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HomeMy WebLinkAboutNovember 18, 1997 I - ~ PRIOR LAKE ECONOMIC DEVELOPMENT AUTHORITY MEETING Tuesday, November 18,1997 5:30 p.m. Fire Station City Council Chambers 1. Call to Order 2. Pledge of Allegiance 3. Approval of Minutes 4. Consent Agenda 5. Presentations 6. Public Hearings 7. Old Business a) TIP Policy b) Consider sale of one acre parcel to NBC Products. c) Consider option request of Mondo Management, LLC for 4.5 acre parcel. d) Consider sale of 1/2 acre parcel to Keyland Homes. 8. New Business 9. Other Business 10. Announcements or Correspondence 11. Adjournment, 7:00 p.m. 16200 Eagle~~A.&.~\lRri.ood...ake. Minnesota 55372-1714 / Ph. (612) 447-4230 / Fax (612) 447-4245 AN EQUAL OPPORTUNITY EMPLOYER piece. He discussed the Shakopee TIP policy, which is based upon use of TIP for promoting development that otherwise could not occur. Many of the communities have a whole other series of requirements associated with their TIF usage. Prior lake needs to have criteria as well. . Commissioner Schenck said he looked at all the proposals and there was something from each which would be appropriate to Prior Lake as well as some things that were not appropriate to Prior Lake. He said he would like to go through each one and pull out things that could be beneficial. He suggested this could be workshop material. . Executive Director Boyles said there were five different approaches to TIP. He suggested that perhaps the EDA take one of them and use it as a base, taking out what was not desirable for the City, and then add whatever they liked from the others. . President Barsness said they could start using the Shakopee policy. . Commissioner Schenck said he liked Shakopee's as a base document, and had some questions about some of the items. He addressed Planning Director Rye, and said looking at the Shakopee Program Eligibility Criteria, how many types of districts was Prior Lake looking at? . Planning Director Rye said the business parks and commercial. He said Shakopee's policy was limited to light industrial except for their downtown redevelopment. If Prior Lake was looking at commercial redevelopment they would have to include that as a district. . Commissioner Kedrowski asked how we assure that the use is proper from a zoning perspective. . Planning Director Rye said a general statement that the proposal must comply with the City's Zoning Ordinance and Comprehensive Plan would be sufficient. . Commissioner Schenck said it is the Council's policy not to provide TIF for residential. . Planning Director Rye said that could be addressed separately in the future should the EDA desire. . President Barsness asked for clarification on the Council's policy. . Commissioner Schenck said it has not been the desire of the Council to provide TIF for residential. Residential development happens without it. Right now Prior Lake is a City in need of commercial and industrial development. r: \council\eda \eda 113 97 . doc 2 . Commissioner Kedrowski said for the record the EDA may want to have Planning Director Rye outline how the City is doing in terms of the Livable Communities Act. . Planning Director Rye said over the next 15 year time period there are goals that have to be met. The City is on track right now, with housing built below the affordability guidelines. For owner occupied housing, 14 to 17 affordable units must be started every year. As time passes that will get tougher to do. If it is determined that that kind of housing is not being provided, the City could look at revising its policy to assist specific housing types. . President Barsness confirmed that the EDA could go to the City Council to revise its policy if necessary. . Commissioner Schenck said he did not know if a policy on residential use of TIP has been written. The Council had a request for residential use of TIP for Kestrel Village. The request was denied. . Consultant Guenette said the only way they could use TIP for housing would be for the provision of low to moderate income. In the course of redevelopment for downtown including mixed use residential, the issue could be revisited by the EDA and City Council. . Commissioner Underferth said if there is already residential in the downtown area and they wrote the policy without a residential component, would it cause difficulty? . Consultant Guenette said it could say they will consider TIP for appropriate redevelopment ventures instead of qualifying it as residential or not. . President Barsness said the policy should be generic. . Commissioner Underferth said in the Farmington policy, the HRA is responsible to assure that the project would not occur BUT FOR the assistance provided. If Prior Lake relies upon a similar statement this would be appropriate. . Consultant Guenette said the cities have all attempted to draft policies that give their EDA, HRA, or City Council the ability to say no if they choose but provides flexibility to meet unique circumstances. If the policy is used as a guideline, it is a good tool, but if it is too rigid it can be a trap. . Commissioner Schenck said his only concern is that Prior Lake is commercial /industrial poor and creating a TIP policy and TIP goals is intended to reduce this r: \council\eda \eda 113 97 ,doc 3 situation. If the EDA supports the Livable Communities act this is good for the City. TIP should be a tool for commercial! industrial development primarily, . Commissioner Underferth said he agreed wholeheartedly and he thought the City's policy should state that as a purpose that TIF is to be used for encouraging commercial industrial. The statement should leave it open for residential if desirable in the future. . President Barsness asked if the EDA liked the program description in the Shakopee policy. . Commissioner Schenck said that is a pretty good one. . President Barsness asked if the Shakopee program goals list, items 1-5, are those items the EDA wants to keep? . Planning Director Rye said it could be expanded to include commercial