4. SR 09-25-1995~/ ~ ~~ ITEM 4.
(
ity of ~ MEMORANDUM
l~ ~ TO: Mayor & City Council
Rover
FROM: Pat Klaers, City Administr t r
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DATE: September 25, 1995
SUBJECT: Worksession - Capi a~ Improvement
Program
The formal agenda part of the 9/25 meeting is relatively short, so staff hopes
to have a few hours available to review with the City Council the status of
some of the projects that are going on in the city. There will be limited
background information offered with this memo and in this packet for the
worksession. Additionally, it is anticipated that there will be few, if any,
formal motions made by the Council during this worksession, but we hope to
reach some consensus on various items and then move these items to an
October agenda.
The following items are possible topics of discussion on 9/25/95:
• • East Highway 10 presentation on Assessment Benefit Analysis by
Mike Amo of St. Cloud Appraisal, Inc., (see attachment).
• Update on the recreation field land proposal.
• Update on the Riverview Heights neighborhood meeting, letter, and
survey.
• Update on the Comprehensive Plan, City Long Range
Transportation Plan, and Sherburne County Transportation Plan.
• Update on the status of code enforcement activities.
• .Update on the inventory of city owned properties.
• Update on the environmental status of the Custom Motors
operation.
• Update on the Lake Orono Committee.
• Update on the status of the computer software programs for the
Planning and Building/Zoning departments.
• Update on the status of the UPA sewer bills.
• Update on the ECM proposal.
Councilmembers who have other discussion items that they would like to
review and discuss should feel free to contact me on Monday, September 25,
1995, so that we can plan on and prepare for additional topics being added to
the discussion list.
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13065 Orono Parkway • P.O. Box 490 • Elk River, MN 55330 • (612) 441-7420 • Fax: (612) 441-7425
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ASSESSMENT BENEFIT ANALYSIS
for
MR. PATRICK D. RLAERS
CITY ADMINISTRATOR
CITY OF ELR RIVER
ELR RIVER, MINNESOTA
by
ST. CLOUD APPRAISAL, INC.
AUGUST, 1995
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Real Evtnle ~ppraisale
ST. CLOUD APPRAISE
INC.
Suite 101 • Roosevelt Office Park • 606 South 25th Ave. • St. Cloud, MN 56301
Phone (612) 253-4488 • FAX (612) 253-8124
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Mike Amo, RES
President
Thomas W. Montreuil, SRA
Vice-President
August 21, 1995
Mr. Patrick Klaers
City Administrator
City of Elk River
13065 Orono Parkway
P.O. Box 490
Elk River, MN 55330
Connie M. Hentges
Appraisal Coordinator
Sharon R. Wiebke
Associate
Kurt L. Dayton
Associate
Re: Benefit Analysis, Extension of City Services, U.S. Highway
#10 East, Elk River, Minnesota.
Dear Mr. Klaers:
As requested in your letters dated June 28, 1995, and July 27,
1995, I have undertaken a study of the market in the Elk River
vicinity with the intent of identifying benefits to property along
and near U.S. Highway #10 East from the extension of trunk water
and sewer services.
I understand that your objective in retaining my services was to
outline the value benefits of trunk sewer and water line
installation within District 1, and Phases 1 and 2 of District 2
of your Urban Service Area Study Map.
The effective date of my study is August 14, 1995, which is the
date I began my research and viewed the area in question. The
specific problem considered was, "What is the per acre benefit
indicated by market sales evidence attributable to immediate or
nearby proximity of city trunk water and sewer"? The results of
this study will presumably be used to apply an assessment rate on
the affected parcels in a defensible manner, and as a defense
mechanism in possible assessment appeals.
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The area considered within the study includes land located south
of the junction of U.S. Highways #10 and #169, east of the
Mississippi River, south to approximately the Kelly Farm, and east
one-half to one mile from the U.S. Highway #10 right-of-way.
Additionally, an area of District 1 located north of Sherburne
County Road #12 and west of County Road #40 is included within the
scope of this study.
In the process of completing this project, I searched sale files
within the Sherburne County Assessor's Office, and interviewed Mr.
Jerry Kritzeck, Assistant Sherburne County Assessor, as well as
several commercial real estate brokers familiar with the market
along U.S. Highway #10 East.
I reviewed over one hundred sale transactions, personally viewed
over forty sites which sold, and also investigated several sites
which are offered for sale. I interviewed the Anoka County
Assessor, Champlin City Assessor, Anoka City Assessor, and a
commercial appraiser in the Anoka County Assessor's Office.
