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Home My WebLink About2018-04-10 COMPLETE PACKET CITY OF COTTAGE GROVE Economic Development Authority AGENDA April 10, 2018, 7:30 A.M. Cottage Grove City Hall, Council Chambers 1. Call to Order 2. Roll Call 3. Approval of Minutes 3.1 March 13, 2018 EDA Minutes 4. Business Items 4.1 Economic Development Update/Business Inquiry 4.2 Amendment to Minnesota Investment Fund (MIF) Grant for American Logistics Services LLC 4.3 Letter of Intent with MWF Properties 4.4 Resolution Adopting a Modification to the Development District No. 1, Establishing Tax Increment Financing District 1-18 (Modern Automotive Performance). 5. Public Hearings 6. Other Business 6.1 EDA Calendar 6.2 EDA Comments 6.3 Response to Previous EDA Comments 7. Workshop 8. Adjournment *The next EDA Meeting will be held on Tuesday, May 8, 2018, at 7:30 AM CITY OF COTTAGE GROVE E CONOMIC D EVELOPMENT A UTHORITY MINUTES March 13, 2018 Pursuant to due call and notice thereof, a regular meeting of the Economic Development Authority was th held at Cottage Grove City Hall, 12800 Ravine Parkway, Cottage Grove, Minnesota 55016 on the 13 day of March, 2018. CALL TO ORDER The meeting was called to order at 7:30 a.m. by EDA President Bailey. ROLL CALL Members Present: Myron Bailey, EDA President Wayne Butt, EDA Member Chris Carey, EDA Member Steve Dennis, EDA Vice President Dan Myers, EDA Member Eric Thiewes, EDA Member Ramona Westerberg, EDA Member Members Absent: Staff Present: Charlene Stevens, EDA Executive Director Jennifer Levitt, Community Development Director/City Engineer Christine Costello, Economic Development Director Robin Roland, Finance Director Matt Wolf, Economic Development Specialist Others Present: APPROVAL OF MINUTES 3.1EDA Member Westerberg motioned to approve the February 13, 2018 EDA Meeting Minutes. EDA Member Butt seconded. Motion passed unanimously (7-to-0 vote) BUSINESS ITEMS 4.1 Economic Development Update/Business Inquiry Economic Development Director Costello gave an update on the projects that are in development around the City of Cottage Grove. Economic Development Authority – Minutes th March 13, 2018 Page 2 of 3 4.2 Request the City Council call for a public hearing for the creation of a TIF district for Modern Automotive Performance Economic Development Specialist Wolf presented on the request from Modern Automotive Performance for financial assistance in the form of Tax Increment Financing and the initial step of requesting the City Council to call for a public hearing. EDA Vice President Dennis made a motion to approve the resolution requesting the City Council of the City of Cottage Grove call for a public hearing on May 2, 2018 to consider the proposed adoption of the Modification to the Development Program for Development District No. 1 and the proposed establishment of Tax Increment Financing District 1-18. EDA Member Thiewes seconded. Motion passed unanimously (7-to-0). 4.3 My Future Cottage Grove Retail & Restaurant Presentation Economic Development Director Costello gave a presentation on the current state of retail across the United States and specifically as it relates to Minnesota. The presentation was given as part of the My Future Cottage Grove Retail & Restaurants meeting and shared with the Economic Development Authority to prepare for the ICSC Conference. EDA Vice President Dennis commented that he thought the presentation was the best he has seen since being on the EDA. EDA President Bailey agreed and commented on the issues of deed restrictions that occur on properties that restrict businesses from entering locations and as result causing those properties to remain vacant despite their demand. EDA President Bailey asked if there was a better way to layout or plan The Shoppes at Cottage View location as the City of Cottage Grove prepares to go to ICSC. Economic Development Director Costello stated that it would benefit the City of Cottage Grove to reexamine the site plan, talk to the land owner on doing some sort of study on including high density residential, walkability and mixed use. EDA Member Butt asked who was attending the ISCS event. EDA President Bailey responded that it would be EDA Vice President Dennis, Economic Development Director Costello, City Administrator Stevens and himself. EDA Member Butt also asked that if the trend in the market is more online sales how could the City of Cottage Grove attract a large online retailer like an Amazon. Economic Development Director Costello stated that the City of Cottage Grove had completed an AUAR (Alternative Urban Areawide Review) to improve the marketability of the land available in Cottage Grove. PUBLIC HEARING None OTHER BUSINESS 6.1 Calendar The EDA looked over the upcoming events that were occurring on the calendar. 6.2 EDA Comments EDA Vice President commented on the City of Cottage Grove’s excellent customer service and ability to fast track projects for development. 6.3 Response to Previous EDA Comments Economic Development Authority – Minutes th March 13, 2018 Page 3 of 3 None WORKSHOP 7.1 None AJOURN EDA Member Westerberg made a motion to adjourn. EDA Member Thiewes seconded. The meeting adjourned at 8:17 a.m. (7-to-0 vote) Respectfully Submitted, Matt Wolf Economic Development Specialist Development Inquiry To: Honorable Mayor Bailey and EDA Members From: Matt Wolf, Economic Development Specialist Date: April 5, 2018 Activites that have taken place in the community that may have a potential impact on economic development activity: Discussion Staff Action Xcel Energy Meeting, March Staff met with Ryan Bruers and Dan Pfeiffer of Xcel Energy 13, 2018 to discuss the Cottage Grove Business Park and the Xcel Shovel Ready Program. With discussion focusing on how the Xcel Energy Program is being marketed specifically for the Cottage Grove sites. Park Grove Library Park Grove Library had an informal visioning session to Redevelopment