4.5. SR 08-28-2000City of
E
MEMORANDUM
IT]~
River
Mayor and City Council
FROM:
DALE:
Marc Nevinski, Assistant Director of
Economic Development
August 28, 2000
SUBJECT:
Consider Resolution Approving TIF District No.
21: SoftPac, Inc. / Opus Northwest
/ssue
The City Council held a public hearing on the establishment of TIF District No. 21
at its August 21, 2000 meeting. However, consideration of a resolution approving
the TIF district was tabled until public concerns about the project could be
addressed. Staff requests that the council now consider that resolution.
Background
TIF 21 has been proposed to assist in financing the development of the Emmerich
site in the West Business Park. The proposed project will include the purchase of
land and the construction of a 73,000 sf manufacturing facility by Opus Northwest,
LLC. The facility will be leased to SoftPac, Inc. (Formerly ANC) who will produce,
package and distribute various juice drinks in boxes or pouches. SoftPac anticipates
creating 60-80 jobs with wages of $13-$18 per hour, plus benefits. Many of the
positions will be technically oriented.
The TIF plan for TIF District 21 proposes to reimburse Opus Northwest on a pay-as-
you-go basis for land acquisition costs in the amount of $700,000 plus eight percent
interest. Initial estimates by staff projected that the project would generate enough
tax dollars to reimburse the land costs in a four to five year period. However,
following the county assessor's review of the site plans, it is now anticipated that it
will take eight and one half years to fully reimburse the land costs. Changes in
market values, tax rates, and/or expansions will impact the actual length of the
district, which cannot exceed nine years. It is estimated that the project will
generate an average of $136,000 in annual increment over the life of the district.
The Business Subsidy Law requires that a project meet at least one public purpose
other than an increase in tax base. Staff has identified four public purposes satisfied
by this project:
1. Enhancement and diversification of the City's industrial composition.
2. Contribution towards fulfillment of the City's Strategic Plan for Economic
Development.
4.5.
13065 Orono Parkway · P.O. Box 490 · Elk River, MN 55330 · TDD & Phone (763) 441-7420 · Fax (763) 441-7425
3. Creation of jobs.
4. Encouragement of additional private development in the area.
Additionally, the Business Subsidy Law requires that goals (generally in terms of job
creation) be established for any project that receives financial assistance. In
addition to the construction of a 73,000 sf manufacturing facility in the West
Business Park, SoftPac, Inc. represents as its goal the creation within a two-year
period of 60 full time equivalent jobs with wages in excess of $10.00 per hour, (the
minimum threshold required by the City's TIF policy) exclusive of benefits. Should
the job goals not be achieved within the two-year period, the Business Subsidy Law
requires that the assistance be repaid on a prorated basis, although a one-year
extension is permitted under certain circumstances.
Action Requested
Staff requests that the City Council consider the attached resolution approving Tax
Increment Financing Plan for, and the establishment of, TIF District No. 21.
Attachments
· ED^ resolution recommending the Council approve the creation of TIF
District No. 21
· Tax Increment Financing Plan for TIF District No. 21
· Resolution approving the creation of TIF District No. 21
ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY
CITY OF ELK RIVER
SHERBURNE COUNTY
STATE OF MINNESOTA
RESOLUTION 00-2
RESOLUTION OF THE ELK RIVER ECONOMIC DEVELOPMENT AUTHROITY
RECOMMENDING THAT THE CITY COUNCIL ADOPT THE TAX INCREMENT
FINANCING PLAN FOR THE CREATION OF TIF DISTRICT 2].
WHEREAS, Tax Increment Financing has been proposed for use in the
acquisition of land for private industrial development in the West Business Park;
and
WHEREAS, the project is proposed at a site which has been identified for
industrial development and which the Economic Development Authority has
been actively marketing for a two and one half year period; and
WHEREAS, the proposed project meets the Elk River Economic
Development Authority's requirements for the use of Tax Increment Financing as
stated in the Tax Increment Financing Policies; and
WHEREAS, the proposed project contributes to the fulfillment of the City's
Strategic Plan for Economic Development by promoting development in the
West Business Park, expanding and diversifying the City's industrial base, and
creating opportunities for quality employment in the Elk River area..
THEREFORE BE IT RESOLVED, that the Elk River Economic Development
Authority recommends that the Elk River City Council approve at its August 21,
2000 meeting, along with the subsequent Modifications to Development District
No. 1. the Tax Increment Financing Plan for the creation of Tax Increment
Financing District No. 21.
Approved this day of August 14, 2000. /~'~ jl ~ ~
"~
' yet, Chair
A1EEST'..~
C~"therir~e Mehelich, Executive Director
MODIFICATIONS
to the
Development Program
for
DEVELOPMENT DISTRICT NO. 1
and the establishment of the
tax increment financing plan
for
TAX INCREMENT FINANCING DISTRICT NO. 21
(An Economic Development District)
City of Elk River
Sherburne County
City of Elk River, Minnesota
Prepared: July 19, 2000
Revised: August 9, 2000
Adopted: August 28, 2000
Prepared by:
City of Elk River
13065 Orono Parkway
Elk River Minnesota 55330
(612) 441-7420
SECTION I.
SECTION 1I.
Section A.
Section B.
Section C.
Section D.
Section E.
Section F.
Section G.
Section H.
Section I.
Section J.
Section K.
Section L.
Section M.
Section N.
Section O.
Section P.
Section Q.
Section R.
Section S.
Section T.
Section U.
Section V.
Section W.
Section X.
Section Y.
Section Z.
Section AA.
Section AB.
Section AC.
