7.1. HRSR 01-03-2022 City of
Elk �-- Request for Action
River
To Item Number
Housing and Redevelopment Authority 7.1
Agenda Section Meeting Date Prepared by
General Business January 3, 2022 Brent O'Neil, Economic Development Director
Item Description Reviewed by
TIF Application Jackson Hills Second Edition Cal Portner, City Administrator
Reviewed by
Action Requested
Review application and analysis and recommend to the City Council, by motion,that it approve the
creation of Tax Increment District No. 28.
Background/Discussion
The city received an application for Tax Increment Finance (TIF) from Briggs Companies to complete a
multifamily housing project known as Jackson Hills II at Jackson Avenue and Sixth Street. The project is
similar in size and design to the Jackson Hills apartment project which recently opened and received approval
of TIF in 2019.
Key parameters of the project and summary of the TIF request are stated below:
■ 44-unit apartment building with a mix of studio, 1-,2-, and 3-bedroom units.
■ Twenty percent of units are proposed as income restricted,primarily studio units.
■ 88 total parking spaces, one-half indoors and one-half surface parking.
■ Project budget of$8.59 million - $6 million in financing, $2.59 million from equity sources.
■ Current taxes are at$4,400. Developer projects taxes after completion at$88,000. Based on
preliminary taxable value estimates from the county,actual taxes may exceed $110,000.
■ TIF request: 15 years at 90%increment capture during that period.
■ Overall site excavation and grading is in excess of typical costs and is due to extraordinary mitigation
for unbuildable soils.
Baker Tilly has been engaged to provide a review and analysis of the request. The attached memo summarizes
Baker Tilly's review and contains its evaluation of cost and revenue assumptions,qualifications as a housing
TIF district, and financial need. The analysis includes TIF participation in the project at$850,000 (principal
value). The analysis indicates the project would not move forward but for the use of TIF due to the
extraordinary costs related to site development and soils correction costs.
The Joint Finance Committee has reviewed the project and has made an affirmative recommendation for the
use of TIF on this project. The application has also been reviewed by the Planning Commission for
conformance to the Comprehensive Plan. The HRA is asked to review the request and make a final
recommendation to the city council for consideration.
The Elk River Vision
A Y�elcoming community nvitb revolutionary and spirited resourcefulness, exceptional p D W E H E D D Y
service, and community engagement that encourages and inspires prosperity ,g /` UR
Financial Impact
The project is requesting TIF at the maximum allowed by city policy for a housing district. The developer
would receive 90% of the tax increment generated from the project during the entirety of the TIF district.
Mission/Policy/Goal
The request meets the city's TIF policy criteria including public purpose criteria and overall policy statements.
Attachments
■ Submitted TIF Application and Support Materials
■ Memorandum from Baker Tilly
■ TIF District No. 28 Program and Plan
■ Draft Minutes from November 30, 2021,Joint Finance Committee
N:\Departments\Community Development\Economic Development\HRA\Administrative\Agenda\2022\01-03-2022\7.1 sr TIF District No.28
Jackson Hills.docx
FTia
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Tax Increment Financing Policy
Purpose
The purpose of this policy is to ensure development receiving Tax Increment Financing
(TIF) is consistent with the long-term city Comprehensive Plan, Strategic Plan, Mississippi
Connections Plan and/or most recent Housing Study. This is a guide for processing and review
of TIF applications. The City of Elk River shall utilize TIF to encourage desirable
development or redevelopment that would not otherwise occur but for TIF.
The city is empowered to utilize TIF by the Minnesota Tax Increment Financing Act, as
amended in Minnesota Statutes 469-174 through 469-1794. The city provides the minimum
amount of TIF at the shortest term required for a project to proceed. The city reserves the
right to approve or reject projects on a case-by-case basis, taking into consideration
established policies, project criteria, and demand on city services in relation to the potential
benefits from the project. Projects meeting policy criteria are not guaranteed the award of
TIF. Approval or denial of a certain project is not a precedent for approval or denial of
another project.
The City Council and Economic Development Authority and the Housing and
Redevelopment Authority can deviate from this policy for projects that supersede the
objectives identified herein.
Authority
Minnesota Statutes 469-174 through 469-1794 govern the use of TIF and exceed any issues
that conflict with this policy.
Public Purpose
The City of Elk River will consider TIF for projects that achieve one or more of the
following:
1. Demonstrate long-term benefits to the community.
2. Retain local jobs and/or increase the number and diversity of jobs that offer stable
employment and/or attractive wages and benefits through:
Diversification of the local economy
Significant addition of permanent, high-wage, full-time jobs
Addition of jobs attractive to those unemployed or underemployed
3. Significantly increases the city’s commercial and industrial tax base.
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4. Demonstrates the ability to encourage unsubsidized private development through
“spin off” development.
5. Facilitates the development process and achieves development on sites that would
not develop “but for” the use of TIF.
6. Removes blight and/or encourages redevelopment of commercial and industrial
areas resulting in high quality redevelopment and private reinvestment.
7. Offsets redevelopment costs (i.e. contaminated site cleanup) over and above the
costs normally incurred in development.
8. Aids the implementation of the Mississippi Connections Plan.
Policy Statements
1. The primary intent of TIF is direct funding for public improvements and secondarily
for developer assistance.
2. The use of TIF shall be in accordance with state law. The more restrictive language
will apply when a conflict exists between this policy and state law.
3. Projects must be consistent with the Comprehensive Plan and/or the Mississippi
Connections Plan.
4. Projects must be consistent with the Strategic Plan for Economic Development
and/or the most recent Housing Study.
5. Preferred projects promote the completion of major public improvement projects
within the city such as the installation of trunk sewer and water lines and major
transportation projects.
6. The level of assistance provided will be determined on a case-by-case basis as
referenced in Public Purpose.
Based on the extent to which the project achieves the policy statements (1-6 above), the city
will consider TIF for projects in the following categories:
Manufacturing
Major office warehouse/production facilities
Research and development
Commercial projects encouraging substantial redevelopment of substandard
properties
Housing needs identified in the most recent city housing study
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1. Assistance for TIF is required to meet the uses identified by statute including, but not
limited to the following:
Public improvements
Land acquisition and land write down
Loans
Site preparation and improvement
Demolition
Legal, administration, and engineering
2. The preferred method of TIF is pay-as-you-go for eligible costs as reimbursement,
upfront financing maybe considered on a case-by-case basis.
3. A maximum of ten percent (10%) of any tax increment received from the district
shall be retained by the city to reimburse administrative costs.
4. All TIF assistance must be accompanied by a signed development agreement
including a minimum assessment value. The developer must provide additional
financing guarantees to ensure completion of the project, including, but not limited
to: letters of credit, personal guarantees, corporate guarantees, etc.
5. TIF District’s shall be limited to the minimum term necessary to meet the project
needs. Only projects exceeding the objectives identified in this policy will be
considered to exceed the following general thresholds:
Redevelopment District 15 Years (Max is 26)
Housing District 15 Years (Max is 26)
Soils Condition District 15 Years (Max is 21)
Renewal and Renovation District 10 Years (Max is 16)
Economic Development District 8 Years (Max is 9)
6. Policy Considerations
Each project is required to meet the “but-for” test to determine the need for and
level of assistance. This test and the amount of tax increment generated
determines the district’s term. It is difficult to facilitate a redevelopment, housing
or soils condition district for less than the maximum term as the extraordinary
costs involved are usually significant.
