3. HRSR SPEC JNT 11-04-2013 Elk
............ Request for Action
River
To Item Number
City Council/Housing and Redevelopment Authority 3.0
Agenda Section Meeting Date Prepared by
General Business November 4, 2013 Brian Beeman,Director of Economic
Development
Item Description Reviewed by
Discuss housing survey and develop housing TIF Jeremy Barnhart, Deputy Director, CODD
scoring worksheet. Reviewed by
Cal Portner, City Administrator
Action Requested
1. Review the results from the housing policy survey.
2. onsider draft housing objectives scoring framework_
Background/Discussion
On October 21, 2013 the City Council discussed the proposed Blackhawk housing TIF project. Prior to
establishing a public hearing, the Council determined that a separate housing TIF scoring sheet should be
de4eloped in order to adequately and fairly evaluate housing TIF applications.
The Council directed staff to work with Springsted to prepare a draft policy on housing TIF districts, and
the associated evaluation materials for this and future projects. Necessary for the preparation of a policy
is a greater understanding of the Council and HRA's desires related to housing assistance,which staff
hopes to achieve with the survey distributed October 31, 2013 and the following discussion.
Springsted will be available to present the findings of the Council/HRA policy survey to the group and
will also present examples from other cities.
It is not expected that the Council and the HRA will complete the formation of a Housing TIF policy,
additional steps including confirmation of objectives, criteria, and scoring process will be discussed at a
future workshop.
Financial Impact
None
Attachments
• Springsted Policy Discussion&Facilitation Memo
• Elk River Policy Pre-Session Questions
• Housing TIF Review Worksheet
• 2006 TIF Policy&Application
INATUREI E H E I 1 1
Springsted Incorporated
380 Jackson Street, Suite 300
Saint Paul,MN 55101-2887
Springsted
Tel: 651-223-3000
Fax: 651-223-3002
www.springsted.com
DRAFT MEMORANDUM — FOR DISCUSSION
TO: Members of the City Council
Members of the HRA
Calvin Portner, City Administrator
Brian Beeman, Economic Development Director
FROM: Mikaela Huot,Vice President/Consultant
DATE: October 31, 2013
SUBJECT: Policy Discussion and Facilitation for Joint HRA/City Council Meeting
The City of Elk River has a tax increment financing (TIF)policy initially created in 1991 and later amended in 2000
and 2006. The policy contains the purpose,objectives of tax increment financing, policies for use of tax increment
financing, project qualifications, application for TIF, and application review worksheet. The policy lists many City
objectives regarding the use of tax increment financing, including creation of affordable housing; however the
application review worksheet does not align with the scoring and review of potential housing projects. As a result,the
City Council has asked staff and Springsted to provide additional information regarding the review of affordable
housing projects that may include a policy and review worksheet update. The purpose of this memo is to serve as a
cover for the additional information being provided for the City Council and HRA members to consider in advance of
the joint meeting scheduled for Monday, November 4,2013 at 5:45pm.
1. Current City TIF Policy
2. Other City TIF Policies that include housing as an objective
3. Sample Housing Rating Worksheet
4. Affordable Housing Considerations
Issues to consider in conjunction with housing and affordable housing:
1. Type of affordable housing
a. Owner-occupied
b. Multi-family
c. Senior
i. Independent Living
ii. Assisted Living
iii. Memory Care
2. If affordable housing
a. Minimum income requirements
b. Additional requirements
3. Location of housing within city
a. Near existing jobs,transportation, recreation, retail
4. Jobs created in conjunction with housing
a. Assisted Living
b. Memory Care
Thank you for the opportunity to be of assistance to the City of Elk River. We look forward to discussing in greater
detail at the scheduled meeting. I can be reached at 651-223-3036 or mhuot(a.springsted.com with any questions or
comments.
City of Elk River,Minnesota
Business Subsidy,Tax Increment Financing and
Tax Abatement Policy and Procedures
Pre-Session Questions
Please limit your responses to a development perspective only.
I. Strengths
Identify the top three to five strengths of the City; Specifics are not needed; key phrases, ideas and
observations desired.
II. Issues and Challenges
Identify the top three to five issues or challenges of the City; specifics are not needed;key phrases, ideas
and observations desired.
