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EDA Agenda 02-12-2013 (Workshop Meeting)EDA MEETING - WORKSHOP Wednesday, February 13th, 2013 8:00 p.m. Mississippi Room - 505 Walnut Street, Monticello, MN Commissioners: President Bill Demeules, Vice President Bill Tapper, Treasurer Tracy Hinz, Matt Frie, Rod Dragsten and Council members Tom Perrault and Brian Stumpf Staff: Executive Director Jeff O'Neill, Wayne Oberg 1. Call to Order 2. Review 2012 Workplan 3. Set 2013 Workplan Priorities 4. Adj ourn. EDA Agenda - 02/13/13 2. Review 2012 Workplan (AS) A. REFERENCE AND BACKGROUND EDA will be asked to review the 2012 workplan to determine which items should be carried forward for 2013 and briefly discuss the outcomes of other items accomplished. B. SUPPORTING DATA 2012 EDA Workplan EDA 2012 WORK PLAN: Purpose: The EDA is charged with coordinating and administering the City of Monticello's economic development and redevelopment plans and programs. The EDA is also responsible for housing and redevelopment. Job attraction and retention: 1. Promote amenities in Monticello 2. Implement a technical training program in conjunction with existing business workforce needs 3. Provide appropriate higher education classes / training opportunities 4. Work with the Monticello School district to implement a strong STEM program and better coordinate opportunities between the students and industries Attracting New Businesses: 1. Industries that provide livable wage jobs and compliment Monticello's current businesses 2. Market to companies in St. Cloud and CEO's in Monticello and surrounding areas 3. Host a Broker Breakfast Expanding Tax Base: 1. Promote gap financing options to help facilitate new development and business expansions 2. Promote business expansion incentive program 3. Review land area options for future industrial park and initiate a master planning process in coordination with the IEDC 4. Develop a strategic plan for use of surplus TIF 5. Participate in the I -94 Corridor Coalition Business Retention: 1. Promote GMEF, business expansion incentive, and other financing options 2. Communicate on a regular and consistent basis 3. Participate on the Transportation Advisory Committee (TAC) to continue to move transportation initiatives forward to improve traffic flow in and through the city. 4. Work in conjunction with the IEDC to develop a follow up BR &E survey 5. Continue to fund Industry of the Year Event Enhancing Downtown: Start initiating recommendations from the Embracing Downtown plan a. Initial catalyst projects could include redevelopment of Block 34 and the "Anchor" Block Apply for all applicable redevelopment grants including Small Cities Grant Pursue purchasing properties that fit within the "next steps" or recommendations stated in the Embracing Downtown Plan 4. Establish a Downtown revitalization program Facilitating Redevelopment: 1. Initiate recommendations from the Embracing Downtown Plan 2. Participate in residential redevelopment when determined appropriate Housing & Redevelopment Authority: 1. Purchase distressed properties and promote redevelopment of said properties at such time when they will add additional tax capacity and value to the community. 2. Look at the potential to sell 413 4"' Street for a single lot user or retain for future redevelopment possibilities 3. Research need and opportunities for additional affordable housing in the City EDA Agenda - 02/13/13 3. Set 2013 Workplan Priorities (AS) A. REFERENCE AND BACKGROUND Prior to discussion on other 2013 workplan priorities, staff would like to hold a brief exercise aimed at developing ideas and direction for the use of surplus increment in TIF 1 -6. A copy of the 1 -6 District Summary from the adopted TIF Management Plan is included with this report. The summary indicates that the district will have a surplus increment balance of approximately $691,000. The summary details some potential uses of the available increment, as well as other compliance items for completion. The EDA will note that TIF District 1 -6 is a pre -1990 tax increment district. Pre -1990 districts have greater flexibility in available increment usage than those districts enacted after more restrictive TIF legislation in 1990. In short, the increment collected in District 1 -6 can be spent anywhere within the Central Monticello Redevelopment Project Area No. 1. It is not subject to pooling restrictions and does not need to be spent in the district in which it originated. In order to utilize the increment in TIF 1 -6, the EDA may be required to modify the original TIF Plan budget line items. The EDA would not be modifying the amount of the original project budget (which was $1.47 million), but rather reallocating funds among the line items. Following the discussion of District 1 -6, staff will provide an overview or description of each one of the items below, then open the floor for discussion on these items and others added by EDA members. The EDA may also wish to carry over items from the 2012 workplan. After the discussion, staff will ask the EDA to prioritize the items for the development of a 2013 workplan. • Redevelopment — Focus Project Areas • Otter Creek Cost /Benefit Analysis • Downtown Facade Improvement Program • Use of Housing Increment • Senior/Multi- Family Housing Study • Emerging Projects • Marketing of EDA/City Properties • Other B. ALTERNATIVE ACTIONS Motion to direct staff to prepare a 2013 EDA Workplan as identified in the workshop of February 13 th, 2013. C. STAFF RECOMMENDATION Not applicable. D. SUPPORTING DATA 1. TIF 1 -6 Summary Information 2. Redevelopment Policies 3. Subsidy Program Information 4. TIF 1 -19, 1 -20, 1 -24, and 1 -29 Housing District Information 5. EDA and City Owned Properties Map 6. Otter Creek Business Park Available Inventory Map W District 1 -6 was originally established for the construc- tion of 33,000 square foot retail center. The original TIF plan has been modified to authorize additional expenditures for public improvements and other (un- specified) project costs. The District is not subject to the limitations of pooling or the five -year rule. It is due to be decertified by the end of 2013. All obligations in the District have been paid. Actions Taken Since 2009 No actions have been taken since 2009 for this district. Administrative Tasks The TIF plan estimates on file with the Office of the State Auditor (OSA) for this district needs review to confirm the OSA has the correct authorized expendi- tures amounts. Management Strategies Option 1- Decertify The conservative approach for the District would be to request decertification. Excess tax increments (in- cluding tax increments to be paid in 2012) would be conveyed to the County and redistributed to the tax- ing jurisdictions. The EDA would need to coordinate decertification of the District with Wright County. Currently, the district is scheduled for decertification in 2013. Coordination with the County would allow benefits from the expanded tax base in the year follow- ing decertification. Option 2 - Use Remaining Resources Past modifications show that the EDA has planned for the future use of revenues from District 1 -6. The pro- jections show an estimated fund balance of $690,000 at the end of the District in 2013. The City could expend CityNumber ....................................................................... ............................1 -6 CountyNumber ................................................................. .............................23 Name.............................................. ............................... ......................Raindance Type.......................................................... ............................... Redevelopment Established........................................................... ............................... 11/12/85 Certification Requested ............. ............................... ........................12 /5/85 Certified..................................................................... .............................12 /5/85 Year of First Increment ................... ............................... ...........................1988 4 -Year Knockdown ................................................. .............................12 /5/89 5 -Year Rule ....................................................................... ............................... NA Decertification .................................................... ............................... 12/31/13 Original Tax Rate ........................... ............................... ......................81.305% Original Tax Capacity Value ............................................ .............................98 Current Base Tax Capacity Value .................................. .............................98 Current (Pay 2012) Tax Capacity .............................. .........................68,158 Parcels.................................................................................... ............................... 3 155-010-015010 155-019-015040 155- 019- 015070 the remaining fund balance prior to the end of 2013 or keep the fund for this Pre -1990 District open after decertification and continue to expend funds as long as expenditures remain within the adopted budget amounts. No further amendments to the budget can be made after decertification. This option consists of two steps: 1. Evaluate options and set elan for use of these funds. Technically, increment from this District can be spent within the boundaries of the Project Area for use authorized in the TIF Plan. The con- tinued use of District 1 -6 offers opportunities for supporting Downtown redevelopment. Addition- District Summary District 1 -6 (Raindance) Redevelopment ff .