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HomeMy WebLinkAbout3.1 11-09-2021 EDA Meeting Minutes CITY OF COTTAGE GROVE ECONOMIC DEVELOPMENT AUTHORITY ____________________________________________________________________ MINUTES Economic Development Authority (EDA) Meeting November 9, 2021 Pursuant to due call and notice thereof, a meeting of the Economic Development Authority was held on the 9th day of November, 2021, at 7:30 a.m. CALL TO ORDER The meeting was called to order at 7:31 a.m. by EDA President Bailey. ROLL CALL Assistant Mann called the roll: EDA President Bailey-Here; EDA Vice President Dennis-Here; EDA Member Carey-Here; EDA Member Thiewes- Here. Members Present: Myron Bailey, EDA President Steve Dennis, EDA Vice President Chris Carey, EDA Member Eric Thiewes, EDA Member Members Absent: Kyle Knop, EDA Member Dan Myers, EDA Member Rachel Smoot, EDA Member Staff Present: Jennifer Levitt, EDA Executive Director/City Administrator Robin Roland, Finance Director Christine Costello, Community Development Director Jaime Mann, Assistant to the City Administrator Amanda Meyer, Assistant City Engineer Emily Schmitz, Senior Planner Others Present: Adam May, Communications Director for Renewal by Andersen Stacie Kvilvang, Senior Municipal Advisor for Ehlers, Inc. Brent Miles, Chief Marketing Officer/Founding Partner, NorthPoint Development APPROVAL OF MINUTES 3.1 Approval of October 12, 2021 EDA Meeting Minutes EDA Vice President Dennis motioned to approve the October 12, 2021 EDA Meeting Minutes. Motion was seconded by EDA Member Carey. Motion passed unanimously (4-to-0 vote). BUSINESS ITEMS 4.1 Economic Development Update/Business Inquiry City Administrator Jennifer Levitt gave the Beige Book Report for October, 2021. Employment saw a moderate growth, but hiring demand continued to outpace labor availability, which we can all relate to. Employers reported a modest increase in labor availability since the pandemic-era unemployment benefits stopped. There’s been a lot of talk about the federally-mandated vaccine and a potential reduction in workers if some quit because of that, but the mandate has actually seen a lower-than-expected impact on that. There’s currently a federal stay on the vaccine requirement. Wage pressures were strong; wage increases were strongest in retail, hospitality, health care, and construction. Price pressures increased slightly from an elevated level, and businesses are passing more costs into their final prices. Hospitality and tourism reported strong activity through the end of summer. Restaurants and retailers have pulled back on hours and even days of operation due to labor difficulties, supply chain problems, and the higher input into prices. Commercial construction grew moderately while construction real estate was flat. Residential construction real estate activities decreased slightly in our region, but we didn’t see that trend in Cottage Grove with our building permit activity. Manufacturing activity increased moderately, and we’re seeing a manufacturing increase in our region. Agricultural conditions deteriorated somewhat with the severe and worsening drought conditions. Business Retention & Expansion: We’ve completed eight interviews with local businesses. We targeted the businesses that had received our CARES Act grants, and in December we will be reporting the interview results to you. Expos: 1) MNCAR Expo, October 27, 2021: It was good to be back in person at that event and engage with the commercial real estate market. There were over 80 exhibitors and 600 attendees at that event. We had a successful event engaging with our brokers, and we even see some of that result today. 2) Medical Design & Manufacturing Expo, November 3-4, 2021, Minneapolis Convention Center: There were over 400 exhibitors there, really focusing on medical technology, packaging, robotics, animation, product design, and plastics technology. We were one of the only cities there, but it gave us a great opportunity to engage and tell them if you have a business that you want to expand, the Cottage Grove Business Park is really the place for you. Economic Development Authority - Minutes November 9, 2021 Page 2 of 5 Ribbon Cuttings: Grove80 Apartments: The ribbon cutting took place on October 28, our market-rate apartments, which was exciting. Boondocks Vintage Boutique: That ribbon cutting will take place this afternoon. Cross Country Mortgage: Is located in Almar Village, and their ribbon cutting will take place on November 15. Project Updates: Airgas: Their project is substantially complete with testing to be done soon. Caribou Cabin: We’re always asked when they will be open, and the answer is just before Thanksgiving. Hamlet Park Shelter: Work continues on the framing and rough-in portions. Oakwood Park: The building permit was issued, and work will begin soon on the footings and foundation for the new pavilion. 