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04/01/2008 - City Council Finance Committee AGENDA FINANCE COMMITTEE MEETING TUESDAY, APRIL 1, 2008 4:30 - 5:30 P.M. CONFERENCE ROOMS 2A&B 1. AGENDA ADOPTION II. NORTHEAST EAGAN REDEVELOPMENT DISTRICT - REVIEW OF TIF DISTRICT STATUS III. 2008 FIRE APPARATUS FUNDING (Items IV, V, and VI will be considered only if time permits.) IV. CITY DEVELOPMENT RELATED FINANCIAL GUARANTEES V. ELECTED OFFICIALS OUT-OF-STATE TRAVEL POLICY VI. OTHER BUSINESS VII. ADJOURNMENT MEETING NOTES FINANCE COMMITTEE MEETING TUESDAY, APRIL 1, 2008 4:30-5:30 P.M. CONFERENCE ROOMS 2A & 2B Committee members present: Mayor Maguire and Councilmember Carlson. City Staff present: City Administrator Hedges, Assistant to the City Administrator Miller, Director of Administrator Services VanOverbeke, Director of Community Development Hohenstein and Fire Chief Scott. Also present were Rebecca Kurtz and Sid Inman from Ehlers and Associates. Northeast Eagan Redevelopment District - Review of TIF District Status Community Development Director Hohenstein summarized the current status of the TIF district in Northeast Eagan and noted that the City is at a point where it has options given that the district is developed in part. The Committee discussed the merits of creating a new district in Northeast Eagan. In discussing the possible modifications to the TIF district, Director Hohenstein noted that if no modification is done to the district, the loss of five years of increment and time value of that revenue flow would currently be approximately $2 million with 75 percent available to the developer (McGough) which would equate to $1.5 million. Hohenstein added the developer has indicated there are extraordinary costs to the project which are as great or greater than they were when the original pro forma was prepared and they have asked the City to consider alternatives to provide a level of increment at or approaching the $2.8 million estimated originally. After the discussing the options available to the City, the Committee recommended that a new district be created with fiscal disparities coming from outside the district. The Committee also directed that an item be added to the April 1 City Council meeting to set a public hearing for June 3, 2008 to consider the creation of the new TIF district. The Committee voiced their consensus that they are comfortable with the recommendation being made to the City Council with the understanding that funding being gained will be pooled with some of it being designated towards the Cedar Grove Redevelopment Area. Fire Apparatus Funding City Administrator Hedges noted that at the November 25, 2007 City Council meeting, a Fire Apparatus Funding Plan was approved by the City Council, which included direction that the Community Investment Fund would be designated as a funding source for 3 fire apparatus being replaced in 2008 at an estimated cost of $675,000. Director of Administrative Services VanOverbeke summarized the future funding plan for funding fire equipment, which was included with the Council action in November of 2007. The Committee confirmed that they are comfortable with the direction of the Council to go ahead and purchase the 3 pieces of fire apparatus in 2008, with funding coming from the Community Investment Fund. Development Related Financial Guarantees City Administrator Hedges introduced the item noting that the City requires financial securities to ensure the completion of a variety of conditions of development agreements. Hedges added that during the last residential building boom, the City encountered a small number of situations in which a developer asked to be permitted to provide a financial security from a smaller specialized finance company. Upon discussing the issue, there was Committee consensus to recommend to the Council that the City develop a policy stating that financial securities for development projects be required to be issued by established financial institutions with branches in Minnesota. Community Development Director Hohenstein noted that a policy would be prepared for Council consideration on the April 15, 2008 City Council agenda. Elected Officials Out-of-State Travel Policy City Administrator Hedges noted that at the June 12, 2007 City Council Workshop, the Finance Committee was directed to review other cities' practices regarding conference requests outside of the budget process. Hedges added that staff solicited copies of elected officials out-of-state travel policies from comparable communities. Upon discussing the City's current elected officials out-of-state travel policy, the Committee directed that the City maintain its current policy and, if a Councilmember would like to request attendance at a conference not included in the budget, that request can be brought before the City Council for individual consideration. Mayor Maguire noted that he would like to suggest to the Council that they be cognizant of the overall budget and try to limit their consumption of the travel budget to no more than 30 percent of the total budget (i.e., no one Councilmember should use more than 30 percent of the total budget for their travel expenditures). The Committee also discussed the upcoming 2009 budget process and noted their hope that the City Council could closely review their travel budget, including the idea that Councilmembers would be limited to one out-of-state conference per year and/or consider removing NOISE as a preapproved conference within the budget. Adjournment The meeting adjourned at 5:35 p.m. AGENDA FINANCE COMMITTEE MEETING TUESDAY, APRIL 1, 2008 4:30 - 5:30 P.M. CONFERENCE ROOMS 2A&B 1. AGENDA ADOPTION 1 II. NORTHEAST EAGAN REDEVELOPMENT DISTRICT - REVIEW OF TIF DISTRICT STATUS P 7 III. 2008 FIRE APPARATUS FUNDING (Items IV, V, and VI will be considered only if time permits.) 19 ID IV. CITY DEVELOPMENT RELATED FINANCIAL GUARANTEES I V. ELECTED OFFICIALS OUT-OF-STATE TRAVEL POLICY VI. OTHER BUSINESS VII. ADJOURNMENT Agenda Information Memo April 1, 2008 Finance Committee Meeting II. REVIEW FINANCIAL STATUS FOR NORTHEAST EAGAN TIF DISTRICT ACTION TO BE DISCUSSED: To review the Financial Status of the Northeast Eagan Redevelopment TIF District and consider a recommendation to the EDA and City Council concerning continuing the district or modifying it. FACTS: • At the March 18, 2008 meeting, the EDA directed consideration of this item to the council Finance Committee for its review. Staff requested this review in order to discuss and receive a Committee recommendation regarding the future of the Northeast Eagan Redevelopment District's TIF District 2-4. • The City is at a point at which it has a number of options regarding the continuation or modification of this TIF District. The options have different impacts on the amount of TIF assistance available to the McGough Blue Gentian project, the amount of TIF that would be available to pool to other redevelopment