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HomeMy WebLinkAbout01.17.23 EDA Minutes MINUTES ECONOMIC DEVELOPMENT AUTHORITY Regular Meeting January 17, 2023 1. CALL TO ORDER The meeting was called to order by Chair Wilson at 5:00 p.m. Members Present: Wilson, Bernatz, Hoyt, Lien, Porter Members Absent: None Also Present: Deanna Kuennen, Community Development Director; Lynn Gorski, City Administrator;Julie Flaten, Assistant City Administrator/HR Director; John Powell, Public Works Director; Tony Wippler, Planning Manager; Cynthia Muller, Administrative Assistant Jason Aarsvold, Ehlers; Greg Hayes and Ebert Construction members 2. PLEDGE OF ALLEGIANCE 3. ROLL CALL 4. APPROVE AGENDA MOTION by Hoyt, second by Lien to approve the agenda. APIF, MOTION CARRIED. 5. CITIZEN COMMENTS/PRESENTATIONS 6. CONSENT AGENDA MOTION by Hoyt, second by Lien to approve the Consent Agenda as follows: a) Approved Appointment of Executive Director b) Accepted Monthly Financial Statement APIF, MOTION CARRIED. 7. PUBLIC HEARINGS 8. DISCUSSION ITEMS a) Ebert Downtown Apartment—TIF Term Sheet Discussion Ebert Construction has entered into a purchase agreement to purchase the property at 310 Third Street (former Dakota Motors building at the corner of Third and Elm Streets). The developer is Ten Nineteen Development LLC. They plan to construct a 4-story, 74-unit market rate apartment building with first floor parking and other amenities. It is estimated the total project costs will be nearly$20 million. To support the project the developer is seeking public financing assistance in the form of Tax Increment Financing (TIF). Staff and the developer have been working with Jason Aarsvold, Ehlers to review the application, prepare a TIF schedule and conduct a TIF analysis to determine the minimum level of public financing necessary to make the project financially EDA Minutes(Regular) January 17, 2023 Page 2 feasible. This project will be going through multiple reviews and approvals with the city council, planning commission and EDA. Mr. Aarsvold has completed the analysis and presented a term sheet. He stated the project cost is $19.7 million and the TIF request is for$2 million for 26 years. The proforma analysis included project costs, expenses, determined if the financing meets the industry standard, rents at$2.11/sq. ft., the project does show a need for assistance to achieve feasibility. The project return on investment with 26 years of TIF is higher than the standard. The TIF note would be reduced to $1,750,000. Project repayment would be within 20 years. The analysis and negotiations confirm this assistance is necessary for financial feasibility but is not over subsidizing the project. Director Kuennen added the financing has a higher level of equity. Mr. Aarsvold stated the developer is bringing 36%equity to the project. Less than 10%of public costs are being supported by assistance. Chair Wilson confirmed the public assistance is not a new line item. We are talking about taxes not collected on this project. The $1.75 million was arrived at because the analysis showed that. According to the term sheet, the key business terms for the developer are: - Execution of Development Agreement - Acquisition of Property - Preparation and Submittal of Construction Plans Key business terms for the EDA are: - Creation of a new TIF district for the project, subject to qualification as a redevelopment tax increment district - Approval of Construction Plans - Execution of Development Agreement - Determination that developer has sufficient financial means to construct minimum improvements. - Obtain all land use approvals, permits necessary to construct the project and payment of customary city fees. The construction schedule would commence approximately June 1, 2023, and be completed by December 31, 2024. Public assistance is subject to all terms and conditions of the Development Agreement, the EDA will reimburse the developer with 95% available tax increment for up to a total of approximately$1,750,000 (present value) of qualified costs related to the minimum improvements. Payments will be made through a TIF note issued on a pay-as-you-go basis over a maximum of 20 years at a rate of 6% per annum. The building to be constructed is anticipated to have an assessed value of approximately$14,800,000. The developer has made an escrow deposit of$6,000 for reasonable out-of- pocket expenses for legal and financial consultant services. There can be no EDA Minutes(Regular) January 17,2023 Page 3 transfer of property or Development Agreement to an unrelated entity without EDA consent. Developer covenants to pay property taxes and maintain customary insurance. Chair Wilson stated this is a unique housing offering and asked if council can anticipate future projects requesting TIF. Director Kuennen replied every project is analyzed on its own merits. Any project this size will have a financial assistance request. Mayor Hoyt stated this is a significant commercial investment in our community. With high density, long term the tax rate is much higher. Next steps are to proceed with establishing TIF district#15. - Requires approval of a TIF plan - Documents set forth policy obligations for the project - Identifies geographic location of the project - Provides maximum budget authority for TIF revenues and expenses - Planning document that allows for creation of TIF district - Does not identify an amount of or grant any assistance to the developer— the TIF agreement does this. The TIF plan process includes: - Notice to the county—completed 1/10/23 - TIF plan to the county and school district 1/20/23 - Public hearing notice published 2/10/23 - Public hearing held 2/21/23 o EDA approval of TIF plan as designated o Council holds public hearing, considers resolution to adopt TIF plan - A TIF agreement between the EDA and developer is approved o Specific terms and conditions, EDA will pay increment collected in the TIF district to the developer o City attorney drafts the TIF agreement Ebert Construction has no concerns with finding renters. Delano is a similar size community and apartments were filled right away. This will go to the planning commission on February 14, 2023. Director Kuennen stated we are trying to consolidate the process with planning commission approvals and TIF. If the project is not approved,TIF will not move forward. At the next work session we will talk about the total project and details. Mayor Hoyt