Pre-Design collect ideas about the new library. A short presentation was Open House March 20, 2018 given on the first stages of the project and the overall schedule. Business Park Marketing Staff held a meeting to discuss a preliminary plan for Meeting March 21, 2018 marketing the Cottage Grove Business Park and how to best begin incorporating the AUAR land into the plan. My Future Cottage Grove On Thursday, March 22 at 6 p.m. the My Future Cottage Grove Retail & Restaurants Committee met in the Training Room of City Retail & Restaurants March Hall. The meeting featured Ben Gathje the owner of Culver’s, 22, 2018 Jason Fleig the co-owner of Junction 70 Grill and Tom Leighton a retail market specialist with Tangible Consulting Services. The meeting centered on the current restaurant sector in Cottage Grove, the decisions restaurants make when they choose a location and some of the challenges/strengths of the Cottage Grove restaurant market. The key points from the meeting was that daytime populations, specifically Monday through Thursday, need to increase for restaurants to take the next step in Cottage Grove. Additionally financing for businesses is getting harder to access as constructions costs continue to increase and contractors are more difficult to access. Meeting with DEED to Staff presented a proposal to DEED for a manufacturing business looking for a site in Minnesota. The business would be looking to respond to a Request for construct a 250,000 square feet facility and employ approximately Proposal, March 23, 2018 250 people. A decision by the manufacturing company would not be made until the end of 2018. Chamber of Commerce Economic Development Director Costello attended the Events Meeting April 2, 2018 Chamber of Commerce Events Committee meeting. Chamber of Commerce Economic Development Specialist Wolf attended the Ambassadors Meeting April Chamber of Commerce Ambassadors Committee meeting. 5, 2018 TO: Economic Development Authority FROM: Jennifer Levitt, Community Development Director/City Engineer Christine Costello, Economic Development Director DATE: April 5, 2018 RE: Development Update Building Permits Building Permit Statistics: Between March 1 and March 31, 2018, 197 building permits were issued with a total valuation of $12,612,113, including 10 new single-family homes valued at $2,764,091 and 4 quad units in one building valued at $687,313. Commercial Permit Valuation Comparison By Month 2017-2018 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 - JanFebMarAprMayJunJulAugSepOctNovDec 2018 Valuation2017 Valuation Economic Development Authority Development Update April 5, 2018 Page 2 of 12 Commercial/Industrial Construction Activity 120000000 100000000 80000000 60000000 40000000 20000000 0 yearpermitsvaluationLinear (permits) Residential Permits -New construction 1996 to 2018 350 300 250 200 150 100 50 0 199520002005201020152020 Economic Development Authority Development Update April 5, 2018 Page 3 of 12 With a large amount of residential development and street construction planned for 2018, staff reviewed historical data to provide a comparison. Below are two charts showing the street & utility construction totals from 2005-2018, and also the total number of final platted lots each year from 2002-2018. Construction totals were only easily accessible to 2005, which is the reason for the difference in comparison years. The street & utility construction includes both public streets projects, along with residential development, which is typically funded by a developer. The final platted lots includes both single family detached and single family attached (twin homes, quad homes, 8-unit town homes). The large quantity of single family attached lots in 2003 included Mis- sissippi Dunes and Pine Arbor. Total Street & Utility Construction -Public Projects & Residential Development $30,000,000 2005-2015 Average -$6,934,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $- 20052006200720082009201020112012201320142015201620172018 Economic Development Authority Development Update April 5, 2018 Page 4 of 12 Final Platted Lots by Year 500 450 400 350 300 250 200 150 100 50 0 20022003200420052006200720082009201020112012201320142015201620172018 Single Family DettachedSingle Family Attached Current Project Updates Oltman Middle School: Finish work is being conducted on many phases of the project including the upper 8th, 7th, & 6th grade classrooms. Underground work is being done within the lower level. The permit for the final phase was submitted and is currently being reviewed. This phase consists of the monument sign, drop off canopy, and maintenance garage with a construction value of $850,000. Economic Development Authority Development Update April 5, 2018 Page 5 of 12 Well #12: Well 12 is located at 6411 Ideal Avenue South, south of Sunny Hill Park in the green space between the Pinecliff and Calarosa developments. Phase 1 of the project included the con- struction of the well and casing and was completed the week of December 15, 2017. Phase 2 includes construction of the pumping facility and began the first week of January. Interior rough-in construction is ongoing with the interior finish work to start soon. The pumping facility is scheduled to be substantially complete and operational by May 1, 2018. The anticipated final completion date is July 1, 2018. Pumping Facility West Elevation Pumping Facility South Elevation Pumping Facility Norris Square: This project consists of three buildings the Town Square, which is the common area that connects both the Independent Living and Care Center with the existing senior living building. The Town Square underground footings and foundation have been completed and the project is currently in the framing stage. For the Independent Living building, the rough-in inspections for HVAC, plumbing, electrical, and framing are being conducted on the 3rd floor. Economic Development Authority