City Council - Regular Meeting

Call to order for the Watertown City Council meeting on March 2nd, 2026. Please rise while Hank Roso leads us in prayer. And then right after, we're going to have the Little Lutheran's Learning Academy led by Cara Julius uh lead the pledge of allegiance. Thank you. Please join me. Our gracious heavenly father, as we come to this evening, we thank you for this great community that we live in and these uh leaders serve in. Lord, we're so blessed and we take so much of this for granted. Our law enforcement and fire fighters and paramedics, the EMTs, the stuff they see, Lord, out there in the front lines, some of us will never know, never understand. So we pray you'd help them, Lord. Minister to them, their hearts, and their families. Keep them safe, oh God. Watch over them. We thank you for the city services we enjoy so much. Again, we take for granted even tomorrow morning's garbage collection day. Imagine what this place would be like without something like that. And we thank you for the leadership here tonight, the common bond that's shared with our love for Watertown. We thank you, Lord, for your presence here tonight. Jesus name we pray. Amen. Just go.

[applause] I can assure you that would be the cutest thing we hear all night. Thank you very much. You're welcome. Uh, finance officer Bob Z, would you please call the role? Okay. Mormon here. Durens here. Peters here. Shuty here. Allen here. Hoyer here. Pauline, I just got a text from him. He says he's on, but he cannot hear or see anything. So, that's not helpful. Yeah, okay. Thank you.

All right. Next up on the agenda, we have a conflict of interest. Does anybody have a conflict that they wish to disclose before we approve the agenda? Seeing none, I would ask for an approval of the agenda with one change. We're going to remove item 12B. I need a motion. Motion by Allan, second by Shotty. All those in favor, please say I. I. Oppose. Same sign. Motion carries. Welcome, mayor. Thank you very much.

All right, we're going to move on down to 10A, contracts and change orders. 10A is an approval of the construction administration agreement for the Fifth Avenue North reconstruct project 253 with Civil Design, Inc. Go to city manager Stagger to tell us more. Thank you de deputy mayor and uh councel. Uh this is a construction administration agreement that we are bringing before you tonight related to the project that you approved at the last council meeting. And this project is a a relatively large reconstruction of Fifth Avenue North uh that is slated to begin actually on the 16th of March uh and go through most of the uh construction season this year. This is actually an amendment of the original proposed uh agreement with Civil Design, Inc. Uh initially, this was about a $250,000 contract, and I've reviewed it with staff, and we've determined that uh the amount of on-site work that we require from a third-party firm uh can be greatly minimized. Uh we do have our project manager in in the audience today if there are any questions. However, I I recommend your approval of uh of this contract uh for the project that uh that we'll be beginning.

Thank you, Alan. Uh we will open this up to a public comment. Is there anybody here to wish to speak to this item from the public? Seeing none, we will close the public comment. Looking for a motion for approval. So moved by Councilman Jurns, second by Councilman Allen. Is there any questions from the council? Seeing none, uh, let's do a roll call vote with the mayor online. Finance officer, if you do the honors, I Peters. Hi, Shy. Hi. Allan, I All in favor?

All in favor? Motion carries. Next up is uh 11A. It's ordinance and first readings. We have a first reading of ordinance 26-01 establishing the zoning destination from R1C compact fam single family residential district for the property to be known as the Harmony Hill annexation second edition. We will go to community development manager Hon to tell us more.

Thank you Deputy Mayor. So if I t let's see on my screen here um this will be the next phase of the Harmony Hill development that has an approved concept plan. It is a 2.8 acre piece of property that will be annexed and zoned into city limits and brought in as the R1C compact single family residential district. And this right now is just the first reading of the zoning. The annexation will come with the your second meeting um in March where action will be taken on both. That I'll stand by for any questions.

Very good. Uh since this is a first reading, we will not need to do uh any action, but we will take some public comment if anybody's here to speak on this item. Seeing none, I will move it over to council questions for the staff. Councilman Jurns, is this part of the upcoming affordable single family housing development? Yes, it will be it's going to be zoned compact single family residential. That zoning district alone is meant for um not necessarily afford I mean just smaller lot sizes which helps with cutting costs.

Maybe the word's not affordable anymore. Workforce housing compact compact housing. Okay, thanks Brandy. Thank you. Any other questions? Okay, seeing none, we will see this at uh next up at our next city council meeting for the second reading. We'll move on to 11B. 11B is a first reading of ordinance 26-02 amending the zoning map of the city of Watertown for a portion of property be known as Harmony Hill annexation second edition from uh the egg district to R-1 compact single family residential district. We will go back to Brandy to tell us more.

Right. Thank you, Deputy Mayor. So, this piece here, it contains approximately seven acres. Sorry, I'm not I'm a little off on my acres here. Seven acres. All right. Um, that will be included with the piece that we just looked at to annex and zone for the next phase of the Harmony Hill subdivision. And again, this was brought in, annexed and zoned as A1 agricultural district, which is a lot of the times a placeholding zoning designation. And so then this is reszoning from the A1 to the R1C. So then once everything is annexed and zoned and reszoned, it can be replplatted into the boundary line shown here on on this proposed plat. The plat will be approved administratively however because at this time there won't be infrastructure improvements. Um there is also a sue ro water territory fee that has been made known to the um owners of the property and so water municipal utilities will work with them through that process and that actually ties into the annexation more than it does this reszone. I'll stand by for questions.

Sounds good. Thank you Brandy. Anybody from the public that wishes to speak on this item? Seeing none, we'll go back to council questions. Have any questions for the staff? Shy. Actually, I do. Uh, thank you, Deputy Mayor. Has there been discussions or or a plan brought to the city as far as what that entire region is going to look like? As far as having R3 next to R2s, R1's just this particular one here. I guess has that already been thought out, you know, we're approving this one little chunk, but what's it going to look like around it? I guess as I have those conversations.

Yeah, great question. Um, so we actually do have an approved concept plan for this area and it is shown as R3 and it's a large uh a large spans of area there. And the reason why it doesn't have to go back for concept plan approval is because it is less intrusive or less dense than an R3 zoning designation. So the R1C is appropriate and really it will come down to when the next phase is annexed and zoned or reszoned whatnot that then that would be looked at um at that time. But everything in this area has to be residential in nature that will be adjacent to this portion. Otherwise, we do have the overall concept plan.

I can blow that up. So, yeah. So, for a followup, the land that's adjacent, it's R3 currently. Is that correct? Um, it's actually currently agricultural. It's agricult. It is on the um on the concept plan. It's approved to be R3, which is multifamily residential, so it's higher density. So follow up with that. Theoretically, we could have an R3, a 55 foot story building right in the backyard of these these particular homes then. Is that possible? Yes.

As a city, is that something that we we've had many discussions about that? I'm curious if that's brings some um

alarm to how we do the zoning. If it were going to be more dense than what So the fact that the property is laid out to it it's allowed to be as high it's multifamily density. The fact that they want to do um less dense development then everyone is aware of what this area can allow for. So that would be you know something that would be discussed at the time that the next development came forward. Although and I think too there can be um you know with residential development there can be good transitional zoning between if it's single family compact residential to you know and that'll just be something in the future. Councilman Hoyer,

I think uh the question might be that next section that'll will abut it. Has that already been platted and determined? I know we have that R3 designation going on because I think what we're having here is that we don't want folks going into that R1 having buyer remorse when an apartment building goes right next to them and they bought a townhouse and had a view of what they thought it was going to be and it doesn't pan out how they maybe thought it was going to be. So, we're just trying to look out for them, get ahead of it, make sure they understand what the concept is and where it's going. Yeah. And the owners that are reszoning this are aware of that. Okay.

That [clears throat] was kind of my same question about that really is that there's nothing that prohibits them from making a change in that plan and deciding to put in a 72 unit multifamily housing structure in that space because it's zoned to allow for that. Right. Correct. Yeah. So, so this is a like a concept plan, but there's no reason for them to stick to it or not stick to it. They're not required to stick to.

They are as long as So, there's different parameters in ordinance of if it's a major or minor amendment. And if you're not increasing the density in the zoning, as long as it's residential in nature, you don't have to go back before the planning commission to amend the concept plan. So, but if they were proposing to change this to commercial development, then they would have to go back for an amendment and review.