The term of the district could coincide with the amount of tax increment the city
has to spend on its priorities within a project area.
Of all the TIF districts, the Economic Development District is most often the
one limited to a lesser term. Economic Development Districts are really
“incentive” districts where it is not so much the extraordinary costs as it is an
“incentive” to get a business to locate in a community. In the other districts, the
costs are easily identifiable and usually significant such as demolition, relocation,
environmental remediation, and the cost differential between market rate and
income/rent restricted housing.
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7. Developers receiving TIF assistance shall provide a minimum of ten percent (10%)
cash equity investment in the project. TIF will not be used to supplant cash equity.
8. TIF will not be used in circumstances where land and/or property price is in excess
of fair market value. A third-party appraiser agreed upon by the city and developer
will determine the fair market value of the land.
9. The developer shall demonstrate a market demand for a proposed project. TIF shall
not be used to support purely speculative projects.
10. The developer shall adequately demonstrate, to the city’s sole satisfaction, an ability
to complete the proposed project based on past development experience, general
reputation, and credit history, among other factors, including the size and scope of
the proposed project.
11. For the purposes of underwriting the proposal, the developer shall provide any
requested market, financial, environmental, or other data requested by the city or its
consultants.
12. The city of Elk River shall only use TIF to encourage economic growth and
development within the city limits.
Application Process
1. Applicant submits a complete application and a $10,000 application deposit by the
first Monday of the month. The application deposit will be used toward the cost of
services provided in the evaluation of financial feasibility, establishment or
modification of the district, and preparation of legal documents and agreements. An
additional deposit of $10,000 shall be required for projects requiring statutory
redevelopment substandard tests. The applicant shall reimburse the city for
professional services in excess of the initial deposit. Deposit portions not utilized
shall be refunded.
2. City staff reviews the application for completeness and submits the application to the
city’s financial consultant for review and preparation of a financial analysis.
3. The Joint Finance Committee shall review the proposal’s financial strength and make
a recommendation to the appropriate commission with findings of fact.
4. The appropriate authority reviews the proposal and the recommendation to
determine conformance with this policy. The authority makes a recommendation to
the City Council.
5. After meeting the statutory requirements for establishing the Tax Increment District,
the City Council holds a Public Hearing and takes action on the proposal
(Approximately 45-60 days).
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APPLICATION FOR TAX INCREMENT FINANCING
A. APPLICANT INFORMATION
Name of Entity The Briggs Companies
Address PO Box 719 Big Lake, MN 55309
Primary Contact Patrick Briggs
Address PO Box 719 Big Lake, MN 55309
Phone 612-919-1961 Fax 763-633-1430 Email
pat@thebriggscompanies.com
Brief description of the entity business, including history, principal product or service:
Build, develop and manage apartment buildings
Brief description of the proposed project:
Phase 2 of Jackson Hills Residential Suites, 44 units, 80% market rate, 20% income restricted
Attorney Name n/a
Address
Phone Fax Email
Accountant Name Don Myers
Address
Phone 763-370-2038 Fax Email
Contractor Name The Briggs Companies
Address
Phone 763-633-1080 Fax 763-633-1430 Email
Engineer TBD
Address
Phone Fax Email
Architect Name Douglas A. Moe Architects Incorporated
Address
Phone 763-441-5469 Fax Email
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B. PROJECT INFORMATION
1. The project will be:
Redevelopment District
X Housing District
X Soils Condition District
Renewal and Renovation District
Economic Development District
2. The project will be: Owner Occupied X Leased Space
3. Project Address 726 6th Street Elk River, MN 55330
Legal Description & Parcel Identification Number(s) 75-134-2305
PARCEL D-N. THAT PT OF THE FOLLOWING DESC PARCEL D LYING N OF WLY EXTENSION OF THE CTR LINE OF 6TH ST (FORMERLY PLATTED AS
8TH ST) AS DEDICATED IN THE PLAT OF BURRELL'S ADDTION SUBJ TO EASEMENTS OF RECORD. PARCEL D:THAT PT OF SW 1-4 OF NW 1-4 DESC
AS COMM AT THE POINT OF INTERSECTION OF THE CTRLINE OF JACKSON AVE (FORMERLY KNOWN AS STATE TRUNK HIGHWAY NO.201 & "OLD
HIGHWAY NO.169") WITH THE S LINE OF SAID SW 1-4 OF NW 1-4;THENCE W ALONG SAID S LINE FOR 200.00 FT;THENCE N PARA WITH SAID
CTRLINE FOR 285.70 FT TO A POINT TO BE HERE- AFTER KNOW AS POINT "A" FOR THE PURP OF THIS DESC;THENCE E PARA WITH SAID S LINE
OF SW 1-4 OF NW 1-4 FOR 150.00 FT TO INTERSECT WITH THE W LINE OF R-O-W OF SAID JACKSON AVE BEING A LINE 50.00 FT,AS MEASEURED
AT RT ANGLES, W OF & PARA WITH SAID CTRLINE SAID POINT OF INTERSECTION ALSO BEING THE ACTURAL POB OF THE LAND TO BE HEREBY
DESC;THENCE RETURN W PARA WITH SAID S LINE OF SW 1-4 OF NW 1-4 FOR FOR 150 FT TO SAID POINT "A";THENCE N PARA WITH SAID
CTRLINE FOR 14.30 FT,MORE OR LESS, TO INTERSECT N LINE OF S 300 FT,AS MEAS AT RT ANGLES,OF SAID SW 1-4 OF NW 1-4;THENCE W ALONG
SAID N LINE OF S 300.00 FT FOR 200.01 FT,MORE OR LESS, TO INTERSECT A LINE 400.00 FT W OF,AS MEAS AT RT ANGLES TO SAID CTRLINE
OFJACKSON AVE;THENCE N PARA WITH SAID CTR- LINE FOR 1039.77 FT,MORE OR LESS,TO INTERSECT THE N LINE OF SAID SW 1-4 OF NW 1-
4;THENCE E ALONG SAID N LINE FOR 350.03 FT,MORE OF LESS, TO INTERSECT SAID W LINE OF THE R-O-W OF JACKSON AVE;THENCE S ALONG
SAID W LINE OF THE R-O-W FOR 1056.71 FT,MORE OR LESS, TO POB.
4. Site Plan and Preliminary Construction Plans Attached: X Yes No
5. Amount of Tax Increment Requested for:
Land Purchase $ 0
Public Improvement $ 0
Site Improvement 15 years @ 90%
6. Current Real Estate Taxes on Project Site: $ 4396
Estimated Real Estate Taxes upon Completion: Phase II $ 88,000
Phase III $
7. Construction Start Date: April 2022
Construction Completion Date: May 2023
If Phased Project: Year % Completed
Year % Completed
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C. PUBLIC PURPOSE
It is the policy of the City of Elk River that the use of Tax Increment Financing should result in a
benefit to the public. Please indicate how this project will serve a public purpose.
