HomeMy WebLinkAboutSP May 1, 1986
CITY of ANDOVER
SPECIAL CITY COUNCIL MEETING
MAY 1, 1986
6:00 P.M.
CALL TO ORDER
l. ROUND LAKE DRAINAGE
2.
ADJOURNMENT
CITY of ANDOVER
SPECIAL CITY COUNCIL MEETING - MAY 1, 1986
MINUTES
A Special Meeting of the Andover City Council was called to order by Mayor Jerry
Windschit1 on May 1, 1986, 7:50 p.m., at the Andover City Hall, 1685 Crosstown
Boulevard NW, Andover, Minnesota.
Councilmen present: Elling, Knight, Lachinski, Ortte1
Councilmen absent: None
Also present: Wayne Anderson of Rademacher & Associates; Jeff Wickert
and Terry Smith of Boisclair Corporation; Arlen Welton
of Holmes & Graven; Dave Kennedy of LeFevere, Lefler,
Kennedy, O'Brien & Drawz; City Attorney William G.
Hawkins; and City Administrator/Engineer, James Schrantz
SHOPPING CENTER DEVELOPMENT/ BOISCLAIR/TIF DISTRICT PROPOSAL
Mr. Wickert explained the development of the shopping center started out as a one-
story concept, then went to a second and third story concept which they found
difficult to market; and they have now revised the plans for a single level
enclosed mall. They are in need of secondary financing to construct this mall
to be of superior quality and to be competitive with the rent levels of the
surrounding area.
He said they are proposing the City establish a tax increment financing district,
which would include all the undeveloped business zones in that vicinity. They
would use the tax increment from Phase 2 for the Phase 2 construction (the
shopping mall), but the broader district would be set up so that several sources
are available to generate additional increment to payoff the bonds. He stated
he does not intend to use tax increment for any of the other phases. Mr. Wickert
explained they have examined two possible financing methods of the tax increments.
The costs of the public improvements such as grading, fill, utilities, etc.,
could be determined and the City assume responsibility for those improvements.
Or the City can use the tax increment money to purchase the land from Boisclair
and lease it back to them.
Ms. Welton then reviewed a draft of the development program for the shopping center,
including a tax increment financing plan for a proposed Tax Increment Financing
District No.1 within Andover. She explained any TIF project must be able to
stand on its own, and the assumption is Phase 2 will generate enough income for
the City to payoff the bonds. A redevelopment and assessment agreement should be
signed before doing any tax increment financing. The City must initiate and
develop a TIF district and determine that the proposed development would not occur
soley through private development now or in the future. The City can also take
into consideration what it wants developed in the area and whether that can or
would be done through private development.
Ms. Welton continued to review Subsections 1.1, 1.2, 1.3, 1.4, and 1.5. She also
noted the City's alternatives to either use the bonds to put in the improvements
on the land or for a land acquisition/lease-back situation. They have estimated
the acquisition of the mall site to cost $950,000. Adding professional services
and capitalized interest, less the discount, the total amount of the ~onds to be
sold would be $1,070,000.
Council questioned why capitalized interest would be needed. Ms. Welton reviewed
the timetable for the project. They propose selling the bonds before September 1
to fall within the existing guidelines for TIFs. Groundbreaking for the mall
would be August 1. The funds would be given to Boisclair as the last amount of
Special City Council Meeting
May 1, 1986 - Minutes
Page 2
(Shopping Center Development/Boisclair/TIF District proposal, Continued)
money needed for the project, which would be about March, 1987. The grand opening
is scheduled for May 31, 1987. She also noted the calculations are very conserva-
tive, including a negative arbitrage factor. And no allowances have been made for
inflation, increased mill rates, etc. Ms. Welton reviewed the bond schedule, noting
it is a 17-year schedule, and the City would not be receiving a full year's increment
until 1989. There would be no principal payment on the bond until 1989.
