,152
County
$16,714
$234,031
$677,888
$928,634
School
$9,899
$138,602
$401,470
$549,971
Total
$42,563
$595,959
$1,726,236
$2,364,757
Estimated averaae annual redistribution of excess increment for ten vear Deriod between vears 2015 -2024:
City
$64,688 37.5%
County
$67,789 39.3%
School
$40,147 23.3%
Total
$172,624 100.0%
NORTHLAND STRATEGIES
Special Projects Group
From March 24, 2014, Presentation to City of Monticello City Council 10
6/18/2014
EDA Agenda: 09/09/15
12. Economic Development Report (JO /AS)
Economic Development Authority Update
Economic Development Position
The EDA's recommendation for the approval of a dedicated Economic Development staff
position will be presented to the City Council by the Human Resources Manager as part of the
budgeting workshops for the City Council on September 14th. IT was previously presented by
the Community Development Department. The position is also included in the budget to be
filed and presented to the Council for consideration of the HRA levy on September 14th. The
final decision on the hiring of the position will require Council approval of the budget for the
item, as well as Council approval of the posting for the proposed full -time position.
EDA/HRA Levy
The City Council will consider a resolution approving a special benefit levy (HRA levy) and
accepting the EDA budget for fiscal year 2016 on September 14th, 2015. EDA members are
welcome to attend the Council meeting.
Solar Energy Update
The City Council adopted the proposed amendments for Solar Energy Systems on August
24th, 2015. Full text of the consideration can be found in the August 2e, 2015 Council agenda
packet for the item.
Sunrise Energy Ventures has filed a petition with the Public Utilities Commission as related to
their proposal under the Xcel Energy Solar Rewards program. Sunrise is asking the PUC to
reconsider their earlier decision limiting the program to installations of 5 megawwatts or less.
Industry of the Year Update
Mr. David FitzSimmons, Chief of Staff for US Representative Tom Emmer, has agreed to be
the keynote speaker for this year's Industry of the Year event. Invitations for the October
21st, 2015 event will be sent in early October with a "Save the Date" sent in mid - September.
EDA members are encouraged to attend this event, so please mark your calendars.
UMC/Workforce Education Event
Staff and EDA President Bill Demeules attended a meeting at UMC in Monticello to discuss
on on -going workforce development concept exploring how high schools, technical
centers /colleges and businesses can work together build skills for a career in the
manufacturing industry. Monticello, through Wright Technical College, is the model for this
program. (Wright Tech also works with 7 other area school districts on the program.) The
model is aimed at the high school level to create a flow with the technical centers /colleges and
business partnerships to lay out a plan for transitioning the student between each level.
TAC Update
EDA Agenda: 09/09/15
1. TH 25 1CSAH 75 Project
On August 24th, 2015, the City Council rejected bids associated with the TH 25 /CSAH 75
project. This was primarily due to the submitted bid costs, which were over engineer's
estimates. It is intended that the project will be re -bid in October or November for a spring
construction.
2. Interchange Study
The City Council previously authorized work on an interchange study to determine the
viability of interchange locations in the northwest corridor of the community. WSB has
indicated that a critical component of the study is an understanding of interchange need based
on land use for the area. At present, much of the northwest area in the MOAA is designated
as "Interchange Planning Area ". As such, staff have worked with the City Planner, NAC, to
develop a scope of work for an interchange planning study to better define land use concepts
as related to potential interchange(s). More detail on that proposal, which will go forward to
the Planning Commission, then ultimately to the City Council, can be found on the Planning
Commission's September agenda page. Planning Commission recommended moving forward
with the study. The issue will be brought to the city Council for consideration on September
28th, 2015.
TIF 1 -5 Funding
The EDA had raised questions during levy discussions regarding the possible return of TIF 1-
5 funds to the EDA. The agenda and minutes of the October, 2012 meeting regarding the use
of TIF 1 -5 funds are attached for reference.
2
EDA Agenda — 10/10/12
6. Consideration to approve Resolution 2012 -88, a Resolution Ratifying Modification to
the Tax Increment Financine Plan for Tax Increment Financine District No. 1 -5.
(JO /ASBW/WO)
A. REFERENCE AND BACKGROUND
The EDA is asked to consider a modification to TIF District 1 -5 and a reallocation of increment
within District 1 -5 to City Project City Project No. 12C002, West 7th Street Extension (Minnesota
to Elm).
TIF District 1 -5 is a pre -1990 tax increment district. Pre -1990 districts have greater flexibility in
available increment usage than those districts enacted after more restrictive TIF legislation in 1990.
In short, the increment collected in District 1 -5 can be spent anywhere within the Central
Monticello Redevelopment Project Area No. 1. It is not subject to pooling restrictions and does not
need to be spent in the district in which it originated.
Due to the flexibility in pooling allowances and spending for this district, staff is requesting that the
EDA consider modifying the original TIF 1 -5 District budget to allow for the reallocation of
increment within the district to the 7th Street Project.
Currently, west 7th Street extends west from Highway 25 to Minnesota Street. The street begins
again at Elm Street. The proposed project would therefore extend West 7th Street between
Minnesota Street and Elm Street. This extension of West 7th Street is approximately 1/4 mile in
length and is proposed to be constructed as a 44 -foot wide urban section with curb and gutter and
bituminous pavement, and a bituminous pathway constructed along the north side of the road.
LED street lights and trees are also proposed to be installed with the project, as well as a regional
stormwater pond north of 7th Street and east of Elm Street.
Approximately 25 acres would become available for development via construction of this
collector road, which makes it an excellent use of these funds. This new road will also provide
a more direct connection between East CR 39 and the properties along West 7th Street versus the
use of Chelsea Road and/or West 6th Street. This connection will also serve to complete the
frontage road system north of Interstate 94, which was previously identified as a requirement for
constructing a new interchange along Interstate 94 on the west side of the City by both Mn/DOT
and the Federal Highway Administration.
The extension of West 7th Street between Minnesota and Elm Streets is identified as a proposed
improvement in the City's Transportation Plan, and is also included in the City's current 5 -year
Capital Improvement Plan as a proposed improvement for 2013.
At the present time, the City Council has authorized a feasibility report for the completion
of the street improvements. Preliminary funding estimates and sources for the project is as
follows:
Estimated Project Costs = $ 1,230,000
Estimated Eligible State -Aid Costs = $ 633,700
Estimated Assessments (Deferred) _ $ 652,290
Staff is requesting that the EDA allocate all of the available increment in TIF 1 -5 towards
the Tat Street project as a means to fund much of the deferred component of the
assessments. The deferred component of the project would require the complete allocation
of increment from TIF 1 -5, which is estimated to be $450,890 at the close of 2012.
