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9 PCSR 10-28-1993 1 A. ITEM 9 fil..ity of TO: ELK RIVER PLANNING COMMISSION ik/ • FROM: WILLIAM RUBIN, ECONOMI River DEVELOPMENT COORDINATO DATE: OCTOBER 19 , 1993 SUBJECT: REVIEW OF TAX INCREMENT FINANCING PLAN FOR TAX INCREMENT FINANCING DISTRICT NO. 12 INTRODUCTION UkK' 'h ►-7j, On Monday, Novcmbcr 15, 1993, the Elk River City Council will conduct a public hearing to consider a Tax Increment Financing Plan for Tax Increment Financing District No. 12 . Pursuant to Minnesota Statutes, the Planning Commission is required to review and comment on proposed tax increment financing plans prior to the City Council conducting a public hearing. BACKGROUND The Elk River Economic Development Authority (EDA) is proposing the creation of Tax Increment District No. 12 . The District will be comprised of two parcels (PID No. 75-404-0150 and No. III 75-404-0151) which make up the following legal description: The West 71 . 7 feet of Lot 15, Auditor's Subdivision No. 4 . The request for tax increment assistance comes from Kurt Kjellberg/Kjellberg' s Carpet and Interiors, 16862 Highway 10, Elk River, Minnesota. Mr. Kjellberg seeks $165, 000 in tax increment financing assistance to support the proposed construction of a 12,000 square foot retail building in the Elk River Central Business District. Tax increment funds would be used for site preparation costs associated with the redevelopment of the above-referenced site. The Elk River EDA is proposing the creation of a "Redevelopment TIF District" . It is estimated that TIF District No. 12 would last twelve to thirteen years, during which time the City/EDA would collect the tax increment payments for a period of ten to eleven years . Collection of the tax increment funds would be used to pay the EDA for its costs associated with this project. ACTION REQUESTED The Elk River Planning Commission is asked to review the TIF Plan to ensure that it is consistent with the City' s Comprehensive Plan. The Planning Commission' s comments and • finding will then be forwarded to the City Council for consideration at the November 15th public hearing. P.O. Box 490 • 13065 Orono Parkway • Elk River, MN 55330 • (612) 441-7420 • Fax: (612) 441-7425 • DRAFT TAX INCREMENT FINANCING PLAN TAX INCREMENT FINANCING DISTRICT NO. 12 410 CITY OF ELK RIVER, MINNESOTA NOVEMBER 15, 1993 D &Y)) ‘31 i 4 S TAX INCREMENT FINANCING PLAN NCREMENT FINANCING DISTRICT NO. 12 SUMMARY Kjellberg' s Carpet and Interiors, 16862 Highway 10, Elk River, Minnesota, seeks $165,000 in tax increment financing assistance to support its proposed construction of a 12,000 square foot retail facility in the Elk River Central Business District. Kjellberg' s Carpet will occupy approximately 6 ,000 square feet on the main floor of the retail facility. The remaining 6,000 square feet will be leased space. The new facility will have a finished market value estimated at approximately $625,000 . Construction may begin during the fall of 1993 and will be completed by the spring of 1994 . The Economic Development Authority for the City of Elk River, Minnesota, is proposing the creation of a Redevelopment District pursuant to the Tax Increment Financing Act. Tax increment funds will be used for site preparation costs associated with the redevelopment site. The site is currently owned by the Economic Development Authority and will be conveyed to Kjellberg' s Carpet and Interiors subject to the terms and conditions of a Development Agreement. 