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HomeMy WebLinkAbout11.10.94 Special Council Minutes MINUTES COUNCIL MEETING SPECIAL NOVEMBER 10, 1994 1. Mayor Kuchera called the meeting to order at 7:00 P.M. at the Dakota County Extension Office. Members Present: Kuchera, Ristow, Orr, Rotty, Galler. Members Absent: None. Also Present: Administrator Thompson, Attorney Grannis, Finance Director Henneke, Planner Tooker. 2. MOTION by Galler, second by Rotty to approve the agenda. APIF, MOTION CARRIED. 3. Mayor Kuchera opened a public hearing at 7:00 P.M. to consider the proposed Soils Correction TIF District NO.1. Jerry Shannon of Springsted, Inc., presented an overview of the proposed Tax Increment Financing District, noting the following: A. The City's options for financing the prairie Waterway: a. G.O. Ad Valorem Bond requiring a referendum; b. G.O. Improvement Bonds and Assess minimum of 20% of the costs; c. establish a special stormwater taxing district; d. stormwater utility revenue bonds; e. TIF. B. Explained how TIF works. C. Construction of prairie Waterway will be a joint venture between the City and developer to handle the runoff from the proposed development and surrounding areas. D. Outlined proposed TIF area - property will be developed and homes built within 8 to 10 years. E. Designated as a Soils Correction District. F. Explained how revenues will be used: a. City debt service first, b. City administrative costs second, c. if excess TIF is available, the developer will be reimbursed for extraordinary costs, d. maximum $1,350,000 to developer, e. approximately $2,850,000 for Prairie Waterway and related costs, f. LGA/HACA penalties explained. G. Residual benefits to community - economic benefit. H. City will reimburse itself for LGA/HACA loss through stormwater utility, Council Minutes - 11/10/94 - Special - Page 2 I. If no TIF is generated, the City is no better or worse off - it can still use stormwater utilities. The following testimony was heard: Ed Kral: What will the bonds be used for? Jerry Shannon: The G.O. Bonds will finance the waterway. Laura Adelmann: Does the City or the State come up with the money? How can we be sure the TIF money isn't used for other purposes? Jerry Shannon: Statutory provisions cover it. As property taxes are paid, the County Auditor will turn the increments over to the City. The increment income is identified and put into a special fund to pay eligible costs. The City cannot put it into the General Fund. The City has to audit these funds each year. Laura Adelmann: There is no money right now? Jerry Shannon: The initial money comes from the bonds. As the property is developed, the increments will start coming to repay the bonds. Laura Adelmann: You can't separate the ditch from Sienna? Who is building the ditch? Who is liable for damages? WaYne Henneke: S.J. Louis is the contractor. Atty. Grannis: If there was a liability, it would be the City's unless the contractor was negligent. Dennis Gramentz: Is there a projected time line? Jerry Shannon: No more than 12 years by statute. #,...".., Laura Adelmann: What if sufficient increment is not available? Jerry Shannon: To the extent increment is not available, the City has pledged its full faith and credit. The City can use ad valorem utility fees or special assessments. If TIF is generated, it frees revenues from other sources which can be spent on other projects. Laura Adelmann: Is there a fine if the money isn't used properly? Council Minutes - 11/10/94 - Special - Page 3 Jerry Shannon: The money is paid to the County and the County turns it over to the City. It must be placed in a special fund. WaYne Henneke: We are audited every year. We must account for everything. If we were just going to fund the project with utility fees, the rates would need to be adjusted 18% per year until 2002 and the City would have $79,000 in the stormwater fund. 2% per year. year. (Corrected Mr. Henneke.) The fund would only have $79,000 if rates were adjusted It would be $2,000,000 if rates were adjusted 18% per Adm. Thompson: Mona Ostroot: Why would the stormwater utility need $2,000,000? Adm. Thompson: That is what is projected in the fund if no adjustments are made. The City could use it for other