MINUTES – MORRIS CITY COUNCIL
- REGULAR MEETING – OCTOBER 9, 2018
The regular meeting of the Morris City Council was called to order at 5:15 p.m. this 9th day of October, 2018, by Mayor Giese in the Council Chambers of the Morris Senior Citizens/Community Center.
The Pledge of Allegiance was recited.
Roll call was taken with the following members present: Council member Wohlers, Solvie, Gullickson, Miller, and Mayor Giese. Also present was City Manager Hill, Finance Director Raasch, City Attorney Jordan and Police Chief Tiegs.
COMMENTS: Introduction of Ben Erickson, GreenCorps Service Member: City Manager Hill introduced Ben Erickson. Erickson is a GreenCorps service member doing an 11 month internship in Morris for the MN GreenCorps to help reduce chloride levels in the water and reduce energy consumption of buildings in the city.
Sydney Bauer was present at the meeting and informed the council that the biomass plant at UMM is up and running and burning corn cobs. Bauer stated it was interesting that cobs from local farmers are heating the entire University campus by using bio gas.
PUBLIC HEARINGS: Proposed Establishment of TIF District No. 16 and Resolution Establishing TIF District No. 16::
Nick Anhut from Ehlers and Associates was present at the meeting. Anhut explained that tax increment financing is the ability to capture the future taxes related to a new development and allocate those taxes towards financing. The financing could be either that development, or some public infrastructure that’s going to support it, to overcome some barrier to the financing of the project. Anhut explained that John Timmerman, the developer, has approached the city to build additional housing units and is asking for assistance in the form of future tax increments to finance the project. Anhut stated Timmerman has already completed one phase of the development and anticipates building an additional 40 units on the property. Anhut noted there are considerations for the county and school board because it is their potential taxes that are being deferred. The council and EDA can establish the district by approving the two resolutions. Anhut indicated there would be further steps to actually negotiate a contract to set the terms for what the developer needs to do.
Anhut explained this would be a housing TIF district intended for occupancy in part by individuals at affordable levels. The duration of the district can be for as long as 26 years and the potential taxes that could be generated from the additional 40 units is potentially $1.2 million over that entire term. Anhut pointed out that the initial four units cannot be captured as tax increment because they were started before these proceedings for the district. Anhut indicated it is up to the EDA, in future actions, to determine how to allocate or spend the money. The development of the property must occur within five years.
Giese asked if it needs approval from the county and school board. Anhut stated they do not have a formal say or action to approve it, but they were provided with a 30 day notice of the TIF plan. There were some initial comments from the county coordinator but nothing from the school.
The difference between tax abatement and TIF was discussed.
Anhut added that the basis of the TIF tool is the “but for” clause, which means that but for this assistance the project wouldn’t happen. The taxes are deferred rather than actively allocating the taxes to a project because it wouldn’t happen without the TIF. Anhut noted they reviewed the cost and rent structure that is being proposed and compared that to rents within the city itself and there is a gap. Anhut stated the rents don’t overcome the mortgages, plus the up front development costs of building new housing here in the city.
Council member Gullickson asked if tonight established the TIF district and the administration of the district is done at a later date. Anhut noted the project could be scaled down to a smaller number of units, or the project abandoned. Anhut noted that until the contract is signed, the city doesn’t need to take the step of certifying the district with the state, the city can hold onto the certification until a date certain that the EDA and developer have agreed on the terms. Wohlers asked if Timmerman decided not to go through with the project, would the district be open to another developer. Anhut noted the TIF tool would be there but Timmerman would have to sell the parcels of land.
Miller asked what the tax value on the three parcels is if the city does nothing. Nick stated including the four units that are already completed the value would be $389,000 with a tax capacity of $4,561. Anhut indicated if the developer does build the additional 40 units within the 5 year time frame, the expected value is $2.9 million.
Mayor Giese opened the public hearing at 5:37 p.m.
Vance Gullickson, 2 Circle Pines, asked about the county and school district and did not feel that deferring the taxes was an accurate description. Gullickson stated he feels all the other entities are losing that money for their budgets. Anhut pointed out there is no lost revenue and taxpayers are benefiting from a new development by expanding the tax base.
City Manager Hill stated the developer has already built four units and in order to build anything else he's going to need help. The city doesn’t lose anything, but gains potential future taxes. Hill noted that Willie’s Super Valu is a great example, because if it wasn’t for TIF that project wouldn't have been done, the same as this.
Vance Gullickson asked if any jobs are created with this district because TIF money is required to meet community needs such as the creation of quality jobs that provide family supporting wages and benefits. Anhut stated there are no job requirements to create the TIF district and the qualifying use of the statute for this district is to provide quality housing. Anhut noted the district can last up to 26 years but it doesn’t have to be that long. Vance Gullickson asked that the city council weigh the 26 years and what the benefit back to the community is.
Council member Solvie stated without a project there is no generation of taxes so there’s nothing to defer. Solvie asked what the tax value of the undeveloped property is. Anhut stated the value is $97,000, with the house being about $60,000 of that.
Hill affirmed that there are no job requirements in TIF, but there are for tax abatement so when the car lot project was done there was a requirement to create jobs. Hill added that when DEED funds are involved they are also typically based on job creation. In this case, the benefit to the city is housing.
Vance Gullickson stated he is not against TIF and there are positive situations where it works. Gullickson asked if some of the project would be subsidized housing. Gullickson also asked if a housing study had been done that says the city needs 40 additional housing units. Gullickson noted there is an apartment building right behind this property that's been paying taxes for a long time.