III.Short Term Outcomes(1-3 years)
Identify outcomes and results you want to achieve in the short term(1 to 3 years). In three years what
clear and distinct development successes do you want to achieve?
IV.Mid-Term Outcomes(3 to 10 years)
Identify outcomes and results you want to achieve in the mid-term(3 to 10 years). During this
timeframe what clear and distinct development successes do you want to achieve?
V. Long Term Outcomes
Identify outcomes and results you want to achieve in the long term. Consider these legacy decisions
that you may not be directly involve d in,but your decisions in the next few years will create an
environment or opportunity for the City to capitalize on them in the long term.
VI.Overall Priorities
We are interested in knowing what your overall priorities are for development, including housing.
Please identify the top three to five priorities you want to achieve(regardless of timeframe).
VII.Role of City in Development
We are interested in knowing how active or passive you desire the City to be in development, including
housing,activities. Please identify the top three to five roles and activities the City should undertake
and those that the City should not undertake. Explain why but limit response to bullet points or key
phrases.
Thank you very much for your time and input. Please send completed form to Mikaela Huot-
mhuot@springsted.com or fax— 651-268-5036 by Monday, November 4. If you have any questions,
please contact me at 651-223-3036.
Mikaela Huot
Springsted Incorporated
City of ,Minnesota
EXHIBIT D
BUSINESS ASSISTANCE REVIEW WORKSHEET
FOR HOUSING PROJECTS
1. The project meets which of the following objectives as set forth in the Tax Increment
policy:
❑ 1. To encourage redevelopment within the City.
❑ 2. To retain local jobs and/or increase the number and diversity of jobs that offer stable
employment and/or attractive wages and benefits.
❑ 3. To enhance and/or diversify the City's economic base.
❑ 4. To encourage additional unsubsidized private(re)development.
❑ 5. To remove blight and/or encourage(re)development of commercial and industrial areas.
❑ 6. To create housing opportunities for senior and low to moderate income families.
❑ 7. To provide a diversity of housing within the City.
❑ 8. To provide a variety of family housing ownership alternatives and housing choices.
❑ 9. To promote neighborhood stabilization and revitalization by the removal of blight and the
upgrading of existing housing stock in residential areas.
❑ 10. To accomplish other public policies which may be adopted such as the promotion of quality
urban or architectural design,energy conservation,and decreasing capital and/or operating
costs of local government.
• Utilization of architectural and landscaping techniques that will enable the
components of the project to blend with the natural environment.
• Mitigation of project impact on the natural environment.
2. Ratio of Private to Public Investment in Project: Points:
$ Private investment 5:1 5
$ Public Investment 4:1 4
Ratio Private to Public Financing 3:1 3
2:1 2
Less than 2:1 1
3.Type of Project: Points:
100% Owner Occupied 5
Mix Owner Occupied & Investment 3
Investment Property 1
4. Project provides housing that is not restricted
Page 1
to persons 55 years and older: Points:
3
5. Project provides that at least 30%of the total units
are three-bedroom or more: Points:
3
6. Project proposes rehabilitation of existing
housing, housing stock, and maximizes
utilization of existing infrastructure: Points:
5
7. Project proposes a location near existing
jobs,transportation, recreation, retail services,
social services, and schools: Points:
5
8. Project Size: Points:
The project will result in the construction 35,000+ 5
of square feet. 25,000+ 4
15,000+ 3
10,000+ 2
Under 10,000+ 1
9. Likelihood that the project will result in Points:
unsubsidized, spin-off development. High 5
Moderate 3
Low 1
Sub-Total Points: of a possible 45 points.
