09-27-10 SCCA.1bertAlle
September 21, 2010
Honorable Mayor Jessica Stockamp
8899 Nashua Avenue N.E.
Otsego, Minnesota 55301
Dear Mayor Stockamp:
Thank you for your prompt response inviting us to attend your September 13a' Council meeting
to discuss Otsego's participation in our I-94 project.
Unfortunately, your $400,000 offer is inadequate to move the project forward; the conditions are
too onerous and unrelated to the I-94 Interchange project. Your offer requires Albertville to
commit to acquiring right of way for a future I-94 Interchange project that is speculative in time,
layout, location, cost and lacks State or Federal approval. Because the amount and layout of the
right of way needed for the Kadler Avenue I-94 project is not known at this time, Otsego is
asking Albertville to commit to acquiring right of way for which costs cannot be accurately
estimated. However, because Albertville recently acquired one acre of right of way for its I-94
project at a cost in excess of $600,000, it is reasonable.to assume that the cost of the Kadler
Avenue I-94 Interchange right of way in Albertville alone will likely run in excess of $1 million.
In addition, Otsego's requirement that the second phase of Albertville's I--94 Interchange project
be completed within three years is unrealistic; particularly since Albertville does not control the
Federal or State funding that will be needed to construct the second phase of the project. Were
Albertville to commit to Otsego's 3 -year time frame without first securing Federal or State
Funding, Albertville would be committing to pay an additional $4,000,000 that it has no practical
way of funding afthis time.
Albertville believes that Otsego's request for Albertville to intercede on its behalf with Wright
County relating to accesses on CSAH 19 that are not related to the I-94 Interchange project will
prove unproductive and will likely tarnish the good working relationship we have established
with Wright County. Some of your proposed access requests appear to be contrary to the
Northeast Wright County Transportation Study and Wright County's consistent application of
their access policy.
Albertville sought Otsego's participation in this project in the amount of $1,030,000 as a way to
make this project possible and benefit both communities while leveraging $7,080,000 of State
and County funds that have been made available. Acceptance of Otsego's $400,000 along with
the proposed conditions does not bridge the current funding gap, leaving Albertville to find an
additional $630,000 in funding to make this project happen. At the same time, it would have the
City of Albertville
I-94 Otsego Funding Letter
Page 2 of 2
effect of committing Albertville to spend an additional $4,000,000 that it does not have within
the next three years. If Albertville had access to an additional $4,000,000 million to spend on the
I-94 Interchange project, Albertville would not have sought the assistance of Otsego. As you can
see, Albertville simply cannot afford to accept Otsego's $400,000 funding offer.
While Albertville appreciates the fact that your offer acknowledges responsibility for
approximately $50,000 for the existing traffic signal, however it does not address the past,
present and future operating and maintenance costs that are typically borne by the parties within
whose jurisdiction the traffic signal is located. Perhaps that issue can be discussed further at
some time in the future.
We believe the project's five to one benefit/cost ratio identified by our City Engineer is very
significant. Our request for less than 10% of the project is very reasonable, and our offer to work
collaboratively with you to lobby for and secure funding for a future Kadler Interchange and 7&
Street can far outweigh the requested contribution being sought for Albertville's I-94 Project.
As you are aware, there is an opportunity to finance the project using the State's transportation
revolving loan fund, which has a September 30a` deadline. The State's revolving loan program
offers an interest rate -of approximately 2.5% and results in a $685,000 saving when compared to
a standard Wright County G.O. bond at 4%, which the project cannot afford. They actually write
down the interest rate 150 basis points. Without the low interest loan and the requested Otsego
contribution, the project cannot move forward at this time.
We sincerely request the City of Otsego reconsider the $1,030,000 funding request to move this
project forward on its merits. We are hopeful, that with this added information you can revisit
this again at your Monday, September 27" meeting.
Best Regards,
Ron Klecker
Albertville Mayor
MAPublic Data\Correspondence\2010 ComspondenceU-94 Otsego Funding Request Sept 21, 2010.doc
DRAFT FOR CITY LETTERHEAD
28 September 2010
Mayor Ron Klecker
City of Albertville
PO Box 9
5959 Main Street
Albertville, MN 55301
Dear Mayor Klecker:
The City Council of the City of Otsego discussed again Albertville's request to provide
$1,030,000.00 to the proposed Albertville 1-94/CSAH 19 interchange project at our
regular meeting on 27 September 2010.
The original request for a contribution from Otsego was made with very little time for the
City Council to study the issue and respond. Nevertheless, the City Council acted
quickly to accommodate and acted upon Albertville's request for over a million dollars.
The City Council felt that the $400,000.00 offered was generous under the
circumstances. The decision to make that offer was made immediately at that meeting
to accommodate Albertville but had to be made conditionally based upon the lack of
comprehensive information regarding the project and the questions raised in the short
period of time that Otsego had to review the matter. The decision was also based upon
Albertville's assertion that they would cooperate with Otsego on future projects. Otsego
feels obliged to include such assurances in any agreement in order to justify the
expenditure.
However, based on the comments of your letter dated 21 September 2010 we wish to
provide additional information as to the City Council's rationale for Otsego's offer of
contribution:
This project is almost entirely within the City of Albertville but for a portion of the
existing on ramp from CSAH 37 to west 1-94. Discussions with the City's
financial adviser and bond counsel have raised concerns regarding the
legitimacy of Otsego making payments to a project mostly outside of the City
boundaries from the City's general fund or otherwise. Otsego's bond counsel
has indicated that in most scenarios where a City contributes to a project bonded
for by another City through agreement it must have statutory bonding authority
that would allow it to bond for the project separately or the agreement must
include a non -appropriation clause.