410 The property taxes produced by the retail facility will be "captured" by the Economic Development Authority so that the City of Elk River can recover the $165,000 in tax increment assistance as well as the other costs outlined in the tax increment budget. After recapturing the project debt, Tax Increment Financing District No. 12 will be decertified, thereby enabling all local taxing jurisdictions (county, school, city, etc. ) to share in the project' s property taxes . The Economic Development Authority for the City of Elk River, Minnesota, anticipates that Tax Increment Financing District No. 12 will exist for approximately twelve ( 12) to thirteen ( 13) years; during which time tax increment funds will be collected for ten ( 10) to eleven ( 11) years . TAX INCREMENT FINANCING PLAN TAX INCREMENT FINANCING DISTRICT NO. 12 A. STATEMENT OF OBJECTIVES Tax Increment Financing District No. 12 is located entirely within the City' s Development District No. 1, a Municipal Development District created and established pursuant to the Development District Act. The Development Program for Development District No. 1, was adopted by the City Council on April 1, 1985, and was amended on January 27, 1986, and November 30, 1987 . The objectives of the Development District, as amended, and as set forth in the Development Program, are hereby incorporated into this Tax Increment Financing Plan. Attached as Exhibit A is a map of Development District No. 1 . The specific objectives of the Tax Increment Financing Plan for Tax Increment Financing District No. 12 are: 1 . To provide opportunities for the redevelopment of land within Development District No. 1; 2 . To eliminate a blighted area within the Elk River • Central Business District; 3 . To preserve and enhance the tax base of the City; and, 4 . To provide maximum opportunity, consistent with the needs of the City, for development by private enterprise. B. CLASSIFICATION OF THE DISTRICT The City Council of the City of Elk River, Minnesota determines that it is necessary, desirable, and in the public interest to designate, establish, develop, and administer a Redevelopment Tax Increment Financing District in the City of Elk River pursuant to the provisions of the Tax Increment Financing Act, Minnesota Statutes 469 . 174, Subdivision 10 . The purpose of Tax Increment Financing District No. 12 is to encourage the redevelopment of a blighted area in the Elk River Central Business District, thereby increasing local employment opportunities and preserving and enhancing the local tax base and the tax base of the State of Minnesota. 111/ C. DEVELOPMENT PROGRAM 1 . Overview Kjellberg' s Carpet and Interiors, 16862 Highway 10, Elk River, Minnesota, seeks Tax Increment Financing assistance to support its proposed construction of a 12,000 square foot retail facility in the Elk River Central Business District. The Tax Increment funds will be used for site preparation costs associated with the redevelopment of the Main Street site. 2 . Property Included in Tax Increment Financing District No. 12 The legal description of the property included in TIF District No. 12 is as follows : The West 71.7 feet of Lot 15, Auditor' s Subdivision No. 4 (PID No. 75-404-0150 and No. 75-404-0151) Attached as Exhibits B-1 and B-2 are maps showing the 410 exact location of the property included in Tax Increment Financing District No. 12 . 