10-28-2015 Council Workshop Minutes

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MINUTES CITY COUNCIL OCTOBER 28, 2015 The City Administrator presented the Council with TIF analysis information based on a 15 -year District for both a $5 million building and an $8 million dollar building. The Administrator noted that the City cannot control the valuation that the County sets on a building. However, the City and the County could enter into an assessment agreement relative to the project. The Administrator pointed out that the TIF analysis sheets presented this evening are just examples, and that there are many different scenarios that could be considered. Keis clarified that the situation would be that LA Fitness would pay $4.50 per square foot in property taxes under their lease agreement, and any tax burden over that amount would be paid by the developer. If the City provides TIF for qualifying costs, essentially those funds would offset any additional tax burden over $4.50 per square foot. Ruff indicated that the reality is that the developer wants the City to offset some of the tax cap risk. Ruff indicated that there would be plenty of TIF eligible costs to do so. Keis suggested that if LA Fitness has a 10 -year lease for the property, then the TIF assistance should cover that time frame. Ruff stated that the discussions are for a 15 -year lease. Keis asked about pay-as-you-go under TIF. The City Administrator explained that the developer would front the dollars for eligible costs and the City would do an annual reimbursement under a TIF Note. That reimbursement would be limited based on the TIF received. The Administrator indicated that in the $8 million building scenario, there would be an annual reimbursement for the first 10 years. Years 11 through 15, the tax cap is gone but TIF would be needed to recover tax cap reimbursements over the first 10 years that the normal increment did not cover. Ruff indicated that the risk is how quickly the property goes back on the tax rolls. Keis pointed out that the additional tax dollars that this project would generate does not go to the City, the County, or the School District during the life of the TIF District. The Administrator explained the "but for" test. He noted that the property taxes that the property currently generates would continue to go to the City, County, and School District. It is the additional tax revenue that the new project generates that is captured in the TIF District. The Administrator indicated that the question is if the City does not provide assistance, will the property redevelop on its own. The Administrator felt that was doubtful. He also pointed out that there are less desirable options to the redevelopment, such as the use of the current building in its substandard state. The Administrator pointed out that while the City would not provide TIF assistance in that scenario, there would also be no growth in the tax base. 3