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10.0. EDSR 06-12-1995 ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY MEMORANDUM TO: Economic Development Authority FROM: William Rubin,Executive Directofl DATE: June 12, 1995 '/ vv SUBJECT: EDA Public Hearing on Tax Increment Financing Plan for Tax Increment Financing District No. 12 (Mowry/Neos, Inc. Expansion Project) Introduction At its May 8 meeting, the Elk River EDA authorized a public hearing for June 12, 1995, to consider a Tax Increment Financing Plan for Tax Increment Financing District No. 12. • Background The Request for Assistance/Revision to Project Size The request for tax increment financing assistance comes from Mr. Jack T. Mowry/ Neos, Inc., 12797 Meadowvale Road. Mr. Mowry is president of Neos, Inc. He is also the owner of Metal Craft Machine and Engineering, 12797 Meadowvale Road. Neos designs and builds machinery specializing in packaging machinery. Newly expanded space would enable Neos to grow; its vacated space within the Metal Craft building would also allow that company to meet its demands for continued growth. Initially, the Mowry/Neos expansion called for the construction of a 16,000 square foot office and manufacturing facility to be located on Lots 6 and 7, Block 1, McChesney Industrial Park. The Tax Increment Financing Plan for Tax Increment Financing District No. 12 reflects a 16,000 square foot facility and its respective valuation of approximately$585,000. At this writing, Mr. Mowry is now proposing the construction of a 12,000 square foot facility with a finished valuation between $300,000 and $325,000 (excluding land value). In the interest of time, these revisions are not reflected in the draft Tax Increment Financing Plan. Instead, a revised Exhibit D reflects a lower finished market valuation. The lower valuation requires the City/EDA to P.O. Box 490 • 13065 Orono Parkway • Elk River, MN 55330-1743 • (612) 441-7420 • Fax: (612) 441-7425 Equal Opportunity Housing and Equal Opportunity Employment EDA Public Hearing on TIF No. 12 Page 2 collect two additional years of increments in order to pay down the project • debt. Other components of the original facility remain intact. This includes a profit business incubator with shared clerical service, copiers, faxes, and conference room, etc. In addition, other space within the facility will be leased to other manufacturing operations. The facility will be constructed of block, similar to the Fairview Northland clinic, or of tilt-up panels. The sidewalls will be high enough to allow for a mezzanine level. Mowry/Neos seeks $80,000 in tax increment financing assistance to support its proposed facility. Tax increment funds would be used to "write down" the cost of the land, and for general site development and site preparation costs associated with this project. At the May 8 EDA meeting, the proposed TIF assistance concept was for the EDA to acquire the property on behalf of Mowry/Neos. This concept requires the HRA to borrow these funds and to repay principal and interest. The cost of borrowed funds and interest charges results in extending the life of the TIF District. An alternative financing technique that has been discussed with Mr. Mowry is that of"pay-as-you-go" TIF assistance. Under this option, Mowry/Neos absorbs the cost of site acquisition and site preparation. However, as the new facility begins generating taxes, the city rebates the new property taxes (otherwise known as the tax increment) back to Mowry/Neos twice a year -:in July and in • December. This option has several advantages; the EDA is not forced to borrow funds, the life of the TIF District is much shorter not having to incur interest charges, and while the expanding company absorbs these extra carrying costs, the city/EDA is still able to participate in the retention of existing companies as well as the attraction of new ones. The Jarmoluk Dental Center was structured as a "pay-as-you-go" TIF District. Jobs Created and Retained According to the application for tax increment financing assistance, Neos would retain five existing jobs and create six new ones. Prospective tenants would likely retain another eleven existing jobs and create ten new ones. Recently adopted state legislation dubbed the "corporate welfare/living wage bill" requires that businesses which receive assistance, including tax increment financing assistance, in excess of$25,000 must create a net increase in jobs in Minnesota within two years of receiving the assistance. Job creation goals must be reported to the Department of Trade and Economic Development(DTED). If these goals are not met, the business must repay the assistance. The Mowry/Neos tax increment financing assistance would fall within the provisions of this legislation. • EDA Public Hearing on TIF No.