06-04-14 Special Council/Manager Agenda Packet AGENDA
Special Council/Manager Meeting
Golden Valley City Hall
7800 Golden Valley Road
Council Conference Room
June 4, 2014
5 pm
Paqes
1. Long-Term Strategic Planning 2-6
a. Request by Lake West Development Co., LLC -Amend General Land Use
Plan Map - 345 Pennsylvania Avenue South from Mixed Use to Medium-Low
Density Residential; and 305 Pennsylvania Avenue South from Low Density
Residential to Medium-Low Density Residential 7-11
b. Mini Storage 12
2. Economic Development Financing 13-47
3. Board/Commission Appointments 48
Council/Manager meetings have an informal, discussion-style format and are designed
for the Council to obtain background information, consider policy alternatives, and
provide general directions to staff. No formal actions are taken at these meetings. The
public is invited to attend Council/Manager meetings and listen to the discussion; public
participation is allowed by invitation of the City Council.
This docurnent is available in alternate farrnats up�n a 72-h�ur'request. P(ease calt
763-593-8�Q6 (Tl'Y; 763-593-3968)to make a request. Examples of aiternate formats '
may includ�large print, electronic, Braille, autliocassette, etc.
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Planning Department
763-593-8095/763-593-8109(fax)
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Executive Summary
Golden Valley Special Council/Manager Meeting
June 4, 2014
Agenda Item
1. Long-Term Strategic Planning
Prepared By
Jason Zimmerman, City Planner
Summary
Staff will be in attendance to discuss long-term strategic land use planning.
Summary
Staff will be in attendance to discuss long-term strategic land use planning.
Attachments
Memo to the Planning Commission from Mark Grimes dated May 22, 2007 (1 page)
Memo to the Planning Commission from Mark Grimes dated April 3, 2007 (1 page)
Planning Commission Minutes dated May 29, 2007 (2 pages)
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763-593-8095/763-593-8109 (fax)
Date: May 22, 2007
To: Golden Valley Planning Commission
From: Mark W. Grimes, Director of Planning and Development
Subject: Workshop to Review"Hot Spots" for Updated Comprehensive Plan
Last month, staff provided each of the Planning Commission members with a General Land
Use Plan map for the City of Golden Valley. Your assignment was to review the map and mark
areas on the map related to the following:
• Likely to change due to market conditions
• Better suited for an alternative land uses
• Inappropriate land uses
• Concerns related to a specific area of parcel
• Traffic or circulation issues
The purpose of this exercise is to begin the process to amend the existing General Land Use
Map as part of the updated Comprehensive Plan. The Land Use Plan map is a portion of the
Land Use chapter of the Comprehensive Plan. The Land Use chapter is a key chapter to the
plan because it will be used to determine the need for other systems such a5 transportation,
sanitary sewer, or storm water management.
I have received several of the "hot spot" maps from the Commission. If you have not submitted
it to me, bring it to the meeting on May 29 and we will look at the maps together and make a
master "hot spots" map.
Attachments
Memo from Mark Grimes dated April 3, 2007 (1 page)
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763-593-8095!763-593-8109 (fax)
Date: April 3, 2007
To: Golden Valley Planning Commission
From: Mark W. Grimes, Director of Planning and Development
Subject: "Hot Spot" Mapping for Updated Land Use Plan
The staff has begun the process to update the City's Comprehensive Plan. It was our hope
that we would have a "kickoff' session last month with the Environmental Commission and
Park and Open Space C`ommission. This session was cancelled because the City Council
wanfied to review the budget for consultants. We are planning on doing this "kickoff' session on
April 23, 2007 to bring all the Commissions up to date on the #iming of the Comp Plan update.
The Planning staff(with Planning Commission oversight) will be responsible for coordinating
� the entire Comp Plan. However, the Planning staff(again with Planning Commission oversight
and input) will be responsible for writing only the Land Use and the Housing chapters. The
other chapters are the responsibility of the Public Works Department and the Park and
Recreation Department. The Land Use chapter is a key chapter to the overall Camp Plan.
Much of what is written in the other chapters depends on the Land Use Plan. For instance, the
planning for the upgrading of water and sewer lines depends on where the City plans for new
or more intense development. The Planning staff would like to get a started on drafting the
Land Use chapter so that it can be brought to the Planning Gommission for input over the next
several months and be used in the preparation of the other chapters of the Comp Plan.
The Planning staff is working with Planning Consultant Perry Thorvig (he helped with the
lighting ordinance) to draft the language in the chapter. Perry will be working clasely with me
and the interns on this process. Perry would like to get input from the Planning Commission
throughout the writing of the chapter since this is to be a document approved by the
Commission. For the April 9 meeting, he would like the Planning Commission to each look at
the current Land Use Plan Map of the'City and identify planning "hot spots". "Mot spots" are
areas wifh issues or the likelihood of ch��ge. These can be positive or negative. These "hot
spatsn will then be inventoried and brought back for discussion with the Planning Commission
at a future meeting. (Examples of"hot spots" may be an area where you may see a change in
land use from low density housing to high density housing or an area of the city showing
deterioration.) The new land use plan map will take into consideration the ideas from this "hot
spot" mapping.
Attachments
General Land Use Plan Map (1 page)
Minutes of the Golden Valley Planning Commission
May 29, 2007
Page 3
Kluchka suggested allowing 30 feet maximum height measuring from the towest point on
the lot. Cera said that would not allow for alk-out basements. Eck said that if someone
has alk-out basement and was allowe to go to 30 feet in height then fihey couldn't
build tw ories and if someone has a flat t, then 30 feet is r�ally tall.
Kluchka sta that it has been decided thr ugh several conversations that t ity can't
solve every pro m regarding infill develop ent and that there are tools
neighborhoods to such as neighborhoo covenants.
Fluer said she knows th are other tools b t she believes it is the City to look at the
good of the communifiy. Sh aid there is no ing magical ab figuring out the lowest
paint and the Planning Commi 'on is makin it overly co icated.
Keysser said he likes the Bloomingto meth wher ey measure 40 feet up from the
lowest filoar elevation. Schmidgall clari i th # Blo ington's method is to measure 40
feet from the lowest point of the foundatio t ighest poinf of the roof. He said he
also liked that method, but he is concerned a ut measuring a home built on a slab.
