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HomeMy WebLinkAbout5D - Creekside TIF Amend CITY COUNCIL AGENDA REPORT 16200 Eagle Creek Avenue S.E. Prior Lake, MN 55372-1714 October 4, 2004 ~~ank Boyles, City Mana~1'\ AGENDA ITEM: CONSIDER APPROVAL A RESOLUTION CALLING FOR A PUBLIC HEARING BY THE CITY COUNCIL ON THE PROPOSED MODIFICATION OF THE DEVELOPMENT PROGRAM FOR DEVELOPMENT DISTRICT NO.3 AND THE PROPOSED MODIFICATION OF TAX INCREMENT FINANCING DISTRICT NO. 3-1 THEREIN AND THE ADOPTION OF A TAX INCREMENT FINANCING PLAN THEREFORE. DISCUSSION: Historv: In December 2001, the City Council authorized tax increment financing in the a maximum amount of $517,000 for the Creekside Commons Senior Rental Project at Priorwood and Five Hawks Avenues. This 54-unit 3-story building offers 42 market rate rental units and 12 low-to-moderate income units (60% of the median household income in Scott County). Current Circumstances: The tax increment financing was approved for Eagle Creek Development LLD ("ECD"). ECD is owned equally by Messenbrink Construction and Engineering, Inc. ("MCEI") and Premier Development Inc. ("PDI"), a corporation owned by Larry Gensmer. The applicant would like to change the ownership of Creekside Commons so that Mr. Messenbrink and Mr. Gensmer personally own 21 rental units each. Together, they would own the remaining 12 low-to-moderate income rental units. The owners have indicated that the restructuring will not affect the senior, rental or low-to-moderate income features of the project. The restructuring is intended to assist the owners to receive lower interest rates on their mortgage and to facilitate estate planning for each of them. Conclusion: The City has received the material needed to evaluate the new proposal. The next step in the tax increment approval process is to call for a public hearing and to allow the School District and County the opportunity to comment on the proposed modification. Adoption of the attached resolution would initiate both actions. The hearing would be scheduled for the December 6, 2004 City Council meeting. ISSUES: This is an unusual tax increment request in that it is modifying the ownership structure of an already approved program. Accordingly, we have requested new financial information to assure conformance with the "but for" test. We also asked the State Auditor how this modification should be processed. Their recommendation is to process it as if it were a new request. We are following that recommendation. ALTERNATIVES: (1) Adopt Resolution 04-XX setting a public hearing and directing notification to the County and School District. (2) Take no action. www.cityofpriorlake.com 1:ICOUNCILIAGNRPTSIFORMAT.DOPhone 952.447.4230 / Fax 952.447.4245 RECOMMENDED MOTION: Alternative (1) as part of the consent agenda. 1:ICOUNCILIAGNRPTSIFORMA T.DOC ..I.,m~ PR10<!' <' t: ~ u '" "'/JVNE50~" 16200 Eagle Creek Avenue S.E. Prior Lake, MN 55372-1714 RESOLUTION 04-XX A RESOLUTION CALLING FOR A PUBLIC HEARING BY THE CITY COUNCIL ON THE PROPOSED MODIFICATION OF THE DEVELOPMENT PROGRAM FOR THE DEVELOPMENT DISTRICT NO.3 AND THE PROPOSED MODIFICATION OF TAX INCREMENT FINANCING DISTRICT NO. 301 THEREIN AND THE ADOPTION OF THE TAX INCREMENT FINANCING PLAN THEREFORE. (CREEKSIDE ESTATES) Motion By: Second By: WHEREAS, the Creekside Commons Senior Rental Project consists of a 54-unit 3-story building offering 42 market rate rental units and 1210w-to-moderate income units ("Project"); and WHEREAS, the City Council of the City of Prior Lake established Development District No. 3 and adopted the Development Program and approved tax increment funding therefore by Resolution 01-138 dated December 17, 2001: and WHEREAS, the owners of the Project have made an application to restructure ownership of the Project and amend the tax increment financing plan therefore; and WHEREAS, in order to consider an amendment to the tax increment funding plan, the City must conduct a public hearing on the proposed modification. NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF PRIOR LAKE, MINNESOTA that: 1. The recitals set forth above are incorporated herein. 2. A public hearing to consider a proposed modification of the Development Program for Development District No.3, and the proposed modification to the tax increment financing plan for TIF District No. 3-1 (a housing district) therefore, all pursuant to and in accordance with Minnesota Statutes, Section 469.174 through 469.1799, inclusive, as amended, in an effort to encourage the development and redevelopment of certain designated areas within the City, shall be conducted on December 6, 2004 at 7pm at Prior Lake Fire Station NO.1 (16776 Fish Point Road SE, Prior Lake, MN). 3. City staff is authorized and directed to work with Ehlers & Associates, Inc. to prepare the modifications and to forward documents to the appropriate taxing jurisdictions including Scott County and Independent School District No. 719. The City Clerk is authorized and directed to cause notice of the hearing, together with an appropriate map as required by law, to be published at least once in the official newspaper of the City not later than 10, nor more than 30, days prior to December 6, 2004, and to place a copy of the modifications on file in the City Clerk's office at City Hall and to make such copy available for inspection by the public. PASSED AND ADOPTED THIS 4TH DAY OF OCTOBER, 2004. www.cityofpriorlake.com Phone 952.447.4230 / Fax 952.447.4245 Hauaen Hauaen Blombera Blombero LeMair LeMair Petersen Petersen Zieska Zieska YES NO City Manager, City of Prior Lake R:\RESOLUTIIADMINRES\2004\Creekside TIF Amend.DOC RESOLUTION NO. 01-138 RESOLUTION ADOPTING THE DEVELOPMENT PROGRAM FOR DEVELOPMENT DISTRICT NO.3; AND ESTABLISHING TAX INCREMENT FINANCING DISTRICT NO. 1 WITHIN DEVELOPMENT DISTRICT NO. 3 AND ADOPTING THE TAX INCREMENT FINANCING PLAN THEREFOR. MOTION BY: Petersen SECOND BY: Gundlach 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 (the "Council") of the City of Prior Lake (the "City") has proposed that the City establish Development District No. 3 and adopt the Development Program therefor and establish Tax Increment Financing District No. 3-1 (the "District") therein, and adopt the Tax Increment Financing Plan therefor (collectively, the "Program and Plan"); all pursuant to and in conformity with applicable law, including