3 . Property to be Acquired by the Authority No property is scheduled for acquisition by the Economic Development Authority for the City of Elk River, Minnesota. The redevelopment site is currently owned by the Economic Development Authority and will be conveyed to Kjellberg' s Carpet and Interiors subject to the terms and conditions of a Contract for Private Development. D. DEVELOPMENT ACTIVITIES 1 . Development Overview Kjellberg' s Carpet and Interiors proposes to construct a new retail facility containing approximately 12,000 square feet on the redevelopment site. The new facility will have a finished market value estimated at approximately $625,000 . Construction may begin during the fall of 1993 and will be completed by the spring of 1994 . Kjellberg' s Carpet will occupy approximately 6,000 square feet in the retail facility. The remaining 6 ,000 square feet will be leased space. 410 2 . Contracts No contracts have been entered into at the time of the preparation of this Tax Increment Financing Plan. Proposed contracts for services associated with Tax Increment Financing No. 12 include: - Contract for construction of a 12,000 square foot retail facility (by Kjellberg' s Carpet and Interiors) E. FINANCIAL ANALYSIS OF TAX INCREMENT FINANCING DISTRICT NO. 12 1 . Tax Increment Financing District No. 12 Cost Estimates Budget Amount Site Preparation $165,000 Administration -0- Legal $ 5,000 Cost of Issuance Fees $ 6 ,000 Bond Discount -0- 410 Capitalized Interest $ 19 ,000 Miscellaneous 5,000 Total $200,000 Total Project Costs $200,000 Less Application Fee 5,000 Net Project Costs $195,000 2 . Bonded Indebtedness The Elk River Economic Development Authority is proposing to privately place a tax increment note through a lending institution to finance the costs associated with Tax Increment Financing District No. 12 . 3 . Sources of Revenue to Pay Public Costs Tax Increments collected from the Kjellberg retail facility will be used to pay the public costs associated with Tax Increment Financing District No. 12 . 4 . Original Tax Capacity 410 The original net tax capacity, based on the January 2 , 1992, valuation, for the real property in Tax Increment District No. 12 is estimated to be $0 .00 . 410 The County Auditor Certification attributable to this value is attached as Exhibit C. 5 . Estimated Captured Tax Capacity The finished market value upon completion of the improvements in Tax Increment Financing District No. 12 is estimated at $625,000 . This value translates into a completed net tax capacity estimated at $27 , 150. The captured net tax capacity is estimated as follows : Completed Net Tax Capacity $27, 150 Less Original Net Tax Capacity -0- Equals Captured Net Tax Capacity $27, 150 One hundred percent of the captured net tax capacity of Tax Increment Financing District No. 12 will be required to finance the public redevelopment costs associated with District No. 12 . As a result, the City of Elk River elects, pursuant to Minnesota Statute 469 . 177 Subdivision 2 (a) ( 1) , to retain the full captured net tax capacity of Tax Increment Financing District No. 12 . 6 . Duration of the Tax Increment Financing District No. 12 The City of Elk River expects that the first increment it will receive from Tax Increment Financing District No. 12 will be for taxes payable in 1996 , and will be based on a completed value as of January 2, 1995. The City expects to continue to receive tax increment from Tax Increment District No. 11 up to and including 2006, or until the project debt of $195,000 has been repaid. Thereafter, no further increments may be received and Tax Increment District No. 12 will terminate. F. CASH FLOW ANALYSIS Attached as Exhibit D is the Cash Flow Analysis for Tax Increment District No. 12 . 