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AGENDA #:
PREPARED BY:
SUBJECT:
DATE:
BACKGROUND:
DISCUSSION:
STAFF AGENDA REPORT
4 (e)
BONITA CARLSON, ASSISTANT CITY MANAGER
CONSIDER ESTABLISHMENT OF PUBLIC HEARING DATE FOR
CREATION OF AN ECONOMIC DEVELOPMENT TAX INCREMENT
FINANCING DISTRICT AND A REDEVELOPMENT TAX INCREMENT
FINANCING DISTRICT - RESOLUTION 94-37
JULY 5, 1994
City staff has been working over the past several months with four
developers on proposals for three separate projects. During the course of
this review, it became apparent that the proposed projects presented an
opportunity for the City to use tax increment financing to encourage
commercial redevelopment and eliminate blighted properties. The
projects under consideration are:
1) A retail center on the vacant lots abutting Walker and
Pleasant Street proposed by Steve Nielsen, This project is
not eligible for Tax Increment Financing, however, if the
increment for this project is captured, it can be used to
redevelop the blighted and substandard structures located
west of the vacant lots, adjacent to Main Avenue.
2) A proposed 10,000 square foot multi-tenant building to be
constructed and occupied by two local businessmen, Guy
Selinske d/b/aJ American Glass and Mirror, Inc. and Tim
Sinnen d/b/aJ Metro Cabinet. The building will be located in
Waterfront Passage Business Office Park.
City staff is recommending that tax increment financing districts be
established to include all of the above described properties, plus the
blighted property adjacent to Steve Nielsen's proposed development on
Pleasant and Walker. The proceeds of the tax increment are proposed to
be used to provide (1) incentive to redevelop the properties on Main and
Pleasant, (2) funding for future realignment of 170th Street and Highway
13 South and, (3) assistance for the construction of a 10,000 square foot
building in Waterfront Passage Business Office Park, The projects are
described more completely in the attached document titled "Proposed Tax
Increment Financing Redevelopment District and Economic Development
District-. In order to establish the Tax Increment Financing Districts 2.3
and 2.4 the City Council must approve a Resolution 94-37 establishing a
public hearing on August 1, 1994.
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4629 Dakota St. S.E., Prior Lake, Minnesota 55372-1714 / Ph. (612) 447-4230 / Fax (612) 447-4245
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ALTERNATIVES:
RECOMMENDATION:
ACTION REQUIRED:
EDAAG3. WRT
The City Council has the following alternatives:
1. Adopt Resolution 94-37 establishing a public hearing on
August 1, 1994 to consider establishing Tax Increment
Financing Districts No. 2-3 and No. 2-4.
2. Do not adopt Resolution 94-37 and do not approve the Tax
Increment Rnancing Districts No. 2-3 and 2-4.
Staff recommends Alternative No.1.
Motion and second to i~
Reviewed by: Lv.
City Mapager
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RESOLUTION 94-37
RESOLUTION ON THE PROPOSAL TO MODIFY DEVELOPMENT DISTRICT NO. 2 AND
FORM TAX INCREMENT FINANCING DISTRICTS NOS. 2-3 AND 2-4 WITHIN
DEVELOPMENT DISTRICT NO. 2 AND ADOPT A DEVELOPMENT PROGRAM AND TAX
INCREMENT FINANCING PLANS AND CALL FOR CONSULTATION WITH OTHER
AFFECTED JURISDICTIONS AND PUBLIC HEARING
MOTION BY:
WHEREAS,
WHEREAS,
WHEREAS,
SECONDED BY:
a proposal to modify Development District No.2, form Tax Increment
Financing Districts Nos. 2-3 and 2-4 within Development District No.2 under
the provisions of Minnesota Statues, chapter 469 (the · Act.) and to adopt a
development program and tax increment financing plans has been received
by the City Council; and
the Act requires that prior to modification of a development district and
formation of a tax increment financing district the City Council shall provide a
reasonable opportunity to members of the County Board of Commissioners
of the County of Scott and the members of the School Board of Independent
School District No. 719 to meet with the City Council and that the City
Council shall fully inform the members of the County Board and School
Board of the fiscal and economic implications of the proposed tax increment
financing districts; and
the Act further requires that prior to the modification of a development
district, formation of a tax increment financing district and the adoption of a
development program and tax increment financing plan a public hearing shall
be held thereon.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF PRIOR LAKE,
MINNESOTA, as follows:
1. The City Clerk is authorized and directed to make available to the
County Board of Commissioners of Scott County and of the School
Board of Independent School District No. 719 a copy of this resolution,
together with a copy of the proposed development program and tax
increment financing plans, and to invite board members to meet with the
City Council to discuss said proposals on the 1 st day of August. 1994, at
7:45 p.m. at the City Hall.
