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HomeMy WebLinkAbout2021/12/13 - ADMIN - Minutes - Economic Development Authority - Regular Official minutes Special EDA meeting St. Louis Park, Minnesota Dec. 13, 2021 1. Call to order Vice President Rog called the special meeting to order at 6:00 p.m. 2. Roll call Commissioners present: President Tim Brausen (arrived 6:30 p.m.), Lynette Dumalag, Rachel Harris, Larry Kraft, Nadia Mohamed, Vice President Margaret Rog, and Jake Spano Commissioners absent: none Staff present: City Manager (Ms. Keller), CFO (Ms. Schmitt), Interim Deputy City Manager/Park and Recreation Director (Ms. Walsh), EDA Executive Director (Ms. Barton), Communications Manager (Ms. Smith) 3. Approval of EDA minutes - none 4. Approval of agenda and items on EDA consent calendar 4a. Elmwood Village Tax Increment District interfund loan. EDA Resolution No. 21- 39 Commissioner Spano made a motion, seconded by Commissioner Mohamed, to approve the agenda and items listed on the consent calendar. The motion passed 6-0 (President Brausen absent). 5. Reports - none 6. Old business – none 7. New business 7a. 2022 final HRA levy certification and budget adoption . EDA Resolution No. 21- 40 Ms. Schmitt presented the staff report. Commissioner Spano noted that the print version of item 7b indicated that it was the preliminary EDA levy and not the final version. Ms. Schmitt confirmed item 7b relates to the final EDA levy certification. DocuSign Envelope ID: 0BCEDAED-A73B-4521-B907-07C7A8381EE7 Economic Development Authority -2- Dec. 13, 2021 Commissioner Kraft stated he will support this action. He explained affordable housing is one of the most important and challenging issues the city faces, and the HRA levy is targeted to address that issue. He applauded this council and prior councils for their commitment to this issue, including the inclusionary housing policy that has had a real impact on significantly increasing affordable apartments in the city. He stated he does not think the city can relax their efforts on this front, noting affordable home ownership opportunities could use more attention. He added there is a balancing act with property taxes, made even more precarious due to home value trends. Especially this year, more affordable homes are increasing in value substantially faster than other parts of the market, resulting in comparatively large increases in property tax bills that are likely hitting homeowners less able to afford it. Commissioner Kraft stated going forward for next years’ budget process, he would like the council to consider how much the city should be spending on affordable housing. Clearly there is no limit to the need, but there is some limit to what the city can spend. Given the substantial sums that are being generated by the city’s pooled TIF, around $900,000 to $1.5 million annually for the next several years, he suggested the council should look at the total amount being spent and determine if there are other ways of focusing the money and economizing a bit. He stated given that he just realized the way the HRA levy is applied on straight market value versus tax capacity, puts the burden more on lower value homes than if it was part of the general levy. He noted it may not be a substantial amount, but there is some impact. He would like the council to investigate folding the HRA levy into the general levy. He added he wished he understood these two dynamics better earlier in this year’s budget process. Given how long the HRA levy has been in place, he thinks it is important that changes be carefully considered to ensure they don’t create unintended consequences. It was moved by Commissioner Kraft, seconded by Commissioner Mohamed, to adopt EDA Resolution No. 21-40, authorizing the 2022 final HRA levy. Vice President Rog concurred with most of Commissioner Kraft’s comments. She stated as of now, despite her concerns about the new EDA levy, she continues to support the use of the HRA levy to collect tax dollars. Primarily because it has been integrated into the budget process at this point and she does not want to lose access to the significant affordable housing dollars it generates, as well as potential for a trust fund match from the legislature someday. Vice President Rog stated she is open to discussing what to do about this levy in the future with staff and colleagues. She noted the revenues from this levy will make possible wealth building programs to address historical injustices and access to home ownership. She added it will also provide the opportunity to hopefully create a new multi-family homeownership development on Minnetonka Boulevard, and support the ability to provide rental assistance, grant, and transformation loan programs. DocuSign Envelope ID: 0BCEDAED-A73B-4521-B907-07C7A8381EE7 Economic Development Authority -3- Dec. 13, 2021 Commissioner Spano thanked staff who put this money to good use on behalf of the city’s residents. He stated he will be participating in a discussion on homeownership, racial equity impacts, and the wealth divide and he asked staff for information on the programs the city funds for housing, and there are many. He stated he will support adoption of the HRA levy as well. The motion passed 6-0 (President Brausen absent). 7b. 2022 final EDA levy certification Commissioner Mohamed stated there was some conversation at the last meeting regarding the EDA levy being a regressive tax. She requested that Ms. Schmitt clarify the impact of how the EDA levy is applied. Ms. Schmitt stated she reviewed the $500,000 EDA levy and calculated the levy with both market value tax capacity and the net tax capacity formula. For a $200,000 home the difference was $1.02/year. For a $300,000 home, the difference is $.54/year and for a $400,000 home it is $.07/year. She noted the difference is so small because of the dollar amount of the levy. A greater impact would be seen if you were to compare based on the city’s entire levy. Commissioner Mohamed thanked staff for their work to provide data that clarified the impact and stated she is supportive of the EDA levy as proposed. Commissioner Kraft stated he is not against the money the city is spending, but he is against the EDA levy. He encouraged