Regular Meeting
March 1, 2011
The Mayor and Council
of the City of Fairbury met in regular session in the Council Chambers
located at 612 D Street, Fairbury, Nebraska, on the 1st day of
March 2011, at 7:30 p.m. Mayor Homer L. Ward called the meeting to order.
Notice of meeting was
given in advance thereof by publication in the Fairbury Journal News,
Fairbury, Nebraska, the designated method of giving notice, as shown by
affidavit of publication. The Open Meetings Act was posted in the meeting
room and pointed out by Mayor Ward as required by law.
Roll call found the
following Council Members present: Doug Brown, Rick Carmichael, Roger
Bailey, Tim Polson, Shirley Bender, Brad Kuzelka, and Kelly Davis. Absent:
Joshua Vossler.
Mayor Ward called for
the submittal of forms to request future agenda items. No forms were
submitted during the meeting.
Mayor Ward read the
Consent Agenda:
1.
Approval of the minutes of the regular meeting of February 15, 2011.
2.
Approval of claims.
Bailey moved to
approve the Consent Agenda. Motion seconded by Carmichael. On roll call,
Polson, Bailey, Carmichael, Brown, Bender, Kuzelka, and Davis voted “yes.”
Vossler absent. Motion carried.
Mayor Ward read from
the agenda “presentation by Tim Moll with Rembolt Ludtke LLP regarding tax
increment financing pursuant to the Nebraska Community Development Act”.
Tim Moll with Rembolt Ludtke LLP addressed the Council. Moll stated he
wants to go over the basics of tax increment financing (TIF); an overview of
how the process works. Moll went through a power point presentation: What
is TIF? Tax Increment Financing “TIF” is a municipal economic development
tool, put in place by the Nebraska Legislature a number of years ago, used
to help finance needed improvements in a specific geographical area.
Generally, the purpose of TIF is to promote existing business and to attract
new business – a financial incentive. Who can use TIF? Moll stated in
Nebraska, only cities and villages can use TIF – no county funded TIFs –
TIFs only happen at the city or village level. Moll stated generally, TIF
can only be used on property located within a city or village’s city limits
– with one exception like an ethanol plant – TIF in an area outside the
municipality where a spot annexation takes place for an agriculture
processing facility. Moll stated if you had a project on the edge of town
that wants to use TIF – the first step would be to annex that piece of
ground and then do the TIF. Where does TIF money come from? Moll stated
the whole purpose of TIF is to redevelop areas that are substandard. A TIF
project requires redevelopment of a blight and substandard area. The first
step is the area has to be designated as blight and substandard – it can’t
be the best part of town; you’re redeveloping a part of town that isn’t as
well developed. Moll stated the idea of redevelopment is when someone comes
in and invests money that takes the taxable value of that property up and
the tax increment peels off some tax from that increase. So, if you had a
piece of property in town that was worth $100,000.00 and the assessed value
at the assessors office was $100,000.00 and someone came in and said they
were going to invest enough that when all is said and done it is worth one
million dollars – the difference in that value from $100,000.00 to
$1,000,000.00 is $900,000.00. What we’re talking about using here is the
increment – the additional tax on that new $900,000.00. What TIF says is
that we can peel off that tax and use that to help fund the project. If we
assume that million dollar project, that $900,000.00 tax on that – say it is
2% - the 2% per year gets split off at the county assessors office, the
county treasurer gets the check – the tax on the $100,000.00 they keep, the
tax on the new $900,000.00 they send over to the City to the Community
Redevelopment Authority and they will use it to fund projects. That new
increment is available for fifteen years after the development is done.
