HomeMy WebLinkAbout8A - Tax Increment Financing
PRIOR LAKE ECONOMIC DEVELOPMENT AUTHORITY
STAFF AGENDA REPORT
AGENDA #:
PREPARED BY:
SUBJECT:
DATE:
8A
DONALD RYE, PLANNING DIRECTOR
CONSIDER DEVELOPMENT OF TAX
FINANCING POLICY
NOVEMBER 3, 1997
INCREMENT
INTRODUCTION:
President Barsness has asked that the EDA consider the
development of a policy and criteria for the use of tax
increment financing before consideration of agenda items 8b
and 8c.
DISCUSSION:
Staff has contacted several communities to determine what
their policies and criteria are with regard to the use of TIP.
Copies of these policies are attached to this report Each
community has taken a slightly different approach from the
others, but generally the criteria contain elements of
similarity.
Basic criteria include compliance with the City's
Comprehensive Plan and zoning ordinances, maximum levels
of City support, job creation standards, job quality expressed
in terms of both industry type and wage levels and assistance
to local companies as opposed to those from outside the City.
ISSUES:
There are several issues the EDA needs to address in
developing a policy and criteria for the use of TIP. These
include:
. What specific criteria should be used? Examples include
job creation, wage levels, maximum debt ratios,
. What level of public assistance should be provided?
. What are the payback provisions which should be
utilized?
. Should the City/EDA charge a processing fee?
. What should be done with excess TIP revenues?
. Should the increment be guaranteed?
. What other impacts should be considered? Examples
might include increased service costs resulting from a
8AII0397.DOC 1
16200 E~e Creek Ave. S.L Prior Lake. Minnesota 55372-1714 / Ph. (612) 447-4230 / Fax (612) 447-4245
AN EQUAL OPPORTUNITY EMPLOYER
development, number of new residents in the community,
energy conservation and so forth.
It is suggested that the EDA members review these policies
and criteria and determine how the EDA would like to
proceed. One possibility is to develop some general guidelines
while another would be to develop definitive criteria which
would be strictly followed. One of the policies contained a
note to the effect that there are always subjective
considerations which enter a decision whether to provide
assistance to a project and in some cases, it may not be
possible to follow the policy and criteria to the letter.
RECOMMENDATIO It is recommended that the EDA direct staff to develop a
N: policy and criteria to be applied in the evaluation of requests
for Tax Increment Pinancing
ACTION REQUIRED: Motion
8AII0397.DOC
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OCT-23-1997 23:30
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Industrial Tax Increment Financing Program.
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PRO=DESC~TIO ~~. ~ n , /',
· t- Tax Increment Financin (TIF) is an economic dcwelop t tool whereby districts are .J~\~
V QlI established for development or redevelopment and the increased property tax revenues, or ~\J oJ ·
l>" increment. generated by the improvements is captured to pay back the bond debt or other y ~ 1
~- financing provided for the project up front. TIF is useful for the attraction and retention ot tI.
.......'\ of businesses by the City of Shakopee. The fundamental principle which makes Tax t
'" ~ "Increment Financing viable is that it is designed to encourage development which would " "\
~~ ~ not otherwise occur. The Shakopee Economic Development Authority shall consider TIF
~ I &~ in cases that serve to accomplish the City's economic development goals. and to assist
& J)" projects that would not occur "but for" the assistance provided throus. h Tax Increment
\"fJ' Financing. TIF may be used in cases where extraordinary site preparation or infrastruct
costs impede development from occurring without assistance. .5~""'e,..4.+-, a"", t ~"'l ~
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PROGRAM GO
..~ 1. To promot dustrial development that would not otherwise occur.
fft>- ~2. To promole"d~~.llthat will build a strong industrial 1lD< base for Ihe
~ \\t~' \4b 3. City of Shakopee.
To improve the community's economic vitality through the creation and ex anslOn
~~ ~ industrial employment opportunities. tC. ~ IN , ,>>
\'I K V 4. To assure that projects developed in industrial districts are constructed and ':(
C; maintained with quality consistent wilh the goalsbfthe City of Shakopee. ~,,'i
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~ PROGRAM ELIGmn.I:rV C~RIA: ~ iJ> V Y
~ 9~a1ifi~industrial projects (app~cants) must meet or exceed the following criteria to be \ () ~
- elIgible or TIF assistance. Meeting the threshold of eligibility does not mean automatic \):
approval for the applicant. Final approval of industrial development assistance shall be ~.
made by the Shakopee Economic Development Authority and City Council. The applicant \1>
must complete an Application for Industrial TIF Assistance as one measure of project
eligibility.
