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HomeMy WebLinkAboutItem 06Memorandum City of Lakeville Community & Economic Development To: Mayor and City Council Members Steven Mielke, City Administrator From: David L. Olson, Community and Economic Development Director Copy: Adam Kienberger, Economic Development Specialist Date: February 22, 2013 Subject: Review of Draft Tax increment Financing and Tax Abatement Policies One of the goals in the City Council approved 2011 -2013 Strategic Plan for Economic Development is the creation of a toolbox of incentives. The most commonly used incentive tool utilized by cities in Minnesota is Tax Increment Financing (TIF). The EDC reviewed and recommended a proposed TIF Policy to the City Council at the November EDC Meeting. Tax Abatement is probably the second most common economic development incentive used by cities. The EDC reviewed and recommended a proposed Tax Abatement Policy to the City Council at their January EDC Meeting. It is recommended that these attached recommended policies be considered together by the City Council. Also attached is a PowerPoint presentation prepared by Springsted, the City's fiscal consultant that provides a good overview on the basics of both these economic development financing tools. Both of these recommended policies attempt to include the objectives that were included in the revised overall Business Subsidy Policy recommended by the EDC and adopted by the City Council in August of 2011 and is also attached. The primary objectives of both the TIF and Tax Abatement polices are to: 1. To retain local jobs and /or increase the number and diversity of jobs that offer stable employment and /or attractive wages and benefits. 2. To encourage additional unsubsidized private development in the area, either directly or indirectly through "spin off" development. 3. To facilitate the development process and to achieve development on sites that would not otherwise be developed but /for the use of TIF or Tax Abatement. 4. To remove blight and /or encourage the redevelopment of commercial and industrial areas of the City. 5. To create opportunities for affordable housing. 6. Projects that improve the quality of life in the City by providing a desirable good or service and address an unmet demand in the community. Tax Abatement, while similar to TIF, has several significant differences. One of the most significant differences is that the County and School District are able to decide if they wish to participate in tax abatement projects, which is not the case with TIF projects. As a result, many Tax Abatement projects are done with only City participation. With City only participation, the amount of financial incentive that can be offered for projects is considerably less. This is, however, offset somewhat by the increased flexibility of Tax Abatement. While TIF can only be used for manufacturing and warehousing projects (unless it is a redevelopment or housing type project), Tax Abatement can be used for other types of projects, such as commercial office or retail projects, as well as industrial projects. While Lakeville has approved a number of TIF projects over the years, Tax Abatement has not previously been used in Lakeville. In practice, Tax Abatement is a rebate rather than an exemption from paying taxes. In fact, the City is required to increase its levy by the amount of the Tax Abatement amount. This will however, be offset by a decrease in the tax levy by the other taxing entities (County and School District) that are not participating in the Tax Abatement project. Action Requested: Staff is requesting comments and feedback from the Council on both proposed policies. Formal adoption of these policies would take place at a future regular City Council meeting. �3. CITY OF LAKEVILLE ECONOMIC DEVELOPMENT COMMISSION MEETING MINUTES November 27, 2012 it Matasosky called the meeting to order at 4:30 p.m. in the Marion Conference Roo - City Hall. Members Pres- • Comms. Matasosky, Longie, Brantly, Emoncl(5:35 p.m.), Starfield, Smith, Schubert, Vlas- Ex- officio member Chamber of Commerce Executive Director Todd Bornhauser, Ex- office ember Mayor Mark Bellows" E officio member City Administrator Steve Mielke. Members Absent: Comm. Tushie. Others Present: David Olson, Community & Icono Developments ctor; Adam Kienberger, Economic Development SpeciaC .. 