Development Update April 5, 2018 Page 6 of 12 The Care Center building is nearing completion of the framing process with a major portion of the roof installed. Grove Plaza: The demolition permit for the interior, garden center, and canopy has been issued. The plans for the vanilla shell reconstruction of a portion of the building and a new loading dock in the rear of the building that includes a new bypass lane is being reviewed. Eleven trees will be removed for the bypass lane, but additional landscaping is planned. Central Fire Station: This project is nearing completion with the Temporary Certificate of Occupancy to be issued soon. The temp CO will allow for the equipment to be installed with occupancy to begin in mid-April. Remaining site work, fine grading, and landscaping will continue when weather permits. An emergency beacon traffic light will be installed at the intersection of the Central Fire Station access drive and 80th Street, which is scheduled to be operational by the end of May. This beacon system will allow traffic to be stopped on 80th Street as emergency vehicles leave the site. Photos are at the end of the Update. North Star Sheets: The permit has been issued with a construction valuation of $8,144,177. Silt fence has been installed and site grading has begun. Hadley Avenue Reconstruction: The Hadley Avenue project will include reconstructing Hadley Avenue from 65th Street to the Cottage Grove/Woodbury border to an urban section, including concrete curb & gutter, bituminous pavement, street lighting, storm sewer, water main, and sanitary sewer. The water main and sanitary sewer constructed with this project would serve the adjacent Eastbrooke development. The plans & specifications were approved on April 4, 2018, with a bid date of April 26, 2018. Work on this project is anticipated to start in May and be completed in fall of 2018. Hadley Avenue will be closed during construction, with a detour on 65th Street/County 13 (Hinton Avenue)/Glen Road. Economic Development Authority Development Update April 5, 2018 Page 7 of 12 Ravine Parkway: Final design is currently being completed for the Ravine Parkway project, which is planned for construction in 2018 and 2019. This project includes the construction of two seg- ments of Ravine Parkway: Jamaica Avenue to Keats Avenue in 2018 and Hinton Avenue to Idsen Avenue in 2019. The City is currently working with MnDOT and Washington County on plan ap- proval. The City anticipates starting construction of the Jamaica to Keats segment of the roadway in May 2018. The segment from Hinton Avenue to Innsdale Avenue will be constructed in 2019. 2018 Construction Keats to Jamaica 2019 Construction Innsdale to Hinton West Point Douglas Road Reconstruction: A feasibility report for the West Point Douglas Road utility extension and street reconstruction was authorized on March 21. This project would include reconstructing West Point Douglas Road from the roundabout to 96th Street from the rural road section to a full curb and gutter section. The project will also include improvements to street lighting and storm sewer as well as extending water main and sanitary sewer south to the former Majestic Ballroom site and the EDA-owned land. The completion of the project would be in conjunction with redevelopment in the area. Calarosa 1st Addition: Calarosa 1st Addition includes the development of 71 lots for single and multi-family homes by Lennar, and is located on property east of the Pinecliff 5th Addition, south of Military Road, north of 65th Street, and west of Inwood Avenue. This development includes 12 quad-style buildings with 48 units and 23 villa-style single family homes. The Developer placed temporary asphalt pavement and temporary curbs along 63rd and 64th Streets within the develop- ment to allow for winter construction of buildings. The temporary roads will be removed and re- placed with permanent roads in the spring of 2018. Construction of model homes for the quad-style and villa-style buildings is currently progressing. Economic Development Authority Development Update April 5, 2018 Page 8 of 12 Calarosa 1st Quad Style Building Overview Calarosa 1st Villa Style Unit Overvew Eastbrooke: The Eastbrooke development will include 124 single family homes. Phase 1, which will be constructed in 2018, will include 51 single family lots. The final plat, development agreement, and plans & specification were approved at the April 4 Council meeting. This project is anticipated to begin grading in early spring 2018, with utility and street construction anticipated to begin by mid- summer 2018 and home building permits likely in late-summer/early-fall 2018. This development will occur congruently with the Hadley Avenue Reconstruction Project. Mississippi Dunes 5th Addition: Mississippi Dunes 5th Addition is the final addition to the Mississippi Dunes single-family development. This addition will include the development of 44 single-family homes along Mississippi Dunes Boulevard and construction of the final connection of Mississippi Dunes Boulevard between 95th Street and 98th Street. The final plat and development agreement were approved at the April 4 Council meeting. This project is scheduled to begin construction in early spring 2018 with street and utility construction anticipated to be complete by mid- summer 2018. Building permits for single family homes are likely to begin by late summer or early fall 2018. Thompson Grove Country Club (Old Municipal Pool Site): Habitat for Humanity plans to build three single family homes on the former Cottage Grove pool site. Building demolition and foundation Economic Development Authority Development Update April 5, 2018 Page 9 of 12 removal was complete by March 15. Parking lot removal is scheduled to be complete by early April, as weather conditions allow. Thompson Grove Country Club Single Family Home Elevations Pool Building Demolition Pool Building