5.1 PCSR 06-27-2017Springsted
MEMORANDUM
TO: Amanda Othoudt, Economic Development Director
FROM: Mikaela Huot, Vice President /Consultant
DATE: June 21, 2017
Springsted Incorporated
380 Jackson Street, Suite 300
Saint Paul. MN 55101 -2887
Tel: 651 - 223 -3000
Fax: 651 - 223 -3002
www.springsted.com
SUBJECT Proposed Redevelopment TIF District No. 24 (The Truck Shop Project)
Planning Commission resolution review of TIF Plan
At the Tuesday, June 27, 2017 meeting, the Elk River Planning Commission is being asked to review the draft
Modification to the Development Program for Development District No. 1 and the proposed Tax Increment Financing
Plan for Tax Increment Financing (Redevelopment) District No. 24. The City is required pursuant to MN Statutes
469.126 to consult with its Planning Commission prior to creating or modifying a development district and pursuant to
MN Statutes 469.175, Subd. 3, the City needs to make certain findings that include the following:
(1) The TIF District qualifies as a redevelopment district;
(2) The proposed redevelopment, in the opinion of the City, would not reasonably be expected to
occur solely through private investment within the reasonably foreseeable future and the increased
market value of 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 increments for
the maximum duration of the district permitted by the TIF Plan;
(3) The TIF Plan will afford maximum opportunity, consistent with the sound needs of the City as a
whole, for development of the Project Area by private enterprise; and
(4) The TIF Plan conforms to general plans for development of the City as a whole.
Multiple steps need to be followed in order to establish a tax increment financing district, including notifications to the
County and School District, publication of a public hearing notice, and the holding of a public hearing. The public
hearing to consider this project has been scheduled for Monday, July 3, 2017. The public hearing date is the time in
which City Council would take any public comment, and after the hearing, consider the adoption of a resolution
approving the TIF District.
City of Elk River, Minnesota
Proposed Redevelopment TIF District No. 24 (The Truck Shop Project)
Planning Commission Meeting to Review Draft TIF Plan
June 21, 2017
Page 2
A TIF District must be established within a Project Area. The boundaries of the Tax Increment Financing District (TIF
District) are within the Development District No. 1. Tax increment revenues of the TIF District are generated from
incremental growth within the district and are allowed to be spent both within the boundaries of the TIF District and
with some limitations outside the boundaries of the District and within the Project Area.
Background
The City of Elk River is considering the establishment of a Tax Increment Financing (TIF) District to assist with
financing a portion of the costs associated with redevelopment of the properties comprising of the TIF District. Those
redevelopment costs include acquisition, demolition and installation of public improvements, subject to feasibility and
availability of revenues. A business is planning the construction of an approximate new 7,216 square foot facility to
operate a light maintenance facility for the Beaudry Oil existing fleet. The facility will be used for minor repair for
Beaudry Oil & Propane Fleet (not open to the public), which includes oil changes, replacing tires, changing brakes,
minor service, light maintenance, cleaning and detailing.
The City has identified additional public improvement costs related to the redevelopment project including acquisition
of additional blighted properties adjacent to the proposed project site, as well as infrastructure improvements to allow
better access to the project site. Following acquisition and demolition of the blighted properties, it is anticipated that
a second development will occur in the District, generating additional taxable value and increment that will be
available to financing the redevelopment costs. The City anticipates using tax increments to finance the identified
redevelopment costs, including eligible related administrative expenses.
Action
The Planning Commission is being asked to determine that the project within the TIF District meets the following
through adoption of the accompanying resolution:
(4) The TIF Plan conforms to general plans for development of the City as a whole.
Thank you for the opportunity to be of assistance to the City of Elk River. Please contact me at 651 - 223 -3036 or
mhuot(cDspringsted.com with any questions or to discuss.
City of Elk River, Minnesota
Modification to the Development Program
for Development District No.1
and the
Tax Increment Financing Plan
for
Tax Increment Financing (Redevelopment)
District No. 24
Within Municipal Development District No.1
(The Truck Shop Project)
Draft Dated: June 1, 2017
Public Hearing Scheduled: July 3, 2017
Anticipated Approval: July 3, 2017
Prepared by:
SPRINGSTED INCORPORATED
380 Jackson Street, Suite 300
St. Paul, MN 55101 -2887
(651) 223 -3000
WWW.SPRINGSTED.COM
TABLE OF CONTENTS
SECTION I — MODIFICATION TO THE DEVELOPMENT PROGRAM
FOR DEVELOPMENT DISTRICT NO. 1
Foreword.......................................................................................................................................... ..............................1
SECTION II —TAX INCREMENT FINANCING PLAN
FOR TAX INCREMENT FINANCING (REDEVELOPMENT) DISTRICT NO. 24
A.
Definitions ................................................................................................................................ ..............................2
B.
Statutory Authorization ............................................................................................................ ..............................2
C.
Statement of Need and Public Purpose ................................................................................... ..............................2
D.
Statement of Objectives .......................................................................................................... ..............................2
E.
Designation of Tax Increment Financing District as a Redevelopment District ........................ ..............................2
F.
Duration of the TIF District ....................................................................................................... ..............................4
G.
Property to be Included in the TIF District ................................................................................ ..............................4
H.
Property to be Acquired in the TIF District ............................................................................... ..............................4
I.
Specific Development Expected to Occur Within the TIF District ............................................ ..............................4
J.
Findings and Need for Tax Increment Financing ..................................................................... ..............................5
K.
Estimated Public Costs ............................................................................................................ ..............................7
L.
Estimated Sources of Revenue ............................................................................................... ..............................7
M.
