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HomeMy WebLinkAbout[06] CMCU TIF Resolution 6 Planning Commission Agenda Item MEETING DATE: March 5, 2015 AGENDA ITEM: CMCU TIF Resolution SUBMITTED BY: Cynthia Smith-Strack BACKGROUND INFORMATION: Central Minnesota Credit Union has submitted a pre-application for tax increment financing assistance to construct a building at 1140 Elm Street East. Approval of the resolution stating the development program for Municipal Development District No. 3 and the Tax Increment Financing Plan for Tax Increment Financing District No. 3-1 conform to the City Plans and Ordinances for Development is needed in order for the Council to proceed. ATTACHMENTS: Request for PC Action Development Program & Tax Increment Financing Plan Resolution PC2015-001 REQUESTED PLANNING COMMISSION ACTION: Authorize the Chair and Administrator to execute Resolution PC2015-001 Finding the Development Program for Municipal Development District No. 3 and the Tax Increment Financing Plan for Tax Increment Financing District No. 3-1 conform to the City Plans for Development of the City as a Whole. THIS PAGE INTENTIONALLY LEFT BLANK PC2015-001 RESOLUTION OF THE PLANNING COMMISSION FINDING THE DEVELOPMENT PROGRAM FOR MUNICIPAL DEVELOPMENT DISTRICT NO. 3 AND THE TAX INCREMENT FINANCING PLAN FOR TAX INCREMENT FINANCING DISTRICT NO. 3-1 CONFORM TO THE CITY PLANS FOR DEVELOPMENT OF THE CITY AS A WHOLE WHEREAS, the City of St. Joseph, Minnesota (the “City”), has prepared a Development Plan for Municipal Development District No. 3 (the “Program”) and a Tax Increment Financing Plan (the “Plan”) for Tax Increment Financing District No. 3 therein and has submitted the Program and the Plan to the City Planning Commission pursuant to Minnesota Statutes, Sections 469.027 and 469.126, and WHEREAS, the Planning Commission has reviewed said Program and Plan to determine conformity of said Program and Plan to the general plan for the development or redevelopment of the City as a whole, and WHEREAS, the Planning Commission is in agreement with the Program and Plan. NOW, THEREFORE, BE IT RESOLVED by the Planning Commission of the City of St. Joseph that the proposed Program and Plan conform to the general plan for the development or redevelopment of the City as a whole and the Commission recommends the Program and Plan to the City Council of the City of St. Joseph for its approval. th Adopted by the Planning Commission of the City of St. Joseph, this 5 day of March, 2015. Rick Schultz, Planning Commission Chair Planning Commission of the City of St. Joseph 6191541v1 This page intentionally left blank CITY OF ST. JOSEPH, MINNESOTA Development Program for Municipal Development District No. 3 0 Tax Increment Financing Plan for ECONOMIC DEVELOPMENT TAX INCREMENT FINANCING DISTRICT #3-1 In connection with the Central Minnesota Credit Union Office Building Project DRAFT Proposed for Adoption on March 16, 2015 TALE OF CONTENTS Development Program for Municipal Development District No. 3 Section A Definitions Section B Statutory Authorization Section C Statement of Need and Public Purpose Section D Statement of Objectives Section E Boundaries of Development District Section F Development Activities Section G Payment of Public Costs Section H Environmental Controls Section I Parks & Open Space Section J Property Acquisition Section K Administration & Maintenance Section L Relocation Section M Amendments Tax Increment Financing Plan for Economic Development TIF District No. 3-1 SECTION 1— CREATION OF DISTRICT Section 1.1 Definitions Section 1.2 Statement of Need & Public Purpose Section 1.3 Statutory Authorizations Section 1.4 Statements of Objectives - - Section 1.5 Designation as an Economic Development District Section 1.6 Statement as to the Property the Authority May Acquire Section 1.7 Activities Proposed for which Development Agreements have been Entered Section 1.8 Specific Development Reasonably Expected to Occur Section 1.9 Estimated Costs Section 1.10 Amount of Bonds to be Issued Section 1.11 Original Net Tax Capacity Section 1.12 The estimated captured net tax capacity of the tax increment financing district: Section 1.13 Duration of the tax increment financing district Section 1.14 Estimates of Impact on Other Jurisdictions Section 1.15 Identification and description of studies and analyses used to make the Findings Section 1.16 Identification of all parcels to be included in the district Section 1.17 Findings & Need for Tax Increment Financing SECTION 2—ADMINISTRATION OF DISTRICT Section 2.1. Use of Tax Increments— Economic Development Districts Section 2.2. Use of Tax Increments— General Section 2.3. "Green Acres" Section 2.4. 4 -Year Knock -Down Rule Section 2.5. Tax Increment Pooling -5 -year Rule Section 2.6. Excess Tax Increment Section2. 7. Limitation on Administrative Expenses 21 Page Section 2.8. Prior Planned Improvements Section 2.9. Development Agreements Section 2.10. Business Subsidy Laws Section 2.11. Assessment Agreements Section 2.12. Modifications of the Tax Increment Financing Plan Section 2. 13. Administration of the Tax Increment Financing Plan Section 2.14. Financial Reporting and Disclosure Requirements EXHIBITS Map( Pam TIF P Estirr, Mark Exhibit 1 Exhibit 2 Exhibit 3 Exhibit 4 Exhibit 5 31 Page Development Program for Municipal Development District No. 3 Introduction —This Development District is referred to, for the purposes of this Plan as the St. Joseph Professional Plat Area. The City has identified this area as one with similar conditions distributed throughout where the City proposes to encourage development that generally presents economic opportunities that create professional and technical job opportunities and a higher than average quality of construction and design. Section A Definitions The terms defined in this section have the meanings given herein, unless the context in which they are used indicates a different meaning: "Authority" means the City Council of the City of St. Joseph, Minnesota. "City" means the City of St. Joseph, Minnesota, a municipal corporation and political subdivision of the State of Minnesota. 