projects or to reduce taxes. Laura Adelmann: How will the ditch be maintained? Adm. Thompson: Through the stormwater utility fund. Pat Akin: If TIF isn't sufficient, general taxpayers pay the difference on the debt? This is different from other TIF projects. WaYne Henneke: All previous TIF bonds were G.O. backed. Peggy Schmidtke: The fill from the ditch is a direct benefit to the developer? Adm. Thompson: Yes. Cm. Ristow: Do we need the ditch? Adm. Thompson: Yes. (Reviewed history, including problem areas, studies and hearings.) Peggy Schmidtke: I've read Farmington will be facing a 15% tax increase and that Cottage Grove School District had to pass a referendum because of TIF. WaYne Henneke: A goal of the City Finance Committee is to have no tax increase, so I don't see City taxes increasing. Council Minutes - 11/10/94 - Special - Page 4 Cm. Galler: The City's share of the taxes is only one part of the tax bill. You will have the opportunity to discuss tax rates at the City/School/County Truth in Taxation hearings. Also, it is my understanding TIF doesn't affect school tax rates. Jerry Shannon: The school tax formula is very complicated. (Lengthy explanation.) loss to the school is made up by the State from the City LGA/HACA penalty. The bottom line is that any which receives the revenues Bill Fitch: The project will make a difference in the number of students. What happens if the schools become overcrowded? What is the cost of the bonds at maturity? Jerry Shannon: Approximately $4,600,000. Bill Fitch: What are the anticipated TIF revenues? Jerry Shannon: Approximately $6,500,000. Bill Fitch: How much is the LGA/HACA penalty? Jerry Shannon: Approximately $1,200,000. Bill Fitch: How will the City make up the penalty? (Lengthy discussion followed regarding the TIF financing plan. The City will substantially reimburse the General Fund loss from the LGA/HACA penalty with the administrative fees and developer stormwater management fees. The City will use the TIF paYments to first pay for the bonds, then the City administrative fees, and if any money remains, to the developer up to a maximum of $1,350,000. Referred to the TIF schedule.) Greg Adelmann: Who pays for street maintenance? Cm. Galler: The City. Bob Browniwell: What are the "extraordinary costs to the developer? Adm. Thompson: Drainage and water table plus the amount of undevelopable land. Sharon Ohman (Sienna Attorney) : Grading of land, additional fill, water main dewatering, boulevard If the soils from the waterway had tc costs further. swales, additional engineering. be purchased, it would increase Greg Adelmann: Who is going to pay for my road when it gets broken up? Council Minutes - 11/10/94 - Special - Page 5 Cm. Galler: The prairie Waterway construction won't use roads. contractor damages a road, makes no difference if its It's no different than other developments in the City. If a the contractor must repair the road. a TIF project or not. It Adm. Thompson: Fred Schmidtke: If it is going to cost so much money to develop the site, why not move it to another area? Roger Wood: You've listed the advantages of TIF to the City, what are the disadvantages? Adm. Thompson: The major disadvantage is that the City will not be able to use the tax base to provide services. The other disadvantage is in the event sufficient TIF is not generated, the City must use other revenue sources, but that would be the case if no TIF is approved. WaYne Henneke: It should be noted the maximum amount to the developer is $1,350,000. If lots are sold for more than projected or costs come in under estimate, the paYment is reduced. for pursuing the project. should not have enticed the (Read a prepared statement. Opposed to TIF for housing. Staff should be blamed It is a poor area to develop. The City developer. ) Pat Akin: Cm. Galler: The City did not entice the developer. He came to the City. Bill Fitch: Has the City calculated the cost of services to the area? Will the high water table cause a problem with utility maintenance? Adm. Thompson: The City hasn't calculated the cost. Eng. Kaldunski: If shouldn't be a maintenance problem. Laura Adelmann: How much has the City spent on this project to date? Adm. Thompson: I'm not sure. Laura Adelmann: