3.0. EDSR 10-12-1998 ,--Q --'\
MEMORANDUM
liry of ,,
lk TO: Economic Development Authority
FROM: Paul T. Steinman, Director of Economic
Development
DATE: October 12, 1998
SUBJECT: Worksession Agenda Memo
Hohlen/Vandenberg Property Mixed Use Development
Issue
The purpose of this worksession is to discuss, in concept, tax increment
issues relating to the Hohlen/Vandenberg mixed use commercial/industrial
development project.
Overview
• Tax Increment Financing District No. 19 has been established to include
approximately 68 acres of Earl Hohlen property and 40 acres of Vandenberg
property lying west of and adjacent to the newly proposed Tyler Street - east
of 169. TIF District 19 also includes all of the public rights of way adjacent
to these two properties including portions of County Road 12, the intersection
of Main Street/Highway 169, and Highway 169. TIF District No. 19 is a
redevelopment tax increment district, allowing for the collection of increment
for a maximum term of 25 years. The EDA has the ability to use the
increment generated in the following manner:
• provide increment to the developer to pay for qualified and eligible
activities - land, site improvements, public improvements, wetland
remediation
• provide increment to the city for various qualified and eligible tax
increment activities - public improvements
• up to 10 percent of the increment generated can be used to pay
administrative costs.
There is a penalty, defined as a "local contribution," imposed upon cities for
the creation of tax increment districts. The penalty for TIF District No. 19 is
IDequal to 5 percent of the tax increment expended from the District. This 5
13065 Orono Parkway • P.O. Box 490 • Elk River,MN 55330 • TDD &Phone: (612)441-7420 • Fax: (612)441-7425
• percent penalty is mandated to come from any source other than tax
increment itself. This so called penalty can be provided up front as part of
the city's participation in the overall project. Staff is continuing to research
options regarding this issue.
Background
The developer has submitted a final tax increment request for the entire
project, including industrial, in the amount of approximately $5.5 million. A
majority of this request relates specifically to the 40 acre industrial park.
The request breaks down as follows:
• commercial piece - $2.6 million
• industrial piece - $2.9 million.
The tax increment request to build the industrial park includes dollars for
land purchase, site improvements, grading, wetland remediation, and
construction of internal road/sewer/water to serve the industrial park. It is
proposed that a portion of these industrial costs would be provided to the
developer on a pay-as-you-go basis and a small percentage (the internal
public improvements) would be provided up front.
• The commercial request of approximately $2.6 million is a bit more
challenging in that it is a specific request for tax increment dollars for a
commercial project. The two projects are tied together, however, in that if the
commercial component of the project cannot proceed, the industrial park will
not be developed. In this case, the EDA and staff have felt that providing
some justified tax increment to the commercial piece is worthwhile to spur
development of the 40 acre industrial park.
Most of the $2.6 million commercial component tax increment request is
shown to pay the public improvement costs associated with this District.
This is a well defined line in our discussion with the developer. The
developer has indicated that with the development constraints of this project
they need increment to write down the cost of some private improvements
(i.e. site preparation), in addition to their request for dollars for public
improvements.
The city has potential to benefit from increment in TIF 19 to pay some of its
various public improvement costs associated with the project and overall
eastern area utility expansion. One example of such public improvement is
construction of a lift station. The lift station is proposed to be constructed
within the boundaries of the TIF District, but will serve to benefit a much
• larger area.
• Conclusion
The mechanics of this process over the next several months include the
continued discussion of a development agreement, including the provision of
a specific amount of tax increment. The EDA may have a couple
development agreements - one with Associated Developers and a second with
AmCon for construction of the industrial park. Staff would recommend the
EDA plan another worksession prior to the November EDA meeting for
continued discussion of these issues.
If EDA/Councilmembers wish to discuss the more specific details of the
ongoing negotiations, please feel free to call me any time at 441-4905.
•
•
•
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SITE LOCATION MAP
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CONSULTING ENGINEERS