HomeMy WebLinkAbout7A TIF Financing Gateway Development O1 PRI%
04646 Dakota Street SE
Prior Lake,MN 55372
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CITY COUNCIL AGENDA REPORT
MEETING DATE: MAY 11, 2015
AGENDA#: 7A
PREPARED BY: DAN ROGNESS, COMMUNITY& ECONOMIC DEVELOPMENT DIRECTOR
PRESENTED BY: DAN ROGNESS
AGENDA ITEM: CONSIDER APPROVAL OF A RESOLUTION MODIFYING MUNICIPAL DE-
VELOPMENT DISTRICT NO. 1 AND MODIFYING THE DEVELOPMENT PRO-
GRAM THEREFORE, AND ESTABLISHING TAX INCREMENT FINANCING
(HOUSING) DISTRICT NO. 1-5 THEREIN, AND APPROVING A TAX INCRE-
MENT FINANCING PLAN THEREFORE FOR GATEWAY REDEVELOPMENT
DISCUSSION: Introduction
The purpose of this agenda item is to consider approval of certain actions that
implement Tax Increment Financing (TIF) assistance to the Dominium redevel-
opment project at the Gateway Center site. These actions include: (1) modifying
the existing Municipal Development District No. 1; (2)establishing TIF District No.
1-5; and (3) approving a TIF Plan.
History
On March 9, the City Council adopted resolutions amending the Comprehensive
Land Use Plan to R-HD Residential Urban High Density and approving a Prelim-
inary PUD Plan; it also approved an ordinance rezoning the property to PUD. On
April 13, the City Council adopted a resolution approving the Final PUD Plan and
PUD Agreement.
Dominium applied for public financing assistance in the form of Tax Increment
Financing (TIF), waiver of city fees, and City Revenue Conduit Bond financing.
Now, a public hearing is being held by the Council on May 11 to consider the
public financing proposals for TIF and Conduit Bond assistance. Using the ap-
plicant's fee revenue, the City engaged Northland Securities to provide financial
analysis and advice to the city.
Current Circumstances
Dominium has a purchase agreement on a 2.54-acre commercial site, which in-
cludes the purchase of 27 additional feet on the easterly adjacent lot. Dominium's
proposed redevelopment project will include a 4-story, 170-unit senior (55+) in-
dependent-living, rental apartment building with associated underground and sur-
face parking. The unit mix includes 115 1-bedroom, 23 2-bedroom, and 32 3-
bedroom units, all as affordable to households at/below 60% of area median
household income ($34,860 for 1-person; $39,840 for 2-person). For example,
rent levels will be approximately $935/month for a 1-bedroom and $1,120/month
for a 2-bedroom unit.
Dominium's first request to the city was for it to receive a combination of tax in-
crement financing, a waiver of city fees, and conduit bond financing. City staff
asked Dominium not to consider the waiver of city fees. Therefore, negotiations
have been underway to determine an alternative, which included the developer's
dedication of parkland instead of paying park dedication fees of over $600,000
(based on $3,750 per housing unit). That dedication could potentially occur with
Dominium's acquisition of the 0.3-acre adjacent carwash property, which would
be demolished and graded.
After further analysis and input from the City Council, staff and consultants, Do-
minium is not pursuing the acquisition of the carwash property for park dedication.
Dominium was willing to include additional dollars into its project budget to ac-
quire this property without asking for city reimbursement. Now, Dominium and
city staff have reached an agreement that would be based on a scenario further
described in Attachment 2. This public financing scenario achieves multiple ob-
jectives, including a shorter TIF District term, no waiver of city fees, and city fi-
nancial support for a key redevelopment project based on TIF "but for" analysis.
At the April 20th EDA meeting, a unanimous vote (4-0) recommended public fi-
nancing assistance for the Dominium redevelopment project as proposed by
staff. In addition, the EDA discussed and recommended a business financing
program for potential assistance that would support the move of three businesses
in the Gateway Center (McGeez Closet, Pizza & Pasta, and Prior Lake Shoe
Service)to move to other commercial property in Prior Lake. That recommended
program is provided in a separate agenda item under New Business.
Conclusion
Staff has evaluated this application based upon what is beneficial to the City and
to Dominium. This includes an approach to consider the following sources of
financing and assistance (see a summary of this in Attachment 2):
1. Approve Tax Increment Financing for this Proiect. Agree in the TIF Plan
to a maximum amount of TIF assistance to the housing project of $2.1
million over a maximum TIF District term of 20 years (Housing Districts
may be approved up to 26 years). The corresponding Development
Agreement, however, identifies a maximum TIF Note of$1,637,000 prin-
cipal. The plan establishes the maximum parameters of a TIF budget,
while the agreement sets the final amount provided to the project.
2. Accept the maiority of the park dedication payment, but direct 30% back
to the project. Allow a portion of the Park Dedication payment from Do-
minium ($637,500)to be returned to Dominium to assist with the develop-
ment of affordable senior rental housing. Staff proposes a transfer of 30%
of those funds, or $187,500, to Dominium as a credit to help with the re-
development nature of this project.
3. Utilize Statutory authorized pooling of past administrative fees. A process
whereby funds within an existing Housing TIF District (Shepherd's Path
senior rental housing project) can be captured or "pooled" to another af-
fordable housing project. TIF laws allow the pooling of TIF funds from
one housing district to another(see Attachment 3). The city originally set
aside 10% of all TIF revenues for administrative costs, (now and into the
future). These funds are available to be pooled for this project. The cur-
rent administrative fund balance is approximately $200,000.
2
4. Utilize Statutory authorized pooling of future administrative fees. A pro-
cess whereby future funds from the Shepherd's Path TIF District, esti-
mated at$300,000 would also be pooled and transferred to the Dominium
project. That action will shorten the term of the newly formed Housing TIF
District for Dominium closer to the City council's desired term of 15 years.
Both actions related to #3 and #4 above will require a future public hearing to
consider amending the Shepherd's Path TIF District. Based on City Council di-
rection, staff can return to a future council meeting with a resolution initiating the
next steps for this type of TIF pooling. Therefore, the TIF Plan and corresponding
Development Agreement do not structure this pooling into the financial plan. If
pooling is subsequently approved, then that additional revenue will strictly be
used to shorten the term of the TIF District based upon that additional revenue.
ISSUES: Staff has worked closely with Dominium staff to develop this final proposal. The
City will see the following benefits from the Dominium redevelopment project:
• A historically underutilized commercial area will be redeveloped into a
new use, which may also spur other improvements in the Gateway area
and improve the downtown market.
• The market value of the property will increase ten-fold to $17 million.
• After the TIF District is complete within 15-20 years, an estimated total
property tax revenue will be over $150,000 annually to be divided
between the schools, county, city and other taxing jurisdictions.
• Affordable high-quality low-maintenance housing will be available to the
growing senior population in and around Prior Lake.
• This project will help the city achieve its affordable and life-cycle housing
goals identified in its approved Comprehensive Plan.
• Single family housing being vacated by seniors for this rental option will
make more affordable housing available to growing families.
• The city's Park Fund will see a net revenue gain of$450,000 for city park
improvements.
• The city's sewer and water trunk funds will see an estimated net revenue
gain of$297,500 in 2015.
• The city's Building Inspection division will see a gain of permit revenue of
nearly $117,500 in 2015.
• A high level of construction jobs will be in Prior Lake for this project within
an estimated 14-month timeframe.
ALTERNATIVES: 1. Conduct the public hearing and unless new information is offered, close
the public hearing; approve a resolution modifying Municipal Develop-
ment District No. 1 and modifying the Development Program therefore,
and establishing TIF (Housing) District No. 1-5 therein, and approving a
TIF Plan therefor for Gateway Redevelopment.
2. Motion and a second to deny a resolution modifying Municipal Develop-
ment District No. 1 and modifying the Development Program therefore,
and establishing TIF (Housing) District No. 1-5 therein, and approving a
TIF Plan therefor for Gateway Redevelopment.
3. Motion and a second to table action and ask City staff to provide additional
information as requested by the Council.
3
RECOMMENDED Alternative #1
MOTION:
ATTACHMENTS: 1. Modification to Development Program for Municipal Development District No.