2. A public hearing on said plan will be held at the time and place set forth
in the Notice of Hearing hereto attached and incorporated herein by
reference. The City Clerk is authorized and directed to cause said
Notice of Hearing to be published in the official newspaper and, if the
official newspaper does not have general circulation, in a newspaper of
general circulation in the City as least once not less than 10 days nor
4629 Dakota St. S.E., Prior Lake, Minnesota 55372-1714 / Ph. (612) 447-4230 / Fax (612) 447-4245
AN EQUAL OPPORTUNIlY EMPLOYER
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more than 30 days prior to the date of hearing and to cause a copy of
said notice to be mailed to Scott County and the School Board of
Independent School District No. 719.
Passed and adopted this 5th day of July, 1994.
YES
NO
Andren
Greenfield
Kedrowski
Scott
Schenck
Andren
Greenfield
Kedrowski
Scott
Schenck
Frank Boyles
City Manager
City of Prior Lake
{Seal}
CITY OF PRIOR LAKE
Proposed Tax Increment Financing
Redevelopment District
and
Economic Development District
July 1994
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I. LEGAL AUTHORITY
A. Tvpe of proiect: The proposed projects are to be qualified as a Redevelopment
Tax Increment Financing District and as an Economic Tax Increment Financing
District. (See attached maps on Exhibits A B and D for the locations.)
B. Duration: The anticipated duration will be twelve years for the Redevelopment
District and eleven years for the Economic Development District.
C. "But for" test: Without the use of Tax Increment Financing the projects probably
will not occur. The costs of development including acquisition, demolition,
relocation, infrastructure and construction are such that the economic return to
private investors will not warrant development on the sites. Private developers
could choose alternative sites that are vacant and thus do not require expenditures
for redevelopment. Also, the City's interest in promoting redevelopment of
blighted, inappropriately used and economically obsolete properties cannot be
accomplished without the use of proceeds from a tax increment district.
D. IssuinJ! authoritv: The issuing authority for this project will be the Prior Lake
City Council. The City Council may opt to utilize their Economic Development
Authority in some or all aspects of the financing and development of the project.
ll. FINANCING
A. Tvpe of Debt: The City has not made a final decision on the type (if any) of debt
instruments that may be used to finance all or a portion of the redevelopment
costs. It is anticipated that the project financing may involve the following
financing alternatives; but the City Council reserves the right to make a final
determination based upon future discussions and negotiations with participating
parties.
1. The City prefers to finance acquisition, demolition, and relocation costs
through a "pay as you go" arrangement with the developer. Under this
scenario the developer would initially fund these costs and receive
reimbursements from the City as tax increments are received.
2. In the event the developer cannot fund the costs up front, it is likely at
the City would use General Obligation Tax Increment or Special
Assessment bonds to fund improvements on or adjacent to the project sites
and pledge the tax increments generated by the projects to finance all or a
portion of the debt service on the bonds.
3. It is anticipated the developer will secure bank financing for construction
of the project and will use a lease arrangement with individual retail
businesses to generate revenue for financing bank debt. The City will not
be involved in a lease or mortgage for the project and the Tax Increment
Financing will not be directly applied to a lease or mortgage
B. Amount of Debt: The estimated redevelopment costs to be financed with Tax
Increment Financing for acquisition, demolition, relocation and infrastructure are
$400,000. If General Obligation bonds are used to finance the activities,
capitalized interest would be approximately $30,000. It is not anticipated that
arbitrage will be factor in this project.
