HomeMy WebLinkAbout05 22 2017 Joint EDA Work Session Report
Phone 952.447.9800 / Fax 952.447.4245 / www.cityofpriorlake.com
4646 Dakota Street SE
Prior Lake, MN 55372
CITY COUNCIL WORK SESSION REPORT
MEETING DATE: MAY 22, 2017
AGENDA #: A
PREPARED BY: CASEY MCCABE, COMMUNITY DEVELOPMENT DIRECTOR
PRESENTED BY: DAVE CHROMY, EDA PRESIDENT
CASEY MCCABE
AGENDA ITEM: JOINT MEETING WITH THE EDA
INTRODUCTION: Both the City Council and EDA had shared interest in a joint meeting to
discuss the city’s philosophy related to the use of incentives, including:
Tax Increment Financing and Tax Abatement, which are the two most
widely used tools for facilitating economic development and
redevelopment for cities. The City of Prior Lake has recently received, and
will continue to receive, requests for incentives to assist with development
or redevelopment costs.
This work session will provide an opportunity for the City Council and EDA
to review the different incentive programs available and discuss what role,
if any, the City of Prior Lake should play in assisting specific commercial
or residential projects in the community.
TOPICS: The EDA has prepared the following agenda topics to guide the
conversation.
1. EDA Goals (Attachment 1)
a. Review and Discuss the Revised 2017 EDA Goals
2. Five Commercial Areas of Prior Lake (Attachment 2)
3. Business Incentives Discussion
a. Business Subsidies Policy (Attachment 3)
i. Wage and Employment Goals
b. Business Incentives Report (Attachment 4)
i. Available Incentives in ‘Tool Box’
ii. Prior Lake’s Historical Use and Status of Business Incentives
c. Business Incentives Discussion
CONCLUSION:
Following a review of the available business subsidy and incentive
programs, it would be helpful to staff and to potential customers for the
City Council and EDA to identify the specific incentive programs that will
be supported by the City of Prior Lake and which types of development
and redevelopment projects the city would consider using these
assistance programs.
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ATTACHMENTS:
Developers and redevelopers prefer a swift no to a prolonged maybe
followed by a no. They also would prefer not to pay the city’s $5,000 to
$10,000 application fees only to learn the city will ultimately not support
their proposed project.
The City of Prior Lake has a reputation for being conservative in the
amount of incentive it will consider and the number of years for pay back.
We have authorized ‘pay-as-you-go TIF’ almost exclusively which places
the risk on the developer rather than taxpayer.
Of late, councilors have expressed an interest in getting more commercial
development in Prior Lake. There is competition for these developments
with other cities who are offering incentives as well, so our approach to
incentives should be considered with this in mind.
1. Revised EDA Goals
2. Prior Lake Commercial Areas
3. Business Subsidies Policy
4. Business Incentives Report
2017 EDA Goals
The EDA adopted the following 2017 goals during their November 21, 2016 meeting, which were
approved by the City Council on January 9, 2017.
1. Continue to guide the Economic Development Advisory Committee and support the Technology Village Board
of Directors as they implement the recommendations of the Technology Village program analysis and
expansion plans, including expansion opportunities within Scott County.
2. Establish a task force of downtown residents and businesses to develop an integrated road network plan that
supports future traffic volumes, a downtown vision, and a targeted redevelopment plan.
3. Establish a process and plan to target resources to economic opportunities that provide significant benefits
to Prior Lake, including those that may include property acquisition and direct support to commercial and
industrial development.
The EDA approved the following 2017 revised goals during their May 15, 2017 meeting.
1. Continue to guide the Economic Development Advisory Committee and support the Technology Village Board
of Directors as they implement the recommendations of the Technology Village program analysis and
expansion plans, including expansion opportunities within Scott County.
2. Make recommendations and provide strong input to the Prior Lake City Council and Scott County Board
related to proposed improvements to the CH21 road corridor, specifically CH82 to Franklin Trail, as it relates
to potential impacts or benefits on economic development and redevelopment activities.
3. Establish a process and plan to target resources for economic opportunities that provide significant benefits
to Prior Lake, including those that may include property acquisition and direct support to commercial and
industrial development. Provide a graphic showing the city owned downtown properties and their usefulness
for economic development and redevelopment activities and identify additional properties for strategic
acquisition within the five commercial areas identified by the EDAC; including: Deerfield/Welcome;
Downtown; Commerce Avenue; Gateway; and South Lake Village.
4. Conduct a meeting with the Scott County CDA First Stop Shop for the purpose of identifying reciprocal goals.
5. Conduct an annual meeting with the Scott County CDA First Stop Shop, the Prior Lake City Council and the
Prior Lake Planning Commission.
The City Council will be asked to approve the revised goals during an upcoming council meeting.