Minnesota Statutes, 469.124 through 469.134 and 469.174 through 469.179, 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 properly 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 submitted to the Council andlor made a part of the City files and proceedings on the Program and Plan. The Reports include data, information andlor substantiation constituting or relating to the bases for the other findings and determinations made in this resolution. The Council hereby confltms, 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. L:\Olfile.IOleda\RES3.1121701.doc I 16200 Eagle Creek Ave. S.E., Prior Lake, Minnesota 55372.1714 / Ph. (952) 447-4230 / Fax (952) 447-4245 AN EQUAL OPPORTUNITY EMPLOYER Section 2. Findinlls for the AdOtltion and Aooroval of the Prooram and Plan. 2.0 I. The Council hereby fmds that the Program and Plan, are intended and, in the judgment of this Council, the effect of such actions will be, to provide an impetus for development in the public purpose and accomplish certain objectives as specified in the Program and Plan, which are hereby incorporated herein. Section 3. Findinlls for the Establishment of Tax Increment Financinll District No.3-I. 3.01. The Council hereby finds that Tax Increment Financing District No.3-I is in the public interest and is a "housing district" under Minnesota Statutes, Section 469.174, Subd. 11. 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 pennitted 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 development or redevelopment 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. Public Purpose 4.01. The adoption of the Program and Plan conforms in all respects to the requirements of the Act and will help fulfill a need to develop an area of the City which is already built up, to provide housing opportunities, to improve the tax base and to improve the general economy of the State and thereby serves a public purpose. Section 5. Approval and Adoption of the ProllTam and Plan. 5.01. 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 City Clerk. 5.02. 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 necessa!)' for this purpose. 5.03 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 L:IOlfilesIOleda\RES3-1121701.doc 2 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. 5.04. The City Manager is further authorized and directed to file a copy of the Program and Plan with the Commissioner of Revenue. YES NO MADER X MADER GUNDLACH X GUNDLACH ~ ERICSON AI#.K ERICSON PETERSEN X PETERSEN ZIESKA X ZIESKA Passed and adopted this 1?th day of December, 2001 (Seal) L:IOI files10leda1RES3.1121701.doc 3 EXHIBIT A RESOLUTION #01-138 The reasons and facts supporting the findings for the adoption of the Tax Increment Financing Plan for Tax Increment Financing District No.3-I, as required pursuant to Minnesota Statutes, Section 469.175. Subdivision 3 are as follows: I. Finding that Tax Increment Financing District No. 3-1 is a housing district as defined in M.S.. Section 469.174. Subd. II. Tax Increment Financing District No. 3-1 consists of one parcel. The development will consist of rental housing. At least 20 percent of the unitslhomes receiving assistance will have incomes at or below 50 percent of statewide median income. The market value of non-assisted housing or commercial property will be less than 20 percent of the total fair market value of the planned improvements. ^t least 20 percenl of the units/homes receiving assistance \,,'ill have rents according to the utta<..~hed schedule (See E"hibit B). Appendix E of the TIF plan contains detailed analysis for the above finding. 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. 3-1 permitted by the 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 housing that meets the City's objectives for development and redevelopment. The cost site and public improvements and utilities makes this housing development infeasible without City assistance. Due to the high cost of building affordable new housing in the City and the cost of financing the proposed public improvements, this project is feasible only through assistance, in part, from tax increment financing. The developer was asked for and provided a proforma as justification that the developer would not have gone forward without tax increment assistance (see attachment in Appendix F of the TIF plan). The increased market value of the site that could reasonable 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 Plan: The City supported this finding on the grounds that the cost of site and public improvements and utilities add to the total development cost. Historically, site development costs in this area have made development infeasible without tax increment assistance. Therefore, 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. 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. If all development which is proposed to be assisted with tax increment were to occur in the District, the total increase in market value would be up to $4,135,000. The present value of tax increments from the District is estimated to be $643,095. The developer rnay recl:ive " maximum of S517.000 of the lax increment assishmce. It is the Council's finding L:IOlfilesIOledaIRES3-1121701.doc 4 that no development with a market value of greater than $3,491.905 would occur without tax increment assistance in this district within 25 years. This finding is based upon evidence from general past experience with the high cost of site improvements and public improvements in the general area of the District (see Cashflow in Appendix D of the TIP plan). 3. Finding that the Tax Increment Financing Plan for Tax Increment Financing District No. 3-1 conforms to the general plan for the development or redevelopment of the municipality as a whole. The Planning Commission reviewed the Plan and found that the Plan conforms to the general development plan of the City. 4. Finding that the Tax Increment Financing Plan for Tax Increment Financing District No. 3-1 will afford maximum opportunity, consistent with the sound needs of the City as a whole. for the development or redevelopment of Development District No.3 by private enterprise. Through the implementation of the Plan, the City will provide an impetus for residential development, desirable or necessary for increased population with the City. L:IOlfileslOI eda1RES3-J 121701.doc 5