HomeMy WebLinkAbout12/07/2017 EDAC PacketCITY OF LINO LAKES
ECONOMIC DEVELOPMENT ADVISORY COMMITTEE MEETING
Thursday, December 7, 2017
8:00 A.M.
Community Room
AGENDA
CALL TO ORDER AND ROLL CALL
2. APPROVAL OF MINUTES. November 2, 2017
3. DISCUSSION ITEMS
A. Lino Lakes Tax Increment and Abatement Financial Incentives Policy (Cont.)
B. Comprehensive Plan Update
C. Project Updates
4. ADJOURN
CITY OF LINO LAKES
ECONOMIC DEVELOPMENT
ADVISORY COMMITTEE
MINUTES
DATE: November 02, 2017
MEMBERS
PRESENT: Thomas Colgan, Jim Schueller, Nathan Vojtech, Julie Schwartz, Chad Wagner,
Don Johnson, Lou Masonick, Michael Ruhland, Patrick Kohler
MEMBERS
ABSENT: None
OTHERS PRESENT: Michael Grochala, Kirsten Barsness, Joe Widing
APPROVAL OF MINUTES
It was moved by Mr. Schuller to approve the minutes from October 05, 2017. The motion was
seconded by Mr. Masonick and passed unanimously.
DISCUSSION ITEMS
A. Lino Lakes Tax Increment and Abatement Financial Incentives Policy (Cont.)
The discussion continued on policy in relation to tax abatement.
Ms. Barsness began the discussion with Section IV. Policies. Committee members
expressed concern that considering upfront financing on a case by case basis could be
seen as arbitrary and capricious. Mr. Grochala explained that most upfront financing
requests related to construction of public improvements. The Council would need to
weigh these independently.
Ms. Barsness stated that the amount for private equity in a project is required to be 20%
for abatement or TIF. Committee members asked if the 20% was a hard line or flexible,
but agreed that 20% is a good number.
The Committee members discussed the provision regarding property price in excess of
market value. There was agreement that public assistance should not be used to cover an
inflated land price. However, Mr. Grochala noted that there may be projects where the
land selling price is not supported by market value, which is often the case with
redevelopment. Many times an existing building holds value for the current owner but
not for the redevelopment purposes. The committee agreed to remove the language.
Ms. Barsness questioned the language in relation to extraordinary environmental impacts
from projects receiving public financing. Mr. Grochala stated that he would like to
remove that language stating that it is unnessary and difficult to define "extraordinary".
Most large projects are subject to environmental review.
Committee members asked if language in the policy was negotiable or firm.
Ms. Barsness replied that everything is a negotiation, but the language gives the city the
ability to negotiate from a better position. Mr. Grochala stated that generically there is a
base of items required for each project and is going to be required whether the project
was requesting funds or not.
Discussion moved on to Section V. Project Qualifications. Ms. Barsness asked if the city
wants to limit what projects could be used for. Mr. Grochala explained that both TIF and
Abatement required a public purpose and had fairly specific use requirements in place.
The Committee recommended that the language be removed from the policy.
Ms. Barsness asked if language about the requirements of a project should remain as is.
Mr. Grochala stated he would like to add a clause about public improvement to the
policy.
Mr. Grochala stated that the language should be changed from "will not" to "should not"
on exceeding the 16% limit on TIF for the value of projects.
B. Hodgson Road & County Road J Concept Plan
Mr. Grochala presented the background and the staff report for the conceptual
development plan for the Morris property north of the intersection. He laid out the
guidelines for what the city is looking for on the site as envisioned in the master plan. He
presented the concept plan and asked the committee for feedback on it.
The Committee thought that the site plan looks ok overall, and that a restaurant would be
a good use for corner commercial, but had worries about the effect of adjacent land uses
for future commercial on the site.
The Committee asked if the intersection on J would be right in right out. Mr. Grochala
responded that it is. He also stated that the intersection is at capacity and the city would
have to make improvements on its own in relation to new development.
