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6.1. PCSR 12-21-2021
Request for Action Cir•ci Elk - River= To Item Number Planning Commission 6.1 Agenda Section Meeting Date Prepared by General Business December 21, 2021 Zack Carlton,Planning Manager Item Description Reviewed by Resolution: TIF District No. 28 Consistency with the Comprehensive Plan Reviewed by Action Requested Approve,by motion,a resolution confirming that the proposed TIF District and plan conforms to the city's Comprehensive Plan. Background/Discussion The Jackson Hills Phase II housing project is a proposed 44-unit multi-family residential apartment building at the northwest corner of Jackson Ave and entrance to the Elk River Boys and Girls Club. The project will include approximately nine units of affordable housing. The building will look similar to the first Jackson Hills project,immediately south of the currently proposed project. At this time,the project is still in the early design stages and the applicant has only made application for city financing through establishment of a Tax Increment Financing District. The applicant still requires land use and zoning approvals prior to any sort of construction on the site, and approval of this resolution does not constitute approval of any zoning or land use applications. The Comprehensive Plan guides this property for Multifamily Residential Uses. This land use designation includes higher density apartment complexes. Based on the recently adopted Comprehensive Plan, the proposed use is consistent with the vision for the community. Financial Impact None Mission/Policy/Goal ■ Responsibly grow ■ Ethical, efficient,and responsible Attachments ■ Resolution ■ Memo Regarding the TIF Application ■ TIF Plan The Elk River Vision P O N E R E o R Y A welcoming community avith revolutionary and spirited resourcefulness, exceptional [NAWR service, and community engagement that encourages and inspires prosperity. Updated.August 2020 City of Elk*� City of Elk River River Planning Commission Resolution 21-04 A Resolution of the Planning Commission of the City of Elk River Concerning Development District No. I and a Proposed Tax Increment Financing District of the City of Elk River, Minnesota WHEREAS, the proposal by the City of Elk River,Minnesota to amend the Development Program for Development District No. 1 (the "Program") to reflect additional public development and redevelopment costs and activities, establish Tax Increment Financing District (Housing) No. 28 Uackson Hills Phase II Housing Project) (the "TIF District") within Development District No. 1, and adopt the Tax Increment Financing Plan relating thereto (the "TIF Plan" and,together with the Program, the "Project"),all pursuant to and in conformity with applicable law,including Minnesota Statutes, 469.124 to 469.133 and Sections 469.174 to 469.1794, as amended (the "TIF Act"),has been submitted to the City of Elk River Planning Commission (the "Commission"); and WHEREAS, the Commission has reviewed the Project to determine the consistency of the Project with the comprehensive plan for the City of Elk River; and WHEREAS, the Planning Commission's review of the Projects relates solely to compliance with the TIF Act. The Planning Commission shall undertake a detailed review of the proposed plans described in the TIF Plan as part of the City's normal planning process on a later date. NOW, THEREFORE, BE IT RESOLVED by the Planning Commission of the City of Elk River,Minnesota,as follows: the Project is consistent with the comprehensive plan for the City of Elk River and conform to general plans for development or redevelopment of the City as a whole. Passed and adopted this 215`day of December 2021. Perry Beise,Vice-Chair ATTEST: Tina Allard, City Clerk UREJ bakertitly MUNICIPAL ADVISORS Memo To: City of Elk River Planning Commission Brent O'Neil, City of Elk River From: Mikaela Huot, Director Date: December 21, 2021 Subject: Proposed Tax Increment Financing Plan for Tax Increment Financing (TIF) District No. 28 (Jackson Hills Phase II Housing Project) At its Tuesday, December 21 meeting, the City of Elk River Planning Commission is being asked to review the amended Development Program for Development District No. 1 and the proposed Tax Increment Financing Plan for Tax Increment Financing District No. 28 for Jackson Hills Phase II Housing Project (the "Plans"). The Planning Commission review of the Plans is pursuant to the TIF Act. Pursuant to MN Statutes 469.175, Subd. 3, the City needs to make certain findings that include the following: 1. The TIF District qualifies as a housing district; 2. The proposed development, in the opinion of the City, would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future; 3. The TIF Plan will afford maximum opportunity, consistent with the sound needs of the City as a whole, for development of the Project Area by private enterprise; and 4. The TIF Plan conforms to general plans for development of the City as a whole. The City Council will hold a public hearing on Monday, January 3 to consider approval of the TIF District, after making the findings outlined above. The public hearing date is the time in which City Council would take any public comment, and after the hearing, consider the adoption of a resolution approving the TIF District. Multiple steps are followed to allow for establishment of a tax increment financing district, including notifications to the County and School District, Planning Commission review and approval, HRA review and recommendation, publication of a public hearing notice, and the holding of a public hearing. Notices have been sent to the County Commissioner on November 18 and County and School Board (draft TIF Plan and fiscal and economic impacts) on December 3. Publication of the hearing notice for the TI F District creation will be Saturday, December 18 in Star News. HRA review is scheduled for January 3. Background The City of Elk River is considering the establishment of a Tax Increment Financing (TIF) District to assist with financing a portion of the costs associated with development of an approximate 44-unit multifamily housing project, of which approximately 9 units will be affordable. In order to comply with the requirements of a Housing TIF District, at least 20% of the units will be occupied by persons with incomes no greater than 50% of the area median income. The City anticipates using tax increment to finance eligible costs associated with development of the project site including site improvements related to soils correction, as well as related administrative expenses. The project is expected to commence in 2022 and be fully constructed by December 31, 2023 and 100% assessed and on the tax rolls as of January 2, 2024 for taxes payable in 2025. The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances,the services of a professional should be sought. Baker Tilly Virchow Krause, LLP trading as Baker Tilly is a member of the global network of Baker Tilly International Ltd.,the members of which are separate and independent legal entities.