Mayor Ron Klecker
City of Albertville
Page 2
Since Otsego cannot assess for the project, there are no available TIF funds and
no property which could be tax abated to make the payments, the range of
bonding authority left to the City is narrow. The pro -rated portion of the project
within Otsego is a very small percentage of the overall project and the costs
extrapolated from that area would most likely not even come near Otsego's
proposed contribution of $400,000.00. Funding a major transportation
improvement almost entirely outside of Otsego with no direct benefiting
properties upon which to assess or charge a fee is contrary to the City's
fundamental "Users Pay" policy. Otsego has requested additional information
from Albertville as to the structure of the project financing including the
mechanism for Otsego to make a monetary contribution but none has been
provided.
Otsego considers the Albertville 1-94/CSAH 19 project to be a response to
existing traffic conditions within the City of Albertville related to land use and
transportation decisions associated with both phases of the Albertville Outlet
Mail. Otsego raised concerns about the traffic impacts the Albertville Outlet Mall
would create as part of the environmental review process for both phases. We
would note that the majority of households and businesses Albertville has
projected to occur within Otsego's west sewer district that would supposedly
benefit from the interchange project have not been constructed. To this end, we
believe the proposed Albertville 1-94/CSAH 19 project will be a short term fix for a
local traffic issue that will once again reach failing conditions as development
continues in the area highlighted by Albertville as well as the region south of 1-94.
There is relatively greater benefit to Otsego of a full collector/distributor
interchange at 1-94 and CSAH 19 than the current proposal for only Phase 1
involving only the off -ramp from west 1-94 to CSAH 19, which as noted will be
perceived as an off -ramp to the Albertville Outlet Mall. Given the statements
regarding Albertville's limited financial resources even for Phase 1 of the project,
Otsego is legitimately concerned about the feasibility of Phase 2 ever being
undertaken. Otsego cannot depend on statements promising to seek Federal or
State funding to complete Phase 2 as a guarantee that the project will be
completed.
Albertville reasons that undeveloped land in Otsego adjacent to CSAH 19 that is
guided for commercial uses will benefit from the proposed Albertville 1-94/CSAH
19 project. Otsego considers this benefit to be many years away given current
market conditions and the amount of commercial land in Albertville to be
absorbed before the development would extend north into Otsego. The primary
beneficiaries of this project are the existing businesses along the CSAH 19
corridor, and specifically the Albertville Outlet Mall. Otsego understands that the
ownership of the Albertville Outlet Mall is opposed to proposed assessments for
the project and will likely object. If the ownership of the Albertville Outlet Mall is
Mayor Ron Klecker
City of Albertville
Page 3
objecting to contributing to this project how should Otsego justify a contribution to
its taxpayers, many of whom are never likely to utilize these roadways? Otsego
seeks assurances as part of any contribution to the Albertville 1-94/CSAH 19
project that access to these future commercial developments would be
guaranteed otherwise what little benefit there may be to properties in Otsego
from the project would cease to exist entirely. Otsego further wants to establish
access spacing, lane widths and other design issues for CSAH 19 and 70th Street
now so that the project would be "shovel ready" should a funding source appear.
Otsego's own analysis as part of the Northeast Wright County Transportation
Study (NEWC) was that an interchange at Kadler Avenue together with a
connection of 70th Street between 1-94 and TH 101 was more effective at
addressing regional transportation issues than a full or partial interchange at 1-94
and CSAH 19 in Albertville. Otsego has no expectation that Albertville would
participate financially in construction of a future interchange at Kadler Avenue
recognizing that in the future Albertville will likely have limited financial resources
as a fully developed city. Otsego's condition with regards to participation in a
future Kadler interchange is only that Albertville adopt as part of its
Comprehensive Plan and an Official Map of the interchange design to facilitate
Otsego acquiring needed right-of-way.
Our meeting on 13 September 2010 was the first time the issue of the signal at
off -ramp from west 1-94 to CSAH 37 was raised to the Otsego City Council. The
City Council and City staff agrees that this signal benefits the portion of the traffic
moving through this intersection to CSAH 37 east, which would include Otsego
residents, Albertville residents and Albertville businesses east of 1-94. Otsego
offers to pay not more than 1/8 of the maintenance and operational costs
associated with this traffic signal. We will leave this as an issue to be worked
out by the respective City staffs and brought back to us for further action in the
future.
The City of Otsego understands that Albertville has already expended in excess of $1
Million dollars of its own funds towards the Albertville 1-94/CSAH 19 project, garnered
unprecedented financial support from Wright County and obtained significant Federal
and State funding. Albertville therefore has significant effort, time and monies invested
in seeing this project go forward. However, these factors and a simple need to cover
the remaining funding shortfall does not dictate Otsego contributing the amount
requested. The City Council has voted unanimously not to change the amount Otsego
would provide to the Albertville 1-94/CSAH 19 project from $400,000.00 or amend the
conditions for providing these monies. A cash contribution to be paid over time of
$400,000.00 is the maximum amount the City Council of the City of Otsego will offer
together with the stated conditions without some feasible alternative to use of its general
funds. Enclosed with this letter are the terms of Otsego's original offer to contribute to
the Albertville 1-94/CSAH 19 project which remain for your consideration.
Mayor Ron Klecker
City of Albertville
Page 4
Sincerely,
CITY OF OTSEGO
Jessica Stockamp
Mayor
Tom Darkenwald
Council member
Doug Schroeder
Council member
encl.
Vern Heidner
Council member
Dan Scharber
Council member
C. Mike Robertson, City Administrator
Tami Loff, City Clerk
Gary Groen, Finance Director
Andy MacArthur, City Attorney
Ron Wagner, City Engineer
Daniel Licht, City Planner
Pat Sawatzke, Wright County Board of Commissioners
Wayne Fingleson, Wright County Engineer
Larry Kruse, Albertville City Administrator