*3 al planning should be undertaken to determine the greatest need/best use for the existing fund balance and future tax increments. Potential uses include the following (these are the same as shown for Dis- trict 1 -5): • Support construction of bridge over Fallen Avenue overpass. The Comprehensive Plan shows a future bridge crossing in this area. Tax increments could be used for the bridge improvements, related improvements to sup- porting roads, or redevelopment of property in this area. • Support east interchange project. The tax in- crements from District 1 -5 could be used to supplement the funding for the east I -94 inter- change funded through District 1 -34. • Facilitate development along 7th Street. The area west of District 1 -5 contains several un- developed parcels. These financial resources could be used to attract new development to this area. • Improvement projects for the corner of 7th and Highway 25. • Encourage redevelopment on the east side of Highway 25. • Support improvements to Highway 25. • Improve pedestrian crossing of Highway 25 and pedestrian connections to Downtown. • Implementation of Embracing Downtown on Block 34 and Anchor Block. 2. Determine compliance with Plan. Prior to making any additional expenditures from District 1 -6, it is important to verify that the uses fall within the budget and any parcels for acquisition are listed in the plan. It is anticipated that modifications to the TIF plan will be needed to authorize additional expenditures. At a minimum, the budget should be amended to allocate the expenses assigned to "Other Project Costs" ($83,100 and $610,400) to specific purposes. District Summary Mo District Summary Original TIF Cumulative Accounted Estimated District 1 -6 Plan Budget Modified TIF for in Prior 2010 2011 2012 2013 Total Life Amount Plan Budget Year of District Revenues and Other Financing Sources Tax increment revenue 1,025,000 1,650,000 1,219,352 75,144 77,583 83,528 83,528 1,539,135 Market Value Homestead Credit - Investment earnings 267,000 64,265 7,142 15,930 7,623 8,983 103,943 Bond proceeds 350,000 350,000 350,000 350,000 Loan proceeds - Special assessments - Sales /lease proceeds 62,150 65,000 64,150 64,150 Loan /advance repayments - Developer payment 2,500 - Interfund loan /transfer - Other - Transfers (in) - Total Revenues /OFS 1,437,150 2,334,500 1,697,767 82,286 93,513 91,151 92,511 2,057,228 Expenditures and Other Financing Uses Land /building acquisition 229,000 235,000 232,076 232,076 Site improvement /preparation costs 28,000 28,000 28,000 Utilities 0 Public parking facilities 0 Streets and sidewalks 75,000 250,000 180,276 180,276 Public park facilities 0 Social, recreation, or conference facilities 0 Interest reduction payments 0 Bond principal payments 350,000 350,000 350,000 350,000 Bond interest payments 692,000 692,000 397,373 397,373 Loan principal payments 0 Loan /note interest payments 0 Administrative expenses 38,150 45,000 36,598 365 26 500 500 37,989 Paying agent fees 0 Other 83,100 0 0 Other 610,400 0 0 Transfers (out) 140,654 140,654 Total Expend itures /OFU 1,384,150 2,293,500 1,364,977 365 26 500 500 1,366,368 Revenues /OFS Over(Under) Expend itures /OFU 53,000 41,000 332,790 81,921 93,487 90,651 92,011 690,860 Fund Balance - Begin 332,790 414,711 508,198 598,849 0 Fund Balance - End 414,711 508,198 598,849 690,860 690,860 20 CITY OF MONTICELLO REDEVELOPMENT PRIORITIES POLICY The Monticello Economic Development Authority (EDA) is committed to redevelopment as an important and necessary tool to maintain the health of the community and encourage economic development. For the purpose of this document, the term "redevelopment" carries abroad definition including, but not limited to, activities associated with neighborhood preservation and revitalization, commercial and industrial stabilization and growth, redevelopment and revitalization of downtown Monticello. The EDA will serve as a catalyst for redevelopment based on the following policies. The community needs for redevelopment will always surpass the ability of the EDA and /or other funding entities to fully finance and /or be a partner in such endeavors. In order to maximize the effect of EDA involvement, redevelopment priorities have been established as illustrated in Attachment L This priority list and the redevelopment policies will be reviewed and updated by the EDA on an annual basis. 2. The TIF Management Plan, available and applicable grants, and other applicable funding opportunities will be utilized as a guide to evaluate availability of financial resources. The EDA recognizes that redevelopment scenarios are extremely complex and each plan will demand a unique set of solutions. 4. Creation of major redevelopment plans shall include participation by the community including but not limited to, residents, business and property owners, affected government agencies and other stakeholders. Solutions for redevelopment shall be comprehensive in nature and assume market realities. Approved plans shall be positively promoted and endorsed by the City Council, City Boards and staff. The EDA will continue to be innovative in developing creative solutions and resources to meet its redevelopment needs. The EDA will continue to seek outside funding sources to supplement the EDA's financial resources. When seeking EDA and City Council approval for acquisition of property, the following factors will be taken into account: a. Proximity to priority project areas (see Attachment I) b. Reasonable purchase price C. County assessed value d. Recent completed appraisal, if any C. Property key to transportation or public utility projects f. Number and type of existing tenants g. Timeline of new development potential h. Availability and appropriateness of eminent domain Reviewing appropriateness of purchasing property based on the factors outlined in Number 8 will assist in reducing land - banking by the City. 10. The end objectives of redevelopment efforts include: a. Stabilizing and increasing tax base b. Removing influences that can or have negatively affected the community C. Rejuvenating the appearance and perception of a given area d. Leveraging private funding where feasible C. Jobs created and /or retained 11. Redevelopment plans are viewed as inherently flexible and it is recognized that the component parts of a plan may change from time to time in order for it to be implemented within the market place. ADOPTED BYthe Monticello Economic Development Authority this 14th day of March, 2012. CITY OF MONTICELLO Bill Demeules, President ATTEST: Megan Barnett Livgard, Executive Director Attachment I — Redevelopment Priorities Primary Activities: • Implementation of the Embracing Downtown Plan a. Block 34 b. Block 31 c. Other areas as deemed appropriate and driven by private investment • Redevelopment and revitalization of blighted residential properties Potential Future Activities: • Block 35 • Block 33 • Design enhancements to major intersections and street corridors 4M km MONTICELLO GREATER MONTICELLO ENTERPRISE FUND GUIDELINES 1. PURPOSE The purpose of the Greater Monticello Enterprise Fund (GMEF) is to encourage economic development by supplementing conventional fmancing sources available to existing and new businesses. This program is administered by the City of Monticello Economic Development Authority (EDA) and participating lending institution(s). GMEF Loans are made to businesses to help them meet a portion of their financing needs. The loans are meant to be a secondary source of fmancing, provide gaps in private financing, and assist in securing other grants. All loans must meet four or more of the criteria established in the Definition of Public Purpose section. ORGANIZATION The Greater Monticello Enterprise Fund is administered by the EDA. It is the responsibility of the EDA to assure that loans meet the public purpose standard and comply with all other GMEF policies as defined in this document. GMEF GUIDELINE MODIFICATION At a minimum, the EDA shall review the guidelines on an annual basis. Changes to the GMEF guidelines require approval by the City Council. 4. DEFINITION OF PUBLIC PURPOSE GMEF Loans must meet at least one (1) of the following public purposes (if the EDA finds that the public purpose described in b. is met, the EDA must find that the GMEF Loan meets at least one additional public purpose): a. To provide loans for credit -worthy businesses which create new jobs. 1. One job is equivalent to a total of 37.5 hours per week. 2. At least 90% of the jobs created must pay at least 160% of the federal minimum wage, exclusive of benefits, for individuals over the age of 20 during the term of assistance. Annual written reports are required until repayment of the assistance. Failure to meet the job and wage level goals requires partial or full repayment of the assistance with interest. b. To provide loans for credit -worthy businesses that would increase the community tax base. c. To provide loans to credit - worthy industrial or commercial businesses (new or existing) that would allow the ability to improve or expand their operation. Factors including but not limited to the following will be taken into account: 1. Type and size of the business 2. Product or service involved 3. Present availability of the product or service within the City of Monticello 4. Compatibility of the proposed business as it relates to the comprehensive plan and existing zoning policies, 5. Potential for adverse environmental effects of the business, if any. d. In the event job creation is not a viable option, credit - worthy businesses have the ability to demonstrate public purpose by means of job retention. 5. GREATER MONTICELLO ENTERPRISE FUND POLICIES a. Business Eli ibg ility: 1. Industrial and commercial businesses. 2. Businesses currently located or to be located within the City of Monticello. 3. Credit - worthy existing businesses. 4. Start-up businesses with worthy business plan and /or pro forma in a form acceptable to the EDA (historically non credit -worthy businesses will be denied). b. Acceptable Private Financing Methods: 1. Companion Direct Loan: The GMEF is subordinate to the primary lender. 