council member thorson's absent councilmember peterson here council member wong here councilmember cole is absent mayor furlong here we do have a quorum so uh motion to adopt the agenda your honor by councilmember peterson second second by councilmember i think it's gonna be like that tonight either one of the other tonight so uh uh all those in favor signify by saying aye aye opposed motion carries we have a few topics here and i'll turn it over to a city manager uh brian frandl thank you mayor first up is the mmpa wholesale park contract extension we have two gentlemen here from avant energy slash mmpa the chief operating officer which is anjur and we have senior vice president david niles here as well to discuss extension and with the powerpoint so i'd like to turn it over to you guys please welcome thank you very much and thank you for having us my name is david niles as brian said i'm a senior vice president with avon energy we manage mmpa and what we thought we'd do tonight is go through the presentation that we gave at our annual meeting a couple months ago so that's why it says july 26 up there this is the presentation as we gave it we had an annual dinner meeting where we invite city council members elected officials city staff utility folks and just try and give them a sense of mmpa where we are where we're going and so i'll take the first part and anju will finish up and feel free to ask questions if you'd like so we're going to talk today about mmpa's mission who we are our history and how north st paul's been an important part of that history what we've done and our plans for the future so mmpa's mission there are two pillars to provide power that's reliable and to provide power that's competitively priced and in addition to that we want to create value for mmpa and for its members like north st paul so just to give you a sense of who mmpa's members are there's 12 members sort of situated around the twin cities metro area and then kind of mainly off to the south and west a little bit and then we've got east grand forks up there on the northwest corner of the state as an outlier when's the last time somebody actually joined the uh consortium or whatever you would call it the most recent customer or member started taking power in 2018 they made the decision to buy power in 2013 but started but started buying because contracts in the utility industry take a long time to take effect because of it's such a capital intensive nature and that's part of why we're talking about a contract extension you know a ways out in fact one of the graphs i have in just a second i'll show you that so yeah so just to talk about the history mmpa was founded in 1992 north st paul was one of the eight founding members of the agency uh all had been former excel energy customers or northern states power as it was at the time we started supplying power to members in 20 in 1995. uh east grand forks and shakopee joined in 2004 and buffalo joined a year later elk river our newest member joined in 2013 and in 2020 we had this plan on having a big celebration for 25 years for success and then the pandemic hit so this shows how how strong the agency's growth has been over the last quarter century and more so we started up in the middle of 95 summer of 95 and then had some growth there when we when whenever we had a full year in 96 and 97 and then that first big bump is is the 2005-2006 time period when shakopee buffalo and east grand forks all started taking power and then that and then you can see that our agency members have have had quite a bit of organic growth as well so all of that from sort of the middle up until that last big bump is just growth in residential and business customers in our at the time 11 member communities and then that last big jump is when elk river started buying power on october 1st of 2018 and you can see a little dip from 19 to 20 with the pandemic and then 21 we had a nice recovery there so one of the main things i want to demonstrate here is that our rates are competitive with excel and i think it's important for me to state here that what we're showing are wholesale rates because that's what mmpa is as a wholesale power supply wholesale power provider you guys at the city level do certain things that add costs and end up to the ultimate retail rates that your customers see but what's in our control and so how we track our competitiveness is is excel is sort of the main utility in the area bordering most of our members including you guys and so what you can see here this graph goes back to 1998 and what you can see is that forever in all years except for two 2007 and 2008 our rates were either pretty much right the same or or quite a bit lower than excel in 2007 2008 was the last time gas prices went really high like they are right now and our rates went higher and we said we're not going to let that happen again and we've built quite a resource portfolio since then which i'll talk to you about in just a minute but the main takeaway from this graph is that since 2009 our rates have been consistently lower than our competitive benchmark and we expect them to continue to be that way so i want to talk about how the agency has matured and changed over time so when we started supplying power in 1995 you can see that all of our capacity came from coal there were two contracts we had contracts with other utilities we didn't own a coal plant it was a virtual agency at the time starting in 2000 we expanded some hydro into that again through contracts with with our neighbors to the north and canada starting in 2005's when the agency had its first own generation and that's natural gas and that's the orange there and the bulk of the agency's capacity since 2005 has been natural gas the other thing and what you can see is i want two other things i want to point out one is that coal was phased out completely by 2015 and the second is how renewable started in 2011. you don't see it on here but but in 2011's when our first utility scale wind farm went into place and how from 15 to 20 it grew and then as we look into next year we have a wind farm that's projected to come online here in the next few months it's going to even further expand our renewable capacity so when you change that to on an energy basis because energy is what drives our costs more than capacity this goes back to 2006 and what you can see is that you know the purple is market purchases and mmpa has been fairly reliant on market purchases from 2006 even into 2020 it was still a significant portion but as our natural gas generation has grown as our renewables are growing and continuing to grow into 2023 our dependence on market purchases and therefore a lot of our energy price risk is going to go down so i want to talk now about our power supply and you can see how these two columns align with the two pillars of mmpa's mission we have our conventional resources and when we say conventional that means they're fossil fuel fire which means natural gas we have three of those from 2001 2005 and then 2017 and those natural gas resources provide the reliability to mmpa's portfolio then we have the renewable resources which is a mixture of wind solar and bio energy those really can help us control price because they're fixed price contracts because they're either fixed price contracts or assets we own where the variable cost is zero and so for all of those renewable resources in this recent run-up of natural gas prices which andrew's going to talk about a little later we aren't exposed to that risk by having those renewables in our portfolio and so we've been very glad that we do so i'm going to walk briefly through each of these resources mainly to show you what mmpa has built and what you know what your rate payers money has helped build as a portfolio that's a part of the the group that north st paul's a member of in the last 27 years now so minnesota river station's a 49 megawatt gas turbine it's a peaking plant meaning it's designed to only run on the hottest days of the summer so it doesn't run very often it's a relatively more expensive plant to operate it's less efficient again that's a normal part of any utilities portfolio owned by the city of chaska one of mmpa's members leased to the agency until 2031 we have options to extend that until 2051 and we expect to do so the largest plant in our portfolio and sort of the centerpiece of our portfolio is the faribault energy park this is a plant if you're driving on 35 down towards iowa you can see on the right or sorry the left as you're driving south it's a 300 megawatt combined cycle dual fuel plant so the dual fuel means it primarily runs on natural gas but in one of those tanks you can see on the screen there's also fuel oil so if natural gas is interrupted for any reason we can switch over and run on fuel oil it's a fast starting plant which means which is valuable because it means when the market needs energy they look to us it's high availability meaning that it's not down for maintenance very often and because that impacts how much capacity credit