©2018 Baker Tilly Virchow Krause, LLP Action The Planning Commission is being asked to review the Plans as it relates solely to compliance with the TIF Act through adoption of the accompanying resolution. The Planning Commission shall undertake a detailed review of the proposed project described in the TIF Plan as part of the City's normal planning process on a later date. It is being asked to determine that the project within the TIF District meets the following finding: 4. The TIF Plan conforms to general plans for development of the City as a whole. Project Qualifications To establish the area identified above as a Housing TIF District, the project as proposed will need to qualify for inclusion within a housing TIF District. A housing TIF District is a type of tax increment district which consists of a project that is intended for occupancy by persons or families of low and moderate income. Revenue derived from tax increment from a housing district must be used solely to finance the cost of a housing project as defined. The cost of public improvements directly related to the housing projects and the allocated administrative expenses of the City may be included in the cost of a housing project. For the proposed project to qualify as a tax increment financing housing district, the property must satisfy the income requirements for a qualified residential rental project as defined in section 142(d) of the Internal Revenue Code. The requirements of this subdivision apply for the duration of the tax increment financing district. The income requirements are as follows: • at least 20% of units are occupied by individuals whose income is 50% or less of area median income, or • at least 40% of units are occupied by individuals whose income is 60% or less of area median income. In addition, not more than 20 percent of the square footage of the buildings that receive assistance from tax increments may consist of commercial, retail, or other non-residential uses. The maximum term of a housing district is 25 years after receipt of first increment for a total of 26 years. The term for the TIF District is proposed to be a maximum of 15 years to follow the City's TIF Policy. Thank you for the opportunity to be of assistance to the City of Elk River. Please contact me at 651-223-3036 or mikaela.huota-bakertilly.com with any questions or to discuss. The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances,the services of a professional should be sought. Baker Tilly Virchow Krause, LLP trading as Baker Tilly is a member of the global network of Baker Tilly International Ltd.,the members of which are separate and independent legal entities.©2018 Baker Tilly Virchow Krause, LLP (9 ba kerti ll y Tax Increment Financing Plan for Tax Increment Financing (Housing) District No. 28 (Jackson Hills Apartments Phase II Housing Project) City of Elk River, Minnesota Prepared by Baker Tilly Municipal Advisors, LLC Draft Dated: December 2, 2021 Anticipated Review by HRA Board: January 3, 2022 Anticipated Approval by City Council: January 18, 2022 Baker Tilly Municipal Advisors, LLC is a registered municipal advisor and wholly-owned subsidiary of Baker Tilly US, LLP, an accounting firm. Baker Tilly US, LLP trading as Baker Tilly is a member of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. TABLE OF CONTENTS SECTION I — MODIFICATION TO THE DEVELOPMENT PROGRAM FOR DEVELOPMENT DISTRICT NO. 1 Foreword...................................................................................................... 1 SECTION 11 —TAX INCREMENT FINANCING PLAN FOR TAX INCREMENT FINANCING (HOUSING) DISTRICT NO. 28 Section Page(s) A. Definitions .............................................................................................. 1 B. Statutory Authorization........................................................................... 2 C. Statement of Need and Public Purpose................................................. 2 D. Statement of Objectives......................................................................... 2 E. Designation of the TIF District as a Housing District.............................. 2 F. Duration of the TIF District..................................................................... 3 G. Property to be Included in the TIF District.............................................. 3 H. Property to be Acquired in the TIF District............................................. 3 1. Specific Development Expected to Occur Within the TIF District .......... 3 J. Findings and Need for Tax Increment Financing................................... 4 K. Estimated Public Costs.......................................................................... 5 L. Estimated Sources of Revenue.............................................................. 5 M. Estimated Amount of Bonded Indebtedness.......................................... 6 N. Original Net Tax Capacity...................................................................... 6 O. Original Tax Capacity Rate.................................................................... 6 P. Projected Retained Captured Net Tax Capacity and Projected Tax Increment 7 Q. Use of Tax Increment............................................................................. 7 R. Excess Tax Increment............................................................................ 8 S. Tax Increment Pooling and the Five Year Rule ..................................... 8 T. Limitation on Administrative Expenses .................................................. 9 U. Limitation on Property Not Subject to Improvements - Four Year Rule . 9 V. Estimated Impact on Other Taxing Jurisdictions.................................... 9 W. Prior Planned Improvements.................................................................. 10 X. Development Agreements...................................................................... 10 Y. Assessment Agreements....................................................................... 11 Z. Modifications of the Tax Increment Financing Plan ............................... 11 AA. Administration of the Tax Increment Financing Plan............................. 11 AB.Filing Financial Reporting and Disclosure Requirements ...................... 