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6.6 ek/ --\, \,4 - ITEM 6.6. Tj y of � MEMORANDUM 1kRiverTO: PlanningCommission FROM: Pat Klaers, City Adminis / DATE: March 26, 1996 SUBJECT: Review of TIF Plan for TIF District No. 14 On Monday, April 8, 1996, the Elk River City Council will hold a public hearing to consider a Tax Increment Financing (TIF) Plan for TIF District No. 14. Pursuant to Minnesota Statutes, the Planning Commission is required to review and comment on the proposed TIF Plan prior to the City Council conducting a public hearing. This is done to ensure that the land use of the project is consistent with the city's Comprehensive Plan. The Elk River Economic Development Authority (EDA) is proposing the creation of TIF District No. 14. The District will be comprised of two parcels, • Lots 6 & 7, Block 1, McChesney Industrial Park. This is the same location as the proposal for Neos, Inc., which was outlined in TIF District No. 12. The Neos project did not become reality and a new project for Marketech, Inc., is now being proposed on this site. Marketech, Inc., currently leases spaces in two different facilities and is looking to construct its own building. The company seeks approximately $65,100 in TIF assistance to support the construction of an approximately 9,300 square foot facility on Lots 6 & 7. Tax increment funds will be used to write down the acquisition price of the lots. With this expansion, it is estimated that 13 new employees will be added over the next three years. Marketech currently has 22 employees. To support the request for assistance, the EDA proposes to create an economic development TIF District. New property taxes generated by the 9,300 square foot facility will be captured by the city/EDA in order to pay back the $65,100 TIF Grant. It is estimated that the Marketech TIF District would last approximately seven years. New property taxes, or the increment, will be collected for five years. • 13065 Orono Parkway • P.O. Box 490 • Elk River, MN 55330 • (612) 441-7420 • Fax: (612) 441-7425 • Action Requested The Elk River Planning Commission is requested 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 action and findings will be forwarded to the City Council for its consideration at the April 8, 1996, public hearing. s:\planning\pc\tifl4.doc • 0 RESOLUTION 96 - A RESOLUTION OF THE ELK RIVER PLANNING COMMISSION FINDING THE ECONOMIC DEVELOPMENT AUTHORITY'S TAX INCREMENT FINANCING PLAN FOR TAX INCREMENT FINANCING DISTRICT NO. 14 LOCATED WITHIN DEVELOPMENT DISTRICT NO. 1 TO BE CONSISTENT WITH THE COMPREHENSIVE PLAN FOR THE CITY OF ELK RIVER WHEREAS, the Economic Development Authority's proposed Tax Increment Plan for Tax Increment Financing District No. 14 (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. 14 is consistent with the Elk River Comprehensive Plan based on the following findings: 1. The present zoning of I-1 (Light Industrial) and land use designation of L-I (Light Industrial) is the appropriate zoning and land use to allow industrial development. 2. The comprehensive land use for this area is not envisioned to change in the immediate future; therefore, expanding industrial businesses at this location is consistent with the Comprehensive Plan. 3. One of the Comprehensive Plan goals is to encourage industrial development to assist the city's tax base and employment base. Passed and adopted by the Planning Commission of the City of Elk River this 26th day of March, 1996. Tom Dillon, Chair ATTEST: 111 Steven B. Ach, City Planner • TAX INCREMENT FINANCING PLAN TAX INCREMENT FINANCING DISTRICT NO. 14 0 CITY OF ELK RIVER, MINNESOTA APRIL 8, 1996 0 TAX INCREMENT FINANCING PLAN TAX INCREMENT FINANCING DISTRICT NO. 14 SUMMARY Marketech, Inc., 16864 Highway 10 NW, Elk River, Minnesota seeks $65,100 in Tax Increment Financing assistance to support its proposed construction of a 9,324 square foot facility in the McChesney Industrial Park. Marketech is a service company in the printed circuit board (PCB) market. The services offered include board test fixturing, in-circuit test development, loaded board test and repair, and design services. Marketech, Inc., currently occupies leased space at two facilities in Elk River, Minnesota, and currently employs twenty-two (22) persons at these facilities. As a result of the expansion, approximately five new full-time jobs will be created in 1996, four new jobs in 1997, and four new jobs in 1998. 