as well as industrial. . Commissioner Schenck said commercial can be assumed where industrial is mentioned. . Commissioner Kedrowski asked if the EDA wants to focus on smaller or mid sized business? . Consultant Guenette said the reality is we will not have large lots. There is a 40 acre parcel on Pike Lake Trail and CSAH 42 and a 60 acre tract in Deerfield Industrial Park. . Commissioner Kedrowski said he didn't think the policy should specifically detail lot size. . Commissioner Schenck asked if the Shakopee 5 acre parcel criteria is realistic for Prior Lake? . Consultant Guenette said it is not realistic for Prior Lake. Most of the Shakopee lots start at 5 acres. . President Barsness said that is industrial. . Commissioner Schenck asked if it would be appropriate to require 5 acre industrial and smaller commercial parcels? r:\council\eda\edal1397,doc 4 . Planning Director Rye said they would be better off dealing with that through ratio of taxes generated before and after development rather than pinning it down to a lot size. . City Attorney Pace suggested a 2-1 ratio. . Planning Director Rye said the EDA could also consider a debt service ratio and a tax ratio. . President Barsness asked do we want to be that definitive? . Planning Director Rye said if it gets to the point where you want to say no, it is better to have specific criteria. . Consultant Guenette said every project Prior Lake has would meet the criteria we have been discussing except the 5 acres. He said if this is the type of format the EDA would be comfortable with, the staff could take it and rework the language so it would be a better fit for Prior Lake. The idea was to give some samples so that the EDA could see what other communities have done. . Commissioner Schenck said he was fine with that and would like to continue. He asked if item D, a 10 to one rate of return would be realistic. . Consultant Guenette said it depends on what it is based on. . Planning Director Rye said he understood that for every dollar of public assistance, there is ten of private investment. . Consultant Guenette said he thought the criteria used was increase in valuation. The Shakopee EDA is saying they will assist at 10% of the increment generated. . Planning Director Rye said that did not sound like a lot of money. . Consultant Guenette said it was not. . President Barsness said they would accept Shakopee's format generally and add to it. He said it looked like the EDA would accept the program goals. He said he had a question on #5 to enhance competitive position"? . Planning Director Rye said he read it as the City would get a share of the commercial industrial development in the area. . Commissioner Kedrowski suggested adding a goal about redevelopment. r:\council\eda\edal1397.doc 5 . Planning Director Rye said it would be good to add C and D from Hopkins policy. . City Attorney Pace. said include C, and D in lieu of or in addition to 2. . Commissioner Kedrowski said add 5, C, and D. . Commissioner Underferth, asked does anyone want to address the livable wage aspect of job creation? . Commissioner Kedrowski said it is already $8.00 per hour out here for minimum wage. . Planning Director Rye said that could be a criteria. . Commissioner Schenck said other cities have that. . Commissioner Underferth said he would favor that. . Commissioner Kedrowski said the dollars they have to pay to attract people are up. . City Attorney Pace said the EDA should keep in mind what kind of jobs it wants to attract. . Commissioner Kedrowski said if it is legitimate he is not opposed to it. . Consultant Guenette said it was necessary to separate industrial from commercial redevelopment. These are different economies and different goals. Downtown has viable retail options and redevelopment of blighted areas. They are both legitimate goals but don't necessary fit under the same policies. Downtown redevelopment has a longer duration and the public purpose objectives are different. They could write different objectives within the same policy. . Commissioner Schenck said if the EDA is too restrictive on wage, isn't that eliminating summer employment for kids? . Consultant Guenette said the EDA may consider eligibility criteria. The more criteria, the more heavily weighted will be Council's decision. It should be used as more of a guideline so the flexibility is kept. . President Barsness asked if that was acceptable. . Commissioner Underferth said yes. r:\council\eda\edal1397.doc 6 . Commissioner Schenck said add Hopkins 5 C & D and 6. . Commissioner Kedrowski said expand 3 to include what we just talked about. . President Barsness asked about including eligibility criteria. . Planning Director Rye said projects only needed to comply with the zoning ordinance and the comprehensive plan. . City Attorney Pace said it would be OK to generalize it to be consistent with the comprehensive plan and zoning ordinance. . Planning Director Rye clarified that they would drop C. . Commissioner Kedrowski said there were two different interpretations ofD, industrial and commercial. . Consultant Guenette said Shakopee's was overstated. This arrangement would not generate much assistance to a lot of the transactions we have looked at. The rate of return 10-1 is not realistic. . City Attorney Pace said C and D were the only objective criteria. . Planning Director Rye said M is objective. . Consultant Guenette said there were other examples, where if it is an EDA project, the investment has to be X dollars combined with a certain level of private investment. That is an objective criteria. They are trying to increase the valuation. They would be better off stipulating minimum target investment dollar or%. . Councilmember Kedrowski asked would that have precluded a smaller investor. . City Attorney Pace referred to the benchmark ratio of Hopkins. . Consultant Guenette said to build an industrial facility, they would be looking at $250,000 as starting point for private investment. . Executive Director Boyles clarified 503 B was