City Council Minutes 01-16-2008 SpecialSpecial Council Meeting Minutes: 1/1G/08
MINUTES
SPECIAL COUNCIL MEETING
JOINT MEETING EDA AND CITY COUNCIL
'Wednesday, January I6, 2.008 - 7 p.m.
Members Present: Council: Clint Herbst, Wayne Mayer Tom Perrault and Susie Wojchouski.
EDA: Bil] Demeules, Bill Fair, Dan Frie, Bill Tapper and Bob Viering.
Members Absent: Brian Stumpf
The Monticello EDA and City Council participated in a joint workshop on tax increment financing
and other economic development tools. Todd Hagen from Ehlers and Associates and Steve Bubul
from Kennedy and Graven presented information on the use of tax increment financing and tax
abatement as tools for economic development.
The purpose of using tools such as tax increment financing is to create jobs, redevelop blighted areas,
cleanup of polluted sites and construct affordable housing.
Todd Hagen explained what tax increment financing is and how it works. He noted that the laws on
tax increment financing have changed dramatically since it has come into use. At one time the tax
increments generated by the district could be spent outside the specific tax increment financing
district (pooling) but that is no longer the case. Todd Hagen stated that the tax increment financing
regulations in effect at the time of the creation of the TIF district applies for the duration of the
district. There are different types of tax increment districts and different regulations apply to each
type of district. The type of tax increment district determines the duration of the district, which can
run from eight years to twenty-six years. The most common tax increment districts are
redevelopment districts anal economic development. There are other district types such as housing
and soil conditions.
Steve Bubul stated that the criteria for determining substandard structures has changed significantly
and some of the redevelopment districts the City has would not meet the current criteria. Within any
redevelopment district SO% of the existing structures must be found to meet the definition of
substandard. Current criteria requires an interior inspection of a substandard building and identifying
code violations. This was not the case for example when TIF district 1-22 was established by the
City.
In establishing a tax increment financing district there is the "but for" test. This means the City has
to show that if not for tax increment this development or the increase in market value due to
development would not have occurred. Tax increment financing can capture only new value
generated by the improvements. When the City establishes a tax increment financing district, the
Planning Commission must present findings showing that the proposed development conforms to the
City's plan.
After explaining other requirements of tax increment financing, Todd Hagen and Steve Bubul
discussed tax abatement and how that is used as an economic development tool. Tax abatement is a
relatively new economic tool since the original law was only adopted in 1.997. Todd Hagen defined
tax abatement as a rebate wherein the City collects the City's share of local property tax from the
Special Council Meeting Minutes: 1/16/08
parcel and then turns it back to the property owner. However, in any one year the City can rebate no
more than 10% of the City's current levy or $200,000 whichever is greater. A tax abatement process
requires a public hearing and a statement ofpublic benefit. The statement defines why the tax
abatement is in the public interest.
Steve Bubul and Todd Hagen discussed the advantage and disadvantages of the use of tax increment
financing and tax abatement as development tools covering what development scenarios are more
suited to tax abatement and which ones are better suited for tax increment financing.
Steve Bubul talked about the development contract and what it should contain. A key provision of
the development contract is what type of financing will be used to finance the improvements which
could be bonds, an interfund loan or pay-as-you go. The pay-as-you-go method probably has the least
financial risk to the City. In this case the developer constructs the improvement and the City
reimburses the developer in the amount of tax increment. These agreements can be redevelopment
agreements, agreements for private development or loan agreements. In a loan agreement because
the EDA is loaning money to the developer, the EDA can impose more restriction on the
development than just compliance with zoning or building codes.
Todd Hagen thought that tax abatement might be more difficult for staff to administer since you are
collecting revenues and issuing checks to the affected property owners. There is nothing in the state
statute for tax abatement that requires a "but for" test but he felt that was a good criteria to apply
when considering tax abatement. Authority to approve tax abatement comes from the City Council
and not the EDA.
After the formal presentation Steve Bubul and Todd Hagen answered questions and. discussed some
of the City's tax increment financing districts. Economic Development Director, Ollie Koropchak
had presented a map showing the location of the City's active tax increment financing districts.
The workshop session closed at 9 p.m.
Recording Secretary
2