Grimes said he thinks measuring from the es oor elevation makes sense because
that measurement is typically shown on su ey. clarified that the direction he hears
coming from the Commissioners is th they on't wa to see structures higher than 30
f or itched roof an 7 feet f r a fla# roo ouse. Keysser suggested
lowering that Meight limit by 10 f or omes ui on from fiF�e
lowest floor elevation, not fro e footings.
Cera summarized what t Planning Commis ion had discussed s far as follows: The
Planning Commission " recommending that height of 40 feet, me red from the
lowest floor level, be lowed for homes with sements, a height of 3 et, measured
from the lowest flo level, be allowed for ho s without basements and height of 27
feet, measured f m the lowest floor level, be Ilowed for flat roof homes.
Michael Car , 520 Janalyn Circle, stated th in the time it has taken for the Ci work
on this inf issue, three new homes have be n built. He encouraged the Planning
Commi on and City Council to move quickl .
Gri s said he would discuss the Commissi n's recommendations with the Building
O cial and start drafting changes to the ord ance.
3. Discussion regarding planning "hot spots" for Land Use Plan Map
Grimes referred to the General Land U,se Plan maps that were in the agenda packet and
explained that Perry Thorvig, the Planning Consulting working on the Comprehensive
Plan update, wanted the Commission to review the map and locate areas that would be
likely to change due to market conditions or would be better suited for an alternative land
use.
Grimes suggested diViding the map into quadrants starting in the northwest corner of the
city.
Minutes of the Golden Valley Pianning Commission
May 29, 2007
Page 4
The Commissioners discussed the possible land use changes for several properties
including the northwest corner of Highway 55 and Winnetka, the deep iots east of the
Methodist church on Harold Avenue, the old bowling alley property, the corner of
Medicine Lake Road and Winnetka, the northeast corner Highway 55 and Douglas and
the large dirt pile on the southwest corner of Highway 55 and Winnetka (Brookview Golf
Course)
Thorvig suggested taking the wetland areas off of the map and re-designating the
Honeywell ballpark area to park land and the General Mills corporate office property to
Business and Professional Offices rather than Industrial. He said that he would work on
drafting a proposed Land Use Plan map and bring it back to the Planning Commission to
review.
Keysser asked about the timetable for updating the Comprehensive Plan. Grimes said
that the whole plan, in draft form, should be ready early next year.
4. isGussion regarding Mixed U e land use designation on the Comprehensive
map for the I-394 Corrido
Grimes explain that he would like the lanning Commission's input r rding how large
the I-394 Corridor 'xed Use area shoul be. He referred to a ma the area and
suggested that the b daries of the are be Rhode Island Av e on the west, Laurel
Avenue on the north, Tu ers Crossroad n the east and I- on the south. He also
suggested including the tw arcels loca d at 345 Pen vania Avenue and 7400
Caurel Avenue (north of Laure
The Planning Commission agreed a th sugg ed boundaries for the I-394-Corridor
Mixed Use area.
gs of the H sin nd Redevelopment Authority, City
Council, Board of Zoning e Is an ther Meetings
No reports on other meetings e give .
6. Other Business
Cera discussed a co rence regarding lanning for energy ch e being held on June
6, 2007 and invite e Planning Comm sioners to attend.
Kluchka said would like to have a di ussion regarding pre-fab ho ing being
allowed in den Valley.
7. Adjournment
T meeting was adjourned at 9:00 pm.
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Executive Summary
Golden Valley Special Council/Manager Meeting
June 4, 2014
Agenda Item
1. a. Request by Lake West Development Co., LLC-Amend General Land Use Plan Map -
345 Pennsylvania Avenue South from Mixed Use to Medium-Low Density Residential;
305 Pennsylvania Avenue South from Low Density Residential to Medium-Low Density
Residential
Prepared By
Mark Grimes, Community Development Director
Summary
Lake West Development Company has requested that the City Council consider changing the
General Land Use Plan Map for the 22,000 square foot parcel at 305 Pennsylvania Avenue South
from Residentia) Low Density (under 5 units per acre) to Residential Medium-Low Density (5 to
11.9 units per acre). They have an agreement to purchase this approximately%z acre property
in order to demolish the house and add it to a planned detached townhome development at
345 Pennsylvania Avenue South (the former Speak the Word Church property at the northeast
corner of Laurel and Pennsylvania).
The preliminary proposal for detached townhomes that Lake West Company first shared with
staff did not include the 305 Pennsylvania property. It showed 25 houses on the 2.6 acre Speak
the Word property. This property is guided Mixed Use that allows housing with a PUD. With this
additional property, the new Lake West site would be 3.1 acres in size. They are now proposing
to build about 30 units on this larger site. Staff has determined that the City must re-guide the
305 Pennsylvania parcel from Low Density to Medium-Low Density because the four to five units
planned on this parcel will be greater than the 5 units per acre. The Low Density designation
allows housing at less than 5 units per acre.
Staff is also recommending that the City Council consider changing the General Land Use Plan
Map for the former Speak the Word Church property from Mixed Use to Residential Medium-Low
Density (5-11.9 units per acre). This property is about 2.6 acres in size. The Residential Medium-
Low Density guiding better "fits"the proposed Lake West development which is in the 9-10 unit
per acre category. The residential use of this property also seems to be more consistent with the
surrounding neighborhood.
If the City Council eventually approves these General Land Use Plan map changes, Lake West
would then apply to change the zoning of these two parcels to R-3 Medium Density Housing.
They will also be going through the PUD process to gain approval for the detached townhome
development. They would like to begin the process in July 2014.
