ITEM 1 Kadler Avenue Industrial Park & TIF DistrictYj
CITY OF
se o
MINNESOTA
TO: Mayor and City Council
FROM: Adam Flaherty, Finance Director
DATE: April 10, 2017
SUBJECT: Kadler Avenue Industrial Park & TIF District
At the March 6, 2017 Special City Council meeting, the Council directed staff to explore the
concept of a Tax Increment Financing (TIF) District as a tool for the combination of constructing
Kadler Avenue and development of Bury Industrial Park.
City staff has been working with Northland Securities, Inc., over the past few weeks to develop debt
and TIF projections. Jessica Green and Rusty Fifield are present to review these projections with the
City Council. They are also available to answer any other potential questions related to either the
bonding or TIF segments of this potential project.
Materials Attached for Discussion
1) Estimated TIF Calculation — Phase 1 Only
2) Comprehensive Project Cash Flow — Phase 1 Only
3) Estimated TIF Calculation — All Three Phases
4) Comprehensive Project Cash Flow — All Three Phases
5) TIF Calendar of Events
Project Discussion Topics
Pros
- Allows for growth in commercial/industrial tax base.
- Job growth.
- Creates shovel -ready sites for +/- 80 acres of industrial development
- Development generates WAC/SAC to reimburse utility investment.
Cons
- City is taking on risk for repayment of GO Bond for construction of Kadler
o Special Assessments & Increment are dependent upon successful developer.
o Repayment of debt is backed by full faith and credit of City (property taxes).
City of Otsego 113400 90' Street NE, Otsego, MN 55330 1 Tel. (763) 441-4414 Fax (763) 441-9163
Open Aspects of Project
Street Construction
Authorize preparation of design and specifications for road and utilities.
Bidding Process
Construction
Assessments
- Call for and hold Public Improvement Hearing
- Obtain waiver from developer
- Call for and hold Assessment Hearing (need to verify with City Attorney)
- Certification to Wright County
Bonding
- Reimbursement Resolution approval by City Council (depends on timing of project)
- Set Sale Resolution approval by City Council
- Official Statement and Rating Call
- Bond Sale
- Sale Authorization Resolution approval by City Council
Tax Increment Financing District
- See attached calendar of events
Developer
- Submit necessary planning applications
- Staff, Planning Commission and City Council review process
- Development agreement
Decisions
1) Tax Increment Financing
a. Yes or No
b. How to appropriate the increment generated
2) Kadler Avenue Plans and Specifications
a. Authorize now
b. Wait until developer submits plans
3) Timing of Construction
a. Complete bidding process ASAP, reject bids if necessary
b. Wait until 2018 and go to bidding process early in season
City of Otsego 113400 90t' Street NE, Otsego, MN 55330 1 Tel. (763) 441-4414 Fax (763) 441-9163
PRELIMINARY - For Discussion Only
City of Otsego
Tax Increment Financing District No. New (Economic Development)
Kadler Development
Projected Tax Increment Cash Flow
Key Asssumptions
1 Taxable market value (TMV) annual growth assumption = 0,00%.
2 Assume Pay 2017 Tax Year.
3 Base Taxable Market Value= $804,700 PID 118-800-274100 118-800-274101
4 Assumption for New Taxable Market Value = $4,391,752 based on 60,710 SF at $87.16 per SF. Includes land and building valuation ((NEED)SF office and (NEED)SF production space).
