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Item 6.1 EDA Annual Meeting ReportTO: Economic Development Authority, Board of Commissioners FROM: Executive Director Flaherty DATE: February 10, 2025 SUBJECT: Annual Meeting Report __________________________________________________________________________________________________ Outline In addition to the specific agenda items for consideration, staff have developed an outline of discussion topics for the EDA Board. The topics included in this memorandum are for discussion only and staff are not seeking any action from the Board. If the Board desires, directions can be provided to staff for future meetings. Economic Development Revolving – Fund 255 This fund was established to provide for economic development subsidies and loans to be provided to business entities in the City through the Economic Development Authority. At year-end 2024, this fund has a cash balance of $389,446. The fund balance components include Restricted of $105,514 and Unassigned of $283,932. As part of year-end audit preparations, additional funds will be added to the unassigned balance when interest revenues are allocated. Statewide Affordable Housing Aid The Restricted Fund Balance in the Economic Development Revolving Fund is derived from Statewide Affordable Housing Aid received in 2023 and 2024 in total amount of $105,514. The City is expected to receive an additional $23,786 of aid in 2025. Funds from this aid program must be spent on a qualifying project by December 31 of the fourth year after the aid was received. This would require the City to spend at least $52,757 for qualifying projects by December 31, 2027. Economic Development Loan Policy The Unassigned Fund Balance in the Economic Development Revolving Fund is available for the Economic Development Loan Program. This program policy was developed and adopted in 2013 and has not been revised since. Staff is not aware of any loans under this program since its adoption. The policy is attached for discussion by the EDA Board. Economic Development Strategies and Priorities Policy This policy is in place to ensure that the City’s limited resources are used to achieve the City’s highest priority economic development goals. This policy serves as a guideline for staff when discussing financial assistance requests with prospective developers. The policy was last amended in 2018 and is attached for discussion by the EDA Board. EDA Item 6.1 TIF Districts There are currently three active TIF Districts within the City. A short summary of each district is outlined as follows: District No. 1 – Great River Centre This district was created in 2016 and assisted in creating industrial development within Great River Centre. The project included construction of a 54,000+ square foot manufacturing facility, site improvements, and public infrastructure improvements. A note was issued to the developer and is repaid with tax increments from the development. This district will be active through taxes payable 2026 with the last note payment scheduled for February 1, 2027. District No. 3 – Riverview Landing This district was created in 2017 and assisted in creating a senior housing facility project in Waterfront East. The project included construction of a 142-unit facility that provides senior housing, assisted living, and memory care units. The project is required to provide 20% of the units to be occupied or available for occupancy by people whose income does not exceed 50% of the County median income. A note was issued to the developer and is repaid with tax increments from the development. This district will be active through taxes payable 2045 with the last note payment scheduled for February 1, 2046. District No. 4 – Riverbend North This district was created in 2019 and assisted in redevelopment within Riverbend North. The project included decommissioning of a private wastewater treatment facility and construction multi-family housing units, mini- storage facilities, and creation of two additional lots for commercial development. A note was issued to the developer and is repaid with tax increments from the development. This district will be active through taxes payable 2026 with the last note payment scheduled for February 1, 2027. City Owned Property The City currently owns three parcels of land for future resale and development. One property (5.82 acres) is located within Great River Centre and is guided by the Comprehensive Plan for industrial development. The other two properties (1.14 acres and 0.90 acres) are located within Waterfront East and are guided by the Comprehensive Plan for commercial development. The City has had listing agreements with Commercial Realty Solutions (CRS) since 2019. Attachments - Statewide Affordable Housing Aid Information - Economic Development Loan Policy - Economic Development Strategies and Priorities https://www.revenue.state.mn.us/statewide-affordable-housing-aid 0 Draft: February 20, 2013 March 11, 2013 Adopted: March 13, 2013 1 Purpose: The City of Otsego Economic Development Authority (EDA) values the existing investment businesses have made in the City. The EDA is committed to growing the private sector investment in Otsego and recognizes the City’s roll in stimulating future private sector investment in all sectors of business that retain or bring new jobs or increase the City’s tax base. The City has developed an Economic Development Loan Program (Program) to achieve that goal. The Program provides loans to eligible businesses including: 1. A new business locating in Otsego. 