2017-03-28 HRA Agenda PacketPLEASE TURN OFF CELL PHONES & PAGERS IN COUNCIL CHAMBERS.
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MOUND HOUSING & REDEVELOPMENT AUTHORITY
REGULAR MEETING
TUESDAY, •' 28,2017 6:55 P.M.
MOUND CITY COUNCIL CHAMBERS
Page
1. Opening the meeting
2. Action approving agenda, with any amendments
3. Action approving minutes: Mar 14, 2017 regular meeting 1-2
4. Action to approve a resolution requesting the City Council of the 3-6
City of Mound call for a public hearing on the modification of the 6
redevelopment plan for the Mound Harbor Project Area and the
establishment of the Harrison Bay Senior Housing Tax Increment
Financing District
5. Adjourn
March 14, 2017
The Mound Housing and Redevelopment Authority in and for the City of Mound, Minnesota, met in
regular session on Tuesday, March 14, 2017, at 6:00 p.m. in the council chambers of the Centennial
Building.
Members present: Chair Mark Wegscheid, Jennifer Peterson, Jeff Bergquist, Ray Salazar, and Kelli
Gillispie
Members absent: none
Others present: City Manager and Director of Public Works Eric Hoversten and Director of Finance and
Administrative Services Catherine Pausche, Director of Community Development Sarah Smith, Field
Officer Stewart Simon, Scott O'Brien, Roger Fink, Pat Buffington, Troy Koopman, Kevin Peterson,
Yuliya Navasialetskaya, Karen Buffington, Nicole Brodzik, Chris Valerius, Stacie Kvilvang, James
Lehnhoff
Public Present:
1. Open meeting
Chair Mark Wegscheid called the meeting to order at 6:00 p.m.
2. Approve agenda
MOTION by Salazar, seconded by Bergquist, to approve the agenda.
All voted in favor. Motion carried.
3. Approve minutes
MOTION by Salazar, seconded by Peterson, to approve the minutes of the Feb 28, 2017
regular meeting. All voted in favor. Motion carried.
4. Stacie Kvilvanq and James Lehnhoff from Ehlers requesting action approving establishment of a
TIF District for Harrison's Bair Senior Living
Kvilvang walked through the Power Point presentation, giving an overview of TIF and why it is used,
and demonstrating how the tax increment is generated. Kvilvang said the property is currently
valued at $646K, with the City portion of the taxes $3,442. Kvilvang noted that it takes about two
years for the full value to be assessed for a project this size. Kvilvang described the "But For" test
criteria, stating that she believes the project meets the test. Kvilvang said Ehlers analyzes the
development costs, ensuring the developer is maxing out the mortgage requirements and looks at
reasonableness of return on investment based on similar market conditions. Kvilvang suggested
having a look -back provision after 3+ years to assess what actually happened to determine
assumptions were correct.
Kvilvang said the majority of TIF in Mound has been a Pay-as-you-go where the developer pays the
taxes, the County pays them to the City and the City passes them on to the developer, versus the
City bonding up front and using the tax increment to pay the debt service. Kvilvang noted the
project costs are $16.2M but the tax value is estimated at $9.36M based on conversations with the
County Assessor. Kvilvang noted that it not unusual for assisted living projects to cost more than
the market value.
Kvilvang said the City share of property taxes will increase from the current $3,442 to approximately
$55K at the end of the TIF district and noted total taxes on the property are estimated at $158K
which will net to $127K of TIF available, or $0.81 on the dollar. Kvilvang walked the board through
the sources and uses and how Ehlers deters -1 -led the amount of TIF needed to be $930K. Ehlers
HRA Minutes — March 14, 2017
said the developer is maxing the first mortgage at 75% and that a $225K per unit cost is common
for assisted living and memory care because of the additional common spaces. Kvilvang noted the
$800K developer fee, or 4.94%, is in line with the norm being 2% to 5% and usually contains some
contingency.
Kvilvang said the affordable units will result in $491 K less cash flow per year. Kvilvang had
accounted for service packages reimbursed by Medicaid and Medicare and calculated net operating
income of $900K. Kvilvang pointed out year 3 on the Project Returns spreadsheet that showed
cash on cash returns in pink of 8.36% with TIF and 5.34% without TIF and cash on cost in yellow of
5.44% with TIF and 5.10% without TIF. Kvilvang noted market returns for cash on cost are usually
6.5 — 8%, which would suggest the need for TIF. At year 11 when TIF drops off, they are ata 10%
return, or 9.4% annualized. Ehlers benchmarks returns and compared the developer request and
what Ehlers is recommending. Ehlers suggested 3 options (1) TIF Note for $930K paid over 10
years (2) TIF Note for $930K, a 10 year TIF district with payments to developer over 15 years (pay
60% per year instead of 90%) (3) Developer's counter, which is a TIF Note for $1 M for 10 years
which would have a 2% inflation factor on valuation, which would provide an additional $70K over
the life of the district and the developer would guarantee the affordability for 15 years.
