ITEM 7.1 Resolution 2018-230 tsTY
F o
MINNESOTA g
DEPARTMENT INFORMATION
Request for
City Council Action
ORIGINATING DEPARTMENT
REQUESTOR:
MEETING DATE:
Administration
City Administrator/ Finance Director
Flaherty
February 26, 2018
PRESENTER(s)
REVIEWED BY:
ITEM #:
City Administrator/ Finance
Director Flaherty
The proposed redevelopment would include the decommissioning of the private waste water treatment
7.1
AGENDA ITEM DETAILS
RECOMMENDATION:
City staff is recommending that the City Council approve the attached resolution in relation to the use of
tax increment financing on the redevelopment of the Riverbend North site by Otsego Apartments, LLC.
ARE YOU SEEKING APPROVAL OF A CONTRACT?
IS A PUBLIC HEARING REQUIRED?
No
Yes —Was Held February 12, 2018
BACKGROUND/JUSTIFICATION:
At a special meeting on December 11, 2017, the City Council concurred to move forward with the
consideration of tax increment financing on the Riverbend North redevelopment project.
The proposed redevelopment would include the decommissioning of the private waste water treatment
facility currently operating on the Riverbend North site to facilitate new development.
The project will include the construction of 84 units of market rate multi -family housing and a mini -storage
facility. Future phasing would include the construction of an additional 80 units of market rate multi -family
housing and approximately 15,000 square feet of future commercial development. The project will be
undertaken on approximately 13 acres located at the southeast intersection of Trunk Highway 101 and
CSAH 42.
The current taxable market value of the district is calculated to be $342,200. The future taxable market
value projects to be $17,781,000 and will generate approximately $8,072,579 of revenue over the life of
the district.
At a meeting on February 12, 2018, the City Council held a public hearing in accordance with Minnesota
Statutes on the proposed redevelopment TIF District. No comments were received from the public leading
up to, or during that meeting. The next step would be for the City Council to consider the attached
resolution, which will adopt a modification to Development District No. 1, formally establish Tax Increment
Financing District No. 4 and will formally approve the attached Tax Increment Financing Plan.
The Tax Increment Financing Plan provides a summary of the District and provides a budget for the sources
and uses of the tax increment revenue; however, the Plan itself does not commit the City to providing any
assistance or specific appropriation of the future increment. That obligation is to come in the form of a
Redevelopment Agreement between the City and the developer. The terms of this agreement are still in
negotiation and will ultimately require approval from the City Council by passing a future resolution.
At this time, City staff expects that Otsego Apartments, LLC will be submitting their development
application on a timeline that would allow for City Council consideration no earlier than April 23, 2018.
SUPPORTING DOCUMENTS ATTACHED:
• Tax Increment Financing Plan
• Resolution 2018-23
POSSIBLE MOTION
PLEASE WORD MOTION AS YOU WOULD LIKE ITTO APPEAR IN THE MINUTES:
Motion to approve Resolution 2018-23 adopting a modification to Development District No. 1; establishing
Tax Increment Financing District No. 4; and approving a Tax Increment Financing Plan therefor.
BUDGET INFORMATION
FUNDING: BUDGETED:
N/A
As of Februaq 6, 2018
Draft for Public Hearing
Modification to the Development Program
for Development District No. 1
and the
Tax Increment Financing Plan
for the establishment of
Tax Increment Financing District No. 4 - Riverbend North
(a redevelopment district)
within
Development District No. 1
City of Otsego
Wright County
State of Minnesota
Public Hearing: February 12, 2018
Adopted:
ja Prepared by: E5S & ASSOCIATES, INC.
EHLERS 306entrePineDiRoMinnesota 55113-1105
6C65697550
Table of Contents
(for reference purposes only)
Section 1 - Modification to the Development Program
for Development District No. 1......................................................................................................1-4
Foreword............................................................................................................................................1-4
Section 2 - Tax Increment Financing Plan
for Tax Increment Financing District No. 4 - Riverbend North.................................................2-1
Subsection 2-1.
Foreword...........................................................................................................2-1
Subsection 2-2.
Statutory Authority...........................................................................................2-1
Subsection 2-3.
Statement of Objectives ......... .... ..... ........... .......... ............ ..............................
.2-1
Subsection 2-4.
Development Program Overview..................................................................2-1
Subsection 2-5.
Description of Property in the District and Property To Be Acquired .
2-
2 Subsection 2-6.
Classification of the District...........................................................................
.2-2
Subsection 2-7.
Duration and First Year of Tax Increment of the District ...........................2-4
Subsection 2-8.
Original Tax Capacity, Tax Rate and Estimated Captured Net Tax Capacity
Value/Increment
and Notification of Prior Planned Improvements......................................2-4
Subsection 2-9.
Sources of Revenue/Bonds to be Issued.....................................................2-5
Subsection2-10.
Uses of Funds..................................................................................................2-6
Subsection 2-11.
Business Subsidies.........................................................................................2-7
Subsection 2-12.
County Road Costs.........................................................................................2-8
Subsection 2-13.
Estimated Impact on Other Taxing Jurisdictions.........................................2-8
Subsection 2-14.
Supporting Documentation...........................................................................2-10
Subsection 2-15.
Definition of Tax Increment Revenues.......................................................2-10
Subsection 2-16.
Modifications to the District..........................................................................2-10
Subsection 2-17.
Administrative Expenses..............................................................................2-11
Subsection 2-18.
Limitation of Increment..................................................................................2-12
Subsection 2-19.
Use of Tax Increment....................................................................................2-12
Subsection 2-20.
Excess Increments........................................................................................2-13
Subsection 2-21.
Requirements for Agreements with the Developer...................................2-13
Subsection 2-22.
Assessment Agreements..............................................................................2-13
Subsection 2-23.
Administration of the District........................................................................2-14
Subsection 2-24.
Annual Disclosure Requirements................................................................2-14
Subsection 2-25.
Reasonable Expectations.............................................................................2-14
Subsection 2-26.
Other Limitations on the Use of Tax Increment.........................................2-14
Subsection2-27.
Summary .........................................................................................................2-15
Appendix A
Project Description...................................................... A-1
Appendix B
Map(s) of Development District No. 1 and the District ........................... B-1
Appendix C
Description of Property to be Included in the District ............................ C-1
Appendix D
Estimated Cash Flow for the District ........................................ D-1
Appendix E
Minnesota Business Assistance Form ....................................... E-1
Appendix F
Redevelopment Qualifications for the District .................................. F-1
Appendix G
Findings Including But/For Qualifications ..................................... G-1
Section 1 - Modification to the Development Program
for Development District No. 1
Foreword
The following text represents a Modification to the Development Program for Development District No. 1.
This modification represents a continuation of the goals and objectives set forth in the Development Program
for Development District No. 1. Generally, the substantive changes include the establishment of Tax
Increment Financing District No. 4 - Riverbend North.
For further information, a review of the Development Program for Development District No. 1, adopted
February 22, 2016, is recommended. It is available from the City Administrator at the City of Otsego. Other
relevant information is contained in the Tax Increment Financing Plans for the Tax Increment Financing
Districts located within Development District No. 1.
City of Otsego Modification to the Development Program for Development District No. 1 1-1
Section 2 - Tax Increment Financing Plan
for Tax Increment Financing District No. 4 - Riverbend North
Subsection 2-1. Foreword
The City of Otsego (the "City"), staff and consultants have prepared the following information to expedite
the establishment of Tax Increment Financing District No. 4 - Riverbend North (the "District"), a
redevelopment tax increment financing district, located in Development District No. 1.
Subsection 2-2. Statutory Authority
Within the City, there exist areas where public involvement is necessary to cause development or
redevelopment to occur. To this end, the City has certain statutory powers pursuant to Minnesota Statutes
C'M.S.'), Sections 469.124 to 469.133, inclusive, as amended, and M.S., Sections 469.174 to 469.1794,
inclusive, as amended (the "Tax Increment Financing Act" or "TIF Act"), to assist in financing public costs
related to this project.
This section contains the Tax Increment Financing Plan (the "TIF Plan") for the District. Other relevant
information is contained in the Modification to the Development Program for Development District No. 1.
Subsection 2-3. Statement of Objectives
The District currently consists of three parcels of land and adjacent and internal rights-of-way. The
District is being created to redevelop the existing site, including the decommissioning of a private
wastewater treatment facility, to facilitate the construction of 164 units of market rate multifamily
housing, a mini -storage facility, and approximately 15,000 square feet of commercial retail in the City.
Please see Appendix A for further District information. The City has not entered into an agreement, but is
working with Darkenwald Corporation as redeveloper of the site. This TIF Plan is expected to achieve
many of the objectives outlined in the Development Program for Development District No. 1.
The activities contemplated in the Modification to the Development Program and the TIF Plan do not
preclude the undertaking of other qualified development or redevelopment activities. These activities are
anticipated to occur over the life of Development District No. 1 and the District.
Subsection 2-4. Development Program Overview
1. Property to be Acquired — Selected property located within the District may be acquired by
the City and is further described in this TIF Plan.
2. Relocation - Relocation services, to the extent required by law, are available pursuant to
M.S., Chapter 117 and other relevant state and federal laws.
3. Upon approval of a developer's plan relating to the project and completion of the necessary
legal requirements, the City may sell to a developer selected properties that it may acquire
within the District or may lease land or facilities to a developer.
4. The City may perform or provide for some or all necessary acquisition, construction,
relocation, demolition, and required utilities and public street work within the District.
City of Otsego
Tax Increment Financing Plan for Tax Increment Financing District No. 4 - Riverbend North 2-1
Subsection 2-5. Description of Property in the District and Property To Be Acquired
The District encompasses all property and adjacent rights-of-way and abutting roadways identified by the
parcels listed in Appendix C of this TIF Plan. Please also see the map in Appendix B for further information
on the location of the District.
The City may acquire any parcel within the District including interior and adjacent street rights of way. Any
properties identified for acquisition will be acquired by the City only in order to accomplish one or more of
the following: storm sewer improvements; provide land for needed public streets, utilities and facilities; cavy
out land acquisition, site improvements, clearance and/or development to accomplish the uses and objectives
set forth in this plan. The City may acquire property by gift, dedication, condemnation or direct purchase
from willing sellers in order to achieve the objectives of this TIF Plan. Such acquisitions will be undertaken
only when there is assurance of funding to finance the acquisition and related costs.
Subsection 2-6. Classification of the District
The City, in determining the need to create a tax increment financing district in accordance with M.S.,
Sections 469.174 to 469.1794, as amended, inclusive, finds that the District, to be established, is a
redevelopment district pursuant to M.S., Section 469.174, Subd. 10(a)(1) as defined below:
(a) "Redevelopment district" means a type oftax incrementfinancing district consisting ofaproject,
or portions of a project, within which the authority finds by resolution that one or more of the
following conditions, reasonably distributed throughout the district, exists:
(1) parcels consisting of 70 percent of the area in the district are occupied by buildings, streets,
utilities, paved or gravel parking lots or other similar structures and more than 50 percent
of the buildings, not including outbuildings, are structurally substandard to a degree
requiring substantial renovation or clearance;
(2) The property consists of vacant, unused, underused, inappropriately used, or infrequently
used rail yards, rail storage facilities or excessive or vacated railroad rights-of-way;
(3) tankfacilities, orproperty whose immediatelyprevious use wasfor tankfacilities, as defined
in Section 115C, Subd. 15, if the tankfacility:
(i) have or had a capacity of more than one million gallons;
(ii) are located adjacent to rail facilities; or
(iii) have been removed, or are unused, underused, inappropriately used or infrequently
used,- or
(4) a qualifying disaster area, as defined in Subd. 10b.
