City Council - Regular Meeting

You know, there's some good, there's value there. It's just a matter of kind of getting to the right place, I think, for something that's acceptable for him and his bottom line with regard to his project, as well as for the city. So I just need a little bit of time to kind of go back and forth with him. But then also, as we go through what I developed with Anthony, Al, and the two Scotts, sorry, I didn't mean to group you into one, but it was easier. You know, if I get some just some some blank slate guidance from you guys, then I can kind of run with that and a few other other developments. Another piece that I wanted to surface before we discussed is we are talking to a developer out of Columbus, Ohio. We should know by the end of the week whether or not they get the tax credits they seek. But there is there is a pretty decent sized project, about 44 units. That's being considered. The project itself has actually been in the works for a few months. This is something that the city wasn't made aware of until about two weeks ago. But at the end of the day, if the state of Minnesota does give them what they need from basically an incentive perspective, then I think we're going to see a well first we'll have to talk about zoning and things like that but a pretty decent sized project where we won't have to give away much as a city and it's a private it's not our land it's a private transaction and i'll also add that some of the feedback i got from a few council members that i polled Regarding this particular project that the feedback I got was, you know, it'd be a lot better if there were some retail associated with it. So the folks out of Columbus indicated that if they do get the money from really it's a tax incentive. I keep saying the money, but the reality is it's just a super expensive. It's one of the better programs across the nation that states administer. And if they do get that money or that incentive, then we'll have not only the units, but a ground floor of retail. Subsequent to that, the other piece I kind of wanted to just surface just so everybody's made aware. We have been meeting with a developer. I don't want anybody to get excited, as I've mentioned in the past. And the RTC is being looked at. The initial feedback we're getting is the developers that we've met with now five times kind of floated the concept as well as some of the basic economics with some of their investor groups. And so they are considering two projects, maybe a third. And instead of taking on the whole you know, seven, eight, 900,000 square feet, whatever it is, you know, they're looking at it from a very regimented bit by bit project that might make the economics work much more in their favor. So I share this with you just so that I want you to understand the playing field the city isn't desperate for development. There is, I wouldn't call it a lot of interest, but there is some interest, whether it's in the RTC, whether it's in this new development opportunity from the group in Ohio, or, you know, as you learned last time, the Rognos offer. So there is interest, and what I think is important, and the goal is to just very briefly summarize the document you have. And if... the Port Authority is amenable, you know, taking on just a consensus view. To me, it doesn't have to be formal, but it's enough for me to know and understand this is something that the city will support. Then in speaking with some of the local realtors and also some connections I have back in Fargo-Moorhead, I do believe sometime in the month of july maybe second or third week we could have a pretty decent half a dozen serious developers come maybe we We rent one of those shuttle buses or something from the Otter Express. I don't know. But basically take them around, show them the community, articulate the city's value proposition, show them the properties we have. We may want to include one or two private properties that are being considered or that are for sale just so that we don't limit them. But at the end of the day, I do think we can gin up enough momentum and interest to get something moving uh in one direction or another and with that with some of the the projects we're working right now we we can continue working with those development groups including our local developer because i i don't want to you know i don't want it to be an oversight you know he did put in 48 units uh which is pretty impressive i mean when you consider he's one of the few developers that are doing work. So I don't wanna throw that away, but at the same time, I wanna work the momentum and get a few projects going at the same time so that we have that momentum and development. Any questions so far?

I don't have any questions. I was gonna ask who was gonna take the lead on the whole developer day, but I think you answered that for me, so.