districts within the City and the potential to provide TIF assistance to a redevelopment project on the south side of Hwy 55, should one come forward. The options also have consequences related to the length of the district term and fiscal disparities costs. • The City's current development agreement with McGough provides for the City to provide public financing assistance in the amount of 75% of the tax increment generated by the Blue Gentian office project up to a maximum of $3.8 million. The amount of assistance was based on a review of the project pro forma by Ehler's and Associates, who confirmed that extraordinary costs associated with the acquisition and assembly of previously developed properties, their demolition and the construction of a parking structure to support a 260,000 office building created a financing gap of that scale. • The agreement to provide this level of assistance was based on an original projection of TIF to be generated if the project were constructed earlier in the life of the district 2-4, such that tax increment from the project would be created and captured for much of the 26 year term of the district. As the Council is aware, market conditions as well as the time taken to complete the acquisition and assembly of the site caused McGough to postpone commencement of the district until this year. As a consequence, if no modification is done to the district, the loss of five years of increment and the time value of that revenue flow would now be roughly $2 million with 75% available to the developer being $1.5 million. The developer has indicated that the extraordinary costs of the project are as great or greater than they were when the original pro forma was prepared and they have asked the City to consider alternatives to provide a level of increment at or approaching the $3.8 million estimated originally. • The City has the option of decertifying the portion of TIF District 2-4 that has not redeveloped to date (the portion of the district not including Grand Oak and the Atlas/U-Line building) and recertifying it as a new TIF district, because the conditions that caused the district to be formed originally, the level of lot coverage and the percentage of substandard structures exceed the thresholds necessary for a new district. • The attached spreadsheet compares retaining the current district for the remainder of its term with the potential creation of a new TIF district for Parcels 1-23 on the attached map. Parcels 24-29 would remain in a revised District 2-4. Because the base values of all parcels has increased since District 2-4 was created, there is only a modest increase in TIF generation from the creating the district on the same terms as 2-4 was formed. • If a new district is created, however, the City has the option of electing that fiscal disparities be paid from outside the district rather than inside it. District 2-4 currently pays fiscal disparities within the district. If an election to pay fiscal disparities outside of the district were made for a new Northeast Eagan Redevelopment District, the tax increment generated by the district that would be available to support the McGough development would approach the $3.8 million previously estimated ($3.5 million, with no inflation) and a larger balance would be available to pool to other City redevelopment districts. • The City's general policy for TIF districts has been that fiscal disparities for the new development be paid from within the district. This policy was originally adopted when the City was considering economic development districts for the benefit of a particular business to create jobs within the community, rather than a redevelopment district, the purpose of which is to remove blight, stop the decline in tax base and create substantially greater tax base. Given the special nature of a redevelopment district, the City did elect to have fiscal disparities paid outside the district for the Cedar Grove Redevelopment District. The determination was that the different purposes of a redevelopment district and the general benefit to the City from the removal of blight and redevelopment of the area, the Council determined that spreading the fiscal disparities contribution over the community was justified. If the Committee, EDA and Council concur, a similar finding could be made in this case. • In the event that inflation or some other factors cause TIF revenues in the district to substantially exceed the current projections, the City may decide to switch at a later date and pay fiscal disparities from within the new district. State law does not permit the opposite, however, so if the Council does not make the election to pay fiscal disparities outside the district at the creation of a new district, it cannot make that change later on. • The decertification and recertification of a TIF district in this area has occurred before and for similar reasons. In 2002, following redevelopment activity on a portion of District 2-3 that brought about the acquisition and development of portions of the Grand Oak development on the sites of the former Airliner and Spruce Motels and other residential properties in the area, the City decertified a portion of that district and certified the parcels that make up District 2-4 to support the redevelopment of the current district. While the City has made substantial progress in each of these districts, work remains to redevelop a number of remaining properties in the Hwy 55 Gateway area and a number of current options preserve that ability. ISSUES: • The City has the opportunity to recertify a new TIF district from the portion of District 2-4 that has not yet redeveloped. Within that decision, the City may elect to pay fiscal disparities from outside the district. Do the potential benefits of creating a new district on that basis - providing TIF assistance on par with the original expectation for the McGough project, providing greater pooling to other redevelopment districts and preserving the ability to provide TIF assistance if a redevelopment project were to be proposed within the district on the south side of Hwy 55 - justify the creation of a new TIF district and the election to pay fiscal disparities from outside the district? ATTACHMENTS: • Enclosed on page 3 is a spreadsheet that compares the options and overviews their results. • Map of potential TIF district boundaries on page • Draft Schedule of Events for Creation of New District on pages 5 through L a 27-Mar-08 Column 1 2 3 4 (3-2) New District Existing District Fiscal Fiscal F/D Impact McGough Disparities From Disparities From Increase Impact Within District Outside District In Increment Present Value Increment Uses: Developer 1,508,294 1,545,638 3,518,561 1,972,923 City Admin & Pooling 502,765 515,213 1,172,854 657,641 State Auditor 7,266 7,446 16,950 9,504 Total Increment 2,018,325 2,068,297 4,708,365 2,640,068 Tax Impact To Community Using 2008 Payable Information: Estimated required annual tax capacity contribution to fiscal disparities after development within the new district: 291,961 Fiscal Fiscal Disparities From Disparities From Annual Within District Outside District Change Net Tax Capacity 83,090,249 82,798,288 (291,961) Tax Capacity Rate 0.25892 0.25983 0.00091 Taxes on: $281,208 Residence 730.69 733.15 2.46 $350,000 Residence 940.23 943.37 3.14 $1,000,000 C/I 3,325.08 3,336.23 11.15 $ 5,000,000 C/I 17,119.81 17,177.30 57.49 This increase in taxes is only for the City and does not include similar small tax impacts for other taxing jurisdictions. NE Redevelopment TIF District 2-4 Prospective Revision 1 . , Legend Iue Gentian Ro6 5 T5 Prospecive TIF 2 4 Revised McGou h Proposed Parcel Line 8 Blue Gentian Corporate Centert jr Gs13 1415 Water ?;e~ 11 12 Building g 10 Road/Pavement Edge • e mom, • gyp, ~ Prospective District 2-5 NIRANJAN D SHAKTA/ BUDGET HOST MOTEL DAVID A CHASE/CONVEYOR INC/ VPACKAGINGAUTOMATION 17 19 Revised ATLAS OF MINNESOTA INC/ District'2-4 DART WAREHOUSE \29 -r-. 