The committee asked if the Morris property would spur the development 49 club parcel.
Mr. Grochala stated that it is a possibility as the improvements go in for any new
development north.
The committee stated that the city's dreams of large scale commercial are not likely and
that the residential might just be the way to go as the site has been sitting for over a
decade as is.
Mr. Grochala agreed and stated that the commercial in the concept plan is likely to be all
of the commercial that can be supported on the site.
The committee stated that across the street is the best opportunity for larger scale
commercial as the current uses are a detriment to development and are zoned for such as
well. Mr. Grochala stated that the proposed project could be worth as much as $50
million. The committee agreed that now is the best time for housing construction as the
market is favorable. The committee recommends that the City allow the concept to move
forward.
C. Project Updates
There were no project updates for the committee.
ADJOURNMENT
The meeting was adjourned at 9:31 AM.
ECONOMIC DEVELOPMENT ADVISORY COMMITTEE
AGENDA ITEM 3A
STAFF ORIGINATOR: Michael Grochala
EDAC MEETING DATE: December 7, 2017
REQUEST: Incentive Policy Update
BACKGROUND
Over the past two months the board has been discussing modifications to the City's Tax
Abatement and Tax Increment Financing policies. The two documents have been merged and
updated. A revised document is attached along with a draft application and project scoring sheet.
These documents will need to be updated once the policy is completed.
EDAC CONSIDERATION
Staff is requesting EDAC discussion and recommendation regarding the proposed policy
changes.
ATTACHMENTS
1. Draft Financial Incentive Policy
Financial Assistance Policy
for
Tax Increment Financing &Z, Tax Abatement
City of Lino Lakes
December 2017
City of Lino Lakes, Minnesota
I. POLICY PURPOSE
The purpose of this policy is to establish the City of Lino Lakes'
position relating to the use of Tax Abatem inancial assistance
programs, for private development above and beyond the
requirements and limitations set forth by State Law. This policy
shall be used as a guide in the processing and review of
applications requesting tax increment financing or tax abatement
assistance. The fundamental purpose of Tov nho+omon+financial
assistance programs in the City of Lino Lakes is to encourage
desirable development or redevelopment that would not otherwise
occur but for the assistance provided_ through Tax nbatemeRt
The City of Lino Lakes is granted the power to utilize Tax
Increment Financing and Tax Abatement by the Minnesota Tax
b eRt AGt, as aR;eRdedStatute. It is the intent of the City to
provide the minimum amount of Tax A#ateici%-i4Rfinancial
assistance, as well as other incentives, at the shortest term
required for the project to proceed. The City reserves the right to
approve or reject projects on a case by case basis, taking into
consideration established policies, project criteria, and demand on
city services in relation to the potential benefits from the project.
Meeting policy criteria does not guarantee the award of Tax
"ha+;tfinancial assistance to the project. Approval or denial
of one project is not intended to set precedent for approval or
denial of another project.
II. DIFFERENCE BETWEEN TAX ABATEMENT & TAX
INCREMENT FINANCING
The primary difference between Tax Abatement and Tax
Increment Financing (TIF) is the way in which the dollars are
awarded to the project. When TIF is awarded to a project by the
city, the other political subdivisions (the school district and the
county) are required to contribute their portion of the increased
taxes to the project. Conversely, when Tax Abatement is
requested, each political subdivision has the option of granting its
portion of the increased taxes to the project. Subsequently, the
dollars generated for the project with Tax Abatement are generally
less than the dollars generated with TIF.
III. OBJECTIVES OF TAX ABATEMENTFINAN4GALFINANCIAL
ASSISfTANCE
As a matter of adopted policy, the City will consider using Tax
Increment or Tax Abatement to assist private development
projects to achieve one or more of the following objectives:
• To retain local jobs and/or increase the number and
diversity of jobs that offer stable employment and/or
attractive wages and benefits.
Financial Assistance Policy Page 1
City of Lino Lakes, Minnesota
• To enhance and diversify the City of Lino Lakes' economic
base.
