3.2. SR 07-13-1998City of
Item # 3.2.
MEMORANDUM
ver
TO:
Mayor & City Council
FROM:
DATE:
Paul T. Steinman, Director of Economic
Development
July 13, 1998
SUBJECT:
Hold Public Hearing to Consider a
Resolution Approving TIF District No.
19 (Earl Hohlen Project)
Issue
The issue before the City Council at this time is to consider the attached
resolution which makes all of the statutory findings necessary for the
establishment of TIF District No. 19.
Overview
TIF District No. 19 has been proposed by Associated Builders to aid in the
redevelopment of the Earl Hohlen property at the southeast corner of 169
and County Road 12. This mixed use project will include a commercial
component and an approximate 40 acre business park on the south end of the
site. The project area is adjacent to the proposed new transportation corridor
which is to connect County Road 12 and Highway 10.
Consideration of the attached resolution is the last formal Council action
taken to establish TIF District No. 19. The TIF Plan and District ~ be
certified to the county and state upon approval of the resolution and, at that
point, the tax increment "tool" will be in place for use to stimulate the
redevelopment of this project area and construction of a 40 acre business
park. The future process of this issue will involve an approximately three to
five month time period during which the developer and EDA will proceed
with negotiating a tax increment package which will meet the developer's
needs and goals of the city.
City staff worked closely with the city attorney's office to establish the
statutory findings as indicated in the attached resolution. Various
measurements were taken by the city engineer's office to determine the
13065 Orono Parkway · P.O. Box 490 · Elk River, MN 55330 · TDD & Phone: (612) 441-7420 · Fax: (612) 441-7425
RESOLUTION 98 -__
CITY OF ELK RIVER
COUNTY OF SHERBURNE
STATE OF MINNESOTA
RESOLUTION MODIFYING DEVELOPMENT DISTRICT NO. 1 AND
ADOPTING THE DEVELOPMENT PROGRAM THEREFOR; AND
ESTABLISHING WITHIN DEVELOPMENT DISTRICT NO. 1, TAX
INCREMENT FINANCING DISTRICT NO. 19, AND ADOPTING THE
RELATED TAX INCREMENT FINANCING PLAN THEREFOR.
BE IT RESOLVED by the City Council (the "Council") of the City of Elk
River, Minnesota (the "City") as follows:
Section 1. - Recitals.
1.01. The EDA has heretofore established Municipal Development District
No. i and adopted the Development Program therefor. It has been proposed that
the City modify Development District No. i and adopt the Development Program
therefor and establish within Development District No. 1, Tax Increment Financing
District No. 19 ("District No. 19"), and adopt the related Tax Increment Financing
Plan therefor (collectively, the "Program" and "Plan"); all pursuant to and in
conformity with existing law, including Minnesota Statutes, Sections 469.090
through 469.1081 and 469.174 through 469.179, inclusive, as amended, all as
reflected in the Program and Plan and presented for the Council's consideration.
1.02. The Council has investigated the facts relating to the Program and
Plan.
1.03. The City has performed, or will perform, all actions required by law to
be performed prior to the adoption of the Program and Plan by the City, including,
but not limited to, notification of Sherburne County and School District No. 728
having taxing jurisdiction over the property included in District No. 19, a request for
review of and written comment on the Program and Plan by the City Planning
Commission, and a request that the Council schedule a public hearing on the
Program and Plan upon published notice as required by law.
1.04 Certain written reports (the "Reports") relating to the Program and
Plan and to the activities contemplated therein have heretofore been prepared by
staff and submitted to the Council and/or made a part of the City files and
proceedings on the Program and Plan. The Reports include data, information and/or
substantiation constituting or relating to (1) the "studies and analyses" on why the
new District No. 19 meets the so-called '"out for" test; and (2) the basis for the other
findings and determinations made in this resolution. The Council hereby confirms,
ratifies, and adopts the Reports, which are hereby incorporated into and made as
fully a part of this resolution to the same extent as if set forth in full herein.
Section 2. - Findings for the Adoption and Approval of the Program and Plan.
2.01. The Council hereby finds that the Program and Plan, are intended
and, in the judgment of this Council, the effect of such actions will be, to provide an
impetus for development in the public purpose and accomplish certain objectives as
specified in the Program and Plan, which are hereby incorporated herein.
Section 3. - Approval and Adoption of the Program and Plan.
3.01. The Council hereby finds that Tax Increment Financing District No.
19 is in the public interest and is a "redevelopment district" under Minnesota
Statutes, Section 469.174, subd. 10.
3.02. The Council further finds that the proposed development would not
occur solely through private investment within the reasonably foreseeable future
and that the increased market value on the site that could reasonably be expected to
occur without the use of tax increment financing would be less than the increase in
the market value estimated to result from the proposed development after
subtracting the present value of the projected tax increments for the maximum
duration of District No. 19 permitted by the Tax Increment Financing Plan, that the
Program and Plan conform to the general plan for the development or
redevelopment of the City as a whole; and that the Program and Plan will afford
maximum opportunity consistent with the sound needs of the City as a whole, for
the development of District No. 19 by private enterprise.
3.03. The City elects to make a qualifying local contribution in accordance
with Minnesota Statutes, Section 273.1399, subd. 6(d), in order to qualify District
No. 19 for exemption from state aid losses set forth in Section 273.1399 subd. (c).
3.04. The Council further finds, declares, and determines that the City
made the above findings stated in this Section and has set forth the reasons and
supporting facts for each determination in writing, attached hereto as Exhibit A.
Section 4. Approval and Adoption of the Program and Plan
4.01. The Program and Plan, as presented to the Council on this date,
including without limitation the findings and statement of objectives contained
therein, are hereby approved, ratified, established, and adopted and shall be placed
on file in the office of the EDA Executive Director.
4.02. The staffofthe City, the City's advisors and legal counsel are
authorized and directed to proceed with the implementation of the Program and
Plan and to negotiate, draft, and prepare and present to this Council for its
consideration all further plans, resolutions, documents, and contracts necessary for
this purpose.
4.03. The Auditor of Sherburne County is requested to certify the original
net tax capacity of District No. 19, as described in the Program and Plan; and the
City of Elk River is authorized and directed to forthwith transmit this request to the
County Auditor in such form and content as the Auditor may specify, together with
a list of all properties within District No. 19, for which building permits have been
issued during the 18 months immediately preceding the adoption of this resolution.
The motion for the adoption of the foregoing resolution made by
Councilmember and was duly seconded by
Councilmember and upon a vote being taken thereon, the
following voted in favor thereof:
and the following voted against the same:
Dated: July 13, 1998
ATTEST:
Henry A. Duitsman, Mayor Sandra A. Peine, City Clerk
EXHIBIT A
RESOLUTION NO. 98 -
The reasons and facts supporting the findings for the adoption of the Tax
Increment Financing Plan for Tax Increment Financing District No. 19 ("District No.
19") as required pursuant to Minnesota Statutes, Section 469.175, Subdivision 3 are as
follows:
Finding that the District No. 19 is a 'tedevelopment district"as defined in
Minnesota Statutes, Section 469.174, Subdivision 10.
District No. 19 consists of five parcels of property. Parcels consisting of 70
percent of the area of the District are occupied by buildings, streets, utilities, or
other improvements and more than 50 percent of the buildings, not including
outbuildings, are structurally substandard (within the meaning of Minnesota
Statutes, Section 469.174, subd. 10(b)) to a degree requiring substantial
renovation or clearance, which finding is made based, in part, upon internal
inspections of such buildings.
Finding that the proposed development, in the opinion of the Council, would not
reasonably be expected to occur solely through private investment within the
reasonably foreseeable future and that the increased market value of the site that
could reasonably be expected to occur without the use of tax increment financing
would be less than the increase in the market value estimated to result from the
proposed development after subtracting the present value of the projected tax
increments for the maximum duration of the district permitted by the plan.
