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8A Tax Increment Financing
(� 0 LO I" U ffso 4646 Dakota Street SE Pr ior Lake. MN 55372 CITY COUNCIL AGENDA REPORT MEETING DATE: September 19, 2011 AGENDA M 8A PREPARED BY: Dan Rogness, Community & Economic Development Director PRESENTED BY: Dan Rogness, Community & Economic Development Director AGENDA ITEM: Consider Approval of Two Resolutions Relating to Tax Increment Financ- ing: 1) A Resolution Adopting a Modification to the Development Program for Municipal Development District No. 1; and Establishing Tax Increment Financing District No. 1-4 Therein and Adopting a Tax Increment Financing Plan Therefor, and 2) A Resolution Authorizing an Interfund Loan for Ad- vance of Certain Costs in Connection with Tax Increment Financing Dis- trict No. 1-4. DISCUSSION: Introduction The purpose of this agenda item is to complete three actions with respect to Tax Increment Financing: 1) to hold a public hearing and take action on a request to provide Tax Increment Financing (TIF) to assist with the expansion of the River Valley Veterinary Service at 15900 Jordan Avenue; and 2)as part of that public hearing take action on the proposed modification of Development District No. 1 and 3) Authorize an Interfund Loan for advancement of certain costs in connec- tion with the TIF District. Since multiple actions are proposed, this agenda re- port will address each separately. Hi story River Valley Veterinary Service has been operating at its present location since 1990. The existing building is approximately 7,000 square feet, including the main level and a basement level. The site area is 1.1 acres. This business be- gan in 1984 by Dr. Bruce Viren and Dr. Cynthia Sellin, which provides animal care, grooming and dog obedience services. They contemplate a project which will double the size of the building on the property and require assistance to complete the project. All tax increment projects take place within a development or redevelopment dis- trict approved by the city council which at present does not include all properties within the corporate limits of Prior Lake. Historically the city has deducted the costs of preparation of the TIF Plan from the application fee paid by the applicant. An opinion by the State Auditor allows the city to recover other TIF related costs through interfund borrowing. Current Circumstances The property is owned by Jordan Real Estate Partnership of Prior Lake and leased to River Valley Veterinary Services, Inc. The Partnership partners in- clude Bruce Viren and Cynthia Sellin. Dr. Viren and Dr. Sellin would like to ex- pand their space by another 7,000 square feet by completing an addition with two floors that would primarily accommodate pet boarding. The total estimated project cost is $682,000. The Partnership will be using a combination of equity, bank financing and TIF to complete this project. The need for public financing relates to cash flow to support debt service based on projections for new business growth. TIF is being requested from the city as a "pay -as- you -go ", which allows a specified percent of the annual tax increment to be paid to the Partnership. Within the framework of an Economic Development TIF District of nine years, the estimated annual increment is $6,560 without an inflation factor, or an average of $8,890 with an annual 4% inflation factor. By assuming no property value inflation over nine years, the total estimated in- crement would be $59,000 based on a total property market value of $980,000 (existing @ $455,000 + new @ $525,000). Retaining 10% for city administration results in an estimated payment to the Partnership totaling $53,000 with no property value inflation. If some inflation does occur, staff estimates that the Partnership could potentially obtain up to $60,000 in increment, which is pro- posed to be the cap of total increment provided to them (less than the 4% infla- tion amount of $71,750). In addition, the city council is being asked to modify Municipal Development Dis- trict No. 1 from an area that presently encompasses the downtown to one which is coterminous with the city boundaries. This change would allow the city to es- tablish future TIF Districts throughout the city without having to create other De- velopment Districts at the same time. This type of flexibility does not create ex- pectations that more TIF Districts will be established, but rather, it provides more timely opportunity and some degree of additional flexibility in the use of the funds generated by the projects therein. It also allows for annexed properties to be immediately incorporated as part of the development district. The State Auditor concluded in the recent past that issuers of Tax Increment Financing incur expenses often before the TIF request is approved. The auditor has therefore authorized the city to make an interfund loan commensurate with the expenses we have incurred. The loan is paid back for the life of the project through TIF proceeds. Conclusion The Partnership has applied for TIF assistance, and the City Council previously called for a public hearing to consider TIF for the expansion project. If ap- proved, TIF will assist with 8 -9% of the total project cost. Tax increment will be captured for 9 years after which the full taxes will be distributed to all taxing ju- risdictions. The council should also determine if it wishes to enlarge the devel- opment district to be coterminous with our corporate limits and authorize inter - fund borrowing to reimburse the city for TIF related expenses "up front" rather than over the nine year life of the district. ISSUES: Fundamentally Tax Increment Financing allows the taxes generated by the new value created by a project to assist in the cost of the project for a specific num- ber of years rather than be remitted to the taxing entities. There are two broad categories of Tax Increment Financing. One is bonded TIF. The other is pay as you go. Bonded TIF means that the city sells bonds and remits the proceeds of 2 those bonds to TIF eligible expenses. The bonds are paid back over the life of the district. If for some reason the TIF increments are not enough to pay back the bonds, the city must pay from other funds. Pay as you go does not guaran- tee the petitioner a specific amount of money. Instead the tax increment is for- warded to the developer Special provisions of the Minnesota State Legislature in 2010 allowed a broader use of 9 -year Economic Development districts that opened the door to the use of TIF for commercial /industrial projects that create jobs (including construction jobs). This legislation can be found in Article 4, Sec- tion 16, MN Statutes, Section 469.176, Subdivision 4c. Although the typical TIF "but for" test is not required if jobs are being created under the special legisla- tion. However, as a matter of public policy, the Partnership has stated and demonstrated that their proposed project will not be done without TIF assistance (see their letter contained in the attached Tax Increment Plan prepared by Eh- lers and Associates). The window for this special legislation was through June 30, 2011, which was subsequently extended to June 30, 2012 (the date at which construction must have begun). In addition to the construction jobs hired for the expansion project, this business projects that another four employees will be hired with non - minimum wages and full benefits. Therefore, if a total estimated 4.5 FTE jobs are created as a result of TIF, then approximately $13,350 public funding is being spent per job. Ehlers Financial is coordinating the TIF process, including notifications to the county and school district. The school district has not provided any comments, and the county board took action on this item on September 18, 2011. The board's comments are attached and are supportive of the project. In addition, the Prior Lake Economic Development Advisory Committee (EDAC) approved a motion to unanimously support this assistance at its meeting on September 8, 2011. The expansion of the development district to include the entire city affords max- imum flexibility should the city council desire to use it for the consideration of future TIF projects and for potential use of TIF funds to serve the entire commu- nity rather than subparts of the city circumscribed by a development district which includes less than the entire city. The interfund loan is proposed as the result of the State Auditor's opinion. While the city is not mandated to authorize the interfund transfer, it does have the benefit of providing immediate reimbursement for related documented city costs. Various documents are attached to this agenda item including: The county's po- sition on the TIF Proposal; The Plan which includes modification of the devel- opment district, the tax increment plan and tax increment financing district; the amended development program for the municipal development district and two resolutions, one approving the development district amendment and the TIF re- quest and plan and another approving the interfund loan. Rebecca Kurtz with Ehlers and Associates will be present to assist with this presentation and re- spond to any questions the council may have. FINANCIAL The taxes generated on the existing property continue to be distributed to the IMPACT: various taxing entities unabated. The new value due to expansion (an estimated $59,000 in captured taxes), will be used to finance the proposed business ex- pansion project over a 9 -year period. Starting with the tenth year, those taxes will be distributed to all taxing jurisdictions. Of that total tax increment, the city would have received $5,960 based on 10.1 % of total taxes received during 2011. If the actual tax increment is less than estimated, then the Partnership will only receive 90% of that increment never to exceed a total of $60,000. The risk is solely upon the applicant and not the taxpayers. The mechanics of this pro- gram are that for the nine year life of the TIF the taxes are paid by the property owner, and the portion associated with the expansion project are given back in to increments yearly. Once the TIF is complete, all taxes are distributed to the various taxing entities. ALTERNATIVES: 1. Deny the establishment of TIF District No. 1 -4 the modification of Municipal Development District No. 1 and the interfund loan 2. Approve the establishment of TIF District No. 1 -4, the modification of Munici- pal Development District No. 1, using pay -as- you -go to provide 90% of the annual tax increment for the 9 -year Economic Development District period and the interfund loan. 3. Approve all three but authorize a smaller TIF amount either by reducing the number of years in which the increment occurs or by keeping the years the same but reducing the amount of money to be generated by the TIF District each year. RECOMMENDED Staff recommends Alternative #2. MOTION: CITY OF PRIOR LAKE SCOTT COUNTY STATE OF MINNESOTA Motion By: Second By: RESOLUTION NO. RESOLUTION ADOPTING A MODIFICATION TO THE DEVELOPMENT PROGRAM FOR MUNICIPAL DEVELOPMENT DISTRICT NO. 1; AND ESTABLISHING TAX INCREMENT FINANCING DISTRICT NO. 1 -4 THEREIN AND ADOPTING A TAX INCREMENT FINANCING PLAN THEREFOR. BE IT RESOLVED by the City Council (the "Council ") of the City of Prior Lake, Minnesota (the "City "), as follows: Section 1. Recitals 1.01. The City Council of the City of Prior Lake (the "City ") has heretofore established Municipal Development District No. 1 and adopted the Development Program therefor. It has been proposed that the City adopt a Modification to the Development Program (the "Development Program Modification ") for Municipal Development District No. 1 (the "Project Area ") and establish Tax Increment Financing District No. 1 -4 (the "District ") therein and adopt a Tax Increment Financing Plan (the "TIF Plan ") therefor (the Development Program Modification and the TIF Plan are referred to collectively herein as the "Program and Plan"); all pursuant to and in conformity with applicable law, including Minnesota Statutes, Sections 469.124 through 469.134 and Sections 469.174 to 469.1799, all inclusive, as amended, (the "Act ") all as reflected in the Program and Plan, and presented for the Council's consideration. 1.02. The City has investigated the facts relating to the Program and Plan and has caused the Program and Plan to be prepared. 1.03. The City has performed all actions required by law to be performed prior to the establishment of the District and the adoption and approval of the proposed Program and Plan, including, but not limited to, notification of Scott County and Independent School District No. 719 having taxing jurisdiction over the property to be included in the District, a review of and written comment on the Program and Plan by the City Planning Commission, and the holding of a public hearing upon published notice as required by law. 1.04. Certain written reports (the "Reports ") relating to the Program and Plan and to the activities contemplated therein have heretofore been prepared by staff and consultants and submitted to the Council and/or made a part of the City files and proceedings on the Program and Plan. The Reports include data, information and/or substantiation constituting or relating to the basis for the other findings and determinations made in this resolution. The Council hereby confirms, ratifies and adopts the Reports, which are hereby incorporated into and made as fully a part of this resolution to the same extent as if set forth in full herein. 1.05 The Council recognizes that, pursuant to Minnesota Statutes, Section 469.177, Subd. 3, clause b, there is a mandatory fiscal disparities contribution for the District, an economic development district. 1.06. The City is modifying the boundaries of the Project Area to be coterminous with the city limits of the City of Prior Lake. Section 2. Findings for the Adoption and Approval of the Development Program Modification. 2.01. The Council approves the Development Program Modification, and specifically finds that: (a) the land within the Project area as expanded would not be available for redevelopment without the financial aid to be sought under this Development Program; (b) the Development Program, as modified, will afford maximum opportunity, consistent with the needs of the City as a whole, for the development of the Project by private enterprise; and (c) that the Development Program, as modified, conforms to the general plan for the development of the City as a whole. Section 3. Findings for the Establishment of Tax Increment Financing District No. 1 -4. 3.01. The Council hereby finds that the District is in the public interest and is an "economic development district" under Minnesota Statutes, Section 469.174, Subd. 12 of the Act. 3.02. The Council further finds that the proposed development would not occur solely through private investment within the reasonably foreseeable future and that the increased market value of the site 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 the District permitted by the Tax Increment Financing Plan, that the Program and Plan conform to the general plan for the development or redevelopment of the City as a whole; and that the Program and Plan will afford maximum opportunity consistent with the sound needs of the City as a whole, for the redevelopment or development of the District by private enterprise. 