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5.6. & 5.7. SR 06-17-1996ITEMS 5.6 & 5.?. City of MEMORANDUM TO: FROM: DATE: SUBJECT: Mayor & City Council Lori Johnson, Asst. City Administrator June 17, 1996 TIF No. 15 Public Hearing The public hearing for Tax Increment Financing District No. 15 is scheduled for June 17. TIF District No. 15 relates to McChesney Cabinets and involves city pay-as-you-go assistance in the amount of $35,000. All information on this item, with the exception of the Contract for Private Development which is attached, was distributed with the June 10 EDA packet. If you need another copy, please contact City Hall and we will make one available to you. Action Requested The City Council is asked to hold a public hearing on Tax Increment Financing District No. 15 and to consider the attached resolution relating to the establishment of Tax Increment Financing District No. 15 and the adoption and approval of the Tax Increment Financing Plan related thereto located within Development District 1. Additionally, the City Council is asked to approve the Contract for Private Development. s:\councilXtif151j.doc 13065 Orono Parkway · P.O. Box 490 · Elk River, MN 55330 · (612) 441-7420 ° Fax: (612) 441-7425 RESOLUTION 96 - A RESOLUTION FOR THE CITY OF ELK RIVER A RESOLUTION FOR THE CITY OF ELK RIVER RELATING TO THE ESTABLISHMENT OF TAX INCREMENT FINANCING DISTRICT NO. 15 AND THE ADOPTION AND APPROVAL OF THE TAX INCREMENT FINANCING PLAN RELATED THERETO, LOCATED WITHIN DEVELOPMENT DISTRICT NO. I BE IT RESOLVED by the City Council (the Council) of the City of Elk River, Minnesota (the City), as follows: Section 1. - Recitals. 1.01. It has been proposed and adopted by the Economic Development Authority for the City of Elk River, Minnesota (the EDA) that the EDA establish Tax Increment Financing District No. 15 within Development District No. 1 pursuant to and in accordance with Minnesota Statutes. 1.02. The EDA has caused to be prepared, and this Council has investigated the facts with respect thereto, a proposed Tax Increment Financing Plan for Tax Increment Financing District No. 15 (the Plan). 1.03. The EDA and the City have performed all actions required by law to be performed prior to the establishment of Tax Increment Financing District No. 15 and the adoption of the Plan relating thereto. 1.04. The Council hereby determines that it is necessary and in the best interest of the City at this time to establish Tax Increment Financing District No. 15 and the adoption of the Plan relating thereto. Section 2. - Findings for the Establishment of Tax Increment Financing District No. 15. 2.01. The Council hereby finds, determines, and declares that the establishment of Tax Increment Financing District No. 15 located within Development District No. I is intended and, in the judgement of this Council, its effects will be, to provide an impetus for commercial and industrial development, increase employment, and otherwise promote certain public purposes and accomplish certain objectives as specified in the Plan for Tax Increment Financing District No. 15. 2.02. The Council further finds, determines, and declares that Tax Increment Financing District No. 15 qualifies as an Economic Development District pursuant to Minnesota Statutes, Section 469.174, Subdivision 12. 2.03. The Council further finds, determines, and declares that the proposed development, in the opinion of the Council, would not occur solely through private investment within the reasonably foreseeable future and, therefore, the use of Tax Increment Financing is deemed necessary. 2.04. The Council further finds, determines, and declares that the proposed Plan for Tax Increment Financing District No. 15 conforms to the Comprehensive Plan of the City. 2.05. The Council further finds, determines, and declares that the proposed Plan for Tax Increment Financing District No. 15 will afford maximum opportunity, consistent with the sound needs of the City as a whole, for the development or redevelopment of Development District No. 1 by private enterprise. 2.06. The Council determines and declares that Tax Increment Financing District No. 15 located within Development District No. 1 is hereby established. Section 3. - Adoption of the Plan. 3.01. The Plan presented to the Council on this date, is hereby approved and adopted and shall be placed on file in the office of the City Clerk. Section 4. - Implementation of the Plan. The City Administrator and Assistant City Administrator are authorized and directed to proceed with the implementation of this Plan, and for this purpose, to negotiate, draft, prepare, and present to the Council for its consideration, all future plans, resolutions, documents, and contracts necessary for this purpose. Adopted by the City Council of the City of Elk River, Minnesota, this 17th day of June, 1996. Henry A. Duitsman, Mayor ATTEST: Sandra A. Thackeray, City Clerk CONTRACT FOR PRIVATE DEVELOPMENT BY AND BETWEEN THE CITY OF ELK RIVER, THE ECONOMIC DEVELOPMENT