Estimated Amount of Bonded Indebtedness ............................................................................ ..............................7
N.
Original Net Tax Capacity ........................................................................................................ ..............................8
O.
Original Local Tax Rate ........................................................................................................... ..............................8
P.
Projected Retained Captured Net Tax Capacity and Projected Tax Increment ....................... ..............................9
Q.
Use of Tax Increment .............................................................................................................. ..............................9
R.
Excess Tax Increment ............................................................................................................ .............................10
S.
Tax Increment Pooling and the Five Year Rule ...................................................................... .............................10
T.
Limitation on Administrative Expenses ................................................................................... .............................11
U.
Limitation on Property Not Subject to Improvements - Four Year Rule .................................. .............................11
V.
Estimated Impact on Other Taxing Jurisdictions ..................................................................... .............................12
W.
Prior Planned Improvements .................................................................................................. .............................12
X.
Development Agreements ...................................................................................................... .............................12
Y.
Assessment Agreements ........................................................................................................ .............................13
Z.
Modifications of the Tax Increment Financing Plan ................................................................ .............................13
AA.
Administration of the Tax Increment Financing Plan ............................................................... .............................13
AB.
Filing TIF Plan, Financial Reporting and Disclosure Requirements ........................................ .............................14
Map of the Tax Increment Financing District ............................................................ ............................... EXHIBIT I
AssumptionsReport ........................................................................ ............................... ........................EXHIBIT II
Projected Tax Increment Report ............................................................................. ............................... EXHIBIT III
Estimated Impact on Other Taxing Jurisdictions Report ................. ............................... ........................EXHIBIT IV
Market Value Analysis Report ......................................................... ............................... ........................EXHIBIT V
Redevelopment TIF District Qualifications Report .......................... ............................... ........................EXHIBIT VI
City of Elk River, Minnesota
SECTION I — MODIFICATION TO THE DEVELOPMENT PROGRAM
FOR DEVELOPMENT DISTRICT NO.1
Foreword
The following text represents a Modification to the Development Program for Development District No. 1. This
modification represents a continuation of the goals and objectives set forth in the Development Program for
Development District No. 1. The changes generally include the establishment of Tax Increment Financing
(Redevelopment) District No. 24.
For further information, a review of the Development Program for Development District No. 1 is recommended. It is
available from the City Administrator at the City of Elk River. Other relevant information is contained in the Tax
Increment Financing Plans for the Tax Increment Financing Districts located within Development District No. 1.
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City of Elk River, Minnesota
SECTION II — TAX INCREMENT FINANCING PLAN
FOR TAX INCREMENT FINANCING (REDEVELOPMENTG) DISTRICT NO. 24
Section A Definitions
The terms defined in this section have the meanings given herein, unless the context in which they are used indicates
a different meaning:
"City„ means the City of Elk River, Minnesota; also referred to as a "Municipality ".
"City Council" means the City Council of the City; also referred to as the "Governing Body ".
"County„ means Sherburne County, Minnesota
"Development District" means Development District No. 1 in the City, which is described in the corresponding
Development Program.
"Development Program" means the Development Program for the Development District.
"Protect Area" means the geographic area of the Development District.
"School District" means Independent School District No. 728, Minnesota.
"State" means the State of Minnesota.
"TIF Act" means Minnesota Statutes, Sections 469.174 through 469.1794, both inclusive.
"TIF District" means Tax Increment Financing (Redevelopment) District No. 24
"TIF Plan" means the tax increment financing plan for the TIF District (this document).
Section B Statutory Authorization
See the Development Program for the Development District.
Section C Statement of Need and Public Purpose
See the Development Program for the Development District.
Section D Statement of Objectives
See the Development Program for the Development District.
Section E Designation of Tax Increment Financing District as a
Redevelopment District
Redevelopment districts are a type of tax increment financing district in which one or more of the following conditions
exists and is reasonably distributed throughout the district:
(1) parcels comprising at least 70% of the area of the district are occupied by buildings, streets, utilities, paved
or gravel parking lots, or other similar structures and more than 50% of the buildings, not including
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City of Elk River, Minnesota
outbuildings, are structurally substandard requiring substantial renovation or clearance. A parcel is deemed
"occupied" if at least 15% of the area of the parcel contains buildings, streets, utilities, paved or gravel
parking lots, or other similar structures.
(2) the property consists of vacant, unused, underused, inappropriately used, or infrequently used railyards, rail
storage facilities, or excessive or vacated railroad right -of -ways; or
(3) tank facilities, or property whose immediately previous use was for tank facilities, as defined in section
115C.02, subdivision 15, if the tank facilities:
(i) have or had a capacity of more than 1,000,000 gallons;
(ii) are located adjacent to rail facilities; and
(iii) have been removed or are unused, underused, inappropriately used, or infrequently used.
For districts consisting of two more noncontiguous areas, each area must individually qualify under the provisions
listed above, as well as the entire area must also qualify as a whole.
The TIF District qualifies as a redevelopment district in that it meets all of the criteria listed in (1) above. The
supporting facts and documentation for this determination will be retained by the City for the life of the TIF District and
are available to the public upon request. An analysis was completed by LHB to make this determination.
"Structurally substandard" is defined as buildings containing defects or deficiencies in structural elements, essential
utilities and facilities, light and ventilation, fire protection (including egress), layout and condition of interior partitions,
or similar factors. Generally, a building is not structurally substandard if it is in compliance with the building code
applicable to a new building, or could be modified to satisfy the existing code at a cost of less than 15% of the cost of
constructing a new structure of the same size and type.