1, TIF Plan for TIF (Housing) District No. 1-5
2. Tax Increment Summary
3. TIF Pooling Summary
4
RESOLUTION 15-xx
A RESOLUTION MODIFYING MUNICIPAL DEVELOPMENT DISTRICT NO. 1 AND MODIFYING THE
DEVELOPMENT PROGRAM THEREFORE,AND ESTABLISHING TAX INCREMENT FINANCING
(HOUSING) DISTRICT NO. 1-5 THEREIN,AND APPROVING A TAX INCREMENT FINANCING PLAN
THEREFORE FOR GATEWAY REDEVELOPMENT
Motion By: Second By:
WHEREAS, It has been proposed that the City of Prior Lake, Minnesota (the "City") modify Municipal
Development District No. 1 (the "Development District") and approve a modification to the
Development Program therefor, establish Tax Increment Financing (Housing) District No. 1-5
(the"TIF District") therein and approve and accept the proposed Tax Increment Financing Plan
(the "TIF Plan") therefor, pursuant to Minnesota Statutes, Sections 469.124 through 469.134
and Minnesota Statutes Sections 469.174 through 469.1794, both inclusive, as amended (the
"Act"); and
WHEREAS, The City Council has investigated the facts and has caused to be prepared a proposed
modification to the Development Program for the Development District, and has caused to be
prepared a proposed TIF Plan for the TIF District; and
WHEREAS, The City has performed all actions required by law to be performed prior to the modification of
the Development District and TIF District, and the adoption of the proposed Development
Program and TIF Plan therefor, including, but not limited to, notification of Scott County and
Prior Lake-Savage Area Public Schools(ISD 719) having taxing jurisdiction over the property to
be included in the TIF District and the holding of a public hearing upon published and mailed
notice as required by law.
NOW THEREFORE, BE IT HEREBY RESOLVED BY THE CITY COUNCIL OF PRIOR LAKE,
MINNESOTA as follows:
1. The recitals set forth above are incorporated herein.
2. Municipal Development District No. 1. The Development Program for the Development District
contained in Article II of the TIF Plan for the TIF District is hereby ratified and affirmed.
3. Tax Increment Financing (Economic Development) District No. 1-5. The TIF District is hereby
established in the City within the Development District, the initial boundaries of which are fixed and
determined as described in the TIF Plan for the TIF District.
4. Tax Increment Financing Plan. The TIF Plan is adopted as the tax increment financing plan for the TIF
District, and the City Council makes the following findings:
a. The TIF District is a housing district as defined in Minnesota Statutes, Section 469.174,
Subdivision 11, the specific basis for such determination being that the approximate 170 unit
multifamily senior rental housing project will provide safe, decent, affordable, sanitary housing
for residents of the city and it will result in the preservation and enhancement of the tax base of
the State.
b. The proposed development, in the opinion of the City Council, would not occur solely through
private investment. The reasons supporting these findings are that:
(i) The developer, Prior Lake Leased Housing Associates I, LLP, has represented to the
City that private investment will not finance these development activities because of
prohibitive construction costs relative to rental revenues for low and moderate income
housing units. It is necessary to finance these development activities through the use
of tax increment financing so that this and other development by private enterprise will
occur within the Development District.
(ii) A comparative analysis of estimated market values both with and without establishment
of the TIF District and the use of tax increments has been performed as described
above. Such analysis is found in Exhibit I of the TIF Plan, which is hereby incorporated,
herein by reference, 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 TIF District and the use of tax
increments.
(iii) In the opinion of the City Council, 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 TIF District permitted by the TIF Plan. The reasons supporting
this finding can be found in Exhibit I of the TIF Plan.
c. The TIF Plan for the TIF District conforms to the general plan for the development of the City as
a whole. The reasons for supporting this finding are that:
(i) The TIF District is property zoned; and
(ii) The TIF Plan will generally complement and serve to implement policies adopted in the
City's comprehensive Plan.
d. The TIF Plan 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.
5. Public Purpose. The adoption of the Development Program for the Development District, and the
adoption of the TIF Plan for the TIF District therein conform in all respects to the requirements of the
Act and will help fulfill a need to provide affordable housing choices, to improve the tax base and to
improve the general economy of the State and thereby serves a public purpose.
6. Certification and Filing. The City Manager is authorized and directed to transmit a certified copy of this
resolution together with a certified copy of the TIF Plan to the Auditor of Scott County with a request
that the original tax capacity of the property within the TIF District be certified to the City pursuant to
Section 469.177, Subdivision 1, of the Act, and to file a copy of the Development Program and the TIF
Plan with the Minnesota Commissioner of Revenue and State Auditor as required by the Act.
7. Administration. The administration of the Development District and the TIF District is assigned to the
City Manager who shall from time to time be granted such powers and duties pursuant to the Act as
the City Council may deem appropriate.
PASSED AND ADOPTED THIS 11h DAY OF MAY, 2015.
VOTE Hedberg Keeney McGuire Morton Thompson
Aye ❑ ❑ ❑ ❑ ❑
Nay ❑ ❑ ❑ ❑ ❑
Absent ❑ ❑ ❑ ❑ ❑
Abstain ❑ ❑ ❑ ❑ ❑
Frank Boyles, City Manager
Attachment #1
CITY OF PRIOR LAKE, MINNESOTA
MODIFICATION TO DEVELOPMENT PROGRAM FOR
MUNICIPAL DEVELOPMENT DISTRICT NO. 1
TAX INCREMENT FINANCING PLAN FOR
TAX INCREMENT FINANCING (HOUSING)
DISTRICT NO. 1-5
(GATEWAY CENTER)
PUBLIC HEARING DATE: MAY 11, 2015
PLAN APPROVED DATE: , 2015
PLAN CERTIFICATION REQUEST DATE: , 2015
PLAN CERTIFIED DATE: , 2015
0 Northland Securities,Inc.
45 South 7th Street,Suite 2000
NORTHLAND STRATEGIES Minneapolis,MN 55402
Special Projects :0)851-2920
Member NASD and SIPC
TABLE OF CONTENTS
ARTICLE I-INTRODUCTION AND DEFINITIONS
Section 1.01 Introduction 1
Section 1.02 Definitions 1
Section 1.03 Plan Preparation 1
ARTICLE II-DEVELOPMENT PROGRAM 2
Section 2.01 Overview 2
Section 2.02 Statement of Objectives 2
Section 2.03 Boundaries of Development District 3
Section 2.04 Development Activities 3
Section 2.05 Payment of Project Costs 3
Section 2.06 Environmental Controls;Land Use Regulations 3
Section 2.07 Park and Open Space to be Created 3
Section 2.08 Proposed Reuse of Property 3
Section 2.09 Administration and Maintenance of Development District 4
Section 2.10 Relocation 4
Section 2.11 Amendments 4
ARTICLE III-TAX INCREMENT FINANCING PLAN 5
Section 3.01 Statutory Authority 5
Section 3.02 Planned Development 5
3.02.1 Project Description 5
3.02.2 City Plans and Development Program 5
3.02.3 Land Acquisition 5
3.02.4 Development Activities 5
3.02.5 Need for Tax Increment Financing 5
Section 3.03 Tax Increment Financing District 6
3.03.1 Designation 6
3.03.2 Boundaries of TIF District 6
3.03.3 Type of District 6
Section 3.04 Plan for Use of Tax Increment 6
3.04.1 Estimated Tax Increment 6
3.04.2 Project Costs 7
3.04.3 Estimated Sources and Uses of Funds 8
Figure 3-1 8
3.04.4 Administrative Expense 8
3.04.5 County Road Costs 9
3.04.6 Bonded Indebtedness 9
3.04.7 Duration of TIF District 9
3.04.8 Estimated Impact on Other Taxing Jurisdictions 9
3.04.9 Prior Planned Improvements 9
ARTICLE IV-ADMINISTERING THE TIF DISTRICT 10
Section 4.01 Filing and Certification 10
Section 4.02 Modifications of the Tax Increment Financing Plan 10
Section 4.03 4-Year Knockdown Rule 10
Section 4.04 Pooling/5-Year Rule 11
Section 4.05 Financial Reporting and Disclosure Requirements 11
Section 4.06 Business Subsidy Compliance 12
EXHIBITS 13
Exhibit I-Present Value Analysis 13
Exhibit II-Projected Tax Increment 14
Exhibit III-Impact on Other Taxing Jurisdictions 15
Exhibit IV-Estimated Tax Increment Over Life of District 16
Exhibit V-Map of Municipal Development District No. 1 and TIF 1-5 17
TAX INCREMENT FINANCING DISTRICT NO. 1-5
ARTICLE I—INTRODUCTION AND DEFINITIONS
SECTION 1.01 INTRODUCTION
The City of Prior Lake proposes to provide tax increment financing assistance to Prior Lake
Leased Housing Associates I,LLP,for public costs related to the construction of a multifamily
senior housing facility in the City. This document contains the plan for achieving the
objectives of the Development Program for Municipal Development District No. 1 through the
establishment of Tax Increment Financing District No. 1-5.