(b) For purposes of this subdivision, "structurally substandard" shall mean containing defects in
structural elements or a combination of deficiencies in essential utilities andfacilities, light and
ventilation, fire protection including adequate egress, layout and condition of interiorpartitions,
or similar factors, which defects or deficiencies are of sufficient total significance to just
substantial renovation or clearance.
(c) A building is not structurally substandard if it is in compliance with the building code applicable
to new buildings or could be modified to satisfy the building code at a cost of less than 15
City of Otsego
Tax Increment Financing Plan for Tax Increment Financing District No. 4 - Riverbend North 2-2
percent of the cost of constructing a new structure of the same square footage and type on the
site. The municipality may find that a building is not disqualified as structurally substandard
under the preceding sentence on the basis of reasonably available evidence, such as the size,
type, and age of the building, the average cost of plumbing, electrical, or structural repairs or
other similar reliable evidence. The municipality may not make such a determination without
an interior inspection of the property, but need not have an independent, expert appraisal
prepared of the cost of repair and rehabilitation of the building. An interior inspection of the
property is not required, if the municipalityfinds that (1) the municipality or authority is unable
to gain access to the property after using its best efforts to obtain permission from the party that
owns or controls the property; and (2) the evidence otherwise supports a reasonable conclusion
that the building is structurally substandard.
(d) A parcel is deemed to be occupied by a structurally substandard building for purposes of the
finding under paragraph (a) or by the improvement described in paragraph (e) if all of the
following conditions are met:
(1) the parcel was occupied by a substandard building or met the requirements of paragraph
(e), as the case may be, within three years of the filing of the request for certification of the
parcel as part of the district with the county auditor;
(2) the substandard building or the improvements described in paragraph (e) were demolished
or removed by the authority or the demolition or removal was financed by the authority or
was done by a developer under a development agreement with the authority;
(3) the authority found by resolution before the demolition or removal that the parcel was
occupied bya structurally substandard building or met the requirement ofparagraph (e) and
that after demolition and clearance the authority intended to include the parcel within a
district; and
(4) upon filing the request for certification of the tax capacity of the parcel as part of a district,
the authority notifies the county auditor that the original tax capacity of the parcel must be
adjusted as provided by § 469.177, subdivision 1, paragraph (f).
(e) For purposes of this subdivision, a parcel is not occupied by buildings, streets, utilities, paved
or gravel parking lots or other similar structures unless 15 percent of the area of the parcel
contains buildings, streets, utilities, paved or gravel parking lots or other similar structures.
(� For districts consisting of two or more noncontiguous areas, each area must qualify as a
redevelopment district under paragraph (a) to be included in the district, and the entire area of
the district must satisfy paragraph (a).
In meeting the statutory criteria the City relies on the following facts and findings:
• The District is a redevelopment district consisting of three parcels.
• An inventory shows that parcels consisting of more than 70 percent of the area in the District are
occupied by buildings, streets, utilities, paved or gravel parking lots or other similar structures.
• An inspection of the buildings located within the District finds that more than 50 percent of the buildings
are structurally substandard as defined in the TIF Act. (See Appendix F).
Pursuant to M.S., Section 469.176, Subd. 7, the District does not contain any parcel or part of a parcel that
City of Otsego
Tax Increment Financing Plan for Tax Increment Financing District No. 4 - Riverbend North 2-3
qualified under the provisions of M.S., Sections 273.111, 273.112, or 273.114 or Chapter 473H for taxes
payable in any of the five calendar years before the filing of the request for certification of the District.
Subsection 2-7. Duration and First Year of Tax Increment of the District
Pursuant to M.S., Section 469.175, Subd. 1, and Section 469.176, Subd. 1, the duration and first year of tax
increment of the District must be indicated within the TIF Plan. Pursuant to M.S., Section 469.176, Subd. 1 b.,
the duration of the District will be 25 years after receipt of the first increment by the City (a total of 26 years
of tax increment). The City elects to receive the first tax increment in 2020, which is no later than four years
following the year of approval of the District. Thus, it is estimated that the District, including any
modifications of the TIF Plan for subsequent phases or other changes, would terminate after 2045, or when
the TIF Plan is satisfied. The City reserves the right to decertify the District prior to the legally required date.
Subsection 2-8. Original Tax Capacity, Tax Rate and Estimated Captured Net Tax Capacity
Value/Increment and Notification of Prior Planned Improvements
Pursuant to M.S., Section 469.174, Subd. 7 andM.S., Section 469.177, Subd. 1, the Original Net Tax Capacity
(ONTC) as certified for the District will be based on the market values placed on the property by the assessor
in 2017 for taxes payable 2018.
Pursuant to M.S., Section 469.177, Subds. I and 2, the County Auditor shall certify in each year (beginning
in the payment year 2020) the amount by which the original value has increased or decreased as a result of.
1. Change in tax exempt status of property;
2. Reduction or enlargement of the geographic boundaries of the district;
3. Change due to adjustments, negotiated or court-ordered abatements;
4. Change in the use of the property and classification;
5. Change in state law governing class rates; or
6. Change in previously issued building permits.
In any year in which the current Net Tax Capacity (NTC) value of the District declines below the ONTO, no
value will be captured and no tax increment will be payable to the City.
The original local tax rate for the District will be the local tax rate for taxes payable 2018, assuming the
request for certification is made before June 30, 2018. The ONTC and the Original Local Tax Rate for the
District appear in the table below.
Pursuant to M.S., Section 469.174 Subd. 4 and M.S., Section 469.177, Subd. 1, 2, and 4, the estimated
Captured Net Tax Capacity (CTC) of the District, within Development District No. 1, upon completion of
the projects within the District, will annually approximate tax increment revenues as shown in the table
below. The City requests 100 percent ofthe available increase in tax capacity for repayment of its obligations
and current expenditures, beginning in the tax year payable 2020. The Project Tax Capacity (PTC) listed is
an estimate of values when the projects within the District are completed.
City of Otsego
Tax Increment Financing Plan for Tax Increment Financing District No. 4 - Riverbend North 2-4
Project Estimated Tax Capacity upon Completion (PTC) $307,044
Original Estimated Net Tax Capacity (ONTC) $4,592
Estimated Captured Tax Capacity (CTC) $302,452
Original Local Tax Rate 1.12506 Estimated t aced
Y
Estimated Annual Tax Increment (CTC x Local Tax Rate) $340,277
Percent Retained by the City 100%
Tax capacity includes a 1% inflation factor for the duration of the District. The tax capacity included in this
chart is the estimated tax capacity of the District in year 25. The tax capacity of the District in year one is
estimated to be $209,238.
Pursuant to M.S., Section 469.177, Subd. 4, the City shall, after a due and diligent search, accompany its
request for certification to the County Auditor or its notice of the District enlargement pursuant to M.S.,
Section 469.175, Subd. 4, with a listing of all properties within the District or area of enlargement for which
building permits have been issued during the eighteen (18) months immediately preceding approval of the
TIF Plan by the municipality pursuant to M.S., Section 469.175, Subd. 3. The County Auditor shall increase
the original net tax capacity of the District by the net tax capacity of improvements for which a building
permit was issued.
The City has reviewed the area to be included in the District and found no parcels for which building
permits have been issued during the 18 months immediately preceding approval of the TIF Plan by the
City.
Subsection 2-9. Sources of Revenue/Bonds to be Issued
The costs outlined in the Uses of Funds will be financed primarily through the annual collection of tax
increments. The City reserves the right to incur bonds or other indebtedness as a result of the TIF Plan. As
presently proposed, the projects within the District will be financed by one or more pay-as-you-go notes.
Any refunding amounts will be deemed a budgeted cost without a formal TIF Plan Modification. This
provision does not obligate the City to incur debt. The City will issue bonds or incur other debt only upon
the determination that such action is in the best interest of the City.
The total estimated tax increment revenues for the District are shown in the table below:
SOURCES OF FUNDS TOTAL
Tax Increment $7,688,170
Interest $384,409
TOTAL $8,072,579
The City may issue bonds (as defined in the TIF Act) secured in whole or in part with tax increments from
the District in a maximum principal amount of $5,572,579. Such bonds maybe in the form of pay-as-you-go
notes, revenue bonds or notes, general obligation bonds, or interfund loans. This estimate of total bonded
indebtedness is a cumulative statement of authority under this TIF Plan as of the date of approval.
City of Otsego
Tax Increment Financing Plan for Tax Increment Financing District No. 4 - Riverbend North 2-5
Subsection 2-10. Uses of Funds
Currently under consideration for the District is a proposal to redevelop the existing site, including the
decommissioning of a private wastewater treatment facility, to facilitate the construction of 164 units of
market rate multifamily housing, a mini -storage facility, and approximately 15,000 square feet of
commercial retail in the City. The City has determined that it will be necessary to provide assistance to the
project(s) for certain District costs, as described. The City has studied the feasibility of the development or
redevelopment of property in and around the District. To facilitate the establishment and development or
redevelopment of the District, this TIF Plan authorizes the use of tax increment financing to pay for the
cost of certain eligible expenses. The estimate of public costs and uses of funds associated with the District
is outlined in the following table.
USES OF TAX INCREMENT FUNDS TOTAL
Land/Building Acquisition $1,500,000
Site Improvements/Preparation $1,000,000
Utilities $1,800,000
Other Qualifying Improvements $888,170
Administrative Costs (up to 10%) $384,409
PROJECT COST TOTAL $5,572,579
Interest $2.5W000
PROJECT AND INTEREST COSTS TOTAL $8,072,579
The total project cost, including financing costs (interest) listed in the table. above does not exceed the total
projected tax increments for the District as shown in Subsection 2-9.
Estimated costs associated with the District are subject to change among categories without a modification
to this TIF Plan. The cost of all activities to be considered for tax increment financing will not exceed,
without formal modification, the budget above pursuant to the applicable statutory requirements. Pursuant
to M.S., Section 469.1763, Subd. 2, no more than 25 percent of the tax increment paid by property within the
District will be spent on activities related to development or redevelopment outside of the District but within
the boundaries of Development District No. 1, (including administrative costs, which are considered to be
spent outside of the District) subject to the limitations as described in this TIF Plan.