In order to utilize the increment in TIF 1 -5, the EDA is required to modify the original TIF
Plan budget line items. As the EDA is not modifying the amount of the original project
budget (which was $4.3 million), but rather reallocating funds among the line items, the
EDA's attorney has indicated that no public hearing is required for this modification.
In order to accomplish the funding of the 7b Street project, staff and the EDA attorney
recommends the following budget modification:
USES OF TAX INCREMENT FUNDS TOTAL
Land/Building Acquisition $1,100,000
Site Improvements/Preparation $1,201,300
Utilities $900,000
Bond Principal Payments $390,000
Bond Interest Payments $433,500
Streets and Sidewalks $500,000
Administrative Costs (gV to 10 %) $370.200
PROJECT COST TOTAL $4,895,000
Should the EDA approve this modification, the City Council will also need to adopt a
companion resolution at their October 24', 2012 meeting. At that time, the funds will be
reallocated internally. No additional increment will be collected after 2012.
The EDA Attorney has indicated that the District can be decertified in November after the
reallocation procedure.
In relationship to the impact on potential funding sources for the EDA to accomplish its
redevelopment goals, it should be noted that the EDA will still have the use of similarly
structure TIF District 1 -6, as well as funds within TIF 1 -22 (which will be covered in a
subsequent item.) Additionally, by utilizing the increment in 1 -5 for deferred
assessments, the City will be paid back once the assessments are levied and paid (at the
time of development). Those funds could then be re -used for additional projects that foster
economic development. The funds would be similarly unrestricted in their use, as they
will no longer be associated with TIF. Furthermore, the Finance Director would encourage
the EDA to utilize 1 -22 as its first resource to accomplish goals within that district, as
those funds are subject to post -1990 pooling restrictions.
2
B. ALTERNATIVE ACTIONS
1. Motion to approve EDA Resolution 2012 -88, a Resolution Ratifying Modification to the
Tax Increment Financing Plan for Tax Increment Financing District No. 1 -5.
2. Motion to deny approval of EDA Resolution 2012 -88, a Resolution Ratifying
Modification to the Tax Increment Financing Plan for Tax Increment Financing District
No. 1 -5.
3. Motion to table for further study or discussion.
C. STAFF RECOMMENDATION
Staff supports alternative 1.
D. SUPPORTING DATA
A. Resolution 2012 -88
B. TIF Management Plan District Summary
C. TIF District 1 -5 Plan Excerpts
D. Central Monticello Redevelopment District No. 1 Project Area
E. 7t' Street Project Area
3
CITY OF MONTICELLO
ECONOMIC DEVELOPMENT AUTHORITY
RESOLUTION NO. 2012-088
RESOLUTION APPROVING MODIFICATION TO THE TAX INCREMENT
FINANCING PLAN FOR TAX INCREMENT FINANCING DISTRICT NO. 1-5
WHEREAS, the Housing and Redevelopment Authority in and for the City of Monticello
(the "HRA ") and the City of Monticello, Minnesota (the "City ") previously established Central
Monticello Redevelopment Project Area No. 1 (the "Redevelopment Project") pursuant to
Minnesota Statutes, Sections 469.001 through 469.047, as amended (the "HRA Act"); and
WHEREAS, on March 15, 1985, the City and the HRA approved a Tax Increment
Financing Plan (the ` FIF Plan") for Tax Increment Financing District No. 1 -5 (the ` FIF District")
located within the Redevelopment Project, pursuant to the HRA Act and Minnesota Statutes,
Sections 469.174 to 469.1799, as amended (collectively, the "TIF Act "); and
WHEREAS, administration of the TIF District was subsequently transferred to the City of
Monticello Economic Development Authority (the "Authority "); and
WHEREAS, the City and Authority have determined a need to modify the TIF Plan in order
to amend the budget contained therein and such amendment is consistent with the redevelopment
program for the Redevelopment Project; and
WHEREAS, pursuant to Section 469.175, subd. 4(b) of the TIF Act, a tax increment
financing plan may be modified without public hearing or the findings required to be made for the
original tax increment financing plan if the modification does not include (i) any reduction or
enlargement of the geographic area of the project or tax increment financing district; (ii) an increase
in the amount of bonded indebtedness; (iii) a determination to capitalize interest on debt if that
determination was not a part of the original plan; (iv) an increase in the portion of the captured net
tax capacity to be retained by the City; (v) an increase in the estimated cost of the project, including
administrative expenses, to be paid or financed with tax increment from the district; or (vi) the
designation of additional property to be acquired by the authority; and
WHEREAS, by this resolution, the Authority proposes to modify the public costs and uses
of funds table located within the TIF Plan in order to reallocate tax increment expenditures from
"Other" and "Site Improvements/Preparation Costs" to "Streets and Sidewalks," as set forth in
Exhibit A, attached hereto and made a part hereof, in order to use such tax increment to finance a
portion of City Project Z7STEX, the 7t' Street Extension.
NOW, THEREFORE, BE IT RESOLVED, by the City of Monticello Economic
Development Authority as follows:
412054v1 MINI MIN190 -101
1. The TIF Plan for the TIF District, as amended by this resolution, conforms to the
general plan of redevelopment of the City as a whole.
2. The approval of the TIF Plan, as amended by this resolution, is intended, and in the
Authority's judgment its effect will be, to promote the public purposes and accomplish the
objectives specified in the TIF Plan.
3. The proposed modification to the TIF Plan may be made without public hearing or
the findings required for the original TIF Plan since the modification does not include (i) any
reduction or enlargement of geographic area of the Redevelopment Project or the TIF District;
(ii) an increase in the amount of bonded indebtedness; (iii) a determination to capitalize interest on
debt; (iv) an increase in the portion of the captured net tax capacity to be retained by the City; (v) an
increase in the estimated cost of the project to be paid or financed with tax increment from the TIF
District; or (vi) the designation of additional property to be acquired by the Authority.
4. The amended TIF Plan is hereby approved and adopted.
5. The Community Development Director is authorized and directed to file a copy of
this resolution with the Minnesota Commissioner of Revenue and the Wright County Auditor as
required by the TIF Act.
Approved by the City of Monticello Economic Development Authority this 10th day of
October, 2012.
President
ATTEST:
Secretary
412054v1 MINI MIN190 -101 2
W-411-1 1.4m.1
MODIFIED TABLE OF EXPENDITURES AND OTHER FINANCING USES
USES OF TAX INCREMENT FUNDS TOTAL
Land/Building Acquisition $1,100,000
Site Improvements/Preparation $1,201,300
Utilities $900,000
Bond Principal Payments $390,000
Bond Interest Payments $433,500
Streets and Sidewalks $500,000
Administrative Costs (up to 10 %) $370.200
PROJECT COST TOTAL $4,895,000
A -1
412054v1 MINI MIN190 -101
District 1 -5 was originally established for the construc-
tion of 72 units of apartment housing. The original
TIF plan has been modified to authorize additional
expenditures for land acquisition, site improvements
and public utilities. The District is not subject to the
limitations of pooling or the five -year rule. It is due to
be decertified by the end of 2012. All obligations in the
District have been paid.