3M: The incinerator will be shutting down; they’ll stop taking Public Safety waste as of November 12, and by mid-December, they will actually stop all import of hazardous materials for incineration. They’re working on a decommissioning plan with the Pollution Control Agency and Washington County so we’ll keep you up to date on that. They’re also expanding their buildings: Building 149 is going to have expansion of their water filtration system, some of their aluminum oxide storage lockers are going to be moving to a new location. Building 150 is getting some additional improvements with nearly a 64,000 square-foot expansion, valued at just over $10 million. Building 151 is also being reviewed for a nearly 18,000 square-foot expansion. Mister Car Wash: Will be installing an exterior vehicle vacuum center as part of their project so we’ll see some modifications to the exterior and their site plan. 61 Marine & Sports: A conditional use permit to expand their nonconforming use of their existing building was approved; they’ll be adding another 4,000 square-foot addition for boat storage and assembly. Glengrove Industrial Park 9th Addition: This plat created an outlot for our regional stormwater pond; as part of that, we’re actually making the adjacent 19-acre parcel pad ready. We’ll talk about acquisition of that parcel later in this meeting. Mississippi Dunes Master Plan: We’ve had extensive public engagement and interaction related to this so now will be moving into the final stages with it being at the Planning Commission in November, and it was at the Parks Commission last night. An EAW will be out for comment. This is an opportunity to provide river access, as part of our Strategic Plan, and add a variety of housing options for our residents. 4.2 Letter of Intent with Interstate Development, LLC (95th and Jamaica) Administrator Levitt stated we have a Letter of Intent (LOI) from Interstate Development, LLC, dated October 12, 2021. The vacant parcel is approximately 22.40 acres; there is an adjacent three-acre parcel that’s owned by the EDA, and we’re asking them to amend their LOI for acquisition of both parcels because if we leave the three-acre parcel there it will become a remnant parcel. The LOI provides a purchase price of $3,171,168. The parcel is zoned I2 and is a Minnesota Shovel-Ready certified development site through DEED. The land within the parcel is owned by the WAG Farms Trust. Historically, all land in the Business Park has been sold to the EDA and then sold to the end user, allowing for cost recovery to make the site pad ready. They’re proposing two buildings, 150 square-feet and 90 square-feet, for their business; we’d anticipate it would be done in two phases. There is another party interested in both parcels should this fall through, but at this time we’re recommending the EDA approve the recommendation below. Recommendation: By motion, authorize the EDA President and City Administrator to execute the Letter of Intent with Interstate Development, LLC, for the purchase of 22.40 acres located at the corner of 97th Street and Hemingway Avenue South if they include the adjacent three-acre parcel, which is owned by the EDA at $3.25 per square foot. Administrator Levitt stated she’d take any questions. EDA Member Carey asked if there was any insight on the type of business this would be or if they’d build the buildings for later tenants. Administrator Levitt stated Interstate Development will be moving their current operations from the other side of the river as their intent is to grow and expand. EDA Member Thiewes motioned to authorize the EDA President and City Administrator to execute the Letter of Intent with Interstate Development, LLC, for the purchase of 22.40 acres located at the corner of 97th Street South and Hemingway Avenue South if they include the adjacent three-acre parcel, which is owned by the EDA, at $3.25 per square foot. Motion was seconded by EDA Member Carey. Motion passed unanimously (4-0). 4.3 Purchase Agreement with Renewal by Andersen Administrator Levitt stated we’re excited because Renewal by Andersen is looking to expand their operations once again. They continue to make an investment in our community and bring jobs to our community. They’d like to purchase 19.34 acres at the corner of Hemingway Avenue and 100th Street, on which they’d like to construct a 332,000+ square-foot building and a parking lot with truck trailer and storage. We gave Gardenworld the first right of refusal opportunity for the area adjacent to their parcel; they were notified last week, and we anticipate that the First Right of Refusal will expire on Thursday. At that time, we would be able to move ahead with the Purchase Agreement, as outlined. This might also mitigate the number of vehicles on 100th Street. We purchase the property from WAG and then the EDA is the end seller to the end user as we recover the costs to make this pad ready and bring the utilities to the site. Recommendation: 1) By motion, authorize the EDA President and City Administrator to execute the Purchase Agreement with WAG Farms Trust for the purchase of 19.34 acres for development purposes. 