HomeMy WebLinkAbout2015/10/26 - ADMIN - Minutes - City Council - Study Session `If St. Louis Park OFFICIAL MINUTES
MINNESOTA CITY COUNCIL STUDY SESSION
ST. LOUIS PARK, MINNESOTA
OCTOBER 26, 2015
The meeting convened at 6:32 p m.
Councilmembers present: Tim Brausen (arnved at 6.58 p m.), Steve Hallfin, Acting Mayor
Gregg Lindberg, Anne Mavity, Susan Sanger, and Jake Spano (arrived at 6:34 p.m ).
Councilmembers absent. Mayor Jeff Jacobs
Staff present: City Manager (Mr. Harmening), Finance Supervisor (Mr. Heintz), Community
Development Director (Mr Locke), Economic Development Coordinator (Mr. Hunt), Human
Resources Director (Ms. Deno), Controller (Mr. Swanson), Director of Inspections (Mr.
Hoffman), Inspection Services Manager(Ms. Boettcher), and Recording Secretary(Ms. Wirth).
Guest: Stacie Kvilvang, Ehlers & Associates.
1. Future Study Session Agenda Planning—November 2 and 9, 2015
Mr. Harmening presented the proposed Special Study Session agenda for November 2"d and the
regularly scheduled Study Session agenda for November 9th.
Councilmember Hallfin stated he will be absent from the November 16th meeting.
Councilmember Spano arrived at 6:34 p.m.
Mayor Pro Tem Lindberg asked if there is interest in discussing the BSNF oil train traffic that is
now coming through St. Louis Park. Mr. Harmening explained the primary reason for that extra
traffic is work on other rail lines. Councilmember Hallfin stated since the Fire Chief and staff
are aware of this item and conducted due diligence, he does not think a Session is needed on that
topic. Councilmember Mavity concurred, noting there is nothing the City Council can do
anyway but she would ask for a summarized written report on what is happening.
Councilmember Sanger asked staff to find out how long the additional rail traffic will be going
on. Councilmember Mavity suggested that information be posted to the website
The Council discussed the impact of late hour construction on Highway 100, newly opened
highway ramps, difficulty in merging from the southbound Minnetonka Boulevard ramp due to
placement of construction barrels, and traffic back-ups on Wooddale from Highway 7.
2. Annual TIF Management Report
Mr. Hunt explained that staff and Ehlers & Associates representatives have prepared the 2015
TIF Management Review & Analysis, a status report of the City's TIF distncts, which staff
regards as a highly useful guide for managing the City's TIF districts.
Councilmember Spano stated the term PAYGO was not included in the Definitions section.
Stacie Kvilvang, Ehlers &Associates, provided an explanation of`pay-as-you-go' TIF and stated
it will be added to the report's "Definitions" section.
Ms. Kvilvang provided a descnption of the City's 16 TIF distncts. 10 redevelopment distncts
with terms of 26 years; 2 housing distncts with terms of 26 years, 1 soil district with a term of 20
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years, 1 renewal and renovation district with a term of 16 years, 1 economic development district
with a term of 9 years, and 1 hazardous substance sub-district with a term of a 26 year term. She
explained the hazardous substance sub-district allowed the City to take the base value of a
property to zero to capture 100% of the increment so the contamination issues could be
addressed.
Ms. Kvilvang presented the October 2015 Management Review & Analysis for the City's TIF
districts including a ten-year history of tax capacity captured by TIF, noting the progression
grows based on the size of the development projects, and future captured tax capacity in TIF
She stated if no new TIF districts are established by the end of 2023, the percentage captured will
be reduced significantly. She noted St. Louis Park ranks in the mid-range of comparable cities
for its use of TIF.
Ms. Kvilvang commended the City's use of TIF for key redevelopment and housing projects so
as to accomplish its goals and strengthen the overall diversity of housing options, land uses, and
tax base while increasing employment opportunities and cleaning contaminated sites. As a
result, the City's overall market value in vanous TIF distncts has increased by more than 750%.
Councilmember Hallfin stated he likes the description presented of the individual distncts and
asked that the property address be included in future reports so the location is known. Ms
Kvilvang agreed and noted that over time, the name of the distnct may change so it would help
to also include that name.