X Job Creation/Retention: 2
Number of existing jobs
Number of jobs created by project
Average hourly wage of jobs created/retained
New industrial development, which will result in additional private investment in the area.
X Enhancement or diversification of the city’s economic base.
X The project contributes to the fulfillment of the City’s Plan.
X Removal of blight or the rehabilitation of a high profile or priority site.
X Significantly increase the City’s tax base.
X Other: Unbuildable site based on soil conditions
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D. SOURCES & USES
SOURCES NAME AMOUNT
Bank Loan First Bank & Trust $6,000,000.00
Other Private Funds Owner $2,588,174.00
Owner Cash Equity $
Fed Grant/Loan $
State Grant/Loan $
EDA Micro Loan $
Tax Increment $
ID Bonds $
TOTAL
$8,588,174.00
USES
AMOUNT
Land Acquisition $400,000.00
Site Development $850,000.00
Construction $6,828,174.00
Machinery & Equipment $
Architectural & Engineering Fees $75,000.00
Legal Fees $10,000.00
Interest During Construction $175,000.00
Debt Service Reserve $0
Contingencies $250,000.00
TOTAL
$8,588,174.00
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E. ADDITIONAL DOCUMENTATION AND CHECKLIST
Applicants will also be required to provide the following documentation.
X A) Written business plan, including a description of the business,
ownership/management, date established, products and services, and future
plans
X B) Financial Statements for Past Two Years
Profit & Loss Statement
Balance Sheet
X C) Current Financial Statements
Profit & Loss Statement to Date
Balance Sheet to Date
X D) Two Year Financial Projections
X E) Personal Financial Statements of all Major Shareholders
Current Tax Return
F) Letter of Commitment from Applicant Pledging to Complete
During the Proposed Project Timeline
X G) Letter of Commitment from the Other Sources of Financing,
Stating Terms and Conditions of their Participation in
Project
X H) Application deposit of $10,000, with any unused portion to be refunded.
X I) Construction Plans and Itemized Project Construction Statement
X J) Attach the following documentation as Exhibits
Exhibit A – Entity Documents
Exhibit B – Description of Project
Exhibit C – List of Shareholders/Partners
Exhibit D – But-For Analysis
Exhibit E – List of Prospective Lessees
Exhibit F – Legal Description and PID Number(s)
Note: All Major shareholders will be required to sign personal guarantees if up front financing of the
project is required.
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The undersigned certifies that all information provided in this application is true and correct to the best of the
undersigned’s knowledge. The undersigned authorizes the City of Elk River to check credit references and verify
financial and other information. The undersigned also agrees to provide any additional information as may be requested
by the City after the filing of this application.
Applicant Name Patrick Briggs Date 10-1-21
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Tax Increment Financing
Policy History
Adopted by: On (date) Item #
City Council 12/4/2017
EDA 11/20/2017
HRA 11/6/2017
Apartment Loan Request Summary - PurchasePrequal Package Must Include:
Loan Request Summary Form
Pictures - Mounted
Financing Date:9/6/2021
Sworn Orig. Agent Name:Pat Briggs
Cashflow with TIFF 15 yr Principal:xxx 6th Street
Telephone #:Regestered Abstractors
Facsimile #:
COMPLETE THIS SECTION IN ITS ENTIRETY
NAME OF PROPERTY Briggs Companies
NAME OF BORROWER
SUBJECT PROPERTY ADDRESS
PROPERTY TYPE MULTIFAMILY Market Rate high density Housing TIFF Elk River, MN
AGE New Construction Income restricted 80/20 Housing
Jackson Hill Residential Suites
Monthly Rent Total Monthly Total Annual
Unit Type # of units Unit Size Per Unit Rent-1st year Rent-1st year
Studio 8 545 $1,000 $8,000 $96,000 1.83$
1 Bedroom 1A 12 745 $1,100 $13,200 $158,400 1.48$
1 Bedroom 1B 2 960 $1,175 $2,350 $28,200 1.22$
1 Bedroom ADA 1D (HC) 1 745 $1,100 $1,100 $13,200 1.48$
1 Bedroom 1C 4 856 $1,150 $4,600 $55,200 1.34$
1 Bedroom 1E 2 960 $1,200 $2,400 $28,800 1.25$
2 Bedrooms 1Bath 2A 9 1050 $1,400 $12,600 $151,200 1.33$
2 Bedrooms 1Bath 2B 4 1281 $1,600 $6,400 $76,800 1.25$
2 Bedrooms $0 $0 #DIV/0!
2 Bedrooms 1 3/4Bath $0 $0 #DIV/0!
2 Bedrooms 2B 1 3/4Bath $0 $0 #DIV/0!
3 Bedrooms 3A 2 1246 $1,600 $3,200 $38,400 1.28$
Garages 44 $50 $2,200 $26,400
Lockers $0 $0
Total 44 $56,050 $672,600
CONDITION OF PROPERTY New Construction
SURROUNDING PROPERTIES General Occupancy Residential
COMPLETE THIS SECTION IF PURCHASE
SALES PRICE Price per unit 214,704.35$ 8,588,174$ #REF!
REQUESTED 1ST T.D.150,000.00$ 6,000,000$ 70%
SECONDARY FINANCING -$ 0%
CASH DOWN PAYMENT 2,588,174$ 30%
TERMS 100%
CASH FLOW ANALYSIS
GROSS ANNUAL INCOME 672,600$
VACANCY 5%33,630$
EFFECTIVE GROSS INCOME 638,970$
EXPENSES 42%282,492$ 7,062.30$
NET OPERATING INCOME 356,478$
DEBT SERVICE
1ST T.D. @ 4.000%(380,043)$ 380,043$
2ND T.D. @ 0.0%-$ 31,670.21$
NET CASH FLOW (23,565)$
DEBT COVERAGE RATIO 1ST T.D.0.94
COMBINED DEBT COVERAGE RATIO W/2ND T.D.0.94
LOAN QUOTE
LENDER Lakewood Mortgage
LOAN AMOUNT 6,000,000$ FLOOR/CEILING
PROPERTY RATING: A, B, C, D B AMORT./TERM
LOAN PROGRAM: MO.ARM, NO-NEG ARM, 3/1, 5/1, 7/1, 10/1 TYPE OF PREPAYMENT
INDEX: 12MAT, COFI, CMT, LIBOR RECOURSE
CURRENT INDEX RATE EST. FUNDING
LOAN MARGIN
START RATE COMMENTS
FULLY INDEXED RATE
UNDERWRITING RATE
REVIEWED AND ACCEPTED FOR SUBMISSION OF FULL CREDIT PACKAGE.
