04/09/2019 - City Council Finance CommitteeFINANCE COMMITTEE MEETING
TUESDAY, APRIL 9, 2019
10:30 A.M.
EAGAN FIRE STATION #2, 1001 STATION TRAIL
UPPER CONFERENCE ROOM
AGENDA
I.AGENDA ADOPTION
II.ACCESS EAGAN
III.ETV REVENUE PROJECTIONS
IV.LAND USE/PROPERTY TAX REVENUE IMPLICATIONS
V.REDEVELOPMENT FUND
VI.REVIEW OF PUBLIC FINANCING ASSISTANCE POLICY
VII.DATABANK ABATEMENT
VIII.OTHER BUSINESS
IX.ADJOURNMENT
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Agenda Information Memo
Finance Committee
April 9, 2019
II.Access Eagan
Action to be Considered:
Review options for the future of AccessEagan.
Facts:
This City built out the initial fiber network which consisted of two phases beginning in 2011 and
completing in the fall of 2012. The two phases included 17 miles of fiber throughout the core business
district of Eagan and was engineered by Design Nine & Associates. The cost to build the fiber network
was $1.6 million.
The fiber network became known as AccessEagan and is open to all service providers to sell direct fiber
services to Eagan businesses. Currently, the network has five (5) service providers; Frontier
Communications, Arvig, Velocity Telephone, Consolidated Communications and OneNet USA.
Other additions to the AccessEagan network since the initial Phase 1 & Phase 2 buildout include adding
fiber to the Cedar Grove area, Northeast Eagan, as well as shared fiber strands with Dakota County
along Cliff Road. In addition, the networks Point-of-Presence was moved from Eagan Fire Station 2 to
DataBank Data Center in 2015.
Since its inception, $3.1 million has been transferred from Tower Lease Revenues to AccessEagan to
date. In 2011, an additional $500,000 was transferred from the Cable Franchise Fees Fund to
AccessEagan to finance previous fiber installation construction and consulting studies. Thus, $3.6
million has been invested into AccessEagan.
Annual revenues for AccessEagan operations in 2018 were $83,604.48, while expenses were
$216,561.84.
Multiple fiber projects have been completed as a result of having AccessEagan fiber available
throughout the city, including: a voice backhaul between radio towers to improve radio
communications between Sperry and Yankee Doodle communication towers; fiber connections to
various lift stations, multiple street lights, and traffic signals. These projects have helped increase
speed and reliability of critical infrastructure.
Staff will provide additional budget information and options to consider at the Finance Committee
meeting.
Attachments: (0)
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Agenda Information Memo
Finance Committee Meeting
April 9, 2019
III.ETV Revenue Projections
DIRECTION TO BE CONSIDERED:
To provide direction on the next steps for review by the City Council, if any, of the information
presented at the Finance Committee.
FACTS:
Franchise and PEG fees fund ETV and Eagan’s Communication department.
PEG fees may only be used to fund the City’s public, educational and government channels and
may not be used for wages or salaries.
Because cable subscription numbers are dropping, the calculation of those fees was negotiated
by the City from a per subscriber to a percent of revenue model as part of the City’s new 10-year
franchise agreements with Comcast and CenturyLink signed in 2018.
In his memo to the Council for its retreat in January 2019, Finance Director Pepper noted that
franchise fees and PEG fees dropped significantly in 2018. That drop was expected and has
reversed in recent quarters. Staff projects a 2% annual increase in those revenues going
forward.
Expense has exceeded franchise fee revenue since 2014. In 2019 that growing annual gap is
expected to be $271,750.
Expense is projected to continue to exceed franchise fee revenue, leaving the fund depleted by
2024.
Expense also exceeded revenue for the PEG fund in 2018, mostly due to the purchase of a
mobile production truck shared with the City of Burnsville.
Barring any unforeseen major capital expenses, the PEG fund is expected to grow to $1.2 million
by 2024.