To enGO irage additional i msi bsidized private development
Oho ' h Aire y o�•rr Y thi OUgh "SPOn off'
�a�,�,�a�ea either ee n,--�r-
deyelonment
• To facilitate the development process and to achieve
development on sites which would not be developed
without Tax Abatemen+financial assistance.
• To remove blight and/or encourage redevelopment of
commercial and industrial areas in the city that result in
high -quality redevelopment and private reinvestment.
• To offset increased costs of redevelopment (i.e.,
contaminated site clean up) over and above the costs
normally incurred in development.
• To create opportunities for life cycle affordable housing
• To contribute to the implementation of other public policies,
as adopted by the city from time to time, such as the
promotion of quality urban or architectural design, energy
conservation, and decreasing capital and/or operating
costs of local government.
IV. POLICIES FOR THE USE OF TAX BATEMENTFINANCIAL
ASSISTANCE
a. Tax Increment or Tax Abatement assistance will be
provided to the developer upon receipt of taxes by the City,
otherwise referred to as the pay-as-you-go method.
Requests for up -front financing will be considered on a
case -by -case basis, for project related public
improvements.
b. Any developer receiving Tax Abaternen+financial
assistance shall provide a minimum of twenty percent
(20%) cash equity investment in the project.
G. Abatement Will net he i is��r�Gi i��mstLaRGees where
land and/or property nriGe is in exGess of fair market value.
d.c. Developer shall be able to demonstrate a market demand
for a proposed project.
e Tax Abatement may net he utilized in Gases where it wei ld
^vrreate an u�iffaa'iand --SiggnifiGa t GGIITIp titi.�nuRGial
advantage ever ether nreieets anther existing businesses
in the area
f Tax Abatement Fray Ret be used fe�ejcGtS that would
p llaGe extFaeFdonaFy rdemandsGrG%seFYTGes eFfe
nreiecsat would generate sign,ifi eantepyirenmental
mod. The developer must provide adequate financial guarantees
to ensure completion of the project, including, but not
Financial Assistance Policy Page 2
City of Lino Lakes, Minnesota
limited to: assessment agreements, letters of credit,
personal guaranties, etcetera.
Ise. The developer shall adequately demonstrate, to the City's
sole satisfaction, an ability to complete the proposed
project based on past development experience, general
reputation, and credit history, among other factors,
including the size and scope of the proposed project.
�J. For the purposes of underwriting the proposal, the
developer shall provide any requested market, financial,
environmental, or other data requested by the City or its
consultants.
V. PROJECT QUALIFICATIONS
All Tax Increment or Tax Abatement projects considered by the
City of Lino Lakes must meet each of the following requirements:
a. The project shall meet at least one of the objectives
set forth in section IV of this document.
Eb. The developer shall demonstrate that the project is
not financially feasible but -for the use of Tax
Abatement.
d-c. The project shall comply with all provisions set forth
in the state's Tax Increment Law, statutes 469.174
to 469.1794, as amended or the Tax Abatement
Law, statutes 469.1812 to 469.1815, as amended.
mod. The project must be consistent with the City's
Comprehensive Plan, Land Use Plan, and Zoning
Ordinances.
Vie. The project shall serve at least two of the following
public purposes:
• Job creation.
• Increase tax base.
• Enhancement or diversification of the city's
economic base.
• Development or redevelopment that will spur
additional private investment in the area.
• Fulfillment of defined city objectives, such as
those identified in the Comprehensive Plan.
• Removal of blight or the rehabilitation of a high
profile or priority site.
Financial Assistance Policy Page 3
City of Lino Lakes, Minnesota
Construction of public improvements that
benefit the City of Lino Lakes, its residents and
businesses.
• Financial commitments should not exceed 16%
of the estimated market value of the Droiect
VI. SUBSIDY AGREEMENT & REPORTING REQUIREMENTS
All developers/businesses receiving Tax AbateMeRtinancial
assistance in the form of Tax Increment or Tax Abatement
ass'sce from the City of Lino Lakes shall be subject to the
provisions and requirements set forth by state statute 116J.993
and summarized below.