3.03. The Council further finds, declares and determines that the City made the above findings stated in this Section and has set forth the reasons and supporting facts for each determination in writing, attached hereto as Exhibit A. Section 4. Findings for Use of the District to Provide Assistance Pursuant to Section 469.176 Subdivision 4c(d) of the Act 4.01. The Council further expects that the District will meet the requirements of Minnesota Statutes, Sections 469.176., Subd. 4c(d) (exempting the District from manufacturing/warehouse / distribution use restrictions), because: (i) the proposed development will create or retain jobs in the State (including construction jobs), and that construction of the project would not have commenced before July 1, 2012; (ii) construction of the project begins no later than July 1, 2012 with the assistance under the TIF Plan; and (iii) the City and EDA will request certification of the District by no later than June 30, 2012. 4.02. The findings in this section are based on the facts stated in Exhibit A and other materials on file at City Hall. Section 5. Public Purpose 5.01. The adoption of the Program and Plan conforms in all respects to the requirements of the Act and will result in increased employment in the state, and will result in preservation and enhancement of the tax base of the State and thereby serves a public purpose. For the reasons described in Exhibit A, the City believes these benefits directly derive from the tax increment assistance provided under the TIF Plan. A private developer will receive only the assistance needed to make this development financially feasible. As such, any private benefits received by a developer are incidental and do not outweigh the primary public benefits. Section 6. Approval and Adoption of the Program and Plan 6.01. The Program and Plan, as presented to the Council on this date, including without limitation the findings and statements of objectives contained therein, are hereby approved, ratified, established, and adopted and shall be placed on file in the office of the Finance Director. 6.02. The staff of the City, the City's advisors and legal counsel are authorized and directed to proceed with the implementation of the Program and Plan and to negotiate, draft, prepare and present to this Council for its consideration all further plans, resolutions, documents and contracts necessary for this purpose. 6.03 The Auditor of Scott County is requested to certify the original net tax capacity of the District, as described in the Program and Plan, and to certify in each year thereafter the amount by which the original net tax capacity has increased or decreased; and the City of Prior Lake is authorized and directed to forthwith transmit this request to the County Auditor in such form and content as the Auditor may specify, together with a list of all properties within the District, for which building permits have been issued during the 18 months immediately preceding the adoption of this resolution. 6.04. The City Clerk is further authorized and directed to file a copy of the Program and Plan with the Commissioner of Revenue and the Office of the State Auditor pursuant to Minnesota Statutes 469.175, Subd. 4a. PASSED AND ADOPTED THIS 19` DAY OF SEPTEMBER 2011. YES NO M ser M ser Erickson Erickson Hedberg Hedber Keeney Keene Soukup Souku Frank Boyles, City Manager EXHIBIT A RESOLUTION NO. The reasons and facts supporting the findings for the adoption of the Tax Increment Financing Plan for Tax Increment Financing District No. 1 -4 as required pursuant to M.S., Section 469.175, Subd. 3 are as follows: 1. Finding that the Tax Increment Financing District No. 1 -4 is an economic development district as defined in M.S., Section 469.174, Subd. 12. Tax Increment Financing District No. 1 -4 is a contiguous geographic area within the City's Development District No. 1, delineated in the TIF Plan, for the purpose of financing economic development in the City through the use of tax increment. The District is in the public interest because it will facilitate construction of an expansion to a veterinarian clinic which will increase employment in the state, and preserve and enhance the tax base of the state. • The private development to be assisted pursuant to the TIF Plan will create or retain jobs in the state, including construction jobs; • The development consists of an expansion to a veterinarian clinic in the City, construction will be required to commence no later than July 1, 2012; • Construction of the proposed development would not have commenced before July 1, 2012, without the tax increment financing assistance to be provided pursuant to the TIF Plan; and • The City will file the request for certification of the District by June 30, 2012. 2. Finding that the proposed development, in the opinion of the City Council, would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future and that the increased market value of the site 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. 1 -4 permitted by the TIF Plan. 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: This finding is supported by the fact that the development proposed in this plan is a veterinarian clinic that meets the City's objectives for economic development. The City has adopted its 2030 Vision and continues with its efforts to sustain and grow its downtown area. The cost of site improvements makes development of the facility infeasible without City assistance. The developer was asked for and provided a letter and a proforma as justification that the developer would not have gone forward without tax increment assistance (see attachment in Appendix F). The increased market value of the site that could reasonably be expected to occur without the use of tax increment financing would be less than the increase in market value estimated to result from the proposed development after subtracting the present value of the projected tax increments for the maximum duration of the TIF District permitted by the TIF Plan: The City supported this finding on the grounds that the cost of site improvements add to the total development cost. Historically, site development costs in this area have made development infeasible without tax increment assistance. The City reasonably determines that no other development of similar scope is anticipated on this site without substantially similar assistance being provided to the development. Therefore, the City concludes as follows: a. The City's estimate of the amount by which the market value of the entire District will increase without the use of tax increment financing is $0. b. If the proposed development occurs, the total increase in market value will be $525,000 (see Appendix D and F of the TIF Plan) c. The present value of tax increments from the District for the maximum duration of the district permitted by the TIF Plan is estimated to be $80,019 (see Appendix D and F of the TIF Plan). d. Even if some development other than the proposed development were to occur, the Council finds that no alternative would occur that would produce a market value increase greater than $444,981 (the amount in clause b less the amount in clause c) without tax increment assistance. 3. Finding that the TIF Plan for Tax Increment Financing District No. 1 -4 conforms to the general plan for the development or redevelopment of the municipality as a whole. The Planning Commission reviewed the TIF Plan and found that the TIF Plan conforms to the general development plan of the City. 4. Finding that the Tax Increment Financing Plan for Tax Increment Financing District No. 1 -4 will afford maximum opportunity, consistent with the sound needs of the City as a whole, for the development of Municipal Development District No. I by private enterprise. The project to be assisted by the District will result in increased employment in the City and the State of Minnesota, increased tax base of the State, and the development of currently vacant and underutilized land by a private business. CITY OF PRIOR LAKE SCOTT COUNTY STATE OF MINNESOTA Motion By: Second By: RESOLUTION NO. RESOLUTION AUTHORIZING AN INTERFUND LOAN FOR ADVANCE OF CERTAIN COSTS IN CONNECTION WITH TAX INCREMENT FINANCING DISTRICT NO. 1-4. BE IT RESOLVED by the City Council (the "Council ") of the City of Prior Lake, Minnesota (the "City "), as follows: Section 1. Background 1.01. The City has heretofore approved the establishment of Tax Increment Financing District No. 1 -4 (the "TIF District ") within Development District No. 1 (the "Project "), and has adopted a Tax Increment Financing Plan (the "TIF Plan") for the purpose of financing certain improvements within the Project. 1.02. The City has determined to pay for certain costs identified in the TIF Plan consisting of site improvements /preparation and administrative costs (collectively, the "Qualified Costs "), which costs may be financed on a temporary basis from City funds available for such purposes. 1.03. Under Minnesota Statutes, Section 469.178, Subd. 7, the City is authorized to advance or loan money from the City's general fund or any other fund from which such advances may be legally authorized, in order to finance the Qualified Costs. 1.04. The City intends to reimburse itself for the Qualified Costs from tax increments derived from the TIF District in accordance with the terms of this resolution (which terms are referred to collectively as the " Interfund Loan"). Section 2. Terms of Interfund Loan 2.01. The City hereby authorizes the advance of up to $ from the fund or so much thereof as may be paid as Qualified Costs. The City shall reimburse itself for such advances together with interest at the rate stated below. Interest accrues on the principal amount from the date of each advance. The maximum rate of interest permitted to be charged is limited to the greater of the rates specified under Minnesota Statutes, Section 270C.40 or Section 549.09 as of the date the loan or advance is authorized, unless the written agreement states that the maximum interest rate will fluctuate as the interest rates specified under Minnesota Statutes, Section 270C.40 or Section 549.09 are from time to time adjusted. The interest rate shall be 4% and will not fluctuate. 2.02. Principal and interest ( "Payments ") on the Interfund Loan shall be paid semi - annually on each August 1 and February 1 (each a "Payment Date "), commencing on the first Payment Date on which the Authority has Available Tax Increment (defined below), or on any other dates determined by the Finance Director, through the date of last receipt of tax increment from the TIF District. 2.03. Payments on this Interfund Loan are payable solely from "Available Tax Increment," which shall mean, on each Payment Date, payments to the Interfund Loan will be based on increment generated in the preceding six (6) months with respect to the property within the TIF District and remitted to the City by Scott County, all in accordance with Minnesota Statutes, Sections 469.174 to 469.1799, all inclusive, as amended. Payments on this Interfund Loan may be subordinated to any outstanding or future bonds, notes or contracts secured in whole or in part with Available Tax Increment, and are on parity with any other outstanding or future interf ind loans secured in whole or in part with Available Tax Increment. 2.04. The principal sum and all accrued interest payable under this Interfund Loan are pre- payable in whole or in part at any time by the City without premium or penalty. No partial prepayment shall affect the amount or timing of any other regular payment otherwise required to be made under this Interfund Loan. 2.05. This Interfund Loan is evidence of an internal borrowing by the City in accordance with Minnesota Statutes, Section 469.178, Subd. 7, and is a limited obligation payable solely from Available Tax Increment pledged to the payment hereof under this resolution. This Interfund Loan and the interest hereon shall not be deemed to constitute a general obligation of the State of Minnesota or any political subdivision thereof, including, without limitation, the City. Neither the State of Minnesota, nor any political subdivision thereof shall be obligated to pay the principal of or interest on this Interfund Loan or other costs incident hereto except out of Available Tax Increment, and neither the full faith and credit nor the taxing power of the State of Minnesota or any political subdivision thereof is pledged to the payment of the principal of or interest on this Interfund Loan or other costs incident hereto. The City shall have no obligation to pay any principal amount of the Interfund Loan or accrued interest thereon, which may remain unpaid after the final Payment Date. 2.06. The City may amend the terms of this Interfund Loan at any time by resolution of the City Council, including a determination to forgive the outstanding principal amount and accrued interest to the extent permissible under law. Section 3. Effective Date This resolution is effective upon the date of its approval. PASSED AND ADOPTED THIS 19"' SEPTEMBER 2011. YES NO M ser M ser Erickson Erickson Hedberg Hedber Keeney Keene Soukup Souku Frank Boyles, City Manager eov4� ®Oo GARY L. SHELTON COUNTY ADMINISTRATOR September 14, 2011 Frank Boyles Prior Lake City Manager 4646 Dakota Street SE Prior Lake, Minnesota 55372 SCOTT COUNTY OFFICE OF THE ADMINISTRATOR GOVERNMENT CENTER - 200 FOURTH AVENUE WEST • SHAKOPEE, MN 55379 -1220 (952) 496 -8100 • FAX: (952) 496 -8180 • gshelton @co.scott.mn.us • www.co.scott.mn.us RE: Adoption of Tax Increment Financing District #1 -4 River Valley Veterinary Clinic Dear Mr. Boyles: On September 19, 2011 the Prior Lake City Council will be conducting a public hearing regarding the establishment of Tax Increment Financing (TIF) District #1 -4 (River Valley Veterinary Clinic). On September 13, 2011, County and City staff presented information regarding this proposal to the Scott County Board of Commissioners. While Scott County acknowledges that the City is the ultimate authority to approve or reject this TIF proposal, the Board of Commissioners — after reviewing the plan and receiving the proposal information — would like to take this opportunity to provide the County's comments to the City. First, the County agrees that the district statutorily qualifies as an "economic development district" under the 2010 and amended 2011 legislative actions promoting jobs within the State of Minnesota. Yet even further, the Scott County Board of Commissioners fully endorses the goal of jobs creation within Scott County. As the economic conditions remain depressed, and unemployment within the State and County remain at extremely high levels, the County endorses opportunities that will create permanent and temporary jobs within Scott County. The River Valley Veterinary Clinic is a long time business within the City of Prior Lake that currently provides over 20 jobs. Scott County appreciates their commitment to the County and City and hopes that the improvement will allow them to expand their business and employee base as anticipated. The Scott County Board of Commissioners have funded and promoted economic development initiatives that promote new construction growth and business opportunities within the County. This proposal is consistent with our vision of encouraging existing County businesses to expand and grow. The Board acknowledges that the added growth will not increase the local tax base for a period not to exceed 9 years, but that following the expiration of the TIF district, the increase in tax base will be added to the existing tax base. The Scott County Board of Commissioners supports this development and wishes City, property owner and developer of the project much success. Respectfully, �Ga Scott County Administrator cc: Scott County Commissioners Prior Lake City Council Dan Rogness, Prior Lake Community & Economic Development Director An Equal Opportunity/Safety Aware Employer Printed on recycled paper containing 30% post consenter content 211 As of September 14, 2011 Draft for Public Hearing Modification to the Development Program for Municipal Development District No. 1 and the Tax Increment Financing Plan for the establishment of Tax Increment Financing District No. 1-4 (an economic development district) within Municipal Development District No. 1 OF PRlp$ U U Mac* City of Prior Lake Scott County State of Minnesota Public Hearing: September 19, 2011 Adopted: ja EHLERS Prepared by: EHLERS & ASSOCIATES, INC. 3060 Centre Pointe Drive, Roseville, Minnesota 55113 -1105 651 - 697 -8500 fax: 651 - 697 -8555 www.ehiers- inc.com Table of Contents (for reference purposes only) Section 1 - Tax Increment Financing Plan for Tax Increment Financing District No. 1 -4 Subsection 1 -1. Foreword ................ ............................... 1 -1 Subsection 1 -2. Statutory Authority ......... ............................... 1 -1 Subsection 1 -3. Statement of Objectives .... ............................... 1 -1 Subsection 1 -4. Development Program Overview ............................ 1 -1 Subsection 1 -5. Description of Property in the District and Property To Be Acquired . 1 -2 Subsection 1 -6. Classification of the District .. ............................... 1 -2 Subsection 1 -7. Duration and First Year of Tax Increment of the District ........... 1 -3 Subsection 1 -8. Original Tax Capacity, Tax Rate and Estimated Captured Net Tax Capacity Value /Increment and Notification of Prior Planned Improvements ...... 1 -3 Subsection 1 -9. Sources of Revenue /Bonds to be Issued ...................... 1 -4 Subsection 1 -10. Uses of Funds ............ ............................... 1 -5 Subsection 1 -11. Fiscal Disparities Election ... ............................... 1 -5 Subsection 1 -12. Business Subsidies ........ ............................... 1 -6 Subsection 1 -13. County Road Costs ........ ............................... 1 -7 Subsection 1 -14. Estimated Impact on Other Taxing Jurisdictions ................. 1 -7 Subsection 1 -15. Supporting Documentation .. ............................... 1 -9 Subsection 1 -16. Definition of Tax Increment Revenues ........................ 1 -9 Subsection 1 -17. Modifications to the District .. ............................... 1 -9 Subsection 1 -18. Administrative Expenses ... ............................... 1 -10 Subsection 1 -19. Limitation of Increment .... ............................... 1 -11 Subsection 1 -20. Use of Tax Increment ..... ............................... 1 -11 Subsection 1 -21. Excess Increments ....... ............................... 1 -12 Subsection 1 -22. Requirements for Agreements with the Developer .............. 1 -12 Subsection 1 -23. Assessment Agreements .. ............................... 1 -12 Subsection 1 -24. Administration of the District ............................... 1 -12 Subsection 1 -25. Annual Disclosure Requirements ........................... 1 -13 Subsection 1 -26. Reasonable Expectations .. ............................... 1 -13 Subsection 1 -27. Other Limitations on the Use of Tax Increment ................. 1 -13 Subsection 1 -28. Summary ............... ............................... 1 -14 Appendix A Project Description ....................... ............................... A -1 Appendix B Map(s) of Municipal Development District No. 1 and the District ................... B -1 Appendix C Description of Property to be Included in the District ............................ C -1 Appendix D Estimated Cash Flow for the District ......... ............................... D -1 Appendix E Minnesota Business Assistance Form ........ ............................... E -1 Appendix F Findings Including But/For Qualifications ...... ............................... F -1 Section 1- Tax Increment Financing Plan for Tax Increment Financing District No. 1 -4 Subsection 1 -1. Foreword The City of Prior Lake (the "City "), staff and consultants have prepared the following information to expedite the establishment of Tax Increment Financing District No. 1 -4 (the "District "), an economic development tax increment financing district, located in Municipal Development District No. 1. Subsection 1 -2. Statutory Authority Within the City, there exist areas where public involvement is necessary to cause development or redevelopment to occur. To this end, the City has certain statutory powers pursuant to Minnesota Statutes ( "M.S.'), Sections 469.124 to 469.134, inclusive, as amended, and M.S., Sections 469.174 to 469.1799, inclusive, as amended (the "Tax Increment Financing Act" or "TIF Act "), to assist in financing public costs related to this project. This District is being created pursuant to M.S., Section 469.176, Subd. 4c (d). This section contains the Tax Increment Financing Plan (the "TIF Plan") for the District. Other relevant information is contained in the Modification to the Development Program for Municipal Development District No. 1. Subsection 1 -3. Statement of Objectives The District currently consists of one parcel of land and adjacent and internal rights -of -way. The District is being created to facilitate construction of an approximately 7,000 square foot expansion to an existing veterinarian facility in the City. Please see Appendix A for further District information. The City has not entered into an agreement at the time of preparation of this TIF Plan, but the City anticipates entering into an agreement with the River Valley Vet Clinic, and development is likely to occur in the fall of 2011. This TIF Plan is expected to achieve many of the objectives outlined in the Development Program for Municipal Development District No. 1. The activities contemplated in the Modification to the Development Program and the TIF Plan do not preclude the undertaking of other qualified development or redevelopment activities. These activities are anticipated to occur over the life of Municipal Development District No. 1 and the District. Subsection 1-4. Development Program Overview 1. Property to be Acquired - Selected property located within the District may be acquired by the City and is further described in this TIF Plan. 2. Relocation - Relocation services, to the extent required by law, are available pursuant to M.S., Chapter 117 and other relevant state and federal laws. 3. Upon approval of a developer's plan relating to the project and completion of the necessary legal requirements, the City may sell to a developer selected properties that it may acquire within the District or may lease land or facilities to a developer. 4. The City may perform or provide for some or all necessary acquisition, construction, relocation, demolition, and required utilities and public street work within the District. City of Prior Lake Tax Increment Financing Plan for Tax Increment Financing District No. 1 -4 1 -1 5. The City proposes both public and private infrastructure within the District. The proposed reuse of private property within the District will be for the expansion of a veterinarian clinic, and there will be continued operation of Municipal Development District No. 1 after the capital improvements within Municipal Development District No. 1 have been completed. Subsection 1 -5. Description of Property in the District and Property To Be Acquired The District encompasses all property and adjacent rights -of -way and abutting roadways identified by the parcels listed in Appendix C of this TIF Plan. Please also see the map in Appendix B for further information on the location of the District. The City may acquire any parcel within the District including interior and adjacent street rights of way. Any properties identified for acquisition will be acquired by the City only in order to accomplish one or more of the following: storm sewer improvements; provide land for needed public streets, utilities and facilities; carry out land acquisition, site improvements, clearance and/or development to accomplish the uses and objectives set forth in this plan. The City may acquire property by gift, dedication, condemnation or direct purchase from willing sellers in order to achieve the objectives of this TIF Plan. Such acquisitions will be undertaken only when there is assurance of funding to finance the acquisition and related costs. Subsection 1 -6. Classification of the District The District is an economic development district as defined in M.S. 469.176, Subd. 12, as modified by M.S., Section 469.176, Sudb. 4(d). In order to create an economic development district under general law (M.S., Section 469.176, Subd. 12), the City must find that the District is in the public interest because: (1) it will discourage commerce, industry, or manufacturing from moving their operations to another state or municipality; or (2) it will result in increased employment in the state; or (3) it will result in preservation and enhancement of the tax base of the state. In addition, M.S., Section 469.176, Subd. 4c provides that assistance from a general law economic development district may not be used to provide assistance to development if more than 15 percent of the buildings and ancillary facilities (determined on a square footage basis), are used for other than certain specified purposes (largely manufacturing, warehousing and distribution facilities). However, M.S., Section 469.176, Subd. 4c(d) provides a limited -time exception to these general law rules. Under this provision (originally enacted in 2010 legislature and extended in 2011 legislature), a City may establish an economic development of any kind, notwithstanding the normal findings required under M.S., Section 469.176, Subd. 12, and notwithstanding the limitation on types of assisted development under MS., Section 469.176, Subd. 4c. To satisfy the requirement of M.S., Section 469.176, Subd. 4c(d), the City finds that: (1) the municipality finds that the project will create or retain jobs in this state, including construction jobs and that construction of the project would not have commenced before July 1, 2012, without the authority providing assistance under the provisions of this paragraph; (2) construction of the project begins no later than July 1, 2012; (3) the request for certification of the district is made no later than June 30, 2012; and (4) for development under this paragraph, the construction must begin before July 1, 2012 City of Prior Lake Tax Increment Financing Plan for Tax Increment Financing District No. 1 -4 1 -2 In meeting the statutory criteria the City rely on the following facts and findings: The City's findings in creating the District is pursuant to M.S. Sections 469.176, Subd. 4c(d) in order to assist in the construction of an expansion to a veterinarian clinic. If construction does not commence by July 1, 2012, the proposed facility will need to meet the criteria in M.S., Section 469.176, Subd. 4c(a), and must satisfy the findings required under M.S., Section 469.174, Subd. 12. Pursuant to M.S., Section 469.176, Subd. 7, the District does not contain any parcel or part of a parcel that qualified under the provisions of M.S., Sections 273.111 or 273.112 or Chapter 473H for taxes payable in any of the five calendar years before the filing of the request for certification of the District. Subsection 1 -7. Duration and First Year of Tax Increment of the District Pursuant to M.S., Section 469.175, Subd. 1, and M.S., Section 469.176, Subd. 1, the duration of the District must be indicated within the TIF Plan. Pursuant to M.S., Section 469.176, Subd. 1b., the duration of the District will be 8 years after receipt of the first increment by the City. The date of receipt by the City of the first tax increment is expected to be 2013. Thus, it is estimated that the District, including any modifications of the TIF Plan for subsequent phases or other changes, would terminate after 2021, or when the TIF Plan is satisfied. If increment is received in 2014, the term of the District will be 2022. The City reserves the right to decertify the District prior to the legally required date. Subsection 1 -8. Original Tax Capacity, Tax Rate and Estimated Captured Net Tax Capacity Value /Increment and Notification of Prior Planned Improvements Pursuant to M.S., Section 469.174, Subd. 7 and M.S., Section 469.177, Subd. 1, the Original Net Tax Capacity (ONTC) as certified for the District will be based on the market values placed on the property by the assessor in 2011 for taxes payable 2012. Pursuant to M.S., Section 469.177, Subds. 1 and 2, the County Auditor shall certify in each year (beginning in the payment year 2013) the amount by which the original value has increased or decreased as a result of: 1. Change in tax exempt status of property; 2. Reduction or enlargement of the geographic boundaries of the district; 3. Change due to adjustments, negotiated or court- ordered abatements; 4. Change in the use of the property and classification; 5. Change in state law governing class rates; or 6. Change in previously issued building permits. In any year in which the current Net Tax Capacity (NTC) value of the District declines below the ONTC, no value will be captured and no tax increment will be payable to the City. The original local tax rate for the District will be the local tax rate for taxes payable 2012, assuming the request for certification is made before June 30, 2012. The ONTC and the Original Local Tax Rate for the District appear in the table below. Pursuant to M.S., Section 469.174 Subd. 4 and M.S., Section 469.177, Subd. 1, 2, and 4, the estimated Captured Net Tax Capacity (CTC) of the District, within Municipal Development District No. 1, upon completion of the projects within the District, will annually approximate tax increment revenues as shown in the table below. The City requests 100 percent of the available increase in tax capacity for repayment of its obligations and current expenditures, beginning in the tax year payable 2013. The Project Tax Capacity (PTC) listed is an estimate of values when the projects within the District are completed. City of Prior Lake Tax Increment Financing Plan for Tax Increment Financing District No. 1 -4 1 -3 Project Estimated Tax Capacity upon Completion (PTC) $25,798 Original Estimated Net Tax Capacity (ONTC) $8,350 Fiscal Disparities Contribution $6,491 Estimated Captured Tax Capacity (CTC) $10,957 Original Local Tax Rate 1.067996 Pay 2011 Estimated Annual Tax Increment (CTC x Local Tax Rate) $11,702 Percent Retained by the City 100% Tax capacity includes a 4% inflation factor for the duration of the District. The tax capacity included in this chart is the estimated tax capacity of the District in year 8. The tax capacity of the District in year one is estimated to be $18,850. Pursuant to M.S., Section 469.177, Subd. 4, the City shall, after a due and diligent search, accompany its request for certification to the County Auditor or its notice of the District enlargement pursuant to M.S., Section 469.175, Subd. 4, with a listing of all properties within the District or area of enlargement for which building permits have been issued during the eighteen (18) months immediately preceding approval of the TIF Plan by the municipality pursuant to M.S., Section 469.175, Subd. 3. The County Auditor shall increase the original net tax capacity of the District by the net tax capacity of improvements for which a building permit was issued. The City has reviewed the area to be included in the District and determined that no building permits have been issued during the 18 months immediately preceding approval of the TIF Plan by the City. Subsection 1 -9. Sources of Revenue /Bonds to be Issued The costs outlined in the Uses of Funds will be financed primarily through the annual collection of tax increments. The City reserves the right to incur bonds or other indebtedness as a result of the TIF Plan. As presently proposed, the projects within the District will be financed by a pay -as- you -go note. Any refunding amounts will be deemed a budgeted cost without a formal TIF Plan Modification. This provision