SECTION 1.02 DEFINITIONS
For the purposes of this document,the terms below have the meanings given in this section,
unless the context in which they are used indicates a different meaning:
1. "City" means the City of Prior Lake,Minnesota.
2. "City Council"means the City Council of the City.
3. "County"means Scott County,Minnesota.
4. "Developer"means the private party undertaking construction in the TIF District,
anticipated to be Prior Lake Leased Housing Associates I,LLP.
5. "Development District" means Development District No. 1 in the City,created and
established pursuant to and in accordance with the Development District Act.
6. "Development District Act" means Minnesota Statutes,Sections 469.124 through 469.134, as
amended and supplemented from time to time.
7. "Development Program"means the Development Program for the Development District,as
amended and supplemented from time to time.
8. "Project Area"means the geographic area of the Development District.
9. "Project Costs"means the cost of the development activities that will or are expected to
occur within the Project Area or TIF District.
10. "School District"means Prior Lake-Savage Area Public Schools(ISD#719).
11. "State"means the State of Minnesota.
12. "TIF Act"means Minnesota Statutes,Sections 469.174 through 469.1794, as amended,both
inclusive.
13. "TIF District"means Tax Increment Financing(Housing)District No. 1-5 (Gateway Center).
14. "TIF Plan" means the tax increment financing plan for the TIF District(this document).
SECTION 1.03 PLAN PREPARATION
The document was prepared for the City by Northland Securities,Inc.
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TAX INCREMENT FINANCING DISTRICT NO. 1-5
ARTICLE II - DEVELOPMENT PROGRAM
SECTION 2.01 OVERVIEW
The City established the Development District and the related Development Program as a tool
to achieve the objectives described in Section 2.02. The Development District was first approved
in March, 1985, and has been modified subsequently. The Development District serves as
the Project Area for tax increment financing districts established within its boundaries. The
Development Program describes the City's objectives for the development of this area and the
use of tax increment financing.
Current modifications to the Development Program include budget revisions to coincide with
the TIF Plan relating to the TIF District.
This modified Development Program is intended to restate and expand on the original
Development Program and all prior amendments hereto,which are incorporated herein by
reference. Nothing in this modification is intended to supersede or alter the activities described
in the original Development Program.
SECTION 2.02 STATEMENT OF OBJECTIVES
The modifications of the Development District in the City pursuant to the Development District
Act are necessary and in the best interests of the City and its residents and are necessary to give
the City the ability to meet certain public purpose objectives that would not be obtainable in the
foreseeable future without intervention by the City in the normal development process.
The current proposed development is consistent with the established"Statement of Objectives"
documented by the original Development Program and prior amendments hereto,which are
incorporated herein by reference.
The established "Statement of Objectives" for the Development Program provide the City with
the ability to achieve certain public purpose goals not otherwise obtainable in the foreseeable
future without City intervention in the normal development process.The public purpose
goals include:restore and improve the tax base and tax revenue generating capacity of the
Development District;increase employment and housing opportunities;realize comprehensive
planning goals;remove blighted conditions;revitalize the property within the Development
District to create an attractive,comfortable,convenient, and efficient area for industrial,
commercial and related use. The City and Council seek to achieve the following Development
District program objectives:
1. Promote and secure the prompt development of certain property in the Development
District,which property is not now in productive use or in its highest and best use,in a
manner consistent with the City's Comprehensive Plan and with the minimum adverse
impact on the environment, and thereby promote and secure the development of other land
in the City.
2. Promote and secure additional employment and housing opportunities within the
Development District and the City for residents of the City and the surrounding area,
thereby improving living standards, reducing unemployment and the loss of skilled and
unskilled labor and other human resources in the City.
3. Secure the increase of commercial/industrial property subject to taxation by the City,School,
County and other taxing jurisdictions in order to better enable such entities to pay for
governmental services and programs required to be provided by them.
4. Provide for the financing and construction of public improvements in the Development
District necessary for the orderly and beneficial development of the Development District
DRAFT TIF PLAN FOR PUBLIC HEARING, DATED 5/11/2015 2
TAX INCREMENT FINANCING DISTRICT NO.1-5
and adjacent areas of the City.
5. Promote the concentration of commercial, office,and other appropriate development in the
Development District so as to maintain the area in a manner compatible with its accessibility
and prominence in the City.
6. Encourage local business expansion,improvement, and development,whenever possible.
7. Create a desirable and unique character within the Development District thorough quality
land use alternatives and design quality in new and remodeled buildings.
8. Encourage and provide maximum opportunity for private redevelopment of existing areas
and structures that are compatible with the Development Program.
9. Encourage redevelopment of substandard buildings,to improve employment opportunities
in the Development District and the City,where compatible with other planning and
development goals.
SECTION 2.03 BOUNDARIES OF DEVELOPMENT DISTRICT
The boundaries of the Development District are depicted in Exhibit V. The boundaries of the
Development District are coterminous with the boundaries of the City.
The City is not acting to modify the boundaries of the Development District. Within the
Development District,the City has previously established Tax Increment Financing District
Numbers 1 through 4,inclusive.
SECTION 2.04 DEVELOPMENT ACTIVITIES
The proposed development activities within the Development District are consistent with the
goals,objectives,and plans expressed by the Development Program. The current modifications
to the Development Program relate to plans by the Developer to construction an affordable
senior housing project.
SECTION 2.05 PAYMENT OF PROJECT COSTS
Project Costs and the plan for their payment will be described in the tax increment financing
plans. It is anticipated that the Project Costs of the Development Program will be paid
primarily from Tax Increments. The City reserves the right to utilize other available sources of
revenue,including but not limited to special assessments and user charges,which the City may
apply to pay a portion of the Project Costs.
SECTION 2.06 ENVIRONMENTAL CONTROLS; LAND USE REGULATIONS
All municipal actions,public improvements and private development shall be carried out
in a manner consistent with existing environmental controls and all applicable Land Use
Regulations.
SECTION 2.07 PARK AND OPEN SPACE TO BE CREATED
Park and open space within the Development District if created will be created in accordance
with the City's Comprehensive Plan and zoning and subdivision ordinances.
SECTION 2.08 PROPOSED REUSE OF PROPERTY
The modification to the Development Program does not contemplate that the City will acquire
DRAFT TIF PLAN FOR PUBLIC HEARING, DATED 5/11/2015 3
TAX INCREMENT FINANCING DISTRICT NO. 1-5
property and reconvey the same to another entity. Should the Development Program be further
amended to authorize land acquisition, the City Council will require the execution of a binding
development agreement with respect thereto and evidence that Tax Increments or other funds
will be available to repay the Project Costs associated with the proposed acquisition. It is the
intent of the City to negotiate the acquisition of property whenever possible. Appropriate
restrictions regarding the reuse and redevelopment of property shall be incorporated into any
Development Agreement to which the City is a party.
SECTION 2.09 ADMINISTRATION AND MAINTENANCE OF DEVELOPMENT
DISTRICT
Maintenance and operation of the Development District will be the responsibility of the
City Administrator who shall serve as administrator of the Development District. Each year
the administrator will submit to the Council the maintenance and operation budget for the
following year.
