6.2 EDSR 11-20-2017
The Elk River Vision
A welcoming community with revolutionary and spirited resourcefulness, exceptional
service, and community engagement that encourages and inspires prosperity
Request for Action
To
Economic Development Authority
Item Number
6.2
Agenda Section
General Business
Meeting Date
November 20, 2017
Prepared by
Amanda Othoudt, EDD
Item Description
TIF Policy
Reviewed by
Cal Portner, City Administrator
Reviewed by
Action Requested
Approve, by motion, the Tax Increment Financing Policy.
Background/Discussion
The EDA reviewed the new Tax Increment Financing (TIF) policy at their October 16, 2017, meeting.
The newly-created policy is intended to replace the existing TIF Policy that was approved by the City
Council in February of 2014 and the Housing TIF Policy that was approved in April of 2015.
The new policy eliminates the minimum square footage requirement and minimum tax base requirement
for projects. The new policy follows market demands as it relates to housing projects identified in the
Maxfield Housing Study and is guided by both the Mississippi Connections Plan and Comprehensive
Plan.
The preferred method of TIF is pay-as-you-go (PAYGO), however upfront financing maybe considered
on a case-by-case basis. The city has the authority to approve or deny projects, taking into consideration
established policies, project criteria, and demand on city services in relation to the potential benefits from
the project.
Our financial consultant and attorney have reviewed the final version of the TIF policy. Staff
recommends the EDA review and make a recommendation to the City Council for action at their
December 4, 2017, meeting.
Financial Impact
None
Attachments
2017 TIF Policy (Clean and Markup)
Page 1 of 8
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 Comprehensive Plan, Strategic Plan, Mississippi Connections Plan and/or most recent
Housing Study. 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 in
Minnesota Statutes 469-174 through 469-1794. 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 and the Housing and Redevelopment 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 exceed any issues that conflict
with this policy.
Public Purpose
The City of Elk River will consider TIF for projects that achieve one or more of 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.
6. Removes blight and/or encourages redevelopment of commercial and industrial areas resulting in
high quality redevelopment and private reinvestment.
Page 2 of 8
7. Offsets redevelopment costs (i.e. contaminated site cleanup) over and above the costs normally
incurred in development.
8. Aids the implementation of the Mississippi Connections 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. 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 and/or the Mississippi Connections Plan.
4. Projects must be consistent with the Strategic Plan for Economic Development and/or the most
recent Housing Study.
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 Public
Purpose.
Based on the extent to which the project achieves the policy statements (1-6 above), the city will consider
TIF for projects 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
1. 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
2. The preferred method of TIF is pay-as-you-go for eligible costs as reimbursement, upfront financing
maybe considered on a case-by-case basis.
3. A maximum of ten percent (10%) of any tax increment received from the district shall be retained
by the city to reimburse administrative costs.
4. All TIF assistance must 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.
Page 3 of 8
5. TIF District’s shall be limited to the minimum term necessary to meet the project needs. Only
projects exceeding the objectives identified in this policy will be considered to exceed the following
general thresholds:
Redevelopment District 15 Years (Max is 26)
Housing District 15 Years (Max is 26)
Soils Condition District 15 Years (Max is 21)
Renewal and Renovation District 10 Years (Max is 16)
Economic Development District 8 Years (Max is 9)
6. Policy Considerations
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.
The term of the district could coincide with the amount of tax increment the city has to spend
on its priorities within a project area.
Of all the TIF districts, the Economic Development District is most often the one limited to a
lesser term. Economic Development Districts are really “incentive” districts where it is not so
much the extraordinary costs as it is an “incentive” to get a business 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.
7. Developers receiving TIF assistance shall provide a minimum of twenty percent (10%) cash equity
investment in the project. TIF will not be used to supplant cash equity.
8. TIF will 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.
9. The developer shall demonstrate a market demand for a proposed project. TIF shall not be used to
support purely speculative projects.
10. 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.
11. 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.
12. The city of Elk River shall only use TIF to encourage economic growth and development within the
city limits.
Application Process
1. Applicant submits a complete application and a $10,000 application deposit by the first Monday of
the month. The application deposit will 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.
Page 4 of 8
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.
3. The Joint Finance Committee shall review the proposal’s financial strength and make 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. After meeting the statutory requirements for establishing the Tax Increment District, the City
Council holds a Public Hearing and takes action on the proposal (Approximately 45-60 days).