Demolition Economic Development Authority Development Update April 5, 2018 Page 10 of 12 Summers Landing 2nd Addition Street & Utility Improvements: The Summers Landing 2nd Addition includes 91 lots for single family home, located near the intersection of Hadley Avenue & 95th Street. The project was awarded to Northwest Asphalt at the February 21 City Council meeting. A grading preconstruction meeting was hosted on February 27, 2018. The grading contractor began tree removals and equipment mobilizations the first week of March 2018. Grading work is scheduled to begin in April, as weather allows. Street and utility con- struction is anticipated to begin in May. Planning Division Bike/Pedestrian Forum: As part of the My Future Cottage Grove initiative, the Connection to Parks Focus Group, 2040 Comprehensive Plan Update Steering Committee, Planning Commission, and Parks Commission participated in the Bike/Pedestrian Forum, on Monday, March 26. Phil Carlson from Stantec Consulting Services high- lighted the results of the online polling and comment page for pedestrian bike and trail corridors within the City. An aerial map showing all the existing trails, sidewalks, and pedestrian walkways throughout Cottage Grove was used in identifying potential walkway corridors that should be constructed in the future. Roadway corridors lacking safe walkways were identified as follows: Keats Avenue Off-road walkway paralleling Keats Avenue between 82nd Street and East Point Douglas Road. 100th Street Pedestrian walkway paralleling 100th Street between Ideal Avenue and Hadley Avenue. Hadley Avenue Sidewalk/trail paralleling Hadley Avenue from 90th Street and 80th Street. 80th Street The segment of existing sidewalk on the south side of 80th Street between East Point Douglas Road and Hadley Avenue needs upgrades. A curvilinear walkway with landscaped features was suggested to improve the appearance of the 80th Street Gateway. 80th Street Construct new pedestrian crossings along 80th Street to improve pedestrian safety. Jamaica Avenue Construct a sidewalk or trail paralleling Jamaica Avenue between 70th Street and 67th Street. It was noted that the future development of the proposed Kingston Fields resi- dential development will include the construction of a trail system along the east side of Jamaica Avenue between the Rose of Sharon Lutheran Church access drive and future Ravine Parkway. It was pointed out that the missing trail segment along the east side of Jamaica Avenue, between 65th Street A trailway system be constructed along 65th Street, between Hinton Avenue and Geneva Avenue. Economic Development Authority Development Update April 5, 2018 Page 11 of 12 West Point Douglas Road Complete the sidewalk or trail system along West Point Douglas Road between Belden Boulevard and Jamaica Avenue. Future Meetings: There will be a Joint Meeting of the 2040 Comprehensive Plan Update Steering Committee, Planning Commission, and Housing Focus Group on Monday, April 9, 2018, at 7:00 p.m. in the Training Room at City Hall. The groups will review the preliminary draft of the proposed 2040 Comprehensive Plan. This meeting is open to the public. Economic Development Retail & Restaurants Focus Group Meeting: The My Future Cottage Grove Retail & Restaurants Focus Group met on Thursday, March 22, in the Training Room at City Hall. The meeting featured -owner of Junction 70 Grill, and Tom Leighton, a retail market specialist with Tangible Consulting Services. The meeting centered on the current restaurant sector in Cottage Grove, the decisions restaurants make when they choose a location, and some of the challenges/strengths of the Cottage Grove restaurant market. The key points from the meeting was that daytime populations, specifically Monday through Thursday, need to increase for restaurants to take the next step in Cottage Grove. Additionally, financing for businesses is getting harder to secure as construction costs continue to increase, and contractors are more diffi- cult to hire. The My Future Cottage Grove Retail & Restaurants committee will be sending out a survey to their members in the next couple of weeks to determine the topic for their next meeting. Economic Development Authority Development Update April 5, 2018 Page 12 of 12 Central Fire Station Photos West Elevation Northeast Elevation Entrance Lobby Training Room Overview West Bay Overview Kitchen Overview Fitness Room Fitness Room TO: Economic Development Authority FROM: Christine Costello, Economic Development Director DATE: March 28, 2018 RE: Amendment to Minnesota Investment Fund (MIF) Grant Contract with American Logistics Services, LLC. Background In 2015 the Economic Development Authority (EDA) approved a resolution supporting a Minnesota Investment Fund (MIF) Loan from the Minnesota Department of Employment and Economic Development (DEED) supporting the expansion of American Logistics in the business park. The purpose of the Minnesota Investment Fund (MIF) is to provide financing to help add workers and retain high quality jobs. The focus of the program is on industrial, manufacturing and technology related industries to increase the local and state tax base and increase economic vitality. All qualifying MIF projects must meet a minimum criteria for private investment, number of jobs created or retained and wages paid. MIF funds are awarded to the City and granted to the expanding businesses through the City. For that reason, the City is responsible for submitting reports to DEED and assuring that all program requirements are being met. Through the MIF program, once all the requirements are met, the business is eligible for the forgiveness of the loan. Since the loan agreement and promissory note for American Logistics was approved and signed by the EDA President and Executive Director in 2015, they received their funding. American Logistics was to create the following in seven years:  Maintain 126 