you get um so if you have a 300 megawatt plant and you have on average a 10 outage rate then when they're calculating up how much capacity you need to have you only get 270 megawatts if you've got a 10 outage rate and so our plant has a lower outage rate than that and that's one of the it's a ge plant and ge has told us that it's among the the best performing plants in their whole fleet around the country and it's also the center of mmpa's energy education program and i want to pause in my description of the power plants just to talk about that for a minute so you know we realize that our main role and what we're focused on is delivering that reliable competitively priced power but we also know there's other ways that we're in your community and one of the ways is our energy education program and that's a fourth grade program that's been going on for 10 years now and we bring the kids to faribault energy park we partner with the science museum of minnesota and for people like east grand forks where you can't really make a bus trip to faribault and back in a day we also can bring the program to you since launching the program 10 years ago we've had 20 000 students participate in the program and when you consider the fact that the total population of mmpa member cities is only about 163 thousand i think that's pretty impressive and we've recently in the last three years expanded it to include a high school program as well and we're there and that's at our shakopee energy park plant which will be the next plant i'll talk about and there we go much more in depth than we do with the fourth grader so we talk about electric circuits we talk about power generation and then one of the things i think that's been the most popular teachers and students is we run a career panel and we tell tell the students you know there's and what is neat about it is we bring folks from our office so people who dispatch power plants you know in sort of an operations room people who maybe do conservation planning and then the our member communities bring folks from their community as well so maybe a customer account rep or a line worker and what we communicate to the students is there's multiple paths to great careers in the energy industry some which involve a you know maybe a four-year traditional more traditional you know college degree but there's a lot of great programs with uh with a vocational program that can still lead to very rewarding and lucrative careers in the energy industry and the students and teachers have both responded really well to that so going back to our assets the most recently added conventional resource in our in our portfolio is the shock b energy park that's a 46 megawatt natural gas fueled facility and you can see on the right there that little silver bullet looking thing that's liquefied natural gas as a backup fuel so instead of using fuel oil here we have a 99 000 gallon tank of liquefied natural gas so if if the local gas distribution company isn't able to supply gas on like a really cold winter day we can switch over and operate from our own supply and this plant was recognized as a power magazine 2017 plant of the year award winner which which our plants have a history of receiving that recognition when they've gone into service so now on to our renewables first one we did was in 2011 the oakland wind farm it's a 44 megawatt wind farm in blooming prairie minnesota it's been operating just over 10 years now probably the most innovative uh facility in our portfolio is the hometown bioenergy project this is an eight megawatt project in la sewer minnesota it uses aggregate anaerobic digestion technology so the feedstock the fuel is agricultural waste processing products the primary ones corn silage we've also used pork pork byproducts from from a nearby meat processor potato processing's vegetable processing as sad as it is to say expired beer and soda have gone in but those go into those two green tanks you see there where where microbes eat away and release biogas and what's really neat about this facility and the gas is burned in engines and what's really neat is it's a renewable project but those three white sort of domes you see those are gas storage holders or gas holders and so we can store the gas there so unlike solar which you need the sun to be shiny or wind you need the wind to be blowing we can store the gas there and call upon this energy when we need it or want it so it's dispatchable renewable energy which is pretty unusual black oak wind farm is their newest wind farm up until now it's a 78 megawatt wind farm located near sauk center in stearns county went into service about six years ago buffalo solar is our solar facility it's a seven megawatt solar facility located a couple miles north of downtown buffalo which is also an mmpa member and then our newest project the one that was causing those green bars to get bigger and those graphs we were looking at earlier is the walleye wind farm located in rock county it's right in the southwest corner of the state it's a 110 megawatt wind farm currently under construction this photos from the groundbreaking back in june and it's expected to be in service by the end of this year and will add a significant portion of renewable energy to mmpa's portfolio i'm expecting to see a bunch of walleyes been out there or something yeah so i'm going to walk through mpa's financial results before i turn it over to andrew to talk about the current business environment and our plans for the future so mmpa's and i'm going to focus on the last six years just because it's sort of a reasonable time frame i think mpa has had very strong net income over the last six years you can see there's been some variability but in each year income's been more than 10 million dollars and mmpa needs that net income to replace its capital assets and to support its bond payments and that income produces a healthy cash position and again you can see some variability but you can see again that cash has been in excess of 35 million dollars each of the last six years and there's been some buildups and then some some decrease from 2019 to 2020 and that's because mmpa has used some of its cash to reduce its debt position so 2016 is the year that that shakopee energy park that natural gas facility went in service so we issued bonds in that or sorry it went in service in 2017 but we bonded for it in 2016 ahead of construction and we were our debt at that point was about 320 million dollars we've used our cash to work our debt down by 140 million dollars in the last six years toward about 180 million as of the end of last year and the benefit there is that by having you know less debt into the future we have less cash requirements for debt service less less of a stream of fixed costs into the future which means that we can have lower rates than we would otherwise and again we're very focused on rates at mmpa and we've done all this while keeping rates lower than our competitive benchmark and so this is again just looking at that same six-year period and the other thing i want to point out here is how i mentioned that the last time we had sort of a upset in energy prices in the 2007 8 200 2007 2008 time frame rates went above excel this graph also shows you the first six months of 2022 when energy prices had started to go up substantially and this time because of that resource that portfolio of resources i showed you we've been able to maintain that that rate distance between us and excel which we work to do so with that i will turn it over to anju to talk about the current business environment and our plans for the future thank you thank you good evening welcome good evening i'm going to walk you through the business environment and then take you through our plans for the future let's start with uh natural gas prices because natural gas is an input into energy production and it is probably produces the last megawatts that get produced in the marketplace which means it sets prices a lot of the hours during the year high natural gas prices is what we hear these days and it is truly that prices have been between two dollars and three dollars if you look at the beginning of 2020 all the way to the february 2021 event that big spike you see where prices went to 10 is the winter storm yuri and then prices sort of normalized quickly after that but then post covert recovery as well as the the war in ukraine to prices to another level we're seeing eight to ten dollar prices as we speak right now high inflation is forefront and in everybody's minds um inflation is at historically high levels at the preparation of this presentation the numbers were about nine percent i think the numbers have come off slightly since then we're at eight point three percent right now interest rates are high so there are a couple of interesting observations about this particular graph on this graph one of them is that the one-year u.s treasury is represented by the blue line the 10-year u.s treasury which is represented by the red line and the 30-year u.s treasury represented