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5.14. SR 09-18-1995~~( ~~ ITEM 5.14 ity of ~~ MEMORANDUM lk ~ TO: Mayor & City Council Rover FROM: William Rubin, ED Coordinator DATE: September 18, 1995 SUBJECT: Public Hearing on Tax Increment Financing Plan for Tax Increment Financing District No. 13 (TL Feedin~('~, Systems, Inc. Expansion Project) ~~ yy Introduction At its August 21 meeting, the Elk River City Council authorized a public hearing for September 18, 1995, to consider a Tax Increment Financing Plan for Tax Increment District No. 13. Background • The EDA memo for its September 11 TIF public hearing is attached to this memo. It addresses the salient points of the TL Feeding Systems, Inc., TIF request. However, during the course of the EDA public hearing, additional points emerged as issues and are outlined below: A. BUDGET PORTION OF TIF PLAN The previously stated cost estimates for TIF District No. 13 are outlined below: Bind et Amount Land Write Down $135,000 Site Survey $ -0- Site Preparation $ 15,000 Soil Borings and Analysis $ -0- Administration $ -0- Legal $ 2,500 Cost of Issuance Fees $ -0- Bond Discount $ -0- Capitalized Interest $ -0- Miscellaneous $ 2.500 TOTAL $155,000 .] 13065 Orono Parkway • P.O. Box 490 • Elk River, MN 55330 • (612) 441-7420 • Fax: (612) 441-7425 . Because the proposed acquisition price of a 3 acre site in the Country Crossing Business Center (Business Park) is unresolved, the EDA revised the cost estimates as follows: Budget Amount Land Write Down $163,350 Site Survey $ -0- Site Preparation $ 11,650 Soil Borings and Analysis $ -0- Administration $ 2,500 Legal $ -0- Cost of Issuance Fees $ -0- Bond Discount $ -0- Capitalized Interest $ -0- Miscellaneous $ -0- TOTAL $177,500 The proposed budget revisions perhaps overstate actual expenditures for TIF District No. 13. However, understating these costs would result in a budget amendment at a later date. A budget amendment results in new public hearings and adequate time for School Board and County Board review and comment. B. NEW SECTION IN THE TIF PLAN ADDRESSING LOCAL GOVERNMENT AID/HACA REDUCTION An additional section to the TIF Plan for District No. 13 has been added. This new section addresses the city's option of making a "qualifying local contribution" in lieu of a Local Government Aid/HACA reduction associated with the establishment of Tax Increment Financing District No. 13. The new section is labeled as Section J of the TIF Plan and is entitled Local Government Aid/HACAReduction. C. MAXIMUM TIF GRANT Section V of Elk River's TIF Policy Guideline outlines the maximum TIF grant for various projects. The maximum TIF grant is generally expressed as a percentage of a project's finished market value (land and building). Section V of the Policy indicates that "except for redevelopment projects which may require more assistance than other projects, the average tax increment subsidy shall not exceed fifteen percent of the project's finished market value." However, "under extraordinary circumstances, the City Council reserves the right to adjust the average subsidy level." Because the TL Feeding Systems project is the initial industrial user in the Business Park, and, because of higher anticipated acquisition costs, the EDA recommended that the City Council waive the 15 percent maximum TIF grant for this project. It is expected that the TL Feeding Systems project will likely have a finished market value of $675,000 (land and building). A $175,000 TIF grant equates to a grant in the amount of 28 percent of the project's finished market value. Pav As-You-Go TIFDistrict It is proposed that TIF District No. 13 be structured as apay-as-you-go district. This requires the company and its principals to incur the cost of acquiring the site and conducting the site development and site preparation activities up front. The project's new property taxes (otherwise known as the tax increment) will be repaid to TL Feeding Systems twice ayear - in July • and in December. Action Requested After conducting the TIF public hearing on the TIF Plan for TIF District No. 13, the City Council is asked to adopt the attached