EDA 1999 01 28CHANHASSEN ECONOMIC
DEVELOPMENT AUTHORITY
REGULAR MEETING
JANUARY 28, 1999
Chairman Boyle called the meeting to order at 6:30 p.m.
MEMBERS PRESENT: Gary Boyle, Jim Bohn, Mark Engel, Mark Senn, Nancy Mancino,
Steve Labatt, and Linda Jansen
MEMBERS ABSENT: None.
STAFF PRESENT: Don Ashworth, Economic Development Director; and Todd Gerhardt,
Acting City Manager
APPROVAL OF MINUTES:
Bohn: Can ! ask a question? Mike Mason did not approve the Minutes.
Senn: He didn't approve the Minutes in what sense?
Bohn: He wasn't here.
Senn: Oh.
Boyle: Under approval of the previous minutes it says Boyle moved, Mason seconded to approve
the minutes but Mason wasn't here so.
Senn: So it couldn't have been him who seconded it is what you're saying?
Boyle: Yeah.
Bohn: I did.
Senn: You did?
Boyle: Can you correct that Todd and make sure that Mr. Bohn gets recognition.
Mancino: ! move to approve the Minutes with the correction of the approval of Minutes from our
last meeting. The second was done, not by Mike Mason but by Jim Bohn.
Boyle: May ! have a second?
Bohn: Second.
Economic Development Authority - January 28, 1999
Mancino moved, Bohn seconded to approve the Minutes of the Economic Development
Authority meeting dated January 28, 1999 as correct noting that Jim Bohn seconded the
approval of Minutes for August 13, 1998, not Mike Mason who was absent. All voted in
favor and the motion carried.
VISITOR PRESENTATIONS: None.
REQUEST FOR TIF ASSISTANCE~ EDEN TRACE CORPORATION.
Ashworth: Thank you Mr. Chair. Staff's been meeting with the representatives of Eden Trace.
We're very excited about the proposal. It provides an opportunity to bring a number of small
businesses into the community. The development's located north of proposed Lake Drive, south
of the existing business park. It will compliment our existing business park tremendously. The
developer has asked whether or not TIF could be considered for the project. Staff stated that we
would make that recommendation and we would do it in light of the fact that it appeared that the
proposal met the guidelines that had previously been set by the EDA or whether you would
consider a TIF project or not. Specifically the project cannot go forward without the construction
of Lake Drive. Lake Drive represents a major roadway for the city of Chanhassen. The roadway,
without the roadway the housing project that's currently owned by Mr. Patton, which is south of
Lake Drive, cannot be a reality. And third, the construction of the roadway is going to involve a
lot of public costs in that there's a large frontage on the roadway by a pond that lies on the west
end. A lot of this, if you look to the map in the back you can kind of follow what I'm saying. As
well as city park. If not done by TIF, those would become general obligation dollars. The EDA
has supported the use of tax increment only to the extent that it's solely used to reduce special
assessment costs. EDA no longer will consider land write downs, soil corrections, those kinds of
things. In this particular instance, the developer himself would not be receiving any direct benefit.
A potential buyer of any of those lots would see the special assessments against them. Therefore
he cannot really increase his costs recognizing that that is a total cost of the lot. On the other side
of the coin, whichever smaller firm coming in would be made aware of the fact that they could see
those special assessments for their particular business written down through the EDA's TIF
policies. ! don't know where ! was, fourth, fifth. This project should produce a strong economic
vitality for the city. Right now we've been going through a process of continuing dwindling
residential lots. We haven't seen near as much construction on residential. It's not hurt us in
terms of permit revenue and permit activity but within, if it continues the current trend it will
within 1 or 2 years whereas the commercial-industrial type of activity has continued to be strong
and is one of the primary reasons that our overall revenues have stayed the way they have.
Finally, and I'm able at this point to give two reports at one time and that is that tax increment
pooling, we did do a new run. We really dodged the bullet on this one and that is we've got, here
are the projections that were used by...when we did a refunding earlier, well during 1988...We
had anticipated that this would be much more severe than what it turned out to be. When that...
auditor's office ! sampled about 40 parcels and found that in almost all cases property taxes were
being reduced by between 12% and 14% for 1999. That would have stayed true and you look at
some of the numbers as far as the tax increment collected. When ! wrote my report
approximately a week ago we were looking at like say year 2000 where you have increment of
$5,376,000.00, or 1999, $5,178,000.00. Those figures being reduced by anywhere from
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Economic Development Authority - January 28, 1999
$500,000.00 to $700,000.00 per year. If that were the case the overall deficit would have
changed from the $2,555,000.00 shown under the 2004 scenario to well over $5 million. ! did, !
was successful today in getting from Laurie the total tax capacity for the TIF district. As it turns
out, we did see a significant increase in new construction and as a result, the figure shown for the
$5 million, let's say $178,000.00 for 1999 is almost right on the mark with the figure that we're
looking at right now for 1999 is $5,204,000.00. About $20,000.00 better than what's shown
there. 2000 should be on line. What it comes down to is we're still looking to an approximate
2.7 million dollar deficit. At this point in time we, our consultants are advising us to approach the
legislature because they created the problem which is really one of the next items on the agenda,
seeking your authorization to allow staff to do that. As really the first line of defense to solve that
2.7 million dollar problem. The alternative with failure of the legislature to consider our request
would be to take from some other district. The logical district would be the Hennepin County
district. The problem with that is raiding dollars out of there potentially hurts our ability to
construct Highway 101, and ! think that that has remained as a high priority for the city council
and EDA. Accordingly the creation of this district and not providing incentive dollars back to the
developer provides you with a third alternative means by which to cover that $2.7 deficit while
still ensuring that we had monies available to carry out the construction of 101. In conclusion
staff is recommending that the EDA authorize staff to prepare a TIF plan. It would be brought
back to you. If you approved it we would then send it to the various agencies and carry out the
necessary public hearings to in fact make it a reality. And again this report basically is the same
report that I'd be giving for the authorization to have staff meet with the state legislature and try
to get them to help solve that $2.7 million problem. With that staff stands ready for any
questions.
Boyle: Jim, would you like to start?
Bohn: ! have no questions.
Boyle: Nancy?
Mancino: Don, when you come back with a plan will it include the future housing? That
development on the south side of the road is zoned high density, correct? So will Eden Trace
come back with a plan for, are they going to develop any high density housing?
Ashworth: At this point in time there's no intent by Eden Trace to attempt to do that. I don't
know how much they're into the housing .... he's not here?
Mancino: ...but when you come back with a plan you can show how it's applicable to the
affordable housing...
Boyle: Mark, do you have any questions?
Engel: Well the question, and Nancy touched on it already when ! was reading about it was the
affordable housing component. ! was curious what that might look like. But ! guess it doesn't
look like we've, you already got the answer to that.
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Economic Development Authority - January 28, 1999
Mancino: We really haven't talked about it at all. I just wanted to see how it works in the tax
increment district.
Ashworth: It looks like R-12.
Mancino: And then the city park is the Sunset Ridge Park that's already there and is already
zoned and is part of our comprehensive plan.., which is right here. It's not a newly created park.
Engel: Yeah, and that's the one, I'm familiar with that one. They've got swing sets and a
baseball diamond on it already. I'm familiar with it.
Mancino: ! have one last question. Don, the piece that's...
Gerhardt: You've got the interceptor that goes through a portion of that. So the interceptor
which is probably 100 feet, 200 feet.
Ashworth: That's right. There is the strip of property that's owned by the city that lies between
there and then on the other side of that is the Pat Pahl property. That's the real high hill up there.
Mancino:...
Gerhardt: A farmer still farms part of the land up there. And he has no long range plans to
develop that. Or short range plans to develop it.
Mancino: So there would be, if we put a road in there, they would be assessed, that property
would be assessed?
Ashworth: We assessed them for Powers Boulevard with the interceding parcel owned by the
city. ! don't see a way which you could assess Mr. Pahl. He's the original owner of NordicTrak
and really doesn't need a lot of money.
Gerhardt: Direct access ! would believe off of Lake Drive.
Ashworth: He has no frontage on Lake Drive.
Boyle: Questions?
Jansen: ! think mine are probably premature. ! guess I'm looking at the fact that we're referring
to the assessment for the road and what that would be. ! guess my question is you know what
kind of dollars are we looking at for that city park frontage that you're referring to and the
drainage pond. But ! went back in my prior records and did we just approve the feasibility study
for this piece of Lake Drive back on 12-147
Ashworth: Correct.
Economic Development Authority - January 28, 1999
Jansen: And that's where we'll get more the dollar amounts as to what we're actually talking
about.
Ashworth: Right.
Jansen: Okay. That was my big question was what kind of dollars we were talking about being
assessed.
Boyle: Mark?
Senn: Don is this in District 1 or not now?
Ashworth: It would have to be decertified out of District 1 so the answer is yes. It currently is in
1.
Senn: Okay, and as we decertify it of 1, what ramifications does that have to 17
Ashworth: Right now it's shown really as raw land value and I'll have that answer but, I will
provide that answer for you. ! cannot give it to you right now.
Senn: Okay, so what you're effectively proposing is to decertify this out of district 1, set up a
separate district as what, pay as you go or bonding?
Ashworth: ! don't know of any other way to do it than to do the bonding portion.
Gerhardt: The payments would be pay as you go with each of the individual tenants. You would
have to bond to build Lake Drive and then we would hope that this would be 100% assessed. So
the city would finance the construction of Lake Drive and assess each of the benefiting property
owners. And then through our special assessment reduction program, each of the businesses
could come in and apply for the half year worth of taxes over 3 years to write down those
assessments against each of the individual properties...
Senn: No other questions at this time. I'll have the rest in comments.
Boyle: Okay. Are there any further questions before ! ask for a motion? Therefore I'd like to
have a motion that we authorize staff to prepare an economic development plan that would
encompass the Eden Trace development, including those parcels abutting the south side of Lake
Drive.
Senn: Before we have a motion ! guess I'd like to get into some discussion, because we haven't
had any yet.
Boyle: Okay.
Economic Development Authority - January 28, 1999
Senn: ! don't want to just jump to me if anybody else.
Boyle: Oh, go right ahead. Please.
Senn: As far as the creation of this district goes, I think before we can really take an action on
saying we'd create this district, ! think we need to fully understand the ramifications of the
existing district through the decertification process as it relates, like ! say in the existing district.
We have enough problems there. We don't need to compound them in any way, shape or form by
actions on this district. As far as the overall project goes, ! mean if you take the whole concept in
total, you know ! think this looks like overall a good project but in my mind the reason it's overall
a good project and deserving of a TIF look is the housing. The affordable housing and it seems to
me if we're going to create a district here, or a TIF District here, ! think what I'd like to see is a
contractual commitments up front for the affordable housing rather than commitments up front
for more industrial with the future promise of maybe some housing, which is what we've got now.
Under at least the proposed scenario. ! think it's a big assumption to assume there will be
affordable housing there simply because of the zoning. One thing ! guess ! want to take exception
with in here is the point that the developer himself would receive zero benefits from our
authorizing a special assessment district. ! mean that, you know if ! need to go to the black board
that's not true, I'll show you. ! mean essentially when you create a special assessment district,
we're paying the special assessments. So the developer charges $2.00 a square foot for the land
and says you know it's fully improved land so pay $2.00 a square foot for it. Then you don't have
any special assessment liability. If the person had special assessment liability, the developer could
only charge $1.00 a square foot for the land and the other dollar would go from the owner to pay
for special assessments. So the developer does benefit from special assessment write down on the
land because he doesn't change the market rate for the land. ! mean it's the same thing that's
going on out in Gateway right now. Gateway's marketing property at $2.25 a square foot up to
$4.50 a square foot, based on it being fully improved, which means municipal facilities and
systems are there. And then you turn around and say okay and here's the TIF that's how it will
do it. They couldn't get that amount of money for that property on a basis that somebody would
have to come in and put the improvements in place. They could get it if they paid for it out of
their pocket and turned around and charged the same price for the land, but again that's a profit.