2. Participation Loan: The GMEF participates in a portion of the loan. 3. Guarantee Loans: The GMEF guarantees a portion of the bank loan. a. Interest rate cap is subject to EDA approval c. Use of Proceeds: 1. Real property acquisition, development, & rehabilitation improvement costs including but not limited to the following: a. Land Acquisition b. Engineer /Design Inspection Fees c. Building Permit Fees d. Architect Fees e. Building Materials £ Soil Borings g. Construction Labor h. Appraisal Fees i. Landscaping j. Legal Fees 2 k. Grading 1. Environmental Study m. Curbing/Parking Lot n. Recording Fees o. Title Insurance 2. Machinery and equipment: a. Personal property used as an integral part of the manufacturing or commercial business, with a useful life of at least three years. Acquisition costs would include freight and sales taxes paid. As a general rule, office equipment would not qualify. d. Terms and conditions: 1. Loan Size: Minimum of $25,000 and maximum not to exceed 50% of the remaining GMEF balance 2. Leveraging: Minimum 60% private /public Non -GMEF, Maximum 30% GMEF, Minimum 10% equity. 3. Loan Term: Personal property term not to exceed life of equipment (generally 5 -7 years). Real estate property maximum of 5 -year maturity amortized up to 30 years. Balloon payment at 5 years. 4. Interest Rate: Fixed rate not less than 2% below prime rate as published in the Wall Street Journal on date of EDA loan approval, with a minimum interest rate of 3.0 %. 5. Loan Fee: Minimum of $500 but not to exceed 1.5% of the total loan. Fees are to be documented and no duplication of fees between the lending institution and the GMEF. Loan fee may be incorporated into project cost. EDA retains the right to reduce or waive loan fee or portion of loan fee. Fee to be paid by applicant to the EDA within 5 working days after City Council approval of GMEF loan. The fee is non - refundable. e. Pre - payment Polio No penalty for pre - payment £ Deferral of Payments: 1. Extending a balloon payment will require a verification letter from two lending institutions stating the inability to refinance and is subject to approval by the EDA. 2. Monthly payments may be deferred for a determined period of time upon approval by the EDA. g. Late Payment Polices 1. Failure to pay principal or interest when due may result in the loan being immediately called. In addition to any other amounts due on any loan, and without waiving any right of the Economic Development Authority under any applicable documents, a late fee of $250 will be 3 imposed on any borrower for any payment not received in full by the Authority within 30 calendar days of the date on which it is due. Furthermore, interest will continue to accrue on any amount due until the date on which it is paid to the Authority, and all such interest will be due and payable at the same time as the amount on which it has accrued. h. Assumability of Loan: None i. Business Equity Requirements: Subject to type of loan. The EDA will determine appropriate and applicable business equity requirements on a case by case analysis, utilizing normal lending guidelines. j. Collateral: 1. Liens on real property in project (mortgage deed). 2. Liens on real property in business (mortgage deed). 3. Liens on real property held personally (subject to EDA approval, homestead exempt). 4. Machinery and equipment liens (except equipment exempt from bankruptcy). 5. Personal and /or corporate guarantees (requires unlimited personal guarantees). k. Non - Performance: An approved GMEF loan shall be null and void if funds are not drawn upon or disbursed within 180 days from date of City Council approval. Non - Performance Extension: 1. The 180 -day non - performance date can be extended up to an additional 120 days, upon approval by the EDA. 2. A written request must be received 30 days prior to expiration of the 180 -day non - performance date. m. Out of Pocket Fees: Responsibility of the GMEF applicant. n. Equal Opportunity: The Greater Monticello Enterprise Fund is operated as an equal opportunity program. All applicants shall have equal access to GMEF funds regardless of race, sex, age, marital status, or other personal characteristics o. Participating Lending Institution(s): 1. Participating lending institution(s) shall be determined by the GMEF applicant. 4 2. Participating lending institution(s) shall cooperate with the EDA and assist in carrying out the policies of the GMEF as approved by the City Council. 3. Participating lending institution(s) shall analyze the formal application and indicate to the EDA the level at which the lending institution will participate in the finance package. p. Loan Administration: 1. City Staff shall collect applicable GMEF payments. 2. City Staff shall assure City compliance with all applicable terms and conditions of the approved loan. 3. All loan documents shall include the following: a. Definition of loan default, agreements regarding notification of default b. Copy of primary lenders documents C. Provisions allowing the City to inquire on the status of the primary loan 6. LOAN APPLICATION PROCEDURES The EDA desires to make the GMEF loan application process as simple as possible. However, certain procedures must be followed prior to EDA consideration of a loan request. Information regarding the program and procedures for obtaining a loan are as follows: a. City Staff. City Staff shall carry out GMEF operating procedures as approved by the EDA and City Council. Staff is responsible for assisting businesses in the loan application process and will work closely with applicants in developing the necessary information. b. Application Process: 1. Applicant shall complete a preliminary loan application. Staff will review application for consistency with the policies set forth in the Greater Monticello Fund Guidelines. 2. If applicant gains initial support from lending institution and if the preliminary loan application is approved, applicant is then asked to complete a formal application. Formal application shall include a business plan which will include its management structure, market analysis, and financial statement. Like documentation necessary for obtaining the bank loan associated with the proposal is acceptable. Attached with each formal application is a written release of information executed by the loan applicant 3. If the preliminary loan application is not approved by staff, the applicant may request that the EDA consider approval of the preliminary application at the next regularly scheduled meeting of the EDA. 4. City staff shall analyze the formal application and financial statements contained therein to determine if the proposed business and finance plan is viable. City staff shall submit a written recommendation to the EDA. A decision regarding the 5 application shall be made by the EDA within 60 days of the submittal of a completed formal application. The EDA shall have authority to approve or deny loans; however, within 21 days of EDA action, the City Council may reverse a decision by the EDA, if it is determined by the City Council that such loan was denied /approved in violation of GMEF guidelines. 6. Prior to issuance of an approved loan, the EDA Attorney shall review and /or prepare all contracts, legal documents, and inter- creditor agreements. After such review is complete, the City shall issue said loan. 7. REPORTING City Staff shall submit to the EDA and City Council a semiannual report detailing the balance of the Greater Monticello Enterprise Fund. 8. HISTORY Public Hearing and Adoption the 31 st day of August, 1999 Public Hearing and Adoption of Amendments the 8th day of November 2000 Public Hearing and Adoption of Amendments the 24th day of April 2001 Public Hearing and Adoption of Amendments the 13th day of December 2005 Public Hearing and Adoption the 23rd day of March, 2009 0 MONTICELLO MONTICELLO SMALL CITIES ECONOMIC DEVELOPMENT SET - ASIDE REVOLVING LOAN FUND GUIDELINES I. PURPOSE: The City of Monticello ( "City ") has received a grant through the Community Development Block Grant Economic Development Set Aside program (the " Program ") administered through the Department of Employment and Economic Development ( "DEED "). The grant may be used to make loans to local businesses as described below. As the recipient of a grant through the Program, the City is authorized to keep all of the principal repayments and interest on the loans it makes. The City is required to use these funds to create a revolving loan fund ( "RLF ") and to establish policies and procedures for the RLF. The City Council administers the RLF. Once the RLF funds have been re- issued as new loans, RLF loan repayments may be redirected to the Greater Monticello Enterprise Fund ( "GMEF ") administered by the City of Monticello Economic Development Authority ( "EDA "). II. PURPOSE OF THE REVOLVING LOAN FUND Revolving loan funds are to be used for business start ups, expansions, and retention where jobs are created or retained. This may be accomplished by the following means: 1.) Creation or retention of permanent private- sector jobs in order to create above average economic growth; 2.) Stimulation or leverage of private investment to ensure economic renewal and competitiveness; 3.) Increase to the local tax base; 4.) Improvement of employment and economic opportunity for citizens in the region to create a reasonable standard of living; and 5.) Stimulation of productivity growth through improved manufacturing or new technologies. III. ELIGIBLE EXPENDITURES RLF's may be used to provide assistance for infrastructure, loans, loan guarantees, interest buy- downs, and other forms of participation with private sources of financing. The RLF assistance can be for no more than one -half of the cost of the project. The RLF is subject to all of the state and federal CDBG requirements, as described in Exhibits A and B attached. However, once the loan funds have cycled through the RLF and are redirected to the GMEF, the funds will no longer be subject to federal CDBG requirements. IV. ELIGIBLE PROJECTS The grant or loan must be based on one or more of the following criteria: 1.) Creation of new jobs or retention of existing jobs; 2.) Increase in the tax base; 3.) Investment of public dollars inducing private investment; 4.) Excessive public infrastructure or improvement cost beyond the means of the affected community and private participants in the project; 5.) Higher wage levels to the community or added value to current workforce