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6.0. EDSR 08-14-2000 ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY 4, Item 6. MEMORANDUM TO: Elk River Economic Development Authority FROM: Marc Nevinski, Assistant Director of Economic Development rr DATE: August 14, 2000 SUBJECT: Consider Resolution Recommending City Council Adopt Tax Increment Financing Plan No. 21 for Opus Northwest/SoftPac, Inc. Issue The plan for.TIF District No. 21 will be presented to the City Council for consideration of approval on August 21, 2000. This will be the last formal action for the approval of the district. Staff requests that the EDA consider the terms of the • plan for TIF District 21 and send the attached resolution to the City Council for its consideration in approving the plan. 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 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 $728,000 plus eight percent interest. This amount includes the purchase price of the property ($700,000) and broker fees ($28,000). It is anticipated that it will take eight and one half years to fully reimburse the development costs, although changes in market values and tax rates will impact the actual length of the district. It is estimated that the project will generate an average of $136,000 annual increment over the life of the district. Due to the configuration of the building, the Planning Commission, following a public hearing at its July 25th meeting, recommended that the City Council approve • 13065 Orono Parkway • P. O. Box 490 • Elk River, MN 55330-1743 • (612) 441-7420 • Fax (612) 441-7425 Equal Opportunity Housing and Equal Opportunity Employment • a conditional use permit for the project. The Council will consider the approval of the CUP, as well as the adoption of the TIF Plan, at its August 21, 2000 meeting. Action Requested Staff requests that the EDA consider the proposed Plan for TIF District 21 and then consider the attached resolution recommending that the City Council adopt the Tax Increment Financing Plan for the creation of TIF District 21. Attachments • TIF Plan for Tax Increment Financing District No. 21 • Resolution recommending that the City Council adopt the Tax Increment Financing Plan for the creation of TIF District 21. • • • 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 21,2000 Prepared by: City of Elk River 13065 Orono Parkway Elk River Minnesota 55330 (612)441-7420 • • TABLE OF CONTENTS TAX INCREMENT FINANCING PLAN FOR TAX INCREMENT FINANCING DISTRICT NO. 21 SECTION I. MODIFIED DEVELOPMENT PROGRAM FOR DEVELOPMENT DISTRICT I-1 SECTION II. TAX INCREMENT FINANCING PLAN FOR TAX INCREMENT FINANCING DISTRICT NO. 21 Section A. Statutory Authority II-1 Section B. Statement of Objectives II-1 Section C. Development Program Overview II-2 Section D. Description of Property in District No. 21 II-2 Section E. Classification of the Tax Increment Financing District II-2 Section F. Property To Be Acquired II-3 Section G. Estimate of Costs -Use of Funds II-4 Section H. Estimated Amount of Loan/Bonded Indebtedness II-5 Section I. Sources of Revenue II-5 Section J. Original Tax Capacity and Tax Rate II-5 Section K. Amount of Captured Tax Capacity and Tax Rate II-5 Section L. Duration of the District II-6 Section M. Estimated Impact on Other Taxing Jurisdictions II-6 • Section N. Modifications of the Tax Increment Financing District II-7 Section O. Administrative Expenses II-7 Section P. Duration of Tax Increment Financing Districts II-7 Section Q. Limitation on Qualification of Property in Tax Increment District Not Subject to Improvement II-8 Section R. Limitation on the Use of Tax Increment II-8 Section S. Notification of Prior Planned Improvements II-8 Section T. Excess Tax Increments II-9 Section U. Requirement for Agreements with the Developer II-9 Section V. Assessment Agreements II-9 Section W. Administration of District and Maintenance of the Tax Increment Account II-10 Section X. Financial Reporting Requirements II-10 Section Y. Municipal Approval II-10 Section Z. County Road Costs II-12 Section AA. Other Limitations on the Use of Tax Increment II-12 Section AB. Reduction in State Tax Increment Financing Aid II-12 Section AC. Summary II-13 EXHIBIT A Boundary Map of Development District No. 1 A-1 EXHIBIT B Boundary Map of Tax Increment Financing District No. 21 B-1 EXHIBIT C Cashflow Analysis and Base Value Analysis C-1 • • SECTION 1. 