council to vote against creation of the EDA levy and instead absorb as much as possible into the general fund levy. He is convinced creation of the EDA levy is not a good idea and there is no good reason for the city to do this with a separate levy. He stated one of the arguments he has heard in favor of the action are it’s a sustainable funding source, but he feels it is no more or less sustainable than the general levy. The council can make changes to any levy at any time. He stated he has also heard it is less likely to be cut in the future, and that also does not make sense to him because the council can cut or change any levy during the budget process. It is only less likely to be cut if they depend on a future council not realizing that they can adjust it. The rationale that other cities do this, does not make it right. Commissioner Kraft stated one of the biggest reasons he is advocating for this change is transparency. He noted throughout this process, the discussion has been about the increase in the general levy, and staff has done a good job of trying to incorporate the other two levies to show the total impact, but when the council discussed it, they talked about the 6.5% increase when it was preliminary and now the number discussed is 5.58%. He stated the 5.58% is not relevant to residents. The number that is relevant is the 6.9% increase in total levy that the city is doing year over year. He added when someone receives their truth in taxation notice, it is not a 5.58% increase. It is really 6.9% that is applied across their property’s value. He stated whether it is intended or not, having separate levies is obscuring what is being done and anytime that happens, DocuSign Envelope ID: 0BCEDAED-A73B-4521-B907-07C7A8381EE7 Economic Development Authority -4- Dec. 13, 2021 from a government perspective, is not good. He noted they did just learn that doing it this way falls a little bit more on the lower end of the value spectrum, versus if the money was in the general fund levy. He recognized it is a small amount this year, but if the levy increases in the future the impact would be greater and compound over time. He questioned why the council would do it if they don’t have to. He added including the money in the general fund levy would also reduce complexity. He feels it is very difficult to explain to residents what the EDA levy is, what it is for, and why it is separate. Climate investment in this was originally going to be corporate only because the money was coming from the EDA levy. He noted staff was able to figure out how to structure this so the climate investment money would not be restricted to corporate only. He stated while he appreciates the creativity used to solve this issue, these are machinations that are not necessary. Commissioner Kraft stated he believes the council can make a change with minimal impact and proposed rejecting the EDA levy and adopting general levy of 6.5%. This would absorb approximately $330,000 of the $500,000 EDA levy. He proposed this would be $300,000 for the climate investment fund and the balance for the development fund, leaving a gap of $170,000 from the amount originally planned. He suggested directing staff to look at making up this difference with any end of year fund balance that the city may have. He stated his understanding is that there may be some fund surpluses at the end of the year. Even if that is not possible, he stated the city could do without the $170,000 for 2022 because it is not urgent that it happen this year and the city will not run out of money in the development fund without it. One of the reasons to do it was to begin to establish a sustainable fund ing source for the development fund, and they would still be doing that. He stated this proposal would result in a small reduction in taxes for residents and would move the total levy increase from 6.9% to just under 6.5%. He reiterated he will not support the EDA levy. Commissioner Harris asked staff to review how the creation of the EDA levy came to be proposed. Ms. Schmitt explained earlier this year staff and council had discussions about finding funding sources for programs like climate. Staff discussed with council establishing an EDA levy for the climate programs because they felt it was a more transparent way to do the levy because it would stand out and be separate from the general levy. For years staff has discussed with council the fact that the development fund has no sustainable funding source and that a portion of that fund was being used for salaries. Commissioner Harris recalled that last spring there was a request that the city find a dedicated funding source for climate change initiatives and programs. She s tated there are always different ways to look at the same issue. The proposed funding source is transparent in that it is indicated as a line item. She noted one of the things she has found helpful is to have the tax impact numbers articulated as early in the process as possible because it helps convey to residents what the impact is on them. She asked for staff to review the EDA levy impact on median-value homes. Ms. Schmitt stated the DocuSign Envelope ID: 0BCEDAED-A73B-4521-B907-07C7A8381EE7 Economic Development Authority -5- Dec. 13, 2021 anticipated average increase, for all three levies combined, is $160.48. The impact of the proposed EDA levy alone, was approximately $18/year for a median-value home. Commissioner Harris stated one of the benefits of having a separate line-item budget for climate investment initiatives is residents being able to see immediately what that money is intended for and the impact on their tax bill. She noted she supports the EDA levy and appreciates staff looking for solutions based on what council has requested. President Brausen apologized for being late to the meeting. He stated he supports the EDA levy, which is a new tax that will fund development activities in the upcoming years, including staff salaries. He noted there has been and will continue to be a great deal of redevelopment activity in the city. He stated these funds will help to manage this important and detailed process. He added the city also plans to use the additional new revenue to make significant