HomeMy WebLinkAbout20190204_EDA_Minutes
ECONOMIC DEVELOPMENT AUTHORITY (EDA)
MINUTES OF THE MEETING OF
FEBRUARY 4, 2019
The meeting was called to order at 7:02 pm by Secretary Keith Dahl.
Members Present: Murzyn, Schmitt, Buesgens, Williams, Novitsky, and Szurek.
Members absent: Herringer
Staff Present: Keith Dahl, Mitch Forney, Elizabeth Hammond, Kevin Hansen, and Shelley Hanson
PLEDGE OF ALLEGIANCE- RECITED
OATH OF OFFICE- Donna Schmitt, John Murzyn, and Nick Novitsky were sworn in for their new terms.
ELECTION OF OFFICERS:
Schmitt stated that it is important for either the President or Vice-President to be a council person so
that someone is always available to sign documents.
Williams nominated Szurek for President. There were no other nominations.
Williams nominated Murzyn for Vice-President. There were no other nominations.
Williams nominated Buesgens for Treasurer. There were no other nominations.
Motion by Williams, to elect Szurek President of the Economic Development Authority. Ayes-Murzyn,
Buesgens, Williams, Novitsky, Szurek. Nays-Schmitt
Motion by Williams, to elect Murzyn Vice President of the Economic Development Authority. All ayes.
Motion by Williams, to elect Buesgens Treasurer of the Economic Development Authority. All ayes.
Motion by Szurek, seconded by Murzyn, to appoint Keith Dahl as Secretary of the Economic Development
Authority. All ayes.
Motion by Szurek, seconded by Murzyn, to appoint Shelley Hanson as the Assistant Secretary of the
Economic Development authority.
Motion by Szurek, seconded by Murzyn, to appoint Joseph Kloiber as the Assistant Treasurer of the
Economic Development Authority.
The meeting resumed under the leadership of President Szurek.
CONSENT AGENDA
1. Approve minutes of November 5, 2018.
2. Approve Financial Report & Payment of Bills for October-December, 2018–Resolution 2019-01
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Questions from Members:
Schmitt questioned the payment to HyVee on page 12 of the report. Dahl stated that was
the balance remaining for the escrow deposit they made to the City to cover legal fees
associated with the TIF financing.
Szurek asked staff if they were aware of semis parking in the HyVee lot over the weekend.
Dahl said HyVee has given a company permission to use the lot for those working on their
CDL licensing.
Motion by Buesgens, seconded by Williams, to approve the Consent Agenda as presented.
All ayes. MOTION PASSED.
RESOLUTIONNO.2019-01
AResolution of theEconomic Development Authorityof Columbia Heights, Minnesota, Approving the
Financial Statements for the Months of October, November, and December 2018 and the Payment of
the Bills for the Months of October, November, and December 2018.
WHEREAS,the Columbia Heights Economic Development Authority (EDA) is required by Minnesota Statutes
Section 469.096, Subd. 9, to prepare a detailed financial statement which shows all receipts and
disbursements, their nature, the money on hand, the purposes to which the money on hand is to be applied,
the EDA's credits and assets and its outstanding liabilities; and
WHEREAS,said Statute also requires the EDA to examine the statement and treasurer's vouchers or bills and if
correct, to approve them by Resolutionand enter the Resolution in its records; and
WHEREAS,the financial statement for the months of October-December 2018 has been reviewed by the
EDA Commission; and
WHEREAS,the EDA has examined the financial statements and finds them to be acceptable as to both form
and accuracy; and
WHEREAS,the EDA Commission has other means to verify the intent of Section 469.096, Subd. 9, including but
not limited to Comprehensive Annual Financial Reports, Annual City approved Budgets, Audits and similar
documentation; and
WHEREAS,financials statements are held by the City’s Finance Department in a method outlined by the State
of Minnesota’s Records Retention Schedule,
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NOW, THEREFORE BE IT RESOLVEDby the Board of Commissioners of the Columbia Heights Economic
Development Authority that it has examined the referenced financial statements including the check history,
and they are found to be correct, as to form and content; and
BE IT FURTHER RESOLVEDthe financial statements are acknowledged and received and the check historyas
presented in writing is approved for payment out of proper funds; and
BE IT FURTHER RESOLVEDthis resolution is made a part of the permanent records of the Columbia Heights
Economic Development Authority.