Based upon my investigations and analysis, I arrived at several
• conclusions, which will be summarized following this letter.
The data collected and investigated is accurate to the best of my
knowledge, and I relied upon information provided by others in many
cases. I am not a surveyor, and in some instances parcel sizes
were estimated by myself based upon scaling and interpretation.
In any case, I attempted to achieve a degree of reasonable accuracy
in my analysis, to the point where any changes completed at a later
date will have minor affect on the results of this study.
To achieve a clear indicator of the effects of trunk water and
sewer versus land without these benefits, a paired data analysis
is typically performed. In this technique, sales data on nearly
identical lots are analyzed to isolate a single characteristic's
effect upon value. For instance, a lot next to water and sewer
sells for a price, and a nearly identical lot without available
water and sewer sells for another price. One could conclude, all
other things being equal, that the difference in price is
attributable to the presence of or lack of water and sewer.
I utilized this general method in my analysis, but failed to find
the perfect set of "matched pairs" to prove the value of water and
sewer amenities.
Page 3
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The sales I uncovered differed from one another in many aspects,
including items such as parcel size, visibility and access to major
roadways, shape, topography, and neighboring environment. These
differences and others were considered and adjusted for, when
necessary, and the remaining differential in sale price was
attributable to differences in water and sewer amenities..
For the most part I limited the geographic scope of my
investigations to areas believed to have some similarity to the
area in question. Sales data from Elk River Township, Elk River
City proper, and the City of Ramsey was specifically targeted. I
referred to sales of commercial lots along the U.S. Highway #10 or
U.S. Highway #169 corridor outside of the Elk River area., as well
as additional supportive data, but did not use these distant sales
for direct comparison.
If you have questions regarding the finite detail of this study or
its results, please contact me. I shall be happy to meet with you
or the Council to discuss my findings.
Thank you for the opportunity to serve you in this matter.
• Sincerely yours,
~.u-
e Am , CAE
President
MA:cmh
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SUMMARY, EAST ELR RIVER BENEFIT STUDY, AUGIIST, 1995
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Benefit Conclusions, By Property Type:
Industrial Land, Benefit Due to
Presence of City Water and Sewer:
Residential Land, Benefit Due to
Nearby Proximity to City Water and Sewer:
$ 3,920/Acre
$ 4,700/Acre
Residential Development Land, Benefit Due to
Immediate Proximity to Water and Sewer: $ 5,707/Acre
Highway Commercial Land, Benefit Due to
Presence of City Water and Sewer:
(See following comments and maps.)
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$10,900/Acre
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R~~i Erbu OnD~ic~, Ino mCOPYHIOHT IEl!
HIGHWAY COMMERCIAL LAND, U.S. HIGHWAY #10 EAST CORRIDOR
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BENEFITS STUDY, EFFECTS OF CITY WATER AND SEWER VERSUS PRIVATE
UTILITIES
For this analysis I searched for sales of and offers to sell
vacant land parcels adjacent to U.S. Highway #10, between the
junction of U.S. Highways #101 and #169 in Elk River, to U.S.
Highway #10 at the Anoka city limits.
The map presented on the following page depicts the sale
prices and asking prices of various sites, as well as the location
of the MUSA (Metropolitan Urban Services Area) relative to each
site (shown as a yellow line), and the location of city water and
sewer lines (shown as red dashed lines).
The second map depicts the recent sales of vacant land within
the Elk River portion of the corridor, and the approximate location
of city water and sewer lines.
Although not presented in this report, a similar methodology
was utilized in the analysis of benefits to residential and
industrial lands.
Considering the differences between the sale parcels and
asking parcels, but isolating the benefit indicated by the market
for the nearby presence of water and sewer, the sales indicate that
this amenity adds $10,900 per acre to the price.
Reviewing the sales in Sherburne County along U.S. Highway
#10, the same general pattern develops, wherein as one moves closer
to city water and sewer lines, the sale price per acre increases.
Based upon the evidence examined, it is clear that the
presence of city water and sewer near highway commercial sites
along this corridor is enhanced considerably, as indicated above.
Estimated Benefit Attributable to City Water and Sewer
on Highway Business Land: $10,900/Acre
CERTIFICATION
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I certify that, to the best of my knowledge and belief:
The statements of fact contained in this report are true and
correct.