5 Present value is based on semi-annual payments.
6 Present value is calculated based on semi-annual payments, stated rate in the schedule above, and beginning on the following date of. 8/1/2018
7 Tax capacity is calculated based on first $150,000 of TMV at 1.S% and TMV above the $150,000 at 2.0%.
NORTHLAND
Economic Development TIF District SECURITIES 1/3/2017
0.36%
100.00%
2.74%
100.00%
2.749/o
Assumed
Estimated
Less
Est. TIF To Pay
TIF
Value
Taxes
Taxable Market
New Tax
Base Tax
Captured Tax
Original
Tax
State
Estimated Tax
Present Value of
City Project
Present
District
Payable
i a
z�
s
z
Estimated Tax
Value of TIF
Year
Value
Capacity ,
Capacity
Capacity
Tax Rate
Increment
Fee
Increment
516
and Financing
Year
Year
Increment
to City
Before State Fee
Costs
1
2019
2020
2,329,787
45,846
(14,594)
31,252
114.774%
35,869
(129)
35,740
33,618
35,740
33,618
2
2020
2021
2,329,787
45,846
(14,594)
31,252
114.774%
35,869
(129)
35,740
66,333
35,740
66,333
3
2021
2022
2,961,697
57,734
(14,594)
43,140
114.774%
49,513
(178)
49,335
110,281
49,335
110,281
4
2022
2023
4,391,752
85,585
(14,594)
70,991
114.774%
81,479
(293)
81,186
180,660
81,186
180,660
5
2023
2024
4,391,752
85,585
(14,594)
70,991
114.774%
81,479
(293)
81,186
249,149
81,186
249,149
6
2024
2025
4,391,752
85,585
(14,594)
70,991
114.774%
81,479
(293)
81,186
315,800
81,186
315,800
7
2025
2026
4,391,752
85,585
(14,594)
70,991
114.774%
81,479
(293)
81,186
380,661
81,186
380,661
8
2026
2027
4,391,752
85,585
(14,594)
70,991
114.774%
81,479
(293)
81,186
443,781
81,186
443,781
9
2027
2028
4,391,752
85,585
(14,594)
70,991
114.774%
81,479
(293)
81,186
505,206
81,186
505,206
4,241,752
TOTAL =
610,125
(2,196)
607,931
607,931
Key Asssumptions
1 Taxable market value (TMV) annual growth assumption = 0,00%.
2 Assume Pay 2017 Tax Year.
3 Base Taxable Market Value= $804,700 PID 118-800-274100 118-800-274101
4 Assumption for New Taxable Market Value = $4,391,752 based on 60,710 SF at $87.16 per SF. Includes land and building valuation ((NEED)SF office and (NEED)SF production space).
5 Present value is based on semi-annual payments.
6 Present value is calculated based on semi-annual payments, stated rate in the schedule above, and beginning on the following date of. 8/1/2018
7 Tax capacity is calculated based on first $150,000 of TMV at 1.S% and TMV above the $150,000 at 2.0%.
NORTHLAND
Economic Development TIF District SECURITIES 1/3/2017
City of Otsego, Minnesota
$1,170,000 General Obligation Improvement Bonds, Series 2017A
(Preliminary AA, NBQ rates as of 4/3/17, Plus 5 BPS)
105% Levy
Less: Less: Equals:
Special
Assessment TIF City Net Levy Collection
Date Total P+I CIF 105% Levy Revenues* Revenues* Levy Year Year
02/01/2018
18,496.67 (18,496.67)
-
-
-
-
-
02/01/2019
107,745.00 -
113,132.25
59,422.18
53,710.07
2017
2018
02/01/2020
106,825.00 -
112,166.25
59,422.18
35,740.00
17,004.07
2018
2019
02/01/2021
105,785.00 -
111,074.25
59,422.20
35,740.00
15,912.05
2019
2020
02/01/2022
104,585.00-
109,814.25
59,422.18
35,740.00
14,652.07
2020
2021
02j01/2023
103,225.00 -
108,386.25
..........
59,422.19
--1- .
- -- .............. . .. . ....................
35,740.00
13,224.06
-- ---- - ------
2021
. ....... .... ...............
2022
02/01/2024
101,665.00 -
106,748.25
59,422.19
35,740.00
11,586.06
2022
2023
02/01/2025
99,945.00 -
104,94225
59,422.19
35,740.00
9,780.06
2023
2024
02/01/2026
98,105.00 -
103,01025
59,422.18
35,740.00
7,848.07
2024
2025
02/01/2027
96,145.00 -
-l-, ............