How are engineering fees calculated? Adm. Thompson: Mostly on a percentage of construction costs. Council Minutes - 11/10/94 - Special - Page 6 Henry Iwerks: The consultant said if there/s no TIF, there is no project. Is that correct? Dick Krier (Sienna Consultant) : Correct. Henry Iwerks: Does the City have the permits? Charles Tooker: No. Henry Iwerks: This TIF is using money that should to the City, schools and County. I Department of Education and they indicated there money in the future for schools. go checked with the might not be any Cm. Galler: Does that mean that the City should not build any houses? That by building creating children for our schools? The children who already collecting State aid for their education. houses we are move here are (A lengthy argument followed regarding the impact of Farmington's growth on school aids and school construction.) Willard Barnett: I wonder why Charlie Tooker has deliberately mislead the audiences in the past by stating the City had the permits? Charlie Tooker: I have never stated that the City has had the permits, only that they were anticipated. There's a big difference between the two. Willard Barnett: Why have you stated it anticipates getting the permits? Charlie Tooker: That is what I have been told by the MPCA and Corps of Engineers. Willard Barnett: Why do you want to build more houses and create a burden on the School State Aid system and pressures to build more schools? Cm. Galler: Are you suggesting that building more houses creates more children? The houses are built because of demand. We/ve already heard that the TIF does not impact school taxes significantly. You would like to see the Farmington taxpayer pay for it because you don/t live in Farmington and don't have to pay Farmington taxes. Bill Fitch: What type of surety is going to be required? . '- Council Minutes - 11/10/94 - Special - Page 7 Adm. Thompson: 125% of privately installed improvements (streets, sewer, water, utilities, etc.) and $150,000 to cover the City's purchase of the waterway property from the developer which would not be required if the Farmington PUD is not involved. Greg Adelmann: Does the developer have his permits? developer does not get his not move forward, the City No. The City's and developer's permits are presently tied together. If the permits or the East Farmington project does will proceed separately. Adm. Thompson: Laura Adelmann: Why build in the wetlands? Rod Hardy (Sienna): (Lengthy speech regarding the background of the project, the City's water problems and how, through a partnership, the solutions to the problems presented by the project offer an opportunity to benefit the City) . Sienna didn't create the demand but is reacting to the tremendous growth which is going to occur. Laura Adelmann: How will you be responsible to the citizens? What if scum forms on my pond? Eng. Kaldunski: The City's project will not be connected to your pond. Cm. Ristow: Have you done any other TIF housing projects? Rod Hardy: In Burnsville and Eden Prairie. Bob Browniwell: The downside is the burden placed on the schools. The East Farmington development wasn't figured into the school's projections. The extra 400 to 500 students will stress the district. Henry Iwerks: The developer indicated he has invested $500,000 into the project. The community has already invested $500,000 in annexation with only payments to the attorneys to show for it. promoting it? development? The developer is indicating a rush is coming to Farmington. Why are we Why not follow Lakeville's lead and put a moratorium on Willard Barnett: Rod Hardy: The City is not promoting it. What I have seen is the City recognizing that growth is coming because of demand and taking positive steps to manage it. Council Minutes - 11/10/94 - Special - Page 8 Bob Shea: Will the Prairie Waterway be built with or without Sienna? Cm. Galler: I believe it will. Bob Shea: If it's built without TIF, what will it cost the City? With all things being equal, it would cost $100 per year for the person owning Cm. Galler: a $100,000 home. Adm. Thompson: It would cost the taxpayers $2,600,000. Bob Shea: (To Bob Browniwell) Sienna hasn't even started and you are already talking about building a new