Further questions? Any other questions? Thinking about something over here. Okay. All right. Seeing no more, we'll move on. No actions needed on that item. We're going to move on to 12A. Public hearings and second readings. 12A is an approval of a two-year lease renewable for one additional two-year term with Lyall Both Both DBA LJ Farms and Ranch for approximately 732 acres of land for the sole and exclusive purpose of hanging, growing, and harvesting crops on the Watertown Regional Airport property in the amount of $122,40 per year. We'll go to our uh director, Ian Merryweather, for more on this.

Thank you, Deputy Mayor, Councilman. Uh this lease was put out for bid in November and subsequently accepted in December. Uh typically we have reserve that area for just hanging operations. However, it's part of my job to look for non-traditional sources of revenue and farming operations will definitely bring in much needed revenue from um estimating about 122,000 with this setup as opposed to the 46,000 that we currently receive for hanging. I'll stand by for any questions. Sounds good.

I will open this up to the public to see if there's anybody that would like to discuss this. Okay, seeing none, we will move over to council action. I'll need approval for this to discuss. Councilman Jires, second by Councilman Allen. Questions for Ian Council. Councilman Mormon. Uh, just one question. Are there certain crops that they're allowed to plant and then not allowed to plant so that way we don't get deer running around inside the fence?

Well, hopefully never deer make it out of the airfield. Um, however, yes, tall row crops are prohibited. Um, typically the FAA does doesn't necessarily want you to farm, but they don't like hang as well. So, it's just kind of a give and take of my team is acutely aware of the possibility of birds on the airfield and that's kind of the main concern. However, uh we've got plenty of hazing techniques and that's just if we have to haze a little bit more to keep the birds off the airfield, then that's that's what we'll do. Okay.

Councilman Allen. Uh so Ian, how did you um so not all the acres I mean some are still going to remain just hay and is that determined based on like proximity to runways or Yeah. none of the um critical areas of the imaginary surfaces will or can be um farmed upon or hay at this point. Um so it's going to be with the farm to determine the breakdown of that come you know another month or two as weather permits. Okay.

So Ian I was wondering why we got 166 bucks an acre for um and to Councilman Mormon and and Councilman Allen's uh questions. Uh wildlife has been a an issue. They've had deer inside that fence and Canadian geese, I don't know how they react, but they're not easy to haze. They're they're they're rascals all around the country. So, bringing food in proximity to and runway is an interesting concept, but it must be happening, huh?

Well, uh, as you hay, so as you bail, um, you grow, you're going to have an increase in hawks. It's predatory bird. As you cut down, you're going to have small animals and that brings in hawks. Now, the less amount of hay we have, less amount of hawks. However, that tradeoff might be more waterfell. But there is a clause in the um lease itself that states that within 24 hours of harvest, all food source has to be removed. So, from harvest, you have 24 hours to remove any food source. So, that should take away that incentive to habitate. I don't have much experience, but I did grow up as a farm kid. Um, you can't get all the crop off after they've combined it. That's when they want to come in. Flock after flock after flock is what us wild waterfall hunters would hope for. Uh I don't know if this farmer is different than the rest that are out there, but um that's an interesting uh thought.

Tell us more. So yeah, that is kind of the directive that we had from the FA is make sure that within a reasonable time frame that all food source is uh taken away from the field. Now again, does that mean that we need to stand out there and blast off pyrochnics to make sure that we don't have flocks come in? Then that's what we'll do. But it's part of our job to increase revenue. And part of that is uh a non-traditional sources, outside of the box thinking, but also uh safety in mind. So we're ready for it. We're I'm ready to take my turn again if someone else has a question. Why don't you keep going?

Um, what what does the FAA know about hunting and wildlife in You don't have to answer Water Town. Uh, and this is kind of gets us to the real fun about government is um, as hunters and as agricultural people, we get this birds are coming. They are coming and and we're in the one of the flyaways which maybe the FAA knows about that too. We'll be ready for them. One more. What are your hazing techniques? Because pyrochnics don't work.

Everything from pyros to physical hazing to firearms. We have depradation permit that we apply for every year. So, we're able to take x amount of uh species and it's all kind of wrapped into one. It's active. It's not reactive and we're constantly outing. All right. Thanks. I love the revenue. Council Hoyer. Yeah. Not to cut you off. I was just going to ask um Ian, do you have any historical data with other areas [snorts] doing the same thing and how has that panned out for them?

Uh not in this area. No. Uh again, um it's more mainly small GA airports that really really need the revenue in order uh to survive that uh go for this sort of strategy. Um but as long as we're keeping it safe and we do everything we can to keep the uh wildlife off the air airport property, then that's what we'll do. That's wonderful. I know that we can do a little bit of hazing and stuff, but in the event that this does rear its head as being an issue or a safety hazard, what steps do we take then um in the event that it's just too much risk,

then it'll just go back to hanging ground. And that's a that is a conversation I've had with LJ Farms. They know that if if it does get to a point where I deem it to be unsafe, which it won't, but um then we'll just go back to Hay Anybody else? I got a quick question for you since we're on the the topic of animals here. What who who's controlling the prairie dogs out there? Do you guys as the airport uh are you responsible with with poisoning them or is this something that falls under the the tenant?

So, well, this I'm glad you brought that up, Councilman. Um, so we have a huge problem with prairie dogs, ground squirrels out there. And actually, as part of our remedies for um you have to have a safe RSA, runway safety area. Uh we've got burrows out there. Uh we've made a uh been talking with LJ to disc up and help us regrade that area. So, it's kind of a all-encompassing uh strategy. So, it'll help up with wildlife, ground, and birds, but also um bring in the revenue that we need.

Yeah. Yeah. My thought on that is if we have a prairie dog town, it cuts down on hay and gr grazing opportunities back at least. Councilman Jurns, well, we're not quite west far enough here for a prairie dog issue, but we do have a lot of pocket golfers around here that build those big black mounds. Mhm. You got propane for that? No, we don't. We don't have one of those, unfortunately. I know a lot of my team would love to use it for sure. Okay, any other questions?

Just a couple of comments. Uh uh first of all, I I hope the predators were not listening and we've divulged our tactics to the 13 striped gophers. Um, I I will call your attention just to the fact that the airport board met on this lease and had many discussions over several meetings on the agricultural practices and the board and the airport manager do have the final determination on which crops can be planted in which season those crops can be planted. And the final thing in this lease that is important is at the conclusion of any rope crop farming operations, the tenant is required to restore uh hay grasses to the entire property.

Sounds good. Thank you, city manager. Okay, seeing no more questions, we will need action on this. Miss Bob Z, would you please call the role? Okay. Orman, I Peter, hi. Hi. [snorts] Allan, I All in favor? All in favor? That's going to pass. We're moving on to 13A. Thank you, Ian. Uh, we're moving on to 13A, an approval of resolution number 26-08 designating the district boundaries adopting the project plan for the tax increment financing district number 21. We will go to city manager Stagger to tell us more on this one.

Thank you, Deputy Mayor. And I'm actually going to make some comments relative to both 13A and 13B. Both of these items involve the creation of a tax increment financing district uh in the community uh in support of two development projects. Um, just by way of background, we currently have 12 active TIFF districts in the community and those districts combined have a current base valuation of just about 6.3 million. And so that is the value that was placed on those properties before they were developed in the tax increment financing district. The increment value of those 12 properties is actually about $123 million. So you can really start to see the significant impact that the creation of tax increment financing districts have had in our community. By statute, we are are limited to only having 10% of the total assessed value of our properties in the community subject to a tax increment financing district. In our case, that would be a base value of about $280 million compared to only about the $6.3 million that we have in place today. So I bring this uh background to you for your consideration just to show that with this financing tool we are nowhere close to hitting uh a threshold statutoily in the community um with uh with tax increment financing districts. As we go through these, uh, community development management manager Hon will bring us through some detail and then Tobin Morris with Collier's Securities is a consultant working with the developers

and representing the city's interest in these districts. Uh, will be available to answer some questions. recommend that as you consider your deliberation, you follow a process that we did at the planning commission, which was very helpful to add some structure to the conversation. And what we did at the planning commission was to ask on each one of these proposed tiffs that you consider three separate topics. The first topic for your consideration is the district boundary designation. And as you consider that boundary designation, you should be asking if this is the appropriate type of use for the particularly defined uh property in the district. Then secondly, we'd ask that you consider the proposal before you and look at it to see if the numbers make sense, to see if the numbers will work. And as you do that, we can help with pointing out some numbers in the plan. But essentially what you're looking for is whether or not the district will generate enough additional property tax to be viable over the life of the district. And then finally, we'd ask you to make sure that the project economics makes sense. The developers here are making uh various economic assertions as they put the plan together. And generally what state statute is asking you to do is to ensure that the general economic welfare of the area is benefited and improved by the plan under proposal. So we can take those uh one at a time as you go through uh listening to the proposal from both community development manager Hon and also Mr. Morris. I'll stand by and uh provide any assistance I can as you go through your deliberation.