Yeah, I mean, it's a collective effort and we're all kind of in on it. And, you know, at the end of the day, when we do have this, any of these projects, I think it's super important to have not just folks that are sitting around the table now, but, you know, having a couple of our employers join us and maybe a bank or two, just so that they can talk through what they're seeing in terms of their workforce needs, you know, kind of a qualitative augmentation to what we're quantitatively demonstrating to them through policy, through incentivization, through numbers. The challenge we have just being fully transparent in Fergus Falls today is if you want new development, the cost of a new home, even if it's 1200 or 1500 square feet, so something that's not quite the average American home, but also not tiny, it's still 40 to $50,000 less than if someone did the same project in Fargo-Moorhead, Detroit Lakes, or Alexandria. And I share that with you because it's something you have to just keep in mind when developers looking at doing 40, 50, 60 units, you know, they're looking at a bottom line. And I'm not suggesting it all needs to be made up through city coffers. But what I am telling you is the math is the math. So given this, what I'm looking for and the reason why I put together in conjunction with the housing subcommittee, if you will, this document was because we do have some supply challenges. It's interesting because there's a report that's coming. Obviously the council worked with the HRA, if you recall last month or two months ago, and you have that report coming. And so there is gonna be data that suggests there is a housing need and it'll break down more or less what the, what the numbers are concerning what types of housing. But even keeping that in mind, what I wanted to put in front of you is, working with this group, smaller group, what we're effectively trying to do is just create a housing infrastructure so that the next 20 or 30 years, whatever the city does, they start realizing a return on investment within a reasonable timeframe. And when I say reasonable, I think the consensus with the subcommittee was roughly 20 years or so. And I don't mean you have to tip for 20 years. So there's a difference. What I mean is with whatever investment you put into it, whether it be land infrastructure or, you know, some sort of abatement, the, before that met indicated somewhere around a 20 year return on investment. So once, year 21 kicks in, they'd like to start seeing that return start. And so given that parameter coupled with trying to speak the language of developers, because developers are looking for obviously the best possible deal they can get, but then also ensuring that taxpayers in Fergus Falls are protected. So, you know, looking at competitive development recruitment right now, given where we sit geographically, protecting taxpayers, but also developer-friendly positioning, I think we have a good sort of roadmap, if you will, here. And more or less, what the subcommittee came up with was for the Stanton Avenue area, they're looking at about a $300,000 price point. Also, you know, in addition to brick and mortar, I'm going to do some exploration on modular housing, whether that being, you know, the folks in Fergus that make these homes or whomever it is in the region, but it is something we might want to look at because it could potentially take 20% off the price of a new home thereby making it more affordable. So the Stanton Avenue property was looked at from a town attraction point of view. And when I say talent attraction, when you look at the economics associated with 35% of a household income going toward a mortgage, you're looking at somewhere between one full-time working spouse slash part-time and two full-time working spouses given today's median wage in Fergus Falls. And so we think that somewhere between 275 and 300, can be met at Stanton. And we're looking at roughly 40 units there. And then for Norgren, the idea was to create maybe a slightly higher end portfolio of homes. And the reason being just where it sits, what the infrastructure cost is likely to be, and just a variety of factors that the subcommittee had. And then we also looked at the RTC or Kirkbride and as i mentioned uh that comes with its own incentives that that that's kind of speak for themselves and what i'm doing right now with the the folks that are looking at that facility is trying to find them not just tax incentives or credits but any additional angle we possibly can to make it pencil out because i think that would be just an amazing project to augment single family development and and having someone come and develop that property i think would be pretty awesome so that's more or less what the committee came up with um in terms of incentives because you're probably thinking okay well what's it going to run more or less each project would be different depending on the proposal of the developer but Um, the, the, the team that met did understand that we're going to have to give and take something. And what that means is it might be, you know, a shorter term TIF, 12 or 15 years. versus a long-term TIF, this way you see a return, perhaps an abatement, perhaps the city taking on some of the infrastructure, whatever the case is. But ultimately the goal is, as I mentioned earlier, to attract the developers, but also protect the taxpayers while getting the kind of housing that demand requires, because there is a difference between I think what we think the community needs and what the developers are going to tell us when they do come based on their experience, either in the community or in surrounding communities. So not much of a difference, but some. So I'll leave it there and turn it back over to you.

Yeah, go ahead.

James, if I could just ask or make one comment on what you just said. You said the cost of a home in Fergus is $40,000 to $50,000 less than Alex Yale, Fargo-Moorhead. And I think by that you meant what it sells for, not what it's costing to build. And so a developer can build the same house here or there, but get more money for it there than here. And so why build here if you can make more money somewhere else? I think that's my understanding of our conversation earlier, correct?