411 G. IMPACT ON OTHER LOCAL TAXING JURISDICTIONS 1 . Estimated Impact of District No. 12 on the Taxing Jurisdictions Assuming the Captured Net Tax Capacity is Available to the Taxing Jurisdictions Without Creation of District No. 12 : Pursuant to Minnesota law, tax increment generated by development within the Tax Increment Financing District may be captured by the City for a period of up to eight years . During this period other taxing jurisdictions will continue to receive taxes from the property within the Tax Increment Financing District based on the current net tax capacity. 2 . Estimated Impact of District No. 12 on the Taxing Jurisdictions Assuming None of the Captured Net Tax Capacity is Available to Taxing Jurisdictions Without Creation of District No. 12 : The Economic Development Authority of the City of Elk River has determined that the Kjellberg' s Carpet and Interiors redevelopment project would not reasonably be expected to occur without the creation of TIF District No. 12 and the use of tax increment • financing. Therefore, none of the net tax capacity captured during the term of this TIF District would be available to other taxing jurisdictions without the creation of this district. 3 . Additional information on the impact of Tax Increment Financing District No. 12 on the other local taxing jurisdictions can be found in Exhibit E. H. STUDIES AND ANALYSIS USED TO DETERMINE THE NEED FOR TAX INCREMENT FINANCING The Elk River EDA and City Council have determined that the Kjellberg' s Carpet and Interiors redevelopment project cannot reasonably be expected to occur solely through private investment within the reasonably foreseeable future. Therefore, the use of Tax Increment Financing assistance is deemed necessary. This determination has been made based on the following: - The extraordinary site preparation costs associated with this redevelopment project prohibits private investment from occurring on its own initiative. Therefore, public participation, in the form of tax increment assistance, is required in order for this redevelopment project to occur. • I . PARCELS INCLUDED IN TAX INCREMENT FINANCING DISTRICT NO. 12 Tax Increment Financing District No. 12 is comprised of two land parcels . They are listed below: 1993 Original Parcel 1992 EMV Pay 1993 Net Tax Capacity 75-404-0150 $ 59,200 $0 (Tax Exempt) 75-404-0151 $ 59 ,200 $0 (Tax Exempt) Please refer to Exhibit C for the County Auditor Certification of this parcel in Tax Increment Financing District No. 12 . • • 1 • 1 .1 .1 .1 : . • , : ; . . 4 4 4 . • : , : , • • • ; I . i • , ' -..... .. ; , -... , ....m. I, ... • _ . .. • - . t,--\ --- • .- . - - I . .. -- ,_...... • •-• . _.•,. ...... • ... • -- • . . .- _ __ - ;• :,... — , 1, .;" - -. I . .. • ..! t • . . . ... . .. • •• , . • • 0, .... . I' N e.) , ,, • - - 1 •...( .. 1 ...z. ' t •. .•-'. . i• ....' • ...,.,. .• .... •' . , - „........ ' :' 1: •• - • i '.i • !I . • ' . -.. • :.- _. ^Ne•. 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"A si 1 il i. ..• y• 3r, vi.• • .s. 51.:• - t71,.1 ( .b ---,re‘ --)t.tioi .A43... .,.. .._ . ,„.„„:-; •.4,: .4.t! ...41: r - •IF ^,Vit.q.. :::• ',.., - . •---— .,.._ .., • \ ) .71 .."-----kfy--, ).. ,---2,:t ...„ "..,, -7.,-,:Tt. ,i:- li..77.if,..; ., liiP, :• -- ',-.1.„.. ,.... ,.... i , ...,.........„,!. _.,11...:., -'.. •"••.-. •< •• • h''-''' • IT- 11(4''' .141' ' I .... ..I• glrx..t,..... ! .z7.4•-1-•,. 