09/29/2006 - City Council Finance Committee17pr
Cityof E
TO: FINANCE COMMITTEE MEMBERS CARLSON AND
MA-G-U- IRE "�n
FROM: CITY ADMINISTRATOR HEDGES
DATE: SEPTEMBER 29, 2006
SUBJECT: FINANCE COMMITTEE TUESDAY, OCTOBER 3,2006
DISCUSSION OF BUSINESS ASSISTANCE POLICY AND PUBLIC FINANCING
POLICIES
Enclosed is a copy of the Business Assistance Policy and Public Financing Policies that have
been worked on for some time with the former Economic Development Commission and our
City staff under the direction of Director Hohenstein. There is considerable data enclosed for
review. Please pay particular attention to the memorandum prepared by Director Hohenstein
that outlines all of the City's Business Assistance Policies and, if time permits, the attached
documents provide greater detail for City and business if the policies are adopted and
implemented.
We anticipate representatives of Ehlers and Associates to be present to discuss the policies.
OTHER BUSINESS
The City Administrator would like a few minutes at the end of the Finance Committee
meeting to discuss the financing elements that are under current consideration regarding a
practice facility/training room expansion for the Civic Arena.
The Director of Administrative Services will also be present to help respond to any questions.
There will be no written documentation on this item in advance of the meeting.
Thomas L. Hedges
City Administrator
AGENDA
CITY COUNCIL
FINANCE COMMITTEE MEETING
TUESDAY, OCTOBER 3, 2006
4:30 P.M.
CONFERENCE ROOMS 2A & 2B
I. 'ROLL CALL / AGENDA ADOPTION
II. BUSINESS ASSISTANCE POLICY & PUBLIC
FINANCING POLICIES
III. OTHER BUSINESS
IV. ADJOURNMENT
Agenda Information Memo
City Council Finance Committee
October 3, 2006
DISCUSSION OF BUSINESS ASSISTANCE POLICY AND PUBLIC FINANCING
POLICIES
DIRECTION REQUESTED:
To recommend to the City Council the adoption of updated Business Assistance and TIF Policies.
FACTS:
➢ In order to comply with state statute and to provide direction to staff and prospective
developers and businesses regarding the possible use of public financing assistance, it is
necessary for the City to adopt a Business Assistance Policy. It is also appropriate to
adopt policies with respect to the various types of public financing assistance that may be
applied to property development or redevelopment and business assistance.
➢ The City's current Business Assistance Policy and TIF Policy are out of date and should
be updated to comply with current statutes. Prior to its being disbanded, the EDC and its
Finance and Development Committee worked on these policies and brought them close to
completion. It would be appropriate for the Finance Committee to review the most recent
drafts of the policies and provide direction for their completion and consideration by the
full City Council.
ATTACHMENTS:
• Staff memo on pages through
• Current City Business Assistance Policy and TIF Policy on pages through
• EDC Dra s of Business Assistance Policy and TIF Policy Updates on pageQ—W
through
• Ehlers and Associates memo on job and wagg joals on pages through
• Tax Abatement information sheet on pages through
• Twin Cities Community Capital Fund information sheet on pages 4.. through'4- _
• City of Burnsville Bus ss Subsidy Policy, TIF Policy and Tax Abatement Policy on
pages S through`'Ad
City of Eap ma
TO: TOM HEDGES, CITY ADMINISTRATOR
FROM: JON HOHENSTEIN, COMMUNITY DEVELOPMENT DIRECTOR
DATE: SEPTEMBER 29, 2006
SUBJECT: BUSINESS ASSISTANCE AND TIF POLICIES — FINANCE
COMMITTEE REVIEW
The purpose of this memo is to overview the current status of the City's Business
Assistance Policy and the related Tax Increment Financing and Public Financing
Assistance Policies, in preparation for a meeting with the City Council Finance
Committee.
The desired outcome of the Committee's consideration of these items would be a
recommendation to the City Council to adopt updated Business Assistance and TIF
Policies for our use in responding to applications for public financing assistance and
to form the basis of our future reports to the state regarding our compliance with
state law and the policies when providing public financing assistance to businesses
and developments.
REQUIREMENT FOR BUSINESS ASSISTANCE POLICIES
State Law requires that local governments that provide public financing assistance
to businesses or development adopt policies to define the criteria by which they will
consider such assistance. The criteria typically stark with the criteria for a specific
business financing tool (TIF, revolving loan funds, etc.) and may include other
criteria that are deemed appropriate by the local government. If the assistance is
provided for true economic development (job and/or business retention, expansion
or location), however, state law requires that the policy include job creation and
wage goals, of some kind.
The City's current policy, which is attached, is a number of years old and should be
updated to comply with statutory changes and make appropriate references to
applicable statutes. It would be best if this could be completed prior to the end
2006, so that the policies could be the basis for year end 2006 reports to the state.
It will also be valuable to have a current policy in place to guide discussions with
business and development prospects that approach staff on a confidential basis in
advance of a formal development application or financing assistance application.
When used in this way, the policy would not guaranty assistance, but would help
04
define what projects may be covered by the policies and would merit further
consideration or application.
EDC DISCUSSION OF UPDATED BAP AND TIF POLICIES
Prior to the discontinuation of the Economic Development Commission earlier this
year, the EDC Finance and Development Committee had completed drafts of the
Business Assistance Policy and TIF Policy, which are attached. The format of the
policies is to treat the Business Assistance Policy as an umbrella for all types of
financing assistance and for policies related to specific types of assistance to be
attachments to it.
The group stressed the need to keep the policies understandable to the business or
developer that might be requesting assistance, so other than legal references that
are required by the statutes, the layout and language'of the policies is purposely
simplified.
Job and Wage Goals
The primary outstanding issue related to the criteria to be applied to Economic
Development TIF Districts, specifically as they relate to job creation and wage
goals. Such goals are legal requirements for such policies.
The reason that job and wage goals are a requirement relates to the definition of
economic development. The National Development Council defines "economic
development" as private sector investment in long-lived physical plant and
equipment, to increase productivity and to create new, permanent private sector
jobs. The NDC defines the public sector role as encouraging such investment by a
variety of means, sometimes including public financing assistance. Economic
development literature typically focuses on head of household or living wage jobs.
For that reason, state economic development programs and many, if not most, City
policies have require that public financing assistance for economic development
purposes result in the creation of jobs at or above a certain living wage level or
leverage requirements of one job at a required wage level for every $xxxxx of
assistance. Such wage levels often are defined as a multiple of the minimum
wage, an annual calculation of a living wage or head of household wage or a
prevailing wage for a particular type of job. Eagan's current policy is based on a
prevailing wage standard for comparable jobs. Other policies set a basic wage rate
as a prerequisite for consideration and award points for average wage rates for jobs
created that substantially exceed that.. An example of this approach is the
Burnsville Business Assistance Policy and TIF Policy, which is attached. While not
as simplified as a straight base standard, the factor weighting approach of the
Burnsville policy allows it to both set a base level for wages and award greater
points for higher numbers of higher paying jobs.
In situations that do not relate to "economic development", such as redevelopment,
renewal and replacement, soils correction and other property focused projects,
other cities' business assistance policies permit the job creation and wage goals to
be waived by the City in consideration of other public benefits. Again, the Burnsville
policy is an example.
The EDC Finance Committee discussed the matter at length and concluded that
the City Council and the EDA would have the maximum flexibility if the policy did
not set substantial minimums for jobs or wages and, as a consequence, prepared a
draft policy that set the job and wage goals for a project at one job at the federal
minimum wage. The Committee indicated that it would understand if the Council
wished to set higher standards in the policy or for a particular project, but the group
took the approach of creating a low base that would be met in all cases rather than
a higher one that might be waived if the job and wage goals were found not to apply
to the type of project under consideration.
Staff presented the more traditional approach of setting a particular job and wage
level or leverage ratio would help the staff and the Council screen and evaluate
proposals and applications for "economic development" projects. It would also
control situations in which large amounts of public financing were being requested
for projects that would only provide low paying jobs.
The Committee agreed that both options should be presented to the Council for its
consideration.. The matter had not gone to the full Commission at the time that it
discontinued its meetings.
Other Issues
Tax Abatement Policy.
In 1997, the state created the authority for cities, counties and school districts to
create Tax Abatement Districts. Unlike tax increment where the City can make a
decision to capture and use the incremental taxes from a development from all
taxing jurisdictions, under tax abatement, each jurisdiction gets to determine
whether to abate its portion of property taxes. A fact sheet regarding Tax
Abatement is attached.
The City of Eagan has not used this tool and, to .date, has not had a policy
statement for its use. Cities that do use the tool, typically only apply it to the
incremental taxes from a development, but the statute does permit the abatement
of the base tax amount as well. The EDC Finance Committee was reluctant to
recommend a policy for the use of the tool, because of concerns that it would be
difficult to adhere to the standard that the City would only abate incremental taxes
and that there would be pressure and temptation to use the tool to bail out troubled
businesses rather than encourage economic development and additional
investment.
That having been said, as more cities use the tool, the City does receive inquiries
as to whether the tool is available. It would be important to determine whether
Eagan should develop a policy and whether the Council would be comfortable that
a policy based on abatement of incremental taxes would resolve the EDC
members' concerns.
Revolving Loan Fund - TCCCF
At the recommendation of the EDC, the City Council also approved participation in
the Twin Cities Community Capital Fund, a pooled revolving loan fund. A fact sheet
regarding the Fund is attached. The City capitalized its participation in the fund
using the proceeds of two DEED grant/loan projects that were carried out and
repaid in the 1990's. The fund allows loans to be packaged and issued up to ten
times the amount of the City's participation ($2 million on the $200,000 investment)
and, because the loans are combined and resold on the secondary market, it is
possible for the fund to make multiple loans, rather than being limited, to $200,000
or even $2,000,000. Loans are available for fixed assets at market rates with terms
roughly matching the life of the assets acquired. The loans will only provide gap
financing to businesses that can get conventional and/or SBA financing for a
majority of the amount to be lent.
The City has participated in publicizing the availability of the fund to area banks, but
it seemed advisable to have the Business Assistance Policy update completed
before more promotion of its availability to the business community.
At the present time, the only eligibility criteria for the use of the fund would be that
the project and loan amounts are credit worthy as determined by the primary bank
and the TCCCF and that the applicant meets the Business Assistance Policy job
and wage goals. This appears to be the common approach from discussions with
other TCCCF members. This would be the approach staff would recommend,
unless the Finance Committee and City Council conclude otherwise. A simple
policy statement to that effect could be prepared and added under the Business
Assistance Policy umbrella.
POLICY QUESTIONS
The primary policy questions that have been identified are:
• Whether the basic approach to the Business Assistance and TIF Policies is
appropriate and presented in a usable and understandable way?
• Whether the City's economic development criteria should have a base of
one minimum wage job to qualify for economic development business
financing assistance or if a higher base or leverage approach would be more
appropriate?
a
• Whether the City should consider developing and adopting a tax abatement
policy?
• Whether the City should apply additional criteria above the basic Business
Assistance Policy to applicants for the Twin Cities Community Capital Fund?
CONCLUSION
The updates of the City's Business Assistance Policy and TIF Policy are in order for
approval, with additional direction with respect to the job creation and wage goals.
A Revolving Loan Fund/TCCCF Policy can be prepared if the background is
satisfactory. Staff is requesting direction on whether to prepare a Tax Abatement
Policy for consideration by the Committee and the City Council.
1Ur*L4PZZ]
ToLTniq Development Director
Cc: Gene VanOverbeke, Director of Administrative Services
Rebecca Kurtz, Ehlers and Associates
BUSINESS SUBSIDY
BUSINESS SUBSIDY CRITERIA
The following business subsidy criteria are intended to satisfy the requirements of
Minnesota Statutes §§116J.993 through 1167.995. The term "city" means the City of
Eagan, The term "project" means the property with respect to which business subsidy is
provided.
A. Project Review and Evaluation Policy
The City recognizes that the creation of good paying jobs is a desirable goal that
benefits the community. Nevertheless, not all projects assisted with subsidies
derive their public purposes and importance solely by virtue of job creation. In
addition, the imposition of high job creation requirements and high wage level
requirements may be unrealistic, and counter-productive in the face of larger
economic forces influencing, and the financial and competitive circumstances of,
an individual business. In determining the requirements for a project under
consideration for a business subsidy, the determination of the number of jobs to
be created and the wage levels therefore will be guided by the following
principles and criteria:
a. Each project will be evaluated on a case by case basis. The evaluation
will take into consideration the project's importance in and benefit to the
community from all perspectives, including created or retained jobs.
b. If a particular project does not involve the creation of jobs, but is
nonetheless found to be worthy of support and subsidy, assistance may be
approved without any specific job or wage goals if permitted by applicable
law.
C. In cases where the objective is the retention of existing jobs, the recipient
of the subsidy will be required to provide evidence that demonstrates that
the loss of those jobs is imminent. .
d. The setting of wages and job goals will be informed by (i) prevailing wage
rates, (ii) local economic conditions, (iii) external economic forces over
which neither the City nor the recipient of the subsidy has control, (iv) the
financial resources of the recipient and (v) the competitive environment in
which the recipient's business exists.
2. The City retains the right to approve the projects and business subsidies which may
vary from the principles and criteria set forth herein in order to retain the flexibility
necessary to respond to all proposed projects because it is not possible to anticipate
all the needs and requirements of every type of project and the ever-changing needs
of the community.
I?
B. Project Review and Evaluation Procedure
The City will consider one or more of the criteria listed in Section C below in
determining whether to provide financial or other assistance to a project as a business
subsidy. In applying the criteria to a specific project, the following will apply:
1. The City may consider the requirements of any other business subsidy received,
or to be received, from a grantor other than the City.
2. If the business subsidy is a guaranty, the amount of the business subsidy may be
valued at the principal amount of the guaranteed payment obligation.
3. If the business subsidy is real or personal property, the amount of the subsidy will
be the fair market value of the property as determined by the City.
4. If the business subsidy is received over time, the City may value the subsidy at its
present value using a discount rate equal to an interest rate that the City
determines is fair and reasonable under the circumstances.
As used herein, "benefit date" means the date the business subsidy is received. If the
business subsidy involves the purchase, lease, or donation of physical equipment, then
the benefit date occurs when the recipient puts the equipment into service. If the business
subsidy is for improvements to property, then the benefit date refers to the earliest date of
either: when the improvements finished for the entire project; or when a business
occupies the property.
C. Project Review and Evaluation Criteria
The project review and evaluation criteria are the following:
1. Jobs and Wages
a. New Jobs. The minimum net number of direct full time equivalent jobs to be
created or retained by the proposed project for a period of at least two years from
the estimated benefit date.
b. Payroll. The minimum annual net payroll (including employer contributions for
health benefits) to be generated at the end of the third anniversary date of the
estimated benefit date.
2. Tax Base
a. Increase in Tax Base. The net increase in property taxes estimated to be
generated by the project in the first fall year of operation.
3. Land Use
a. Compliance with Comprehensive or Other Plans. Whether, apart from any
needed services to the community described in section 5 below, the project is
more compatible with the comprehensive plan than other permitted uses for the
property. For example, the project may involve a "clean" industry such as a
technology or service business that is preferred over other permitted uses.
b. Marginal Property. Whether the project is located on property which needs but is
not likely to be developed or redeveloped because of blight or other adverse
conditions of the property. For example, property may be so blighted that the cost
of making land ready for redevelopment exceeds the property's fair market value.
c. Design and/or Other Amenities. Whether, as a result of the business subsidy, the
project will include design and/or amenity features not otherwise required by law.