A city may not find that a building is structurally substandard without an interior inspection, unless it can not gain
access to the property and there exists evidence which supports the structurally substandard finding. Such evidence
includes recent fire or police inspections, on -site property tax appraisals or housing inspections, exterior evidence of
deterioration, or other similar reliable evidence. Written documentation of the findings and reasons why an interior
inspection was not conducted must be made and retained. A parcel is deemed to be occupied by a structurally
substandard building if the following conditions are met:
(1) the parcel was occupied by a substandard building within three years of the filing of the request for
certification of the parcel as part of the district;
(2) the demolition or removal of the substandard building was performed or financed by the City, or was
performed by a developer under a development agreement with the City;
(3) the City found by resolution before such demolition or removal occurred that the building was structurally
substandard and that the City intended to include the parcel in the TIF district, and
(4) the City notifies the county auditor that the original tax capacity of the parcel must be adjusted upon filing
the request for certification of the tax capacity of the parcel as part of a district.
In the case of (4) above, the County Auditor shall certify the original net tax capacity of the parcel to be the greater of
(a) the current tax capacity of the parcel, or (b) a computed tax capacity of the parcel using the estimated market
value of the parcel for the year in which the demolition or removal occurred, and the appropriate classification rate(s)
for the current year.
At least 90 percent of the tax increment from a redevelopment district must be used to finance the cost of correcting
conditions that allow designation as a redevelopment district. These costs include, but are not limited to, acquiring
properties containing structurally substandard buildings or improvements or hazardous substances, pollution, or
contaminants, acquiring adjacent parcels necessary to provide a site of sufficient size to permit development,
demolition and rehabilitation of structures, clearing of land, removal of hazardous substances or remediation
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City of Elk River, Minnesota
necessary to develop the land, and installation of utilities, roads, sidewalks, and parking facilities for the site. The
allocated administrative expenses of the City may be included in the qualifying costs.
Section F Duration of the TIF District
Redevelopment districts may remain in existence 25 years from the date of receipt by the City of the first tax
increment. Modifications of this plan (see Section Z) shall not extend these limitations.
Pursuant to Minnesota Statutes, Section 469.175, subd. 1(b), the City specifies 2020 as the first year in which it
elects to receive tax increment from the TIF District, which is no later than four years following the year of approval of
the TIF District. Thus, the City may collect increment from the district through December 31, 2045, and anticipates
that the TIF District may be active for the maximum duration allowed (see Section P). However the City will decertify
the TIF District as early as possible should the projected increment be received in a shorter time period than originally
projected. All tax increments from taxes payable in the year the TIF District is decertified shall be paid to the City.
Section G Property to be Included in the TIF District
The TIF District comprises of 12 parcels containing multiple substandard buildings to be demolished. The total area
of the TIF district is approximately 4 acres and also includes adjacent streets and right -of -way located within the
Project Area. A map showing the location of the TIF District is shown in Exhibit I. The boundaries and area
encompassed by the TIF District are described below:
Parcel Number
Legal Description
75- 410 -0735
LOTS 8 & 9, BLK 7
75- 410 -0730
LOT 7, BLK 7
75- 410 -0725
LOT 6, BLK 7. SUB TO PERPETUAL EASEMENT
75- 410 -0720
LOTS 4 & 5, BLK 7
75- 410 -0715
N 1 -2 OF LOT 2, & ALL OF LOT 3, BLK 7 PLUS PERMANENT EASEMENT
75- 410 -0710
LOT 1 EXCEPT THE W 80 FT THEREOF, AND THE S 1/2 OF LOT 2 EXCEPT THE W 80
FT THEREOF, ALL IN BLK 7.
75- 410 -0705
W 80 FT OF LOT 1 & W 80 FT OF S 1 -2 OF LOT 2, BLK 7
75- 410 -0740
LOT 10 & E 1 -2 OF LOT 11, BLK 7
75- 410 -0745
W 1 -2 OF LOT 11 & ALL OF LOT 12, BLK 7
75- 403 -0010
LOT 1
75- 403 -0020
LOT 2
75- 403 -0030
LOT 3
The area encompassed by the TIF District shall also include all street or utility right -of -ways located upon or adjacent
to the property described above, as illustrated in the boundary map included in Exhibit I.
Section H Property to be Acquired in the TIF District
The City anticipates acquiring property located within the TIF District; and reserves the right to sell such property as
related to redevelopment.
Section I Specific Development Expected to Occur Within the TIF District
The proposed project includes the redevelopment of property within the City that consists of blighted buildings that
have been found to be substandard and will be demolished. A business is planning the construction of an
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City of Elk River, Minnesota
approximate new 7,216 square foot facility to operate a light maintenance facility for the Beaudry Oil existing fleet.
The facility will be used for minor repair for Beaudry Oil & Propane Fleet (not open to the public), which includes oil
changes, replacing tires, changing brakes, minor service, light maintenance, cleaning and detailing. The City has
identified additional public improvement costs related to the redevelopment project including acquisition of additional
blighted properties adjacent to the proposed project site, as well as infrastructure improvements to allow better
access to the project site. Following acquisition and demolition of the blighted properties, it is anticipated that a
second development will occur in the District, generating additional taxable value and increment that will be available
to financing the redevelopment costs. The City anticipates using tax increments to finance the identified
redevelopment costs, including eligible related administrative expenses.
Demolition and subsequent construction of the new development on the project site is projected to start in 2017 and is
anticipated to occur in phases subject to market. The total project is expected to be fully constructed by December
31, 2018, and be 100% assessed and on the tax rolls as of January 2, 2019 for taxes payable 2020.
