HomeMy WebLinkAbout[06] Public Hearing, Tax Abatement Bonds ���.5��.��.
,����,���,���;� Council Agenda Item 6
MEETING DATE: June 15,2015
AGENDA ITEM: Public Hearing—Proposed Property Tax Abatement—
Northland Securities
SUBMITTED BY: Administration/Finance
BOARD/COMMISSION/COMMITTEE RECOMMENDATION: None
PREVIOUS COUNCIL ACTION: City Council negotiating with ISD 742 for the purchase of Colts
Academy for a community center in the amount of$2.3M. During the negotiations the Council identified
the items of concern for staff to negotiate a purchase agreement with ISD 742 and Little Saints.
BACKGROUND INFORMATION: Staff reviewed the financial options for purchasing Colts
Academy to be used for a community center. The negotiations includes lease proceeds for Little Saints
daycare. Council indicated half cent sales tax revenue would be used for the purchase, with the lease
revenue offsetting the operational costs of the building.
Based on the uses of the building and funding sources,the City has the option of issuing either sales tax
revenue bonds or tax abatement bonds. The use of sales tax revenue bonds would require that the City
maintain a balance equal to 125% of the levy. While this could be achieved today, depending on how the
City opts to use the funding, it could restrict access to the funds for the life of the debt(15 years).
Alternatively the City has the option of issuing Sales Tax Abatement Bonds. It will be actual sales t�
revenue paying the debt,not the taxes from the general fund. This is the similar process that Sartell is
using for one of their project. The abatement funds have a lower interest rate and based on an earlier
analysis,the Tax Abatement Bonds would save the City approximately$ 110,000 over the life of the
debt. After reviewing the provisions for each bond type, Staff recommends tax abatement bonds. During
the review of the options it was determined that if the School District participated,the City could narrow
the number of parcels that were needed for abatement. Therefore,the City requested participation of ISD
742 and they agreed. The City is also required to solicit participation from Stearns County and they
declined as anticipated.
The public hearing is to get public testimony before issuing the abatement bonds far the parcels listed in
the hearing notice. The notice was published in the St. Cloud Times on June 3rd meeting the publication
rules under the abatement laws. This notice required 10 days plus one(11 days)far publication. Due to
the complexity of the project, combining public and private uses, it took time to wark out the details and
prepare the necessary paperwark.
Property owners listed in the abatement were not required to be notified as their property tax statements
will not change. The City and School District will be required to show an annual levy for the abatement
(not shown as sales tax revenue); however,the City's half cent sales tax revenue will pay for the bonds.
Even though the School District is participating,their actual levy will not be effected.
After the public hearing is closed,the Council will consider two actions: 1)issuance of Tax Abatement
Bonds; 2)Execution of the Abatement Agreement between the City of St. Joseph and ISD 742.
Northland Securities will be present to respond to questions Council may have. The Abatement bonds
will be issued with the 2015 Street Improvement bonds and 2015 Equipment Certificates to save money
on issuing costs.
BUDGET/FISCAL IMPACT: Annual Estimated Abatement(Sales Tax Revenue)$160,000
ATTACHMENTS: Request for Council Action—Public Hearing Proposed Tax Abatement
Resolution 2015-021-Approving Abatement and Agreement
Abatement Agreement
Abatement Public Hearing Notice
REQUESTED COiJNCIL ACTION: Authorize Resolution 2015-021 Approving property tax
abatement related to financing the acquisition and construction of public facilities in the City of St. Joseph
and autharize execution of the abatement agreement between the City of St.Joseph and ISD 742.
CITY OF ST. JOSEPH
NOTICE OF PUBLIC HEARING
REGARDING PROPOSED PROPERTY TAX ABATEMENT
NOTICE IS HEREBY GIVEN that the City Council of the City of St. Joseph, Minnesota (the
"City")will hold a public hearing at or after 6:00 p.m. on Monday, June 15, 2015, at City Hall, 25 College
Ave.N.in the City, on the proposal that the City abate all or a portion of property taxes levied by the City on
the properties identified by the following parcel identification numbers(the"Property"):
84.53795.0220 84.53475.0008
84.53546.0000 84.53474.0030
84.53797.0800 84.53474.0028
84.53432.0072 84.53474.0032
84.53475.0006 84.53795.0200
84.53475.0004 84.53360.0005
84.53547.0006
The total amount of the taxes proposed to be abated by the City on the Property is estimated to be not
more than $1,797,000 collected over a 15-year term. The City Council will consider the property taac
abatement in connection with financing the acquisition of an existing elementary school and renovation for
use as a regional communiry center(the"Project").
