EDA Meeting Date: June 24, 2024
To: Members of the Economic Development Authority
From: Ben Martig, City Administrator
Jake Reilly, Community Development Director
Nate Carlson, Economic Development Coordinator
David Bennett, Director of Public Works/City Engineer
Title
EDA Action Related to Facilitating Orderly Growth and Development for Economic Vitality.
Body
Action Requested:
Consider policy implications related to growing the City’s commercial/industrial tax base and provide recommendation to the City Council through a motion or resolution.
Summary Report:
Growing the City’s commercial/industrial tax base by focusing on new industrial growth is a stated City priority, reflected in first the Economic Development Plan (2006), the City’s adopted Comprehensive Plan (2008), and in the Council’s Strategic Plan documents beginning in 2018.
Background
The 2006 Economic Development Plan describes three priority strategies for the community:
• Diversify the economic base.
• Maintain Northfield’s sense of place.
• Attract and retain talent.
In the 2008 Comprehensive Plan the following policies apply to land development, economic development and sustainability concerns associated with development in the NW area:
• Community Identity:
o CI 1.4 Ensure that all development, redevelopment and expansion be compatible with the desirable features of the natural and man-made environment.
• Land Use
o LU 1.6 Annually monitor the land use of residential as compared to commercial and industrial land uses as shown in Table 4.1 and Map 4.1, as a means to accomplish the overall planning objectives of the city.
o LU 1.7 - The City Council should determine, through a process involving the Planning Commission, Economic Development Authority, and citizens, what would constitute an acceptable balance between residential and commercial/industrial uses. This balance could be measured by analyzing tax revenues, jobs in Northfield versus commuters, and other factors. Once the definition of acceptable balance is determined, the City Council should prepare policies and ordinances to bring about the desired balance.
o LU 2.1 Promote general merchandise retailers, financial institutions, office developments and entertainment uses within the downtown core. Create new opportunities for businesses by reinvesting in the infrastructure and public spaces in and around the downtown.
o LU 3 Encourage a compact development pattern, and support infill, redevelopment and land intensification.
§ LU 3.1Create incentives to encourage infill, redevelopment, and land intensification
§ LU 3.2 Work collaboratively to identify structures and sites for redevelopment, intensification or reuse.
§ LU 3.3 The Economic Development Authority (EDA), with the assistance of City staff, will prepare a marketing program for targeted structures and/or sites for infill, redevelopment, and land intensification.
§ LU 3.4 Establish priorities for capital improvements that are directed toward infill sites and mature neighborhoods.
§ LU 3.5 Facilitate redevelopment of uses that do not fit the development pattern of downtown (i.e. single story uses surrounded by parking), but which with better design could increase density and provide more commercial, office or housing opportunities.
o LU 6.3 Modify existing regulations and create new policies that mandate environmentally-sensitive and sustainable planning and building practices, as identified and defined in the City’s Natural Resources Inventory Final Report adopted in 2005.
o LU 8 Provide locations that facilitate economic development opportunities.
§ LU 8.1 Identify sites for commercial and industrial development.
§ LU 8.2 Identify sites for new office development.
§ LU 8.3 Facilitate the development of new business parks.
§ LU 8.4 Ensure land served by public infrastructure is available to accommodate future economic growth.
§ LU 8.5 Create architectural and site controls for development on Hwy 19 and Hwy 3, in order to present a high quality image for the character of the city.
• Environmental Resources
o ER 2 Protect and enhance environmentally significant areas
o ER 3 Protect and enhance water quality.
o ER 4 Conserve energy in public and private sector development efforts.
o ER 5 Promote the reduction of solid waste generated.
o ER 8 Minimize negative noise impacts within the community.
• Sewer and Water Resources
o SW 1 Provide potable water, sanitary waste collection and treatment, and surface water management to existing and future development areas in the city in an environmentally sensitive, financially equitable and fiscally responsible manner.
o SW 2 Manage water resources so that the beneficial uses of wetlands, ponds and streams remain available to the existing and future community (sustainability).
• Economic Development
o ED 1.4 Adopt a regulating policy that accommodates and provides incentives for infill and redevelopment opportunities
o ED 2 The City will make sufficient land resources available for the needs of existing and future businesses in line with the strategies outlined in the 2006 Economic Development Plan.
In the fall of 2023, the Northfield City Council adopted an Alternative Urban Areawide Review
(AUAR) for an area of approximately 787 undeveloped acres (530 acres in the city limits and the remainder in Greenvale Township) northwest of downtown and west of the Northfield Hospital complex. The AUAR is a unique-to-Minnesota environmental review process intended to evaluate cumulative impacts under multiple development scenarios, including the existing scenario described in the 2008 Comprehensive Plan, and consider mitigation strategies. By frontloading environmental review in this way, the AUAR may serve as a development incentive, in part by reducing uncertainty in the development process for prospective developers. The AUAR was funded by Xcel Energy as part of the existing Shovel Ready Site Certification and Marketing & Recruitment Process between the City and Xcel Energy.
In 2018, the City Council established a committee comprised of members from the EDA, HRA, Planning Commission and City Council. The committee’s charge was to provide a recommendation to City Council regarding a process to facilitate growth in the Northwest Area of Northfield. See the resolution and findings attached. After careful consideration of multiple approaches to planning for development in the area, including a master plan, which is described as the desired outcome in the 2008 Comprehensive Plan, the committee recommended, instead, an incremental approach to development in the area.