does not obligate the City to incur debt. The City will issue bonds or incur other debt only upon the determination that such action is in the best interest of the City. The total estimated tax increment revenues for the District are shown in the table below: SOURCES OF FUNDS TOTAL Tax Increment $81,000 Interest $15,000 TOTAL $96,000 The City may issue bonds (as defined in the TIF Act) secured in whole or in part with tax increments from, the District in a maximum principal amount of $96,000. Such bonds may be in the form of pay -as- you -go notes, revenue bonds or notes, general obligation bonds, or interfund loans. This estimate of total bonded indebtedness is a cumulative statement of authority under this TIF Plan as of the date of approval. City of Prior Lake Tax Increment Financing Plan for Tax Increment Financing District No. 1 -4 1 -4 Subsection 1 -10. Uses of Funds Currently under consideration for the District is a proposal to facilitate construction of an approximately 7,000 square foot expansion to an existing veterinarian facility. The City has determined that it will be necessary to provide assistance to the project(s) for certain District costs, as described. The City has studied the feasibility of the development or redevelopment of property in and around the District. To facilitate the establishment and development or redevelopment of the District, this TIF Plan authorizes the use of tax increment financing to pay for the cost of certain eligible expenses. The estimate of public costs and uses of funds associated with the District is outlined in the following table. USES OF TAX INCREMENT FUNDS TOTAL Land/Building Acquisition $0 Site Improvements/Preparation $87,900 Utilities $0 Other Qualifying Improvements $0 Administrative Costs (up to 10% $8,100 PROJECT COST TOTAL $96,000 Interest PROJECT AND INTEREST COSTS TOTAL $96,000 The total project cost, including financing costs (interest) listed in the table above does not exceed the total projected tax increments for the District as shown in Appendix D. Estimated capital and administrative costs listed above are subject to change among categories by modification of the TIF Plan without hearings and notices as required for approval of the initial TIF Plan, so long as the total capital and administrative costs combined do not exceed the total listed above. Further, the City may spend up to 20 percent of the tax increments from the District for activities (described in the table above) located outside the boundaries of the District but within the boundaries of the Project (including administrative costs, which are considered to be spend outside the District), subject to all other terms and conditions of this TIF Plan. Subsection 1 -11. Fiscal Disparities Election Pursuant to M.S., Section 469.177, Subd. 3, clause b, the City must calculate fiscal disparities using the following method of computation: (b) The following method of computation applies to any economic development districtfor which the request for certification was made after June 30, 1997, and to any other district for which the governing body, by resolution approving the tax increment financing plan pursuant to M.S., Section 469.177, Subd. 3, elects: (1) The original net tax capacity shall be determined before the application of the fiscal disparity provisions of Chapter 276A or 473F. The current net tax capacity shall exclude any fiscal disparity commercial - industrial net tax capacity increase between the original year and the current year multiplied by the fiscal disparity ratio determined pursuant to City of Prior Lake Tax Increment Financing Plan for Tax Increment Financing District No. 1 -4 1 -5 M.S., Section 276A.06, subdivision 7 or M.S., Section 473F.08, subdivision 6 Where the original net tax capacity is equal to or greater than the current net tax capacity, there is no captured tax capacity and no tax increment determination. Where the original tax capacity is less than the current tax capacity, the difference between the original net tax capacity and the current net tax capacity is the captured net tax capacity. This amount less any portion thereofwhich the authority has designated, in its tax incrementfinancingplan, to share with the local taxing districts is the retained captured net tax capacity of the authority. (2) The county auditor shall exclude the retained captured net tax capacity ofthe authorityfrom the net tax capacity of the local taxing districts in determining local taxing district tax rates. The local tax rates so determined are to be extended against the retained captured net tax capacity of the authority as well as the net tax capacity of the local taxing districts. The tax generated by the extension of the less of (A) the local taxing district tax rates or (B) the original local tax rate to the retained captured net tax capacity of the authority is the tax increment of the authority. Subsection 1 -12. Business Subsidies Pursuant to M.S., Section 116J.993, Subd. 3, the following forms of financial assistance are not considered a business subsidy: (1) A business subsidy of less than $150,000; (2) Assistance that is generally available to all businesses or to a general class of similar businesses, such as a line of business, size, location, or similar general criteria; (3) Public improvements to buildings or lands owned by the state or local government that serve a public purpose and do not principally benefit a single business or defined group of businesses at the time the improvements are made; (4) Redevelopment property polluted by contaminants as defined in M.S., Section 116J.552, Subd. 3; (5) Assistance provided for the sole purpose of renovating old or decaying building stock or bringing it up to code and assistance provided for designated historic preservation districts, provided that the assistance is equal to or less than 50% of the total cost; (6) Assistance to provide job readiness and training services if the sole purpose of the assistance is to provide those services; (7) Assistance for housing; (8) Assistance for pollution control or abatement, including assistance for a tax increment financing hazardous substance subdistrict as defined under M.S., Section 469.174, Subd. 23; (9) Assistance for energy conservation; (10) Tax reductions resulting from conformity with federal tax law; (11) Workers' compensation and unemployment compensation; (12) Benefits derived from regulation; (13) Indirect benefits derived from assistance to educational institutions; (14) Funds from bonds allocated under chapter 474A, bonds issued to refund outstanding bonds, and bonds issued for the benefit of an organization described in section 501 (c) (3) of the Internal Revenue Code of 1986, as amended through December 31, 1999; (15) Assistance for a collaboration between a Minnesota higher education institution and a business; (16) Assistance for a tax increment financing soils condition district as defined under M.S., Section 469.174, Subd. 19; (17) Redevelopment when the recipient's investment in the purchase of the site and in site preparation is 70 percent or more of the assessor's current year's estimated market value; (18) General changes in tax increment financing law and other general tax law changes of a principally technical nature; City of Prior Lake Tax Increment Financing Plan for Tax Increment Financing District No. 1 -4 1 -6 (19) Federal assistance until the assistance has been repaid to, and reinvested by, the state or local government agency; (20) Funds from dock and wharf bonds issued by a seaway port authority; (21) Business loans and loan guarantees of $150,000 or less; (22) Federal loan funds provided through the United States Department of Commerce, Economic Development Administration; and (23) Property tax abatements granted under M.S., Section 469.1813 to property that is subject to valuation under Minnesota Rules, chapter 8100. The City will comply with M.S., Sections 116J.993 to 116J.995 to the extent the tax increment assistance under this TIF Plan does not fall under any of the above exemptions. Subsection 1 -13. County Road Costs Pursuant to M.S., Section 469.175, Subd. 1 a, the county board may require the City to pay for all or part of the cost of county road improvements if the proposed development to be assisted by tax increment will, in the judgment of the county, substantially increase the use of county roads requiring construction of road improvements or other road costs and if the road improvements are not scheduled within the next five years under a capital improvement plan or within five years under another county plan. If the county elects to use increments to improve county roads, it must notify the City within forty-five days of receipt of this TIF Plan. In the opinion of the City and consultants, the proposed development outlined in this TIF Plan will have little or no impact upon county roads, therefore the TIF Plan was not forwarded to the county 45 days prior to the public hearing. The City is aware that the county could claim that tax increment should be used for county roads, even after the public hearing. Subsection 1 -14. Estimated Impact on Other Taxing Jurisdictions The estimated impact on other taxing jurisdictions assumes that the redevelopment contemplated by the TIF Plan would occur without the creation of the District. However, the City has determined that such development or redevelopment would not occur "but for" tax increment financing and that, therefore, the fiscal impact on other taxing jurisdictions is $0. The estimated fiscal impact of the District would be as follows if the "but for" test was not met: IMPACT ON TAX BASE 2010/Pay 2011 Estimated Captured Total Net Tax Capacity (CTC) Percent of CTC Tax Capacity Upon Completion to Entity Total Scott County 142,578,089 10,957 0.0077% City of Prior Lake 26,768,943 10,957 0.0409% Prior Lake ISD No. 719 44,498,209 10,957 0.0246% City of Prior Lake Tax Increment Financing Plan for Tax Increment Financing District No. 1 -4 1 -7 The estimates listed above display the captured tax capacity when all construction is completed. The tax rate used for calculations is the actual Pay 2011 rate. The total net capacity for the entities listed above are based on actual Pay 2011 figures. The District will be certified under the actual Pay 2012 rates, which were unavailable at the time this TIF Plan was prepared. Pursuant to M.S. Section 469.175 Subd. 2(b): (1) Estimate of total tax increment. It is estimated that the total amount of tax increment that will be generated over the life of the District is $96,000; (2) Probable impact of the District on city provided services and ability to issue debt. The District is expected to have very minimal impact on police protection since the proposed development is an expansion of an existing business. With any addition of new residents or businesses, police calls for service typically are increased. New developments add an increase in traffic, and additional overall demands to the call load. The City does not expect that the proposed development, in and of itself, will necessitate new capital investment in vehicles. The probable impact ofthe District on fire protection is not expected to be significant. Typically new buildings generate few calls, if any, and are of superior construction. The impact of the District on public infrastructure is expected to be minimal. The development is not expected to significantly impact any traffic movements in the area. The current infrastructure for sanitary sewer, storm sewer and water will be able to handle the additional volume generated from the proposed development. Based on the development plans, there are no additional costs associated with street maintenance, sweeping, plowing, lighting and sidewalks. The probable impact of any District general obligation tax increment bonds on the ability to issue debt for general fund purposes is expected to be minimal. It is not anticipated that there will be any general obligation debt issued in relation to this project, therefore there will be no impact on the City's ability to issue future debt or on the City's debt limit. (3) Estimated amount of tax increment attributable to school district levies. It is estimated that the amount of tax increments over the life of the 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 $30,595; (4) Estimated amount of tax increment attributable to couW levies. It is estimated that the amount of tax increments over the life of the 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 $31,939; City of Prior Lake Tax Increment Financing Plan for Tax Increment Financing District No. 1 -4 1 -8 IMPACT ON TAX RATES Pay 2011 Percent Potential Extension Rates of Total CTC Taxes Scott County 0.355343 33.27% 10,957 3,893 City of Prior Lake 0.307102 28.76% 10,957 3,365 Prior Lake ISD No. 719 0.340357 31.87% 10,957 3,729 Other 0.065194 6.10% 10.957 714 Total 1.067996 100.00% 11,702 The estimates listed above display the captured tax capacity when all construction is completed. The tax rate used for calculations is the actual Pay 2011 rate. The total net capacity for the entities listed above are based on actual Pay 2011 figures. The District will be certified under the actual Pay 2012 rates, which were unavailable at the time this TIF Plan was prepared. Pursuant to M.S. Section 469.175 Subd. 2(b): (1) Estimate of total tax increment. It is estimated that the total amount of tax increment that will be generated over the life of the District is $96,000; (2) Probable impact of the District on city provided services and ability to issue debt. The District is expected to have very minimal impact on police protection since the proposed development is an expansion of an existing business. With any addition of new residents or businesses, police calls for service typically are increased. New developments add an increase in traffic, and additional overall demands to the call load. The City does not expect that the proposed development, in and of itself, will necessitate new capital investment in vehicles. The probable impact ofthe District on fire protection is not expected to be significant. Typically new buildings generate few calls, if any, and are of superior construction. The impact of the District on public infrastructure is expected to be minimal. The development is not expected to significantly impact any traffic movements in the area. The current infrastructure for sanitary sewer, storm sewer and water will be able to handle the additional volume generated from the proposed development. Based on the development plans, there are no additional costs associated with street maintenance, sweeping, plowing, lighting and sidewalks. The probable impact of any District general obligation tax increment bonds on the ability to issue debt for general fund purposes is expected to be minimal. It is not anticipated that there will be any general obligation debt issued in relation to this project, therefore there will be no impact on the City's ability to issue future debt or on the City's debt limit. (3) Estimated amount of tax increment attributable to school district levies. It is estimated that the amount of tax increments over the life of the 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 $30,595; (4) Estimated amount of tax increment attributable to couW levies. It is estimated that the amount of tax increments over the life of the 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 $31,939; City of Prior Lake Tax Increment Financing Plan for Tax Increment Financing District No. 1 -4 1 -8 (5) Additional information requested by the county or school district. The City is not aware of any standard questions in a county or school district written policy regarding tax increment districts and impact on county or school district services. The