ORDER OFECONOMIC DEVELOPMENT AUTHORITY
Passed this __4th____ dayof ___February_____, 2019
Offered by: Buesgens
Seconded by: Williams
Roll Call: All ayes
BUSINESS ITEMS
1. Updates from 2018 and Project Discussions for 2019
Throughout 2018, the Economic Development Authority (the “EDA”) has accomplished several projects and
objectives. The purpose of this report is to review and discuss the EDA’s accomplishments in 2018, but also to
determine the projects and objectives that the EDA would like staff to focus on in 2019. Dahl reviewed the
highlights of 2018 accomplishments that included, but were not limited to the following:
2018 EDA Accomplishments
Obtained an Opportunity Zone designation for census tract 51501. An Opportunity Zone is an economically-
distressed community where new investments, under certain conditions, may be eligible for preferential tax
treatment.
Sold all of the remaining lots in the Single Family Home Lot Sales Program. Over the course of the program,
a total of 23 lots were acquired, demolished, and conveyed for new construction of single-family homes,
which effectively increased Columbia Heights’ property value by $1,954,188.
Purchased the property located at 4827 University Avenue NE for commercial redevelopment. Dahl
reminded members that we also own the neighboring property at 4833 University Ave.
Initiated a business retention and expansion program to gather information about local businesses in an effort
to establish relationships, but also to anticipate the changing needs of the business community. Dahl told
members that surveys were distributed to businesses by the Fire Dept. and that we received about 30 back.
Created the Façade Improvement Grant Program and leveraged $70,960 in private reinvestment. The
leverage ratio equated to 1:2.03; for every $1.00 of public investment, there was $2.03 of private
reinvestment.
Installed 5 security surveillance systems along Central Avenue NE to reduce the incident rate of criminal
activity, as well as increase business vitality and economic performance. A total of 11 security cameras were
installed.
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Now, as the EDA looks ahead to 2019, staff seeks to facilitate discussion about what projects, programs, and
objectives commission members desire to see initiated and/ or completed in 2019. First, staff would like to review
the cash balances of several accounts that the EDA utilizes to accomplish its initiatives. The figures below are
estimations and subject to change as the year-end fund balances have not been finalized for all of the accounts.
Fund 226: Special Projects Revenue: $ 537,000
Fund 371: TIF T4 Kmart/ Central Ave: $ 480,000
Fund 376: TIF A3,C7,C8 Scattered Site District: $ 206,000
Fund 408: EDA Redevelopment Project Fund $ 730,000
Fund 420: CAP Improvement Development: $ 1,557,000
Anoka County HRA Levy: $ 668,000
Schmitt asked if any of these funds could be used towards a new City Hall. Dahl said approximately $400,000 could
be taken from Fund 226 and another $400,000 or so, from fund 420. Nothing from Funds 371 or 376 can be used for
a new City Hall. Kevin Hansen concurred that he believes almost one million dollars are earmarked from these
funds that Dahl noted per his conversations with the Finance Director.
The list below provides a starting point for the discussion tonight. Staff highly encourages the EDA commission
members to provide feedback and propose changes to the following 2019 proposed projects, programs, and
objectives:
2019 Proposed Projects, Programs and Objectives
Acquire and remediate the Root Property located on the corner of 40th Avenue NE and University Avenue
NE. Forney told members that staff applied for CDBG funds to remediate the Root property and that the
County is working with the City to sell the property at a reduced price. The use of CDBG funds to rid cities
of blighted properties is a priority in the award of funds. Dahl explained that the City will initially expend
$80,000 to purchase the property, but will get most of it back (est. $53,600 or 67%) as the dollars will be
spread between the School District, County and the City. Murzyn asked how much it would cost to do the
soil remediation. Dahl said approximately $120,000 and that the CDBG funds will cover that.
Continue the development of and initiation of a business retention and expansion program to assist the
Columbia Heights business community. Buesgens asked what type of feedback staff got from the returned
surveys. Dahl stated that staff will re-evaluate the questions asked on future surveys, but that some would
like help in order to remodel the interior space of their business.
Evaluate the possibility of expanding the Façade Improvement Grant Program to incorporate more eligible
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applicants, specifically between 37-47 Ave along Central and along 39 Ave and 40 Ave.
Create and implement a subsidized interest loan program for commercial property owners to encourage
further reinvestment within Columbia Heights’ commercial corridors. Addressed below (A).
Determine a fund source and create a housing rehabilitation grant or low to no interest loan program for
exterior remodels and/ or interior renovations. Addressed below (B).
Create and offer an energy audit program that would subsidize home energy audits for residential structures
throughout Columbia Heights. Addressed below (C).
