4.7. SR 02-18-2014 City of
Elk - Request for Action
River O.
To Item Number
Mayor and City Council 4.7
Agenda Section Meeting Date Prepared by
Consent February 18, 2014 Brian Beeman,Director of Economic
Development
Item Description Reviewed by
Tax Increment Financing Policy&Housing Scoring Jeremy Barnhart,Deputy Director, CODD
Worksheet Reviewed by
Cal Portner, City Administrator
Action Requested
Approve,by motion,the Tax Increment Financing Policy as recommended by the Economic
Development Authority (EDA) and the Housing and Redevelopment Authority (HRA).
Background/Discussion
As directed by the EDA in December, Springsted has developed a number of recommended
amendments to the Tax Increment Financing Policy to reflect the comments and direction from the two
joint workshops held November 4, 2013, and December 2, 2013.
These changes were to be reviewed by the EDA and HRA before the City Council approves the final
policy. The HRA reviewed the documents at their meeting on February 3, and the EDA on February 18.
Tax Abatement Policy Updates
1. Edits under Section VI to update statutory reference
2. Edits to Section VII A to be consistent with City's fee schedule
3. Edits to Section VIII E to be consistent with City's fee schedule
Financial Impact
N/A
Attachments
• EDA report dated February 18, 2014
• HRA report from February 3, 2014
Paw IRLD AY
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Ells -Vft
_ Request for Action
River
To Item Number
Economic Development Authori 6.1
Agenda Section Meeting Date Prepared by
General Business February 18,2014 Brian Beeman,Director of Economic
Development
Item Description Reviewed by
Review TIF Policy Jeremy Barnhart,Deputy Director, CODD
Reviewed by
Action Requested
Approve by motion,the Tax Increment Financing Policy and recommend to the City Council on same.
Background/Discussion
At the December 2,2013 joint City Council/HRA workshop,it was suggested that both the HRA and
EDA review the current Tax Increment Financing Policy before the City Council approves the final
policy. Springsted,the city's financial consultant, has updated the policy to reflect the comments and
direction from the two joint workshops held November 4,2013 and December 2,2013. A copy of the
proposed updated policy is attached.A representative from Springsted will be available for any questions.
Tax Increment Financing (TIF) Policy Updates
1. Inclusion of housing projects under Section III (b) (3)
2. Edit under Section III (j)
3. Addition of Section V Subsidy Agreement&Reporting Requirements
4. Edits to Section VI.Application Process for TIF (1) to be consistent with City's fee schedule
5. Edits to Section VI.Application Process for TIF (2) inclusion of housing projects
6. Edits to Section VII. Section E to be consistent with City's fee schedule
7. Minor edits to Section IX
8. Addition of Section X—Housing Review Worksheet
Financial Impact
N/A
Attachments
• Springsted Memo dated February 11,2014
• Updated TIF Policy
• Joint Workshop Minutes dated Nov 4, 2013
• Joint Workshop Minutes dated Dec 2,2013
P 0 W F R I U 0
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Ells -Wft
_ Request for Action
River
To Item Number
City Council/Housing and Redevelopment Authority 2.1
Agenda Section Meeting Date Prepared by
General Business November 412013 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
Consider results of Springsted's housing survey. Determine Council and HRA's policy stance on
affordable and senior housing. If stance is to support these types of programs, Council/HRA,with the
help of Springsted will develop housing TIF objectives and criteria for a separate housing TIF scoring
worksheet.
Background/Discussion
On October 21,2013 the City Council discussed the Blackhawk housing TIF project. The Council
determined that a separate housing TIF should be developed in order to adequately and fairly evaluate
housing TIF applications. Instead of setting a date for a Public Hearing for the Blackhawk TIF project,
the Council directed staff to work with Springsted to determine the Council/HRA's policy on housing
TIF's going forward and also to present example application scoring worksheets from other cities in
order to develop objectives and criterion for Elk River's housing TIF applications.
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.
