09/28/1998 Council Packet - Laserfiche WebLink

Home Search

MEMORANDUM TO: Lino Lakes Economic Development Authority FROM: Ron Batty, EDA Attorney DATE: September 18, 1998 RE: JADT Shopping Center Development At several recent meetings the EDA has discussed a proposed shopping center development in the northeast quadrant of the intersection of I -35W and Highway 49. The developer's request for financial assistance from the EDA presents issues that are novel and somewhat complex. The purpose of this memorandum is to summarize these matters for the benefit of all members. The proposal is to create a redevelopment project area centered on the intersection of I- 35W and Highway 49. The project area would include land in addition to the parcel under consideration for the shopping center. Establishing a redevelopment project area is essentially a planning decision. The project should include areas of the city viewed as needing additional development attention but it does not necessarily involve any fiscal or financial implications. There is no commitment to assist a project merely because of its location within a redevelopment project area. Within a redevelopment project, however, the EDA may choose to assist selected developments. In the past, the EDA's most frequently used tool for assistance has been tax increment financing. TIF is not available in this instance because it would be necessary to establish an economic development TIF district and such districts cannot be used to assist retail projects. The suggestion in this instance is to use a different method to assist the developer. The alternate has some characteristics of tax increment, although it is significantly less powerful because it involves only the city's portion of taxes generated by the new development. This method of financing, sometimes called "phantom" tax increment, involves the EDA entering into a contract with a developer. The developer would agree to construct specified improvements and the EDA would agree to provide a level of financial assistance. Rather than utilizing tax increment generated by the project to meet its obligations, the EDA would look to the city. State law allows the city to assist the EDA in promoting specific development goals. The city may use any funds available to it for this purpose. The city would limit its commitment to the EDA to the amount of new taxes generated by development on the subject property. Rather than controlling the entire stream of new taxes, however, the city would be limited to its minority percentage of the taxes generated by the project. Upon receipt of these taxes, the city would pay the EDA, which in turn would reimburse the developer for specified expenses. RHB- 150056 LN140 -64 1