EXHIBIT A
EXHIBIT B
EXHIBIT C
TABLE OF CONTENTS
TAX INCREMENT FINANCING PLAN FOR
TAX INCREMENT FINANCING DISTRICT NO. 21
MODIFIED DEVELOPMENT PROGRAM FOR DEVELOPMENT DISTRICT ........ I-1
TAX INCREMENT FINANCING PLAN FOR TAX INCREMENT FINANCING
DISTRICT NO. 21
Statutory Authority ............................................................................................... II-1
Statement of Objectives ....................................................................................... 11-1
Development Program Overview ......................................................................... 1I-2
Description of Property in District No. 21 ........................................................... 11-2
Classification of the Tax Increment Financing District ....................................... 11-2
Property To Be Acquired ...................................................................................... I1-3
Estimate of Costs - Use of Funds ......................................................................... 11-4
Estimated Amount of Loan/Bonded Indebtedness ............................................... 11-5
Sources of Revenue .............................................................................................. 11-5
Original Tax Capacity and Tax Rate .................................................................... 11-5
Amount of Captured Tax Capacity and Tax Rate ................................................ I1-5
Duration of the District ........................................................................................ 11-6
Estimated Impact on Other Taxing Jurisdictions ................................................. I1-6
Modifications of the Tax Increment Financing District ....................................... 11-7
Administrative Expenses ...................................................................................... 11-7
Duration of Tax Increment Financing Districts .................................................... 11-7
Limitation on Qualification of Property in Tax Increment District
Not Subject to Improvement ................................................................................ 11-8
Limitation on the Use of Tax Increment .............................................................. 11-8
Notification of Prior Planned Improvements ....................................................... 11-8
Excess Tax Increments ......................................................................................... 11-9
Requirement for Agreements with the Developer ................................................ 11-9
Assessment Agreements ....................................................................................... 1I-9
Administration of District and Maintenance of the Tax Increment Account ..... 11-10
Financial Reporting Requirements ..................................................................... 11-10
Municipal Approval ........................................................................................... 11-10
County Road Costs ............................................................................................. 11-12
Other Limitations on the Use of Tax Increment ................................................. 11-12
Reduction in State Tax Increment Financing Aid .............................................. 11-12
Summary ............................................................................................................ 11-13
Boundary Map of Development District No. 1 .................................................... A-1
Boundary Map of Tax Increment Financing District No. 21 ............................. B-1
Cashflow Analysis and Base Value Analysis ....................................................... C-1
SECTION I.
MODIFIED DEVELOPMENT PROGRAM
FOR DEVELOPMENT DISTRICT NO. 1
MODIFICATION TO SECTION I:
Current plans for this development project are to build a 73,000 square foot industrial facility (TIF
District No. 21). The project is proposed to include a maximum of $1,353,000 of Tax Increment
Financing, as summarized in Section G of the TIF Plan for the District. Additionally, the
Development Program for Development District No. 1 is proposed to be modified as per section 2
of Tax Increment Financing Plan 21.
Development Program for Development District NO. 1 ....................................................................................................................................................................................... Page I-I
SECTION II.
TAX INCREMENT FINANCING PLAN FOR
TAX INCREMENT FINANCING DISTRICT NO. 21
A. STATUTORY AUTHORITY
Within the City of Elk River (the "City") there exist areas where public involvement is necessary to
cause development or redevelopment to occur. The City faces various existing land use problems
that require corrective action by the City before development by private enterprise becomes
financially feasible or desirable. The City is authorized to establish a tax increment district pursuant
to Minnesota Statutes~ Section 469.174 to 469.179, inclusive, as amended, to assist in financing
public costs related to this project. Tax increments are derived only from the increased amount of
taxes that are paid on a parcel of property after the construction of a new structure on the parcel.
Tax increment districts encompass the parcels from which tax increments are paid for a period of
time.
Below is the Tax Increment Financing Plan (the "Plan") for Tax Increment Financing District No. 21
("District No. 21"). Other relevant information is contained in the Development Program for
Development District No. 1, originally adopted on April 1, 1985 and subsequently modified.
Development District No. 1 includes the area proposed for District No. 21.
B. STATEMENT OF OBJECTIVES
District No. 21 consists of 1 parcel of land and adjacent and internal rights-of-way.
The current plans for the new development on the site include a 73,000 square foot industrial
facility.
District No. 21 is expected to achieve many of the objectives set forth in the Development Program
for Development District No. 1 in regard to land use. These objectives include:
Provide impetus for industrial development by constructing the public facilities
necessary to make such development possible;
Increase employment opportunities in the City by encouraging additional industrial
development.
Tax Increment F'mancing District No. 21 Page II-1
o
Provide adequately serviced industrial areas of the City to accommodate desirable
users;
Preserve and enhance the tax base of the City;
o
Preserve and enhance the quality of life of the City; and,
°
Provide maximum opportunity, consistent with the needs of the City for
development by private enterprise.
C. DEVELOPMENT PROGRAM OVERVIEW
Property to be Acquired - Property located within District No. 21, which is further
described in this Plan, will be acquired by the Developer, Opus Northwest, LLC,
and all or a portion of those costs will be reimbursed by TIF or other revenues.
The City may perform or provide for some or all necessary relocation, removal of
substandard structures, site preparation, grading, demolition, construction of
required utilities and public parking/streets work within District No. 21.
o
District No. 21 contains property zoned BP - Business Park. All development in the
area will conform to applicable state and local codes and ordinances.
D. LEGAL DESCRIPTION OF PROPERTY IN DISTRICT NO. 21
TIF District No. 21 will encompass the parcel identified below in addition to all adjacent and
interior right-of-ways:
Country Crossing Business Center Third Addition, Lot 1, Block 1 (PIN 75 - 616 - 0020)
The City reserves a right to approve all or a portion of the area of the parcel listed as being
designated for District No. 21.
See the map in Exhibit B for further information on the location of District No. 21.
E. CLASSIFICATION OF THE TAX INCREMENT FINANCING DISTRICT
The City, in determining the need to create a tax increment financing district in accordance with
Minnesota Statutest Section 469.1 74 to 469.1 79, as amended, inclusive, find that
District No. 21 to be established is an economic development district pursuant to Minnesota
Statutes, Section 469.1 74, Subdivision 12 and 469.176 Subdivision 4c as defined below:
Subd. 12. "Economic Development district" means a type of tax increment financing district
which consists of any proiect, or portions of a proiect, not meeting the requirements
found in the definition of redevelopment district, renewal and renovation district, soils
condition district, mined underground space development district, or housing district,
but which the City finds to be in the public interest because:
(1) it will discourage commerce, industry, or manufacturing from moving their
Tax Increment Financing District No. 21 Page II-2
operations to another state or municipality; or
(2) it will result in increased employment in the state; or
(3) it will result in preservation and enhancement of the tax base of the state.