school. Most of the pressure is coming from Lakeville and north Farmington, not from this project. Laura Adelmann: Will we be assessed? Adm. Thompson: The City has a number of options for financing. If the City orders the project tonight, it would be limited to TIF or stormwater revenues. If the project is not ordered tonight, the City could use special assessments but I would not recommend it due to the problems proving benefit. Regardless, you cannot be assessed because you do not live in the City. Cm. Galler: The main benefit I see with TIF is that it reduces the cost to the Farmington taxpayer. Laura Adelmann: What if costs go over budget? Adm. Thompson: We have a contingency. Bill Fitch: What are the project costs? Adm. Thompson: $2.2 million for construction (all phases - to Highways 3 and 50); land - $150,000; capitalized interest - $446,000; insurance - $90,000. Laura Adelmann: What if land costs exceed estimates? MOTION by Galler, second by Rotty to close the hearing. APIF, MOTION CARRIED. Council Minutes - 11/10/94 - Special - Page 9 Administrator Thompson outlined the actions necessary to approve the project: 1. Adopt a resolution approving the TIF district, 2. Adopt an ordinance amending the East Farmington PUD ordinance, 3. Adopt a resolution approving the preliminary plat and PUD. 4. Adopt a resolution awarding the prairie Waterway contract. Discussion followed regarding the project. Councilmember Rotty asked what happens if the contract was awarded this evening. Administrator Thompson stated it narrowed financing options to TIF or stormwater revenues. Councilmembers Galler, Rotty and Orr and Mayor Kuchera indicated they were in favor of the project because the TIF provided a favorable financing option for the City. Councilmernber Ristow indicated he had reservations because he was uncertain how project phases beyond the Prairie Waterway would be financed, a new Council would be taking over in 2 months which should make the decision and questioned if the prairie Waterway should even be built. Councilmember Galler stated that he felt it would not be fair to postpone the decision to a new council which has not had the opportunity to study the project as thoroughly as the Council. MOTION by Galler, second by Rotty to adopt RESOLUTION NO. R138-94 approving the development program for East Farmington Municipal Development District and Establishment of Tax Increment Financing District #1 to be located therein and approving and adopting a Tax Increment Financing Plan. VOTING FOR: Rotty, Galler, Kuchera, Orr. AGAINST: Ristow. MOTION CARRIED. MOTION by Galler, second by Rotty to adopt ORDINANCE NO. 094-338 amending the East Farmington PUD. VOTING FOR: Galler, Kuchera, Orr, Rotty. AGAINST: Ristow. MOTION CARRIED. MOTION by Galler, second by Rotty to adopt RESOLUTION NO. R139-94 approving the East Farmington preliminary plat with the following contingencies: 1. execution of. a developer agreement and PUD agreement; 2. developer reimburses the City for all legal, administrative and engineering costs; 3. Bids are let for the prairie Waterway; 4. the Southeast Area. Storm Sewer Project is ordered; 5. sufficient properties and/or easements for the Spruce Street access are secured; 6. all conditions placed by the City Engineer and City Planning Commission are met; 7. the necessary permits are secured; 8. the first phase is developed at one time; 9. two easement accesses for each block park. VOTING FOR: Kuchera, Orr, Rotty, Galler. AGAINST: Ristow. MOTION CARRIED. Council Minutes - 11/10/94 - Special - Page 10 MOTION by Rotty, second by Galler to adopt RESOLUTION NO. R140-94 awarding the contract for the Prairie Waterway to S.J. Louis contingent upon receiving the necessary permits. VOTING FOR: Orr, Rotty, Galler, Kuchera. ABSTAIN: Ristow. MOTION CARRIED. 4. MOTION by Orr, second by Kuchera to adopt RESOLUTION NO. R141-94 accepting the results of the 1994 municipal election. APIF, MOTION CARRIED. 5. MOTION by Orr, second by Kuchera to adopt RESOLUTION NO. R142-94 approving purchase of land - Siewart Sod Farm. APIF, MOTION CARRIED. 6. MOTION by Rotty, second by Orr to adjourn at 10:00 P.M.. APIF, MOTION CARRIED. Respectfully submitted, Larry Thompson City Administrator Approved tj~1 hlf I