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Home My WebLink About5. Existing Tax Increment Districts-Projects packetCity of Lakeville Finance Department Memorandum To: Mayor and City Council Economic Development Commission From: Jerilyn Erickson, Finance Director David L. Olson, Community & Economic Development Director Copy: Justin Miller, City Administrator Kati Bachmayer, Economic Development Coordinator Date: May 24, 2022 Subject: Tax Increment Projects Update The purpose of this report is to provide an update to the City Council and Economic Development Commission on tax increment financing districts. The City of Lakeville currently has six active tax increment districts as follows:  TIF 10-Fairfield  TIF 18-Menasha  TIF 19-BTD  TIF 22-Launch Park  TIF 23-Schneidermans’  TIF 24-QA1 The attached summary provides details for each of the active as well as two inactive districts. City staff has also prepared the attached a spreadsheet that lists the jobs that have been retained and the jobs created, and the increase in property taxes and Estimated Market Value for the Menasha, BTD, Launch Park, Schneiderman’s and QA1 TIF projects. TIF 10-Fairfield must be decertified by December 31, 2022. Staff and Northland Securities have been corresponding with Dakota County regarding the status of the remaining funds in this district. No final determination has been made. In 2016, the City Council approved resolution #16-31 (attached) which established the terms of an internal financing in connection with a tax abatement for Mom Brands Company, LLC. The City Council authorized up to $375,000 for qualified costs using funds from the City’s General Fund. Upon decertification of Fairfield TIF 10, it was the City’s intention to establish a tax abatement fund for a period of years for the purpose of collecting taxes from these same properties and repaying the General Fund. The current balance as of 12/31/2021 is $455,186 ($375,000 principal; accrued interest 2016-2021 = $80,186). The City Council could also consider writing off the interfund loan and not establishing a tax abatement district; instead, allowing the properties to be added to the City’s tax base starting in 2023. A map showing the location of the tax increment financing districts is also attached. Requested Action Staff is requesting that the EDC make a recommendation to the City Council regarding the decertification of TIF 10 – Fairfield and the approval of tax abatement district or the write-off of the interfund loan. Attachments: 1) Summary of Tax Increment Financing (TIF) Districts 2) Summary of Job Retention/Creation, Etc. 3) Tax Abatement Resolution 16-31 4) Maps of Tax Increment Districts Summary of Lakeville Tax Increment Financing (TIF) districts with a fund balance as of 12/31/2021 INACTIVE TIF DISTRICTS • TIF 8- Southfork- o A housing district certified in 1988, within the I-35 redevelopment project area for the construction of a low-income, multi-family rental housing complex. o Location: Lots 1, 2 and 3 of Block 1, and Outlot A, Southfork Village o First tax increment date: 01/1989 o Decertification date: 12/31/2014 o Fund balance at 12/31/2021: $1,618,549 o Planned uses (estimates):  $750K-$790K- Royal Milc Property purchase and demo (2022)  $10K- College Hunks relocation (after Argonne TIF funds are applied first, Argonne to cover remaining costs) (2022)  $200K- CP 20-09 Kenrick Ave Extension (Dependent on development of Tower Crossing Site)) o Approximate remaining unassigned funding: $650,000 o Allowable uses for remaining unassigned funds: HRA's authorized purposes including blight reduction, housing projects for low and moderate income housing and related improvements, and other urban renewal projects such as repair and rehabilitation of buildings, reduction of traffic hazards or other land uses detrimental to the public welfare, and acquisition of property to remove unhealthful, unsanitary or unsafe conditions. • TIF 9-Argonne- o A redevelopment district certified in 1988, for the purpose of development of Argonne Plaza construction. o Location: Within the I-35 redevelopment project area. o First tax increment date: 1989 o Decertification date: 12/31/2014 o Fund balance at 12/31/2021: $36,678 o Planned use: Remaining funds to be used toward the relocation of College Hunks (acquired in December 2021). ACTIVE TIF DISTRICTS • TIF 10- Fairfield- o A redevelopment district certified in 1989, for the purpose of development of the Fairfield Business Campus, o Location: Within the I-35 redevelopment project area. o First tax increment date: 4/29/1989 o Decertification date: By 12/31/2022 o Fund balance at 12/31/2021: $2,041,567 o Planned uses (estimates):  $200K- CP21-06 209th St (Kenrick Ave-West of Kensington Blvd) (2023)  $455,186- Payoff of interfund loan to the General Fund from 2016  Some to be repaid to Dakota County and ISD 194 o Approximately $335,000 of tax capacity (after fiscal