Regular Meeting
June 21, 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 21st day of
June 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, Joshua Vossler, Shirley Bender, Brad Kuzelka, and Kelly
Davis.
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 June 7, 2011.
2.
Approval of claims.
3.
Approval of the May 2011
Reconciliation Report.
4.
Approval of the resignation of
Diana Worm from the Library Board.
Bailey moved to approve
the Consent Agenda. Motion seconded by Polson. On roll call, Polson,
Bailey, Carmichael, Brown, Vossler, Bender, Kuzelka, and Davis voted “yes.”
Motion carried.
Mayor Ward opened the public hearing
concerning the use of $18,550.00 of LB840 Local Option Sales Tax funds to
the City of Fairbury as a “Public Works Grant” for a project consisting of
making vital public works street improvements to the 300 block of F Street
in downtown Fairbury. City Administrator Joseph Parker addressed the
Council. Parker quoted from the Economic Development Plan – the budget
section – “this section describes a preliminary source of funds and budget
for Fairbury’s economic development program. It is important to note that
this budget must be developed annually and may be modified from time to time
by the City Council. In the field of economic development, it is impossible
to anticipate every condition or requirement. The city should maintain the
flexibility to respond to specific requirements and opportunities on a
short-term basis.” Parker stated under the preliminary annual budget, the
economic development plan has $92,500.00 for infrastructure - it is with
this portion of the economic development plan that the City intends to use
to pay for this particular street improvement. Parker stated under the
eligibility activities section of the economic development plan it states eligible
public works improvements shall include, but not be limited to streets (the
first item listed is streets) – it is an eligible item. Parker stated in
May 2010 when the LB840 Local Option Sales Tax was voted in for another ten
year period – one thing that was designated was infrastructure
improvements. Parker stated this area on the 300 block of F Street isn’t a
real expensive project – but it meets the requirements of using LB840 money
for this project. Parker stated the Economic Development Review Committee
has met and the applicant meets the LB840 criteria, therefore the Committee
recommends the City Council approve obligation of $18,550.00 as a “Public
Works Grant” from the LB840 Economic Development Plan.
No one else addressed the Council during
the public hearing. Mayor Ward declared the hearing closed.
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
hopes to give clarity of what the City’s options are regarding TIF and how
to proceed. Moll stated the thing to remember with tax increment financing
(TIF) is the word increment. Moll stated this is not city tax dollars, but
new tax dollars that will flow from property taxes that result in an
increase in valuation. Moll stated with straight TIF – which you would do
for just one project – that property has a value today of say $50,000.00 – a
developer proposes to do this development which would increase the value to
$250,000.00 – so the increase in value of $200,000.00 would be the
increment. The property tax on that amount – the increment - for fifteen
years the City would have the opportunity to tell the county assessor the
City is going to peel that off to be used for certain TIF improvements –
site acquisition, prepare the site to demolish things, do public
infrastructure type of things like run utilities, parking, etc. Moll stated
with straight TIF, the developer could say they wouldn’t do this project or
do this project at a certain scale “but for” the extra help from TIF. Moll
stated the City could say through the Development Authority that the City
will loan the developer this amount of money – say you have this $50,000.00
project that would be TIF type of expenses – put in parking lot, site
demolition, those types of things – say the value is going up $200,000.00
and the tax on that would be 2 – 3% so over fifteen years the City thinks it
could afford to pay back that $50,000.00. So what happens is the developer
goes and spends that $50,000.00 actually does those improvements – the City
would then say it will give the developer our note for that $50,000.00 – the
City owes you that money. The developer improves the property – the value
goes up to $250,000.00 from $50,000.00 – the county assessor then starts
sending that tax money to the City and the City uses those tax monies to pay
the note back to the developer. The developer pays the taxes to the County
– part of it gets split over and paid to the City and part of it goes right
back to the developer. Part of the additional property tax dollars the
developer pays gets re-routed back to them to pay for these TIF
improvements. Moll stated this is straight TIF – just doing it on one
project. Moll stated to assist the developer to create more value for all
the taxing entities, the City will take fifteen years worth of it and pass
that back to the developer. The City is not obligated – the City is only
obligated to the extent it receives this money that is split off that the
developer has created by the new value. Mayor Ward asked if the developer
has to meet certain guidelines to qualify for TIF. Moll stated the City
would do a redevelopment contract with the developer that would state the
developer agrees to do this project and build it this way and agree that
they will not contest the property value over a certain amount – so if we
state the value is $250,000.00 – they agree they won’t protest any value
that is $250,000.00 or less – they agree to build it a certain way and not
protest those things. If the City thinks the development will create
$250,000.00 and the county assessor says it creates only $150,000.00 – there
is not enough increment there – not enough money to pay back that note, but
the way the note is structured, the developer just doesn’t get paid that
amount – the developer has to pay enough additional to pay the note which
makes the circle back to the developer – in this scenario there is no risk
to the City in terms of saying the City has lost money or dollars -- it’s
purely -- in terms of what’s “lost” -- is that the City is giving up their
share of that additional increment for fifteen years as well as the school
district, the county, the other taxing entities are losing that share only
for that time. Moll stated the overall goal would be for the completed
development to increase the property’s valuation and thus property tax in
the future, and it promotes economic development -- in the long run everyone
would be better off because fifteen years from now everyone would be paying
taxes on a higher value. Moll stated if another developer comes in with a
different project you would do a separate agreement with them for just that
area; the fifteen years would start ticking again for that project – you can
go project by project.
