9.1 HRSR 10-02-2017 Request for Action
River
To Item Number
Housing and Redevelopment Authority 9.1
Agenda Section Meeting Date Prepared by
Work Session October 2,2017 Amanda Othoudt, EDD
Item Description Reviewed by
Draft TIF Policy Cal Portner,City Administrator
Reviewed by
Action Requested
Review the new draft Tax Increment Financing Policy.
Background/Discussion
The Tax Increment Financing policy was last approved on February 18,2014.
In 2014,the HRA and the City Council established a separate Housing TIF policy formalizing a tool to
assist in the development of housing projects that satisfy city goals and require assistance.The Housing
TIF policy is a separate policy to the policy employed for economic development where factors such as
job growth and wages are a vital consideration. The HRA approved the Housing TIF Policy and
worksheet on April 6, 2015,with the goal of attracting affordable senior housing to Elk River.
Staff initiated an EDA Finance Committee review of all financial policies in March of 2016.The TIF
policy is the final policy under review. Both the EDA and the HRA had an opportunity to review the
policy and opted to remove the project scoring worksheet and create a more generic policy that is guided
by the recommendations in the Housing Study completed by Maxfield Research in 2015.
Staff is looking for direction from the HRA, EDA and City Council to replace the existing policy with the
newly drafted policy providing more flexibility to TIF related projects.
Financial Impact
None
Attachments
• Housing TIF Policy and Application (April 6, 2015)
• TIF Policy and Application (February,2014)
• Executive Summary—Maxfield Housing Study (December, 2015)
• DRAFT TIF Policy
The Elk River Vision
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Tax Increment Financing
PolicyApplication&
Amended: February 2014
Amended: May 2006
Amended: March 2000
Adopted: August 1991
City of Elk River
Economic Development Division
13065 Orono Parkway
J
L., Elk River,MN 55330
763.635.1040
Table of Contents
I. Policy Purpose 3
II. Objectives of Tax Increment Financing 3
III. City of Elk River Policies for the Use of TIF 4
IV. Project Qualifications 5
V. Subsidy Agreement & Reporting Requirements 6
VI. Application Process for TIF 6
VII. Application for TIF 7
Applicant Information 7
Project Information 8
Public Purpose 8
Sources&Uses 9
Checklist&Additional Information 10
VIII. Sample But-For Analysis I I
IX. Application Review Worksheet:
Commercial-Industrial Projects 1 2
X. Application Review Worksheet:
Housing Projects 1 4
City of Elk River Tax Increment Financing Policy&Application LIIIIERED
.mended February2014 NATURE
Page 2 of 15
I. POLICY PURPOSE
For the purposes o f this document, the term "City"shall include the Elk River City Council, Economic
Development Authority, and Housing and Redevelopment Authority.
The purpose of this policy is to establish the City of Elk River's position relating to the
use of Tax Increment Financing (TIF) for private development above and beyond the
requirements and limitations set forth by State Law. This policy shall be used as a guide
in the processing and review of applications requesting tax increment assistance. The
fundamental purpose of tax increment financing in Elk River is to encourage desirable
development or redevelopment that would not otherwise occur but for the assistance
provided through TIF.
The City of Elk River is granted the power to utilize TIF by the Minnesota Tax
Increment Financing Act, as amended. It is the intent of the City to provide the
minimum amount of TIF, as well as other incentives, at the shortest term required for
the project to proceed. The City reserves the right to approve or reject projects on a
case by case basis, taking into consideration established policies, project criteria, and
demand on city services in relation to the potential benefits from the project. Meeting
policy criteria does not guarantee the award of TIF to the project. Approval or denial of
one project is not intended to set precedent for approval or denial of another project.
II. OBJECTIVES OF TAX INCREMENT FINANCING
As a matter of adopted policy, the City will consider using TIF to assist private
�-- development projects to achieve one or more of the following objectives:
• To retain local jobs and/or increase the number and diversity of jobs that offer
stable employment and/or attractive wages and benefits as defined in the City's
Business Subsidy Policy.
• To encourage additional unsubsidized private development in the area, either
directly or indirectly through "spin off' development.
• To facilitate the development process and to achieve development on sites
which would not be developed without TIF assistance.
• To remove blight and/or encourage redevelopment of commercial and
industrial areas in the city that result in high quality redevelopment and private
reinvestment.
• To offset increased costs of redevelopment (i.e. contaminated site clean up)
over and above the costs normally incurred in development.
• To create opportunities for affordable housing.
• To contribute to the implementation of other public policies, as adopted by the
�... city from time to time, such as the promotion of quality urban or architectural
City of Elk River Tax Increment Financing Policy&Application P I I E 1 E e 1 if
Amended February 2014
Page 3 of 15 NATME
design, energy conservation, and decreasing capital and/or operating costs of
local government.
• To enhance and diversify the City of Elk River's economic base.
• To significantly increase the City of Elk River's tax base.
III. POLICIES FOR THE VSE OF TIF
a. When possible,TIF shall be used to finance public improvements associated
with the project. The priority for the use of TIF funds is:
1. Public improvements, legal, administrative, and engineering costs.
2. Site preparation, site improvement, land purchase, and demolition.
3. Capitalized interest,bonding costs.
b. It is the City's policy to establish the following types of TIF districts:
1. Economic Development Districts
• It is desired that the project result in a minimum creation of
one full time job per$25,000 of TIF, or
• Result in a significant increase in the tax base.
2. Redevelopment Districts
• The market value of a redeveloped site shall increase by a
minimum of 50% of the current market value.
3. Housing Districts
• May be considered on a case-by-case basis.
Other types of TIF districts, along with specific criteria, may be considered
on a case-by-case basis.
c. TIF assistance will be provided to the developer upon receipt of the
increment by the City, otherwise referred to as the pay-asyou go method.
Requests for up front financing will be considered on a case-by-case basis.
d. A maximum of ten percent (10%) of any tax increment received from the
district may be retained by the City to reimburse administrative costs.
e. Any developer receiving TIF assistance shall provide a minimum of ten
percent (10%) owner cash equity investment in the project.
f. TIF will not be used in circumstances where land and/or property price is in
excess of fair market value.
g. Developer shall be able to demonstrate a market demand for a proposed
project. TIF shall not be used to support purely speculative projects.
h. TIF will not be utilized in cases where it would create an unfair and
significant competitive financial advantage over other projects in the area.
City of Elk.River Tax Increment Financing Policy&Application ' w E i E
Amended February 2014
Page 4 of 15 NATURE
i. TIF shall not be used for projects that would place extraordinary demands
on city services or for projects that would generate significant environmental
impacts.
j. The developer must provide adequate financial guarantees to ensure
completion of the project,including,but not limited to: minimum assessment
agreements, letters of credit, personal guaranties, etc.
k. The developer shall adequately demonstrate, to the City's sole satisfaction, an
ability to complete the proposed project based on past development
experience, general reputation, and credit history, among other factors,
including the size and scope of the proposed project.
1. For the purposes of underwriting the proposal, the developer shall provide
any requested market, financial, environmental, or other data requested by
the City or its consultants.
m. All TIF proposals shall optimize the private development potential of a site.
IV. PROJECT QUALIFICATIONS
All TIF projects considered by the City of Elk River must meet each of the following
requirements:
a. To be eligible for TIF, a project shall result in:
i. The new construction of a minimum of 25,000 square feet;
ii. A minimum increase of$37,500 per year in property taxes, excluding
the state portion;and
iii. Have a market value of at least$1,250,000 upon completion.
b. The project shall meet at least one of the objectives set forth in Section II
and satisfy all the provisions set forth in Section III of this document.
c. The developer shall demonstrate that the project is not financially feasible
but for the use of TIF.
d. The project shall comply with all provisions set forth in the Tax Increment
Financing Act, Minnesota Statutes 469.124 to 469.134,inclusive, as amended,
and Statutes 469.174 to 469.1794,inclusive, as amended.
e. The project must be consistent with the City's Comprehensive Plan, Land
Use Plan, and Zoning Ordinances.
f. The project shall serve at least two of the following public purposes:
• Creation of jobs with livable wages and benefits.
• Significantly increase the City's tax base.
• Enhancement or diversification of the city's economic base.
• Industrial development that will spur additional private investment in
City of Elk River Tax Increment Financing Policy&Application rail Y
Amended February 2014
Page 5of15 NATURE
the area.
• Fulfillment of defined city objectives such as those identified in the
City's Comprehensive Plan and the City's Economic Development
`-- Strategic Plan, among others.
• Removal of blight or the rehabilitation of a high profile or priority
site.
V. SUBSIDY AGREEMENT & REPORTING REQUIRMENTS
All developers/businesses receiving Tax Increment assistance from the City of Elk
River shall be subject to the provisions and requirements set forth by the City's
Business Subsidy Policy as amended and Minnesota Statutes Sections 1161993 to
116J.995 (the "Minnesota Business Subsidy Law").
