6.0. EDSR 02-14-2000 •
Elk River Economic Development Authority
Tax Increment Financing
Policy & Application
Adopted: August, 1991
Revised: January, 2000
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Table of Contents
• I. Policy Purpose 3
II. Objectives of Tax Increment Financing 3
III. City of Elk River Policies for the Use of TIF 4
IV. Qualifications 5
General 5
Economic Development Districts 5
Redevelopment Districts 6
Additional Districts 6
V. Subsidy Agreement & Reporting Requirements 6
VI. Application Process 7
VII. Application 8
Applicant Information 8
Project Information 9
Public Purpose 9
Sources & Uses 10
Checklist & Additional Information 11
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VIII. Application Review Worksheet 12
Economic Development District 12
Redevelopment District 14
IX. Exhibits 16
A Corporation/Partnership Description 16
B Project Description 17
C Shareholders 18
D But-for Analysis 19
E Prospective Lessees 20
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II. POLICY PURPOSE
For the purposes of this document, the term "City"shall include the Elk River City
Council, Economic Development Authority, and Housing and Redevelopment Authority.
. The purpose of this policy is to establish the City of Elk River's position
relating to the use of Tax Increment Financing (TIF) for private
development above and beyond the requirements and limitations set forth
by State Law. This policy shall be used as a guide in the processing and
review of applications requesting tax increment assistance. The
fundamental purpose of tax increment financing in Elk River is to
encourage desirable development or redevelopment that would not
otherwise occur but for the assistance provided through TIF.
The City of Elk River is granted the power to utilize TIF by the Minnesota
Tax Increment Financing Act, as amended. It is the intent of the City to
provide the minimum amount of TIF 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.
III. 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
purposes:
•
• To retain local jobs and/or increase the number and diversity of
jobs that offer stable employment and/or attractive wages and
benefits.
• 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.
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IV. 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. TIF assistance will be provided to the developer upon receipt of
the increment by the City, otherwise referred to as the pay-as-
you-go method. Requests for up front financing will be
considered on a case by case basis.
c. A maximum of ten percent (10%) of any tax increment received
from the district shall be retained by the City to reimburse
administrative costs.
d. Any developer receiving TIF assistance shall provide a
minimum of twenty percent (20%) cash equity investment in the
project.
• e. TIF will not be used in circumstances where land and/or
property price is in excess of fair market value.
f. Developer shall be able to demonstrate a market demand for a
proposed project. TIF shall not be used to support purely
speculative projects.
g. TIF will not be utilized in cases where it would create an unfair
and significant competitive financial advantage over other
projects in the area.
h. TIF shall not be used for projects that would place extraordinary
demands on city services or for projects that would generate
significant environmental concerns.
i. The developer must provide adequate financial guarantees to
ensure completion of the project, including, but not limited to:
assessment agreements, letters of credit, personal guaranties,
etcetera.
j. 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
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history, among other factors, including the size and scope of the
proposed project.
• k. 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.
V. PROJECT QUALIFICATIONS
A. General 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$25,000 per year in property
taxes.
iii. Have a market value of at least $1,000,000 upon
completion.
b. The project shall meet at least two of the objectives set forth in
section II of this document.
c. The developer shall demonstrate that the project is not
financially feasible but-for the use of TIF.
d. The project must be consistent with the City's Comprehensive
Plan, Land Use Plan, and Zoning Ordinance.
e. The project shall serve at least one of the following public
purposes:
• Job creation
• Industrial development that will spawn additional private
investment in the area.
• Fulfillment of the City's Strategic Plan for Economic
Development.
• Removal of blight or the rehabilitation of a high profile or
priority site.
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B. District Qualifications
The application for Tax Increment Financing will be considered based on
the following criteria for each district.
• Economic Development Districts
The purpose of an Economic Development District is to preserve and
enhance job opportunities and the tax base through the retention,
expansion, or creation of industrial enterprises. In addition to the
requirements and criteria set forth by the State of Minnesota, the
City of Elk River will consider tax increment financing applications for
the creation of economic development districts based on the following:
• All applicants shall meet the criteria established in Section IV,
Subdivision A of this document.
• The project should result in the creation of 1 job per $20,000 of
TIF with attractive wages and benefits.
