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HomeMy WebLinkAbout2021/01/11 - ADMIN - Minutes - City Council - Study Session Official minutes City council study session St. Louis Park, Minnesota Jan. 11, 2021 The meeting convened at 6:30 p.m. Councilmembers present: Mayor Jake Spano, Tim Brausen, Lynette Dumalag, Rachel Harris, Larry Kraft, Nadia Mohamed, and Margaret Rog Councilmembers absent: none Staff present: City Manager (Mr. Harmening), Engineering Director (Ms. Heiser), CFO (Ms. Schmitt), Economic Development Coordinator (Mr. Hunt), Deputy City Manager/Human Resources Director (Ms. Deno), Director of Community Development (Ms. Barton), City Assessor (Mr. Bultema), Sustainability Manager (Ms. Ziring), Senior Management Analyst (Ms. Solano), and Recording Secretary (Ms. Pappas) Guests: Stacy Kvilvang, Ehlers 1. Annual TIF district management report Ms. Kvilvang presented the report. Mayor Spano noted while TIF dollars may not be used for city buildings, they can be used for SWLRT related projects and fiber optics, and he questioned how this is different. Ms. Kvilvang explained legislation in 2001 stated TIF dollars cannot be used for public facilities; however, other traditional public improvements that promote or enhance development in certain areas, such as SWLRT and fiber optics, is allowed. Councilmember Kraft asked about pooling from TIF districts and if 25% can be pooled. Ms. Kvilvang stated that is correct. Councilmember Kraft noted when pooling, there are still obligations the city mu st pay. He asked if the city still pools after obligations are paid off. Ms. Kvilvang stated with TIF, pooling can be up to 25%, but in St. Louis Park, the city provides 95% of the TIF to pay TIF Note obligations as long as the obligations are outstanding. Councilmember Kraft asked when comparing an increase in market value, are you comparing base value to future value. Ms. Kvilvang stated no, the comparisons happen every year and it is comparing to current year market values. Councilmember Kraft stated this is a misleading comparison as base value does not remain the same over time. Ms. Kvilvang stated, however, on the flip side there are properties that decrease in value over time. DocuSign Envelope ID: AA66C092-9C17-40F6-94FC-8647D0BA46AB Study session minutes -2- Jan. 11, 2021 Councilmember Kraft asked what TIF investment has done for the city. Ms. Kvilvang stated TIF has facilitated developments that have put St. Louis Park on the national map, such as The West End and Excelsior & Grand. She added these, and many other developments have increased the city’s market value and moved the city from an AA to an AAA bond rating, along with increasing housing opportunities for folks as it upgraded the city’s rental housing stock. Ms. Kvilvang continued that TIF has expanded the city’s housing stock allowing for more multi- family housing units including new Class A layered affordable units. It is an especially important tool since there is no available land to build on in St. Louis Park. This has given the city the ability to go up and add market value and residents. Councilmember Mohamed asked if pooling from housing goes back only to housing, and if redevelopment pooling goes back into redevelopment. Ms. Kvilvang stated some redevelopment can go towards affordable housing also, but the majority goes to redevelopment since TIF from two housing districts goes towards affordable housing. Councilmember Mohamed asked what the difference is between obligation due date and expiration date for TIF. Ms. Kvilvang explained when a pay as you go note is issued, there is a last day of payment, but the obligation may be paid off earlier. Councilmember Mohamed asked related to affordable housing, if TIF is applied for under the inclusionary housing policy, and if that is a condition for development companies, is that a local decision. Ms. Kvilvang stated yes, that is a minimum so investment can be done for affordable housing. She added if it is in a housing district, a minimum of 20% of the units must be affordable. Councilmember Harris stated fiber optics was mentioned as a reinvestment as it encourages future development. She asked if TIF could be used for elements of the city’s Climate Action Plan (CAP). Ms. Kvilvang clarified TIF must be used for capital costs or redevelopment. Councilmember Harris asked if TIF can be used for water conservation or technology to reduce water consumption. Ms. Kvilvang stated it must be used for qualified redevelopment purposes. Councilmember Harris stated residents have said if the city did not use as many TIF districts, we could capture additional tax money faster and therefore lower the annual tax levy . She asked if this is true. Ms. Kvilvang stated without TIF, the city would not have that development or tax base. Councilmember Harris asked if there is merit in reducing the term in TIF districts to capture dollars sooner. Ms. Kvilvang stated it is recommended to do