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A The project must be located in ~al..... AU I 1 (t,161.L I. Lj.:l!l. .1) ~. I-k ~neavy ~Hdw~l. f)
zoning district. ~ ~~,. riJ.e- :#
B. The project must be consistent with the City's Comprehensive Plan. 4 (0 d"frr I
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OCT-23-1997 23:31
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E. The project must be consistent with environmental regulations and not create an
environmental hardship for the community.
F. The applicant must be willing to enter into a Developer's Agreement approved by the
City.
G. The applicant should at all times retain and be assisted by qualified financial
consultants andlor underwriters~ and by legal counsel.
H. Construction of the project shall not commence until the City has given preliminary
approval to the application for financing.
1. The City reserves the right to select a third party administrator/consultant to assist in
the review and project development process.
J. The applicant must submit preliminary plans of the project and evidence of ability to
finance the project.
K. The applicant must provide security to the City to cover all costs paid by tax
increment, unless the TIF plan is a "pay as you go" agreement.
L. The City reserves the right to deny any application for financing for any reason at any
stage of the proceedings prior to adoption of the final approval authorizing the
issuance of bonds.
"\ M. The developer will provide a minimum of 10% owner and/or developer equity in the
\..
project.
The City reserves the right to deny projects which substantially comply with the eligibility
criteria, but which fail to have a significant positive impact on the community or to
accomplish the City's economic development goals as determined by the Economic
Development Authority and City Council. The City reserves the right to consider and
approve projects which substantially comply with the eligibility criteria. as set forth in the
program providing other tangential items such as building materials. building quality. etc.,
meet or exceed minimum standards and have, in the Council's judgment, a signific:ant
positive impact on the community and have accomplished the City's economic
development goals.
OCT-23-1997 23:31
612 445 6718 P.05/13
S:OSTS ELIGIBLE FOR TAX INCREMENT FINANCING ASSISTANCE:
Project costs qualifying for TIP assistance, as defined under the :MiMesota TJF Act,
include the following:
1. Acquisition of property
2. Clearing ofland
3. Relocation and demolition of existing structures
4. Site preparation
5. Soils correction
6. Removal of hazardous waste or pollution
7. Installation of utilities
8. Construction of public Of private improvements
9. Administrative costs directly related to the parcels identified
10. Other similar activities
\
APPLICATION PROCESS:
The applicant shall make an application for industrial TIF assistance on forms available
:from the City, and shall provide other information as requested by the City.
1. City staff or the City's agent shall review the application materials and make
preliminary recorrunendations to the Shakopee Economic Development Authority and
City Council as to compliance ofthe application and proposed project 'With City goals
and eligibility criteria.
2. Final evaluation of the application shall include, in addition to items subject to
preliminary review; a review of applicable credit analysis, credit enhancement and legal
compliance. A formal recommendation shall then be made to the Economic
Development Authority and the City Council.
3. After a review of the formal evaluation, the Shakopee Economic Development
Authority and City Council shall consider final approval of the use of TIP assistance
and hold the appropriate public hearings.
4. All applications and supporting materials and documents shall become the property of
the City.
OCT.27.1997 11:52RM
HOPKINS CITY HRLL
NO.667
P.1/7
CITY OF HOPKINS
TAX. :INCREMENT POLICY
I. PURPOSE
1.01 The purpose of this policy is to establish the City's position as relates to the use of Tax
Inaement Financing for private development. This policy shall be used as a guide in
processing and reviewing applications requesting Tax Increment assistance.
1.02 The City shall have the option of amending or waiving sections of this policy when
determined necessaty Of appropriate.
2. STATUTORY LIMITATIONS
2.01 In accordanoe with the Tax Increment Policy. TlF requests must comply with
applicable state statutes. The City of Hopkins i:; governed by the limitations
established in Minnesota Statutes 469.174, the Minnesota Tax Increment Financing
Act. for all districts created after August 1, 1979.
3. ELIGIBLE USES FOR THE USE OF TAX INCREMENT FINANCING
3.01 As a matter of adopted policy, the City of Hopkins '-Vill consider using Tax Increment
Financing (TIF) to assist private developments only in those circumstances in which
the proposed private projects meet one or more of the following uses.
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A. To redevelop blighted or underutilized areas of the community.
B. To meet the following housing.re1ated uses.
1. To provide a diversity of housing adjacent to the Hopkins downtown area.
2. To provide a variety of housing ownership alternatives and housing
choices. '
3. To promote affordable housing for low or moderate income individuals.
4. To promote neighborhood stabilization and revitalization by the removal of
blight and the upgrading in existing housing stock in residential areas.