Subsection 2-11. Business Subsidies
Pursuant to M.S., Section 116J.993, Subd. 3, the following forms of financial assistance are not considered
a business subsidy:
(1) A business subsidy of less than $150,000;
(2) Assistance that is generally available to all businesses or to a general class of similar businesses,
such as a line of business, size, location, or similar general criteria;
(3) Public improvements to buildings or lands owned by the state or local government that serve a
public purpose and do not principally benefit a single business or defined group of businesses at
the time the improvements are made;
(4) Redevelopment property polluted by contaminants as defined in M.S., Section 116J.552, Subd. 3;
City of Otsego
Tax Increment Financing Plan for Tax Increment Financing District No. 4 - Riverbend North 2-6
(5) Assistance provided for the sole purpose of renovating old or decaying building stock or bringing
it up to code and assistance provided for designated historic preservation districts, provided that
the assistance is equal to or less than 50% of the total cost;
(6) Assistance to provide job readiness and training services if the sole purpose of the assistance is to
provide those services;
(7) Assistance for housing;
(8) Assistance for pollution control or abatement, including assistance for a tax increment financing
hazardous substance subdistrict as defined under M.S., Section 469.174, Subd. 23;
(9) Assistance for energy conservation;
(10) Tax reductions resulting from conformity with federal tax law;
(11) Workers' compensation and unemployment compensation;
(12) Benefits derived from regulation;
(13) Indirect benefits derived from assistance to educational institutions;
(14) Funds from bonds allocated under chapter 474A, bonds issued to refund outstanding bonds, and
bonds issued for the benefit of an organization described in section 501 (c) (3) of the Internal
Revenue Code of 1986, as amended through December 31, 1999;
(15) Assistance for a collaboration between a Minnesota higher education institution and a business;
(16) Assistance for a tax increment financing soils condition district as defined under M.S., Section
469.174, Subd. 19;
(17) Redevelopment when the recipient's investment in the purchase of the site and in site preparation
is 70 percent or more of the assessor's current year's estimated market value;
(18) General changes in tax increment financing law and other general tax law changes of a principally
technical nature;
(19) Federal assistance until the assistance has been repaid to, and reinvested by, the state or local
government agency;
(20) Funds from dock and wharf bonds issued by a seaway port authority;
(21) Business loans and loan guarantees of $150,000 or less;
(22) Federal loan funds provided through the United States Department of Commerce, Economic
Development Administration; and
(23) Property tax abatements granted under M.S., Section 469.1813 to property that is subject to
valuation under Minnesota Rules, chapter 8100.
The City will comply with M.S., Sections 116J.993 to 116J.995 to the extent the tax increment assistance
under this TIF Plan does not fall under any of the above exemptions.
Subsection 2-12. County Road Costs
Pursuant to M.S., Section 469.175, Subd la, the County Board may require the City to pay for all or part
of the cost of county road improvements if the proposed development to be assisted by tax increment will,
in the judgment of the county, substantially increase the use of county roads requiring construction of
road improvements or other road costs and if the road improvements are not scheduled within the next five
years under a capital improvement plan or within five years under another county plan.
If the county elects to use increments to improve county roads, it must notify the City within forty-five days
of receipt of this TIF Plan. In the opinion of the City and consultants, the proposed development outlined
in this TIF Plan will have little or no impact upon county roads, therefore the TIF Plan was not forwarded to
the county 45 days prior to the public hearing. The City is aware that the county could claim that tax
increment should be used for county roads, even after the public hearing.
City of Otsego
Tax Increment Financing Plan for Tax Increment Financing District No. 4 - Riverbend North 2-7
Subsection 2-13. Estimated Impact on Other Taxing Jurisdictions
The estimated impact on other taxing jurisdictions assumes that the redevelopment contemplated by the TIF
Plan would occur without the creation of the District. However, the City has determined that such
development or redevelopment would not occur "but for" tax increment financing and that, therefore, the
fiscal impact on other taxing jurisdictions is $0. The estimated fiscal impact of the District would be as
follows if the "but for" test was not met:
IMPACT ON TAX BASE
Estimated
Estimated
Estimated Captured
Potential
2017/Pay 2018
Tax Capacity (CTC)
Percent of CTC
Total Net
Upon Completion
to Entity Total
Tax Capacity
Wright County 156,725,581
302,452
0.1930%
City of Otsego 16,700,452
302,452
1.8110%
ISD No. 728 18,379,065
302,452
1.6456%
IMPACT ON TAX RATES
110,592
The estimates listed above display the captured tax capacity when all construction is completed. The tax rate
used for calculations is the estimated Pay 2018 rate. The total net capacity for the entities listed above are
based on estimated Pay 2018 figures. The District will be certified under the actual Pay 2018 rates, which
were unavailable at the time this TIF Plan was prepared.
Pursuant to M.S. Section 469.175 Subd. 2(b):
(1) Estimate of total tax increment. It is estimated that the total amount of tax increment that will be
generated over the life of the District is $7,688,170;
(2) Probable impact of the District on city provided services and ability to issue debt. An impact of the
District on police protection is not expected. The City currently contracts with the Wright County
Sheriff's Office for police services. The Wright County Sheriffs Office does track all calls for
service including property -type calls and crimes. With any addition of new residents or businesses,
police calls for service may be increased. New developments may add an increase in traffic, and
additional overall demands to the call load. The City does not expect that the proposed development,
in and of itself, will necessitate new capital investment in vehicles or require that the City expand its
City of Otsego
Tax Increment Financing Plan for Tax Increment Financing District No. 4 - Riverbend North 2-8
Estimated
Percent
Potential
Pay 2018
of Total
CTC
Taxes
Extension Rates
Wright County
0.399210
35.48%
302,452
120,742
City of Otsego
0.365650
32.50%
302,452
110,592
ISD No. 728
0.360200
32.02%
302,452
108,943
Total
1.125060
100.00%
340,277
The estimates listed above display the captured tax capacity when all construction is completed. The tax rate
used for calculations is the estimated Pay 2018 rate. The total net capacity for the entities listed above are
based on estimated Pay 2018 figures. The District will be certified under the actual Pay 2018 rates, which
were unavailable at the time this TIF Plan was prepared.
Pursuant to M.S. Section 469.175 Subd. 2(b):
(1) Estimate of total tax increment. It is estimated that the total amount of tax increment that will be
generated over the life of the District is $7,688,170;
(2) Probable impact of the District on city provided services and ability to issue debt. An impact of the
District on police protection is not expected. The City currently contracts with the Wright County
Sheriff's Office for police services. The Wright County Sheriffs Office does track all calls for
service including property -type calls and crimes. With any addition of new residents or businesses,
police calls for service may be increased. New developments may add an increase in traffic, and
additional overall demands to the call load. The City does not expect that the proposed development,
in and of itself, will necessitate new capital investment in vehicles or require that the City expand its
City of Otsego
Tax Increment Financing Plan for Tax Increment Financing District No. 4 - Riverbend North 2-8
contract with Wright County.
The probable impact of the District on fire protection is not expected to be significant. The parcels
in the District are served under a contract with the City of Elk River fire department, and the
development is not anticipated to impact fire protections costs or services. Typically new buildings
generate few calls, if any, and are of superior construction.
The impact of the District on public infrastructure is expected to be minimal. The development is
not expected to significantly impact any traffic movements in the area. The current infrastructure for
sanitary sewer, storm sewer and water will be able to handle the additional volume generated from
the proposed development. Based on the development plans, there are no additional costs associated
with street maintenance, sweeping, plowing, lighting and sidewalks. The development in the District
is expected to contribute an estimated $3,469,182 in sanitary sewer (SAC) and water (WAC)
connection fees.
The probable impact of any District general obligation tax increment bonds on the ability to issue
debt for general fund purposes is expected to be minimal. It is not anticipated that there will be
any general obligation debt issued in relation to this project, therefore there will be no impact on
the City's ability to issue future debt or on the City's debt limit.
(3) Estimated amount of tax increment attributable to school district levies. It is estimated that 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 $2,461,752;
(4) Estimated amount of tax increment attributable to county levies. It is estimated that 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 2,727,763;
(5) Additional information requested by the county or school district. The City is not aware of any
standard questions in a county or school district written policy regarding tax increment districts and
impact on county or school district services. The county or school district must request additional
information pursuant to M.S. Section 469.175 Subd. 2(b) within 15 days after receipt of the tax
increment financing plan.
No requests for additional information from the county or school district regarding the proposed
development for the District have been received.
Subsection 2-14. Supporting Documentation
Pursuant to M.S. Section 469.175, Subd. I (a), clause 7 the TIF Plan must contain identification and
description of studies and analyses used to make the determination set forth in M.S. Section 469.175, Subd.
3, clause (b)(2) and the findings are required in the resolution approving the District. Following is a list of
reports and studies on file at the City that support the City's findings:
• LHB, Inc. Redevelopment TIF District Qualifications Report
Subsection 2-15. Definition of Tax Increment Revenues
Pursuant to M.S., Section 469.174, Subd. 25, tax increment revenues derived from a tax increment financing
City of Otsego
Tax Increment Financing Plan for Tax Increment Financing District No. 4 - Riverbend North 2-9
district include all of the following potential revenue sources:
1. Taxes paid by the captured net tax capacity, but excluding any excess taxes, as computed underMS.,
Section 469.177;
2. The proceeds from the sale or lease of property, tangible or intangible, to the extent the property was
purchased by the authority with tax increments;
3. Principal and interest received on loans or other advances made by the authority with tax increments;
4. Interest or other investment earnings on or from tax increments;
5. Repayments or return of tax increments made to the Authority under agreements for districts for
which the request for certification was made after August 1, 1993; and
6. The market value homestead credit paid to the Authority under M.S., Section 273.1384.
Subsection 2-16. Modifications to the District
In accordance with M.S., Section 469.175, Subd. 4, any:
1. Reduction or enlargement of the geographic area of the District, if the reduction does not meet the
requirements of M.S., Section 469.175, Subd. 4(e);
2. Increase in amount of bonded indebtedness to be incurred;
3. A determination to capitalize interest on debt if that determination was not a part of the original TIF
Plan;
4. Increase in the portion of the captured net tax capacity to be retained by the City;
5. Increase in the estimate ofthe cost ofthe District, including administrative expenses, that will be paid
or financed with tax increment from the District; or
5. Designation of additional property to be acquired by the City,
shall be approved upon the notice and after the discussion, public hearing and findings required for approval
of the original TIF Plan.
Pursuant to M.S. Section 469.175 Subd. 4(f), the geographic area of the District may be reduced, but shall not
be enlarged after five years following the date of certification of the original net tax capacity by the county
auditor. If a redevelopment district is enlarged, the reasons and supporting facts for the determination that
the addition to the district meets the criteria of M.S., Section 469.174, Subd. 10, must be documented in
writing and retained. The requirements of this paragraph do not apply if (1) the only modification is
elimination of parcel(s) from the District and (2)(A) the current net tax capacity of the parcel(s) eliminated
from the District equals or exceeds the net tax capacity of those parcel(s) in the District's original net tax
capacity or (B) the City agrees that, notwithstanding M.S., Section 469.177, Subd. 1, the original net tax
capacity will be reduced by no more than the current net tax capacity of the parcel(s) eliminated from the
District.
The City must notify the County Auditor of any modification to the District. Modifications to the District
in the form of a budget modification or an expansion of the boundaries will be recorded in the TIF Plan.
Subsection 2-17. Administrative Expenses
In accordance with M.S., Section 469.174, Subd. 14, administrative expenses means all expenditures of the
City, other than:
1. Amounts paid for the purchase of land;
2. Amounts paid to contractors or others providing materials and services, including architectural and
City of Otsego
Tax Increment Financing Plan for Tax Increment Financing District No. 4 - Riverbend North 2-10
engineering services, directly connected with the physical development of the real property in the
District;
3. Relocation benefits paid to or services provided for persons residing or businesses located in the
District;
4. Amounts used to pay principal or interest on, fund a reserve for, or sell at a discount bonds issued
pursuant to M.S., Section 469.178; or
5. Amounts used to pay other financial obligations to the extent those obligations were used to finance
costs described in clauses (1) to (3).
For districts for which the request for certification were made before August 1, 1979, or after June 30, 1982,
and before August 1, 2001, administrative expenses also include amounts paid for services provided by bond
counsel, fiscal consultants, and planning or economic development consultants. Pursuant to M.S., Section
469.176, Subd. 3, tax increment may be used to pay any authorized and documented administrative
expenses for the District up to but not to exceed 10 percent of the total estimated tax increment expenditures
authorized by the TIF Plan or the total tax increments, as defined by M.S., Section 469.174, Subd. 25, clause
(1), from the District, whichever is less.