Downtown Area
Deerfield Business Park / Welcome Avenue Industrial Area
Commerce Avenue / Fountain Hills Area
Village Commerce / South Lake Village Area
Gateway Area
City of Prior Lake
Business Incentives Report
Prepared By:
City of Prior Lake
Community Development Department
May 2017
Prepared For:
City of Prior Lake City Council
City of Prior Lake Economic Development Authority
4646 DAKOTA STREET SE
PRIOR LAKE, MN 55372
952-447-9815
cmccabe@cityofpriorlake.com
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INTRODUCTION
This report was prepared by the City of Prior Lake Community Development Department. The
information within this report is intended to provide the City Council , Economic Development
Authority (EDA) and Prior Lake residents with a summary of available economic development
programs and the amount of incentive provided by the City of Prior Lake.
To provide greater transparency and increase community awareness of available programs and
incentives, this report provides a detailed status of the currently active incentives and includes a general
overview of historical incentives.
OVERVIEW OF ECONOMIC DEVELOPMENT INCENTIVES
The fundamental purpose of providing business subsidies in the City of Prior Lake is to encourage
desirable development or redevelopment that may not otherwise occur; not to enhance the return on
investment for individual projects.
It is the policy of the City of Prior Lake to provide subsidies and incentives in the most limited fashion
possible to assure that the project will proceed. The City reserves the right to approve or reject projects
on a case-by-case basis, taking into account established policies, specific project criteria and demand
on city services in relation to the potential benefits to be achieved from a proposed project. This
process is inherently subjective and whether a project receives a business subsidy or not may be as
much a function of the City’s budget as the merit of the project.
While it is recognized that the creation of good paying jobs is a desirable goal that benefits the city, it
must also be recognized that not all projects assisted with business subsidies derive their public
purposes solely by virtue of job creation. The City believes that each economic development
opportunity offers its own unique benefit to the city, whether it be retail, commercial or industrial in
nature. These benefits may be in the form of added tax base, new or retained jobs and higher incomes,
overall investment in the area, business diversification and/or increased economic activity and vitality.
It is the desire of the City to promote job creation, redevelopment and investment as well as to expand
the city’s tax base and diversify the city’s industrial, commercial and retail base.
DEFINITION OF “BUSINESS SUBSIDY”
The following types of assistance are defined as a “business subsidy” within the Minnesota Business
Subsidy Law:
➢ A state or local government agency grant;
➢ Contribution of personal property, real property, or infrastructure;
➢ The principal amount of a loan at rates below those commercially available to the recipient;
➢ Any reduction or deferral of any tax or fee;
➢ Any guarantee of any payment under any loan, lease, or other obligation; or
➢ Any preferential use of government facilities given to a business.
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PUBLIC PURPOSE OBJECTIVES OF BUSINESS SUBSIDIES
In accordance with the MN Business Subsidy Law, the City considers using business subsidies to assist
private development projects in an attempt to achieve one or more of the following public purpose
objectives:
➢ To retain local jobs and/or increase the number and diversity of jobs that offer stable employment
and/or attractive wages and benefits.
➢ To enhance and diversify the City of Prior Lake’s tax base.
➢ To encourage additional unsubsidized private development in the area, either directly or indirectly,
through “spin-off” development.
➢ To achieve development on sites that may not be developed without business subsidies assistance.
➢ To remove blight and/or encourage development of commercial and industrial areas in the city that
result in higher quality development or redevelopment and private investment.
➢ To offset increased costs of development for specific properties when the unique physical
characteristics of the site may otherwise preclude private investment.
GUIDELINES FOR COMMERCIAL / INDUSTRIAL BUSINESS SUBSIDIES
➢ Business subsidies will not be used for on-site retail or service business unless it is a redevelopment
project that demonstrates that it will result in a substantial increase in tax base a nd/or a significant
improvement in quality employment, or is eligible for a specific program (e.g. SAC/WAC
Deferral).
➢ The project must be consistent with the City’s Comprehensive Plan, Land Use Plan and Zoning
Ordinances.
➢ Projects that result in the retention of existing jobs that may be lost without the proposed
development, or result in an increase and diversification in local jobs that may not otherwise occur
without the proposed development will be strongly considered.
➢ If wage and job goals are required by the City, the City will determine such goals giving
consideration to the particular form of the subsidy, nature of the development, the purpose of the
subsidy, local economic conditions and similar factors. The recipient will have up to two years
after the Benefit Date to meet the job and wage goals established by the City. The City's goal in
this area is to assist in the creation of jobs at wage and benefit levels that will support families.
The minimum wage for a job to be considered a new or retained job shall be established at 120%
of the federal poverty level for a family of four, as determined annually by the U. S. Department
of Health and Human Services ($14.19/hour in 2017), exclusive of benefits. Deviations less than
the wage floor will be considered on a case-by-case basis and in accordance with the requirements
of the MN Business Subsidy Law. In projects where a business subsidy provided by the City is
secondary to a business subsidy provided by another granting agency, such as the State or federal
government, the wage guidelines set by that agency shall be used.
➢ Business subsidies will not be given to commercial/industrial projects or applicants that have a
history of inconsistent compliance with applicable environmental rules and regulations, or failure
to comply with State and Federal Regulations regarding Equal Opportunity and Occupational
Safety Standards.