Other: The City has an "A" bond rating. If General Obligation Tax Increment
Bonds are issued they are expected to be tax exempt. Since the City will use the
proceeds either to reimburse developer's expense or for infrastructure
improvements, it is not anticipated that the developer would be required to provide
insurance or a letter of credit. The current tax capacity of real property within the
City of Prior Lake is $6,732,031. Enclosed with this report on Exhibit C is an
estimate of the fiscal impact of the proposed Tax Increment District including the
proposed project to be located within the Waterfront Passage Business/Office
Park.
III. POLICY
A. Economic status of jurisdiction:
1. As of July 1,1994 the City of Prior Lake had $14,945,000 of outstanding
indebtedness and $40,150 tax increment revenue collected in 1993.
2. There are no current statistics available on employment/unemployment
within the City of Prior Lake however the Minnesota Department of
Economic Security has compiled current statistics on Scott County which
depict 35,773 employed people, 1,301 unemployed persons and a 3.5%
unemployment rate as of April 1994.
3. The project entails redevelopment of two blighted, economically obsolete
commercial properties and is and replacing these uses with new
commercial retail centers totaling approximately 20,000 square feet. The
Economic development Tax Increment Financing project involves
relocating a business from an area in which it is a non-conforming use to
a 10,000 square foot manufacturing facility in the Waterfront Passage
Business Park and where the use is permitted.
Changes in population over the past ten years and projected into the future
are as follows:
1980
1990
2000
7,284
1l,482
21,400
4. The redevelopment projects and the proposed manufacturing expansion
should help to strengthen the community's economy through the creation
of new employment opportunities and increase tax base. Additional
impacts are likely to occur through the elimination of blight. Removal of
two to three blighted structures on Main Street may serve to induce other
nearby property owners to redevelop or rehabilitate their properties. The
redevelopment of the "triangle car wash" property located at Highway 13
and 170th street could also help stimulate additional development and
private investment on the southern border of the City. The redevelopment
project entails approximately five acres of land on two sites, the first at
Main and Pleasant Street on approximately 1 acre and the second on
approximately 3.6 acres at the "triangle car wash" site. The economic
development project involves 1 acre of land in the Waterfront Passage
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Business Park. These projects will not have any effect on the City's credit
rating.
B. Countv effec.ts
1. For years residents of Prior Lake have been going out of the community to
fulfill their retail shopping needs. A primary reason is the absence of
diverse retail development within the community. The creation of
additional commercial facilities will help to increase retail opportunities
within the community. In addition, the elimination of blight may
encourage other private investment and increased retail development and
redevelopment on Main Avenue and Highway 13 South. If these projects
are not undertaken and new retail development continues on the
Mdewakanton land and in Bumsville the opportunity for redevelopment
on Main Street and Highway 13 South may be delayed indefinitely. The
impact on the local tax rate, if the projects were to occur without the use
of Tax: Increment Financing, is estimated to be $73,000 per year or .628%
of the tax base.
2. All development has some cost relating to increased demand for services,
however, since the projects are to occur on sites with existing
infrastructure in place these costs should be minimized. In fact, the
proposed project at Highway 13 South and l70th Street may help to
defray County costs for road realignment thus making state aid available
for other projects.
3. The increase service cost and effect on County taxpayers is estimated to
be very minimal.
C. Purpose ofOToiect.
1. A primary purpose of the Redevelopment Tax: Increment Financing
project is to remove/renovate five blighted economically obsolete
structures.
2. Employment will increase by approximately thirty new retail service jobs
and four to six new manufacturing positions.
3. The tax base will increase by approximately $73,000 per year.
4. There will be no impact on housing stock.
5. A portion of the Tax: Increment Financing proceeds will be allocated to
defray special assessments, City and/or County costs for realignment of
roadways at Highway 13 South and l70th Street.
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