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02-22-96 WSCITY OF OTSEGO SPECIAL WORKSHOP MEETING FEBRUARY 22, 1996 7 P OTSEGO CITY HALL 1_ Mayor Norman F Freske will call meeting to order_ Mayor Freske called the City Council Workshop Meeting to order at 7 PM. Roll Call: Norman F. Freske, Mayor; Councilmembers; Larry Fournier, Vern Heidner, Ron Black, Absent: Suzanne Ackerman Staff. Bob Kirmis, Assistant City Planner; Andrew MacArthur, City Attorney; Larry Koshak; City Engineer; Elaine Beatty, City Clerk/Zoning Administrator; Phyllis Cokley, Business/Finance Director; Judy Hudson, Deputy Clerk; Also attending was LeRoy Lindenfelser, EDAAC and Carl Swenson, Planning Commission. ? Presentation and discussion of financial option for Perlich/Riverwood Conference Center Proposal by representatives from Springs ed. Ronald Langness, Springsted, stated he would like this to be more of a question and answer session. When he heard this proposal he had several cautions the Council should consider, before entering into a franchise agreement. -Developer talks about a cluster system in a certain area and he wants agreements done in a hurry. -Concerns of Franchise Agreement which City Attorney addressed in his letter (attached), they are not common in Minnesota. -Other states have them, where it is necessary to get something going. -Very often find this in Trailer Court Areas, which are not incorporated or are on edges of corporate areas. -Typically the developer comes in and builds and completes the development and it may not be the same developer completing the project. -He doesn't know anything about Mr. Perlich's Company. -System must be maintained. -Complaints will go to City Hall and not the Franchise holder. -What rights does the City have to go in and force corrections. -Disturbs him that the developer is trying to force the City to make a rush decision in writing. -(Mayor Freske said the developer has been asking for two months) -Once the City signs the agreement, you are struck with it. -A lot of issues to be looked at before signing off. -What will development be for around that area. -Water is different but same category. Special City Council Workshop Meeting of February 22, 1996, cont'd. Page 2. 3 Comment% and discussion from City Attorney,City Engineer and City Planner - Elaine Beatty gave the history and background of this development request, starting with Riverwood Conference Center and their current septic problems etc., CM Black asked why this can't be treated the same way other developments are treated in other cities. If the developer builds it and when it is done, they turn it over to the City. The same concept as what is applied to streets etc. He doesn't want to spend a lot of time talking about a franchise. CM Black doesn't see any cost savings in the long run and he suggested not spending any more time considering a franchise but rather if it's a feasible project from the City's perspective. CM Fournier agreed with this. He would rather have the City own the plant. CM Heidner is not convinced if its economically feasible for the developer to put in. This could go through several developers, and if we bond for it and it doesn't fill up, then the franchise would be the better deal. CM Black said the City can be protected by the Letter of Credit. Mayor Freske said where the developer is coming from, is if the City would want other areas hooked up and we would need it in the future. Andrew MacArthur said this was all gone over with the Darkenwalds. In those discussions, what was presented was whether it was actually a franchise. State Franchise Statutes don't include waste water treatment plant. The developer should be providing this information and agreement and he hasn't seen any. The Attorney doesn't want a situation where Otsego is reinventing the wheel for this. His other concerns were: -Who owns the lines, streets, etc. -Have to have financial security behind it and this would be a -problem with the project. -See attached letter for Attorney's concerns. Mr. MacArthur passed out information that Darkenwald's had previously provided. It lists the type of analysis and steps the City has to go through before making a decision. CM Fournier said it looks like putting something together is time consuming and the developer wants answers in two weeks and stated he doesn't like that approach. CM Heidner said he has never heard the cost of this plant. Elaine Beatty stated they do not have a clear view on this because of the golf course involvement. Mr. Koshak's concerns: -Putting in a franchise- the City is setting a precedent. -Riverwood Conference Center has to do something because of current septic problems. -If Riverwood puts in a plant that would be expandable, the City could take it over because its a private entity and it wouldn't be a franchise. -Riverwood also needs water, they are a valued commodity to the City and should be given some consideration. -Soils in this area dictate Mound Systems, should be served by Public Sewer. -Developer can build the treatment plant per approved plans and then turn it over. Special City Council Workshop Meeting of February 22, 19%, cont'd. Page 3. CM Heidner pointed out in regards to costs: -200 septics at a cost of $10,000 each equals $2,000,000.00 -With sewer, more homes could go in, more feasible to developer. He went on to say he does agree that the developer should put the plant in and turn it over to the City. He felt that they can't afford not to put in the plant. CM Fournier asked if the City puts in the plant, could the City have the cost of plant put on each lot to recover the costs. Mr. Langness said through connection charges. He advised do the lines in phases. If designed for a larger area you can also assessed that area. Typically done in MN in 2 ways: 1. Developer builds the plant per City specifications, which is not as common as cities would like it. 2. Reverse of that, City bonds and puts plant in. The special assessment connection user fees go in to pay for those improvements, He cautioned that the