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HomeMy WebLinkAbout3F - Tax Increment Policy 1 l CONSENT AGENDA: PREPARED BY: SUBJECT: DATE: INTRODUCTION: BACKGROUND: DISCUSSION: HERITAGE 1891 COMMUNITY 1991 1!X J:e;(}. ~ ' 2Q9/ 3 (f) KAY SCHMUDLACH, ASSISTANT CITY MANAGER CONSIDER COMMERCIAL AND INDUSTRIAL TAX INCREMENT POLICY JUNE 17, 1991 The Prior Lake City Council reviewed the draft of the Commercial and Industrial Tax Increment Financing Policy at the June 3, 1991 City Council meeting. This agenda item is being placed on the June 17, 1991 Council agenda for final approval. The Commercial and Industrial Tax Increment Financing POlicy has been prepared by the Economic Development Committee with staff's assistance. The policy has been informally and formally introduced to the City Council, most recently at the June 3, 1991 City Council meeting. The Council recommended several changes to the policy at that time. The proposed changes have been reviewed by staff and the Economic Development Committee and will be addressed in the following Discussion section of this agenda report. The Commercial and Industrial Tax Increment Financing Policy was established to guide commercial and industrial projects requesting public assistance in the form of Tax Increment Financing. Mayor Andren expressed concern regarding the definition of the policy purpose and what trpes of projects would qualify under the guide11nes of this policy. The Purpose statement (page 2) was rewritten to clarify the intended uses of the policy. A sl?ecific clarification of housing and its relatlonship to the Commercial and Industrial Tax Increment Financing Policy was provided. A second concern was identified with the word "shall" as part of the Proposal Requirements section (page 4) of the document. Staff 4629 Dakota 51. 5.E., Prior Lake, Minnesota 55372 / Ph. (612) 447-4230 / Fax (612) 447-4245 RECOMMENDATION: reviewed the section and believe the section introductorr paragraph clearly defines the minimum crlteria required. The "shall" statements that identify the developer's minimum requirements will be enforced by staff prior to requesting Council consideration. The third concern was identified under the section Funding Approach (page 5). Counci1member Larson expressed a concern with the City's policy for "up front" assistance. Mr. Larson inquired as to establishing a policy which requires the developer to provide some security to the City in exchange for "up front" assistance. staff did research this inquiry and received opinions from several sources including Barry stock with the City of Shakopee and Roger Guenette with Advanced Resources Inc. The general consensus is that in any situation when the City is considering "up front" assistance the City is incurring some level of risk. The best protection for the City would be to request either money in escrow, and/or a letter of credit to guarantee the entire amount of debt. Unfortunately either of these forms of guarantees jeopardize the Tax Exempt status of the bonds sold, thereby reducing the financial benefit of providing "up front" assistance. However, staff believes that through a combination of an assessment agreement, and a ~ercentage of funds in escrow, and/or an lrrevocable letter of credit for a percentage of the debt, the Tax Exempt status of the bonds could be maintained. In the event that the Council considers "up front" financial assistance through a Tax Increment Financing Project that has been determined to have significant benefit to Prior Lake, staff will address in the Development Agreement the terms under which the City should provide the assistance. If reasonable guarantees are not provided by the developer, and specifically stated in the Development Agreement, staff would not recommend approval. Staff and the Economic Development Committee recommend approval of the policy as written. 2 ALTERNATIVES: ACTION REQUIRED: j, The Prior Lake City Council has the following alternatives to consider for action. 1. Approve the Policy as written. 2. Modify the policy and approve the policy as modified. 3. Table the policy for a specific reason until a specific time. Approval of the Consent Agenda will include approval of the Commercial and Industrial Tax Increment Financing Policy as listed in Alternative 1. 3 ADOPTED: REVISED: CITY OF PRIOR LAKE COMMERCIAL AND INDUSTRIAL TAX INCREMENT FINANCING POLICY AND APPLICATION INFORMATION PURPOSE: The purpose of this policy is to describe the goals and objectives of the City of Prior Lake for the use of Tax Increment Financing assistance for commercial or industrial projects. Projects eligible for consideration under this policy are defined within the commercial and industrial Prior Lake zoning code categories. Housing as a secondary or auxiliary use i.e. condominiums above an office structure, would be eligible as a project component as defined below. A secondary purpose is to establish a review process for Tax Increment Financing pro~osals, inc1udin9 requirements, review criteria, eligible activ1ties, and fundlng approaches. This policy shall be used as a guide in processing and reviewing commercial and industrial applications requesting Tax Increment Assistance. Projects including housing as a secondary purpose would have to qualify according to the criteria established for both the Commercial and Industrial Tax Increment Financing Policy and a Housing Tax Increment Financing POlicy, and following the development process identified in both policies. STATUTORY AUTHORITY; On July 17, 1989, the City of Prior Lake established an Economic