Due to the high cost of redevelopment on the parcel and the cost of financing the
proposed improvements, this project is feasible only through assistance, in part,
from tax increment financing.
A comparative analysis of estimated market values both with and without
establishment of Tax Increment Financing District No. 19 and the use of tax
increment has been performed as described above. If all development which is
proposed to be assisted with tax increment were to occur in District No. 19, the
total increased market value would be up to $36,000,000. It is the Council's
finding that no development with a market value of greater than $23,450,013
would occur without tax increment assistance in this district within 25 years.
This finding is based upon evidence from general past experience with the high
cost of redevelopment of the type of uses found in District No. 19.
Finding that the Tax Increment Financing Plan for District No. 19 conforms to
the general plan for the development or redevelopment of the municipality as a
whole.
The Tax Increment Financing Plan for District No. 19 has been reviewed by the
Planning Commission on June 23, 1998, and been found to conform to the
Comprehensive Plan and general development plan of the CiW.
Finding that the Tax Increment Financing Plan for District No. 19 will afford
maximum opportunity, consistent with the sound needs of the City as a whole, for
the development o£ Municipal Development District No. I by private enterprise.
The development to be assisted by District No. 19 will result in increased
employment in the City and the State of Minnesota, increased tax base of the
State and add a high quality development to the City.
MODIFICATIONS
To the
Development Program
For
Development District No. 1
and the
TAX INCREMENT FINANCING PLAN
for
Tax Increment Financing District No. 19
(A Redevelopment District)
Economic Development Authority in and for the City of Elk River
Sherburne County
City of Elk River, Minnesota
Prepared: July 1, 1998
Revised: July 1, 1998
Adopted: July 13, 1998
Prepared by:
Springsted Incorporated
85 E. Seventh Place, Suite 100
St. Paul, Minnesota 55101-2887
(612) 223-3000
City of Elk River, Minnesota
Modification to the Development Program
for
Development District No. 1
Dated' July 1, 1998
Prepared by:
SPRINGSTED INCORPORATED
85 E. Seventh Place, Suite '100
St. Paul, MN 55101-2887
(612) 223-3000
MODIFICATION TO THE DEVELOPMENT PROGRAM
FOR DEVELOPMENT DISTRICT NO. I
Add to Section I:
As of the date of this modification, anticipated development within Tax Increment Financing
District No. 19 consists of several mixed-use projects. Commercial development on
approximately 70 acres of the TIF District will encompass approximately 1.5 million square feet
of retail space and approximately 300,000 square feet of restaurant and convenience store
space. Construction is tentatively scheduled for 1998 and 1999.
Approximately 40 acres of the TIF District is currently zoned for an industrial business park. At
this time no specific development has been scheduled for this site, although it is anticipated that
300,000+ square feet of industrial space will be constructed over the next 2-5 years. The
estimated public costs associated with the anticipated development and redevelopment projects
within the TIF District are shown in Section K of the TIF Plan.
City of Elk River, Minnesota
Tax Increment Financing Plan
for
Tax Increment Financing (Redevelopment)
District No. 19
(U.S. Highway 169 and County Highway 12 Project)
Dated: July 1, 1998
Prepared by:
SPRINGSTED INCORPORATED
85 E. Seventh Place, Suite 100
St. Paul, MN 55101-2887
(612) 223-3000
TABLE OF CONTENTS
Section
Page(s)
A. Definitions ..................................................................................................................
B. Statutory Authorization ..............................................................................................
C. Statement of Need and Public Purpose .....................................................................
D. Statement of Objectives ............................................................................................
E. Designation of Tax Increment Financing District as a Redevelopment District ...........
F. Duration of the TIF District and the Three Year Rule .................................................
G. Property to be Included in the TIF District ..................................................................
H. Property to be Acquired in the TIF District .................................................................
I. Specific Development Expected to Occur Within the TIF District ...............................
J. Findings and Need for Tax Increment Financing .......................................................
K. Estimated Public Costs ..............................................................................................
L. Estimated Sources of Revenue .................................................................................
M. Estimated Amount of Bonded Indebtedness ..............................................................
N. Original Net Tax Capacity ..........................................................................................
O. Original Tax Capacity Rate ........................................................................................
P. Projected Retained Captured Net Tax Capacity and Projected Tax Increment ..........
Q. Use of Tax Increment ................................................................................................
R. Excess Tax Increment .................................................... = ..........................................
S. Tax Increment Pooling and the Five Year Rule ..........................................................
T. Limitation on Administrative Expenses ......................................................................
U. Limitation on Property Not Subject to Improvements - Four Year Rule ......................
V. Estimated Impact on Other Taxing Jurisdictions ........................................................
W. Local Government Aid Penalty ..................................................................................
X. Prior Planned Improvements .....................................................................................
Y. Development Agreements .........................................................................................
Zo
AA.
AB.
AC.
1
1
1
1
1-2
3
3-4
4
4
5
6
6
6
6-7
7
7-8
8
9
9
10
10
10
11
11
11
Assessment Agreements ........................................................................................... 11-12
Modifications of the Tax Increment Financing Plan .................................................... 12
Administration of the Tax Increment Financing Plan .................................................. 12-13
Financial Reporting and Disclosure Requirements .................................................... 13-15
Map of the Tax Increment Financing District ..........................................................
Assumptions Report ..............................................................................................
Projected Tax Increment Report ............................................................................
Estimated Impact on Other Taxing Jurisdictions Report ........................................
Market Value Analysis Report ................................................................................
EXHIBIT I
EXHIBIT II
EXHIBIT III
EXHIBIT IV
EXHIBIT V
City of Elk River, Minnesota
Section A Definitions
The terms defined in this section have the meanings given herein, unless the context in which
they are used indicates a different meaning:
'.'City" means the City of Elk River, Minnesota; also referred to as a "Municipality".
"City Council" means the City Council of the City; also referred to as the "Governinq Body".
'.'County" means Sherburne County, Minnesota.
"Development District" means Municipal Development District No. 1 in the City, which is
described in the corresponding Development Program.
"Development Pro_qram" means the Development Program for the Development District.
"Proiect Area" means the geographic area of the Development District.
"School District" means Independent School District No. 728, Minnesota.
"State" means the State of Minnesota.
"TIF Act" means Minnesota Statutes, Sections 469.174 through 469.1791, both inclusive.
"TIF District" means Tax Increment Financing (Redevelopment) District No. 19.
"TIF Plan" means the tax increment financing plan for the TIF District (this document).
Section B Statutory Authorization
See Section A of the Development Program for the Development District.
Section C Statement of Need and Public Purpose
See Section B of the Development Program for the Development District.
Section D Statement of Objectives
See Section E of the Development Program for the Development District.
Section E
Designation of Tax Increment Financing District as a
Redevelopment District
Redevelopment districts are a type of tax increment financing district in which one of the
following conditions exists and is reasonably distributed throughout the district:
(1) parcels comprising at least 70% of the area of the district are occupied by buildings,
streets, utilities, or other improvements, and more than 50% of the buildings (not
including outbuildings) are structurally substandard requiring substantial renovation or
clearance. A parcel is deemed "occupied" if at least 15% of the area of the parcel
contains some type of improvement; or
SPRINGSTED Page 1
City of Elk River, Minnesota
(2) the property consists of vacant, unused, underused, inappropriately used, or
infrequently used railyards, rail storage facilities, or excessive or vacated railroad right-
of-ways.
For districts consisting of two more noncontiguous areas, each area must individually qualify
under the provisions listed above, as well as the entire area must also qualify as a whole.
