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HomeMy WebLinkAbout2006-06-15 - Council MinutesCITY OF CORCORAN CITY COUNCIL SPECIAL MEETING June 15, 2006 The Corcoran City Council met on June 15, 2006, at city hall in Corcoran, Minnesota. Present were Mayor Cossette, Councilor Jacobs, Councilor Call to Order Lymangood, and Councilor Thomas. Also present were Administrator Vergin, City Engineer Vander Top, Planner Lindahl, Paul Donna of Northland Securities, and Roll Call Joanne Foust of Municipal Development Group. Councilor Grabowski was absent. Mayor Cossette called the meeting to order at 6:30 p.m. followed by the Pledge of Allegiance. Agenda Approval MOTION by Thomas, seconded by Jacobs, to approve the agenda with adding 7.a. Agenda Approval Goals & Objectives. Voting Aye: Cossette, Jacobs, Lymangood, and Thomas. (Motion carried 4:0) Open Forum No one. Overview of Corcoran Business Park Planner Lindahl provided a brief description of the Corcoran Business Park project. It consists of 53 acres, 26,600 square feet of retail and 536,200 square feet of industrial. Sanitary sewer and water will service this area from the City of Medina. This project will include a backage road from Rolling Hills Road to Pioneer Trail, for which the City has received MnDot funding in the amount of $550,000. This plat was reviewed by the Planning Commission on June 1, where it was tabled allowing the applicant to address some concerns that were raised. It is anticipated that this will be back on their agenda in August. Financing Scenarios Paul Donna, Northland Securities addressed the council indicating that his role is to provide the City with information regarding the financial impact that this project will have to bring infrastructure services to this area. That information will assist the City Council in their decisions. He informed the Council of the Tax Increment Finance (TIF) Committee's meeting on Tuesday, June 20. At that meeting three components were reviewed and now need to be further addressed by the Council. 1. Allocation of spreading the costs on either an area basis, or a project specific basis. Total cost to provide services to the SW District is $15.7 million — Area basis allocation to CBP = $1.8 million, Project basis to CBP = $2.5 million. 2. Allocation of area charges and connection fees. It is proposed these costs be split 50/50 with area charges being collected upfront, the connection fees would be collected at the time that building permits were issued. The risk that the City runs is the gap between when connection fees are collected. 3. Financing vehicles that are available to the City to fill that gap and the time line between the collection of connection fees. Donna explained to the Council that the least risk to the City is to do a 429 Assessment process; this allows the City to have a lien on the properties allowing the city to eventually receive funds for the improvements. Donna further explained that the bonding costs, including principal and interest are assessed to the properties, filed with the County to be collected with the taxes and Open Forum Overview of Corcoran Business Park Project Financing Scenarios — Discussion of Council Page -1- CITY OF CORCORAN CITY COUNCIL SPECIAL MEETING June 15, 2006 paid semi - annually, or are prepaid. Donna noted that the TIF Committee's recommendation is to use the project costs basis. Councilor Thomas questioned clarification on the water costs included in the cash flow analysis. It does include future infrastructure improvements such as storage wells and a tower. The City can decide as development continues whether to build those or continue to retain services from Medina, but the CBP project does assume those future improvement costs. Engineer Vander Top noted to the council that the city would revisit area charges and connection fees annually to assure that the City is collecting the necessary funds. Donna reviewed the cash flow analysis with the Council, indicating that there will be a gap that will need to be funded by cash either on hand or through bonding. If bonding is used, the assessments could be collected over a ten -year period or at the time that the property sells. Scenario 2 (Project Basis) leaves a $1 million gap; Scenario 1 (Area Basis) includes the utilization of TIF funds to reduce the gap to $775,000. Foust indicated that it would be the preference of the City to collect 100% of the area charges and connections fees up front, but the 50/50 split is typically used. Councilor Thomas stated that if the City is to aggressive, collecting 100% upfront, that developers would most likely go away. Donna and Foust further noted that the City can adjust the 50/50 ratio per project or annually, but suggested that the City stay consistent. Mayor Cossette indicated that he prefers using the project basis, but the area basis seems fairer. Could consider crediting back to United Properties when additional development occurs. Councilor Thomas concurred that he also prefers the project basis and the idea of crediting back area charges to United Properties if additional development occurs. Councilor Lymangood stated that this should not be compared to the Hedgestone Project in the SE District, where the developer will finance all infrastructure and sizing to serve the larger area, and no financing is being sought through the City. This project is different — there are four things that the City should be looking at: 1. Who should pay? 2. How much? 3. When? And 4. How? Thomas stated he prefers the project basis with no TIF funds. Cossette agreed with Thomas, further noting that if the City cannot get 100% of the charges upfront then bonding should be utilized. Thomas added that there are other properties in the SW District that may be interested in moving forward with development. The City needs to get more of those people involved in this process. Lymangood reminded the Council that the City has received interest in writing Page -2- CITY OF CORCORAN CITY COUNCIL SPECIAL MEETING June 15, 2006 from others in the area seeking services and are willing to pay for those services. Thomas stated that he would be interested in using TIF funds if others in the area