`12 Page 3 Type of TIF District/Consequences SIn order to honor the request for tax increment financing assistance, the EDA would create an"Economic Development TIF District." These districts are designed to last a short period of time - a maximum of eleven years during which time property taxes(otherwise known as tax increments) can be collected for a period of nine years. In accordance with 1990 legislation, a consequence of creating a new TIF District is that of a local government aid (LGA) loss. The rule-of-thumb calculation used to estimate the LGA loss is thirty-five percent of the gross taxes generated within a respective TIF District. The calculation for the Mowry/Neos TIF District is estimated as follows: Tax Capacity of$15,650 times 1995 tax capacity rate of 1.04247 equals $16,315 times 35% equals a local government aid loss of approximately $5,710 per year. It is estimated that the Mowry/Neos TIF District would generate tax increment payments for a period of six years (from 1997 through 2002, inclusive) in order to repay the $80,000 TIF grant. Therefore, total local government aid losses are estimated as follows: $5,710 per year times six years equals $34,260 IDWorkshop Revisited At an EDA workshop in January, EDA Commissioners and City Councilmembers participating in the workshop considered the consequences of the local government aid losses as well as the long term benefits of creating new TIF Districts for manufacturing uses. It was agreed that future requests for tax increment financing assistance would be evaluated on a case by case basis. Criteria for establishing new districts included the type of user, jobs created or retained, the finished product, and the need to retain existing businesses. Alternative to State Aid Losses Another recent legislative,change related to tax increment financing assistance enables cities/eda's to opt out of the local government aid penalty by making a "qualifying local contribution"of 10 percent of the tax increment financing assistance requested. The contribution must come from unrestricted monies of the tax increment authority or municipality (or other local jurisdictions). The cap on the total of these contributions is 2 percent of a city's net tax capacity. Considering this option, the following calculation is offered: EDA Public Hearing on TIF No. 12 Page 4 $80,000 TIF Grant times 10 percent equals $8,000 "local contribution • According to some legislative experts, the alternative to opt out of the local government aid penalty is the best news in years. While the exact information is unknown at this writing, additional details for this option are being explored at staff level. TIF Review and Notices Since the May 8 meeting, the writer of this memo has completed the review exercises necessary to honor the Mowry/Neos request for tax increment financing assistance. Components of the exercise include the distribution of TIF Plans to the School District and County Board, presentation to the County Board, Planning Commission review of the Tax Increment Financing Plan, and TIF hearing notices published in the Star News. Lastly, the City Council will conduct its public hearing on the TIF request on June 19, 1995. Action Requested After conducting the public hearing on the TIF Plan for TIF District No. 12, the EDA is asked to adopt the attached Resolution. S DRAFT TAX INCREMENT FINANCING PLAN TAX INCREMENT FINANCING DISTRICT NO. 12 CITY OF ELK RIVER, MINNESOTA JUNE 19, 1995 i TAX INCREMENT FINANCING PLAN TAX INCREMENT FINANCING DISTRICT NO. 12 • SUMMARY Neos, Inc., 12797 Meadowvale Road, Suite B, Elk River, Minnesota seeks $80,000 in Tax Increment Financing assistance to support its proposed construction of a 16,000 square foot facility in the McChesney Industrial Park. Neos designs and builds machinery - specializing in packaging machinery. It currently occupies leased space at 12797 Meadowvale Road, Elk River, Minnesota. Neos currently employs five persons at this facility. As a result of the expansion, approximately six new full-time jobs will be created by Neos, Inc. In addition, the business incubator component of this facility is expected to create ten full-time jobs and retain another eleven positions. The Economic Development Authority for the City of Elk River, Minnesota is proposing the creation of an Economic Development District pursuant to the Tax Increment Financing Act. Tax increment funds will be used to "write- down" the acquisition price of the development site. Additional tax increment funds will be used for site preparation and site development costs. The site, Lots 6 and 7, Block 1, McChesney Industrial Park, is currently owned by Jerry and Joanne McChesney. The Economic Development Authority for the City of Elk River proposes to acquire Lots 6 and 7 on behalf of Neos, Inc. Subject to the terms and conditions of a Contract for Private Development, Lots 6 and 7 will be conveyed to Neos, Inc. The 16,000 square foot facility will have a finished market value estimated at $585,000 which produces new property taxes of approximately $24,000 per year. These funds will be "captured" by the Economic Development Authority so that