VI. APPLICATION PROCESS FOR TIF
1. Applicant submits the completed application along with a $10,000 application
deposit, to be refunded for any portions not utilized if the tax increment project
does not proceed. The application deposit will be used toward the cost of
services provided in the evaluation of financial feasibility, establishment or
modification of the TIF district, and preparation of legal documents and
agreements. An additional deposit of$10,000 will be required for projects that
require meeting statutory eminent domain and/or redevelopment substandard
tests. Projects that demand professional services in excess of the initial deposit
shall be required to reimburse the City for the additional expenses.
2. City staff reviews the application and completes the Commercial-Industrial
and/or Housing Worksheets. The Application and Commercial-Industrial
and/or Housing Worksheets are primarily designed to score the desirability of
the proposed project. Industrial, Redevelopment and Housing projects will be
evaluated on a case-by-case basis and as the projects meet the city's desired
objectives.
3. Results of the Commercial-Industrial and/or Housing Worksheets are
submitted to the appropriate governing authorities (EDA or HRA) for
recommendation to the City Council of approval or denial of the request.
4. If preliminary approval is granted, the Tax Increment Financing Plan, along
with all necessary notices,resolutions are prepared by City staff and/or
consultants.
5. Notices are published and sent to the county and school board.
6. Public hearing(s) on the proposed request are held.
7. The City Council grants final approval or denial of the request.
City of Elk River Tax Increment Financing Policy&Application riEltill
_mended February2014
Page 6 of 15
VII. APPLICATION FOR TAX INCREMENT FINANCING
A. APPLICANT INFORMATION
Name of Corporation/Partnership
Address
Primary Contact
Address
Phone Fax Email
Brief description of the corporation/partnership's business,including history, principal
product or service:
Brief description of the proposed project:
Attorney Name
Address
Phone Fax Email
Accountant Name
Address
Phone Fax Email
Contractor Name
Address
Phone Fax Email
Engineer Name
Address
Phone Fax Email
Architect Name
Address
Phone Fax Email
City of Elk River Tax Increment Financing Policy&Application [1 M E A E i 1 1
Amended February2014 NATURE
Page 7 of 15
B. PROJECT INFORMATION
1. The project will be:
Industrial Greenfield: New Construction Expansion
Commercial Redevelopment: New Construction Rehabilitation
Industrial Redevelopment: New Construction Rehabilitation
Other
2. The project will be: Owner Occupied Leased Space
3. Project Address
Legal Description &Parcel Identification Number(s)
4. Site Plan and Preliminary Construction Plans Attached: Yes No
5. Amount of Tax Increment Requested for:
Land Purchase $
Public Improvement$
Site Improvement$
6. Current Real Estate Taxes on Project Site: $
Estimated Real Estate Taxes upon Completion: Phase I $
Phase II $
7. Construction Start Date:
Construction Completion Date:
If Phased Project: Year % Completed
Year % Completed
C. PUBLIC PURPOSE
It is the policy of the City of Elk River that the use of Tax Increment Financing should
result in a benefit to the public. Please indicate how this project will serve a public
purpose.
Job Creation/Retention: Number of existing jobs
Number of jobs created by project
Average hourly wage of jobs created/retained
New industrial development,which will result in additional private
investment in the area.
Enhancement or diversification of the city's economic base.
The project contributes to the fulfillment of the City's Economic Development
Strategic Plan.
Removal of blight or the rehabilitation of a high profile or priority site.
Significantly increase the City's tax base.
Other:
City of Elk River Tax Increment Financing Policy&Application rill !'
Amended February 2014
Page 8of15 NAME
D. SOURCES & USES
SOURCES NAME AMOUNT
Bank Loan $
Other Private Funds $
Owner Cash Equity $
Fed Grant/Loan $
State Grant/Loan $
EDA Micro Loan $
Tax Increment $
ID Bonds $
TOTAL $
USES AMOUNT
Land Acquisition $
Site Development $
Construction $
Machinery&Equipment $
Architectural& Engineering Fees $
Legal Fees $
Interest During Construction $
Debt Service Reserve $
Contingencies $
TOTAL $
City of Elk River Tax Increment Financing Policy&Application t ® i E i i i t �►
Amended February 2014 NAp
Page 9 of 15
E. ADDITIONAL DOCUMENTATION AND CHECKLIST
Applicants will also be required to provide the following documentation.
A) Written business plan,including a description of the business,
ownership/management, date established, products and services, and
future plans
B) Financial Statements for Past Two Years
Profit&Loss Statement
Balance Sheet
C) Current Financial Statements
Profit&Loss Statement to Date
Balance Sheet to Date
D) Two Year Financial Projections
E) Personal Financial Statements of all Major Shareholders
Profit&Loss
Current Tax Return
F) Letter of Commitment from Applicant Pledging to Complete
During the Proposed Project Duration
G) Letter of Commitment from the Other Sources of Financing,
Stating Terms and Conditions of their Participation in
Project
H) Application deposit of$10,000,with any unused portion to be
refunded if project does not proceed.
I) Construction Plans and Itemized Project Construction Statement
J) Attach the following documentation as Exhibits
Exhibit A—Corporation/Partnership Description
Exhibit B—Description of Project
Exhibit C —List of Shareholders/Partners
Exhibit D — But-For Analysis
Exhibit E—List of Prospective Lessees
Exhibit F—Legal Description and PID Number(s)
Note: All Major shareholders will be required to sign personal guarantees if up front
financing of the project is required.
The undersigned certifies that all information provided in this application is true and correct to the best of the
undersigned's knowledge. The undersigned authorizes the City of Elk River to check credit references and
verify financial and other information. The undersigned also agrees to provide any additional information as
may be requested by the City after the filing of this application.
Applicant Name Date
City of Elk River Tax Increment Financing Policy&Application [ OREN I ! 1 Y
Amended February 2014
Page 10 of 15 NATURE
VIII. SAMPLE BUT-FOR ANALYSIS
..
WITH NO WITH
TAX INCREMENT TAX INCREMENT
SOURCES AND USES SOURCES AND USES
SOURCES SOURCES
Mortgage 9,600,000 8,667,000
Equity 2,400,000 2,400,00
Tax Increment Financing 0 933,000
TOTAL SOURCES 12,000,000 12,000,000
USES USES
Land 1,500,000 1,500,000
Site Work 300,000 300,000
Soil Correction 468,000 468,000
Demolition 100,000 100,000
Relocation 65,000 65,000
Subtotal Land Costs 2,433,000 2,433,000
Construction 6,750,000 6,750,000
Finish Manufacturing 250,000 250,000
Subtotal Construction Costs 7,000,000 7,000,000
...,. Soft Costs 350,000 350,000
Taxes 35,000 35,000
Finance Fees 850,000 850,000
Project Manager 542,000 542,000
Developer Fee 540,000 540,000
Contingency 250,000 250,000
Subtotal Soft Costs 2,567,000 2,567,000
TOTAL USES 12,000,000 12,000,000
Income Statement Income Statement
Sq. Ft. Per Sq. Ft. Sq. Ft. Per Sq. Ft.
Rent-Space 1 100,000 $8.00 800,000 100,000 $8.00 800,000
Rent-Space 2 25,000 $8.50 212,500 25,000 $8.50 212,500
Rent-Space 3 25,000 $9.00 225,000 25,000 $9.00 225,000
Other 0 $0.00 0 0 $0.00 0
1,237,500 1,237,500
Mortgage 20 Term 1,051,646 20 Term 949,439
9.00% Interest 9.00%Interest
9,600,000 Principal 8,667,000 Principal
Net Income 185,854 288,061
Total Return on Equity 7.74% 12.00%
City of Elk River Tax Increment Financing Policy&Application P 1 1 E 1 E 1 11
Amended February 2014 NATURE
Page 11 of 15
IX. TAX INCREMENT FINANCING APPLICATION REVIEW
WORKSHEET - COMMERCIAL/INDUSTRIAL PROJECTS
TO BE COMPLETED BY CITY STAFF
1. The project meets the criteria set forth in Section IV of the City's Tax Increment
Financing policy.
a) Meets minimum thresholds for size,value, and tax revenue.
b) Meets at least one of the objectives in Section II and satisfies
all of the provisions set forth in Section III.
c) Demonstrates need for TIF with the but for analysis.
d) Consistent with all city plans and ordinances.
e) Serves at least two public purposes as defined in Section IV (f).