12 Map of the Tax Increment Financing District and Project Area............................... EXHIBIT I TIF District Assumptions Report............................................................................. EXHIBIT 11 Projected Tax Increment Report............................................................................. EXHIBIT III Estimated Impact on Other Taxing Jurisdictions Report......................................... EXHIBIT IV Baker Tilly Municipal Advisors, LLC is a registered municipal advisor and wholly-owned subsidiary of Baker Tilly US, LLP, an accounting firm. Baker Tilly US, LLP trading as Baker Tilly is a member of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. City of Elk River, Minnesota SECTION I — MODIFICATION TO THE DEVELOPMENT PROGRAM FOR DEVELOPMENT DISTRICT NO. 1 Foreword The following text represents a Modification to the Development Program for Development District No. 1. This modification represents a continuation of the goals and objectives set forth in the Development Program for Development District No. 1. The changes generally include the establishment of Tax Increment Financing (Housing) District No. 28. For further information, a review of the Development Program for Development District No. 1 is recommended. It is available from the City Administrator at the City of Elk River. Other relevant information is contained in the Tax Increment Financing Plans for the Tax Increment Financing Districts located within Development District No. 1. SECTION II —TAX INCREMENT FINANCING PLAN FOR TAX INCREMENT FINANCING (HOUSING) DISTRICT NO. 28 Introduction The following text represents the Tax Increment Financing Plan for Tax Increment Financing District No. 28. Section A Definitions The terms defined in this section have the meanings given herein, unless the context in which they are used indicates a different meaning: "City" means the City of Elk River, Minnesota; also referred to as a "Municipality". "City Council" means the City Council of the City; also referred to as the "Governing Body". "County" means Sherburne County, Minnesota "Development District" means Development District No. 1 in the City, which is described in the corresponding Development Program. "Development Program" means the Development Program for the Development District. "Project Area" means the geographic area of the Development District. "School District" means Independent School District No. 728, Minnesota. "State" means the State of Minnesota. "TIF Act" means Minnesota Statutes, Sections 469.174 through 469.1794, both inclusive. "TIF District" means Tax Increment Financing (Housing) District No. 28. "TIF Plan" means the tax increment financing plan for the TIF District (this document). Baker Tilly Municipal Advisors, LLC Page 1 City of Elk River, Minnesota Section B Statutory Authorization See the Development Program for the Development District. Section C Statement of Need and Public Purpose See the Development Program for the Development District. Section D Statement of Objectives See the Development Program for the Development District. Section E Designation of the TIF District as a Housing District Pursuant to the TIF Act, the City seeks to create Tax Increment Financing (Housing) District No. 28 and adopt a TIF Plan for the TIF District. The City will review this TIF Plan prior to City adoption. The TIF District is a housing district. Housing districts are a type of tax increment financing district that consist of a project intended for occupancy, in part, by persons or families of low and moderate income. Low and moderate income is defined in federal, state, and municipal legislation. A project does not qualify if more than 20% of the square footage of buildings that receive assistance from tax increments consist of commercial, retail or other nonresidential use. In addition, housing districts are subject to various income limitations and requirements for residential property. For owner occupied residential property, 95% of the housing units must be initially purchased and occupied by individuals whose family income is less than or equal to the income requirements for qualified mortgage bond projects under section 143(f) of the Internal Revenue Code. For residential rental property, the property must satisfy the income requirements for a qualified residential rental project as defined in section 142(d) of the Internal Revenue Code. The TIF District meets the above qualifications for these reasons: 1. The planned improvements consist of the following: a. Approximately 44 total units, for which one of the following will apply: o at least 20% of the dwelling units shall be available for rent by persons whose incomes do not exceed 50% of areawide median family income, as adjusted for family size or o at least 40% of the dwelling units shall be available for rent by persons whose incomes do not exceed 60% of areawide median family income, as adjusted for family size. 2. No improvements are planned other than housing and therefore no more than 20% of the square footage of buildings included in the TIF District will consist of commercial, retail, or other nonresidential uses. 3. The City will require in the development agreement that the income limitations for the rental units in the apartment buildings will apply for the duration of the TIF District. Baker Tilly Municipal Advisors, LLC Page 2 City of Elk River, Minnesota Tax increments derived from a housing district must be used solely to finance the cost of housing projects as defined in section 469.174, subd. 11 and 469.176, subd. 4d of the TIF Act. The cost of public improvements directly related to the housing projects and the allocated administrative expenses of the City may be included in the cost of a housing project. The City anticipates using tax increment revenues to finance the costs of TIF eligible and development costs related to construction of the new multifamily housing units within the TIF District. Section F Duration of the TIF District Housing districts may remain in existence 25 years from the date of receipt of the first tax increment. Modifications of this TIF Plan (see Section AB) shall not extend beyond these limitations. Pursuant to Minnesota Statutes section 469.175, subd. 1(b), the City specifies 2024 as the first year in which it elects to receive tax increment from the TIF District, which is no later than four years following the year of approval of the TIF District. Thus, the City may collect increment from the TIF District through December 31, 2050 but anticipates the TIF District being decertified following December 31, 2039 (see Section R) (up to 15 years of collection to meet the City's Tax Increment Policy). All tax increments from taxes payable in the year the TIF District is decertified shall be paid to the City. Section G Property to be Included in the TIF District The TIF District comprises of one parcel that is approximately 6.64 acres and anticipated to be split with a portion within the boundaries. A map showing the location of the TIF District is shown in Exhibit I. The boundaries and area encompassed by the TIF District are described below: Parcel