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HomeMy WebLinkAbout2025/02/18 - ADMIN - Minutes - Economic Development Authority - Regular Official minutes EDA meeting St. Louis Park, Minnesota Feb. 18, 2025 1. Call to order. President Budd called the meeting to order at 6:03 p.m. a. Roll call Commissioners present: President Sue Budd, Lynette Dumalag, Paul Baudhuin, Tim Brausen, Yolanda Farris, Nadia Mohamed (arrived 6:05 p.m.), Margaret Rog Commissioners absent: none Staff present: City manager (Ms. Keller), city attorney (Mr. Mattick), community development director (Ms. Barton), finance director (Ms. Cruver), administrative services director (Ms. Brodeen), senior planner (Ms. Chamberlain), community engagement coordinator (Mr. Coleman), economic development manager (Mr. Hunt), zoning administrator (Mr. Morrison), housing supervisor (Ms. Olson), deputy city clerk (Ms. Scott-Lerdal), HR director (Ms. Vorpahl), planning manager (Mr. Walther) 2. Approve agenda. It was moved by Commissioner Brausen, seconded by Commissioner Farris, to approve the EDA agenda as presented. The motion passed 6-0 (Commissioner Mohamed absent). 3. Minutes. a. EDA meeting minutes of Jan. 21, 2025 Commissioner Dumalag noted a correction on page 2, paragraph 2 to read, “Commissioner Dumalag stated that the city was in negotiations with the developer when the letter was received. She shares the concerns that Commissioner Rog presented, but noted she will support the recommended action since an applicant, by law, is not judged on their hiring practices. Commissioner Dumalag reiterated that more questions will come up when the developer will come before the city council for TIF or other incentives. She stated that the city council also has a responsibility to the taxpayers.” Commissioner Dumalag also noted to staff that on the city website, the video link to the city council and EDA meeting of Jan. 21, 2025 is incorrectly linked to a planning commission meeting. It was moved by Commissioner Brausen, seconded by Commissioner Farris, to approve the EDA meeting minutes of Jan. 21, 2025, as amended. The motion passed 6-0 (Commissioner Mohamed absent). Docusign Envelope ID: 725EB51C-B7AD-4142-A9A8-F80570BF9A1C Economic Development Authority -2- Feb. 18, 2025 4. Consent items. a. Approval of contract with Kutak Rock LLP for Economic Development Authority legal services It was moved by Commissioner Brausen, seconded by Commissioner Baudhuin, to approve the consent items as listed and to waive reading of all resolutions. The motion passed 6-0 (Commissioner Mohamed absent). 5. Public hearings – none. 6. Regular business. a. EDA Resolutions No. 25-06 and 25-07 establishing the Terasă Tax Increment Financing District and interfund loan to reimburse EDA for costs related to administering the district - Ward 4 Mr. Hunt presented the staff report. Commissioner Brausen stated that although this project is in Ward 4, it involves the whole city. He is excited about the project, which will be used for affordable and market rate housing as well as retail. The commercial market is changing rapidly, and this is an appropriate use of property; he will support the requests. Commissioner Rog stated throughout her time as a commissioner and council member, she has found it challenging to find the proper entry point and timing for sharing her views on Tax Increment Financing (TIF) funding requests. TIF funding approvals come before the EDA and council for each project, and only now are they being asked to approve the actual funding agreement of $5.54 million. Commissioner Rog stated that she will oppose this request in keeping with her current views and concerns regarding what she feels is the overuse of this financing tool. She shared she is in the minority in this position and respects the differing perspectives of staff and her fellow commissioners. However, she does feel it is important to continue voicing her concerns and her rationale for opposing the use of TIF for this development. Commissioner Rog stated this development will house an estimated 350 to 400 new residents. There will be no increase in public funding via property taxes for city services the residents will utilize for the next decade. Combined with all the other new and planned multifamily developments and existing TIF agreements, she still struggles to grasp how thousands of new residents will not create additional demands on staff and the budget. Policing services, emergency medical services programs, events and other benefits residents enjoy are funded via property taxes. Commissioner Rog stated we do know that TIF is tax revenue that will be collected in the future, but TIF agreements should be balanced against the cost of providing services to current Docusign Envelope ID: 725EB51C-B7AD-4142-A9A8-F80570BF9A1C Economic Development Authority -3- Feb. 18, 2025 residents. It is her belief that this particular development truly meets the identified housing and retail needs that most residents really want. Commissioner Rog referenced the 2023 Maxfield Housing Study, which predicted saturation of the market rate multifamily rental housing market and even recommended a pause on this type of housing for now. The report also recommends adding significantly more senior housing such as condominiums and townhomes; this is the kind of housing she could more easily support with TIF, while understanding she cannot control everything developers do on private land. Commissioner Rog stated she can understand why the developer wants to build this type of housing and retail development. With a market rate of 80%, including a grocery store and drive- through coffee shop, this makes sense from an investment standpoint. However, she will not support subsidizing this investor and developer to guarantee or increase the likelihood of a high rate of return on their investment by deferring property taxes for over a decade. Commissioner Rog stated the developer would be required to adhere to the city’s affordable housing and green building policies regardless of TIF and the Planned Unit Development (PUD) has already been approved. She added there is already a guarantee of affordable housing, which is part of her consideration in opposing the TIF. Commissioner Rog stated staff, and the EDA have different perspectives on TIF that make sense to them and work for them. She noted her intent was not to suggest the city should never use TIF; she hopes her comments create space for an interest in more detailed future conversations about the pros and cons of each TIF request. She stated she will be voting against the requests. Commissioner Dumalag stated there have been many discussions on TIF, but she will vote in support of this motion. She stated this is a class B- property and she has toured it, noting there are many opportunities for this asset. Generally speaking, the West End is a great commercial district that wants more walkable spaces to