10%hh, X "City Council" means the City Council of the City; also referred to as the "Governing Body." "County" means Steams County, Minnesota. � '4%k AV%hh, "Development District" means Municipal Development District No. 3 of the City, which has been created and established pursuant to and in accordance with the Development District Act, the boundaries of which are described in Section E. "Development District Act"' means Minnesota Statutes Sections 469.124 through 469.134, both inclusive. "Development Program" means the Development Program for the Development District. "Land Use Regulations" means all federal, state and local laws, rules, regulations, ordinances and plans relating to or governing the use or development of land in the City, including but not limited to environmental, zoning and building code laws and regulations. "Project Area" means the geographic area of the Development District "Public Costs" means the costs of land acquisition, public and site improvements, repayment of debt service on tax increment bonds, and other eligible costs as set forth in the Development Program and Tax Increment Financing Plan(s). "School District" means the Independent School District No. 742 in Minnesota "State" means the State of Minnesota. 41 Page 'TIF Act'' means Minnesota Statutes, Sections 469.174 through 469.1799, both inclusive. 'TIF District'' means any tax increment financing district presently established or to be established in the future in the Development District. 'TIF Plan" means the respective Tax Increment Financing Plan for each TIF District located within the Development District. Section B Statutory Authorization The Development District Act authorizes the Authority, upon certain public purpose findings by the City Council, to establish and designate development districts within the City and to develop and administer development programs therefore to meet the needs and accomplish the public purposes specified in Section C. In accordance with the purposes set forth in Section 469.124 of the Development District Act, the Authority has established the Development District comprising the area described in Section E and has adopted this Development Program. Ar 'X The TIF Act also authorizes the Authority to establish and administer tax increment financing districts within the Development District. Eligible public costs of the Development District and TIF District may be paid from tax increments collected from the TIF District. Section C Statement of Need and Public Purpose The City Council has determined that there is a need for the City to take certain actions it deems necessary in order to encourage, ensure and facilitate development and redevelopment by the private sector of underutilized, inappropriately used and unused land located within the corporate limits of the City. Such actions are necessary in order to provide additional employment opportunities for residents of the City and the surrounding area; to improve the tax base of the City, the County and the School District, thereby enabling them to better provide needed public services; and to improve the general economy of the City, the County and the State. Section D Statement of Objectives The establishment of the Development District, pursuant to the Development District Act, is in the best interests of the City and its residents, and is necessary in order to give the Authority the ability to meet certain public purpose objectives that would otherwise not be obtainable in the foreseeable future without intervention by the Authority in the normal development process. The Authority intends, to the extent permitted by law, to accomplish the following objectives through the implementation of the Development Program: (1) Provide for the construction and financing of Public Costs in the Development District, which are necessary for the orderly and beneficial development of the Development District. (2) Promote and secure the prompt and unified development and redevelopment of certain property in the Development District, such property is not now in productive use or in its 51 Page highest and best use, with a minimum adverse impact on the environment, and thereby promote and secure the desirable development of other land in the City. (3) Promote and secure additional employment opportunities within the Development District for residents of the City and the surrounding area, thereby improving living standards and reducing unemployment and the loss of skilled and unskilled labor and other human resources in the City. (4) Secure the increase of assessed values of property subject to taxation by the City, the County, the School District, and other taxing jurisdictions in order to enable such entities to pay for governmental services and programs that they are required to provide. (5) Encourage the expansion and improvement of local business and economic development whenever possible. Section E Boundaries of the Development District The boundaries of the Development District are identified in Exhibit 1 of this document. Section F Development Activities The Authority will perform or cause to be performed, to the extent permitted by law, all project activities pursuant to the Development District Act, the TIF Act and other applicable state laws. In doing so the Authority anticipates that the following may be undertaken: • The making of studies, planning and other formal and informal activities relating to the Development Program. • The implementation and administration of the Development Program. • The acquisition of property, or interests in property, by purchase or condemnation, when such acquisition is consistent with the objectives of the Development District. • The preparation of property for use and development in accordance with applicable Land Use Regulations, including demolition of structures, clearance of sites, placement of fill and grading and other site improvements. • The resale of property to private parties. • The construction or reconstruction of public improvements, including but not limited to, streets, storm sewer, sanitary sewer, water and curb and gutter improvements. • The issuance of tax increment bonds and the use of tax increments, or other funds available to the City, to pay or finance the Public Costs of the Development Program. • The use of tax increments to pay debt service on tax increment bonds or otherwise pay or reimburse with interest the Public Costs of the Development Program. Section G Payment of Public Costs Public Costs of the Development Program will be paid primarily from tax increments and/or proceeds of tax increment bonds. Such costs are identified in the TIF Plan for the corresponding TIF District located 61 mage within the Development District. The Authority reserves the right to utilize other available sources of revenue to pay for a portion of the Public Costs. Section H Environmental Controls; Land Use Regulations All municipal actions, public improvements and private development shall be carried out in a manner consistent with