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. The site, Lots 6 and 7, Block 1, McChesney Industrial Park, is currently owned by Jerry and Joanne McChesney. The Economic Development Authority for the City of Elk River • proposes to reimburse Marketech, Inc., for its expense associated with the acquisition of Lots 6 and 7 under a pay-as-you-go Tax Increment Financing District. The 9,324 square foot facility will have a finished market value estimated at $400,000 which produces property taxes of approximately $16,800 per year. Of this total, $14,360 will be new additional taxes. These new funds will be "captured" by the Economic Development Authority so that the City of Elk River can recover the $65,100 in tax increment assistance. After these funds have been repaid, Tax Increment Financing District No. 14 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. 14 will exist for approximately seven (7) years; during which time tax increment funds will be collected for five (5) years. • • TAX INCREMENT FINANCING PLAN TAX INCREMENT FINANCING DISTRICT NO. 14 A. STATEMENT OF OBJECTIVES Tax Increment Financing District No. 14 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. 14 are: 1. To provide pay-as-you-go reimbursement for the acquisition price of Lots 6 and 7, Block 1, McChesney Industrial Park; (the development site); 110 2. To encourage a manufacturing company to expand in the McChesney Industrial Park; said expansion includes the construction of a new facility estimated at approximately 9,324 square feet; 3. To increase employment opportunities in the community and in the State of Minnesota; said expansion will create approximately 13 full time positions over the next three years and approximately 22 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 total property taxes of approximately $16,800 including new additional property taxes of approximately 14,360. 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. 14 is to encourage the expansion of a manufacturing company in • the McChesney Industrial Park, thereby increasing local employment opportunities and preserving and enhancing the local tax base of the State of Minnesota. C. DEVELOPMENT PROGRAM 1. Overview Marketech, Inc., 16864 Highway 10, Elk River, Minnesota, seeks Tax Increment Financing assistance to support its proposed construction of a 9,324 square foot facility in the McChesney Industrial Park. The Tax Increment funds will be used to reimburse Marketech, Inc., for the acquisition of the development site. 2. Property Included in Tax Increment Financing District No. 12 The legal descriptions of the properties included in TIF District No. 14 are as follows: Lot 6, Block 1, McChesney Industrial Park (PID No. 75- 433-0150) Lot 7, Block 1, McChesney Industrial Park (PID No. 75- 433-0160) • Attached as Exhibits B-1 and B-2 are maps showing the exact location of the property included in Tax Increment Financing District No. 14. 3. Property to be Acquired by the Authority No property will be acquired by the Authority. D. DEVELOPMENT ACTIVITIES 1. Development Overview Marketech, Inc., proposes to construct a new facility containing approximately 9,324 square feet on Lots 6 and 7. The new facility will have a finished market value estimated at $400,000. Construction may begin during the summer of 1996 and will be completed by December 31, 1996. Marketech, Inc., currently employs 22 persons at its two leased spaces in Elk River. As a result of the expansion, approximately 13 new full-time jobs will be created by Marketech, Inc., in the next three years. • • 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. 14 include: • Contract for Construction of a 9,324 Square Foot Facility (by Marketech, Inc.) • Soil Borings and Analysis • Site Preparation and Development E. FINANCIAL ANALYSIS OF TAX INCREMENT FINANCING DISTRICT NO. 14 1. Tax Increment Financing District No. 14 Cost Estimates Budget Amount Land Write Down $65,100 Administration & Legal $ 1,000 Miscellaneous $ 1.000 Total $67,100 • 2. Bonded Indebtedness The City of Elk River anticipates a pay-as-you-go Tax Increment Financing District No. 14 and no bonds will be issued. 