Good evening. It is 7 pm on Monday, October 13th, and I'm calling the economic development authority meeting um to order. With that, looking for a motion to adopt this evening's agenda. >> I'll make that motion. >> Motion by um Francis. >> Second. >> Second by Berock. All in favor, please signify by saying I. >> I. >> Oame sign. Motion carries. six to zero. Next item of business this evening is the minutes from the September 8th EDA meeting. Any corrections on those? Uh, Administrator Coander? Nothing. Oh, okay. Looking for a motion to approve those. >> So moved. >> Moved by Francis. >> Second. >> Second by Warden. Any discussion or questions? Hearing none. All in favor, please signify by saying I. I >> post same sign eyes have it six to zero. Next item of business this evening is old business and that is our downtown redevelopment and I'm going to turn that over to our planner Mr. Bus. >> Thank you chair and members I a couple things that I wanted to go through tonight with you the so that we can show the um screen. So, see if this goes different. Sorry, technical difficulties. And One pass code 6896. All right. So, um, since we, um, have last met or talked, the city has continued to work with the downtown redeveloper on the redevelopment plan, uh, for down the redevelopment kind of site plan as well as um, we've been working on uh, deal points associated with the um, the overall redevelopment. And so with that, uh, there's been some things that the city's been working on, um, that I just wanted to go over. The city's been working with the developer on an updated site plan that corresponds to what the city is trying to put forward for potential street uh, redevelopment uh, a street redevelopment section. So, one of the things we've been going back and forth with the developer on is what the section of Maple and Maine will look like in the after condition. And we've been trying to capture um making sure that we can get parking, we can get sidewalk, and then we'd be able to get the city's streetscape that um would allow street trees, uh street lighting, um and then kind of a a walkable sidewalk. And so we've been kind of going back and forth between Wank and myself and then the developers engineer to try to get to a point where we think we're really close um on what this site layout looks like um as it relates to just kind of the parking the street dimensions and then the sidewalk dimensions for the building. we haven't gotten too far into um to to the elevations of the building or anything that start to show um kind of the three dimension of it, the third dimension, but for now we're we're trying to get to what this site plan would um ultimately look like. So, we've been working quite a bit on that. The um city has also put together a tax increment financing uh kind of calendar and plan uh that would and it's in your packet that would show how we're going to get from where we are today to uh ultimately being able to consider a tax increment financing financing package uh that would uh work for this project. And so we've been kind of working through different proformas from the developer um different tax increment financing analysis uh with Northland to try to just get us to um uh a point where we'd have a a schedule for kind of moving forward and then um what that might look like. So, with that, we've been going back and forth with the developer on his pro-forma and the city's uh tax increment financing analysis. Um, in order to get to these numbers, we've met with Henipin County. I've actually met a couple times with the county to try to go through what they might assess the building or what the taxable market value of the building would be. Um, so that we could get as close as we can to trying to project what the increment generated off of this project would be. So, so with all of that, we we're at a place now where the developer um is in a position to move forward with the second kind of uh committing to the second phase of the purchase agreement, which means that they would uh be putting more money down uh for the city and they'd be moving into preparing a set of drawings to submit for full entitlement. So they would be making application for preliminary final plat and site plan review for the downtown buildings. And so they've got an architect engaged. They've got engineering and um landscape architecture and everybody else engaged at this point. Um and they're they're ready to proceed with that. They also completed their market study which I included in the packet. It's a long study, but essentially it supports their notion, which is that they that a 71 unit building is supported by the market. Um, and the rents that were projected the developer feels are are rents that they can that they're comfortable with and that work well with their pro-forma. So, with all of that, um, we're at a point now where trading information back and forth, the developers come back and they said, "I want to move forward. I'm ready to go." Um, my proforma is still a little bit shy of where I think it needs to be for for me to feel really comfortable moving forward. I've had a bunch of conversations with Tammy from Northland to kind of walk