For districts for which certification was requested after July 31, 2001, no tax increment may be used to pay
any administrative expenses for District costs which exceed ten percent of total estimated tax increment
expenditures authorized by the TIF Plan or the total tax increments, as defined inM.S., Section 469.174, Subd.
25, clause (1), from the District, whichever is less.
Pursuant to M.S., Section 469.176, Subd. 4h, tax increments may be used to pay for the County's actual
administrative expenses incurred in connection with the District and are not subject to the percentage limits
of M. S., Section 469.176, Subd. 3. The county may require payment of those expenses by February 15 of the
year following the year the expenses were incurred.
Pursuant to M.S., Section 469. 177, Subd. 11, the County Treasurer shall deduct an amount (currently 0.36
percent) of any increment distributed to the City and the County Treasurer shall pay the amount deducted to
the State Commissioner of Management and Budget for deposit in the state general fund to be appropriated
to the State Auditor for the cost of financial reporting of tax increment financing information and the cost of
examining and auditing authorities' use of tax increment financing. This amount may be adjusted annually
by the Commissioner of Revenue.
Subsection 2-18. Limitation of Increment
The tax increment pledged to the payment of bonds and interest thereon may be discharged and the District
may be terminated if sufficient funds have been irrevocably deposited in the debt service fund or other escrow
account held in trust for all outstanding bonds to provide for the payment of the bonds at maturity or
redemption date.
Pursuant to M.S., Section 469.176, Subd. 6:
if, after four years from the date of certification of the original net tax capacity of the tax
incrementfinancingdistrictpursuanttoMS., Section 469.177, no demolition, rehabilitation
or renovation of property or other site preparation, including qualified improvement of a
street adjacent to a parcel but not installation of utility service including sewer or water
systems, has been commenced on a parcel located within a tax increment financing district
by the authority or by the owner of the parcel in accordance with the tax incrementfinancing
plan, no additional tax increment may be taken from that parcel, and the original net tax
City of Otsego
Tax Increment Financing Plan for Tax Increment Financing District No. 4 - Riverbend North 2-11
capacity of that parcel shall be excluded from the original net tax capacity of the tax
increment financing district. If the authority or the owner of the parcel subsequently
commences demolition, rehabilitation or renovation or other site preparation on thatparcel
including qualified improvement of a street adjacent to that parcel, in accordance with the
tax incrementfinancingplan, the authority shall certify to the county auditor that the activity
has commenced and the county auditor shall certify the net tax capacity thereof as most
recently certified by the commissioner ofrevenue and add it to the original net tax capacity
ofthe tax incrementfinancing district. The county auditor must enforce theprovisions ofthis
subdivision. The authority must submit to the county auditor evidence that the required
activity has taken place for each parcel in the district. The evidence for a parcel must be
submitted by February I of the fifth year following the year in which the parcel was certified
as included in the district. For purposes of this subdivision, qualified improvements of a
street are limited to (1) construction or opening of a new street, (2) relocation of a street,
and (3) substantial reconstruction or rebuilding of an existing street.
The City or a property owner must improve parcels within the District by approximately February 2022 and
report such actions to the County Auditor.
Subsection 2-19. Use of Tax Increment
The City hereby determines that it will use 100 percent of the captured net tax capacity of taxable property
located in the District for the following purposes:
1. To pay the principal of and interest on bonds issued to finance a project;
2. To finance, or otherwise pay the capital and administration costs of Development District No. 1
pursuant to M.S., Sections 469.124 to 469.133;
3. To pay for project costs as identified in the budget set forth in the TIF Plan;
4. To finance, or otherwise pay for other purposes as provided in M.S., Section 469.176, Subd. 4;
5. To pay principal and interest on any loans, advances or other payments made to or on behalf of the
City or for the benefit of Development District No. 1 by a developer;
6. To finance or otherwise pay premiums and other costs for insurance or other security guaranteeing
the payment when due of principal of and interest on bonds pursuant to the TIF Plan or pursuant to
M.S., Chapter 462C. M.S., Sections 469.152 through 469.165, and/or M.S., Sections 469.178; and
7. To accumulate or maintain a reserve securing the payment when due of the principal and interest on
the tax increment bonds or bonds issued pursuant to M.S., Chapter 4620 M.S., Sections 469.152
through 469.165, and/or M.S., Sections 469.178.
These revenues shall not be used to circumvent any levy limitations applicable to the City nor for other
purposes prohibited by M.S., Section 469.176, Subd. 4.
Subsection 2-20. Excess Increments
Excess increments, as defined in M.S., Section 469.176, Subd. 2, shall be used only to do one or more of the
following:
1. Prepay any outstanding bonds;
2. Discharge the pledge of tax increment for any outstanding bonds;
3. Pay into an escrow account dedicated to the payment of any outstanding bonds; or
4. Return the excess to the County Auditor for redistribution to the respective taxing jurisdictions in
proportion to their local tax rates.
City of Otsego
Tax Increment Financing Plan for Tax Increment Financing District No. 4 - Riverbend North 2-12
The City must spend or return the excess increments under paragraph (c) within nine months after the end
of the year. In addition, the City may, subject to the limitations set forth herein, choose to modify the TIF
Plan in order to finance additional public costs in Development District No. 1 or the District.
Subsection 2-21. Requirements for Agreements with the Developer
The City will review any proposal for private development to determine its conformance with the
Development Program and with applicable municipal ordinances and codes. To facilitate this effort, the
following documents may be requested for review and approval: site plan, construction, mechanical, and
electrical system drawings, landscaping plan, grading and storm drainage plan, signage system plan, and any
other drawings or narrative deemed necessary by the City to demonstrate the conformance ofthe development
with City plans and ordinances. The City may also use the Agreements to address other issues related to the
development.
Pursuant to M.S., Section 469.176, Subd. 5, no more than 25 percent, by acreage, of the property to be
acquired in the District as set forth in the TIF Plan shall at any time be owned by the City as a result of
acquisition with the proceeds of bonds issued pursuant to M.S., Section 469.178 to which tax increments from
property acquired is pledged, unless prior to acquisition in excess of 25 percent of the acreage, the City
concluded an agreement for the development or redevelopment of the property acquired and which provides
recourse for the City should the development or redevelopment not be completed.
Subsection 2-22. Assessment Agreements
Pursuant to M.S., Section 469.177, Subd. 8, the City may enter into a written assessment agreement in
recordable form with the developer ofproperty within the District which establishes a minimum market value
of the land and completed improvements for the duration of the District. The assessment agreement shall be
presented to the County Assessor who shall review the plans and specifications for the improvements to be
constructed, review the market value previously assigned to the land upon which the improvements are to be
constructed and, so long as the minimum market value contained in the assessment agreement appears, in the
judgment of the assessor, to be a reasonable estimate, the County Assessor shall also certify the minimum
market value agreement.
Subsection 2-23. Administration of the District
Administration of the District will be handled by the City Administrator.
Subsection 2-24. Annual Disclosure Requirements
Pursuant to M.S., Section 469.175, Subds. 5, 6, and 6b the City must undertake financial reporting for all tax
increment financing districts to the Office of the State Auditor, County Board and County Auditor on or
before August 1 of each year. M.S., Section 469.175, Subd. 5 also provides that an annual statement shall be
published in a newspaper of general circulation in the City on or before August 15.
If the City fails to make a disclosure or submit a report containing the information required by M.S., Section
469.175 Subd. 5 and Subd. 6, the Office of the State Auditor will direct the County Auditor to withhold the
distribution of tax increment from the District.
Subsection 2-25. Reasonable Expectations
As required by the TIF Act, in establishing the District, the determination has been made that the anticipated
City of Otsego
Tax Increment Financing Plan for Tax Increment Financing District No. 4 - Riverbend North 2-13
development would not reasonably be expected to occur solely through private investment within the
reasonably foreseeable future and that the increased market value ofthe 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 ofthe District permitted by the TIF Plan. In making said determination,
reliance has been placed upon written representation made by the developer to such effects and upon City
staff awareness of the feasibility of developing the project site(s) within the District. A comparative analysis
of estimated market values both with and without establishment of the District and the use of tax increments
has been performed as described above. Such analysis is included with the cashflow in Appendix D, and
indicates that the increase in estimated market value of the proposed development (less the indicated
subtractions) exceeds the estimated market value of the site absent the establishment of the District and the
use of tax increments.
Subsection 2-26. Other Limitations on the Use of Tax Increment
General Limitations. All revenue derived from tax increment shall be used in accordance with the TIF
Plan. The revenues shall be used to finance, or otherwise pay the capital and administration costs of
Development District No. 1 pursuant to M.S., Sections 469.124 to 469.133. Tax increments may not be
used to circumvent existing levy limit law. No tax increment may be used for 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. This provision does not prohibit the use of revenues derived from tax
increments for the construction or renovation of a parking structure.
2. Pooling Limitations. At least 75 percent of tax increments from the District must be expended on
activities in the District or to pay bonds, to the extent that the proceeds of the bonds were used to finance
activities within said district or to pay, or secure payment of, debt service on credit enhanced bonds. Not
more than 25 percent of said tax increments may be expended, through a development fund or otherwise,
on activities outside of the District except to pay, or secure payment of, debt service on credit enhanced
bonds. For purposes of applying this restriction, all administrative expenses must be treated as if they
were solely for activities outside of the District.
I Five Year Limitation on Commitment of Tax Increments. Revenues derived from tax increments paid by
properties in the District shall be deemed to have satisfied the 75 percent test set forth in paragraph (2)
above only if the five year rule set forth in M.S., Section 469.1763, Subd. 3, has been satisfied; and
beginning with the sixth year following certification of the District, 75 percent of said tax increments
that remain after expenditures permitted under said five year rule must be used only to pay previously
committed expenditures or credit enhanced bonds as more fully set forth in M.S., Section 469.1763,
Subd. S.
Redevelopment District. At least 90 percent of the revenues derived from tax increment from a
redevelopment district must be used to finance the cost of correcting conditions that allow designation
of redevelopment and renewal and renovation districts under M.S., Section 469.176 Subd. 4j. These costs
include, but are not limited to, acquiring properties containing structurally substandard buildings or
improvements or hazardous substances, pollution, or contaminants, acquiring adjacent parcels necessary
to provide a site of sufficient size to permit development, demolition and rehabilitation of structures,
clearing of the land, the removal of hazardous substances or remediation necessary for development of
the land, and installation of utilities, roads, sidewalks, and parking facilities for the site. The allocated
administrative expenses of the City, including the cost of preparation of the development action response
plan, may be included in the qualifying costs.
City of Otsego
Tax Increment Financing Plan for Tax Increment Financing District No. 4 - Riverbend North 2-14
Subsection 2-27. Summary
The City of Otsego is establishing the District to preserve and enhance the tax base, redevelop substandard
areas, and provide employment opportunities in the City. The TIF Plan for the District was prepared by
Ehlers & Associates, Inc., 3060 Centre Pointe Drive, Roseville, Minnesota 55113, telephone (651) 697-8500.
City of Otsego
Tax Increment Financing Plan for Tax Increment Financing District No. 4 - Riverbend North 2-15
Appendix A
Project Description
The Riverbend North site is located on a private drive extended from River Road, near State Highway 101 in
the City of Otsego. The 13.1 -acre site also contains the existing Riverbend Wastewater Treatment Facility, a
private facility providing sewer service to the Riverbend Mobile Home Park located directly to the south of
the site. In 2017, Darkenwald Corporation submitted an application to amend the Riverbend North PUD
with a new concept plan including 164 units of market rate multifamily housing, a commercial mini -storage
facility of 23,650 square feet, and sites for future commercial retail buildings totaling 15,000 square feet. It is
anticipated that a first phase, 84 -unit apartment building and mini -storage would be the first phase of
development starting in 2018. A second phase comprised of an 80 -unit apartment building would follow.