by the green line they have actually fully recovered from their pre-corvette levels now this graph we have an updated version of this and you would see that they're they're actually surpassed their pre-covered levels another thing that's interesting here to make is the difference between these graphs the 1 and 10 and 10 and 30 years have completely uh disappeared so you see that all these three lines merge at the top which means the first 1 year 10-year and 30-year treasuries are the same right now we're facing an economic contraction um prior to the first quarter first quarter of this year the u.s economy had some robust growth as you as you could see with the orange graphs over there it was between two percent and six percent and then the first quarter this year we experienced a 1.6 contraction in the economy and the second quarter numbers are 0.6 percent contraction we're facing tight labor markets um at the time of the preparation of this presentation again the low on the unemployment rate was 3.6 which is a very low number there were 11.3 million open positions in the united states and there's only five point there's 5.9 million unemployed people so if you were to fill in every single position you would still have over five million open positions in the united states today so what does this business environment mean for our future plans our future plans consist of adding large scale solar facilities which are likely going to be interconnected at the transmission level and we're going to be adding smaller scale solar near member communities these will be likely interconnected at the distribution level of the of our member cities we're going to continue to operate the three power plants which are our conventional resources gas plants which is the minnesota river station the farewell energy park and shakopee energy park and we're going to pursue fueling these resources with renewable natural gas which i'm going to take a minute to explain in the next slide mnpa as david mentioned is in a very unique position at that one of its facilities one of its member communities city of lasur hosts a biogas facility today it's an operating facility it's been in service for nine plus years and today we produce renewable natural biogas at this facility and as david said earlier we put this into engines and we generate electricity from this our plans uh in the second quarter and second half of next year is to clean up this biogas and to pipeline quality gas and then make it what is called renewable natural gas how we do is we do that is we remove siloxanes carbon dioxide h2s and volatile organic compounds from the biogas make it cleaner and then we put it into the pipeline and our goal is to sell it into the renewable natural gas markets or use this fuel at our conventional gas facilities minnesota river station farewell energy park and shakopee energy park which is very unique fairly unique and as david and i were talking yesterday too we don't know of any other utility in the state of minnesota that has this particular strategy actually to make their natural gas plants renewable by creating renewable natural gas themselves at the scale that we're intending to do this thing so and our goal is to develop more rng facilities because we have one in operation and we have a few that were in the in the negotiation phase so in order for mmpa to achieve this vision and execute on these plans member contract extensions play a very important role most member contracts today run until 2050 being in 2022 this limits the dead term to 28 years extending contracts 2060 is what we're looking for basically going from 2050 to 2060 so another 10 years this would provide mnpa the flexibility to sell 30-year debt and this would help keep member rates competitive mnpa is in a great position we have a quarter century of success with the commercial operations of its walleye wind farm that david mentioned mmp is going to be 42 renewable next year we have rates below excel energy and mmp has an approach for futures power supply that is fairly unique as we said this comprises of solar and renewable natural gas today and then we intend to continue to have competitive rates and extending contracts will keep these rates competitive happy to answer any questions um thank you for the opportunity to be here tonight very good presentation um how does north saint paul fit in this whole scheme i mean i know we're not the largest i mean we're in the middle of the pack or if anyone would ask yeah no i would say that north st paul is probably right about smack in the middle okay uh so the 12 members i think you're about probably seven six or seven okay so so the largest ones are shakopee chaska elk river anoka then after that it's probably buffalo and east grand forks and then then i think you guys you guys in la sewer are about the same size in terms of peak demand another question you know i'm outdoor knocking people are asking me why our prices are higher than excel now you just told us that we're more competitive and and that goes back to what i was saying when i first presented the rate comparison that um that what we're showing are wholesale rates right yeah and so it's possible that at a retail rate level there could be different results um and that has to do with a fun you know a variety of things the level of costs at the local utility level you know many of our members use the electric utility to help subsidize the general fund by having a transfer into the general fund which i believe north st paul does um and so you know that helps you keep taxes lower but it but you're in essence having your electric rates a little higher than they otherwise would be if you weren't doing that and so those are some things that can lead to differences there but um you know i think that having the reliability and the local control of a municipal utility has served north st paul well for many years how many how many uh other cities are you able to handle i mean what's your capacity are you able to handle more people coming on board or yeah so so there are about four main power agencies in the state of minnesota so minnesota has a hundred and something cities that own their own utilities as opposed to you know either members of co-ops or customers of an investor in like excel or minnesota power um you know our competitors i'll say that the other municipal power agencies their members have similar long-term contracts like we're talking about here and so what it means is the the universe of people for us to court is is not very big um and usually they're they're under long-term contracts just like you guys are with us and that's that's sort of the nature of the utility industry that said you've seen we we've taken advantage of opportunities where they are there are a few other utilities in the state that are so sort of a little bit more they've hit traditionally a little bit more of an independent path [Music] what's often different about them is that they typically own generation themselves in the community and one of the reasons i think that mmpa has been so successful for the past quarter century is that all of our members interests are aligned so every member pays the exact same rates to mmpa i mean your average rate might be slightly different if your usage pattern is different but the rate per unit of consumption is the same for every member our members don't own generation um and i think that that that keeping interest aligned has really allowed the board to to be focused on that mission of providing reliable and competitively priced power do you only sell to these 12 communities or do you sell to anybody else excel or no that so so our our power supply is to those 12 cities you know the way the wholesale markets work we sort of sell into the broader market just like all utilities do and then we buy out of that broader market and that's the benefits of being in a power pool so so the whole state of minnesota is part of a group called a mid-continent independent system operator it's a 15 state-wide power pool plus manitoba canada and so you know it means that if one of our generators is down you know we're not just in trouble we can buy from the market if we need to and similarly we can can provide to the market if if there's a if we have more power than we have needs a couple more questions for this council member uh so if uh you know you hear the the south and the the uh the west and the east and you know they all are experiencing potentially blackouts and they need the power are we sending power outside of the state then are we capable to do that i would say at a you know that's at a sort of a bigger level than mmpa is involved in but that's more that would be more at the miso level and miso has certain important export capabilities and so you know if there's a system crisis there are price signals that sort of come into play and so there's some possibility to to help with that again that's help that's sort of at the larger the wholesale of wholesale level um the problems out there does that affect you guys so so