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COMMITTEE OF THE WHOLE - MINUTES - 2/4/1999 CITY OF MUSKEGO Approved COMMITTEE OF THE WHOLE MINUTES OF MEETING HELD FEBRUARY 4, 1999 Mayor De Angelis called the meeting to order at 7:05 p.m. Also present were Aldermen Slocomb, Chiaverotti, Pionek, Patterson, Salentine, Woodard, and Deputy Clerk Blenski. Alderman Sanders was not present. The Deputy Clerk stated the meeting was noticed in accordance with the Open Meeting Law. The minutes of the 1/11/99 meeting were accepted. The Deputy Clerk read the Notice of Closed Session. NEW BUSINESS Item No. 1 - Review draft resolution - TIF - Parkland Mall Mayor De Angelis presented a brief history of the issue. Two resolutions defining expenses as possibly eligible for tax incremental financing (TIF) for the Parkland Mall property have been defeated. At the 1/26/99 Council meeting, a request was made that a resolution be drafted for the purpose of discussion at the 2/4/99 Committee of the Whole meeting. It is anticipated that the Committee will reach some consensus and a resolution will then be brought to the 2/9/99 Council meeting. The Mayor stated we need to keep in mind that the mall must come down and the City’s downtown needs to be revitalized. He requested that be the focus of discussion. Mayor De Angelis recommends the Council review and determine the parameters of what it wants to accomplish. Ground rules will be set for the City, as well as the developer. The focus tonight should be what the Council wants to do, as a matter of public policy, using tax incremental financing to redevelop the area. TIF is used to alleviate blight. The question is how far are we willing to go with public money and what kind of development do we want. The Committee determined how public input would be received. Alderman Pionek requested that the Mayor give a brief explanation of tax incremental financing. The Mayor presented information on how TIF works. The Mayor responded to several questions presented by the aldermen. He stated the City does all the general obligation borrowing. The monies from the TIF are pledged to pay back the general obligation borrowing. The Mayor stated the developer guarantees that the property will be developed to a certain level of value. The developer’s agreement establishes the penalties that will be assessed to make up the difference if that does not occur. Alderman Slocomb noted that there is some unknown risk to the City if guarantee does not materialize. Public Input: David Wells stated his property abuts the mall. He asked what the time frame was to demolish the mall. He is concerned about kids going into the abandoned building. The Mayor responded that Mr. Dyer is looking for commitment that a TIF district would be Committee of the Whole Page 2 Minutes of Meeting Held February 4, 1999 created and then demolition could begin. Mayor De Angelis stated that the building will either come down voluntarily or involuntarily. Mr. Wells asked about the impact of the mold and fungus contained in the building. Alderman Slocomb responded that an independent review showed that what is in there is common to ordinary air; however, the concentration level is high. A small percentage of the population, if exposed, could be affected. There is very little risk now at this time of the year. Alderman Slocomb stated greater risk factors exist regarding the structure of the building itself. Jim Luglio asked about the increased value of the property and the benefit the owner receives. The Mayor stated you are borrowing the money to improve the property which directly benefits the owner. The Mayor also noted that the developer benefits from improvements made to the property that he would have been required to complete and now does not have to pay for. The value of the property increases as the improvements are made with the property owner paying additional taxes. Ted Balistreri stated his father and uncle own the Blockbuster/Post Office building. He clarified that his family does not have an agreement with the owners of Parkland Mall and they are not interested in selling. They do not want to be included in the TIF boundary. Mr. Balistreri stated that they would like to see something positive happen to the mall. Kathleen Luglio asked what the current and historical property taxes on the mall have been? She stated that the owners have had the property assessed down to the bare bones minimum at a current loss to all the taxing bodies. The Mayor stated that the property is currently assessed at approximately $200,000. He did not know what the 1997 assessment was. Mrs. Luglio stated she knows ballpark figures. The taxpayer will pay $4,300 for 1998 taxes. The 1997 tax figure was over $30,000. She stated this was a deliberate effort by the current owner to reduce his contribution to the community. Jay Erdman stated he is against inclusion of demolition in the TIF and the use of taxpayer revenue for private development. He stated $4,323 was paid in taxes for this year, $27,528 for 1997, and $46,181 for 1995. He objects to the current assessed value of