Pure and simple. So ! don't accept that rationale and argument in here but the, you know coming
kind of full circle around to me again the key issue in this area, especially as far as that site goes
given the very limited number of potential sites that we have, and I'm going to say you know
potential sites in a lot of different ways. Potential sites as it relates to affordable housing. ! mean
affordable housing is not an uncontroversial issue. And where you put it is not an uncontroversial
issue. Okay. This site is one of maybe a couple in the entire city, two or three in the entire city
that probably could be approached as affordable housing without a great deal of controversy.
And to me that's the key element of the whole project even going forward, or at least in terms of
the interest of the city and that ought to be again like ! say the contractual commitment up front.
That that be the project that we're funding and what we're doing. And if there's something that
comes in effectively off of the industrial to help us do that, and to lend increment to that
affordable housing, you know then ! could see meshing the industrial into it. But otherwise !
don't see the benefits to the city. In doing that. And so ! think we should, ! mean on this basis
basically ! guess the true reality is, the industrial will go ahead. They'll make their money on the
Economic Development Authority - January 28, 1999
land. The land developer will sell it off. We'll have industrial there and we'll have a future
housing site with absolutely no guarantees it will even end up being affordable housing. Because
there's absolutely nothing that could stop the owner from going in and developing market rate
housing on it. Because we don't have any control over there. And so ! think that control ought
to be put on up front with the TIF project, with the affordable housing contract in place so that's
just my comments.
Boyle: Any further discussion?
Mancino: Don, can you talk a little bit about the decertification and taking it out of the District
No. 1. What that will do to it or do you want to come back with that information?
Ashworth: ! would prefer making sure that I'm correct in what I'm telling you. ! think that
generally the property is probably being shown at $30,000.00 to $40,000.00 an acre by Orlin
because it's really undeveloped. Times the total number of acres. ! would rather get you the
correct information.
Mancino: Okay. And how does the development, the industrial development help the high
density and if we want to do affordable housing?
Ashworth: Well my first thought there would be one of, you can use the increment to write down
costs of improvements that can be shown to be directly of benefit to like the housing project. And
! think that's another good reason to do it as a public improvement project. Put the special
assessments against it and that's going to force the developer into doing something with the
property. The carrot can be dangled in front of him that basically says we will pay those costs if
you will take whatever portion of this project and make it affordable. The cost of the assessments
are so high that you cannot just simply sit there and sit on it. Right now he' s been able to do that
because he has not been able to access the property because there's been no road. Once those
assessments go on he will have to market it. Can ! guarantee you that it won't go market? No,
but ! think it's going to be a pretty good carrot to take and dangle in front of him to make it
affordable. Or some portion of it.
Senn: Help me out when you say him, who are you talking about?
Ashworth: Patton.
Senn: Okay, but I mean Eden Trace is doing, I mean Eden Trace has an option on the Redmond
parcel and they'll be the owner of that in developing the industrial. Mr. Patton is doing, ! mean he
owns the other parcel and at least from what ! know has no intention of selling it at this time. So
! mean that would be under separate ownership and separate development and everything else and
will have nothing to do with the Eden Trace project.
Ashworth: Correct. But what I'm saying is, if you put a $500,000.00 to $700,000.00 assessment
against somebody, they simply cannot afford to continue to sit on the property. Especially when
Economic Development Authority - January 28, 1999
they would then have the opportunity to access the property and to develop it which it currently
doesn't really have.
Senn: But isn't that a hell of a risk? ! mean the risk is yes, you are going to force him to develop
it but as what? There's absolutely no guarantees this could be affordable housing. In fact right
now in the current marketplace it would develop almost overnight in market rate housing.
Because there's such a demand for new market rate housing projects right now. In fact there's
... on the outskirts of town looking for them right now. Not for affordable housing but for market
rate housing. So ! mean all you're doing is effectively creating the ideal situation for that to go
ahead and happen and we haven't accomplished what we want to accomplish. ! mean that's why
we created the policy we created. Harping on affordable housing as being the main stay, the
driving force, the way that we should be focusing the TIF.
Mancino: Well absolutely but Don was talking about the carrot that would be there once it was
established.
Senn: And the carrot is.
Mancino: Just a minute, let him.
Ashworth: Todd and ! will get a hold of Mr. Patton. We've talked to him many times over the
years and ! can assure you that as we start in the various hearing processes, he will assuredly be in
front of you and we will be providing updates and he can take and say yes, we're kind of agreeing
with staff that we can do something or no, we can't. You know but ! assure you he will be in
front of you before the whole process is completed. Before you authorize the project.
Boyle: I think we have to start somewhere with this and it seems to me the starting point is
putting a plan together coming back to the EDA with some sort of a plan and that' s the stage that
we're at tonight. We either agree to have them go forward, as ! understand it, and come back
with a plan or stymie it at this point and say no. We're not interested.
Senn: The plan that's being requested Gary only relates to industrial development for Eden
Trace. ! have no other plan. ! mean we have no other proposal even in front of us, or even being
suggested.
Boyle: Okay. Isn't that what we're asking?
Senn: So what I'm saying is it's more appropriate to wait until we have an affordable housing
proposal in front of us and then tie it all together and do it. Then we have true control of the
situation and we can put true carrots in and we can assure that it will happen. This way you're
never going to assure it happens. It's a real crap shoot.
Boyle: You believe there should be another proposal coming forth before we put together an
economic development plan, is that what you're saying Mark?
Economic Development Authority - January 28, 1999
Senn: I think if we are going to proceed with looking at a plan to form a district, the driving force
to do that should be a proposed affordable housing project on the housing portion of this site and
it can include the other parcels too which are industrial parcels which can lend increment in and
help us put together a scenario we'd want to on an affordable housing and overall district project.
And give us all the controls that we would want and achieve what we want to achieve in
relationship to the affordable housing.
Boyle: Do you have a comment on that Don?
Ashworth: Well ! think what you have here is kind of a chicken and an egg situation. ! mean face
it, Mr. Patton has owned the land for at least 15 years that I'm aware of. ! think 1978,
somewhere in there. That's closer to 20 years. And has continued to talk about he really can't do
anything without, with that because he doesn't have this road thing, etc. ! think that moving
ahead with plans to show him we're going to move ahead with this whole road thing, but we'd
like you as a partner. ! think we can get his attention. If by the time we get towards the point of
actually authorizing the project, and we don't have that agreement, then you as a group make a
decision, okay. Do we want to pull the plug at this point in time or does it look as though we're
going to be able to bring him to the plate or not?
Boyle: That's kind of the way I read it too I guess.
Mancino: ! would too, the only clarity would be that ! would feel uncomfortable with Eden Trace
you know we're kind of starting the project and putting together a plan and ! think that they
would know how important it is from our EDA and what we've decided to really focus on in
affordable housing, that that part of the equation is extremely important and must be a component
of it. That is one of the major benefits for our city that we as Chanhassen are really focused on, is
the affordable housing for our city as we see new development, retail, low wage development
coming in and we need to house that part of our city. So the component for it to work right may
need the industrial development but also it is as equally important to have the high density. ! think
we need to talk about percentages here because ! think there may be different feelings
philosophically when we do affordable and high density. Is it 20%, etc. But ! wouldn't want
Eden Trace to feel that we would go ahead not knowing or not focusing on that affordable
housing part. Does that sound?
Bohn: Yeah...
Mancino: And ! don't know if there are partners or networking we can start that action and get
that...
(There was a tape change at this point in the discussion.)
Engel moved, Bohn seconded that the EDA authorize staff to prepare an economic
development plan that would encompass the Eden Trace development, including those
parcels abutting the south side of Lake Drive. Once the plan is complete, staff will
Economic Development Authority - January 28, 1999
resubmit such to the EDA for approval of initiating the public hearing process. All voted
in favor and the motion carried.
CONSIDER APPROVAL OF RESOLUTION FOR 1999 LEGISLATIVE WORK.
Ashworth: ...$76,000.00. 2001 is showing an increment of $2,446,000.00.
Mancino: How come it drops so much from that?
Ashworth: That's because you're only collecting a partial during that 2001, 2 and 3 and it
represents the bonds that were outstanding prior to May of 1988. If we were able, and this time
am correct in '88 and not '98. But if we were able to collect the full increment for those three
years, we would have more than sufficient dollars to pay off that $2.7 million deficit.
Mancino: How come we can only collect half?.
Ashworth: Because we can only collect for bonds that were outstanding prior to May of 1988
that went beyond the 2000 timeframe. So we will collect the full increment, and it doesn't really
drop down to zero. In fact in the year 2001 we will be getting a check for let's say roughly 5
million 4. But as far as what we can use of that, the most we can use is the $2,446,000.00 and
here's the real sad kicker out of it and that is that almost the entire difference will be sent via a
check to School District #112 and the following year the State of Minnesota will reduce the
amount of aids to the school district by that same. Let's say we send them a check for $3 million
this year or in 2001. In 2002 the State aid formula will kick in and take the $3 million away from
them. So ! mean it's not like gee, by us keeping this $3 million and helping to solve our problem
we're hurting the school district, we're not.
Mancino: Because it will reduce the school district, the contribution to the school district.
Boyle: That's fine. Other questions?
Senn: So effectively are you asking for our authorization tonight to go to the legislature then and
seek their approval to allow collection of the increment for those three years?
Ashworth: We will bring back, each step in the process, as we're starting to get a feeling from
Ann Reston and Amber Rice-Scott and right on down the line, as to what wordage they may find
acceptable, we will bring that back to you and we will seek your authorization to continue in that
direction. You know if they say well no, we can't support getting the increment in this fashion
but we can support another fashion, we'll then come back to you and say we're not getting
support if we went this direction but we are getting support if we go another direction.
Senn: Why are you choosing this route instead of just simply extending the district?
Ashworth: Oh, you mean to extend it for another year?
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Economic Development Authority - January 28, 1999
Senn: To go to the legislature and ask for extension of the district.
Ashworth: That's another option.
Senn: What I'm saying, why are you deciding on this option versus that?
Ashworth: Well ! only wanted to clarify, because these years we are collecting the full increment
and you have continued to be an advocate of let's get this thing over with as quickly as possible
so my natural conclusion is.
Senn: Use within what we've got.
Ashworth: Yes. Stay with what was already, the years we're already collecting. Asking you to
support. Going for one more year. Maybe it isn't palatable.
Mancino: I'd rather do it early.
Senn: You know under that scenario then, with the three years though, if it's a $2.5 million
problem, you've got it covered. What if it's a $5 million problem?
Ashworth: ! would anticipate, based on initial discussions with Ron Batty that the suggested
wordage that the legislature will come back with would be the allowance for us to take and
collect that increment in those three years. The difference between what ! call full increment and
what is now partial, but only to the extent that it pays for existing bonded debt that has failed
because of actions of the State legislature. They will not allow us to do new projects. They will
not allow us to consider, well I'd love to do the library but they're not going to let you do that.
Senn: No, ! understand that but in what you were saying before, according to your estimates,
taking full increment off these for the three years and stuff is going to bring in about $2.7 which
will more than solve the $2.5 problem. But if we have a $5 million problem, we're still going to
be sitting with a $2.3 million shortfall.
Mancino: Well then maybe we have to go back and ask for the extra year.
Senn: Well no but that's what I'm asking how...
Mancino: Or the other option is to take it out of the council's paychecks.
Senn: That would take a hundred years to even get close to it. But what I'm saying Don is you
can't go to the legislature once now and go back in three years and say you want, oops we still
have a problem. You've got to deal with it all at once now as you're going to the legislature and
view the whole picture. So if it's a $5 million problem, we need a solution that will take up the $5
million problem. Not one which will just simply take up the $2.5 million problem.
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Economic Development Authority - January 28, 1999
Ashworth: And ! fully agree with you, and ! hope you followed me in terms of the legislature's
only going to let us take care of whatever the problem is so the 2 lA in my scenario, 5 in yours.
But let's add them up a little bit. 2001, 2 million 4. Well that's $3 million less than what we're
actually collecting. 2002, $4 million 2. That's a million, just say roughly a million more than
what was collected. So now we're up to $4 million. The next year's roughly $3 million. That's
another $2 lA million. So if just taking my solution, would take care of a $5 lA million problem if
that truly were to occur, but ! don't see where it's going to but future legislature could take an
reduce rates again.
Boyle: Any further questions? Comments? Discussion? ...
