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HomeMy WebLinkAbout9B - Report on EDA Relationship to City Council MEETING DATE: AGENDA #: PREPARED BY: PRESENTER: AGENDA ITEM: DISCUSSION: 4646 Dakota Street SE Prior Lake. MN 55372 ECONOMIC DEVELOPMENT AUTHO iTY AGENDA REPORT June 21,2010 9B Frank Boyles, Executive Direc Frank Boyles Consider Approval of a Report on the Relationship of the Economic Develop- ment Authority (EDA) to the City Council and Other Related Matters Introduction The purpose of this agenda item is to solicit EDA input regarding various issues identified at the February 16, 2010 meeting including: 1) the finan- cial relationship between the City Council and EDA; 2) the accountability of the EDA to the Council; 3) the relationships between the City Council, EDA, EDAC and staff; and 4) the size and composition of the EDA. Historv Minnesota Law allows cities to create Economic Development Authorities, Housing Authorities, Housing and Redevelopment Authorities, and other entities such as; Rural Development Financing Authorities, City Develop- ment Districts and Port Authorities. The City does not meet the criteria for some of the authorities authorized by statute. When the City Council first created the EDA it invested it with the powers of an EDA, HRA and HA (collectively herein "EDA"). The Commissioners were not all Council members and the EDA contracted with a consultant to attract new business. This occurred at a time when the City was develop- ing its industrial park. In the early to mid 2000's the City created hired an Economic Development Director in-house, but as development began to slump that position was eliminated in 2009. The level of interest in the EDA has ebbed and flowed under different Councils. There was a discussion at the February 16, 2010 EDA meeting concerning various ideas to maximize the effectiveness of the EDA's efforts. The Commissioners asked: 1) the financial relationship between the City Council and EDA, 2) the accountability of the EDA to the Council, 3) the relationships between the City Council, EDA, EDAC and staff, and 4) the size and composition of the EDA. This report is intended to address each of the areas provided for above. R\Council\2010 Agenda Reports\06 2110\EDA Reporting Relationships.doc Current Circumstances 1. Financial Relationships Between the City Council and EDA The EDA has never had an independent budget; although it does have the authority (with City Council approval) to set a tax levy to fund its ac- tivities. Because the City Council has to approve issuing bonds, levying taxes and borrowing, for the most part the EDA has remained under uti- lized and dependant upon the City. The City maintains accountability for EDA funds and since the members of the Council and EDA are one and the same, there has never been any friction when, for example, the EDA asked the City for authority to issue bonds to construct the new City Hall and Police Station. The EDA has never sought authority to set a tax levy and therefore has no ongoing funding of its own. This means that virtually every financial decision and action the EDA wants to take must be approved by the City Council. The EDA's desire to retain a consultant depends on the City Council authorizing the necessary funding. The staff is checking with the City's auditor to determine if there is a way to remove some of this duplication while retaining the fundamental accountability it establishes unless directed otherwise. It would be useful for the EDA to have an operating budget in order for it to be in a position to exercise some of the powers the City Council granted to the EDA in its enabling resolution. One option to address this issue would be to allow the EDA to set a levy in an amount sufficient to facilitate achieving its objectives. In order to maintain a zero impact on property owners the City there would have to be corresponding de- crease in the General Fund levy. The funds earmarked in the 2010 budget for economic development amount to $44,401. Only $30,000 of this amount is available for economic development. This is hardly enough money to launch an effective economic development effort. 2. Accountability of the EDA to the City Council Because of the composition of the EDA there is no issue of accountabil- ity between the Council and the EDA. This type of blanket statement could not be made if the composition of the five-member EDA was changed to replace a Council member with a member of the EDAC for example, or, the size of the EDA was increased to seven. There is no question or ambiguity in the statutes that the City Council is the final authority in key EDA actions. Based upon the Statutes (see the City Attorney's document entitled, "Structure and Authority of the EDA," the City Council may restrict EDA powers in the following areas by modifying the EDA's enabling resolution: . City Council must approve management and administrative struc- ture. . Actions of the EDA must be consistent with the City's Comprehen- sive Plan. . The EDA must follow the City budget process. R:\Council\2010 Agenda Reports\06 2110\EDA Reporting Relationships.doc 2 . The City Council, by 2/3 majority, must approve EDA bond issues. . The City Council must approve any action involving a government agency (loans, grants, etc.) . The City Council may require transfer of EDA reserves. In addition, the EDA Bylaws