2. Approval of September 25, 2012 meeting nhrtu Motion Comms. Smit September 25, unanimously. The EDC discus customer C ed m. Smith cone and flexibilit Id moved approve the minutes the ng as presented. Motion carne Review of Proposed Tax Increment Fi (TIF) Policy Mr. Olson reviewed the EDC "demo ouining the proposed TIF policy. He provided an overview of he recommended objectives and policies for the use of TIF. prof' Feral i gunge t tieaks to the policy to make it "more EDC also discussed the level of equity stake that should considered for TIF assistance. e policy serves as a guide for analyzing TIF eligible accounted for in the policy. Motion Smith /Longie moved to recommend the draft TIF policy to y Council. Motion carried unanimously. Mr. Olson noted that a draft Tax Abatement policy will be presented at the next EDC meeting. Cit Visioning Process for the upcoming City visioning process. He used to guide the City Mr. Mielke discusse noted that the process is community focuse Council on making decisions about what the City should look like as i grow and age. Economic Development Commission Meeting Minutes, January 22, 2013 Page 3 rnhauser noted that the Comprehensive Parks Plan should be reviewed and reevaluate • - - 't truly "afford" it. Mr. Mielke responded that there is a revs that review to come after the Visioning Plan currently un Review of Proposed Tax Abatement Policy Mr. Olson reviewed the EDC memo outlining the proposed tax abatement policy. He provided an overview of the recommended objectives and policies for the use of tax abatement and noted its similarities to the recommended TIF policy. Comm. Emond inquired if there have been projects that Piave recently requested assistance. Mr. Olson responded that there have been several recent requests for assistance. The EDC discussed the differences between:. ax abatement and F how there needs to be a public benefit demonstratett prior to granting a tax abatement. They also went on to clarify how this will be ' as an incentive or assistance versus calling it a subsidy. Mr. Mielke added decision based of the City C 'I. 2012 Plan but the Council wants Mr. Olson noted that it is prudent to conduct: e diligence of each individual application for assistance but t[ is a tool that .n be used as an incentive to attract business growth. `but -for" to t;for public assistance will be a City Council e indiv tal project's merit. Comm. Tushi concluded that the more tools the City has in its toolbox for businesses, the better p ®"ft Tushie /Brantly moved to recommend the draft Tax temer policy be forwarded to the City Council for approval. otion carried unanimously. iscusson of Recent `City Council Actions Co agie requested clarification on how the EDC motions are forwarded on to Mr. Mielke respo t - e Council receives copies of all minutes from boards and commissions on a regula : - is, as well as discusses recommendations at work sessions. Comm. Longie inquired about a recent approval o - IBG fund allocation by the City Council and why it was not brought to the EDC prior to • oval. Mr. Mielke responded that not all CDBG activities are within the purview o • - EDC and that the Council decision this year was on appropriating funds for pu improvements and housing initiatives. Lakeville City Council February 26, 2013 Business Assistance Programs • Tax Increment Financing • Tax Abatement Tax Increment and Tax Abatement Generally • Frequently used tools for development • Different set of rules apply to each • Tax Increment usually gives control over more revenues • Tax Abatement is often less restrictive Springsted 1 Commonalities • Locally controlled resources • Capture taxes and redistribute them to support development efforts • Debt issued is not subject to general debt limit • General obligation backing is permitted Use requires certain process steps be followed, including public hearing(s) Business subsidy provisions apply Springsted Differences • Locally controlled resources — Tax Increment: 100% by initiating entity — Tax Abatement: City, school, county can each approve /deny • Capture taxes and redistribute them to support development efforts — Tax Increment: 100% from new development value — Tax Abatement: From old and/or new development value Public Sector Advisors Springste; Differences com. • General obligation backing — Tax Increment: TIF must provide for at least 20% of the debt service to be paid — Tax Abatement: GO may be used, but for any type of issue, TA must at least equal principal amount of bonds to be issued Springste,. Differences cony. • Administration — Tax increment - Counties provide settlements semi - annually to Cities with their property tax payments — Tax abatement - Cities collect revenues through annual levy • Reporting — Tax increment — Must submit annual TIF Reports to OSA — Tax abatement - No financial reporting requirements (yet) Public Sector Advisors Springsted 3 What is TIF? • A method of capturing tax base growth resulting from new development • Captures new local taxes (increment) to pay for public improvements related to development • Fixed term for capture, then new development added to tax base Springsted Tax Increment Financing • Defined by State Statute 469.174 — 469.1799 • Gap financing tool • Depending on year created, different compliance requirements apply • Used mainly by Cities and Counties • Provides incentive and funding