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06-11-2024 EDC Agenda PacketA.5:30 P.M. - CALL TO ORDER B.APPROVAL OF AGENDA Commissioners may add or delete items at this time. C.APPROVAL OF MINUTES C.1 Approve Economic Development Commission Minutes of May 14, 2024. D.VISITOR PRESENTATIONS E.DISCUSSION / GENERAL BUSINESS ITEMS E.1 Sewer (SAC) and Water (WAC) Availability Charge Policy Consideration E.2 Establishment of a Local Housing Incentive Account Deferred Loan Program F.DIRECTOR'S REPORT G.ADJOURNMENT AGENDA CHANHASSEN ECONOMIC DEVELOPMENT COMMISSION TUESDAY, JUNE 11, 2024 CITY COUNCIL CHAMBERS, 7700 MARKET BOULEVARD 1 Economic Development Commission Item June 11, 2024 Subject Approve Economic Development Commission Minutes of May 14, 2024. Section APPROVAL OF MINUTES Item No: C.1 Prepared By Kate Vogt, Admin Support Specialist File No: SUMMARY BACKGROUND DISCUSSION RECOMMENDATION Staff recommends that the Economic Development Commission approve the May 14, 2024 Commission minutes. ATTACHMENTS Economic Development Commission Minutes of May 14, 2024 2 CHANHASSEN ECONOMIC DEVELOPMENT COMMISSION REGULAR MEETING May 14, 2024 Vice Chair Zurek called the meeting to order at 5:30 p.m. MEMBERS PRESENT: Chair Eric Anderson, Vice Chair Duke Zurek, Chris Freeman, Stacy Goff, Cohen Lee MEMBERS ABSENT: Luke Bame STAFF PRESENT: Samantha DiMaggio, Economic Development Manager; Laurie Hokkanen, City Manager PUBLIC PRESENT: APPROVAL OF AGENDA: APPROVE ECONOMIC DEVELOPMENT COMMISSION AGENDA DATED February 13, 2024 Commissioner Zurek moved, and Commissioner Lee seconded to approve the Agenda of the Economic Development Commission meeting dated February 13, 2024, as presented. All voted in favor and the motion was carried unanimously with a vote of 5 to 0. APPROVAL OF MINUTES: APPROVE ECONOMIC DEVELOPMENT COMMISSION MINUTES DATED February 13, 2024 Commissioner Zurek moved, and Commissioner Lee seconded to approve the Minutes of the Economic Development Commission meeting dated February 13, 2024, as presented. All voted in favor and the motion was carried unanimously with a vote of 5 to 0. VISITOR PRESENTATIONS: 1. Updates on Civic Campus, Chanhassen Bluffs Recreational Facility, and Avienda. DISCUSSION/GENERAL BUSINESS ITEMS: 1. Election of 2024 Chair and Vice Chair a. Election of Chair Commissioner Zurek nominated Commissioner Anderson for Chair, and Commissioner Goff seconded. All voted in favor and the motion was carried unanimously with a vote of 5 to 0. 3 Economic Development Commission – January 9, 2024 2 b. Election of Vice Chair Commissioner Freeman nominated Commissioner Anderson for Vice Chair, and Commissioner Goff seconded. All voted in favor and the motion was carried unanimously with a vote of 5 to 0. At this time Commissioner Zurek excused himself, leaving the meeting. 2. Review and Adopt Economic Development Commission Bylaws Commissioner Freeman moved, and Commissioner Goff seconded to approve the Bylaws of the Economic Development Commission for 2024, as presented. All voted in favor and the motion was carried unanimously with a vote of 4 to 0. ADJOURNMENT: Commissioner Freeman moved, and Commissioner Lee seconded to adjourn the meeting. All voted in favor and the motion was carried unanimously with a vote of 4 to 0. The Economic Development Commission meeting was adjourned at 6:43 p.m. Submitted by Samantha DiMaggio Economic Development Manager 4 Economic Development Commission Item June 11, 2024 Subject Sewer (SAC) and Water (WAC) Availability Charge Policy Consideration Section DISCUSSION / GENERAL BUSINESS ITEMS Item No: E.1 Prepared By Sam DiMaggio, Economic Development Manager File No: SUMMARY The City Council identified Sewer (SAC) and Water (WAC) Availability Charges as one of their 2024 City Council priorities, therefore staff has created the following policy for consideration. BACKGROUND The Metropolitan Council Environmental Services (MCES) is a “wholesaler” of wastewater services for the seven-county metro area. MCES collects SAC from communities and grants SAC credits to communities. Communities are responsible for paying SAC to the Council whether they charge local SAC or not. Communities can pass on their SAC costs to property or business owners. Generally, communities issue permits (building, sewer connection, or plumbing permits) or a business license indicating that development or redevelopment is occurring and that the demand for sewer service is likely to change. The change in demand or use triggers a SAC determination. The SAC determination is based on the commercial property’s estimated maximum wastewater flow potential or maximum demand. The city provides local water and sanitary sewer services and charges SAC and WAC