the City of Elk River can recover the $80,000 in tax increment assistance. After these funds have been repaid, Tax Increment Financing District No. 12 will be decertified, thereby enabling all local taxing jurisdictions (county, school, city, etc.) to share in the project's property taxes. The Economic Development Authority for the City of Elk River, Minnesota anticipates that Tax Increment Financing District No. 12 will exist for approximately six (6) years; during which time tax increment funds will be collected for four (4) years. • TAX INCREMENT FINANCING PLAN TAX INCREMENT FINANCING DISTRICT NO. 12 A. STATEMENT OF OBJECTIVES Tax Increment Financing District No. 12 is located entirely within the City's Development District No. 1, a Municipal Development District created and established pursuant to the Development District Act. The Development Program for Development District No. 1, was adopted by the City Council on April 1, 1985, and was amended on January 27, 1986, and November 30, 1987. The objectives of the Development District, as amended, and as set forth in the Development Program, are hereby incorporated into this Tax Increment Financing Plan. Attached as Exhibit A is a map of Development District No. 1. The specific objectives of the Tax Increment Financing Plan for Tax Increment Financing District No. 12 are: 1. To jorovide incentive financing for the sale of Lots 6 and 7, Block 1, McChesney Industrial Park; (the development site); 2. To encourage a manufacturing company to expand in the McChesney Industrial Park; said expansion includes the construction of a new facility estimated at approximately 16,000 square feet; 3. To increase employment opportunities in the community and in the State of Minnesota; said expansion will create 6 to 10 full time positions and 5 to 11 positions will be retained; and, 4. To preserve and enhance the local tax base and the tax base in the State of Minnesota; said expansion will generate new property taxes of approximately $24,000. B. CLASSIFICATION OF THE DISTRICT The City Council of the City of Elk River, Minnesota determines that it is necessary, desirable, and in the public interest to designate, establish, develop, and administer an Economic Development Tax Increment Financing District in the City of Elk River pursuant to the provisions of the Tax Increment Financing Act, Minnesota Statutes 469.174, Subdivision 12. The purpose of the Tax Increment Financing Plan and Tax Increment Financing District No. 12 is to encourage the expansion of a manufacturing company in the McChesney Industrial Park, thereby increasing local employment opportunities and preserving and enhancing the local tax base of the State of Minnesota. • C. DEVELOPMENT PROGRAM 1. Overview • Neos, Inc., 12797 Meadowvale Road, Suite B, Elk River, Minnesota, seeks Tax Increment Financing assistance to support its proposed construction of a 16,000 square foot facility in the McChesney Industrial Park. The Tax Increment funds will be used to "write down" the acquisition of the development site. In addition, funds will be used for site preparation and site development costs. 2. Property Included in Tax Increment Financing District No. 12 The legal descriptions of the properties included in TIF District No. 12 are as follows: Lot 6, Block 1, McChesney Industrial Park (PID No. 75- 433-0150) Lot 7, Block 1, McChesney Industrial Park (PID No. 75- 433-0160) Attached as Exhibits B-1 and B-2 are maps showing the exact location of the property included in Tax Increment Financing District No. 12. 3. Property to be Acquired by the Authority Lots 6 and 7, Block 1, McChesney Industrial Park are proposed for acquisition by the Economic Development Authority for the City of Elk River, Minnesota. Subject to the terms and conditions of a Contract for Private Development, Lots 6 and 7, Block 1, McChesney Industrial Park will be conveyed to Neos, Inc. D. DEVELOPMENT ACTIVITIES 1. Development Overview Neos, Inc., proposes to construct a new facility containing approximately 16,000 square feet on Lots 6 and 7. The new facility will have a finished market value estimated at $585,000. Construction may begin during the summer of 1995 and will be completed by the winter of 1995. Neos, Inc., currently employs 5 persons at its leased space at the 12797 Meadowvale Road facility. As a result of the expansion, approximately 6 new full-time jobs will be created by Neos, Inc. In addition, the business incubator component of this facility is expected to create 10 full-time jobs and retain another 11 positions. 