Depending on the levy, the increment is what is set aside for fifteen years
to pay for a portion of the project. It really isn’t new money coming in,
in terms of the state granting dollars or the developer granting dollars, it
is the developer paying the real estate taxes on that full million – of the
million, the $900,000.00 gets peeled off to use for other purposes – it
doesn’t go to the school, it doesn’t go to the city or to the county, it
gets peeled off of that fifteen year period. The idea behind it is that
overall the million dollar development, over a long term benefit for all the
taxing entities, so once we get past fifteen years they are better off
getting now the tax on that million dollars than if that development never
happened. Where does this all start? The TIF process starts with a blight
and substandard study. TIF can only be used to redevelop substandard and
blighted areas. Under the TIF statutes, the following factors are used to
determine whether an area is substandard and blighted: substandard areas
means areas in which there is a predominance of buildings or improvements in
character, which, by reason of dilapidation, deterioration, age or
obsolescence, inadequate provision for ventilation, light, air, sanitation,
or open spaces, high density of population and overcrowding, or the
existence of conditions which endanger life or property by fire or other
causes, or any combination of such factors, is conducive to ill health,
transmission of disease, infant mortality, juvenile delinquency, and crime,
(which cannot be remedied through construction of prisons), and is
detrimental to the public health, safety, morals, or welfare of the
municipality. Blighted area means an area, which A) by reason of the
presence of a substantial number of deteriorated or deteriorating
structures, existence of defective or inadequate street layout, faulty lot
layout in relation to size, adequacy, accessibility, or usefulness,
unsanitary or unsafe conditions, deterioration of site of other
improvements, diversity of ownership, tax or special assessment delinquency
exceeding the fair market value of the land, defective or unusual conditions
of title, improper subdivision or obsolete platting, or the existence of
conditions which endanger life or property by fire and other causes, or any
combination of such factors, substantially impairs or arrests the sound
growth of the community, retards the provision of housing accommodations, or
constitutes an economic or social liability and is detrimental to the public
health, safety, morals, or welfare in its present condition and use; and B)
in which there is at least one of the following conditions: *unemployment in
the designated area is at least one hundred twenty percent of the state or
national average; *the average age of the residential or commercial units in
the area is at least forty years; *more than half of the plotted and
subdivided property in the area is unimproved land that has been within the
city for forty years and has remained unimproved during that time; *the per
capita income of the area is lower than the average per capita income of the
city or village in which the area is designated; or *the area has had either
stable or decreasing population based on the last two decennial censuses.
No more than 50% of a second class city can be designated. Moll stated the
municipalities generally hire qualified community planners to study a given
area to determine whether it is substandard and blighted. The TIF Process:
Planning Commission. Moll stated after the municipality has received a
blight and substandard study from a community planner, it submits the study
to its planning commission. Moll stated the Planning Commission will look
at the study and make a recommendation to the municipality as to whether it
thinks the studied area meets the statutory substandard and blighted
criteria. The TIF Process: Blight and Substandard Declaration. Moll stated
after the municipality receives the planning commission’s recommendation,
and after required notice procedures, the municipality can hold a public
hearing to declare (or not declare) the study area as substandard and
blighted. Moll stated if the City makes an area blight and substandard – it
doesn’t give the City the power to do anything with that property – the City
doesn’t have the right to tell the property owners they have to tear their
house down – it only means that you are making this area available for TIF.
The TIF Process: CRA. Moll stated assuming the municipality declares the
study area substandard and blighted; it will forward the matter on to either
a Community Redevelopment Authority or a Community Development Agency (the
municipality’s governing body) (for purposes of this presentation, the “CRA”
– as the City of Fairbury has the CRA designated as council members.) Moll
stated the CRA will then conduct a cost benefit analysis, analyzing a
redevelopment proposal made by a developer that would not do the project
“but for” TIF. If the CRA feels the benefit of TIF outweighs TIF’s costs,
it will construct a redevelopment plan, and submit the plan to the planning
commission. The planning commission will then review the proposed
redevelopment plan and make a recommendation to the municipality. The TIF
Process: Council Action. Moll stated after receiving a recommended
redevelopment plan, the municipality can then (after a statutory required
notice publication) hold a public hearing on the plan. Assuming the
municipality approves the redevelopment plan, TIF is then pledged to the
business requesting it, and financing can take place. Moll stated how the
funds would flow: say you have a million dollar project and would like to
use $100,000.00 of TIF to be able to help contribute to the project – like
put in parking around the new building, or to extend a sewer line, or to do
other public types of things – generally funds would flow: the developer
would pay to put the parking or whatever in, spend the $100,000.00 – but you
the CRA will give the developer a note back saying that over the next
fifteen years the CRA would repay money – the $100,000.00 that the developer
put in. Moll stated how does that get paid: the developer that owns the
property – pays the real estate taxes, the county treasurer says we don’t
get to keep all of that money we have to split part of it off and give it to
the CRA, the CRA says now we have this money but we owe that payment to the
developer. Moll stated it’s just a big circle. Moll stated essentially the
developer who has built the project gets part of their real estate taxes
back. Moll stated sometimes the developer will say they don’t have that
money, they won’t put up that money, they will have to have a bank come in
and do the same thing where the developer pays the taxes, the taxes get
split off, get paid to the CRA, and the CRA pays the money to the bank.