The City proposes to issue General Obligation Ta�c Abatement Bonds in an amount not to exceed
$1,900,000 to finance the Project.
All interested persons may appear at the public hearing and present their views orally or in writing.
Dated: [Date of Publicatian]
BY ORDER OF THE CITY COUNCIL OF
THE CITY OF ST.JOSEPH,MINNESOTA
/s/Judy Weyrens
City Administrator
City of St.Joseph, Minnesota
CITY OF ST. JOSEPH, MINNESOTA
RESOLUTION NO. 2015-021
RESOLUTION APPROVING PROPERTY TAX ABATEMENT
RELATED TO FINANCING THE ACQUISITION AND CONSTRUCTION
OF PUBLIC FACILITIES IN THE CITY OF ST. JOSEPH AND AUTHORIZING
EXECUTION OF AN ABATEMENT AGREEMENT
BE IT RESOLVED by the City Council (the "City Council") of the City of St. Joseph,
Minnesota(the "City") as follows:
Section 1. Recitals.
1.01. The City is authorized by Minnesota Statues, Sections 469.1812 through 469.1815,
as amended (the "Act"), to grant a property tax abatement on one or more parcels of property in
order to accomplish certain public purposes, including situations in which the abatement will
increase or preserve tax base,provide or help acquire or construct public facilities, help redevelop
or renew blighted areas, help provide access to services for City residents, or finance or provide
public infrastructure. The City is also authorized by the Act to issue bonds or other obligations to
pay for public improvements benefiting the property.
1.02. Pursuant to Section 469.1813, subdivision 1 of the Act, the City may grant an
abatement of all or a portion of the taxes imposed by the City on one or more parcels of property
to pay for all or part of the cost of acquisition or improvement of public facilities. Section
469.1813, subdivision 4 prohibits the City from entering into an abatement if the abatement will
occur while the parcel or parcels are located in a tax increment financing district.
1.03. The City has contemplated granting a property tax abatement in order to help
finance the acquisition and construction of public facilities,including the acquisition of an existing
elementary school for redevelopment and repurposing into a regional community center to serve
as an economic engine for the broader community, benefiting commercial, industrial, and
residential properties,by drawing visitors and new residents to the City(the "Project")pursuant to
the Act.
1.04. The City has identified 13 parcels, identified in EXHIBIT A attached hereto (the
"Abatement Property"), located within the City, which will be benefitted by the Project and from
which the City proposes to abate the City's share of taxes to help finance the Project, subject to all
the terms and conditions of this resolution (the "Abatement"). The Abatement Property is not
located in a tax increment financing district.
1.05. The City intends to issue general obligation tax abatement bonds in the aggregate
principal amount not to exceed $1,900,000 (the "Abatement Bonds") and will be used to pay the
costs of the Project pursuant to the Act. The Abatement Bonds are expected to be paid primarily
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through the collection of Abatement revenues by the City and Independent School District No.
742, (the "School").
1.06. The City has requested the School to approve an abatement for the Project and to
pledge the aggregate abatement revenues collected by the School for the Project to the City and
have determined to enter into an Abatement Agreement in connection therewith (the "Abatement
Agreement").
1.07. On the date hereof, the City Council conducted a duly noticed public hearing on
the Abatement at which the views of all interested persons were heard.
Section 2. Findin�s.
2.01. It is hereby found and determined that the benefits to the City from the Abatement
will be at least equal to the costs to the City of the Abatement for the following reasons:
(a) The Abatement will help finance the Project, which is necessary to
redevelop underutilized property and will maximize the use of land within the City in a
way that will maintain the local economy, protect natural resources, and contribute to the
quality of life for residents of the City.
(b) The Project will help preserve and increase the value of the Abatement
Property, thereby helping to generate additional City tax revenues over the long term after
the expiration of the Abatement.
2.02. It is hereby found and determined that the Abatement is in the public interest for
the following reasons:
(a) The Abatement will increase or preserve tax base by helping to maintain
values in the area, as set forth above.