2. Contracts • No contracts have been entered into at the time of the preparation of this Tax Increment Financing Plan. Proposed contracts for services associated with Tax Increment Financing District No. 12 include: • Option Agreement for Lots 6 and 7 • Contract for Construction of a 16,000 Square Foot Facility (by Neos, Inc.) • Soil Borings and Analysis • Site Preparation and Development E. FINANCIAL ANALYSIS OF TAX INCREMENT FINANCING DISTRICT NO. 12 1. Tax Increment Financing District No. 12 Cost Estimates Budget Amount Land Write Down $60,000 Site Survey Site Preparation $20,000 Soil Borings and Analysis Administration Legal $ 2,500 • Cost of Issuance Fees Bond Discount Capitalized Interest Miscellaneous $ 2.500 Total $85,000 2. Bonded Indebtedness The City of Elk River anticipates a pay-as-you-Tax Increment Financing District No. 12 and no bonds will be issued. 3. Sources of Revenue to Pay Public Costs Tax Increments collected from the Neos, Inc., expansion will be used to pay the public costs associated with Tax Increment Financing District No. 12. 4. Original Tax Capacity The original net tax capacity, based on the 1994 valuation, for the real property in Tax Increment District No. 12 is estimated to be $2,300. The County Auditor Certification attributable to this value is attached as Exhibit C. 5. Estimated Captured Tax Capacity The finished market value upon completion of the improvements in Tax Increment Financing District No. 12 is estimated at $585,000. This value translates into a completed net tax capacity estimated at $25,310. The captured net tax capacity is estimated as follows: Completed Net Tax Capacity $25,310 Less Original Net Tax Capacity 2,300 Equals Captured Net Tax Capacity $23,010 One hundred percent of the captured net tax capacity of Tax Increment Financing District No. 12 will be required to finance the public costs associated with District No. 12. As a result, the City of Elk River elects, pursuant to Minnesota Statute 469.177 Subdivision 2 (a)(1), to retain the full captured net tax capacity of Tax Increment Financing District No. 12. 6. Duration of the Tax Increment Financing District No. 12 The City of Elk River expects that the first increment it will receive from Tax Increment Financing District No. 12 will be for taxes payable in 1997, and will be based on a completed value as of January 2, 1996. The City expects to continue to receive tax increment from Tax Increment District No. 12 up to and including the year 2000, or until $85,000 in tax increment has been received. Thereafter, no further increments may be t received and Tax Increment Financing District No. 12 will terminate. F. CASH FLOW ANALYSIS Attached as Exhibit D is the Cash Flow Analysis for Tax Increment Financing District No. 12. G. IMPACT ON OTHER LOCAL TAXING JURISDICTIONS 1. Estimated Impact of District No. 12 on the Taxing Jurisdictions Assuming the Captured Net Tax Capacity is Available to the Taxing Jurisdictions Without Creation of District No. 12: Pursuant to Minnesota law, tax increment generated by development within the Tax Increment Financing District may be captured by the City for a period of up to eight years. During this period other taxing jurisdictions will continue to receive taxes from the property within the Tax Increment Financing District based on the current net tax capacity. 2. Estimated Impact of District No. 12 on the Taxing Jurisdictions Assuming None of the Captured Net Tax Capacity is Available to Taxing Jurisdictions Without Creation of District No. 12: • The Economic Development Authority of the City of Elk River has determined that the Neos, Inc., project would not reasonably be expected to occur without the creation of TIF District No. 12 and the use of tax increment financing is necessary. Therefore, none of the net tax capacity captured during the term of this TIF District would be available to other taxing jurisdictions without the creation of this district. 3. Additional information on the impact of Tax Increment Financing District No. 12 on the other local taxing jurisdictions can be found in Exhibit E. H. STUDIES AND ANALYSIS USED TO DETERMINE THE NEED FOR TAX INCREMENT FINANCING The Elk River EDA and City Council have determined that the Neos, Inc., expansion project cannot reasonably be expected to occur solely through private investment within the reasonably foreseeable future. Therefore, the use of Tax Increment Financing assistance is deemed necessary. This determination has been made based on the following: • The company currently occupies leased space at 12797 • Meadowvale Road and this expansion into a permanent facility is its first. Tax increment assistance is needed to reduce the overall project costs - thereby preserving scarce capital to ensure that Neos, Inc., remains financially stable after the expansion. • In addition, tax increment assistance is necessary because the project will result in increased employment in the State, and, it will result in the preservation and enhancement of the tax base of the State. I. PARCELS INCLUDED IN TAX INCREMENT FINANCING DISTRICT NO. 12 Tax Increment Financing District No. 12 is comprised of two parcels of land. They are listed below: 1994 Original Parcel 1994 EMV Payable 1995 Net Tax Capacity 75-433-0150 $25,000 $1,150 75-433-0160 $25,000 $1,150 • Please refer to Exhibit C for the County Auditor Certification of this parcel in Tax Increment Financing District No. 12 • • • iiddiddiiiidiiidiiididiiiiidd a1i0iiiiididddiidiiiidfiiiddiididiiiiiiiiiiiiii s a. j -- f — —i - `, @ 1 Js _ -,-- 3 ns _ — I iJ ��J JJJJ JIM- • _ E VI I opir.P.,---* -gm 0 / , , - \-.., „----.24k ,t , .... _____ , , i. 4 _____,..