A proposed FCC rule that allows cable companies to count items such as bandwidth and cable
service to public buildings as part of their payments could reduce Franchise revenue by as much
as 20% -- accelerating the depletion of the Franchise Fee fund to as early as 2023.
Attachments:
III-1 Franchise Fees Charts
III-2 PEG Fees Charts
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200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
2010 2011 2012 2013 2014 2015 2016 2017 2018 est.
2019
est.
2020
est.
2021
est.
2022
est.
2023
est.
2024
Franchise Fees Revenues/Expenditures
Communications ETV Personnel Franchise Fee Revenues
(500,000)
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500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
2010 2011 2012 2013 2014 2015 2016 2017 2018 est.
2019
est.
2020
est.
2021
est.
2022
est.
2023
est.
2024
Franchise Fees Cash Balances
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100,000
200,000
300,000
400,000
500,000
600,000
700,000
2010 2011 2012 2013 2014 2015 2016 2017 2018 est.
2019
est.
2020
est.
2021
est.
2022
est.
2023
est.
2024
PEG Fees/ETV Revenue Expenses
ETV Operations (non-staff)Capital & Other PEG Fees Revenues
-
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
2010 2011 2012 2013 2014 2015 2016 2017 2018 est.
2019
est.
2020
est.
2021
est.
2022
est.
2023
est.
2024
PEG Fees/ETV Cash Balances
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Agenda Information Memo
Finance Committee Meeting
April 9, 2019
IV.Land Use and Property Tax Implications
DIRECTION TO BE CONSIDERED:
To provide direction on the next steps for review by the City Council, if any, of the information
presented at the Finance Committee
FACTS:
On occasion, the City Council is asked to consider a change in the land use guide designation of
land in the City of Eagan.
As part of that discussion, it is not uncommon for the City Council to address the fiscal impact to
the City of the requested land use change.
This may include, but not be limited to the property tax revenue generated from certain land
use designations: residential low density, medium density, high density, commercial and
industrial; which might then be compared against the expenditures incurred by the City to
service those same types of property.
Throughout the last several months, Staff conducted certain limited analysis of 2017-2018 public
safety calls (as a proxy for expenditures) by land use type, and compared those to property tax
capacity (proxy for revenues) for those land use designations; if you will, a “high level”
comparison of City revenues vs. expenditures for various land use designations.
Northland Securities has augmented Staff’s analysis by incorporating estimated allocations of
Public Works and Parks/Recreation resources by property type to test whether the results
would mirror the conclusions of a 2012 TischlerBise study prepared for the MN Dept of
Revenue.
CONCLUSIONS:
o The TischlerBise study suggests generally that Commercial and Industrial (C/I) property
taxes more than cover the costs of services provided to those properties, while taxes on
residential properties do not cover costs.
o The City’s simplistic study of 9-1-1 calls indicates that C/I taxes do not cover costs, and
neither do taxes on high-density residential; only low- to medium-density residential
taxes cover costs.
o Northand’s augmentation of the City’s study appears to confirm the results of the
TischlerBise report: C/I property taxes more than cover the costs to serve C/I
properties, while the opposite is the case for residential. This also seems to confirm
that 9-1-1 calls alone are not a good proxy for total costs.
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Attachments:
IV-1 Net Fiscal Results for Developed City by Property Type (TischlerBise)
IV-2 9-1-1 Calls and Tax Revenues by Property Type (Eagan staff)
IV-3 Total Service Costs and Tax Revenues by Property Type (Northland)
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Agenda Information Memo
Finance Committee Meeting
April 9, 2019
V. REDEVELOPMENT FUND
DIRECTION TO BE CONSIDERED:
To provide direction on whether the City should establish a Redevelopment Fund
FACTS:
Only approximately 180 acres or 4% of Eagan’s commercially-zoned land remains
undeveloped. An additional 132 acres, most of which is in Viking Lakes, is
available for Mixed-Use development. As a nearly fully developed city, Eagan is
turning its attention to reinvestment and reuse which tends to be more difficult
and expensive than greenfield development.