through that and right now they're sitting just below a 6% return on and they look at return on cash investment, but that's that's that's a common number that they use for an investor. um and they really want to be right at about 6%. So I said, "Well, in order to do that, what what is it that you need?" Um in order to do that, they they need somewhere in the neighborhood of about another 300,000 in the form of uh assistance from the city. And that's not a perfect number, and their numbers aren't perfect because everything we do is estimated because we're not we don't know exactly what all of this comes back in. We're doing our best to guess where it is. But with that said, one of the things we've held fast on is we want to maintain the the city's um fees. So, we've talked about whether or not there'd be in any um room in the in the city's fee schedule or in the city's fees charged for this development to consider offsetting some of their costs with additional fees or fee waiver. And then we've also looked at increasing the percentage of tax increment financing as another way to do it uh as another way to generate additional revenue if we want to generate additional revenue for the developer. So in in looking at all of that um I there's two proformas in here. one was the original uh proformer that we looked at or I'm sorry tax increment analysis that we looked at which was a 7030 split meaning the city would give the developer 70% of the tax increment generated on the project and the city would retain 30. Um the second one that I I had Tammy run was a 2080 split. So the developer would get 80% and the city would retain 20. that does generate approximately an additional $300,000 over the life of the district. Um, and so I just want to have that conversation with EDA relating to that particular piece. And then um the other two items that I had just to talk about tonight were if we're in a position to move forward um we would want to initiate our phase two or our second environmental investigation which really constitutes us putting holes in the ground to see if there is any kind of vapor that is present. Um that's really going to then drive whether or not we have to have some sort of mitigation system included in the building or or not included in the building. And so we've always been kind of waiting on that to try to get a project that's ready to go before we decide to move forward. Um, but we're we're now at a position where I think we're ready to move forward. And then the other piece of that is tax increment financing. In order to certify the tax increment financing, we need to uh we need to certify essentially the the museum building as substandard which doesn't it's not going to take a lot but it does have to be done and it has to be done in a format that then is um approvable by the city and then defendable that it meets the statutory requirements. And so I have this phase two teed up. I have the um TIFF certification essentially of this second of this building substandard. Um I have that teed up and then I want to I want to just talk about this additional possible subsidy to the developer. So um so with that um be happy to answer any questions or we can just kind of talk about the the subsidy piece. I think the um the phase two and the um TIFF certification or the building certification those are pretty straightforward. There's not I mean there is there is uh there are a lot of choices as it relates to the environmental engineer but we're continuing to go back to wink or now at Stantech just because they've done the original investigation. They have a lot of history. it's easier to just kind of work with somebody who's already done the basis um and has all the information as it relates to the TIFF certification or the substandard building certification. There's really only a handful of people in the whole metro that even do that. LHB is somebody we've hired before to do it. They do a really good job. Their reports are accepted all the time and um they meet all the requirements. So, um, but with that, um, happy to just talk through that or go into more detail, um, or have a discussion on this funding piece. >> Mark, can we call this out without additional money? This project not go anywhere? Yeah, I mean I go back and forth. I think the developer is pretty transparent with his with his information, but he's a developer. He's trying to make money. He has investors who want to make money. So, um, he's not here. I knew he wasn't going to be here tonight because he had another commitment. I thought maybe somebody representing him would be here. But in either case, I think, you know, he and I have talked talked about it. He's he gives he's given us his proform. I mean, he he gave us his Excel document and said, "It's my numbers. You can go through or scrutinize any." We did. Tammy does that right for cities all the time and she said I don't think his ask is unreasonable. I think the 6% is market. I think that's what people are trying to get to. Um she she had a caveat with that though which is there's no it's not perfect. His numbers aren't perfect. What we give him is not perfect. Um so can we get a project without it? I think I