Thank you, city manager. Would you like to chime in on that before we Yes, I'll provide some background if that's all right. All right. Thank you, uh, Manager Stagger and Deputy Mayor Peters.

So, this project here, and once again, I'll plug in so you guys can see vicinity wise. So, this is the uh boundary map for the tax increment financing district number 22. As you can see, it's adjacent to the project that was completed in 2020 for the Oaks one. And then this second phase will be the Oaks 2. It will provide 72 multifamily units, 83 bedrooms altogether. Um, one thing to note in the TIFF plan is there are overall the total project costs are estimated to be uh 16,346,100 and then the TIFF eligible costs are in total uh $1.58 million and then but the developer is only requesting $953,564 so they're not taking the entire eligible costs and that's really about when you run the numbers of what the estimated assessed value will be to ensure that the project will generate enough tax dollars to within the the life of the tiff uh to meet the 953,564. So altogether the idea of this tiff being classified as affordable housing per um the options of our state legislature um the affordable housing is the type of tiff that they are utilizing and what that means is that the

the project will hold rental rates to be 80% of the average median income and that's set forward by HUD or the housing of urban the housing urban development department um US housing and urban development sorry acronyms uh and then again with South Dakota housing um with our state laws so or state agencies um uh there was a a unanimous recommendation from the planning commission at our last meeting there. So, with that, I'll stand by if there's any questions.

Good. Thank you, Brandy. Okay, we will go to open uh comment here. Is anybody here that wants to talk on this item in particular? Anybody whose name might rhyme with Toby Morris want to talk?

You got to turn that. There you go. Thanks, Deputy Mayor, members of the commission. Toby Morris with Collier Securities. Uh, it's been a few years since I think we've done a TIFF presentation for you on a few uh retreat must have been about three maybe four years ago. What [clears throat] I don't want to do is assume that everybody understands how a TIFF mechanic works. So, by all means, if there's something I say that doesn't make sense, um, this process is always meant to be transparent, explain. uh tiffs have a lot of moving parts to them. When you [clears throat] look at them though from the beginning, we've done a lot throughout the state of South Dakota is there there's a couple things that we always address before we even get to the portion that's here today. One, does it fit the need of a community? TIFFs are designed to be economic development. If I go to Faith, South Dakota, you're going to find out it's probably a veterinarian, electrician, some of the stuff we might take for granted here. We come to Watertown. One of the primary things that we looked at right away was your 2023 housing study and the growth projections that you're on. Uh and would these complement your existing needs? Uh the other ones that we take very serious being in kind of investment bankers, we help cities with their debt and uh schools, counties is we do the background credibility check. There's nothing worse than having something come in with a developer that may or may not deliver what they say they're going to do. You know, every developer is going to light the world on fire and they want it done yesterday. But I think what you find a similarity with these two proposals and I'm going to intermingle them to begin with, but then maybe take questions separately as [clears throat] they come up is we have proven track records. You have one stencil group which is already here that built in 2018 and 19. They're coming back to redeploy capital here right now. They're a group that's highly soughta in South Dakota um in terms of being

recruited because they deliver a great product on time, on budget. They do everything they say they're going to do. I actually lived in one of their apartments in Rochester this summer. And you know, for a guy who's 51 living in an apartment, it was a little humbling, but I didn't hear my neighbors. I was like, "Wow, this is quality built and uh just the quality all around." So, they're throughout the state throughout the region. [clears throat] On page five, I believe, of the Dakota Commons, you have Dustin referred to as the mailbox's money. Um, there again, firsthand experience. My assistant came in this morning. She stayed with her daughter down in Yankton on the first floor and she's like, "Wow, another great product." So, they're they're quality quality managed. And so, that that passes our test. We also do the investigation to say are you do you have the equity to complete this? Do you have uh the capital to do that? We can only go so far but at the same time through our conversations with the bankers and the equity group the answer to that is yes. So now then that really comes down to the need. And when we look at the need and how it fits in your u uh housing study, it's still a big issue throughout the state of South Dakota. It it it is and it's two issues. It's one the need for it, but it's also the capital expenditures. In 2017 2018, when Stencil was looking at starting out on the project, the Oaks One, we refer to an apartment as a door. So, at that time, you're probably paying 75 to 85,000 a door. You're in precoid prices, pre-inflation, you're in interest rates that rhyme three, three and a half%. Today's conditions are much different. you're 150 to 200,000 a door. You're at a minimum of an interest rate of six and a half to seven and a half percent as we're commercial rates. So, it's a complete different economic times. And that kind of goes into what I might call the but for test. Would these have

happened but for the tiff? We see the economics of multifamily. Not only do we see it, we live it, we breathe it, and we refinance these developers once they're stabilized. And the most important five years is going to be that stabilization. We all know there's a a property tax debate that's going on in the state. But we look at it then as well. You figure from a developer side, typically one months or one and a half months rent per unit is just going to their property tax. So this is where it helps get them to invest their capital, stabilize their capital. At the same time, we're putting a restriction on them. That's South Dakota housing 80% AMI and I think it was Kristen and and Lisa had a great comment today on one of them where it's phased in. So it doesn't start today but rather when the certificate of occupancy starts. So if they want to take five years the phase well guess what that last one still has another five years to go out. It's not at the time of creation but it's going to be so we're ensuring hopefully the affordability at that 80% AMI on that. Um, we've gone through the computations. It's interesting the way assessments work in the state where you're going to see Stencil has higher per unit door but a lower tiff. And that's really based on the comparables when we look at it. Everything in the state for the most part is comparables. So half of my job is managing developer egos. You might say they'll say, "Well, Toby, we have three million." And I said, "I don't care if you have three million in cost. You only have 900,000 of revenue. That's just the way it works. On a multi-phase project in in broken up buildings, they tend to be assessed higher. So, that's where we look at it from that standpoint. But on these, you'll see that there's not an imputed interest rate to it. There's no developer fee. It's a dollar for dollar as they go in. One of the things I'll point out in Dakota Commons is um

through Allen's help but great ideas, we know is it 19th Street that is a potential issue. The problem with TIFFs is I have to assume what an an issue is going to be in two or three or four years, but I have to put it in the plan today. So we built in a contingency specifically only for that 19th street only allowable once it would come back through the city uh through the developers agreement at that part. [clears throat] So again as a as a registered municipal adviser we look at it as how do we always keep the city in a partnership [clears throat] role more importantly in the driver's seat. So we try to take into account a lot of things and trust me over 25 years there's stuff I wish I would have known 25 years ago that I do today and each one's a learning period of that. So we we do our best estimate of what's going forward. We know on these that it is the responsibility of the developer. There's no liability to the city other than that it's a pass through from the city to the developer. So if revenue falls short, if Pure comes up with more wonderful ideas next year and or Toby says there's no more property tax, not this Toby, but the other one, and that's the responsibility of the developer and that's something that they have to deal with. Where the city wins is once that infrastructure goes in, once it goes vertical, that's what matters the most. and what does it take to help reduce some of the risk to the developer and that's the tiff that that really becomes a strategical important part uh at the planning and zoning said well Toby what what if there is no tiff and I can say financially from the investor groups that I've seen of how these proformers are structured there's simply no projects because the margins are thin when you're running [clears throat] 150 to 200,000 a door at 6 and a half 7% you figure you borrow 10 million at 7%

you got to come up with 700,000 just of interest. So it really takes a lot of risk on to invest in these communities. But that's where I point out you have solid developers that are coming in that are capitalized with a proven track record throughout the state. Most important thing is it's throughout the state because we know how the grape pine still works in this state. Um deputy mayor I can go into more details. Sorry, I'm just coming off a man cold here for the last couple days. That's great. Why don't we um Why don't you just talk about the oaks as well? We'll just talk about them all at once and then we can go and we can do separate motions [clears throat] for each.

Yeah, the oaks is just a continuation again with the stencil group. Uh the 72 units, they plan on starting construction. I spoke to them tonight. They said April, which probably means late March. The way they run, they don't mess around. Dustin's already got plans for the commons reserve to I believe start in May or June once everything is mobilized and put together. Again, they fall into the affordability. You'll have zero or you have studios um one and twobedroom in the oaks and you'll have I think eight threebedrooms in the comments. So, it it caters really to a lot of different demographics within the town.