That's correct. That's precisely what I meant. So if I misspoke, I apologize. So that's correct. I mean, the input costs are going to be the same for all four of those locations. But we don't have the wages that those communities have. Therefore, they do get higher margins in those communities.

I don't think it was a case of you misspoke. I think it was just more to the story and you were moving along. So that's fine. Thanks. You bet.

Any other questions?

I think that like we saw the Norgren property as because of the acreage concerned that you could almost have different phases or different kind of segments of that property where you would have kind of homes that were in that 300 to half a million dollar range and then homes that were kind of half a million to a million and then homes that were a million plus type of thing where the land has different aspects of it that you could warrant a premium. So it would be more kind of a more complex situation than just In Stanton, I think everybody viewed that as being sort of high density homes, kind of first type buyer, something to get people kind of into Fergus and to be an alternative to somebody that's probably living in a rental home today If we could get the cost down from, as James said, closer to the 275 if we went down a modular route, that might be not far off what somebody's paying for rent for a nice property. And if we could start to give an alternate to renting, that might open up some of the rentals that either they would have to start putting some money into rentals to do them up or sell them. But either way we would get, and plus we would get a lot more bang for our buck quickly because the infrastructure cost for that was in that million dollar range. So if you got 40 to 45 homes in there and divided it, it's not that much money per home.

Right. Makes sense.

And it's ready to go. Yeah.

Yes.

And I think we, you know, probably just to add, we didn't really touch on the dairy property. I think everybody agreed that the dairy property was, you know, potentially it needed to be a class of its own and that we shouldn't be looking at putting, you know, twin homes or kind of any basic type property. housing in there that should be something that's of a class that's better than kind of you know or warrants the district in which you want to build it in

Yeah, I mean, it's a very unique property for sure. Yeah. Laurel?

I was going to ask on the dairy. I'm glad to hear that. I would like to see some mixed use a little bit on the dairy too, not just homes. But one of my concerns is if we're going to attract a good quality developer for the dairy, are we at all concerned by having that adjoining property on Stanton being a bunch of modulars? that to me that's going to be a little harder sell for people that are going to be trying to do higher end things right on the other side of the hill kind of thing so i just i worry a little bit about the idea of modular on staten i'm all for the lower the i don't want to say low income but that price range i'm just worried about the look of modular Closed proximate to the dairy.

There's a rail track in between, which that's going to be a detraction, obviously.

On its own.

On its own. And I mean, we had somebody come in with modular homes last year at some time pitching them to Clara and I, and they don't look modular.

As long as we kind of keep a design standard. That would be my concern. It's like, if we're going to do modular, let's make sure we have some design standards so we have some personality.

Yep. I mean, a modular, all that really is, is that they were, they build them off-site and it takes about three months to build them. And then they, it's a kit. It's like a kit that they bring out and then erect on site. And so therefore you get a house up in inverted commas quicker. So it's, they've moved a long way from the kind of, you know, the initial kind of harvest home type buildings that you just bolt together.

No, they've definitely changed modular for sure. Okay, any other questions? I guess one thing that has been brought up is we do not have like a price structure. Can any of you from the committee kind of speak to that a little bit?

Oh, did you want to take it, Mayor?

No, no, no, you can do it.

Yeah, we did talk about that. I think the issue is, depending on the model that developer deploys, in some instances, they may see more value in land being cheaper, but in other instances, they may feel like, well, if the city takes on more infrastructure or if the city is willing to grant, you know, this term of a TIF, then I can afford to pay more for land. So I think a lot of it has to do with, um, cause we, we did talk about this quite a bit, but the, the reluctance, I think, to price the land was based on the fact that each developer's model is going to be different in terms of what they need to pencil out the project. Um, I don't know, Mayor, did I capture that accurately? Cause I, I think in some instances, you're going to have to look at some sort of discount in some areas. And when I say discount, I don't mean you're going to have to take a haircut compared to what you have into it. But I'm looking at it from the prism of getting your money back in a reasonable time frame, if that makes sense, from tax rolls.