skills; 6.) Necessity of assistance to retain existing business; and 7.) Necessity of assistance to attract out -of -state business. The grant or loan cannot be made based solely on a finding that the conditions in clause 2.), 6.) or 7.) exist. A finding must be made that a condition in clause 1.), 3.), 4.), or 5.) also exists. V. ELIGIBLE ACTIVITIES RLF's may be used for the following activities: 1.) Purchase of land 2.) Construction of a building or other improvements 3.) Renovation of an existing building to accommodate the business 4.) Construction of tenant improvements 5) Purchase of Capital Equipment 6.) Lease or purchase of an existing building 7.) Site improvements 8.) Public improvements and privately owned utilities 9.) Workforce Development including job training and placement: a.) Training low skilled, low- income persons for specific jobs for which they have been hired and which require skill levels beyond what they now have; b.) Training a pool of low- income prospective employees for specific jobs being created as a result of a CDBG - funded industrial expansion, where the employer agrees to give first consideration to filling the new positions with people from this pool; c.) Re- training existing employees of a business as part of a project which qualifies as retaining jobs. 10.) Microenterprise Assistance: RLF assistance can be provided to persons owning or developing a microenterprise, which is defined as a commercial enterprise that has 5 or fewer employees, one or more of whom owns the enterprise. VI. INELIGIBLE ACTIVITIES RLF assistance may not be used for the following: 1.) Operation or expansion of a casino. 2.) For a project related to a sports facility. "Sports facility" means a building that has a professional sports team as a principal tenant. 3.) General promotion of the community. 4.) Professional sports teams. 5.) Privately owned recreational facilities that serve a predominantly higher income clientele where the benefit to users clearly outweighs the benefit of jobs created or retained. 6.) Acquisition of land for which a specific use has not been identified (i.e. land banking) 7.) Assistance to a for - profit business that is, or its owner is, the subject of unresolved findings of noncompliance related to previous CDBG assistance. 8.) For relocation of an out of state business. 9.) New housing construction. 10.) Planning for economic development projects. 11.) Job training that is not part of a CDBG eligible economic development activity to create or retain permanent jobs. 12.) Working capital. VII. PUBLIC BENEFIT A project using RLF funds must show a minimum level of public benefit. The amount of the assistance must not exceed $50,000 per full -time equivalent, permanent job (created or retained). If the City finds, after a public hearing, that the primary purpose of the project is not job creation, this provision is not applicable. VIII. PROJECT COSTS AND FINANCIAL REQUIREMENTS A. Acceptable Private Financing Methods: 1. Companion Direct Loan: The RLF is subordinate to the primary lender. 2. Participation Loan: The RLF participates in a portion of the loan. 3. Guarantee Loans: The RLF guarantees a portion of the bank loan. a. Interest rate cap is subject to City approval B. Terms and Conditions: 1. Leveraging: Minimum 60% private /public Non -RLF, Maximum 30% RLF, Minimum 10% equity. 2. Loan Term: Personal property term not to exceed life of equipment (generally 5 -7 years). Real estate property maximum of 5 -year maturity amortized up to 30 years. Balloon payment at 5 years. 3. Interest Rate: Fixed rate not less than 2% below prime rate as published in the Wall Street Journal on date of RLF loan approval, with a minimum interest rate of 3.0 %. 4. Loan Fee: Minimum of $500 but not to exceed 1.5% of the total loan. Fees are to be documented and no duplication of fees between the lending institution and the RLF. Loan fee may be incorporated into project cost. City retains the right to reduce or waive loan fee or portion of loan fee. Fee to be paid by applicant to the City within 5 working days after City Council approval of RLF loan. The fee is non - refundable. C. Other: No penalty for prepayment of loan in whole or in part. 2. Extending a balloon payment will require a verification letter from two lending institutions stating the inability to refinance and is subject to approval by the City. Monthly payments may be deferred for a determined period of time upon approval by the City Council. 4. Failure to pay principal or interest when due may result in the loan being immediately called. In addition to any other amounts due on any loan, and without waiving any right of the City under any applicable documents, a late fee of $250 will be imposed on any borrower for any payment not received in full by the City within 30 calendar days of the date on which it is due. Furthermore, interest will continue to accrue on any amount due until the date on which it is paid to the City, and all such interest will be due and payable at the same time as the amount on which it has accrued. RLF Loans are not assumable. The City will determine appropriate and applicable business equity requirements on a case by case analysis, utilizing normal lending guidelines, subject to the type of assistance. Collateral may include: i. Liens on real property in project (mortgage deed). ii. Liens on real property in business (mortgage deed). iii. Liens on real property held personally (subject to City approval, homestead exempt). iv. Machinery and equipment liens (except equipment exempt from bankruptcy). v. Personal and /or corporate guarantees (requires unlimited personal guarantees). An approved RLF loan shall be null and void if funds are not drawn upon or disbursed within 180 days from date of City Council approval. i. The 180 -day non - performance date can be extended up to an additional 120 days, upon approval by the City. ii. A written request must be received 30 days prior to expiration of the 180 -day non - performance date. Legal fees are the responsibility of the RLF applicant. 10. Participating Lending Institutions: i. shall be determined by the RLF applicant ii. shall cooperate with the City and assist in carrying out the policies of the RLF as approved by the City Council. iii. Shall analyze the formal application and indicate to the City the level at which the lending institution will participate in the finance package. 11. Loan Administration: i. City Staff shall collect applicable RLF payments ii. City Staff shall assure City compliance with all applicable terms and conditions of the approved loan. iii. All loan documents shall include the following: a) Definition of loan default, agreements regarding notification of default b) Copy of primary lenders documents c) Provisions allowing the City to inquire on the status of the primary loan IV. LOAN APPLICATION PROCEDURES The City desires to make the RLF loan application process as simple as possible. However, certain procedures must be followed prior to City consideration of a loan request. Information regarding the program and procedures for obtaining a loan are as follows: a. City Staff. City Staff shall carry out RLF operating procedures as approved by the EDA and City Council. Staff is responsible for assisting businesses in the loan application process and will work closely with applicants in developing the necessary information. b. Application Process: Applicant shall complete a preliminary loan application. Staff will review application for consistency with the policies set forth in the Guidelines. 2. If applicant gains initial support from lending institution and if the preliminary loan application is approved, applicant is then asked to complete a formal application. Formal application shall include a business plan which will include its management structure, market analysis, and financial statement. Like documentation necessary for obtaining the bank loan associated with the proposal is acceptable. Attached with each formal application is a written release of information executed by the loan applicant If the preliminary loan application is not approved by staff, the applicant may request that the City consider approval of the preliminary application at the next regularly scheduled meeting of the City Council. 4. City staff shall analyze the formal application and financial statements contained therein to determine if the proposed business and finance plan is viable. City staff shall submit a written recommendation to the City Council. A decision regarding the application shall be made by the City Council within 60 days of the submittal of a completed formal application. Prior to issuance of an approved loan, the City Attorney shall review and /or prepare all contracts, legal documents, and inter- creditor agreements. After such review is complete, the City shall issue said loan. History: Public Hearing and Adoption on March 23, 2009 Exhibit A STATE REQUIREMENTS 1. MINNESOTA INVESTMENT FUND (MS.116J.8731) Wage Goals: Businesses receiving RLF assistance must pay each employee total compensation, including benefits not mandated by law, that on an annualized basis is equal to at least 110% of the federal poverty level for a family of four. Retail Businesses: are not prohibited from receiving federal ED assistance. 2. MUNICIPAL RIGHTS, POWERS, DUTIES (MS 471.87- 471.88) An officer of the city may not have a personal financial interest or personally benefit financially from the business to be assisted. 3. BUSINESS SUBSIDY LAW (MS 116J.993- 116J.995). Any state or local government agency or public entity that provides financial assistance to a business must comply with this statute. 4. FIRST SOURCE AGREEMENT (MS 116L.66) A business that receives grants or loans in an amount greater than $200,000 must list any vacant or new positions with the Department of Employment and Economic Development. 5. SURETY DEPOSITS REQUIRED FOR CONSTRUCTION CONTRACTS (MS 290.9705 When a contract exceeds $100,000 and a non - Minnesota construction contractor has been hired to perform the work, the city must do one of the following: a. Deposit with the Department of Revenue, 8 % of every payment made to the contractor; or b. Have in its possession a Waiver of Withholding from the Department of Revenue. 