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BUSINESS SUBSIDY POLICIES & GUIDELINES
Community & Economic Development staff, along with the Economic Development Authority (EDA),
Economic Development Advisory Committee (EDAC) and City Council, have been working to
update/develop guidelines and policies related to financing or incentive programs. Examples include:
➢ City of Prior Lake Business Subsidies Policy Update. This policy establishes guidelines and
criteria regarding the use of business subsidies, such as tax increment financing, tax abatement,
loans and other business subsidies for private development projects within the City of Prior Lake.
These guidelines and criteria are in addition to the requirements and limitations set forth by
provisions of Minnesota Statute 116J.993 – 116J.995 (MN Business Subsidy Law).
➢ Adoption of a Local Business Incentives Policy. This policy establishes guidelines and criteria
regarding the use of local business incentives that are not subject to the requirements and
limitations set forth by provisions of Minnesota Statute 116J.993 – 116J.995 (MN Business
Subsidy Law).
➢ Updates to the Economic Development Revolving Loan Fund Guidelines. These guidelines
establish policies and procedures to regulate, coordinate and facilitate the workflow for
underwriting new financing requests, servicing revolving loans and ensuring borrower compliance
with loan terms and conditions; including regulations established by the U.S. Department of
Housing and Urban Development for use of Federal funds.
➢ Development and annual updates of the Technology Village Business Accelerator Business Plan.
The Technology Village Business Accelerator business plan helps guide the programming and
direction of the Technology Village program as well as ensuring the overall financial viability of
the business accelerator program.
➢ Creation of an EDA Business Plan. This business plan helps guide the Prior Lake Economic
Development Authority as it develops and implements strategic initiatives.
➢ Updates to the City of Prior Lake Sewer and Water Fee Deferral Program Policy. This policy
governs the use of two programs, including the Metropolitan Council’s “SAC Deferral Program”
for certain sewer fees (Regional Program) and the City of Prior Lake’s “Payment of Permit Fees”
for certain sewer and water fees (Local Program). The policy establishes procedures to regulate,
coordinate and facilitate the approval of certain sewer and water fee deferrals for eligible
businesses or properties.
➢ Creation of a Targeted Commercial Assistance Program. This program was created to encourage
existing businesses to move to another Prior Lake location as a result of the demolition and
redevelopment of the Gateway Center property. The three businesses who occupied the Gateway
Center when the building was purchased for redevelopment were eligible to receive up to $20,000
to assist with relocation expenses. The funds were provided from the TIF 1 -1 account and were
required to be matched one-to-one by the applicant. Repayment of the loan is deferred for a period
of three years and then forgiven if the business remained in Prior Lake after 36 months.
➢ Creation of a Private Activity Revenue Bond Policy. Prior to the creation of this new policy in
2016, the City of Prior Lake had no formal application process or policy in place to guide the
review of bond applications. The policy identifies the general requirements, types of projects
which are eligible to apply, application fees, post -issuance compliance requirements of the
applicant and the application process. The policy provides the city with complete discretion
regarding whether to issue private activity bonds.
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AVAILABLE INCENTIVES
Economic development incentives come in several forms to help facilitate development or
redevelopment projects. A thorough evaluation of the project’s needs as compared to the eligibility
requirements of various incentive programs helps determine which development assistance programs
may, or may not, be utilized.
The following economic development incentives are available for use by the Ci ty of Prior Lake for
certain development projects. Not all incentives are available for each project and projects may be
offered more than one incentive. The type and number of incentives is the sole discretion of the City
of Prior Lake. Incentives are as follows:
Tax Increment Financing – A development tool whereby the taxes generated by a development or
redevelopment project are used to pay the costs of the project.
Economic Development District – for new industrial expansion and job creation purposes
(maximum duration 8 years).
Redevelopment District – to redevelop or reuse previously developed land and/or buildings.
Usually used for building code issues, base value purchase, demolition and/or infrastructure
purposes (maximum duration 25 years).
Soils District – used to make land with unstable soils usable for development. Also, used to
address situations involving pollution (maximum duration 20 years).
Housing District – used to develop affordable housing by acquiring land, buildings and or
funding infrastructure (maximum duration 25 years).
Economic Development Revolving Loan Fund – Provides gap financing through low interest loans to
small and medium size businesses for a variety of economic development activities.
DEED Loans/Grants – Numerous grant and loan programs are available from the Minnesota
Department of Employment and Economic Development to assist with development and
redevelopment projects. The city must serve as the applicant in partnership with a company or
developer.
Conduit Bonds – City issued revenue bonds on behalf of a private developer. These “conduit”
borrowers agree to repay the issuer, who pays principal and interest on the securities from the revenues
generated from a specific project or source. Liability for repayment of the bonds is solely that of the
developer.
Land Sale Write Downs – Land owned by the City, acquired either through purchase or through
property tax default, may be sold at less than what an appraisal determines to be i ts estimated market
value. This can be done either because of unique conditions on a site, such as soils, rock, pollution,
wetland, or it can be done purely as an incentive.