Section J Findings and Need for Tax Increment Financing
In establishing the TIF District, the City makes the following findings:
(1) The TIF District qualifies as a redevelopment district;
The City hired LHB to inspect and evaluate the property within the proposed Tax
Increment Financing District No. 24 to be established by the City. The purpose of the
evaluation was to determine if the proposed district met the statutory requirements for
coverage and if the buildings met the qualifications required for a Redevelopment District.
A final report will be prepared for the City to retain on file in City offices for public
inspection. The report contains the details of the findings summarized below regarding the
substandard qualifications:
The TIF District consists of twelve parcels that are occupied so 100 percent of
the area of the proposed TIF District is occupied (exceeding the 70 percent
coverage test);
66.7 percent (8 of 12) of the buildings in the proposed District contain code
deficiencies exceeding the 15 percent threshold;
at least 50 percent of the buildings are structurally substandard to a degree
requiring substantial renovation or clearance, because of defects in structural
elements or a combination of deficiencies in essential utilities and facilities, light
and ventilation, fire protection including adequate egress, layout and condition of
interior partitions, or similar factors which defects or deficiencies are of sufficient
total significance to justify substantial renovation or clearance, exceeding the
more than 50 percent substandard test; and
The substandard buildings are reasonably distributed throughout the geographic
area of the proposed TIF District.
(2) The proposed redevelopment, in the opinion of the City, would not reasonably be expected to occur
solely through private investment within the reasonably foreseeable future and the increased
market value of 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 increments for the
maximum duration of the district permitted by the TIF Plan.
Factual basis:
Proposed development not expected to occur.-
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City of Elk River, Minnesota
The proposed project consists of the redevelopment of property within the City that consists of blighted
properties that were found to be substandard and will be demolished following establishment of the district.
The City has identified significant and extraordinary costs including public improvements, acquisition and
demolition associated with redevelopment of the project site in conjunction with new development. The
estimated total redevelopment costs for this property make the total cost of this effort significantly higher than
costs reasonably incurred for similar developments on a clean site. The City's finding that the proposed
redevelopment would be unlikely to occur solely through private investment within the reasonably foreseeable
future is based on an analysis of the proforma and other materials submitted by the developer. As necessary, the
City anticipates analyzing future developer's proformas in detail to determine the minimal amount of assistance
needed to compensate developers for extraordinary and allowable costs.
No higher market value expected.
If the proposed redevelopment did not go forward, for the same reasons described above, no significant
alternative redevelopment of the proposed TIF area would occur. The existing buildings are currently
substandard and it is highly unlikely that the improvements would be made on the property site without tax
increment financing. In short, there is no basis for expectation that the area would redevelop or be renovated in
any significant way purely by private action without public subsidy.
To summarize the basis for the City's findings regarding alternative market value, in accordance with Minnesota
Statutes, Section 469.175, Subd. 3(d), the City makes the following determinations:
a. The City's estimate of the amount by which the market value of the site will increase without
the use of tax increment financing is anywhere from $0 to some modest amount based on small scale
renovation or redevelopment that could be possible without assistance; any estimated values would be
too speculative to ascertain.
b. If the proposed development to be assisted with tax increment occurs in the District, the total
increase in market value would be approximately $2,829,727, including the value of the building (See
Exhibit V).
C. The present value of tax increments from the District for the maximum duration of the district
permitted by the TIF Plan is estimated to be $731,388 (See Exhibit V).
d. Even if some development other than the proposed development were to occur, the Council
finds that no alternative would occur that would produce a market value increase greater than
$2,098,339 (the amount in clause b less the amount in clause c) without tax increment assistance.
(3) The TIF Plan will afford maximum opportunity, consistent with the sound needs of the City as a
whole, for development of the Project Area by private enterprise.
Factual basis:
The anticipated redevelopment of the project site and any subsequent demolition, reconstruction, or renovation
related to the project will remain consistent with the City's design goals.
(4) The TIF Plan conforms to general plans for development of the City as a whole.
Factual basis: The City Planning Commission has determined that the development proposed in the TIF Plan
conforms to the City comprehensive plan.
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City of Elk River, Minnesota
Section K Estimated Public Costs
The estimated public costs of the TIF District are listed below. Such costs are eligible for reimbursement from tax
increments of the TIF District.
Land/Building acquisition
500,000
Site improvement/preparation costs
167,000
Utilities
Other public improvements
Interest expenses
598,753
Administrative expenses
140,640
Total
1 1,406,393
The City anticipates using tax increment to the extent available to finance redevelopment costs of the project
including primarily acquisition of blighted properties and site improvement /preparation costs (demolition), related
administrative expenses, and other TIF - eligible expenditures as deemed necessary and related to redevelopment of
the project site.
The City reserves the right to administratively adjust the amount of any of the items listed above or to incorporate
additional eligible items, so long as the total estimated public cost ($1,406,393) is not increased. The City also
reserves the right to fund any of the identified costs with any other legally available revenues, but anticipates that
such costs will be primarily financed with tax increments.
Section L Estimated Sources of Revenue
Tax Increment revenue 1,406,393
Interest on invested funds
Other
Total 1,406,393
The City anticipates capturing the tax increments from the project for financing of the identified redevelopment costs
including acquisition and demolition. As tax increments are collected from the TIF District in future years, a portion of
these taxes will be used by the City to reimburse itself for public costs incurred (see Section K). The City also
anticipates retaining any remaining increment to finance additional needed public improvement costs.
The City reserves the right to finance any or all public costs of the TIF District using pay -as- you -go assistance,
internal funding, general obligation or revenue debt, or any other financing mechanism authorized by law. The City
also reserves the right to use other sources of revenue legally applicable to the Project Area to pay for such costs
including, but not limited to, special assessments, utility revenues, federal or state funds, and investment income.
