HomeMy WebLinkAbout7.b. Tax Increment Financing PolicyCity of Rosemount
Executive Summary for Action
City Council Meeting Date: January 2, 1995
Agenda Item:
Tax Increment Financing Policy
Agenda Section:
NEW BUSINESS
Prepared By:
Dan Rogness
Community Development Director
Agenda No: _
ITEM
Attachments:
TIF Policy and Application
Approved By:
V
Staff has been working on a proposed Tax Increment Financing (ill -0 Policy during this past
year. The final draft as attached was recommended by the port authority on December 19,
1995 by a unanimous vote.
The policy is divided into nine sections, each one providing a framework in which the port
authority and city council can make decisions related to tax increment requests. This policy
allows an individual or business to make application for TIF, and it also allows the port
authority and /or city council to initiate a new district or amendment on its own behalf. As a
policy, it does not carry the "law" standards that ordinances do, but rather, it carries the intent
of the city for its overall use of TIF. The policy should probably be reevaluated once a year in
order to make sure it provides useful guidance to the city.
According to state statues, one of the most important justifications for the use of TIF is the "but
for" standard. Therefore, Section VI of the policy requires the applicant to make this
determination based upon one or a combination of six criteria. Also, more cities are using the
pay -as- you -go option for financing, which has the least risk to cities. In Section IV, the policy
identifies this financing method as the most preferable and allows more benefits to the project
developer as a result.
Recommended Action: A MOTION to adopt a RESOLUTION APPROVING THE TAX
INCREMENT FINANCING POLICY AS RECOMMENDED BY THE ROSEMOUNT
PORT AUTHORITY
Council Action:
CITY OF ROSEMOUNT
DAKOTA COUNTY, MINNESOTA
RESOLUTION 1996-
A RESOLUTION APPROVING A TAX INCREMENT FINANCING
POLICY FOR THE CITY OF ROSEMOUNT
WHEREAS, the City of Rosemount is in need of a policy for its use of Tax Increment
Financing (TIF) within the municipality; and
WHEREAS, the Rosemount Port Authority developed a policy and corresponding applica-
tion, and it voted on December 19, 1995 to recommend this policy to the city council; and
WHEREAS, the proposed policy will provide the city a framework in which to review
requests and applications for the following: (1) tax increment projects within existing TIF
Districts, (2) new TIF Districts, and (3) amendments to existing TIF Districts.
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Rosemount
hereby adopts a Tax Increment Financing Policy effective January 2, 1996 for (re)develop-
ment projects within the city.
ADOPTED this 2nd day of January, 1996.
Cathy Busho, Mayor
ATTEST:
Susan M. Walsh, City Clerk
Motion by: Seconded by:
Voted in favor:
Voted against:
TAX INCREMENT FINANCING POLICY
CITY OF ROSEMOUNT, MINNESOTA
APPROVED JANUARY 2, 1996
I. GENERAL PURPOSE
The purpose of this policy is to establish the City of Rosemount's (the "City") position as it
relates to the use of Tax Increment Financing ( "TIF ") for private development. Rosemount
recognizes the importance of TIF as a development financing tool that may be appropriately
used, under some circumstances, to assist the City in satisfying it's economic development
goals and objectives. These specifically include the following:
A. To broaden and diversify the tax base
B. To develop an enhanced employment base
C. To encourage strong, viable growth and development for the commercial
and industrial areas of the community
D. To stimulate the redevelopment of underutilized, blighted or obsolete land
uses
E. To insure that publicly assisted economic development projects meet
established criteria that guarantee public benefit
F. To promote and encourage a high quality of construction
G. To provide more and better services to the citizens
In order to meet these needs, the City finds it essential to create a TIF Policy with specific
guidelines so that the fmancing tool can be used appropriately. On September 3, 1991 (Res.
91 -53), the City established a Port Authority (the "Authority ") which is responsible for the
administration and issuance of TIF funds, pursuant to Minnesota Statutes 469 et sec. The
Authority will consider a request for TIF where the project serves to further the City's stated
economic development goals and objectives. The Authority is also responsible for ensuring
that the project would not otherwise occur "but for" the assistance provided through TIF.
