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HomeMy WebLinkAboutItem 07City of Lakeville Community & Economic Development Memorandum To: Mayor and City Council From: David L. Olson, Community and Economic Development Director Copy: Justin Miller, City Administrator Rick Howden, Economic Development Specialist Dan Regan, Launch Properties LLC Date: February 23, 2017 Subject: Review of Preliminary Tax Increment Financing Application from Launch Properties LLC The City received an application for Tax Increment Financing (TIF) assistance from Launch Properties LLC (Launch) on February 14th. Launch is proposing to develop a portion of the Hat Trick Investment property located in the industrial park east of Cedar Avenue. (see attached location map). Launch is proposing to construct a 280,000 square foot office-warehouse building on 21 acres of this property. Approximately 150,000 square feet of this building would be leased to Menasha Packaging. Menasha Packaging has operated in Lakeville since 1970. Their current manufacturing facility is located at 8085 220th Street. Menasha completed a 120,000 square foot expansion of this facility in 2014. The City provided up to $626,000 in Tax Increment Financing assistance for this expansion and the State of MN Department of Employment and Economic Development provided $422,520 in Job Creation Fund assistance. Menasha committed to retaining 221 existing jobs and to create 15 new jobs. As of March 30, 2016 Menasha reported that they had retained 221 jobs and created 25 new jobs. Menasha is in the process of relocating manufacturing and warehouse functions that they had in Brooklyn Park to Lakeville. This will result in 75 new jobs coming to Lakeville and also creates the need for more space in Lakeville. Launch is also in discussions with another prospective tenant to occupy an additional 90,000 square feet of the proposed 280,000 square foot building. This tenant remains confidential at this time, but is another manufacturing company that would relocate an additional 80 jobs to Lakeville with an average wage level of $58,000 per year not including benefits. Launch has indicated that the development cost would be $17,670,000 for the project. The request for TIF is to assist in filling a project financing gap of approximately $1,941,076. The proposed project includes significant infrastructure costs since the proposed site is a considerable distance from existing municipal services such as water and sewer service. A new east-west public street, along with turn-lane improvements on Cedar Avenue are also required for the project. The Launch TIF application includes an estimate of increased market value for property tax purposes of $11,936,140 after all of the proposed improvements have been constructed. (It should be noted that this estimate of market value has not been confirmed by the County Assessor’s Office.) Based on this estimate, Launch has estimated the total amount of new property taxes upon completion of the proposed improvements would be $471,776. After the State Property Tax and Fiscal Disparities are deducted since they are not able to be captured as tax increments, the preliminary estimated total of tax increment to be generated is $215,675 per year or a maximum of $1,941,076 over the maximum life of a nine year Economic Development TIF District. The TIF application indicates that any assistance be provided on a pay-as-you-go basis which means that TIF funds would be reimbursed on an annual basis after the payment of property taxes has occurred. This eliminates any financial risk to the City. The amount of any proposed TIF assistance for this project does not need to be determined at this time. The estimated TIF eligible costs for the project are estimated at $2.964 million and thus no level of TIF assistance would cover all of the TIF eligible project costs. Launch has requested the City consider installing the street, water and sewer improvements as a public improvement project and that Launch would enter into an assessment agreement with the City that would allow Launch Properties to pay 100% of this portion of the development cost for the project over a period of years. EDC Recommendation: The EDC reviewed this request at a Special Meeting held on Wednesday, February 22nd. They recommended to the City Council that the City HRA Board and City Council take the necessary steps to prepare the necessary TIF Plan for the proposed Launch Properties project and provide the required notifications to Dakota County and Farmington Independent School District #192. Requested Action: If the City Council supports this preliminary request from Launch for TIF assistance, the next step would be for the City HRA Board and City Council to schedule a public hearing to consider the creation of a new Tax Increment Financing District and retain Springsted to prepare the required TIF Plans and notifications to Dakota County and Farmington Independent School District #192. The City Council should indicate whether there is support for the City to pursue a public improvement project for the construction of the new City street and installation of City water and sewer services subject to entering into an assessment agreement with Launch for 100% of the project costs. It should be noted that there would be separate City Council actions on these two requests and that neither action on these issues would be dependent on the other.