Redevelopment Districts
The purpose of a redevelopment district is to remove blighted buildings
or improve marginal land to encourage redevelopment. In addition to
the requirements and criteria set forth by the State of Minnesota, the
City of Elk River will consider tax increment financing applications for
the creation of redevelopment districts based on the following:
• All applicants shall meet the criteria established in Section IV,
Subdivision A of this document.
• • At a minimum, the market value of a redeveloped site shall
increase by a ratio of 1:1.5.
• The project shall result in an increased tax base and,
subsequently, the creation of jobs with attractive
wages and benefits.
• The project shall remove blight and promote the highest and
best use of underutilized property.
Other Districts
The City of Elk River will consider the establishment of other TIF
districts not identified above on a case-by-case basis.
VI. SUBSIDY AGREEMENT & REPORTING REQUIRMENTS
All developers/businesses receiving Tax Increment Financing
assistance from the City of Elk River shall be subject to the provisions
and requirements set forth by state statute 116J.993 and summarized
below.
All developers/businesses receiving TIF assistance shall enter into a
subsidy agreement with the City of Elk River that identifies: the reason
for the subsidy, the public purpose served by the subsidy, and the goals
• for the subsidy, as well as other criteria set forth by statute 116J.993.
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The developer/business shall file a report annually for two years after
the date the benefit is received or until all goals set forth in the
application and performance agreement have been meet, which ever
• is latter. Reports shall be completed using the format drafted by the
State of Minnesota and shall be filed with the City of Elk River no
later than March 1 of each year for the previous calendar year.
Businesses fulfilling job creation requirements must file a report to
that effect with the city no within 30 days of meeting the
requirements.
The developer/business owner shall maintain and operate its facility
at the site where TIF assistance is used for a period of five years after
the benefit is received.
In addition to attaining or exceeding the jobs and wages goals set
forth in the Subsidy Agreement, the borrower shall achieve at least
two of the objectives set forth in Section II of this document.
Developers /Businesses failing to comply with the above provisions
will be subject to fines, repayment requirements, and be deemed
ineligible by the State to receive any loans or grants from public
entities for a period of five years.
VII. APPLICATION PROCESS
• 1. Applicant submits the completed application along with all
application fees.
2. City staff reviews the application and completes the Application
Review Worksheet.
3. Results of the Worksheet are submitted to the appropriate
governing authorities for preliminary approval of the proposal.
4. If preliminary approval is granted, the Tax Increment Financing
Plan, along with all necessary notices, resolutions and certificates
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 project are held.
7. The City grants final approval of the proposal.
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VII. APPLICATION FOR TAX INCREMENT FINANCING
A. APPLICANT INFORMATION
Name of Corporation/Partnership
Address
Primary Contact
Address
Phone Fax Email
On a separate sheet, please provide the following:
• Brief description of the corporation/partnership's business,
including history, principal product or service, etc... Attach as
Exhibit A .
• Brief description of the proposed project. Attach as Exhibit B.
• List names of officers and shareholders/partners with more than
• five percent (5%) interest in the corporation/partnership. Attach as
Exhibit C.
• A but-for analysis. Attach as Exhibit D.
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
The project will be:
Industrial Greenfield: New Construction Expansion
• Commercial Redevelopment: New Construction Expansion
Industrial Redevelopment: New Construction Rehabilitation
Other
The project will be: _Owner Occupied Leased Space
If leased space, please attach a list names and addresses of future lessees and indicate
the status of commitments or lease agreements.Attach as Exhibit E.
Project Address
Legal Description
Site Plan Attached: Yes No
Amount of Tax Increment Requested:
Land $
Public Improvement $
Site Improvement $
Current Real Estate Taxes on Project Site: $
• Estimated Real Estate Taxes upon Completion: Phase I $
Phase II $
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: Number of existing jobs
Number of jobs created by project
Average hourly wage of jobs created
New industrial development which will result in additional private
investment in the area.
The project contributes to the fulfillment of the City's Strategic
Plan for Economic Development.
Removal of blight.
Rehabilitation of a high profile or priority site.