3. Sources of Revenue to Pay Public Costs Tax Increments collected from the Marketech, Inc., expansion will be used to pay the public costs associated with Tax Increment Financing District No. 14. 4. Original Tax Capacity The original net tax capacity, based on the 1995 valuation, for the real property in Tax Increment District No. 14 is estimated to be $2,300. 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. 14 is estimated at $400,000. This value translates into a completed net tax capacity estimated at $16,800. The captured net tax capacity is estimated as follows: Completed Net Tax Capacity $16,800 Less Original Net Tax Capacity 2.300 Equals Captured Net Tax Capacity $14,500 One hundred percent of the captured net tax capacity of Tax Increment Financing District No. 14 will be required to finance the public costs associated with District No. 14. 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. 14. 6. Duration of the Tax Increment Financing District No. 14 The City of Elk River expects that the first increment it will receive from Tax Increment Financing District No. 14 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. 14 up to and • including the year 2002, or until approximately $65,100 in tax increment has been received. Thereafter, no further increments may be received and Tax Increment Financing District No. 14 will terminate. F. CASH FLOW ANALYSIS Attached as Exhibit D is the Cash Flow Analysis for Tax Increment Financing District No. 14. G. IMPACT ON OTHER LOCAL TAXING JURISDICTIONS 1. Estimated Impact of District No. 14 on the Taxing Jurisdictions Assuming the Captured Net Tax Capacity is Available to the Taxing Jurisdictions Without Creation of District No. 14: 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. 14 on the Taxing Jurisdictions Assuming None of the Captured Net Tax Capacity is Available to Taxing Jurisdictions Without Creation of District No. 14: The Economic Development Authority of the City of Elk River has determined that the Marketech, Inc., project would not reasonably be expected to occur without the creation of TIF District No. 14 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. 14 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 Marketech, 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 two leased space in Elk River 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 Marketech, Inc., 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. 14 Tax Increment Financing District No. 14 is comprised of two parcels of land. They are listed below: 1995 Original Parcel 1995 EMV Payable 1996 Net Tax Capacity 75-433-0150 $25,000 $1,150 75-433-0160 $25,000 $1,150 • • Please refer to Exhibit C for the County Auditor Certification of this parcel in Tax Increment Financing District No. 14 • • liiifiiililiifiuiiiiiiiIIllrfffiili!lllfiiiliiifiifiiiiiliifilliiiliffllifh Ilii i . 1---_-____ FH I _ J i AAtlJ ��`-` II Y_ 1'� i _ i -Minn. •/\ l- JUL _ •,___-_,,,„, .,:,..... - r --....) ., .% -on.. —''i�—� 1 r \ �-/ •! p i •r , --� , J is JI _ : ` 1 t' N ry i �_ �`��� W I L.3v, 1 r • r'1 i I -r ����_- iiim + � / t .x" e y• a �ffl .� 'L _ L • .... _ 1�ti0�� !'. tik, ;-7,-,...--,... 7' II' . ,... -aos. k - , ,, , to_ -- . - a-4- t , i -an. rte' ..... .. i s - 1 1 i .'".. \'17' 6. - ---- -I -am i i _ i — 1 I i 7 i — _ _ -. BOUNDARY OF \\. _,. i DEVELOPMENT DISTRICT NO. 1 -_ I i _�, a (CITY LIMITS) - -d ELK RIVER, MINNESOTA \ ! - _ i( 1 i Y i Elk Uver I i ..._ -mac.- , f,. 0 4 -:_N!‘.: -Iti'v:. 2 I i I i � ; i� _'LL EX ':BIT A I ,I , , �A DEVELOPMENT DISTRICT NO. 1 I Itli I 1\111111 DEVELOPMENT \ \ `........•. • k-- ----\ i I i I 4111,----- 1a IlLt, S a gEMIla /" rg wi. 7 - ` I 193RD ST. > RD AVE. IIM 3 IIV g •. -. I W O SE RVIC DR i :, s RIVER IW ELK 2 & 4111114 .__.._.„. —PARK 2 STRIA BLVD. VOL 1111 All � ADDITION `.1�1.1�' -_ PAll ROM�:9 ADO. 47111113 A.0 R •a• . 400 . t • "2. •• °ce '+• _ RK ft,,..,0,. .. • gri,t.-,-; ito _ 24 R .