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HomeMy WebLinkAbout4. Approval of Minutes: June 07, 2005 OFFICIAL PROCEEDINGS OF THE ECONONITCDEVELOPMENTAUTHORlTY SHAKOPEE, MINNESOTA REGULAR SESSION JUNE 7, 2005 Members Present: Chair Menden, Lehman, Schmitt, Helkamp and Joos. Members Absent: None Staff Present: Mark McNeill, City Administrator; Judith S. Cox, City Clerk; R. Michael Leek, Community Development Director; Bruce Loney, Public Works/City Engineer; Dan Hughes, Police Chief and Jim Thomson, City Attorney; and Kris Wilson, Assistant to the City Administrator. I. Roll Call: Chair Menden called the meeting to order at 7:30 p.m. Roll was taken as noted above. II. Aooroval of the A2enda: Helkamp/Joos moved to approve the Agenda. Motion carried 5-0. m. Aooroval of Consent Business: Items on the Consent Agenda were: Item No.4: Approval of the minutes for May 3,2005. Item No.5: Approval of Bills. Lehman/Helkamp moved to approve the Consent Agenda. Motion carried 5-0. IV. Aooroval of Minutes: for Mav3. 2005. Action was taken under the Consent Agenda. v. Aooroval of the Bills: Action was taken under the Consent Agenda. VI. Joint Meetin2 of City Council and EDA: Public Hearin2 on Modifvin2 the Redevelooment Plan for Minnesota River Vallev Housin2 and Redevelooment Proiect No.1 and a Tax Increment Financin2 Plan for TIF District No. 13.0oen Systems. Inc. - Res. No. lEDA 2005-4). lEDA 2005-5) and lCouncil6251). Lehman/Helkamp moved to open the Public Hearing. Motion carried 5-0. Ms. Wilson presented. Ms. Wilson stated that Open Systems, Inc. has submitted a request for Tax Increment Financing assistance for the construction of a new facility in the Dean Lakes Business Park. Ms. Wilson stated that the proposed economic development TIP district would provide Open Systems, Inc. with an estimated $170,478 in pay as you go tax increment assistance over the course of seven years. Ms. Wilson Official Proceedings of the June 7,2005 Economic Development Authority Page -2- described Open Systems, Inc. background information. Ms. Wilson added that this company is considering a proposal from Ryan Co. to build a 25,000 sq ft facility in the new Dean Lakes Business Park, with an estimated market value of $2.4 million dollars. Ms. Wilson stated that this building would be the first occupant of the Business Park and would establish Open Systems, Inc. long-term headquarters in Shakopee. Ms. Wilson presented a map to show the location of the land. Ms. Wilson offered that tax increment financing assistance has been requested, because the proposed site carries several unique costs. Ms. Wilson added that these unique costs include: 1) StreetIRoad ImprovementlUtility Costs 2) Site Balancing/Grading Costs 3) Landscaping Costs 4) .3 acres for Power line Easement. Ms. Wilson noted that in addition to the requested tax increment financing assistance, Open Systems will be eligible to receive a portion of the tax abatement assistance that is provided through the master development agreement. Ms. Wilson stated that it was envisioned that some additional assistance would be needed for particular parcels within the development, such as the TIP District. Ms. Wilsqn offered the benefits of maintaining Open Systems, Inc. as a local employer and providing them with the assistance to build their own facility within Dean Lakes. Ms. Wilson stated that the proposed TIP district has been reviewed and unanimously recommended by the City's Economic Development Advisory Committee and has also been reviewed by the Planning Commission and found to be consistent with the overall general plan for development of the city. Commissioner Lehman noted the "pay as you go" idea. Commissioner Lehman also noted that if the requirements are not met under the newly adopted Business Subsidy Policy; then it would be scaled back accordingly. Michael Bertini, CEO of Open Systems, approached the podium. Mr. Bertini went over the background information regarding the company. Mr. Bertini stated that they are one ofthe top three software developers in the industry right now. Mr. Bertini added that they have about 60 employees and are looking at about 35% growth this year, and therefore need a new building. Mr. Bertini stated that Open Systems' mission is to partner with the people they do business with and with the community. Mr. Bertini stated that they are asking for help from the City of Shakopee. Mark Sims, Commercial Real-estate Broker with United Properties, approached the podium. Mr. Sims stated that he has been representing Open Systems for about the past 6-8 months. Mr. Sims went over unique costs for this development that were identified by Ms. Wilson earlier, totaling over $300,000. Chair Menden asked if there were any citizens present in the audience who wished to address this issue. Harry Weinandt, approached the podium. Mr. Weinandt stated that if Open Systems is subsidized with tax increment financing, then that will create fiscal disparity that will Official Proceedings of the June 7, 2005 Economic Development Authority Page -3- have to be shared with the Metropolitan Area. Mr. Weinandt stated that his biggest concern is that if there is no tax for seven years, then that means the schools will not get any income out of that for seven years. Mr. Weinandt added that the city needs to start, not giving away the tax that the city should be receiving. Mr. Weinandt stated that if this tax increment financing is approved, then there should be a sign up stating "Businesses, Come to Shakopee, We have Tax Increment Financing!" Mr. McNeill added that fiscal disparities were factored in at the time that the