HomeMy WebLinkAboutAugust 29, 2017 Shakopee City Council
pwakaj August 29,2017
7:00 PM
SHAKO ' City Hall 485 Gorman St.
Shakopee Mission Statement
The Mission of the City,of Shakopee is to provide the opportunity to live, work and play in a community
with a proud past,promising future, and small town atmosphere within a metropolitan setting.
A.Keep Shakopee a safe and healthy community where residents can pursue active and quality lifestyles.
B.Positively manage the challenges and opportunities presented by growth,development and change.
C.Maintain the City's strong financial health.
D.Maintain,improve and create strong partnerships with other public and private sector entities.
E.Deliver effective and efficient public services by a staff of well-trained,caring and professional employees.
F. Housekeeping item.
Mayor Bill Mars presiding
1. Roll Call
2. Pledge of Allegiance
3. Approval of Agenda
4. Consent Business - (All items listed in this section are anticipated to be routine. After
a discussion by the Mayor there will be an opportunity for members of the Council to
remove any items from the consent agenda for individual discussion. Those items
removed will be considered following the Public hearing portion of the agenda. Items
remaining on the Consent Agenda will not be discussed and will be approved in one
motion.)
A. Administration
*4. A.1. *Tobacco License for Hy-Vee Gas Station
5. Workshop
S.A. Preliminary Budget and Levy Review
S.B. Comprehensive Plan Amendment for Entertainment Land Use
5.C. High Density Housing Overview
6. Adjournment to September 5, 2017 at 7:00 p.m.
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*4.A.1.
Pb9akA
SHAKOPEE
Shakopee City Council
August 29, 2017
FROM: Lori J. Hensen, City Clerk
TO: Mayor and Council Members
Subject:
Tobacco license for Hy-Vee Gas Station located at 1421 Adams Street South.
Policy/Action Requested:
Approve the application and grant a tobacco license to Hy-Vee, Inc. dba Hy-Vee Gas at 1421
Adams Street.
Recommendation:
Approve the above motion.
Discussion:
City staff have received an application from Hy-Vee Inc. to sell tobacco products at Hy-Vee
Gas located at 1421 Adams Street South. The application is in order. The Police Department
has conducted the customary background investigation and learned of nothing that would
prevent the issuance of a tobacco license.
Budget Impact:
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S.A.
PM*MA
SHAKOPE:
Shakopee City Council
August 29, 2017
FROM: Darin Nelson, Finance Director
TO: Mayor and Council Members
Subject:
Review of 2018 Preliminary Budget and Levy
Policy/Action Requested:
Discuss and provide direction regarding the 2018 preliminary levy and budget. No formal
action is being sought.
Recommendation:
Staff is proposing a preliminary city levy of increase of$488,883 or 2.58 percent. In
addition, the EDA is proposing the establishment of a $350,000 market value levy that will
be dedicated to economic development activities.
Discussion:
The City Council must certify a proposed levy on or before September 30, 2017. The
Council will consider adoption of the proposed maximum tax levies for both the city and the
EDA on Tuesday, September 19. Staff seeks additional guidance from the Council in
preparation of necessary documents for that meeting. Attached is an in-depth budget memo.
Budget Impact:
The 2018 city and EDA levies provide the necessary funds to maintain the city's current
service levels.
ATTACHMENTS:
D Preliminary Budget & Levy Memo
D General Fund Preliminary Budget
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SHAKOPEE
Preliminary Levy Workshop—August 29, 2017
Background
Each year the City must prepare a budget and property tax levy for the following year. Staff has
been analyzing revenues, expenditure information and initiatives in order to prepare a
preliminary budget and levy for your consideration.
For the second consecutive year, staff is proposing a budget with minimal impact to residents
(approximately $20 per household) absent increases in their property valuation. The proposed
budget actually decreases our current tax rate, lowering it from 38.521 percent to 37.455
percent. Even with splitting out an economic development authority levy, the rate falls to 38.212.
More importantly, we are focusing on right-sizing our organization in several key areas to fit our
growing city of over 41,000. We are asking to add two police officers to concentrate on keeping
our streets safe, an Assistant Fire Chief responsible for training our fire forces, a Code
Compliance Officer who will monitor our community's health and safety, and two full-time
lifeguards to ensure our new aquatic facilities remain safe for our children. We also seek to add
a junior planner to ensure our growth is properly mapped for the future.