resolution. Approval of the TIF Plan is subject to the execution of a Contract for Private Development with a specific reference to the project's finished market value and a Tax Increment Revenue Note which indebts the city to TL Feeding Systems, Inc. Approval of the TIF Plan is also subject to the City Council waiving the 15 percent maximum TIF grant as found in the TIF Policy Guidelines. • .] TAX INCREMENT FINANCING PLAN TAX INCREMENT FINANCING DISTRICT NO. 13 CITY OF ELK RIVER, MINNESOTA SEPTEMBER 18, 1995 • TAX INCREMENT FINANCING PLAN • TAX INCREMENT FINANCING DISTRICT NO. 13 SUMMARY TL Feeding Systems, Inc., 8720 Wyoming Avenue North, Brooklyn Park, MN seeks $175,000 in Tax Increment Financing assistance to support its proposed construction of a 15,000 square foot office and production facility on a three (3) acre lot in Country Crossing Business Center (Business Park). TL Feeding Systems designs and manufactures vibratory and centrifugal feeding equipment and systems that orient various products for assembly and packaging. The company currently occupies leased space and it desires a more permanent office and production facility to ensure continued growth. The Economic Development Authority for the City of Elk River, Minnesota is proposing the creation of an Economic Development District pursuant to the Tax Increment Financing Act. Tax increment funds will be used to "write down" the acquisition price of the development site. Additional tax increment funds will be used for site preparation and site development costs. The expansion site is currently an unplatted parcel owned by DMV Mall Corporation. The Economic Development Authority for the City of Elk River proposes to reimburse TL Feeding Systems for its expense associated with the acquisition of the three acre Business Park site under apay-as-you-go Tax Increment Financing District. The 15,000 square foot facility will have a finished market value estimated at $675,000 which produces "property taxes of approximately $30,700 per year. These funds will be "captured" by the Economic Development Authority so that the City of Elk River can recover the $175,000 in tax increment assistance. After these funds have been repaid, Tax Increment Financing District No. 13 will be decertified, thereby enabling all local taxing jurisdictions (county, school, city, etc.) to share in the project's property taxes. The Economic Development Authority for the City of Elk River, Minnesota anticipates that Tax Increment Financing District No. 13 will exist for approximately eight (8) years; during which times tax increment funds will be collected for six (6) years. . s:\eda\document\tifnol3.doc • TAX INCREMENT FINANCING PLAN TAX INCREMENT FINANCING DISTRICT NO. 13 A. STATEMENT OF OBJECTNES Tax Increment Financing District No. 13 is located entirely within the City's Development District No. 1, a Municipal Development District created and established pursuant to the Development District Act. The Development Program for Development District No. 1, was adopted by the City Council on April 1, 1985, and was amended on January 27, 1986, and November 30, 1987. The objectives of the Development District as amended, and as set forth in the Develo meat Program, are hereby incorporated into this Tax Increment ~inancin Plan. Attached as Exhibit A is a map of Development District No. 1. The specific objectives of the Tax Increment Financing Plan for Tax Increment Financing District No. 13 are: 1. To provide pay-as-you-go reimbursement for the acquisition price of a three (3) to five (5) .acre site to be platted in the Country Crossin Business Center (Business Park) (the development site; 2. To encourage a manufacturing company to expand in the Business Park; said expansion includes the construction of a new facility estimated at approximately .15,000 square feet; 3. To increase employment opportunities in the community and in the State of Minnesota; said expansion will create six (6) full-time positions and ten (10) positions will be retained; and, 4. To preserve and enhance the local tax base and the tax base in the State of Minnesota; said a ansion will generate property