Senn: I'll move that we authorize staff to approach the legislature on extending TIF, or on
rewriting components of TIF District 1 to achieve, to see if we can obtain full increment during
the years 2001, 2 and 3 on the basis that any additional increment obtained through that approval
would go to directly reduce only bonded indebtedness.
Mancino: I'll second that.
Boyle: Discussion?
Senn moved, Mancino seconded that the EDA approve the resolution authorizing Kennedy
& Graven to act on the EDA's behalf to request special legislation to extend the life of TIF
District No. 1 to obtain full increment during the years 2001, 2002, and 2003 on the basis
that any additional increment obtained through this approval would go to directly reduce
only bonded indebtedness. All voted in favor, except Labatt who abstained, and the
motion carried.
Labatt: I wanted to abstain just...whole discussion.
Mancino: Can ! just ask one question? Don, when do you think that will be?
Ashworth: Well we're starting to make contacts right now. We've already contacted Oliver and
Workman to alert them to the problem. I'm guessing immediately. And many, we're not alone.
mean there' s.
Mancino: Oh I know.
Ashworth: There's a number of other cities that are already over there and going through. We
were at a deficit position because Carver County is so much slower so ! needed to present these
numbers to you so you would know what kind of a problem we have but ! physically got the
phone call at 11:00 this morning and Laurie told me, well Don. Here's the number but I'm not
real confident, we could have some minor adjustments. ! said ! don't care about minor
adjustments. ! needed numbers for the EDA tonight so.
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Economic Development Authority - January 28, 1999
Mancino: Well we appreciate that. At the TIF seminar ! went to, there were a lot of cities there,
and Councilman Senn was there, that they did say that a lot of the cities hadn't figured out yet
you know what the deficit would be and the League of Minnesota Cities really hadn't heard much
yet. So you're being proactive in bringing us there. Thank you.
Boyle: Thank you.
CONSIDER TIF ASSISTANCE FOR PHASE III~ ENTERTAINMENT PROJECT.
Boyle: Todd, are you going to brief us on this one?
Gerhardt: Sure. Mr. Chairman, EDA members. At our last meeting there were several questions
brought up. Staff put an emphasis on that meeting to give you a background on what ! would say
are the planning type issues. Architectural style, parking layout, traffic, and uses. At this meeting
we're going to concentrate on the numbers so what I'd like to do is to answer your questions that
were raised at the last meeting. Give some history on how this project all got started, and then
take some time and use the big board and show you the numbers that staff has come up with in
this proposal. At our last meeting there was a question regarding the breakdown of ownership for
the proposed movie theater development. The ownership is Bob Copeland, Ray Mithun, Jr and
Mike Delaney. There was also a question that Mr. Copeland had marked the TIF application
incorrectly and that the applicant had filed for bankruptcy and Mr. Copeland and his partners have
never been involved in a bankruptcy or loan default. As to the third question, ! explained in detail
the public purpose of why the EDA should consider giving this project. In your packet under
Attachment #1, Mr. Copeland has gone through his analysis of why TIF assistance should be used
for this project based on the public purpose guidelines under TIF laws. Staff had also completed
the advantages and disadvantages of the project. Some of the advantages that staff had
highlighted was the improved overall aesthetics of this area. Currently ! have laid out a couple of
pictures of how the area looked here in the last couple of weeks and for EDA members, if you
haven't driven by there lately. Entrance to the city's night and weekend activity and drawing over
250,000 patrons each year. You know with over 6,000 employees in our business park, our
restaurants and businesses do a very good job during the noon hour in servicing, or being serviced
by those employees in our business park. At night our downtown area is a little slower and
putting in additional theaters that would provide additional night activity and drawing patrons to
our downtown businesses. With the proposed project you would see an additional 10,000 square
feet of additional retail that the city currently doesn't have and would provide services to our
residents and businesses. Providing TIF assistance may provide for a higher quality building than
what our existing codes may provide. And improve the utilization of the property. Currently
right now it's used as a bowling center and bar and with the additional 10,000 square feet of retail
and the additional movies, there can be a question that we already have 8 and 8 more you know,
what benefit does that have besides bringing more people to the downtown. So that's kind of an
advantage/disadvantage but definitely the 10,000 square feet of additional retail would be an
advantage. Each project would be a pay as you go without sharing the tax increment from the
Timber Lounge and hotel expansion. I'll explain that in more detail as ! go up to the board and
who how that can work. Some disadvantage to the project. It does need a substantial amount of
economic investment on the EDA's behalf. A loss of bowling in the community as a recreational
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Economic Development Authority - January 28, 1999
activity. There's no question in the original plan that having a restaurant and a bowling center and
a little bit of retail, it really lent itself to a true type entertainment situation. Increase in traffic can
be good for the patrons. Can be bad if this project is really successful and that we may have to
put a signal out onto Market, additional costs associated with that. That's it. That's all I could
come up with for advantages and disadvantages. Right now I'd kind of like to go through the
numbers unless the EDA members have any questions on my preliminary report.
Boyle: Any questions at this time or should we let Todd go further?
Gerhardt: How we got to this point, started back approximately 6 years ago when we started
with the Highway 5 corridor group. The Highway 5 corridor group...to look at how can
Highway 5 develop in this community. What sites should we preserve and with the assistance of
Bill Morrish from the University of Minnesota Landscape School, he came out and assisted us in
windows in the rooms and corridors to preserve along that highway and the group got on a bus
and drove up and down the corridor. They could see which of those creeks and tree lines that
they wanted to preserve. And one of the other things that that group highlighted as they were
driving up and down the corridor and as they sat out here at the intersection of Market and
Highway 5 was how unattractive the bowling alley and the back of the Dinner Theater and the
presence that showed to individuals sitting at that intersection. So through the efforts of
Bloomberg Company, Dan Dahlen, Lotus Realty and the HRA at that time, we sat down with the
owners to try to work out a deal where we could come in and pay for the necessary parking lot
improvements and facade improvements on the bowling alley.., retail center. Frontier Building.
And as we moved along, this was all going to be one project. And with that, as we got into it
deeper and deeper, the bowling center with some of the issues of changing ownership and filing
bankruptcy led to, we had to start separating the projects individually. Bloomberg wanted to
work his... The movie theater wanted to get going right away and Dan Dahlen... was working
with Pauly's in trying to get his package together. So everybody wanted to kind of be treated
separately and we brought it back to the HRA and City Council and said yes. We could separate
these. Well, what also got separated in that process is that we got away from the original
architectural treatments that were originally approved. And everybody else thought that they
needed to do the improvements that would work for the tenants that they were working with and
that would fit in their budget. So where we're at now is, as you drive by out there, you can see
Bloomberg's retail space is starting to take shape. They've got the brick out there. They've got
the new windows in and starting to see the mansard go up and it' s to me... The movie theater is
open. It's operational.
Mancino: It's got a sign.
Gerhardt: It has a sign.
Engel: Does it have all the letters working?
Gerhardt: It has the letters on the sign and Mr. Copeland feels that for him to stay a vital part in
the downtown area for the long term, he feels he needs 8 more theaters to stay up with what the
market is doing. I don't know if that's correct or not but Mr. Copeland feels it's important. And
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Economic Development Authority - January 28, 1999
with that we encouraged Mr. Copeland to include retail as a part of it. This is a mixed type use.
It's a mix proposed and we asked him that he include that and he has agreed to do that and that
he would do the retail out front with the.., in concert with the movie theater. Now with that,
what I'd like to do is just explain to everybody that hasn't been here since the beginning of kind of
how tax increment, how this tax increment district got created. How the money flows from there
and also how Mr. Copeland and ! have talked over the last couple of months of how we kind of
changed the deal and how he wants to stand alone and take his own increment from both of those.
Mancino: Todd could you include, Mr. Chair if this is okay. Could you include one other thing.
Could you talk a little bit about two things that ! guess I'm getting old but a little bit about
parking and the, you know what we have done as a city to increase the parking and about the
road that would continue over the Bloomberg property and how that would flow. Okay. At the
end of the money, the fiscal part if you could also talk about parking and kind of, ! get very mixed
up who owns what as far as the parking part and improvements that have already been made just
at the end. Thank you.
Gerhardt: Well back in 19, ! think it was 95. The HRA at that time agreed to create a new tax
increment district. When you create a new tax increment district, you first have to decertify the
bowling center, the movie center phase I, hotel expansion, Timber Lounge and Bloomberg retail.
All those properties were included in the original downtown tax increment district and.., we're
dealing with so what happened is that.., took those parcels out of that original downtown tax
increment district. What happens when you do that is these properties in 1995, you established a
new base value. What that base value does is Timber Lounge in 1995 was paying $19,000.00, no.
Timber Lounge was $6,000.00... The hotel expansion, before the hotel was here there was a
vacant piece of land and they were paying $2,901.00 in taxes. The retail, Bloomberg Companies.
This property was paying $49,669.00 in taxes. The bowling center was paying $67,000.00 in
taxes. The movie theater was paying $19,000.00... And so these dollar amounts were coming to
the downtown TIF district and that totaled $146,175.00. When we decertified that district this
money is now going to the school district. It's going to the county. It's going to the city. And
it's going to other. This $146,000.00 is now being paid to those jurisdictions. Now what's
happened since then is the Timber Lounge has remodeled and they are.
Mancino: Under percentages for school, county, city is what the normal percentage is. It's just
regular tax, property taxes?
Gerhardt: 50% school. County, 30%. City, 18%. . . and then 2% other. Timber Loungeisnow
creating $19,057.00 in increment. Hotel expansion is creating $64,904.00 in increment.
Bloomberg Companies will be creating $30,927.00. And movie theater Phase ! will be
$40,458.00. The old plan the bowling center was going to create $30,927.00. So that's a grand
total of $186,273.00. And with Mr. Copeland's proposed development, that has intensified the
use of that than what was originally proposed with the restaurant, bowling center and little bit of
retail. He will now be creating $105,000.00... so with that $105,000.00 would, if he was to
receive the $105,000.00 to write down. What we're trying to accomplish here is the
improvements that are proposed for Bloomberg Companies. What we're trying to pay off is the
$360,000.00 worth of improvement for parking lot, landscaping and facade treatment for
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Economic Development Authority - January 28, 1999
Bloomberg.
$665,000.00.
Senn: Well stick the other two in too.
whole picture.
Gerhardt: Well, okay.
Bohn: From '95.
Gerhardt: This times three years.
Engel: 58. 57,000.
Clayton Johnson: Are you on the Timber Lounge?
Gerhardt: Yes.
Clayton Johnson:
Mancino:
Gerhardt:
On the movie theater portion it was $540,000.00. And the bowling center it's
Hotel expansion and conference rooms. So you have the
Theirs are, it's three years of this. At this time it's three years.
This is roughly $60,000.00.
What were you showing for that?
Increment of 19.
That has gone up this year.
Senn: What we're talking about is the incentive that went back to each project and it's three
years worth of increment which is approximately $60,000.00.
Mancino: ... 60 for the Bloomberg was for what?
Gerhardt: It was to offset the facade improvement here along the front, and the parking lot
improvements here.
Mancino: So 540.
540 was for facade improvements here, boardwalk. When ! say facade.., and parking
Gerhardt:
lot.
Mancino:
Gerhardt:
And parking lot. And 665?
665, facade, boardwalk, parking lot improvements.
Senn: That was in the original plan.
Gerhardt: In the original plan.
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Economic Development Authority - January 28, 1999
Mancino: Alright, thankyou.
(There was a tape change at this point in the discussion.)
Mancino: ... so we get that increase from the 18 to the 25%.
Gerhardt: The increase referendum dollar amount would go to the school district...
Mancino: Okay. Let me ask you another way. If somebody came in, a different applicant came
in and developed the bowling center privately. Didn't want any money. How would that, the
taxes generated, would they be any different? Would the market value be any different than what
we're seeing here? I mean does that make sense?
Gerhardt: Does it intensify it more?
Mancino: Yeah. To intensify the use more.
Gerhardt: Yeah, I mean if you put some AAA office stuff in there, you could get the price up
there. You know some real class A office space would pay probably more than a movie theaters.
Retail space maybe like Byerly's would probably pay more.
Mancino:...trying to understand that.
Ashworth: If that were to happen then you'd have two choices. You could take those dollars
because you'd still be collecting them, and pay off any existing loans, notes that you have and
therefore collapse those early. Or take that particular parcel and decertify it and put it right back
on the tax role immediately.