Awesome.

Great. Okay. Anything else before we do our deal? You good? All right. Thank you, Toby. I will need a motion for approval on 13A and then we'll stand by probably be some questions for you and then we'll we'll go through 13A, then we'll go to 13B, but I'll need a motion for 13A. I'll move by Councilman Jurns, second by Councilman Shuddy. All right, questions on 13A, which is 2608. This is the Oaks project. Councilman Hoyer. Um, I guess my question is with regard to the AMI. I know that we keep it's a moving number. I understand that. But, um, I'm curious where the developers actually sitting at shooting for for a rent price versus that AMI just because the numbers that I've looked up on that for our area AMI is 92,500. I don't know if that reflects anyone else's, but you do that math, it's 80% gets you down to 74,000 a year. You break that down, divide it by 12, you got 6,166 a month, and then you take that down to the 30% that you could cap it at for rent, and that's 1,850. Um, if you take instead um just median household income in Watertown, South Dakota, that gets you to 69,600, which is a pretty drastic switch in numbers, but that is not AMI. But with those numbers, that gets you at the 80% being 5568. Drop it down with the 12 dividing by 12, 4,640 a month, which this is starting to feel realistic for a lot of people I talk to. And then that puts you at 30% being 1,392 a month as being the maximum rent. So I just I'm curious from the developer standpoint what their goal is. Um the AMI doesn't exactly give me warm and fuzzy. I hope there's a better figure than what I found. But I'm just if anyone knows that'd be

great. Toby, would you like to address that or who would be best appropriate for that?

What really dictates it the most is the market. That that pure and simple is what it does. What helps control the stabilization in the market is competition. It's when I live in Pier and you take a look at a two-bedroom there that's built 14 18 years ago, you're pushing 2,000 because there's no other competition. When Stencil opened up there with their two-bedroom within that 1500 range, similar here, they went to about 94% occupancy within about eight months. Unheard of. And so the AMI again is set by the feds and also with the South Dakota State House or the South Dakota Housing Development Authority. And so that's the maximum that they can charge it. It's a little misconstrued number because it does seem high. And on these guys' projections, they have and always historically come in before that because they have to rent up, they have to stabilize, and they have to see what the market's doing. You [clears throat] go to Sou Falls, it's interesting now. There's a lot of advertisements there that you rent 12 months, you get one or two months free after that. And so I I I I truly see that happening with the marketplace and the competition to keep those rents stabilized if that helps.

Oh, go ahead. Um, I guess my followup is just that for me reflecting on affordability. You know, the AMI just doesn't really guarantee much. I mean, it caps it, yes, but in Watertown, of course, you'd really struggle to rent an $1,800 unit. So, obviously, you're probably not going to end up in that range. And so, it's it's a challenge of uh someone could do this privately and probably still have to compete, too. I'm not saying I'm against it in any way, just so you know. But um just trying to weigh it out.

I I get this question a lot. That word affordability, I mean, who would have thought the first-time home buyer, firsttime home buyer is 411,000. And that's what they've now dictated that it's I hate to always keep going back to CO, but that really turned our world upside down, especially in South Dakota, because now our wages have to catch up, and there's going to be a ton of pressure on wages to catch up to the living standard. Um, you know, it's kind of a a high tide raises all boats, but one boat's floating a lot higher than the other is right now. And and that's going to be the challenge going forward. Oh, that's another question. Council,

uh, [clears throat] do we know what the increment is uh, for either of these projects? So, I know it's a projection, um, but how much tax revenue is the increment going to raise? Go ahead, Alan. I can take that one. I've got it right in front of me.

So, on the oaks, we have been extremely conservative here. Um, we are planning an increment on the oaks of about three and a half million in property valuation. And what that is based on is we have the assessed value of the oaks one which is about 3.5 million. Now if you look at that that is a $3.5 million valuation um compared to a cost of the project of 16 million. That would imply that we are assessing real property which is statutoily required to be assessed at the full and true value which is an arms links transaction at only 23%. And I bring that up just to show you the amount of conservatism that's built into this plan. So if if you consider that 23% maybe we'll get the assessments fixed to be closer to 100%. What that means is instead of an 18 or 19year time frame for the tiff district to uh to be settled, it will actually be closer to four or five, which is what we see elsewhere in the state. I know I said a lot there. Did that answer your question?

Um sort of. It sort of did. Um, and and that's part of the question that I that I get when I'm talking to people in the public is they want to know, well, 20 years, that's a lot of time to defer taxes going, you know, to be to rerouting the tax. And they say, wow, you know, really, how much tax increment are we talking about? And that's the um the tiein I think that you're making is to the assessed value and how important it is that we have an accurate assessed value. And I guess I'm thinking I get the conservatism but it doesn't seem like it's that accurate an assessed value. So they're actually a the next step in this process is to negotiate a development agreement with the developer in the city and in the draft that we have proposed of that agreement we've actually drafted some new language that I've never seen in one before but we will be continuing. First of all we are defining what the assessed value by state statute should be placed on the property rather than leaving it up to whoever does that by whatever magic. today. It's defined in statute. So, we're putting that in our developers agreement. Secondly, we are asking the developer to wave their right to come in and protest the assessed value of the property for the length of the tiff district and five years after that. So, what that means is we can't give the developer the tiff and then they turn around a year after it and say, "Wait a minute, your property assessment is way too high." and ask for it to be lowered by the board of adjustment. And so we've got those safeguards built in. It's the first time we've ever done that. I don't know, Toby, if you've seen that done before, but we think it really provides a lot of protection to the process going forward.

We, if I may, Alan, we've taken it even a step further, which you haven't had in the past. If a property is sold, it's going to come back to the council to approval of whether or not you continue that tiff. So there's no reason why developer A receives an annuity for 15 years and they sell it in year five. So I have seen that happen again 25 years of scar tissue. So we're really putting a lot of protections in for the city. Thank you. Any other questions? I'm going to go to Councilman Journeys. [clears throat]

So, the reason uh Councilman Allen here is getting calls is because property tax is the big issue South Dakota this year. And we're going to get calls and we're going to um see the quote criticism why the homeowner is having to take the burden of all the property taxes in this state. And we should all get it. I think we get it. uh why commercial properties are not being assessed correctly and yeah go ahead you're ready

I I I would say uniformly across the state there's a lot of discrepancies of how things are assessed I could point out to Menards in several different locations take out the land same footprint they have different valuations ations. There's there's a lot of underlying issues when you really get into the weeds in my opinion as somebody who's practiced in this field that you know our politicians go to pier and they come up with a solution they don't even understand the problem and and that's what it is. You you look at the city of Watertown and I brought this out of your own um comprehensive report that Kristen does a wonderful job on. Your mill levies have gone from 233 to 169 in nine years. So, you're going down in your mill levies. Um, and if I could, Mr. Peters, just digress here a little bit. You take Senate Bill 216 last year, it caps you at 3%. You can't grow more than 3%. But, you know what 3% is? Is it's new buildings, it's new growth, but it does not take into account reassessment. Reassessment goes to the denominator, and the denominator is the devil. So what's happening is you're walking in a drizzle getting soaked and you're not knowing it because you're stuck at that 3%. I think your growth this last year was what maybe 22 or 25 I think

27

27 there's only two communities Senate Bill 216 impacted last year and I'm going to probably get shot when I go back to pier but it it just doesn't make sense. However, they say unless the growth comes out of a tiff district. So now those that are in a tiff district and they come out and they sprout off. If you take a look, you jump from 93 million in increment in 2023. 98 million to 130 million in two years. So there alone, if these tips start popping off, it's it's planting a tree. The shade will come. It really will. But we we have to get that development to happen today. Um and I can hand these out. I I think what you've done with tips has been very very well managed. Um I was asked that on the podcast that must have lost a bet to Allan and gave my name to the news media guy. But anyhow um um

over there there he is [laughter] the culprit. U but there again you can see you're jumping 40 million. You got 130 million. You put that in perspective. A lot of communities aren't even over a hundred million. I think Harrisburg just topped 600 million and they're one of the fastest growing cities. So there you are. 20% of your tiff increment is 100% of their valuation. I know I just spit it out a lot there, but to to the original question, is there such thing as the word fair in the constitution? No. And there's not a fair assessment. I'd love to follow up.