28 20, 21 , 0ak Five ;I j 22 a ! q 25 ' Office/Retail _ ~ CHENEVj EAGAN BUILDING LLC'/ BUILDING MATERIALS WTLET X": - 23 26 ATLAS OF MINNESOTA INC / + n I~ ti,~ I DART WAREHOUSE/ULINE 24 N ~ Ij a ~ I - 500 250 OF-t - F ' Map date: March 27, 2008 TI-1 1. DRAFT SCHEDULE OF EVENTS EAGAN ECONOMIC DEVELOPMENT AUTHORITY AND THE CITY OF EAGAN CITY COUNCIL FOR THE MODIFICATION OF THE DEVELOPMENT PROGRAM FOR THE NORTHEAST EAGAN PROJECT AREA NO.2 AND THE ESTABLISHMENT OF TAX INCREMENT FINANCING DISTRICT NO. 2-5 (redevelopment district) April 1, 2008 Finance Committee meets at 4:30 p.m. to discuss potential establishment of TIF District No. 2-5. EDA requests that the City Council call for a public hearing. EDA directs LHB to review property and complete building inspections and blight analysis. City Council meets at 6:30 p.m. and calls for public hearing on the modification of the Development Program for the Northeast Eagan Project Area No. 2 and the establishment of Tax Increment Financing District No. 2-5. April 2, 2008 LHB begins building inspections and blight analysis. (To be confirmed) April 4, 2008 Project information (property identification numbers and legal descriptions, building permits, detailed project description, maps, but/for statement, and list of sources and uses of funds) for drafting necessary documentation sent to Ehlers. April/May 2008 LHB inspects buildings and drafts Report. April 18, 2008 Notification of the modification of the Development Program for the Northeast Eagan Project Area No. 2 and the establishment of Tax Increment Financing District No. 2-5 sent to the County Commissioner who represents the Area. April 18, 2008 Project information and a copy of the Plan submitted to the County Board for review of county road impacts (at least 45 days prior to public hearing). [Ehlers faxes & mails on April 16, 2008] April 22, 2008 Planning Commission meets at 6:30 p.m. and reviews Plans to determine if they are in compliance with City's comprehensive plan. [Ehlers e-mails packet information by April 14, 2008.1 May 2, 2008 Fiscal/economic implications received by School Board Clerk and County Auditor (at least 30 days prior to public hearing). [Ehlers faxes & mails by April 30, 20081 May 18, 2008 Date of publication of hearing notice and map (at least 10 days but not more than 30 days prior to hearing). [Ehlers e-mails to Thisweek Eagan on May 14, 2008 by 4 PM.] 5- May 13, 2008 LHB completes building inspection and blight analysis report. May 20, 2008 EDA considers the Plans. [Ehlers e-mails EDA packet information by May 13, 2008] June 3, 2008 City Council holds public hearing at 6:30 p.m. on the modification of the Redevelopment Plan for the Cedar Grove Project Area and the establishment of Tax Increment Financing District No. 5, and directs the completion of the Findings. [Ehlers e-mails Council packet information by May 27, 20081 City Council passes resolution approving the TIF District and Findings. [Ehlers e- mails Council packet information by May 27, 2008] June 4, 2008 Building permit can be issued, and demolition of buildings can begin. , 2008 Council approves the Amendment to the Development Agreement with McGough. '2008 City authorizes Ehlers to request certification of the TIF District. , 2008 Ehlers & Associates requests certification of the TIF District from the state and county. Note: This schedule assumes that LHB can meet the deadlines in the timeline; however, the deadlines have not yet been approved by LHB. " The County Board, by law, has 45 days to review the plan to determine if any county roads will be impacted by the development. Please be aware that the County Board could claim that tax increment should be used for county roads. An action under subdivision 1, paragraph (a), contesting the validity of a determination by an authority under section 469.175, subdivision 3, must be commenced within the later of. (1) 180 days after the municipality's approval under section 469.175, subdivision 3; or (2) 90 days after the request for certification of the district is filed with the county auditor under section 469.177, subdivision 1. EHLERS LEADERS IN PUBLIC FINANCE Agenda Information Memo April 1, 2008, Finance Committee Meeting III. FIRE APPARATUS FUNDING ACTION TO BE CONSIDERED: To provide direction to staff regarding funding for purchase of Fire apparatus. FACTS: • At the regular November 25, 2007, meeting a fire apparatus funding plan was approved by the City Council. • The following general parameters are incorporated into the plan: o The Community Investment Fund is the designated funding source for the three fire apparatus being replaced in 2008 at an estimated cost of $675,000. o Ten-year equipment certificates will be used to finance replacement equipment until a full renewal and replacement fund can be created. It is estimated that, after the purchase of the first three apparatus noted above, equipment certificates will be used to replace each piece of apparatus one time before the renewal and replacement fund is fully operational and self-sustaining. o Most fire apparatus is estimated to be replaced at 22 years; however, other factors such as safety and functionality will be analyzed prior to replacement. o All calculations are in 2007 dollars meaning there was no inflation applied to the average market value house, the total tax base, or to the cost of the equipment. o Estimated debt service costs are based on today's rates and result in an annual cost of $12,872 per each $100,000 of borrowed principal. The term is ten years, which is the maximum allowable for equipment certificates. o A tax levy estimated at approximately $400,000 annually is proposed to provide for the debt service on the equipment certificates as well as to provide additional cash toward creating the renewal and replacement fund. Eventually, after all equipment certificates are retired, the full levy will be directed to the