existing environmental controls and all applicable land use regulations. Section I Park and Open Space to be Created Park and open space created within the Development District will be done in accordance with the zoning and platting ordinances or standards of the City. Section J Property Acquisition and Proposed Reuse `r The Authority may acquire property for public or private development purposes. Prior to formal consideration of the acquisition of any property for private development purposes, the City Council will require the execution of a binding development agreement with respect thereto and evidence that tax increments or other funds will be available to repay the Public Costs associated with the proposed acquisition. It is the intent of the Authority to negotiate the acquisition of property whenever possible. Appropriate restrictions regarding the reuse and redevelopment of property will be incorporated into any development agreement to which the Authority is a party. Section K Administration and Maintenance Maintenance and operation of the Development District will be the responsibility of the City Administrator who shall serve as administrator of the Development District. The administrator will administer the Development District pursuant to the provisions of Section 469.131 of the Development District Act; provided, however, that such powers may only be exercised at the direction of the City Council. No action taken by the administrator pursuant to the above mentioned powers shall be effective without authorization by the Authority and the City Council. Section L Relocation X 1% Any person or business that is displaced as a result of the Development Program will be relocated in accordance with Minnesota Statutes, Sections 117.50 to 117.56. The City accepts its responsibility for providing for relocation assistance pursuant to Section 469.133 of the Development District Act. Section M Amendments The Authority reserves the right to alter and amend the Development Program subject to the provisions of state law regulating such action. 71 Page Tax Increment Financing Plan for ECONOMIC DEVELOPMENT TAX INCREMENT FINANCING DISTRICT NO.3-1 Introduction The City of St. Joseph has been asked to provide Tax Increment Financing (TIF) assistance to the developers of Bayou Blues, an approximately 16,941 square foot mixed use commercial/residential project along with parking facilities and Alley Flats, a four unit residential for sale condominium project, located in downtown. Pay-as- you-go TIF assistance will be considered to help reduce the extraordinary cost associated with redeveloping the site which include, but are not limited to acquisition, demolition, site improvements and other costs allowable by TIF law. A second development, which is similar in nature but located along Minnesota Avenue, is also in the early stages of discussions and TIF would likely be considered for use for similar purposes. SECTION 1 — CREATION OF DISTRICT Section 1.1 Definitions The terms defined in this section have the meanings given herein, unless the context in which they are used indicates a different meaning: "Authority" means the City Council of the City of St. Joseph, Minnesota. "City" means the City of St. Joseph, Minnesota, a municipal corporation and political subdivision of the State of Minnesota. "City Council" means the City Council of the City; also referred to as the "Governing Body." "County" means Stearns County, Minnesota. "Development District" means Development District No. 3 of the City, which has been created and established pursuant to and in accordance with the Development District Act, the boundaries of which are and described in Exhibit 1. "Development District Act" means Minnesota Statutes, Sections 469.124 through 469.134, both inclusive. "Development Program" means the Development Program for the Development District No.3. "Project Area" means the geographic area of the Development District. "Public Costs" means the costs of land acquisition, public and site improvements, repayment of debt service on tax increment bonds, and other eligible costs as set forth in the Development Program and Tax Increment Financing Plan(s). "School District" means the Independent School District No. 742 in Minnesota. "State" means the State of Minnesota. "TIF Act" means Minnesota Statutes, Sections 469.174 through 469.1794, both inclusive. "TIF District" means Tax Increment Financing district No. 3-1. "TIF Plan" means the respective Tax Increment Financing Plan for each TIF District located within the Development District. Section 1.2 Statement of Need & Public Purpose The 'Need & Public Purpose' remains consistent with those listed in Section C of the Development Program for Municipal Development District No. 3. Section 1.3 Statutory Authorization 'Statutory Authorization' remains consistent with those listed in Section B of the Development Program for Municipal Development District No. 3. Section 1.4 Statement of Objectives The 'Objectives' remain consistent with those listed in Section D of the Development Program for Municipal Development District No.3. Section 1.5 Designation as an Economic Development District "Economic Development district" means a type of tax increment financing district consisting of any project, or portions of a project, which the Authority finds to be in the public interest because: (1) It will discourage commerce, industry, or manufacturing from moving their operations to another state or municipality; (2) It will result in increased employment in the state; or (3) It will result in preservation and enhancement of the tax base of the state. The TIF District qualifies as an economic development district in that the proposed development described in this TIF Plan (see Section 1.8) meets the criteria listed above in (1) and (2). Without the establishment of the TIF District, the proposed development would not occur within the City. The proposed development will also result in increased employment and enhancement of the tax base in both the City and the State. Tax Increments from the TIF District will be used to provide financial assistance to the proposed development in which 85% of the square footage of the facilities to be constructed will be used for Telemarketing and the spaces necessary for and related to the telemarketing call center operation. 