Actions Taken Since 2009
Funds from this district and TIF district 1 -2 (which
is now closed) were used to pay for an update to the
City's Downtown Redevelopment Plan. The study,
"Embracing Downtown, focused on marketing, land
use, transportation, financing, and implementation
strategies.
Administrative Tasks
The TIF plan estimates on file with the Office of the
State Auditor (OSA) for this district needs review to
confirm the OSA has the correct authorized expendi-
tures amounts. Any future modifications (discussed
under Management Strategies below) would also need
to be filed with the OSA.
While, the budget included in the original and modi-
fied TIF Plan shows expenditures in excess of tax incre-
ment revenues, the district shows there has been more
than sufficient tax increments to cover expenditures.
Management Strategies
Option 1- Decertify
The conservative approach for the District would be to
request decertification. Excess tax increments (includ-
ing tax increments to be paid in 2012) would be con-
veyed to the County and redistributed to the taxing
jurisdictions. The EDA would need to coordinate with
CityNumber ....................................................................... ............................1 -5
CountyNumber ................................................................. .............................16
Name........................................ ............................... ...................Construction
5
Type.......................................................... ...............................
Redevelopment
Established...................................... ............................... ........................3
/15/85
Certification Requested ............. ............................... ........................5
/15/85
Certified........................................... ............................... ........................5
/15 /85
Year of First Increment ................... ............................... ...........................1987
4 -Year Knockdown ................................................ ..............................5
/15/89
5-Year Rule ....................................................................... ...............................
NA
Decertification .......................... ............................... ..................
........12 /31 /12
Original Tax Rate ....:.................... ............................... ........................81.305%
Original Tax Capacity Value ........... ............................... ............................708
Current Base Tax Capacity Value . ............................... ............................708
Current (Pay 2012) Tax Capacity .............................. .........................43,638
Parcels.................................................................................... ............................... 8
155 -050- 000010
155.010.001010
155 010 001030
155010 001050
155 010 000020
155 010 001020
155 010 001040
155 -010- 002010
i
Wright County to decertify the District. Currently, the
district is scheduled for decertification at the end of
2012.
Option 2 - Use Remaining Resources
Past modifications show that the EDA has planned
for the use of revenues from District 1 -5. The last year
for tax increment collections is 2012. The projections
show an estimated fund balance of $450,000 at the end
of the District. The City could expend the remaining
fund balance in 2012 or keep the fund for this Pre -1990
District open after decertification and continue to ex-
District Summary
District 1 -5
(Construction 5)
Redevelopment
`M
r
A
L
V]
V
'i
r-1
Ln
sj
N
s,
bo
0
N
0
CN
0
o~
o~
to
9
o Q
� o
O .0
a
•� o
� •m
P
a a
a
■ i
O
CC
� a o
u
}^ U
biD
� o �
b.p
P,
a
f� 4-
O
O
0
G
,n O
W P4
0
o u
o
a
o
v
o
O m
O
0
o °
G a
O �
o �
� w
t-�
aw cu m a cr � CD °
"o 'd 'r. �' +, Q
O -0 cn + �
r...ra5CD
ca o u a — 5 U
�-
u
cz v v ai
4� 0 P-4
o:� ar
R+ •rti .� �, �
v O a .6 x
.� -I-, m
.. ca o
O °rA O V a v
a y ,� m �'
• WN 'o a�i a w o +rA u
14.
o
v '� a u
Q"
N
U U G a r
0 0
Cd V
bc I r.
a
N
a a
0
Q
o
bn
4
a
cn
o
w
.� can
U
a
a O
Ln ^^°i
�
�
rrjj
1
u v a M
CJ
W ° o
�
o a
.
3
U C�
V � . -.0
0
r. r.
Cd V
bc I r.
o
N
a a
0
75
o
a
w a
o
w
.� can
a
�
�"
Q)
a
o
fl
4-;
V r
A
cu
r.
ra�
J
>
a 0
a
•� (z
°
.
Ln a
rn En
O
a
a u4�
w
O
cu
0 a
'"
ar
b y
t [p
a
°
a
o�
a
��
C)
j
;
a
a
Q"
C
a
a
°
�
ca
a
o
,--�
G]
�;
a
o
u
40J
w
O
O
O
G
a
a N
a N
a
o�
`� a
En
°
p v
o a
a'
3 0
W
> M
3
CC `�
v
y
p
E
0
o x
°�
v
Q
cl N w
o�
o~ NO
U bO
cn
F-4
cn u
En
w 'ts
u
x
W xi
r
District 1 -5
Revenues and Other Financing Sources
Tax increment revenue
Market Value Homestead Credit
Investment earnings
Bond proceeds
Loan proceeds
Special assessments
Sales /lease proceeds
Loan /advance repayments
Developer payment
Interfund loan /transfer
Other
Transfers (in)
Total Revenues /OFS
Expenditures and Other Financing Uses
Land /building acquisition
Site improvement /preparation costs
Utilities
Public parking facilities
Streets and sidewalks
Public park facilities
Social, recreation, or conference facilities
Interest reduction payments
Bond principal payments
Bond interest payments
Loan principal payments
Loan /note interest payments
Administrative expenses
Paying agent fees
Other
Transfers (out)
Total Expend itures /OFU
Original TIF Cumulative Accounted
Plan Budget Modified TIF for in Prior 2010 2011
Amount Plan Budget Year
625,000 4,365,000 1,392,676 54,362 49,007
District Summary
Estimated
2012 Total Life
of District
52,687 1,548,732
113,313 6,270 13,113 5,894 138590
390,000 390,000 365 000 3b5,000
1,015,000 4,755,000 1,870,989 60,632 62,120 58,580 2,052,321
1,400,000_ 360,310 360,310
301,300 1,201,300 469,838 469,838
900,000
390,000 390,000 365,000 365,000_
433,500 433,500 187,390 187,390
30,200 37%200 53,805 365 31,317 500 85,987
200,000 -
- 132,811 132,811
1,155,000 4,895,000 1,569,154 365 31,317 500 1,601,336
Revenues /OFS Over(Under) Expenditures /OFU
Fund Balance - Begin
E d
Fund Balance - n
(140,000) (140,000) 301,835 60,267 30,803 58,080 450,985
301,835_ 362,102" ___ 392„905 -
362,102 _ 392,905 450,985 450,985
17
THE MONTICELLO HOUSING AND REDEVELOPMENT AUTHORITY
TAX INCREMENT FINANCING PLAN
(Minnesota Statutes, Section 273.71 to 273.78)
for
THE CONSTRUCTION FIVE DEVELOPMENT PROPOSAL
Date: March, 1985
Amended January 26, 1987
TABLE OF CONTENTS
PART II TAX INCREMENT REDEVELOPMENT DISTRICT FINANCE PLAN
Section A.