The TIF District qualifies as a redevelopment district in that it meets all of the criteria listed in
above. The supporting facts and documentation for this determination will be retained by the
City for the life of the TIF District and are available to the public upon request.
"Structurally substandard" is defined as buildings containing defects or deficiencies in structural
elements, essential utilities and facilities, light and ventilation, fire protection (including egress),
layout and condition of interior partitions, or similar factors. A building is not structurally
substandard if it is in compliance with the building code applicable to a new building, or could be
modified to satisfy the existing code at a cost of less than 15% of the cost of constructing a new
structure of the same size and type.
A city may not find that a building is structurally substandard without an interior inspection,
unless it can not gain access to the property and there exists evidence which supports the
structurally substandard finding. Such evidence includes recent fire or police inspections, on-
site property tax appraisals or housing inspections, exterior evidence of deterioration, or other
similar reliable evidence. A parcel is deemed to be occupied by a structurally substandard
building if the following conditions are met:
(1) the parcel was occupied by a substandard building within a three-year period prior to the
parcels inclusion in the district; and
(2)
if the substandard building was demolished or rem(~ved within the three year period,
such demolition or removal was performed or financed by the City, or was performed by
a developer under a development agreement with the City. In addition, the City must
have found by resolution before such demolition or removal occurred that the building
was structurally substandard and that the City intended to include the parcel in the TIF
District.
In the case of (2) above, the County Auditor shall certify the original net tax capacity of the
parcel to be the greater of (a)the current tax capacity of the parcel, or (b)a computed tax
capacity of the parcel using the estimated market value of the parcel for the year in which the
demolition or removal occurred, and the appropriate classification rate(s) for the current year.
At least 90 percent of the tax increment from a redevelopment district must be used to finance
the cost of correcting conditions that allow designation as a redevelopment district. These
costs include, but are not limited to, acquiring properties containing structurally substandard
buildings or improvements or hazardous substances, acquiring adjacent parcels necessary to
provide a site of sufficient size to permit development, demolition and rehabilitation of
structures, clearing of land, removal of hazardous substances, and installation of utilities, roads,
sidewalks, and parking facilities for the site. The allocated administrative expenses of the
authority may be included in the qualifying costs.
SPRINGSTED Page 2
City of Elk River, Minnesota
Section F Duration of the TIF District and the Three Year Rule
Redevelopment districts may remain in existence 25 years from the date of receipt of the first
tax increment. This term shall be reduced to 20 years if the City elects to delay receipt of the
first tax increment until a minimum market value for the TIF District is reached or exceeded, or
four years have elapsed from the date of certification, whichever is earlier. Modifications of this
plan (see Section AA) shall not extend these limitations.
The City does not elect to delay receipt of the first tax increment. The City reserves the riqht to
allow the TIF District to remain in existence the maximum duration allowed by law (proiected to
be throuqh the year 2024}. All tax increments from taxes payable in the year the TIF District is
decertified shall be paid to the City.
In addition, no tax increments shall be paid to the City from the TIF District after three years
from the date of certification unless within that time period:
(1)
(2)
(3)
bonds have been issued in aid of the Project Area (except revenue bonds issued
pursuant to M.S. Sections 469.152 to 469.165);
the City has acquired property within the TIF District; or
the City has constructed public improvements within the TIF District.
Section G Property to be Included in the TIF District
The TIF District is a 156.37 acre area of land located within the Project Area. A map showing
the location of the TIF District is shown in Exhibit I. The boundaries and area encompassed by
the TIF District are described below:
PID #'s:
75-002-2200
75-002-2300
75-135-3420
75-135-3315
75-135-3310
In addition, the following property is to be included in the TIF District:
That part of the West half of the Northwest Quarter of Section 2 and that part of the East half of
the Northeast Quarter of Section 3, both in Township 32, Range 26, and that part of the East
half of the Southeast Quarter of Section 34 and that part of the West half of the Southwest
Quarter of Section 35, both in Township 33, said Range 26, all in Sherburne County,
Minnesota, described as follows:
Beginning at the Northeast corner of said West half of the Northwest Quarter of Section 2;
thence South, along the East line of said West half of the Northwest Quarter of Section 2, to the
Southeast corner of said West half of Northwest Quarter of Section 2; thence West, along the
South line of said West half of the Northwest Quarter of Section 2, to the Southwest corner of
said West half of the Northwest Quarter of Section 2; thence West, along the South line of said
East half of the Northeast Quarter of Section 3, to the intersection with the Northeasterly
right-of-way line of the Burlington Northern Railroad; thence Northwesterly, along said
Northeasterly right-of-way line of the Burlington Northern Railway, to the intersection with the
Westerly right-of-way line of U.S. Highway No. 169, thence Northerly, Easterly, and Northerly
along the Westerly, Northerly and Westerly right-of-way line of said U.S. Highway No. 169 to
the intersection with a line, to be hereinafter described as follows:
SPRINGSTED Page 3
City of Elk River, Minnesota
Commencing at the Northwest corner of Johnson Plat, according to said plat on
file and of record in the office of the County Recorder, Sherbume County,
Minnesota; thence South 17 degrees 04 minutes 00 seconds East, an assumed
bearing along the West line of said Johnson Plat, a distance of 520.00 feet;
thence South 72 degrees 56 minutes 00 seconds West, a distance of 327.60 feet
to the intersection with the Easterly right-of-way line of said U.S. Highway
No. 169; thence South 17 degrees 04 minutes 00 seconds East, along said
Easterly right-of-way line, a distance of 260.00 feet, to the actual point of
beginning of said line to be hereinafter described; thence South 72 degrees
56 minutes 00 seconds West, to the intersection with the Westerly right-of-way
line of U.S. Highway No. 169 and there terminating.
thence North 72 degrees 56 minutes 00 seconds East, along the last described line, to the
intersection with said Easterly right-of-way line of U.S. Highway No. 169; thence Southerly and
Southeasterly, along said Easterly and Northeasterly right-of-way line of said U.S. Highway
No. 169, to the intersection with the Northerly right-of-way line of County Road No. 12; thence
Easterly and Northeasterly, along the Northerly and Northwesterly right-of-way line of said
County Road No. 12, to the intersection with the Northwesterly and Westerly right-of-way line of
County Road No. 13; thence Northerly along said Westerly right-of-way line of County Road
No. 13, to the intersection with the Easterly extension of the North line of Outlot A, said
Johnson Plat; thence Easterly, along said Easterly extension of the North line of Outlot A, to the
intersection with the Easterly right-of-way line of said County Road No. 13; thence Southerly,
along said Easterly right-of-way of County Road No. 13 to the intersection with said Northerly
right-of-way line of County Road No. 12; thence Easterly and Southeasterly, along said
Northerly and the Northeasterly right-of-way line of County Road No. 12, to the intersection with
the East line of said West half of the Southwest Quarter of Section 35; thence South, along said
East line of the West half of the Southwest Quarter of Section 35, to the point of beginning.
Section H Property to be Acquired in the TIF District
The City may acquire and sell any or all of the property located within the TIF District; however,
the City does not anticipate acquiring any such property at this time.
Section I Specific Development Expected to Occur Within the TIF District
As of the date of this TIF Plan, anticipated development within the TIF. District consists of
several mixed-use projects. Commercial development on approximately 70 acres of the TIF
District will encompass approximately 1.5 million square feet of retail space and approximately
300,000 square feet of restaurant and convenience store space. Construction is tentatively
scheduled for 1998 and 1999.
Approximately 40 acres of the TIF District is currently zoned for an industrial business park. At
this time no specific development has been scheduled for this site, although it is anticipated that
300,000+ square feet of industrial space will be constructed over the next 2-5 years.
At the time this document was prepared, there were no signed development agreements or
construction contracts with regard to any of the anticipated development described above. As
such development occurs and contracts are signed, the City will periodically update this
document to reflect such information.
