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ITEM 3.5 Authorizing Tax Increments Financing DistrictsOF Otsego MINNESOTA DEPARTMENT INFORMATION Request for City Council Action ORIGINATING DEPARTMENT REQUESTOR: MEETING DATE: Administration City Administrator/Finance Director Flaherty August 12, 2019 PRESENTER(s) REVIEWED BY: ITEM #: Consent 3.5 STRATEGIC VISION MEETS: I THE CITY OF OTSEGO: X Is a strong organization that is committed to leading the community through innovative communication. IS A PUBLIC HEARING REQUIRED? Has proactively expanded infrastructure to responsibly provide core services. No Is committed to delivery of quality emergency service responsive to community needs and expectations in a cost-effective manner. The City has previously approved the establishment of Tax Increment Financing (TIF) Districts for Guardian Is a social community with diverse housing, service options, and employment opportunities. City incurs certain administrative expenditures, often including, but not limited to: staff time, newspaper Is a distinctive, connected community known for its beauty and natural surroundings. AGENDA ITEM DETAILS RECOMMENDATION: City staff is recommending that the City Council authorize interfund loans in connection with certain Tax Increment Financing districts. ARE YOU SEEKING APPROVAL OF A CONTRACT? IS A PUBLIC HEARING REQUIRED? No No BACKG ROU N D/J USTI FI CATI ON: The City has previously approved the establishment of Tax Increment Financing (TIF) Districts for Guardian Angels Riverview Landing (No. 3) and Riverbend North (No. 4). In connection with these TIF Districts, the City incurs certain administrative expenditures, often including, but not limited to: staff time, newspaper publications, preparation of annual reporting forms and county fees. After establishment of a TIF District, it often is multiple years before tax increment is generated within the respective projects; however, the City will incur certain expenditures prior to that tax increment generation. During this time period, the TIF District funds will carry a deficit fund balance. The corresponding Resolutions will authorize the City to advance or loan $25,000 (per District) from the City's General fund to provide for the payment of the respective administrative expenditures. This advance will be reimbursed from tax increments derived from the respective TIF Districts. The adoption of the Resolutions was recommended by the City's TIF consultants, Ehlers. Also, having a formal Resolution authorizing the advance satisfies Statutory requirements and provides additional support to the Minnesota Office of the State Auditor, whom reviews the annual TIF reporting forms. SUPPORTING DOCUMENTS ATTACHED: • Resolution 2019-43 • Resolution 2019-44 POSSIBLE MOTION PLEASE WORD MOTION AS YOU WOULD LIKE ITTO APPEAR IN THE MINUTES: Motion to approve Resolution 2019-43 authorizing an interfund loan in connection with Tax Increment Financing District No. 3 — Guardian Angels Riverview Landing. Motion to approve Resolution 2019-44 authorizing an interfund loan in connection with Tax Increment Financing District No. 4—Riverbend North. BUDGET INFORMATION FUNDING: BUDGETED: N/A Council member CITY OF OTSEGO WRIGHT COUNTY STATE OF MINNESOTA introduced the following resolution and moved its adoption: RESOLUTION NO. 2019-43 RESOLUTION AUTHORIZING AN INTERFUND LOAN FOR ADVANCE OF CERTAIN COSTS IN CONNECTION WITH TAX INCREMENT FINANCING DISTRICT NO.3 - GUARDIAN ANGELS RIVERVIEW LANDING. BE IT RESOLVED by the City Council (the "Council") of the City of Otsego, Minnesota (the "City"), as follows: Section 1. Background. 1.01. The City has heretofore approved the establishment of Tax Increment Financing District No. 3 - Guardian Angels Riverview Landing (the "TIF District") within Development District No. 1 (the "Project"), and has adopted a Tax Increment Financing Plan (the "TIF Plan") for the purpose of financing certain improvements within the Project. 1.02. The City has determined to pay for certain costs identified in the TIF Plan consisting of land/building acquisition, site improvements/preparation, public utilities, streets and sidewalks, other qualifying improvements, interest and administrative costs (collectively, the "Qualified Costs"), which costs may be financed on a temporary basis from City funds available for such purposes. 1.03. Under Minnesota Statutes, Section 469.178, Subd. 7, the City is authorized to advance or loan money from the City's general fund or any other fiend from which such advances may be legally authorized, in order to finance the Qualified Costs. 