Moll stated the CRA is not on the hook for anything. Moll stated if things
would go wrong and don’t have enough tax revenue – if the developers
business goes under and the taxes don’t get paid – the CRA wouldn’t have the
money to make the payment to the bank – so they wouldn’t. Moll stated the
CRA has a non recourse note meaning if the taxes are there, they have to pay
it, if the taxes aren’t there they don’t pay it – no risk to the City. Moll
stated how TIF works – have an upfront investment – money flows in that
circle for fifteen years – up front have to figure what you think the
increment will be, what you think the taxes will be, and what the value will
do – have to do estimates what you think the project will be worth – what
the project would support in terms of TIF. The TIF Process: Redevelopment
Agreement. Moll stated a redevelopment agreement is the instrument a
business (redeveloper) and a municipality enters so as to consummate the
division of taxes, authorize issuance of TIF indebtedness, pledge TIF
revenues, and grant proceeds from the indebtedness to the redeveloper. In
addition, the Redevelopment Agreement spells out obligations of the
redeveloper (i.e. project construction, cost certification, discrimination,
payment of taxes, etc.) The Redevelopment Agreement provides remedies for
the municipality in the event of default. Moll stated the Redevelopment
Agreement – what the developer agrees to do: build facility, won’t protest
the valuation of the property, will build to certain specifications, will
make certain improvements, will pick up certain fees, may agree to pick up
fees of the blight and substandard study, may pick up attorney fees – this
is all built into the Redevelopment Agreement. Moll stated in case of
default, the CRA can maybe go in and get some of the money back or take
other action to get some of the money back. The TIF Process: Financing.
Moll stated generally the business will want financing up front. Because
TIF provides a bi-annual real property tax annuity over a period of fifteen
years, the business will often pledge its TIF stream for upfront financing.
This can be done in the form of bonds, a note, or any other commonly used
financing structure. Moll stated TIF must be used for certain purposes:
land acquisition, demolition and site preparation, construction of “public”
improvements such as streets, utilities, parks, playgrounds, street lights,
etc., repair and rehabilitation of existing buildings, and certain
redevelopment expenses – i.e. cost of study, attorney fees. City
Administrator Joseph Parker asked if the City could make any improvements in
any part of the Redevelopment Area, like sewer repairs that is vital in that
area. Moll stated there are two ways that would work – one would be that
sometime in the overall development you would say the developer would kick
in more money to improve like a park that is also in this area – it would be
an incentive for the developer to use TIF money and we ask him to put in
more money – would be part of the agreement, we would agree to pay for this
if the developer would pay for that. The second way this could happen would
be with B Notes – supplemental notes – with TIF you will do your best to
guess what the new value will be – the B Note you would say if things go a
lot better than what you thought – if the tax increment keeps going up – end
up getting way more than we need to fund the TIF note – then you could take
some of the additional funds and say when the money comes into the CRA – the
CRA can pay the note and still have money left; then that extra money could
go to fund any other public projects in that area – this would be negotiated
with the developer in the agreement. Laura Bedlan, Zoning Administrator
asked if B Notes would be used would the City have to specify up front right
away what the money would be used for. Moll stated if the B Notes are set
aside for the Community Redevelopment Authority, you do not have to
designate what that money will be used for until that money actually becomes
available – which is usually at least ten years out from the project – even
the TIF notes that get paid off early usually takes about ten years – so
could have five years of that increment left. Moll stated that money would
then come into the CRA and it is then up to them to decide how this money
should be spent – what kind of improvements within this district, may want
to do more studies for the next TIF project – do not have to make the
decision of how to spend this money until the money is actually there.
City Attorney David Bargen stated the City has existing TIF redevelopment
areas, if the City would make the redevelopment area larger by combining
areas and the areas would touch, if TIF money could be used throughout the
entire area. Moll stated he would have to look at the state statutes to see
the requirements for this. Moll stated in Nebraska TIF has been used to
fund a portion of redevelopments, such as: ethanol plants, grocery stores,
fabrication plants, office buildings, hospitals (for profit), manufacturing
facilities, solid waste disposal facilities, packing plants, residential
living facilities, streets and sewers, lighting, electrical facilities,
building facades, and many more. Moll stated to be able to use TIF, it has
to fit within those permitted categories: always limited by 1) the increment
– in terms of how much you can pay based on how much the value will go up
and 2) how many qualified expenses you have. Sometimes you don’t have
enough increment to pay for all of the expenses - sometimes you have way
more than enough value but not enough qualified expenses to utilize TIF.