Financial Impact
None
Attachments
■ Springsted documents
PRwER10 0
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Springsted Incorporated
380 Jackson Street, Suite 300
Springsted Saint Paul,MN 55101-2887
Tel: 651-223-3000
Fax: 651-223-3002
www.springsted.com
MEMORANDUM
TO: Members of the EDA
Brian Beeman, Economic Development Director
FROM: Mikaela Huot,Vice President/Consultant
DATE: February 11, 2014
SUBJECT: Tax Increment Financing,Tax Abatement and Business Subsidy Policy Updates
The Elk River City Council and Housing and Redevelopment Authority(HRA) held joint meetings on Monday,
November 4, 2013 and December 2, 2013 to discuss the City's existing tax increment financing (TIF) policy that was
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 of the joint meetings, staff and Springsted were asked to update
the current policy to include the review of affordable housing projects. A general review and update of the existing
TIF policy in conjunction with development of the housing review worksheet has also occurred and was reviewed and
approved by the HRA at its February 3, 2014 meeting.
It was also advised that updates be made to the existing business subsidy and tax abatement policies to ensure
compliance with current statutory requirements and consistency. The purpose of this memo is to provide a brief
summary of the recommended changes and potential areas of discussion for the updates. .
Tax Increment Financing (TIF) Policy Updates
1. Inclusion of housing projects under Section III (b)(3)
2. Edit under Section III Q)
3. Addition of Section V Subsidy Agreement&Reporting Requirements
4. Edits to Section VI.Application Process for TIF(1)to be consistent with City's fee schedule
5. Edits to Section VI.Application Process for TIF(2)inclusion of housing projects
6. Edits to Section VII. Section E to be consistent with City's fee schedule
7. Minor edits to Section IX
8. Addition of Section X—Housing Review Worksheet
Tax Abatement Policy Updates
1. Edits under Section VI. to update statutory reference
2. Edits to Section VII.A to be consistent with City's fee schedule
3. Edits to Section VIII E to be consistent with City's fee schedule
Business Subsidy Policy Updates
1. Edits to Section I to update statutory reference
2. Edits to Section 11 to clarify definition of business subsidy
3. Edits to Section V(A.)to clarify intent
4. Edits to Section V(E.)to update minimum wage requirement
a. Subject to discussion—some alternates to consider
i. At least state or federal minimum wage,whichever is greater, exclusive of benefits
ii. Wage of higher or$_/hr or_%federal minimum wage, exclusive of benefits
iii. %of most recent median wage figure for County
iv. %of federal poverty level
V. %of minimum wage
5. Removal of Section VI. (included under Section 11)
6. Edits to Section VII to be consistent with statutory requirement
7. Edits to Section VII I for clarification
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 February 18, 2014 scheduled meeting. I can be reached at 651-223-3036 or mhuot(cDspringsted.com
with any questions or comments.
City of
eri
Tax Increment Financing
Policy & Application
Amended: February 2014
Amended: May 2006
Amended: March 2000
Adopted: August 1991
Ci"-of Elk River
Economic Development Division
13065 Orono Parkway
Elk River,TAIN 55330
763.635.1040
Table of Contents
I. Policy Purpose 3
11. Objectives of Tax Increment Financing 3
III. City of Elk River Policies for the Use of TIF 4
IV. Project Qualifications 5
V. Subsidy Agreement & Reporting Requirements 7
V1. Application Process for TIF 47
VII. Application for TIF -78
Applicant Information 7
Project Information 8
Public Purpose 8
Sources &Uses 9
Checklist&Additional Information 10
VIII. Sample But-For Analysis 4412
IX. Application Review Worksheet:
Commercial-Industrial Projects 42 13
X. Application Review Worksheet:
Housing Projects 4-4 15
X. City of Elk River Business Subsidy Policy 16
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I. POLICY PURPOSE
For the purposes of tbis document, the term "City"sball include the Elk River City Council, Economic
Development Autbority, and Housing and Redevelopment Autbority.
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.
• To enhance and diversify the City of Elk River's economic base.
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• 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.
