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10/06/2022 EDAC Packet
CITY OF LINO LAKES ECONOMIC DEVELOPMENT ADVISORY COMMITTEE MEETING Thursday, October 6, 2022 8:00 A.M. Community Room AGENDA 1. CALL TO ORDER AND ROLL CALL 2. APPROVAL OF MINUTES: September 1, 2022 3. DISCUSSION ITEMS A. Clearwater Creek Business Park, TIF Plan for District 1-14 B. 2020 Census Data Report C. Project Updates 4. ADJOURN DRAFT MINUTES CITY OF LINO LAKES ECONOMIC DEVELOPMENT ADVISORY COMMITTEE MINUTES I. CALL TO ORDER Chair Schueller called the Economic Development Advisory Committee meeting to order at 8:01 A.M. on September 8, 2022. II. APPROVAL OF MINUTES Mr. Vojtech made a MOTION to approve the August 4, 2022 meeting minutes. Motion was supported by Mr. Marchek, passing unanimously. III. DISCUSSION ITEMS A. Clearwater Creek Business Park, Draft TIF Plan Mr. Grochala, Community Development Director, presented the staff report. Mikaela Huot, a representative from Baker Tilly, City Financial Advisor, and Mr. Grochala provided a brief overview of tax increment financing, reviewed the TIF District Plan and discussed the analysis performed. Mr. Fitzgerald, Ryan Companies, was present to provide clarification on the TIF District Plan. The committee discussed the TIF District Plan and analysis in greater detail. Mr. Cravero made a MOTION to recommend approval of Clearwater Creek Business Park, Draft TIF Plan. Motion was supported by Mr. Marchek. Motion carried 8 – 0. DATE: September 8, 2022 TIME STARTED: 8:01 A.M. TIME ENDED: 9:04 A.M. MEMBERS PRESENT: Patrick Kohler, Chad Wagner, Don Johnson, Steve Marchek, Andrew Cravero, Keith Hembre, Jim Schueller, Nathan Vojtech MEMBERS ABSENT: Julie Jeffrey-Schwartz, Blakely LaCroix STAFF PRESENT: Michael Grochala, Harrison Maxwell, Julie Whitney Economic Development Advisory Committee August 4, 2022 Page 2 DRAFT MINUTES B. Project Updates Mr. Grochala updated the committee on current City projects. IV. ADJOURNMENT Mr. Cravero made a MOTION to adjourn the meeting at 9:04 A.M. Motion was supported by Mr. Vojtech, passing unanimously. Respectfully submitted, Harrison Maxwell, Community Development Intern 1 ECONOMIC DEVELOPMENT ADVISORY COMMITTEE AGENDA ITEM 3A STAFF ORIGINATOR: Michael Grochala, Community Development Director EDAC MEETING DATE: October 6, 2022 TOPIC: Clearwater Creek Business Park – Draft TIF Plan 1-14 BACKGROUND The EDAC reviewed a draft Tax Increment Financing plan at the September 8, 2022 regular meeting. As previously discussed Ryan Companies, US, Inc., recently entered into a purchase agreement to acquire 33 acres north of Clearwater Creek, west of I-35E. Ryan is proposing construction of 3 buildings totaling approximately 451,000 square feet of manufacturing, office and warehouse space with an estimated market value of $31,000,000. Staff has worked with Baker Tilly to complete an analysis of the request and development pro forma. Based on this review staff is recommending establishment of the TIF District. The Ryan Development is estimated to generate $3444,854 in increment over the full 9 year term of a district. The City would expect to retain 5% ($172,240) for administrative expenses and pooling purposes, leaving approximately $3.27 million available for project use. Staff has reviewed the extraordinary costs identified by Ryan Co.’s, along with their financial projections for development of their site and extension of 21st Avenue. Based on this review we are supportive of assistance in the amount of $2,900,000 as shown in the following table: Estimated Total TIF Eligible Costs Identified Costs Eligible Costs Extraordinary Site Costs Soil Corrections/Lime Stabilization $1,000,000 $1,000,000 Site Fill $2,500,000 $200,000 Public Utility Relocation $300,000 $300,000 Aggregate Piers $1,000,000 $1,000,000 Subtotal Extraordinary Site Costs $4,800,000 $2,500,000 Offsite 21st Ave Road Extension Removals/Sitework $300,000 $150,000 Utilities $300,000 $100,000 Paving $200,000 $100,000 Landscaping/Street Lighting $100,000 $0 A&E/Mgmt/Inspections/Contingencies $200,000 $50,000 Subtotal Offsite 21st Ave Road Extension $1,100,000 $400,000 Total Ryan Project $5,900,000 $2,900,000 This would be provided in the form of a pay as you go note. Ryan would be reimbursed on an annual basis for eligible costs incurred as increment becomes available. 2 The Tax Increment Financing Plan for District 1-14 based on the projections above. The plan establishes the objectives, district assumptions, budget and use of funding for the district. This will form the basis for any TIF assistance with Ryan Companies should they move forward with the project. The City Council is holding the required public hearing for the request on October 10, 2022. The City’s Economic Development Authority will be acting on the plan on the same date. EDAC CONSIDERATION Recommendation to approve the Tax Increment Financing Plan for District 1-14. ATTACHMENTS 1. Draft District Map 2. Concept Plan 3. Draft TIF Plan 1-14 4. BakerTilly Analysis Summary IJ84 §¨¦I-35E O TTE R LA KE RD O TTE R LA KE RD21ST AVE21ST AVE70TH ST70TH ST OTTER LAKE SERVICE RDOTTER LAKE SERVICE RDNNOORRTTHHEERRNNLLIIGGHHTTSSBBLLVVDD OOTTTTEERRLLAAKKEERRDDPHELPS RDPHELPS RD Ü06001,200300Feet 9/7/2022 Proposed Tax Increment DistrictClearwater Creek Business Park Proposed TIF District Lino Lakes Spec Industrial • Concept Site Plan • 04.14.2022LEGENDEXISTING WETLAND AREA(±2.16 ACRES)FEMA - ZONE A(1% ANNUAL CHANCE FLOOD) Baker Tilly Municipal Advisors, LLC is a registered municipal advisor and wholly-owned subsidiary of Baker Tilly Virchow Krause, LLP, an accounting firm. Baker Tilly Virchow Krause, LLP trading as Baker Tilly is a member of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. Tax Increment Financing Plan for Tax Increment Financing (Economic Development) District No. 1-14 within Development District No. 1 (Clearwater Creek Industrial Development Project) City of Lino Lakes, Minnesota Lino Lakes Economic Development Authority Prepared by Baker Tilly Municipal Advisors, LLC Draft Dated: October 3, 2022 Anticipated Public Hearing: October 10, 2022 Anticipated Approval by City Council: October 10, 2022 TABLE OF CONTENTS Section Page(s) A. Definitions ................................................................................................................................... 1 B. Statutory Authorization ............................................................................................................... 1 C. Statement of Need and Public Purpose ..................................................................................... 1 D. Statement of Objectives ............................................................................................................. 2 E. Designation of Tax Increment Financing District as an Economic Development District ............................................................................................... 2 F. Duration of the TIF District ......................................................................................................... 3 G. Property to be Included in the TIF District .................................................................................. 4 H. Property to be Acquired in the TIF District ................................................................................. 4 I. Specific Development Expected to Occur Within the TIF District .............................................. 4 J. Findings and Need for Tax Increment Financing ....................................................................... 5 K. Estimated Public Costs .............................................................................................................. 6 L. Estimated Sources of Revenue .................................................................................................. 7 M. Estimated Amount of Bonded Indebtedness .............................................................................. 7 N. Original Net Tax Capacity .......................................................................................................... 8 O. Original Tax Capacity Rate ........................................................................................................ 8 P. Projected Retained Captured Net Tax Capacity and Projected Tax Increment ......................... 9 Q. Use of Tax Increment ................................................................................................................. 9 R. Excess Tax Increment ................................................................................................................ 10 S. Tax Increment Pooling and the Five-Year Rule ......................................................................... 10 T. Limitation on Administrative Expenses ...................................................................................... 11 U. Limitation on Property Not Subject to Improvements - Four Year Rule ..................................... 11 V. Estimated Impact on Other Taxing Jurisdictions ........................................................................ 12 W. Prior Planned Improvements ...................................................................................................... 12 X. Development Agreements .......................................................................................................... 13 Y. Assessment Agreements ........................................................................................................... 13 Z. Modifications of the Tax Increment Financing Plan ................................................................... 13 AA. Administration of the Tax Increment Financing Plan ................................................................. 14 AB. Financial Reporting and Disclosure Requirements .................................................................... 14 Map of the Tax Increment Financing District ........................................................................ EXHIBIT I Assumptions Report .............................................................................................................. EXHIBIT II Projected Tax Increment Report ........................................................................................... EXHIBIT III Estimated Impact on Other Taxing Jurisdictions Report ....................................................... EXHIBIT IV Market Value Analysis Report ............................................................................................... EXHIBIT V City of Lino Lakes and Lino Lakes Economic Development Authority Baker Tilly Municipal Advisors, LLC Page 1 ESTABLISHMENT OF THE TAX INCREMENT FINANCING PLAN FOR TAX INCREMENT FINANCING (ECONOMIC DEVELOPMENT) DISTRICT NO. 1-14 Section A Definitions The terms defined in this section have the meanings given herein, unless the context in which they are used indicates a different meaning: "Authority" means the Lino Lakes Economic Development Authority. "City" means the City of Lino Lakes, Minnesota; also referred to as a "Municipality". "City Council" means the City Council of the City; also referred to as the "Governing Body". "County" means Anoka County, Minnesota "Development District" means Development District No. 1 in the City, which is described in the corresponding Development Program. "Development Program" means the Development Program for the Development District. "Project Area" means the geographic area of the Development District. "School District" means Independent School District No. 12, Minnesota. "State" means the State of Minnesota. "TIF Act" means Minnesota Statutes, Sections 469.174 through 469.1794, both inclusive. "TIF District" means Tax Increment Financing (Economic Development) District No. 1-14. "TIF Plan" means the tax increment financing plan for the TIF District (this document). Section B Statutory Authorization The Development District Act authorizes the City and Authority, upon certain public purpose findings by the City Council, to establish and designate development districts within the City and to develop and administer development programs therefore to meet the needs and accomplish the public purposes specified in Section C. In accordance with the purposes set forth in Section 469.124 of the Development District Act, the City Council and Authority have established the Development District comprising the area described in Section E and have adopted this Development Program. Section C Statement of Need and Public Purpose The City Council and Authority have determined that there is a need for the City to take certain actions they deem necessary in order to encourage, ensure and facilitate development and redevelopment by the private sector of underutilized, inappropriately used and unused land located within the corporate limits of the City. Such actions are necessary in order to provide additional employment opportunities for residents of the City and the surrounding area; to improve the tax base of the City, the County and the City of Lino Lakes and Lino Lakes Economic Development Authority Baker Tilly Municipal Advisors, LLC Page 2 School District, thereby enabling them to better provide needed public services; and to improve the general economy of the City, the County and the State. Section D Statement of Objectives The Authority seeks to achieve the following objectives through the establishment of TIF District No. 1-14: 1. redevelop blighted areas as identified 2. provide employment opportunities within the community. 3. improve the tax base of Lino Lakes and the general economy of the City and State; 4. implement relevant portions of the Comprehensive Plan. The Authority’s specific purpose in establishing TIF District No. 1-14 is to aid in the construction of 3 large manufacturing/warehousing/distribution facilities that will collectively be approximately 451,000 total square feet. The Authority intends to use increment generated by the new development to assist with financing a portion of the extraordinary site improvements and soil correction costs and offsite improvements that include streets, public utilities, and public improvements to gain access to the site and maximize building size on the development parcels. Section E Designation of Tax Increment Financing District as an Economic Development District Economic development districts are a type of tax increment financing district which consist of any project, or portions of a project, which the Authority finds to be in the public interest because: (1) it will discourage commerce, industry, or manufacturing from moving their operations to another state or municipality; (2) it will result in increased employment in the state; or (3) it will result in preservation and enhancement of the tax base of the state; or (4) it satisfies the requirements of a workforce housing project as defined . The TIF District qualifies as an economic development district in that the proposed development described in this TIF Plan (see Section I) meets the criteria listed above in (2) and (3). Without establishment of the TIF District, the proposed development would not occur within the City. The proposed development will also result in increased employment and enhancement of the tax base in both the City and the State. Tax increments from an economic development district must be used to provide improvements, loans, subsidies, grants, interest rate subsidies, or other assistance in which at least 85% of the square footage of the facilities to be constructed are used for any of the following purposes: (1) manufacturing, production, or processing of tangible personal property; (2) warehousing, storage and distribution of tangible personal property, excluding retail sales; (3) research and development related to the activities listed in (1) or (2) above; City of Lino Lakes and Lino Lakes Economic Development Authority Baker Tilly Municipal Advisors, LLC Page 3 (4) telemarketing if that activity is the exclusive use of the property; (5) tourism facilities (see M.S. Section 469.174, Subd. 22); (6) space necessary for and related to the activities listed in (1) through (5) above; (7) a workforce housing project that satisfies the requirements under Minnesota Statutes, Section 469.176, subdivision 4c, paragraph (d). Tax increments from the TIF District will be used to provide financial assistance to the proposed development (see Section I), in which over 85% of the square footage of the facilities to be constructed will be used for manufacturing, production, or processing of tangible personal property and warehousing, storage and distribution of tangible personal property, excluding retail sales as listed in (1) and (2) above. In addition, the parcels to be included within the district have qualified for inclusion under the provisions of chapter 473H in the previous five calendar years before the filing of the request for certification only and therefore the project must meet the following qualifications: (1) a district in which 85 percent or more of the planned buildings and facilities (determined on the basis of square footage) are a qualified manufacturing facility or a qualified distribution facility or a combination of both; or (2) a housing district. A distribution facility means buildings and other improvements to real property that are used to conduct activities in at least each of the following categories: (i) to store or warehouse tangible personal property; (ii) to take orders for shipment, mailing, or delivery; (iii) to prepare personal property for shipment, mailing, or delivery; and (iv) to ship, mail, or deliver property. A manufacturing facility includes space used for manufacturing or producing tangible personal property, including processing resulting in the change in condition of the property, and space necessary for and related to the manufacturing activities. To be a qualified facility, the owner or operator of a manufacturing or distribution facility must agree to pay and pay 90 percent or more of the employees of the facility at a rate equal to or greater than 160 percent of the federal minimum wage for individuals over the age of 20. The proposed project will be a qualified manufacturing and distribution facility. Section F Duration of the TIF District Economic development districts may remain in existence 8 years from the date of receipt by the Authority of the first tax increment. The Authority anticipates that the TIF District will remain in existence the maximum duration allowed by law (projected to be through the year 2033, due to anticipated receipt of first increment in 2025). Modifications of this plan (see Section AA) shall not extend these limitations. City of Lino Lakes and Lino Lakes Economic Development Authority Baker Tilly Municipal Advisors, LLC Page 4 Section G Property to be Included in the TIF District The TIF District is an approximate 37-acre area of land comprising of the parcels listed below that are located within the Project Area. A map showing the boundaries of the TIF District is shown in Exhibit I. Parcel ID Number Legal Description 24-31-22-31-0004 Outlot A, Clearwater Creek Business Park 24-31-22-24-0009 Outlot A, Clearwater Creek Business Center 24-31-22-24-0008 Lot 2, Block 2, Clearwater Creek Business Center 24-31-22-24-0002 That part of the Southeast Quarter of the Northwest Quarter (SE ¼ of NW ¼) of Section 24, Township 31, Range 22, described as follows, to-wit: Commencing at the Southwest corner of said Southeast Quarter of Northwest Quarter (SE ¼ of NW ¼) of Section 24, thence running East along the South line of said Southeast Quarter of Northwest Quarter (SE ¼ of NW ¼) a distance of 275 feet; thence running North parallel with the West line of said Southeast Quarter of Northwest Quarter (SE ¼ of NW ¼) a distance of 375 feet; thence West parallel with the South line of said Southeast Quarter of Northwest Quarter (SW ¼ of NW ¼) a distance of 275 feet to the West line of said Southeast Quarter of Northwest Quarter (SE ¼ of NW ¼); thence running South along the West line of said Southeast Quarter of Northwest Quarter (SE ¼ of NW ¼) a distance of 375 feet to the point of beginning; Anoka County, Minnesota. * The parcels listed above are anticipated to be replatted and will be site upon which the new industrial building development with 3 separate buildings will be built. The area encompassed by the TIF District shall also include all street or utility right-of-ways located upon or adjacent to the property described above. Section H Property to be Acquired in the TIF District The Authority may acquire and sell any or all of the property located within the TIF District. It will not be acquiring any property at this time and will not be selling the property to facilitate development. Section I Specific Development Expected to Occur Within the TIF District The proposed project is anticipated to include the construction of approximately 451,000 square feet of light industrial manufacturing, warehousing and distribution space to be constructed in 2 phases within 3 buildings – each building will be approximately 189,000, 147,000 and 115,000, respectively. Tax increment is a financing tool the Authority is planning to use for financing of a portion of the eligible costs associated with construction of the project to offset extraordinary costs. The square footage of the completed buildings will comply with the requirements of an economic development district with at least 85% being used for a qualifying purpose (industrial warehousing, distribution, manufacturing project). It is anticipated that the Authority will use the tax increment to finance a portion of the site development, soils correction, infrastructure, public