6.a) Staff Report-EDA Resolution � l �6
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SCANDIA
Staff Report
Date of Meeting: May 21, 2013
To: City Council
From: Kristina Handt, City Administrator
Re: EDA Resolution
Agenda Item #: 6.a)
Background:
The City Council has been discussing the creation of an Economic Development Authority
(EDA) for a few months. At the March meeting, the Council directed staff to publish the notice
for a public hearing. The notice appeared twice in the Country Messenger in early May.
The Mayor should open the public hearing and accept any comments from the public. After
closing the public hearing, the Council may begin its discussion of the issue.
Issue:
Should the Council approve the resolution to create and EDA?
Proposal Details:
Included in your packet is a memo from Attorney Pratt first reviewed by the Council in January.
It discusses the general powers and membership of EDAs.
Also included in your packet is Resolution OS-21-13-01, an enabling resolution establishing an
EDA in Scandia. Specific items included in the resolution consistent with previous Council
discussions are:
➢ A five member board consisting of two Council members. The initial terms are staggered
3, 4 or 5 years. The there would be 6 year terms as required by statute.
➢ The EDA would have the powers in statute given to economic development, house and
redevelopment authorities with the exception that the use of eminent domain have prior
Council approval.
➢ The sale of general obligation or revenue bonds would also require the approval of the
Council.
➢ Actions would be required to be consistent with the Comprehensive Plan.
➢ The EDA would follow the same budget process as other City departments and be
approved at the same time as the general fund budget.
One item previously questioned by the Council was whether or not the Commissioners had to be
residents of the City. State statute does not require they be residents of the City. Draft bylaws
are included in your packet so you can see that language was added to require commissioners "to
either be residents of or own real property in the area of operations of the Authority."
If the Council approves the creation of an EDA, the next step would be to solicit applications
from interested individuals, appoint the members, then approve the bylaws. I recommend the
bylaws first be reviewed and recommended by the EDA board to the Council.
Fiscal Impact:
As previously mentioned, the EDA would require liability insurance. Initially, that would cost
little to nothing as the League basis the rate off of the number of employees and the annual
expenditures. Since existing City staff will likely assist the EDA and expenses are expected to
be relatively low as the group begins to get organized, the City would not see an increase in the
premium.
Per state statute, the EDA would be able to levy taxes for economic development purposed in an
amount not to exceed 0.01813% of the taxable market value. If the EDA was also given HRA
powers a levy not exceeding 0.0185% of the taxable market value would be allowed.
Options: (After taking public comment)
1) Approve Resolution OS-21-13-01
2) Amend and then Approve Resolution OS-21-13-01
3) Take no action on Resolution OS-21-13-01
CITY OF SCANDIA
RESOLUTION NO.OS-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 far 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 Authoritv.
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 far the following terms: one(l) for three (3)years, one (1) far 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 successars 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 autharity 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 far 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 21 S'day of May, 2013.
Randall Simonson,Mayor
ATTEST:
Kristina Handt,Administrator/City Clerk
J
ECKBERG LAMMERS
MEMORANDUM
To: Mayor Simonson and City Council
Kristina Handt, City Administrator
From: Andrew Pratt, Assistant City Attorney
Date: January 3, 2013
Re: Potential Economic Development Authority (EDA) Establishment
The purpose of this memorandum is to discuss the general power and authority allocated
to economic development authorities ("EDA") in the State of Minnesota and the legal procedures
required for the City of Scandia, Minnesota(the "City")to create an EDA.
General EDA Background Information
An economic development authority is another layer of government. It is a public body
corporate and politic and political subdivision of the State of Minnesota, so it can sue and be
sued, enter into contracts, levy taxes, hold meetings, and much more. One benefit to this
separate existence is that the City is not liable for any decisions made by the EDA. In other
words, anyone who is allegedly damaged by the EDA cannot get a legal judgment against the
City; EDA's carry their own liability insurance policies. Another benefit is that over time the
EDA can become an expert body on all things economic development, and its membership may
consist of a mix of interested community members and council members, or it may be all council
members.