The administrator will administer the Development District pursuant to the provisions of
Section 469.131 of the Development District Act;provided,however,that such powers may only
be exercised at the direction of the City Council. No action taken by the administrator pursuant
to the above-mentioned powers shall be effective without authorization by the City Council.
SECTION 2.10 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 Section 469.133 of the
Development District Act.
SECTION 2.11 AMENDMENTS
The City reserves the right to alter and amend the Development Program,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,the Development Program and the Project Costs
of the Development.
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TAX INCREMENT FINANCING DISTRICT NO. 1-5
ARTICLE III - TAX INCREMENT FINANCING PLAN
SECTION 3.01 STATUTORY AUTHORITY
The TIF District and the TIF Plan are established under the authority of the TIF Act.
SECTION 3.02 PLANNED DEVELOPMENT
3.02.1 Project Description
The Developer proposes to build an approximate 170 senior rental units on a 2 1/2-acre site
located east of Trunk Highway 13 on Gateway Street and Jordan Avenue within the City. The
Developer's proposal calls for four-story independent living rental apartment building.The
building will include approximately 115 one-bedroom,23 two-bedroom, and 32 three-bedroom
units. The property where the housing will be built currently is occupied by a an approximate
23,650-square-foot commercial building.
3.02.2 City Plans and Development Program
In addition to achieving the objectives of the Development Program, the proposed development
is consistent with and works to achieve the development objectives of the City. The TIF Plan for
the TIF District conforms to the general plan for development or redevelopment of the City as a,
whole.
The City has adopted land use controls to guide the use of property. The proposed
development plans for the project in the TIF District have been reviewed by the Planning
Commission and the City Council.
3.02.3 Land Acquisition
The City does not intend to acquire any property within the TIF District.
3.02.4 Development Activities
As of the date of approval of this TIF Plan,there are no development activities proposed in this
TIF Plan that are subject to contracts.
3.02.5 Need for Tax Increment Financing
In various materials the Developer has demonstrated that the proposed use of tax increment
financing is needed to offset the high construction costs of high-quality low-to moderate-
income senior housing and associated infrastructure required to support the facility. Without
the proposed assistance,these initial up-front costs would make it infeasible for the Developer
to be able to charge the affordable rents required for low-to moderate-income seniors. Thus,it
is the City's opinion that the proposed development would not reasonably be expected to occur
solely through private investment within the 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 TIF District permitted by the TIF Plan.
A comparative analysis of estimated market values both with and without establishment of
the TIF District and the use of tax increments has been performed as described above and is
shown in Exhibit I. This analysis indicates that the increase in estimated market value of the
proposed development(less the present value of the projected tax increments for the maximum
duration permitted by the TIF Plan)exceeds the estimated market value of the site prior to the
establishment of the TIF District.
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TAX INCREMENT FINANCING DISTRICT NO. 1-5
SECTION 3.03 TAX INCREMENT FINANCING DISTRICT
3.03.1 Designation
This TIF District is designated Tax Increment Financing(Housing)District No.1-5.
3.03.2 Boundaries of TIF District
The boundaries of the TIF District are depicted in Exhibit V. The TIF District includes parcel
number 251740020 and a portion of parcel number 251740010, and including adjacent right-of-
way. Parcel number 251740010 is currently undergoing an administrative subdivision process.
A portion of parcel number 251740010 will be included in the TIF District. The combined(new)
parcel that will be created will be described as follows:
Lot 2, Block One, GATEWAY CENTER 1ST ADD'N, according to the recorded plat thereof,
Scott County,Minnesota, together with the westerly 27.00 feet of Lot 1, said Block One.
3.03.3 Type of District
The TIF District is designated as a"housing" district pursuant to Minnesota Statutes Section
469.174,Subd. 11. In the Development Agreement,the developer will commit to:
1. Satisfy the income requirements for a qualified residential rental project as defined in
section 142(d)of the Internal Revenue Code. This requirement applies for the duration
of the tax increment financing district. The Fiscal Year 2015 Area Median Income for the
County is$86,600. The developer will commit to provide(a)20%or more of units for
occupancy by persons at 50%or less of area median gross income(estimated at$43,300)or
(b) (a)40%or more of units for occupancy by persons at 60%or less of area median gross
income(estimated at$51,960). These income thresholds may change over the life of the TIF
District.
2. No more than 20%of the square footage of buildings that receive assistance from tax
increments consist of commercial, retail,or other nonresidential uses.Revenue derived from
tax increment from a housing district must be used solely to finance the cost of housing
projects as defined in Minnesota Statutes,Section 469.174, subdivision 11. The cost of public
improvements directly related to the housing projects and the allocated administrative
expenses of the City may be included in the cost of a housing project.
3. Failure to comply with these income limitations is subject to Minnesota Statutes,Section
469.1771.
SECTION 3.04 PLAN FOR USE OF TAX INCREMENT
3.04.1 Estimated Tax Increment
The original net tax capacity of value of the TIF District will be set by the County upon request
for certification. For the purposes of this Plan,the estimated original net tax capacity is
$13,210. This amount is estimated based on the most recent published estimated market value
of$1,761,300 for Parcel 251740020 (the parcel that is subject to an administrative subdivision
process will impact this estimate);with tax capacity value calculated for residential low income
property.
The total tax capacity value of the property after development completion(for taxes payable
in 2018)is estimated to be$127,500. This amount is based on a total estimated market value
of$17,000,000 with property classified as residential low-income property. The estimated
difference between the total tax capacity value after development completion(for taxes payable
in 2018) and the original net tax capacity value is the captured tax capacity value for the creation
of tax increment($114,928).
The total local tax rate for taxes payable in 2015 is 110.108%. The TIF Plan assumes that this
rate will be set as the original local tax rate for the TIF District. At the time of the certification
DRAFT TIF PLAN FOR PUBLIC HEARING, DATED 5/11/2015 6
TAX INCREMENT FINANCING DISTRICT NO.1-5
of the original net tax capacity for the TIF District,the county auditor shall certify the original
local tax rate that applies to the TIF District.The original local tax rate is the sum of all the local
tax rates,excluding that portion of the school rate attributable to the general education levy
under Minnesota Statutes section 126C.13,that apply to a property in the TIF District.The local
tax rate to be certified is the rate in effect for the same taxes payable year applicable to the tax
capacity values certified as the TIF District's original tax capacity.The resulting tax capacity rate
is the original local tax rate for the life of the TIF District.
Under these assumptions,the estimated annual tax increment will be$126,545 after
development completion. The actual tax increment will vary according to the certified original
tax capacity value and original tax rate,the actual property value produced by the proposed
development and the changes in property value and State tax policy over the life of the district.
It is the City's intent to retain 100%of the Capture Tax Capacity Value for the duration of the
TIF district. Exhibit II contains the projected tax increment over the life of the District.
3.04.2 Project Costs
The City will use tax increment to pay Project Costs. The City anticipates the use of tax
increment to pay administrative expenses for the TIF District and to reimburse the Developer on
a pay-go basis for a portion of the cost for construction of affordable housing. A development
assistance contract with the Developer will define the means for verifying Developer costs
eligible for reimbursement and the means of disbursing tax increments collected by the City to
the Developer.
The City may also use tax increments to pay financing costs. The interest rate payable on bonds
(i.e.,tax increment financing note)to be issued will be set pursuant to a development assistance
contract with the Developer.
The City reserves the right to use any other legally available revenues to finance or pay for
Project Costs associated with the development in the TIF District.
The City reserves the authority to modify the TIF Plan to provide authority to expend tax
increment from the TIF District on other housing projects that meet the criteria for establishing
a housing TIF district. The statutes governing the use of TIF define a housing district consisting
of a project,or a portion of a project,intended for occupancy,in part,by persons or families of
low and moderate income (Minnesota Statutes,Section 469.174,Subd. 11). The requirements
for the establishment of a housing TIF district are contained in Minnesota Statutes,Section
469.1761. The primary criteria are income related. The criteria are different for owned and
rental housing.
The practical application of this authority for the City includes:
• The use of tax increment is not limited by pooling restrictions or the five-year rule.
• The tax increment can be spent on activities outside of the TIF district,but within the
Development District No. 1.
• This authority does not extend the maximum statutory duration of the TIF district.