Council asked when the land would be bought back by the developer, noting it would
need to be bought back at fair market value. Mr. Wickert stated he hoped there
would be several periods of the lease. One would be during the time when the
bonds are outstanding. He would then like to extend that lease for a very long
term beyond that -- a 99-year lease if the City agrees. He does not want to be in
the position of having to acquire the land back in the foreseeable future.
Mr. Kennedy explained that if it is tax exempt property that the City owns and
leases, the statutes require that the taxes are paid in the same amount as if it
were personal property. The developer would pay the taxes directly to the County
Auditor, and the County in turns gives the City the tax increment.
Discussion continued between the Council and those present. Mr. Wickert stated they
absolutely would not be able to construct the enclosed mall proposal without the
tax increment financing. If the City will not agree to tax increment financing,
he supposed the center would be scaled down to a strip-type mall; and he would not
speculate as to when it would be built except to say it would not be very soon.
He felt the advantage to the city is the city receives a quality product, an
enclosed mall, filled with tenants.
Mr. Smith then spent some time reviewing the marketing procedures that are used
to attract tenants to a mall such as this. Mr. Wickert again noted that without
the City's help, they would·~Ótbe able to construct a quality, attractive center
and lease it to tenants ,.at a competitive rate. With the TIF, they will be able
to keep the costs down for their tenants and give them a better product.
Mr. Smith continued reviewing the floor plan, noting the two large tenants of a
supermarket and combination drug store/hardware/variety store. The combination
store lease has been fully executed, and he anticipated executing and making an
announcement on the supermarket within a week. They have not signed any other
tenants, as everything else is dependent on the signing of the supermarket. He
also explained that the many changes that have been taking place in the supermarket
business the last few years has been the major reason they have been unable to
contract with a supermarket and have not been able to proceed with the center.
In further discussion, it was determined there is about $8.4 million left from
the revenue bonds on the project. Phase 1 cost $1.2 million, plus other expenses
involving Phase 2 have been expended. Mayor Windschitl asked how much is being
put into management charges or management fees. Mr. Wickert stated zero, although
they do have overhead costs that will be expended for the project which will come
out of the project.
Mayor Windschitl asked what the mall will be worth once it is constructed. Mr.
Wickert was not sure. It will clearly be worth what the construction costs are,
depending on how full it is. They anticipate the center will be a standard shop
for most tenants except the anchors, which means the walls, lighting, etc., will
be constructed for the tenants.
Council raised some concern over the negative news heard about Boisclair recently.
Mr. Wickert explained that in the Galtier Plaza project, they refinanced the bonds
as they were able to get an interest rate for less than half of what they were
Special City Council Meeting
May 1, 1986 - Minutes
Page 3
(Shopping Center Development/Boisclair/TIF District Proposal. Continued)
paying. But that meant the amount of the bonds were somewhat more. In St. Loui s
Park, they had to back out of a project because they were unable to meet the time
schedule set up by the City. though they would still very much like to do the
project.
Council then discussed the proposal and options available. After some discussion,
the Council generally agreed an enclosed mall would be a desirable development in
that area. But at this point the majority were not in favor of the land purchase/
lease-back option. The preference would be to have the City use the tax increment
to do the public improvements to the site. Also, the Council requested the bond
counsel look at the numbers again to see if the length of the bonds could be
reduced from 17 to 10 years. Both bond counsels present didn't feel that would be
possible, but noted there is a call-back after 10 years. And in all likelihood,
the City would have enough funds to payoff the bonds at that time.
Several Councilmen were also concerned with the tax exempt bond and having to pledge
the full faith and credit of the city for those bonds. Bond counsels then-notèd
there is only a 60-basis-point spread between taxable and tax exempt bonds at this
time, which is one-half of a percent, feeling that might be worth exploring. The
bond market is favorable at this time, but it is not known whether such a taxable
bond issue would be marketable.