The City currently has capacity for development in the area with sewer, water, and road infrastructure. For that infrastructure to be accessible to a large development proposal such as for a large data center, three years possibly up to five years of capital improvement design and construction is necessary. The City has future ability to add additional water and wastewater infrastructure capacity to serve light industrial growth in the AUAR area. A study is underway to determine the full capacity of the wastewater collection and other plans continue for water distribution expansion is coordinated. The City owns a water tower site and has included on the Capital Improvement plans being able to implement if and when a development needing capacity is necessary. The existing wastewater treatment plant has capacity to handle roughly 3 million gallons per day additional flow and there is an ability to expand that capacity in the future by adding to the wastewater treatment plant’s physical plant The water treatment plant in final construction designs also will accommodate current and future growth.
Staff and development advisors believe that light manufacturing, research and development, agri-business, and data centers are likely to be interested in this area. This has been a particular focus of recruitment by Xcel Energy and the City of Northfield.
Minnesota is experiencing a data center boom. This type of development has the potential to add taxable value to the community. Data centers employ relatively few people at a high-skill and high-salary. This is favorable at times when the job market is highly competitive due to a low unemployment environment. Data center water usage has become more efficient as technology advances (see attached article). The water needs have been one of multiple factors that make Minnesota attractive to data centers in addition to: cooler climate for natural cooling systems, favorable tax environment, highly educated workforce, geographic resilience to severe storms, and robust telecommunications infrastructure. Electronic waste is a component of data center development that should be addressed in development agreements or through complementary development.
Staff has provided a financial model showing the impact of a similar development to that of the Meta Platforms, Inc. project in Rosemount. See attachment labeled “Tax Growth Strategy.” The impact of a similar project could net typical households a 32-percent reduction in property taxes by year 2027. This could save homeowners more than $800 in annual property taxes. This model does not include consideration of any financial incentives or capital expenses by the municipality to support the development.
The EDA has a significant role in this future growth area. The City Council’s adopted strategic plan stresses the importance of future tax base growth, and the EDA has made efforts to achieve that goal. There is growing interest from private development following the adoption of the AUAR and continued demand for tax base growth, and the EDA has additional opportunity for significant influence and support for development efforts.
In February, the Planning Commission adopted the attached Resolution recommending the City Council adopt an interim ordinance prohibiting development-related applications in the 530 acres in the city limits of the AUAR Area for an initial period not to exceed one year (as dictated by state statute) to allow for the completion and adoption of a 2045-horizon Comprehensive Plan, including if necessary adoption of updated official controls, such as the Land Development Code. Subsequent to forwarding Resolution 2024-001, the Planning Commission adopted a revised resolution (Resolution 2024-002, attached) that included additional background information associated with the 2018 Process Advisory Committee’s recommendation.
Economic Development staff finds that an interim ordinance is unnecessary at this current time pertaining to prohibiting development-related applications in this area. A representative of a major property owner of over 200 acres who is soliciting prospective buyers with a current focus on data centers has indicated a moratorium will lead to Northfield being skipped over consideration during the moratorium hence no support. This owner does not support a moratorium. Another smaller property of about 30 acres in that area have indicated that they are exploring options to sell to prospective development or lease for a solar field. They are neutral on the position of a moratorium but do believe it will likely lead to no activity for development during the moratorium that is not in their private interest.
EDA staff does find that further development of commercial solar fields in this area could significantly reduce development opportunities and limit opportunities to increase the tax base. Additionally, staff finds that rezoning the 40 to 60 acres of St. Olaf-owned land identified in the Process Advisory Committee’s recommendation to Industrial would be a positive step forward for future industrial development. Staff is working to get more information from Xcel Energy related to solar fields and potential congestion that may not allow solar to expand at this time which may further support a moratorium on speculative solar projects that wouldn’t have capacity to get an Xcel Energy permit regardless of owner interest.
Staff has prepared a resolution recommending that the Council approve an interim ordinance prohibiting applications from or for commercial solar garden developments in this area, and stating the EDA members’ support for rezoning a portion of the Xcel Site Certified land to Industrial.
Staff is working to develop new zoning standards at this time that would be used for a re-zoning from Ag to Industrial. Additionally, infrastructure planning and business recruitment materials are in process of development to market this site and other sites within the City of Northfield. Those materials would include industries identified as prime targets for recruitment in the Comprehensive Economic Development Plan. This includes data centers that we know would be a good fit in Northfield at this location and is also consistent with the comprehensive plan and economic development plan. The “no action” option would include staff continuing to work on these issues.
Alternative Options:
The EDA can take a number of related actions pertaining to this issue. For example, the EDA may:
• Take no action;
• Support the Planning Commission’s recommendation for an interim ordinance limiting development applications for one year;
• Recommend the staff resolution to enact an interim ordinance limiting commercial solar field development and rezone the area to Industrial to the Council;
• Take an alternative action not contemplated in this report.
Opportunities, consequences, and implications of these options will be discussed at the meeting.
Financial Impacts:
The Economic Development Authority may be asked to dedicate a portion of the budget to Northwest Area development initiatives. Other financial impacts to the City’s general fund associated with development in the NW area include but are not limited to the cost to extend and enhance capacity for wastewater and water infrastructure to the site(s). And, any developer may request financial incentives which may include tax abatement, tax increment financing, and potential bonding requests.
Tentative Timelines:
• June - July 2024 -City Council considers Planning Commission Resolution 2024-001as revised by Resolution 2024-002 and any recommendation from the EDA.
o Tentative July 9th, 2024 regular agenda
• December 2024 - Statutory deadline for Council Response to Planning Commission Resolutions (after revision made by Planning Commission in June).