Loading...
HomeMy WebLinkAbout2024/10/14 - ADMIN - Minutes - City Council - Study SessionOfficial minutes City council study session St. Louis Park, Minnesota Oct. 14, 2024 The meeting convened at 6:05 p.m. Council members present: Paul Baudhuin, Tim Brausen, Margaret Rog, Mayor Pro Tem Yolanda Farris Council members absent: Lynette Dumalag, Sue Budd, Mayor Nadia Mohamed Staff present: City manager (Ms. Keller), community development director (Ms. Barton), economic development manager (Mr. Hunt), finance director (Ms. Cruver) Guests: Stacie Kvilvang, Ehlers Discussion items 1. Tax increment financing 101 and other forms of financial assistance for proposed redevelopment projects 2. Annual TIF District status update Mr. Hunt introduced Ms. Kvilvang from Ehlers, who provided the presentations on an overview of TIF and other financial tools and the annual tax increment financing (TIF) district status update. Council Member Baudhuin asked if the “but for” test needs to meet all three elements listed in the presentation. Ms. Kvilvang stated it only needs to meet the top two elements, adding that those are statutory requirements. Councilmember Baudhuin asked for confirmation that the city requires the third element. Ms. Kvilvang stated yes. Council Member Baudhuin asked if the city could say no to TIF for any reason. Ms. Kvilvang stated yes and added it is not an entitlement. She added the EDA/city council makes the decision if and when to provide TIF. Council Member Baudhuin asked if it is correct to say that TIF reduces property values and asked for clarification. Ms. Kvilvang stated this is the “but for” and all taxing jurisdictions continue to receive taxes on the base value but not on the increased valuation. She stated with TIF, the city gives up tax on new value for a period of time to gain taxes on higher value later. Council Member Baudhuin asked how the developers benefit from TIF. Ms. Kvilvang stated every development that comes before council has information on how they may benefit included in the staff report. When the project is completed, the developer must provide detailed information as to eligible expenditures to evidence how TIF benefitted them so the city can ensure they did not receive more TIF than was necessary for the project. Council Member Baudhuin stated he would like to compare the numerical data on how the city and the developer each benefit from TIF. Ms. Kvilvang stated the rate of return is provided in Docusign Envelope ID: 74DD26EE-DF11-4148-A89C-B25C733908E8 Study session minutes -2- Oct. 14, 2024 the staff report, and clarified that the city also receives other benefits outside of financial return for things such as affordable housing, sustainability improvements, and DEI goals. Council Member Baudhuin stated he wants to know how much developers profit on TIF. Council Member Brausen stated developers make about 10-20% on the overall development. Mayor Pro Tem Farris summarized that the city sees the benefit from TIF when the development is completed. Ms. Kvilvang stated yes, that is correct. Council Member Brausen pointed out that the city also continues to receive baseline property taxes during the TIF district period. Council Member Rog stated she is not opposed to TIF, but stated she would like to be more discerning about its use. She noted the comparison between two properties, Corsa and Risor, which are located next to each other. Corsa utilized TIF while Risor did not, and they were both required to adhere to the city’s inclusionary affordable housing policy. She stated it is more transparent to note that the city does not only obtain affordable housing through TIF, and there are developers who do not request TIF. Ms. Kvilvang stated that is correct and noted that Risor is an age-restricted development which has different financial assistance available to it. Council Member Rog asked for examples of tax abatement and where it is used in the city. Ms. Kvilvang stated it has never been used in St. Louis Park, and it was only presented as a tool. Mr. Hunt added it typically does not generate enough assistance to fill project gaps and therefore hasn’t been used previously. Ms. Kvilvang clarified that tax abatement is a tool that may be used when TIF is not allowed to do certain things with a development site. Council Member Rog stated for transparency, there is general agreement that the benefit of tax abatement to counties and school districts is that they can say no to tax abatement. That suggests there is an impact on counties and school districts. Ms. Kvilvang agreed that counties and school districts would not receive the benefit as would cities, but the amount of tax captured in TIF districts is so insignificant to the overall budget for Hennepin County that it is not as concerning to them. She added there is no impact to school districts either because the taxes are based on the prior years' valuation and tax levy. She added there are also no impacts from TIF because funds are based on the number of students a school district has. Council Member Rog observed that there is, however, an impact on residents. Ms. Kvilvang disagreed and stated the school districts will say there is no impact as well. Council Member Rog