andrew showed you gas prices that spiked up in winter storm yuri we saw power prices here go up nothing like what they did in texas and again you know there were news articles about people without power for a week in texas and you know texas has made the decision it's mostly its own grid the the it's called the electric reliability council of texas and it's not really interconnected so the most of the bulk bulk electric system in the united states is split into an east and a west and there's sort of near the rockies there's two big systems that are ultimately interconnected altogether and then there's texas which is sort of elected to to keep itself separate i think they've done that mainly to avoid federal regulation but what that means is that they didn't have a big as big a pool of resources and so when things got really cold in february of 2021 they couldn't call on people the same way that we could here in minnesota because we're part of a larger group and that's that's caused some of the reliability concerns that you've seen now you know that doesn't mean that something like that couldn't happen here but it means it's less likely one last question can you explain in very simple terms how do we get our power from all these plants sure because people always ask us where your power plant we have our own municipality uh power where does it come from what so how does it get here yeah so so this is a finance guy's explanation of electric power transmission but all of our power lines are excuse me all of our power plants well except for shakopee and buffalo are hooked up to the the transmission system that's the high voltage system it's kind of like the interstates of power so a thing at 115 kilovolts and higher so that's 115 000 volts whereas that that's 120 volts right there and then those lines feed to substations where the voltage is then transformed down to distribution voltage which is usually in the 12 000 to 13 000 volt range and then that goes through feeders into our communities and then you have the local transformers that transform it down into sort of the the level that comes into your house the um and and then i mentioned that that was most of our power plants worked up to those big systems and then uh shakopee and buffalo are hooked up at that distribution level sort of the larger city roads but not the um not the individual lines into people's houses and then you know in reality electrons flow through the path of least resistance so the power that's being generated for example down at faribault may not end up at our member communities outlets um but again that's the benefit of being part of an interconnected system is that is that we sort of get we get credit for putting it in and then we get to take it out yeah thank you for your presentation um i'm just wondering what the interest around renewable energy is amongst students i see that the education components are mostly at um facilities that don't produce that so i'm just wondering what the wrong way here i want to just take you back and it's a little hard to see here but my mouse isn't popping up may i go point just right here too a few oh okay that might be easier so we what we have here is we have a solar panel here and we have a wind turbine and so when we bring the kids into the energy education we take them through three three three sessions if you will and a pizza lunge which is very popular but one of the sessions is about is about the farrable energy plant and how it makes power and that that session also takes into account how power is delivered so some of your last question there mayor we talk about how powerful is through transmission and distribution lines and into your house the other two sessions one is on energy efficiency and we talk we we bring a bike out and that bike is hooked up to different levels of lights so we have some incandescent bulbs and the kids get on the bike and you have to bike really hard to light up the two incandescent bulbs and then they flip a switch and you're powering the two um cfl bulbs and it's much easier and then you go to the led bulbs and it's even easier and so they're able to see that for the same amount of light output the amount of work or energy that goes in as much less for that and then the third station we actually walk them out there on those paths you can see and we we do we focus on renewable energy and we talk about wind power we talk about solar power we give them a workbook that also walks them through the technologies and we talk about how renewable energy is growing in minnesota and the benefits of renewable energy so it's definitely something that's highlighted strongly in this program thank you and then i have a question in regards to the renewable natural gas conversion that you all are doing is that going to be just as reliable as natural gas because you said that's kind of your conventional and that's your most reliable so is it going to have equivalent reliability yeah so the plan is that we will generate that net renewable natural gas and we can then inject it into the natural gas transportation system and we can either then depending on whether it makes more economic sense or more money we can either then sell it to others that want to buy a renewable natural gas or we could pull it back out at facilities like faribault and run it there and from that standpoint it would have the same level of reliability without the without the commodity price risk good got a question nope i have some comments um these gentlemen are rather modest but they are the best in their field and their industry what they have done over the years has been phenomenal um they are just such assets to have um the wholesale power agency that they are the decision that they make based off of you know best uh judgment best guesses of what the future will be currently by law we have to have 20 of the power that we sell going to renewable the last several legislative sessions um they're talking what 40 and even sometimes 50 in some of these places these are really large investments that it takes for us to get there to invest in whether or not it's wind or whatever kind of renewable projects that we have and um so i definitely support the extent extension of the contract tonight but uh we're certainly very fortunate to have these gentlemen well if we don't accept it do we lose our power like for a couple weeks and we gotta figure out how to get power i've got a comment and i remember you guys at a back a long time ago dinner we couldn't come the last time because we had a city city business that's what i heard yeah i'm glad you came and gave us the information we appreciate the opportunity to be here in front thank you thank you very much appreciate it okay city manager frandl thank you mayor next topic is the proposed tax increment financing uh redevelopment district number 4-12 uh draft term sheet and michaela haute is here from baker tilly to present for us please welcome michaela thank you good evening mayor members of the council here again to provide kind of an overview of the status of the tax increment financing request maybe as background the city did receive a request for tax increment financing for the proposed redevelopment of the properties including the lilly building included within your packet for the workshop is a draft of the the term sheet we wanted to provide you with an opportunity of the current status of the tax increment request the financial analysis related to that and then consideration of next steps so the in your draft term sheet i'll walk through some of the highlights of the terms and we'll address any questions that you might have on the project or the tax increment financing request and next steps so in the project summary again we're looking at a redevelopment project the developer that submitted the request is referred to as 2515 nsp llc the tax increment district would be tax increment financing redevelopment district number 4-12 again for the lilly building redevelopment there are four parcel ids that would be included within this redevelopment project and the maybe a point of that point the project or those properties have been inspected and determined to be substandard and eligible for or qualifying for inclusion within a redevelopment district so the statutory background that allows for creation of the district has been met and the city has that documentation the redevelopment of those substandard buildings would include an approximate 82-unit apartment building that would consist of studio one and two-bedroom floor plans with a little bit of commercial or live workspace on the first floor the total development cost estimate is about 25.6 million and as part of the terms the developer would agree to build the project in the in the form of the final development plan as approved by council with an estimated cost of 25.6 of course we know numbers are still moving around but that is anticipated to be the minimum investment for that site construction would uh commence in early 2023 with a projected completion in 2024. the