2011.05.12 Work Session PacketIV FTI
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CRYSTAL CITY COUNCIL
WORK SESSION
WORKING AGENDA
Thursday, May 12, 2011
7:00 p.m.
Crystal City Hall
Conference Room -A
Pursuant to due call and notice given in the manner prescribed by Section 3.01 of theCityCharter, the Work Session of the Crystal City COUncll was held at J: - p.m. onThursday. May 12 2011 in Conference Room A at City Hall located at 4141 DouglasDrive, Crystal, Minnesota.
I. Attendance
Council members
v Deshler
Anderson
Selton
Moore
f
V Budziszewski
Hoffmann
id Bowman
Staff
Norris
Therres
Banick
Peters
athisen
Hansen
Sutter
II. Agenda The purpose of the work session is to discuss the following agenda items:
Major Building Replacement Fund;
Tax Increment Financing review and update, and
Cavanagh update
III. Adjournment The Work Session adjourned at 2 11
p.m.
Tf7 s port+Qn ofthe 'Vorl Sess'011 InaY be closed to the public for t11e Purpose of tegotlation. GACity
Clerk\Cound Work sessionslws2genda5.12.2011 work session. doc
CGrMemorandumAl.
DATE: April 30, 2011
TO: Mayor and City Council
FROM: Anne Norris, City Manager
Charles Hansen, Finance Director
SUBJECT: Major Building Replacement Fund
Lh
One of the Council's top five short-term goals identified at its January goals sessions
was to better understand the purpose of the Major Building Replacement (MBR) Fund.
The MBR fund is part of the city's comprehensive Capital Improvement Program, which
includes the PIR, PERF, FERF, and utilities capital project funds.
The City of Crystal has for many years followed a practice of saving up money in
advance to pay for certain capital projects such as the seal coating of streets, purchase
of fire trucks and replacement of major buildings, to name a few.
Up until 2007, major building replacement was a component of the Permanent
Improvement Revolving Fund (PIR). This caused confusion because the available PIR
balance ($16,011,496 as of December 31, 2006) seemed large relative to the annual
needs of the PIR in the absence of a major building project. No consensus was
reached on how much should be set aside for future major building projects.
The City Council passed Resolution 2006-113 (attached) to create the MBR Fund,
effective January 1, 2007. The 2007 adopted budget provided for a transfer of
8,000,000 from the PIR fund to the MBR fund. The first WHEREAS in that resolution
provides the only policy guidance when it states: "capital projects to provide for the
major remodeling and eventual replacement of the City's primary public buildings will
require the use of both cash on hand and new bond issues." Since then, the Council
has had no in-depth discussion regarding the MBR fund.
Interest earnings on the fund balance were to be the only ongoing source of revenue,
although transfers from other funds could be made at the discretion of the City Council.
One transfer of $60,390 from the Pool Reconstruction Fund was made after completion
of the pool project. The fund balance has grown to $9,410,035 as of December 31,
2010.
State law recently changed which permits cities to bond for municipal buildings without
voter approval. However, the law makes such bond issues subject to reverse
referendum provisions.
The following buildings are considered to be covered by the MBR fund and are shown
with the insurance value placed on them by the LMCIT in the 2011 insurance policy.
Building Name
Cit Hall/Police Station
Communit Center
Swimming Pool & Bath
Year Built Renovation
Year
1965 1994
1990
House 1968 2005 (pool
only)
Public Works shops & storage 1 1964/2002
buildings salt shed
North Fire Station 1984
South Fire Station 1975
Insurance
Value
5,574,975
6,131, 550
2,964,817
4,752,310
1,668,700
1,820,400
These six complexes of buildings and structures are insured for a total of $22,912,752
In 2011, Insurance is intended to replace current structures with simiiar new
construction ire the event that the current structure is destroyed (fire, tornado, etc,)
Currently routine maintenance and repairs to city buildings are provided for either in the
general fund if they are minor (refinishing gym floors, deep cleaning, HVAC contracts,
minor HVAC repairs, etc.) or in the PIR if they are major (roof repair/replacement,
carpet/flooring replacement, boiler/AC replacement, etc.) As city buildings age, we
need to develop a long-term plan for major maintenance/renovation and in the very
long-term, replacement.
Before we start working on a long-term plan, the Council needs to agree on how the
MBR fund will be utilized. Once we know how the fund will be used, we can work on
the next steps in developing the plan for the fund. These steps include:
Assess current condition of major buildings
Identify current uses of buildings
Identify potential future uses/needs for buildings
Set reasonable life expectancies for each building
Develop a possible schedule for upcoming building renovations & replacements
Develop a plan for financing including cash on hand, bonding, other revenues
The Council will discuss uses of the MBR fund at its May 12 work session.
Attach:
City of Crystal
RESOLUTION NO. 2006- 1 1 3
CREATING THE MAJOR BUILDING REPLACEMENT FUND
WHEREAS, capital projects to provide for the major remodeling and eventual
replacement of the City's primary public buildings will require the use of both cash on
hand and new bond issues, and
WHEREAS, planning for these funding needs can be better managed if the
cash on hand is segregated in a separate Major Building Replacement Fund, and
WHEREAS, there is a portion of the P.I.R. Fund available to be transferred to
create the Major Building Replacement Fund in the 2007 budget.
NOW, THEREFORE, BE IT RESOLVED that the Major Building Replacement
Fund is created as of January 1, 2007.
Adopted by the Crystal City Council this 2 f
4Novel06. ReNaeJ.Br
ATTEST:
It-l-, U ± /, /;. i / " - 6 i,
J11 Lewis, City Clerk
M P 1h
Tax Increment
What is it
w 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
The ability to capture and use all
increased local property tax
revenues from new development
within a defined geographic area.