Our 2018 Budget should be the final one of a three-year transformative budget process, and will
set the stage to achieve the Council's ultimate goals of low taxes, financial stability and a stable
tax rate. The foundation established by this process will keep those goals in play for the
foreseeable future absent a major recessionary period.
Upon City Administrator Reynolds arrival, he explained the need to retool our budget and
budget process over a three-year period in order:
1) to establish true fiscal transparency (which included defining our revenues), and
2) to ensure that our budgets accurately reflect how we spend tax dollars (including the
reduction of variances).
Some of those changes have been budgetary "inside baseball" to a degree, but all have had an
impact upon our financial future.
The last few years has been more than just a time of change in our budget process. During the
first two years of this budgetary transformation, we have had to address multiple challenges that
in and of themselves could be considered noteworthy. This included successfully inculcating the
Community Center debt bond payment, establishment of a franchise fee, realignment of our
liability insurance premiums and separation of our insurance from SPUC, creation of a fund to
pave the way for future self-insurance, and adjustment of internal service fund rent shortfalls.
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Staff also reviewed with City Council this past spring the long-term financial position of the
Sanitary Sewer and Surface Water enterprise funds. This review was done to determine
appropriate cash balances for each respective fund and to ensure rate are maintained at a
satisfactory level to ensure long-term viability.
Through all of this change and challenge we still had our bond rating upgraded — a remarkable
achievement as well.
After last year's challenging budget, staff produced and the City Council approved a tax rate that
had 0% impact to residents at the average home value (absent home valuation increases).
2017 was our first year really tightening the budgets at the department level to offset the
previous philosophy of never coming before council to request adjustments. As Administrator
Reynolds stated last year, not wanting to come before council had the effect of encouraging a
padding of the budget at the departmental level. It is important that we budget as best we can
based upon actual revenue and expense estimates.
Again, as a reminder, staff does not have a crystal ball to fully determine what will be needed in
all cases. Snowfall greater than average is a perfect case in point. If we do miss a projection, we
bring that to council and explain the situation and then request a budget amendment. All of
which is publicly documented (again transparency). Council also needs to remember that this
change in budgeting philosophy is not a failure on staff's part. There will be unforeseen
contingencies.
We are in year three of our transition, and we have several challenges that if successfully
addressed will cement our future financial stability. This third year will have some more internal
changes, but more importantly it allows us the opportunity to "right-size" the organization for
growth.
We continue to have a lot to be thankful for. Our efforts renegotiating the Jackson Township
Orderly Annexation Agreement were successful which ensures we have land available for
growth. In addition, we have adjusted our community center revenue projections (in a positive
way!) based upon our initial 2017 numbers.
Our challenges compared to last year seem minimal. We do need to include the 2nd installment
of the internal service fund adjustment which was carved out of last year's budget due to
Council's concerns. There will continue to be spillover from the school district's issues by
residents who don't realize we are separate entities. And we will need to prepare for the results
of our compensation plan study. But in reality, those are challenges that can be met with little
difficulty.
In this budget, we continue our efforts with transparency by breaking the economic
development levy out of our general fund and establishing it as a stand-alone levy. We did the
same last year with abatements and the Capital Improvement Fund to make them easily
identifiable and to ensure greater transparency.
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After last year's challenging budget, it is great to see that we have some stability in year three of
our budget change process.
Administrator Reynolds remains confident that at the end of it, we will be a better organization
with great transparency and greater fiscal controls. And in the end, we will continue to be one of
the lowest taxed communities in the metro area.
Schedule for budget and property tax levy development
Date Who What
July 18, 2017 Council/Staff Review Preliminary Capital
Improvement Plan (CIP)
August 29, 2017 Council/Staff Review Maximum Levy,
review initiatives and
requests
September 19, 2017 Council Adopt proposed maximum
tax levy for City and EDA.
Adopt final 2018-2022 CIP
October 2, 2017 Staff Certify maximum tax levy to
the County which will be used
for proposed property tax
notices
November County Proposed tax notices sent to
owners
November Council/Staff Work session to review
budget document
December 5, 2017 Council Hold public meeting to
discuss levy and budget.
Review and approve utility
rates for 2018.