renewal and replacement fund. o The full tax levy of $400,000 is projected to be certified for payable 2009. The 2008 payable impact of that levy on the average market value house of $281,208 would be approximately $13. o All fire vehicles and equipment are to be removed from the Equipment Revolving Fund and financed through this new renewal and replacement fund. Replacement and new purchases are to be subject to the same criteria, but will be financed from this new funding source. Equipment certificates will not be used to purchase vehicles and equipment costing less than $100,000. o The long-term plan is subject to periodic review to revise and adjust the assumptions as necessary. o Replacement of all apparatus will be subject to specific criteria and replacements and upgrades will be justified before any dollars are actually allocated for expenditure. o The plan reflects operating a volunteer paid on-call department with the same number of stations as exist today. • Recent discussion regarding a possible referendum for the purchase of land and replacement fire station has included the possibility of including some fire apparatus in the bond referendum. • The attached replacement plans notes some changes being implemented for 2008 and 2009 within the general funding parameters. ISSUES: 1. Is the 2008 replacement equipment at a total cost of approximately $675,000 to be financed per the approved financing plan, which is by the Community Investment Fund? 2. Should a $400,000 payable 2009 tax levy still be considered per the plan? ATTACHMENTS: • Enclosed on page is a copy of the fire apparatus inventory including purchase date and price and expected replacement date and cost. Eagan Fire Department Apparatus Over $100,000 Replacement Plan 24-Mar-08 Cost 2007 Age when Unit # Call Sign Year Description Replace with Year to Replace Dollars Age 2008 Replaced 9 U-4 1973 Ford Rescue Truck Light Rescue 2008 &2030 125,000 35 35 10 B-5 1985 Chevrolet Quick Response 2008 & 2030 Quick Response Truck 275,000 23 23 13 E-6 1980 Ford/General LS9000 Quick Response 2008 & 2030 Engine 275,000 28 28 19 E-1 1988 Peterbilt/Custom Engine 2009 & 2031 550,000 20 21 Engine 21 E-2 1988 Peterbilt/Custom Heavy Rescue 2010 & 2032 600,000 20 22 Engine W/ pump 20 E-42 1988 Peterbilt/Custom Engine 2011 & 2033 550,000 20 23 Engine 22 E-52 1988 Peterbilt/Custom Snozzle-Engine 2013 & 2035 700,000 20 25 Engine 3 R-1 1995 REHAB/Air Supply REHAB/AIR 2015 & 2037 375,000 13 20 Freightliner SVI 26 E-3 1993 Kenworth General Engine 2017 & 2039 550,000 15 24 Engine 5 E-5 2002 Pierce 100' Platform Ladder Ladder 2024 900,000 6 22 Truck 18 E-4 2005 Pierce Enforcer Engine 2027 550,000 3 22 Rear Mount Engine 12 L-1 2005 Pierce Engine/Tanker Engine/Tanker 2027 650,000 3 22 16 COMMAND 2006 LDV Mobile Command Truck Command 2028 550,000 2 22 17 L-2 2007 Pierce 75' Ladder Truck Ladder 2029 700,000 1 22 2008 Modifications: Total $7,350,000 14.9 23.6 1 Unit 9 is being replaced with a pickup at an approximate cost of $35,000 with equipment. 2 Unit 10 is being replaced with an Expedition at an approximate cost of $40,000 with equipment. 3 Unit 13 may be delayed into 2009 to better position the City to be successful with the grant application. In that case Unit 19 would be advanced to 2008. 4 The total 2008 cost will remain at approximately $675,000. Agenda Information Memo April 1, 2008 Finance Committee Meeting IV. DEVELOPMENT RELATED FINANCIAL GUARANTEES ACTION TO BE DISCUSSED: To consider whether financial securities for development projects be required to be issued by established financial institutions with branches in Minnesota. FACTS: • The City requires financial securities to insure the completion of a variety of conditions of development agreements. These may be in the form of cash deposits, bonds and/or letters of credit. • In the past, the City has preferred that the third party securities be issued by banks or other established financial institutions, to insure adequate backing of the instrument, and that the issuers have branches in Minnesota, to permit the security to be drawn on in person locally if it becomes necessary. The City Attorney routinely includes language to this effect in development agreements. • During the last residential building boom, the City encountered a small number of situations in which the developer asked to be permitted to provide a financial security from a smaller, specialized finance company. Staff and the City Attorney were concerned that, in the event of a default by the developer, collecting on financial securities from small, new, unregulated finance companies could present substantial challenges. While the City has not had to draw on letters of credit from those companies to date, staff and the City Attorney believe that there is sufficient concern to bring the matter to the attention of the Committee and Council. • Research of other growth communities found that most had similar concerns about the collectability of such securities and that some had implemented specific policies to make the preference for established institutions with local branches a formal requirement. • While the challenges in the current credit market have resulted in the contraction of small, unregulated finance companies and the City has not had such a request in the last two years, the issue may come up again when the development market improves. • The issue of the presence of a local branch comes up occasionally, when a developer has primary relationships with banks outside of the state, but most national developers also have some relationship with one or more of the national banks, most of whom do have branches in the state, so this has become less of an issue over time. When it has been raised, staff and the City Attorney have typically been able to reach some accommodation on a case by case basis. • While it is unlikely that the developers who are credit worthy in the current environment would pursue such options now, the Committee may wish to discuss whether to solicit input from the development community in this regard prior to Council action. Alternatively, in light of the general tightening of the credit market in response to the mortgage crisis, this may be viewed as a prudent step for the City to take and, if variances to the policy are requested in the future, they can be addressed on a case by case basis. ATTACHMENTS: None lv Agenda Information Memo April 1, 2008, Finance Committee Meeting V. ELECTED OFFICIALS OUT-OF-STATE TRAVEL POLICY ACTION TO BE CONSIDERED: To provide direction to staff regarding the City's Elected Officials Out-of-State Travel Policy. FACTS: • At the June 12, 2007 City Council Workshop the Finance Committee was directed to review other cities' practices re: "conference requests outside of budget process." • Eagan's Elected Officials Out-of-State Travel Policy was approved for 2007 on June 19, 2007 and was approved for 2008 on January 15, 2008. The 2007 approval