Special Assessment – The levying of a charge for public costs against property that has received a
benefit from a project or activity. The special assessment becomes a part of the funding mechanism to
defray the cost of the project.
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Commercial Property Leases – Commercial property owned by the City may be leased at less than
market value.
Business Accelerator Space Write Downs – Below market lease rates available to qualifying companies
or program participants in city owned office space.
Tax Abatement – Minnesota law authorizes political subdivisions to grant property tax abatements for
a broad range of economic development purposes.
Sewer and Water Fee Deferral Program – Deferral of a portion of certain Metropolitan Council sewer
availability charge (SAC) fees and certain City of Prior Lake water fees for eligible commercial and
residential properties.
Targeted Commercial Assistance Program – Temporary program to encourage existing businesses to
move to another Prior Lake location as a result of a redevelopment project at their previous location.
Downtown Façade Improvement Program – Provided an economic incentive in the form of a one-to-
one matching grant to encourage businesses to reinvest in buildings and facades in the downtown.
USE OF INCENTIVES
Below is a summary of the current and historical use of economic development incentives in the City
of Prior Lake. Every effort was made to include all recent and currently active incentives granted by
the City. References to the historical uses of incentives were provided for background; this list is not
intended to be a complete list of all previous incentives granted by the City of Prior Lake.
TAX INCREMENT FINANCING
The City of Prior Lake has six active Tax Increment Financing (TIF) districts:
TIF District Number 1-3 1-4 3-1 5-1 6-1 1-5
TIF District Name Lakefront
Plaza
River Valley
Vet Clinic
Creekside
Commons
Premiere
Dance
Shepherds
Path
Gateway
Center
District Type Redev. Ec. Dev. Housing Redev. Housing Housing
TIF Plan Approval Date 12/14/2001 9/19/2011 12/17/2001 3/6/2006 6/26/2006 5/11/2015
Certification Date 3/29/2002 3/27/2012 3/29/2002 7/18/2006 7/18/2006 6/6/2016
Month/Year of First Increment June 2004 July 2013 June 2004 June 2009 June 2007 July 2017
Required Decertification Date 12/31/2029 12/31/2021 12/31/2029 12/31/2034 12/31/2032 12/31/2035
TIF Revenues Distributed by County $3,000,000 $81,000 $1,600,000 $330,000 $6,186,000 $2,270,000
Interest and Investment Earnings $0 $15,000 $0 $0 $0 $0
Total Estimated Increment Revenue $3,000,000 $96,000 $1,600,000 $330,000 $6,186,000 $2,270,000
Land/Building Acquisition $0 $0 $311,600 $200,000 $0 $0
Site Improvements/Preparation Costs $950,000 $87,900 $74,400 $25,000 $2,388,000 $0
Utilities $0 $0 $29,200 $0 $0 $0
Other Qualifying Improvements $665,000 $0 $41,600 $20,000 $0 $0
Construction of Affordable Housing $0 $0 $114,200 $0 $0 $1,637,000
Administrative Costs $70,000 $8,100 $160,000 $33,000 $640,000 $113,500
Estimated Tax Increment Project Costs $1,685,000 $96,000 $731,000 $278,000 $3,028,000 $1,750,500
Interest Expense $1,315,000 $0 $869,000 $52,000 $3,158,000 $517,000
Total Proj/Financing Costs Paid from Tax Inc. $3,000,000 $96,000 $1,600,000 $330,000 $6,186,000 $2,267,500
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The City Council approved retaining excess tax increment from an older downtown redevelopment
district (No. 1-1), with approximately $200,000 retained. These funds may be used in certain targeted
downtown redevelopment sites. In 2014, the City approved funds from this TIF account, in the amount
of $140,500, for the acquisition of a single-family residential properties at 4664 Dakota Street SE. The
Dakota Street property received a minor renovation for rental purposes and rental revenue received for
the Dakota Street property ($825/month) is entered as revenue in this TIF account. The City of Prior
Lake will have the option to continue to rent the property, remove the structure in the future for parking
or redevelopment or sell the single family residential property. The city also used funds from TIF
District 1-1 to fund a business retention loan program, which is summarized later in this report under
Targeted Commercial Assistance Program. As of April 30, 2016, the TIF 1-1 fund had a balance of
$96,670.
Tax Increment Financing was used to facilitate the development of various motor vehicle repair and
body shops near the intersection of Main Avenue, CH44 and TH13 in the 1980’s. In the early 1990’s,
the City, through its EDA, purchased the 35 acre Adelmann Farm on CH21 betwee n Adelmann Dr.
and Fish Point Rd. The purchase agreement allowed the city to purchase the property on a parcel by
parcel basis. The initial properties that developed within the business park, approximately six, received
pay-as-you-go TIF (economic development district), which was seen as a means of ‘jumpstarting’ this
commercial/industrial area. The area around the original industrial park is still in the process of
development. One of the properties within the original business park was sold to Norex for $1 as an
incentive to keep them in the Prior Lake community.