asked where the 30% of taxes go. Council Member Brausen stated that tax revenue goes to the affordable housing trust fund and other areas. Ms. Cruver added what Ms. Kvilvang is focusing on is the tax rate, not the levy increase. She stated we will always get the same amount of revenue because the levy is set and collected. With TIF, once it is decertified, the levy is spread out among a lot more tax capacity, but the amount the city collects is set by the levy adoption process and is unaffected by TIF decertification alone. The school district tax is set by state statutes and the only difference for school districts and possibly missing tax monies is because the city has more interest in Docusign Envelope ID: 74DD26EE-DF11-4148-A89C-B25C733908E8 Study session minutes -3- Oct. 14, 2024 economic development of the city, but that concern is not in the schools’ purview or interest. She stated there is a chance there was a small increase in the property values for the TIF district which is what the city would forgo if there was no TIF district. Council Member Rog noted the special legislation on affordable housing and asked if there is a plan to ask for an extension. Ms. Barton stated that it is part of the city’s legislative priorities for 2025 and it was in 2024 also. Council Member Rog noted she has concerns about seeing three-bedroom units as some of these are market rate, and she wants to be discerning about what we are subsidizing. Ms. Barton stated the TIF received is facilitating the creation of the affordable units, even though there are market-rate units in the development also. Ms. Kvilvang added there also needs to be proportional distribution between the type of units in the development, as well as a certain number of three-bedroom units in the development as required by the city’s inclusionary housing policy. Ms. Barton stated the council can make a change in the inclusionary housing policy to a different number also, but added this will then change the TIF needed to subsidize a greater number of affordable three-bedroom units. Council Member Rog asked how Aquila Commons is funded, as an owner-occupied project. Ms. Kvilvang stated that is by a “pay-as-you-go” note. She noted there are residents who would like more of this kind of affordable owner-occupied housing. Council Member Rog pointed out market-rate housing versus affordable housing. She stated that market-rate rental housing is something the city has a lot of now, and has been supported by TIF. People are more interested in affordable rental housing and ownership opportunities versus market-rate rental housing. She stated she would like to have more affordable housing within the city, adding this is what the community wants and what the studies are saying is needed, which is 30%. Council Member Brausen stated the city has used TIF judiciously over the years and noted the example of the former Santorini site which sat vacant for over 15 years. Now, with the inclusionary housing policy, the city was able to get 233 units of housing of which 20% of the units are affordable. He added there are also a couple of affordable three-bedroom units that would not have existed except for these policies. With the vacant property, there had been no tax benefit for 15 years. Using TIF, the city was able to get something that has a substantial value for the community. Council Member Brausen stated the market-rate units all seem to fill up and developers would not build them if they were not making a profit on them. He pointed out there are not high vacancy rates in St. Louis Park, and shared he also hears the city has too much rental housing. He stated there is an issue with affordable home ownership within the city as well. The city must also deal with the realities of the existing market and where people want to spend their money. TIF subsidizes affordable housing in this community and increased tax revenues would not exist without these developments. Docusign Envelope ID: 74DD26EE-DF11-4148-A89C-B25C733908E8 Study session minutes -4- Oct. 14, 2024 Council Member Rog stated she is not opposed to TIF in general and added she is not demonizing renters. She did not suggest there are too many market-rate apartments for people to rent. She stated she is most concerned about having discernment as it relates to TIF. Ms. Kvilvang indicated that the last four developments noted in the staff report are all affordable rental housing. The council will need to look at the tax implications of developments going forward, even with the city’s very well-developed tax base. She stated that all-affordable developments pay one-fourth of the taxes the market-rate developments pay, and these are factors to consider when looking at goals. Council Member Baudhuin stated he appreciates this conversation and the tension around it. Communications/meeting check-in (verbal) Council Member Rog stated there is a community event on Tuesday, Oct. 15 at Westwood Hills about the community safety plan from 4-7 p.m. The meeting adjourned at 7:22 p.m. ______________________________________ ______________________________________ Melissa Kennedy, city clerk Nadia Mohamed, mayor Docusign Envelope ID: 74DD26EE-DF11-4148-A89C-B25C733908E8