fees to property owners connecting to the city’s system. The city provides up-front investment into water and sewer infrastructure and then pays off that infrastructure over time in part through SAC/WAC fee revenue. The city also bills users based on volume as part of the monthly utility bill. Staff is recommending a similar SAC Credit Program to the one the City of Maple Grove has adopted and implemented, the Community Credit Program. When a redeveloping property’s new use requires lower wastewater capacity than what was demanded previously, net credits may occur. If credits do occur, the community has the option to take the net credit community-wide or leave it site-specific. Maple Grove leaves the credits site-specific for five (5) years, if they aren’t claimed in five (5) years, they then can be used community-wide. The goal is to help spur new small businesses choosing to expand or relocate to the city. DISCUSSION 5 RECOMMENDATION The Economic Development Commission should review the proposed Sewer (SAC) and Water (WAC) Availability Charge Policy and recommend any changes before it goes to the City Council for formal adoption. ATTACHMENTS SAC Policy 2024 6 1 June 11, 2024 SEWER (SAC) & WATER (WAC) AVAILABILITY CHARGE POLICY Adopted: June XX, 2024 I. INTRODUCTION The Metropolitan Council Environmental Services (MCES) is the wastewater provider for the seven-county metro area. MCES charges a fee when a residence or business connects to the regional wastewater (sewer) system, this fee is referred to as a Sewer Access Charge (SAC). The SAC fee recoups the capital invested to build and maintain the MCES wastewater system. The METC charges the SAC unit fee to the city, which captures this fee during the permitting (building, sewer connection, or plumbing). A review of the sewer capacity also occurs when a company expands or changes use, creating a higher demand for the system. The total SAC charge is based on the maximum wastewater flow created by a residence or type of business. II. CITY SAC AND WAC WAIVER POLICY The City of Chanhassen also charges local water (Water Access Charge – WAC) and sanitary sewer services (Sewer Access Charge - SAC) fees to property owners connecting to the city’s systems. The city provides up-front investment into water and sewer infrastructure and then pays off that infrastructure over time in part through SAC and WAC fee revenue. Chanhassen mirrors the MCES unit determination for local SAC/WAC charges. With the adoption of this policy, if any existing Commercial or Industrial building is renovated in Chanhassen and has an increase in SAC/WAC, the city will waive the first five (5) city SAC/WAC Charges. III. CHANHASSEN SAC AND WAC SITE-SPECIFIC AND COMMUNITY-WIDE CREDIT PROGRAMS As redevelopment occurs within the city, in certain circumstances, there will be an opportunity for excess charges to be claimed and designated as community-wide credit. When a redeveloped property’s new use requires lower wastewater capacity than what was demanded previously, net credits will occur if SAC was previously paid on the property, or a non-conforming grandparent demand will apply. Where the SAC was previously paid to MCES, the city can take the net credit community-wide or leave it site-specific. Through the adoption of this policy, the city will begin to collect community-wide credits to aid small businesses choosing to start a new business, expand their current business, or wish to relocate their business to Chanhassen. 7 2 June 11, 2024 If the credit is from a non-conforming grandparent demand, net credits will remain site-specific for five years to allow for the new use’s growth, after which the credits expire. If site-specific credits remain unused after five years, the credits will be available community-wide. If SAC credits generated on a site were used elsewhere by the community (i.e., community- wide) or a different business used the site-specific credits, those credits are no longer available to offset the current SAC charges on the original site. A. USAGE OF SITE-SPECIFIC CREDITS If you are redeveloping a property, SAC may have already been paid. If this is the case, SAC credits may exist for the site and can be used to discount or eliminate any SAC fees. Check with MCES to inquire whether a property has available credits. If site-specific credits remain unused after five years, the credits will be available community-wide. B. USAGE OF COMMUNITY-WIDE CREDITS Community-wide credits will be used to retain current small businesses or attract new small businesses to Chanhassen. 