2. Ratio of Private to All Public Investment in Project: Points:
$ Private investment 5:1 5
$ Public Investment 4:1 4
Ratio Private: Public Financing 3:1 3
2:1 2
Less than 2:1 1
3. Job Creation in the City of Elk River: Points:
Number of new jobs as a result of the project. 40+ 5
Number of existing/retained jobs divided by 2. 30+ 4
`-- Total 20+ 3
10+ 2
Less than 10 1
4. Ratio of Public Investment to Job Creation: Points:
$ Public Investment $15,000 or less 5
Number of new jobs created/retained $20,000 or less 4
$ Public Investment per new job $22,000 or less 3
$25,000 or less 2
Over$25,000 1
5. Wage Level of new jobs created/retained: Points:
Minimum hourly wage Over$21/ hour 5
of jobs created/retained: $18-21 / hour 4
$14-17 / hour 3
$10-13 / hour 2
Under$10 / hour 1
6. Project size: Points:
The project will result in the construction 80,000+ 5
of square feet 65,000+ 4
50,000+ 3
35,000+ 2
City of Elk River Tax Increment Financing Policy&Application i / II f 1 E / 1
Amended February2014 NA1TURE
Page 12 of 15
25,000+ 1
7. Market Value Tax Base Generation: Points:
The project will result in a per square foot Industrial Commercial
estimated market value (land and building) $80/sf+ $110/sf+ 5
of $70/sf+ $100/sf+ 4
$60/sf+ $90/sf+ 3
$50/sf+ $80/sf+ 2
$40/sf+ $70/sf+ 1
8. Type of Project: Points:
100% Owner Occupied 5
Mix Owner Occupied& Investment 4
Investment Property 3
9. Use: Points:
Manufacturing 5
Research &Development 4
Commercial Redevelopment 3
Warehouse/Distribution 2
Housing 1
10. Likelihood that the project will result in Points:
unsubsidized, spin-off development. High 5
Moderate 3
Low 1
Sub - Total Points: of a possible 45 points.
11. Bonus Points Bonus Points:
The project will be 100% Pay-asyou go TIF. 3 points
The project contributes to the goals of Energy City. 2 points
• Product promotes sensible use of energy, OR
• Project utilizes significant energy efficient design&/or
materials in construction.
Total Points:
Overall project analysis: High 45-38 points
Moderate 37-29 points
Low 28-20 points
Not Eligible 19-0 points
City of Elk River Tax Increment Financing Policy&Application riEl
Amended February 2014 NATURE
Page 13of15
X. TAX INCREMENT FINANCING APPLICATION REVIEW
WORKSHEET- HOUSING PROJECTS
TO BE COMPLETED BY CITY STAFF
1. The project meets the criteria set forth in Section IV of the City's Tax Increment
Financing policy.
a) Meets minimum thresholds for size,value,and tax revenue.
b) Meets at least one of the objectives in Section II and satisfies
all of the provisions set forth in Section III.
c) Demonstrates need for TIF with the Gut for analysis.
d) Consistent with all city plans and ordinances.
e) Serves at least two public purposes as defined in Section IV (f).
2. Ratio of Private to All Public Investment in Project: Points:
$ Private investment 5:1 5
$ Public Investment 4:1 4
Ratio Private: Public Financing 3:1 3
2:1 2
Less than 2:1 1
3. Job Creation in the City of Elk River: Points:
Number of new jobs as a result of the project. 20+ 5
Number of existing/retained jobs divided by 2. 15+ 4
Total 10+ 3
5+ 2
Less than 5 1
4. Wage Level of new jobs created/retained: Points:
Minimum hourly wage Over$25/hour 5
of jobs created/retained: $21-25/hour 4
$17-20/hour 3
$14-16/hour 2
Under$14/hour 1
5. Market Value/Tax Base Generation: Points:
Project will result in an estimated
market value per unit $135,000/Unit 5
(land and building) of $125,000/Unit 4
$115,000/Unit 3
$105,000/Unit 2
$ 95,000/Unit 1
6. Project provides housing that is restricted Points:
to persons 55 years and older:
5
City of Elk River Tax Increment Financing Policy&Application 111E1E1 11
Amended February 2014 NATURE
Page 14 of 15
7. Project proposes rehabilitation of existing
housing, housing stock, and maximizes
utilization of existing infrastructure: Points:
4
8. Project proposes a location near existing
jobs, transportation, recreation, retail services,
social services, and schools: Points:
2
9. Type of Housing Project: Points:
100% Owner Occupied 2
Investment Property 1
10. Likelihood that the project will result in Points:
unsubsidized, spin-off development. High 5
Moderate 3
Low 1
Sub- Total Points: of a possible 38 points.
11. Bonus Points Bonus Points:
The project will be 100%Pay-asyou go TIF. 3 points
The project contributes to the goals of Energy City. 2 points
• Product promotes sensible use of energy, OR
• Project utilizes significant energy efficient design&/or
materials in construction.
Total Points:
Overall project analysis: High 38-30 points
Moderate 29-22 points
Low 21-13 points
Not Eligible 12-0 points
City of Elk River Tax Increment Financing Policy&Application ®i E l ' al
Amended February 2014 NATIJIM
Page 15 of 15
City
River
Tax Increment Financing
PolicyApplication&
HOUSING
Amended: April 2015
Amended: February 2014
Amended: May 2006
Amended: March 2000
Adopted: August 1991
City of Elk River
Economic Development Division
13065 Orono Parkway
Elk River,1\IN 55330
763.635.1040
Table of Contents
I. Policy Purpose 3
II. Objectives of Tax Increment Financing 3
III. Policies for the Use of TIF 4
IV. Project Qualifications 5
V. Subsidy Agreement & Reporting Requirements 6
VI. Application Process for TIF 6
VII. Meeting Schedule 7
VIII. Sample But-For Analysis 9
IX. Application Review Worksheet:
Housing Projects 8
Application I I
City of Elk River Tax Increment Financing Policy&Application-Housing i.01111111 / t
Amended April 8 2015 NATURE
Page 2 of 14
I. POLICY PURPOSE
For the purposes of this document, the term "Go"shall include the Elk River City Council, Economic
Development Authority, and Housing and Redevelopment Authority.
The purpose of this policy is to establish the City of Elk River's position relating to the
use of Tax Increment Financing (TIF) for Housing private development above and
beyond the requirements and limitations set forth by State Law. This policy shall be used
as a guide in the processing and review of applications requesting tax increment
assistance. The fundamental purpose of tax increment financing in Elk River is to
encourage desirable development or redevelopment that would not otherwise occur but
for the assistance provided through TIF.
The City of Elk River is granted the power to utilize TIF by the Minnesota Tax
Increment Financing Act,as amended. It is the intent of the City to provide the
minimum amount of TIF, as well as other incentives, at the shortest term required for
the project to proceed. The City reserves the right to approve or reject projects on a
case by case basis, taking into consideration established policies,project criteria, and
demand on city services in relation to the potential benefits from the project. Meeting
policy criteria does not guarantee the award of TIF to the project. Approval or denial of
one project is not intended to set precedent for approval or denial of another project.
II. OBJECTIVES OF TAX INCREMENT FINANCING
As a matter of adopted policy, the City will consider using TIF for Housing to assist
private development projects to achieve one or more of the following objectives:
• To encourage additional unsubsidized private development in the area, either
directly or indirectly through "spin off' development.
• To facilitate the development process and to achieve development on sites
which would not be developed without TIF assistance.
• To remove blight and/or encourage redevelopment of residential areas in the
city that result in high quality redevelopment and private reinvestment.
• To offset increased costs of redevelopment (i.e. contaminated site clean up)
over and above the costs normally incurred in development.
• To create opportunities for affordable housing.
• To contribute to the implementation of other public policies, as adopted by the
city from time to time, such as the promotion of quality urban or architectural
design, energy conservation, and decreasing capital and/or operating costs of
local government.
• To enhance and diversify the City of Elk River's housing stock.
City of Elk River Tax Increment Financing Policy&Application- Housing P ® I E N E I I
Amended April 8 2015
Page 3 of 14 NATURE
III. POLICIES FOR THE USE OF HOUSING TIF
a. When possible,TIF shall be used to finance public improvements associated
with the project. The priority for the use of TIF funds is:
1. Public improvements,legal, administrative, and engineering costs.
2. Site preparation, site improvement,land purchase, and demolition.
3. Capitalized interest, bonding costs.
b. TIF assistance will be provided to the developer upon receipt of the
increment by the City, otherwise referred to as the pay-asyou go method.
c. A maximum of ten percent (10%) of any tax increment received from the
district may be retained by the City to reimburse administrative costs.
d. Any developer receiving TIF assistance shall provide a minimum of ten
percent (10%) owner cash equity investment in the project.
e. TIF will not be used in circumstances where land and/or property price is in
excess of fair market value.
f. Developer shall be able to demonstrate a market demand for a proposed
project. TIF shall not be used to support purely speculative projects.
g. TIF will not be utilized in cases where it would create an unfair and
�,.. significant competitive financial advantage over other projects in the area.
h. TIF shall not be used for projects that would place extraordinary demands
on city services or for projects that would generate significant environmental
impacts.
i. The developer must provide adequate financial guarantees to ensure
completion of the project,including, but not limited to: minimum assessment
agreements, letters of credit, personal guaranties, etc.
j. The developer shall adequately demonstrate, to the City's sole satisfaction, an
ability to complete the proposed project based on past development
experience,general reputation, and credit history, among other factors,
including the size and scope of the proposed project.
k. For the purposes of underwriting the proposal, the developer shall provide
any requested market, financial, environmental, or other data requested by
the City or its consultants.