it for the shortest term and pay off obligations early. She added if paid off early, a percentage can be sent back on an annual basis and the council is then given flexibility. Councilmember Harris asked if there is a maximum on the number of TIF districts the city can have in a year. Ms. Kvilvang stated no. DocuSign Envelope ID: AA66C092-9C17-40F6-94FC-8647D0BA46AB Study session minutes -3- Jan. 11, 2021 Councilmember Harris stated she is supportive of the two policy questions in the staff report and would like to see more flexibility with TIF to be used for climate change mitigation . Mayor Spano stated he is also supportive of the two policy questions. Councilmember Rog asked how the city subjectively finds the difference between the cost of doing business and the fact that this would not have occurred without TIF. Ms. Kvilvang stated each project goes through a financial analysis to determine whether TIF is needed for the project to move forward. Councilmember Harris stated some say TIF is a subsidy for private development. Ms. Kvilvang stated it is but without it you would not get developments in the city. Councilmember Rog asked about public benefit determination unique to cities and if cities can add more specificity to their benefit. Ms. Kvilvang stated yes. Councilmember Rog asked when the most recent time is the council reviewed the public benefit for TIF policy. Mr. Hunt stated the council reviews TIF on an annual ongoing basis and especially since council has been more interested in affordable housing and using TIF in relation to the inclusionary housing policy. Councilmember Rog stated she would like the council to look more at public benefit of TIF at a future time. Mr. Hunt added that the TIF policy stipulates what it can be used for. He indicated that each staff report states how the proposed TIF would be utilized along with a list of how its usage would benefit the community. Councilmember Rog asked if council has ever refused or not approved a TIF request recommended by staff for a project. Mr. Hunt stated none that he could recall. Mr. Harmening agreed, adding there may have been a project where TIF was negotiated, and it met standards but then the council decided not to move f orward. He noted there have also been projects brought forward to council that did not receive TIF, but those usually did not go far. Mr. Hunt stated TIF allows the city to create affordable housing and include green features in housing, that could not be afforded without it. Councilmember Rog stated while she likes the Texa Tonka project, the city is paying $2.9 million in requested TIF for about 20 affordable units. She asked if that is a good return on investment for taxpayers or is it better to purchase a NOAH building and update that, which would be more affordable. Mr. Harmening stated the city has done the community visioning process and has development priorities in place, adding staff uses that as guidance for what the city should be striving for. He stated when developers come to St. Louis Park, they also know those priorities and if the project is in alignment with what council wants, staff pursues it. Councilmember Rog stated she is inviting council to be more thoughtful about ROI on TIF adding this is a potential area of exploration. She stated the city is subsidizing a lot of market rate housing and there is an opportunity to add more specificity to what the city gets for those taxpayer dollars. DocuSign Envelope ID: AA66C092-9C17-40F6-94FC-8647D0BA46AB Study session minutes -4- Jan. 11, 2021 Councilmember Rog stated related to the policy questions, she has questions and concerns and the second question also warrants more consideration with ROI. She supports seeking legislation for ownership as an option and does not support lowering affordable units. Councilmember Dumalag asked if a developer can use TIF for any costs and if there are any restrictions. Ms. Kvilvang stated there are state restrictions including land acquisition, building removal, soil cleanup, parking among others and TIF cannot be used for city buildings. She added if the project is affordable housing, TIF can be used for nearly anything. Councilmember Dumalag asked if there is a scorecard for this and if it is more weighted toward families. Ms. Kvilvang stated staff puts together a scorecard . Ms. Barton added staff follows the council’s goals. Councilmember Dumalag asked about pay as you go and if some developers use that as collateral, what happens if the developer defaults. Ms. Kvilvang stated if taxes are paid it is fine, but if not, the bank will take over on a default, adding if it is not cured the city can then terminate the TIF note. Councilmember Brausen stated TIF has been a wonderful tool for the city over the past 20 years, which has helped development regularly. He supports the policy questions and noted Texa Tonka is a classic example of how to leverage future funds the city will receive. He noted by