„ ,, J . 1 _ / _, / _ 4 -au- ,I -MIL it i.�. .I..' l_,<"�•-, _ 1 -aa I 10 _ - �f r — I 7 rt Ili .▪� 4 II IL ' 1 '�'^ , 1 f__________________, - .l''.-11.4..k."3-' It AtrIgM,-rtAllitMiiiiM t I \ . 11171W-,- , II -"It-1., ..... vtgig,,,,... 1 , v^'E't Tbr~•1. rtets" ' � I- : - 11 t , Jilt Jif. acI 1 -11212. ir Jn 10 II :` .51 ' ' C• fr _\�.�� i ...V 7`p. : ..an. te -''''''' l&-'41. 'd11341k: '% 1-kv,i't:-::,-.7-711.t:.:'''"0,,,- zt.,.'-ir - J-6 11111 EIMIIIIIP.- '44141-10.,0'; -Ir'---vg„,,,jV._...o.r4ft,__e 14, \olli "---- 1 I \\,,.,,....., __ \ ...„. • , ..... .4. _j1� ANL 1g a .. m s _ BOUNDARY OF --• _ . - ,-.____\ ,= DEVELOPMENT DISTRICT NO. 1 -- -- (CITY LIMITS) -MIL \\ _,...- ELK RIVER, MINNESOTA 2 \ -- -._ ill _ - \ ,. 5 River 1 • 1 a .�JAN- EXHIBIT A 11 ,1q 111 AIN. DEVELOPMENT DISTRICT NO. 1 I I 011 ,1q111 I I I I ---\ "......., II • • C a X . ,a AP a m \ I 193RD ST. 110 > RD AVE. 3 111 S R. t a Q ¢I,2, SERVIC DR.Illiiiall.111113 •3RIVER ' aELK 2 KiE1' • q 111111L Z . Ro_. � ADDITION LVD. `` �jj0i1, �' ROHLFMSFF ADO. , 4, �� ,' yaAePA° 11111 . fil. � ‘‘. ‘ oa. Ida" . . �- /-s= 1N'%11%.\ 1 :. ,-12L �� nizi Alli—.4r, 0 f1146 ,;,-,„.Z 4:,..-___ —0 a ii.i.,k,,,-. MIMI a ,....00, 1014Ma ..16.' 7a ' V am! . '' ..T$ 44n jai (4, ID ',KAN..: v. rrap 4 ist '.. 411,11141P! Itt' 1`, 6-� � I ALIO ' I ' x ni I i/ Ea /�� Autw: C.RCL pR5/ v----,-- --.,._:...limi ra . l/ \ 2 j AU01T' ,0 -fr •/ AMMO ' SUBDI 0 .1. - WI • ` A Er ' 1.1 � i i �\ L„7-, c Q n 6 TIA 5T-1 /// Alf- = 111111 If// �/��\�\\ LAKE ORON `\- 2 0 ST' In L Bails WWI ( << N\ 511.- © MIK" 5' l Ig 1111 Ei — sovTenuNr o \ '14\ ) h 1 kTH? Ti it �,,. itallCOUNTY PAN.< 1 OW 1Wf. Iq' )1= I P‘. '' jiti GROUNDS `�' PO ‘\� ' `_ _ i \. \ \ tit4 .. 111 '183RD 2 AVE. MEq¢1 AT ti -_� � e'er `�+ 1A4:1 ` \:',, A mo- Ii ` -r il pRgN0� U1A �, u�u •.i .,iyR ; \a 111 � �I` \Q '182ND ' AVQ . k\ S . � � � ZD. i . --CO. W • PARK • o.d D' aI3In R4\ � �jJs- „Ji182NE. ri 2 xlIlass5sNpH► I ,- Ili l PP ° AD D• LI . � ' IBI , TAX INCREMENT NINANCING DISTRICT NO. 12 I'/ ice... `�: S �_ -- �ERyC ' 1c . .Qq! At----f �• .t., ..mo ' V• M r ----. yst(4' 54c y /l ft 1004c.7‘ (0,01,0000.00,0 �� : :r0 ♦:.• .•0Ao.0.•.00+:�;0.•40 0.0•; DRAFT EXHIBIT C • COUNTY AUDITOR CERTIFICATION TAX INCREMENT FINANCING DISTRICT NO. 12 The original net tax capacity of the following listed parcel(s) as of January 2, 1994, is certified to be $2,300. The parcel(s) contained in Tax Increment District No. 12 are listed below. 1994 EMV 1994 Original Parcel Number Payable 1995 Net Tax Capacity 75-433-0150 $25,000 $1,150 75-433-0160 $25,000 $1,150 TOTAL $50,000 $2,300 The Base Tax Rate will be the rate calculated for taxes payable in 1995. In accordance with Minnesota Statutes, Section 469.177, Subdivision 1,the average percentage increase in the original Net Tax Capacity shall be zero percent (0%). • Ramona Doebler Sherburne County Auditor SHERBURNE COUNTY SEAL June , 1995 • DRAFT EXHIBIT D 1111 TAX INCREMENT FINANCING DISTRICT NO. 12 CASH FLOW ANALYSIS *1996 1997 1998 1999 2000 2001*** Original Net Tax Capacity(1) *12,300 $2,369 $2,440 $2,513 $2,588 $2,665 Total Net Tax Capacity $2,300 $25,310 $25,310 $25,310 $25,310 $25,310 Captured Net Tax Capacity $0 $22,941 $22,870 $22,797 $22,722 $22,645 Estimated Tax Rate (2) 1.04247 1.04247 1.04247 1.04247 1.04247 1.04247 Captured Tax Increment $23,915 $23,841 $23,765 $23,687 $0 Cumulative Captured Tax Increment $47,756 $71,521 $95,208 $95,208 (1) Assumes a three percent(3%) annual increase in original tax capacity. (2) Based on a payable 1995 tax rate. This rate will change in 1996 and in subsequent years; This will result in a change in the actual amount of tax increment collected by the city. * Taxes will be generated in 1996, but no increment will be collected. The first year an increment will be collected is 1997 and is based on a finished market value as of January 1, 1996. ** Assumes no construction value as a January 1, 1995. • ***The District is decertified December 31, 2000, and taxes generated in 2001 will be collected by the local taxing jurisdictions. • CE° 0 NICO CV > o CO CO ._ 't '.. u'j N N Z E. 0 L ��69 ' .5 • o -, �, ami ' 0000 a)y E O O r O aVal lhthhM 0 xi n o69 Is. Vl W a E 000 "' Q 7 � o fa >. °.ic a0 � « E •� E -0 •� w to Ps CI a a. 5 m `o 7 •� X U.w eh N co' p X m y N =a Q N N CO ��Cn. spy, 7U O t!) Y y,� tJ e O N fU OO O O> E �,cs.I lc n ta0.p (Q��� {p O m m o e c3 lhaoC' V 72. 8C .t Z > y N ' O go X .0 O V Z N Q CO 69 M9(i9 — V X O COO. '. t- d E a� a. 6 T4 15 U) c..) ��— � � CO_C°. 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It has been proposed that the EDA establish Tax Increment Financing District No. 12 within Development District No. 1. 