Gladstone Redevelopment Plan Council Manager Workshop

City Hall/Council Chambers, February 5, 2005, 5 PM

Totally Unofficial Notes by John Nephew

Preface: There was a lot of densely-packed information from staff during this workshop, including powerpoint presentations on screen that I often had trouble reading from where I was sitting. So while I took notes on the presentations, I would strongly recommend that interested citizens find the powerpoint slides and other materials that should be on the city website.

The meeting began around a quarter after five, after the completion of some candidate interviews for citizen boards and commissions.

Mayor Longrie called the meeting to order.

Chuck Ahl, city director of public works, wanted the council to understand that the city is in a process with a lot of steps and decisions that need to be made. He discussed the development concept for Gladstone, how the development will be approved, and how it fits into the comprehensive plan. He highlighted the particular importance of adhering to the required process because of the Met Council grant, both to comply with the grant's conditions, and also for the purpose of qualifying for more such grants in the future. He also indicated the importance in this workshop of understanding the financial impact of the development and the finance-related decisions the council will need to make.

The key question, said Ahl, is whether to provide some financial support to the developers. The council was not going to decide that during this workshop, but needed to know that the question is coming up. And, more importantly, they needed to understand what process will the council go through to answer the question. Once they make the decision, it will affect what level of improvements can be done, and how all that ties together into one major project.

Link Wilson, who was architect of record for the Summerhill project in Maplewood, which seems to have made many seniors living there very happy, was brought forward next. The Lake Phalen Estates project (the name that has been chosen for the development on the St Paul Tourist Cabins site) is what he calls “the gateway to the Gladstone development,” which will sit to the east. So the focus tonight is not just about site amenities, but the visuals of the entry, and what residents will see when they drive along Frost Avenue. Wilson believes the development will turn the tourist cabin site into an asset for the city, whereas it has presented some problems in the past. Among the features he mentioned are facilities to help senior citizen residents who are recovering from surgery, for example.

Hardy siding and stone will be used at the eastern end. The developer plans to incorporate a bus stop down at the end of the east. He notes that there will be 60 jobs created by the facility. Besides the new jobs, the bus stop integrated into the building architecture will serve the whole community. Also they are designing a multi-purpose space into the design, with security and whatnot, that any citizens of the community will be able to reserve and use. Security will be in place to protect the residents of the building (if there are concerns about the non-residents using the space). A bank, chapel, deli, and movie theater, are all included in the building; at this time, they're seen as private for the residents of the building only. The design aims to preserve green space, and even to enlarge the wetlands portion of the site. Stormwater runoff will be designed to have less drainage into Lake Phalen than is currently the case. Also discussed was the connectivity of trails throughout the project.

Longrie asked about underground parking. Wilson confirmed that underground heated parking is still planned, with approximately 103 spaces. He said that they have been finding in other developments that significantly fewer parking spaces are needed than the number of residents.

City planner Shann Finwall then spoke about the comprehensive land use plan amendment proposal and zoning proposal. The master plan for Gladstone was adopted in Dec. 2006, which necessitates some changes to the plan and zoning. The comprehensive land use plan is a document that interacts with the whole metro area, in terms of land use and its impacts.

Finwall explained the stages of changing the plan and zoning. First was a public hearing, held the following (Tuesday) night at the Planning Commission. Notice of this hearing was sent to people who live within 500 feet of the land at issue. Second, notices of the proposed plan amendment will be sent to adjacent governmental units (school districts, Saint Paul, surrounding cities), as required by state law. Third, the city council at this workshop could authorize submission of the changes to the Met Council, to happen right after the public hearing on Tuesday, which at the same time can be given to the neighboring governments. The Met Council will study the proposal, and they have 60 days to review it and make sure it fits into the metro-wide land use issues. Problems are not foreseen, since it seems pretty clear that these changes fit the criteria needed.

The staff proposes adopting entire master plan as an amendment to the comp plan. A lot of changes are necessary, to allow for the mixed commercial/retail/residential uses envisioned. A variety of designations are being created for medium- and high-density residential areas.