full time equivalent jobs; and  Create 60 permanent, non-contract, non-seasonal full time jobs paying at least $15.00 per hour in wages, exclusive of benefits. American Logistics will complete this requirement within the next few months. In order to close out the grant contract DEED has request that the EDA amend the contract to include the updated Minnesota State Statute language that allows a local community to retain 40 percent of each principal and interest payment made by American Logistics, but not more than $100,000 of the MIF grant when it is repaid to the local community. The remaining 60 percent of each principal and interest payment is to repay the State. Discussion The purpose of the amendment to modify the grant contract with the State and American Logistics to comply with Minnesota Statute 116J.8731, Subd. 5., Grant limits which states “…A local, community or recognized Indian Tribal government may retain 40 percent of each principal and interest payment made by the Borrower, but not more than $100,000 of a Minnesota Investment Economic Development Authority March 28, 2017 Page 2 of 2 Fund grant when it is repaid to the local community or recognized Indian tribal government by the person or entity to which it is repaid to the local community or Indian tribal government.” The EDA has been retaining the 40 percent of each principal and interest payment made by American Logistics, is Minnesota Statute was missing from the original grant contract. The funds we receive are placed in the EDA fund. Recommendation Authorize the EDA President and Executive Director to amend the grant contract between DEED and the EDA to add Section 9 to Exhibit A. Attachment Amendment #1 for Grant Contract CDAP-15-0006-H-FY16 TO: Economic Development Authority FROM: Christine Costello, Economic Development Director DATE: April 2, 2018 RE: Letter of Intent with MWF Properties Background Langdon Village was originally settled in the 1870’s as a railroad stop on the St. Paul and Chicago Railroad. Today the 45-acre area includes 12 residential properties and two commercial properties. One of these commercial parcels, the former Majestic Ballroom, is currently vacant. Approximately eight acres in Langdon are owned by the City of Cottage Grove Economic Development Authority (EDA) and were acquired to facilitate redevelopment in the area. Currently the EDA owned land is leased to a farmer until redevelopment takes place. EDA Owned In the 1990s, the Red Rock Corridor was included as part of the regional commuter rail plan. Langdon Village would have served as a commuter rail location for the proposed transitway from Hastings to Union Depot in St. Paul. In 2007 a federal analysis was conducted for the Economic Development Authority April 2, 2017 Page 2 of 4 commuter rail service and it was determined that it would be more appropriate for the long term solution that a commuter bus service in the corridor be built to build the demand for service. The City of Cottage Grove still sees the Langdon Village area as a viable redevelopment opportunity even with the change in locations for bus rapid transit (BRT) stations, which will be located on the East Point Douglas Road side of Highway 61/10. The City’s Comprehensive Plan guides Langdon Village as a mixed use development. A site plan was created for Langdon Village that includes a variety of land use designations and roadway alignments to allow for a development that provides for a walkability. The City has used this site plan as a guiding document for the future redevelopment of Langdon Village area. The area is guided in the Cottage Grove Comprehensive Plan for mixed use development. This designation allows a combination of commercial and medium to high density residential development. Currently, a combination of commercial and residential zoning is in place. Rezoning will need to be completed as future redevelopment opportunities come forward. Currently City utilities do not serve the entire Langdon Village area, so as redevelopment takes place utilities will need to be extended to serve redevelopment in the area. Also discussions with 3M, who is a predominate land owner to the south of Langdon Village area, will take place in the next few weeks to discuss the extension of West Point Douglas Road through to the Innovation Road interchange. Providing additional access to the Langdon Village area will make the area more marketable and attractive for development. Discussion In February 2018, MWF Properties approached the City with a proposed plan for workforce housing. MWF Properties proposed a 176 unit, four-story building at the former Majestic Ballroom site in the Langdon Village area. At the March 21st City Council workshop MWF properties received feedback on their proposal from the City Council. The City Council expressed that they were not opposed to the housing project but felt the Majestic Ballroom’s visibility to Highway 61/10 was more suited for commercial development, and that another location in Langdon Village was more suitable for housing development. The feedback from the City Council provided staff and MWF Properties the opportunity to reevaluated locations within Langdon Village that would be appropriate for housing development. It was determined that the EDA owned property would provide a great location for housing development and also met the intent of the original Langdon Village site plan. Economic Development Authority April 2, 2017 Page 3 of 4 MWF Properties will provide a Letter of Intent (LOI) for the EDA owned property which will provide a guarantee to MWF Properties that the EDA will work exclusively with them on a purchase/development agreement for the development of a housing project on the EDA owned parcels. In return, MWF Properties will move forward with their purchase agreement for the Majestic Ballroom site and then as part of the purchase agreement/development agreement for the EDA owned