1. All TIF proposals shall optimize the private development potential of a site.
City of Elk River Tax Increment Financing Policy&Application- Housing t 0111 E A E B 1 Y
Amended April 8 2015
Page 4 of 14 NATURE
IV. PROJECT QUALIFICATIONS
Housing TIF projects considered by the City of Elk River must meet each of the
following requirements:
a. To be eligible for TIF, a project shall result in:
i. A minimum increase of$37,500 per year in property taxes, excluding
the state portion; and
ii. Have a market value of at least$1,250,000 upon completion.
b. The project shall meet at least one of the objectives set forth in Section II
and satisfy all the provisions set forth in Section III of this document.
c. The developer shall demonstrate that the project is not financially feasible
but for the use of TIF.
d. The project shall comply with all provisions set forth in the Tax Increment
Financing Act, Minnesota Statutes 469.124 to 469.134,inclusive, as amended,
and Statutes 469.174 to 469.1794,inclusive, as amended.
e. The project must be consistent with the City's Comprehensive Plan,Land
Use Plan, and Zoning Ordinances.
f. The project shall serve at least two of the following public purposes:
• Enhancement or diversification of the city's housing stock.
• Development that will spur additional private investment in the area.
• Fulfillment of defined city objectives such as those identified in the
City's s Comprehensive Plan and the City's Housing and
Redevelopment Strategic Plan, among others.
• Removal of blight or the rehabilitation of a high profile or priority
site.
V. SUBSIDY AGREEMENT & REPORTING REQUIRMENTS
All developers/businesses receiving Tax Increment assistance from the City of Elk
River may be subject to the provisions and requirements set forth by the City's
Business Subsidy Policy as amended and Minnesota Statutes Sections 116J.993 to
116J.995 (the "Minnesota Business Subsidy Law").
VI. APPLICATION PROCESS FOR TIF
1. Applicant submits the completed application along with a $10,000 application
deposit, to be refunded for any portions not utilized if the tax increment project
does not proceed. The application deposit will be used toward the cost of
services provided in the evaluation of financial feasibility, establishment or
modification of the TIF district, and preparation of legal documents and
agreements. An additional deposit of$10,000 will be required for projects that
require meeting statutory eminent domain and/or redevelopment substandard
tests. Projects that demand professional services in excess of the initial deposit
shall be required to reimburse the City for the additional expenses.
City of Elk River Tax Increment Financing Policy&Application-Housing 'j v tato 1 r
Amended April 8 2015
Page 5 of 14 NATURE
2. City staff reviews the application and completes the Housing Worksheets. The
Housing Worksheets are primarily designed to score the desirability of the
proposed project. Housing projects will be evaluated on a case-by-case basis
and as the projects meet the city's desired objectives.
3. Results of the Housing Worksheets are submitted to the appropriate governing
authorities (EDA or HRA) for recommendation to the City Council of approval
or denial of the request.
4. If preliminary approval is granted, the Tax Increment Financing Plan, along
with all necessary notices, resolutions are prepared by City staff and/or
consultants.
5. Notices are published and sent to the county and school board.
6. Public hearing(s) on the proposed request are held.
7. The City Council grants final approval or denial of the request.
City of Elk River Tax Increment Financing Policy&Application- Housing
Amended April 8 2015 KillAllful
Page 6of14
VII. MEETING SCHEDULE
�,. 2015 Housing and Redevelopment Authority & City Council Meeting
Schedule
For Review of Applications related to Housing assistance
Feb 23 Mar 24 Ma 4 Ma 4
Apr 27 May 26 July 6 July 6
Jun 29 Jul 28 Sep 8 Sep 8
Au• 31 Se• 29 Nov 2 Nov 2
Oct 26 Nov 24 Jan 4 2016 Jan 4 2016
Dec 28 Jan 26 2016 Mar 7 2016 Mar 7 2016
ALL REQUIRED APPLICATION MATERIALS MUST BE SUBMITTED BY
THE DEADLINE OR YOUR APPLICATION WILL BE POSTPONED TO
THE NEXT MONTH
Cite of Elk River Tax Increment Financing Policy&Application-Housing loilIte
Amended April 8 2015
Page 7of14 NA'1UREI
VIII. SAMPLE BUT-FOR ANALYSIS
WITH NO WITH
TAX ABATEMENT TAX ABATEMENT
SOURCES AND USES SOURCES AND USES
SOURCES SOURCES
Mortgage 9,600,000 8,667,000
Equity 2,400,000 2,400,00
Tax Abatement 0 933,000
TOTAL SOURCES 12,000,000 12,000,000
USES USES
Land 1,500,000 1,500,000
Site Work 300,000 300,000
Soil Correction 468,000 468,000
Demolition 100,000 100,000
Relocation 65,000 65,000
Subtotal Land Costs 2,433,000 2,433,000
Construction 6,750,000 6,750,000
Finish Manufacturing 250,000 250,000
Subtotal Construction Costs 7,000,000 7,000,000
Soft Costs 350,000 350,000
Taxes 35,000 35,000
Finance Fees 850,000 850,000
,.., Project Manager 542,000 542,000
Developer Fee 540,000 540,000
Contingency 250,000 250,000
Subtotal Soft Costs 2,567,000 2,567,000
TOTAL USES 12,000,000 12,000,000
Income Statement Income Statement
Sq. Ft. Per Sq. Ft. Sq. Ft. Per Sq. Ft.
Rent-Space 1 100,000 $8.00 800,000 100,000 $8.00 800,000
Rent-Space 2 25,000 $8.50 212,500 25,000 $8.50 212,500
Rent-Space 3 25,000 $9.00 225,000 25,000 $9.00 225,000
Other 0 $0.00 0 0 $0.00 0
1,237,500 1,237,500
Mortgage 20 Term 1,051,646 20 Term 949,439
9.00%Interest 9.00%Interest
9,600,000 Principal 8,667,000 Principal
Net Income 185,854 288,061
Total Return on Equity 7.74%_ 12.00%
City of Elk River Tax Increment Financing Policy&Application-Housing f o I E llE i I Y
Amended April 8 2015 NATURE
Page 8of14
2015 Financial
of Application
• ""�
ver HousingTax increment
Financing
I . PROJECT INFORMATION
Property Information (please print)
Address: Parcel Number: 75 -
The project will be:
Housing
Other
The project will be: Owner Occupied Leased Space
If Leased Space Percent Occupied 6 months after Certificate of Occupancy
Total Amount of Tax Increment Requested: $ over years.
City Portion: Annual$ Total$
County Portion: Annual$ Total$
ISD 728 Portion: Annual$ Total$
Current Real Estate Taxes on Project Site: $
Estimated Real Estate Taxes upon Completion: Phase I $ Phase II $
Construction Start Date Construction Completion Date
Percent of project complete on December 31, current year.
II. CONTACT INFORMATION
Public Information Notice
Generally, correspondence to and from Staff is considered public information. Specific data related
to a financial assistance request is deemed not public: Financial Information,Financial Statements,
Net worth Calculations,Business Plans, Income and Expense projections,Balance Sheets, Customer
Lists,Income Tax returns. When public financial assistance is received,only the following remains
not public: Business Plans,Income and Expense projections,Customer lists,Income tax returns,
design,market,and feasibility studies not paid for with public funds. The city does allow an
applicant to submit sensitive financial information directly to the City's financial consultant, for
additional security.
Property Owner Information (please print)Name: E-
mail address:
Address:
City of Elk River Tax Increment Financing Policy&Application-Housing p ® a I 1 I II
Amended April 8 2015
Page 9 of 14 NATURE
Street City State Zip Code
Phone :
Legal Name of Business:
Check One: Proprietor Corporation Partnership
Federal ID # State ID #
Agent Information (print) Same as Property Owner Different,as below I I (Check one)
Name: E-mail address:
Address:
Street City State Zip Code
Phone (w):
III. SIGNATURE
I certify that is defined as a Small Business,For-Profit and is not a religious,
(Business name)
Political, Casino,Sports Facility,or Pornographic Enterprise. I further certify that all information
provided in this application is true and correct to the best of my knowledge. I authorize the city of
Elk River and the Finance Committee to check credit references and verify financial and other
information. I further agree,if approved, to the loan security and guarantees required by the Subsidy
policy. I agree to provide any additional information as may be requested by the city.
Agreement to Pay Costs of Review
It is the policy of the City of Elk River to require applicants to pay costs incurred by the City in
reviewing and acting upon applications,so that these costs are not borne by the taxpayers of the City.
These costs include all of the City's out-of-pocket costs for expenses, including the City's costs for
review of the application by the City's Financial Consultant and City Attorney, or other consultants,
recording fees,and necessary publication costs.
The application processing fees cover anticipated costs;costs incurred above the application fee will
be invoiced as they are incurred,and payment will be due within thirty (30) days. Application fees
are not refundable,though any unused portion is returned at the request of the applicant. If payment
is not received as required by this agreement,the City may suspend the application review process
and may deny the application for failure to comply with the requirements for processing the
application. Payment for costs will be required whether the application is granted or denied.