Financing
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A B C D E
FINANCING PERFORMA
Jackson Hills 40 unit
Square Ft:24,394
Category:
Total Project Cost 8,588,174$
Equity Contributions 2,588,174$
Funding Requirement 6,000,000$
Rate Assumption 4.00%
Term Assumption ( in years)300
Annual Debt Service 380,043$
Monthly Debt Service 31,670$
Operating Income 638,970$
Operating Expense 282,492$
Income From Operation 356,478$
Debt Service Ratio 0.94 Without Tiff
Cash Available For ROI (23,565)$
ROI (cash on cash)-0.91%
Cap Rate 4.15%
Page 2
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A B C F G H I J K L M N O P Q R S T U V W X Y Z AA AB AC AD AE AF AG AH AI AJ
Item Furnished By
Sources Budgeted Uses Actual Uses POC POC POC
Advance at
closing Draw 1 Draw 2 Draw 3 Draw 4 Draw 5 Draw 6 Draw 7 Draw 8 Draw 9 Draw 10 Draw 11 Draw 12 Draw 13
Operating
Account Debit 1 (-)Credit 1 (+)Debit 2 (-)Credit 2 (+)Debit 3 (-)Credit 3 (+)Balance to Finish
Excavating/Grading Excavating -$ 760,000.00$ 19,000.00$
Concrete Work Kopp Concrete -$ 300,000.00$ 7,500.00$
Footings/Foundation Included # 2 -$
Floor/Steps/Sidewal
k Included # 2 -$
Curbing -$
Driveway Omann Bros -$ 60,000.00$ 1,500.00$
Stone Cultured 96,600.00$ 2,415.00$
Water/Sewer Included #1 -$
Landscaping Combined-see Bid 45,289.00$ 55,000.00$ 1,375.00$
Steel Doors TCH -$ 15,000.00$ 375.00$
Stake Building Bogart Pederson -$ 8,000.00$ 200.00$
Carpentry Labor -$ 350,000.00$ 8,750.00$
Gypcrete KMAC -$ 32,000.00$ 800.00$
Lumber/Trusses Hall 900,000.00$ 22,500.00$
Lumber Included # 15 -$ -$
Millwork ? Price -$ 153,829.00$ 3,845.73$
Cabinets Brenny -$ 90,000.00$ Cabinets only 2,250.00$
Counter Tops Tops Plus -$ 50,000.00$ 1,250.00$
Interior Trim Labor -$ 79,920.00$ 1,998.00$
Closet Shelving Commercial Closet
Systems 12,000.00$ 300.00$
Windows Matthew Hall -$ 50,000.00$ 1,250.00$
Hardware Wheeler Hardware -$ 65,000.00$ 1,625.00$
Roofing ABC Supply Co.76,840.00$ 80,682.00$ 2,017.05$
Trusses Included # 15 -$ -$
Marble Vanity Tops included #19 -$ inc line 28 -$
Taping/Hanging Otto Drywall -$ 325,000.00$ -21800 ####8,125.00$
Siding Mat/Labor Quad City -$ 225,000.00$ 5,625.00$
Fire Protection
Sprinkler Express -$ 150,000.00$ 3,750.00$
Fire Proofing Steel Evergreen Wall Systems -$ 33,800.00$ 845.00$
Acoustical Ceiling St. Cloud Acoustics -$ 15,000.00$ 375.00$
Insulation Evergreen Wall Systems -$ 120,000.00$ 3,000.00$
Plumbing -$ 700,000.00$ 17,500.00$
HVAC inc #33 #########-$
Electrical Wiring Bertram -$ 385,000.00$ 9,625.00$
Screen Enclosures Screen Pro 75,000.00$ 1,875.00$
Railings Als Ornimental -$ 7,500.00$ 187.50$
Schlage multi reader Safe Security 4,558.00$ 113.95$
TV/Data Phone Safe Guard Security 19,150.00$ 478.75$
Low Volt Fire alarm Safe Guard Security -$ 16,691.16$ 417.28$
Painting/Decorating 10 PT Painting 75,000.00$ 110,000.00$ coloful concepts 2 coats 2,750.00$
Glass/Mirrors/Door
s East Side Glass 14,863.00$ 35,000.00$ 875.00$
Garage Doors Heartland Doors, Inc.-$ 12,000.00$ 300.00$
Flooring Multiple Vendors #########214,123.00$ 5,353.08$
Elevator SchindlerElevator -$ 97,000.00$ 2,425.00$
Bath Accessories Jackson Hills Luxury
Suites -$ 10,000.00$ 250.00$
Mail Boxes Bucaro Distrubutors 6,542.00$ 5,500.00$ 137.50$
Appliances Appliance Smart -$ 225,000.00$ 5,625.00$
Cultured
marbletops&window
sills Brenny -$ 7,000.00$ 175.00$
Window Blids Light F/X -$ 12,000.00$ 300.00$
Video/Security/Vide
o Protections
Services 15,746.00$ 10,000.00$ 250.00$
Interior Décor Ashley St. Cloud 3,000.00$ 7,500.00$ 187.50$
Steel Fabrication Ben's Structural Fabrication 1 175,000.00$ ########4,375.00$
General Contracting $ - -$ 450,000.00$ 11,250.00$
Steel Erecting A.M.E. 30,000.00$ 750.00$
Total Cost ##########6,634,853.16$ 165,871.33$
-$
General Conditions -$
Construction
Cleanup Dem-Con -$ 15,000.00$ 375.00$
Final Clean up -$ 10,000.00$ 250.00$
Temp Electric &
Gas centerpoint -$ 6,800.00$ 170.00$
Const Material Testing ITT -$ 15,000.00$ 375.00$
Temp.Toilet Elite Sanitation -$ 2,900.00$ 72.50$
Temp.Heat Briggs Properties, Inc -$ 7,000.00$ 175.00$
Job Trailer Hilltop Trailer Sales 4,325.00$ 5,000.00$ 125.00$
Project Sign Jackson Hills Residential Suites -$ 6,191.00$ 154.78$
Rental Chads Repair 7,985.00$ 15,000.00$ 375.00$
Insurance TBD,LLC -$ 20,000.00$ 500.00$
Supervision/PM -$ -$ 125,000.00$ 3,125.00$ -$ -$
Total General
Conditions 12,310.00$ 227,891.00$ 5,697.28$
-$
Soft Cost -$ -$
Building Permit Fee -$ $15,000.00 375.00$
Plan Check Commercial $10,000.00 250.00$
State Surcharge valuation $1,500.00 37.50$
SAC $200,800.00 5,020.00$
TIFF City of Elk River $10,000.00 250.00$
Architect/Engineering $ 75,825.00 75,825.00$ $75,825.00 3,000.00$ ####5,000.00$ 1,895.63$
Appraisal -$ $5,000.00 125.00$
Water Connection Charge $3500x40 $140,000.00 3,500.00$
Wac 383x40 #########$15,320.00 383.00$
Environmental
Assessment Bogart Pederson -$ $1,500.00 37.50$
Legal 10,000.00$ $10,000.00 250.00$
Soil Boring/Testing 6,985.00$ $6,985.00 2,550.00$ 174.63$
Closing Cost -$ $65,000.00 1,625.00$
Interim Financing Jackson Hills Residential Suites,
LLC 54,896.00$ $175,000.00 4,375.00$
Misc Expenses Briggs Properties, Inc $120,000.00 #########$3,000.00 75.00$
Water Meter 17,000.00$ $4,000.00 100.00$
Electrical Connection Elk River Municipalities $15,000.00 375.00$
Storm Sewer
Inspection Stark Engineering -$ $1,500.00 37.50$
Developers Fee $103,448.28 -$ $300,000.00 7,500.00$
Land $400,000.00 -$ $400,000.00 10,000.00$
#########-$
Testing ITT -$ $20,000.00 500.00$
Contingency Multiple vendors #########$250,000.00 6,250.00$
Total #########$1,725,430.00 43,135.75$
-$ -$
-$ -$
-$ -$
-$ Contigency -$
Total Nut ########$8,588,174.16 185.70$ Per sqf 214,704.35$ 214,704.35$
Page 3
Cash Flow With TIFF
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A B C D E F G
REVISED 9/13/2021 Monthly Rent Total Monthly Total Annual
Unit Type # of units Unit Size Per Unit Rent-1st year Rent-1st year
Studio income restricted 8 519 $900 $7,200 $86,400 $1.73
1 Bedroom 1A 12 715 $1,100 $13,200 $158,400 $1.54
1 Bedroom 1B 2 924 $1,175 $2,350 $28,200 $1.27
1 Bedroom ADA 1D (HC) Income restricted 1 715 $1,000 $1,000 $12,000 $1.40
1 Bedroom 1C 4 820 $1,150 $4,600 $55,200 $1.40
1 Bedroom 1E 2 924 $1,250 $2,500 $30,000 $1.35
2 Bedrooms 1Bath 2A 9 915 $1,400 $12,600 $151,200 $1.53
2 Bedrooms 1Bath 2B 4 934 $1,600 $6,400 $76,800 $1.71
$0 $0 #DIV/0!