think we're right at the like it's it's just razor thin. So, I don't know that he'd walk away, but what he's told me is I really need a little bit more to make it go. >> Well, not surprising, but a little disappointing. Um, where do interest rates play into that performance? Is we're in a market right now where interest rates are going to be going down in the next months? >> They would definitely play into it. I mean that's that's part of his financing. So I mean he's got he's got a return that he's projecting but part of that is based on that he's borrowing money >> projecting interest rates. >> Uh look at the proformative to see I didn't focus in on that but I could I can see what's in there >> because obviously the ask comes to us. It says find a way to come up with more money. The other way is of course to move the equation on the other side of the thing and he looks more at his performer to go where are we? I mean everything from what he charges to what he's anticipating as Tammy said it's not an exact science. I get that. And maybe there's some middle ground in there between him just saying, "I want another $300,000 versus, you know what, let's share this a little bit." Well, and there is a point, I didn't I didn't highlight it um exactly, but one of the things that we talked about in in doing that is he would reduce his what we came up with was about a $600,000 gap. And the way that we got to the 300 was that he would reduce his development fee by 300,000. So I I don't know that that's I don't know it's an apple for an apple, but it is something he is trying to take some of his profit and pull it back down. So what we talked about in this split was or in this uh 300,000 was that we would essentially split it. That that was his proposal. you know, you come up with 300 and I'll I'll come up with 300. He's trying to make it work. I mean, I I I think it's in good faith that he's trying to make it work. I do not feel like he's asking us to be one-sided um in what we've been talking about so far. If we let the tiff differently the way you proposed it, does that provide us enough to do what we need to do on our side with our 20 or 30%. Yeah, it starts making your side um I mean 300,000 takes takes down what you can do for your side and I think we would need to I think we would need to look at what that analysis is to what that impact is to the city because we're getting below where we're getting below that it's going to cover 100%. Now you guys are trying to get the LI funds which would obviously help that and there's going to be an assessment piece on that project. So I don't think we've looked at what's the total impact to the city on that project based on you know the total project when we've been looking at it at least for the last couple of years we've always just been looking at Maple and Maine in that little quadrant and we've got a bigger project that we're actually talking about doing all the way down Main Street. So um that analysis hasn't been um completed by the by the develop or by us I mean as to what the total impact would be trying to find the interest rate. Hard to have us make a recommendation though if there isn't going to be enough revenue generated by the TIF that we have to start digging into other dollars to make a project work. This has always been based on the fact that project would generate what we need to in order to make it work on both sides. Right? Where's that line? Is it at 300? Is it at 200? I don't know. >> I think um you know, in order to do that, I think we'd have I mean, we'd have to do some more analysis on the overall project. I know. >> Give us a best guess, Mark. >> Well, so the net present value of the tiff that's being generated in the in the um in the project in the projections is really about what the borrowing power is. So, if you look at the 30% um under the 70 to 30, this is the number. I'm going to blow it up. I mean, it's about a million dollars in TIFF revenue. And then we have another um and I need to look about uh say three 300 to 400,000 in um fees that are going to come in. So, sewer, water, storm water fees that would come in with a development. Those would be paid upfront by the developer. So, I look at the combination of those fees plus the TIFF as your total towards what you would then potentially use u or or be able to borrow. That's about 1.5. It's right under 1.5 million, which is what we've always been targeting as this piece. So if we drop by 300,000 that takes you below that threshold. Now with that said the city does have the ability to recoup if the project and the valuation is higher over time. We we would definitely have the ability to repay ourselves. Um, one of the things we've talked about is not giving up our fees because we're giving up that we're kind of giving up the known and I like to look at I I'd rather look at giving up the tiff at the end or giving up the percentage of tiff because that's an unknown. That's a pay as you go. We don't there's no guarantee in the tiff whereas the fees would be coming in day one. So, if we were looking at anything, it would be to me the best the best way to look at it is with the um with a percentage of TIFF. The the