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EDA Minutes 04-09-2008MINUTES CITY OF MONTICELLO ECONOMIC DEVELOPMENT AUTHORITY Wednesday, April 91h, 2008 1. Call to Order. Chairman Demueles called the meeting to order at 6:10, and declared a quorum of the Authority present. 2. Roll Call Commissioners Bill Fair, Dan Frie, Bill Demueles, Bill Tapper, Bob Viering and Wayne Mayer present. Commissioner Herbst absent. 3. Reading of minutes. MOTION BY COMMISSIONER FAIR TO APPROVE THE CITY OF MONTICELLO EDA WORKSHOP MINUTES OF MARCH 12th, 2008. MOTION SECONDED BY COMMISSIONER FRIE . MOTION CARRIED, 6- 0. MOTION BY COMMISSIONER FAIR TO APPROVE THE CITY OF MONTICELLO EDA MINUTES OF MARCH 12th, 2008. MOTION SECONDED BY COMMISSIONER TAPPER. MOTION CARRIED, 6-0. 4. Agenda Addition Koropchak added as item 8g the consideration of an amendment to the contract for private redevelopment for the Front Porch project. 5. Approval of the EDA bills and communications. Fair asked if Koropchak was recommending approval of the bills, including the WSB billing included. Koropchak stated that they are new WSB invoices, which include a line item description of the work. Koropchak stated that recommends approval as described. Viering asked about how many more invoices will be coming on this project. Koropchak stated that she does not have the answer to that. She explained that EDA Minutes — 04/09/08 these invoices are for Otter Creek. Phases one and two are completed, but there will still be a phase three. Koropchak explained that when Finance Director Kelly gives his report, he may have a better feel for future project costs. They are still doing as-builts and surveying for the first two phases. Tapper stated that it seems that the descriptions are fine, but the question is where they stand relative to budget. Koropchak stated that Kelly is analyzing estimates for land purchase, infrastructure improvements and what has been spent to -date. She stated that she doesn't have an immediate answer, but there was an estimate for the completion of the infrastructure. Viering asked if the EDA could have that by the next meeting. Koropchak stated that it was on the agenda, she and Kelly is working on it. Tapper stated that the hard part is that the EDA does not have any idea whether the invoices are reasonable. Fair noted some of the invoice expenses would be captured by the taxes. Viering stated that the issue is that it seems there is an open checkbook. Tapper stated that the EDA has a responsibility to keep this in check. Koropchak stated that she understands the need for accountability. Kelly noted that the City has changed its invoicing process because of questions like this. City Engineer Westby is now reviewing every bill that WSB is submitting to the City for a project. In addition, the City is trying to refine who can request WSB to complete projects. He stated that he is currently trying to put all the pieces of the industrial park back together. However, because many projects that have been run through that project code, the finances are in the process of being sorted out. Tapper stated that based on that information, he questions whether the EDA should be approving this bill. Kelly stated that the bill could be approved, as it is a legitimate invoice. Fair asked if there is any area on this that staff feels is deficient. Koropchak responded that these items are needed to complete the project. MOTION BY COMMISSIONER TAPPER TO APPROVE THE BILLS. MOTION SECONDED BY COMMISSIONER VIERING. MOTION CARRIED 6-0. 2 EDA Minutes — 04/09/08 6. Report of Executive Director. Koropchak noted that as of the date of the present meeting, the EDA had not received the first half of required payment from WRE Properties. She stated that she has not yet addressed a second letter. She stated that she will outline the EDA's discussion on how to improve the communication. Koropchak indicated that she plans to go out and visit with Walker. Koropchak recommended a second letter and a personal visit. Viering stated that it was his impression that Walker understood the invoice. Koropchak mentioned that the higher education group met on Friday the 4th Anoka -Ramsey Technical presented a proposal with four options on ways that the committee could provide resources on classes and educational opportunities. Dr. Jim Benson, who was instrumental in working with business in relationship to job creation is scheduled to come to the next meeting on May 2nd. Koropchak also reported that she and Susie Wojchouski will visit a higher education center in Apple Valley in the coming month. She noted that when the higher education committee makes a decision on a direction, there will most likely be a financial commitment needed, and so the group will need to research a source of funding. 7. Report of Committees Marketing Frie stated that the group is looking at vendors for a billboard sign on the freeway and the possibility of using a commercial industrial broker to some extent for industrial park. He stated that the group will come forward to the EDA with a recommendation. Fiber Optics Mayer stated that the task force is moving rapidly toward a bond sale, which will hopefully be within the next 4-6 weeks. He explained that there are many parallel paths being worked on in order to prepare for the bonds sale and get construction under way as soon as possible. Housing Viering reported that the committee had met and began discussion on the general housing issue and overall scope of the housing problem. The conclusion was to have a representative at an upcoming Greater Minnesota Housing Fund seminar on foreclosures and to look to GMMF as a resource for information on funding and technical expertise. 