disparities) will be added to the City’s tax base for 2023 which would fund about $110,000 of the property tax levy (using the 2022 tax capacity rate). • TIF 18- Menasha- o An economic development district certified in 2014, for a 123,000 square foot industrial facility on land within the TIF district for Menasha Packaging Company. The agreement also required Menasha to retain 221 existing jobs and bring 15 new full-time jobs to Lakeville. Menasha actually created 25 new jobs. o Location: Lot 5, Block 3, Airlake Industrial Park 1st Addition o First tax increment date: 07/2016 o Decertification date:12/31/2024 o Fund balance at 12/31/2021: $3,550 o TIF Note details:  Note amount: $626,018  Share of tax increment payable as TIF note principal reduction: 95%  Estimated note payoff date*: August 2024 • TIF 19- BTD- o An economic development district certified in 2015 for a 199,615 square foot industrial warehouse facility expansion, constructed in 2014-2015. The development was required to retain 215 jobs and add 100 new jobs in Lakeville. BTD actually created 144 new jobs. o Location: Fulford Group 1st Addition o First tax increment date: 07/2016 o Decertification date: 12/31/2024 o Fund balance at 12/31/2021: $15,497 o TIF Note details:  Note amount: $1,023,940  Share of tax increment payable as TIF note principal reduction: 95%  Estimated note payoff date*: August 2024 • TIF 22-Launch Park- o An economic development district certified in 2018 for a 286,000 square foot multi-tenant industrial building and parking lot constructed in 2017. The project included a relocation of Menasha Packaging from Brooklyn Park to Lakeville and was required to retain 60 jobs and bring 9 new jobs to Lakeville. Menasha actually created 11 new jobs. o Location: Lot 1, Block 1 Launch Park First Addition o First tax increment date: 07/2019 o Decertification date: 12/31/2027 o Fund balance at 12/31/2021: $98,936 o TIF Note details:  Note amount: $1,000,000  Share of tax increment payable as TIF note principal reduction: 80%  Estimated note payoff date*: August 2025 (early)  Share of tax increment payable as TIF note principal reduction: 95%  The intent was to maximize excess funding we receive from the TIF for use on other projects in the area. • TIF 23-Schneiderman’s- o An economic development district certified in 2019 for a 130,000 square foot Schneiderman’s distribution center constructed in 2018-2019, within the Airlake redevelopment project. The project included wage and job goals, including 40 new full- time jobs in the City. Schneiderman’s actually created a total of 72 jobs. o Location: Lot 2, Block 1 Interstate South Logistics Park o First tax increment date: 07/2020 o Decertification date: 12/31/2028 o Fund balance at 12/31/2021: $7,231 o TIF Note details:  Note amount: $732,637  Share of tax increment payable as TIF note principal reduction: 90%  Estimated note payoff date*: August 2028 • TIF 24- QA-1- o An economic development district certified in 2019 for a 100,000 square foot manufacturing and warehouse building constructed in 2019-20 within the Airlake Redevelopment Project Area. The project included wage and job goals including retaining 95 existing jobs and required to create 19 new full-time jobs in the City. QA1 actually created 54 new jobs. o Location: Lot 1, Block 1, Interstate South Logistics Park Second Addition o First tax increment date: 07/2021 o Decertification date: 12/31/2029 o Fund balance (deficit) at 12/31/2021: $(2,119) o TIF Note details:  Note amount: $526,015  Share of tax increment payable as TIF note principal reduction: 95%  Estimated note payoff date*: August 2027 (early)  The intent of this TIF is to meet the paygo note obligation to the developer in seven years so we can capture the last two years of TIF revenues, for use on other projects in the area OR to decertify early. *A TIF pay as you go obligation (or “paygo note”) was established for this district at an amount agreed upon by the City and the developer. The developer incurred the costs upfront, submits bi-annual property tax payments to the County, and then the City repays a percentage of said tax payments back to the taxpayer. The term of the note will be the sooner of the end date established in the TIF Note, or the date the taxpayer has received the full TIF Note amount. Year Awarded Business District #DEED City Development Cost New Jobs Goal Minimum Wage per Hour Goal Retained Jobs Goal Actual Retained Jobs Actual New FT Jobs Actual Wage per Hour (New Jobs) Last Year Reported Total FT Employment Pre-TIF Estimated Market Value Pre-TIF Total Taxes Post-TIF Estimated Market Value (2022 est. value for taxes payable in 2023) Post-TIF Total Taxes (payable 2022) Cumulative Received Tax Increment (through 12.31.2021) TIF Agreement Status 2014 Menasha Packaging (Expansion)18 $422,520 $626,018 $7,183,562 15 $15.00 221 221 25 8 @ $19-20.99 9 @ $21-22.99 7 @ $23-24.99 1 @ $31.00+ 2017 246 $4,477,700 $174,943 $11,203,700 $331,944 $326,206 Active/Complete 2015 BTD (Expansion)19 $300,000 $1,023,941 $14,198,321 100 $14.00 215 215 144 66 @ $17-18.99 41 @ $19-20.99 17 @ $21-22.99 1 @ $23-24.99 6 @ $25-26.99 1 @ $27-28.99 10 @ $29-30.99 10 @ $31.00+ 2019 359 $8,436,311 $329,119 $19,507,400 $563,828 $548,665 Active/Complete 2017 Launch Properties/Menasha Packaging II (New Build)22 $0 $1,000,000 $14,500,000 9 $20.50 60 60 11 1 @ $19-20.99 9 @ $21-22.99 1 @ $31.00+ 2018 71 $130,553 $3,634 $16,164,400 $461,224 $535,661 Active/In progress 2018 Schneiderman's Distribution Center (New Build)23 $0 $732,637 $6,500,000 40 $17.00 0 0 72 7 @ $13-14.99 14 @ $15-16.99 19 @ $17-18.99 19 @ $19-20.99 5 @ $21-22.99 2 @ $23-24.99 2 @ $25-26.99 1 @ $29-30.99 3 @ $31+ 2020 72 $74,311 $1,991 $7,545,000 $206,854 $124,231 Active/In progress 2019 QA1 Precision Products Inc. (New Build)24 $450,000 $526,015 $6,000,000 19 $14.00 95 95 54 16 @ $17-18.99 7 @ $19-20.99 6 @ $21-22.99 5 @ $23-24.99 2 @ $25-26.99 2 @ $27-28.99 1 @ $29-30.99 15 @ $31+ 2022 149 $149,783 $2,247 $7,388,700 $208,328 $76,353 Active/In progress $1,172,520 $3,908,611 $48,381,883 183 591 591 306 897 $13,268,658 $511,934 $61,809,200 $1,772,178 $1,611,116 REVISED on 5/17/2022 NOTE: 2022 Updated Job Count Total Menasha 286 BTD 390 Schneiderman's 60 QA1 149 Property market value/taxes with PID numbers by TIF district Revised 5.17.22 2021 est. value (for taxes payable 2022) 2022 taxes payable 2022 est. value (for taxes payable 2023) 18 22-11100-03-050 Menasha 10,637,200 331,944 11,203,700 19 22-27900-01-010 BTD 17,382,800 563,828 19,507,400 22 22-44505-01-010 Launch 14,229,000 461,224 16,164,400 23 22-37510-01-020 Schneidermans 6,648,200 206,854 7,545,000 24 22-37511-01-010 QA-1 6,695,200 208,328 7,388,700 55,592,400 1,772,179 61,809,200 City of Lakeville Active TIF Funded Projects TOTALS CITY OF LAKEVILLE, MINNESOTA RESOLUTION NO. 16-31 RESOLUTION APPROVING THE TERMS OF AN INTERNAL FINANCING IN CONNECTION WITH A TAX ABATEMENT FOR MOM BRANDS COMPANY, LLC BE IT RESOLVED by the City Council (the "Council") of the City of Lakeville, Minnesota the "City"), as follows: Section 1. Background. a) The City has heretofore approved the establishment of a tax abatement to assist MOM Brands Company, LLC with the retention of a minimum of 250 existing jobs in its current location within the City. b) The City has determined to assist with the business and job retention project and will pay for certain costs associated with the project (the "Qualified Costs"), for which will be internally financed from City funds available for such purposes. c) The City intends to reimburse itself for the payment of the Qualified Costs, plus interest thereon, from the City's share of annual tax abatements that will be levied for and collected annually in accordance with the terms of this resolution (which terms are referred to as the "Internal Financing"). Section 2. Terms of Internal Financing. a) The City hereby authorizes the advance of up to $375,000 from the City's General Fund that may be paid as Qualified Costs. The City shall reimburse itself for such advances together with interest at the rate stated below. Interest accrues on the principal amount from the date of each advance. The interest rate shall be 3.50%. b) The Abatement shall commence in the first taxes payable year after the existing TIF District in which the property is currently located will be decertified. c) Principal and interest on the Internal Financing shall be paid semi-annually on each February 1 and August 1 (each "Payment Date") following commencement of annual levies by the City for collection of annual tax abatements through the term of the tax abatement collections (up to 10 years). d) The principal sum and all accrued interest payable under the Internal Financing are pre -payable in whole or in part at any time by the City. e) The City may amend the terms of the Internal Financing at any time by resolution of the City Council, including a determination to forgive the outstanding principal amount and accrued interest to the extent permissible under law. Section 3. Effective Date. This resolution is effective upon the date of its approval. Adopted this 7t1 day of March, 2016 BY: Matt Li e, Mayor ATTEST: y Charlene Friedges, City Clerk I==;:::::;:== --w 2osrH·sr wd�==�4·>-,____ [ EE EE,<( H-.1-1-1 -w �1---EEBE 5 EE BE ?S EEt:5gf38E � -rnrm-�BEBE \ � �·m I�---201_1H=sr_w z UJ � NS\ TO,· -....---.:=203 UJ ,_____.__ > . <(· I �-----J J--(_) Ct:· KAIS � 21 JD K .J:D......., -.,_......,.---,.._ '.? 20,5T. -\\ . l&�uMIR ·,1:, . � �--...__c_-1........1...___J ;'0-,..........�- �___, - t--z ====.-------'-----f-....... iiiiii ........................ _�-- UJ � :::jf----i c:c z f----lf2 �KE--.J ----:�==::--::J TIF District 10 - Fairfield Business Campus I-35 Redevelopment Project Area No. 1 Updated February 2021 23 24 22 19 18 Active Lakeville TIF Districts Updated February 2021