6. GOVERNMENT DATA PRACTICES (MS 13) Information contained in the application for assistance will become a matter of public record with the exception of those items protected under the Minnesota Government Data Practices Act. Exhibit B FEDERAL REQUIREMENTS A. The project must meet at least one of two national objectives. These objectives are: Benefit to Low and Moderate Income (LMI) or Prevention or Elimination of Slums or Blight- Low and Moderate Income Job Creation/Retention. The business to be assisted must commit to the creation and or retention of jobs with 51% of the jobs to be made available to or held by LMI persons. When jobs will be retained, the business must document that the jobs would be lost without the RLF assistance and that one or both of the following applies to at least 51% of the jobs: a.) The job is held by a LMI person; or b.) The job can reasonably be expected to turn over within the following 2 years and steps will be taken to ensure that the job will be filled by, or made available to, a LMI person. A position is "Available to" LMI persons if the following criteria apply to the position: a.) The job does not require special skills that can only be acquired with substantial training, work experience or education beyond high school. b.) The business agrees to hire unqualified persons and provide training; and c.) The city and the assisted business take actions to ensure that LMI persons receive first consideration for filling such jobs. A job that is "Taken by" an LMI person if his/her household income is within the Section 8 income guidelines. (See attached Job Information form) Retained Jobs In order to consider jobs retained as a result of this assistance, there must be "clear and objective" evidence that permanent jobs will be lost without such assistance. For these purposes "clear and objective" evidence means that jobs will be lost would include: a) Evidence that the business has issued a notice to affected employees or made a public announcement to that effect, or b) Analysis of relevant financial records which clearly and convincingly shows that the business is likely to have to cut back employment in the near future without the planned intervention. To meet the LMI standard, 51% or more of the retained jobs must be either: a) Known to be held by LMI persons at the time this assistance is provided and /or b) Jobs not known to be held by LMI persons, but which can be reasonably expected to "turn over" to LMI persons within 2 years. (This would involve the grant recipient or business taking actions to ensure that such a job, upon turnover, will be either taken by or made available to a LMI person in a manner similar to that pertained to a newly created job. Slums /Blight An economic development project, such as commercial rehab, which aid in the prevention or elimination of slums or blight in a designated area may qualify under the Slum/Blight National Objective. To qualify, the economic development activity must take place in an area that: 1.) Has been designated by the city as meeting a definition of a slum, blighted, deteriorated or deteriorating area under state or local law; and 2.) Has a substantial number of deteriorated or deteriorating buildings, or the public improvements are in a general state of deterioration. The assisted activity must address the conditions that contributed to the deterioration of the delineated area. The city must maintain documentation on the boundaries of the area and the condition which qualified the area when it was designated under state or local law. B. An RLF project must also meet the following federal requirements: 1. FAIR HOUSING AND EQUAL ACCESS a. Title VI of the Civil Rights Act of 1964, as Amended (42 U.S.C. 2000d et seq.) (24 CFR Part 1) No person may be excluded from participation in, denied the benefits of, or subjected to discrimination under any program or activity receiving Federal financial assistance on the basis of race, color or national origin. b. The Fair Housing Act (42 U.S.C. 3601 -3620) ((24 CFR Part 100 -115) Prohibits discrimination in the sale or rental of housing, the financing of housing or the provision of brokerage services against any person on the basis of race, color, religion, sex, national origin, handicap or familial status. Furthermore, section 104 (b) (2) of the Act requires that each grantee certify to the secretary of HUD that it is affirmatively furthering fair housing. The certification specifically requires grantees to conduct a fair housing analysis, develop a fair housing plan, take appropriate actions to overcome the effects of any impediments identified and maintain records on the analysis, plan and actions in this regard. C. Equal Opportunity in Housing (Executive Order 11063, as amended by Executive Order 12259) (24 CFR Part 107) Prohibits discrimination against individuals on the basis of race, color, religion, sex or national origin in the sale, rental, leasing or other disposition of residential property, or in the use or occupancy of housing assisted with Federal funds. d. Age Discrimination Act of 1975, As Amended (42 U.S.C. 6101) (24 CFR Part 146) Prohibits age discrimination in programs receiving Federal financial assistance. C. Section 109 of Title I of the Housing and Community Development Act of 1974 Requires that no person shall be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity funded with CDBG funds on the basis of race, color, religion, national origin or sex. f. Americans with Disabilities Act (ADA) (42 U.S.C. 12131, 47 U.S.C. 155, 201, 218, and 225 Provides comprehensive civil rights to individuals with disabilities in the areas of employment, public accomodations, state and local government services and telecommunications. The Act also states that discrimination includes the failure to design and construct facilities that are accessible to and usable by persons with disabilities and requites the removal of architectural and communication barriers that are structural in nature in existing facilities. g Section 504 of the Rehabilitation Act of 1973 Prohibits discrimination in Federally assisted programs on the basis of handicap. It imposes requirements to ensure that "qualified individuals with handicaps" have access to programs and activities that receive Federal funds. h. Architectural Barriers Act of 1968 (942 U.S.C. 4151 -4157) Requires certain Federally funded buildings an other facilities to be designed, constructed or altered in accordance with standards that ensure accessibility to, and use by, physically handicapped people. 2. EQUAL OPPORTUNITY a. Equal Employment Opportunity, Executive Order 11246, as amended.. (41 CFR art 60 Prohibits discrimination against any employee or applicant for employment because of race, color, religion, sex or national origin. Provisions to effectuate this prohibition must be included in all construction contracts exceeding $10,000. b. Section 3 of the Housing and Urban Development Act of 1968 Requires that, to the greatest extent feasible, opportunities for training and employment arising from CDBG will be provided to low- income persons residing in the program service area. Also, to the greatest extent feasible, contracts for work (all types) to be performed in connection with CDBG will be awarded to business concerns that are located in or owned by persons residing in the program service area. C. Minority/Women's Business Enterprise (Executive Orders 11625, 12432, 12138)(24 CFR 85.36(c)). City must prescribe procedures for a minority outreach program to ensure the inclusion, to the maximum extent possible, of minorities and women, and entities owned by minorities and women, in all contracts. 3. LABOR REQUIREMENTS All contracts for construction and installation of equipment must comply with the following: a. Davis -Bacon and Related Acts (40 USC 276 (A) -7) Ensures that mechanics and laborers employed in construction work under Federally contracts are paid wages and fringe benefits equal to those that prevail in the locality where the work is performed. b. Contract Work Hours and Safety Standards Act, as amended (40 USC 327 -333) Provides that mechanics and laborers employed on Federally assisted construction jobs are paid time and one -half for work in excess of 40 hours per week, and provides for the payment liquidated damages where violations occur. It also addresses safe and healthy working conditions. C. Copeland (Anti- Kickback)Act (40 USC 276c) Governs the deductions from paychecks that are allowable. Makes it a criminal offense to induce anyone employed on a Federally assisted project to relinquish any compensation to which he /she is entitled, and requires all contractors to submit weekly payrolls and statements of compliance. d. Fair Housing Standards Act of 1938, As Amended (29 USC 201, et.seq.) Establishes the basic minimum wage for all work and requires the payment of overtime at the rate of at least time and one -half. It also requires the payment of wages for the entire time that an employee is required or permitted to work, and establishes child labor standards. In accordance with 24 CFR Part 5, CDBG funds may not be used to directly or indirectly employ, award contracts to or otherwise engage the services of any contractor or subrecipient during any period of debarment, suspension or placement of ineligibility status. Grantees should check all contractors, subcontractors, lower tier contractors and subrecipients against the Federal publication that lists debarred, suspended and ineligible contractors. See internet site at http: / /www.amet.gov /epls /. 4. PROCUREMENT The procurement standards of 24 CFR 85.36 apply. 