SPRINGSTED Page 4
City of Elk River, Minnesota
Section J Findings and Need for Tax Increment Financing
In establishing the TIF District, the City makes the following findings:
(1) The TIF District qualifies as a redevelopment district;
See Section E of this document for the reasons and facts supporting this
finding.
(2)
The proposed development, in the opinion of the City, would not reasonably be
expected to occur solely through private investment within the reasonably
foreseeable future, and the increased market value of the site that could
reasonably be expected to occur without the use of tax increment would be less
than the increase in market value estimated to result from the proposed
development after subtracting the present value of the projected tax increments
for the maximum duration of the TIF District permitted by the TIF Plan;
The reasons and facts supporting this finding are that the developer has
represented to the City that it would not undertake the proposed
development without the assistance of tax increment financing. Private
investment will not finance these development activities because of
prohibitive costs. It is necessary to finance these development activities
through the use of tax increment financing so that other development by
private enterprise will occur within the Project Area.
A comparative analysis of estimated market values both with and without
establishment of the TIF District and the use of tax increments has been
performed as described above and is shown in Exhibit V. This analysis
indicates that the increase in estimated market value of the proposed
development (less the indicated subtractions) exceeds the estimated
market value of the site absent the establishment of the TIF District and
the use of tax increments.
(3)
The TIF Plan conforms to the general plan for development or redevelopment of
the City as a whole; and
The reasons and facts supporting this finding are that the TIF District is
properly zoned, and the TIF Plan has been approved by the City Planning
Commission and will generally compliment and serve to implement
policies adopted in the City's comprehensive plan.
(4)
The TIF Plan will afford maximum opportunity, consistent with the sound needs
of the City as a whole, for the development of the Project Area by private
enterprise.
The reasons and facts supporting this finding are that the development
activities are necessary so that development and redevelopment by
private enterprise can occur within the Project Area.
SPRINGSTED Page 5
City of Elk River, Minnesota
Section K Estimated Public Costs
The estimated public costs of the TIF District are listed below. Such costs are eligible for
reimbursement from tax increments of the TIF District.
Land Acquisition, Demolition, $12,595,000
Site Improvements,
Public Improvements, etc.
Subtotal $12,595,000
Interest on Pay-As-You-Go 20,185,000
Obligations or Bonds
Administration 1,640,000
Total $34,420,000
The City reserves the right to administratively adjust the amount of any of the items listed above
or to incorporate additional eligible items, so long as the total estimated public cost is not
increased.
Section L Estimated Sources of Revenue
The City currently anticipates providing financial assistance to the proposed developments
through the use of a pay-as-you-go technique. As tax increments are collected from the TIF
District in future years, a portion of these taxes will be distributed to the developer/owner as
reimbursement for public costs incurred (see Section K).
The City reserves the right to finance any or all public costs of the TIF District using pay-as-you-
go assistance, internal funding, general obligation or revenue debt, or any other financing
mechanism authorized by law. The City also reserves the right to use other sources of revenue
legally applicable to the Project Area to pay for such costs including, but not limited to, special
assessments, utility revenues, federal or state funds, and investment income.
Section M Estimated Amount of Bonded Indebtedness
The City does not anticipate issuing tax increment bonds to finance the estimated public costs
of the TIF District, but reserves the riqht to issue such bonds in an amount not to exceed
$12,595,000.
Section N Original Net Tax Capacity
The County Auditor shall certify the original net tax capacity of the TIF District. This value will
be equal to the total net tax capacity of all property in the TIF District as certified by the State
Commissioner of Revenue. For districts certified between January 1 and June 30, inclusive,
this value is based on the previous assessment year. For districts certified between July 1 and
December 31, inclusive, this value is based on the current assessment year.
The Estimated Market Value of all property within the TIF District as of January 2, 1998, for
taxes payable in 1999, is $2,229,200. Upon establishment of the TIF District, and subsequent
reclassification of property, it is estimated that the original net tax capacity of the TIF District will
be approximately $76,447.
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City of Elk River, Minnesota
Each year the County Auditor shall certify the amount that the odginal net tax capacity has
increased or decreased as a result of:.
(1)
(2)
(3)
(4)
changes in the tax-exempt status of property;
reductions or enlargements of the geographic area of the TIF District;
changes due to stipulation agreements or abatements; or
changes in property classification rates.
Section O Original Tax Capacity Rate
The County Auditor shall also certify the odginal tax capacity rate of the TIF District. This rate
shall be the sum of all local tax rates that apply to property in the TIF District. This rate shall be
for the same taxes payable year as the original net tax capacity.
In future years, the amount of tax increment generated by the TIF District will be calculated
using the lesser of (a) the sum of the current local tax rates at that time or (b) the original tax
capacity rate of the TIF District.
At the time this document was prepared, the sum of all local tax rates that apply to property in
the TIF District, for taxes levied in 1998 and payable in 1999, was not yet available. When this
total becomes available, the County Auditor shall certify this amount as the original tax capacity
rate of the TIF District. For purposes of estimating the tax increment generated by the TIF
District, the sum of the local tax rates for taxes levied in 1997 and payable in 1998, is 111.504%
as shown below.
Taxinq Jurisdiction
1997/1998
Local Tax Rate
City of Elk River 26.255%
Sherbume County 27.235%
ISD #728 56.539%
Elk River HRA .633%
Elk River EDA .- - .842%
Total 111.504%
Section P
Projected Retained Captured Net Tax Capacity and
Projected Tax Increment
Each year the County Auditor shall determine the current net tax capacity of all property in the
TIF District. To the extent that this total exceeds the original net tax capacity, the difference
shall be known as the captured net tax capacity of the TIF District.
The County Auditor shall certify to the City the amount of captured net tax capacity each year.
The City may choose to retain any or all of this amount. It is the City's intention to retain 100%
of the captured net tax capacity of the TIF District. Such amount shall be known as the retained
captured net tax capacity of the TIF District.
SPRINGSTED Page 7
City of Elk River, Minnesota
Exhibit II gives a listing of the various information and assumptions used in preparing a number
of the exhibits contained in this TIF Plan, including Exhibit III which shows the projected tax
increment generated over the anticipated life of the TIF District.
Section Q use of Tax Increment
Each year the County Treasurer shall deduct 0.25% of the annual tax increment generated by
the TIF District and pay such amount to the State's General Fund. Such amounts will be
appropriated to the State Auditor for the cost of financial reporting and auditing of tax increment
financing information throughout the state. Exhibit III shows the projected deduction for this
purpose over the anticipated life of the TIF District.
The City has determined that it will use 100% of the remaining tax increment generated by the
TIF District for any of the following purposes:
(1)
Pay for the estimated public costs of the TIF District (see Section K) and County
administrative costs associated with the TIF District (see Section T);
(2)
pay principal and interest on tax increment bonds or other bonds issued to
finance the estimated public costs of the TIF District;
(3)
accumulate a reserve securing the payment of tax increment bonds or other
bonds issued to finance the estimated public costs of the TIF District;
(4)
pay all or a portion of the county road costs as may be required by the County
Board under M.S. Section 469.175, Subdivision la; or
(5)
return excess tax increments to the County Auditor for redistribution to the City,
County and School District.
Tax increments from property located in one county must be expended for the direct and
primary benefit of a project located within that county, unless both county boards involved waive
this requirement. 'Fax increments shall not be used to circumvent levy limitations applicable to
the City.
Tax increment shall not be used to finance the acquisition, construction, renovation, operation,
or maintenance of a building to be used primarily and regularly for conducting the business of a
municipality, county, school district, or any other local unit of government or the State or federal
government. This prohibition does not apply to the construction or renovation of a parking
structure, a common area used as a public park, or a facility used for social, recreational, or
conference purposes and not primarily for conducting the business of the community.