3 EDA Minutes — 04/09/08 He noted that the most important thing is that the program is not being looked at to bail out lenders or those in foreclosure. The goal is to get homes into the hands of first-time homebuyers. Tapper stated that the group is looking at a multi -prong approach. He explained that there may be a way to provide resources and education for those facing foreclosure, and address some of the problems that can be addressed by the City to make neighborhoods look better. He also reported that as another facet, the group is looking at assistance with gap funding. 7. Unfinished Business. a. Consideration to approve the revised January 2008 Kennedy & Graven (EDA General Matters) Invoice MOTION BY COMMISSIONER FAIR TO PAY THE REVISED 2008 KENNEDY & GRAVEN (EDA GENERAL MATTERS) INVOICE. MOTION SECONDED BY COMMISSIONER VIERING. MOTION CARRIED, 6-0. b. Consideration to hear subcommittee report on supplement gap funding program options to encourage purchase of unoccupied single- family homes and to authorize further direction. Koropchak noted this had been covered earlier. 8. New Business a. Consideration to call for a public hearing date to amend the Business Subsidy Criteria of the City of Monticello Economic Development Authority. Koropchak noted the recommended change to the business subsidy criteria was to separate the document into that which was TIF -related and that which is related to the loan program. Koropchak stated that separation, as well as the other changes noted would be made and sent to the Authority. MOTION BY COMMISSIONER FRIE TO TABLE ACTION ON THE PUBLIC HEARING DATE FOR THE BUSINESS SUBSIDY CRITERIA UNTIL THE EDA HAS REVIEWED THE FINAL VERSION OF CRITERIA. MOTION SECONDED BY COMMISSIONER FAIR. MOTION CARRIED, 6-0. 0 EDA Minutes — 04/09/08 b. Consideration to review and accept 2007 annual TIF/General Fund Reports. Kelly reported that he had used the general reporting form used in the past, and updated it as best as possible. He noted that because the audit is not completely finished, the reports may not be final. Kelly indicated that the report starts out with beginning cash balance for each district, along with revenue and expenditures. The report then provides the cash available at the end of the year. He reported that most districts have positive cash balances, with the exception of newer districts which have start up costs and TIF hasn't come in yet to offset those expenses. The report also outlines loans and agreements and their status as far as what is outstanding. Fair asked if there will be any change to this document, given the historical nature of some of the districts. Kelly stated that because of time, he used the current format. Kelly commented that the format can be changed to "hide" the old districts. Frie asked about decertification. Kelly responded that most of the districts showing zeros have been decertified. Mayer stated that as far as the conversation about hiding old districts, he would prefer that they remain shown, given the new formation of the EDA. He indicated it is helpful to new members. Frie asked about districts 2, 5 and 6, and whether they do not have the more recent restrictions on fund use. Koropchak stated that districts 2, 5, and 6 are redevelopment districts and do not have all of the restrictions that newer districts do. She noted that in 2007, the City purchased the Cedar Street Garden Center, and because it was potential redevelopment property, the expenditure was taken from the revenues of that TIF district. Koropchak noted districts where the debt obligation has been paid off. In those districts, the EDA will receive TIF for the years until decertification, which does then provide dollars in each district. Koropchak reported that the cash surplus seems to indicate a deficit of $639,000. However, that is the balance of combined TIF districts. Kelly stated that when combined, although some districts have more restricted funds, overall the EDA has $675,000 in cash available. He noted that the previous Finance Director charged a lot of the legal and engineering to the general fund and didn't assign to the individual TIF district, which is part of the reason it appears that the funds are running a negative balance. 5 EDA Minutes — 04/09/08 Koropchak pointed out that district 1-22 was one of the largest TIF districts certified, and is the downtown district. She stated that the reports show the overall district, then each project within. MOTION BY COMMISSIONER TAPPER TO ACCEPT THE 2007 ANNUAL TIF/GENERAL FUND REPORT. MOTION SECONDED BY COMMISSIONER MAYER. MOTION CARRIED, 6-0. c. Consideration to review and accept the 2007 GMEF Financial Statements, Activity Report, and 2008 Budget. Koropchak reported that the GMEF has approximately $761,000 in cash currently. Additionally, the EDA has approximately $1.647 million in loans receivable. Koropchak stated that the majority of 2007 activity was interest income and interest on the notes. Again, the report uses the same format as previous years. Koropchak summarized action taken by EDA in 2007 and noted that the cash flow projections for 2008 are an estimate. She calculates this by starting with the cash fund balance and then looking at the payments due on the loans and then additionally estimates for interest income. The