taxes of approximately $30,700. B. CLASSIFICATION OF THE DISTRICT The City Council of the City of Elk River, Minnesota determines that it is necessary, desirable, and in the public interest to designate, establish, develop, and administer an Economic Development Tax Increment Financing District in the City of Elk River pursuant to the provisions of the Tax Increment Financing Act, Minnesota Statutes 469.174, Subdivision 12. The purpose of the Tax Increment Financing Plan and Tax Increment Financing District No. 13 is to encourage the expansion of a manufacturing company in the Business Park, thereby increasing local employment opportunities • and preserving and enhancing the local tax base of the State of • Minnesota. C. DEVELOPMENT PROGRAM L Overview TL Feeding Systems, Inc., 8720 Wyoming Avenue North, Brooklyn Park, Minnesota, seeks Tax Increment Fnane.ng assistance to support its proposed construction of a 15,000 square foot facility in the Country Crossing :Business Center (Business Park). The Tax Increment funds will be used to reimburse TL Feeding Systems for the acquisition of the development site. In addition, funds will be used for site preparation and site development costs. 2. Property Included in Tax Increment Financing District No 13 The legal description of the property included in TIF District No. 13 is as follows: Lot 1, Block 1, Country Crossing Business Center Second Addition (part of PID No. 75-575-0020} . Attached as Exhibits B-1 and B-2 are maps showing the exact location of the property included in Tax Increment Financing District No. 13. 3. Property to be Acquired by the Authority No property will be acquired by the Authority. D. DEVELOPMENT ACTIVITIES Development Overview TL Feeding Systems, Inc., proposes to construct a new facility containing approximately 15,000 square feet on the Business Park Lot. The new facility will have a finished market value estimated at $675,000. Construction may begin during the fall of 1995 and will be completed by the spring of 1996. TL Feeding Systems, Inc., currently employs 10 persons at its existing leased facility. As a result of the expansion, approximately six (6) new full-time jobs will be created by TL Feeding Systems. ~J 2. Contracts No contracts have been entered into at the time of the preparation of this Tax Increment Financing Plan. Proposed contracts for services associated with Tax Increment Financing District No. 13 include: Contract for Construction of a 15,000 Square Foot Facility (TL Feeding Systems) Soil Borings and Analysis Site Preparation and Development E. FINANCIAL ANALYSIS OF TAX INCREMENT FINANCING DISTRICT NO. 13 Tax Increment Financing District No. 13 Cost Estimates Budget Amount Land Write Down $163,350 Site Survey Site Preparation $ 1.1,650 Soil Borings and Analysis Administration $ 2,500 Legal $ 2,500 Cost of Issuance Fees Bond Discount Capitalized Interest Miscellaneous $ Total $177,500 2. Bonded Indebtedness The City of Elk River anticipates apay-as-you-go Tax Increment Financing District No. 13 and no bonds will be issued. 3. Sources of Revenue to Pa~lic. Costs Tax Increments collected from the TL Feeding Systems, expansion will be used to pay the .public costs associated with Tax Increment Financing District No. 13. 4. Original Tax Capacity The original net tax capacity, based on the 1994 valuation, for the real property in Tax Increment District No. 13 is estimated to be $93$. The County Auditor Certification attributable to • this value is attached as Exhibit C. 5. Estimated Captured Tax Capacity The finished market value upon com letion of th improvements in Tax Increment Financing District No. 13 is estimated at $675,000. This value translates into a completed net tax capacity estimated at $29,450. The captured net tax capacity is estimated as follows: Completed Net Tax Capacity $29,450 Less Original Net Tax Capacity 938 Equals Captured Net Tax Capacity $28,512 One hundred percent of the captured net tax capacity of Tax Increment Financing District No. 13 will be required to finance the public costs associated with District No. 13. As a result, the City of Elk River elects, pursuant to Minnesota Statute 469.177 Subdivision 2 (a)(1), to retain the full captured net tax capacity of Tax Increment Financing District No. 13. 