Moll stated another
approach to TIF that is different – it’s an overall TIF of the whole area –
so-called “bucket TIF”. Moll stated the whole area that is blight and
substandard – right now the City is designating some projects that could be
done or that the City thinks need to be done as a City and is declaring that
whole area to be blight and substandard; TIF it all – the City would declare
that whole area to be a redevelopment area and start claiming the increment
on all of that area for fifteen years. Moll stated the idea behind that is
that the City would start using the increment going forward to do those
improvements itself or to make grants to developers to do that. Moll
stated this is different because you don’t know what the increment will be
going in. Moll stated bucket TIF would be used for more general
improvements. Council member Doug Brown asked how the bucket TIF would work
for McNish Park since the park doesn’t pay taxes – it’s in the blight and
substandard area. Moll stated you could look over the years to see what
type of value there has been in this area and see what the increment would
be. Audience member Stan Smith asked if you could do both types of TIF at
the same time. Moll stated once you have an area designated as a
redevelopment area and you’ve made that split where you’re pulling off the
values you can do projects within that area but can’t start the fifteen year
clock ticking again. If a developer came five years later and wants to do a
project and use straight TIF; you would have to build it into your process –
you can’t start the fifteen year period over – this would start at ten years
– it’s fifteen years for the entire area. Moll stated a redevelopment area
can only be in an area once every fifteen years – once started, you can’t
restart it. Moll stated with the specific hotel project currently being
considered, the City’s options could be to do straight TIF and just do that
one project and say the City would exclude that from everything else and say
the City would do a bucket TIF for the rest of the district; but this would
have to be designated at the beginning. Moll stated with bucket TIF it is
more difficult to have developers pay the cost of the blight and substandard
study, attorney’s fees, etc. – may have to pay that out of the TIF dollars;
the bucket TIF is more unpredictable. City Attorney David Bargen stated one
advantage to the City with a straight TIF would be higher valuation on that
piece of property, therefore all the taxing authorities get more property
tax in the future, whereas an advantage of general, or “bucket,” TIF, would
be that the City may get new infrastructure. Moll stated it’s harder to do
the broad types of infrastructure with straight TIF – with bucket TIF the
City could use funds from different areas within the redevelopment area, so
long as they’re in the same redevelopment area. Assistant Street
Superintendent Laura Bedlan asked if the projects need to be ready up front
or could the City plan as the projects develop. Moll stated the City could
wait and say it plans to do a particular project within the TIF period, but
you don’t have to start right away. Moll stated the City could have its
list of priorities – these are the first things that you would do and then
work down the list as the increments come in. Moll stated hopefully the
projects that would be done first would be the ones that would make the
values go up more, faster, because the more the values go up then the more
increment the City has to work with in future years during the increment
period. Council member Shirley Bender asked regarding the hotel project if
they go with straight TIF – say another project, like Maatsch’s, would
decide to expand and make it more of a truck stop that would be straight TIF
#2, then could we still do a bucket TIF for residential since it’s in that
plan with the park. Moll stated yes you could – it comes down to where you
define the redevelopment area – as long as those areas are outside of it –
then you’re fine to do the bucket TIF. Citizen Glen Tedrow asked if TIF
revenue is only used for public works projects or can it be used to defer
construction costs. Moll stated yes – the statutes list things that are
approved for TIF purposes – public improvement things like sidewalks,
infrastructure, etc. are approved TIF expenses. Moll stated the things that
would be more of a direct benefit to the developer would be rehabilitation
of old buildings, site acquisition – buy the property to rehabilitate the
older building or to tear it down. Tedrow asked if you have a project that
is privately funded can TIF be used to defer some of the construction
costs. Moll stated it could be if the project passes the “but for” test.