Number Legal Description PARCEL D-N. THAT PT OF THE FOLLOWING DESC 75-134-2305 PARCEL D LYING N OF WLY EXTENSION OF THE CTR LINE OF 6TH ST (FORMERLY PLATTED AS 8TH ST) The area encompassed by the TIF District shall also include all street or utility right-of-ways located upon or adjacent to the property described above, as illustrated in the boundary map included in Exhibit I. Section H Property to be Acquired in the TIF District The City may acquire and sell any or all of the property located within the TIF District; however, the City does not anticipate acquiring property. Section I Specific Development Expected to Occur Within the TIF District The project as proposed by The Briggs Company is anticipated to include the construction of approximately 44 rental housing units comprising studio, 1, 2- and 3-bedroom units with supporting garages. In order to qualify as a housing district, at least 20% of the units will be occupied by persons or families at 50% of area median or 40% of the units will be occupied by persons or families at 60% of area median income. As proposed, the project is expected to Baker Tilly Municipal Advisors, LLC Page 3 City of Elk River, Minnesota include 20% of the units not to exceed 50% of the area median income. The City anticipates using tax increment revenues to finance eligible costs associated with development of the housing project site including primarily soils correction and site development costs, as deemed a barrier to development of the property, as well as related administrative expenses. The project is expected to start construction in 2022 and continue construction through 2023 and be 100% complete as of January 2, 2024 for taxes payable 2025. Section J Findings and Need for Tax Increment Financing In establishing the TIF District, the City makes the following findings: (1) The TIF District qualifies as a housing district. See Section G of this TIF Plan for the reasons and facts supporting this finding. (2) The proposed development, in the opinion of the City, would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future. The proposed development is expected to consist of approximately 44 newly constructed housing units. The City's finding that the proposed development would be unlikely to occur solely through private investment within the reasonably foreseeable future is based on an analysis of the project pro forma and other materials submitted to the City by the developer. These documents have indicated that the costs of constructing the new project, in addition to the significant soils corrections and site improvement costs will result in debt service coverage and returns that are not sufficient to support development, thereby making this housing development infeasible without public assistance. Therefore, the developer has indicated in communications with the City and submitted financial data that the development as proposed would not move forward without tax increment assistance. (3) The TIF Plan conforms to the general plan for development or redevelopment of the City as a whole. The reasons and facts supporting this finding are that the Planning Commission of the City has found this TIF Plan consistent with the general plan for development of the City as a whole and will generally complement and serve to implement policies adopted in the City's comprehensive plan. (4) The TIF Plan will afford maximum opportunity, consistent with the sound needs of the City as a whole, for the development or redevelopment of the Project Area by private enterprise. Through the implementation of this TIF Plan, the City will provide an impetus for the construction of an apartment project, of which all or a portion of the units will be affordable for occupants at or less than 50% median income. The project will complement the overall housing needs of the City and helps support other private types of development by providing a range of housing opportunities for residents and workers within the City. Baker Tilly Municipal Advisors, LLC Page 4 City of Elk River, Minnesota Section K Estimated Public Costs The estimated public costs of the TIF District are listed below. Such costs are eligible for reimbursement from tax increments of the TIF District. Estimated Project Costs Land/Building acquisition $0 Site Improvements/Preparation costs $850,000 Utilities $0 Other public improvements $579,256 Construction of Affordable Housing $0 Administrative expenses $158,806 Estimated Tax Increment Project Costs $1,588,062 Estimated Financing Costs Interest Payments $0 Total Estimated Project/Financing Costs to be Paid $1,588,062 from Tax Increment The City anticipates using tax increment revenues to finance eligible costs associated with development of the housing project site including primarily site development, soil remediation, and other extraordinary affordable housing costs, as well as related administrative expenses. The City reserves the right to administratively adjust the amount of any of the items listed above or to incorporate additional eligible items, so long as the total estimated public cost ($1,588,062) is not increased. The City also reserves the right to fund any of the identified costs with any other legally available revenues, such as grants and/or loans, but anticipates that such costs will be primarily financed with tax increments. Section L Estimated Sources of Revenue Tax Increment revenue $1,588,062 Interest on invested funds Land Sale Proceeds Other Total $L,588,062 The City anticipates providing financial assistance through the terms of a pay-as-you go note in which the developer will finance costs upfront. As tax increments are collected from the TIF District in future years, a portion of these taxes will be used by the City to reimburse itself for public costs incurred (see Section M). The City reserves the right to finance any or all public costs of the TIF District using pay-as-you- go assistance, internal funding, general obligation or revenue debt, or any other financing mechanism authorized by law. The City also reserves the right to use other sources of revenue legally applicable to the Project Area to pay for such costs including, but not limited to, special assessments, utility revenues, federal or state funds, and investment income. Baker Tilly Municipal Advisors, LLC Page 5 City of Elk River, Minnesota Section M Estimated Amount of Bonded Indebtedness The maximum principal amount of bonds (as defined in the TIF Act) secured in whole or part with tax increment from the TIF District is $1,588,062. The City plans to finance the project through pay-as-you-go financing to finance housing development and other eligible costs associated with providing long-term affordable workforce housing within the TIF District. The City reserves the right to issue bonds in any form, including without