11. Bonus Points Points:
The project will be 100% Pay-as-you-go financing 3 points
Total Points:
Overall Project Analysis*: 31-39 Points High
21-30 Points Moderate
11-20 Points Low
0-10 Points Not Eligible
`*The purpose of this analysis is determine project eligibility
City of
Rive r
Tax Increment Financing
Policy & Application
Amended: May 2006
Amended: March 2000
Adopted: August 1991
City of Elk River
Economic Development Division
13065 Orono Parkway
Elk River,MN 55330
763.635.1040
Table of Contents
I. Policy Purpose 3
II. Objectives of Tax Increment Financing 3
III. City of Elk River Policies for the Use of TIF 4
IV. Project Qualifications 5
V. Application Process for TIF 6
VI. Application for TIF 7
Applicant Information 7
Project Information 8
Public Purpose 8
Sources&Uses 9
Checklist&Additional Information 10
VII. Sample But-For Analysis I I
VIII. Application Review Worksheet 12
IX. City of Elk River Business Subsidy Policy 15
City of Elk River
Tax Increment Policy&Application
Amended May 2006 Page 2 of 13
I. POLICY PURPOSE
For the purposes of this document, the term "City"shall include the Elk River City Council, Economic
Development Authority, and Housing and Redevelopment Authority.
The purpose of this policy is to establish the City of Elk River's position relating to the
use of Tax Increment Financing(TIF) for private development above and beyond the
requirements and limitations set forth by State Law.This policy shall be used as a guide
in the processing and review of applications requesting tax increment assistance.The
fundamental purpose of tax increment financing in Elk River is to encourage desirable
development or redevelopment that would not otherwise occur but for the assistance
provided through TIF.
The City of Elk River is granted the power to utilize TIF by the Minnesota Tax
Increment Financing Act,as amended. It is the intent of the City to provide the
minimum amount of TIF, as well as other incentives,at the shortest term required for
the project to proceed. The City reserves the right to approve or reject projects on a
case by case basis,taking into consideration established policies,project criteria,and
demand on city services in relation to the potential benefits from the project. Meeting
policy criteria does not guarantee the award of TIF to the project.Approval or denial of
one project is not intended to set precedent for approval or denial of another project.
II. OBJECTIVES OF TAX INCREMENT FINANCING
As a matter of adopted policy, the City will consider using TIF to assist private
development projects to achieve one or more of the following objectives:
• To retain local jobs and/or increase the number and diversity of jobs that offer
stable employment and/or attractive wages and benefits as defined in the City's
Business Subsidy Policy.
• To encourage additional unsubsidized private development in the area,either
directly or indirectly through"spin off' development.
• To facilitate the development process and to achieve development on sites
which would not be developed without TIF assistance.
• To remove blight and/or encourage redevelopment of commercial and
industrial areas in the city that result in high quality redevelopment and private
reinvestment.
• To offset increased costs of redevelopment (i.e. contaminated site clean up)
over and above the costs normally incurred in development.
• To create opportunities for affordable housing.
• To contribute to the implementation of other public policies,as adopted by the
city from time to time, such as the promotion of quality urban or architectural
design, energy conservation,and decreasing capital and/or operating costs of
local government.
City of Elk River
Tax Increment Policy&Application
Amended May 2006 Page 3 of 13
• To enhance and diversify the City of Elk River's economic base.
• To significantly increase the City of Elk River's tax base.
III. POLICIES FOR THE USE OF TIF
a. When possible,TIF shall be used to finance public improvements associated
with the project. The priority for the use of TIF funds is:
1. Public improvements,legal,administrative,and engineering costs.
2. Site preparation, site improvement,land purchase,and demolition.
3. Capitalized interest,bonding costs.
b. It is the City's policy to establish the following types of TIF districts:
1. Economic Development Districts
• It is desired that the project result in a minimum creation of
one full time job per$25,000 of TIF, or
• Result in a significant increase in the tax base.
2. Redevelopment Districts
• The market value of a redeveloped site shall increase by a
minimum of 50% of the current market value.
Other types of TIF districts,along with specific criteria,may be considered
on a case-by-case basis.
c. TIF assistance will be provided to the developer upon receipt of the
increment by the City,otherwise referred to as the pay-asyougo method.
Requests for up front financing will be considered on a case-by-case basis.
d. A maximum of ten percent (10%) of any tax increment received from the
district may be retained by the City to reimburse administrative costs.
e. Any developer receiving TIF assistance shall provide a minimum of ten
percent (10%) owner cash equity investment in the project.
f. TIF will not be used in circumstances where land and/or property price is in
excess of fair market value.
g. Developer shall be able to demonstrate a market demand for a proposed
project. TIF shall not be used to support purely speculative projects.
h. TIF will not be utilized in cases where it would create an unfair and
significant competitive financial advantage over other projects in the area.
i. TIF shall not be used for projects that would place extraordinary demands
on city services or for projects that would generate significant environmental
impacts.
j. The developer must provide adequate financial guarantees to ensure
completion of the project,including,but not limited to:minimum assessment
agreements,letters of credit,personal guaranties,and etcetera.
