6. HRSR 05-03-2010ITEM # 6.
REQUEST FOR ACTION
ver
To Item Number
Housin & Redevelo ment Authori
Agenda Section Meeting Date Prepared by
May 3, 2010 Catherine Mehelich, Director of
Economic Develo ment
Item Description Reviewed by
Consider Modification to Tax Increment Financing District #16
Reviewed by
Action Requested
The HRA is asked to authorize staff to proceed with the necessary steps to modify TIF District #16
(King & Main) consistent with recent legislation to stimulate construction or rehabilitation of private
development.
Background/Discussion
The recently passed and executed Jobs Bill (HF 2695) contains several changes related to the use of TIF.
One of the changes expands the ability to temporarily use tax increments from an existing TIF district to
assist construction or rehabilitation of private development. The attached memo from the HRA's
development attorney at Kennedy & Graven, summarizes the provisions.
A critical limitation in the authority is the requirement that the authority to spend tax increments under
this subdivision expires December 31, 2011. This allows the tax increments collected in 2010 and 2011 to
be dedicated toward a viable project. The estimated amount collected in this time will be just over
$100,000.
The HRA established TIF District #16 in 1999 to redevelop the properties at King Ave & Main Street in
downtown Elk River. The debt obligation which reimburses the HRA for eligible costs in this district
will be paid in full ($39,671.78) at the end of 2010, assuming all taxes are paid. At that time the HRA will
be required to decertify the district and the property taxes will be distributed to the city, county and
school district. The modification proposed under the new legislation would essentially defer the HRA's
final payment for 2 years in order to provide financing assistance to an eligible project. The HRA would
continue to receive tax increments after December 31, 2011 until the earlier of it's debt obligation is paid
or until the TIF district expires its 25-year life (2023).
Staff is exploring projects that axe potentially eligible for the financing assistance. The TIF could be used
for any type of costs such as construction, renovation, or land and in any form such as equity in a
partnership or a forgivable loan. The modification process requires the HRA to adopt a written spending
plan that specifically authorizes the assistance and a public hearing. At that time it is expected that the
specific project would be disclosed.
S:\Community Development\Economic Development\TIF\TIF16\5.3.10 I IRA Action Requested.doc
Financial Impact
The estimated tax increment to be collected u12010 is $55,645.10. The deferral of tax increment for
2-years will be just over $100,000 that could be utilized under the recent legislation.
Attachments
• Memorandum from Kennedy & Graven dated Apri16, 2010 RE: Jobs Bill -House File 2695
Action Motion by Second by Vote
Follow Up
S:\Community Development\Economic Development\TIF\TIF16\5.3.10 IIRA Action Requested.doc
Offices in 470 U.S. Bank Plaza
Kenned y 200 South Sixth Street
Minneapolis Minneapolis MN 55402
~! P Saint Paul
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1"av (612) 337-9300 telephone
(612) 337-9310 fax
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1 St. Cloud N'~'•kennedy-graven.com
CHARTERED AfErmative Action Equal Opportunity Employer
MEMORANDUM
FROM: Mary Dyrseth
Jenny Boulton
DATE: Apri16, 2010
RE: Jobs Bill -House File 2695
The Jobs Bill (HF 2695), which was passed by the Minnesota legislature and signed into
law by the Governor last week, includes several provisions which liberalize the use of tax
increment financing in order to stimulate job creation. Three provisions in the Jobs Bill which
maybe of interest to the City, but are only available for a limited time, include the following:
1. Compact Development Districts.
(a) The Jobs Bill authorizes the establishment of "compact development
districts" as a new type of tax increment financing district. A compact development district has a
25 year duration, and must satisfy the following requirements:
(i) Parcels consisting of 70% of the area of the district must be
"occupied" (at least 15% of a parcel must be covered) by buildings or similar
structures that constitute commercial or industrial property; and
(ii) The planned development will increase the total square footage of
the commercial and industrial buildings by three times or more relative to the
square footage of the buildings before the district was approved.
(b) Tax increments from a compact development district may be used only to
pay the following:
(i) Administrative expenses within the 10% limitation;
(ii) The costs of acquiring land located in or abutting the district;
(iii) Demolition or removal buildings or other improvements and other
site preparation costs for land in or abutting the district; and
(iv) Installation of public infrastructure or public improvements serving
the district, but excluding costs of streets, roads, highways, parking or other
366669v1 MMD KG400-1
public improvements primarily designed to serve private passenger motor
vehicles.
The request to certify a compact development district must be filed with the county after
June 30, 2010 but before June 30, 2012.
2. Liberalization of Economic District Rules. The Jobs Bill provides that an
economic development district may be created for any development. Tax increments from an
economic development district may be used to provide improvements, loans subsidies, grants,
interest rate subsidies or assistance in any form to developments consisting of buildings and
ancillary facilities if the following conditions are met:
(a) The municipality finds the project will create or retain jobs in the state,
including construction jobs, and the construction of the project would not have commenced
before July 1, 2011 without the assistance to be provided;
(b) Construction of the project begins no later than July 1, 201 l; and
(c) The request for certification of the district is made to the county no later
than June 30, 2011.
3. Tem~orary Authority to Stimulate Construction. The Jobs Bill authorizes tax
increments from an existing tax increment district, whenever the district was certified -and not
withstanding any law to the contrary, to be spent for any of the following purposes:
(a) To provide improvements, loans, interest rate subsidies or assistance in
any form to private development consisting of the construction or substantial rehabilitation of
buildings and ancillary facilities, if doing so will create or retain jobs in the state, including
construction jobs, and construction commences before July 1, 2011, and would not commence
before that date without the assistance; and
(b) To make a equity or similar investment in a corporation, partnership or
limited liability company that the authority determines is necessary to make the construction of a
development meeting the requirements of paragraph (a) above financially feasible.
The authority must adopt a written spending plan that specifically authorizes the
assistance. A notice of public hearing on the spending plan must be published in a newspaper of
general circulation at least once and not less than 10 days and not more than 30 days prior to the
date of hearing.
The authority to spend tax increments under this authorization expires on December 31,
2011. Expenditures of tax increments are not allowed beyond that date.
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