For example, the project may, at the request of the City, include landscaping,
open space, public trails, employees' work out facilities or day care facilities that
serve a public purpose but are not required by law.
d. Impact on Existing and Future Public Investment
a.
Utilization of Existing Infrastructure Investment. Whether and to what extent (a)
the project will utilize existent public infrastructure capacity and (b) the project
will require additional publicly funded infrastructure investments,
Direct Monetary Return on Public Investment. Arrangements made or to be made
for theCity to receive a direct monetary return on its investment in the project.
For example, the business subsidy may be in the form of an interest-bearing loan
or may involve a project sharing arrangement.
Iv
5. Economic Development
a. Leveraged Funds. For every dollar of business subsidy to be provided for the
project, the minimum amount of private funds which will be applied towards the
capital cost of the project.
b. Spin Off Development. The dollar amount of non -subsidized development the
project is expected to generate in the surrounding area and the need for and
likelihood of such spin off development.
c. Growth Potential. Based on recipient's market studies and plans for expansion,
whether and to what extent the project is expected within five years of its
completion, be expanded to produce a net increase of full time equivalent jobs and
of payroll, over and above the minimum net increase in jobs and payroll described
in section 1 above.
6. Quality of Life
a. Community Services. Whether the project will provide services in the community
and the need for such services. For example, the project may provide health
services, retail convenience services such as a nearby grocery store, or social
services needed in the community.
7. Other
a. Other Factors. Depending on the nature of the project, such other factors as the
City may deem relevant in evaluating the project and the business subsidy
proposed for it.
D. Criteria Required For All Projects
All projects must comply with the following criteria:
1. But For Test. There is a substantial likelihood that the project would not go forward
without the business subsidy.. This criterion may be met based solely on
representations of the recipient of the business subsidy.
*2. Wage Policy. If the project results in the creation of any jobs, the wage for each part-
time and full-time job created must be, within two years of the date assistance is
received (as defined in the Act), at least equal to the prevailing wage for like or
similar jobs within the area or such greater amount as the City may require for a
specific project.
3. , Economic Feasibility. The recipient must demonstrate to the satisfaction of the City
that it has adequate financing for the project and that the project will be completed in
a timely fashion.
*4. Compliance with Act. The business subsidy from the City must satisfy all
requirements of the Act.
* These are the only provisions in this business subsidy criteria document which are required by law.
Ad(
Date of Adoption: / /5' /ov
Date of Public Hearing: / >
1C
BUSINESS SUBSIDY AGREEMENT
This Business Subsidy Agreement (this "Agreement") is made as of the — day of
'2000 '
2000, between the City of Eagan, Dakota County, Minnesota (the "Grantor")
and [name of business], a Minnesota corporation (the "Recipient"), In order to' satisfy the
provisions of Minnesota Statutes, § § 1167.993 through 1161995 (the "Act"), the
Recipient acknowledges and agrees as follows:
1. Description of the Business Subsidy
(a) The Project. The Recipient will be undertaking the following project within the
area of the Grantor: [Insert project description] (the "Project").
(b) Type of Business Subsidy. The Business Subsidy consists of the following
assistance to the Recipient for the Project:, [Grant, contribution of property or
infrastructure, low-interest loan, reduction or deferral of a tax or fee, guarantee, or
preferential use of.governmental facilities, etc.] (the "Business Subsidy").
(c) Amount of the Business Subsidy. The amount of the Business Subsidy granted to
the Recipient under this Agreement is $ [which is the difference between
$ , the fair market value of the property to be sold to the Recipient (the
"Development Property") and $ . , the purchase price paid by the
Recipient for the Development Property]. [Bracketed language to be used if
subsidy is not a forgivable loan]
(d) Type of Tax Increment Financing District. The Tax Increment District in which
the Project is located is a [type of district; e.g., "redevelopment district"] within
the meaning of the Tax Increment Financing Act, Minnesota Statutes, §§469.174
through 469.179. [Section to be deleted if assistance is not TIF]
2. Public Purpose for the Business Subsidy. The public purpose of the Business Subsidy
is to encourage the construction of necessary improvements and to redevelop blighted
areas and replace structurally substandard buildings. [This section should reflect the
public purpose of the actual project]
3. Why the Business Subsidy is Needed. The Business Subsidy is needed because the
Project is not economically feasible for the Recipient to undertake without the
Business Subsidy.
4. Goals for the Business Subsidy.
(a) The Recipient agrees that it will meet the following goals (the "Goals"):
(i) it will create at least _jobs in connection with the Project, of which _
(ii) it will retain at least ` jobs in connection with the Project, of which will
be full-time jobs and _ will be part-time jobs;
(iii)the hourly wage of the new jobs will be at least $ _ per hour;
110
within two years from the date the Business Subsidy is received by the Recipient
(the "Benefit Date").
(b) As used herein "Benefit Date" means the date the Business Subsidy is received.
If the Business Subsidy involves the purchase, lease, or donation of physical
equipment, then the Benefit Date occurs when the Recipient puts the equipment
into service. If the Business Subsidy is for improvements to property, then the
Benefit Date refers to the earliest date of either: when the improvements are
finished for the entire Project; or when the Recipient occupies the property.
5. Continued Operations. The Recipient agrees to continue its operations at the location
of the Project for at least five years after the Benefit Date.
6. Financial Obligation of the Recipient if Goals Not Met.
(a) The Recipient agrees that if the Goals are not met in their entirety, the Recipient
will repay all of the Business Subsidy to the Grantor plus interest ("Interest") set
at the implicit price deflator defined in Minnesota Statutes, §275.70, Subdivision
2, accruing from and after the Benefit Date, compounded semiannually.
(b) If the Goals are only met in part, the Recipient agrees to repay a portion of the
Business Subsidy (plus the Interest) determined by multiplying the Business
Subsidy by a fraction, the numerator of which is the number of jobs -in the Goals
which were not created at the wage level set forth above and the denominator of
which is . [Insert the number of jobs set forth in the goals.]
7. Reporting Requirements.
(a) The Recipient agrees to:
(i) report its progress on achieving the Goals to the Grantor until the Goals are
met, or the Business Subsidy is repaid, whichever occurs earlier;
(ii) include in the report the information required in § 116J.994, subdivision 7 of
the Act. on forms developed by the Minnesota Department of Trade and
Economic Development; and
(iii)send completed reports to the Commissioner of the Department of Trade and
Economic Development and the to the Grantor no later than March 1 of each
year commencing March 1, 2000, and within 30 days after the deadline for
meeting the Goals.
(b) If the Grantor does not receive the reports, it will mail the Recipient a warning
within one week of the required filing date. If within 14 days of the post marked
of the warning the zeports are not made .the Recipient agrees_ to p� to the
Grantor a penalty of $100 for each subsequent day until the report is filed up to a
maximum of $1,000.
The Grantor and Recipient have executed this Agreement as of the date written above.
Grantor:
City of Eagan
By —
Its
By_
Its
Recipient:
[Name of Recipient]
By
Its
8. Forgivable Loan. The Recipient acknowledges that the Business Subsidy is a loan
and that it must repay the Business Subsidy; provided, however the Recipient's
obligation to repay the Business Subsidy will be forgiven upon and the to the extent
of its successful, compliance with the Goals. will,
with Grants]
9. Parent Corporation. The name and address of the Recipient's parent corporation is as
follows:
10. Multiple Recipients. The Grantor acknowledges that the Business Subsidy benefits
more than one recipient. Recipient's proportionate share of the Business Subsidy is
%, which represents a reasonable estimate of Recipient's share of the total
benefits. [Use if multiple recipients]
11. Other Grantors. The following is a list of all financial assistance to be provided by all
grantors for the Project: [Insert List]
12. Term of Agreement. This Agreement will be in full force and effect until the earlier
of the Recipient meeting all of its obligations hereunder or the provisions of the Act
no longer apply to the Grantor, the Recipient or the Project, in which case this
Agreement will be terminated.
111
r
CITY OF EAGAN
INFORMATIONAL PACKET FOR
TAX INCREMENT FINANCING
CONTENTS
A. CITY POLICY STATEMENT
B. CITY APPLICATION FORM
C. GUIDELINES
D. RESOLUTIONS
E. APPENDICES
Proposed Revisions July 1999
TIF DESCRIPTION AND DEFINITION
CITY ECONOMIC DEVELOPIZNT GOALS AND
POLICIES .
17
A. CITY POLICY STATEMENT
mi
CITY OF EAGAN, MINNESOTA
POLICY AND CRITERIA AS TO THE
REVIEW OF TAX INCREMENT
FINANCING APPLICATIONS
I. GENERAL
The City Council has been granted the power to issue tax
increment financing (TIF) bonds, by the Minnesota Tax
Increment Financing Act, Chapter 469, Minnesota Statutes (the
"Act") as amended. Through this act, the City may undertake
economic development and redevelopment projects and finance
public improvements for qualified projects within them.
The Eagan City Council, being aware that such financing may
benefit the community by attracting industry, expanding
employment opportunities, eliminating blighted land and
enhancing tax base, has expressed its support for the use of
the tool but has reserved the right to approve or reject
projects on a case-by-case basis, taking into consideration
the following factors:
a. An application fee of $500.00 is to be received by the
City for each Tax Increment Financing application
processed. The City reserves the right to charge the
applicant for out of pocket costs relative to the
processing of the application. The application fee for
redevelopment projects may be waived or refunded at the
discretion of the City Council..
b. To be eligible, an industrial or commercial project
shall be compatible with the overall development plans
and objectives of the City, including its Comprehensive
Land Use Guide Plan.
C. The project shall be of a nature that the City wishes to
attract, or an existing business the City wishes to have
expand within the, City considering potential for
employment, incentive for further development, increased
tax base, impact on City service needs and support for
industrial or commercial operations currently located
within the City.
Priority consideration will be given to proposals that
meet one of the following descriptions:
1. Corporate headquarters or large corporate campuses;
2. Development that achieves the highest, best use of
an individual parcel or area.
3. Infrastructure improvements that will faciiltate
additional development in areas of existing use.
4. Redevelopment projects that are consistent with the
economic.development goals of the City.
d. The City recognizes that the provisions of the Tax
Increment Financing Act provide industrial and
commercial enterprises with potentially significant
savings in financing costs. These savings are intended
to provide the enterprise incentive to locate or expand
in Eagan.` The City will not look favorably on the use
of TIF for limited partnerships and other forms of tax-
sheltered business organizations whereby individuals
gain personal tax advantages.
e The ' applicant must show that other forms of
financial assistance have been investigated. The City
will give priority consideration to proposals that
incorporate alternative financing methods that reduce
the level of tax increment necessary.
f. The application cannot be considered by the City Council
until preliminary City requirements have been met and
findings have been made with respect to zoning, building
plans, platting, streets and utility services.
Preliminary plat or site plan approval is necessary
prior to the public hearing on such financing.
g. The applicant's proposed facility, or expansion of an
existing one, shall provide a significant, demonstrable
benefit to the City. Applicants should define their
project's impact with respect to the following:
1. Preservation or Expansion of Current Employment
Base
- Jobs Retained
- Jobs Created
- Nature of Jobs Retained or Created
- Potential for Location or Relocation Outside
of Minnesota
2. Diversification of Employment Base
Jobs Created
- Nature of Jobs Created
Relationship of Enterprise to Current Economic
Base
3. Known Benefits
Property Tax Enhancement (Target:
of Tax Base to Public Assistance)
- Local Economic Impact
Potential for Expansion and
Development
4. Known Impacts
- Traffic and Road Impacts
- Utility Impacts
- Service Impacts
- Environmental Impacts
5. Potential Risks
12:1 Return
Spin -Off
Note: The City of Eagan and the State of Minnesota have
made a commitment to job retention and business
retention within the state. Compelling evidence
that a business has the capacity and seriously
intends to relocate or expand operations outside of
Minnesota will be a factor in the consideration of
TIF applications from such firms.
h. The applicant's proposed facility, or expansion of an
existing one, must be a qualified project under the Act.
Under these guidelines, the City of Eagan will consider
applications for projects of the following types
(Housing Project TIF guidelines are available under
separate cover due to the fact that the qualifying
criteria are unique from the economic criteria outlined
in this document).
1. Redevelopment Project
A "Redevelopment Project" means a project where the
City finds, by resolution, the following conditions
reasonably distributed throughout the project:
The land is predominantly occupied by
buildings, streets, utilities' or other
improvements, and more than 500 of the
buildings (not including outbuildings) are
structurally substandard to a degree requiring
substantial renovation or clearance; or
Underused of vacated railyards or rail rights
of way.
2. Renovation and Renewal Project
A "Renovation and Renewal Project" means a project
1.
3.
4.
The
where the City finds, by resolution, the following
conditions reasonably distributed throught the
project:
- The land is predominantly occupied by
buildings, streets, utilities or other
improvements, and 20% of the buildings are
structurally substandard and an additional 30%
of the buildings are found to require
substantial renovation or clearance in order
to remove such existing conditions as:
inadequate street layout; incompatible land
use relationships; overcrowding of buildings
on the land; excessive dwelling unit density;
obsolete buildings not suitable for
improvement or conversion; or other identified
hazards to the health, safety and general well
being of the community; or
soils Condition Project
A "Soils Condition Project" means a project which
the City finds, by resolution, that 80% or more of
the district requires substantial earth work and
that costs of the earth work exceed the anticipated
fair market value of the land after site
preparation.
Economic Development Project
An "Economic Development Project" means any project
not meeting the criteria of a Redevelopment,
Renovation and Renewal or Soils Condi-tion Project,
but which the City finds to be in the public
interest because:
The project will discourage commerce, industry
or manufacturing from moving their operations
to another state or municipality; or
The project will result in increased
employment in the state; or,
The project will result in the preservation
and enhancement of the tax base of the state.
Economic Development Projects may only be applied
in the case of Manufacturing, Production,
Processing, Warehousing, Storage, Research and
Development, Telemarketing and, Distribution of
Property (excluding retail sales).
applicant shall
3
select qualified financial
consultants and legal counsel to prepare all necessary
documents and materials. The City Council may rely on
the opinion of such experts or their own experts in
reviewing the application. The application shall be
accompanied by the applicant's" letter of intent and a
financial analysis regarding the financing soundness of
the applicant and the feasibility of the project.
j. The City must be able to make a finding that the project
meets a rigorous "but for" test, that is that the
project would not proceed but for the use of the tax
increment financing. To demonstrate the need for tax
increment financing, the applicant shall be required to
furnish two (2) copies of the. following materials in
addition to the tax increment application:
1. Narrative which demonstrates that the "but for"
finding can be made by"the City Council through an
objective and detailed description of the project
and the project's needs which cannot be met through
conventional means or in comparison to alternative
sites outside of the community or state. The
narrative should include a description of other
financing tools that can or will be used to reduce
the level of tax increment necessary, as well as a
description of financial tools that were considered
but did not provide adequate assistance.
2. Certified annual audits for the last two fiscal
years;
3. The most recent quarterly financial statements;
4. The most current rating report of Dunn and
Bradstreet;
5. The applicant's realistic financial forecasts for a
period of not less than three years, including pro
forma, estimate of project - specific revenues and
costs, business plan and marketing plan. (Forms
and outlines are provided with the application).
