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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