Yeah, please. The homeowner in Watertown and the homeowner everywhere else is getting their rear ends kicked right now. I sold a home four years ago. Tax was 7700 a year. Now it's 11,900. That really really drives home what people are dealing with their escrow accounts. I just had another call today. Uh, was it my insurance that caused this? No, it went down 400 bucks. Uh, must have been my taxes. Uh, the homeowner is getting drilled and the homeowners who we're representing. Uh, I mean, we want to represent everyone, but the homeowners who are representing. So, it's good to hear that there's some language. I think this is what's really good for the public to understand. There's really good language that's being drafted in that development agreement that is going to help this because someone is missing the boat somewhere and nobody wants to pay taxes. No one wants to, but we need reassurances to the people who put us on this city council that we are doing the right things here. And I know it. We need to put more doors in Watertown. Our employers need it. We all need it. Our sales tax numbers need to keep going up. So before we, you know, shoot the messenger, um, so to speak. Um, sales tax needs to grow. Otherwise, we're in trouble.

You live and die by sales tax. Yes. Councilman Hoyer has been waiting. Go ahead, Councilman. Sure. I'm just going to jump back to we were kind of discussing the AMI. Um, so again to put it into perspective, I'm going to refer to the Oaks, the one that's currently built, if that's okay. So just folks know what the rates are. So like a studio apartment there, 500 ft² is $861 to $956. Onebedroom is 620 ft, $1,50 to $1,195. And then the two-bedroom is 912 ft for 1,326 to 1471. All of these are well below what that AMI was putting out even at 80%. So for it is little background and that's the market.

Yep.

Council u yeah I I think uh it's easy for us to get distracted by the property tax problem and the assessment problem that I think we have as a state. I think we should do something about that as a state. I think there are ways to do that. there would be some value and uniformity in terms of how we assess property. Um, I just want to say we we can't as a council solve any of those problems. Um, and they're multifaceted problems with all kinds of moving variables. For me, the bottom line is uh is this a reasonable investment uh in development? I I think it is. I think that there's a call for it. Um, do I have some heartburn? I I do because the heartburn for me is is mostly the but for test. And it's very hard for me to make an assessment. I have to accept what a developer says that says, well, I'm not going to build it unless you do this tiff.

And I feel like in some ways it's a it's a gun to the head. I'm not denying the fact that developer costs have skyrocketed. Um, I get that. I mean, I built a home in 2022 and it was much more expensive than I thought it was going to be. And that has to do with materials and everything else. Um, and I'm frustrated by that because I think as a as a federal uh government moves, it has an impact on all of us. and insanity of tariffs that drive up developer costs, lumber costs, everything else. Absolutely ridiculous. Uh it's crippling us as a country, I believe. And now to have found out, of course, that they're illegal, that's another piece of heartburn for me because we all paid that cost. And that's why I think it's also extremely difficult for people that we talk to in our community when they say, "Look, here's my grocery bill. Here's my homeowners insurance. Here's all these bills that I'm paying." And I think we have to be very careful to say, "I get that. I can't solve that problem." But we know that part of our job is to ensure the growth of the community. And I think that housing is a component of that. I agree with Michael that I think that the developers are not going to be anywhere near the 1,800 AMA uh dollar amount. It's not going to work. And I know that um there are also people in this community who are never going to be able to move into those apartments even at those rates. They live in pretty substandard situations right now. and we can build a bunch of what we call affordable housing and it's not affordable for them is part of the reality that we that we have in Watertown that we don't like to really

admit there's a lot of poverty here but I do think that we have to as a city make investments strategic investments and I think this tiff district uh is a part of that um you know I I still have some additional questions about Dakota Commons but I think I've probably said enough at this juncture so I appreciate everything that you've done to try and educate us and I think uh you know I think again it's an investment that we need to make as a community. Thank you Council Councilman Mormon.

Uh just want to say something briefly. Appreciate you being here Mr. Morris tonight. Um I'd like to thank the planning commission uh for a very good and what I thought very thorough job of questions and information on these tiffs. Um, if you had a chance to watch that meeting, I I just want to say thank you to them. I felt like they did a really phenomenal job. Gave us a lot of information. Um, I like the safeguards that we now have um with the tiffs going forward. as city manager Stagger said, you know, I think we can say we've learned from the sins of the past um and some of the some of the issues we've had with previous tiffs and now going forward, I think the public can have confidence knowing we got some pretty serious safeguards um on anything that we would give a tiff. Um I had a chance about a week and a half ago up here at city hall. I sat down with an employee and we looked at the numbers that you had presented um as far as the cost uh per per door and the overall pricing. Um and yeah, I I truly feel that without a tiff, your profit margin or your that margin that you're looking for is going to be very very very tight. And anytime a person that's a developer uh would look at a project and see maybe a 1.5% annual return or whatever on money when he factors in all the expenses. Um it's going to be very hard to get a developer to say yeah I'm going to come and build an apartment complex and I'm going to take a risk on that. So I I truly feel that right now with the market, the way the market is, the way the interest rates are, the expense of construction, um I feel these tiffs do help put that percentage number into

uh in up to a number where developers have confidence and a lot more comfort um with taking the risk in stepping out and building an apartment complex. I know there's lots of people that really do not like tiffs, hate hate tiffs. I've had people reach out to me. Um, yeah, I personally am not a fan. I think anytime the government gives involved and I'm not saying we're giving out money but anytime essentially the government gives money we can never expect a correction factor because the money will be there by the government to help offset and therefore the free market and the capitalist uh society it doesn't bring about a correction factor on the costs. So personally I'm not a fan of tiffs just because of that. But what I will say um in in closing, my last comment I want to mention is that if a developer comes before us um as a council, it comes before the city and they've checked all the boxes that they're required to check by SDCL law and they have done their due diligence and everything um is laid out and makes sense. And as Mr. Morris has done. He's looked into these developers that he's working for and he's said yes, they have the financial means to do these projects. Um I I feel that everybody that comes before us should feel as though they're treated fairly and equally and we've handed out tiffs uh before um in this situation. Um and I know we'll be looking at another one. I feel like they've checked all the boxes and I feel that in the spirit of fairness to everybody um unless the city wants to take a hard stand and say no more tiffs period for anybody um I feel like we have to treat everyone fairly. So that's why I will be supporting the tiffs.

Thank you Councilman Shy.

Thank you Deputy Mayor. Um yeah, thank you for the conversation this evening and I was I have I was at the um planning commission meeting. I was able to to listen and be a part of that. Not speak into it, but at least listen along and and as it was being vetted out. I do have some questions. Thank you uh Mr. Moore for being here tonight and and and your your expertise in this subject. Um so I'm kind of going [clears throat] to be asking some questions not from uh I mean I appreciate the developers doing this and I and I appreciate these tiffs even being applied for. Um, however, as Councilman Mormon had said, we've got to make sure every box is checked. And I guess for me, I'm not personally sold completely on this first one. I'm just we're talking about this first one right now on 21 [clears throat] on the but four clause. But, however, maybe I need some clarification. You can help me with that. Um, it was you had mentioned that the this this unit would not be built but for the tiff uh because of the well the environment of building with cost of material and that that being the reason for the but for clause when I see another unit in town that was just finished and people are moving into uh half the number of units basically in this one um about half the price half the cost so if you do the math it's pretty similar per unit um they were able to do it without a tiff and so I guess I'm just curious on if if that's the justification for the but for clause Um that's then it' be hard to explain why another developer can do it without a tip. So if you not that you can answer to what the other builder is doing.

Was that the same developer seven years ago or we speaking to a different

they just finished up and are moving in this this year. They just they built this this year calendar year right now. Yeah. And they're doing it without a tiff. So, if another developer can do it without a tip, it's hard for me to grasp the but for clause because we got to make sure that we're deciding here at this in this council. Um, if all the boxes are checked, as Councilman Mormon said, is the butt for clause checked when that's the when that's the justification for this particular one. Um, we're going to have the next one coming up too, and that one maybe is a little different. We're trying to put a street in and do some other infrastructure. This one doesn't have the infrastructure involved. So that's why if it doesn't have the infrastructure involved with the road, um it's hard for me to say yes because of the butt four clock. And so that's where I'm at. That's my thoughts. There's anybody wants to give shed some input on that.