Specific EDA Powers
Under state law, an EDA has the power to create economic development districts, acquire
and sell property, enter into options to purchase or lease property, administer taa� increment
financing (TIF) districts, issue general obligation and revenue bonds, undertake eminent domain
proceedings, execute development and construction contracts, become a limited partner in a
partnership, acquire easements, buy supplies, make loans, supply small business capital, operate
a public parking facility, and more. These powers are mostly found in Minnesota Statutes,
Section 469.101, but may also be located in other sections. A lengthy discussion of specific
EDA powers is beyond the scope of this memorandum, but the correct legal authorization for
each proposed activity should be considered on a case-by-case basis.
An EDA may also take on the powers of a housing and redevelopment authority (HRA).
This authorization allows the EDA to mix and match EDA and HRA powers for housing and
economic development projects as needed. Today, if a city needs to create a development
authority, EDA's are almost always the choice, because of the flexibility to also serve as an HRA
(in contrast, HRA's cannot cross-over into EDA powers). An EDA exercising HRA powers may
also impose two tax levies: one for the EDA, and one for the HRA. A later section in this
memorandum will describe EDA/HRA levies in more detail.
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City of Scandia, Minnesota
Re: EDA Establishment Discussion
May 16, 2013
Creation of an Eco�omic Development Authority
Enabling Resolution and Public Hearin�
There are several procedural steps required to create an EDA, but creation is not
administratively difficult. The first step is for the City Council to call for a public hearing on the
adoption of an "enabling resolution" for the EDA. Notice of the public hearing must be
published in a newspaper of general circulation in the City once a week for two consecutive
weeks, and the first publication cannot appear more than 30 days before the public hearing date.
Minnesota Statutes, Section 469.092, contains the requirements for the Enabling
Resolution, and includes many limitations that the City Council may place on the operations of
the EDA. For example, the Council may require the EDA to follow the same budget adoption
process as the City, ensure that all land use actions follow the City's Comprehensive Plan,
submit the EDA's administrative structure to the Council for approval, and require Council
approval for all EDA bond issuances. The Council may also decree that an EDA does not have
HRA powers, although such a decision would drastically limit the EDA's effectiveness and is
not recommended. If the Enabling Resolution is ever modified after adoption, the modification
must be made pursuant to the same notice and public hearing procedures undertaken for the
original approval.
EDA Commissioners
Minnesota Statutes, Section 469.095 provides three different membership scenarios for
the EDA's Board of Commissioners: three, five and seven members. The chosen scenario must
be selected in the Enabling Resolution. EDA commissioners are appointed by the Mayor with
approval from the City Council. The initial commissioner terms are staggered, and thereafter all
commissioners serve six-year terms. The entiretv of the EDA Board may consist of Citv Council
members. At a minimum, a three-person Board must have one council member, and five- and
seven-person Boards must have two council members. When a City Council member serving on
the EDA Board leaves the Council, a vacancy is created on the EDA Board, which must be filled
for the balance of the unexpired term. EDA commissioners may be paid for attending EDA
meetings and reimbursed for actual expenses incurred.� Finally, EDA commissioners may be
removed for cause by the City Council after a public hearing on the issue.
EDA Officers and Em�loyees
Minnesota Statutes, Section 469.096, Subdivision 2 provides that an EDA must have a
president, vice-president, treasurer, secretary, and assistant treasurer. The president, secretary
' State law is also strict on EDA commissioner conflicts of interest. If an EDA commissioner may be
financially benefited by any potential project, generally the commissioner must state what the conflict is
and recuse himself or herself from the decision-making. Failure to comply with these rules can result in
criminal liability, so if a conflict arises it must be discussed promptly with EDA staff and legal counsel.
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City of Scandia, Minnesota
Re: EDA Establishment Discussion
May 16, 2013
and treasurer are elected annually (typically at the EDA's annual meeting in January), and the
offices of secretary and assistant treasurer need not be held by a commissioner. All duties and
powers of the officers will be detailed in the EDA's bylaws. The EDA also may employ an
executive director, chief engineer, and other professional consultants.
EDA/HRA Tax Levies and Bud eg tin�
As mentioned previously, the EDA may use taxes to fund a portion of its operations. The
City Council levies the tax on behalf of the EDA. The levy cannot be more than 0.01813% of
taxable market value, and the proceeds can be used for any EDA purpose described in state law.
The City Council may increase the levy over the 0.01813% maximum level after a public
hearing. The increased levy must first be approved via referendum if a petition (signed by voters
equaling five percent of the votes cast in the City in the last general election) requesting a
referendum on the levy is filed with the City within 30 days after the public hearing.