(b) The Abatement will finance or provide for the acquisition and construction
of public facilities in the City, which will protect the general health and welfare of the
community and contribute to the quality of life in the City by maintaining public
infrastructure and facilities in proper working order.
Section 3. Actions Ratified; Abatement A�proved.
3.01. The City hereby ratifies all actions of the City's staff in publishing the notice of the
public hearing in accordance with the Act.
3.02. Subject to the provisions of the Act,the Abatement is hereby approved and adopted
subject to the following terms and conditions:
(a) The term "Abatement" means the City's share of the real property taxes
generated from the improvements on the Abatement Property, in the amounts described in
this Section:
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(i) The aggregate and combined Abatement paid by the City and paid
by the School during the term of this resolution will not exceed the amount
necessary to pay the 105%of the principal of and interest on the Abatement Bonds,
up to a maximum of$2,668,000.
(ii) Notwithstanding anything to the contrary herein, the annual
Abatement amount will not exceed the amount produced by extending the City`s
total tax rate for the applicable year against the tax capacity of the Abatement
Property, as of January 2 in the prior year.
(iii) In accordance with Section 469.1813, subdivision 8 of the Act, in
no year shall the Abatement, together with all other abatements approved by the
City under the Act and paid in that year, exceed the greater of 10% of the City's
levy for that year or $200,000 (the "Abatement Cap"). The City may grant any
other abatements permitted under the Act after the date of this resolution,provided
that to the extent the total abatements in any year exceed the Abatement Cap, the
allocation of Abatement Cap to such other abatements is subordinate to the
Abatements under this Agreement.
(b) The Abatement will be for a term of fifteen (15) years and shall apply to
taxes payable in the years 2016 through 2030, inclusive.
(c) This resolution may not be modified because the City is issuing the
Abatement Bonds.
(d) In accordance with Section 469.1815 of the Act,the City will add to its levy
in each year during the term of the Abatement the total estimated amount of current year
Abatement granted under this resolution.
3.03. The City will issue the Abatement Bonds at the time and in the manner it deems
appropriate, and in accordance with Section 469.1814, subdivision 5 of the Abatement Act, the
proceeds thereof will be used to finance the Project and to pay the costs of issuance of the
Abatement Bonds.
3.04. Abatement Agreement; Authorization to Execute.
(a) The City Council hereby approves the Abatement Agreement in
substantially the form submitted, and the Mayor and Administrator-Clerk are hereby
authorized and directed to execute the Abatement Agreement on behalf of the City.
(b) The approval hereby given to the Abatement Agreement includes approval
of such additional details therein as may be necessary and appropriate and such
modifications thereof, deletions therefrom and additions thereto as may be necessary and
appropriate and approved by the City officials authorized by this resolution to execute the
Abatement Agreement. The execution of the Abatement Agreement by the appropriate
officer or officers of the City shall be conclusive evidence of the approval of the Abatement
Agreement in accordance with the terms hereof.
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3.05. The Mayar and City Administrator are authorized and directed to execute and
deliver any agreements, certificates or other documents that the City determines are necessary to
implement this resolution.
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Approved by the City Council of the City of St. Joseph, Minnesota, this 15th day of June,
2015.
Mayor
Attest:
City Administrator-Clerk
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EXHIBIT A
ABATEMENT PROPERTY
Parcel Identification Numbers:
84.53795.0220 84.53475.0008
84.53546.0000 84.53474.0030
84.53797.0800 84.53474.0028
84.53432.0072 84.53474.0032
84.53475.0006 84.53795.0200
84.53475.0004 84.53360.0005
84.53547.0006
Map of the Abatement Property:
[Insert map]
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ABATEMENT AGREEMENT
This Abatement Agreement (this "Agreement") dated , 2015, by and
between the City of St. Joseph, Minnesota (the "City") and Independent School District Number
742 (the "School District"):
WIT'NESSETH:
WHEREAS, the City will issue general obligation tax abatement bonds (the "Bonds") for
the purpose of acquiring an existing elementary school for redevelopment and repurposing into a
regional community center to serve as an economic engine for the broader community, benefitting
commercial, industrial, and residential properties by drawing investors and new residents to the
City (the "Project"); and
WHEREAS, this Agreement is authorized by Minnesota Statutes, Section 469.1813,
Subdivision 2,as a method for the School District to transfer to the City the School District's share
of the property taxes payable in the years 2016 through 2030 derived from the increased market
value resulting from development on the Tax Abatement Property(as defined in Exhibit A hereto
and in the abatement resolutions adopted by both of the parties hereto (the "Resolutions")) (the
"School District Abatements") to be pledged to the payment of the Bonds and interest thereon
together with the City's share of the property taxes payable in the years 2016 through 2030 derived
from the increased market value resulting from development on the Tax Abatement Property (the
"City Abatements"); and
WHEREAS,the City has agreed to reimburse the School District for the School District's
Abatements by a pledge of sales tax revenues; and
NOW, THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties hereto do hereby agree as
follows:
1. Purpose or Power; Method or Manner. The purpose hereof is to coordinate the use
of tax abatements made by the parties hereto. The power to be exercised pursuant hereto is to
utilize tax abatements for purposes authorized by Minnesota Statutes, Section 469.1812 et seq.