improvement and other related costs that are necessary for this project to proceed. In addition, the city may use tax increment for related administrative expenses, and any other eligible expenditures associated with development of the site that may include additional necessary public improvements. City of Lino Lakes and Lino Lakes Economic Development Authority Baker Tilly Municipal Advisors, LLC Page 5 Construction of the project is expected to commence in 2023 and continue in 2024 and be 100% assessed and on the tax rolls as of January 2, 2025, for taxes payable in 2026. At the time this document was prepared there were no signed construction contracts with regards to the above-described development. Section J Findings and Need for Tax Increment Financing In establishing the TIF District, the City makes the following findings: (1) The TIF District qualifies as an economic development district. See Section E of this document for the reasons and facts supporting this finding. (2) The proposed development, in the opinion of the City, would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future and the increased market value of the site that could reasonably be expected to occur without the use of tax increment financing would be less than the increase in the market value estimated to result from the proposed development after subtracting the present value of the projected tax increments for the maximum duration of the district permitted by the TIF Plan. Factual basis: Proposed development not expected to occur: The project includes the development of new large industrial buildings comprising of approximately 451,000 square feet in an undeveloped area of the City. The proposed developer of the site has submitted information to the city demonstrating that the development of this site is not financially feasible without the assistance provided in this TIF Plan. The City has determined that the proposed development would not occur but for the financial assistance provided in this TIF Plan because of the high cost of construction at the site due to the need for significant site development, soils correction and public improvement infrastructure costs necessary for development to occur. Specifically, soils correction/lime stabilization, aggregate piers, site preparation and site fill, public utility relocation and offsite road extension to allow maximum development on the site and area. Due to the high costs of investment for the proposed project, including site improvements, public improvements, soil correction, and infrastructure costs that would be incurred by the developer in conjunction with development of the project, the developer has stated that the project as proposed would not occur without the financial assistance provided by the City, as it would not be economically feasible without financial assistance. The City finds the use of tax increment necessary to finance a portion of the site improvement, public infrastructure, soil correction and infrastructure costs to facilitate development of the project and developer investment. The City anticipates providing financial assistance on a pay-as-you-go basis. Therefore, the City has determined that the proposed development would not occur but for the financial assistance provided in this TIF Plan because of the increased costs related to development within the TIF District and construction of the project. The cost of construction of the project and availability of revenues to support repayment of debt has created a financial gap that requires a level of public assistance. No higher market value expected: City of Lino Lakes and Lino Lakes Economic Development Authority Baker Tilly Municipal Advisors, LLC Page 6 The project to be constructed within TIF District No. 1-14 requires significant investment to be financially feasible. To commence construction of the new industrial project, assistance with financing a portion of those costs will be necessary. The financial assistance provided under this TIF Plan will help offset the costs of the improvements. Given the nature of this project, there is no reasonable expectation of any development occurring that would generate as much market value increase as is estimated to be generated by the proposed development by the new business. Therefore, the City has concluded that substantial development at this particular site--and hence any significant increase in market value--is not reasonably expected to occur unless the City provides tax increment assistance as described in this Tax Increment Plan. To summarize the basis for the City’s findings regarding alternative market value, in accordance with Minnesota Statutes, Section 469.175, Subd. 3(d), the City makes the following determinations: a. The City's estimate of the amount by which the market value of the site will increase without the use of tax increment financing is $0 (for the reasons described above), except some unknown amount of appreciation. b. If the proposed development to be assisted with tax increment occurs in the District, the total increase in market value would be approximately $35,960,717, including the value of the building (See Exhibit II). c. The present value of tax increments from the District for the maximum duration of the district permitted by the TIF Plan is estimated to be $2,692,001 (See Exhibit V). d. Even if some development other than the proposed development were to occur, the Council finds that no alternative would occur that would produce a market value increase greater than $33,268,716 (the amount in clause b less the amount in clause c) without tax increment assistance. (3) The TIF Plan will afford maximum opportunity, consistent with the sound needs of the City as a whole, for development of the Project Area by private enterprise. Factual basis: The proposed development is the construction of new large buildings that will be a mix of warehousing, manufacturing and distribution in the Project Area that is expected to retain existing jobs as well as create new jobs in the City, plus create new tax base for the City and the State. The development meets the City’s economic development goals in terms of tax base expansion, job retention, and wage levels. (4) The TIF Plan conforms to general plans for development of the City as a whole. Factual basis: The City Council has determined that the development proposed in the TIF Plan conforms to the City comprehensive plan. (5) The City is electing the method of tax increment computation set forth in Minnesota Statutes, Section 469.177, Subdivision 3(b) (see Section P). Section K Estimated Public Costs The estimated public costs of the TIF District are listed in the table on the following page. Such costs are eligible for reimbursement from tax increments of the TIF District. City of Lino Lakes and Lino Lakes Economic Development Authority Baker Tilly Municipal Advisors, LLC Page 7 Estimated Public Costs Estimated Amount Land/Building acquisition $0 Site Improvements/Preparation costs $2,672,614 Utilities $0 Other public improvements $600,000 Construction of affordable housing $0 Administrative expenses $172,240 Total Estimated Public Costs $3,444,854 Interest expenses $0 Total Costs $3,444,854 The Authority reserves the right to administratively adjust the amount of any of the items listed above or to incorporate additional eligible items, so long as the total estimated public costs ($3,444,854) do not increase. The Authority also reserves the right to fund any of the identified costs with any other legally available revenues, such as grants and/or loans, but anticipates that such costs will be primarily financed with tax increments. Section L Estimated Sources of Revenue Estimated Sources of Revenue Estimated Amount Tax Increment revenue $3,444,854 Interest on invested funds Total $3,444,854 The Authority anticipates providing financial assistance to the proposed development through pay-as-you- go financing in which the City will provide funding to the development. As revenues are collected from the TIF District in future years, a portion will be retained by the City and the remaining funds will be provided as reimbursement for certain identified costs as necessary within the TIF District to assist with financing the public costs incurred (see Section K). The City reserves the right to finance any or all public costs of the TIF District using pay-as-you-go assistance, internal funding, general obligation or revenue debt, or any other financing mechanism authorized by law. The Authority also reserves the right to use other sources of revenue legally applicable to the Project Area to pay for such costs including, but not limited to, special assessments, utility revenues, federal or state funds, and investment income. The projected tax increment report is included as Exhibit III. Section M Estimated Amount of Bonded Indebtedness The maximum principal amount of bonds (as defined in the TIF Act) secured in whole or part with tax increment from the TIF District is $3,444,854. The Authority currently plans to finance the public costs through pay-as-you-go financing. The Authority reserves the right to issue an interfund loan or issue bonds in any form, including without limitation any interfund loan with interest not to exceed the maximum permitted under Section 469.178, subd. 7 of the TIF Act. City of Lino Lakes and Lino Lakes Economic Development Authority Baker Tilly Municipal Advisors, LLC Page 8 Section N Original Net Tax Capacity The County Auditor shall certify the original net tax capacity of the TIF District. This value will be equal to the total net tax capacity of all property in the TIF District as certified by the State Commissioner of Revenue. For districts certified between January 1 and June 30, inclusive, this value is based on the previous assessment year. For districts certified between July 1 and December 31, inclusive, this value is based on the current assessment year. The Estimated Market Value of all property within the TIF District as of January 2, 2022, for taxes payable in 2023, is $699,300. Upon establishment of the TIF District, it is estimated that the original net tax capacity of the TIF District will increase as a result of the property reclassifying as commercial-industrial. Each year the County Auditor shall certify the amount that the original net tax capacity has increased or decreased as a result of: (1) changes in the tax-exempt status of property; (2) reductions or enlargements of the geographic area of the TIF District; (3) changes due to stipulation agreements or abatements; or (4) changes in property classification rates. Section O Original Tax Capacity Rate The County Auditor shall also certify the original tax capacity rate of the TIF District. This rate shall be the sum of all local tax rates that apply to property in the TIF District. This rate