100,952.25
59,422.20
..... .
35,740.00
5,790.05
2025
2026
02/01/2028
89,025.00 -
. . . . ....................
93,476.25
. .... . . .......... . ........
59,422,18
35,740.00
(1,685.93)
. .
2026
. ... ..... . .... ...... —
2027
02/01/2029
86,925.00 -
91,271.25
59,422,19
31,849.06
2027
2028
02/01/2030
84,712.50 -
88,948.13
59,422.19
29,525.94
2028
2029
02/01/2031
82,387.50 -
86,506.88
59,422.19
27,084.69
2029
2030
02/01/2032
79,987.50 -
83,986.88
59,422.19
24,564.69
2030
2031
02/01/203377,512.50
-
81,388.13
.... ..............
59,422.18
21,965.95
2031
2032
Total $1,443,071.67 (18496.67) $1495,803.75 $891,332.81 $321,660.00 $282,810.94
*Assumes $647,079.55 in principal spread in even payments for a term of 15 years with an
interest rate of 4.25%, which is 1.5% over the average coupon.
GO Improvement 2017A-15 1 SINGLE PURPOSE 1 4/5/2017 1 221 PM
Northland Securities, Inc.
Public Finance Page 3
PRELIMINARY - For Discussion Only
City of Otsego
Tax Increment Financing District No. New (Economic Development)
Kadler Development
Projected Tax Increment Cash Flow
TIF
District
Year
Value
Year
Taxes.
Payable
Year
Taxable Market
i s
Value
New Tax
i �
Capacity '
Base Tax
a
Capacity
Captured Tax
Capacity
Assumed
Original
z
Tax Rate
Estimated
Tax
Increment
Before State Fee
0.36%
Less
State
Fee
100.00%
Estimated Tax
Increment
2.74%
Present Value of
Estimated Tax
s 6
Increment
100.00%
Est. TIF To Pay
City Project
and Financing
Costs
2.74%
Present
Value of TIF
to City
1
2019
2020
2,329,787
45,846
(14,594)
31,252
114.774%
35,869
(129)
35,740
33,618
35,740
33,618
2
2020
2021
2,329,787
45,846
(14,594)
31,252
114.774%
35,869
(129)
35,740
66,333
35,740
66,333
3
2021
2022
2,329,787
45,846
(14,594)
31,252
114.774%0
35,869
(129)
35,740
98,171
35,740
98,171
4
2022
2023
2,329,787
45,846
(14,594)
31,252
114.774%
35,869
(129)
35,740
129,153
35,740
129,153
5
2023
2024
2,329,787
45,846
(14,594)
31,252
114.774%
35,869
(129)
35,740
159,304
35,740
159,304
6
2024
2025
2,329,787
45,846
(14,594)
31,252
114.774%
35,869
(129)
35,740
188,645
35,740
188,645
7
2025
2026
2,329,787
45,846
(14,594)
31,252
114.774%
35,869
(129)
35,740
217,198
35,740
217,198
8
2026
2027
2,329,787
45,846
(14,594)
31,252
114.774%
35,869
(129)
35,740
244,985
35,740
244,985
9
2027
2028
2,329,787
45,846
(14,594)
31,252
114.774%
35,869
(129)
35,740
272,026
35,740
272,026
2,179,787
TOTAL =
322,821
(1,162)
321,660
321,660
Key Asssumptions
1 Taxable market value (TMV) annual growth assumption = 0.00%.
2 Assume Pay 2017 Tax Year.
3 Base Taxable Market Value= $804,700 PID 118-800-274100 118-800-274101
4 Assumption for New Taxable Market Value = $2,329,787 based on 26,730 SF at $87.16 per SF. Includes land and building valuation ((NEED)SF office and (NEED)SF production space).
5 Present value is based on semi-annual payments.
6 Present value is calculated based on semi-annual payments, stated rate in the schedule above, and beginning on the following date of. 8/1/2018
7 Tax capacity is calculated based on first $150,000 of TMV at 1.5% and TMV above the $150,000 at 2.0%.
.mak.