1.02 The EDA has caused to be prepared a proposed Tax Increment Financing Plan (the Plan) for Tax Increment Financing District No. 12. 1.03 The EDA has performed all actions by Minnesota Statutes to be performed prior to the establishment of Tax Increment Financing District No. • 12 and the adoption of the Plan relating thereto. 1.04 The EDA hereby determines that it is necessary and in the best interest of the City at this time to establish Tax Increment Financing District No. 12 and to approve the Plan relating thereto. Section 2. - Findings for the Establishment of Tax Increment Financing District No. 12. 2.01 The EDA hereby finds, determines, and declares that the establishment of Tax Increment Financing District No. 12 within Development District No. 1 is intended and, in the judgment of this EDA, its effects will be, to provide an impetus for commercial and industrial development, increase employment and otherwise promote certain public purposes and accomplish certain objectives as specified in the Plan for Tax Increment Financing District No. 12. 2.02 The EDA further finds, determines, and declares that Tax Increment Financing District No. 12 qualifies as an Economic Development District pursuant to Minnesota Statutes, Section 469.174, Subdivision 12. 2.03 The EDA further finds, determines, and declares that the • proposed development, in the opinion of the EDA, would not occur solely through private investment within the reasonably foreseeable future and, • therefore, the use of Tax Increment Financing is deemed necessary. 2.04 The EDA further finds, determines, and declares that the proposed Plan for Tax Increment Financing District No. 12 conforms to the Comprehensive Plan of the City. 2.05 The EDA further finds, determines, and declares that the proposed Plan for Tax Increment Financing District No. 12 will afford maximum opportunity, consistent with the sound needs of the City as a whole, for the development or redevelopment of Development District No. 1 by private enterprise. 2.06 The EDA determines and declares that Tax Increment Financing District No. 12 located within Development District No. 1 is hereby established. Section 3. - Adoption of the Plan. 3.01 The Plan for Tax Increment Financing District No. 12 presented to the EDA on this date, is hereby approved and adopted and shall be placed on file in the office of the City Clerk. • Section 4. - Implementation of the Plan. 4.01 The Executive Director of the EDA, the City Administrator, and the Assistant City Administrator are authorized and directed to proceed with implementation of the Plan, and for this purpose, to negotiate, draft, and prepare and present to the EDA for its consideration all future plans, resolutions, documents, and contracts necessary for this purpose. Adopted this 12th day of June, 1995. Jeffrey A. Gongoll, President Elk River EDA ATTEST: William Rubin, Executive Director Elk River EDA • RESOLUTION 95 - 1 110 A RESOLUTION OF THE ELK RIVER PLANNING COMMISSION FINDING THE ECONOMIC DEVELOPMENT AUTHORITY'S TAX INCREMENT FINANCING PLAN FOR TAX INCREMENT FINANCING DISTRICT NO. 12 LOCATED WITHIN DEVELOPMENT DISTRICT NO. 1 IS CONSISTENT WITH THE COMPREHENSIVE PLAN FOR THE CITY OF ELK RIVER WHEREAS, the Economic Development Authority's proposed Tax Increment Plan for Tax Increment Financing District No. 12 (the Plan) to be located within Development District No. 1, has been submitted to the Elk River Planning Commission; and, WHEREAS, the Planning Commission has reviewed the Plan to determine the consistency of the Plan to the Comprehensive Plan of the City of Elk River. NOW, THEREFORE, BE IT RESOLVED by the Elk River Planning Commission that the Tax Increment Financing Plan for Tax Increment Financing District No. 12 is consistent with the Elk River Comprehensive Plan based on the following findings: • 1. The present zoning of I-1 (Light Industrial) and land use designation of L-I (Light Industrial) is the appropriate zoning and land use to allow industrial development. 2. The comprehensive land use for this area is not envisioned to change in the immediate future; therefore, expanding industrial businesses at this location is consistent with the comprehensive plan. 3. One of the comprehensive plan goals is to encourage industrial development to assist the City's tax base. Adopted this 23rd day of May, 1995. LOUT KITESTER Louis Kuester, Chair ATTEST: /S/ STEVEN B. ACH • Steven B. Ach, City Planner s:eda:meeting:restifl 2 CONTRACT FOR PRIVATE DEVELOPMENT THIS DEVELOPMENT AGREEMENT entered into this day of , 1995, by and between the Economic Development Authority for the City of Elk River (EDA) and Independent School District No. 728 (District 728). WHEREAS, District 728 proposes to construct a maintenance facility containing approximately 16,000 gross square feet (the Project) on property (the Development Property) legally described as follows: Lot 8, Block 1, Elk River Industrial Park, Sherburne County, Minnesota (PID No. 75-427-0180); and, WHEREAS, District 728 has represented