Anoka City Council

March 25, 2024 (Worksession) Page 1 of 11 WORKSESSION OF THE ANOKA CITY COUNCIL ANOKA CITY HALL CITY COUNCIL WORKSESSION ROOM MARCH 25, 2024 1. CALL TO ORDER Mayor Rice called the worksession meeting to order at 5:03 p.m. 2. ROLL CALL Present at roll call: Mayor Rice, Councilmembers Scott, Skogquist, Weaver, and Wesp. Staff present: City Manager Greg Lee, Assistant City Engineer Ben Nelson, Liquor Store Manager Kevin Morelli; Finance Director Brenda Springer; Senior City Planner Clark Palmer; Housing and Redevelopment Director Darin Berger; Public Works Director Mark Anderson; Utility Director Del Vancura; Community Development Director Doug Borglund; City Attorney Scott Baumgartner. Absent: None. 3. COUNCIL BUSINESS and/or DISCUSSION ITEMS 3.1 Discussion; Cannabis Overview. Community Development Director Doug Borglund shared a staff report stating the legislature created new statute legalizing cannabis in Minnesota as of August 2023. The legislation creates the framework for adult-use cannabis in Minnesota and established a new Office of Cannabis Management, which will regulate cannabis, including for the adult-use market, the medical cannabis program, and for lower-potency hemp edibles, and issue licenses and develop regulations outlining how and when businesses can participate in the industry. He shared further information about the law including where dispensaries can be allowed, the proposed 500-foot distance for registration process, and compliance checks. He shared possible legislative amendments being considered this session to allow municipalities to have priority of first round of licenses in their jurisdictions then asked if the City was interested in pursuing a cannabis license. He asked direction by Council on whether Anoka would support the proposed legislative change, work with a consultant to further explore a municipal dispensary, feedback on the proposed 500-foot distance, and developing a cannabis related ordinance. Ashley Picillo, CEO of Point 7 Group Cannabis Consultant, shared her background and factors to consider while the City decides direction on municipal licensing and their proposal which was based on phases that includes a business plan and financial model. March 25, 2024 (Worksession) Page 2 of 11 Kevin Landry, 765 Main Street, spoke about the recent opening of Dollar General and how as a homeowner this store has decreased his property values 16-21% and with a dispensary opening nearby his values will decrease another 3-8%. He spoke about Councilmember Weaver’s recent new building and how he appreciated that addition and asked for the same consideration by the rest of Council. City Attorney Scott Baumgartner noted cities do not have a choice about whether or not to allow a dispensary but that based on Anoka’s population we only have to allow one license and the question was whether the City wants to have a municipal dispensary or allow someone else to apply for the license. Councilmember Scott shared his support to consider a municipal cannabis license and said while we’ll have questions and need discussion regarding priority and social equity, federal funding, and banking options he would prefer a quasi- private/public partnership through allowing a couple licenses which would be good by providing profits and tax revenue. He asked if the Council wanted to solicit bids for consultants that would possibly include local consultants. Councilmember Skogquist commented about City liquor stores that benefit the park systems and sees cannabis being similar and agreed we should have options by allowing two to three licenses. Jamie Croyle, Anoka, shared cannabis is not legal federally and will have an impact on officers. She said while Anoka works to build the social district opening a municipal dispensary may not be the best thing and suggested waiting one to three years to let other cities do it first then work to create a space that is inviting. Mayor Rice shared his disappointment with current law and its limits and said he would support a municipal dispensary. Mr. Borglund summarized Council consensus to support pursuit of a cannabis license. Councilmember Weaver supported Ms. Croyle suggestion keeping licensing on the private side. Mr. Baumgartner spoke about social equity licenses and how there was no guarantee to obtain a license as well as the extensive infrastructure needed and the importance of first knowing if we would even be considered for planning purposes. Councilmember Weaver shared concerns with having a dispensary on 7th and Main Street, Green Haven Golf Course, or Rum River Shores area. March 25, 2024 (Worksession) Page 3 of 11 City Manager Greg Lee said if the direction was to work towards a City dispensary that it would be associated with the liquor store to share costs, staffing, etc. Councilmember Skogquist confirmed one license has to be in Anoka regardless and suggested possible locations of commercial nodes. He said he supported considering if a City license was viable through a consultant but was not in favor of the City supporting the proposed legislation then asked if there was a draft ordinance yet from the League of Minnesota Cities. Mr. Borglund said there was no model ordinance available yet but