amenities, and noted she will support the request. Commissioner Baudhuin stated he is torn and feels compelled by Commissioner Rog’s words. He agrees with many of her points, but because of the largely vacant nature of the business park, he supports this project because something needs to happen in that area. There also needs to be more affordable housing in the West End. He added the EDA needs to take a very serious look at TIF. He is concerned that the city has entered a place where the “but for” clause has become a “must do” clause and he wants to examine this more. It feels like commissioners are being forced to give applicants TIF even if they meet only a minimum of criteria and wonders how “but for” is determined. He will support this motion but also supports Commissioner Rog’s position. Commissioner Brausen stated TIF is being mischaracterized as a handout to developers and that is not the way the city utilizes it. He stated it is a loan for future tax revenues that would not exist “but for” this development occurring. He stated the developer actually needs the loan to make the project financially feasible and profitable, adding the project would not proceed otherwise. Docusign Envelope ID: 725EB51C-B7AD-4142-A9A8-F80570BF9A1C Economic Development Authority -4- Feb. 18, 2025 Commissioner Brausen stated the city hires consultants to go through an analysis on the project. Based upon the consultants' recommendation, it makes sense to lend this development $5.5 million of future tax revenues. The land is appraised at about $6 million, which generates $300,000 worth of tax revenue, and that tax revenue is still going to come back to the city. He explained what the city is loaning out is the funds for additional tax revenue that it is going to receive for a $91 million assessed property, while still having the $330,000 in base value to provide essential services to the property. Commissioner Brausen noted that new residents pay for utilities which contribute to paying for utility costs, as well as franchise fees and other taxes related to the property that will pay for road repairs and other things. The only question is whether adding 300 residents will truly increase public safety expenditures substantially, noting he does not think there is any evidence of this. The city will get a tremendous return on investment that it would not have had otherwise. The addition of multiple affordable units includes some housing targeted towards people that earn 30% of the area median income. Commissioner Brausen stated the importance of a development that promotes economic growth and housing affordability at the West End. He will continue to support this type of development within the city using TIF. Commissioner Rog asked if $40,000 is the property tax currently paid annually to the city currently. Mr. Hunt stated that the amount was approximately correct. Commissioner Rog stated that the amount is lower than the 32% the city typically collects and asked why. Mr. Hunt stated the property currently pays less than $42,000 in property taxes, which reflects its assessed value determined by its commercial property class rate, property value and the vacancy in the building. Commissioner Rog asked about housing vouchers and if that is guaranteed income to the developers, and if there is any risk or financial outlay. Ms. Barton stated the vouchers will allow occupants to pay no more than 30% of their gross income while the voucher pays the rest when the unit is occupied. She stated housing vouchers are typically granted for five years by the housing authority but can be granted for up to 20 years. Commissioner Mohamed stated she agrees with Commissioner Rog’s comments; the subject of TIF will continue to come back for discussion. She agreed with Commissioner Brausen’s and Baudhuin’s comments as well and shared that in her opinion, the city is not being forced to do anything. She stated TIF is a policy decision furthering goals for the city. The West End should have more affordable housing and if it adds to economic growth of the city, she is in support of that. She added that commissioners do have autonomy and are not forced to say yes to projects, and that they are empowered to say no if something does not fit the goals of the city. Commissioner Farris stated the space is not being used adequately and this brings affordable housing to the West End, and she will support the requests. President Budd stated she will also support the motion and stated there is a huge housing shortage throughout Minnesota. She stated the market rate is determined by supply, so the Docusign Envelope ID: 725EB51C-B7AD-4142-A9A8-F80570BF9A1C Economic Development Authority -5- Feb. 18, 2025 more the city adds to supply, the more it can impact the market rate by the basic laws of economics. President Budd commented that adding housing, as far as it relates to TIF, can be difficult to understand but the upcoming projects will add substantially to the city’s budget. She noted additional TIF at this point makes sense relating to the city’s goals: this is a $91 million project, and taxes will go from $42,000 to nearly $400,000 within 11 years. This request meets the city’s long-term goals, and while she appreciates Commissioner Rog’s reference to the Maxwell Report and feels it is worth revisiting, she will support the requests. Commissioner Brausen added that the city’s portion of taxes is $41,656 for 2025 and the $300,000 is what the city’s portion would be after decertification of TIF in 11 years. He summarized that at some point, the city will collect significantly more taxes. It was moved by Commissioner Brausen, seconded by Commissioner Mohamed, to adopt EDA Resolutions No. 25-06 establishing the Terasă Increment Financing District and interfund loan and to adopt EDA Resolutions No. 25-07 authorizing an interfund loan for the advance of certain costs in connection with the administration of Terasă TIF district. The motion passed 6-1 (Commissioner Rog opposed). b. EDA Resolution No. 25-08 approving the contract for private redevelopment between the EDA, the city and Terasă LLC – Ward 4 Mr. Hunt presented the staff report. Commissioner Brausen stated he generally does believe that this development furthers the purposes and the strategic priorities in the city. It is in the interest of our residents to create additional housing, and he will support the redevelopment. It was moved by Commissioner Brausen, seconded by Commissioner Mohamed, to adopt EDA Resolution No. 25-08 approving private redevelopment contract between EDA, the city, and Terasă LLC. The motion passed 6-1 (Commissioner Rog opposed). 7. Communications and announcements - none. 8. Adjournment. The meeting adjourned at 6:34 p.m. ______________________________________ ______________________________________ Melissa Kennedy, EDA secretary Sue Budd, EDA president Docusign Envelope ID: 725EB51C-B7AD-4142-A9A8-F80570BF9A1C