TIF #2 Board of Directors Minutes - 06/15/2011O REINVESTMENT ZONE #2
TAX INCREMENT FINANCING BOARD
MINUTES
June 15, 2011
Members:
Ben Filer, Chairman •
Jim Chandler •
Jerry Taylor
Michael Smith, Council liaison •
Staff:
Leo Bethge, Planner 11
Jim Dockery, Assistant City Manager/Chief Financial Officer •
Karen Gagne, Planner III
Pat Hoffman, Property Administrator •
Kevin Hugman, Assistant City Manager •
Absent:
Ann Bishop
John Luig •
1. Call to order & Introductions
Chairman Filer called the meeting to order upon obtaining quorum at 3:42 p.m.
2. Approval of Minutes
Chairman Filer called for a motion to approve the minutes from the November 17th
2010 meeting; Mr. Chandler introduced a motion approving the November 17t', 2010
TI F#2 meeting minutes, motion was seconded by Mr. Taylor. The minutes were
unanimously approved.
3. Staff Update -- Staff Update Financials
Ms. Gagne reviewed Table #1, Tax Increment Finance Zone #2, for comparison
purposes with Table #2, Tax Increment Finance Zone #2. In reviewing Table #1, she
pointed out city revenues have increased from $255,000, in fall 2010, to almost
$320,000 with the spring 2011 increment (Table #2). She stated this is more than a
$64,000 increase and considering economic issues over the past year, Ms. Gagne
indicated the Zone is performing much better than projected in the original Financial
Plan.
Ms. Gagne deferred to Mr. Dockery for a detailed assessment of the financials. He
stated there was a 25% increase in revenue generated above debt service
requirements to the 4B Sales Tax Corporation (STC). By 2012, assuming a
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conservation 3% annual increase, TIF#2 will no longer be in debt and will just be
paying the annual debt service and rebuilding the fund balance. He stated, based on
Ms. Gagne's review, that this is a substantial increase. Councilor Smith questioned
when the debt to the 4B STC would be completely paid and when this T1 F Zone
expired. Mr. Dockery replied stating this information will be discussed later in the
meeting. However, he noted by 2025 T1 F#2 will expire -- with a final increment
payment in 2025.
4. Review, Discussion and Action Regarding Funding Allocation for Specific
TIF#2 Project Priorities: Priority ##1 -- Call Field/Rhea/Lawrence Rd.
Intersection
Mr. Hugman provided a presentation regarding the Rhea/Call Field Road realignment
project. The latest MPO Mobility Study completed in 2010 reaffirmed the Rhea
Road/Call Field intersection realignment as a high priority project within the T1F#2
Zone. An alternative, northern realignment of the Call Field and Rhea Road
intersection is now being considered. The question, based on meeting the Mobility
Study priority, is how to fund the intersection improvement. Mr. Hugman provided a
brief background, noting the intersection was originally engineered for a southern
realignment through a portion of the Faith Village Plaza property. However after
numerous meetings and phone conversations with the Faith Village Plaza owners
(Karns Commercial Real Estate), over a period of three years, they were unwilling to
work with the City due their pending development projects (El Fenix restaurant) at the
site. The new objective, if authorized by Council, is to pursue discussions with the
owners of the Strategic Realty building located on the northeast corner of the existing
intersection. The property owners stated they are willing to talk with the city and sign
a contingency agreement at appraised value. Continued discussions with the Council
will now revolve around how to finance the proposed project cost of $3.2 million for
property acquisition, demolition, construction, and future contingencies.
After Mr. Hugman's presentation Mr. Dockery continued his discussion of funding
alternatives and a proposed staff recommendation. He stated the 4B STC is an
eligible source for funding; however, the 4B Fund cannot fund the entire project. Mr.
Dockery explained the 4B STC already has commitments and maintains a reserve of
approximately $2 million to help retain the City's bond rating. He noted 4B STC only
has $500,000 available annually in discretionary funds. Mr. Dockery recommended a
funding solution of either a certificate of obligation and/or bonds. Reimbursement for
debt service could be from a combination of funds (4B STC/T1F#2). He stated they
are potentially looking for a commitment from the T1F#2 Board to assist with funding
the project.