to the EDA that the Project will require a minimum investment of$600,000; and, WHEREAS, District 728 has represented to the EDA that the Project will be constructed of prefabricated, tip-up panels, or approved equivalent; and, • WHEREAS, the EDA has discounted the price of the Development Property. NOW, THEREFORE, the parties hereto agree as follows: 1. District 728 Obligations District 728 covenants and agrees as follows: • to acquire fee title to the Development Property; • to develop and construct a maintenance facility of prefabricated, tip-up panels, or approved equivalent, containing approximately 16,000 gross square feet requiring a minimum investment of$600,000; and, • to complete construction of the Project and obtain a Certificate of Occupancy for the maintenance facility building no later than January 1, 1996. S 2. EDA Obligations 1110 EDA covenants and agrees as follows: • to diligently prosecute to complete District 728's site plan review of the Project as required by the Elk River Planning Department; and, • to convey any and all title to the Development Property held by the EDA, subject to any easements, reservations, restrictions, covenants, and conditions affecting the Development Property by Quitclaim Deed substantially in the form attached as Exhibit A to this Agreement (the Quitclaim Deed). 3. Default District 728 shall be in default under the terms of this Agreement if: • District 728 fails to obtain a Certificate of Occupancy for the Project on or before January 1, 1996; or, • • the minimum investment of the Project is less than $600,000. 4. Remedies on Default If District 728 is in default under the terms of this Agreement, the EDA may exercise one or more of the following remedies: • the EDA may terminate this Development Agreement; • the EDA may bring an action against District 728 for performance under this Agreement; • the EDA may exercise any other remedies which it may have at law. IN WITNESS WHEREOF, the EDA and District 728 have caused this Agreement to be executed by their duly authorized representatives. • From:BCD/MKTG To: Mr.Bill Rubin Date:612/95 lime:13:01:03 Page 1 of 2 _` ' `v4 ECONOMIC DEVELOPMENT UPDATE ��` DTED EDAM 114-4,,;,• Minnesota Department of Trade Economic Development Economic Development Association of Minnesota Contact:Gene Goddard,612-297-1168 Volume 2,No.20 1.800-657.3858 Contact:John Moon,612.854-6215 1995 LEGISLATIVE SESSION SUMMARY Governor Signs Workers'Compensation Reform Rill: Governor Arne H.Carlson signed the 1994 Workers'Compensation Reform bill. The compromise legislation developed by the Bipartisan Workers'Compensation Caucus includes the following provisions: *Cuts costs to Minnesota Employers by 11 percent,or about$130 million per year. *Reduces cash benefits paid to injured workers by nearly 33 The reductions come primarily from raising the threshold of the permanently disabled classification. Abouthalf as many workers would qualify for that.category. *Reduces and delays cost of living increases.A workers'compensation recipient can now get up to 4%cost of living increase after two years. The bill would cut the increase to 2%and delay the first cost of living adjustment until the fourth year. *Repeals supplementary benefits for certain workers,and replaces them with a benefit equal to 65%o of the statewide weekly average wage. *Raises the maximum weekly benefit fir a person who is temporarily totally disabled to$615 from$517. *Provides a premium discount of 33%for small employers in the assigned-risk pool who have had no lost-time claims for three consecutive years. *Group self-insurance will be more available then ever. Smaller employers with good safety and premiums less than$3,000 per year will be eligible for a 33%discount on their assigned risk premiums. *Repealed the two tier system and lump sum benefits and replaced them with a new permanent partial disability schedule. *WC benefits will end at age 67,unless the injured worker is without regular Social Security payments or lacks a pension. *Charges Workers'Compensation Advisory Council with recommending changes to benefit amounts and other changes in the system. Leadership of Bipartisan Workers'Compensation Caucus:Sen.Dallas Sams,Sen.Linda Runbeck,Sen.Roy Terwilliger,Sen.Keith T.anseth,Rep.Hilda Rettermann,Rep.Becky Kelso,Rep.Jim Girard,Rep.Jeff Bertram,Rep.Wayne Simonean. • DTED Economic Development Spending Bill:The final budget bill passed by both houses includes several cuts for DTED. The following is a list of the program funding levels:$6,017,000 Economic Recovery Fund first year only. *$400,000 grant to Advantage Minnesota *$900,000 match for SBDC's *$3,949,000 biennial for MN Job Skills Partnership V *$1,000,000 increase for tourism marketing. Corporate Welfare/T.ivin_o Wage Bill Amended:Corporate Welfare provisions were included in S.F. 1 670,Section 55 hutthe language has been modified from its original version. The new provisions require that businesses that receive