shall be for the same taxes payable year as the original net tax capacity. In future years, the amount of tax increment generated by the TIF District will be calculated using the lesser of (a) the sum of the current local tax rates at that time or (b) the original tax capacity rate of the TIF District. It is anticipated the request for certification of the District will occur after June 30, 2023 and the local tax rates for taxes levied in 2023 and payable in 2024 will apply. The payable 2024 rates are not available at the time of drafting of the TIF Plan. For purposes of estimating the tax increment generated by the TIF District, the sum of the local tax rates for taxes levied in 2021 and payable in 2022 of 105.106% have been used and are shown below: 2021/2022 Taxing Jurisdiction Local Tax Rate City of Lino Lakes 40.154% Anoka County 29.605% ISD 12 31.074% Other 4.273% Total 105.106% City of Lino Lakes and Lino Lakes Economic Development Authority Baker Tilly Municipal Advisors, LLC Page 9 Section P Projected Retained Captured Net Tax Capacity and Projected Tax Increment The Authority anticipates that the building construction will be completed by December 31, 2024, creating a total tax capacity for TIF District No. 1-14 of $609,740 as of January 2, 2025. The captured tax capacity as of that date is estimated to be $344,365 and the first full year of tax increment is estimated to be $361,948 payable in 2026. A complete schedule of estimated tax increment from the TIF District is shown in Exhibit III. The estimates shown in this TIF plan assume that commercial class rates remain at 1.5% of the estimated market value up to $150,000 and 2.0% of the estimated market value over $150,000 and assume 2% annual increases in market values. Each year the County Auditor shall determine the current net tax capacity of all property in the TIF District. To the extent that this total exceeds the original net tax capacity, the difference shall be known as the captured net tax capacity of the TIF District. For communities affected by the fiscal disparity provisions of Minnesota Statutes, Chapter 473F and Chapter 276A, the original net tax capacity of the TIF District shall be determined before the application of fiscal disparity. In subsequent years, the current net tax capacity shall either (a) be determined before the application of fiscal disparity or (b) exclude the product of any fiscal disparity increase in the TIF District (since the original net tax capacity was certified) times the appropriate fiscal disparity ratio. The method the Authority elects shall remain the same for the life of the TIF District, except that a single change may be made at any time from method (a) to method (b) above. The Authority elects method (b), or M.S. Section 469.177, Subdivision 3(b). The County Auditor shall certify to the Authority the amount of captured net tax capacity each year. The Authority may choose to retain any or all of this amount. It is the Authority's intention to retain 100% of the captured net tax capacity of the TIF District. Such amount shall be known as the retained captured net tax capacity of the TIF District. Exhibit II gives a listing of the various information and assumptions used in preparing a number of the exhibits contained in this TIF Plan, including Exhibit III which shows the projected tax increment generated over the anticipated life of the TIF District. Section Q Use of Tax Increment Each year the County Treasurer shall deduct 0.36% of the annual tax increment generated by the TIF District and pay such amount to the State's General Fund. Such amounts will be appropriated to the State Auditor for the cost of financial reporting and auditing of tax increment financing information throughout the state. Exhibit III shows the projected deduction for this purpose over the anticipated life of the TIF District. The Authority has determined that it will use 100% of the remaining tax increment generated by the TIF District for any of the following purposes: (1) pay for the estimated public costs of the TIF District (see Section K) and County administrative costs associated with the TIF District (see Section T); (2) pay principal and interest on tax increment bonds or other bonds issued to finance the estimated public costs of the TIF District; City of Lino Lakes and Lino Lakes Economic Development Authority Baker Tilly Municipal Advisors, LLC Page 10 (3) accumulate a reserve securing the payment of tax increment bonds or other bonds issued to finance the estimated public costs of the TIF District; (4) pay all or a portion of the county road costs as may be required by the County Board under M.S. Section 469.175, Subdivision 1a; or (5) return excess tax increments to the County Auditor for redistribution to the City, County and School District. Tax increments from property located in one county must be expended for the direct and primary benefit of a project located within that county, unless both county boards involved waive this requirement. Tax increments shall not be used to circumvent levy limitations applicable to the City. Tax increment shall not be used to finance the acquisition, construction, renovation, operation, or maintenance of a building to be used primarily and regularly for conducting the business of a municipality, county, school district, or any other local unit of government or the State or federal government, or for a commons area used as a public park, or a facility used for social, recreational, or conference purposes. This prohibition does not apply to the construction or renovation of a parking structure or of a privately- owned facility for conference purposes. If there exists any type of agreement or arrangement providing for the developer, or other beneficiary of assistance, to repay all or a portion of the assistance that was paid or financed with tax increments, such payments shall be subject to all of the restrictions imposed on the use of tax increments. Assistance includes sale of property at less than the cost of acquisition or fair market value, grants, ground or other leases at less then fair market rent, interest rate subsidies, utility service connections, roads, or other similar assistance that would otherwise be paid for by the developer or beneficiary. Section R Excess Tax Increment In any year in which the tax increments from the TIF District exceed the amount necessary to pay the estimated public costs authorized by the TIF Plan, the Authority shall use the excess tax increments to: (1) prepay any outstanding tax increment bonds; (2) discharge the pledge of tax increments thereof; (3) pay amounts into an escrow account dedicated to the payment of the tax increment bonds; or (4) return excess tax increments to the County Auditor for redistribution to the City, County and School District. The County Auditor must report to the Commissioner of Education the amount of any excess tax increment redistributed to the School District within 30 days of such redistribution. Section S Tax Increment Pooling and the Five-Year Rule At least 80% of the tax increments from the TIF District must be expended on activities within the district or to pay for bonds used to finance the estimated public costs of the TIF District (see Section E for additional restrictions). No more than 20% of the tax increments may be spent on costs outside of the TIF District but within the boundaries of the Project Area, except to pay debt service on credit enhanced bonds. All administrative expenses are considered to have been spent outside of the TIF District. Tax increments are considered to have been spent within the TIF District if such amounts are: City of Lino Lakes and Lino Lakes Economic Development Authority Baker Tilly Municipal Advisors, LLC Page 11 (1) actually paid to a third party for activities performed within the TIF District within five years after certification of the district; (2) used to pay bonds that were issued and sold to a third party, the proceeds of which are reasonably expected on the date of issuance to be spent within the later of the five-year period or a reasonable temporary period or are deposited in a reasonably required reserve or replacement fund. (3) used to make payments or reimbursements to a third party under binding contracts for activities performed within the TIF District, which were entered into within five years after certification of the district; or (4) used to reimburse a party for payment of eligible costs (including interest) incurred within five years from certification of the district. Beginning with the sixth year following certification of the TIF District, at least 80% of the tax increments must be used to pay outstanding bonds or make contractual payments obligated within the first five years. When outstanding bonds have been defeased and sufficient money has been set aside to pay for such contractual obligations, the TIF District must be decertified. The Authority anticipates that a portion of the tax increments may be spent outside of the TIF District (including allowable administrative expenses); and the Authority reserves the right to allow for tax increment pooling from the TIF District in the future. Section T Limitation on Administrative Expenses Administrative expenses are defined as all costs of the Authority other than: (1) amounts paid for the purchase of land; (2) amounts paid for materials and services, including architectural and engineering services directly connected with the physical development of the real property in the project; (3) relocation benefits paid to, or services provided for, persons residing or businesses located in the project; (4) amounts used to pay principal or interest on, fund a reserve for, or sell at a discount bonds issued pursuant to section 469.178; or (5) amounts used to pay other financial obligations to the extent those obligations were used to finance costs described in clause (1) to (3). Administrative expenses include amounts paid for services provided by bond counsel, fiscal consultants, planning or economic development consultants, and actual costs incurred by the County in administering the TIF District. Tax increments may be used to pay administrative expenses of the TIF District up to the lesser of (a) 10% of the total tax increment expenditures authorized by the TIF Plan or (b) 10% of the total tax increments received by the TIF District. Section U Limitation on Property Not Subject to Improvements - Four Year Rule If after four years from certification of the TIF District no demolition, rehabilitation, renovation of property or other site preparation, including qualified improvement of an adjacent street, has commenced on a parcel located within the TIF District, then that parcel shall be excluded from the TIF District and the City of Lino Lakes and Lino Lakes Economic Development Authority Baker Tilly