Subd. 4c. Economic development districts. (a) Revenue derived from tax increment from an
economic development district may not be used to provide improvements, loans, subsidies,
grants, interest rate subsidies, or assistance in any form to developments consisting of
buildings and ancillary facilities, if more than 15 percent of the buildings and facilities
(determined on the basis of square footage) are used for a purpose other than:
(I) the manufacturing or production of tangible personal property, including processing
resulting in the change in condition of the property;
(2) warehousing, storage, and distribution of tangible personal property, excluding retail
sales;
(3) research and development related to the activities listed in clause (1) or (2);
(4) telemarketing if that activity is the exclusive use of the property;
(5) tourism facilities; or
(6) space necessary for and related to the activities listed in clause (1) to (5).
The parcel has been investigated by City staff and consultants and District No. 21 has been found
to meet all requirements of an economic development district. Data on file regarding the
qualifications of the economic development tax increment financing district.
o
.°
District No. 21 consists of 1 parcel.
District No. 21 does not meet the requirements of any other Tax Increment Financing
District.
District No. 21 will discourage commerce, industry, or manufacturing from moving their
operations to another state or municipality.
District No. 21 will result in increased employment in the state.
District No. 21 will result in preservation and enhancement of the tax base of the state.
The facility will qualify specifically under Subd. 4c. (1), (2), (3), and (6), as indicated in
Section E of this Plan, as approximately ninety percent of its square footage will be used
for manufacturing purposes.
F. PROPERTY TO BE ACQUIRED
The Developer will acquire all parcels within District No. 21. It is anticipated that the city of Elk
river will enter into an agreement to reimburse the developer for all or part of the costs associated
with the purchase of the property.
Tax Increment F'mancing Dis~ict No. 21 Page II-3
G. ESTIMATE OF PUBLIC COSTS- USE OF FUNDS
The estimated use of funds associated with District No. 21 are outlined in the following line item
budget:
USE OF FUNDS TOTAL
Qualified Costs:
Land Acquisition
Site Improvements
Public Improvements
Other Development Costs
Interest (8%)
Administration (up to 10%)
$ 700,000
$ 1 78,000
$ 0
$ 0
$ 450,000
$ 25,000
TOTAL: $1,353,000
The City reserves the right to modify actual line item dollar amounts at any time throughout the
duration of the District, as long as it does not change the Total as indicated above.
Capitalized interest and other interest payments on tax increment bonds and obligations are also
considered to be public costs in addition to the above referenced estimate of public costs. Interest
payments and capitalized interest will be determined at the time of issuance of the bonds and
obligations and are dependent on interest rates in effect at such time. In addition to above
mentioned costs, administration costs to cover City staff and overhead and various consulting fees
in an amount not to exceed 10% of total tax increment will be funded with tax increments from
District No. 21.
This provision does not obligate the City to incur debt. The City will issue bonds, including tax
increment revenue obligations, only upon determination that such action is in the best interest of
the City. Such bonds or other obligations would bear interest at a rate between five percent and
nine percent per annum depending on market conditions and other characteristics. The City may
also finance the activities to be undertaken pursuant to the Tax Increment Financing Plan through
loans from funds of the City or to reimburse the developer on a ~pay-as-you-go" basis for eligible
activities paid for by the developer.
Any funds to be expended outside the boundaries of District No. 21, but within the boundaries of
Development District No. 1, will be less than 20 percent of total tax increment generated by
District No. 21, including administrative costs. Subject to that limitation, and the limitations as
described in Section R., the tax increment from District No. 21 may be used to pay for public costs
outlined in the Development Program for Development District No. 1 (subject to the limitations as
described in this Plan).
Tax Incremeat F'mancing District No. 21 Page 1I-4
H. ESTIMATED AMOUNT OF LOAN/BONDED INDEBTEDNESS
The City has the ability to issue a revenue bond, general obligation bond, or other type of
obligation in one or more series for a maximum amount of $700,000 to finance any or all of the
Total Estimated Public Costs authorized to be paid under Section G of this Plan.
I. SOURCES OF REVENUE
The anticipated source of revenue to be used to finance public costs associated with the public
development projects and objectives as stated in Development District No. 1 is tax increment
generated as a result of the taxation of the land and improvements in District No. 21. Tax
increment financing refers to a funding technique that utilizes increases in valuation and the
property taxes attributable to new development to finance, or assist in the financing of, public
development costs. Additional sources of revenue may include, but are not limited to, investment
income and land sales proceeds. This does not preclude the City or the developer from using other
funds, at its discretion, to pay such costs.
SOURCES OF FUNDS TOTAL
Tax Increment
Interest
Local Contribution
Other Revenue Sources
$1,230,000
123,000
TOTAL $ 1,353,000
J. ORIGINAL TAX CAPACITY AND TAX RATE
Pursuant to Minnesota Statutes Section 469.174 Subdivision 7 and Section 469.177, Subdivision 1,
the original Net Tax Capacity for District 21 is based on the value placed on the property by the
assessor in 2000 for taxes payable 2001.
The original local tax rate used for the purpose of the projecting cashflow for District No. 21 is the
tax rate of 119.448% for taxes payable in 2000. The certified original local tax rate for District No.
21 will be the tax rate for taxes payable in 2001.
K. AMOUNT OF CAPTURED TAX CAPACITY AND TAX RATE
Pursuant to Minnesota Statutes~ Section 469.174 Subdivision 4 and Minnesota Statutes~ Section
469.177, Subdivision If and Subdivision 2, the estimated Captured Net Tax Capacity (CTC) of
District No. 21, upon completion of Phase I of the project, will annually approximate tax increment
revenues as shown in the table below. The City requests 100 percent of the available increase in
tax capacity for repayment of debt and current expenditures, beginning in the tax year payable
2002.