provide that the EDA will annually provide a written report to the City Council detailing and accounting for its activi- ties and of its receipts and expenditures during the preceding calendar year. The EDA must be audited annually and may undergo a financial compliance check if directed by the City Council. The EDA may not dispose of City property without the City Council's approval as set forth in City Code. Finally, EDA commissioners may be removed from office by the City Council for cause (inefficiency, neglect of duty, or miscon- duct in office). The Bylaws provide that the City Manager shall act as the Executive Di- rector of the EDA. This is another mechanism for providing coordina- tion, communication and accountability between the City Council and EDA. The City Attorney also serves as the legal counsel to the EDA. The EDA may employ engineers and experts and other employees as it deems necessary. It may make purchases. The City may furnish the EDA with offices, supplies and equipment. The conduct of meetings and conflict of interest provisions of the City Council Bylaws apply to the EDA as well. 3. Relationship with the EDAC The EDAC is analogous to various other advisory committees the Council has created to advise it in particular areas where the expertise or interest of the Committee's members adds values to the Council's deliberations. The existing EDAC has not been provided with a great deal of direction from the Council, yet as a group of motivated self- starters the EDAC has developed goals and objectives for itself. This may be because there is no formalized reporting relationship between the EDA and EDAC. There are a number of possible ways to improve upon the current situation. (1) The size of the EDA could be changed to seven. The two additional members to the EDA could be the Chairperson and a member at large. (2) The composition of the EDA could be changed to include three Counselors and two additional members; one from the EDAC and the other from the Planning Commission. (3) The EDA could hold quarterly meetings and have the Chair- person of the EDAC provide the EDA with a written report of its activities. (4) A member of the EDAC could be appointed as a liaison to the EDA; attend meetings and report back to the EDAC. Any of these suggestions would require amendments to the Bylaws and potentially enabling resolutions. Bylaws provide that the EDA may, "contract for the services of any of consultants, agents, public accoun- tants and other oersons needed to oerform its duties and exercise its. powers." (emphasis added) This suggests that the EDA could estab- R\Council\2010 Agenda Reports\06 2110\EDA Reporting Relatlonships.doc 3 lish an EDAC-type advisory body. So the EDAC could report to the EDA by amendment of its Bylaws by the City Council, EDA or both. 4. EDA Size and Composition Most of my suggestions regarding the size and composition are ad- dressed within the context of my comments concerning the relationship between the EDA and the EDAC. As you know Minnesota Statutes provide that the EDA may be a three, five or seven-member body. The provisions below are directly from the Statutes: U(a) Three-member authority: the commissioners constituting a three- member authority, one of whom must be a member of the city council, shall be appointed by the mayor with the approval of the city council. Those initially appointed shall be appointed for terms of two, four, and six years, respectively. Thereafter all commissioners shall be appointed for six-year terms." U(b) Five-member authority: the commissioners constituting a five- member authority, two of whom must be members of the city council, shall be appointed by the mayor with the approval of the city council. Those initially appointed shall be appointed for terms of two, three, four, five, and six years respectively. Thereafter all commissioners shall be appointed for six-year terms." U(c) Seven-member authority: the commissioners constituting a seven- member authority, two of whom must be members of the city council, shall be appointed by the mayor with the approval of the city council. Those initially appointed shall be appointed for terms of one, two, three, four, and five years respectively and two members for six years. The- reafter all commissioners shall be appointed for six-year terms." The Statute provides that the enabling resolution may allow the ap- pointment of more city council members than set forth in the paragraphs above. They do not indicate how an existing EDA, whether five or sev- en, would reduce itself to a lesser number. If commissioner vacancies are filled by non-city council members, the council may establish a job description based upon the responsibilities of the EDA and desired knowledge and credentials of applicants. Conclusion Given the information in this report, the Council should determine if it wish- es to make modifications to the size and composition of the EDA, or report- ing relationship between the City Council, EDA and EDAC. ISSUES: The information in this report demonstrates that there is considerable ac- countability of the Economic Development Authority to the City Council. Given these safeguards, the City Council may wish to determine if it wishes to consider any modifications other than allowing the EDA to set a tax levy R\Collncil\2010 Agenda Reports\06 2110\EDA Reporting RelatiJnships.doc 4 and more