II. PROJECTS AND USES ELIGIBLE FOR TIF ASSISTANCE
In order to meet the stated goals and objectives of the City, the Authority may consider using
TIF to assist private development only in those instances where the proposed project includes
one or more of the following targeted uses:
A. Office, Office /Showroom
B. Office /Service/Warehouse
C. Office/Industrial/Corporate Headquarters
D. Industrial/ Manufacturing /Warehouse
E. Senior Citizen Housing
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F. Commercial and retail uses of a general City-wide benefit where:
1. The project is a part of a redevelopment plan, or otherwise meets the
criteria for a redevelopment TIF district; and
2. The project has a net gain of ten (10) or more new full-time jobs; and/or
3. The project will significantly enhance the overall appearance, character
and/or quality of the Rosemount Commercial District as identified in the
Comprehensive Guide Plan.
G. Residential development or redevelopment only where such a use is found to
meet the "but for" test and is located within or adjacent to the City's
Redevelopment District, and/or serves to meet the City's goals and objectives.
III. ELIGIBLE TIF EXPENDITURES
Project costs qualifying for TIF assistance is defined by state statute, including land
acquisition, site preparation, soils correction, utilities, parking lots, landscaping, lighting,
and associated design and utility fees. The City and Authority prefer to use TIF to address
the following prioritized list of expenditures:
A. Soil correction
B. Deteriorated/obsolete building removal
C. Public streets and utilities (which may include publicly owned land as a write -down)
D. Site improvements (grading)
E. Site improvements (parking, lighting, landscaping)
F. Land write -down
IV. FINANCING STRUCTURE
The City and Authority have three general options regarding the use of TIF relating to the
type of financing structure: (1) bonding /other debt; (2) pay -as- you -go; and (3) loans.
Bonding is the most advantageous to the developer due to the City obtaining and releasing
funds at the beginning of the project; however, this type of financing is also the most risky
for the City. Pay -as- you -go is safe from the City's perspective since tax increments are paid
annually to the project only to the extent that it is available. Loans could be structured under
bonding or pay -as- you -go, but the business is required to pay back the proceeds to the City
or the Authority rather than treating the tax increment as a grant. For purposes of this
policy, the following guidelines are established:
A. Loans will be used to the extent that financing "gaps" are identified rather than site
corrections or write - downs.
B. Pay -as- you -go financing is preferred over bonding or other debt instrument; therefore,
bonding will be used only if a significant public benefit is demonstrated.
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C. The City or Authority may structure the financing such that higher benefits go to the
project developer based on the type of financing (i.e., more principal with a loan or a
longer term with a pay -as- you -go structure).
D. The overall level of public financing should be targeted to no more than fifteen
percent (15 %) for economic development projects and twenty -five percent (25 %) for
redevelopment projects as a percent of the total project cost.
E. If public financing needs exceed the level of tax increments generated from within the
corresponding TIF District, then the City and Authority will evaluate other sources of
financing.
F. In general, the City and Authority desire at least as much private equity in the project
as the level of public financing.
V. CRITERIA; PROJECT
The City and Authority have expressed their support for the use of TIF in appropriate
circumstances. However, they reserve the right to approve or reject new or redevelopment
projects in the City on an individual basis. The Authority will take into consideration the
following factors for each TIF application:
A. Is the proposed development in compliance with TIF law as stated in Minnesota State
Statues 469?
B. Will the project increase the tax base, and if so, to what extent?
C. Will new jobs be created and if so, will these jobs constitute "head of household"
opportunities?
D. What level of quality will the facility reflect with respect to the materials used, size,
landscaping and general aesthetics?