Economic Development TIF District NORTHLAND se1/3/201SECURITIES
of Otsezo, Minnesota
$1,170,000 General Obligation Improvement Bonds, Series 2017A
(Preliminary AA, NBQ rates as of 4/3/17, Plus 5 BPS)
105% Levy
Less: Less: Equals:
Special
Assessment TIF City Net Levy Collection
Date Total P+1 OF 105% Levy Revenues* Revenues* Levy Year Year
02/01/2018
18,496.67
(18,496.67) -
-
-
-
-
02/01/2019
107,745.00
- 113,13225
59,422.18
53,710.07
2017
2018
02/01/2020
106,825.00
- 112,166.25
59,422.18
35,740.00
17,004.07
2018
2019
02/01/2021
105,785.00
- 111,074.25
59,422.20
35,740.00
15,912.05
2019
2020
02/01/2022
......................................................................................._....._.......
104,585.00
- 109,814.25
_._...._.........._.._._—...—_...
59,422.18
49,335.00
-------
1,057.07
-............._....----.._..__.
2020
2021
02/01/2023
103,225.00
- 108,386.25
59,422.19
81,186.00
(32,221.94)
2021
2022
02/01/2024
101,665.00
- 106,748.25
59,422.19
81,186.00
(33,859.94)
2022
2023
02/01/2025
99,945.00
- 104,942.25
59,422.19
81,186.00
(35,665.94)
2023
2024
02/01/2026
98,105.00
- 103,010.25
59,422.18
81,186.00
(37,597.93)
2024
2025
02/01/2027
96,145.00-
100,952.25
59,422.20
81,186.00
(39,655.95)
2025
2026
02/01/2028
89,025.00
93,476.25
59,422.18
81,186.00
(47,131.93)
2026
2027
02/01/2029
86,925.00
91,271.25
59,422.19
31,849.06
2027
2028
02/01/2030
84,712.50
- 88,948.13
59,422.19
29,525.94
2028
2029
02/01/2031
82,387.50
- 86,506.88
59,422.19
27,084.69
2029
2030
02/01/2032
79,987.50
- 83,986.88
59,422.19
24,564.69
2030
2031
02/01/2033
_....._.........._...._._
77,512.50
.............................._.._...._..._.....
81,388.13
59,422.18
.................. __...... ---- ......
21,965.95
_..... _.__..._....__..__..__.._.......
2031
—
2032
Total
$1,443,071.67
(18,496.67) $1,495,803.75
$891,332.81
$607,931.00
(3,460.06)
*Assumes $647,079.55 in principal spread in even payments for a term of 15 years with an
interest rate of 4.25%, which is 1.5% over the average coupon.
GO Improvement 2017A-15 1 SINGLE PURPOSE 1 4/5/2017 1 221 PM
Northland Securities, Inc.
Public Finance Page 3
PRELIMINARY- For Discussion Only
City of Otsego
Establishment of Development District #TBD
Establishment of Tax Increment Financing District No. TBD
Economic Development TIF District
Kadler Development
Public Hearing on June 12
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24 June 19 Request certification by County Northland submits to County
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April 24
City Council calls for public hearing
Northland prepares resolution
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May 3
Draft TIF Plan distributed for review
Northland prepares and distributes
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May 12
Last day plan and fiscal implications to County and School District
Northland submits via email
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25
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May 24
Last day for notice to newspaper
City provides information to Elk River Star News
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May 27
Actual publication date
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17 June 12 City Council Hearing Date -Approval of TIF Plan and Develpoment Agreement Northland prepares background memo and resolution
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24 June 19 Request certification by County Northland submits to County
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15 July 10 Submit plan to State Northland submits to State
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Notes:
1. City will submit notices to the newspaper for publication.
2. Cost incurred priorto June 12 will not be eligible for reimbursement from TIF.
Economic Development TIF District �O��RND 4/4/2017