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: 1. Provide impetus for industrial development by constructing the public facilities necessary to make such development possible; 2. Increase employment opportunities in the City by encouraging additional industrial development. • Tax Increment Financing District No.21 Page 11-1 3. Provide adequately serviced industrial areas of the City to accommodate desirable users; 4. Preserve and enhance the tax base of the City; 5. Preserve and enhance the quality of life of the City; and, 6. Provide maximum opportunity, consistent with the needs of the City for development by private enterprise. C. DEVELOPMENT PROGRAM OVERVIEW 1. 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. 2. 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. 3. 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 As of the drafting of this plan, TIF District No. 21 encompasses the parcel identified below in addition to all adjacent and interior right-of-ways: Country Crossing Business Center Second Addition, Outlot A, (PIN 75 — 616 — 0020) according to the plat thereof on file and of record in the office of the County Recorder in and for Sherburne County, Minnesota. It is anticipated that the parcel will be recorded prior to purchase by the developer with the following legal description and PIN number: Country Crossing Business Center Third Addition, Block 1, Lot 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 Statutes, Section 469.174 to 469.179, as amended, inclusive, find that • District No. 21 to be established is an economic development district pursuant to Minnesota Statutes, Section 469.174, Subdivision 12 and 469.176 Subdivision 4c as defined below: Tax Increment Financing District No.21 Page 11-2 • Subd. 12. "Economic Development district" means a type of tax increment financing district which consists of any project, or portions of a project, 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 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: (1) 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. 1. District No. 21 consists of 1 parcel. 2. District No. 21 does not meet the requirements of any other Tax Increment Financing District. 3. District No. 21 will discourage commerce,industry, or manufacturing from moving their operations to another state or municipality. 4. District No. 21 will result in increased employment in the state. 5. District No. 21 will result in preservation and enhancement of the tax base of the state. 6. 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 Financing District No.21 Page 11-3 • 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 $ 728,000 Site Improvements $ 150,000 Public Improvements $ 0 Other Development Costs $ 0 Interest(8%) $ 450,000 Administration (up to 10%) $ 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). S Tax Increment Financing District No.21 Page 11-4 • 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 $728,000 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 $ 1,230,000 Interest Local Contribution 123,000 Other Revenue Sources 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 1f 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 Financing District No.21 Page II-5 Original Estimated Project Tax Capacity (upon