Attachments
• Letter from Lake West Development Co. to Mayor Harris et. al. dated May 27, 2014 (2 pages)
� General Land Use Plan Map (1 page)
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17EVEL0 �'MENT C4. , LLC
Mayor Harris& Members of the Council May 27, 2014
Mana�er Burt
c/o lasan Zimmerman
City Planner
City of Golden Valley
7804 Golden Valley Road
Golden Valley, MN 55427
Re: Laurel Pond Minor Guide Plan Amendment, 305 Pennsylvania Ave
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'f� 1�1-vi�tr.✓�.oN'�"1i ��CL !.�
Dear Mr. Burt,Grimes&Council: Ct�ev,�`+4�r�`� �db<<< W��ks, .�^S�fi"�'s� C` � µ(rw�j{'
� '`CMM1n�P+ r
Lakewest has been meeting with staff DRC on several of their Tuesday meetings since
March to resolve site circulation issues,guest parking issues,storm water ponding
criteria,access ta Pennsylvania and overall livability prior to our submission on 345
Pennsylvania Ave. As part of resolving the above issues,we have an agreement to
purchase 305 Pennsylvania�subject to project approval. Adding 305 Pennsylvania
assists in resolving many af the above design details by allowing some increased .
spacing for the fire department to use a circular road at the higher elevations of the
site.
What is not clear from a ptanning approval direction is what guide plan designation
to use for the 305 Pennsylvania portion of the plan.
• The zoning wi(1 be PUD regardless.
• The Majority of the site plan has compliant guiding and use of PUD grants the
City tlexibility to approve without a guide plan amendment.
• A neighborhood meeting was well attended on May 15t and there was strong
sentiment to allow a ptan appraval for detached townhomes substantially
similar to what was reviewed that night.
• 305 Pennsylvania sits at the top of the hill and would be lowered by several
feet to make the main 22'wide circulatian drive lane and garage driveways
function safely in our seasons for residents and emergency responders.
• The acquisition would create the opportunity for 4 net new additional
dwelling units.
• The new neighborhood density of 3.1 per acre is all that is being proposed on
both parcels.
• The total blended site area is 3.31 acres, 22,1b6 SF at 305 Pennsylvania.
14-525 Highway 7. �uite 33� • tvlinna�Gonka. MN 55345 * Phoner 952-930-;30070 * Fax: 952-rrs53-2998
We believe that the City has some choice in recommending a guider plan designation
for us to proceed with. Given that the average density of the development is low,
perhaps low density residential guiding is still usable. Should the increase to overall
density af 3.1 be recognized as medium density residential due to the form of the
housing,then medium density guiding would be relevant and we would amend the
apglication accordingly as we pro�eed. We have been retiant on staff
recommendations to proceed on the 345 Pennsylvania location using PUD zoning and
that the underlying guide plan of the I394 corridor is adequate to review the plans as
submitted and to render your approval with conditions. No guide plan change for
345 Pennsylvania was necessary to process our application.
Request
Should the Cauncit determine that upon approval,the guiding of the balance of the
devetopment should become residential,rather than the 394 district,we would be
happy to accommodate that request We desire to move the development farward for
full review using the PUD zoning and minor amendment to the guide plan for 305
Pennsylvania as a coordinated action with the PUD zoning request.
Due ta the time of year,the phasing shown on our submittals will allaw for the
creation of the lots closest to Laurel and Pennsylvania Ave�rst,with the Iots on top of
the hill being able to be completed late in 2414 or early 2015,allowing for any guide
plan amendments to go to Met Council without affecting the development
canstructiun cycle. In any alternative,the guide plan amendments should be deemed
minor,and not of regional significance.
5ummary
Many sections of your guide plan speak to creating new aptions for life cycle housing.
Sometimes the life cycle is allowing for greater efficiency and less maintenance.
Adding 305 Pennsylvania to the development pian creates resolution to the last
parcel in this vicinity that is not divided into its most efficient size. The outcome is
still residential, consistent with the current guiding,just barely above tow density
guiding,depending on rounding,to the next density classification higher.
Respectfully submitted,
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Donald)ensen
Land Development Director
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Cr. Curt Fretharn
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Executive Summary
Golden Valley Special Council/Manager Meeting
June 4, 2014
Agenda Item
1.b. Mini Storage
Prepared By
Tom Burt, City Manager
Summary
The Mayor asked that a building permit application be discussed amongst the City Council.
Cl�� t�� ,;��,;� �
�� �
��,. � ��T Finance Department
763 593 8013/763-593-8109(fax)
Executive Summary
Golden Valley Special City Council Workshop
June 4, 2014
Agenda Item
2. Economic Development Financing
Prepared By
Susan Virnig, Finance Director
Summary
Tony Schertier and Tom Denaway from Springsted will review Economic Tools for Financing
Development.
Attachments
Tax Abatement in Minnesota Concepts and Mechanics (8 pages)
Tax Increment Financing (TIF) in Minnesota Concepts and Mechanics (26 pages)
Tax Abatement in Minnesota
Concepts and Mechanics
February 2013
Prepared by:
Springsted Incorporated
Saint Paul, Minnesota
Saint Paul Office Des Moines Of/ice Richmond O�ce
Corporate Headquarters 300 Walnut Street 1564 East Parham Road
380 Jackson Street,Suite 300 Suite 215 Richmond,VA 23228
St.Paul,MN 55101-2887 Des Moines,IA 50309 804.726.9748
651.223.3000 515.244.1358 804.726.9752 Fax
651.223.3002 Fax 515.244.1508 Fax
Denver Office Kansas City�ce Milwaukee Office
8400 East Prentice Avenue 9229 Ward Parkway 710 North Plankinton Avenue
Suite 500 Suite 104N Suite 804
Greenwood Village,CO 80111 Kansas City,MO 64114-3311 Milwaukee,WI 53203
303.893.5800 816.333.7200 414.220.4250
303.771.1334 Fax 816.333.6899 Fax 414.220.4251 Fax
advisors@springsted.com www.springsted.com
Tax Abatement in Minnesota
Table of Contents
INTRODUCTION......................................................................................1
PARTI C I PA N TS.......................................................................................2
THEMECHANICS....................................................................................3
Quali�cations 3
Duration and Restrictions 3
Fiscal Disparities 4
Bonding and Levy Limits 4
Process 5
Review and Modification 5
HOW DOES TAX ABATEMENT COMPARE TO TAX INCREMENT?....................6
G�SPRINGSTED
Tax Abatement in Minnesota
Introduction
In 1997,legislation authorizing the use of tax abatement in Minnesota was
passed by the State legislature. Amendments to the statute were approved
nearly every year since authorization. The statutory language defining tax
abatement is quite brief and is contained in MN Statutes 469.1812 to
469.1815.