• _Other:
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D. SOURCES & USES
• SOURCES NAME AMOUNT
Bank Loan $
Other Private Funds $
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
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
F) Personal Financial Statements of all Major Shareholders
Profit & Loss
Current Tax Return
G) Letter of Commitment from Applicant Pledging to Complete
During the Proposed Project Duration
1111 H) Letter of Commitment from the Other Sources of Financing,
Stating Terms and Conditions of their Participation in
Project
I) Application fee of$5000 (to be returned upon project
completion.)
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
By
• Its
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TAX INCREMENT FINANCING PROPOSAL REVIEW WORKSHEET
ECONOMIC DEVELOPMENT DISTRICT
• The project meets the criteria set forth in Yes
Section V of the Tax Increment Financing policy. No
1. Ratio of Private to 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
2. Job Creation in the City of Elk River: Points:
Number of new jobs as a result of the project. 50+ 5
Number of existing/retained jobs divided by 10. 30+ 4
Total 25+ 3
15+ 2
Less than 15 1
• 3. Ratio of TIF to new jobs created: Points:
$ TIF request $15,000 or less 5
Number of new jobs created $20,000 or less 4
$ of TIF per new job created $22,000 or less 3
$25,000 or less 2
Over $25,000 1
4. Wage Level of jobs created: Points:
Average hourly wage Over $21/hour 5
of jobs created: $18 —21 /hour 4
$14-17/hour 3
$10-13 /hour 2
Under $10 /hour 1
5. Project size: Points:
The project will result in the construction Over 120,000 5
of square feet 100,000+ 4
80,000+ 3
60,000+ 2
III 50,000+ 1
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6. Type of Project: Points:
100% Owner Occupied 5
. Mix Owner Occupied & Investment 4
Investment Property 3
8. Use: Points:
Manufacturing 5
Warehouse/Distribution 3
Commercial 1
7. The project will pay annual Points:
property taxes in the first fully 150,000+ 5
assessed year of$ 100,000+ 4
75,000+ 3
50,000+ 2
25,000+ 1
Below 25,000 0
8. 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.
9. Bonus Points Bonus Points:
The project will be 100%Pay-as-you-go 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 45-39 points
Moderate 38-31 points
Low 30-24 points
Not Eligible 23-0 points
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• TAX INCREMENT FINANCING PROPOSAL REVIEW WORKSHEET
REDEVELOPMENT DISTRICT
The project meets the criteria set forth in Yes
Section V of the Tax Increment Financing policy. No
1. Ratio of Private to Public Investment in Project: Points:
$ Private investment 4:1 5
$ Public Investment 3:1 4
Ratio of Private to Public Financing 2:1 3
1:1 2
Less than 1:1 1
2. Increase in Real Estate Value: Points:
$ Value of Site before redevelopment 1:5+ 5
$ Value of site after redevelopment 1:4 4
$ Ratio of value before:after redevelopment 1:3 3
1:2 2
Less than 1:2 1
• 3. New Job Creation in the City of Elk River: Points:
Number of new jobs as a result of the project. 50+ 5
Number of existing/retained jobs divided by 10. 30+ 4
Total 25+ 3
15+ 2
Less than 15 1
4. Ratio of TIF to new jobs created: Points:
$ TIF request $15,000 or less 5
Number of new jobs created $20,000 or less 4
$ of TIF per new job created $22,000 or less 3
$25,000 or less 2
Over $25,000 1
5. Wage Level of jobs created: Points:
Average hourly wage Over $21/hour 5
of jobs created: $18 —21 /hour 4
$14-17 /hour 3
$10-13 /hour 2
Under $10 /hour 1
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6. Project size: Points:
The project will result in the construction Over 120,000 5
of square feet 100,000+ 4
• 80,000+ 3
60,000+ 2
50,000+ 1
7. Type of Project: Points:
100% Owner Occupied 5
Mix Owner Occupied & Investment 4
Investment Property 3
8. Use: Points:
Industrial 5
Warehouse/Distribution 4
Commercial 3
Housing 1
9. The project will pay annual Points:
property taxes in the first fully assessed 150,000+ 5
year of$ 100,000+ 4
75,000+ 3
50,000+ 2
25,000+ 1
• Below 25,000 0
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 50 points.
11. Bonus Points Bonus Points:
The project will be 100%pay-as-you-go 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 50-43 points
Moderate 42-34 points
411 Low 33-26 points
Not Eligible 25-0 points
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