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HomeMy WebLinkAboutApr_18th_2023_EDASt. Joseph Economic Development Authority Tuesday, April 18th, 2023 12:00 PM 75 Callaway St E (St. Joseph City Hall) ** The meeting will also be offered remotely via Zoom** 1.Call to order 2.Public Comments 3.Approve Agenda 4.Consent Agendaa.Minutes – Requested Action: Approve the minutes of March 21st, 2023b.Financial Report – Up to FEB 5.BFA Grant – Sal’s Bar 6.TIF/Abatement Inquires 7.Project list/tracker 8.Boutique hotel 9.JR Mobile 10.General Business/Development update 11.Board Member Announcements 12.Adjourn Zoom Meeting Information Join Zoom Meeting https://us06web.zoom.us/j/89347556498?pwd=TTc4SGh4V3Y1bFBPSmI3SHlXOGhJZz09 Meeting ID: 893 4755 6498 Passcode: 707356 One tap mobile +13126266799,,89347556498#,,,,*707356# US (Chicago) +19292056099,,89347556498#,,,,*707356# US (New York) 1 Board Member Larry Hosch will be attending meeting via Zoom and be located at: 75 Rev. Dr. Martin Luther King Jr BLVD St. Paul, MN 55155 Pursuant to due call and notice thereof, the St. Joseph Economic Development Authority met on Tuesday, March 21st, 2023 at 12:00 PM. Members Present: Board Members Joe Bye, Dale Wick, Larry Hosch Members Absent: Kevin Kluesner, Rick Schultz City Representatives Present: Community Development Director Nate Keller Wick called the St. Joseph Economic Development Authority meeting to order at 12:00 PM Public Comments None Agenda Approval: Bye made a motion to approve the agenda as presented; seconded by Hosch and passed unanimously by those present. Consent Agenda: Wick made a motion to approve the consent agenda as follows; seconded by Bye and passed unanimously by those present. a. Minutes - Approve the minutes of February 21st, 2023b.Financial Report – None CSBSJU Student Project Keller provided some background on the conversation he had with student who is interested in doing an “Economic Impact” report for the city. The report would look at programs the city offers like the Revolving Loan Fund. Liam Miller CSBSJU student provided an overview of the project. Project would entail a design evaluation, monitoring, and impact evaluation. Hosch asked about including the Façade grant into the report. Miller will look to add this program into his report. RLF Policy Background on the discussion the Finance Team had on the RLF policy was provided by Keller. Discussion was had on the interest rate language and aligning the program with all of DEED’s goals/requirements. Keller mentioned any changes would not impact the current applicants request. Keller to look at the cost of Administrating the loan and language for interest rate. The importance of being below prime lending rate was discussed. Boutique hotel Keller continues to meet with interested developers. JR Mobile Update Council granted an extension to the owner to complete the demolition of the building by April 30th. This is a 30-day extension from the Court issued end of March date. General Business/Development updates Keller gave an overview of: Goodin C.U.P.; Wedding/Event Venue request, FMLA by Keller anticipated to be end of April – early June (6 weeks) but timing may of course change. Board Member Announcements None. Adjourn: Hosch made a motion to adjourn the meeting at 12:38 PM, seconded by Bye and passed unanimously by those present. Nate Keller Community Development Director 2 EDA Agenda Item ________________________ MEETING DATE: April 18, 2023 AGENDA ITEM: January - February Finance Reports SUBMITTED BY: Finance BOARD/COMMISSION/COMMITTEE/COUNCIL RECOMMENDATION: N/A PREVIOUS EDA ACTION: None BACKGROUND INFORMATION: Note: The balances may include 2022 activity. The amounts will be reversed in June following the 2022 financial audit. Enclosed you will find the reconciled financial reports through February 28, 2023. The ending undesignated balance shows a surplus of $39,535. The designated project balance is $45,147 for economic development programs. The designation for capital programs includes the 2023 budget. The budget is paid for with tax proceeds. The first half taxes will be received in June/July. The other funds reported include the TIF funds, Lodging Tax, DEED CDAP Grant reimbursement and the Revolving Loan fund. There are three revolving loans to Krewe and Flour to Flower Bakery; St. Joseph Food Co-Op; and Jupiter Moon Ice Cream. The current revolving loan fund balance is $406,272 on February 28th, including $377,054 reserved balance from the EDA fund to be used for future economic development projects; $29,219 is available from the State’s RLF fund for future loan requests. The Lodging Tax fund has a balance of $16,808 on February 28th. A summary of their activity is enclosed in this report. Hats and t-shirts are being sold at the MN Street Market. The Co-op remits sales proceeds monthly. City staff is monitoring the sales and inventory monthly. BUDGET/FISCAL IMPACT: For Information Only ATTACHMENTS: EDA Financial Summary EDA Balance Sheet EDA Revenue Report EDA Expenditure Report EDA Summary CIP CVB Financial Summary REQUESTED BOARD ACTION: Consider acceptance of the January through February 2023 financial reports. 3 04/12/23 2:06 PM EDA Balance Sheet STJOSEPH, MN Page 1 Current Period: February 2023 FUND Descr Account Descr Begin Yr YTDDebit YTDCredit CurrentBalance FUND 150 Economic Development Economic Development G 150-10100 Cash $93,983.11 $6,145.72 $24,247.19 $75,881.64 Economic Development G 150-10450 Interest Receivable $0.00 $0.00 $0.00 $0.00 Economic Development G 150-10500 Accounts Receivable $0.00 $0.00 $0.00 $0.00 Economic Development G 150-10700 Taxes Receivable - Delinque $0.00 $0.00 $0.00 $0.00 Economic Development G 150-13113 Due From other Gov t Units $0.00 $0.00 $0.00 $0.00 Economic Development G 150-15500 Due From Other Fund $8,800.00 $0.00 $0.00 $8,800.00 Economic Development G 150-20200 Accounts Payable $0.00 $0.00 $0.00 $0.00 Economic Development G 150-20201 Salaries Payable $0.00 $0.00 $0.00 $0.00 Economic Development G 150-22204 Deferred Inflow of Resources $0.00 $0.00 $0.00 $0.00 Economic Development G 150-24415 Design. Fd Bal - Operations $0.00 $0.00 $0.00 $0.00 Economic Development G 150-25310 Unassigned Fund Balance -$102,783.11 $24,247.19 $6,145.72 -$84,681.64 $0.00 $30,392.91 $30,392.91 $0.00FUND 150 Economic Development FUND 153 TIF 4-1 Fortitude Senior Apts TIF 4-1 Fortitude Senior G 153-10100 Cash $21,910.23 $61.92 $19.96 $21,952.19 TIF 4-1 Fortitude Senior G 153-10450 Interest Receivable $0.00 $0.00 $0.00 $0.00 TIF 4-1 Fortitude Senior G 153-10500 Accounts Receivable $0.00 $0.00 $0.00 $0.00 TIF 4-1 Fortitude Senior G 153-20200 Accounts Payable $0.00 $0.00 $0.00 $0.00 TIF 4-1 Fortitude Senior G 153-20500 Due To Other Fund $0.00 $0.00 $0.00 $0.00 TIF 4-1 Fortitude Senior G 153-25310 Unassigned Fund Balance -$21,910.23 $19.96 $61.92 -$21,952.19 $0.00 $81.88 $81.88 $0.00FUND 153 TIF 4-1 Fortitude Senior Apts FUND 157 TIF 2-1 Millstream TIF 2-1 Millstream G 157-10100 Cash $37,750.69 $115.43 $35.72 $37,830.40 TIF 2-1 Millstream G 157-10450 Interest Receivable $0.00 $0.00 $0.00 $0.00 TIF 2-1 Millstream G 157-10500 Accounts Receivable $0.00 $0.00 $0.00 $0.00 TIF 2-1 Millstream G 157-13113 Due From other Gov t Units $0.00 $0.00 $0.00 $0.00 TIF 2-1 Millstream G 157-20200 Accounts Payable $0.00 $0.00 $0.00 $0.00 TIF 2-1 Millstream G 157-25310 Unassigned Fund Balance -$37,750.69 $35.72 $115.43 -$37,830.40 $0.00 $151.15 $151.15 $0.00FUND 157 TIF 2-1 Millstream FUND 159 TIF 2-3 Bayou Blues/Alley Flat TIF 2-3 Bayou Blues/All G 159-10100 Cash $20,030.78 $21.37 $17,966.31 $2,085.84 TIF 2-3 Bayou Blues/All G 159-10450 Interest Receivable $0.00 $0.00 $0.00 $0.00 TIF 2-3 Bayou Blues/All G 159-13113 Due From other Gov t Units $0.00 $0.00 $0.00 $0.00 TIF 2-3 Bayou Blues/All G 159-20200 Accounts Payable $0.00 $0.00 $0.00 $0.00 TIF 2-3 Bayou Blues/All G 159-20500 Due To Other Fund -$8,800.00 $0.00 $0.00 -$8,800.00 TIF 2-3 Bayou Blues/All G 159-25310 Unassigned Fund Balance -$11,230.78 $17,966.31 $21.37 $6,714.16 $0.00 $17,987.68 $17,987.68 $0.00FUND 159 TIF 2-3 Bayou Blues/Alley Flat FUND 220 Lodging Tax Lodging Tax G 220-10100 Cash $19,253.62 $1,836.66 $4,281.93 $16,808.35 Lodging Tax G 220-10450 Interest Receivable $0.00 $0.00 $0.00 $0.00 Lodging Tax G 220-10500 Accounts Receivable $0.00 $0.00 $0.00 $0.00 Lodging Tax G 220-20200 Accounts Payable $0.00 $0.00 $0.00 $0.00 Lodging Tax G 220-25310 Unassigned Fund Balance -$19,253.62 $4,281.93 $1,836.66 -$16,808.35 $0.00 $6,118.59 $6,118.59 $0.00FUND 220 Lodging Tax FUND 225 DEED CDAP Grant DEED CDAP Grant G 225-10100 Cash $53,492.79 $168.78 $51.37 $53,610.20 DEED CDAP Grant G 225-10450 Interest Receivable $0.00 $0.00 $0.00 $0.00 DEED CDAP Grant G 225-25310 Unassigned Fund Balance -$53,492.79 $51.37 $168.78 -$53,610.20 4 FUND Descr Account Descr Begin Yr YTDDebit YTDCredit CurrentBalance Page 2 04/12/23 2:06 PM EDA Balance Sheet STJOSEPH, MN Current Period: February 2023 $0.00 $220.15 $220.15 $0.00FUND 225 DEED CDAP Grant FUND 250 Revolving Loan Fund Revolving Loan Fund G 250-10100 Cash $402,984.71 $3,674.81 $387.11 $406,272.41 Revolving Loan Fund G 250-10450 Interest Receivable $0.00 $0.00 $0.00 $0.00 Revolving Loan Fund G 250-11900 Notes Receivable $0.00 $0.00 $0.00 $0.00 Revolving Loan Fund G 250-11910 Note Interest Receivable $0.00 $0.00 $0.00 $0.00 Revolving Loan Fund G 250-20200 Accounts Payable $0.00 $0.00 $0.00 $0.00 Revolving Loan Fund G 250-22204 Deferred Inflow of Resources $0.00 $0.00 $0.00 $0.00 Revolving Loan Fund G 250-24415 Design. Fd Bal - Operations -$377,053.91 $0.00 $0.00 -$377,053.91 Revolving Loan Fund G 250-25310 Unassigned Fund Balance -$25,930.80 $387.11 $3,674.81 -$29,218.50 $0.00 $4,061.92 $4,061.92 $0.00FUND 250 Revolving Loan Fund $0.00 $59,014.28 $59,014.28 $0.00 5 2023 Capital Expenditures General Fund Capital Improvement Plan ‐ EDA EDA Recommended: August 2022 Adopted December 19, 2022 12/31/2022 Available through 2/28 through 2/28 Project Project Reserve Budget Grants/Aids Spent 2023 Department Account Code Number Equipment Balance 2023 2023 2023 Balance EDA 150-46500-582 EDA-1401 Computer Software 3,306.74                     500.00                        3,806.74           EDA 150-46500-588 EDA-1402 Business Development 14,140.22                   30,000.00                   2,800.00          41,340.22         RLF 250-46500-588 EDA-1402 Business Development 377,053.91                 ‐                               377,053.91      391,194.13                 30,000.00                   ‐                      2,800.00          418,394.13      TOTAL EDA CIP 394,500.87                    30,500.00                      ‐                        2,800.00             422,200.87         6 04/12/23 2:06 PM EDA Expenditure Report STJOSEPH, MN Page 1 Current Period: February 2023 Account Descr 2023YTD Budget February2023 Amt 2023YTD Amt FUND 150 Economic Development E 150-46500-101 Salaries $42,180.00 $2,850.88 $5,654.34 E 150-46500-103 Legislative Bodies $1,050.00 $0.00 $175.00 E 150-46500-121 PERA Contributions $3,165.00 $213.82 $424.08 E 150-46500-122 FICA Contributions $2,545.00 $175.18 $347.42 E 150-46500-123 Deferred Comp-Employer $455.00 $17.50 $35.00 E 150-46500-125 Medicare Contributions $595.00 $40.98 $81.27 E 150-46500-130 H S A- Employer Contribution $965.00 $0.00 $402.50 E 150-46500-131 Health Insurance $6,090.00 $448.62 $897.24 E 150-46500-132 Dental Insurance $445.00 $31.52 $63.04 E 150-46500-133 Life Insurance $25.00 $2.33 $4.66 E 150-46500-134 Disabilty Insurance $365.00 $22.30 $44.60 E 150-46500-151 Workers Comp. Insur. Prem.$285.00 $0.00 $0.00 E 150-46500-171 Clothing Allowance $0.00 $0.00 $0.00 E 150-46500-200 Office Supplies $200.00 $0.00 $0.00 E 150-46500-215 Software Support $1,360.00 $635.14 $635.14 E 150-46500-300 Professional Services $1,000.00 $0.00 $0.00 E 150-46500-303 Engineering Fee $0.00 $0.00 $0.00 E 150-46500-304 Legal Fees $0.00 $2,156.00 $2,685.00 E 150-46500-308 Community Programs $0.00 $0.00 $0.00 E 150-46500-321 Telephone $1,435.00 $120.08 $230.32 E 150-46500-322 Postage $50.00 $0.00 $0.00 E 150-46500-328 Marketing $500.00 $0.00 $0.00 E 150-46500-331 Travel & Conference Expense $630.00 $0.00 $0.00 E 150-46500-340 Advertising $150.00 $0.00 $0.00 E 150-46500-420 Depreciation $0.00 $0.00 $0.00 E 150-46500-433 Dues & Memberships $5,295.00 $0.00 $5,000.00 E 150-46500-582 Computer Software $500.00 $0.00 $0.00 E 150-46500-588 EDA Programs $30,000.00 $2,000.00 $7,491.00 E 150-46500-622 TIF/Abatement Payments $36,400.00 $0.00 $0.00 E 150-49300-720 Transfers to Other Funds $0.00 $0.00 $0.00 $135,685.00 $8,714.35 $24,170.61FUND 150 Economic Development FUND 153 TIF 4-1 Fortitude Senior Apts E 153-46500-300 Professional Services $1,000.00 $0.00 $0.00 E 153-46500-301 Audit & Accounting Services $0.00 $0.00 $0.00 E 153-46500-306 County TIF Admin Fee $90.00 $0.00 $0.00 E 153-46500-340 Advertising $55.00 $0.00 $0.00 E 153-46500-622 TIF/Abatement Payments $63,000.00 $0.00 $0.00 E 153-49300-720 Transfers to Other Funds $0.00 $0.00 $0.00 $64,145.00 $0.00 $0.00FUND 153 TIF 4-1 Fortitude Senior Apts FUND 157 TIF 2-1 Millstream E 157-46500-300 Professional Services $1,000.00 $0.00 $0.00 E 157-46500-301 Audit & Accounting Services $0.00 $0.00 $0.00 E 157-46500-306 County TIF Admin Fee $70.00 $0.00 $0.00 E 157-46500-340 Advertising $55.00 $0.00 $0.00 E 157-46500-622 TIF/Abatement Payments $43,000.00 $0.00 $0.00 E 157-49300-720 Transfers to Other Funds $0.00 $0.00 $0.00 $44,125.00 $0.00 $0.00FUND 157 TIF 2-1 Millstream FUND 159 TIF 2-3 Bayou Blues/Alley Flat E 159-46500-300 Professional Services $1,000.00 $0.00 $0.00 7 Account Descr 2023YTD Budget February2023 Amt 2023YTD Amt Page 2 04/12/23 2:06 PM EDA Expenditure Report STJOSEPH, MN Current Period: February 2023 E 159-46500-301 Audit & Accounting Services $0.00 $0.00 $0.00 E 159-46500-306 County TIF Admin Fee $50.00 $0.00 $0.00 E 159-46500-340 Advertising $55.00 $0.00 $0.00 E 159-46500-622 TIF/Abatement Payments $34,000.00 $0.00 $17,959.19 E 159-49300-720 Transfers to Other Funds $0.00 $0.00 $0.00 $35,105.00 $0.00 $17,959.19FUND 159 TIF 2-3 Bayou Blues/Alley Flat FUND 220 Lodging Tax E 220-46500-300 Professional Services $9,000.00 $1,500.00 $1,500.00 E 220-46500-308 Community Programs $1,945.00 $0.00 $0.00 E 220-46500-309 Visitors Bureau Photos/Videos $1,000.00 $775.00 $775.00 E 220-46500-310 IT Services $600.00 $0.00 $0.00 E 220-46500-311 Visitors Bureau Prizes $200.00 $0.00 $0.00 E 220-46500-313 Visitors Bureau Merchandise $1,000.00 $0.00 $0.00 E 220-46500-328 Marketing $1,500.00 $1,988.15 $1,988.15 E 220-46500-331 Travel & Conference Expense $0.00 $0.00 $0.00 E 220-46500-340 Advertising $1,755.00 $0.00 $0.00 $17,000.00 $4,263.15 $4,263.15FUND 220 Lodging Tax FUND 225 DEED CDAP Grant E 225-46500-300 Professional Services $0.00 $0.00 $0.00 E 225-46500-340 Advertising $0.00 $0.00 $0.00 E 225-46500-431 Annexation/Recording Fee $0.00 $0.00 $0.00 $0.00 $0.00 $0.00FUND 225 DEED CDAP Grant FUND 250 Revolving Loan Fund E 250-46500-304 Legal Fees $0.00 $0.00 $0.00 E 250-46500-455 Revolving Loan Proceeds $0.00 $0.00 $0.00 $0.00 $0.00 $0.00FUND 250 Revolving Loan Fund $296,060.00 $12,977.50 $46,392.95 8 St. Joseph Economic Development Authority Summary Treasurer's Report - Fund 150 January - February 2023 Fund 150, EDA Balance as of December 31, 2022 (Unaudited)102,783.11 Year to Date Revenue:Budget YTD Actual Interest Earnings 500 155.34 TIF/MIF Deposit - - DEED Housing Federal Grant Proceeds - - Abatement Reimbursement (School District)9,385 4,691.00 Ad Valorem Taxes 120,800 1,222.80 Total Revenue 130,685 6,069.14 Year to Date Expenditures by Object: Board Stipends 1,050 (175.00) Staff Salaries/Training 57,460 (7,754.15) Workers Comp Premium 285 - Software Support/Office Supplies/Postage 1,610 (635.14) Professional Services 1,000 - Legal/Engineering Fees - (2,685.00) Telephone 1,435 (230.32) Greater St. Cloud Development Investment 5,000 (5,000.00) Dues and Memberships (Other)295 - Advertising 150 - Abatement Payments (Country Manor)36,400 (4,691.00) Marketing 500 - Computers 500 - EDA Programs 30,000 (3,000.00) Transfer to Other Funds - - Total Expenses 135,685 (24,170.61) Fund Summaries as of Febuary 28, 2023: EDA Fund Balance - Fund 150 - unaudited, cash balance 84,681.64 Designated for Capital Programs 45,146.96 Undesignated 39,534.68 TIF 4-1 Fortitude Senior Apts Fund Balance - Fund 153 21,952.19 TIF 2-1 Millstream Shops and Lofts Fund Balance - Fund 157 37,830.40 TIF 2-3 Bayou Blues & Alley Flats Fund Balance - Fund 159 (6,714.16) Lodging Tax Fund Balance - Fund 220 16,808.35 DEED CDAP Grant Fund Balance - Fund 225 53,610.20 Revolving Loan Fund Balance - Fund 250 406,272.41 Designated for Revolving Loan Program 29,218.50 Designated for Economic Development 377,053.91 9 04/12/23 2:06 PM EDA Revenue Report STJOSEPH, MN Page 1 Current Period: February 2023 Account Descr SOURC 2023YTD Budget February2023 Amt 2023YTD Amt FUND 150 Economic Development R 150-46500-31010 Ad Valorem Taxes 31010 $120,800.00 $0.00 $1,222.80 R 150-46500-33160 Federal Grants 33160 $0.00 $0.00 $0.00 R 150-46500-34150 TIF/Abatement Deposit 34150 $0.00 $0.00 $0.00 R 150-46500-34155 TIF/Abatement Fee 34155 $0.00 $0.00 $0.00 R 150-46500-34160 Tax Abatement Reimbursement 34160 $9,385.00 $0.00 $4,691.00 R 150-46500-36210 Interest Earnings 36210 $500.00 -$76.58 $155.34 R 150-49302-36260 Surplus Property 36260 $0.00 $0.00 $0.00 R 150-49302-39201 Transfers from Other Funds 39201 $0.00 $0.00 $0.00 $130,685.00 -$76.58 $6,069.14FUND 150 Economic Development FUND 153 TIF 4-1 Fortitude Senior Apts R 153-46500-31050 Tax Increment 31050 $70,000.00 $0.00 $0.00 R 153-46500-36210 Interest Earnings 36210 $100.00 -$19.96 $41.96 R 153-49302-39201 Transfers from Other Funds 39201 $0.00 $0.00 $0.00 $70,100.00 -$19.96 $41.96FUND 153 TIF 4-1 Fortitude Senior Apts FUND 157 TIF 2-1 Millstream R 157-46500-31050 Tax Increment 31050 $48,000.00 $0.00 $0.00 R 157-46500-36210 Interest Earnings 36210 $500.00 -$35.72 $79.71 $48,500.00 -$35.72 $79.71FUND 157 TIF 2-1 Millstream FUND 159 TIF 2-3 Bayou Blues/Alley Flat R 159-46500-31050 Tax Increment 31050 $38,000.00 $0.00 $0.00 R 159-46500-36210 Interest Earnings 36210 $100.00 -$7.12 $14.25 $38,100.00 -$7.12 $14.25FUND 159 TIF 2-3 Bayou Blues/Alley Flat FUND 220 Lodging Tax R 220-46500-31600 Lodging Tax 31600 $15,700.00 $1,446.52 $1,586.26 R 220-46500-33400 State Grants and Aids 33400 $0.00 $0.00 $0.00 R 220-46500-34406 Sponsorship Fee 34406 $0.00 $0.00 $0.00 R 220-46500-34409 Merchandise Sales 34409 $1,000.00 $0.00 $187.50 R 220-46500-36210 Interest Earnings 36210 $300.00 -$18.78 $44.12 R 220-46500-36230 Donations 36230 $0.00 $0.00 $0.00 R 220-49302-39201 