2) By motion, authorize the EDA President and City Administrator to execute Purchase Agreement with Renewal by Andersen for the purchase of 19.34 acres once the Right of First Refusal expires with Belijah, L.L.C. Adam May, Communications Director for Renewal by Andersen, stated it was good to be back here again. Mr. May stated they’re seeing unprecedented demand for their products right now as most people have heavily invested in their homes over the last couple of years. He stated they’re looking forward to bringing more jobs here. The City has been an awesome partner. He thanked them for their consideration and stated they’re looking forward to continuing to grow here. Mayor Bailey had a question for Administrator Levitt on the slide that displayed the current businesses. He asked if the two lots between Gardenworld and Leafline Labs were buildable lots for the future. Administrator Levitt replied that no, those were for the regional stormwater facility. EDA Vice President Dennis motioned to authorize the EDA President and City Administrator to execute the Purchase Agreement with WAG Farms Trust for the purchase of 19.34 acres for development purposes. Motion was seconded by EDA Member Thiewes. Motion passed unanimously (4-0). EDA Member Carey motioned to authorize the EDA President and City Administrator to execute the Purchase Agreement with Renewal by Andersen for the purchase of 19.34 acres once the Right of First Refusal expires with Belijah, L.L.C. Motion was seconded by EDA Vice President Dennis. Motion passed unanimously (4-to-0). Economic Development Authority - Minutes November 9, 2021 Page 3 of 5 4.4 Letter of Intent with Endeavor Holding Company LLC Administrator Levitt stated the City of Cottage Grove received a LOI from Endeavor Holding Company, L.L.C., dated November 2, 2021 for a vacant parcel, approximately 19 acres, at the corner of 95th Street and Jamaica Avenue, with a purchase price of $2,689,830. The parcel is zoned I1, and the developer is anticipating a 260,000 square-foot spec building. As part of this, our agreement with WAG Farms is that they would dedicate to us the actual outlot for the pond. We would use the excavated materials to create a pad-ready site for the 19 acres adjacent to it. They’re indicating that steel and tilt-up panels are quite a bit out, so they anticipate having to do much of their site work, parking lot, and footings, and actually wait almost 9-to-10 months to actually get the materials. They desire to move forward. This is a great representation of how we work with the WAG Trust to bring parcels forward for development and enable them to move forward. Recommendation: By motion, authorize the EDA President and City Administrator to execute the Letter of Intent with Endeavor Holding Company, L.L.C., for the purchase of 19 acres located at the corner of 95th Street South and Jamaica Avenue South. EDA Member Thiewes motioned to authorize the EDA President and City Administrator to execute the Letter of Intent with Endeavor Holding Company, L.L. C., for the purchases of 19 acres located at the corner of 95th Street South and Jamaica Avenue South. Motion was seconded by EDA Member Carey. Motion passed unanimously (4-to-0). PUBLIC HEARINGS 5.1 NorthPoint TIF Community Development Director Costello provided background on the NorthPoint Development project: They’re headquartered in Kansas City, Missouri. They specialize in Class A Industrial Facilities. NorthPoint is new to the Twin Cities market, but they saw a need for a type of warehousing missing in our market. Their site will be approximately 236 acres, 3.4 million square feet. Our 2040 Comprehensive Plan guides this area for industrial use. The uses will include distribution, light manufacturing, warehouse, and office space. Their Master Plan has four phases. We’ve held two neighborhood meetings; about 30 people attended each of those meetings. They’ve provided images of the proposed building, using glass corners and canopies and brick panels on elevations. The site will have berms throughout and a sound wall along 105th Street. Director Costello displayed a map of the building layouts, and stated NorthPoint will be constructing some roads, including 100th Street, 105th Street, as well as a portion of the roundabout at 105th Street. They will install utilities and provide stormwater ponding. NorthPoint’s investment is $210 million; preliminary road and utility estimates are $9.93 million. City development fees, including connection fees and area charges, are approximately $7 million. Business Subsidy Policy Director Costello stated we need to look at this when there’s a request for financial assistance. This policy was approved in 2017, and we look at projects to make sure they meet the objectives. NorthPoint met the following objectives: • Expand and diversify the local economy and tax base • Increase the number and diversity of quality jobs and/or retain local jobs at a high wage • Provide the highest and best use for the property • Improve or add public infrastructure such as roads, utility extensions, stormwater ponding, etc. • Establish business interest that add to the diversity of the City’s offerings Desired qualifications for projects using the business subsidy include: • Proposals that significantly increase the amount of property taxes paid after redevelopment • Implementing the vision and values for the Business Park • Provides opportunities for high-tech, R & D facilities/office or major manufacturer • Attract a significant employer to the City • Adds needed roads, access, and other public infrastructure • Provides significant improvement to surrounding land uses Based on NorthPoint’s sources and uses, they qualified for consideration of an Economic Development TIF District. NorthPoint TIF District 1-20 • Duration will be 8 years after receipt of the first increment, which is anticipated in 2024: -It will terminate earlier with either satisfaction of a Pay-As-You-Go Note (developer pays for various TIF-eligible expenses/costs, then the City reimburses the developer from the increment) and Interfund loan where City advances money to use for the increment and then reimburses ourselves, or on December 31, 2032 -If the first increment is received earlier than 2023, the District would terminate on December 31, 2031 • The maximum amount of tax increment collected may not exceed the Project Costs, approximately $18.6 million. • The budget does not resemble the amount of assistance being provided. • Actual amount of assistance will be $8.311 million in the form of a Pay-As-You-Go TIF Note. • Terms of the assistance and the overall provisions will be contained within the TIF Agreement, which will be before the EDA on December 14, 2021. • Term Sheet summarizes what was agreed to by both parties; Director Costello reviewed each section: General-Developer will construct public improvements by April 30, 2024; Development-Four Phases, with commencement and completion dates given; Job & Wage Goals- Developer must create at least 1,870 fulltime jobs within two years of completion, 300 of which must exceed an hourly wage totaling 200% of the State’s minimum wage at the time of Certificate of Occupancy (CO). The wage in 2022 is starting at $20.66. Developer required to pay 90% or more of the employees of the building at a rate equal to or greater than 160% of the Federal minimum wage for individuals over the age of 20 at the time the CO is issued for each phase ($18 staring in 2022). Developer is required to annually report progress until job and wage are met through the terms of the TIF Note for each phase. A number of these parcels are called green acres; hence, the job requirement. Our Business Subsidy Policy only requires you to create one fulltime job at 200% of the State’s minimum, but because of this green-acre provision in State Statute, those are the job requirements we’re required to meet. If the goals are NOT met, TIF assistance with interest must be repaid. Operations must be maintained within the City for at least five (5) years from project completion. TIF Note: • Developer will receive a Pay-As-You-Go TIF Note in the amount of $8,311,000 after providing proof of actual expenditures in connection with the public improvements. Economic Development Authority - Minutes November 9, 2021 Page 4 of 5 • The term of the TIF Note will be six (6) years, and interest will be paid at 4%. • Payable from 90% of the available tax increments (the EDA retains 10%). • In the event of default, the City can cancel or rescind the TIF Note. • Developer will not seek a reduction in market value of property during the term of the TIF Note. Business Subsidy: • Developer acknowledges EDA is providing this in accordance with State Statutes. Director Costello stated the EDA needs to determine if the business terms as presented are acceptable to draft the TIF Agreement; if so, it will be brought back for approval at the next EDA Meeting on December 14, 2021. Recommendation: By motion, approve a modification to the Development Program for Development District No. 1 and a Tax Increment Financing Plan for Tax Increment Financing District No. 1-20. Director Costello stated she, the applicant, and our Ehlers representative would take any questions regarding the TIF. EDA Member Thiewes asked since this is a four-phase development if the job and wage goals would adjust if they decided to only do three phases versus four; he asked how those would be changed if they didn’t complete all four phases. Director Costello deferred that question to our financial consultant, Stacy Kvilvang, from Ehlers & Associates, to answer that question. Ms. Kvilvang replied that is the number that they have to create; if they don’t meet the job and wage goals, then there would probably be a reduction or payback of the assistance. If something were to happen in the economy where they weren’t able to meet finish the fourth phase so weren’t able to meet the job and wage goals, they would come back and have that discussion with