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HomeMy WebLinkAbout10C - Resolution re: TIC Reimbursement MEETING DATE: AGENDA #: PREPARED BY: AGENDA ITEM: DISCUSSION: March 5, 2007 10C Paul Snook, Economic Development Director CONSIDER APPROVAL OF A RESOLUTION ALLOCATING THE DEPOSIT OF THE TAX INCREMENT FUND REIMBURSEMENT INTO THE DOWNTOWN REDEVELOPMENT FUND. Introduction The purpose of this agenda item is to have the City Council authorize the deposit of $114,969.05 into the Downtown Redevelopment Fund of the Economic Development Account. Historv The City developed the 35-acre Waterfront Business Park beginning in 1993. To facilitate the development of the park, the City through interfund borrowing extended water, sewer, stormwater and streets through the park. The park was projected to develop over ten years with the assistance of tax increment financing to pay the city back for these infrastructure improvements and land costs. What actually happened is the park developed in six years and generated more tax increment than was required to pay all related city expenses. Current Circumstances Tax increments were collected to repay the City for the price of the land, extension of utilities, construction of streets and administration of the tax increment accounts. Once all these expenses had been reimbursed, there remained $362,575.76 in the tax increment account. On December 18, 2006, in accordance with State Statute, the City Council authorized the staff to remit this tax increment surplus to the County in accordance with Resolution 06-214. The County has received this amount and dispersed it to the respective taxing agencies. In the case of Prior Lake, we received $114,969.05 back. The City Council has flexibility in allocating this money. The money could be allocated to the City's general fund reserve which presently stands at $4.94 million or 42 percent of the 2007 general fund budget. This balance is in accordance with the City Auditor's recommendations and with the City Council's policy. The council could opt to allocate the funds to reduce the tax levy needed to support the 2008 budget. Another option is to establish an account for park equipment and trails replacement once they wear out and there is no capital park funding available for this purpose. Yet another option is to deposit the money in the economic development account. We presently have small amounts of funds in various accounts www.cityofpriorlake.com Phone 952.447.9800 / Fax 952.447.4245 for economic development purposes. As of January 2,2007, the economic development accounts were as follows: Economic Development Federal Loan Fund Economic Development Minnesota Loan Fund Downtown Redevelopment Fund Tax Increment Fund Total $87,841 $61 ,444 $31,961 $61,676 $242,922 Following is a summary of the uses to which each account can be used and the restrictions on each: Economic Development - Federal Loan Fund · Balance: $87,841 · Source: State of MNI Small Cities Development Program (SCDP) I Federal E.D. Set-Aside · Original Use: Expansion of EM Products · Restrictions: When program income equals or exceeds $25,000 in a single report year (October 1 through September 30), all of the "federal objective" requirements that apply to the SCDP (e.g., environmental, fair housing, civil rights, Davis-Bacon, etc.) apply to the use of the income. · Future Use: Similar to original use for EM Products, as economic development loan subject to all federal guidelines. Economic Development - Minnesota Loan Fund · Balance: $61,444 · Source: State of MNI Minnesota Investment Fund · Original Use: Expansion of NBC Products · Restrictions: Must be used to establish and maintain an economic development revolving loan fund. Revolving loan fund policies and procedures must be consistent with the Minnesota Investment Fund Program policies and requirements to further economic development in the community thereby creating or retaining permanent jobs. · Future Use: Similar to original use, through local economic development revolving loan fund. State guidelines are not as restrictive as the federal guidelines. Downtown Redevelopment Fund · Balance: $31,961 · Source: Tax Increment Fund · Original Use: Fac;ade Improvement Program for rehab of downtown buildings · Restrictions: None · Future Use: Flexible; It is recommended that these funds be available for economic development loans, to purchase property (for redevelopment), to procure economic development and redevelopment professional services, and for capital improvements. Tax Increment Fund Tax Increment Finance District 1-1 (est. 6-19-85) and Tax Increment Finance District 1-2 (est. 3-23-88) · Balance: $61,676 · Source: Increments from TIF districts in downtown area. · Original Use: To construct 18,000 square foot retail service building (Carlson's Auto); and redevelopment of a service station to add a convenience store and car wash · Restrictions: Increment must be used in Development District NO.1 (Downtown) · Future Use: Excess increment can be used for other eligible TIF expenditures within Development District NO.1 **. * * Increment from districts created before May 1, 1990 may be spent anywhere within the Project boundaries (or in this case Development District No. 1 boundary), which permits "pooling" of increments (that is, combining increment from multiple T1F districts). Staff recommends that the $114, 469.05 be placed in the Downtown Redevelopment Fund. Together with $31,961 already in this account, a new total of $146,930.05 would be available for a wide variety of economic development purposes. ISSUES: The reserve fund is at the level called for both by the City's Auditor and the City Council's policy. Moreover, a contribution could be made to the reserve if the Council desires once the 2006 audit is completed. The economic development accounts are scattered and do not offer the kinds of resources which may be needed to facilitate development and redevelopment. The addition of $114,969.05 would help provide resources if loans are requested by businesses, or land needs to be purchased or expertise retained to assist businesses. Moreover, these funds were originally derived from commercial/industrial property taxes (tax increment). The Council could decide to use these funds to "buy down" either the 2007 or 2008 general fund budget, but there would be little impact and no lasting value to such an action. ALTERNATIVES: 1. Adopt a resolution directing the deposit of $114,969.05 to the general fund reserve. 2. Adopt a resolution directing the deposit of $114,959.05 to the Downtown Redevelopment Fund of the Economic Development Account. RECOMMENDED MOTION: Alternative #2. Frank Boyle 4646 Dakota Street S.E. Prior Lake, MN 55372-1714 RESOLUTION 07 -xxx A RESOLUTION DIRECTING THE DEPOSIT OF FUNDS TO THE DOWNTOWN REDEVELOPMENT FUND Motion By: Second By: WHEREAS, The City purchased, improved and developed the 35-acre Waterfront Passage Industrial Park; and WHEREAS, The City's costs for the park were to be reimbursed by tax increment financing over a ten-year period; and WHEREAS, The business park was fully developed in six years leaving a tax increment balance of $362,575.76 after the City had been reimbursed for all capital expenses for the land and improvements together with administrative costs; and WHEREAS, Pursuant to state statute the City Council directed the staff to forward the $362,575.76 to Scott County for redistribution to taxing districts; and WHEREAS, Said redistribution has taken place and the City has received $114,969.05; and WHEREAS, The City Council has received a report from staff recommending that these funds be deposited into the Economic Development Fund to better support economic development and redevelopment in the Downtown. 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 staff is hereby directed to deposit the $114,969.05 into the Downtown Redevelopment Fund of the Economic Development Account. 3. All expenditures from this account require City Council approval. PASSED AND ADOPTED THIS 5th DAY OF MARCH, 2007. YES NO Haugen Hauaen Erickson Erickson Hedbera Hedbera LeMair LeMair Millar Millar Frank Boyles, City Manager R>'Counc:lV\genda Repor;s'2DOT03 05 R~i~~~.fp~~~Sit of Funds.doc Phone 952.447.9800 / Fax 952.447.4245