Redevelopment projects have become financially more difficult since the Cedar
Grove Redevelopment project was initiated. Cities cannot acquire and assemble
land using eminent domain. The 2001 Omnibus Tax Bill decreased
commercial/industrial tax rates and created a State property tax which could not
be captured in TIF districts. With those changes, TIF revenues declined while in
the past 20 years acquisition and construction costs have increased dramatically.
Buildings with functional obsolescence may not meet the blight test required by
Redevelopment and Renewal/Renovation TIF districts. For example, despite the
vacancy rate and market challenges, Burnsville Mall cannot meet the blight test
required for a TIF district. Because counties and school districts seldom
participate, abatement generates much less revenue than TIF districts.
Tax increment districts and abatement projects are often not able to generate
adequate revenue to support large-scale redevelopment projects that require
new public infrastructure including streets, pedestrian facilities, stormwater
management, public parking, sewer and water, and public gathering spaces. Tax
increment may not be used for park and recreational facilities or decorative
public improvements which are often critical place-making elements of
redevelopment projects.
Many cities that wish to encourage redevelopment establish special funds to
support the extraordinary costs of redevelopment that cannot fully be met by
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grants, TIF, or abatement. For example, Brooklyn Park and St. Louis Park have
“war chests” estimated at over $20 million each which the cities use as funding
for Council priorities. The source of funds is the EDA and HRA levies in Brooklyn
Park, and land sale proceeds and interest earnings for the past 25+ years in St.
Louis Park.
Given limitations in the use of TIF, abatement, and grants, an independent
redevelopment fund provides flexibility and influence to ensure that City goals
are met.
POLICY QUESTIONS:
1. Would the Finance Committee support the establishment of a Redevelopment
Fund?
2. The City recently received $250,000 for the sale of land to Costco. Could that
revenue be seed money for a Redevelopment Fund? What other funding
sources would be appropriate?
3. What further information on redevelopment and public financing does the
Finance Committee need to consider establishment of a Redevelopment Fund or
to develop additional policies supportive of redevelopment and reinvestment?
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Agenda Information Memo
Finance Committee Meeting
April 9, 2019
VI. REVIEW OF PUBLIC FINANCING ASSISTANCE POLICY
DIRECTION TO BE CONSIDERED:
To provide direction on whether the City’s Public Financing Assistance Policy should be
amended.
FACTS:
On December 19, 2006, the City adopted a Business Assistance Policy that meets
the criteria of Minnesota Statutes 116J.993 through 116J.995. The Policy was
subsequently amended in 2012 and 2014.
With the City nearing full development and the emphasis on reinvestment and
redevelopment in the 2040 Comprehensive Plan Update, it is appropriate to
regularly review the Business Assistance Policy, Business Assistance Financing
Application, and Programs Available for Financial Assistance to determine
whether modifications are recommended.
POLICY QUESTIONS:
1. Should the evaluation criteria defined in Section 5.01 be amended?
2. Are any changes to the job and wage goals defined in Section H1 recommended?
3. Programs Available for Financial Assistance lists the statutory requirements for
each type of TIF district. For tax abatement it states that abatement will only be
considered for specific City priorities including attraction of a colocation data
center, attraction of a telecommunications carrier hotel, or development/reuse
projects under certain circumstances.
a. Should the tax abatement section be consistent with the TIF sections and
only include statutory requirements?
b. If not, should additional City priorities be listed?
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ATTACHMENTS: (2)
VI.-1 City of Eagan Business Assistance Policy, Application, and Programs Available for
Financial Assistance
VI.-2 2040 Draft Comprehensive Plan Economic Development Goals
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Draft 2040 Comprehensive Plan
Economic Development Goals
1. To encourage resiliency by supporting a broad range of businesses in terms of size, type and market
emphasis to protect the community against economic cycles.