that Anoka needs to establish locations where licenses will be allowed and said staff was beginning to review the adult use ordinance as people will be calling soon to inquire about possible locations. Councilmember Skogquist supported work on a draft ordinance to be ready when licenses become available. Councilmember Weaver asked about businesses leasing space for THC infused beverages and gummies which were currently legal and trying to set themselves up for a dispensary license and the need to decide locations now, especially with regard to social equity. Mr. Landry asked if Anoka has enough police staffing to cover these new businesses. Ms. Croyle said as someone who has been serving the community for years, she would find it helpful to know where to look for a space now. Councilmember Scott suggested one location could be Rivers Commons. Mr. Lee said staff will create a map of possible locations and appropriate distances from current THC licenses for Council consideration and will pursue research on a municipal license through a consultant. Councilmember Skogquist suggested drafting an ordinance too for discussion as the legislative session will be over in May after which we should have more direction. Mr. Baumgartner noted there was not much cities could regulate outside of locations. Ms. Picillo encouraged the Council to hear each other out as this was a major decision for cities, adding the number one task is to map out the financial model. She said while there are many positives there are also inflated ideas surrounding cannabis, especially with any resulting lottery outcome and social equity being considered. March 25, 2024 (Worksession) Page 4 of 11 3.2 Discussion; Purchase of 7th Avenue and Main Street. Mr. Borglund shared a staff report stating at the February 20, 2024 Regular City Council meeting discussed the purchase of 7th Avenue and Main Street from the City of Anoka Housing and Redevelopment Authority (HRA). After being presented with a purchase agreement for the property, the Council requested the item be tabled and a worksession be held to discuss this concept further. He shared information submitted for the February 20, 2024 meeting for your reference that included how the HRA began assembling the blighted properties in this expanded South-Central Business Tax Increment Finance (TIF) District in August of 2019. After the HRA purchased 640 E. Main Street out of the HRA General Fund, they secured bond funds and purchased 650/658 E. Main Street, 639 Monroe Street, and 1919 7th Avenue. Bonds were issued to purchase and redevelop properties at this location and the City and HRA entered into a pledge agreement which pledged the TIF revenues from the South-Central Business TIF District to pay the principal and interest of the bond debt. This district already had internal loans from both the HRA General Fund and the expired (pre-1990) Redevelopment TIF District. He outlined the debt incurred and said since that time, staff has worked with CBRE, Inc. to market this 1.75-acre property for various uses. The current listing price is $950,000.00. Though there has been much interest, most of the interest was for uses not allowed in this zoning district, a greatly reduced purchase price or non-preferred uses based on HRA, Council and Planning Commission input. The HRA also signed a purchase agreement with a development group, spending a year working towards a favorable outcome to no avail. HRA and staff worked with financial consultant, Ehlers, Inc. to analyze TIF revenue projections and other aspects of the potential deal. TIF revenues should exceed what it would take for the City to repay all HRA debt ($4,033,852 including interest), however, the actual TIF numbers will not be determined until a more specific plan is agreed upon. At the February 26, 2024, worksession discussion touched on many variables and components related to the subject including acquisition, funding, future liquor store, site development, site layout, future users, etc. He further reviewed discussion from the worksession that included financial analysis, development layout proposals, and asked for direction on acquisition of the subject property then highlighted developer Mike Briggs’ proposal for a possible restaurant. Finance Director Brenda Springer shared current financials, loans, principal and interest balances along with internal loan amounts, with a total debt of $4 million and projected revenues of $3 million of TIF revenues to pay back the debt. She shared potential options, including debt scenarios, for Council consideration. Mr. Borglund reviewed several options for Council consideration and outlined possible square footage availability, parking, access, and other elements. March 25, 2024 (Worksession) Page 5 of 11 Liquor Store Manager Kevin Morelli commented on Option A and shared there was no need for a loading dock but instead a loading area that included a large enough door opening. Councilmember Weaver stated the liquor store should be constructed to include the potential for a future drive thru as liquor laws change over time then asked questions regarding store access in the front and back of building. Mr. Morelli responded the main entry would be in the back by the parking