Assuming the EDA also exercises HRA powers, the EDA may levy a tax for HRA
purposes with the consent of the City Council (i.e. the Council adopts a consenting resolution,
confirming the EDA's resolution). The maximum amount of the tax levy cannot exceed
0.0185% of taxable market value. The proceeds derived from each levy should be segregated
into different sub-accounts, to ensure the EDA levy is being used for EDA purposes, and the
HRA levy is being used for HRA purposes. Because EDA and HRA purposes frequently
overlap, a large expense could usually be paid for out of each levy, but payment options should
be determined on a case-by-case basis.2
The EDA must send a budget to the City Council at a fixed time every year, ideally to
coincide with the City's budget process. The budget must include a detailed estimate of the
amount of money the EDA expects to need, after subtracting all expected receipts, from the City
during the next fiscal year. The City may then plan to transfer available money to the EDA
based on this budget. There is no limit to the amount of money the City may transfer to the
EDA. Additionally, the EDA must submit an annual report to the Council, summarizing the
EDA's activities and expenditures. The EDA's financial statements also must be prepared and
audited in the same manner as the City's financial statements. The EDA's financial report must
be sent to the State Auditor by June 30 every year.
Project Financing
The EDA may issue general obligation bonds ("G.O. Bonds") to finance authorized
projects. The G.O. Bonds must be authorized by a 2/3 vote of the City Council. G.O. Bonds
Z Because the EDA t� levy is actually levied by the City, the EDA is not considered to be a "special
taxing district," so any taxes levied are subject to levy limits imposed on the City by state law. Levy
limits are not in place past taxes payable year 2013, but this policy is of course always subject to
legislative change. The HRA tax is considered to be levied by a "special t�ing district" and is therefore
levied outside of levy limits.
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City of Scandia, Minnesota
Re: EDA Establishment Discussion
May 16, 2013
must be secured by the full faith and credit of the City, which is pledged in an ordinance adopted
by the City Council. The EDA must levy a tax equal to 105% of the debt service due on the
G.O. Bonds, just as the City does with its G.O. Bonds. It is rare for an EDA to issue G.O.
Bonds, because projects eligible for this type of financing can usually be financed through City
G.O. Bonds.
The EDA may also issue revenue bonds to finance authorized projects. Revenue bonds
are not a general obligation or debt of the City, and are payable solely from the revenues of one
or more economic development projects. In the past, EDA's have frequently issued lease-
revenue bonds, whereby a project is leased to a city or other governmental entity, and the entity
pays rent to the EDA. The EDA then pays debt service on the revenue bonds out of the rental
payments. This was a frequent financing mechanism for city halls before the Capital
Improvement Plan statute was adopted (Minn. Stat. 475.521). Sometimes lease-revenue bonds
are still used for political purposes, or to avoid a reverse referendum under the Capital
Improvement Plan statute. Finally, an EDA may issue conduit revenue bonds, which are tax-
exempt obligations the proceeds of which are loaned to a qualifying non-profit or 501(c)(3)
organization and used for projects benefiting the organization. In such a financing scenario, the
EDA has no obligation to pay the bonds, as all payment risk is transferred to the non-
profit/501(c)(3) organization.
I will be at the Council's January 8 work session to discuss this memorandum, and I am
happy to assist the Council with a discussion of the policy objectives and reasons why EDA's are
created. Please do not hesitate to contact me if you have any questions regarding this
memorandum (651-351-2125 (direct); apratt@eckberglammers.com). I look forward to working
with the City during this process.
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BYLAWS OF THE ECONOMIC DEVELOPMENT AUTHORITY
OF THE CITY OF SCANDIA,MINNESOTA
ARTICLE I—THE AUTHORITY
Section 1. Name of Authoritv. 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 469.080 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 Authoritv. 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. OS-21-13-01,
approved by the City Council of the City of Scandia, Minnesota on May 2l, 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 l. 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 Autharity, 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.
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Section 4. Secretarv. 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 Director. The Executive Director of the Authority shall be the City
Administrator of the City. The Executive Directar 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 Autharity 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. Re�ular Meetin�s. 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 Meetin�s. 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. uarum. 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.
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Section 5. Manner of Voting; 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 reyuires otherwise.
ARTICLE lV—MISCELLANEOUS
Section l. Initial A�proval and Amendments to Bvlaws. 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 ar 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. 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: , 20_
President
ATTEST:
Secretary