3. Housing Districts
• May be considered on a case-bv-case basis.
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
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agreements,letters of credit,personal guaranties, etca"d eteetefft.
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 469.17934,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.
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V. SUBSIDY AGREEMENT & REPORTING REQUIRMENTS
All developers/businesses receiving Tax Increment assistance from the City of Elk
River shall be subject to the provisions and requirements set forth by the Ci ,T's
Business Subsidy Policy as amended and Minnesota Statutes Sections 1161.993 to
1161995 (the "Minnesota Business Subsidy Law").
VI. APPLICATION PROCESS FOR TIF
1. Applicant submits the completed application along with a ft eft T-e ft f.da
$10,000 application deposit, to be refunded for any portions not utilized if the
tax increment project does not proceed. 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+1-,e that 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 Commercial-Industrial
and/or Housing Worksheets. The Application and Commercial-Industrial
and/or Housing Worksheets is are primarily designed to score the desirability of
the proposed aft iftdustr4 project. Industrial,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 Commercial-Industrial and/or Housing Worksheets 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.
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V4 VII. 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
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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:
D. SOURCES & USES
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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 $
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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) Na r-ef.,fa,.h1 Application deposit of$10,000,with any unused
portion to be refunded if project does not proceed.
1) 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
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V14 VIII. 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 Equityl 7.74%1 12.00%
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V44. IX. TAX INCREMENT FINANCING APPLICATION
REVIEW WORKSHEET - COMMERCIAL/INDUSTRIAL
PROJECTS
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 provisions set forth in Section III.
c) Demonstrates need for TIF with the butfor analysis.
-e d) Consistent with all city plans and ordinances.
€e) Serves at least two public purposes as defined in Section IV4 .
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 40-2. 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
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25,000+ 1
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
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X. TAX INCREMENT FINANCING APPLICATION
REVIEW WORKSHEET- HOUSING PROJECTS
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 provisions set forth in Section III.
c) Demonstrates need for TIF with the butfo°analysis.
d) Consistent with all city plans and ordinances.
e) Serves at least two public purposes as defined in Section IV44.
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. 20+ 5
Number of existing/retained jobs divided by 2. 15+ 4
Total 10+ 3
5+ 2
Less than 5 1
4. Wage Level of new jobs created/retained: Points:
Minimum hourly wage Over $25/hour 5
of jobs created/retained: $21-25/hour 4
$17-20/hour 3
$14-16/hour 2
Under$14/hour 1
5. Market Value/Tax Base Generation: Points:
Project will result in an estimated
market value per unit $135,000/Unit 5
(land and building)of $125,000/Unit 4
$115,000/Unit 3
$105,000/Unit 2
$ 95,000/Unit 1
6. Project provides housing that is restricted Points:
to persons 55 years and older:
5
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7. Project proposes rehabilitation of existing
housing, housing stock, and maximizes
utilization of existing infrastructure: Points:
4
8. Project proposes a location near existing
jobs, transportation, recreation, retail services,
social services, and schools: Points:
2
9. Type of Housing Project: Points:
100% Owner Occupied 2
Investment Property 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 38 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 38-30 points
Moderate 29-22 points
Low 21-13 points
Not Eligible 12-0 points
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City of k — Joint Special Meeting of the Elk River City Council
Wver and Housing and Redevelopment Authority
Held at Elk River City Hall
Monday, November 4, 2013
Members Present: Mayor Dietz, Councilmembers Westgaard,Wilson, Burandt, and
Motin
HRA Commissioners Chuba,Knester, and Toth
Members Absent: None
Staff Present: City Administrator Calvin Portner, Community Operations and
Development Deputy Director Manager Jeremy Barnhart,Director
of Economic Development Brian Beeman, Finance Director Tim
Simon, Community Operations and Development Director Suzanne
Fischer, and City Clerk Tina Allard
Call Meeting to Order
Pursuant to due call and notice thereof, the meeting of the Elk River City Council
was called to order at 5:50 p.m. by Mayor Dietz.