6. Duration of the Tax Increment Financin District No. 13 The City of Elk River expects that the first increment it will receive from Tax Increment Financing District No. 13 will be for taxes payable in 1998, and will. be based on a completed value as of January 2, 1997. The City expects to continue to receive tax increment from Tax Increment District No. 13 up to and including the year 2003, or until $177,500 in tax increment has been received. Thereafter, no further increments may be received and Tax Increment Financing District No. 13 will terminate. F. CASH FLOW ANALYSIS Attached as Exhibit D is the Cash Flow Analysis for Tax Increment Financing District No. 13. G. IlVIPACT ON OTHER LOCAL TAXING JURISDICTIONS 1. Pursuant to Minnesota law, tax increment generated by development within the Tax Increment Financing District may be captured by the City for a period of up to nine years. During this period other taxing jurisdictions will continue to receive taxes from the property within the Tax Increment Financing District based on the current net tax capacity. • • 2. 3. H. STUDIES AND ANALYSIS USED TO DETERMINE THE NEED FQR TAX INCREMENT FINANCING The Elk River City Council and EDA have determined that the TL Feeding Systems, Inc., expansion project cannot reasonably be expected to occur solely through private investment within the reasonably foreseeable future. Therefore, the use of Tax Increment Financing assistance is deemed necessary. This determination has been made based on the following: The City of Elk River and its Economic Development Authority have determined that the TL Feeding Systems, Inc., project would not reasonably be expected to occur without the creation of TIF District No. 13 and the use of tax increment financing is necessary. Therefore, none of the net tax capacity captured during the term of this TIF District would be available to other taxing jurisdictions without the creation of this district. Additional information on the impact of Tax Increment Financing District No. 13 an the other local taxing jurisdictions can be found in Exhibit E. The company currently occupies leased space at 8720 Wyoming Avenue North, Brooklyn Park, Minnesota and this expansion into a permanent facility is its first. Tax increment assistance is needed to reduce the overall project costs -thereby preserving scarce capital to ensure that TL Feeding Systems, remains financially stable after the expansion. • In addition, tax increment assistance is necessary because the project will result in increased employment in the State, and, it will result in the preservation and enhancement of the tax base of the State. I. PARCELS INCLUDED IN TAX INCREMENT FINANCING DISTRICT NO. 13 Tax Increment Financing District No. 13 is comprised of two parcels of land. They are listed below: 1994 Original Parcel 1994 EMV Payable 1995 Net Tax Capacity • Part of $20,400 $938 75-5 75-0020 (For 3 acre parcel) (For 3 acre parcel) • Please refer to Exhibit G for the County Auditor Certification of this parcel in Tax Increment Financing District No. 13 J. LOCAL GOVERNMENT AID/HACA REDUCTION In accordance with the laws of Minnesota for 1995, Chapter 264, Article 5, the City of Elk River and the Economic Development Authority for the City of Elk River accept the option of making a qualifying contribution in lieu of a Local Government Aid/HACA reduction associated with the establishment of Tax Increment Financing District No. 13. • • • -- - __._ _ - -~~ _o .. __ •~ i •_ : p ^_ _ r ~ ~ _ ~ ~_ y 11 ~ ~,® _._ a ~ _ ~ ~ .~ t_.___•_ ~- -d - - ' -- - ~- ,' 4 ,n~~ ~\\ • • ~, i _ ,_, ~. , ~ -- „y i ~ ~ a m ~~ .._----' ~_ -~ _i~ { . _ ~ ~, ~- ~ i I _ ~ ~ I ~ i a. - i ---- ~ -~ V i ' -' s 9 l ~ ~. ~ _ ~ ... i ~ i ya. _ 1 •~i a ~IL: L_~ ~.~ ~. f i BOUNDARY OF ~ ---• ! ~ °' - ' DEVELOPMENT DISTRICT NO . 1 "-" =.}-- -`~ - __ .~. (CITY LIMITS) - i '~ ~ \ `\ ELK RIVER, MINNESOTA "" ~~ "' a i _ -----.._. _ ~ . ~ ~, s ~ _ ~~ ~ a s ~~~~ _ ~;f ,. s OnJ ~~ ` $• ' ~ .~~,i~~~~i ~ i ~ ~ ~ a M_ 1 EXHIBIT A ~ ~ (~ d ;~~ 1 > > ~ a DEVELOPMENT DISTRICT N0. 