91 Page Section 1.6 Statement as to the Property the Authority May Acquire While the City does not anticipate acquiring property within the TIF District, it reserves the right to do so and/or reimburse developer(s) for TIF eligible costs including but not limited to land acquisition. Section 1.7 Development Activities Proposed with Development Agreements The City has not entered into development agreements but anticipates that it will do so upon creation of the TIF District to provide pay-as-you-go assistance to reimburse private developers for TIF authorized improvements. Section 1.8 Specific Development Reasonably Expected to Occur The Central Minnesota Credit Union is proposing to construct a $4.2 million office building in the City of St. Joseph which will house a call center and related activities. The business is requesting pay-as-you-go TIF assistance to write down development costs to a degree that would make the St. Joseph site competitive with other locations that have been considered outside of the City of S. Joseph. This development is proposed to commence and complete construction in 2015. The project site would allow for additional expansion that may be contemplated in the future which has not been ruled out by the developer. Section 1.9 Estimated Costs The following budget is proposed for the TIF District. The budget reflects the maximum revenues and expenditures for the TIF District based upon the increments that could be realized from development that is reasonably anticipated within the TIF District. REVENUES Tax Increments $450,998 Interest Earnings 4,510 Loan/Advance Repayments - Lease Proceeds - Repayments/Return of Increments - Sale of Property - TOTAL $455,508 EXPENDITURES Land Acquisition $ - Site Improvements 130,000 Utilities - Public Improvements 158,267 Affordable Housing - Small City Authority Costs - Administration Costs 45,551 County Admin Costs - TOTAL $333,818 Financing Costs $121,690 101 Page Maximum Bonds $333,818 The Authority reserves the right to adjust the amount of Capital and Administration line items listed above or to incorporate additional eligible items, so long as the total Capital and Administration costs are not increased. Adjusting financing costs, principal or interest, will require a public hearing. The City anticipates providing financial assistance on a pay-as-you-go basis for acquisition and site improvement and site preparation costs as well as other TIF eligible expenses related to the proposed development. In doing so, increments collected in future years will be used to reimburse developers/the city for eligible costs incurred. Section 1.10 Amount of Bonds to be Issued The maximum principal amount of bonds to be secured in whole or in part with increments from TIF District No. 3-1 shall not exceed $ 333,818. The Authority reserves the right to fund all Project costs permitted by law using internal funding, general obligation bonds, pay-as-you-go financing or any other financing mechanism authorized by law. Internal Loans, including a negative balance in the TIF fund, must be authorized by resolution of the entity advancing the loan before money is transferred, advanced or spent. The resolution must include the terms and conditions for repayment of the loan to include, at a minimum, the principal amount of the loan, the interest rate and the maximum term. The interest rate to be charged on internal loans shall be 4% based upon the limit of the greater of the rates specified under Minnesota Statutes 270C.40 or 549.09 as of the date this Plan is approved. Section 1.11 The original net tax capacity of taxable real property within the tax increment financing district The County Auditor shall certify the original net tax capacity of the TIF District. This value will be equal to the total net tax capacity of all property in the TIF District as certified by the State Commissioner of Revenue. For districts certified between January 1 and June 30, inclusive, this value is based on the previous assessment year. For districts certified between July 1 and December 31, inclusive, this value is based on the current assessment year. The Estimated Market Value of all property within TIF District as of January 2, 2013, for taxes payable in 2014, is $496,200 and the estimated tax capacity is $4,962, which is estimated to be the original net tax capacity of the TIF District upon establishment and subsequent certification. Each year the County Auditor shall certify the amount that the original net tax capacity has increased or decreased as a result of: 1. Changes in the tax-exempt status of property; 111 Page 2. Reductions or enlargements of the geographic area of the TIF District; 3. Changes due to stipulation agreements or abatements; or 4. Changes in property classification rates The County Auditor shall also certify the Original Local Tax Rate of the TIF District. This rate shall be the sum of all local tax rates that apply to property in the TIF District. This rate shall be for the same taxes payable year as the Original Net Tax Capacity. In future years, the amount of tax increment generated by the TIF District will be calculated using the lesser of (a) the sum of the current local tax rates at that time or (b) the Original Local Tax Rate of the TIF District. The sum of all local tax rates that apply to property in the TIF District for taxes levied in 2013 and payable in 2014 is 128.4618%. The final Original Local Tax Rate may be higher or lower than this value, depending upon the final local tax rates for payable 2015. The projected original local tax rate does not include the State of Minnesota property tax rate on commercial, industrial and seasonal recreation property of 50.840% (2015), which is not captured as tax increment. Section 1.12 The estimated captured net tax capacity of the tax increment financing district The captured net tax capacity for the TIF District is estimated to be $45,816. Section 1.13 Duration of the tax increment financing district Economic Development districts may remain in existence 8 years from the date of receipt of the firs tax increment, resulting in 9 TIF collections. The Authority anticipates that the TIF District may receive the first increment in 2017. The authority may specify in the tax increment financing plan the first year in which it elects to receive increment, up to four years following the year of approval of the district, with the exception of economic development districts. The District is expected to remain in existence the maximum duration allowed by law (projected to be through 2025). Modifications of this plan shall not extend these duration limits. Section 1.14 Estimates of Impact Exhibit 4 shows the estimated impact on other taxing jurisdictions if the projected Retained Captured Net Tax Capacity of the TIF District were