Statutory Authority
1
Section B.
Statement of Objectives
1
Section C.
Development Program
1
Section D.
Description of Property in Tax
Increment Financing District
2
Section E.
Classification of the Tax Increment
Financing District
2
Section F.
Parcels in Acquisition
2
Section G.
Estimate of Costs
3
Section H.
Estimated Amount of Loan /Bonded
Indebtedness
3
Section I.
Sources of Revenue
3
Section J.
Original Assessed Value
4
Section K.
Estimated Captured Assessed Value
4
Section L.
Duration of the District
4
Section M.
Estimated Impact on Other
Taxing Jurisdictions
5
Section N.
Modifications of the Tax Increment
Financing District
8
Section 0.
Limitation on Administrative Expenses
h
Section P.
Limitation on Duration of Tax
Increment Financing Districts
7
Section Q.
Limitation on Qualification of Property
in Tax Increment District Not Subject
to Improvement
7
Section R.
Limitation on the Use of Tax Increment
7
Section S.
Notification of Prior Planned Improvements
8
Section T.
Excess Tax Increments
8
Section U.
Requirement for Agreements with
the Developer
9
Section V.
Assessment Agreements
Section W.
Administration of the Tax Increment
Financing Redevelopment District and
Maintenance of the Tax Increment Account
9
Section X.
Annual Disclosure Requirements
9
Section Y.
Assumptions
10
Section Z.
Municipal Findings
10
Tax Increment Redevel2pment District Finance Plan
A. Statutory Authority
The Monticello Housing and Redevelopment Authority (the "Authority ") and
the City of Monticello are authorized to establish a tax increment district
pursuant to Minnesota Statutes, Section 273.71 -78.
B. Statement of Objectives
1. To provide opportunities for development and expansion of new
business;
2. To provide employment opportunities through the creation of new
jobs;
3. To provide opportunities for growth in the tax base;
4. To assist with street construction, sanitary sewer and watermain
construction, storm sewer and other public improvements to
encourage redevelopment in the area.
5. To encourage the development of additional rental housing in the
City.
C. Development Program
1. Description of the Development Activities:
Construction Five (the "Developer ") plans to construct an 18- -unit,
a 24 -unit, and a 30 --unit apartment buildings. Appropriate zoning
standards in the City provide for these developments which will
be located near the highway in an area that encompasses both
light industrial and residential uses. The developer will be
assisted with public improvements to service the buildings with
tax increment revenues. The 18 -unit building is expected to
complete construction in 1985, and the 24 and 30 unit buildings
will complete construction in 1987.
2. Other Development Not Under Contract Reasonably Expected to Occur
in the Project:
The development program may include a future 25,000 sq ft office
building located in the tax increment redevelopment district.
The geographical boundaries of the district are not expected
to change due to this development.
D. Description of Property in the Tax Increment Financing District
Based on discussions with the City Assessor, the replat to be filed
for the tax increment district will be legally described as follows:
Lot 1, Block 2, Outlot A, and Lots 1, 2, 3, 4, 5, Block 1,
Construction Five Addition, Monticello, Minnesota
A map revealing the location of the parcels within the project is provided
on the following page.
E. Classification of the Tax Increment Financing District
The Monticello City Council and Housing and Redevelopment Authority
in determining the need to create a tax increment financing district in
in accordance with Minnesota Statutes, Section 273.71 -78 inclusive,
find that the district to be established is a redevelopment district
pursuant to Minnesota Statutes, Section 273.73, Subdivision 10(a)(3).
Less than seventy percent of the parcels in the district are occupied
by buildings, streets, utilities, or other improvements, but due to
unusual terrain or soil deficiencies requiring substantial filling,
grading, or other physical preparation for use at least 80 percent
of the total acreage of such land has a fair market value upon inclusion
in the redevelopment district which, when added to the estimated cost
of preparing that land for development, excluding costs directly related
to roads as defined in Minnesota Statutes, Section 160.01 and local
improvements as described in Section 429.021, Subdivision 1, clauses
1 to 7, 11 and 12, and Section 430.01, if any, exceeds its anticipated
fair market value after completion of said preparation; provided that
no parcel shall be included within a redevelopment district unless
the authority has concluded an agreement or agreements for the development
of at least 50 percent of the acreage having the unusual soil or terrain
deficiencies, which agreement provides recourse for the authority should
the development not be completed. Since, of the parcels proposed to
be placed into a tax increment district, less than seventy percent
are occupied by buildings, streets, utilities, or other improvements,
and the total acreage (80 percent or more) of the area has a fair market
value when added to the estimated cost of preparing the land for use
exceeds its anticipated fair market value after completion of the preparations,
excluding costs directly related to roads and local improvements, and
a development agreement for at least 50 percent of the acreage having
the unusual soil deficiencies and including recourse for the City should
the development not be completed, will have been concluded, prior to
bond sale, the area qualifies as a redevelopment district.
The description of the parcels that have been used to establish eligibility
as a redevelopment district are described below.
Lot 1, Block 2, Outlot A, and Lots 1, 2, 3, 4, 5, Block 1,
Construction Five Addition, Monticello, Minnesota
F. Parcels in Acquisition
No parcels are scheduled to be acquired by the City at the present
time.
K
G. Estimate of Costs
The estimate of public costs associated with the tax increment financing
redevelopment district are outlined in the following line item budget.
BUDGET
Street Construction
$127,500
Sanitary Sewer & Watermain
116,500
Storm Sewer
57,300
Attorney Fees
7,600
Issuance Costs
15,190
Allowance for Discount
7,410
*Capitalized Interest
58,500
TOTAL
$390,000
*The amount of capitalized interest will be equal to an amount sufficient
to pay interest on the bonds from the date of issue until the date
of collection of sufficient tax increment revenue to meet scheduled
interest payments when due, but not exceeding 3 years as required by
Minnesota Statutes, Chapter 475. Predicting capitalized interest prior
to issuance is extremely difficult, as it is a function of interest
rates, construction schedules, and tax timing; therefore, the above
figure is only an estimate of capitalized interest and is subject to
change.
H. Estimated Amount of Loan /Bonded Indebtedness
An estimate of the amount of bonded indebtedness is expected to
be $390,000. The term of the issue is 20 years and the interest rate
is expected to be 9 percent. The amount of two and one -half to three
years capitalized interest is estimated to be $58,500. Debt service
on the bond will be met through a combination of tax increment revenues,
tax levies, and assessment income.