1 l i !~~ I ~ i~ ! _ ~ ~d; l._J ~ _ - ,.,.,. ~ ~ ~\ o l ti• _~ ~ ~~ ~ I ~-~ I-' ~ Ic`~,, / 6 ~ I' ~ IF g t~ ~ Q I O W 20 ~ tg /n 1g ~ A YO. 12 ~ _ t w ~ t t^ t e~ ~. _ _ t K a~_ ti n x 3 I N ` + ~ + t + 6 ',• 14 1 s n ~ ~) ~ 3 h, 61' +o Ho g ~ t _ 13 t n ouaoT A , ~ j, ~ 2 Elk O ; Riy£R ~ g - 3 ~ JI l'l~): ' T - , F LAKE ORONO .'.. ounoT ~ c I z O u u. / 3 1 pal ~~` ~ ~ \ ~ W ~ t o U D S ELK LAKE ~ v/ ~ 1 ~ ~ O Q 4' S \ ° ~~~ ~ ~ RIVER a ~, ORONO ~ 23 ^ o ____ _ /: . • :'( lT1(E LOT A - ~ i~j 18 o ~ ~ ~ ~ w PARK I ' ~ / /-.-~. ~ 1' ~ w CITY WcE LDT 8 _ ~ '^ •~:~~ ' LAKE > i%/ vt v I Q a '~~ L O W TOME? <_.. oc Z ~: ° ~ ~ a i ~ a oROwo - v.5. w{r.>NwaY wo. 52 _ CEuE,ERr . ~o `:p I CWNTY SOFTBALL OIJU~. J CWNTY = J .' y.. ' ; FAIR PARK t qjy '~ ...... 1 CWRT W GROUNDS ~ tom' I y ~ ~~F t N i -2 r,WSE ' n ~ °- ~ . ~' s I oRDNO a~~~ 2 2 :~ ~ a. _ 18 T 1 _- ~~ ORONO PARKWAY 1 t U 6 t .~ 7 I 1 .. 1 •~ Z •~ PARK t PARK 2 t T ~ O g t ~ ti 10 S T t ` 39 1 ~ .+ 1 ~ .,, Y `~ .2 f ~ t 2 P 3 ~ ~- ~2 .~ t2 t ~ n +e AVE. .~ ,~~' + n SAP ~ 2 n - '^ PARK ~\S~5 s e Y <-T ~ .3 T 1 3 % c eo <e 21 '' zo u T + l e g + 3 ~ t t z. , 11 ` t ' ~±TS ~ ' ° g ~ N ~ / I , _/_ ~ t -s W ~ W ? ~ 16 2 S / r ~ W ~.` e ,n 2S _ ~ z- a ~ i - ~ ..: -~~. g 23 - j•. to Z + ~ ~ 12 ..... i - 9 g '~: Afl$g/SS/Ppl J I RIVERNEW DRIVE + ~: (, ~ ~ ~ $ I 1 ~~~ ~fRB~Rry ~ t g ~` I ~~ ,/7 E ~ t ~ / z ~\ ~ C.~ _ ,~` ~---~-EX~IIBIT B-1 RItiER ?~X I'~ ~ >r~T FI~TA~'CING DISTRICT T?0.-T3 ~ ~ i / i i ~ L~ I ~ / / ~ ~ i '~ i ~~ ii ~ / ~ / ~ \ I- ---_"-~~~ ~ -- ~- 1 I ..--; I •a:•}iatititir:{': tt: :V:.... ~ °ri~-iniii:=nn"i.~ ,r ~~~ ti I ••.~ E•E6d07 ~ ~x / ~~ \, / iL-__i._ ~~ ~: ,,.- , .i .~ -'""~ ~- E-aen.so w E•E00.1S -~ l ~ ~ K-~_~ `_.L ~ J r+~ae+.n E•a7a~.s w E•S70.A0 E • i:~[[: ;t:I; 'i ~I •----- I Q ~ ~ - ` ,` \ ARE-Reazss .•. •' . ~ , ~ ~ E•Q7LSS E ~:.•::: ,z:, 1 ` .. ~ ~-~ . _:----- ~ --j.- ::: 'L------- I ---------- ---------------------------------------1------------------------------------------------- .~~~~~ ~ ~,-v'j y f i ~ J ~ - .. , i i /~/ r -r ' -' -i-'+ ~ ~ ~ r r ' ~ r ~ ~ ~~ ~ 5~ i i 7 Zr ~ i t;+. i f ~, 11 I I i i i 1 • , 1 _.....J `•1 • .. __________c_______ ____ ____ _____ ____„ i ~ i i t i ~ i i i ~ ~ .~ i i i ~ ~ ~ ...... .. ... ........ .-.... 'E~~I~~3IT B-2 ~i 1 `fV t' ' c^-' i -.S' ~ ~~ a G~f j~',, }_'' ~ i C~„-~~ oROr~o _ ARKWAY -- -- --- ` .- li ______ •__. ____.. r-_ .:\, i i - ~~ ~ t ,` I •_-f-'' -~-----~ ,~ .~ ~• ~~-_ j -, ,. ~ ~ .. j ; c ~ J l 1L f 4 ~~ ~ ~---~ r: ~~ ~~~ ~ ~ ~~ ~r. ~ ~ r r ~; ~ _-. ~ 4 ; - Y __J l ~ ~ ~I"' .~ ~ ~ ~ ~ ~ I, ~" ~ EXHIBIT C COUNTY AUDITOR CERTIFICATION TAX INCREMENT FINANCING DISTRICT N0.13 The original net tax capacity of the following. listed parcel(s) as of January 2, 1994, is certified to be $938. The parcel(s) contained in Tax Increment District No. 13 are listed below. 1994 EMV 1994 Original Parcel Number Payable 1995 Net Tax Capacity Part of 75-575-0020 $20,400 $938 TOTAL $20,400 $938 The Base Tax Rate will be the rate calculated for taxes payable in 1995. In accordance with Minnesota Statutes, Section 469.177, Subdivision 1, the average percentage increase in the original Net Tax Capacity shall be zero percent (0%). C SHERBURNE COUNTY SEAL Ramona Doebler Sherburne County Auditor September , 1995 r1 LJ ~" aGOO coo ~ °~- rn °o ~ ~ ~ ~ cat ~+ o0 o N ~ ~ ~ ~ ds ~ rn ~ rn rn m ,-, cat c~ ~r ~r °o ~ r' ~ °° ~ ~ 0 ~ rn ~ ~s ~ ~ ~ ° m ~ c ~ GV ,-~ m Gil LcJ O~ O ~ '"~ ~ ~ ~ 64 O ~ ~ ~ ~ ~ ~ ~--~ 0~0 CmD d~ cep CEO e~ °o o r' m o0 ~ 0 ~ °' er ~° ~ ~ ~ ~ ~ .-+ ~ cis '-+ ~ ~ z ~ ~ ~ o [~ o o m ~ o ao U ~ o ~ ^' ds ~ ~ 0 ~ 6' ~ o0 ~ ~ tD O ifJ mo L ~ G~7 CD ~ A ~ ~ ~ i ' d' G ~7 ~ CD G V ~ .- m 61 Q~ A ~ ~. ~ ~ ~ z ~ ~ ~ ~~o ~ ~ ~ ~ ~ O ~ ~ ~ r r w W ~"'~ rn o ~U U o cmn o~ ~ z 6, ' rn ~ ~ o ~ -+ 6 ~ F ~ r d •~~ U H ~ ~ ~ U C~ C"i E-i v «S a U sc ~ ~ a~ ~ sa ~ ~ U E ; ~ ~ CL z ~ z b ~ ; _ ~ ~ ~ z ~ ~ ~ ~ ~ ~ •~ ~ ~~ ~ ~ ~ ~ O E~ U W U U U CSS C~ U C~ :~ O .~ C~ U . ,., c~ \° 0 m U F~ i-I Cd J~ ~ ~' U a~ y a' ~ ~ ~ ~ ~ m ~ ,~ U a~ ~ o ~ U ~ ~ ~ ~ ~~ ~~ ~~ ~~ U ~ O ~ ~ c~ ~ c~ ~ ~ Ei ~ m ~ ~ ~ ~ +~ LEA u~ ~ ~ ~ ~ U ~ ~ ~ ~ • r-1 c~ '"'' C~ p„ i ~~ O a~ H ~ ~ ~ o ~ ~ ~ ~ a~ ,.