hypothetically available to other other jurisdictions. The Authority believes that there will be no adverse impact on other taxing jurisdictions during the life of the TIF District, since the proposed development would not have occurred without the establishment of the TIF District and the provision 121 Page 2013/2014 Taxing Jurisdiction Local Tax Rate City of St. Joseph 52.0569% Stearns County 54.7913% School District 742 20.0983% Other 1.5153% Total 128.4618 The projected original local tax rate does not include the State of Minnesota property tax rate on commercial, industrial and seasonal recreation property of 50.840% (2015), which is not captured as tax increment. Section 1.12 The estimated captured net tax capacity of the tax increment financing district The captured net tax capacity for the TIF District is estimated to be $45,816. Section 1.13 Duration of the tax increment financing district Economic Development districts may remain in existence 8 years from the date of receipt of the firs tax increment, resulting in 9 TIF collections. The Authority anticipates that the TIF District may receive the first increment in 2017. The authority may specify in the tax increment financing plan the first year in which it elects to receive increment, up to four years following the year of approval of the district, with the exception of economic development districts. The District is expected to remain in existence the maximum duration allowed by law (projected to be through 2025). Modifications of this plan shall not extend these duration limits. Section 1.14 Estimates of Impact Exhibit 4 shows the estimated impact on other taxing jurisdictions if the projected Retained Captured Net Tax Capacity of the TIF District were hypothetically available to other other jurisdictions. The Authority believes that there will be no adverse impact on other taxing jurisdictions during the life of the TIF District, since the proposed development would not have occurred without the establishment of the TIF District and the provision 121 Page of public assistance. A positive impact on other taxing jurisdictions will occur when the TIF District is decertified and the respective taxing jurisdictions can enjoy the increase in taxes generated by the development. Section 1.15 Identification and description of studies and analyses used to make the Findings outlined in Section 1.17 No specific studies were conducted directly by the City. Section 1.16 Identification of all parcels to be included in the district. The property proposed to be included within the boundaries of TIF District No. 3-1 includes two non-contiguous areas with each area having four parcels. The property includes the following: 1 84.53798.0574 Central MN Credit Union Section 1.17 Findings & Need for Tax Increment Financing Before or at the time of approval of the tax increment financing plan, the municipality shall make the following findings, and shall set forth in writing the reasons and supporting facts for each determination: (1) that the proposed tax increment financing district is an Economic Development district Statement of Fact: See Section 1.5 of this document for the reasons and facts supporting this finding. (2) that, in the opinion of the municipality, the proposed development would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future; and the increased market value of the site that could reasonably be expected to occur without the use of tax increment financing would be less than the increase in the market value estimated to result from the proposed development after subtracting the present value of the projected tax increments for the maximum duration of the district permitted by the plan. The requirements of this item do not apply if the district is a housing district; Statement of Fact: The developer(s) have indicated in their applications and verbally, that were it not for the use of Tax Increment Financing assistance they would not move forward with their project. Instead, they would choose another location outside of the City of St. Joseph where the costs to develop would be less expensive. The use of increment is necessary to overcome the difference in costs associated with the alternative site. (3) that the tax increment financing plan conforms to the general plan for the development of the municipality as a whole; Statement of Fact: The proposed development and plan is consistent with the planning efforts, zoning ordinances and efforts of the City of St. Joseph to promote development within the City. (4) that the tax increment financing plan will afford maximum opportunity, consistent with the sound needs of the municipality as a whole, for the development or redevelopment of the project by private enterprise; 131 Page Statement of Fact: The City of St. Joseph and the St. Joseph Economic Development Authority have worked diligently to promote development efforts in the area of the proposed project and believe that projects contemplated in this TIF District will afford maximum opportunity consistent with the needs of the municipality as a whole. SECTION 2 - ADMINISTRATION OF DISTRICT Section 2.1. Use of Tax Increments - Economic Development Districts Tax increments from an economic development district must be used to provide improvements, loans, subsidies, grant, interest rate subsidies, or other assistance in which at least 85% of the square footabge of the facilities to be constructed are used for any of the following purposes: (1) Manufacturing or production of tangible personal property, including processing, resulting in the change of the condition of the property; (2) Warehousing, storage and distribution of tangible personal property, excluding retail sales; (3) Research and development related to the activities listed in (1) or (2) above; (4) Telemarketing if that activity is the exclusive use of the property; (5) Tourism facilities (6) Qualified border retail facilities; or, (7) Space necessary for and related to the activities listed in (1) through (6) above. In addition to the uses specified above, tax increments may also be used to provide assistance for up to 15,000 square feet of any separately owned commercial facility located within a "small city' as defined by Minnesota Statutes 469.176, Subd. 4c). Section 2.2. Use of Tax Increments - General Each year the county treasurer will deduct an estimated 0.36% of the annual tax increment generated by the TIF District and pay such amount to the state general fund. Such amounts will be appropriated to the state auditor for the cost of financial reporting and auditing of tax