If there exists any type of agreement or arrangement providing for the developer, or other
beneficiary of assistance, to repay all or a portion of the assistance that was paid or financed
with tax increments, such payments shall be subject to all of the restrictions imposed on the use
of tax increments. Assistance includes sale of property at less than the cost of acquisition or
fair market value, grants, ground or other leases at less then fair market rent, interest rate
subsidies, utility service connections, roads, or other similar assistance that would otherwise be
paid for by the developer or beneficiary.
SPRINGSTED Page 8
City of Elk River, Minnesota
Section R Excess Tax Increment
In any year in which the tax increments from the TIF District exceed the amount necessary to
pay the estimated public costs authorized by the TIF Plan, the City shall use the excess tax
increments to:
(1) prepay any outstanding tax increment bonds;
(2) discharge the pledge of tax increments thereof;
(3)
pay amounts into an escrow account dedicated to the payment of the tax
increment bonds; or
(4)
return excess tax increments to the County Auditor for redistribution to the City,
County and School District. The County Auditor must report to the
Commissioner of Education the amount of any excess tax increment
redistributed to the School District within 30 days of such redistribution.
Section S Tax Increment Pooling and the Five Year Rule
At least 75% of the tax increments from the TIF District must be expended on activities within
the district or to pay for bonds used to finance the estimated public costs of the TIF District (see
Section E for additional restrictions). No more than 25% of the tax increments may be spent on
costs outside of the TIF District but within the boundaries of the Project Area, except to pay
debt service on credit enhanced bonds. All administrative expenses are considered to have
been spent outside of the TIF District. Tax increments are considered to have been spent
within the TIF District if such amounts are:
(1)
actually paid to a third party for activities performed within the TIF District within
five years after certification of the district;
(2)
used to pay bonds that were issued and sold to a third party, the proceeds of
which are reasonably expected on the date of issuance to be spent within the
later of the five-year period or a reasonable temporary period or are deposited in
a reasonably required reserve or replacement fund.
(3)
used to make payments or reimbursements to a third party under binding
contracts for activities performed within the TIF District, which were entered into
within five years after certification of the district; or
(4)
used to reimburse a party for payment of eligible costs (including interest)
incurred within five years from certification of the district.
Beginning with the sixth year following certification of the TIF District, at least 75% of the tax
increments must be used to pay outstanding bonds or make contractual payments obligated
within the first five years. When outstanding bonds have been defeased and sufficient money
has been set aside to pay for such contractual obligations, the TIF District must be decertified.
The City does not anticipate that tax increments will be spent outside of the TIF District (except
for allowable administrative expenses); however, the City does reserve the right to allow for tax
increment pooling from the TIF District in the future.
SPRINGSTED Page 9
City of Elk River, Minnesota
Section T Limitation on Administrative Expenses
Administrative expenses are defined as all costs of the City other than:
(1) amounts paid for the purchase of land;
(2)
amounts paid for materials and services, including architectural and engineering
services directly connected with the proposed development within the TIF
District;
(3)
relocation benefits paid to, or services provided for, persons or businesses
residing or located within the TIF District; or
(4)
amounts used to pay interest on, fund a reserve for, or sell at a discount, tax
increment bonds.
Administrative expenses include amounts paid for services provided by bond counsel, fiscal
consultants, planning or economic development consultants, and actual costs incurred by the
County in administering the TIF District. Tax increments may be used to pay administrative
expenses of the TIF District up to the lesser of (a) 10% of the total estimated public costs
authorized by the TIF Plan or (b) 10% of the total tax increment expenditures for the project.
Section U Limitation on Property Not Subject to Improvements - Four Year Rule
If after four years from certification of the TIF District no demolition, rehabilitation, renovation,
or qualified improvement of an adjacent street has commenced on a parcel located within the
TIF District, then that parcel shall be excluded from the TIF District and the original net tax
capacity shall be adjusted accordingly. Qualified improvements of a street are limited to
construction or opening of a new street, relocation of a street, or substantial reconstruction or
rebuilding of an existing street. The City must submit to the County Auditor, by February I of
the fifth year, evidence that the required activity has taken place for each parcel in the TIF
District.
If a parcel is excluded from the TIF District and the City or owner of the parcel subsequently
commences any of the above activities, the City shall certify to the County Auditor that such
activity has commenced and the parcel shall once again be included in the TIF District. The
County Auditor shall certify the net tax capacity of the parcel, as most recently certified by the
Commissioner of Revenue, and add such amount to the original net tax capacity of the TIF
District.
Section V Estimated Impact on Other Taxing Jurisdictions
Exhibit IV shows the estimated impact on other taxing jurisdictions if the maximum projected
retained captured net tax capacity of the TIF District was hypothetically available to the other
taxing jurisdictions. The City believes that there will be no adverse impact on other taxing
jurisdictions during the life of the TIF District, since the proposed development would not have
occurred without the establishment of the TIF District and the provision of public assistance. A
positive impact on other taxing jurisdictions will occur when the TIF District is decertified and the
development therein becomes part of the general tax base.
SPRINGSTED Page 10
City of Elk River, Minnesota
Section W Local Government Aid Penalty
Tax increment financing districts established or expanded after April 30, 1990 may cause a
reduction in the local government aid (LGA/HACA) received by the City from the State. For tax
increment financing plans approved on of after July 1, 1995, the City may elect at the time of
such approval to make qualifying local contributions to the project, and thereby be exempt from
any loss of local government aid.
For redevelopment districts these contributions must equal 5.0% of the annual increment
generated by the district. If the City elects to make the local contribution but fails to do so in
any year, a reduction in local government aid will occur. The loss of aid will equal the greater of
1) the required local contribution or 2) the loss of aid which would have been incurred had the
local contribution election not been made.
Local contributions must be made out of unrestricted money and may not be made, directly or
indirectly, with tax increments or developer payments. The contributions must be used to pay
project costs and cannot be used for general government purposes or for costs which would
have been incurred absent the project. The City may request contributions from other local
governmental entities that will benefit from the establishment of the district.
The City elects to make the qualifyinq local contributions to the project.
Section X Prior Planned Improvements
The City shall accompany its request for certification to the County Auditor (or notice of district
enlargement), with a listing of all properties within the TIF District for which building permits
have been issued during the 18 months immediately preced, ing approval of the TIF Plan. The
County Auditor shall increase the original net tax capacity of the TIF District by the net tax
capacity of each improvement for which a building permit was issued.
There have been no buildinq permits issued in the last 18 months in conjunction with any of the
properties within the TIF District.
Section Y Development Agreements
If within a project containing a redevelopment district, more than 25% of the acreage of the
property to be acquired by the City is purchased with tax increment bonds proceeds (to which
tax increment from the property is pledged), then prior to such acquisition, the City must enter
into an agreement for the development of the property. Such agreement must provide
recourse for the City should the development not be completed. The City anticipates enterinq
into an aqreement for development.
Section Z Assessment Agreements
The City may, upon entering into a development agreement, also enter into an assessment
agreement with the developer, which establishes a minimum market value of the land and
improvements for each year during the life of the TIF District.
The assessment agreement shall be presented to the County or City Assessor who shall review
the plans and specifications for the improvements to be constructed, review the market value
previously assigned to the land, and so long as the minimum market value contained in the
assessment agreement appears to be an accurate estimate, shall certify the assessment
SPRINGSTED Page 11
City of Elk River, Minnesota
agreement as reasonable. The assessment agreement shall be filed for record in the office of
the County Recorder of each county where the property is located. Any modification or
premature termination of this agreement must first be approved by the City, County and School
District.
At the time this document was prepared, it was not determined whether the City would enter
into any assessment agreements.