developer subject to approval of all the the conditions would consider demolition of the properties as soon as early early winter subject to the conditions there are significant extraordinary costs related to redevelopment of the site and those essentially are the barriers to allowing the redevelopment to occur you'll see listed here they're the standard costs that you see for redevelopment districts they include site improvements we have acquisition demolition some earthwork grading environmental remediation parking improvements public improvements utilities and then other redevelopment costs that are related to that site the related to that extraordinary cost as part of the request for tax increment assistance the developer has requested up to 90 of the tax increment revenues generated from the district and they would be pledged the total projected net estimated tif based on current assumptions is about 9.95 million assuming a present value or a discount interest rate of 4.25 the value of that revenue stream to the developer is about 5.3 million and on this point what i want to point out is that right right now we're still in preliminary tax increment revenue projections we're still working with the county on an estimated valuation of this property and right now the the value range is between based on our assumptions is between 16 million and 20 million so there is a range of projected revenues based on what the actual valuation of that property would be so what we want to point out here is the maximum that we would expect to see is up to 90 percent of the tax increment revenues based on the higher valuation of about 250 000 per unit so total valuation of 20 million that is what would equal that 9.95 of net increment to the project and when i say up to we are still in negotiations with the developer um to see if if the right now the the financial feasibility of the project is tight the developer needs and has requested all of the tax increment so that's for the up to 90 percent there has been some discussions if we can reduce that percentage in the later years once the project is stabilized so there is potential that the blended percent pledge to the developer could be something less than 90 percent but we wanted to share with you what we see as the maximum amount of assistance that could be provided based on the current assumptions and requests so what's being requested of the city again is agreeing to invest in this project through the establishment of a redevelopment district and again agreeing to pledge up to 90 percent of the annual tax increments that would be generated over the life of the district for reimbursement of the identified tif eligible expenses this would equate to the developer receiving up to 9.957 million which does equate to a present value estimate of about 5.3 million the max the maximum term for redevelopment district is 26 years and that is 25 years of receipt after the first increment received so we would be looking at the maximum 26 26-year term for this district similar to other pays you go notes and agreements that the city has entered into these would be semi-annual payments back to the developer and they would coincide with the property tax payment schedules so um the based on the current assumptions of construction started in 2023 we would expect the first payment on the tiff note to be in august 1st of 2025 and then for all the way through february 1st of 2051 again that's the maximum that we're looking at this would be financed as pay-as-you-go meaning the developer would be responsible for financing all the costs the entire 25.6 million upfront through a combination of debt and equity and then the tax income revenues would be pledged on that semi-annual basis to provide additional cash flow to repay the the debt and the equity obligations at the or the debt obligations and the equity investment that the developer is contributing to the project um page two of the of the term sheet these are really more of the the summary of the um terms that would be within the agreement um and again i think you know as moving forward um we're in the still the earlier stages of negotiation understanding what the developer has requested and in their application they have requested up to 6.1 million that would be over that night or excuse me over the 26 years with the 90 percent pledged as further down within the terms of the agreement um again with the pay-as-you-go financing there would be conditions as far as what the property would be included within the tax increment district what the minimum improvements would be and that is the the redevelopment and construction of the 80 approximate 82 unit multi-family building the construction timeline in the estimates for when they would complete or commence and complete construction and then if there's any look back provisions or clawback provisions we want to include and that's really understanding that the terms of the deal everything right now is based on assumptions and that the developer is is responsible for basically constructing the building incurring those costs and there's potential look-backs if they're based on if there's a potential sale eligible cost and the total developer investment of being what's being represented and maybe the last point is based on it being a redevelopment district we are looking at it being exempt from the requirements of the business subsidy act and as this would be um the focus of the public assistance would be on the bus on the redevelopment of the site and the qualifying tax increment expenditures so that's an overview of the term sheet and what is being considered and i guess again as i said in the early stages of the tax increment and with that i think i'd be happy to answer any questions you might have on the tax increment or the project or next steps how does this compare to what we just went through over at the sentinel is it very similar to same type of development same type of tiff may members of the council the question regarding how this project compares to the sentinel the sentinel was financed through a lot of negotiations and the project changing in scope from started as a pay-as-you-go request there were additional public improvements that were related to that project so that project was financed through the issuance of city bonds in which point the city financed a portion of the cost up front and then we'll take the future tax increment revenues to repay that bond debt service payments in this case it's being proposed as pay-as-you-go developer finance so the developer is taking on all the financing up front taking on the the the risk of the tax increment being available for the debt service payments so it's primarily debt or developer finance as opposed to city financed for the project across the street it sounds like that's better for us the city to go there in this case for the financing of it being all private improvements um the generally the financing is somewhat contingent on what's and how the project's being proposed what's being included and in this scenario based on it being a private all private project no public components that's correct any other questions it's complicated can be complicated we're hoping this one stays on the simpler side yeah thank you we've been through this with you before hi dr [Music] aldrin i know you've been working on this project and uh you're kind of our city uh liaison for this or city uh go-to person uh how do you feel that negotiations went and how do you feel you know we are with this tiff honorable mayor members of the council uh i really feel good about this one um first of all uh mckayla and baker tilly just do an excellent job digging into the details so uh when they tell you that they need the assistance and so forth they've really dug into that and and got it justified and and figured it out so um i i think we're in good shape and it's very positive to have that background that they they give us so we know what's being requested is indeed reasonable the other part of that as we move forward on your agenda tonight you have the component to set up or start moving forward with the hearing on the district and then the only other thing to emphasize is that uh michaela at this point gave you the top end of where we could end up but that's not where we might end up in the end so what we're basically asking for tonight in addition to moving forward with the district is just that a sign off by you that you're comfortable with these negotiating parameters yet will still come back with the final development agreement at a later date for you to sign off on but we just want to make sure you're comfortable at this point with the general parameters that we're looking at so we can add this to the agenda for the yeah i would recommend it if you're comfortable with with the top end and that is a overall parameter sure knowing full well that we come back with a right financing right uh that would be very helpful for us as we move forward right pretty comfortable adding this to the agenda what happened this year obviously