$0 $0 #DIV/0!
$0 $0 #DIV/0!
3 Bedrooms 2 1216 $1,600 $3,200 $38,400 $1.32
9x20 $0 $0
Garages 44 9x20 $50 $2,200 $26,400
Total 44 $55,250 $663,000
½ Year
Year 2023 2024 2025 2026 2027 2028
Gross Income
Potential Gross Rent $198,900 $663,000 $669,630 $676,326 $689,853 $689,853
Less: 5% Vacancy -$9,945 -$33,150 -$33,482 -$33,816 -$34,493 -$34,493
Less: Collection Loss $0 $0 $0 $0 $0 $0
Net Rent $188,955 $629,850 $636,149 $642,510 $655,360 $655,360
Other Income $0 $0 $0 $0 $0 $0
Effective Gross Income $188,955 $629,850 $636,149 $642,510 $655,360 $655,360
Annual Expenses
Administrative
Management Fee –6%$9,448 $44,090 $44,530 $44,976 $45,875 $45,875
On Site Manager & caretaker $5,500 $60,000 $61,800 $63,654 $65,564 $67,531
Legal/Accounting $4,000 $4,500 $4,635 $4,774 $4,917 $5,065
Advertising $5,500 $6,299 $6,361 $6,425 $6,554 $6,554
Misc Admin $3,000 $3,000 $3,090 $3,183 $3,278 $3,377
Operating
Electric $6,524 $9,225 $9,502 $9,787 $10,080 $10,383
Heat $7,650 $12,500 $12,875 $13,261 $13,659 $14,069
Insurance $8,900 $17,500 $18,025 $18,566 $19,123 $19,696
Sewer & Water $4,752 $10,825 $11,150 $11,484 $11,829 $12,184
Elevator $1,000 $2,500 $2,575 $2,652 $2,732 $2,814
Fire protection $500 $1,050 $1,082 $1,114 $1,147 $1,182
Garbage .$7,615 $7,843 $8,079 $8,321 $8,571
Maintenance
Snow Removal $5,000 $6,500 $6,695 $6,896 $7,103 $7,316
Repair & Maintenance $3,000 $9,560 $9,847 $10,142 $10,446 $10,760
Grounds Maintenance $5,200 $5,356 $5,517 $5,682 $5,853 $6,028
Taxes
Real Estate $4,500 $88,000 $88,880 $89,769 $90,666 $91,573
Less TIF -$79,200 -$79,200 -$79,200 -$79,200 -$79,200
Total Annual Expenses $74,474 $209,319 $215,207 $221,244 $227,948 $233,776
Expenses Per Unit $1,862 $5,233 $5,380 $5,531 $5,699 $5,844
Cash Flow Before Debt Service $114,481 $420,531 $420,942 $421,266 $427,413 $421,584
Replacement Reserves - 2% of rent $3,978 $13,260 $13,393 $13,527 $13,797 $13,797
Net Operating Income $110,503 $407,271 $407,549 $407,740 $413,616 $407,787
Debt Service
Source 1 ($6,000,000 @ 4%, 25 yrs)$148,523 $380,043 $380,043 $380,043 $380,043 $380,043
Source 2 $0 $0 $0 $0 $0 $0
Total Cash Flow -$38,020 $27,228 $27,507 $27,697 $33,573 $27,745
DCR 0.74 1.07 1.07 1.07 1.09 1.07
Cash on Cash (down = $1,800,000.00)-3.24%2.32%2.35%2.36%2.86%2.37%
The data and calculations presented herein, while not guaranteed, have been obtained from sources we believe to be reliable.
Income and Expense Growth Rate Assumptions
Rental Income 1.0%
Expenses 3.0%
Page 4
Complete site excavating for the Phased 2020 Jackson Hills Residential Suites
Phase 2 to include the following items:
- Mobilization
- Obtain and manage SWPPP
- Install perimeter erosion control and rock entrance
- Clear and Grub trees and brush
- Strip and salvage Black Dirt for respread
- Remove all unsuitable soils within Building and Parking lot per soil borings
- Import and place clean sand to replace unsuitable soils
- Subgrade site per plan
- Dig and Backfill footings
- Install drain tile around elevator pit and daylight into pond
- Install Sewer and Water per plan with dewatering
- Install Storm Sewer per plan (PVC pipe figured where storm crosses water)
- Install 4" Radon Rock after plumbing underground
- Import, Place and Tolerance Class 5 for pavement
- Final Grade all green spaces
- Infiltrometer Tests in Infiltration Pond
Phase 2 785,000.00$
- Wet tap included for water connection in street
- No concrete or asphalt replacement included for water and sewer connections
- No detour included if required by city for street closure
PLEASE NOTE:
- NO Bond fees, Permit fees, Staking, Surveying, or Testing included
- Dewatering for footing installation not included
- No surveying included for monitoring settlement from dewatering process
- No Temporary or Permanent stabilization included
- Price good for 1 year from date of proposal
- Estimated increase of 5-10% after 1 year
Proposal 4-17-20
Kraemer Trucking & Excavating Inc.