Gerhardt: Your two choices here...take these guys out of the equation and you take the
increment from here and here and you pay Bloomberg off earlier, you could do a couple of things.
You could take this and pay Mr. Copeland off earlier or you could take this and there's two little
buildings over here on the back side of the Dinner Theater that you haven't dealt with yet. And
do something over there and try to encourage an office building to come in there. Or you could
just put these on the tax rolls is another option... So what we do is come in, number one we
decertify this district and everything came back on, you would come in here and say, Laurie down
at the auditor's office, we've decided to decertify these three properties and we'd like them back
on tax rolls again.
Mancino: Does it cost us to keep decertifying?
Gerhardt: Just attorney fees...
Mancino: That costs us.
Boyle: A portion of that 25%.
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Economic Development Authority - January 28, 1999
Gerhardt: Yeah a portion. Not all of it.
Senn: Why would you ever decertify it when you could use that money and go back into District
1 where you took it out of in the first place to help solve the deficit problem?
Gerhardt: Yep, you could do that too.
Senn: ! mean by the first decertification and taking it out of the district in the first place, if you
hadn't done that, right now a majority of the $2.5 problem wouldn't exist. So ! mean it's just, if
you want the whole history.
Mancino:
Gerhardt:
Mancino:
make in the administration fee, the 25%, does it have to stay in the district? ! mean.
Gerhardt: Yes.
Mancino: Okay.
Gerhardt: 10% can be used for administrative costs. The other 15% can be used anywhere
within this red line.
Mancino: And onlythere.
Gerhardt: Only there.
Boyle: It's very thorough. Thank you.
Mancino: Very good. Thank you. Oh! ...can you talk a little bit about, Todd I'm concerned
about a couple things. And the road. The road going through and you know will we be at some
point down the road, will the city have to come into play and upgrade the road? ! mean what
improvements are going to again fall back as part of this project and all that kind of stuff?.
Gerhardt: ... needed to work that out an issue regarding... ! know we had to deal with the access
issue here. But how this wasn't included as a part of the project.
Mancino: That's just a dirt road now. Can we keep it the way it is, all the way through there?
Ashworth: ... this type of a cul-de-sac fashion and we did it in such a fashion so that the road
came in. You come back up in here. IfBloomberg wanted to take and improve these, they could
have access off of that roadway because...
That's water over the dam. Hey, the 25%, are we limited?
Then you don't have problem in the future.
The 25%, do we, are there any limitations on where we can use it? The money that we
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Economic Development Authority - January 28, 1999
Clayton Johnson: No, a little history there was that we originally wanted.., first attempt to
develop the property and put the road through and the previous HRA didn't want to put the road
through. So when we came with the plan that we're currently working on, it's intended that
everything would be served off Market Boulevard...
Bohn: That's not true. We wanted the road through but we didn't want to pay for it.
Vernelle Clayton: ...
Mancino: So where are we now with the road? I want to explain the road because I think it's
important.
Gerhardt: Our road right-of-way stops right at the entrance, the first entrance into the parking
lot. The City Council as a part of the approval of this vacated the road, we had road right-of-way
up here. They vacated so we could expand the parking. But we never had, we never had right-
of-way that would take us all the way over here.
Clayton Johnson: For one thing the Dinner Theater's not... The Dinner Theater's still in District
1.
Gerhardt: Right, the Dinner Theater isn't but the two smaller buildings and see the PID number
for this goes all the way over here. It's like an upside down Florida.
Mancino: But Todd, what you have told us, I again it's my memory but is that the road will go all
the way through.
Gerhardt: Will go all the way through once this property is developed.
Mancino: Oh, okay. So you're saying with this new development adding, and I'm just going to
call it bowling because we've already done movie phase I. The bowling part that you will not be
able to, there will not be an improved road whatsoever going out to the east?
Boyle: Not as a result of the improvement of the bowling alley.
Mancino: We will not be paralleling those two things?
Gerhardt: I think that's going to be an issue as this thing goes back through planning commission
and city council process through this because we did talk about there would be another potential
access, if I remember right, when we talk about traffic that we needed, we needed something to
go through here, be it a paved drive or something to allow a... access because of the amount of
traffic generated from these people to go out. We didn't want them all to go out one way. We
wanted it to be diverted to a second alternative so.
Mancino: Public safety concern, etc.
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Economic Development Authority - January 28, 1999
Gerhardt: Well for engineering, yep. Everybody.
Mancino: Yeah, and will there, I'm sorry I don't want to get into too much detail but I just want
to make sure that all these things are out in front and who is going to end up paying for improving
that road and etc because again that may be added cost due to improving the bowling alley. And
just everybody needs to know that.
Gerhardt: I think it's already included in these figures here.
Mancino: But the 665 has jumped to $1.3 million.
Gerhardt: Well that's interest. That's with the interest. The $1,390,000.00 is interest. That's the
total payments over the 22 years. The $1,390,000.00. That includes all the interest that...
Mancino: That was 14 years.
Gerhardt: Okay.
Mancino:
Gerhardt:
Mancino:
Gerhardt:
Mancino:
$665,000.00. It will be $1.3 million so when that bowling alley is improved we will have paid
$1.3 over 14 years. Okay.
Interest and principal.
And we don't know yet who has responsibility and haven't talked about the east
Gerhardt:
Mancino:
access.
I just want to know how much we have to pay. Okay.
Well if it's over the 14 years, including the interest and everything, it's $1,390,000.00.
Because it's not really 665 because we're going to end up paying 1.3.
With interest.
Yeah, that's what I'm saying. That's what our obligation as a city will be. Not
Bob Copeland: The private parties have responsibility. We'll be responsible for...
Mancino: For not only the easement but the upgrade and everything.
Bob Copeland: Right.
Mancino: Okay.
Bob Copeland: It'd be a private paved access.
2O
Economic Development Authority - January 28, 1999
Mancino: Okay, thankyou.
Senn: Say Todd if there's any additional infrastructure such as semaphores or anything like that
are required in any of the connection points here or anything else like that, there's absolutely no
money.., for that?
Gerhardt: Well you could use the excess increment for the 15%...
Senn: I'm not talking about the upper. I'm talking about now what you're talking about down
here. Down here there's basically no dollars in anywhere there to fund any infrastructure
improvements if they're necessary or semaphores or whatever.
Gerhardt: Nope. It's parking lot improvements, facade and boardwalk and sign.
Bob Copeland: We hired a traffic engineer who determined that a stop light would not be
required.
Gerhardt: And that was with the east access though right? I've been working numbers the last
two weeks. ! haven't been thinking traffic.
Boyle: Well let's, thank you Todd. Let's continue with questions then at this point. Linda, do
you have something?
Jansen: ! don't have any questions, no.
Engel: ! don't have any. You got them. Good job.
Boyle: Nancy.
Mancino: My only other one about parking. ! just want to make sure that park and ride will stay
there and that the work that's been done to date and looking at it that we have no problems
keeping the park and ride there and co, you know both uses work out.
Gerhardt: Park and ride has a permanent easement that.
Mancino: How much of the parking lot does the city own? Can you kind of show that?... You
mean they get to go to the, if the movie theater goes in there, they get to go to the movie free?
Gerhardt: Well...Here's Market. Here's the entrance to the bowling center. This is that long
entrance here. And so they have an easement that runs...the last three rows of the parking.
Mancino: And that easement is because we as a city own that land or Southwest has bought it?
Gerhardt: HRA owned it.
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Economic Development Authority - January 28, 1999
Mancino: HRA still owns that. We own that land, okay. Okay.
Gerhardt: Right now Southwest Metro, which will be an issue when this retail comes in. They've
been parking like this. And so they're supposed to be parking outside this line so we've had
discussions with Southwest Metro... to basically renegotiate some of the parking in that area.
Retail may want some of the parking over in this area and we'll... Once we have an approved
project and know what the uses are, we're going to sit down with Southwest Metro and try to
work out this parking scenario.
Mancino: Thank you.
Boyle: Jim, questions.
Bohn: Yes...part of that building going to stay or is that going to be torn down?
Gerhardt: ! understand the entire building will be torn down.
Boyle: Steve.
Labatt: My only question was that road and the cost...
Boyle: Mark Senn, ! didn't mean to pass you. You had already asked some questions but let's
come back, I'm sure you have some more.
Senn: Not in terms of the parking. Does this project as it's now configured meet or not meet
parking requirements?
Gerhardt: ! believe we are short by, ! don't remember the number offhand. But we are short, !
know it's less than 100.
Senn: But it's around 100 though if! remember correctly.
Gerhardt: Yeah. Somewhere around there, yep.
Boyle: Didn't we address that last time? ! thought we were .... ! was under the impression we
were not short.
Senn: We were short according to parking requirements.
Mancino: Yeah because Sharmin said her figures were wrong and she came back to us and gave
us a sheet Councilman Senn that said that her, it was in the Minutes that ! read that were attached.
That her first calculations were incorrect. ! don't have that sheet though but ! think in the Minutes
! can't remember where. Let's see.
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Economic Development Authority - January 28, 1999
Engel: You mean 700 rather than the 900...
Mancino: There you go. But again we can kind of address that and make sure that that' s.
Gerhardt: Yeah, ! mean the parking, we decided, ! thought at the last meeting that the parking
issues, you know a lot of the architectural style and things were going to be more addressed at the
planning commission level. I'm sorry that I'm not up to date on the parking.
Boyle: At the beginning of your presentation, Todd you had recommended that we focus on the
numbers tonight. The economic portion of this recommendation and ! think that's a very good
recommendation and ! think we probably should stay in those guidelines and focus towards that
arena as it applies to our authority.
Mancino: ...
Boyle: And that's in the ballpark.
Gerhardt: Well ! won't bring back anything that moves these numbers up any higher.
Boyle: Promise? Has the tape run out?
Gerhardt: Probably.
Boyle: Mark, were there further questions before we? If there are no further questions we'll
move on to comments then. Or discussions, excuse me. Go ahead. Bob, would you like to come
up and?
Bob Copeland: Well Vernelle and I...
Boyle: Okay, excuse me. Vernelle.
Vernelle Clayton: ! just have to make one comment on this sheet. It ties in with this project.
There are good things on this sheet as well and as you beat your head against the wall, there's one
that Don handed out earlier, go out and stand out in the street and look up and down. Check
what we have out there. Main Street is something ! think we're all proud of and it wouldn't there
if you didn't have this problem. Also want to point out that we've never had enough chance to
toot our horn here, and I'm wearing a different hat now. I'm wearing a Market Square hat. You
have a million two that came in in 1997 and that was a result of the courageous effort on the part
of the former HRA's to lend those folks 700 some thousand dollars to correct the problem at
Market Square which was partly due to the fact that a bridge had been buried there and it was
returned to you at a million two which ! think is about as good an investment during that period
of time that the city made. It was basically 10% per year and it paid cash then since. So there are
good things with TIF. There are lots of mysteries with TIF. There are complexities with TIF and
basically it comes down to how can we serve best the economic welfare of the city of Chanhassen.
Todd explained a lot of things that ! thought ! might explain and so ! certainly am not going to go
23
Economic Development Authority - January 28, 1999
back over it but there are a couple things that ! just want to mention. When the district, when the
old district was decertified and we created this new district one of the things that we had to do
was prove that it warranted being created and to do that a certain percentage of the buildings had
to be in a sense sub-par. That's an abbreviation or summary of various criteria that you have to
go through to see just exactly what you have to have a redevelopment district. One of the
buildings that was sub-par and helped the district become qualified was, and ! haven't seen the
wonderful picture but ! think you have a picture of the problem we're trying to correct. So to
some extent it would be somewhat incongruous at this point, having used that building as a reason
for creating the district in the first place, not to give TIF to this particular project to in fact correct
the problem for which we created the district. We have had explanations of pay as you go. !
think it's fairly clear. ! think you've done a good job of explaining that. ! had meant to explain it
because it's not really pay as you go from a developer's perspective. It's go, pay and then get.
