The URL can be used to link to this page

5.0. 6.0. 7.0. EDSR 08-10-1998 ity of MEMORANDUM Elk Ri ver TO: Economic Development Authority FROM: Paul T. Steinman, Director of Economic / Development DATE: August 5, 1998 SUBJECT: Agenda Memo for August 10, 1998, Meeting 5. Discuss Sherburne County Business Development Fund Program Sherburne County Economic Development Coordinator Michael Darger will be available at the EDA meeting to discuss the concept of a new loan incentive program for Sherburne County. The purpose of • Mr. Darger's presentation will be to discuss the general concept of this type of loan program, gain input from the EDA, and, at a later date, ask that the EDA make a recommendation to the City Council to participate as an investor in this program. Attachments to this memo include a fact sheet, program benefits, eligibility guidelines, description for investors, and an application form and guidelines. The following is an example of the mechanics of the business development fund concept: • Investors such as all the Sherburne County cities, utility companies, telephone companies, would agree to pledge a certain amount of dollars to this program. City of Elk River staff has discussed this number to be $200,000. • The $200,000 is not "at risk" dollars - these are not loan dollars, but dollars pledged to be invested in federally insured certificates of deposit for eligible and approved business development fund applicants. • A fund applicant is approved for a $500,000 loan from the business development fund through any bank in Sherburne County. • The project can be built anywhere in Sherburne County. • County staff calls all investors and asks for their proportionate share of pledged investments to be taken at the bank in the form of the purchase of certificates of deposit. 13065 Orono Parkway • P.O. Box 490 • Elk River, MN 55330 • TDD&Phone: (612) 441-7420 • Fax: (612)441-7425 EDA Agenda Memo August 5, 1998 Page 2 0 • These CD's are federally insured and, by law, municipalities are allowed to purchase CD's as investment instruments. • This "new money" in the amount of$500,000 is now available at the bank to be loaned to the approved business development fund applicant at a reduced interest rate. • The interest rate which has been discussed to be provided to the applicant is 7 to 7.5 percent. • The investors purchase five year CDs, thereby committing their proportionate share of dollars to that investment instrument for a minimum of five years. • Investors may take a small hit on the interest rate with this type of investment versus a more traditional five year investment. • If the City of Elk River is called upon to purchase $50,000 in a five year CD at 5.25 percent versus a five year investment at 6.5 percent, this would mean a loss in interest income in the amount of approximately $4,000. • The participating lender is also possibly going to take a small hit on its interest rate on the loan also. The participating lender however, has the ability to keep the business loan • when it is refinanced at the end of five years at its market interest rates. This is just one scenario of the use of the business development fund program. City staff feels this program can be another advantage in attracting companies from outside Sherburne County or to help existing companies grow and expand. 6. Consider Resolution 98- Approving TIF District No. 20- Supermats, Inc. TIF District No. 20 is scheduled to be before the City Council at a public hearing on August 24, 1998. This Council action is the last formal action for approval of TIF District No. 20. TIF No. 20 is proposed to be used to reimburse the EDA for its purchase of the last remaining lot in the Elk River Industrial Park. The request by Supermats is for the lot to be provided to the project up front at no cost. The amount of equity this lot will provide to the project will be determined by an appraisal of the lot as part of the overall project. This lot appraisal will also determine the maximum level of reimbursement which the EDA can receive from TIF for this • lot. EDA Agenda Memo August 5, 1998 Page 3 41110 As indicated in the budget within the attached Tax Increment Plan for District No. 20, staff has included a lot purchase reimbursement to the EDA in the amount of a maximum $85,000. As indicated in the attached Plan, the project, upon completion, will generate approximately $34,000 in annual tax revenues. The EDA will be reimbursed for its lot purchase in approximately years one and two (Year 2000 and 2001). The Supermats building will be approximately 35-40,000 square feet. The owner intends to lease 10,000 square feet to an industrial user and eventually grow into that space. The project is intended to be completed by February 1999. 7. Consider Resolution 98- Approving 1999 EDA Levy Staff is unprepared to discuss specific budget issues with the EDA at this meeting. However, this issue pertains to passage of a resolution which establishes the tax levy for the Elk River EDA and requests that the City Council levy the maximum amount for the Authority for the year 1999 as it has done in all years past. The city must certify its total 1999 proposed maximum levy, including EDA and HRA levies, to • Sherburne County by September 15, 1998. Discussion of the 1999 EDA budget will occur at the meeting of the EDA in September. The major issue to be discussed with regard to next year's budget includes the hiring of additional personnel in the economic development department. Recommendation Staff is recommending at this time the EDA approve Resolution 98- Establishing the Tax Levy for the Elk River Economic Development Authority and Requesting that the City Council of the City of Elk River Levy a Tax in the Amount of.01813% of the Taxable Market Value of the City Less 1999 HACA of$12,069 for the Year 1999 for the Benefit of the Authority to be Used for Economic Development Authority Purposes as Provided by the Statute. \\elkriver\sys\shrdoc\eda\meetings\agdamm.doc S J • Business Development Fund Fact Sheet Toni for Tndustrial Growth •Not a loan fund but a targeted incentive program for industrial building projects *Focus on tax base creation •Equal opportunity for existing or new-to-the-County manufacturers or industrial service firms *Only quality "bankable" loans are eligible • Easy and low-cost Investment 41) 'Risk free, FDIC-insured investment for institutional investors • *Very low revenue loss to investors • •Opportunity cost is the only real question • •Successful program in Kandiyohi and Chisago counties Partnership Opportunities • •Provides opportunity for County to partner with communities *Can be used alongside other programs such as SBA, CMIF, City RLFs, etc. •Eligibility of applicants monitored by BDF Oversight Committee •Wage ($8.01/hour) and job requirements ($30,000 of RDF per job) monitored by County staff S ER en to 00 A 0 g � Rg0: : V � ootin � � � c 71 • O C ' `� $ 'O In 4 N N 't e1+! O %c o 0 U c° co" Cl [� a- 44 64 64 64 d4 (44 6A 4f4 (i 46. .O A o c 0a. 0 ti A 0 C V I44 i E w T3 6. co TA .15 V OCL' n > v 0 y Q > > a E..� a ... O O 5 :. �p N O p0 ig Vn @ <tE✓ .Se: Ei.; F, he: E,.. ti, .° Q (i, E-. E-4 8 • gg 14 ›"4 Onb � ClIn d� � 4 VV V tV fV Q c'I C- C- 'R O G CV c\o cVA O0 r- 0 0 N N e i U8 V06 N N N N N .2 N .to 6 6R b 64 4,4 4.4 44 44 A QQ U. EA 4 d C F aa)i t, o, 0 u 0 V� 3ae a, a. 4) o cp % 06. a,, $C w c A U C c"a y O E E G R c� IS 0 14 F. E . N E. E— '7 y y `. F. 8 � � RE-� .� � E� E— E., cil - . Business Development.Fund Guidelines, p. 1, 7/30/98 • Sherburne County Business Development Fund Desired Outcomes 1. To give the County a financial incentive tool that will be useful for both business expansion and business attraction. 2. To create a tool that can augment city tools in assembling attractive financial packages for business. 