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5.10 PCSR 08-22-1995 ITEM 5.10. ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY • MEMORANDUM TO: ELK RIVER PLANNING COMMISSION FROM: WILLIAM RUBIN, EDA EXECUTIVE DIRECTO '�1 DATE: AUGUST 22, 1995 I SUBJECT: PLANNING COMMISSION REVIEW OF TAX INCREMENT FINANCING PLAN FOR TAX INCREMENT FINANCING DISTRICT NO. 13 INTRODUCTION On Monday, September 18, 1995, the Elk River City Council will conduct a public hearing • to consider a Tax Increment Financing Plan for Tax Increment Financing District No. 13. Pursuant to Minnesota Statutes, the Planning Commission is required to review and comment on each proposed Tax Increment Financing Plan(or amendment thereto)prior to the City Council conducting a public hearing. This is done to ensure that the project within the proposed Tax Increment Financing District is consistent with the City's Comprehensive Land Use Plan. BACKGROUND The Elk River Economic Development Authority(EDA)is proposing the creation of Tax Increment Financing District No. 13. The District will be comprised of a three (3) acre parcel which will be platted in the Country Crossing Business Center(Business Park). The request for Tax Increment Financing assistance comes from TL Feeding Systems, Inc., 8720 Wyoming Ave N, Brooklyn Park, Minnesota. The company designs and manufactures vibratory and centrifugal feeding equipment and systems that orient various products for assembly and packaging. Primary customers are associated with the food sector, high technology, medical sector, industrial sector, and original equipment manufacturers(OEM). TL Feeding Systems seeks$150,000.00 in tax increment financing assistance to support • its proposed construction of a 15,000 square foot office and production facility in the Business Park. Tax increment funds would be used to write down the acquisition price of the lot and for general site preparation and site development costs. P.O. Box 490 • 13065 Orono Parkway •Elk River, MN 55330-1743 • (612) 441-7420 • Fax: (612) 441-7425 Equal Opportunity Housing and Equal Opportunity Employment • To support the request for assistance, the EDA proposes to create an Economic Development TIF District. New property taxes generated by the 15,000 square foot facility would be "captured"by the EDA/City in order to pay back the $150,000.00 TIF grant. It is estimated that the TL Feeding TIF District would last approximately eight(8) years. The new property taxes(otherwise known as the tax increment)would be collected for six(6)years- 1998 through 2003, inclusive. The 15,000 square foot facility will likely be constructed of pre-cast tip-up panels, consistent with the design standards of the 1994 Business Park Ordinance. In addition, the three acre parcel will readily accommodate future expansions. It is estimated that the project will have an initial finished market value(land and building) of$625,000.00. ACTION REQUESTED The Elk River Planning Commission is asked to adopt the attached resolution which finds that the proposed TIF Plan is consistent with the City's Comprehensive Land Use Plan. The Planning Commission's resolution and findings will then be forwarded to the City Council for consideration at its September 18 public hearing. • s:\eda\pla.doc • • RESOLUTION 95- A RESOLUTION OF THE ELK RIVER PLANNING COMMISSION FINDING THE ECONOMIC DEVELOPMENT AUTHORITY'S TAX INCREMENT FINANCING PLAN FOR TAX INCREMENT FINANCING DISTRICT NO. 13 LOCATED WITHIN DEVELOPMENT DISTRICT NO. 1 IS CONSISTENT WITH THE COMPREHENSIVE PLAN FOR THE CITY OF ELK RIVER WHEREAS, the Economic Development Authority's proposed Tax Increment Plan for the Tax Increment Financing District No. 13 (the Plan)to be located within Development District No. 1, has been submitted to the Elk River Planning Commission; and, WHEREAS, the Planning Commission has reviewed the Plan to determine the consistency of the Plan to the Comprehensive Plan of the City of Elk River. NOW, THEREFORE, BE IT RESOLVED by the Elk River Planning Commission that the Tax Increment Financing Plan for