Subdivide the remnant parcel located to the north of the Public Safety Building and identify a redevelopment
opportunity. Dahl also mentioned subdividing the remaining Library parcel for future use as parking or a
small development that would complement the area.
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A. Subsidized Interest Loan Program
This memo is in regards to the possible creation of a subsidized interest loan program. Staff continues to seek ways
in which the Columbia Heights Economic Development Authority (the “EDA”) may establish a public-private
partnership/relationship that would increase the amount of funds reinvested into commercial properties throughout
the City of Columbia Heights (the “City”), specifically for businesses or commercial property owners to renovate,
retrofit, modernize, or remodel their current space. One concept previously discussed was in regards to a subsidized
interest loan program where the EDA would agree to pay a portion of a borrower’s accrued interest over a specified
period of time.
For instance, the following examples were prepared to depict a subsidized interest loan program, and to determine
what the true cost of the program would be to the EDA if a program such as this was offered. Furthermore, the
examples were calculated based on an amortization schedule for a loan amount of $5,000, $15,000, and $30,000
over a three-year repayment period at a traditional interest rate of 5.50%, and the EDA would subsidize 2.75% over
the specified repayment period.
Commercial Loan of $5,000.00:
The total three-year cost to the EDA would be a subsidy in the amount of $217.50 with a monthly payment of $6.04.
Monthly Payment Total Interest Paid Total Repayment
Borrower$ 144.96 $ 217.50 $ 5,217.50
Columbia Heights EDA$ 6.04 $ 217.50 $ 217.50
TOTAL$ 151.00 $ 435.00 $ 5,435.00
Commercial Loan of $15,000.00:
The total three-year cost to the EDA would be a subsidy in the amount of $653.00 with a monthly payment of
$18.14.
Monthly Payment Total Interest Paid Total Repayment
Borrower$ 434.86 $ 653.00 $ 15,653.00
Columbia Heights EDA$ 18.14 $ 653.00 $ 653.00
TOTAL$ 453.00 $ 1,306.00 $ 16,306.00
Commercial Loan of $30,000.00:
The total three-year cost to the EDA would be a subsidy in the amount of $1,306.00 with a monthly payment of
$36.28.
Monthly Payment Total Interest Paid Total Repayment
Borrower$ 869.72 $ 1,306.00 $ 31,306.00
Columbia Heights EDA$ 36.28 $ 1,306.00 $ 1,306.00
TOTAL$ 906.00 $ 2,612.00 $ 32,612.00
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Ultimately, a subsidized interest loan program would be a relatively inexpensive way for the EDA to encourage
reinvestment of commercial properties throughout the City, and may have a combined use with the Façade
Improvement Grant Program to encourage more substantial improvement, renovation, and remodel projects.
Staff seeks to facilitate a discussion with the EDA Commissioners to determine if further pursuit should be given to
develop a subsidized interest loan program or a comparable program with the same concept.
Members were interested in helping businesses invest in their properties depending on the dollars available. They
feel it best to prioritize their options, but were open to this idea, and wanted staff to further investigate the possibility
of this program.
B. Creation of a Home Rehabilitation Loan Program
This memo is in regards to the possible establishment of a housing rehabilitation loan program, specifically a
presentation of research on available options.
Other cities located throughout the metro offer their citizen’s home rehabilitation loans. Some cities take it upon
themselves to finance and administer these loans, while the majority of cities either; utilize a third party for
administering the loans, or; advertise county and state programs rather than use their own money. Cities that utilize a
third party to administer loans often use the Center for Energy and Environment (CEE) to administer the loans. CEE
is a nonprofit organization that seeks to promote energy efficiency and economic development along with offering
two separate options in terms of loan administration. As a city we can either fund, set interest rates, and create our
own criteria for the loans; or buy down interest rates on one of CEE’s loan programs. As you can see in the table
below there is a wide variety of loan amounts, lengths and interest rates. Depending on the goals of our program and
available money the city can decide which variables fit our program goals.
City Min Loan Amount Max Loan amount Interest Rate term
Roseville $
$ 40,000.00 4.0%<10
Fridley
$ 1,000.00 $ 50,000.00 4.5%<20
Richfield
$ 50,000.00 $ 0.0%<30
Minneapolis
$ 2,000.00 $ 30,000.00 2.0%
0
MHFA FIX UP FUND
$ 2,000.00 $ 50,000.00 5.7%
<20
Dakota County
Development
Agency $ 15,000.00 $ 25,000.00 0.0%
0
CEE Home
Improvement $ 1,000.00 <10
$ 20,000.00 6.0%
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There are many variables that the City of Columbia Heights can alter to tailor the loan program to fit the cities goals.