3. To strengthen relationships among economic developers and bankers for economic development financing. 4. To create confidence among County Commissioners,SCEDA members,and the public that financial incentives can be an appropriate tool for the County to 113C to maximize the growth of business,employment and income. 5. To build County tax base and employment opportunities. 6. To be competitive with other counties offering similar incentives. •-• • • - . . H:\2744DARCACOMMITTEIRESOURCE\BDFOUI88,DOC Po v.( )'r�;,w•Q e. Ft 191- -tins Business Development Fund Guidelines, p. 2, 7/30/98 Business Development Fund Guidelines • • Project Eligibility Guidelines • All projects submitted for review must meet the following criteria: I.The eligible firm must be a manufacturing or warehouse/distribution business. Under certain circumstances a service business may be eligible(i.e. in the case of a non-retail,professional service that has more locational flexibility than a typical service business). 2.Loan proceeds must he used for real estate,including new construiction or expansion of existing facilities, and/or equipment purchases. Working capital financing and refinancing of existing debt is not eligible. Funds are for owner-occupied business buildings,not real estate investment. • 3.The project must create jobs or improve or retain existing jobs. 4. A minimum of one job per S30,000 of funds borrowed must he created/retained within three years of the loan. If this requirement is not fulfilled the interest rate on the loan will revert to market rate. A job will only be counted if it pays at least the current State of Minnesota minimum for"nutstate"jobs of 0X.01/hour. (30+ • • hours per week). S.Equal consideration will be given to both existing business expansion and businesses newly locating in the • County. A portion of the program may be targeted at businesses locating in Sherburne County from outside the. County. All proposed projects will be reviewed for compliance with the above criteria by the Business Development Fund Oversight Committee. The Committee may waive requirements in certain cases if needed. Final loan approval will be made by the participating local bank. Business Development Funnel Guidelines, p. 3, 7/30/98 • Business Development Fund Description for Investors The Business Development Fund(BDF)allows individuals,businesses and governmental units to invest in economic development in Sherburne County. This investment is available through the purchase of Business Development Fund Certificates of Deposit(BDCD). These deposits are available in increments of$1,000. The CD's are fully insured by the F.D.I.C. They pay an interest rate of 3.25%below New York prime rate(as published in the Wall Street Journal).An additional .25%will be paid as a finders fcc to the Sherburne County Economic Development Alliance. The investment rate will be adjusted quarterly and compounded quarterly. Investment in the certificates will be for five(5)years. For example,if the prime rate is 8.5%,then the DDCD will initially pay 5.25%,with the rate adjusting quarterly thereafter. For example,a$1,000 investment in a BDCD at 5.25%will yield$52.50 in simple interest annually(ignoring compounding for this example). A variable rate C.U.at an average rate of 6%would yield$60. The small difference of$7.50 is not great,yet it gives you the satisfaction of having made a contribution to economic development in Sherbume County. Loans are made through the BDF to existing or new manufacturing businesses who want to expand or locate in Sherburne County. Funding from the program must be used for equipment,real estate,or new construction. The loan must either create new jobs or improve or retain existing jobs. Funds generated by BDCDs arc used to offer reduced rate financing through participating banks. BDF are loaned out by the banks at 1%below prime rate. The participating bank retains the difference between the BDCD rate and the loan rate as its"spread"or fee for administering the loan(initially it will always be 2%). All funds borrowed through this program must • meet the lending requirements of the participating bank. The maximum term of an BDF loan is 5 years,yet individual banks may consider longer amortizations(without BDF subsidy after 5 years)as they deem • appropriate. The minimum loan amount is$100,000 and the maximum is$500,000. The collective investment of Sherburne County businesses,banks,individuals,and governmental units in the Business Development Fund provides an excellent revenue source for financing the expansion of existing and the attraction of new manufacturing or distribution businesses to Sherburne County. For more information,contact a Sherburne County Bank,or Michael Darger at Sherburne County,241- 2744 or 1.800-433-5229 Banker Participation Banks with a branch located in the County will be eligible to participate in making loans. Also,banks with branches in cities not wholly included in or with a common border to Sherburne County wilt be eligible to participate(i.e. St. Cloud,Monticello,Princeton,Ramsey,Otsego,Clearwater,Sauk Rapids, etc.). However,all banks which choose to participate as lenders must first make a minimum investment of$25,000 in BDCDs. In the case of loans exceeding$100,000,there will be BDCDs placed with the originating bank by more than one investor. This is ensure that FDIC insurance of only$100,000 per depositor is not exceeded. Any government investor exceeding$100,000 in one bank will receive the additional pledge of assets required by law. Business Development Fund Guidelines, p. 4, 7/30/98 Application Guidelines • Eligibility Guidelines The business must be located in,or proposing to locate in Sherburne County. The eligible firm must be a manufacturing or warehouse/distribution business. The project must create jobs or iniptove/retain jobs paying the minimum amount required by the State for its economic development programs(i.e. currently $8.01/hour). A minimum of one job per$30,000 of funds borrowed must be created/retained within three years of the loan. These wage and job goals will be monitored by the County economic development staffpet son. Arutually every January,a simple report will be sent to borrowers to collect wage and job data for comparison to their wage and job goals. If this requirement is not fulfilled the interest rate on the loan will revert to market rate. The Loan Agreement will be made a tri-party agreement between the lender,the borrower,and the County. The interest rate for the loan will increase 2 percentage points if the wage and job guidelines are not met within 3 years. Equal consideration will be given to both existing business expansion and businesses newly locating in the County. A portion of the program may be targeted at businesses locating in Sherburne County from outside the County. Loan Uses Loan proceeds must be used for real estate,including new construction or expansion of existing facilities, and/or equipment purchases. Working capital financing and refinancing of existing debt is not eligible. Funds arc for owner-occupied business buildings,not real estate investment. 