increment financing information throughout the state. Exhibit 3 shows the projected deduction for this purpose over the anticipated life of the TIF District. The Authority has determined that it will use 100% of the remaining tax increment generated by the TIF District for any of the following purposes: 1. pay for the estimated public costs of the TIF District (including administrative expenses, see Section 7) and City administrative costs associated with the TIF District (see Section 22); 2. pay principal and interest on tax increment bonds, notes or other financial obligations issued to finance the public costs of the TIF District; 3. accumulate a reserve securing the payment of tax increment bonds or other bonds issued to finance the public costs of the TIF District; 4. pay all or a portion of the county road costs as may be required by the County Board under M.S. Section 469.175, Subdivision 1a; or 141 Page return excess tax increments to the County Auditor for redistribution to the City, County and School District in proportion to their local tax capacity rates. Tax increments from property located in one county must be expended for the direct and primary benefit of a project located within that county, unless both County Boards involved waive this requirement. Tax increments shall not be used to circumvent levy limitations. Tax increment cannot be used to finance the acquisition, construction, renovation, operation, or maintenance of a building to be used primarily and regularly for conducting the business of a municipality, county, school district, or any other local unit of government or the State or Federal government. This prohibition does not apply to the construction or renovation of a parking structure, a common area used as a public park, or a facility used for social, recreational, or conference purposes and not primarily for conducting the business of the community. If there exists any type of agreement or arrangement providing for the developer, or other beneficiary of assistance, to repay all or a portion of the assistance that was paid or financed with tax increments, such payments shall be subject to all of the restrictions imposed on the use of tax increments. Assistance includes sales of property at less than the cost of acquisition or fair market value, grants, ground or other leases at less than fair market rent, interest rate subsidies, utility service connections, roads, or other similar assistance that would otherwise be paid for by the developer or beneficiary. Section 2.3. "Green Acres" A TIF District may NOT include parcels that qualified as "green acres" in any of the five (5) years preceding the request for certification, unless 85% of development in the district is restricted to qualified manufacturing or distribution facilities directly related to production of tangible personal property and paying at least 90% of its employees' wages equal to or greater than 160% of the federal minimum wage, or the development in the district is a qualified housing project Section 2.4. 4 -Year Knock -Down Rule If after four years from certification of the TIF District no demolition, rehabilitation, renovation, or qualified improvement of an adjacent street has commenced on a parcel located within the TIF District, then that parcel shall be excluded from the TIF District and the Original Net Tax Capacity shall be adjusted accordingly. Qualified improvements of a street are limited to construction or opening of a new street, relocation of a street, or substantial reconstruction or rebuilding of an existing street. The Authority must submit to the County Auditor, by February 1 of the fifth year, evidence that the required activity has taken place for each parcel in the TIF District. If a parcel is excluded from the TIF District and the Authority or owner of the parcel subsequently commences any of the above activities, the Authority shall certify to the County Auditor that such activity has commenced and the parcel shall once again be included in the TIF District. The County Auditor shall certify the Net Tax Capacity of the parcel, as most recently certified by the Commissioner of Revenue, and add such amount to the Original Net Tax Capacity of the TIF District. 151 Page Section 2.5. Tax Increment Pooling — 5 -year Rule At least 75% of the tax increments from the TIF District must be expended on activities in the district or to pay bonds, to the extent that the proceeds of the bonds were used to finance activities in the district or to pay, or secure payment of, debt service on credit enhanced bonds. For districts, other than Economic Development districts for which the request for certification was made after June 30, 1995, the in -district percentage for purposes of the preceding sentence is 80 percent. Not more than 25 percent of the total revenue derived from tax increments paid by properties in the district may be expended, through a development fund or otherwise, on activities outside of the district but within the defined geographic area of the project except to pay, or secure payment of, debt service on credit enhanced bonds. All administrative expenses are considered to have been spent outside of the District. Tax increments are considered to have been spent within the TIF District if such amounts are: 1. actually paid to a third party for activities performed within the TIF District within five years after certification of the district; 2. used to make payments or reimbursements to a third party under binding contracts for activities performed within the TIF District, which were entered into within five years after certification of the district; or 3. used to pay bonds that were issued and sold to a third party, the proceeds of which are reasonably expected on the date of issuance to be spent within the later of the five-year period or a reasonable temporary period or are deposited in a reasonably required reserve or replacement fund. Beginning with the sixth year following certification of the TIF District, at least 75% of the tax increments must be used to pay outstanding bonds or make contractual payments obligated within the first five years. When outstanding bonds have been defeased and sufficient money has been set aside to pay for such contractual obligations, the TIF District must be decertified. The Authority also elects the option provided by M.S. 469.1763 to increase the amount of expenditures permitted outside the District by up to an additional 10%. However, these expenditures are limited to assisting housing which meets the requirements of a low income housing building defined under section 42(c) of the Internal Revenue Code. The Authority expects that a portion of tax increments may be used for housing expenses elsewhere within the Development District. Section 2.6. Excess Tax Increment On December 31st of each year, the Authority must determine the amount of excess increments for the TIF District. See M.S. Section 469.176 subdivision 2 for a complete definition. Excess increments may only be used to: 1. prepay any outstanding tax increment bonds, notes or other obligations; 2. discharge the pledge of tax increments thereon. 