2. Pledge of Allegiance
The Pledge of Allegiance was recited.
3. Discuss Tax Increment Financing Housing Policy
Mr. Beeman presented the staff report. He introduced Springsted Consultant
Mikaela Hout.
Ms. Hout discussed the following:
• Role of an HRA/EDA.
• Mission/objectives for tax increment financing.
• Importance of establishing criteria/policies based on what the market will
support.
• Public purpose benefits.
• City's policy for use of Tax Increment Financing
• City's project qualifications.
• What drives the need for public financing assistance.
• What role the community wants to play to encourage development.
• Development efforts a city makes may affect the city's financial reputation.
Ms. Hout reviewed a survey that was sent our earlier to Council and Housing and
Redevelopment Authority members.
Joint Special City Council&HRA Minutes Page 2
November 4,2013
Councilmember Wilson questioned the minimum numbers and when they were
established.
Ms. Hout noted the policy was amended in May 2006 but adopted in 1991 and stated
staff could check on how reasonable the numbers are for current tax increment
financing projects.
Mayor Dietz questioned Council and HRA on whether and how TIF should be used
for housing.
Ms. Hout stated they should consider if it is their objective that TIF be used for
housing. If so,then the policy should have some language to allow the city to explore
options. If no,then this change should be made clear in policy. She further stated the
city could limit the types of housing they would like to consider, such as making it
available only for senior housing.
Commissioner Toth questioned the criteria for the scoring sheet and had concerns
with it being too flexible and setting precedence when allowing exceptions.
Ms. Hout stated the policy acts as general guidelines for the city and would be
flexible and dependent upon community need.
Mayor Dietz suggested the policy be flexible enough so each project can stand on its
own.
Councilmember Westgaard stated he is not opposed to keeping housing as a
consideration in TIF districts but he is not sure if the city should narrow down to
development versus a redevelopment scenario. He'd like to allow for TIF for
housing but put it as a lower priority over other types of applications. He'd like to
stay more on the conservative side from the risk component.
Commissioner Kuester stated the commission hasn't covered much with housing
and believes the current project is an opportunity to go to market when there is a
need in the community for senior housing. She stated the Mayfield Study backs up
the need for senior housing.
Commissioner Toth commented he likes the set up the city has with the MN Central
Housing Partnership. He agreed on the need for some housing work done in the
city. He stated TIF may be an avenue worth exploring but it needs to be done
carefully with a new evaluation criteria and looking to the long-term benefits for the
community.
Commissioner Chuba stated he feels it is important for the city to have life cycle
housing with a range of affordable housing for the young and elderly. He stated the
TIF financing should be flexible,but issues need to be worked out, such as how
much TIF to allow,how long it should be good for, and how much increase in value
is expected.
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Joint Special City Council&HRA Minutes Page 3
November 4,2013
Councilmember Motin stated he would not like to see TIF for housing purposes but
if the city votes to have it,then the developer would need to meet some other need
such as being in an area that also needs redevelopment or close to where it will help
a commercial area. He stated the Maxfield Study was done from the viewpoint of,if
you build it,they will come,rather than based on a community need. He also noted
there are other funding options available for developers.
Councilmember Burandt concurred with Commissioner Chuba regarding life cycle
housing and felt the need for having different types of availability for all income
levels. She felt there is a need to be flexible with the TIF policy and that TIF for
housing should be included. She stated there will be more seniors in the near future
and the city needs to plan for them coming back to their community.
Councilmember Wilson stated housing has not been addressed over the years by the
HRA. He stated he would like to address the city policy and limit TIF to senior
housing. He stated there is a gap between what Guardian Angels offers,which is low
income housing,versus affordable housing.
Roger Derrick stated people are already here and they need help now.
Commissioner Toth stated he has no issue with using TIF but the city needs well
maintained criteria.
Ms. Hout stated they would look at the changes that are needed to the existing policy
and prepare a new scoring worksheet based on the discussion tonight.
