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Mayor & City Council <br />April 5, 1991 <br />Page 2 <br />* A limitation that must be considered relates to the fact <br />that the City cannot acquire more than 25 percent of the <br />project property without a development agreement. This <br />calculation would need to be based on the assumption that <br />Phases I thru III have been developed. It may be possible <br />that a development agreement could be written for the <br />property under consideration for acquisition if we tie in <br />a time frame for the development and some type of penalty <br />provision. This factor will have to be cleared by bond <br />council before we undertake any acquisition. <br />* Another concern relates to acquisition itself. <br />Acquisition of property by the City will be governed by <br />regulations consistent with the Uniform Act. We need to <br />do a detailed evaluation of the best manner to handle the <br />acquisition so that the City is not faced with unnecessary <br />costs in this process. <br />Another concern relates to the fact that we should ensure <br />that by acquiring this property we will have a developable <br />parcel available for the futture. This may necessitate the <br />City acquiring the Quirin property and the.Gag property <br />to generate a significant development in terms of tax <br />increment generation. While that may not mean actually <br />acquiring that property, it may necessitate obtaining the <br />option to acquire that property or portions of it. <br />* The last concern relates to the excess increment <br />generated. While that increment is a virtual certainty <br />based on today's factors, the State of Minnesota could <br />jeopardize this possibility. Specifically, the State has <br />discussed the goal of having commercial property taxes <br />based on four percent tax capacity factor. Presently this <br />factor is 5.06 percent. Obviously, if this goal is <br />achieved we would see reduction in taxes generated of 20 <br />percent. This would be a serious, negative impact on <br />excess tax increments. <br />As you can see, many factors still need to be evaluated before the <br />City can make an informed decision on this process. At this time, it <br />is safe to say that without completion of Phase III, the likelihood <br />of the City proceeding with acquisition would be diminished. Please <br />let me know of any comments or questions you may have regarding this <br />matter prior to Wednesday's meeting. <br />cc: Mark Malsam <br />George Zender <br />Charles Rice <br />Page 37 <br />