county or school district must request additional information pursuant to M.S. Section 469.175 Subd. 2(b) within 15 days after receipt of the tax increment financing plan. No requests for additional information from the county or school district regarding the proposed development for the District have been received. Subsection 1 -16. Supporting Documentation Pursuant to M.S. Section 469.175, Subd. 1 (a), clause 7 the TIF Plan must contain identification and description of studies and analyses used to make the determination set forth in M.S. Section 469.175, Subd. 3, clause (b) (2) and the findings are required in the resolution approving the District. Following is a list of reports and studies on file at the City that support the City's findings: • Tax Increment Application. Subsection 1 -16. Definition of Tax Increment Revenues Pursuant to M.S., Section 469.174, Subd. 25, tax increment revenues derived from a tax increment financing district include all of the following potential revenue sources: 1. Taxes paid by the captured net tax capacity, but excluding any excess taxes, as computed under M. S., Section 469.177; 2. The proceeds from the sale or lease of property, tangible or intangible, to the extent the property was purchased by the Authority with tax increments; 3. Principal and interest received on loans or other advances made by the Authority with tax increments; 4. Interest or other investment earnings on or from tax increments; 5. Repayments or return of tax increments made to the Authority under agreements for districts for which the request for certification was made after August 1, 1993; and 6. The market value homestead credit paid to the Authority under M.S., Section 273.1384. Subsection 1 -17. Modifications to the District In accordance with M.S., Section 469.175, Subd. 4, any: 1. Reduction or enlargement of the geographic area of the District, if the reduction does not meet the requirements of M.S., Section 469.175, Subd. 4(e); 2. Increase in amount of bonded indebtedness to be incurred; 3. A determination to capitalize interest on debt if that determination was not a part of the original TIF Plan; 4. Increase in the portion of the captured net tax capacity to be retained by the City; 5. Increase in the estimate of the cost ofthe District, including administrative expenses, that will be paid or financed with tax increment from the District; or 6. Designation of additional property to be acquired by the City, shall be approved upon the notice and after the discussion, public hearing and findings required for approval of the original TIF Plan. If the District qualifies for certification only under M.S. Section 469.176, Subd. 4c(d), than the District boundaries may not be enlarged after July 1, 2012. City of Prior Lake Tax Increment Financing Plan for Tax Increment Financing District No. 1 -4 1 -9 The City's findings in creating the District is pursuant to M.S. Sections 469.176, Subd. 4c(d) in order to assist in the construction of a veterinarian clinic expansion. If construction does not commence by July 1, 2012, the proposed facility will need to meet the criteria in M.S., Section 469.176, Subd. 4c(a), and must satisfy the findings required under M.S., Section 469.174, Subd. 12. The City must notify the County Auditor of any modification to the District. Modifications to the District in the form of a budget modification or an expansion of the boundaries will be recorded in the TIF Plan. Subsection 1 -18. Administrative Expenses In accordance with M.S., Section 469.174, Subd. 14, administrative expenses means all expenditures of the City, other than: 1. Amounts paid for the purchase of land; 2. Amounts paid to contractors or others providing materials and services, including architectural and engineering services, directly connected with the physical development of the real property in the District; 3. Relocation benefits paid to or services provided for persons residing or businesses located in the District; or 4. Amounts used to pay principal or interest on, fund a reserve for, or sell at a discount bonds issued pursuant to M.S., Section 469.178; or 5. Amounts used to pay other financial obligations to the extent those obligations were used to finance costs described in clauses (1) to (3). For districts for which the request for certification were made before August 1, 1979, or after June 30, 1982, and before August 1, 2001, administrative expenses also include amounts paid for services provided by bond counsel, fiscal consultants, and planning or economic development consultants. Pursuant to M.S., Section 469.176, Subd. 3, tax increment may be used to pay any authorized and documented administrative expenses for the District up to but not to exceed 10 percent of the total estimated tax increment expenditures authorized by the TIF Plan or the total tax increments, as defined by M.S., Section 469.174, Subd. 25, clause (1), from the District, whichever is less. For districts for which certification was requested after July 31, 2001, no tax increment may be used to pay any administrative expenses for District costs which exceed ten percent of total estimated tax increment expenditures authorized by the TIF Plan or the total tax increments, as defined in M. S., Section 469.174, Subd. 25, clause (1), from the District, whichever is less. Pursuant to M.S., Section 469.176, Subd. 4h, tax increments may be used to pay for the County's actual administrative expenses incurred in connection with the District and are not subject to the percentage limits of M.S., Section 469.176, Subd. 3. The county may require payment of those expenses by February 15 of the year following the year the expenses were incurred. Pursuant to M.S., Section 469. 177, Subd. 11, the County Treasurer shall deduct an amount (currently .36 percent) of any increment distributed to the City and the County Treasurer shall pay the amount deducted to the State Commissioner of Management and Budget for deposit in the state general fund to be appropriated to the State Auditor for the cost of financial reporting of tax increment financing information and the cost of examining and auditing authorities' use of tax increment financing. This amount may be adjusted annually by the Commissioner of Revenue. City of Prior Lake Tax Increment Financing Plan for Tax Increment Financing District No. 1 -4 1 -10 Subsection 1 -19. Limitation of Increment The tax increment pledged to the payment of bonds and interest thereon may be discharged and the District may be terminated if sufficient funds have been irrevocably deposited in the debt service fund or other escrow account held in trust for all outstanding bonds to provide for the payment of the bonds at maturity or redemption date. Pursuant to M.S., Section 469.176, Subd. 6: if, after four years from the date of certification of the original net tax capacity of the tax incrementfinancingdistrictpursuanttoM .S., Section 469.177, nodemolition, rehabilitation or renovation of property or other site preparation, including qualified improvement of a street adjacent to a parcel but not installation of utility service including sewer or water systems, has been commenced on a parcel located within a tax incrementfinancing district by the authority or by the owner ofthe parcel in accordance with the tax incrementfinancing plan, no additional tax increment may be taken from that parcel and the original net tax capacity of that parcel shall be excluded from the original net tax capacity of the tax increment financing district. If the authority or the owner of the parcel subsequently commences demolition, rehabilitation or renovation or other site preparation on thatparcel including qualified improvement of a street adjacent to that parcel, in accordance with the tax incrementfinancingplan, the authority shall certify to the county auditor that the activity has commenced and the county auditor shall certify the net tax capacity thereof as most recently certified by the commissioner of revenue and add it to the original net tax capacity of the tax incrementfinancing district. The county auditor must enforce the provisions of this subdivision. The authority must submit to the county auditor evidence that the required activity has taken place for each parcel in the district. The evidence for a parcel must be submitted by February 1 of the fifth year following the year in which the parcel was certified as included in the district. For purposes of this subdivision, qualified improvements of a street are limited to (1) construction or opening of a new street, (2) relocation of a street, and (3) substantial reconstruction or rebuilding of an existing street. The City or a property owner must improve parcels within the District by approximately September 2015 and report such actions to the County Auditor. Subsection 1 -20. Use of Tax Increment The City hereby determines that it will use 100 percent of the captured net tax capacity of taxable property located in the District for the following purposes: 1. To pay the principal of and interest on bonds issued to finance a project; 2. To finance, or otherwise pay the capital and administration costs of Municipal Development District No. 1 pursuant to M.S., Sections 469.124 to 469.134; 3. To pay for project costs as identified in the budget set forth in the TIF Plan; 4. To finance, or otherwise pay for other purposes as provided in M.S., Section 469.176, Subd. 4; 5. To pay principal and interest on any loans, advances or other payments made to or on behalf of the City or for the benefit of Municipal Development District No. 1 by a developer; 6. To finance or otherwise pay premiums and other costs for insurance or other security guaranteeing the payment when due of principal of and interest on bonds pursuant to the TIF Plan or pursuant to M.S., Chapter 462C. M.S., Sections 469.152 through 469.165, and /or M.S., Sections 469.178; and 7. To accumulate or maintain a reserve securing the payment when due of the principal and interest on the tax increment bonds or bonds issued pursuant to M.S., Chapter 462C, M.S., Sections 469.152 through 469.165, and /or M.S., Sections 469.178. City of Prior Lake Tax Increment Financing Plan for Tax Increment Financing District No. 1 -4 1 -11 These revenues shall not be used to circumvent any levy limitations applicable to the City nor for other purposes prohibited by M.S., Section 469.176, Subd. 4. Subsection 1 -21. Excess Increments Excess increments, as defined in M.S., Section 469.176, Subd. 2, shall be used only to do one or more of the following: 1. Prepay any outstanding bonds; 2. Discharge the pledge of tax increment for any outstanding bonds; 3. Pay into an escrow account dedicated to the payment of any outstanding bonds; or 4. Return the excess to the County Auditor for redistribution to the respective taxing jurisdictions in proportion to their local tax rates. The City must spend or return the excess increments under paragraph (c) within nine months after the end of the year. In addition, the City may, subject to the limitations set forth herein, choose to modify the TIF Plan in order to finance additional public costs in Municipal Development District No. 1 or the District. Subsection 1 -22. Requirements for Agreements with the Developer The City will review any proposal for private development to determine its conformance with the Development Program and with applicable municipal ordinances and codes. To facilitate this effort, the following documents may be requested for review and approval: site plan, construction, mechanical, and electrical system drawings, landscaping plan, grading and storm drainage plan, signage system plan, and any other drawings or narrative deemed necessary by the City to demonstrate the conformance of the development with City plans and ordinances. The City may also use the Agreements to address other issues related to the development. Pursuant to M.S., Section 469.176, Subd. S, no more than 10 percent, by acreage, of the property to be acquired in the District as set forth in the TIF Plan shall at any time be owned by the City as a result of acquisition with the proceeds of bonds issued pursuant to M.S., Section 469.178 to which tax increments from property acquired is pledged, unless prior to acquisition in excess of 10 percent of the acreage, the City concluded an agreement for the development of the property acquired and which provides recourse for the City should the development not be completed. Subsection 1 -23. Assessment Agreements Pursuant to M.S., Section 469.177, Subd. 8, the City may enter into a written assessment agreement in recordable form with the developer of property within the District which establishes a minimum market value of the land and completed improvements for the duration of the District. The assessment agreement shall be presented to the County Assessor who shall review the plans and specifications for the improvements to be constructed, review the market value previously assigned to the land upon which the improvements are to be constructed and, so long as the minimum market value contained in the assessment agreement appears, in the judgment of the assessor, to be a reasonable estimate, the County Assessor shall also certify the minimum market value agreement. Subsection 1 -24. Administration of the District Administration of the District will be handled by the Finance Director. City of Prior Lake Tax Increment Financing Plan for Tax Increment Financing District No. 1 -4 1 -12 Subsection 1 -26. Annual Disclosure Requirements Pursuant to M.S., Section 469.175, Subds. 5, 6, and 6b the City must undertake financial reporting for all tax increment financing districts to the Office of the State Auditor, County Board and County Auditor on or before August 1 of each year. M.S., Section 469.175, Subd. 5 also provides that an annual statement shall be published in a newspaper of general circulation in the City on or before August 15. If the City fails to make a disclosure or submit a report containing the information required by M.S., Section 469.175 Subd. 5 and Subd. 6, the OSA will direct the County Auditor to withhold the distribution of tax increment from the District. Subsection 1 -26. Reasonable Expectations As required by the TIF Act, in establishing the District, the determination has been made that the anticipated development would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future and that the increased market value ofthe site 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 the District permitted by the TIF Plan. In making said determination, reliance has been placed upon written representation made by the developer to such effects and upon City staff awareness of the feasibility of developing the project site(s) within the District. A comparative analysis of estimated market values both with and without establishment of the District and the use of tax increments has been performed as described above. Such analysis is included with the cashflow in Appendix D, and indicates that the increase in estimated market value of the proposed development (less the indicated subtractions) exceeds the estimated market value of the site absent the establishment of the District and the use of tax increments. Subsection 1-27. Other Limitations on the Use of Tax Increment General Limitations All revenue derived from tax increment shall be used in accordance with the TIF Plan. The revenues shall be used to finance, or otherwise pay the capital and administration costs of Municipal Development District No. 1 pursuant to M.S., Sections 469.124 to 469.134. Tax increments may not be used to circumvent existing levy limit law. No tax increment may be used for 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. This provision does not prohibit the use of revenues derived from tax increments for the construction or renovation of a parking structure. Pooling Limitations At least 80 percent of tax increments from the District must be expended on activities in the District or to pay bonds, to the extent that the proceeds of the bonds were used to finance activities within said district or to pay, or secure payment of, debt service on credit enhanced bonds. Not more than 20 percent of said tax increments may be expended, through a development fund or otherwise, on activities outside of the District except to pay, or secure payment of, debt service on credit enhanced bonds. For purposes of applying this restriction, all administrative expenses must be treated as if they were solely for activities outside of the District. 