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08.e1 Recommended Changes to Economic Development Authoritya:. Staff Report Date of Meeting: February 21, 2023 To: Mayor and City Council From: Anne Hurlburt, Interim City Administrator Re: Recommended Changes to Scandia Economic Development Authority (EDA) Action Requested: Consider the Scandia EDA Board's recommendation that the EDA should 1) be changed so that the City Council members serve as the Board, and 2) that Council should provide in its budget sufficient funds to continue supporting the efforts of the Tourism Committee. Background: At the January 2023 meeting, the EDA Board discussed a recommendation from Treasurer Colleen Firkus that the EDA's separate checking account be closed. Maintaining separate accounts has been causing accounting problems and unnecessary work. The Board agreed with staff that we should continue tracking EDA expenditures and revenues in their separate 225 Fund, but use the city's main cash account and close the EDA checking account to simplify matters. After the EDA made their recommendation, we looked more carefully at the EDA Bylaws and establishing resolution, and realized that the practices of the EDA were in violation of several provisions including terms of office, officers and financial management. This led to a discussion about the need for a separate EDA Board and whether some significant changes were needed. The Board discussed this at their February 13 meeting and reached a consensus that EDA as an entity separate from the City Council was not necessary. The City Council has reserved most of the decisions to itself and could easily act as the EDA when and if necessary. The Tourism and Parks and Recreation committees carry out most of the activities to promote the city and can continue without a separate EDA. While the EDA has been working on a revolving loan fund, members feel that it is probably impractical given the small amount of funding it could provide. Recommendations: The Council should discuss the EDA Board's recommendations. If it agrees that the EDA should be reconstituted so that the City Council is designated at the EDA board, the City Attorney should be requested to recommend the legal process by which to accomplish the change. The issue of how to provide a sufficient budget for the Tourism Committee can be addressed during preparation of the budget for 2024. Attachments: 1. Resolution No 05-21-13-01, Enabling Establishment of the Scandia EDA 2. EDA Bylaws, Adopted August 19, 2013 3. Excerpt, League of Minnesota Cities Handbook, Community Development and Redevelopment (re: Economic Development Authorities) 2 CITY OF SCANDIA RESOLUTION NO. 05-21-13-01 RESOLUTION ENABLING THE ESTABLISHMENT OF THE ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF SCANDIA, MINNESOTA, PURSUANT TO MINNESOTA STATUTES, SECTIONS 469.090 THROUGH 469.1082, AS AMENDED BE IT RESOLVED by the City Council (the "Council") of the City of Scandia, Minnesota (the "City"), as follows: Section 1. Recitals. 1.01. The City is authorized pursuant to Minnesota Statutes, Sections 469.090 through 469.1082, as amended (the "Act") to establish an economic development authority for the City and the Council desires to do so in order to promote certain economic, commercial, housing and industrial development and redevelopment goals and objectives. 1.02. The Council hereby finds that the encouragement and financial support of economic development and redevelopment in the City is vital to the orderly development and is in the best interests of the health, safety, prosperity and general welfare of the residents of the City. 1.03. The City has caused notice of a public hearing on the establishment of an economic development authority to be published in a newspaper of general circulation in the City once each week for two consecutive weeks, and pursuant to such notice, a public hearing on the proposal has been held by the Council on the date hereof, at which hearing all persons desiring to present their oral or written comments on the proposal were given an opportunity to do so. Section 2. Establishment of Economic Development Authority. 2.01. Pursuant to the Act, the Council establishes an economic development authority for the City to be known as the Economic Development Authority of the City of Scandia, Minnesota (the "EDA"). 