Jackson Residential Suites
Elk River, Minnesota
Memo for Review
To:
Members of the City Council of the City of Elk River
Members of the HRA of the City of Elk River
Brent O’Neil, City of Elk River
From: Mikaela Huot, Director
Date: January 3, 2022
Subject: Financial Needs Analysis for proposed Tax Increment Financing Housing
(TIF) District No. 28 (Jackson Hills Phase II Housing Project)
Executive Summary
The City of Elk River received an application from The Briggs Company for financial assistance through Tax
Increment Financing (TIF) to assist with financing the construction of a new 44-unit affordable housing
development referred to as Phase 2 of Jackson Hills Residential Suites. The project is proposed to include 20%
of the units as affordable to occupants with incomes no greater than 50% of the area median income. The
request is for 90% of the incremental revenues for the maximum term allowable by City policy of 15 years. The
current taxable value of the project is $233,700. The estimated taxable value of the project upon construction
completion is estimated to be approximately $6,300,000.
Included within the application are identified TIF-eligible expenditures in the range of $760,000-$850,000
related to site development and soils corrections work. The applicant has indicated in the request that the
project would be unable to proceed without City financial assistance due to inability of the project to support
those extraordinary costs. The project financing includes a provision and need for 15 years of tax increment
assistance as an additional source of revenue to repay the debt obligation. Based on current tax increment
projections, as further described in this memo in Table 2 on page 3, it is estimated to take approximately 15
years of increment collections to fulfil the request. The applicant would finance the total development costs of
$8.5 million (further described in Table 1 on page 2) upfront with debt and equity and would be reimbursed for a
portion of those costs on an annual basis using future tax increment revenues.
Background
The purpose of this memorandum is to provide a summary of Baker Tilly’s review of the development project
costs and operating pro forma as provided by the applicant (The Briggs Company) to assist the City with
making a determination 1) if the project as proposed would be unlikely to proceed “but-for” the requested Tax
Increment Financing (TIF) assistance, and 2) if assistance was necessary, to determine the appropriate amount
and terms, if any, of public assistance. Prior to establishing a tax increment financing district, there are findings
that need to be made by the City that include: 1) determination that the project qualifies as a TIF district and 2)
determination that the project as proposed would not proceed without public assistance (meeting the “but-for”
test). When reviewing requests for financial assistance it is important to understand how the level of financial
assistance would impact the ability of the project to proceed as proposed and maximize new value created on
the current project site.
Project Summary and Qualifications
The project is proposed to include the construction of 44 residential apartment buildings comprising of studio, 1,
2- and 3-bedroom units with separate garages. In order to qualify for inclusion within a housing TIF district, one
of the two following income qualifications need to be met by the residents:
• at least 20% of the units must be occupied by persons or families at 50% area median income or
• at least 40% of the units must be occupied by persons or families at 60% area median income.
The project as proposed would provide for at least 20% of the units being occupied and affordable to persons at
50% area median income. The applicant would need to annually certify the project qualifies for the duration of
the TIF district. This income requirement would allow for the establishment of a Tax Increment Financing
Housing District. Tax increment financing is a tool the City may consider using to support financial assistance
for the project, subject to meeting the but-for test and need for public financial participation.
Applicant Request for Assistance
Financial assistance through pay-as-you-go tax increment financing from the City of Elk River has been
requested to provide additional revenues to support the required level of debt and project cash flow to repay
annual debt service payments. The request is for 90% of incremental revenues for up to 15 years related to the
extraordinary development costs of the project site that include site development and soils corrections in an
estimated amount of $760,000-$850,000. The application includes an approximate $8.5 million project funded
through a combination of debt and equity. The applicant’s supporting financial information includes sources
and uses of funds with 70% as debt financing and 30% as private equity. Debt repayment would be supported
by annual cash flows of the project and would also require additional revenues through tax increment financing.
The applicant has provided a letter from its potential lender indicating that 15 years of TIF revenues would be
needed to support the project financing. Typical extraordinary development costs that cannot be supported
solely by the project alone could justify the need for public financial assistance and allow the project to proceed
as proposed to provide appropriate upfront funding and meet the minimum debt coverage requirements. The
applicant has indicated the receipt of City financial assistance is necessary for the project to proceed.
Table 1: Sources and Uses of Funds
Sources Amount Uses Amount
First Mortgage $6,000,000 70% Acquisition (2) $400,000 5%
Equity $2,588,174 30% Site Development $850,000 10%
Deferred Developer Fee Construction $6,828,174 79%
TIF (1) Arch & Eng. Fees $75,000 1%
Legal Fee $10,000 .12%
Construction Interest $175,000 2%
Contingency $250,000 3%
Total $8,588,174 Total $8,588,174
(1) Tax increment financing has been requested as pay-as-you-go and would not be an upfront funding
source
(2) Acquisition price includes entire 6.64-acre site. Only portion of property to include the proposed project
would be included within the TIF District
Project Financing
There are generally two ways in which assistance can be provided for most projects, either upfront or on a pay-
as-you-go basis. With upfront financing, the City would finance a portion of the applicant’s initial project costs
through the issuance of bonds or as an internal loan. Future tax increment would be collected by the City and
used to pay debt service on the bonds or repayment of the internal loan. With pay-as-you-go financing, the
applicant would finance all project costs upfront and would be reimbursed over time for a portion of those costs
as revenues are available.
Pay-as-you-go-financing is generally more acceptable than upfront financing for the City because it shifts the
risk for repayment to the applicant. If tax increment revenues are less than originally projected, the applicant
receives less and therefore bears the risk of not being reimbursed the full amount of their financing. However,
in some cases pay as you go financing may not be financially feasible. With bonds, the City would still need to
make debt service payments and would have to use other sources to fill any shortfall of tax increment revenues.
With internal financing, the City reimburses the loan with future revenue collections and may risk not repaying
itself in full if tax increment revenues are not sufficient. The project financing as requested includes pay-as-you-
go for reimbursement of eligible costs.
Tax Increment Revenue Assumptions
To estimate the amount of available TIF revenues generated by the proposed project, certain assumptions were
made based on the value of the project, construction schedule, and anticipated financing terms.
• Total existing value of $233,700
o Parcel ID: 755-134-2305
o Base value as of Jan. 1, 2021
o Original net tax capacity (ONTC) of $2,921
o Assuming classification as residential rental
Rental classification is 1.25%
• Estimated total market value upon completion
o $6,300,000
o 44 new units at $143,182/unit
• Classification for all units as rental
o Rental class rate (1.25% per unit)
• Incremental value based on difference between existing and new land/building value
• Construction commences in 2022 and is completed in 2023
o Project values 60% complete for assess 2023 and taxes payable 2024
o Project values 100% complete for assess 2024 and taxes payable 2025
• First increment collected in 2024
o Election to delay first increment by up to 4 years
• Net present value (discount) rate of 4%
• 1% annual market value inflation
Table 2: Tax Increment Revenue Estimates
Scenario 1
Existing ‘Base’ Value $233,700
Estimated Total Taxable Value $6,300,000
Estimated Annual Increment (full buildout 2025) $94,995
Estimated Total Gross Increment $1,588,062
Estimated City Retainage (10%) $158,806
Estimated Total Net Increment (90%) $1,429,256
Estimated Developer Principal TIF Note (Maximum) $850,000
Estimated Developer TIF Note Interest at 4% $339,454
Estimated Total Payments on TIF Note $1,189,454
Estimated Number of Years 15.5 years
Estimated Surplus Revenues ($1,429,256 - $1,189,454) $239,802
Financial Needs (Pro forma Analysis) including But-For
Upon approval of a TIF district and project, the City must make several findings, including the “but for” test: that
the proposed development would not reasonably be expected to occur solely through private investment within
the reasonably foreseeable future. The applicant has stated that but for the provision of tax increment
financing, the project as proposed would not occur. Based on the applicant’s stated position relative to the
need for tax increment financing assistance, the City could make its “but for” finding and provide tax increment
assistance. We recommend, however, that the City review the provided assumptions to consider if the project
meets the but-for test and, if so, what an appropriate level and type of TIF assistance may be based on the
information submitted by the applicant.