Minneapolis and the MHFA loan program are the only two programs that establish income limits with both limits
exceeding $100,000. Columbia Heights has the ability to tailor its income restrictions to affect certain populations.
Columbia Heights has the opportunity to restrict the maximum value a house can have to enter the program along
with setting a minimum age of a house. These variables allow the city to affect houses that have lower property
values along with updating our aging housing stock. Another aspect of which the City of Columbia Heights has to
consider is the type of projects our loan program will allow. Projects such as general maintenance tasks do not add
value to our community, in terms of market value to our homes. It is the goal of the Community Development
Department to add value to our housing stock by funding projects with a high return on investment. Located below is
a chart that highlights the average value of home improvement projects and their average return on investment. The
projects selected for the chart were highlighted by the county assessor as projects that increase the value of the
home. As you can see, major remodels provide the highest average return on investment.
Project Average Cost Average ROI
Kitchen Remodel $ 19,920 80%
Bathroom Remodel $ 9,274 60%
Bathroom Addition $ 10,000-25,000 67%
Build a Deck $ 6,919 70%
Basement Remodel $ 10,000-30,000 70%
Basement Finishing $ 6,500-18,500 69%
Garage Addition $ 7,500-27,040 81%
Windows $ 3,000-7,000 85%
Siding Depends on material 77%
adding a shed $ 1,000-5,000 50-80%
As stated in the 2040 Comprehensive plan, it is a goal of the city to “adopt a sustainable policy for home
construction and renovation.” (4-67) It is the recommendation of staff that the City of Columbia Heights begin the
preliminary production of a home Rehabilitation Program.
Forney explained that we used to administer a loan program and can do so again. The other option is to subsidize a
loan program that goes through MHFA or CEE and tailor the program the way we want. We can buy down interest
rates, or restrict it to projects that add value to a home such as additions, and kitchen remodels, rather than
maintenance items. Buesgens asked what fund the assistance would come from. Dahl stated Fund Reserves in
Account 408 would be used to finance this. Forney told members that Columbia Heights’ residents can presently
access loan programs through MHFA and CEE, and that 7 have done so in 2018.
Schmitt asked if staff had reached out to local banks and credit unions to see if they can compete with the interest
rates. Dahl said they hadn’t yet, but thought that was a good idea. Schmitt thought the 6% interest rate from CEE
was high.
Members were open to this program in some capacity depending on more information gathered. In the meantime,
they thought it would be a good idea to promote/market the fact that MHFA and CEE have loan programs available
to our residents that could help them to improve their properties.
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C. Creation of an Energy Audit Subsidy Program
This memo is in regards to a possible energy audit program, specifically whether or not the City of Columbia
Heights should produce a program that subsidizes home energy audits for its residents.
The Center for Energy and Environment (CEE) is a nonprofit organization that seeks to promote energy efficiency
and economic development. CEE often partners with local municipalities to offer energy audit services to their
residents. CEE’s energy audit service, without city input, costs $100 per audit. Each audit inspects each house for air
leaks, insulation issues, attic space, and the safety of heating systems. The home energy audit also installs door
weather stripping, a water heater blanket, a programmable thermostathigh-efficiency water fixtures, andpipe wrap
,
if needed. The majority of cities that partner with CEE buy down the rate of the energy audit for their citizens, many
times limiting the number of home owners eligible for their program. Located in the chart below is an example of
how much other cities reduce CEE’s energy audit rate.
City amount paid by city resident total
Roseville $ 60.00 $ 40.00
Fridley $ 50.00 $ 50.00
St. Louis Park $ 50.00 $ 50.00
Bloomington $ 50.00 $ 50.00
Brooklyn Park $ 50.00 $ 50.00
Eden Prairie $ 100.00 $ 0
Plymouth $ 70.00 $ 30.00
Richfield $ 50.00 $ 50.00
It is the recommendation of staff that the City of Columbia Heights pursue preliminary actions in producing a
program to initiate energy audit subsidies for the residents of Columbia Heights. Moving forward the City will have
to discuss the amount of money the city would like to finance and the number of home owners the program will
influence. These variables can be discussed after the initial program is formed and research has been completed.
