HomeMy WebLinkAbout02-14-2000 Council Work Session2
MINUTES OF THE ORONO CITY COUNCIL WORK SESSION
HELD AT 5:00 P.M., MONDAY, FEBRUARY 14,2000
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1. Tax Increment Financing
Rusty Fificld of Ehlers Associates provided a general explanation of what tax increment financing
is and how it works.
Kelley indicated a concern that the City could sell bonds for improvements; and a future Council
could use the TIP revenue for other purposes, and find itself without funding for the bonds. Kelley
also indicated a concern that the City would use the TIP revenue for operating expenses, and would
become dependent on the TIP revenue to fund significant services. At the time that the TIP district
expired, the City would be left without the TIP revenue, but would still have the demand for the
services.
Pifield indicated that statutory restrictions regarding how the TIP revenue is used, and the way the
City structures its obligations regarding the TIP revenue, can prevent these problems.
The Council indicated an interest in obtaining more information regarding a potential TIP district,
specifically the potential benefits of a TIP district in Navarre, 'fhe Council directed that staff put
together information on all parcels alopg County Road 1 5 adjacent to the City's public parking lot
and those parcels on the south side of Count) Road 15. I he information will include the current
assessed value and taxes paid for each parcel, and the assessed value and taxes related to potential
development or redevelopment of specific parcels.
The Council questioned when the district would have to be in place in order to capture the new taxes
related to the new development on the Church property. (Rusty Pifield has indicated the district has
to be in place before a building permit is issued for the development.)
2.Governance Issues
Jabbour indicated many things are accomplished due to relationships established with key people.
It can take years to build these relationships. It is not possible for one person to build the necessarv'
network of relationships. If all Council Members are involved in building these relationships, it
would strengthen the City’s ability to impact key issues.
Kelley suggested the City take advantage of the know ledge, experience and networks of those who
have scrN cd the City in the past, such as former mayors and former commission members.
Jabbour indicated there are many good people in the communitv ’ w ho would make good mayors and
council members, but they will be surprised and potentially ovenvhclmcd by the time and effort
required to be an effective mayor or council member. The Council needs to create some sort of a
job description so that potential mayors and council members can be clear about what is expected
of them.
Moorsc indicated the Mayor, Council and City Administrator have not discussed how they can best
work together. This includes the most basic aspects, such as communication - who is responsible
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MINUTES OF iHE ORONO CITY COUNCIL WORK SESSION
__________________HELP AT S;00 P.M., MONDAY, FEBRUARY 14,2000__________________
for keeping ever>'one informed, what responsibility does each member have for keeping the others
informed of his or her activities. Right now, the Mayor plays the key role in communication and
coordination. We need a set of guidelines to ensure we can operate effectively, regardless of who
is mayor.
Sansevere indicated any guidelines put together should not discourage Mayor Jabbour from
continuing his efforts and involvement.
Moorse suggested the most eff ective way for the Mayor, Council and City Administrator to develop
an understanding about what is expected of each, and how they can best work together, is to take a
day to work with a consultant/facilitator who is familiar with city governance issues.
Dick Flint asked whether it would be better to wait until after the next election to do this.
Jim Murphy indicated an important part of the legacy of the Mayor and City Council is their
philosophy and perspective on governance - their thoughts about how the Mayor, Council and City
Administrator can most effectively work together for the best interests of the City. If the current
Council can work through these issues and provide the next Council with a framework for
governance, they will have given the new' Council a good head start.
Dick Flint asked whether, rather than spending a full day on a Friday, it might work to spend a half
day on Friday and a half day on Saturday.
Murphy indicated two full days would be ideal, but two half days would work well, since many
positive things can happen during the informal social time in the evening between the Friday session
and the Saturday session,
1'he Council indicated they are willing to move ahead w ith an off-site facilitated session.
3. Highway 12 Water and Sewer Project Connection Charges
Moorse indicated the reduction in connection charges is being proposed for two reasons.
1. Tlie projected revenues e.xceed the project expenditures.
2. The connection charges are high compared to those in other cities. This puts the
City at a disadvantage in its efforts to attract quality development, particularly in
the area guided for medium-density residential development.
Moorse indicated the owners of the property in the northwest quadrant of Willow and 12 may expect
to receive a credit against the connection charges, based on a sewer and water assessment paid in
1965. Glenn Cook, the City's consultant engineer, has indicated it docs not appear they would be
eligible for a credit. This issue will be further explored prior to bringing final connection charge
reductions to the Council.
rhe Council indicated support for the connection charge reduction.