Ms. Kvilvang described the existing PAYGO obligations, noting that nearly 70% lies within two
distncts: Park Commons and West End. She stated the City does not issue a lot of bonds for its
TIF districts but if it should issue GO bonds, the senior pnority is always the City. Currently,
there are $7 million in outstanding bonds that will be retired in 2023.
Ms. Kvilvang presented the eight recommendations for the Council's consideration. Ehlers
recommended the City complete a pooling analysis for the Zarthan and Park Commons Distncts
to determine how much will be available for use and what strategies can be implemented to
secure the use of the funds. She explained that when the district is established, they estimate the
valuation and TIF to be generated. However, the property value changes during the term
Mr. Harmening asked for an example. Ms. Kvilvang stated the Park Center TIF Distnct is a
housing district so those dollars, $120,000 annually, go into the housing fund and can be used for
affordable housing-related projects like rehabilitation or rental assistance.
Councilmember Sanger asked why the Zarthan District has excess money but also challenges
with making payments. Ms Kvilvang explained that only a certain percentage of the increment
can be used to pay the obligation. The developer has no nghts to the cash balance. She stated
Ehlers will conduct a pooling analysis to determine how much will be available.
Mr. Harmening asked whether those funds could be used for Southwest LRT infrastructure. Ms.
Kvilvang stated typically public infrastructure improvements are eligible.
Councilmember Brausen arrived at 6:58 p.m.
Ms. Kvilvang presented Recommendation #2 relating to use of TIF in districts with on-going
cash balances; and, #3. relating to return of fund balance ($619,085) in Victona Ponds. She
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explained that of the Victoria Ponds' balance, the City can retain $259,779 for legal pooling
purposes and Ehlers recommends the City return the non-legal pooling dollars of$359,306 to the
County for redistnbution to the City, County, and School Distnct With regard to
Recommendation #4, Ms. Kvilvang explained Ehlers conducts a lookback on all distncts Since
all units have sold within the Aquila Commons project, Ehlers recommended completing the
required lookback analysis as soon as possible to determine if any reduction in assistance is
required. She doubted there will be a reduction as the profit has been eaten up by the non-sale of
the last several units.
Ms. Kvilvang explained Recommendation #5 relates to the 5-year deadline from certification
that requires funds to be expended or obligated for projects within the TIF distnct That term
was extended to 10-years for certain TIF distncts so there is still time to either modify the
boundanes or secure additional obligations for Elmwood Village, Highway 7 Corporate Center,
West End, Hardcoat, and Eliot Park. However, for most of these districts, the City would
probably not do a boundary revision.
Mr. Hunt stated that PLACE planned to redevelop a parcel within the Elmwood Village TIF and
three others just outside that district and staff may recommend a modification to Elmwood
Village to include those additional parcels.
Ms. Kvilvang explained Recommendation #6 relates to the 6-year rule requiring the City to
utilize 75% of the tax increment generated to pay obligations. Ehlers recommends completing a
6-year rule analysis for the Ellipse TIF District to determine whether it can be decertified sooner
than 2022 when it is anticipated the E2 Note will be paid in full.
With regard to Recommendation #7, Ms. Kvilvang explained why a $5 million interfund loan
was approved for Elmwood Village to pay for public improvements. Ehlers recommended
increasing it to $5.5 million to cover additional funds anticipated within that distnct for use on
identified public improvements.
Mr. Harmening stated the public improvements would be to reconstruct 36th Street or Wooddale
Ave. Councilmember Mavity asked if it can be used for an underpass on Xenwood Ave Ms.
Kvilvang answered in the affirmative.
Ms. Kvilvang stated the City is on the forefront of redevelopment in the Metro area, noting it has
a record of innovative projects and as a result of aggressively pursuing redevelopment, those
efforts have increased the property valuations within the TIF distncts by over 750%, which she
believes justifies the short-term investment.
Councilmember Mavity asked how to explain to residents the rationale for considenng TIF
projects. Ms. Kvilvang stated redevelopment is an operational cost or opportunity As
properties redevelop, they intensify their uses which create higher property valuations which
help reduce property tax burdens.