.C. To remove blight and encourage redevelopment in the commercial and industrial
areas oftbe City in order to encourage high levels of property maintenance and
private reinvestment in those areas. A&. J .
D. 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 the reliance 00
residential property t
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HOPKINS CITY HALL
NO. 557
P.2/7
E. To retain local jobs, increase the local job base. and provide diversity in that job
base.
F. To increase the local business and industrial ~rket potential of the City of
Hopkins.
G. To provide adequate short~tenn business and shopper parking and resident
parking.
H. To encourage additional unsubsidized private development in the area. either
directly or through secondary "spin-off' development.
1. To promote the potential tuture usage of a public transit system light rai11ine
through maximizing the development potential of parcels adjacent to the system
stations.
J. To offset increased oosts of redevelopment over and above those costs that a
developer would incur in nonnal urban and suburban development.
K. To accelerate the development process and achieve development on sites which
would not be developed without this assistance.
L. To meet other uses of public policy. as adopted by the Council from time to time,
including promotion of quality urban design, quality architectural design, energy
conservation, decreasing the capital and operating costs of local government. etc.
4. TAX INCREMENT PROJECT APPROVAL CRITERIA
4,01 All new projects approved by the City of Hopkins should meet the following
mandatory minimum approval criteria. However. it should not be presumed that a
project meeting these criteria will automatically be approved. Meeting these criteria
creates no contractual rights on the part of any potential developer.
A. The TIF assistance shall be provided within applicable state legislative restrictions.
debt limit guidelines, and other appropriate financial requirements and policies.
B. The project should meet one or more ofthe above adopted Tax Increment
Financing Goals of the City.
C. The project must be in accord 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 approval.
D. TIP assistance will not be provided to projects that have the financial feasibility to
proceed without the benefit of Tax Increment Financing. In effect, TIF assistance
will not be provided solely to broaden a developer's profit margins on a project.
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NO.66?
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Prior to consideration of a TIF assistance request. the City may undertake an
independent underwriting of the project to help ensure that the request for
assistance is valid. .
E. Prior to ~pproval of a TIF plan" the developer shall provide any required market
and financial feasibility stuc!ie:i, appraisals, soil boring, information pro:vided to
private lenders for the project. and other information or data that the City or its
financial consultants may require in order to proceed with an independent
undeIWriting.
F. To ensure cash fIow$ are adequate, projects receiving TIF assistance should
nonnally have a 1.2: 1 debt service coverage ratio (a ratio offunds projected to be
available to funds required for debt service).
G. The developer should provide adequilte :financial guarantees to ensure the
repaYU1ent of the TIF subsidy. These may include. but are not limited to:
assessment agreements, letters of credit. etc.
H. Any developer requesting TJF assistance should be able to demonstrate past
successful general development capability as well as specific capability in the type
and size of development proposed.
1. The developer should retain ownership of the project at least long enough to
complete it, to stabilize its occupancy, to establish the project management, and to
initiate repayment of the TIP.
1. The level of T~ funding should be reduced to the lowest possible level by
maximizing the use of private debt and equity financing first. and then using other
funding sources or income producing vehicles that can be structured into the
project financing. prior to using additional Tn' funding,
5. TAX INCREMENT PROJECT BV ALUATION CRITERIA
5.01 All projects will be evaluated on the following criteria for comparison with other
proposed TIF projects reviewed by the City. and for comparison with other subsidy
standards (where appropriate). It is realized that changes in local markets and costs of
construction and interest rates may cause changes in the amount of Tax Increment
subsidies that a given project may require at any given time.
5.02 Some criteria, by their very nature, must remain subjective, However, wherever
possible, benchmark criteria have been established for review purposes. . The fact that
a given proposal meers one or more benchmlU'k criteria does not mean that it is
entitled to funding under this policy, but rather that the City is in a position to proceed
with evaluations of (and comparisons between) various TIF proposals. using uniform
standards whenever possible.
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OCT.2?199~11:53RM
HOPKINS CITY HRLL
5.03 Following are the evaluation criteria that will be used by the City of Hopkins.
A. All TIF proposals should bptimize the private development potential of a site.
All TIF proposols should obtain the highest pOSSlble private-la-public financial
inve$lXI1ent ratio. The Council establishes a bencbrn3fk ratio of ee parts private
to one part public funding fur indU$lrial projects. . etaiVcommercW
projects shall be reviewed on an individual basis. '
C. All TIF proposals should create the highest feas1ble nurober ofncw jobs on the
site. The Council ejllablishes a bencbmBrl< of one newly created (or retained) FTE
job per $10,000 ofTIF assistanC" provided to industrial projects. Housing and
retail/commercial projects shall be reviewed on an individual basis.