I have no present nor prospective interest in the property
that is the subject of this report.
The compensation is not contingent upon an action or event
resulting from the analyses, opinions, or conclusions in, or the
use of, this report.
The appraisal assignment was not based on a requested minimum
valuation or specific valuation or approval of a loan.
The analyses, opinions, and conclusions were developed, and
this report has been prepared, in conformity with the requirements
of the Uniform Standards of Professional Appraisal Practice.
The use of this report is subject to the requirements of the
Appraisal Institute relating to review by its duly authorized
• representatives.
The subject property was physically viewed by myself.
No one provided significant professional assistance to the
person signing this report.
Amo, CAE, President
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Professional Affiliations
QUALIFICATIONS OF THE APPRAISER
MIKE AMO, CAE
CAE - Certified Assessment Evaluator #981 - International Association of Assessing Officers
Candidate for MAI - Appraisal Institute
Certified General Appraiser License #4000495
CAA - Certified Appraiser Assessor - South Dakota
Education
Associate Degree in Public Administration, 1979, Brainerd Community College
Numerous Appraisal and College Courses the past twenty years, both as an attendee and as an
instructor.
Experience
Twenty-two years experience in the public and private sector in ad valorem and fee appraisal.
Instructor and lecturer for the University of Minnesota, including the "Hotel-Motel Appraisal Seminar"
and "Resort Valuation Seminar"
Previously held positions:
Loan Officer, Security Loan & Thrift, Brainerd
Manager, ITT Thorp, Little Falls
County Assessor, Morrison County
City Assessor, St. Cloud
Published twice in the international magazine Assessment Digest
Appraisals completed in Minnesota, Iowa, North Dakota, Wisconsin, Missouri, Wyoming, Kentucky, and South
Dakota
Representative Clients
Lending Institutions Government Agencies
Zapp National Bank St. Cloud HRA Wabasha County
CreditAmerica Sauk Rapids City & School District Pennington County
First American Bank City of St. Cloud Douglas County
Norwest Bank Stearns County Brown County
First Bank System Wright County Sherburne County
Citizen's Bank, Big Lake Meeker County Cass County
SBA Benton County City of Princeton
American National Bank Nicollet County City of Elk River
American Heritage Bank Pine County
Cold Spring Bank Kanabec County
First National-Deerwood Minnesota Department of Revenue
Minnesota Attorney General
University of Minnesota
St. Cloud State University
Corporate Clients
Burlington Northern Dairycraft, Inc. Hoolihan & Neils
Ben Franklin Company Strack Construction Miller Companies
Donohue, Rajkowski, Ltd. Champion International Big Bear Company
R.A. Morton & Associates Duinlivan, Sherwood, Spellacy, M.E. International
and Tarvestad Antioch Publishing
AIREA Courses Completed
Appraisal Principles
Basic Valuation Procedures
Capitalization A
Capitalization e
Valuation Analysis & Report Writing
Standards of Professional Practice A & B
Business Valuation
Report Writing Seminar
HP-lZC Financial Calculator Seminar
R-4lb Seminar
Case Studies in Real Estate Valuation
Easement Valuation
ASFMRA Courses Completed
Ranch Appraisal
Rural Appraisal
Standards of Professional Practice
IAAO Courses Completed
Fundamentals of Reat Property Appraisal
Assessment Administration
Appraisal of Income Producing Property
Mass Appraisal of Income Property
NAIFA Courses
Capitalization Theory, "ROadmap System"
Pro Source Courses
Narrative Report Writing
Advanced Yield Capitalization
SREA Courses Completed
SRA-101
Tax Considerations in Real Estate
ILLUSTRATION
ECM PUBLISHERS, INC.
KING AND MAIN STREET OFFICE
Background
A. Existing Properties
931 Main Street
317 King Avenue
307 King Avenue
$ 4,601 net tax capacity
3,248
$13,650 original net tax capacity
B. Hypothetical Office
$ 975,000 building value
162.000 land value ($5.00 per sq. ft.)
$1,137,000
$1,137,000 times 4.6% (commercial property -second parcel)
equals net tax capacity of $52,302
C. Captured Net Tax Capacity
$52,302 net tax capacity of office building less
13,650 original net tax capacity equals
$38,652 "captured" net tax capacity
D. Estimated Tax Increment Value
$38,652 "captured" net tax capacity times
1.04247 1995 tax capacity rate equals
$40,294 tax increment
HRA/City Project Debt -estimated and assumed
$238,000 (purchase price of three existing sites at King/Main
of $40,000 less $162,000 attributable to "land only"
value [$5.00 per sq. ft.])