The original tax capacity and project tax capacity are estimated at current market values and class
rates to be the total amount when all development is in place and uses of the property have
changed.
Tax Increment F'mancing District No. 21 Page II-5
Original Estimated Project Tax Capacity (upon completion of project)
less: Original Tax Capacity
Estimated Captured Tax Capacity
$130,046
24t442
105,604
Estimated Annual Tax Increment (CTC x Tax Rate)
$126,141
L. DURATION OF THE DISTRICT
Pursuant to Minnesota Statutes, Section 469.175, Subdivision lb, the duration of District No. 21
must be indicated within the Plan. The duration of District No. 21 will be no more than eight years
after receipt by the City of the first increment which is expected in 2002. Thus it is estimated that
District No. 21, including any modifications of the Plan for subsequent phases or other changes,
would terminate at the end of the year 2010. The City reserves the right to decertify District No. 21
prior to the legally required date.
M. ESTIMATED IMPACT ON OTHER TAXING JURISDICTIONS
The estimated impact on other taxing jurisdictions assumes construction would have occurred
without the creation of District No. 21. After careful consideration and analysis, the City has
determined that construction would not occur without the creation of District No. 21. If the
construction is a result of tax increment financing, the impact is $0 to other entities.
Notwithstanding the fact that the fiscal impact on the other taxing jurisdictions is $0 due to the fact
that the construction would not have occurred without the assistance of the City, the following
estimated impact of District No. 21 would be as follows if the "but for" test was not met:
ENTITY
Sherburne County
City of Elk River
School District No. 728
IMPACT ON TAX BASE
ENTITY'S
TOTAL NET
TAX CAPACITY
ESTIMATED
CAPTU RE D
TAX CAPACITY
59,143,714
13,208,236
17,985,332
105,604
105,604
105,604
% OF CAPTURED
TAX CAPACITY
TO ENTITY TOTAL
.0018%
.0080%
.0059%
ENTITY
Sherburne County
City of Elk River
School District No. 728
Other
TOTAL
CURRENT
TAX RATE
.31468
.3O248
.56O27
.01705
1.19448
IMPACT ON TAX RATES
PERCENT
OF TOTAL
CAPTURED
TAX CAPACITY
.26
.25
.47
.01
105,604
105,604
105,604
105,604
1.00
POTENTIAL
TAXES
33,231
31,943
59,167
lt801
126,142
Tax Increment Financing District No. 21 Page II-6
The estimates listed above display captured tax capacity when all construction is completed. The
tax rates and tax capacities are the payable 2000 figures for all jurisdictions. District No. 21 will be
certified under rates for tax year payable 2001 which were unavailable at the time of preparation of
this Plan.
N. MODIFICATIONS OF THE TAX INCREMENT FINANCING DISTRICT
In accordance with Minnesota Statutest Section 469.175, Subdivision 4, any reduction or
enlargement of the geographic area of the project or tax increment financing district, increase in
amount of bonded indebtedness to be incurred, including a determination to capitalize interest on
debt if that determination was not a part of the original plan, or to increase or decrease the amount
of interest on the debt to be capitalized, increase in the portion of the captured tax capacity to be
retained by the City, increase in total estimated tax increment expenditures or designation of
additional property to be acquired by the City shall be approved upon the notice and after the
discussion, public hearing and findings required for approval of the original plan. The geographic
area of a tax increment financing district may be reduced, but shall not be enlarged after five years
following the date of certification of the original tax capacity by the county auditor or by
approximately August 2004. If an economic development district is enlarged, the reasons and
supporting facts for the determination that the addition to the district meets the criteria of Sections
469.174, subdivision 12, must be documented. The requirements of this paragraph do not apply if
(1) the only modification is elimination of parcel(s) from the project or district and (2)(A) the current
tax capacity of the parcel(s) eliminated from the district equals or exceeds the tax capacity of those
parcel(s) in the district's original tax capacity or (B) the City agrees that, notwithstanding Sections
469.177, subdivision 1, the original tax capacity will be reduced by no more than the current tax
capacity of the parcel(s) eliminated from District No. 21. The City must notify the County Auditor
of any modification that reduces or enlarges the geographic area of District No. 21 or Development
District No. 1.
Modifications to the District No. 21, in the form of a budget modification or an expansion of the
boundaries, will be recorded in this Plan.
O. LIMITATION ON ADMINISTRATIVE EXPENSES
Minnesota Statutest Section 469.174, Subdivision 14 and Minnesota Statutes, Section 469.176,
Subdivision 3, provide limitations on administrative expenses.
P. DURATION OF TAX INCREMENT FINANCING DISTRICTS
Pursuant to Minnesota Statutes~ Section 469.176, Subdivision l(d), no tax increment shall be paid
to the City three years from the date of certification of the ONTC by the County Auditor unless
within the three-year period (1) bonds have been issued pursuant to Section 469.178, or in aid of a
project pursuant to any other law, except revenue bonds issued pursuant to Chapter 469.152 to
469.165, prior to the effective date of the Act; or (2) the City has acquired property within the
district; or (3) the City has constructed or caused to be constructed public improvements within the
district.