D. All TIF proposols should create the highest possible ratio of property taxes paid
before and after redevelopment. Given the different ..sessrnent c\rcUmSlances in
the City, this ratio will-vatY widely. HoVIever, under nonnal circumstances, the
council will ex;pect at least a 1'.2 ratio of taxes paid before and after
redevelopment.
E. TIF proposals should nonnal1y not be used to support speculative industrial,
coromercie1. and office projects. In general. speculative projects are defined as
those projects whicb haVe letters ofinteDl or pre1easing for less than SO percent of
the space available for lease.
F. All TIF proposals will he reviewed to determine the feasibility to provide the City
with equity participation in new developments (through a share of the profits), or
to treat the TIE" assistance as a second mongage with fix.ed payments.
G. All TIF proposals involving displacement oflow and moderate jocome residents
should gIve specific attention to the re-housing needs of those residents.
Normally, this should be done as part of the TIP funding proposaL Adequate
solutions to these re-housing needs will be required as a matter ofpublic policy.
H. TIF will nonne1ly oat be used in a project that involves an 'l<cessive land and/or
property price. This will normally be where the acquisition price is more than 10
percent in excess of tnarket value.
I. All TIP projects will need to meet the "but lOr" test. TlF win not be used uoles.
the need fOf the City's economic participation is sufiicient that without that
assistance the project could not proceed in the manner as proposed.
J. TIF will not be used in projects !bat would givo a significlUlt competitive fioancial
advantage over similar projects in the area due to the use of tax increment
subsidie~.
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HOPKINS CITY HALL
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K. TIF will not be used when the developer's credentials, in the judgment of the City,
are inadequate due to past track record relating to: completion of projects. general
reputation and/or bankruptcy. or other problems or issues considered relevant by
the City.
L. A developer using TIF will need to provide a financial guarantee for the repayment
of the TIP within the constraint, of existing tax law.
M TIF will not be used to support projects that place demands on City services, Of
other capital or operating expenditures, tha.t exceed the average City expenditures
for similar facilities. Consideration will be given to the total public costs that are
required to support the project, including off-site facilities costs that are required,
N. TIF will not normally be used for projects that would generate significant
environmental problems in the opinion of the local, state. or federal governments.
O. TIF will not be used when the schedule for development has exceeded the schedule
established in the redevelopment agreement. and where the City has not agreed to
extensions of that schedule.
p, TIP funding should not be provided to those projects that fail to meet good public
policy criteria as determined by the Council, including: poor project quality;
projects that are not in accord with the Comprehensive Plan, zoning,
redevelopment plans. and City policies; projects that provide no significant
improvement to surrounding land use~, the neighborhood, and/or the City; projects
that do not provide a significant increase in tax base; projects that do not have
significant new. or retained, employment; projects that do not meet financial
feasibility criteria established by-the City; and projects that do not provide the
highest and best desired use for the property.
'llPPO\.CY
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The City of Rochester and Rochester Area Economic Development, Inc. (RAEDI)
Procedures and Guidelines for Business Financial Assistance
The City of Rochester and Rochester Area Economic Development. Inc. (RAEDI) are working
together in order to encourage the diversification and growth of the Rochester area economy. In
order to encourage business expansions and locations. the City and RAEDI will, at times and as
resources allow. participate in the financing of various business projects. The City of Rochester
and RAEDI have adopted the following guidelines and procedures which relate to the providing
of business financial assistance:
A. Business Elie:ibilitv
The following guidelines are used to determine a business's eligibility for financial assistance:
1. A minimum of25 jobs must be created and/or retained at an average wage of$8 per
hour or more excluding the cost of benefits
2. The business must be located within the City of Rochester
3. The business must qualify as a "basic" business (basic businesses are defined
as manufacturing, wholesale. or service sector businesses that sell 60% or more of their
products. goods, or services to customers residing outside of Olmsted County)
4. Retail businesses for these purposes are considered "non-basic" and therefore, as a
rule. are ineligible for financial assistance except for circumstances when specific
financial assistance programs are created that apply to these businesses
B. Businesses Information Needed
Businesses seeking to take advantage of RAEDI and/or City financial assistance shall provide the
following information:
1. An estimate of the number of jobs to be created and retained as well as the number of
jobs the business is willing to guarantee that it will create over a specified time period
2. The annual amount of new payroll created (exclusive of fringe benefits)
3. The annual amount spent on the provision of fringe benefits
4. The annual amount spent locally on purchases of goods and services
5. The amount of new property taxes generated
6. The total cost of the project and proposed sources of financing