Development Authority (E.D.A.) with all the powers contained in Minnesota Statutes, Section 469.090 to 469.108, the powers of a housing and redevelopment authority under Minnesota statutes, sections 469.001 to 469.047 or other law, and the powers of a city under Minnesota statutes, Sections 469.124 to 469.134 or other law. The purpose of establishin9 the Economic Development Authority was to centralize the Clty'S redevelopment and economic development efforts in a single governmental organization having the broadest statutory authority for undertaking community development activities. Tax Increment Financing assistance requests to the E.D.A. must comply with applicable state Statutes. The City of Prior Lake is governed by the limitations established in Minnesota statutes 469.174, the Minnesota Tax Increment Financing Act for all districts created after August 1, 1979. GOALS AND OBJECTIVES: Goals for the city of Prior Lake include 1) the encouragement and provisions for the vitalization of the City through development, or redevelopment, of existing and new commercial, and industrial areas; 2) to increase employment; and 3) to strengthen the local tax base. It is the intention of the Prior Lake Economic Development Authority to support broad-scale, community development activities and to use available and appropriate financing to fund the public redevelopment cost. 2 objectives for the City include: 1. To promote the development of certain areas and properties consistent with the City Comprehensive Plan. 2. To encoura~e the retention, expansion, and development of commerclal and industrial enterprises within the city. 3. To remove structurally substandard buildings for which rehabilitation is not feasible. 4. To acquire and remove buildings that are functionally obsolete, underutilized or uneconomical. 5. To acquire land and/or buildings which are vacant, unused, underused, or inappropriately used. 6. To acquire propertr of irregular form and shape, or inadequate size WhlCh has prevented normal development. 7. To eliminate blighting potential development. 8. To encourage the rehabilitation of remaining intensive businesses. influences which impede 9. To realize a high standard of construction for building in the project area. 10. To ~rovide adequate streets, utilities, and other publlC improvements and facilities to enhance the area for both new and existing development. 11. To eliminate or correct physical deterrents, such as soil condition, to the development of the land. 12. To achieve a high level of design and landscaping quality to enhance the physical environment. 14. To accomplish convenient and adequate parking to serve the needs of the area. To combine elements of other city plans with this project. To implement elements of other City plans, which are consistent with an eligible project. 13. 15. 16. To provide maximum opportunity, consistent needs of the city, for development by enterprise. with the private 3 17. To provide increased employment opportunities. 18. To ~rovide a retail service level required by the res1dents of the community and surrounding region. ELIGIBLE USES FOR TAX INCREMENT FINANCING IN PRIOR LAKE: The City of Prior Lake will endeavor to meet the aforementioned objectives throu~h the use of Tax Increment Financing, but will assist prlvate develo~ments only in those circumstances where the proposed private proJects meet one or more of the following uses: 1. Provide site preparation for private development. This may include soil correction, grading, landscaping, and/or drainage improvements; or 2. Provide for the financing and construction of public improvements, such as water, sanitary and storm sewer systems, and roadways; or 3. Provides for the implementation of the City's Tax Increment Financing Goals and Objectives. PROPOSAL REQUIREMENTS: All projects considered for the City of Prior Lake shall meet the following mandatory minimum criteria prior to approval. However, it should not be presumed that a project that meets these criteria will automatically be approved. Meeting these criteria creates no contractual or obligatory rights on the part of the City to participate in a project with Tax Increment Financing assistance. MINIMUM APPROVAL CRITERIA: 1. Public benefit of assistance must be clearly demonstrated. It must be financially demonstrated that the project will not materialize without tax increment assistance. All proposals requesting TIF assistance shall si~n a "but for" letter demonstrating the need for the pub11C assistance and that, but for the assistance the project would not progress further, or would locate in another area. 2. The project must be in accordance with the Comprehensive Plan and Zoning Ordinances, or required changes to the Plan and Ordinances must be under active consideration by the City at the time of the approval. 4 3. Tax Increment Financing assistance shall be provided within applicable state legislative restrictions, debt limit guidelines, and other appropriate financial requirements and policies. 4. The project shall meet one or more of the aforementioned Tax Increment Financing Eligible Uses. 5. Prior to approval, the developer shall provide any required lease documents, market and financial feasibility studies, a~praisa1s, soil borings, information provided to prlvate lenders for the project, and other information or data that the City or its financial consultants mar require in order to proceed with independent eva1uatlons. 6. Developers shall provide full disclosure of a project's financial and market information so that the City can have the information verified and reviewed to its satisfaction. 