1-/•••• :...•.1:''', .: S', ,r • 7.. ....:.;' . :. .... .. s'"......./e .... . .., ‘.,_-....-,‘.....,z,....•%•\d'44-4,4":•.'•,..!;,..T.'Li' ; •••• • -,.......11V...•.-tel - 4..--i,:••••e- '-• ••=•....' ..r •I:'. -t....7:P t.i. ,.t. •' .. - •:.•:n- .-. . , - 3 1 IA- i ... • . ..- )\ 1 -- . .... . ....; ... ----2 f".t., I .•'s '-C....'-%., -- -..- .-.,. .. •.- . 1iMi 1111111d11fi 6 004 I 1 — \ ... . c ,- , i i , - , , i • . . 1• • i 1 ; — •••,.. ,t , .... • • ! 1 !, , -- - ...;;.-.. ,,•, ..... .... • • .".,e• • ',, ::i'•• ! 1 — • . BOUNDARY OF , — • ____ DEVELOPMENT DISTRICT NO. 1 -- . (CITY LIMITS) —. . — • -- •.. • —_\ ,.P• —_ , — ." . i ,M- Cor4 • a i '''• Elk River 2 , 1 i —_•• . •.: ..• • I 11 • 1 Iiii • t ___. j --_•_. :. i —_ , ! t ..1 i 1 —=••=-\- -. • t -•— ' I iliCi4 i n ' EXHIBIT A lita3itti DEVELOPMENT DISTRICT NO. 1 H( I6i.,AO z�. -1934 ' ' 2` . A`''c ' J e-4/v6- U 9• W _'� �•� a P • o V AVE •oR 44,� ®.'�\g3•0 193RD AVE \ \ J o ,, 9! ; ' V 10 6fRd dVf 4 110 , ,, 1 h • 44400 111 illia 11111 /* L;kj 4;0 V 11-1 %ZIA 13IJ cl'- 4.0* 4011E , , rikamnift-' ci cr iliringills-Rigi 1.1111.111 4 61 ".1.111e7 4W4f11111: i 7 lidgEMINfigniali 7 4,0 444 4%‘t7 I B I IS a ' SORRIIINO howl= all-Ok 4-444, e, \R um $.7 0 ir 1111188 MT II •A l& **I ____ . 6, ‘tio lir trt. 1114" 190 H • 9 /4 : 1.1111111 6- ii„ ''1,,.....— 4t^t -• , D. R .. " lard *. E' I . z.Vlike•v• CNl - r" 0 i IIIIIM ill 'IMF Ain OS I c, IPFilEle .5cnooi 0 iwn sm°w • W vAistirdi vi w • el ism prko i, Pin s writior F- in . gill al.o. 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" --- • \\\ li -- No. i "3 � it i� ` ; �1h 15 �1)�� %I y '� EXHIB c,I; ' 1 \' Ni 9a //( \ 1 AX I ` .- - EMENT 1' $ 4, o T S ' o *e-,- / . / /03 os, ; •i. 33- 1 31 al d , I ,# il .rt v•- • de ceC • . ei N.\ ei // 1 ÷. qo .;r OPt .• .. co 4 t• ,. 131 • , >-• /..„ H.-- i • , ---Th *,4 I allianamalii • i .. . 41 'IN 0 m :::: r) ig , 8 * * id e4 ... .., —.• pit g C.) 4. :.4 I ::. .g4 .98 41 'i'l. ., r! .... .s. 8 ,.. .... -- 1k Sb 44"'04 r.-4---- a at. . vob_sz io. i ............ k 1-- Ns. ... ,., .. • •....„ • ki. vs ••,1-NIIIIIIikt -.. .., -, . .. a - kr•"..'• -. )".:.: ...:, 2 .. _ . -.. :, .1,7,. 15 A 1. er 1 ".. . . I ... 'I* I Os 0-.z..., -,t.._ ...,. g -........„-- .Itiv ...:- ..„ miclkxHENIBTITD 08-. '''•..:Zi..a. 414 t pa, ..,..• .., Z --04 TAX eg ..•'•, coc6..„..xs...:......„_zos BI:TRICT NO.12 ••••Cru- • aRcrtrSEC, iaLIILn,aci 6.5.91' X c9Z' w J J q n 3 0 vi 9 0 Naln aAv o:i I 40, 0 sr Asei4 ALT- N pAgK,1.j� Z NA,J,)IGA Nib,c-Ae • 4'.m s• N10 �,� 1 - IBIT B-3 \,../Au-. Tai•�I NT DISTRICT TAX INCRE NO.12 EXISTIf�-5 t�RivEw�Y � ��F�IDIJAL r�LV4 / O 1- o V1 • . 7 VI J • • � • IV 4 . 0 • Q 0 . . o • • of < •.' .. .... . : . ... .. . . • • • • 1 W . • • . •• w . • Y - - . • • ,..,...,"_4•.:•,...,,•,...,....,..1-2)!..H. IIn ,ry ;u. nr . . 0 . j,R:H i.'.-1!-I;lh ri!II:rl ri I EXHIBIT B-4 • TAX INCREMENT DISTRICT NO. 12 • EXHIBIT C COUNTY AUDITOR CERTIFICATION TAX INCREMENT FINANCING DISTRICT NO. 12 The original net tax capacity of the following listed parcel (s) as of January 2, 1993, is certified to be: $0 . 