161 Page 3. pay amounts into an escrow account dedicated to the payment of the tax increment bonds, notes or other obligations; or 4. return excess tax increments to the County Auditor for redistribution to the City, County and School District in proportion to their local tax capacity rates. The County Auditor must report to the Commissioner of Education the amount of any excess tax increment redistributed to the School District within 30 days of such redistribution. Allocation of excess increments must be completed by September 31st in the year following the year in which the excess increments were generated. Section2. 7. Limitation on Administrative Expenses Administrative expenses are defined as all costs of the Authority other than: 1. amounts paid for the purchase of land; 2. amounts paid for materials and services, including architectural and engineering services directly connected with the proposed development within the TIF District; 3. relocation benefits paid to, or services provided for, persons or businesses located within the TIF District; or 4. amounts used to pay principal or interest on, fund a reserve for, or sell at a discount, tax increment bonds. 5. amounts used to make payments on other financial obligations used to finance costs outlined above. Administrative expenses include amounts paid for services provided by bond counsel, fiscal consultants, planning or economic development consultants, and actual costs incurred by the City in administering the TIF District. Tax increments may be used to pay administrative expenses of the TIF District up to the lesser of (a) 10% of the total estimated public costs authorized by the TIF Plan or (b) 10% of the total tax increment expenditures of the project. Section 2.8. Prior Planned Improvements The City shall accompany its request for certification to the County Auditor with a listing of all properties within the TIF District for which building permits have been issued during the 18 months immediately preceding approval of the TIF Plan. The County Auditor shall increase the Original Net Tax Capacity of the TIF District by the Net Tax Capacity of each improvement for which a building permit was issued. 171:)age Section 2.9. Development Agreements If more than 10% of the acreage of a project (which contains a housing district) is to be acquired by the Authority with proceeds from tax increment bonds then, prior to such acquisition, the Authority must enter into an agreement for the development of the property. Such agreement must provide recourse for the Authority should the development not be completed. Section 2.10. Business Subsidy Laws Minnesota Statutes 116.1.991 requires an Authority providing a business with a subsidy worth $25,000 to complete a subsidy approval process. Housing assistance is exempt from the requirements. Section 2.11. Assessment Agreements The Authority may, upon entering into a development agreement, also enter into an assessment agreement with the developer, which establishes a minimum market value of the land and improvements for each year during the life of the TIF District. The assessment agreement shall be presented to the County or City Assessor who shall review the plans and specifications for the improvements to be constructed, review the market value previously assigned to the land, and so long as the minimum market value contained in the assessment agreement appears to be a reasonable estimate, shall certify the assessment agreement as reasonable. The assessment agreement shall be filed for record in the office of the County Recorder of each county where the property is located. Any modification or premature termination of this agreement must first be approved by the City, and if the project is valued below the minimum market value, also approved by the County and School District. Section 2.12. Modifications of the Tax Increment Financing Plan Any reduction or enlargement in the geographic area of the Project Area or the TIF District; increase in the amount of bonded indebtedness to be incurred; increase in the amount of capitalized interest; increase in that portion of the Captured Net Tax Capacity to be retained by the Authority; increase in the total estimated public costs; or designation of additional property to be acquired by the Authority shall be approved only after satisfying all the necessary requirements for approval of the original TIF Plan. These restrictions do not apply if: 1. the only modification is elimination of parcels from the Project Area or the TIF District; and 2. the current Net Tax Capacity of the parcels eliminated equals or exceeds the Net Tax Capacity of those parcels in the TIF District's Original Net Tax Capacity, or the Authority agrees that the TIF District's Original Net Tax Capacity will be reduced by no more than the current Net Tax Capacity of the parcels eliminated. The Authority must notify the County Auditor of any modification that reduces or enlarges the geographic area of the Project Area or the TIF District. The geographic area of the TIF District may be reduced but not enlarged after five years following the date of certification. 18 1 Page Section 2. 13. Administration of the Tax Increment Financing Plan Upon adoption of the TIF Plan, the Authority shall submit a copy of such plan to the State Auditor's Office. The Authority shall also request that the County Auditor certify the Original Net Tax Capacity and Net Tax Capacity Rate of the TIF District. To assist the County Auditor in this process, the Authority shall submit copies of the TIF Plan, the resolution establishing the TIF District and adopting the TIF Plan, and a listing of any prior planned improvements. The Authority shall also send the County Assessor any assessment agreements establishing the minimum market value of land and improvements in the TIF District, and shall request that the County Assessor review and certify any assessment agreements as reasonable. The County shall distribute to the Authority the amount of tax increment as it becomes available. The amount of tax increment in any year represents the applicable property taxes generated by the Retained Captured Net Tax Capacity of the TIF District. The amount of tax increment may change due to development anticipated by the TIF Plan, other development, inflation of property values, or changes in property classification rates or formulas. In administering and implementing the TIF Plan, the following actions should occur on an annual basis: 1. Prior to July 1, the Authority shall notify the County Assessor of any new development that has occurred in the TIF District during the past year to insure that the new value will be recorded in a timely manner. 