investments in response to climate change, which is the singular existential crisis facing us as a people. He stated it is important to begin to robustly fund the process to change our self-destructive consumption habits to save the planet. He stated the world’s leaders, including our own, have been slow to make these changes and we cannot afford to not ignore these needs. President Brausen stated in the future he would support adding this type of levy to the full extent of the law, which would allow taxing at 0.01813% of the estimated market value of all properties in St. Louis Park because the sooner these investments are made, the sooner they can take transformative action. He added, however, staff and the council has preferred to tax only a one-third portion of the levy that the state allows to be collected, to reduce the immediate tax impacts on residents and business owners. President Brausen continued that pushing action and costs down the road in the face of this crisis is irresponsible. He stated until the city pays the true costs of “business as usual”, they will not make the transformative investments needed. This includes the lifestyle changes needed to reduce and end carbon emissions. He stated we are leaving our grandchildren in a severely damaged world in exchange for cushioning the impact on consumers and taxpayers. He added the proposed levy will be a start to pay the tab, but still is too little in his estimation. He stated he supports the creation of this new levy for these reasons and feels the process has been very transparent and the proposed EDA levy was specifically discussed repeatedly at many meetings. He noted he had not heard any objection to the proposed levy, other than those who spoke at the public hearing. He reiterated he supports the EDA levy and believes it is essential for the community and society in general to be making these types of investments. Commissioner Dumalag stated she is also supportive of all the investments being made in climate initiatives, but noted the devil is in the details. She asked Ms. Schmitt to explain the market rate value versus tax capacity and the calculation difference between creating an EDA levy versus having all of the money in the general fund. DocuSign Envelope ID: 0BCEDAED-A73B-4521-B907-07C7A8381EE7 Economic Development Authority -6- Dec. 13, 2021 Ms. Schmitt stated for properties that are homestead, when net tax capacity is calculated, a market value exclusion is applied based on the homes value. The lower the home value, the higher the market value exclusion. She explained for a $250,000 home, you could subtract almost $15,000 off the initial market value. When that is then divided by 100, you get the net tax capacity which would be $2,353 . Levies that are not calculated using net tax capacity would result in the market value of the same property being $2,500. A levy, such as the EDA levy, is applied against a higher amount. She noted this becomes more noticeable with a larger levy. If they used a market value calculation rather than a net tax capacity for the entire levy, such as $38 million dollars, the impact would be more noticeable because the property values would be higher without the market value exclusion applied. Commissioner Dumalag stated she appreciated the work staff did to show the difference between the impact in real dollars of creating the EDA levy or including that amount in the general fund levy. She added the creation of the EDA levy was discussed by council and it is known that staff salaries are included, but it is specifically for an initiative that the council has determined to be very important. She stated she will support the EDA levy. Commissioner Spano stated he will also support the proposed EDA levy because the impacts are minimal to the more moderately valued homes in the community. He appreciated Commissioner Kraft’s commitment on the issue but will not support his proposal at this time. He added certainly the council will be discussing this again in future years, but he does not want to short a fund by $170,000 recognizing that would not have been Commissioner Kraft’s first choice either. He stated his experience has been that folks are not so worried about the percentage and are more concerned about the real dollar amount. He added the dollar amounts can fluctuate quickly depending on an individual’s property value. He noted in his conversations only two people have objected to the EDA levy, because of what the money was going to be spent on. He stated he is less concerned about the percentage than about the dollar and is fine with the way staff has structured this, and it feels very transparent to him. Commissioner Kraft stated his proposal is not to bury this in the general fund and would suggest this be called out very clearly similar to the way other funds in the general levy are highlighted. He noted he wants to echo President Brausen’s comments and is in full agreement regarding the crisis we all face and the importance of it, especially leaving a world for their kids and grandkids that is at least as good as the one that was given to them. He supports the funding but disagrees with the way it is being done and feels it is unnecessary and overly complex. Vice President Rog stated as much as she does not want to overcomplicate things, she cannot deny the logic Commissioner Kraft presented. She stated she is not supportive of a new levy but is fully supportive of investing in climate initiatives. She is in favor of DocuSign Envelope ID: 0BCEDAED-A73B-4521-B907-07C7A8381EE7 Economic Development Authority -7- Dec. 13, 2021 being as transparent as possible and adding a new levy does not align with that goal. She stated she supports these investments but will vote against the EDA levy. It was moved by Commissioner Brausen, seconded by Commissioner Mohamed, to recommend adoption of the 2022 EDA levy by the city council. The motion passed 5-2 (Commissioners Rog and Kraft opposed). 8. Communications – none. 9. Adjournment The special meeting adjourned at 6:45 p.m. ______________________________________ ______________________________________ Melissa Kennedy, secretary Tim Brausen, president DocuSign Envelope ID: 0BCEDAED-A73B-4521-B907-07C7A8381EE7