And that's a great question because the butt four is emotional, not technical. It it's we try to technicalize an emotional question for it on the butt four. I can say on mathematics is that when the investor groups each investor requires a minimum return for the most part you're seeing at least 8% some others require 12 14 I've seen as high as 18 it just depends on the level but what you don't know behind the scenes are what are some of the sunken costs in particular land a lot of times that you see is a person may have bought that land or was given to them or was inherited 15 20 years ago at 20 cents a square foot which now has an appraised value of four they now all of a sudden are leveraging that into the project where [clears throat] they don't have to do a debt repayment. I'm not familiar with the economics on the other. But that's [clears throat] that's one of the reasons there. I also look at then and say where is that tiff being applied and what you see on the first one it is purely infrastructure and half the land cost. So it's not a runaway tiff by any means but rather um infrastructure is directly related to that site that fits within the codified law. So there again, we see the emotional question above four. I try to justify it under the codified law. Does it fit within that? And then mathematically back into it. So um I can't speak to the other developer, but that's how I would rationalize the butt four on that side. And then also look at the need of the community when you're showing you have a need of four to 500 units in the next five years to meet that growth that's coming. Oh, u yeah, thank you for your input on that. Would and just again just a question that I'm I'm just want to know the answer to as far as interest rates if they're 3%, six or 10.

Um that is a valid point to factor in. You're saying for a tiff you're for the but four clause is interest rates, right? That valid point. Correct.

All right. And so and that's that's good to know as we're learning this subject a little more. I mean, I've been doing this for four years and had some other conversations and gained some some knowledge in this. However, there's this subject. There's always more caveats, more to learn. Um, I'm still strugg I guess on this TIFF 21, I'm still struggling on the but for just I want to see the project done and I want to see the I like to see the developer be successful. Um, but just knowing just looking at the numbers and and and other developments that are being h that are happening without the tiff, I just I'm still not completely sold. And so that's what I'm working through. So again, if there's more conversation tonight, I'd appreciate that. Thank you. We'll just call this therapy. We'll get you there.

Any other question? But great questions though. Really? Any other questions?

See? None. Okay. Well, I think I'm comfortable taking a vote on this one. I didn't really get a clear answer to or hear a clear answer to what Dan's question was because developing in Watertown. I don't know if others have experience on the council uh doing it, but I have and we did it without a tiff. And I don't know specifically what project Dan is talking about that developer. I did I'm not I'm not clear, but that is a real real important question. Finishing a project with actually probably the same building costs. I know this land on this Oaks 2 was bought uh from the family about seven years ago prior to big up big up in in land costs. It was bought using the same valuation and the same cost as their first building. Um I don't know if it was inherit, you know, I know it wasn't inherited. I know it had to be purchased from the family. Um, but the but for is emotional yet it shouldn't be all on emotions and it shouldn't be it it should be real. I like the rest on the council and I think everyone listening wants more doors in Watertown.

But do we start handing out these like we hand out candy at a parade? Or do we ask the right questions and wait for the the right answer? Go ahead. Well, obviously I've never missed a float with the candy when you look at me. But good.

You bring a great question up because I stress this time and time again is there's a point where TIFF fatigue comes and there's a point where how much is enough is enough before you have to say no more. Um, and as a person who makes a living off tiffs, I've probably have recommended not to do 10 just in the last couple weeks because of that tiff fatigue because they're they're not they're not accomplishing the task. And a lot of it I think is too is you've had a great growth now with these two before you on multifamily, but you also have to make sure they succeed. We see what happens when a multif family doesn't succeed because it's a black eye on all of us that are involved. But what I would say at this point going forward is and we did this in Harrisburg, we put a moratorum on single family homes because we knew in order to grow sales tax, retail follows rooftops. And so that was the primary mission at that time was to get more sales tax. To do that, we needed single family homes. We accomplished the single family homes. Then we stopped it. Then we said, "Okay, we need commercial. What can we do for commercial?" We targeted a TIFF towards event centers and hotels because they don't have any. And so what I would say is as you look forward and working with Cliff in the in the future goals of what the city is is to spell that out. You have every right to put in your TIFF policies or guidelines, we want to curb this down. We want to let the market absorb this. Um is is one thing I would I would recommend and we're seeing it throughout some communities. But u there I I I would say though you you haven't handed them out. I think you've got you're up 22 right now. Go to Rapid City, they're well over a hundred. There's other communities that just hit the 50 mark. Um you know, it just really depends on where you're at. But to the point in rural South Dakota, and I say rural sometimes outside of Rapid and Sou Falls, you need a catalyst to spark that

development. And that's where the tiff is the tool to make it happen. or excuse me, city manager Allen. I I appreciate Councilman Chuy's question and it's it's one I've been doing some thinking about and studying uh state statutes as well as past practices and it is the third point that that I laid out that we should ask here and it's the pro do the project economics make sense and the question Councilman Shuddy asked is a great one but I don't know enough about that other development to be able to do a comparison. Um, that's the tough part. But I will just share with you, albeit it it may be more confusing. Um, the but for clause that we refer to really doesn't exist. Uh, but for doesn't appear in the state statutes around tiffs. Where the butt four came from is some other states that had a pure definition of tiff eligibility being around blighted properties. And our state legislatures in I believe 2008 and then again in 2011 and then again in 2018 when housing was added um have really tried to address this economic question differently. And I will read just a couple of short paragraphs from state statutes to help you wrap your head around this economic question. So I'm looking at here um South Dakota codified law 11-9-8 and there are two requirements and both of these requirements need to be met. The first requirement has an or clause in it. So don't mistakenly think I'm going out of the second requirement. So the first requirement is not less than

25% by area of the real property within the district is a blighted area or not less than 50% by area of the real property within the district will stimulate and develop the general economic welfare and prosperity of the state through the promotion and advancement of industrial, commercial, manufacturing, agricultural or natural resources development. So that's the first requirement. The second one and this this is preceded by an and and the improvement of the areas likely to signif sign significantly enhance the value of substantially all other real property in the district. And it concludes with it is not necessary to identify the specific parcels meeting the the criteria. No county may create a district located in whole or in part with any municipality unless the governing body of the municipality has consented to creation of a district by resolution. And so as I look at that, I think it really supports what Mr. Morris is telling us. You guys have the difficult job of subjectively trying to determine if the economics and the result of the tiff are going to benefit the overall tide that lifts all boats in our community and and that's why we bring these tough decisions to you as a council. If this could be purely done by formula, we would do it administratively. So I don't [clears throat] envy your task and I I hope this has helped you uh helped you frame what we traditionally call that but for requirement.

Great point. Thank you Alan. Very helpful.

Okay. I was just going to jump in and say I think some of the challenge that we face with this and it's going to tie back to that AMI a little bit again is that you would hope through the tiff this creates savings for the developer that are then not passed to the developer so much as it's passed on to the person who's going to be renting the home. Um unfortunately for us that AMI does not guarantee that. It's already above what we bask market price. Um, so in some ways we have to goodwill hope that it passes along because they are getting cost savings that wouldn't otherwise be there. Um, and yeah, it's challenging to be a developer. I know what it's like to take risk and stick your neck out there. It's a gamble. Um, and I understand wanting to leverage the tools that your disposal in order to try and make it happen. And then I also know that we have some pretty big goals here in Watertown right now trying to grow our population and continue to move ahead. So, I just think a lot of that's going to have to be kept in mind as we deliberate this going forward. But, um, you know, the lack of a guarantee that it gets passed to the consumer is always the challenge. Um, can you answer was the first oaks was that a tiff?

No, it's not. And so, like, you know, realistically, would we expect these to be a comparable price then for rental or would they be less because this developer is receiving, you know, aid in a way? it it would be comparable with a little bit newer cause and probably better amenities. Okay. Society today, my my twin daughters think that they need stainless steel counter or appliances. I'm like, "No, the old frigid is just fine." But I mean, that's just today's younger kids, right? Think Councilman Jer must have one of those daughters. Council

Jires. Well, for as important of a subject as this is, we haven't been going at it that long. And there was good uh good questions, good answers by Toby and the planning commission. Um yet this one wasn't asked. So, Rapid City is 100 minus one because that one didn't go through. and it didn't go through because the public got involved. First time in South Dakota history and so the public is being a little more educated by that one.

Good, bad, ugly. That one I think went down because of discretionary funds that the developer had maybe some right to get after. Similar things have happened in Watertown. two, three, four properties. Do we have asurances in the development agreement that limit the ability for the developer to go out and get some financing so that they can pull money out of it instead of passing that savings on to the tenants in this case?

Are you talking in terms of like a refinancing?