Discussion among Board members and staff focused on specifics of the proposed
project location within the TIF#2 Zone, design of the northern alignment, properties
potentially impacted, etc. Mr. Chandler questioned the future use of excess property
west of Strategic along Call Field. Mr. Hugman commented that perhaps the land
owner west of Lawrence (McAlister's) may be interested in the property or it will be
marketed for a development site. Mr. Chandler inquired about the size of the excess
tract of land. Ms. Hoffman stated there would be sufficient land area for a stand alone
facility, such as a small restaurant, with adequate parking. Mr. Taylor questioned if
TAX INCREMENT FINANCING ZONE #2 June 15, 2011 Page 2
the Kohl's site would be impacted and if anyone had talked with them, if not, they need
to be part of the discussions. Ms. Hoffman replied that Mr. Taylor was correct, a
portion of the Kohl's parking lot would be impacted, but for now we have to wait before
we enter into discussions. Mr. Hugman stated it appeared from the engineered
designs the Kohl's access point on Lawrence Road will be preserved. Mr. Hugman
stated another entrance, for both McAI isters and Kohl's may be needed from
Lawrence Road. Mr. Taylor inquired about the elongated piece of land noted on the
design map. Ms. Hoffman explained it was additional right -of --way. Mr. Hugman
further stated the realignment will create a better long-term solution as compared to
the by-pass dedicated right turn lane option.
Mr. Dockery continued stating this Board considers the Rhea/Call Field/Lawrence
Road intersection the highest project priority within the T1F#2 Zone even though
currently there is no fund balance as result of paying for debt service to the 4B STC
for the Maplewood extension and drainage channel improvements. Based on
conservative trends, by 2015 the T1F#2 fund should no longer have a deficit. Based
on Mr. Dockery's research, he described each funding scenario for the Rhea/Call Field
Road realignment.
1) T1 F#2 Funding: With a projected "conservative" growth of 3% annually, the
unobligated T1F Fund balance could be $2.6 million by 2026. This amount takes into
account the annual debt service owed to repay the 4B STC for Maplewood extension.
2) 4B Sales Tax Corporation: This is an eligible source since the use of 4B Funds is
limited to public improvement projects, such as the Maplewood extension project.
Currently, $1.7 million remains in the fund balance and as noted earlier the City/413
Board desires to retain this level of reserves. Annual discretionary funding is currently
set at $500,000; with $200,000 in annual debt service about ready to expire.
3) General Fund Reserves: Currently there is $14.5 million in the general fund
balance, of which 20% of expenditures suggests $13 million should be maintained in
reserves to for emergencies, potential legal settlements to maintain the City's bond
credit ratings. Lastly, with the pending budget for 2011 /2012 there are various
projects identified that are not eligible for either T1F or 4A/4B Funds.
Based on this information, Mr. Dockery recommended issuing $3.2 million in
Certificates of Obligation over 20 years. This would create an estimated debt service
of about $246,000 per year. If authorized by City Council, it may be possible to
advance the use of General Funds for property acquisition ($1.3 million) and be
reimbursed through bond proceeds are deposited. The use of 4B Funds could initially
pay the debt service, similar to the Maplewood extension project. The use of the
estimated $2.6 million in future T1F increments could repay a portion of the project
cost back to the 4B STC. This option would be a 50%-50% sharing project.
Mr. Dockery referred members to three financial tables as part of his packet — all items
related to T1F#2's priority project Rhea/Call Field/Lawrence Rd. realignment. The first
table was based on the existing debt service repayment schedule. He stated by 2026
final repayment is due for the Maplewood extension/drainage channel improvements
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and with a 3% "conservative" growth rate, the total debt service of $2.56 million will be
paid in full. Mr. Taylor added that from 2010 to 2011 the T1 F#2 District growth rate
increased by 25% based on Zone improvement including Marriott and Jack in the Box
—this is a phenomenal growth rate. Members commented with pending developments
scheduled in the Zone, it is reasonable to anticipate additional growth beyond the 3%
for the increment.
The second table outlined a project financing option (scenario #1) estimating annual
contributions from 4B STC at $246,000 and committing the total remaining TIF#2
increment through 2026. if $2.5 million in TIF#2 funds were used to repay the $4.9
million of 4B STC debt service, the shared commitment is approximately 50%.
Finally, the third table (scenario #2) included the estimated 4B STC annual $246,000
debt service payment and a reduced annual commitment from TIF#2. This second
scenario reduces the TIF#2 obligation to a maximum annual payment of $150,000
from 2012 through 2026 for a total commitment of approximately $2 million. Thus
providing opportunity to consider assistance with other identified TIF#2 projects.