will benefit. Lymangood pointed out that TIF funds should be utilized rather than bonding. That the tax revenues that the City will receive will exceed the $1 million gap. It is unfortunate that one council member is not present and one councilor has remained quiet. Jacobs responded that United Properties is only responsible for 11% of the development in that area, yet driving it 90 %. City is taking risk, the residents should be heard. There are a lot of uncertainties. Thomas interjected that by allocating the costs on the project basis the city is reducing the risk. Jacobs stated that United Properties is more credit worthy, most bank loans look at ability to pay. He is slow to commit the City to holding the funding. Thomas questioned Councilor Jacobs if he is comfortable with the City bonding and then assessing United Properties. Donna informed the Council that the General Obligation bonds are backed by the City; if they are not collected then the City would pay back the debt. There are ways to mitigate that by requiring the developer to post a letter of credit, this is not often done, but could be. Is only aware of this being done in 2 or 3 instances in 15 years. TIF would allow the city to buy down the infrastructure costs that would benefit the area as a whole. United Properties will need to make an application to the City if they wish to have the City utilize TIF funds for this project. Mayor Cossette called a five - minute recess to allow Administrator Vergin to notarize paper work for a resident. Mayor Cossette reconvened the Council meeting. Mayor Cossette stated that his position is that the City use consistency, use the area basis, if the City collects more than what UP's project basis is, then rebate back to the developer; and prefers not using TIF at this time. Thomas stated that if the City is not willing to bond, then no development in the City will most likely occur. Jacobs stated with only 11% he is slow to say the City should be involved with the process, if 70% more likely. Should do this similar to process used for improving roads. Donna indicated that this is for the development of 54 acres, there is no direct benefit to others at this time Thomas stated this development is an investment to the City, it is not similar to a Meeting Recessed Meeting Reconvened Page -3- CITY OF CORCORAN CITY COUNCIL SPECIAL MEETING June 15, 2006 road project. Jacobs responded that it is United Properties making the investment, and they have financing options available to them, a business should take 100% of the risk. Cossette informed the council that they need to make some decisions on how to move this forward and how this will be paid. Thomas replied that the information in front of the Council is all that is needed at this time, if not this then what option should be used? Lymangood responded that is the key — have been provided with the information, the City has been negotiating with Medina for services, have adopted goals that include being business friendly and desire to expand the tax base. The SW District property owners have requested services to the area so why is the council blocking this. Questioned staff if there are any TIF expenditures planned for in the next 4 years. Administrator Vergin responded that there are not. Lymangood continued that he is in favor of considering bonding, but TIF funds first. We need to be proactive so that development will occur. Jacobs responded that they do not need 40% of the Council to make decision. Referred to an industrial park expansion in Princeton where the park did not get filled and the bonding was then picked up by the City because of default. MOTION by Lymangood to table items 5 and 6 to the next meeting. (Motion died due to the lack of a second.) Lymangood stated that the 50 acres being developed is valued at approximately $1.5 million, and the infrastructure is estimated at $20,000, therefore there is very little risk to the City. Princeton occurred 10 years ago, we have 300 acres waiting for services, the risk is minimal. MOTION by Thomas, seconded by Cossette, to direct staff to work with United Properties on the financing of the project based on the project basis scenario, utilizing bonding with assessments to United Properties, and allow staff the latitude to negotiate a pro -rated credit back to United Properties. Voting Aye: Cossette and Thomas. Voting Nay: Jacobs and Lymangood. (Motion Not Carried 2:2) MOTION by Thomas, seconded by Lymangood to table items 5 & 6 to the June Tabled to 6122/06 22 council meeting. Voting Aye: Jacobs, Lymangood, and Thomas. Voting Nay: Cossette. (Motion Carried 3:1) Councilor Thomas apologized to Joanne Foust and Paul Donna for their efforts and time in bringing information forward to the Council, they came to a special meeting yesterday morning and one of our council members does not show up, and the same councilor does not show up for this meeting; and our other councilor seems totally incapable of taking any action even though it is totally consistent with what the City has been working on for a year, the City owes you an apology, the Council owes you an apology. Mayor Cossette stated that he would echo that same comment, and thanked them Page -4- CITY OF CORCORAN CITY COUNCIL SPECIAL MEETING June 15, 2006 for helping him understand the information. Councilor Jacobs stated that whether he and if absent councilor Grabowski voted no, there would still be three others that could vote. Mayor Cossette announced that this matter would be placed on the next city council meeting agenda and informed the Council that they should come prepared with a plan for voting on a motion at that next meeting. Staff was directed to notify the past petitioners of the next meeting and encourage their attendance; provide information regarding the matter in Princeton; contact and update Councilor Grabowski on this evening's meeting; and include information on how this development will expand the city's tax base. Adjournment MOTION by Thomas, seconded by Lymangood, to adjourn the meeting at 8:20 p.m. Voting Aye: Cossette, Jacobs, Lymangood, and Thomas. (Motion carried 4:0) SusanVergin, City Administ Directives to Staff Adjournment Page -5-