Section 469 refers to the capture or deferral of property taxes due as"tax
abatement." Under Minnesota law,taxes due on real property subject to
tax abatement must still be paid as due. If tax abatement is in place,the
appropriate portion of the taxes can be captured for development purposes.
Just what the appropriate portion is depends on which governmental
entities hold public hearings and adopt abatement resolutions. A
participating city,county, or school district is required to act separately to
determine the use of its share of property taxes.
Unlike tax increment,t�abatement can be used to capture taxes on land
and existing buildings as well as new improvements. The captured taxes
must be used to offset the costs agreed to under an abatement agreement.
G�SPRINGSTED Page 1
Tax Abatement in Minnesota
Participants
Abatement Participants
• Elected Officials • Landowner or Developer
• Advisory Commissions • Attorney
• City Staff
. Fiscal Consultant: Springsted
Incorporated
• Bond Counsel
Other Possible Participants
� u � � wd � �
� ;p`' s `;:<f ;:s:� b��.. #���r�y�"' ���:. � �TM & x� ,
: rz
��- �� _,��c�s. n,x. ,. . ,� �.
x. �x>:'c�uti� ,�,�.'„ �::� ,�.
• County • Federal Government
• School District • State Government
. Metropolitan Council, etc.
• Other Municipalities Bordering Project
Area
G�SPRINGSTED Page 2
Tax Abatement in Minnesota
The Mechanics»
Qualifications
Any political subdivision, including statutory cities, home rule charter
cities,towns,counties,and school districts, is authorized to abate
property taxes on selected parcels or defer the payments of the taxes and
abate the interest and penalty that otherwise would apply, if:
• The benefits gained equal or exceed the cost to the political
subdivision or the abatement phases in a property tax increase,
and
� The abatement is in the public interest because it will:
— increases or preservesthe tax base;
— provides employment opportunities;
— provides or helps acquire or construct public facilities;
— helps redevelop or renew blighted areas;
— helps provide access to services;
— finances or provides for public infrastructure;
— phase in a property tax increase on the parcel resulting from an
increase of 50%or more in one year on the estimated market
value of the parcel,other than an increase due to improvement of
the parcel;or
— stabilize the tax base through equalization of property t�
revenues for a specified time period with respect to a taYpayer
whose real and personal property is subject to valuation under
Minnesota Rules, chapter 8100.
Duration and Restrictions
Cities,counties,and school districts as combined jurisdictions may grant
an abatement for no longer than 15 years(8 year maximum if no initial
duration is specified),or for no longer than 20 years if two or fewer
jurisdictions participate. However, individual jurisdictions may grant an
abatement for a period of up to 20 years, if the abatement is for a
qualified business meaning a taxpayer whose real and personal property
is subject to valuation under Minnesota Rules, chapter 8100.
No back-to-back abatements. Eight years must pass before a new
abatement can be applied.
In any given year,the total amount of property taxes abated by a political
subdivision for all parcels may not exceed the rg eater of(1) 10%of the
G�SPRINGSTED Page 3
Tax Abatement in Minnesofa
net tax capacity of the political subdivision for the taxes payable year to
which the abatement applies,or(2)$200,000.
The State will not reimburse school districts for lost taxes resulting from
abatement.
Taxes may be abated on the entire net tax capacity of a parcel including
land or areas subject to the areawide fiscal disparities tax.
Property in a tax increment financing district is not eligible for abatement.
Fiscal Disparities
In the Seven-County Metro Area and Taconite Tax Relief Area,where
the fiscal disparities program is applicable,the abatement may be
calculated from the net tax capacity either before or after the portion of
tax capacity subject to fiscal disparities sharing has been deducted. The
tax abatement law as originally enacted prohibited any abatement of the
fiscal disparities portion of the tax.
Bonding and Levy Limits
General Obligation bonds supported by tax abatements may be issued
without a referendum,and such debt does not count against the debt
limit of the subdivision.
Tax Abatement bond proceeds can be used to pay for public
improvements that benefit the property,acquire and convey land or other
property,reimburse property owner for cost of improvements to the
property, or pay costs of issuance of the bonds.
The maximum principal of bonds may not exceed the estimated sum of
the abatements for the property for the years authorized.
Tax abatements are not subject to levy limitations and are excluded from
the calculation of the net debt limit.
G�SPRINGSTED Page 4
Tax Abatement in Minnesota
Process
A political subdivision may grant an abatement only after a public
hearing has been held. Notice of the hearing must be published in a
newspaper of general circulation not less than 10 days or more than 30
days prior to the hearing. The notice must identify the property for
which abatement is under consideration and specify the total estimated
amount of property taxes to be abated.
The governing body must adopt a resolution specifying the terms of the
abatement. The resolution must also contain a statement as to the nature
and extent of the public benefits that are expected to be received.
The political subdivision must add to its levy amount for the current year
the total estimated amount of all current year abatements granted.
Review and Modification
The abatement resolution can provide that no review and modification is
permitted.
If resolution is silent, abatement may be reviewed and modified every
second year after it has been approved.
G�SPRINGSTED Page 5
Tax Abatement in Minnesota
How does Tax Abatement compare
to Tax Increment?
The following does not apply to tax abatement but is applicable to tax
increment:
• "But For"test
Existing tax base can be abated, a hearing and abatement resolution are
required,and maximum duration is I S years or 20 years if two or fewer
jurisdictions participate or 20 years if the project qualifies.
Tax increment t�es captured do not include existing land and building
value,a hearing and tax increment plan are required, and maximum
duration varies.