for development Public Sector Advisors Springsted 4 Tax Increment Financing • Cities Use TIF to: — Stimulate development where it would otherwise not occur ( "but for" test) — Encourage development of uses and areas that would otherwise not occur — Enhance tax base — Facilitate infrastructure improvements — Coordinate new developments with existing plans tai Auvise�s Springsted Process for Approving TIF District • Subsidy Review • Approximate 60 day approval process, which includes notifications to County and School Board, publication of hearing notice, Planning Commission review, and holding of public hearing • But -For test: — City to make a finding that "...the proposed development or redevelopment would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future..." Public Sector Advisors Springsted 5 Analysis of Subsidy Request • Process of testing subsidy request and measuring against industry standards • Two questions are asked and answered: — Is the assistance necessary? — How much assistance is needed? • Objective: — Provide minimum subsidy required to get a project completed — Mitigate city risk Springsted Types of TIF Districts (Determines Timeframe and Uses of TIF) • Redevelopment • Renewal and Renovation • Housing • Soils Condition • Economic Development • Other — Hazardous Substance Subdistrict Public Sector Advisors Springsted 6 Tax Increment Financing (TIF) Eligible Costs • Public Improvements • Land Acquisition • Soil Correction -Site Grading • Site Preparation /Demolition • Relocation • Cost of Qualifying Housing • Financing Fees /Capitalized Interest • Administrative Costs Springsted Tax Increment Financing (TIF) Public Improvement Costs Allowed • Streets and Roads • Utilities • Bridges and Interchanges • Parking • Sidewalks and walkways • Soft costs related to any of the above Springsted 7 Tax Increment Financing (TIF) Public Improvement Costs Not Allowed • Public Buildings such as a City Center, Public Safety, Public Works buildings • Culture and Recreation such as parks, community centers, golf courses, etc. • Administration beyond 10% of TIF collections Spring Tax Increment Financing (TIF) Common Methods for Financing Costs • Pay -as- you -go Notes — Project financed upfront by developer — Developer is reimbursed over time • G.O. Tax Increment Bonds — Can be issued without a referendum if tax increment contributes at least 20% of debt service costs Public Sector Advisors ° Springsted 8 Tax Increment — Project Example • Manufacturing business proposing to locate in the City's Industrial Park • Business asks for an incentive to reduce development costs • City reviews request and determines a gap exists • City establishes TIF District and enters into a Development Agreement with developer • City pledges portion of annual increment to developer for reimbursement of TIF - eligible costs Springsted Tax Abatement Basics • Defined in Minnesota Statutes 469.1812 to 469.1815 (as amended) • NOT an actual abatement of taxes • Permits levy of taxes for application toward development purposes • Adopted by resolution at a noticed meeting (does not require property owner consent) • Abatement resolution indicates terms: amount, length, public benefit, etc. Public Sector Advisors - Springsted 9 Tax Abatement Eligible Costs • Improvements to private property • Finance or provide public infrastructure • Acquire or construct public facilities • Phase in property tax increase /equalization of property tax revenue • If bonds are issued, eligible costs only include - - public improvements that benefit the property, — acquisition and conveyance of land or other property, — reimbursements to the property owner for the cost of improvements made to their property, or — costs of issuance Springst Tax Abatement Constraints • No back -to -back abatements Eight years must pass before a new abatement may begin on the same parcel. • Cannot be applied within TIF districts, but can be used after TIF decertification • Maximum duration of 15 years if three participants (City, County & ISD), 20 years if two or fewer ublic Sector Advisors Springstec 10 Tax Abatement Constraints coil • If Tax Abatement Bonds issued - principal may not exceed the estimated sum of total abatements • Maximum aggregate annual abatement for any taxing entity is the greater of: — 10% of the net tax capacity or $200,000 • Maximum parcel abatement is subdivision's tax rate times net tax capacity of parcel Springsted Tax Abatement — Things to Consider • Taxing entities often adopt Tax Abatement Policies that may further constrain abatement terms • Bonding issues with public versus private improvements • Political subdivision must add to its levy each year the estimated amount of the abatements • Abatements may be reviewed and modified every other year by the governing body, unless abatement bonds have been issued or resolution indicates no modification permitted 