The next steps in the comp plan revision will be:

react to any modifications requested by neighboring communities

adopt the final form after considering recommendations from the Met Council's review

submit two final copies to Met Council

For the zoning process, Finwall described these steps:

1. Draft ordinance (present to planning commission, community design review board, hopefully by end of February)

2. Test the ordinance

3. Facilitiate public review (including additional reviews by planning commission, city council)

Mayor Longrie then stepped in with a series of questions and comments for the staff

“With respect to the PowerPoint presentation, can we put this on the city website?” (The answer was yes.)

With regard to form-based zoning, she could see how this will work well with concept the council put forth for blended development of old and new. She thought it's “a nice direction.”

She then asked a question about an apparent zoning change of an area of single family homes. In the discussion that ensued it became apparent that, perhaps due to an error on a map, she was confusing one street with another, or maybe the map in the packet the councilors have was not up to date with what was on the screen. Finwall clarified that no single-family zoning was being changed. Then she corrected that an area just to the east of Vento Trail is currently zoned single dwelling, currently has large lots, and the proposal is to allow the back portion of those lots to allow medium density development. But the area the mayor was concerned about is definitely staying single-family.

Then Mr. Ahl discussed the public works side of things. He described two possible different approaches for public works in Gladstone.

1. A $3.5 million project budget, which assumes no TIF assistance and no developer at Lake Phalen Estates. This includes the $1.8 million grant. Funding would also be provided by some assessments, and MSAS Funds.

2. A $5.95 million project that includes a developer, with expanded street reconstruction/streetscrape work, adding savanna improvements, burying power lines, and other redevelopment costs. A majority of the savannah money in this case would come from PAC fees from Lake Phalen Estates. (As I understand it, these are the per-unit fees that are assessed on developers and go into the capital funding of the parks system.)

Rossbach had a question at this point. In the chart he was looking at that does not include TIF, this assumes we're not having a developer on the tourist cabin site? Ahl explained that this was a worst-case scenario. It has to do with property value increases, which are necessary to legally sustain assessments. (To assess property owners for nearby public improvements, you have to be able to demonstrate that you are increasing the value of their land, and that justifies making them pay for part or all of the cost.)

Longrie asked then, where's the chart that shows a developer and no TIF? Ahl seems to say that this also is the “worst-case” development scenario. I then got horribly confused by the ensuing discussion of TIF, abatement, PAC, and assessments.

Another thing that came up was “Ramsey County turnback.” This is a condition of the Met Council grant — Frost and East Shore Drive, which are not currently city streets, need to be taken over by the city. Maplewood has proposed a street swap, so that Maplewood would take over these streets, and in exchange County Road D would actually be turned over to the county.

Some other requirements of the Met Council grant were highlighted by staff. They include: “pay as you go” (the city pays costs, and then the grant reimburses them); a construction contract must be signed by Dec 2007; the work must be completed by September 2008; and the final grant must be to the City Council on Feb 26th.

Longrie said there are three areas of improvement for which we have grant money, and asked Ahl to describe them. The three areas are (1) a roundabout at Frost and East Shore Drive; (2) work on Frost itself (mill & overlay), trails/sidewalks on Frost and East Shore Drive, and some enhancements along the roadway (lighting, etc.); (3) stormwater enhancements, to improve runoff issues and meet water quality standards.

Ahl suggested a list of things the council needs to be thinking about, such as whether the development is the type of land use desired, whether the city should support the development, how it fits in with the master plan for Gladstone, etc.

Longrie asked a question about impaired waters and the “dirty thirty”: Is there an update on progress on various grants related to the water issues, and does any of that have bearing on this financial planning? Ahl responded that on impaired waters, we by statute cannot increase pollutant loads to those waters, and may have to decrease. The “dirty thirty” is about “non-degradation.” We are one of 30 communities in the state that have to come up with a plan to prove we can reduce our runoff to 1988 levels. Also he reported “a very good response from a number of agencies” that have heard about the city's plan and are excited about it. He could not predict the outcome, but expressed confidence that we will get some grant funds – but he wants to plan along a worst-case-scenario set of assumptions. He hopes over the next 3-5 months we'll know more about the grant outcome.

Juenemann stated that the key issue on impaired waters is what comes out of the legislature and governor, as it could fall “under the unfunded mandate category,” where the state requires that local governments take care of a problem but provide no funding to help them do it.

Ahl said we do have six impaired waters in Maplewood now – and a lot of the other ones just haven't been analyzed yet.