MINUTES OF THE ORONO CITY COUNCIL WORK SESSION
HELD AT 5:00 P.M., MONDAY, FEBRUARY 14,2000
4. City Administrator Compensation
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City Council Work Session
5:00 p.m., Monday, February 14,2000
Orono City Council Chambers
2780 Kelley Parkway, Orono, Minnesota
AGENDA
1.
2.
3.
Tax increment financing.•3
City Administrator compensation.
Suggested process for clarifying “governance” issues and operational issues
related to the Mayor/Council/City Administrator.
4. Highway 12 water and sewer project connection charges.
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. i^iii ^ m'i i.MT-I ~i ninrii -inraiMaTif i i -1 nt i-k T I
TO:
FROM:
Mayor Jabbour and Orono City Council Members
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Ron Moorse, City Administrator
DATE:February 2,2000
SUBJECT: Tax Increment Financing (TIF) in Navarre
Mayor Jabbour has advised staff that a new proposal for a substantial retail development on the
former church site in Navarre is being developed. With the potential for this redevelopment project,
staff would like to revisit the idea of setting up a Tax Increment Financing district in Navarre. A TIF
district would enable the City to capture the increased taxes to be generated by the new development
for use in funding public improvements in the Navarre commercial area or in assisting
redevelopment projects in Navarre.
What is TIF and how does it work?
In a nut shell. Tax Increment Financing is the ability to capture and use the property tax revenue
from a new development within a defined geographical area. When a TIF district is put in place, the
taxes that are currently being paid based on the property value prior to the new development
continue to be received by the various taxing jurisdictions; i.e., city, county, school district, etc. The
new taxes based on the value of the new development (which excludes the pre-developmenc value
of the property) are captured by the City. No other taxing jurisdictions receive ta.\es based on the
value of the new development.
Tax Increment Financing provides a new source of revenue the City can use to assist its economic
development efforts. Tax Increment Financing can be used to:
• Provide public improvements to enhance a commercial district (i.e., repairing and
relighting the Navarre public parking lot).
• Increase the City ’s leverage in terms of the type and quality of new
development/redevelopment.
• Assist a redevelopment project that would not be economically feasible without
financial assistance.
Rusty Fifield of Ehlers, the City ’s bond consultant, will attend the work session to answer questions
the Council may have regarding TIF.
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TO:Mayor and City Council
FROM:Ron Moorse, City Administrator
DATE:February 10,2000
SUBJECT: City Administrator Compensation
After completing the annual performance evaluation of the City Administrator, Council began to
discuss compensation adjustments for the City Administrator but had to adjourn before making any
decisions. The Council was previously provided with a memo with salary and car allowance
information to assist the Council in making a decision regarding compensation adjustments.
• ^
TO:Mayor and City Council
FROM:Ron Moorse, City Administotor
DATE:February 10,2000
SUBJECT: Addressing “Governance” Issues and Operational Issues Related to the Mayor, City
Council and City Administrator
The Council has had several discussions regarding the expectations of the City Administrator,
particularly in relation to the key role played by Mayor Jabbour, and how the City will carry on at
the time Mayor Jabbour is no longer Mayor. These discussions have touched on the broader question
of the role of the Mayor, the City Council and the City Administrator, and how they can work
together in a way that enables everyone to contribute most effectively.
Currently, as situations occur that require action, they are dealt with not so much according to an
articulated method of operation as by someone jumping in to address the problem. Most often this
has been the Mayor. Although this has, in recent years, been successful from a results standpoint,
it is not an ideal long-term approach. The most obvious reason is that the Mayor will not be Mayor
forever.
The Mayor, Council and City Administrator need to be clear about how they will operate to assure
that they can function effectively, and can do so regardless of who is Mayor. This involves clarifying
what is expected of the Mayor, Council and City Administrator, and how they will work together.
I believe this could most quickly and effectively be accomplished with the assistance of someone
outside of the organization with strong expertise in city governance and the effective functioning of
Mayors, City Councils and City Administrators. 1 would like to discuss with the Council moving
forward in this manner.
TO:
FROM:
DATE:
Mayor and City Council
Ron Moorse, City Administrator ^^
January 27,2000
SUBJECT: Connection Charges Related to the 1989 Highway 12 Water and Sewer Improvement
Project
When the 1989 Highway 12 water and sewer improvement project was constructed, the funding was
to come from two sources.
1. Special assessments on the properties that were ready to develop.
2. Connection charges for the properties that would develop later.
The assessment amount was set at approximately $5,500 per unit for the combined water and sewer
costs. The connection charge amount was set at the same level. Each year, the connection charge
has bc ^n increased by a cost-of-living factor. For the year 2000, the combined water and sewer
connection charge is $9650 per unit. The Council may want to review the connection charge for two
reasons.
