05-23-2012 Council Agenda - Laserfiche WebLink

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ce, o `S U°a�car 515 Little Canada Road, Lillie Canada, MN 55117-1600 (651) 766 -4029 / FAX: (651) 766 -4048 www.ei.latle-canada.mn.us MEMORAN1)11M TO: Mayor 13lesener and Members of the City Council FROM: Joel Hanson, City Administrator DATE: May 18, 2012 MAYOR Bill Blesencr COUNCIL. Rick Montour John Kcis Michael McGraw Shelly Boss ADMINISTRATOR Joel ft Hanson RE: PILOT Agreement - International Union of Painters and Allied Trades Council 82 Building Corporation, Inc. With a change in State Statutes back in 2008, District Council 82 now qualities for tax - exempt status on the portion of the building used for apprenticeship training programs. However, our development agreement with them related to tax increment financing assistance provided back in 2003 precluded them from lowering the estimated market value below $4,000,000 until the TIF obligations have been satisfied. With the TIF District nearing the end of its financial obligations, it has become advantageous for District Council 82 to pay off the remaining obligation in order to gain the benefits of the exemption from property taxes for a good portion of the property. To pay off the remaining obligations (after allowing for the TIFI payments that will be received in 2012), they only need to pay us $47,397.20 (8105,390.38 Tess a security deposit balance of 857,993.18), With the 78% anticipated reduction in value that the Ramsey County Assessor's Office indicates is likely, they will reduce their property tax burden by almost $140,000 (based on 2012 nmbers). Staff has met with their attorney and key officials and expressed our concern about the utilization of tax- exempt status and the impact it has on our ability to provide services. It was pointed out that when the project was initially contemplated, we were assured the property would not he tax exempt. As a result, we were interested in assisting them to enhance our tax base. Iftax- exempt status were possible, we likely would have declined to assist the project given our limited land for development. With circumstances changing in 2008, they are obviously entitled to take advantage of the change in property tax law. They believe the savings will aid them in providing programs /services to their members. While under no legal obligation to do so, District Council #82 has indicated a willingness to keep the City essentially whole. To that end, the attached Payment hi Lieu of Taxes (PILOT) agreement was drafted. It provides for a payment from District Council #82 in the amount of $11,500 per year for the next 10 years starting in 2013. (Exhibit 13 has the details of how that number was arrived at.) At the end of that time, the arrangement will be evaluated to make sure it is still appropriate in terms of the dollars provided. 1