Tax Increment Financing District No. 13 is consistent with the Elk River Comprehensive Plan. • Adopted this 22nd day of August, 1995. Louis Kuester, Chair ATTEST: Steven B. Ach, City Planner • • TAX INCREMENT FINANCING PLAN TAX INCREMENT FINANCING DISTRICT NO. 13 • CITY OF ELK RIVER, MINNESOTA SEPTEMBER 18, 1995 • TAX INCREMENT FINANCING PLAN TAX INCREMENT FINANCING DISTRICT NO. 13 SUMMARY TL Feeding Systems, Inc., 8720 Wyoming Avenue North, Brooklyn Park, MN seeks $150,000 in Tax Increment Financing assistance to support its proposed construction of a 15,000 square foot office and production facility on a three (3) acre lot in Country Crossing Business Center(Business Park). TL Feeding Systems designs and manufacturers vibratory and centrifugal feeding equipment and systems that orient various products for assembly and packaging. The company currently occupies leased space and it desires a more permanent office and production facility to ensure continued growth. The Economic Development Authority for the City of Elk River, Minnesota is proposing the creation of an Economic Development District pursuant to the Tax Increment Financing Act. Tax increment funds will be used to `write down"the acquisition price of the development site. Additional tax increment funds will be used for site preparation and site development costs. The expansion site is currently an unplatted parcel owned by DVM Mall Corp.. The Economic Development Authority for the City of Elk River proposes to reimburse TL Feeding Systems for its expense associated with the acquisition of the 3 acre Business Park site under a pay-as-you-go Tax Increment Financing District. • The 15,000 square foot facility will have a finished market value estimated at $625,000 which produces property taxes of approximately$28,300 per year. These fluids will be "captured"by the Economic Development Authority so that the City of Elk River can recover the $150,000 in tax increment assistance. After these funds have been repaid, Tax Increment Financing District No. 12 will be decertified, thereby enabling all local taxing jurisdictions(county, school, city, etc.)to share in the project's property taxes. The Economic Development Authority for the City of Elk River, Minnesota anticipates that Tax Increment Financing District No. 12 will exist for approximately eight (8)years; during which times tax increment funds will be collected for six(6)years. s:\eda\documant\foo13.doc • • TAX INCREMENT FINANCING PLAN TAX INCREMENT FINANCING DISTRICT NO. 13 A. STATEMENT OF OBJECTIVES Tax Increment Financing District No. 13 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. 13 are: 1. To provide pay-as-you-go reimbursement for the acquisition price of a three (3) to five (5) acre site to be platted in the Country CrossingBusiness Center (Business Park) (the development site); • 2. To encourage a manufacturing company to expand in the Business Park; said expansion includes the construction of a new facility estimated at approximately 15,000 square feet; 3. To increase employment opportunities in the community and in the State of Minnesota; said expansion will create full time positions and positions will be retained; and, 4. To preserve and enhance the local tax base and the tax base in the State of Minnesota; said expansion will generate property taxes of approximately $28,30 B. CLASSIFICATION OF THE DISTRICT The City Council of the City of Elk River, Minnesota determines that it is necessary, desirable, and in the public interest to designate, establish, develop, and administer an Economic Development Tax Increment Financing District in the City of Elk River pursuant to the provisions of the Tax Increment Financing Act, Minnesota Statutes 469.174, Subdivision 12. The purpose of the Tax Increment Financing Plan and Tax Increment Financing District No. 13 is to encourage the expansion of a manufacturing company in the Business Park, thereby increasing local employment opportunities • and preserving and enhancing the local tax base of the State of Minnesota. C. DEVELOPMENT PROGRAM 1. Overview TL Feeding Systems, Inc., 8720 Wyoming Avenue North, Brooklyn Park, Minnesota, seeks Tax Increment Financing assistance to support its proposed construction of a 15,000 square foot facility in the Country Crossing Business Center (Business Park). The Tax Increment funds will be used to reimburse TL Feeding Systems for the acquisition of the development site. In addition, funds will be used for site preparation and site development costs. 