December 19, 2017 Council Adopt final tax levy and
budget
December 29, 2017 Staff Certify final tax levy and
budget to County and State
Budget Impact Issues
Wages and benefits
Two of our three union contracts went into effect on January 1, 2017. Both contracts negotiated
three percent cost of living adjustments for 2017, 2018 and 2019. The third contract would be
expected to fall into a similar range. The preliminary budget has been built with an assumption
of a 3 percent increase in wages. The General Fund impact of a 3 percent COLA is approximately
$411,000.
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Health insurance has been budgeted at a 15 percent increase. Actual renewal rates will be
known later this fall. The city did experience a ten percent increase in health insurance for the
current year. The City is experiencing a higher number of claims year to date compared the
previous couple year. A fifteen percent increase in health insurance is approximately $179,300.
Administration undertook a class and compensation study earlier this year that is anticipated to
have a financial impact. The actual impact is expected to be received in late September or early
October. As a budget placeholder, staff is including an additional $100,000.
No other benefit changes are anticipated or legislated for the upcoming year.
Seven full-time staff positions are being requested for 2018 along with additional part-time
staffing. The Fire Department is requesting an assistant fire chief, the Police Department is
requesting two police officers and a code compliance officer, Planning and Development is
requesting an additional planner and Recreation is requesting two lifeguards. Recreation is
requesting an additional $133,200 for part-time salaries related specifically to staffing needs at
the community center pool. Department directors will be available at the budget work session to
discuss their requests in further detail. Below is breakdown of the budget impact for 2018.
Total 2018
Estimated Wages and
Dept. Title Start Date Benefits
Fire Assistant Chief 1/1/2018 $ 125,600
Police Code Compliance Officer 1/1/2018 70,500
Police Police Officer 10/1/2018 22,100
Police Police Officer 10/1/2018 22,100
Planning Planner 1/1/2018 83,900
Recreation FT Lifeguard 1/1/2018 55,700
Recreation FT Lifeguard 1/1/2018 55,700
$ 435,600
Internal Charges
Part of the budget process for 2017 was restoring internal service charges/rents that were
reduced by 20 percent in 2014. The restoration of rents is needed to ensure long-term
sustainability and replacement of city assets including equipment, park assets and city buildings.
Last year the Council directed staff to restore rent funding over a two-year span rather than
recovering all the rent charges in one year. The one caveat was that park assets would be
restored to 100 percent funding in 2017.
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The impact to restore the second half of internal charges to the 2018 budget is approximately
$150,000. Total rent increases for 2018, which includes both the restoration of rent charges and
the replacement cost of equipment and facilities is approximately $265,700.
The community center and ice arena are being depreciated at 35% of the book value as of
December 31, 2016. The rationale behind the 35 percent was that the rent charge would be
sufficient to cover any facility needs that may occur in the next 10 to 20 years, but would lessen
the tax burden of current tax payers that are also paying the current debt service on the
facilities. When the debt service is fully retired, community center and ice arena rents would be
expected to increase to full funding.
Other Services & Charges
A few other line items in the 2018 budget outside of personnel and rent are requiring additional
funding for 2018. First, natural gas and electricity for the community center and ice arena are
being increased by $103,500. Cleaning services for the police department and public works
facilities is increasing by approximately $68,000. This increase is being offset by a reduction in
custodial staff. Overall this change is budget neutral, but there will be a shift in expenditures
from the Personnel category to the Other Services & Charges category. The City's annual service
payments to LOGIS for various applications is increasing by about $19,000. This is mainly related
to the new permitting and accounts payable applications implemented in 2017. All other line
items within each department's Other Services & Charges category are being held to a zero
percent increase for 2018.
Revenues
Typically, governmental revenues such as grants, charges for service and fees & permits are
constant with not a lot of dramatic fluctuations from one year to the next. Obviously, the
economy is typically the biggest factor in revenue fluctuations. The City's building permits have
been strong over the past couple years with the influx of commercial development. Those
strong permits are expected to continue with the recent housing developments beginning to
take shape. Building permits are anticipated to grow by 10 percent or $161,600 in 2018.
The community center and ice arena revenues for 2018 are expected to increase substantially.