~ E-+ ~ ~ • ~ cti N ~, ~ ~ o ~ r~l U .--I ~ ~.a c ~ '~' lA ~ cd ~ ~ ~ E-{ ~ v ,.~ c~ ~ ~ ~ ~ at y ~r-~~~ U ~ ~ a~ ~ °~ ~ ~ C~ ~ +~ ~y" • ~ .o .N ~ ~ a~~ ~o~ ~ ~ ~' R$ till ,SZ C~ ~--~ , ~ Li ~" '~ ~ ~ ~ `~ ~ ~ ~ ~ a~ ~ ~ .~ ~ ~ ''~ U • ~ a~ a~ y O ,y ~ ~ ~A ~ -~ G7 •~ ~ ~ ~ ,--i ~ U ~ ~ Cd ~ ~ ~ ~ V •~ ~ ~ C'1 rl C~ c~ m c~ a~ O .~ U rn O U O ~"+ a~ U N O U a~ ~t+ 0 O c~ .~ C~ F~ N ~' C~ GYM O O GV m a~ U N ~ ~ ~ ~ O ~ ;~ ~ U U ~ ~ ~ ~ ~,,,'~ ~" ~ ~~ Q ~ ~'" U .~. ~. ~ ~ ~ ~ ~ ~ ~ ~ • r~ M .r z A ~ c .~ O W O .~-1 U W W k~ ~ ~ ~ ~ ~ c ~ y F1 ~ . . ~ N ~ ~ .. ~ ~+ U ++ U ~"~ M vhf T N h N 00 h F1 N .CI N~ U ~D. ¢~ eUC y ~ ~ y F ~ 6~9 ~ 1^I 69 ~ ~ fA U}"~' a+ 94 U ~ U pC ~.y y a~+ C y~ 1 ~ ~ ~ ~ O ~ N N N N ~ ~ ~ W ~ ~; ~ ~ R U~ •^ o . r . .. -i N N N N ~~~~ ~ ~ N +-' . o . 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O ~ ~ ` U U y U~~ P. ~ ^~'~'b ~ Q [~ N~~ ~ 69 6R ~ N.~ U 1C O ~ k + + ~ y., ~ ~ `~ `~ F" U o e V .., T7 '~ .1''Ti ~ R rQ,y` ~ ~ k ~ O e0 ~ 3 p\ ~ R '~ ~ 0 ~O : ~ ~ s , a ~ + ~ ~ a+ ~ O\ U ~ .d N N ~ ~ ..w ~ "" "~ eUC ~ ~ U O ~ ~ ~ Q`v7i~ , UUr~ ~,~^~ U tL~i, G.. [~ ~ b9 f19 [^ •^f U R .~ ri N ~ ~ ~ q rr 1 r T~ ~~ RESOLUTION 95 - • 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. 13 AND THE ADOPTION AND APPROVAL OF THE TAX INCREMENT FINANCING PLAN RELATED THERETO, LOCATED WITHIN DEVELOPMENT DISTRICT NO. 1 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. 13 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. 13 (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. 13 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. 13 and the adoption of the Plan relating thereto. Section 2. -Findings for the Establishment of Tax Increment Financing. District No. 13. 2.01. The Council hereby finds, determines, and declares that. the establishment of Tax Increment Financing District No. 13 located within Development District No. 1 is intended and, in the judgment 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. 13. 2.02. The Council further finds, determines, and declares that Tax Increment Financing District No. 13 qualifies as an Economic Devei©pment • District pursuant to Minnesota Statutes, Section 4G9.174, 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 increased market value of Tax Increment Financing District No. 13 that could reasonably be expected to occur without the use of tax increment financing would be less than the increase in the market value estimated to result from the proposed development after subtracting the present value of the projected tax increments for the maximum duration of Tax Increment Financing District No. i3 permitted by the Tax Increment Financing Flan for Tax Increment Financing District No. 13. 2.05. The Council further finds,. determines, and declares that the proposed Plan for Tax IncrementFinancing District No. 13 conforms to the Comprehensive Plan of the City. 2.06. The Council further finds, determines, and declares that the proposed Plan for Tax Increment Financing District No. 13 will afford maximum opportunity, consistent with the sound needs of the City as a whole, for the development or redevelopment of Development District No. by private enterprise. 2.07. The Council determines and declares that Tax Increment Financing District No. 13 located within Development District No. 1 is hereby established. Section 3. -Local Government Aid/HACA Reduction In accordance with the laws of Minnesota far 1995, Chapter 264, Article 5, the City of Elk River and the EDA accept the option of making a qualifying local contribution in lieu of a Local Government Aid/HACA reduction associated with the establishment of Tax Increment Financing District No. 13. Section 4. -Adoption of the .Plan. 