the property and the owner’s representation to the state that he got stuck with the property. Mr. Erdman stated the property was bought willingly and as is. He objects to adjoining properties being included in the TIF due to the taxes that will be lost. The Mayor clarified that taxes paid by the adjoining properties are not lost to the different taxing entities, only the potential increase in value of those properties. Pat Berrigan stated that this situation is what TIF was set up to do. He is uncertain if demolition expenses should be included from a public policy standpoint. Mr. Berrigan encouraged working with the developer to create tax incremental financing. Alderman Salentine stated the City has the power to begin the condemnation process and raze the building. She objects to being told that we will look at the building forever if the City does not create a TIF district. Mr. Berrigan acknowledged the City has the power to issue the razing order. However, Mr. Dyer would be entitled to due process and the issue could potentially end up in litigation for a long time. The Mayor noted that Committee of the Whole Page 3 Minutes of Meeting Held February 4, 1999 voluntary compliance is preferred and will be to the advantage of the developer and the community. Bill Simmons stated he does not agree with using public funds to finance the project. Mr. Dyer needs to bring something forward. He opposes TIF until a written plan and financial guarantees are in place. It is best if all parties cooperate. Mr. Simmons opposes demolition being included in TIF. The City is not in business to benefit a private landowner. In response to comments by Alderman Chiaverotti, Mayor De Angelis clarified that demolition could not have occurred earlier because the property owner did not reach an agreement to vacate the remaining tenant until fall of last year. Alderman Slocomb stated the key reason for a preliminary resolution is to say what possibly would be included in TIF. You need to make a statement before demolition removes the blight. The Mayor stated that the blight is not entirely removed just because the building is demolished. Passing a preliminary resolution speaks better to the Joint Review Board and moves the process along. Alderman Pionek asked for clarification about the term “City funds.” He does not believe City funds are in the TIF. The Mayor stated repayment of the funding comes from the taxes generated by the increment. Part of the payment is money diverted from the City’s tax portion. It is not money coming from general tax dollars. Alderman Salentine asked Alderman Pionek what changed his mind about TIF. She noted that he repeatedly expressed his opinion against and supported other means of financing. Alderman Pionek responded that he opposed TIF for the proposed business park because of its location. He stated this is different. Stuart Wangard stated TIF is an economic tool justified for certain projects. He stated TIF should not be utilized unless the project would not occur without such financing. That is the question regarding the demolition. When he has worked with other municipalities, a question is generally raised if a higher quality development will be provided with TIF. Jack Galkowski stated this is a golden opportunity to make our community look beautiful. Let’s do something besides arguing. He asked if the City tears down the building, do the taxpayers bear the cost. The Mayor responded that the City will have to pay for the demolition and the cost is then placed as a lien on the property. What is it going to take to make this move? Mario Deluca stated he has several businesses in the area. He has watched the process for months. It is clear the mall has to come down and qualifies for TIF. The choice between a $4 million project and a $10 million project (with TIF) is clear to him. Stop arguing and get involved with Mr. Dyer. Mr. Deluca stated Alderman Salentine is the spearhead against this project. Committee of the Whole Page 4 Minutes of Meeting Held February 4, 1999 Aldermen Pionek stated there are three ponds in the area with problems that will have to be addressed. The City will have to do something with them which will cost the taxpayers money. This could be included in the TIF district. John Petkoff of Parkland Ventures stated there are other people involved in this project besides Mr. Dyer. We are here to spend money and make the community nice. Let the majority rule. Mr. Petkoff stated he has been in the business for 25 years and has worked in many other communities. Alderman Woodard asked if there were any plans to sell the property. Mr. Petkoff responded no. Alderman Patterson stated the aldermen must listen to their constituents. Mr. Petkoff agreed. He noted someone has to give a little to get a lot in the end. Art Dyer stated the mall has been deteriorating for 15 years. The first week he owned the mall he did more work than what was done in the previous 15 years. The shell of the structure was going to be used. Due to contamination, that plan was abandoned. The experts hired by Parkland Ventures say now is the time