AUTHORITY FOR THE CITY OF ELK RIVER, AND GERALD AND JOANNE MCCHESNEY THIS AGREEMENT entered into this ~ day of ,1996, between and among the City of Elk River ("City") and the Economic Development Authority for the City of Elk River ("EDA"), and Gerald Eugene McChesney and JoAnne McChesney (together, the "Developer"). WHEREAS, Minnesota Statutes, Section 469.090, et seq., authorizes cities and counties to establish Economic Development Authorities for the purpose of furthering the economic development objectives of the respective city or county; and WHEREAS, the City of Elk River, Minnesota, established the Economic Development Authority for the City of Elk River ("EDA") in 1987; and WHEREAS, Minnesota Statutes, Section 469.174, ,et seq., (the "Tax Increment Financing Act") enables an Economic Development Authority to undertake certain housing projects, redevelopment projects, and economic development projects with the use of Tax Increment Financing; and WHEREAS, Developer applied to the EDA for Tax Increment Financing Assistance ("TIF") for development of the property located at Lot 9, Block 1, McChesney Industrial Park, Elk River, Sherburne County, Minnesota (the "Development Site") into an office and manufacturing facility of approximately 10,000 square feet to be constructed and owned by Developer, to be occupied by McChesney Cabinets and Winn Electric (the "Project"); and WHEREAS, the TIF assistance was requested to provide Developer with partial reimbursement for site acquisition costs (the "Land Write Down"); and WHEREAS, City staff prepared a Tax Increment Financing Plan ("TIF Plan") for the Project which proposed maximum reimbursement for Land Write Down to Developer in the amount of Thirty-Five Thousand and No/100 Dollars ($35,000.00); and WHEREAS, the EDA held a public hearing on the TIF Plan on and approved the TIF Plan on that date; and , 1996, WHEREAS, the City Council held a public hearing on the TIF Plan on 1996, and approved the TIF Plan on that date; and WHEREAS, an Economic Development Tax Increment Financing District ("TIF District") was established on the Development Site, legally described as follows: Lot 9, Block 1, McChesney Industrial Park ; and WHEREAS, the Tax Increment Financing Plan for the TIF District provides for the Developer to be reimbursed, in an amount up to a maximum total assistance sum of Thirty-Five Thousand and No/100 Dollars ($35,000.00), upon evidencing payment of annual real estate taxes; and WHEREAS, the 1998 real estate tax year is the first year Developer is eligible for a reimbursement payment, based on the January 2, 1997, value of the Project; NOW, THEREFORE, BE IT RESOLVED that the City, the EDA and the Developer agree on the following terms and conditions for reimbursement of the Land Write Down: The EDA hereby pledges the Tax Increment it receives from the TIF District to the City of Elk River to enable the City to reimburse Developer for the Land Write Down identified in the TIF Plan. Payments shall be made by the City to Developer, in a total amount not to exceed the Land Write Down, pursuant to the terms of the Note attached as Exhibit A to this Agreement (the "Note"). The sole source of funds for payment of the City's obligations under the Note shall be the tax increment generated by the TIF District. If taxes are not paid, or taxes paid are not sufficient to generate tax increment, no payment on the Note shall be due from the City. If Developer fails to make real estate tax payments prior to the date when said taxes are due to Sherburne County, an Event of Default under this Agreement shall exist. No payments shall be made to Developer under the terms of the Note if an Event of Default occurs, and payments shall not be resumed until the Default is remedied. The Default shall be deemed remedied upon evidence of receipt of payment in full for real estate taxes from Sherburne County. After reimbursing Developer for the principal sum of the Land Write Down, no further payments shall be due under this Agreement and the City shall request that Sherburne County decertify the TIF District. Developer shall complete construction and shall occupy all or a substantial portion of the Project by December 31, 1996. Failure to complete construction and achieve occupancy of the Project by this date shall be an Event of Default under tiffs Agreement and City and EDA shall have the right to terminate this Agreement and their obligations hereunder. Developer shall, prior to January 2, 1997, provide City with evidence acceptable to City of Developer's expenditures for Development Site acquisition costs. PXB 123191 2 Pursuant to Minnesota Statutes, Section 116J.991, City and EDA have established, and Developer has agreed, to the following Job Creation and Wage Level Goals: Job Creation: Two new jobs Wage Level: to dollars per hour Developer agrees to meet the Job Creation and Wage Level Goals on or before , 19~ Failure to meet the Goals by this date shall be a Default under the terms of this Agreement. In addition to such other remedies as City and EDA may have, if Developer defaults by not meeting the Job Creation and Wage Level Goals, Developer shall immediately repay to City all amounts paid to Developer pursuant to this Agreement. 