acceptable. . Consultant Guenette said the use of that language along with a benchmark number was not a bad strategy. . Executive Director Boyles said strike housing, what about D on Hopkins? r: \council\eda \eda 113 97 ,doc 7 . Commissioner Kedrowski said that works for raw land but maybe not commercial. . Consultant Guenette said not on all parcels. . Commissioner Kedrowski said they could use that ratio but distinguish new and redevelopment. . Consultant Guenette said if it was redevelopment, then they would have that ratio. . Planning Director Rye said they should differentiate between new and redevelopment. . President Barsness clarified that the EDA does not need a good reason to reject. . Executive Director Boyles said under N in the Shakopee policy, the City reserves the right to deny. . President Barsness said so do we add any from Hopkins? Can it give us base numbers for ratios? . City Attorney Pace said it could be done by a basic number or by jobs versus public investment over number of years and how much investment is required. She said why does there need to be a policy? She said to the extent the EDA wants to measure, it may want to set some minimum guidelines. . Planning Director Rye said does it make sense to say "only provide enough assistance to get a specified rate of return,"? . Consultant Guenette said it works for someone who really wants to be in the community, but not something that is being sought after by a handful of communities. He gave as an example South St. Paul, with the amount of private dollars, investment, jobs created, and how much created. Each category is in a matrix, and either meets or falls short of the criteria. If there are enough positive things it will be supported. If it conforms, they will make a decision accordingly. . Commissioner Schenck said but it is not inappropriate for us to establish goals. . Consultant Guenette said it would be case by case. These are nice documents, but who pays attention to them after they are developed? . Commissioner Schenck said when we create this, we don't want to scare away business. r:\council\eda\edal1397.doc 8 . Planning Director Rye said they did put in "substantially comply" criteria, it is subjective. . Consultant Guenette said so there is a better sense among the EDA of its charge with TIF. He said there is enough information to prepare a policy paper that could include a matrix. . Planning Director Rye said there could be a grading system for projects. . President Barsness said they would be looking at grades based on levels. . City Attorney Pace said it is her sense that the EDA wants some threshold criteria. . President Barsness said so it could either accept or reject. . Consultant Guenette said having a policy is something they can look at. If the EDA wants to spend time going through this, it can always come back to it. It gives people a sense of whether or not it will be a priority. He said the projects going on are what the City Council and EDA want and what their vision is. . President Barsness said the projection is they wanted to sell enough to generate a tax base and employment. They needed this as a catalyst to make it happen. The EDA was aggressive. The property left available is diminished. Should we look at some other criteria, how easy should we make it? . Consultant Guenette said it goes beyond that. A policy is more important now. Developer/Investors will want to see their property move. Private parties will take over the responsibility. . President Barsness said Anderson's property is owner/user/landlord. The most recent being built is a developer/owner not a user. Mr. Wallis' project is the same situation, a commercial developer that builds and leases. . Mr. Wallis said the intent of the four acres could be owner occupants. It may not be multi-tenant. Part of reason they agreed to terms initially is they wanted to sell if they wanted to. They are not stopping anyone from owning the project. He said he wants to build buildings and sell, not necessarily own them. . City Attorney Pace said that raises a question. One of these policies says the project has to be owned, one said it cannot be used to fund speculative projects. She said the EDA may want to go through the other criteria and there could be addition to. She said a pro-forma was a good idea. r: \council\eda \eda 113 97 ,doc 9 . President Barsness said those were all good points. He said the next question is have we worked enough with it so staff can develop something. In the case ofMr. Wallis, his project may not fit that. . City Attorney Pace said they have to assess as an Authority whether it wants to fund speculative stuff, what kind of information do you want as part of application, a lot of developers may not want to give it. . Consultant Guenette said he had a couple of things. Yes, Tax Increment provides an inducement to developer if they are a landlord that otherwise would not be opportunity for them. Ultimately, does it matter to the EDA whether the building is owned by corporation or landlord? Does it change the fact that if we bring companies into the City, as these companies grow, one of the biggest impediments to companies moving is loss of their labor force. It is creating opportunities for growth. Companies that are taking 5,000-10,000 foot spaces are least likely to be able to afford to own. It is not a bad strategy if we have people prepared to make an investment. He said he looked at Lakeville, Farmington, and Rosemount, to see what are neighboring communities doing in terms of actual use ofTIF. Lakeville is writing down projects to $1 and using TIF to reimburse themselves. Farmington has written down to $1 per square foot, they get $1 per square foot cash and they reimburse grading and parking. Rosemount wrote down a 10 acre parcel to $1, and a 6 acre which was conveyed at 44 cents per square foot. With the exception of Key land, Prior Lake's have all been $1 per square foot and are competitive in the marketplace. . President Barsness said Prior Lake's costs are