'obhc Sector Aoviror Springsted 11 Tax Abatement — Project Examples • Infrastructure Improvements — New Interchange — Highway Improvements — New Frontage Road — Public and private improvements for Development • Construction of Community Center /Senior Center • Construction of Recreational Facility Springsted 12 1.00 PURPOSE 2.00 POLICY Policy 1.25 BUSINESS SUBSIDY POLICY Adopted 8/1 /11 1.01 This Policy is adopted for purposes of the Business Subsidies Act (the "Act "), Minnesota Statues, Sections 116J.993 through 116J.995. Terms used in this Policy are intended to have the same meanings as if used in the Act, and this Policy shall apply only with respect to "subsidies" as defined by the Act if and to the extend required thereby. 2.01 The City of Lakeville and the Lakeville Economic Development Commission maintain several policy documents which speak to the general goals and objectives for the provision of public assistance for private development or redevelopment activities. These documents include, but are not limited to the current Strategic Plan for Economic Development and the Comprehensive Land Use Plan. 2.02 The City of Lakeville has determined that in order for any project to be considered for financial assistance, a finding is needed that determines that, "but for" the City's assistance, this project will not occur or will not occur within a reasonable amount of time. The City will also need to demonstrate a return on its investment based on one or more of the public benefit categories listed in this Policy. 2.03 Because projects vary greatly in structure and public benefit derived, each project will be considered on its own merits. Consideration will be given to projects providing public benefits in one or more of the following categories: a. The creation of new jobs /increase in total payroll. In the case of new job creation, new jobs must pay an average wage equal to the minimum wage level for business assistance programs administered by the Minnesota Department of Employment and Economic Development for cities located in the seven county metropolitan area in place at the time of an application by any business seeking a subsidy. Preference will be given to higher paying jobs that also provide benefits such as health care coverage. b. Projects that provide value in the forms of needed transportation and other utility infrastructure improvements including regional infrastructure in the community that would be completed in conjunction with the project. c. Redevelopment projects that result in the stabilization of business districts or neighborhoods by elimination of blighting conditions. d. Projects that enhance or increase the economic diversity of the community by attracting businesses or industries not currently located in the City. New job wage requirements will apply to any new jobs created. e. Projects that result in the development of affordable senior or workforce housing. f. Quality of Life based on business /projects. Those business /entities that provide a desirable good or service and address an unmet demand in the community will be considered. New job wage requirements will apply to any new jobs created. g. Retention of existing jobs. To be considered under this category, it must be demonstrated — to the satisfaction of the City - that the loss of jobs is specific and can be demonstrated. 2.04 If a particular project does not involve the creation of jobs, but is nonetheless found to meet another public purpose of the City it may be considered without any specific job wage goals, as permitted by Minnesota Statutes. This public purpose has to be something other than an increase to the City's tax base. Other measurable, specific and tangible goals must be established. Examples of tangible goals may include redevelopment or clean-up of a contaminated site or increased tourism. 2.05 Each project shall not only be evaluated against the Business Subsidy Policy but also against other applicable City of Lakeville or Economic Development Commission policies, including the Comprehensive Land Use Plan, current Strategic Plan for Economic Development. The level of assistance to be provided for any project is at the discretion of City of Lakeville. 2.06 Because it is not possible to anticipate every type of project which may in its context and time present desirable community building or preservation goals and objectives, the governing body must retain the right in its discretion to approve projects and subsidies which may vary from the principles and criteria of this Policy. The burden will be on the applicant to demonstrate, to the satisfaction of the City of Lakeville, that the public benefit justifies the requested subsidy. 