1. Sources of Revenue
The majority of the public costs are to be paid with tax increment
revenues in combination with a tax levy. The tax increment is generated
as a result of the taxation of the land and improvements in the tax
increment redevelopment district. Tax increment financing refers to
a funding technique that utilizes increases in assessed valuation and
the property taxes attributed to new development to finance or assist
in the financing of public development costs. The 18 -unit facility
is expected to be fully assessed beginning in 1986 at which time the
development will generate an annual tax increment of $13,350 collectible
in 1987. The tax increment estimate for 1987 is based upon the assumption
that the 18 -unit apartment building is fully com feted in 1985 and
fully assessed on January 2 1986. A partial assessment in 1986 will
produce a partial tax increment payment in 1987. A like increment
will be generated for collection in 1988. The 24 and 30 unit structures
are expected to be fully completed in 1987, fully assessed beginning
in 1988, at which time they will generate an annual tax increment of
$17,600 and $22,760 respectively collectible in 1989. The combined
increment for the three structures is $53,700.
3
J. Original Assessed Value
Pursuant to Minnesota Statutes, Section 273.74, Subdivision 1 and Section
273.76, Subdivision 1, the Original Assessed Value (OAV) for the City of
Monticello tax increment financing redevelopment district is based on the
value placed on the property by the County Assessor in 1984. This assessed
value is $13,960 based on the replat to be filed with the County. Each year
the Office of the County Auditor will measure the amount of increase or
decrease in the total assessed value of the tax increment redevelopment
district to calculate the tax increment payable to the Monticello
redevelopment district fund. In any year in which there is an increase in
total assessed valuation in the tax increment redevelopment district above
the adjusted original assessed value, a tax increment will be payable. In any
year in which the total assessed valuation in the tax increment financing
redevelopment district declines below the original assessed valuation, no
assessed valuation will be captured'and no tax increment will be payable.
The County Auditor shall certify in each year after the date the Original
Assessed Value was certified, the amount the OAV has increased or
decreased as a result of:
1. change in tax exempt status of property;
2. reduction or enlargement of the geographic boundaries of the
district;
3. change due to stipulations, adjustments, negotiated or court- ordered
abatements.
K. Estimated Captured Assessed Value
Pursuant to Minnesota Statutes, Section 273.74, Subdivision 1 and Minnesota
Statutes, Section 273.76, Subdivision 2, the estimated Captured Assessed
Value (CAV) of the tax increment financing redevelopment district will
annually approximate $678,200. It is expected that the estimated $678,200
will be captured as a result of the improvements to be constructed
by Construction Five. This amount will be captured for up to twenty -five
years or until the project debt is retired. The Authority requests
100 percent of the available increase in assessed value for repayment
of debt and current expenditures.
L. Duration of the District
Pursuant to Minnesota Statutes, Section 273.75, Subdivision 1, the duration
of the tax increment district within the Redevelopment Project must be
indicated within the finance plan. The duration of the tax increment
district will be 25 years from the date of receipt of the first tax increment.
Thus, it is estimated that the tax increment district, including any
modifications to the finance plan for subsequent phases or other changes,
would terminate twenty -five years from the collection of the first tax
increment.
4
M. Estimated Impact on Other Taxing Jurisdictions
The impact of the loss of tax dollars represented as tax increments
is estimated below for each taxing jurisdiction. This estimate is
based on the existing redevelopment proposals and does not include
the possible tax increments derived from any other future development,
mill changes, or inflation factors.
Total Assessed Value
Tax Increment Finance District 1/2/84 Total $18,840
Latest Assessed Value of Each Government Body:
% of District
to Total
Wright County $ 358,798,000 .00005
School District #882 101,128,476 .0002
City of Monticello 79,954,554 .0002
Other 115,919,820 .0002
Considering all the districts, it can be seen from the above that the
school, city, and county districts will have over 99% of each respective
district available for normal growth of tax base or valuation. Applying
the percentage of the total mill rate in 1986 levied by each taxing
jurisdiction to the projected mill rate and the estimated tax increment
received reveals the annual loss of tax dollars by each taxing jurisdiction
as listed in the table below assuming development would occur without
public assistance.
The finance plan indicates we anticipate a tax increment at build out
as follows:
Tax Increment Finance District
Captured Assessed
Valuation
$678,204
Estimated Tax
Increment Received
$53,700
Based on the current mill rate, the estimated taxes received would
be as follows for the taxing bodies:
The following table represents the additional mills that would have
to be levied to compensate for the loss of tax dollars in estimated
tax increments for each taxing jurisdiction. The tax increments derived
5
Mills
Percent
Tax Increment
City
15.689
19.9
$10,686
County
20.308
25.6
13,747
School District #882
38.824
49.0
26,313
Other
4.360
5.5
2,954
Total
79.181
100.0%
$53,700
The following table represents the additional mills that would have
to be levied to compensate for the loss of tax dollars in estimated
tax increments for each taxing jurisdiction. The tax increments derived
5
from the manufacturing facility and housing alluded to in the tax increment
district would not be available to any of the taxing jurisdictions
were it not for public intervention by the Authority. Although the
increases in assessed value due to development will not be available
for the application of the mill levy for the duration of the tax increment
financing district, this new assessed value could eventually permit
a mill levy decrease. If it could be assumed that the captured assessed
value was available for each taxing jurisdiction, the non- receipt of
tax dollars represented as tax increments may be determined. This
determination is facilitated by estimating how much the mill levy for
property outside of the tax increment financing district would have
to be increased to raise the same amount of tax dollars in each taxing
jurisdiction that would be available if the projects occurred without
the assistance of the Authority.
Adjusted* Required Tax
Assessed Value Mills Increment
School District 101,114,516 .260 $26,313
County 358,784,040 .038 13,747
City 79,940,594 .134 10,686
*Tax Increment District assessed valuation subtracted.
N. Modifications of the Tax Increment Financing District
In accordance with Minnesota Statutes, Section 273.74, Subdivision 4,
any reduction or enlargement of the geographic area of the project
or tax increment financing district, increase in amount of bonded indebtedness
to be incurred, including a determination to capitalize interest on
debt if that determination was not a part of the original plan, or
to increase or decrease the amount of interest on the debt to be capitalized,
increase in the portion of the captured assessed value to be retained
by the Authority, increase in total estimated tax increment expenditures
or designation of additional property to be acquired by the authority
shall be approved upon the notice and after the discussion, public
hearing and findings required for approval of the original plan. The
geographic area of a tax increment financing district may be reduced,
but shall not be enlarged after five years following the date of certification
of the original assessed value by the county auditor. The tax increment
financing redevelopment district may therefore be expanded until 1990.