Section M Estimated Amount of Bonded Indebtedness
The maximum principal amount of bonds (as defined in the TIF Act) secured in whole or part with tax increment from
the TIF District is $1,406,393. The City currently plans to finance the acquisition and demolition costs through an
interfund loan, but reserves the right to issue bonds in any form, including without limitation any interfund loan with
interest not to exceed the maximum permitted under Section 469.178, subd. 7 of the TIF Act.
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City of Elk River, Minnesota
Section N Original Net Tax Capacity
The County Auditor shall certify the original net tax capacity of the TIF District. This value will be equal to the total net
tax capacity of all property in the TIF District as certified by the State Commissioner of Revenue. For districts certified
between January 1 and June 30, inclusive, this value is based on the previous assessment year. For districts
certified between July 1 and December 31, inclusive, this value is based on the current assessment year.
The Estimated Taxable Value of all property within the TIF District as of January 2, 2017, for taxes payable in 2018, is
$1,352,500. Upon establishment of the district and subsequent reclassification of the property, the estimated original
net tax capacity of the TIF District is estimated to be $20,874. This assumes the properties are reclassified from
residential to commercial - industrial. This value is also assumed to be the value of the properties, including land and
building, as of the date the substandard buildings occupied the parcel.
Each year the County Auditor shall certify the amount that the original net tax capacity has increased or decreased as
a result of:
(1) changes in the tax - exempt status of property;
(2) reductions or enlargements of the geographic area of the TIF District;
(3) changes due to stipulation agreements or abatements; or
(4) changes in property classification rates.
Section 0 Original Local Tax Rate
The County Auditor shall also certify the original local tax rate of the TIF District. This rate shall be the sum of all local
tax rates that apply to property in the TIF District. This rate shall be for the same taxes payable year as the original
net tax capacity.
In future years, the amount of tax increment generated by the TIF District will be calculated using the lesser of (a) the
sum of the current local tax rates at that time or (b) the original local tax rate of the TIF District.
The sum of all local tax rates that apply to property in the TIF District, for taxes levied in 2017 and payable in 2018
shall be the original tax capacity assuming the request for certification is made after June 30, 2017. The County
Auditor shall certify the amount for taxes payable 2018 as the original tax capacity rate of the TIF District. For
purposes of estimating the tax increment generated by the TIF District, the sum of the local tax rates for taxes levied
in 2016 and payable in 2017, is 137.819% as shown below.
2016/2017
Taxing Jurisdiction Local Tax Rate
City of Elk River
46.193%
Sherburne County
50.458%
ISD #728
36.659%
Other
4.509%
Total 137.819%
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City of Elk River, Minnesota
Section P Projected Retained Captured Net Tax Capacity and
Projected Tax Increment
The City anticipates that the redevelopment will be completed by December 31, 2018, creating a total tax capacity for
TIF District No. 24 of $40,398 as of January 2, 2019. The captured tax capacity as of that date is estimated to be
$19,524 and the first full year of increment is projected to be in $26,908 in taxes payable 2020. A complete schedule
of estimated tax increment from the TIF District is shown in Exhibit III.
Each year the County Auditor shall determine the current net tax capacity of all property in the TIF District. To the
extent that this total exceeds the original net tax capacity, the difference shall be known as the captured net tax
capacity of the TIF District.
The estimates shown in this TIF plan assume that commercial - industrial class rates remain at 1.50% for value up to
$150,000 and 2% for value above $150,000 of the estimated taxable value, and assume 3% annual increases in
market values.
Each year the County Auditor shall determine the current net tax capacity of all property in the TIF District. To the
extent that this total exceeds the original net tax capacity, the difference shall be known as the captured net tax
capacity of the TIF District.
The County Auditor shall certify to the City the amount of captured net tax capacity each year. The City may choose
to retain any or all of this amount. It is the City's intention to retain 100% of the captured net tax capacity of the TIF
District. Such amount shall be known as the retained captured net tax capacity of the TIF District.
Exhibit II gives a listing of the various information and assumptions used in preparing a number of the exhibits
contained in this TIF Plan, including Exhibit III which shows the projected tax increment generated over the
anticipated life of the TIF District.
Section Q Use of Tax Increment
Each year the County Treasurer shall deduct 0.36% of the annual tax increment generated by the TIF District and pay
such amount to the State's General Fund. Such amounts will be appropriated to the State Auditor for the cost of
financial reporting and auditing of tax increment financing information throughout the state. Exhibit III shows the
projected deduction for this purpose over the anticipated life of the TIF District.
The City has determined that it will use 100% of the remaining tax increment generated by the TIF District for any of
the following purposes:
(1) pay for the estimated public costs of the TIF District (see Section K) and County administrative
costs associated with the TIF District (see Section T);
(2) pay principal and interest on tax increment bonds or other bonds issued to finance the estimated
public costs of the TIF District;
(3) accumulate a reserve securing the payment of tax increment bonds or other bonds issued to
finance the estimated public costs of the TIF District;
(4) pay all or a portion of the county road costs as may be required by the County Board under M.S.
Section 469.175, Subdivision 1a; or
(5) return excess tax increments to the County Auditor for redistribution to the City, County and School
District.
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City of Elk River, Minnesota
Tax increments from property located in one county must be expended for the direct and primary benefit of a project
located within that county, unless both county boards involved waive this requirement. Tax increments shall not be
used to circumvent levy limitations applicable to the City.
Tax increment shall not be used to finance the acquisition, 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, or for a commons area used as a public park, or a
facility used for social, recreational, or conference purposes. This prohibition does not apply to the construction or
renovation of a parking structure or of a privately owned facility for conference purposes.
