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HomeMy WebLinkAbout5F - Internal Loans /TIF Dst MEETING DATE: AGENDA #: PREPARED BY: AGENDA ITEM: DISCUSSION: ISSUES: FINANCIAL IMPACT: 16200 Eagle Creek Avenue S.E. Prior Lake, MN 55372-1714 CITY COUNCIL AGENDA REPORT August 1, 2005 SF Ralph Teschner, Finance Director CONSIDER APPROVAL OF A RESOLUTION AUTHORIZING THE TERMS OF INTERNAL LOANS IN CONNECTION WITH TIF DISTRICTS IN DEVELOPMENT DISTRICT #2 Introduction The purpose for this agenda item is for the City Council to consider formal approval of re-payment of two internal loans that were initially approved to assist in the development of the Waterfront Passage Business Office Park. History In 1993 the City of Prior Lake established Waterfront Passage Business Office Park in an effort to diversify the City's property tax base and was the City's first significant economic involvement to enhance commercial development in the community. The cost for the street and utility improvements within the business office park amounted to approximately $1.146 million dollars. Bonds were issued to finance $791,000 of the project and contributions from the Enterprise Fund in the amount of $142,000 and $213,000 from the Trunk Reserve Fund made up the difference. These fund transfers took place on November 12, 1993 and the intent was that if sufficient tax increment funds were generated over the district lives, they would eventually be repaid at some future date. Current Circumstances As a result of the recent audit that was conducted by the State Auditor's office on two of the TIF districts in the business office park both our city auditing firm, Abdo, Eick & Meyers and our tax increment consultant Ehlers has recommended that the City formalize the loan repayment as a matter of record. Our bonds are scheduled to be paid off in December of 2006. At that time it would be appropriate to repay the loan plus interest since all outstanding debt obligations associated with the business park will have been paid. A total principal amount of $355,000 was advanced subject to accrued interest at a rate of 6% that brings the total amount scheduled for repayment in December of 2006 to $631,900.00. The important issue here is that if the Council concurs that it is indeed appropriate to repay these fund transfers, a formal TIF Loan Agreement resolution be approved as documentation to legally expend available tax increment within the individual TIF district fund balances Development District #2. The impact is financially beneficial to both the Enterprise Fund and the Trunk Reserve Fund, as they would recoup $252,760 and $379,140 respectively. www.cityofpriorlake.com Phone 952.447.4230 / Fax 952.447.4245 . -."."....-----r-. ALTERNATIVES: The following alternatives are available to the City Council: 1. Approve Resolution Authorizing The Terms of Internal Loans in Connection with TIF Districts in Development District #2. 2. Forgive the outstanding amount in its entirety. 3. Provide for a partial pre-payment as determined by the Council., RECOMMENDED MOTION: Staff would recommend Alternative #1. Reviewed by: ..~ Frank Boyles, I y a r 16200 Eagle Creek Avenue S.E. Prior Lake, MN 55372-1714 RESOLUTION 05-xx Motion By: Second By: WHEREAS, In 1993 the City authorized payment for street and utility improvements associated with Waterfront Passage Business Office Park, identified as Development District #2, consisting of $1,146,000.00 (collectively, the "Qualified Costs"), which costs will be partially financed on a temporary basis from the following funds for such purposes: Enterprise Fund: $142,000.00 Trunk Reserve Fund: $213,000.00 WHEREAS, Under Minnesota Statutes, Section 469.178, Subdivision 7, the City is authorized to advance or loan money from the City's general fund or any other fund from which such advances may be legally made, in order to finance the Qualified Costs. WHEREAS, The initial fund transfers occurred on November 12, 1993 as part of the original financing plan that included the allocation of bonds in the amount of $791 ,000. WHEREAS, The City originally anticipated the repayment of these funds only if sufficient tax increment was generated. WHEREAS, The City intends to reimburse itself for the Qualified Costs from tax increments derived from the following TIF Districts # (which terms are referred to collectively as the "TIF Loan"): TIF #2-1, #2-2, #2-3, #2-5, #2-6, #2-7, #2-8 WHEREAS, The City's planned development of Waterfront Passage Business Office Park was successfully completed and all associated TIF districts have sufficient resources to repay the initial allocation of funds. 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. The City shall repay to the City funds from which the Qualified Costs were initially paid, the principal amount of $355,000 together with interest calculated at 6% on the principal amount expended accruing from the date of 11/13/93. 3. Loan re-payment shall be scheduled for December 31, 2006 to coincide with the final payment of the business office park general obligation bonds of 1993. 4. Payments on this TIF Loan are payable solely from "Available Tax Increment" and payments are subordinate to any outstanding bonds. www.cityofpriorlake.com Phone 952.447.4230 / Fax 952.447.4245 .-......._~-~"....._.... ""I'-'-~-"'''--'''''''''-''''--''~'--''''--''-''''-__'''''''''____"'_..h................ ...---..........._____....._..... . "-"- '" .~ 5. The TIF Loan set forth in the recitals is evidence of an internal borrowing by the City in accordance with Minnesota Statutes, Section 469.178, subdivision 7, and is a limited obligation. payable solely from Available Tax Increment pledged to the payment hereof under this resolution. 6. The City may amend the terms of this TIF Loan at any time by resolution of the City Council, including a determination to forgive the outstanding principal amount and accrued interest to the extent permissible under law. PASSED AND ADOPTED THIS 1st DAY OF AUGUST, 2005. YES NO Haugen Haugen Fleming Fleming LeMair LeMair Petersen Petersen Zieska Zieska Frank Boyles, City Manager ~ ~ H:\TIF\TIF Loan Resolution.doc