property the land will be exchanged. This will provide the EDA with site control of the Majestic Ballroom site for future redevelopment of the site for commercial purposes. A City Council workshop will be held May 2nd to review the revised housing development by MWF Properties on the EDA property. In order to maintain the timeline for MWF Properties proposed workforce housing financing through Washington County a LOI is the first step that needs to be considered in order to maintain the June 1st deadline to submit a letter to Washington County that MWF Properties will be applying for workforce housing funding for their project. Economic Development Authority April 2, 2017 Page 4 of 4 Location of Majestic Site and EDA Site Recommendation Authorize the EDA President and Executive Director to execute the Letter of Intent (LOI) with MWF Properties for the purchase of the EDA-owned parcels of land located in the Langdon Village area. Attachment Letter of Intent from MWF Properties Memo To: Economic Development Authority From: James Lehnhoff, Ehlers Date: April 4, 2018 Subject: Analysis of Request for TIF Assistance Modern Automotive The City of Cottage Grove requested that Ehlers review the development pro forma and Tax Increment Financing (TIF) request from Modern Automotive for their proposal to construct an approximately 24,000 square foot addition to their existing building at 9800 Hemingway Ave S. The proposed building expansion would provide additional space to manufacture and distribute automotive components. The developer requested up to nine (9) years of TIF assistance totaling approximately $117,000 for the $1.83 million project. If approved, the project is expected to commence this spring and be complete by the end of the year. Ehlers conducted a thorough review forma to ensure all development costs, revenues, expenditures, and financing terms are represented appropriately. Based on the analysis, the project meets the expectations of a typical new manufacturing/warehouse project. The table below depicts the proposed sources and uses for the project. Sources AmountPercent Bank Loan$1,362,35074.3% Equity (Land & Cash)$354,50619.3% TIF Note$117,0006.4% Total Sources$1,833,856100% Uses AmountPer SF Acquisition$239,003$9.93 Construction Costs$1,336,309$55.49 Professional Services$232,444$9.65 Financing Costs$26,100$1.08 Developer Fee$0$0.00 Total Uses$1,833,856$76.16 The underlying real estate is owned by 9800 Hemingway LLC, which is an entity controlled by Modern Automotive. The LLC leases the space to Modern Automotivethis is a common ownership scenario. This pro forma analysis treats the proposed expansion project as an independent income producing real estate venture. The evaluation explores whether the project costs and sources of funds would meet typical market returns to attract private financing from a bank and equity investor. Analysis of Request for TIF Assistance Modern Automotive April 4, 2018 Page 2 Summary Analysis The project includes a bank loan for approximately 74% of the project costs (20-year term at 5% interest rate), which is reasonable for this type of project. The applicant will provide the remaining amount in land/cash equity. The total development costs for this project are approximately $1.83 million or $76 per square foot. The TDC is comparable to other similar projects in the metropolitan region. The applicant is not taking a developer fee on the project. For this analysis, it was assumed the building could be leased at $4.75/sf with 0% vacancy since the applicant will occupy all of the space. This lease rate is comparable in the market for this type of manufacturing/warehousing space. Based on the anticipated development costs, financing terms, and potential rental income, the projected cash-on-cost return is 6.2% without TIF assistance and 7.2% with TIF assistance. Industrial developers typically need a cash-on-cost return of between 7% and 9% to attract private financing. With the requested TIF assistance, the projected returns are on the low end of the typical investment returns. Recommendations Based on the analysis of the development may not reasonably be expected to occur solely through private investment within the reasonably near future. TIF assistance would be provided on -as-you-basis in the amount of $117,000. The assistance will help the applicant secure its bank loan and facilitate construction while ensuring the investment returns do not exceed typical industry standards. With pay-as-you-go TIF assistance, the City does not provide any funding up-front. Instead, the City enters into an agreement to provide tax increment payments that are generated solely actual increased property taxes for up to nine years. The applicant uses those future tax increment payments to obtain additional debt and/or support equity returns. If the tax increment is insufficient to pay the $117,000 TIF note in nine years, the City does not make up the shortfall. Please contact me at 651-697-8552 with any questions. COTTAGE GROVE ECONOMIC DEVELOPMENT AUTHORITY CITY OF COTTAGE GROVE WASHINGTON COUNTY STATE OF MINNESOTA RESOLUTION NO. 2018-003 RESOLUTION ADOPTING A MODIFICATION TO THE DEVELOPMENT PROGRAM FOR DEVELOPMENT DISTRICT NO. 1, ESTABLISHING TAX INCREMENT FINANCING DISTRICT NO. 1-18 (MODERN AUTOMOTIVE) THEREIN AND ADOPTING A TAX INCREMENT FINANCING PLAN THEREFOR. WHEREAS, it has been proposed by the Board of Commissioners (the "Board") of the Cottage Grove Economic Development Authority (the "EDA") and the City of Cottage Grove (the "City") that the EDA adopt a Modification to the Development Program (the "Development Program Modification") for Development District No. 1 (the "Project Area") and establish Tax Increment Financing District No. 1-18 (Modern Automotive) (the "District") and adopt a Tax Increment Financing Plan (the "TIF Plan") therefor (the Development Program Modification and the TIF Plan are referred to