1.04. The City intends to reimburse itself for the Qualified Costs from tax increments derived from the TIF District in accordance with the terms of this resolution (which terms are referred to collectively as the "Interfund Loan"). Section 2. Terms of Interfund Loan. 2.01. The City hereby authorizes the advance of up to $25,000 from the General fund or so much thereof as may be paid as Qualified Costs. The City shall reimburse itself for such advances together with interest at the rate stated below. Interest accrues on the principal amount from the date of each advance. The maximum rate of interest permitted to be charged is limited to the greater of the rates specified under Minnesota Statutes, Section 270C.40 or Section 549.09 as of the date the loan or advance is authorized, unless the written agreement states that the maximum interest rate will fluctuate as the interest rates specified under Minnesota Statutes, Section 270C.40 or Section 549.09 are from time to time adjusted. The interest rate shall be 4% and will not fluctuate. 2.02. Principal and interest ("Payments") on the Interfund Loan shall be paid semi-annually on each August 1 and February 1 (each a "Payment Date"), commencing on the first Payment Date on which the Authority has Available Tax Increment (defined below), or on any other dates determined by the City Administrator, through the date of last receipt of tax increment from the TIF District. 2.03. Payments on this Interfund Loan are payable solely from "Available Tax Increment," which shall mean, on each Payment Date, tax increment available after other obligations have been paid, or as determined by the City Administrator, generated in the preceding six (6) months with respect to the property within the TIF District and remitted to the City by Wright County, all in accordance with Minnesota Statutes, Sections 469.174 to 469.1794, all inclusive, as amended. Payments on this Interfund Loan may be subordinated to any outstanding or future bonds, notes or contracts secured in whole or in part with Available Tax Increment, and are on parity with any other outstanding or future interfund loans secured in whole or in part with Available Tax Increment. 2.04. The principal sum and all accrued interest payable under this Interfund Loan are pre- payable in whole or in part at any time by the City without premium or penalty. No partial prepayment shall affect the amount or timing of any other regular payment otherwise required to be made under this Interfund Loan. 2.05. This Interfund Loan is evidence of an internal borrowing by the City in accordance with Minnesota Statutes, Section 469.178, Subd. 7, and is a limited obligation payable solely from Available Tax Increment pledged to the payment hereof under this resolution. This Interfund Loan and the interest hereon shall not be deemed to constitute a general obligation of the State of Minnesota or any political subdivision thereof, including, without limitation, the City. Neither the State of Minnesota, nor any political subdivision thereof shall be obligated to pay the principal of or interest on this Interfund Loan or other costs incident hereto except out of Available Tax Increment, and neither the full faith and credit nor the taxing power of the State of Minnesota or any political subdivision thereof is pledged to the payment of the principal of or interest on this Interfund Loan or other costs incident hereto. The City shall have no obligation to pay any principal amount of the Interfund Loan or accrued interest thereon, which may remain unpaid after the final Payment Date. 2.06. The City may amend the terms of this Interfund Loan at any time by resolution of the City Council, including a determination to forgive the outstanding principal amount and accrued interest to the extent permissible under law. Section 3. Effective Date. This resolution is effective upon the date of its approval. 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: ATTEST: Jessica Stockamp, Mayor Adam Flaherty, City Administrator (Seal) CITY OF OTSEGO WRIGHT COUNTY STATE OF MINNESOTA Council member introduced the following resolution and moved its adoption: RESOLUTION NO. 2019-44 RESOLUTION AUTHORIZING AN INTERFUND LOAN FOR ADVANCE OF CERTAIN COSTS IN CONNECTION WITH TAX INCREMENT FINANCING DISTRICT NO.4 — RIVERBEND NORTH. BE IT RESOLVED by the City Council (the "Council") of the City of Otsego, Minnesota (the "City"), as follows: Section 1. Background. 1.01. The City has heretofore approved the establishment of Tax Increment Financing District No. 4 — Riverbend North (the "TIF District") within Development District No. 1 (the "Project"), and has adopted a Tax Increment Financing Plan (the "TIF Plan") for the purpose of financing certain improvements within the Project. 