Municipal Advisors, LLC Page 12 original net tax capacity shall be adjusted accordingly. Qualified improvements of a street are limited to construction or opening of a new street, relocation of a street, or substantial reconstruction or rebuilding of an existing street. The Authority must submit to the County Auditor, by February 1 of the fifth year, evidence that the required activity has taken place for each parcel in the TIF District. If a parcel is excluded from the TIF District and the Authority or owner of the parcel subsequently commences any of the above activities, the Authority shall certify to the County Auditor that such activity has commenced, and the parcel shall once again be included in the TIF District. The County Auditor shall certify the net tax capacity of the parcel, as most recently certified by the Commissioner of Revenue, and add such amount to the original net tax capacity of the TIF District. Section V Estimated Impact on Other Taxing Jurisdictions Exhibit IV shows the estimated impact on other taxing jurisdictions if the maximum projected retained captured net tax capacity of the TIF District was hypothetically available to the other taxing jurisdictions. The Authority believes that there will be no adverse impact on other taxing jurisdictions during the life of the TIF District, since the proposed development would not have occurred without the establishment of the TIF District and the provision of public assistance. A positive impact on other taxing jurisdictions will occur when the TIF District is decertified, and the development therein becomes part of the general tax base. The fiscal and economic implications of the proposed tax increment financing district, as pursuant to Minnesota Statutes, Section 469.175, Subdivision 2, are listed below. 1. The total amount of tax increment that will be generated over the life of the district is estimated to be $3,457,300. 2. To the extent the facility in the proposed TIF District generates any public cost impacts on city- provided services such as police and fire protection, public infrastructure, and borrowing costs attributable to the district, such costs will be levied upon the taxable net tax capacity of the City, excluding that portion captured by the District. The City does not anticipate issuing tax increment revenue bonds in conjunction with this project but reserves the right to issue bonds as necessary to facilitate development. 3. The amount of tax increments over the life of the district that would be attributable to school district levies, assuming the school district’s share of the total local tax rate for all taxing jurisdictions remained the same, is estimated to be $1,022,131. 4. The amount of tax increments over the life of the district that would be attributable to county levies, assuming the county’s share of the total local tax rate for all taxing jurisdictions remained the same is estimated to be $973,811. 5. No additional information has been requested by the county or school district that would enable it to determine additional costs that will accrue to it due to the development proposed for the district. Section W Prior Planned Improvements The City shall accompany its request for certification to the County Auditor (or notice of district enlargement), with a listing of all properties within the TIF District for which building permits have been issued during the 18 months immediately preceding approval of the TIF Plan. The County Auditor shall increase the original net tax capacity of the TIF District by the net tax capacity of each improvement for which a building permit was issued. City of Lino Lakes and Lino Lakes Economic Development Authority Baker Tilly Municipal Advisors, LLC Page 13 There have been no building permits issued in the last 18 months in conjunction with any of the properties within the TIF District. Section X Development Agreements If within a project containing an economic development district, more than 10% of the acreage of the property to be acquired by the Authority is purchased with tax increment bonds proceeds (to which tax increment from the property is pledged), then prior to such acquisition, the Authority must enter into an agreement for the development of the property. Such agreement must provide recourse for the Authority should the development not be completed. The Authority anticipates entering into an agreement with the Developer relating to the project. Section Y Assessment Agreements The Authority may, upon entering into a development agreement, also enter into an assessment agreement with the developer, which establishes a minimum market value of the land and improvements for each year during the life of the TIF District. The assessment agreement shall be presented to the County or City Assessor who shall review the plans and specifications for the improvements to be constructed, review the market value previously assigned to the land, and so long as the minimum market value contained in the assessment agreement appears to be an accurate estimate, shall certify the assessment agreement as reasonable. The assessment agreement shall be filed for record in the office of the County Recorder of each county where the property is located. Any modification or premature termination of this agreement must first be approved by the City, County and School District. The Authority does not anticipate entering into an assessment agreement. Section Z Modifications of the Tax Increment Financing Plan Any reduction or enlargement in the geographic area of the Project Area or the TIF District; increase in the amount of bonded indebtedness to be incurred; determination to capitalize interest on the debt if it was not part of original plan; increase in that portion of the captured net tax capacity to be retained by the Authority; increase in the total estimated public costs; or designation of additional property to be acquired by the Authority shall be approved only after satisfying all the necessary requirements for approval of the original TIF Plan. This paragraph does not apply if: (1) the only modification is elimination of parcels from the TIF District; and (2) the current net tax capacity of the parcels eliminated equals or exceeds the net tax capacity of those parcels in the TIF District's original net tax capacity, or the Authority agrees that the TIF District's original net tax capacity will be reduced by no more than the current net tax capacity of the parcels eliminated. The Authority must notify the County Auditor of any modification that reduces or enlarges the geographic area of the TIF District. The geographic area of the TIF District may be reduced but not enlarged after five years following the date of certification. City of Lino Lakes and Lino Lakes Economic Development Authority Baker Tilly Municipal Advisors, LLC Page 14 Section AA Administration of the Tax Increment Financing Plan Upon adoption of the TIF Plan, the Authority shall submit a copy of such plan to the Minnesota Department of Revenue. The Authority shall also request that the County Auditor certify the original net tax capacity and net tax capacity rate of the TIF District. To assist the County Auditor in this process, the Authority shall submit copies of the TIF Plan, the resolution establishing the TIF District and adopting the TIF Plan, and a listing of any prior planned improvements. The Authority shall also send the County Assessor any assessment agreement establishing the minimum market value of land and improvements in the TIF District and shall request that the County Assessor review and certify this assessment agreement as reasonable. The County shall distribute to the Authority the amount of tax increment as it becomes available. The amount of tax increment in any year represents the applicable property taxes generated by the retained captured net tax capacity of the TIF District. The amount of tax increment may change due to development anticipated by the TIF Plan, other development, inflation of property values, or changes in property classification rates or formulas. In administering and implementing the TIF Plan, the following actions should occur on an annual basis: (1) prior to July 1, the Authority shall notify the County Assessor of any new development that has occurred in the TIF District during the past year to ensure that the new value will be recorded in a timely manner. (2) if the County Auditor receives the request for certification of a new TIF District, or for modification of an existing TIF District, before July 1, the request shall be recognized in determining local tax rates for the current and subsequent levy years. Requests received on or after July 1 shall be used to determine local tax rates in subsequent years. (3) each year the County Auditor shall certify the amount of the original net tax capacity of the TIF District. The amount certified shall reflect any changes that occur as a result of the following: (a) the value of property that changes from tax-exempt to taxable shall be added to the original net tax capacity of the TIF District. The reverse shall also apply; (b) the original net tax capacity may be modified by any approved enlargement or reduction of the TIF District; (c) if laws governing the classification of real property cause changes to the percentage of estimated market value to be applied for property tax purposes, then the resulting increase or decrease in net tax capacity shall be applied proportionately to the original net tax capacity and the retained captured net tax capacity of the TIF District. The County Auditor shall notify the Authority of all changes made to the original net tax capacity of the TIF District. Section AB Filing TIF Plan, Financial Reporting and Disclosure Requirements The Authority will file the TIF Plan, and any subsequent amendments thereto, with the Commissioner of Revenue and the Office of the State Auditor pursuant to Minnesota Statutes, Section 469.175, subdivision 4A. The Authority will comply with all reporting requirements for the TIF District under Minnesota Statutes, Section 469.175, subdivisions 5 and 6. Exhibit I Map of Tax Increment Financing (Economic Development) District No. 1-14 Proposed Tax Increment District Clearwater Creek Business Park 0 300 600 Feet 1,200 Ü 9/7/2022 Exhibit II Assumptions Report City of Lino Lakes, Minnesota Tax Increment Financing (Economic Development) District No. 1-14 Clearwater Creek Business Park Project Draft TIF Plan Exhibits: 451,000 SF 3 Bldgs valued at $70/SF Type of Tax Increment Financing District Economic Development Maximum Duration of TIF District 8 years from 1st increment Projected Certification Request Date 01/07/23 Decertification Date 12/31/33 (9 Years of Increment) 2022/2023 Base Estimated Market Value * $699,300 PID: 24-31-22-31-0004 24-31-22-24-0009 24-31-22-24-0008 