Mr. Kennedy then advised the Council to consider whether they want the project done
in the area; and if so, what do they want built there. If they believe it is
necessary to go with tax increment financing, a plan must be drafted. General
obligation bonds would be sold and the tax increment used to pay them off, but
the city is liable for those bonds in any event. So the Council must be fairly
confident the increment will meet the bond payments; and the bond should be paid
off as soon as possible to put the land back on the tax rolls. Mr. Kennedy stated
he is not familiar with the land buy/lease-back option. He also advised that the
program requires a responsible developer and an iron clad development agreement
between the city and that developer with security. He also felt ft may be possible
to go with a taxable bond in this instance where the city would have no liability,
though there is the question of marketability on this type of issue.
Several Councilmem felt the taxable bond would be preferable and asked that it be
investigated further. They wanted to minimize the risk to the City.
Council then discussed the overall tax increment financing district program within
the City, noting the desire has always been to do something with the blighted area
along Bunker Lake Boulevard just west of Hanson Boulevard. Bond counsels stated
cities generally have between 5 and 10 percent of their assessed valuation in TIF
districts. Mayor Winschitl noted in Andover's case,S percent assessed valuation
would be approximately $2.5 million in bonds, of which approxi-ate1y $1 million is
being as~ed for in this project. Attorney Hawkins advised the TIF bond does not
count toward the city's debt percentage limitation.
Councilman Lachinski felt the shopping center is needed now but wanted the Economic
Development Committee to be providing input into the process. Ms. Welton advised
that to meet the time schedule, the City should start negotiating the redevelopment
assessment agreement as soon as possible and proceed with setting up the TIF
district.
Councilman Lachinski also asked bond counsel to find some method for the shopping
center to provide for the level of public services needed for such a center when
the city uses the tax increment to do the improvements to the parcel.
Councilman Knight indicated he would have difficulty with the City having to back
the bond issue, preferring the taxable bonds discussed this evening.
Special City Council Meeting
May 1, 1986 - Minutes
Page 4
(Shopping Center Development/Boisclair/TIF District Proposal, Continued)
It was then agreed to set the next meeting on this issue for May 15 and ask
that the members of the Economic Development Committee be there as well.
MOTION by Knight, Seconded by Elling, that we have a joint meeting with the
Economic Development Committee on May 15 regarding the Boisclair proposal. Motion
carried unanimously.
SOUTHWEST STORM DRAINAGE ISSUE/MEET WITH ANOKA COUNCILMEMBERS
Mayor Windschitl explained he has made arrangements to meet with two members of
the City of Anoka council on Monday morning, May 5, in another attempt to resolve
this issue and discuss some variations of the county proposal. He asked which
two Anodver Councilmen would be able to attend.
Council discussedthe·county proposal to construct over $280,000 worth of storm
drainage pipe to solve the problem. After viewing the area this evening, the
Council generally felt that was a very high estimate, feeling very little pipe
would be needed. They also questioned why the road was being offset toward the
Andover side within the right of way. It was suggested that Andover would bear
the costs of the construction of the system which would drain both Andover and
Anoka if Anoka would allow the use of their system. It was also felt a smaller
pipe could be used, with the control placed within Andover so Anoka doesn't get
flooded out.
Councilman Elling stated he would attend that meeting. Councilman Lachinski said
he would like to but wouldn't know if he would be available until Sunday evening.
It was agreed if Councilman Lachinski is unable to attend, Mayor Windschitl
would be there instead.
APPROVAL OF CLAIMS
MOTION by Elling, Seconded by Knight, that we pay Checks 11007 and 11008 for a sum
of $121,195.92. Motion carried unanimously.
CHANGE PUBLIC HEARING DATE/TRUNK WATERMAIN & SANITARY SEWER/86-3
Mr. Schrantz stated the May 15 date for the public hearing for Project 86-3 must
be changed because of an error in publishing.
MOTION by Knight, Seconded by Elling, to change the date in the Resolution to hold
the public hearing on May 22. (See Resolution R033A-86) Motion carried
unanimously.
MOTION by Orttel, Seconded by Knight, to adjourn. Motion carried unanimously.
Meeting adjourned at 10:48 p.m.
Respectfully submitted,
w"_~ C(-f;l~
Marc la A. Peach
Recordl 9 Secretary