2. Property Included in Tax Increment Financing District No. 13 The legal description of the property included in TIF District No. 13 is as follows: Lot X, Block X, Country Crossing Business Center (part of PID No. 75-575-0020) • Attached as Exhibits B-1 and B-2 are maps showing the exact location of the property included in Tax Increment Financing District No. 13. 3. Property to be Acquired by the Authority No property will be acquired by the Authority. D. DEVELOPMENT ACTIVITIES 1. Development Overview TL Feeding Systems, Inc., proposes to construct a new facility containing approximately 15,000 square feet on the Business Park Lot. The new facility will have a finished market value estimated at $625,000. Construction may begin during the fall of 1995 and will be completed by the spring of 1996. TL Feeding Systems, Inc., currently employs 10 persons at its existing leased facility. As a result of the expansion, approximately new full-time jobs will be created by TL Feeding Systems. • • 2. Contracts No contracts have been entered into at the time of the preparation of this Tax Increment Financing Plan. Proposed contracts for services associated with Tax Increment Financing District No. 13 include: • Contract for Construction of a 15,000 Square Foot Facility (TL Feeding Systems) • Soil Borings and Analysis • Site Preparation and Development E. FINANCIAL ANALYSIS OF TAX INCREMENT FINANCING DISTRICT NO. 13 1. Tax Increment Financing District No. 13 Cost Estimates Budget Amount Land Write Down $135,000 Site Survey Site Preparation $ 15,000 Soil Borings and Analysis Administration • Legal $ 2,500 Cost of Issuance Fees Bond Discount Capitalized Interest Miscellaneous $ 2.500 Total $155,000 2. Bonded Indebtedness The City of Elk River anticipates a pay-as-you-go Tax Increment Financing District No. 13 and no bonds will be issued. 3. Sources of Revenue to Pay Public Costs Tax Increments collected from the TL Feeding Systems, expansion will be used to pay the public costs associated with Tax Increment Financing District No. 13. 4. Original Tax Capacity The original net tax capacity, based on the 1994 valuation, for the real property in Tax Increment District No. 13 is estimated to be $938. 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. 13 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 938 Equals Captured Net Tax Capacity $26,212 One hundred percent of the captured net tax capacity of Tax Increment Financing District No. 13 will be required to finance the public costs associated with District No. 13. 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. 13. 6. Duration of the Tax Increment Financing District No. 13 The City of Elk River expects that the first increment it will receive from Tax Increment Financing District No. 13 will be for taxes payable in 1998, and will be based on a completed value as of January 2, 1997. The City expects to continue to receive tax increment from Tax Increment District No. 13 up to and • including the year 2003, or until $155,000 in tax increment has been received. Thereafter, no further increments may be received and Tax Increment Financing District No. 13 will terminate. F. CASH FLOW ANALYSIS Attached as Exhibit D is the Cash Flow Analysis for Tax Increment Financing District No. 13. G. IMPACT ON OTHER LOCAL TAXING JURISDICTIONS 1. Estimated Impact of District No. 13 on the Taxing Jurisdictions Assuming the Captured Net Tax Capacity is Available to the Taxing Jurisdictions Without Creation of District No. 13: 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 nine 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. 