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HomeMy WebLinkAbout4 - Commercial & Industrail Tax Increment Policy I / AGENDA NUMBER: PREPARED BY: SUBJECT: DATE: INTRODUCTION: BACKGROUND: DISCUSSION: HERITAGE 1891 COMMUNITY 1991 '10: J.'c;().\ ' 20}/ 4 KAY SCHMUDLACH, ASSISTANT CITY MANAGER CONSIDER DRAFT OF COMMERCIAL AND INDUSTRIAL TAX INCREMENT POLICY JUNE 3, 1991 The Economic Development Committee identified as a 1991 goal the creation of a Commercial and Industrial Tax Increment Financing Policy. This agenda item formally introduces the policy for Council consideration. The Economic Development Committee established a subcommittee of Jim Hill and Ray Lemley to draft the Commercial and Industrial Tax Increment Policy. with the assistance of Planning Intern Terrie Sandbeck research on similar city's policies was made and a draft produced. The draft was modified by the subcommittee and full Economic Development Committee prior to being forwarded to the City Council for informal review. Larson submitted comments on the was reviewed by the Economic Committee prior to this Councilmember policy which Development submittal. The purpose of the Commercial and Industrial Tax Increment Financing Policy is to provide guidance and objectivity in the evaluation of proposals requesting Tax Increment Financing assistance. The City Council will find the policy helpful in determining the benefit of the proposed project to the City's goals and objectives. The policy is however, purposely broad so as to allow necessary flexibility when negotiating with development parties. Staff believes the policy will be helpful and extremely important in the upcoming years. The Commercial and Industrial Financing Policy will be one Tax Increment component of a 4629 Dakota St. S.E., Prior Lake, Minnesota 55372 / Ph. (612) 447-4230 / Fax (612) 447-4245 RECOMMENDATION: ALTERNATIVES: ACTION REQUIRED: series of policies directed at guiding development proposals. Similar policies will be I?roposed br the Economic Development Comm1ttee to gU1de city financial assistance in the form of Industrial Revenue Bonds, Economic Recovery Grants and Small Business Loans. The Elderly Housing Policy was our first objective and that was accomplished earlier this year. Staff and the Economic Development Committee encourage the City Council to review the policy draft and discuss the elements of the policy. Staff anticiJ?ates placing the draft with Council modif1cations on the June 17 City Council Consent Agenda for formal approval. The Prior Lake City Council has the following alternatives to consider for action. 1. Approve the Senior Policy as written. 2. Modify the policy and direct staff to place on the June 17 Consent Agenda. 3. Table the policy discussion until a specific time for a specific reason. Discuss the policy and direct staff to place on the June 17 Consent Agenda. DR. .'" ~,. ~ i -..... , ADOPTED: REVISED: DRAFT 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, including business and office parks; and to establish a review process for Tax Increment Financing proposals, including requirements, review criteria, eligible activities, and funding approaches. This policy shall be used as a guide in processing and reviewing commercial and industrial applications requesting Tax Increment Assistance. 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 establishin~ the Economic Development Authority was to centralize the C1ty'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 emplorment; and 3) to strengthen the local tax base. It is the intent10n 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. 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 commerc1al and industrial enterprises within the City. 3. To remove structurally substandard buildings for which rehabilitation is not feasible. 2 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 property of irregular form and shape, or inadequate size which has prevented normal development. 7. To eliminate blighting potential development. influences which impede 8. To encourage the rehabilitation of remaining intensive businesses. 9. To realize a high standard of construction for building in the project area. 10. To provide adequate streets, utilities, and other public 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. 13. 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. 14. 15. 16. To provide maximum needs of the City, enterprise. 17. To provide increased employment opportunities. opportunity, consistent for development by with the private 18. To J?rovide a retail service level required by the res1dents of the community and surrounding region. 3 ELIGIBLE USES FOR TAX INCREMENT FINANCING IN PRIOR LAKE; The City of Prior Lake will endeavor to meet the aforementioned objectives through the use of Tax Increment Financing, but will assist private developments 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 publ1c 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. 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. 4 5. Prior to approval, the developer shall provide any required lease documents, market and financial feasibility studies, aJ?praisals, soil borings, information provided to pr1vate lenders for the project, and other information or data that the City or its financial consultants mar require in order to proceed with independent evaluat1ons. 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 guarantees to ensure the repayment of the Tax Increment. These may include, but are not limited to assessment agreements, 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. 9. Developers shall retain ownership of a project at least long enough to complete it, stabilize its occuJ?ancy, establish the project management, and to in1tiate 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 financ1ng. FUNDING APPROACH: The method of providing assistance for private projects is the "pay-as-you-go" approach and the loan approach. "Par-as-you-~o" does not ;involve the issuance of bonds, and thus lim1ts the C1ty's financial exposure in these uncertain times of state enabling legislation. The loan approach involves the sale of tax increment bonds, and loaning the J?roceeds to the developer which, in turn, comes back to the City w1th 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. Only in unique situations where significant communitr can be clearly demonstrated, will "up be cons1dered. A combination of assistance appropriate in these situations. benefit to the front" assistance techniques may be 5 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 processin~ the application. Submitting these forms provides the appl1cant's permission to allow the City's Economic 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. Statement of Public Purpose b. Description of Project c. Plans and drawings of Project d. Description of Business e. Legal Opinions f. Financial Letters of Reference g. Market Analysis h. Pro Forma Analysis i. Financial Statements j. Certified M.A.I. Appraisals k. Traffic Impact Analysis I. 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. Develol?ers may be required to complete a market study to determ1ne 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 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 project will be presented to the City Council and/or the Economic Development Authority. 6