agreeing to invest those funds later, the city will generate affordable housing units. He added until the city started adding requirements to TIF, there was no affordable housing. Councilmember Brausen stated there is no risk at all on this and taxes will pay debt off in 12 years and continue to capture and pay for affordable housing costs. He stated it is a win-win, and if developers do not get TIF, there will be no affordable housing. He added it makes good sense to him, encourages developers to come to St. Louis Park, and he supports this. Councilmember Brausen added the 1100% increase in taxable market value is tremendous and the return on investment has been wonderful. He stated Texa Tonka will be a great example and will develop that corner and all the property values in the area will increase, and this is how to redevelop and renew the city. Councilmember Rog stated there is value in some assumptions around TIF and how it is used in the city. She stated going forward she wants to continue to question the return on investment, adding TIF can be subjective and it is the council’s job to look out for taxpayers and have more scrutiny. She added the Texa Tonka project did not evolve only because of TIF, noting it had to do with the mall being for sale and opportunistic availability of properties. Councilmember Rog stated here the city has over 1000% increase in tax value but in Roseville they have 900% increase in taxability and only 1% of tax based tied up in TIF . She stated St. Louis Park does not need 12% of our tax base tied into TIF. Councilmember Kraft stated it seems St. Louis Park does TIF well adding he is not sure what that means, but it has had a significant impact. However, the city spends a lot on it. He stated it DocuSign Envelope ID: AA66C092-9C17-40F6-94FC-8647D0BA46AB Study session minutes -5- Jan. 11, 2021 is difficult to understand, the council should endeavor to understand it better, and he agrees with Councilmember Rog on looking further into it . He added there are arguments against TIF stating the city needs to examine the “but for” clause more carefully. Councilmember Kraft stated he supports the policy questions but is not in favor of reducing rental percentages to go to affordable and is interested in owner-occupied. He added he would like to see market value information also as it relates to how much is pooled and how much the city captures in tax dollars. Mayor Spano stated staff is acting at the council’s direction but council can look at changing TIF . He stated we talk about this like it is a gift to developers, but the council can look at this further to get some quantification as to what the city gets now, at the back end, and the difference between the two. Ms. Kvilvang stated she can provide that information to the council. Mr. Hunt added staff goes through the TIF process with Ehlers and does not provide developers any more dollars than necessary to enable a project to proceed and tells them if their project does not meet the city’s TIF policy requirements. He added if developers do not meet the “but for” test, staff will not recommend TIF be used. It was the consensus of the council to support the majority of the staff recommendations. 2. Long term funding of Climate Action Plan (CAP) Mr. Harmening presented the report. Councilmember Kraft thanked staff for the report and stated he believes fundin g for the CAP needs to be increased, pointing out every single square inch of the US was warmer than normal, with the last 7 years being the warmest on record . Councilmember Harris asked if staff has the funds currently to meet the council’s goals for 2030 and beyond. Ms. Ziring outlined the report of what is needed to get the community to carbon neutrality by 2040. Councilmember Harris stated St. Louis Park is not an island and asked if there are efforts in other communities and regionally to do a broad climate plan. Ms. Ziring stated there is lobbying at the state level going on for changes around the advanced energy code and efforts on a Hennepin County climate plan and several city coalitions. She added the city joins these groups if their initiatives are in line with our CAP, while taking advantage of as many partnerships as possible. Mr. Hoffman added Edina and Bloomington also have sustainability commissions and St. Louis Park is looking to work on initiatives with them. Mr. Harmening stated staff is also working on energy requirements for new construction. DocuSign Envelope ID: AA66C092-9C17-40F6-94FC-8647D0BA46AB Study session minutes -6- Jan. 11, 2021 Councilmember Harris asked if our goals for 2030 are attainable no matter how much money is put into the CAP. Mr. Harmening stated that depends, as the biggest carbon creators in the city must participate in the program and if they do not, it will be difficult . He added the city does not have the tools today to require businesses or compel them to take action. Ms. Ziring stated that the goals are