staff and with the EDA. The agreements could be amended as necessary as the EDA deems fit. Brent Miles, Chief Operating Officer/Founding Partner, NorthPoint Development, stated they started about 10 years with five employees, and today they have 802 employees; they’re the largest privately-held developer in the U.S. This is a big capital investment for them, so they spent a lot of time studying the market. You haven’t seen a park quite like this in this quadrant of the city, and the data suggests now is the time; they’re investing over $200M into the project and they like the site. At the Planning Commission, he quoted Benjamin Franklin, “Capital goes where capital is welcome.” City staff and your consultants have been tremendous; they work throughout the entire country, and this is one of the best experiences they’ve ever had. They didn’t get everything they wanted, but had robust debates about it. The City has a good policy, clear communication, and professional, honest staff. They’ve been working on this for five-to-six months, and we feel we’ve struck a fair deal. Mr. Miles stated this is one of the best processes they’ve ever experienced in over their 500+ developments, and they couldn’t be happier. They hope to begin construction in the spring. He stated he’d be happy to answer any questions. EDA President Bailey asked after they build this project, if they would continue to own the buildings. Mr. Miles replied, yes, they would. This local market is characterized as a flip and build; in the real estate world, that’s how this market is characterized. Personally, they feel that’s a mistake so they’re long-term holders. They’ve had three partners they’ve interviewed, but haven’t picked one yet; two of whom are very well known life insurance companies, so they’re looking at it as a 30- to 50-year capital investment. The size and scale of the Cottage Grove project will most likely warrant NorthPoint having an office here and staff here. EDA Vice President Dennis told Mr. Miles that his capital was welcome here. Mayor Bailey thanked Mr. Miles for being here and his positive comments about our staff; our Business Park is expanding so rapidly because our staff works well with developers to find solutions if there are any obstacles. He gave kudos to the staff members for their great work. EDA Member Thiewes asked how the size of the Cottage Grove facility compares to other facilities they’ve built throughout the country. Mr. Miles replied that this would be on the medium to smaller size; for this market, proportionately, this would be one of the biggest parks in the whole metro when it’s all said and done. To put it in perspective, he’s flying to Philadelphia where they’re developing an 18,000,000 square-foot park, which is massive, but felt their Cottage Grove development will still be considered a big park. EDA Member Carey stated he’s seeing 1,870 jobs, 90% of which will be 160% over the federal minimum wage; he asked if that’s something that’s stipulated in the lease agreement to the eventual tenant. Mr. Miles stated that’s something they’ll look at specifically for tenants at this location. One thing that drove them to this quadrant was the lack of industrial development. They looked at the number of available workers in this area and their wages. Mr. Miles stated he felt very confident that they will be hitting both of those criteria, on the number of jobs and the wages that will be paid. EDA President Bailey opened the public hearing. As no one wished to speak on this item, EDA President Bailey closed the public hearing. EDA Vice President Dennis motioned to approve a modification to the Development Program for Development District No. 1 and a Tax Increment Financing Plan for Tax Increment Financing District No. 1-20. Motion was seconded by EDA Member Thiewes. EDA Vice President Dennis felt it was important for the public to know that this TIF District is set at a very low end of the number of years from what it could be. He felt this would provide a relatively quick path to assist in getting this done here, but also to ensure that we’re seeing the return coming back to the community as soon as possible. He feels very good about it. Motion passed unanimously (4-0). OTHER BUSINESS 6.1 EDA Calendar EDA President Bailey stated later this afternoon, at 3:30 p.m., the Boondocks Vintage Boutique will be having their ribbon cutting. Next week, on November 15, there will be a ribbon cutting for Cross Country Mortgage at 3:30 p.m. Economic Development Authority - Minutes November 9, 2021 Page 5 of 5 6.2 EDA Comments EDA Vice President Dennis congratulated EDA Member Dan Myers, although he wasn’t there, as he’s now the President of the Cottage Grove Area Chamber of Commerce. 6.3 Response to Previous EDA Comments - None. 7 WORKSHOP - None. ADJOURNMENT EDA Member Carey motioned to adjourn. Motion was seconded by EDA Member Thiewes. The meeting adjourned at 8:13 a.m. (4-to-0 vote). Respectfully submitted, Jaime Mann Assistant to the City Administrator /jag