Parker asked if you’re going to build in an area that already has all the
infrastructure that is needed, it doesn’t seem like you have much of a
choice of what to spend the TIF money on if you received TIF funding. Moll
stated you may be able to use the TIF money for land acquisition and the
land is more valuable with having all the improvements there – may need
public improvements like parking or those types of things. Moll stated the
overall test that you have to qualify for TIF is “but for” TIF you would not
be able to do this project. Economically this project wouldn’t make sense
if “but for” TIF financing – a break on the property taxes for fifteen
years.
Mayor Ward read from
the agenda “consider directing Hanna:Keelan to perform a blight study as it
relates to Redevelopment Area #4 considered for tax increment financing
project. Fees to be paid and deposited with the City of Fairbury by the
developer”. Council member Rick Carmichael asked if we don’t do the study,
how would we come up with funding to do other projects if we don’t do the
study. Carmichael stated we only know of one project for this particular
area. City Attorney David Bargen stated the first step in the TIF process
is to do the blight and substandard study; the question becomes funding and
how it would be paid for. Moll stated the proposed blight area here is one
project but it could encompass future projects in that area. Moll stated in
a case like this, the developer may pay a portion of that or if it’s just
blight and substandard for the one project, then usually the developer would
pick up the cost of the study. Moll stated funding for the other areas,
could be LB840 funds, or if it were several projects – each developer could
pay a portion of the study. Moll stated the City can decide who needs to
pay for the study. Council member Brown stated this agenda item reads “fees
to be paid and deposited with the City of Fairbury by the developer”. Ed
Friesen, Reuse Committee member addressed the Council. Friesen stated at
the previous council meeting, Council member Kelly Davis had asked Mr.
Keelan about the start date of the project. Friesen stated if he understood
Mr. Keelan right – they would need to have the redevelopment area in place
before construction starts. Davis stated that was correct. Friesen asked
what they’re looking at for process time – he thought they were looking at
120 days, if everything goes well, to get the study and everything completed
with the meetings, hearings, etc. – to get everything in motion to go
through the entire TIF process. Brown asked Moll if this is typical. Moll
stated it would probably take Hanna:Keelan four to six weeks to do the
study. Brown stated Keelan had stated it could take six to eight weeks to
complete the study. Moll stated once you have the study, then it needs to
go to the Planning Commission, hearings, etc., it could be another sixty
days – so the 120 days would probably be pretty accurate. Moll stated if
you’re going to use TIF for a project, particularly if you’re going to use
it for site acquisition, you can’t buy the land until it is blight and
substandard in terms of digging dirt and those types of things. Moll stated
once you have the blight and substandard, if everyone is on board that
you’re going to have a redevelopment contract then there are some things
that you can do to let them get started before you get through some of the
other steps – but blight and substandard is the first step that has to take
place if you’re going to use TIF. Brown asked Davis if he knows what the
proposed start date is for the project. Davis stated originally they wanted
to start the first of March – but that was before he heard anything about
the TIF – so he’s not sure. Brown asked if we’ve heard anything from the
developer. City Administrator Joseph Parker stated he hasn’t heard anything
from the developer. Council member Shirley Bender stated they would be
looking at August or September before anything could be started if we do the
TIF process correctly. Brown stated he doesn’t feel the City Council can
take any action on this now without knowing where the developer is on this
project. Parker stated you’re offering the developer the opportunity to
stand up and say yes and pay for the study and get it going; if the
developer doesn’t come forward to pay the money, then you don’t have a
project. Bargen stated the Council could phrase this and pass it with the
developer paying one hundred percent of the project cost of the study up
front, or fifty percent, or whatever the Council decides; this would say the
study will be done if the developer pays some portion of the fee of the
study. Bargen stated Hanna:Keelan would be doing it for the City – the City
would be the client – but the developer would reimburse the City for the
cost of the study. Bargen stated the City would own the study when it is
completed. Brown stated if the City is the client and if something would
happen and the project didn’t go through – then the City would be on the
hook. Bargen stated if the City Council would want to pass this, this
evening then the City would commission Hanna:Keelan to do the blight and
substandard study, so long as, the developer first pays the City for the
study in some fashion, if the Council wants to structure it that way.
Bargen stated it would be contingent upon the developer paying the City up
front for the blight and substandard study if the Council so desires. Brown
stated if the developer decides not to pay it, then it just sits there.