“But for” TIF we wouldn’t do this project in this way, then yes. Moll
stated with the hotel project there could be some costs that would be a
direct benefit to the developer – they’re building it for less - they’re
paying the full amount but they would be getting part of their real estate
taxes back through the circle to repay for that. Moll stated yes it is TIF
dollars paying for private things, but it’s not like the City of Fairbury is
writing a check out of tax dollars to do the project – it is the split off
increment – a portion of the taxable value after the value has increased due
to the development – that is doing that. Tedrow asked if this is a form of
tax abatement. Moll stated it is – the City and all the taxing entities –
with each project, the City Council has to go through the cost benefit
analysis and ask the question, “is the City better off with this project not
happening?” – if there is no TIF, this project doesn’t happen – the City
never gets those additional tax dollars in the future because the value
never went up, because the development did not occur; if the development
does occur, the City does not get the increased property tax revenues for
fifteen years, but then they eventually do – this is the cost-benefit
analysis. Moll stated there is a price to pay for development and there is
also a price to pay if the development does not go forward. Moll stated if
a developer comes in and says I would do this exact project with or
without TIF – they do not qualify to receive TIF; but if the developer says
financially this doesn’t work at this way or at this level without TIF –
then TIF can be used. City Administrator Joseph Parker asked if the City
would be negotiating these types of things with the developer. Moll stated
if you’re using the straight TIF, there would be a redevelopment plan that
would state what the developer is going to do and a redevelopment contract
that would say exactly what amounts are allowed ~ a project could have too
many TIF expenses, not have enough increment, or the City just doesn’t want
to give the developer that much money to pay for all of their TIF expenses,
or there could be projects where the developer could use more money but
there isn’t enough qualified TIF expenses to be paid so you’re always
negotiating what those numbers would be with the developer. Moll stated
with straight TIF, if the property value goes up a lot more than what you
thought – say you thought the value of the property after the new project
would go up to $250,000.00 and it actually went up to $500,000.00, then the
amount the City advanced to the developer would get paid back a lot more
quickly than what the City thought – it may get paid off in six or seven
years instead of the full fifteen – so the redevelopment contract could be
structured so that the extra six or seven years of tax dollars come into the
City development authority to be used for the other projects around the City
like the park improvements, sidewalks, etc. – however the City doesn’t get
that money until the bond is paid off first, and waiting to see if the value
is high enough to pay it off early. Moll stated the Planning Commission has
already looked at declaring an area as blight and substandard and the next
step will be up to the City Council to decide if Redevelopment Area #4 will
be blight and substandard. Moll stated the City Council can go that far
without making a decision whether to do straight TIF or bucket TIF. At the
next point with the hotel project, the City Council will have to decide if
they want to do a bucket TIF and include the hotel project or decide to do
just the hotel project and consider that separately and come back to it if
the City wants to do bucket TIF later. Council member Roger Bailey asked
what TIF money this new construction would actually qualify for. Bailey
stated it is his understanding that new private construction is not eligible
for TIF money. Moll stated in terms of new construction it is generally not
an approved TIF expense – just to build a new building is not eligible; but
parts of it can be – site acquisition, site preparation, etc. -- those
things can be – but paying for the rafters, windows, furniture, etc., those
are not approved TIF expenses. Bailey asked what if the development
included a meeting room that could be used by the public or the pool being
open for public use. Moll stated public infrastructure would be approved
TIF expenses – but a pool open to the general public – he doesn’t see how
that would work or a meeting room for public use – maybe, but that’s a gray
area – not sure how that would work – if it would be TIF approved expenses
or not. Bailey stated what the developer is doing now with the site
acquisition and site preparation would probably qualify but the actual
construction would not qualify. Council member Tim Polson asked if it is up
to the City Council to decide what is qualified and what isn’t. Moll stated
in the final say, yes - the City Council would approve a redevelopment
contract that would be negotiated back and forth between the City and the
developer. Polson asked what happens if the City Council makes a wrong
decision and let’s the developer use TIF for something that shouldn’t be.
Moll stated technically someone could come in and challenge that and say the
developer would have to give the money back. The City would not have to
refund that but the developer could. Council member Joshua Vossler stated
it is his understanding the developer is building it to the standard in case
they want to make it a franchise, they could then qualify for a franchise
where the franchise requires that they apply for TIF. Vossler asked why the
franchise would require this. Moll stated he didn’t know why the franchise
would require that. Moll stated the franchise may recommend the developer
apply for TIF as it may be a way for the developer to build a nicer, better
facility – but he doesn’t know why they would require they apply for TIF.