Yes. So, most of them are all going to get refinanced and and because you can access uh the Fanny May or Freddy Mack market, which is a federal program where you're going to have a little bit lower rate 5 years down the road once it's stabilized. Uh the the big thing though is making certain that we have in the developer agreement the costs are certified. So, it's not just an open conduit for 900 and some thousand or or for 2 million. But once you know those costs go in there, um they they do get certified uh to that point. So I think that's if you were to look into it as a tiff police, it's not so much the refinancing that a person should be concerned about. It should be certifying the cost and that it just wasn't estimates that were pulled out of thin air and and and so that's we do have that in the developer agreement that they must be certified with.

Does that help?

Yeah, please follow mind at all. So, what I'm getting at is that the developer takes off, files bankruptcy, but he got out of town with a lot. He got out of town with cash. That's okay. There's a lot of risk involved in some of these projects. Have no problem with it. Um, are there new guard rails in place? Are there new ways? Are there in in your experience, not just in our new tips, but are there things that you're seeing that prevent that from happening a little more because that's where the public goes at some fishy businesses going.

Toby, can you when you answer that, can you talk in the context of the Oaks property? What guard rails do you have in place so things don't get off the tracks with this this plan this tip plan? You like me to take that one? Go ahead.

Councilman, if you look in your agenda package on page 71 and 72, it lists the specific costs that are eligible. And those costs need to be supported by an invoice from a contractor and an inspection that that work has been done and a certification that that work is in the ground. If the developer takes off after this stuff is in the ground, we're to the benefit because the tiff won't exist and we will have public infrastructure than a development for someone else. If I can further answer. Yeah, please.

I mean obviously growing up the size I am was picked on in high school. So vengeance was always in the back of my mind and I I turned that that knowledge into something to always keep the city in the driver's seat. There's a clause in the developer agreement that talks about what's called an annual appropriation lease and there's two or annual appropriation and there's two reasons for that. If you look at the constitution of South Dakota, it states state of South Dakota cannot borrow more than $100,000. Wow. You know, how did we get the capital? How do we get the buildings, the regions unless it's annually appropriated? So, I do that for two reasons and I put this in the developer agreement. One, so it doesn't count as constitutional debt. So, you're when Rod Forton calls you up and you say, "Uhuh, I have it in here." The other thing is it becomes a big hammer. So, let's just say we have a a developer from North Dakota with a couple tattoos on them and they want to pull some stuff. You can say, "Well, you know, I just don't know if I'm going to appropriate it this year." Well, what's that mean? You have every right to appropriate it. And they're going to say, "Well, what if it impacts your rating?" Then I'm going to step in as your municipal adviser. And I said, "No, I can explain that because I was the one that took the state to the AAA rating. So I have you covered on that side." So it becomes a really big sledgehammer on a very technical vengeful kind of way.

I really did get picked on a lot. Councilman Mormon. Uh just just a quick question and mostly for the uh public's knowledge for anybody that's uh listening in to help understand a tiff. Um [clears throat] if you if you take if you receive this tiff, you have to keep it at 80% of the average median income set by HUD. If you don't receive the tiff or you don't come and ask for this tiff, essentially you could charge whatever you wanted for rent. Then you could You could set it as high as you wanted it to. Okay. Thank you.

Um, just one other thing about this is that I don't want anybody to be confused that we're taking tax dollars and giving them to a developer. No, that the the tax dollars don't exist unless this development gets built. Uh, in other words, the value of the property, uh, there's a base value to it. What the developer gets is the increment once it once it increases in value. So, it's not like I'm taking tax dollars from hardworking Watertonians and handing them over to someone. I'm not doing that. uh we're increasing the valuation of the land and we're taking that increment between the base value and the and the higher value and saying that goes to a very specifically delineated project cost that as Allen said is invoiced and verified and all those things. So I just want to make sure people don't misunderstand that. Thank you. And the last thing I would add to that, Councilman Allen, is that they only get that incentive if they put up the capital and do the project. There's no money that exchanges before the project is completed. Councilman Shetty,

to follow up on Councilman Allen's point there, the but four clause, however, if the developer will still do the project without the tiff, well then yes, we miss out on that tax revenue as a county, as a city, and as a school. That's where the but four four clause comes in. However, however, We take that in consideration on where does that play in what count city manager Al Stagger had said? How much does that play in then into our role tonight? I guess I would like to have that answered.

That's a difficult question. Um because you're really asking is a developer really going to do the project if you don't approve the tiff. I will tell you these projects are far enough along that they probably will, but they're not going to be happy developers going forward. Um, that's not a easy answer. And as I said before, you guys have a difficult deliberation in front of you. Yes. So my question I guess is as far as state statute, we don't really have to we don't take in the but for isn't really following a state statute. That's just more for us to deliberate around this desk.

What what you're asking yourself to get comfortable with the but for is whether or not if the plan before you is executed as it's put forward. Do you believe there's going to be over 50% of the properties in the district will generate to an improved economic condition in the community. And in this case, it's going to lead to more housing for people, which leads to the more ability to bring in workforce that our employers need and the additional people and rooftops make us more attractive for retail activities. So, I I think you can get comfortable that yes, there is going to be an economic uplift by having more multif family residential units in the community. Uh, and I just want to make one clarification, too. Not to complicate things unnecessarily, but they're already fairly complicated, but uh um from a school district standpoint, these tiffs, there's a hold harmless for the school district. So, they're not losing out on those dollars. If this was a local tiff, then there would be a rebalancing of the school levy that happens by some magic formula that I would have no idea how they figure that out. But these don't require that there there's a hold harmless for the district. Correct.

The general fund with the school regardless of the classification is always going to be held harmless. It's a matter of who is holding it harmless. If it's a local, it gets spread. We don't I I do very few locals.

Other questions? Good. Okay. We've got a motion on the table for approval of resolution number 26-08. Finance officer Bob Z, would you please call the role and see how we vote? Okay. Mormon. I Peters. Hi. Eddie. Pass. Hi. Here. Hi. Hi.

I'll go with I. All in favor? Motion passes. We are on to 13B. Other business. We co-mingled these a little bit. So, um, after I read this, we will open up just for open comment here for a minute. Uh, 13B is the approval of resolution number 26-09 designating the district boundaries and adopting the project plan for tax increment financing district number 22. Uh, this one is the Dakota Commons. So, before we jump into the discussion again, is there anybody here that would like to speak on this item? Okay, seeing none, we'll just jump right back into to the council discussion here. Um, Toby, is there anything you want to present to us before we make a motion on this?

I would stand by for questions. Okay, we'll need a motion for approval then. Council Councilman Mormon made the first, second by Councilman Allen. Uh, okay. We will open it up for questions. Well, be we're talking just about the Dakota Commons project now. Any questions for staff or Mr. Morris? Councilman Allen.

Um, I don't know if it's so much a question necessarily, but this one does give me a little bit of heartburn because uh, one of the things that we did in approving the reszoning was we based it at least in part upon a concept that was presented to us of what the what the goal of the developer was. Um and it was at that time four units uh four of these apartment complexes. Uh when they eventually submitted the plan perfectly legally uh they proposed eight units. Um so they doubled the size of what they had um presented as their plan to begin with. Um that surprised a number of people. Um perhaps naively, we we assumed that what we were looking at was probably what was going to be proposed and it wasn't the case. And we recognized that when we reszoned it, they were, you know, it gave them this window to to change the size of the plan. But so my question would be then um between that concept that was presented to us and the eventual plan um I imagine they doubled the cost uh of the project. And so as I look at it and I think well they doubled the cost of the project and now they're saying we can't do it without I forget the dollar amount of that particular tiff. Is it two million? Am I am I correct? About $2 million. So, you know, now I'm thinking, well, you know, so you you developed this plan, you reszoned it, you went through all that effort, and now you're saying, I'm going to double the size of the project, and I want $2 million uh in order to be able to build that. Well, I can imagine if you doubled the size of what you were projected to do that it probably makes more sense for you now to apply for a TIFF and try and get that tiff. Um, but again, I think, well,

maybe does that mean that that they would have asked for the TIFF if they'd stuck with the four units instead of eight? I don't know. I mean, I again, I have to assume they doubled the cost. Uh, so maybe they would have come to us and said, "I need a million dollar tiff." I really don't know the answer to that, but it makes the the butt four in that particular case really give me a lot of heartburn. And and again, I you know, I recognize their ability and all within the ordinance uh to expand that project, but that one gives me a little bit of heartburn as a consequence of that.