In conclusion, Mr. Dockery stated if 413 STC funding is requested, based on obtaining
T1 F#2 commitments, this matter will then need to be presented to City Council for final
authorization. Similar to the Maplewood extension project, TIF funds will be used to
repay 4B/debt service commitments. However, utilizing scenario #1 the increment
funding is available for the realignment project -- no additional projects in the TIF#2
OProject Plan could be considered.
Chairman Filer asked about the street project priorities for the TIF#2 District. Staff
highlighted the T1 F#2 Board's project pdoritieslestimated costs while members
reiterated their commitment to the project listing. Mr. Dockery commented Chairman
Filer was correct; TIF#2 would probably run out of increment and be unable to fund
the remaining projects. Scenario ##2 would likely put the TIF#2 Board in a position to
possibly consider one -- two additional projects. Chairman Filer questioned the
extension of Maplewood from Lawrence Road to MCNiel. Members discussed and Mr.
Chandler stated his concerns, which may also be similar to those of Ms. Bishop, the
City can't do all the projects with scenario #1. However, with scenario #2 the T1 F#2
Fund could at least cover a large share of one additional public improvement project.
Members commented with better traffic flow, based on street improvements, more
development will follow in the Zone. Also, the City should purchase the Faith Village
Plaza corner since the owner will benefit from additional traffic. Mr. Hugman added
the Faith Village Plaza owners want direct access onto Call Field Road.
Mr. Dockery indicated there was no problem with committing the entire future
increment (scenario #1) for the realignment project but the City wanted to present
various scenarios for the TIF#2 Board's consideration. Mr. Taylor commented on the
scenarios, noting if all the money were rolled into one project that may be all that's
accomplished for the remaining years in the Zone. Mr. Dockery noted scenario #2
offers flexibility with the T1 F#2 Fund contributing $2-2.25 million with the 4B STC Fund
potentially paying for the remaining $2.9 million portion of the project. Councilor Smith
commented that he preferred funding scenario #2, with the realignment of Rhea/Call
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Field Road intersection being the first priority for improvement; Wenonah Blvd. being
second; Maplewood extension to McNiel Ave. being third; and drainage improvements
along McGrath Creek being the fourth priority for future improvements. He stated
undeveloped land in the area between McNiel and Lawrence along with east of
Lowe's still remains within the T1F#2 Zone for future development but unless some of
these identified public projects are completed the areas may not develop.
Board members continued to discuss project priorities and funding scenarios, noting
three key projects remain after the realignment project. Councilor Smith indicated the
need for flexibility over the next 5-10 years considering the number of undeveloped
land parcels within the T1F#2 Zone. Chairman Filer stated he was in favor of scenario
#2. Mr. Chandler introduced a motion and Mr. Taylor seconded for approval of T1 F#2
funding scenario #2; initially using $3.2 million in General Fund reserves to fund
acquisition and demolition, construction and contingencies for the Rhea/Call Field
Road realignment project with repayment through the issuance of a 20-yr Certificate of
Obligation, annual debt service of $250,000, with debt service commitments from 4B
STC ($2.9 million) and T1F#2 in an amount not to exceed $150,000 annually for a total
of approximately $2 million. Motion passed unanimously.
Mr. Hugman stated next steps will include taking this matter to the 4B STC and City
Council for further review and authorization. Staff indicated the T1F#2 funding
recommendations will be presented for City Council consideration at their July 19
meeting. Ms. Gagne updated the Board regarding their recommendation from the
November 17th meeting. She explained the final bid information was received, in
March 2011 from the applicant's surveyor, for a directional boring cost of $15,625
which was less than anticipated. This recommendation will also be presented to City
Council at the July 19t' meeting.
5. other Business: Board Appreciation Luncheon -- July loth MPEC
Ms. Gagne reminded members about the City's Board/Commission appreciation
luncheon scheduled for Tuesday, July 20�' at MPEC from 12-1pm. She asked if
everyone had received the email notification. Members indicated they received both
the email and postcard invitations. Staff took a roll count of those who can attend the
luncheon and noted they will contact absent members to determine their availability.
6. Adjourn
Chairman Filer motioned to adjourn the meeting at 4:28 pm.
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Ben Filer, Chairman Date
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