The method by which the purpose shall be accomplished is for the City to acquire and construct
the Project to be paid for with approximately $1,900,000 of the Bond proceeds. The manner in
which the power shall be exercised is by actions and this Agreement.
2. Disbursement of Funds. Disbursements from public funds to carry out the purposes
of this Agreement shall be made as follows: (1) the City shall expend approximately $1,900,000
of the Bond proceeds on the acquisition and construction of the Project; (2) the School District
shall transfer School District Abatements it receives to the City to pay a portion of the principal of
and interest on the Bonds; (3)the City shall retain City Abatements it receives, to pay a portion of
the principal of and interest on the Bonds; and (4) the City shall pay to the School District sales
tax revenues to reimburse it for the payment of the School District Abatements. This method
agrees as far as practicable with the method provided by law for the disbursement of funds made
by the parties hereto.
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3. Pledge of Abatements. The School District hereby pledges the School District
Abatements to the City for the payment of the Bonds and the interest thereon. The School District
shall pay the semiannual School District Abatements to the City on or before July 1, 2016 and
January 1 and July 1 thereafter to and including January 1,2031. To evidence its obligations under
this Section 3 the School District shall execute and deliver to the City the Promissory Note attached
as Exhibit B hereto.
4. Pledge of Sales Tax Revenues. In consideration for the payment to the City by the
School District of the School District Abatements, the City hereby pledges to the School District
sales tax revenues received by the City in an amount equal to the School District Abatement
payments made by the School District. The City shall make such payments of sales tax revenues
to the School District within three business days following receipt by the City of a payment of
School District Abatement. The City has no outstanding liens agains the City's sales tax revenues
and the City hereby grants a first lien in the City's sales tax revenues to the School District for the
term of this Agreement.
5. Contracts. Contracts let and purchases made under this Agreement shall conform
to the requirements applicable to contracts and purchases of the City.
6. Accountin�. Strict accountability of all funds and reports of all receipts and
disbursements shall be made as follows: annually the City shall report to the School District on
the amount and utilization of School District Abatements and City Abatements.
7. Terms; Termination of Agreement. This Agreement shall continue until the
discharge and payment in full of the Bonds, estimated to occur on or about June 1, 2030. The
parties hereto agree that, pursuant to Minnesota Statutes, Section 469.1814 Subd. 4, the School
District Abatements and the City Abatements may not be modified or changed during the term of
this Agreement.
8. Disposition of Property. Property acquired as the result of the joint or cooperative
exercise of powers pursuant hereto shall be disposed of as follows: the City shall retain all property
acquired in connection with the Project. Surplus moneys shall be returned in proportion to
contributions of the parties hereto after the purpose of this Agreement has been completed.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement by the
signatures of their respective officers and by affixing hereto their seals.
CITY OF ST. JOSEPH, MINNESOTA
By
Its Mayor
(SEAL)
And By
Its Administrator-Clerk
Abatement Agreement by and between the City of St. Joseph, Minnesota and Independent
School District Number 742, Minnesota.
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INDEPENDENT SCHOOL DISTRICT
NUMBER 742, MINNESOTA
By
Its Chair of the School Board
(SEAL)
And By
Its Clerk
Abatement Agreement by and between the City of St. Joseph, Minnesota and Independent
School District Number 742, Minnesota.