limitation any interfund loan with interest not to exceed the maximum permitted under Section 469.178, subd. 7 of the TIF Act. Section N Original Net Tax Capacity The County Auditor shall certify the original net tax capacity of the TIF District. This value will be equal to the total net tax capacity of all property in the TIF District as certified by the State Commissioner of Revenue. For districts certified between January 1 and June 30, inclusive, this value is based on the previous assessment year. For districts certified between July 1 and December 31, inclusive, this value is based on the current assessment year. The Estimated Market Value of all property within the TIF District as of January 2, 2021, for taxes payable in 2022, is $233,700. Upon establishment of the TIF District and subsequent reclassification of property, the estimated original net tax capacity of the TIF District is expected to be $2,921. This assumes the property is classified as residential rental. Each year the County Auditor shall certify the amount that the original net tax capacity has increased or decreased as a result of: (1) changes in the tax-exempt status of property; (2) reductions or enlargements of the geographic area of the TIF District; (3) changes due to stipulation agreements or abatements; or (4) changes in property classification rates. Section O Original Tax Capacity Rate The County Auditor shall also certify the original tax capacity rate of the TIF District. This rate shall be the sum of all local tax rates that apply to property in the TIF District. This rate shall be for the same taxes payable year as the original net tax capacity. In future years, the amount of tax increment generated by the TIF District will be calculated using the lesser of (a) the sum of the current local tax rates at that time or (b) the original tax capacity rate of the TIF District. The County Auditor shall certify the sum of all local tax rates that apply to property in the TIF District for taxes levied in 2021 and payable in 2022 as the original tax capacity rate of the TIF District. Because those rates are not available at the time of drafting of the plan, the sum of the local tax rates for taxes levied in 2020 and payable in 2021 of 124.436% have been used and shown below. Baker Tilly Municipal Advisors, LLC Page 6 City of Elk River, Minnesota 2020/2021 Taxing Jurisdiction Local Tax Rate City of Elk River 44.556% Sherburne County 45.835% ISD #728 31.717% Other 2.328% Total 124.436% Section P Projected Retained Captured Net Tax Capacity and Projected Tax Increment Each year the County Auditor shall determine the current net tax capacity of all property in the TIF District. To the extent that this total exceeds the original net tax capacity, the difference shall be known as the captured net tax capacity of the TIF District. The estimates shown in this TIF plan assume that residential rental class rates remain at 1.25% of the estimated taxable value and assume 1% annual increases in market values. The County Auditor shall certify to the City the amount of captured net tax capacity each year. The City may choose to retain any or all of this amount. It is the City's intention to retain 100% of the captured net tax capacity of the TIF District. Such amount shall be known as the retained captured net tax capacity of the TIF District. Exhibit II gives a listing of the various information and assumptions used in preparing a number of the exhibits contained in this TIF Plan, including Exhibit III which shows the projected tax increment generated over the anticipated life of the TIF District. Section Q Use of Tax Increment Each year the County Treasurer shall deduct 0.36% of the annual tax increment generated by the TIF District and pay such amount to the State's General Fund. Such amounts will be appropriated to the State Auditor for the cost of financial reporting and auditing of tax increment financing information throughout the State. Exhibit III shows the projected deduction for this purpose over the anticipated life of the TIF District. The City has determined that it will use 100% of the remaining tax increment generated by the TIF District for any of the following purposes: (1) Pay for the estimated public costs of the TIF District (see Section M) and County administrative costs associated with the TIF District (see Section V); (2) pay principal and interest on one or more pay-as-you-go notes, tax increment bonds or other bonds issued to finance the estimated public costs of the TIF District; (3) accumulate a reserve securing the payment of tax increment bonds or other bonds issued to finance the estimated public costs of the TIF District; (4) pay all or a portion of the county road costs as may be required by the County Board under Minnesota Statutes section 469.175, Subd.1a; or Baker Tilly Municipal Advisors, LLC Page 7 City of Elk River, Minnesota (5) return excess tax increments to the County Auditor for redistribution to the City, County and School District. Tax increment from property located in one county must be expended for the direct and primary benefit of a project located within that county, unless the county board involved waives this requirement. Tax increment shall not be used to circumvent levy limitations applicable to the City. Tax increment derived from the TIF District must be used solely to finance the cost of housing projects (including administrative expenses and public improvement costs) as defined in Section 469.174, Subdivision 11 of the TIF Act and subject to the requirements set forth in Section 469.1761 of the TI F Act. Tax increment shall not be used to finance the acquisition, construction, renovation, operation, or maintenance of a building to be used primarily and regularly for conducting the business of a municipality, county, school district, or any other local unit of government or the State or federal government. Further, tax increment may not be used to finance: a commons area used as a public park; facilities used for social or recreational purposes (whether public or private); or publicly-owned facilities used for conference purposes; provided that tax increment may be used for a privately owned conference facility, and for parking structures whether public or privately owned and whether or not they are ancillary to one of the otherwise prohibited uses described above. If there exists any type of agreement or arrangement providing for the developer, or other beneficiary of assistance, to repay all or a portion of the assistance that was paid or financed with tax increments, such payments shall be subject to all of the restrictions imposed on the use of tax increments. Assistance includes sale of property at less than the cost of acquisition or fair market value, grants, ground or other leases at less then fair market