Page 5 of 8
APPLICATION FOR TAX INCREMENT FINANCING
A. APPLICANT INFORMATION
Name of Entity
Address
Primary Contact
Address
Phone Fax Email
Brief description of the entity 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
Page 6 of 8
B. PROJECT INFORMATION
1. The project will be:
_____ Redevelopment District
_____ 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 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
Page 7 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 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 8 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
Current Tax Return
_____F) Letter of Commitment from Applicant Pledging to Complete
During the Proposed Project Timeline
_____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.
_____ I) Construction Plans and Itemized Project Construction Statement
_____J) Attach the following documentation as Exhibits
Exhibit A – Entity Documents
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
Page 1 of 8
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 programComprehensive Plan, Strategic Plan, Mississippi Connections Plan
and/or most recent Housing Study. 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 in
Minnesota Statutes 469-174 through 469-1794. 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 and the Housing and Redevelopment 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 exceed any issues that
conflict with this policy.
Policy ConsiderationsPublic Purpose
The City of Elk River will consider TIF for projects that achieve one or more of the following:
1. Demonstrate long-term benefits to the community.
1.
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)
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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 cleanup) over and above the costs normally
incurred in development.
7.
8. Aids the implementation of the Economic Development Strategic PlanMississippi Connections Plan.
Policy Statements
1. The primary intent of TIF is direct funding for public improvements and secondarily for developer
assistance.
1.
2.
3.2. 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.
4.3. Projects must be consistent with the Comprehensive Plan and/or the Mississippi Connections Plan.
5.4. Projects must be consistent with the Strategic Plan for Economic Development and/or the most
recent Housing Study.
6.5. 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.
7.6. The level of assistance provided will be determined on a case-by-case basis as referenced in Policy
ConsiderationsPublic Purpose.
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
8.1. 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
9.2. The preferred method of TIF is pay-as-you-go for eligible costs as reimbursement, upfront financing
maybe considered on a case-by-case basis.IF receipts shall be allocated as pay-as-you-go method.
10.3. A maximum of ten percent (10%) of any tax increment received from the district shall be
retained by the city to reimburse administrative costs. (Statutory Reference)
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11.4. All TIF assistance shall must 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.
12.5. TIF District’s shall be limited to the minimum term necessary to meet the project needs.
Only projects superseding exceeding the objectives identified in this policy will be considered to
exceed the following general thresholds:
Redevelopment District 15 Years (Max is 265)
Housing District 15 Years (Max is 265)
Qualified Housing District 15 Years (Max is 25)
Soils Condition District 15 Years (Max is 210)
Renewal and Renovation District 10 Years (Max is 165)
Economic Development District 8 Years (Max is 98)
13.6. Policy IssueConsiderations
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.
Limiting theThe term of the district also limitscould coincide with the amount of tax increment
the city has to spend on its priorities within a project area.
Of all the TIF districts, the Economic Development District is most often the one limited to a
lesser term. Economic Development Districts are really “incentive” districts where it is not so
much the extraordinary costs as it is an “incentive” to get a manufacturer business 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.
14.7. Developers receiving TIF assistance shall provide a minimum of twenty percent (1020%)
cash equity investment in the project. TIF shall will not be used to supplant cash equity.
15.8. TIF shall will 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.
16.9. The developer shall demonstrate a market demand for a proposed project. TIF shall not be
used to support purely speculative projects.
17.10. 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.
18.11. 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.
19.12. The city of Elk River shall only use TIF to encourage economic growth and development
within the city limits. (See attached map)
Application Process
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1. Applicant submits a complete application and a $10,000 application deposit by the first Monday of
the month. The application deposit shall will 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.
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. After meeting the statutory requirements for establishing the Tax Increment District, tThe City
Council holds a Public Hearing and takes action on the proposal (Approximately 45-60 days).
Page 5 of 8
APPLICATION FOR TAX INCREMENT FINANCING
A. APPLICANT INFORMATION
Name of Corporation/PartnershipEntity
Address
Primary Contact
Address
Phone Fax Email
Brief description of the corporation/partnership’sentity 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
Page 6 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 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
Page 7 of 8
C. POLICY CONSIDERATIONS AND 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 PlanPlan.
_____ 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 $
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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 DurationTimeline
_____ 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 DescriptionEntity Documents
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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