Yeah, and I think it was because if you look at Stanton, for example, we've got approximately about $150,000 of kind of city money in it, which obviously over the kind of eight acres isn't that much from a recovery point of view. But then when you looked at, say, like the dairy property, you've almost got 100 and sort of, I think it was 100 to $115,000 an acre in it. And so no two models are the same. And as James said, we've got people that seem to approach us with a different methodology of how they make the numbers work for them. And so I think it was, we need to be somewhat flexible in what we kind of, We say that we're you know, we will consider all of these options as kind of potential, but not necessarily all, you know, but almost having an aliquot menu to say you can if you if you want, if you're not going to get cheap land, if you want this, you're not going to get that. And I think that's where we ended up kind of looking to try to put this tour of properties together almost was to try to get some developers to come to us and then be able to have conversations with them as to say, well, what type of programs are you looking for? And whether or not we can then accommodate them or chase particular ones. Because it sort of goes there, like Stanton was the cheapest we've got in it. Norgrens is the medium. But then, likewise, on Norgrens, we also talked about the fact that there's a lot of acreages. There might be a greater upfront cost to put infrastructure into no grand Because you've got to build the first sewer pipe you lay in the ground has got to accommodate all 120 houses if that's what the number was Where Stanton it's kind of a known number and so It might be in Norgren's that you're going to have to kind of finance phase one. You're greater than you're going to have to kind of like. In anticipation of the next phase. Yeah. By the time you get to phase three, you know, those houses would be kind of relatively cheap from an infrastructure point of view. Because you're paid for most of it up front.

Was there any conversation around letting it be a developer do private utilities out there? Cause I know the city of Horace has allowed some of their developments to be private utilities, like where there's still sewer and water, but it's like managed by the association versus the city. So then we have less upfront costs if we let a developer do that. I just, I know it's a successful thing because we have friends that live in a development in Horace that they have their septic and water is their neighborhoods.

The entire development, I would assume, would have to be like the homeowner's association. Right, yeah. And that probably could happen if that's what they wanted to do. But that's a big homeowner's association if you're talking 120 houses. Yeah, that's huge. It's huge.

And specifically, we didn't really talk about that. We didn't spend any time talking about that.

If utilities are a roadblock to development, then we need to talk options, in my mind.

They could probably do it cheaper than we could.

They can, and that's why they're doing it up there some.

Do they pay, like, a user fee for us to take the poop?

I think they have a fee. Right. Yeah. I don't know if it's per use, but I think it's a fee. Every flush. Yeah.

Your poop at work.

And I think they even did it through, like, a private assessment. I mean, I think it's through their homeowners association. I can find out more.

They have HOA fees, I'm assuming.

Yeah, but it's not huge. It's not that different than a utility bill.

Right. Because the infrastructure cost is cheaper.

and they don't have to do prevailing wage and all the things. Right, but we'd have to change our zoning, I think, to allow for private, to some extent, which, I mean, we can do, but we would just have to work through our zoning and our ordinances.

Well, I don't think we'd be against it, and if we had a developer that was willing to, you know, look at putting that kind of stuff up front, we'd certainly entertain it. I don't know why we wouldn't, so...

I just think it should be part of the conversation.

Yeah. Yeah.

