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EHLERS • g;;` & ASSOCIATES INC QTo: Mike Morrison, City Manager From: Mark Ruff UJ Jim Prosser Subject: Apache Mall TIF Parcel Decertification Date: November 20, 2000 Ehlers & Associates has been asked to review the Apache Mall Phase I TIF (Tax Increment District No. 3)parcels to identify any parcel which should be considered for decertification from the district. The district contains eleven parcels shown in the attached table. Two of those parcels currently have a value significantly lower than at the time the district was established. The impact of the reduced value is to reduce the resources available for redevelopment expenses. Therefore it would be prudent to consider removing the parcels from the district. Two issues need to be considered before making this decision. First, it is necessary to review existing development.agreements to determine if the removal of the parcels would impair the • agreement. The assessment agreement dated April 1, 1996 between the Housing and RedevelopmentAuthority (HRA) and the Ste. Marie Company provides a minimum market value of$2,945,000. The assessment agreement supports the City's General Obligation Taxable Tax Increment Bonds, Series 1996A. The current market value and the base year market value of the district are $3,881,200 and $4,225,725; respectively. Both the base and current market value of the district are well in excess of the minimum value provided for within the minimum assessment agreement. According to the City's Bond Attorney removal of these parcels would not impair the existing assessment agreement. The impact of removing the two parcels that have declined in value since the establishment of the district is to improve the tax base in support of the bonds. The second issue is the method of decertification. State law(Minnesota Statutes, Section 469.175)permits two options for decertification of parcels from a TIF district. If a public hearing is conducted the full amount of the net tax capacity may be removed from the district. This amount would be ($48,379). This means that the captured net tax capacity would increase from $152,498 to $200,877. Based on a tax rate of 1.35059, an additional $65,340 in tax increment would be available. If a hearing is not conducted the original net tax capacity is reduced by no more than the current net tax capacity of the parcels eliminated from the district. This means that there would be no additional tax increment available in the current year. If the tax capacity continued to decline additional revenue would be available in future years. It is recommended that a public hearing be conducted to remove the two identified parcels from LEADERS IN PUBLIC FINANCE 3060 Centre Pointe Drive 651.697.8503 fax 651.697.8555 Roseville, MN 55113-1105 jim @ehlers-inc.com