to take the building down. If taken down by the City, the amount of blight is reduced. There will not be enough to pay for stormwater improvements. The incremental value will be reduced. Mr. Dyer stated that Mr. Erdman misquoted the findings of the state regarding the assessed value. Mr. Dyer stated he and Mr. Petkoff are prepared to give a financial guarantee. Don’t put a two million dollar tax burden on citizens. Mr. Dyer urged the Council members to work together with him. Alderman Salentine questioned the spirit of cooperation as he threatened to personally sue her, Domonic D’Acquisto and the Mayor. She stated he has asked to be treated like any other developer. Mr. Dyer responded that Alderman Salentine has a personal vendetta against him because he foreclosed on her parents’ mortgage. The Mayor advised Mr. Dyer that he would not allow these type of remarks to continue. Richard Knudsen noted he likes the availability of open discussion. Take the name of the developer away. If another developer owned the mall, the same financing opportunities would be pursued. Mr. Knudsen encouraged the use of public monies as other cities have done. Now is the time to make wrong right; don’t get caught up in your own personal opinions. Get the best deal you can; the best deal for the City is to get a TIF district. Forget about the developer and move on with the project. Bill Simmons stated there are avenues of financing other than TIF. Alderman Patterson stated, in response to comment by Mr. Deluca, that the Council members are seven independent individuals. This is not about the Council going in one direction because of one alderman. Committee Discussion: Alderman Slocomb noted that there were 14 items presented in the July 14, 1998 plan submitted by Parkland Ventures. He would like to address each of the items. Committee of the Whole Page 5 Minutes of Meeting Held February 4, 1999 Alderman Pionek noted that the committee needs to determine if there is a consensus for TIF before individual items are discussed. The consensus was unanimous in favor of TIF. 1. Hazardous Materials Remediation Alderman Slocomb opposes inclusion in TIF because it is contained within the facility. He opposes use of public funds for private development; his constituents have not indicated otherwise. Vote 4 (Slocomb, Chiaverotti, Patterson, Salentine) in favor to remove and 2 in favor (Pionek and Woodard) to keep. Alderman Slocomb noted that the dollar amounts cannot be looked at; the Committee should only consider if it is receptive to include the items in a possible TIF district. 2. Demolish Existing Structures Alderman Slocomb noted that he opposes. Vote 3 (Slocomb, Patterson, Salentine) in favor to remove and 3 (Chiaverotti, Pionek, Woodard) in favor to keep. Due to tie at committee level, item died. Alderman Pionek requested vote on mall structure only. The result was the same as the previous vote. 3. Tenant Relocation. The Mayor noted there were none to be relocated. 4. Regrade Property and Create Building Sites Alderman Slocomb stated that was totally a developer’s cost. Vote 6 in favor to remove. 5. Install Traffic Control - Parkland Drive and Janesville Road Alderman Pionek requested that Lannon Drive upgrade be included. Alderman Salentine noted that the City requires developers to pay for the impact their developments have. The Mayor stated that TIF can only be used to the extent that the development has an impact on the outside improvement. It has to be a benefit to the TIF district. Alderman Slocomb stated the item will be retitled, “Install/Upgrade Traffic Control - Parkland Drive, Janesville Road, and Lannon Drive. At this point, Mr. Dyer interrupted and stated you are wasting your time. He will not guarantee a ten million dollar project if there is no benefit to him and demolition is not included. 5. Install/Upgrade Traffic Control - Parkland Drive, Janesville Road, and Lannon Drive Vote 6 in favor to include. 6. Install Utilities to New Construction This item was clarified to include laterals from main service to property line. Committee of the Whole Page 6 Minutes of Meeting Held February 4, 1999 Vote 6 in favor to include. 7. Construct Stormwater Retention System Vote 6 in favor to include. 8. Regrade and Repave Parking Lot Alderman Slocomb stated opposition. Vote 6 in favor to remove. 9. Complete Building Site Enhancements Alderman Pionek requested this be left until the end. 10. Install Site Lighting Item was changed to include only street lights. Vote 5 in favor to include with 1 (Salentine) in favor to remove. 11. Install Curbing and Parking Lot Islands Vote 6 in favor to remove. 12. Install Sprinkler System Item was clarified as exterior only. Vote 6 in favor to remove. 13. Install Landscaping Vote 6 in favor to remove. 14. Administration, Planning, and Legal Services Item was clarified to include to the extent required for the TIF items, or the creation of TIF district. Vote 6 in favor to include. 