The commercial retail sites will comprise the final phase of redevelopment once the housing is established.
In total, the estimated project cost is in excess of $25 million.
The primary purpose of the public financing is to assist with costs to privately redevelop the Riverbend
North site and facilitate new housing options and tax base growth within an under-utilized area of the city.
The City expects to utilize one or more pay-as-you-go revenue notes to the developer to reimburse qualifying
site redevelopment costs including: land acquisition, site clearance, costs from the elimination of the private
WWTF and connection to the municipal sewer system, and other qualifying redevelopment costs. The
Developer has stated that the extraordinary redevelopment costs make the project infeasible without public
assistance. The assistance is necessary to enable the developer to adequately secure private financing for the
project.
The City has engaged LHB, Inc. in late 2017 to inspect and evaluate the properties within the site as a
potential redevelopment TIF District. LHB, Inc. found the property to be occupied by a structurally
substandard building requiring substantial renovation or clearance. Their findings are documented within a
report included within Appendix F.
Appendix
Appendix B
Map of Development District No. 1 and the District
Appendix
Tax Increment Financing District No. 4 -
tcello
1100
Riverbend North
Development District No. I
City of Otsego
Wright County, Minnesota
101
Otsego 1
TIF District
101
Albertville
TIF District Inset
241
101 k1185
Appendix C
Description of Property to be Included in the District
The District encompasses all property and adjacent rights-of-way and abutting roadways identified by the
parcels listed below.
Parcel Numbers
Address
Owner
118303000010
118303000020
118500262400
Appendix
Appendix D
Estimated Cash Flow for the District
Appendix
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Appendix E
Minnesota Business Assistance Form
(Minnesota Department of Employment and Economic Development)
A Minnesota Business Assistance Form (MBAF) should be used to report and/or update each calendar year's
activity by April 1 of the following year.
Please see the Minnesota Department of Employment and Economic Development (DEED) website at
http://www.deed.state.mn.us/Community/subsidies/MBAFForm.htm for information and forms.
Appendix
Appendix F
Redevelopment Qualifications for the District
Appendix
Report of Inspection Procedures and Results for
Determining Qualifications of a
Tax Increment Financing District as a Redevelopment District
Otsego River Road Redevelopment TIF District
Otsego, Minnesota
November 14, 2017
Prepared For the
City of Otsego
Prepared by:
LHB, Inc.
701 Washington Avenue North, Suite 200
Minneapolis, 1\/Iinnesota 55401
LHB Project No. 170692
TABLE OF CONTENTS
PART 1 — EXECUTIVE SUMMARY................................................................................ 2
Purpose of Evaluation................................................................................2
Scopeof Work........................................................................................... 3
Conclusion................................................................................................. 3
PART 2 — MINNESOTA STATUTE 469.174, SUBDIVISION 10 REQUIREMENTS....... 3
A. Coverage Test...................................................................................... 4
B. Condition of Buildings Test................................................................... 4
C. Distribution of Substandard Buildings ................................................... 5
PART 3 — PROCEDURES FOLLOWED......................................................................... 6
PART 4 — FINDINGS...................................................................................................... 6
A. Coverage Test...................................................................................... 6
B. Condition of Building Test..................................................................... 7
1. Building Inspection.................................................................... 7
2. Replacement Cost..................................................................... 8
3. Code Deficiencies..................................................................... 8
4. System Condition Deficiencies.................................................. 9
C. Distribution of Substandard Structures ................................................. 9
PART 5 - TEAM CREDENTIALS.................................................................................. 11
APPENDIX A Property Condition Assessment Summary Sheet
APPENDIX B Building Code, Condition Deficiency and Context Analysis Reports
APPENDIX C Building Replacement Cost Reports
Code Deficiency Cost Reports
Photographs
Otsego River Road Redevelopment TIF District
LHB Project No. 170692 Page 1 of 12 Final Report
PART 1 - EXECUTIVE SUMMARY
PURPOSE OF EVALUATION
LHB was hired by the City of Otsego to inspect and evaluate the properties within a Tax Increment
Financing Redevelopment District ("TIF District") proposed to be established by the City. The
proposed TIF District is bounded by River Road Northeast, State Highway 101, and Saint Croix Drive
(Diagram 1). The purpose of LHB's work is to determine whether the proposed TIF District meets
the statutory requirements for coverage, and whether one (1) building on four (4) parcels, located
within the proposed TIF District, meet the qualifications required for a Redevelopment District.
Diagram 1— Proposed TIF District
Otsego River Road Redevelopment TIF District
LHB Project No. 170692 Page 2 of 12 Final Report
SCOPE OF WORK
The proposed TIF District consists of four (4) parcels with one (1) building. One (1) building was
inspected on October 6, 2017. The cold storage building on Parcel A is not considered a building
under TIF definitions because it is an unoccupied structure without utilities. A Building Code and
Condition Deficiency report for the building that was inspected is located in Appendix B.
CONCLUSION
After inspecting and evaluating the properties within the proposed TIF District and applying current
statutory criteria for a Redevelopment District under Minnesota Statutes, Section 469.174, Subdivision 10,
it is our professional opinion that the proposed TIF District qualifies as a Redevelopment District
because:
• The proposed TIF District has a coverage calculation of 87.3 percent which is above the 70
percent requirement.
100 percent of the buildings are structurally substandard which exceeds the 50 percent
requirement.
• The substandard buildings are reasonably distributed.
The remainder of this report describes our process and findings in detail.
PART 2 - MINNESOTA STATUTE 469.174, SUBDIVISION 10
REQUIREMENTS
The properties were inspected in accordance with the following requirements under Minnesota Statutes,
Section 469.174, Subdivision 10(c), which states:
INTERIOR INSPECTION
"The municipality may not make such determination [that the building is structurally substandard]
without an interior inspection of the property..."
EXTERIOR INSPECTION AND OTHER MEANS
"An interior inspection of the property is not required, if the municipality finds that
(1) the municipality or authority is unable to gain access to the property after using its best efforts
to obtain permission from the party that owns or controls the property; and
(2) the evidence otherwise supports a reasonable conclusion that the building is structurally
substandard."
DOCUMENTATION
"Written documentation of the findings and reasons why an interior inspection was not conducted
must be made and retained under section 469.175, subdivision 3(1)."
QUALIFICATION REQUIREMENTS
Minnesota Statutes, Section 469.174, Subdivision 10 (a) (1) requires three tests for occupied parcels:
Otsego River Road Redevelopment TIF District
LHB Project No. 170692 Page 3 of 12 Final Report
A. COVERAGE TEST
..."Parcels consisting of 70 percent of the area of the district are occupied by buildings, streets,
utilities, or paved or gravel parking lots..."
The coverage required by the parcel to be considered occupied is defined under Minnesota
Statutes, Section 469.174, Subdivision 10(e), which states: "For purposes of this subdivision, a parcel
is not occupied by buildings, streets, utilities, paved or gravel parking lots, or other similar
structures unless 15 percent of the area of the parcel contains buildings, streets, utilities, paved
or gravel parking lots, or other similar structures."
B. CONDITION OF BUILDINGS TEST
Minnesota Statutes, Section 469.174, Subdivision 10(a) states, "...and more than 50 percent of the
buildings, not including outbuildings, are structurally substandard to a degree requiring
substantial renovation or clearance;"
Structurally substandard is defined under Minnesota Statutes, Section 469.174, Subdivision 10(b),
which states: "For purposes of this subdivision, `structurally substandard' shall mean
containing defects in structural elements or a combination of deficiencies in essential
utilities and facilities, light and ventilation, fire protection including adequate egress, layout
and condition of interior partitions, or similar factors, which defects or deficiencies are of
sufficient total significance to justify substantial renovation or clearance."
a. We do not count energy code deficiencies toward the thresholds required by Minnesota
Statutes, Section 469.174, Subdivision 10(b) defined as "structurally substandard", due to
concerns expressed by the State of 1\/Iinnesota Court of Appeals in the ll'Ialrer Auto
Sales, Inc. vs. City of Richfield case filed November 13, 2001.
2. Buildings are not eligible to be considered structurally substandard unless they meet certain
additional criteria, as set forth in Subdivision 10(c) which states:
"A building is not structurally substandard if it is in compliance with the building code
applicable to new buildings or could be modified to satisfy the building code at a cost of
less than 15 percent of the cost of constructing a new structure of the same square footage
and type on the site. The municipality may find that a building is not disqualified as
structurally substandard under the preceding sentence on the basis of reasonably available
evidence, such as the size, type, and age of the building, the average cost of plumbing,
electrical, or structural repairs, or other similar reliable evidence."
"Items of evidence that support such a conclusion [that the building is not disqualified]
include recent fire or police inspections, on-site property tax appraisals or housing
inspections, exterior evidence of deterioration, or other similar reliable evidence."
LHB counts energy code deficiencies toward the 15 percent code threshold required by
1tilinnesota Statutes, Section 469.174, Subdivision 10(c)) for the following reasons:
• The Minnesota energy code is one of ten building code areas highlighted by the
Minnesota Department of Labor and Industry website where minimum
construction standards are required by law.
Otsego River Road Redevelopment TIF District
LHB Project No. 170692 Page 4 of 12 Final Report
• Chapter 13 of the 2015 Minnesota Building Code states, "Buildings shall be designed
and constructed in accordance with the International Energy Conservation Code."
Furthermore, Minnesota Rules, Chapter 1305.0021 Subpart 9 states, "References
to the International Energy Conservation Code in this code mean the Minnesota Energy
Code..."
• The Senior Building Code Representative for the Construction Codes and
Licensing Division of the Minnesota Department of Labor and Industry
confirmed that the Minnesota Energy Code is being enforced throughout the State
of Minnesota.
• In a January 2002 report to the Minnesota Legislature, the Management Analysis
Division of the Minnesota Department of Administration confirmed that the
construction cost of new buildings complying with the Minnesota Energy Code is
higher than buildings built prior to the enactment of the code.
• Proper TIF analysis requires a comparison between the replacement value of a
new building built under current code standards with the repairs that would be
necessary to bring the existing building up to current code standards. In order for
an equal comparison to be made, all applicable code chapters should be applied to
both scenarios. Since current construction estimating software automatically
applies the construction cost of complying with the Minnesota Energy Code,
energy code deficiencies should also be identified in the existing structures.
C. DISTRIBUTION OF SUBSTANDARD BUILDINGS
-Minnesota Statutes, Section 469.174, Subdivision 10, defines a Redevelopment District and requires
one or more of the following conditions, "reasonably distributed throughout the district."
(1) "Parcels consisting of 70 percent of the area of the district are occupied by buildings,
streets, utilities, paved or gravel parking lots, or other similar structures and more than
50 percent of the buildings, not including outbuildings, are structurally substandard to a
degree requiring substantial renovation or clearance;
(2) the property consists of vacant, unused, underused, inappropriately used, or infrequently
used rail yards, rail storage facilities, or excessive or vacated railroad rights-of-way;
(3) tank facilities, or property whose immediately previous use was for tank facilities..."