All developers/businesses receiving Tax ^"a+;tfinancial
assistance shall enter into a subsidy agreement with the City of
Lino Lakes that identifies: the reason for the subsidy, the public
purpose served by the subsidy, and the goals for the subsidy, as
well as other criteria set forth by statute 116J.993.
The developer/business shall file a report annually for two years
after the date the benefit is received or until all goals set forth in
the application and performance agreement have been met,
whichever is later. Reports shall be completed using the format
drafted by the State of Minnesota and shall be filed with the City of
Lino Lakes no later than March 1 of each year for the previous
calendar year. Businesses fulfilling job creation requirements
must file a report to that effect with the city within 30 days of
meeting the requirements.
The developer/business owner shall maintain and operate its
facility at the site where Tax Increment or Tax Abatement
assistance is used for a period of five years after the benefit is
received.
In addition to attaining or exceeding the jobs and wages goals set
forth in the Subsidy Agreement, the borrower shall achieve at
least one of the objectives set forth in Section III of this
document.
Developers/Businesses failing to comply with the above provisions
will be subject to fines, repayment requirements, and be deemed
ineligible by the State to receive any loans or grants from public
entities for a period of five years.
VII. APPLICATION PROCESS FOR TAX ABATEMENT
A. City of Lino Lakes
Applicant submits the completed application and
completes the Application Review Worksheet.
Financial Assistance Policy Page 4
City of Lino Lakes, Minnesota
2. City staff reviews the application and completes the
Application Review Worksheet.
3. Results of the Worksheet are submitted to the
appropriate governing authorities for preliminary
approval of the proposal.
4. If preliminary approval is granted, all necessary
notices, resolutions and certificates are prepared by
City staff and/or consultants.
5. Public hearing(s) on the proposed project are held.
6. The EDA or HRA recommends approval or denial
of the proposal to the City Council.
7. The City Council grants final approval or denial of
the proposal.
B. Applications to other political subdivisions
It is recommended that applicants intending to seek Tax
Abatement from the affected County or School District
make their applications to those bodies concurrent with
their application to the City of Lino Lakes.
Financial Assistance Policy Page 5
City of Lino Lakes, Minnesota
Vill. APPLICATION FOR FINANCIAL ASSISTANCETAv AQATCMCAIT
A. Applicant Information
Name of Corporation/Partnership
Address
Primary Contact
Address
Phone
Fax
Email
On a separate sheet, please provide the following:
• Brief description of the corporation/partnership's business, including history, principal
product or service, etc... Attach as Exhibit A.
• Brief description of the proposed project. Attach as Exhibit B.
• List names of officers and shareholders/partners with more than five percent (5%)
interest in the corporation/partnership. Attach as Exhibit C.
• A but -for analysis and narrative. Attach as Exhibit D.
Attorney Name
Address
Phone
Accountant Name
Address
Phone
Contractor Name
Address
Phone
Engineer Name
Address
Phone
Architect Name
Address
Phone
Fax
Fax
Fax
Fax
Fax
Email
Email
Email
Email
Email
Financial Assistance Application Page 6
City of Lino Lakes, Minnesota
B. PROJECT INFORMATION
1. The project will be:
Industrial: New Construction Expansion Redevelopment/Rehab
Office/research facility that conforms to business park standards
Commercial Redevelopment/Rehabilitation
Other
2. In addition to the City of , applicant is requesting Tax Abatement funds from:
Xxxxxx Anoka County School District xxx
3. The project will be: Owner Occupied Leased Space
• If leased space, please attach a list of names and addresses of future lessees and
indicate the status of commitments or lease agreements. Attach as Exhibit E.
4. Project Address
• Include Legal Description and PID number. Attach as Exhibit F.