Staff has worked diligently on estimating membership renewals for 2018 and are anticipating an
additional $300,000 in revenue compared to 2017. Overall, recreation is anticipating an
additional revenue of $430,000 in combined charges for services for 2018. These additional
revenues aid in offsetting increased operational costs.
Economic Development Authority
Part of the budget discussions last year involved the implementation of a dedicated EDA levy
which would be separate from the City's general levy. EDA's have the statutory authority to levy
a small percentage (up to 0.01813%) of the city's estimated market value, which for 2018 would
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be a maximum of approximately $768,500. The levy cap is a maximum levy, the EDA and City
Council can set the levy at any amount up to this cap.
The EDA levy should be considered a budget neutral change. In prior years, a transfer was made
from the General Fund to the EDA to cover EDA operational costs, facade loan funds, and other
development related activities. This EDA levy will eliminate that transfer from the General Fund,
thus reducing the City's general levy.
The advantage of the EDA market value levy is that is applies to all taxable properties within the
city including properties that are currently part of a tax abatement or TIF plan. The EDA levy is
also identified on property tax statements as a separate local tax outside of the city's general
property tax. Staff is recommending an EDA levy of $350,000 for 2018. A home valued at
$229,100 for taxes payable 2017 would pay approximately $20 towards this EDA levy.
Debt Service
The community center/ice arena tax abatement bonds had a substantial impact on the levy for
2017. Now that the debt service levy is in place, staff is anticipating that the City's total debt
service payments to remain stable at approximately $2.2 million annually. In addition, due to
available fund balances in existing debt service funds and the structuring of the tax abatement
bonds staff will need the Council to approve debt service reduction resolutions on September
19th. A breakdown and comparison of the individual debt levies can be viewed on the next page.
Levy Request & Impact
Staff is recommending a preliminary levy increase of 2.58% or $488,883 for the City levy and a
preliminary EDA levy of $350,000. The EDA levy will be a separate levy on property tax
statement. The preliminary levy is the maximum the City can levy, the final levy may be less than
the preliminary levy, but may not be more. Ensuring we are levying sufficiently to cover certain
unknowns at this point in the budget process is prudent.
The City experienced 8 1/2 percent growth in tax capacity for taxes payable 2018. This is on top
of eight percent growth from the previous year. New construction accounts for about $1.1
million of additional tax capacity, which equates to about 25% of the growth in tax capacity. In
terms of levy dollars, the new construction tax capacity allows for the city to increase the levy by
$488,883 or 2.58 percent without having a tax impact on existing properties, outside of changes
in valuation. So if all values stayed the same from last year to this year, tax payers would pay
exactly the same as the prior year with the 2.58 percent increase in the levy.
The breakdown and comparison of the proposed 2018 levy is as follows:
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City of Shakopee
Preliminary Levy Analysis
August 23,2017
Increase/
2016 Final 2017 Final 2018 Proposed (Decrease) %Change
City Levy
General Fund $ 16,825,900 $ 16,175,900 $ 16,849,176 $ 673,276 4.16%
Abatements 174,915 182,400 7,485 4.28%
Capital Improvement Levy 385,000 200,000 (185,000) -48.05%
Debt Service
2004 B 238,027 - -
2006 B 315,390 - -
2007 B Improve 94,992 92,471 -
2008A Improve - 148,800 135,448
2010 A I m p rove 88,500 107,145 105,940
2012 A Refunding 47,386 - -
2016Abatement - 1,842,110 1,942,260
Total Debt Service 784,295 2,190,526 2,183,648 (6,878) -0.31%
Total City Levy $ 17,610,195 $ 18,926,341 $ 19,415,224 $ 488,883 2.58%
EDA Market Value Levy $ - $ - $ 350,000 $ 350,000 100.00%
Total City and EDA Levies $ 17,610,195 $ 18,926,341 $ 19,765,224 $ 838,883 4.43%
Items to note with the 2018 preliminary levy include:
• The Capital Improvement Fund levy is reduced by $185,000 for 2018. The City will be
receiving additional Municipal State Aid (MSA) dollars in 2018 along with a small shift of
MSA dollars from maintenance to construction allows for the levy to be decreased in the
Capital Improvement Fund.
• Abatement levies continued to be isolated. This practice was started in 2017. In prior
years, private development abatements have been included in the General Fund levy.
Isolating these abatements provides for increased transparency.