7. A description of the project building plans (type of building to be constructed. square
footage, etc.); submission of design when completed
8. Submission of a current business plan and/or a description of the project as well as
current, projected. and historical copies of financial statements. This information will
not be subject to public disclosure but will be used by RAEDI to assess the general
financial condition of the firm. Ifafter review. the business wishes to further pursue
the availability of city financial assistance. RAEDI will provide city officials with a
report of the firm's current and projected financial condition
C. Determination of Economic Benefit
Upon the business's submission of information, RAEDI will prepare a preliminary pro forma
statem~nt outlining the economic benefits of the proposed project. Projects which meet all or
most the following return on investment goals will be considered for negotiation of formal and
binding development agreements:
1. A cost not to exceed $5.000 per job over the life of the project which shall not
exceed ten years
2. Upon completion, the project must return at least $25 of new income through
additional payroll dollars and purchases oflocal goods and services for every dollar of
community funds invested
3. A private investment ratio of at least $6 for every community dollar invested in
building and equipment
4. A community marginal investment not to exceed 8% of total project
D. Develooment A2:reement
The terms and conditions of any financial assistance package shall be stated in writing in the form
of a legally binding development agreement. This agreement will detail the specific performance
obligations of the business, the City of Rochester, and/or RAEDL Businesses should be aware
that these agreements will contain terms that penalize the business for not meeting their job and/or
investment obligations.
Section 3: Industrial Development Support Criteria (rOSC)
Industrial Eliqibilitv: In order to expand the industrial base of Olmsted
County, industrial development support should initially be available to all
industrial uses which are planned for in Olmsted County and its municipal-
ities. This should include service industries which may desire to locate in
areas planned or zoned for intensive business activity. Because no two
industrial activities or developments are alike each opportunity to expand the
area's industrial base will have to be reviewed individually against criteria
structured to evaluate the financial, and locational criteria which are
outlinedbelnw
~: The overall approach to determining the level of financial support
equired by a particular project requires close review of the financial
components of the project. Under certain conditions financial support may be
required to offset a financing or market gap in the proposed project. Under
other conditions financial support may be required to enhance a project and
cause the project to be located in the selected area. Both gap financing and
project enhancement financing require a full review of the proposed project.
Criteria to evaluate a project's required level of financial support is still
volving, but can be generally looked at as either a ratio of public financial
support to private investment or a ratio of public dollars invested to the
number of jobs created. .M.inimum stanrl:IIl"~i '.ffel:ll~ ho :l~ ~nl'nl.,... .
One full time e~ployment opportunity of a permanent nature for each
fifteen thousand dollars ($15,000.) of public investment.
. One dollar of public investment for every five dollars of private
investment in fixed assets not including moveable equipment and
start up operational capital.
Employment to public financial support ratios may be varied according to a
schedule of values which may allow for more consideration of a project and a
ratio lower than $15,000 to 1 if the positions created are highly skilled and
highly paid. A base ratio of $15,000 to 1 should be employed if the jobs to
be created are minimum wage and are unskilled positions.
Financial support ratios should not be viewed as static determinants of a
project. Ratios of 5 to 1 should be considered as a bare minimum with a
higher ratio of 8 to 1 or 10 to 1 as m~re ~ccept~ble frem a financial support
perspective. The above statement is based on experience gained by the United
States Department of Housing and Urban Development in administering its Urban
Development Action Grant program. A financial analysis of the project that
shoul d be completed to determi ne the fi na 1 rat i 0 of monetary support to
private investment should include the review of the following project cash
flow components:
. Potential Rental Income (if not owner occupied)
. Adjusted Gross Income of Project (Building)
. Net Operating Income
- of Parent Corporation, or
- of Project Or Building
. Equity and Debt ratios
. Before and After Tax Flows
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CITY OF LAKEVILLE
TAX INCREMENT FINANCING POLICY
POLICY PURPOSE
..
The purpose of this policy is to provide direction for developers
seeking tax increment financing assistance from the City of Lakeville.
POLICY GOALS AND OBJECTIVES
1. To acquire blighted areas and other real property for the purpose of
removing. preventing or reducing blight. blighting factors or the
causes of blight.
2. To acquire open or undeveloped land ~hich is determined to be
blighted by virtue of conditions yhich have prevented normal
development of the land by private enterprise and have resulted in a
stagnant and unproductive condition of the land.
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3. To acquire land or .space ~hich is vacant. unused. underused or
inappropriately used.
4. To clear any areas acquired and install~ construct or reconstruct
streets. utilities. and site improvements.