higher. . Consultant Guenette said ours are $2.04 per square foot. The best conclusion is we have 33 acres that requires a lot of grading, and an extra road. Here we have as much road connection as some of the 80 acre parks, but they have an economy to scale. The land price was not a big deal; it was infrastructure. . President Barsness asked then why wouldn't everyone go to Lakeville? . Stan Anderson said he purchased land for 50 cents per foot owner occupant. They require that taxes be fully assessed after first year. They are getting their money back earlier. They are paying $50,000 in taxes, getting more back faster. It helps them on the front end to get them going, but end up costing more. . Consultant Guenette said one thing they do in Lakeville is look at larger projects. Some of the projects we have served they would not deal with. Lakeville is looking at 4-5 acre projects and we had quite a few I to 1/2 acres. There is no economy for these people to build with a small builder and ownership. Prior Lake business provides a place for small businesses to grow. r:\council\eda\eda11397.doc 10 . Executive Director Boyles asked does the EDA wish to state a preference? With a matrix, perhaps an owner could receive more points than leasing. . President Barsness said there was a rationale to reward owner occupancy. Economies of scale for smaller operation make it difficult for small size owner occupants. They need to come up with criteria they can be comfortable with. . Consultant Guenette said he does understand what the EDA wants to accomplish. He said of the three remaining parcels, 4-41/2 is the largest. Right now a pond juts into the lot, and it will cost $25-30,000 to mitigate pond. He said it is no surprise it remains for sale. Then the 1/2 acre that is adjacent to 4 acre. The 1/2 acre could be purchased by Keyland Homes or tacked on to the 4 acre. If the EDA got 1$ per square foot to sell someone 4 1/2 acres when part of the property is not useable, it is a difficult proposition. He said he would work to find a single user, owner- operator. Presently Jeff Wallis and Construction 70 will be prepared to take an option out. He has talked to Gary Horkey about the 1/2 acre parcel. He would hate to see an existing business person get landlocked. He said they should give Mr. Horkey the opportunity. With Mesenbrink and Wensmann opening next year, it would be good to have the business park land sold out. . President Barsness said there is four acres including lowland. . Consultant Guenette said approximately 4.5 acres. It can be re-surveyed. It depends on the survey. . President Barsness asked about the proposal. . Consultant Guenette said the proposal would be an option at a cost of $1 0,000 initially with a requirement of $1 per square foot prior to the start of development, for an area determined by survey. . President Barsness asked how they would know how much footage. . Jeff Wallis said they were developing a site plan right now. B, Review Horkey Land Purchase Proposal . President Barsness introduced the item. . Commissioner Kedrowski asked if these terms were acceptable to Mr. Horkey. . Consultant Guenette said the memo had not been sent to Mr. Horkey. The EDA mayor may not fmd this acceptable. He said before they could proceed, they needed to put something in front of Mr. Horkey. He said there is approximately 1/2 acre behind Keyland. r: \council\eda \eda 113 97 . doc 11 . Executive Director Boyles explained about the City's earlier experience where the existing TIF agreement was in arrears and Mr. Horkey wanted to re-negotiate the agreement and thro'w in the parcel with the re-negotiated agreement. . Commissioner Kedrowski said it wasn't Mr. Horkey's fault he was in arrears. . Consultant Guenette said things did not get processed in timely manner, and the building was not completed by December 31 st, consequently the assessor assessed his building as uncompleted, and his agreement required he guarantee the payment on TIP. He had to make a TIP payment even though project completion was delayed a year. . Commissioner Kedrowski asked if the assessor was not correct. . Consultant Guenette said the assessor was correct. . Commissioner Kedrowski said someone should have had the assessor do it differently. . Consultant Guenette said the auditor did not send a statement to reflect the minimum market value. Mr. Horkey was aware of the agreement. He was hoping that the City would give him another year. . Commissioner Barsness said the Horkey agreement is structured like a contract for deed. . Consultant Guenette said that is correct, $10,600 down payment and an annual amount of $1 0,500 and to the extent develops any more facility on that site, that increment would be credited against the cost. . Commissioner Kedrowski asked if this was a good deal. . Consultant Guenette said Horkey does not have a lot of options for expansion. If he would expand his facility by 15,000 square feet, he would end up paying only $14,000 additional. We would generate $56,280 in new increment. It is not likely he will build at that time. . Executive Director Boyles asked how much will that total expansion cost. . Consultant Guenette said he is paying $70,000 for the land. He will pay $30 per square foot. for any building addition. A maximum of $18,000 would be available from TIP if a 5,000 square foot expansion were allowed. . Commissioner Kedrowski asked does he need more than the 1/2 acre? r:\council\eda\edal1397.doc 12 . Consultant Guenette said the maximum he would envision is 15,000 square feet. . Executive Director Boyles asked about the cost. . Consultant Guenette said he is not going to get wealthy, just defray a portion of the land costs. . Commissioner Kedrowski asked does he have any other options? MOTION BY KEDROWSKI SECOND BY BARSNESS TO DIRECT THE STAFF TO PREP ARE A PURCHASE AGREEMENT AS OUTLINED IN THE STAFF REPORT. Upon a vote, ayes by Barsness, Kedrowski, Schenck, and Underferth, the motion carried. C. Discuss Proposed Wallis Option on 4-Acre Business Park