ECONOMIC DEVELOPMENT REVOLVING LOAN FUND
The Economic Development Revolving Loan Fund was created to provide gap financing through low
interest loans to businesses for a variety of economic development activities; primarily to assist in the
attraction of new businesses and the expansion of existing businesses. The source of funding in the
revolving loan fund is loan repayments received by the City of Prior Lake from previous state and
federal loans provided to Prior Lake businesses, which are identified below under DEED Loans/Grants.
The state and federal programs provided the initial funding with loan repayments made to the city for
the purpose of relending to assist future projects.
In 2016, the Prior Lake City Council approved a resolution authorizing a loan to Versatile Vehicles,
Inc. in the amount of $95,000 from the State Revolving Loan Fund to assist Versatile Vehicles with
the construction of a 58,000 SF building within the Deerfield Business Park. The loan funds will be
forgiven based on specified job creation goals. Failure to create the required number of jobs will result
in the loan funds, or a portion of the loan funds, being repaid to the city.
As of April 30, 2017, the Federal Revolving Loan Fund had an available balance of $122,485 and the
State Revolving Loan Fund has an available fund balance of $0.
DEED LOANS/GRANTS
The Minnesota Department of Employment and Economic Development (DEED) has programs in
place to provide financial assistance to communities for the following types of projects:
➢ Business Development Funding - for projects likely to result in economic growth, stimulate
business startups and expansions, create and retain jobs.
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➢ Community Development Funding - to preserve or improve community vitality and economic
growth, including residential and commercial redevelopment.
➢ Infrastructure Funding - for basic infrastructure, including drinking water, wastewater treatment,
roads, housing and other public facilities.
➢ Site Cleanup and Redevelopment - to redevelop contaminated and blighted properties.
The City of Prior Lake must serve as the grant/loan applicant in partnership with a company or
developer. The City has no active loan or grant agreements with DEED; however, the City of Prior
Lake has utilized these available programs in the past. The City was awarded:
1. A Minnesota Investment Fund grant in the amount of $75,000 to assist in the financing of the NBC
Products, Inc. project in Waterfront Passage Business Park (1998).
2. A Small Cities Economic Development Set-Aside Program grant in the amount of $50,000 to assist
with the EM Products project in Waterfront Passage Business Park (1995).
CONDUIT BONDS
Conduit debt obligations are certain limited obligation revenue bonds or similar instruments issued for
express purpose of providing capital financing for a specific third party. The City has issued revenue
bonds to provide funding to private sector entit ies for projects deemed to be in public interest.
Although these bonds bear the name of the City, the City has no obligation for such debt. Accordingly,
the bonds are not reported as liabilities in the financial statements of the City.
In 2006, the Prior Lake EDA and the City of Prior Lake issued $10,000,000 in Senior Housing Revenue
Bonds, Series 2006A and $21,445,000 Senior Housing Revenue Bonds, Series 2006B to finance the
acquisition, construction and equipping of an elderly housing development of 154 senior rental housing
units, including 82 independent housing units, 54 assisted living units and 18 memory care units,
together with approximately 35,000 SF of common space for the McKenna Crossing project owned
and operated by Presbyterian Homes.
In 2016, Shepherd’s Path Senior Housing, Inc., an affiliate of Presbyterian Homes, asked the City of
Prior Lake to act as one of three issuers (along with the Cities of Hampton and Mayer) of over
$25,000,000 in revenue bonds to refinanced the 2006 Senior Housing Revenue Bonds. The amount of
bonds issued by the City of Prior Lake for the refinancing was $5,155,000. The current outstanding
bond balance for this project, as of December 31, 2016, was $5,106,848.
LAND SALE WRITE DOWNS
The City of Prior Lake has the ability to sell land owned by the City, acquired either through purchase
or through property tax default, at less than what an appraisal determines to be its estimated market
value. This can be done either because of unique conditions on a site, such as soils, rock, pollution,
wetland, or it can be done purely as an incentive.
Over the years, the City of Prior Lake has acquired several downtown properties. Although the City
of Prior Lake has not recently sold property for economic development pu rposes, the City may elect
to sell its commercial property at less than market rate in the future to incentivize commercial
development or redevelopment in the downtown. Below is an aerial photo showing downtown
properties owned by the City of Prior Lake as well as a table that identifies the parcel identification
numbers and the purpose or current use of the property.
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No. PID Acreage Purpose / Use
250010520 0.35 Parking
250010581 0.76 Public Building (City Hall)
250010590 0.88 Public Building (City Hall)
2 250010550 0.17 Single Family Residential (Rental)
3 250010560 0.17 Vacant (Park)
250010420 1.53 Public Building/Parking (Police Station)
259020640 0.22 Vacant (storm water)
5 259020620 0.78 Public Building / Parking (Library)
6 250010370 0.49 Parking
7 250010410 0.07 Parking
8 250010300 0.02 Commercial (URBANHALO)
9 250010330 0.26 Parking
10 259020630 0.19 Commercial (Flowers Naturally)
250010190 0.08 Street (Hastings Avenue)
250010200 0.08 Parking
259020670 0.08 Parking
12 250011220 0.34 Vacant
13 250011040 0.28 Vacant
14 250011140 0.18 Vacant (ROW)
15 250011100 0.76 Parking
250020100 0.05 Alley
250020080 0.07 Parking
250020060 0.11 Parking
17 259020720 0.25 Vacant (ROW)
TOTAL 8.18
1
4
11
16
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SPECIAL ASSESSMENT
The City of Prior Lake has the ability to levy a charge for public costs against property that has received
a benefit from a particular project or activity. The special assessment may become part of the funding
mechanism to defray project costs.