estimate includes some disbursement of loans. Kelly reported that the $100,000 repayment of liquor store funds still needs to be transferred out of this fund and repaid to the debt service to the City and applied to the levy. Fair noted that would happen this year, so the EDA should anticipate that reduction, essentially leaving a $661,000 cash balance. Koropchak reported that given all projections, the year-end cash balance would be approximately $639,000, assuming the EDA would approve loans of up to $300,000. Demeules confirmed that the $100,000 repayment would be used to reduce the bonded indebtedness of the City and would not go to the general fund. Koropchak confirmed. MOTION BY COMMISSIONER VIERING TO ACCEPT THE EDA FINANCIAL STATEMENTS AND ACTIVITY REPORT FOR SUBMISSION TO THE CITY COUNCIL ON APRIL 14TH, 2008. MOTION SECONDED BY COMMISSIONER FRIE. MOTION CARRIED, 6-0. EDA Minutes — 04/09/08 d. Consideration to review year end balance of other sources of revenue. Kelly noted again the use of previous format for reporting on this item. He stated that the MN Investment fund includes two outstanding loans. These are TCDC, which was paid off in 2007 and UMC, which ends this year with a balloon payment. A summary of the different lines of credit that the City has open was also provided. Koropchak stated that the TCDC loan fund payments are federal dollars with restrictions. Once the EDA has loaned those funds again, they are recycled and federal restrictions will not apply. UMC's funds are available for job creation. Koropchak stated that she wanted EDA to have a record to show the loans approved using the liquor store funds. e. Consideration to review revenues and expenditures associated with the development of Otter Creek Crossings. Removed. f. Consideration to establish and approve a deposit and fee range for the Preliminary Development Agreements. Koropchak stated that this had been discussed briefly at the workshop. The EDA had talked about establishing a deposit associated with the development agreement. She indicated that currently, the only administrative expenses accounted for are those from Ehlers & Associates. Koropchak indicated that she had provided information on what the flat rates are for by district and type. She stated that she had also asked Kennedy & Graven to provide their rates and information on a flat fee for establishment of districts and associated contracts. Mr. Bubul responded that is not their general practice. Koropchak reported that the administrative costs typically range from $15,000 — $17,500. She noted it had been some times since establishment of a district outside of Otter Creek. Koropchak explained that a downtown redevelopment district could cost $10,000 — $19,000 just for the fee. Viering suggested a letter to accompany the draft development agreement as a means of improving communication. Viering stated that his feeling is that the best Ehlers & Associates can do is provide an estimate. He stated that he is not sure he agrees when it comes to legal fees as they should be able to readily provide as estimate once they know the parameters. 7 EDA Minutes — 04/09/08 Koropchak stated that she thought their hesitation is that costs don't relate to the size of the project, but rather how many amendment and changes are made to the agreements. Viering responded that he is not asking for flat fees, just asking for estimate once the deal is put together in principal, and should be done with each transaction. Koropchak commented that when the EDA evaluates projects in terms of criteria and performance, that is the point at which the preliminary agreement is signed. She sought confirmation that it is at that time that Viering would like to include those estimated costs into the addendum. Veiring confirmed. Frie noted that if the EDA sets a flat fee, it could then be paid back as an eligible expense through the TIF district. He asked if that affects the amount they could request. Koropchak stated that it would provide a clearer idea of their costs. Kelly stated that he does not like the idea of getting the fee out of the increment. The costs occur in one year and through increment, the EDA would be spreading the costs out over 5-7 years. He recommended a deposit and that they be billed. Fair agreed, stating that these are the costs of doing business. He noted that some of these expenses are because the developer makes changes, not the City making those changes. Tapper stated that after looking at the numbers on the previous page, his opinion on the approach the EDA should take is that the attorneys provide an estimate and then revise the deposit to 50% of that amount. He would eliminate the estimated administrative costs. Koropchak confirmed that Tapper's recommendation is to revise the agreement to read much as it does, but eliminating the section where it references amounts and provide a number of deposit at 50% of the estimated cost. The estimate then also goes into the addendum, along with a statement of understanding that the developer is responsible for the actual expenses. Fair asked where in the process the developer would get this information. Koropchak stated that it would be provided when the EDA enters into a preliminary development agreement, within that agreement, it requests the deposit. Koropchak also noted that the actual administrative costs are greater than just these two things. Staff time is not currently charged to these projects, for instance. Tapper asked if she is proposing