Councilmember Hallfin referenced the Note balance chart that identifies interest rates from 1%
to 9% and asked how they are set. Ms. Kvilvang explained that interest is set by the bank
financing in place at the time. She advised that the 1% rate for the Highway 7 Corporate Center
was an anomaly as it received EPA financing.
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Ms. Kvilvang reported the City's TIF distncts are in good financial health with the exception of
Zarthan, as there will be a principle balance at the end. In addition, the City has opportunities to
utilize funds from several distncts to augment its housing and redevelopment efforts.
Councilmember Brausen pointed out that redevelopment results in renewal of the City, which is
another benefit.
The Council indicated it found this TIF Management Review & Analysis to be helpful.
Councilmember Mavity stated she appreciated the City's reputation for its aggressive
redevelopment efforts, and paying off notes quickly has become its brand so she was surprised
that 9% of the City's tax base was included in TIF distncts. Ms. Kvilvang stated it is up to the
policy makers to determine if there should be a cap on the percentage and while there is cost to
develop, there is also a cost to not develop. She noted these rates are on par with other cities.
Mr. Harmening stated it would be a shame to turn down an exciting project due to an artificial
cap.
Councilmember Sanger stated TIF is a tool that has served the City well and asked how other
cities fund redevelopment without using TIF. Ms. Kvilvang explained they may be using tax
abatement or not providing any assistance.
Councilmember Spano stated Golden Valley's property mix would foreshadow some of the
numbers as they do not have commercial, industrial, or multi-family opportunities.
Councilmember Mavity stated St. Louis Park also gets diversity of housing stock.
Mr. Locke stated another consideration is that each city has a different age and character so when
companng with newer communities, their development is more recent and without old railroad
industrial parks so you are not seeing redevelopment in those locations. Ms. Kvilvang stated
developers like working with St. Louis Park because the Council has a pro-development vision
and is able to articulate it well. She noted a 'but for' analysis is conducted when TIF is requested
to determine if it is really needed.
3. Business Terms for Purchase & Redevelopment Contract with 4900 Excelsior, LLC
Mr. Hunt described the project proposed by Oppidan Investment Company to tear down the
former Bally Fitness Center and construct a 5-6 story, mixed-use building consisting of 176
residential units (of which 10% will be affordable), and 28,228 square feet of commercial space
to be leased to a grocer. Structured and street parking will also be constructed as part of the
project.
It was noted the estimated cost to construct the proposed 4900 Excelsior project is $47.7 million,
which is not financially feasible because of more than $7.1 million of extraordinary site
preparation costs. Due to those extraordinary costs, Oppidan applied to the EDA for Tax
Increment Financing (TIF) assistance to offset a portion of those costs.
Councilmember Hallfin noted the Bally building was constructed in the late 1970s, early 1980s,
so he was surprised it contained asbestos. Mr. Hunt concurred.
Study Session Minutes -5- October 26, 2015
Councilmember Sanger asked whether it is the responsibility of the developer to abate that
asbestos and any other hazardous materials that may be found on the site purchased from the
City or the Bally site. Mr. Hunt answered in the affirmative
Mr. Hunt presented the terms of the redevelopment contract with Oppidan He explained the
redeveloper would be reimbursed for qualified site preparation costs up to $2.8 million in pay-as-
you-go tax increment generated by the project. That level of assistance would overcome enough
of the extraordinary site costs to allow the project to achieve a rate of return sufficient to attract
the necessary equity capital and enable the project to receive financing. A TIF Note in this
amount would likely be retired within approximately seven years and would be subject to a look-
back. Mr. Hunt explained the proposed assistance is not expected to constitute a business
subsidy under Minnesota Statutes, the project is expected to commence July of 2016 or sooner,
and be completed June 30, 2018.
Mr. Hunt completed presentation of the contract terms and described what the developer will be
responsible for upon completion, including participating in Special Service District #3. He
stated in the event the grocer leaves, a restnction is in place relating to what that space could be
used for.
Councilmember Sanger noted in theory, that space could become a liquor store Mr. Hunt stated
it could; however, a long-term lease is being signed with the grocer. Councilmember Sanger
stated since the contract contains a list of restricted uses, she would ask if it could also include a
maximum footprint for a liquor store. Mr. Harmening noted that restnction would only be in
place for as long as the contract lasts, seven years
Mayor Pro Tern Lindberg stated this is a larger discussion and if such a restnction is set for one
use, it should be considered for all.