Forney told members that 28 households took advantage of CEE’s audit program in 2018 and 9 more are scheduled
in 2019 so far, without our City subsidizing it yet. He explained that Fridley puts so much money into an account
with CEE and that way it is limited to a certain number of audits each year. The resident pays $50 and $50 comes
out of the City account set up. It is on a first come, first served basis. Schmitt asked which fund monies would
come from to pay for this. Dahl stated that Fund 408 would be used. If we served 50 residents a year it would cost
the City $2,500. The EDA can determine how much to allow for this if they are interested. However, this is the
same fund used to purchase properties, and if the EDA chooses to, subsidize loan programs.
Buesgens and Novitsky liked this program. He said there is a minimal investment by the City and encourages
people to make their homes more energy efficient. Szurek also liked the program and asked how we would let
residents know that CEE offers this service. Dahl stated we can put inserts in utility bills, pass out information at the
City Expo coming up in March, put on social media, and in the City Newsletter.
Novitsky asked if renters would be able to take advantage of this audit since so many pay for their own utilities.
Dahl will check with CEE to see if owners have to order the audit, or if renters also could.
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The discussion then turned to the façade improvement program. Dahl said there was a lot of interest from businesses
wanting to participate in the program. Since the funds were limited, a certain number of businesses were selected
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primarily in the area targeted by Police along Central Avenue (37 Ave – 45 Ave). Dahl told the businesses not
selected to re-apply this year. He explained that some of the businesses only spent the minimum amount, while
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others invested a great deal more. Dahl asked members if they wished to expand the area, maybe up to 47 Avenue,
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and possibly include 39 Ave and 40 Ave from Central to Jefferson. If so, does the EDA want to put additional
money towards this program. He said we could also reach out to businesses we want to target if the program is
expanded. However, since this is also funded out of Fund 408 it isn’t sustainable to do all the programs.
rd
2. Acquisition Discussion- 3909 3 St NE
Forney explained that the City has an opportunity to acquire the property at 3909 3rd St NE. It is a single family
home parcel located just west of University Ave NE and South of 40th Ave. The parcel maintains a taxable market
value of about $171,400. From 2010 to 2014 the property owner had troubles paying in full their property taxes.
According to the county to pay back the taxes owed from these years the current property owner has been entered
into the Confession of Judgement program. This program allows the property owner to pay back their taxes over a
set amount of years. The owner of 3909 is entered into a contract for 10 years with a 5% interest rate. If the owner
misses a payment the property will go into tax forfeiture.
On December 31st, 2018 the Department of Community Development received a letter from the owner of 3909 3rd
St NE. The letter, which is attached, states that the current owner would like to sell the property and more
specifically is looking to sell to the city. The letter clearly states that the home owner would like to consider an offer
from the city before entertaining any other offers.
Located on the eastern border of 3909 3rd St NE is a property called the Root Property. This property entered tax
forfeiture and is currently owned by the state. On the southern border of the root property, two parcels down from
3909, is 3853 3rd St NE. 3853 3rd St NE is currently owned by the city. This combination of properties gives the
city a great opportunity for the redevelopment or the restructuring of the block.
STAFF RECOMMENDATION:
The Community Development staff recommends that the EDA proceed in purchasing the property. This property
adds to the parcel distortion found on this block. This distortion limits redevelopment of nearby sites. This property
is also perfectly located, being attached to city owned properties, to allow the city to redevelop the whole block.
Redevelopment would not only Increase the city’s tax base and the livability in the neighborhood.
Questions/comments from members:
Szurek asked if the property is worth $171,400. Dahl responded that the City’s Real Estate Attorney said that price
is probably on the high end. The actual value would probably be closer to $165,000. The City can’t reach out to
owners to acquire properties as it makes us responsible for relocation costs, so the fact they have approached us,
makes this more attractive in creating a larger site for future redevelopment.
Murzyn asked if this site could also be contaminated and require environmental clean-up. He finds it hard to believe
that some of the contamination on the Root property adjacent to this parcel wouldn’t have leached onto this site. If
so, this would lower the value of the property considerably. Dahl said staff has been working with an environmental
consultant and he would check with him to see what they think the possibility is that this piece is contaminated also.
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Dahl told members that the owners of 230 40 Avenue have expressed some interest in selling their property in the
next couple of years also. This would create a large enough site to possibly attract some developers.