411 Loan Terms Loans can be made for amounts between$100,000 to$500,000. The interest rate will be 1%below prime. This will be a variable interest rate adjusted quarterly. Generally,the maximum term of financing will be 5 years. However, individual banks may consider longer amortizations(without BDF subsidy after 5 years) as they deem appropriate. Final loan terms and conditions will be set by the local originating bank on an individual project basis. Application Review All loans will be originated by the participating local bank. Therefore the applicant and project must meet the normal commercial lending criteria of the bank. If the participating bank finds that the project meets their lending criteria,the proposed project will be reviewed for compliance with the above criteria by the Business Development Fund Oversight Committee. The Committee will be composed of one representative from each of the four following groups: utility companies,lenders,government,and the Resource Committee of the Sherburne County Economic Development Alliance. The Committee may waive requirements in certain cases if need be. The DDE Oversight Committee will only review the project for compliance with the program guidelines. if the Committee finds that the project meets program guidelines they will notify the local bank who will then determine final loan status. • Business Development Fund Guidelines, p. 5, 7/30/98 • (.)nly general project intbrmation will be released to the BAF Oversight Committee. All business and personal financial data of the applicant related to the loan application will only be released to the participating bank,and not the RDF Oversight Committee. How to Apply. If you are interested in applying for financing from the Business Development Fund contact a Sherburne C:nunty Rank,or Michael!larger at Sherburne County,241-2744 or 1-800-433-5229 i • Business Development Fund Guidelines, p. 6, 7/30/98 • Business Development Fund Application 1.Applicant Information • Name of Applicant Title_ • Firm Name Corporation Sole Proprietorship Partnership (check one) Address City State Zip Start-up Existing Business (check one) 2.Brief Description of Project in which funds would be utilized and description of business in which applicant is engaged as it relates to this project. 3.Project Funding 111, Amount of loan request$ Total Project Cost$ Use of BDF Funds(put amount allocated to each type of use,they should add up to the.Amount of Loan Request above) Real Estate costs$ Equipment costs$ 4.Employment(please count number of full time equivalent jobs) Number of existing employees with wages over$8,00 (not including fringe benefits) Number of$8.01/hour jobs to be created within three years (not including fringe benefits) Number of$8.01/hour jobs to he retained within three years (not including fringe benefits) S.Lender Information Participating Lender Bank Lender Contact Person Phone. Authorized Signature of Applicant 411 Date • RESOLUTION 98 - A RESOLUTION OF THE ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY A RESOLUTION ESTABLISHING THE TAX LEVY FOR THE ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY IN AND FOR THE CITY OF ELK RIVER, MINNESOTA WHEREAS, Minnesota Statutes, Section 469.107, Subdivision 1, authorizes the Economic Development Authority to levy an amount not to exceed .01813 percent of the taxable market value in the city to fund the Authority's anticipated budget needs for the fiscal year 1999; and, WHEREAS, the Elk River Economic Development Authority will adopt and approve its budget and will forward such to the City of Elk River pursuant to Minnesota Statutes, Section 469.100, Subdivision 2. NOW, THEREFORE, BE IT RESOLVED by the Economic Development Authority in and for the City of Elk River, Minnesota, that it hereby requests the City Council of the City of Elk River to levy a tax in the amount of.01813 percent of the taxable market value in the city less 1999 HACA certified to be $12,069 for the year 1999 for the benefit of the Authority to be used for Economic Development Authority purposes as provided by the Statute. Passed and adopted by the Elk River Economic Development Authority this 10th day of August, 1998. Henry A. Duitsman, President ATTEST: Paul T. Steinman, Executive Director • • MODIFICATIONS To the Development Program For Development District No. 1 and the TAX INCREMENT FINANCING PLAN for Tax Increment Financing District No. 20 (An Economic Development District) Economic Development Authority in and for the City of Elk River • Sherburne County City of Elk River, Minnesota Prepared: July 10, 1998 Revised: August 4, 1998 Adopted: August 24, 1998 Prepared by: City of Elk River 13065 Orono Parkway Elk River Minnesota 55330 (612)441-7420 With final review by: Doherty Rumble&Butler, PA 3500 Fifth Street Towers 150 South Fifth Street Minneapolis, Minnesota 55402-4235 (612) 340-5584 • TABLE OF CONTENTS TAX INCREMENT FINANCING PLAN FOR TAX INCREMENT FINANCING DISTRICT NO. 20 SECTION I. MODIFIED DEVELOPMENT PROGRAM FOR DEVELOPMENT DISTRICT I-1 SECTION II. TAX INCREMENT FINANCING PLAN FOR TAX INCREMENT FINANCING DISTRICT NO. 20 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. 20 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 1I-4 Section I. Sources of Revenue 1I-5 Section J. Original Tax Capacity and Tax Rate 1I-5 Section K. Amount of Captured Tax Capacity and Tax Rate II-6 Section L. Duration of the District 1I-6 Section M. Estimated Impact on Other Taxing Jurisdictions II-6 • Section N. Modifications of the Tax Increment Financing District 1I-7 Section O. Administrative Expenses II-8 Section P. Duration of Tax Increment Financing Districts 1I-8 Section Q. Limitation on Qualification of Property in Tax Increment District Not Subject to Improvement 1I-8 Section R. Limitation on the Use of Tax Increment II-9 Section S. Notification of Prior Planned Improvements II-9 Section T. Excess Tax Increments II-10 Section U. Requirement for Agreements with the Developer II-10 Section V. Assessment Agreements II-10 Section W. Administration of District and Maintenance of the Tax Increment Account II-10 Section X. Financial Reporting Requirements II-11 Section Y. Municipal Approval II-13 Section Z. County Road Costs I1-14 Section AA. Other Limitations on the Use of Tax Increment II-14 Section AB. Reduction in State Tax Increment Financing Aid 1I-15 Section AC. Economic Development and Job Creation II-15 Section AD. Summary II-16 EXHIBIT A Boundary Map of Tax Increment Financing District No. 20 A-1 • EXHIBIT B Cashflow Analysis and Base Value Analysis B-1 EXHIBIT C Minnesota Business Assistance Form 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 40,000 square foot industrial facility (TIF District No. 20). The project is proposed to include a maximum $132,000 of Tax Increment Financing, as summarized in Section G of the TIF Plan for the District. • • Development Program for Development District No.1 Page I-I • SECTION II. TAX INCREMENT FINANCING PLAN FOR TAX INCREMENT FINANCING DISTRICT NO. 20 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. To this end, the City Council established the Elk River Economic Development Authority (the "Authority"). The City faces various existing land use problems that require corrective action by the City or Authority before development by private enterprise becomes financially feasible or desirable. The Authority and City are 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 which 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. 20 ("District No. 20"). Other relevant information is contained in the Development Program for Development District No. 1, originally adopted on April 1, 1985 and subsequently modified. A modification of the Development Program is contemplated in the Tax Increment Plan. Development District No. 1 includes the area proposed for District No. 20. The Authority or the City reserves the right to approve all or a portion of the property proposed to be included in District No. 20 on the date of the first public hearing, August 24, 1998. B. STATEMENT OF OBJECTIVES District No. 20 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 40,000 square foot industrial facility. District No. 20 is expected to achieve many of the objectives set forth in the Development Program 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.20 Page II-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. 