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2017-02-14 HRA Meeting MinutesFebruary 14, 2017 The Mound Housing and Redevelopment Authority in and for the City of Mound, Minnesota, met in regular session on Tuesday, February 14, 2017, at 6:55 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, Director of Finance and Administrative Services Catherine Pausche, City Attorney Troy Gilchrist Public Present: Steve Rettler, Roxanne Goodwin, Bethany Slicerson, Anna Hedstrom, and Peter Norton 1. Open meeting Chair Mark Wegscheid called the meeting to order at 6:56 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 Gillispie, seconded by Bergquist, to approve the minutes of the Jan 24, 2017 regular meeting. Wegscheid, Peterson, Gillispie, and Bergquist voted in favor; Salazar abstained. Motion carried. 4. Approve claims MOTION by Salazar, seconded by Gillispie, to approve the claims in the amount of $23,182.96. All voted in favor. Motion carried. 5. Action on a resolution authorizing acceptance of an Application for Public Financing Pausche started the discussion by saying the HRA/City Council approved ADMIN -004 Tax Increment Financing (TIF) Policy in June of 2016 which sets objectives and criteria for granting TIF on a project by project basis. Pausche said that in addition to providing for affordability in the new assisted living development, the project also meets other criteria like expanding the tax base, adding new jobs, adding a mixture of housing options not currently available, remediation of blighted land, and improved storm water treatment. Pausche emphasized that approving the resolution effectively accepts the application for further analysis and consideration, but does not imply TIF will ultimately be granted. Pausche said there have been projects discussed where Staff feels TIF would not be warranted, but that Staff feels consideration of TIF in this instance is appropriate and that the next step would be to hire a financial advisor to do the analysis, at the expense of the developer. Pausche said the intent is to have the HRA Board accept the application in order to avoid time and expense only to have the HRA reject it outright. Salazar asked Pausche to explain how TIF works and the terms of the Pay as You Go Note. Pausche said that Mound has granted TIF related to three downtown redevelopment projects. The first district, Commerce Place with Wells Fargo and Thrifty White decertified a few years ago. The second district is the Mound Marketplace and Village by the Bay Development and the third district is the Harbor District. Pausche said in the case of Mound Marketplace, there was both a bond issued by the City for the project for which TIF generated is used to repay, and also a subordinate "note" which the City splits any HRA Minutes — February 14, 2017 excess TIF to pay off the bonds early and make payments on the developer's note. To the extent TIF fails to materialize before the note's maturity, the City will no longer be liable. Pausche said that in the Harbor District, the City issued the "Dump Bonds" to pay for the Lost Lake dredge, soil remediation and other improvements in the Harbor District and that the former developer met the value of the improvements they were obligated to make prior to the recession. This released the developer of liability, and when the recession hit and TIF dried up, the City chose to levy for the bonds instead of defaulting. Pausche said that with the Pay as You Go Note the developer is requesting, they will only be paid if the TIF is generated. The City will not be asked to issue bonds that puts us at additional risk as in the case of the Harbor District. Pausche noted that the TIF policy states the City will issue the minimum amount and duration of TIF and that the financial advisor will use this directive while analyzing the pro -forma to make their recommendation. Roger Fink, Sr. Vice President of Trident Development, LLC, said that Trident Development has done 6 to 8 TIF projects with the most recent in Farmington. Fink said they requested significantly more TIF in the Farmington project, but that Ehlers, the financial advisor, recommend a lesser amount. Fink said the requested TIF for Harrison Bay Shores is more in line with the final negotiated amount in Farmington. Fink said state statute limits what are eligible costs for TIF to things like site acquisition, earth work and utilities, or basically the "foundation on down." In addition, statute limits the amount of TIF based on the frozen base of tax capacity and then the incremental tax capacity created by the improvements. The actual TIF can vary by community because of the different tax rates for cities, counties and school districts. Salazar asked how the 90% was determined and Fink said that a 10% administrative deduction is kept by the City. Salazar asked the total project cost and Fink said approximately $16M. Salazar asked how many years has Trident been considering this project in Mound. Fink said they started with the Mound Harbor District, then looked at the Langdon District before settling on the old Anthony's property. Salazar said he remembers a discussion with Fink's partner when Salazar served on the Facilities Committee and storage for public works was also being considered on the Anthony's property. Salazar said he was told at the time the developer would not be asking the City for money. Salazar asked Fink to sell him on the need for TIF and why less than 10% of the total project cost is so necessary. Fink said that the project meets the majority of objectives in Mound's TIF policy, including increased tax values, job creation, affordable housing and a new housing option. Fink said he thought the project deserves to be considered for TIF because it meets these objectives. In addition, Fink said as the project costs are developed in relation to the market rents, additional pressure on the bottom line can put project feasibility into question. Fink said statute permitting housing TIF districts was created to help offset the difference between market rate rents and services and amounts received when residents are on a subsidy program, like the Title 19 Elderly Waiver. Housing TIF ensures at least 20% of the units are reserved for those who could not otherwise afford it. Discussion ensued as to what the differences are between private pay housing and services and those on the Elderly Waiver program. Fink noted that many residents spend down their assets while in assisted living and it has been his partnership's practice not to make them relocate even if they can't continue to afford it. Chair Wegscheid stated that it was important that the Board not confuse approval of the application with the approval of TIF and he applauded Trident's commitment to exploring many opportunities in Mound and seeing value in our community. Wegscheid acknowledged that it is a business and margin; matter and that the City was pleased to be working with such a financially sound group, demonstrated by the way they weathered the recession. HRA Minutes— February 14, 2017 Pausche said that it should be noted that she expects the financial advisor's analysis to recommend some level of TIF. Salazar said he is frustrated that with all the meetings and dialogue to date that this request had not been brought forth sooner. Pausche said the land use approvals are separate, and that all the work on the TIF Policy last June was in anticipation of this application as well as others. Wegscheid noted that the TIF policy states that meeting the criteria is not a guarantee of award of TIF and approval or denial of one project is not intended to set precedent for approval or denial of another project. Wegscheid also noted that this is just accepting the application and not approving TIF. Chair Wegscheid said he would accept a motion at this time. Motion by Gillispie, seconded by Peterson. Discussion ensued with Salazar thanking Mr. Fink and stating he could see the potential benefit of TIF for this project, especially when it comes to the affordability aspect. All voted in favor. Motion carried. • •- 5. Adjourn MOTION by Peterson, seconded by Bergquist, to adjourn at 7:45 p.m. All voted in favor. Motion carried. Attest: Catherine Pausche, Clerk Chair Mark Wegscheid