Hill stated housing was a need that was identified a long time ago as the city had no market rate housing. Hill noted the new 62 unit apartment building is pretty much full and they want to add to it so that speaks to what the market needed. Hill pointed out the city needs all kinds of housing including upper level, lower level, rental houses, apartment buildings and 1, 2 and 3 bedroom apartments. Hill pointed out Morris is a destination point for workers and where there are jobs there needs to be places for people to live. Hill stated the city needs new development from time to time. Hill noted Timmerman has invested $13,000 of his own money to put this together.
Dan Johnson, Johnson Property Management, stated he has two apartment buildings that have 70 units with eight vacancies in one building and two in another. Johnson indicated he is committed to Morris and continually upgrading his property to be quality units. Johnson asked about affordable housing yet market rate and what kind of rents would be charged since it’s not considered a blighted area or an area to be redeveloped. Anhut explained that the state MN Housing sets the income thresholds every year. Housing units need to demonstrate that at least 20% of the units are available for occupancy for individuals or families at or below 50% of the area medium income or 40% of the units set aside for occupancy for individuals or families at 60% of the area medium income.
John Timmerman, 819 Lake Street, Osakis, stated with climbing interest rates, trade wars and the cost of materials and supplies continuing to rise, he would abandon this project if he does not get the TIF financing.
Melanie Fohl, Stevens County HRA, stated 20% would be that 9 of the 44 units would have to be affordable. Fohl stated because her office does the rental licensing it’s important to note that the declining population on the University campus has had an impact and there are a number of housing vacancies. Fohl added that another development that was developed with TIF district money is asking MN Housing for a waiver from those income limits because they are unable to fill those units.
Income guidelines for the rentals were discussed.
Mayor Giese closed the public hearing at 6:04 p.m.
Solvie stated it seems to him there's a concern about the taxes, but the “but for” test is that if it wasn't for the assistance there wouldn't be any taxes. Solvie noted that University enrollment is down a little bit but Morris has a lot of jobs where the employees work out of town. Solvie indicated new people are getting hired that want to come into town and the city has been deficient in housing in the past. Solvie believes that for the amount of jobs that are in Morris the population should be bigger. Solvie stated it is a benefit that somebody wants to invest in the community and sees it as a positive for the city and the surrounding community.
Council member Gullickson stated she struggles with this a little bit. Gullickson noted that while she appreciates any developer coming into town, the “but for” is that the property was bought and planned for building without any TIF. Gullickson indicated the developer realized it was really expensive but that was the risk he took in putting up these properties.
Wohlers stated he concurs with Solvie and sees it as a positive and a progressive move for the city.
Giese stated he believes development sparks development. Giese believes the population will hold or get better because of this development. Giese indicated he sees no negative in doing this project. Giese noted the “but for” test to him is that it makes absolute sense and it’s a good deal.
Miller pointed out the city is not getting much off the property right now and there will be an increase in housing units. Miller indicated the city should move forward with it from what there is to gain.
Council member Wohlers expressed concern about sidewalks in the area with the new polling location being nearby. City Manager Hill’s recommendation is to move forward with the project.
Council member Solvie moved, seconded by Miller, to adopt Resolution #3575-10-18, Resolution Establishing Tax Increment Financing District No. 16. Upon a roll call vote taken and all present voting in favor, motion carried.
READING AND APPROVAL OF MINUTES: 9/25/18 Regular City Council Meeting Minutes: Council member Solvie moved, seconded by Council member Wohlers, to approve the 9/25/18 regular meeting minutes. Motion carried.
9/25/18 Condensed Version Minutes: Council member Miller moved, seconded by Gullickson, to approve the 9/25/18 condensed version minutes. Motion carried.
CONSENT AGENDA: Mayor Giese moved, seconded by Council member Wohlers, to approve the consent agenda which included the following items:
A. Audit of City Bills
B. Pay Estimate #13 – Magney Construction
C. September Transit Report
D. Gambling Report
PETITIONS, REQUESTS AND COMMUNICATIONS: None
ORDINANCES AND RESOLUTIONS: Resolution Adopting Assessment for Current Services:
Council member Wohlers moved, seconded by Solvie, to adopt Resolution #3576-10-18, Resolution Adopting Assessment for Current Services. Upon a roll call vote taken and all present voting in favor, motion carried.
Resolution Appointing Judges for the 11/6/18 State General Election: Council member Wohlers moved, seconded by Gullickson, to adopt Resolution #3577-10-18, Resolution Appointing Judges for the 11/6/18 State General Election. Upon a roll call vote taken and all present voting in favor, motion carried.
Resolution Authorizing Execution of an Agreement for the Toward Zero Deaths (TZD) Project for 2018-2019: Mayor Giese moved, seconded by Council member Gullickson, to adopt Resolution #3578-10-18, Resolution Authorizing Execution of an Agreement for the Toward Zero Deaths (TZD) Project for 2018-2019. Upon a roll call vote taken and all present voting in favor, motion carried.
CITY MANAGER'S REPORTS & RECOMMENDATIONS: City Manager Newsletter: This was informational for the council.
Ordering a 2019 Ford Interceptor Police Vehicle: Police Chief Tiegs explained that the department was informed that Ford would no longer be making the vehicle they wanted so in order to get one for next year they had to place an order for it by the end of September. The money is budgeted in capital outlay for next year.
There was discussion on the process used to order the vehicle and that it should have come before the council before it was ordered.
Mayor Giese moved, seconded by Gullickson, to approve ordering a 2019 Ford Interceptor Police vehicle. Upon a roll call vote taken and Wohlers, Gullickson, Miller and Mayor Giese voting in favor and Council member Solvie voting against, motion carried.
OTHER BUSINESS: None
INFORMATIONAL ITEMS: MPD Media Reports: This was informational for the council.
Progress Report - Water Treatment Facility: This was informational for the council.
ADJOURNMENT: There being no further business, Mayor Giese adjourned the meeting at 6:46 p.m.