rent, interest rate subsidies, utility service connections, roads, or other similar assistance that would otherwise be paid for by the developer or beneficiary. Section R Excess Tax Increment Beginning with the sixth year after certification of the TIF District, any year in which the tax increments from the TIF District exceed the amount necessary to pay the estimated public costs authorized by the TIF Plan, the City shall use the excess tax increments to: (1) prepay any outstanding tax increment bonds; (2) discharge the pledge of tax increments thereof; (3) pay amounts into an escrow account dedicated to the payment of the tax increment bonds; or (4) return excess tax increments to the County Auditor for redistribution to the City, County and School District. The County Auditor must report to the Commissioner of Education the amount of any excess tax increment redistributed to the School District within 30 days of such redistribution. Section S Tax Increment Pooling and the Five-Year Rule As permitted under Minnesota Statutes section 469.1763, subd. 2(b) and subd. 3(a)(5), any expenditures of increment from the TIF District to pay the cost of a "housing project" as defined in Minnesota Statutes section 469.174, subd. 11 will be treated as an expenditure within the Baker Tilly Municipal Advisors, LLC Page 8 City of Elk River, Minnesota district for the purposes of the "pooling rules" and the "five-year rule". The City anticipates that tax increments will be spent outside the TIF District (including allowable administrative expenses), and such expenditures are expressly authorized in this TIF Plan. The City does not anticipate that allowable pooling expenditures will be made outside of the TIF District, but such expenditures are expressly authorized in this TIF Plan. Section T Limitation on Administrative Expenses Administrative expenses are defined as all costs of the City other than: (1) amounts paid for the purchase of land; (2) amounts paid for materials and services, including architectural and engineering services directly connected with the proposed development within the TIF District; (3) relocation benefits paid to, or services provided for, persons or businesses residing or located within the TIF District; or (4) amounts used to pay interest on, fund a reserve for, or sell at a discount, tax increment bonds. Administrative expenses include amounts paid for services provided by bond and other legal counsel, fiscal consultants, planning or economic development consultants, and actual costs incurred by the County in administering the TIF District. Tax increment may be used to pay administrative expenses of the TIF District up to the lesser of (a) 10% of the total tax increment expenditures authorized by the TIF Plan or (b) 10% of the total tax increments received by the TIF District. Section U Limitation on Property Not Subject to Improvements - Four Year Rule If after four years from certification of the TIF District no demolition, rehabilitation, renovation, or qualified improvement of an adjacent street has commenced on a parcel located within the TIF District, then that parcel shall be excluded from the TIF District and the original net tax capacity shall be adjusted accordingly. Qualified improvements of a street are limited to construction or opening of a new street, relocation of a street, or substantial reconstruction or rebuilding of an existing street. The City must submit to the County Auditor, by February 1 of the fifth year, evidence that the required activity has taken place for each parcel in the TIF District. If a parcel is excluded from the TIF District and the City or owner of the parcel subsequently commences any of the above activities, the City shall certify to the County Auditor that such activity has commenced and the parcel shall once again be included in the TIF District. The County Auditor shall certify the net tax capacity of the parcel, as most recently certified by the Commissioner of Revenue, and add such amount to the original net tax capacity of the TIF District. Section V Estimated Impact on Other Taxing Jurisdictions Exhibit IV shows the estimated impact on other taxing jurisdictions if the maximum projected retained captured net tax capacity of the TIF District was hypothetically available to the other taxing jurisdictions. The City believes that there will be no adverse impact on other taxing jurisdictions during the life of the TIF District, since the proposed development would not have Baker Tilly Municipal Advisors, LLC Page 9 City of Elk River, Minnesota occurred without the establishment of the TIF District and the provision of public assistance. A positive impact on other taxing jurisdictions will occur when the TIF District is decertified and the development therein becomes part of the general tax base. The fiscal and economic implications of the proposed tax increment financing district, as pursuant to Minnesota Statutes section 469.175, subd. 2, are listed below. 1. The total amount of tax increment that will be generated over the life of the TIF district is estimated to be $1,593,798. 2. To the extent the project in the TIF District generates any public cost impacts on City- provided services such as police and fire protection, public infrastructure, and the impact of any general obligation tax increment bonds attributable to the TIF District upon the ability to issue other debt for general fund purposes, such costs will be levied upon the taxable net tax capacity of the City, excluding that portion captured by the TIF District. The City anticipates financing the project through the issuance of a tax increment financing note supported by future tax increments. The City also reserves the right to use internal financing or bonding, as necessary, to finance a portion of the project costs attributable to the TIF District. Tax increment project revenues from the TIF District and project will repay any issued obligations. 3. The amount of tax increment over the life of the TIF District that would be attributable to school district levies, assuming the School District's share of the total local tax rate for all taxing jurisdictions remained the same, is estimated to be $406,327. 4. The amount of tax increment over the life of the TIF District that would be attributable to county levies, assuming the County's share of the total local tax rate for all taxing jurisdictions remained the same is estimated to be $587,062. 