The undersigned has received the City's policy regarding the payment of costs of review, understands
that reimbursement to the City of costs incurred in reviewing the application will be required, agrees
to reimburse the City as required in the policy and make payment when billed by the City, and agrees
that the application may be denied for failure to reimburse the City for costs as provided in the
policy.
Note:All Major shareholders will be required to sign personal guarantees and a minimum
assessment agreement if up front financing of the project is required.
APPLICANT SIGNATURE:
TITLE: DATE:
City of Elk River Tax Increment Financing Policy&Application- Housing1 1
Amended April 8 2015 NATURE
Page 10 of 14
IV. PUBLIC PURPOSE
It is the policy of the City of Elk River that the use of Tax Increment Financing should
result in a benefit to the public. Please indicate how this project will serve a public purpose:
L.• Job Creation/Retention (Complete table in Section V).
New industrial development which will result in additional private
investment in the area.
Enhancement and/or diversification of the City of Elk River's economic base.
The project contributes to the fulfillment of the City's Economic Development
Strategic Plan.
Removal of blight.
Rehabilitation of a high profile or priority site.
Significantly increase the City's tax base.
V. SOURCES & USES
SOURCES NAME AMOUNT
Bank Loan $
Other Private Funds $
Owner Cash Equity $
Fed Grant/Loan $
State Grant/Loan $
EDA Micro Loan $
Tax Abatement $
ID Bonds $
TOTAL $
USES AMOUNT
Land Acquisition $
Site Development $
Construction $
Machinery &Equipment $
Architectural&Engineering Fees $
Legal Fees $
Interest During Construction $
Debt Service Reserve $
Contingencies $
TOTAL $
VI. ADDITIONAL DOCUMENTATION AND CHECKLIST
Please provide one paper and one electronic copy of following: (Incomplete applications
will delay the review of an application)
A) Application deposit of$10,000,with any unused portion to be refunded if
project does not proceed.
B) Written Narrative: Please give a brief summary of your business,its products or
service, the project and how this subsidy will impact your project. The narrative
should include a statement demonstrating how the project meets the public
purpose in IV (above).
City of Elk River Tax Increment Financing Policy&Application-Housing ' j I E IT
Amended April 8 2015
Page 11 of 14 NATURE
C) Business Plan. The business plan should include the following:
1. Description of Business
2. Ownership
3. Management
4. Date Established
5. Products/Services
6. Future Plans
7. Market for Business
D) Project Proforma1
1. Sources and uses of funds to finance the project, and
2. Operating cash flow assumptions that include:
a. Projected revenues,
b. Operating expenses,
c. Net operating income, and
d. Annual debt service and loan payments.
E) Financial Statements for previous Two Years and the Current year to date 1
Profit&Loss Statement
Balance Sheet
F) Financial Projections for Term of abatement,up to 10 Years1
G) Personal Financial Statements of all Major Shareholders,Partners,Guarantors
H) Letter of Commitment from Applicant Pledging to Complete
During the Proposed Project Duration
I) Letter of Commitment from the Other Sources of Financing,
Stating Terms and Conditions of their Participation in Project Completion
J)Written statement of contact information (Name, Company,Address,Email,
Phone, Fax) for project team,including: Attorney,Accountant,Financing
Sources (lenders,partners,etc...),Parent Company,Architect
1 Sensitive financial documents,while not-public information,may be submitted directly to the City's
financial consultant by signing the attached confidentiality agreement, for additional confidentiality.
The attached Confidentiality Agreement may be signed and included with the application.
K) Construction Plans and Itemized Project Construction Statement
L) Attach the following documentation as Exhibits
Exhibit A—Corporation/Partnership Description
Exhibit B—List of Shareholders/Partners
Exhibit C—But-For Analysis
Exhibit D—List of Prospective Lessees (if applicable)
Exhibit E—Legal Description
M) Site and Construction Plans
City of Elk River Tax Increment Financing Policy&Application- Housing P01111118 IT
Amended April 8 2015
Page 12 of 14 NAME
CONFIDENTIALITY AGREEMENT
(Sample Agreement)
This agreement is made this day of , 20 ,by and between
�-- , a company, hereinafter"Developer,"and
Springsted Incorporated, a Minnesota corporation, hereinafter"Springsted."
WHEREAS, Developer is (description of project), hereinafter the"Project,"
pursuant to a (form of agreement)with
(public entity), hereinafter the"City,"dated ;
and
WHEREAS, Springsted has been hired by the City to investigate certain financial aspects of the
Developer and the Project; and
WHEREAS, in conjunction with such investigation, Springsted desires to examine the financial
information of Developer relative to Developer and the Project; and
WHEREAS, Developer is willing to disclose such information only on the condition that such
information be kept confidential.
NOW,THEREFORE, in consideration of the terms and mutual covenants contained herein,the
parties agree as follows:
1. Developer agrees to make its financial information, development pro forma and
projection,budget information, and such other financial information concerning the
Project as Springsted may reasonably request, hereinafter the"Information,"available
for inspection by Springsted,but solely for the purpose set forth above.
2. Springsted shall accept the Information in strict confidence solely for that purpose
and shall make no other use of the information, or disclose it to any other person or
party, including the City, without the express written consent of Developer.
Notwithstanding the foregoing, Springsted may use the Information in summary form
only to report its findings to the City provided that Springsted first presents its proposed
report to Developer and obtains Developer's written consent to ensure that no
inadvertent disclosures of confidential information or other inaccurate information are
contained in such report.
3. Inspection of the Information shall take place in such manner and at such place and
time as the parties may agree. The Information shall not be copied, duplicated,
abstracted, summarized or recorded, directly or indirectly, by any means whatsoever,
without the prior consent of Developer.
4. The Information shall remain the property of Developer, and any Information
provided in tangible form shall be returned to Developer upon completion of such
inspection. Any copies, duplications, abstracts, summaries or other recordings of the
Information made with Developer's consent shall be returned to Developer upon
demand.
5. Springsted agrees that any breach of the obligation of confidentiality imposed hereby
shall constitute irreparable harm to Developer and shall entitle Developer to equitable
relief enjoining any further breaches of this Agreement, together and in conjunction with
any and all such other remedies as may be available to Developer at law or in equity.
IN WITNESS WHEREOF,the parties have hereunto set their hands the day and year first above
written.
DEVELOPER
By Its
SPRINGSTED INC.
By Its
City of Elk River Tax Increment Financing Policy&Application- Housing riEllta
1 Y
Amended April 8 2015 NATURE
Page 13 of 14
Comprehensive Housing Needs Analysis
City of Elk River
,H9,1111Maxfield
Research & Consulting
j * MaxfieId
Research & Consulting
December 4,2015
Ms.Amanda Othoudt
Economic Development Director
City of Elk River
13065 Orono Parkway
Elk River, MN 55330
Dear Ms. Othoudt:
Attached is the Comprehensive Housing Needs Analysis for the City of Elk River, Minnesota
conducted by Maxfield Research and Consulting LLC. The study updates the previous housing
study completed in 2012 during the economic downturn and projects housing demand from
2015 through 2025. The updated study provides recommendations on the amount and type of
housing that could be built in Elk River to satisfy demand from current and future residents over
the next decade.
The study identifies a potential demand for over 1,500 new housing units in Elk River over the
remainder of the decade and beyond (2015 to 2025, including a variety of housing options).
Demand will be spread across all product types; including 787 for-sale units,442 general-
occupancy rental units,and 296 senior units. The existing single-family finished lot supply is
dwindling;therefore new platted developed lots will be needed soon to meet future housing
demand. Detailed information regarding recommended housing concepts can be found in the
Conclusions and Recommendations section at the end of the report.
We have enjoyed performing this study for you and are available should you have any
questions or need additional information.
Sincerely,
MAXFIELD RESEARCH AND CONSULTING LLC
4.1d#44
• .