3. Five Year Limitation on Commitment of Tax Increments Tax increments derived from the District shall be deemed to have satisfied the 80 percent test set forth in paragraph (2) above only if the five year rule set forth in M.S., Section 469.1763, Subd. 3, has been satisfied; and beginning with the sixth year following certification of the District, 80 percent of said tax increments that remain after expenditures permitted under said five year rule must be used only to pay previously committed expenditures or credit enhanced bonds as more fully set forth in M.S., Section 469.1763, Subd. 5. City of Prior Lake Tax Increment Financing Plan for Tax Increment Financing District No. 1 -4 1 -13 Subsection 1 -28. Summary The City of Prior Lake is establishing the District to preserve and enhance the tax base, and retain jobs, including construction jobs, in the City. The TIF Plan for the District was prepared by Ehlers & Associates, Inc., 3060 Centre Pointe Drive, Roseville, Minnesota 55113 -1105, telephone (651) 697 -8500. City of Prior Lake Tax Increment Financing Plan for Tax Increment Financing District No. 1 -4 1 -14 Appendix A Project Description Tax Increment Financing District No. 1 -4 is being established to facilitate the expansion of the River Valley Vet Clinic in the City of Prior Lake. The clinic is proposing a 7,000 square foot expansion to its existing facility. The expansion will provide additional space for providing veterinary services as well as kennels and other equipment. The expansion will also continue the City's efforts in sustaining and growing its downtown area and expansion of the tax base. The City is planning to issue a pay -as- you -go note to provide the financing for the expansion. Construction is anticipated to begin in the fall of 2011. Appendix A -1 Appendix B Map(s) of Municipal Development District No. 1 and the District Appendix B -1 i Appendix C Description of Property to be Included in the District The District encompasses all property and adjacent rights -of -way and abutting roadways identified by the parcel listed below. Parcel Number Address Owner 252240020 Gateway Center, 2 nd Addition, Lot 002, Block 001, Subdivision CD 25224 Jordan Real Estate of Prior Lake Appendix C -1 Appendix D Estimated Cash Flow for the District Appendix D -1 9/13/2011 EHLERS '.1 A "IW Y1' VI" 1 IhA%I', TIF 1-4: River Valley Vet Clinic City of Prior Lake, Minnesota 7,056 SF Vet Clinic Base Value Assumptions - Page 1 BASE ASSUMPTIONS Percentage DistrictType: Economic Development Maximum /Frozen Local Tax Rate: 106.800% Pay 2011 District Name /Number: TIF 1.4 Current Local Tax Rate: (Use lesser of Current or Max.) 106.800% Pay 2011 County District #: TBD State -wide Tax Rate (Comm. /Ind. only used for total taxes) 49.0430% Pay 2011 First Year Construction or Inflation on Value 2011 Market Value Tax Rate (Used for total taxes) 0.23140% Pay 2011 Existing District - Specify No. Years Remaining Orig. Tax Cap. Area /Phase 252240020 Jordan RE 360,000 95,000 455,000 100% 455,000 Inflation Rate - Every Year: 4.00% PROPERTY TAX CLASSES AND CLASS RATES: C/I Pref. 8,350 Interest Rate: 0.00% Exempt Class Rate (Exempt) 0.00% Present Value Date: 1- Aug -12 Commercial Industrial Preferred Class Rate (C /I Pref.) First Period Ending 1- Feb -13 First $150,000 1.50% Tax Year District was Certified: Pay 2012 Over $150,000 2.00% Cashflow Assumes First Tax Increment For Development: 2013 Commercial Industrial Class Rate (C /I) 2.00% Years of Tax Increment 9 Rental Housing Class Rate (Rental) 1.25% Assumes Last Year of Tax Increment 2021 Affordable Rental Housing Class Rate (Aff. Rental) 0.75% Fiscal Disparities Election [Outside (A), Inside (B), or NA] Inside(B) Non - Homestead Residential (Non -H Res.) 1.25% Incremental or Total Fiscal Disparities Incremental Homestead Residental Class Rate (Hmstd. Res.) Fiscal Disparities Contribution Ratio 41.5044% Pay 2011 First $500,000 1.00% Fiscal Disparities Metro -Wide Tax Rate 129.3270% Pay 2011 Over $500,000 1.25% Agricultural Non - Homestead 1.00% BASE VALUE •' • (O riginal Percentage Tax Year Property Current Class After Land Building Total Of Value Used Original Original Tax Original After Conversion Map # PID Owner Address Market Value Market Value Market Value for District Market Value Market Value Class Tax Capacity Conversion Orig. Tax Cap. Area /Phase 252240020 Jordan RE 360,000 95,000 455,000 100% 455,000 Pay 2012 C/I Pref. 8,350 C/I Pref. 8,350 455,000 8,350 8,350 Note: 1. Base values are based on email correspondence from Scott County Taxation Department on 9/12111. Prepared by Ehlers 8 Associates, Inc. - Estimates Only N: \Minnsota \Prior Lake\Housing - Economic - Redevelopment\TIF\TIF DistrictsMF 1-0 \TIF Cashflow 9 12 11 9/13/2011 EHLERS TIF 1 -4: River Valley Vet Clinic City of Prior Lake, Minnesota 7,056 SF Vet Clinic Base Value Assumptions - Page 2 Note: 1. Base values are based on email correspondence from Scott County Taxation Department on 9112/11. P ROJECT •' • N (Project Tax Capa Area /Phase New Use Total Market Value Sq. Ft. /Units Sq. Ft. /Units Market Value roperty Tax Class Project Tax Capacity ercentage Completed 2011 flercentage Completed 2012 iercentage Completed 2013 er can tage Completed 2014 r rs ear Full Taxes Payable Existing Expansion Tax 455,000 525,000 C/I Pref. C/I 8,350 10,500 100% 100% 100% 100% 100% 100 % 100% 100% 2013 2013 TOT AL Capacity 980,000 Capacity 18,850 Taxes Taxes Taxes Taxes Sq. Ft. /Unit Subtotal Residential 0 0 4,884 0 4,482 4,095 1,053 14,846 #DIV /01 Subtotal CommerciallInd. 0 980,000 6,142 18,850 5,636 5,150 1,215 18,560 #DIV /0! Note: 1. Base values are based on email correspondence from Scott County Taxation Department on 9112/11. Note: 1. Taxes and tax increment will vary signficantly from year to year depending upon values, rates, state law, fiscal disparities and other factors which cannot be predicted. 2. If tax increment in ,r! 2n+? t! o,, f �. !: br orto year shorter. WHAT IS EXCLUDED FR TIF? Total Property Taxes 33,407 less State -wide Taxes (9,245) less Fiscal Disp. Adj. (10,118) less Market Value Taxes (2,268) less Base Value Taxes 5,217) Annual Gross TIF Prepared by Ehlers 8 Associates, Inc.- Estimates Only N:Winnsota \Prior Lake \Housing - Economic - Red- abirment\TIRT1F Districts \TIF 1A \TIF Cashfl -9 1211 CALCULATI TAX l utal oca oca Fisca tale -w a Xarket Tax Disparities Tax Property Disparities Property Value Total Taxes Per New Use Capacity Tax Capacity Capacity Taxes Taxes Taxes Taxes Taxes Sq. Ft. /Unit Existing 8,350 3,466 4,884 5,217 4,482 4,095 1,053 14,846 #DIV /01 Ex ansion 10,500 4,358 6,142 6,560 5,636 5,150 1,215 18,560 #DIV /0! 18,850 7,824 11,026 11,776 10,118 9,245 2,268 407 Note: 1. Taxes and tax increment will vary signficantly from year to year depending upon values, rates, state law, fiscal disparities and other factors which cannot be predicted. 2. If tax increment in ,r! 2n+? t! o,, f �. !: br orto year shorter. WHAT IS EXCLUDED FR TIF? Total Property Taxes 33,407 less State -wide Taxes (9,245) less Fiscal Disp. Adj. (10,118) less Market Value Taxes (2,268) less Base Value Taxes 5,217) Annual Gross TIF Prepared by Ehlers 8 Associates, Inc.- Estimates Only N:Winnsota \Prior Lake \Housing - Economic - Red- abirment\TIRT1F Districts \TIF 1A \TIF Cashfl -9 1211 9/13/2011 Tax Increment Cashflow - Page 3 EHL ERS t. t'0. ©FR5 rN PURttf. 1'INM1hr:t TIF 1-4: River Valley Vet Clinic City of Prior Lake, Minnesota 7,056 SF Vet Clinic TAX INCREMENT CASH FLOW Project Original Fiscal Captured Local Annual Semi - Annual State Admin. Semi - Annual Semi - Annual PERIOD % of Tax Tax Disparities Tax Tax Gross Tax Gross Tax Auditor at Net Tax Present ENDING Tax Payment OTC Capacity Capacity Incremental Capacity Rate Increment I Increment 0.36% 10% Increment Value Yrs. Year Date �yauyr�K� I uu% 18,85U (8,35u) (4,358) 6,142 106.800% 6,560 3,280 (12) (327) 2,941 2,941 0.5 2013 08/01/13 3,280 (12) (327) 2,941 5,882 1 2013 02/01/14 100% 19,604 (8,350) (4,671) 6,583 106.800% 7,031 3,515 (13) (350) 3,152 9,035 1.5 2014 08/01/14 3,515 (13) (350) 3,152 12,187 2 2014 02/01/15 100% 20,388 (8,350) (4,996) 7,042 106.800% 7,521 3,760 (14) (375) 3,372 15,559 2.5 2015 08/01/15 3,760 (14) (375) 3,372 18,932 3 2015 02/01/16 100% 21,204 (8,350) (5,335) 7,519 106.600% 8,030 4,015 (14) (400) 3,601 22,532 3.5 2016 08/01116 4,015 (14) (400) 3,601 26,133 4 2016 02/01/17 100% 22,052 (8,350) (5,548) 8,154 106.800% 8,708 4,354 (16) (434) 3,905 30,037 4.5 2017 08/01/17 4,354 (16) (434) 3,905 33,942 5 2017 02/01/18 100% 22,934 (8,350) (5,770) 8,814 106.800% 9,413 4,707 (17) (469) 4,221 38,162 5.5 2018 08/01/18 4,707 (17) (469) 4,221 42,383 6 2018 02/01/19 100% 23,851 (8,350) (6,001) 9,500 106.800% 10,146 5,073 (18) (505) 4,549 46,932 6.5 2019 08/01/19 5,073 (18) (505) 4,549 51,482 7 2019 02/01/20 100% 24,805 (8,350) (6,241) 10,214 106.800% 10,909 5,454 (20) (543) 4,891 56,373 7.5 2020 08/01/20 5,454 (20) (543) 4,891 61,264 8 2020 02/01/21 100% 25,798 (8,350) (6,491) 10,957 106.800% 11,702 5,851 (21) (583) 5,247 66,511 8.5 2021 08/01/21 5 (21) (583) 5,247 71 9 2021 02/01/22 Total 80,019 (288) (7,973) 71,758 Present Value From 08/01/2012 Present Value Rate 0.00% 80,019 (288) (7,973) 71,758 Prepared by Ehlers & Associates, Inc. - Estimates Only N: \Minnsota \Prior Lake\Housing - Economic - Redevelopment \TIF\TIF Districts \TIF 1-4 \TIF Cashflow g 12 11 Appendix E Minnesota Business Assistance Form (Minnesota Department of Employment and Economic Development) A Minnesota Business Assistance Form (MBAF) should be used to report and/or update each calendar year's activity by April 1 of the following year. Please see the Minnesota Department of Employment and Economic Development (DEED) website at http: / /www. deed. state. mn.us/ Community/subsidies/MBAFForm.htm for information and forms. Appendix E -1 Appendix F Findings Including But/For Qualifications The reasons and facts supporting the findings for the adoption of the Tax Increment Financing Plan for Tax Increment Financing District No. 1 -4 as required pursuant to M.S., Section 469.175, Subd. 3 are as follows: 1. Finding that the Tax Increment Financing DistrictNo.1 -4 is an economic development district as defined in M.S., Section 469.174, Subd. 12. Tax Increment Financing District No. 1-4 is a contiguous geographic area within the City's Development District No. 1, delineated in the TIF Plan, for the purpose of financing economic development in the City through the use of tax increment. The District is in the public interest because it will facilitate construction of an expansion to a veterinarian clinic which will increase employment in the state, and preserve and enhance the tax base of the state. • The private development to be assisted pursuant to the TIF Plan will create or retain jobs in the state, including construction jobs; • The development consists of an expansion to a veterinarian clinic in the City, construction will be required to commence no later than July 1, 2012; • Construction of the proposed development would not have commenced before July 1, 2012, without the tax increment financing assistance to be provided pursuant to the TIF Plan; and • The City will file the request for certification of the District by June 30, 2012. 2. Finding that the proposed development, in the opinion of the City Council, would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future and that the increased market value of the site 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. 1 -4 permitted by the TIF Plan. The proposed development, in the opinion ofthe City, would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future: This finding is supported by the fact that the development proposed in this plan is a veterinarian clinic that meets the City's objectives for economic development. The City has adopted its 2030 Vision and continues with its efforts to sustain and grow its downtown area. The cost of site improvements makes development of the facility infeasible without City assistance. The developer was asked for and provided a letter and a proforma as justification that the developer would not have gone forward without tax increment assistance (see attachment in Appendix F). The increased market value of the site that could reasonably be expected to occur without the use of tax increment financing would be less than the increase in market value estimated to result from the proposed development after subtracting the present value of the projected tax increments for the maximum duration of the TIF District permitted by the TIF Plan: The City supported this finding on the grounds that the cost of site improvements add to the total development cost. Historically, site development costs in this area have made development infeasible without tax increment assistance. The City reasonably determines that no other development of similar scope is anticipated on this site without substantially similar assistance being provided to the development. Therefore, the City concludes as follows: a. The City's estimate of the amount by which the market value of the entire District will increase Appendix F -1 without the use of tax increment financing is $0. b. If the proposed development occurs, the total increase in market value will be $525,000 (see Appendix D and the table below) c. The present value of tax increments from the District for the maximum duration of the district permitted by the TIF Plan is estimated to be $80,019 (see Appendix D and F of the TIF Plan). d. Even if some development other than the proposed development were to occur, the Council finds that no alternative would occur that would produce a market value increase greater than $444,981 (the amount in clause b less the amount in clause c) without tax increment assistance. But -For Analysis Current Market Value 455,000 New Market Value - Estimate 980,000 Difference 525,000 Present Value of Tax Increment 80,019 Difference 444,981 V alue Likely to Occur Without TIF is Less Than: 444,981 3. Finding that the TIF Plan for Tax Increment Financing District No. 1 -4 conforms to the general plan for the development or redevelopment of the municipality as a whole. The Planning Commission reviewed the TIF Plan and found that the TIF Plan conforms to the general development plan of the City. 4. Finding that the Tax Increment Financing Plan for Tax Increment Financing District No. 1 -4 will afford maximum opportunity, consistent with the sound needs of the City as a whole, for the development of Municipal Development District No. 1 by private enterprise. The project to be assisted by the District will result in increased employment in the City and the State of Minnesota, increased tax base of the State, and the development of currently vacant and underutilized land by a private business. Appendix F -2 W CYNTHIA L. SELLIN D.V.M. LAURIE A. MILLER D.V.Mt. 13RUCE W. VIUHN D.V.M. CHRISM M. WILLIAMS D.V.M. 4 TERIMR River Va Y r v , x August 31, 2011 City of Prior Lake Attention: Frank Boyles, City Manager 4646 Dakota Street SE Prior Lake, MN 55372 RE: River Valley Veterinary Service /Jordan Real Estate Partnership Request for Tax Increment Financing (TIF) Dear Mr. Boyles: The,River Valley Veterinary Service /Jordan Real Estate Partnership is requesting TIF for the expansion of our existing building at .15900 Jordan Avenue. Our business has been at this location since 1990. We are now proposing to expand the business with an additional 7,000 square feet on the existing building. This addition will nearly double the size of the existing building. The cost of the addition is approximately $625,000, In order to construct the addition, we will need to remove nearly 100 truckloads of soil from the site and manage rain water run -off. We are requesting the tax increment to assist us with site development, and with the additional SAC and WAC charges this addition will accrue. Thank you for your consideration. If you have questions, please contact meat 952-447 - 4118 or 952 - 292 -2648. Sincerely, Tr'�-- Dr. Cynthia Sellin r- 0 0 z a > 0 n 0 rn z n x M 4 z 0 z 0 a 0 a n a n r, a n N 15900 JORDAN AVENUE • PRIOR LAKE, MN 55372 • 952 - 4474118 • (FAX) 952 - 447 -4113 • cvww.rivervalleyveterinary.com Amended Development Program for Municipal Development District No. 1 V t�► 7 AWS50 0 City of Prior Lake Scott County State of Minnesota Adopted: March 1, 1985 Public Hearing on Modification: September 19, 2011 Modification Adopted: E H L E RS Modification prepared by: EHLERS & ASSOCIATES, INC. 3060 Centre Pointe Drive, Roseville, Minnesota 55113 -1105 LEADERS IN PUBLIC FINANCE 651 - 697 -8500 fax: 651 - 697 -8555 www.ehlers - inc.com Table of Contents (for reference purposes only) Modification to the Development Program For Municipal Development District No. 1 Introduction..................................................................................................................... ..............................1 Definitions...................................................................................................................... ..............................1 Purpose of Development District ................................................................................... ............................... 