1.02. The City has determined to pay for certain costs identified in the TIF Plan consisting of land/building acquisition, site improvements/preparation, public utilities, streets and sidewalks, other qualifying improvements, interest and administrative costs (collectively, the "Qualified Costs"), which costs may be financed on a temporary basis from City funds available for such purposes. 1.03. Under Minnesota Statutes, Section 469.178, Subd. 7, the City is authorized to advance or loan money from the City's general fund or any other fund from which such advances may be legally authorized, in order to finance the Qualified Costs. 1.04. The City intends to reimburse itself for the Qualified Costs from tax increments derived from the TIF District in accordance with the terms of this resolution (which terms are referred to collectively as the "Interfund Loan"). Section 2. Terms of Interfund Loan. 2.01. The City hereby authorizes the advance of up to $25,000 from the General fund or so much thereof as may be paid as Qualified Costs. The City shall reimburse itself for such advances together with interest at the rate stated below. Interest accrues on the principal amount from the date of each advance. The maximum rate of interest permitted to be charged is limited to the greater of the rates specified under Minnesota Statutes, Section 270C.40 or Section 549.09 as of the date the loan or advance is authorized, unless the written agreement states that the maximum interest rate will fluctuate as the interest rates specified under Minnesota Statutes, Section 270C.40 or Section 549.09 are from time to time adjusted. The interest rate shall be 4% and will not fluctuate. 2.02. Principal and interest ("Payments") on the Interfiind Loan shall be paid semi-annually on each August 1 and February 1 (each a "Payment Date"), commencing on the first Payment Date on which the Authority has Available Tax Increment (defined below), or on any other dates determined by the City Administrator, through the date of last receipt of tax increment from the TIF District. 2.03. Payments on this Interfund Loan are payable solely from "Available Tax Increment," which shall mean, on each Payment Date, tax increment available after other obligations have been paid, or as determined by the City Administrator, generated in the preceding six (6) months with respect to the property within the TIF District and remitted to the City by Wright County, all in accordance with Minnesota Statutes, Sections 469.174 to 469.1794, all inclusive, as amended. Payments on this Interfund Loan may be subordinated to any outstanding or future bonds, notes or contracts secured in whole or in part with Available Tax Increment, and are on parity with any other outstanding or future interfund loans secured in whole or in part with Available Tax Increment. 2.04. The principal sum and all accrued interest payable under this Interfund Loan are pre- payable in whole or in part at any time by the City without premium or penalty. No partial prepayment shall affect the amount or timing of any other regular payment otherwise required to be made under this Interfund Loan. 2.05. This Interfund Loan is evidence of an internal borrowing by the City in accordance with Minnesota Statutes, Section 469.178, Subd. 7, and is a limited obligation payable solely from Available Tax Increment pledged to the payment hereof under this resolution. This Interfund Loan and the interest hereon shall not be deemed to constitute a general obligation of the State of Minnesota or any political subdivision thereof, including, without limitation, the City. Neither the State of Minnesota, nor any political subdivision thereof shall be obligated to pay the principal of or interest on this Interfund Loan or other costs incident hereto except out of Available Tax Increment, and neither the full faith and credit nor the taxing power of the State of Minnesota or any political subdivision thereof is pledged to the payment of the principal of or interest on this Interfund Loan or other costs incident hereto. The City shall have no obligation to pay any principal amount of the Interfund Loan or accrued interest thereon, which may remain unpaid after the final Payment Date. 2.06. The City may amend the terms of this Interfund Loan at any time by resolution of the City Council, including a determination to forgive the outstanding principal amount and accrued interest to the extent permissible under law. Section 3. Effective Date. This resolution is effective upon the date of its approval. 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: ATTEST: Jessica Stockamp, Mayor Adam Flaherty, City Administrator (Seal)