2. Expansion or revitalization of an existing business. Loan Program: Purpose: Encourage commercial and industrial development or revitalization that adds tax base or creates or maintains quality job growth. Amount: Up to $50,000. Loan amount shall not exceed 20 percent of the project cost. Equity: Borrower must commit at least 10 percent of the project financing in cash or project related fixed assets. Financing: Borrower must have private sector commitments, including owner equity, of at least 80 percent before applying for a loan. Rate: Fixed at Prime rate on the date the loan is closed plus 50 basis points. Term: Five year balloon amortized over a maximum of 10 years. (The loan payments are set based on a ten year repayment with the full outstanding principal due at the end of five years [60 months].)Loan becomes due and payable in full immediately if the business closes, moves out of the City of Otsego, violates the terms and conditions of the loan, or eliminates the jobs required to meet the Program criteria. Extension: One two year extension may be granted at an interest rate of Prime plus two (2) percent. A written request for an extension shall be submitted indicating the reason for the extension, documentation of denial of a loan request from a conventional lender along with finance statements for the current and past year. A $500.00 up front processing fee is required at the time of the extension request. The fee will be returned if the request is denied. Upon approval, the applicant is responsible for all legal and other City costs related to the extension. Late Payment: Late payments will be charged a late payment fee of eight (8) percent. A payment is considered late if it is received or postmarked any day past the due date. 2 Structure: Loan shall be structured as a participation loan serviced by the project’s primary lending institution unless otherwise approved by the EDA Finance Committee as a direct loan with the City. Security: 1. Collateral, either through a subordinate mortgage or pledge of assets, equal to the amount of the loan must be provided. 2. A personal guarantee and promissory note may be required. 3. Other security may be required as deemed necessary by the EDA Finance Committee or EDA to secure the loan. Eligibility: 1. Loan amount not to exceed $10,000 for each full time equivalent job created or retained. Said jobs must be retained for duration of Loan. Jobs must pay a minimum wage of $10.00 per hour excluding benefits. Jobs shall be counted only once if multiple sources of financing are requested; the same job may not be counted on more than one application. 2. Must be a for-profit corporation, partnership, or sole proprietorship. Religious, political, and adult businesses or adult uses or businesses which include adult uses are not eligible. 3. Borrower must have a positive net worth. Other: Borrower must comply with all applicable local and state building, zoning, and other regulatory requirements. When available, building shall be connected to City utilities. No project should commence until the EDA has acted upon the application. Any costs incurred prior to the approval of the loan application are generally not eligible expenditures. Uses: Permitted Uses: In priority order 1. Building renovation 2. New construction 3. Land acquisition 4. Expansion of public infrastructure to accommodate project 5. Investment in real estate with a minimum of 50 percent of the space pre- leased 6. Machinery, equipment, and fixtures if approved by the EDA under unique circumstances 3 Ineligible Uses: 1. Working capital 2. Inventory 3. Refinancing existing debt 4. Residential or multifamily construction of any type Application and Review: Fees: A non-refundable application processing fee of $750.00 is due at time of application. The fee may be refunded if the loan is denied. In addition the borrower is responsible for paying all legal and filing fees at loan closing. A $750.00 escrow payment is required before closing documents will be drafted. Any excess fees above the $750.00 escrow must be paid prior to or at closing. Any excess escrow will be refunded without interest within 30 days after closing. Application: After meeting with City Staff regarding the proposed project, an application for an Economic Development Loan may be submitted. Public Data: The data submitted on the application and as part of the application are subject to the provisions of Minnesota Data Practices Act. Data determined by the Applicant to be nonpublic data under Minnesota Statute 13.59 must be so marked by the Applicant. Applicant is hereby notified that applicant’s determination of what is or is not nonpublic data is not binding upon the City , which must abide by statutory, administrative and court rulings regarding the status of data once submitted. Review: The application will be reviewed to determine if it meets the goals and objectives of the City and the EDA. Evaluation criteria include, but are not limited to the following: 1. Positive impact to create or retain jobs and tax base. 2. Financial feasibility of the project and the business. a. Adequate security b. Positive net worth c. Private funding requirement met d. Applicant equity requirement met e. Documentation of inability to secure additional private financing 3. Elimination of blight The EDA Finance Committee will review the application and make a recommendation to the EDA. The EDA will review the application and consider the Finance Committee’s recommendation before acting on the application. The Staff, Finance Committee, and EDA all reserve the right to request additional information from the applicant throughout the application review process. 4 The EDA and City reserve all rights to accept, reject, or propose modifications to any application based upon its sole discretion. Each application shall be reviewed based upon its individual merits, current economic circumstances, amount of loans already provided, available City funding and the unique circumstances set forth by the application. Approval of any individual loan does not serve as a precedent or requirement that any other loan be approved. Loan Policy Review: This Loan Policy will be reviewed annually to ensure that it meets the development goals and objectives of the City. Adopted: DRAFT OF UPDATES FROM 2-26-2018 City of Otsego Economic Development Strategies and Priorities Policy This Economic Development Strategies and Priorities Policy (Policy) is in place to ensure that the City’s limited economic development resources are used to achieve the City’s highest priority economic development goals. The Council must consider each request