2 Summary........................................................................................................................ ............................... 2 StatutoryAuthority ........................................................................................................ ............................... 2 Background.................................................................................................................... ............................... 3 Basisfor Proposing Project ............................................................................................ ............................... 3 Narrative Boundary Description of Municipal Development District No. 1 as Modified: ........................... 3 Project Eligibility / Statement of and Finding of Public Purpose .................................. ............................... 3 Objectives of the Municipal Development District ....................................................... ............................... 5 Development District Plan and Public Facilities to be Constructed Within the Development District........ 6 Conformance with Comprehensive Plan for the City .................................................... ............................... 7 Procedure for Making Modifications in an Approved Municipal Development District ............................. 8 OpenSpace to be Created .............................................................................................. ............................... 8 Proposed Reuse of Private Property ............................................................................... ............................... 8 Maintenance and Operation of Public Improvements and Administration of Development District........... 8 EnvironmentalControls ................................................................................................. ............................... 8 Rehabilitation................................................................................................................. ............................... 9 Relocation...................................................................................................................... ............................... 9 Appendix A Map of Municipal Development District No. 1 ......................................................... .............................10 Modification to the Development Program For Municipal Development District No. 1 Introduction The purpose of the modification to the Development Program for Municipal Development District No. 1 is to accomplish the following: 1. Update the boundaries of Municipal Development District No. 1 to include all parcels in the City limits. The boundaries of the Municipal Development District No. 1 will remain coterminous with the boundaries of the City of Prior Lake. 2. The establishment of Tax Increment Financing District No. 1 -4, which represents a continuation of the goals and objectives set forth in the Development Program for Municipal Development District No. 1. 3. Update the Development Program to include changes in statutory references and /or requirements; Definitions The terms defined below shall, for purposes of this Development Program, have the meanings herein specified, unless the context otherwise specifically requires. "City" means the City of Prior Lake. "City Council" means the City Council of the City of Prior Lake. "Comprehensive Plan" means the documents which contain the objectives, policies, standards and programs to guide public and private land use, development, redevelopment and preservation for all lands and water within the City. "County" means Scott County, Minnesota. "Enabling Act" means Minnesota Statues, 469.124 to 469.134, as amended and supplemented from time to time. "Development District" means the property within Municipal Development District No. 1, as described in the Development Program. "Development Program" means this Modification to the Development Program for Municipal Development District No. 1, and all subsequent modifications. "Land Use Regulations" means all federal, state and local laws, rules, regulations, ordinances, and plans relating to or governing the use of development of land in the City, including but not limited to environmental, zoning and building code laws and regulations. "Municipal Development District Act" means Minnesota Statutes, 469.124 to 469.134, inclusive, as amended. City of Prior Lake Page 1 Development Program for Municipal Development District No. 1 "Project" means Development District. "Public Costs" means the costs set forth in the Tax Increment Financing Plan, and any other costs eligible to be financed by Tax Increments under the TIF Act or the Municipal Development District Act. "Public Improvements" means the public improvements described in the Development Program and Tax Increment Financing Plan. "State" means the State of Minnesota. "Tax Increment Bonds" means any tax increment bonds or notes issued by the City to finance the Public Costs as stated in the Development Program for Municipal Development District No. 1 and in the Tax Increment Financing Plans, and any obligations issued to refund such bonds. "TIF Act" means Minnesota Statutes, Sections 479.174 through 479.1799, inclusive, as amended. "Tax Increment Financing District" means any tax increment financing district presently established or to be established in the future in Municipal Development District No. 1. "Tax Increment Financing Plan" or "Plan" means the Plans adopted by the City for any Tax Increment Financing District. Purpose of Development District Municipal Development District No. 1 is being formed pursuant to Minnesota Statutes, Chapter 472A, in order to give the City Council the authority to carry out development activities as outlined in this report. In proposing Municipal Development District No. 1, the City is considering the financing of Project area improvements through the use of tax increment financing, assessments or other financing sources. Prior to commitment of any City financial assistance for Project activities for development proposed within the Development District, the City will require evidence of the need for requested financing as well as a sound financial plan showing Project and development economic feasibility. Summary Formation of Municipal Development District No. 1 improves the quality of life in the community by assisting private development through the installation of public improvements and the provision of development incentives, thus making available increased employment opportunities and enhancing the tax base. Statutory Authority The City established Municipal Development District No. 1 pursuant to the Municipal Development District Act. Pursuant to the Municipal Development District Act, the City is authorized to administer Municipal Development District No. 1 and any tax increment financing districts. Within Municipal Development District No. 1, the City plans to create one or more tax increment financing districts established pursuant to the Tax Increment Act to finance the public improvements proposed for the Development District. The public improvements may be initially financed from other City sources, including, but not limited to the use of improvement bonds issued pursuant to Minnesota Statutes, Chapter City of Prior Lake Page 2 Development Program for Municipal Development District No. 1 429, which sources the City may reimburse from tax increment proceeds derived from tax increment districts to be created with Municipal Development District No. 1. The tax increment district or districts will be created at such time as will enable the City to capture the increase in taxable value of private improvements to be constructed within Municipal Development District No. 1. Backeround Prior Lake has a record of planning for and participating in community development. Previous development efforts have been guided by community development plans, zoning and subdivision ordinances, and input for the business and development community. This planning process has resulted in an objective of community cooperation aimed at encouraging well - planned, financially sound economic development; development which will retain existing jobs, create new jobs, and promote the economic well -being of the community by enhancing the tax base. B asis for Promsin¢ Project Prior Lake's planning process has identified land within the Development District as an opportunity for economic development. Municipal Development District No. 1 has been established and is being modified to promote and support additional business, development and housing opportunities within the community. The development program is being undertaken as part of an overall effort by the City to improve the physical condition of the downtown and surrounding areas; by building additional public facilities, such as parking facilities and streets; by removing substandard structures or structures which are functionally obsolete; by affording merchants opportunities for planning, engineering, fiscal and other sources of technical assistance needed to facilitate redevelopment efforts; by affording commercial developers financial assistance to develop and redevelop property within the City; and providing financial assistance to promote additional housing opportunities for area residents. Municipal Development District No. 1 will implement the community planning process by assisting economic development and redevelopment in the downtown, thus retaining jobs, creating jobs, providing additional housing opportunities and enhancing the tax base. Narrative Boundary Description of Municipal Development District No. 1 as Modified: The boundaries of the Development District are coterminous with the boundaries of the City of Prior Lake. The boundaries of the Development District are being expanded to include the entire City. Proiect Eli ¢ ibility / Statement of and Finding of Public Purpose The Municipal Development District Act, requires that areas proposed for Municipal Development District designation must be found to be located in areas of the community that are "already built up." For the following reasons, the proposed Development District qualifies: 1. The Development District is substantially urban. 2. The Development District has municipal sanitary sewer, storm sewer and water lines installed. 3. The Development District has a completed street network. City of Prior Lake Page 3 Development Program for Municipal Development District No. 1 4. The Development District will be occupied by urban uses. Minnesota Statutes 472A.03 authorizes a Municipal Development District to accomplish the following activities: "Within these districts the municipality may adopt a development program consistent with which the municipality may acquire, construct, reconstruct, improve, alter, extend, operate, maintain or promote developments aimed at improving the physical facilities, quality of life and quality of transportation. The municipality may acquire land or easements through negotiation or through powers of eminent domain." Activities proposed in this report for Municipal Development District No. 1 will accomplish the goals of developing new commercial and industrial enterprises, providing additional opportunities for employment and housing in the municipality and enhancing and increasing the tax base of the municipality. The City has been reviewing the future development of the community. This review has defined several important roles for the City of Prior Lake: • Ensuring that the City develops commercial districts and parcels to diversify its tax base and provide retail and employment opportunities to its residents • Facilitating development activities that are compatible with overall community development objectives of the City • Removing the physical and economic barriers to development • Providing the infrastructure needed to support development • Providing sites for future development through land assembly and/or by annexing property The City intends to use the powers allowed under the Enabling Act to fill these roles, to promote development and redevelopment throughout the City, and to pool resources in order to reduce financial barriers to providing decent housing and development and redevelopment opportunities. The City has found that there is a need for development and redevelopment within the Development District based upon the following conditions: 1. The Development District requires active promotion, attraction, encouragement and development of economically sound commerce through government action for the purpose of diversifying the tax base and ensuring that development will occur in an orderly way to allow the City to provide sewer and water services and streets. 2. The Development District contains numerous parcels containing buildings or improvements which, by reason of dilapidation, obsolescence, overcrowding, faulty arrangement or design, lack of ventilation, light and sanitary facilities, excessive land coverage, deleterious land use or obsolete layout, and a combination of these and other factors is detrimental to the safety, health, morals or welfare of the community. 