Tax Incre~nt Financing District No. 21 Page I]-7
qo
LIMITATION ON QUALIFICATION OF PROPERTY IN TAX INCREMENT DISTRICT NOT
SUBJECT TO IMPROVEMENT
Pursuant to Minnesota Statutes, Section 469.176, Subdivision 6,
If, after four years from the date of certification of the original tax capacity of the tax increment
financing district pursuant to Minnesota Statute& Section 469. 177, no demolition, rehabilitation
or renovation of property or other site preparation, including qualified improvement of a street
adjacent to a parcel but not installation of utility service including sewer or water systems, has
been commenced on a parcel located within a tax increment financing district by the city or by
the owner of the parcel in accordance with the tax increment financing plan, no additional tax
increment may be taken from that parcel and the original tax capacity of that parcel shall be
excluded from the original tax capacity of the tax increment financing district. If City or the
owner of the parcel subsequently commences demolition, rehabilitation or renovation or other
site preparation on that parcel including improvement of a street adjacent to that parcel, in
accordance with the tax increment financing plan, the City shall certify to the county auditor in
the annual disclosure report that the activity has commenced. The county auditor shall certify
the tax capacity thereof as most recently certified by the commissioner of revenue and add it to
the original tax capacity of the tax increment financing district. The county auditor must enforce
the provisions of this subdivision... For purposes of this subdivision, qualified improvements are
limited to (1) construction or opening of a new street, (2) relocation of a street, and (3)
substantial reconstruction or rebuilding of an existing street.
R. LIMITATION ON THE USE OF TAX INCREMENT
Pursuant to Minnesota Statutes., 469.1763, Subd. 2, at least 80 percent of the revenues derived
from tax increments from an economic development district must be expended on activities in the
district. These costs include demolition of structures, grading, site preparation, clearing of the land
and installation of utilities, roads, sidewalks, and parking facilities for the site.
The revenues shall be used to finance or otherwise pay public redevelopment and economic
development costs allowed by law. These revenues shall not be used to circumvent any levy limit
law. No revenues derived from tax increment shall be used for the construction or renovation of a
municipally owned building used primarily and regularly for conducting the business of the
municipality; this provision shall not prohibit the use of revenues derived from tax increments for
the construction or renovation of a parking structure, a commons 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 municipality.
Tax increments generated in Tax Increment Financing District No. 21 will be paid by Sherburne
County to the City of Elk River for the Tax Increment Fund of said District No. 21. The City will
pay to the developer annually an amount not to exceed an amount as specified in a developer's
agreement to reimburse the costs of land acquisition and site preparation. Remaining increment
funds will be used for City administration (up to 10 percent) and the costs of public improvement
activities outside District No. 21 (subject to the limitations as described in this Plan).
S. NOTIFICATION OF PRIOR PLANNED IMPROVEMENTS
Pursuant to Minnesota Statutest Section 469.1 77, Subdivision 4, the City has reviewed the area to
be included in District No. 21 and found no properties for which building permits have been
issued during the 18 months immediately preceding approval of the Plan by the City. If a building
Tax Increment Fiaancing District No. 21 Page II-8
permit had been issued within the 18 month period preceding approval of the plan by the City, the
county auditors shall increase the original tax capacity of the district by the valuation of the
improvements for which the building permit was issued.
T. EXCESS TAX INCREMENTS
Pursuant to Minnesota Statutes~ Section 469.176, Subdivision 2, in any year in which the tax
increment exceeds the amount necessary to pay the costs authorized by the tax increment plan,
including the amount necessary to cancel any tax levy as provided in Minnesota Statutes, Section
475.61, Subdivision 3, the City shall use the excess amount to do any of the following:
2.
3.
4.
prepay the outstanding bonds;
discharge the pledge of tax increment therefore;
pay into an escrow account dedicated to the payment of such bond; or
return the excess to the County Auditor for redistribution to the respective taxing
jurisdictions in proportion to their tax capacity rate as provided in Minnesota
Statutes, Sections 469.176, Subdivision 2.
The City may also modify this Plan to authorize additional costs within 5 years of date of
certification.
U. REQUIREMENT FOR AGREEMENTS WITH THE DEVELOPER
The City will review any Developer's proposal to determine its conformance with the
Development Program and with applicable municipal ordinances and codes. To facilitate this
effort, the following documents may be requested for review and approval: site plan, construction,
mechanical, and electrical system drawings, landscaping plan, grading and storm drainage plan,
signage system plan, and any other drawings or narrative deemed necessary by the City to
demonstrate the conformance of the development with City plans and ordinances. The City may
use the Agreement to address other issues related to the development.
The requirements to be imposed upon the Developer and the City's exact participation in the
project will be negotiated as part of the development Agreement between the City and the
Developer.
V. ASSESSMENT AGREEMENTS
Pursuant to Minnesota Statutest Section 469.177, Subdivision 8, the City may enter into an
agreement in recordable form with the owner of property within the tax increment financing district
which establishes a minimum market value of the land and improvements for the duration of
District No. 21. The assessment agreement shall be presented to the county assessor who shall
review the plans and specifications for the improvements constructed, review the market value
assigned to the land upon which the improvements have been or will be constructed and, so long
as the minimum market value contained in the assessment agreement appear, in the judgment of
the assessor, to be a reasonable estimate, the assessor may certify the minimum market value
agreement.
Tax Increment Ymancing District No. 21 Page II-9
W. ADMINISTRATION OF DISTRICT AND MAINTENANCE OF THE TAX INCREMENT
ACCO U NT
Administration of District No. 21 will be handled by the City. The tax increment received as a
result of increases in the tax capacity of District No. 21 will be maintained in a special fund
separate from all other municipal funds and expended only upon sanctioned municipal activities
identified in the tax increment financing plan.
X. FINANCIAL REPORTING REQUIREMENTS
Pursuant to the applicable sections of Minnesota Statutes, the City will report on TIF District No.
21.
Y. MUNICIPAL APPROVAL
The City of Elk River hereby makes the following findings:
Finding that the Tax Increment Financing District No. 21 is an economic development
district as defined in Minnesota Statutest Section 469.174, Subd. 12.
District No. 21 consists of one parcel of property. The District is in the public interest
because it will result in increased employment in the State, and it will result in preservation
and enhancement of the tax base of the State.
Finding that the proposed development, in the opinion of the City' Council, would not
occur solely' through private investment within the reasonably' foreseeable future and that
the increased market value of the site that could reasonable 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. 21 permitted by' the
Tax Increment Financing Plan.
Due to the high cost of development 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. 21 and the use of tax increments has been performed
and is presented below.
Tax Incrermnt Financing District No. 21 Page II-10
BUT/FOR
ANALYSIS
;urrent Market Value - Est.
lew Market Value - Est.
