Minutes

of the

Regular Meeting Of

DETROIT LAKES DEVELOPMENT AUTHORITY

Tuesday, November 8, 2005

4:30 PM

Conference Room

 City Administration Building

MEMBERS PRESENT:     Dixie Johnson, Matt Brenk, Tom Klyve, Jim Anderson and Greg                                   Hildenbrand

MEMBERS ABSENT:      Tim Olson and Mark Hagen

OTHERS PRESENT:       Larry Remmen, Nancy Wichmann, Bob Bristlin

I.       Call To Order:

          Chairman Dixie Johnson called the meeting of the Detroit Lakes Development Authority to order at 4:30 PM in the Council Chambers of the City Administration Building, 1025 Roosevelt Avenue on Tuesday, November 8th, 2005. All members of the Authority having been duly notified of the meeting and the business to be transacted.

II.     Minutes:

        A motion was made by Commissioner Tom Klyve, seconded by Commissioner Matt Brenk and carried unanimously to approve the minutes of the regular meeting held October 25^th, 2005 as presented.

III.    Financials:

A.      A motion was made by Commissioner Greg Hildenbrand, seconded by Commissioner Jim Anderson and carried unanimously to approve the financial report and payment of claims for the period ending September 30, 2005.

IV.    Old Business:

A.      Other

          Larry Remmen reported that there were some questions with reference to the OZAB Debt Service Account and when the Authority was going to review the account.  The account review date has been changed to end of December because many pledges are received at the end of the year. 

V.      New Business

A.      CONSIDERATION TO THE REQUEST OF BOB BRISTLIN TO AMEND TIF DISTRICT 8-15 PELICAN RIVER HEIGHITS

          Bob Bristlin is requesting an amendment to TIF District 8-15, Pelican River Heights Development.  The original request was for approximately 34 lots, in Pelican River Heights.  A pay as you go TIF plan was approved for $196,000.  Bristlin is requesting an amendment to that district for either $370,000 for the entire site or he would reduce the size of the project 20 -24 lots and request of $170,000 in upfront tax increment financing payments.   The Authority would have to amend the District so that the amount paid could be paid up front and also have to amend the district to pay interest on the bonds.  Either the District would have or be left whole, the way it is or amend it eliminate some of the lots from the District. 

        An opinion from Briggs and Morgan was requested and Remmen reported that in their opinion, response was there were some difficulties in increasing the assistance and making an upfront payment rather than the approved pay as you go arrangement. They are as follows:

• First, the change would have to be justified by showing that the project would not go forward without the increased assistance and a change from a pay as you go payment to an upfront payment.  This is a requirement of the tax increment financing law, which requires a “but for” analysis.  This would require some evidence that circumstances have changed requiring pay as you go to change to upfront assistance.  The argument that “but for” the change in the amount and the financing structure of the development would not proceed becomes more difficult to support to the extent construction has already progressed.

• Secondly the City and the Authority cannot be at risk under an upfront payment.  If the City issues tax increment bonds to fund an upfront payment, the City will need to secure the bonds with an assessment agreement on the units in the Development and a guarantee from the Bristlin of any shortfall in the tax increments. The guarantee will have to be secured by a letter of credit from a bank.  The security pledges will cause the bonds issued by the City to be taxable, and more tax increment will be necessary to finance the bonds at a taxable rate. 

• Third, the TIF plan did not contemplate the payment of any interest on the pay as you go note.  A public hearing will be necessary to amend the TIF Plan to provide for the payment of interest on any bonds issued by the City. 

Jenny Boulton, Briggs and Morgan, also addressed the issue of why the Authority would distinguish between commercial developers and nonprofit or governmental developers as follows:  There is no entitlement to tax increment assistance and it is entirely appropriate for the Authority’s Board to make policy determinations regarding the form and amount of assistance to any developer whether based on the type of development, the Authority’s other desired uses of increments or the extent to which it desires to subsidize for profit developers return on investment. 

Bristlin reported when he applied for tax increment financing, he didn’t think it would include all of the lots, but just a dollar amount, and he didn’t know it was on a pay as you go basis.  He chose to provide the utilities, pay for them himself, and now he is waiting for his money and has already paid $400,000 in infrastructure.

Chairman Dixie Johnson reported that the City normally installs sewer and water, which is assessed against the lots.  Johnson questioned how Bristlin ran his assessments.  Bob replied it was all paid for and he planned on paying for them with tax increment. 

Matt Brenk inquired how Bristlin could address the points brought forth by Briggs and Morgan.  Bob was not sure how to address all of the issues raised.

Larry Remmen reported the majority of tax increment requests have been on a pay as you go basis.  It varies depending upon the type of project and the request.  Considerations such as how big is the project; how much tax increment will it generate  and will there be enough to make a meaningful contribution to the project to pay the interest are some of the factors considered.   With a pay as you go project you are not putting the tax payers at risk. 

Generally the Authority likes to do a pay as you go as it keeps the tax payer and the City from being at risk to pay bonds if the development does not generate enough tax increment. 

Bob Bristlin reported the project, as it is, would be no problem if he didn’t have to wait until 2008 to start receiving tax increment financing.

A motion was made by Commissioner Jim Anderson, seconded by Commissioner Greg Hildenbrand and carried with Commissioner Matt Brenk voting no and Commissioner Tom Klyve abstaining from the vote to stand by the original approved tax increment financing plan for tax increment financing District 8-15. 

B.      Other

Larry Remmen reported that TEAM Industries is requesting that the following amendments be made to the DEED grant 3CDAP-03-0005-H-FY03 for TEAM Industries Park Rapids – DL

This is $250,000 through Minnesota Investment fund which was delayed taking action due to Davis Bacon.  The State Grant is to TEAM Industries through the City.

• Delete special conditions 2a, 2c, and 2d
• Loan term be four (4) years at 4% interest
• Collateral to be 2^nd position
• Job base be reduced to ninety nine (99)
• All new jobs will be paying greater than $9,00 with $9.97 with wages and benefits
• Job creation completion date to be December 31, 2006

A motion was made by Commissioner Jim Anderson seconded by Commissioner Matt Brenk and carried unanimously to approve the state grant and loan as presented.

VI.    Adjournment

        There being no further business to bring before the Board, the meeting was         adjourned.                                

                                                        Signed                                                      

                                                        Larry Remmen                                                                                                                     Community Development Director