collectively herein as the "Program and Plan"), all pursuant to and in conformity with applicable law, including Minnesota Statutes, Sections 469.090 to 469.1082, and Sections 469.174 to 469.1794, inclusive, as amended (the "Act"), all as reflected in the Program and Plan and presented for the Board's consideration; and WHEREAS, the EDA has investigated the facts relating to the Program and Plan and has caused the Program and Plan to be prepared; and WHEREAS, the EDA has performed all actions required by law to be performed prior to the adoption of the Program and Plan. The EDA has also requested the City Planning Commission to provide for review of and written comment on Program and Plan and that the Council schedule a public hearing on the Program and Plan upon published notice as required by law. NOW, THEREFORE, BE IT RESOLVED by the Board as follows: 1. The EDA hereby finds that the District is in the public interest and is an "economic development district" under Minnesota Statutes, Section 469.174, Subd. 12, and finds that the Program and Plan conform in all respects to the requirements of the Act and will help fulfill a need to develop an area of the State of Minnesota which is already built up and that the adoption of the proposed Program and Plan will help provide employment opportunities in the State and will result in the preservation and enhancement of the tax base of the City and the State because it will discourage commerce and industry from moving their operations to another state or municipality and thereby serves a public purpose. 2. The EDA further finds that the Program and Plan will afford maximum opportunity, consistent with the sound needs for the City as a whole, for the development or redevelopment of the Project Area by private enterprise in that the intent is to provide only that public assistance necessary to make the private developments financially feasible. 3. The boundaries of the Project Area are not being expanded. 4. The reasons and facts supporting the findings in this resolution are described in the Program and Plan. 5. The EDA elects to calculate fiscal disparities for the District in accordance with Minnesota Statutes, Section 469.177, Subd. 3, clause b, which means the fiscal disparities contribution would be taken from inside the District. 6. Conditioned upon the approval thereof by the City Council following its public hearing thereon, the Program and Plan, as presented to the EDA on this date, are hereby approved, established and adopted and shall be placed on file in the office of the Executive Director of the EDA. 7. Upon approval of the Program and Plan by the City Council, the staff, the EDA's advisors and legal counsel are authorized and directed to proceed with the implementation of the Program and Plan and for this purpose to negotiate, draft, prepare and present to this Board for its consideration all further plans, resolutions, documents and contracts necessary for this purpose. Approval of the Program and Plan does not constitute approval of any project or a Development Agreement with any developer. 8. Upon approval of the Program and Plan by the City Council, the Executive Director of the EDA is authorized and directed to forward a copy of the Program and Plan to the Minnesota Department of Revenue and the Office of the State Auditor pursuant to Minnesota Statutes 469.175, Subd. 4a. 9. The Executive Director of the EDA is authorized and directed to forward a copy of the Program and Plan to the Washington County Auditor and request that the Auditor certify the original tax capacity of the District as described in the Program and Plan, all in accordance with Minnesota Statutes 469.177. Approved by the Board on April 10, 2018. _______________________________ Chair ATTEST: __________________________ Secretary As of April 3, 2018 Draft for EDA Section 1 - Modification to the Development Program for Development District No. 1 Section 2 - Tax Increment Financing Plan for Tax Increment Financing District No. 1-18 (Modern Automotive) Minnesota Statutes ("M.S."), Sections 469.090 to 469.1082M.S., Sections 469.174 to 469.1794 M.S., Chapter 117 M.S., Sections 469.174 to 469.1794 M.S., Section 469.174, Subd. 12 "Economic development district" means a type of tax increment financing district which consists of any project, or portions of a project, which the authority finds to be in the public interest because: (1)it will discourage commerce, industry, or manufacturing from moving their operations to another state or municipality; or (2)it will result in increased employment in the state; or (3)it will result in preservation and enhancement of the tax base of the state. M.S., Section 469.176, Subd. 4c, M.S., Section 469.176, Subd. 7 M.S., Sections 273.111273.112, or 273.114Chapter 473H M.S., Section 469.175, Subd. 1, and M.S., Section 469.176, Subd. 1 M.S., Section 469.176, Subd. 1b. M.S., Section 469.174, Subd. 7 and M.S., Section 469.177, Subd. 1 M.S., Section 469.177, Subds. 1 and 2 M.S., Section 469.174 Subd. 4 and M.S., Section 469.177, Subd. 1, 2, and 4 M.S., Section 469.177, Subd. 4 M.S., Section 469.175, Subd. 4 M.S., Section 469.175, Subd. 3. M.S., Section 469.177, Subd. 3 M.S., Section 469.177, Subd. 3, clause b (1)The original net tax capacity shall be determined before the application of the fiscal disparity provisions of Chapter 276A or 473F. The current net tax capacity shall exclude any fiscal disparity commercial-industrial net tax capacity increase between the original year and the current year multiplied by the fiscal disparity ratio determined pursuant to M.S., Section 276A.06, subdivision 7 or M.S., Section 473F.08, subdivision 6. Where the original net tax capacity is equal to or greater than the current net tax capacity, there is no captured tax capacity and no tax increment determination. Where the original tax capacity is less than the current tax capacity, the difference between