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EDA 2010 10 25 CHANHASSEN ECONOMIC DEVELOPMENT AUTHORITY SPECIAL MEETING OCTOBER 25, 2010 Chairman Furlong called the meeting to order at 7:05 p.m. MEMBERS PRESENT: Tom Furlong, Bryan Litsey, Vicki Ernst, Bethany Tjornhom, and Jerry McDonald STAFF PRESENT: Todd Gerhardt, Laurie Hokkanen, Kate Aanenson, Paul Oehme, Todd Hoffman, Greg Sticha and Roger Knutson Furlong: We have two items on our agenda this evening. Let’s start with any changes or modifications to the agenda. If not, without objection we’ll proceed as, with the agenda as published. CONSIDER ADOPTION OF A RESOLUTION APPROVING MODIFICATIONS TO THE TAX INCREMENT FINANCING (TIF) PLANS FOR TIF DISTRICTS 4 AND 5. Hokkanen: TIF Districts 4 and 5 were created before the Office of the State Auditor was involved in the regulation and reporting requirements of those districts and in the time since then they’ve made changes that require the TIF budgets to include interest income that’s both paid and generated, which was not a requirement at the time of the creation of the TIF plan. So the modifications that are before you provide for the modification of those budgets to include the interest income that we have earned and paid out. They’re not changing the obligations of the district or adding any new payments. Simply statutory changes. For TIF 4 you’re also providing for the opportunity to pool some dollars from TIF 4 to TIF 10. An action that you would take at a later date. The EDA will consider this, consider a resolution that would recommend, make a recommendation to the City Council and the City Council will hold a public hearing to consider adoption of a resolution actually approving the changes to the plan. Furlong: Okay, thank you. Any questions for staff? We talked about this some in our work session this evening. I know we had a work session on this item a couple weeks ago as well. Any questions for staff? Ernst: I think I asked all my questions already. Furlong: Alright, very good. Tjornhom: Mayor, I’m sorry. Furlong: Councilwoman Tjornhom. Tjornhom: My only question would be if, maybe for those who are listening and for the council once again, just a quick or just a brief synopsis of the benefits of doing this versus not doing it. Chanhassen Economic Development Authority - October 25, 2010 Hokkanen: Sure. By modifying the TIF districts, particularly TIF 4 is kind of added, it’s collected approximately the amount of increment that was originally outlined in the TIF budget and so without the modification we would have to close the TIF district out but we would still have outstanding obligation that would then need to be paid with general fund or other city funds. The TIF dollars would not be available for that purpose. The same thing would happen in 5, just not quite as rapidly. And the other benefit is that by providing for the opportunity to pool the dollars we would be able to repay a portion of the interfund loan that was taken to, for some of the expenses in TIF 10 at an earlier date and save interest costs. Furlong: And the amounts of those benefits? I mean the current obligation, the bonds outstanding on TIF 4 for example is just under 1.2 million. Hokkanen: Correct. The payment that’s $107,000 to $113,000 per year. Furlong: Per year. And there is some money currently in that fund balance but, about $600,000, $700,000. Sticha: That’s correct. Furlong: So we’re looking at an obligation of about a half million dollars then that once that limit’s reached, that obligation would fall on the general taxpayers then. Hokkanen: Correct. Furlong: Of some form. Okay. Ernst: So Mayor, as long as we are making comments maybe I’ll make a couple comments then. So we talked about the benefits and so I am going to talk about some of the disadvantages or not necessarily disadvantages to doing this but the disadvantage as to what is in the packet which to me could be a disadvantage to the proposal and that is some of the gaps in the information that we received tonight. Knowing when the original 1995, the original 1995 was modified and what was modified in that, and then, and that really relates to when the district was established in 1995 to facilitate redevelopment in the downtown area. And then the budgeted amount that was exceeding by about $5 million dollars as modified as being part of this proposal that we’re going to talk about tonight. It sounds like there were some assumptions made from that. The documentation’s still there. And then just to talk a little bit about what we talked about in the work session and that was that anything above and beyond what would be going into the TIF districts. As I understand it, now correct me if I’m wrong, for TIF 4 anything above and beyond that amount would be going back to the taxpayers. Right, but that original amount. That would not be on the tax roll. Gerhardt: The increment generated in TIF District number 4 is about $200,000. Ernst: Yep. 2 Chanhassen Economic Development Authority - October 25, 2010 Gerhardt: And if you were to decertify that district that $200,000 would go back to all the government entities within that area. Watershed district, school district, and county. And would be distributed based on whatever their tax rate is for that tax year. And so yes, that would go back to the taxpayers. Ernst: Okay. Hokkanen: To clarify on the budget, the plan, the current plan modification assumes that the district would stay active through 2023, which is the maximum statutory time limit. Based on the current obligations staff is projecting that we will be able to decertify the district in 2013, and nothing in the plan, in the budget, obligates anything different. Ernst: Okay. Furlong: Any other questions at this time? McDonald: Well if I could just do a point of clarification. When we talk about the $200,000, that’s not $200,000 coming back to us. By the time you divide it up the end number as I understand is roughly about $40,000 is what we would see within the city. Gerhardt: That’s correct. McDonald: Okay. Gerhardt: And we still have the obligation to pay the outstanding bonds which is about $100,000 a year. Ernst: But there would still be an obligation. Gerhardt: Yeah, either way. Ernst: Yep. Gerhardt: Yep. Litsey: But by doing it this way you’re gaining more from the dollars because you’re not capturing the full amount when you talk about doing it the other way because you’re splitting amongst multiple entities. This way we’re able to capture the full amount and apply it to that interloan that we have to ourselves. Gerhardt: You would use the $200,000 available to you to write down the debt on those bonds. If you were to decertify that district you would need to use $40,000 of the new taxes coming on and have to come up with an additional $60,000 dollars that can either be used with the existing budget or an increase. 3 Chanhassen Economic Development Authority - October 25, 2010 Litsey: I guess what I’m getting at, we’re realizing the full potential of that dollars, in my opinion this way. You’re deriving greater benefit from the dollars doing it this way than you would doing it the other way we talked about simplistically. Gerhardt: In your opinion. Litsey: Alright. I’ll preface that with my opinion in there. Furlong: Using the word simple to talk about… Litsey: …really simple thing but I guess. Furlong: As part of the EDA then our action tonight would be to consider a motion to approve the resolution for the modifications. I guess are there any, if there are no more questions for staff, any comments on that? For the action. If not, is there somebody that would like to make the motion then? McDonald: Sure, I’ll do the motion. The EDA approves a resolution adopting the modification to the Tax Increment Financing plans for Tax Increment Financing District Number 4 and 5-1. Furlong: Thank you. Is there a second? Litsey: Second. Furlong: Made and seconded. Any discussion on the motion? EDA Resolution #2010-08: McDonald moved, Litsey seconded that the EDA approves a resolution adopting the modification to the Tax Increment Financing plans for Tax Increment Financing District Numbers 4 and 5-1. All voted in favor, except Ernst who opposed, and the motion carried with a vote of 4 to 1. APPROVAL OF MINUTES: Litsey moved, McDonald seconded to approve the minutes of the Economic Development Authority meeting dated September 13, 2010 as presented. All voted in favor and the motion carried unanimously with a vote of 5 to 0. Tjornhom moved, Ernst seconded to adjourn the meeting. All voted in favor and the motion carried unanimously with a vote of 5 to 0. The Economic Development Authority meeting was adjourned at 7:15 p.m. Submitted by Todd Gerhardt City Manager Prepared by Nann Opheim 4