area and the liquor store and potential dispensary in the front with windows with the mechanical area by delivery area. Councilmember Weaver strongly opposed having the building close to Main Street because this area was different than downtown and had no on street parking and was currently not zoned for the other options being proposed. Councilmember Skogquist asked about setbacks from the street. Mr. Borglund responded the current setbacks were 15-foot minimum and 35-foot maximum. Councilmember Scott reviewed parking stalls with each option and said it appeared Option C would be best to share for multiple businesses as it had the greatest number of parking stalls. Councilmember Weaver shared about Councilmember Skogquist’s earlier concern with strip malls. Councilmember Skogquist said the two-story was different than a traditional strip mall and that he was more opposed to a one-story strip mall. He said this proposal would look good but we need to review the financial proposal to see if this made sense, adding he would be open to including drive-thrus. Councilmember Wesp asked if the tax revenue is maximized based on the usable space. Ms. Springer confirmed Option 3 included the most commercial space by far. Councilmember Wesp asked about access in a two-level building and proposed ownership plans, adding he liked the 35-foot setback. Mr. Borglund said an elevator and vestibule access would allow for a two-story building and said the City could lease space to tenants. Mayor Rice said the scenario would likely be a zero-lot line with the building being offered for sale. Councilmember Wesp said the consultant recommended a 10,000-square foot liquor store and that there would be so much more other retail and parking needs. He said he liked the 35-foot setback but having only 61 stalls was concerning. He said they were trying to drive business to the area and a use such as a restaurant March 25, 2024 (Worksession) Page 6 of 11 would need 85 stalls. He said he liked that the main entrance didn’t face Main Street. Mr. Borglund explained how loading area could be shared with other tenants. Councilmember Wesp inquired about potential increased property taxes. Ms. Springer said property taxes would increase the City’s tax capacity once the district was decertified. An audience member asked about the proposed smokehouse restaurant with live music and concerns for nearby neighbors and parking impacts. Mr. Lee clarified the action at this time was limited to purchasing the site and that the options being presented were just concepts and not formal site plans. Councilmember Weaver asked what changes were needed to allow certain uses without having to create a legal non-conforming use. Mr. Borglund explained available options that included leaving the zoning in place and master planned through a PUD project for some flexibility or variance, amend the existing EM2 standards with parking and drive aisles in front of the building, or create an EM-3 subdistrict similar to the B-3 general business district. Councilmember Weaver said Option 3 was the most creative, adding CVS Pharmacy wouldn’t be allowed today but noted the Dollar General building leased out quickly which was good. He said we need to maximize the amount of space for a building to make it successful and while we have three in place, we don’t know yet about the fourth and shouldn’t limit opportunity. Mayor Rice said a two-story building provided the best financial options and asked what use could occupy second floor. Mr. Borglund suggested potential options could include law firms because of the proximity to the courthouse or a long-time retail business Sterling Trophy. Planning Commissioner Borgie Bonthuis suggested asking the Chamber for potential businesses then shared comments about other projects and how she was not sure parking was that important, referring to the mattress store and credit union with parking in front. Councilmember Weaver said this site will be different than downtown and that we need to have more parking options. He said he was not opposed to buying but wanted the correct zoning in place first as he didn’t want to compete against other businesses. Councilmember Skogquist felt the current zoning was correct and said we know we have a need because of the liquor store and the option includes private enterprise through a zero-lot line or other option. March 25, 2024 (Worksession) Page 7 of 11 Mr. Landry asked why the property has been for sale for so long. Councilmember Skogquist responded because other restrictions were in place for uses but since then the liquor study was conducted that provided another possibility. Councilmember Wesp said he wouldn’t mind owning a portion of the site for a liquor store but didn’t want to be a landlord long-term and would support the zoning change outlined in Option 3 and liked Site Plan C. He said he wouldn’t be in favor of purchase without rezoning first. HRA Chair Dave Bonthuis noted the HRA was giving the City a great price on the site. Mayor Rice agreed but said the problem was the resulting debt of a building. Councilmember Wesp added there would be additional debt for the new liquor store and said we need to know how to pay for this debt. Mayor Rice said the