5. Site Plan Attached:
Yes
6. Total Amount of Tax Abatement $
Requested:
City Portion of Tax Annual $
Abatement:
County Portion of Tax Annual $
Abatement
ISD xxx Portion of Tax Annual $
Abatement:
7. Current Real Estate Taxes on Project Site:
Estimated Real Estate Taxes Upon Completion
8. Construction Start Date:
Construction Completion Date:
If Phased Project:
Year
Year
No
over years.
Total $
Total $
Total $
Phase 1 $
Phase II $
• •
Completed
Completed
Financial Assistance Application Page 7
City of Lino Lakes, Minnesota
C. PUBLIC PURPOSE
It is the policy of the City of Lino Lakes that the use of Tax Abatement should
result in a benefit to the public. Please indicate how this project will serve a
public purpose.
Job Creation: Number of existing jobs
Number of jobs created by project
Average hourly wage of jobs created
New Industrial development which will result in additional private investment in
the area
Enhancement and/or diversification of the city's economic base
The project contributes to the fulfillment of the City's Strategic Plan for Economic
Development
Removal of blight
Rehabilitation of a high profile or priority site
Other:
SOURCES NAME
AMOUNT
Bank Loan
$
Other Private Funds
$
Equity
$
Fed Grant/Loan
$
State Grant/Loan
$
EDA Micro Loan
$
Tax Abatement
$
ID Bonds
$
TOTAL
$
USES
AMOUNT
Land Acquisition
$
Site Development
$
Construction
$
Machinery & Equipment
$
Architectural & Engineering Fees
$
Legal Fees
$
Interest During Construction
$
Debt Service Reserve
$
Contingencies
$
TOTAL
$
Financial Assistance Application Page 8
City of Lino Lakes, Minnesota
E. ADDITIONAL DOCUMENTATION AND CHECKLIST
Applicants will also be required to provide the following documentation.
A) Written business plan, including a description of the business,
ownership/management, date established, products and services, and future plans
B) Financial Statements for Past Two Years
Profit & Loss Statement
Balance Sheet
C) Current Financial Statements
Profit & Loss Statement to Date
Balance Sheet to Date
D) Two Year Financial Projections
F) Letter of Commitment from Applicant Pledging to Complete During the Proposed
Project Duration
G) Letter of Commitment from the Other Sources of Financing, Stating Terms and
Conditions of their Participation in the Project
H) Application fee of $5000 (to be returned upon project completion.)
J) Attach the following documentation as Exhibits
Exhibit A — Corporation/Partnership Description
Exhibit B — Description of Project
Exhibit C — List of Shareholders/Partners
Exhibit D
— But -For Analysis
Exhibit E —
List of Prospective Lessees
Exhibit F —
Legal Description
Note: All Major shareholders will be required to sign personal guarantees if up -front financing of the
project is required.
The undersigned certifies that all information provided in this application is true and correct to the best of
the undersigned's knowledge. The undersigned authorizes the City of Lino Lakes to check credit
references, verify financial and other information, and share this information with other political
subdivisions as needed. The undersigned also agrees to provide any additional information as may be
requested by the City after the filing of this application.
Applicant Name
By
Its
Date
Financial Assistance Application Page 9
City of Lino Lakes, Minnesota
TAX ABATEMENT PROPOSAL REVIEW WORKSHEET
TO BE COMPLETED BY CITY STAFF
1. The project meets the criteria set forth in Section V of the Tax Abatement policy.
a) Meets at least one of the objectives in Section 111.