20 is owned by the Authority and is further described in this Plan. 2. Relocation - Complete relocation services are available pursuant to Minnesota Statutes, Chapter 117 and other relevant state and federal laws. 3. Upon approval of the developer's plan relating to the project and completion of the necessary legal requirements, the City or the Authority may sell to the developer selected properties it may acquire within District No. 20. 4. The City or the Authority 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. 20. 5. District No. 20 contains property zoned I-1 - Light Industrial. All development in the area will conform to applicable state and local codes and ordinances. D. LEGAL DESCRIPTION OF PROPERTY IN DISTRICT NO. 20 District No. 20 encompasses the parcel (PIN 75-427-0120) as identified below in addition to all adjacent and interior right-of-ways: Lot 2, Block 1, Elk River Industrial Park, according to the plat thereof on file and of record in the office of the County Recorder in and for Sherburne County, Minnesota. The City or the Authority reserves a right to approve all or a portion of the area of the parcels listed as being designated for District No. 20. See the map in Exhibit A for further information on the location of District No. 20. E. CLASSIFICATION OF THE TAX INCREMENT FINANCING DISTRICT The City and the Authority, 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 Tax Increment Financing District No.20 Page II-2 • District No. 20 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: 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 authority 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 and Authority staff and consultants and District No. 20 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. 20 consists of 1 parcel. 2. District No. 20 does not meet the requirements of any other Tax Increment Financing District. 3. District No. 20 will discourage commerce, industry, or manufacturing from moving their operations to another state or municipality. 4. District No. 20 will result in increased employment in the state. 5. District No. 20 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. F. PROPERTY TO BE ACQUIRED The Authority has acquired all parcels within District No. 20. • Tax Increment Financing District No.20 Page II-3 • G. ESTIMATE OF PUBLIC COSTS - USE OF FUNDS The estimated use of funds associated with District No. 20 are outlined in the following line item budget: USE OF FUNDS TOTAL Qualified Costs: Land Acquisition $ 85,000 Site Improvements $ 25,000 Public Improvements $ 0 Other Development Costs $ 12,000 Interest $ 0 Administration (up to 10%) $ 10,000 TOTAL: $ 132,000 The City or Authority reserve 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. 20. This provision does not obligate the City or Authority to incur debt. The City or Authority will issue bonds only upon determination that such action is in the best interest of the City. The City or Authority may also finance the activities to be undertaken pursuant to the Tax Increment Financing Plan through loans from funds of the City or Authority 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. 20, but within the boundaries of Development District No. 1, will be less than 20 percent of total tax increment generated by District No. 20, including administrative costs. Subject to that limitation, and the limitations as described in Section R., the tax increment from District No. 20 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). H. ESTIMATED AMOUNT OF LOAN/BONDED INDEBTEDNESS The City or Authority have 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 $500,000 to finance any or all Tax Increment Financing District No.20 Page II-4 • 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. 20. 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, the Authority, or the developer from using other funds, at its discretion, to pay such costs. SOURCES OF FUNDS TOTAL Tax Increment $ 120,000 Interest Local Contribution 12,000 Other Revenue Sources TOTAL $ 132,000 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 (ONTC) for the District No. 20 is based on the value placed on the property by the assessor in 1998 for taxes payable 1999. Pursuant to Sections 469.177, subd. 1(0, the ONTC will be increased each year by a factor which represents the average percentage increase in the estimated market value of all property in District No. 20 during the five year period before certification of District No. 20 (assessment years 1993 through 1998). The County Auditor will increase the ONTC 8.33% each year over the life of District No. 20. Average 1993 1998 Annual EMV EMV Increase % Increase Increase $40,000 $50,000 $10,000 25% 8.33% The original local tax rate for the purpose of the projecting cashflow for District No. 20 will be the tax rate for taxes payable in 1998 of 1.11504. The certified original local tax rate for District No. 20 will be the tax rate for taxes payable in 1999. Each year, the Sherburne County Auditors Office will measure the amount of increase or decrease in the total tax capacity of District No. 20 to calculate the tax increment payable to the City and the Authority. In any year in which there is an increase in total tax capacity in the tax increment financing district above the average annual percentage increase based upon the 5 years prior to • certification of the district, a tax increment will be payable. In any year in which the total tax capacity in District No. 20 declines below the original net tax capacity, no additional valuation will be captured and no tax increment will be payable. Tax Increment Financing District No.20 Page II-5 • The County Auditor shall certify in each year after the date the ONTC was certified, the amount the ONTC has increased or decreased as a result of: 1. change in tax exempt status of property; 2. reduction or enlargement of the geographic boundaries of the district; 3. change due to stipulations, adjustments, negotiated or court-ordered abatements; 4. change in the use of the property and classification; or 5. change in state law governing class rates. 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. 20, 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 2000. 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. Original Estimated Project Tax Capacity (upon completion of project) $32,310 • less: Original Tax Capacity 1,350 Estimated Captured Tax Capacity 30,960 Estimated Annual Tax Increment (CTC x Tax Rate) $34,522 L. DURATION OF THE DISTRICT Pursuant to Minnesota Statutes, Section 469.175, Subdivision 1b, the duration of District No. 20 must be indicated within the Plan. The duration of District No. 20 will be 9 years from payment of the first tax increment expected in 2000. Thus it is estimated that District No. 20, including any modifications of the Plan for subsequent phases or other changes, would terminate at the end of the year 2008. The City and the Authority reserve the right to decertify District No. 20 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. 20. After careful consideration and analysis, the Authority has determined that construction would not occur without the creation of District No. 20. 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. 