Difference
Present Value of Increment at
Difference
Value Likely to Occur Without TIF is Less Than:
8.00%
763,00C
3,869,00C
3,106,00C
843,51
2,262,48S
2,262,48S
Such analysis is included in the Tax Increment Financing Plan and shows that the estimated
market value of the proposed development (less the indicated subtractions) after
discounting by the present value of the tax increment is significantly greater than the
increase in the market value estimated to result from other development that could be
expected to occur without the use of tax increment after the present value of the projected
tax increment for the maximum duration of District No. 21 permitted by the Tax Increment
Financing Plan.
The amount of TIF proposed for use in this project to assist with land acquisition costs is
commensurate with the actual market value of the property. This is evidenced by an
exclusive marketing agreement entered into by the Elk River Economic Development
Authority and Country Ridge, Inc. on February 2, 1998.
Finally, the developer has been presented with an option to undertake the project at an out-
of-state location. Without the use of Tax Increment Financing for the purposes stated within
this plan, the proposed project will not occur at the site. Nor is it foreseeable that other
development of similar scope and magnitude will occur at the site solely with private
investment in the.
Finding that the Tax Increment Financing Plan for District No. 21 conforms to the general
plan for the development or redevelopment of the municipality as a whole.
The site is appropriately zoned. The Tax Increment Financing Plan will be reviewed by the
Planning Commission on July 25, 2000, for conformance with the general development
plan of the City.
Finding that the Tax Increment Financing Plan for Tax Increment Financing District No. 21
will afford maximum opportunity, consistent with the sound needs of the City as a whole,
for the development of Development District No. 1 by private enterprise.
The establishment of Tax Increment Financing District No. 21 will result in increased
employment for the City and State of Minnesota, increased tax base of the State, and add a
high quality development to the City.
Additional findings may be set forth in the Authorizing Resolution of the City.
Tax Incrermnt F'mancing Dis~ict No. 21 Page II-11
Z. COUNTY ROAD COSTS
Pursuant to Minnesota Statutes, Section 469.175, Subdivision la, the county board may require the
City to pay for all or part of the cost of county road improvements if the proposed development to
be assisted by tax increment will, in the judgment of the county, substantially increase the use of
county roads requiring construction of road improvements or other road costs and if the road
improvements are not scheduled within the next five years under a capital improvement plan or
other county plan.
The improvements outlined in the Plan serve as notice to the county that the development of the
commercial facility will be assisted with tax increment. In the opinion of the City, and consultants,
the proposed development will have little or no impact upon county roads. If the county elects to
use increments to improve county roads, it must notify the City within thirty days of receipt of this
plan.
AA. OTHER LIMITATIONS ON THE USE OF TAX INCREMENT
General Limitations. All revenue derived from tax increment shall be used in accordance
with the tax increment financing plan.
Pooling Limitations. At least 80 percent of tax increments from District No. 21 must be
expended on activities in District No. 21 or to pay bonds, to the extent that the proceeds of
the bonds were used to finance activities within said district or to pay, or secure payment
of, debt service on credit enhanced bonds. Not more than 20 percent of said tax
increments may be expended, through a development fund or otherwise, on activities
outside of District No. 21 except to pay, or secure payment of, debt service on credit
enhanced bonds. For purposes of applying this restriction, all administrative expenses must
be treated as if they were solely for activities outside of District No. 21.
o
Five Year Limitation on Commitment of Tax Increments. Tax Increments derived from
District No. 21 shall be deemed to have satisfied the 80 percent test set forth in paragraph
(2) above only if the five year rule set forth in Minnesota Statues, Sections 469.1763,
subdivision 3, has been satisfied; and beginning with the sixth year following certification
of District No. 21, 80 percent of said tax increments that remain after expenditures
permitted under said five year rule must be used only to pay previously commitment
expenditures or credit enhanced bonds as more fully set forth in Minnesota Statues,
Sections 469.1763, subdivision 4.
AB. REDUCTION IN STATE TAX INCREMENT FINANCING AID
Pursuant to Minnesota Statues, Section 273.1399, for tax increment financing districts for which
certification was requested after April 30, 1990, a municipality incurs a reduction in state tax
increment financing aid (RISTIFA) applied to the municipality's Local Government Aids (LGA) first
and, Homestead and Agricultural Credit Aids (HACA) second, in an amount equal to a formula
based upon the equalized qualifying captured tax capacity (QCTC) of the tax increment financing
district.
Tax Increment F'mancing District No. 21 Page II-12
Pursuant to Minnesota Statutest Section 273.1399, Subdivision 6, for tax increment financing
districts certified after June 30, 1994, the City may choose an option to the LGA-HACA penalty. A
tax increment financing district is exempt if the City elects at the time of approving the tax
increment financing plan to make a qualifying local contribution. To qualify for the exemption in
each year, the City must make a qualifying local contribution to the project of a certain percentage.
The local contribution for an economic development district is 10 percent. The maximum local
contribution for all districts in the City is limited to two percent of the City's net tax capacity.
The amount of the local contribution must be made out of unrestricted money of the City, such as
the general fund, a property tax levy, or a federal or a state grand-in-aid which may be spent for
general government purposes. The local contribution may not be made, directly or indirectly, with
tax increments or developer payments. The local contribution must be used to pay project costs
and cannot be used for general government purposes.
The City elects to make the annual local contribution to the project to exempt itself from the LGA-
HACA penalty. The City will pay for costs of the project described in this Plan, or other eligible
costs of the development program, in an amount equal to 10 percent of annual tax increment for
District No. 21, subject to the limitations described above, in any year in which such amount does
not exceed 2 percent of the City's net tax capacity. Such contribution may be in the form of either
lump sum or annual payments (in addition to tax increment payments) toward costs identified in
this plan or other costs related to that development or redevelopment. The contribution may also
be made in the form of public improvements financed by the City or other unit of government with
unrestricted funds.