•. ft�. � PP • _ 1 � OWL '/ �1 I [�'�7i1Ci 1i11y Ip��l -�/ '\V1 I 1....,,,,,, . \AR / iu ft. /slyER 6 �,� '` 7 a tri Bk.d G <f 9/�9/�F� ?" \\ �� a se kfii;0 4e �©° . R0. %� 642 �: asNa 4 R' �a mat _ • 3Pp • e•wry, : one �, • S - i �= ___, .r-==ado IOD # t ! ' 1� ' 41 // _ •— CIRCA , 111111!111111041 /� / 1, �\41ra 711141111r4 I . 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I ..4% 1,,. ' e - A.t. -'73itt• er.-- %ir,........,., 12.197 R 8 --____. ,..taz.ty ...,„-....... ............. i ii'4 • 8 1-....... ; , -..-....-- ft, .t. ...... a.. L._.........c i. .:'... 4'. . /....,a,''-,,4! 12;7 ----- ' . ' 4 4";<.-- -411%'''''' .42-d.... ' 1;1'4.4)00 3 ! /0 • . % .0 '639 .„ 1'S . 1/4,,, .1/4, 0,,,,512,..1- 9 /2 / 1 c • :4.-;.:ti? : i' l,e••.,,.._. . :.., /0 .....,_ .Z(.-. -^.......-se.._'. - ...... °a4c. ;••,..;....: I ! ..:,.., • ..,,-7-. .... ..-'.. .. i ..;::1 ; Cc : ... ,..: Cte4/7.fr. -... I 4/0 J ' • "*. • .•0,;.1' 1 • 57.57, i+4%.1'..• ) 4 . 4 / .......0$.4....IC .e.. , 1..IS.Ay I, •fawnwnve . • ..•;' .: .• II i I I 1 i Scale: 1 inch .- 100 feet. Bearinys arc assumed. o Denotes iron pipe set with a plastic plug stampedRLS 8194. Or Denotes drainage and utility easen, rits. 10 feet in width unless otherwise noted. -. . vAEN'y-DoRs•-• ..• . /0 /0 EXHIBIT B-2 rrk Rirer,Minn.' I ' TAX INCREMENT FINANCING DISTRICT NO. 14 '-.Mt—.-.4-,..e...e.........---.._: EXHIBIT C 9 COUNTY AUDITOR CERTIFICATION TAX INCREMENT FINANCING DISTRICT NO. 14 The original net tax capacity of the following listed parcel(s) as of January 2, 1995, is certified to be $2,300. The parcel(s) contained in Tax Increment District No. 14 are listed below. 1995 EMV 1995 Original Parcel Number Payable 1996 Net Tax Capacity 75-433-0150 $25,000 $1,150 75-433-0160 $25.000 51.150 TOTAL $50,000 $2,300 The Base Tax Rate will be the rate calculated for taxes payable in 1996. In accordance with Minnesota Statutes, Section 469.177, Subdivision 1, the average percentage increase in the original Net Tax Capacity shall be three percent(3%). • Ramona Doebler Sherburne County Auditor SHERBURNE COUNTY SEAL April _, 1996 • • • • EXHIBIT D TAX INCREMENT FINANCING DISTRICT NO. 14 CASH FLOW ANALYSIS *1997 1998 1999 2000 2001 2002 ***2003 Original Net Tax Capacity(1) $ 2,369 $2,440 $2,513 $2,772 $2,855 $2,940 $ 3,028 Total Net Tax Capacity $2,369 $16,800 $16,800 $16,800 $16,800 $16,800 $ 16,800 Captured Net Tax Capacity $0 $14,360 $14,287 $14,028 $13,945 $13,860 $ 13,772 Estimated Tax Rate (2) 103.497 103.497 103.497 103.497 103.497 103.497 103.497 Captured Tax Increment $14,863 $14,787 $14,519 $14,433 $14,345 $0 Cumulative Captured Tax Increment $29,650 $44,169 $58,602 $72,947 $ 72,947 (1) Assumes a three percent(3%) annual increase in original tax capacity. (2) Based on a payable 1996 tax rate. This rate will change in 1997 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 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 of January 1, 1997. ** Assumes no construction value as a January 1, 1996. ***The District is decertified December 31, 2002, and taxes generated in 2003 will be collected by the local taxing jurisdictions. • • • EXHIBIT E IMPACT OF TAX INCREMENT FINANCING DISTRICT NO. 12 ON OTHER MAJOR TAXING JURISDICTIONS City of Elk River,Minnesota Without Project With Project Projected 1995/96 1996 1996 1995/96 Projected New Tax 1995/96 Adjusted Tax Capacity Captured Impact've 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 $10,694,856 $2,570,439 24.033% $10,694,856 $14,500 $10,709,356 $2,570,439 24.002 0.031 Sherburne County $57,579,856 $13,555,651 23.574% $57,579,856 $14,500 $14,500 $449 ISD 728 $22,502,787 $12,305,019 54.530% $57,594,356 $13,555,651 23.536 0.038 $14,500 $551 $22,502,787 $14,500 $22,517,287 $12,305,019 54.495 0.035 $14,500 $507 Other 1.360% $14,500 0 $14,500 TOTALS 103.497% $0 103.393 0.104 $1,507 STATEMENT 1: The 1995/96 tax capacity value times the 1995/96 tax capacity rate produces 1995/96 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$14,500,the tax capacity rate for the above-selected major taxing jurisdictions would be reduced by a rate of.104%to an adjusted tax capacity of 103.393%. The captured tax capacity times the adjusted tax capacity rate of 103.393% would generate$1,507 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