11
There is Value in the District
when created (also called
base value")
Tax revenues
go to all local
governments
Original Tax Capacity
TIF District "captures"
value from new
development
Abatement can "capture"
part or the entire value
from the parcel
Development f I
occurs
1
Origlna ax apaclty
Assistance =
Captured Tax
Capacity X
Tax Rate
Where Commercial Tax Dollars Go
Fiscal
Disparities
county
17 %
20
Other
M Cotuttr
4% "{Il
015
K#ote*r
D
L1fltCk
State A I lacMl ft35 fY eilfe
22 11
cih
22 %.
Where Residential Tax Dollars Go
yt r
7Y,
Cih
35 %
SD
25%
ountr
13 %.
r (.'ill- ® Other
Taxes Not Captured For TIF
Base Property Taxes
Current taxes paid by existing land and buildings
r State Property Taxes
Tax paid by commercial users to support education (cabin owners
pay as well)
r Market Value Taxes
City & County referendums and School operating referendums
Fiscal Disparities (can elect to capture for a TIF
district)
State Law requires new commercial/industrial properties in 7-
County area and Taconite Tax Relief Area to contribute up to 40%
of valuation to an area -wide pool for redistribution to all local
taxing jurisdictions
T
Crystals Fiscal Disparities percentage for Pay 2011 is 37.7513%
Total Property Taxes
less State-wide Taxes
less Fiscal Disp. Adj.
less Market Value Taxes
less Base Value Taxes
Annual Gross TIF
40 on the dollar TIF
0
234,191
60,936)
60, 662)
5,733)
11 3
95, 465
N
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 a a12 nfl4
90 on the dollar is TIF
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
j types of districts to
accomplish different
policy objectives
TIF Districts must be
Project Area located in a Project
Area or Development
District.
Can have multiple TIF
Districts in one Project
Area
Some increment can
be spent outside
District in Project Area
called "Pooling")
1%
k
Eligible uses
Land acquisition
Demolition and clearance
Site improvements
Public utilities
Relocation
Administration
Other public improvements
Interest on financing
Different rules for each type (6 types)
Redevelopment — condition now
Economic Dev. and Housing — future conditions
Uses and duration of tax increment differ
by district
Old districts are grandfathered in with
the old rules
0
Improved parcels and structurally
substandard buildings
70% of area must be improved
Improved area equals 15% area of parcel
More than 50% of buildings must be
substandard
Building Conditions
1 5% Code Requirement
90% of TIF used to correct
redevelopment issues
26 year maximum duration
s Fiscal Disparities in or out of district
2I.J9
Outside District Inside District
Captured Net
Tat Capacity
Captured Net /
54°
Tax Capacity
Fiscal Disparities
Contributiuu
35`/
Original Net Tax
Original Net Capacity
Tax Capacity
Impacts
Fiscal disparities from inside the TIF district
equates to less TIF for project
Fiscal disparities from outside the TIF district
equates to more TIF for project
Amount of contribution must come from other all other
users within the community
Potential exists for City tax rate increases
Depends on magnitude of development with respect to total
tax capacity
I•
Similar to Redevelopment District
Qualifications
70% of area is improved — Same as Redevelopment
More than 20% of buildings are structurally
substandard (50% for redevelopment)
30% of other buildings require substantial renovation
or clearance
To remove inadequate street layout, incompatible uses or
land use relationships, overcrowding of buildings, excessive
dwelling unit density, obsolete buildings not suitable for
improvement or conversion, etc.
wl Ire i
C 16 year maximum duration
90% must be used to correct
redevelopment issues
Fiscal Disparities in or out of
district
AN
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
0 # f`- 0
Owner occupied housing: 95% of units must be sold to persons: At 100°;, (for 2 or fuss persons in the household) V $73,100
At 115% (3 or more persons) median income84,065
Rental housing must be income
restricted for the life of the district20% of units affordable at 50 of median incorne
V 40% of units affordable at 60% of median income
W f— -Vok
i Tax Increment payments to developers
Development Agreement between City (orAuthority) and developer
Make payments annually to developer on February 1andAugust1
Reimburse them after they pay their taxes
Payments are based upon actual TIF
collected
If not enough TIF, City (or Authority) is not obligatedtopayoruseothersources
w Should have evidence that project
meets tests
Developer Proforma
Comparable costs of land
Risk
Future development potential for site
TIF Fund Balances
m
1;5Y Y+y U'rcrw,1amlo 4 10: f. ill
I AM la rwn y71-mg fI,y,I,
ha.n c1-AN. I.,-i iIIan r.,
T4TaL A38M Z123,020 $202,487 $133,488 $189,907 $12,758 $619,561 3,%341,221
Hr p-I-V- ! I .- I 6xs7 1.w Mir
I'Arw11.1 ELC
A0gimM llq rrm. 1Y t D)Q
Tallll LMLLM16l 54.611 M73 W1 3-m 11T7,572 mid $1K456
Lll•: I La I,V 57r1a MS t75 om
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Un--d- designated 7, f, „3211F tici.6 i,}L'Y+ 1: Im4m 01.16861-h f11G7A. T NI11TIrry TnlaI
FII,N rtt 4068,209 _ 6281,916 $133,054 1189,450 4466,814 $618,961 $2.804,765 TOTAL LIABILITIES
AND FUND BALANCES 72,123,020 $262,487 $133.488 6189.907 612,758 $619.501 $3.341.221 BegYnYq BYnce
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