Our interpretation of the distribution requirement is that the substandard buildings must be
reasonably distributed throughout the district as compared to the location of all buildings in
the district. For example, if all of the buildings in a district are located on one half of the
area of the district, with the other half occupied by parking lots (meeting the required 70
percent coverage for the district), we would evaluate the distribution of the substandard
buildings compared with only the half of the district where the buildings are located. If all of
the buildings in a district are located evenly throughout the entire area of the district, the
substandard buildings must be reasonably distributed throughout the entire area of the
district. We believe this is consistent with the opinion expressed by the State of Minnesota
Court of Appeals in the WlalrerAuto Sales, Inc. vs. City of Biclfeld case filed November 13,
2001.
Otsego River Road Redevelopment TIF District
LHB Project No. 170692 Page 5 of 12 Final Report
PART 3 - PROCEDURES FOLLOWED
LHB inspected one (1) building during the day of October 6, 2017.
PART 4 - FINDINGS
A. COVERAGE TEST
1. The total square foot area of the parcel in the proposed TIF District was obtained from City
records, GIS mapping and site verification.
2. The total square foot area of buildings and site improvements on the parcels in the
proposed TIF District was obtained from City records, GIS mapping and site verification.
3. The percentage of coverage for each parcel in the proposed TIF District was computed to
determine if the 15 percent minimum requirement was met. The total square footage of
parcels meeting the 15 percent requirement was divided into the total square footage of the
entire district to determine if the 70 percent requirement was met.
FINDING:
The proposed TIF District met the coverage test under Minnesota Statutes, Section 469.174, Subdivision
10(e), which resulted in parcels consisting of 87.3 percent of the area of the proposed TIF District
being occupied by buildings, streets, utilities, paved or gravel parking lots, or other similar structures
(Diagram 2). This exceeds the 70 percent area coverage requirement for the proposed TIF District
under Minnesota Statutes, Section 469.174, Subdivision (a) (1).
Otsego River Road Redevelopment TIF District
LHB Project No. 170692 Page 6 of 12 Final Report
Diagram 2 — Coverage Diagram
Shaded area depicts a parcel more than 15 percent occupied by buildings, streets, utilities,
paved or gravel parking lots or other similar structures
B. CONDITION OF BUILDING TEST
1. BUILDING INSPECTION
The first step in the evaluation process is the building inspection. After an initial walk-
thru, the inspector makes a judgment whether or not a building "appears" to have enough
defects or deficiencies of sufficient total significance to justify substantial renovation or
clearance. If it does, the inspector documents with notes and photographs code and non -
code deficiencies in the building.
Otsego River Road Redevelopment TIF District
LHB Project No. 170692 Page 7 of 12 Final Report
2. REPLACEMENT COST
The second step in evaluating a building to determine if it is substandard to a degree
requiring substantial renovation or clearance is to determine its replacement cost. This is
the cost of constructing a new structure of the same square footage and type on site.
Replacement costs were researched using R.S. Means Cost Works square foot models for
2017.
A replacement cost was calculated by first establishing building use (office, retail, residential,
etc.), building construction type (wood, concrete, masonry, etc.), and building size to obtain
the appropriate median replacement cost, which factors in the costs of construction in
Otsego, Minnesota.
Replacement cost includes labor, materials, and the contractor's overhead and profit.
Replacement costs do not include architectural fees, legal fees or other "soft" costs not
directly related to construction activities. Replacement cost for each building is tabulated
in Appendix A.
3. CODE DEFICIENCIES
The next step in evaluating a building is to determine what code deficiencies exist with
respect to such building. Code deficiencies are those conditions for a building which are
not in compliance with current building codes applicable to new buildings in the State of
Minnesota.
Minnesota Statutes, Section 469.974, Subdivision 10(c), specifically provides that a building
cannot be considered structurally substandard if its code deficiencies are not at least 15
percent of the replacement cost of the building. As a result, it was necessary to determine
the extent of code deficiencies for each building in the proposed TIF District.
The evaluation was made by reviewing all available information with respect to such
buildings contained in City Building Inspection records and making interior and exterior
inspections of the buildings. LHB utilizes the current Minnesota State Building Code as
the official code for our evaluations. The Minnesota State Building Code is actually a series
of provisional codes written specifically for Minnesota only requirements, adoption of
several international codes, and amendments to the adopted international codes.
After identifying the code deficiencies in each building, we used R.S. Means Cost Works
2017: Unit and Assembly Costs to determine the cost of correcting the identified
deficiencies. We were then able to compare the correction costs with the replacement cost
of each building to determine if the costs for correcting code deficiencies meet the required
15 percent threshold.
FINDING:
One (1) out of one (1) building (100 percent) in the proposed TIF District contained code
deficiencies exceeding the 15 percent threshold required by Minnesota Statutes, Section
469.174, Subdivision 10(c). A Building Code, Condition Deficiency and Context Analysis
Otsego River Road Redevelopment TIF District
LHB Project No. 170692 Page 8 of 12 Final Report
report for the building in the proposed TIF District can be found in Appendix B of this
report.
4. SYSTEM CONDITION DEFICIENCIES
If a building meets the minimum code deficiency threshold under Minnesota Statutes, Section
469.174, Siibdivision 10(c), then in order for such building to be "structurally substandard"
under Minnesota Statutes, Section 469.974, Subdivision 10(b), the building's defects or
deficiencies should be of sufficient total significance to justify "substantial renovation or
clearance." Based on this definition, LHB re-evaluated each of the buildings that met the
code deficiency threshold under Minnesota Statutes, Section 469.974, Subdivision 10(c), to
determine if the total deficiencies warranted "substantial renovation or clearance" based on
the criteria we outlined above.
System condition deficiencies are a measurement of defects or substantial deterioration in
site elements, structure, exterior envelope, mechanical and electrical components, fire
protection and emergency systems, interior partitions, ceilings, floors and doors.
The evaluation of system condition deficiencies was made by reviewing all available
information contained in City records, and making interior and exterior inspections of the
buildings. LHB only identified system condition deficiencies that were visible upon our
inspection of the building or contained in City records. We did not consider the amount
of "service life" used up for a particular component unless it was an obvious part of that
component's deficiencies.
After identifying the system condition deficiencies in each building, we used our
professional judgment to determine if the list of defects or deficiencies is of sufficient total
significance to justify "substantial renovation or clearance."
FINDING:
In our professional opinion, one (1) out of one (1) building (100 percent) in the proposed
TIF District are structurally substandard to a degree requiring substantial renovation or
clearance, because of defects in structural elements or a combination of deficiencies in
essential utilities and facilities, light and ventilation, fire protection including adequate
egress, layout and condition of interior partitions, or similar factors which defects or
deficiencies are of sufficient total significance to justify substantial renovation or clearance.
This exceeds the 50 percent requirement of Subdivision 10a(1).
C. DISTRIBUTION OF SUBSTANDARD STRUCTURES
Much of this report has focused on the condition of individual buildings as they relate to
requirements identified by Minnesota Statutes, Section 469.974, Subdivision 10. It is also
important to look at the distribution of substandard buildings throughout the geographic
area of the proposed TIF District (Diagram 3).
Otsego River Road Redevelopment TIF District
LHB Project No. 170692 Page 9 of 12 Final Report
FINDING:
The parcels with substandard buildings are reasonably distributed compared to all parcels
that contain buildings.
Diagram 3 — Substandard Buildings
Shaded green area depicts parcels wide bnuld ngs.
Shaded orange area depicts substandard buildings.
Otsego River Road Redevelopment TIF District
LHB Project No. 170692 Page 10 of 12 Final Report
PART 5 - TEAM CREDENTIALS
Michael A. Fischer, AIA, LEED AP - Project Principal/TIF Analyst
Michael has 29 years of experience as project principal, project manager, project designer and project
architect on planning, urban design, educational, commercial and governmental projects. He has
become an expert on Tax Increment Finance District analysis assisting over 100 cities with strategic
planning for TIF Districts. He is an Architectural Principal at LHB and currently leads the
Minneapolis office.
Michael completed a two-year Bush Fellowship, studying at MIT and Harvard in 1999, earning Masters
degrees in City Planning and Real Estate Development from MIT. He has served on more than 50
committees, boards and community task forces, including a term as a City Council President and as
Chair of a Metropolitan Planning Organization. Most recently, he served as Chair of the Edina,
Minnesota planning commission and is currently a member of the Edina city council. Michael has
also managed and designed several award-winning architectural projects, and was one of four
architects in the Country to receive the AIA Young Architects Citation in 1997.
Philip Waugh — Project Manager/TIF Analyst
Philip is a project manager with 13 years pf experience in historic preservation, building investigations,
material research, and construction methods. He previously worked as a historic preservationist and
also served as the preservation specialist at the St. Paul Heritage Preservation Commission. Currently,
Phil sits on the Board of Directors for the Preservation Alliance of Minnesota. His current
responsibilities include project management of historic preservation projects, performing building
condition surveys and analysis, TIF analysis, writing preservation specifications, historic design
reviews, writing Historic Preservation Tax Credit applications, preservation planning, and grant
writing.
Phil Fisher— Inspector
For 35 years, Phil Fisher worked in the field of Building Operations in Minnesota including White Bear
Lake Area Schools. At the University of Minnesota he earned his Bachelor of Science in Industrial
Technology. He is a Certified Playground Safety Inspector, Certified Plant Engineer, and is trained in
Minnesota Enierprise Real Properties (MERP) Facility Condition Assessment (FCA). His FCA training
was recently applied to the Minnesota Department of Natural Resources Facilities Condition
Assessment project involving over 2,000 buildings.
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Otsego River Road Redevelopment TIF District
t_HB Project No. 170692 Page 11 of 12 Final Report
APPENDICES
APPENDIX A , Property Condition Assessment Summary Sheet
APPENDIX B Building Code and Condition Deficiencies Reports
APPENDIX C Building Replacement Cost Reports
Code Deficiency Cost Reports
Photographs
Otsego River Road Redevelopment TIF District
LHB Project No. 170692 Page 12 of 12 Final Report
APPENDIX A
Property Condition Assessment Summary Sheet
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APPENDIX B
Building Code, Condition Deficiency and Contest Analysis Reports
Otsego River Road Redevelopment TIF District
Building Code, Condition Deficiency and Context Analysis Report
November 2, 2017
Parcel No. & Building Name: Parcel C Wastewater Treatment Facility
Address: Property Address Not Listed
Parcel ID: 118303000010
Inspection Date(s) & Time(s): October 6, 2017 11:00 am
Inspection Type: Interior and Exterior
Summaiy of Deficiencies: It is our professional opinion that this building is Substandard
because:
- Substantial renovation is required to correct Conditions found.
- Building Code deficiencies total more than 15% of
replacement cost, NOT including energy code deficiencies.
Estimated Replacement Cost:
Estimated Cost to Correct Building Code Deficiencies:
Percentage of Replacement Cost for Building Code Deficiencies:
Defects in Structural Elements
1. None observed.
Combination of Deficiencies
1. Essential Utilities and Facilities
a. There is no ADA code required accessible parking.
b. There is no ADA code required means of entry into the building.
c. Door hardware does not meet ADA code.
d. There is no code required restroom in the building.
2. Light and Ventilation
a. The interior lighting does not comply with electrical/building code.
3. Fire Protection/Adequate Egress
a. There are no code required smoke detectors in the building.
b. There is no code required emergency notification system in the building.
c. There is no code required emergency lighting in the building.
d. There is no code required building sprinkler system installed.