20 would be as follows if the "but for" test was not met: • Tax Increment Financing District No.20 Page II-6 S IMPACT ON TAX BASE ENTITY'S ESTIMATED % OF CAPTURED TOTAL NET CAPTURED TAX CAPACITY ENTITY TAX CAPACITY TAX CAPACITY TO ENTITY TOTAL Sherburne County 58,246,430 30,960 .053% City of Elk River 12,383,123 30,960 .211% School District No. 728 26,390,619 30,960 .117% IMPACT ON TAX RATES CURRENT PERCENT CAPTURED POTENTIAL ENTITY TAX RATE OF TOTAL TAX CAPACITY TAXES Sherburne County .27253 .24 30,960 8,432 City of Elk River .26255 .24 30,960 8,129 School District No. 728 .56539 .51 30,960 17,504 Other .01475 .01 30,960 457 1111 TOTAL 1.11504 1.00 34,522 The estimates listed above display captured tax capacity when all construction is completed. The tax rates and tax capacities are the payable 1998 figures for all jurisdictions. District No. 20 will be certified under rates for tax year payable 1999 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 or Authority, increase in total estimated tax increment expenditures or designation of additional property to be acquired by the City or Authority 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 July 2003. 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 authority agrees that, notwithstanding Sections 469.177, subdivision 1, the original tax capacity will be reduced by no Tax Increment Financing District No.20 Page II-7 • more than the current tax capacity of the parcel(s) eliminated from District No. 20. The City or EDA must notify the County Auditor of any modification that reduces or enlarges the geographic area of District No. 20 or Development District No. 1. Modifications to the District No. 20, in the form of a budget modification or an expansion of the boundaries, will be recorded in this Plan. O. LIMITATION ON ADMINISTRATIVE EXPENSES In accordance with Minnesota Statutes, Section 469.174, Subdivision 14 and Minnesota Statutes, Section 469.176, Subdivision 3, administrative expenses means all expenditures of an authority other than amounts paid for the purchase of land or amounts paid to contractors or others providing materials and services, including architectural and engineering services, directly connected with the physical development of the real property in the district, relocation benefits paid to or services provided for persons residing or businesses located in the district or amounts used to pay interest on, fund a reserve for, or sell at a discount bonds issued pursuant to Section 469.178. Administrative expenses include amounts paid for services provided by bond counsel, fiscal consultants, and planning or economic development consultants. No tax increment shall be used to pay any administrative expenses for a project which exceed ten percent of the total tax increment expenditures authorized by the tax increment financing plan or the total tax increment expenditures for the project, whichever is less. Pursuant to Minnesota Statutes, Section 469.176, Subdivision 4h, tax increments may be used to pay for the county's actual administrative expenses incurred in connection with District No. 20. The county may require payment of those expenses by February 15 of the year following the year the expenses were incurred. Pursuant to Minnesota Statutes, Section 469.177, Subd. 11, the County Treasurer shall deduct an amount equal to .25 percent of any increment distributed to the City or Authority and the County Treasurer shall pay the amount deducted to the State Treasurer for deposit in the state general fund. 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 or Authority 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 authority has acquired property within the district; or (3) the authority has constructed or caused to be constructed public improvements within the district. The City or Authority must therefore issue bonds, or acquire property, or construct or cause public improvements to be constructed in District No. 20 by approximately February, 2001. 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 Tax Increment Financing District No.20 Page II-8 • 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 authority 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 the authority 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 authority 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 III 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. 20 will be paid by Sherburne County to the City of Elk River for the Tax Increment Fund of said District No. 20. The City or Authority 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, public improvements, demolition and relocation, site preparation, and administration. Remaining increment funds will be used for City or Authority administration (up to 10 percent) and the costs of public improvement activities outside District No. 20 (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 and the Authority have reviewed the area to be included in District No. 20 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 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 IIIvaluation of the improvements for which the building permit was issued. Tax Increment Financing District No.20 Page II-9 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 or Authority 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 Authority 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 or Authority 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 or Authority to demonstrate the conformance of the development with City plans and ordinances. The City or Authority may use the Agreement to address other issues related to the development. The requirements to be imposed upon the Developer and the City's or Authority's exact participation in the project will be negotiated as part of the Redevelopment Agreement between the City or the Authority and the Developer. V. ASSESSMENT AGREEMENTS Pursuant to Minnesota Statutes, Section 469.177, Subdivision 8, the City or Authority 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. 20. 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. W. ADMINISTRATION OF DISTRICT AND MAINTENANCE OF THE TAX INCREMENT ACCOUNT • Administration of District No. 20 will be handled by the Executive Director of the Authority. The Tax Increment Financing District No.20 Page II-10 • tax increment received as a result of increases in the tax capacity of District No. 20 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 Minnesota Statutes, Section 469.175, Subdivisions 5, 6, and 6(a); the City or Authority must file an annual disclosure report for all tax increment financing districts with the State Auditor, the county board, county auditor, and school board. Pursuant to Section 469.175, Subd. 5, of the Tax Increment Financing Act, the City or Authority must file an annual disclosure report for the Tax Increment Financing District. The report shall be filed with the State Auditor, the county board, county auditor, and school board on or before July 1 of each year. The report to be filed by the City or Authority shall include the following information: 1. the amount and source of revenue in the tax increment account; 2. the amount and purpose of expenditures from the account; 3. the amount of any pledge of revenues, including principal and interest, on any outstanding bond indebtedness; 4. the original net tax capacity of the Tax Increment Financing District; 5. the captured net tax capacity retained by the City; 6. the captured net tax capacity shared with other taxing districts; • 7. the tax increment received; 8. any additional information necessary to demonstrate compliance with the tax increment financing plan. Section 469.175, Subd. 5, of the Tax Increment Financing Act also provides that an annual statement showing the tax increment received and expended in that year, the original net tax capacity, captured net tax capacity, amount of outstanding bonded indebtedness, the amount of the district's increments paid to other governmental bodies, the amount paid for administrative costs, the sum of increments paid, directly or indirectly, for activities and improvements located outside of the district, and any additional information the City or Authority deems necessary