5. To provide housing for persons of lo~ and moderate income.
6. To provide housing for senior citizens.
7. To provide assistance for projects that have no other financing
alternatives available.
8. To provide assistance for projects chat substantially increase the
tax base of the City.
9. To provide 'assistance for projects that provide full time equivalent
employment opportunities.
10. To provide assistance for projects vhich provide especially needed
services or demonstrate other, long term benefits to'che City.
11. To promote development so as to maintain viable business districts-
12. The proposed development or redevelopment ~ould not reasonably be
expected to occur solely through private investment Yithin the
reasonably foreseeable future.
The proposed project must be consistent vith the City's
Comprehensive Plan, anc zoning and subdivision ordinances.
POLICY STATEMENT
1. Tax increment financing will be. used for economic development.
redevelopment or housing projects deemed by the City Council to be
of special significance in achieving City goals and objectives.
2. Tax increment financing can be used for all purposes authorized by
Minnesota Statutes, i.e. land acquisition, land write-down, site
improvements, public improvements. demolition. soil correction. the
removal of hazardous substances, commercial rehabilitation and
interest reduction programs for low and moderate income housing.
3. The market value of all parcels of property in all tax increment
districts within the City of Lakeville shall not exceed 15 percent
of the market value of private property in the City as established
by the Dakota County Assessor. The City Council reserves the right
to modify this percentage guideline based upon a requested analysis
of the total market value of property contained wi~hin all tax
increment districts.
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4. No tax increment financing request will be processed without a pro
forma demonstration of need. City staff will not begin work on the
evaluation of any requests for which direct subsidy to a developer
exceeds 25% of the project's proposed market value unless the City
Council specifically authorizes preliminary approval of a project
exceeding that level.
5. ~en bonding is required to complete a tax increment project,
the City Council will be the final arbiter of security requirements
which might include. but not be limited to, a development agreement.
an assessment agreement. letters of credit, insurance. cash
deposits. performance bonds and personal guarantees by project
participants.
6. Tax increment financing will be used to promote development projects
within the Metropolitan Urban Service Area (MUSA).
7. The initial processing of a tax increment financing request shall
include a fiscal dispa=i~ies evalua~ion so ~hat a decision can be
made early on by the City Council as to whether the fiscal
disparities portion must be paid from the district or the community
at large.
8. Persons requesting tax increment financing for a project must submit
an application. An initial deposit of S5,OOO will be required to
offset City processing costs. such as review by legal counsel. bond
counsel, fiscal agent. tax increment specialist and other necessary
consultants. unless the City determines that a smaller cost will
suffice for a particular project. This will provide for initial
City review. Upon completion of the initial review. a determination
will be made by the City Council on whether processing costs will be
paid directly by the developer of the project or from the p_oceeds
of the tax increment district. Applicable fees related to planning,
engineering and administration for revieu of a development project
are the responsibility of the developer as per City policy.
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LAKEVILLE PROCEDURE
If this project deals with low and moderate income housing and downtowu
redevelopment. it must be submitted to the Dakota County HRA.
The following procedure will be utilized in reviewing tax increment
financing proposals:
1. A written request with adequate support data shall be submitted to
the City Administrator and Community Development Director by the
person or firm requesting the City to utilize its tax increment
financing capacity.
2. Upon submission to the City Administrator and Community Development
Director. the request shall be reviewed by City staff on a
preliminary basis, to determine whether the proposal appears to be
feasible.
3. The City will refer the developer's estimate of market value and tax
increment to the County Assessor for verification of projected
values at completion of the project. and also require the develo~er
to submit any detail of the proposed project as might be required
by the County assessor to make that evaluation.
4. The request and accompanying supportive financial data shall be
forwarded to the Economic Development Commission for a
recommendation to the City Council.
5. The request will then be.forwarded to the Planning Commission for
recommendation to the City Council.
6. Based on the City Council's preliminary review. the applicant may
proceed to file a formal application. accompanied by a deposit of
$5.000. In addition. the applicant must agree to assume all direct
costs to the City for its analysis and evaluation of the request.
7. Upon the filing of a formal application. staff shall proceed to
complete a tax increment financing analysis which shall examine in
detail the proposal's financial viability, benefit to the community,
etc.
8. Upon completion of the tax increment financing analysis, a recommen-
dation will be made to the City Council. Based upon that recommen-
dation, the Council may authorize the staff to commence negotiation
of a development contract.
9. Negotiation of the development contract prepared by the City occurs.
10. Simultaneously with the negotiation of the development contract. a
tax increment financing plan and project plan. if required. will be
prepared by staff. with notification being provided to Dakota County
and the affected school district(s).