Chair Wegscheid said the current policy is to provide the minimum amount of TIF over the shortest
time period so he thinks Option 1 is really the only option according to the policy.
Roger Fink of Trident Development asked the board to consider that factoring in inflation won't differ
from policy. Fink said they are struggling with whether the affordability can be preserved for 15
years without the higher TIF payments. Fink highlighted that the inflationary factor is a risk borne by
the developer. Fink said if the property increases more than 2% annually, the note gets paid down
faster and the district will expire earlier.
Chair Wegscheid said the policy does not address inflation, and is open to a change in policy, but
that should come first. Peterson asked if this requires a policy change and Gillispie said she would
prefer one.
Kvilvang noted that the original recommendation was for the $1 M but the assessor's valuation was
lower than Ehler's assumptions which then reduced the amount of recommended TIF. Kvilvang
noted policies are not laws or ordinances, but that she understands the concern about deviating
from policy. Kvilvang said it will take up to 90 days to establish the district, so there will be time for
the policy discussion.
Wegscheid agreed and said the board can indicate where they are leaning. Wegscheid said he has
no problem with looking at option 3 and the other board members agreed.
Kvilvang said that no action is necessary tonight as they have the guidance they need and the
action will follow at an upcoming meeting.
5. Adjourn
MOTION by Peterson, seconded by Gillispie, to adjourn at 6:38 p.m. All voted in favor.
Motion carried.
Attest: Catherine Pausche, Clerk
-2-
Chair Mark Wegscheid
i
Housing and Redevelopment Authority
To: City Council
From: Stacie Kvilvang - Ehlers
Date: March 28, 2017
Call For Public Hearing on Creation of the Harrison Bay Senior Housing
Subject: Development TIF District and Modification to the Redevelopment Plan for
the Mound Harbor Project Area
At the March 14, 2017 HRA meeting, the HRA discussed beginning the process of creating
a new Housing TIF district for the Harrison Bay Senior Housing development. This
development is being undertaken by Trident Development and will consist of 72 -units of
assisted living and memory care units, of which 21% or 15 units will be affordable to
residents at or below 50% of the area median income (AMI).
To begin the process, the HRA is considering approval of a resolution requesting that the
City Council call for a public hearing on the creation of this district. On the same night, the
City Council will consider approval of a resolution that will set the public hearing on creation
of the district for May 23, 2017. It should be noted that approval of these resolutions only
starts the process to create the TIF district and does not obligate the HRA or the Council to
approve creation of the district or to provide assistance to the project. It merely starts the
public approval process to review the project and the request for assistance.
In addition to creating the TIF district, the HRA and City will be required to modify (expand)
the boundaries of the Mound Harbor Project Area to include the parcels that this
development will be constructed upon. This is a statutory requirement that a TIF district
must be located within an approved Project Area. This is a typical modification that is
needed in the majority of cities where their approved project area is not coterminous with
the corporate boundaries of the City. Ehlers and staff will be reviewing and recommending
to the HRA/City the location of the new boundaries (i.e. coterminous with corporate
boundaries, limited number of parcels between existing project area and new TIF district,
etc.)
Please contact me at 651-697-8506 with any questions.
,a-EHLERS
LEADERS IN PUBLIC FINANCE
vAm.ehlers-inc.com
Minnesota phone 651-697-8500 3060 Centre Pointe Drive
Offices also in Wisconsin and Illinois fax 651-697-8555 Roseville, MN 55113-1122
toll free 800-552-1171
CITY OF MOUND
TAX INCREMENT FINANCING DISTRICT NO. 1-4 (HARRISON BAY SR. HOUSING)
(a housing district)
March 27, 2017 Project information, property identification numbers, and maps sent to Ehlers &
Associates for drafting documentation.
March 28, 2017 HRA requests that the City Council calls for a public hearing on the proposed
Modification to the Mound Harbor Project Area (the "Project Area") and the
establishment of TIF District No. 1-4 (Harrison Bay Senior Housing) (the "TIF
District").
March 28, 2017 City Council calls for public hearing on the proposed modification to the Project
Area and the proposed establishment of the TIF District.