Parcel. . Consultant Guenette introduced the item. They plan to initiate construction of a 25,000 square foot building by the end of 1998 with completion of the facility no later than 1999. If they do not initiate building, they will pay the City a penalty and lose the option on the property. . Executive Director Boyles asked how do we assure or motivate continued development of the parcel? . Consultant Guenette said total development of the 4.5 acre site is expected to be 70,000 square feet. He said there is a reasonable perspective that the developer pay $1 per square foot for the land and $170,000 up front. . Commissioner Kedrowski asked what if nothing happens? . Consultant Guenette said if the EDA breaks even, the project is worthwhile. . Executive Director Boyles, asked why would the City enter in to the agreement at 25,000 square feet? . Consultant Guenette said the EDA will recapture the City's investment. The developer is paying more than they need to pay if they are only going to develop 25,000 square feet. With the exception of Becker, the City has tried to encourage business to buy more property than initially needed. . President Barsness wondered about the cost of wetland mitigation. r:\council\eda\edal1397.doc 13 . Consultant Guenette said $20-30,000. . Commissioner Schenck asked if the city is responsible for correcting that? . President Barsness asked is that a good estimate? . Consultant Guenette said that both Larry Anderson and Greg Ilkka looked at it. It is a question of excavation and fill. They have to do a 2 for 1 replacement on wetland. . Planning Director Rye said the numbers are conservative. . Mr. Wallis said he did not intend to do one building. . Commissioner Kedrowski, asked where are you looking at first, and where second? . Mr. Wallis said two buildings would be completed. They could have three buildings there. He is assuming the pond can be mitigated and from there come up with a proposed site plan. . Councilmember Kedrowski asked if the EDA should look at a site plan first. . City Attorney Pace said they faced something like this a year ago and developed a process to follow. . Consultant Guenette said they were looking at an option here. . President Barsness asked other than the above, they would like the same considerations as any other business receiving TIP? . City Attorney Pace said she is not contemplating any of this being included in the option. . Consultant Guenette said in exchange for x dollars on the option, Wallis is seeking TIP in way it has been handled with other projects if they develop. . City Attorney Pace asked if the City would have to do the mitigation or could it be worked out? . Consultant Guenette said that when he surveyed other communities on what they are getting up front for industrial parks he found that Prior Lake is doing better. . President Barsness indicated the survey may not include all considerations. r:\council\eda\edal1397.doc 14 . President Barsness said he is familiar with AMCON which is a quality company and builds a good building. . Mr. Wallis said timing is an issue. There are potential tenants left over from the previous leasing. . President Barsness said this is not expected for fall construction. . Mr. Wallis said it was not but it is 70% leased. It is important for him to know whether they should spend AMCON's money to do a site plan. City Attorney Pace asked about the terms of the option. Consultant Guenette indicated the option is not actually completed. That is the request before the EDA. The terms would be similar to the Anderson option. Mr. Wallis said ifhe knows there is a proposal coming, he will have a site plan done, that is why this proposal is so general. City Attorney Pace asked if a final option proposal was expected for the next meeting. Consultant Guenette said if the EDA and Mr. Wallis agree in concept then a detailed option agreement must be drafted. City Attorney Pace clarified that the EDA is seeking the development of option agreement but not to enter into one. Commissioner Kedrowski said that is what the EDA wants. President Barsness said the next meeting is November 18th. MOTION BY KEDROWSKI SECOND BY BARSNESS THAT AN OPTION AGREEMENT BE DEVELOPED FOR CONSIDERATION BY THE EDA. Upon a vote, ayes by Barsness, Kedrowski, Underferth, and Schenck, the motion carried. 9. Other Business. . Consultant Guenette said Tony Schencks of NBC products would like to prepare a purchase agreement to buy 1.1 acres south of his building. It is along the same lines of the original sale, $1 per square foot. They will seek $10,000 down and a balance due in March. . Councilmember Kedrowski suggested that item be brought up at the next meeting. . President Barsness indicated that was all of the business for this meeting. r:\council\eda\edal1397,doc 15 10. Announcements: There were no announcements. 11. Adjournment: MOTION BY SCHENCK SECOND BY BARSNESS TO ADJOURN. Upon a vote, ayes by Barsness, Kedrowski, Schenck and Underferth, the motion carried. The meeting adjourned at 7:30 p.m. City Manager Recording Secretary r:\council\eda\edal1397,doc 16 .. PRIOR LAKE ECONOMIC DEVELOPMENT AUTHORITY STAFF AGENDA REPORT AGENDA #: PREPARED BY: SUBJECT: 7A DONALD RYE, PLANNING DIRECTOR CONSIDER ADOPTION OF TAX INCREMENT FINANCING POLICY NOVEMBER 18,1997 DATE: INTRODUCTION: At the last meeting, the EDA considered TIF policies from several other communities and directed staff to prepare a suggested policy for EDA consideration. DISCUSSION: Attached is a draft TIF policy for EDA consideration. The policy contains a general purpose statement, goals and objectives, criteria and an application procedure. Also attached are a list of submittal requirements for City assistance, a matrix for application evaluation, a more formal evaluation procedure and a sample "but-for" analysis. ISSUES: The primary question is whether the proposed policy adequately addresses Commissioner's concerns over granting assistance to private developments. ALTERNATIVES: 1. Adopt the policy as proposed 2. Adopt the