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EXHIBIT A
TAX ABATEMENT PROPERTY
Parcel Identification Numbers:
84.53795.0220 84.53475.0008
84.53546.0000 84.53474.0030
84.53797.0800 84.53474.0028
84.53432.0072 84.53474.0032
84.53475.0006 84.53795.0200
84.53475.0004 84.53360.0005
84.53547.0006
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EXHIBIT B
FORM OF PROMISSORY NOTE
$840,000 _, 2015
Independent School District Number 742(the "School District"),for value received,hereby
promises to pay to the City of St. Joseph, Minnesota (the "City") or its assigns (the City and any
assigns are hereinafter referred to as the "Holder"), at its designated principal office or such other
place as the Holder may designate in writing,the principal sum of$840,000 or so much thereof as
may be advanced under this Note, without interest, in any coin or currency which at the time or
times of payment is legal tender for the payment of private debts in the United States of America.
1. This Note evidences the promise made by the School District to the City pursuant
to a Abatement Agreement(the "Agreement")to pledge the School District's share of the property
taxes payable in the years 2016 through 2030 derived from the increased market value resulting
from development on the Tax Abatement Property(as defined in Exhibit A to the Agreement) (the
"School District Abatements") to the payment of a portion of the principal of and interest on the
portion of the City's general obligation tax abatement bonds (the "Bonds") allocable to the
acquisition and construction of the Project, as defined in the Agreement.
2. The principal of this Note is payable in the amounts and the times in accordance
with the attached Schedule A. No interest shall accrue on this Note.
3. The School District shall have the right to prepay the principal of this Note,in whole
or in part, without prepayment penalty on any date.
4. All of the agreements,conditions,covenants,provisions,and stipulations contained
in the Agreement are hereby made a part of this Note to the same extent and with the same force
and effect as if they were fully set forth herein. It is agreed that time is of the essence of this Note.
5. In the event of failure by the School District to pay any principal when due, then
the Holder shall have no right or option to declare the entire principal balance immediately due
and payable, but any such delinquent payment shall be payable out of revenues next available as
provided in Paragraph 1 hereof and such delinquency shall not defer or postpone any installment
next due hereunder. All such delinquent payments shall be immediately due and payable on the
date when all of the Bonds have been paid or otherwise satisfied and are no longer outstanding.
6. This Note may not be amended,modified, or changed except only by an instrument
in writing signed by the party against whom enforcement of any such amendment, modification,
or change is sought.
7. This Note shall be governed by and construed in accordance with the laws of the
State of Minnesota without regard to its conflict of laws provisions. Any disputes, controversies,
or claims arising out of this Note shall be heard in the state or federal courts of Minnesota, and all
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parties to this Note waive any objection to the jurisdiction of these courts, whether based on
convenience or otherwise.
8. This Note,with the Agreement,constitutes the entire agreement between the parties
pertaining to its subject matter and it supercedes all prior contemporaneous agreements,
representations, and understandings of the parties pertaining to the subject matter of this Note.
9. Wherever possible, each provision of this Note and each related document shall be
interpreted so that it is valid under applicable law. If any provision of this Note or any related
document is to any extent found invalid by a court or other governmental entity of competent
jurisdiction, that provision shall be ineffective only to the extent of such invalidity, without
invalidating the remainder of such provision or the remaining provisions of this Note or any other
related document.
10. The Clerk is hereby directed to file a certified copy of this Note and the resolution
approving it and the Agreement with the County Auditor of Stearns County, Minnesota, together
with such other information as the County Auditor shall require,and to obtain the County Auditor's
certificate that the Note has been entered in the County Auditor's Bond Register and that the tax
levy required by law has been made.
IT IS HEREBY CERTIFIED AND RECITED that all conditions, acts, and things required
to exist, happen, and be performed precedent to or in the issuance of this Note do exist, have
happened, and have been performed in regular and due form as required by law.
IN WITNESS WHEREOF,the School District has caused this Note to be duly executed as
of the_day of , 2015.
1NDEPENDENT SCHOOL DISTRICT
NUMBER 742, MINNESOTA
By
Its Chair of the School Board
(SEAL)
And By
Its Clerk
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SCHEDULE A
NOTE PAYMENTS
$28,000 payable on July 1, 2016 and each January 1 and Juiy 1
thereafter to include January 1, 2031
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