AC. SUMMARY
The City of Elk River is establishing Tax Increment Financing District No. 21 to preserve and
enhance the tax base, to develop underutilized areas, and increase employment of the City. The
Tax Increment Financing Plan for Tax Increment Financing District No. 21 was prepared by the City
of Elk River, 13065 Orono Parkway, Elk River, Minnesota 55330, and telephone (763) 441-7420.
Tax Increrrent F'mancing Dis~ict No. 21 Page 11-13
EXHIBIT A
Boundary Map of Development District No. 1
Tax Increment F'mancing District No. 21 Page A-1
13065 Orono Parkway · P.O. Box 490
Elk River. MN 55330
DEVELOPMENT DISTRICT NO. 1
EXHIBIT B
Boundary Map of Tax Increment Financing District No. 21
Tax Increment Financing District No. 21 Page B-!
COUNTRY CROSSING BUSINESS CENTER
PLA',T, AFI£A
TH/RD ADD/T/ON
\ '::. \ .:.:.
I
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~ % ~ L '~'5"4,- ~ / ~ II
I
PLAT AREA: 608,599 S.F., or 13.97
I
.. i,: '::[,} UH T,;W: _ __
TAX INCREMENT FINANCING DISTRICT NO. 21
City
Elt ",, River
13065 Orono Parkway · P.O. Box E!k River. MN 5.5330
EXHIBIT C
Cashflow Analysis and Base Value Analysis
Tax Incrermnt F'mancing District No. 21 Page C-1
CITY OF ELK RIVER, MINNESOTA - TIF DISTRICT NO. 21
BASIC ASSUMPTIONS District
District: New Economic Development
Inflation Rate per Year 3.0000%I
Pay As You Go Rate 8.00%I
Current Tax Extension Rate - Pay 2000 1.194480
Frozen Tax Extension Rate - Pay 2001 Estimate 1.194480
PID BASE TAX CAPACITY
Market Tax Rate Tax Year
Value Capacity Payable
75-616-0020 763,000 2.4%-3.4% 24,442 2001
TOTALS 763,000 24,442
Phase
PROJECT VALUE INFORMATION
Market Val Taxes Total Tax
Sq. Ft. Sq. Ft. Per Total Capacity
Units Units Sq. Ft./Unit Taxes
Developm~ Tax Market
Type Rate Value Payable
Industrial 1 $53.00 73,000 $2.13 155,337 130,046 2.4%/3.4% 3,869,000 2002
TOTALS 155,337 130,046 3,869,000
TAX INCREMENT CASH FLOW PROJECTIONS
Beginning Period Semi-Annual State Aud. Semi-Annual Local
Gross Tax Payment Tax Match
Yrs. Mth. Yr. Increment 0.25% Increment 10.00%
0.5 07-01 2002
1.0 12-01 2002
1.5 07-01 2003
2.0 12-01 2003
2.5 07-01 2004
3.0 12-01 2004
3.5 07-01 2005
4.0 12-01 2005
4.5 07-01 2006
5.0 12-01 2006
5.5 07-01 2007
6.0 12-01 2007
6.5 07-01 2008
7.0 12-01 2008
7.5 07-01 2009
8.0 12-01 2009
8.5 07-01 2010
9.0 12-01 2010
Annual Pr~e~
Base Tax Tax
Capaci~ Capacity
24,442 97,160
24,442 97,160
24,442 130 046
24,442 130 046
24,442 133 947
24,442 133 947
24,442 137 966
24,442 137 966
24,442 142 105
24,442 142 105
24,442 146 368
24,442 146 368
24,442 150 759
24,442 150 759
24,442 155 282
24,442 155 282
24,442 159 940
24,442 159940
Captured
Tax
Capaci~
72,718
72,718
105 604
105 604
109 505
109 505
113 524
113 524
117 663
117 663
121 926
121 926
126 317
126 317
130 840
130 840
135 498
135 498
TOTALS 1,234,608
PRESENT VALUE 843,511
43,430 (182) 43,248 4,325
43,430 (182) 43,248 4,325
63,071 (264) 62,807 6,281
63,071 (264) 62,807 6,281
65,401 (274) 65,127 6,513
65,401 (274) 65,127 6,513
67,801 (284) 67,517 6,752
67,801 (284) 67,517 6,752
70,273 (294) 69,979 6,998
70,273 (294) 69,979 6,998
72,819 (305) 72,514 7,251
72,819 (305) 72,514 7,251
75,442 (316) 75,126 7,513
75,442 (316) 75,126 7,513
78,143 (327) 77,816 7,782
78,143 (327) 77,816 7,782
80,925 (339) 80,586 8,059
80,925 (339) 80,586 8,059
(5,168) 1,229,440 122,944
(3,531) 839,980 83,998
Prepared by City of Elk River 8/29/00 Page 1
CITY OF ELK RIVER
COUNTY OF SHERBURNE
STATE OF MINNESOTA
RESOLUTION NO.
RESOLUTION APPROVING DEVELOPMENT DISTRICT
AND TAX INCREMENT FINANCING DISTRICT PLANS
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. It has been proposed that the City amend the
Development Program for its Development District No. 1 (the
"Development District") to reflect additional goals, activities
and costs for that project; establish within the Development
District Tax Increment Financing District No. 21 (the "TIF
District") and adopt the related Tax Increment Financing Plan
therefor (collectively, the "Plans"); all pursuant to and in
conformity with applicable law, including Minnesota Statutes,
Sections 469.124 through 469.134 and 469.174 through 469.179; all
as reflected in that certain document of the City entitled in
part "Modifications to the Development Program for Development
District No. 1," dated August 28, 2000, and presented for the
Council's consideration.
1.02.
the Plans.
The Council has investigated the facts relating to
1.03. The City has performed all actions required by law to
be performed prior to the adoption and approval of the Plans,
including but not limited to 30 days prior notification of the
County Auditor and School District Clerk, a review of and comment
on the Plans by the Elk River Planning Commission, and the
Council's holding (on August 21, 2000) of a public hearing
thereon following notice thereof published in the City's official
newspaper at least 10 but not more than 30 days prior to the
public hearing.