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Williams thinks the small parcel located at 3861 3 Street could present a problem as it is wedged into the rest of the
surrounding property at the southwest side of the proposed redevelopment area being discussed. Therefore, he is not
in favor of moving forward with the purchase of this property since we don’t own the Root property yet. Dahl again
explained that the County is working on an agreement to sell the Root property to the City at the reduced price. The
CDBG funds will cover the cost of the remediation since Phase 1 & 2 have already been completed, so by
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purchasing the property at 3909 3 St it moves the City closer in achieving its long term goal of redeveloping that
corner as planned in the 2040 Comp Plan that was just submitted. Dahl explained that if the motion is approved to
move forward with negotiating an offer it will come back to the EDA for ratification and that the funds would come
out of Fund 408 which had budgeted $200,000 last year for purchase of properties.
Motion by Buesgens, seconded by Schmitt, to authorize staff to respond to the Letter of Sale Intent from Andrew A.
Gustafson, Personal Representative of Marianne Terlouw, owner of 3909 3rd Street NE, Columbia Heights, MN;
and make a fair market value offer of up to $171,400, subject to the full ratification of the Columbia Heights
Economic Development Authority at the March 4th, 2019 meeting. Ayes- Murzyn, Schmitt, Buesgens, Novitsky, and
Szurek. Nay- Williams. MOTION PASSED.
3. Optional Redemption Discussion-Taxable GO Tax Increment Bonds, Series 2009B
In 2004, the Columbia Heights Economic Development Authority (the “EDA”) and the City of Columbia Heights
(the “City”) established the Kmart/Central Avenue Tax Increment Financing District (commonly referred to as the
“T4 District”) within the Downtown CBD Redevelopment Project.
In 2009, the EDA and City authorized an expansion of the T4 District to include the Heritage Heights Neighborhood
in order to facilitate acquisition and redevelopment of foreclosed properties, such as single-family homes, duplexes,
and fourplexes. At that time, the City authorized an issuance of a Taxable General Obligation Tax Increment Bond
in the amount of $580,000 (the “Bond”) to provide for financing of the redevelopment activity. The Bond was
agreed to be repaid over nine years with the first installment date of February 1, 2013.
Currently, the City has two installments remaining on the Bond in the years and amounts as follows:
Installment Date Principal Amount
February 1, 2020 $ 75,000
February 1, 2021 $ 75,000
On February 1, 2019, and on any date thereafter the City may elect to prepay the installments due on or after
February 1, 2020. If the EDA Commissioners and City Council members desire to prepay the outstanding principal
amounts remaining on the Bond, the City would need to approve a resolution electing for an optional redemption.
Staff would like to facilitate a discussion in regards to the optional redemption of the Taxable General Obligation
Tax Increment Bond, Series 2009B to obtain direction from the EDA Commissioners.
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Questions/comments from members:
Dahl told members that we are still recapping increment into the account till 2020 at approximately $10,000/yr.
These monies are then used to buy properties which is what the TIF Plan was approved for. He said by paying it off
we would save about $6,000 in interest. Novitsky and Schmitt thought we should pay it off if we have enough
funding to do so. Dahl explained this item will go to the City Council for formal approval.
4. Business Subsidy Policy & Criteria Discussion
Forney told members that in 1999 the State of Minnesota adopted Statutes 16J.993 and 16J.994 to define and create
universal regulations for local and state business subsidies. The Policy attached below is the Community
Development Departments recommended policy to bring the City of Columbia Heights and the Columbia Heights
Economic Development Authority into compliance with state law.
Minnesota statute considers grants, contributions of property, infrastructure, and any reduction of taxes or deferrals
as business subsidies. In general, Minnesota Statute 116J.994 develops the regulations by which a local government
or agency must comply. This includes but is not limited to: (1) requiring cities to develop universal criteria, (2)
establishing Subsidy agreements and reporting requirements, and (3) Presenting public hearing and failure to comply
regulations.
The Community Development Department sought to create a policy which brought the City and EDA into
compliance with State Statute and allowed the City and EDA to utilize subsidies to accomplish its economic and
community development goals. This policy was drafted by referencing 9 other cities policies and tailoring their ideas
to best fit the needs of our community. The three most important pieces of the policy are the Public Purpose,
Criteria, and Wage and Job growth requirements. These sections shape the future economic development of the
community, and were composed consulting the 2040 Comprehensive Plan.
In accordance with State Statute, all business subsidies must be used to assist a public purpose. The public purpose
section details objectives in which the City or EDA would consider using subsidies. This section contains specific
objectives along with statements that give the City and EDA flexibility in approaching unforeseen objectives in the
future. The minimum criteria section combines criteria established in Minnesota Statute along with local criteria
meant to maximize the success of a subsidy agreement. Last, the wage and job requirements are variable but
mandated by state law. The City and EDA have the choice of setting these criteria but is required to apply them
consistently to all subsidy agreements.