2.07 In all cases of business subsidy, where the subsidy is equal to or greater than the threshold prescribed in Minnesota Statutes, a subsidy agreement will be entered into between the City and the recipient. This agreement will delineate the subsidy structure and amount, as well as the expected public benefit. The agreement will include provisions for repayment and other resolution options if the expected public benefit is not achieved. Upon completion of the project, the actual costs of the elements of the project eligible for the business subsidy will be verified. All business subsidies will be subject to the criteria outlined in Minnesota Statutes, Section 116J.933 through Section 116J.955 except those subsidies as exempted by same. DRAFT CITY OF LAKEVILLE TAX INCREMENT FINANCING POLICY A. POLICY PURPOSE For the purposes of this document, the term "City "shall include the Lakeville City Council. The purpose of this policy is to establish the City of Lakeville's position relating to the use of Tax Increment Financing (TIF) for private development above and beyond the requirements and limitations set forth by State Law. This policy shall be used as a guide in the processing and review of applications requesting tax increment assistance. The fundamental purpose of tax increment financing in the City of Lakeville is to encourage desirable development or redevelopment that would not otherwise occur but forthe assistance provided through TIF. The City of Lakeville (City) is granted the power to utilize TIF by the Minnesota Tax Increment Financing Act, as amended. The fundamental purpose of tax increment financing in Lakeville is to encourage desirable development or redevelopment that would not otherwise occur but for the assistance provided through the tax abatement. The City reserves the right to approve or reject projects on a case by case basis, taking into consideration established policies, project criteria, and demand on city services in relation to the potential benefits from the project. Meeting policy criteria does not guarantee the award of business assistance to the project. Approval or denial of one project is not intended to set precedent for approval or denial of another project. The City Council can deviate from this policy for projects that supersede the objectives identified herein. B. OBJECTIVES OF TAX INCREMENT FINANCING Tax Increment Financing (TIF) uses the increased property taxes generated by new real estate development within a tax increment district to pay for certain eligible costs associated with the development. As a matter of adopted policy, the City will consider using TIF to assist private development projects that will achieve one or more of the following objectives: 1. To retain local jobs and /or increase the number and diversity of jobs that offer stable employment and /or attractive wages and benefits. Preference will be given to higher paying jobs that also provide benefits such as health care coverage. 1 2. Projects that provide value in the forms of needed transportation and other utility infrastructure improvement that would be completed in conjunction with the project. 3. To encourage additional unsubsidized private development in the area, either directly or indirectly through "spin off" development. 4. To facilitate the development process and to achieve development on sites which would not otherwise be developed but /for the use of TIF. 5. To remove blight and /or encourage redevelopment of commercial and industrial areas in the city that result in high quality redevelopment and private reinvestment. 6. To offset increased costs of redevelopment (i.e. contaminated site clean up) over and above the costs normally incurred in development. 7. To create opportunities for affordable housing. 8. Projects that improve the quality of life in the City by providing a desirable good or service and address an unmet demand in the community. 9. To contribute to the implementation of other public policies, as adopted by the city from time to time, such as the promotion of quality urban or architectural design, energy conservation, and decreasing capital and /or operating costs of local government. C. POLICIES FOR THE USE OF TIF 1. When possible, TIF shall be used to finance public improvements associated with the project. The priority for the use of TIF funds is: a. Public improvements, legal, administrative, and engineering costs. b. Site preparation, site improvement, land purchase, demolition, and environmental remediation. c. Capitalized interest, bonding costs. 2. The following types of TIF districts may be established: a. Economic Development Districts (maximum term 9 years) b. Redevelopment Districts (maximum term 26 years) c. Housing Districts (maximum term 26 years) d. Renewal and Renovation Districts (maximum term 16 years) 2 e. Other types of TIF districts, along with specific criteria, may be considered on a case by case basis. 