5. CONFLICT -OF- INTEREST For the procurement of property and services, the conflict -of- interest provisions at 24 CFR 85.36 and 24 CFR 84.42 apply. This requires the city to maintain written standards governing the performance of their employees engaged in awarding and administering contracts. At a minimum, these standards must: a. Require that no employee, officer, agent of the city or its sub - recipient shall participate in the selection, award or administration of a contract supported by CDBG if a conflict -of- interest, either real or apparent, would be involved; b. Require that grantee or sub - recipient employees, officers and agents not accept gratuities, favors or anything of monetary value from contractors potential contractors or parties to sub - agreements; and C. Stipulate provisions for penalties, sanctions or other disciplinary actions for violations or standards. A conflict would arise when any of the following has a financial or other interest in a firm for award: a. An employee, agent or officer of the grantee or sub - recipient; b. Any member of an employee's, agent's or officer's immediate family; C. An employee's, agent's or officer's partner; or d. An organization that employs or is about to employ an employee, agent or officer of the grantee or sub - recipient. In cases not covered by the above, the CDBG regulations at 24 CFR 570.611 governing conflict -of- interest apply. These provisions cover employees, agents, consultants, officers and elected or appointed officials of the city or sub - recipient. The regulations state that no person covered who exercises or has exercised any functions or responsibilities with respect to CDBG activities or who is in a position to participate in decisions or gain inside information: a. May obtain a financial interest or benefit from a CDBG activity; b. Have an interest in any contract, subcontract or agreement for themselves or for persons with business or family ties. This requirement applies to covered persons during their tenure and for one year after leaving the city or sub - recipient entity. Upon written request, exceptions to these provisions may be granted by HUD on a case - by -case basis only after the city has: a. Disclosed the full nature of the conflict and submitted proof that the disclosure has been made public, and b. Provided a legal opinion from the city stating that there would be no violation of state or law if the exception were granted. 6. ENVIRONMENTAL REVIEW The city is responsible for undertaking environmental reviews in accordance with the Environmental Handbook. The environmental review must be completed before funds are committed. 7. FLOOD INSURANCE Section 202 of the Flood Disaster Protection Act of 1973 (42 USC 4106) Requires that CDBG funds shall not be provided to an area that has been identified by the Federal Emergency Management Agency (FEMA) as having special flood hazards unless: a. The community is participating in the National Flood Insurance Program, or it has been less than a year since the community was designated as having special flood hazards; and b. Flood insurance is obtained. 8. DISPLACEMENT, RELOCATION, ACQUISITION AND REPLACEMENT OF HOUSING Projects involving acquisition, rehabilitation or demolition may be subject to the provisions of the Uniform Relocation Act. EDA - TIF Criteria k VA �1 ON fICELLO CITY OF MONTICELLO ECONOMIC DEVELOPMENT AUTHORITY TAX INCREMENT FINANCING 1. PROJECT EVALUATION CRITERIA 1:01 Tax increment financing proposals must meet a public purpose in addition to increasing tax base; which can include but are not limited to, the creation of livable wage jobs, removal of blight, and environmental clean up. 1:02 The EDA will utilize Tax Increment financing (TIF) to support the community's long -term economic, redevelopment, and housing goals stipulated in the Comprehensive Plan and Zoning Ordinance. TIF proposals will be considered under the Comprehensive Plan and City Code in effect at the time the TIF proposal is received. 1:03 The EDA shall use the following guidelines when evaluating a TIF request. A. All TIF requests shall meet the "but for" test. The "but for" test means that the project would not develop solely on private investment in the reasonable future. The developer shall provide findings for the "but for" test. B. TIF will not be provided to projects that have the financial feasibility to proceed without the benefit of the subsidy. In effect, TIF will not be provided solely to broaden a developer's profit margins on a project. C. TIF requests should create the highest feasible number of jobs on site from date of occupancy where deemed appropriate. D. For manufacturing and warehousing TIF requests, at least 90% of the jobs created must pay at least 160% of the federal minimum wage requirements for individuals over the age of 20 during the term of the assistance. In the case of a recipient with existing jobs, the EDA may determine that the wage goal is satisfied if wages are increased to at least the minimum specified in this paragraph. Annual written reports are required until termination date. Failure to meet the job and wage level goals require partial or full repayment of the assistance with interest. E. In the case of a recipient with existing jobs, the EDA may determine that the wage goal is satisfied if wages are increased by a specified amount over the federal minimum wage. Annual written reports are required until termination date. Failure to meet the job and wage level goals require partial or full repayment of the assistance with interest. EDA - TIF Criteria F. TIF requests should result in a substantial increase in property value and /or property taxes. F. TIF requests should facilitate redevelopment or elimination of "substandard" or "blighted" areas where deemed appropriate. G. TIF requests should facilitate the "clean -up" of environmentally unsound property where deemed appropriate. H. TIF requests should increase housing options for area residents where deemed appropriate. 2. TIF APPROVAL CRITERIA 2:01 All new projects considered by the EDA should meet the following minimum approval criteria. However, it should not be presumed that a project meeting these criteria will automatically be approved. Meeting these criteria creates no contractual right on the part of any potential developer or the EDA. 2:02 Prior to approval by the EDA, the developer shall provide any and all applicable and required market and financial documentation, appraisals, soil boring, information provided to private lenders for the project, and other information or data as requested. 2:03 A recipient of TIF must make a commitment to continue operations at the site where the subsidy is used for at least five years after the benefit date. 2:04 The EDA may determine job creation or retention is not a goal of the subsidy. In those cases, the recipient must instead meet at least one of the following minimum requirements (in addition to all other criteria in this document other than those relating to jobs and minimum wages): A. To remove blight and encourage redevelopment in the commercial and industrial areas of the City in order to encourage high levels of property maintenance and private reinvestment in those areas; or B. The proposed subsidy must result in improvements to public infrastructure or public facilities, including without limitations, sewers, storm sewers, streets, parks, recreational facilities, and other City facilities; or C. The proposed subsidy must remove physical impediments to development of land, including without limitations poor soils, bedrock conditions, steep slopes, or similar geotechnical problems. 3. PROCEDURES 3:01 Meet with appropriate Staff to discuss the scope of the project, define public assistance requested, identify public participation eligibility, and other information as may be necessary. 2 EDA - TIF Criteria 3:02 The request shall be reviewed by Staff on a preliminary basis as to the feasibility of the project. 3:03 The project concept shall be placed on the EDA agenda for concept review. The applicant will make a presentation of the project. Staff will present its findings. 3:04 If EDA concept review is positive, Staff will provide the City Council with an informational concept review. 3:05 The City will hold all required public hearings. 3:06 The applicant will execute and submit the Preliminary Development Agreement accompanied by a deposit per approved fee schedule. 3:07 Building and site plans will be required to be submitted to the Community Development Department. 3:08 If Planning and Zoning Commission action is required, it will be necessary for the applicant, at this time, to make application to the Commission. 3:09 Staff will authorize the following steps: A. Preparation for establishment of the Tax Increment Finance District and the Tax Increment Financing Plan if required. B. Preparation of the Purchase and Development Contract or Private Redevelopment Contract (Subsidy Agreement) based upon agreed terms. 3:10 When action is required for the Tax Increment Finance District and Plan, Purchase and Development Contract or Private Redevelopment Contract, or Zoning /Ordinance; the EDA, Planning Commission and City Council shall take appropriate action such as public hearings and consideration of approvals. 3:11 Building permit will be issued after the Tax Increment Finance District and Plan is approved by the City Council, the Purchase and Development Contract or Private Redevelopment Contract is executed by the developer and EDA, and the Building Permit Fees are paid. 3:12 Generally Tax Increment Financing projects take between six to eight weeks from time of authorization to begin drafting plan and contract. History Public Hearing and Adoption the 8th of September 1999 Public Haring and Adoption of Amendments the 4th day of October 2000 Public Hearing and Adoption of Amendments the 5th of May 2004 Public Hearing and Adoption of Amendments the 3rd day of May 2006 Public Hearing and Adoption the 12th day of November 2008 Public Hearing and Adoption the 23rd day of March 2009. 