You go with the project. You pay for the project, which is one of the reasons you have more
interest than you might have if you just went out and bought a house. Bought a house for
$100,000.00. You pay off what? 200 some thousand. Here you pay a little more because there's
a lag time. He's going to pay his taxes. The first year he'll pay taxes on the old rate. The next
year he'll pay taxes on the new rate from which the TIF is extracted and the following year he'll
get the money. So they're filling that gap. You have a little more interest on this than you
otherwise would have. The city on the other hand has very little risk in what it has to pay out. It
doesn't pay out anything that it doesn't get. It only pays what it gets. It passes it through. So
with that ! think that ! want to talk a little bit about how we came, we've been on the.., of a
dilemma a little bit with this project and what we've talked to you folks about. The first meeting
we came to you with plans and with a plea and with an explanation as to why we needed the TIF.
How we met the but for. We had planned then for the next meeting simply to answer the
questions that were left when the request was tabled. In the meantime we have a couple new
folks on the group here and so we felt we needed to go back over a few things, but we're still
taking to heart the comment and the general agreement and understanding that we're focusing on
economic issues and we aren't so much focusing on the architecture as Todd and you folks just
discussed and so while the plans are here, are they here where they can see them. ! don't know
what's up here. ! don't know what they're looking at... So we have the plans so you can see
what will be proposed. You see it in it's form as it will be presented to the planning commission,
but not necessarily as things go from time to time as it will be when you come out of the planning
commission. So that is the direction that everyone has decided to take here to go through
planning...you folks first see frankly what kind of building these folks can afford. The but for, so
while to some extent we thought well okay we've had the project approved before. We're not
asking for any more money. Perhaps this is kind of an easy task. And perhaps it should be since
we are meeting what the goals of the district were to create, to clean up this awful looking
building. On the other hand we do recognize, and it's reasonable for you to revisit the issue
because there has been changes. Some of the changes have somewhat clouded the vision. Some
of them are reasonable to explore more thoroughly. The question though that we have to ask for
is if it's going to be built without TIF, what is the but for. Part of the but for is very easy to
answer. Bob has put together a list of, an analysis of the numbers. How it works. How it
doesn't work. The rest of the but for though is a little more subjective and it's one that does
affect the overall economy of what happens here in the city because but for the TIF Bob has two
choices. He can cancel the purchase agreement and go with his eight screens and we've left at the
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Economic Development Authority - January 28, 1999
city with the ugly building for, in my judgment, at least another couple of years. That's because
of the time it takes to get another group put together. Invariably the other group that we get put
together, they put together, the other, whoever puts together, will come back to you and say,
okay. We want to do this now and but for the TIF, we'll not do it. So you might find yourself
right back where we are today if the TIF is not given to these folks, on a plan that we can have in
place. Get the taxes paid sooner. Speaking of paying taxes, one of the risks here is that this
particular building that we're dealing with at the moment has been the one that's been the least
reliable for paying taxes period. The other alternative is that, that Bob has, is to go ahead but
with a lesser building. Lesser in intricacy of design. Lesser in quality. And something that
probably would not be as aesthetically pleasing and therefore would not have as good an impact
on our downtown as a TIF sponsored building would have. So let's discuss a few of the other
issues then that have clouded the issue. First of all, on the project that you were originally
providing the TIF it was to redo the parking lot, redo the facade, add a boardwalk and there was a
mixed use of retail, bowling and restaurant. The current use is retail, a little bit more movie and at
the request of the city I should remind you, no restaurant. So the question is, is this a viable,
economic development that should be supported? The question is not, did we support the prior
plan because there was a restaurant and now there is none because the restaurant was removed at
the request of the city. The question is not did we support it before because there was a bowling
alley and now there is none because the city's files and ours is full of reasons why the bowling
alley is not a very good, an economic investment. While there have been several offers that have
come forward with a thought they might take a crack at managing a new bowling alley, each of
them has come away saying it would take more money than you could recover in any reasonable
period of time to bring the bowling alley up to speed. They also come forward with the response
that 24 lanes, which this is, is the bare minimum that you can have in one facility and expect to be
a success. Even if it were a success, the value of the rents that a successful bowling alley can pay
are so low that it does not enhance the value of the building. If you know buildings value in
commercial, commercial buildings values are determined by the amount of rent that is paid. The
question is not either did we split the prior project because the retail, of the retail component
because now we have something that in fact has more retail. And so to the question is this a
viable economic development that should be supported when comparing it with a prior proposal,
the answer is yes. Some other questions have come up and this has come to where there is
difficulty on our part in trying to answer questions because we can only respond to what we've
heard. We haven't heard a whole lot of questions but we have heard a couple of questions. One
is math and we will deal with that when we get to the planning commission unless someone has a
comment and a reason to talk about it tonight. We'll respond to that at the planning commission.
The other is use and we've heard a variety of reasons why romantically we'd like to stay with
what we have. But that's sort of a, and I too went through that with this project. We've all gone
through a period of what one experiences is somewhat like a death in a family. First you're sad.
Then you're mad. And then you get to the part where okay, let's get on with life. So we all went
through a period of okay, this isn't quite what we had in mind before. We don't have.., up front.
We don't have the cute boardwalk. We don't have all the little things that we planned to have
inside. But we don't have that because it wasn't economically viable and we won't have it
because the folks that do those sorts of things need more space than would be available if it were
left that way and I just talked about how a bowling alley is not very economically viable. True,
it's one less thing you can do in downtown Chanhassen but it's not economically viable. The
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Economic Development Authority - January 28, 1999
other area is, the other thought that we've heard and someone else is going to talk a little bit
about that but ! would just mention a little bit.., as Bob told you last time when we were here,
they are closing eight screen movie theaters in many locations because they are too small to
compete. Sixteen screens do lots of little things for us, in addition to making sure that we have an
investment that has already been made more secure. We will see better movies. There is a thing
going on ! understand in the movie industry where if you have fewer than 20, you don't get some
of the first run movies. But if you have 20 and you can consistently assure that vendor that you'll
be taking those movies, they put you on the list for all the good movies. The other issue on the
regional draw is one that ! love to talk about but ! think Steve wants to talk about it a little bit and
so ! will just say, in my summary on that, that we are a regional draw. Steve can talk about some
of the institutions that we have here in town. Some of the businesses that we have here in town
that are regional draws and ! can only say to you from my experience that ! would hope that you
would take the same approach as ! do in my business which is I'm responsible for bringing a fairly
large number of businesses and tenants to this town. ! feel responsible for their success. We as a
city are responsible for encouraging and bringing these folks to town and we need to follow
through to make sure that they succeed. It's not known to most people that most businesses here
in town are not making a whole lot of money. They knew that, most of them. The ones that
don't know, we counsel with them and tell them that ! hope that you have a reserve so you can
live through the lean years until you get to the point that you want to be. But most folks here in
Chanhassen are positioning themselves. They're positioning themselves for our future growth and
they're positioning themselves for the growth from around the region that will come from them.
And you'd be surprised how many folks in town here rely on a region and not just Chanhassen. In
fact there are more people in town doing business that rely on more than Chanhassen, and always
will, than rely on just Chanhassen. If we had businesses, only businesses in Chanhassen that relied
on Chanhassen businesses, we would get by with strip centers. One of the businesses that ! just
learned of and it's kind of interesting so I'll pass it on is a business that moved here from
Excelsior and that's the Sampler. She has people coming here from Japan. If they are in the
United States, they come to her store. And that is truly a regional shopping center so, first they
don't have any money anywhere to spend so ! don't know why we care about that. But so in
summary ! do think we do have to think of a broad view. Not short view. Commitments that are
previously made to folks and just what this will do economically for our city and ! think it's
exciting. You all know ! worked on the other plan. ! liked that plan but ! think it's terribly
exciting to put Chanhassen on the map with a 16 screen theater.
Boyle: Thank you Vernelle. You commented, Steve did you have some comments?
Steve Berquist: I'm Steve Berquist. ! live at 7207 Frontier Trail. ! really didn't know ! was
going to be introduced, nor did ! know for sure that ! was going to make comments. ! thought
perhaps that ! would and ! have made some notes. Not necessarily in any particular order so
you'll have to bear with me as ! go through them. The first thing ! want to tell you, ! want to be
completely up front about this is, and I'm not here as a former councilmember or EDA member.
I'm not here as a mechanical contractor, the HVAC contractor that did the original theater,
although we did. ! have no idea whether we've even looked at anything regarding the tear down
and the rebuild. I'm not here in that regard. You'll have to just weigh in my comments
accordingly and if you think I'm biased, you're certainly welcome to discard them. But ! assure
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you I'm up here as a citizen. The first note that ! made, oh the other thing ! wanted to do. !
really wanted to bring a piece of a computer paper with the fold out so ! could.., have them all
fold out like ! did at the original, at the State of the City thing. Everybody just groaned...
Anyway, the regionality.
Senn: I'm kind of glad you didn't do that.
Steve Berquist: Well it would have been funny. But that's alright. Vernelle talks on the
regionality issue. We are a regional draw. We have the Target. We have the Byerly's. We have
other draws, the Dinner Theater. Many, many reasons for people in all areas of this part of the
suburb ring to come to Chanhassen. The decision regarding our regionality was made far before !
sat there or you sit there. Now, in my opinion, the question is how do we insure the vitality of
our, of what we have created as our regionality. So I'm worried about that. I'm concerned that
the multiplexes of commercial theaters, I've got to make sure ! read my notes here. I'm
concerned that in the event that this project does not go forward, that what could happen, again
as a citizen, is that 4-5 years down the road that we'll be sitting here, you'll be sitting there talking
to some other developer about the redevelopment of not only the bowling alley, but also what is
currently the existing 8 screen theater. And from a citizens point of view, ! would hate to have to
look at that reinvestment again. ! don't want that to happen. ! don't look at this as corporate
welfare. ! know at some point somebody had made that comment. This is not corporate welfare
in my opinion. Again, increment is only returned to the developer if the valuation per tax dollars
are generated. Do we got an eye sore there? This is, Jim you're nodding your head. You know,
everybody knows what that place looks like. ! mean to us, who drive it every day, who look at it
every day, we have a tendency to look right past it. But believe me the people that come through
Chanhassen that live in other areas and look at that building, don't look right past it. It's an ugly
eye sore and it needs to be cleaned up. Let's see my starred items here. ! want to talk very
briefly about other communities continuing to offer incentives, and other communities even
looking to annex land for the enhancement of their commercial, industrial tax base. ! think we're
foolish if we don't believe that they're going to be offering tax increment to, on that land. To
help themselves remain economically viable. Now ! say that not only with this project in mind,
but this is a comment that ! thought of when you were talking about the original proposal with
Eden Trace. Not that ! don't think affordable housing is a very important component to include
with the project but ! don't want to sell the tax increment tool short. I'm afraid with the hot
button, the hot phrase being affordable housing, that that may happen. ! look at this project that's
before you as a movie theater expansion and the retail component and ! think back on the original
project that we all looked at and fell in love with. The Frontier Building, the movie theater, the
Pauly's restaurant. We all loved it. We all thought it was a great thing for Chanhassen. We
looked forward to how much it was going to draw our downtown together. How many people it
was going to bring to our downtown. How it was going to affect our economic vitality. ! look
now at this project and ! really believe that this is a better project. This is a superior project to
what we agreed to back in 1996 but never came to fruition. And ! would urge the commissioners
to work towards an agreement with the developer and get this thing going. Lastly, two quick
points. Three quick points. The Mayor mentioned the revenue. Tax revenue flow into the city,
and ! just wanted to, I'm sure it's all on the forefront of your minds but you need to keep in mind
the other benefits associated with the vitality of that area. We have a significant piece of land on
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the other side of Highway 5 that is largely at this point undeveloped. We have the CR James
piece that for lack of investment is just sitting there vacant currently. Nobody wants to take the
risk to put anything on it. We've got the Boston Market piece that went down, for whatever
reason. It's down. With the enhancement of this particular area, there's my phone, pardon me.
Engel: Now that's staying in touch.
Steve Berquist: ! told him to call me if he needed me, and he just sounded like he wanted to hear
me say hello. Anyway. It's kind of nice when a 12 year old calls his dad, isn't it?
Boyle: Especially when he's at the podium.