3. TIF assistance shall not be provided for reimbursement of land and /or property price that is in excess of fair market value. An appraisal by a third party, agreed upon by the City and Developer, will determine the fair market value of the land. 4. The City shall retain a fee to reimburse administrative costs up to but not to exceed ten percent (10 %) of any tax increment received. 5. Only for a project which significantly supersedes the objectives identified herein, will the term of the TIF assistance exceed 15 years. 6. Any developer receiving TIF assistance shall provide a minimum of twenty percent (20 %) cash equity investment in the project. The assistance shall not be used to supplant cash equity. The City may consider exceptions for "pay -as- you -go" TIF projects. 7. Developer shall be able to demonstrate a market demand for a proposed project. TIF shall not be used to support purely speculative projects. 8. TIF shall not be utilized in cases where it would create an unfair and significant competitive financial advantage over other projects in the City. 9. TIF shall not be provided for projects that would place extraordinary demands on city services or for projects that would generate significant environmental impacts. 10. The developer must provide adequate financial guarantees to ensure completion of the project, including, but not limited to: assessment agreements, letters of credit, personal guaranties, etc. 11. The developer shall adequately demonstrate, to the City's sole satisfaction, an ability to complete the proposed project based on past development experience, general reputation, and credit history, among other factors, including the size and scope of the proposed project. 12. For the purposes of underwriting the proposal, the developer shall provide any requested market, financial, environmental, or other data requested by the City or its consultants. 3 D. PROJECT QUALIFICATIONS All TIF projects considered by the City of Lakeville must meet a / /of the following requirements: 1. To be eligible for TIF, a project shall result in: a. For Economic Development TIF Districts, new construction of a minimum of 5,000 square feet; b. For Economic Development TIF Districts, the minimum creation of one new or retained full time job per $25,000 of TIF provided; c. For Redevelopment TIF Districts, a minimum value increase of $200,000 or not less than 2 times the current year assessed value, whichever is greater; and, 2. The project shall meet at least one of the objectives set forth in Section B. 3. The developer shall demonstrate that the project is not financially feasible but - forthe use of TIF. 4. The project must be consistent with the City's Comprehensive Plan, Land Use Plan, and Zoning Ordinances. 5. The project shall serve at least two of the following public purposes: a. Creation of jobs with livable wages and benefits, per City's Business Subsidy Policy. b. Increase of tax base. c. Enhancement or diversification of the city's economic base. d. Industrial development that will spur additional private investment in the area. e. The project contributes to the fulfillment of the City's development or redevelopment objectives. f. Removal of blight or the rehabilitation of a high profile or priority downtown site. E. SUBSIDY AGREEMENT & REPORTING REQUIRMENTS All developers /businesses receiving tax increment financing assistance from the City of Lakeville shall be subject to the provisions and requirements set forth by state statute 1161993 and summarized below. All developers /businesses receiving TIF assistance shall enter into a subsidyagreementwith the City of Lakeville that identifies: the reason for the subsidy, the public purpose served by the subsidy, and the goals for the subsidy, as well as other criteria set forth by statute 1163.993. 4 The developer /business shall file a report annually for two years after the date the benefit is received or until all goals set forth in the application and performance agreement have been meet, whichever is later. Reports shall be completed using the format drafted by the State of Minnesota and shall be filed with the City of Lakeville no later than March 1 of each year for the previous calendar year. Businesses fulfilling job creation requirements must file a report to that effect with the city within 30 days of meeting the requirements. The developer /business owner shall maintain and operate its facility at the site where TIF assistance is used for a period of five years after the benefit is received. The developer /business will be required to attain or exceed the jobs and wages goals set forth in the Subsidy Agreement. Developers / Businesses failing to comply with the above provisions will be subject to fines, repayment requirements, and be deemed ineligible by the State of Minnesota to receive any loans or grants from public entities for a period of five years. F. APPLICATION PROCESS 1. Applicant submits the completed application along with a nonrefundable initial application fee of $500. a. City staff reviews the application and completes the Application Review Worksheet. b. Results of the Worksheet are submitted to the appropriate governing authorities for preliminary approval of the proposal. 