6. Leverage summary depicting private and requested
public financing (Target 10:1 Private/Public
ratio) .
7. Such other information as may be required by the
City to properly review the application.
The City shall select qualified financial analysts who
will review the data and make written comments to the
Council as to the current and- projected financial
position of the applicant in order that the Council will
be in a position to reasonably evaluate the applicant's
aL[
ability to carry out the project as proposed. The
applicant shall be responsible for costs which are
incurred by the City in conducting this fiscal review.
k. The City shall select qualified financial consultants
and/or underwriters to prepare all necessary documents
and materials required for a Municipal Tax Increment
Bond sale, if necessary, who will submit a letter of
intent which establishes the positive feasibility of the
project. The applicant shall be required to assume all
costs which may be incurred by the City in examining
legal and/or fiscal aspects of the proposed project.
1. The applicant must not commence any part of the
construction of the project until there has been final
approval by the Council of the application for
financing. Under certain conditions, grading may
preceed such approval, subject to the City's ordinary
permitting requirements.
M. The City Council reserves the right to deny any
application for financing at any stage of the
proceedings prior to adopting the final resolution
authorizing the tax increment financing project.
n. The City is to be reimbursed, and held harmless, for and
from any out-of-pocket costs related to the actual or
proposed issuance of the bonds.
II. ADMINISTRATIVE
a. The applicant shall make an application for financing on
forms available from the City Administrator of the City
of Eagan. The application may be reviewed by the City's
Finance Committee at a special meeting called for that
purpose and such Committee shall forward a
recommendation to the City Council. Specific findings
shall be made regarding employment and satisfaction of
public purposes of the Act.
b. The applicant shall furnish a description of the
project, site plan, rendering of proposed building,
brief description of the applicant and the proposed
financing in such form as shall be required at the time
of application. Such material is to be furnished to
members of the City 'Council for background information
only. Statute prevents the release of such information
prior to approval of financing. Upon approval, only
that application data which is within the public domain
may be released. Trade secret data, security data, tax
returns and information held by consultants or analysts
may not be released. Identifying information concerning
the recipient of public financial assistance, reports of
analysts and consultants, bond documents and
0
correspondence are all public information and must be
released upon request.
C. All applications and supporting materials and documents
shall remain the property of the City. (Private
financial data shall remain property of the city's
,financial analyst or consultant.)
d. It is the policy of the City of Eagan that tax increment
proceeds be used for public improvements and
infrastructure, administrative costs and out of pocket
costs associated with a project. Other eligible costs
under the Act may be considered only under extremely
unique circumstances.
e. It is the policy of the City of Eagan that tax increment
projects not create an unfunded fiscal disparities
obligation.. The City reserves the right to structure a
tax -increment plan so that the estimated increment will
be sufficient to cover both the project's proportion of
the City's fiscal disparities contribution and its debt
service requirements.
f. It is also the policy of the City of Eagan that tax
increment projects not diminish the City's levy base
through Local Government Aid or Homestead and
Agricultural Credit Aid Adjustments. The City reserves
the right to require that the applicant pay an amount
equal to such adjustments as may be necessary under
applicable law to insure continued funding for City
services otherwise covered by the general fund.
g. The City of Eagan will require that it be indemnified in
whole or in part through guarantees of project
completion, timely payment of property taxes, letters of
credit and/or other guarantees in the public interest to
the maximum extent permitted by law. The nature and
scope of the guarantees required will depend upon the
type of project, the method of financing and other
factors bearing on the cetainty of the necessary
outcomes.
DRAFT -- CITY OF EAGAN
Business Assistance Policy
PURPOSE
1.01 The purpose of this policy is to provide a guideline for the City of Eagan to offer assistance for
commercial and housing development and redevelopment projects. The Business Subsidies
Statutes are codified as Minnesota Statutes 116J.993 through '116J.995.
Minnesota Statutes 116J993, Subd. 3 defines a Business Subsidy as "a state or local government
agency grant, contribution of personal property, real property, infrastructure, the principal amount
of a loan at rates below those commercially available to the recipient, any reduction or deferral of
any tax or any fee, any guarantee of any payment under any loan, lease, or other obligation, or
any preferential use of government facilities given to a business." Appendix A lists forms of
financial assistance that are not a business subsidy. This policy shall be used as a guide in
processing and reviewing applications requesting business assistance.
1.02 The City shall have the option of amending or waiving sections of this policy when determined
necessary or appropriate. Minnesota Statutes 116J.994, Subd. 2, allows the City to deviate from
its criteria by documenting in writing the reason for the deviation and attaching a copy of the
document to its next annual report to the department.
2. STATUTORY LIMITATIONS
2.01 In accordance with the City of Eagan's Business Assistance Policy, assistance requests must
comply with applicable State Statutes, including Minnesota Statutes 116J.993 through 116J.995.
3. GOALS
3.01 Asa matter of adopted policy, the City of Eagan will consider using a business assistance tool to
assist private developments only in those circumstances in which the proposed private projects
show a demonstrated financing gap and meet one of more of the goals, as identified in the City of
Eagan's Comprehensive Plan for Economic Development dated February 22, 2001.
4. BUSINESS ASSISTANCE PROJECT APPROVAL CRITERIA
4,01 All new projects approved by the City of Eagan should meet the following mandatory minimum
approval criteria. However, it should not be presumed that a project meeting these criteria will
automatically be approved. Meeting these criteria creates no contractual rights on the part of any
potential developer.
A. The assistance shall be provided within applicable state'legislative restrictions, State Auditor
interpretation, debt limit guidelines, and other appropriate financial requirements . and
policies.
B. The project should meet one or more of the goals referenced in Section 3, Eligible Uses for
the Receipt of Business Assistance.
C97 1
C. The project must be in accord with the Comprehensive Plan and Zoning Ordinances, or
required changes to the Comprehensive Plan and Zoning Ordinances must be under active
consideration by the City at the time of approval.
D. The assistance will not be provided to projects that have the financial feasibility to proceed
without the benefit of the assistance. Assistance will not be provided solely to broaden a
developer's profit margins on a project. Prior to consideration of a business assistance
request, the City may undertake an independent underwriting of the project to help ensure
that the request for assistance is valid.
E. Prior to approval of business assistance, the developer shall provide any required market and
financial feasibility studies, appraisals, soil boring, information provided to private lenders
for the project, and other information or data that the City or its financial consultants may
require in order to proceed with an independent underwriting.
F. Any developer requesting business assistance should be able to demonstrate past successful
general development capability as well as specific capability in the type and size of
development proposed.
G. The developer must retain ownership of the project at least long enough to complete it, to
stabilize its occupancy, to establish the project management, and to initiate repayment of the
business assistance.
H. The level of business assistance funding should be reduced to the lowest possible level and
least amount of time by maximizing the use of private debt and equity financing first, and
then using other funding sources or income producing vehicles that can be structured into the
project financing, prior to using additional business assistance funding.
BUSINESS ASSISTANCE PROJECT EVALUATION CRITERIA
5.01 If a business meets the criteria in Section 4 and is eligible for assistance, the following criteria
will be used to determine the amount of assistance and type of assistance provided. All projects
will be evaluated by the EDC and Eagan City Council on the following criteria for comparison
with other proposed business assistance projects reviewed by the City, and for comparison with
other subsidy standards (where appropriate). It is realized that changes in local markets, costs of
construction, and interest rates may cause changes in the amounts of,business assistance subsidies
that a given project may require at any given time. In applying the criteria to a specific project,
the following will apply;
A. The City may consider the requirements of any other business subsidy received, or to be
received, from a grantor other than the City.
B. If the business subsidy is a guaranty, the amount of the business subsidy may be valued at the
principal amount of the guaranteed payment obligation.
C. If the business subsidy is real or personal property, the amount of the subsidy will be the fair
market value of the property as determined by the City.
D. If the business subsidy is received over time, the City may value the subsidy at it determines
is fair and reasonable under the circumstances.
As used herein, "Benefit Date," means the date the business subsidy is received. If the
business subsidy involves the purchase, lease, or donation of physical equipment, then the
benefit date occurs when the recipient puts the equipment into service. If the business subsidy.
is for improvements to property, then the Benefit Date refers to the earliest date of either
when the improvements are finished for the entire project .or when a business occupies the
property.
E. All business assistance projects will need to meet a "Reasonable Rate of Return." Assistance
will not be used unless the need for the City's economic participation is sufficient that,
without that assistance the project could not proceed in the manner as proposed. The
Reasonable Rate of Return will be based on market standards at the time of the application
for assistance.
F. Business assistance will not be used when the developer's credentials, in the sole judgment of
the City, are inadequate due to past track record relating to: completion of projects, general
reputation and/or bankruptcy, or other problems or issues considered relevant by the City.
G. Business assistance funding should not be provided to those projects that fail to meet good
public policy criteria as determined by the Council, including: poor project quality; projects
that are not in accord with the comprehensive plan, zoning, redevelopment plans, and city
policies; projects that provide no significant improvement to surrounding land uses, the
neighborhood, and/or the City; projects that do not have significant new, or retained,
employment; projects that do not meet financial feasibility criteria established by the City;
and projects that do not provide the highest and best desired use for the property.
H. All projects receiving business assistance under the criteria listed in Minnesota Statutes
116J.993, Subd. 3 must create a minimum of one or more new full-time. equivalent jobs based
on proven need in the community with a minimum wage of one times the Federal minimum
wage, base on proven need.. Minnesota Statutes 1161994, Subd. 2 allows the City to deviate
from its criteria by documenting in writing the reason for the deviation and attaching a copy
of the document to its next annual report to the Department of Employment and Economic
Development.
I. Business assistance will normally be used for projects that address the following land use
issues: (1) more compatible with the City's Comprehensive Plan than other permitted uses for
property; (2) located on property which needs but is not likely to be developed or redeveloped
because of blight or other adverse conditions of the property; and/or include design and/or
amenity features not otherwise required by law.
J. Business assistance will be evaluated on the project's impact on existing and future public
investment: (1) whether and to what extent the project will utilize existent public
infrastructure capacity and the extent it requires additional publicly funded infrastructure
investments; (2) arrangements for the City to receive a direct monetary return on its
investment in the project.
K. Business assistance will normally be used for projects that demonstrate to the satisfaction of
the City adequate financing for the project is available and that the project will be completed
in a timely fashion. .
L. Business assistance from the City must satisfy all requirements of Minnesota Statutes
116J.993 through 116J.995.
a 3
5.02 Some criteria, by their very nature, must remain subjective. However, wherever possible
"benchmark" criteria, have been established for review purposes. The fact that a given proposal
meets one or more "benchmark" criteria does not mean that it is entitled to funding under this
policy, but rather that the City is in a position to proceed with evaluations of (and comparisons
between) various business assistance proposals, using uniform standards whenever possible.
4
CITY OF EAGAN
PRE -APPLICATION
BUSINESS ASSISTANCE FINANCING
Legal name of applicant:
Address:
Telephone number:
Name of contact person:
REQUESTED INFORMATION
Addendum shall be attached hereto addressing in detail the following:
1. A map showing the exact boundaries of proposed development.
2. Give a general description of the project including size and location of building(s); business
type or use; traffic information including parking, projected vehicle counts and traffic flow;
timing of the project; estimated market value following completion.
3. The existing Comprehensive Guide Plan Land Use designation and zoning of the property.
Include a statement as to how the proposed development will conform to the land use
designation and how the property will be zoned.
4. A statement, identifying how the assistance will be used and why it is necessary to undertake
the project.
5. A statement identifying the public benefits of the proposal including estimated increase in
property valuation, new jobs to be created, hourly wages and other community assets.
6. A written description of the developer's business, principals, history and past projects
I understand that the application fee will be used for City staff and consultant costs and may be partially
refundable if the request for assistance is withdrawn. Refunds will be made at the discretion of the City
Council and be based on the costs incurred by the City prior to the withdraw of the request for assistance.
If the initial application fee is insufficient, I will be responsible for additional deposits.
SIGNATURE
Applicant's signature:
Date:
31 5
CITY OF EAGAN
Application for Business Assistance Financing
GENERAL INFORMATION:
Business Name: Date:
Address:
Type (Partnership, etc.):
Authorized Representative:
Description of Business:
Legal Counsel:
Phone:
Address: Phone:
FINANCIAL BACKGROUND:
1. Have you ever filed for bankruptcy?
2. Have you ever defaulted on any loan commitment?
3. Have you applied for conventional financing for the project?
4. List financial references:
a.
b.
C.
0
5. Have you ever used Business Assistance Financing before?
If yes, what, where and when?
PROJECT INFORMATION:
1. Location of Proposed Project:
2. Amount of Business Assistance requested?
3. Need for Business Assistance:
4. Present ownership of site:
5. Number of permanent jobs created as a result of project?
6. Estimated annual sales: Present: Future:
7. Market value of project following completion:
8. Anticipated start date: Completion Date:
FINANCIAL INFORMATION:
1. Estimated project related costs:
a. land acquisition $
b. site development
C. building cost
d. equipment
e. architectural/engineering fee
f. legal fees
g, off-site development costs
33 7
2. Source of financing:
a. private financing institution
b. requested public assistance funds
other public funds
d. developer equity
PLEASE INCLUDE:
1. Preliminary financial commitment from bank.
2. Plans and drawing of project.
3. Background material of company.
4. Pro Forma analysis.
5. Financial statements.
6. Statement of property ownership or control.
7. Payment of application fee.
3.� 8
APPENDIX A
The Business Subsidies Statutes specifically exclude 22 items from the definition. The following are NOT
business subsidies:
• A business subsidy of less than $25,000;
• Assistance that is generally available to all businesses or to a general class of similar businesses,
such as a line of business, size, location, or similar general criteria;
• Public improvements to buildings or lands owned by the state or local government that serve a
public purpose and do not principally benefit a single business or defined group of businesses at
the time the improvements are made;
• Redevelopment property polluted by contaminants as defined in M. S. Section I I6J.552, Subd. 3;
• Assistance provided for the sole purpose of renovating old or decaying building stock or bringing
it up to code and assistance provided for designated historic preservation districts, provided that
the assistance is equal to or less than 50% of the total cost;
• Assistance to provide job readiness and training services if the sole purpose of the assistance is to
provide those services;
• Assistance for housing;
• Assistance for pollution control or abatement, including assistance for a tax increment financing
hazardous substance sub -district as defined under M.S. Section 469.174, Subd. 23;
• Assistance for energy conservation;
• Tax reductions resulting from conformity with federal tax law;
• Workers' compensation and unemployment compensation;
• Benefits derived from regulation;
• Indirect benefits derived from assistance to educational institutions;
• Funds from bonds allocated under chapter 474A, bonds issued to refund outstanding bonds, and
bonds issued for the benefit of an organization described in section 501 (c) (3) of the Internal
Revenue Code of 1986, as amended through December 31, 1999;
• Assistance for a collaboration between a Minnesota higher education institution and a business;
• Assistance for a tax increment financing soils condition district as defined under M.S. Section
469.174, Subd. 19;
• Redevelopment when the recipient's investment in the purchase of the site and in site preparation
is 70 percent or more of the assessor's current year's estimated market value;
• General changes in tax increment financing law and other general tax law changes of a
principally technical nature;
• Federal assistance until the assistance has been repaid to, and reinvested by, the state or local
government agency;
• Funds from dock and wharf bonds issued by a seaway port authority;
• Business loans and loan guarantees of $75,000 or less; and
• Federal loan funds provided through the United States Department of Commerce, Economic
Development Administration..