- .
11. The City Council will be asked to approve a development contract.
tax increment financing plan and project plan. after public
hearings with published notice for the project have been held.
12. The adopted plans will be filed with Dakota County and the State of
Minnesota.
13. Tax increment bonds are issued or pay-as-you-go contract is
executed.
.'
PROPOSED
RESOLUTION NO.
CITY OF FARMINGTON
DAKOTA COUNTY, MINNESOTA
HOUSING AND REDEVELOPMENT AUTHORITY
RESOLUTION ADOPTING TAX INCREMENT FINANCING
POLICY FOR THE CITY OF FARMINGTON
WHEREAS, Minnesota Statutes, Section's 469.174 through 469.179 (T .I.F. Act). as amended.
authorizes local government authorities to utilize Tax Increment Financing to assist development and
redevelopment of certain parcels within its boundaries.
WHEREAS, the Farmington Housing and Redevelopment Authority (HRA) has five established Tax
Increment Financing (TIF) districts within the City, two adjacent redevelopment districts and three
economic development districts.
WHEREAS, the Farmington Housing and Redevelopment Authority has received applications for Tax
Increment Financing assistance within existing districts.
WHEREAS, the Farmington Housing and Redevelopment Authority has received inquiries and requests
for consideration of creating new Tax Increment Financing districts.
NOW, THEREFORE BE IT RESOLVED, by the Farmington Housing and Redevelopment Authority
that the following policy statement serve as a guideline for use of Tax Increment Financing in the City
of Farmington.
GENERAL POLICY:
While Tax Increment Financing is an important and useful tool in attracting and retaining businesses,
it is essential that it is used appropriately to accomplish the city's economic development goals and
objectives. The fundamental principle which makes Tax Increment Financing viable is that it is designed
to encourage development which would not othen\ise occur. The Farmington Housing and Redevelop-
ment Authority is responsible to assure that the project would not occur "but for" the assistance provided
through Ta'{ Increment Financing.
The Farmington Housing and Redevelopment Authority shall consider Ta'{ Increment Financing in cases
that serve to accomplish the city's targeted goals for economic development as they may change over
time. These goals include projects that would result in the creation of a significant number of household
jobs, and the retention and expansion of business.
PROJECTS ELIGIBLE FOR TAX INCREMENT FINANCING:
Projects eligible for consideration of Tax Increment Financing assistance include, but are not limited
to. office, office/service/warehouse. industrial/manufacturing, office/industrial/corporate head-
quarters and retail (if within an existing tax increment district).
Given the current development patterns within the city, the Farmington Housing and Redevelopment
Authority does intend to participate fmancially in the development of retail commercial projects;
further the Farmington Housing and Redevelopment Authority is generally not in favor of the use of
Tax Increment Financing to subsidize the development of housing. However, the Farmington
Housing and Redevelopment Authority may consider the use of this tool in the future if it becomes
necessary to meet changing goals for the provision of low and moderate income housing or to
provide housing for senior citizens. Such requests will be evaluated on a case by case basis.
COSTS ELIGIBLE FOR TAX INCREMENT FINANCING ASSISTANCE:
Project costs qualifying for Tax Increment Financing assistance include, but are limited to, land and
building acquisition, site preparation. site improvements, soil corrections, and any other costs that
are eligible under the T.I.F. Act.
DETERMINATION OF AMOUNT OF ASSISTANCE TO APPLICANT:
The amount of Tax Increment Financing provided to an applicant will be based on the analysis of,
(A) Fundability Guidelines for Financial Assistance (Attachment "A"), (B) eligible project costs
submitted on the application for Tax Increment financing assistance (Attachment "B"), and (C)
amount of increment generated by the project.
The standard guidelines for assistance is based on a fundability Rating of 16-20 points (Fundable),
and will be 65% of the projects annual increment up to X 8 (years).
The level of assistance provided with 11-15 points (Potentially Fundable) or 20 And Over points
(Highly Fundable) will be evaluated on a case by case basis and may reflect an increase or decrease
in assistance. In addition, evaluation of the subjective information provided may result in adjusting
the amount of assistance provided.
TYPES OF ASSISTANCE:
Tax Increment Financing can be provided in two different forms. One form is "pay as you go"
wherein the Farmington Housing and Redevelopment Authority compensates the applicant for a
predetermined amount for a predetermined number of years. Annual payments are based on
increment generated from the project and issued to the applicant after payment of property taxes by
the applicant. The Farmington Housing and Redevelopment Authority will give special consider-
ation to applicants applying for "pay as you go" assistance.