right michaela sooner the better that is correct um the anticipated public hearing on consideration of the tax increment district and if if we can get the the terms agreed to and potentially the tif contract at the november 7th city council meeting and that of course and that is to allow the framework the approval of the tax increment district and would allow the developer to start subject to other approvals start to do demolition this fall so they would be ready to go with soon as the spring construction cycle is ready okay alicia uk um yeah okay thank you michaela thank you appreciate your hard work thank you definitely turn over city manager frandl thank you mayor uh last topic is the capital improvement plan for 2023 to uh 2032 and we have finance director dan winick here to discuss that we'll turn it over to you dan welcome dan thank you mayor uh council members first of all i just have to as i'm getting set up here that's a really tough act to follow um mmpa uh fantastic public speakers did an excellent job excellent uh program that they have and then you know and then i got to follow michaela on top of it that just that just isn't the way things are supposed to be you get the boring stuff i get the boring stuff so um what we're going to take a look at tonight actually has been attached to previous nights we kind of briefly talked about the capital improvement program at a very high level we had morgan kind of speak to it and so if i can get this up here it's really to give you an opportunity if you have any specific questions regarding the cip and really even though it's a 10-year plan it does have the 2022 which was already approved for this year kind of as a point of reference for you to to look at but then it has from 2023 to 2032 we really will be approving the whole plan um and and the reason for the approving of the whole plan is is to allow our department heads opportunities to do planning um have more consistency to know what is going to be happening in the future it allows me on the finance side to know if we're going to be going out for bonding and so forth and and making sure that we have uh you know when we're doing our financial planning on our on future levies and so forth so that's kind of why the whole plan is approved but really the focus is on um really the 2023 and particularly the reason for that is because it is going to be then incorporated within all of the other budgets so later on tonight we'll be um approving um uh we'll be requesting for approval of our preliminary levy which includes the general fund economic development authority and the housing redevelopment authority levies again that's the maximum they can absolutely come down this the cip and all of the budgets will be formally approved and adopted on december 6th of this year so there's still time that we're going to be having a lot of discussions we still have to go through you know all of the enterprise funds and a number of our other budgets we can also relook at the the general fund um at that point in time too [Music] two of our department heads were not able to be here tonight so if there's any specific questions either for our police chief and or our fire chief we will definitely take those down and revisit those but they play kind of a smaller part in our whole overall plan they really are more focused on the equipment the vehicle and equipment component of the plan the rest of it really unfortunately falls underneath for a large part of public works with the exception of items that are from the electric department and so what do i have to do to get this to that's what i ended up having to do last time so again that i'm just going to give the first summary part to it of the how the capital improvement plan is developed and laid out the i think the first three pages are summary pages it'll show the vehicle and equipment it'll show from 22 is more of a courtesy of what was approved and what's in our current budgets and then from 2023 all the way to 2032 it'll have the departments on the left-hand side so the police department fire department street maintenance department urban forestry department general parks and then it'll also have for those items are coming out of the equipment fund it'll show the fund balance at the end of 2021 and then it'll show what is anticipated both on a funding side to it and an expenditure side and showing you what the balance moving forward for the next actually it will be 11 years to take you to 2032. there's also the internal service or the enterprise funds of water wastewater service water and electric that are shown up there you'll see that format on each and every one of them you'll see building and facility improvements you'll see the capital technology component pavement preservation ponds natural resources environment parks playgrounds past and open space street and utility reconstruction utility infrastructure preservation and so it'll show all of those and then after that will be the specific detail um of each one of the plans with a little description of the um either the project or the piece of equipment or so or so forth and then an estimate of the cost the spreadsheet does a very um conservative even though you just heard earlier and it is true right now we're at an 8.3 percent inflationary rate hopefully it doesn't last forever we this is built on only a two and a half percent escalation we're also experiencing long delays of getting any type of equipment vehicles uh can be out you know anywhere between 12 to 18 months um brian's um experience on the electric side for i think it was transformers that can be out two to three years so we're still dealing with a lot of the supply chain issues the inflation feds are meeting today and tomorrow with the anticipation of raising the rates again to get inflation under control so there's a lot of different factors that's where the 2023 is is kind of our best guess of where we're at the future years are again really subject to a lot of flexibility and a lot of changes and parameters so we've used the two and a half percent escalation if we were to look in the past 20 years outside of the past couple of years anywhere between two to three percent escalation would have been fine so that's kind of what we're you know we've maintained that um at this point in time um but uh so really going to turn it over to to ask the council if there's any specific questions that they have on the plan itself the next process after this is this will go in front of the planning commission and the planning commission will make any changes or recommendations for that we certainly at the city council level can revisit this at any point in time as we go through more of our budget talks for the remainder of this year and again on december 6th is when we'll actually approve this any changes that we make i will then incorporate them into our budgets to show you the impact that it'll have on on any of our budget that's that you know from the changes that we make if we ended up deleting something but again this is not our first time seeing this it's not your first time seeing this and i just wanted to make sure really it's to make sure that city council is comfortable with the plan um and again last year was the first time that we've really taken a shot at really building a totally comprehensive capital improvement plan up until that point in time it really was more of streets and you would see you know equipment and vehicles coming just on a one-year look we're trying to make it more incorporated and just like we were we had talked before we keep adding things there's still needs i think i had talked a little bit at our last budget meeting that we really do need to do a facility assessment and and that information needs to be incorporated into here there's a spot for it we just haven't really done an adequate job of of looking at a 20-year look at our facilities and making sure that we're identifying parts that need to be replaced and and and if we're looking at it from that standpoint then we can end up coming up with some sort of way of a funding source and so forth so this is like i said last year when it kind of introduces this is a living document this continuously will change um unfortunately in the times that we're living this thing changes all the time as far as estimates and so forth because of the inflationary factors but with that again really going to turn it over and ask some questions if we can answer them i've got morgan and ron and randy here to answer a bulk of the questions anything related again to police and the fire i'll take those down and we'll have them addressed those departments address them in a future time any questions for dan when's the truth and taxation that's in december correct yeah and tonight we'll make a motion in addition to approving uh the three levees we'll also make a motion to adopt i think it's december 6th as our public hearing date number yes yeah i have several questions that's good sure yeah so um i was looking at the trade-in values for a lot of the vehicles