total fees that we projected on this project were um >> you have that. Yeah. >> How much of that was park dedication though? Because >> 266. >> Yeah. So, it's really the 686 minus the 266 because the park dedication is totally unrelated. I mean, it is fees, but it's totally unrelated really to your ability to pay for sewer, water, um, things like that. But the fees, the other fees, the sac >> Yeah. See, so it's like right at it's right at that 1.4. We're really close at 1.5 um million is what we've always been trying to get to. >> And we're a little under at 1.2. Yep. So, we'd be down at 1 point two, a little bit less potentially. Um, there's one there's one other piece that Jacob and I are trying to figure out and that is um whether or not we still have sack credits. I don't know. Anybody who was here when we did Elim remembers we gave Elum sack credits as a offset. So the city over the years when they when they well I think we have about I think we have about 50 sack credits left but we're going to try to confirm that. Um we had 50 in 2020 at like right at the beginning of 22 which was after elim. That's why I think we still have about 50. Yeah they were like 18 19. Yeah. So we confirmed when we were in 21 is the last correspondence I have. So we'll we can see on that that that would be a that would be a really good potential offset for this project is if we had sack credits we could use some of those um as maybe a a piece of that package. I don't >> you want to explain to the new people what the sack credit is. >> Yeah. So for those of you who don't, so the city as the city developed um the city paid the Met Council or essentially established with the Met Council a um sewer access charge which corresponds with a particular property address or a particular building. And as the city builds out, they report a new building that's built, how many sat how many sewer access charges that building pays in. and the Met Council keeps tabs of that. When the city demolishes a building or a building goes away, those SAC credits are then credited back to the city essentially or or the property, but really the city is the holder of those. Um, and those credits then are available essentially to the city to use to offset then when a new project would come in and be charged offsetting sack credits. And so the Met Council keeps this balance for the city. In 2015 16, we discovered that we had a substantial surplus of SAT credits that have been generated over the years. We used some of those SAT credits to essentially provide a subsidy to Elim to build their new project. The city, I think, still has actually a pretty good little number of those. Um, but we're trying to confirm whether or not those side credits exist. That would be another piece that we could layer in to not reduce, you know, our to or or to help offset our total give to the project if that's something we wanted to look at. >> So when I heard you earlier, you were asking >> Yeah, absolutely. >> Different different to get there. >> Absolutely. Yeah. I think >> I would entertain that >> 7525 as a possibility. >> That would generate probably somewhere in the 200,000. I mean 200 or a little under maybe, right? Umund. Yeah. >> Um >> that the combination of what interest rates could do potential SAT credits that you that we could figure out. This feels like it's doable. >> Yeah. >> Without giving the shift. >> I know. And you're right. He's a developer trying to make money. >> Yeah. >> I think that's a reasonable response anyway that we'd be willing to go back to a 7525 with the with the possibility and we'd have to research whether or not we have sack credits. >> Um But, you know, sack credits, um, if our numbers right, those could generate, you know, >> Yeah. But if we wanted to just give him a, you know, if we wanted to do a 7525 and then maybe like 40 sack credits or something, which essentially would be, you know, half his sack, half of those, that'd be 100,000 plus 7525. I think that's a reasonable response. Obviously, we're trying to get the deal done. He's trying to get the deal done. I mean, he's put a lot into this and he has I mean, he if he was sitting here, he'd tell you the same thing. He wants to go. He does not have another project that he's working on right now. This one is one that they really like. His investment group really likes it and they want to try to make it work. And it's I will tell you it's hard. Like there's not a lot of deals flying around because it's hard right now. Everybody's trying to figure it out. But that doesn't mean, you know, we have to give up everything. I mean, we want to try to make it work. But I'd feel comfortable going back to him with that 7525 and a potential sack credit if we have it. >> That feels like a win for me for everyone. You know, it still says we're open to this. We want to work with you. We want to see it happen, but we're also not willing >> give it all away. It just kind of odd that that's such a large number to me. I guess that There's a gap there. Seems like how was that missed? I I know you try to explain it, but to me it's still still crazy to me. >> How do we get to that? >> Yeah. I mean I mean it just seems like that