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 18th • day of September, 1995. Henry A. Duitsman, Mayor ATTEST: Sandra A. Thackeray, City Clerk • • RESOLUTION 95- 2 • A RESOLUTION OF THE ELK RIVER PLANNING COMMISSION FINDING THE ECONOMIC DEVELOPMENT AUTHORITY'S. TAX INCREMENT FINANCING PLAN FOR TAX INCREMENT FINANCING DISTRICT NO. 13 LOCATED WITHIN DEVELOPMENT DISTRICT NO. 1 IS CONSISTENT WITH THE COMPREHENSIVE PLAN FOR THE CITY OF ELK RIVER WHEREAS, the Economic Development Authority's proposed Tax Increment PIan for the Tax Increment Financing District No. 13 (the Plan) to be located within Development District No. 1, has been submitted to the Elk River Planning Commission; and, WHEREAS, the Planning Commission has reviewed the Plan to determine the consistency of the Plan to the Comprehensive Plan of the City. of Elk River based on the following findings: The Tax Increment Financing District is located within the Business Park Zoning District, with an underlying land use of Light Industrial. 2. The proposed project's use is consistent with the uses found in the Business Park Zoning Ordinance. The Business Park (Country Crossing Business Center) has water and sewer available to the sites. 4. The Business Park (Country Crossing Business Center) is adequately served by atransportation system that is designed to accommodate manufacturing uses and associated industrial traffic. NOW, THEREFORE, BE IT RESOLVED by the Elk River Flanning Commission that the Tax Increment Financing Plan for Tax Increment Financing District No. 13 is consistent with the Elk River Comprehensive Plan. Adopted this 22nd day of August, 1995. Louis~uester, Chair ATTEST: • Steven B. Ach, City Planner • ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY MEMORANDUM Introduction TO: Economic Development Authority "FROM: William Rubin, Executive Directo DATE: September 11, 1995 .SUBJECT: EDA Public Hearing on Tax Increment. Financing Plan for .Tax Increment Financing District No. 13 (TL Feeding Systems, Inc. Expansion Project) At its August 8 meeting, the Elk River EDA authorized a public hearing for September-11, 1995, to consider a tax increment financing plan for Tax Increment District No: 13. Background The Request for Assistance The request for tax increment~financing assistance comes from TL Feeding Systems, Inc:, 8720 Wyoming Avenue North, Brooklyn Park, Minnesota: TL Feeding Systems designs and manufactures vibratory and centrifugal feeding equipment and systems that orient various products for assembling and packaging. The company currently occupies leased space and it desires a more permanent office and production facility to ensure continued growth. TL Feeding. Systems is proposing. to construct a 15,000 square foot o~.ce and manufacturing facility that~will be located on a 3.0 acre plus/minus lot `along :.Business, Center Drive in the Elk River Business 'Center (Business Park): The project's finished market value .(land and building) is estimated. at - $625,000: The company currently employs ten persons and they will be retained as .part of the .Elk River expansion_ project. TL Feeding Systems seeks $150,000 in tax increment financing assistance to - support its proposed facilty_ Tax increment funds would be used to "write - down" the cost of the land; and for general site development and "site preparation costs associated with this project: At this writing, a "pay-as-you- P.O. Box 490 • 13065 Orono Parkway • Elk River, MN 55330-1743 • (612)441-7420 • Fax: (612) 441-7425 Equal Opportunity Housing and Equal Opportunity Employment TIF District No. 13 Page 2 September 11, 1995 go" TIF package has been proposed to TL Feeding. Under this option; TL • Feeding Systems would absorb the cost. of the site acquisition and site preparation: As the new facility begins generating taxes, the city rebates the new property taxes (i.e. the tax increment) back to TL Feeding Systems twice a year -- in July and in December. The pay-as-you-go package is virtually the same concept as the TIF request approved for the MowrylNeos project in June: State Aid/HACA Reduction As with the Neos TIF Plan, a consequence of creating a new TIF District is that of a state aid/HACA reduction. Because an "Economic Development TIF District" would be created for TL Feeding Systems, the state aid/HACA reduction occurs the first year an increment is generated, and, the reduction is the most significant (i.e. 100 percent of the calculated formula). A recent legislative change enables cities/EDA's to opt out of the reduction by making a "qualifying local contribution" of 10 percent