1.04. Certain written reports and other documentation
(collectively, the "Reports") relating to the Plans, including
the tax increment application made and other information supplied
by or on behalf of SoftPac and/or Opus Northwest, L.L.C.
(collectively, the "Company") and to the activities and project
contemplated within the TIF District, and including the Plans
themselves, have heretofore been assembled or prepared by staff
or others and submitted to the Council and/or made a part of the
City files and proceedings on the Plans. The Reports include
1198600.2
data, information and/or substantiation constituting or relating
to (1) the "studies and analyses" on why the new TIF District
meets the so-called "but for" test and (2) the bases 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.
Plans.
Findings for the Adoption and Approval of the
2.01. The Council hereby finds that the proposed TIF
District is in the public interest and is an "economic
development district," within the meaning of Minnesota Statutes,
Section 469.174, Subdivision 12, because it will result in
increased employment opportunities in the State of Minnesota and
in the preservation and enhancement of the tax base of the City
and the State of Minnesota and because it will discourage
commerce or industry from moving their operations to another
state or municipality. In addition, the Council has been advised
that the facility to be constructed within the TIF District is an
approximately 73,000 square foot facility (the "SoftPac
Development") to be used by SoftPac, Inc., in its packaging,
manufacturing, warehouse and distribution operations; and not
less than 85% of those facilities, in accordance with the
applicable provisions of Minnesota Statutes, Section 469.176,
Subdivision 4c, is expected to be used for the manufacturing,
production, warehousing, storage, and distribution (including
processing which results in the change in condition of the raw
materials) of tangible personal property (but not retail sales
thereof) and for uses necessary for and related to those
activities. One of the reasons for the above findings and for
the "but for" finding below is the fact that SoftPac had several
other options, including an out-of-state option, for its project,
and accordingly, the Council believes that the SoftPac
Development would not be located in the City of Elk River without
the tax increment assistance.
2.02. The Council further finds that, based in part upon
the nature and location of the subject properties and the
intended developments thereof involved, and based upon
representations made by the Company, the proposed SoftPac
Development would not occur solely through private investment
within the reasonably foreseeable future and, therefore, the use
of tax increment financing is deemed necessary; that the Plans
conform to the general plan for the development or redevelopment
of the City as a whole because the subject area is properly zoned
for the intended uses, and the anticipated SoftPac Development is
in furtherance of long range plans of the City and the
investments heretofore made by the City for that area; and that
the Plans will afford maximum opportunity consistent with the
sound needs of the City as a whole, for the development of the
1198600.2 2
Development District and the TIF District by private enterprise
because they will enable the City to provide and finance suitable
and necessary public inducements.
2.03. The Council further finds that the Plans are intended
and in the judgment of the Council their effect will be to
promote the public purposes and accomplish the objectives
specified in the Tax Increment Financin9 Plan for the TIF
District and the Development Program for Development District No.
1.
2.04. For purposes of compliance with Minnesota Statutes,
Section 469.175, Subdivision 3(2), the Council hereby finds that
the increased market value of the TIF District that could
reasonably be expected to occur without the use of tax increment
financing would be less than the increase in market value
estimated to result from the SoftPac Development after
subtracting the present value of the projected tax increments for
the maximum duration of the TIF District permitted by the Tax
Increment Plan, which for these purposes is an assumed period of
9 years of increment. In this regard, reference is hereby made
to Section Y.2. of the Plans.
In makin~ these findings, it is noted that the subject
property is currently undeveloped and that it would be unlikely
or at least uncertain that an alternate project would appear for
the subject site. Thus, the Council cannot reasonably assume or
determine that there would be an increase in the market value of
the site without the aid of tax increment financin~ and the
completion of the new development. In addition, based on current
estimates, it appears that the market value for property tax
purposes upon completion of the development would be
approximately $3,869,000; subtractin~ from that number $763,000
(the current market value of the property) yields a net increase
in the market value of $3,106,000.
The present value of the tax increment is estimated to be
$843,511, usin9 a present valuin~ factor of 8.00%, which is
substantially less than the projected $3,106,000 net increase in
market value. Thus, the SoftPac Development on these analyses
will be a positive net ~ain to the City, the School District, and
the County, and the tax increment assistance does not exceed the
benefit which will be derived therefrom.
2.05. Pursuant to the Tax Increment Plan for the TIF
District, a 10% "qualifyin~ local contribution" will be made
respecting the TIF District, and the LGA/HACA offsets will not
apply. The qualifying contributions are expected to come from
generally available, non-TIF funds of the County, State, and/or
City, includin~ payment of eligible costs of the Development
Program for the Development District.
1198600.2 3
Section 3. Approval and AdoDtion of the Plans.
3.01. The Plans, as presented to the Council on this date,
including without limitation the findings and statements of
objectives contained therein, are hereby approved, ratified,
established, and adopted and shall be placed on file in the
office of the City Clerk. City staff shall make written request
of the Sherburne County Auditor to certify the new TIF District.
Adopted on August 28, 2000, by the Elk River City Council.
Councilmember moved the adoption of
the foregoing resolution, which motion was duly seconded by
Councilmember , and upon vote being taken
thereon, the following Councilmembers voted in favor thereof:
and the following Councilmembers voted against the same:
whereupon said resolution was declared duly passed on adopted.
1198600.2 4
CITY CLERK'S CERTIFICATE
I, the undersigned, being the duly qualified and acting City
Clerk of the City of Elk River, Minnesota, DO HEREBY CERTIFY that
I have carefully compared the attached and foregoing extract of
minutes of a duly called and regularly held meeting of the City
Council of said City held on August 28, 2000, with the original
minutes thereof on file in my office and I further certify that
the same is a full, true, and correct transcript thereof insofar
as said minutes relate to the tax increment and related actions
referenced therein with respect to the City's Development
District No. 1 and Tax Increment Financing District No. 21
therein.
WITNESS My hand officially and the official seal of the City
this day of , 2000.
(SEAL)
City Clerk
Elk River, Minnesota
1198600.2 5