G�SPRINGSTED Page 6
Tax lncrement Financing (TlF) in Minnesota
Concepts and Mechanics
May 2012
Minnesota Olfice Des Moines O�ce Richmond O�ce
Corporate Headquarters 300 Walnut Street 1564 East Parham Road
380 Jadcson Street,5uite 300 Suite 215
Des Moines,IA 50309-2258 Richmond,VA 23228-2360
St.Paul,MN 55101-2887 515.244.1358 804.726.9748
651.223.3000 515.244.1508 fax 804.726.9752 Fax
651.223.3002 Fax
Co%ado O�ce Missouri Office Wisconsin O�ce
8400 E.Prentice Avenue 9229 Ward Parkway 1110 North Old Wor�d 3b Street
Suite 500 Suite 104N Suite 218
Greenwood Village,CO 80111 Kansas City MO 64114-3311 Milwaukee,WI 53203-1100
303.893.5800 816.333.7200 414.220.4250
303.771.1334 Fax 816.333.6899 Fax 414220.4251 Fax
advisors@springsied.com www.springsted.com
Table of Contents
INTRODUCTION............................................................................................ 1
A. PARTICIPANTS.................................................................................. 3
B. THE MECHANICS................................................................................4
ProjectArea........................................................................................4
Types of Tax Increment Financing Districts................................................ 5
Examples of TIF Eligible Project Costs...................................................... 7
TheIncrement..................................................................................... 7
Financing of Project Costs ................................................................... 10
Pooling............................................................................................ 12
TimeRestrictions............................................................................... 13
C. THE DOCUMENTS............................................................................ 14
Development District Program............................................................... 14
Tax Increment Financing Plan............................................................... 14
Development Agreement..................................................................... 14
D. PROCESS FOR ESTABLISHMENT....................................................... 15
E. BENEFITS AND COSTS..................................................................... 16
City's Perspective .............................................................................. 16
Landowner(s)Perspective.................................................................... 17
F. POLICY QUESTIONS......................................................................... 18
��But For"Test.................................................................................... 18
ProjectArea...................................................................................... 18
Level of Assistance ............................................................................ 19
FiscalDisparities................................................................................20
City Security Guarantees.....................................................................23
City Administrative Costs.....................................................................24
�SPRINGSTED
Tax lncrement Financinq in Minnesota
Introduction
Tax Increment Financing(TIF) uses the increased property taxes
generated by new real estate development within a tax increment
financing district to pay for certain eligible costs associated with the
development. The value that is"captured"(i.e.,the increase in
value over the year the TIF district was established) generates
property taxes. These "incremental"taxes go to the development
authority or the city authority rather than to the city, county, school
district,or other taxing jurisdictions that normally share in the total
property tax bill. The captured taxes are used to subsidize eligible
project costs such as land acyuisition, demolition,public and site
improvements,and related consulting and administrative costs. The
value of the property prior to development(i.e.,the "non-captured"
portion) continues to generate property taxes which are distributed
to all appropriate taxing jurisdictions.
The justification for use of TIF rests solely with the "But For"test.
A simple way to express this test is that the development or
redevelopment would not occur without a tax increment subsidy.
Critics of TIF often point to the"But For"test as the weakness in
the actual use of TIF. Such critics often claim that the development
would have occurred anyway, and local officials are not rigorously
applying this test. The net result in such cases is an overuse of tax
increment financing at the expense of the tax base of the county,
school district, and other taxing jurisdictions. While there have been
limited abuses,this financing tool has helped to reshape and
revitalize many communities. In addition to assisting core
development and redevelopment, residual growth outside of the
established TIF districts provides a direct benefit to all taxing
jurisdictions.
In response to the potential misuse of tax increment financing, each
year the State Legislature further refines the use of this financing
tool. Each amendment to the statutes has, in recent years, resulted
in a more complicated and restrictive financing vehicle. The
purpose of this document is to outline the basic concepts and
mechanics of using tax increment financing within the statutory
guidelines and parameters. This report outlines the participants
involved in TIF, mechanics, documents, process, a discussion of
benefits and costs, and policy questions associated with the use of
TIF.
�SPRINGSTED Page 1
Tax lncrement Financinq in Minnesota
The material included in this report is intended to be used as an
informational guideline for the use of TIF. The complete Tax
Increment Financing Act can be found in Minnesota Statutes,
Section 469.174 - 469.1799.
Springsted Incorporated has a proven track record in working with
communities in the use of tax increment financing as an economic
development and redevelopment tool. Please feel free to contact us
if you need further information or would (ike to discuss in more
detail the concepts contained in the following materials.
�SPRINGSTED Page 2
Tax lncrement Financinq in Minnesota
A. Participants �
Participants
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�_ �
;� i�� �� � .�`� �-� �� �,� �'�`� � �`r � �i s� �„ �;�'�� � � � �� �� �� � �'^.
� s '
_
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r
,a� . _�.'..�r.. _,..< < ..� .�.>.� u �, . �,k . „r�., � � .v �`e� 3, ���ix��
Elected Officials Landowner or Developer
Advisory Commissions Attorney
City Staff
Fiscal Consultant:
Springsted Incorporated
Bond Counsel
Other Governmental Jurisdictions
�
` ���'�����t�-��� � � }�� .� � i F ������
, �
:
_ . �_ .. �
,
�
_ .
. . .. w .� � ..., e: � �
County Federal Government
School District State Government
Other Taxing Jurisdictions Metropolitan Council, etc.
County
Other Municipalities
Bordering Project Area
� SPRINGSTED Page 3
Tax/ncrement Financin in Minnesota
B. The Mechanics
Project Area(i.e.,Development District) and
Tax Increment Financing (TIF)District
A. Financial difference between the two
➢ Project Area: Area in which TIF funds can be spent
(with certain restrictions).
➢ TIF District: Area from which TIF funds are generated.
B. Geographical difference between the two
➢ Project Area and TIF District can be the same, or
Project Area
TIF District
➢ Project Area can be larger than the TIF District
TIF
District Project Area
#1
TIF
District
#2
� SPRINGSTED Page 4
Tax lncrement Financinq in Minnesota
Types of Tax Increment Financing Districts
A. Redevelopment District
➢ Generally a blighted area containing substandard
buildings, sometimes having inadequate streets and
incompatible land uses.
➢ Reyuires documentation to evaluate occupied land area
and estimated costs of rehabilitation versus new
construction.
➢ Additional conditions include railroad uses or tank
facilities or a qualified disaster area.
➢ Maximum duration of TIF district is 25 years from
receipt of the first tax increment.
B. Renewal and Renovation District
➢ Blight and obsolescence tests must be met, which are
slightly less restrictive than for redevelopment TIF
districts.
➢ Maximum duration of TIF district is l 5 years from
receipt of the first tax increment.
C. Housing District
➢ Provides housing opportunities for persons and families
of low to moderate income.
➢ Maximum duration of TIF district is 25 years from
receipt of the first tax increment.