13 on the Taxing Jurisdictions Assuming None of the Captured Net Tax Capacity is Available to Taxing Jurisdictions Without Creation of District No. 13: The City of Elk River and its Economic Development Authority have determined that the TL Feeding Systems, Inc., project would not reasonably be expected to occur without the creation of TIF District No. 13 and the use of tax increment financing is necessary. Therefore, none of the net tax capacity captured during the term of this TIF District would be available to other taxing jurisdictions without the creation of this district. 3. Additional information on the impact of Tax Increment Financing District No. 13 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 City Council and EDA have determined that the TL Feeding Systems, Inc., expansion project cannot reasonably be expected to occur solely through private investment within the reasonably foreseeable future. Therefore, the use of Tax Increment Financing assistance is deemed necessary. This determination has been made based on the following: • The company currently occupies leased space at 8720 Wyoming Avenue North, Brooklyn Park, Minnesota and this expansion into a permanent facility is its first. Tax increment assistance is needed to reduce the overall project costs - thereby preserving scarce capital to ensure that TL Feeding Systems, remains financially stable after the expansion. • In addition, tax increment assistance is necessary because the project will result in increased employment in the State, and, it will result in the preservation and enhancement of the tax base of the State. PARCELS INCLUDED IN TAX INCREMENT FINANCING DISTRICT NO. 13 Tax Increment Financing District No. 13 is comprised of two parcels of land. They are listed below: 1994 Original Parcel 1994 EMV Payable 1995 Net Tax Capacity Part of $20,400 $938 • 75-575-0020 (For 3 acre parcel) (For 3 acre parcel) • Please refer to Exhibit C for the County Auditor Certification of this parcel in Tax Increment Financing District No. 13 0 • • - 1iiiiddifiliii� d�addiiiiiilii / l � �111 �jf1lH i ;i�� lildiil iliiii �ililiiliil;ii i = 5�, v`._ a, — — ;/ 0 . ..--- ________--. _7_,;____— r - __ n __ _ -----------,..moi.. ._ _ ialla in- in. I �� - ``. • --- 7JJ1 O I -- ----- /1-- ► - _,_,.,i ' I - I" „-/ s • :Ir.,' __ r-_ -ma —F-- •[, ‘\, �. ,/ - 0 -Ia. _ _..."---2.1___ „I__---.. . ' M'Z''-.- • ,MIL 1 .:- ---- F , ---,4111111 - EN,' to ti y ..... fiA : i_. . ili ,.) -- m., ' - irt . -- 'f7'4-.C\140111r .____ __ a +..w.- -- .,_sem– .-"/x p��''+aQe -_-_ , ii \ ., , : —a. _ - m — ai 1 s 4 i II Ji. as i I " i I CC�i77� BOUNDARY OF , _. ! i a` M-- DEVELOPMENT DISTRICT NO. 1 ' -- 1r. -- _ "" (CITY LIMITS) - ELK RIVER, MINNESOTA "` -- \`; a s .',,,,* ill i •••_ \ \ -us- 1 I I i .\\L ,..r , . "'''' D.J • ak River . ii .0, itgq an, .........‘ ..,i, in. EXHIBIT A I �`.\1 ! DEVELOPMENT DISTRICT NO. 1 +i( 111 1 1 i N /V 1D Will , • • . . ,, • , , . J el _W .r Pi M al . . o , . liffirov 41111411r— 3 • . • .. -• • - . . ','j' O. . • O� ®114 5if:F RACI.int 1 '0! ./3 5 6 ®o AO' oinmom ,o�•.Y�ILI �--�. .� . — �""'� 4- t� V 1��tic , •�... �D 5 1 a,noT w UM fits �Rr�...__ d3V0a�6lYl (�� frial":" )1170. ' � 0 k TR • w l Val = I�, LAKE ORONO �: ;wpm um.aus •Ami �niti�rr ,,Oiat:.% ' `.".:2...1,14 �r is ��m it„I 0 r : ' ®tea mar. rr.a D MIN r _•11.1411 5 ELK O LAKE O "° . � 1 RIVER O iikliht ORONO ♦1 � L ab 11111111 iz G • ..I j tAl(C LOT A �stasr1111111*,,,.... i; i W PARK /�--'C--M� , • -,W I NW -,''• ' • • ut LAKE LOco o ;� �,CITY >11,,,..40 LAKE ... U.S. HIGHWAY N0. 52 . aYCTtR't COUNTY LD`� SOFTBALL U•,p4; J COUNTY1 z FAIR PARK t CiTY 's CWRT L GkOUNDS l ' T BALL 444.-e., .... .444,4, MOUSE 6BM ORONO .�0ll `Y •, .ate ` ! '•R3 - Si a� ' ORONO PARK WAV O :f. �/�ili� ��/�' ,_11,030 111 •, liniirt � tdi al.-, MOM t'''' : ;,aiQeer► e�739Lm E!D4L wk.i1 Ott e I- ,-- z./ mtlr p,� AVE roamZi MINI r.: MIN 7r :;�; QQ, =. mhos® �� mi. ea. mumNM PARK•' WI 4\$4 BAN ; igam 13■.© ai�r&i?S ' 'ar mil y II 4 '' L7-. ®tea '. t:sez4 1� ��ki g em. MIN r TR Nell ice.