ITEM 6.2 Resolution 2017-97Ot.ITY OF
M1
DEPARTMENT INFORMATION
Request for
City Council Action
ORIGINATING DEPARTMENT
REQUESTOR:
MEETING DATE:
Administration
City Administrator/ Finance Director
Flaherty
November 27, 2017
PRESENTER(s)
REVIEWED BY:
ITEM #:
City Administrator/ Finance
Director Flaherty
City Attorney MacArthur
6.2
AGENDA ITEM DETAILS
RECOMMENDATION:
City staff is recommending that the City Council authorize the decertification of Tax Increment Financing
District No. 2.
ARE YOU SEEKING APPROVAL OF A CONTRACT?
IS A PUBLIC HEARING REQUIRED?
No
No
BACKG ROU N D/J USTI F1 CATION:
On June 12, 2017, the City Council approved the establishment of Tax Increment Financing District No. 2
and the respective Tax Increment Financing Plan. The tax increment district was established to provide
financing for the Kadler Avenue street construction project that would have provided access to an
industrial development project proposed by Bury Industries, LLC.
The project was proceeding as planned, with the City of Otsego advertising for bids on the street
construction project. Prior to the City awarding a construction contract, the developer, Bury Industries, LLC
informed the City that it needed to delay the first phase of their industrial development from 2017 to 2018.
With the project being delayed until 2018, unforeseen complications arose regarding the effectiveness of
the previously established tax increment financing district. The details of such are further outlined within
the memorandum from Jessica Green with Northland Securities. In short, the district would not have
generated as much increment as originally projected. This increment was being relied upon to offset the
debt service payments on the bonds issued to finance the street construction project. Without the
increment generated as planned, the debt service payments would have had to been financed with general
ad valorem property tax levies.
City staff has had recent conversations with the developer, and so far, the industrial development seems
imminent for 2018. City staff will be working closely with the developer during the upcoming months and
will schedule a work session with the City Council as the project nears commencement.
SUPPORTING DOCUMENTS ATTACHED:
• Memorandum —Jessica Green, Northland Securities
• Resolution 2017-97
POSSIBLE MOTION
PLEASE WORD MOTION AS YOU WOULD LIKE IT TO APPEAR IN THE MINUTES:
Motion to adopt Resolution 2017-97, Authorizing the decertification of Tax Increment Financing District
No. 2.
BUDGET INFORMATION
FUNDING: BUDGETED:
N/A
N_ ORTHLAND
PUBLIC FINANCE
MEMORANDUM
To: Mayor Stockamp
City Council Members
City Administrator Flaherty
From: Jessica Green, Northland Securities
Date: November 27,2017
Re: Tax Increment Financing District No. 2
On June 12, 2017, the City Council approved the establishment of Tax Increment Financing (TIF)
District No. 2 (Economic Development District) in an effort to facilitate the development of an
industrial park via the construction of Kadler Avenue Northeast. The City intended to issue
General Obligation TIF Revenue Bonds to finance the construction of the roadway, and utilize
the increment captured from the increase in property tax revenues as a result of the
development within the District to support approximately half of the debt service associated
with the bonds.
Shortly after the Council approved the TIF Plan, the developer (Bury Industries, LLC) of the
industrial park determined it necessary to delay the first phase of development, and to begin
construction in 2018 rather than 2017. After discussing the parcels within the District with the
County Assessor and reviewing the 2018 working assessment information available for the
properties, it was determined that an increase in property value was likely to occur based solely
on land values in the area. Econon-dc Development Districts have a rather short duration of
only 8 years. With the City financing the project through the issuance of debt, ies important that
efforts are made to collect the maximum amount of increment to offset the City's investment in
the project. Since the near-term increase in the overall market value could trigger the first
collection of increment, Northland is recommending that the City Council consider decertifying
TIF District No. 2 as of December 31, 2017, and wait until development is imminent to establish
a new District to ensure collection of the maximum increment. Additionally, based on recent
conversations with the developer, the scope of the project has changed slightly from what was
originally shared with City staff. Decertifying District No. 2 and establishing a new District will
allow for more accurate financial projections based on new project information.
A resolution for the decertification of Tax hicrement Financing District No. 2 is attached for City
Council consideration. Should Council approve the resolution, Northland will work with City
staff to take steps necessary to decertify the District as of December 31, 2017.
CITY OF OTSEGO
COUNTY OF WRIGHT
STATE OF MINNESOTA
RESOLUTION NO: 2017-97
AUTHORIZING THE DECE RTIFICATION OF
TAX INCRE MIENT FINANCING DISTRICT NO. 2
WHEREAS, on June 12, 2017, the City of Otsego (the "City") created its Tax Increment Financing
District No. 2 (the "District") within its Municipal Development District No. I (the "Project"); and
WHEREAS, as of the date hereof no bonds or obligations to which tax increment from the district have
been pledged have been issued; and
WHEREAS, the City wishes to decertify the District pursuant to Minnesota Statutes, section 469.177,
subdivision 12 effective on December 31, 2017; and
WHEREAS, the City desires by this resolution to cause the decertification of the District after which all
property taxes generated within the District will be distributed in the same manner as all other property
taxes.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF TIM CITY OF OTSEGO,
MINNESOTA:
That the City Administrator is authorized and directed to provide Wright County with documents related
to decertification of the District, to submit Confirmation of Decertified TIF District form to the Office of
the State Auditor and take any other steps necessary required for a decertification date of December 3 1,
2017.
ADOPTED by the Otsego City Council this 27th day of November, 2017.
ATTEST:
CITY OF OTSEGO
Jessica Stockamp, Mayor
Tami Loff, City Clerk
MOTION made by Council Member and SECONDED by Council Member
IN FAVOR:
OPPOSED: