07/15/2014 - City Council Finance CommitteeFINANCE COMMITTEE MEETING
TUESDAY, JULY 15, 2014
5:30 P.M,
CONFERENCE ROOMS 1 A &B
AGENDA
I. AGENDA ADOPTION
II. PUBLIC FINANCING ASSISTANCE - CSM REQUEST REGARDING FORMER LOCKHEED
MARTIN' PROPERTY - CENTRAL PARK COMMONS
III. OTHER BUSINESS
IV. ADJOURNMENT
Agenda Information Memo
Finance Committee Meeting
July 15, 2014
II. PUBLIC FINANCING ASSISTANCE — CSM REQUEST REGARDING FORMER
LOCKHEED MARTIN PROPERTY -- CENTRAL PARK COMMONS
DIRECTION TO BE CONSIDERED:
To make a recommendation to the City Council to approve or deny a request by CSM for
public financing assistance for potential enhancements of the Central Park Commons
development proposal.
FACTS:
The Finance Committee met with CSM representatives on June 23, 2014, to review
and discuss the firm's application for consideration of public financing assistance for
potential enhancements of the firm's proposed development on the former
Lockheed Martin property.
The only financing tool staff and the City's consultants have identified that could be
applied in this situation is tax abatement. The City recently updated its public
financing assistance policy to permit consideration of the use of tax abatement for
redevelopment and reuse projects under certain circumstances. The Committee
discussed whether the circumstances related to the proposed reuse of the property
provided justification for assistance.
Prior to finalizing a recommendation to approve or deny the request, the Committee
asked for additional information regarding policy considerations relative to the
payment of the fiscal disparities contribution for the proposed development within
or outside the district. Ehlers and Associates has prepared the attached memo in
that regard.
The other information included in the Committee packet from June 23, 2014 is not
reproduced here, but is available for Committee review, if requested.
ATTACHMENTS;
• Memo from Ehlers and Associates regarding projections of tax abatement revenue
and effects of the Fiscal Disparities election on pages 3 through 'NV
Ira
Memo
To: Dave Osberg and Jon Hohenstein, City of Eagan
From: Rebecca Kurtz and Mark Ruff, Ehlers
Date-, July 8, 2014
ulbjert: DRAFT - Abatement Options and Impact
Park Commons 4
As a follow -up to the Finance Committee discus ' Z t n June I _ - the follo :.'s a summary of
the fiscal disparities program and the impact of calc T i _ 1 disparities f utside the
abatement area for the proposed Co. k Common. 0 eet.
Fiscal Disparities Background
The :fiscal disparities pr a system • t the pa ing r mercial and industrial
property tax base a 'ctions wi t11r = , metropolitan area of the Twin
Cities. The main pu _ s and go of the pr F ollow:
Support a regional appro de . ent. Ta se sharing spreads the fiscal benefit of
business d s ; t spaw 1 io vest • t in infrastructure, such as airports,
freewa e a z ange' sports s sf also may make communities more
willin ° ccept low -t d re < 1 facilitie , ch as parks.
Equalize t tribution of reso Communities with a below average tax base must
impose highe - rates to deli the sa ervices as communities with a higher tax base.
These high tax r aloe poor: ; munities less attractive places for businesses to locate or
expand in, exacerb • the prog pro; Sharing tax base was originally designed to equalize tax
rates among different ecl i
Q0 EHLERS
LEADERS IN PUBLIC FINANCE
Disparities for Central
Reduce competition for coMercial- industrial development. Communities generally believe that
some kinds of commercial industrial properties, such as office buildings, pay more in taxes than
it costs to provide services to them. This encourages communities to compete for these properties
by providing tax concessions or extra services, which can weaken their fiscal condition. Tax -
base sharing was originally designed to reduce the incentive for this competition, thereby
discouraging urban sprawl and reducing the cost of providing regional services such as sanitary
sewer trunk lines and all forms of transportation investments,
With the fiscal disparities program, each taxing jurisdiction annually contributes 40 percent of
the growth in its commercial industrial tax base since the year of enactment (1971) to an abstract
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entity called the "fiscal disparities pool," This contribution value is not available for taxation by
the jurisdictions where the property is located.
Each city receives a distribution from share of the "fiscal disparities pool" through a formula
based on its share of the area's population and its relative property tax wealth (tax base per
capita). The distribution is divided among all jurisdictions in that city according to the size of
their tax rate in proportion to the others. The fiscal disparities distribution is then used to write
down the annual levy of the local taxing jurisdiction,
The City of Eagan is a net contributor of fiscal disparities. In 2014, the City contributed $12,6
million in tax capacity value to the pool, which is the equival $4.8 million in taxes, The
distribution received by the City was $2.6 million,
Abatement Options
Based on discussions with the City and Finance
abatement assistance. One scenario assumeAim
district; the other assumes fiscal disparities
scenarios we have used the fallowing assumptic
Tax abatement district established
Development completed in one phase
Completed market value
County Commercial A
City only abatement
be directed to the City
Term of 2 No in, s
Present va to of 5.5!