2. If the County Auditor receives the request for certification of a new TIF District, or for modification of an existing TIF District, before July 1, the request shall be recognized in determining local tax rates for the current and subsequent levy years. Requests received on or after July 1 shall be used to determine local tax rates in subsequent years. Each year the County Auditor shall certify the amount of the Original Net Tax Capacity of the TIF District. The amount certified shall reflect any changes that occur as a result of the following: a) the value of property that changes from tax-exempt to taxable shall be added to the Original Net Tax Capacity of the TIF District. The reverse shall also apply; b) the Original Net Tax Capacity may be modified by any approved enlargement or reduction of the TIF District; c) if the TIF District is classified as an economic development district, then the Original Net Tax Capacity shall be increased by the amount of the annual adjustment factor; and d) if laws governing the classification of real property cause changes to the percentage of Estimated Market Value to be applied for property tax purposes, then the resulting increase or decrease in Net Tax Capacity shall be applied proportionately to the Original Net Tax Capacity and the Retained Captured Net Tax Capacity of the TIF District. The County Auditor shall notify the Authority of all changes made to the Original Net Tax Capacity of the TIF District. 191 Page Section 2.14. Financial Reporting and Disclosure Requirements The Authority is responsible for information and financial reporting on the activities of the TIF District. These responsibilities include: Prepare and Publish an Annual Statement. No later than August 1 of each year, the Authority must prepare and publish an annual statement which includes at least the following information: (a) tax increment received and expended in that year (b) Original Net Tax Capacity (c) captured Net Tax Capacity (d) amount of outstanding bonded indebtedness (e) increments paid to other government bodies (f) administrative costs (g) increments paid directly or indirectly outside of the district (h) if a fiscal disparities contribution is computed under section 469.177, Subd. 3(a), the increase in property tax imposed on other properties in the municipality as a result of the fiscal disparities contribution in the manner prescribed by the commissioner of revenue. A copy of the annual statement must also be provided to the State Auditor, county board and county auditor, school board, and the municipality. 2. Prepare an Annual Report. (469.175 Subds. 5 and 6) The State Auditor enforces the provisions of the TIF Act and has full responsibility for financial and compliance auditing of the Authority's use of tax increment financing. The State Auditor's office provides detailed tax increment reporting forms for use in complying with annual reporting requirements. On or before August 1 of each year, the Authority and/or the City must prepare a status and financial report for the TIF District and submit it to the state auditor, the county board, the county auditor, the school board, and the governing body of the municipality, if the municipality is not also the authority. 3. Business Subsidy Annual Reports — Minnesota Statutes 116J.993-995 require units of government to adopt criteria for awarding assistance to business, to monitor the progress of projects receiving assistance and to submit annual reports to the Minnesota Department of Employment & Economic Development depending upon the level of assistance. Reports, when required, must be filed no later than March 1 of each year for the previous year 201 Page EXHIBITS Map(s) Parcels, Values, Improvements TIF Projections Estimated Impact on Other Taxing Jurisdictions Market Value Analysis Exhibit 1 Exhibit 2 Exhibit 3 Exhibit 4 Exhibit 5 211 Page 3N 9AV H16� LU LLJ LLJ Lli LIJ uj uj Li uj LLJ LU jl z z z 7 z z z -- z z z wLLI Lu LL! 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C c m N v m N O^ -p O O d' u w C C o Q O C Q Q •O Q O aj ° N T aJ N v m -0v = in Y Y Z u M X w -o aj aj N X y OU O O n U C N T N T N _ .� in N N L U a) Y O v ai ° C O � p N aJ — Y u U O in in O "O O EV in m T N D H O U in '^ O H EXHIBIT 5 City of Saint Joseph, Minnesota Economic Development Tax Increment Financing District No. 3-1 St. Joseph Professional Plat Development Projects Proposed Plan Adoption Date: 3/16/2015 MARKET VALUE ANALYSIS Increased Market Value of Site $ 2,578,300 Less Present Value of TIF Revenues $ - $ 2,578,300 Reasonably expected increase w/out TIF* $ 500,000 Net Value Increase $ 2,078,300 Present Value Calculation Calculation Date 2015 Present Value Factor 4% Gross Tax Present Period Year Increment Value - 2015 - - 2016 - - 1 2017 39,444 36,468 2 2018 39,444 35,066 3 2019 39,444 33,717 4 2020 39,444 32,420 5 2021 58,644 46,347 6 2022 58,644 44,565 7 2023 58,644 42,851 8 2024 58,644 41,203 9 2025 58,644 39,618 450,998 352,255 1 2 3 4 5 6 7 8 9 EXHIBIT 7 City of Saint Joseph, Minnesota Economic Development Tax Increment Financing District No. 3-1 St. Joseph Professional Plat Development Projects Proposed Plan Adoption Date: 3/16/2015 Pay-as-you-go Payment Schedule 4% TIF Date Principal Rate Interest Payment Balance 1/1/2015 Starting Reimbursable Expenses> 2/1/2016 (5,200) 4.00% 5,200 $ - 2/1/2017 30,092 4.00% 5,408 $ 35,500 2/1/2018 31,296 4.00% 4,204 $ 35,500 2/1/2019 32,547 4.00% 2,953 $ 35,500 2/1/2020 33,849 4.00% 1,651 $ 35,500 2/1/2021 35,203 4.00% 297 $ 35,500 2/1/2022 36,611 4.00% (1,111) $ 35,500 2/1/2023 38,076 4.00% (2,576) $ 35,500 2/1/2024 39,599 4.00% (4,099) $ 35,500 2/1/2025 41,183 4.00% (5,683) $ 35,500 This Schedule is for illustrative purposes only. The actual TIF Note will be based upon actual increment generated. 130,000 135,200 105,108 73,813 41,265 7,416 (27,787) (64,398) (102,474) (142,073) (183, 256)