Prior to the establishment of the Sewer and Water Fee Deferral Program, the City had entered into
agreements with private developers or businesses for deferral of payments for sewer and water service
associated with development and redevelopment activities. Although not used in recent years, the
ability for the City of Prior Lake to specially assess for certain development or redevelopment costs is
an available economic development incentive.
COMMERCIAL PROPERTY LEASES
The City of Prior Lake owns and leases six commercial properties. Income generated from these
property leases is placed in the City of Prior Lake General Fund. Below is a summary of the lease
rates received by the City of Prior Lake.
Although a market rental rate of $15.00 per square foot was used to determine the annual rent subsidy
amount, it is noted that rental rates for city owned property varies depending on multiple factors,
including but not limited to: i) the condition of the property; ii) size of the leased space; iii) lease term;
and iv) market conditions at the time the lease was signed.
The City of Prior Lake also owns and rents two single family residential properties; however, the
revenue received from the rental of those two properties is placed in the funds used to acquire the
properties; the Parks Fund and the TIF 1-1 Fund.
BUSINESS ACCELERATOR SPACE WRITE DOWNS
The Technology Village Business Accelerator program provides business support and office space to
program participants focused on emerging technology and professional services. The 2,000-square
foot office space is located on the main floor of Prior Lake City Hall. The program is run by a Board
of Directors who serve as a subcommittee to the EDA.
The Board of Directors established a ‘Phase II’ program in 2014 when the first program participant
entered into a private lease agreement for space outside of city hall. Phase II allow ed Technology
Village to serve program participants who, because of lac k of space within city hall or business needs
that cannot be served in city hall, are able to locate in private lease space within the City of Prior Lake.
Phase II participants were required to enter into a private lease for office space in Prior Lake and
Tenant Location Square
Feet
Lease
Rate/SF
Monthly
Rent
Annual
Rent
*Annual City
Rent Subsidy
Flowers Naturally 16244 Eagle Creek Ave. SE 4,300 $9.00 $3,225.00 $38,700.00 $25,800.00
Allina Health System Portion of PLFS No. 2 1,000 $16.84 $1,403.33 $16,840.00 $0.00
PLAY 4646 Dakota St. SE 225 $12.80 $240.00 $2,880.00 $495.00
URBANHALO 16220 Main Ave. SE 720 $11.25 $675.00 $8,100.00 $2,700.00
Twisted Loop Yarn Shop 16210 Eagle Creek Ave. SE 480 $15.00 $600.00 $7,200.00 $0.00
*City rent subsidy assumes a market rate of $15.00/SF TOTAL $73,720.00 $28,995.00
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receive a reimbursement of a portion of their monthly rental payment from the City of Prior Lake EDA.
To date, the Technology Village Board has only approved one Phase II participant.
In 2016, the Technology Village Board established a Technology Village Virtual Program, which is
designed to support Prior Lake and Scott County’s emerging technology and professional service
businesses which are not located in the Technology Village offic e space or may be a home-based
business. For a monthly fee of $50, virtual program participants do not have an office in the Technology
Village space but they do receive many of the same benefits as the Phase I participants.
As of April 30, 2017, the Technology Village Business Accelerator had six program participant
businesses with a total of 31 employees. Below is a summary of the revenues and expenditures for the
Technology Village program since it opened in 2013.
TAX ABATEMENT
Minnesota law authorizes political subdivisions to grant property tax abatements for economic
development. Abatements can serve similar purposes to tax increment financing (TIF). The legislature
enacted the abatement law in 1997 to provide an alternative to TIF and to supplement it.
The law allows abatements to be used for a broad range of projects and purposes if the political
subdivision finds that public benefits exceed the costs. Permitted uses of abatements include the
following:
➢ General economic development, such as increasing the tax base or the number of jobs in the area.
➢ Construction of public facilities or infrastructure.
➢ Redevelopment of blighted areas.
➢ Providing access to services for residents.
➢ Deferring or phasing in a large (over 50 percent) property tax increase.
➢ Stabilizing the tax base resulting from the updated utility valuation administrative rules.
➢ Providing relief for businesses with estimated market value of $250,000 or less who have disrupted
access due to public transportation projects.
In 2016, the Prior Lake City Council approved a resolution approving an application for tax abatement
in an amount not to exceed $180,000 to assist Versatile Vehicles, Inc. with the construction of a 58,000
SF building within the Deerfield Business Park. The abatement benefit for Versatile Vehicles will be
the net amount of property taxes received by the City from the project sit e. The net amount is the
actual annual amount of property taxes received by the city attributable to an increase in the property
taxes as a result of the project.