The following c. a.* . outl.
690,000,11
May 13,
it:
ttee, we ha .. :,viewed two scenarios for
irities will be lated from within the
elated from outsi e district. With both
establishment of the district)
on disc ? dons with the Dakota
(curreifftaxes received) will continue to
Currently the property has a market value of $9,024,200 and pays $335,316 in taxes. The City's
share of taxes is $41,350. Under both scenarios, this amount would continue to be directed to the
City and assist with paying for the increase in City services needed for the development. If no
Annual
Assistance
Total
Assistance
Present Value of
Assistance
Fiscal Disparities within District
$298,218
$5,964,352
$3,400,649
Fiscal Disparities outside of District
$487,043
$9,740,867
$5,553,876
Currently the property has a market value of $9,024,200 and pays $335,316 in taxes. The City's
share of taxes is $41,350. Under both scenarios, this amount would continue to be directed to the
City and assist with paying for the increase in City services needed for the development. If no
abatement is granted, the proposed market development plan would result in $339,568 in City
tax revenue to support local services.
Impact of Fiscal Disparities from Outside CPC development
The impact of calculating fiscal disparities from outside the abatement area is an increase in
property taxes to all other tax payers in the City. The City must make a contribution to the -fiscal
disparities pool regardless if the development is inside or outside a tax abatement or a tax
increment financing area. Under Pay 2014 values, the fiscal disparities contribution from the
proposed CPC development would be $918,934 annually. If fist 1 disparities are calculated from
outside the CPC development area, the City's tax rate would ase 0,287% (from 38,250% to
38.537 %). For a home valued at $250,000, this equates to annually, For commercial
property valued at $1,000,000, this equates to $33.78 az it a_1
The following chart shows the impacts for various -> .e of devel` =.1 = ents and market values. The
highlighted column shows the increase in taxes "_ : al disparities calculated from outside
the project area.
_ City of Eagan
nesota -
Estimated Tax
f
........ ..... . ......... ._ _ .......
�¢
.. ....r .. _.
. ..
ra p4J'RTY.kTA�4N.�1?lY��Oas ..
... _........ ... ..... .
Actual Net Tax Capacity •Payable 2014 66,38dr
........... _ .............. .,.... ............... ............- .................... ........... -52 - . ...........
_ .. ... .. ... .............. ... .. .. ............. ... ....
................. ..i...
Estimated Tax Capac Rate
"
Payable ?014 Without Proc j9 38.260%
_.,..,._..
i
... ._
2014WlthPropose 38.637 %...
_,P. ayable ._ ..
. . .... ..... _ ..
gy.... .. £ . .......
.. .... 4.
Estimated Tax Rate Increase
i
T , e�of Br��e :, ��z i;
t�:�af�CetUalue �
��ccluslvq�, =�
_hack Valile~<,
,.� ,Capaclty.� 4S
� .C�13y Tax, �t,�
I�ateasg� ;
,F „�Clty Ta7� ==
x100 000
000
28,240
F 23,740
760
$
718
$ 274 48
$ 2 06
.a
$
276 64
1,263
482.94
3 62
486.66
0
`690
151351b
1,636
587,18
440
69167
N�-o
2
180 760
1 808
691.41
5 18
696 69
_.....
µ M
226
1
2 080
795 6,T
5 8Sz
801 60
260 00 1
276 000
14 7
12,490
235 260
282 510
2 353
2,625
898 87
1,004:10
s 6 7d:
f T 52:
906.61
1,011.02
.. ...
e 300,000
... __..
.. 1D,240
289 760
2 898
1 108 33
8 30
1 116.64
r
” 400,000
1,240
398 780
3,988
1,526.26
11 43
1,538 68
500,000
500,000
1 5,000
1;912,60
192683
$ 50 00�
$ 260,000
$ 2,602
$ 995 37
s$ <x 7 46
$
1,002,83
Comma rclalllndusirial
7
500,000
760,000
$ 6,664
$ 8,725
2,166.40
3,337.43
T6 23
25 OD
2,182 83
3,362
1 00 ( °00
1 000 000
$ 11,787
_
4 508 46
33 78
a3
d 612.,L3
_._ ..... . .. ..........
1 500 000
..._._r..
_ .
1 500 000
$ 17, 910
6 850 51
6132
.....
,. Sa801.04:...
2,000,000
2,000,000
$ 24,033
9,26144
Please do not hesitate to contact us if you have questions.
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