3 Introduction City Number 1 -5 1 -6 1 -19 1 -20 1 -22 1 -24 1 -29 County Number 16 23 80 620 622 624 629 Mississippi Downtown Church of St. Front Porch Name Construction 5 Raindance Prairie West Shores District Henry Associates Type Redevelopment Redevelopment Housing Redevelopment Redevelopment Housing Housing Established 5/15/85 11/12/85 3/13/95 6/24/96 3/10/97 8/24/98 3/15/02 Certification Requested 5/15/85 12/5/85 4/27/95 12/20/96 6/25/97 1/4/99 6/14/02 Certified 5/15/85 12/5/85 4/28/95 12/23/96 6/30/97 1/8/99 8/22/02 Year of First Increment 1987 1988 1998 1999 1999 2001 2004 4 -Year Knockdown 5/15/89 12/5/89 4/30/99 12/23/00 6/30/01 1/8/03 8/22/06 5 -Year Rule NA NA 4/30/00 12/23/01 6/30/02 1/8/04 8/22/07 Decertification 12/31/12 12/31/13 12/31/23 12/31/24 12/31/24 12/31/26 12/31/29 Original Tax Rate 81.305% 81.305% 111.789% 1 10,581 % 112.618% 118.645% 145.859% Original Tax Capacity Value 708 98 2,523 3,000 157,311 2,500 1,162 Current Base Tax Capacity Value 708 98 2,523 1,672 178,814 441 974 Current (Pay 2012) Tax Capacity 43,638 68,158 32,310 18,323 458,208 41,634 21,721 Parcels 8 3 2 12 58 1 18 City Number 1 -30 1 -34 1 -35 1 -36 1 -37 1 -38 1 -39 County Number 630 634 635 636 637 638 Pending Central MN Monticello Landmark Rocky Mountain SL Real Estate Otter Creek Name Housing Walker Interchange Square II Group Holdings Crossing Partnership Renewal and Economic Economic Economic Economic Type Housing Redevelopment Renovation Development Development Development Development Established 6/24/02 9/12/05 9/12/05 8/22/05 4/24/06 4/11/07 8/22/11 Certification Requested 6/28/02 12/29/05 12/29/05 12/30/05 7/19/06 1011107 Pending Certified 8/22/02 8/1/06 8/1/06 8/1/06 4/16/07 1011107 Pending Year of First Increment 2004 2007 2008 2007 2008 2009 Pending 4 -Year Knockdown 8/22/06 8/1/12 8/1/12 8/1/12 8/1/12 8/1/12 Pending 5 -Year Rule 8/22/07 8/1/16 8/1/16 8/1/11 4/16/12 10/1/12 Pending Decertification 12/31/29 12/31/22 12/31/33 12/31/15 12/31/16 12/31/17 Pending Original Tax Rate 145.859% 110.297% 110.297% 110.297% 99.269% 106.364% Pending Original Tax Capacity Value 1,918 47,897 3,409 4,354 1,614 1,781 Pending Current Base Tax Capacity Value 2,107 32,548 6,068 4,354 1,614 1,781 Pending Current (Pay 2012) Tax Capacity 8,395 285,662 2,962 66,784 26,434 13,674 Pending Parcels 11 13 1 1 1 1 1 6 Northland Securities, Inc. 45 South 7th Street, Suite 2000, Minneapolis, MN 55402 Main: (612) 851-5900 / Direct: (612) 851-4992 / Email: rfifield@northlandsecurities.com Member FINRA and SIPC MEMORANDUM To: City of Monticello From: Rusty Fifield and Tammy Omdal Date: September 12, 2012 Re: Pooling for Housing The City has requested additional information on the management strategies included in the 2012 Updated Tax Increment Financing Plan Analysis and Management Plan (the “TIF Management Plan”) prepared by Northland. Specifically, the City is interested in authority for pooling for housing. We have categorized the City’s authority under housing TIF districts, non-housing TIF districts, and expanded pooling for foreclosed housing. For easy reference, at the end of this memorandum we have included information on the criteria for establishment of a housing TIF district and a summary of the portions of the TIF Act related to pooling for housing Housing TIF Districts For housing TIF districts, tax increments can be spent on projects that meet the criteria for establishing a housing TIF district (The criteria are described later in this memo). The practical application of this authority includes: • The use of tax increment is not limited by pooling restrictions or the five-year rule. • The tax increment can be spent on activities outside of the TIF district, but within the Central Monticello Project Area. • This authority does not extend the maximum statutory duration of a TIF district. • The tax increment must be used solely to finance the cost of the “housing project” as defined by the statute. The cost of public improvements directly related to the housing project and the allocated administrative expenses of the city may be included in the cost of a housing project. • No more than 20% of the square footage of buildings that receive TIF assistance may consist of commercial, retail, or other nonresidential uses. Options for Housing TIF Districts The City has four housing TIF districts (TIF 1-19, 1-24, 1-29, and 1-30). Each of these districts had outstanding obligations as of December 31, 2011. (The outstanding obligation for TIF 1-19 ended with the termination of a developer note effective 2/1/2012.) TIF law requires that a district be decertified after its obligations are satisfied, with limited exception. A plan for the use of this pooling authority could create an obligation to avoid decertification. Pooling for Housing September 12, 2012 Page 2 The TIF Management Plan provides information by district on fund balance and estimated balance at the end of TIF district life. A summary of district information from the TIF Management Plan is provided as an attachment to this memorandum. Potential applications of this authority include: • Individual housing projects avoiding the need for a new TIF district. • Supplementing the revenues of another housing TIF district. • Assistance for the renovation of existing housing. • Acquisition of land for housing. • Assistance to make public improvements more affordable. We look forward to working with you to explore applications in Monticello. Non-Housing TIF Districts For all other types of TIF district, the amount of expenditure is limited to an additional 10% in the regular pooling limitations. The qualified uses are different from housing districts. To qualify for the 10% pooling increase, the expenditure must: 1. Be used exclusively to assist housing that meets the requirement for a qualified low-income building, as that term is defined in Internal Revenue Code (IRC). 2. Not exceed the qualified basis of the housing, as defined under IRC, less the amount of any credit allowed under IRC. 3. Be used to acquire and prepare the site of the housing; acquire, construct, or rehabilitate the housing; or make public improvements directly related to the housing. 4. Be used to develop housing if the market value of the housing does not exceed the lesser of: 150 percent of the average market value of single-family homes in that municipality; or $200,000 for municipalities located in the metropolitan area, as defined in the TIF Act, or $125,000 for all other municipalities; and if the expenditures are used to pay the cost of site acquisition, relocation, demolition of existing structures, site preparation, and pollution abatement on one or more parcels, if the parcel contains a residence containing one to four family dwelling units that has been vacant for six or more months and is in foreclosure as defined Statutes, but without regard to whether the residence is the owner's principal residence, and only after the redemption period stated in the notice provided under Statute has expired. The expenditures may be for activities outside of the Project Area. Options for Non Housing TIF Districts The potential uses of this authority are the same as those listed for hosing TIF districts. A critical limitation is the requirement to use the tax increments solely for expenditures related to qualifying housing for low/moderate income persons. Determination of the funding capacity requires analysis of the other expenditures subject to pooling limitations. Pooling for Housing September 12, 2012 Page 3 The City could act to pool available tax increment from its existing non-housing TIF districts for the purpose of housing, subject to regular pooling limitations for a district plus an additional 10%. The TIF plan for a district must include a specific provision for the additional 10% pooling. If the TIF plan for a district does not include this pooling provision for housing, the City could act to administratively amend (without notice and hearing) the TIF Plan provided the district has existing obligations outstanding. The City may not amend a TIF Plan for a district after obligations are satisfied and decertification is required. If an amendment to the budget in the TIF Plan is required to provide for the additional expenditure on housing, the City may approve modifications only upon the notice and hearing. The first step to proceed under this option is for the City to review the TIF Plans for non-housing districts with projected available tax increment balances to determine whether the expanded pooling authority for housing exists and determine whether the current budget in the TIF Plan is sufficient to cover the additional expenditure on housing. Expanded Pooling for Foreclosed Housing The ability to spend tax increments outside a TIF district (Section 469.1763, Subd. 2) allows for a 10% increase in the general limitation for certain types of housing.1 The 2011 Amendments expanded this authority. The expanded poling authority may be used to develop housing under the following criteria: 1. The parcel contains a residence containing one to four family dwelling units that has been vacant for six or more months and is in foreclosure as defined in section 325N.10, subdivision 7, but without regard to whether the residence is the owner's principal residence, and only after the redemption period stated in the notice provided under section 580.06 has expired. 2. The market value of the housing does not exceed the lesser of: 150% of the average market value of single-family homes in that municipality or $200,000 for municipalities located in the metropolitan area, as defined in section 473.121, or $125,000 for all other municipalities. 3. The tax increments are used to pay the cost of site acquisition, relocation, demolition of existing structures, site preparation, and pollution abatement on one or more parcels. 