assistance,including TIF, for economic development or job growth purposes in excess of$25,000 must create a net increase in jobs in Minnesota within two years of receiving the assistance. In addition,the agency must establish wage level and job creation goals to be met by the business and report them to DTED. If these goals are not met the business must repay the assistance. Tax Increment Financing:Compared to many versions of bills introduced that affect TIF,the changes included in Article 5 of the Omnibus Tax Bill are relatively moderate. In at least one case,the changes may lead to increased opportunities for cities,EDA's and }IRA's. The following summary of key provisions has been prepared by Mark Ruff of Ehlcrs/Publicorp: LG.A/HACA Penalty *The one change which seems to be a positive move is the local contribution option.A tax increment district is exempt from the LGA/HACA penalty if the authority or municipality makes a local contribution to a project in the new district.The contribution must be made from unrestricted money and is lower if a state incentive is involved. For economic development,housing and renewal and renovation districts,the contribution is 10%,and for all other districts the minimum contribution is 7.5%. Any district which requested or requests certification after June 30, 1994,may elect to make the contribution. *Up to$1.5 million of tax increment for ethanol and agricultural processing facilities are exempt fount the LGA/HACA penalty,under certain conditions. *No new qualified manufacturing districts are allowed. From:BCD/MKTG To: Mr.Bill Rubin Date:612195 lime:13:01:04 Page 2 of 2 p.2 TIF continued. Disclosure: *The state auditor is now the repository of annual disclosure for TIF districts established in any year,including pre-1979 districts. The • state auditor is authorized to randomly check records of authorities to verify compliance with the TIF law. Any violations of the TIF law will be reported to the legislature and will be turned over to the county attorney for enforcement. *A variety of increased disclosure for all districts is required including a list of payments of benefits to other taxing jurisdictions,any payments to private entities,payments for publicly owned facilities,total amount of increment pooled,and impact of not taking fiscal disparities from within the district. *A new finding is required at the time of approval by the authority or municipality that the present value of potential increment from a district is greater than the"unexpected"increased market value of the district,unless the district is a qualified housing district. Miscellaneous: *Soils condition districts are only possible for areas with pollution problems. Bedrock condition soils problems are moved to economic development districts. *New districts,other than redevelopment districts arc restricted to 20%pooling instead of 25%. *Parcels classified under MS.273.111 and 473 H(agricultural preserves,open space and green acres class)within the last five years are not allowable in a new district unless located outside the metropolitan area and unless they contain a manufacturing use. Business Tax Subsidy Studies to be done by DTED:The 1995 Omnibus Tax Bill also included language that will require communities and development authorities that provide incentives in the form of a tax reduction or waiver to report to DTED the number of jobs created and wages paid on those new jobs. Housing Programs Funded: MN Housing Finance Agency received funding for the following programs: *$2,400,000 for Rental Housing Assistance. *$6,000,000 for Affordable Rental Investment Fund-Metro funds are to be established with the Met Council. *$5,800,000 for Conununity Rehabilitation. *$374,000 for Urban Indian Housing. *$500,000 for Lead Paint Abatement. *$8,570,000 for Housing Rehabilitation and Accessibility. *$3,000,000 for Rental Assistance. Data Practices Act:A study has been required to be completed by Jan. 15, 1996 on what information state and locally-funded business . projects should be made public. Minimum Wage Bill:A bill that would have raised the minimum wage.in Minnesota from$4.25 to$4.50/$5.00 per hour died on the House floor after heavy debate. This bill would have raised Minnesota's minimum wage higher than that of neighboring states. DTED Commissioner Reslans: E.Peter Gillette resigned his position as Commissioner of DTED effective June 2,and will be returning to his previous employer Piper Jaffray. Mr.Gillette was appointed by Governor Carlson in 1991 and has successfully led DTED through many large projects and reorganization. Deputy Commissioner Jennifer Engh will serve as the Acting Commissioner. An"Open House"reception for Mr.Gillette will be held Thursday,June 8, 1995 from 4-6:30 pm,with a program scheduled for 4:45 pm. The reception will be in the atrium on the third floor of the Minnesota World Trade Center at 30 East Seventh Street,St.Paul. If you have any questions please call Jan Williams at 612-296-6424. •