$166,559
$41,074
24.66%
Otsego River Road Redevelopment TIF District Page 1 of 2 Building Report
LHB Project No. 170692 Parcel C — Wastewater Treatment Facility
4. Layout and Condition of Interior Partitions/Materials
a. The interior space should be painted.
b. Interior windows are rusting.
c. Interior metal surfaces are shoving significant rusting.
d. Interior wood surfaces are showing signs of water damage from elevated humidity levels.
5. Exterior Construction
a. Exterior metal panels are damaged and should be repaired to prevent water intrusion per
code.
b. Exterior panels are allowing for water intrusion at ground level, contrary to code.
c. Windows are rusting and should be replaced/repaired.
Description of Code Deficiencies
1. ADA code compliant parking should be designated.
2. ADA code compliant accessible entrance into the building should be created.
3: ADA code compliant door hardware should be installed.
4. ADA code compliant restroom should be installed.
5. Interior lighting should be replaced to comply with code.
6. Code required smoke detectors should be installed.
7. Code required emergency lighting should be installed.
8. Code required emergency notification system should be installed.
9. Code required building sprinkler system should be installed.
10. Damaged exterior metal panels should be repaired to prevent water intrusion per code.
11. Exterior metal panels should be modified to prevent water intrusion at ground level per code.
Overview of Deficiencies
This insulated wood framed metal building houses a wastewater treatment facility for the mobile home park.
While the exterior is in relatively good shape, the interior is showing signs of water damage in the form of
rust and corrosion. Interior wood is being affected by excessive humidity levels. Staff indicates that the
building is occupied anywhere from 2-8 hours per day. There is no code required restroom within the
building. The building does not have a code required emergency system.
0:\17Proj\170692\400 Design\406 Reports\Building Reports\Building I - Wastewater Treatment Facility\170692 Building 1 Building Report.docx
Otsego River Road Redevelopment TIF District Page 2 of 2 Building Report
LHB Project No. 170692 Parcel C — Wastewater Treatment Facility
APPENDIX C
Building Replacement Cost Reports
Code Deficiency Cost Reports
Photographs
Otsego River Road Redevelopment TIF District
Replacement Cost Report
FtSIVIeans data, Square Foot Cost Estimate Report
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Estimate Name:
Riverbend Mobile Home Park Waste Water
Cost
Treatment Facility
City of Otsego
Parcel ID: 118303000010, Otsego, Minnesota,
Standard Foundations
55330
Building Type:
Metal Panel /Wood Frame
Location:
OTSEGO, MN
Story Count:
1
Story Height (L.F.):
12
Floor Area (S.F.):
2400
Labor Type:
OPN
Basement Included:
No
Data Release:
Year 2017 Quarter 3
Cost Per Square Foot:
$69.38
Building Cost:
$166,559.46
Date: 10/10/2017
Costs are derived from a building model with basic components.
Scope differences and market conditions can cause costs to vary significantly.
"' Area entered is outside the range recommended by RSMeans.
Otsego River Road Redevelopment TIF District Replacement Cost Report
LHB Project No. 170692 Page 1 of 3 Parcel C - Wastewater Treatment Facility
of Total
Cost Per S.F.
Cost
A Substructure
A1010
Standard Foundations
16.42
39,419.67
Foundation wall, CIP, 4' wall height, direct chute, .148 CY/LF, 7.2 PLF, 12"
thick
10.38
24,909.75
Strip footing, concrete, reinforced, load 6.8 KLF, soil bearing capacity 3 KSF,
12" deep x 32" wide
5.90
14,162.85
Spread footings, 3000 PSI concrete, load 75K, soil bearing capacity 6 KSF, 4' -
0" square x 12" deep
0.14
347.07
A1030
Slab on Grade
2.81
6,744.00
Slab on grade, 6" thick, light industrial, reinforced
2.81
6,744.00
A2010
Basement Excavation
0.18
441.22
Excavate and fill, 30,000 SF, 4' deep, sand, gravel, or common earth, on site
storage
0.18
441.22
81020
Roof Construction
2.90
6,960.00
Wood roof, flat rafter, 2" x 6", 16" O.C.
2.90
6,960.00
B2010
Exterior Walls
8.94
21,452.82
Metal siding, steel, corrugated or ribbed, 20 ga, .0359" thick, galvanized
7.62
18,280.69
Metal siding support, 18' building height, 30 PSF wind load, 25' column
spacing, wind columns
1.32
3,172.13
82020
Exterior Windows
1.48
3,554.80
Windows, steel, horizontal pivoted, standard glass, 2'x 2'
1.48
3,554.80
B2030
Exterior Doors
1.67
3,998.46
Door, steel 18 gauge, hollow metal, 1 door with frame, no label, 2'-6" x 7'-0"
opening
1.67
3,998.46
B3010
Roof Coverings
6.46
15,506.14
Roofing, corrugated, steel, galvanized, 29 ga, .72 PSF
3.97
9,528.00
Insulation, rigid, roof deck, fiberboard, mineral, 1-1/2" thick, R4.17
1.82
4,365.86
Otsego River Road Redevelopment TIF District Replacement Cost Report
LHB Project No. 170692 Page 1 of 3 Parcel C - Wastewater Treatment Facility
Otsego River Road Redevelopment TIF District Replacement Cost Report
LHB Project No. 170692 Page 2 of 3 Parcel C - Wastewater Treatment Facility
Flashing, aluminum, no backing sides, .019"
0.67
1,612.28
C Interiors
C1020
Interior Doors
0.24
587.93
Door, single leaf, kd steel frame, hollow metal, commercial quality, flush, 3'-
0" x 7'-0" x 1-3/8"
0.24
587.93
C1030
Fittings
0.31
755.91
Toilet partitions, cubicless, floor mounted, headrail braced, plastic laminate
0.22
533.84
Entrance screens, floor mounted, 54" high, painted metal
0.04
84.69
Urinal screens, floor mounted, 24" wide, laminated plastic
0.06
137.38
C3010
Wall Finishes
0.14
330.25
Painting, masonry or concrete, latex, brushwork, primer & 1 coat
0.14
330.25
D Services
D2010
Plumbing Fixtures
1.73
4,148.52
Water closet, vitreous china, tank type, 2 piece close coupled
0.50
1,210.70
Urinal, vitreous china, stall type
0.19
463.12
Lavatory w/trim, wall hung, PE on Cl, 19" x 17"
0.58
1,390.50
Service sink w/trim, PE on Cl,wall hung w/rim guard, 24" x 20"
0.29
699.03
Water cooler, electric, wall hung, wheelchair type, 7.5 GPH
0.16
385.17
D2020
Domestic Water Distribution
3.00
7,210.32
Gas fired water heater, commercial, 100< F rise, 600 MBH input, 576 GPH
3.00
7,210.32
D4010
Sprinklers
5.41
12,984.00
Dry pipe sprinkler systems, steel, light hazard, 1 floor, 5000 SF
5.41
12,984.00
D4020
Standpipes
0.75
1,800.00
Wet standpipe risers, class III, steel, black, sch 40, 3" diam pipe, additional
floors
0.75
1,800.00
135010
Electrical Service/Distribution
1.05
2,513.66
Overhead service installation, includes breakers, metering, 20' conduit &
wire, 3 phase, 4 wire, 120/208 V, 200 A
0.19
448.17
Feeder installation 600 V, including RGS conduit and XHHW wire, 200 A
0.24
568.78
Switchgear installation, incl switchboard, panels & circuit breaker, 120/208
V, 3 phase, 400 A
0.62
1,496.71
D5020
Lighting and Branch Wiring
5.29
12,700.94
Receptacles incl plate, box, conduit, wire, 4 per 1000 SF, .5 W per SF, with
transformer
2.45
5,882.06
Miscellaneous power, to .5 watts
0.16
386.88
Fluorescent fixtures recess mounted in ceiling, 1 watt per SF, 20 FC, 5 fixtures
@40 watts per 1000 SF
2.68
6,432.00
D5030
Communications and Security
3.76
9,032.78
Communication and alarm systems, fire detection, addressable, 25 detectors,
includes outlets, boxes, conduit and wire
1.07
2,577.83
Fire alarm command center, addressable without voice, excl. wire & conduit
2.69
6,454.95
D5090
Other Electrical Systems
0.53
1,276.27
Generator sets, w/battery, charger, muffler and transfer switch, gas/gasoline
operated, 3 phase, 4 wire, 277/480 V, 7.5 kW
0.08
195.10
Generator sets, w/battery, charger, muffler and transfer switch, diesel
engine with fuel tank, 30 kW
0.45
1,081.17
Otsego River Road Redevelopment TIF District Replacement Cost Report
LHB Project No. 170692 Page 2 of 3 Parcel C - Wastewater Treatment Facility
E Equipment & Furnishings 1 0%1 01 0
0•0 Other Equipment 0 M
SubTotal
Contractor Fees (General Conditions,Overhead,Profit)
Architectural Fees
User Fees
Otsego River Road Redevelopment TIF District
LHB Project No. 170692
100% $63.07 $151,417.69
10.00% $6.31 $15,141.77
0.00% $0.00 $0.00
0.00% $0.00 $0.00
Replacement Cost Report
Page 3 of 3 Parcel C - Wastewater Treatment Facility
Otsego River Road Redevelopment TIF District
Code Deficiency Cost Report
Parcel C - PID 118303000010 - Wastewater Treatment Facility
Accessibility Items
Parking
Create ADA code compliant parking
Accessible Route
Create an ADA code compliant accessible route to building
Door Hardware
Install ADA code compliant door hardware
Restroom
Install ADA code compliant restroom
Structural Elements
Exiting
Fire Protection
Smoke Detectors
Install code required smoke detectors
Emergency Lighting
Install code required emergency lighting
Emergency Notification System
Install code required emergency notification system
Building Sprinkler System
Install code required building sprinkler system
Exterior Construction
Metal Panels
Repair metal panels to prevent water intrusion per code
Modify metal panes to prevent water intrusion per code
Roof Construction
$ 150.00
Ea
1
$
150.00
$ 250.00
Ea
1
$
250.00
$ 250.00
EA
3
$
750.00
$ 1.73
SF
2400
$
4,152.00
$ 2.12
SF
2400
$
5,088.00
$ 250.00
Ea
4
$
1,000.00
$ 1.32
SF
2400
$
3,168.00
$ 6.16
SF
2400
$
14,784.00
$ 500.00 Lump 1 $ 500.00
$ 2.00 SF 2400 $ 4,800.00
Otsego River Road Redevelopment TIF District Code Deficiency Cost Report
LHB Project No. 170692 Page 1 of 2 Parcel C - Wastewater Treatment Facility
Mechanical- Electrical
Electrical
Install code compliant lighting
2.68 SF 2400 $ 6,432.00
Total Code Improvements $ 41,074
Otsego River Road Redevelopment TIF District Code Deficiency Cost Report
LHB Project No. 170692 Page 2 of 2 Parcel C - Wastewater Treatment Facility
Otsego River Road Redevelopment TIF Analysis
Photos: Parcel C - Wastewater Treatment Facility
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P1150819.JPG
P1150820.JPG
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87
l -
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Page 1 of 4
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r, 4``
P1150826.JPG
,r
P1150829.JPG
Otsego River Road Redevelopment TIF Analysis
hotos: Parcel C - Wastewater Treatment Facility
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Page 2 of 4
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Otsego River Road Redevelopment TIF Analysis
Photos: Parcel C - Wastewater Treatment Facilitv
P1150843.JPG
P1150844.JPG
P1150845.JPG
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Page 3 of 4
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River Road Redevelopment TIF Analysis
Photos: Parcel C - Wastewater Treatment Facility
P1150855.JPG
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Page 4 of 4
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Appendix G
Findings Including But/For Qualifications
The reasons and facts supporting the findings for the adoption of the Tax Increment Financing Plan (TIF
Plan) for Tax Increment Financing District No. 4 - Riverbend North (District), as required pursuant to
Minnesota Statutes, Section 469.175, Subdivision 3 are as follows:
Finding that Tax Increment Financing District No. 4 - Riverbend North is a redevelopment district
as defined in M.S., Section 469.174, Subd. 10.