E. Will the project spur future development? When? And what type?
F. Would the project proceed as presented without TIF?
G. Will the proposed project be financially feasible?
H. Will the proposed use(s) be compatible with the City's Comprehensive Guide Plan
and Zoning Ordinance)
I. What will the impact be on City public services?
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W. CRITERIA: "BUT FOR" TEST
A key indicator for the use of TIF is the state - required "but for" analysis that says the
proposed development project would not occur but for the TIF assistance. Therefore, the
City and Authority will review each TIF application based on the following criteria:
A. Development obstacles (e.g., deteriorated/obsolete buildings; poor soil conditions) are
obvious characteristics of the site.
B. The site has been targeted by the City and/or Authority for (re)development based on
specified needs and policy.
C. The development project will (re)locate to a different city and/or state without local
public financing.
D. Public infrastructure is necessary in order to serve a large area or targeted site.
E. The land acquisition costs are reduced in order to address a specified public strategy
or need (e.g., publicly owned property with high costs; lower valued property at
another less desirable location).
F. The public financing fills an identifiable financing "gap" for the project due to such
factors as inadequate lender financing or below- market return on investment.
VII. STANDARDS
A. Construction of the project shall not begin until the Council and the Authority have
approved or amended a TIF District and Plan, and executed a corresponding contract
for private (re)development.
B. The Council and the Authority reserve the right to deny any application for TIF that
does not meet the standards of this Policy.
C. The City and Authority shall be reimbursed by the applicant for costs associated with
reviewing the TIF application, approving a TIF District/Plan, and executing a
contract. The applicant will deposit with the City an administrative fee of $2,500 for
a project within an existing TIF District or $4,000 for a new TIF District, which will
be applied to costs incurred by the City in conjunction with the proposed project. In
the event such costs exceed the deposit, the applicant may be required to pay
additional costs billed by City or Authority.
D. At all times, procedures and policies related to the proposed or actual approval of the
TIF will comply with the laws of the State of Minnesota.
E. All applications and supporting documents shall become property of the City, and the
classification of the data shall be governed by the Data Practices Act.
--- Page 4 of 5 ---
F. The Council and Authority reserve the right to select and retain, at the expense of the
applicant, a third party to assist in the evaluation of the proposed development project
and corresponding TIF District/Plan
G. The applicant shall pay all permits and fees normally charged by the City as part of
the approval process unless otherwise approved by the City.
VIII.
ADMINISTRATIVE
The attached TIF application forms (Exhibit A of this Policy) must be completed and must
include all of the information requested without exception. Also, the applicant shall agree to
allow the City and the Port Authority to check the backgrounds and financial history of the
applicant(s). The Authority and City staff will review the application and provide
preliminary recommendations to the Authority and Council as to the compliance of the
proposed project with the City's economic development goals. Other required project
approvals may proceed simultaneously with the TIF approval process.
IX. PROCEDURE FOR A NEW /AMENDED TIF DISTRICT
A. A completed application with the deposit shall be submitted to the City Administrator.
The City or Authority may also initiate a proposed TIF District/Plan without applica-
tion based upon a determination on the suitability of a particular area for inclusion in
a TIF district (i.e., type of district; legal criteria; and future use of the area).
B. The proposed (re)development project is presented to the Authority. If the Authority
desires to proceed, it authorizes its staff and/or consultants to draft a new or amended
TIF plan for a district, or draft a development agreement if the project is within an
existing district (step F). The Authority approves a preliminary plan and requests a
public hearing; the Council orders a public hearing on the proposed TIF District/Plan.
C. The Planning Commission adopts a resolution that the proposed use(s) are consistent
with the City's Comprehensive Guide Plan.
D. Information on the proposed TIF District/Plan is sent to the county and school district
thirty (30) days prior to the public hearing; the notice of public hearing is published;
the County Commissioner representing the area of the TIF district is notified in
writing of the proposed district's creation (if required by state law).
E. The City Council holds a public hearing; it approves or disapproves the TIF
Plan/District; the district is certified with Dakota County and the State of Minnesota.
F. City staff and/or consultants prepare a Contract for Private (Re)Development that
identifies the responsibilities and obligations of all parties associated with the
proposed project; the Authority reviews and recommends this contract to the Council
for final adoption.