Okay. I mean, at the end of the day, I think the higher the infrastructure cost, the more they're going to want to recoup on, because we aren't looking at 28- or 30-year TIFs. They're going to want to take that out somewhere just to make a pencil out. One thing I'm not suggesting is, like, You know, as you guys talked about a project not too long ago where the state was going to take on 30% and they wanted this, they wanted that. You know, these aren't the types of projects we're trying to attract. Not that there's anything wrong with those, but ultimately, you don't have, I don't believe, the supply problem that more desperate communities may have because you still have proximity and you still have development attributes that are different than communities that are, let's just say, further isolated, like far northern communities or something. So I don't want you to think you're going to be taking these massive haircuts. But at the end of the day, because there are some limits in terms of the types of incentives we can offer, in an instance where there's already certain pieces of infrastructure like you just cited, you should expect them, they're going to offer you something low, but you should at least expect to be able to push that price higher because you're already offering them the infrastructure. Whereas the Norgren property is going to be fairly difficult as it grows just because of the volume of infrastructure. So that to me is probably the one that's going to cost you the most of the dairy stand and Norgren just because of it's not built, you know, whereas the other ones are tied closely to infrastructure. Some already have some of the road built or all of the road, whatever the case is. So I just want you to keep that in mind. It's all balancing act, right? You know, the more they have to put in here and since they're restricted here, they may want to get more value out of every acre perhaps. And that's why it was so difficult to, okay, this one's worth, say, $600,000 for these acres and then 12, you know, it just was, it was hard that way, just given different models, as well as different sized homes. That's the other thing, like, you know, we're looking at a completely different type of home, depending on which area you look at.

How, is there any like going for bonding bill money to get an infrastructure out there once we have a housing study that shows we need the housing? I mean, is there anything that's out there that we could go at legislatively?

Ultimately, I mean, that would be a goal. Certainly, I mean, we've applied obviously twice for Stanton and not been successful. But I think that's something that, you know, I mean, I talked to Ben about that and sort of said that, you know, We keep applying, but we're not successful. We need to understand kind of either A, why is it, or B, do we have to kind of write it differently? And is it the way that we're presenting it that doesn't get us enough points? So I think, yes, the answer is there's always a program somewhere. A, it's finding it, and B, it's then writing the right kind of proposal for it. you'd have thought like the stanton one would have been a fairly simple one but clearly not and maybe this one being bigger scale they'll see more bang for their buck out of it yeah and that's maybe hopefully where the the housing study would would help support an application for kind of because when it comes to the dairy i think you know we will definitely need some help on the dairy property as well and as you say nogren's so big Theoretically, that's one of the things that, I mean, Klobuchar said she's pushing, she's going to push rural housing. So, we'll see. I mean, I suppose the question as well would be, I mean, what would it take to, you know, take like, you know, I mean, I think we have one for the standard property because HRA did that, but And we've kind of got something in the master plan for the dairy property of some sort of block housing diagrams. But what would it take to do something like that for the entire kind of like Norgren property? TO KIND OF PUT. I THINK IF WE'RE GOING TO DO, YOU KNOW, LIKE, YOU KNOW, WE'RE GOING TO TRY AND GET PEOPLE TO COME TO FERGUS, YOU KNOW, FROM A DEVELOPER POINT OF VIEW, IT WOULD BE NICE IF WE COULD HAVE A POSTER THAT SORT OF SHOWED, YOU KNOW, THE NOGRAM PROPERTY OUT. YOU KNOW, THIS WE SEE AS KIND OF THIS PHASE AND THIS PLATTED OUT SOMEWHERE.

THERE IS A PARTIAL, ISN'T THERE?

I KNOW THERE'S A PARTIAL There is a partial plat for Norgren, but that is likely something that we could sit down with more engineering and have drawn up. It's not working. It's not working? OK. There's a partial plat, but if we want to do something different than that or beyond that, I think that's something we could likely work with more engineering on to come up with some sort of a concept. Even talk with maybe some other city planning groups, something like that, just to get something drawn up that could be an idea to show people. I don't think it would be difficult to answer your question.

Because people are visual. Yeah.

Okay.

I think it would also be fair to say that one of the realtors that we've had a conversation with recently also kind of did see that, you know, from a city's getting to a point whereby it's saturated with twin homes and they're getting harder to sell.

Yep.

and that we're short of the $300,000 to $500,000 homes. There's a need for that home. The Nogren property would lend itself to fulfill that market segment that currently is vacant.

I will agree with that. There is definitely a need in that. All right. Any other comments or questions for the subcommittee and for James? Well, again, I appreciate the work that went into this. I want to thank the subcommittee for working on this. And we are going to call this Port Authority meeting adjourned. THANK YOU. THANK YOU, CHAIR. THANK YOU.

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