ITEM 4.1 P&F PropertiesOtsTY.F o
MINNESOTA C
DEPARTMENT INFORMATION
Request for
City Council Action
ORIGINATING DEPARTMENT:
REQUESTOR:
MEETING DATE:
Administration
Lori Johnson, City Administrator
February 22, 2016
PRESENTER(s):
REVIEWED BY:
ITEM #:
Lori Johnson, City Administrator
4.1
AGENDA ITEM DETAILS
RECOMMENDATION:
Recommend holding a public hearing on the proposed Tax Increment Financing (TIF) district for P & F
Properties/ P & F Machining., Inc. development on Outlot A Great River Centre of Otsego 3 and the
adoption of resolution 2016-21 that adopts the Development Program, establishes TIF District No. 1, and
adopts the Tax Increment Financing Plan for the district.
ARE YOU SEEKING APPROVAL OF A CONTRACT? IS A PUBLIC HEARING REQUIRED?
No — Development Agreement to follow on March Yes
14, 2016
BACKGROUND/JUSTIFICATION:
In 2015, the City was approached by P & F Machining, Inc. regarding the expansion of P & F Machining's
manufacturing operation in Otsego on Outlot A, Great River Centre of Otsego 3. The proposed
development meets the City's economic development goals by adding jobs in and tax base to the City.
The project includes construction of an approximately 54,400 square foot manufacturing facility and
creation of 40 jobs in Otsego immediately with the possibility of an additional 17 in the future.
The site proposed for the project is an undeveloped, tax -forfeited parcel with a large special assessment
balance for County Road 42 (CR 42) improvements and extraordinary site improvement costs due to the
property's flood plain status. In addition, the installation of infrastructure improvements including
street, sewer, water, and storm sewer is required before the property can develop. The assessments for
CR 42 and the Quaday Improvement project (infrastructure) total $596,068.13 for the P & F Machining
parcel. Outlot A will be assessed $154,211.55 for the Quaday Improvement project and the DEED grant
will fund fifty percent of the project up to $317,696. Therefore, it was not financially feasible to develop
this parcel without financial assistance. But for financial assistance through tax increment financing and
a DEED infrastructure grant, this project would not occur.
The City acquired Outlot A through the tax forfeit process with cooperation from Wright County. The
City re -platted the parcel to Lot 1 Block 1 and Outlot A of Great River Centre of Otsego, Fourth Addition.
The City subsequently entered into a Purchase and Option Agreement with P & F Properties for Lot 1
Block 1 of Great River Centre of Otsego, Fourth Addition with the option for Lot 2 to be platted from
Outlot A in the future for a second development of approximately 34,000 square feet.
P & F Machining submitted an application requesting TIF assistance for this project. The application has
been reviewed by staff, Ehlers, and Mary Ippel, Briggs and Morgan. The attached TIF documents and
agreements were drafted by Ehlers and Mary Ippel and reviewed by staff and the City Attorney.
The attached Tax Increment Financing District Overview provides a summary of the TIF project. This
project is estimated to generate $95,904 of increment annually. P & F Properties will receive a
maximum of $462,105 (principal) of assistance. The Development Agreement By and Between City of
Otsego and P & F Properties, Inc. defines the terms of the TIF note. The City will retain increment for
administrative expenses as stated in the documents.
As required, Independent School District 728 and Wright County were provided copies of the proposed
TIF district and both were given an opportunity to comment. No comments were received.
By agreement of the parties, adoption of the Development Agreement has been placed on the March
14, 2016, Council agenda. Therefore, the action required on the 22nd is to hold the public hearing and to
adopt the resolution 2016-21 that adopts the Development Program, establishes TIF District No. 1, and
adopts the Tax Increment Financing Plan for the district.
SUPPORTING DOCUMENTS: X❑ ATTACHED ❑ NONE
1. Tax Increment Financing District Overview —TIF District No. 1— Great River Centre
2. Tax Increment Financing Plan for the establishment of Tax Increment Financing District
No. 1— Great River Centre within Development District 1
3. Development Program for the establishment of Development District No. 1
4. Resolution 2016-21 a Resolution Adopting a Development Program for Development
District No. 1; and Establishing Tax Increment Financing District No. 1—Great River
Centre Therein and Adopting a Tax Increment Financing Plan Therefor
POSSIBLE MOTION
Please word motion as you would like it to appear in the minutes.
• Motion to approve Resolution 2016-21 a Resolution Adopting a Development Program for
Development District No 1; and Establishing Tax Increment Financing District No 1— Great River
Centre Therein and Adopting a Tax Increment Financing Plan Therefor
BUDGET INFORMATION
FUNDING: BUDGETED: ❑ YES
Pay as you go Tax Increment
❑ NO
ACTION TAKEN
❑ APPROVED AS REQUESTED ❑ DENIED ❑ TABLED ❑ OTHER (List changes)
COMMENTS:
CITY OF OTSEGO
WRIGHT COUNTY
STATE OF MINNESOTA
RESOLUTION NO.2016-21
RESOLUTION ADOPTING A DEVELOPMENT PROGRAM FOR
DEVELOPMENT DISTRICT NO. 1; AND ESTABLISHING TAX INCREMENT
FINANCING DISTRICT NO. I - GREAT RIVER CENTRE THEREIN AND
ADOPTING A TAX INCREMENT FINANCING PLAN THEREFOR.
BE IT RESOLVED by the City Council (the "Council") of the City of Otsego, Minnesota (the
"City"), as follows:
Section 1. Recitals.