shall be published in a newspaper of general circulation in the City. Pursuant to Minnesota Statutes, Section 469.175, Subd. 6, of the Tax Increment Financing Act, the City or Authority must annually submit to the State Auditor, on or before July 1, a financial report which shall: 1. provide for full disclosure of the sources and uses of the public funds in the district; 2. permit comparison and reconciliation with the City's accounts and financial reports; 3. permit auditing of the funds expended on behalf of the tax increment district, including a single district that is part of a multi district project or that is funded in part or whole through the use of a development account funded with tax increments from other districts or with other public money; and 4. be consistent with generally accepted accounting principles. S Tax Increment Financing District No.20 Page II-11 • The financial report must also include the following: 1. the original net tax capacity of District No. 20; 2. the captured net tax capacity of the District No. 20, including the amount of any captured net tax capacity shared with other taxing districts; 3. for the reporting period and for the duration of District No. 20, the amount budgeted under the tax increment financing plan, and the actual amount expended for, at least, the following categories: a. acquisition of land and buildings through condemnation or purchase; b. site improvements or preparation costs; c. installation of public utilities, parking facilities, streets, roads, sidewalks, or other similar public improvements; d. administrative costs, including the allocated cost of the authority; e. public park facilities, facilities for social, recreational, or conference purposes, or other similar public improvements; and 4. the total cost of the property to the authority and the price paid by developers (for properties sold to developers); 5. the amount of increments rebated or paid to developers or property owners for privately financed improvements or other qualifying costs, other than those reported under clause (3), that were issued on behalf of private entities for facilities located in District No. 20. Pursuant to Minnesota Statutes, Section 469.175, subdivision 6a, the City or Authority must also • annually report to the State Auditor before or on July 1 of each year the following amounts for the entire City or EDA: 1. the total principal amount of nondefeased tax increment financing bonds that are outstanding at the end of the previous calendar year; and 2. the total annual amount of principal and interest payments that are due for the current calendar year on (i) general obligation tax increment financing bonds and (ii) other tax increment financing bonds. and for each tax increment financing district within the City: 1. the type of tax increment financing district; 2. the date on which the district is required to be decertified; 3. the amount of any payments and the value of in-kind benefits, such as physical improvements and the use of building space, that are financed with revenues derived from increments and are provided to another governmental unit (other than the municipality) during the preceding calendar year; 4. the tax increment revenues for taxes payable in the current calendar year; 5. whether the tax increment financing plan or other governing document permits increment revenues to be expended outside of District No. 20; 6. any additional information that the State Auditor may require. Copies of this report must also be provided to the county and school district boards. Tax Increment Financing District No.20 Page II-12 • Y. MUNICIPAL APPROVAL Pursuant to Minnesota Statutes, Section 469.175, Subdivision 3, before or at the time of approval of the tax increment financing plan for District No. 20, the municipality shall make the following findings and shall set forth in writing the reasons and supporting facts for each determination. 1. Finding that the Tax Increment Financing District No. 20 is an economic development district as defined in Minnesota Statutes, Section 469.174, Subd. 12. District No. 20 consists of 1 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 and the Authority, 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. 20 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. 20 and the use of tax increments has been performed as described above. 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 that 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. 20 permitted by the Tax Increment Financing Plan (see cashflows in Appendix C). 3. Finding that the Tax Increment Financing Plan for District No. 20 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 28, 1998, for conformance with the general development plan of the City. 4. Finding that the Tax Increment Financing Plan for Tax Increment Financing District No. 20 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. 20 will result in increased Tax Increment Financing District No.20 Page II-I3 • 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. Z. COUNTY ROAD COSTS Pursuant to Minnesota Statutes, Section 469.175, Subdivision 1 a, the county board may require the authority 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, the Authority, 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. The revenues shall be used to finance or otherwise pay public capital and administration costs pursuant to Minnesota Statutes, Section 469.124 through 469.134. These revenues shall not be used to circumvent existing levy limit law. No revenues derived from tax increment shall be used for the construction, renovation, operation or maintenance of a building to be used primarily and regularly for conducting the business of a municipality, county, school district, or any other local unit of government or the state or federal government; 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. 2. Pooling Limitations. At least 80 percent of tax increments from District No. 20 must be expended on activities in District No. 20 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. 20 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. 20. 3. Five Year Limitation on Commitment of Tax Increments. Tax Increments derived from District No. 20 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 Tax Increment Financing District No.20 Page II-14 • of District No. 20, 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. 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 or • Authority, 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 Authority elects to make the annual local contribution to the project to exempt itself from the LGA-HACA penalty. The City or Authority will pay for costs of the project described in this Plan, in an amount equal to 10 percent of annual tax increment for District No. 20, 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 Authority or other unit of government with unrestricted funds. AC. ECONOMIC DEVELOPMENT AND JOB CREATION To the extent applicable, the City agrees to comply with Minnesota Statutes, Section 116J.991, which states that a business receiving state or local government assistance for economic development or job growth purposes, including tax increment financing, must create a net increase in jobs and meet wage level goals in Minnesota within two years of receiving assistance (See Appendix C). • Tax Increment Financing District No.20 Page II-15 • AD. SUMMARY The City of Elk River is establishing Tax Increment Financing District No. 20 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. 