policy with modifications as directed by EDA members 3. Postpone adoption for specified reasons ACTION REQUIRED: Motion expressing the will of the EDA 7A111897.DOC 1 16200 E~e Creek Ave. S,E.. Prior Lake. Minnesota 55372-1714 / Ph. (612) 447-4230 / Fax (612) 447-4245 AN EQUAL OPPORTLNITY EMPLOYER CITY OF PRIOR LAKE ECONOMIC DEVELOPMENT AUTHORITY T AX INCREMENT FINANCING PROGRAM PURPOSE This policy is established to outline the City's position on the use of tax increment financing(TIF)policy for private development. This policy will be used as a guide in processing and reviewing applications for tax increment financing assistance. In accordance with the TIF policy, TIF requests must comply with applicable state statutes. The City of Prior Lake is governed by the limitations established in Minnesota Statutes Chapter 469.174, the Minnesota Tax Increment Financing Act, for all districts created after August 1, 1979. . PROGRAM GOALS This program exists to achieve the following goals: 1. To promote commercial and industrial development that would otherwise not occur. 2. To increase the tax base of the City in order to ensure the long-term ability of the City to provide adequate services for its' residents while lessening reliance on the residential property tax. 3. To improve the City's economic vitality through the creation and expansion of employment opportunities. 4. To remove blight and encourage redevelopment in the commercial and industrial areas of the City in order to encourage high levels of property maintenance and private reinvestment in those areas. 5. To assure that projects are constructed and maintained at a level of quality consistent with the goals of the City of Prior Lake. 6. To retain local jobs, increase the local job base and provide diversity in that job base. 7. To assist in achieving other goals contained in adopted public policies as may be adopted by the City Council from time to time, including without limitation, quality design and construction, energy conservation and reductions in the capital and operating costs of government. PROGRAM ELIGIBILITY CRITERIA Qualified projects must meet or exceed the following criteria to be eligible for TIF assistance. Meeting the threshold of eligibility does not guarantee approval of the project by the City. Final approval of any project will be made by the City Council and 16200 Eagle Creek Ave. S.E,. Prior Lake, Minnesota 55372-1714 / Ph. (612) 447-4230 / Fax (612) 447-4245 AN EQUAL OPPORTUNITY EMPLOYER Economic Development Authority. The applicant for assistance must complete an Application for TIF Assistance pursuant to the procedures outlined below. 1. The project must be consistent with the City's Comprehensive Plan, zoning ordinance and other applicable .City ordinances. 2. The applicant must be willing to enter into a development or redevelopment agreement with the City, 3. The project must comply with all applicable environmental regulations. 4. The applicant must submit all ofthe materials required in the application. 5. The applicant must agree to provide surety to the City to cover all costs paid by the increment, unless the project is a "pay as you go" agreement. Theses may include assessment agreements, letters of credit, personal deficiency guarantees, guaranteed maximum cost contracts and minimum payment agreements. 6. The applicant/developer must provide a minimum of20% equity in the project. 7. The EDA will favor owner-occupied projects over projects which will be leased. 8. For projects in an Economic Development District, a maximum of $10,000 of public money will be invested for each full-time equivalent position created or retained. 9. For projects in Redevelopment Districts, those which remove or prevent blight will be favored. 10. For projects in Redevelopment Districts, a ratio of taxes paid before and after redevelopment of 1:2 is desired. 11. TIF will not be used in projects that would give a significant competitive financial advantage over similar projects in the area. Developers will provide information to demonstrate that this criterion is met. 12. TIF proposals should normally not be used to assist speculative developments. The developer should be able to provide market data, letters of intent or financial statements which illustrate the market potential or demand for the project. PROJECT COSTS ELIGIBLE FOR TIF ASSISTANCE Project costs which qualify for TIF assistance include the following: . Property acquisition . Land clearance . Relocation and demolition of structures . Site preparation . Soils correction . Removal of hazardous wastes or remediation of site contamination . Installation of utilities . Construction of public or private improvements . Administrative costs directly related to the identified parcels. . Design fees . Surveys . Environmental studies . Relocation of building occupants . Rehabilitation of structures . Special assessments . Other costs allowed by statute APPLICATION PROCEDURE 1. The applicant should meet with appropriate staff and consultants to discuss the scope of the project, public assistance being requested, time schedule and other pertinent information. 2. The applicant should complete a Tax Increment Financing application and submit this to the Planning Department. 3. The application will be reviewed by City staff and their consultants for feasibility and compliance with the criteria. The staffwill prepare a report on the project. 4. The application will be placed on the EDA agenda for its review. The applicant may make a presentation and the staff will prepare a staff report with preliminary findings. 5. If the EDAs preliminary review is positive, the applicant can make final application for assistance. This shall be accompanied by the $2,000 application fee, a completed But-For worksheet and a $5,000 application deposit. 6. If zoning approvals are required, the applicant should file the applications at this time. 7. Following final analysis of the submitted materials, the EDA and City Council will receive a report with staff recommendations for final action. If approved, staff will prepare a Development or Redevelopment Agreement as appropriate between the City and the developer. 