was held up pending revisions to the City's overall Travel Policy, while the Elected Officials Out-of-State Travel Policy was approved for 2008 without changes. • Eagan's Elected Officials Out-of-State Travel Policy consists of three components, including: 1) the City's overall training policy; 2) the City's Travel Regulations & Reimbursement Policies; and 3) inclusion of specific conferences in the approved annual operating budget. • Staff solicited copies of Elected Officials Out-of-State Travel Policies via email from the following cities: Bloomington, Brooklyn Park, Burnsville, Coon Rapids, Eden Prairie, Lakeville, Maple Grove, Minnetonka, and Plymouth and received copies from all of them except Bloomington and Brooklyn Park. While there are wide variations in details and specifics about how the Elected Officials Out-of- State Travel Policies are related to the more general City travel policies, there really is little that makes them different from what Eagan already has in place. Lakeville provides a $1,150 appropriation for city related activities - including travel, but I have not reviewed how that works in practice. • It appears the directive request results from an occasional desire to attend conferences not specifically budged for in the normal budgeting process. However, since the City Council must approve all elected official's travel, approval must be given as part of the budget process or as part of a separate specific action related to the travel that was not specifically approved within the budget. Eagan's policy as it has been approved seems to be very minimalist and practical while still meeting the intent of the State law. 11 ISSUES: 1. What recommendation(s) should be made by the Finance Committee to the City Council regarding the City's Elected Officials Out-of-State Travel Policy? ATTACHMENTS: • Enclosed on pages )3 through is a copy of the City's Elected Officials Out-of-State Travel Policy. Elected Officials Out-of-State Travel Policy City of Eagan Purpose: Minnesota Statutes Section 471.661 titled "Out-of-State Travel" provides that by January 1, 2006, the governing body of each statutory or home rule charter city, county, school district, regional agency, or other political subdivision, except a town, must develop a policy that controls travel outside the state of Minnesota for the applicable elected officials of the relevant unit of government. The policy must be approved by a recorded vote and specify: (1) when travel outside the state is appropriate; (2) applicable expense limits; and (3) procedures for approval of the travel. The policy must be made available for public inspection upon request and reviewed annually. Subsequent changes to the policy must be approved by a recorded vote. Policy: Out-of-state travel by City of Eagan elected officials is covered by the following City policies: 1. Section 21 of the City's Personnel Policy: TRAINING POLICY: Costs for employer-initiated or required workshops, professional seminars, training programs, courses, continuing education credits, and license/certification maintenance for existing employees will be covered in total by the City. 2. Travel Regulations & Reimbursement Policies Attached as Appendix A 3. Budgeting For Travel-Conferences-and Schools Attached as Appendix B The policy must be made available for public inspection upon request and reviewed annually. Subsequent changes to the policy must be approved by a recorded vote. /3 Requirements of State Statute: (1) When travel outside the state is appropriate-Travel outside the state is appropriate when the travel meets the conditions of the City's Training Policy and the Travel Regulations & Reimbursement Policies and is budgeted. (2) Applicable expense limits-The applicable expense limits are as contained in the City's Travel Regulations & Reimbursement Policies. (3) Procedures for approval of the travel-The travel is approved as part of the City's annual budgeting process or through budget amendments as approved by the City Council. (4) Public Availability, Review, and Changes--The policy must be made available for public inspection upon request and reviewed annually. Subsequent changes to the policy must be approved by a recorded vote. Approved By City Council Action: January 3, 2006 / June 19, 2007 / January 15, 2008 City of Eagan APPENDIX A Travel Regulations & Reimbursement Policies Page 1 CITY OF EAGAN TRAVEL REGULATIONS & REIMBURSEMENT POLICIES Reimbursements of travel expenses are intended to refund actual costs incurred by City employees and officials while traveling as authorized representatives of the City of Eagan. APPROVAL (1) All travel and seminar attendance by City of Eagan employees requires prior approval by the appropriate Department Head. Department Heads require the approval of the City Administrator. (2) Approval for travel shall be obtained prior to seminar registration or other final travel arrangements. (3) Travel and/or pre-registration fees and prepayments intended to defray costs incurred while on a trip and prior to submission of an expense report shall be submitted to the Finance Department for processing far enough in advance to allow checks to be produced in the normal course of business. (4) Pre-registration and/or lodging reservation payments may be made by the Finance Department directly. (5) City issued credit cards may be used as a payment option per the terms of the City's "Policy and Procedures: Purchasing with City Credit Cards" policy. ALLOWABLE EXPENSES A. HOTEL/LODGING: (1) Accommodations shall be selected at a reasonable cost, consistent with the facility available and convenient to location of the conference or business meeting attended. (2) Employees may claim only the actual and necessary cost of single occupancy (receipt required). (3) Lodging will be paid for the night before the conference begins. Approved by City Council June 19, 2007 is- City of Eagan APPENDIX A Travel Regulations & Reimbursement Policies Page 2 B. TRANSPORTATION: (1) Allowable transportation cost shall include reimbursement for the following: mileage accumulated on personal vehicle at the Federal IRS mileage reimbursement rate in effect at the time of the travel; actual round trip coach rate airfare; or actual receipted expenses for City owned vehicle, as required and as approved. The City will also reimburse the cost of mileage or a taxi fare to and from the Minneapolis/St. Paul airport to the place of residence for employees who live in Eagan, if no other options are available. For employees who do not reside in Eagan the City will reimburse the cost of mileage or a taxi fare to and from the Minneapolis/St. Paul airport to the employee's City of Eagan work location, if no other options are available. The City does not reimburse airport or park and fly parking fees. (2) The mode of transportation must be approved by the Department Head prior to any authorized trip. If a personal vehicle is used at an