O. Limitation on Administrative Expenses
In accordance with Minnesota Statutes, Section 273.73, Subdivision 13
and Minnesota Statutes, Section 273.75, Subdivision 3, administrative
expenses means all expenditures of an authority other than amounts
paid for the purchase of land or amounts paid to contractors or others
providing materials and services, including architectural and engineering
services, directly connected with the physical development of the real
property in the district, relocation benefits paid to or services provided
for persons residing or businesses located in the district or amounts
used to pay interest on, fund a reserve for, or sell at a discount
bonds issued pursuant to Section 273.77. Administrative
expenses includes amounts paid for services provided by bond
6
counsel, fiscal consultants, and planning or economic development
consultants. No tax increment shall be used to pay any administrative
expenses for a project which exceed ten percent of the total tax increment
expenditures authorized by the tax increment financing plan or the total tax
increment expenditures for the project, whichever is less.
P. Limitation on Duration of Tax Increment Financing Districts
Pursuant to Minnesota Statutes, Section 273.75, Subdivision 1, "no tax
increment shall be paid to an authority three years from the date of
certification by the County Auditor unless within the three -year period (1)
bonds have been issued pursuant to Section 273.77 or in aid of a project
pursuant to any other law, except revenue bonds issued pursuant to Chapter
474, prior to the effective date of the Act; or (2) the authority has acquired
property within the district; or (3) the authority has constructed or caused
to be constructed public improvements within the district ... " The City or
Authority must therefore issue bonds, or acquire property, or construct or
cause public improvements to be constructed by 1988 or the Office of the
County Auditor may dissolve the tax increment financing district.
Q. Limitation on Qualification of Property in Tax Increment District Not
Subject to Improvement
Pursuant to Minnesota Statutes Section 273.75, Subdivision 6, "if, after four
years from the d cer�tion of the original assessed value of the tax
increment financing district ..., no demolition, rehabilitation or renovation
of a parcel or other site preparation including improvement of a street
adjacent to a property but not installation of utility service including sewer
or water systems, has been commenced on a parcel located within a tax
increment financing district by the authority or by the owner of the parcel
in accordance with the tax increment financing plan, no additional tax
increment may be taken from that parcel and the original assessed value of
that parcel shall be excluded from the original assessed value of the tax
increment financing district. If the authority or the owner of the parcel
subsequently commences demolition, rehabilitation or renovation or other
site preparation on that parcel including improvement of a street adjacent
to that parcel, in accordance with the tax increment financing plan, the
authority shall certify to the county auditor in the annual disclosure report
that the activity has commenced. The county auditor shall certify the
assessed value thereof as most recently certified by the commissioner of
revenue and add it to the original assessed value of the tax increment
financing district.
R. Limitation on the Use of Tax Increment
All revenues derived from tax increment shall be used in accordance with
the tax increment financing plan. The revenues shall be used to finance or
otherwise pay public redevelopment costs pursuant to Minnesota Statutes,
Chapter 472A. These revenues shall not be used to circumvent existing levy
limit law. No revenues derived from tax increment shall be used for the
construction or renovation of a municipally owned building used primarily
and regularly for conducting the business of the municipality; this provision
shall not prohibit the use of revenues derived from tax increments for the
7
construction or renovation of a parking structure, a commons area used as a
public park or a -facility used for social, recreational or conference purposes
and not primarily for conducting the business of the municipality.
S. Notification of Prior Planned Improvements
Pursuant to Minnesota Statutes Section 273.76, Subdivision 4, the Authority
has reviewed and searched the properties to be included in the tax
increment financing redevelopment district and found no properties for
which building permits have been issued during the 18 months immediately
preceding approval of the tax increment financing plan by the city. If the
building permit had been issued within the 18 month period preceding
approval of the tax increment financing plan by the city, the county auditor
shall increase the original assessed value of the district by the assessed
valuation of the improvements for which the building permit was issued,
excluding the assessed valuation of improvements for which a building
permit was issued during the three month period immediately preceding said
approval of the tax increment financing plan, as certified by the assessor.
T. Excess Tax Increments
Pursuant to Minnesota Statutes, Section 273.75, Subdivision 2, in any year in
which the tax increment exceeds the amount necessary to pay the costs
authorized by the tax increment plan, including the amount necessary to
cancel any tax levy as provided in Minnesota Statutes, Section 475.61,
Subdivision 3, the Authority shall use the excess amount to:
1. prepay the outstanding bonds;
2. discharge the pledge of tax increment therefore;
3. pay into an escrow account dedicated to the payment of such bond;
4. repay any loans including interest on these loans; or
5. return the excess to the County Auditor for redistribution to the
respective taxing jurisdictions in proportion to their mill rate.
U. Requirement for Agreements with the Developer
Pursuant to Minnesota Statutes Section 273.75, Subdivision 5, no more that
25 percent by acreage of the property to be acquired by the Authority
within a project which contains a in the redevelopment district shall be
owned by the Authority as a result of acquisition with the proceeds of bonds
issued pursuant to Section 273.77 without the Authority having prior to
acquisition in excess of 25 percent of the acreage, concluded an agreement
for the development of the property acquired and which provides recourse
for the Authority should the development not be completed. See Section E
for the development agreement requirement due to soil deficiencies.
V. Assessment Agreements
Pursuant to Minnesota Statutes Section 273.76, Subdivision 8, the Authority
may, upon entering into a development agreement pursuant to Minnesota
Statutes Section 273.75, Subdivision 5, enter into an agreement in
recordable form- with the developer of property within the tax increment
financing district which establishes a minimum market value of the land and
completed improvements for the duration of the tax increment
redevelopment district. The assessment agreement shall be presented to the
county assessor who shall review the plans and specifications for the
improvements to be constructed, review the market value previously
assigned to the land upon which the improvements are to be constructed and
so long as the minimum market value contained in the assessment
agreement appears in the judgment of the assessor, to be a reasonable
estimate, the assessor may certify the minimum market value agreement.
W. Administration of the Tax Increment Financing Redevelopment District and
Maintenance of the Tax Increment Account
Administration of the tax increment financing redevelopment district will
be handled by the Executive Director of the Authority and the Office of the
City Administrator.
The tax increment received as a result of increases in the assessed value of
the tax increment financing redevelopment district will be maintained in a
special account separate from all other municipal accounts and expended
only upon sanctioned municipal activities identified in the finance plan.
X. Annual Disclosure Requirements
Pursuant to Minnesota Statutes, Section 273.74, Subdivision 5, an authority
must file an annual disclosure report for all tax increment financing
districts. The report shall be filed with the school board, county board and
the Minnesota Department of Energy and Economic Development. The
report shall include the following information:
1. The amount and source of revenue in the account;
2. The amount and purpose of expenditures from the account;
3. The amount of any pledge of revenues, including principal and
interest on any outstanding bonded indebtedness;
4. The original assessed value of the district;
5. The captured assessed value retained by the authority;
6. The captured assessed value shared with other taxing districts;
7. The tax increment received.
The annual disclosure report is designed to be a two -way medium of
information dissemination for both the Office of the County Auditor and the
Authority. Should the auditor want additional information from the
Authority regarding its tax increment financing activities, such information
should be requested prior to submission of the annual disclosure report by
the Authority. Similarly, the city council may utilize the annual disclosure
k
report as a means for requesting information from the Office of the County
Auditor.