24-31-22-24-0002 Original Net Tax Capacity $13,986 Assessment/Collection Year 2023/2024 2024/2025 2025/2026 2026/2027 Base Estimated Market Value $699,300 $699,300 $699,300 $699,300 Increase in Estimated Market Value 0 18,116,700 29,637,020 31,853,746 Total Estimated Market Value 699,300 18,816,000 30,336,320 32,553,046 Total Net Tax Capacity $13,986 $375,570 $605,976 $650,311 City of Lino Lakes 40.154% Anoka County 29.605% ISD # 12 31.074% Other (61 - 36012B) 4.273% Local Tax Capacity Rate 105.106% Payable 2022 Anticipated Frozen Tax Capacity Rate 105.106% Fiscal Disparities Contribution From TIF District 42.1968% Administrative Retainage Percent (maximum = 10%) 5.00% Pooling Percent 0.00% Present Value Date & Rate 08/01/23 4.00% Net Amount to Developer 2,900,000 Notes * Base market values for parcels within district. Tax capacity calculated at 1.5%/2% class rate. Assume property will be classified as commercial/industrial upon project completion. Projections assume no future changes to class rates or tax rates, and include 2% annual market value inflator. Development includes construction commencing in 2023 and complete in 2024 Exhibit III Projected Tax Increment Report City of Lino Lakes, MinnesotaTax Increment Financing (Economic Development) District No. 1-14Clearwater Creek Business Park ProjectDraft TIF Plan Exhibits: 451,000 SF 3 Bldgs valued at $70/SFLess: Less: Retained Times: Less: Annual Less: Less:Annual Total Total Original Fiscal Captured Tax Annual State Aud. Revenue Admin. Pooling AnnualPeriod Market Net Tax Net Tax Disp. @ Net Tax Capacity Gross Tax Deduction Net of Retainage Retainage NetEnding Value * Capacity Capacity ** 42.1968% Capacity Rate *** Increment 0.360% OSA Deduction 5.00% 0.00% Revenue(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)12/31/23 699,300 13,986 13,986 0 0 105.106% 0 0 0 0 0 012/31/24 699,300 13,986 13,986 0 0 105.106% 0 0 0 0 0 012/31/25 18,816,000 375,570 13,986 152,577 209,007 105.106% 219,679 791 218,888 10,944 0 207,94412/31/26 30,336,320 605,976 13,986 249,801 342,189 105.106% 359,662 1,295 358,367 17,918 0 340,44912/31/27 32,553,046 650,311 13,986 268,509 367,816 105.106% 386,597 1,392 385,205 19,260 0 365,94512/31/28 33,204,107 663,332 13,986 274,003 375,343 105.106% 394,508 1,420 393,088 19,654 0 373,43412/31/29 33,868,189 676,614 13,986 279,608 383,020 105.106% 402,577 1,449 401,128 20,056 0 381,07212/31/30 34,545,553 690,161 13,986 285,324 390,851 105.106% 410,808 1,479 409,329 20,466 0 388,86312/31/31 35,236,464 703,979 13,986 291,155 398,838 105.106% 419,203 1,509 417,694 20,885 0 396,80912/31/32 35,941,194 718,074 13,986 297,103 406,985 105.106% 427,766 1,540 426,226 21,311 0 404,91512/31/33 36,660,017 732,450 13,986 303,169 415,295 105.106% 436,500 1,571 434,929 21,746 0 413,183$3,457,300 $12,446 $3,444,854 $172,240 $0 $3,272,614* Total Taxable Value based on new estimated land and building value of $70/square foot for 451,000 square feet between all buildings** Original net tax capacity based on existing taxable land value of one property and calculated based on reclassification to commercial-industrial class rates*** Total Combined Local Tax Capacity Rate of City, County, School District and other taxing jurisdictions for taxes payable 2022 Exhibit IV Estimated Impact on Other Taxing Jurisdictions ReportCity of Lino Lakes, MinnesotaTax Increment Financing (Economic Development) District No. 1-14Clearwater Creek Business Park ProjectDraft TIF Plan Exhibits: 451,000 SF 3 Bldgs valued at $70/SFWithoutProject or TIF District With Project and TIF DistrictProjected Hypothetical2021/2022 2021/2022 Retained New Hypothetical Hypothetical Tax GeneratedTaxable 2021/2022 Taxable Captured Taxable Adjusted Decrease In by RetainedTaxing Net Tax Local Net Tax Net Tax Net Tax Local Local CapturedJurisdiction Capacity (1) Tax Rate Capacity (1) + Capacity = Capacity Tax Rate (*) Tax Rate (*) N.T.C. (*)City of Lino Lakes 29,439,929 40.154% 29,439,929 $415,295 29,855,224 39.595% 0.559% 164,438Anoka County 482,873,486 29.605% 482,873,486 415,295 483,288,781 29.580% 0.025% 122,843ISD # 12 47,053,418 31.074% 47,053,418 415,295 47,468,713 30.802% 0.272% 127,920 Other (2) --- 4.273% --- 415,295 --- 4.273% --- --- Totals 105.106% 104.250% 0.856% * Statement 1: If the projected Retained Captured Net Tax Capacity of the TIF District was hypothetically available to each ofthe taxing jurisdictions above, the result would be a lower local tax rate (see Hypothetical Adjusted Tax Rate above)which would produce the same amount of taxes for each taxing jurisdiction. In such a case, the total local tax ratewould decrease by 0.856% (see Hypothetical Decrease in Local Tax Rate above). The hypothetical tax that theRetained Captured Net Tax Capacity of the TIF District would generate is also shown above.Statement 2: Since the projected Retained Captured Net Tax Capacity of the TIF District is not available to the taxing jurisdictions,then there is no impact on taxes levied or local tax rates. (1) Taxable net tax capacity = total net tax capacity - captured TIF - fiscal disparity contribution, if applicable. (2) The impact on these taxing jurisdictions is negligible since they represent only 4.07% of the total tax rate. Exhibit V Market Value Analysis Report City of Lino Lakes, Minnesota Tax Increment Financing (Economic Development) District No. 1-14 Clearwater Creek Business Park Project Draft TIF Plan Exhibits: 451,000 SF 3 Bldgs valued at $70/SF Assumptions Present Value Date 08/01/23 P.V. Rate - Gross T.I. 4.00% Increase in EMV With TIF District $35,960,717 Less: P.V of Gross Tax Increment 2,692,001 Subtotal $33,268,716 Less: Increase in EMV Without TIF 0 Difference $33,268,716 Annual Present Gross Tax Value @ Year Increment 4.00% 1 2025 219,679 201,782 2 2026 359,663 317,656 3 2027 386,598 328,312 4 2028 394,509 322,145 5 2029 402,578 316,090 6 2030 410,809 310,147 7 2031 419,204 304,313 8 2032 427,767 298,585 9 2033 436,501 292,963 $3,457,326 $2,692,001 Memo To: Michael Grochala, City of Lino Lakes From: Mikaela Huot, Director Date: October 3, 2022 Subject: Financial Analysis for Tax Increment Financing (Economic Development) District No. 1-14 (Clearwater Creek Industrial Business Park Project) Executive Summary The City of Lino Lakes received development interest from two perspective developers (Ryan Companies and MSP) for the construction of approximately 578,000 square feet of light industrial buildings that would comprise of manufacturing, warehousing, and distribution space. Since initial discussions with both developers, the City received an application for financial assistance from one of the development entities – Ryan Companies (the “developer”) for the construction of approximately 451,000 square feet of light industrial speculative building space between 3 buildings. MSP had been proposing an additional 127,000 square feet of light industrial space on property south of the Ryan Companies’ site and existing Distribution Alternatives building. Since initial development interest, it was determined that the MSP site is not proceeding on the same schedule as Ryan Companies and as a result, we are proceeding only with analysis of the Ryan Companies request for assistance and subsequent establishment of an Economic Development TIF District to facilitate their planned development. The developer has identified extraordinary site development and related costs that are barriers to constructing on the project site and maximizing building size and taxable valuations. Tax increment is a financing tool the City could consider for financing of a portion of the eligible costs associated with construction of the project, subject to additional due diligence analysis to assist with determining if the project meets the but-for test and would not proceed without public financial assistance. Prior to establishing a tax increment financing district, there are findings that need to be made by the City that include: 1) determination that the project qualifies as a TIF district, 2) determination that the project as proposed would not proceed without public assistance (meeting the “but-for” test), and 3) the increased market value of the property to be developed is greater with tax increment than if no public assistance is provided. When reviewing requests for financial assistance it is important to understand how the level of financial assistance would impact the ability of the project to proceed as proposed and maximize new value created on the current project site. Review of the operating proformas based on with assistance as pay-as-you-go and with no assistance provides the range of financial feasibility for this project and what the estimated financial gap would be without assistance. To understand viability of the project and need for an appropriate level of public assistance, we provided a sensitivity analysis to the proformas with adjustments made to the total project costs (including land/building acquisition, construction costs, soft costs, developer and other related items) and corresponding funding sources, as well as projected annual lease rates and operating expenses. The purpose of the sensitivity analysis is to test the level of assistance that may be needed using those assumptions to understand if the recommended level of assistance could be consistent with the City’s objectives resulting in reduced amount from what had been requested. Based on the financial analysis and available financing assumptions, without financial assistance, the project does not appear to be feasible due to the significance of the extraordinary site development and soils correction costs. Without assistance, the projected annual and cumulative rate of return to the developer is projected to be below industry standards for this type of project. The rate of return analysis indicates that the provided financing structure would not be financially viable without one or more of the following: 1) reduction in project costs 2) additional annual cash flow, and/or 3) additional funding sources. With annual public assistance, the project is projected to achieve marketable returns by providing additional cash flow to the project. The level of public assistance is expected to have a positive impact on what the projected returns for the project could be as compared to no assistance. The purpose of this memorandum is to provide a summary of Baker Tilly’s review of the development project costs, operating pro forma and other financial information as provided by the developer to assist the City with making a determination 1) if the project as proposed would be unlikely to proceed “but-for” the requested Tax Increment Financing (TIF) assistance, and 2) if assistance was necessary, to determine an appropriate level of public assistance that could be considered. Developer Request for Assistance The developer has requested assistance