and um they looked to be about three thousand dollars which this economy seems kind of low considering the supply of vehicles a lot of people are saying it's cheaper to buy new compared to used so i'm just wondering what the if where that number comes from yeah and a lot of the the 3 000 estimated trade-in values are on their police vehicles so when a police vehicle ends up becoming you know if we're going to decommission it there's a lot of removal of equipment and so forth that needs to take place in that vehicle we don't repl we don't repair the vehicle afterwards so it actually diminishes the resale value of that of that vehicle in comparison to um if you know like my own personal vehicle if i were to turn turn that in right now i would get probably a better price than any time because of the inflation and and and so forth but um so again we we try to take a kind of a conservative approach a conservative approach so we're not trying to overestimate the trade-in value and if we don't get it then we end up having a a hole in our inner budget um and we're not able to fund um you know the replacement of the vehicle i assume it goes to some sort of auction yes or do you just treat or do you trade in and it depe it depends um a really good example is um is our public works director um ron um really does an excellent job and and um and really puts the time in and he'll look at what that trade-in value is versus what's on the market and he'll make that decision he won't take the easy way out just the bottom line and he'll make that decision and say hey i'm going to put that out i'm going to deem that surplus we're going to put it out on the internet and we're going to sell that and he does um a lot better than what he would get at just a pure trade in on a new on you know on the vehicle at the time of purchase so he does look at at that on a continuous basis for the police in the time that i've been here last year we had a vehicle that was wrecked that ended up getting donated for a very good um purpose to um to a trade i think to a trade school for them to kind of repair and to kind of help um i haven't seen any of uh the vehicles actually being sold at this point in time um what our police chief has done up until this point in time has kind of repurposed that the vehicle that's being replaced it may end up being a cso vehicle for a while so he may end up running that out too um so these are on a i believe on a five-year life cycle he may end up using it for the next three to five years as a cso vehicle getting the most value out of that vehicle before then it's it's gone so then again now we're looking at a 10-year time period when the vehicle finally goes three thousand dollars probably is is more more reflective of what that ten-year vehicle actually would get um i've also noticed that all of the vehicles are suvs and with gas prices having gone up significantly i mean they've dropped down what are the considerations around suvs versus like you know your four-door vehicles so that's one question i do have and and i do believe uh this past year there's in 2022 there's four vehicles that um are gonna that are in the process of being replaced again there's a long lead time um i believe that uh phil actually wasn't going with four um suvs he was actually looking at one being a pickup truck and then one being a a four-door sedan i believe the sedan had such a lead time on to it that it was pushed out somewhere towards the end of or middle towards at least the middle or the end of next year so he is looking at other variations instead of just the traditional suv and usually they've in the past have always gone with the i should kind of say brand name for the ford explorer has been what the typical suv is [Music] thank you and then i'm curious on the replacement of the vehicles so there are other vehicles that are have been in service before and look like they may be up for replacement but it says not applicable can you can you explain that to me a little bit because that's that's where i was talking about that what phil has has been doing and it's actually been going before phil took over as the police chief is that they'll replace the vehicle but they'll repurpose that vehicle for either a cso or for some other utilization so the city still has ownership of that vehicle it's already been truly replaced and so when it has no more of a need it'll be deemed as a surplus piece of equipment and then auctioned off at that point in time [Music] yeah just one question is um you know i'm looking at the long term and it seems like every five years there's a there's four vehicles that are being purchased is it possible to have it staggered so it's not just one large sum of money every five years but staggered on a you know annual basis so um absolutely yeah yep absolutely i'll i'll talk to phil um about that and see what he's open but yeah we absolutely could look at that yep thank you when looking at the radios it looks like there's a lot of different needs for radios in different departments is there opportunity for like bulk pricing if we just do it on a swoop yeah and uh i think the like the handhelds was an item that came up last year it's actually in the 22 budget it was actually needed for both police and for fire and they did purchase them together so yes that is exactly what they're trying to do is get a better pricing many of those items are off of the state master contracts so the pricing is is pretty much set and some of the vendors that are on master contract don't allow or don't give a different incentive if you you know are over a certain threshold or not thank you and then it looks like also some of the requests are like rifle replacements my understanding is that there has been they're really old i'm just wondering from that time to now how often or how necessary they've been in um in use and all 14 of them yeah and that's a very good question that one i'm going to defer to our police chief he did a write-up for justification for those but i'm gonna leave there's some newer items that are on for the 2023. uh there's rifles there's uh ballistic helmets and ppe there's um solar powered stop signs um and then the drones that we discussed at the last meeting but those other three items i really would like our police chief to address at a future time thank you um in terms of the parks section i see that there's a need for the silver lake bathrooms and then all other buildings are more hvac focus just curious on what that update is can you just point which page you're [Music] [Music] oh i see nine of 17 and you're [Music] uh i will uh i i will defer this to um our public works director ron richie good evening mayor console um so um what is the number that you're looking at or it's silver like bathrooms just for like a rehab in the the stalls are all rusty and falling down and we're just gonna do kind of do a a remodel with our people you know our public works guys over the winter is what that is for okay gotcha and then the hvac systems for all of our buildings or all the park buildings it looks like is also being revisited yeah i guess what is i just want to see what we're looking at here yeah i believe those were numbers that were put in previously just for like placeholders for us to look at to look at that stuff if we needed like casey lake probably doesn't need anything but just any needed repairs or maintenance or anything that we would have to do on any of that stuff okay see it so it's a little bit more general then yeah yeah and some of these numbers were put in i'll have a way better grip on this next year because some of these numbers were put in i think as placeholders in the previous year just you know for so some of the stuff we looked at and we're like we'll leave it there we'll see where we're at and kind of just you know review everything in these buildings so thank you and in this section is really where what i'm talking about that we really should have a facility assessment being done on our facilities and that means all of our park facilities in addition and that we would have a much better picture of what the real cost is and timing of of when replacement would be recommended when i was with ramsey county we hired a consultant to do it for all of the county-owned facilities which you know is uh you know quite an extensive uh job to to do but it allows you the opportunity to do a better job of planning and then it also when you're having a consultant look at the facility planning it also helps you a little bit more of looking at things from an operational and a maintenance component to it too which is something that you know we really need to to look at because if we can do a better job in preventative maintenance we usually can you know extend the useful life of a piece of equipment again if we don't we usually shorten the life of that piece of equipment so yeah i think that's a good plan because we don't want things falling apart and like we've kind of learned with the community center it's like a house we have to keep maintaining it so that's a