should have been figured out be you know. >> Well, >> I guess I don't understand everything about this situation or how this whole thing works, but it seems like an awfully big number. Yeah, I think you know on a $16 million project it's it's really not you know that big when you're think >> but >> when you're thinking about that and I mean some of these numbers are moving. One of the things that um one of the things that we did in our projection that did change it a little bit. It's part of why he's back. His initial proforma he had a $235 um000 per unit cost um in and after talking to the assessor that was outside of the range. Now, she said she goes, "I'm super uncomfortable giving you guys a hard number in Maple Plane because I have nothing nothing to compare it to in Henipin County. We really don't have anything on this western edge." So, we were looking at what are the numbers for like a Reich County, a Delano building, right? That was one of the comparables. We have Matt's other project in Long Lake, but that that project's different. It's not the same. So, when I was talking to the assessor, and I did talk to the assessor on three different meetings, she just was like, "I have searched all over trying to find comps for this building. I just don't I'm not comfortable." So, what she gave us is her range was a really broad range. I went back to Tammy. We talked through it and we decided we'd go with 225. That was the top of where Tammy said I would feel comfortable. uh um recommending to the council to put our tiff analysis. It's very possible this building comes in higher and it it's assessed higher. It's very possible, which is a it's a good thing. It's a good thing for us that you know then we would we would realize that. But so that $10,000 per unit is what a it's a difference in how much tiff was generated by the project then. >> Yeah. I know. And that's >> I know that's your gap. It's still it's still a risk. >> Yeah. Yeah. And there's still a risk, which is why if we if we do it through a percentage, the risk then is mitigated somewhat because we're not we're only promising him what is generated. We're not we're not promising him something that we um that we don't know about. It's why I think the fees are good to keep and it's why we've talked about keeping the fees is then you're getting that cash up front. Commissioner Berak is has something >> I would like to say I like the idea of keeping the fees in place and I would be willing to go with a 5% difference here. Um especially because there is a lot of unknown with it. So the risk is kind of on both sides for changing the tiff numbers. >> Thank you Warden. >> Yeah. Um, I'll chime in. I think the same. I think uh we definitely want to keep those fees up front. Uh, I'm in a little bit uh different position as the rest of you sit on council. You have to make some of your decisions based on other kind of funding. For me, solely as a member of the economic development authority, from an economic development standpoint, I absolutely agree. I think this project is something we've been working on for a while. I think these market rate rooftops in kind of that CBD area that we have will be a benefit. I think great idea in terms of again kind of yeah we're willing to work with you bump into that 75% it still shows our willingness to work I think looking at the the tiff valuation here it has a an estimated uh taxable market value annual growth of 1% which I think is on the conservative side and so I think the you know the potential for tiff funds there I think it's unlike likely that we would come in under these projections. And I see, you know, hopefully they realize that too, that, you know, if that goes up, then that's additional funding for them and it's also more money in our pocket. >> Thank you. >> Any other thoughts or questions? >> Is that enough direction for staff? >> It is. And um just Jacob found a letter from 23 still showing 58 credits. I think that's what's there. I just we just need to get the confirmation that that's still our number. And I think we'd be able to use some of those if we want to do that, which would be I think a really good way to try to make this go together was 7525 with a with a sack credit. >> Sounds like a good compromise and you know good step forward on both sides. But I think there's um consensus then that that's a direction that we'd like for you to take back um developer. >> Great. >> Right. >> Is there any other questions or is there consensus or direction to move forward with the environmental andor the tiff certification? And the only thing I'd note on the environmental there's a and I just learned of this this week actually but there is a or and and last week there's a um window for boring where it's not winter cost versus winter cost and it's like it's November one and I didn't know that anybody thinks about that with um environmental boring holes but uh apparently it's a thing. So um I think it would be great if we could go ahead and move forward on that. Um I had put 15 to 20,000. I got the formal um proposal after kind of there's a couple of questions that I needed to go through um with um Stantech and you guys probably