Section AA Modifications of the Tax Increment Financing Plan
Any reduction or enlargement in the geographic area of the Project Area or the TIF District;
increase in the amount of bonded indebtedness to be incurred; increase in the amount of
capitalized interest; increase in that portion of the captured net tax capacity to be retained by
the City; increase in the total estimated public costs; or designation of additional property to be
acquired by the City shall be approved only after satisfying all the necessary requirements for
approval of the original TIF Plan. This paragraph does not apply if:
(1) the only modification is elimination of parcels from the TIF District; and
(2)
the current net tax capacity of the parcels eliminated equals or exceeds the net
tax capacity of those parcels in the TIF District's original net tax capacity, or the
City agrees that the TIF District's original net tax capacity will be reduced by no
more than the current net tax capacity of the parcels eliminated.
The City must notify the County Auditor of any modification that reduces or enlarges the
geographic area of the TIF District. The geographic area of the TIF District may be reduced but
not enlarged after five years following the date of certification.
Section AB Administration of the Tax Increment Financing Plan
Upon adoption of the TIF Plan, the City shall submit a copy of such plan to the Minnesota
Department of Revenue. The City shall also request that the County Auditor certify the original
net tax capacity and net tax capacity rate of the TIF District. To assist the County Auditor in this
process, the City shall submit copies of the TIF Plan, the resolution establishing the TIF District
and adopting the TIF Plan, and a listing of any prior planned improvements. The City shall also
send the County Assessor any assessment agreement establishing the minimum market value
of land and improvements in the TIF District, and shall request that the County Assessor review
and certify this assessment agreement as reasonable.
The County shall distribute to the City the amount of tax increment as it becomes available.
The amount of tax increment in any year represents the applicable property taxes generated by
the retained captured net tax capacity of the TIF District. The amount of tax increment may
change due to development anticipated by the TIF Plan, other development, inflation of
property values, or changes in property classification rates or formulas. In administering and
implementing the TIF Plan, the following actions should occur on an annual basis:
(1)
prior to July 1, the City shall notify the County Assessor of any new development
that has occurred in the TiF District during the past year to insure that the new
value will be recorded in a timely manner.
(2)
if the County Auditor receives the request for certification of a new TIF District, or
for modification of an existing TIF District, before July 1, the request shall be
recognized in determining local tax rates for the current and subsequent levy
years. Requests received on or after July 1 shall be used to determine local tax
rates in subsequent years.
SPRINGSTED Page 12
City of Elk River, Minnesota
(3)
each year the County Auditor shall certify the amount of the original net tax
capacity of the TIF District. The amount certified shall reflect any changes that
occur as a result of the following:
(a).
the value of property that changes from tax-exempt to taxable shall be
added to the original net tax capacity of the TIF District. The reverse
shall also apply;
(b)
the original net tax capacity may be modified by any approved
enlargement or reduction of the TIF District;
(c)
if the TIF District is classified as an economic development district, then
the original net tax capacity shall be increased by the amount of the
annual adjustment factor; and
(d)
if laws governing the classification of real property cause changes to the
percentage of estimated market value to be applied for property tax
purposes, then the resulting increase or decrease in net tax capacity shall
be applied proportionately to the original net tax capacity and the retained
captured net tax capacity of the TIF District.
The County Auditor shall notify the City of all changes made to the original net tax capacity of
the TIF District.
Section AC Financial Reporting and Disclosure Requirements
The State Auditor shall enforce the provisions of the TIF Act.and shall have full responsibility for
financial and compliance auditing of the City's use of tax increment financing. On or before
August 1 of each year, the City must annually submit to the State Auditor, City Council, County
Board and County Auditor, and the School District Board a report which shall:
(1) provide full disclosure of the sources and uses of public funds in the TIF District;
(2) permit comparison and reconciliation of the accounts and financial reports;
(3) permit auditing of the funds expended on behalf of the TIF District; and
(4) be consistent with generally accepted accounting principles.
The report shall include, among other items, the following information:
(1) the original net tax capacity of the TIF District;
(2) the captured net tax capacity of the TIF District, including the amount of any
captured net tax capacity shared with other taxing jurisdictions;
(3) for the reporting period and for the duration of the TIF District, the amount
budgeted under the TIF Plan, and the actual amount expended for, at least, the
following categories:
(a) acquisition of land and buildings through condemnation or purchase;
(b) site improvements or preparation costs;
SPRINGSTED Page 13
City of Elk River, Minnesota
(c)
installation of public utilities, parking facilities, streets, roads, sidewalks,
or other similar public improvements;
(d) administrative costs, including the allocated cost of the City; and
(e)
public park facilities, facilities for social, recreational, or conference
purposes, or other similar public improvements.
(4)
for properties sold to developers, the total cost of the property to the City and the
price paid by the developer; and
(5)
the amount of increments rebated or paid to developers or property owners for
privately financed improvements or other qualifying costs.
Additional information which must be annually reported to the State Auditor, by August 1 of
each year, includes:
(1) for the entire City:
(a) the total principal amount of nondefeased tax increment bonds
outstanding at the end of the previous calendar year; and
(b)
the total amount of principal and interest payments that are due for the
current calendar year on tax increment bonds.
(2) for each tax increment financing district in the City:
(a) the type of district;
(b) the date the TIF District is required to be decertified;
(c)
the amount of any payments and the value of in-kind benefits, such as
physical improvements and the use of building space, that are financed
with revenues from increments and are provided to another governmental
unit during the preceding calendar year;
(d)
the tax increment revenues for taxes payable in the current calendar
year;
(e)
whether the TIF Plan permits tax increment revenues to be expended for
activities located outside of the TIF District, and
(f) any additional information that the State Auditor may require.
The City must also annually publish in a newspaper of general circulation in the City an annual
statement for each tax increment financing district showing the tax increment received in that
year, the original and captured net tax capacity, the amount of outstanding bonded
indebtedness, the amount of increments paid to other governmental bodies, the amount paid
for administrative costs, the sum of increment paid, directly or indirectly, for activities and
improvements located outside of the district, the increase in property taxes if a fiscal disparity
contribution is being made from outside of the district, and any additional information the City
deems necessary. The City must publish the annual statement by August 1 of the next year
and must provide a copy to the State Auditor by the time it submits the annual statement for
publication.
SPRINGSTED Page 14
City of Elk River, Minnesota
The reporting and disclosure requirements outlined in this section shall begin with the year the
district was certified, and shall end in the year in which both the district has been decertified and
all tax increments have been spent or returned to the county for redistribution. Failure to meet
these requirements, as determined by the State Auditors Office, may result in suspension of
distribution of tax increment.
SPRINGSTED Page 15
EXHIBIT I
JOHNSON
PLA r
The Boundaries of Municipal Development District No. 1
Are Coterminous With the City Limits
Tax Increment Financing District No. 19
(Redevelopment)
unty Highway 13
U.S. Highway 1
Highway 12
goer L O r
~oy*r LOt
;00112J
L£C£ND
EXHIBIT II
[ Assumptions Report J
City of Elk River, Minnesota
Tax Increment Financing (Redevelopment) District No. 19
(U.S. Highway 16g and County Highway 12 Project)
Type of Tax Increment Financing District
Maximum Duration of TIF District
Certification Request Date
Decertification Date
Redevelopment
25 years from 1st increment
08~01/98
12/01/24 (25 Years of Increment)
Base Estimated Market Value
Times: First $150,000
Excess
Original Net Tax Capacity
2.45%
3.50%
1998/1999
$2,229,200
3,675
72,772
$76,447
(5 PID
Base Estimated Market Value
Increase in Estimated Market Value (a)
Total Estimated Market Value
Times: First $150,000
Excess
Total Net Tax Capacity
2.45%
3.50%
Assessment/Collection Year
1999~2000 2000/2001 2001/2002 2002/2003
$2,229,200 $2,229,200 $2,229,200 $2,229,200
8,000,000 16,000,000 26,000,000 36,000,000
$10,229,200 $18,229,200 $28,229,200 $38,229,200
3,675 3,675 3,675 3,675
352,772 632,772 982,772 1,332,772
$356,447 $636,447 $986,447 $1,336,447
Base Inflation Factor
Local Tax Capacity Rate
Fiscal Disparities Contribution From TIF District
Administrative Retainage Percent (maximum = 10%)
Pooling Percent
City Tax Rate (Only if Local-Effort TIF)
NA
111.504%
0.0000%
5.00%
0.00%
NA
(Pay 98)
Bonds
Bonds Dated 09/01/98
First Interest Date 02/01/99
Underwriters Discount 1.50%
Note (Pay-As-You-Go)
Note Dated 09101/98
Note Rate 7.50%
(Blended)
Will Annual Local Contribution Be Made (Yes or No)?