Transfers from Other Funds 39201 $0.00 $0.00 $0.00 $17,000.00 $1,427.74 $1,817.88FUND 220 Lodging Tax FUND 225 DEED CDAP Grant R 225-46500-34200 DEED Housing Grant Payoff 34200 $0.00 $0.00 $0.00 R 225-46500-36210 Interest Earnings 36210 $150.00 -$51.37 $117.41 R 225-49302-39201 Transfers from Other Funds 39201 $0.00 $0.00 $0.00 $150.00 -$51.37 $117.41FUND 225 DEED CDAP Grant FUND 250 Revolving Loan Fund R 250-46500-36210 Interest Earnings 36210 $1,000.00 -$387.11 $880.26 R 250-49302-39201 Transfers from Other Funds 39201 $0.00 $0.00 $0.00 R 250-46500-39320 Loan Principal 39320 $13,015.00 $1,354.44 $2,136.09 R 250-46500-39321 Loan Interest 39321 $1,430.00 $179.61 $271.35 R 250-46500-39322 Loan Origination Fee 39322 $0.00 $0.00 $0.00 $15,445.00 $1,146.94 $3,287.70FUND 250 Revolving Loan Fund $319,980.00 $2,383.93 $11,428.05 10 CVB 2023 Financial Summary As of February 28, 2023 Beginning Fund Balance 1‐1‐23 (unaudited)19,245.90$               Budget YTD Rev Customer 2023 2022 Interest Earnings 300.00$                         62.90$                       T‐shirt/Hats/Merchandise Sales 1,000.00                        ‐                             Rodeway Inn Lodging Tax 10,500.00                      239.44                       CSB Lodging Tax 4,100.00                        2.30                           Estates B&B Lodging Tax 1,100.00                        150.09                       17,000.00$                    454.73$                     Budget YTD Exp Vendor 2023 2023 Professional Services ‐ Manage Social Media (Bruno Press)9,000.00$                      1,500.00$                 Travel & Conference Expenses ‐$                                ‐                             IT Services ‐ Website/Social Media 600.00                             Visitor's Bureau ‐ Rubinski Works ‐ Videos 500.00                            ‐                             Visitor's Bureau ‐ Photos 500.00                            ‐                             Community Programs ‐ Shop Small/Winterwalk/Feb/June 1,945.00                        ‐                             Visitors Bureau Prizes ‐ Swag Give‐Aways/Prizes 200.00                            ‐                             Marketing ‐ SHRPA 500.00                            ‐                             Marketing ‐ Campaigns 1,000.00                        ‐                             Visitor's Bureau ‐ Merchandise (Krillan/Rambow)1,000.00                        ‐                             Advertise ‐ Think Tourism USA 775.00                            775.00                       Advertise ‐ MN Trails Magazine 780.00                            598.50                       Advertise ‐ Newcomer Service Magazine 200.00                            ‐                             17,000.00$                    2,873.50                    Ending Cash Balance 2‐28‐23 (unaudited)16,827.13$               11 EDA Agenda Items 5-9 MEETING DATE: April 18th, 2023 AGENDA ITEM: 5-9 PREVIOUS BOARD ACTION: 5 - None 6 - None 7- updates provided past several months 8 – updates provided past several months 9 – updates provided past several months BACKGROUND INFORMATION: 5 – BFA Grant – Sal’s Bar Kyle Schneider the owner of Sal’s bar is proposing to redo his front façade. The proposal includes removing the existing windows and replacing with larger 10’ x 3’9” over head glass doors. The BFA request is for the maximum $2,000. Total project cost is expected to be $13,000. Staff recommends approval of the BFA request. A motion by the EDA is required. 6 – TIF/Abatement Inquires Staff would like discussion and direction from EDA on what type of projects EDA prioritizes for TIF/Abatement inquires. Currently the process involves staff screening TIF/Abatement requests and determining if they do or do not meet State law/requirements and qualifications. However, some projects may technically meet state law but not be deemed a “substantial” enough project. Staff would like further direction from EDA on prioritizing TIF/Abatement requests. This will help provide guidance on the use of TIF/Abatement and help ensure higher priority projects are being brought forward. A great example of this is the use of TIF on housing projects. Staff would like a clear understanding of EDA’s priority in supporting housing projects through TIF. Attached are: • TIF/Abatement Policy • TIF/Abatement handouts • Example “Request for Public Financial Assistance Form” sheet. Staff would like to implement a form like this to help screen applications in accordance to EDA priorities. 7 – Project list/tracker Staff will provide a tracker update a few times a year. Attached is a very rough sample with confidential information redacted. Staff will continue to provide verbal updates on projects at the end of every EDA meeting under “General Business/Development update”. Tracker is meant to provide more information, help answer questions, and allow for discussion. Please note the list is not entirely exhaustive of all potential projects. 12 8 – Boutique hotel Staff has met with two developers recently who expressed interest in the concept/idea. Both developers have local ties and were provided a staff overview/tour of the downtown/commercial area. Connections were also made between developers and property owner. 9 – JR Mobile Council extended deadline to demo building to April 30th, 2023. Demo work started on the building on April 12th with all appropriate permits applied for, paid, and approved. More information will be provided at meeting. BUDGET/FISCAL IMPACT: $2,000 if BFA grant is approved. Funds not released until project is completed. ATTACHMENTS: BFA Grant application TIF/Abatement Policy TIF/Abatement handouts Example “Request for Public Financial Assistance Form” sheet Example Project Tracker REQUESTED BOARD ACTION: 5 – Motion needed on BFA grant request 6 – Direction and discussion requested on TIF/Abatement Policy and priorities 7 – none informational only 8 – none informational only 9 – none informational only 13 14 15 16 17 18 19 20 21 22 City of St. Joseph Policy and Procedures Tax Increment Financing and Tax Abatement For the purpose of this policy, the “EDA” shall also mean the St. Joseph Economic Development Authority, which serves in conducting various economic development, housing and redevelopment programs and activities within the City of St. Joseph. Tax increment financing and tax abatement are generally interchangeable with respect to policy application. I. GENERAL POLICY The purpose of this policy is to establish the position of the City of St. Joseph and the Economic Development Authority with respect to the use of tax increment financing or tax abatement for private development within the City. This policy shall be used as a guide in the application for, review and consideration of any requests for tax increment or abatement assistance. The fundamental purpose of tax increment financing or tax abatement in St. Joseph is to encourage desirable development and/or redevelopment that would not otherwise occur “but for “the assistance provided through TIF or tax abatement. The City of St. Joseph and EDA shall consider tax increment financing or tax abatement for projects that serve to accomplish the City’s goals for housing and economic development as they may change over time. The goals include facilitating projects that would result in the creation of quality jobs (i.e. stable employment and/or attractive wages and benefits) and the attraction, retention, and expansion of business and housing options in the City. II. CITY/EDA OBJECTIVES FOR THE USE OF TIF or TAX ABATEMENT As a matter of adopted policy, the City of St. Joseph and EDA will consider using tax increment financing (TIF) or tax abatement to assist private development projects to achieve one or more of the following purposes: • Remove blight and/or encourage redevelopment in the commercial and industrial areas of the City in order to encourage high quality development or redevelopment and private reinvestment in those areas. • To provide for a balanced and sustainable housing stock to meet diverse needs both today and in the future. • To retain local jobs and/or increase the number and diversity of quality jobs (i.e. stable employment and/or attractive wages and benefits. • To encourage additional unsubsidized private development in the area, either directly, or through secondary “spin-off” development. • To offset increased costs of redevelopment (i.e. contaminated site clean-up), over and above those costs that a developer would incur in normal urban and suburban development. • To facilitate the development process and to achieve development on sites which would not be developed without this assistance. 