Year Revenue Expenditure Difference Expenditure Notes
2013 $2,710.80 $35,244.62 ($32,533.82)$32,481 of Build-Out and Furniture/Office Equipment
2014 $5,638.72 $8,144.63 ($2,505.91)$5,400 of Phase II Rental Reimbursement Expense
2015 $7,438.32 $16,277.70 ($8,839.38)$13,500 of Phase II Rental Reimbursement Expense
2016 $6,339.99 $8,830.71 ($2,490.72)$4,275 of Phase II Rental Reimbursement Expense
Total $22,127.83 $68,497.66 ($46,369.83)
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SEWER AND WATER FEE DEFERRAL PROGRAM
The Sewer and Water Fee Deferral Program allows for the deferment of Sewer Availability Charge
(SAC) fees for eligible businesses that receive SAC determinations between three and 25 units.
Eligible businesses or properties can apply for the deferral of a portion of one or more sewer/water
fees, including:
➢ Metropolitan Council Sewer Availability Charge (SAC) – Regional Program sewer fee;
➢ Prior Lake Sewer Connection Charge – Local Program sewer fee;
➢ Prior Lake Water Connection Charge – Local Program water fee; and
➢ Prior Lake Water Tower Charge – Local Program water fee.
The Sewer and Water Fee Deferral Program is divided into three subgroups:
➢ Met Council SAC Deferral Program: 5-year term; 2.25% interest (interest rates adjust annually);
20% paid up-front; secured by assessment agreement against the prope rty; eligible only to business
with a SAC unit determination between three (3) and twenty-five (25) units. This program is
established and regulated by a master deferral agreement executed between the city and
Metropolitan Council.
➢ City Sewer/Water Fee Deferral Program A: 5-year term; same interest rate as Met Council
program; 20% paid up-front; secured by assessment agreement against the property; eligible only
to business with a SAC unit determination between three (3) and twenty-five (25) units. This
program is established by city ordinance and is intended to parallel the Metropolitan Council
program guidelines.
➢ City Sewer/Water Fee Deferral Program B: 5-year term; interest established identical to the
assessment rate method; 20% paid up-front, secured by assessment agreement against the property;
eligible to anyone with a SAC unit determination greater than twenty-five (25) units. This program
is unique to the City of Prior Lake and is established and regulated by city ordinance.
For any SAC deferral, the three (3) unit minimum and the twenty-five (25) unit maximum are
determined before application of any credits on the site. The Local Program also allows anyone to
apply for a deferral of sewer/water fees when the SAC determination is greater than twenty-five (25)
units, before application of any credits on the site.
The structure of the Regional and Local Program deferrals includes, but is not limited to, the following
provisions:
➢ The deferral amount can equal up to eighty percent (80%) of the total sewer and/or water fees due.
➢ The deferment term is five (5) years.
➢ Each deferment liability will be effective the first day of the subsequent month (e.g., for an April
building permit that is due and typically reported in May, interest will begin accruing June 1).
➢ Interest rates for the Regional Program and Local Program A are determined using the
Metropolitan Council’s SAC Deferral Program rate, which is determined annually and set for the
deferment period. Interest is amortized over the term of the deferment period using whole months.
➢ Interest rates for Local Program B are determined using a rate of two (2) percentage points higher
than the net interest cost of the most recent bonds sold by the City.
➢ A Payment Agreement will be executed between the eligible business, the fee property owner, and
the City stating all conditions and requirements of the parties for the Regional and Local Programs;
this document shall be recorded.
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The following conditions create ineligibility for a business or p roperty to apply for the Regional or
Local Programs:
➢ The fee owner’s property taxes are delinquent.
➢ The business is not in good standing with the State of Minnesota, or is in violation of a Prior Lake
City Code.
➢ The SAC determination (before credits) is less than three (3) units.
➢ The business does not meet the definition of eligible commercial properties in the Metropolitan
Council’s SAC Deferral Program (for the Regional Program and Local Program A).
➢ The property is not located within the City of Prior Lake.
➢ The property is located on tribal lands.
As of April 30, 2017, the City of Prior Lake has approved three SAC/WAC deferral agreements, below
is a summary of the approved agreements:
TARGETED COMMERCIAL ASSISTANCE PROGRAM
In 2015, the EDA created a Targeted Commercial Assistance Program, which was approved by the
City Council and to encourage existing businesses to move to another Prior Lake location as a result
of the demolition and redevelopment of the Gateway Center property. The three businesses who
occupied the Gateway Center when the building was purchased for redevelopment were eligible to
receive up to $20,000 to assist with relocation expenses. The funds were provided from the TIF 1 -1
account and were required to be matched one-to-one by the applicant. Repayment of the loan is
deferred for a period of three years and then forgiven if the business remained in Prior Lake after 36
months.