I.S.D #728 Equalized Tax Capacity Rate
I.SD #728 Sales Ratio
City Sales Ratio & Taxable Net Tax Capacity
Present Value Date & Rate
Yes
NA
NA
NA
0~01~8
(Annually)
NA
7.50%
(Blended)
(a) Assumes new commercial development of $8,000,000 in 1998 (50% complete),
and an additional $8,000,000 in 1999 (total new commercial EMV = $16,000,000).
Also assumes new industrial development of $10,000,000 in each of the years 2000 and 2001.
(total new industrial EMV = $20,000,000 = 400,000 sq. ff. @ $50/sq. ft.).
Prepared by: Spdngsted Incorporated (printed on 6/30/98 at 3:00 PM) Tifinca
I Pro~ected Tax Increment Report I
City of Eik River, Minnesota
Tax Increment Financing (Redevelopment) District No. 19
(U.S. Highway 169 and County Highway 12 Project)
Less: Less: Retained
Annual Total Odginal Fiscal Captured
Period Net Tax Net Tax Disp. @ Net Tax
Ending Capacity Capacity 0.0000% Capacity
(1) (2) (3) (4) (5)
12131/98 76,447 76,447 0 0
12/31/99 76,447 76,447 0 0
12/31/00 356,447 76,447 0 280,000
12/31/01 636,447 76,447 0 560,000
12/31/02 986,447 76,447 0 910,000
12/31/03 1,336,447 76,447 0 1,260,000
12/31/04 1,336,447 76,447 0 1,260,000
12/31/05 1,336,447 76,447 0 1,260,000
12/31106 1,336,447 76,447 0 1,260,000
12131/07 1,336,447 76,447 0 1,260,000
12/31/08 1,336,447 76,447 0 1,260,000
12/31/09 1,336,447 76,447 0 1,260,000
12/31/10 1,336,447 76,447 0 1,260,000
12/31/11 1,336,447 76,447 0 1,260,000
12131112 1,336,447 76,447 0 1,260,000
12131/13 1,336,447 76,447 0 1,260,000
12131114 1,336,447 76,447 0 1,260,000
12/31115 1,336,447 76,447 0 1,260,000
12/31116 1,336,447 76,447 0 1,260,000
12/31/17 1,336,447 76,447 0 1,260,000
12/31/18 1,336,447 76,447 0 1,260,000
12/31/19 1,336,447 76,447 0 1,260,000
12131120 1,336,447 76,447 0 1,260,000
12/31/21 1,336,447 76,447 0 1,260,000
12131122 1,336,447 76,447 0 1,260,000
12131/23 1,336,447 76,447 0 1,260,000
12131124 1,336,447 76,447 0 1,260,000
Less: Less: Plus:
Annual State Aud. Admin. Annual Local Annual
Gross Tax Deduction Retainage Net Tax Contribution Net
Increment 0.25% 5.00% Increment 5.00% Revenue
(7) (8) (9) (10) (11) (12)
0 0 0 0 0 0
0 0 0 0 0 0
312,211 781 15,572 295,858 15,572 311,430
624,422 1,561 31,143 591,718 31,143 622,861
1,014,686 2,537 50,607 961,542 50,607 1,012,149
1,404,950 3,512 70,072 1,331,366 70,072 1,401,438
1,404,950 3,512 70,072 1,331,366 70,072 1,401,438
1,404,950 3,512 70,072 1,331,366 70,072 1,401,438
1,404,950 3,512 70,072 1,331,366 70,072 1,401,438
1,404,950 3,512 70,072 1,331,366 70,072 1,401,438
1,404,950 3,512 70,072 1,331,366 70,072 1,401,438
1,404,950 3,512 70,072 1,331,366 70,072 1,401,438
1,404,950 3,512 70,072 1,331,366 70,072 1,401,438
1,404,950 3,512 70,072 1,331,366 70,072 1,401,438
;I,404,950 3,512 70,072 1,331,366 70,072 1,401,438
1,404,950 3,512 70,072 1,331,366 70,072 1,401,438
1,404,950 3,512 70,072 1,331,366 70,072 1,401,438
1,404,950 3,512 70,072 1,331,366 70,072 1,401,438
1,404,950 3,512 70,072 1,331,366 70,072 1,401,438
1,404,950 3,512 70,072 1,331,366 70,072 1,401,438
1,404,950 3,512 70,072 1,331,366 70,072 1,401,438
1,404,950 3,512 70,072 1,331,366 70,072 1,401,438
1,404,950 3,512 70,072 1,331,366 70,072 1,401,438
1,404,950 3,512 70,072 1,331,366 70,072 1,401,438
1,404,950 3,512 70,072 1,331,366 70,072 1,401,438
1,404,950 3,512 70,072 1,331,366 70,072 1,401,438
1,404,950 3,512 70,072 1,331,366 70,072 1,401,438
$32,860,219 $82,143 $1,638,906 $31,139,170 $1,638,906 $32,778,076
Times:
Tax
Capacity
Rate
(6)
111.504%
111.504%
111.504%
111.504%
111.504%
111.504%
111.504%
111.504%
111.504%
111.504%
111.5O4%
111.504%
111.504%
111.504%
111.504%
111.504%
111.504%
111.504%
111.504%
111.504%
111.504%
111.504%
111.504%
111.504%
111.504%
111.504%
111.504%
Present Value @ 7.50% = $12,594,291
Prepared by: Springsted Incorporated (printed on 6111/98 at 2'1(1 PM) Tifinca ..
Estimated Impact on Other Taxi,!,2 J?!s ,dictions Report
City of Elk River, Minnesota
Tax Increment Financing (Redevelopment) District No. 19
(U.S. Highway 169 and County Highway 12 Project)
Taxing
Jurisdiction
City of Elk River
Sherburne County
lSD #728, Elk River
Other (2)
Totals
Without
Project or TIF District
With Project and TIF District
Projected
1997/98 1997/98 Retained New
Taxable 1997/98 Taxable Captured Taxable
Net Tax Local Net Tax Net Tax Net Tax
Capacity (11 Tax Rate Capacity I1) + Capacity = Capacity
12,383,123 26.255% 12,383,123 1,260,000 13,643,123
58,246,430 27.235% 58,246,430 1,260,000 59,506,430
26,39o,619 56.539% 26,390,619 1,260,000 27,650,619
-- 1.475% -- 1,260,000 --
Hypothetical
Adjusted
Local
Tax Rate (*)
23.830%
Hypothetical
Decrease In
Local
Tax Rate
2.425%
26.658%
Hypothetical
Tax Generated
by Retained
Captured
N.T.C. (*)
300,261
0.577%
53.963%
335,895
2.576%
1.475%
679,929
111.504% 105.926% 5.578%
Statement 1:
Statement 2:
If the projected Retained Captured Net Tax Capacity of the TIF District was hypothetically available to each of
the taxing jurisdictions above, the result would be a lower local tax rate (see Hypothetical Adjusted Tax Rate above)
which would produce the same amount of taxes for each taxing jurisdiction. In such a case, the total local tax rate
would decrease by 5.578% (see. Hypothetical Decrease in Local Tax Rate above). The hypothetical tax that the
Retained Captured Net Tax Capacity ol~ the TIF District would generate is also shown above.