Bargen stated that is correct; you could make it open-ended for any
developer or for a specific developer, or half or three-fourths, or all of
it – however the City Council would like to do that. Bender stated, in the
past, they did the blighted study for the Orscheln store – they ended up
having the space next to it – Dollar General – but it turned out to be the
same developer and they used TIF. Davis asked how much Tim Keelan had said
it would cost for the study. Brown stated $8,000.00 – he didn’t know if
that was a firm quote. Bender moved to direct Hanna:Keelan to perform a
blight and substandard study as it relates to Redevelopment Area #4 as long
as the fees for the study are paid, deposited up front with the City of
Fairbury by the developer. Motion seconded by Carmichael. Council member
Roger Bailey asked Bargen if this is how it is usually done with a study for
tax increment financing – is the developer usually the one that pays for the
study. Bargen stated usually the developer pays or a series of developers
pay for that study. Bargen stated the City, the sponsor of the TIF, is not
stuck with the cost of doing the study – it’s benefitting the developer so
they usually pitch in to get that benefit. Moll stated some cities will not
have any projects in mind, but think it is important to declare a certain
area blight and substandard, and use like LB840 funds or something to pay
for the study because they do not have a developer in mind at the time a
blight study is commissioned. Moll stated if developers are involved, then
typically the study is paid by the developer. Council member Tim Polson
stated it would be easier if we had like ten projects, then it could be
divided by the ten developers; but we don’t have that many developers – only
one. On roll call, Polson, Bailey, Carmichael, Brown, Bender, Kuzelka, and
Davis voted “yes.” Vossler absent. Motion carried.
Mayor Ward stated Items
3, 4, and 5 under Current Business will be postponed and discussed at a
later date / until the City receives all the information for the Collective
Bargaining Agreement, Memorandum of Understanding, and the Agreement and
Withdrawal of Grievance, between the City of Fairbury and the Communications
Workers of America (AFL-CIO. Bargen stated his firm received notice late
Friday that the union wasn’t sure if the documents are in final form; so
we’re waiting for clarification.
Bender moved to approve
the request from the Fairbury Chamber of Commerce to block off 4th
Street between E Street and F Street from 10:00 a.m. – 12:30 p.m. on
Saturday, March 12, 2011 for the Shamrock Shuffle 5K Run/Walk. Motion
seconded by Davis. On roll call,
Polson, Bailey, Carmichael, Brown, Bender, Kuzelka, and Davis voted “yes.”
Vossler absent. Motion carried.
Mayor Ward read by
title Ordinance No. 3006: AN ORDINANCE SETTING CERTAIN SALARIES FOR CITY
EMPLOYEES COVERED BY IBEW AGREEMENT; PROVIDING FOR THE EFFECTIVE DATE
THEREOF; AND REPEALING CONFLICTING ORDINANCES.
Bailey moved to introduce Ordinance No.
3006 and provide for its first reading. Motion seconded by Carmichael.
On roll call, Polson, Bailey,
Carmichael, Brown, Bender, Kuzelka, and Davis voted “yes.” Vossler absent.
Motion carried.
Mayor Ward read by
title Ordinance No. 3007: AN ORDINANCE SETTING SALARIES FOR CITY POLICE
DEPARTMENT EMPLOYEES COVERED BY CWA AGREEMENT; PROVIDING FOR THE EFFECTIVE
DATE THEREOF; AND REPEALING CONFLICTING ORDINANCES.
Brown moved to postpone Ordinance No. 3007
until we have the final contract in place. Motion seconded by Bailey.
On roll call, Polson, Bailey,
Carmichael, Brown, Bender, Kuzelka, and Davis voted “yes.” Vossler absent.
Motion carried.
Assistant Street
Superintendent Laura Bedlan stated the Community Needs Assessments Surveys
deadline was February 28. Bedlan stated the surveys have been mailed to
Kearney and she will be working with Shawn Kaskie from the University of
Nebraska in Kearney, Director of the Center for Rural Research and
Development and also the Nebraska Department of Economic Development to get
everything finalized. Bedlan thanked everyone for helping with the surveys.
Bender moved to
adjourn the meeting. Motion seconded by Polson. On roll call, Polson,
Bailey, Carmichael, Brown, Bender, Kuzelka, and Davis voted “yes.” Vossler
absent. Motion carried. Meeting adjourned at 8:20 p.m.
Homer L. Ward, Mayor
ATTEST: Sharyl Preston, City Clerk