Another form is "up front" payment to the applicant wherein the Farmington Housing and
Redevelopment Authority must issue revenue or general obligation bonds. The increment generated
from the applicant's project is then used for repayment of the bonds.
APPLICATION FOR TAX INCREMENT FINANCING ASSISTANCE WITIDN EXISTING
DISTRICT:
The Farmington Housing and Redevelopment Authority shall require a deposit in the amount of 10%
up to $10,000, upon receipt of a request from the applicant for the city to investigate the potential for
providing Tax Increment Financing assistance to the applicant. The deposit will be used for
consultant's fees associated with the investigation of the feasibility to provide such fInancial assis-
tance. If the applicant proceeds with the project, and if the work performed by the consultants'
qualifies as administrative expense. the city shall then reimburse the applicant for these costs to the
extent permissible under the T.I.F. Act. If for whatever reason, the applicant does not proceed with
the project, the Farmington Housing and Redevelopment Authority shall reimburse to the applicant
any unused portion of the deposit. It should be noted that if the city incurs additional expenses prior
to the execution of the Developer's Agreement, the city shall notify the applicant in writing and it
will be required to deposit additional funds.
APPLICATION FOR TAX INCREl\'fENT FINANCING ASSISTANCE NECESSITATING
THE CREATION OF A NEW TAX INCREl\'IENT FINANCING DISTRICT:
The Farmington Housing and Redevelopment Authority shall require a deposit in the amount of 10%
up to $10,000, upon receipt of a request from the applicant for the city to investigate the potential for
the creation of a new Tax Increment Financing District. This money will be used for consultant's
fees associated with the investigation of the feasibility of the creation of a new district. If the Hous-
ing and Redevelopment Authority proceeds to establish a new Tax Increment Financing District and
if the work performed by staff and consultants' qualifies as administrative expenses in the Tax
Increment Financing District, the Farmington Housing and Redevelopment Authority shall then
reimburse the applicant for these costs to the extent permissible under the T.I.F. Act. If, for
whatever reason, the Farmington Housing and Redevelopment Authority does not go forward with
the creation of a Tax Increment Financing District, the Farmington Housing and Redevelopment
Authority shall reimburse to the applicant any unused portion of the deposit. It should also be noted
that if the Farmington Housing and Redevelopment Authority incurs additional expenses prior to the
creation of the district, the Farmington Housing and Redevelopment Authority shall notify the
applicant in \\Titing and it will be required to deposit additional funds.
SUB MITT AL OF APPLICATION FORMS
Applicants requesting Tax Increment Financing assistance within an existing district or in the
creation of a new district, shall be required to complete and submit the following:
I. Request for Tax Increment Financing
2. Fundability Guidelines for Financial Assistance
3. Appropriate Deposit (10% upio $10.000)
OTHER POLICY ISSUES
A. Fiscal Disparities:
Although each Tax Increment Financing District will be evaluated and each case will be
decided on its own merits, it will be the city's general policy to have Tax Increment
Financing districts be exempt from the contribution of Fiscal Disparities. The percentage of
revenues required from the project within the Tax Increment Financing districts will be the
responsibility of properties within the district.
This resolution adopted by recorded vote of the Farmington Housing and Redevelopment Authority
in open session on the day of , 1994.
HRA Chairperson
Attested to the
day of
,1994.
HRA Executive Director
SEAL
OCT-30-1997 10:44 FROM RDVRNCE INC.
TO
[12] PRIOR LRKE-CITY
P.02
DYANCE
TO:
Prior lA.ke 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 commercial/industrial development. Following is a summary of the
information they provided:
. Lakeville __ The City owns an 80 acre industrial park with approximately 20 acres remaining
for sale. The City's 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 CifY supports the
project, the property is conveyed for a total cost of $1. 1I04A.1tw..~ ~ .,~~1.S.
. Farmington -- The City owns a 40 acre industrial park with plans to expand in the future. The
development cost to the City is S1.10/SF. Projects are reviewed on a case by case basis. The City sells
the property for $lISF and then uses TIF revenues to reimburse the land sale proceeds and a portion of
the developers cost for site improvements including e,.-cavation, 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 oc;x;urred 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 (23 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 $l/SF and providing pay-as-you-go rebate are borh competitive and aggressive.
Business Finance and
Economic Development
Specialists
CCr;>PCRATE QC:::CC,
P.o. Box 32609
Mpls.. MN 55432-0609
Phone: (012) 755-5393
Fox: (612) 755-7741
"~
P.O. Box 30?,7 ~
Monko1o. MN S6002-~7
Phone: (507) 387-7117
Fax: (507) 387-6115
TOTAL P.02