00 . The parcel(s) contained in Tax Increment District No. 12 are listed below: Parcel 1993 EMV 1993 Original Number Pay 1994 Net Tax Capacity 75-404-1500 $ 59 ,200 $0 (Tax Exempt) 75-404-0151 $ 59 ,200 $0 (Tax Exempt) TOTAL $118,400 $0 411 E . Dale Palmer SHERBURNE Sherburne County Auditor COUNTY SEAL November , 1993 • • . . * • EXHIBIT D TAX INCREMENT FINANCING DISTRICT NO. 12 CASH FLOW ANALYSIS 1995* 1996** 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007*** Original Net Tax Capacity $ -0- $ -0- $ -0- $ -0- $ -0- $ -0- $ -0- $ -0- $ -0- $ -0- $ -0- $ -0- $ -0- Total Net Tax Capacity 3,846 27,150 27,150 27,150 27,150 27,150 27,150 27,150 27,150 27,150 27,150 27,150 27,150 Captured Net Tax Capacity $ 3,846 $ 27,150 $27,150 $27,150 $ 27,150 $ 27,150 $ 27,150 $ 27,150 $ 27,150 $ 27,150 $ 27,150 $ 27,150 $ 27,150 Estimated Tax Rate (1) 103.025 103.025 103.025 103.025 103.025 103.025 103.025 103.025 103.025 103.025 103.025 103.025 103.025 Captured Increment $ 27,971 $ 27,971 $ 27,971 $ 27,971 $ 27,971 $ 27,971 $ 27,971 $ 27,971 $ 27,971 $ 27,971 $ 27,971 $ -0- Cumulative Increment $ 55,942 $ 83,913 $111,884 $139,855 $167,826 $195,797 $223,768 $251,739 $279,710 $307,681 $307,681 (1) Based on a Payable 1993 tax rate. This rate will change for taxes payable in 1994 and is subsequent years; this will result in a change in the actual amount of tax increment collected by the City. * Taxes will be generated in 1995 but no increment will be collected. ** The first year an increment will be collected is 1996 and is based on a finished market value as of January 2, 1995. *** The District is decertified on December 31, 2006, and taxes generated in 2007 will be collected by the local taxing jurisdictions. • F3IT E0 . . IMPACT OF TAX INCREMENT FINANCING DISTRICT NO. 12 ON OTHER MAJOR TAXING JURISDICTIONS City of Elk River, Minnesota Impact of Tax Increment Financing District No. 12 On Other Major Taxing Jurisdictions Without Project With Project 1992/93 1992/93 1992/93 1992/93 Projected 1992/93 Adjusted Tax Projected Negative Tax Ad Valorem Tax Tax Captured New Tax Ad Valorem Tax Capacity Captured Impact On Capacity Taxes Capacity Capacity Tax Capacity Capacity Taxes Capacity Rate Tax Capacity Other Taxing Value Levied Rate Value Value Value Levied Rate Impact Value Jurisdictions (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) City of Elk River $ 7,928,363 $ 1,567,370 20.56 % $ 7,928,363 $27,150 $ 7,955,513 $ 1,567,370 19.701% .859% $27,150 $ 5,349 Sherburne County 51,850,407 10,298,271 19.883 53,850,407 27,150 51,877,557 10,928,271 19.851 .032 27,150 5,389 ISD 728 15,301,069 9,365,109 61.209 15,301,069 27,150 15,328,219 9,365,109 61.109 .100 27,150 16,591 other 1.373 27,150 1.373 27,150 373 Totals 103.025% 102.034% .991% $ 27,702 Statement 1: The 1992/93 tax capacity value times the 1992/93 tax capacity rate produces 1992/93 taxes generated. If the captured tax capacity value was available to each taxing jurisdiction, the result would be a lower or adjusted tax capacity rate which would produce the same amount of taxes. Thus, with the addition of captured value of $27,150, the tax capacity rate for the above selected major taxing jurisdictions would be reduced by a rate of 0.991% to an adjusted tax capacity rate of 102.034%. The captured tax capacity value times the adjusted tax capacity rate of 102.034% would generate $27,702 in increment income, which represents the loss of new tax revenues if the development had not occurred without inclusion in a tax increment district. Statement 2: If no captured tax capacity value is available to each of the taxing jurisdictions, there is no impact on the taxes heretofore levied and, therefore, no impact on tax capacity rates. NOTE: The impact on other taxing jurisdictions is negligible since those jurisdictions represent approximately 1.0% of the overall tax levy. cam_. ✓� RECEIVED FEB 08 1943