stated this is a great long term investment in the community. Member Lien noted high density drives development for a grocery store and taxes. Member Bernatz stated her initial concern was turning commercial property into resident until hearing of the tax revenue this generates. We need to communicate this effectively. She asked if we can expect new residents or current residents moving in? Mr. Hayes stated a market rate study is available to EDA Minutes(Regular) January 17,2023 Page 4 the city and where customers will come from within a 10-mile radius. Member Porter had no reservations. The aesthetics is something we need downtown. Chair Wilson is excited about the offering. He appreciated staff for their collaboration and this will make the community look good for other development. b) 2023 EDA Budget and Work Plan/Goals Director Kuennen considers 2023 a rebuilding year. We need to think about how the visioning process translates into the budget. EDA revenues are $51,000, including the general fund $50,000 transfer; expenses are $81,000. The EDA has a fund balance of$220,000. The budget has two categories—operating expenses and program funds. There is $60,000 allocated to programs and $10,000 in expenditures incurred with other agencies. Comparing the budget to the strategic plan and what the activities are is another way to look at this. Currently we use the $60,000 for fagade and redevelopment programs. Director Kuennen suggested utilizing those funds differently this year. Marketing is the EDA's number one priority. She suggested redirecting the $60,000 to marketing which would mean being present at events, get people asking questions about Farmington and get them here. Instead of fagade and redevelopment grants, look at micro-grants citywide, build in relocation expenses and focus on entrepreneurs. Use the $60,000 to move us forward with strategic planning. The EDA also needs to consider long term and seek additional funding resources, implementation of the visioning and comp plan. The budget for programs could be a rolling approach. We would establish guidelines and help businesses where they are. We didn't use all of what was budgeted for programs in 2022. Chair Wilson liked this approach and asked what we can do with marketing dollars. Director Kuennen explained we can get involved with groups and getting us known. She is not talking about ads in magazines. There are realtor summits where we can get on the panel and talk about what's happening in our community. Create relationships. This requires a membership, we get a sponsorship opportunity with a booth and speaking opportunities. Another opportunity is an organization called Community Venture Network. They normally work with cities outside the metro but would accept Farmington. The organization brings in so many businesses a year in some level of growth and determines which ones are better suited in outer communities. Staff would identify which one would fit here and work with them. Member Porter liked allocating funds to marketing and not set parameters to just downtown. She is all in on these recommendations. Member Lien agreed with pulling dollars out of the fagade improvement program. He would like to discuss micro-grants further. Director Kuennen noted if we put half the funds into marketing and half to grants, that would go a long way. Chair Wilson noted we need more opportunities, but we are land incumbered. Director Kuennen stated we need to get the word out, but we are not prepared for ten businesses to come. We need to have conversations with land owners and learn their EDA Minutes(Regular) January 17, 2023 Page 5 timeline and determine if infrastructure is at the site. This needs to be done incrementally. We need to look at long term funding sources and what does that look like. Director Kuennen's goals for 2023 are for the EDA to build relationships with partner organizations, visiting businesses and have conversations with land owners. Look at incremental things. Mayor Hoyt stated the EDA has talked about wanting and spent money on determining needs. We can't cut and re-allocate to make things work. We need to cut and go out and get more money, like an EDA levy. To make decisions for the long term will hurt in the short term. Member Bernatz noted businesses are not going to wait for Farmington to be ready. She liked the idea of micro-grants. Chair Wilson asked if the EDA should give direction to reuse the program dollars. Director Kuennen would formulate goals and bring them back to the EDA. Member Lien was okay with the marketing side. Mayor Hoyt noted if staff comes back with a situation we need to take advantage of, we can't wait. The EDA direction was they liked this approach and look forward to seeing a work plan. Bring back a micro-grant program for discussion. Member Lien would like to see a "but for" test with the micro-grants and a good set of criteria. c) Extension Request-2022 Fayade Improvement Program Mr. Edward Endres, owner of Pizza Man, 409 Third Street, was awarded a fagade grant in April 2022. Staff received a request for reimbursement on December 31, 2022, but additional information is still required in order to satisfy the conditions of the grant and make payment. The work is completed. Mr. Endres requested an extension of 45 days, until February 14, 2023, to submit the required documentation. MOTION by Hoyt, second by Porter to approve the extension for the 2022 fa§ade improvement program grant for 409 Third Street, Mr. Edward Endres. APIF, MOTION CARRIED. 8. DIRECTOR'S REPORT a) Director's Report During the next several months, staff will be focusing on the following initiatives: 1. Developing an EDA Work Plan 2. Meeting with economic development partners within the region. 3. Program review, organization and development. 4. Marketing opportunities. 5. Business visits. Administrator Gorski thanked the EDA for listening to the community development plans and trusting staff. The City Council strategic planning session was confirmed for February 6, 2023. Council already has three goals and we can focus on ideas within those goals. EDA Minutes(Regular) January 17,2023 Page 6 She will send out some pre-work containing the 2022 goals and the second half of the day will be a discussion with council and staff. 9. ADJOURN MOTION by Hoyt, second by Porter to adjourn at 6:50 p.m. APIF, MOTION CARRIED. Respectfully submitted, Cynthia .Muller Cynthia Muller Administrative Assistant