One business, Prior Lake Pizza, Inc., d/b/a Pizza & Pasta, took advantage of the loan program and the
City of Prior Lake provided a $20,000 matching grant to assist with their relocation costs to 15875
Franklin Trail SE.
DOWNTOWN FAÇADE IMPROVEMENT PROGRAM
In 2002, the City initiated a Downtown Façade Improvement Program which provided up to a $25,000
as a one-to-one matching loan/grant to downtown businesses to improve their building façade or
construct a new building that met certain design criteria in the downtown area. The City Council
initially authorized up to $150,000 from the Downtown TIF 1-1 fund to the Downtown Façade
Improvement Program to revitalize, renovate exteriors and increase investment in the downtown area.
Due to the overwhelming response, the council authorized and additional $100,000 in 2003 and an
additional $34,000 in 2004. The City of Prior Lake investment, along with the significant private
investment from 12 downtown businesses, resulted in a total impact of $2.4 million in downtown
Business Interest
Rate
Term
(months)
Agreement
Date
First
Payment
Date
Principal Interest Total
Payment Principal Interest Total
Payment
Artisan Bistro Café 2.37%60 3/18/2013 5/1/2013 $5,884.00 $352.03 $6,236.03 $6,000.00 $394.79 $6,394.79
Honest One Auto Care 2.37%60 7/12/2013 9/1/2013 $7,792.00 $469.37 $8,261.37 $8,000.00 $529.94 $8,529.94
Charlie's on Prior 2.25%60 8/8/2015 10/1/2015 $37,772.00 $2,160.09 $39,932.09 $38,000.00 $2,252.93 $40,252.93
Total $51,448.00 $2,981.49 $54,429.49 $52,000.00 $3,177.66 $55,177.66
City of Prior Lake Met Council
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façade improvements and new construction. Below is a summary of the businesses who received a
façade improvement grant and the resulting public/private investment made in downtown Prior Lake.
RFPs
The City of Prior Lake has attempted to initiate redevelopment in the downtown through a request for
proposals (RFP) process on three occasions. The first was for the site of the city owned Flowers
Naturally property and privately owned Prior Lake Professional Building on Main Avenue. The
second RFP was related to redevelopment of the current VFW property. In both cases, developers
were encouraged to submit proposals to develop a mixed use multi-story building on each site. Mixed
use buildings typically have commercial/retail on the first floor and residential on the upper flo ors,
much like the Lakefront Plaza building in downtown Prior Lake. The city received very little interest
for mixed use development and in the case of the Flowers Naturally / Professional Building p roposal,
only received one proposal from the Scott County CDA for a residential only project. In both cases,
the city received comments from potential developers that they were discouraged to submit proposals
because the property was not controlled by the city and involved multiple property owners.
The city of Prior Lake successfully used the RFP process for the development of the Rock Creek
building. The City owned the land where the Rock Creek building currently sits and sent out an RFP
seeking a project that would meet the city’s downtown design guidelines. In this case the RFP process
worked incredibly well and the city and downtown area were rewarded with a high-quality building at
a key focal point in the downtown.
Building Description Date City
Cost
Business
Cost
Project
Cost
Little Lakers Montessori School Façade - Four Sides 9/30/2003 $33,000 $34,074 $67,074
Speiker Building New Building 9/2/2003 $25,000 $655,000 $680,000
Carlson Ace Hardware Façade - Two Sides 1/5/2004 $25,000 $31,582 $56,582
Fong's Façade - One Side 3/1/2004 $25,000 $45,000 $70,000
Harry & Gina Tupy Two Front Facades 4/5/2004 $8,565 $9,472 $18,037
Viking Liquor Façade - One Side 4/19/2004 $17,500 $31,068 $48,568
Extra Innings Façade - One Side 5/17/2004 $18,021 $18,021 $36,042
O'Malley's on Main Façade - One Side 6/7/2004 $25,000 $27,000 $52,000
Premiere Dance Academy New Building 10/4/2004 $25,000 $1,175,000 $1,200,000
VFW Façade - Two Sides 10/4/2004 $25,000 $33,872 $58,872
Express Gas and Groceries Façade - Two Sides unknown $25,000 $35,073 $60,073
Dehmlow Auto Façade - Two Sides 10/4/2004 $25,000 $25,073 $50,073
TOTAL $277,086 $2,120,235 $2,397,321
Note: Some projects exceeded $25,000 because façade improvements were required for multiple building walls
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ACTIVE BUSINESS INCENTIVE PROJECTS
The table below identifies the previously approved and currently active economic development
incentive projects, as of April 30, 2017.
Incentive Type Active Projects
(as of 4/30/2017)
Tax Increment Financing Districts 6
Economic Development Revolving Loans 1
DEED Loans/Grants 0
Conduit Bonds 1
Land Sale Write Downs 0
Special Assessments 0
Commercial Property Leases (below market rate) 3
Business Accelerator Participants 6
Business Accelerator Phase II Participants 0
Tax Abatement 1
Sewer & Water Fee Deferral 3
Targeted Commercial Assistance Program 1
Downtown Façade Improvement Program 0
TOTAL 22