attainable, and it is important to have hope, but the estimates that alluded to $1.9-2.4 million are based on 100% participation from businesses and residents to meet the strategies within each goal. She added the goals are lofty but attainable. Councilmember Harris stated she is committed to the CAP and the goals adopted but hesitates to put a lot of money in up front until the city can get a sense of industry cooperation. Councilmember Rog agreed this problem cannot be solved alone and asked where St. Louis Park can be a leader. She stated many cities have CAPs now, and she proposed considering what being a leader looks like. She stated she values what staff is doing and even if we have limited resources, there is potential to do big things. She added one of these might be the tree initiative, which could position the city as a leader, adding there would also be communications and marketing potential. Councilmember Rog added installing solar on affordable housing and requiring savings be passed on to renters, as well as doing street closures, are bold actions against climate change and are opportunities to make a difference. She added policy and mandates are ways that do not cost the city very much, and costs can be passed along to others. Councilmember Dumalag stated she is supportive of increasing allocations for the CAP, noting that in 2020 most people were working from home. She asked how racial equity will be included in this work. Mayor Spano stated these questions feel like “means” questions, adding he is not afraid to spend more money to achieve the CAP, but asked if there are ways to do that without doing that. He asked staff to come with recommendations on where the funds can come from for whatever reduces our carbon footprint by the greatest amount. He stated he is interested in programs that get the city the greatest bang for the buck to reduce carbon emissions. Councilmember Mohamed agreed with Mayor Spano and said that more investment should go to the CAP, as well as staff coming up with more ideas and presenting to council, to get to the priorities. Councilmember Brausen stated he is in favor of spending more money on the CAP but added staff has presented a list of what can be done and given council a price tag for the next 10 years, and he does not want to kick this back to staff. He added if we make cuts to the budget, staff will have to look for new revenue sources, and the CAP must be done to survive as a species. He stated he is guardedly optimistic with the new administration providing some funds, but noted incentives are important also. He pointed out if the council were to cut the city parks program it would get them half-way to the funds needed. DocuSign Envelope ID: AA66C092-9C17-40F6-94FC-8647D0BA46AB Study session minutes -7- Jan. 11, 2021 Councilmember Kraft stated he appreciated the council’s comments and likes being a leader in this. He stated he is willing to look for additional resources and go to the community on this. He added there needs to be an evaluation methodology added as well as looking at these big investments. He noted a scorecard must be developed and stated this will need to overlap with other strategic objectives--including racial equity--in the methodology, noting this is not a one size fits all. Councilmember Kraft suggested the ESC work on this first and bring it back to council for review. Councilmember Kraft stated these resources could come from utility fees, usage-based tax on utilities, such as natural gas; however, he would be concerned about the regressive nature and would want to exempt lower income folks. He is open to a separate levy such as the HRA levy and ways to get the community more invested, such as the tree program which provides carbon reduction over time and could be an on-ramp to climate action for the community. Councilmember Rog stated in the interest of climate action , the city invested a couple million dollars extra into the nature center to get to net zero, and yet the nature center was the lowest emitter of carbon, while the REC center is the highest. She stated the investment in the nature center was done because it was a model, but she does not understand what the priorities are given the council’s choices. She added she also likes the scorecard idea and asked if our goal is to reduce carbon or to be a model. Councilmember Rog stated the city needs to get serious about this and look at all activities we do here, what are the biggest emitters, and then look at stopping or reallocating those activities to get to carbon reduction. Councilmember Kraft agreed and added this will need a multi -approached model. Mr. Harmening summarized comments by the council stating resources will need to be redirected and priorities adjusted. Mr. Harmening added if the city reduces carbon emissions from commercial and industrial and residential buildings, while also supporting the tree program, it may help but will not get the city to