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1985-07-09 Special Council mtg minutesPage No. 2296 July 9, 1985 CITY OF MENDOTA HEIGHTS DAKOTA COUNTY STATE OF MINNESOTA Minutes of the Special Meeting Held Tuesday, July 9, 1985 The special meeting of the Mendota Heights City Council was held at 7:30 o'clock P.M. at City Hall, 750 South Plaza Drive, Mendota Heights, Minnesota. Mayor Lockwood called the meeting to order at 7:36 P.M. The following members were present: Mayor Lockwood, Councilmembers Blesener, Hartmann, Cummins. Councilmember Witt arrived at 7:50 P.M. YORKTON DEVELOP- MENT CORP. Mr, Larry Lee, developer, And Mr. Pat Pelstring, financial adviser, were present to discuss the Alpha Environments project proposed for the Gould property site. Mr. Lee said that he would be purchasing the strip of land currently owned by Resurrection Cemetery, which would make his total parcel approximately 46 acres. He said that the City had approved $5 million in IDB authority for the Alpha Environments project in the previous year. City Finance Consultant Larry Shaughnessy indicated that Mendota Heights has 3.165 million dollars in IDB authority, and that Mr. Pelstring was working with Washington County HRA to obtain the additional authorizationdauthority. He indicated that to satisfy federal law, the Council would need to hold a public hearing on the increase in the total IDB authority above the $5 million that had previously been approved. Mr. Lee explained that his Conference Center would be operated by Alpha Environments Inc., which is headed up by Mr. Steve Musado. Mr. Lee said that he and his partners would be both owners of the building, and part-owners of the buiness itself. Mr. Pelstring said that he was confident that Mendota Heights could get the necessary IDB application authority from Washington County. He then explained their proposal whereby the City's tax increment district would advance the money for all of the utilities to the site, as well as site development costs in the total amount of approximately $850,000. Their proposal is that half or $425,000, would be a direct write down subsidy from the tax increment district, and that the other $425,000 would be repaid by the developer to the City over a 10 year period at 8% ,interest. Mr. Pelstring said that this would provide a cash flow back to the City of $60 - $63,000 per year, and that there were statutorially no limit on the use of these funds. They would be available for use at Council discretion. He said that under law there are two ways to recoup those monies. First, to special assess the developer for the $425,000 of improvements, but the special assessment payments come to the City as general revenue, rather than repayment of special assessment bonds which are taken care of by the tax increment district. Page No. 2297 July. 9, 19.85 The second option is a payment in lieu of taxes made by the developer to the City. Mr. Pelstring said that the proposal was of interest to the developer because the entire tax increment amount is considered an equity position in the project, and enables the developer to secure a larger loan. Financial Advisor Shaughnessy said that the Yorkton proposal was a departure from our past use of tax increment financing. Historically, theCity has used tax increment financing to under- write the unusual utility cost associated with development of a particular site, but that the City gets none of that back in terms of a repaid loan, except its allowable administrative cost for the tax increment district. He said that it appeared the utility assessments on this project would be approximately twice that on a normal piece of developable property, so our past practice would be to underwrite those extraordinary costs. Mr. Shaughnessy also said that in his estimation, the annual tax payments from the project to the City would be in the range of $120,000, as opposed to the $300,000 Mr. Pelstring had suggested. Mr. Lee explained that he was also going to be building a "high- tech" office building on this site of 40,000 square feet, which would be a lab/research type facility. He said that they hoped to have the Alpha Environments Conference Center operational in a year. Mr. Shaughnessy said that we will know by next Wednesday whether or not we will get our IDB allocation request from Washington County HRA, and that the Council should probably act at its meeting of July 16 to call a public hearing for the next meeting to increase the IDB authority from $5 to $6 million dollars. Mr. Lee said that he also has two hospitals that are interested in putting satellite medical clinics on the property, Health Resources Inc., and the Baptist Hospital Fund. He indicated that either would build a general services type clinic with OB/ gyn, internists, etc. Mr. Lee said that he is proposing to serve the property with a 100 foot divided boulevard coming directly off TH 110, then circling back east to Lexington. He said that he would be platting the one lot for the Alpha Environments Center, and then showing the rest as outlot in his preliminary plat. Ultimately, he hopes to have six buildings on the currently owned site, and a potential for four more on the property currently owned by Resurrection. He said that he was thinking in terms of one of these being a 10 story office building, and envisioned that there would ultimately be approximately 600,000 square feet of finished space on the property. There was a concensus of the Council to take action at the July 16 meeting to call for the public hearing on IDB authority. PROPOSED SEWER RATE INCREASES Page No. 2298 July 9, 19.85 Public Works Director Danielson explained the way that sewage from Mendota Heights flows under the Mississippi River through three pipes, and into the MWCC system. He explained that the MWCC had traditionally thought only one of the pipes was carrying any significant amount of flow, but upon beginning to meter a second pipe in 1984, they found that the flow going into that line was quite substantial. Mayor Lockwood said that he thought the community may have a real problem with people who have sump pumps and drain tiles going directly into the sanitary sewer system. Mr. Danielson said that the MWCC figures show that we are getting an inflow/infiltration of almost 100% of water consumption. The I/I study done earlier by the City indicated that it was about 50%. He said that staff was beginning to be suspicious that we just simply have a lot of little holes contributing to inflow, rather than one big hole. Financial Consultant Shaughnessy then discussed the implications for sewer billings. He said that the City had held its sewer rate constant for the past several years, and that those revenues had been able to cover the MWCC bill, plus have $125,000 for maintenance. However, he said that in 1986, the City's MWCC bill would go from $266,000 to $456,000, including a $36,000 debit for excess flows that were metered in the last half of 1984. In 1987, he said that the City would be picking up full flow deficit for 1985 and would be looking at an MWCC bill of approximately $520,000, minus some unknown credit due to under- expenditure by the MWCC. He said that the current rate structure would raise approximately $320,000 in 1986. He also said that by increasing sewer revenues 30% in the third quarter of 1985, and continuing through 1986, we would raise a total of $148,000 additional revenue for a total or $468,000 for payment of the 1986 MWCC bill. He said that-an additional 15% would likely be needed in the last quarter of 1986, to meet the 1987 MWCC bill. Mr. Shaughnessy said that if the Council wished to take action similar to that recommended by staff, itwouldhave to adopt an ordinance the last meeting in August in order to put in in effect for the third quarter billings. Mr. Shaughnessy then gave a presentation of current and proposed Mendota Heights sewer rates compared to those of other surrounding communities. He then presented three optional ways of structur- ing the increased sewer revenues, ranging from a percent increase on all levels of useage, to one that keeps the minimum for small users at basically existing levels, but increases the flow charge beyond that point. Mayor Lockwood said that he felt the City had been penalizing the small users for several years, and that maybe as a part of our rate restructuring, there should actually be a decrease for the minimum users. He proposed two additional rate tables for consideration along with the above three options. ADJOURN Ayes: 5 Nays: 0 Page No. 2299 July 9, 1985 Other Council members, however, felt that in the face of an emergency problem and very sizeable sewer increase, everyone should have to pay a little of the burden, and that it would not be a time to be looking at reducing rates for some categories of users. Generally, there was a concensus to leave the minimum quarterly charge at its current $20.00, then step up the rates from there to create the necessary extra revenues. Staff was directed to prepare a presentation on the problem for the public and press at the July 16th Council meeting, and to lay out some options for Council. It was agreed that Council would then plan to try to take action by the second meeting in August. There being no further business to come before the Council, Councilmember Blesener moved that the meeting be adjourned. Councilmember Witt seconded the motion. TIME OF ADJOURNMENT: 10:24 o'clock P.M. Kevin D. Frazell City Administrator ATTEST: .0tar.1),4 Robert G. Lockwood Mayor