Councilmember Mavity stated that while she agrees with the intent of restricting square footage
for liquor stores, she does not support doing so in this case as it is only a seven-year contract.
Mr. Hunt stated the final plat and PUD will be presented to the Council next week and on November
16th the TIF District and Development Contract will be considered for formal approval.
4. Proposed Ordinance Amending Chapter 6 Article V— Property Maintenance Code
Mr. Hoffman presented an overview of proposed changes to the City's Property Maintenance
Code that would adopt the 2012 edition of the International Property Maintenance Code (IPMC),
with revised amendments. It was noted the 2003 edition of the IPMC has been in use as a basis
for the City's maintenance programs for the past decade. Mr. Hoffman described the positive
impact that has resulted since the City's Property Maintenance Code was adopted
Councilmember Sanger agreed there has been a huge improvement as a result of enforcing this
code. She supported the proposed amendments and asked if fence maintenance can be included
as well as removal of diseased trees and noxious weeds. Councilmember Sanger stated she's
noticed more teardowns that leave a portion of the preceding home and asked if that means they
will not need to comply with current standards. Mr. Hoffman explained State code is clear that it
is technically a remodel if a wall or portion of the foundation is left. In that way certain
regulations, like current energy codes, and setbacks do not apply. With regard to maintenance of
Study Session Minutes -6- October 26, 2015
fences, he stated it is required by the City code and would be addressed through the City-wide
evaluation and other inspection programs.
Mr. Hoffman stated when the first City-wide survey was conducted, the biggest concern was
blighted housing so when properties were evaluated the first time, staff stopped at 200 because of
the large number of issues discovered. But, over time those larger violations have been resolved
so staff is now finding it has the resources to identify more minor issues that still need to be
resolved.
Mr. Hoffman explained that every four years, staff notifies property owners through media of an
upcoming city-wide property evaluation, conducted from the nght-of-way, to identify Code
violations. Owners of properties identified with deficiencies are then contacted and reminded of
the need to fix those violations and notified of city incentives, like low-interest loans. Staff then
returns for re-inspection with the goal to get all issues resolved. Mr. Hoffman explained this can
take up to one year. Commercial properties are evaluated alternating two years apart from the
residential evaluation cycle.
Mr Harmening stated the evaluation is typically done from the car and a rating scale is used. In
the past, the community has been informed in advance and the next evaluation will start in the
spring of 2016.
Councilmember Brausen referenced Section 310 relating to outdoor storage and asked if hot tubs
are addressed in the code. Mr. Hoffman answered in the affirmative. Councilmember Brausen
asked about holiday displays. Mr. Hoffman indicated they are not. Councilmember Brausen
asked if more restrictive code language is needed to require businesses to shut off their lights
after hours. Mr. Hoffman stated that would be an operational issue, not addressed by code.
Councilmember Brausen stated he would like that considered in the future and stated he supports
the amendments.
Councilmember Mavity asked about ornamental grass in the boulevard that can become too tall
Mr. Harmening explained that is allowed under certain circumstances. Ms. Boettcher indicated
that is regulated by the Operations and Recreation Department, and a permit is required.
Councilmember Sanger described a successful pilot project in the Blackstone neighborhood that
offered small loans/grants and resulted in about one-half of that neighborhood improving their
single-family houses. She asked whether that is an option for another neighborhood Mr.
Hoffman explained that was a neighborhood-focused program and not done as part of the
evaluation program. Mr. Harmening stated CDBG funds were used, in part.
The Council agreed with the suggestion of Mr. Harmening to ask the Housing Supervisor,
Michele Schnitker, about this opportunity. Mr. Hoffman stated staff could identify a potential
neighborhood through the City-wide evaluation.
It was the consensus of the City Council to direct staff to work with the City Attorney to prepare
an ordinance for first reading to adopt the 2012 IPMC with City amendments.