completion of project) $130,046 less: Original Tax Capacity 24,442 Estimated Captured Tax Capacity 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 1b, 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: • IMPACT ON TAX BASE ENTITY'S ESTIMATED % OF CAPTURED TOTAL NET CAPTURED TAX CAPACITY ENTITY TAX CAPACITY TAX CAPACITY TO ENTITY TOTAL Sherburne County 59,143,714 105,604 .0018% City of Elk River 13,208,236 105,604 .0080% School District No. 728 17,985,332 105,604 .0059% IMPACT ON TAX RATES CURRENT PERCENT CAPTURED POTENTIAL ENTITY TAX RATE OF TOTAL TAX CAPACITY TAXES Sherburne County .31468 .26 105,604 33,231 City of Elk River .30248 .25 105,604 31,943 School District No. 728 .56027 .47 105,604 59,167 Other .01705 .01 105,604 1,801 • TOTAL 1.19448 1.00 126,142 Tax Increment Financing District No.21 Page 11-6 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 Statutes, 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 Statutes, 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 1(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 Increment Financing District No.21 Page 11-7 Q. 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 Statutes, 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 Statutes, Section 469.177, 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 Financing 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: 1. prepay the outstanding bonds; 2. discharge the pledge of tax increment therefore; 3. pay into an escrow account dedicated to the payment of such bond; or 4. 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 Statutes, 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 Financing District No.21 Page 1I-9 W. ADMINISTRATION OF DISTRICT AND MAINTENANCE OF THE TAX INCREMENT iACCOUNT 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: 1. Finding that the Tax Increment Financing District No. 21 is an economic development district as defined in Minnesota Statutes, 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. 2. 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. 110 Tax Increment Financing District No.21 Page II-10 • BUT/FOR ANALYSIS Current Market Value- Est. 763,000 New Market Value- Est. 3,869,000 Difference 3,106,000 Present Value of Increment at 8.00% 843,511 Difference 2,262,489 Value Likely to Occur Without TIF is Less Than: 2,262,489 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. 4111 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. 3. 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. 4. 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 Increment Financing District No.21 Page 11-11 Z. COUNTY ROAD COSTS 1111 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 1. General Limitations. All revenue derived from tax increment shall be used in accordance with the tax increment financing plan. 2. 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. 3. 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 Financing District No.21 Page 11-12 • Pursuant to Minnesota Statutes, 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 Increment Financing District No.21 Page 11-13 II EXHIBIT A Boundary Map of Development District No. 1 • IIITax Increment Financing District No.21 Page A-1 / • I _ 'I''/' 1I-/ 33.3.Co.,.of IA•. w i,;i/...Awe .:. — ————--— ..—wvw iYr d uw w3 �/.•��M 5. /. k 31 Y U w.Y Sm.,LLiIN ,..— l 1 / / \\.: \\ p+Y M•. — \ \ ....S-•M ' C J• f r'. \ - .b.96 —- R \.290oo.J•2. \ • I _ I /I 1 +QaQ11'J" \ - / r + ++++i• , +++++++��• a, •••• ••• 4-- °+°+°+++++++°+++++°�.c„;oma' --— =i _ - +++++++++++�� 3359'.1•56'3 992.57..7-3 i +++°+++ ++++++++++++ + • +++°• +..• � —_— I • +°+°Q+o+aO+o++++++++++++++a+++o++•+++++o++oo+++++++++w i • W •+°OOOi°i°i°i°i°iii°i°i+i°i°i°i°i°i°i°i°i°i°i°i°i°i°O 5T. "Jwi +++++++++++°+++++•++++•�+++°+°++°°°°++�• t __3399'41'55'3 123 7•1`-- - ++ + • ° .