Matt Mullins Brian Smith
Vice President Research Associate
Attachment
•r91 612-338-0012 (fax)612-904-7979
7575 Golden Valley Road,Suite 385,Golden Valley,MN 55427
Vb. www.maxfieldresearch.com
TABLE OF CONTENTS
Page
EXECUTIVE SUMMARY 1
DEMOGRAPHIC ANALYSIS 6
Introduction 6
Elk River Study Area Definition 6
Population and Household Growth Trends and Projections 8
Population Age Distribution Trends 9
Household Income 11
Tenure by Age of Householder 14
Household Type 15
Tenure by Income 18
Net Worth by Age of Householder 20
EMPLOYMENT ANALYSIS 22
Employment Growth Trends 22
Major Employer Interviews 28
HOUSING CHARACTERISTICS 31
Introduction 31
Residential Construction Trends 2000 to Present 31
American Community Survey 33
Age of Housing Stock 33
Housing Units by Structure and Occupancy or(Housing Stock by Structure Type) 35
Housing Units by Occupancy Status and Tenure 37
Owner Occupied Housing Units by Mortgage Status 38
Owner-Occupied Housing Units by Value 39
Renter-Occupied Units by Contract Rent 40
RENTAL MARKET ANALYSIS 41
Introduction 41
General Occupancy Rental Projects 41
Pending Rental Developments in Elk River.. 49
Rental Market interview Summary 50
SENIOR HOUSING ANALYSIS 51
Senior Housing Defined 51
Senior Housing in Elk River 52
TABLE OF CONTENTS
(continued)
Page
FOR-SALE MARKET ANALYSIS 59
Introduction 59
Overview of For-Sale Housing Market Conditions 59
Home Resales by Price 64
Home Resales per Square Foot("PSF) 65
Current Supply of Homes on the Market 67
Elk River Lot Supply 73
HOUSING DEMAND ANALYSIS 78
Introduction 78
Demographic Profile and Housing Demand 78
Housing Demand Overview 79
Estimated Demand for For-Sale Housing 83
Estimated Demand for General Occupancy Rental Housing 84
Estimated Demand for Independent Adult Few Services Senior Housing 86
Estimated Demand for Affordable Independent Senior Housing 88
Estimated Demand for Subsidized Senior Housing 89
Estimated Demand for Congregate Senior Housing 90
Demand Estimate for Assisted Living Housing 92
Estimated Demand for Memory Care Housing 94
RECOMMENDATIONS AND CONCLUSIONS 97
Introduction/Overall Housing Recommendations 97
Recommended Housing Product Types 100
For-Sale Housing 100
General Occupancy Rental Housing 105
Senior Housing 107
Challenges and Opportunities
Challenges and Opportunities 110
APPENDIX-DEFINITIONS 113
LIST OF TABLES
Table Number and Title Page
Dl. Population and Household Growth Trends and Projections, Elk River, 1990 to 2025. 9
D2. Population Age Distribution, Elk River, 2000,2010, 2015,and 2020 10
D3. Household Income by Age of Householder, Elk River, 2015&2020 13
D4. Tenure by Age of Householder, Elk River, 2000 and 2010 16
D5. Household Type Trends, Elk River, 2000 and 2010 17
D6. Tenure by Household Income, Elk River, 2000 and 2013* 20
D7. Net Worth by Age of Householder, Elk River, 2015 21
El. Resident Employment,Sherburne County, 2000-2015* 24
E2. Covered Employment Trends, Elk River, 2000, 2005, 2010,and 2014 25
E3. Major Employers,City of Elk River,June 2012 32
HC1. Residential Construction, City of Elk River,Annual Building Permits Issued, 2000 to
2015* 32
HC2. Age of Housing Stock, Elk River, 2013* 34
HC3. Housing Stock by Units in Structure, Elk River, 2000 and 2013* 36
HC4. Housing Stock by Occupancy Status and Tenure, Elk River, 2000 to 2020 37
HC5. Housing Units by Mortgage Status, Elk River, 2013* 48
HC6. Units by Value, Elk River, 2013* 39
HC7. Units by Contract Rent, Elk River, 2013* 40
RM1.General Occupancy Rental Housing,City of Elk River, October 2015 43
RM2.Common Area Features/Amenities, City of Elk River, October 2015 46
SH1. Senior Housing Units By Type, City of Elk River, October 2015 52
SH2. Senior Housing, City of Elk River,October 2015 53
SH3. Unit Features/Building Amenities/Services, Existing Senior Housing,City of
Elk River, October 2015 55
FS1. Home Resales,City of Elk River, 2000 to June 2015 60
F52. Single Family and Multifamily Residential Sales, City of Elk River, 2000 through 2015 62
FS3. Home Resales by Sales Price & Product Type, City of Elk River, 2014 64
F54. Housing Sales Per Square Foot (PSF), Elk River, 2005 to June 2015 66
FS5. Homes Currently Listed For-Sale, City of Elk River,August 2015 68
FS6. Active Listings by Housing Type, Elk River,August 2015 69
F57. Active Listings by Housing Type, Elk River, August 2015 70
F58. Active Listing by Year Built, Elk River,August 2015 72
F59. Subdivision & Lot Inventory-Detached Housing Units, City of Elk River,
2nd Quarter 2015 74
FS10.Subdivisions& Lot Inventory-Attached Housing Units, City of Elk River,
2nd Quarter 2015 75
LIST OF TABLES
(continued)
Table Number and Title Page
FS11.Vacant Lot for Parcels Platted,Sherburne County, 2000 to Present 76
HD1. For-Sale Housing Demand, Elk River, 2015 to 2025 77
HD2. Rental Housing Demand, Elk River, 2015 to 2025 78
HD3. Market Rate Adult/Few Services Housing Demand, Elk River, 2015 &2020.. 80
HD4. Affordable Independent Senior Housing Demand, Elk River,2015&2020 82
HDS. Subsidized Independent Senior Housing Demand, Elk River, 2015&2020 83
HD6, Market Rate Congregate Housing Demand, Elk River,2015 &20120 84
HD7, Market Rate Assisted Living Demand, Elk River, 2015&2020 87
HD8. Memory Care Demand, Elk River, 2015 &2020 90
CR1. Summary of Housing Demand, City of Elk River, November 2015 97
CR2. Recommended Housing Development,City of Elk River, 2015 to 2025 99
HA4. Elk River Area Housing Affordability—Based on Household Income 110
EXECUTIVE SUMMARY
Purpose and Scope of Study
Maxfield Research and Consulting LLC was engaged by the City of Elk River to update the
Comprehensive Housing Needs Analysis for the City of Elk River that was completed in 2012.
The Housing Needs Analysis provides recommendations on the amount and types of housing
that should be developed in order to meet the needs of current and future households who
choose to reside in the City.
The scope of this study includes: an analysis of the demographic and economic characteristics
of the City; a review of the characteristics of the existing housing stock and building permit
trends; an analysis of the market condition for a variety of rental and for-sale housing products;
and an assessment of the need for housing by product type in the City. Recommendations on
the number and types of housing products that should be considered in the City are also
supplied.
Demographic Analysis
• The City of Elk River is forecast to add an additional 1,602 people and 742 households
between 2010 and 2020.
• The population in Elk River is aging and older age cohorts are accounting for a significant
percentage of the total population. Over the next five years,the age 55 to 64 cohort will
continue to have the highest growth numerically(791 people,or 38%), but significant
growth is also forecast in the age 65 to 74 cohort(716 people,or 60%)and 75+households
(262 people, or 27%). Older adults and younger seniors (those between the ages of 55 and
74) in these high growth age cohorts are the target market for active adult housing
products.
• The overall median household income in 2015 in Elk River is estimated at about$78,300.
This is substantially higher than the Twin Cities Metro Area at$67,795.
• Between 2000 and 2010, homeownership rates increased from 78.3%to 80.2%in the City
of Elk River
• The County's unemployment rate of 4.2%in 2015 is slightly higher than the State of
Minnesota(3.9%)and lower than the Nation(5.5%).
Housing Characteristics
• In total, Elk River is reported to have approximately 8,810 housing units,of which about
6,650 are owner-occupied, 1,602 are renter-occupied,and 457 are vacant as of 2015.
• Owner-occupied housing units account for about 78%of the City's total housing stock.
MAXFIELD RESEARCH&CONSULTING,LLC. 1
EXECUTIVE SUMMARY
• The Cityof Elk River issued permits for the construction of 2,704 new residential units from
2000 to 2010. That equates to 246 units annually. However, 91.5%of development
occurred from 2000 to 2006. New residential construction declined significantly from 2006
through 2012. Permits have increased since the recession but not near the levels they were
in the early 2000s.
• Approximately 81%of Elk River homeowners have a mortgage. About 24%of homeowners
with mortgages also have a second mortgage or home equity loan. Comparatively, about
66%of homeowners in the United States have a mortgage.
Rental Housing Market Analysis
• In order to assess the current market conditions for rental housing in Elk River, Maxfield
Research and Consulting LLC conducted an inventory of subsidized (i.e. housing that is
income-restricted to households earning at or below 30%of the Area Median Income),
affordable (i.e. housing that is income-restricted between 30%and 80%of the Area Median
Income) and market rate(i.e. housing that is not income-restricted) projects located in the
City.
• In total, Maxfield Research inventoried 931 general occupancy market rate rental units in
the City of Elk River spread across 22 multifamily developments(16 units and larger). At the
time of the survey,there 49 vacant units(5.3%). Of which 28 vacancies were located in Elk
Park Estates that recently underwent a change in management. Excluding Elk Park Estates,
the market rate vacancy rate totals 2.3%. Typically, a healthy rental market maintains a
vacancy rate of roughly 5%,which promotes competitive rates, ensures adequate consumer
choice, and allows for unit turnover.
• Elk River has a total of 54 subsidized units within two buildings and 244 affordable units
across five developments. The buildings feature a variety of unit types that cater to a wide-
spectrum of household types. There were four units vacant at the time of the survey for a
rate of 1.3%. A healthy income based rental market typically maintains roughly a 3.0%
vacancy rate.
• Coachman Ridge(Tax-Credit) recently opened in November of 2015 with 52 units. All of the
units were leased prior to opening.