that includes 90% of incremental revenues for up to 9 years related to development of the project site to support approximately $6.7M ($5.9M excluding MSP property) in TIF eligible costs. The preliminary request includes an approximate $67.1 million project funded through a combination of private debt and equity and public assistance through TIF. Typical extraordinary redevelopment costs that cannot be supported solely by the project alone could justify the need for public financial assistance and allow the project to proceed as proposed. Tax increment financing from the City provides an additional funding source to the project that allows the developer to obtain an appropriate level of upfront funding and meet minimum debt coverage and return metrics. A summary of the sources and uses of funds is illustrated in Table 1 below. Table 1: Sources and Uses of Funds Sources Amount Uses Amount First Mortgage $40,250,111 Land/Soft Costs $11,955,387 Equity $21,187,210 Site Work $13,847,328 Offsite $1,846,051 TIF * $5,727,541 Shell Construction $29,328,000 Transaction Costs $10,188,096 Total $67,164,862 Total $67,164,862 Tax increment financing has been requested as pay-as-you-go and would not be an upfront funding source. Developer would obtain separate TIF Note supported by City TIF resulting in estimated available TIF proceeds amount of approximately $5.7M as requested. Actual TIF Note amount subject to approval. Table 2: Estimated Total Tax Increment Eligible and Extraordinary Costs Identified Costs Extraordinary Costs Extraordinary Site Costs Soil Corrections/Lime Stabilization $1,000,000 $1,000,000 Site Fill $2,500,000 $200,000 Public Utility Relocation $300,000 $300,000 Aggregate Piers $1,000,000 $1,000,000 Subtotal Extraordinary Site Costs $4,800,000 $2,500,000 Offsite 21st Ave Road Extension Removals/Sitework $300,000 $150,000 Utilities $300,000 $100,000 Paving $200,000 $100,000 Landscaping/Street Lighting $100,000 $0 A&E/Mgmt/Inspections/Contingencies $200,000 $50,000 Subtotal Offsite 21st Ave Road Extension $1,100,000 $400,000 Total Ryan Project $5,900,000 $2,900,000 Extraordinary Costs $2,900,000 The range of public assistance is in part based on the financial parameters as further outlined below while considering what an appropriate level of public assistance may be for a redevelopment project while balancing the level of extraordinary costs and financial cash flow performance of the project and public policy guidelines. Considered parameters include the following: •Return on Investment: (City benefits) •Purchase price and other development costs: (reasonable ranges and supported by project) •Public to private investment: (public participation within 10% or less) •Public assistance (TIF) and private equity: (public does not exceed private equity) •Extraordinary costs: (as opposed to ‘greenfield’ or market) •Financial gap: (limit on private debt and equity) •Term of collection (district): (less than maximum term) •Other necessary public improvements: (case by case basis to be determined) Tax Increment Analysis The follow assumptions were used to estimate the amount of projected tax increment revenues (maximum term up to 9 years). •Total project areaoParcel id: 24-31-22-31-0004 (Ryan) o Parcel id: 24-31-22-24-0009 (Ryan)o Parcel id: 24-31-22-24-0008 (Ryan) o Parcel id: 24-31-22-24-0002 (Ryan) •Total estimated base value of $699,300oOriginal net tax capacity $13,986 •Estimated total taxable value upon completiono451,000 total square feet 189,000 SF (Ryan) 147,000 SF (Ryan) 115,000 SF (Ryan)o $31,570,000 (Approximately $70 per square foot) •Incremental revenues based on new building construction value •Maximum term of tax increment districtoEconomic Development o 9 total years (2025-2033) •Construction commences in 2023 and completes in 2024o60% assessed in January of 2024 for taxes payable in 2025 o 100% assessed in January of 2025 for taxes payable in 2026 •Tax rates, class rates and future market values remain constantoTax rates City: 40.154% County: 29.605% School: 31.074% Other: 4.273% Total: 105.106% o Class rates 1.50% commercial/industrial first $150,000 value and 2% value above $150,000 o 2% annual market value inflatoro10% Administrative retainage Maximum is 10% Tax Increment Estimates Based on the assumptions outlined above, the projected tax increment revenues to be generated from the project are shown in the chart on the following page: Table 3: Projected Tax Increment Revenues Ryan Companies Total Building Square Footage 451,000 Total Estimated Taxable Value $31,570,000 Projected Annual Tax Increment Revenues upon Completion (Full Buildout Year 2) $358,367 Less: City withheld for Admin (5%) $17,918 Projected Annual Net Revenues (95%) Year 2 $340,449 Projected Total Gross Revenues over District Term $3,444,854 Less: City Retainage (5%) $172,240 Projected Total Net Revenues over District Term (95%) $3,272,614 Recommended Developer Assistance $2,900,000 Projected Surplus Increment 372,614 Financial Needs (Pro forma Analysis) including But-For Upon approval of a TIF district and project, the City must make several findings, including the “but for” test: that the proposed redevelopment would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future. The developer has stated that but for the provision of tax increment financing, the project as proposed would not occur. Based on the developer’s stated position relative to the need for tax increment financing assistance, the City could make its “but for” finding and provide tax increment assistance. We recommend, however, that the City review the provided assumptions to consider if the project meets the but-for test and, if so, what an appropriate level and type of TIF assistance may be based on the information submitted by the developer. Following thorough evaluation of the project as provided allows the City to be prepared to make an informed “but-for” decision based on the likelihood of the project needing assistance, as well as the appropriate level of assistance. To complete this analysis, we reviewed the developer’s provided operating proforma and constructed similar ten-year project proformas, showing a result if the project received financial assistance as pay-as-you-go (reimbursement for TIF eligible costs) and showing a result if the project did not receive assistance. Our analysis of the proformas include a review of the development budget, projected operating revenues and expenditures, and the project’s capacity to support annual debt service on outstanding debt. The purpose of evaluating the operating proformas is to understand the potential cash flow performance through initial development of the project and the annual operations of the project over a 10-year period to assist with determining if the project is financially feasible and in need of public participation. Measuring project feasibility is typically accomplished by analyzing a combination of 1) projected rate of return – both annual and cumulative and 2) estimated debt coverage ratio (DCR). Rate of return analysis illustrates the projected return to the investor using the available cash flow after payment of operating expenses and debt as a measurement to the initial equity investment. Industry standards for development types indicate the level of investment a developer is willing to make based on projected returns from the project. Should the projected annual and cumulative returns fall below those standards, the project would require a reduced level of equity participation and/or increased cash flow to be feasible. Debt Coverage Ratio (DCR) is a calculation detailing the ratio by which operating income exceeds the debt payments for the project. If the DCR is greater than 1.0 it indicates the project has operating income that is greater than the debt-service payment by some margin; conversely if the DCR is less than 1.0, it indicates the project is incapable of meeting its debt-service payment and would need to seek additional revenue sources in order to pay its debt. Typical lending standards will require a DCR of greater than 1.0 as a measure of cushion in the event actual revenues and expenses are different than projected. Review of the operating proformas based on with assistance as pay-as-you-go and with no assistance provides the range of financial feasibility for this project and what the estimated gap would be without assistance. It is important to note that certain assumptions were made based on the developer’s provided information and market industry standards to understand the project performance. Adjustments made to those assumptions assist in understanding potential impacts on performance and what a required level of assistance (number of years and total amounts) may be. To understand viability of the project and need for an appropriate level of public assistance, we provided a sensitivity analysis to the proformas with adjustments made to the total project costs (including land/building acquisition, construction costs, soft costs, developer and other related construction management fees and contingency) and corresponding funding sources, as well as projected annual lease rates and operating expenses. Realizing any adjustments are all subject to market conditions. The purpose of the sensitivity analysis is to test the level of assistance that may be needed using those assumptions to understand if the recommended level of assistance could be consistent with the City’s objectives resulting in less assistance than what has been requested. Conclusion The developer has requested financial assistance for the construction of approximately 578,000 square feet of light industrial speculative building space (451,000 square feet constructed by Ryan and an additional 127,000 square feet to be constructed by MSP). The developer has identified extraordinary site development and related costs associated with constructing on the project site. Through submission of the tax increment financing request and supporting financial information, the developer has indicated that the project would not occur as proposed without financial assistance from the City due to below market rates of return. Based on the financial analysis and available financing assumptions, without financial assistance, the project would not appear to be feasible. Without assistance, the projected annual and cumulative rate of return is below industry standards for this type of project. The rate of return analysis indicates that the provided financing structure would not be financially viable without one or more of the following: 1) reduction in project costs 2) additional annual cash flow, and/or 3) additional funding sources. With annual public assistance the project is projected to achieve marketable returns. There are ranges of what would be considered market returns and are generally subject to the project