23 • To meet other uses of public policy, as adopted by the Council from time to time, including promotion of quality urban design, quality architectural design, energy conservation, decreasing the capital and operating costs of local government, etc. III. COSTS WHICH QUALIFY FOR TIF OR ABATEMENT ASSISTANCE • Project design fees including: utilities, landscape, architectural and engineering design. • Site related work including: permits for site work, earthwork/excavation, soil correction, landscaping, utilities, streets and roads, street/parking lot paving, street/parking lot lighting, curb and gutter, sidewalks • Land acquisition • Special assessments • Legal fees (acquisition, finance, closing) • Soil tests • Environmental studies • Surveys • Park and open space dedication fees • Interest rate write downs • Relocation assistance • Replacement or clean-up of contaminated soils which would otherwise preclude redevelopment • Rehabilitation • Any other costs allowable by Statute IV. PROJECTS WHICH MAY QUALIFY FOR TIF OR ABATEMENT ASSISTANCE All new TIF or tax abatement projects considered by the City of St. Joseph and EDA must meet each of the following minimum qualifications and will also be evaluated based on their ability to meet the desired qualifications for assistance. However, it should not be presumed that a project meeting any of the qualifications will automatically be approved. Meeting the qualifications creates no contractual rights on the part of any potential developer to have its project approved. A. MINIMUM QUALFICIATIONS 1. The project should meet one or more of the tax increment or tax abatement Objectives outlined in Section II of this policy, but at a minimum shall: • Remove blight and/or encourage redevelopment in the commercial and industrial areas of the City in order to encourage high quality development and redevelopment and private investment in those areas. • To facilitate the development process and to achieve development on sites which would not be developed without this assistance. 2. The developer must demonstrate that the project is not financially feasible “but for” the use of TIF or abatement assistance. 3. The project must be consistent with the City’s Comprehensive Plan, zoning ordinance, and building code or require changes to the plan and ordinances must be under active consideration by the City at the time of final TIF or abatement application submittal. 24 4. Prior to approval of a TIF or abatement financing plan, the developer shall provide any requested market and financial feasibility studies, appraisals, soil borings, private lender commitment, and/or other information the City, EDA or its financial consultants may require in order to proceed with an independent underwriting of the proposal. 5. The developer must provide adequate financial guarantees to ensure the completion of the project. These may include, but not limited to: assessment agreements, letter of credit, personal deficiency guarantees, maximum cost contract, etc. 6. Any developer requesting TIF or tax abatement assistance should be able to demonstrate past successful general development capability as well as specific capability in the type and size of development proposed. TIF or abatement will not be used when the developer’s credentials, in the sole judgement of the City, are inadequate due to past track record relating to: completion of the projects, general reputation and/or bankruptcy, or other problems or issues considered relevant by the City and EDA. 7. The developer shall retain ownership of the project at least long enough to complete it, to stabilize its occupancy, and to establish the project management and initiate repayment via the TIF or abatement assistance. B. DESIRED QUALIFICATIONS 1. TIF and abatement proposals creating a higher ratio of property taxes paid before and after redevelopment will receive priority consideration. Given the different assessment circumstances in the City, this ratio will vary widely. A 1:2 ratio of taxes paid before and after redevelopment is desired. 2. TIF and abatement proposals should normally not be used to support speculative industrial, commercial, office or housing projects. In general, the developer should be able to provide market data, tenant letter of commitment or finance statements which support the market potential/demand for the proposed project. 3. TIF and abatement will normally not be used in a project that involves an excessive land and/or property price. This will normally be where the acquisition price is more than 20% in excess of the market value as determined by an independent appraisal of the property. 4. TIF and abatement will not be used in projects that would give a significant competitive financial advantage over similar projects in the area due to the use of tax increment or abatement subsidies. Developers should provide information to support that the TIF or abatement assistance will not create such a competitive advantage. Priority consideration will be given to projects that fill an unmet market need. 5. TIF and abatement will be provided on a pay-as-you-go basis. Any request for up front assistance will be evaluated on its own merit in accordance with this policy. Projects requesting pay-as-you-go financing will receive priority consideration. 6. Preference will be given to projects that do not place extraordinary demands on City services. If it is determined by the City’s Public Works Director and City Engineer that an extraordinary increase in public service would result because of the project, TIF or abatement will not be considered. 25 7. TIF or tax abatement will not normally be used for projects that would generate significant environmental problems in the opinion of the local, state, or federal governments. Priority will be given to project that aim to clean-up existing contaminated sites and would facilitate the location of an industry or business that has an environmentally sound track record, or meet a housing need in the City. 8. Preference will be given to projects that meet good public policy criteria as determined by the EDA and City Council, including: • Projects that are in accord with the Comprehensive Plan, Strategic Plan, Zoning Ordinances and other redevelopment plans of the City and EDA, • Projects that provide significant improvement to surrounding land uses, the neighborhood, and/or the City, • Projects that provide a significant increase in tax base, • Projects that provide significant new, or retained employment, • Projects that meet financial feasibility criteria established by the EDA, and • Projects that provide the highest and best desired use for the property. V. TAX INCREMENT OR ABATEMENT PROJECT EVALUATION PROCESS The following five methods of analysis for all TIF proposals will be used: 1. Consideration of project meeting minimum qualifications. 2. Consideration of project meeting desired qualifications. 3. Project meets “but for” analysis and statutory qualifications (Exhibit A). 4. Project Report Card (Exhibit B). 5. Project is deemed consistent with the EDA Strategic Plan and the City’s Comprehensive Plan. Please note that the evaluation methodology is intended to provide a balanced review. Each area will be evaluated individually and collectively and in no case shall one area outweigh another in terms of importance to determining the level of TIF assistance. VI. APPLICATIONS The City’s tax increment financing or tax abatement program will be administered by the St. Joseph Economic Development Authority (EDA). The St. Joseph EDA will require a non-refundable application fee for its processing of the application. The application fee shall be paid to the EDA at the time a final application is submitted. At the time a final application is submitted, the applicant shall also deposit a review escrow as required in the fee schedule. If additional costs are incurred beyond required review escrow the Applicant shall be notified of such additional costs in writing. Said additional costs shall be paid prior to the execution of a development agreement, the EDA shall notify the applicant in writing and the applicant will be required to deposit additional funds upon notice. If the project is approved and the applicant proceeds with the project, the EDA shall reimburse the applicant any unused portion of the deposit as of the date of execution of the development agreement. If the applicant does not proceed with the project, the EDA shall reimburse the applicant for the unused portion of the deposit as of the date that the EDA is notified in writing that the applicant desires to withdraw its application. 