best way to pay off the debt was to maximize the square footage of the building. Planning Commissioner Bonthuis confirmed this new store would generate more money. Mr. Morelli said the new liquor store would generate $1 million more in sales versus staying near the existing store. Mayor Rice agreed but added there will be debt incurred if building new. Councilmember Wesp agreed with the consultant that this was a better location for the store. Mr. Borglund explained a two-story building would be $12 million and would leave the commercial space as shells. He said if we sold the building, we would have to do more build-out first then noted the cost was estimated at $4.5 million in Option B. Councilmember Wesp asked if there would be more marketability if there was less-restricted zoning in place. Housing and Redevelopment Director Darin Berger said the current zoning was bringing interest from uses the City was not interested in pursuing. Councilmember Skogquist said he was in favor of purchasing with flexibility but did not want to change the zoning for something we don’t yet know exists, adding we can change the zoning when a use arises. Councilmember Weaver said he would not support purchase without a zoning change first and said he would support Option 3 after rezoning then shared concerns with the Miller building outcome occurring again. He said if zoning March 25, 2024 (Worksession) Page 8 of 11 changes, he will support purchasing the site as it provides the most flexibility and felt the EM4 zoning covers the corner sites. Commissioner Bonthuis said we need to know the parking first and will have to wait to build the liquor store until we know the adjacent uses. Councilmember Weaver said we would own the site and have the ability to not allow a proposed use so this provides us the most options, adding all zoning options could work. Councilmember Wesp said we need to cover the debt for the liquor store first and wanted to have options for the property too but control the property then shared concerns about the Miller building outcome as well and supported Option 1. Councilmember Skogquist said it takes three members to rezone property but four members to sell and asked why a PUD wouldn’t be more appropriate, adding he liked Option C as it looked the best. Councilmember Weaver noted it also takes four members to issue bonds. Councilmember Skogquist said if we do Option 3 it would change the zoning on a current Councilmember’s property as well and suggested a hybrid option by not addressing all four corners while not spot zoning. Councilmember Weaver said he didn’t want to see a variance because banks don’t want to finance a legal non-conforming use. Councilmember Scott said he liked Option 3 for zoning but Option C for the site plan as it improves traffic and logistics for access and keeps entrances and exits furthest away from the intersection. He said he could support either one or two- story building depending on costs. Councilmember Weaver said there was current lobbying around the sale of strong beer in grocery stores and the possibility of including drive-thrus in municipal liquor stores only. Councilmember Scott said he would like to see Anoka business on that marquee corner of 7th and Main Street and agreed about generating parks revenue from liquor sales. Mr. Borglund outlined options to try to maintain going to east and west but include the current situation and parameters. Mayor Rice asked if residential would be allowed. Mr. Borglund said there are existing single family in the area but not apartments but condominiums could be created on the second story with the existing zoning. March 25, 2024 (Worksession) Page 9 of 11 Mayor Rice said we can construct the $4 million liquor store but someone else has to build the remaining part of the building to sell. Mr. Berger said the City could build the liquor store and the rest of the land could be done in pads or zero lot lines with common parking. He said the HRA still has some debt to pay then referred to the previous anchor of Scooter’s Coffee. Mayor Rice suggested setting aside 600 square feet for King’s Wok. Councilmember Skogquist said Option C was back to individual pads and we need to come to agreement with Option C as the physical structure that creates a drive-thru and multi-story building. He said he would support that option and suggested agreeing to the zoning and plan generally as he didn’t want to do part and then not do the project, adding he didn’t want to wait to build the liquor store. Councilmember Weaver disagreed and said we have to preserve options and have the ability to be flexible. Mayor Rice said the financials of the corner and parking and building will make just as much sense to a private partner as the City. He said if we build a two-story building, we’ll have to add an elevator which is a huge cost but would be beneficial to any future tenant. Mr. Lee suggested working with a consultant to market the site and pre-lease to build the building already set. Council consensus was to rezone based on Option 3, purchase the site from the HRA, and work towards Option C through marketing and partnering with a broker. 