b) Demonstrates need for Tax Abatement with the but -for analysis
c) Consistent with all city plans and ordinances
d) Serves at least two public purposes as defined in Section V
2. Ratio of Private to Public Investment in Project: Points:
$ Private Investment 5:1 5
$ Public Investment 4:1 4
Ratio Private : Public Financing 3:1 3
2:1 2
Less than 2:1 1
3. Job Creation in the City of Points:
Private Investment 25+ 5
Public Investment 20+ 4
Total 15+ 3
10+ 2
Less than 10 1
4. Ratio Of Tax ABATEMENT To New Jobs Created: Points:
$ Tax Abatement request $8,000 or less 5
Number of newjobs created $10,000 or less 4
$ of Tax Abatement per new job created $12,000 or less 3
$15,000 or less 2
Over $15,000 1
5. Wage Level of jobs created: Points:
Average hourly wage Over $21/hour 5
of jobs created $18-21/hour 4
$14-17/hour 3
$10-13/hour 2
Under $10/hour 1
6. Project size: Points:
The project will result in the construction 40,000+ 5
of square feet 30,000+ 4
20,000+ 3
10,000+ 2
10,000 or less 1
7. Type of Project: Points:
100% Owner Occupied 5
Mix Owner Occupied & Investment 4
Investment Property 3
Financial Assistance Application Page 10
City of Lino Lakes, Minnesota
8. Use:
Industrial or Business Park Project
Commercial Rehabilitation/Redevelopment
Points:
5
4
9. The project will pay annual property taxes
Points:
in the first fully assessed year of
35,000+ 5
25,000+ 4
15,000+ 3
10,000+ 2
Under $10,000 1
10. Likelihood that the project will result in
Points:
unsubsidized, spin-off development
High 5
Moderate 3
Low 1
Sub -Total Points of a possible 45 points.
11. Bonus Points Bonus Points:
The project will be 100% pay-as-you-go Tax 3 points
Abatement
The project contributes to the goals of ..... 2 points
• Product promotes sensible use of energy, OR
• Project utilizes significant energy efficient design
and/or materials in construction
Total Points:
Overall project analysis
High
Moderate
Low
Not Eligible
45-38 points
37-29 points
28-20 points
19-0 points
Financial Assistance Application Page 11
City of Lino Lakes, Minnesota
EXHIBIT A
Description of the corporation or partnership
EXHIBIT B
Description of the proposed project
EXHIBIT C
Names of officers and shareholders/partners with more than five percent (5%)
interest in the corporation/partnership
EXHIBIT D
But -for analysis
EXHIBIT E
Prospective Lessees
EXHIBIT F
Legal Description and PID number
Financial Assistance Application Page 12
City of Lino Lakes, Minnesota
XI. SAMPLE BUT -FOR ANALYSIS
WITH NO TAX ABATEMENT
WITH TAX ABATEMENT
SOURCES AND
USES
SOURCES AND
USES
SOURCES
SOURCES
9,600,000
8,667,000
Mortgage
Equity
2,400,000
2,400,000
Tax Abatement
0
0
TOTAL SOURCES
12,000,000
12,000,000
USES
USES
1,500,000
1,500,000
Land
Site Work
300,000
300,000
Soil Correction
468,000
468,000
Demolition
100,000
100,000
Relocation
65,000
65,000
Subtotal Land Costs
2,433,000
2,433,000
Construction
6,750,000
6,750,000
Finish Manufacturing
250,000
250,000
Subtotal Construction Costs
7,000,000
7,000,000
Soft Costs
350,000
350,000
Taxes
35,000
35,000
Finance Fees
850,000
850,000
Project Manager
542,000
542,000
Developer Fee
540,000
540,000
Contingency
250,000
250,000
Subtotal Soft Costs
2,567,000
2,567,000
TOTAL USES
12,000,000
12,000,000
Income Statement
Income Statement
Sq. Ft. Per Sq.
Sq. Ft. Per Sq.
Ft.
Ft.
Rent -Space 1
100,000 $8.00
800,000
100,000 $8.00
800,000
Rent -Space 2
25,000 $8.50
212,500
25,000 $8.50
212,500
Rent -Space 3
25,000 $9.00
225,000
25,000 $9.00
225,000
Other
0 $0.00
0
0 $0.00
0
1,237,500
1,237,500
Mortgage
20 Term
1,051,646
20 Term
1,051,646
9.00% Interest
9.00% Interest
9,600,000 Principal
9,600,000 Principal
Net Income
185,854
185,854
7.74%
7.74%
Total Return on Equity
Financial Assistance Application Page 13