the original net tax capacity and the current net tax capacity is the captured net tax capacity. This amount less any portion thereof which the authority has designated, in its tax increment financing plan, to share with the local taxing districts is the retained captured net tax capacity of the authority. (2)The county auditor shall exclude the retained captured net tax capacity of the authority from the net tax capacity of the local taxing districts in determining local taxing district tax rates. The local tax rates so determined are to be extended against the retained captured net tax capacity of the authority as well as the net tax capacity of the local taxing districts. The tax generated by the extension of the less of (A) the local taxing district tax rates or (B) the original local tax rate to the retained captured net tax capacity of the authority is the tax increment of the authority. M.S., Section 469.177, Subd. 3: (c)The method of computation of tax increment applied to a district pursuant to paragraph (a) or (b) shall remain the same for the duration of the district, except that the governing body may elect to change its election from the method of computation in paragraph (a) to the method in paragraph (b). M.S., Section 116J.993, Subd. 3 M.S., Section 116J.552, Subd. 3; M.S., Section 469.174, Subd. 23 M.S., Section 469.174, Subd. 19 M.S., Section469.1813 M.S., Sections 116J.993 to 116J.995 M.S., Section 469.175, Subd. 1a M.S. Section 469.175 Subd. 2(b) M.S. Section 469.175 Subd. 2(b) M.S. Section 469.175, Subd. 1 (a), clause 7 M.S. Section 469.175, Subd. 3, clause (b)(2) M.S., Section 469.174, Subd. 25 M.S., Section 469.177 M.S., Section 273.1384 M.S., Section 469.175, Subd. 4 M.S., Section 469.175, Subd. 4(e) M.S., Section 469.175 Subd. 4(f) M.S., Section 469.174, Subd. 12 M.S., Section 469.177, Subd. 1 M.S., Section 469.174, Subd. 14, other than M.S., Section 469.178 M.S., Section 469.176, Subd. 3 M.S., Section 469.174, Subd. 25, clause (1) M.S., Section 469.174, Subd. 25, clause (1) M.S., Section 469.176, Subd. 4h M.S., Section 469.176, Subd. 3 M.S., Section 469. 177, Subd. 11 M.S., Section 469.176, Subd. 6 if, after four years from the date of certification of the original net tax capacity of the tax increment financing district pursuant to M.S., Section 469.177, no demolition, rehabilitation or renovation of property or other site preparation, including qualified improvement of a street adjacent to a parcel but not installation of utility service including sewer or water systems, has been commenced on a parcel located within a tax increment financing district by the authority or by the owner of the parcel in accordance with the tax increment financing plan, no additional tax increment may be taken from that parcel, and the original net tax capacity of that parcel shall be excluded from the original net tax capacity of the tax increment financing district. If the authority or the owner of the parcel subsequently commences demolition, rehabilitation or renovation or other site preparation on that parcel including qualified improvement of a street adjacent to that parcel, in accordance with the tax increment financing plan, the authority shall certify to the county auditor that the activity has commenced and the county auditor shall certify the net tax capacity thereof as most recently certified by the commissioner of revenue and add it to the original net tax capacity of the tax increment financing district. The county auditor must enforce the provisions of this subdivision. The authority must submit to the county auditor evidence that the required activity has taken place for each parcel in the district. The evidence for a parcel must be submitted by February 1 of the fifth year following the year in which the parcel was certified as included in the district. For purposes of this subdivision, qualified improvements of a street are limited to (1) construction or opening of a new street, (2) relocation of a street, and (3) substantial reconstruction or rebuilding of an existing street. M.S., Sections 469.090 to 469.1082 M.S., Section 469.176, Subd. 4 M.S., Chapter 462C. M.S., Sections 469.152 through 469.165M.S., Sections 469.178 M.S., Chapter 462C, M.S., Sections 469.152 through 469.165M.S., Sections 469.178 M.S., Section 469.176, Subd. 4. M.S., Section 469.176, Subd. 2 M.S., Section 469.176, Subd. 5 M.S., Section 469.178 M.S., Section 469.177, Subd. 8 M.S., Section 469.175, Subds. 5, 6, and 6b M.S., Section 469.175, Subd. 5 M.S., Section 469.175 Subd. 5 and Subd. 6, M.S., Sections 469.090 to 469.1082 M.S., Section 469.1763, Subd. 3 M.S., Section 469.1763, Subd. 5 To be added prior to the public hearing To: EDA From: Christine Costello, Economic Development Director Date: March 28, 2018 Subject: Upcoming Events DATE EVENT TIME LOCATION April 12, 2018 Tornado Drill Day 1:45 pm & 6:55 pm April 16, 2018 Pre-Design Open House 6 pm to 8 pm Park Grove Library Park Grove Library Meeting Room April 21, 2018 Chamber Business Expo TBA Ice Arena April 21, 2018 Month of the Militrary 9:30 am to Noon Cottage Grove Child Event Armory April 22, 2018 Earth Day April 28, 2018 Arbor Day Celebration 9 am Hamlet Park April 28, 2018 Stone Soup-er Bowl 9 am to 5 pm Park Grove Bowling, SSP May 5, 2018 Spring Clean Up 7 am to 3 pm Public Works May 7, 2018 Community Center Task 5:30 pm to 8:30 pm City Hall Force May 11, 2018 Ice Show 7 pm Ice Arena May 12, 2018 Ice Show 3 pm Ice Arena May 14, 2018 Mississippi River Access 6 pm to 7 pm City Hall Task Force May 15, 2018 Pre-Design Open House 6:30 pm to 8 pm Park Grove Library Park Grove Library Meeting Room May 19, 2018 Standing Strong 5K June 14-17, 2018 Strawberry Fest Kingston Park DATE EVENT TIME LOCATION July 19, 2018 Tunes into Twilight 6:30 pm to 8:30 pm City Hall Summer Concert Series Amphitheatre August 16, 2018 Tunes into Twilight 6:30 pm to 8:30 pm City Hall Summer Concert Series Amphitheatre