9. Complete Building Site Enhancements Alderman Pionek stated the item was too general; spell out. He noted it could be used to pick up additional costs (brick required by the Plan Commission) so as not to lose a potential tenant. The Mayor suggested the title of the line item could be changed to “Economic Incentives” to achieve that objective. There was support for that concept as it gave the City latitude and provided some contingency for the unknown. 9. (Retitled) Economic Incentives Vote 6 in favor to include. Lannon Drive Upgrade Alderman Slocomb suggested inclusion of this item. Vote 6 in favor to include. Signature Feature Committee of the Whole Page 7 Minutes of Meeting Held February 4, 1999 Alderman Pionek suggested the inclusion of this item if the City would like to see something like this in the development to enhance the downtown area. Aldermen Salentine and Patterson voiced objection. Alderman Chiaverotti stated it could be included later. Alderman Pionek said the point is to add everything we can now. Vote 3 (Slocomb, Patterson, Salentine) in favor to remove and 3 (Chiaverotti, Pionek, Woodard) in favor to keep. Alderman Pionek requested that the demolition item be revisited to include a specific dollar amount that TIF could pay for. Anything additional would be borne by the developer. Aldermen Slocomb and Patterson stated opposition. Alderman Chiaverotti stated the idea was a compromise and a good incentive. Alderman Pionek noted that the TIF districts of the past have indirectly benefited developers and landowners. There isn’t any difference here. Alderman Chiaverotti stated a number of the other items that the aldermen have agreed to include will benefit the developer; it is contradictory. Alderman Slocomb stated the other items have a public purpose. The TIF already provides significant benefits to the developer and to add further economic benefit is poor public policy. There has been no direct private improvement in any past TIF. Alderman Pionek stated that the City will benefit from the additional tax revenue after the TIF is paid. The community will benefit. Alderman Chiaverotti also noted that jobs will be created and putting something there that is useable and attractive is a positive aspect. Alderman Patterson stated his constituents do not want demolition included in the TIF district. Alderman Pionek stated the mall is in his district. His people are saying the opposite. Alderman Chiaverotti indicated that she had calls on both sides of the issue, almost split down the middle. Alderman Pionek stated it makes a difference where you live regarding this item. Additional Public Input: Mr. Dyer asked why he would offer a personal guarantee and accept the risk when the City will not include demolition in the TIF district. The Mayor noted that there are other incentives being extended to Mr. Dyer. There is nothing that says you have to pay for demolition with TIF to create the TIF district. Mr. Dyer stated he has to receive benefits to guarantee ten million dollar project; that is just good business sense. Wendy Reinboldt stated she has seen TIF districts work in other areas. Give a future tenant incentive to come here. The negative articles will keep potential businesses away. Having a two million dollar project versus having a ten million dollar project should mean something. Mr. Erdman asked if there was a value to the items to be included in the TIF. The Mayor stated that is not known at this time. Kim Murphy stated she has a business and was contacted by Mr. Dyer to possibly relocate, or expand in this area. With everything she has read, she would not be interested. Rick Petfalski, Highland Park Drive, stated he has a business in the area. The City and its citizens will receive benefits if money is given to an individual developer. Mr. Committee of the Whole Page 8 Minutes of Meeting Held February 4, 1999 Petfalski stated does not object to the developer benefiting because he will receive a benefit as well. He does not want to see developed into another strip mall project. Aldermen Woodard stated she believes people in Muskego do not understand TIF or all of the facts involved. We are not working together. Why can’t we include everything and make this the best project it can be. This will benefit all of us; she would not put her constituents at risk. The Mayor noted this will come forward to Tuesday’s Council meeting. There was no miscellaneous business. In an effort to adhere to the 10:00 time limit, none of the other items on the agenda were discussed. CLOSED SESSION Ald. Chiaverotti moved to convene into closed session pursuant to §19.85(1)(e) Deliberating or negotiating the purchasing of public properties, the investing of public funds, or conducting other specified public business, whenever competitive or bargaining reasons require a closed session; more specifically discussion of a possible border agreement with the Town of Vernon. Ald. Slocomb seconded; motion carried 6- 0. The Deputy Clerk was dismissed. Alderman Salentine moved to convene into open session. Alderman. Slocomb seconded; motion carried 6-0. Alderman Slocomb moved to adjourn at 10:13 p.m. Alderman Salentine seconded, motion carried. Respectfully submitted, Jill Blenski, CMC Deputy Clerk jmb