8. Any zoning or other land use approvals required shall be completed prior to final consideration of the developers agreement. NOV-04-1997 16:08 FROM ADVANCE INC. TO PR IOR LAKE-C ITY P.02 OUTLINE FOR PROPOSAL TO PRIOR LAKE, MN Company description Including product or service, history, legal structure, ownership and subsidiaries Management (brief resumes). include all owners and key emplcyees Marketing strategy including description of the industry, major customers and suppliers, competition, prospective customers, mari(sting activities and sales activities Financial data including banking contact, accountant, attomey, personal financial statements of owners, historical financial statements of business (three years balance sheet ~nd pro1i't and less statements), interim financial statements and 24 month cash flow projection Description at project including project costs (land, site preparation, building construction, soft costs); tne project costs should be based upon written bids or estimates from an:hiteds/contractors Anticipated sources of 1inancing to complete the project including equity contribution, bank loans (please include bank commitment letter) and any other sources oftinancing including public funds requested Project impacts, please provide information regarding estimated number of jobs to be created/retained, estimated annual payroll, and anticipated increase in local tax base as a result of development. NOV-04-1997 16:09 FROM ADVANCE INC. TO PRIOR LAKE-CITY P.03 The following information is presented as suggested guidelines for the BRA to ActlJal consider the use of public funds to assist in private development projects. Project Impacts Project Meets Threshold + - , . Maximum public dollars invested to jobs/created/retained ratio $10,000:1. 2. Maximum HRA investment to other dolla~ leveraged will not exceed 1 :1.5 and public financing will only be made available if loeallenders are unable/un willing to meet all of the developers financing needs. 3. Minimum assessed valuation increase on land to be developed/redeveloped must: be 100% ...2! capital costs must exceed $250,000; or prENention/elimination of blight will n:lsult from project. 4. Businesses should have a history of stable or rising sales. 5. Detailed business plan depicting marXeting strategies, cash flow statements and ability to finance projected growth for a :3 year period. 6. Loans will not be made available for working capital requirements. 7. Cash flow coverage for the entire project meets or exceeds 1.2: 1. a. Priority consideration will be given to projects in the following categories: - Value added manufadurers who will emplOY skilled workers with wages above 50% or the median income ($17,500) - Companies seeking to construct facilities which will significantly enhance the aesthetics and image of the community. - Local companies seeking to expand operations - Expanding companies which will enhance the economic viability of existing local businesses. - Companies/developments which maximize land use density (facility coverage equal to or exceeding 25% land ar9B. 9. Reduced consideration will be given to projects in the following categories: - Companies with low ratios of employees/facility size (e.g. warehouse operations) . - Projects that will not enhance the aesthetics/image of the community (additional freight operations, waste storage, etc.) - Companies that pay wages below 35% median income ($12,.500) DEVELOPMENT GUIDELINES TOTPL P,0= OCT-29-97 WED 09:19 CITY SLP 2ND FLR FAX NO. 6129242663 P. 11 EXHIBIT B TAX INCREMENT FINANCING PROPOSAL , GradinE: and Reoort Card iBusiness and Commercial Redevelopment 1. Ratio ofP.-ivate to Public Investment in Project: Grade: s S $ Private Investment Iil' !Public Investment Ratio ofPrivateIPublic Financing Private FundsrrIF $5:1 A 4:1 B 3:1 C 2:1 D Below 2: 1 f 2. New job cTl"..ation in the City: Grade: _ New Ernpi-oyees in St. Louis Park as a Result of Project 50+ A 25+ B 15+ C Less than 15 D NR F 3. R:1tio of City financing to new jobs cre:1ted: Grade:_ $ TIT Request New jobs TIF/job S8,OOO or less per job $10,000 or less per job $12,000 or less per j ob $15,000 or less per job More than $15,000 A B C D F s OCT-29-97 WED 09:20 CITY SLP 2ND FLR FAX NO. 6129242663 4. Pay Level pf Jobs ~): Pay Range $45,OOO/yr or mor~ $35,OOO/yr or more $30,000/yr or mor'e $20,OOO/yr or more Less than $20,000 Total : # of Employees in range Total Wages $ (FTE) # of employees 5. Increase in Real Esute Value= Value of site after redevelopment Vaine of site before redevelopment Ratio of value before/after redevelopment Bonus points (5 'l?oints total) The Project adds value to the neighborhood and/or incorporates princip:lls of livable communities: . The developer is proposing pay as you go financing: Grade: Total wages Grade A B C D F = Average wage $ Grade:_ Before/After Redevelopment 1:5 A 1:4 B 1:3 C 1:2 D 1:1.5 F 2 point 1 points . The proposed projec:t wi]) redevelop a previously cont~rninated or environme~tally challenged site: . Mixed use project bonus: TOTAL BONUS' POINTS AVAILABLE 2 points 2 points 7 points P. 12 : OCT-29-97 WED 09:20 CITY SLP 2ND FLR FAX NO. 6129242663 p, 15 . PROJECT REPORT CARD Business/Commercial and Housing Projects Question' 1. 2, 3. 4, 5, Bonus Points TOTAL POINTS Grade Points '. /5 GPA 9193:0A A Excellent 5 B Very Good - 4 C Average - 3 D Below Average - 2 F Fail - 1 : -, ,...... . ~ .