•••°•i 110EXHIBIT B Boundary Map of Tax Increment Financing District No. 21 • • Tax Increment Financing District No.21 Page B-1 I,I �� m '1 • ,Ih� , A 4 ' — r� pL111Eitimomillit � i 1 it � lm migii-ApAgrapilli r INMEnrilta...9111.,11,71,..3.10 .61.110.,11 laummun mE0 �,. 0°a�.11.7.74.w.- � p.a.a•o.v0al.Yoll iiiiestettatb---------:4------40... leiglaripir ,a----m--:".".3 ...-..i.E., _•....,...,........„,„v�\,. ,„,-� to 19 /,°-mi a i 1.7e. ve.... Gf li��...,J uOr L....7Q.v.�1 10. ay. �/N o mad`../ •§ ..-4 iii t ei�i_a1 R v `1 i _�J� ' I m• Mr.T. qo.a � .11 ai.� krti lava . .7 ...worm, Is ,.o.. I iliglignill vimmilill— III= �` ��.;L��''''''°°° ,� it ICy�e-�q Il�":?.i,,u:.�� _3 �nl�Pj� i 1. II rjli wars,- YY %i• %: d t,', �r � r JW II ��'Y+IIA",�I� ��e ,fir, \5. ua^:711�i� , 1111 atfiniammmi:xii.10*.tramilitirt7to,t4...v. — 11417,1L1.4k- 111i111e1id a e ril lei,, �� '2 1Efi1.Ii 1=: 11111 EilltiegePriVilp -,„',, • -RAZIIIIII imii .........:E-i*--,m:.-.:-p-.wrim"SItit2.--.,.v0,._.-_i-a4.-,-gM,t,,nT:1,:,1Tt.E1,7l01.E..,-,,„nF4,:i4,,.Vc.-g.f.-.-"...4...,,:,.f.._,A_,0_,_I,1FI%AI._ i 7 1 �.�` laso- Ihl 7 .'.ti.0~it �lI1 1'.\,.N.Va_1i. sdO/ice. Irregkl ---,--- - //' UY -ili 9u.p«. — .1 atom • i is--- l ■ p tk 6 I° '111111" 111,%\111 riSt.041 1111 dll __ ll � ' • . , ,-c./• \\( N DEVELOPMENT DISTRICT NO. 1 City of �i 11 F 11 , ... • dih.e- River . 13065 Orono Parkway • P.O. Box 490 Elk River. MN 55330 4 • EXHIBIT C Cashflow Analysis and Base Value Analysis • IIITax Increment Financing District No.21 Page C-1 CITY OF ELK RIVER,MINNESOTA-TIF DISTRICT NO.21 • BASIC ASSUMPTIONS District: New Economic Development District Inflation Rate per Year 3.0000% Pay As You Go Rate 8.00% Current Tax Extension Rate-Pay 2000 1.194480 Frozen Tax Extension Rate -Pay 2001 Estimate 1.194480 BASE TAX CAPACITY Market Tax Rate Tax Year PID Value Capacity Payable 75-616-0020 763,000 2.4%-3.4% 24,442 2001 TOTALS 763,000 24,442 PROJECT VALUE INFORMATION Market Val Taxes Total Tax Developmi Phase Sq.Ft. Sq.Ft. Per Total Capacity Tax Market Type Units Units Sq.Ft./Unit Taxes 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 Annual Project Captured Semi-Annual State Aud. Semi-Annual Local Base Tax Tax Tax Gross Tax Payment Tax Match Yrs. Mth. Yr. Capacity Capacity Capacity Increment 0.25% Increment 10.00% 0.5 07-01 2002 24,442 97,160 72,718 43,430 (182) 43,248 4,325 ID 1.0 12-01 2002 24,442 97,160 72,718 43,430 (182) 43,248 4,325 1.5 07-01 2003 24,442 130,046 105,604 63,071 (264) 62,807 6,281 2.0 12-01 2003 24,442 130,046 105,604 63,071 (264) 62,807 6,281 2.5 07-01 2004 24,442 133,947 109,505 65,401 (274) 65,127 6,513 3.0 12-01 2004 24,442 133,947 109,505 65,401 (274) 65,127 6,513 3.5 07-01 2005 24,442 137,966 113,524 67,801 (284) 67,517 6,752 4.0 12-01 2005 24,442 137,966 113,524 67,801 (284) 67,517 6,752 4.5 07-01 2006 24,442 142,105 117,663 70,273 (294) 69,979 6,998 5.0 12-01 2006 24,442 142,105 117,663 70,273 (294) 69,979 6,998 5.5 07-01 2007 24,442 146,368 121,926 72,819 (305) 72,514 7,251 6.0 12-01 2007 24,442 146,368 121,926 72,819 (305) 72,514 7,251 6.5 07-01 2008 24,442 150,759 126,317 75,442 (316) 75,126 7,513 7.0 12-01 2008 24,442 150,759 126,317 75,442 (316) 75,126 7,513 7.5 07-01 2009 24,442 155,282 130,840 78,143 (327) 77,816 7,782 8.0 12-01 2009 24,442 155,282 130,840 78,143 (327) 77,816 7,782 8.5 07-01 2010 24,442 159,940 135,498 80,925 (339) 80,586 8,059 9.0 12-01 2010 24,442 159,940 135,498 80,925 (339) 80,586 8,059 TOTALS 1,234,608 (5,168) 1,229,440 122,944 PRESENT VALUE 843,511 (3,531) 839,980 83,998 • Prepared by City of Elk River 8/9/2000 Page 1 ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY • CITY OF ELK RIVER SHERBURNE COUNTY STATE OF MINNESOTA RESOLUTION 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 21. 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. Patrick Dwyer, Chair ATTEST: • Catherine Mehelich, Executive Director