• Low vacancy rates in all general occupancy rental products indicate pent-up demand for
additional rental housing in Elk River.
MAXFIELD RESEARCH&CONSULTING,LLC. 2
EXECUTIVE SUMMARY
Senior Housing Market Analysis
• There are eight senior housing facilities located in Elk River with a total of 412 units. There
were three vacant rental units and one ownership unit for sale at the time of the survey.
This equates to a vacancy rate of 1.0%. This indicates a need for additional senior housing
units.
• Guardian Angels by the Lake are the only facility that offers senior housing with services.
The development contains 60 assisted living units and 30 memory care units. The recent
expansion absorbed quickly and the units have remained steadily occupied.
For-Sale Housing Market Analysis
• The average and median resale price of homes in Elk River was approximately$216,840 and
$209,975 respectively as of June 2015. The median sales price over the last decade peaked
in 2005. From 2005 to 2011, median sales prices have declined by 44%. Since 2011,the
median sale price has recovered increasing by 59%through June 2015.
a Home sales have remained relatively steady in Elk River with an average of roughly 400
homes annually in Elk River since 2010. Considering that Elk River has a supply of nearly
6,500 owned homes in 2010,this represents turnover of almost 6%of the owned homes
annually.
• The median list price of homes for sale in Elk River was about$245,960 in June 2015. Based
on a median list price of$245,960,a household would need an income of about$63,225 in
order to afford to make monthly housing payments of about$1,245 (assuming a 10%down
payment, 3.75%30-year fixed mortgage). A household with significantly more equity(in an
existing home and/or savings)could put more than 10%down and afford a higher priced
home. About 67.8%of Elk River households have annual incomes at or above$63,225.
• As of July 2015, Elk River had a total of nearly 200 vacant lots within 25 subdivisions.All of
the subdivisions were platted between 2000 and 2014. Only 3%of Lots were platted after
2010.
• The lot supply benchmark for growing communities is a three-to five-year lot supply. This
supply of lots is appropriate as it provides adequate consumer choice but minimizes
developers' carrying costs. Given the number of existing platted lots and the annual
absorption of single-family lots over the past few years, we conclude that Elk River is
currently just under a three-year lot supply indicating the need for additional platted lots.
MAXFIELD RESEARCH&CONSULTING,LLC. 3
EXECUTIVE SUMMARY
Housing Analysis
sis
Y
• Based on our calculations, demand exists for the following general occupancy product types
between 2015 and 2025:
o Market rate rental 265 units
o Affordable rental 133 units
o Subsidized rental 44 units
o For-sale single-family 601 units
o For-sale multifamily 186 units
• In addition,we find demand for multiple senior housing product types. By 2020,demand
for senior housing is forecast for the following:
o Active adult ownership 0 units
o Active adult market rate rental 77 units
o Active adult affordable 42 units
o Active adult subsidized 0 units
o Congregate 102 units
o Assisted living 47 units
o Memory.care 28 units
Recommendations and Conclusions
• Based on the finding of our analysis and demand calculations,the chart on the following
page provides a summary of the recommended development concepts by product type for
the City of Elk River through 2025. Detailed findings are described in the Conclusions and
Recommendations section of the report.
MAXFIELD RESEARCH&CONSULTING,LLC. 4
EXECUTIVE SUMMARY
RECOMMENDED HOUSING DEVELOPMENT
CITY OF ELK RIVER
2015 to 2025
Purchase Price/ No.of Pct. Development
Monthly Rent Range' Units of Total Timing
.n ....^ ,.._:. ..1' F �st:a :: •a ... +S ''`N'aK ri,,,,:.�s ar._ R { \`i'- -,Gv =>1i.
•� - r: .--. � .. .. ..A2,.,. ...l-,.n... .. -`: _;.,_R; -•'S mac' � .S ;+C. � Rl::$ ::L '-X-
r ..yr-... -s✓_. 'T':- i. .,F 'o`er
2 -t ':i^L ..•3'. r-� '3 :.7 l .} ,spy .i Y !3
�r2->3.:.aic.:a.o•, . v ..,....-E:; ..-- _.-�..>.._. .::._..._. .:.r.,, .. 4_.. .- ,ems :-. .,.$c�.. ,..' .. t '-'^• _ .-- ,... ., .. _ i x '::•<�.,.:'�i'-..:�+.a r?'=�
Single Family 2
Entry-level 4225,000 175 - 200 31% 2016+
Move-up $250,000-$350,000 320 - 350 56% 2016+
Executive $350,000+ 75 - 80 13% 2017+
Total 570 - 630 100%
Townhomes/Detached Townhomes/Twinhomes 2
Entry-level 4200,000 50 - 60 31% 2018+
Move-up $200,000+ 110 - 130 69% 2016+
Total 160 - 190 100%
Total Owner-Occupied 730 - 820
-. Zs ., r �. -.ty;3,: y...,. -.;.� '. _ '`"-r`:•-3.. a. :.>a<1 ...e, - - .`.8 ..y:4r: -
sS.1
-7;
i. .i A,•..`. .. .- -_i.e -. '.. to'.. .'r „c; - .,`-r,,, ..>.":..'r,x. .4 tc�: 6i.sk: -2,''-' ai3.C«` - ."`k5`Jn_>
_n7..-t': ...i-<_. .....a.::.-...�:, ,-:r4•....;'^:�..s::*.siyi�. i�i,v<aG `r..�-.:daT",:-. ^-,-wf.'>�`. :'",:.�a��. .�xa�� l.:.,_`:"�..._n�a:$:s."'�+TeT•.,a�'--: ,.....w.'�i��re`cll�,du.,..:`�-s'�nzFa+. 4�.. ..a.,.: aYrr',rv,:.
Market Rate Rental Housing
Apartment-style $950/1BR-$1,450/3BR 180 - 200 78% 2017+
Townhomes $1,200/2BR-$1,500/3BR 50 - 60 22% 2016+
Total 230 - 260 100%
Affordable Rental Housing
Apartment-style Moderate Income3 90 - 100 73% 2017+
Townhomes Moderate Income3 30 - 40 27% 2016+
Total 120 - 140 100%
Total Renter-Occupied 350 -400
•��3 F�a.� �^�( 4 i:E . .4 'R:. 1r:- 4- 3'. .yam
r�t :t'.:•=3.�+>�,_+,�.'�..��#._._.u�Y54.•':.�a...a.r:.�];....,..F-='�«.-.,1't..}.,.:».>�_c '', �'s�u:•�„i.s�% -�+a^' a.�,s: ;._ �_. ,.�Cr�s:_ y `Sao-',`,u:��
Active Adult Affordable Rental Moderate Income 40 - 42 27% 2016+
Active Adult Market Rate Rental's $900/1BR-$1,200/2BR+ 50 - 60 36% 2019+
Independent Living(Congregate) $1,750/1BR-$1,950/2BR 60 - 80 45% 2018+
Assisted Living $2,750/EFF-$4,000/2BR 40 - 50 29% 2017+
Memory Care $4,000/EFF-$5,000/2BR 26 - 28 18% 2017+
Total 144 - 164 100%
Total-All Units 1,224 - 1,384
' Pricing in 2015 dollars. Pricing can be adjusted to account for inflation.
2 Recommendations include the absorption of some existing previously platted lots.
3 Affordablity subject to Income guidelines per MHFA. See Table HA-1 for Sherburne County Income limits.
4 Alternative development concept is to combine active adult affordable and market rate active adult into mixed-income senior
community
Note-Recommended development does not coincide with total demand. Elk River may not be able to accommodate all recommended housing
types based on a variety of factors(i.e.development constraints,land availability,etc.)
Source: Maxfield Research&Consulting,LLC
MAXFIELD RESEARCH&CONSULTING,LLC. 5
Tax Increment Financing Policy
Purpose
The purpose of this policy is to ensure development receiving Tax Increment Financing(TIF) is consistent
with the long-term city economic development program. This is a guide for processing and review of TIF
applications. The City of Elk River shall utilize TIF to encourage desirable development or redevelopment
that would not otherwise occur but for TIF.
The city is empowered to utilize TIF by the Minnesota Tax Increment Financing Act, as amended. The city
provides the minimum amount of TIF at the shortest term required for a project to proceed. The city
reserves the right to approve or reject projects on a case-by-case basis, taking into consideration established
policies,project criteria, and demand on city services in relation to the potential benefits from the project.
Projects meeting policy criteria are not guaranteed the award of TIF. Approval or denial of a certain project
is not a precedent for approval or denial of another project.
The City Council and Economic Development Authority can deviate from this policy for projects that
supersede the objectives identified herein.
Authority
Minnesota Statutes 469-174 through 469-1794 govern the use of TIF and supersede any issues that conflict
with this policy.
\.- Policy Considerations
The City of Elk River will consider TIF for projects that achieve the following:
1. Demonstrate long-term benefits to the community.
2. Retain local jobs and/or increase the number and diversity of jobs that offer stable employment
and/or attractive wages and benefits through:
• Diversification of the local economy
• Significant addition of permanent, high-wage, full-time jobs
• Addition of jobs attractive to those unemployed or underemployed
3. Significantly increases the city's commercial and industrial tax base.
4. Demonstrates the ability to encourage unsubsidized private development through "spin off'
development.