4. Adjournment
There being no further business,Mayor Dietz adjourned the meeting at 6:55 p.m.
John J. Dietz,Mayor
Tina Allard, City Clerk
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.Elk _ Joint Special Meeting of the Elk River City Council
River and Housing and Redevelopment Authority
Held at Elk River City Hall
Monday, December 2, 2013
Members Present: Mayor Dietz, Councilmembers Wilson,Motin,and Westgaard (6:27 p.m.)
HRA Commissioners Chuba,Kuester, and Toth
Members Absent: Councilmembers Burandt and Commissioner Kuester
Staff Present: City Administrator Calvin Portner, Community Operations and
Development Deputy Director Manager Jeremy Barnhart,Director of
Economic Development Brian Beeman, and Senior Administrative
Assistant/Recording Secretary Jennifer Johnson
I. Call Meeting to Order
Pursuant to due call and notice thereof,the meeting of the Elk River City Council was called
to order at 5:46 p.m.by Mayor Dietz.
2.1 Discuss Housing Survey and Develop Housing Tax Increment Financing
Scoring Worksheet
Mr.Beeman presented the staff report. He introduced Springsted Consultant Mikaela Huot,
who reviewed the draft application scoring worksheet with the Council and commission
members.
The following areas of the worksheet were discussed and adjustments suggested:
Under question 1 of the application worksheet, "The policy meets the criteria set forth in
Section IV of the city's Tax Increment Financing policy,"Ms.Huot reviewed the TIF policy
sections asked if the overall policy should be adjusted.She noted the policy as currently
worded remained in compliance with state statute.There were no comments regarding
question 1.
Under question 2, "Ratio of Private to All Public Investment in Project,"Councilmember
Motin suggested no points be awarded if the ratio was less than 2:1.Discussion ensued
regarding whether or not to assign 0 points versus 1 point if some aspects of a project don't
meet specific thresholds.Ms.Huot stated some projects may have areas that still qualify it as
a worthy,viable project,but may have areas that don't meet all thresholds even by assigning
0 points.It was decided to consider each project in a case-by-case basis.
Under question 3,"Job Creation in the City of Elk River,"Commissioner Chuba noted his
concerns with the number of jobs retained being viewed as significantly less valuable than
the new creation of jobs.He felt it more a penalty not attempt to retain businesses who may
wish to relocate. Councilmember Motin felt it important to remain consistent between both
industrial and housing project types.Ms. Huot agreed and noted other cities differ across the
board,depending upon whether or not retainage of current jobs is more important than
creating new jobs. It was decided to lower the number of existing/retained jobs divided by a
lower number instead of 10.
Joint Special City Council&HRA Minutes Page 2
December 2,2013
Under question 4,"Wage level of new jobs created/retained,"Councilmember Motin had
concerns with requiring a certain minimum number of jobs and felt an emphasis was placed
on higher paying jobs. Commissioner Toth asked if these jobs were considered temporary,
part time,or full time positions.Ms. Huot gave an example of a healthcare wage in an
assisted living or memory care setting would produce a full time,higher wage job than a
manufacturing type of job.She noted these figures come from the existing policy,which was
based upon old figures and should be adjusted to a more current salary market. She stated
the positions created would be on permanent,full time-equivalent positions.
Under question 5,"Market Value/Tax Base Generation,"Ms. Hout stated the focus should
be on per unit value,not cost to construct. Councilmember Motin stated he felt the range
from$95,000/unit to $135,000 was too narrow and suggested a higher price per unit would
also increase the quality of the unit. Commissioner Chuba noted values increase and decrease
based upon the economy, and if these values were set in stone,it would be difficult to have
gotten these figures about 4 years ago but felt a$40,000 variation isn't too far out of line in
this area. Councilmember Wilson asked if the building's other amenities were factored into
the unit cost.Ms.Huot stated it would depend upon how the assessor applied the value of
the unit along with any amenities the building offered such as a community room. She also
noted the project intention would also drive the per-price unit,such as if the project were an
income-based property.