its 2030 goals. He stated incentivizing commercial and industrial businesses, while doing marketing and education and promoting the biggest emitters of carbon to reduce their carbon generation, would be a start. Ms. Ziring added that if the city is to address the biggest carbon producers first, it should start with commercial and multifamily buildings followed by travel. Councilmember Kraft stated part of hitting the goal by 2030 is getting residential use down by 30%. He agreed on prioritization but added they will have to be careful on it being an all or nothing deal. Therefore, the evaluation method will be important in the short term . He stated he would like to see staff come back with thoughts on how to raise the additional dollars necessary, the possibility of adding an additional levy, and how to fund and make tradeoffs. Mr. Harmening stated this will be a process and will be included in upcoming budget discussions. He stated to continue to fund our core services, we would need to reallocate discretionary resources adding, however, this will have consequences. DocuSign Envelope ID: AA66C092-9C17-40F6-94FC-8647D0BA46AB Study session minutes -8- Jan. 11, 2021 Councilmember Kraft added substituting something for another area or money already being spent that could be leveraged, such as through the waste program, might be a way to expand funding for climate change. He added TIF for affordable housing and overlapping this with NOAH which tends to not be energy efficient, is another program to look at and a way of reorganizing the way the city is already spending funds. Councilmember Dumalag added she is open to looking at additional revenue ideas and leveraging NOAH incentives to turn older housing into energy efficiency housing. She added she is also open to looking at a levy as well to allocate resources to the CAP. Mr. Harmening stated that the city will need to invest more and incent commercial and multi- family buildings, however there is no way to compel them to do this. He added the city will need to do the things it has most control over and get community buy-in. He added the city will still plan to roll-out the climate champions program this year as well. 3. Future study session agenda planning and prioritization Councilmember Brausen noted the topic of agenda and video presentations. Councilmember Kraft asked about the retreat and adding more study sessions when the council is not meeting. Mr. Harmening stated staff is looking at both items as a topic of discussion for the next study session. Councilmember Kraft stated in the Texa Tonka written report, in the future, he would like to see the table include numbers by apartment unit type, including affordable apartments, to make a comparison. Councilmember Harris pointed out the planning commission held a public hear ing regarding the Texa Tonka development on January 6 which is available for viewing on the city website. However, she added the audio quality was not up to standard and public comments could not be heard. She stated staff is directing comments be heard at the January 19 council meeting. Mr. Harmening added this will not be an official public hearing, but residents will be allowed to speak on the topic. Ms. Barton noted staff has also contacted residents who spoke at the planning commission and offered them to speak on January 19, and to submit their comments in writing. She stated a communication was mailed to the whole neighborhood again. Councilmember Harris added she supports the TIF request for cleaning the contaminated areas where the dry-cleaning business was at Texa Tonka. Councilmember Rog stated in the Texa Tonka report, it notes promoting of housing for large families; however, the largest units are only 2 bedrooms. She stated going forward, she would like to know what the council’s definition is on housing for large families is, adding perhaps this should be more concrete. DocuSign Envelope ID: AA66C092-9C17-40F6-94FC-8647D0BA46AB Study session minutes -9- Jan. 11, 2021 Councilmember Kraft noted the report on legislative priorities and stated he had sent request to staff to add support for the national popular vote interstate compact. Councilmember Kraft also asked to have the advanced building energy codes standards added to the legislative list as a top priority. Councilmember Rog noted the Fernhill written report, adding the residents there are grateful to be part of Connect the Park, and she supports this as well. The meeting adjourned at 10:20 p.m. Written Reports provided and documented for recording purposes only: 4 Application for Tax Increment Financing assistance – Texa-Tonka Apartments 5. Home-based businesses 6. 2021 legislative issues and priorities 7. 2022 Pavement Management update – West Fern Hill (4021-1000) ______________________________________ ______________________________________ Melissa Kennedy, city clerk Jake Spano, mayor DocuSign Envelope ID: AA66C092-9C17-40F6-94FC-8647D0BA46AB