for assistance in the context of this Policy. The Policy may be amended by the Council at any time and should be reviewed periodically to realign the Policy with changes in City development, priorities, economic and financial conditions, and applicable laws. The City Council has complete discretion to determine if a project will receive City assistance, the type of assistance and the amount of assistance. The City Council may deviate from this Policy in the event that a unique development opportunity is presented that does not fall into the established criteria; but that the City Council determines will provide benefit to the City and its residents. City Identified Priority Projects: After thorough review of current conditions and development of the City, and after examining long term City goals, the City Council identified high priority projects and initiatives that:  Enhance the City as a whole  Provide jobs to residents  Create tax base to sustain a reasonable tax rate that will support the ongoing, necessary core services along with the amenities the residents desire. High Priority Projects and Initiatives may be considered for City assistance or incentives, if eligible and available, and if the Council believes the project would not occur without such assistance. The City Council, in its sole discretion, will determine if a project will receive City assistance and the amount of such assistance. Medium Priority Projects and Initiatives are important to the development of the City and to enhancing the community but are typically not eligible for City assistance. In rare cases the Council may determine that a project warrants assistance because of an unusual circumstance that exists which prohibits the development from occurring and the project has benefit to the City. Low Priority Projects and Initiatives are projects or initiatives that the Council has determined are of such nature, that other assistance is readily available in the community and the project or initiative does not provide benefits justifying City assistance. The City Council has identified the following as development priorities and initiatives: Adopted: DRAFT OF UPDATES FROM 2-26-2018 1. High Priority Projects and Initiatives a. Projects that bring jobs with substantial pay to employ residents b. Projects that increase the City tax base c. Creating and assisting with the creation of shovel ready sites for targeted future development d. Manufacturing development e. Office and professional development f. Retail development 2. Medium Priority Projects and Initiatives a. Warehouse development b. Senior housing development with amenities typical of senior housing 3. Low Priority Projects and Initiatives a. Low to Moderate Income Housing b. Multifamily Housing c. Redevelopment City Assistance: State laws and City Policy allow for several forms of City assistance to projects that meet certain eligibility criteria. Incentives to attract certain types of projects, jobs, or development include: 1. Tax Abatement 2. Tax Increment Financing (TIF) 3. Economic Development Loan 4. Assessment of SAC/WAC fees 5. Support of grant and loan fund applications to other government entities or non-profit organizations All assistance must comply with the provisions of the City’s Business Subsidy Policy. All TIF shall be pay as you go only with the exception of City infrastructure that may be funded through bonds. The City will consider the merits of each project before determining if it meets the City’s long-term objectives and is eligible for and worthy of assistance. Generally, Tax Abatement and TIF assistance are reserved for High Priority Projects and Initiatives. Both High Priority Projects and Initiatives and Medium Priority Projects and Initiatives are eligible for Economic Development Loan, assessment, and grant support assistance. Additional criteria may apply to projects requesting City assistance including but not limited to the following: 1. Assistance to manufacturing projects is dependent upon the new jobs meeting wage criteria as determined by the Council Adopted: DRAFT OF UPDATES FROM 2-26-2018 2. Redevelopment of blighted low-income housing may qualify for assistance as determined by the City Council 3. Land write down will be considered only for properties in the flood plain where fill is required to make the site buildable 4. The City may impose additional development requirements including but not limited to higher building design standards 5. The City may require a minimum value assessment agreement Assistance for public infrastructure to serve the development will be considered under the following circumstances: 1. The project is a High Priority Project and Initiative 2. The street is identified as a Collector street; local streets are not eligible 3. It is needed to create shovel ready development sites City assistance to a project will be determined based on at least one or more of the following factors: 1. A maximum percent of the project cost 2. A maximum number of years of TIF or Tax Abatement assistance 3. A maximum per type of project 4. By the location of the project 5. By the number and wages of jobs created 6. By the market value created 7. If it is a High Priority Project and Initiative The above Policy shall serve as a general guide for administering financial assistance to economic development projects. The City Council shall interpret the policy and determine its applicability to each individual project. The Policy may be amended or changed from time to time by majority vote of a quorum of the City Council. The Policy is a general guide for evaluating proposals and not a rule or ordinance and is subject to change. Parties seeking assistance should understand that it is only a general guide for evaluation and does not provide applicant with any assurance that the City can or will provide requested assistance, even if the proposal appears to meet the criteria established within the Policy. Applicants present requests to the City at their own risk and expense, and the City accepts no liability of any nature by receiving and evaluating the proposal.