dollars were determined. Mr. McNeill stated that this has a seven year impact and the schools will not see the benefit of this additional tax base until after the seven years have gone by. Mr. McNeill added that this is a classic TIF, if it wasn't for the assistance oftax increment, the tax base would not grow. Mr. McNeill added that this TIF is to retain jobs and job expanSiOn. Commissioner Lehman added that it is actually a job retention and job expansion, because the workforce is expected to grow. Commissioner Lehman also pointed out that it's not TIF for seven years, if they don't meet the obligations. He added that if they do meet the obligations, it creates much more jobs. Tom Schneider, 1572 Mike Court, approached the podium. Mr. Schneider stated that he would like to compliment OSI for extending their business in Shakopee. Mr. Schneider stated that his main concern is cost. Mr. Schneider added that somewhere we need to stop the "bleeding" of the tax dollars. Mr. Schneider concerned about giving resources away. Mr. Schneider was of the opinion that if there was no TIF that they would still develop. Commissioner Lehman addressed a past Ryan Companies proposal. Commissioner Lehman stated that the Ryan Master Agreement started out with a request of $18 million in tax abatement and through that process, the final request was approximately $1.8 million. Commissioner Lehman stated that out of that project, the city ended up getting $790,000 worth of natural amenities, with the maintenance of the amenities free of charge to the tax payers of Shakopee forever. Commissioner Lehman stated that the reason for this was so future Council's, as projects came in, would be able to judge on their own merits. He stated that this gives the Council the chance to look at each individual business. Chair Menden asked for additional comments. There were none. Joos/Helkamp moved to close the public hearing. Motion carried 5-0. Commissioner Lehman, in regards to the past Ryan Companies proposal, added that $1 million dollars was invested to gain a guaranteed $282 million of tax capacity, which buys down every property owners taxes in Shakopee. Commissioner Lehman stated that Official Proceedings of the June 7, 2005 Economic Development Authority Page -4- individual property tax is seen more because your value went up, if your value didn't go up, the property tax would have gone down. Commissioner Lehman offered that it is because of this type of effort, which does that for you. Mayor Schmitt stated that he is comfortable with this particular business subsidy, because it starts the business park and it starts the development process in this area and he feels it's a wise investment on the city's part. Mayor Schmitt stated that it behooves the city to be an active participant in marketing those projects. Mayor Schmitt added that he is in support of this Tax Increment Financing Plan. Chair Menden questioned why in the past, the Tax Increment Financing has been looked at on a six year basis and that this Plan is for a seven year basis. Ms. Wilson stated that each year of increment is approximately $24,000, so if it were a six year district, they would receive approximately $24,000 less than the $170,000 figure. Mr. McNeill stated that they asked for nine years and seven years is closer to the six year practice. Mr. McNeill stated that they did seven years as a compromise with Open Systems, Inc. Chair Menden questioned how to make sure that the TIF dollars aren't overspent in this area. Ms. Wilson stated that there is no hard and fast limitation on the use of tax increment financing by state statute. Ms. Wilson added that if using Tax Abatement, you can only abate up to 10% of the city's levy. Ms. Wilson stated that with Tax Increment Financing, it's more of a local decision. Commissioner Lehman stated that the newly developed Subsidy Policy made it clear what the requirements are to be considered and that the emphasis has been placed on jobs. Chair Menden and Mr. McNeill discussed the annual salaries contained in the Subsidy Policy. Mr. McNeill stated that the salaries paid by a business must be 275% of the minimum wage in order to be eligible for city assistance. Commissioner Joos stated that the city's fmancial health and stability is really tied a lot to the industrial base. Commissioner Joos also stated that this is a good policy and he is in favor of moving forward with this TIF request. Lehman/Schmitt offered Resolution No. 2005-4, A Resolution Approving Tax Increment Financing Plan for Tax Increment Financing District No. 13 and a Modified Redevelopment Plan for the Minnesota River Valley Housing and Redevelopment Project No.1, and moved its adoption. Motion carried 5-0. SchmittlJoos offered Resolution No. 2005-5, A Resolution Approving the Contract For Private Development With Open Systems, Inc. and Awarding the Sale Of, and Providing Official Proceedings of the June 7, 2005 Economic Development Authority Page -5- the Form, Terms, Covenants and Directions for the Issuance ofIts $125,200 Tax Increment Revenue Note, Series 2005, and moved its adoption. Chair Menden added that he has a hard time justifying Tax Increment Financing and it is not the way he would go, but because of what Open Systems, Inc. brings to this community and what it does for this development as a whole in the future, he is choosing to decide otherwise. Motion carried 5-0. VII. Other Business: There was no other business. VIII. Adjourn: Joos/Helkamp moved to adjourn the meeting. Motion carried 5-0. The meeting adjourned at 8:08 p.m. U~~.~ ith S. Cox, EDA Secretary Alysia Vinkemeier Recording Secretary