26 VII. APPLICATION PROCESS The application process is a two-step process and must be completed in accordance with the TIF and abatement application procedures (Exhibit C). The purpose of this approach is to give an applicant the opportunity to present a development proposal without expending a great deal of money and time in pursuing a development that may conflict with the City’s and EDA’s goals and objectives. VIII. OTHER POLICY ISSUES FISCAL DISPARITIES Does not impact the City of St. Joseph according to State Statute. Loss of Government Aid At any time, if the formation of a new TIF district or the use of an existing district to finance a project will subject the City to an LGA/HACA penalty or local contribution to a project, the transaction shall be structured so as to have the ultimate cost the City minimized to the greatest extent permitted by law, so as to have the project bear the cost of the penalty or contribution. Public Use of Tax Increment or Abatement The City and EDA shall follow applicable state laws in terms of potential public improvement financing with TIF or abatement. It shall be the general policy of the City and EDA to identify public improvements at the time of adoption or amendment of the TIF Plan or abatement agreement. Attachment A “But For” Worksheet Attachment B In-house Grading and Report Card Attachment C Application Procedures 27 Please contact a Northland Public Finance professional with any questions about how Northland can serve your community. Greg Baufield 612-851-5931 gbaufield@northlandsecurities.com Troy Bernberg 303-801-3386 tbernberg@northlandsecurities.com Joe Britt 636-681-1833 jbritt@northlandsecurities.com George Eilertson 612-851-5906 geilertson@northlandsecurities.com Jessica Green 612-851-5930 jgreen@northlandsecurities.com Jeff Heil 641-750-5720 jheil@northlandsecurities.com Heidi Kuhl 515-657-4684 hkuhl@northlandsecurities.com Tammy Omdal 612-851-4964 tomdal@northlandsecurities.com Chip Schultz 515-657-4688 cschultz@northlandsecurities.com The Public Finance Group of Northland Securities, Inc. 150 S. Fifth Street, Suite 3300 Minneapolis, MN 55402 Phone: 612-851-5900 / Fax: 612-851-5918 www.northlandsecurities.com/public-finance/ Member FINRA & SIPC/Registered with SEC & MSRB RC 20-285 | Muni 20-190 Economic Development TIF District This summary explains the statutes governing Economic Development Tax Increment Financing (TIF) Districts. In addition to the specific rules for Economic Development districts, their use is governed by the wide range of other statutory controls on TIF in Minnesota Statutes, Sections 469.175 through 469.1799 (the “TIF Act”). Overview The Economic Development TIF district is more limited in scope than other districts. The primary focus of this type of TIF district is “industrial” development. The statutory authority includes several other targeted uses. The Economic Development district has a short duration (maximum of eight years after collection of the initial tax increment). In establishing this district, the authority must find that the district will: 1. Discourage commerce, industry, or manufacturing from moving their operations to another state or municipality; 2. Result in increased employment in the state; 3. Result in preservation and enhancement of the tax base of the state; or 4. Satisfy the requirements of a workforce housing project. Additional findings may be required to use specific powers related to this type of district. Uses The ability to establish an Economic Development TIF district is tied to the type of development that will occur within the district. In practical terms, there are two types of Economic Development districts. Some ap- plications of this district may be used by any eligible “authority” in the state. Some applications are limited by specific qualifying criteria. General Uses The general uses of an Economic Development district are: ƒManufacturing or production of tangible personal property, including processing resulting in the change in condition of the property. ƒWarehousing, storage, and distribution of tangible personal property, excluding retail sales. ƒResearch and development related to the activities listed in 1 and 2. ƒTelemarketing if that activity is the exclusive use of the property. Not more than 15% of the buildings and facilities (determined on the basis of square footage) can be used for a purpose other than the use that quali- fies the district. The statute also allows for “space necessary for and related to” these uses. The statute does not provide any further definition of these terms. Other types of Economic Development districts are subject to qualifying statutory criteria. Continued on next page 28 2 Tourism Facilities Tourism facilities are defined as property “acquired, constructed, or rehabilitated for use as a convention and meeting facility that is privately owned, marina, hotel, motel, lodging facility, or nonhomestead dwell- ing unit that in each case is intended to serve primarily individuals from outside the county” (M.S. 469.174, Subd. 12). The site must be located in a county in development region 1, 2, 3, 4, 5, or 7E with a median income no more than 85 percent of the state median income and not located in a city with a population in excess of 20,000. Workforce Housing A city outside of the metropolitan area may establish an Economic Development district to support rental housing development intended to serve employees of businesses located in the municipality or surrounding area. To qualify, the average vacancy rate for rental housing located in the municipality and in any statu- tory or home rule charter city located within 15 miles or less of the boundaries of the municipality has been three percent or less for at least the immediately pre- ceding two-year period. In addition, at least one busi- ness located in the municipality or within 15 miles of the municipality that employs a minimum of 20 full- time equivalent employees in aggregate has provided a written statement to the municipality indicating that the lack of available rental housing has impeded the ability of the business to recruit and hire employees. Increments from the district can be used exclusively to assist in the acquisition of property; construction of improvements; and provision of loans or subsidies, grants, interest rate subsidies, public infrastructure, and related financing costs for the rental housing developments. Unlike other types of TIF district, the governing bodies of the county and the school district must review the TIF plan and approve it by resolution. Small Cities Exception A “small city” may establish an Economic Develop- ment district to provide improvements, loans, sub- sidies, grants, interest rate subsidies, or assistance in any form for any separately owned commercial facility (not more than 15,000 square feet in size) located within its jurisdiction. Eligible small cities must have a population of 5,000 or less and be located ten miles or more from another city in Minnesota. The revenues derived from increments are spent only to assist the facility directly or for administrative expenses and may not be spent on activities outside of the district. Duration The maximum duration of an Economic Development district is eight (8) years after receipt by the authority of the first increment (nine years of revenue). Other Considerations Out of District Expenditures Many Economic Development TIF districts are created for a single project. The parcel (or parcels) that form the site typically set the boundaries of the TIF district. The TIF Act (M.S. 469.1763, Subd. 2) requires that an amount equal to at least 80% of the total revenue derived from tax increments paid by properties in the district must be expended on activities in the district or to pay bonds. The limitation affects the ability to use tax increments for related infrastructure improve- ments not in the district. Business Subsidy The TIF assistance may constitute a “business subsi- dy.” The statutory requirements for granting business subsidies can be found in M.S. 116J.993 to 116J.995. The steps taken to comply with this statute should be incorporated into the process for establishing the TIF district. Key Statutory References Required Findings - 469.174, Subd. 12 Tourism Facility Criteria - 469.174, Subd. 22 Small City Criteria - 469.174, Subd. 27 Workforce Housing Criteria - 469.175, Subd. 3(f) Duration of District - 469.176, Subd. 1b Eligible Uses - 469.176, Subd 4c 29 Please contact a Northland Public Finance professional with any questions about how Northland can serve your community. Greg Baufield 612-851-5931 gbaufield@northlandsecurities.com Troy Bernberg 303-801-3386 tbernberg@northlandsecurities.com Joe Britt 636-681-1833 jbritt@northlandsecurities.com George Eilertson 612-851-5906 geilertson@northlandsecurities.com Jessica Green 612-851-5930 jgreen@northlandsecurities.com Jeff Heil 641-750-5720 jheil@northlandsecurities.com Heidi Kuhl 515-657-4684 hkuhl@northlandsecurities.com Tammy Omdal 612-851-4964 tomdal@northlandsecurities.com Chip Schultz 515-657-4688 cschultz@northlandsecurities.com The Public Finance Group of Northland Securities, Inc. 150 S. Fifth Street, Suite 3300 Minneapolis, MN 55402 Phone: 612-851-5900 / Fax: 612-851-5918 www.northlandsecurities.com/public-finance/ Member FINRA & SIPC/Registered with SEC & MSRB RC 20-288 | Muni 20-193 Housing TIF District This summary explains the statutes governing housing tax increment financing (TIF) districts. In addition to the specific rules for housing districts, their use is governed by the wide range of other statutory controls on TIF in Minnesota Statutes, Sections 469.174 through 469.1794 (the “TIF Act”). Uses A housing district is a type of TIF district which consists of a project intended for occupancy, in part, by persons or families of low and moder- ate income. Low and moderate income is defined by federal, state, and sometimes local legislation. The tax increment assistance provided must be directly related to the housing project. The revenue derived from tax increment in a housing district must be used “solely to finance the cost of housing projects.” Aside from directly related public improvements and administration, the TIF Act does not further define the TIF-eligible costs for housing projects. No more than 20% of the square footage of buildings that receive assistance may consist of commercial, retail, or other nonresidential uses. Income Limitations Housing districts are subject to various income limitations. For owner- occupied residential property, 95% of the housing units must be initially