Serving Northern St. Louis County, Minnesota

Economic development dominates council agenda

Marshall Helmberger
Posted 9/27/17

TOWER— Economic development dominated the agenda here on Monday night, as a short-handed city council discussed how to proceed on several potential projects. Councilors Brad Matich and Lance …

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Economic development dominates council agenda

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TOWER— Economic development dominated the agenda here on Monday night, as a short-handed city council discussed how to proceed on several potential projects. Councilors Brad Matich and Lance Dougherty were both absent from the meeting.

Nick Skarich, of Northland Securities, was on hand to talk about funding options for upgrades to the Standing Bear Marina. He had spoken to the Tower Economic Development Authority earlier in the month and he offered much the same message to the council, recommending the establishment of a tax increment financing, or TIF, district with a pay-as-you-go contract between the prospective new owners and the city. That was the same recommendation that TEDA had forwarded to the council earlier this month.

“It eliminates a lot of risk for the city,” he said.

The pay-as-you-go TIF works on a reimbursement basis, so the redeveloper must first pay their full property tax bill, and then a pre-determined portion is refunded to help cover some of the debt service on improvements to the site. The funding can only come from the difference, or increment, between the original base value of the property and the new value once the improvements are completed, so the local units of government involved don’t experience a loss of property tax revenue.

Skarich offered a quick rundown of the various forms of TIF available to cities and said the marina redevelopment, which is currently planned by Your Boat Club, is “a perfect fit” for TIF. He noted that there are some caveats to TIF, such as the “but-for” test, which means that the developers must demonstrate that without the TIF package, the project likely would not be financially viable.

Skarich also briefly discussed tax abatement, which is another development tool used by cities, but he noted that tax abatement requires more administrative work at city hall and provides a shorter funding window, ranging from 15-20 years versus 26 years under TIF. “And in tax increment financing, the county does all the work,” said Skarich. “It’s on the county system. They do the figuring. The city just gets a check for that twice a year and they can take up to ten percent of it for administrative costs on an annual basis.”

The council took no immediate action on Skarich’s recommendation. The city will wait for an actual proposal from the prospective new marina owners, who are expected to close on the property in October. City officials anticipate that the new owners will provide substantial upgrades to the marina, which the current owners had allowed to fall into disrepair in recent years.

In other redevelopment action, the council rejected all bids for their planned sewer extension and other related upgrades at Hoodoo Point Campground. The low bid came in at $472,000, which was substantially higher than engineers’ estimates. At the same time, the bid included a $25,000 math error and the bidder, Low Impact Excavators, indicated they could not honor the actual bid price. With the next lowest bid at over $600,000, the council opted to seek new bids.

But the higher-than-expected bids do not appear to be prompting the council to reconsider the project and they approved the ordering of a grinder pump for the project in order to keep the work on track to begin yet this fall. City Clerk-Treasurer Linda Keith said it typically takes about six weeks for the pump to arrive, so it was important to order it as soon as possible.

The city is now anticipating issuing a revenue bond in the amount of approximately $550,000 to cover the cost of the improvements, and the council approved higher rates for the campground for next year to help cover at least a portion of the bond payments. The annual payment will depend on interest rates, but is expected to range from $39,791 to $43,434 per year.

The council also tabled a decision on engineering costs for the planned expansion of Lamppa Manufacturing until the Oct. 10 meeting. Keith told the council that the city’s engineering expenses line item is already overspent for the year and she wants the Lamppa expansion set up as a separate project so engineering costs can come from project funds rather than the city’s general fund. Jason Chopp from SEH said he doesn’t have enough information at this point to estimate the costs for siting the building within the city’s industrial park. Lamppa Manufacturing is planning to handle construction of its new manufacturing facility itself, with a loan from TEDA. Company officials say they plan to use local contractors and local suppliers for their building materials and are anxious to get underway before winter.

In other business, the council:

• Deferred action on a request by Orlyn Kringstad, who has taken over management of the Marjo Motel since reopening the facility in May, for a street light near the entrance to the hotel. Kringstad noted that the motel entrance used to be lighted by the glow of the motel’s sign, but since the city moved the entrance for the harbor bridge project it is difficult to see and people often miss it. “During dark or rainy nights, the entrance is nearly invisible,” stated Kringstad in a Sept. 20 letter to the council. Kringstad has installed some temporary solar lighting at the entrance, but said those lights will need to be removed before winter or they’ll be destroyed by snow plowing and he’s concerned the situation will provide a public safety hazard. Kringstad also noted that the economic impact of reopening of the motel has been significant, citing a study he requested from the Minnesota office of tourism. He said the study put the extra spending in the community at between $165,000 and $180,000. But councilors noted that the installation of an overhead street light would be expensive, about $20,000 for installation and then ongoing operating costs. Mayor Josh Carlson said the city should first get feedback from MnDOT since the streetlight would be in the highway right-of-way.

• Approved a request from the Main Street Committee to repaint the interior of the civic center to brighten the room. The committee will rely on grants and donations to fund the project. The committee also noted that they will be repainting the garage doors on the EMS building white.

• Approved the transfer of the liquor license at Benchwarmers from Gary Mellesmoen Sr. to Gary Mellesmoen Jr.

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