Anything you want to comment on there? No. I wish I had Tums. Any other any other uh Councilman Shetty? So, just have a question on this one as far as is is there a maybe the developer can answer this one as far as a second exit into out of that development into the building some infrastructure as far as a road. I guess if someone could talk to that is a developer planning on doing that is that I guess I want to just find that information because that's part of this tiff as far as infrastructure and everything's

I I can give you some insight into that. So, as you will recall uh this particular development caused some heartburn with with the neighborhood. And as we've worked with the neighbors, um we have found a solution. Um the neighborhood will be much more accepting of this development if there is a point of uh access directly onto 19th Street. And so what you will see in the details of the tiff plan here and the parties have agreed to do this. Um there's a $200,000 contingency to create the access through a commercial lot uh directly onto 19th Street. That may be the primary. Um there may continue to be the need uh for another point of uh ingress or egress onto Prairie uh View Trail. that's currently under review by the fire marshall and the planning and zoning team to see if we do need that secondary access. So, it could exist. It may be an emergencyon access, but the dollars do exist in the tiff plan and the uh owner of the adjacent property, Mills Development, has agreed to cooperate with allowing access across their property to provide the access to uh 19th Street. Thank you. Follow other questions. Councilman Hoy,

maybe I missed this. I apologize, but I just want to be certain the folks in Dakota Commons are aware of this expansion of this project. Um, I can't speak for all of the people at Dakota Commons. I do know that uh the roughly 40 people we had packed in a room downstairs when the expansion was made uh made known and are definitely aware of it. Okay. Other questions, comments,

deputy mayor, just to share the numbers similar to what we did on the last one. Um the total cost per the developer on this project is 17.5 million and in this case we have estimated that the assessed value will be 8 million. So it's a much better position being eight individual buildings than the last one. That is about 47% of the the cost um of the project. This one also is I think about $156 a door. Um, so it's in a much better position economically than uh the last one that you just looked at.

Thank you, Councilman J.

Yeah. Um, I have to say that I thank city manager Stagger for digging into pages 71 and 72 of that that agreement. Um, because I didn't. um yet I'd like to know that the same asurances are in this project that are in pages 71 and 72. And then as a side question, is that a different agreement than some of the other tiffs that we're referring to here? Um is that a differentiation from previous tiffs that we've done in the city?

There is. They are quite similar. So to answer your first question, uh page 110 and 111 provides the same uh itemized list of costs in in this tiff. Uh the development agreement is how tiffs are always memorialized and and in the past um the city has used a development agreement that maybe had some holes in it. And we've looked back at those and looked at all the things we've learned. We've worked with uh with our TIFF advisor to create a developers agreement that we believe closes a lot of the loopholes that we had in the past.

I'm assuming you read those pages and skipped the 70s. I missed 120 and 121. It's 110 and 111. [laughter]

Very good. All right. Any other questions, comments? Okay, seeing none, motion on the table here is to approve resolution number 26-09. Finance officer Bob Zingi, please call the RO. Okay, Norman, I Peters, I Allan, I All in favor? All in favor? Motion passes. Thank you, Toby. Appreciate

Take just a moment, Kyle. [clears throat] I have to really commend your staff, and I don't say this because I just put lipstick on, but we really vetted these quite a bit. Um, right down to Dakota Commons, must have started last summer. So, your staff did an incredible job from beginning to end. Um, I think I must have been on speed dial with Brandy for every day there for about two weeks. So, I I really want to compliment them. I don't see that kind of vetting in that kind of detail. A lot of times I see it, but I really think it's complimentary to what you guys have for a team here.

Yeah. echo those sentiments. Thank you very much. Okay, we will move on here. Um, I actually made a boo boo and skipped open forum in the beginning. I'm assuming we don't have many candidates for that, but is there anybody here that wishes to speak on something that's on the agenda? If you have been, you've been waiting patiently. Thank you for your patience. Okay, we'll move on here to 14. Uh, city council member announcements and introduction to topics for future discussion. Anything anybody wishes to say here? Councilman Norman,

just a couple quick shout outs. Uh just want to congratulate senior Sunny Rider secured a position at the national speech and debate tournament in Richmond, Virginia by capturing first place in serious interpretation at the Northern District qualifier. Um also Abigail Reeves became the first ever South Dakota to receive five gold medal medals status from United States Figure Skating. Um then over the weekend the boys wrestling tournament got third in the state with Gage Lure winning his fourth state championship. Last time that's happened in Watertown was I believe about 54 years ago. And Shay Richtor won his uh first state championship. And then the girls team finished second in the state with Allison Conrad and Eden Hawk each winning their second individual state championship. So some incredible uh incredible students here in Watertown.

Very good. I challenged somebody in game of trivia with Councilman Mormon. Very good stats. Thank you, Councilman Hoyer.

Just wanted to give a little shout out announcement coming up here on the 14th in between our next meeting. Watertown will be celebrating their St. Patrick's Day celebration. So, take advantage of all the fun stuff that the chambers put together for that. Um, all the classic things, the pancake feed, the Knights of Columbus, run for the gold 5K walk, Little Miss Shamrock, all that good stuff. Um, on top of that, uh, Downtown Collective will be doing a soup stroll that day, too. So, if you want to grab a mug and go store to store, you can get all full of soup. So, there you go. It's going to be cute. Um, but yeah, take advantage of that. That's one of the cool things that makes us uniquely Watertown. So, get out and just have a nice time.

Thank you, Councilman. Anybody else? Go ahead, Councilman Jar. Sorry, I'm gonna be quick. This is going long now.

Yep. It's all good. Uh just wanted to let everyone know that there's a group of us that are going out to uh the local media in the next couple days and that we'll be uh further answering questions I'm sure from the announcers about this item. But also another item I think would be a very good topic is what's happening with our airport. Thank you Ian for being here tonight. A good reminder, I flew in uh supposed to land at five o'clock, got in at 20 minutes, 25 minutes to 5. Um there were 40 people on that plane. That is the largest I've seen. Uh I have been on a lot of flights in and out of Watertown the last year. 40 people were on that plane and there's no hunting going on right now. It's not the not the world's largest uh celebration in South Dakota. It wasn't opener of pheasant hunting. So, um we had great numbers in January as we saw compared to January of last year. I have a hunch that is trending the right way. And I spoke with passengers that were getting off and you know what, a lot of smiles.

That's actually a really good topic. I know our flight times are changing. We should see more numbers with those time changes. Does anybody have those updates? It's bumping back an hour in the morning and getting in earlier. Does that sound right that Delta flight? It It sounds right. On the Minneapolis flight, uh uh Director Merryweather would have to share the exact times, but you are right as a general direction. Yeah, it's exciting. Good stuff. Anybody else? Okay, city manager report.

Couple of things I'll just point out. Our street department did an excellent job this weekend on snow removal. they were expecting an inch or less of snow and got almost almost six. Uh and they were surprised by some of our contractors who were out of town and so the the staff did have have to take on some additional areas and did an excellent job. Uh just around the topic of communication, uh Councilman Jurn's brought up that several of you will be with media outlets the next two days. We will also be with media outlets from a staff standpoint going through public safety statistics next week and and we will get the exact date out on that. Also around communications uh through our our public information officer, we've changed the way that that we communicate in many ways and you will start to see both the media side and also you as council members um various media briefings coming out. I think there was one out today on an injury accident that's coming out through a new channel and and hopefully improving the overall process there. And then also code red is our emergency notification system. We are up to about,00 people live on that system. It worked flawlessly this weekend in in conveying information on the snow emergency. Uh two other things and then I'll wrap it up. The first one is uh street improvements for 2026. As you will recall from the last meeting, we had ve very favorable bids on the large Fifth Avenue project. And so now we are evaluating other smaller projects that we can complete um within 2026 and and maintain the 2026 budget level. Um the priority that we're looking at there are things such as neglected half streets or

perhaps even some of the gravel areas that have been um um difficult to do in other years. And then finally, we're also finalizing the annual cemetery improvement projects. Every year we budget a certain amount of dollars to repave areas in the cemetery. And we've done a pivot this year. What we want to do is look at the newer areas of the cemetery that are currently not served by paved roads versus repaving old roads where quite honestly some of the graves may not be visited very often just based upon the age of the graves. So we do look at expanding some roads into the newer areas this year and that is a change from our past practice. We'll stand by for any questions if you have them. questions.

Okay, we do have a reason to go into executive session to discuss contract negotiations. No action will be taken when we get out. So, thank you and have a good night. Thank you.