know that Adam Zabel Zabel is his name. He's the guy that's done all our environmental when we did Olsen's and which is helpful for us. But anyway, he his uh boring price he locked in um by because he actually was able to find somebody that could still do it is $11,474. So that's what we'd be talking about >> if we did it before November. >> If we do it before November one, but we'd have to tell them like tomorrow go and get it done otherwise we're out. But I I know that the EDA is limited on that. But I just thought I'd bring it up. We have to do the environmental work. >> We've been waiting on that until you and there was a I recall there was a timing issue that you didn't want to do this two years ago. >> Yeah. Because we would have wasted it. >> Waste. So >> does seem like now is the time to do that. >> Without a meeting though, can we just p staff can just can you proceed? I think that if you guys give us direction in this meeting um to move forward with it, we'll take that as the approval to use uh the EDA funds to to do that and the council will approve it when it comes to um >> we can bring a formal proposal in a week and a half or whatever. >> We're going to have it on the consent agenda >> and it will come out of the ADA funds. So, and I mean it's It's planned. It's the time. So why not save some money and do it now before November one >> general consensus send to move forward with the environmental boarding? >> Yes, ma'am. >> Yes. >> Right. Okay. You have the go ahead to >> do that too, please. >> And then you wanted to talk more about the TIF if we wanted to. >> Well, I'll bring I'll bring the TIFF. Um I'll bring the TIF to your council meeting. I have a formal proposal for that. It's about It's $4,900. We're going to have to do it at some point to certify. Um what we're what we're looking at um I try to connect again, but I bet it'll take too long. But if you look at that survey that that we did, essentially what we need to do is certify that we meet redevelopment standards. We've talked about this a multitude of times. We still I mean, and this is like crazy that we can still do it because we've torn down all the buildings except for we sell the museum and that actually still counts. So, if we certify the museum substandard along with the old parking lot that's still there, it counts for our coverage. If we bring these five properties into one property, which we would do, we would plot those, then we meet our coverage test and we have the substandard building and we can tear down or we can qualify this for redevelopment. So, that's what we're trying to do because redevelopment tiff is what makes everything work on this. Um, so in order to do that, we have to have a report that says the building substandard. I mean, it's the simplest report ever done, but it still has to check all the boxes. So, it it's not like it's that much cheaper even though it's a building that will take three minutes to go in and say it doesn't meet the they still have to say why, what's the value, what's the cost of improving it. I mean, there's still work. So, um, LHB, who's done it for us before, Mike Fiser, is one of the few people that does this still in the metro. And so, that's how we got the proposal. We'll bring that to the council meeting, but if the EDA is agreeable, I mean, it would be a recommendation to the city council that we do it. And once that museum, assuming it would be deemed substandard, which is to be expected, what would the plan be for that then in terms of communication with them and time? >> If we're ready to move forward and we and Matt submits the full thing, then I mean we're going to give them a notification of approximate timing for being able to remove that. So, um I mean I have I I did talk to Jacob and um you know, dependent just up or just winterized our building. So, we we would have ability to try to help them at least for temporary or whatever they want to do to move some of their stuff if that's something they wanted to do. We could work with them on that for sure, but or or they could I mean, I don't know how they do it, but I think we try to give them as much time as possible to say this is what we're thinking about >> and they have been aware of this for years and they do have the opportunity to build in Veterans Memorial Park. um as well. So, okay. Just want to make sure that doesn't fall through the cracks. >> Yeah. >> All right. Um I think then we'll wait on the tiff. I think we've got enough for right now. Administrator Coander. >> Uh thank you, Madam Chair. Um so, I did have a conversation with um Judy Sutherland um about the option of going over to the newly remodeled um Museum of Independence. Um I think they were going to talk that over We'll certainly address that again as we get closer and come up with that. >> Okay. Thank you. I appreciate that. >> All right. Right. Anything else that staff needs from us this evening? >> That's great. >> Anything else from any of the commissioners? No new business come before us. Looking for um or other business looking for a motion to adjurnn. >> Move by Warden. >> Second. >> Second by Beer. All in favor? I >> I post same sign meeting's adjourned at 7:38.