Steve Berquist: There will be other activities and values received by the citizens of Chanhassen
with this project, in my opinion. They won't necessarily be tangible, and ! know you all believe
that. ! simply bring it up. The other thing is that $1.3 million is a case scenario which from what
! heard represents a lot of very conservative or worse case criteria. Is that right? $1.3. That $1.3
million represents a lot of worse case stuff. And lastly, and partly leastly, the park and ride. You
talk about the park and ride. There was no benefit to the park and ride with the old proposal. We
simply had a restaurant there in the existing building and a movie theater. This park and ride,
again if you look at the retail element of it, that is a component of it, stands to benefit. It will still
be there number one, and the services that typically will serve a park and ride, and Mark you're
very privy to those being on the Southwest Metro Council down there for the development on
Highway 5. We stand a good chance of going in that retail and being benefited by the park and
ride as well. So that wasn't part of the original concept. ! think it's a superior project to what we
had originally, and ! would urge you to strongly consider supporting it.
Boyle: Steve, ! think there's a couple questions. Nancy.
Mancino: Yeah ! just wanted to draw from you. You said, you thought it was a superior project
than the original one in '96 and you just said one of it's due to the retail on the west side being
close to the park and ride, ! understand. And ! didn't get your other key points on why you think
it is better than the original one.
Steve Berquist: One of the big reasons is that we get a new building out of it. You know the old
thing, while made out of, you know built like a bunker, comes down and gets replaced by
something that's new.
Mancino: ! just wanted to make sure ! got your key points on why you think this is better than
the other one.
Steve Berquist: Well the other thing that I thought about mentioning that I didn't want to
necessarily. ! think Vernelle mentioned the fact that there was some discussion regarding the loss
of a restaurant. To me that's not a bad deal. If you look at the restaurants we have in town now.
Adding one more, ! don't necessarily think that's a good deal for us. Any other questions?
Thank you for your indulgence.
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Boyle: Thank you Steve.
Clayton Johnson: For those who are new, I'm Clayton Johnson with the Bloomberg Companies.
And the next door neighbor to this project. And Todd ! want to compliment you. That was a
great presentation and ! think it was very helpful, particularly to the new members and it's helpful
even to us who have been through the whole thing. But ! think we support the project obviously
because we're the next door neighbor. We've been active in the development of all of downtown
since 1986, but also in this whole site. The original hotel, the hotel expansion, the meeting rooms
and so on and we're currently wrapping up the Frontier improvement. ! don't know if you've
been back there in the last few days but it's actually starting to look like something. But the other
reason that we support it is that we are very interested in taking this thing to the next step, which
is the area behind the Dinner Theater which we know is everybody's concern and Brad, from
Lotus' office and myself have continued to work with a major developer and a major tenant on a
large office building for that spot and we are encouraged by them to continue, and we're going to
probably be at the next meeting to make a preliminary presentation. So we're actively pursuing
that and we hope that your support for this project continues.
Boyle: Thank you.
John Rice: I didn't plan on saying anything.
Boyle: Well everybody else has, you might as well.
John Rice: Let silence be taken as objection. My name is John Rice. My office is in the Frontier
Building, 551 West 78th Street. As some of you may know I'm the attorney for Bloomberg
Companies and I've been here before on various projects. ! have some other history which Don
might or might not remember. ! sat in the closing on the first development and sale of the
bowling alley, representing one of the parties in there. And it has, it needs some help now. But
anyway, it would be a vast improvement on that building. That building and it's current use is a
drag. The taxes itself are, the usage has demonstrated that it's not going to be economically
viable. Mr. Copeland here has already made a substantial investment in the first stage of the
cinema. He's made a substantial investment and he chooses putting his own money in to expand
that same investment in the downtown to make that improvement next door to his own building.
And ! would think that that would be a significant factor indicating that there's some good faith
work and investment to be done by him and merits your approval. Besides that it's going to work
favorably for the overall improvements of the entire south side there that faces on Highway 5.
Thanks.
Boyle: Thank you. ! think at this point, let's open it up now for questions please. And again,
let's focus on the economic portion if we could please. I'll start on my right side, Mark. Engel.
Or Senn, if you'd like to begin.
Senn: I'll have you come back to me...
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Economic Development Authority - January 28, 1999
Boyle: Alright, Linda.
Jansen: ! have one question. In mention to the eight screen theaters actually being closed down
and that they can't compete. When did that trend start? I'm looking at the cinema just having
opened and now it's not viable.
Bob Copeland: When we started to plan the cinema there in about 1994...
Boyle: Bob, it might be best so this gets on. Thank you.
Bob Copeland: When we started planning the existing cinema there in 1994, eight screens was
kind of a big deal. At least we thought it was. But since then there is a national trend that is
towards larger and larger complexes. More and more screens. And what's happening is that 16
has somehow become sort of a magic number that if you're smaller than 16, you're in jeopardy of
not surviving. The 8 screen cinema down in Burnsville is closed. There's one in Edina that will
be closed in the coming year. It's an 8 screen cinema. And we're hearing about this and we're
seeing it all around the country and 8 just is not a viable number any longer and so this is just a
development that's happened I'd say in the last 3 or 4 years, but it's accelerating. And there are
going to be fewer movie theaters with larger numbers of screens at those fewer theaters.
Jansen: And so as we're looking at some of the smaller markets, and of course trying to
familiarize myself with your business ! was going through the paper. As I'm looking at all of
these smaller theaters in smaller communities, and meaning even our size, you're forecasting that
those will be closed because our population will be traveling into say an Eden Prairie where
maybe they would put 16 screens. Making us less viable.
Bob Copeland: Well that's right. There probably will be a 16 screen plus cinema in Eden Prairie
in the coming years. ! think that's inevitable. But what we're concerned about is that in the
coming years there may be a 16 screen at some other community that would be closer than we
could withstand. And the smaller numbers of screen cinemas in smaller communities will probably
survive. We have a 7 screen cinema in Buffalo that we think will do fine. But at the, this,
Chanhassen is closer in to where the population is and the smaller ones that are where the
population are are not going to survive. The Brookdale Cinema just closed this month. Four
screens. It's going to happen. And it's a national trend and it's not something that we relish. It's
not something that we, you know anybody's promoting but that's you know the way it's going.
Mancino: What's a single reason for that? ! mean why would ! want to go outside of my own
city of Chanhassen that has an 8 screen theater to go to a 16 one 10 miles away? ! mean what do
they say is the draw? Is it because everybody in my family can go to a different, you know go to a
different movie in the same building?
Bob Copeland: That's one of the things. But even with 8 screens here in Chanhassen, we can't
play all the movies. We can't get them all. You know there are you know a handful of movies
that we don't have right now because we only have 8 screens so we can't show all the movies.
So there might be some movies that you want to see that we don't have.
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Economic Development Authority - January 28, 1999
Mancino:
Bob Copeland:
Mancino: Oh!
Bob Copeland:
You mean ! have to wait a week to see before you get the new ones?
Well no, but we won't be getting them.
You won't be getting them at all?
Right. For example if you want to see Waking Ned Devine. ! mean you have to
go down to some other place to see that. And if you want to see Life is Beautiful.
Mancino: ! have to go to the Lagoon.
Bob Copeland: Or some other place. But the big reason though is that the larger, newer cinemas
with stadium seating and in some cases bigger screens which we would intend to have here is have
one big auditorium with a very large screen, they are drawing people. People are driving by the
smaller ones and they're going to those.
Mancino: Yeah, no. ! can understand that...
Bob Copeland: And it's not everybody's taste. Some people say well that wouldn't be for me. !
wouldn't do that but people are doing that.
Jansen: The theaters that are open now, and you have to forgive me. I'm not a big movie goer,
but don't ! recall seeing, don't you have the stadium seating in the existing cinema?
Bob Copeland: In 4 of the 8 auditoriums we have stadium seating, yes.
Jansen: Okay. And are they the oversized screens or the big screens?
Bob Copeland: Well ! would say no. They're just average size screens.
Jansen: Okay. Thank you.
Boyle: You ready Mark? Excuse me Bob. Does anybody else have any questions for Bob while
he's at the podium. Questions of Bob? Okay. ! had one but ! forgot what it was.
Engel: ! don't have questions. Just a few comments but I'm going to wait until, are you ready to
go Mark?
Senn: No.
Engel: No?
Boyle: Go ahead.
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Engel: Well, ! just watched this for a number of years before ! got on council or EDA and to me
the gain from the commercial viability of just our core downtown, in and of itself, is probably
enough reason for me to approve it. Just that. And ! think it's very pretentious on our part to sit
here and think that under market conditions that property is going to redevelop, given it's
demonstrated staying power to not do so. And it's certainly been uglier than the amount of years
I've just been here but I've about had it with that place myself. So ! don't believe there's any
market condition that says that's going to change. If that's the case, ! believe it would have
happened by now and ! don't see anybody else stepping up to the plate and ! know it may not be
perfect but it's not our property. We've got to deal with what we get and it's better than
anything we've gotten so far. ! think if we get this, we get closer to that office building, tower,
center, complex, whatever you want to call it behind the Dinner Theater. Again it's that
incrementalism. We're sneaking up on it. But we're not going to get it with this there, in my
opinion. You wouldn't get me to build an office building there with that thing around. And it's
all better than the existing use. It just is. That' s not even debatable. It' s not cash out of pocket.
We're not being asked for a loan. It's incremental tax dollars. It's a win for us. It may not be a
win for everybody but it is a win for the city so I'm going to approve it.
Boyle: Thank you. Right to the point. Appreciate that.
Jansen: Can ! ask yet another question? It actually came up from something Mark said. I'm
recalling, and ! spent two days going through the history on this project and Mr. Gerhardt was
wonderful. This is my second presentation of the numbers so he made sure ! understood them
perfectly clear. But one of the things ! recall reading was, at least one other approach to the
project that seemed to stall and then fail because of the existing financial situation of the bowling
alley owners. Wasn't there a whole complicated process where the purchase just couldn't be
made and the project stalled and stopped because of that? Or we would have something there
now?
Gerhardt: One of the deals was that Pauly would be included in on it. Dan Dahlen would be
included in it and Dan would rent back basically from himself the bowling element and it wasn't a
marketable deal. You couldn't take it to a bank and it failed.
Jansen: So it was more the financial situation of the property that stopped the deal or we'd have
something there now?
Gerhardt: ...
Jansen: Okay.
Gerhardt: Bowling is difficult, it's difficult to get a bowling alley to survive and pay over $2.00 a
square foot in taxes. $3.00 a square foot in taxes. And for them to survive there. And the
amount of space that you need for a bowling alley. There' s 24 lanes and then the space in-
between. You just have way too much square footage to really afford to pay $15.00-$12.00 a
square foot in a lease and still make money.
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Economic Development Authority - January 28, 1999
Jansen: So is the first project that's come before the EDA or the HRA as far as demolishing the
building completely and putting up a new business? Okay. So it's really the first time it's been
looked at that way. Okay. And then the other part that of course ! keep reading and we keep
mentioning is the eye sore of the existing building and taking a good look at it and your pictures
show it beautifully with the paint peeling off of the facade. ! brought the question up and it was
with staff as to whether or not there is an ordinance that, in place that actually addresses those
things because if we're actually coming at it and saying you know this thing is an eye sore. It's
detracting from being able to bring businesses into the downtown. If we weren't replacing it...
(There was a tape change at this point in the discussion.)
Ashworth: ... passes that referendum, these businesses will be taxed for that. And the money will
go directly to the school district. Or it would go directly to us.
Boyle: Well does the 25% remain? ! mean the 25% is there year after year after year, right?
That goes right back to the city, is this correct? Where does the 25% come?
Ashworth: ! think that Todd had mentioned, the 10% can be used for any type of purpose
whatsoever. The 15% has to kind of stay within that boundary area that is totally up to us. In
other words it doesn't have to benefit these particular owners.
Boyle: Okay. As long as that district is, okay ! understand.
Mancino: So I think what Councilman Senn is saying that the 15% has to stay within the district.
If it were regular property taxes, it would not have to stay in that district. It could be used over
all in the city anywhere and so that it wouldn't have to just stay in the district. We could use it
anywhere you have a little bigger universe to decide whereas this has to stay just right there. Is
that what you're, part of your point?
Senn: Only 10% of the revenues coming off this project can go outside of this very small district
area. 10%. Okay. So what ! was saying was not relating to capital referendums or whatever.