5. Facilitates the development process and achieves development on sites that would not develop "but
for" the use of TIF. (statutory reference)
6. Removes blight and/or encourages redevelopment of commercial and industrial areas resulting in
high quality redevelopment and private reinvestment.
�,... 7. Offsets redevelopment costs (i.e. contaminated site clean up) over and above the costs normally
incurred in development.
Page 1 of 8
8. Aids the implementation of the Economic Development Strategic Plan.
Policy Statements
1. The primary intent of TIF is direct funding for public improvements and secondarily for developer
assistance.
2. The use of TIF shall be in accordance with state law,which changes frequently. The more restrictive
language will apply when a conflict exists between this policy and state law.
3. Projects must be consistent with the Comprehensive Plan.
4. Projects must be consistent with the Strategic Plan for Economic Development.
5. Preferred projects promote the completion of major public improvement projects within the city such
as the installation of trunk sewer and water lines and major transportation projects.
6. The level of assistance provided will be determined on a case-by-case basis as referenced in Policy
Considerations.
Based on the extent to which the project achieves the policy statements (1-6 above), the city will
consider TIF for projects falling in the following categories.
• Manufacturing
• Major office warehouse/production facilities
• Research and development
• Commercial projects encouraging substantial redevelopment of substandard properties
• Housing needs identified in the most recent city housing study
7. Assistance for TIF is required to meet the uses identified by statute including,but not limited to the
following:
• Public improvements
• Land acquisition and land write down
• Loans
• Site preparation and improvement
• Demolition
• Legal, administration, and engineering
8. TIF receipts shall be allocated as pay-as-you-go method.
9. A maximum of ten percent (10%) of any tax increment received from the district shall be retained by
city (Statutory Reference)
the to reimburse administrative costs.
10. All TIF assistance shall be accompanied by a signed development agreement including a minimum
assessment value. The developer must provide additional financing guarantees to ensure completion of
the project,including,but not limited to: letters of credit,personal guarantees, corporate guarantees,
etc.
11. TIF District's shall be limited to the minimum term necessary to meet the project needs. Only projects
superseding the objectives identified in this policy will be considered to exceed the following general
thresholds:
• Redevelopment District 15 Years (Max is 25)
Page 2 of 8
• Housing District 15 Years (Max is 25)
• Qualified Housing District 15 Years (Max is 25)
• Soils Condition District 15 Years (Max is 20)
• Renewal and Renovation District 10 Years (Max is 15)
• Economic Development District 8 Years (Max is 8)
Policy Issue
o Each project is required to meet the "but-for" test to determine the need for and level of
assistance. This test and the amount of tax increment generated determines the district's
term. It is difficult to facilitate a redevelopment,housing or soils condition district for less
than the maximum term as the extraordinary costs involved are usually significant.
o Limiting the term of the district also limits the amount of tax increment the city has to spend
on its priorities within a project area.
o Of all the TIF districts, the Economic Development District is most often the one limited to
a lesser term. ED Districts are really"incentive" districts where it is not so much the
extraordinary costs as it is an"incentive" to get a manufacturer to locate in a community.
In the other districts, the costs are easily identifiable and usually significant such as
demolition,relocation,environmental remediation, and the cost differential between market
rate and income/rent restricted housing.
12. Developers receiving TIF assistance shall provide a minimum of twenty percent (20%) cash equity
investment in the project. TIF shall not be used to supplant cash equity.
13. TIF shall not be used in circumstances where land and/or property price is in excess of fair market
value. A third-party appraiser agreed upon by the city and developer will determine the fair market
value of the land.
14. The developer shall demonstrate a market demand for a proposed project. TIF shall not be used to
support purely speculative projects.
15. The developer shall adequately demonstrate,to the city's sole satisfaction, an ability to complete the
proposed project based on past development experience,general reputation,and credit history, among
other factors,including the size and scope of the proposed project.
16. For the purposes of underwriting the proposal, the developer shall provide any requested market,
financial,environmental,or other data requested by the city or its consultants.
17. The city of Elk River shall only use TIF to encourage economic growth and development within the
city limits (See attached map)
Application Process
1. Applicant submits a complete application and a$10,000 application deposit. The application deposit
shall be used toward the cost of services provided in the evaluation of financial feasibility, establishment
or modification of the district, and preparation of legal documents and agreements. An additional
deposit of$10,000 shall be required for projects requiring statutory redevelopment substandard tests.
The applicant shall reimburse the city for professional services in excess of the initial deposit. Deposit
portions not utilized shall be refunded.
2. City staff reviews the application for completeness and submits the application to the city's financial
consultant for review and preparation of a financial analysis.
Page 3 of 8
3. The Joint Finance Committee shall review the proposal's financial strength and makes a
recommendation to the appropriate commission with findings of fact.
4. The appropriate authority reviews the proposal and the recommendation to determine conformance
with this policy. The authority makes a recommendation to the City Council.
5. The City Council holds a Public Hearing and takes action on the proposal.
Page 4 of 8
APPLICATION FOR TAX INCREMENT FINANCING
A. APPLICANT INFORMATION
Name of Corporation/Partnership
Address
Primary Contact
Address
Phone Fax Email
Brief description of the corporation/partnership's business,including history, principal product or service:
Brief description of the proposed project:
`P"- Attorney Name
Address
Phone Fax Email
Accountant Name
Address
Phone Fax Email
Contractor Name
Address
Phone Fax Email
Engineer Name
Address
Phone Fax Email
Architect Name
Address
Phone Fax Email
Page 5 of 8
B. PROJECT INFORMATION
1. The project will be:
Redevelopment District
Housing District
Qualified Housing District
Soils Condition District
Renewal and Renovation District
Economic Development District
2. The project will be: _Owner Occupied Leased Space
3. Project Address
Legal Description&Parcel Idenrification Number(s)
4. Site Plan and Preliminary Construction Plans Attached: Yes No
5. Amount of Tax Increment Requested for:
Land Purchase$
Public Improvement$
Site Improvement$
6. Current Real Estate Taxes on Project Site: $
Estimated Real Estate Taxes upon Completion: Phase I $
Phase II $
7. Construction Start Date:
Construction Completion Date:
If Phased Project: Year % Completed
Year % Completed
Page 6 of 8
C. PUBLIC PURPOSE
It is the policy of the City of Elk River that the use of Tax Increment Financing should result in a benefit to the
public. Please indicate how this project will serve a public purpose.
Job Creation/Retention:
Number of existing jobs
Number of jobs created by project
Average hourly wage of jobs created/retained
New industrial development,which will result in additional private investment in the area.
Enhancement or diversification of the city's economic base.
The project contributes to the fulfillment of the City's Economic Development Strategic Plan.
Removal of blight or the rehabilitation of a high profile or priority site.
Significantly increase the City's tax base.
Other:
D. SOURCES & USES
`-' SOURCES NAME AMOUNT
Bank Loan $
Other Private Funds $
Owner Cash Equity $
Fed Grant/Loan $
State Grant/Loan $
EDA Micro Loan $
Tax Increment $
ID Bonds $
TOTAL $
USES AMOUNT
Land Acquisition $
Site Development $
Construction $
Machinery&Equipment $
Architectural& Engineering Fees $
Legal Fees $
Interest During Construction $
Debt Service Reserve $
Contingencies $
TOTAL $
Page 7 of 8
E. ADDITIONAL DOCUMENTATION AND CHECKLIST
Applicants will also be required to provide the following documentation.
A) Written business plan,including a description of the business, ownership/management, date
established,products and services, and future plans
B) Financial Statements for Past Two Years
Profit&Loss Statement
Balance Sheet
C) Current Financial Statements
Profit&Loss Statement to Date
Balance Sheet to Date
D) Two Year Financial Projections
E) Personal Financial Statements of all Major Shareholders
Profit&Loss
Current Tax Return
Letter of Commitment from Applicant Pledging to Complete
During the Proposed Project Duration
G) Letter of Commitment from the Other Sources of Financing,
Stating Terms and Conditions of their Participation in
Project
`�. H) Application deposit of$10,000,with any unused portion to be refunded if project does not proceed.
I) Construction Plans and Itemized Project Construction Statement
J) Attach the following documentation as Exhibits
Exhibit A—Corporation/Partnership Description
Exhibit B—Description of Project
Exhibit C—List of Shareholders/Partners
Exhibit D —But-For Analysis
Exhibit E—List of Prospective Lessees
Exhibit F—Legal Description and PID Number(s)
Note:All Major shareholders will be required to sign personal guarantees if up front financing of the project is
required.
The undersigned certifies that all information provided in this application is true and correct to the best of the undersigned's knowledge.
The undersigned authorizes the City of Elk River to check credit references and verify financial and other information. The undersigned
also agrees to provide any additional information as may be requested by the City after the filing of this application.
Applicant Name Date
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