The connection charge amount is substantially higher than similar connection charges
in other cities. This is due to the high cost of the improvement project being spread
over a relatively small area. The high connection charge amount could make it
difficult for the City to obtain the type of development it wants, particularly on the
40-acre medium density residential parcel, but also on the 17-acre commercied parcel.
1.
For example, if the 40-acre residential parcel was to be developed at 3 units per acre
on the approximately 30 acres of dry buildable land, the development would be 90
units. The connection charge for 90 units @ $9,650 per unit would be $868,500.
This is a very large cost for water and sewer service, and it does not include the cost
of installing water and sewer lines throughout the development.
2.If the City were to collect the $9,650 per unit cotmection charge on all development,
the City would collect approximately $700,000 of revenues beyond the amount
required to pay all expenses related to the 1989 water and sewer project.
Based on the above two factors, staff has developed a proposed revised connection charge schedule.
The proposed schedule changes the connection charge for the school property, the ice arena property,
the medium density residential property, and the commercial property from a per-unit charge to a
per-acre charge. The advantage of the per-acre charge is that the per-acre charge can be set at an
amount sufficient to cover project expenses, and the City will receive the planned amount regardless
of the number of units developed.
The attached spreadsheet shows the total expenses and the total estimated revenues using the revised
connection charge amount.
•• •
Connection Charges Related to the 1989 Highway 12 Water and Sewer Improvement Project
January 27, 2000
Page 2 ____________________________________________
The comparison of the revenues generated from the various properties under each connection charge
option is shown below.
Property Per Unit Charge Per Acre Charge
Medium Density Residential $869,000 $520,000
Commercial $290,000 $221,000
Orono Ice Arena $120,000 $58,500
Orono Schools $595,840 $390,000
Total $1,874,840 $1,189,500
As the above table shows, while the Orono Schools and Orono Ice Arena connection charges would
be reduced significantly, the most substantial reduction is related to the medium density residential
property; which is the property on which the City is most interested in facilitating a quality
development.
Potential Connection Charge Credits
In 1967, the City installed sewer and water lines along Highway 12 to serve the Orono Schools and
the City’s industrial district. The project also provided water and sewer facilities to serve the area
north of Highway 12 between Willow Drive and Old Crystal Bay Road in the event the MUSA was
expanded to include that property. This property- was assessed for the water and sewer project in the
total amount of $44,146 based on both a cost-per-lineal-foot and a cost-per-unit.
Although the 1989 water and sewer project provided additional facilities to enable water and sewer
service to the property between Willow Drive and Old Crystal Bay Road, the property owners may
claim a credit against the 1989 connection charges based on the assessment paid for the 1967 project.
The amount of credit they could claim could be as high as 30 units since that is the number of units
allowed by the zoning in 1967. If they received a credit for 30 units, it would result in a loss of
$290,850 in connection charge revenue. The City would argue that the 1989 project provided
increased capacity without which the 1967 water and sewer facilities could not have been used by
the property. Therefore, the property owners should not receive any credit.
The Council may want to take into account the potential credit against the connection charges in
determining any changes to be made in the current connection charge amounts.
Staff will try to further clarify the potential for credits if the Council determines the connection
charge amounts should be changed.
• ••
1989 Water & Sewer Project
Eipenses:
Principal and Interest Payments
1989 Revenue Bond
1995 Refunding Bond
Total Principal and Interest Payments
Fiscal Agent/City Service Charges
Sl,618»031
1,783,729
$3,401,760
27,740
Total Debt Service & Related Costs
2000 Interim Sewer Capacity Lift Station Project
TOTAL EXPENSES
Revenges:
Developer Deposits
Developer Assessments
Phase I - Principal and Interest
Phase II - Principal and Interest
Total Developers’ Revenue
$176,570
261,239
419,535
$857,344
Sewer Fees (from non-Hwy 12 Lift Station Project)
Sewer Op Constr acct (unused bonds from 89 project)
1980 Debt Fund - closed to water portion 1994/1995
398,424
877,265
97,809
Total Confirmed Funding
Estimated Additional Funding
Two acre residential development (25 units @ $9,695)
Medium density residential development (40acres @ $13,000)
Commercial development (17 acres @ $13,000)
Orono Ice Arena (4.5 acres @ $13,000)
Orono Schools (30 acres @ $13,000)
Total Estimated Additional Funding
Total Revenues (Confirmed and Estimated Additional)
Excess of Revenues Over Expenses
updated 01/26/00
T0M\DEBTSERV\89-DEBT.I23
$3,429,500
200,000
$^629^
$2,230,842
$242,375
520,000
221,000
58,500
390,000
1,431,875
$3,662,717
$33,217