Additionally, the Authority must annually publish a statement in a
newspaper of general circulation in the municipality showing the tax
increment received and expended in that year, the original assessed value,
the captured assessed value, amount of outstanding 'bonded indebtedness and
any additional information the city deems necessary.
Y. Assumptions
It was necessary to make certain assumptions regarding income, costs and
timing of the tax increment redevelopment district. These assumption are
based on discussions with Authority, County, and fiscal consultant staff.
Z. Municipal Findings
Pursuant to ,Minnesota Statutes, Section 273.74, Subdivision 3, before or at
the time of approval of the tax increment financing plan, the municipality
shall make the following findings and shall set forth in writing the reasons
and supporting facts for each determination:
1. The proposed development or redevelopment, in the opinion of the
city, would not reasonably be expected to occur solely through
private investment within the reasonably foreseeable future and,
therefore, the use of tax increment financing is deemed necessary
since Construction Five could not economically construct the present
facility without the provision of the necessary public improvements
to the site and without the use of tax increments to assist with the
financing of these public improvements, the developer would not have
constructed the apartment building and manufacturing facility in the
City; and
2. The tax increment financing plan will afford maximum opportunity,
consistent with the sound needs of the City as a whole, for the
development by private enterprise as it will enable the City to
provide the necessary public improvements for development; thereby
encouraging redevelopment in the area.
3. The tax increment financing plan conforms to the general plan for
the development of the city as a whole as it will result in
construction of an apartment building and a manufacturing facility
which will provide needed housing, create new jobs and increase the
tax base of the City.
4. The tax increment district to be established is a redevelopment
district pursuant to Minnesota Statutes, Section 273.73, Subdivision
10(a)(3) in which the coffin �€ ons- esc�ribed in Section E of this plan
exist.
10
Central Monticello Redevelopment
Project Area No. 1.
Introduction
NEW
1.
M onticCflo CITY°r 7th Street Project Area
0 300ft
pp
- •Ji -
V
Ak
� � J
• I
r
6
! t�
r
hL
W.,
Y +■ ^� wi
E �5
+ �1 ti ■�' C
�*
I�F j'
IFL;
J*. -s !4 _ Nk
Rey ` . st d
y
1C r' sf r° b
- -7 - +r 194.
�r
MINUTES
ECONOMIC DEVELOPMENT AUTHORITY (EDA)
Wednesday, October 10, 2012 - 6:00 p.m.
Commissioners Present: Vice President Bill Tapper, Matt Frie, Rod Dragsten and Council
Members Tom Perrault and Brian Stumpf
Commissioners Absent: Bill Demeules, Tracy Hinz
Staff: Executive Director Jeff O'Neill, Angela Schumann, Wayne Oberg
1. Call to Order
Bill Tapper called the meeting to order at 6 p.m.
2. Approve Meeting Minutes
The September 12t", 2012 regular meeting minutes were not yet available for review.
3. Consideration of a]2Rroving payment of bills
Tom Perrault asked for a more detailed record of eligible expenses and repairs related to
Lakeland Dental's relocation. Staff agreed to provide that specific information for EDA
review. Jeff O'Neill noted that Dan Wilson has worked to ensure that tenants are protected
and that the costs to the EDA are appropriate.
BRIAN STUMPF MOVED TO APPROVE PAYMENT OF BILLS FOR OCTOBER
10TH, 2012. MATT FRTE SECONDED THE MOTION. MOTION CARRIED 5 -0,
4. Consideration of additional agenda items None
5. Consideration of an update on TIF 1 -22 Knockdown Analysis
Rusty Fifield from Northland Securities outlined the Knockdown Analysis and provided an
overview of the current financial capacity of TIF District 1 -22.
The analysis determined that $42,000 in excess tax increment had been collected and must
be returned to the County for redistribution. $17,500 of this excess will be returned to the
City's General fund.
Ten percent of the increment from taxes collected from property in TIF 1 -22 could be used
for qualified housing projects. Such expenditures must be authorized in the TIF plan,
finance the cost of correcting conditions in the redevelopment district, and meet
low - income housing requirements.
Economic Development Authority Minutes: 10/14/12
A portion of the existing fund balance could be used for TIF eligible expenses (not subject
to 5 year and pooling limits). This portion is revenue resulting from investment income,
state payments, and the sale of land.
TIF 1 -22 is required to be decertified by 2024. Northland had previously recommended
decertifying the district in 2012. Further review indicated that there seems to be more
flexibility to use existing resources than initially assumed.
There are currently 58 parcels in TIT' 1 -22. The following three options are proposed for
removing the 55 parcels unencumbered by existing obligations from the district. These
options only address current parcels and assume 40% of redistributed funds are returned to
the City.
o Option 1: Decertify TIF 1 -22 and redistribute all funding. $1.3 million would be
declared excess, filtered through the county, and returned to the City's General
fund. There would be $95,000 in tax revenue resulting from decertification.
o Option 2: Decertify TIT' 1 -22 and retain usable funds for the EDA. There would be
an approximate $2.9 million dollar fiend balance available ($2.5 million current
funds and $384,000 future funds). The City's General Fund would receive
$177,000 as a share of redistributed funds and $95,000 in tax revenue from
decertification.
o Option 3: Do not decertify TIF 1-22 at this time and use current and future funds as
allowed by pooling. This option provides the EDA $2.9 million in current funding
and $1.1 million in future funding.
Rusty Fifield recommended a variation of Option 3 as it provides a sizable amount of
money that can be invested in the downtown. He pointed out that using the allowable 10%
in TIF administration funding for related staff time and marketing is a great way to
leverage resources rather than spending from the General fiend. He also suggested that
there may be areas within TIF 1 -22 that could drop out and instead be created as
independent tax increment districts.
Additionally, there are 124 parcels eligible for reinstatement into the district due to a
qualifying activity and 14 parcels still under review for activity.
6. Consideration to approve Resolution 2012 -88, a Resolution Ratifying Modification to
the Tax Increment Financing Plan for Tax Increment Financing District No. 1 -5.
The EDA is required to define a purpose for fiends available in TIF District 1 -5 by the end
of 2012. Due to the flexibility in pooling allowances and spending in this district, staff
asked that the EDA consider modifying the original budget to allow for the reallocation of
increment within the district to the West 7th Street Extension project (Minnesota to Elm).
2
Economic Development Authority Minutes: 10/14/12
This project is identified as a proposed improvement in the City's Transportation Plan, and
is also included in the City's current 5 -year Capital Improvement Plan as a proposed
improvement for 2013.