project would be piecemeal if the City does this. The developer would want the City to do it all at once. If the developer does it all, then he is the one taking the risks. Bob Kirmis suggested for developer to produce a Market Study. He had a concern with all the other communities putting in golf courses. Larry Koshak stated on the east side of the City you have the option for developmental timing, there are several 40's, commercial development there and the City has some options for retiring the debt. In this western area, the City is locked into a fixed area, and the City is responsible for retiring that debt. CM Fournier questioned if the City can apply different rules for treatment plants in different areas of the City. Mr. Koshak and Mr. MacArthur both said yes, that the City would be forming an agreement with the developer. Mr. Koshak advised the City that they would want to do a background study of the developer. Also, a financial feasibility and other studies would have to be done at a substantial cost to the City. Mayor Freske said we have to keep Riverwood in mind now and the City will eventually have to get involved. CM Black agreed with this and the City needs to become involved. Phyllis Cokley discussed the Riverwood situation and if the City is involved, how does the City pay for it. The City can get the money cheaper and Riverwood needs it. Mr. Langness said to bond and build the facility, determine their share of the costs and then work through an agreement, there are the assessment and connection charges. The City has some options - Riverwood needs it, they can front-end their share of it. Another option, the City may want to do the whole thing and bill back to them. The City may want to look at connection charges which usually are looked at as sac or WAC charges. Special City Council Workshop Meeting of February 22, 1996, cont'd. Page 4. Mr. MacArthur cautioned that with private systems, enforcement is sticky. Mr. Koshak commented that in building treatment plants, you want to plan ahead. Another consideration, Riverwood is currently at 10,000 gallons, there are different ways to treat without building a sophisticated plant. Phyllis Cokley asked if there was a sense of direction or suggestions. CM Heidner agreed with the concept of the developer building the plant, which he feels would be economical for them, turn it over to the City and perhaps if we thought the plant should be bigger the City could pick up that share. Mayor Freske said that is one of his questions, the size of plant. Would the City be willing to get involved. Norm Gartner said he was in attendance, representing Neal Perlich. Mayor Freske explained to the group, that the Council is leaning towards having the developer build the treatment plant and turn it over to the City the same ways streets are treated. Arleen DeCandia said she has been watching for potential development and if Neal Perlich does develop housing and a golf course, there would be an opportunity to be a partner with them so Riverwood could get its sewage need fitted into the project. If that doesn't happen, then they have Plan B. Norm Gartner said what he is hearing, is that the City is suggesting the developer construct and finance the treatment plant and turn it over to the City. CM Black said that is correct and the City is not interested in a Franchise Agreement. Mr. MacArthur explained a Franchise Agreement, the State Statutes, his concerns and that he has not received any information on what the developer is proposing. Mr. Gartner explained he was just brought on and doesn't know the background. He said Mr. Perlich is looking for direction from the City as to what he can expect in expenses. He referred to Mr. Perlich's letter dated February 15. If Mr. Perlich can't make the numbers fly before proceeding, he will look at this differently. Mayor Freske reminded him of the cost of septics. CM Black said Otsego is not able to afford to take a risk, with the public not in any position to pick up a tab, Otsego is not as flexible as other cities. Special City Council Workshop Meeting of February 22, 1996, cont'd. Page 5. Mr. Koshak said most other cities plants were built with grant money which makes a difference. Now, most cities have to pay the capital costs without grants and the funding comes out of the individual units. Mr. Gartner asked why does Otsego want to get into waste treatment. Mayor Freske said we have to look at the future. Larry Koshak said with the soils in that area, every system would have to be a Mound System, which is very expensive. The only way to develop property out there is through a community system. The City needs to address the pollution issues. Arleen DeCandia said Riverwood would be paying for their share. The cost of a plant just for Riverwood is about $150,000, and they are willing to invest that amount for the City. Therefore, Mr. Perlich wouldn't be paying the $500,000 by himself. Riverwood has paid out a lot in research and development. Mr. Gartner said Mr. Perlich is talking about residential with a golf course. He asked the Council feelings of removing the golf course and putting that into residential. The Council stated they would not be in favor of this. CM Black said the Council is saying instead of a privately owned plant, it would be City owned. Arleen DeCandia said the golf course would come back in leverage of value, it has to have an aesthetic reason. She said she is willing to partner and a golf course developer is willing to partner, its affordable when you have 3 partners. There was discussion by the Council on the number of homes and amount of acreage. Arleen DeCandia said Island View Estates, lots are going for $40,000. She said Mr. Perlich always counted on having the City running the plant. CM Black pointed out how is the return of investment on sewer any different than the street being put in. Mr. Gartner said from what your saying when you talk about public improvements, the return is through the sale of the lot, and the franchise is above that in operating. CM