4.4. SR 04-06-2020
Request for Action
To Item Number
Mayor and City Council 4.4
Agenda Section Meeting Date Prepared by
Consent April 6, 2020 Amanda Othoudt, ED Director
Item Description Reviewed by
Interfund Loan Resolution for Main and Gates Cal Portner, City Administrator
Reviewed by
Action Requested
Approve, by motion, an interfund loan resolution authorizing advance of funds to be reimbursed with
future tax increment.
Background/Discussion
At their April 3, 2017, meeting, the HRA directed staff to move forward with the steps necessary to create a
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redevelopment plan for the property located at the intersection of Main Street, Gates Avenue NW and 3
Street. As part of this project, the HRA will incur certain costs related to the creation of a TIF District which
may be financed on a temporary basis from available HRA funds.
At their December 1, 2017, meeting, the HRA and the City Council adopted an interfund loan resolution to
reimburse itself for the costs advances including administrative costs incurred prior to the establishment of
the TIF District, subject to the limitations of the TIF Act, and certain costs incurred in connection with a
study of blighting conditions, engineering, land and building acquisition, demolition and site preparation costs
in an aggregate amount not to exceed the greater of $1,100,00 or the adopted and, if applicable, amended Tax
Increment Financing Plan budget for the TIF District.
At their February 3, 2020, meeting the HRA directed staff to include 406 Main Street into the proposed
redevelopment project. The HRA directed staff to amend the Original Interfund Loan Resolution to request
an additional interfund loan in the maximum principal amount of $200,000 to finance additional qualified
costs.
Financial Impact
N/A
Attachments
Interfund Loan Resolution
The Elk River Vision
A welcoming community with revolutionary and spirited resourcefulness, exceptional
service, and community engagement that encourages and inspires prosperity
City of Elk River
City Council
Resolution 20-____
A Resolution of the City Council of the City of Elk River Authorizing an
Interfund Loan for Advance of Certain Costs in Connection with a Tax
Increment Financing District
BE IT RESOLVED By the City Council of the City of Elk River, Minnesota (the “City”) as
follows:
Section 1. Background.
1.01. The City and the Housing and Redevelopment Authority in and for the City
of Elk River, Minnesota (the “HRA”) are considering establishing a Tax Increment Financing
District which is anticipated to include certain blighted and underused real property located
near the intersection of Main St NW and Gates Ave NW (the “TIF District”) pursuant to
Minnesota Statutes, Sections 469.174 to 469.1794, as amended (the “TIF Act”).
1.02. The HRA or the City may incur certain costs related to the TIF District which
may be financed on a temporary basis from available HRA funds.
1.03. Under Section 469.178, Subdivision 7 of the TIF Act, the HRA and the City
are authorized to advance or loan money from any fund from which such advances may be
legally made in order to finance expenditures that are eligible to be paid with tax increments
under the TIF Act.
1.04. On December 1, 2017, Board of Commissioners of the City and the City
Council adopted interfund loan resolutions (collectively, the “First Interfund Loan
Resolution”) authorizing the payment of certain costs by the HRA and the City on a temporary
basis from the City' s General Fund, the HRA' s General Fund or any other fund from which
such advances, from time to time, may be legally made (the "Fund") in an aggregate amount
not to exceed the greater of $1,100,000 or the adopted and, if applicable, the Tax Increment
Financing Plan budget for the TIF District pursuant to Minnesota Statutes, Section 469.178,
Subd. 7. Such costs included without limitation (i) administrative costs incurred prior to the
establishment of the TIF District, subject to the limitations of the TIF Act, and (ii) certain
costs incurred in connection with a study of blighting conditions, engineering, land and
building acquisition, demolition and site preparation costs (the “Qualified Costs”).
1.05. On October 7, 2019, the Board of Commissioners of the HRA and the City
Council adopted resolutions supplementing the First Interfund Loan Resolution (the “Second
Interfund Loan Resolution, and together with the First Interfund Loan Resolution, the
“Original Interfund Loan Resolution”).
1.06. The HRA and the City propose to amend the Original Interfund Loan
Resolution to request an additional interfund loan in the maximum principal amount of
$200,000 to finance additional Qualified Costs (the “Additional Interfund Loan”) in
accordance with the terms of this resolution.
1.07. The Original Interfund Loan and the Additional Interfund Loan will be
referred to collectively as the “Interfund Loan.”
Section 2. Repayment of Interfund Loan.
2.01. The amount of the Interfund Loan is increased to $1,300,000. Principal and
interest (“Payments”) on the Interfund Loan shall be paid annually on February 1 (the
“Payment Date”), commencing on the first Payment Date on which the City or the HRA has
received Available Tax Increment (defined below), or on any other dates determined by the
City Finance Director, through the date of last receipt of tax increment from the TIF District
(the “Maturity Date”). Interest shall accrue at the rate prescribed by the statute (Minnesota
Statutes, Section 469.178, Subdivision 7), which is the greater of the rates specified under
Sections 270C.40 or 549.09 at the time a Interfund Loan, or any part of it, is first made;
provided, however, the City Finance Director is authorized to specify a lower rate
2.02. Payments on the Interfund Loan will be made from the tax increment from
the proposed TIF District received by the HRA or the City from Sherburne County in the 6-
month period before any Payment Date, net of the amount paid under any agreement with a
private developer or otherwise pledged to the payment of any obligation (the “Available Tax
Increment”), from proceeds of the sale of the property in the proposed TIF Distract (if any),
and from any other revenues available to the HRA and the City. Payments shall be applied
first to accrued interest, and then to unpaid principal, unless otherwise specified by the City
Finance Director. Interest accruing from the Loan Date will be compounded semiannually
on February 1 and August 1 of each year and added to principal, unless otherwise specified by
the City Finance Director. Payments on this Interfund Loan may be subordinated to any
outstanding or future bonds, notes, or contracts secured in whole or in part with available tax
increment, and are on a parity with any other outstanding or future interfund loans secured in
whole or in part with available tax increment.
2.03. The principal sum and all accrued interest payable under this resolution is pre-
payable in whole or in part at any time by the City without premium or penalty.
2.04. To the extent that a TIF District is created, this resolution is evidence of an
internal borrowing by the HRA or the City in accordance with Section 469.178, subdivision 7
of the TIF Act, and is a limited obligation payable solely from revenues pledged to the payment
hereof under this resolution. The Interfund Loan shall not be deemed to constitute a general
obligation of the State of Minnesota or any political subdivision thereof, including, without
limitation, the HRA or the City. Neither the State of Minnesota, nor any political subdivision
thereof shall be obligated to pay the principal of or interest on the Interfund Loan or other
costs incident hereto except out of revenues pledged hereunder.
2.05. The HRA or the City, as applicable, may at any time make a determination to
forgive the outstanding principal amount and accrued interest on the Interfund Loan, in whole
or in part, on any date from time to time, to the extent permissible under law.
2.06. The City may from time to time amend the terms of this Resolution to the
extent permitted by law, including without limitation amendment to the payment schedule and
the interest rate; provided that the interest rate may not be increased above the maximum
specified in Section 469.178. subd. 7 of the TIF Act.
2.07. This resolution supplements, but does not supercede, the Original Loan
Resolution.
Section 3. Effective Date. This resolution is effective upon adoption.
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Approved by the City Council of the City of Elk River this 6 day of April, 2020.
John J. Dietz, Mayor
ATTEST:
Tina Allard, City Clerk