• The tax increment must be used solely to finance the cost of the "housing project"
as defined by the TIF Act. The cost of public improvements directly related to the
housing project and the allocated administrative expenses of the city may be included
in the cost of a housing project.
• No more than 20%of the square footage of buildings that receive TIF assistance may
consist of commercial,retail, or other nonresidential uses.
Potential applications of this authority include:
• Individual housing projects avoiding the need for a new TIF district.
DRAFT TIF PLAN FOR PUBLIC HEARING, DATED 5/11/2015 7
TAX INCREMENT FINANCING DISTRICT NO. 1-5
• Supplementing the revenues of another housing TIF district.
• Assistance for the renovation of existing housing.
• Acquisition of land for housing.
• Assistance to make public improvements more affordable.
3.04.3 Estimated Sources and Uses of Funds
The estimated sources of revenue, along with the estimated Project Costs of the TIF District,
are itemized in Figure 3-1 that follows. Such costs are eligible for reimbursement from tax
increments, and other listed sources of revenue from the TIF District.
FIGURE 3-1
ESTIMATED SOURCES AND USES OF FUNDS
Total
Estimated Tax Increment Revenues(from tax increment generated by the district)
Tax increment revenues distributed from the county $2,575,000
Interest and investment earnings $100,000
Sales/lease proceeds $0
Market value homestead credit $0
Total Estimated Tax Increment Revenues $2,675,000
Estimated Project/Financing Costs(to be paid or financed with tax increment)
Project costs
Land/building acquisition $0
Site improvements/preparation costs $0
Utilities $0
Other qualifying improvements $0
Construction of affordable housing $2,100,000
Small city authorized costs,if not already included above $0
Administrative costs $128,750
Estimated Tax Increment Project Costs $2,228,750
Estimated financing costs
Interest expense $446,250
Total Estimated Project/Financing Costs to be Paid from Tax Increment $2,675,000
Estimated Financing
Total amount of bonds to be issued* $2,228,750
* Bonds may includs interfund loans,general obligation bonds,and notes to developers.
The City reserves the right to administratively adjust the amount of any of the Project Cost
items listed in Figure 3-1, so long as the total estimated tax increment project costs amount,not
including financing costs,is not increased.
3.04.4 Administrative Expense
The City will retain up to five percent(5%)of annual tax increment revenues,in addition to
required fees paid to the State and County. The City will use these monies to pay for and
reimburse the City for costs of administering the TIF district allowed by the TIF Act. Based
on current projections,this amount is estimated to be$128,750. Anticipated administrative
DRAFT TIF PLAN FOR PUBLIC HEARING, DATED 5/11/2015 8
TAX INCREMENT FINANCING DISTRICT NO.1-5
expenses of the TIF District include annual audit of the fund for TIF District,preparation of
annual reporting,legal publication of annual report, and administration of the development
agreement.
3.04.5 County Road Costs
The proposed development will not substantially increase the use of county roads and
necessitate the need to use tax increments to pay for county road improvements.
3.04.6 Bonded Indebtedness
The total amount of bonds estimated to be issued is$2,228,750. The City will not issue any
general obligation bonded indebtedness as a result of the TIF Plan.
The City intends to use tax increment financing to reimburse the developer on pay-as-you-go
basis for Project Costs.
The City may loan or advance money from its general fund or any other fund it has legal
authority to use to finance qualifying TIF expenditures, such as costs of administering the
TIF District. An interfund loan or advance is defined in the TIF Act as a bond or a qualifying
obligation. Before money is transferred,advanced, or spent, the loan or advance shall be
authorized by resolution of the City. For the loan or advance to be repaid with TIF revenues,
an interfund loan agreement must be in place before any loans or advances are made.The
terms and conditions for repayment of the loan must be in writing and include, at minimum,
(i)the principal amount of the loan or advance, (ii)the interest rate to be charged,and(iii) its
maximum term. The maximum rate of interest that can be charged is limited to the annual rate
charged by the State Courts or by the Department of Revenue,whichever is greater.
3.04.7 Duration of TIF District
The City sets the duration to collect and spend tax increments on eligible purposes for a
maximum of 19 years after the date of receipt of the first tax increment or 20 years of tax
increment collection. The estimated decertification date is 12/31/2036.
The TIF Act allows tax increments to be collected from the TIF District for a period not to exceed
25 years from the date of receipt of the first tax increment. A shorter duration is established for
the TIF District(20 years of tax increment collection versus 26 years).
3.04.8 Estimated Impact on Other Taxing Jurisdictions
Exhibit III and IV shows the estimated impact on other taxing jurisdictions if the maximum
projected retained captured net tax capacity of the TIF District was hypothetically available to
the other taxing jurisdictions. The City believes that there will be no adverse impact on other
taxing jurisdictions during the life of the TIF District, since the proposed development would
not have occurred without the establishment of the TIF District and the provision of public
assistance. A positive impact on other taxing jurisdictions will occur when the TIF District is
decertified and the development therein becomes part of the general tax base.
The City anticipates minimal impact of the proposed development on city-provided services.
There will be no borrowing costs to the City for the project. A manageable increase in water and
sewer usage is expected. It is anticipated that there may be a slight but manageable increase in
police and fire protection duties due to the development.
3.04.9 Prior Planned Improvements
There have been no building permits issued in the last 18 months in conjunction with any of
the properties within the TIF District. The City will include this statement with the request for
certification to the County Auditor. If building permits had been issued during this time period,
then the County Auditor would increase the original net tax capacity of the TIF District by the
net tax capacity of each improvement for which a building permit was issued.
DRAFT TIF PLAN FOR PUBLIC HEARING, DATED 5/11/2015 9
TAX INCREMENT FINANCING DISTRICT NO.1-5
ARTICLE IV—ADMINISTERING THE TIF DISTRICT
SECTION 4.01 FILING AND CERTIFICATION
The filing and certification of the TIF Plan consists of the following steps:
1. Upon adoption of the TIF Plan,the City shall submit a copy of the TIF Plan to the Minnesota
Department of Revenue and the Office of the State Auditor.
2. The City shall request that the County Auditor certify the original net tax capacity and net
tax capacity rate of the TIF District. To assist the County Auditor in this process,the City
shall submit copies of the TIF Plan,the resolution establishing the TIF District and adopting
the TIF Plan, and a listing of any prior planned improvements.
3. The City shall send the County Assessor any assessment agreement establishing the
minimum market value of land and improvements in the TIF District, and shall request that
the County Assessor review and certify this assessment agreement as reasonable.
SECTION 4.02 MODIFICATIONS OF THE TAX INCREMENT FINANCING PLAN
The City reserves the right to modify the TIF District and the TIF Plan. Under current State
Law,the following actions can only be approved after satisfying all the necessary requirements
for approval of the original TIF Plan(including notifications and public hearing):
• Reduction or enlargement in the geographic area of the Development District or the TIF
District.
• Increase in the amount of bonded indebtedness to be incurred.
• Increase in the amount of capitalized interest.
• Increase in that portion of the captured net tax capacity to be retained by the City.
• Increase in the total estimated Project Costs,not including cost of financing.
• Designation of additional property to be acquired by the City.
Other modifications can be made by resolution of the City Council. In addition,the original
approval process does not apply if(1)the only modification is elimination of parcels from the
TIF District and(2)the current net tax capacity of the parcels eliminated equals or exceeds the
net tax capacity of those parcels in the TIF District's original net tax capacity,or the City agrees
that the TIF District's original net tax capacity will be reduced by no more than the current net
tax capacity of the parcels eliminated.
The City must notify the County Auditor of any modification that reduces or enlarges the
geographic area of the TIF District. The geographic area of the TIF District may be reduced but
not enlarged after five years following the date of certification.