1. A small business may apply for credits if they are one of the following business types: Retail, food, beverage-based, entertainment, and manufacturing. Eligible businesses must: a. Opening a new business within the city, or b. Expand existing operations that require additional SAC. 2. Applications for this program shall only be accepted before the issuance of a building permit. Applications will not be accepted for reimbursement of previously paid-for credits. 3. The maximum number of credits that any one applicant may apply for administratively is five (5) credits or 80% of the total number of credits needed, whichever is smaller. 4. Potential applicants should consult with city staff before application to determine the availability of credits. 5. The city will maintain a record of community-wide credits. This includes maintaining a record of community-wide credits available and a record of businesses which have benefitted from this program. Records shall be kept within the Finance Department. C. GENERAL TERMS AND CONDITIONS 1. Any applicant not in good standing with the city, concerning licenses, fees, or other specific charges, will not be considered for this program. 2. Residential purposes are not eligible and will not be considered. 3. Community-wide credit applications won’t be accepted if credits aren’t available. Information contained in the application for assistance will become a matter of public 8 3 June 11, 2024 record except for those items protected under Minn. Stat. 13.591. 4. An officer of the city will not have a personal financial interest or personally benefit financially from the business to be assisted. 5. The City of Chanhassen and the EDC reserve and retain the right to deny an application. 6. All SAC credit recipients shall be required to indemnify the city, the Economic Development Commission, and any officers acting on their behalf. D. APPLICATION PROCESS All applications for credits through this program will be accepted on a first-come, first-served basis. Upon submission of an application, city staff will review the application to ensure complete information is provided. If additional information is needed, staff will request the needed information. Applications for up to five (5) credits shall be processed and are eligible to be approved administratively by the City Manager and Economic Development Manager. Applications that seek above the five (5) credit maximum shall only be approved by the Economic Development Commission. E. TERMS Community-Wide Credit: A SAC credit that the community uses anywhere within the community to offset current SAC payments that would otherwise be due. Grandparent Demand: A potential non-conforming credit benefit to a community which allows use of wastewater capacity on a site even without payment of SAC for the site, if and where it can be shown that the demand had been in existence and connected to the metropolitan disposal system prior to January 1, 2009, and into 2009. SAC Unit: One SAC unit equals 274 gallons of maximum potential daily wastewater flow. A freestanding, single-family residence is charged one SAC unit, a base unit. Other types of buildings pay a SAC fee based on the maximum potential demand on the wastewater system. Site-Specific Credit: A SAC credit restricted to future use only for the benefit of the specific site or campus for which a community paid SAC. Site-specific credits can be used anywhere within the same building but may not be moved to a different building on the same site. Demolitions are indicative only of potential credits, not actual credits. Small Business: A business with fewer than 50 employees, operating a retail, food, beverage-based, entertainment, and manufacturing business. 9 Economic Development Commission Item June 11, 2024 Subject Establishment of a Local Housing Incentive Account Deferred Loan Program Section DISCUSSION / GENERAL BUSINESS ITEMS Item No: E.2 Prepared By Sam DiMaggio, Economic Development Manager File No: SUMMARY The Economic Development Commission should review the proposed Local Housing Incentive Account Deferred Loan Program and recommend any amendments before it goes to the City Council for formal approval. BACKGROUND Local Housing Incentive Account (LHIA) grants support the production and preservation of affordable rental and ownership housing to help municipalities meet their negotiated Livable Communities Act (LCA) housing goals. Grant funds cover gap financing costs such as land/property/structure acquisition, demolition, site preparation (such as water, sewer, roads), general construction/structural additions, alterations and rehabilitation, interior and exterior finishing, roofing, electrical, plumbing, heating, and ventilation. Soft costs, such as architect's fees and travel expenses, are ineligible. The City of Chanhassen was awarded $300,000 in LHIA Funds in 2006. These