1 (d) The authority may elect, in the tax increment financing plan for the district, to increase by up to ten percentage points the permitted amount of expenditures for activities located outside the geographic area of the district under paragraph (a). As permitted by section 469.176, subdivision 4k, the expenditures, including the permitted expenditures under paragraph (a), need not be made within the geographic area of the project. Expenditures that meet the requirements of this paragraph are legally permitted expenditures of the district, notwithstanding section 469.176, subdivisions 4b, 4c, and 4j. To qualify for the increase under this paragraph, the expenditures must: (1) be used exclusively to assist housing that meets the requirement for a qualified low-income building, as that term is used in section 42 of the Internal Revenue Code; (2) not exceed the qualified basis of the housing, as defined under section 42(c) of the Internal Revenue Code, less the amount of any credit allowed under section 42 of the Internal Revenue Code; and (3) be used to: (i) acquire and prepare the site of the housing; (ii) acquire, construct, or rehabilitate the housing; or (iii) make public improvements directly related to the housing. Pooling for Housing September 12, 2012 Page 4 This authority under expires on December 31, 2016. Increments may continue to be expended under this authority after that date, if they are used to pay bonds or binding contracts that would qualify under subdivision 3, paragraph (a), if December 31, 2016, is considered to be the last date of the five- year period after certification under that provision. This authority is effective for any district that is subject to the provisions of section 469.1763, regardless of when the request for certification of the district was made. Options for Expanded Pooling for Foreclosed Housing The City may wish to consider how the expanded authority may be applicable to Monticello. If so, then additional review of application to select existing districts should be undertaken. Criteria for Housing TIF Districts The statutes governing the use of TIF define a housing district consisting of a project, or a portion of a project, intended for occupancy, in part, by persons or families of low and moderate income (Minnesota Statutes, Section 469.174, Subd. 11). The requirements for the establishment of a housing TIF district are contained in Minnesota Statutes, Section 469.1761. The primary criteria are income related. The criteria are different for owned and rental housing. • For owner occupied property, 95% of the housing units must be initially purchased and occupied by individuals whose family income is less than or equal to the income requirements for qualified mortgage bond projects under section 143(f) of the Internal Revenue Code. For households of one or two people, the threshold under the IRS Code is 100% of the greater of the area median gross income or the statewide median gross income. For larger households, the threshold is 115% of the median income. • The income requirements for rental housing are tied to section 142(d) of the Internal Revenue Code. There are two options for income restrictions: (1) 20% or more of the residential units are occupied by individuals whose income is 50% or less of area median gross income, or (2) 40% or more of the residential units are occupied by individuals whose income is 60% or less of area median gross income. While the owned housing test applies to the initial purchase, the rental requirements apply for the duration of the tax increment financing district. Portions of TIF Act Related to Pooling for Housing 469.1763, Subd. 3. Five-year rule. (a) Revenues derived from tax increments are considered to have been expended on an activity within the district under subdivision 2 only if one of the following occurs: (5) expenditures are made for housing purposes as permitted by subdivision 2, paragraphs (b) and (d). 469.1763, Subd. 2. Expenditures outside district. (b) In the case of a housing district, a housing project, as defined in section 469.174, subdivision 11, is an activity in the district. Pooling for Housing September 12, 2012 Page 5 (d) The authority may elect, in the tax increment financing plan for the district, to increase by up to ten percentage points the permitted amount of expenditures for activities located outside the geographic area of the district under paragraph (a). As permitted by section 469.176, subdivision 4k, the expenditures, including the permitted expenditures under paragraph (a), need not be made within the geographic area of the project. Expenditures that meet the requirements of this paragraph are legally permitted expenditures of the district, notwithstanding section 469.176, subdivisions 4b, 4c, and 4j. To qualify for the increase under this paragraph, the expenditures must: (1) be used exclusively to assist housing that meets the requirement for a qualified low-income building, as that term is used in section 42 of the Internal Revenue Code; (2) not exceed the qualified basis of the housing, as defined under section 42(c) of the Internal Revenue Code, less the amount of any credit allowed under section 42 of the Internal Revenue Code; and (3) be used to: (i) acquire and prepare the site of the housing; (ii) acquire, construct, or rehabilitate the housing; or (iii) make public improvements directly related to the housing. (4) be used to develop housing:2 (i) if the market value of the housing does not exceed the lesser of: (A) 150 percent of the average market value of single-family homes in that municipality; or (B) $200,000 for municipalities located in the metropolitan area, as defined in section 473.121, or $125,000 for all other municipalities; and (ii) if the expenditures are used to pay the cost of site acquisition, relocation, demolition of existing structures, site preparation, and pollution abatement on one or more parcels, if the parcel contains a residence containing one to four family dwelling units that has been vacant for six or more months and is in foreclosure as defined in section 325N.10, subdivision 7, but without regard to whether the residence is the owner's principal residence, and only after the redemption period stated in the notice provided under section 580.06 has expired.3 469.174, Subd. 11. Housing district. "Housing district" means a type of tax increment financing district which consists of a project, or a portion of a project, intended for occupancy, in part, by persons or families of low and moderate income, as defined in chapter 462A, Title II of the National Housing Act of 1934, the National Housing Act of 1959, the United States Housing Act of 1937, as amended, Title V of the Housing Act of 1949, as amended, any other similar present or future federal, state, or municipal legislation, or the regulations promulgated under any of those acts, and that satisfies the requirements of section 469.1761. Housing project means a project, or a portion of a project, that meets all of the qualifications of a housing district under this subdivision, whether or not actually established as a housing district. 2 Added MN Laws 2011, Chapter 112. This section is effective for any district that is subject to the provisions of section 469.1763, regardless of when the request for certification of the district was made. 3 Also see time restrictions in paragraph (f). Pooling for Housing September 12, 2012 Page 6 469.176, Subd. 4k. Assisting housing outside project area. Notwithstanding the definition of a project under section 469.174, increments may be spent to assist housing that meets the requirements under section 469.1763, subdivision 2, paragraph (d), regardless of whether the housing is located within the boundaries of the project area. City of MonticelloSummary Information for TIF DistrictsCity Number 1-5 1-6 1-19 1-20 1-22 1-24 1-29County Number 16 23 80 620 622 624 629Name Construction 5 RaindanceMississippi ShoresPrairie WestDowntown DistrictChurch of St. HenryFront Porch AssociatesType Redevelopment Redevelopment Housing Redevelopment Redevelopment Housing HousingEstablished 5/15/85 11/12/85 3/13/95 6/24/96 3/10/97 8/24/98 3/15/02Certification Requested 5/15/85 12/5/85 4/27/95 12/20/96 6/25/97 1/4/99 6/14/02Certified 5/15/85 12/5/85 4/28/95 12/23/96 6/30/97 1/8/99 8/22/02Year of First Increment 1987 1988 1998 1999 1999 2001 20044-Year Knockdown 5/15/89 12/5/89 4/30/99 12/23/00 6/30/01 1/8/03 8/22/065-Year Rule NA NA 4/30/00 12/23/01 6/30/02 1/8/04 8/22/07Decertification 12/31/12 12/31/13 12/31/23 12/31/24 12/31/24 12/31/26 12/31/29Proj Fund Balance 12/31/2012 $450,985 $598,849 $61,057 $147,264 $3,267,070 $38,404 $78,245*Proj Fund Balance Life of District $450,985 $690,860 $465,766 $362,019 $3,274,666 $641,302 $421,526City Number 1-30 1-34 1-35 1-36 1-37 1-38 1-39County Number 630 634 635 636 637 638 PendingNameCentral MN Housing PartnershipMonticello InterchangeLandmark Square IIRocky Mountain GroupSL Real Estate HoldingsWalkerOtter Creek CrossingType HousingRenewal and RenovationRedevelopmentEconomic DevelopmentEconomic DevelopmentEconomic DevelopmentEconomic DevelopmentEstablished 6/24/02 9/12/05 9/12/05 8/22/05 4/24/06 4/11/07 8/22/11Certification Requested 6/28/02 12/29/05 12/29/05 12/30/05 7/19/06 10/1/07 PendingCertified 8/22/02 8/1/06 8/1/06 8/1/06 4/16/07 10/1/07 PendingYear of First Increment 2004 2007 2008 2007 2008 2009 Pending4-Year Knockdown 8/22/06 8/1/12 8/1/12 8/1/12 8/1/12 8/1/12 Pending5-Year Rule 8/22/07 8/1/16 8/1/16 8/1/11 4/16/12 10/1/12 PendingDecertification 12/31/29 12/31/22 12/31/33 12/31/15 12/31/16 12/31/17 PendingProj Fund Balance 12/31/2012 $50,897 ($137,640) $4,865 $11,662 $3,994 ($4,914) n/a*Proj Fund Balance Life of District $73,704 ($185,508) $6,677 $21,382 $39,489 ($2,488) n/a*Note: "Proj Fund Balance Life of District" is the estimated fund balance at the end of the districts life provided that early decertification is not requiredby law or the Authority does not make the decision to decertify early.Information included in this Table is from the 2012 TIF Management Plan prepared by Northland Securities. The balance for TIF 1-22 is currently under review. Monticello L] City of Monticello City Owned /EDA Properties -A-0v 0 -ri / r qrv.. - F I . F c� e�NisAlla 11 �O \Q�Iiunn►elu ai� .�:,,:,,I::: ",;" ?... _ =. � ,,� mn `•• p nm�.1C .. ala e56 �i bvs Ys it unman oon X41 {IIlliil an a a+ � •. Y �� y�h��Y� oL: � :::::::' 'O• iiiitiiiiiiPi� 4'SYID j ie� 8r • nma�r - � �� iaan /• � /111917 /am::na �i w � „ %5 a Yli� e= � y_ o _C � �'�p SA+® \fin.. Ii �= e► v �. "° am ■ 1111 1/�� aaaaaaa .k a, 'n,.rlann 11111 11 � •`iL : ��I °��i' 1 ; .'�y 'ee +�! G:GIS /KarenL /City Owned EDA Property.mxd Legend Monticello Infrastructure MainParks Monticello Parcels TPSortName CITY OF MONTICELLO ® CITY OF MONTICELLO EDA �- City Boundary February 6, 2013