purchased and occupied by individuals whose family income is less than or equal to the income requirements for qualified mortgage bond projects under Section 143(f) of the Internal Revenue Code. Generally, the initial occupants must have incomes of 100% or less of statewide median income or county median income for families of two or less (whichever is great- er), and 115% of statewide median income or county median income for families of three or more (whichever is greater). Owner-occupied income limits apply to each housing unit but only to the first purchaser of the housing. For residential rental property, the property must impose income require- ments on its units. At a minimum, the property must satisfy the income requirements for a qualified residential rental project as defined in Section 142(d) of the Internal Revenue Code. This requires that at least 40% of the units are rented to families with incomes at or below 60% of county median income, or 20% of the units rented to families with incomes at or below 50% of county median income, adjusted for family size. These requirements apply for the life of the housing district. Duration The maximum duration of a housing district is twenty-five (25) years after receipt by the authority of the first increment (26 years of revenue). The receipt of the first tax increment may be delayed for up to four years following the year of approval of the housing district. The TIF plan must specify the first year an authority elects to receive tax increment revenue. Continued on next page 30 2 Pooling The TIF Act establishes thresholds for the minimum amount that must be spent on activities within a TIF district (Section 469.1763, Subd. 2). In doing so, the TIF Act restricts the ability to finance activities outside of the district, also known as “pooling.” The TIF Act provides special authority for pooling for housing projects. Housing TIF Districts For a housing district, tax increments can be spent on other projects that meet the criteria for establishing a housing district (% of units occupied by persons with qualifying incomes). The important elements of this authority include: ƒThe use of tax increment for a qualified housing project is not limited by pooling restrictions or the five-year rule. ƒThe tax increment can be spent on activities outside of the boundaries of the TIF district, but within the project area/development district. ƒThis authority does not extend the maximum statutory duration of a tax increment financing district. ƒAs with a housing district, a portion of the assis- tance may go to persons with incomes above the qualifying limits. Using this authority to provide such assistance requires careful definition of the “housing project.” Potential applications of this authority include: ƒAvoiding the need to create a new TIF district for an individual housing project. ƒSupplementing the revenues of another housing district. ƒProviding assistance for renovation of existing housing. ƒProviding assistance for foreclosed housing. ƒAcquiring land for housing. ƒProviding assistance to make public improve- ments more affordable. Non-Housing TIF Districts For all other types of TIF districts, the amount of ex- penditure is limited to an additional 10% of the regu- lar pooling limitations. The qualified uses are different from housing districts. To qualify for the 10% pooling increase, the expendi- ture must be: ƒUsed exclusively to assist housing that meets the requirement for a qualified low-income building, as that term is defined in Internal Revenue Code (IRC). ƒNot more than the qualified basis of the hous- ing as defined under IRC, less the amount of any credit allowed under IRC. ƒUsed to acquire and prepare the site of the hous- ing; acquire, construct, or rehabilitate the housing; or make public improvements directly related to the housing. ƒUsed to develop housing that meets the following criteria: The market value of the housing does not ex- ceed the lesser of: 150% of the average market value of single-family homes in that munici- pality; or $200,000 for municipalities located in the metropolitan area, as defined in the TIF Act, or $125,000 for all other municipalities; and The expenditures are used to pay the cost of site acquisition, relocation, demolition of exist- ing structures, site preparation, and pollution abatement on one or more parcels; and The parcel contains a residence containing 1 to 4 family dwelling units that has been vacant for 6 or more months and is in foreclosure as defined by statute, but without regard to whether the residence is the owner’s prin- cipal residence, and only after the statutory redemption period stated in the notice has expired. Not only may the expenditures be made for activities outside of the TIF district, they may also occur outside of the project area/development district. Since this authority is an expansion of existing pooling author- ity, the determination of the funding capacity requires analysis of the other expenditures subject to pooling limitations. The critical limitation is the requirement to use the tax increments solely for expenditures re- lated to qualifying housing for low/moderate income persons. 31 Please contact a Northland Public Finance professional with any questions about how Northland can serve your community. Greg Baufield 612-851-5931 gbaufield@northlandsecurities.com Troy Bernberg 303-801-3386 tbernberg@northlandsecurities.com Joe Britt 636-681-1833 jbritt@northlandsecurities.com George Eilertson 612-851-5906 geilertson@northlandsecurities.com Jessica Green 612-851-5930 jgreen@northlandsecurities.com Jeff Heil 641-750-5720 jheil@northlandsecurities.com Heidi Kuhl 515-657-4684 hkuhl@northlandsecurities.com Tammy Omdal 612-851-4964 tomdal@northlandsecurities.com Chip Schultz 515-657-4688 cschultz@northlandsecurities.com The Public Finance Group of Northland Securities, Inc. 150 S. Fifth Street, Suite 3300 Minneapolis, MN 55402 Phone: 612-851-5900 / Fax: 612-851-5918 www.northlandsecurities.com/public-finance/ Member FINRA & SIPC/Registered with SEC & MSRB RC 20-294 | Muni 20-199 Tax Abatement Tax abatement is a useful and flexible economic development tool. The term “tax abatement”, however, can be misleading. The enabling statute (Minnesota Statutes, Sections 469.1812 to 469.1815) does not authorize the actual abatement of taxes. Instead, local governments have the ability to levy a property tax (an abatement levy) that is equivalent to taxes that could be abated. The revenue derived from an abatement levy can be used for a variety of economic development, redevelopment, housing, and infrastructure purposes. Planning for specific projects should refer to the complete statute and utilize the guidance of a qualified financial advisor. Calculating the Abatement A tax abatement is based on the property value of the parcel(s) subject to the abatement. The unit of government granting the abatement decides how much of the parcel value to use in the abatement calculation. The abatement may function like tax increment financing and be based on the value created by new development. Tax abatement may also use the entire value of the parcel or any portion of the parcel(s) value deemed ap- propriate by the governing body of the subdivision. The statute does not control how political subdivisions determine the parcels that will be subject to tax abatement. Users have the flexibility to target individual parcels, parcels grouped into a common project, or a broader area of improvements. The tax abatement is calculated by multiplying the tax capacity value sub- ject to abatement by the abating jurisdiction’s tax rate. It is important to incorporate the tax abatement into the annual levy calculations. An abate- ment levy must be included in the preliminary levy for Truth in Taxation. This timing means that the actual property value will be known (value as of January 1 of the current year for taxes payable in the following year), but the tax rate will be an estimate. The methodology for calculating the abatement should be clearly de- scribed in the resolution authorizing the abatement. Uses The enabling statute contains relatively few limitations on the use of tax abatement. The revenues from the abatement levy can be retained by the political subdivision or conveyed to the property owner. When paid to the property owner the abatement acts like a tax rebate. The only other specific use limitations in the statute relates to bond-fund- ed activities. The proceeds of Tax Abatement Bonds can only be used to (1) pay for public improvements that benefit the property, (2) acquire and convey land or other property, as provided under this section, (3) reimburse the property owner for the cost of improvements made to the property, or (4) pay the costs of issuance of the bonds. Minnesota local governments have made broad use of tax abatement. The following examples illustrate potential applications: Continued on next page 32 2 ƒCommercial, office, and other forms of develop- ment that do not fit the criteria for an economic development TIF district ƒRedevelopment projects where the setting is eco- nomically obsolete, but not physically blighted. ƒPublic improvements that are difficult to finance with special assessments (i.e. - highway inter- changes) ƒImprovements, such as fiber optic