2.02. The EDA shall be governed by a board of commissioners consisting of five members, two of whom shall be members of the Council. The initial appointments of the non- Council commissioners shall be for the following terms: one (1) for three (3) years, one (1) for four (4) years and one (1) for five years. Thereafter, the terms of the non- Council commissioners shall be six (6) years and until their successors are appointed and qualified. The terms of the Council members serving as EDA commissioners shall coincide with their respective terms of office on the Council. Each commissioner of the EDA who is a member of the Council shall cease to be a commissioner effective at such time as he or she is no longer a member of the Council, and a successor commissioner shall be appointed pursuant to the Act to serve the remainder of the applicable term (if any) so vacated. Section 3. Powers. 3.01. The EDA shall have all powers given to an economic development authority pursuant to the Act, as the same may be amended or supplemented from time to time, including the powers of a housing and redevelopment authority contained in Minnesota Statutes, Sections 469.001 through 469.047, as amended, and the powers of a city under Minnesota Statutes, Sections 469.124 through 469.134, as amended. 3.02. The sale of all general obligation or revenue bonds of the EDA must be approved by the Council before such bonds or obligations are issued. 3.03. The EDA shall follow the budget process for City departments as provided by the City and as implemented by the Council. 3.04. All actions of the EDA must be consistent with the adopted comprehensive plan of the City and any official controls implementing the comprehensive plan. 3.05. The general budget of the EDA must be transmitted and approved by the Council at the same time as the City's general budget. 3.06. Notwithstanding Section 469.101, Subdivision 4 of the Act, the EDA may not take or attempt to take any property within the City by eminent domain without the prior approval of the Council. 3.07 As a means of more clearly setting forth its powers and rules of procedure, at its initial organizational meeting the EDA shall adopt a set of By -Laws, which shall, among other things, establish the general policy duties and provide for the appointment of the President, Vice -President, Treasurer, Assistant Treasurer, and Secretary. The initial By -Laws and subsequent amendments thereto must also be approved by a majority vote of the Council. Adopted by the Scandia City Council this 2151 day of May, 2013, Randall Simonson, Mayor ATTEST; Kristina Handt, Administrator/ City Clerk BYLAWS OF THE ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF SCANDIA, MINNESOTA ARTICLE I — THE AUTHORITY Section 1. Name of Autlrority. The name of the Authority shall be the "Economic Development Authority of the City of Scandia, Minnesota" (referred to herein as the "Authority"), and its governing body shall be called the Board of Commissioners (the "Board"). The Board shall be the body responsible for the general governance of the Authority and shall conduct its official business at meetings thereof. The Authority is governed by the provisions of Minnesota Statutes, Sections 469.090 through 469.1082, as amended (the "Act"). Section 2. Seal of Authority. As required by Section 469.096, Subdivision 1 of the Act, the Authority shall have an official seal, to be established and approved by the Board. Section 3. Office of Authority. The business office of the Authority shall be located at Scandia Community and Senior Center, 14727 209th Street North, Scandia, Minnesota. Section 4. Establishment. The Authority was established by Resolution No. 05-21-13-01, approved by the City Council of the City of Scandia, Minnesota on May 21, 2013 (the "Enabling Resolution"), after a duly noticed public hearing was held pursuant to the Act. The Authority has all the powers set forth in the Enabling Resolution. Section 5. Commissioners. In accordance with the Enabling Resolution, five commissioners will serve on the Board, who shall either be residents of or own real property in the area of operations of the Authority. Two City Council members will simultaneously serve as Board Commissioners. The terms of the City Council members also serving as Board Commissioners are coterminous with their respective terms on the City Council. ARTICLE II — OFFICERS Section 1. Officers. The officers of the Authority shall be a President, Vice -President, Treasurer, Secretary, and Assistant Treasurer. The President and the Treasurer shall be members of the Board and elected annually. The Vice -President shall be a member of the Board and may hold office for any term designated by the Board. No Commissioner may be both President and Vice -President simultaneously. The Secretary need not be a member of the Board, but is elected annually by the Board. The Assistant Treasurer need not be a member of the Board and may hold office for any term designated by the Board. Section 2. President. The President shall preside at all meetings of the Board. Except as otherwise authorized by resolution of the Board, the