Then it was turned over to Paul Steinman for the financial discussion. He is with Springstead, the city's financial advisor. Steinman reported that there is a TIF application before the council for this project, looking for $2 million for the Lake Phalen Estates. His purpose is to help folks discern how they want to approach the request for assistance to this project, by talking about how a lot of public bodies approach these questions.

Is the council interested in the type of project proposed? Does the project help the city accomplish its development or redevelopment goals? Is TIF something the council is willing to consider in principle? Typically a developer already knows the answer to most of these questions are yes, or they wouldn't be submitting the application. Steinman displayed a chart with circles and rectangles (with their sharp ends filed down like children's blocks). I could not read it on the screen from across the room.

His purpose this evening was to describe the role of TIF and the process of analyzing a request. Tax increment financing, he explained, is really an option available to fill a financing gap that can't be filled by private financing, other equity sources, etc.; so the developer would like to see it filled by public dollars. The city council needs to consider whether there is in fact a gap, how large is it, and what tools does the city have to fill it – even if the city recognizes a need for help, the way to provide it may not necessarily be TIF (for example, tax abatement is another possibility).

Steinman went on to hit these specific points and questions:

Does the project warrant the assitance? (This is the “but-for” test — the project would not be viable but for government subsidy.) Can the project proceed without the assistance? If the answer is yes, they have not met this test.

The city's financial advisor must look at the developer's sources and uses of funds, the amount of private financing, developer equity, and other sources. The city wants to make sure the developer has maximized all other sources prior to request for TIF assistance. The analyst accomplishes this by doing a side-by-side comparison of the investor's proforma through ten years with the requested assitance, along side a proforma without. The two proformas should have different rates of returns for the developer (there would be more cash flow with public assistance). The pertinent question is, without TIF, is the rate of return still within the reasonable range for a market return on this type of project? If it is, then the council may consider that TIF is not needed, or perhaps less TIF than the developer requests would be appropriate.

If assistance is necessary, what is the minimum amount required? The analyst will try to adjust the number to figure out what would be necessary to make a reasonable rate of return.

Then the city negotiates the amount of assistance, and how it is provided (in this case they want it over time, as “pay-as-you-go TIF”).

I think the last point was something about a development agreement.

In terms of the steps of this process, already a council resolution has preserved the option of a TIF district (the official finding of sub-standard housing on the tourist cabins site). That would allow up to 26 years of TIF. Abatement, an alternative approach for public subsidy, is sort of “TIF light.” With abatement, you are only using the city's share of the tax dollar, rather than city/school district/county taxes together, and the maximum collection period for abatement is twenty years. Different types of costs are eligible – infrastructure, land acquisition, demolition, environmental costs, are eligible for TIF. There are fewer limits on abatement.

Rossbach asked a step back to ask about bonded abatement. It can be either PAYGO, or tax abatement bonds, but those have very specific requirements (in terms of what they can be used for – specific up-front costs). On the other hand, on PAYGO there's an almost unlimited variety possible.

The bottom line is that TIF means greater annual revenues. Based on a cursory analysis, what the developer requests would take 4-6 years under TIF, but under abatement you might not get their amount even with the maximum 20 years (since abatement is only applying to city tax dollars).

The staff then invited questions. Mr. Ahl said there was a question today about where the city is on TIF from previous applications. Mr. Ahl said that to do the TIF study, the developer pays Steinman's firm to do the analysis, if the city approves it.

Ahl summed up: If you are totally opposed to any subsidy, you should vote tonight to stop this process and not waste the developer's $6600. If you are open to the idea, you should approve Steinman's study to put together a TIF plan, which would have a public hearing on May 14th and then the council would decide on it based on all the analysis and different scenarios and recommendations.

Juenemann asked, how is TIF vs. abatement decided? Steinman said there can be two separate issues, really; but timing is tight on this project. If there's lots of time, you can do a but-for process and then do a TIF plan. In this case, it makes sense to do them both at once, basically.

Cave asked a question on the but-for test: Shouldn't we be looking at this before we ask the developer to spend six thousand dollars? She thought this can be answered first. Answer: We typically don't know what they're requesting until they make a formal request. And, since the project isn't a sure thing, doesn't make sense to spend taxpayer dollars on figuring out the answer to the but-for test.