If there exists any type of agreement or arrangement providing for the developer, or other beneficiary of assistance, to
repay all or a portion of the assistance that was paid or financed with tax increments, such payments shall be subject
to all of the restrictions imposed on the use of tax increments. Assistance includes sale of property at less than the
cost of acquisition or fair market value, grants, ground or other leases at less then fair market rent, interest rate
subsidies, utility service connections, roads, or other similar assistance that would otherwise be paid for by the
developer or beneficiary.
Section R Excess Tax Increment
In any year in which the tax increments from the TIF District exceed the amount necessary to pay the estimated
public costs authorized by the TIF Plan, the City shall use the excess tax increments to:
(1) prepay any outstanding tax increment bonds;
(2) discharge the pledge of tax increments thereof;
(3) pay amounts into an escrow account dedicated to the payment of the tax increment bonds; or
(4) return excess tax increments to the County Auditor for redistribution to the City, County and School
District. The County Auditor must report to the Commissioner of Education the amount of any
excess tax increment redistributed to the School District within 30 days of such redistribution.
Section S Tax Increment Pooling and the Five Year Rule
At least 75% of the tax increments from the TIF District must be expended on activities within the district or to pay for
bonds used to finance the estimated public costs of the TIF District (see Section E for additional restrictions). No
more than 25% of the tax increments may be spent on costs outside of the TIF District but within the boundaries of
the Project Area, except to pay debt service on credit enhanced bonds. All administrative expenses are considered to
have been spent outside of the TIF District. Tax increments are considered to have been spent within the TIF District
if such amounts are:
(1) actually paid to a third party for activities performed within the TIF District within five years after
certification of the district;
(2) used to pay bonds that were issued and sold to a third party, the proceeds of which are reasonably
expected on the date of issuance to be spent within the later of the five -year period or a reasonable
temporary period or are deposited in a reasonably required reserve or replacement fund.
(3) used to make payments or reimbursements to a third party under binding contracts for activities
performed within the TIF District, which were entered into within five years after certification of the
district; or
SPRINGSTED Page 10
City of Elk River, Minnesota
(4) used to reimburse a party for payment of eligible costs (including interest) incurred within five years
from certification of the district.
Beginning with the sixth year following certification of the TIF District, at least 75% of the tax increments must be used
to pay outstanding bonds or make contractual payments obligated within the first five years. When outstanding bonds
have been defeased and sufficient money has been set aside to pay for such contractual obligations, the TIF District
must be decertified.
The City does not anticipate that tax increments will be spent outside the TIF District (including allowable
administrative expenses), but such expenditures are expressly authorized in this TIF Plan.
Section T Limitation on Administrative Expenses
Administrative expenses are defined as all costs of the City other than:
(1) amounts paid for the purchase of land;
(2) amounts paid for materials and services, including architectural and engineering services directly
connected with the physical development of the real property in the project;
(3) relocation benefits paid to, or services provided for, persons residing or businesses located in the
project;
(4) amounts used to pay principal or interest on, fund a reserve for, or sell at a discount bonds issued
pursuant to section 469.178; or
(5) amounts used to pay other financial obligations to the extent those obligations were used to finance
costs described in clause (1) to (3).
Administrative expenses include amounts paid for services provided by bond counsel, fiscal consultants, planning or
economic development consultants, and actual costs incurred by the County in administering the TIF District. Tax
increments may be used to pay administrative expenses of the TIF District up to the lesser of (a) 10% of the total tax
increment expenditures authorized by the TIF Plan or (b) 10% of the total tax increments received by the TIF District.
Section U Limitation on Property Not Subject to Improvements - Four Year Rule
If after four years from certification of the TIF District no demolition, rehabilitation, renovation, or qualified
improvement of an adjacent street has commenced on a parcel located within the TIF District, then that parcel shall
be excluded from the TIF District and the original net tax capacity shall be adjusted accordingly. Qualified
improvements of a street are limited to construction or opening of a new street, relocation of a street, or substantial
reconstruction or rebuilding of an existing street. The City must submit to the County Auditor, by February 1 of the
fifth year, evidence that the required activity has taken place for each parcel in the TIF District.
If a parcel is excluded from the TIF District and the City or owner of the parcel subsequently commences any of the
above activities, the City shall certify to the County Auditor that such activity has commenced and the parcel shall
once again be included in the TIF District. The County Auditor shall certify the net tax capacity of the parcel, as most
recently certified by the Commissioner of Revenue, and add such amount to the original net tax capacity of the TIF
District.
SPRINGSTED Page 11
City of Elk River, Minnesota
Section V Estimated Impact on Other Taxing Jurisdictions
Exhibit IV shows the estimated impact on other taxing jurisdictions if the maximum projected retained captured net tax
capacity of the TIF District was hypothetically available to the other taxing jurisdictions. The City believes that there
will be no adverse impact on other taxing jurisdictions during the life of the TIF District, since the proposed
development would not have occurred without the establishment of the TIF District and the provision of public
assistance. A positive impact on other taxing jurisdictions will occur when the TIF District is decertified and the
development therein becomes part of the general tax base.
The fiscal and economic implications of the proposed tax increment financing district, as pursuant to Minnesota
Statutes, Section 469.175, Subdivision 2, are listed below.
1. The total amount of tax increment that will be generated over the life of the district is estimated to be
$1,411,473.