President and the Secretary (or the Vice -President, in case of the Secretary's absence) shall sign all contracts, deeds and other instruments made or executed by the Authority, except that all checks of the Authority shall be signed by the Treasurer and the Assistant Treasurer. At each meeting of the Board the President shall submit such recommendations and information as the President may consider proper concerning the business, affairs and policies of the Authority. Section 3. Vice -President. The Vice -President shall perform the duties of the President in the absence of the President, and in case of the resignation of the President, shall perform such duties as are imposed on the President until such time as the Board shall select a new President. Section 4. Secretary. The Secretary shall keep minutes of all meetings of the Board and shall maintain all records of the Authority. The Secretary shall also have such additional duties and responsibilities as the Board may from time to time and by resolution prescribe. Section 5. Treasurer: Assistant Treasurer. The Treasurer shall have the care and custody of all funds of the Authority and shall deposit the same in the name of the Authority in such bank or banks as the Board may select. The Treasurer and the Assistant Treasurer shall sign all orders and checks for the payment of money and shall pay out and disburse such money under the direction of the Board. The Treasurer shall keep regular books of accounts showing receipts and expenditures and shall render to the Board, at least annually (or more often when requested), an account of such transactions and also of the financial condition of the Authority. The Treasurer shall post a bond as required by Section 469.096, Subdivision 6 of the Act. The Assistant Treasurer shall act as the Treasurer's agent and assistant to perform the above-described duties, subject to the Treasurer's approval thereof. Section 6. Executive Directur. The Executive Director of the Authority shall be the City Administrator of the City. The Executive Director shall have the responsibilities as enumerated in the Act and such additional responsibilities as the Board may from time to time and by resolution prescribe. Section 7. Additional Duties. The officers of the Authority shall perform such other duties and functions as may from time to time be required by the Board or these Bylaws, or the rules and regulations of the Authority. Section 8. Vacancies. Should the office of the President, Vice -President, Treasurer, Secretary or Assistant Treasurer become vacant, the Board shall elect a successor at its next regular meeting, or at a special meeting called for such purpose, and such election shall be for the unexpired term of said officer. Section 9. Additional Personnel. The Board may from time to time employ such personnel as it deems necessary to exercise its powers, duties and functions. The selection and compensation of such personnel shall be determined by the Board. ARTICLE III — MEETINGS Section 1. Regular Meetings. The regular meetings of the Board shall occur according to a meeting schedule, if any, adopted or revised from time to time by resolution of the Board. Section 2. Special Meetings. Special meetings of the Board may be called by the President or by any two members of the Board for the purpose of transacting any business designated in the call for special meeting. The call for special meeting may be delivered at any time prior to the time of the proposed special meeting (in accordance with state law notice requirements) to each member of the Board or may be mailed to the business or home address of each member of the Board. Notice of any special meeting shall be posted and published as may be required by law. Section 3. Quorum. The powers of the Authority shall be vested in the Board. Three Commissioners shall constitute a quorum for the purpose of conducting the business and exercising the powers of the Authority and for all other purposes. When a quorum is in attendance, action may be taken by the Board upon a vote of a majority of the Commissioners present. Section 4. Rules of Procedure. The meetings of the Board shall be governed by the most recent edition of Robert's Rules of Order. Section 5. Manner of Votin • Adoption of Resolutions. Voting on all questions coming before the Board shall be by voice vote unless any Commissioner calls for a roll call vote. The yeas and nays shall be entered upon the minutes of such meeting. Resolutions need not be read aloud prior to vote. Resolutions are deemed adopted if approved by at least a simple majority of all Commissioners present, unless State law requires otherwise. ARTICLE IV — MISCELLANEOUS Section 1. Initial Approval and Amendments to Bylaws. These