City of Elk River
Tax Increment Policy&Application
Amended May 2006 Page 4 of 13
k. The developer shall adequately demonstrate, to the City's sole satisfaction,an
ability to complete the proposed project based on past development
experience,general reputation,and credit history,among other factors,
including the size and scope of the proposed project.
1. For the purposes of underwriting the proposal, the developer shall provide
any requested market, financial,environmental,or other data requested by
the City or its consultants.
m. All TIF proposals shall optimize the private development potential of a site.
IV. PROJECT QUALIFICATIONS
All TIF projects considered by the City of Elk River must meet each of the following
requirements:
a. To be eligible for TIF,a project shall result in:
i. The new construction of a minimum of 25,000 square feet;
ii. A minimum increase of$37,500 per year,excluding the state portion
in property taxes;and,
iii. Have a market value of at least$1,250,000 upon completion.
b. The project shall meet at least one of the objectives set forth in Section II
and satisfy all the provisions set forth in Section III of this document.
c. The developer shall demonstrate that the project is not financially feasible
but for the use of TIF.
d. The project shall comply with all provisions set forth in the Tax Increment
Financing Act,Minnesota Statutes 469.124 to 469.134,inclusive,as amended,
and Statutes 469.174 to 469.1799,inclusive,as amended.
e. The project must be consistent with the City's Comprehensive Plan,Land
Use Plan,and Zoning Ordinances.
f. The project shall serve at least two of the following public purposes:
• Creation of jobs with livable wages and benefits.
• Significantly increase the City's tax base.
• Enhancement or diversification of the city's economic base.
• Industrial development that will spur additional private investment in
the area.
• Fulfillment of defined city objectives such as those identified in the
City's Comprehensive Plan and the City's Economic Development
Strategic Plan,among others.
• Removal of blight or the rehabilitation of a high profile or priority
site.
City of Elk River
Tax Increment Policy&Application
Amended May 2006 Page 5 of 13
V. APPLICATION PROCESS FOR TIF
1. Applicant submits the completed application along with a non-refundable
$10,000 application deposit. The application deposit will be used toward the
cost of services provided in the evaluation of financial feasibility,establishment
or modification of the TIF district,and preparation of legal documents and
agreements. An additional deposit of$10,000 will be required for projects the
require meeting statutory eminent domain and/or redevelopment substandard
tests. Projects that demand professional services in excess of the initial deposit
shall be required to reimburse the City for the additional expenses.
2. City staff reviews the application and completes,the Application Review
Worksheet. The Application and Application Review Worksheet is primarily
designed to score the desirability of an industrial project. Redevelopment and
Housing projects will be evaluated on a case-by-case basis and as the projects
meet the city's desired objectives.
3. Results of the Worksheet are submitted to the appropriate governing authorities
(EDA or HRA) for recommendation to the City Council of approval or denial
of the request.
4. If preliminary approval is granted,the Tax Increment Financing Plan,along
with all necessary notices,resolutions are prepared by City staff and/or
consultants.