D. Soils Condition District
➢ Where there exists the presence of hazardous
substances,pollution or contaminants requiring removal
or remedial action. Such costs must exceed the fair
market value of the land.
➢ Maximum duration of the TIF district is 20 years from
receipt of the first tax increment.
� SPRINGSTED Page 5
Tax lncrement Financinq in Minnesota
E. Economic Development District
➢ May be used only for manufacturing, production,
processing, warehousing, storage, distribution
(excluding retail sales), research and development,
telemarketing,tourism facilities (in certain cases),
qualified border retail facilities, and small city
commercial facilities.
➢ Prohibits establishment if more than 15%of the square
footage of such facilities are used for other purposes.
The allowable percentage of non-qualifying square
footage can be increased when such uses are directly
related to or in support of the qualifying activity.
➢ Must demonstrate retention of local business, increased
employment and enhancement of the state tax base.
➢ Maximum duration of TIF district is 8 years from
receipt of the first tax increment.
F. Other TIF Districts
➢ Includes hazardous substance subdistrict.
� SPRINGSTED Page 6
Tax lncrement Financinq in Minnesota
Exampies of TIF Eligible Project Costs
➢ Public improvements for street, sewer,water, etc.
➢ Land acquisition
➢ Soil correction
➢ Site preparation/demolition
➢ Relocation
➢ Financing fees and capitalized interest
➢ Administrative costs up to 10%of the tax increment
The Increment
A. Prior to forming the TIF district
➢ "Estimated Market Value"of properties in the proposed
TIF district
Estimated
Market
Value
➢ Translated into "Net Tax Capacity"through statutory
classifications
Estimated Net
Market --� Tax
Value Capacity
➢ "Net Tax Capacity"times "Tax Capacity Rate"equals
property taxes
- City
Net Tax Property -County
Tax X Capacity= Taxes -School
Capacity Rate District
- Other
� SPRINGSTED Page 7
Tax lncrement Financinq in Minnesota
B. When a TIF district is established
➢ The"Net Tax Capacity" is given the term "Original Net
Tax Capacity (ONTC)", and is certified for the previous
assessment year,provided that the request for
certification was made by June 30. The ONTC of a
district for which requests are filed after June 30 is
based on the current assessment year.
➢ Property taxes generated by the ONTC of the TIF
district continue to provide revenue to each individual
taxing jurisdiction.
➢ The local tax capacity rate is called "Original Local Tax
Rate,"and is certified for the previous assessment year,
provided that the request for certification was made by
June 30. The Original Local Tax Rate of a district for
which requests are filed after June 30 is based on the
current assessment year.
➢ The Original Local Tax Rate is the sum of all local tax
rates that apply to a property in a district or subdistrict.
➢ The lesser of the Original Local Tax Rate or current
local tax rate is used to calculate the annual tax
increment.
C. New development occurs within the TIF district
➢ New market value is added to the existing estimated
market value.
Total Total Net Total
Estimated Tax Property
Market Value Capacity Taxes
Increase in Increase in
Estimated (Captured) Tax
Market Net Tax Increment
Value Capacity Revenue
Tax
X Capacity=
Original Original Rate Taxes
Estimated Net to Other
Market Tax Taxing
Value Capacity Jurisdiction
(OMV) (ONTC)
� SPRINGSTED Page 8
Tax lncrement Financin in Minnesota
D. Tax increment revenue generated by the increase in Net Tax
Capacity.
➢ Increment received over the duration of the TIF district.
Property
Taxes
Tax Increment Revenue
Taxes to Other Taxing Jurisdictions
Time(Years) ---� �
�SPRINGSTED Page 9
Tax lncrement Financinq in Minnesota
Financing of Project Costs
➢ In some cases,the City is required to fund project costs
prior to development occurrmg.
➢ City issues general obligation tax increment bonds to
finance the project costs. The possibility exists for non-
general obligation revenue bonds to be �ssued.
Taxable Bonds If Two Federally Imposed Tests Are
Met
A. "Private Business Use Test"-Are more than
10%of the expenditures made for a private
purpose?
➢ Types of expenditures for improvements
available to every resident:
♦ Streets, sewer, water, etc.,
➢ Types of expenditures benefitine
rivate parties, such as
landowners/developers;
♦ Land acyuisition, soil corrections,
site preparation, etc.
B. "Private Security Interest Test"-Are more
than 10%of the payments of taxes and/or
debt service guaranteed by the
landowner/developer?
➢ A contract or guarantee requiring the
landowner/developer to make tax
payments and/or fund a debt service
shortfall triggers the private security
interest test.
➢ Assessment agreements trigger the
private security interest test.
➢ City receives tax increment revenues over a period of
years and uses them to pay debt service on the bonds.
➢ Tax increment bonds may be repaid with:
♦ Tax increment revenues.
♦ Other pledged revenues.
♦ General obligations: potential City-wide property
tax levy. This situation can be dealt with through
security guarantees by the landowner.
� SPRINGSTED Page 10
Tax lncrement Financinq in Minnesota
➢ Financial limits on the City's ability to fund project costs
dictated by the amount and duration of the tax increment
revenues available.
➢ In some cases the developer will pay all costs upfront
and be reimbursed for eligib(e project costs over a
period of time. This is generally referred to as"pay-as-
you-go"financing.
♦ Reimbursements are made from tax increment
revenues.
♦ This financing approach significantly reduces City
liability and risk.
♦ If development does not occur or does not reach
the levels forecasted, increment is reduced and
less funds are available for reimbursement.
� SPRINGSTED Page 11
Tax lncrement Financrnq in Minnesota
Pooling
➢ Tax increment revenues may be spent outside of the TIF
District but within the boundaries of the Project Area,
subject to certain restrictions.
➢ For redevelopment TIF districts(certified after June 30,
1995)the minimum in-district percentage is 75%. The
maximum pooling percentage is 25%.
➢ For all other TIF districts (certified after June 30, 1995)
the minimum in-district percentage is 80%. The
maximum pooling percentage is 20%.
➢ All administrative costs are considered expended
outside of the TIF district.
➢ Pooled increment revenue must still be spent on TIF
eligible project costs.
� An additional 10%can be pooled for low-income
housing(must meet statutory guidelines).