employee's request, reimbursement will be on the basis of prevailing mileage allowance or coach airfare, whichever is less. Reimbursement for meals and lodging shall be limited to the period of time required if air commercial transportation were used. Also, additional time required over the time air travel would require must be charged as leave time. (3) City vehicles may be used for in-state travel and out-of-state travel in states adjacent to Minnesota. Under no circumstances may City vehicles be used for personal reasons. Discretion should be used concerning using City vehicles when a member of his/her family accompanies an employee. (4) Air transportation shall be tourist or coach except when neither of these options is available. Reservations are to be made in advance at the earliest date to insure the lowest possible fares. Super Saver rates shall be used if available and appropriate for the particular situation. If the reservation is not going to be used, it must be cancelled immediately. (5) Local transportation in the conference city such as taxicab and/or bus fares to and from place of lodging and businesses are reimbursable only if circumstances require it. Local transportation in the conference city not pertaining directly to City business will not be reimbursed. (6) Use of rental vehicles requires prior approval by the City Administrator. Approval will be limited to situations where that use is projected to be most cost effective and/or it is demonstrated to be necessary for meeting the conference purposes. Approved by City Council June 19, 2007 JL City of Eagan APPENDIX A Travel Regulations & Reimbursement Policies Page 3 C. MEALS AND MISCELLANEOUS: (1) Reimbursement for meals while on authorized travel will be for actual expenditures (receipts required) up to a maximum of $55.00 per full travel/conference day (without regard to the number of meals actually eaten on any given full day), including tax and tips. Per meal maximum reimbursements for any fraction of a full day (travel days and days with conference meals provided) shall be as follows including tax and tip: (a) Breakfast $10.00 (b) Lunch $15.00 (c) Dinner $30.00 Note: Vendor provided lunches are not considered to be a prepaid conference meal. (2) The full cost shall be reimbursed for meals, which are a scheduled activity of a conference or meeting, and the cost of such meals is not included in the registration fee. (3) Breakfast allowance shall be authorized for Minneapolis departures prior to 10:00 a.m. and dinner allowances shall be authorized for Minneapolis arrivals after 7:00 p.m. (4) Other miscellaneous expenses will be reimbursed if incurred for City business, e.g. telephone, fax, telegraph service, internet access fees, tips for bellhops, parking fees, etc., as required. (Calls should be made collect whenever possible or with cell phones per the City's Cell Phone Use Policy.) (5) There shall be no flat per diem payments for meals or any other expenses. (6) If the employee wishes to bring a member(s) of his/her family with him/her, he/she must first notice the Department Head. The City will reimburse the employee only for the employee's meals, lodging (single occupancy), and miscellaneous expenses. Approved by City Council June 19, 2007 I-7 City of Eagan APPENDIX A Travel Regulations & Reimbursement Policies Page 4 EMPLOYEE EXPENSE REPORT (1) The employee shall submit a Travel Expense Report and Request for Reimbursement form, for approval by the Department Head and City Administrator or designee. Receipts for expense items shall accompany each expense report, including meals. If an employee is unable to get a paid receipt for a particular item, he or she must include with his or her report a statement certifying that the claim for that item is accurate. A copy of conference brochures and/or overall information shall be submitted with the report. Under no circumstances will City payments exceed out of pocket expense. (2) Employees will be billed for non-reimbursable expenses paid by the City. (3) Reimbursement for foreign travel expenses will be made at the current rate of exchange. Approved by City Council June 19, 2007 APPENDIX B CITY OF EAGAN 2007 BREAKDOWN OF TRAVEL-CONFERENCES-AND SCHOOLS TOTAL PROPOSED BUDGET 1. Complete Cost Breakdown for Any Item In This Category: 2. Why Is This Necessary? 3. Where Will It Be Held? 4. When Will It Be Held? 5. Who Will Be Attending? FIN/FORM7 19 Agenda Information Memo April 1, 2008 Finance Committee Meeting II. REVIEW FINANCIAL STATUS FOR NORTHEAST EAGAN TIF DISTRICT ACTION TO BE DISCUSSED: To review the Financial Status of the Northeast Eagan Redevelopment TIF District and consider a recommendation to the EDA and City Council concerning continuing the district or modifying it. FACTS: • At the March 18, 2008 meeting, the EDA directed consideration of this item to the council Finance Committee for its review. Staff requested this review in order to discuss and receive a Committee recommendation regarding the future of the Northeast Eagan Redevelopment District's TIF District 2-4. • The City is at a point at which it has a number of options regarding the continuation or modification of this TIF District. The options have different impacts on the amount of TIF assistance available to the McGough Blue Gentian project, the amount of TIF that would be available to pool to other redevelopment districts within the City and the potential to provide TIF assistance to a redevelopment project on the south side of Hwy 55, should one come forward. The options also have consequences related to the length of the district term and fiscal disparities costs. • The City's current development agreement with McGough provides for the City to provide public financing assistance in the amount of 75% of the tax increment generated by the Blue Gentian office project up to a maximum of $3.8 million. The amount of assistance was based on a review of the project pro forma by Ehler's and Associates, who confirmed that extraordinary costs associated with the acquisition and assembly of previously developed properties, their demolition and the construction of a parking structure to support a 260,000 office building created a financing gap of that scale. • The agreement to provide this level of assistance was based on an original projection of TIF to be generated if the project were constructed earlier in the life of the district 2-4, such that tax increment from the project would be created and captured for much of the 26 year term of the district. As the Council is aware, market conditions as well as the time taken to complete the acquisition and assembly of the site caused McGough to postpone commencement of the district until this year. As a consequence, if no modification is done to the district, the loss of five years of increment and the time value of that revenue flow would now be roughly $2 million with 75% available to the developer being $1.5 million. The developer