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Council approves new TIF district; discusses 2014 budget for five enterprise funds

A graphic showing the area in the proposed Merickel TIF project.

The City Council met Oct. 29 and accomplished two important tasks: giving preliminary approval to a new TIF district where six small commercial office buildings are to be constructed during the next 9 years, and studying the proposed 2014 budgets for the city’s five Enterprise Funds.

The council held a public hearing to consider the application of Jim Merickel for Tax Increment Financing (TIF) assistance.  Merickel is the owner of Merickel Lumber Mills, Inc., and Ace Hardware in Wadena, a member of the board of directors of the First National Bank of Wadena, and owner of several commercial and residential buildings in Wadena.

Merickel wants to develop a two-acre site across from the County Fairgrounds in Wadena.  The site stretches from 3rd Street Southwest to 5th Street Southwest.  One building already exists on this site. Merickel would construct six additional 877-sqare foot one-story office buildings, each with two office suites. Each suite would contain two private offices, a conference room, a bathroom, and a lobby/reception area.

At the meeting, council members heard a presentation from Mikaela Huot, Vice President of Springsted, Inc., St Paul, about the steps in a Tax Increment Financing Plan required by Minnesota Statutes to establish a new TIF district, the proposed agreement between the City and the developer, Jim Merickel, and the financial arrangements that would be established between the City and Merickel during the 9-year TIF district’s life.

A TIF District encourages development of land use that would not occur without the help of the city and provide increased employment.  TIF “will be used to provide financial assistance to the proposed development” in Wadena, according to Springsted’s TIF Plan submitted to the City, and create as many as 15 jobs.

The amount of the financial assistance from the city is $182,424, which includes a loan to Merickel to help pay the public costs of the project (utilities, parking, sidewalks, etc.) and interest on the loan.  The cash reimbursement Merickel will receive for the public costs of the project will be no more than $123,000, with the rest going for interest and administrative expenses.

The City plans to finance the eligible development, site improvement and public utility costs in the form of a pay-as-you-go revenue note.

Springsted, Inc., calculated the amount that land will increase in market value after the six office buildings are completed. It would increase from $188,600, which Springsted cited as the current market value, to $1,126,633, by 2024, after the six new buildings are completed.  During the 9-year TIF district existence as the buildings are completed, the tax capacity of the property will increase yearly.  The City will keep the new tax capacity of the TIF District, and use it to pay for the estimated public costs of the new development.  There are other rules that apply to the new tax capacity as the nine years of the TIF District go by, but they are too complex to be discussed here.

Each year, the developer, Jim Merickel, will make two payments on the $123,000 he borrowed from the City through TIF, until he has paid off the loan at the end of 2023.

All the tax calculations and assessments during the project will be certified by the County Auditor.

The City has to file its TIF Plan with the Minnesota Commissioner of Revenue and the Office of the State Auditor.

Although the city council gave preliminary approval to the TIF District 1-13, the council did not approve the development agreement between the city and Merickel, because they did not have time to thoroughly review it and consult the city attorney.  That will occur before the next council meeting on Nov. 12.

Merickel told the Council he expected to break ground for the project on Oct. 30.

2014 Budget Presentation

Following the vote on the TIF District the council recessed for dinner and then began the next part of its agenda:  consideration of the proposed 2014 budgets of the city’s five Enterprise Funds:  electric, water, liquor store, sewer, and golf course.

Each fund manager presented his capital improvement project suggestions along with the 2014 proposed budget.  The budgets include a 2 percent salary increase for all staff.

Dave Evans presented the 2014 electric department budget request.  He expects revenues about $125,000 above his 2013 budget, and expenditures about $500,000 below 2013.   Evans expects the electric fund to end 2014 with a budget surplus.  

Evans also explained that 2014 will see the completion of the Advanced Metering Infrastructure (AMI) installation which has been going on for several years.  When AMI is completed, almost all of the electric meters in the city will transmit their readings electronically, so human meter readers will no longer be needed.

Evans also presented the 2014 water department budget.  He expects revenues about $20,000 above 2013, and expenditures about the same as 2013, and sees a budget deficit of about $108,000 for the water department.  

Tim Booth presented the liquor store proposed 2014 budget.  Booth expects an increase of about $18,000 in revenues, with expenditures remaining about the same.  The liquor fund may see a budget surplus of $59,000 in 2014 if there is good weather.  The bad weather in 2013 in March and May reduced the liquor store’s normal sales volume. Council members discussed the need for a new electronic sign for the store, and agreed that $30,000 should be set aside in the budget for a new sign.  Booth will get estimates from several vendors.

Dan Kovar presented the sewer fund proposed 2014 budget.  He expects revenues to decrease by $400,000 because prior years’ bond funds are used up.  He expects expenditures to decrease by about the same amount, $400,000, and the sewer fund to complete 2014 with a deficit of $191,800.

Kevin Ross presented the golf fund 2014 proposed budget.  Ross expects the Whitetail Run golf course to bring in slightly smaller revenues than 2013, and have increased expenses of about $20,000.  Mayor Wolden indicated that the city will probably provide the golf course with the needed $20,000.  The golf course needs some new maintenance equipment and some of it will be purchased in 2014.  About 140 members (individuals and couples) pay to use the golf course each season.  School groups also use the course.

The city council will take the next few weeks to study the budget requests and go over the general fund budget, and make a final determination on the 2014 budget in December.  According to a proposed budget worksheet presented at the Oct. 29 meeting, the city’s $12 million 2014 budget will have a smaller budget surplus than it had in 2013.