CITY OF EAGAN
Draft as of 8/15/05
Tax Increment Financing Policy
1. PURPOSE
1.01 The purpose of this policy is to provide a guideline for the City of Eagan to offer tax increment
financing assistance for corninercial and housing development and redevelopment projects. The
Minnesota Tax Increment Act is codified as Minnesota Statutes 469.174 through 469.1811.
1.02 As a matter of adopted policy, the City of Eagan will consider using tax increment financing to
assist private developments only in those circumstances in which the proposed private projects
show a demonstrated financing gap and meet one of more of the goals, as identified in the City of
Eagan's Comprehensive Plan for Economic Development dated February 22, 2001.
1.03 This policy shall be used as a guide in processing and reviewing applications requesting tax
increment financing assistance. The City shall have the option of amending or waiving sections of
this policy when determined necessary or appropriate.
1.04 In accordance with the City of Eagan's Business Assistance Policy, assistance requests must
comply with applicable State Statutes, including Minnesota Statutes 116J.993 through 116J.995.
2. USES
2.01 Tax increment may be spent only for specified purposes permitted in the underlying development
statutes. Such purposes generally include: land and/or building acquisition; site improvements;
demolition and relocation; parking, streets and sidewalks; public and on-site utilities; other public
improvements; and interest.
Because the development statutes are often ambiguous, whether a particular activity is
TIF -eligible may depend on the facts in each case.
2.02 The City may retain a maximum of 10% of the tax increment to pay for administrative authorized
in the TIF Plan. The City may also retain an additional 5 to 15 percent for pooling, depending on
the type of tax increment district.
BUT FOR TEST
3.01 The City must find that the increased market value of the site that could reasonably be expected .
to occur without the use of tax increment financing would be less than the increase in the market
value of the proposed development after subtracting the present value of the projected tax
increments for the maximum duration of the district permitted by the TIF Plan according to
Minnesota Statutes, Section 469.175, subd. 3(d).
3.02 A pro forma must be provided by the developer to complete a pro forma analysis for the proposed
project and statement explaining the need for tax increment.
4. TYPES OF FINANCING
4.01 The City will consider "pay as you go" financing arrangement with the developer. For pay as you
go financing, the developer pays for various TIF -eligible costs initially, and the authority
City of Eagan Tax Increment Financing Policy
8(-,0
promises to reimburse the developer from tax increment over time as it is generated. This
arrangement may be structured as a revenue note or bond issued to the developer, with an interest
component to compensate the developer for costs of financing the improvements up front.
4.02 Bonds secured by tax increments may issued when there is a need for initial capital to finance
public or private improvements. The bonds may be general obligation bonds backed by the full
faith and credit of the City.
5. TERM OF ASSISTANCE
5.01 The City retains the ability to provide a shorter term for the tax increment than allowed by
Minnesota Statutes 469.174 through 469.1811
6. ADDITIONAL CRITERIA BY TIF DISTRICT TYPE
6.01 Redevelopment and Renewal and Renovation Tax Increment Districts must consist of parcels
with 70 percent of the area of the district occupied by buildings, streets, utilities, paved or gravel
parking lots or other similar structures. They also must contain structurally substandard buildings,
as defined in Minnesota Statutes 649.175, Subd. 10 and 10a. The City will work with an
independent third party to make the determination if a District qualifies. In addition to the
statutory requirements for this type of district, the City will review proposals on the basis of the
following criteria:
A. Districts typically will include multiple parcels within the City of Eagan.
B. Applications must include a master plan of the developer, including a unified, integrated
development approach to, the entire area and/or major sub -area.
6.02 Housing Tax Increment Districts must develop a facility intended for occupancy in part by
persons or families of low and moderate income.
Minnesota Statutes require that Rental projects must satisfy the income requirements for qualified
residential rental projects under Section 142(d) of the Internal Revenue Code. The three options
for income limits on a standard housing district are 20% of the units at 50% of median income,
40% of the units at 60% of median income, or 50% of the units at 80% of median income.
For single family developments, at least 95% of the houses assisted with tax increment must be
occupied with persons at 100% of median income for a family of two or less and 115% of median
income for families of three or less. Median income under this provision is the greater of the
statewide median or the county median and is annually updated.
In addition to the statutory requirements for this type of district, the City will review proposals on
the -basis of the following criteria:
A. Proposed projects or districts must demonstrate the way in which they will serve policies,
goals or criteria for affordable housing in the City's Comprehensive Guide Plan and/or
goals of the Dakota County Community Development Authority.
C. In addition to the minimum percentage criteria included in Minnesota Statute, proposed
projects should demonstrate how they will support the City's preference scattered site
affordable housing options or projects that consist of a mixture of opportunities at both
3?
affordable and market rate income levels.
6.03 Economic Development Tax Increment DistYict must find that the district will (1) discourage
business from moving to another state or municipality; (2) increase employment in the state; or
(3) preserve and enhance the tax base of the state.
Minnesota Statutes requires that increment may not be used to assist developments if more than
15% of the buildings and facilities (on a square footage basis) are used'for a purpose other than
manufacturing; warehousing, storage and distribution of tangible personal property (excluding
retail sales); research and development related to the aforementioned activities; telemarketing, if
that activity is the exclusive use of the property; and space necessary for and related to the above.
In addition to the statutory requirements for this type of district, the City will review proposals on
the basis of the following criteria:
6.04 Soils Condition Districts require the presence of hazardous substances, pollution, or contaminants
requiring removal or remedial action for use. Soils Condition Districts will be considered on a
case by case basis, and the City does not have additional unique criteria for their review.
6.05 Hazardous Substance Sub -districts consist of parcels within a TIF District of any kind that are
"designated hazardous substance sites" or are contiguous parcels that the authority expects to be
developed together with the hazardous substance site. Hazardous Substance Subdistricts will be
considered on a case by case basis, and the City does not have additional unique criteria for their
review.
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EHLERS
& ASSOCIATES INC
® To: Jon Hohenstein, City of Eagan
C From: Rebecca Kurtz, Ehlers & Associates
uj Date: September 22, 2005
Subject: Information Related to Job and Wages Goals for a Business Subsidy Policy
As a follow-up to the August EDC meeting, I have spoken to several people and confirmed
some additional information related to communities' job and wage goals for their Business
Subsidy Policies.
First, I have confirmed with several communities and co-workers that the job to assistance
ratio is usually "what sounds good" and what people agree on. As we discussed at the
meeting, in most Business Subsidy Policies, the numbers used are not tied to an index.
I spoke with Ed Hoder at the Department of Employment and Economic Development
(DEED), who is responsible for the Business Subsidy Policy review and reporting. He said
that while it was not necessarily the intent of the law, there is not a problem with having one
job at minimum wage for the requirement in the Business Assistance Policy. The law does
not specify any requirements; and therefore, the Policy complies with the law as long as
there is a job and wage number.
I also spoke with Jim Wrobleski from DEED regarding some ideas for assistance amounts
that could be tied to the number of jobs created. Jim works as a liaison between businesses
and workforce organizations.
Jim said that currently DEED's Minnesota Investment Fund program uses $10,000 - $12,000
of assistance per job created. However, he agreed that this number may change depending on
the business and other factors. The JOBZ Program in out -state Minnesota requires the wage
and benefits must be at least $10.23 per hour. There is not a requirement for the minimum
number of jobs created.
One observation Jim made was that one job at minimum wage will put a stress on social
services, and he asked if the community wants to assist in creating jobs that will put a stress
on social services. He suggested working with the LMI (Labor Market Information) staff to
complete a study to determine what wage a person can earn in the community and not use
any social services. I have contact information if the EDC is interested in working with the
group. I think the results could be interesting, but the EDC should consider if they want to
wait for the results or spend the resources on this study at this time.
LEADERS IN PUBLIC FINANCE
3060 Centre Pointe Drive Phone. 651-697 &516 Fax: 651-697-8555
Roseville, MN 55113-1105 rkLirtz@ehlers-inc.com
0
Finally, the State median income for 2005 is $66,950 and Dakota County's median income is
$77,000. The EDC may want to consider tying the amount of assistance to a percentage of
the State or County median income. If the EDC chose to do so, I would recommend
language referring to a percent of the median, rather than a specific dollar amount. The
median incomes information is updated annually, and is available through several resources,
include the Minnesota Housing Finance Agency.
Please let me know if you have questions or comments.
In the 1997 legislative session, Representative Ron Abrams from Minnetonka
authored legislation to allow individual political subdivisions (county, city, town, or school
district) to return their proportional share of all or a portion of a building's. property taxes (see
H.F. 2163, Laws of Minnesota, Article 2, Sections 45 to 48, or Minnesota Statutes, Sections
469.1812 to 469.1815). Abatements were designed to give each jurisdiction a voice in economic
and redevelopment efforts, limit the state's financial liability through the school finance system,
and enable new business retention efforts.
The nuts and bolts of the abatement program are as follows:
■ The abatement is an allocation or redirection of taxes rather than an exemption from
paying taxes.
■ The taxpayer pays taxes on the abated property in the same manner it would if the taxes
were not being abated. The county pays the abatement to the general fund of the political
subdivision without identifying the amount of the abatement.
s Each jurisdiction (city, county and school) has the right to not participate in the abatement.
■ As of May 26, 1999, a school district may abate its entire tax capacity based levy
(previously could only abate 60% to 75%). A school district may not abate market value
based levies.. School boards, also as of May 26, 1999, may now grant abatements for the
entire term of the abatement (previously they could only approve the abatement one year
at a time). School districts may levy an additional property tax to pay for their abatements.
The school district will not lose net revenue by using the program.
■ The 2005 Legislature extended the maximum term of the abatement to fifteen years if the
city (or town), county, and school all participate. If one or more entities decline, the
maximum term is 20 for all participating entities, not just the requesting unit of
government, as further extended under legislation passed in 2005.
■ The 2003 Legislature doubled the maximum that an entity can abate to the greater of
$200,000 per year or 10% of the entity's levy.
IN Taxes payable from the market value of a new or existing building, and, as of May 26,
1999, the value of land and any fiscal disparities contributions (for metro and taconite
credit areas only) may be abated. The maximum annual abatement equals the political
subdivision's local tax rate multiplied by the net tax capacity of the parcel.
Ehlers & Associates, Inc. - Abatement
■ Abatements are authorized to finance public infrastructure, whether or not the benefitted
infrastructure is on,or adjacent to the parcel for which the tax is abated. The owner of a
parcel for which taxes are abated need not consent. Thus, a political subdivision may
approve an abatement for certain parcels and use the retained taxes to finance public
improvement projects.
■ The notification requirements include a public hearing with a 10 to 30 day publication
notice.
■ The findings required by a council or board include general statements of tax base,
preservation, employment, public facilities, blight, or access to services.
■ G.O. Abatement Bonds can be issued without affecting net debt and can be issued without
a referendum under certain conditions. Authorities may increase their abatement levies
to make up for shortfalls resulting from class rate compression.
■ Abatement does not require a property owners consent.
■ Abatements cannot be used in concert with tax increment financing, but can be utilized
after a TIF district is decertified.
■ Effective for abatement levies payable beginning in 2002, the 2001 Legislature authorizes
political subdivisions to increase their abatement levies to make up for shortfalls from class
rate compression.
Another issue which complicates the abatement program is the specific authority of a
governmental body to pledge its abatements to the debt of another governmental entity, if the
debt is not a G.O. Abatement Bond. Many attorneys differ on the interpretations of the pledges
allowed and what exactly constitutes a G.O. Abatement Bond.
We recommend that abatement always be utilized in conjunction with a development agreement
that clearly spells out the developer's responsibilities with respect to improvements and job and
wage goals.
Abatement is a "business subsidy" and as such is subject to Minnesota Statutes, Sections
116J.993 through 116J.995.
Ehlers & Associates, Inc.
- Abatement
l ''C
TWIN CITIES COMMUNITY
CAPITAL FUND
Economic Development Financing
for Growing Businesses
Highlights of the Fund
Choose your own membership level.
The Twin Cities Community Capital Fund welcomes communities and development organizations of all sizes to
participate in the Fund. Three membership levels are available, ranging from as little as $50,000 up to $200,000.
Simply choose the membership level that best fits your organizational needs.
The benefits of membership.
The primary goal of the Twin Cities Community Capital Fund is to leverage the local economic development
financing resources of our member communities. The Fund is designed to respond to a wide variety of local
business financing needs, working in partnership with banks and other commercial lenders.
• Members can originate loans of up to ten times the amount they deposit with the Fund. For example, a
Class B member who deposits $100,000 can originate loans of up to $1,000,000 through TCCCF.
• There is no limit on the number of loans that a member can originate.
• By selling all loans to secondary capital markets on an advance commitment basis, the originating
member significantly reduces and can even eliminate potential loan loss risk.
• Members determine which projects they wish to support through the TCCCF Loan Fund, which can. be�
used as a gap -financing source for most local economic development projects.
• Experienced loan officers work closely with members, prospective borrowers, and participating lenders
in analyzing and structuring financing deals that best meet the needs of all parties. The interest rate and
terms of all TCCCF loans are negotiable, with most loans subordinate to the lead lender in the financing
package.
• TCCCF prepares all documents for loan closings and negotiates the sale of all member -originated loans
to the secondary market, without any cost to members.
• TCCCF members are able to take advantage of the New Markets Tax Credit program, which provides
for below market rate loans to eligible borrowers, without having to handle any of the paperwork
associated with participation in this new Federal economic development initiative.
A self-sustaining loan fund.
The TCCCF is a self-sustaining economic development financing resource. Recapitalization of the Loan Fund is
through the sale of pre -approved loans to a national secondary market.
a7
Our loans are structured to best meet the needs of our members, our borrowers, and participating lenders. One of
the primary considerations for our members as loan terms and conditions are being negotiated is how the
secondary market will price the loan for purchase.
The actual price to be paid for TCCCF loans is known to the originating member before a final loan
commitment is made. if the price offered by the market is discounted from par value (which only occurs when
the member wants to offer below market rate financing to a borrower), the TCCCF member is responsible for
funding the difference between par value and the loan sale price. There is no cost to members when loans are
sold at par value. On the other hand, if the loan is sold at a premium, the member receives the premium payment
(that amount in excess of the loan's par value).
Under this approach, the TCCCF loan pool is continually recapitalized and our members arp able to originate an
unlimited number of loans in their communities.
Member -governed. Member -focused.
The Twin Cities Community Capital Fund is a Minnesota nonprofit membership corporation that was
incorporated on December 2, 2004. The business affairs of the Fund are carried out under the direction of a
nine -member Board of Directors. TCCCF members have the responsibility to elect six directors (two directors
from each membership class). The six elected directors fill the remaining three at -large board seats by
appointment. The ongoing input and advice of the Fund's members helps to ensure that the Fund will be
responsive in meeting the challenges of even the most complex development financings.
Who pays for the cost of operating the Fund?
The Fund's primary revenue sources are the interest earnings on the pooled funds deposited and contributed by
TCCCF members and loan origination fees charged to borrowers. Members do not pay for any of the Fund's
operating costs or for the services provided by the fund manager and loan officers.
Who manages the Fund?
