In triumphant fashion, the City of Wadena and developer, Tri-County Health Care, signed off on a development agreement that will allow the new hospital and clinic project to move forward to the next hurdles in the journey.
The city council approved of the development agreement on a 3-2 vote, with council members Mark Lunde, Wade Miller and Mayor George Deiss in favor of the agreement with an amendment made during their regular meeting Tuesday night. Council members Bruce Uselman and Jessie Gibbs gave opposing votes saying that agreeing to split costs was fair and prefered over additional language regarding a cap on shared expenses.
The development agreement lays out what is expected between the city and developer including who pays for what, what is being developed and when, and what those developments will do for the city and the developer. Any changes or unexpected items that arise must still be worked through between the two groups during the course of construction.
With the development agreement approved, council members went down the line of other agenda items that have been postponed until this agreement would be reached. Those items include approval of an ordinance to annex land located in Compton Township in Otter Tail County; approval of an ordinance amending the city zoning map to rezone the residential property to a C-1 commercial property; and approval of a resolution for a conditional use permit to construct a medical center and related activities in a C-1 zoning district. Those three items were approved with all in favor.
With the final approval, City Administrator Janette Bower stepped down from her seat and proceeded to hug Tri-County Health Care President and CEO Joel Beiswenger. Beiswenger then went around shaking hands with each of the council members and staff. After months of meetings, compromises and amendments, seeing the city and the hospital come to an agreement brought out smiles all around.
Along with Beiswenger was TCHC Vice President and CFO Kim Aagard and TCHC board member Terry Davis. Joining the ranks was a crowd of over a dozen TCHC staff members, who joined in the moment, clapping and quietly cheering upon seeing the two embrace.
The final compromise made to the agreement on Tuesday involved the award paid to Todd-Wadena Electric Cooperative for electrical service to the hospital, which states “Developer and City shall each pay 50% of the Service Territory Acquisition cost. Developer's obligation shall be amortized and payable over 10 years as an addition to developer's monthly electrical service charges and shall be capped at a maximum of $5,000 per year.”
The parties understood that the cost of acquisition was unknown, though they had at least an idea of what it might cost.
“It is an unknown at this time, of course the city will negotiate in good faith to the least amount of buyout as possible,” Bower said. “I think that benefits all of us, perhaps not Todd Wadena, but it benefits the rest of us for that,” Bower said.
Lunde felt the 50/50 split was amicable. Uselman made clear, as the council has in the past, that the goal is to provide electrical utilities to the new hospital. Miller said in his review of other projects in the region that sharing costs was not unheard of to move the process forward.
The cost of the electrical, water and sewer utility extension is estimated at $3,227,300. The developer is responsible for most of that cost except for areas including stub outs, which the city discussed adding for potential development along the extension project, and 50 percent of electrical service territory acquisition costs.
Prior to the regular meeting, the council had a work session meeting hearing from Mikaela Huot, director at Baker Tilly, a municipal advisor, who informed council members about the process of using tax increment financing for the hospital construction project. The goal in using TIF is to help bring in funds to pay for development needed for the hospital property before the property actually starts making the city revenue in the form of taxes. If approved TIF can help pay for public improvements, land acquisition, site work, relocation, financing and administrative costs.
Within her presentation, Huot explained that the requested assistance is $2.9 million. Construction of the project is planned for 2020 with a completion in 2022 and full taxes coming in from the new construction in 2024. The county taxable value estimate for the clinic is $13 million to $15 million. The clinic, which makes up about 45,000 square feet of the 123,000 square foot project, is the taxable portion of the construction. With a value of about $13 million, the total annual increment financing is about $304,000 annually. Over 16 years, that TIF could bring in about $2.7 million. The $2.9 million goal would be achieved with a value of $14 million on the clinic.
The total TIF eligible costs for this project are estimated at $6.6 million.
The preliminary financing for construction of the hospital including site development and acquisition are estimated at $61,841,879.
Preparing for future extensions
In an effort to prepare for future electric service territory expansions like the hospital utility extension, the city council also approved engaging with McGrann, Shea, Carnival, Straughn and Lamb as legal representation for electric service territory matters. The legal representatives would work for the city when needed at a rate of $365 an hour for their attorney and $150-$250 an hour for associates or paralegals.