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APPLICATION FOR TAX INCREMENT FINANCING
BACKGROUND INFORMATION
APPLICANT NAME
DATE
PHONE
TYPE OF BUSINESS (c.g., corporation or partnership)
NATURE OF BUSINESS
REPRESENTATIVE
LOCATION
FINANCIAL HISTORY OF APPLICANT
A.
B.
C.
2. LIST OTHER PROJECTS THE APPLICANT HAS COMPLk hU. LIST THE VALUE, DEBT LOAD, AND LENDER ON EACH PROJECT.
HAS THE APPLICANT EVER DEFAULTED ON ANY LOAN COMMITMENT FOR THE PROJECTS LISTED?
3. HAS THE APPLICANT EVER FILED FOR BANKRUPTCY?
4. TOTAL ESTIMATED PROJECT COST AND THE REQUESTED AMOUNT FOR TAX INCREMENT FINANCING
A -1
APPLICATION FOR TAX INCREMENT FINANCING
INFORMATION ON PROPOSED PROJECT
1. INDUSTRIALCOMMERCIAURETAUJHOUSING?
2. WHAT IS THE PRESENT EMPLOYMENT AT THIS LOCATION?
3. WHAT. WILL THE EMPLOYMENT BE AT COMPLETION OF PROJECT?
4. ANNUAL SALES:
PRESENT FUTURE
5. WHAT IS THE PRINCIPAL BUSINESS OR PRODUCT OF THE COMPANY?
6. POTENTIAL OTHER USE OF PROPOSED FACILITY?
7. WILL THIS PACILITY ATTRACT OTHER RELATED INDUSTRIES?
8. WHAT 13 THE PROPOSED PRIVATE FINANCING ARRANGEMENT?
DEBT $ EQUITY $
9. WHAT IS THE STATUS OF YOUR FINANCING FOR THE PROJECT?
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1. General description of the proposed project, including benefits to Rosemount.
2. Building and site information, including proposed building size, building materials,
estimated market value upon completion (land and improvements), site plan, and
expected commencement/completion dates.
3. Background information on the company.
4. A financing "Source & Use" statement, including private financing, equity, and the
requested TIF amount and terms.
5. A "But For" letter (see Section VI of the TIF Policy) and financial analysis
demonstrating need for public financing assistance.
6. Letter of feasibility from a bank, lender, or financial advisor, including the following
(where applicable):
Retail or office market analysis;
Property appraisal for the proposed project;
Pro forma analysis.
7. Business financial statements including past three years of profit/loss statements and
balance sheets.
8. Resumes and personal financial statements of all principals with 20 % or more
ownership in the business.
9. Statement of property ownership or control (e.g., purchase agreements and contracts
10. Property information, including legal description, tax parcel ID number, size of
parcel(s), and current market value.
r%F f i i OF R il[i.l►OUNT
}
(A separate form
shareholders.
APPLICATION FOR TAX INCREMENT FINANCING
RELEASE AUTHORIZATION
must be signed by all of the applicant's partners, officers, owners, or
Applicant Name: Date:
The undersigned hereby affirms that all information provided to the Rosemount Port
Authority (the "Authority ") relative to all applications submitted for Tax Increment Financing
( "TIF ") consideration are true and complete to the best of the undersigned's knowledge. The
undersigned acknowledges that falsified information or significant omissions on either this
application or other supporting documents may disqualify the applicant for further
consideration for TIF from the Authority. The undersigned hereby authorizes the Authority
to investigate all statements, financial institutions, commercial and/or private partnerships,
credit ratings, or other records or sources as may be necessary for the Authority to determine
an appropriate recommendation of the TIF application.
Information provided by the undersigned is governed by the Minnesota Government Data
Practices Act. The undersigned hereby authorizes release of personal, financial or business
records to the Authority. Private data will be used when it is required for administration and
management of the Rosemount TIF Policy. The undersigned, to the extent permitted by law,
hereby releases any recipient of this authorization from any and all liability for damages that
may arise from furnishing any requested information.
Signature:
Name (Printed) :
Relationship to Applicant:
Date:
A -4