Scott County has provided staff with tax impact estimates for residential homestead properties.
Residential property values held virtually steady from January 1, 2015 to January 1, 2016 for
taxes payable 2017. The value of an average market value home in Shakopee decreased slightly
from $229,700 to $229,100. Residential values are increasing for taxes payable 2018. The
average valued home has now risen from $229,100 to 243,100. In addition, approximately 80
percent of the City's residential properties experienced a 5 to 10 percent increase from January
1, 2016 to January 1, 2017. Taxes payable 2017 saw a shift in tax burden as the commercial
values rose and residential properties were stagnant. Taxes payable 2018 will see a slight shift in
tax burden as residential properties appreciate.
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The chart below provides the average percentage change in value for residential properties from
taxes payable 2017 to taxes payable 2018. These percentage changes are strictly the averages
within each value range. Individual properties valuations will likely be more or less than the
averages.
uiiiioll IUII�II�II Illl�l III,IVIIIVi!!i i ° „,
lu
<$100,000 1168.5/
100000-149999 2,135 7.8%
150000-199999 3,232 6.4%
200000-249999 2,395 6.1%
250000-299999 1,595 5.7
300000-399999' 1,853 3.+6%
400000-499999 471 1.9%
500000-699999' 125 1.6%
700000-999999 6 2.6%
x$999,999 2 1.3%
The chart below provides a comparison of the 2017 levy and the proposed 2018 levy for three
different valued homes including the average valued home of $243,100.
2017 & 20,18 Property Tax Lev Comparison
$151,71101 $2'tax increase $229,100 =$9 tax deer(,—sav $30,100 -$311 tax decrease:
1
Pay
2017
$1 1,400 $26,tax increase $243,100 x34 tax iircirea.5e
' 342.6190 $14 tax fticrea#se
Payr
2018 /l
lion
The proposed tax levy will drop the city's tax rate from 38.521 percent to 37.455 percent, a
decrease of 1.07 percent.
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Staff is still working on receiving preliminary levy estimates from our comparable cities. Staff will
have this information available at the council meeting on September 19tH
Lastly, it is always interesting to see the breakdown of a property tax statement and how tax
dollars are distributed. Below is chart, based on an average valued home for taxes payable in
2017 within the Shakopee School District. A good rule of thumb is that the city, county and
school typically account for about a third of the total tax bill. For homes within the Shakopee
School District that rule doesn't necessarily hold true for 2017. Taxing districts included in the
"Other" section include Scott County CDA, Mosquito Control, Metro Transit, Met Council,
Watersheds, etc.
PROPORTIONATE SHARE OF 2017 TAXES
Special Districts
3°✓a
County city
28% 30%
4e%
c
Schooi
39%
Summary
Attached is a preliminary General Fund Summary Budget that includes all the items discussed
above, including a tax levy of 2.58 percent. Again, the preliminary levy is the maximum levy that
can be levied. The final levy can be reduced but cannot be increased. Between the preliminary
levy and the final levy staff will be working on fine tuning the current unknowns.
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2018 Annual Budget
GENERAL FUND SUMMARY
Actual Actual Original Requested
2015 2016 Budget Budget 2018
2017
REVENUES:
TAXES 16,137,181.59 17,019,256.64 16,568,400.00 17,254,676.00
TAX INCREMENTS 22,892.77 2,946.93 0.00 0.00
SPECIAL ASSESSMENTS 12,042.90 15,817.76 12,000.00 7,000.00
LICENSES AND PERMITS 2,023,436.27 2,564,729.10 1,683,400.00 1,845,000.00
INTERGOVERNMENTAL 1,356,733.68 1,344,279.22 1,287,100.00 1,309,200.00
CHARGES FOR SERVICES 4,452,414.39 4,750,514.28 4,927,600.00 5,633,200.00
FINES AND FORFEITURES 7,093.46 11,213.08 1,500.00 1,500.00
MISCELLANEOUS 318,924.55 218,733.94 223,200.00 194,000.00
TOTAL REVENUES 24,330,719.61 25,927,490.95 24,703,200.00 261244,576.00
EXPENDITURES:
GENERAL GOVERNMENT (3,667,385.64) (3,965,116.02) (4,402,400.00) (5,315,934.00)
PUBLIC SAFETY (10,192,896.35) (10,585,899.22) (10,936,600.00) (11,715,951.00)
PUBLIC WORKS (3,036,283.60) (3,061,172.89) (3,372,300.00) (3,416,891.00)
PARK AND RECREATION (3,889,077.91) (4,232,166.84) (5,324,300.00) (5,835,800.00)
UNALLOCATED (151,446.40) (34,835.56) (217,600.00) (210,000.00)
DEBT SERVICE 0.00 0.00 0.00 0.00
CAPITAL OUTLAY (126,666.89) (37,422.57) 0.00 0.00
TOTAL EXPENDITURES (21,063,756.79) (21,916,613.10) (24,253,200.00) (26,494,576.00)
OTHER FINANCING:
TRANSFERS IN 250,000.00 250,000.00 250,000.00 250,000.00
PROCEEDS FROM SALE OF ASSETS 566.00 9,133.93 0.00 0.00
BOND PROCEEDS 0.00 0.00 0.00 0.00
TRANSFERS OUT (3,515,466.00) (3,348,754.50) (700,000.00) 0.00
TOTAL OTHER FINANCING (3,264,900.00) (3,089,620.57) (450,000.00) 250,000.00
NET 2,062.82 921,257.28 0.00 0.00
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S.B.