Forney reviewed the policy with the members and stated he used State Law in developing the document. He also
looked at nine other cities to add detail that is pertinent to our City. Forney stated it provides for a base agreement
between the City and businesses. He said he established a wage requirement of 120%, but the City can deviate from
this as long as the reason is detailed. There are thresholds established by the legislation. Financial assistance of
$25,000 and more have to be reported, but are not classified as business subsidies. Financial assistance of more than
$150,000 are considered subsidies, and agreements must be in place as per our policy. A copy is as follows:
20190204_EDA_Minutes
City of Columbia Heights
And
Columbia Heights Economic Development
Authority
Business Subsidy Policy
Adopted:
City of Columbia Heights
Community Development Department
590 40th Avenue NE
Columbia Heights, MN 55421
(763) 706-3670
Table of Contents
I. Purpose
II. Authority
III. Definitions
IV. Public Purpose
V. Minimum Criteria
VI. Job and Wage Requirements
VII. Subsidy Agreement and Reporting
20190204_EDA_Minutes
Purpose
The purpose of this policy is to establish criteria in regards to the use of business subsidies by the City of Columbia
Heights (the “City”) and the Columbia Heights Economic Development Authority (the “EDA”) under the general
Business Subsidy Act pursuant to Minnesota Statute, Sections 116J.993 to 116J.995 (the “Business Subsidy Act”).
This policy shall be used as a guide in processing, evaluating and reviewing business subsidy requests.
Authority
The City and EDA’s ability to grant business subsidies is subject to the limitations established in the Business
Subsidy Act.
Unless specifically excluded by the Business Subsidy Act, a business subsidy may include grants by a state or local
government agency, loans, forgivable loans, contributions of property or infrastructure, tax increment financing, tax
abatement, or any preferential use of government facilitates given to a business.
The City and EDA retain absolute authority and discretion, and reserve the right to amend or waive sections of this
policy when necessary or appropriate. Minnesota Statute, Section 116J.994, Subd. 2, allows the City or EDA to
deviate from its criteria by documenting in writing the reason for the deviation and attaching a copy of the document
to its next annual report to the Department of Employment and Economic Development (the “Department”).
Minnesota Statute, Section 116J.993, Subd. 3 exempts certain forms of financial assistance from the requirements of
the Business Subsidy Act.
Incentives will be offered based on the nature of the project and the benefits to the community. Meeting all or a
majority of the criteria does not mean that a business subsidy will be approved by the City or EDA. The City and
EDA maintain the ability to approve or deny a business subsidy at their discretion, based on the merits of the project
and the overall benefit to the community, using the criteria as a means of measuring the overall benefit. Furthermore,
the approval or denial of one project is not intended to set precedent for approval or denial of another project.
Definitions
The City and EDA hereby adopt the definitions pursuant to Minnesota Statute, Section 116J.993.
Public Purpose Objectives
In accordance with the Business Subsidy Act, all business subsidies shall meet a public purpose, and have a
measurable benefit to the community as a whole. The City or EDA will consider the following public purpose
objectives:
Diversification of the local economy;
Create high quality and diverse jobs;
Retention of local jobs, provided that the job retention is only used as a public purpose in cases where job loss is
specific and demonstrable;
Removal of blight and/or encouraging redevelopment within the community to obtain high levels of property
maintenance and private reinvestment;
Encourage additional unsubsidized private development within the community, either directly, or indirectly;
Facilitate and promote development on property that could not be developed without assistance;
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Meet other uses of public policy, as adopted by the City or EDA from time to time, including but not limited to the
promotion of quality urban design, quality architectural design, energy conservation, sustainable building practices,
and decreasing the capital and operating costs of local government.
Minimum Criteria
In order to be eligible for a business subsidy, all business subsidy requests shall meet the following minimum
criteria.
The business subsidy request shall be in compliance with the Business Subsidy Act.
The project must be consistent with the applicable provisions of the Comprehensive Plan, Zoning Ordinances,
Design Guidelines, and any other land use document applicable to the project.
All projects must contribute to one or more of the City’s goals and policies outlined in the Comprehensive Plan.
A business, non-profit, or developer requesting a business subsidy shall complete and submit a Business Subsidy
Application, along with an application fee and escrow deposit determined by the City or EDA.
For the purposes of evaluating the request, the applicant shall provide all requested market and financial feasibility
studies, appraisals, environmental data, private lender commitment and information provided to private lenders
regarding the project, and other information requested by the City, EDA or its consultants, in order for the City or
EDA to evaluate the proposal and determine whether the request is consistent with this policy.