5. Notices are published and sent to the county and school board.
6. Public hearing(s) on the proposed request are held.
7. The City Council grants final approval or denial of the request.
City of Elk River
Tax Increment Policy&Application
Amended May 2006 Page 6 of 13
VI. APPLICATION FOR TAX INCREMENT FINANCING
A. APPLICANT INFORMATION
Name of Corporation/Partnership
Address
Primary Contact
Address
Phone Fax Email
Brief description of the corporation/partnership's business,including history,principal
product or service:
Brief description of the proposed project:
Attorney Name
Address
Phone Fax Email
Accountant Name
Address
Phone Fax Email
Contractor Name
Address
Phone Fax Email
Engineer Name
Address
Phone Fax Email
Architect Name
Address
Phone Fax Email
City of Elk River
Tax Increment Policy&Application
Amended May 2006 Page 7 of 13
B. PROJECT INFORMATION
1. The project will be:
Industrial Greenfield: New Construction Expansion
Commercial Redevelopment: New Construction Rehabilitation
Industrial Redevelopment: New Construction Rehabilitation
Other
2. The project will be: _Owner Occupied Leased Space
3. Project Address
Legal Description&Parcel Identification Number(s)
4. Site Plan and Preliminary Construction Plans Attached: Yes No
5. Amount of Tax Increment Requested for:
Land Purchase$
Public Improvement$
Site Improvement$
6. Current Real Estate Taxes on Project Site: $
Estimated Real Estate Taxes upon Completion: Phase I $
Phase II $
7. Construction Start Date:
Construction Completion Date:
If Phased Project: Year % Completed
Year % Completed
C. PUBLIC PURPOSE
It is the policy of the City of Elk River that the use of Tax Increment Financing should
result in a benefit to the public. Please indicate how this project will serve a public
purpose.
Job Creation/Retention: Number of existing jobs
Number of jobs created by project
Average hourly wage of jobs created/retained
New industrial development,which will result in additional private
investment in the area.
Enhancement or diversification of the city's economic base.
The project contributes to the fulfillment of the City's Economic Development
Strategic Plan.
Removal of blight or the rehabilitation of a high profile or priority site.
_Significantly increase the City's tax base.
Other:
City of Elk River
Tax Increment Policy&Application
Amended May 2006 Page 8 of 13
D. SOURCES & USES
SOURCES NAME AMOUNT
Bank Loan $
Other Private Funds $
Owner Cash Equity $
Fed Grant/Loan $
State Grant/Loan $
EDA Micro Loan $
Tax Increment $
ID Bonds $
TOTAL $
USES AMOUNT
Land Acquisition $
Site Development $
Construction $
Machinery&Equipment $
Architectural&Engineering Fees $
Legal Fees $
Interest During Construction $
Debt Service Reserve $
Contingencies $
TOTAL $
City of Elk River
Tax Increment Policy&Application
Amended May 2006 Page 9 of 13
E. ADDITIONAL DOCUMENTATION AND CHECKLIST
Applicants will also be required to provide the following documentation.
A) Written business plan,including a description of the business,
ownership/management,date established,products and services,and
future plans
B) Financial Statements for Past Two Years
Profit&Loss Statement
Balance Sheet
C) Current Financial Statements
Profit&Loss Statement to Date
Balance Sheet to Date
D) Two Year Financial Projections
E) Personal Financial Statements of all Major Shareholders
Profit&Loss
Current Tax Return
F) Letter of Commitment from Applicant Pledging to Complete
During the Proposed Project Duration
G) Letter of Commitment from the Other Sources of Financing,
Stating Terms and Conditions of their Participation in
Project
H) Non-refundable application deposit of$10,000
I) Construction Plans and Itemized Project Construction Statement
J) Attach the following documentation as Exhibits
Exhibit A—Corporation/Partnership Description
Exhibit B—Description of Project
Exhibit C—List of Shareholders/Partners
Exhibit D—But-For Analysis
Exhibit E—List of Prospective Lessees
Exhibit F—Legal Description and PID Number(s)
Note:All Major shareholders will be required to sign personal guarantees if up front
financing of the project is required.
The undersigned certifies that all information provided in this application is true and correct to the best of the
undersigned's knowledge. The undersigned authorizes the City of Elk River to check credit references and
verify financial and other information. The undersigned also agrees to provide any additional information as
may be requested by the City after the filing of this application.
Applicant Name Date
City of Elk River
Tax Increment Policy&Application
Amended May 2006 Page 10 of 13
VII. SAMPLE BUT-FOR ANALYSIS
WITH NO WITH
TAX INCREMENT TAX INCREMENT
SOURCES AND USES SOURCES AND USES
SOURCES SOURCES
Mortgage 9,600,000 8,667,000
Equity 2,400,000 2,400,00
Tax Increment Financing 0 933,000
TOTAL SOURCES 12,000,000 12,000,000
USES USES
Land 1,500,000 1,500,000
Site Work 300,000 300,000
Soil Correction 468,000 468,000
Demolition 100,000 100,000
Relocation 65,000 65,000
Subtotal Land Costs 2,433,000 2,433,000
Construction 6,750,000 6,750,000
Finish Manufacturing 250,000 250,000
Subtotal Construction Costs 7,000,000 7,000,000
Soft Costs 350,000 350,000
Taxes 35,000 35,000
Finance Fees 850,000 850,000
Project Manager 542,000 542,000
Developer Fee 540,000 540,000
Contingency 250,000 250,000
Subtotal Soft Costs 2,567,000 2,567,000
TOTAL USES 12,000,000 12,000,000
Income Statement Income Statement
Sq. Ft. Per Sq. Ft. Sq. Ft. Per Sq. Ft.