2. To the extent the project in TIF District No. 24 generates any public cost impacts on city - provided services
such as police and fire protection, public infrastructure, and the impact of any general obligation tax
increment bonds attributable to the district upon the ability to issue other debt for general fund purposes,
such costs will be levied upon the taxable net tax capacity of the City, excluding that portion captured by the
District. The City does not anticipate issuing general obligation tax increment bonds, but reserves the right
to the use of internal financing, as necessary, to finance a portion of the project costs attributable to the
District.
3. The amount of tax increments over the life of the district that would be attributable to school district levies,
assuming the school district's share of the total local tax rate for all taxing jurisdictions remained the same, is
estimated to be $375,444.
4. The amount of tax increments over the life of the district that would be attributable to county levies,
assuming the county's share of the total local tax rate for all taxing jurisdictions remained the same is
estimated to be $516,767.
5. No additional information has been requested by the county or school district that would enable it to
determine additional costs that will accrue to it due to the development proposed for the district.
Section W Prior Planned Improvements
The City shall accompany its request for certification to the County Auditor (or notice of district enlargement), with a
listing of all properties within the TIF District for which building permits have been issued during the 18 months
immediately preceding approval of the TIF Plan. The County Auditor shall increase the original net tax capacity of the
TIF District by the net tax capacity of each improvement for which a building permit was issued.
There have been no building permits issued in the last 18 months in conjunction with any of the properties within the
TIF District.
Section X Development Agreements
If within a project containing a redevelopment district, more than 25% of the acreage of the property to be acquired by
the City is purchased with tax increment bonds proceeds (to which tax increment from the property is pledged), then
prior to such acquisition, the City must enter into an agreement for the development of the property. Such
agreement must provide recourse for the City should the development not be completed.
SPRINGSTED Page 12
City of Elk River, Minnesota
The City does not anticipate entering into an agreement for development. The City does anticipate acquiring several
properties directly in conjunction with redevelopment as proposed within the district.
Section Y Assessment Agreements
The City may, upon entering into a development agreement, also enter into an assessment agreement with the
developer, which establishes a minimum market value of the land and improvements for each year during the life of
the TIF District.
The assessment agreement shall be presented to the County or City Assessor who shall review the plans and
specifications for the improvements to be constructed, review the market value previously assigned to the land, and
so long as the minimum market value contained in the assessment agreement appears to be an accurate estimate,
shall certify the assessment agreement as reasonable. The assessment agreement shall be filed for record in the
office of the County Recorder of each county where the property is located. Any modification or premature
termination of this agreement must first be approved by the City, County and School District.
The City does not anticipate entering into an assessment agreement.
Section Z Modifications of the Tax Increment Financing Plan
Any reduction or enlargement in the geographic area of the Project Area or the TIF District; a determination to
capitalize interest on the debt if that determination was not part of the original TIF Plan, increase in the portion of the
captured net tax capacity to be retained by the City; increase in the total estimated public costs; or designation of
property to be acquired by the City shall be approved only after satisfying all the necessary requirements for approval
of the original TIF Plan. This paragraph does not apply if:
(1) the only modification is elimination of parcels from the TIF District; and
(2) the current net tax capacity of the parcels eliminated equals or exceeds the net tax capacity of
those parcels in the TIF District's original net tax capacity, or the City agrees that the TIF District's
original net tax capacity will be reduced by no more than the current net tax capacity of the parcels
eliminated.
The City must notify the County Auditor of any modification that reduces or enlarges the geographic area of the TIF
District. The geographic area of the TIF District may be reduced but not enlarged after five years following the date of
certification.
Section AA Administration of the Tax Increment Financing Plan
Upon adoption of the TIF Plan, the City shall submit a copy of such plan to the Minnesota Department of Revenue
and the Office of the State Auditor. The City shall also request that the County Auditor certify the original net tax
capacity and net tax capacity rate of the TIF District. To assist the County Auditor in this process, the City shall
submit copies of the TIF Plan, the resolution establishing the TIF District and adopting the TIF Plan, and a listing of
any prior planned improvements. The City shall also send the County Assessor any assessment agreement
establishing the minimum market value of land and improvements in the TIF District, and shall request that the
County Assessor review and certify this assessment agreement as reasonable.
The County shall distribute to the City the amount of tax increment as it becomes available. The amount of tax
increment in any year represents the applicable property taxes generated by the retained captured net tax capacity of
the TIF District. The amount of tax increment may change due to development anticipated by the TIF Plan, other
development, inflation of property values, or changes in property classification rates or formulas. In administering and
implementing the TIF Plan, the following actions should occur on an annual basis:
SPRINGSTED Page 13
City of Elk River, Minnesota
prior to July 1, the City shall notify the County Assessor of any new development that has occurred
in the TIF District during the past year to insure that the new value will be recorded in a timely
manner.
(2) if the County Auditor receives the request for certification of a new TIF District, or for modification of
an existing TIF District, before July 1, the request shall be recognized in determining local tax rates
for the current and subsequent levy years. Requests received on or after July 1 shall be used to
determine local tax rates in subsequent years.
(3) each year the County Auditor shall certify the amount of the original net tax capacity of the TIF
District. The amount certified shall reflect any changes that occur as a result of the following:
(a) the value of property that changes from tax - exempt to taxable shall be added to the
original net tax capacity of the TIF District. The reverse shall also apply;
(b) the original net tax capacity may be modified by any approved enlargement or reduction of
the TIF District;
(c) if laws governing the classification of real property cause changes to the percentage of
estimated market value to be applied for property tax purposes, then the resulting increase
or decrease in net tax capacity shall be applied proportionately to the original net tax
capacity and the retained captured net tax capacity of the TIF District.
The County Auditor shall notify the City of all changes made to the original net tax capacity of the TIF District.