SECTION 4.03 4-YEAR KNOCKDOWN RULE
Since the TIF District consists of a single parcel, development of the project as planned
prevents any loss of value from the 4-Year Knockdown Rule. This Rule requires that if after
four years from certification of the TIF District no demolition, rehabilitation,renovation or site
improvement,including a qualified improvement of an adjacent street,has commenced on a
parcel located within the TIF District,then that parcel shall be excluded from the TIF District
and the original net tax capacity shall be adjusted accordingly. Qualified improvements of a
street are limited to construction or opening of a new street, relocation of a street,or substantial
reconstruction or rebuilding of an existing street. The City must submit to the County Auditor,
DRAFT TIF PLAN FOR PUBLIC HEARING, DATED 5/11/2015 10
TAX INCREMENT FINANCING DISTRICT NO.1-5
by February 1 of the fifth year,evidence that the required activity has taken place for each parcel
in the TIF District.
If a parcel is excluded from the TIF District and the City or owner of the parcel subsequently
commences any of the above activities,the City shall certify to the County Auditor that such
activity has commenced and the parcel shall once again be included in the TIF District. The
County Auditor shall certify the net tax capacity of the parcel, as most recently certified by the
Commissioner of Revenue,and add such amount to the original net tax capacity of the TIF
District.
SECTION 4.04 POOLING/5-YEAR RULE
At least 80%of tax increments from the TIF District must be expended on activities in the
TIF 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, provided that in the case of a housing district, a housing project as defined
in Minnesota Statutes,Section 469.174,Sub. 11,is deemed to be an activity in the District,even
if the expenditure occurred after five years. Not more than 20%of said tax increments may be
expended,through a development fund or otherwise, on activities outside of the TIF District
except to pay, or secure payment of, debt service on credit enhanced bonds, provided that in the
case of a housing district,a housing project as defined in Minnesota Statutes,Section 469.174,
Sub. 11,is deemed to be an activity in the District,even if the expenditure occurred after five
years. For purpose of applying this restriction, all administrative expenses must be treated as if
they were solely for activities outside of the TIF District.
Beginning with the sixth year after certification of the TIF District,if the tax increments actually
received by the City representing the "in-District"percentage exceed the amounts considered
"spent" within the TIF District, the excess must be used or set aside to pay or defease bonds
or to make payments under contracts.The TIF District must be decertified when the City has
received tax increments representing the"in-District" percentage in an amount sufficient
to fully pay its in-district obligations (i.e.,to defease any bonds and/or fulfill all contractual
obligations).
It is anticipated that all tax increments collected in the TIF District will be spent or obligated
within this time period. Unless the TIF Plan is modified and additional expenditures are
authorized,tax increments will only be used to pay for authorized"In-District" Project Costs
included in the TIF Plan.
SECTION 4.05 FINANCIAL REPORTING AND DISCLOSURE REQUIREMENTS
The City will comply with the annual reporting requirements of State Law pursuant to the
guidelines of the Office of the State Auditor. Under current law,the City must prepare and
submit a report on the TIF district on or before August 1 of each year. The City must also
annually publish in a newspaper of general circulation in the City an annual statement for each
tax increment financing district.
The reporting and disclosure requirements outlined in this section begin with the year the
district was certified, and shall end in the year in which both the district has been decertified
and all tax increments have been spent or returned to the county for redistribution. Failure to
meet these requirements, as determined by the State Auditors Office,may result in suspension
of distribution of tax increment.
DRAFT TIF PLAN FOR PUBLIC HEARING, DATED 5/11/2015 11
TAX INCREMENT FINANCING DISTRICT NO.1-5
SECTION 4.06 BUSINESS SUBSIDY COMPLIANCE
The City is exempt from the business subsidies requirements specified in Minnesota Statutes,
Sections 116J.993 to 116J.995 because the intended subsidy for the project specified in this
document is anticipated to be 100%for housing assistance.
DRAFT TIF PLAN FOR PUBLIC HEARING, DATED 5/11/2015 12
TAX INCREMENT FINANCING DISTRICT NO. 1-5
Exhibit I
City of Prior Lake
Tax Increment Financing District No. 1-5
Present Value Analysis As Required By
Minnesota Statutes 469.175(3)(2)
Gateway Center
1 Estimated Future Market Value w/Tax Increment Financing 18,783,225
2 Payable Pay 2015 Market Value 1,761,300
3 Market Value Increase (1-2) 17,021,925
4 Present Value of Future Tax Increments 1,850,952
5 Market Value Increase Less PV of Tax Increments 15,170,973
6 Estimated Future Market Value w/o Tax Increment Financing 1,946,053 1
7 Payable Pay 2015 Market Value 1,761,300
8 Market Value Increase (6-7) 184,753
9 Increase in MV From TIF 14,986,221 2
1 Assume 0.50%annual appreciation over 20 year life of district.
2 Statutory compliance achieved if increase in market value from TIF(Line 9) is
greater than or equal to zero.
DRAFT TIF PLAN FOR PUBLIC HEARING, DATED 5/11/2015 13
TAX INCREMENT FINANCING DISTRICT NO. 1-5
EXHIBIT II
•
City of Prior Lake
Tax Increment Financing District No.1-5
Projected Tax Increment
Gateway Center
Assumed 100.00% 5.00% 0.36% Available Total
TIF Taxes New Base Captured Original Estimated State Net Annual PV of Net
District Value Payable Tax Tax Tax Tax Tax City Auditor Tax Available TIF
Year Year Year Capacity,. Capacity Capacity Rate Increment Admin. Deduct. Increment 3.00%
1 2016 2017 63,750 (13,210) 50,540 110.108% 55,649 (2,782) (200) 52,666 51,377
2 2017 2018 128,138 (13,210) 114,928 110.108% 126,545 (6,304) (456) 119,785 164,801
3 2018 2019 128,778 (13,210) 115,568 110.108% 127,250 (6,340) (458) 120,452 275,511
4 2019 2020 129,422 (13,210) 116,212 110.108% 127,959 (6,375) (461) 121,123 383,571
5 2020 2021 130,069 (13,210) 116,859 110.108% 128,672 (6,410) (463) 121,798 489,046
6 2021 2022 130,720 (13,210) 117,510 110.108% 129,388 (6,446) (466) 122,476 591,996
7 2022 2023 131,373 (13,210) 118,163 110.108% 130,107 (6,482) (468) 123,157 692,481
8 2023 2024 132,030 (13,210) 118,820 110.108% 130,831 (6,518) (471) 123,842 790,561
9 2024 2025 132,690 (13,210) 119,480 110.108% 131,557 (6,554) (474) 124,529 886,291
10 2025 2026 133,354 (13,210) 120,144 110.108% 132,288 (6,591) (476) 125,221 985,002
11 2026 2027 134,020 (13,210) 120,811 110.108% 133,022 (6,627) (479) 125,916 1,081,349,
12 2027 2028 134,690 (13,210) 121,481 110.108% 133,760 (6,664) (482) 126,615 1,175,388
13 2028 2029 135,364 (13,210) 122,154 110.108% 134,502 (6,701) (484) 127,317 1,267,175
14 2029 2030 136,041 (13,210) 122,831 110.108% 135,247 (6,738) (487) 128,022 1,356,762
15 2030 2031 136,721 (13,210) 123,511 110.108% 135,996 (6,775) (490) 128,731 1,444,203
16 2031 2032 137,405 (13,210) 124,195 110.108% 136,748 (6,813) (492) 129,443 1,529,547
17 2032 2033 138,092 (13,210) 124,882 110.108% 137,505 (6,850) (495) 130,159 1,612,846
18 2033 2034 138,782 (13,210) 125,572 110.108% 138,265 (6,888) (498) 130,879 1,694,148
19 2034 2035 139,476 (13,210), 126,266 110.108% 139,029 (6,926) (501) 131,602 1,773,501