In order to keep operating costs down, the Fund has no employees. The Northland Institute, a Minnetonka -based
nonprofit economic development organization, provides a full -range of professional management services under
contract with TCCCF. Scott Martin, a Certified Economic Development Finance Professional with 30 years of
business and economic development experience, serves as Fund Manager under the direction of the Board of
Directors. The loan officers assigned to TCCCF member projects also have many years of experience in
business financing, deal structuring, and portfolio management.
Our Money Back Guarantee.
Membership in the TCCCF comes with a money back guarantee. Ninety percent of the funds received from
members are deposited in the TCCCF Loan Fund escrow account, which is managed by an independent Escrow
Agent. These funds remain the property of each respective member and may only be used to fund TCCCF loans.
Ten percent of each member's funds are in the form of a loan to the TCCCF for start-up working capital.
Members may withdraw their money from the Loan Fund escrow account anytime after three years from the
date of deposit, or reduce their position in the Fund down to the $50,000 level—for any reason whatsoever.
For more information about becoming a member, please contact:
Scott Martin, President
Twin Cities Community Capital Fund
13911 Ridgedale Drive, Suite 260
Minneapolis, MN 55305
Phone: (952) 546-9049
Fax: (952) 541-9684
smartin@tcccf.org
IV,
finding the right financing to meet the needs of a
growing business can be challenging. Banks and other
commercial lenders may not always be able to offer the
type of financing that businesses need without the
participation of another lender. That's where the Twin Cities
Community Capital Fund (TCCCF) comes in. .
TCCCF is a nonprofit loan fund that offers customized, flexible
financing solutions that are designed to fit most every business
need. Our long-term,'subordinated, fixed-rate loans are made in
partnership with local lenders and TCCCF member economic
development organizations located throughout the Twin Cities
metropolitan area. Our goal is to put together a financing
package that meets the needs of both our borrowers and all
participating lenders.
With a TCCCF loan you can finance:
• Fixed assets, including land and building purchases.
• Building construction (permanent financing only).
• Leasehold improvements and building renovations.
• Machinery and equipment purchases, renovation, and
moving expenses.
• Working capital (when secured by fixed assets - with
a fixed repayment schedule).
TCCCF loans are not available for refinancing of existing debt,
for the purchase of equity positions in business enterprises, or
for speculative real estate developments.
Flexible terms and service you can count on.
TCCCF loans are competitively priced and offer the flexibility of
negotiable interest rates and terms. We are committed to
outstanding customer service and believe that there are no
common solutions to meeting the needs of our borrowers. Our
a loan officers work closely with both borrowers and participating
project lenders to ensure that our loans are responsive. to the
needs of all parties.
Our loan application approval process - from the receipt of a
complete loan application to our loan commitment - provides for
loan approvals usually within 2-4 weeks, depending on the
amount of the loan.
Want to know more?
For more information about how to apply for a TCCCF loan,
please contact your local representative (see below) or call
(952) 546-9049 and ask to speak with one of our loan officers.
Loan applications, including detailed financing policies and
credit criteria, are available on our website at www.tcccf.org.
Policy Number 1.136
CITY OF BURNSVILLE "
DAKOTA COUNTY, MINNESOTA
BUSINESS SUBSIDY POLICY
I. PURPOSE AND NEED FOR POLICY
This policy provides the criteria that every business subsidy shall be evaluated against.
The business subsidy criteria included in this policy applies to all potential business subsidy .
recipients. In addition to this policy, every business subsidy will be subject to the requirements
of Minnesota (MN) Statutes.
II. POLICY
A. Every business subsidy shall be subject to the requirements of MN Statutes governing
business subsidies and every business subsidy shall be evaluated according to the criteria
included in this Business Subsidy Policy, which shall apply to all potential recipients.
Wherever.the term business subsidy is used in this policy, its definition shall be that as
defined in MN Statutes.
B. A business subsidy must meet a public purpose, which may include, but not be limited to,
increasing the tax base. The City of Burnsville (City) and Burnsville Economic
Development Authority (Authority) shall consider various public purposes including but
not limited to creation or retention of jobs, elimination of blight, neighborhood
revitalization, and other development and redevelopment goals established by the City.
C. Except as described in D and E, a business subsidy must result in wage increase or the
creation or retention of jobs, which will pay at least 150 -percent of the federally imposed
minimum hourly wage, exclusive of benefits, with the wage goals specifically set forth in
the business subsidy agreement. The wage goals will be determined as a weighted
average on new jobs created as defined in the City of Burnsville Fundability Guidelines
for Financial Assistance Form.
D. Wage increase or job creation or retention is not required for businesses subsidies as long
as the grantor identifies an alternate public purpose in addition to tax base increase. If
after a public hearing, the increase in wages or creation or retention of jobs is determined
not to be a goal, the wage and job goals may be set at zero.
E. In lieu of job creation or retention, other measurable, specific, and tangible goals shall be
established. Examples of tangible goals may include redevelopment, or pollution or soil
remediation.
Page 1 of 28 05/01/2006
S1
F. If wage increase or job creation or retention is identified as the public purpose, goals
must be established for wage increase or the number of jobs created; in cases where job
loss is specific and demonstrable, goals must be established for number of jobs retained.
As set forth in.the business subsidy agreement, wage increase or job creation or retention
(based on wage floor set forth in the agreement) shall be attained within two years of the
benefit date.
G. The Authority, as authorized by the City, shall hold a public hearing after notice is
published in the local newspaper, for all requests for business subsidies of $100,000 or
more. The Authority must hold a public hearing for any subsidies under $100,000 that do
not include job and wage goals.
H. The business subsidy agreement must stipulate that the recipient will continue operations
at the site where the subsidy is used for at least five years after the benefit date.
I. Any development agreement or contract for public, assistance as defined in MN Statutes
shall contain, at a minimum, the following provisions:
I. Description of the subsidy including the amount and type of subsidy
2. Identification of the specific tax increment financing district, if tax increment
financing assistance is to be provided
3. Statement of public purposes for the subsidy in addition to tax base increase
4. Identification of measurable, specific, and tangible goals for the subsidy
5. Description of the financial obligation of the recipient if the goals are not met
6. Statement of why the subsidy is needed
7. Statement of commitment to continue operations for at least five years in the
jurisdiction where the subsidy is used - the five year commitment may be waived
if the grantor, after apublic hearing, approves the recipient's request to move
8. Identification of the name and address of the parent corporation of the recipient
9. Identification of all financial assistance by all grantors for the project; and
reporting requirements
10. Identification of specific wage floor for the wages to be paid, if job creation or
retention is a goal, of at least the minimum set forth in Item C of this policy, and
for at least two years after the benefit date or until the goals are met, whichever is
later
J. When granting a business subsidy, the City or the Authority may deviate from the criteria
in this Policy by documenting in writing the reason for the deviation and filing that
explanation with the Department of Employment and Economic Development along with
the grantor's next annual report on business subsidies. The City or the Authority will not
approve a deviation from these criteria unless the applicant provides a written request
describing why the deviation is needed to permit the proposed project to proceed, and the
grantor determines in its sole discretion that such deviation is reasonable and necessary.
K. Each business subsidy agreement will require a recipient failing to meet the specified
goals by the specified date to pay back the assistance plus interest, or at the request of the
05/01/2006
Page 2 of 28 sc�
City or the Authority, to the account created under MN Statutes, Section 116J.551. Any
repayment shall be prorated to reflect partial fulfillment of goals. The interest rate shall
be set at no less than the implicit deflator as defined by MN Statutes, Section 116J.994,
Subdivision 6. The City or the Authority may after a public hearing, extend the period
for meeting job and wage goals for up to one year. The City or the Authority may extend
the period for meeting any other goals for any period specified by the City or the
Authority, by documenting in writing the reason for the extension and filing that
explanation with the Department of Employment and Economic Development along with
the grantor's next annual report on business subsidies.
L. The City and the Authority reserve the right to modify this Policy, from time to time in
accordance with MN Statutes.
M. The following supplemental policies are attached hereto and made part of the Business
Subsidy Policy:
- Attachment 1: Tax Increment Financing Policy (Policy No. 1.137)
- Attachment 2: Tax Abatement Policy (Policy No. 1.138)
III. PROCEDURE
To the extent that a business subsidy requires tax increment financing, it must meet this
Business Subsidy Policy and the Tax Increment Financing Policy. To the extent that a business
subsidy requires tax abatement assistance, it must meet this Business Subsidy Policy and the Tax
Abatement Policy. Any other business subsidy must meet this Business Subsidy Policy.
IV. RESPONSIBILITY AND AUTHORITY
The responsibility and .authority for the City and the Authority to adopt a Business
Subsidy Policy is established by MN Statutes 116J.993-995, which sets requirements for
subsidies allocated to businesses by state or local government agencies. Administrative
implementation of this policy shall be the responsibility of the City Manager:
Submitted by: Tammy Omdal Date: _ May 1, 2006
Reviewed by: Craig Ebeling Dater May 1, 2006
This policy replaces the policy adopted by City Council Resolution No. 5182 on July 21, 2003.
This policy replaces the policy adopted by Economic Development Authority Resolution No. 03-
3 on July 21, 2003.
Page 3 of 28 (� 05/01/2006
ATTACHMENT 1
Policy Number 1.137
CITY OF BURNSVILLE
DAKOTA COUNTY, MINNESOTA
TAX INCREMENT FINANCE POLICY
I. PURPOSE AND NEED FOR POLICY
This policy is to serve as. a guideline for the use of tax increment financing (TIF) within
all previously adopted and current TIF Districts as well as the creation of new tax increment
districts.
II. POLICY
General Policy Backzround
The City of Burnsville (City) and Burnsville Economic Development. Authority
(Authority) recognize that local government plays a critical role in enhancing the vitality of our
community. This is particularly true as the city reaches full development.
All reasonable means shall be utilized to leverage private business development and
redevelopment in the city consistent with this and other policies. Tax increment financing is an
important and useful tool in attracting and retaining businesses.
The fundamental principle that makes tax increment financing viable is that it is designed
to encourage development that would not otherwise occur. The Authority, as authorized by the
City, shall be responsible to determine that (1) a project would not occur "but for" the assistance
provided through tax increment financing; and (2) no other development would occur on the
relevant site without tax increment assistance, that could create a larger market value increase
than the increase expected from the proposed development (after adjusting for the value of the
tax increment).
The Authority shall consider tax increment financing in cases that serve to accomplish
targeted city goals for development and redevelopment as they may change over time. These
goals include, but are not limited to projects that will (1) foster and support redevelopment; (2)
result in the creation or retention of a significant number of jobs that pay wages adequate to
support households; or (3) projects that will assist with the retention and expansion of
businesses, and projects that will expand the city's tax base.
05/01/2006
Page 4 of 28 �"`
Creation of Tax Increment Financing (TIF) Districts
The Authority shall consider the creation of any of the general types of TIF Districts
allowed by MN Statutes or the creation of other types of TIF Districts allowed by Special
Legislation, when doing so is consistent with the development and redevelopment goals of the
City.
TIF Districts are the specific parcels within a Project Area from which tax increment is
captured. MN Statutes currently defines five general types of TIF Districts, which the Authority
shall consider:
1) Redevelopment District
2) Renewal and Renovation District
3) Soils Condition District
4) Housing District
5) Economic Development District
In addition to these five general types of TIF Districts, defined by MN Statutes, the
Authority may also consider the creation of TIF Districts as authorized by applicable special tax
increment financing legislation.
Tax increment financing is a business subsidy under MN Statutes and is governed by
strict legal requirements. Therefore, the City and the Authority shall maintain current Business
Subsidy Policies, as required by MN Statutes.
As granted by the City Council, the Authority shall have control and authority over the
creation and operation of TIF Districts for the City. The Authority shall consider the creation of
a TIF District based on qualifications and term restrictions, as defined in MN Statutes. The
Authority shall consider a range of attributes including but not limited to the following:
• Projects consistent with development and redevelopment goals of the city
• Development of office, office/corporate headquarters, office/service/warehouse and
manufacturing
• Maximized use of other financial resources
• Projects that provide funding for appropriate public improvements that may benefit
numerous development projects
• Low percentage of public investment; high percentage of private investment
• Analysis of detailed business pro forma with reasonable timeline for completion and
occupancy
• Project has potential to enhance spin-off development and redevelopment
• Exceeds minimum design standards per Ordinance
• Presents minimal risk to the City of Burnsville
• Maximizes increased tax base and contributes to higher market values
• Number of jobs and pay level of positions will be a consideration but not a requirement if
other appropriate public purpose(s) is met
• Redevelopment of aging retail strip center
• Analysis of Request for Financial Assistance Form (Attachment A)
Page 5 of 28 05/01/2006
Gs�
Available Funding for Private Development within a Current TIF District
Applications for tax increment financing for a project within a current TIF Districts shall
be considered for approval provided the current TIF District is generating sufficient tax
increment revenue to retire bonds supported by tax increment revenue within the TIF District.
Costs Elible for Tax Increment Financing Assistance
The Authority shall consider the use of tax increment financing to cover project costs as
allowed for under MN Statutes. The types of project costs that are eligible for tax increment
financing are as follows:
• Utilities design
• Architectural and engineering fees
directly attributable to site work
• Earthwork/excavation
• Landscaping .
• Streets and roads
• Street/parking lot lighting
• Sidewalks
• Special assessments
• Soils test and environmental studies
• Title insurance
• Landscape design
• Site related permits
• Soils correction
• Utilities (sanitary sewer, storm sewer,
and water)
• Street/parking lot paving
• Curb and gutter
• Land acquisition
• Legal (acquisition, financing, and closing
fees)
• Surveys .
• Sewer Access Charges (SAC) and Water
Access Charges (WAC)
• TIF application deposit
This list of eligible costs is subject to acceptance by the Authority and changes in MN
Statutes.
Determination o Amount of Assistance
Whether in a new or existing TIF District, the amount of tax increment financing
provided to an applicant shall be based on a review of the following:
• Request for Financial Assistance Form (Attachment A)
• Review of Applicants Pro Forma
• Amount of Increment Generated by the Project
• Fundability Guidelines for Financial Assistance Form (Attachment C)
Page 6 of 28 05/01/2006
Depending on the public purpose to be .met the Fundability Guidelines for Financial
Assistance Form may weigh more or less in the review of the application.
The level of assistance shall be evaluated on a case-by-case basis and may reflect an
increase or decrease in requested financial assistance. When considering a request for tax
increment financing for a project, there shall be consideration of the level of financial assistance
provided for other previously approved projects in the TIF District or Project Area.
Forms of Assistance
Tax increment financing shall generally be provided on a "pay-as-you-go" basis wherein
the Authority compensates the applicant for a predetermined amount for a stated number of
years. The Authority shall have the option to issue a TIF Note with or without interest, where
the principal amount of the TIF Note is equal to the amount of eligible project costs incurred and
proven by the developer. In all cases, semi-annual TIF payments shall be based on available
increment generated from the project. TIF payments shall be made after collection of property
taxes.
Another form of assistance that shall be considered only in extraordinary circumstances is
an "up -front payment" to the applicant. This may be in the form of a revenue or general
obligation bond or an internal loan. (The City would consider revenue bond financing where the
terms of the financing are satisfactory to the Authority and City.) The tax increment generated
from the applicant's project is a source of revenue for repayment of the bonds or loan. This form
of assistance is not one the Authority or City will generally consider because under this form of
assistance the taxpayers assume the risk that the tax increment will be sufficient for repayment of
the bonds or interfund loan.