Communications/Meeting Check-In (Verbal)
Mr. Harmening asked if the Council would like another budget discussion prior to the Truth in
Taxation Hearing to discuss whether the Council desired to approve a levy adjustment of 5.5% or
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6%. Councilmember Sanger suggested staff provide an itemization of services that would be cut
with a 5.5% levy. Mr. Harmening explained that reducing the levy from 6.5% to 5 5% will not
impact current service levels. He stated the Council discussed whether a little extra should be
levied so those funds could be set aside and targeted for an identified project or program
The Council discussed how those funds could be used and asked staff to schedule that discussion
for a future Study Session.
Mr. Harmening stated he had provided the Council with information about a potential smart
meter replacement opt-out for health considerations and indicated at least one shutoff would
need to occur without a policy change. He asked whether the Council wanted to adopt a policy
allowing a resident to opt out due to health reasons.
Councilmember Sanger stated the City needs to consider reasonable accommodation and follow
standard protocols in how those requests are determined. She was concerned the City would lose
control if exceptions are made without following standard protocols.
Mayor Pro Tem Lindberg asked if one opt-out changes the Council's adopted policy. Mr.
Harmening stated it would.
Councilmember Mavity stated her support to consider an opt-out request based on health
considerations as long as it is not a financial burden Councilmember Brausen noted the City
charges an additional fee to manually read the meter, which may be a financial burden.
Councilmember Mavity stated she wants to be careful and asked if it is worth requiring a
doctor's note as suggested by Councilmember Sanger
Councilmember Sanger stated her concern that as soon as it is thought a special consideration
will be given, residents will take advantage of it. Mr. Harmening noted, per a draft policy
developed by staff, the resident will then be charged a fee to manually read the meter.
Councilmember Mavity stated she does not share the concern that control will be lost by granting
exceptions because staff would establish a structure that provides a disincentive for residents
who are casual when objecting and create a process for someone who is truly concerned with this
type of technology. She suggested creating a term other than `opt-out.'
Councilmember Hallfin asked if the opt-out is allowed, would the City replace that meter with an
analog meter. Mr. Harmening stated the meter would still be replaced and explained that based
on the experience of other cities that have allowed an opt-out, St. Louis Park may expect 16-32
to opt-out, but this may be a high estimate.
Councilmember Brausen supported a point of sale requirement that a smart meter be installed
when a property is sold that has had an exception. The Council agreed with that suggestion.
Mr. Harmening stated the $50 fee is charged per read, which is currently quarterly but in several
years it could be a monthly fee. He noted that the form signed by the resident includes notice of
the manual meter reading fee.
Councilmember Spano stated if billed $50 per occurrence to manually read the meter, he thinks
residents will soon change their mind. In addition, they need to open their house so the meter
can be read.
Study Session Minutes -8- October 26, 2015
The Council asked staff to include this item on a future consent agenda.
Councilmember Spano explained that this Friday, HUD Secretary Julian Castro will tour
affordable housing projects and wants to talk with west metro mayors and community leaders
about expanding affordable housing, especially in communities that do not currently have a lot of
affordable housing. He stated he will try to add Councilmember Sanger to the invitation.
Councilmember Brausen stated his support for the Kerasotes Showplace license request and the
small business proclamation.
Councilmember Mavity announced the Metro Cities annual meeting on November 18.
Councilmember Spano reported that someone from AFSCME contacted him about legislation in
the federal court system that would limit the rights of cities to collectively bargain with their
unions and limit the ability of unions to organize in municipalities. He asked the Council if there
is interest to review this information. Councilmember Mavity stated she supports collective
bargaining. Councilmember Sanger stated it makes no sense for individual cities to sign onto
this as it should be a League consideration. Mr. Harmening stated he needs to hear more about it
from an employer's perspective, as the City has five bargaining units. Councilmember Spano
stated he will provide the information to the Council and staff for review.
The meeting adjourned at 8:25 p.m.
Written Reports provided and documented for recording purposes only:
5. September 2015 Monthly Financial Report
6. Third Quarter Investment Report (July—September 2015)
7. EDA Redevelopment Contract Status Report
8. Update on Shoreham Redevelopment Contract
9. 2016 Budget Update
10. Kerasotes Showplace ICON Theatre Liquor License Premises Amendment
11. Proposed Small Business Saturday Proclamation
12. Reilly Tar& Chemical Corp. Site Update
Meli a Kennedy, City Clerk Gre g Lindberg, Mayor Pro T