The City Council authorized a feasibility report for the completion of the 7th Street project.
Preliminary funding estimates and sources for the project are as follows:
Estimated Project Costs $ 1,230,000
Estimated Eligible State -Aid. Costs $ 633,700
Estimated Assessments (Deferred) $ 652,290
Staff asked that the EDA allocate all of the available increment in TIF 1 -5 ($450,890)
toward the 7t11 Street project to fund much of the deferred assessments. The deferred
assessment amount would be applied to the adjoining property and be paid when the land
develops. The property owner is interested in cooperating but unable to pay the assessment
right away. By utilizing the increment in TIF 1 -5 for deferred assessments, the City would
be paid back once assessments are levied and paid. Those funds could then be re -used for
additional projects that foster economic development.
Staff will consider options to address the $150,0004200,000 funding gap. Brian Stumpf
suggested that the gap may be larger because other associated costs have not yet been
identified.
Rod Dragsten asked why the project is important considering all vacant land and expressed
concern that fiends would not available for the downtown project. Jeff O'Neill stated that
the project would create an important circulation pattern for the City and that there will be
other sources of funding available for downtown.
As the EDA is not modifying the amount of the original project budget, but rather
reallocating funds among the line items, no public hearing is required. The district would
be decertified after reallocation.
Bill Tapper asked how long assessments can be deferred. Staff said that a date is not
typically set until development or sunset. It may be ten years or so before payback.
Rod Dragsten asked what if the property owner doesn't agree to the assessments. Jeff
O'Neill noted the road improvements would increase the property value and that would be
a benefit to the owner.
Wayne Oberg suggested that the 7th Street project would be a good use for these funds.
Bill Tapper indicated that he had mixed emotions about spending this money but saw the
benefit of connecting Seventh Street through town.
Economic Development Authority Minutes: 10/14/12
Matt Frie agreed that the project would be a benefit in that it would more easily move
traffic through the City even if the downtown redevelopment doesn't play out as he hoped.
Tom Perrault confirmed that funds designated at this time can be used for this purpose in
the future. He also stated that, although this wasn't the transportation project that he'd
intended to spend these funds on, he would do so.
TOM PERRAULT MOVED TO RECOMMEND THAT THE CITY COUNCIL
APPROVE EDA RESOLUTION #2012 -88, A RESOLUTION RATIFYING
MODIFICATION TO THE TAX INCREMENT FINANCING PLAN FOR TAX
INCREMENT FINANCING DISTRICT NO, 1 -5. BILL TAPPER SECONDED THE
MOTION. MOTION CARRIED 5-0.
7. Consideration of an update regarding, TIF Housing District Increment
Rusty Fifield indicated that some, if not all, existing housing districts would continue to
generate increment beyond their obligation notes until the time of their required
decertification. Obligations under TIF District 1 -19 (Mississippi Shores) have been met,
and the EDA had initially considered decertifying the district. The district has, however,
remaining excess increment available for use and is not required to be decertified until
2023. He recommended that the district not be decertified at this time if there may be
opportunities to utilize any excess increment to benefit low to moderate income housing.
Renovations and expansions may be options for consideration.
S. Consideration to review and approve the EDA General Fund budizet for 2013
Due to the current absence of a consistent source of funds necessary to replenish the EDA
General Fund, the City Administrator and Finance Director recommended that the City
Council continue to fund an amount from the General Fund levy for Economic
Development and allocate that amount to the EDA General Fund for marketing, staffing
and other administrative activities not associated with a TIF district. The EDA would also
be asked to prepare a budget based on a workplan to obtain funding for the following year.
This process would result in close alignment of goals of both bodies and provide a filnding
source for Economic Development/EDA activities.
Jeff O'Neill stated that this funding linkage would not limit the EDA authority to what has
been approved by City Council. He also pointed out that the EDA would continue to have
access to 10% of TIF district funding for administrative costs.
Wayne Oberg suggested that, rather than co- funding certain line items, the City Council
instead transfer $80,000 to the EDA General Fund where it would be allocated among the
line items. In addition, $40,000 would be allocated to TIF administration.
4
Economic Development Authority Minutes: 10/14/t2
He also noted that he had identified a difference between the city's TIF 1 -22 district report
and the 2009 state audit report. An $890,000 entry, which had been transferred in from a
closed debt service fund, was reported in the TIF 1 -22 account. This entry will be moved to
the EDA General Fund as one time revenue and is not recommended to be used for general
operating expenses.
MATT FRIE MOVED THAT THE EDA ACCEPT AN ANNUAL ALLOCATION
FROM THE CITY'S GENERAL FUND TO THE EDA GENERAL FUND AND THAT
THE EDA PRESENT A BUDGET REQUEST TO THE CITY COUNCIL EACH JULY
FOR FUNDS NEEDED TO ACCOMPLISH A WORIULAN FOR THE FOLLOWING
YEAR. BILL TAPPER SECONDED THE MOTION. MOTION CARRIED 5 -0.
9. Director Report
Industry of the Year
Bill Tapper noted that the IEDC had requested that the EDA provide $500 in funding for
the Industry of the Year banquet. Staff will clarify the exact allocation depending on
number of event attendees. The Industry of the Year Award & Manufacturer's
Appreciation Breakfast will be held on Wednesday, October 24"' at 7:30 AM at the
Monticello Community Center.
ROD DRAGSTEN MOVED TO RECOMMEND THAT THE EDA PROVIDE
FUNDING IN AN AMOUNT NOT TO EXCEED $750 FOR THE INDUSTRY OF THE
YEAR BANQUET. BRIAN STUMPF SECONDED THE MOTION. MOTION
CARRIED 5 -0.
Fred's Auto
The Limited Scope Investigation (LSI) on Fred's Auto has been completed. Closure of the
leak site is recommended. The City would likely have limited to no clean up
responsibilities subject to Minnesota Pollution Control Agency (MPCA) review. Staff will
discuss the findings with Braun Intertec and the Department of Commerce and report back
to the EDA. The two invoices that had been submitted to pay for studies costs on the
property were eligible for reimbursement through the Petrofund. The not -to- exceed
amount has not yet been reached.
10. Items added to the agenda
Broadband Conference - Jeff O'Neill invited EDA Commissioners to consider attending an
upcoming broadband conference in Danville, Virginia to learn about what other
communities have done to use their fiber technology as a tool for economic development.
Economic Development Authority Minutes: 10/14/12
11. Adjourn
MATT FRIE MOVED TO ADJOURN THE MEETING AT 8:13 PM. TOM PERRAULT
SECONDED THE MOTION. MOTION CARRIED 5 -0.
Recorder: Kerry T. Burri
Approved: December 12, 2012,�j
Attest: C
Jeff O xecutive Director