Other Policy Issues
1. Fiscal Disparities
TIF Districts shall be exempt from the contribution of fiscal disparities. The. percentage
of revenues required from the project within the TIF District shall be the responsibility of
properties outside the district. The exception to this policy is when MN. Statutes requires that
fiscal disparities be paid from within a TIF District, as is the case with Economic Development
Districts.
2. School District Funding
Annual requests from Independent School District 191 to release excess tax collections
from TIF Districts 1 and 2 (Southcross) resulting from the application of school district referenda
tax rates to the captured value in TIF Districts shall be evaluated on a case by case basis. It shall
be the general policy of the City and the Authority to honor these requests provided there is
sufficient positive cash flow in the Authority reserve fund (that is applicable) in excess of those
amounts necessary to meet development contractual obligations within the various TIF Districts
and Project Area.
Page 7 of 28 ?0 05/01/2006
III. PROCEDURES
The Authority will require a deposit in the amount of $5,000 from the applicant to
investigate the feasibility of providing assistance to the applicant. If the Authority incurs
additional expense beyond the $5,000 prior to execution of the Developer's Agreement, the
Authority shall notify the applicant in writing and the applicant must deposit additional funds for
work on the application to continue.
If the project is approved and the applicant proceeds with the project, the applicant's
deposit may be reimbursed as an eligible project cost to the extent permissible under MN
Statutes.
In addition to the $5,000 deposit fee, the applicant must submit the following forms and
documentation at time of application for the application to be complete and review of the
application to begin:
1. Request for Tax Increment Financing Form (Attachment A)
2. Project Pro Forma Documentation (Developed by Applicant)
3. Fundability Guidelines for Financial Assistance Form (Attachment B)
As required by MN Statutes, the City Council must be the governing body to hold the
public hearing and make the findings of fact for creation of a TIF District.
IV. APPENDICES
The City and the Authority shall add Appendices to this Policy to provide targeted policy
guidance concerning the creation of future TIF Districts for a targeted development or
redevelopment purpose. An Appendix shall be added, modified, or deleted from time to time
based on actions of the City and the Authority.
A. Redevelopment of Aging Strip Centers
V. ATTACHMENTS: FORMS
policy.
The following forms are referenced in this policy and are included as attachments to this
A. Request for Tax Increment Financing Form
B. Fundability Guidelines for Financial Assistance Form
Page 8 of 28 . 05/01/2006
VI. RESPONSIBILITY AND AUTHORITY
MN Statutes, Section 469.174 through 469.179 (Tax Increment Finance Act), as amended
authorizes local governments to utilize Tax Increment Financing to assist development and
redevelopment of certain parcels within its boundaries.
Submitted by: Tammy Omdal
Reviewed by: Craig Ebeling
Date: May 1, 2006
Date: May 1, 2006
This policy replaces the policy adopted by City Council Resolution No. 5182 on July 21, 2003.
This policy replaces the policy adopted by Economic Development Authority Resolution No. 03-
3 on July 21, 2003.
Page 9 of 28 05/01/2006
ATTACHMENT 2
Policy Number 1.138
CITY OF BURNSVILLE
DAKOTA COUNTY, MINNESOTA
TAX ABATEMENT POLICY
I. PURPOSE AND NEED FOR POLICY
This policy is to serve as a guideline for the use of tax abatement as a financing tool for
projects within the City of Burnsville.
II. POLICY
General Policy Backkround
The City of Burnsville (City) and Burnsville Economic Development Authority
(Authority) recognize that local government plays a critical role in enhancing the vitality of our
community. This is particularly true as the city reaches full development. It is the stated goal of
the City and the Authority that all reasonable means shall be utilized to leverage private
development and redevelopment in the city consistent with the policies described below and the
City Council's Ends and Outcomes.
Under Minnesota (MN) Statutes, the City Council is the governing body that must act to
approve all tax abatement assistance. It is the policy of the City Council, that for most projects,
the Authority shall be asked to make recommendation to the City Council regarding tax
abatement assistance.
The tax abatement tool provides the ability to capture and use all or a portion of the
property tax revenues within a defined geographic area. In practice, it is a tax "rebate" rather
than an exemption from paying property taxes. Tax abatement is an important economic
development tool that when used appropriately can be useful to accomplish the city's
development and redevelopment goals and objectives. Requests for tax abatement must serve to
accomplish the city's targeted goals for development and redevelopment. These goals include,
but are not limited to projects that will result in the creation or retention of a significant number
of jobs that pay wages adequate to support households, projects that will assist with the retention
and expansion of businesses, and projects that will expand the city's tax base. Projects must
meet the requirements established by the Business Subsidy Policy of the City and the Authority,
to the extent it is applicable, in order to receive abatement.
Page 10 of 28 ® o 05/01/2006
Projects Eligible for Tax Abatement Assistance
Projects eligible for consideration of property tax abatement include but are not limited to
the following:
• Mixed use projects including new and redevelopment projects
• Commercial and industrial redevelopment projects
• Commercial and industrial new development's
• Residential business properties (with some restrictions as defined in this policy)
Tax Abatement Ob'ectives
A. A property tax abatement must meet at least one of the following public purposes:
1. Increase or preserve the tax base
2. Provide employment opportunities in the City of Burnsville
3. Provide or help acquire or construct public facilities
4. Help redevelop or renew blighted areas
5. Help provide access to services for residents of Burnsville
6. Finance or provide public infrastructure
B. The developer/landowner shall be able to demonstrate a market demand for a proposed
proj ect.
C. Tax abatement shall not be used for projects that would place extraordinary demands on
city services or for projects that would generate significant environmental impacts.
D. Because it is not possible to anticipate every type of project, which may in its context and
time present desirable community building, development, or redevelopment goals and
objectives, the City of Burnsville retains the right in its discretion to approve projects and
tax abatements that may vary from the principles and criteria of this policy.
Determination ofAmount of Assistance
Tax abatement assistance available shall generally be limited to the incremental taxes
generated on the improvements to the property. The City and the Authority may consider a
greater level of financial assistance, up to the maximum allowed under MN Statutes, in limited
circumstances. The level of assistance will be evaluated on -a case-by-case basis and may reflect
an increase or decrease in requested financial assistance from the applicant.
The amount of tax abatement assistance provided to an applicant shall be based on a
review of the following:
• Request for Financial Assistance Form (Attachment A)
• Review of Applicants Pro Forma
• Amount of l crement (Property Tax Revenue) Generated by the Project
• Fundability Guidelines for Financial Assistance Form (Attachment C)
Page 11 of 28 / 05/01/2006
1
In any year, the total amount of property taxes abated (citywide) may not exceed (1) ten
percent of the current levy, or (2) $200,000, whichever is greater. The limit does not apply to an
uncollected abatement from a prior year that is added to the abatement levy.
The developer/landowner must adequately demonstrate, to the City's sole satisfaction, an
ability to complete the proposed project based on past development experience, general
reputation, and credit history, among other factors, including the size and scope of the proposed
project. The developer/landowner must provide adequate financial guarantees to ensure
completion of the project, including, but not limited to: assessment agreements and letters of
credit.
Forms of Assistance
Tax abatement shall generally be provided on a "pay-as-you-go" basis wherein the City
compensates the applicant for a predetermined amount for stated number of years. In all cases,
semi-annual abatement payments are based on available (as approved by agreement) tax revenue
from the property and issued to the applicant after payment of property taxes by the applicant.
Another form of assistance that shall be considered only in extraordinary circumstances is
an "up -front payment" to the applicant. This may be in the form of a revenue or general
obligation bond or an internal loan. (The City would consider revenue bond financing where the
terms of the financing are satisfactory to the City.) The tax increment generated from the
applicant's project is a source of revenue for repayment of the bonds or loan. This form of
assistance is not one the City will generally consider because under this form of assistance the
taxpayers assume the risk that the tax increment will be sufficient for repayment of the bonds or
the interfund loan.
Duration and Restrictions
A. The City may grant an abatement for a period no longer than 15 years, except as provided
under (B). The City may specify in the abatement resolution a shorter duration.
B. The City, when proposing to abate taxes for a parcel, may make a written request to Dakota
County or a school district in which a parcel is located to grant an abatement of county or
school taxes for the property. If one of the other political subdivisions declines, in writing, to
grant an abatement or if 90 days pass after receipt of the request to grant an abatement
without a written response from one of the political subdivisions, the duration limit for all
abatement for the parcel is increased to 20 years.
C. The City may not enter into a property tax abatement agreement that provides for abatement
of taxes on a parcel, if the abatement will occur while the parcel is located in a tax increment
financing district.
Page 12 of 28 05/01/2006
D. Tax Abatement consideration for residential business properties:
Tax abatement requests shall be considered for redevelopment of residential business
properties or redevelopment of an aging retail strip center that includes a residential
component. In no other case shall tax abatement be considered for new residential property
(property that does not presently exist).
If a request for abatement includes redevelopment of residential property, consideration shall
be given to the following:
• Redevelopment of rental housing that is over 25 years old
• Mixed use development that includes housing (must be owner occupied)
• No less than an 80 / 20, Private -Public match for total reinvestment, compared with
the total cost of all local tax abatement. (Private sources represent any non -local
government source; not including federally approved affordable housing tax credits.)
• The case made for the overall public purpose/benefit
• Justification for why the project cannot proceed without public assistance via tax
abatement
• Preserves or enhances the quality, aesthetics and management of workforce/
affordable housing in the community
• Projects that are approved for abatement by another local taxing jurisdiction (i.e.,
Dakota County or a local school district)
III. PROCEDURE
The City shall require a deposit in the amount of $5,000 from the applicant to investigate
the feasibility of providing assistance to the applicant. If the City incurs additional expense
beyond the $5,000 prior to execution of the Developer's Agreement, the City shall notify the
applicant in writing and the applicant must deposit additional funds for work on the application
to continue.
If the project is approved and the applicant proceeds with the project, the applicant's
deposit may be reimbursed to the extent permissible under MN Statutes.
In addition to the $5,000 deposit fee, the applicant must submit the following forms and
documentation at time of application for the application to be complete and review of the
application to begin:
1. Request for Financial Assistance Form (Attachment A)
2. Fundability Guidelines for Financial Assistance Form (Attachment B)
3. Project Pro Forma Documentation (Developed by Applicant)
For the purposes of underwriting the proposal, the developer must provide any requested
market, financial, environmental, or other data requested by the City or its consultants.
Page 13 of 28 � 05/01/2006
The City Council must hold a public hearing on the tax abatement, after notice is
published in the local newspaper. A resolution shall be adopted that will specify the terms of the
abatement.
IV. APPENDICES
The City and the Authority shall add, Appendices to this Policy to provide targeted policy
guidance concerning the use of tax abatement assistance for a targeted development or
redevelopment purpose. An Appendix shall be added, modified, or deleted from time to time
based on actions of the City and the Authority.
A. Redevelopment of Aging Strip Centers
V. ATTACHMENTS: FORMS
The following forms are referenced in this policy and are included as attachments to this
policy.
A. Request for Financial Assistance Form
B. Fundability Guidelines for Financial Assistance Form
VI. RESPONSIBILITY AND AUTHORITY
MN Statutes, Sections 469.1812 through 469.1815, authorizes a political subdivision to
utilize property tax abatement on certain parcels of land within its boundaries., Administrative
implementation of this policy shall be the responsibility of the City Manager.
Submitted by: Tammy Omdal Date: May 1, 2006
Reviewed by: Craig Ebeling Date:. May 1 2006
This policy replaces the policy adopted by City Council Resolution No. 5182 on July 21, 2003.
This policy replaces the policy adopted by Economic Development Authority Resolution No. 03-
3 on July 21, 2003.
Page 14 of 28 4 05/01/2006
APPENDIX A
Redevelopment of Aging Retail Strip Centers
In 2005, the City completed a Governance Process to consider the City's role in
redevelopment of aging retail strip centers. The outcome of the Governance Process was the
Council identified some key policy statements to guide City involvement in any future
redevelopment' of an aging retail strip centers. These policy statements are included in this
Appendix for reference.
I. GENERAL POLICY GUIDELINES
Creation of Tax Increment Financing (TIF) Districts
The City of Burnsville (City) and Burnsville Economic Development Authority
(Authority) shall consider the creation of a TIF District for the purpose of redeveloping an aging
retail strip center. Projects eligible for the creation of a TIF District shall have attributes that are
consistent with those identified in the Business Subsidy and Tax Increment Financing Policy.
Use of Tax Abatement Financing
The City shall consider the abatement of incremental property taxes for the purpose of
redeveloping an aging retail strip center. Projects eligible for abatement of incremental property
taxes shall have attributes that are consistent with those identified in the Business Subsidy and
Tax Abatement Policy.
LandlLease Acquisition
In limited circumstances, the City or the Authority may consider the acquisition of an
aging retail strip center property/and or leases for the purpose of redevelopment when an owner
approaches the City or the Authority requesting this consideration. This would require a funding
source and site-specific plan and/or objective. The acquisition for this purpose shall occur
through negotiated terms and not through eminent domain.
The City and the Authority shall generally not directly contact owners about the
redevelopment of the owner's aging retail strip center, but shall remain open to discussions with
owners that approach the City and the Authority on their own.
The City and the Authority shall bring private developers and property owners together to
facilitate the consideration of redevelopment of an aging retail strip center when doing so would
be consistent with City and the Authority development and redevelopment policies. Facilitation
shall involve education of the City's policies, including possible financial assistance options.
Page 15 of 28 / n��� 05/01/2006
Sis Land Uses
The City and the Authority shall consider applications for tax increment financing or tax
abatement for redevelopment of an aging retail strip center into a mixed-use project, even if the
project shall result in increased density.
The City and the Authority shall not consider applications for tax increment financing or
tax abatement for projects that include the development of residential rental property as part of
the project. Development projects that include condominiums or townhouses shall be eligible for
tax increment financing or tax abatement consideration.
The City and the Authority shall consider applications for tax increment financing or tax
abatement for redevelopment of an aging retail strip center where the project will not change the
intensity or type of use of the property after the improvements (e.g., fagade or site improvements
of existing buildings or building tear downs for rebuilds — commercial to commercial).
The City and the Authority shall not consider application for tax increment financing or
tax abatement for projects to redevelop what the City or Authority considers a "satellite" to the
Burnsville Center Shopping Mall, as determined by the City or Authority, unless specific
circumstances warrant further consideration of this policy. Applications shall be considered for
the redevelopment of "neighborhood" aging retail strip centers only.
The City and the Authority shall consider as part of an application for tax increment
financing or tax abatement assistance to redevelop an aging retail strip center suggestions by the
applicant for possible relief from existing City Ordinances to assist in the financial feasibility of
the project. Specific requests shall be considered on a case-by-case basis. Approval of a specific
request shall not set a precedent for consideration of other requests.
Forms of Assistance
The City and the Authority shall not use the City's bonding capacity, in the form of an
"up -front payment" to the applicant, to support redevelopment of aging retail strip center. Any
assistance provided for redevelopment of an aging retail strip center shall be on a "pay-as-you-
go" basis.
