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2013.02.19 EDA Work Session PacketAGENDA ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF CRYSTAL • WORK SESSION TUESDAY, FEBRUARY 19, 2013 6:15 P.M. CRYSTAL CITY HALL CONFERENCE ROOM A 1. Call to order 2. Roll call 3. TIF 101: An Introduction to Tax Increment Financing 4. Adjournment * Materials attached 02/13/13 G9EDAWgendas12013M 19 ws.docx urCNTSTPL Memorandum DATE: February 13, 2013 TO: EDA Commissioners FROM: Patrick A. Peters, Deputy Executive Director rr SUBJECT: TIF 101: An introduction to Tax Increment Financing At the EDA work session scheduled for February 19, Stacie Kvilvang, the EDA's TIF advisor from Ehlers and Associates, will be in attendance to provide an introduction to Tax Increment Financing. The presentation will offer an overview of how TIF is calculated, where and under what circumstances it can be used, and the various types of TIF districts. A copy of the presentation is attached along with a summary of the TIF districts in Crystal and a map identifying the individual districts and the redevelopment area. Page 1 of 1 t TIF 101 February 19, 2013 Stacie Kvilvang — Ehlers t� EHLERS ■_ lid N, A IJ • Tax Increment ✓ What is It ✓ How is it calculated ✓ How/where it is collected ✓ What it can be used for ✓ Types of districts ✓ Pay -As -You -Go Developer Payments ✓ But For Test 7o(al The abiand use all ncreasrCy tax revenues from nc°w developnwnt within a defined c)eoyraphic are�i. µ Tax revenues There is Value in the District go to all local when created (also called governments "base value") Original Tax Capacity , { • Base Property Taxes v Current taxes paid by existing land and buildings • State Property Taxes ✓ Tax paid by commercial users to support education (cabin owners pay as well) • Market Value Taxes ✓ City & County referendums and School operating referendums • Fiscal Disparities (can elect to capture for a TIF district) ✓ State Law requires new commerciallindustrial properties in 7 - County area and Taconite Tax Relief Area to contribute up to 40% of valuation to an area wide 000l for redistribution to all local taxing jurisdictions ✓ Crystals Fiscal Disparities percentage for Pay 2013 is 33.7222% TIF District "captures" value from new development Assistance Development Captured Tax occurs Capacity X I Tax Rate cil Original Capacity.` • Base Property Taxes v Current taxes paid by existing land and buildings • State Property Taxes ✓ Tax paid by commercial users to support education (cabin owners pay as well) • Market Value Taxes ✓ City & County referendums and School operating referendums • Fiscal Disparities (can elect to capture for a TIF district) ✓ State Law requires new commerciallindustrial properties in 7 - County area and Taconite Tax Relief Area to contribute up to 40% of valuation to an area wide 000l for redistribution to all local taxing jurisdictions ✓ Crystals Fiscal Disparities percentage for Pay 2013 is 33.7222% Where Commercial las Dol lm s Go Fuetl Dbpndliu t... ^.. n,y a NO Er. •50 .air o siaie^ sly Dome. I ° ■nsem olcpo.aler WHAT IS EXCLUDED FROM TIF? 7�less Property Taxes 234,191 tate-wide Taxes (60,936) less Fiscal Disp. Adj. (60,662) less Market Value Taxes (5,733) less Base Value Taxes (11,396) Annual Gross TIF 95,465 When you deduct the OSA fee and City Admin fee, this number is reduced to $85,609 or $.37 on the dollar TIF Where Residential Tax DoIlatS Go W oil Total Property Taxes 70,204 less State-wide Taxes 0 less Fiscal Disp. Adj. 0 less Market Value Taxes (3,540) less Base Value Taxes (3,655) Annual Gross TIF 63,008 When you deduct the OSA fee and City Admin fee, this number is reduced to $56,503 or $.80 on the dollar TIF r- • Defines parcels whose increased value will be captured • Parcels do not have to be contiguous, but usually are • Must meet criteria in state law for different types of districts to accomplish different policy objectives • TIF Districts must be Project Area located in a Project Area or Development District F., Can have multiple TIF Districts in one Project " v + Area Some increment can be spent outside District in Project Area (called "Pooling") Types of TIF Districts -Different rules for each type (6 types) ✓ Redevelopment and Renovation & Renewal— condition now ✓ Housing — future conditions -Uses and duration of tax increment differ by district F� 1 o j U � ' • Eligible uses�i 1 ✓ Land acquisition ✓ Demolition and clearance' ✓ Site improvements ✓ Public utilities ✓ Relocation ✓ Administration ✓ Other public improvements ✓ Interest on financing Types of TIF Districts -Different rules for each type (6 types) ✓ Redevelopment and Renovation & Renewal— condition now ✓ Housing — future conditions -Uses and duration of tax increment differ by district a ®e ■ 26 year maximum term ■ Qualifications ✓ More than 50% buildings substandard ✓ 70% of parcels are "occupied" ■ Any future use allowed ■ 90% of TIF used to correct redevelopment issues ■ 16 year maximum term ■ Qualifications ✓ 20% of buildings substandard ✓ 30% "incompatible" ✓ 70% of parcels are "occupied" ■ Any future use allowed ■ 90% of TIF used to correct redevelopment issues Housing District • 100% tax increment used for affordable housing; 20% of project's value can be used for commercial/industrial development • 26 year maximum duration • Can be used for rental housing or owner occupied housing Outside District Inside District Less TIF & NO More TIF,N*� IMPACT but . ...... �n other IMPACTtax 71 the, payers tax payers fi—I Di'p-R!" Original Net Tax Original Net Capacity Tax Capacity +r. 11% Housing District • 100% tax increment used for affordable housing; 20% of project's value can be used for commercial/industrial development • 26 year maximum duration • Can be used for rental housing or owner occupied housing • Owner occupied housing: ✓ 95% of units must be sold to persons: • At 100% (for 2 or less persons in the household) ✓ $73,900 • At 115% (3 or more persons) median income ✓ $84,985 • Rental housing must be income restricted for the life of the district ✓ 20% of units affordable at 50% of median income ✓ 40% of units affordable at 60% of median income • Tax Increment payments to developers • Development Agreement between City (or Authority) and developer ✓ Make payments annually to developer on February 1 and August 1 • Reimburse them after they pay their taxes • Payments are based upon actual TIF collected ✓ If not enough TIF, City (or Authority) is not obligated to pay or use other sources ■ Should have evidence that project meets tests ✓ Developer Proforma ✓ Comparable costs of land ✓ Risk ✓ Future development potential for site N • 5 TIF Districts ✓ 2 Redevelopment districts • TIF 2-1 (Shopping Center) ✓ Ends December 31, 2016 ✓ No obligations • TIF 3 (Suburban Motel) ✓ Ends December 31, 2026 ✓ Obligation is repayment of interfund loan to TIF 2-1 ■ 5 TIF Districts ✓ 1 Housing District • TIF 4 (Lamplighter Apartments) ✓ Ends December 31.2025 ✓ Obligations are pay-as-you-go note to Lanel and Dominium ✓ 2 Special Legislation Districts for Housing • Phase I and Phase II ✓ Ends December 31, 2013 ✓ Funds are used for home improvement incentive rebate & down payment assistance (203K program) & interest rale buy down for community fix up fund loans OVERVIEW OF CRYSTAL'S TAX INCREMENT FINANCING DISTRICTS Tax Increment Financing District #2150 (TIF Redevelopment District #1) - CLOSED This fund is used to account for collection and disbursement of tax revenues for activities within Bass Lake Road -Becker Park Redevelopment Project Area, which is the area around Bass Lake Road and West Broadway. This is also known as the TIF District #2150 or TIF District 91. The date of the first receipt of tax increment by this district was July 1984. The last receipt of tax increment was in December 2009, and the district expired on December 31, 2009. It will be possible to still expend District money in future years for existing obligations. Money remaining in the fund at this time came entirely from sources other than tax increments, so the remaining money and land inventory was transferred to the EDA Fund at the end of 2012. Tax Increment Financing District 02151 (TIF Redevelopment District #2) This fund is used to account for collection and disbursement of tax revenues for activities within TIF District #2151, Anthony Shopping Center. The date of the first receipt of tax increment by this district was July 1991. The last receipt of tax increment is expected in December 2016, and the district will expire on December 31, 2016. This fund returns a set amount of tax increment back to the property owners as part of a development agreement. Revenue notes are payable only if sufficient tax increment is generated by the properties. Under state law, 25% of the tax increment revenues can be pooled with other tax increment districts for similar development projects. Tax Increment Financing District #2152 (Housing Replacement District #1) This fund is used to account for collection and disbursement of tax revenues for activities within TIF District 92152, Phase 1 Housing Replacement. The date of the first receipt of tax increment by this district was July 1998. The last receipt of tax increment is expected in December 2013, and the district will expire and go out of existence on December 31, 2013. It will be possible to still expend District money in future years for existing obligations. Special legislation was enacted by the State of Minnesota in 2008 which broadens the authority of the City of Crystal to use increments from their housing replacement TIF districts for any purpose in the city that is permitted for housing district increments under general law. Tar Increment Financing District #2153 (Housing Replacement District 1$2) This fund is used to account for collection and disbursement of tax revenues for activities within TIF District 42153, Phase 2 Housing Replacement. The date of the first receipt of tax increment by this district was July 1998. The last receipt of tax increment is expected in December 2013, and the district will expire and go out of existence on December 31, 2013. It will be possible to still expend any remaining District money in future years for existing obligations. Special legislation was enacted by the State of Minnesota in 2008 which broadens the authority of the City of Crystal to use increments from their housing replacement TIF districts for any purpose in the city that is permitted for housing district increments under general law. OVERVIEW OF CRYSTAL'S TAX INCREMENT FINANCING DISTRICTS Tar increment Financing District 92154 (TIF Redevelopment District #3) This fund is used to account for collection and disbursement of tax revenues for activities within TIF District #2154, Suburban Motel Site. The Suburban Motel site was re -developed in 1999- 2000 and is now occupied by the Industrial Equities office/warehouse building. The date of the first receipt of tax increment by this district was July 2001. The last receipt of tax increment is expected in December 2026, and the district will expire and go out of existence on December 31, 2026, Tax Increment Financing District #2155 (TIF Housing District 44) This fund accounts for collection and disbursement of tax revenues for activities within TIF District #2155, LaNel Apartments and Assisted Living Facility, The LaNel (originally the Lamplighter) Apartment Complex was re -developed and expanded to include a new assisted living facility. Funds from this district may not be pooled and used in conjunction with other tax increment districts within the City of Crystal. The date of the first receipt of tax increment by this district was July 2000. The last receipt of tax increment is expected in December 2025, and the district will expires and go out of existence on December 31, 2025.