City, hospital development agreement depends on 1 sentence

If the hospital and city can agree on anything it's that the process of reaching a development agreement has been painfully slow.

Wadena City Council members and Tri-County Health Care officials are at an impasse over a single line of a development agreement with both sides concerned about costs each may incur.

Without an agreement, the city may not provide utilities or annex the new hospital property, which sits just on the other side of the road of Wadena County. Without the city's utilities, TCHC would be forced to look elsewhere. Without the hospital on the line, the city stands to lose out on utility revenue. This item was on the Dec. 10 agenda as well, but was tabled due to a lack of agreement.

The development agreement sets parameters for what the utility construction includes, the costs of extending utilities across a portion of town ($3,227,300.00), who pays for what and any guarantees. The area of concern, which both parties’ attorneys have concerns over, is a line that speaks to other costs that may arise. Among costs that are in question but are not mentioned in the agreement are the electrical utilities. The city wants to provide them to the developer but that's a whole other process involving an agreement with Todd-Wadena Electric Cooperative.

Both TCHC CEO Joel Beiswenger and the council agreed that this was a job for the attorneys to hash out. Still the group tried to talk through the differences for some time. Council member Mark Lunde asked why the attorneys hadn't sat down together to come up with a compromise as another month had passed by without an agreement.

"Why haven't they done that?" Lunde asked. Beiswenger rationed that the timing of the holidays and the extensive work that has been going into the process have made it difficult. City Administrator Janette Bower expressed both sides have been clear that they are not interested in budging on their interpretation. Beiswenger resolved that with an agreement of a few words, they could have an agreeable document to move this partnership forward.

"I think we're all on the same page, we just need to get the language that everyone can agree on," Beiswenger said.

Bower shared the line in question, which the city seeks to keep in the agreement involving excluded improvements.

"The city may provide additional improvements that benefit the project, but are not included in the cost of repayment agreement for the public improvements. The developer shall pay and reimburse City for cost and expenses for additional improvements."

In speaking with City Attorney Jeff Pederson, who worked with the city to craft the language of the development agreement, Bower said this line means that if the developer wants any additions, the city can provide them, but the developer pays for it.

Bower said she has had many conversations with Pederson, who is adamant that that language needs to remain. TCHC's attorney, Matthew Van Bruggen, according to Bower, is adamant that the language come out.

Beiswenger said he agreed that if TCHC has any change orders, they would pay for it. The fear was that the line opened them up to paying for whatever changes came up including the cost of electrical utilities, whether they wanted the city's electrical utilities or not.

"One interpretation of this is .. we'd be required to pay whatever costs," Beiswenger said. "We do have concerns that that could be electrical related in the future."

Beiswenger proposed the following language that he felt got to the concern.

"Additionally in the event that the developer requests any modification to design and construction including change orders (excluded improvements) these costs would be paid by the developer."

"It's not about trust," Beiswenger said. He said in the end it comes down to what the document states. Bower said the improvements in the document are related to water and sewer, the electrical utility is not a part of the agreement. However, the city wants to provide all utilities, especially when the city makes much of its revenue from electrical fees.

When asked about a motion, Mayor George Deiss said at this point he would accept a motion to table or dismiss the agreement. The dismissal word was one that seemed to surprise some in the room.

When Beiswenger asked what Deiss meant by that, Deiss expressed that they could just stop the whole process, meaning no annexation and no utility extension for the hospital. Deiss shared following the meeting that the city has expended a great deal of time on this project and he was losing his patience with what he considered a lack of trust from the developer.

Council member Bruce Uselman pointed out that they were just words away from an agreement and perhaps in the next few weeks, they could approve the document and move ahead with the process. With no agreement in hand, council members tabled the decision along with the annexation.

Bower shared a statement about the annexation project and said that it’s the city’s hope to continue the partnership with TCHC, while looking out for the best interest of the city residents.

TCHC, although I am certain desires for the City to share more of the cost, recognizes the City is 100% funded by our tax and rate payers and that the City’s first obligation is to the City tax and rate payers. When weighing an infrastructure project of this size, the City must consider the tax impact for each property owner. Always in the back of my mind is how much of an increase can Grandma, who is on a fixed income, afford to pay? I believe this Agreement recognizes those concerns. The City will pay the portion which directly benefits the City and TCHC will pay the portion that gets the infrastructure to their property.

She also shared that the latest agreement does not include language about electrical utilities as the first one did. It was removed, because the city has the right to pursue that provision.

“The authority and direction by the council to pursue the territory comes from the City’s adopted policy and from Minnesota Statute 216B.37 – 216B.47,” Bower read from her statement. “Unless otherwise directed by the council, we will follow the established process and will attempt to negotiate in good faith with Todd-Wadena Electric Coop (TWEC) for an appropriate mutual settlement based on the appropriate value of the property. If this does occur, the language will be in a separate document.”

Utilities superintendent Dave Evans spoke to the concern of users picking and choosing which utility they want. It was a concern brought up at a council meeting last year when the new Freshwater Education District building came on board. That large facility uses city sewer and water, but Todd-Wadena Electric provides electricity. The concern is that if a property owner wants to locate near or within the city of Wadena, skipping out on the utility that helps the city raise revenue can put further strain on the city as a whole.