Bylaws shall not become effective until approved by the City Council. These Bylaws shall be amended only by written resolution of the Board. Amendments are to be effective only upon approval of the City Council. Section 2. Fiscal Year. The fiscal year of the Authority shall coincide with the fiscal year of the City of Scandia, Minnesota. Section 3. Commissioner Compensation. Commissioners of the Authority shall be paid for attending each regular or special meeting of the Authority in an amount to be determined by the City Council. In addition, Commissioners shall be reimbursed for actual expenses incurred in doing official business of the Authority. All money paid for compensation or reimbursement must be paid out of the Authority's general budget. Section 4. Removal for Cause. A Commissioner may be removed by the City Council for inefficiency, neglect of duty, or misconduct in office, all pursuant to the procedural requirements contained in Section 469.095, Subdivision 5 of the Act. Section 5. Conflict of Interest Policy. The Board shall adopt a Conflict of Interest Policy a copy of which shall remain on file in the Office of the Authority. Annually, each Commissioner and Employee of the Authority shall complete a Conflict of Interest Certificate and file it with the Secretary. Section 6. Depositories. In accordance with Section 469.099 of the Act, every two years the Authority shall name national or state banks within the State of Minnesota as depositories. Before acting as a depository, a named bank shall give the Authority a bond approved as to form and surety by the Authority. Approved: August 19, 2013. President ATTEST: z 98cr tary RELEVANT LINKS: League of Minnesota Cities Handbook for Minnesota Cities 12/16/2022 Community Development and Redevelopment Chapter 14 1 Page 9 The law states that the principal and interest on bonds are payable exclusively from the income and revenues of the project financed with the proceeds of the bonds, or exclusively from the income and revenues of certain designated projects, whether or not they are financed in whole or in part with the proceeds of the bonds. 8. HRA certifications to state The following documents relating to the establishment and activities of local HRAs must be filed with the DEED commissioner: Minn. Stat. § 469,003, subds, 4, 6, 7, ■ Resolution of need. Minn. Stat. § 469,013 subd . Certificates of appointment or reappointment of HRA commissioners. `- • Low -rent public housing project and management plans. Minn, Stat. § 469,013 subd The following additional documents relating to local HRA activities may also be requested by the DEED commissioner: • Project reports. • Applications for federal assistance. • Contracts with federal agencies. • Redevelopment plans. Minn. Stat. $ 469013 In addition, annual financial reports must go to the state auditor, DEED commissioner, and the city council. 9. HRA federal certification 24 C F.R 982 51 In order for a local HRA to use federal Department of Housing and Urban Development (HUD) assistance programs, it must submit a transcript of organizational documents to the HUD area office. C. Economic development authorities Minnesota Department of Employment and Economic An economic development authority (EDA) is a legal entity created by a Development: The Economic city to facilitate a well-rounded program for business assistance and Development Authorities development projects. Handbook. Minn stat. § 469.091. Minn. Stat. § 469,093, All cities and townships have authority from the Minnesota Legislature to create economic development authorities (EDA). The city may consolidate an EDA with an existing HRA or the city may grant HRA powers to the EDA. The city council may create an EDA by passing an enabling resolution. Before adopting the enabling resolution, the city must first conduct a public hearing. League of Minnesota Cities Handbook for Minnesota Cities 12/16/2022 Community Development and Redevelopment Chapter 14 1 Page 9 RELEVANT LINKS': Minn. Stat § 469.095. The enabling resolution establishes a board of commissioners for the EDA. The city council can choose to serve as the EDA board of commissioners or create a board composed of community members. The mayor, with approval of the council, appoints the commissioners. The board may consist of three, five or seven members who serve six-year terms. The board is subject to the Open Meeting Law. 1. EDA levies Minn. stat. § 469.10T As discussed above, an EDA levy differs from an HRA levy. It is not a levy raised by the EDA it is a levy set by a city at the request of the EDA. Minn- stat § 469.107. A city may, at the request of the EDA, levy a tax for the benefit of the Minnesota Department of EDA in an amount not more than 0.01813% of the