good plan for the future so thanks dan thank you councilmember peterson yes that's a very good point and that's and that's what eventually this this has to be very robust um capital improvement program and and it it does it takes a a lot of time for our department heads to to look at to review but on the flip side to it it allows them to plan for the future and it allows us to then plan that finance make that financial plan no different than when we saw mmpa talk about you know extending it for another 10 years because then that allows them to to do bonding of 30 years and again a very good presentation district energy who's in the downtown st paul area did that with ramsey county and a number of their other that they had contracts with you know in district cooling and district heating they were looking at financing opportunities because they're very capital intensive and so they came and they asked to have all of their agreements extended so this is this is nothing that's that's out of the ordinary to see a utility company coming and doing that i'd like to add something to that and it's another layer of complication that we're having during these pretty unprecedented times is not only trying to pinpoint of what the cost of replacement will be and how far out it is they're flat out just canceling orders saying that we just don't know when we can do it or if it's a state bid contract they're saying the money is not there because that they usually sell that at a pretty low rate of return so what they're doing is they're canceling those orders and they're allowing the higher end to be purchased and bought that way so they can make more money so i know pd has experienced that public works has experienced that i talked to a vendor that deals with uh bucket trucks and altec had over 4 000 bucket trucks the orders canceled because they just didn't even know when they could even get the trucks out it's just been amazing trying to figure this out and try to budget for it that's all i have thank you thank you uh i'm going to throw you with a question that you know you you asked us to do things you know the last couple budget meetings so oh are you kidding me i want you to uh uh so when you go home at night what keep what keeps you up the most when you look at city finances and budget and the capital improvement plan and you know you're kind of in the trenches and understand it that's kind of my question to you okay yeah by nature i'm an insomniac no i uh no truthfully uh when i what keeps me up at times is that uh one um i'm gonna play because it's absolutely true and it's happening right now is that this city has done an excellent job in trying to push at redevelopment in our downtown area our downtown area is is crucial for this for the city it it offers just a great opportunity it's a separate identity there's not a lot of cities that uh you know that offer that um and especially being in with having all the the amenities of the twin cities so what keeps me up at night is you asked our consultant michaela about some of the past tif districts um a fantastic project that was done in the sentinel building but the city took an extreme amount of risk we bonded for that money if the tiff money does not come in on time we still owe that isn't anywhere in our financial forecast to absorb that additional payment of the bond service debt onto onto that so when you have an opportunity to to do a development in in and i'll just speak my own my own opinion that is really a very attractive from an aesthetic standpoint um and you have the developer looking at um not asking the city for additional funds or for the city to upfront the cost in other words for the city to take on risk um the developers taking their risk i like that part to it i mean especially if you if you really believe in the but four clause for for tiffs so what keeps me up at night is i'm worried about the tiff coming in for that one project i am worried about us building a a accurate a comprehensive capital improvement plan that we are addressing all of the needs not just the needs of city council that that comes but all of our commissions that are coming we have a park commission that's that does excellent work or our um council that's an art and culture council that does excellent work they all have plans but all of those plans cost money um and so it's really this to be addressing all of those needs and then coming up with the plan now what helps me sleep at night is the support that the city council has done and i absolutely mean it this is my second budget cycle with the city council you have asked absolutely fantastic questions you have done an excellent job of listening to staff and every department had had an opportunity to come up even to this point and we'll come up again before the end of the year to to talk about their needs and you asked the tough questions and some were passed some some weren't but you didn't look at things just from a bottom line standpoint and say hey zero percent levy not moving off it i don't care what the need is you realize that there's needs in the city and that we need to improve and to become a better community and and be more responsive and keep our extraordinary services moving forward so i'm encouraged by all of the support from the city council but those are probably my two biggest areas that keep me up at night and it's some of the the past risk that the city has assumed and then to make sure that we're really building a comprehensive plan so then we can build a financial plan to back that up and show the city council but i i do have to say you know mayor you have been a great leader of this city and um i have to you i i have 10 minutes so i'm only take a couple of minutes so i didn't pay him my first my first my first my first day on on the job here at the city the mayor came in towards after everybody virtually everybody had left i think brian was was still around and the mayor comes in and i had seen pictures but i did when he came in he came in so quick i didn't really catch and and he told me what did you tell me i was the uh outhouse inspector for the city that's that's great but he has been somebody that you can talk to all the way through and very supportive and i found that with each and every one of the council members and and i see it with council member peterson there's just a level head um council member wong um but i won't speak to the ones that aren't here because they're not here um but there's a level level head there's a there's a there's a passion for the city there's a there's a there's definitely a a reasonableness and and the questions are fantastic and um yeah so i mean uh gives me great confidence um because i know that there's an opportunity to to work and then um our city manager has just been a breath of fresh air in both his interim role and and two times and known as as permanent that he's somebody that i can go and and i'm getting long-winded now um you're not gonna ask me any more questions um but uh no he he's somebody that i can uh i can vet things out with um and throw some different ideas and concepts and and so um but no i think the city actually is in is in very good hands in the future looks very bright and um not to push anybody but i i really do like this this development um that is being proposed um so thank you for all the kind words and uh i just had to put you on the spot oh geez payback so well there will be other budget workshops this year so more activities go ahead oh yeah i was just wondering um in terms of like the commissions and wanting to have you know a lot more comprehensive cip is there some sort of expectation or process this year for those commissions that need to that they need to know or budget for for for this year basically what's been incorporated from the commissions has really come from wsb has incorporated because they work with all the various commissions so so morgan has been kind enough to incorporate that we had a meeting and and he incorporated has done just a phenomenal job of incorporating into our capital improvement program um i have uh you know spoke with some members of the parks um commission um in the future uh for next year's say i i really would like to to get them early in the year involved with the planning and the budget um you know the eda budget um is for for the most part developed by their um the chair of the eda um um and you know but i would really like to be going to each and every one of these commissions and having discussions i've been to a couple of them um when i've been invited to to go and answer any of their questions from a financial standpoint and and then kind of help for for planning in the future i think that's a really good idea good process to go through yeah okay you're good good that one's good all right anything else nothing further nothing else uh motion to adjourn so move by moved that's my wine second by councilmember peterson in the other discussion if not all those in favor signify by saying aye opposed motion carries we are adjourned for about six minutes you