changes. Koropchak stated that she is not. In terms of process, she noted that EDA Minutes — 04/09/08 previously, when the EDA issued certificates of completion, the City accounts for all admin costs, and the difference is then billed. Fair asked if by the time Ehlers and Kennedy & Graven are involved, the EDA already has a preliminary development agreement. Koropchak confirmed, stated that it is difficult because we are asking them to provide an estimate on a project that they have not reviewed. Tapper inquired why the EDA can't expect them to do this research. For example, in his business he has to give estimates long before a final project is defined. Viering agreed, stating that they shouldn't charge to give an estimate. Koropchak noted that generally the consultants and the attorney have not been that much involved in the preliminary negotiations or in analyzing the TIF. Koropchak stated that she does not authorize their expenditures until the preliminary development agreement is executed. Demeules asked if Walker In-store is the only time the EDA has had this issue. Koropchak stated that in many cases, developers are not happy to get the bill, but have always paid it. She stated that the goal should certainly be to try to eliminate that surprise and put it into the financial model. Demeules noted that there is still an issue of providing an estimate and then finding that the developer is still be unhappy about the costs. He stated that he doesn't think the EDA can expect the attorneys to give an estimate. He noted that if it comes out higher, there will still be a have a unsatisfied customer. Tapper stated you can hedge that by saying it is estimated. Fair stated that the clarification needs to be in the original contract. The contract should also state that at some point there will be a final accounting. Viering stated it is a question of what the range of costs are. Tapper stated that there are really two problems, the amount over the deposit and the frequency of the accounting. Fair stated that at the last meeting, it was noted that Walker had requested cost information and had been given that information. He only asked for it once and was given it once. This addendum letter may help a little by providing historical background. Mayer asked how other municipalities have handled this. Kelly stated that other communities just set a deposit amount ranging from $10,000 to $20,000, depending on the project. He stated that the key may be that as a 9 EDA Minutes — 04/09/08 project starts to go over, the developer be billed for those charges, or note to them that they are going over. Mayer stated those additional costs are normally brought on because of extenuating circumstances. If changes are occurring, at that time staff needs to do a better job of informing the applicant. Fair noted that if it is a change the developer is requesting, it then puts the burden for reporting back on the City. Mayer asked if additional costs come about because of late billing. Schumann explained that billings aren't late, but rather the time from the original expense to accounting is often approximately 3 months, given billing and financial report cycles. Frie commented on his experience. The only way to eliminate all hard feelings is to have a flat fee. All other alternative would be better, but you will still create hard feelings in some circumstances. Fair stated the EDA should do the best it can in terms of providing the best estimates, as this document worked in a lot of cases. Tapper stated that from his perspective and from the documentation he's seen, the administrative costs were a concern from the outset. Fair stated that he would like the boilerplate agreement to refer to the amount as a deposit. Frie asked if it helps to see what 3-4 similar communities do. Mayer agreed. Kelly stated that he could do a list serve inquiry for fees and deposits in these agreements. Koropchak noted clarification would be needed in that email. The commissioners directed Koropchak and Kelly to work on this item. MOTION BY COMMISSIONER FAIR TO TABLE ACTION ON THE ESTBALISHMENT OF A DEPOSIT AMOUTN AND FEE RANGE FOR THE PRELIMINARY DEVELOPMENT AGREEMENT PENDING FURTHER INFORMATION. MOTION SECONDED BY COMMISSIONER MAYER. MOTION CARRIED, 6-0. g. Reassignment of contract for redevelopment as related to the Vine Place Townhomes (Front Porch) project. Koropchak reported that she had received a call from 1St National Bank requesting an amendment to the contract because there were two -three homes not yet completed. These are outside of the TIF district. The developer request an extension of the private redevelopment contract to 10 EDA Minutes — 04/09/08 December 30, 2008 to allow those units to be completed. The bank was working with the developer and looking to extend the maturity date on the note to April 1, 2011. The bank's attorney wanted an agreement between the EDA, City and the bank recognizing that extension. EDA attorney Steve Bubul has reviewed this, but she has not heard back from them. She noted that the EDA could approve this, subject from EDA attorney. It was noted that this item would also go on to the City Council. MTOION BY COMMISSIONER FAIR TO AMEND THE PRIVATE CONTRACT FOR REDEVELOPMENT FOR FROTN PORCH TO EXTEND THE DATE OF COMPLETION TO DECEMBER 30, 2008. MOTION SECONDED BY COMMISSIONER TAPPER. MOTION CARRIED, 6-0. 9. Adjourn. MOTION BY COMMISSIONER TAPPER TO ADJOURN. MOTION SECONDED BY COMMISSIONER MAYER. MOTION CARRIED, 6-0. President l � Secretar 11