taxable market value. Employment and Economic The amount levied must be paid by the city treasurer to the treasure of the Development: The Economic Development Authorities EDA to be spent by the EDA. Because the EDA levy is part of the city Handbook. levy, it is not a "special levy" under state law and therefore the EDA levy is part of the city's overall levy limit. Minnesota Department of As a result of being part of the city's overall levy limit, the most common Employment and Economic Development, The Economic practice to fund an EDA is a direct general fund appropriation out of the Development Authorities city's general fund. There is no limit to the amount of funding that can be Handbook, provided to an EDA through this mechanism. Minn. stat. § 469 091. Alternatively, if the city council's enabling resolution adopts all of the powers of the HRA for the EDA, the EDA may levy the separate HRA tax levy, which is not calculated in the city's levy limit. It is still subject to all of the statutory limitation of an HRA, including the levy limit of 0.0185% of the estimated market value. 2. EDA loans Minn. stat § 469192. EDAs are authorized to make loans to businesses, for-profit organizations, nonprofit organizations, or individuals to effectuate the purpose of the EDA. Minn- Stat 469192. Loans must be for a purpose the EDA is authorized to carry out under the Minn. Stat ; 469 102. law. An authorized purpose must deal with or contribute to economic or industrial development. Minn. Stat. 3 469.033 subd One benefit of establishing an EDA is that the EDA can create a pool 4. Metropolitan Council, City where each project's revenue goes into a common fund, improving the Development Powers- security on the pooled bonds, leading to a more favorable interest rate and ultimately a reduced cost of borrowing. League of Minnesota Cities Handbook for Minnesota Cities 12/16/2022 Community Development and Redevelopment Chapter 14 1 Page 10 RELEVANT LINKS: Minn Stat § 469 098 Minn. Stat. § 469.101, subds 1,2. A,G Opinion., 469a-16, July 19, 1966_ Minn. Stat. § 475,58 Minn. Stat. § 469.102. Minn. Stat § 469.101, subds 1 Minnesota House Research Department, Economic Development TIF Districts Minnesota House Research Department, Economic Development TIF Districts Minn. Stat. § 469.049 Minn. Stat. § 469.055 Minn. Stat, § 469.053. Minn. Stat § 469.060 subd. 1. Minn. Stat. § 469.050. Minn. Stat. § 469 051. Before taking an action or making a decision which could substantially affect an EDA commissioner or employee's financial interests or those of an organization with which the commissioner or an employee is associated, a commissioner or employee of an EDA must comply with specific requirements to disclose the conflict and obtain prior approval. Failure to do so may result in criminal charges. 3. Other EDA powers EDAs can acquire property and facilities, but (in most circumstances) cannot issue obligations (debt) without the approval of the electors. See Minn. Stat. § 475.58 for the list of obligations exempted from this requirement. Otherwise, the city must authorize the issuance of debt in the resolution creating the EDA. EDAs can create economic development districts within the city, but the districts must be contiguous. Economic development districts do not need to meet the blight test and may use tax increment financing. When an EDA's enabling resolution includes HRA power, an EDA may undertake a redevelopment project, housing development, or housing project under which a restrictive blight test does not apply. These projects can be used for similar purposes to those of an economic development district under the EDA law. D. Port authorities The purpose of a port authority is to promote the general welfare of a port district, increase the commercial efficiency of the district, and actively improve business opportunities. The Minnesota Legislature authorizes cities to create port authorities. A port authority is a governmental subdivision with the right to sue and be sued in its own name. A port authority may issue general obligation bonds in the amount authorized by its city's council. Cities establish a port authority by passing an enabling resolution. The port authority may have three commissioners appointed by the city council, or seven commissioners, two of whom must be city council members, with the remaining members appointed by the mayor and approved by the city council. Cities may adopt a different procedure and a different number of commissioners in the enabling law for the port authority. State law governs commissioner pay, vacancies, duties, and port authority bylaws. League of Minnesota Cities Handbook for Minnesota Cities 12/16/2022 Community Development and Redevelopment Chapter 14 1 Page 11