20 was prepared by the City of Elk River, 13065 Orono Parkway, Elk River, Minnesota 55330, telephone (612) 441-7420. • • Tax Increment Financing District No.20 Page 1I-16 • EXHIBIT A Boundary Map of Tax Increment Financing District No. 20 TIF DISTRICT NO. 20 BOUNDARY MAP N. 1/2 S.W. 1/4 SEC. 28 T. 33 N., R. 26 W. 1— a � 75-13.421,3 1 75-1211-X101 \ ... flfwl !II (awn 1 WO \ /1 fPol. —.. ELK ' 34.10-0.10IE - /s-.n-0M //-sasml0 wa 1 RIVER I ♦h It a• t TJ-520-0. ALL—LAND i ill INDUSTRIAL 1 , m-1a/-ao was & ' 2 >raw..c1 .rau-w! Y 9t ; I ADDITION \ Z4 72.4.10-000 PARK 1 ry a 4 INDUSTRIAL, ro-ar-ws ,yF SECOND a n-ms-ms i n-u.-4 VII 4 a \itcsMN �1 3-.r.-mw our 3.0.10 ® ADDITION I ' . .. 1.a _...,. mw A II Tax Increment Financing District No.20 Page A-1 • EXHIBIT B Cashflow Analysis and Base Value Analysis • • Tax Increment Financing District No.20 Page B-1 EXHIBIT B, PG. 1 TIF DISTRICT NO. 20 (Supermats) CASH FLOW ASSUMPTIONS 411 Pay-As-You-Go Interest Rate 0.00% Tax Extension Rate 1.11504 Pay 98 Inflation Rate 0.00% VALUE/RATE/CAPACITY Base Effective Tax Value Rate Capacity Value Information 50,000 2.70% 1,350 Pay 98 PROJECT INFORMATION Type of Total Taxes Per Total Tax Market Date Use Sq. Ft. Sq. Ft. Taxes Capacity Value Payable Industrial 38,000 $0.95 36,027 32,310 1,102,000 2000 Totals 38,000 36,027 32,310 1,102,000 BUT FOR ANALYSIS Current Market Value-Estimate 50,000 New Market Value-Estimate 1,102,000 Difference 1,052,000 Present Value at 0.00% 303,596 Difference 748,404 Value Likely to Occur Without TIF 0 Difference 748,404 • LOCAL MATCH ANALYSIS City contribution to project 12,000 Other contribution to project 0 Total local match to project 12,000 IMPACT ANALYSIS TAX CAPACITIES SHERBURNE 58,246,430 30,960 0.053% ELK RIVER 12,383,123 30,960 0.250% DISTRICT 728 26,390,619 30,960 0.117% TAX RATES SHERBURNE 0.272350 30,960 8,432 ELK RIVER 0.262550 30,960 8,129 DISTRICT 728 0.565390 30,960 17,504 OTHER 0.014750 30,960 457 TOTALS 1.115040 34,522 Cashflow analysis prepared by CITY OF ELK RIVER 7/21/98 EXHIBIT B, PG. 2 TIF DISTRICT NO. 20 CASH FLOW ANALYSIS PERIOD BEGINNING Base Project Captured Inflation Semi-Annual Admin. Local Match Total Increment PERIOD ENDING Tax Tax Tax Rate Gross Tax at at Minus Admin 41110 Mth. Yr. Capacity Capacity Capacity 0.00% Increment 10.00% 10.00% Plus Local Match Yrs. Mth. Yr. 07-01 1997 1,350 0 0 0 0 0 0 0 0.0 12-01 1997 0.0 12-01 1997 1,350 0 0 0 0 0 0 0 0.0 07-01 1998 0.0 07-01 1998 1,350 0 0 0 0 0 0 0 0.0 12-01 1998 0.0 12-01 1998 1,350 0 0 0 0 0 0 0 0.0 07-01 1999 0.0 07-01 1999 1,350 0 0 0 0 0 0 0 0.0 12-01 1999 0.0 12-01 1999 1,350 0 0 0 0 0 0 0 0.0 07-01 2000 0.0 07-01 2000 1,462 32,310 30,848 0 17,198 (1,720) 1,720 17,198 0.5 12-01 2000 0.5 12-01 2000 1,462 32,310 30,848 0 17,198 (1,720) 1,720 17,198 1.0 07-01 2001 1.0 07-01 2001 1,584 32,310 30,726 0 17,130 (1,713) 1,713 17,130 1.5 12-01 2001 1.5 12-01 2001 1,584 32,310 30,726 0 17,130 (1,713) 1,713 17,130 2.0 07-01 2002 2.0 07-01 2002 1,716 32,310 30,594 0 17,057 (1,706) 1,706 17,057 2.5 12-01 2002 2.5 12-01 2002 1,716 32,310 30,594 0 17,057 (1,706) 1,706 17,057 3.0 07-01 2003 3.0 07-01 2003 1,859 32,310 30,451 0 16,977 (1,698) 1,698 16,977 3.5 12-01 2003 3.5 12-01 2003 1,859 32,310 30,451 0 16,977 (1,698) 1,698 16,977 4.0 07-01 2004 4.0 07-01 2004 2,014 32,310 30,296 0 16,891 (1,689) 1,689 16,891 4.5 12-01 2004 4.5 12-01 2004 2,014 32,310 30,296 0 16,891 (1,689) 1,689 16,891 5.0 07-01 2005 5.0 07-01 2005 2,182 32,310 30,128 0 16,797 (1,680) 1,680 16,797 5.5 12-01 2005 5.5 12-01 2005 2,182 32,310 30,128 0 16,797 (1,680) 1,680 16,797 6.0 07-01 2006 6.0 07-01 2006 2,364 32,310 29,946 0 16,696 (1,670) 1,670 16,696 6.5 12-01 2006 6.5 12-01 2006 2,364 32,310 29,946 0 16,696 (1,670) 1,670 16,696 7.0 07-01 2007 7.0 07-01 2007 2,560 32,310 29,750 0 16,586 (1,659) 1,659 16,586 7.5 12-01 2007 7.5 12-01 2007 2,560 32,310 29,750 0 16,586 (1,659) 1,659 16,586 8.0 07-01 2008 8.0 07-01 2008 2,774 32,310 29,536 0 16,467 (1,647) 1,647 16,467 8.5 12-01 2008 8.5 12-01 2008 2,774 32,310 29,536 0 16,467 (1,647) 1,647 16,467 9.0 07-01 2009 9.0 07-01 2009 12-01 2009 9.5 12-01 2009 07-01 2010 10.0 07-01 2010 12-01 2010 10.5 12-01 2010 07-01 2011 11.0 07-01 2011 12-01 2011 11.5 12-01 2011 07-01 2012 12.0 07-01 2012 12-01 2012 12.5 12-01 2012 07-01 2013 13.0 07-01 2013 12-01 2013 13.5 12-01 2013 07-01 2014 14.0 07-01 2014 12-01 2014 14.5 12-01 2014 07-01 2015 ch07-01 2015 12-01 2015 12-01 2015 07-01 2016 07-01 2016 12-01 2016 16.5 12-01 2016 07-01 2017 17.0 07-01 2017 12-01 2017 17.5 12-01 2017 07-01 2018 18.0 07-01 2018 12-01 2018 18.5 12-01 2018 07-01 2019 19.0 07-01 2019 12-01 2019 19.5 12-01 2019 07-01 2020 20.0 07-01 2020 12-01 2020 20.5 12-01 2020 07-01 2021 21.0 07-01 2021 12-01 2021 21.5 12-01 2021 07-01 2022 22.0 07-01 2022 12-01 2022 22.5 12-01 2022 07-01 2023 23.0 07-01 2023 12-01 2023 23.5 12-01 2023 07-01 2024 24.0 07-01 2024 12-01 2024 24.5 12-01 202407-01 2025 _ Totals 303,596 (30,360) 30,360 303,596 Total Net Present Value 303,596 (30,360) 30,360 303,596 • Cashflow analysis prepared by CITY OF ELK RIVER 7/21/98 EXHIBIT B, PG. 3 TIF DISTRICT NO. 20 AMORTIZATION SCHEDULE PERIOD BEGINNING Semi-Annual Accrued Note Costs Qualified PERIOD ENDING Principal Interest P&I Net Interest Balance Incurred Costs fib Mth. Yr. Revenue Outstanding Yrs. Mth. Yr. 07-01 1997 0 0 0 0 0 0.0 12-01 1997 0.0 12-01 1997 0 0 0 0 0 0.0 07-01 1998 0.0 07-01 1998 0 0 0 0 85,000 85,000 Land 0.0 12-01 1998 0.0 12-01 1998 0 0 0 0 0 110,000 25,000 Site improve's 0.0 07-01 1999 0.0 07-01 1999 0 0 0 0 0 110,000 0.0 12-01 1999 0.0 12-01 1999 0 0 0 0 0 110,000 0.0 07-01 2000 0.0 07-01 2000 15,478 0 15,478 15,478 0 94,522 0.5 12-01 2000 0.5 12-01 2000 15,478 0 15,478 15,478 0 79,043 1.0 07-01 2001 1.0 07-01 2001 15,417 0 15,417 15,417 0 63,626 1.5 12-01 2001 1.5 12-01 2001 15,417 0 15,417 15,417 0 48,209 2.0 07-01 2002 2.0 07-01 2002 15,351 0 15,351 15,351 0 32,858 2.5 12-01 2002 2.5 12-01 2002 15,351 0 15,351 15,351 0 17,507 3.0 07-01 2003 3.0 07-01 2003 15,279 0 15,279 15,279 0 2,228 3.5 12-01 2003 3.5 12-01 2003 2,228 0 2,228 15,279 0 0 4.0 07-01 2004 4.0 07-01 2004 0 0 0 0 0 0 4.5 12-01 2004 4.5 12-01 2004 0 0 0 0 0 0 5.0 07-01 2005 5.0 07-01 2005 0 0 0 0 0 0 5.5 12-01 2005 5.5 12-01 2005 0 0 0 0 0 0 6.0 07-01 2006 6.0 07-01 2006 0 0 0 0 0 0 6.5 12-01 2006 6.5 12-01 2006 0 0 0 0 0 0 7.0 07-01 2007 7.0 07-01 2007 0 0 0 0 0 0 7.5 12-01 2007 7.5 12-01 2007 0 0 0 0 0 0 8.0 07-01 2008 8.0 07-01 2008 0 0 0 0 0 0 8.5 12-01 2008 8.5 12-01 2008 0 0 0 0 0 0 9.0 07-01 2009 9.0 07-01 2009 12-01 2009 9.5 12-01 2009 07-01 2010 10.0 07-01 2010 12-01 2010 10.5 12-01 2010 07-01 2011 11.0 07-01 2011 12-01 2011 11.5 12-01 2011 07-01 2012 12.0 07-01 2012 12-01 2012 12.5 12-01 2012 07-01 2013 13.0 07-01 2013 12-01 2013 13.5 12-01 2013 07-01 2014 14.0 07-01 2014 12-01 2014 14.5 12-01 2014 07-01 2015 IP07-01 2015 12-01 2015 12-01 2015 07-01 2016 07-01 2016 12-01 2016 16.5 12-01 2016 07-01 2017 17.0 07-01 2017 12-01 2017 17.5 12-01 2017 07-01 2018 18.0 07-01 2018 12-01 2018 18.5 12-01 2018 07-01 2019 19.0 07-01 2019 12-01 2019 19.5 12-01 2019 07-01 2020 20.0 07-01 2020 12-01 2020 20.5 12-01 2020 07-01 2021 21.0 07-01 2021 12-01 2021 21.5 12-01 2021 07-01 2022 22.0 07-01 2022 12-01 2022 22.5 12-01 2022 07-01 2023 23.0 07-01 2023 12-01 2023 23.5 12-01 2023 07-01 2024 24.0 07-01 2024 12-01 2024 24.5 12-01 2024 07-01 2025 Totals 110,000 0 110,000 123,051 0 0 • Cashflow analysis prepared by CITY OF ELK RIVER 7/21/98 EXHIBIT B, PG. 4 TIF DISTRICT NO. 20 SCHEDULED PAYMENTS PERIOD BEGINNING Scheduled Payment Payment Local Match Local Match Local Match PERIOD ENDING Payment To EDA To EDA at Paid up-front Owed 0 Mth. Yr. Date 10%Admin Dev.Costs 10.00% Yrs. Mth. Yr. 07-01 1997 0 0 0 0 0.0 12-01 1997 0.0 12-01 1997 0 0 0 0 0.0 07-01 1998 0.0 07-01 1998 0 0 0 0 0.0 12-01 1998 0.0 12-01 1998 0 0 0 0 0.0 07-01 1999 0.0 07-01 1999 0 0 0 0 0.0 12-01 1999 0.0 12-01 1999 0 0 0 0 0.0 07-01 2000 0.0 07-01 2000 09-01 1,720 15,478 1,720 0 1,720 0.5 12-01 2000 0.5 