systems, that cannot be financed with special assessments ƒRecreational facilities and community centers ƒFinancial assistance to private parties made us- ing tax abatement may create a business subsidy under State Law Key Limitations Several important limitations apply to the use of tax abatement. Political Subdivisions. The ability to use tax abatement is given to cities (statutory or home rule charter), towns, school districts, and counties. Each of these political subdivisions has independent authority over the use of tax abatement. Maximum Amount. The total amount of tax abate- ments for each political subdivision is capped. The total abated taxes in any year cannot exceed the greater of (1) ten percent (10%) of the net tax capacity of the political subdivision for the taxes payable year to which the abatement applies, or (2) $200,000. Duration. The general rule is that a political subdivi- sion may grant an abatement for 15 years or less. The maximum duration is 8 years if the authorizing resolution does not specify a duration. The maximum abatement period may increase to 20 years if one of the other political subdivisions is requested to participate and declines (pursuant to procedures in M.S. 469.1813, Subd. 6b). Relationship to TIF. Parcels in a tax increment financ- ing district may not be used for tax abatement. TIF parcels can be used for abatement after the district is decertified. Tax abatement provides a means to extend the term of financial assistance beyond the life of a TIF district. Bonds Bonds can be issued to provide funding for certain ac- tivities (see “Uses”). The total principal of abatement bonds cannot exceed the sum of estimated abatements for the years granted. If the abatement is not adequate to pay principal and interest, then the political sub- division may use other legally available revenues, including property taxes, to pay interest on the bonds. The general obligation of the political subdivision may be pledged to the bonds. The bonds are not subject to the debt limit and do not require an election. Process Compared to tax increment financing, the process for the use of tax abatement is simple. The governing body of the political subdivision must adopt a resolu- tion that defines the parameters for the tax abatement. A public hearing is required before approving the resolution. Notice of the hearing must be published in a newspaper of general circulation in the political subdivision at least once more than ten days but less than 30 days before the hearing. The statute does not require any other documents or notifications. The statute requires a finding that the use of tax abate- ment is in the public interest for one of the following reasons: ƒIncrease or preserve tax base ƒProvide employment opportunities ƒProvide or help with the acquisition or construc- tion of public facilities ƒHelp redevelop or renew blighted areas ƒHelp provide access to services for residents of the political subdivision ƒFinance or provide public infrastructure ƒPhase in a property tax increase on the parcel The findings are stated in the abatement resolution. The abatement resolution also includes the parcels subject to the abatement, property values of the par- cels used in the abatement calculation, duration of the abatement, and any other terms needed to define use of the abatement. An abatement levy is not currently subject to levy limits. An abatement levy must follow the procedures applicable to all other property tax levies. 33 Please contact a Northland Public Finance professional with any questions about how Northland can serve your community. Greg Baufield 612-851-5931 gbaufield@northlandsecurities.com Troy Bernberg 303-801-3386 tbernberg@northlandsecurities.com Joe Britt 636-681-1833 jbritt@northlandsecurities.com George Eilertson 612-851-5906 geilertson@northlandsecurities.com Jessica Green 612-851-5930 jgreen@northlandsecurities.com Jeff Heil 641-750-5720 jheil@northlandsecurities.com Heidi Kuhl 515-657-4684 hkuhl@northlandsecurities.com Tammy Omdal 612-851-4964 tomdal@northlandsecurities.com Chip Schultz 515-657-4688 cschultz@northlandsecurities.com The Public Finance Group of Northland Securities, Inc. 150 S. Fifth Street, Suite 3300 Minneapolis, MN 55402 Phone: 612-851-5900 / Fax: 612-851-5918 www.northlandsecurities.com/public-finance/ Member FINRA & SIPC/Registered with SEC & MSRB RC 20-295 | Muni 20-200 TIF Overview The Tax Increment Financing (TIF) Law (Minnesota Statutes, Sections 469.174 to 469.179( is complex and has changed over the years and continues to change. The TIF Law gives the power to establish TIF districts to an “authority.” An Authority (as defined in Minnesota Statutes, Section 469.174, Subd.2) has the power to act for the purposes of creating and administering TIF districts and plans. Authorities include cities, economic deevlopment authorities (EDA), housing and redevelopment authorities (HRA), and port authorities. Depending on whether an Authority is acting under HRA powers or Municipal powers, these powers are required to be exercised within a Redevelopment Project or a Municipal Development District. An Authority cannot act on adopting a TIF plan without prior approval by the Municipality. Types of TIF Districts There are different types of TIF districts authorized by the TIF Law. Which type of district is applicable to a specific project depends on the details of the project. To create a TIF district a specific process must be followed and ongoing reporting is required. The types of districts are listed below: Economic Development District ƒDuration limit is 8 years after receipt of first increment ƒNo restrictions on the geographic areas that qualify ƒMore than 75% of the buildings and facilities in the district (deter- mined on the basis of square footage) must be used for manufactur- ing, warehousing, research and development facilities, telemarketing, tourism facilities (in qualifying counties), qualified border retail facili- ties, or space necessary for and related to these purposes ƒSpecial provisions for commercial development (up to 15,000 square feet of any separately owned commercial facility) located within a “small city” ƒRevenue derived from tax increment may be used to provide im- provements, loans, subsidies, grants, interest rate subsidies, or assis- tance in any form Housing District ƒDuration limit is 25 years after receipt of first increment ƒNo restrictions on the geographic areas that qualify ƒPortion of housing must be occupied by persons or families of “low or moderate income” ƒIncome requirements are different for owned and rental housing, vary by location, and change over time ƒRevenue derived from tax increment must be used solely to finance the cost of “housing projects” Redevelopment District ƒDuration limit is 25 years after receipt of first increment ƒParcels consisting of 70% of the area of the district must be “occu- pied” and more than 50% of the buildings are found to be “structur- ally substandard”Continued on next page 34 2 ƒDistricts with noncontiguous areas must qualify each area and the entire area of the district ƒSpecific requirements for determination of struc- turally substandard ƒCertain rail facilities, tank facilities, and disaster areas may qualify as redevelopment districts ƒQualifying conditions must be reasonably distrib- uted throughout the district ƒPossible to make and preserve findings prior to establishing district ƒAt least 90% of the revenues derived from tax in- crements must be used to finance costs of correct- ing conditions that allowed district designation Renewal and Renovation District ƒDuration limit is 15 years after receipt of first increment ƒParcels consisting of 70% of the area of the dis- trict must be “occupied,” 20% of the buildings are found to be “structurally substandard,” and 30% of the other buildings require substantial renova- tion or clearance to remove “existing conditions” ƒAt least 90% of the revenues derived from tax in- crements must be used to finance costs of correct- ing conditions that allowed district designation Soils Condition District ƒDuration limit is 20 years after receipt of first increment ƒGeographic areas that qualify must be for sites that contain pollution and cost of cleanup exceeds lesser of $2.00 per square foot or the fair market value of the land ƒPermitted uses of increment are for site acquisition and cleanup Hazardous Substance Sub-Districts ƒDuration limit is 25 years after receipt of first increment ƒCreated within TIF district ƒGeographic area made up of any parcels that are “designated hazardous substance sites” and may include additional parcels in the district that are contiguous to the hazardous substance sites ƒDesignated hazardous substance sites must be subject to removal or remedial actions specified in a “development response action plan” ƒPermitted uses include removal or remedial actions, pollution testing, demolition, and soil compaction correction necessitated by the devel- opment response action plan; purchase of environ- mental insurance or deposits to a guaranty fund; and related administrative and legal costs Tax Increment In simple terms, tax increment is the local property tax revenues derived from the property value captured by the TIF District. Like many aspects of the TIF Law, the actual