Section AB Filing TIF Plan, Financial Reporting and Disclosure Requirements
The City will file the TIF Plan, and any subsequent amendments thereto, with the Commissioner of Revenue and the
Office of the State Auditor pursuant to Minnesota Statutes, Section 469.175, subdivision 4A. The City will comply
with all reporting requirements for the TIF District under Minnesota Statutes, Section 469.175, subdivisions 5 and 6.
SPRINGSTED Page 14
Exhibit 1
MAP OF PROPOSED TAX INCREMENT FINANCING (REDEVELOPMENT) DISTRICT NO. 24
SPRINGSTED Page 15
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SPRINGSTED Page 15
Exhibit 11
Assumptions Report
City of Elk River, Minnesota
Tax Increment Financing (Redevelopment) District
The Truck Shop Redevelopment Project
Draft TIF Plan Exhibits
Type of Tax Increment Financing District Redevelopment
Maximum Duration of TIF District 25 years from 1st increment
Projected Certification Request Date 12/30/17
Actual Certification Request Date
Decertification Date 12/31/45 (26 Years of Increment)
Base Estimated Market Value $1,352,500
Original Net Tax Capacity $20,874
Base Estimated Market Value
Increase in Estimated Market Value
Total Estimated Market Value
Total Net Tax Capacity
Assess ment/Collection Year
2017/2018 2018/2019 2019/2020 2020/2021
$1,352,500
$1,352,500
$1,352,500
$1,352,500
$0
$0
$704,879
$766,600
Local Tax Capacity Rate
137.819% Payable 2017
Frozen Tax Rate
137.819%
$1,352,500
$1,352,500
$2,057,379
$2,119,100
$20,874 $20,874 $40,398 $41,632
City of Elk River
46.193%
Sherburne County
50.458%
ISD #728
36.659%
Other
4.509%
Local Tax Capacity Rate
137.819% Payable 2017
Frozen Tax Rate
137.819%
Fiscal Disparities Contribution From TIF District
NA
Administrative Retainage Percent (maximum = 10 %)
10.00% 10.00%
Pooling Percent
0.00% 0.00%
Bonds Interfund Loan
Bonds Dated NA Note Dated 02/01/18
Bond Issue @ 0.00% (NIC) NA Note Rate 4.00%
Eligible Project Costs NA Note Amount $667,000
Present Value Date & Rate 02/01/18 4.00%
Notes
Projections assume no future changes to tax and classification rates with 3% annual MV inflator
Projections are based on Pay2017 Total Tax Rate provided by County.
Base values are existing land and building values
SPRINGSTED Page 16
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Exhibit V
Market Value Analysis Report
City of Elk River, Minnesota
Tax Increment Financing (Redevelopment) District
The Truck Shop Redevelopment Project
Draft TIF Plan Exhibits
Assumptions
Present Value Date
P.V. Rate - Gross T.I.
12/30/17
4.00%
Increase in EMV With TIF District
$2,829,727
Less: P.V of Gross Tax Increment
731,388
Subtotal
$2,098,339
Less: Increase in EMV Without TIF
0
Difference
$2,098,339
Annual
Present
Gross Tax
Value @
Year
Increment
4.00%
1
2020
26,908
24,154
2
2021
28,609
24,693
3
2022
30,361
25,198
4
2023
32,166
25,669
5
2024
34,025
26,108
6
2025
35,940
26,517
7
2026
37,912
26,896
8
2027
39,944
27,248
9
2028
42,036
27,572
10
2029
44,191
27,871
11
2030
46,411
28,145
12
2031
48,697
28,395
13
2032
51,052
28,624
14
2033
53,478
28,831
15
2034
55,976
29,017
16
2035
58,550
29,184
17
2036
61,200
29,331
18
2037
63,930
29,461
19
2038
66,742
29,574
20
2039
69,639
29,671
21
2040
72,622
29,752
22
2041
75,694
29,818
23
2042
78,859
29,870
24
2043
82,119
29,908
25
2044
85,477
29,934
26
2045
88,935
29,947
$1,411,473
$731,388
SPRINGSTED Page 19
Exhibit VI
Report of Inspection Procedures and Results for Determining Qualifications of a Tax Increment
Financing District as a Redevelopment District
SPRINGSTED Page 20
CITY OF ELK RIVER PLANNING COMMISSION
RESOLUTION NO.
RESOLUTION OF THE PLANNING COMMISSION
CONCERNING DEVELOPMENT DISTRICT NO. 1 AND A PROPOSED TAX INCREMENT
FINANCING DISTRICT OF THE CITY OF ELK RIVER
WHEREAS, the proposal by the City of Elk River, Minnesota to amend the Development
Program for Development District No. 1 (the "Program ") to reflect increased public development
and redevelopment costs and activities, establish Tax Increment Financing (Redevelopment)
District No. 24 (Beaudry Redevelopment Project), and adopt the Tax Increment Financing Plan
relating thereto (the "TIF Plan" and, together with the Program, the "Plans "), all pursuant to and
in conformity with applicable law, including Minnesota Statutes, 469.124 to 469.133 and
Sections 469.174 to 469.1794, as amended, has been submitted to the City of Elk River Planning
Commission (the "Commission "); and
WHEREAS, the Commission has reviewed the Plans to determine the consistency of the
Plans with the comprehensive plan for the City of Elk River:
NOW THEREFORE, BE IT RESOLVED AND DETERMINED by the City of Elk River
Planning Commission that the Plans are consistent with the comprehensive plan for the City of
Elk River and conform to general plans for development or redevelopment of the City as a
whole.
Adopted June 27, 2017
Chair
501899v1 JSB EL185 -52