clearly define the reporting relationship between the EDA and the EDAC. Without commenting about the proper EDA size or composition, the Council may want to consider the following factors in making their deci- sion: . Is an EDA likely to be more effective if some or all of its members are non-council members? . What is the optimum size for effective EDA decision-making? . What characteristics should EDA commissioners possess to be most effective? . What is the optimum size to include both council members and community experts? . What size will be most cost-effective for the City? . How much City Council/ City Council member time will the EDA re- quire for effective oversight and participation? . How much staff time will be needed to support the new EDA and the existing City Council? . Should the non-Council EDA members come from the EDAC and serve in an official capacity on that body? . If we are to have success with a revised EDA, do we need to reins- tate the full-time Economic Development Director position? . If so, how will this position be funded? FINANCIAL IM- PACT: Undeterminable at this time. Modification of the EDA could result in greater support costs on the part of the staff, or per diem payments at $75 per meeting for EDA commissioners. On the other hand, new developments can create tax base beneficial to supporting these efforts providing local employment and mitigating against property tax increases. ALTERNATIVES: 1. Discuss the pros and cons of modifying the size and composition of the EDA and make decisions at Monday's meeting. 2. Direct the staff to analyze the potential costs of any modifications of the EDA the Council may desire and return with that information for final discussion at a future meeting or work session. RECOMMENDED As determined by the EDA. MOTION: R:\Collncil\2010 Agenda Reports\06 2110\EDA Reporting Relationships doc 5 l- I I-I.. - -- -- - - - - - - - - - - - - - - -- -- -, : MN Stat. Ch. 469 : "*__ ___u u____ __ ___u u___ I I l~E_~~bii~~~i~;~i~ti~~~ J I. LEGISLA TURE CITY EDA y ~urpose '" To acquire, build, lease, sell or pro- vide facilities for industrial, recrea- tional, or commercial development in order to provide stable, diversified local economics and to provide new employment opportunities under the direction of the Mayor and City ~OUnCil. (MN Stat. 469.1 09) ~ ~ Powers I. To acquire, transfer, lease or improve real estate/easements within its area of operation; 2. Eminent domain; 3. To enter into contracts; 4. To act as a limited partner; 5. To cooperate with and act as an agent of the federal government; 6. To compile studies, analysis and re- search; 7. To borrow money, issue bonds, invest reserve funds and make expenditures; 8. To undertake and carry out improve- ment projects within its area of opera- tion; 9. To join official trade associations and perform public relations; 10. Any other powers granted by its City Council. 11. To create Tax Increment Financing Districts ivI:/LDA City of Prior Lake Structure and Authority of the EDA / ~ The City may, by ordinance, divide the economic development powers; and by resolution may transfer the control, authority, and operation of any project from the govemmental agency that established the project to the Economic Development Authority. (MN Stat 469.094, Subd. 1-2) / CITY DEVELOPMENT l ~ " ~ / Limitations: 1. City Council must approve management/administrative structure; 2. All actions must be consistent with the City's Comprehensive Plan; 3. Must follow City Council budget process; 4. City Council must approve the sale of bonds by a 2/3 majority; 5. City Council must approve any action involving a government agency; \!:. City Council may require transfer of reserves. I I HRA y f. '\ Pu rpose To provide a sufficient supply of safe, adequate and affordable hous- ing, to redevelop blighted areas, and to perform those duties accord- ing to comprehensive plans. (MN Stat. 469.001) " ./ y Powers I. To sue and be sued; 2. To employ experts, officers and employ- ees; 3. To undertake and carry out improve- ment projects within its area of opera- tion; 4. To acquire, transfer, lease or improve real estate/easements within its area of operation; 5. To borrow money, issue bonds, invest ..- reserve funds and make expenditures; 6. To compile studies, analysis and re- search; 7. To cooperate with and act as an agent of the federal government; 8. To make recommendations to the City Council on enforcement or initiation of municipal powers relating to develop- ment of improvement projects; 9. To develop housing rehabilitation/ assistance grant programs. ~ y (Purpose "\ To develop a program to provide impetus for commercial develop- ment, increase employment, to provide open space relief, to pro- vide safe, adequate parking. (MN Stat. 469.124) " / y Powers 1. Adopt development programs aimed at improving the facili- ties, quality oflife and quality of transportation; 2. To acquire land or easements through negotiations or eminent domain; 3. Adopt ordinances regulating traffic controls as they relate to adequate parking and pedestrian systems; 4. Install special lighting, landscap- ing and snow removal systems; 5. Negotiate the sale or lease of property for private develop- ment if consistent with the de- velopment program for the dis- tri ct. y The City Council may restrict the powers of the EDA by modification of the enabling resolution. ,/