The applicant shall proactively attempt to minimize the amount of public assistance needed through the pursuit of
grants, innovative solutions in structuring the deal, and other funding mechanisms.
The applicant shall provide adequate financial guarantees to ensure completion of the project and repayment of any
business subsidy (if repayment is required), unless an exception is granted by the City or EDA. These may include,
but are not limited to, assessment agreements, letters of credit, personal deficiency guarantees, and mortgages.
Job and Wage Goals
Specific job and wage goals shall be determined by the City or EDA, and shall be given consideration based upon
the particular form of the business subsidy requested, nature of the development, purpose of the business subsidy,
local economic conditions and other similar factors.
The minimum wage for a job to be considered a new or retained job shall not be less than 120% of the State of
Minnesota’s Minimum Wage, exclusive of benefits.
Wage goals may be set to enhance existing jobs through increased wages, which increase shall result in wages higher
than the minimum under this Section.
In cases where the objective is the retention of existing jobs, the applicant of the business subsidy request shall
provide evidence that demonstrates the loss of jobs is imminent.
The jobs to be created or retained by the applicant shall result in job creation or retention within the City.
In addition to other specific time frames, the job and wage goals shall contain specific requirements to be attained
within two (2) years of the benefit date, unless an exception is granted by the City or EDA.
The project shall result in a minimum of six (6) Full Time, or Full Time Equivalent (FTE) jobs created or retained.
For purposes of this policy, FTE jobs must be permanent positions with set hours, and eligible for benefits.
Part-Time Equivalent jobs may be counted toward the job goals.
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After a public hearing, if the creation or retention of jobs is determined not to be a goal, the wage and job goals may
be set at zero (0).
Subsidy Agreement and Reporting
In accordance with the Business Subsidy Act, a recipient shall enter into a subsidy agreement with the City or EDA.
The subsidy agreement shall include, but is not limited to, the following:
A description of the subsidy, including the amount and type of subsidy, and the type of district if the subsidy is tax
increment financing;
A statement of the public purpose(s) of the subsidy;
Measurable, specific and tangible goals for the subsidy;
A description of the financial obligation of the recipient if the goals are not met;
A statement of why the subsidy is needed;
A commitment to continue operations in the jurisdiction where the subsidy is used for at least five (5) years after the
benefit date;
The name and address of the parent corporation of the recipient, if any;
A list of all financial assistance by all grantors for the project.
A recipient that fails to meet the terms of a subsidy agreement:
Must repay the assistance provided with interest, which is set at no less than the implicit price deflator as defined in
the Business Subsidy Act, Minnesota Statute, Sections § 116J.993 to 116J.995. Repayment may be prorated to
reflect partial fulfillment of goals.
May not receive a business subsidy from any grantor for a period of five (5) years from the date of failure or until a
recipient satisfies its repayment obligation, whichever comes first.
A recipient may be authorized to move from the City within five (5) years of the benefit date (as defined in the
Business Subsidy Act) only if, after a public hearing, the City or EDA approves the request to move. The City or
EDA reserves the right to discontinue the business subsidy if the recipient moves from the City.
The applicant and City or EDA shall comply with the reporting requirements set forth in Section 116J.994, Subd. 7
and 8 of the Business Subsidy Act. The City or EDA shall file a report by April 1 of each year with the Department
regardless of whether or not they have awarded any business subsidies.
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Feb. 4, 2019
Questions/Comments from members:
Buesgens asked why it took so long to establish a policy if it has been required since 1999. Dahl said it was passed
into legislation in 1999, but not enforced. The State turned it over to DEED in 2017, and since they are in charge of
distributing grant money, they are now requiring cities to have this in place in order to be eligible for any DEED
funds.
Schmitt asked how many projects above $100,000 have received a subsidy from the City. Dahl responded that just
one, HyVee.
This policy must be approved at the EDA level and by the City Council at a Public Hearing. So if the policy is
acceptable to the EDA, these hearings will be scheduled. Members thought it seemed complete and would meet the
requirement.
OTHER BUSINESS
Szurek asked a question of the Council members and Acting City Manager Hansen regarding obtaining a copy of a
previously approved Resolution that is needed by the Library Board. Staff will get the copy to her.
The next meeting is scheduled for March 4, 2019.
Motion by Novitsky, seconded by Buesgens, to adjourn the meeting at 8:40 pm.
Respectfully submitted,
Shelley Hanson
Secretary
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