of the tax increment generated from an Economic Development District. The contribution must come from unrestricted monies of the municipality or the tax increment authority. The cap on the total of these contributions is 2 percent of the city's net tax capacity. Considering the alternatives, the following calculations are offered: i State Aid/HACA Reduction Captured net tax capacity of the TL Feeding Systems project of $26,212 times the 1995 tax capacity rate of 1.04247 equals $27,325 times 35 percent equals a local government aid reduction of approximately $9,564 per year. It is estimated. that the TL TIF District would generate tax increment payments for a period of six years (from 1998 through 2003, inclusive) in order to repay the $150,000 TIF grant. Therefore, the estimated local government aid reduction is calculated as follows:- . $9,564 per year times six years equals $57,384. Qualifying Local Contribution - From Exhibit D in the TIF Plan for TIF District No. 13, it is noted that the captured tax increment of .$27,266 begins in 1998 and continues through 2003. By calculating 10 percent of the estimated captured tax ~` TIF District No. 13 Page 3 September 11, 1995 increment from each of the years, the following estimate of the "qualifying local contribution" is offered: $2,727 (in 1998) plus $2,724 (in 1999) plus $2,720 (in 2000) plus $2,717 (in 2001) plus $2,714 (in 2002) plus $2,710 (in 2003) equals a qual~~nglocal contribution of $16,312. TL Feeding System's tax increment grant would be reduced by $16,312 over the life of District No. 13. The Land Value Dilemma Under apay-as-you-go TIF grant, the company/developer incurs the cost of the land acquisition and site development/site preparation costs. As the project begins generating property taxes, the company/developer is reimbursed for the up front costs. over a period of years. During the initial discussions with TL Feeding Systems, it was suggested that the company program in $1.00 per square foot fora 3 acre site.. This brings the acquisition price to nearly $135,000. Country Ridge Partnership recently sold all of its Business Park holdings to DMV Mall Corporation. According to a Certificate of Real Estate Value, DMV paid in excess of $782,000 for approximately $7.5 acres of land. DMV has listed its property with a real estate broker. The quoted price of the Business Park property (for industrial users) is $1.85 per square foot. The writer of this memo has reason to believe that this price is not reflective of the Elk River market value for industrial properties. This is further supported by an EDA-authorized appraisal analysis that was accepted by the EDA in June of 1994. Utilizing a matrix of factors, the appraisal concluded that business park property in Elk River should command, on the average, .90~ per square foot. Sites.. along a frontage road would no doubt command a higher price than internal. sites. However, a great disparity exists between the: quoted price from the real estate broker and the EDA's expectations. Since the EDA is not asked to acquire the property on behalf of TL Feeding. Systems, the EDA would expect TL Feeding Systems to negotiate a price that is reflective of reasonable market values.. Should this not occur, the EDA simply does not have a TIF project. In addition, as the acquisition price changes, the TIF budget and cash flow analysis changes, too. • TIF District No. 13 Page 4 September 11, 1995 • TIF. Review and Notices Since the August 8 meeting, the writer of this memo has completed the review process necessary to honor the TL Feeding Systems request for tax increment financing assistance. This process has included the distribution of the TIF Plans to the School District and County Board, presentation to the County Board, presentation to -the School Board, Planning Commission review of the TIF Plan, and the TIF hearing notices published in the Star News. Lastly, the City Council will conduct its public hearing on the TIF request on September 11, 1995. Action Requested After conducting the public hearing on the TIF Plan for TIF District No. 13, the EDA is asked to adopt the attached resolution. • •