05/01/2006
Page 16 of 28 (�
ATTACHMENT A: FORM
REQUEST FOR FINANCIAL ASSISTANCE FORM
CITY OF BURNSVILLE
AND
BURNSVILLE ECONOMIC DEVELOPMENT AUTHORITY
REQUEST FOR FINANCIAL ASSISTANCE
TAX INCREMENT FINANCING (TIF)
OR
TAX ABATEMENT
FORM
FOR
NAME OF APPLICANT
Page 17 of 28 1 05/01/2006
CITY OF BURNSVILLE
REQUEST FOR FINANCIAL ASSISTANCE FORM
REQUIRED INFORMATION
1. Provide a brief project description
2. Provide business information
Business Name:
Address:
Telephone:
Contact Name:
3. Provide brief description of the business
4. Provide information on the present ownership of the site
Name:
Address:
Phone Number:
Contact Name:
5. Provide information on the proposed project
Building square footage:
Size of property:
Description of building:
Materials and other additional relevant building information:
6. Provide total estimated project costs
Land Acquisition
Site Development
Building Cost
Equipment
Architectural & Engineering Fees
Legal Fees
Financing Costs
Broker Costs
Contingencies
Other (please specify)
Total
P
7. Describe amount and purpose for which financing (either tax increment financing or tax
abatement financing) is required
8. State specific reasons why the use of tax increment financing or tax abatement assistance is
necessary for the project (the "but for" test)
Page 18 of 28 05/01/2006
9. List project costs that may be eligible for assistance. Costs that may be eligible for assistance
include:
- Utilities Design
- Architectural And Engineering Fees
Directly Attributable To Site Work
- Earthwork/Excavation
- Landscaping
- Streets And Roads
- Curb And Gutter
- Land Acquisition
Legal Costs Associated With
Acquisition
- Soil Tests And Environmental Studies
- Title Insurance
- Landscape Design
10. Provide market value information
- Site Related Permits
- Soils Correction
- Utilities (Sanitary Sewer, Storm
Sewer and Water)
Parking Lot Paving and Parking Lot
Lights
- Sidewalks
- Special Assessments
- Legal Costs Associated With
Financing/Closing Attributable To
Site
- Surveys
- City/Met Council SAC and WAC
Charges
- Application Deposit
Current market value (from Dakota County Assessor):
Proposed market value at completion:
11. Provide real estate property tax information
Existing real estate taxes of property:
Estimated real estate taxes of property upon completion:
12. Provide source of financing information
Equity
Bank Loan
Tax increment assistance (TIF or Abatement)
Revenue Bonds
Other
Total
13. Provide name and address of architect, engineer, and general contractor for the project
Page 19 of 28 & � 05/01/2006
14. Provide project construction schedule
Estimated construction start date:
Estimated construction completion date:
If phased project: Year % Complete
Year % Complete
15. Describe how the project will meet one or more of the following City of Burnsville or
Burnsville Economic Development Authority 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 of Burnsville's goals and objectives.
16. Provide a reference from another municipality (if applicable)
17. Provides names of any other municipalities wherein the applicant, or other corporations the
applicant has been involved with, has completed developments within the last five years
18. Provide the following required supplemental information:
- Project Pro Formas (one showing with assistance and one without assistance)
- Legal description of the property
- Application fee of $5,000 payable to.the City of Burnsville
- Site plan and building rendering
SUBJECTIVE ANALYSIS
In addition to the required information from above (items 1-19), the following information is
requested and will be considered as part of the application approval process:
19. Provide number of years in business
20. Provide number of years located in the City of Burnsville (if applicable)
21. Describe potential for business growth or future development
22. Explain whether the building will be owner -occupied (Yes/No)
23. If rental space, provide the targeted retail rates
24. If building is non -owner occupied, explain whether the lessee will be required to capitalize
this lease
25. Provide land costs per acre or square foot
05/01/2006
Page 20 of 28
G o
26. Describe the location of proposed facility within Bunlsville
27. Describe the general quality of the development
28. Provide the size of parcel being developed
29. Provide the projected building cost per square foot
30. Additional comments
Page 21 of 28 -? 1 05/01/2006
ATTACHMENT B: FORM
FUNDABILITY GUIDELINES FORM
CITY OF BURNSVILLE
AND
BURNSVILLE ECONOMIC DEVELOPMENT AUTHORITY
REQUESTS FOR
TAX INCREMENT FINANCING (TIF)
OR
TAX ABATEMENT ASSISTANCE
FUNDABILITY GUIDELINES FORM
FOR
NAME OF APPLICANT
Page 22 of 28 05/01/2006
1. Ratio of Public versus Private Investment
$ Private Investment
$ EDA/Public Investment
$ Total Investment
Ratio of public versus private investment
Point
Value
Private
Value
Public
+ 1
Less than $3
To
$1
+2
Over $3
To
$1
+3
Over $4
To
$1
+4
Over $6
To
$1
+5
Over $8
To
$1
2. Number of Current and Estimated New Employees
Point
Value
Number
+1
1-15
+2
>16-30
+3
> 31 -45
+4
>46-75
+5
> 75 Plus
*Current Number of Employees
*Estimated New Employees (within next 2 - years)
Total Number of Current and Estimated New Employees
*Employees should be computed as full-time equivalent positions
Page 23 of 28 /7 #,7 05/01/2006
3, Public Investment Per Current Employees
Point Value
Investment
0
$7,500+
+ 1
$6,000 - $7,500
+2
$4,500 - $6,000
+3
$3,000 - $4,500
+4
$1,500 - $3,000
+5
$ 0-$1,500
Public Investment (Tax Abatement/Tax Increment) $
*Current Number of Employees
Investment Per Employee =
*Employees should be computed as full-time equivalent positions
911
05/01/2006
Page 24 of 28
4. Pay Level of Jobs Created
*Projected Tax Revenues
Point
Pay
Dollar
Value
Range
Weighting
0
$0- 14,999
$10,000
+1
$15,000 - 24,999
$20,000
+2
$25,000 - 29,999
$27,500
+3
$30,000 - 44,999
$37,500
+4
$45,000 - 59,999
$52,000
+5
$60,000 and Over
$60,000
Total
Employees
Weighted
Dollar Amount
*TOTAL $
WEIGHTED AVERAGE _ $
*Employees should be computed as full-time equivalent positions.
*New Employees over and above the number required to be added shall be exempt from
this section.
5. Real Estate/Property Taxes Generated
Point Value
*Projected Tax Revenues
+ 1
Below $25,000
+2
$ 25,000 - $49,999
+3
$ 50,000 - $99,999
+4
$100,000 - $249,999
+5
$250,000 and Over
Proi ected Tax Revenues $
*Projected Tax Revenues should be based on the existing property tax system and rates
plus legislative future changes if subject to estimation.
Page 25 of 28
05/01/2006
6. Service Impact
Point Value Type of Development
+1 Retail
+2 Office Warehouse
+3 Office
+4 Mixed Use
+5 Hi-Tech/Manufacturing
Type of Use
7. Redevelopment Age Multiplier
Point Value Age of Buildin
1.0
New Development
1.0
0 — 5 Years Redevelopment*
1.1
6 — 10 Years Redevelopment*
1.2
11 — 15 Years Redevelopment*
1.3
16 — 20 Years Redevelopment*
1.4
21 — 25 Years Redevelopment*
1.5
26+ Years Redevelopment*
* Redevelopment is defined as the development of a property again to a better condition.
8. Significant Impact Multiplier
Point Value Type of Use
3.0 Mixed Use New Development or Redevelopment
2.5 Commercial/Industrial Redevelopment
2.0 Industrial New Development
1.5 Commercial New Development
Page 26 of 28
05/01/2006
WORKSHEET SUMMARY
TOTALSCORE
* To determine the total score multiply the Subtotal x Redevelopment Age Multiplier x Service
Impact Multiplier.
The information provided herein is true and accurate to the best of my knowledge:
(Signature)
(Date)
Page 27 of 28 05/01/2006
Worksheet Breakdown Total Points
1.
Ratio of Public versus Private Investment
(1 to 5)
2.
Number of Current and Estimated New Employees
(1 to 5)
3.
Public Investment per Current Employee
(0 to 5)
4.
Pay Level of Positions
(0 to 5)
5.
Real Estate/Property Taxes Generated
(1 to 5)
6.
Service Impact
(0 to 5).
SUBTOTAL
Multiplier's
7.
Redevelopment Age Multiplier
(1.0 to 1.5)
8.
Significant Impact Multiplier
(1.5 to 3.0)
TOTALSCORE
* To determine the total score multiply the Subtotal x Redevelopment Age Multiplier x Service
Impact Multiplier.
The information provided herein is true and accurate to the best of my knowledge:
(Signature)
(Date)
Page 27 of 28 05/01/2006
Fundability Rating for Tax Abatement
The total score.on the protect analysis sheet on page 7 determines the general term of assistance.
The City of Burnsville or Burnsville Economic Development Authority will make any final
decision on term.
Point Value Term of Assistance*
0-25 0 Years
26-35 3 Years
36-45 5 Years
46-59 7 Years
**60 and over 10 Years
* Assistance amount will be the incremental taxes only.
** The City or the Authority may consider between 15 — 20 years for projects that score 60 and
over.
05/01/2006
Page 28 of 28
'Vi
1'1 I�iCQ eLmm t
Pat and Peggy,
At the Finance Committee meeting of October 3, 2006, you provided direction regarding the draft
Business Assistance Policy and related TIF and Twin Cities Community Capital Fund policies.
Staff and Rebecca Kurtz of Ehlers and Associates have incorporated the direction into the
attached draft policies for your review. We believe that the updated drafts address the issues
raised. If you find them to be in order, we would propose to place them on the consent agenda
for the December 19, 2006 Council meeting. If there are any issues that require additional
direction or discussion, please advise the City Administrator and we will attempt to schedule a
follow up Committee meeting to overview those items in advance of the 19tH
We are also distributing this both by email and in hard copy with your workshop packets this
weekend, so you can review them in whatever format is most convenient, given travel plans, etc.
In particular, the policies now state the following:
• Guideline versus Entitlement — The policy states in Section 4.01 and in several other
locations that it gives guidance for the evaluation of applications for public financing
assistance, but meeting some or all of the criteria does not entitle the applicant to
assistance. This retains the City's ultimate ability to choose whether to assist a particular
project or not.
• Wage and Job Goals — As discussed, the policy uses a ratio approach to job and wage
goals. It says a project maybe eligible for up to $10,000 per base job (80% of County
Median Wage) and up to $20,000 per head of household job (100% of the County
Median Wage). Job and wage goals would not apply to assistance for redevelopment,
housing, soils or hazardous waste abatement.
• Twin Cities Community Capital Fund — A policy has been developed that references the
standards established by the TCCCF. The City would not apply the job and wage goals
to TCCCF applications unless the applicant requested assistance from the City in
addition to access to the fund, such as an interest rate write down.
• Tax Abatement — The Committee recommended that the City not entertain applications
for tax abatement. To make that clear, a notation at the bottom of the Financial
Assistance Descriptions says, "By policy, the City of Eagan does not provide assistance
through Tax Abatement."
As noted, please let the City Administrator know if there are any issues that require further
discussion or a Committee meeting. Otherwise I would be happy to respond to any questions
you may have regarding the draft policies.
Jon
4J,
DRAFT -- CITY OF EAGAN
Business Assistance Policy
1. PURPOSE
1.01 The purpose of this policy is to provide a guideline for the City of Eagan.to offer assistance for
commercial and housing development and redevelopment projects. The Business Subsidies
Statutes are codified as Minnesota Statutes II6J.993 through II6J.995.
Minnesota Statutes 116J.993, Subd. 3 defines a Business Subsidy as "a state or local government
agency grant, contribution of personal property, real property, infrastructure, the principal amount
of a loan at rates below those commercially available to the recipient, any reduction or deferral of
any. tax or any fee, any guarantee of any payment under any loan, lease, or other obligation, or
any preferential use of government facilities given to a business." Appendix A lists forms of
financial assistance that are not a business subsidy. This policy shall be used as a guide in
processing and reviewing applications requesting business assistance.
1.02 The City shall have the option of amending or waiving sections of this policy when determined
necessary or appropriate. Minnesota Statutes 116J.994, Subd. 2, allows the City to deviate from
its criteria by documenting in writing the reason for the deviation and attaching a copy of the
document to its next annual report to the department.
2. STATUTORY LIMITATIONS
2.01 In accordance with the City of Eagan's Business Assistance Policy, assistance requests must
comply with applicable State Statutes, including Minnesota Statutes 116J.993 through 116J.995.
3. GOALS
3.01 As a matter of adopted policy, the City of Eagan will consider using a business assistance tool to
assist private developments only in those circumstances in which the proposed private projects
show a demonstrated financing gap and meet one of more of the goals, as identified in the City of
Eagan's Comprehensive Plan for Economic Development dated February 22, 2001.
4. BUSINESS ASSISTANCE PROJECT APPROVAL CRITERIA
4.01 All new projects approved by the City of Eagan should meet the following mandatory minimum
approval criteria. However, it should not be presumed that a project meeting these criteria will
automatically be approved. Meeting these criteria creates no contractual rights on the part of any
potential developer.
A. The assistance shall be provided within applicable state legislative restrictions, State Auditor
interpretation, debt limit guidelines, and other appropriate financial requirements and
policies.
B. The project should meet one or more of the goals referenced in the City of Eagan's
Comprehensive Plan for Economic Development.
C. The project must be in accord with the Comprehensive Plan and Zoning Ordinances, or
required changes to the Comprehensive Plan and Zoning Ordinances must be under active
consideration by the City at the time of approval.
D. The assistance will not be provided to projects that have the financial feasibility to proceed
without the benefit of the assistance. Assistance will not be provided solely to broaden a
developer's profit margins on a project. Prior to consideration of a business assistance
request, the City may undertake an independent underwriting of the project to help ensure
that the request for assistance is valid.
E. Prior to approval of business assistance, the developer shall provide any required market and
financial feasibility studies, appraisals, soil boring, information provided to private lenders
for the project, and other information or data that the City or its financial consultants may
require in order to proceed with an independent underwriting.
F. Any developer requesting business assistance should be able to demonstrate past successful
general development capability as well as specific capability in the type and size of
development proposed.
G. The developer must retain ownership of the project at least long enough to complete it, to
stabilize its occupancy, to establish the project management, and to initiate repayment of the
business assistance.
H. The level of business assistance funding should be reduced to the lowest possible level and,
least amount of time by maximizing the use of private debt and equity financing first, and
then using other funding sources or income producing vehicles that can be structured into the
project financing, prior to using additional business assistance funding.
5. BUSINESS ASSISTANCE PROJECT EVALUATION CRITERIA
5.01 If a business meets the criteria in Section 4 and is eligible for assistance, the following criteria
will be used to determine the amount of assistance and type of assistance provided. All projects
will be evaluated by the. EDA and Eagan City Council on the following criteria for comparison
with other proposed business assistance projects reviewed by the City, and for comparison with
other subsidy standards (where appropriate). It is realized that changes in local markets, costs of
construction, and interest rates may cause changes in the amounts of business assistance subsidies
that a given project may require at any given time. In applying the criteria to a specific project,
the following will apply:
A. The City may consider the requirements of any other business subsidy received, or to be
received, from a grantor other than the City.
B. If the business subsidy is a guaranty, the amount of the business subsidy may be valued at the
principal amount of the guaranteed payment obligation.
C. If. the business subsidy is real or personal property, the amount of the subsidy will be the fair
market value of the property as determined by the City.
D. If the business subsidy is received over time, the City may value the subsidy as it determines
is fair and reasonable under the circumstances.