2. To be proactive and responsive to economic development opportunities.
3. To attract and support businesses that produce goods and services for regional, statewide, national
and international markets.
4. To take reasonable actions to provide sufficient areas of land designated for industrial and
commercial ventures.
5. To reasonably protect and enhance land values through public investment in critical infrastructure,
services, and code enforcement.
6. Where applicable, the City will act as a conduit to assist local businesses in accessing capital, as a
way to attract and retain businesses in Eagan. Achieving this goal may involve leveraging State
and/or Federal funding sources.
7. To support broad employment opportunities for all residents of the City.
8. To support the development of a work force that has the skills needed to meet the needs of local
businesses.
9. To support employment opportunities that relate to regional, state, national and international
economies.
10. To ensure that all businesses have access to the appropriate public services necessary to meet their
business and security needs.
11. To ensure businesses have access to the appropriate physical infrastructure necessary to meet their
business needs.
12. To strive to provide public services and infrastructure in the most efficient and cost-effective
manner possible.
13. To foster a mix of commercial retail uses to meet the needs of City residents and employees of
Eagan businesses. Commercial uses will be encouraged in locations that provide concentrations of
complementary businesses and provide a variety of choices for consumers.
14. To encourage a diverse range of public and private recreation and entertainment opportunities and
gathering places for all segments of Eagan’s residential, workforce and visitor populations.
15. To strengthen a sense of community and ensure that neighborhoods are safe, attractive, and well
linked to nearby commercial developments (in terms of walking and biking).
16. To promote a positive, attractive, and vibrant image of Eagan as a desirable place to live, work,
conduct business and recreate.
17. To clearly communicate the City’s development processes, services, and regulations, and ensure the
timely processing of development applications.
18. To ensure that the appearance of commercial and industrial development will enhance the property
values of adjacent areas rather than serve as a distraction or detriment.
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Agenda Information Memo
Finance Committee Meeting
April 9, 2019
VII. DATABANK ABATEMENT
DIRECTION TO BE CONSIDERED:
To provide direction on whether the City should declare Databank Holdings, LP to be in
default of the Redevelopment Assistance Agreement.
FACTS:
The City of Eagan entered into a Loan Agreement for a DEED Minnesota
Investment Fund (MIF) grant and a Redevelopment Assistance Agreement
(abatement agreement) with Databank Holdings, LP in 2015.
The MIF Loan Agreement provided $135,000, or $7,500 for each of 18 FTE to be
created, and required Databank to meet job and wage goals by the extended
Compliance Date of May 1, 2018.
Databank did not meet job and wage goals by the Compliance Date. Of the 18
required FTE, 9 jobs were filled and met wage goals on the Compliance Date.
Databank repaid DEED for the 9 jobs that did not meet goals plus accrued
interest at 4% since the disbursement date of April 28, 2016 for a total
repayment of approximately $74,200.
The City’s abatement agreement with Databank was tied to the creation of a
Colocation Facility or Carrier Hotel which was a primary objective for the City.
Databank has satisfied that criteria.
In addition to goals related to the Colocation Facility and Carrier Hotel, the
abatement agreement defines the failure to meet job and wage goals in the
years 2016 – 2021 as an event of default, and the City may choose to require
Databank to remedy defaults.
The abatement period is a maximum of 20 years from 2016 through 2035.
Annual payments may not exceed $23,420. Abatement payments in 2016, 2017,
and 2018 were $318, $5,290, and $7,871, respectively.
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Databank has exceeded their original project budget of $22 million and has
invested more than $26 million into the facility with their final $2.5 million Phase
IV bay expansion currently in progress.
City staff request Finance Committee direction on whether to declare a default,
and if so, what action should be taken.
POLICY QUESTIONS:
1. Should the City declare Databank to be in default of the abatement agreement
due to its failure to meet job and wage goals?
2. If so, after allowing Databank 60 days to cure the default, what further actions
should the City take?
ATTACHMENTS (1)
FCVII-1 Redevelopment Assistance Agreement
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