Since the projected Retained Captured Net Tax Capacity of the TIF District is not available to the taxing jurisdictions,
then there is no impact on taxes levied or local tax rates.
(1) Taxable net tax capacity = total net tax capacity - captured TIF.
(2) The impact on these taxing jurisdictions is negligible since they represent only 1.32% of the total tax rate.
Prepared by: Sprinq~ t::d Incorporated (7/1198)
EXHIBIT V
Market Value Analysis Report
City of Elk River, Minnesota
Tax Increment Financing (Redevelopment) District No. 19
(U.S. Highway 169 and County Highway 12 Project)
AssumDtions
Present Value Date
P.V. Rate - Gross T.I.
08/01/98
7.50%
Increase in EMV With TIF District
Less: P.V of Gross Tax Increment
Subtotal
Less: Increase in EMV Without TIF
Difference
$36,000,000
12,549,987
$23,450,013
0
$23,450,013
Year
1 2000
2 2001
3 2002
4 2003
5 2004
6 2005
7 2006
8 2007
9 2008
10 2009
11 2010
12 2011
13 2012
14 2013
15 2014
16 2015
17 2016
18 2017
19 2018
20 2019
21 2020
22 2021
23 2022
24 2023
25 2024
Annual Present
Gross Tax Value @
Increment 7.50%
312,211 266,929
624,422 496,613
1,014,686' 750,694
1,404,950 966,905
1,404,950 899,447
1,404,950 836,694
1,404,950 778,320
1,404,950 724,019
1,404,950 673,506
1,404,950 626,517
1,404,950 582,807
1,404,950 542,146
1,404,950 504,322
1,404,950 469,136
1,404,950 436,406
1,404,950 405,959
1,404,950 377,636
1,404,950 351,290
1,404,950 326,781
1,404,950 303,982
1,404,950 282,774
1,404,950 263,046
1,404,950 244,694
1,404,950 227,622
1,404,950 211,742
$32,860,219 $12,549,987
Prepared by: Spfingsted Incorporated (6/11/98)
DAVID LOCH
July 13, 1998
Mr. Paul Steinman
Director of Economic Development
City of Elk River
13065 Orono Parkway
P.O. Box 490
Elk River, MN 55330
13880 Highway 10
Elk River, MN 55330-4601
(612) 241-2701 L3 1.800-433-5229
website: www. co.sherbume, mn. us
Dear Mr. Steinman:
In response to the request for input on Elk River's proposed Tax Increment Financing
District No. 19, the Sherbume County Board of Commissioners has issued a response.
The enclosed response document was reviewed and approved at the July 7th Board
meeting. I trust that you will enter it into the record of the public hearing scheduled for
JUly 13th:
As you know Sherburne County is supportive of economic development initiatives.
However, in this case we are skeptical that such a massive and very long term diversion
of tax revenues is necessary to create beneficial development. Nevertheless, we look
forward to continued partnership with Elk River to retain, expand, and attract business
development.
Thank you for the consideration of our response.
County Administrator
Eric.
c. Roger Holmgren, Sherbume County Assessor's Office
An Equal Opportunity Employer
Sherburne Counfy Response
SHERBURNE COUNTY'S RESPONSE TO THE CITY OF ELK
RIVER'S TAX INCREMENT FINANCING FOR
(REDEVELOPMENT) DISTRICT NO. 19
The County of Sherburne, in response to the request for input on the Tax Increment
Financing District No. 19, offers the following concerns as to the proposal:
Generally, the County of Sherburne does not favor the use of tax increment
financing for a proiect that is proposed for commercial/retail use. The County
has historically i~avored the use of the increment for industrial base.
ISSUE I. THE COUNTY BELIEVES THAT AMPLE SPACE IS PRESENTLY
AVAILABLE FOR COMMERCIAL USE.
Over 100,000 square feet of commercial space is available in the City of Elk River in
the old shopping mall. The shopping mall, as you are well aware began as a tax
increment financing district. The year that the development agreement lapsed was the
same year that the County was served with a tax appeal for the decrease in the value of
the same (which was agreed to based upon the significant vacancy rate.) By
implementing this project, it would place the old mall in direct competition for the
lease of space. The old mall would continue to remain under utilized and not attain its
true value.
ISSUE II. THE COUNTY BELIEVES THAT THERE ARE AMPLE
RESTAURANTS AND CONVENIENCE STORES TO SERVICE THE
POPULATION.
By count, the County has identified ten convenience stores for service to the public,
including a number of businesses that are owned and operated by the residents of the
City. Further, the County has identified 25-26 restaurants that service the population,
including two which have been recently vacated; namely, the Wendy's and Bagel Place.
The third recent vacancy will soon be filled with a new Chinese restaurant. Therefore,
the County is of the impression that there are sufficient restaurants.
ISSUE III. THE COUNTY BELIEVES THAT THERE IS GLUT OF
SUPERMARKET SPACE IN THE COMMUNITY.
The County has, within the last year, been involved in two tax appeals for involving
supermarkets. Based upon the information gathered, the County determined that the
market literally has too many square feet of supermarkets to service the population
base.
Page 1
Sherburne County Response
ISSUE IV. THE COUNTY DISAGREES WITH THE LENGTH OF THE TIF
DISTRICT.
The County recognizes that the TIF will capture revenues of the project to repay the
City for the infrastructure. However, each governmental unit is struggling to retain
taxes at the lowest possible rate. To capture the rates displaces the burden from the
property onto others in the community. The benefit to the private sector developer
appears to be greater than the benefit to the public. The essential services required by
the project such as law enforcement, prosecution of criminals, ambulance services, fire
protection, maintenance of public access, etc. will not be paid over a 25 year period.
ISSUE V. THE COUNTY DOES NOT ACCEPT THE "BUT FOR" TEST IN THE
PLAN.
The County was not provided with the facts to support the "but for" test in the plan.
This places the County at a handicap in our response. However, given the concerns
that are set forth in this memorandum, the County strongly questions the rational that
may be given to justify not only the project but also the "but for" test."
ISSUE VI. THE COUNTY HAS CONCERN ABOUT THE TOTAL CAPTURED
VALUE THAT THE CITY HAS IN TIF DISTRICTS.
Assuming the same rate of growth that has occurred in the last five years, the
Sherburne County Board is concerned that nine percent of the city's tax base will be
involved in TIF Districts. The impact is the displacement of the tax burden onto
others. The rule of thumb is that ten percent of a captured base is considered fiscally
risky. This is particularly true with the proposed elimination of the personal property
tax base ( including the UPA plant located in the City of Elk river and the loss of the
Sherco plant which would lose 38% of the County revenue stream), the change in the
classification rates for commercial and industrial properties which has shifted the onus
onto the residential and agricultural properties, the sensitivity of the market to the
change in interest rates which directly impacts the growth of both residential and
commercial development. Any one of these shall have an adverse impact which shall
be compounded with the inability of the city to use these "captured" revenues outside
the district. If the District fails or is adversely impacted, then any bonds issued shall
be added to the total underlying debt of the County. In essence, this then becomes a
debt that all residents of the City and will directly effect the County's bond rating.
(This has in fact been true in the past as well.) Further, is it in the best interests of the
City to finance this district in the event that an industrial project comes along?
Industrial jobs have a proven track record of paying livable wages. To attain that
opportunity for our citizens is one that we should be prepared to welcome.
Page 2