Longrie stated that this was a workshop and the council doesn't typically vote at workshops. Without understanding more about the proformas, knowing none of the particulars, not knowing why the gap exists, etc., she suggested she didn't know how to judge the matter right now. She asked, Is it our role to disprove the need for TIF? Or to validate it? She posted a question to legal counsel: If we say no tonight, but we don't have enough information really to decide it, can we do that since we have the application available? She expressed a need to understand the impact on taxpayers, a cost-benefit analysis of property taxes over 4-6 year period of time.

City Attorney Kantrud described the council as having “pretty much open minds,” and didn't think anyone on the council is against TIF on principle.

Hjelle asked if Mr. Bart Montanari (developer) has a problem spending $6.6k on this process. Mr. Montanari came up to the podium. He said he would rather not spend the money if the council is absolutely opposed. He would prefer to know that sooner than later, not only for this application fee but for the hundreds of thousands he is beginning to spend on architect fees, engineering, demolition, etc. (all built around a plan that assumes some TIF or other government financial assistance). He's already written a check to the city for the $6,600 – so he's definitely ready to do it, if there's a chance of success. He stated that he has analyzed the proforma, and sees that they need public money to do the project.

Juenemann, to follow up on what Erik said, observed that the whole point of doing so much is to get the ammunition for an informed decision. We don't need more than we have in order to say we're willing to do it at all or not. We're more likely to make fools of ourselves, if you will, by not even considering that it's something we might look at.

Ahl's went back to his underlying point, which was that at any point the council can say they do not want to consider TIF, and if that is a matter of their public policy they should state that. Then they can stop the TIF process (and hand the developer back his check and application before getting into an analysis of the details), and look for something else that would make the project work. So it's not really a matter that needs to be voted on tonight – but rather an opportunity for the council to state a matter of policy if they wished to do so.

(What was going on with this exchange? If you've watched the council for a while, you know that various council members are on the record saying they oppose TIF in general terms and more explicitly for the Lake Phalen Estates site. For example, last summer in the packet for one Gladstone workshop, Hjelle said his opposition to TIF for the tourist cabins site was “not negotiable.” Just two days before this workshop the mayor made it clear to citizens at the Mayor's Forum that she did not approve of TIF as a matter of “public policy” and asserted that “one of the guiding principles of the Gladstone redevelopment plan was indeed that TIF was not encouraged or looked upon favorably.” She left citizens with the impression that a developer was free to apply for a subsidy, but was not going to get one. Kantrud, Hjelle, and city manager Copeland were also present at that forum. My guess is that the staff wanted to offer an opportunity to the council to discuss their public policy principles on the topic of taxpayer subsidies like this, so that the developer can take that into account, given that his current plans for the site are dependent upon a hefty subsidy.)

Last thing Ahl wished to do in last 10 minutes was to have Ginny ?? (sorry, I didn't catch the last name) talk about the savanna. She described three steps they have to take for open space:

1. landscape drawing – recreational uses, natural areas, ecosystems, etc.

2. restoration plan – topically written document of how to get there (some difficult issues in restoration in savannah, due to weeds and soil compaction)

3. cost & phasing

The staff is starting with the neighborhood plan that the council has given them. They will treat the savanna, Gloucester, and Flicek as one system. Paved trails are an important part of the plan. They want to retain natural characteristics, but make it a more useful site by adding interpretive elements, for instance. They intend to preserve “view corridors” to see in from Frost and English. They are looking ahead at 50 to 100 year terms for the planning of the space, with prairie and oak clusters and so on, which will take decades to mature. Some of the remnant prairie is there, and they hope to preserve and work with those plants to begin with. Oak woodland is another community to restore on the site, mostly as a buffer to the neighborhood. The staff showed pictures of other preserves in Maplewood (which might be what this looks like many decades in the future). Ponds are also part of it, including sedge meadow and wet prairie ecotypes. She emphasized that it's not just about plants; this is an “urban nature preserve,” so trails, access, and education are all important.

The city is looking to the watershed district for some funding help. They'll be interested in innovative storm water management in an educational way.

Mr. Ahl provided some concluding thoughts. Juenemann offered thanks for all the detailed information. Longrie said that the powerpoint presentations should be on the web – and Mr. Ahl agreed that they should be online the next day. Copeland asked for clarification that Ms. Finwall's submission of comp plan issues to Met Council was OK, and there was agreement.