20 2035 2036 140,173 (13,210) 126,964 110.108% 139,797 (503) 132,329 1,850,952
TOTAL= 2,584,117 (9,303) 2,446,063
Key Asssumptiona
1 Estimated annual increase in valuation: 0.50%
2 Tax rate is based on Pay 2015 tax rates.
3 Base Mrkt Value= $1,761,300 Includes 1 parcel,PID: 251740020
4 New Mrkt Value= $17,000,000 Based on 170 units at$100,000/unit. Verified with Scott County.
5 Present value is based on semi-annual payments.
6 Classified as Qualified 4d/Low Income Housing,Classification Rate=0.75%
DRAFT TIF PLAN FOR PUBLIC HEARING, DATED 5/11/2015 14
TAX INCREMENT FINANCING DISTRICT NO. 1-5
Exhibit III
City of Prior Lake
Tax Increment Financing District No.1-5
Impact on Other Taxing Jurisdictions
(Taxes Payable Pay 2015)
Gateway Center
ANNUAL TAX INCREMENT
Estimated Annual Captured Tax Capacity(Full Development) $126,964
Payable Pay 2015 Local Tax Rate 110.108%
Estimated Annual Tax Increment $139,797
Percent of Tax Base
Net Tax Captured
Capacity Tax Percent of
(NTC)* Capacity Total NTC
City of Prior Lake 28,870,899 126,964 0.44%
Scott County 159,180,564 126,964 0.08%
ISD 719 48,721,565 126,964 0.26%
Dollar Impact of Affected Taxing Jurisdictions
Net Tax Tax Added
Capacity %of Total Increment Local Tax
(NTC) Share Rate
City of Prior Lake 31.988% 29.052% 40,614 0.141%
Scott County 36.638% 33.275% 46,517 0.029%
ISD 719 32.639% 29.643% 41,440 0.085%
Other 8.842% 8.031% 11,226
Totals 110.108% 100.000% 139,797
NOTE NO.1: Assuming that ALL of the captured tax capacity would be available to all taxing jurisdictions
even if the City does not create the Tax Increment District,the creation of the District will reduce tax
capacities and increase the local tax rate as illustrated in the above tables.
NOTE NO.2: Assuming that NONE of the captured tax capacity would be available to the taxing jurisdiction
if the City did not create the Tax Increment District,then the plan has virtually no initial effect on the tax
capacities of the taxing jurisdictions. However,once the District is established,allowable costs paid from the
increments,and the District is terminated,all taxing jurisdictions will experience an increase in their tax
base.
DRAFT TIF PLAN FOR PUBLIC HEARING, DATED 5/11/2015 15
TAX INCREMENT FINANCING DISTRICT NO. 1-5
Exhibit IV
City of Prior Lake
Tax Increment Financing District No.1-5
Estimated Tax Increments Over Maximum Life of District
Gateway Center
Based on Pay Pay 2015 Tax Rate= 110.108% 31.988% 36.638% 32.639% 8.842%
Estimated City County School Other
TIF Taxes New Base Captured Total TIF TIF TIF TIF
District Payable Tax Tax Tax Tax Related Related Related Related
Year Year Capacity Capacity Capacity Increment Share Share Share Share
1 2017 63,750 (13,210) 50,540 55,649 16,167 18,517 16,496 4,469
2 2018 128,138 (13,210) 114,928 126,545 36,764 42,107 37,512 10,162
3 2019 128,778 (13,210) 115,568 127,250 36,968 42,342 37,721 10,219
4 2020 129,422 (13,210) 116,212 127,959 37,174 42,578 37,931 10,276
5 2021 130,069 (13,210) 116,859 128,672 37,381 42,815 38,142 10,334
6 2022 130,720 (13,210) 117,510 129,388 37,589 43,053 38,354 10,392
7 2023 131,373 (13,210) 118,163 130,107 37,799 43,293 38,568 10,447
8 2024 132,030 (13,210) 118,820 130,831 38,009 43,533 38,782 10,507
9 2025 132,690 (13,210) 119,480 131,557 38,220 43,775 38,998 10,564
10 2026 133,354 (13,210) 120,144 132,288 38,432 44,018 39,214 10,624
11 2027 134,020 (13,210) 120,811 133,022 38,645 44,262 39,432 10,683
12 2028 134,690 (13,210) 121,481 133,760 38,860 44,508 39,651 10,741
13 2029 135,364 (13,210) 122,154 134,502 39,075 44,755 39,870 10,802
14 2030 136,041 (13,210) 122,831 135,247 39,292 45,003 40,091 10,861
15 2031 136,721 (13,210) 123,511 135,996 39,509 45,252 40,313 10,922
16 2032 137,405 (13,210) 124,195 136,748 39,728 45,502 40,536 10,982
17 2033 138,092 (13,210) 124,882 137,505 39,948 45,754 40,761 11,042
18 2034 138,782 (13,210) 125,572 138,265 40,169 46,007 40,986 11,103
19 2035 139,476 (13,210) 126,266 139,029 40,391 46,261 41,213 11,164
20 2036 140,173 (13,210) 126,964 139,797 40,614 46,517 41,440 11,226
Total 2,584,117 750,734 859,852 766,011 207,520
DRAFT TIF PLAN FOR PUBLIC HEARING, DATED 5/11/2015 16
TAX INCREMENT FINANCING DISTRICT NO. 1-5
EXHIBIT V
Boundaries of Municipal District No. 1 and Tax Increment Financing District No. 1-5
City of Prior Lake
Municipal Development District No, 1
pi..
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are being expanded to be I :, " ./
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conterminous with the city � v,�r: ,' '`� ,_air.,;
limits of the City of Prior Lake. `r;®j „ �� . , � ' �5'1111� g'It }��'
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DRAFT TIF PLAN FOR PUBLIC HEARING, DATED 5/11/2015 17
Attachment #2
TIF Analysis for the Dominium Redevelopment Project
Prior Lake, MN - 2015
KEY PUBLIC FINANCING OBJECTIVES:
➢ Maintain a short-duration TIF District ... ideally, no longer than 15 years.
➢ Provide an amount of financing assistance necessary to meet the TIF "but for" test.
➢ Support affordable housing options for seniors in the rental market using TIF.
➢ Require the developer to pay all local development fees; no waivers granted.
DOMINIUM'S PUBLIC FINANCING REQUEST(NOT INCLUDING REVENUE BOND):
Original request: $1,140,000 TIF (20-year term); waive$935,000 city fees;TOTAL= $2,075,000.
Revised request: $1,437,500 TIF (20-year term, but 15-18 expected); $200,000 pooled TIF option;
$187,500 credit from the paid park fee;TOTAL=$1,825,000
Request Change: $250,000 less
GENERAL FINANCING STRUCTURE:
1. The developer will pay an estimated $935,000 in development fees to the city related to park
dedication ($637,500) and local SAC/WAC/Tower fees ($297,500).
2. The city will consider transferring $187,500 from the park dedication receipt to the General Fund as
an interfund loan to new TIF 1-5 as a payment to the developer(30%of the developer's park
dedication payment); a commercial to residential redevelopment project supports this flexibility.
3. The city will consider transferring$200,000 from the existin Shepherd's Path TIF 6-1 to new TIF 1-5
as a payment to the TIF Note using "pooled" housing funds.
4. The city will issue a TIF (pay-as-you-go) Note to the developer for an estimated $1,637,500 to be
repaid from annual project tax increments over 15-18 year term; $200,000 would go to that note.
5. The city will further consider pooling future tax increments from Shepherd's Path over the life of
that TIF District, estimated to be$300,000 (which will shorten the district term of new TIF 1-5).
PUBLIC FINANCING SUMMARY:
• The city receives$935,000 from the developer at the beginning of the project for the Park Fund and
SAC/WAC/Tower funds.
• The city pays$187,500 to the developer from the Park Fund to the General Fund as an interfund
loan to new TIF 1-5 as a credit for direct affordable housing, redevelopment project assistance.
• The city commits long-term financial support to the developer using tax increments over 15-18
years at$1,637,500 (Note principal amount). Following modification to the existing Shepherd's
Path TIF 6-1 (anticipated to be approved in 2015), the city may transfer$200,000 to the new TIF 1-5
to make a principal payment on the$1,637,500 Note;this action will shorten the term of TIF 1-5.
City's Development Fee (Gross) Revenue = $935,000 ($637,500+$297,500)
City's Estimated Building Permit Revenue = $117,500 (based on$17.0 million value)
TOTAL CITY REVENUE FROM DOMINIUM = $1,052,500 ($6,190/unit)
City's Total Assistance Up-Front = $187,500 (from developer-paid park fee)
City's Total Assistance Pay-as-you-go = $1,637,500 (-$200,000 potential up-front)
TOTAL CITY ASSISTANCE TO DOMINIUM = $1,825,000 ($10,735/unit)
Attachment #3
K -tea.
raf/0061;11":17 v.