7. Developers shall provide adequate financial to ensure the repayment of the Tax Increment. include, but are not limited to assessment letters of credit, etc. 8. Developers shall be able to demonstrate past successful general development capability, as well as specific capability in the type and size of development proposed. guarantees These may agreements, 9. Developers shall retain ownership of a project at least long enough to complete it, stabilize its occu~ancy, establish the project management, and to inltiate repayment of the Tax Increment Financing assistance. 10. The City of Prior Lake will use the "Pay-as-you-go" method of Tax Increment Financing and mar consider, if appropriate, the loan approach to financlng. FUNDING APPROACH: The method of providing assistance for private projects is the "pay-as-you-go" approach and the loan approach. "Par-as-you-go" does not involve the issuance of bonds, and thus limlts the City's financial exposure in these uncertain times of state enabling legislation. The loan approach involves the sale of tax increment bonds, and loaning the ~roceeds to the developer which, in turn, comes back to the City wlth interest. The repayment funds would be placed in a development account to repay the bonds and, if applicable, assist with future development. This lessens the bond risk because there are two income streams, tax increment and loan payments, that can be used to meet the bond obligation. 5 Only in unique situations where significant benefit to the communitr can be clearly demonstrated, will "up front" assistance be consldered. A combination of assistance techniques may be appropriate in these situations. The City will require a combination of an assessment agreement, an irrevocable letter of credit for a percentage of the financing, and/or funds in escrow to secure a percentage of the public assistance. APPLICATION PROCESS: 1. The developer shall make an application for Tax Increment Financing on the attached forms and submit these, with the appropriate application fee, to the City of Prior Lake. The developer may be assessed an additional fee for administrative costs associated with processing the application. Submitting these forms ~rovides the applicant's permission to allow the City's EconomlC Development Authority to check the backgrounds of managing partners or project managers and personnel within the application and within the financial guarantee organization. For evaluation purposed, the information listed below may be requested by the City: a. b. e. f. g. h. i. j . k. I. c. d. Statement of Public Purpose Description of Project Plans and drawings of Project Description of Business Legal Opinions Financial Letters of Reference Market Analysis Pro Forma Analysis Financial Statements Certified M.A.I. Appraisals Traffic Impact Analysis Other Documentation as Requested by the City 2. Project Concept Review Conference: This conference involves initial review of the project by City staff. The developer will be responsible for making a presentation to staff at this conference. The purpose of this conference is to familiarize staff with the proposal and discuss preliminary issues, such as possible site locations, financial and zoning considerations, plan submission requirements, and applicable zoning and design requirements. Deve1o~ers may be required to complete a market study to determlne that the project is feasible in terms of demographics and market demand. 3. Formal Project Review: These meetings may include City Staff, Finance Specialists, City Attorney, Developer and Developer'S Specialists, and the Economic Development Committee and the Economic Development Authority Representatives. The purpose 6 of the meeting is to discuss the viability and financial feasibility of the proposal based on the results of the market study. If the project is determined to be financially feasible, the pro~ect will be presented to the City Council and/or the EconomlC Development Authority. 4. City Council Preliminary Review: The developer will present the l?roject concept to the City Council, Economic Development Commlttee, and Economic Develo~ment Authority Re~resentatives and request approval to enter lnto negotiations 1n order to develop a financial package between the City and Developer. An approval from this meeting is not a Project Approval, but rather an authorization to proceed with a financial feasibility study for the project. Project Analysis: This focus on land use, engineering issues, and City staff. 6. Planning Commission Review and Economic Development Committee Review: Once all financial, market study and project analysis information is available, the developer will present the proposal to the Planning Commission and Economic Development Committee who shall publicly review the project. It is the responsibility of the developer to make application and to present all plans and supporting materials to the Commission and Committee. stage of the process is designed to zonlng, comprehensive plan, and include a series of meetings with 5. 7. Once approval is received from the Planning Commission, the project will be forwarded to the City Council and Economic Development Authority for consideration. The deve1o~er will be responsible to present the entire proposal lncluding funding, rezoning and other requests to the City Council and/or Economic Development Authority. The Council and/or Economic Development Authority will make approvals pertaining to financial and project development considerations. EDC"TIF" 7