funds were originally awarded to Sand Companies. In 2023, Sand Companies sold the property before the resale limitation was met, which then required them to repay the funds to the City of Chanhassen. With the assistance of the METC, staff has developed the attached program criteria. DISCUSSION RECOMMENDATION The Economic Development Commission should review the proposed Local Housing Incentive Account Deferred Loan Program and recommend any changes before it goes to the City Council for formal adoption. ATTACHMENTS Deferred Loan Program 2024 10 11 Local Housing Incentive Account Deferred Loan Program Adopted: XX, XX, 2024 PURPOSE These funds aim to incentivize owners of Naturally Occurring Affordable Housing (NOAH), new or existing affordable rental properties (apartments), that are unsubsidized by any federal program, to maintain lower rents compared to the regional housing market. The guidelines outlined below will determine eligibility and criteria for future deferred loans. The funds must be used for purposes consistent with Minnesota Statutes section 473.25(a), and should address at least one of the following criteria: • Preserving existing affordable housing stock. • Providing workforce housing choices. • Exhibiting strong implementation partnerships. • Identifying significant leveraged resources. • Demonstrating a high degree of readiness. • Achieving comprehensive community support. • Complying with the missions of the funding partners. • Using land efficiently. • Locating developments within walking distance of public transit stations and stops. FUNDING SOURCE The Metropolitan Council originally awarded the City of Chanhassen $300,000 from the Metropolitan Livable Communities Fund, Local Housing Incentives Account, on February 14, 2006. Any repayment of these funds will be used towards this deferred loan fund program. ELIGIBLE USES Certain projects, applicants, activities, and costs are eligible for deferred loan funds: • Gap financing costs, including land acquisition. • Property (structure) acquisition. • Demolition. • Site preparation or rehabilitation of water, sewer, and/or roads • General construction and/or structural additions, alterations, or rehabilitation. • Interior and exterior finishing. • Roofing. • Electrical, plumbing, heating and/or ventilation. 12 INELIGIBLE USES Certain applicants, projects, activities, and soft costs are ineligible for deferred loan funds: • Administrative overhead. • Bonds and insurance. • Legal fees. • Permits. • Travel. • Grant or bid preparation costs. LOAN TERMS AND CONDITIONS The city shall make available to eligible applicants a deferred loan for purposes consistent with Minnesota Statutes section 473.25(a). 1. Loan amount of $6,250 per unit that meets the income requirement of 60% Area Median Income (AMI). The AMI Guidelines will be updated annually. 2024 Area Median Income Guidelines Minneapolis-St. Paul-Bloomington, MN-WI HUD Metro FMR Area AMI Persons in Family 1 2 3 4 5 6 7 8 60% $52,150 $59,600 $67,050 $74,500 $80,500 $86,450 $92,400 $98,350 2. As affordable units turn over, the property owner is responsible for verifying the incomes of new renters in affordable units at the time of move-in. o The property owner does not need to verify the income of existing residents, as they are exempt from verifying their incomes. 3. The borrower will maintain residents’ verification information and will submit this information to the city, which will complete an annual progress report to the METC until the loan term is complete. 4. The loan will be set at zero-percent interest and will be structured as a deferred loan. 5. Total borrower contribution for the project must equal 50% of the total costs for the project. 6. From the date of closing on the deferred loan through the date on which the loan is repaid or the resale limitation date, whichever is later, the 60% AMI per until affordability requirement is required. o The repayment terms will be negotiated between the city and the borrower but will not exceed fifteen (15) years. 7. The loan term will be tied to the resale limitation of no more than fifteen (15) years. This limitation is placed on the property to protect the public investment in the project and to ensure that a proportion of the affordability gap provided by the public investment in the form of a deferred loan is recaptured for reuse in conjunction with other affordable housing efforts and does not become a windfall for any purchaser who might sell the property before the predetermined resale limitation period. o If the property is sold before the expiration of the resale limitation period, the funds will be recaptured by the city and used towards another eligible housing project. 13