2
As used herein, "Benefit Date," means the date the business subsidy is received. If the
business subsidy involves the purchase, lease, or donation of physical equipment, then the
benefit date occurs when the recipient puts the equipment into service. If the business subsidy
is for improvements to property, then the Benefit Date refers to the earliest date of either
when the improvements are finished for the entire project or when a business occupies the
property.
E. All business assistance projects will need to meet a "Reasonable Rate of Return." Assistance
will not be used unless the need for the City's economic participation is sufficient that,
without that assistance the project could not proceed in the manner as proposed. The
Reasonable Rate of Return will be based on market standards at the time of the application
for assistance.
F. Business assistance will not be used when the developer's credentials, in the sole judgment of
the City, are inadequate due to past track record relating to: completion of projects, general
reputation and/or bankruptcy, or other problems or issues considered relevant by the City.
G. Business assistance funding should not be provided to those projects that fail to meet good
public policy criteria as determined by the Council, including: poor project quality; projects
that are not in accord with the comprehensive plan, zoning, redevelopment plans, and city
policies; projects that provide no significant improvement to surrounding land uses, the
neighborhood, and/or the City; projects that do not have significant new, or retained,
employment; projects that do not -meet financial feasibility criteria established by the City;
and proj ects that do not provide the highest and best desired use for the property.
H. All projects receiving business assistance under the criteria listed in Mi7inesota Statutes
116J.993, Subd. 3 must meet the job and wage goals described below. Minnesota Statutes
116J.994, Subd. 2 allows the City to deviate from its criteria by documenting in writing the
reason for the deviation and attaching a copy of the document to its next annual report to the
Department of Employment and Economic Development.
Except as described in 2. and 3, a business subsidy must result in the creation or retention
of jobs, which will pay at least 80% of the Median Income for Dakota County (base
jobs). In addition, consideration will also be given to the creation or retention of jobs,
which will pay 100% of Median Income for Dakota County (head of household jobs).
The Median Income for the County is annually defined by the Minnesota Housing
Finance Agency. In 2006, 100% of the median is $78,500 and 80% of median is
$62,800. Wage goals will be set forth specifically in the business subsidy agreement.
Where job creation is one of the public purposes of the business subsidy, the subsidy may
be up to $10,000 per base job retained or created and may be up to $20,000 per head of
household job retained or created. The amount of assistance available to a project will be
limited by the amount of proceeds that TIF or other financing tools may support.
2. Job creation or retention is not required for businesses subsidies as long as the grantor
identifies an alternate public purpose in addition to tax base increase. If after a public
hearing/council consideration of the alternate public purpose(s) proposed, the creation or
retention of jobs is determined not to be a goal, the wage and job goals may be set at
zero.
3. In lieu of job creation or retention, other measurable, specific, and tangible goals shall be
established. Examples of tangible goals may include redevelopment, or pollution or soil
remediation.
I. Business assistance will normally be used for projects that address the following land use
issues: (1) more compatible with the City's Comprehensive Plan than other permitted uses for
property; (2) located on property which needs but is not likely to be developed or redeveloped
because of blight or other adverse conditions of the property; and/or include design and/or
amenity features not otherwise required by law.
J. Business assistance will be evaluated on the project's impact on existing and future public
investment: (1) whether and to what extent the project will utilize existent public
infrastructure capacity and the extent it requires additional publicly funded infrastructure
investments; (2) arrangements for the City to receive a direct monetary return on its
investment in the project.
K. Business assistance will normally be used for projects that demonstrate to the satisfaction of
the City adequate financing for the project is available and that the project will be completed
in a timely fashion.
L. Business assistance from the City must satisfy all requirements of Milviesota Statutes
116J.993 through 116J.995.
5.02 Some criteria, by their very nature, must remain subjective. However, wherever possible
"benchmark" criteria have been established for review purposes. The fact that a given proposal
meets one or more "benchmark" criteria does not mean that it is entitled to funding under this
Policy, bui rather that the City is in a position to proceed with evaluations of (and comparisons
between) various business assistance proposals, using uniform standards whenever possible.
4
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DRAFT -- CITY OF EAGAN
Tax Increment Financing Policy
1. PURPOSE
1.01 The purpose of this policy is to provide a guideline for the City of Eagan to offer tax increment
financing assistance for commercial and housing development and redevelopment projects. The
Minnesota Tax Increment Act is codified as Minnesota Statutes 469.174 through 469.1811.
1.02 As a matter of adopted policy, the City of Eagan will consider using tax increment financing to
assist private developments only in those circumstances in which the proposed private projects
show a demonstrated financing gap and meet one of more of the goals, as identified in the City of
Eagan's Comprehensive Plan for Economic Development dated February 22, 2001.
1.03 This policy shall be used as a guide in processing and reviewing applications requesting tax
increment financing assistance. The City shall have the option of amending or waiving sections of
this policy when determined necessary or appropriate.
1.04 In accordance with the City of Eagan's Business Assistance Policy, assistance requests must
comply with applicable State Statutes, including Minnesota Statutes 116J.993 through 116J.995.
2. USES
2.01 Tax increment may be spent only for specified purposes permitted in the underlying development
statutes. Such purposes generally include: land and/or building acquisition; site improvements;
demolition and relocation; parking, streets and sidewalks; public and on-site utilities; other public
improvements; and interest.
Because the development statutes are often ambiguous, whether a particular activity is
TIF -eligible may depend on the facts in each case. .
2.02 The City may retain a maximum of 10% of the tax increment to pay for administrative authorized
in the TIF Plan. The City may also retain an additional 5 to 15 percent for pooling, depending on
the type of tax increment district.
BUT FOR TEST
3.01 The City must find that the increased market value of the site that could reasonably be expected
to occur without the use of tax increment financing would be less than the increase in the market
value of the proposed development after subtracting the present value of the projected tax
increments for the maximum duration of the district permitted by the TIF Plan according to
Minnesota Statutes, Section 469.175, subd. 3(d).
3.02 A pro forma must be provided by the developer to complete a pro forma analysis for the proposed
project and statement explaining the need for tax increment .
4. TYPES OF FINANCING
4.01 The City will consider "pay as you go" financing arrangement with the developer. For pay as you
go financing, the developer pays for various TIF -eligible costs initially, and the authority
Ehlers & Associates, Inc. - TIF Basics
promises to reimburse the developer from tax increment over time as it is generated. This
arrangement may be structured as a revenue note or bond issued to the developer, with an interest
component to compensate the developer for costs of financing the improvements up front.
4.02 Bonds secured by tax increments may be issued when there is a need for initial capital to finance
public or private improvements. The bonds may be general obligation bonds backed by the full
faith and credit of the City.
5. TERM OF ASSISTANCE
5.01 The City retains the ability to provide a shorter term for the tax increment than allowed by
Minnesota Statutes 469.174 through 469.1811
ADDITIONAL CRITERIA BY TIF DISTRICT TYPE
6.01 Redevelopment and Renewal and Renovation Tax Increment Districts must consist of parcels
with 70 percent of the area of the district occupied by buildings, streets, utilities, paved or gravel
parking lots or other similar structures. They also must contain structurally substandard buildings,
as defined in Minnesota Statutes 649.175, Subd..10 and 10a. The City will work with an
independent third party to make the determination if a District qualifies.
A. Districts typically will include multiple parcels within the City of Eagan.
B. Applications must include a master plan of the developer, including a unified, integrated
development approach to the entire area and/or major sub -area.
6.02 Housing Tax Increment Districts must develop a facility intended for occupancy in part by
persons or families of low and moderate income. The City will give priority to mixed income
developments.
A. Rental projects must satisfy the income requirements for qualified residential rental
projects under Section 142(4) of the Internal Revenue Code. The three options for income
limits on a standard housing district are 20% of the units at 50% of median income, 40%
of the units at 60% of median income, or 50% of the units at 80% of median income.
B. For single family developments, at least 95% of the houses assisted with tax increment
must be occupied with persons at 100% of median income for a family of two or less and
115% of median income for families of three or. Median income under this provision is
the greater of the statewide median or the county median and is annually updated.
6.03 Economic Development Tax Increment District must find that the district will (1) discourage
business from moving to another state or municipality; (2) increase employment in the state; or
(3) preserve and enhance the tax base of the state.
A. Increment may not be used to assist developments if more than 15% of the buildings and
facilities (on a square footage basis) are used for a purpose other than manufacturing;
warehousing, storage and distribution of tangible personal property (excluding retail
sales); research and development related to the aforementioned activities; telemarketing,
if that activity is the exclusive use of the property; and space necessary for and related to
the above.
B. All projects receiving business assistance must meet the job and wage goals described in
Section 5.01 (H) of the City's Business Assistance Policy.
6.04 Soils Condition Districts require the presence of hazardous substances, pollution, or contaminants
requiring removal or remedial action for use.
6.05 Hazardous Substance Sub -districts consist of parcels within a TIF District of any kind that are
"designated hazardous substance sites" or are contiguous parcels that the authority expects to be
developed together with the hazardous substance site.
Meeting Notes
Finance Committee Meeting
October 3, 2006
I. Adoption of Agenda
The Agenda was adopted as presented.
II. Business Assistance Policy and Public Financing Policies
Community Development Director Hohenstein provided an overview of the
background regarding Business Assistance Policies and Public Financing
Policies. He indicated that cities that provide public financing assistance to
private businesses or developments are required by statute to adopt and follow a
business assistance policy, which among other things lays out specific job and
wage level goals for projects that do not .involve redevelopment or housing
development. The City's most recent Business Assistance Policy was adopted in
2001, prior to statutory amendments that require it to be updated.
He stated that the Economic Development Commission's Finance and
.Development Committee had largely completed an update of the Business
Assistance Policy and TIF Policy, but that the full Commission had not acted on a
recommendation at the time that the EDC was disbanded. He said that the EDC
Committee's approach to the policies was that the Business Assistance Policy
would apply to all types of assistance and that a "tool box' of financing methods,
such as tax increment financing and a revolving loan fund, would be tools within
the tool box.
The one outstanding issue was the specific job and wage goals to be set for
economic development projects where job or business development is the
purpose of the assistance. He indicated that many policies set higher wage or
leverage requirements to help create living wage of head of household jobs and
prevent public financing from being used to create low wage jobs or small
numbers of jobs. Taking a somewhat different approach, the EDC Committee
had suggested setting a low minimum of one job at federal minimum wage to
create the greatest flexibility for the Council to approve projects regardless of the
number of jobs or their wage level. The EDC Committee had determined that
both approaches should be presented to the Council for consideration in the
adoption of the policies.
The Finance Committee indicated that it would be more appropriate to have
higher wage and job creation goals in the City's policies. It was noted that other
City policies do permit Councils to waive or amend the goals for specific projects
if they determine that the project warrants it.
Hohenstein also overviewed information relative to Tax Abatement authority and
the Twin Cities Community Capital Fund, which the Council has authorized the
City to join at the recommendation of the EDC. The TCCCF is a revolving loan
fund, which resells loans on the secondary market to leverage more loans than a
single city's loan fund could capitalize.
The Finance Committee concluded that the basic approach of a master policy
and tool box is appropriate. The Committee directed staff to develop wage and
job goals that would require higher base'wages and a relationship between the
level of assistance and number of jobs. The Committee indicated that it is not
supportive at this time of the City using tax abatement authority and that staff
should prepare a policy statement to that effect. Finally the Committee directed
staff to prepare a brief policy statement indicating that the City will generally
apply the Business Assistance Policy to businesses seeking financing through
the TCCCF, but that the City would not add criteria or standards beyond the
basic TCCCF determination of eligibility and credit worthiness for such loans.
The revised job and wage goals and the policy statements regarding tax
abatement and TCCCF were to be returned to the Finance Committee for a
recommendation to the full Council on the adoption of the policies.
111. Other Business
City Administrator Hedges briefed the Finance Committee on the status of
discussions with a prospective user of the Eagan Civic Arena. He noted a
number of items that need additional clarification and discussion to include
potential bonding questions, payment of operating costs, and a desire to use new
revenue streams such as naming rights and/or advertising sales as a mechanism
to pay for ice time use.
Director of Administrative Services VanOverbeke covered the basic financing
elements relating to new construction as they have been discussed and noted a
list of questions that need to be answered by a bond attorney before additional
substantive discussions can be held. Due to potential client conflicts it has been
problematic to get the questions addressed to date.
The Finance Committee provided direction that interior naming rights may be
appropriate and that any revenue deal needs to be straight forward and simple.
They also directed that if all of the bonding questions can be satisfactorily
answered, protection must be provided to ensure that no debt service
requirements become obligations of the City.
IV. Adjournment
Gene, Tom and Rebecca,
Page 1 of 2
to
Tom Hedges
From: Jon Hohenstein
Sent: Friday, October 13, 2006 5:10 PM
To: Gene VanOverbeke; Tom Hedges; Rebecca Kurtz
Cc: 'Sid Inman'
Subject: Finance Committee Notes
Attachments: Notes 100306 Finance Committee Meeting Notes -October 3 2006.doc; Job and Wage Goal
Draft 101306.doc
Gene, Tom and Rebecca,
Attached is a draft of the Finance Committee notes from October 3. Please review and comment and Tom will
distribute to the Council with an upcoming Informative Memo.
Rebecca (Gene, your insight and suggestions would also be appreciated),
To follow up on the Committee direction, please prepare the following:
Updated Matrix of Financial Assistance Programs
• Remove Tax Abatement from the matrix itself and add a footnote at the end of the matrix that states:
It is the policy of the City of Eagan not to use tax abatement as a business assistance or development
assistance too[
• Fill out the TCCCF row in the matrix using the background in the October 3 Finance Committee
packet for the description, requirements (from the new policy statement), term (life of asset securing
the loan) and maximum ($2 million).
Prepare a TCCCF Policy statement using the TIF format and standard language, based on the packet
description.
• Purpose — To provide gap financing to leverage private sector lending and investment for business
development.
• Uses — Fixed assets, etc. from the brochure on page 49 of the packet.
• Type of Financing — Long term, subordinated, fixed rate loans in partnership with local lenders.
• Term of Assistance — Loans will be amortized up to the life of the asset securing the loan, to be
determined by the TCCCF loan officer.
• Maximum Loan Amount — Up to $2 million, based on need as determined by TCCCF loan officer.
• Criteria — Applicants for TCCCF Assistance shall have made application to a private sector lender,
who has made a determination that the applicant's project is credit worthy, but that a gap exists
between the project cost and the amount that the private lender's loan and applicant's equity can
support. The Applicant will be required to fill out the City's Business Assistance Pre -Application Form
and provide documentation of the status of the private loan application to serve as the basis of the
City's referral of the applicant to the TCCCF program. Applications for TCCCF Loans will be
evaluated in consideration of the Business Assistance Policy Criteria, with the qualification that the
job and wage goals may be waived in consideration of the fact that the assistance is provided by the
resale of the loan to the secondary market. If the structure of the TCCCF loan requires any additional
City cost besides its membership commitment, the job and wage goals would need to be met as well.
Revised Job and Wage Goal Language
• I'm thinking that I would like to mimic the Burnsville Policy (Paragraphs C, D and E on page 51 of the
Finance Committee Packet) so that both the wage and job goals and the exceptions are described in
a revision of the draft policy's paragraph 5.01 H. A cut at the revised language is attached for all to
review as well. I also am proposing that a leverage ratio be included, but that could be inserted
instead in the TIF Policy under Economic Development District Criteria, since that would be the one
place we think it would apply.
Have a great weekend. We'll visit next week.
10/15/2006