10. Developer shall report to EDA no later than that this Agreement is in effect: 1st of each year Actual jobs created since first payment received under this Agreement. Actual average hourly wage paid to employees hired since first payment received under this Agreement. IN WITNESS WHEREOF, the City of Elk River, the Economic Development Authority for the City of Elk River and Developer have caused this Development Agreement to be executed as of the date and year first above written. CITY OF ELK RIVER By: Henry Duitsman, Mayor By: Patrick D. Klaers City Administrator PXB 123191 3 ECONOMIC DEVELOPMENT AUTHOKITY FOR THE CITY OF ELK R.IVER By: Jeffrey Gongoll, Presidem Elk River EDA Patrick D. Klaers, Acting Executive Director, Elk River EDA DEVELOPER: Gerald Eugene McChesney JoAnne McChesney PXB 123191 4 EXHIBIT A TAX INCREMENT REVENUE NOTE UNITED STATES OF AMERICA STATE OF MINNESOTA COUNTY OF SHERBURNE CITY OF ELK RIVER, MINNESOTA TAX INCREMENT REVENUE NOTE The City of Elk River, Minnesota (the "City"), hereby acknowledges itself to be indebted and, for value received, hereby promises to pay to Gerald Eugene McChesney and JoAnne McChesney or its assigns (the "Owner"), an amount equal to Thirty-Five Thousand and No/100 Dollars ($35,000.00) as more fully described in the Contract for Private Development by and between the City of Elk River, the Economic Development Authority for the City of Elk River, and Gerald Eugene McChesney and JoAnne McChesney (the "Development Agreement"), in the manner, at the times, from the sources of revenue, and to the extent hereinafter provided. The unpaid principal on this Note shall be payable on July 15, 1998 and on each December 15 and July 15 thereafter, or within ten (10) days of receipt by City of the tax settlement from Sherburne County, whichever comes later, to and including December 15, 2003 (the "Payment Dates"). On each Payment Date the City shall pay by check or draft mailed to the Owner of this Note an amount equal to the lesser of (1) the principal then due on this Note; or (2) the Tax Increment received and retained by the City pursuant to the City of Elk River Tax Increment Financing Plan for Tax Increment Financing District No. 15. The amounts due hereon shall be payable solely from Tax Increments paid to the City and which the City is entitled to retain pursuant to the provisions of Minnesota Statutes, Sections 469.174 through 469.179, as the same may be amended or supplemented from time to time. This Note shall terminate and be of no further force and effect following the last Payment Date del'reed above, on any date upon which the City shall have terminated the Development Agreement, or on the date that the principal payable hereunder shall have been paid in full, whichever occurs earliest. The City makes no representations or covenants, express or implied, that the Tax Increment received by the City will be sufficient to pay, in whole or in part, the amount due and payable hereunder. The City's payment obligations hereunder shall be further conditioned on the fact that there shall not have occurred and be continuing on the Payment Date a Default under the terms of the Development Agreement, but such unpaid amounts shall become payable if said Event of Default shall have been cured. If, pursuant to the occurrence of a Default under the Development Agreement, the City elects to terminate the Development Agreement, the City shall have no further debt or obligation under this Note whatsoever. This Note is a special, revenue obligation of the City and not a general obligation of the City and is payable by the City only from the sources and subject to the qualifications stated or referenced herein. Neither the full faith and credit nor the taxing powers of the City are pledged to the payment of this Note, and no property or other asset of the City, save and except the above-referenced Tax Increment, is or shall be a source of payment of the City's obligation hereunder. Except as hereinafter qualified, this Note may be assigned but upon such assignment the assignor shall promptly notify the City in care of the office of the City Administrator by registered mail, and the assignee shall surrender the same to the City either in exchange for a new note or for transfer of this Note on the records for the Note maintained by the City. Each permitted assignee shall take this Note subject to the foregoing conditions and subject to all provisions stated or referenced herein. IN WITNESS WHEREOF, The City of Elk River, Minnesota, by its City Council, has caused this Note to be executed by the manual signatures of its Mayor and its City Administrator and has caused this Note to be issued on and dated , 1996. CITY OF ELK RIVER By: Henry Duitsman, Mayor By: Patrick D. Klaers City Administrator PXB 123191 2