2. If preliminary approval is granted, the applicant submits the final application fee of $5,500 and the Tax Increment Financing Plan, along with all necessary notices, resolutions and certificates are prepared by City staff and /or consultants. a. Notices are published and sent to the county and school board b. Public hearing(s) on the proposed project are held. c. The City Council grants final approval or denial of the proposal. 5 DRAFT CITY OF LAKEVILLE TAX ABATEMENT POLICY A. POLICY PURPOSE For the purposes of this document the term "City "shall include the Lakeville City Council. The purpose of this policy is to establish the City of Lakeville's position relating to the use of Tax Abatement for private development above and beyond the requirements and limitations set forth by State Law. This policy shall be used as a guide in the processing and review of applications requesting tax abatement assistance. It is the intent of the city to minimize the risk and amount of business assistance to a project and to leverage its public dollars to maximize private sector funding. The City of Lakeville (City) is granted the power to utilize Tax Abatement by Minnesota Statutes chapters 469.1812 through 468.1815, as amended. The fundamental purpose of Tax Abatement in Lakeville is to encourage desirable development or redevelopment that would not otherwise occur but for the assistance provided through the tax abatement. The City reserves the right to approve or reject projects on a case by case basis, taking into consideration established policies, project criteria, and demand on city services in relation to the potential benefits from the project. Meeting policy criteria does not guarantee the award of business assistance to the project. Approval or denial of one project is not intended to set precedent for approval or denial of another project. The City Council can deviate from this policy for projects that supersede the objectives identified herein. B. OBJECTIVES OF TAX ABATEMENT As a matter of adopted policy, the City will consider using the use of Tax Abatement to assist private development projects that will achieve one or more of the following objectives: 1. To retain local jobs and /or increase the number and diversity of jobs that offer stable employment and /or attractive wages and benefits. 1 2. Projects that provide value in the forms of needed transportation and other utility infrastructure improvement that would be completed in conjunction with the project. 3. To encourage additional unsubsidized private development in the area, either directly or indirectly through "spin off" development. 4. To facilitate the development process and to achieve development on sites which would not otherwise be developed but -for the use of Tax Abatement. 5. To remove blight and /or encourage redevelopment of commercial and industrial areas in the city that result in high quality redevelopment and private reinvestment. 6. To offset increased costs of redevelopment (i.e. contaminated site cleanup) over and above the costs normally incurred in development. 7. To create opportunities for affordable housing. 8. Projects that improve the quality of life in the City by providing a desirable good or service and address an unmet demand in the community. 9. To contribute to the implementation of other public policies, as adopted by the city from time to time, such as the promotion of quality urban or architectural design, energy conservation, and decreasing capital and /or operating costs of local government. C. POLICY FOR THE USE OF TAX ABATEMENT 1. When possible, Tax Abatement shall be used to finance public improvements associated with the project. The priority for the use of Tax Abatement funds is: a. Public improvements, legal, administrative, and engineering costs. b. Site preparation, site improvement, land purchase, demolition, and environmental remediation. c. Capitalized interest, bonding costs. 2. Tax Abatement assistance shall be provided to the developer upon receipt of the increment by the City, otherwise referred to as the pay -as- you -go method. Requests for up front financing will be considered on a case by case basis. 3. Any developer receiving assistance shall provide a reasonable amount of cash equity investment in the project as determined by the City. The assistance shall not be used to supplant cash equity. 4. The length or term of any Tax Abatement assistance will be based on need for each project as determined by the City. 5. Assistance shall not be provided for reimbursement of land and /or property price that is in excess of fair market value. An appraisal by a third party, agreed upon by the City and Developer, will determine the fair market value of the land. 6. The Developer shall be able to demonstrate a market demand for a proposed project. Assistance shall not be granted to support purely speculative projects. 7. Business assistance shall not be utilized in cases where it would create an unfair and significant competitive financial advantage over other projects in the area. 8. Business assistance shall not be provided for projects that would place extraordinary demands on city services or for projects that would generate significant environmental impacts. 9. The developer must provide adequate financial guarantees to ensure completion of the project, including, but not limited to: assessment agreements, letters of credit, personal guaranties, etc. unless an exception is granted by the City. 10. The developer shall adequately demonstrate, to the City's sole satisfaction, an ability to complete the proposed project based on past development experience, general reputation, and credit history, among other factors, including the size and scope of the proposed project. 11. For the purposes of underwriting the proposal, the developer shall provide any requested market, financial, environmental, or other data requested by the City or its consultants. D. PROJECT QUALIFICATIONS All Tax Abatement projects considered by the City of Lakeville must meet all of the following requirements: 1. The project shall meet at least one of the objectives set forth in Section B, Objectives of Tax Abatement, and satisfy all the provisions set forth in Section C, Policy for the Use of Tax Abatement, of this document. 2. The developer shall demonstrate that the project is not financially feasible but - forthe use of Tax Abatement. 3. The project must be consistent with the City's Comprehensive Plan, Land Use Plan, and Zoning Ordinances. 4. The project shall serve at least two of the following public purposes: a. Creation of jobs with livable wages and benefits, per City's Business Subsidy Policy. b. Increase of tax base. c. Enhancement or diversification of the city's economic base. d. Industrial development that will spur additional private investment in the area. e. The project contributes to the fulfillment of the City's development or redevelopment objectives. f. Removal of blight or the rehabilitation of a high profile or priority downtown site. E. SUBSIDY AGREEMENT & REPORTING REQUIREMENTS All developers /businesses receiving tax abatement assistance from the City of Lakeville shall be subject to the provisions and requirements set forth by state statute 116j.993 and summarized below. 4 All developers /businesses receiving tax abatement assistance shall enter into a subsidy agreement with the City of Lakeville that identifies: the reason for the subsidy, the public purpose served by the subsidy, and the goals for the subsidy, as well as other criteria set forth by statute 116j.993. The developer /business shall file a report annually for two years after the date the benefit is received or until all goals set forth in the application and performance agreement have been met, whichever is later. Underperforming projects shall result in reduced assistance on a pro rata basis. Reports shall be completed using the format drafted by the State of Minnesota and shall be filed with the City of Lakeville no later than March 1 of each year for the previous calendar year. Businesses fulfilling job creation requirements must file a report to that effect with the city within 30 days of meeting the requirements. The developer /business will be required to attain or exceed the jobs and wages goals set forth in the Subsidy Agreement. In addition to attaining or exceeding the jobs and wages goals set forth in the Subsidy Agreement, the applicant shall meet the qualifications set forth in Section D, Project Qualifications, of this document. Developers /businesses failing to comply with the above provisions will be subject to fines, repayment requirements, and be deemed ineligible by the State of Minnesota to receive any loans or grants from public entities for a period of five years. F. APPLICATION PROCESS 1. Applicant submits the completed application along with a nonrefundable initial application fee of $500. a. City staff reviews the application and completes the Application Review Worksheet. b. Results of the Worksheet are submitted to the appropriate governing authorities for preliminary approval of the proposal. 2. If preliminary approval is granted, the applicant submits the final application fee of $3,000. The process for creating a Tax Abatement project area, including all necessary notices, resolutions and certificates prepared by City staff and /or consultants is begun. a. Public hearing notices are published. b. Public hearing(s) on the proposed project are held. c. The City Council grants final approval or denial of the proposal.