Following thorough evaluation of the project as provided allows the City to be prepared to make an informed
“but-for” decision based on the likelihood of the project needing assistance, as well as the appropriate level of
assistance. To complete this analysis, we reviewed the applicant’s provided operating proforma and
constructed similar ten-year project proformas, showing a result if the project received financial assistance as
pay-as-you-go (reimbursement for TIF eligible costs) and showing a result if the project did not receive
assistance. Our analysis of the proformas include a review of the development budget, projected operating
revenues and expenditures, and the project’s capacity to support annual debt service on outstanding debt. The
purpose of evaluating the operating proformas is to understand the potential cash flow performance through
initial development of the project and the annual operations of the project over a 10-year period to assist with
determining if the project is financially feasible and in need of public participation.
Measuring project feasibility is typically accomplished by analyzing a combination of 1) projected rate of return –
both annual and cumulative and 2) estimated debt coverage ratio (DCR). Rate of return analysis illustrates the
projected return to the investor using the available cash flow after payment of operating expenses and debt as a
measurement to the initial equity investment. Industry standards for development types indicate the level of
investment a developer is willing to make based on projected returns from the project. Should the projected
annual and cumulative returns fall below those standards, the project would require a reduced level of equity
participation and/or increased cash flow to be feasible. Debt Coverage Ratio (DCR) is a calculation detailing
the ratio by which operating income exceeds the debt payments for the project. If the DCR is greater than 1.0 it
indicates the project has operating income that is greater than the debt-service payment by some margin;
conversely if the DCR is less than 1.0, it indicates the project is incapable of meeting its debt-service payment
and would need to seek additional revenue sources in order to pay its debt. Typical lending standards will
require a DCR of greater than 1.0 as a measure of cushion in the event actual revenues and expenses are
different than projected.
We reviewed the financial information as provided by the applicant to assist with making the determination 1)
that tax increment assistance is necessary and 2) what is an appropriate level of assistance. We analysed the
financial information as provided by the applicant including total development costs as compared to operating
income to estimate both the projected rate of return and debt coverage ratios. The level of debt financing the
project can obtain and support is based on the net operating income (NOI) and approximately 70% of total
project costs. The annual lease and other (parking) revenues and operating expenses have been provided by
the applicant to project the stabilized NOI.
Review of the operating proformas based on with assistance as pay-as-you-go and with no assistance provides
the range of financial feasibility for this project and what the estimated gap would be without assistance. It is
important to note that certain assumptions were made based on the applicant’s provided information and
market industry standards for annual lease rates, vacancy rates and annual revenue and operating expense
inflators in order to understand the project performance. Adjustments made to those assumptions assist in
understanding potential impact on project performance and what a required level of assistance (number of
years and total amounts) may be. Below is a summary of the applicant’s financial assumptions related to the
operating proforma:
1) 2% annual revenue and 2% expense inflator
2) 5% vacancy rate
3) 45% operating expense ratio
4) 44 rental units average $1.47/SF rent
5) Parking income
a. $50/garage per month (44 spaces)
To understand viability of the project and need for an appropriate level of public assistance, we provided a
sensitivity analysis to the proformas with adjustments made to the total project costs (including land/building
acquisition, construction costs, soft costs, developer and other related construction management fees and
contingency) and corresponding funding sources, as well as projected annual lease rates and operating
expenses. Realizing any adjustments is all subject to market conditions. The purpose of the sensitivity analysis
is to test the level of assistance that may be needed using those assumptions to understand if the
recommended level of assistance could be consistent with the City’s objectives resulting in less assistance than
what has been requested. The below table is a summary of the projected performance of the project based on
current assumptions:
Table 3: Estimated Developer Returns
Projected Performance Metrics *
Developer
Without
Assistance
Developer
With
Assistance
Modified With
Assistance
Cash-on-Cash -0.91% 2.32% 1.51%
Debt Coverage Ratio .94x 1.07x 1.04x
* calculated using stabilized net operating income and net project costs financed by the developer
Conclusion
The applicant has requested financial assistance related to construction of 44 units of apartment units, of which
20% would be affordable to occupants with incomes no greater than 50% area median income. There are
significant site development and soils corrections costs necessary to allow for development to occur on the site.
Through submission of the tax increment financing application and supporting financial information, the
applicant has indicated that the project would not occur as proposed without financial assistance from the City
due to below market rates of return.
Based on financial analysis of the provided assumptions, without financial assistance, the project does not
appear to be feasible. Without assistance, the projected annual and cumulative rate of returns and debt
coverage ratios are well below industry standards for this type of project. With financial assistance from the City
through tax increment financing, the project performance is projected to improve and may be closer to
achieving marketable returns and coverage ratios, as needed to obtain debt financing and attract equity
investors. The financial analysis indicates that the project is not expected to be viable without one or more of
the following: 1) reduction in project costs 2) additional annual cash flow, and/or 3) additional upfront funding
sources.
Parameters to consider when determining an appropriate level of public assistance include the following:
• Return on Investment
• Purchase price and other development costs
• Public to private investment
• Public assistance (TIF) and private equity
• Extraordinary costs
• Financial gap
• Term of collection (district)
• Other necessary public improvements
The applicant has requested tax increment financing from the City to provide additional cash flow revenues that
is required to achieve financial feasibility. The request is for 90% of the tax increments generated over 15 years
and would equate to total tax increment revenues of approximately $1.2M (up to $850,000 principal to support
actual extraordinary site development costs plus interest at 4%). The project will be privately financed through
debt and equity and the increment would provide additional annual revenues to enhance cash flow.
Thank you for the opportunity to be of assistance to the City of Elk River. Please contact me at 651.368.2533
or Mikaela.huot@bakertily.com with any questions or comments.
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.
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
Final Draft Dated: January 3, 2022
Anticipated Review by HRA Board: January 3, 2022
Anticipated Approval by City Council: January 3, 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 II –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
I. 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 II
Projected Tax Increment Report ............................................................................. EXHIBIT III
Estimated Impact on Other Taxing Jurisdictions Report ......................................... EXHIBIT IV
City of Elk River, Minnesota
Baker Tilly Municipal Advisors, LLC Page 1
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).
City of Elk River, Minnesota
Baker Tilly Municipal Advisors, LLC Page 2
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.
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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. 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
75-134-2305
PARCEL D-N. THAT PT OF THE FOLLOWING DESC
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
include 20% of the units not to exceed 50% of the area median income. The City anticipates
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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.
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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
from Tax Increment $1,588,062
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 $1,588,062
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.