Question 6, "Project provides housing that is restricted to persons 55 years and older"and
question 7,"Project provides that at least 30%of the total units are three-bedroom or more"
were discussed together.Ms. Huot asked the members to consider the focus of TIF and if it
be towards senior housing projects or a multi-unit housing projects. Councilmember Wilson
referenced the senior housing flowchart included in the staff report and asked if using the
term "55 years"was proper and should be reworded to "senior housing."Ms. Huot
recommended eliminating question 7 if the desire was to focus housing needs on senior
housing. She then recommended changing the points for question 6 to 5 points instead of 3
points if the project provided housing that is restricted to seniors. Commissioner Toth
expressed concerns with discrimination if only awarding points to senior housing.Ms.Huot
stated the project could still generate enough points to qualify for financing even if the
project wasn't specific for senior housing.
Question 8, "Project proposes rehabilitation of existing housing,housing stock, and
maximizes utilization of existing infrastructure"and question 9, "Project proposes a location
near existing jobs, transportation,recreation,retail services, social services, and schools"
were discussed together,and targeted areas of redevelopment. Commissioners Toth and
Chuba asked who determines the criteria of the meaning of the word"near"in question 9.
Ms.Huot states this was based upon comments received of the importance to position
housing in areas of the city where the use a sidewalk or transportation services were already
available. Commissioner Wilson felt this zeroes in on certain areas of the city that would
qualify for that type of a development but felt society had decent means of transportation
available to them.Mayor Dietz suggested changing the number of points in question 9 to 2
points instead of 4.
Question 10"Type of project"was discussed and the question was discussed if it matters if
the property is owner-occupied or rental. It was determined to leave the points as is.
Question 11 "Use"was discussed;the consensus was to eliminate question 11.
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Joint Special City Council&HRA Minutes Page 3
December 2,2013
Councilmember Westgaard suggested removing question 11 and suggested incorporating
into question 10 or 11 more areas of use, such as mixed use or owner-occupied housing.
Question 12"Likelihood that the project will result in unsubsidized, spin-off development"
was discussed. Question 13 "Bonus points"was discussed.Both questions were consistent
with current policy.
Ms.Huot summarized that based upon the comments this evening,the total points would
adjust moderately from 45 to 38.
After discussion,Mayor Dietz asked what the next steps would be.
Ms.Huot stated she will make the final adjustments to the application worksheet that were
discussed,make any final adjustments to the policy,and bring back to both the HRA and
EDA for final review and approval. Once that is completed,the Council will have the final
say in reviewing and approving the final policy and worksheet.
There was some question as to the need for both HRA and EDA to review the final
application and policy revisions.It was the consensus of both the Council and Authority to
have the HRA and EDA review before bringing back to Council for final approval.
3. Adjournment
There being no further business,Mayor Dietz adjourned the meeting at 6:40 p.m.
Minutes prepared by Jennifer Johnson.
John J.Dietz,Mayor
Tina Allard,City Clerk
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Ells -Vft
_ Request for Action
River
To Item Number
Housing and Redevelopment Authority 7.7
Agenda Section Meeting Date Prepared by
General Business February 3,2014 Brian Beeman,Director of Economic
Development
Item Description Reviewed by
Housing TIF Policy Jeremy Barnhart,Deputy Director, CODD
Reviewed by
Action Requested
Review and approve by motion, the Tax Increment Financing Policy and recommend to the City Council
on same.
Background/Discussion
At the December 2,2013 joint City Council/HRA workshop,it was suggested that both the HRA and
FDA review the current Tax Increment Financing Policy before the City Council approves the final
policy. Springsted,the city's financial consultant, has updated the policy to reflect the comments and
direction from the two joint workshops.A copy of the proposed updated policy is attached. (Updated
TIF Policy) Mikaela,who represents Springsted will be available for any questions.
Financial Impact
N/A
Attachments
• Updated TIF Policy
• Joint Workshop Minutes dated Nov 4, 2013
• Joint Workshop Minutes dated Dec 2,2013
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