5. No additional information has been requested by the County or School District that would enable it to determine additional costs that will accrue to it due to the development proposed for the TIF District. Section W Prior Planned Improvements The City shall accompany its request for certification to the County Auditor (or notice of district enlargement), with a listing of all properties within the TIF District for which building permits have been issued during the 18 months immediately preceding approval of the TIF Plan. The County Auditor shall increase the original net tax capacity of the TIF District by the net tax capacity of each improvement for which a building permit was issued. There have been no building permits issued in the last 18 months in conjunction with any of the properties within the TIF District. Section X Development Agreements If within a project containing a housing district, more than 10% of the acreage of the property to be acquired by the City is purchased with tax increment bonds proceeds (to which tax increment from the property is pledged), then prior to such acquisition, the City must enter into an agreement for the development of the property. Such agreement must provide recourse for the City should the development not be completed. Baker Tilly Municipal Advisors, LLC Page 10 City of Elk River, Minnesota The City anticipates entering into an agreement for development. Section Y Assessment Agreements The City may, upon entering into a development agreement, also enter into an assessment agreement with any person, which establishes a minimum market value of the land and improvements for each year during the life of the TIF District. The assessment agreement shall be presented to the County or City Assessor who shall review the plans and specifications for the improvements to be constructed, review the market value previously assigned to the land and so long as the minimum market value contained in the assessment agreement appears to be an accurate estimate, shall certify the assessment agreement as reasonable. The assessment agreement shall be filed for record in the office of the County Recorder and/or Registrar of Titles of each county where the property is located. Any modification or premature termination of this agreement must first be approved by the City, County and School District. The City does not anticipate entering into an assessment agreement with the developer. Section Z Modifications of the Tax Increment Financing Plan Any reduction or enlargement in the geographic area of the Project Area or the TIF District; increase in the amount of bonded indebtedness to be incurred; increase in the amount of capitalized interest; increase in that portion of the captured net tax capacity to be retained by the City; increase in the total estimated capital and administrative costs; or designation of additional property to be acquired by the City shall be approved only after satisfying all the necessary requirements for approval of the original TIF Plan. This paragraph does not apply if: (1) the only modification is elimination of parcels from the TIF District; and (2) the current net tax capacity of the parcels eliminated equals or exceeds the net tax capacity of those parcels in the TIF District's original net tax capacity, or the City agrees that the TIF District's original net tax capacity will be reduced by no more than the current net tax capacity of the parcels eliminated. The City must notify the County Auditor of any modification that reduces or enlarges the geographic area of the TIF District. The geographic area of the TIF District may be reduced but not enlarged after five years following the date of certification. Section AA Administration of the Tax Increment Financing Plan Upon adoption of the TIF Plan, the City shall submit a copy of such plan to the Minnesota Department of Revenue and the Office of the State Auditor. The City shall also request that the County Auditor certify the original net tax capacity and net tax capacity rate of the TIF District. To assist the County Auditor in this process, the City shall submit copies of the TIF Plan, the resolution establishing the TIF District and adopting the TIF Plan, and a listing of any prior planned improvements. The City shall also send the County or City Assessor any assessment agreement establishing the minimum market value of land and improvements in the TIF District and shall request that the County or City Assessor review and certify this assessment agreement as reasonable. The County shall distribute to the City the amount of tax increment as it becomes available. The amount of tax increment in any year represents the applicable property taxes generated by the Baker Tilly Municipal Advisors, LLC Page 11 City of Elk River, Minnesota retained captured net tax capacity of the TIF District. The amount of tax increment may change due to development anticipated by the TIF Plan, other development, inflation of property values, or changes in property classification rates or formulas. In administering and implementing this TIF Plan, the following actions should occur on an annual basis: (1) prior to July 1, the City shall notify the County Assessor of any new development that has occurred in the TIF District during the past year to ensure that the new value will be recorded in a timely manner. (2) if the County Auditor receives the request for certification of a new TIF District, or for modification of an existing TIF District, before July 1, the request shall be recognized in determining local tax rates for the current and subsequent levy years. Requests received on or after July 1 shall be used to determine local tax rates in subsequent years. (3) each year the County Auditor shall certify the amount of the original net tax capacity of the TIF District. The amount certified shall reflect any changes that occur as a result of the following: (a) the value of property that changes from tax-exempt to taxable shall be added to the original net tax capacity of the TIF District. The reverse shall also apply; (b) the original net tax capacity may be modified by any approved enlargement or reduction of the TIF District; (c) if the TIF District is classified as an economic development district, then the original net tax capacity shall be increased by the amount of the annual adjustment factor; and (d) if laws governing the classification of real property cause changes to the percentage of estimated market value to be applied for property tax purposes, then the resulting increase or decrease in net tax capacity shall be applied proportionately to the original net tax capacity and the retained captured net tax capacity of the TIF District. The County Auditor shall notify the City of all changes made to the original net tax capacity of the TIF District. Section AB Filing TIF Plan, Financial Reporting and Disclosure Requirements The City will comply with all reporting requirements for the TIF District under Minnesota Statutes section 469.175, subds. 5 and 6. Baker Tilly Municipal Advisors, LLC Page 12 Exhibit 1 MAP OF PROPOSED TAX INCREMENT FINANCING (HOUSING) DISTRICT NO. 28 a c on Sherburne County, M N ■rhe ya.+R� rj sw cwwwa r11.1-33-1 75-f t r � 1�rrdw m1*m AWluft10 A raot ccomsm 010m ax car irl�f T�LyYMieof �r11 Oft fir,�R/�r�rYwiF�Y wrFfM�r���i���i�+M�arl��f'Cs�i!���'�i■��LL sa.�.wwtl.rwir+rta�r� l `rr. err W&r MEMO rte«rMWW..terW�AN MN gill h I W K WSP=L 1re�1M.++�uyrJtrFo ss �. Baker Tilly Municipal Advisors, LLC Page 13 Exhibit 11 Assumptions Report City of Elk River,Minnesota Tax Increment Financing (Housing) District No.28 Jackson Hills Phase 2 Housing Draft TIF Plan Exhibits: Based on 44 Units Valued at$6.3M Type of Tax Increment Financing District Housing Maximum Duration of TIF District 25 years from 1st increment Assume 1st Increment is 2024 Projected Certification Request Date 06/30/22 Decertification Date 12/31/39 (16 Years of Increment) 2022/2023 Base Estimated Market Value" 233,700 Parcel I D: 75-134-2305 .Values provided by County Original Net Tax Capacity 2,921 Assessment/Collection Year 2022/2023 2023/2024 2024/2025 2025/2026 Base Estimated Market Value $233,700 $233,700 $233,700 $233,700 Estimated Increase in Value-New Construction 0 3,546,300 6,129,300 6,192,930 Total Estimated Market Value 233,700 3,780,000 6,363,000 6,426,630 Total Net Tax Capacity $2,921 $47,250 $79,538 $80,333 Payable 2021 City of Elk River 44.556% Sherburne County 45.835% ISD 728 31.717% Other- 2.328% Local Tax Capacity Rate 124.436% Estimated Frozen Tax Capacity Rate 124.436% Fiscal Disparities Contribution From TIF District NA Administrative Retainage Percent(maximum = 10%) 10.00% Pooling Percent 0.00% Bonds Projected PayGO Note Bonds Dated TBD Loan Dated 08/01/22 Bond Issue @ 0.00%(NIC) TBD Loan Rate 4.00% Eligible Project Costs TBD Loan Amount $850,000 Present Value Date&Rate 08/01/22 4.00% PVAmount $968,279 Notes No adjustments made to future class rates or tax rates Includes 1%annual market value inflator to allow for future growth Total taxable value based on$143,182/unit for new construction Baker Tilly Municipal Advisors, LLC Page 14 Exhibit 111 Projected Tax Increment Report City of Elk River,Minnesota Tax Increment Financing(Housing)District No.28 Jackson Hills Phase 2 Housing Draft TIF Plan Exhibits:Based on 44 Units Valued at$6.3M Less: Retained Times: Less: Less: P.V. Estimated Annual Total Total Original Captured Tax Annual State Aud. Subtotal Admin. Annual Annual Total Taxes Period Market Net Tax Net Tax Net Tax Capacity Gross Tax Deduction Net Tax Retainage Net Net Rev.To Property Ending Value(1) Capacity(2) Capacity(3) Capacity Rate(4) Increment 0.360% Increment 10.00% Revenue 08/01/22 and SD MVR 1 2 3 4 6 7 8 9 10 11 12 4.00% 12/31/22 233,700 2,921 2,921 0 124.436% 0 0 0 0 0 0 0 12/31/23 233,700 2,921 2,921 0 124.436% 0 0 0 0 0 0 4,350 12/31/24 3,780,000 47,250 2,921 44,329 124.436% 55,161 199 54,962 5,496 49,466 44,993 70,362 12/31/25 6,363,000 79,538 2,921 76,616 124.436% 95,338 343 94,995 9,500 85,495 74,773 118,443 12/31/26 6,426,630 80,333 2,921 77,412 124.436% 96,328 347 95,981 9,598 86,383 72,644 119,627 12/31/27 6,490,896 81,136 2,921 78,215 124.436% 97,328 350 96,978 9,698 87,280 70,575 120,823 12/31/28 6,555,805 81,948 2,921 79,026 124.436% 98,337 354 97,983 9,798 88,185 68,564 122,032 12/31/29 6,621,363 82,767 2,921 79,846 124.436% 99,357 358 98,999 9,900 89,099 66,610 123,252 12/31/30 6,687,577 83,595 2,921 80,673 124.436% 100,387 361 100,026 10,003 90,023 64,713 124,485 12/31/31 6,754,453 84,431 2,921 81,509 124.436% 101,427 365 101,062 10,106 90,956 62,869 125,729 12/31/32 6,821,997 85,275 2,921 82,354 124.436% 102,478 369 102,109 10,211 91,898 61,077 126,987 12/31/33 6,890,217 86,128 2,921 83,206 124.436% 103,539 373 103,166 10,317 92,849 59,335 128,257 12/31/34 6,959,119 86,989 2,921 84,068 124.436% 104,611 377 104,234 10,423 93,811 57,644 129,539 12/31/35 7,028,711 87,859 2,921 84,938 124.436% 105,693 380 105,313 10,531 94,782 56,001 130,835 12/31/36 7,098,998 88,737 2,921 85,816 124.436% 106,786 384 106,402 10,640 95,762 54,404 132,143 12/31/37 7,169,988 89,625 2,921 86,704 124.436% 107,890 388 107,502 10,750 96,752 52,852 133,464 12/31/38 7,241,688 90,521 2,921 87,600 124.436% 109,006 392 108,614 10,861 97,753 51,345 134,799 12/31/39 7,314,104 91,426 2,921 88,505 124.436% 110,132 396 109,736 10,974 98,762 49,880 136,147 $1,593,798 $5,736 $1,588,062 $158,8061 $1,429,256 $968,279 $1,981,273 *election to delay receipt of first increment until 2026(up to 4 years from approval date) (1) Total estimated market value based on information provided by County Assessor($143,182/unit) very preliminary and subject to further review.includes 1%annual market value inflator (2) Total net tax capacity based on residential rental market rate class rate of 1.25% (3)Original net tax capacity based on existing land&building value (4) Total local combined tax rate available for taxes payable 2021 rates Baker Tilly Municipal Advisors, LLC Page 15 Exhibit IV Estimated Impact on Other Taxing Jurisdictions Report City of Elk River,Minnesota Tax Increment Financing (Housing) District No.28 Jackson Hills Phase 2 Housing Draft TIF Plan Exhibits: Based on 44 Units Valued at$6.3M Without Project or TIF District With Project and TIF District Projected Hypothetical 2020/2021 2020/2021 Retained New Hypothetical Hypothetical Tax Generated Taxable 2020/2021 Taxable Captured Taxable Adjusted Decrease In by Retained Taxing Net Tax Local Net Tax Net Tax Net Tax Local Local Captured Jurisdiction Capacity(1) Tax Rate Capacity(1) + Capacity = Capacity Tax Rate(*) Tax Rate(*) N.T.C. (*) City of Elk River 29,409,713 44.556% 29,409,713 $88,505 29,498,218 44.422% 0.134% 39,316 Sherburne County 114,209,977 45.835% 114,209,977 88,505 114,298,482 45.800% 0.035% 40,535 ISD 728 44,486,959 31.717% 44,486,959 88,505 44,575,464 31.654% 0.063% 28,015 Other(2) --- 2.328% --- 88,505 --- 2.328% --- --- Totals 124.436% 124.204% 0.232% * Statement 1: If the projected Retained Captured Net Tax Capacity of the TIF District was hypothetically available to each of the taxing jurisdictions above, the result would be a lower local tax rate(see Hypothetical Adjusted Tax Rate above) which would produce the same amount of taxes for each taxing jurisdiction. In such a case, the total local tax rate would decrease by 0.232%(see Hypothetical Decrease in Local Tax Rate above). The hypothetical tax that the Retained Captured Net Tax Capacity of the TIF District would generate is also shown above. Statement 2: Since the projected Retained Captured Net Tax Capacity of the TIF District is not available to the taxing jurisdictions, then there is no impact on taxes levied or local tax rates. (1) Taxable net tax capacity=total net tax capacity-captured TIF-fiscal disparity contribution, if applicable. (2) The impact on these taxing jurisdictions has not been calculated. They represent 1.87%of the total tax rate. Baker Tilly Municipal Advisors, LLC Page 16 Exhibit IV Baker Tilly Municipal Advisors, LLC Page 17