April 6, 2017 Letter received by County Commissioner giving notice of potential housing tax
increment financing district (at least 30 days prior to publication of public
hearing notice. [Ehlers will fax and mail April 6, 2017]
April 7, 2017 County receives TIF Plan for review for County Road impacts (at least 45 days
prior to public hearing). *The County Board, by law, has 45 days to review the
TIF Plan to determine if any county roads will be impacted by the development.
Because the City staff believes that the proposed tax increment financing district
may require county road improvements, the TIF Plan will be forwarded to the
County Board 45 days prior to the public hearing.
April 21, 2017 Fiscal/economic implications received by School Board Clerk and County
Auditor (at least 30 days prior to public hearing). [Ehlers will fax & mail on
April 21, 2017]
May 1, 2017 Ehlers conducts internal review of the Project Plan Modification and TIF Plan.
May 2, 2017 Planning Commission reviews Project Plan Modification and TIF Plan.
May 6, 2017 Date of publication of TIF hearing notice and map (at least 10 days but not more
than 30 days prior to hearing). [The Laker publication deadline, May 2, 2017 —
Ehlers will submit notice, map, and instructions to the newspaper on or before
May 2, 2017, via email at sunlegalskecm-inc.com.]
4%'EHLERS
r,ATA 0101'
FOR THE MODIFICATION i THE
REDEVELOPMENT 1 HARBOR PROJECT .'
1 THE ESTABLISHMENT 1
TAX INCREMENT FINANCING 1(HARRISON1
(a housing district)
May 23, 2017 HRA considers the Plans and adopts a resolution recommending the Project Area
Modification and Plan.
HRA considers approval of entering into a Development Agreement with Trident
Development for the construction of a 72 -unit sr. rental facility, contingent upon
City Council approval of establishment of the TIF District.
May 23, 2017 City Council holds a public hearing at 7:00 P.M. on a Modification to the Project Area
and the establishment of the TIF District, and passes a resolution approving the
Project Area Modification and TIF Plan.
By June 30, 2017 Ehlers files Project Area Modification and TIF Plan with the MN Department of
Revenue and the Office of the State Auditor, and requests certification of the TIF
District with Hennepin County.
An action under subdivision 1, paragraph (a), contesting the validity of a determination by an authority under section 469.175,
subdivision 3, must be commenced within the later of:
(1) 180 days after the municipality's approval under section 469.175, subdivision 3; or
(2) 90 days after the request for certification of the district is filed with the county auditor under section 469.177, subdivision 1.
_SJ_
EHLERS
ICAUt Hb iH PJBLI[ CiNANCE
MOUND HOUSING AND REDEVELOPMENT •,
RESOLUTION NO
BE IT RESOLVED, by the Board of Commissioners (the 'Board") of the Mound Housing and
Redevelopment Authority, Minnesota (the "HRA") as follows:
WHEREAS, the City Council (the "Council") of the City of Mound, Minnesota (the "City")
established the Mound Harbor Project Area pursuant to Minnesota Statutes, Minnesota Statutes, Sections
469.001 to 469.047, inclusive, as amended, in an effort to encourage the development and redevelopment
of certain designated areas within the City; and
WHEREAS, the HRA is proposing the modification of the Redevelopment Plan for the Mound
Harbor Project Area and the establishment of the Harrison Bay Senior Housing Tax Increment Financing
District, pursuant to, and in accordance with, Minnesota Statutes, Sections 469.174 to 469.1794 and
Sections 469.001 to 469.047, inclusive, as amended;
NOW, THEREFORE BE IT RESOLVED by the Board as follows:
1. The HRA hereby requests that the Council call for a public hearing on May 23, 2017, to consider the
proposed modification to the Redevelopment Plan for the Mound Harbor Project Area and the
proposed adoption of the Tax Increment Financing Plan for the Harrison Bay Senior Housing Tax
Increment Financing District (collectively, the "Plans") and cause notice of said public hearing to be
given as required by law.
2. The HRA directs the Executive Director to transmit copies of the Plans to the Planning Commission
of the City and requests the Planning Commission's written opinion indicating whether the proposed
Plans are in accordance with the Comprehensive Plan of the City, prior to the date of the public
hearing.
3. The Executive Director of the HRA is hereby directed to submit a copy of the Plans to the Council
for its approval.
4. The HRA directs the Executive Director to transmit the Plans to the county and the school district(s)
in which the Harrison Bay Senior Housing Tax Increment Financing District is located not later than
April 21, 2017.
5. Staff and consultants are authorized and directed to take all steps necessary to prepare the Plans and
related documents and to undertake other actions necessary to bring the Plans before the Council.
Adopted this 28th day of March, 2017.
Attest: Catherine Pausche, Clerk
M
Chair Mark Wegscheid