12-01 2000 12-30 1,720 15,478 1,720 0 1,720 1.0 07-01 2001 1.0 07-01 2001 09-01 1,713 15,417 1,713 0 1,713 1.5 12-01 2001 1.5 12-01 2001 12-30 1,713 15,417 1,713 0 1,713 2.0 07-01 2002 2.0 07-01 2002 09-01 1,706 15,351 1,706 0 1,706 2.5 12-01 2002 2.5 12-01 2002 12-30 1,706 15,351 1,706 0 1,706 3.0 07-01 2003 3.0 07-01 2003 09-01 1,698 15,279 1,698 0 1,698 3.5 12-01 2003 3.5 12-01 2003 12-30 1,698 2,228 1,698 0 1,698 4.0 07-01 2004 4.0 07-01 2004 09-01 0 0 0 0 0 4.5 12-01 2004 4.5 12-01 2004 12-30 0 0 0 0 0 5.0 07-01 2005 5.0 07-01 2005 09-01 0 0 0 0 0 5.5 12-01 2005 5.5 12-01 2005 12-30 0 0 0 0 0 6.0 07-01 2006 6.0 07-01 2006 09-01 0 0 0 0 0 6.5 12-01 2006 6.5 12-01 2006 12-30 0 0 0 0 0 7.0 07-01 2007 7.0 07-01 2007 09-01 0 0 0 0 0 7.5 12-01 2007 7.5 12-01 2007 12-30 0 0 0 0 0 8.0 07-01 2008 8.0 07-01 2008 09-01 0 0 0 0 0 8.5 12-01 2008 8.5 12-01 2008 12-30 0 0 0 0 0 9.0 07-01 2009 9.0 07-01 2009 12-01 2009 9.5 12-01 2009 07-01 2010 10.0 07-01 2010 12-01 2010 10.5 12-01 2010 07-01 2011 11.0 07-01 2011 12-01 2011 11.5 12-01 2011 07-01 2012 12.0 07-01 2012 12-01 2012 12.5 12-01 2012 07-01 2013 13.0 07-01 2013 12-01 2013 13.5 12-01 2013 07-01 2014 14.0 07-01 2014 12-01 2014 1. 5 12-01 2014 07-01 2015 07-01 2015 12-01 2015 12-01 2015 07-01 2016 .0 07-01 2016 12-01 2016 16.5 12-01 2016 07-01 2017 17.0 07-01 2017 12-01 2017 17.5 12-01 2017 07-01 2018 18.0 07-01 2018 12-01 2018 18.5 12-01 2018 07-01 2019 19.0 07-01 2019 12-01 2019 19.5 12-01 2019 07-01 2020 20.0 07-01 2020 12-01 2020 20.5 12-01 2020 07-01 2021 21.0 07-01 2021 12-01 2021 21.5 12-01 2021 07-01 2022 22.0 07-01 2022 12-01 2022 22.5 12-01 2022 07-01 2023 23.0 07-01 2023 12-01 2023 23.5 12-01 2023 07-01 2024 24.0 07-01 2024 12-01 2024 24.5 12-01 2024 07-01 2025 Totals 13,672 110,000 13,672 Total Net Present Value 13,672 110,000 13,672 • Cashflow analysis prepared by CITY OF ELK RIVER 7/21/98 �I I • EXHIBIT C Minnesota Business Assistance Form (Minnesota Department Of Trade And Economic Development) • • Tax Increment Financing District No.20 Page C-1 .AAAA.,, of•ctade moo!.. 0 0 • a -_ J-- -.: Minnesota Business Assistance Form* 44 2 i;,. °' Minnesota Department of Trade and Economic Development *...)4,,,,Sa�A 444 Please type or print in dark ink. 1.Funding government agency name 2.Agency street address 3.City 4.Zip Code 5.Phone number(area code) 6.Fax number(area code) 7.Contact name 8.Type of government agency _City _County _Regional _State Other(Please indicate) 9.Name of TIF district(if applicable) • • 10.Name of business receiving assistance 11.Date business received assistance 12.Job creation goals for business receiving assistance 13.Hourly wage level goals for business receiving assistance 14.Actual jobs created since business received assistance 15.Actual average hourly wage paid to employees hired since business received assistance 16.Last date actual wage and job creation levels documented *Please complete one form for each business project your agency assisted with$25,000 or more in public funds. Please send completed form annually by March 1 to: or fax report to: Minnesota Business Assistance Form (612)296-1290 Minnesota Department of Trade and Economic Development 0 500 Metro Square For information,call: 121 East 7th Place (612) 297-1291 or 1-800-657-3858 St.Paul,Minnesota 55101 • RESOLUTION 98 - ECONOMIC DEVELOPMENT AUTHORITY CITY OF ELK RIVER COUNTY OF SHERBURNE STATE OF MINNESOTA RESOLUTION MODIFYING DEVELOPMENT DISTRICT NO. 1 AND ADOPTING THE DEVELOPMENT PROGRAM THEREFOR;AND ESTABLISHING WITHIN DEVELOPMENT DISTRICT NO. 1, TAX INCREMENT FINANCING DISTRICT NO. 20,AND ADOPTING THE RELATED TAX INCREMENT FINANCING PLAN THEREFOR BE IT RESOLVED by the Board of Commissioners (the "Board") of the City of Elk River Economic Development Authority ("EDA") of the City of Elk River, Minnesota ("City") as follows: Section 1. - Recitals. 1.01. It has been proposed that the EDA modify Development District No. 1 and adopt the Development Program therefor and establish within Development • District No. 1, Tax Increment Financing District No. 20 ("District No. 20"), and adopt the related Tax Increment Financing Plan therefor (collectively, the "Program" and"Plan"); all pursuant to and in conformity with existing law, including Minnesota Statutes, Sections 469.090 through 469.1081 and 469.174 through 469.179, inclusive, as amended, all as reflected in the Program and Plan and presented for the Board's consideration. 1.02. The Board has investigated the facts relating to the Program and Plan and has caused the Program and Plan to be prepared. 1.03. The EDA has performed all actions required by law to be performed prior to the adoption of the Program and Plan by the City, including, but not limited to, notification of Sherburne County and School District No. 728 having taxing jurisdiction over the property included in District No. 20, review of and written comment on the Program and Plan by the City Planning Commission, and a request that the Council schedule a public hearing on the Program and Plan upon published notice as required by law. Section 2. - Findings for the Adoption and Approval of the Program and Plan. 2.01. The Board hereby finds that District No. 20 is in the public interest and is an "Economic Development District" under Minnesota Statutes, Section 469.174, subd. 12, and finds that the adoption of the proposed Program and Plan will advance the EDA's and City's objectives of encouraging development within Development District No. 1. • 2.02. The EDA further finds that the proposed development, in the opinion of the EDA, would not occur solely through private investment within the reasonably foreseeable future and that the increased market value on the site that could reasonably 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 increment for the maximum duration of District No. 20 permitted by the Tax Increment Financing Plan, that the Program and Plan was reviewed by the City Planning Commission on July 28, 1998, and by resolution was found to be in conformance to the general plan for the development or redevelopment of the City as a whole; and that the Program and Plan will afford maximum opportunity consistent with the sound needs of the City as a whole, for the development of District No. 20 by private enterprise. 2.03. The EDA further finds that the Program and Plan, are intended and, in the judgment of the EDA, the effect of such actions will be, to provide an impetus for development in the public purpose and accomplish certain objectives as specified in the Program and Plan, which are hereby incorporated herein. Section 3. -Approval and Adoption of the Program and Plan. 3.01. Conditioned upon the approval thereof by the City Council following its public hearing thereon, the Program and Plan as presented to the EDA on this date, are hereby approved, established, and adopted. 3.02. The staff, the EDA's advisors and legal counsel are authorized and directed to proceed with the implementation of the Program and Plan and for this purpose to negotiate, draft, prepare, and present to this Board for its consideration all further Plans, Resolutions, Documents, and Contracts necessary for this purpose. Approval of the Program and Plan does not constitute approval of any project or a Development Agreement with any developer. 3.03. Upon approval of the Program and Plan by the City Council, the Executive Director of the EDA is authorized to forward a copy of the Program and Plan to the Sherburne County Auditor and the Minnesota Department of Revenue pursuant to Minnesota Statutes, Section 469.175, subd. 2. Approved by the Board of Commissioners of the Elk River Economic Development Authority this 10th day of August, 1998. Henry A. Duitsman, President ATTEST: • Paul T. Steinman, Executive Director