Black said no franchise. Arleen DeCandia said they don't need to do a franchise because they have a team ready to go. She wouldn't want a franchise. Riverwood is prepared to put in its own package treatment plant, but then they would have to run it and she doesn't want that. Mr. Bogart said they have looked at a package plant as a option, since it was a concern of the City's should the current system fail. He asked how expandable is the facility, if City were to express interest, or be involved for potential expansion Mr. Bogart's concerns: -Mississippi is designated as Outstanding Resource Water Way, which means tests that have to be passed for PCA for addition of pollutants. -Start adding on, and if there is another stream to go to, PCA will say no discharge to Mississippi River. -Additions - then we are looking at odor problems - careful with placement of plant. Special City Council Workshop Meeting of February 22, 1996, cont'd. Page 6. Arleen DeCandia said a package plant is totally different from what she envisioned for the City. Their plant would be small, like a two car garage. Mr. Koshak agreed, a package plant might suite Riverwood's needs for now, but expansion may not be, because of the river situation. Mr. Bogart said he wouldn't want to affect Riverwood's facility. CM Heidner said the other sewer project, the City is looking at is 250 gallons per day, per house. Island View has 150 homes. Mr. Koshak said if you look at Island View, you don't want to put in sewer pipe and suggested a pressurized system. Lots can't be divided, a step system - you don't have the cost of putting in gravity pipes but still have the gallons going to the plant. He explained a pressurized system, it cuts the costs of getting there, but include them for the future. Some lots don't have alternate sites, and should stand up for 10 years. Mr. Bogart said they are looking at potential effluent to ditches and what PCA would accept. The PCA gave them numbers. Arleen DeCandia said they would use the right size pipe in case they ever had to connect to Albertville or to the East. Mr. Gartner said waste water treatment plant - no problem with it, just have to get a handle on costs for Mr. Perlich this evening. Arnie Wasberg discussed the franchise with the Council. The Council and the City Attorney went over with him the reasons why they wouldn't want to get involved with this. Arleen DeCandia said to now move forward and create a partnership where everyone feels safe. Mr. Bogart talked about small package plants and costs. Mayor Freske said regarding the balance of the letter, we will have staff respond to Mr. Perlich in writing. Mr. Gartner asked what time frame for response. CM Black requested to have this on the March 11 City Council Agenda. Some questions involved interpretation of Ordinances, and we need to know what we can do legally, and need staff advice. He went on to say, he doesn't want anything coming back to the Council and saying it is a City Council policy decision. He wants to see a recommendation. Mr. Gartner said when Mr. Perlich gets the numbers, he will plug them in and see if its feasible. 5. Larry Koshak. City Engineer - Discussion of MSA funding and proposed 1996 projects" Mr. Koshak showed an overhead of MSA Projects. As of February, 1996, current unencumbered amount is $403,554.00. Special City Council Workshop Meeting of February 22, 1996, cont'd. Page 7. Mr. Koshak suggested the following projects: 85th Street from Odean Avenue to Page Avenue CM Heidner suggested wait one year and do Odean to Nashua Avenue. Mr. Koshak discussed the State paying for a portion of the gas main for the future access road by 101. Road goes through Big Ed's, and they have to lower the gas main, it is a MSA Road. If they decide to lower, they would like to lower the pipe across the road now rather than later. Mr. Koshak didn't know the total cost. CM Black asked why the City would bear the cost of that project since it is a State Project. Mr. Koshak said the reason is because of future MSA Road of Quale Avenue (North of 37). Mr. Koshak will bring in a map to show location of line. This is suppose to be done with the project and will benefit the City. There was further discussion on the 1996 MSA Project. The Council would like to see 85th Street from Nashua Avenue to Page Avenue done as one project, starting with the feasibility study and the process in 1996 and the construction in 1997. • CM Fournier motioned to adjourn. Seconded by CM Black. All in favor. Motion carried. Mayor Norman F. Freske Attest: Elaine Beatty, City Clerk/Zoning Administrator Recorded: Judy Hudson, Deputy Clerk CITY COUNCIL WORKSHOP FEBRUARY 22, 1996 SUBJECT: Perlich - Riverwood Conference Center Proposal for Development A. 7:00 - 8:00 p.m. Presentation of Financial Options for the City and discussion of the same. Springstead.. Inc., financial consultants will present general information pertinent to the above proposal. Conception scenarios will be presented and discussed along with the general information. Several scenarios to be considered: • Franchising of the utilities by the Developers. Utilities would include sewage collection and treatment, water production and distribution. Streets and storm water drainage ownership and maintenance of the streets and storm sewer would also need to be addressed. Franchising only the sewage treatment production. City would own and maintain watermain, and storm sewer and street. • City owned facilities; no franchise. Comments from City Attorney on franchising issues. Comments from other staff members. Other issues for discussion: • Focus of development in City. facilities and water, the sanitary sewer, • Combining proposed northeast sewer project with this project. • Consideration of Riverwood Conference Center, a prime asset to the City. • Feasibility studies for the construction of treatment facilities, both from a standpoint of engineering and financial. Cost of such studies, and who bears the cost? B. 8:00 - 9:00 P.M. Discussion of proposal with project developers. OT901.wks