has indicated that the extraordinary costs of the project are as great or greater than they were when the original pro forma was prepared and they have asked the City to consider alternatives to provide a level of increment at or approaching the $3.8 million estimated originally. • The City has the option of decertifying the portion of TIF District 2-4 that has not redeveloped to date (the portion of the district not including Grand Oak and the Atlas/U-Line building) and recertifying it as a new TIF district, because the conditions that caused the district to be formed originally, the level of lot coverage and the percentage of substandard structures exceed the thresholds necessary for a new district. • The attached spreadsheet compares retaining the current district for the remainder of its term with the potential creation of a new TIF district for Parcels 1-23 on the attached map. Parcels 24-29 would remain in a revised District 2-4. Because the base values of all parcels has increased since District 2-4 was created, there is only a modest increase in TIF generation from the creating the district on the same terms as 2-4 was formed. • If a new district is created, however, the City has the option of electing that fiscal disparities be paid from outside the district rather than inside it. District 2-4 currently pays fiscal disparities within the district. If an election to pay fiscal disparities outside of the district were made for a new Northeast Eagan Redevelopment District, the tax increment generated by the district that would be available to support the McGough development would approach the $3.8 million previously estimated ($3.5 million, with no inflation) and a larger balance would be available to pool to other City redevelopment districts. • The City's general policy for TIF districts has been that fiscal disparities for the new development be paid from within the district. This policy was originally adopted when the City was considering economic development districts for the benefit of a particular business to create jobs within the community, rather than a redevelopment district, the purpose of which is to remove blight, stop the decline in tax base and create substantially greater tax base. Given the special nature of a redevelopment district, the City did elect to have fiscal disparities paid outside the district for the Cedar Grove Redevelopment District. The determination was that the different purposes of a redevelopment district and the general benefit to the City from the removal of blight and redevelopment of the area, the Council determined that spreading the fiscal disparities contribution over the community was justified. If the Committee, EDA and Council concur, a similar finding could be made in this case. • In the event that inflation or some other factors cause TIF revenues in the district to substantially exceed the current projections, the City may decide to switch at a later date and pay fiscal disparities from within the new district. State law does not permit the opposite, however, so if the Council does not make the election to pay fiscal disparities outside the district at the creation of a new district, it cannot make that change later on. • The decertification and recertification of a TIF district in this area has occurred before and for similar reasons. In 2002, following redevelopment activity on a portion of District 2-3 that brought about the acquisition and development of portions of the Grand Oak development on the sites of the former Airliner and Spruce Motels and other residential properties in the area, the City decertified a portion of that district and certified the parcels that make up District 2-4 to support the redevelopment of the current district. While the City has made substantial progress in each of these districts, work remains to redevelop a number of remaining properties in the Hwy 55 Gateway area and a number of current options preserve that ability. ISSUES: • The City has the opportunity to recertify a new TIF district from the portion of District 2-4 that has not yet redeveloped. Within that decision, the City may elect to pay fiscal disparities from outside the district. Do the potential benefits of creating a new district on that basis - providing TIF assistance on par with the original expectation for the McGough project, providing greater pooling to other redevelopment districts and preserving the ability to provide TIF assistance if a redevelopment project were to be proposed within the district on the south side of Hwy 55 - justify the creation of a new TIF district and the election to pay fiscal disparities from outside the district? ATTACHMENTS: • Enclosed on page is a spreadsheet that compares the options and overviews their results. • Map of potential TIF district boundaries on page • Draft Schedule of Events for Creation of New District on pages through Agenda Information Memo April 1, 2008, Finance Committee Meeting Ill. FIRE APPARATUS FUNDING ACTION TO BE CONSIDERED: To provide direction to staff regarding funding for purchase of Fire apparatus. FACTS: • At the regular November 25, 2007, meeting a fire apparatus funding plan was approved by the City Council. • The following general parameters are incorporated into the plan: o The Community Investment Fund is the designated funding source for the three fire apparatus being replaced in 2008 at an estimated cost of $675,000. o Ten-year equipment certificates will be used to finance replacement equipment until a full renewal and replacement fund can be created. It is estimated that, after the purchase of the first three apparatus noted above, equipment certificates will be used to replace each piece of apparatus one time before the renewal and replacement fund is fully operational and self-sustaining. o Most fire apparatus is estimated to be replaced at 22 years; however, other factors such as safety and functionality will be analyzed prior to replacement. o All calculations are in 2007 dollars meaning there was no inflation applied to the average market value house, the total tax base, or to the cost of the equipment. o Estimated debt service costs are based on today's rates and result in an annual cost of $12,872 per each $100,000 of borrowed principal. The term is ten years, which is the maximum allowable for equipment certificates. o A tax levy estimated at approximately $400,000 annually is proposed to provide for the debt service on the equipment certificates as well as to provide additional cash toward creating the renewal and replacement fund. Eventually, after all equipment certificates are retired, the full levy will be directed to the renewal and replacement fund. o The full tax levy of $400,000 is projected to be certified for payable 2009. The 2008 payable impact of that levy on the average market value house of $281,208 would be approximately $13. o All fire vehicles and equipment are to be removed from the Equipment