Davis moved to approve
the recommendation from the Housing Committee regarding the CDBG – Citywide
Housing Rehabilitation Program – to award the Rehabilitation Construction
Contract for Applicant #007 to Schoenrock Construction in the amount of
$24,573.74. Motion seconded by Brown. Bender stated at the last meeting
when housing applications had been approved it was discussed to let the
names of the property owners be known at that point, after approval, since
they were out for bids and it is tax dollars being used for the projects.
City Attorney David Bargen stated he is not sure whether there are specific
CDBG regulations regarding confidentiality of these grant projects, but he
is hesitant to say the City Council can’t let the receiving
property/property owners be known since it is public dollars being spent.
Bargen stated he would be more comfortable knowing what the CDBG regulations
for these specific grants are before saying the names could be made
public. Bargen stated it is public knowledge who the contractors are – who
will be doing the work. Bender asked if they’re awarding the project to
this construction company – this project is for someone – since it is tax
dollars – is this something that the City Council should let the people know
who is getting this money. Stan Smith with the radio station asserted his
belief that the Council can’t not make this public – that this is a public
meeting, the Council is making a public decision, and the City is spending
the public’s money and who the City is spending it for needs to be part of
the public record. Bargen stated the contractor is getting the funds to do
the work – that was all made public at the time the contractor was chosen at
that Council meeting. Bargen stated in the initial phase, the program
administrator told the Council that the receiving property/property owner is
not made public. Bender stated after it goes out for bids, the program
administrator stated then the names could be made public. Bender stated
instead of saying Applicant #007 say such and such house. Council member
Kelly Davis stated previously with CDBG projects with Blue Valley Community
Action they were not allowed to say who it was for until after it was
approved because the project may not give approval if you knew who it was
for. Bender asked if the City Council approves this project tonight can
the name be given yet tonight. Bargen stated in his opinion he didn’t see
why it could not be, understanding he has not reviewed specific regulations
on the matter regarding these grants. On roll call, Polson, Bailey,
Carmichael, Brown, Vossler, Bender, Kuzelka, and Davis voted “yes.” Motion
carried. Bender asked for the name. Davis stated it is Paren Sims. Bender
stated she just wants the name known since we’re using public money. Brown
asked for the address. Davis stated it is 1009 South 6th Street
– which must be 1009 6th Street.
Brown moved to set the
annual LB840 budget for 2011-2012 as stated in the new Economic Development
Plan, which states the preliminary annual budget for the program as
follows: $17,500.00 for land acquisition and building construction,
$50,000.00 for business recruitment/development, $92,500.00 for
infrastructure, and $25,000.00 for administration.
Motion seconded by Bailey. On roll
call, Polson, Bailey, Carmichael, Brown, Vossler, Bender, Kuzelka, and Davis
voted “yes.” Motion carried.
Brown moved to approve
the request for payment of Southeast Nebraska Development District (SENDD)
FY2012 Membership Dues in the amount of $2,125.00. Motion seconded by
Carmichael. On roll call, Polson,
Bailey, Carmichael, Brown, Vossler, Bender, Kuzelka, and Davis voted “yes.”
Motion carried.
Bailey moved to approve
the request for payment of SENDD FY2012 Housing Dues in the amount of
$1,279.00. Motion seconded by Carmichael.
On roll call, Polson, Bailey, Carmichael,
Brown, Vossler, Bender, Kuzelka, and Davis voted “yes.” Motion carried.
Bender moved to adopt
Resolution No. 820 obligating LB840 funds for a “Public Works Grant” in the
amount of $18,550.00 to the City of Fairbury for the “City of Fairbury F
Street Project”. Motion seconded by Vossler.
On roll call, Polson, Bailey, Carmichael,
Brown, Vossler, Bender, Kuzelka, and Davis voted “yes.” Motion carried.
Mayor Ward read by
title Ordinance No. 3010: AN
ORDINANCE CHANGING THE FEE FOR SANITATION SERVICES AND AMENDING ORDINANCE
NO. 2925. Brown moved to give third reading to Ordinance No. 3010. Motion
seconded by Bailey. On roll call,
Polson, Bailey, Carmichael, Brown, Vossler, Bender, Kuzelka, and Davis voted
“yes.” Motion carried. Carmichael
moved for the final passage of Ordinance No. 3010. Motion seconded by
Kuzelka. On roll call, Polson,
Bailey, Carmichael, Brown, Vossler, Bender, Kuzelka, and Davis voted “yes.”
Motion carried.
Bender
moved to adjourn the meeting. Motion
seconded by Vossler. On roll call, Polson, Bailey, Carmichael, Brown,
Vossler, Bender, Kuzelka, and Davis voted “yes.” Motion carried. Meeting
adjourned at 8:15 p.m.
Homer L. Ward, Mayor
ATTEST: Sharyl Preston, City Clerk