TIF POOLING
It goes without saying that the rules governing the use of tax increment financing(TIF)are Northland Securities is committed
complicated.We often create basic principles to ensure that TIF is used correctly.While usually to keeping local governments In-
a safe strategy,this approach may result in overlooking important and useful TIFF powers. A formed of the latest tools,issues and
good example is the"five year rule". A basic approach to this rule is that TIF district revenues trends in public finance.
can only be spent on obligations incurred within five years of certification and on admirustra Northland's Public Finance Group
Live expense. However,a doser look at the statutes governing the use of TEF finds substantial specializes in thepublic finance
funding capacity after the initial five-year period. needs of municipalities and govern-
• TIF district revenues that are NOT"tax increments paid by the properties"are not mental agencies across the Upper
subject to five-year or pooling restrictions. Midwest.Our public finance profes-
sionals have the depth of experience
• The amount of"pooling"expenditures increases for certain housing projects. in the municipal bond industry that
As with all aspects of TIF,the devil is in the details.This profile highlights the key elements of serves our clients well,as they navi-
this statutory authority. Northland can help you more thoroughly evaluate potential applica- gate through the complexities of the
tions and devise a plan of action. financial markets.
As a diversified financial services
TAX INCREMENT NOT DERIVED FROM PROPERTY firm, we provide financial advisory
All tax increment is not the"same". Revenues that are derived from tax increments paid by services and are also a significant
the properties in the TIF district are not the same as other revenues within the TIF district.The underwriter of municipal debt. This
authority has discretion as to timing of the use of these other dollars and geographically where Provides a distinct advantage to our
these dollars are spent. Revenues not derived from property indude investment earnings/ diems.Not only can they draw upon
our experience to develop a sound
interest income on or from tax increment derived from properties,proceeds from the sale or finance plan, but also our expertise
lease of property purchased with tax increments,principal and interest received on loans or in the credit markets, to get first-
advances made with tax increments,repayments to an authority,and market value credit paid hand market information useful in
to the authority. The use of these other revenues must be for tax increment eligible purposes the structuring and timing of their
but can be spent without regard to the five-year rule or pooling restrictions. financing.
HOUSING TIF DISTRICTS Our mission is to"provide direction
and produce results." Northland
For housingTIF districts,tax increments can be spent on other projects that meet the criteria for Public Finance is committed to devel-
establishing a housing district(96 of units occupied by persons with qualifying incomes). The oping long-term client relationships
practical application of this authority includes: by providing sound advice,creative
solutions,and the desired results.
• This use of tax increment is nu limited by pooling restrictions or the five-year rule.
Northland Securities,Inc.
• The tax increment can be spent on activities autaideabealEgialitt,but within the prof- 45 South 7th Street,Suite 2000
ect area/development district. Minneapolis,MN 55402
• This authority does not extend the maximum statutory duration of a TIF district Toll Free 1-800-851-2920
• As with a housing TIF district,a portion of the assistance may go to persons with Main 612-851-5900
incomes above the qualifying limits. Using this authority to provide such assistance www.northlandsecurities.com
requires careful definition of the'housing project". Member FINRA and SIPC
0 NORTHLAND STRATEGIES
Sp•ctoI reelects Wove
(Continued on Page 2)
T 1 F Pooling
PAGE
• The tax increment must be used solely to finance the cost of limitations. A critical limitation is the requirement to use the tax
the"housing project"as defined by the statute and no more increments solely for expenditures related to qualifying housing
than 20%of the sq.footage of bergs that receive assis- for low/moderate income persons.
lance may consist of commercial,retail,or other nonresiden-
tial uses. FORECLOSED HOUSING
Potential applications of this authority include: The 2011 Amendments to the TIF Act expanded authority related
• Avoid the need to create a new TIF district for an to foreclosed housing. The expanded poling authority may be
individual housing project. used to develop housing under the following criteria:
• Supplement the revenues of another housingTlF district 1. The parcel contains a residence containing 1 to 4 family
• Provide assistance for renovation of existing housing. dwelling units that has been vacant for 6 or more months and
• Provide assistance for foreclosed housing. is in foreclosure(as defined in MN Statues,Section 325N.10,
• Acquire land for housing. Subdivision 7),but without regard to whether the residence
is the owner's principal residence,and only after the redemp-
• Provide assistance to make public improvements more tion period stated in the notice provided under MN Statues,
affordable. Sechon 580.06 has expired.
NON-HOUSING TIF DISTRICTS 2. The market value of the housing does not exceed the lesser
ok 150%of the average market value of single-family
For all other types of TIF district.the amount of expenditure is in that municipality or$200,000 for municipalities located
homes
limited to an additional 10% in the regular pooling limitations ht the meatitan area(as defined in MN Statues,Section
The qualified uses are different from housing districts. lb qualify 473.121)or$125,000 for all other municipalities.
for the 10%pooling increase,the expenditure must: 3. The tax increments are used to pay the cost of site acquisi-
1. Be usedretusivd to assistthat meets the acquisi-
tion,relocation,demolition of existing structures,site prepa-
Y housing require- ration,and pollution abatement on one or more parcels.
mentfor a qualified low-income building,as that term isde- This
authority expires
on December 31, 2016. Increments may
fined in Internal Revenue Code(IRC).
2. Not exceed the qualified basis of the housing,as defined un due to be expended under this authority after that date,if
der IRC,less the amount of any credit allowed under IRC. tile)!ate used to pay bonds or qualifying binding contracts.
3. Be used to acquire and prepare the site of the lousing;ac-
quire,construe,or rehabilitate the housing;or make public
improvements directly related to the housing.
4. Be used to develop housing if the market value of the nous
ing does not exceed the lesser of: 150%of the average mar-
ket value of single-family homes in that municipality; or �:7,77
$200,000 for municipalities located in the metropolitan area,
as defined in the TIF Act,or$125,000 for all other muniicipali-
ties;and if the expenditures are used to pay the cost of site
acquisition,relocation,demoli#on of existing structures,site
preparation,and pollution abatement on one or me par• � ,"°
cels,if the parcel contains a residence containing 1 to 4 family ,
dwelling units that has been vacant for 6 or more months and
is in foredosure as defined Statutes,but without regard to
whether the residence is the owner's principal residence,and
only after the redemption period stated in the notice pro-
vided under Statute has expired.
Not only may the expenditures be made for activities outside of
the TIF district,they may also occur outside of the project area/
development district. Since this authority is an expansion of ex- The fnlosn►ation in nrasy sumis based on sources bled to be
retire pooling authority,the determination of the funding tepee- tellablebut does not purport to be comp
a and mat rvairraniecf
ity requires analysis of the other expenditures subject to pooling fryNnd bra (ASL 13-308)
)44s__. SCOTT COUNTY COMMUNITY SERVICES DIVISION
GOVERNMENT CENTER•200 FOURTH AVENUE WEST •SHAKOPEE,MN 55379-1220
May 4,2015
Dan Rogness
City of Prior Lake
4646 Dakota St SE
Prior Lake,MN 55372
RE: Tax Increment Financing District No. 1-5
Dear Mr. Rogness:
The Scott County Property and Customer Services Division has reviewed the above mentioned TIF
request. After reviewing the request,we have noted below several items which will require attention to
allow for certification of this district should it move forward.
1. The legal descriptions in the TIP plan provided include a portion of a current parcel. Because
portions of a parcel are not allowed to be included in a TIF district,this parcel will need to be split
prior to certification and the new legal description and parcel number indicated in the TIF plan. If
the property is to be platted,that plat needs to be recorded before the TIF District is allowed to be
certified. We are unable to comment on the assumptions included in the proposal as we are unsure
of what portion of the current parcel will be included.
2. The total local tax rate for taxes payable in 2015 is incorrectly stated as 110.108%. The final total
local tax rate for taxes payable in 2015 for the district which includes the proposed parcels is
108.780%.
If you have any questions,please feel free to contact me.
Sincerely,
/466
Kris Lage
Operations Analyst
CC: Tammy Omdal, Senior Vice President, Northland Securities
An Equal Opportunity/Safely Aware Employer