PM*MA
SHAKOPEE
Shakopee City Council
August 29, 2017
FROM: Michael Kerski, Director of Planning and Development
TO: Mayor and City Council
Subject:
Discussion of amendment needed for the Entertainment Land Use in the Comprehensive
Plan
Policy/Action Requested:
Discussion of proposed amendment.
Recommendation:
Discuss and then send to Planning Commission for public hearing and then eventual vote by
the City Council.
Discussion:
The MET Council as part of the EAW review for Canterbury Park's redevelopment, noted
that they could not find a clear definition in the 2008 Comprehensive Plan for the
Entertainment Land Use. They have requested a Comprehensive Plan Amendment to
provide that definition. Staff has worked with planning expert John Shardlow, FAICP, and is
proposing the following definition that would apply to the two Entertainment Land Uses,
Canterbury and ValleyFair.
Entertainment Land Use Designation
The Entertainment land use designation has been applied to two areas that both contain
major, regional entertainment facilities. These are the Valley Fair amusement park and the
Canterbury Park racetrack, entertainment campus, accessory uses and surrounding, mutually
supportive and compatible mixed use development.
Both Valley Fair and Canterbury Park are mature and evolving entertainment designations
within the Twin Cities Metropolitan Area. Both complexes have changed over the years to
respond to new opportunities and to remain viable. This has required changes in facilities and
the reconfiguration of ancillary and accessory uses. The Entertainment Land Use is
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implemented through the MR- Major Recreational Zoning District and Planned Unit
Development zoning. Both zoning districts support this reinvestment and design flexibility.
As these entertainment complexes have matured, they are increasingly changing in response
to new opportunities to attract and retain more visitors, and to increase land use efficiency by
developing complimentary and compatible surrounding land uses. These land uses include
restaurants, hospitality and entertainment, medium and high density residential (limited to
20% of the designated land, with a maximum density of 30 dwelling units per acre), office,
office tech, and medical, retail, and commercial recreational uses. Entertainment will
continue to be the dominant use within these areas.
Budget Impact:
N/A
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S.C.
PM*MA
SHAKOPEE
Shakopee City Council
August 29, 2017
FROM: Michael Kerski, Director of Planning and Development
TO: Mayor and City Council
Subject:
High density housing discussion
Policy/Action Requested:
Discuss policy and make recommendations
Recommendation:
Forward an amendment to the Planning Commission for public hearing and eventual vote by
the City Council.
Discussion•
Council held many meetings in 2016 and 2017 discussing housing density and the creation of
an R-4 zoning category. Council also approved comprehensive plan amendments for two
apartment developments, Southbridge and HyVee, both using the high density housing
zoning.
The Southbridge Apartments are at a density of 25 units per acre. The HyVee apartments are
at a density of 18.6 units per acre.
Staff will present projects, locations and other cities comprehensive plans to build a
consensus on a final definition of high density to be amended to the 2008 Comprehensive
Plan that reflects Council's past actions and intent and to provide guidance for future
developments.
Budget Impact:
N/A
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