�SPRINGSTED Page 12
Tax lncrement Financinp in Minnesota
Time Restrictions
A. Time Limit Number 1: Four-Year Knock-Down Rule
➢ Increment will not be collected from a particular parcel
unless, within four years of certification, demolition,
rehabilitation or renovation of property or other site
improvements has occurred in accordance with TIF
plan.
➢ If a parcel is"knocked down"and later improved, it can
be reinstated in the district, but at the market value at
the time of reinstatement.
B. Time Limit Number 2: Five-Year Rule
➢ For increment to be considered a spent expenditure
within the TIF District, one of the following must occur
within five years after certification of the district:
♦ Increment is paid to a third party for a TIF eligible
expenditure
♦ Bonds are issued to a third party and proceeds are
expected to be spent within five years.
♦ Binding contracts are entered into with a third party
for performance of an activity and increment is spent
under the contract, or
♦ Costs are incurred by a"party"and revenues are
spent to reimburse that party.
�SPRINGSTED Page 13
Tax lncrement Financinq rn Minnesota
C. The Documents
Development District Program
➢ This document(or equivalent document, i.e.
Redevelopment Plan) establishes overall guidelines for
the project area boundaries and the type and level of
improvements to be constructed or acquired.
➢ This document does not establish the TIF district.
Tax Increment Financing Plan
➢ This document establishes the boundaries of the TIF
district,the expenditures and financing limitations,
elects year to first receive tax increments (with
limitation)and starts the process for collection of tax
increment revenue by the City.
➢ The Development District Program and the Tax
Increment Financing Plan can be drafted either
concurrently or the Development District Program can
be drafted first and the TIF Plan later on.
Development Agreement
A. This document is a contract between the City and the
landowner, stipulating the obligations of each party. The
Development Agreement usually reyuires the landowner to:
➢ Construct a development within a certain time frame
with a specified minimum size and market value.
➢ Provide guarantees ensuring the timely completion of
the development, and may require prompt payment of
property taxes and debt service shortfalls.
➢ May require the City to construct public improvements
and/or purchase land associated with the new
development according to an agreed upon schedule
using the expected tax increment revenue.
B. Terms of this agreement may well dictate whether bonds are
tax-exempt or taxable.
C. Many cities currently require a Development Agreement on all
new developments.
�SPRINGSTED Page 14
Tax lncrement Financinq in Minnesota
D. Process for Establishment
In order to establish a TIF district, a specific process must be
followed including the following.
A. At the outset, a Development District Program (or equivalent
document)must be prepared. This sets forth the general goals
for development or redevelopment in the project area.
B. A Tax Increment Financing Plan must be prepared. This sets
forth the specific project(s)to be undertaken, costs involved,
revenues projected and is the guiding document for the
proposed project.
C. A public hearing on the TIF Plan and district must be
conducted. Notification of the public hearing must be
published 10-30 days prior to the hearing.
D. A TIF district"fiscal and economic impact" letter,along with
a draft TIF plan,must be received by the county and school
district at least 30 days prior to the public hearing. For
housing and redevelopment TIF districts a notification letter to
the county commissioner must also be received at least 30
days prior to publication of the public hearing.
E. The City planning commission must review the TIF Plan and
Development Program prior to City approval.
F. At the public hearing, all interested parties are invited to
express their opinion(s).
G. Subsequent to the public hearing, the City must approve or
reject the TIF Plan and district.
H. Upon approva(,the City must request county certification of
the TIF district which will begin the tax increment collection
process. Selected information must also be filed with the
State Department of Revenue and State Auditor.
I. Actual project expenditures may not be made unti(the TIF
Plan is approved and adopted.
�SPRINGSTED Page 15
Tax lncrement Financinq in Minnesota
E. Benefits and Costs
City's Perspective
A. Benefits
➢ TIF allows City to realize new development which
would not otherwise occur without the use of TIF (the
"But For"test).
➢ City can realize broader economic gains of new
development in terms of employment,tax base
enhancement and secondary spin-off effects.
➢ City can facilitate the construction of related public
improvements it wishes to achieve by coordinating a
TIF project with more general public improvement
projects.
➢ City may have better control over the nature of the
development.
➢ City may be able to fund administrative and/or
community development costs with revenue from the
TIF district.
➢ In some cases the quality of new development is
enhanced by TIF financmg.
B. Costs
➢ The City may assume the risk that property taxes might
not be paid and/or changes in property tax laws or
funding of local governments might cause tax
increments to fall short of scheduled debt service
payments. City may pledge to use other funds or
general property tax levies to pay debt service.
(Development Agreement guarantees.)
➢ City and other overlapping taxing jurisdictions (county,
school district, etc.) must wait until TIF district is
terminated until the new development becomes part of
the general tax base.
, ➢ Depending on the magnitude and strategy for addressing
fiscal disparities contribution on commercial properties,
there can be an internal shift in property tax burdens(for
communities in the Twin Cities Metropolitan Area
only).
�SPRINGSTED Page 16
Tax lncrement FinancinQ in Minnesota
Landowner(s) Perspective
A. Benefits
➢ Development can proceed because TIF provides a
funding source for public improvements where no other
viable funding source exists.
➢ Without TIF the landowner absorbs the development
costs of either:
♦ Special assessments for public improvements,
and/or
♦ Hard costs of land acquisition and site preparation.
With TIF these costs are funded in whole or in part by
increment revenues and the landowner pays only his
property taxes, which are the same whether TIF exists or
not.
B. Costs
➢ Usually a slightly extended development period required
for the TIF process.
➢ Usually landowner provides financial guarantees to City
securing taxes and debt service on TIF bonds (if
applicable).
➢ Greater City monitoring of scope, quality and timing of
new development.
�SPRINGSTED Page 17
Tax lncrement Financinq in Minnesota
F. Policy Questions
"But For"Test
➢ In order for the City to create a TIF district it must make
a finding that the new development would not occur
"But For"the use of tax increment financing.
➢ The critics of TIF state that the development would
occur anyway and the City is simply giving funds to a
private party.
➢ Counties and school districts are particularly interested
in this finding because they will not realize any
enhancement to their general tax base until after the TIF
district is terminated (up to 26 years).