3.3 Discussion; Joint Powers Agreement Formulary for Anoka-Champlin Fire Department. Mr. Lee shared a staff report stating on January 17, 2024 the Anoka-Champlin Fire Department Board made a motion to recommend changes to Article III Contribution section of the Joint Powers Agreement between the cities of Anoka and Champlin. He shared Fire Board Staff report and minutes. The Fire Board also made a motion recommending that the proposed changes be presented to the respective City Councils for consideration of approval. He commented on changes for total hours work which was more in Champlin than in Anoka surprisingly and the need for a new metric. He estimated the hours increased was based on the number of fires versus lift assists which was more in Champlin than Anoka and the number of hours spent. Councilmember Wesp shared statistics on full time duty crews versus paid on call crews and the amount of time spent on ancillary calls, adding the new model was March 25, 2024 (Worksession) Page 10 of 11 working very well. He shared there were two administrators on the Fire Board who were not elected officials which resulted in some hiring issues compounded by influence from board members and how they solved that by moving non- elected officials to the operations board. Mr. Lee shared data on similar departments modeled after ours from 1985 which was done based on population and estimated market value as two metrics used to dispense State Fire Aid. He shared further comments on property values per acre in both cities, number of schools, value per square foot, demand for services, and other data. He said the Fire Board was recommending eliminating the population metric and using market valuation and change the demand for services metric to split operating costs 50/50 based on the total number of calls responded to within each city. He outlined the Anoka staff recommendation that 66% of the cost allocation be based only on 17% of the actual fire department variable costs and apply the 50/50 split to actual fixed costs. Discussion was held on current equipment and insurance rates as equipment ages. Councilmember Wesp said his recommendation was to adopt the changes by both cities, which will cost Anoka $100,000 more for this year. Mayor Rice said fixed costs are more than other costs. Mr. Lee said the proposed model will cost a lot of money for a department duty crew only used 17% of the time. Discussion was held on the benefits of paid on call versus duty crew and the variable costs as the additional costs incurred as the fire department is called into duty. Councilmember Wesp supported the proposed amendment splitting fixed costs at more than 66% of the budget. Ms. Springer explained one third of costs would be split 50/50, based on hours and calls averaged over five years. Councilmember Skogquist asked if the fire aid goes to income. Councilmember Weaver said if Champlin doesn’t accept the proposed amendment then the current cost formula remains. Ms. Springer noted the costs are always averaged over three years of calls but noted that would be different should a major event occur. Mr. Lee said he was not in favor of spreading costs over five years then shared Osseo’s interest in joining the department who could never pay one-third based on their lower population of 2,600. Mayor Rice agreed, adding if we become to divergent and the department grows too large the model won’t work. March 25, 2024 (Worksession) Page 11 of 11 Council consensus was to offer Champlin an amendment to 83% as one-third doesn’t represent what we agreed to and doesn’t make sense as the fixed costs are split 50/50 at $1,408,016 with variables of $281,500. They concluded the entirety of fixed costs proposed was 50/50 and the other two dimensions would decide the remainder of costs. 3.4 Discussion; Electric Department; Solar Installs Above 40KW with Max 39.9 KW Inverter Rate Policy. Utility Director Del Vancura shared a staff report stating per the MMPA purchased power agreement, distributed generation solar producers below 40KW will be net metered by AMU. He stated solar system technology has now developed to use systems above 40KW to be used with an inverter to limit total system output to 39.9KW and said AMU needs a policy in place to address systems that produce more than the allowed 39.9KW onto the AMU grid and put the utility in violation of the 39KW net metering cap limit. Solar units under 39.9KW are paid avoidable costs at the retail distribution rate per the statute. The new policy will set non-compliance rates and means for system disconnection. He spoke about roof tops producing 45KW at 100 panels to pay for their own electricity and shared further about the need to adopt the policy. Mayor Rice spoke about customers intentionally staying low that will result in shut off as they lose money going to 40KW and what we are trying to do if on the wrong side of the meter. He stated the goal is to protect stealing of power as AMU and the City’s fixed costs increase. UPDATES/REPORTS/COUNCIL SUGGESTIONS FOR TENTATIVE FUTURE AGENDA ITEMS None. 4. ADJOURNMENT Motion by Councilmember Weaver, seconded by Councilmember Wesp to adjourn the Worksession at 8:27 p.m. Motion carried. Submitted by: Cathy Sorensen, TimeSaver Off Site Secretarial, Inc. Approval Attestation: Amy T. Oehlers, City Clerk