definition of tax increment is more complicated. Here are some important factors in understanding tax increment: ƒThe value of property at the time the TIF District is established is the Original Tax Capacity Value (sometimes called the “base” value). Revenues from this value are not captured and are paid to the local taxing jurisdictions. Tax increment only occurs when the current value exceed the Original Value. ƒThe original Estimated Market Value of the parcels is frozen. The Tax Capacity Value changes with the use of the property. ƒIn the 7-county Twin Cities metropolitan area, the Authority must decide whether to make the Fis- cal Disparities contribution from the TIF District (reducing the captured value) or from outside of the District (reducing the tax base for general taxa- tion). ƒThe tax rate used to calculate the annual tax incre- ment cannot exceed the Original Tax Rate set when the TIF district is established. If the current tax rate is higher, the amount above the Original Tax Rate is excess increment and returned to the local taxing jurisdictions. ƒThe State property tax and market value property taxes are not captured by a TIF district. ƒIn the TIF Law, tax increment may mean some- thing other than the property tax revenues derived from captured value. In some cases, other rev- enues derived from tax increment (i.e. - land sales or loan repayment) may be treated as tax incre- ment. It is important to understand the context of any given use of taxincrement. 35 EXAMPLE FOR CITY USE REQUEST FOR PUBLIC FINANCIAL ASSISTANCE FORM 1. Name of the city and/or the authority the applicant is requesting to receive public financial assistance. 2. Describe type of public financial assistance the applicant is seeking. 3. Applicant information Name of Corporation/Partnership: Contact Person from Corporation/Partnership for the Application: Address: Primary Contact: Address of Primary Contact: Phone: Email: 4. List of business owners name, mailing address, phone number, and email address, holding 10% or more of the business. 5. Brief description of the corporation/partnership business (including history, and principal products or services) 6. Description of the proposed Project (including square footage of commercial buildings and/or number and type of housing units) 7. Proposed commencement and completion dates for the project (if phasing project, please describe and provide percentage completed by calendar year) 8. Provide analysis and narrative to explain why the proposed Project is not feasible without the requested public financial assistance. Include a description of the project costs the developer is seeking to be funded from the public financial assistance, including the project cost amounts. 9. Provide contact information for Applicant’s Attorney, if applicable 36 10. Provide description of the property, including a list of the tax parcel identification number(s) of parcel(s) to be included within Project Area 11. Provide estimated source and use of funds for the Project (categories may be modified, as needed, and provided as an attachment to the application) Use of Funds • Land acquisition • Site development • Construction • Machinery and equipment • Architectural and engineering fees • Legal fees • Furniture and fixtures • Inventory and working capital • Other (explain) • Contingencies • Total Source of Funds • Bank loan • Other financing (explain) • Owner cash equity • Federal grants / loans • State grants / loans • City financial assistance (TIF or Tax Abatement)* • Total 12. Provide ten-year operating pro forma for the Project 13. Describe how the Project will meet one or more of the following City goals (in addition to increasing tax base) Please provide measurable, specific, and tangible goals. Goals may include the following: increased wages; creation of jobs that pay wages adequate to support households; and/or job retention where job loss is specific and demonstrable; and/or development or redevelopment projects that are consistent with the City’s goals and objectives. If stated goal is job and wages, please list number of jobs and wages. 14. Other documents and information that may be provided or requested by the City to be provided: a) Letter of Commitment from Bank or Lender b) List name of officers and shareholders/partners with more than five percent interest in the corporation/partnership (attach as separate exhibit to the application) 37 c) Any other relevant documentation d) Site plan and building rendering, if available The undersigned certifies that all information provided in this application is true and correct to the best of the undersigned’s knowledge. The undersigned authorizes the City and its consultants of _____________ (the “City”) to check credit references, verify financial and other information, and share this information with other political subdivisions as needed. The undersigned also agrees to provide any additional information as may be needed and requested by the City or its consultants after filing of this application. Applicant’s Signature Date Note: The applicant may be required to provide an escrow to the City to cover the City’s costs related to the review of this application. 38 DEVELOPMENT TRACKER Project number Name/location area Type Status 01-A Lambert Storage (outside) yard Pre-development meeting occurred early March 2023. Applicant to resubmit plans based on staff feedback. Staff concerns with existing Ordinance allowing outside storage as principle use in Zoning districts subject to C.U.P. 01-B Distillery Distillery Project is public with all permits approved. Set to open Summer of 2023 01 – C Granite City Gymnastics Gymnastics facility Zoning ordinance amended to allow use in Industrial district in 2022. Discussion on various lots. Pre- development meeting occurred early April. Awaiting Site Plan application. 01-D Goodin Large scale Industrial user Plat approved along with easement vacation in March 2023. Plat to be recorded. C.U.P. , Storage Surfacing, and Proof of Parking recommended for approval by PC on 04/10. May 1st Council item 01- E Knife River Rail Expansion Phase 1 complete. Phase 2 unknown for timing. 01- F Cultural café New commercial cultural café space Looking for space/buildings/land. Meeting had and connections made to property owners. List 39 of potential properties provided to group by staff. 01 - G Wedding/Event Venue amendment in RR areas PC voted to deny amendment 5-2. Council to discuss on May 1st 01 – H Low Density Residential Subdivision expansions near Kennedy Some property like that owned by Berscheld Builders just needs to be final platted. Property on Northside of CO RD 121 has significant constraints due to utility needs (i.e. lift station) Staff monitoring potential funding programs the Legislature is looking at offering. If funds are offered city should apply to help spur residential growth in these areas. 01 – I East Park Expansion of East Park Funding acquired through DNR grant and LCCMR. Construction timing pushed to 2024 due to funding for LCCMR not being approved 01- J Rivers Bend Townhomes Townhome and Tri-plex development Majority of units constructed in River’s Bend 4. Half already being rented out with other needing final inspections and C.O. 28 units total (market rate) 01 – K Joetown Apts 2 Phase market rate apt complex (just south of 100 units) Site Plan and Building Permit approved. Construction has begun on Phase 1. 01 – L Northern Natural Gas Gas line reconstruction and expansion Permits submitted. Expansion needs agreement, and Council approval 40 01 – M Downtown Redevelopment Redevelopment in Downtown Numerous properties along Ash St converted or in process of conversion from Residential to Commercial. Staff helping facilitate. Additional property being looked at for conversion. 01 – N JR Mobile Redevelopment and demo Gas Station April 30th demo due date. Serious inquiry and discussion with inquiry on purchase of site 01 – M Boutique hotel Boutique hotel Discussion with multiple developers with local ties. Connections made to property owner. Tour of area given to developers 01 – N Gateway Green field Commercial development – Gateway Bonding request submitted and lobbyist hired 01 – O Northside Commercial Redevelopment of Northside Commercial area Discussion had with purchaser of Sunset building. More to occur along with invite to EDA 01 – P Elm St Roadway expansion – Elm St Discussions with property owners. Feasibility study to be presented at April 17th Council. 01 – Q Dollar General Rebuild of Dollar General Permits applied for and approved 01 – R Rolling Ridge Expansion of Commercial Facility Numerous discussions with property owner. Zoning information and building information provided on process needed and steps to approval 01 – S Lutgen Relocation of business and new construction Discussion with owner. Research needed on incentives and support 41 to help facilitate project 01 – T MN Home Improvements New Commercial build – MN Home Improvements Project on hold. Variance approvals extended till 2024. Site Plan review on hold 01 – U Plat to do Storage buildings and transition to residential. High – medium – low density Purchase of property has been made. No formal applications to plat property have been submitted Tracker is a sampling of projects and is not exhaustive. 42