`' i : fi- 111 NICIA zrIF I b-t4 figal iFt a 1 , i --d. Aing ,�1�►,'tti �m i %Alb ii ..: i ,4i va um 111 go MrSSI^S,p`I ! �, p T+J. ,_711 ® iiik wvERvitW DRIVE il'� ; f .. ,l Val (./ ....vggp oil . ,,-\ �_�� iv?,,,,, "Y c 411 '01-1151 . f �" /\fin __- -' \ ________.-4-- ---_____________________----6=:„.\ ________ EXHIBIT B-1 RIvER __ -- TAX INCRE _FINANCING DISTRICT NO.7r3 —_� J_ t,L v!`:. 1.../.1.21.1bill ;)NIJNVNI.1 JN,1N1:12LJN1 XV,L I 1 I • ; (� � Z-S ZISI-IIX; ,:•. ... .-. rJ til-`a t,� I I I - _1 1) 1 L • G :' L r� } . ; f II/ EXHIBIT C COUNTY AUDITOR CERTIFICATION TAX INCREMENT FINANCING DISTRICT NO. 13 The original net tax capacity of the following listed parcel(s) as of January 2, 1994, is certified to be $938. The parcel(s) contained in Tax Increment District No. 13 are listed below. 1994 EMV 1994 Original Parcel Number Payable 1995 Net Tax Capacity Part of 75-575-0020 $20,400 $938 TOTAL $20,400 $938 The Base Tax Rate will be the rate calculated for taxes payable in 1995. In accordance with Minnesota Statutes, Section 469.177, Subdivision 1, the average percentage increase in the original Net Tax Capacity shall be zero percent (0%). • Ramona Doebler Sherburne County Auditor SHERBURNE COUNTY SEAL September , 1995 • • • • EXHIBIT D TAX INCREMENT FINANCING DISTRICT NO. 13 CASH FLOW ANALYSIS *1996 1997 1998 1999 2000 2001 2002 2003 ***2004 Original Net Tax Capacity(1) **$938 $966 $995 $1,025 $1,056 $1,087 $1,120 $1,158 $1,118 Total Net Tax Capacity $938 M20.= $27.150 =El 827.150 $27.150 $27.150 $27.150 $27.150 Captured Net Tax Capacity $0 $0 $26,155 $26,125 $26,094 $26,063 $26,030 $25,996 $25,962 Estimated Tax Rate(2) 1.04247 1.04247 1.04247 1.04247 1.04247 1.04247 1.04247 1.04247 1.04247 Captured Tax Increment $27,266 $27,235 $27,202 $27,170 $27,135 $27,100 $0 Cumulative Captured Tax Increment $54,501 $81,703 $108,873 $136,008 $163,108 $163,108 (1) Assumes a three percent (3%) annual increase in original tax capacity. (2) Based on a payable 1995 tax rate. This rate will change in 1996 and in subsequent years; This will result in a change in the actual amount of tax increment collected by the city. * Taxes will be generated in 1996 and in 1997, but no increment will be collected. The first year an increment will be collected is 1998 and is based on a finished market value as a January 1, 1997. The 1997 net tax capacity value in this illustration assumes the project is seventy-five percent (75%) completed as of January 1, 1996. ** Assumes no construction value as a January 1, 1995. *** The District is decertified December 31, 2003, and taxes generated in 2004 will be collected by the local taxing jurisdictions. • • • EXHIBIT E IMPACT OF TAX INCREMENT FINANCING DISTRICT NO. 13 ON OTHER MAJOR TAXING JURISDICTIONS City of Elk River,Minnesota Without Project With Project Projected Negative 1994/1995 1994/1995 1994/1995 1994/1995 Projected New Tax 1994/1995 Adjusted Tax Capacity Captured Impact on Tax Capacity Ad Valorem Tax Capacity Tax Capacity Captured Tax Capacity Ad Valorem Tax Capacity Rate Tax Capacity Other Taxing Value Taxes Levied Rate Value Capacity Value Value Taxes Levied Rate Impact Value Jurisdictions City of Elk River $9,324,360 $2,223,347 23.958% $9,324,360 $26,212 $9,350,572 $2,223,347 23.778 0.180 $26,212 $6,232 Sherburne Country $54,255,803 $12,128,779 22.380% $54,255,803 $26,212 $54,282,015 $12,128,779 22.344 0.036 $26,212 $5,857 ISD 728 $19,431,867 $11,032,065 56.511% $19,431,867 $26,212 $19,458,079 $11,032,065 56.443 0.068 $26,212 $14,795 Other 1.398% $26,212 1.398 $26,212 $321 TOTALS 104.247 103.963 0.284% $27,250 STATEMENT 1: The 1994/1995 tax capacity value times the 1994/1995 tax capacity rate produces 1994/1995 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$26,212,the tax capacity rate for the above-selected major taxing jurisdictions would be reduced by a rate of.284%to an adjusted tax capacity of$103.963%. The captured tax capacity times the adjusted tax capacity rate of 103.963%would generate$27,250 in increment income,which represents the loss of new 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.