Revolving Fund and financed through this new renewal and replacement fund. Replacement and new purchases are to be subject to the same criteria, but will be financed from this new funding source. Equipment certificates will not be used to purchase vehicles and equipment costing less than $100,000. o The long-term plan is subject to periodic review to revise and adjust the assumptions as necessary. o Replacement of all apparatus will be subject to specific criteria and replacements and upgrades will be justified before any dollars are actually allocated for expenditure. o The plan reflects operating a volunteer paid on-call department with the same number of stations as exist today. • Recent discussion regarding a possible referendum for the purchase of land and replacement fire station has included the possibility of including some fire apparatus in the bond referendum. • The attached replacement plans notes some changes being implemented for 2008 and 2009 within the general funding parameters. ISSUES: 1. Is the 2008 replacement equipment at a total cost of approximately $675,000 to be financed per the approved financing plan, which is by the Community Investment Fund? 2. Should a $400,000 payable 2009 tax levy still be considered per the plan? ATTACHMENTS: • Enclosed on page is a copy of the fire apparatus inventory including purchase date and price and expected replacement date and cost. Agenda Information Memo April 1, 2008 Finance Committee Meeting IV. DEVELOPMENT RELATED FINANCIAL GUARANTEES ACTION TO BE DISCUSSED: To consider whether financial securities for development projects be required to be issued by established financial institutions with branches in Minnesota. FACTS: • The City requires financial securities to insure the completion of a variety of conditions of development agreements. These may be in the form of cash deposits, bonds and/or letters of credit. • In the past, the City has preferred that the third party securities be issued by banks or other established financial institutions, to insure adequate backing of the instrument, and that the issuers have branches in Minnesota, to permit the security to be drawn on in person locally if it becomes necessary. The City Attorney routinely includes language to this effect in development agreements. • During the last residential building boom, the City encountered a small number of situations in which the developer asked to be permitted to provide a financial security from a smaller, specialized finance company. Staff and the City Attorney were concerned that, in the event of a default by the developer, collecting on financial securities from small, new, unregulated finance companies could present substantial challenges. While the City has not had to draw on letters of credit from those companies to date, staff and the City Attorney believe that there is sufficient concern to bring the matter to the attention of the Committee and Council. • Research of other growth communities found that most had similar concerns about the collectability of such securities and that some had implemented specific policies to make the preference for established institutions with local branches a formal requirement. • While the challenges in the current credit market have resulted in the contraction of small, unregulated finance companies and the City has not had such a request in the last two years, the issue may come up again when the development market improves. • The issue of the presence of a local branch comes up occasionally, when a developer has primary relationships with banks outside of the state, but most national developers also have some relationship with one or more of the national banks, most of whom do have branches in the state, so this has become less of an issue over time. When it has been raised, staff and the City Attorney have typically been able to reach some accommodation on a case by case basis. • While it is unlikely that the developers who are credit worthy in the current environment would pursue such options now, the Committee may wish to discuss whether to solicit input from the development community in this regard prior to Council action. Alternatively, in light of the general tightening of the credit market in response to the mortgage crisis, this may be viewed as a prudent step for the City to take and, if variances to the policy are requested in the future, they can be addressed on a case by case basis. ATTACHMENTS: None Agenda Information Memo April 1, 2008, Finance Committee Meeting V. ELECTED OFFICIALS OUT-OF-STATE TRAVEL POLICY ACTION TO BE CONSIDERED: To provide direction to staff regarding the City's Elected Officials Out-of-State Travel Policy. FACTS: • At the June 12, 2007 City Council Workshop the Finance Committee was directed to review other cities' practices re: "conference requests outside of budget process." • Eagan's Elected Officials Out-of-State Travel Policy was approved for 2007 on June 19, 2007 and was approved for 2008 on January 15, 2008. The 2007 approval was held up pending revisions to the City's overall Travel Policy, while the Elected Officials Out-of-State Travel Policy was approved for 2008 without changes. • Eagan's Elected Officials Out-of-State Travel Policy consists of three components, including: 1) the City's overall training policy; 2) the City's Travel Regulations & Reimbursement Policies; and 3) inclusion of specific conferences in the approved annual operating budget. • Staff solicited copies of Elected Officials Out-of-State Travel Policies via email from the following cities: Bloomington, Brooklyn Park, Burnsville, Coon Rapids, Eden Prairie, Lakeville, Maple Grove, Minnetonka, and Plymouth and received copies from all of them except Bloomington and Brooklyn Park. While there are wide variations in details and specifics about how the Elected Officials Out-of- State Travel Policies are related to the more general City travel policies, there really is little that makes them different from what Eagan already has in place. Lakeville provides a $1,150 appropriation for city related activities - including travel, but I have not reviewed how that works in practice. • It appears the directive request results from an occasional desire to attend conferences not specifically budged for in the normal budgeting process. However, since the City Council must approve all elected official's travel, approval must be given as part of the budget process or as part of a separate specific action related to the travel that was not specifically approved within the budget. Eagan's policy as it has been approved seems to be very minimalist and practical while still meeting the intent of the State law. ISSUES: 1. What recommendation(s) should be made by the Finance Committee to the City Council regarding the City's Elected Officials Out-of-State Travel Policy? ATTACHMENTS: • Enclosed on pages through is a copy of the City's Elected Officials Out-of-State Travel Policy.