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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.
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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
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(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 TIF 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
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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
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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 $406,237.
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.
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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
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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.
Exhibit I
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MAP OF PROPOSED
TAX INCREMENT FINANCING (HOUSING) DISTRICT NO. 28
Within DEVELOPMENT DISTRICT NO. 1
Exhibit II
Baker Tilly Municipal Advisors, LLC Page 14
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 ID: 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% PV Amount $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
Exhibit III Baker Tilly Municipal Advisors, LLC Page 15 Projected Tax Increment ReportCity of Elk River, MinnesotaTax Increment Financing (Housing) District No. 28Jackson Hills Phase 2 HousingDraft TIF Plan Exhibits: Based on 44 Units Valued at $6.3M Less: Retained Times: Less: Less: P.V. EstimatedAnnual Total Total Original Captured Tax Annual State Aud. Subtotal Admin. Annual Annual Total TaxesPeriod 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%12/31/22233,7002,9212,9210124.436%0000 0 0 012/31/23233,7002,9212,9210124.436%0000 0 04,35012/31/24 3,780,000 47,250 2,921 44,329 124.436% 55,161 199 54,962 5,496 49,466 44,993 70,36212/31/25 6,363,000 79,538 2,921 76,616 124.436% 95,338 343 94,995 9,500 85,495 74,773 118,44312/31/26 6,426,630 80,333 2,921 77,412 124.436% 96,328 347 95,981 9,598 86,383 * 72,644 119,62712/31/27 6,490,896 81,136 2,921 78,215 124.436% 97,328 350 96,978 9,698 87,280 70,575 120,82312/31/28 6,555,805 81,948 2,921 79,026 124.436% 98,337 354 97,983 9,798 88,185 68,564 122,03212/31/29 6,621,363 82,767 2,921 79,846 124.436% 99,357 358 98,999 9,900 89,099 66,610 123,25212/31/30 6,687,577 83,595 2,921 80,673 124.436% 100,387 361 100,026 10,003 90,023 64,713 124,48512/31/31 6,754,453 84,431 2,921 81,509 124.436% 101,427 365 101,062 10,106 90,956 62,869 125,72912/31/32 6,821,997 85,275 2,921 82,354 124.436% 102,478 369 102,109 10,211 91,898 61,077 126,98712/31/33 6,890,217 86,128 2,921 83,206 124.436% 103,539 373 103,166 10,317 92,849 59,335 128,25712/31/34 6,959,119 86,989 2,921 84,068 124.436% 104,611 377 104,234 10,423 93,811 57,644 129,53912/31/35 7,028,711 87,859 2,921 84,938 124.436% 105,693 380 105,313 10,531 94,782 56,001 130,83512/31/36 7,098,998 88,737 2,921 85,816 124.436% 106,786 384 106,402 10,640 95,762 54,404 132,14312/31/37 7,169,988 89,625 2,921 86,704 124.436% 107,890 388 107,502 10,750 96,752 52,852 133,46412/31/38 7,241,688 90,521 2,921 87,600 124.436% 109,006 392 108,614 10,861 97,753 51,345 134,79912/31/39 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 $158,806 $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
Exhibit IV Baker Tilly Municipal Advisors, LLC Page 16 Estimated Impact on Other Taxing Jurisdictions ReportCity of Elk River, MinnesotaTax Increment Financing (Housing) District No. 28Jackson Hills Phase 2 HousingDraft TIF Plan Exhibits: Based on 44 Units Valued at $6.3M WithoutProject or TIF District With Project and TIF DistrictProjected Hypothetical2020/2021 2020/2021 Retained New Hypothetical Hypothetical Tax GeneratedTaxable 2020/2021 Taxable Captured Taxable Adjusted Decrease In by RetainedTaxing Net Tax Local Net Tax Net Tax Net Tax Local Local CapturedJurisdiction 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% 39,316Sherburne County 114,209,977 45.835% 114,209,977 88,505 114,298,482 45.800% 0.035% 40,535ISD 728 44,486,959 31.717% 44,486,959 88,505 44,575,464 31.654% 0.063%28,015Other (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 ofthe 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 ratewould decrease by 0.232% (see Hypothetical Decrease in Local Tax Rate above). The hypothetical tax that theRetained 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.
Meeting of the
Elk River Joint Finance Committee
Held at Elk River City Hall
Tuesday, November 30, 2021
Members Present: Charlie Blesener, Ryan Hardin, Rhonda Magnussen, Dan Tveite, Nate Ovall,
Larry Toth and Jim Gromberg
Members Absent: Chad Vitzhum
Staff Present: Brent O’Neil, Economic Development Director
Others Present: Mikaela Huot, Baker Tilly (via phone conference) and Patrick Briggs, Briggs
Companies
1. Call Meeting to Order
Pursuant to due call and notice thereof, the meeting of the Elk River Joint Finance
Committee was called to order by Chair Tveite at 7:38 a.m.
2. Consider Agenda
Motion by Blesener and seconded by Gromberg to approve the Joint Finance
Committee agenda. Motion carried 7-0.
3. Consent Agenda
Motion by Hardin and seconded by Ovall to approve the October 26, 2021, Joint
Finance Committee meeting minutes. Motion carried 7-0.
4.1 TIF Application Jackson Hills Second Addition
Mr. O’Neil introduced Mikaela Huot and Patrick Briggs to present on the TIF application
for Jackson Hills II. Mr. Briggs spoke to the site and his vision for the project. Ms. Huot
gave a presentation summarizing the project and her analysis of the request. Ms. Huot
highlighted the qualifications of the project as a Housing TIF district, the use of funds, and
the “but-for” analysis. The analysis indicated soil conditions necessitating remediation are
the major contributor to extraordinary project costs anticipated for the project up to
$850,000. The developer could be reimbursed for those costs over the life of a 15-year TIF.
It also found that the project could not support debt service payments without TIF, and the
debt service coverage ratio and projected returns are under market standards.
Several elements of the project were discussed by the committee. Site layout was confirmed
to be on the southern portion of the property, immediately across 6th Street from Jackson
Hills I. Mr. Briggs confirmed that approximately six feet of peat, on average, would need to
be removed and refilled on site. He also indicated that current pavement of 6th Street would
remain, without additional improvements needing to be made.
Ms. Huot was asked about project viability and debt coverage ratios, and she indicated that
the project is feasible with TIF, but project returns and debt coverage ratios are below
prevailing standards.
Mr. Briggs indicated that Jackson I reached stabilization a little slower than expected and
current occupancy is about 90 percent. He also indicated the likely construction schedule
would be summer of 2022.
Mr. Briggs also stated that the project is subject to volatility in the construction market and
he is also looking at other possible programs to strengthen the feasibility of the project.
Motion by Oval and seconded by Blesener to recommend approval of the application
to the Housing and Redevelopment Authority. Motion carried 7-0.
5.1 Announcements
6. Adjournment
There being no further business, Mr. Tveite adjourned the meeting at 8:11 a.m.
Minutes prepared by Brent O’Neil.
_____________________
Tina Allard
City Clerk
___________________
Brent O’Neil
Economic Development Director