3. The Development District contains vacant, unused, underused and inappropriately used land. Therefore, the City has determined to exercise its authority to develop a program for improving the Development District to provide impetus for private development and redevelopment, to provide decent housing to residents, to maintain and increase employment, to provide infrastructure to serve citizens of the City of Prior Lake Page 4 Development Program for Municipal Development District No. 1 City, to utilize existing land for potential development and redevelopment and to provide other facilities as are outlined in the Development Program. The City has also determined that proposed developments to be assisted by the City would not occur solely through private investment in the foreseeable future. The City finds that the welfare of the City, as well as the State of Minnesota, requires active promotion, attraction, encouragement and development of economically sound industry and commerce to carry out its stated public purpose objectives. The City has also determined that any tax increment financing plans to be proposed herein will be consistent with the Development Program, and that the tax increment financing plans will afford maximum opportunity, consistent with the sound needs of the City as a whole, for the development or redevelopment of the Development District by private enterprise. Objectives of the Municipal Development District The City of Prior Lake determines that it is necessary, desirable and in the public interest to establish, designate, develop and administer a development district in the City pursuant to the provisions of Minnesota Statutes, Section 472A.01 to 472A.13 inclusive as amended. The City Council further determines that the funding of the necessary activities and improvements in the Development District may be financed through a wide array of funding mechanisms, including tax increment, financing, tax abatement, assessments and block grants, as well as other appropriate sources. Prior to involving itself in financing Project activities or a development, the City Council shall determine financial feasibility of the Project or development. Any activity — public or private — when municipally financed, shall demonstrate how said financing is going to be repaid if it is a loan. In the case of a grant, the sources of the grant funds shall be identified. The City Council seeks to achieve the following objectives through this Plan: 1. Encourage the retention, expansion and development of residential, commercial and industrial enterprises within the City 2. Remove structurally substandard buildings for which rehabilitation is not feasible 3. Acquire and remove economically or functionally obsolete or underutilized buildings 4. Acquire land and/or buildings which are vacant, unused, underused or inappropriately used 5. Acquire property of irregular form and shape or inadequate size which has prevented normal development 6. Eliminate blighting influences which impede potential development 7. Encourage the rehabilitation of remaining intensive businesses 8. Achieve a high standard of buildings that remain in the Project area 9. Provide adequate streets, utilities and other public improvements and facilities to enhance the area for both new and existing development City of Prior Lake Page 5 Development Program for Municipal Development District No. 1 10. Eliminate or correct physical deterrents to the development of land 11. Provide development sites of such size and character to assure the development of the area 12. Achieve a high level of design and landscaping quality to enhance the physical environment 13. Accomplish convenient and adequate parking to serve the needs of the area 14. Combine elements of other City plans with these Project objectives 15. Improve the financial base of the City 16. Provide maximum opportunity, consistent with the needs of the City, for development by private enterprise 17. Provide increased employment opportunities and, as much as possible, seek businesses with would employ the unemployed and underemployed 18. Provide a retail service level required by the residents of the community and surrounding area Development District Plan and Public Facilities to be Constructed Within the Development District Development activities within Municipal Development District No. 1 must be financially feasible, marketable and be compatible with long -range development strategies of the City. The following recommendations represent the options that satisfy community development objectives for Municipal Development District No. 1 while taking advantage of opportunities which are currently available. The City will perform all Project activities pursuant to the statutes and in doing so, anticipates that the following may, but are not required to be undertaken: Acquisition: The City may acquire for the development of public projects or public improvements. The City may acquire property for the development of private projects. Land acquisition will be completed within the requirements of the Uniform Acquisition and Relocation Act. Specific properties to be acquired will be designated in the tax increment financing plans which are to be established pursuant to the guidelines of this report and State law. Relocation: The City accepts as binding its obligation under State and local law for relocation and will administer relocation services for families, individuals and businesses to be displaced by public action. Relocation shall be done in accordance with the Uniform Acquisition and Relocation Act. Rehabilitation: Code enforcement: Owners of properties shall be required to rehabilitate their properties to conform with the applicable State and local codes and ordinances. Rehabilitation programs may be made City of Prior Lake Page 6 Development Program for Municipal Development District No. 1 available to private owners. Demolition and Clearance: Properties acquired by the City may be cleared of substandard properties or demolition may occur to the point where reconstruction can begin. Site Preparation: Properties acquired by the City may be prepared for development, which may include street, curb, gutter, bituminous, subsoil correction and the establishment of greenways, walkways and common access corridors. Vacation of Public Land and Easements: When public land and easements no longer serve a public purpose, the land or the easements may be vacated for development. Maintenance: Maintenance of improvements undertaken by the City may include the improvement of public lighting, streetscaping, parking, signs, traffic control devices and pedestrian improvements. Incentives for Residential, Commercial and Industrial Expansion and Development: The City may provide financial incentives for the development and /or expansion of commercial business and industry. Public Improvement: The City may construct public facilities such as streets, sanitary sewer, storm drainage improvements, waterlines, parking, and such other facilities as it deems necessary and desirable for the implementation of the Project. In addition to the general activities envisioned by the development program, specific activities may be undertaken in conjunction with individual projects when such activities are within the framework of the objective of the Development District. Programs which could be used to implement these objectives might include state or federal grant or loan programs, private initiatives, tax increment financing projects, or municipal programs. The preceding objectives will be promoted by providing improvements and opportunities within the Development District which may include various types of site improvements, land acquisition, redevelopment, demolition, parking, street, sewer, water and other public improvements. A description of the items of expenditure and the estimated costs can be found in the Tax Increment Financing Plans for the Tax Increment Financing Districts created within this Development District. Conformance with Comprehensive Plan for the City The City Council, by approval of this report, believes that creation and implementation of the City of Prior Lake Municipal Development District No. 1, does indeed meet the intent of City plans, policies and ordinances by maintaining the quality of existing development and improving the quality of life through orderly planned improvements. City of Prior Lake Page 7 Development Program for Municipal Development District No. 1 P for Makine Modifications in an ADDroved Municipal Development District The City reserves the right to alter and amend the Development Program and the Tax Increment Financing Plans, subject to the provisions of state law regulating such action. The City specifically reserves the right to enlarge or reduce the size of the Development District and the Tax Increment Financing District, the Development Program, the Public Costs and the amount of Tax Increment Bonds to be issued to finance such cost by following the procedures specified in Minnesota Statutes, Section 469.175, subdivision 4. Open Space to be Created The City, in carrying out the objectives of the Development District, proposes to encourage the preservation and beautification of open spaces in accordance with the zoning and ordinances of the City. Proposed Reuse of Private Property A substantial portion of the Project area is private property. The Development Program contemplates that the City may acquire property and reconvey the same to another entity when deemed appropriate by the City for public purposes or when assisting a private development. Acquisition of property for assisting private development shall not occur until such time as a developer presents an economically feasible program for the reuse of that property. Proposals, in order to be considered, must be within the framework of the Development District Objectives. Prior to formal consideration of the acquisition of any property, the City Council may require a binding contract, performance bond and /or other evidence or guarantees that a supporting tax increment or other funds will be available to repay the public cost associated with the proposed acquisition. It shall be the intent of the city to negotiate the acquisition of property whenever necessary. Appropriate restrictions regarding the reuse and redevelopment of property shall be incorporated into the land sale contract to which the city is a part. Development proposals are sought for development throughout the Development District. Property will be considered for acquisition when new or an abutting owner or tenant can effectively and economically utilize such property for expansion or development purposes in accordance with this program and the current owner is willing to negotiate the sale of his property to the City or a private developer. Maintenance and Operation of Public Improvements and Administration of Development District Maintenance and operation of the Development District will be the responsibility of the City Administrator. Each year, the administrator of the Development District will submit to the City Council the maintenance and operation budget for the following year. The administrator of the Development District will administer the Development District pursuant to the provision of the Enabling Act; provided, however, that such powers may only be exercised at the direction of the City. No action taken by the administrator of the Development District pursuant to the above - mentioned powers shall be effective without authorization by the City. Environmental Controls The environment controls to be applied in connection with the execution of the Development District shall consist of the applicable ordinances of the Municipality, and the applicable provisions of Minnesota Statutes. City of Prior Lake Page 8 Development Program for Municipal Development District No. 1 Rehabilitation Owners of properties within the Development District may be encouraged to rehabilitate their properties to conform with the applicable state and local codes and ordinances, as well as any design standards. Persons who purchase property within the Development District from the City may be required to rehabilitate their properties as a condition of sale of land. The City may provide such rehabilitation assistance as may be available from federal, state or local sources. Relocation Any person or business that is displaced as a result of the Development Program will be relocated in accordance with Minnesota Statutes, Section 117.50 to 117.56. The City accepts its responsibility for providing for relocation assistance pursuant to the Enabling Act. City of Prior Lake Page 9 Development Program for Municipal Development District No. 1 Appendix A Map of Municipal Development District No. 1 City of Prior Lake Page 10 Development Program for Municipal Development District No. 1 c- i 9/20/2011 Actions Approve TIF District No. 1 - 4 in order to o assist River Valley Veterinary Service project. Modify Municipal Development District o No. 1 in order to expand boundaries. September 19, 2011 Authorize Interfund Loan. o Pros : Allowing future TIF Districts to be created throughout commercial/industrial areas without having to amend the Development District each time; allowing future annexation areas to fold into Development District; opportunity to pool TIF funds; and supporting economic development potential throughout Prior Lake. Cons : Not using an approach of targeting certain areas of the city for potential TIF financing assistance; and creating undo expectations by landowners that TIF may be available anywhere in Prior Lake. 1 9/20/2011 Proposed TIF Assistance: Expand Veterinary Service building of 7,000 SF to 14,000 SF 9 - year Economic Dev. TIF District. 20 employees now + 4 future + construction jobs Special legislative job creation criteria. Total project cost = $682,000 Pay - as - you - go increment payments w/ 90% of annual increment to business. Existing Co. market value = $455,000 Estimated annual increment ranging from New Co. est. market value = $980,000 $6,560 w/o inflation factor to $8,890 average Current annual property tax = $15,200 w/ 4% inflation. New est. annual property tax = $21,750 Total assistance capped at $60,000. Two basic components are required by the municipality to satisfy state statutes related to a “but - for” finding: Provide 90% of annual increment up to a maximum total o The development would not happen solely through amount of $60,000 (staff recommendation). 1. private investment in the “reasonably foreseeable future”; and Provide 90% of annual increment up to a maximum total o The induced development will yield a net increase in amount less than $60,000, which may result in fewer 2. market value for the site compared to the likely years needed to capture the total increment from the TIF development that would occur without TIF. District. The findings represent the opinion of the municipality. In Provide no assistance to this project. o this case, the findings would state that River Valley Veterinary Service will not expand in the foreseeable future on its existing site without TIF assistance. Fiscal disparities is required to be paid from within all An interfund loan associated with TIF is a precaution • Economic Development TIF Districts. rather than a necessity. Fiscal disparities has been calculated in the TIF The proposed resolution allows the city to establish an • cashflow analysis by Ehlers, resulting in estimated interfund loan to pay eligible TIF administrative increment being net of the fiscal disparities payment. expenses prior to tax increment being received over the 9 - year period of the district. No other properties in Prior Lake will be impacted by this TIF District. The applicant’s TIF application fee should cover those • up - front expenses, but just in case, this approval The pay - as - you - go Note will further create no risk for the provides protection to the city (state OSA reviews annual city for future rate or formula changes. TIF reports). 2 9/20/2011 No comments from the School District. Comments of support received from Scott County (letter dated 9/14/11 from Gary Shelton). EDAC recommendation to approve TIF assistance to River Valley (unanimous vote taken on 9/08/11). 3