-.. MEMO TO: FROM: EDA MEMBERS DON RYE, PLANNING DIRECTOR DATE: NOVEMBER 12, 1997 The actual documents referred to in the attached letter from Roger Guenette will be mailed when available - hopefully by Friday. Project 2: Anthony Shanks (NBC Products, Inc.), legal name Anthony Shanks. Legal description of the property to be acquired is as follows: Tax Increment Financing District No. 2-6 Modification is described as follows: That part of Lot 1, Block 2, WATERFRONT PASSAGE ADDITION, Scott County, Minnesota described as follows: Commencing at the most easterly corner of said Lot 1; thence continuing South 33 degrees 45 minutes 56 seconds West a distance of 36.31 feet; thence South 14 degrees 15 minutes 56 seconds West a distance of 75.00 feet; thence South 48 degrees 45 minutes 56 seconds West a distance of 87.00 feet; thence South 75 degrees 45 minutes 56 seconds West a distance of 185.99 feet to the intersection with the west line of said Lot 1; thence northwesterly along said west line, to the intersection with a line bearing North 89 degrees 25 minutes 19 seconds West from the point of beginning; thence South 89 degrees 25 minutes 19 seconds East a distance of 361.36 feet to the point of beginning. I do not know the exact acreage of the property, but have estimated it at 1.01 acres or 43,996 Sq. Ft.; consequently, the proposed purchase price and terms are as follows: $ 7,500 Down Payment due by 12/31197 36,496 Due by 3/31198 $43,996 TOTAL Upon completion of a survey the final payment may be adjusted to reflect a payment equal to $l/SF. The tax increment financing plan modification and development agreement will stipulate an approximate 14,000 sq. ft. building expansion to be completed by 12/31/98. There will be a guarantee of payment provision for TIF District 2-6 modification equal to $45,250/year beginning in year 2000 through 2005 relating to the building addition. The developer will be entitled to a rebate of up to $7,500/year in years 2002 through 2005, if the guaranteed payment is exceeded by tax increment receipts. Project 3: Jeff Wallis (real estate developer), legal name Mondo Management L.L.C. and Amcon Construction Company. Legal description of property to be optioned is as follows: Lots 6 and 7, Block 2, Preliminary Plat, WATERFRONT PASSAGE ADDITION, Scott County, Prior Lake, Minnesota. Approximately 4.5 acres. This description will need to be firmed up following a property survey. The terms of the proposed option are outlined in the enclosed letter to Bob Barsness dated October 16, 1997. The final purchase price will be set at $l/SF with total cost to be determined after the survey has been completed. 2 Additional terms include: Agreement by the City to mitigate wetlands at an estimated cost of $20,000 - $30,000. Forfeiture of the option and penalty payment if construction of a minimum 25,000 sq. ft. facility does not commence by December 31, 1998. Personal guarantee or other acceptable security of developers to make penalty payment if project does not begin within identified timeframe. The plan for TIF District 2-9 and related development agreement will stipulate a minimum payment guarantee of $40,000/year in years 2000 through 2008 if the tax increment receipts are less than that amount. If the developers construct a Phase II expansion and TIF revenues increase above $40,000/year the developers will receive a pay-as-you-go rebate on a 1:1 pro rata sharing with the City up to a maximum rebate of $100,000. Please call me if you have any questions. Sincerely, ~~ Development Consultant RG/ko encl. cc: Don Rye, City of Prior Lake 3 OCT-30-1997 10:44 FROM ADVANCE INC. TO [12] PRIOR LAKE-CITY P.02 J ... DYANC- TO: Prior Lake EDA FROM: Roger Guenette DATE: October 30, 1997 RE: Development Incentives In South Suburban Communities 1 have contacted several communities in the south Metro area to ascertain their policies for utilizing TIF in support of commereiallindustrial development. Following is a summary of the information they provided.: . LakeviUe __ The City owns an 80 acre industrial park with approximately 20 acres remaining for sale. The Cirts investment in land and infrastructure is approximately $l/SF. Projects are reviewed on an individual basis to determine conformity with the development objectives. If the City supports the project, the property is conveyed for a total cost of $1. . Farmington __ The City owns a 40 acre industrial park with plans to expand in the future. The development cost to the City is Sl.10/SF. Projects are reviewed on a case by case basis. The City sells the property for $1/SF and then uses TIF revenues to reimburse the land sale proceeds and a portion of the developers cost for site improvements including e~vation, grading and parking. . Rosemount _ The City owns an 80 acre park that was developed at a cost of SloSS/SF; the cost includes land. utilities and park dedication fees. Projects are reviewed on a case by case basis. Two transactions have occurred thus far. The first sale was a 10 acre parcel that was conveyed for a total of $1. A second transaction involved a 6 acre parcel (2.3 acres developable) that was conveyed for $ .44/SF. Based upon a review of this information, I believe that the present policies of conveying property for $lISF and providing pay-as-you-go rebate are both competitive and aggressive. Business Flnence end Economic Development Speclellsts CORPORATE OFFIGS' PO. Box 32609 Mpls.. MN 55432-0609 Phone: ((,)12) 755-5393 Fox: (612) 755-7741 P,O. Box 30:;;7 Monko1'o, MN 56002-3027 Phone: (507) 387-7117 Fax: (507) 387-6115 TOTAL P.02 ~. .,..>:....~..._............~_._..._,.",~. ,,,_. ._ _' _.__".,....._,..... >n__.._ ' Economic Development Authority Commissioners President Bob Barsness 5400 Fairlawn Shores Trail SE Prior Lake, MN 55372 Ph: (h) 447-4422 (w) 447-2101 Term Expires: 12/31/2002 Treasurer Dick U nderferth 14369 Rutgers Street NE Prior Lake, MN 55372 Ph: (h) 445-6498 (w) 496-2125 x227 Term Expires 12/31/2001 Vice President Michael J. Gresser 15871 Island View Road Prior Lake, MN 55372 Ph: (h)440-7165 (w)817 -4582 Term Expires: 12/31/2000 Commissioner Tom Kedrowski 14770 Maple Trail SE Prior Lake, N 55372 Ph: (h) 447-8344 (w) 851-1616 Term Expires 12/31/99 Commissioner Pete Schenck 6626 Rustic Road SE Prior Lake, MN 55372 Ph: (h) 440-4118 Term Expires: 12/31/1998 Executive Director Frank Boyles 16200 Eagle Creek Avenue SE Prior Lake, MN 55372 Ph: (h) 447-5164 (w) 447-4230 I:\EDA\FDACOM.DOC _..._....'...".....~....~r--.~'::.:.. -'-' - "-. ~...