1.01. It has been proposed by the City Council of the City of Otsego (the "City") that the City
adopt a Development Program (the "Development Program") for Development District No. 1 (the
"Development District") and establish Tax Increment Financing District No. 1 - Great River Centre (the
"District") therein and adopt a Tax Increment Financing Plan (the "TIF Plan") therefor (the Development
Program 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, a review of and written comment on the
Program and Plan by the City Planning Commission, 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
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.
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 Revenue and the Office of the State Auditor pursuant to Minnesota
Statutes 469.175, Subd. 4a.
ADOPTED this 22nd day of February, 2016 by the City Council of Otsego.
MOTION TO ADOPT the Resolution by Council Member.
Council Member
IN FAVOR:
OPPOSED:
CITY OF OTSEGO
Mayor
(Seal)
ATTEST:
City Administrator
and seconded by
FWWWWRITWE
RESOLUTION NO.2016-21
The reasons and facts supporting the findings for the adoption of the Tax Increment Financing Plan for Tax
Increment Financing District No. 1 - Great River Centre as required pursuant to M.S., Section 469.175, Subd. 3
are as follows:
1. Finding that the Tax Increment Financing District No. I - Great River Centre is an economic development
district as defined in M.S., Section 469.174, Subd. 12.
Tax Increment Financing District No. 1 - Great River Centre is a contiguous geographic area within the
City's Development District No. 1, delineated in the TIF Plan, for the purpose of financing economic
development in the City through the use of tax increment. The District is in the public interest because it
will facilitate the construction of a 54,400 square foot manufacturing facility which will discourage
commerce, industry, or manufacturing from moving their operations to another state; it will increase
employment in the state, and preserve and enhance the tax base of the state.
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 Tax Increment Financing District No. I - Great River Centre 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 development proposed in this plan is a manufacturing facility that meets the City's objectives for
economic development. The cost of site and public improvements makes development of the facility
infeasible without City assistance. The developer was asked for and provided an application for
development assistance and detailed project site cost estimates 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 TIF District permitted by the TIF Plan: The City supported this finding on the grounds that the cost
of land acquisition, site and public improvements and utilities add to the total development cost.
Historically, extraordinary site development costs in this area have made development infeasible without
tax increment assistance. This site is a tax forfeit property that has been marketed for at least 8 years since
being platted without success. The City reasonably determines that no other development of similar scope
is anticipated on this site without substantially similar assistance 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 $4,096,100.
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 $662,739.
Section 2. Findings for the Adoption and Approval of the Development Program
2.01. The Council approves the Development Program, and specifically finds that: (a) the land
within the Development District would not be available for development or redevelopment without the
financial aid to be sought under this Development Program; (b) the Development Program will afford
maximum opportunity, consistent with the needs of the City as a whole, for the development of the
Development District by private enterprise; and (c) that the Development Program 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. 1 - Great River
Centre.
3.01, The Council hereby finds that the District is in the public interest and is an "economic
development district" under Minnesota Statutes, Section 469.174, Subd. 12 of the Act.
3.02. The Council further fords that the proposed development 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 redevelopment or
development of the District by private enterprise.
3.04. 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 discourage commerce, industry, or manufacturing from moving their operations to
another state or municipality, will result in increased employment in the state, and will result in
preservation and enhancement of the tax base 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.
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 $3,433,361 (the
amount in clause b less the amount in clause c) without tax increment assistance.
3. Finding that the TIF Plan for Tax Increment Financing District No. I -Great River Centre conforms to the
general plan for the development or redevelopment of the municipality as a whole.
The Planning Commission reviewed the TIT Plan and found that the TIF Plan conforms to the general
development plan of the City.
4. Finding that the Tax Increment Financing Plan for Tax Increment Financing District No. 1- Great River
Centre will afford maximum opportunity, consistent with the sound needs of the City as a whole, for the
development 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, increased tax base of the State, and add a high quality development to the City.
2/22/2016
Tax Increment Financing District No 1.
Great River Centre and Development
Program for Development District
No. 1
Project: P & F Machining, Inc.
Public Hearing: February 22, 2016
• Action tonight is to:
— Hold a public hearing on the establishment of Tax
Increment Financing District No. 1 Great River
Centre and the establishment of Development
District No 1.
—Adopt resolution 2016-21 Adopting Development
District 1, Establishing TIF District 1, and Adopting
a TIF Financing Plan
Development District No. 1
• Established pursuant to the Municipal
Development Act.
• The boundaries are coterminous with the
boundaries of the City
• Provides a means for private development and
redevelopment and City assistance to eligible
projects
1
2/22/2016
Overview of TIF District No. 1
• Economic Development District
• Property included — Lot 1 Block 1 and Cutlot A
Great River Centre Fourth Addition
• Maximum duration of the district is 8 years
from receipt of the first increment (9 years of
increment)
• Estimated annual increment is $95,904
• The maximum assistance to P & F Machining,
Inc., is $462,105 (principal)
P & F Machining, Inc., Project
• 54,400 Square foot manufacturing facility
• 40 jobs initially with potential for 17
additional
• Average annual salary - $60,000
• Building as proposed meets all planning and
zoning requirements
• Project construction budget approximately
$4,500,000
• Estimated market value of $4,263,000
(based on preliminary plans)
2
2/22/2016
New Tax Generated by Project
• Tax Forfeit parcel that was not generating tax
revenue will pay taxes
• Project will generate approximately $95,904 in
new tax revenue annually
• Delinquent special assessments and
outstanding special assessments for CR42
project will be paid
Proposed Building
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G.ttuvllNf •� 5 =U'�
Public Hearing
• Open meeting for public comment on:
— Development Program for the establishment of
Development District No. 1
—Tax Increment Financing Plan for the
establishment of Tax Increment Financing District
No. 1— Great River Centre
• Close public hearing
• Adopt resolution 2016-21
3