06-08-1998 EDA Packet - Laserfiche WebLink

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AGENDA ITEM 3 STAFF ORIGINATOR: Brian Wessel DATE: 6/8/98 TOPIC: Industrial Incentives: Tax Increment Financing Policy BACKGROUND: Since 1995, when the Economic Development Tax Increment Financing District 1-7 (Apollo Business Park) and 3-1 (Clearwater Creek) were created, the city experienced a boom in quality Tight industrial development. Six new industries, with a total market value of $6.8 million, have moved into the Apollo Business Park. Three industries, totaling $10 million, have built in Clearwater Creek. For the first two years of the 10-year TIF Districts, the city was subsidizing land and assessments to qualified companies on a combination of "upfront" and "pay- as-you-go" basis. This generally provided a company moving into the city equity in the range of 16% of the total project cost. As the districts have aged and diminished in capacity, the city is no longer able to provide a subsidy in the range of 16%. This limits the city's ability to attract new business to the city while competing with neighboring cities that are offering land in fully improved business parks, strong TIF incentives and good access to the freeway systems. Other factors also have produced a slow down in industrial development this year in Lino Lakes: • The remaining land in the Apollo Business Park abuts the Lino Lakes Correctional Facility, which has been perceived negatively by some prospects. • Much of the remaining land in Clearwater Creek will not be accessible until the new Otter Lake Road alignment is complete. • The combination of low interest rates and low inflation brought an industrial building boom in 1995 that is now slowing. The opportunistic phase of the market cycle may be over. As the "Industrial Park TIF Status" chart shows, the new businesses that have been built since 1995 will be coming on the tax rolls between 1998 and 2004. However, because of the slowdown of new industrial construction over the past