Demolition 22,000
Site Prep/Site 1r 0
Development
• TOTAL $275,000
TIF District
• - Assumes a renewal and reno i
vat on district is created at King/Main
- Assumes pay-as-you-go TIF District -Developer bears all up-front
costs
- LGA/HACA Reduction: Qualifying local contribution is 10% of
annual increment; LGA reduction is a six year window, in 7th year
the reduction is 12.5% of the estimated penalty, in 8th year the
reduction is 25%, in 9th year 37.5%, etc.
Summary
A project debt of $275,000 can be retired in seven years with
reimbursements credited to the developer under apay-as-you-go TIF
District:
Project debt of $275,000 divided by annual tax increment of
$40,294 equals 6,8 years, say, 7 years.
Other Considerations
Supplemental micro-loan at a reduced interest rate for the renovation
• component of the County Administration building.
Supplemental block grant micro-loan at a reduced interest rate for the
renovation component of the County Administration building.
Outright redevelopment grant from TIF Districts No. 1 and No. 3 -
requires a TIF Plan amendment.
Suggested Course of Action
Communication to ECM outlining HRApay-as-you-go renewal and
renovation TIF District at King and Main, supplemental loans through
EDA, and redevelopment grant from TIF Districts No. 1 and No. 3
from the city. A TIF application accompanies the correspondence (one
$5,000 fee covers pay-as-you-go request and plan amendment to plans
from Districts No. 1 and No. 3), and applications for supplemental
micro-loans accompany the correspondence.
HRA creates pay-as-you-go TIF District
EDA considers micro-loans
• City considers redevelopment grant from Districts No. 1 and No. 3
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ILLUSTRATION
CASH FLOW ANALYSIS -
ECM PUBLISHERS, INC.
King and Main Street Office
Year 1* 2 3 4 5 6 7 8 9 10 **'ll
Original Net Tax Capacity (1) $13,650 $14,060 $14,481 $14,916 $15,363 $15,824 $16,299 $16,788 $17,291 $17,810 $18,344
Total Net Tax Capacity **R 13.6 ~0 $$,151 $52.302 .4'+52.30] ,Q$ .P~52.:102 .P„ri2.:~02 ~ ~nz X52.302 ~F2.R02 X52.302
Captured Net Tax Capacity $0 $12,091 $37,821 $37,386 $36,939 $36,478 $36,003 $35,514 $35,011 $34,492 $33,958
Estimated Tax Rate (2) 1.04247 1.04247 1:04247 1.04247 1.04247 1.04247 1.042471 1.04247 1.04247 1.04247 1.04247
Captured Tax Increment $39,427 $38;974 $38,508 $38,027 $37,532 $37,022 $36,498 $35,957 $0
Cumulative Captured Tax Increment $78,401 $116,909 $154,936 $192,468 $229,490 $265,988 $301,945 $301,945
LGA/HACA Reduction Year 0 1 2 3 4 5 6 7 8 9
Reduction 0 0 0 0 0 0 12.5% 25% 37.5% 50%
(1) Assumes a three percent (3%) annual increase in original tax capacity.
(2) Based on a 1995 tax rate.
* Taxes will be generated in Year 1 and in Year 2, but no increment will be collected. The first year an
increment will be collected is Year 3:
** Assumes no construction value in previous year.
*** The district is decertified in Year l0.and Lases generated in Year 11 will be collected by the local taxing jurisdictions.
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PERCENT OF CAPTURED TAX CAPACITY THAT IS
"QUALIFYING CAPTURED TAX CAPACITY"
Economic
Development Renewal and
Years from or Soils Condition Renovation Other
Certification Districts Districts Districts
0 100 0 0
1 100 0 0
2 100 0 0
3 100 0 0
4 100 0 0
5 100 0 0
6 100 12.5 6.25
7 100 25 12.5
8 100 37.5 18.75
9 100 SO 25
10 100 62.5 31.25
11 100 75 37.5
12 100 87.5 43.75
13 -- 100 50
14 -- 100 56.25
15 -- 100 62.5
16 -- 100 68.75
17 -- 100 75
18 -- 100 81.25
19 -- 100 87.5
20 -- 100 93.75
21 and over -- 100 100
SOURCE:BRIGGS & MORGAN