What ! was saying was normal ongoing city operating needs as the city grows, whatever. As our
infrastructure ages, as it requires more maintenance and everything else as we have more needs
developed because of our population growth, okay we have increased services. We have
increased operating costs. Okay our percentage of the overall tax rate will probably increase. As
it increases, okay you will not recover any increase off these properties. So they will not be
paying their fair share towards any of those future increases in relationship to stress or
infrastructure maintenance and.., whatever within the city so when the area is not doing that, or
bigger properties end up doing that, that means the other properties pay more.
Gerhardt: ...
Mancino: The original base value. The blue numbers.
Gerhardt: ...that will continue to...
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Economic Development Authority - January 28, 1999
Mancino: And if there is a school referendum that does go to the school district, but there is no
money, no green money that goes to the county. So the people who really lose out as it were !
guess, from the tax increment districts, and actually in the latest newsletter from the county, the
people that actually lose out or the agency that actually loses out is the county. And then they
come back to us as the city and say, we lost all this money. How will you make it up to us? !
mean using numbers.., other side of that.
Senn: Well it's more complicated than that. Much more complicated. The county's not the only
negative you know.
Mancino: But ! mean then we enter into agreements on county roads, etc. Again, just
everything.
Boyle: Mark, you still have the floor if you would like.
Senn: No, I'm done.
Boyle: Linda.
Jansen: ! guess tagging onto what Councilman Senn said when he's saying the right project. And
again not thinking of the cinemas as being the wrong type of a business or project, but when !
look at that property and realize that for the 14 year period and the 22 year period that it won't be
on the tax rolls. That yes, we'd like to get it on as soon as possible. In 14 or 22 years, is there a
possibility that there will be a business or a developer that would come in and not need the TIF to
develop the property? Might there be an opportunity for there to be a development that could go
in and that could immediately get onto the tax rolls? Maybe I'm reacting a little bit more in that
direction having just come through the whole election and the campaign process and hearing over
and over again, you know taxes, taxes, taxes and wanting to bring that number down on the
property owners. TIF definitely is one of those issues that you end up having discussions on and
watching where the EDA is taking the funding and going more towards the affordable housing to
get workers into town. It's not that we're needing, we don't have enough workers. It's not that
we're now needing to attract businesses. Though I'm not saying you know no to commercial.
I'm saying if we're at a point in the development of Chanhassen that businesses are coming into
the community, and especially into our downtown area because of the way it's developed with
you know all the hard work that all of you have gone to, we've got this property. We're limited
in the amount of property that is available for development now in the downtown. Do we want,
should we be taking public money to help in the expansion of the business when what the
community and the vision has been for this property is multi-use. And again ! realize that we
don't dictate what businesses go in there. That that's not what we're here for but it's what are
we going to take the public dollars and use them towards. So as ! read through all of the TIF
information and policy information, this being a redevelopment district, we're looking at an
expansion of an existing business which is exciting for the community. Is that the right place for
public dollars and TIF dollars. It's not within that realm of redevelopment. We're looking at an
ugly building that's sitting here. If we step up to the plate and do something with that versus
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Economic Development Authority - January 28, 1999
feeling that we have to commit to a 14 and a 22 year commitment of the one chunk being the
$665,000.00, and the $1.4 million, that's an extravagant investment of public money into an area,
but that's not what the public has had the vision for it. We're straying from that. We're spending
their money on something that wasn't envisioned for. Just some of the questions that came up as
! was comparing TIF policies, this area, the vision of Chanhassen. Maybe I'm less impatient
because ! haven't been sitting up here seeing this property. ! wasn't involved in the first one and
looking at the downtown area, I'm looking at all the things that this community needs, wants,
should have that TIF could go to because they're not here, and we're looking at should we be
making the business decision to finance the expansion of a business? That's not what we're here
for either. We're not to be making those types of entrepreneur type decisions. But again, just a
few of the things that ! hit as ! was going through that. They seem in conflict. You know
definitely wanting businesses in town to succeed. But that's a business purpose. That's private,
not public.
Boyle: Some good points. Thank you.
Mancino: Well ! kind of want to build on that and I'm not really...just because ! think ! feel like a
lot of the other members on the commission and that is that, ! really do believe in redevelopment
and ! believe in the very first point that we have in the new TIF policy which is compatibility of
the proposed project with the city's overall development plans and objectives. And there's no
question that this area has been a focus for the Highway 5 and for the city council. As we on the
planning commission saw this project in '94, so it has been a focus for redevelopment and
committing dollars for the project. So ! am not philosophically opposed to using TIF for some
particular spot redevelopment. At all. Although ! want to caution us from what something that
Councilmember Jansen just said. And ! kind of smiled because ! hadn't thought about it and that
is in this area, and this is a major redevelopment area that Clayton has talked about and that we
can see is, and if you don't mind I'm going to get up .... to make sure that we understand that as
we...that hopefully the rest of this will be developed too. Soon. And it is...are we ready to be
committed to take the same thinking and philosophy over to this area too.
Boyle: Do we dare not do that?
Mancino: So you know I just want to put that on the table that that is something that you know
hopefully in the next few years that we'll be looking at too and philosophically where do we come
down as an EDA as far as using TIF.
Boyle: In other words you feel maybe we're setting a precedent on this one? For let's assume an
office building does come, and they come in and they want TIF. Well you gave TIF here. You
give here. Hey, each issue is new. ! don't believe this sets a precedent. ! think the past comes
more to this.
Senn: ... from what she said, you have to listen to what she said. On a pure premise,
philosophically is redevelopment, okay. If that's the premise that you're deciding this on, then
you are philosophically saying that you're going to continue this...
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Economic Development Authority - January 28, 1999
Boyle: ! don't agree.
Senn: ...for redevelopment purposes...
Engel: A person can change their mind.
Mancino: That's what I'm asking because.
Boyle: Philosophically you're saying.
Mancino: Yeah, philosophically and again I'm not trying to, if this is an eye sore, you know these
two buildings are eye sores because now we've got, we've got everybody down here. We're
using this road, etc. ! just want to make sure that we thought about it and we all feel comfortable
with it because again the same argument for the eye sore could be down here.
Engel: I think that goes without saying.
Boyle: Can ! just make a comment there? Let's just assume that this doesn't go in and another
use comes in and they request some assistance. Do we say oops. I'm sorry. We're going to wait
another two years because you can't afford it. We're going to hold tight. We're going to hold
tight because we're not going to give TIF assistance any more for commercial development. And
we don't care what kind of business you got in here, we're not going to give it. Is that a fair
philosophical assumption?
Senn: Well there is a philosophical assumption that says development will occur regardless of
what you throw at it, yes. But it's a matter of time. ! mean Byerly's wanted to be in Chanhassen
regardless of whether we subsidized it or not. They got kicked out of several other sites. It was
the only one left, okay. So you're kind of kidding yourselves if you think it wouldn't be, okay.
But ! mean essentially you have to ask yourself the question what's the premise you're doing it on
and how big, or how deep are you digging your hole? If you go with a project like this on a pure
premise of effectively redevelopment, which is the only premise that appears to me you can go on.
Then you go down the way and you say but we're going to look at this one differently. ! don't
know how you're going to do that because (a), it's going to be redevelopment and in all
probability it's going to be something other than something that's going to produce nothing more
than a bunch of minimum wage jobs. Which this project's only doing. There won't be a single
job in that place that's not minimum wage probably.
Mancino: Well I just want to make sure we don't go from one extreme to the other. Say no
redevelopment that we're using TIF or all redevelopment that we're using TIF.
Engel: I want every project on it's own.
Mancino: And every project on it's own and talk about that for a few minutes because I don't
want us to get into again going to the extremes on either. ! mean ! think that's a good
conversation to have .... those things that it must bring the city that we feel TIF should be used
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Economic Development Authority - January 28, 1999
for. And again, because this is going to come up again, whether it's just, you know we're talking
about extremes right now so I'd like to talk about some of those gray areas and why even this one
in particular is important.
Engel: And I just wanted, this body by it's very nature is fluid. It is going to change so whatever
long term policy we would put in place is really going to be subjected to the thinking of the
people sitting in these chairs the next time one comes up. So by default they almost live in a case
by case basis. So philosophically ! love that. ! think the long term vision, something for the city.
That's great. But the fact is everybody that moves into these seats is going to look at what
they've got and they're going to decide based on the way they feel about it right now. Regardless
of what the policy is.
Jansen: Making comment to that, as one of the new kids sitting up here. Prior to this meeting the
reason that ! went back on all of the history and went back to the Vision 2002 was to make sure
that ! don't want to implement a major change. That's not why I'm here. I'm here because
there's a vision and there's a course that's being gone down and ! need to make sure that I'm on
board with that and one of the things that as an EDA that you've done recently is you've changed
your focus and so I'm getting on board with a new focus and now this project's coming along and
to me it's out of sync with where your new focus is. I'm trying to get myself onto the new course
and you've got a transition going on here. Because I'm looking at these 2, 3 year projects. The
hotel expansion and the Timber Lounge and those to me are a better comparison to this project.
So ! look at the 3 years and the amount of money that went into those compared to 14 years and
22 years and it's wow.
Engel: See and ! look at it, and ! don't want to use the word utopian because that denigrates it
but it's the only word ! can think of for now so I'm going to leave it there but it's not that bad
when ! use that word. ! mean ! look at it from a reality perspective. Is it better or is it worse?
And regardless of what we think, we might wait another year. We might wait two years. The
next one doesn't quite do it for us. Maybe it's three years. How many years has it been there?
20? 25? ! don't know. And I've watched these guys come up here over the last couple years, !
don't see anybody nipping at their heels to grab this parcel of land out from underneath their feet
and snap it up and do a better deal. I'm kind of waiting to see the next drawing. ! haven't seen
one yet. It tends to tell me that there's some reality as to what that thing can viably support and
what people are willing to put into it. If somebody had another deal on the table and was coming
right on the door behind him, I'd be willing to look at it. I've been waiting two years, ! haven't
seen it. They don't own exclusive rights to redevelop in Chanhassen and ! don't see anybody
stepping up with another offer.
Senn: Mark they haven't been able to develop in two years because of bankruptcy...
Engel: You know what, that's all part of the deal Mark. That's what ! was saying.
Senn: That's not part of the market. When you're asking $2 million from each property trying to
bring it down and then...
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Economic Development Authority - January 28, 1999
Boyle: Vernelle, you have some comments. Would you like to?
Vernelle Clayton: ... the bankruptcy that has kept this from being sold. Lots of reasons, mostly
economic and.
Senn: Vernelle, okay. If you want to get up then let's debate it because when a thing's tied up in
bankruptcy, when there's judgments against it, when the security position for closing on it, you
can't sell a piece of property. If you can tell me any differently there as a professional real estate
person I'd like you to put that on the record.., how much you know about the real estate
profession.
Vernelle Clayton: I'll put it on the record. I'll speak slowly enough so that what you say can be
on the record too. But I'll be happy to put it on the record. This property has not been in
bankruptcy that long. We spent a lot of time before it went into bankruptcy trying to get it sold.
We had problems getting enough money generated on an income stream on the.., to get any kind
of a loan. That was a problem.
Senn: ... security interest. They were in default on. That was the problem.
Vernelle Clayton: That's not true. He had the money.
Senn: We were the one who had the security interest. The City. They were in default.
Vernelle Clayton: We can go back and go through all the agreements that we had and what
you're saying isn't true. Plain and simple.
Gerhardt: Mr. Chairman I'd just like to add one other point. I'm not trying to skew anything
here but you know there is, could be other potential users that you might not want there other
than movies. There are other permitted uses in the area that might go in there that are less
attractive than a movie theater. So that is also a gamble. ! just want you to make sure that you
understand that. It could be a lawn and sports shop. It could be a big tobacco store. You know
other things like that. Just so you understand that you're weighing what you see here against
something in the future which might be something that you don't like. Okay. Or worse than what
this is, okay. You know just don't think the next project will be better than this. You've got to
keep that in the back of your mind.
Engel: Todd, and I'm going to answer that. ! mean you're going down a path there that ! think is
in response to sort of a premise that's being said here that we're analyzing this use. That doesn't
make it to my radar screen. This debate about a movie theater and whether we need it or not and
whether we should subsidize the expansion of an existing business. That doesn't make it to the
radar screen in my opinion. It is a gigantic, it is a huge improvement over what we presently
have. That's the bottom line, in my opinion. Again ! guess I'm preaching a choir already. We
know where we stand on this. It's a huge improvement over what we already have. ! don't think
we should be debating the uses because we're getting into that slippery, that's a slippery slope.