The District consists of three parcels, with plans to redevelop the area for commercial and housing
purposes. At least 70 percent of the area of the parcels in the District are occupied by buildings,
streets, utilities, paved or gravel parking lots or other similar structures and more than 50 percent of
the buildings in the District, not including outbuildings, are structurally substandard to a degree
requiring substantial renovation or clearance. (See Appendix F of the TIF Plan.)
2. Finding that the proposed development, in the opinion of the City Council, would not reasonably be
expected to occur solely through private investment within the reasonably foreseeable future and
that 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.
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: This finding is supported
by the fact that the redevelopment proposed in the TIF Plan meets the City's objectives for
redevelopment. Due to the high cost of redevelopment on the parcels currently occupied by
substandard buildings in need of clearance, the cost of financing the proposed improvements and the
need to decommission an existing wastewater treatment facility, this project is feasible only through
assistance, in part, from tax increment financing. The developer was asked for and provided a letter
and a proforma as justification that the developer would not have gone forward without tax
increment assistance.
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 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: This finding is justified on the grounds
that the cost of redeveloping the site, plant decommissioning, and required public improvements add
to the total redevelopment cost, the financing of which is infeasible without tax increment assistance.
The City reasonably determines that no other redevelopment of similar scope is anticipated on this
site without substantially similar assistance to overcome said costs being provided to the
development.
Therefore, the City concludes as follows:
a. The City's estimate of the amount by which the market value of the entire District will
increase without the use of tax increment financing is $0.
b. If the proposed development occurs, the total increase in market value will be $17,438,800.
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 $3,963,320.
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 $13,475,480 (the amount in clause b less the amount in clause c) without tax increment
assistance.
3. Finding that the TIF Plan for the District conforms to the general plan for the development or
redevelopment of the municipality as a whole.
The City Council reviewed the TIF Plan and found that the TIF Plan conforms to the general
development plan of the City.
4. Finding that the TIF Plan for the District will afford maximum opportunity, consistent with the
sound needs of the City as a whole, for the development or redevelopment of Development District
No. I by private enterprise.
The project to be assisted by the District will result in increased employment in the City and the State of
Minnesota, the clearance of substandard buildings and redevelopment of underutilized property, increased
tax base of the State and add a high-quality development to the City which will increase the availability of
safe and decent life -cycle housing in the City.
But -For Analysis
Current Market Value 342,200
New Market Value - Estimate 17,781,000
Difference 17,438,800
Present Value of Tax Increment 3,963,320
Difference 13,475,480
Value Likely to Occur Without TIF is Less Than: 13,475,480
CITY OF OTSEGO
WRIGHT COUNTY
STATE OF MINNESOTA
RESOLUTION NO. 2018-23
RESOLUTION ADOPTING A MODIFICATION TO THE DEVELOPMENT
PROGRAM FOR DEVELOPMENT DISTRICT NO. 1; AND ESTABLISHING
TAX INCREMENT FINANCING DISTRICT NO. 4 - RIVERBEND NORTH
THEREIN AND ADOPTING A TAX INCREMENT FINANCING PLAN
1_M,1.11 7 M 0) t?
BE IT RESOLVED by the City Council (the "Council") of the City of Otsego, Minnesota (the
"City"), as follows:
Section 1. Recitals
1.01. The City Council of the City of Otsego (the "City") has heretofore established
Development District No. 1 and adopted the Development Program therefor. It has been proposed by the
City that the City adopt a Modification to the Development Program (the "Development Program
Modification") for Development District No. 1 (the "Project Area") and establish Tax Increment
Financing District No. 4 - Riverbend North (the "District") therein and adopt a Tax Increment Financing
Plan (the "TIF Plan") therefor (the Development Program Modification and the TIF Plan are referred to
collectively herein as the "Program and Plan"); all pursuant to and in conformity with applicable law,
including Minnesota Statutes, Sections 469.124 to 469.133 and Sections 469.174 to 469.1794, all
inclusive, as amended, (the "Act") all as reflected in the Program and Plan, and presented for the
Council's consideration.
1.02. The City has investigated the facts relating to the Program and Plan and has caused the
Program and Plan to be prepared.
1.03. The City has performed all actions required by law to be performed prior to the
establishment of the District and the adoption and approval of the proposed Program and Plan, including,
but not limited to, notification of Wright County and Independent School District No. 728 having taxing
jurisdiction over the property to be included in the District and the holding of a public hearing upon
published notice as required by law.
1.04. Certain written reports (the "Reports") relating to the Program and Plan and to the
activities contemplated therein have heretofore been prepared by staff and consultants and submitted to
the Council and/or made a part of the City files and proceedings on the Program and Plan. The Reports,
including the redevelopment qualifications reports and planning documents, include data, information
and/or substantiation constituting or relating to the basis for the other findings and determinations made in
this resolution. The Council hereby confirms, ratifies and adopts the Reports, which are hereby
incorporated into and made as fully a part of this resolution to the same extent as if set forth in full herein.
1.05 The City is not modifying the boundaries of Development District No. 1, but is however,
modifying the Development Program therefor.
Section 2. Findings for the Adoption and Approval of the Development Program Modification.
2.01. The Council approves the Development Program Modification, and specifically finds
that: (a) the land within the Project Area would not be available for redevelopment without the financial
aid to be sought under this Development Program; (b) the Development Program, as modified, will afford
maximum opportunity, consistent with the needs of the City as a whole, for the development of the
Project Area by private enterprise; and (c) that the Development Program, as modified, conforms to the
general plan for the development of the City as a whole.
Section 3. Findings for the Establishment of Tax Increment Financing District No. 4 - Riverbend
North
3.01. The Council hereby finds that the District is in the public interest and is a "redevelopment
district" under Minnesota Statutes, Section 469.174, Subd. 10 of the Act.
3.02. The Council further finds that the proposed redevelopment would not occur solely
through private investment within the reasonably foreseeable future and that 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 Tax Increment Financing Plan, that the Program and Plan conform to the general plan for
the development or redevelopment of the City as a whole; and that the Program and Plan will afford
maximum opportunity consistent with the sound needs of the City as a whole, for the development or
redevelopment of the District by private enterprise.
3.03. The Council further finds, declares and determines that the City made the above findings
stated in this Section and has set forth the reasons and supporting facts for each determination in writing,
attached hereto as Exhibit A.
Section 4. Public Purpose
4.01. The adoption of the Program and Plan conforms in all respects to the requirements of the
Act and will help fulfill a need to develop an area of the City which is already built up, to provide
employment opportunities, to improve the tax base and to improve the general economy of the State and
thereby serves a public purpose. For the reasons described in Exhibit A, the City believes these benefits
directly derive from the tax increment assistance provided under the TIF Plan. A private developer will
receive only the assistance needed to make this development financially feasible. As such, any private
benefits received by a developer are incidental and do not outweigh the primary public benefits.
Section 5. Approval and Adoption of the Program and Plan
5.01. The Program and Plan, as presented to the Council on this date, including without
limitation the findings and statements of objectives contained therein, are hereby approved, ratified,
established, and adopted and shall be placed on file in the office of the City Administrator.
5.02. The staff of the City, the City's advisors and legal counsel are authorized and directed to
proceed with the implementation of the Program and Plan and to negotiate, draft, prepare and present to
this Council for its consideration all further plans, resolutions, documents and contracts necessary for this
purpose.
5.03 The Auditor of Wright County is requested to certify the original net tax capacity of the
District, as described in the Program and Plan, and to certify in each year thereafter the amount by which
the original net tax capacity has increased or decreased; and the City of Otsego is authorized and directed
to forthwith transmit this request to the County Auditor in such form and content as the Auditor may
specify, together with a list of all properties within the District, for which building permits have been
issued during the 18 months immediately preceding the adoption of this resolution.
5.04. The City Administrator is further authorized and directed to file a copy of the Program
and Plan with the Commissioner of the Minnesota Department of Revenue and the Office of the State
Auditor pursuant to Minnesota Statutes 469.175, Subd. 4a.
Council member
introduced the following resolution and moved its adoption:
The motion for the adoption of the foregoing resolution was duly seconded by Council member
, and upon a vote being taken thereon, the following voted in favor thereof..
and the following voted against the same:
Dated: February 26, 2018
Mayor
(Seal)
ATTEST:
City Administrator
W41 r_i:
The reasons and facts supporting the findings for the adoption of the Tax Increment Financing Plan (TIF
Plan) for Tax Increment Financing District No. 4 - Riverbend North (District), as required pursuant to
Minnesota Statutes, Section 469.175, Subdivision 3 are as follows:
1. Finding that Tax Increment Financing District No. 4 - Riverbend North is a redevelopment
district as defined in M.S., Section 469.174, Subd. 10.
The District consists of three parcels, with plans to redevelop the area for commercial and
housing purposes. At least 70 percent of the area of the parcels in the District are occupied by
buildings, streets, utilities, paved or gravel parking lots or other similar structures and more than
50 percent of the buildings in the District, not including outbuildings, are structurally substandard
to a degree requiring substantial renovation or clearance. (See Appendix F of the TIF Plan.)
2. Finding that the proposed development, in the opinion of the City Council, would not reasonably
be expected to occur solely through private investment within the reasonably foreseeable future
and that 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.
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: This finding is
supported by the fact that the redevelopment proposed in the TIF Plan meets the City's objectives
for redevelopment. Due to the high cost of redevelopment on the parcels currently occupied by
substandard buildings in need of clearance, the cost of financing the proposed improvements and
the need to decommission an existing wastewater treatment facility, this project is feasible only
through assistance, in part, from tax increment financing. The developer was asked for and
provided a letter and a proforma as justification that the developer would not have gone forward
without tax increment assistance.
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 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: This finding is
justified on the grounds that the cost of redeveloping the site, plant decommissioning, and
required public improvements add to the total redevelopment cost, the financing of which is
infeasible without tax increment assistance. The City reasonably determines that no other
redevelopment of similar scope is anticipated on this site without substantially similar assistance
to overcome said costs being provided to the development.
Therefore, the City concludes as follows:
a. The City's estimate of the amount by which the market value of the entire District will
increase without the use of tax increment financing is $0.
b. If the proposed development occurs, the total increase in market value will be
$17,438,800.
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 $3,963,320.
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 $13,475,480 (the amount in clause b less the amount in clause c) without tax
increment assistance.
3. Finding that the TIF Plan for the District conforms to the general plan for the development or
redevelopment of the municipality as a whole.
The City Council reviewed the TIF Plan and found that the TIF Plan conforms to the general
development plan of the City.
4. Finding that the TIF Plan for the District will afford maximum opportunity, consistent with the
sound needs of the City as a whole, for the development or redevelopment of Development
District No. I by private enterprise.
The project to be assisted by the District will result in increased employment in the City and the State of
Minnesota, the clearance of substandard buildings and redevelopment of underutilized property, increased
tax base of the State and add a high-quality development to the City which will increase the availability of
safe and decent life -cycle housing in the City.