HomeMy WebLinkAboutItem 06.hi
March 15, 2013 Item No.
TAX INCREMENT FINANCING POLICY
March 18, 2013 City Council Meeting
Proposed Action
Staff recommends adoption of the following motion: Move to adopt the attached Tax Increment
Financing Polio..
Approval of this motion will result in the City having an updated Tax Increment Financing Policy.
Overview
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 the attached TIF
Policy to the City Council at its November 27, 2012 EDC Meeting. (A copy of the minutes are attached.)
The attached TIF policy attempts 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.
The primary objectives of the TIF policy 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.
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.
The City Council reviewed the attached TIF policy at the February 25, 2013 Council Work Session. Staff
recommends approval of the attached TIF policy.
Primary Issues to Consider
• What is the benefit of having a TIF Policy? It provides staff and the Council with guidelines
in evaluating requests for this type of development financing assistance.
Supporting Information
• Tax Increment Financi Policy
D Ison, Community and Economic Development Director
Financial Impact: $ None Budgeted: Y/N Source:
CITY OF LAKEVILLE
ECONOMIC DEVELOPMENT COMMISSION
MEETING MINUTES
November 27, 2012
Matasosky called the meeting to order at 4:30 p.m. in the Marion Conference
City Hall.
Members Pros : Comms. Matasosky, Longie, Brantly, Emond (5:35 p.m.), Starfield,
Smith, Schubert, Via Ex- officio member Chamber of Commerce Executive Director
Todd Bornhauser, Ex -o i ' ember Mayor Mark Bellows, Ex- officio member City
Administrator Steve Mielke.
Members Absent: Comm. Tushie.
Others Present: David Olson, Community & Eco is Development Director; Adam
Kienberger, Economic Development Specialist.
2. Approval of September 25, 2012 meeting minutes
Motion Comms. Smith /StarField moved to approve the mi6btes of the
September 25, 2012 meeting as presented. Motion ta<ied
3. Review of Proposed Tax Increment Financing (TIF) Policy
Mr. Olson reviewed the EDC memo outlining the proposed TIF policy. He provided
an overview of the recommended objectives and policies for the use of TIF.
The EDC discussed several language tweaks to the policy to make it "more
customer focused ". The EDC also discussed the level of equity stake that should
be required for a project to be considered for TIF assistance.
Comm. Smith concluded that the policy serves as a guide for analyzing TIF eligible
projects and flexibility is accounted for in the policy.
Motion Comm. Smith / Longie moved to recommend the draft TIF policy to
the City Council. Motion carried unanimously.
Mr. Olson noted that a draft Tax Abatement policy will be presented at the next
EDC meeting.
� pin
4.
Mr. Mielke i e roc for the upcoming City visioning process. He
noted that the process is com used and will be used to guide the City
Council on making decisions about what the i k like as it continues to
grow and age.
TAX INCREMENT FINANCING POLICY
Policy 2.06
1) PURPOSE
For the purposes of this document, the term "City" shall include the Lakeville City Council.
a) 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.
b) 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 the City of
Lakeville is to encourage desirable development or redevelopment that would not otherwise
occur but for the assistance provided through TIF.
c) 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.
d) The City Council can deviate from this policy for projects that supersede the objectives identified
herein.
2) OBJECTIVES OF TAX INCREMENT FINANCING
a) 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:
i) 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.
ii) Projects that provide value in the forms of needed transportation and other utility
infrastructure improvement that would be completed in conjunction with the project.
iii) To encourage additional unsubsidized private development in the area, either directly or
indirectly through "spin off' development.
iv) To facilitate the development process and to achieve development on sites which would not
otherwise be developed but -for the use of TIF.
v) To remove blight and /or encourage redevelopment of commercial and industrial areas in
the City that result in high quality redevelopment and private reinvestment.
vi) To offset increased costs of redevelopment (i.e. contaminated site clean -up) over and above
the costs normally incurred in development.
vii) To create opportunities for affordable housing.
viii) 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.
ix) 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.
3) POLICIES FOR THE USE OF TIF
a) 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.
ii) Site preparation, site improvement, land purchase, demolition, and environmental
remediation.
iii) Capitalized interest, bonding costs.
b) The following types of TIF districts may be established:
i) Economic Development Districts (maximum term 9 years)
ii) Redevelopment Districts (maximum term 26 years)
iii) Housing Districts (maximum term 26 years)
iv) Renewal and Renovation Districts (maximum term 16 years)
v) Other types of TIF districts, along with specific criteria, maybe considered on a case by case
basis.
c) 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.
d) The City shall retain a fee to reimburse administrative costs up to but not to exceed ten percent
(10%) of any tax increment received.
e) Only for a project which significantly supersedes the objectives identified herein, will the term of
the TIF assistance exceed 15 years.
f) 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.
g) Developer shall be able to demonstrate a market demand for a proposed project. TIF shall not
be used to support purely speculative projects.
h) TIF shall not be utilized in cases where it would create an unfair and significant competitive
financial advantage over other projects in the City.
i) TIF shall not be provided for projects that would place extraordinary demands on city services or
for projects that would generate significant environmental impacts.
j) The developer must provide adequate financial guarantees to ensure completion of the project,
including, but not limited to: assessment agreements, letters of credit, personal guarantees,
etc.
k) 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.
1) 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.
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4) PROJECT QUALIFICATIONS
All TIF projects considered by the City of Lakeville must meet all of the following requirements:
a) To be eligible for TIF, a project shall result in:
i. For Economic Development TIF Districts, new construction of a minimum of 5,000 square
feet.
ii. For Economic Development TIF Districts, the minimum creation of one new or retained full
time job per $25,000 of TIF provided.
iii. 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.
b) The project shall meet at least one of the objectives set forth in Section 2.
c) The developer shall demonstrate that the project is not financially feasible but -for the use of TIF.
d) The project must be consistent with the City's Comprehensive Plan, Land Use Plan, and Zoning
Ordinances.
e) The project shall serve at least two of the following public purposes:
i. Creation of jobs with livable wages and benefits, per City's Business Subsidy Policy.
ii. Increase of tax base.
iii. Enhancement or diversification of the City's economic base.
iv. Industrial development that will spur additional private investment in the area.
v. The project contributes to the fulfillment of the City's development or redevelopment
objectives.
vi. Removal of blight or the rehabilitation of a high profile or priority downtown site.
5) SUBSIDY AGREEMENT & REPORTING REQUIREMENTS
a) 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 116J.993 and
summarized below.
b) All developers /businesses receiving TIF 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 State Statute
116J.993.
c) 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. 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.
d) 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.
e) The developer /business will be required to attain or exceed the jobs and wages goals set forth in
the Subsidy Agreement.
f) Developer /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.
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6) APPLICATION PROCESS
a) Applicant submits the completed application along with a nonrefundable initial application fee
of $500.
i. City staff reviews the application and completes the Application Review Worksheet.
ii. Results of the Worksheet are submitted to the appropriate governing authorities for
preliminary approval of the proposal.
b) 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.
i. Notices are published and sent to the county and school board.
ii. Public hearing(s) on the proposed project are held.
iii. The City Council grants final approval or denial of the proposal.
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