What's next? We can't make that call.
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Economic Development Authority - January 28, 1999
Boyle: Yeah, excuse me Jim.
Bohn: We created this new district with the idea of redeveloping it and that's what we were
going to do. Redevelop it. Regardless if it's a movie theater or another bowling alley or what it
was, but we were going to rebuild. That's why we created this new district and that's what we
should be doing is redeveloping. Saying that we're just adding onto the movie theater.
Redeveloping the bowling alley that's going down the tubes. We are redeveloping and that's
what our job is as a HRA or EDA, is to redevelop that area. And taking it from a bowling alley,
an addition to a movie theater, that's what we're supposed to be doing.
Boyle: ! guess ! would like to take, excuse me Nancy just a minute, take that just a little bit
further because at the time, the purpose was designated and at one point in time there were other
people sitting here that says yeah, we think that a restaurant and a bar and a bowling alley
combined is ideal and we're willing to help in the financing of that. Now the fact that that's not
part of the mix, you have now a movie theater with 10,000 square feet of retail space, which !
think is a big plus by the way that hasn't been mentioned before and ! think it adds to it. It doesn't
change the scenario from where we were four years ago, or five.
Mancino: Well Jim just answered one of the points that ! was trying to make when ! was standing
up there and that is, if we as an EDA, ! mean to again be proactive and decide philosophically that
we want to go in and redevelop a place, let's be, and I'm talking about it for Don and Todd, let's
be very proactive and say here is the area we want to redevelop it like has been done here. We
haven't moved on into the next area.
Gerhardt: At the next meeting ! will bring.
Mancino: Okay. Let's be proactive and say where it is we want to redevelop it and then counter
to Councilman Engel, because I'm probably 360, I'm the opposite end of Councilman Engel. ! do
think that use is important. We spent lots of time talking about use and what kind of use we want
in our downtown and what kind of services and the mix of uses, etc. It is extremely important to
me along with the redevelopment and focusing in on that. So as an EDA we should make sure
that we are proactive if there is an area that we want to focus in and say with some TIF dollars we
will go into partnership and be again very proactive about that and spend some time doing that
and say you know why is it important to us. Don?
Ashworth: In going along, ! totally agree with you. And ! also agree with Councilman Senn in
that some of these things could have happened privately because ! was part of the negotiations on
Byerly's, the Chanhassen State Bank, Festival Foods. ! can guarantee you if they would have
come in, in each and every case, they wanted to be out on the highway. They had already, not
purchase agreements but what are the initial agreements you enter into. It was because of our
efforts to say we want you in downtown that we brought Byerly's downtown. Because of our
efforts we could put Chanhassen State Bank who also had an option on property out there.
Similar with Festival Foods. So ! agree with you, we could take and ensure that this property
gets developed in the way that we want it developed.
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Economic Development Authority - January 28, 1999
Mancino: Then, may ! ask more? Did you want to go on?
Boyle: No, but what helps us assure that that happens the way we want it to happen, and that's
utilizing TIF, is that correct? Excuse me, now you can.
Mancino: Let's figure it up front. One of the very important reasons that ! think we use TIF in a
redevelopment is for the quality of the facility to be built, etc, and ! have concerns about that !
want to make sure that if we do go ahead with this, that the planning commission and some
conceptual concerns that ! have with one, quality of materials. ! have some very big concerns
about when the movie theater stops there, that there is, in the original on the east side of the
movie theater there were supposed to be two retail. That was original, original of '94. So again
it brought energy around that corner and again would focus it in going up the alley way into the
hotel and Timber Lounge. It would be, bring energy around the Bloomberg retail. So I'm very,
very concerned with that corner and ! think a big lesson that we've probably all learned is doing
these things in phases and not knowing what's going to go on next. Because ! think that the
boardwalk just stopping now from what ! can see is a concern again in materials and then how we
deal with that whole eastern part is a very big concern for me. And it to me doesn't have the
quality. ! don't see it meeting that quality test which again if it goes through ! would like to see
come back to the EDA to make sure that it does do that. After going through planning. ! don't
think we need to sit here and do that at all but after going through planning.
Boyle: Do you feel Nancy then that there is more control if there is TIF involved than if there is
not TIF involved?
Mancino: Well you know.
Boyle: Control meaning we have more control of the quality and the appearance, etc.
Mancino: Well we can decide to have that or not to some degree. This is in the Highway 5
corridor so there is a lot of control because it is in the Highway 5 corridor already. ! mean
architectural materials, etc. So as far as ! look at it is the use of TIF goes even over and above
the Highway 5. But then again ! don't think it's fair for an applicant to then go to planning and
say, don't worry about TIF. They do need to know that we are involved with the project and that
we do expect and we have it right down here, that it has to meet our high quality.
Boyle: Could we assume that the quality of the materials and the appearance might not be as
good if it does not have TIF?
Mancino: Well you know, I don't know. Obviously, and I said to Bob...you know he did not
want to use EFIS because he didn't think that the material would hold up and then we did the
precast and now we're back to EFIS and so I'm kind of, you know we went back and forth on
that. So I'm concerned about quality of materials, etc and that's something that ! want the
planning commission to look at.
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Economic Development Authority - January 28, 1999
Jansen: And Mayor and Chairman, ! did ask that question of staff as one of my concerns,
realizing that there was a vision for the entire project and they did go and they referred to the
Highway 5 corridor study and in getting back to me said, that because of the parameters within
that study they felt confident that however this project comes to them, they will be able to guide it
because there does need to be the consistency. And that in fact it would give the, if they went
with the Highway 5 corridor ordinances, it would give more green space to that area so it changes
it some. It actually in some of the ordinances it's a titch stricter than we're actually applying with
the current facade, parking and boardwalk parameters. That was staff' s feedback to me.
Mancino: Well ! would like to make sure that it at least, you know it fulfills the Highway 5
corridor and then builds upon that. And ! think that that's how we, and ! think a lot of us saw
and still feel that the Richfield Bank that Bob was involved in and the new, the Byerly's complex,
and the Chanhassen Bank are just...
(There was a tape change at this point in the discussion.)
Mancino: ... ! mean ! think that that's a key component of it. ! kind of feel like we have, we're
pretty sure about parking but we'll want to make sure that that happens too.
Engel: My understanding was that they were prepared to go to that route anyway but if you want
to.
Senn: We probably should put it into it.
Engel: That's fine. ! don't think they have any problem with that. I'll add that.
Boyle: How would that be worded again, I'm sorry. Why don't we.
Gerhardt: The tape wasn't on so if you could just repeat it one more time.
Engel: Again huh. Okay, I'm going to be briefer this time. Move approval of private
redevelopment agreement for Phase I! per staff' s details with Chanhassen Cinema, modifying
existing private redevelopment for Phase ! and add that it's contingent on architectural approval
by the EDA and road and access approval as well. Access from the east per Mayor Mancino's
request. And the retail is included with the movie as one development, not phased. Period.
Boyle: The motion has been redefined. May ! have a second to the revised motion? Jim
continues to second. Is there further discussion?
Engel moved, Bohn seconded that the Economic Development Authority approve the
Private Redevelopment Agreement for Phase II (Movie and Retail as one development, not
phased) with Chanhassen Cinema, LLC and their request for $1,389,854 in city assistance
and modify the existing Private Redevelopment For Phase I (existing movie) with
Chanhassen Cinema, LLC and reducing the Limited Revenue Note to $1,066,319
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Economic Development Authority - January 28, 1999
contingent approval of the architecture and access from the east by the EDA. All voted in
favor, except Senn and Jansen who opposed, and the motion carried with a vote of 5 to 2.
APPROVAL OF BILLS:
Boyle: That brings us up to the bills. Time to pay the bills. May I have a motion to approve the
bills as listed? ! don't have it.
Labatt: I'll make a motion to approve the bills.
Boyle: Before that, are there questions regarding the bills to staff?.
Engel: None here.
Boyle: Linda, Mark,
at this time?
Jansen: No.
Boyle: Steve? Jim?
Bohn: No.
Labatt: No.
Boyle: May ! have a motion to approve the bills as presented.
Labatt: I'll make a motion to approve the bills as presented.
Mancino: Second.
Labatt moved, Mancino seconded that the Economic Development Authority approve the
bills as presented. All voted in favor and the motion carried.
do you have any questions on the bills that you'd like to address with staff
ECONOMIC DEVELOPMENT AUTHORITY PRESENTATIONS:
Boyle: We do have a Economic Development Authority presentations and we're going to let you
raise a question about your meeting nights, Mayor if you would pleas e.
Mancino: Oh, okay. ! have a question for the members. ! don't know if it works with
everyone's schedule but ! recently volunteered to be on the Southwest Transit Commission and
they have their monthly meetings the third Thursday of the month so ! am wondering if we could
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Economic Development Authority - January 28, 1999
possibly change our meetings to the same time but the fourth Thursday of the month? If that
works for people.
Engel: No objections here.
Bohn: Works for me.
Boyle: ! have no problem.
Labatt: No problem.
Jansen: Fine with me.
Mancino: Is that fine with you?
Jansen: Yes.
Engel: So ! take this needs scheduling changes.
Mancino: Councilman Senn, does that work for you?
Senn:...
Boyle: Okay, Todd. We will officially change, we will change the official meeting date to the
fourth Thursday of each and remain at 6:30 for the time being. Is that?
Engel: That works well.
Boyle: Is that okay? ! mean does anybody want to go to 6:00? No? Okay.
Gerhardt: ! understand that in April we've got one, we've got five Thursdays so the 22nd,
everybody has that?
Boyle: The fourth, is that the fourth Thursday then?
Engel: Which will still be one week always after Southwest Metro so it won't be a problem for
Nancy. Hers is always the third so as long as we just stay fourth it shouldn't matter how many
Thursday are there.
Thank you... Todd, what were you talking about another project coming in in this
Mancino:
area.
Gerhardt: Well Brad Johnson has called me and wants time on the EDA schedule to talk about
the office building that they was proposed there. The MLT building. And ! guess MLT is still
looking and would like to make a presentation to the EDA regarding that proposal.
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Economic Development Authority - January 28, 1999
Engel: MLT would?
Gerhardt: First Industrial and Brad Johnson, Lotus Realty.
Engel: So is MLT a part of that?
Gerhardt: I'm not sure. He referenced it that MLT was still looking so I'm not sure.
Boyle: This is not MLT is what.
Gerhardt: MLT would be a tenant in the building.
Boyle: Oh I see. First Industrial is...
Gerhardt: ... I don't think MLT wants to own the building.
Engel: So Brad acting with First Industrial.
Boyle: What size building are we looking at Todd?
Gerhardt: I'm not sure. I haven't seen a proposal. He called me and I told him, I said let's wait
and see what happens here on Thursday night and take it from here.
Mancino: I would, I would still like to advance my philosophy that again instead of looking at
things in phases, you and I talked about this a little bit. Or just one building at a time, we look at
areas where we want to redevelop and keep thinking a little bigger like this because.
Boyle: We kind of tried to do this on this parcel.
Mancino: I know and the only thing I can say is, as you look at, and this is always hindsight.
20/20 hindsight. I mean I know that, but if the whole movie theater complex had been you know
that whole thing, just think. We could have a, I was driving by it tonight and I thought gosh, you
know. Put the entrance right here, it could have been this whole side and.., so again, looking at
things as a whole, just not one piece. So I just thought if you had...
Boyle: Todd, when this comes before the planning commission, would you let us know. I mean I
personally would like to sit in on it. Not that...but if you would let us know. That gives us a
little bit a heads up so when they do come back to us, we know what has transpired and maybe
cut through a little of the mud before. I personally would like to see that.
Gerhardt: ... I will make sure that Karen sends out the information on the movie theater to Jim
and Gary so they can see it and put a date on there when...
Boyle: We're adjourned.
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Economic Development Authority - January 28, 1999
Chairman Boyle adjourned the Economic Development Authority meeting.
Submitted by Don Ashworth
Economic Development Director
45