Project Area
The project area, the parcels upon which TIF funds can be spent, can
be the same as or greater than the TIF district.
➢ Does the City intend to use TIF funds beyond the
parcels from which TIF revenue will be generated?
➢ Does the City envision numerous TIF districts created
over time within a single project area?
➢ Does the City have other improvement projects in other
adjoining areas for which funding can be augmented
with TIF?
➢ Does the scope of the improvement project benefit two
or more TIF districts?
� SPRINGSTED Page 18
Tax lncrement Financinq in Minnesota
Level of Assistance
A. How much funding does the City wish to commit to the
project?
➢ Demonstration by private parties of need for level of
TIF assistance requested.
B. Mandatory imposed limitations
➢ Statutory duration of the TIF district
➢ Tax capacity rate ceilings
C. Discretionary imposed limitations
➢ Term of TIF district shorter than maximum permitted
➢ Nature of expenditures
♦ Do they lead to taxability and therefore higher
interest rates yielding lower net bond proceeds?
➢ Pace of development
♦ How soon will development occur?
➢ Fiscal disparities option on commercial-industrial
developments in the Twin Cities Metropolitan Area and
Tacon�te Tax Relief Area.
�SPRINGSTED Page 19
Tax lncrement Financinq in Minnesota
Fiscai Disparities
➢ State law requires new commercial-industriai properties
in the Twin Cities Metropolitan Area and Taconite Tax
Relief Area to contribute up to 40%of their valuation to
an area wide pool for distribution back to all local taxing
jurisdictions.
➢ For TIF districts with new commercial-industrial
development,the City must decide whether the fiscal
disparities contribution will be made from valuation
within the TIF district or from commercial-industrial
properties located within the City but outside of the TIF
district.
➢ New economic development TIF Districts must have
fiscal disparity contribution made from within the TIF
District(no option).
➢ How does this affect the TIF district and related
increment revenue?
TIF District IVet Tax Capacity
Without/VUith Fiscal Disparities Contrib�tion
Without With
(Option A) (Option B)
Captured
Net Tax
Capacity
Captured (>_ 60%)
Net Tax
Capacity
Fiscal
Disparities
Contribution
(<— 40%)
(ONTC) (ONTC)
�SPRINGSTED Page 20
Tax lncrement Financinq in Minnesota
➢ Over the life of the TIF district.
Without Fiscal Disparities Contribution
(Option A)
Net Tax
Capacity
Captured Net Tax Capacity
Original Net Tax Capacity
Time(Years) �
With Fiscal Disparities Contribution
(Option B)
Net Tax
Capacity
Captured Net Tax Capacity
Fiscal Disparities Contribution
Original Net Tax Capacity
Time(Years) —�
� SPRINGSTED Page 21
Tax lncrement Financin in Minnesota
Primary Imnacts
If the fiscal disparities contribution comes from the TIF district, less
increment revenue results, which restricts the level of funding for
the project.
If the fiscal disparities contribution comes from outside the TIF
district,the converse is true, that being an increase in the level of
funding.
Secondarv Impacts
With the fiscal disparities contribution being made from outside the
TIF district,the amount of the contribution must come from other
commercial-industrial properties within the City.
➢ The potential exists for City tax rate increases dependent on
the relative magnitude of the new development to the City's
total tax capacrty. With the fiscal disparities contribution
coming from outside of the TIF district, the City's total gross
tax capacity is reduced by both the TIF captured tax capacity
and the fiscal disparities contribution. This can lead to a
potentially higher City tax rate.
�SPRINGSTED Page 22
Tax lncrement Financin in Minnesota
City Security Guarantees
A. Usually when TIF bonds are sold they are general obligation
bonds. General obligation TIF bonds require that if increment
revenue is not sufficient to pay debt service at any time over
the life of the bonds, then the City is ultimately required to
levy City-wide property taxes to repay the bonds.
B. How can this occur?
➢ New development is constructed over a longer time
frame and/or to a lesser market value than was
represented to the City at the time of approval;
➢ Property owners don't pay their taxes on time;
➢ Property owners pay taxes on time, but with decreases in
tax capacity rates caused by changes in the funding of
local governments or tax structure changes, actual
property tax payments are less than scheduled debt
service.
C. How does the City protect itself?
➢ Assessment agreement stipulating the market value of
new development and schedule of completion.
➢ Withholding bond proceeds or delaying construction of
public improvement until all or a portion of new
development is completed.
➢ Liquidity guarantees(letters of credit)provided by
property owners ensuring timely payment of property
taxes.
➢ Liquidity guarantees(letters of credit)provided by
property owners covering debt service shortfalls
regardless if taxes are paid on time.
➢ Pay-as-you-go: No debt is issued. The landowner
finances his own improvements and is reimbursed over
time by the City from the actual collection of increment
revenue.
D. The type of guarantees depends on the level of risk the City
perceives itself to be exposed to.
�SPRINGSTED Page 23
Tax lncrement Financin in Minnesota
City Administrative Costs
The establishment of a TIF district and the negotiation of a thorough
Development Agreement require substantial time commitments by
City staff and its consultants. A large portion of that time is
expended prior to the signing of the Development Agreement and
before actual construction of the new development. Furthermore,
additional City stafftime is needed to monitor and report on the
performance of the TIF district over its life. The legislature has
anticipated these City costs by providing for a reimbursement for
admin�strative costs (interfund resolution required). This
reimbursement is limited to the lesser of 10%of project costs or
10%of increment revenue, and is intended to cover all staff and
consultant costs other than engineering.
The City should consider two relevant policy questions.
➢ Does the City wish to receive a guarantee of its costs from the
landowner for the period from inception of the TIF process
until signing of the Development Agreement? This guarantee
covers the situation whereby the pro�ect terminates during the
negotiation phase.
➢ What is the appropriate level of administrative cost
reimbursement?
�SPRINGSTED Page 24
W M M� 6/j iqbgil:??.� ., f
��� I
City Administration/Council
763 593 8003/763 593 8709(fax)
Executive Summary
Golden Valley Special Council/Manager Meeting
lune 4, 2014
Agenda Item
3. Board/Commission Vacancies
Prepared By
Thomas Burt, City Manager
Summary
Staff will provide an updated list of board/commission vacancies. The list will be distributed at
the meeting.