type, market indicators, investor demands and financing structure. The level of public assistance is expected to have an impact on what the projected returns for the project could be. Considered parameters for level of public assistance include the following: •Return on Investment: (City benefits) •Purchase price and other development costs: (reasonable ranges and supported by project) •Public to private investment: (public participation within 10% or less) •Public assistance (TIF) and private equity: (public does not exceed private equity) •Extraordinary costs: (as opposed to ‘greenfield’ or market) •Financial gap: (limit on private debt and equity) •Term of collection (district): (less than maximum term) •Other necessary public improvements: (case by case basis to be determined) Identified Extraordinary Costs (Ryan Development) $2,900,000 The developer has requested tax increment financing from the City as a method of providing additional cash flow revenues required to achieve financial feasibility. The request is for 90% of the tax increments generated over the maximum 9-year term of the TIF District. The project will be privately financed through debt and equity and the increment would provide additional annual revenues to support a secondary TIF mortgage, enhance cash flow and increase the developer’s return. We typically review both the annual (upon stabilization) and long-term (10-15-year period) investment returns to understand financial performance and verification of need for public assistance, as well as identifying those costs considered TIF-eligible as extraordinary to the project. Due to timing for anticipated construction between the Ryan development (451,000 square feet to the north of the existing Distribution Alternatives (DA) project) and MSP development (127,000 square feet to the south of DA), two separate tax increment financing districts are anticipated to be created and certified. We are focusing solely on the Ryan development with this analysis and proposed establishment of an Economic Development Tax Increment Financing District. Thank you for the opportunity to be of assistance to the City of Lino Lakes. Please contact me at 651-368-2533 or mikaela.huot@bakertilly.com with any questions or to discuss. The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Baker Tilly Virchow Krause, LLP trading as Baker Tilly is a member of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. © 2018 Baker Tilly Virchow Krause, LLP Definition of Economic Development District MN Statutes 469.174, Subd. 12. Economic development district means a type of tax increment financing district which consists of any project, or portions of a project, which the authority finds to be in the public interest because: 1. it will discourage commerce, industry, or manufacturing from moving their operations to another state or municipality; 2. it will result in increased employment in the state; 3. it will result in preservation and enhancement of the tax base of the state; or 4. it satisfies the requirements of a workforce housing project under section 469.176, subdivision 4c, paragraph (d). MN Statutes 469.176, Subd. 4c. Revenue derived from tax increment from an economic development district may not be used to provide improvements, loans, subsidies, grants, interest rate subsidies, or assistance in any form to developments consisting of buildings and ancillary facilities, if more than 15 percent of the buildings and facilities (determined on the basis of square footage) are used for a purpose other than: 1. the manufacturing or production of tangible personal property, including processing resulting in the change in condition of the property; 2. warehousing, storage, and distribution of tangible personal property, excluding retail sales; 3. research and development related to the activities listed in clause (1) or (2); 4. telemarketing if that activity is the exclusive use of the property; 5. tourism facilities; 6. space necessary for and related to the activities listed in clauses (1) to (5); or 7. a workforce housing project that satisfies the requirements listed below. A project qualifies as a workforce housing project under this subdivision if: (1) increments from the district are used exclusively to assist in the acquisition of property; construction of improvements; and provision of loans or subsidies, grants, interest rate subsidies, public infrastructure, and related financing costs for rental housing developments in the municipality; (2) the governing body of the municipality made the findings for the project required by section 469.175, subdivision 3, paragraph (f); and (3) the governing bodies of the county and the school district, following receipt, review, and discussion of the materials required by section 469.175, subdivision 2, for the tax increment financing district, have each approved the tax increment financing plan, by resolution. The maximum term of an economic development district is eight years after receipt of first increment for a total collection term of 9 years. Projected Tax Increment Report City of Lino Lakes, MinnesotaTax Increment Financing (Economic Development) District No. 1-14Clearwater Creek Business Park ProjectDraft TIF Plan Exhibits: 451,000 SF 3 Bldgs valued at $70/SF Less:Less: Retained Times:Less:Annual Less:Less:Annual Total Total Original Fiscal Captured Tax Annual State Aud. Revenue Admin.Pooling AnnualPeriodMarketNet Tax Net Tax Disp. @ Net Tax Capacity Gross Tax Deduction Net of Retainage Retainage NetEndingValue *Capacity Capacity **42.1968%Capacity Rate ***Increment 0.360%OSA Deduction 5.00%0.00% Revenue(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12)(13) 12/31/23 699,300 13,986 13,986 0 0 105.106%0 0 0 0 0 012/31/24 699,300 13,986 13,986 0 0 105.106%0 0 0 0 0 012/31/25 18,816,000 375,570 13,986 152,577 209,007 105.106% 219,679 791 218,888 10,944 0 207,94412/31/26 30,336,320 605,976 13,986 249,801 342,189 105.106% 359,662 1,295 358,367 17,918 0 340,44912/31/27 32,553,046 650,311 13,986 268,509 367,816 105.106% 386,597 1,392 385,205 19,260 0 365,94512/31/28 33,204,107 663,332 13,986 274,003 375,343 105.106% 394,508 1,420 393,088 19,654 0 373,43412/31/29 33,868,189 676,614 13,986 279,608 383,020 105.106% 402,577 1,449 401,128 20,056 0 381,072 12/31/30 34,545,553 690,161 13,986 285,324 390,851 105.106% 410,808 1,479 409,329 20,466 0 388,863 12/31/31 35,236,464 703,979 13,986 291,155 398,838 105.106% 419,203 1,509 417,694 20,885 0 396,809 12/31/32 35,941,194 718,074 13,986 297,103 406,985 105.106% 427,766 1,540 426,226 21,311 0 404,915 12/31/33 36,660,017 732,450 13,986 303,169 415,295 105.106% 436,500 1,571 434,929 21,746 0 413,183 $3,457,300 $12,446 $3,444,854 $172,240 $0 $3,272,614 * Total Taxable Value based on new estimated land and building value of $70/square foot for 451,000 square feet between all buildings ** Original net tax capacity based on existing taxable land value of one property and calculated based on reclassification to commercial-industrial class rates *** Total Combined Local Tax Capacity Rate of City, County, School District and other taxing jurisdictions for taxes payable 2022 ECONOMIC DEVELOPMENT ADVISORY COMMITTEE AGENDA ITEM 3B STAFF ORIGINATOR: Harrison Maxwell, Community Development Intern EDAC MEETING DATE: October 6, 2022 TOPIC: 2020 Census Data Report BACKGROUND In 2022, the US Census Bureau released the 2020 Decennial Census results. Staff has been reviewing relevant data pertaining to The City of Lino Lakes. Attached is a report that highlights the demographic trends captured by the 2020 US Census. EDAC CONSIDERATION None required. Discussion only. ATTACHMENTS 1. 2020 Census Data Report Lino Lakes 2020 Decennial Census Results What data is available from the Decennial Census? Data Available as of October 25, 2021 • Population by census block • Race • Hispanic or Latino origin • Occupied and Vacant Housing units Other Census Bureau Data Sources Additional Data to be Released in 2022 • Gender • Age • Ethnicity • Housing tenure (rent, own) • Household type (family, non-family) • Family type (married-couple, female householder no husband present, etc.) • American Community Survey (ACS) – Annual. Based on surveys sent to sample of population. Includes topics such as education, employment, internet access, and transportation. • Population Estimates Profile (PEP) – Annual. Utilizes current data on births, deaths, and migration to calculate population change since the most recent decennial census and produce a time series of estimates of population, demographic components of change, and housing units. Population is Growing; Number of Households is Growing • From 2010 to 2020, Lino Lakes’ total population increased by 9.9%, from 19,784 to 21,748. • The percent of occupied housing units increased by 23.6% from 2010 to 2020, from 5,887 to 7,275. • The percent of renter-occupied housing units increased by 90.5% from 2010 to 2020, from 306 to 583. Lino Lakes is Growing Older • From 2010 to 2020, the total population of individuals in the age range of under 5 to 19 years decreased by 7.2%, from 32.9% of the City’s population to 25.7%. • From 2010 to 2020, the total population of individuals in the age range of 45 to 49 years of decreased by 2.9%, from 11.1% of the City’s population to 8.2%. • From 2010 to 2020, the total population of individuals in the age range of 50 to 54 years of increased by 3.9%, from 5.1% of the City’s population to 9.0%. • From 2010 to 2020, Householders of occupied housing units in the age range of 55 to 65 years increased by 12.2%, from 15.3% of the City’s population to 27.5%. • From 2010 to 2020, the total population of individuals in the age range of 55 to 85 years and older Increased by 15.2%, from 13.2% of the City’s population to 28.4%. OnTheMap Inflow/Outflow Report All Private Jobs for All Workers in 2019 Inflow/Outflow Counts of All Private Jobs for Selection Area in 2019 All Workers Map Legend Selection Areas Analysis Selection Inflow/Outflow Employed and Live in Selection Area Employed in Selection Area, Live OutsideLivein Selection Area, Employed OutsideNote: Overlay arrows do not indicate directionality of worker flow between home and employment locations. Inflow/Outflow Counts of All Private Jobs for Selection Area in 2019 All Workers Worker Flows 3,200 -Employed in Selection Area, Live Outside 9,469 -Live in Selection Area, Employed Outside 440 -Employed and Live in Selection Area Inflow/Outflow Counts of All Private Jobs for Selection Area in 2019 All Workers 2019 Worker Totals and Flows Count Share Employed in the Selection Area 3,640 100.0 Employed in the Selection Area but Living Outside 3,200 87.9 Employed and Living in the Selection Area 440 12.1 Living in the Selection Area 9,909 100.0 Living in the Selection Area but Employed Outside 9,469 95.6 Living and Employed in the Selection Area 440 4.4