Rent-Space 1 100,000 $8.00 800,000 100,000 $8.00 800,000
Rent-Space 2 25,000 $8.50 212,500 25,000 $8.50 212,500
Rent-Space 3 25,000 $9.00 225,000 25,000 $9.00 225,000
Other 0 $0.00 0 0 $0.00 0
1,237,500 1,237,500
Mortgage 20 Term 1,051,646 20 Term 949,439
9.00%Interest 9.00%Interest
9,600,000 Principal 8,667,000 Principal
Net Income 185,854 288,061
Total Return on Equity 7.74% 12.00%
City of Elk River
Tax Increment Policy&Application
Amended May 2006 Page 11 of 13
VIII. TAX INCREMENT FINANCING APPLICATION REVIEW
WORKSHEET
TO BE COMPLETED BY CITY STAFF
1. The project meets the criteria set forth in Section IV of the City's Tax Increment
Financing policy.
a) Meets minimum thresholds for size,value,and tax revenue.
b) Meets at least one of the objectives in Section II and satisfies
the provision set forth in Section III.
c) Demonstrates need for TIF with the but for analysis.
e) Consistent with all city plans and ordinances.
1) Serves at least two public purposes as defined in Section IV.
2. Ratio of Private to All Public Investment in Project: Points:
$ Private investment 5:1 5
$ Public Investment 4:1 4
Ratio Private : Public Financing 3:1 3
2:1 2
Less than 2:1 1
3. Job Creation in the City of Elk River: Points:
Number of new jobs as a result of the project. 40+ 5
Number of existing/retained jobs divided by 10. 30+ 4
Total 20+ 3
10+ 2
Less than 10 1
4. Ratio of Public Investment to Job Creation: Points:
$ Public Investment $15,000 or less 5
Number of new jobs created/retained $20,000 or less 4
$ Public Investment per new job $22,000 or less 3
$25,000 or less 2
Over$25,000 1
5. Wage Level of new jobs created/retained: Points:
Minimum hourly wage Over$21/ hour 5
of jobs created/retained: $18-21 / hour 4
$14-17 / hour 3
$10-13 / hour 2
Under$10 / hour 1
6. Project size: Points:
The project will result in the construction 80,000+ 5
of square feet 65,000+ 4
50,000+ 3
35,000+ 2
25,000+ 1
City of Elk River
Tax Increment Policy&Application
Amended May 2006 Page 12 of 13
7. Market Value/Tax Base Generation: Points:
The project will result in a per square foot Industrial Commercial
estimated market value (land and building) $80/sf+ $110/sf+ 5
of $70/sf+ $100/sf+ 4
$60/sf+ $90/sf+ 3
$50/sf+ $80/sf+ 2
$40/sf+ $70/sf+ 1
8. Type of Project: Points:
100% Owner Occupied 5
Mix Owner Occupied&Investment 4
Investment Property 3
9. Use: Points:
Manufacturing 5
Research&Development 4
Commercial Redevelopment 3
Warehouse/Distribution 2
Housing 1
10. Likelihood that the project will result in Points:
unsubsidized, spin-off development. High 5
Moderate 3
Low 1
Sub-Total Points: of a possible 45 points.
11. Bonus Points Bonus Points:
The project will be 100%Pay-asyougo TIF. 3 points
The project contributes to the goals of Energy City. 2 points
• Product promotes sensible use of energy,OR
• Project utilizes significant energy efficient design&/or
materials in construction.
Total Points:
Overall project analysis: High 45-38 points
Moderate 37-29 points
Low 28-20 points
Not Eligible 19-0 points
City of Elk River
Tax Increment Policy&Application
Amended May 2006 Page 13 of 13